Notes Receivable and Allowance for Losses

The Company segregates its notes receivable for the purposes of evaluating allowances for credit losses between two categories: Mezzanine and Other Notes Receivable and Forgivable Notes Receivable. The Company utilizes the level of security it has in the various notes receivable as its primary credit quality indicator (i.e., senior, subordinated or unsecured) when determining the appropriate allowances for uncollectible loans within these categories.

The Company considers loans to be past due and in default when payments are not made when due. Although the Company considers loans to be in default if payments are not received on the due date, the Company does not suspend the accrual of interest until those payments are more than 30 days past due. The Company applies payments received for loans on non-accrual status first to interest and then principal. The Company does not resume interest accrual until all delinquent payments are received. For impaired loans, the Company recognizes interest income on a cash basis.

The following table shows the composition of the Company's notes receivable balances:



	September 30, 2016						December 31, 2015
	(in thousands)						(in thousands)
Credit Quality Indicator	Forgivable Notes Receivable		Mezzanine & Other Notes Receivable		Total		Forgivable Notes Receivable		Mezzanine & Other Notes Receivable		Total
Senior	$	—	$	52,176	$	52,176	$	—	$	40,388	$	40,388
Subordinated	—		6,416		6,416		—		6,197		6,197
Unsecured	51,401		3,915		55,316		44,333		3,526		47,859
Total notes receivable	51,401		62,507		113,908		44,333		50,111		94,444
Allowance for losses on non-impaired loans	5,052		1,050		6,102		4,615		1,364		5,979
Allowance for losses on receivables specifically evaluated for impairment	—		1,647		1,647		—		786		786
Total loan reserves	5,052		2,697		7,749		4,615		2,150		6,765
Net carrying value	$	46,349	$	59,810	$	106,159	$	39,718	$	47,961	$	87,679
Current portion, net	$	295	$	7,414	$	7,709	$	143	$	4,964	$	5,107
Long-term portion, net	46,054		52,396		98,450		39,575		42,997		82,572
Total	$	46,349	$	59,810	$	106,159	$	39,718	$	47,961	$	87,679

The Company classifies notes receivable due within one year as current assets in the Company’s consolidated balance sheets.

The following table summarizes the activity related to the Company’s Forgivable Notes Receivable and Mezzanine and Other Notes Receivable allowance for losses for the nine months ended September 30, 2016:



	Forgivable Notes Receivable			Mezzanine & Other Notes Receivable
	(in thousands)
Beginning balance	$	4,615		$	2,150
Provisions	1,188			861
Recoveries	(74		)	(164		)
Write-offs	(301		)	(150		)
Other⁽¹⁾	(376		)	—
Ending balance	$	5,052		$	2,697

(1) Consists of changes in foreign currency exchange rates and default rate assumption changes

Forgivable Notes Receivable

As of September 30, 2016 and December 31, 2015, the unamortized balance of the Company's forgivable notes receivable totaled $51.4 million and $44.3 million, respectively. The Company recorded an allowance for credit losses on these forgivable notes receivable of $5.1 million and $4.6 million at September 30, 2016 and December 31, 2015, respectively. Amortization expense included in the accompanying consolidated statements of income related to the notes for the three months ended September 30, 2016 and 2015 was $2.3 million and $2.1 million, respectively. Amortization expense included in the accompanying consolidated statements of income related to the notes for the nine months ended September 30, 2016 and 2015 was $6.7 million and $6.0 million, respectively.

Past due balances of forgivable notes receivable are as follows:



	30-89 days Past Due		> 90 days Past Due		Total Past Due		Current		Total Notes Receivable
	(in thousands)
As of September 30, 2016
Forgivable Notes	$	—	$	1,822	$	1,822	$	49,579	$	51,401
	$	—	$	1,822	$	1,822	$	49,579	$	51,401

As of December 31, 2015
Forgivable Notes	$	—	$	1,161	$	1,161	$	43,172	$	44,333
	$	—	$	1,161	$	1,161	$	43,172	$	44,333

Mezzanine and Other Notes Receivable

The Company determined that approximately $1.9 million and $0.8 million of its mezzanine and other notes receivable were impaired at September 30, 2016 and December 31, 2015, respectively. The Company recorded allowance for credit losses on these impaired loans totaling $1.6 million and $0.8 million at September 30, 2016 and December 31, 2015, respectively. The average mezzanine and other notes receivable on non-accrual status was approximately $1.4 million and $0.8 million for the nine months ended September 30, 2016 and 2015, respectively. The Company recognizes interest income for impaired loans on a cash basis. No interest income on impaired loans was recognized during the three months ended September 30, 2016, and 2015. Approximately $43 thousand and $33 thousand of interest income on impaired loans was recognized during the nine months ended September 30, 2016, and 2015, respectively. The Company provided loan reserves on non-impaired loans totaling $1.1 million and $1.4 million at September 30, 2016 and December 31, 2015, respectively.

Past due balances of mezzanine and other notes receivable by credit quality indicators are as follows:



	30-89 days Past Due		> 90 days Past Due		Total Past Due		Current		Total Notes Receivable
	(in thousands)
As of September 30, 2016
Senior	$	6,056	$	—	$	6,056	$	46,120	$	52,176
Subordinated	—		—		—		6,416		6,416
Unsecured	—		—		—		3,915		3,915
	$	6,056	$	—	$	6,056	$	56,451	$	62,507
As of December 31, 2015
Senior	$	—	$	—	$	—	$	40,388	$	40,388
Subordinated	—		—		—		6,197		6,197
Unsecured	—		—		—		3,526		3,526
	$	—	$	—	$	—	$	50,111	$	50,111