Notes Receivable and Allowance for Losses

6 Months Ended

Jun. 30, 2019

Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract]

Notes Receivable and Allowance for Losses

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



	June 30, 2019		December 31, 2018
Credit Quality Indicator	(in thousands)
Senior	$	93,617	$	94,349
Subordinated	29,458		28,100
Unsecured	2,529		2,435
Total notes receivable	125,604		124,884
Allowance for losses on receivables specifically evaluated for impairment	4,426		4,426
Allowance for losses on non-impaired loans	259		259
Total loan reserves	4,685		4,685
Net carrying value	$	120,919	$	120,199
Current portion, net	$	34,014	$	36,759
Long-term portion, net	86,905		83,440
Total	$	120,919	$	120,199

The Company utilizes the level of security it has in the notes receivable as its primary credit quality indicator (i.e., senior, subordinated or unsecured) when determining the appropriate allowances for uncollectible loans. 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. For restructured loans that are provided a concession, the Company recognizes interest as earned as long as the borrower is in compliance with the restructured loan terms.

The Company determined that approximately $52.1 million of its notes receivable were impaired at both June 30, 2019 and December 31, 2018, respectively. The total unpaid principal balances of these impaired notes, which were current based on their restructured loan maturity terms, as of both June 30, 2019 and December 31, 2018 was $51.8 million. The Company recorded allowances for credit losses on these impaired loans totaling $4.4 million at both June 30, 2019 and December 31, 2018. The average notes receivable on non-accrual status was approximately $1.7 million and $1.8 million for the six months ended June 30, 2019 and 2018, respectively. The Company recognized $1.5 million and $43 thousand of interest income on impaired loans on a cash basis during the six months ended June 30, 2019 and 2018, respectively.

The Company provided loan reserves on non-impaired loans totaling $0.3 million at both June 30, 2019 and December 31, 2018. There were no changes in total loan reserves between December 31, 2018 and June 30, 2019.

The Company has identified loans totaling approximately $13.8 million and $12.9 million, respectively, with stated interest rates that are less than market rate, representing a total discount of $1.3 million and $1.5 million as of June 30, 2019 and December 31, 2018, respectively. These discounts are reflected as a reduction of the outstanding loan amounts and are amortized over the life of the related loan.

Past due balances of 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
As of June 30, 2019	(in thousands)
Senior	$	—	$	—	$	—	$	93,617	$	93,617
Subordinated	—		—		—		29,458		29,458
Unsecured	—		—		—		2,529		2,529
	$	—	$	—	$	—	$	125,604	$	125,604
As of December 31, 2018
Senior	$	—	$	—	$	—	$	94,349	$	94,349
Subordinated	—		—		—		28,100		28,100
Unsecured	—		—		—		2,435		2,435
	$	—	$	—	$	—	$	124,884	$	124,884

Variable Interest through Notes Issued

The Company has issued notes receivables to certain entities that have created variable interests in these borrowers totaling $115.0 million and $114.3 million as of June 30, 2019 and December 31, 2018, respectively. The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs"). These loans have stated fixed and/ or variable interest amounts.