Note 6 - Variable Interest Entities

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Variable Interest Entity Disclosure [Text Block]

(a) Consolidated VIEs

Argo Holdings Fund I, LLC

The Company holds a 43.4% investment in Argo Holdings at December 31, 2022 and December 31, 2021. Argo Holdings makes investments, primarily in established lower middle market companies based in North America, through investments in search funds. The managing member of Argo Holdings is Argo Management Group, LLC ("Argo Management"), a wholly owned subsidiary of the Company. Argo Holdings is considered to be a VIE as the members holding equity at risk lack characteristics of a controlling financial interest. The Company holds a variable interest in Argo Holdings due to its right to absorb significant economics in Argo Holdings and through its controlling interest in Argo Management, through which the Company holds the power to direct the significant activities of Argo Holdings. As such, the Company was the primary beneficiary of Argo Holdings and consolidated Argo Holdings at December 31, 2022 and December 31, 2021.

Net Lease Investment Grade Portfolio, LLC

The Company holds a 71.0% investment in Net Lease at December 31, 2022 and December 31, 2021. Net Lease holds one commercial property under a triple net lease. The current property is encumbered by a mortgage loan.  Net Lease is considered to be a VIE as the members holding equity at risk lack characteristics of a controlling financial interest.  The Company holds a variable interest in Net Lease due to its right to absorb significant economics in Net Lease and to control the management decisions of Net Lease, which allows the Company to hold the power to direct the significant activities of Net Lease.  As such, the Company is the primary beneficiary of Net Lease and consolidated Net Lease at December 31, 2022 and December 31, 2021.

The following table summarizes the assets and liabilities related to VIEs consolidated by the Company at December 31, 2022 and December 31, 2021:     

(in thousands)	December 31,
	2022		2021
Assets
Limited liability investments, at fair value	$	17,059	$	18,826
Cash and cash equivalents		573		944
Accrued investment income		829		716
Total Assets		18,461		20,486
Liabilities
Accrued expenses and other liabilities		333		250
Total Liabilities	$	333	$	250

No arrangements exist requiring the Company to provide additional funding to the consolidated VIEs in excess of the Company’s unfunded commitments to its consolidated VIEs. At December 31, 2022 and December 31, 2021, the Company had no unfunded commitments. There are no restrictions on assets consolidated by these VIEs. There are no structured settlements of liabilities consolidated by these VIEs. Creditors have no recourse to the general credit of the Company as the primary beneficiary of these VIEs.

(b) Non-Consolidated VIEs

The Company’s investments include certain non-consolidated investments, primarily in limited liability companies and limited partnerships in which the Company holds variable interests, that are considered VIEs due to the legal entities holding insufficient equity; the holders of equity at risk in the legal entities lacking controlling financial interests; and/or the holders of equity at risk having non-proportional voting rights.

The Company’s risk of loss associated with its non-consolidated VIEs is limited and depends on the investment. Limited liability investments accounted for under the equity method are limited to the Company’s initial investments. At December 31, 2022 and December 31, 2021, the Company had no unfunded commitments to its non-consolidated VIEs.

The following table summarizes the carrying value and maximum loss exposure of the Company’s non-consolidated VIEs at December 31, 2022 and December 31, 2021:

(in thousands)	December 31,
	2022				2021
			Maximum Loss				Maximum Loss
	Carrying Value		Exposure		Carrying Value		Exposure
Investments in non-consolidated VIEs	$	940	$	940	$	1,514	$	1,514

The following table summarizes the Company’s non-consolidated VIEs by category at December 31, 2022 and December 31, 2021:

(in thousands)	December 31,
	2022					2021
	Carrying					Carrying
	Value		Percent of total			Value		Percent of total
Investments in non-consolidated VIEs:
Real estate related	$	—		—	%	$	628		41.5	%
Non-real estate related		940		100.0	%		886		58.5	%
Total investments in non-consolidated VIEs	$	940		100.0	%	$	1,514		100.0	%

The following table presents aggregated summarized financial information of the Company’s non-consolidated VIEs at December 31, 2022 and December 31, 2021. For certain of the non-consolidated VIEs, the financial information is presented on a lag basis, consistent with how the changes in the Company’s share of the net asset values of these equity method investees are recorded in net investment income. The difference between the end of the reporting period of an equity method investee and that of the Company is typically no more than three months.

(in thousands)	December 31,
	2022			2021
Assets	$	241,050		$	283,432
Liabilities	$	330,470		$	299,340
Equity	$	(89,420	)	$	(15,908	)

(in thousands)	December 31,
	2022		2021
Net income	$	16,330	$	18,647