Loans Receivable

3 Months Ended

Mar. 31, 2025

Receivables [Abstract]

Loans Receivable

Note 5. Loans Receivable

Commercial real estate loans receivable, net consist of the following:

	March 31, 2025			December 31, 2024
Commercial real estate loans receivable, gross	$	388,944		$	392,186
Allowance for credit losses		-			-
Commercial real estate loans receivable, net		388,944			392,186
Current portion		(13,580	)		(13,332	)
Noncurrent portion	$	375,364		$	378,854

Allowance for Credit Losses

The allowance for credit losses is maintained at a level believed to be sufficient to provide for estimated credit losses based on evaluating known and inherent risks in the loan portfolio. The Company’s estimated the allowance for credit losses on the reporting date in accordance with the credit loss policy described in Note 2 to the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2024.

The allowance for credit losses consists of the following activity for the three months ended March 31, 2025 and 2024:

Three months ended March 31,	2025		2024
Allowance for credit losses
Beginning balance	$	-	$	10,723
Charge-offs		-		-
Recoveries		-		-
Benefits		-		(1,642	)
Ending balance	$	-	$	9,081
Loans receivable:
Individually evaluated for impairment	$	-	$	-
Collectively evaluated for impairment		388,944		401,564
	$	388,944	$	401,564
Allowance for credit losses:
Individually evaluated for impairment	$	-	$	-
Collectively evaluated for impairment		-		9,081
	$	-	$	9,081

As of March 31, 2025 and December 31, 2024, no loans were past due, or classified as non-accrual or considered impaired. Additionally, no loans were modified during the three months ended March 31, 2025, or 2024.

Credit Quality of Loans:

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks credit quality indicators based on the loan payment status on monthly basis. The Company continuously evaluates the credit quality of each loan by assessing the risk factors and assigning a risk rating based on a variety of factors. Risk factors include property type, geographic and local market dynamics, physical condition, projected cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage ratio, project sponsorship, and other factors deemed necessary. Based on a 10-point scale, the Company’s loans are rated “0” through “10,” from less risk to greater risk, which ratings are defined as follows:

Risk rating	Category	Description
0	Risk Free	Free of repayment risk. The loan is fully guaranteed by the full faith and backing of the US Government or entirely secured by cash controlled by SHF.
1	Highest Quality	High caliber loan with the lowest risk of default. Significant excess cash flow after debt service and moderate to low leverage.
2	Excellent	High quality loan that carry’s a low risk of default. Strong cash flow and relatively few negative individual risk factors.
3	Good	Loans with lower-than-average level of risk. Excess cash flow and other factors contributing to the overall low level of risk in the loan.
4	Average	Risk factors may be mixed with some negative and some positive aspects, but the overall rating will indicate an average level of risk.
5	Fair	Loans in this category have the maximum level of risk that can be accepted while still recommending a new loan for origination. The loan risk factors may contain multiple negative factors, but they are generally outweighed by the positive aspects of the loan.
6	Watch List	There is a temporary and curable condition resulting in a lower risk rating.
7	Special Mention	There is a potential weakness that may result in the deterioration of the prospect of repayment that are not temporary and may require additional collection or workout efforts.
8	Substandard	Loans in this category are inadequately protected by the current net worth and paying capacity of the obligors or of the collateral pledged and have well-defined weaknesses that jeopardize the liquidation of the debt with distinct possibility of loss. SHF may be required to advance additional funds to manage the loan. Escalated collection activities such as foreclosure have been scheduled with anticipated losses up to 20% of the outstanding balance.
9	Doubtful	Collection or liquidation in full highly questionable and improbable. Escalated collection activities such as foreclosure have commenced with anticipated losses from 20% to 50% of the outstanding balance.
10	Loss	Uncollectable loans. A complete write-off is imminent although a partial recovery may be affected in the future.

The carrying value of the Company’s loan, excluding the CECL reserve and based on the risk rating, is as follows:

Risk rating	March 31, 2025		December 31, 2024
6	$	388,944	$	392,186
Grand total	$	388,944	$	392,186