Loans Held For Investment, Net

6 Months Ended

Jun. 30, 2025

Loans Held For Investment, Net [Abstract]

LOANS HELD FOR INVESTMENT, NET

3. LOANS HELD FOR INVESTMENT, NET

The Company primarily originates senior secured loans that it has the intent and ability to hold until maturity or payoff. Such loans are classified as held for investment and are reported on the consolidated balance sheets at amortized cost. The following tables present summarized information regarding our loans held for investment by interest rate type as of June 30, 2025 and December 31, 2024:

	As of June 30, 2025
	Total Principal		Original Issue Discount			Carrying Value		Percentage of loans held for investment
Fixed-rate loans	$	166,213,408	$	(708,502	)	$	165,504,906		39.9	%
Floating-rate loans		250,204,740		(1,734,162	)		248,470,578		60.1	%
Total	$	416,418,148	$	(2,442,664	)	$	413,975,484		100.0	%

	As of December 31, 2024
	Total Principal		Original Issue Discount			Carrying Value		Percentage of loans held for investment
Fixed-rate loans	$	149,771,871	$	(545,081	)	$	149,226,790		37.1	%
Floating-rate loans		254,949,683		(1,699,427	)		253,250,256		62.9	%
Total	$	404,721,554	$	(2,244,508	)	$	402,477,046		100.0	%

The following tables summarize the Company’s aggregate portfolio of loans held for investment, net of the current expected credit loss reserve as of June 30, 2025 and December 31, 2024:

	As of June 30, 2025
	Outstanding Principal		Original Issue Discount			Carrying Value			Weighted Average Remaining Life (Years) (1)
Senior Term Loans	$	416,418,148	$	(2,442,664	)	$	413,975,484			2.0
Current expected credit loss reserve		-		-			(4,421,348	)
Total loans held at carrying value, net	$	416,418,148	$	(2,442,664	)	$	409,554,136

	As of December 31, 2024
	Outstanding Principal		Original Issue Discount			Carrying Value			Weighted Average Remaining Life (Years) (1)
Senior Term Loans	$	404,721,554	$	(2,244,508	)	$	402,477,046			2.2
Current expected credit loss reserve		-		-			(4,346,869	)
Total loans held at carrying value, net	$	404,721,554	$	(2,244,508	)	$	398,130,177

(1)Weighted average remaining life is calculated based on the carrying value of the loans as of June 30, 2025 and December 31, 2024, respectively.

The following tables present changes in loans held at carrying value as of and for the six months ended June 30, 2025 and 2024.

	Principal			Original Issue Discount			Current Expected Credit Loss Reserve			Carrying Value
Balance at December 31, 2024	$	404,721,554		$	(2,244,508	)	$	(4,346,869	)	$	398,130,177
Purchase of investments		20,859,561			(1,048,270	)		-			19,811,291
Principal repayment of loans		(12,279,060	)		-			-			(12,279,060	)
Accretion of original issue discount		-			850,114			-			850,114
Transfer of loan held for investment to loan held for sale		-			-			-			-
PIK Interest		3,116,093			-			-			3,116,093
Increase in provision for current expected credit losses		-			-			(74,479	)		(74,479	)
Balance at June 30, 2025	$	416,418,148		$	(2,442,664	)	$	(4,421,348	)	$	409,554,136

	Principal			Original Issue Discount			Current Expected Credit Loss Reserve			Carrying Value
Balance at December 31, 2023	$	355,745,305		$	(2,104,695	)	$	(4,972,647	)	$	348,667,963
Purchase of investments		43,372,158			(161,080	)		-			43,211,078
Principal repayment of loans		(21,638,340	)		-			-			(21,638,340	)
Accretion of original issue discount		-			847,315			-			847,315
Transfer of loan held for investment to loan held for sale		—						-			—
PIK Interest		5,802,004			-			-			5,802,004
Increase in provision for current expected credit losses		-			-			(107,900	)		(107,900	)
Balance at June 30, 2024	$	383,281,127		$	(1,418,460	)	$	(5,080,547	)	$	376,782,120

A more detailed listing of the Company’s loans held at carrying value based on information available as of June 30, 2025, is as follows:

		Initial Funding	Maturity	Principal		Original Issue			Carrying		Percent of Loans held			Future			Periodic	YTM
Loan	Location(s)	Date (1)	Date (2)	Balance		Premium/(Discount)			Value		for investment			Fundings		Interest Rate (3)	Payment (4)	IRR (5)
1	Various	10/27/2022	10/30/2026	$	19,186,876	$	(191,080	)	$	18,995,796		4.6	%	$	-	P+6.5% Cash (8)	P&I	17.1%
2	Michigan	12/31/2021	12/31/2025		27,110,506		(19,285	)		27,091,221		6.5	%		-	P+3% Cash (13)	I/O	17.3%
3	Various	11/18/2021	1/29/2027		21,523,183		(398,115	)		21,125,068		5.1	%		-	P+10.375% Cash, 2.75% PIK (11)(14)(15)(21)	I/O	23.5%
4	Arizona	6/1/2024	6/17/2026		6,626,809		-			6,626,809		1.6	%		-	11.91% Cash	I/O	17.0%
6	Michigan	8/20/2021	1/30/2026		4,958,672		(1,537	)		4,957,135		1.2	%		-	P+6.5% Cash (13)(20)	P&I	17.2%
7	Illinois, Arizona	6/30/2025	6/30/2028		33,130,667		(537,735	)		32,592,932		7.9	%		3,000,000	P+5.75% Cash (9)	I/O	15.6%
8	West Virginia	8/30/2024	12/31/2025		8,491,943		-			8,491,943		2.1	%		-	10% Cash	I/O	15.0%
9	Pennsylvania	3/31/2025	3/31/2028		17,926,987		(108,037	)		17,818,950		4.3	%			9% Cash (16)	I/O	9.7%
12	Various	11/8/2021	10/31/2027		14,807,687		(95,856	)		14,711,831		3.6	%		-	P+7% Cash, 2% PIK (10)	I/O	19.6%
16	Florida	6/1/2025	1/29/2027		9,557,500		(127,753	)		9,429,747		2.3	%		500,000	16.75% Cash	I/O	26.7%
18	Ohio	2/3/2022	12/31/2025		46,168,399		(227,963	)		45,940,436		11.1	%		-	P+1.75% Cash, 5% PIK (9)(17)	I/O	16.7%
19	Florida	3/11/2022	12/31/2025		18,061,526		(10,511	)		18,051,015		4.4	%		-	11% Cash, 5% PIK	P&I	16.5%
20	Missouri	5/9/2022	11/28/2025		21,104,965		(34,683	)		21,070,282		5.1	%		-	11% Cash, 2% PIK (21)	I/O	14.7%
21	Illinois	7/1/2022	7/29/2026		6,325,417		(19,981	)		6,305,436		1.5	%		-	P+7% Cash, 2% PIK (9)	P&I	23.3%
23	Arizona	3/27/2023	3/31/2026		1,500,000		(9,307	)		1,490,693		0.4	%		-	P+7.5% Cash (12)	P&I	18.7%
24	Oregon	9/27/2022	9/27/2026		460,000		-			460,000		0.1	%		-	P+10.5% Cash (7)	P&I	21.7%
25	New York	7/1/2023	6/29/2036		23,580,998		-			23,580,998		5.7	%		-	15% Cash	P&I	16.6%
27	Nebraska	8/15/2023	6/30/2027		17,400,000		-			17,400,000		4.2	%		-	P+6.5% Cash (18)	I/O	15.7%
29	Illinois	10/11/2023	10/9/2026		1,897,729		-			1,897,729		0.5	%		-	11.4% Cash, 1.5% PIK (21)	P&I	14.7%
30	Missouri, Arizona	12/19/2023	12/31/2026		18,400,000		(95,257	)		18,304,743		4.4	%		-	P+7.75% Cash (13)	I/O	18.7%
31	California, Illinois	5/3/2023	5/3/2026		6,680,000		-			6,680,000		1.6	%		-	P+8.75% Cash (10)	I/O	18.3%
32	Nevada	4/15/2024	8/15/2027		5,750,000		(21,717	)		5,728,283		1.4	%		-	P+6.5% Cash (12)(21)	I/O	16.1%
33	Minnesota	5/20/2024	5/28/2027		1,044,000		(3,294	)		1,040,706		0.3	%		-	12% Cash (14)(21)	P&I	13.3%
34	Arizona	6/17/2024	5/29/2026		10,000,000		-			10,000,000		2.4	%		-	11.91% Cash	I/O	12.8%
35	California	8/23/2024	8/23/2027		24,624,213		-			24,624,213		5.9	%		-	12% Cash, 3% PIK	I/O	16.3%
36	Illinois	10/28/2024	1/1/2027		26,570,000		(94,816	)		26,475,184		6.4	%		1,030,000	P+6.25% Cash (10)	I/O	15.4%
37	Various	11/26/2024	11/24/2028		20,120,309		(340,507	)		19,779,802		4.8	%		10,000,000	12% Cash, 1% PIK (19)	I/O	15.2%
38a	Various	12/13/2024	12/12/2025		2,065,000		(52,726	)		2,012,274		0.5	%		2,065,000	10% Cash (19)	I/O	15.6%
38b	Various	1/15/2025	12/12/2025		840,000		(23,994	)		816,006		0.2	%		-	10% Cash (19)	I/O	15.6%
40	Various	3/28/2025	7/28/2028		233,333		(21,513	)		211,820		0.1	%		-	SOFR +10.25% Cash (6)	I/O	19.4%
41	Ohio	3/1/2025	3/13/2027		271,429		(6,997	)		264,432		0.1	%		-	14.5% Cash	I/O	16.1%
			Subtotal	$	416,418,148	$	(2,442,664	)	$	413,975,484		100.0	%	$	16,595,000			16.8%

(1)Loan numbering in the table above is maintained from origination for purposes of comparability and may not be sequential due to maturities, payoffs, or refinancings.

(2)Certain loans are subject to contractual extension options as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein and certain borrowers may have the right to prepay with or without a contractual prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.

(3)"P" = prime rate; "SOFR"= Secured Overnight Financing Rate. "P" and "SOFR" represent floating rate loans that pay interest at the designed benchmark rate plus an applicable spread; "SOFR" loans are typically indexed to 30-day, 90-day or 180-day rates (1 month, 3 month, or 6 month, respectively); "PIK" = paid-in-kind interest.

(4)P&I = principal and interest. I/O = interest only. P&I loans may include interest only periods for a portion of the loan term. The frequency of loan payments may be monthly or quarterly as required by the respective credit agreement governing such loan.

(5)Estimated YTM, calculated on a weighted average principal basis, includes a variety of fees and features that affect the total yield, which may include, but is not limited to, OID, exit fees, prepayment fees, unused fees and contingent features. OID is recognized as a discount to the funded loan principal and is accreted to income over the term of the loan. The estimated YTM calculations require management to make estimates and assumptions, including, but not limited to, the timing and amounts of loan draws on delayed draw loans, the timing and collectability of exit fees, the probability and timing of prepayments and the probability of contingent features occurring. For example, certain credit agreements contain provisions pursuant to which certain PIK interest rates and fees earned by us under such credit agreements will decrease upon the satisfaction of certain specified criteria which we believe may improve the risk profile of the applicable borrower. To be conservative, we have not assumed any prepayment penalties or early payoffs in our estimated YTM calculation. Estimated YTM is based on current management estimates and assumptions, which may change. Actual results could differ from those estimates and assumptions.

(6)This Loan is subject to a SOFR floor of 4.00%

(7)This Loan is subject to a prime rate floor of 5.50%

(8)This Loan is subject to a prime rate floor of 6.25%

(9)This Loan is subject to a prime rate floor of 7.00%

(10)This Loan is subject to a prime rate floor of 7.50%

(11)This Loan is subject to a prime rate floor of 7.75%

(12)This Loan is subject to a prime rate floor of 8.00%

(13)This Loan is subject to a prime rate floor of 8.50%

(14)The borrowers of Loan #3 and Loan #33 are affiliates of Vireo Growth, Inc., a related party. The aggregate principal balance of these loans is included on the consolidated balance sheet as loans held for investment - related party. See Note 8 for further details.

(15)The aggregate principal balance outstanding of Loan #3 is comprised of two tranches. The first tranche has a principal balance of approximately $16.9 million, bears a floating interest rate of prime plus 10.375% cash and 2.75% PIK and has a maturity date of January 29, 2027. The second tranche has a principal balance of approximately $4.4 million, bears an interest rate of 15.00% cash and 2.00% PIK, and a maturity date of May 29, 2026. The statistics presented reflect the weighted average of the rate terms under both tranches for the total aggregate loan principal, however only the maturity date for the first tranche has been presented in the table above.

(16)Loan #9, is comprised of two tranches, a $14.5 million first lien judgment loan (the "Judgment Loan") and a $2.0 million second lien term loan (the "Term Loan"). The Judgment Loan and the Term Loan bear interest at a rate of 9.0%. The Judgment Loan has no contractual maturity and will remain outstanding until paid by the obligor and the Term Loan has a maturity of March 31, 2028. For comparability to previously issued financial statements, management will continue to reference the Judgment Loan and the Term Loan, collectively, as Loan #9, and the maturity date presented represents the maturity date of the Term Loan. See Note 8 for additional information.

(17)An affiliate under common control holds a controlling equity investment in this portfolio company (Note 8).

(18)This loan has floating grid pricing based on the Prime Rate plus a spread of 5.00% to 8.75% based on monthly annualized EBITDA performance. As of June 30, 2025, applied interest rate is Prime Rate + 6.50%.

(19)Loan #37 and Loan #38 bear unused fees on the unfunded commitment of 0.75% and 1.50% per annum, respectively.

(20)Loan #6 was placed on non-accrual on May 9, 2025 and all accrued interest after April 1, 2025 was reversed at that time. This loan remains on non-accrual as of June 30, 2025.

(21)These loans were repaid in full with all accrued interest and fees during the subsequent period from July 1, 2025 to August 7, 2025 (Note 16).

The following table presents aging analyses of past due loans by amortized cost, excluding the CECL reserve, as of June 30, 2025 and December 31, 2024:

	As of June 30, 2025
	Current Loans (1)		31-60 Days Past Due		61-90 Days Past Due		90+ Days Past Due		Total Past Due		Total Loans		Non- Accrual(2)(3)
Senior Term Loans	$	413,975,484	$	-	$	-	$	-	$	-	$	413,975,484	$	22,776,085
Total	$	413,975,484	$	-	$	-	$	-	$	-	$	413,975,484	$	22,776,085

	As of December 31, 2024
	Current Loans (1)		31-60 Days Past Due		61-90 Days Past Due		90+ Days Past Due (2)		Total Past Due		Total Loans		Non- Accrual(2)
Senior Term Loans	$	386,074,558	$	-	$	-	$	16,402,488	$	16,402,488	$	402,477,046	$	16,402,488
Total	$	386,074,558	$	-	$	-	$	16,402,488	$	16,402,488	$	402,477,046	$	16,402,488

(1)Loans for which principal repayment is 1-30 days past due are included in the current loans.

(2)On May 1, 2023, Loan #9 was placed on non-accrual status. On June 20, 2023, the Administrative Agent to Loan #9 issued an acceleration notice requesting immediate payment of all amounts outstanding and therefore is 90 days past due as of December 31, 2024. See Note 8 for further details.

(3)Loan #6 was placed on non-accrual on May 9, 2025 and remains on non-accrual as of June 30, 2025.

Non-Accrual Loans

As of June 30, 2025 and December 31, 2024, there were two and one loans placed on non-accrual status.

As more fully described in Note 8, Loan #9 was placed on non-accrual status as of May 1, 2023 and has a carrying value of approximately $17.8 million and $16.4 million as of both June 30, 2025 and December 31, 2024. Loan #9 carried a reserve for current expected credit losses of approximately $0.5 million and $1.2 million as of June 30, 2025 and December 31, 2024, respectively. The Company ceased accruing interest on the first date of delinquency, based on expectation of its ability to collect all amounts then due from the borrower. As a result, there was no accrued interest to write-off when the loan was placed on non-accrual.

Loan #6 was placed on non-accrual status as of May 9, 2025 and had an outstanding principal balance and carrying value of approximately $4.9 million as of June 30, 2025. A Default Notice was sent to the borrower on May 9, 2025 specifying certain events of default including the non-payment of interest and principal. Management has begun the process to exercise its rights and remedies under the loan documents.

Credit Quality Indicators

The Company assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, payment history, real estate collateral coverage, property type, geographic and local market dynamics, financial performance, loan to enterprise value and fixed charge coverage ratios, loan structure and exit strategy, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:

Rating	Definition
1	Very low risk
2	Low risk
3	Moderate/average risk
4	High risk/potential for loss: a loan that has a risk of realizing a principal loss
5	Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded

The risk ratings are primarily determined based on current and historical performance metrics specific to each portfolio company, as well as consideration of future economic conditions and each borrower’s estimated ability to meet debt service requirements. The risk ratings shown in the following table as of June 30, 2025 and December 31, 2024 consider borrower specific credit history and performance and reflect a quarterly re-evaluation of overall current macroeconomic conditions affecting the Company’s borrowers, specifically those designated as held for investment.

As of June 30, 2025 and December 31, 2024, the carrying value, excluding the current expected credit loss reserve (the “CECL Reserve”), of the Company’s loans within each risk rating category by year of origination is as follows:

	As of June 30, 2025(1)
Risk Rating	2025		2024		2023		2022		2021		Total
1	$	-	$	6,768,989	$	1,897,729	$	21,530,282	$	21,125,068	$	51,322,068
2		33,620,758		53,111,671		67,456,434		43,352,247		-		197,541,110
3		9,694,179		28,271,745		-		45,940,436		41,803,052		125,709,412
4		17,818,950		16,626,809		-		-		4,957,135		39,402,894
5		-		-		-		-		-		-
Total	$	61,133,887	$	104,779,214	$	69,354,163	$	110,822,965	$	67,885,255	$	413,975,484

	As of December 31, 2024(1)
Risk Rating	2024		2023		2022		2021		Total
1		1,111,224	$	580,000	$	41,045,793	$	-	$	42,737,017
2		63,823,279		64,896,824		90,874,764		24,239,380		243,834,247
3		34,653,247		2,466,705		27,110,506		13,687,904		77,918,362
4		10,000,000		-		-		27,987,420		37,987,420
5		-		-		-		-		-
Total	$	109,587,750	$	67,943,529	$	159,031,063	$	65,914,704	$	402,477,046

(1)Amounts are presented by loan origination year with subsequent advances shown in the original year of origination.

Real estate collateral coverage is also a significant credit quality indicator, and real estate collateral coverage, excluding the CECL Reserve, was as follows as of June 30, 2025 and December 31, 2024:

As of June 30, 2025(1)
	< 1.0x		1.0x – 1.25x		1.25x – 1.5x		1.50x – 1.75x		1.75x – 2.0x		> 2.0x		Total
Fixed-rate	$	86,414,228	$	24,624,213	$	43,036,087	$	9,532,649	$	-	$	1,897,729	$	165,504,906
Floating-rate		132,976,850		6,305,436		211,820		32,592,932		26,475,184		49,908,356		248,470,578
	$	219,391,078	$	30,929,649	$	43,247,907	$	42,125,581	$	26,475,184	$	51,806,085	$	413,975,484

As of December 31, 2024(1)
	< 1.0x		1.0x – 1.25x		1.25x – 1.5x		1.50x – 1.75x		1.75x – 2.0x		> 2.0x		Total
Fixed-rate	$	45,029,665	$	48,900,184	$	43,750,558	$	9,603,167	$	-	$	1,943,216	$	149,226,790
Floating-rate		155,364,941		16,402,488		6,549,135		—		24,885,063		50,048,629		253,250,256
	$	200,394,606	$	65,302,672	$	50,299,693	$	9,603,167	$	24,885,063	$	51,991,845	$	402,477,046

(1)Real estate collateral coverage is calculated based upon most recent third party appraised values. The Company generally obtains a new appraisal of all material real estate collateral at least once annually.

Geography concentration of our loans held for investment is also a significant credit quality indicator. As of June 30, 2025 and December 31, 2024, our borrowers have operations in the jurisdictions in the table below:

As of June 30, 2025						As of December 31, 2024
Jurisdiction	Outstanding Principal (1)		Percentage of Our Loan Portfolio			Jurisdiction	Outstanding Principal (1)		Percentage of Our Loan Portfolio
Illinois	$	70,614,725		17	%	Illinois	$	55,958,079		14	%
Ohio		63,487,510		15	%	Ohio		60,065,707		15	%
Florida		44,968,576		11	%	Florida		42,712,285		11	%
Pennsylvania		37,113,862		9	%	Pennsylvania		35,727,045		9	%
Missouri		36,073,052		9	%	Missouri		38,208,259		9	%
Michigan		32,069,178		8	%	Michigan		32,068,629		8	%
Arizona		25,163,960		6	%	Arizona		28,023,340		7	%
California		25,008,065		6	%	California		26,057,479		6	%
New York		23,580,998		6	%	New York		25,093,595		6	%
Maryland		22,188,184		5	%	Maryland		21,835,901		5	%
Nebraska		17,400,000		4	%	Nebraska		17,400,000		4	%
West Virginia		8,491,943		2	%	West Virginia		8,491,943		2	%
Nevada		5,750,001		1	%	Nevada		6,000,000		1	%
Texas		2,770,760		1	%	Texas		2,756,870		1	%
Minnesota		1,124,460		0	%	Minnesota		1,116,000		0	%
Oregon		612,874		0	%	Oregon		580,000		0	%
Massachusetts		-		-	%	Massachusetts		2,626,423		1	%
Total	$	416,418,148		100	%	Total	$	404,721,554		100	%

(1)The principal balance of the loans not secured by real estate collateral are included in the jurisdiction representing the principal place of business.

CECL Reserve

The Company records an allowance for current expected credit losses for its loans held for investment. The allowances are deducted from the gross carrying amount of the assets to present the net carrying value of the amounts expected to be collected on such assets. The Company estimates its CECL Reserve using, among other inputs, third-party valuations and a third-party probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan based on the risk profile for approximately three years after which we immediately revert to use of historical loss data.

ASC 326 requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. The Company considers multiple datapoints and methodologies that may include likelihood of default and expected loss given default for each individual loan, valuations derived from discount cash flows (“DCF”), and other inputs including the risk rating of the loan, how recently the loan was originated compared to the measurement date, and expected prepayment, if applicable. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments.

The Company evaluates its loans on a collective (pool) basis by aggregating on the basis of similar risk characteristics as explained above. We make the judgment that loans to cannabis-related borrowers that are collateralized by real estate exhibit similar risk characteristics and are evaluated as a pool. Further, loans that have no real estate collateral, but are secured by other forms of collateral, including equity pledges of the borrower, and otherwise have similar characteristics as those collateralized by real estate may be evaluated as a separate pool. All other loans are analyzed individually, either because they operate in a different industry, may have a different risk profile, or maturities that extend beyond the forecast horizon for which we are able to derive reasonable and supportable forecasts.

Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of the Company’s loan portfolio, and (iv) the Company’s current and future view of the macroeconomic environment including benchmark interest rate fluctuations. The Company also considers loan-specific qualitative factors which may include; among other factors; (i) whether cash from the borrower’s operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan, and (iii) the liquidation value of collateral. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we may elect to apply a practical expedient, in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a CECL Reserve.

To estimate the historic loan losses relevant to the Company’s portfolio, the Company evaluates its historical loan performance, which includes zero realized loan losses since the inception of its operations. Additionally, the Company analyzed its repayment history, noting it has limited “true” operating history, since the incorporation date of March 30, 2021. However, the Company’s Sponsor and its affiliates have had operations for the past five fiscal years and have made investments in similar loans that have similar characteristics including interest rate, collateral coverage, guarantees, and prepayment/make whole provisions, which fall into the pools identified above, and may be considered by management in determining the extent to which a CECL Reserve shall be recorded.

In addition, the Company reviews each loan on a quarterly basis and evaluates the borrower’s ability to pay the monthly interest and principal, if required, as well as the loan-to-value (LTV) ratio. When evaluating qualitative factors that may indicate the need for a CECL Reserve, the Company forecasts losses considering a variety of factors. In considering the potential current expected credit loss, the Manager primarily considers significant inputs to the Company’s forecasting methods, which include (i) key loan-specific inputs such as the value of the real estate collateral, liens on equity (including the equity in the entity that holds the state-issued license to cultivate, process, distribute, or retail cannabis), presence of personal or corporate guarantees, among other credit enhancements, LTV ratio, rate type (fixed or floating) and IRR, loan-term, geographic location, and expected timing and amount of future loan fundings, (ii) performance against the underwritten business plan and the Company’s internal loan risk rating, and (iii) a macro-economic forecast. Estimating the enterprise value of our borrowers in order to calculate LTV ratios is often a significant estimate. The Manager utilizes a third-party valuation appraiser to assist with the Company’s valuation process primarily using comparable transactions to estimate enterprise value of its portfolio companies and supplement such analysis with a multiple-based approach to enterprise value to revenue multiples of publicly-traded comparable companies obtained from S&P Capital IQ as of June 30, 2025, to which the Manager may apply a private company discount based on the Company’s current borrower profile.

During the six month period ended June 30, 2025, the Company's CECL Reserve increased by approximately $0.1 million. On a relative size basis, the CECL reserve represented 1.07% and 1.06% of principal our loans held for investment as of both June 30, 2025 and December 31, 2024, respectively; however, the Company noted approximately $51.3 million of principal of loans held for investment were fully repaid during the subsequent period from June 30, 2025 through August 7, 2025 and for these loans, management applied a $0 CECL reserve. These loans are included in risk rating "1" in the tables above. Accordingly, adjusted for these full repayments, the CECL reserve as of June 30, 2025 represents approximately 1.23% of the principal of loans held of investment.

The increase in the CECL reserve corresponds to risk rating changes within of our portfolio of loans held for investment during the comparative three-month period from March 31, 2025 to June 30, 2025, primarily due to Loan #6 being placed on non-accrual status and the continued non-accrual of Loan #9. The carrying value of loans held for investment risk rated "4" increased from approximately $21.6 million or 5.4% as of March 31, 2025 to $39.4 million or 9.5% as of June 30, 2025.

Regarding real estate collateral, the Company generally cannot take the position of mortgagee-in-possession as long as the property is used by a cannabis operator, but it can request that the court appoint a receiver to manage and operate the subject real property until the foreclosure proceedings are completed. Additionally, while the Company cannot foreclose under state Uniform Commercial Code (“UCC”) and take title or sell equity in a licensed cannabis business, a potential purchaser of a delinquent or defaulted loan could.

In order to estimate the future expected loan losses relevant to the Company’s portfolio, the Company utilizes historical market loan loss data obtained from a third-party database for commercial real estate loans, which the Company believes is a reasonably comparable and available data set to use as an input for its type of loans. The Company believes this dataset to be representative for future credit losses without historical loss data.

All of the above assumptions, although made with the most available information at the time of the estimate, are subjective and actual activity may not follow the estimated schedule. These assumptions impact the future balances that the loss rate will be applied to and as such impact the Company’s CECL Reserve. As the Company acquires new loans and the Manager monitors loan and borrower performance, these estimates will be revised each period.

Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value and loans receivable at carrying value as of and for the six months ended June 30, 2025 and 2024 is presented in the table below.

	Funded		Unfunded			Total
Balance at December 31, 2024	$	4,346,869	$	45,572		$	4,392,441
Provision (benefit) for current expected credit losses		74,479		(465	)		74,014
Balance at June 30, 2025	$	4,421,348	$	45,107		$	4,466,455

	Funded		Unfunded			Total
Balance at December 31, 2023	$	4,972,647	$	3,092		$	4,975,739
Provision (benefit) for current expected credit losses		107,900		(3,092	)		104,808
Balance at June 30, 2024	$	5,080,547	$	—		$	5,080,547

The Company has made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of the related loans held for investment in determining the CECL Reserve, as any uncollectible accrued interest receivable is generally written off in a timely manner. To date, the Company has had zero write-offs related to uncollectible interest receivable, but will discontinue accrual of interest on loans if deemed to be uncollectible, with any previously accrued uncollected interest on the loan charged to interest income in the same period. For loans on non-accrual as of June 30, 2025, the Company generally ceased accruing interest on the first date of delinquency, based on expectation of its ability to collect all amounts then due from the borrower. As it relates to Loan #6, accrued interest for the period from April 1, 2025 through May 9, 2025, the date the loan was placed on non-accrual, was reversed. Management believes it is more likely than not that the remaining outstanding interest receivable prior to such date remains collectible.