What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-10 · 163 added, 132 removed, 157 unchanged (65% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this report.

The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the accompanying unaudited consolidated financial statements and the notes to those statements included elsewhere in this Report.

Certain statements in this discussion and elsewhere in this Report constitute forward-looking statements, within the meaning of section 21E of the Exchange Act, that involve risks and uncertainties.

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As a REIT, we may also be subject to federal excise taxes and state taxes.

Review of the First Quarter and Outlook for Balance of Year

Compared to the first quarter of 2023, revenue in the first quarter of 2024 increased 17.0%, net income attributable to common shareholders decreased 13.0%, and earnings per share decreased $0.02 per share.

Review of the First Half of 2024 and Outlook for Balance of Year

Compared to the first half of 2023, revenue in the first half of 2024 increased 4.4%, net income attributable to common shareholders decreased 105.3%, and earnings per share decreased $0.22 per share.

The increase in revenue is primarily due to an increase in interest rates that we are able to charge borrowers, reflected in our interest income which had an increase of 6.6%.

In addition, income from partnership investments increased 117.4%, and, as of March 31, 2024 the underlying investments within those partnerships had zero defaults.

On the other hand, unrealized gain on equity securities decreased approximately $0.5 million quarter-over-quarter.

The increase in revenue was offset by an overall 30.7% increase in operating costs and expenses.

The increase in operating expenses is mainly attributable to a 8.7% increase in interest expense and amortization of deferred financing costs.

The increase in interest expense is attributable to the higher interest rate environment.

In addition, income from partnership investments increased 55.1%, and, as of June 30, 2024 the underlying mortgage loan investments within those partnerships had zero defaults.

The increase in revenue was offset by an overall 54.4% increase in operating expenses.

The increase in operating expenses is mainly attributable to an increase of $9.7 million in provisions for credit losses related to loans year-over-year, which had the most significant impact on earnings per share.

This was primarily driven by underlying asset valuation declines in our loans that are pending foreclosure.

Provisions for credit losses, including impairment losses, are a non-cash charge and have no impact on our taxable income.

Additionally, we had a 3.1% increase in interest expense and amortization of deferred financing costs.

The increase in interest expense is primarily attributable to the higher interest rate environment.

We expect interest expense to increase over the remainder of 2024 as we seek to refinance over $34.5 million aggregate principal amount of our unsecured unsubordinated notes maturing in 2024.

We experienced a 37.9% increase in general and administrative expenses, driven primarily from consulting and professional fees, a 564.9% increase in other expenses driven primarily by tax expenses relating to the TRS, and a 1,192.4% increase in provision for credit losses related to loans.

The additional provision for credit losses related to loans was principally caused by value declines in mortgages secured by commercial real estate.

Despite a difficult commercial real estate and capital markets environment, our primary business objective for 2024 remains to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term principally through dividends.

This optimism stems from our perception that the ongoing dislocation and turmoil in the credit markets and the banking sector will continue to fuel significant demand for our mortgage products.

We intend to achieve this objective by continuing to focus on selectively originating, managing, and servicing a portfolio of first mortgage real estate loans designed to generate attractive risk-adjusted returns across a variety of market conditions and economic cycles.

We believe that our strategy targeting larger-value commercial loans with strong, experienced sponsors and on developing relationships with larger scale brokers, furthering our efforts to attract larger borrowers with better credit quality has been critical to our ability to continue to operate profitably in this difficult lending environment.

We experienced a 12.7% increase in general and administrative expenses, driven primarily from consulting and professional fees, a 191.6% increase in other expenses driven primarily by tax expenses relating to our taxable REIT subsidiary.

Despite a difficult commercial real estate and capital markets environment, our primary business objective for 2024 is to protect book value for our shareholders.

We believe we can do so by allocating capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term - principally through dividends.

This stems from our perception that the ongoing dislocation and turmoil in the credit markets and the banking sector will continue to fuel significant demand for our mortgage products.

We intend to achieve our primary business objective by continuing to focus on selectively originating, managing, and servicing a portfolio of first mortgage real estate loans designed to generate attractive returns across a variety of market conditions and economic cycles.

We believe that our strategy targeting larger-value loans with strong, experienced sponsors and on developing relationships with larger scale brokers, furthering our efforts to attract larger borrowers with better credit quality has been critical to our ability to continue to operate profitably in this difficult lending environment.

In addition, to drive additional operational excellence, we are committed to continuously review, assess, and upgrade our existing operational processes, from workflows and employee roles/responsibilities to decision trees and data collection forms.

We believe that our ability to react quickly to the needs of borrowers, our flexibility in terms of structuring loans to meet the needs of borrowers, our knowledge of the primary real estate markets we lend in, our expertise in “hard money” lending and our focus on newly originated first mortgage loans, should enable us to achieve our primary objective.

Nevertheless, we remain flexible to take advantage of other real estate opportunities that may arise from time to time, whether they relate to the mortgage market or to direct or indirect investments in real estate.

achieve our primary business objective.

Nevertheless, we remain poised to take advantage of other real estate opportunities that may arise from time to time, whether they relate to the mortgage market or to direct or indirect investments in real estate.

Our overall business strategy is as follows:

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● operate to qualify as a REIT and for an exemption from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act.

We believe that the following factors are the major challenges confronting us in 2024:

We believe that the following factors are the major challenges confronting us for the remainder of 2024:

High interest rate environment.

The rates on our existing credit facilities, including the Churchill Facility, the Wells Fargo Loan and the NHB Mortgage (refinanced in February 2023) (as defined below), have all increased.

The effective rate of Needham Bank Credit Facility was 8.25%, and Churchill Facility was 9.40% as of March 31, 2024.

The rates on our existing credit facilities, including the Churchill Facility and the New NHB Mortgage (as defined below), have all increased.

The effective rate of Needham Bank Credit Facility was 8.25%, and Churchill Facility was 9.60% as of June 30, 2024.

In addition, the interest rate on the September 2027 Notes, our last note offering in 2022, was 8.0%, the highest it has ever been.

We expect interest rates to remain elevated for the remainder of 2024.

Geopolitical concerns.

2023 and early 2024 was marked with various geopolitical concerns, including the ongoing conflict between Ukraine and Russia and Israel and Hamas, heightened tensions between the U.S.

and China regarding Taiwan and global trade, and Iran’s continued pursuit of nuclear weapons and its ongoing attempts to destabilize the Middle East, to name a few.

Capital markets illiquidity .

Our last underwritten public offering was in August 2022.

Since then our sole source of working capital has been interest and principal payments on our existing loan portfolio, our existing credit facilities (Churchill and Needham) and intermittent sales under our at-the-market offering facility.

In the current environment, growth capital is simply too expensive and will remain so until interest rates begin to come down.

Global and domestic political concerns.

2023 and early 2024 was marked with various geopolitical concerns, including the ongoing conflict between Ukraine and Russia and Israel and Hamas and other Iranian proxies, heightened tensions between the U.S.

and China regarding Taiwan and global trade, Iran’s and North Korea’s continued pursuit of nuclear weapons and Iran’s ongoing attempts to destabilize the Middle East.

These conflicts have led to market volatility, spikes in commodity prices, supply chain interruptions, heightened cybersecurity concerns and general concerns that it might lead to unconventional warfare.

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Our business is purely domestic, but we are impacted by market volatility and cybersecurity is a concern for all businesses.

Additionally the United States will have a presidential election in the fourth quarter of this year.

While the effects of the election are difficult to predict, one thing is clear:

come January 2025, we will have a new administration, whose policies and priorities remain to be seen.

Increased competition from private lenders.

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Given recent developments regarding mid-size regional banks, we believe competition from traditional banks will continue to abate in 2024 rather than increase.

However, as traditional banks exit the lending market, non-traditional lenders, such as non-bank real estate companies, hedge funds, private equity funds and insurance companies, are likely to step into the void.

However, as traditional banks exit the lending market, non-traditional lenders, such as non-bank real estate companies, hedge funds, private equity funds and insurance companies, are likely to

step into the void.

Our principal competitive advantages include our experience, our reputation, our size and our ability to address the needs of borrowers in terms of timing and structuring loan transactions.

Property value fluctuations.

Property value market cycles could have an adverse impact on our operations and financial condition.

We monitor a variety of indicators to track property value trends, including the Federal Funds Rate, U.S Treasury data, days-on-market, pending sales, NAHB’s Housing Market Index and CoStar reports.

Additionally, we almost always utilize a third party valuation including, but not limited to, appraisals, Broker Price Opinions (“BPOs”), and Automated Valuation Models (“AVMs”), to assist in both our underwriting and monitoring of our portfolio assets.

We continue to see declines in real estate

valuations, particularly with larger commercial real estate assets (notably office).

By judiciously relying on our indicators and continuing to make sound underwriting decisions, we are poised to respond quickly if asset valuations begin to decline.

Increased operating expenses and capital outlay.

Our operating expenses for the three months ended March 31, 2024 are higher than they were in 2023 due to our higher debt load, as well as higher borrowing rates.

In addition, we have two tranches of unsecured Notes coming due in 2024.

The refinance of these Notes will likely carry a higher interest rate, ultimately increasing interest expenses even further.

Finally, our other expenses increased primarily from federal tax liabilities and general and administrative increased from short payoffs on defaulted loans.

Property value fluctuations and declines.

Additionally, we primarily utilize third-party valuations including, but not limited to, appraisals, broker price opinions, automated valuation models, and internal valuations to assist in both our underwriting and monitoring of our portfolio assets.

Nevertheless, property value market cycles could have an adverse impact on our operations and financial condition.

Over the past two years, the commercial real estate market throughout most of the United States has experienced a significant decline in value, which has led to a corresponding increase in the rate of loan defaults and foreclosures.

As a result, many REITs have been forced to record additional allowances for credit losses and write-downs of real estate assets.

Although many of our loans are secured by residential properties, 29.3% of our portfolio is secured by commercial real estate and, hence, we are not immune from this trend.

On a quarterly basis, we evaluate the allowance for credit losses by analyzing several market indicators indicated above and adjust accordingly.

Our total allowance for credit losses related to loans as of June 30, 2024 was $19.1 million.

Our total provisions for credit losses related to loans for the three and six month periods ended June 30, 2024 were $8.5 million and $9.9 million, respectively.

Similarly, the decline in commercial real estate values has led to an increase in our foreclosure rates.

At June 30, 2024, 19.1% of the loans in our portfolio were in foreclosure proceedings compared to 18.0% at December 31, 2023.

We expect these trends to continue through the remainder of 2024.

Unfunded commitments.

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However, where all or a portion of the loan proceeds are to be used to fund the costs of renovating or constructing improvements on the property, only a portion of the loan may be funded at closing.

At March 31, 2024, our mortgage loan portfolio included 93 loans with future funding obligations, in the aggregate principal amount of $95.5 million, compared 171 loans with future funding obligations, in the aggregate principal amount of approximately $114.9 million at March 31, 2023.

At June 30, 2024, our mortgage loan portfolio included 93 loans with future funding obligations, in the aggregate principal amount of $89.0 million, compared 143 loans with future funding obligations, in the aggregate principal amount of $103.3 million at June 30, 2023.

Advances under construction loans are funded against requests supported by all required documentation (including lien waivers) as and when needed to pay contractors and other costs of construction.

To deal with these obligations, we are compelled to maintain higher cash balances, which could adversely impact our financial performance.

Despite these challenges, the changing dynamics of the real estate finance marketplace, the debt and equity markets, shocks to the financial system and challenging geopolitical developments, we continue to believe in the viability of our business model.

Despite these challenges, the changing dynamics of the real estate finance marketplace, the debt and equity markets, shocks to the financial system and challenging political developments, we continue to believe in the viability of our business model.

We believe that there continues to be a significant market opportunity for a well-capitalized “hard money” lender to originate attractively priced loans to small- and mid-scale real estate developers with good collateral, particularly in markets where, traditionally, real estate values are stable and substandard properties are improved, rehabilitated, and renovated as well as under-developed markets that are experiencing rapid growth due to population shifts.

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● Strong balance sheet.

At March 31, 2024, we had approximately $237.4 million of shareholders’ equity and total indebtedness for borrowed money of approximately $377.6 million (including deferred financing costs).

Thus, our capital structure was approximately 60.3% debt and 39.7% equity compared to approximately 59.9% debt and 40.1% equity at March 31, 2023 which is significantly lower than our mortgage REIT peers.

Our equity includes 2,108,957 shares of Series A Preferred Stock, which carries a dividend rate of 7.75% per annum.

At June 30, 2024, we had $230.2 million of shareholders’ equity and total indebtedness for borrowed money of $343.8 million (including deferred financing costs).

Thus, our capital structure was 58.6% debt and 41.4% equity compared to 61.3% debt and 38.7% equity at June 30, 2023 which is significantly lower than our mortgage REIT peers.

Our equity includes 2,206,128 shares of Series A Preferred Stock (as defined in Note 18), which carries a dividend rate of 7.75% per annum.

● Pricing power.

For the three months ended March 31, 2024, and 2023, the yield on our mortgage loan portfolio, inclusive of default interest, was 12.7% and 11.69%, respectively.

For the six months ended June 30, 2024, and 2023, the yield on our mortgage loan portfolio, inclusive of default interest, was 12.81% and 12.17%, respectively.

(For this purpose, the yield only takes into account the stated interest rate on the mortgage note adjusted to the default rate, if applicable.) The pullback from the banking sector continues to provide demand for products and as such we have the ability to maintain attractive pricing.

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As a public company subject to the reporting requirements of the Exchange Act, we are able to access the public markets for capital.

Since the IPO through March 31, 2024, we raised approximately $509.6 million of gross proceeds through public offerings of our equity and debt securities.

We used the net proceeds from these offerings to grow our business.

Since the IPO through June 30, 2024, we raised $511.7 million of gross proceeds through public offerings of our equity and debt securities.

We have used the net proceeds from these offerings to grow our business.

● Liquidity .

In addition, to our capital raises through the public markets, we have other sources of liquidity:

(ii) a margin loan account with Wells Fargo that allows us to borrow against our investment securities portfolio (the “Wells Fargo Loan”);

and (iii) a $65 million revolving credit facility with Needham Bank, a Massachusetts co-operative bank, which can be increased up to $75 million (the “Needham Credit Facility”).

As of March 31, 2024, we had cash and cash equivalents of approximately $18.4 million.

(i) a $200 million master repurchase financing facility (the “Churchill Facility”) with Churchill MRA Funding I LLC (“Churchill”), a subsidiary of Churchill Real Estate, a vertically integrated real estate finance company based in New York, New York and (ii) a $65 million revolving credit facility with Needham Bank, a Massachusetts co-operative bank, which can be increased up to $75 million (the “Needham Credit Facility”).

As of June 30, 2024, we had cash and cash equivalents of $10.6 million.

● Management .

Our senior executive officers include John Villano, chief executive officer, president and interim chief financial officer.

Other key personnel include a vice president – finance and operations, a senior vice president – asset management and a vice president – asset management.

Our senior executive officers include John Villano, president and chief executive officer, and Nicholas Marcello, chief financial officer.

Other key personnel include a senior vice president – asset management and a vice president – asset management.

In addition, we have added personnel in operations, accounting and administration to accommodate the growth of our business.

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Although we have no pre-set guidelines in terms of leverage ratio, the amount of leverage we will deploy will depend on our assessment of a variety of factors, which may include the liquidity of the real estate market in which most of our collateral is located, employment rates, general economic conditions, the cost of funds relative to the yield curve, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, our opinion regarding the creditworthiness of our borrowers, the value of the collateral underlying our portfolio, and our outlook for interest rates and property values.

At March 31, 2024, debt represented approximately 60.3% of our total capital compared to 59.9% at March 31, 2023.

At June 30, 2024, debt represented 58.6% of our total capital compared to 61.3% at June 30, 2023.

To prudently grow the business and satisfy the tax requirement to distribute 90% of our taxable income, we expect to maintain our current level of debt and look to reduce our cost of capital.

We intend to maintain a modest amount of leverage for the sole purpose of financing our portfolio and not for speculating on changes in interest rates.

Our total outstanding indebtedness at March 31, 2024 was approximately $377.6 million, which included the Wells Fargo Loan balance of $27.3 million, $25.9 million outstanding under the Churchill Facility, approximately $1.1 million outstanding under the NHB Mortgage, $35.0 million outstanding under the Needham Credit Facility and approximately $288.4 million aggregate outstanding principal amount of five-year, unsecured unsubordinated notes, (the “Notes”) as follows:

● Approximately $40.3 million aggregate original principal amount, issued August 23, 2022, bearing interest at the rate of 8.00% per annum and maturing on September 30, 2027 (the “September 2027 Notes”), which trades on the NYSE American under the symbol SCCG;

Our total outstanding indebtedness at June 30, 2024 was $343.8 million, which included $23.0 million outstanding under the Churchill Facility, $1.0 million outstanding under the New NHB Mortgage, $55.0 million outstanding under the Needham Credit Facility and $264.7 million aggregate outstanding principal amount of five-year, unsecured unsubordinated notes, (the “Notes”) as set forth below.

On June 25, 2024, we redeemed our 7.125% unsecured, unsubordinated Notes due June 30, 2024 in the aggregate principal amount of $23.7 million (“the June 2024 Notes”) plus accrued and unpaid interest.

Following the repayment of the June 2024 Notes, the following Notes remain outstanding:

● $40.3 million aggregate original principal amount, issued August 23, 2022, bearing interest at the rate of 8.00% per annum and maturing on September 30, 2027 (the “September 2027 Notes”), which trades on the NYSE American under the symbol SCCG;

● $30.0 million aggregate original principal amount, issued May 11, 2022, bearing interest at the rate of 7.125% per annum and maturing on June 30, 2027 (the “June 2027 Notes”), which trades on the NYSE American under the symbol SCCF;

● Approximately $51.9 million aggregate original principal amount, issued March 9, 2022, bearing interest at the rate of 6.00% per annum and maturing on March 30, 2027 (the “March 2027 Notes”), which trades on the NYSE American under the symbol SCCE;

● Approximately $51.8 million aggregate original principal amount, issued December 20, 2021, bearing interest at the rate of 6.00% per annum and maturing on December 30, 2026 (the “2026 Notes”), which trades on the NYSE American under the symbol SCCD;

● Approximately $56.4 million aggregate original principal amount, of which approximately $14.4 million was issued September 4, 2020, $14.0 million was issued October 23, 2020 and $28.0 million was issued December 22, 2020,

bearing interest at the rate of 7.75% per annum and maturing on September 30, 2025 (the “2025 Notes”), which trades on the NYSE American under the symbol SCCC.

● $51.9 million aggregate original principal amount, issued March 9, 2022, bearing interest at the rate of 6.00% per annum and maturing on March 30, 2027 (the “March 2027 Notes”), which trades on the NYSE American under the symbol SCCE;

● $51.8 million aggregate original principal amount, issued December 20, 2021, bearing interest at the rate of 6.00% per annum and maturing on December 30, 2026 (the “2026 Notes”), which trades on the NYSE American under the symbol SCCD;

● $56.4 million aggregate original principal amount, of which $14.4 million was issued September 4, 2020, $14.0 million was issued October 23, 2020 and $28.0 million was issued December 22, 2020, bearing interest at the rate of 7.75% per annum and maturing on September 30, 2025 (the “2025 Notes”), which trades on the NYSE American under the symbol SCCC.

The 2025 Notes are prepayable beginning on September 4, 2022;

● $34.5 million aggregate original principal amount, issued November 7, 2019, bearing interest at the rate of 6.875% per annum and maturing on December 30, 2024 (the “December 2024 Notes”), which trades on the NYSE American under the symbol SACC.

● Approximately $23.7 million aggregate original principal amount, issued June 25, 2019, bearing interest at the rate of 7.125% per annum and maturing on June 30, 2024 (the “June 2024 Notes”), which trades on the NYSE American under the symbol SCCB.

Each series of Notes was issued pursuant to the Indenture, dated June 21, 2019, and a supplement thereto, which provides for the form and terms, including default provisions and cures, applicable to each series.

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Under the terms of the Indenture, we may, at our option, at any time and from time to time, redeem Notes two years after the date of their original issuance.

As such, the June 2024 Notes, the December 2024 Notes, the 2025 Notes, the 2026 Notes and the March 2027 are all currently redeemable at our option.

The June 2027 Notes will be redeemable in May 2024, and the September 27 Notes, will be redeemable in August 2024.

As such, the December 2024 Notes, the 2025 Notes, the 2026 Notes, the March 2027 and the June 2027 Notes are all currently redeemable at our option.

The September 2027 Notes will be redeemable at any time on or after August 23, 2024.

In each case the redemption price is equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest to, but excluding, the date fixed for redemption.

On and after any redemption date, interest will cease to accrue on the redeemed notes.

Our secured indebtedness as of March 31, 2024 includes the Churchill Facility, the Wells Fargo Loan, the NHB Mortgage and the Needham Credit Facility (each as described below).

Our secured indebtedness as of June 30, 2024 includes the Churchill Facility, the New NHB Mortgage and the Needham Credit Facility (each as described below).

Under the terms of the Churchill Facility, we have the right, but not the obligation, to sell mortgage loans to Churchill, and Churchill has the right, but not the obligation, to purchase those loans.

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It also gives us the flexibility to seek other sources of funding.

At March 31, 2024, the amount outstanding under the Churchill Facility was approximately $25.9 million, which amount was accruing interest of an effective rate of 9.4% per annum.

The Wells Fargo Loan is secured by our portfolio of investment securities, which had a value of approximately $36.6 million at March 31, 2024.

The outstanding balance on the Wells Fargo Loan of approximately $27.3 million bears interest at a rate equal to 1.75% below the prime rate.

Other than increasing our borrowing costs under the Wells Fargo Loan, it is difficult to forecast what impact the elevated interest rate environment will have on our investment securities portfolio.

On February 28, 2023, we refinanced the NHB Mortgage with a new $1.66 million adjustable-rate mortgage loan from New Haven Bank.

At June 30, 2024, the amount outstanding under the Churchill Facility was $23.0 million, which amount was accruing interest of an effective rate of 9.6% per annum.

On February 28, 2023, we refinanced the $1.4 million adjustable-rate mortgage loan from New Haven Bank which we originally obtained in 2021, with a new $1.66 million adjustable-rate mortgage loan from New Haven Bank (the “New NHB Mortgage”).

The new loan accrues interest at an initial rate of 5.75% per annum for the first 60 months.

The interest rate will be adjusted on each of March 1, 2028 and March 1, 2033 to the then published 5-year Federal Home Loan Bank of Boston Classic Advance Rate, plus 1.75%.

The interest rate will be adjusted on each of March 1, 2028 and March 1, 2033 to the then published 5-year Federal Home Loan Bank of Boston Classic

Advance Rate, plus 1.75%.

From April 1, 2023 through March 1, 2038, principal and interest is due and payable on a monthly basis.

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and (C) an asset coverage ratio of at least 150%.

At March 31, 2024, the amount outstanding under the Needham Credit Facility was approximately $35.0 million, which was accruing interest of an effective rate of 8.25% per annum.

At June 30, 2024, the amount outstanding under the Needham Credit Facility was $55.0 million, which was accruing interest of an effective rate of 8.25% per annum.

Finally, from time-to-time we raise capital by selling our Common Shares and shares of our Series A Preferred Stock through our at-the market offering facility.

During the three months ended March 31, 2024, under our at-the-market offering facility, we sold an aggregate of 568,711 Common Shares, realizing gross proceeds of approximately $2.1 million and 79,034 shares of its Series A Preferred Stock having an aggregate liquidation preference of $1,975,850, realizing gross proceeds of $1,587,954 (representing a discount of approximately 20% from the liquidation preference.) At March 31, 2024, approximately $48.6 million of Common Shares and $20.8 million of Series A Preferred Stock were available for future sale under the ongoing at-the-market offering.

During the six months ended June 30, 2024, under our at-the-market offering facility, we sold an aggregate of 568,711 common shares, realizing gross proceeds of $2.1 million and 176,205 shares of its Series A Preferred Stock having an aggregate liquidation preference of approximately $4.4 million, realizing gross proceeds of $3.7 million (representing a discount of 16.2% from the liquidation preference.) At June 30, 2024, $48.3 million of common shares and shares of Series A Preferred Stock having a liquidation preference of approximately $18.7 million were available for future sale under the ongoing at-the-market offering.

REIT Qualification

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Interest income from commercial loans is recognized, as earned, over the loan period, whereas origination and modification fee revenue on commercial loans are amortized over the term of the respective notes.

We record an allowance for credit losses (“CECL”) in accordance with the CECL standard on our loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics.

We record allowances for credit losses in accordance with ASU No.

2016-13, known as CECL (i.e., current expected credit losses) on our loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics.

This methodology replaces the probable incurred loss impairment methodology.

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The loss rate method involves applying a loss rate to a pool of loans with similar risk characteristics to estimate the expected credit losses on that pool of loans.

In determining the CECL allowance, we consider various factors including (1) historical loss experience in its portfolio, (2) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, and (3) its current and future view of the macroeconomic environment.

In determining the CECL allowance, we consider various factors including (1) historical loss experience in its portfolio, (2) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, and (3) our current and future view of the macroeconomic environment.

We also utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus any applicable short-term extensions that are reasonably expected for construction loans.

The allowance for the mortgages receivable is presented in the consolidated balance sheets while the allowances on the interest receivable, due from borrowers, and (available-for-sale debt) investment securities are presented net.

The accrued allowance for unfunded construction commitments is included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

The change in the balances during the reporting period are recorded in the Consolidated Statements of Comprehensive Income under the Provision for credit losses related to loans.

The accrued allowance for unfunded construction commitments is included in accounts payable and accrued liabilities on the consolidated balance sheets included in the accompanying unaudited consolidated financial statements.

The change in the balances during the reporting period are recorded in the consolidated statements of operations under the provision for credit losses related to loans.

Results of Operations

Three months ended March 31, 2024 compared to three months ended March 31, 2023

Three months ended June 30, 2024 compared to three months ended June 30, 2023

Total revenue

Total revenue for the three months ended March 31, 2024 was approximately $17.2 million compared to approximately $14.7 million for the three months ended March 31, 2023, an increase of approximately $2.5 million, or 17.0%.

The increase in revenue is primarily due to an increase in interest rates that we are able to charge borrowers in comparison to the 2023 period.

For the 2024 period, interest income was approximately $12.6 million compared to approximately $11.0 million for the 2023 period, an increase of approximately $1.6 million or 15.1%.

Income from partnership investments was approximately $1.2 million for the 2024 period compared to approximately $0.5 million for the 2023 period, an increase of approximately $0.7 million or 117.4%.

Other income was approximately $1.2 million for the 2024 period compared to approximately $0.7 million for the 2023 period, an increase of approximately $0.5 million or 68.1%.

The increases were offset by a decrease in unrealized gain on investment securities of approximately $0.5 million, or 74.2% in the 2024 period, from approximately $0.7 million in the 2023 period to approximately $0.2 million in the 2024 period.

Operating costs and expenses

Total operating costs and expenses for three months ended March 31, 2024 were approximately $12.5 million compared to approximately $9.6 million for the three months ended March 31, 2023, an increase of approximately $2.9 million or 30.7%.

The largest contributor to this increase was provisions for credit losses related to loans, which were approximately $1.3 million in the 2024 period compared to approximately $0.1 million in the 2023 period.

In the 2024 period, interest and amortization of deferred financing costs were approximately $7.5 million compared to approximately $6.9 million in the same 2023 period, an increase of approximately $0.6 million or 8.7%.

The remaining fluctuations in operating expenses were primarily attributable to (i) compensation, fees and taxes which increased approximately $0.2 million, (ii) general and administrative expenses which increased approximately $0.3 million, and (iii) other expenses, which increased approximately $0.5 million.

Comprehensive income

For the quarter ended March 31, 2024, we reported an unrealized loss on available-for-sale debt securities of approximately $0.1 million reflecting the net reclass of unrealized gains over realized gains since December 31, 2023.

For the quarter ended March 31, 2023, we reported an unrealized gain on investment securities of approximately $0.1 million reflecting the decrease in prior unrealized losses since December 31, 2022.

Net income attributable to common shareholders for the three months ended March 31, 2024 was approximately $3.6 million, or $0.08 per share, compared to approximately $4.2 million, or $0.10 per share for the three months ended March 31, 2023.

Non-GAAP Metrics – Adjusted Earnings

We invest our excess cash in marketable securities.

Under GAAP, those securities are required to be “marked to market” at the end of each reporting period.

Accordingly, if the value of certain of those securities increases, the increase is reported within net income, whereas the remaining increase is reported as a change in accumulated other comprehensive income.

On the other hand, if the value decreases, the decrease in value of certain of the securities reduces our net income.

For income tax purposes, we do not report the unrealized gain or loss on those securities until they are sold or mature.

This creates a discrepancy between our GAAP net income and our taxable income.

To maintain our status as a REIT, we are required to distribute, on an annual basis, at least 90% of our taxable income.

Thus, to give our shareholders a better perspective of our taxable income, we use a metric called Adjusted Earnings.

Adjusted Earnings is calculated as net income attributable to common shareholders, prior to the effect of unrealized gains (losses) on equity investments.

Adjusted Earnings should be examined in conjunction with net income (loss) as shown in our statements of comprehensive income.

Adjusted Earnings should not be considered as an alternative to net income (loss) (determined in accordance with GAAP), or to cash flows from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is Adjusted Earnings indicative of funds available to fund our cash needs or available for distribution to shareholders.

Rather, Adjusted Earnings is an additional measure we use to analyze our business performance because it excludes the effects of certain non-cash charges that we believe are not necessarily indicative of our operating performance.

It should be noted that our manner of calculating Adjusted Earnings may differ from the calculations of similarly-titled measures by other companies.

In addition, there may be other differences between GAAP and tax accounting that would impact Adjusted Earnings, which are not reflected in the table below.

For the Three Month Period Ended March 31,

Adjusted earnings:

Net income attributable to common shareholders

(Subtract)/Add:

Unrealized gain on equity securities

Adjusted earnings attributable to common shareholders

For the three months ended March 31, 2024 and 2023, Adjusted Earnings per share was $0.07 and $0.08, respectively.

Total revenue for the three months ended June 30, 2024 was $15.1 million compared to $16.3 million for the three months ended June 30, 2023, a decrease of $1.2 million, or 6.9%.

The decrease in revenue is primarily attributable to a decrease in our lending operations in comparison to the three months ended June 30, 2023.

This decrease is attributable to the current conditions in the capital markets, which make it very difficult for us to raise the capital we need to grow our mortgage loan portfolio.

As a result, loan originations, modifications, and extensions for the second quarter of 2024 were $34.5 million compared to $46.4 million for the second quarter of 2023 resulting in fee income in the second quarter of 2024 amounting to $2.1 million compared to $3.3 million in the second quarter of 2023, a decrease of $1.2 million, or 37.2%.

For the 2024 period, interest income was $11.8 million compared to $11.9 million for the 2023 period, a decrease of $0.1 million or 1.2%.

Income from partnership investments was $1.2 million for the 2024 period compared to $1.0 million for the 2023 period, an increase of $0.2 million or 21.0%.

In addition, other investment income for the 2024 period was $0.07 million compared to $0.03 million for the 2023 period, an increase of $0.04 million or 105.9%.

Other income remained stagnant period over period.

Operating expenses

Total operating expenses for three months ended June 30, 2024 were $18.5 million compared to $10.3 million for the three months ended June 30, 2023, an increase of $8.2 million or 78.8%.

The increase in operating expenses is primarily attributable to our provision for credit losses related to loans.

In the 2024 period, provision for credit losses related to loans were $8.5 million compared to $0.1 million in the same 2023 period, an increase of $8.4 million.

This increase is primarily due to a period-over-period increase of loans in pending and pre-foreclosure status of $23.1 million, as a result of $73.1 million of unpaid principal, interest, and charges as of June 30, 2024 compared to $50.0 million as of June 30, 2023.

Such balances consist of primarily commercial assets, of which have experienced a decline in fair value throughout 2024.

See Note 2 to the accompanying unaudited consolidated financial statements included elsewhere in this Report for further details on our methodology on determining allowance for credit losses and provisions for credit losses related to loans under such category.

The remaining fluctuations in operating expenses were primarily attributable to (i) general and administrative expenses decreased $0.1 million, (ii) interest and amortization of deferred financing costs decreased $0.2 million, and (iii) other expenses which increased $0.1 million.

Other income (loss)

Total other income (loss) for the three months ended June 30, 2024, was $0.3 million compared to a ($0.3) million loss for the three months ended June 30, 2023.

For the three months ended June 30, 2024, we reported a gain on equity securities of $0.1 million as a result of market fluctuations.

The remaining balance in other income (loss) for the 2024 period relate to a gain on sale of real estate and property and equipment, net of $0.3 million and impairment loss of $0.1 million.

For the three months ended June 30, 2023, we reported gain on equity securities of $0.2 million as a result of market fluctuation.

The remaining balance in other income (loss) for the 2023 period relate to a loss on sale of real estate and property and equipment, net of $0.02 million and impairment loss of $0.4 million.

Net income (loss)

Net income (loss) attributable to common shareholders for the three months ended June 30, 2024 was ($4.1) million, or ($0.09) per share, compared to $4.8 million, or $0.11 per share for the three months ended June 30, 2023.

The decrease in net income is primarily due to the period-over-period increase of $8.4 million in the provision for credit losses related to loans and the period-over-period decrease of $1.1 million in revenue.

Six months ended June 30, 2024 compared to six months ended June 30, 2023

Total revenue

Total revenue for the six months ended June 30, 2024 was $32.0 million compared to $30.6 million for the six months ended June 30, 2023, an increase of $1.4 million, or 4.4%.

The increase in revenue is primarily attributable to the increase in the interest rates that we are able to charge borrowers compared to the six months ended June 30, 2023.

For the 2024 period, interest income was $24.4 million compared to $22.9 million for the 2023 period, representing an increase of $1.5 million or 6.6%.

Fee income from loans decreased to $4.7 million compared to $5.5 million for the 2023 period, a decrease of $0.8 million, or 14.4%.

This decrease was attributable mainly to a decrease in originations.

The number of new loans funded in the first six months of 2024 were 24 in the amount of $50.7 million, compared to 38 loans in the amount of $72.2 million in the first six months of 2023.

Similarly, origination fee income decreased approximately 50.0%, from $1.6 million in the first six months of 2023 to $0.8 million in the first six months of 2024, which is included in fee income.

Income from partnership investments increased to $2.4 million for the 2024 period compared to $1.6 million for the 2023 period, an increase of $0.8 million or 55.1%.

Other investment income was $0.4 million for the 2024 period compared to $0.6 million for the 2023 period, a decrease of $0.2 million or 39.0%.

Other income was $0.06 million for the 2024 period compared to $0.03 million for the 2023 period, an increase of $0.03 million, or 90%.

Operating expenses

Total operating costs and expenses for six months ended June 30, 2024 were $31.0 million compared to $20.1 million for the six months ended June 30, 2023, an increase of $10.9 million, or 54.4%.

The increase in operating expenses is primarily attributable to our provision for credit losses related to loans.

In the 2024 period, provision for credit losses related to loans were $9.9 million compared to $0.2 million in the same 2023 period, an increase of $9.7 million.

The increase in provision for credit losses related to loans relates to the aforementioned increase in loans in pending and pre-foreclosure as well as the decline in fair value of such assets,

along with the expectation of future decreases in such fair values.

The remaining fluctuations relate to the increase in our floating rates for our debt.

In the 2024 period, interest and amortization of deferred financing costs was $14.4 million compared to $14.0 million in the same 2023 period, an increase of $0.4 million, or 3.1%.

Lastly, general and administrative expenses increased $0.3 million, or 12.7%, and other expenses increased $0.6 million or 191.6%.

Other income (loss)

Total other income for the six months ended June 30, 2024, was $0.6 million compared to $0.3 million for the six months ended June 30, 2023, an increase of $0.3 million.

For the six months ended June 30, 2024, we reported a gain on equity securities of $0.5 million as a result of market fluctuations and liquidating the investments held at Wells Fargo.

The remaining fluctuations in other income (loss) for the 2024 period were gain on sale of real estate and property and equipment, net of $0.3 million and impairment loss of $0.1 million.

For the six months ended June 30, 2023, we reported gain on equity securities of $0.6 million as a result of market fluctuation.

The remaining balance in other income for the 2023 period relate to a gain on sale of real estate and property and equipment, net of $0.1 million and impairment loss of $0.4 million.

Net Income (loss)

Net income (loss) attributable to common shareholders for the six months ended June 30, 2024 was $0.5 million, or ($0.01) per share, compared to $9.0 million, or $0.21 per share for the six months ended June 30, 2023.

The decrease in net income is primarily due to the year-over-year increase in provisions for credit losses related to loans, as stated above.

Liquidity and Capital Resources

Total assets at March 31, 2024 were approximately $626.5 million compared to approximately $625.5 million at December 31, 2023, an increase of approximately $1.0 million, or 0.2%.

The increase was due primarily to the increase of our cash and cash equivalents of approximately $5.8 million, an increase in investments in partnership of approximately $3.2 million, an increase in investment securities of approximately $0.7 million, and an increase in net investments in rental real estate of approximately $0.7 million, offset by decreases in net mortgages receivable of approximately $9.0 million and net interest and fees receivable of approximately $0.4 million.

Total liabilities at March 31, 2024 were approximately $389.1 million compared to approximately $395.5 million at December 31, 2023, a decrease of approximately $6.4 million, or 1.6%.

This decrease is principally due to decreases in the accrued dividends payable of approximately $5.1 million and advances from borrowers of approximately $1.8 million, offset primarily by an increase in accounts payable and accrued expenses of approximately $0.4 million and increase in the line of credit of approximately $0.5 million.

Total shareholders’ equity at March 31, 2024 was approximately $237.4 million compared to approximately $230.1 million at December 31, 2023, an increase of approximately $7.3 million, or 3.2%.

This increase was due primarily to net proceeds of $3.6 million from the sale of Common Shares and Preferred shares and our net income of approximately $3.5 million.

Net cash provided by operating activities for the three months ended March 31, 2024 was approximately $4.2 million compared to approximately $5.0 million for the comparable 2023 period.

For the 2024 period net cash provided by operating activities consisted primarily of net income of approximately $4.7 million, amortization of deferred financing costs and bond discount of approximately $0.6 million, provisions for credit losses related to loans of approximately $1.3 million, stock based compensation of approximately $0.2 million, a decrease in net interest and fees receivable of approximately $0.4 million, and an increase in accounts payable and accrued liabilities of approximately $0.4 million, offset unrealized gains on investment securities of approximately $0.2 million, decreases in advances from borrowers of approximately $1.8 million and deferred revenue of approximately $0.3 million, as well as increases in other assets of approximately $0.3 million, and net due from borrowers of approximately $1.0 million.

For the 2023 period net cash provided by operating activities consisted primarily of net income of approximately $5.1 million, amortization of deferred financing costs and bond discount of approximately $0.6 million and increases in deferred revenue of approximately $0.3 million and advances from borrowers of approximately $1.4 million, offset by gain on the sale of real estate of approximately $0.1 million, unrealized gain on investment securities of approximately $0.7 million, gain on the sale of investment securities of approximately $0.3 million and increases in due from borrowers of approximately $0.8 million, other assets of approximately $0.5 million, and interest and fees receivable of approximately $0.4 million.

Net cash provided for investing activities for the three months ended March 31, 2024 was approximately $4.3 million compared to net cash used of approximately $34.0 million for the comparable 2023 period.

For the 2024 period, net cash provided for investing activities consisted primarily of proceeds from the sale of investment securities of approximately $7.1 million, principal collections on mortgages receivable of approximately $51.4 million, and proceeds from the sale of real estate owned of approximately $0.1 million, offset by purchases of investment securities of approximately $7.7 million, principal disbursements for mortgages receivable of approximately $42.7 million, purchases of net interests in investment partnerships of approximately $3.2 million, and purchases of rental real estate of approximately $0.7 million.

For the 2023 period, net cash used for investing activities consisted primarily of purchases of investment securities of approximately $14.0 million, net purchases of interests in investment partnerships of approximately $4.5 million, purchase of property and equipment of approximately $711,000 and principal disbursements for mortgages receivable of approximately $58.9 million, offset by principal collections on mortgages receivable of approximately $39.9 million, proceeds from sale of real estate owned of approximately $515,000 and by proceeds from the sale of investment securities of approximately $3.8 million.

Net cash used in financing activities for the three months ended March 31, 2024 was approximately $2.7 million compared to net cash provided by financing activities of approximately $25.6 million for the comparable 2023 period.

Net cash used for financing activities for the 2024 period consists principally of dividends paid on common shares of approximately $5.1 million, dividends paid on Series A Preferred Stock of approximately $1.0 million, and repayment of repurchase facilities of approximately $0.6 million, offset primarily by net proceeds from issuance of common shares of approximately $2.1 million, net proceeds from issuance of Series A Preferred Stock of approximately $1.6 million, and net proceeds from lines of credit of approximately $0.5 million.

Net cash provided by financing activities for the 2023 period consists principally of net proceeds from the issuance of common shares of approximately $9.2 million, net proceeds from line of credit of approximately $10.1 million, net proceeds from repurchase facility of

approximately $11.5 million and proceeds from mortgage of $910,000, offset primarily by dividends paid on common stock of approximately $5.3 million and preferred stock of approximately $925,000.

Total assets at June 30, 2024 were $586.3 million compared to $625.5 million at December 31, 2023, a decrease of $39.2 million, or 6.3%.

The decrease was due primarily to the decrease of our cash and cash equivalents of $2.0 million, a decrease in investments securities of $36.0 million, a decrease in net mortgages receivable of $6.0 million, and a decrease in interest and fee receivable of $0.7 million, offset by increases in investment in rental real estate of $1.4 million and investment in partnership of $3.9 million.

Total liabilities at June 30, 2024 were $356.2 million compared to $395.5 million at December 31, 2023, a decrease of $39.3 million, or 9.9%.

This decrease is primarily due to principal repayments of;

notes payable of $22.4 million, repurchase facility of $3.5 million, and the line of credit of $6.8 million.

Additionally, decreases in the accrued dividends payable of $5.1 million and advances from borrowers of $2.1 million, offset by increases in deferred revenue of $0.2 million and accounts payable and accrued liabilities of $0.5 million.

Total shareholders’ equity at June 30, 2024 was $230.2 million compared to $230.1 million at December 31, 2023, an increase of $0.1 million.

This increase was due primarily to net proceeds of $5.7 million from the sale of common shares and shares of Series A Preferred Stock and our net income of $1.6 million, offset by dividends paid on common shares and Series A Preferred stock of $2.1 million and $5.2 million, respectively.

Net cash provided by operating activities for the six months ended June 30, 2024 was $11.2 million compared to $12.1 million for the comparable 2023 period.

For the 2024 period net cash provided by operating activities consisted primarily of net income of $1.6 million, amortization of deferred financing costs and bond discount of $1.3 million, depreciation expense of $0.2 million, stock based compensation of $0.4 million, provision for credit losses related to loans of $9.9 million, and a decrease in interest and fees receivable, net of $0.4 million, offset by gain on equity securities of $0.5 million, decrease in advances from borrowers of $2.1 million, an increase due from borrowers, net of $0.6 million, and a net gain on sale of real estate and property and equipment of $0.3 million.

For the 2023 period net cash provided by operating activities consisted primarily of net income of $10.8 million, amortization of deferred financing costs and bond discount of $1.2 million, stock based compensation of $0.4 million, impairment loss of $0.4 million, increases in deferred revenue of $0.5 million and advances from borrowers of $2.7 million, offset by gain on equity securities of $0.6 million, increase in due from borrowers, net of $1.5 million, increase in other assets in aggregate of $0.7 million, and an increase interest and fees receivable, net of $1.5 million.

Net cash provided by (used in) investing activities for the six months ended June 30, 2024 was $27.5 million compared to net cash used for investing activities of $65.2 million for the comparable 2023 period.

For the 2024 period, net cash provided by investing activities consisted primarily of proceeds from the sale of investment securities of $44.0 million, proceeds from sales of real

estate owned of $1.4 million, and principal collections on mortgages receivable of $79.6 million, offset by purchases of investment securities of $7.8 million, purchases of interests in investment partnerships, net of $3.9 million, improvements in investment in rental real estate of $1.4 million, and principal disbursements for mortgages receivable of $84.3 million.

For the 2023 period, net cash used in investing activities consisted primarily of purchases of investment securities of $18.3 million, net purchases of interests in investment partnerships, net of $4.6 million, purchase of property and equipment of $0.7 million and principal disbursements for mortgages receivable of $114.5 million, offset by principal collections on mortgages receivable of $66.4 million, proceeds from sale of real estate owned of $0.2 million and by proceeds from the sale of investment securities of $6.5 million.

Net cash provided by (used in) financing activities for the six months ended June 30, 2024 was $(40.7) million compared to net cash provided by financing activities of $44.5 million for the comparable 2023 period.

Net cash used in financing activities for the 2024 period consists principally of repayment of lines of credit of $6.8 million, repayment of repurchase facility of $3.5 million, dividends paid on common shares and Series A Preferred Stock of $10.4 million and $2.1 million, respectively, and repayment of the unsecured notes payable that came due in June 2024 of $23.6 million, offset by proceeds from the issuance of common shares, net of expenses and Series A Preferred Stock, net of expenses of $2.1 million and $3.6 million, respectively.

Net cash provided by financing activities for the 2023 period consists principally of net proceeds from the issuance of common shares, net of expenses of $9.7 million, net proceeds from the issuance of Series A Preferred Stock, net of expenses of $0.5 million, net proceeds from lines of credit of $32.3 million, net proceeds from repurchase facility of $8.0 million, proceeds from mortgage payable of $0.9 million and proceeds from issuance of unsecured unsubordinated notes payable of $6.2 million, offset primarily by dividends paid on Common Shares of $11.0 million and Series A Preferred Stock of $11.0 million and $1.8 million, respectively.

We project anticipated cash requirements for our operating needs as well as cash flows generated from operating activities available to meet these needs.

Our short-term cash requirements primarily include funding of loans and construction draws and payments for usual and customary operating and administrative expenses, such as interest payments on notes payable, employee compensation, sales, marketing expenses and dividends.

Additionally, Notes having an aggregate outstanding principal balance of approximately $23.7 million are maturing on June 30, 2024 and Notes having an aggregate outstanding principal balance of $34.5 million are maturing on December 30, 2024.

We intend to repay the Notes either by refinancing them or with a combination drawdowns from of our existing credit facilities, current cash on hand, and principal repayments of our mortgage loans.

Additionally, the December 2024 Notes are maturing on December 30, 2024.

We intend to repay the December 2024 Notes either by refinancing them or with a combination of drawdowns from of our existing credit facilities, current cash on hand, and principal repayments of our mortgage loans.

Based on this analysis, we believe that our current cash balances, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months.

2 unchanged sentences

From and after the effective date of our REIT election, we intend to pay regular quarterly distributions to holders of our common shares in an amount not less than 90% of our REIT taxable income (determined before the deduction for dividends paid and excluding any net capital gains).

On April 1, 2024, the Company declared a dividend of $0.11 per share, or $5,219,066 in the aggregate, to shareholders of record as of April 9, 2024, which was paid on April 16, 2024.

Between April 1, 2024 and May 9, 2024, through our at-the-market offering facility, we sold no Common Shares, and 69,431 shares of its Series A Preferred Stock having an aggregate liquidation preference of $1,735,775, realizing gross proceeds of $1,519,944 (representing a discount of approximately 12% from the liquidation preference.)

On July 19, 2024 we declared a dividend of $0.08 per share, or $3.8 million in the aggregate, to shareholders of record as of July 29, 2024, which was paid on August 6, 2024.

Between July 1, 2024 and August 14, 2024, through our at-the-market offering facility, we sold 7,622 shares of its Series A Preferred Stock having an aggregate liquidation preference of $0.2 million, realizing gross proceeds of $0.2 million (representing a discount of 13.3% from the liquidation preference.)

Between July 1, 2024 and August 14, 2024, we repurchased 114,796 common shares through our existing stock repurchase plan.

Off-Balance Sheet Arrangements

1 unchanged sentence

Contractual Obligations

As of March 31, 2024, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans as well as contractual obligations consisting of operating leases for equipment, software licenses and investment in partnerships.

As of June 30, 2024, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans as well as contractual obligations consisting of operating leases for equipment, software licenses and investment in partnerships.

(In thousands)

Unfunded portions of outstanding construction loans

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis