Mortgage Loans on Real Estate

12 Months Ended

Dec. 31, 2023

Our financing receivables consist of the following three portfolio segments: commercial mortgage loans, agricultural mortgage loans and residential mortgage loans. Our mortgage loan portfolios are summarized in the following table. There were commitments outstanding of $786.4 million at December 31, 2023.


	December 31,
	2023		2022
	(Dollars in thousands)
Commercial mortgage loans:
Principal outstanding	$	3,550,204	$	3,560,903
Deferred fees and costs, net	(2,494)		(6,345)
Unamortized discounts and premiums, net	(2,711)		—
Amortized cost	3,544,999		3,554,558
Valuation allowance	(17,902)		(22,428)
Commercial mortgage loans, carrying value	3,527,097		3,532,130

Agricultural mortgage loans:
Principal outstanding	581,287		567,630
Deferred fees and costs, net	(1,654)		(1,667)
Amortized cost	579,633		565,963
Valuation allowance	(2,590)		(1,021)
Agricultural mortgage loans, carrying value	577,043		564,942

Residential mortgage loans:
Principal outstanding	3,384,737		2,807,652
Deferred fees and costs, net	558		1,909
Unamortized discounts and premiums, net	65,802		55,917
Amortized cost	3,451,097		2,865,478
Valuation allowance	(17,643)		(13,523)
Residential mortgage loans, carrying value	3,433,454		2,851,955
Mortgage loans, carrying value	$	7,537,594	$	6,949,027

Our commercial mortgage loan portfolio consists of loans collateralized by the related properties and diversified as to property type, location and loan size. Our lending policies establish limits on the amount that can be loaned to one borrower and other criteria to attempt to reduce the risk of default. The commercial mortgage loan portfolio is summarized by geographic region and property type as follows:


	December 31,
	2023				2022
	Principal		Percent		Principal		Percent
	(Dollars in thousands)
Geographic distribution
East	$	471,707	13.3	%	$	502,659	14.1	%
Middle Atlantic	274,017		7.7	%	280,993		7.9	%
Mountain	404,143		11.4	%	416,307		11.7	%
New England	87,041		2.4	%	73,631		2.1	%
Pacific	835,085		23.5	%	858,812		24.1	%
South Atlantic	927,547		26.1	%	934,007		26.2	%
West North Central	183,856		5.2	%	205,568		5.8	%
West South Central	328,918		9.3	%	288,926		8.1	%
International	37,890		1.1	%	—		—	%
	$	3,550,204	100.0	%	$	3,560,903	100.0	%
Property type distribution
Office	$	360,328	10.1	%	$	388,978	10.9	%

Retail	801,977		22.6	%	896,351		25.2	%
Industrial/Warehouse	940,546		26.5	%	866,623		24.3	%
Apartment	1,047,740		29.5	%	912,984		25.6	%
Hotel	319,733		9.0	%	285,271		8.0	%
Mixed Use/Other	79,880		2.3	%	210,696		6.0	%
	$	3,550,204	100.0	%	$	3,560,903	100.0	%

Our agricultural mortgage loan portfolio consists of loans with an outstanding principal balance of $581.3 million and $567.6 million as of December 31, 2023 and 2022, respectively. These loans are collateralized by agricultural land and are diversified as to location within the United States. Our residential mortgage loan portfolio consists of loans with an outstanding principal balance of $3.4 billion and $2.8 billion as of December 31, 2023 and 2022, respectively. These loans are collateralized by the related properties and diversified as to location within the United States.

Mortgage loans on real estate are generally reported at cost adjusted for amortization of premiums and accrual of discounts, computed using the interest method and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Interest income is included in Net investment income on our Consolidated Statements of Operations. Accrued interest receivable, which was $69.5 million and $58.2 million as of December 31, 2023 and 2022, respectively, is included in Accrued investment income on our Consolidated Balance Sheets.

Loan Valuation Allowance

We establish a valuation allowance to provide for the risk of credit losses inherent in our mortgage loan portfolios. The valuation allowance is maintained at a level believed adequate by management to absorb estimated expected credit losses. The valuation allowance is based on amortized cost, which excludes accrued interest receivable. We do not measure a credit loss allowance on accrued interest receivable as we write off any uncollectible accrued interest receivable balances to net investment income in a timely manner. We did not charge off any uncollectible accrued interest receivable on our commercial, agricultural or residential mortgage loan portfolios for the years ended December 31, 2023 or 2022, respectively.

The valuation allowances for each of our mortgage loan portfolios are estimated by deriving probability of default and recovery rate assumptions based on the characteristics of the loans in each portfolio, historical economic data and loss information, and current and forecasted economic conditions. Key loan characteristics impacting the estimate for our commercial mortgage loan portfolio include the current state of the borrower’s credit quality, which considers factors such as loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios, loan performance, underlying collateral type, delinquency status, time to maturity, and original credit scores. Key loan characteristics impacting the estimate for our agricultural and residential mortgage loan portfolios include the current state of the borrowers' credit quality, delinquency status, time to maturity and original credit scores.

The following table represents a rollforward of the valuation allowance on our mortgage loan portfolios:


	Year Ended December 31, 2023
	Commercial		Agricultural		Residential		Total
	(Dollars in thousands)
Beginning allowance balance	$	(22,428)	$	(1,021)	$	(13,523)	$	(36,972)
Charge-offs	—		—		11		11
Recoveries	—		—		—		—
Change in provision for credit losses	4,526		(1,569)		(4,131)		(1,174)
Ending allowance balance	$	(17,902)	$	(2,590)	$	(17,643)	$	(38,135)

	Year Ended December 31, 2022
	Commercial		Agricultural		Residential		Total
	(Dollars in thousands)
Beginning allowance balance	$	(17,926)	$	(519)	$	(5,579)	$	(24,024)
Charge-offs	501		—		—		501
Recoveries	1,677		—		—		1,677
Change in provision for credit losses	(6,680)		(502)		(7,944)		(15,126)
Ending allowance balance	$	(22,428)	$	(1,021)	$	(13,523)	$	(36,972)

Charge-offs include allowances that have been established on loans that were satisfied either by taking ownership of the collateral or by some other means such as discounted pay-off or loan sale. When ownership of the property is taken it is recorded at the lower of the loan's carrying value or the property's fair value (based on appraised values) less estimated costs to sell. The real estate owned is recorded as a component of Real estate investments and the loan is recorded as fully paid, with any allowance for credit loss that has been established charged off. Fair value of the real estate is determined by third party appraisal. There were twelve real estate properties totaling $6.5 million at December 31, 2023 and no real estate properties at December 31, 2022 in which ownership of the property was taken to satisfy an outstanding loan. Recoveries are situations where we have received a payment from the borrower in an amount greater than the carrying value of the loan (principal outstanding less specific allowance).

Credit Quality Indicators

We evaluate the credit quality of our commercial and agricultural mortgage loans by analyzing LTV and DSC ratios and loan performance. We evaluate the credit quality of our residential mortgage loans by analyzing loan performance.

LTV and DSC ratios for our commercial mortgage loans are originally calculated at the time of loan origination and are updated annually for each loan using information such as rent rolls, assessment of lease maturity dates and property operating statements, which are reviewed in the context of current leasing and in place rents compared to market leasing and market rents. A DSC ratio of less than 1.0 indicates that a property's operations do not generate sufficient income to cover debt payments. An LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the value of the underlying collateral. All of our commercial mortgage loans that have a debt service coverage ratio of less than 1.0 are performing under the original contractual loan terms at December 31, 2023 and 2022.

The amortized cost of our commercial mortgage loan portfolio by LTV and DSC ratios based on the most recent information collected was as follows at December 31, 2023 and 2022 (by year of origination):


	2023				2022				2021				2020				2019				Prior				Total
As of December 31, 2023:	Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV
Debt Service Coverage Ratio:	(Dollars in thousands)
Greater than or equal to 1.5	$	3,444	46	%	$	285,481	62	%	$	272,661	57	%	$	370,299	51	%	$	449,973	55	%	$	1,056,159	44	%	$	2,438,017	50	%
Greater than or equal to 1.2 and less than 1.5	—		—	%	76,122		49	%	4,500		55	%	36,534		57	%	108,232		64	%	177,489		57	%	402,877		58	%
Greater than or equal to 1.0 and less than 1.2	40,727		38	%	105,578		32	%	328,722		45	%	28,935		54	%	—		—	%	63,972		71	%	567,934		46	%
Less than 1.0	—		—	%	53,470		54	%	26,960		52	%	—		—	%	2,545		80	%	53,196		52	%	136,171		53	%
Total	$	44,171	39	%	$	520,651	53	%	$	632,843	51	%	$	435,768	52	%	$	560,750	57	%	$	1,350,816	47	%	$	3,544,999	51	%


	2022				2021				2020				2019				2018				Prior				Total
As of December 31, 2022:	Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV
Debt Service Coverage Ratio:	(Dollars in thousands)
Greater than or equal to 1.5	$	249,328	63	%	$	257,746	61	%	$	421,391	57	%	$	429,596	58	%	$	325,117	53	%	$	813,319	44	%	$	2,496,497	53	%
Greater than or equal to 1.2 and less than 1.5	6,488		70	%	123,038		55	%	46,804		58	%	115,977		66	%	67,642		67	%	145,703		60	%	505,652		62	%
Greater than or equal to 1.0 and less than 1.2	170,059		52	%	211,684		43	%	18,144		79	%	39,396		73	%	10,348		76	%	58,021		47	%	507,652		51	%
Less than 1.0	—		—	%	—		—	%	—		—	%	6,107		64	%	13,025		70	%	25,625		65	%	44,757		66	%
Total	$	425,875	59	%	$	592,468	53	%	$	486,339	58	%	$	591,076	61	%	$	416,132	57	%	$	1,042,668	47	%	$	3,554,558	54	%

LTV and DSC ratios for our agricultural mortgage loans are calculated at the time of loan origination and are evaluated annually for each loan using land value averages. A DSC ratio of less than 1.0 indicates that a property's operations do not generate sufficient income to cover debt payments. An LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the value of the underlying collateral. All of our agricultural mortgage loans that have a debt service coverage ratio of less than 1.0 are performing under the original contractual loan terms at December 31, 2023 and 2022.

The amortized cost of our agricultural mortgage loan portfolio by LTV and DSC ratios based on the most recent information collected was as follows at December 31, 2023 and 2022 (by year of origination):


	2023				2022				2021				2020				2019				Prior				Total
As of December 31, 2023:	Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV
Debt Service Coverage Ratio:	(Dollars in thousands)
Greater than or equal to 1.5	$	26,890	59	%	$	61,374	54	%	$	46,060	57	%	$	91,060	46	%	$	—	—	%	$	34,000	42	%	$	259,384	50	%
Greater than or equal to 1.2 and less than 1.5	17,798		59	%	89,548		54	%	51,819		52	%	27,433		32	%	—		—	%	—		—	%	186,598		51	%
Greater than or equal to 1.0 and less than 1.2	3,988		43	%	3,080		55	%	9,246		57	%	902		59	%	—		—	%	—		—	%	17,216		53	%
Less than 1.0	—		—	%	38,675		37	%	26,514		51	%	49,105		48	%	2,141		33	%	—		—	%	116,435		45	%
Total	$	48,676	58	%	$	192,677	51	%	$	133,639	54	%	$	168,500	44	%	$	2,141	33	%	$	34,000	42	%	$	579,633	49	%


	2022				2021				2020				2019				2018				Prior				Total
As of December 31, 2022:	Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV		Amortized Cost		Average LTV
Debt Service Coverage Ratio:	(Dollars in thousands)
Greater than or equal to 1.5	$	85,367	47	%	$	84,186	46	%	$	97,143	41	%	$	—	—	%	$	—	—	%	$	—	—	%	$	266,696	45	%
Greater than or equal to 1.2 and less than 1.5	107,856		54	%	67,630		52	%	61,103		32	%	—		—	%	—		—	%	—		—	%	236,589		48	%
Greater than or equal to 1.0 and less than 1.2	3,124		56	%	8,825		38	%	3,125		25	%	—		—	%	—		—	%	—		—	%	15,074		39	%
Less than 1.0	—		—	%	—		—	%	7,975		35	%	5,629		41	%	34,000		31	%	—		—	%	47,604		33	%
Total	$	196,347	51	%	$	160,641	48	%	$	169,346	37	%	$	5,629	41	%	$	34,000	31	%	$	—	—	%	$	565,963	45	%

We closely monitor loan performance for our commercial, agricultural and residential mortgage loan portfolios. Aging of financing receivables is summarized in the following table (by year of origination):


	2023		2022		2021		2020		2019		Prior		Total
As of December 31, 2023:	(Dollars in thousands)
Commercial mortgage loans
Current	$	44,171	$	520,651	$	632,843	$	435,768	$	560,750	$	1,350,816	$	3,544,999
30 - 59 days past due	—		—		—		—		—		—		—
60 - 89 days past due	—		—		—		—		—		—		—
Over 90 days past due	—		—		—		—		—		—		—
Total commercial mortgage loans	$	44,171	$	520,651	$	632,843	$	435,768	$	560,750	$	1,350,816	$	3,544,999

Agricultural mortgage loans
Current	$	48,676	$	182,273	$	131,448	$	168,500	$	2,141	$	34,000	$	567,038
30 - 59 days past due	—		—		—		—		—		—		—
60 - 89 days past due	—		—		—		—		—		—		—
Over 90 days past due	—		10,404		2,191		—		—		—		12,595
Total agricultural mortgage loans	$	48,676	$	192,677	$	133,639	$	168,500	$	2,141	$	34,000	$	579,633

Residential mortgage loans
Current	$	1,183,248	$	1,493,165	$	365,704	$	161,426	$	22,654	$	794	$	3,226,991
30 - 59 days past due	21,367		58,420		10,253		5,731		4,988		—		100,759
60 - 89 days past due	5,017		22,383		3,908		1,839		99		—		33,246
Over 90 days past due	18,558		38,255		23,707		5,275		3,398		908		90,101
Total residential mortgage loans	$	1,228,190	$	1,612,223	$	403,572	$	174,271	$	31,139	$	1,702	$	3,451,097


	2022		2021		2020		2019		2018		Prior		Total
As of December 31, 2022:	(Dollars in thousands)
Commercial mortgage loans
Current	$	425,875	$	592,468	$	486,339	$	591,076	$	416,132	$	1,042,668	$	3,554,558
30 - 59 days past due	—		—		—		—		—		—		—
60 - 89 days past due	—		—		—		—		—		—		—
Over 90 days past due	—		—		—		—		—		—		—
Total commercial mortgage loans	$	425,875	$	592,468	$	486,339	$	591,076	$	416,132	$	1,042,668	$	3,554,558

Agricultural mortgage loans
Current	$	196,347	$	160,641	$	166,211	$	5,629	$	34,000	$	—	$	562,828
30 - 59 days past due	—		—		—		—		—		—		—
60 - 89 days past due	—		—		—		—		—		—		—
Over 90 days past due	—		—		3,135		—		—		—		3,135
Total agricultural mortgage loans	$	196,347	$	160,641	$	169,346	$	5,629	$	34,000	$	—	$	565,963

Residential mortgage loans
Current	$	1,915,169	$	595,363	$	211,119	$	27,483	$	1,710	$	417	$	2,751,261
30 - 59 days past due	39,179		8,238		13,073		1,960		—		—		62,450
60 - 89 days past due	6,668		7,165		3,034		57		—		—		16,924
Over 90 days past due	9,702		14,068		6,515		1,762		2,796		—		34,843
Total residential mortgage loans	$	1,970,718	$	624,834	$	233,741	$	31,262	$	4,506	$	417	$	2,865,478

Commercial, agricultural and residential mortgage loans are considered nonperforming when they become 90 days or more past due. When loans become nonperforming, we place them on non-accrual status and discontinue recognizing interest income. If payments are received on a nonperforming loan, interest income is recognized to the extent it would have been recognized if normal principal and interest would have been received timely. If payments are received to bring a nonperforming loan back to less than 90 days past due, we will resume accruing interest income on that loan. There were 155 loans in non-accrual status at December 31, 2023 and 59 loans in non-accrual status at December 31, 2022. During the years ended December 31, 2023, 2022, and 2021 we recognized interest income of $3.0 million, $670 thousand, and $36 thousand respectively, on loans which were in non-accrual status at the respective period end.

Loan Modifications

Our commercial, agricultural and residential mortgage loans may be subject to loan modifications. Loan modifications may be granted to borrowers experiencing financial difficulty and could include principal forgiveness, interest rate reduction, an other-than-significant delay or a term extension. We consider the following factors in determining whether or not a borrower is experiencing financial difficulty:

•borrower is in default,

•borrower has declared bankruptcy,

•there is growing concern about the borrower's ability to continue as a going concern,

•borrower has insufficient cash flows to service debt,

•borrower's inability to obtain funds from other sources, and

•there is a breach of financial covenants by the borrower.

A loan modification typically does not result in a change in valuation allowance as it is already incorporated into our allowance methodology. However, if we grant a borrower experiencing financial difficulty principal forgiveness, the amount of principal forgiven would be written off, which would reduce the amortized cost of the loan and result in an adjustment to the valuation allowance.

There were no significant mortgage loan modifications for the year ended December 31, 2023.

Prior to adoption of authoritative guidance on January 1, 2023, we evaluated whether a troubled debt restructuring (TDR) had occurred on our commercial, agricultural or residential mortgage loans. We did not have any significant loan modifications that resulted in a TDR for the year ended December 31, 2022.