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LOANS (Tables)

9 Months Ended

Sep. 30, 2021

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

The following table presents the activity of the Company’s loan investments, including loans held for sale and excluding loans transferred or pledged to securitization vehicles and loan warehouse facilities, for the nine months ended September 30, 2021:


	Residential		Commercial		Corporate Debt		Corporate Debt Held for Sale (1)		Total
	(dollars in thousands)
Beginning balance January 1, 2021	$	345,810	$	498,081	$	2,239,930	$	—	$	3,083,821

Purchases / originations	3,597,844		126,722		1,055,048		468,483		5,248,097
Sales and transfers (2)	(2,206,190)		(608,202)		(879,622)		(466,370)		(4,160,384)



Principal payments	(43,690)		(84,929)		(546,631)		—		(675,250)
Gains / (losses) (3)	(784)		67,784		11,826		—		78,826
(Amortization) / accretion	(6,722)		544		10,158		—		3,980

Ending balance September 30, 2021	$	1,686,268	$	—	$	1,890,709	$	2,113	$	3,579,090


(1) Represents loans the Company originated during the three months ended June 30, 2021 and subsequently syndicated and closed. At September 30, 2021, loans held for sale were carried at the lower of cost or fair value. (2) Includes securitizations, syndications, transfers to securitization vehicles and commercial loan transfers to assets of disposal group held for sale. Includes transfer of residential loans to securitization vehicles with a carrying value of $2.0 billion during the nine months ended September 30, 2021. (3) Includes loan loss allowances.

Fair Value and Unpaid Principal of Residential Mortgage Loan Portfolio

The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles and excluding loan warehouse facilities, at September 30, 2021 and December 31, 2020:


	September 30, 2021		December 31, 2020
	(dollars in thousands)
Fair value	$	5,826,826	$	3,595,061
Unpaid principal balance	$	5,602,342	$	3,482,865

Summary of Comprehensive Income (Loss)

The following table provides information regarding the line items and amounts recognized in the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020 for these investments, excluding loan warehouse facilities:


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(dollars in thousands)
Interest income	$	45,799	$	42,508	$	121,871	$	132,937
Net gains (losses) on disposal of investments and other	(7,154)		(4,638)		(34,095)		(22,014)
Net unrealized gains (losses) on instruments measured at fair value through earnings	12,525		77,837		49,436		(4,381)
Total included in net income (loss)	$	51,170	$	115,707	$	137,212	$	106,542

Geographic Concentrations Based on Unpaid Principal Balances

The following table provides the geographic concentrations based on the unpaid principal balances at September 30, 2021 and December 31, 2020 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:

Geographic Concentrations of Residential Mortgage Loans

September 30, 2021

December 31, 2020

Property location

% of Balance

Property location

% of Balance

California

51.3%

California

48.9%

New York

10.7%

New York

14.0%

Florida

6.4%

Florida

6.0%

All other (none individually greater than 5%)

31.6%

All other (none individually greater than 5%)

31.1%

Total

100.0%

The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the Company’s VIEs, excluding the multifamily securitization, credit facility and OBX Trusts VIEs, at September 30, 2021 are as follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk


Residential Trusts
	Property Location	Principal Balance		% of Balance

	California	$	12,219	52.6	%
	Illinois	3,516		15.1	%
	Texas	2,456		10.6	%
	Other (1)	5,052		21.7	%
	Total	$	23,243	100.0	%

	(1) No individual state greater than 5%.

Residential Mortgage Loans

The following table provides additional data on the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, at September 30, 2021 and December 31, 2020:


	September 30, 2021		December 31, 2020
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$1 - $4,382	$517	$1 - $3,448	$473
Interest rate	0.50% - 9.24%	4.25%	0.50% - 9.24%	4.89%
Maturity	7/1/2029 - 10/1/2061	6/5/2050	7/1/2029 - 1/1/2061	4/17/2046
FICO score at loan origination	604 - 829	761	505 - 829	755
Loan-to-value ratio at loan origination	8% - 103%	66%	8% - 104%	67%

Schedule of Commercial Mortgage Loans Held for Sale and Investment

The following tables represent a rollforward of the activity for the Company’s commercial real estate investments held for sale at September 30, 2021 and held for investment at December 31, 2020:


September 30, 2021
	Senior Mortgages		Senior Securitized Mortgages (1)		Mezzanine Loans		Total
	(dollars in thousands)
Beginning balance (January 1, 2021) (2)	$	373,925	$	874,349	$	124,156	$	1,372,430

Originations & advances (principal)	127,481		69		644		128,194
Principal payments	(75,007)		(87,253)		(9,922)		(172,182)


Transfers and sales (3)	(436,408)		(797,116)		(171,794)		(1,405,318)
Net (increase) decrease in origination fees	(1,403)		—		—		(1,403)

Amortization of net origination fees	501		486		43		1,030
Allowance for loan losses
Beginning allowance	(10,911)		(62,149)		(56,873)		(129,933)


Current period (allowance) reversal	10,911		62,149		56,873		129,933

Ending allowance	—		—		—		—


Net carrying value (September 30, 2021)	$	—	$	52,684	$	—	$	52,684


December 31, 2020
	Senior Mortgages		Senior Securitized Mortgages (1)		Mezzanine Loans		Total
	(dollars in thousands)
Beginning balance (January 1, 2020) (2)	$	499,690	$	936,378	$	182,726	$	1,618,794
Originations & advances (principal)	206,090		—		12,374		218,464
Principal payments	(77,344)		(144,308)		(78)		(221,730)
Principal write off	—		—		(7,000)		(7,000)


Transfers (3)	(245,120)		142,621		(7,100)		(109,599)
Net (increase) decrease in origination fees	(1,055)		(653)		(80)		(1,788)
Realized gain	204		—		—		204
Amortization of net origination fees	2,371		2,460		187		5,018
Allowance for loan losses
Beginning allowance, prior to CECL adoption	—		—		(12,703)		(12,703)
Impact of adopting CECL	(2,263)		(4,166)		(1,336)		(7,765)
Current period (allowance) reversal	(8,648)		(57,983)		(66,521)		(133,152)

Write offs	—		—		23,687		23,687
Ending allowance	(10,911)		(62,149)		(56,873)		(129,933)

Net carrying value (December 31, 2020)	$	373,925	$	874,349	$	124,156	$	1,372,430

(1) Represents assets of consolidated VIEs held for sale at September 30, 2021. (2) Excludes loan loss allowances. (3) Includes transfers to securitization vehicles.

Summary of Internal Risk Rating for Corporate Debt

The Company’s internal risk rating rubric for corporate debt has nine categories as depicted below:


Risk Rating - Corporate Debt			Description
1-5 / Performing			Meets all present contractual obligations.
6 / Performing - Closely Monitored			Meets all present contractual obligations but exhibits a defined weakness in either leverage or liquidity, but not both. Loans at this rating will require closer monitoring, but where we expect no loss of interest or principal.
7 / Substandard			A loan that has a defined weakness in either leverage and/or liquidity, and which may require substantial changes to strengthen the asset. Loans at this rating level have a higher probability of loss, although no determination of the amount or timing of a loss is yet possible.
8 / Doubtful			A loan that has missed a scheduled principal or interest payment or is otherwise deemed a non-earning account. The probability of loss is increasingly certain due to significant performance issues.
9 / Loss			Considered uncollectible.

Schedule of Industry and Rate Attributes of The Portfolio

The industry and rate attributes of the portfolio at September 30, 2021 and December 31, 2020 are as follows:


	Industry Dispersion
	September 30, 2021			December 31, 2020
		Total (1)		Total (1)
	(dollars in thousands)
Computer Programming, Data Processing & Other Computer Related Services		$	435,210	$	483,142
Management & Public Relations Services		263,196		300,869
Industrial Inorganic Chemicals		156,483		156,391
Metal Cans & Shipping Containers		117,355		115,670
Public Warehousing & Storage		88,032		132,397
Surgical, Medical & Dental Instruments & Supplies		81,160		83,161
Electronic Components & Accessories		78,452		78,129
Offices & Clinics of Doctors of Medicine		61,243		104,781
Telephone Communications		58,881		58,450
Specialty Outpatient Facilities, not elsewhere classified		48,109		—
Research, Development & Testing Services		45,546		62,008
Insurance Agents, Brokers and Service		43,827		67,193
Electric Work		42,635		41,128
Engineering, Architectural, and Surveying		39,275		77,308
Miscellaneous Industrial and Commercial		33,074		77,163
Miscellaneous Equipment Rental & Leasing		32,332		49,587
Medical & Dental Laboratories		30,404		30,711
Schools & Educational Services, not elsewhere classified		29,186		29,040
Home Health Care Services		28,726		28,587
Metal Forgings & Stampings		27,449		27,523
Legal Services		26,392		26,399
Petroleum and Petroleum Products		21,471		33,890
Grocery Stores		19,632		22,895
Coating, Engraving and Allied Services		18,458		19,484
Chemicals & Allied Products		14,689		14,686
Mailing, Reproduction, Commercial Art and Photography and Stenographic		12,311		12,733
Machinery, Equipment & Supplies		11,370		12,096
Sanitary Services		10,743		—
Offices and Clinics of Other Health Practitioners		10,095		9,730
Miscellaneous Business Services		1,952		12,980
Drugs		1,756		12,942
Computer integrated systems design		1,265		—
Miscellaneous Food Preparations		—		58,857
















Total		$	1,890,709	$	2,239,930

(1) All middle market lending positions are floating rate.

Aggregate Positions by Respective Place in the Capital Structure of the Borrowers

The table below reflects the Company’s aggregate positions by their respective place in the capital structure of the borrowers at September 30, 2021 and December 31, 2020.


	September 30, 2021		December 31, 2020
	(dollars in thousands)
First lien loans	$	1,302,441	$	1,489,125
Second lien loans	588,268		750,805



Total	$	1,890,709	$	2,239,930

Schedule of Corporate Loans Held for Investment

The following tables represent a rollforward of the activity for the Company’s corporate debt investments held for investment at September 30, 2021 and December 31, 2020:


September 30, 2021
	First Lien		Second Lien		Total
	(dollars in thousands)
Beginning balance (January 1, 2021) (1)	$	1,489,125	$	750,805	$	2,239,930

Originations & advances	988,568		66,480		1,055,048
Sales and transfers (2)	(795,932)		(83,690)		(879,622)
Principal payments	(388,928)		(157,703)		(546,631)
Amortization & accretion of (premium) discounts	7,078		3,080		10,158
Loan restructuring	—		—		—


Allowance for loan losses
Beginning allowance	(18,767)		(20,785)		(39,552)

Current period (allowance) reversal	2,530		9,296		11,826

Ending allowance	(16,237)		(11,489)		(27,726)

Net carrying value (September 30, 2021)	$	1,302,441	$	588,268	$	1,890,709


December 31, 2020
	First Lien		Second Lien		Total
	(dollars in thousands)
Beginning balance (January 1, 2020) (1)	$	1,403,503	$	748,710	$	2,152,213
Originations & advances	834,211		227,433		1,061,644
Sales (2)	(273,887)		(79,203)		(353,090)
Principal payments	(444,759)		(132,000)		(576,759)
Amortization & accretion of (premium) discounts	8,374		3,832		12,206
Loan restructuring	(19,550)		2,818		(16,732)


Allowance for loan losses
Beginning allowance, prior to CECL adoption	(7,363)		—		(7,363)
Impact of adopting CECL	(10,787)		(18,866)		(29,653)
Current period (allowance) reversal	(12,510)		(1,919)		(14,429)
Write offs	11,893		—		11,893
Ending allowance	(18,767)		(20,785)		(39,552)

Net carrying value (December 31, 2020)	$	1,489,125	$	750,805	$	2,239,930


(1) Excludes loan loss allowances. (2) Includes syndications and, for the period ended September 30, 2021 includes transfers to held for sale.

Debt Securities, Held-to-maturity, Amortized Costs Basis by Risk Rating and Vintage

The following table provides the amortized cost basis of corporate debt held for investment as of September 30, 2021 by vintage year and internal risk rating.


Amortized Cost Basis by Risk Rating and Vintage (1)
Risk Rating	Vintage
	Total		2021		2020		2019		2018		2017		2016		2015
(dollars in thousands)
1-5 / Performing	$	1,728,548	$	416,715	$	363,377	$	219,426	$	545,882	$	159,772	$	23,376
6 / Performing - Closely Monitored	40,195		820		26,392		—		—		12,983		—		—
7 / Substandard	121,966		—		11,370		25,556		85,040		—		—		—
8 / Doubtful	—		—		—		—		—		—		—		—
9 / Loss	—		—		—		—		—		—		—		—
Total	$	1,890,709	$	417,535	$	401,139	$	244,982	$	630,922	$	172,755	$	23,376	$	—

(1) The amortized cost basis excludes accrued interest and includes deferred fees on unfunded loans. As of September 30, 2021, the Company had $12.1 million of accrued interest receivable on corporate loans which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition and $2.1 million of deferred loan fees on unfunded loans, which is reported in Loans, net in the Consolidated Statements of Financial Condition.