NOTE 3: INVESTMENTS IN LOANS

Investments in Commercial Mortgages, Mezzanine Loans, Other Loans and Preferred Equity Interests

The following table summarizes our investments in commercial mortgages, mezzanine loans, other loans and preferred equity interests as of September 30, 2014:


	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE) Loans
Commercial mortgages (2)	$	1,068,977		$	(15,787	)	$	1,053,190			86		5.9	%	Dec. 2014 to Jul. 2044
Mezzanine loans		257,553			(2,576	)		254,977			77		9.4	%	Dec. 2014 to Jan. 2029
Preferred equity interests		42,608			0			42,608			10		7.7	%	May 2015 to Aug. 2025

Total CRE Loans		1,369,138			(18,363	)		1,350,775			173		6.6	%
Other loans		20,138			53			20,191			1		2.8	%	Oct. 2016

Total Loans	$	1,389,276		$	(18,310	)	$	1,370,966			174		6.6	%

Deferred fees		(1,184	)		0			(1,184	)

Total investments in loans	$	1,388,092		$	(18,310	)	$	1,369,782

(1)	Weighted-average coupon is calculated on the unpaid principal amount of the underlying instruments, which does not necessarily correspond to the carrying amount.

(2)	Commercial mortgages includes 11 conduit loans with an unpaid principal balance and carrying amount of $107,164, a weighted-average coupon of 4.6% and maturity dates ranging from September 2021 through July 2044. These commercial mortgages are classified as loans held for sale.

The following table summarizes our investments in commercial mortgages, mezzanine loans, other loans and preferred equity interests as of December 31, 2013:


	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE) Loans
Commercial mortgages (2)	$	792,526		$	(19,257	)	$	773,269			59		6.4	%	Mar. 2014 to Jan. 2029
Mezzanine loans		269,034			(3,273	)		265,761			81		9.6	%	Mar. 2014 to Jan. 2029
Preferred equity interests		54,389			(939	)		53,450			11		8.6	%	May 2015 to Aug. 2025

Total CRE Loans		1,115,949			(23,469	)		1,092,480			151		7.3	%
Other loans		30,625			72			30,697			2		4.3	%	Mar. 2014 to Oct. 2016

Total Loans		1,146,574			(23,397	)		1,123,177			153		7.2	%

Deferred fees		(800	)		0			(800	)

Total investments in loans	$	1,145,774		$	(23,397	)	$	1,122,377

(1)	Weighted-average coupon is calculated on the unpaid principal amount of the underlying instruments, which does not necessarily correspond to the carrying amount.

(2)	Commercial mortgages includes six conduit loans with an unpaid principal balance and carrying amount of $61,825, a weighted-average coupon of 5.3% and maturity dates ranging from January 2024 through January 2029. These commercial mortgages are classified as loans held for sale.

During the nine-month period ended September 30, 2014, we completed the conversion of two commercial real estate loans with a carrying value of $35,404 to real estate owned property. We recorded a gain on asset of $136 on one property as the value of the real estate exceeded the carrying amount of the converted loan and charged off $360 to the allowance for losses as the carrying amount of the other loan exceeded the fair value of the real estate property. During the nine-month period ended September 30, 2013, we did not convert any commercial real estate loans to owned real estate property.

In June 2014, we sold all of the remaining interests, held by Taberna VIII and Taberna IX, in one of our other investments with an unpaid principal balance of $10,488 for $2,850. We recorded a loss on sale of asset of $7,638 due to the illiquid nature of the investment.

The following table summarizes the delinquency statistics of our commercial real estate loans as of September 30, 2014 and December 31, 2013:


Delinquency Status	As of September 30, 2014		As of December 31, 2013
30 to 59 days	$	0	$	0
60 to 89 days		0		6,441
90 days or more		32,811		13,603
In foreclosure or bankruptcy proceedings		7,930		23,470

Total	$	40,741	$	43,514

As of September 30, 2014 and December 31, 2013, approximately $40,741 and $37,073, respectively, of our commercial real estate loans were on non-accrual status and had a weighted-average interest rate of 7.3% and 6.3%, respectively.

During the nine-month period ended September 30, 2014, we removed a loan with an unpaid principal balance of $5,500 from non-accrual status. The carrying amount of this loan is $4,330 as it was acquired at a discount. We recorded $882 of accrued interest which represents the interest during the time the loan was on non-accrual status. Management believes the entire unpaid principal balance and all accrued interest is collectible.

Allowance For Losses And Impaired Loans

The following table provides a roll-forward of our allowance for losses for our commercial mortgages, mezzanine loans and other loans for the three-month periods ended September 30, 2014 and 2013:


	For the Three-Month Period Ended September 30, 2014			For the Three-Month Period Ended September 30, 2013
Beginning balance	$	15,336		$	24,222
Provision		1,500			500
Charge-offs, net of recoveries		(1,174	)		(1,405	)

Ending balance	$	15,662		$	23,317

The following table provides a roll-forward of our allowance for losses for our commercial mortgages, mezzanine loans and other loans for the nine-month periods ended September 30, 2014 and 2013:


	For the Nine-Month Period Ended September 30, 2014			For the Nine-Month Period Ended September 30, 2013
Beginning balance	$	22,955		$	30,400
Provision		3,500			1,500
Charge-offs, net of recoveries		(10,793	)		(8,583	)

Ending balance	$	15,662		$	23,317

As of September 30, 2014 and December 31, 2013, we identified 14 commercial mortgages and mezzanine loans with unpaid principal balances and recorded investment of $64,741 and $55,573, respectively, as impaired.

The average unpaid principal balance and recorded investment of total impaired loans was $65,129 and $65,199 during the three-month periods ended September 30, 2014 and 2013, respectively, and $58,088 and $67,315 during the nine-month periods ended September 30, 2014 and 2013, respectively. As of September 30, 2014, there are four impaired loans with unpaid principal balances of $20,180 for which there is no allowance. We recorded interest income from impaired loans of $53 and $23 for the three-month periods ended September 30, 2014 and 2013, respectively. We recorded interest income from impaired loans of $938 and $229 for the nine-month periods ended September 30, 2014 and 2013, respectively.

We have evaluated modifications to our commercial real estate loans to determine if the modification constitutes a troubled debt restructuring (TDR) under FASB ASC Topic 310, “Receivables”. During the nine-month period ended September 30, 2014, we have determined that a modification to one commercial real estate loan constituted a TDR as the borrower was experiencing financial difficulties and we, as the lender, granted a concession to the borrower by deferring principal payments to future periods. The outstanding recorded investment was $11,140 both before and after the modification. As of September 30, 2014, there were no TDRs that subsequently defaulted for modifications within the previous 12 months.