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Commercial Mortgage Loans (Tables)
 9 Months Ended
Sep. 30, 2022
Receivables [Abstract]  
Schedule of loans receivable by class
The following table is a summary of the Company's commercial mortgage loans, held for investment, carrying values by class (dollars in thousands):
September 30, 2022December 31, 2021
Senior loans$5,311,315 $4,204,464 
Mezzanine loans16,958 22,424 
Total amortized cost of loans5,328,273 4,226,888 
General allowance for credit losses19,195 15,827 
Specific allowance for credit losses (1)
27,620 — 
Less: Total Allowance for Credit Losses46,815 15,827 
Total commercial mortgage loans, held for investment, net$5,281,458 $4,211,061 
_________________________________________________________
(1) As of September 30, 2022, the Company recorded a specific reserve with respect to a retail loan designated as non-performing.
The following tables represent the composition by loan collateral type and region of the Company's commercial mortgage loans, held for investment portfolio (dollars in thousands):
September 30, 2022December 31, 2021
Loan Collateral Type Par Value Percentage Par Value Percentage
Multifamily$3,992,990 74.7 %$2,953,938 69.6 %
Hospitality503,251 9.4 %460,884 10.9 %
Office456,866 8.6 %485,575 11.4 %
Retail172,503 3.2 %104,990 2.5 %
Industrial93,035 1.7 %88,956 2.1 %
Mixed Use52,500 1.0 %62,965 1.5 %
Self Storage44,895 0.8 %56,495 1.3 %
Manufactured Housing34,688 0.6 %29,159 0.7 %
Total $5,350,728 100.0 %$4,242,962 100.0 %
September 30, 2022December 31, 2021
Loan RegionPar Value Percentage Par Value Percentage
Southeast$2,158,660 40.4 %$1,106,439 26.2 %
Southwest1,757,121 32.9 %1,764,905 41.6 %
Mideast781,379 14.6 %646,125 15.2 %
Far West232,734 4.3 %301,040 7.1 %
Great Lakes169,191 3.2 %183,930 4.3 %
Various109,230 2.0 %68,896 1.6 %
New England66,065 1.2 %67,651 1.6 %
Rocky Mountain43,751 0.8 %43,751 1.0 %
Plains32,597 0.6 %60,225 1.4 %
Total$5,350,728 100.0 %$4,242,962 100.0 %
The following tables represent the composition by loan collateral type and region of the Company's commercial mortgage loans, held for sale, measured at fair value (dollars in thousands):
September 30, 2022December 31, 2021
Loan Collateral Type Par Value PercentagePar Value Percentage
Retail$25,000 56.1 %$— — %
Hospitality19,546 43.9 %— — %
Office— — %34,250 100.0 %
Total $44,546 100.0 %$34,250 100.0 %
September 30, 2022December 31, 2021
Loan RegionPar ValuePercentagePar ValuePercentage
Southeast$37,996 85.3 %$34,250 100.0 %
Mideast6,550 14.7 %— — %
Total$44,546 100.0 %$34,250 100.0 %
Schedule of allowance for credit losses
The following table presents the activity in the Company's allowance for credit losses, excluding the unfunded loan commitments, as of September 30, 2022 (dollars in thousands):
MultiFamilyRetailOfficeIndustrialMixed UseHospitalitySelf-StorageManufactured HousingTotal
December 31, 2021$9,681 $288 $776 $86 $169 $4,597 $152 $78 $15,827 
Changes:
General provision/(benefit) for credit losses32 234 (103)15 (108)(807)(110)(47)(894)
March 31, 2022$9,713 $522 $673 $101 $61 $3,790 $42 $31 $14,933 
Changes:
General provision/(benefit) for credit losses4,595 (128)(48)(18)(22)(687)(23)(8)3,661 
Specific provision/(benefit) for credit losses— 28,431 — — — — — — 28,431 
June 30, 2022$14,308 $28,825 $625 $83 $39 $3,103 $19 $23 $47,025 
Changes:
General provision/(benefit) for credit losses(41)(25)(181)49 6 793 (13)13 601 
Specific provision/(benefit) for credit losses— (811)— — — — — — (811)
September 30, 2022$14,267 $27,989 $444 $132 $45 $3,896 $6 $36 $46,815 
The following table presents the activity in the Company's allowance for credit losses, for the unfunded loan commitments, as of September 30, 2022 (dollars in thousands):
MultiFamilyRetailOfficeIndustrialMixed UseHospitalitySelf-StorageManufactured HousingTotal
December 31, 2021$137 $1 $13 $3 $10 $79 $— $— $243 
Changes:
General provision/(benefit) for credit losses(32)15 (4)(2)(10)(28)— — (61)
March 31, 2022$105 $16 $9 $1 $— $51 $— $— $182 
Changes:
General provision/(benefit) for credit losses443 (1)1 (1)— (4)— — 438 
June 30, 2022$548 $15 $10 $— $— $47 $— $— $620 
Changes:
General provision/(benefit) for credit losses(403)— (1)2 — 11 — 2 (389)
September 30, 2022$145 $15 $9 $2 $— $58 $— $2 $231 
As part of the Company's process for monitoring the credit quality of its commercial mortgage loans, excluding those held for sale, measured at fair value, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its loans. The loans are scored on a scale of 1 to 5 as follows:
Investment Rating
Summary Description
1
Very Low Risk - Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2
Low Risk - Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3
Average Risk - Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4
High Risk/Defaulted/Potential For Loss - Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5
Impaired/Loss Likely - Underperforming investment with expected loss of interest and some principal.
Schedule of allocation by risk rating
The following tables present the amortized cost of our commercial mortgage loans, held for investment as of September 30, 2022 and December 31, 2021, by loan collateral type, the Company’s internal risk rating and year of origination. The risk ratings are updated as of September 30, 2022.
As of September 30, 2022
202220212020201920182017Total
Multifamily:
Risk Rating:
1-2 internal grade$1,402,934 $2,276,836 $92,829 $— $37,851 $— $3,810,450 
3-4 internal grade— 95,036 10,852 24,058 37,025 — 166,971 
Total Multifamily Loans$1,402,934 $2,371,872 $103,681 $24,058 $74,876 $— $3,977,421 
Retail:
Risk Rating:
1-2 internal grade$20,941 $33,870 $— $8,203 $— $— $63,014 
3-4 internal grade— — — — — — — 
5 internal grade105,498 — — — — — 105,498 
Total Retail Loans$126,439 $33,870 $— $8,203 $— $— $168,512 
Office:
Risk Rating:
1-2 internal grade$— $50,343 $203,840 $108,152 $18,746 $— $381,081 
3-4 internal grade— — 36,343 25,736 12,977 — 75,056 
Total Office Loans$— $50,343 $240,183 $133,888 $31,723 $— $456,137 
Industrial:
Risk Rating:
1-2 internal grade$77,712 $— $14,946 $— $— $— $92,658 
3-4 internal grade— — — — — — — 
Total Industrial Loans$77,712 $— $14,946 $— $— $— $92,658 
Mixed Use:
Risk Rating:
1-2 internal grade$19,926 $32,446 $— $— $— $— $52,372 
3-4 internal grade— — — — — — — 
Total Mixed Use Loans$19,926 $32,446 $— $— $— $— $52,372 
Hospitality:
Risk Rating:
1-2 internal grade$129,645 $155,287 $26,956 $58,814 $22,195 $— $392,897 
3-4 internal grade— — — 29,966 — 78,928 108,894 
Total Hospitality Loans$129,645 $155,287 $26,956 $88,780 $22,195 $78,928 $501,791 
Self-Storage:
Risk Rating:
1-2 internal grade$— $14,976 $29,846 $— $— $— $44,822 
3-4 internal grade— — — — — — — 
Total Self-Storage Loans$— $14,976 $29,846 $— $— $— $44,822 
Manufactured Housing:
Risk Rating:
1-2 internal grade$10,469 $6,674 $17,417 $— $— $— $34,560 
3-4 internal grade— — — — — — — 
Total Manufactured Housing Loans$10,469 $6,674 $17,417 $— $— $— $34,560 
Total$1,767,125 $2,665,468 $433,029 $254,929 $128,794 $78,928 $5,328,273 
As of December 31, 2021
20212020201920182017Total
Multifamily:
Risk Rating:
1-2 internal grade$2,438,376 $270,953 $103,989 $90,877 $— $2,904,195 
3-4 internal grade— — — 37,025 — 37,025 
Total Multifamily Loans$2,438,376 $270,953 $103,989 $127,902 $— $2,941,220 
Retail:
Risk Rating:
1-2 internal grade$33,830 $11,928 $29,515 $29,452 $— $104,725 
3-4 internal grade— — — — — — 
Total Retail Loans$33,830 $11,928 $29,515 $29,452 $— $104,725 
Office:
Risk Rating:
1-2 internal grade$50,291 $253,759 $136,800 $43,308 $— $484,158 
3-4 internal grade— — — — — — 
Total Office Loans$50,291 $253,759 $136,800 $43,308 $— $484,158 
Industrial:
Risk Rating:
1-2 internal grade$— $31,906 $— $— $— $31,906 
3-4 internal grade— — 56,933 — — 56,933 
Total Industrial Loans$— $31,906 $56,933 $— $— $88,839 
Mixed Use:
Risk Rating:
1-2 internal grade$32,395 $30,325 $— $— $— $62,720 
3-4 internal grade— — — — — — 
Total Mixed Use Loans$32,395 $30,325 $— $— $— $62,720 
Hospitality:
Risk Rating:
1-2 internal grade$153,032 $26,920 $34,054 $— $— $214,006 
3-4 internal grade— — 113,961 52,790 79,102 245,853 
Total Hospitality Loans$153,032 $26,920 $148,015 $52,790 $79,102 $459,859 
Self-Storage:
Risk Rating:
1-2 internal grade$14,948 $41,382 $— $— $— $56,330 
3-4 internal grade— — — — — — 
Total Self-Storage Loans$14,948 $41,382 $— $— $— $56,330 
Manufactured Housing:
Risk Rating:
1-2 internal grade$6,665 $22,372 $— $— $— $29,037 
3-4 internal grade— — — — — — 
Total Manufactured Housing Loans$6,665 $22,372 $— $— $— $29,037 
Total$2,729,537 $689,545 $475,252 $253,452 $79,102 $4,226,888 
The following table represents the allocation by risk rating for the Company's commercial mortgage loans, held for investment (dollars in thousands):
September 30, 2022  December 31, 2021
Risk Rating  Number of Loans  Par ValueRisk Rating  Number of Loans  Par Value
1  —   $— 1  —   $— 
2  148   4,890,312 2  148   3,903,047 
3  14   244,109 3  16   282,840 
4  3   107,077 4  1   57,075 
5  1   109,230 5  —   — 
  166   $5,350,728 165   $4,242,962 
Schedule of financing receivable past due
The following table presents an aging summary of the loans amortized cost basis as of September 30, 2022 (dollars in thousands):
MultifamilyRetailOfficeIndustrialMixed UseHospitalitySelf-StorageManufactured HousingTotal
Status:
Current$3,977,421 $63,014 $456,137 $92,658 $52,372 $444,716 $44,822 $34,560 $5,165,700 
1-29 days past due— — — — — — — — 
30-59 days past due— — — — — — — — — 
60-89 days past due— — — — — — — — — 
90-119 days past due— — — — — — — — — 
120+ days past due (1)
— 105,498 — — — 57,075 — — 162,573 
Total$3,977,421 $168,512 $456,137 $92,658 $52,372 $501,791 $44,822 $34,560 $5,328,273 
_________________________________________________________
(1) For the three and nine months ended September 30, 2022, there was no interest income recognized on these loans.
Financing Receivable, Nonaccrual
The following table presents the amortized cost basis of the loans on nonaccrual status as of September 30, 2022 and December 31, 2021 (dollars in thousands):
September 30, 2022December 31, 2021
Non-performing loan amortized cost at beginning of year, January 1$57,075 $94,887 
Addition of non-performing loan amortized cost105,498 — 
Less: Removal of non-performing loan amortized cost— 37,812 
Non-performing loan amortized cost at end of period$162,573 $57,075 
Schedule of real estate notes receivable rollforward
For the nine months ended September 30, 2022 and year ended December 31, 2021, the activity in the Company's commercial mortgage loans, held for investment portfolio was as follows (dollars in thousands):
Nine Months Ended September 30, 2022Year Ended December 31, 2021
Balance at Beginning of Year$4,211,061 $2,693,848 
Acquisitions and originations1,980,296 2,897,002 
Principal repayments(863,186)(1,286,598)
Discount accretion/premium amortization8,780 7,038 
Loans transferred from/(to) commercial real estate loans, held for sale(9,296)(52,615)
Net fees capitalized into carrying value of loans(12,803)(15,150)
General (provision)/benefit for credit losses(3,368)4,770 
Specific (provision)/benefit for credit losses(27,620)— 
Cost recovery(2,406)— 
Charge-off from allowance— 289 
Transfer to real estate owned— (37,523)
Balance at End of Period$5,281,458 $4,211,061