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Mortgage Loans
3 Months Ended
Mar. 31, 2019
Mortgage Loans on Real Estate [Abstract]  
Mortgage Loans
Mortgage Loans
The following table presents information regarding the carrying value for the mortgage loan categories of RPL loan pools, NPL loan pools and SBC loans as of March 31, 2019 and December 31, 2018 ($ in thousands):
Loan portfolio basis by asset type
 
March 31, 2019
 
December 31, 2018
Residential RPL loan pools
 
$
1,228,968

 
$
1,242,207

SBC loan pools
 
21,127

 
21,203

SBC loans non-pooled1
 
28,605

 
11,140

Residential NPL loan pools
 
34,977

 
36,323

Total
 
$
1,313,677

 
$
1,310,873

 
(1)
SBC loans not pooled are accounted for under ASC 310-20 versus ASC 310-30 for our loan pools.

Included on the Company’s consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 are approximately $1.3 billion and $1.3 billion, respectively, of RPLs, NPLs, and SBCs. RPLs and NPLs are categorized at acquisition. The carrying value of all loans reflects the original investment amount, plus accrual of interest income and discount, less principal and interest cash flows received. The carrying values at March 31, 2019 for the Company's loans in the table above are reduced by an allowance for loan losses of $1.3 million, reflected in the totals for each line in the table above. The Company had $1.2 million allowance for loan losses at December 31, 2018. For the three months ended March 31, 2019 the Company recognized $0.2 million provision for loan loss. For the three months ended March 31, 2018, the Company recognized no provision for loan loss. For the three month periods ended March 31, 2019 and 2018, the Company accreted $26.4 million and $25.2 million, respectively, into interest income with respect to its RPL, NPL and SBC loan pools.
The Company’s RPL loan acquisitions during the three month periods ended March 31, 2019 consisted of 38 purchased RPLs with UPB of $8.5 million. Comparatively during the three months ended March 31, 2018, the Company acquired 87 RPLs with UPB of $19.7 million. No NPLs were directly purchased during the three months ended March 31, 2019 and 2018.
The Company acquired 19 SBC loans, with no deterioration in credit quality that are not accounted for by pooling, with $17.8 million of UPB for the three months ended March 31, 2019 and no SBC loans, similarly not pooled for accounting, were acquired during the three months ended 2018.
The following table presents information regarding the accretable yield and non-accretable amount for purchased loan pools acquired during the following periods ($ in thousands):
 
Three months ended March 31, 2019
 
Three months ended March 31, 2018
 
Re-performing
loans

Non-performing
loans

Re-performing
loans

Non-performing
loans
Contractually required principal and interest
$
14,966

 
$

 
$
31,623

 
$

Non-accretable amount
(5,500
)
 

 
(9,574
)
 

Expected cash flows to be collected
9,466

 

 
22,049

 

Accretable yield
(2,261
)
 

 
(4,483
)
 

Fair value at acquisition
$
7,205

 
$

 
$
17,566

 
$


    
The Company determines the accretable yield on new acquisitions by comparing the expected cash flows from the Company’s proprietary cash flow model to the remaining contractual cash flows at acquisition. The difference between the expected cash flows and the portfolio acquisition price is accretable yield. The difference between the remaining contractual cash flows and the expected cash flows is the non-accretable amount. Accretable yield and accretion amounts do not include any of the interest income on unpooled SBC loans at March 31, 2019 and 2018 ($ in thousands):

Three months ended March 31, 2019

Three months ended March 31, 2018

Re-performing
loans

Non-performing
loans

Re-performing
loans

Non-performing
loans
Balance at beginning of period
$
311,806


$
6,459


$
344,141


$
7,370

Accretable yield additions
2,261




4,483



Accretion
(26,072
)

(330
)

(24,502
)

(715
)
Reclassification from (to) non-accretable amount, net
8,333


(1,281
)

(6,603
)

(370
)
Balance at end of period
$
296,328


$
4,848


$
317,519


$
6,285


During the three months ended March 31, 2019, the Company reclassified a net $7.1 million from non-accretable amount to accretable yield, consisting of a $8.3 million transfer from non-accretable amount to accretable yield for RPLs, and a $1.3 million transfer from accretable yield to non-accretable amount for NPLs. Comparatively, during the three months ended March 31, 2018, the Company reclassified a net $7.0 million from accretable yield to non-accretable amount, consisting of a $6.6 million transfer from accretable yield to non-accretable amount for its RPLs and $0.4 million from accretable yield to non-accretable amount on NPLs. The Company recalculates the amount of accretable yield and non-accretable amount on a quarterly basis. Reclassifications between the two categories are primarily based upon changes in expected cash flows and actual prepayments, including payoffs in full or in part. Additionally, the accretable yield and non-accretable amounts are revised when loans are reclassified to REO because the future expected cash flows are removed from the pool. The reclassification in the first quarter of 2019 and 2018 is based on an updated assessment of projected loan cash flows as compared to the projection at December 31, 2018 and December 31, 2017, respectively. This is offset by the removal of the accretable yield for loans that are removed from the pool at foreclosure and for loan payoffs, both in full or in part, prior to modeled expectations.
The Company performs an analysis of its expectation of the amount of undiscounted cash flows expected to be collected from its mortgage loan pools at the end of each calendar quarter. If the Company expects to collect greater cash flows over the life of the pool, the accretable yield amount increases and the expected yield to maturity is adjusted on a prospective basis. An allowance for loan losses is established when it is probable the Company will not collect all amounts previously estimated to be collectible. Management assesses the credit quality of the portfolio and the adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. During the quarter ended March 31, 2019, the Company recorded an impairment of $0.2 million of the value of five of its NPL pools acquired in 2014, 2015 and 2016. No impairment was recorded for the quarter ended March 31, 2018. An analysis of the balance in the allowance for loan losses account follows ($ in thousands):
 
Three months ended March 31,
 
2019
 
2018
Allowance for loan losses, beginning of period
$
(1,164
)
 
$

Provision for loan losses
(154
)
 

Allowance for loan losses, end of period
$
(1,318
)
 
$


The following table sets forth the carrying value of the Company’s mortgage loans, and related unpaid principal balance by delinquency status as of March 31, 2019 and December 31, 2018 ($ in thousands):
 
March 31, 2019
 
December 31, 2018
 
Number of
loans
 
Carrying
value
 
Unpaid
principal
balance
 
Number of
loans
 
Carrying
value
 
Unpaid
principal
balance
Current
4,031

 
$
781,289

 
$
864,758

 
3,929

 
$
757,276

 
$
848,551

30
960

 
166,180

 
183,499

 
1,006

 
167,286

 
185,742

60
667

 
113,418

 
125,095

 
711

 
123,078

 
136,586

90
1,104

 
195,211

 
220,436

 
1,188

 
200,419

 
231,063

Foreclosure
256

 
57,579

 
76,595

 
277

 
62,814

 
79,777

Mortgage loans
7,018

 
$
1,313,677

 
$
1,470,383

 
7,111

 
$
1,310,873

 
$
1,481,719