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Investments
3 Months Ended
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Investments Investments The Company holds investments in various debt securities and beneficial interests which are the net residual interest of the Company’s investments in securitization trusts. The Company's debt securities and beneficial interests are issued by securitization trusts, which are VIEs, that the Company has sponsored but which the Company does not consolidate since it has determined it is not the primary beneficiary (See Note 10 Related party transactions). The Company marks its debt securities to fair value using prices provided by financing counterparties, and believes any unrealized losses to be temporary.
Risks inherent in the Company's debt securities portfolio, affecting both the valuation of its securities as well as the portfolio's interest income include the risk of default, delays and inconsistency in the frequency and amount of payments, risks affecting borrowers such as man-made or natural disasters, or the COVID-19 outbreak, and damage to or delay in realizing the value of the underlying collateral. The Company monitors the credit quality of the mortgage loans underlying its debt securities on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluates whether and when it becomes probable that all amounts contractually due will not be collected. The following table presents information regarding the Company's investments in debt securities and investments in beneficial interests ($ in thousands):

As of March 31, 2020
Basis(1)
Gross unrealized gainsGross unrealized lossesCarrying value (fair value)
Debt securities
$274,539  $—  $(27,167) $247,372  
Beneficial interests in securitization trusts64,703  —  —  64,703  
Total investments$339,242  $—  $(27,167) $312,075  

(1)Basis amount is net of any amortized discount, allowance for credit losses, principal paydowns and interest receivable on securities of $0.3 million.


As of December 31, 2019
Basis(1)
Gross unrealized gainsGross unrealized lossesCarrying value (fair value)
Debt securities$230,408  $1,643  $(366) $231,685  
Beneficial interests in securitization trusts57,954  —  —  57,954  
Total investments$288,362  $1,643  $(366) $289,639  

(1)Basis amount is net of any amortized discount, principal paydown and interest receivable on securities of $0.3 million.

As of March 31, 2020, the Company recorded no gross unrealized gains and a gross unrealized loss of $27.2 million in fair valuation adjustments in accumulated other comprehensive income and carried the Notes on the consolidated balance sheet at a fair value of $247.4 million, which includes $0.3 million in interest receivable. As of March 31, 2020, the Company had a gross unrealized loss of $5.2 million for securities due in April 2058, February 2057 and September 2059 which have been in an unrealized loss position for 12 months or longer. As of December 31, 2019, the Company recorded a gross unrealized gain of $1.6 million and a gross unrealized loss of $0.4 million in fair valuation adjustments in accumulated other comprehensive income and carried the Notes on the Company's consolidated balance sheet at fair value of $231.7 million, which includes $0.3 million in interest receivable. As of December 31, 2019, the Company had a gross unrealized loss of $0.4 million for securities due in April 2058, February 2057 and September 2059 which had been in an unrealized loss position for 12 months or longer.

During the first quarter of 2020, the Company acquired $61.3 million in notes and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors.  Each joint venture issued senior notes and beneficial interests, which are trust certificates representing the residual investment of the trust.  In certain transactions, the joint ventures also issued subordinate notes.  Of the $61.3 million acquired in the first quarter of 2020, the Company acquired $49.6 million in senior notes and $4.6 million in subordinate notes, collectively “the Notes.” The Notes are accounted for as debt securities and carried at fair value.  During the first quarter of 2019, the Company sold senior notes issued by certain joint ventures for total proceeds of $39.6 million and recognized a gain of $8 thousand, net of transaction fees.

The remaining $7.1 million consisted of beneficial interests issued by its sponsored joint ventures during the first quarter of 2020. As of March 31, 2020, the investments in beneficial interests were carried on the Company's consolidated balance sheet at $64.7 million. For the year ended December 31, 2019, the investments in beneficial interests were carried on the Company's consolidated balance sheet at $58.0 million. As of March 31, 2020 and December 31, 2019, the Company had no securities that were past due.

The following table presents a reconciliation between the purchase price and par value for the Company's beneficial interests acquisitions for the quarter ended March 31, 2020 ($ in thousands):
Three months ended March 31, 2020
Beneficial Interest
Par$11,970  
Discount(4,888) 
Purchase Price$7,082  

The Company adopted CECL using the prospective transition approach for PCD assets for its beneficial interests on January 1, 2020, at the time $4.2 million was reclassified from discount to allowance for credit losses for its Investments in beneficial interests. Under CECL, the company adjusts its allowance for loan losses when there are changes in its expectation of future cash flows. An increase to the allowance for losses will occur when there is a reduction in the Company’s expected future cash flows. A reduction to the allowance, or recovery, may occur if there is an increase in expected future cash flows that were previously subject to a provision for losses. 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, 2020, the Company recorded a provision for credit losses of $3.0 million on its mortgage loan portfolio, primarily as a result of reduced cash flow expectations due to the pandemic caused by COVID-19. This reserve reflects the macroeconomic impact of the COVID-19 outbreak on mortgage loan and residential real estate markets generally and is not specific to any specific asset in the beneficial interest portfolio. During the quarter ended March 31, 2019, the Company recorded no impairment on its beneficial interests. An analysis of the balance in the allowance for beneficial interest losses account follows ($ in thousands):

Three months ended March 31,
20202019
Allowance for beneficial interests credit losses, beginning balance$—  $—  
Beginning period adjustment for CECL(4,221) —  
Provision for credit losses on beneficial interests(2,987) —  
Allowance for beneficial interests credit losses, end balance$(7,208) $—