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Commercial Mortgage Loans Held for Investment (Tables)
6 Months Ended
Jun. 30, 2023
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]  
Schedule of Commercial Mortgage Loans Held for Investment

The tables below show the Company’s commercial mortgage loans held for investment as of June 30, 2023 and December 31, 2022:

June 30, 2023

 

Loan Type (1)

 

Number
of Loans

 

 

Principal
Balance

 

 

Unamortized (fees)/costs, net

 

 

Allowance for credit losses

 

 

Carrying
Value

 

 

Weighted Average
Interest Rate
(2)

 

 

Weighted Average
Years to Maturity
(3)

 

First mortgage loans

 

 

38

 

 

$

778,492

 

 

$

1,530

 

 

$

(21,276

)

 

$

758,746

 

 

 

8.7

%

 

 

1.1

 

Credit loans

 

 

2

 

 

 

13,500

 

 

 

 

 

 

(61

)

 

 

13,439

 

 

 

9.6

%

 

 

1.3

 

Total and average

 

 

40

 

 

$

791,992

 

 

$

1,530

 

 

$

(21,337

)

 

$

772,185

 

 

 

8.7

%

 

 

1.1

 

 

December 31, 2022

Loan Type (1)

 

Number
of Loans

 

 

Principal
Balance

 

 

Unamortized (fees)/costs, net

 

 

Allowance for credit losses

 

 

Carrying
Value

 

 

Weighted Average
Interest Rate
(2)

 

 

Weighted Average
Years to Maturity
(3)

 

First mortgage loans

 

 

41

 

 

$

831,007

 

 

$

1,359

 

 

$

(3,588

)

 

$

828,778

 

 

 

7.7

%

 

 

1.4

 

Credit loans

 

 

2

 

 

 

13,500

 

 

 

 

 

 

 

 

 

13,500

 

 

 

9.6

%

 

 

3.4

 

Total and average

 

 

43

 

 

$

844,507

 

 

$

1,359

 

 

$

(3,588

)

 

$

842,278

 

 

 

7.8

%

 

 

1.4

 

 

 

 

(1)
First mortgage loans are first position mortgage loans and credit loans are mezzanine and subordinated loans.
(2)
Weighted average interest rate is based on the loan spreads plus the applicable indices as of the last interest reset date, which is typically the 15th of each month. On June 15, 2023, the SOFR rate reset to 5.15%, respectively. On December 15, 2022, the LIBOR and SOFR rates reset to 4.32% and 4.34%, respectively.
(3)
Weighted average years to maturity excludes allowable extensions on the loans.
Schedule of Commercial Mortgage Loans held for Investment Portfolio

For the six months ended June 30, 2023, the activity in the Company’s commercial mortgage loans, held-for-investment portfolio was as follows:

 

 

 

Commercial mortgage loans at cost

 

 

Allowance for credit losses

 

 

Carrying Value

 

Balance at Beginning of Year

 

$

845,866

 

 

$

(3,588

)

 

$

842,278

 

Adoption of ASU 2016-13

 

 

 

 

 

(4,787

)

 

 

(4,787

)

Balance at beginning of period after adoption

 

 

845,866

 

 

 

(8,375

)

 

 

837,491

 

Loan originations

 

 

13,597

 

 

 

 

 

 

13,597

 

Principal repayments

 

 

(66,112

)

 

 

 

 

 

(66,112

)

Amortization of loan origination and deferred exit fees

 

 

297

 

 

 

 

 

 

297

 

Origination fees and extension fees received on commercial loans

 

 

(126

)

 

 

 

 

 

(126

)

Provision for credit losses

 

 

 

 

 

(12,962

)

 

 

(12,962

)

Balance at End of Period

 

$

793,522

 

 

$

(21,337

)

 

$

772,185

 

Schedule of Allowance for Credit Losses

The following table presents the activity in the Company's allowance for credit losses for the six months ended June 30, 2023:

 

 

 

Commercial Mortgage Loans

 

 

Unfunded Loan Commitments (1)

 

 

Total

 

Balance at beginning of period

 

$

(3,588

)

 

$

 

 

$

(3,588

)

Adoption of ASU 2016-13

 

 

(4,787

)

 

 

(335

)

 

 

(5,122

)

Balance at beginning of period after adoption

 

 

(8,375

)

 

 

(335

)

 

 

(8,710

)

Provision for credit losses

 

 

(12,962

)

 

 

(3

)

 

 

(12,965

)

Ending allowance for credit losses

 

$

(21,337

)

 

$

(338

)

 

$

(21,675

)

Summary of Investment Grade of Loans Loss

As part of the Company’s process for monitoring the credit quality of its investments, it performs a quarterly asset review of the investment portfolio and assigns risk ratings to each of its loans and certain securities it may own, such as CMBS. Risk factors include payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographic location, as well as national and regional economic factors. To determine the likelihood of loss, the loans are rated on a 5-point scale as follows:

 

Investment

Grade

Investment Grade Definition

1

Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.

2

Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.

3

Performing investment requiring closer monitoring. Trends and risk factors show some deterioration. Collection of principal and interest is still expected.

4

Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.

5

Underperforming investment with expected loss of interest and some principal.