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LOANS (Tables)
9 Months Ended
Sep. 30, 2020
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]  
Loan Investment Activity
The following table presents the activity of the Company’s loan investments, including loans held for sale and excluding loans transferred or pledged to securitization vehicles, for the nine months ended September 30, 2020:
ResidentialCommercialCorporate DebtTotal
(dollars in thousands)
Beginning balance January 1, 2020$1,647,787 $669,713 $2,144,850 $4,462,350 
Impact of adopting CECL (3,600)(29,653)(33,253)
Purchases / originations935,232 194,926 678,608 1,808,766 
Sales and transfers (1)
(2,258,330)(148,036)(321,847)(2,728,213)
Principal payments(151,708)(59,675)(410,421)(621,804)
Gains / (losses) (2)
(14,980)(81,659)(9,842)(106,481)
(Amortization) / accretion(5,042)1,835 10,183 6,976 
Ending balance September 30, 2020
$152,959 $573,504 $2,061,878 $2,788,341 
(1)     Includes securitizations, syndications and transfers to securitization vehicles or REO.
(2)     Includes loan loss allowances.
Fair Value and Unpaid Principal of Residential Mortgage Loan Portfolio The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles, at September 30, 2020 and December 31, 2019:
September 30, 2020December 31, 2019
 (dollars in thousands)
Fair value$3,741,638 $4,246,161 
Unpaid principal balance$3,666,420 $4,133,149 
Summary of Comprehensive Income (Loss)
The following table provides information regarding the line items and amounts recognized in the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019 for these investments:
For the Three Months EndedFor the Nine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
 (dollars in thousands)
Interest income$42,508 $37,673 $132,937 $102,689 
Net gains (losses) on disposal of investments and other(4,638)(9,671)(22,014)(19,499)
Net unrealized gains (losses) on instruments measured at fair value through earnings77,837 18,093 (4,381)61,805 
Total included in net income (loss)$115,707 $46,095 $106,542 $144,995 
Geographic Concentrations Based on Unpaid Principal Balances
The following table provides the geographic concentrations based on the unpaid principal balances at September 30, 2020 and December 31, 2019 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:
 
Geographic Concentrations of Residential Mortgage Loans
September 30, 2020December 31, 2019
Property location% of BalanceProperty location% of Balance
California50.1%California52.1%
New York12.8%New York10.5%
Florida5.8%Florida5.3%
All other (none individually greater than 5%)31.3%All other (none individually greater than 5%)32.1%
Total100.0%100.0%
The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the Company’s VIEs, excluding the CLO, OBX Trusts and credit facility VIEs, at September 30, 2020 are as follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk
Commercial TrustsResidential Trusts
Property LocationPrincipal Balance% of BalanceProperty LocationPrincipal Balance% of Balance
(dollars in thousands)
California$1,236,527 37.9 %California$22,925 45.6 %
Texas477,642 14.6 %Texas7,481 14.9 %
New York381,425 11.7 %Illinois6,504 12.9 %
Florida180,892 5.5 %
Other (1)
13,343 26.6 %
Other (1)
986,851 30.3 %
Total$3,263,337 100.0 %Total$50,253 100.0 %
    (1) No individual state greater than 5%.
Residential Mortgage Loans
The following table provides additional data on the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, at September 30, 2020 and December 31, 2019:
 September 30, 2020December 31, 2019
 
Portfolio
Range
Portfolio Weighted
Average
Portfolio
Range
Portfolio Weighted Average
 (dollars in thousands)
Unpaid principal balance
$1 - $3,448
$458
$1 - $3,448
$459
Interest rate
0.50% - 9.24%
4.88%
2.00% - 8.38%
4.94%
Maturity7/1/2029 - 10/1/20604/29/20481/1/2028 - 12/1/205912/29/2047
FICO score at loan origination
505 - 829
756
505 - 829
758
Loan-to-value ratio at loan origination
8% - 105%
67%
8% - 105%
67%
Commercial Real Estate, Held for Investments, Amortized Cost Basis by Risk Rating and Vintage
The Company’s internal loan risk ratings are based on the guidance provided by the Office of the Comptroller of the Currency for commercial real estate lending. The Company’s internal risk rating rubric for commercial loans has nine categories as depicted below:
Risk Rating - Commercial LoansDescription
1-4 / PerformingMeets all present contractual obligations.
5 / Performing - Closely MonitoredMeets all present contractual obligations, but are transitional or could be exhibiting some weaknesses in both leverage and liquidity.
6 / Performing - Special MentionMeets all present contractual obligations, but exhibit potential weakness that deserves management’s close attention and, if uncorrected, may result in deterioration of repayment prospects.
7 / SubstandardInadequately protected by sound worth and paying capacity of the obligor or of the collateral pledged with a distinct possibility that loss will be sustained if some of the deficiencies are not corrected.
8 / DoubtfulSubstandard loans whereby collection of all contractual principal and interest is highly questionable or improbable.
9 / LossConsidered uncollectible.
The following table provides the internal loan risk ratings of commercial real estate investments held for investment as of September 30, 2020.
Amortized Cost Basis by Risk Rating and Vintage (1)
Risk RatingVintage
Total20202019201820172016Prior
(dollars in thousands)
1-4 / Performing$354,960 $92,076 $168,409 $ $12,447 $ $82,028 
5 / Performing - Closely Monitored158,701  158,701     
6 / Performing - Special Mention676,700 56,845 216,591 270,767 64,139 68,358  
7 / Substandard169,058 9,155  67,391 42,716  49,796 
8 / Doubtful97,040   39,668 57,372   
9 / Loss (2)
       
Total$1,456,459 $158,076 $543,701 $377,826 $176,674 $68,358 $131,824 
(1) The amortized cost basis excludes accrued interest. As of September 30, 2020, the Company had $4.1 million of accrued interest receivable on
commercial loans which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition.
(2) Includes two commercial mezzanine loans for which the Company recorded a full loan loss allowance of $46.6 million.
The Company’s internal risk rating rubric for corporate debt has nine categories as depicted below:
Risk Rating - Corporate DebtDescription
1-5 / PerformingMeets all present contractual obligations.
6 / Performing - Closely Monitored
Meets all present contractual obligations but exhibits a defined weakness in either leverage or liquidity, but not both. Loans at this rating will require closer monitoring, but where we expect no loss of interest or principal.
7 / SubstandardA loan that has a defined weakness in either leverage and/or liquidity, and which may require substantial changes to strengthen the asset. Loans at this rating level have a higher probability of loss, although no determination of the amount or timing of a loss is yet possible.
8 / Doubtful
A loan that has missed a scheduled principal or interest payment or is otherwise deemed a non-earning account. The probability of loss is increasingly certain due to significant performance issues.
9 / LossConsidered uncollectible.
Schedule of Commercial Mortgage Loans Held for Investment
The sector attributes of the Company’s commercial real estate investments held for investment at September 30, 2020 and December 31, 2019 were as follows:
 Sector Dispersion
 
September 30, 2020
December 31, 2019
 Carrying Value% of Loan PortfolioCarrying Value% of Loan Portfolio
 (dollars in thousands)
Office$666,115 45.7 %$681,129 42.4 %
Retail278,714 19.1 %389,076 24.2 %
Multifamily279,430 19.2 %262,302 16.3 %
Hotel121,829 8.4 %135,681 8.4 %
Industrial58,890 4.0 %82,441 5.1 %
Other31,805 2.2 %36,589 2.3 %
Healthcare19,676 1.4 %18,873 1.3 %
Total$1,456,459 100.0 %$1,606,091 100.0 %


At September 30, 2020 and December 31, 2019, commercial real estate investments held for investment were comprised of the following:
 September 30, 2020December 31, 2019
 Outstanding Principal
Carrying
Value
(1)
Percentage
of Loan
Portfolio
(2)
Outstanding Principal
Carrying
Value
(1)
Percentage
of Loan
Portfolio
(2)
 (dollars in thousands)
Senior mortgages$469,813 $450,177 29.5 %$503,499 $499,690 30.9 %
Senior securitized mortgages (3)
939,654 882,955 59.1 %940,546 936,378 57.8 %
Mezzanine loans181,170 123,327 11.4 %183,064 170,023 11.3 %
Total$1,590,637 $1,456,459 100.0 %$1,627,109 $1,606,091 100.0 %
(1)    Carrying value includes unamortized origination fees of $5.9 million and $8.3 million at September 30, 2020 and December 31, 2019, respectively.
(2)    Based on outstanding principal.
(3)    Represents assets of consolidated VIEs.

The following tables represent a rollforward of the activity for the Company’s commercial real estate investments held for investment at September 30, 2020 and December 31, 2019:
September 30, 2020
 Senior
Mortgages
Senior
Securitized Mortgages
(1)
Mezzanine
Loans
Total
 (dollars in thousands)
Beginning balance (January 1, 2020) (2)
$499,690 $936,378 $182,726 $1,618,794 
Originations & advances (principal)183,612  12,206 195,818 
Principal payments(59,675)(56,017) (115,692)
Principal write off  (7,000)(7,000)
Transfers (3)
(157,623)54,471 (7,100)(110,252)
Net (increase) decrease in origination fees(812) (80)(892)
Realized gain204   204 
Amortization of net origination fees1,695 1,908 140 3,743 
Allowance for loan losses
          Beginning allowance, prior to CECL adoption  (12,703)(12,703)
          Impact of adopting CECL(2,264)(4,166)(1,336)(7,766)
          Current period allowance(14,650)(49,619)(67,213)(131,482)
          Write offs  23,687 23,687 
          Ending allowance(16,914)(53,785)(57,565)(128,264)
Net carrying value (September 30, 2020)
$450,177 $882,955 $123,327 $1,456,459 
December 31, 2019
Senior
Mortgages
Senior
Securitized Mortgages
(1)
Mezzanine
Loans
Total
 (dollars in thousands)
Net carrying value (January 1, 2019)$981,202 $— $315,601 $1,296,803 
Originations & advances (principal)572,204 — 21,709 593,913 
Principal payments(16,785)(150,245)(149,633)(316,663)
Transfers(1,034,754)1,083,487 (8,675)40,058 
Net (increase) decrease in origination fees(4,200)— (184)(4,384)
Amortization of net origination fees2,023 3,136 412 5,571 
Net (increase) decrease in allowance— — (9,207)(9,207)
Net carrying value (December 31, 2019)$499,690 $936,378 $170,023 $1,606,091 
(1)     Represents assets of consolidated VIEs.
(2)     Excludes loan loss allowances.
(3)     Includes transfers to securitization vehicles or REO.
Schedule of Industry and Rate Attributes of The Portfolio The industry and rate attributes of the portfolio at September 30, 2020 and December 31, 2019 are as follows:
 Industry Dispersion
 September 30, 2020December 31, 2019
 
Total (1)
Total (1)
 (dollars in thousands)
Computer Programming, Data Processing & Other Computer Related Services$409,644 $394,193 
Management & Public Relations Services257,404 339,179 
Industrial Inorganic Chemicals141,941 — 
Public Warehousing & Storage124,836 107,029 
Engineering, Architectural, and Surveying110,984 124,201 
Metal Cans & Shipping Containers110,478 118,456 
Offices & Clinics of Doctors of Medicine104,064 106,993 
Surgical, Medical & Dental Instruments & Supplies99,444 102,182 
Electronic Components & Accessories78,114 24,000 
Insurance Agents, Brokers and Service68,577 75,410 
Telephone Communications58,233 61,210 
Miscellaneous Health & Allied Services, not elsewhere classified52,307 78,908 
Miscellaneous Equipment Rental & Leasing49,589 49,776 
Electric Work41,170 43,175 
Medical & Dental Laboratories40,477 41,344 
Research, Development & Testing Services29,648 45,610 
Metal Forgings & Stampings29,390 — 
Home Health Care Services28,914 29,361 
Motor Vehicles and Motor Vehicle Parts & Supplies28,545 28,815 
Legal Services26,420 — 
Petroleum and Petroleum Products24,709 24,923 
Grocery Stores22,937 23,248 
Coating, Engraving and Allied Services19,456 47,249 
Schools & Educational Services, not elsewhere classified19,325 19,586 
Chemicals & Allied Products14,595 15,002 
Miscellaneous Business Services12,953 164,033 
Drugs12,952 15,923 
Mailing, Reproduction, Commercial Art and Photography and Stenographic12,879 14,755 
Machinery, Equipment & Supplies12,080 — 
Miscellaneous Plastic Products9,940 10,000 
Offices and Clinics of Other Health Practitioners9,873 10,098 
Nonferrous Foundries (Castings) 30,191 
Total$2,061,878 $2,144,850 
(1)     All middle market lending positions are floating rate.
Aggregate Positions by Respective Place in the Capital Structure of the Borrowers
The table below reflects the Company’s aggregate positions by their respective place in the capital structure of the borrowers at September 30, 2020 and December 31, 2019.
 
 September 30, 2020December 31, 2019
 (dollars in thousands)
First lien loans$1,320,115 $1,396,140 
Second lien loans741,763 748,710 
Total$2,061,878 $2,144,850 
Schedule of Corporate Loans Held for Investment
The following tables represent a rollforward of the activity for the Company’s corporate debt investments held for investment at September 30, 2020 and December 31, 2019:
September 30, 2020
First LienSecond LienTotal
 (dollars in thousands)
Beginning balance (January 1, 2020) (1)
$1,403,503 $748,710 $2,152,213 
Originations & advances499,623 178,985 678,608 
Principal payments(311,856)(98,565)(410,421)
Amortization & accretion of (premium) discounts6,826 3,357 10,183 
Loan restructuring(19,550)2,818 (16,732)
Sales (2)
(242,658)(69,592)(312,250)
Allowance for loan losses
         Beginning allowance, prior to CECL adoption(7,363) (7,363)
         Impact of adopting CECL(10,787)(18,866)(29,653)
         Current period allowance(9,517)(5,084)(14,601)
         Write offs11,894  11,894 
         Ending allowance(15,773)(23,950)(39,723)
Net carrying value (September 30, 2020)
$1,320,115 $741,763 $2,061,878 
    (1) Excludes loan loss allowances.
(2) Includes syndications.

December 31, 2019
 First LienSecond LienTotal
 (dollars in thousands)
Net carrying value (January 1, 2019)$1,346,356 $540,826 $1,887,182 
Originations & advances542,463 345,573 888,036 
Principal payments(228,302)(140,625)(368,927)
Amortization & accretion of (premium) discounts5,960 2,936 8,896 
Sales(262,974) (262,974)
Net (increase) decrease in allowance(7,363) (7,363)
Net carrying value (December 31, 2019)$1,396,140 $748,710 $2,144,850 
Debt Securities, Held-to-maturity, Amortized Costs Basis by Risk Rating and Vintage
The following table provides the amortized cost basis of corporate debt held for investment as of September 30, 2020 by vintage year and internal risk rating.
Amortized Cost Basis by Risk Rating and Vintage (1)
Risk RatingVintage
Total202020192018201720162015Revolvers
(dollars in thousands)
1-5 / Performing$1,520,243 $259,377 $373,388 $457,891 $295,371 $95,256 $34,268 $4,692 
6 / Performing - Closely Monitored294,795 23,574 38,874 168,115 38,178 21,855  4,199 
7 / Substandard234,535  31,416 142,595 60,524    
8 / Doubtful12,879   12,879     
9 / Loss        
Total$2,062,452 $282,951 $443,678 $781,480 $394,073 $117,111 $34,268 $8,891 

(1) The amortized cost basis excludes accrued interest and deferred fees on unfunded loans. As of September 30, 2020, the Company had $11.9 million of accrued interest receivable on corporate loans which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition.