The Company invests in residential and corporate loans. Loans are classified as either held for investment or held for sale. Loans are also eligible to be accounted for under the fair value option. Excluding loans transferred or pledged to securitization vehicles, as of March 31, 2021 and December 31, 2020, the Company reported $528.9 million and $345.8 million, respectively, of loans for which the fair value option was elected. If loans are held for investment and the fair value option has not been elected, they are accounted for at amortized cost less impairment. If the Company intends to sell or securitize the loans and the securitization vehicle is not expected to be consolidated, the loans are classified as held for sale. If loans are held for sale and the fair value option was not elected, they are accounted for at the lower of cost or fair value. Any origination fees and costs or purchase premiums or discounts are deferred and recognized upon sale. The Company determines the fair value of loans held for sale on an individual loan basis.

Given the unique nature of each underlying borrower and any collateral, the Company assesses an allowance for each individual loan held-for-investment. A provision is established at origination or acquisition that reflects management’s estimate of the total expected credit loss over the expected life of the loan. In estimating the lifetime expected credit losses, management utilizes a probability of default and loss given default methodology (“Loss Given Default methodology”), which considers projected economic conditions over the reasonable and supportable forecast period. The forecast incorporates primarily market-based assumptions including, but not limited to, forward interest rate curves, unemployment rate estimates and certain indexes sourced from third party vendors. For any remaining period of the expected life of the loan after the reasonable and supportable period, the Company reverts to historical losses on a straight-line basis. Management uses third-party vendors’ loan pool data for loans with similar risk characteristics to estimate historical losses given the limited loss history of the Company’s loan portfolio. Changes in the lifetime expected credit loss are reflected in Loan loss (provision) reversal in the Consolidated Statements of Comprehensive Income (Loss).

For loans experiencing credit deterioration, the Company may use a different methodology to determine the expected credit losses such as a discounted cash flow analysis. For collateral-dependent loans, if foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for any selling costs, if applicable. Additionally, the Company may elect the practical expedient for a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty by measuring the allowance as the difference between the fair value of the collateral, less costs to sell, if applicable, and the amortized cost basis of the financial asset at the reporting date. The Company’s commercial loans are collateralized by commercial real estate including, but not limited to, multifamily real estate, office and retail space, hotels and industrial space. At origination, the fair value of the collateral generally exceeds the principal loan balance.

Management assesses the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. Depending on the expected recovery of its investment, the Company considers the estimated net recoverable value of the loans as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive landscape where the borrower conducts business. To determine if loan loss allowances are required on investments in corporate debt, the Company reviews the monthly and/or quarterly financial statements of the borrowers, verifies loan compliance packages, if applicable, and analyzes current results relative to budgets and sensitivities performed at inception of the investment. Because these determinations are based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the reporting date.

The Company may be exposed to various levels of credit risk depending on the nature of its investments and credit enhancements, if any, supporting its assets. The Company’s core investment process includes procedures related to the initial approval and periodic monitoring of credit risk and other risks associated with each investment. The Company’s investment underwriting procedures include evaluation of the underlying borrowers’ ability to manage and operate their respective properties or companies. Management reviews loan-to-value metrics at origination or acquisition of a new investment and if events occur that trigger re-evaluation by management.


	Residential		Commercial		Corporate Debt		Total
	(dollars in thousands)
Beginning balance January 1, 2021	$	345,810	$	498,081	$	2,239,930	$	3,083,821

Purchases / originations	467,307		114,467		71,493		653,267
Sales and transfers (1)	(267,551)		(536,829)		(45,776)		(850,156)



Principal payments	(10,281)		(63,959)		(201,247)		(275,487)
Gains / (losses) (2)	(5,164)		(12,199)		6,186		(11,177)
(Amortization) / accretion	(1,253)		439		3,889		3,075

Ending balance March 31, 2021	$	528,868	$	—	$	2,074,475	$	2,603,343

(1) Includes securitizations, syndications, transfers to securitization vehicles and commercial loan transfers to assets of disposal group held for sale. Includes transfer of residential loans to securitization vehicles with a carrying value of $257.1 million during the three months ended March 31, 2021.
(2) Includes loan loss allowances.

The Company also has off-balance-sheet credit exposures related to unfunded loan commitments, including revolvers, delayed draw term loans and future funding commitments that are not unconditionally cancelable by the Company. The Company utilizes the same methodology in calculating the liability related to the expected credit losses on these exposures as it does for the calculation of the allowance for loan losses. In determining the estimate of credit losses for off-balance-sheet credit exposures, the Company will consider the contractual period in which the entity is exposed to credit risk and the likelihood that funding will occur, if material. Estimated credit losses for off-balance-sheet credit exposures are included in Other liabilities on the Company’s Consolidated Statements of Financial Condition.

The Company’s residential mortgage loans are primarily comprised of performing adjustable-rate and fixed-rate whole loans. The Company’s residential loans are accounted for under the fair value option with changes in fair value reflected in Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss). Additionally, the Company consolidates a collateralized financing entity that securitized prime adjustable-rate jumbo residential mortgage loans. The Company also consolidates securitization trusts in which it had purchased subordinated securities because it also has certain powers and rights to direct the activities of such trusts. Refer to the “Variable Interest Entities” Note for further information related to the Company’s consolidated residential mortgage loan trusts.


	For the Three Months Ended
	March 31, 2021		March 31, 2020
	(dollars in thousands)
Interest income	$	37,109	$	47,557
Net gains (losses) on disposal of investments and other	(5,220)		(12,000)
Net unrealized gains (losses) on instruments measured at fair value through earnings	22,455		(192,763)
Total included in net income (loss)	$	54,344	$	(157,206)

Geographic Concentrations of Residential Mortgage Loans

March 31, 2021

December 31, 2020

Property location

% of Balance

Property location

% of Balance

California

51.0%

California

48.9%

New York

14.0%

New York

14.0%

Florida

6.0%

Florida

6.0%

All other (none individually greater than 5%)

29.0%

All other (none individually greater than 5%)

31.1%

Total

100.0%


	March 31, 2021		December 31, 2020
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$1 - $3,448	$485	$1 - $3,448	$473
Interest rate	0.50% - 9.24%	4.85%	0.50% - 9.24%	4.89%
Maturity	7/1/2029 - 4/1/2061	12/11/2048	7/1/2029 - 1/1/2061	4/17/2046
FICO score at loan origination	505 - 829	754	505 - 829	755
Loan-to-value ratio at loan origination	8% - 104%	67%	8% - 104%	67%

As of March 31, 2021, commercial real estate loans are reported in Assets of disposal group held for sale in the Consolidated Statements of Financial Condition and classified as held for sale. As of December 31, 2020, commercial real estate loans are reported in Loans, net in the Consolidated Statements of Financial Condition and classified as held for investment. Refer to the “Sale of Commercial Real Estate Business” Note for additional information on the announced transaction.

The Company’s commercial real estate loans are comprised of adjustable-rate and fixed-rate loans. The difference between the principal amount of a loan and proceeds at acquisition is recorded as either a discount or premium. Commercial real estate loans and preferred equity interests that were designated as held for investment and were originated or purchased by the Company were carried at their outstanding principal balance, net of unamortized origination fees and costs, premiums or discounts, less an allowance for losses, if necessary. Origination fees and costs, premiums or discounts are amortized into interest income over the life of the loan.

Management generally reviews the most recent financial information and metrics derived therefrom produced by the borrower, which may include, but is not limited to, net operating income (“NOI”), debt service coverage ratios, property debt yields (net cash flow or NOI divided by the amount of outstanding indebtedness), loan per unit and rent rolls relating to each of the Company’s commercial real estate loans and preferred equity interests (“CRE Debt and Preferred Equity Investments”), and may consider other factors management deems important. Management also reviews market pricing to determine each borrower’s ability to refinance their respective assets at the maturity of each loan, economic trends (both macro and those affecting the property specifically), and the supply and demand of competing projects in the sub-market in which each subject property is located. Management monitors the financial condition and operating results of its borrowers and continually assesses the future outlook of the borrower’s financial performance in light of industry developments, management changes and company-specific considerations.

The Company’s commercial loans are collateral-dependent and, as such, for loans experiencing credit deterioration, the Company was required to record an allowance for loans held for investment based upon the fair value of the underlying collateral if foreclosure is probable or if the practical expedient is elected. For the three months ended March 31, 2021, the Company reversed the loan loss allowance resulting in a loan loss reversal on impaired commercial loans of ($67.4) million as the loans are classified as held for sale and are carried at lower of cost or fair value. For the three months ended March 31, 2020, the Company recorded a loan loss provision on impaired commercial loans of $52.1 million based upon the fair value of the underlying collateral. The Company uses a discounted cash flow or market based valuation technique based upon the underlying property to project property cash flows. In projecting these cash flows, the Company reviewed the borrower financial statements, rent rolls, economic trends and other factors management deems important. These nonrecurring fair value measurements are considered to be in Level 3 of the fair value measurement hierarchy as there are unobservable inputs, which are significant to the overall fair value.

For the three months ended March 31, 2021, the Company reversed the loan loss allowance based upon its Loss Given Default methodology resulting in a loan loss reversal on commercial loans of ($62.5) million as the loans are classified as held for sale and are carried at lower of cost or fair value. For the three months ended March 31, 2020, the Company recorded a net loan loss provision of $23.2 million based upon its Loss Given Default methodology. As a result of the implementation of the Loss Given Default methodology under the modified retrospective method, a cumulative effect loan loss allowance of $7.8 million was recorded on January 1, 2020.

During the year ended December 31, 2020, the Company modified five commercial loans with a carrying value of $243.8 million at December 31, 2020. The maturity dates on four commercial loans were extended and one commercial loan was granted a 120 day forebearance. Additionally, as part of the restructuring two loans had partial paydowns totaling $4.5 million. The loan loss allowance recorded for these commercial loans was $23.6 million at December 31, 2020. Future funding commitments on the restructured loans totaled $4.1 million at December 31, 2020.


	Sector Dispersion
	March 31, 2021				December 31, 2020
	Carrying Value		% of Loan Portfolio		Carrying Value		% of Loan Portfolio
	(dollars in thousands)
Office	$	577,893	41.8	%	$	650,034	47.4	%
Retail	249,917		18.1	%	256,493		18.7	%
Multifamily	217,131		15.7	%	250,095		18.2	%
Hotel	130,578		9.4	%	115,536		8.4	%
Industrial	114,152		8.2	%	60,097		4.4	%
Other	75,306		5.4	%	20,302		1.5	%
Healthcare	19,145		1.4	%	19,873		1.4	%
Total	$	1,384,122	100.0	%	$	1,372,430	100.0	%


	March 31, 2021						December 31, 2020
	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	$	432,736	$	409,166	28.6	%	$	387,124	$	373,925	25.7	%
Senior securitized mortgages (3)	906,440		861,996		60.0	%	938,859		874,349		62.3	%
Mezzanine loans	171,639		112,960		11.4	%	181,261		124,156		12.0	%

Total	$	1,510,815	$	1,384,122	100.0	%	$	1,507,244	$	1,372,430	100.0	%


March 31, 2021
	Senior Mortgages		Senior Securitized Mortgages (1)		Mezzanine Loans		Total
	(dollars in thousands)
Beginning balance (January 1, 2021) (2)	$	373,925	$	874,349	$	124,156	$	1,372,430

Originations & advances (principal)	115,569		69		301		115,939
Principal payments	(54,037)		(48,409)		(9,922)		(112,368)


Transfers (3)	(36,195)		(26,639)		(58,491)		(121,325)
Net (increase) decrease in origination fees	(1,403)		—		—		(1,403)

Amortization of net origination fees	396		477		43		916
Allowance for loan losses
Beginning allowance	(10,911)		(62,149)		(56,873)		(129,933)


Current period (allowance) reversal	10,911		62,149		56,873		129,933

Ending allowance	—		—		—		—
Net carrying value (March 31, 2021)	$	409,166	$	861,996	$	112,960	$	1,384,122


December 31, 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)	206,090		—		12,374		218,464
Principal payments	(77,344)		(144,308)		(78)		(221,730)
Principal write off	—		—		(7,000)		(7,000)


Transfers (3)	(245,120)		142,621		(7,100)		(109,599)
Net (increase) decrease in origination fees	(1,055)		(653)		(80)		(1,788)
Realized gain	204		—		—		204
Amortization of net origination fees	2,371		2,460		187		5,018
Allowance for loan losses
Beginning allowance, prior to CECL adoption	—		—		(12,703)		(12,703)
Impact of adopting CECL	(2,263)		(4,166)		(1,336)		(7,765)
Current period (allowance) reversal	(8,648)		(57,983)		(66,521)		(133,152)

Write offs	—		—		23,687		23,687
Ending allowance	(10,911)		(62,149)		(56,873)		(129,933)

Net carrying value (December 31, 2020)	$	373,925	$	874,349	$	124,156	$	1,372,430

(1) Represents assets of consolidated VIEs.
(2) Excludes loan loss allowances.
(3) Includes transfers to securitization vehicles.

The Company’s investments in corporate loans typically take the form of senior secured loans primarily in first or second lien positions. The Company’s senior secured loans generally have stated maturities of five to seven years. In connection with these senior secured loans, the Company receives a security interest in certain assets of the borrower and such assets support repayment of such loans. Senior secured loans are generally exposed to less credit risk than more junior loans given their seniority to scheduled principal and interest and priority of security in the assets of the borrower. Interest income from coupon payments is accrued based upon the outstanding principal amounts of the debt and its contractual terms. Premiums and discounts are amortized or accreted into interest income using the effective interest method.


Risk Rating - Corporate Debt			Description
1-5 / Performing			Meets 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 / Substandard			A 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 / Loss			Considered uncollectible.

Management assesses each loan at least quarterly and assigns an internal risk rating based on its evaluation of the most recent financial information produced by the borrower and consideration of economic conditions. See below for a tabular disclosure of the amortized cost basis of the Company’s corporate debt held for investment by year of origination and internal risk rating.

$10.0 million on impaired corporate loans using a discounted cash flow methodology with a principal balance and carrying value, net of allowances of $29.3 million and $21.9 million, respectively. During the three months ended March 31, 2020, a loan was restructured and the Company received $2.8 million of second lien debt and $4.8 million of equity. As a result of the restructuring, $19.6 million of first lien debt was written off and the related allowance of $11.9 million was charged off.

For the three months ended March 31, 2021 and 2020 the Company recorded a net loan loss provision (reversal) on corporate loans of ($6.2) million and $14.1 million, respectively, based upon its Loss Given Default methodology. As a result of the implementation of the Loss Given Default methodology under the modified retrospective method, a cumulative effect loan loss allowance on corporate loans of $29.7 million was recorded on January 1, 2020.


	Industry Dispersion
	March 31, 2021			December 31, 2020
		Total (1)		Total (1)
	(dollars in thousands)




Computer Programming, Data Processing & Other Computer Related Services		$	375,103	$	483,142
Management & Public Relations Services		291,581		300,869
Industrial Inorganic Chemicals		156,782		156,391


Public Warehousing & Storage		120,473		132,397

Metal Cans & Shipping Containers		115,907		115,670
Surgical, Medical & Dental Instruments & Supplies		82,831		83,161
Electronic Components & Accessories		78,257		78,129
Engineering, Architectural, and Surveying		77,156		77,308

Offices & Clinics of Doctors of Medicine		74,481		104,781
Miscellaneous Health & Allied Services, not elsewhere classified		70,295		77,163
Insurance Agents, Brokers and Service		65,624		67,193
Research, Development & Testing Services		62,218		62,008
Miscellaneous Food Preparations		59,009		58,857
Telephone Communications		58,694		58,450
Miscellaneous Equipment Rental & Leasing		49,641		49,587
Electric Work		40,390		41,128
Petroleum and Petroleum Products		33,836		33,890
Medical & Dental Laboratories		30,763		30,711
Schools & Educational Services, not elsewhere classified		29,183		29,040

Home Health Care Services		28,669		28,587
Metal Forgings & Stampings		27,689		27,523
Legal Services		26,358		26,399
Grocery Stores		22,906		22,895
Coating, Engraving and Allied Services		19,500		19,484
Miscellaneous Business Services		14,996		12,980
Chemicals & Allied Products		14,667		14,686
Mailing, Reproduction, Commercial Art and Photography and Stenographic		12,917		12,733
Drugs		12,622		12,942
Machinery, Equipment & Supplies		11,839		12,096

Offices and Clinics of Other Health Practitioners		10,088		9,730








Total		$	2,074,475	$	2,239,930

(1) All middle market lending positions are floating rate.


March 31, 2021
	First Lien		Second Lien		Total
	(dollars in thousands)
Beginning balance (January 1, 2021) (1)	$	1,489,125	$	750,805	$	2,239,930

Originations & advances	56,939		14,554		71,493
Sales (2)	(21,328)		(24,448)		(45,776)
Principal payments	(96,247)		(105,000)		(201,247)
Amortization & accretion of (premium) discounts	1,708		2,181		3,889



Allowance for loan losses
Beginning allowance	(18,767)		(20,785)		(39,552)

Current period (allowance) reversal	1,685		4,501		6,186

Ending allowance	(17,082)		(16,284)		(33,366)

Net carrying value (March 31, 2021)	$	1,431,882	$	642,593	$	2,074,475


December 31, 2020
	First Lien		Second Lien		Total
	(dollars in thousands)
Beginning balance (January 1, 2020) (1)	$	1,403,503	$	748,710	$	2,152,213
Originations & advances	834,211		227,433		1,061,644
Sales (2)	(273,887)		(79,203)		(353,090)
Principal payments	(444,759)		(132,000)		(576,759)
Amortization & accretion of (premium) discounts	8,374		3,832		12,206
Loan restructuring	(19,550)		2,818		(16,732)


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) reversal	(12,510)		(1,919)		(14,429)
Write offs	11,893		—		11,893
Ending allowance	(18,767)		(20,785)		(39,552)

Net carrying value (December 31, 2020)	$	1,489,125	$	750,805	$	2,239,930


Amortized Cost Basis by Risk Rating and Vintage (1)
Risk Rating	Vintage
	Total		2021		2020		2019		2018		2017		2016		2015
(dollars in thousands)
1-5 / Performing	$	1,618,878	$	44,236	$	478,783	$	309,602	$	415,939	$	289,450	$	46,394	$	34,474
6 / Performing - Closely Monitored	374,004		2,931		26,358		21,567		259,057		64,091		—		—
7 / Substandard	81,593		—		11,839		26,173		43,581		—		—		—
8 / Doubtful	—		—		—		—		—		—		—		—
9 / Loss	—		—		—		—		—		—		—		—
Total	$	2,074,475	$	47,167	$	516,980	$	357,342	$	718,577	$	353,541	$	46,394	$	34,474

(1) The amortized cost basis excludes accrued interest and includes deferred fees on unfunded loans. As of March 31, 2021, the Company had $8.8 million of accrued interest receivable on corporate loans which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition and $1.1 million of deferred loan fees on unfunded loans, which is reported in Loans, net in the Consolidated Statements of Financial Condition.