Our Structured Business loan and investment portfolio consists of ($ in thousands):

(1)

“Weighted Average Pay Rate” is a weighted average, based on the unpaid principal balance (“UPB”) of each loan in our portfolio, of the interest rate required to be paid monthly as stated in the individual loan agreements. Certain loans and investments that require an additional rate of interest “accrual rate” to be paid at maturity are not included in the weighted average pay rate as shown in the table.

(2)	The “First Dollar Loan-to-Value (“LTV”) Ratio” is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position.

(3)	The “Last Dollar LTV Ratio” is calculated by comparing the total of the carrying value of our loan and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will initially absorb a loss.

(4)	At September 30, 2022 and December 31, 2021, bridge loans included 215 and 120, respectively, of SFR loans with a total gross loan commitment of $1.42 billion and $804.6 million, respectively, of which $825.8 million and $408.2 million, respectively, was funded.

(5)	At September 30, 2022 and December 31, 2021, other loans included 3 and 2 variable rate SFR permanent loans , respectively.

Concentration of Credit Risk

We are subject to concentration risk in that, at September 30, 2022, the UPB related to 39 loans with five different borrowers represented 10% of total assets. At December 31, 2021, the UPB related to 31 loans with five different borrowers represented 11% of total assets. During both the nine months ended September 30, 2022 and the year ended December 31, 2021, no single loan or investment represented more than 10% of our total assets and no single investor group generated over 10% of our revenue. See Note 17 for details on our concentration of related party loans and investments.

We assign a credit risk rating of pass, pass/watch, special mention, substandard or doubtful to each loan and investment, with a pass rating being the lowest risk and a doubtful rating being the highest risk. Each credit risk rating has benchmark guidelines that pertain to debt-service coverage ratios, LTV ratios, borrower strength, asset quality, and funded cash reserves. Other factors such as guarantees, market strength, and remaining loan term and borrower equity are also reviewed and factored into determining the credit risk rating assigned to each loan. This metric provides a helpful snapshot of portfolio quality and credit risk. All portfolio assets are subject to, at a minimum, a thorough quarterly financial evaluation in which historical operating performance and forward-looking projections are reviewed, however, we maintain a higher level of scrutiny and focus on loans that we consider “high risk” and that possess deteriorating credit quality.

Generally speaking, given our typical loan profile, risk ratings of pass, pass/watch and special mention suggest that we expect the loan to make both principal and interest payments according to the contractual terms of the loan agreement. A risk rating of substandard indicates we anticipate the loan may require a modification of some kind. A risk rating of doubtful indicates we expect the loan to underperform over its term, and there could be loss of interest and/or principal. Further, while the above are the primary guidelines used in determining a certain risk rating, subjective items such as borrower strength, market strength or asset quality may result in a rating that is higher or lower than might be indicated by any risk rating matrix.

A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at September 30, 2022 is as follows ($ in thousands):


																Wtd. Avg.		Wtd. Avg.
	UPB by Origination Year															First Dollar		Last Dollar
Asset Class / Risk Rating	2022		2021		2020		2019		2018		Prior		Total			LTV Ratio		LTV Ratio
Multifamily:
Pass	$	278,255	$	302,181	$	5,935	$	38,375	$	—	$	20,300	$	645,046
Pass/Watch		3,208,311		4,006,812		599,665		279,891		41,650		—		8,136,329
Special Mention		1,132,268		3,354,479		197,450		91,917		64,000		7,594		4,847,708
Substandard		—		10,125		52,350		40,325		—		—		102,800
Total Multifamily	$	4,618,834	$	7,673,597	$	855,400	$	450,508	$	105,650	$	27,894	$	13,731,883		1	%	77	%
Single-Family Rental:												Percentage of portfolio		92	%
Pass	$	1,133	$	14,459	$	8,886	$	—	$	—	$	—	$	24,478
Pass/Watch		341,478		325,308		121,458		20,270		—		—		808,514
Special Mention		—		5,336		23,557		—		—		—		28,893
Total Single-Family Rental	$	342,611	$	345,103	$	153,901	$	20,270	$	—	$	—	$	861,885		0	%	63	%
Land:												Percentage of portfolio		6	%
Special Mention	$	—	$	—	$	8,100	$	—	$	—	$	—	$	8,100
Substandard		—		—		—		—		—		127,928		127,928
Total Land	$	—	$	—	$	8,100	$	—	$	—	$	127,928	$	136,028		0	%	97	%
Office:												Percentage of portfolio		1	%
Pass/Watch	$	—	$	—	$	—	$	—	$	44,015	$	—	$	44,015
Special Mention		—		—		35,410		—		—		—		35,410
Total Office	$	—	$	—	$	35,410	$	—	$	44,015	$	—	$	79,425		0	%	87	%
Healthcare:												Percentage of portfolio		1	%
Pass/Watch	$	—	$	—	$	—	$	14,558	$	—	$	—	$	14,558
Special Mention		—		—		—		51,069		—		—		51,069
Total Healthcare	$	—	$	—	$	—	$	65,627	$	—	$	—	$	65,627		0	%	77	%
Student Housing:												Percentage of portfolio		< 1	%
Pass	$	—	$	25,700	$	—	$	—	$	—	$	—	$	25,700
Substandard		—		—		20,500		—		—		—		20,500
Total Student Housing	$	—	$	25,700	$	20,500	$	—	$	—	$	—	$	46,200		33	%	76	%
Hotel:												Percentage of portfolio		< 1	%
Substandard	$	—	$	—	$	—	$	40,850	$	—	$	—	$	40,850
Total Hotel	$	—	$	—	$	—	$	40,850	$	—	$	—	$	40,850		0	%	70	%
Retail:												Percentage of portfolio		< 1	%
Pass	$	—	$	—	$	—	$	4,000	$	—	$	—	$	4,000
Substandard		—		—		—		—		18,600		3,445		22,045
Total Retail	$	—	$	—	$	—	$	4,000	$	18,600	$	3,445	$	26,045		12	%	71	%
Other:												Percentage of portfolio		< 1	%
Doubtful	$	—	$	—	$	—	$	—	$	—	$	1,700	$	1,700
Total Other	$	—	$	—	$	—	$	—	$	—	$	1,700	$	1,700		63	%	63	%
												Percentage of portfolio		< 1	%
Grand Total	$	4,961,445	$	8,044,400	$	1,073,311	$	581,255	$	168,265	$	160,967	$	14,989,643		1	%	76	%

Geographic Concentration Risk

At September 30, 2022, underlying properties in Texas and Florida represented 21% and 13%, respectively, of the outstanding balance of our loan and investment portfolio. At December 31, 2021, underlying properties in Texas and Florida represented 19% and 12%, respectively, of the outstanding balance of our loan and investment portfolio. No other states represented 10% or more of the total loan and investment portfolio.

Allowance for Credit Losses

A summary of the changes in the allowance for credit losses is as follows (in thousands):


	Three Months Ended September 30, 2022
	Land		Multifamily		Office		Retail		Student Housing		Hotel		Healthcare		Other		Total
Allowance for credit losses:
Beginning balance	$	77,918	$	27,958	$	7,031	$	5,819	$	161	$	16	$	3	$	2,425	$	121,331
Provision for credit losses (net of recoveries)		(8)		(675)		306		—		14		2		1		1,325		965
Ending balance	$	77,910	$	27,283	$	7,337	$	5,819	$	175	$	18	$	4	$	3,750	$	122,296


	Three Months Ended September 30, 2021
Allowance for credit losses:
Beginning balance	$	78,057	$	30,160	$	7,822	$	13,819	$	2,365	$	225	$	3,866	$	2,133	$	138,447
Provision for credit losses (net of recoveries)		(45)		(2,093)		(95)		—		(542)		(209)		(3,851)		(78)		(6,913)
Ending balance	$	78,012	$	28,067	$	7,727	$	13,819	$	1,823	$	16	$	15	$	2,055	$	131,534


	Nine Months Ended September 30, 2022
Allowance for credit losses:
Beginning balance	$	77,970	$	18,707	$	8,073	$	5,819	$	636	$	8	$	8	$	2,020	$	113,241
Provision for credit losses (net of recoveries)		(60)		8,576		(736)		—		(461)		10		(4)		1,730		9,055
Ending balance	$	77,910	$	27,283	$	7,337	$	5,819	$	175	$	18	$	4	$	3,750	$	122,296


	Nine Months Ended September 30, 2021
Allowance for credit losses:
Beginning balance	$	78,150	$	36,468	$	1,846	$	13,861	$	4,078	$	7,759	$	3,880	$	2,287	$	148,329
Provision for credit losses (net of recoveries)		(138)		(8,401)		5,881		(42)		(2,255)		(7,743)		(3,865)		(232)		(16,795)
Ending balance	$	78,012	$	28,067	$	7,727	$	13,819	$	1,823	$	16	$	15	$	2,055	$	131,534

During the three and nine months ended September 30, 2022, we recorded a $1.0 million and a $9.1 million provision for credit losses, which was net of a $1.5 million loan loss recovery for a loan that paid off during the second quarter of 2022. The increase in the provision for credit losses during the three months ended September 30, 2022 was primarily attributable to the impact of rising interest rates and inflation. The increase in the provision for credit losses during the nine months ended September 30, 2022 was primarily attributable to an increase in our loans and investments balance as a result of portfolio growth and the impact of rising interest rates, inflation and economic forecasts. Our estimate of allowance for credit losses on our structured loans and investments, including related unfunded loan commitments, was based on a reasonable and supportable forecast period that reflects recent observable data, including an increase in interest rates, higher unemployment forecasts, and rising inflation, partially offset by increasing property values and other market factors, including continued optimism in the COVID-19 pandemic.

The expected credit losses over the contractual period of our loans also include the obligation to extend credit through our unfunded loan commitments. Our current expected credit loss (“CECL”) allowance for unfunded loan commitments is adjusted quarterly and corresponds with the associated outstanding loans. At September 30, 2022 and December 31, 2021, we had outstanding unfunded commitments of $1.25 billion and $975.2 million, respectively, that we are obligated to fund as borrowers meet certain requirements.

At September 30, 2022 and December 31, 2021, accrued interest receivable related to our loans totaling $97.8 million and $58.3 million, respectively, was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheets.

All of our structured loans and investments are secured by real estate assets or by interests in real estate assets, and, as such, the measurement of credit losses may be based on the difference between the fair value of the underlying collateral and the carrying value of the assets as of the period end. A summary of our specific loans considered impaired by asset class is as follows (in thousands):


	September 30, 2022
							Wtd. Avg. First		Wtd. Avg. Last
			Carrying		Allowance for		Dollar LTV		Dollar LTV
Asset Class	UPB (1)		Value		Credit Losses		Ratio		Ratio
Land	$	134,215	$	127,868	$	77,869	0	%	99	%
Retail		22,045		17,563		5,817	14	%	79	%
Commercial		1,700		1,700		1,700	63	%	63	%
Total	$	157,960	$	147,131	$	85,386	3	%	96	%


	December 31, 2021
Land	$	134,215	$	127,868	$	77,869	0	%	99	%
Retail		22,045		17,291		5,817	14	%	77	%
Office		1,980		1,980		1,500	0	%	51	%
Commercial		1,700		1,700		1,700	63	%	63	%
Total	$	159,940	$	148,839	$	86,886	3	%	95	%

(1)	Represents the UPB of seven and eight impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at September 30, 2022 and December 31, 2021, respectively.

There were no loans for which the fair value of the collateral securing the loan was less than the carrying value of the loan for which we had not recorded a provision for credit loss at September 30, 2022 and December 31, 2021.

At September 30, 2022, four loans with an aggregate net carrying value of $19.1 million, net of related loan loss reserves of $5.1 million, were classified as non-performing and, at December 31, 2021, three loans with an aggregate net carrying value of $20.1 million, net of related loan loss reserves of $2.6 million, were classified as non-performing. Income from non-performing loans is generally recognized on a cash basis when it is received. Full income recognition will resume when the loan becomes contractually current and performance has recommenced.

A summary of our non-performing loans by asset class is as follows (in thousands):


	September 30, 2022						December 31, 2021
			Less Than		Greater Than				Less Than		Greater Than
			90 Days		90 Days				90 Days		90 Days
	UPB		Past Due		Past Due		UPB		Past Due		Past Due
Student Housing	$	20,500	$	—	$	20,500	$	21,500	$	—	$	21,500
Retail		3,445		—		3,445		920		—		920
Commercial		1,700		—		1,700		1,700		—		1,700
Total	$	25,645	$	—	$	25,645	$	24,120	$	—	$	24,120

In addition, we have six loans with a carrying value totaling $121.4 million at September 30, 2022, that are collateralized by a land development project. The loans do not carry a current pay rate of interest, however, five of the loans with a carrying value totaling $112.1 million entitle us to a weighted average accrual rate of interest of 7.91%. In 2008, we suspended the recording of the accrual rate of interest on these loans, as they were impaired and we deemed the collection of this interest to be doubtful. At both September 30, 2022 and December 31, 2021, we had a cumulative allowance for credit losses of $71.4 million related to these loans. The loans are subject to certain risks associated with a development project including, but not limited to, availability of construction financing, increases in projected construction costs, demand for the development’s outputs upon completion of the project, and litigation risk. Additionally, these loans were not classified as non-performing as the borrower is compliant with all of the terms and conditions of the loans.

At both September 30, 2022 and December 31, 2021, we had no loans contractually past due 90 days or more that are still accruing interest. During both the three and nine months ended September 30, 2022 and 2021, there was no interest income recognized on nonaccrual loans.

In the third quarter of 2022, we sold 4 bridge loans with an aggregate UPB of $296.9 million at par less shared loan origination fees and selling costs totaling $2.0 million. The shared loan origination fees and selling costs were recorded as an unrealized impairment loss during the second quarter of 2022 and included in other income, net on the consolidated statements of income.

During the second quarter of 2022, we sold a bridge loan and mezzanine loans totaling $110.5 million, that were collateralized by a land development project, at a discount for $102.2 million. In connection with this transaction, we released $66.3 million of capital to be used for future investments and recorded a $9.2 million loss (including fees and expenses), which was included in other income, net on the consolidated statements of income. Additionally, we have the potential to recover up to $2.8 million depending on the future performance of the loan.

In 2020, we entered into a loan modification agreement on a $26.5 million bridge loan with an interest rate of LIBOR plus 6.00% with a 2.375% LIBOR floor and a $6.1 million mezzanine loan with a fixed rate of 12% collateralized by a retail property to: (1) reduce the interest rate on both loans to the greater of: (i) LIBOR plus 5.50% and (ii) 6.50%, and (2) to extend the maturity three years to December 2024. A portion of the foregoing interest equal to 2.00% was deferred to payoff and will be waived if the loan is paid off by December 31, 2022. The loan modification agreement also included a $6.0 million required principal paydown, which occurred at the closing of the modification transaction, and an $8.0 million principal reduction once the borrower deposited an additional reserve of $4.6 million, which took place in 2021 and was charged-off against the previously recorded allowance for credit losses.

In 2019, we purchased $50.0 million of a $110.0 million bridge loan, which was collateralized by a hotel property and scheduled to mature in December 2022. In 2020, we recorded a $7.5 million allowance for credit losses due to a reduction in the appraised value of the property. In 2020, we purchased the remaining $60.0 million bridge loan at a discount for $39.9 million, which we determined had experienced a more than insignificant deterioration in credit quality since origination and, therefore, deemed to be a purchased loan with credit deterioration. The $20.1 million discount was classified as a noncredit discount and no portion of the discount was allocated to allowance for credit losses at the date of purchase since the appraised value of the property was greater than the purchase price. Shortly after the purchase, we entered into a forbearance agreement with the borrower to temporarily reduce the interest rate from LIBOR plus 3.00% with a 1.50% LIBOR floor to a pay rate of 1.00% and to include a $10.0 million principal reduction if the loan is paid off by March 2, 2021. In 2021, we entered into a second forbearance agreement that temporarily eliminated the pay rate, extended the principal reduction payoff deadline to June 30, 2021 and increased the interest rate to an unaccrued default rate of 9.50%, which was deferred until payoff. In June 2021, we received $95.0 million for full satisfaction of these loans, reversed the $7.5 million allowance for credit losses and recorded interest income of $3.5 million.

These two loan modifications were deemed troubled debt restructurings. There were no other loan modifications, refinancing’s and/or extensions during the nine months ended September 30, 2022 and 2021 that were considered troubled debt restructurings.

Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve, based on contractual requirements, to cover debt service costs. At September 30, 2022 and December 31, 2021, we had total interest reserves of $123.9 million and $87.4 million, respectively, on 463 loans and 328 loans, respectively, with an aggregate UPB of $7.73 billion and $5.75 billion, respectively.