Loans

Allowance for Loan Losses

During the period ending

March 31, 2019,

the Company deconsolidated its investments in the CLOs and as a result,

longer has loans collateralizing ABS on its Consolidated Statement of Financial Condition as of

March 31, 2019.

See Note

for additional information on deconsolidation. A summary of the activity in the allowance for loan losses for the

three

months ended

March 31, 2019

and

2018

is as follows:

(In thousands)	Three Months Ended March 31,
	2019						2018
	Impaired			Non-Impaired			Impaired			Non-Impaired
Balance, at beginning of period	$	(836	)	$	(9,751	)	$	(391	)	$	(6,533	)
Reversal (provision) for loan losses:
Specific reserve		-			-			(953	)		-
General reserve		-			-			-			41
Charge off		181			-			135			-
Derecognition due to deconsolidation		655			9,751			-			-
Balance, at end of period	$	-		$	-		$	(1,209	)	$	(6,492	)

A loan is considered to be impaired when, based on current information, it is probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the original loan agreement, including scheduled principal and interest payments. As of

December 31, 2018,

$1.8

million of the recorded investment amount in loans collateralizing asset-backed securities issued were individually evaluated for impairment. The remaining

$1,170.2

million of recorded investment amount of loans collateralizing asset-backed securities issued were collectively evaluated for impairment as of

December 31, 2018.

As of

December 31, 2018

the Company classified all its loans as Cash Flow loans, as their funding decisions were all primarily driven by the cash flows of the borrower. The table below presents certain information pertaining to the loans on non-accrual status at

December 31, 2018:

(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2018
Impaired loans with an allowance recorded	$	1,813	$	1,951	$	838	$	1,817	$	119
Impaired loans with no related allowance recorded		-		-		-		-		-
Total impaired loans	$	1,813	$	1,951	$	838	$	1,817	$	119

Loans are considered past due if the required principal and interest payments have

not

been received as of the date such payments were du

loans were past due a

t M

arch

31,

2019

December 31, 2018.

During the year ended

December 31, 2018,

the Company had

two

loans, which were modif

ied in a troubled debt res

tructuring. The loans, with a principal balance and a carrying balance of

$1.9

million and

$1.0

million in total, respectively, were converted to equity. The Company valued the equity at

$0.8

million in total upon conversion and incurred a loss of

$0.1

million in relation to the restructuring as of

December 31, 2018.

The

Company had

one

troubled debt restructuring during the

three

months ended Ma

rch

31,

2019.

The loan, with a principal balance and a carrying balance of

$0.5

million and

$0.2

million in total, respectively, was converted to equity. The Company valued the equity at

$0.2

million in total upon conversion.

The Company

’s management, at least on a quarterly basis, reviews each loan and evaluates the credit quality of the loan. The review primarily includes the following credit quality indicators with regard to each loan:

) Moody’s rating,

) current internal rating,

) the trading price of the loan and

) performance of the obligor. The tables below present, by credit quality indicator, the Company’s recorded investment in loans collateralizing asset-backed securities issued at

December 31, 2018. These loans were deconsolidated as of March 31, 2019.

(In thousands)	Cash Flow Loans
	March 31,		December 31,
	2019		2018

Moody's rating:
Baa1 - Baa3	$	-	$	7,300
Ba1 - Ba3		-		247,686
B1 - B3		-		856,204
Caa1 - Caa3		-		59,046
Ca		-		1,813
Total:	$	-	$	1,172,049

Internal rating: (1)
2	$	-	$	1,018,261
3		-		132,169
4		-		19,806
5		-		1,813
Total:	$	-	$	1,172,049

Performance:
Performing	$	-	$	1,170,236
Non-Performing		-		1,813
Total:	$	-	$	1,172,049

(

)

Loans with an internal rating of

or below are reviewed individually to identify loans to be designated for non-accrual status.

Loans Held for Investment

March 31, 2019

and

December 31, 2018,

the number of loans held for investment outside of the CLO warehouse portfolio was

seven

and five, respectively. The Company reviews credit quality of these loans within this portfolio segment on a loan by loan basis mainly focusing on the borrower’s financial position and results of operations as well as the current and expected future cash flows on the loans. As of

December 31, 2018,

the Company held

$26.0

million of loans held for investment in the CLO VI warehouse portfolio. The credit quality of the CLO VI warehouse loans are evaluated in the same manner as the credit quality of loans collateralizing asset-backed securities issued. During the

three

-month period ended

March 31, 2019,

the Company deconsolidated its investments in the CLO VI warehouse and a result,

longer has loans held for investment related to CLO VI on its Consolidated Statement of Financial Condition as of

March 31, 2019.

See Note

for additional information on deconsolidation.

Ther

e were

loans past due as of

March 31, 2019

and

March 31, 2018.

A summary of activity in loan losses for the

three

months ended

March 31, 2019

and

2018

is as follows:

(in thousands)	Three Months Ended March 31,
	2019						2018
	Impaired			Non-impaired			Impaired			Non-impaired
Balance, at beginning of the period	$	(218	)	$	(181	)	$	(2,279	)	$	(494	)
Provision for loan losses
Specific		-			-			(205	)		-
General		-			-			-			(364	)
Charge off		218			-			2,279			-
Derecognition due to deconsolidation		-			181			-			-
Balance, at end of the period	$	-		$	-		$	(205	)	$	(858	)

March 31, 2019

and

December 31, 2018,

zero

and

$0.5

million of recorded investment amount of loans issued were individually evaluated for impairment, respectively.

The

Company had

one

troubled debt restructuring during the

three

months ended Ma

rch

31,

2019.

The loan, with a principal balance and a carrying balance of

$0.5

million and

$0.2

million in total, respectively, was converted to equity. The Company valued the equity at

$0.2

million in total upon conversion.

As of

December 31, 2018,

the Company classified all its loans as Cash Flow loans, as their funding decisions were all primarily driven by the cash flows of the borrower. There were

impaired loans on non-accrual status as of

March 31, 2019.

The table below presents certain information pertaining to the loans on non-accrual status as of

December 31, 2018:

	Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2018
Impaired loans with an allowance recorded	$	462	$	484	$	218	$	462	$	34
Impaired loans with no related allowance recorded		-		-		-		-		-
Total impaired loans	$	462	$	484	$	218	$	462	$	34

The Company's management, at least on a quarterly basis, reviews each loan and evaluates the credit quality of the loan. The review primarily includes the following credit quality indicators with regard to each loan:

) Moody's rating,

) current internal rating,

) trading price of the loan, and

) performance of the obligor. The table below presents, by credit quality indicator, the Company's recorded investment in loans held for investment at

March 31, 2019

and

December 31, 2018:

(In thousands)	Cash Flow Loans
	March 31,		December 31,
	2019		2018

Moody's rating:
Baa1 - Baa3	$	-	$	-
Ba1 - Ba3		-		7,459
B1 - B3		-		18,342
Caa1 - Caa3		-		419
Ca		-		463
Not Rated		4,853		3,326
Total:	$	4,853	$	30,009

Internal rating (1) :
2	$	1,539	$	26,208
3		885		909
4		-		-
5		-		462
Not rated		2,429		2,430
Total:	$	4,853	$	30,009

Performance:
Performing	$	4,853	$	29,547
Non-performing		-		462
Total:	$	4,853	$	30,009

(

) Loans with an internal rating of

or below are reviewed individually to identify loans to be designated for non-accrual status.