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Note 6 - Loans
 12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Loans Collateralizing Asset Backed Securities Issued and Loans Held for Sale [Text Block]
6.
Loans
 
Loans Collateralizing Asset-Backed Securities issued (through
March 2019)
 
 
During the year ended
December 31, 2019,
the Company deconsolidated its investments in the CLOs and as a result,
no
longer has loans collateralizing ABS on its Consolidated Statements of Financial Condition as of
December 31, 2019
. See Note
1
for additional information on deconsolidation.
 
 A summary of the activity in the allowance for loan losses for the years
 ended
December 31, 2019
and
2018
 is as follows:
 
(In thousands)
  
Year Ended December 31,
  
   
2019
    
2018
  
   
Impaired
    
Non-Impaired
    
Impaired
    
Non-Impaired
  
Balance at beginning of period
   $
(836
 )   $
(9,751
 )   $
(389
 )   $
(6,535
 )
Reversal (provision) for loan losses:
                                
Specific reserve
    
-
      
-
      
(1,645
 )    
-
  
General reserve
    
181
      
-
      
-
      
(1,470
 )
Charge off
    
-
      
-
      
1,198
      
-
  
Transfer to (from) loans held for investment
    
-
      
-
      
-
      
(1,746
 )
Derecognition due to deconsolidation    
655
      
9,751
      
-
      
-
  
Balance at end of period
   $
-
     $
-
     $
(836
 )   $
(9,751
 )
 
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, respectively. The remaining
$1,170.2
 
mi
llion 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. 
There were
no
loans in non-accrual status as of
December 31, 2019.
 
(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
e.
No
loans were past due at
December 31, 2019
or
December 31, 2018
. 
During the year ended
December 31, 2019
,
the Company had
no
loans that were modified in a troubled debt restructuring. During the year ended
December 31, 2018,
the Company had
two
 loans which were modified in a troubled debt restructuring. 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’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:
1
) Moody’s rating,
2
) current internal rating,
3
) the trading price of the loan and
4
) 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 in
March 2019
as part of the deconsolidation of the CLOs. See Note
1
for additional information. 
 
(In thousands)
  
Cash Flow Loans
  
   
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:
      
 
      
 
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 Held for Investment
 
As of
December 31, 2019
and
December 31, 2018,
the number of loans held for investment outside of the CLO warehouse portfolio was
four
and five, respectively. The Company reviews the 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 ABS issued. On
March 19, 2019,
the Company deconsolidated its investments in the CLO VI warehouse and a result,
no
longer has loans held for investment related to CLO VI on its Consolidated Statements of Financial Condition as of
December 31, 2019.
See Note
1
 for additional information on the deconsolidation.
 
There were
no
loans past due as of
December 31, 2019
and
2018
. 
A summary of activity in loan losses for the years ended
December 31, 2019
and
2018
is as follows:
 
(in thousands)
  
Year Ended December 31,
  
   
2019
    
2018
  
   
Impaired
    
Non-impaired
    
Impaired
    
Non-impaired
  
Balance, at beginning of the period
   $
(218
 )   $
(181
 )   $
(2,279
 )   $
(468
 )
Provision for loan losses
                                
Specific
    
(438
 )    
-
      
(422
 )    
-
  
General
    
-
      
-
      
-
      
(1,459
 )
Charge off
    
218
      
-
      
2,483
      
-
  
Transfer to (from) loans held for investment    
-
      
-
      
-
      
1,746
  
Reversal of provision due to restructure of loan    
438
      
-
      
-
      
-
  
Derecognition due to deconsolidation    
-
      
181
      
-
      
-
  
Balance, at end of the period
   $
-
     $
-
     $
(218
 )   $
(181
 )
 
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, 2019
and
2018
, zero
 and 
$0.5
 million
 of 
recorded investment amount of loans issued were individually evaluated for impairment
, respectively
. 
 
During the year ended
December 31, 2019,
the Company recorded
$0.4
million of impairment on the
$1.0
million loans evaluated for impairment.
 
The Company had
two
troubled debt restructurings during the year ended
December 31, 2019.
The loans, with a principal balance and a carrying balance of
$1.4
 million and
$0.7
 million in total, respectively, was converted to equity. The Company valued the equity at
$0.7
 million in total upon conversion and recorded
no
material gain or loss upon the execution of the restructuring.
 
During the year ended
December 31, 2018,
the Company had
two
 loans, which were modified in a troubled debt restructuring. The 
two
  loans were held under the same borrower. The
two
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.
 
 As of
December 31, 2019
and
2018
,
the Company classified all its loans held for investment as Cash Flow loans held for investment, 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 in non-accrual status as of
December 31, 2018.
There were
no
loans in non-accrual status as of
December 31, 2019.
 
 
   
Recorded Investment
    
Unpaid Principal
    
Related Allowance
    
Average Recorded Investment
    
Interest Income Recognized
  
December 31, 2018
      
 
      
 
      
 
      
 
      
 
Impaired loans with an allowance recorded
   $
462
     $
484
     $
219
     $
462
     $
34
  
Impaired loans with no related allowance recorded
    
-
      
-
      
-
      
-
      
-
  
Total impaired loans
   $
462
     $
484
     $
219
     $
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:
1
) Moody's rating,
2
) current internal rating (through
March 19, 2019)
3
) trading price of the loan, and
4
) 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 in
March 
2019
as part of the deconsolidation of the CLOs. See Note
1
for additional information.
 
(In thousands)
  
Cash Flow Loans
  
   
December 31,
  
   
2019
    
2018
  
                 
Moody's rating:
      
 
      
 
Baa1 - Baa3
   $
-
     $
-
  
Ba1 - Ba3
    
-
      
7,459
  
B1 - B3
    
-
      
18,342
  
Caa1 - Caa3
    
-
      
419
  
Ca
    
-
      
463
  
Not Rated
    
1,210
      
3,326
  
Total:
   $
1,210
     $
30,009
  
                 
Internal rating:
      
 
      
 
2   $
-
     $
26,208
  
3    
-
      
909
  
4    
-
      
-
  
5    
-
      
462
  
Not rated
    
1,210
      
2,430
  
Total:
   $
1,210
     $
30,009
  
                 
Performance:
      
 
      
 
Performing
   $
1,210
     $
29,547
  
Non-performing
    
-
      
462
  
Total:
   $
1,210
     $
30,009