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FINANCING RECEIVABLES (Tables)
 6 Months Ended
Jun. 30, 2024
Receivables [Abstract]  
Activity in Allowance for Credit Losses

The following table shows the activity in the allowance for credit losses for the six months ended June 30, 2024 and the year ended December 31, 2023 (in thousands):

 

 

 

Six Months Ended June 30, 2024

 

 

Year Ended December 31, 2023

 

Allowance for credit losses at beginning of period

 

$

28,757

 

 

$

18,803

 

Provision for credit losses

 

 

6,233

 

 

 

10,902

 

Charge offs

 

 

—

 

 

 

(948

)

Allowance for credit losses at end of period

 

$

34,990

 

 

$

28,757

 

 
Credit quality indicators for bank loans and commercial real estate loans

The criteria set forth below should be used as general guidelines. Therefore, not every loan will have all of the characteristics described in each category below.

 

 

 

 

 

Risk Rating

Risk Characteristics

1

• Property performance has surpassed underwritten expectations.

• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high-quality tenant mix.

2

• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded.

• Occupancy is stabilized, near stabilized or is on track with underwriting.

3

• Property performance lags behind underwritten expectations.

• Occupancy is not stabilized and the property has some tenancy rollover.

4

• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers.

• Occupancy is not stabilized and the property has a large amount of tenancy rollover.

5

• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Expected sale proceeds would not be sufficient to pay off the loan at maturity.

• The property has a material vacancy rate and significant rollover of remaining tenants.

• An updated appraisal is required upon designation and updated on an as-needed basis.

 

All CRE loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Mezzanine loans may experience greater credit risks due to their nature as subordinated investments.

For the purpose of calculating the quarterly provision for credit losses under CECL, the Company pools CRE loans based on the underlying collateral property type and utilizes a probability of default and loss given default methodology for approximately one year after which it immediately reverts to a historical mean loss ratio.

Credit risk profiles of CRE loans at amortized cost were as follows (in thousands, except amounts in the footnote):

 

 

 

Rating 1

 

 

Rating 2

 

 

Rating 3

 

 

Rating 4

 

 

Rating 5

 

 

Total (1)

 

At June 30, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Whole loans, floating-rate

 

$

74,447

 

 

$

760,146

 

 

$

510,578

 

 

$

349,442

 

 

$

14,398

 

 

$

1,709,011

 

Mezzanine loan

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,700

 

 

 

4,700

 

Total

 

$

74,447

 

 

$

760,146

 

 

$

510,578

 

 

$

349,442

 

 

$

19,098

 

 

$

1,713,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Whole loans, floating-rate

 

$

—

 

 

$

973,424

 

 

$

581,032

 

 

$

256,785

 

 

$

41,152

 

 

$

1,852,393

 

Mezzanine loan

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,700

 

 

 

4,700

 

Total

 

$

—

 

 

$

973,424

 

 

$

581,032

 

 

$

256,785

 

 

$

45,852

 

 

$

1,857,093

 

 

(1)
The total amortized cost of CRE whole loans excluded accrued interest receivable of $12.5 million and $11.8 million at June 30, 2024 and December 31, 2023, respectively.

Credit risk profiles of CRE loans by origination year at amortized cost were as follows (in thousands, except amounts in the footnotes):

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Total (1)

 

At June 30, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Whole loans, floating-rate: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rating 1

 

$

—

 

 

$

—

 

 

$

—

 

 

$

74,447

 

 

$

—

 

 

$

—

 

 

$

74,447

 

Rating 2

 

 

—

 

 

 

46,656

 

 

 

192,413

 

 

 

450,493

 

 

 

56,583

 

 

 

14,001

 

 

 

760,146

 

Rating 3

 

 

—

 

 

 

15,785

 

 

 

198,389

 

 

 

285,302

 

 

 

—

 

 

 

11,102

 

 

 

510,578

 

Rating 4

 

 

—

 

 

 

—

 

 

 

84,260

 

 

 

214,676

 

 

 

—

 

 

 

50,506

 

 

 

349,442

 

Rating 5

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14,398

 

 

 

14,398

 

Total whole loans, floating-rate

 

 

—

 

 

 

62,441

 

 

 

475,062

 

 

 

1,024,918

 

 

 

56,583

 

 

 

90,007

 

 

 

1,709,011

 

Mezzanine loan (rating 5)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,700

 

 

 

4,700

 

Total

 

$

—

 

 

$

62,441

 

 

$

475,062

 

 

$

1,024,918

 

 

$

56,583

 

 

$

94,707

 

 

$

1,713,711

 

Current Period Gross Write-Offs

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Total (1)

 

At December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Whole loans, floating-rate: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rating 2

 

$

63,634

 

 

$

212,175

 

 

$

636,487

 

 

$

22,556

 

 

$

38,572

 

 

$

—

 

 

$

973,424

 

Rating 3

 

 

—

 

 

 

168,791

 

 

 

364,369

 

 

 

34,232

 

 

 

—

 

 

 

13,640

 

 

 

581,032

 

Rating 4

 

 

—

 

 

 

82,918

 

 

 

123,333

 

 

 

—

 

 

 

5,645

 

 

 

44,889

 

 

 

256,785

 

Rating 5

 

 

—

 

 

 

14,000

 

 

 

—

 

 

 

—

 

 

 

19,127

 

 

 

8,025

 

 

 

41,152

 

Total whole loans, floating-rate

 

 

63,634

 

 

 

477,884

 

 

 

1,124,189

 

 

 

56,788

 

 

 

63,344

 

 

 

66,554

 

 

 

1,852,393

 

Mezzanine loan (rating 5)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,700

 

 

 

4,700

 

Total

 

$

63,634

 

 

$

477,884

 

 

$

1,124,189

 

 

$

56,788

 

 

$

63,344

 

 

$

71,254

 

 

$

1,857,093

 

Current Period Gross Write-Offs

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(948

)

 

$

—

 

 

$

(948

)

 

(1)
The total amortized cost of CRE whole loans excluded accrued interest receivable of $12.5 million and $11.8 million at June 30, 2024 and December 31, 2023, respectively.
(2)
Acquired CRE whole loans are grouped within each loan’s year of origination.

The Company has one additional mezzanine loan that was included in other assets held for sale, and that loan had no carrying value at both June 30, 2024 and December 31, 2023.
Loan portfolios aging analysis

The following table presents the CRE loan portfolio aging analysis at the dates indicated for CRE loans at amortized cost (in thousands, except amounts in footnotes):

 

 

 

30-59 Days

 

 

60-89 Days

 

 

Greater than 90
Days (1)

 

 

Total Past Due

 

 

Current (2)

 

 

Total Loans Receivable (3)

 

 

Total Loans > 90 Days and Accruing

 

At June 30, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Whole loans, floating-rate

 

$

—

 

 

$

—

 

 

$

14,398

 

 

$

14,398

 

 

$

1,694,613

 

 

$

1,709,011

 

 

$

—

 

Mezzanine loan (4)

 

 

—

 

 

 

—

 

 

 

4,700

 

 

 

4,700

 

 

 

—

 

 

 

4,700

 

 

 

—

 

Total

 

$

—

 

 

$

—

 

 

$

19,098

 

 

$

19,098

 

 

$

1,694,613

 

 

$

1,713,711

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Whole loans, floating-rate

 

$

—

 

 

$

—

 

 

$

41,152

 

 

$

41,152

 

 

$

1,811,241

 

 

$

1,852,393

 

 

$

19,127

 

Mezzanine loan (4)

 

 

—

 

 

 

—

 

 

 

4,700

 

 

 

4,700

 

 

 

—

 

 

 

4,700

 

 

 

—

 

Total

 

$

—

 

 

$

—

 

 

$

45,852

 

 

$

45,852

 

 

$

1,811,241

 

 

$

1,857,093

 

 

$

19,127

 

 

(1)
During the three and six months ended June 30, 2024, the Company recognized interest income of $258,000 and $922,000, respectively, on one CRE whole loan with a principal payment past due greater than 90 days at June 30, 2024. During the three and six months ended June 30, 2023, the Company recognized interest income of $837,000 and $1.8 million, respectively, on one CRE whole loan with a principal payment past due greater than 90 days at June 30, 2023.
(2)
Includes three CRE whole loans, with total amortized costs of $88.5 million, that are past due on interest payments at June 30, 2024.
(3)
The total amortized cost of CRE whole loans excluded accrued interest receivable of $12.5 million and $11.8 million at June 30, 2024 and December 31, 2023, respectively.
(4)
Fully reserved at both June 30, 2024 and December 31, 2023.