Segment Reporting

12 Months Ended

Dec. 31, 2023

Segment Reporting

Segment Reporting

Note 26. Segment reporting

The Company reports its results of operations through the following two business segments: i) LMM Commercial Real Estate (formerly our SBC Lending and Acquisitions segment) and ii) Small Business Lending. The Company’s organizational structure is based on a number of factors that the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer, uses to evaluate, view, and run its business operations, which includes customer base and nature of loan program types. The segments are based on this organizational structure and the information reviewed by the CODM and management to evaluate segment results.

LMM Commercial Real Estate

The Company originates LMM loans across the full life-cycle of an LMM property including construction, bridge, stabilized and agency channels. As part of this segment, the Company originates and services multi-family loan products under the Freddie Mac SBL program. LMM originations include construction and permanent financing activities for the preservation and construction of affordable housing, primarily utilizing tax-exempt bonds, through Red Stone. This segment also reflects the impact of LMM securitization activities. The Company acquires performing and non-performing LMM loans and intends to continue to acquire these loans as part of the Company’s business strategy.

Small Business Lending

The Company acquires, originates and services loans guaranteed by the SBA under the SBA Section 7(a) Program. This segment also reflects the impact of SBA securitization activities. The Company also acquires purchased future receivables through Knight Capital.

Corporate- Other

Corporate - Other consists primarily of unallocated activities, including interest expense relating to senior secured and convertible notes, allocated employee compensation from the Manager, management and incentive fees paid to the Manager and other general corporate overhead expenses.

Results of business segments and all other. The tables below present reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other.

	Year Ended December 31, 2023
		LMM	Small
	Commercial		Business		Corporate-
(in thousands)	Real Estate		Lending		Other		Consolidated
Interest income	$	847,253	$	98,561	$	—	$	945,814
Interest expense		(650,624)		(65,844)		—		(716,468)
Net interest income before provision for loan losses	$	196,629	$	32,717	$	—	$	229,346
Provision for loan losses		(1,413)		(5,817)		—		(7,230)
Net interest income after provision for loan losses	$	195,216	$	26,900	$	—	$	222,116
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned		34,072		30,936		—		65,008
Net unrealized gain (loss) on financial instruments		8,427		1,291		—		9,718
Servicing income, net		5,819		15,342		—		21,161
Income on purchased future receivables, net		—		2,387		—		2,387
Gain on bargain purchase		—		—		207,972		207,972
Loss on unconsolidated joint ventures		(905)		—		—		(905)
Other income		38,552		62,112		2,463		103,127
Total non-interest income	$	85,965	$	112,068	$	210,435	$	408,468
Non-interest expense
Employee compensation and benefits		(33,012)		(40,289)		(8,229)		(81,530)
Allocated employee compensation and benefits from related party		(882)		—		(9,955)		(10,837)
Professional fees		(5,369)		(19,535)		(9,834)		(34,738)
Management fees – related party		—		—		(25,103)		(25,103)
Incentive fees – related party		—		—		(1,791)		(1,791)
Loan servicing expense		(40,070)		(741)		—		(40,811)
Transaction related expenses		—		—		(17,764)		(17,764)
Other operating expenses		(24,443)		(27,763)		(7,385)		(59,591)
Total non-interest expense	$	(103,776)	$	(88,328)	$	(80,061)	$	(272,165)
Income before provision for income taxes	$	177,405	$	50,640	$	130,374	$	358,419
Total assets	$	10,282,531	$	1,395,687	$	308,403	$	11,986,621

	Year Ended December 31, 2022
			Small
	LMM Commercial		Business		Corporate-
(in thousands)	Real Estate		Lending		Other		Consolidated
Interest income	$	565,128	$	98,089	$	—	$	663,217
Interest expense		(364,343)		(27,382)		(635)		(392,360)
Net interest income before provision for loan losses	$	200,785	$	70,707	$	(635)	$	270,857
Provision for loan losses		(31,471)		(2,971)		—		(34,442)
Net interest income after provision for loan losses	$	169,314	$	67,736	$	(635)	$	236,415
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned		21,813		31,951		—		53,764
Net unrealized gain (loss) on financial instruments		23,321		(1,431)		—		21,890
Servicing income, net		4,623		6,805		—		11,428
Income on purchased future receivables, net		—		5,490		—		5,490
Income on unconsolidated joint ventures		11,661		—		—		11,661
Other income		29,506		20,382		830		50,718
Total non-interest income	$	90,924	$	63,197	$	830	$	154,951
Non-interest expense
Employee compensation and benefits		(29,417)		(40,546)		(5,026)		(74,989)
Allocated employee compensation and benefits from related party		(955)		—		(8,594)		(9,549)
Professional fees		(7,030)		(5,361)		(4,911)		(17,302)
Management fees – related party		—		—		(19,295)		(19,295)
Incentive fees – related party		—		—		(3,105)		(3,105)
Loan servicing expense		(30,107)		(707)		—		(30,814)
Transaction related expenses		—		—		(13,633)		(13,633)
Other operating expenses		(23,761)		(17,776)		(6,116)		(47,653)
Total non-interest expense	$	(91,270)	$	(64,390)	$	(60,680)	$	(216,340)
Income (loss) before provision for income taxes	$	168,968	$	66,543	$	(60,485)	$	175,026
Total assets	$	10,197,876	$	835,836	$	148,074	$	11,181,786

	Year Ended December 31, 2021
				Small
		LMM Commercial		Business		Corporate-
(in thousands)		Real Estate		Lending		Other		Consolidated
Interest income		$	278,455	$	116,741	$	—	$	395,196
Interest expense			(164,797)		(36,872)		(2,699)		(204,368)
Net interest income before provision for loan losses		$	113,658	$	79,869	$	(2,699)	$	190,828
Provision for loan losses			(7,387)		(662)		—		(8,049)
Net interest income after provision for loan losses		$	106,271	$	79,207	$	(2,699)	$	182,779
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned			24,813		44,068		—		68,881
Net unrealized gain (loss) on financial instruments			19,458		2,999		—		22,457
Servicing income, net			3,113		14,510		—		17,623
Income on purchased future receivables, net			—		10,257		—		10,257
Income on unconsolidated joint ventures			6,916		—		—		6,916
Other income (loss)			13,002		(6,231)		85		6,856
Total non-interest income		$	67,302	$	65,603	$	85	$	132,990
Non-interest expense
Employee compensation and benefits			(16,582)		(36,757)		(3,753)		(57,092)
Allocated employee compensation and benefits from related party			(1,203)		—		(10,828)		(12,031)
Professional fees			(4,064)		(3,034)		(6,290)		(13,388)
Management fees – related party			—		—		(10,928)		(10,928)
Incentive fees – related party			—		—		(5,419)		(5,419)
Loan servicing expense			(19,680)		(886)		—		(20,566)
Transaction related expenses			—		—		(14,282)		(14,282)
Other operating expenses			(21,997)		(23,377)		(4,529)		(49,903)
Total non-interest expense		$	(63,526)	$	(64,054)	$	(56,029)	$	(183,609)
Income (loss) before provision for income taxes		$	110,047	$	80,756	$	(58,643)	$	132,160
Total assets		$	7,106,206	$	1,558,641	$	350,438	$	9,015,285