Segment reporting

3 Months Ended

Mar. 31, 2024

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 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.

	Three Months Ended March 31, 2024
			Small
	LMM Commercial		Business		Corporate-
(in thousands)	Real Estate		Lending		Other		Consolidated
Interest income	$	200,763	$	31,591	$	—	$	232,354
Interest expense		(158,885)		(24,920)		—		(183,805)
Net interest income before recovery of (provision for) loan losses	$	41,878	$	6,671	$	—	$	48,549
Recovery of (provision) for loan losses		30,755		(4,211)		—		26,544
Net interest income after recovery of (provision for) loan losses	$	72,633	$	2,460	$	—	$	75,093
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned		5,755		13,113		—		18,868
Net unrealized gain (loss) on financial instruments		2,986		1,646		—		4,632
Valuation allowance, loans held for sale		(146,180)		—		—		(146,180)
Servicing income, net		1,298		2,460		—		3,758
Income on purchased future receivables, net		—		446		—		446
Income on unconsolidated joint ventures		468		—		—		468
Other income		12,727		2,653		—		15,380
Total non-interest income	$	(122,946)	$	20,318	$	—	$	(102,628)
Non-interest expense
Employee compensation and benefits		(7,476)		(9,292)		(1,646)		(18,414)
Allocated employee compensation and benefits from related party		(250)		—		(2,250)		(2,500)
Professional fees		(1,641)		(3,215)		(2,209)		(7,065)
Management fees – related party		—		—		(6,648)		(6,648)
Loan servicing expense		(12,547)		(247)		—		(12,794)
Transaction related expenses		—		—		(650)		(650)
Other operating expenses		(21,534)		(5,353)		(3,300)		(30,187)
Total non-interest expense	$	(43,448)	$	(18,107)	$	(16,703)	$	(78,258)
Income before provision for income taxes	$	(93,761)	$	4,671	$	(16,703)	$	(105,793)
Total assets	$	9,905,732	$	1,357,398	$	341,101	$	11,604,231

	Three Months Ended March 31, 2023
			Small
	LMM Commercial		Business		Corporate-
(in thousands)	Real Estate		Lending		Other		Consolidated
Interest income	$	198,039	$	17,929	$	—	$	215,968
Interest expense		(149,494)		(9,374)		—		(158,868)
Net interest income before recovery of (provision for) loan losses	$	48,545	$	8,555	$	—	$	57,100
Recovery of (provision for) loan losses		8,129		(1,395)		—		6,734
Net interest income after recovery of (provision for) loan losses	$	56,674	$	7,160	$	—	$	63,834
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned		4,825		6,750		—		11,575
Net unrealized gain (loss) on financial instruments		(6,111)		476		—		(5,635)
Servicing income, net		1,093		3,549		—		4,642
Income on purchased future receivables, net		—		540		—		540
Income on unconsolidated joint ventures		656		—		—		656
Other income		9,093		10,428		331		19,852
Total non-interest income	$	9,556	$	21,743	$	331	$	31,630
Non-interest expense
Employee compensation and benefits		(6,206)		(11,275)		(2,246)		(19,727)
Allocated employee compensation and benefits from related party		(232)		—		(2,094)		(2,326)
Professional fees		(981)		(1,625)		(2,937)		(5,543)
Management fees – related party		—		—		(5,081)		(5,081)
Incentive fees – related party		—		—		(1,720)		(1,720)
Loan servicing expense		(8,058)		(97)		—		(8,155)
Transaction related expenses		—		—		(893)		(893)
Other operating expenses		(6,733)		(4,094)		(1,782)		(12,609)
Total non-interest expense	$	(22,210)	$	(17,091)	$	(16,753)	$	(56,054)
Income (loss) before provision for income taxes	$	44,020	$	11,812	$	(16,422)	$	39,410
Total assets	$	10,184,788	$	791,394	$	104,601	$	11,080,783