Loans and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2024

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

Note 6. Loans and Allowance for Credit Losses

Loans includes (i) loans held for investment that are accounted for at amortized cost net of allowance for credit losses, (ii) loans held at fair value under the fair value option, (iii) loans held for sale that are accounted for at the lower of cost or fair value net of valuation allowance and (iv) loans held for sale at fair value under the fair value option. The classification for a loan is based on product type and management’s strategy for the loan.

Loan portfolio

The table below summarizes the classification, unpaid principal balance (“UPB”), and carrying value of loans held by the Company including loans of consolidated VIEs.

	June 30, 2024				December 31, 2023
(in thousands)	Carrying Value		UPB		Carrying Value		UPB
Loans
Bridge	$	1,267,122	$	1,270,125	$	1,444,770	$	1,448,281
Fixed rate		186,857		184,707		247,476		241,674
Construction		841,695		842,854		1,207,783		1,212,526
Freddie Mac		—		—		9,500		9,719
SBA - 7(a)		1,020,826		1,028,043		995,974		1,003,323
Other		162,155		164,043		196,087		198,499
Total Loans, before allowance for loan losses	$	3,478,655	$	3,489,772	$	4,101,590	$	4,114,022
Allowance for loan losses	$	(33,776)	$	—	$	(81,430)	$	—
Total Loans, net	$	3,444,879	$	3,489,772	$	4,020,160	$	4,114,022
Loans in consolidated VIEs
Bridge		4,804,452		4,816,128		5,370,251		5,389,535
Fixed rate		773,230		772,576		790,068		790,967
SBA - 7(a)		201,343		214,415		213,892		227,636
Other		233,440		234,224		257,289		258,029
Total Loans, in consolidated VIEs, before allowance for loan losses	$	6,012,465	$	6,037,343	$	6,631,500	$	6,666,167
Allowance for loan losses on loans in consolidated VIEs	$	(11,056)	$	—	$	(20,175)	$	—
Total Loans, net, in consolidated VIEs	$	6,001,409	$	6,037,343	$	6,611,325	$	6,666,167
Loans, held for sale
Bridge		251,836		251,375		—		—
Fixed rate		38,051		39,826		—		—
Construction		356,753		359,208		—		—
Freddie Mac		12,046		12,266		20,955		20,729
SBA - 7(a)		71,281		65,842		59,421		55,769
Other		20,263		20,021		1,223		1,297
Total Loans, held for sale, before valuation allowance	$	750,230	$	748,538	$	81,599	$	77,795
Valuation allowance	$	(217,719)	$	—	$	—	$	—
Total Loans, held for sale	$	532,511	$	748,538	$	81,599	$	77,795
Loans, held for sale in consolidated VIEs
Bridge	$	19,173	$	19,173	$	—	$	—
Valuation allowance on loans, held for sale in consolidated VIEs	$	(9,448)	$	—	$	—	$	—
Total Loans, held for sale in consolidated VIEs	$	9,725	$	19,173	$	—	$	—
Total	$	9,988,524	$	10,294,826	$	10,713,084	$	10,857,984

In the table above, loans with the “Other” classification are generally LMM acquired loans that have nonconforming characteristics for the Fixed rate, Bridge, Construction, or Freddie Mac classifications due to loan size, rate type, collateral, or borrower criteria.

Loan vintage and credit quality indicators

The Company monitors the credit quality of its loan portfolio based on primary credit quality indicators, such as delinquency rates. Loans that are 30 days or more past due, provide an indication of the borrower’s capacity and willingness to meet its financial obligations. Total Loans, net includes Loans, net in consolidated VIEs and a specific allowance for loan losses of $8.2 million, including $1.9 million of PCD loan reserves as of June 30, 2024, and a specific allowance for loan losses of $57.1 million, including $21.4 million of PCD loan reserves, as of December 31, 2023.

The tables below summarize the classification, UPB, carrying value and gross write-offs of loans by year of origination.

			Carrying Value by Year of Origination
(in thousands)	UPB		2024		2023		2022		2021		2020		Pre 2020		Total
June 30, 2024
Bridge	$	6,086,253	$	231,149	$	255,672	$	2,669,676	$	2,643,443	$	176,563	$	93,405	$	6,069,908
Fixed rate		957,283		—		—		110,625		181,427		90,094		576,876		959,022
Construction		842,854		—		107,206		156,856		103,290		12,866		459,407		839,625
SBA - 7(a)		1,242,458		94,112		148,941		344,158		283,853		109,300		238,443		1,218,807
Other		398,267		6,330		2,801		4,614		7,375		8,600		365,824		395,544
Total Loans, before general allowance for loan losses	$	9,527,115	$	331,591	$	514,620	$	3,285,929	$	3,219,388	$	397,423	$	1,733,955	$	9,482,906
General allowance for loan losses															$	(36,618)
Total Loans, net															$	9,446,288
Gross write-offs			$	—	$	1,273	$	1,492	$	2,890	$	533	$	5,511	$	11,699
	UPB		2023		2022		2021		2020		2019		Pre 2019		Total
December 31, 2023
Bridge	$	6,837,816	$	323,648	$	2,956,697	$	2,949,521	$	288,647	$	166,266	$	111,303	$	6,796,082
Fixed rate		1,032,641		4,007		110,800		207,510		90,794		318,077		300,642		1,031,830
Construction		1,212,526		108,218		253,100		182,920		73,370		434,151		128,876		1,180,635
Freddie Mac		9,719		—		—		3,810		5,690		—		—		9,500
SBA - 7(a)		1,230,959		151,878		353,871		318,208		115,019		76,080		189,622		1,204,678
Other		456,528		2,599		4,877		18,549		8,708		43,724		374,776		453,233
Total Loans, before general allowance for loan losses	$	10,780,189	$	590,350	$	3,679,345	$	3,680,518	$	582,228	$	1,038,298	$	1,105,219	$	10,675,958
General allowance for loan losses															$	(44,473)
Total Loans, net															$	10,631,485
Gross write-offs			$	100	$	950	$	3,236	$	258	$	360	$	25,731	$	30,635

The tables below present delinquency information on loans, net by year of origination.

			Carrying Value by Year of Origination
(in thousands)	UPB		2024		2023		2022		2021		2020		Pre 2020		Total
June 30, 2024
Current	$	9,103,724	$	330,985	$	497,155	$	3,168,095	$	3,029,683	$	380,511	$	1,664,385	$	9,070,814
30 - 59 days past due		45,971		505		124		16,759		13,408		—		15,112		45,908
60+ days past due		377,420		101		17,341		101,075		176,297		16,912		54,458		366,184
Total Loans, before general allowance for loan losses	$	9,527,115	$	331,591	$	514,620	$	3,285,929	$	3,219,388	$	397,423	$	1,733,955	$	9,482,906
General allowance for loan losses															$	(36,618)
Total Loans, net															$	9,446,288
	UPB		2023		2022		2021		2020		2019		Pre 2019		Total
December 31, 2023
Current	$	9,632,399	$	574,507	$	3,351,046	$	3,409,643	$	495,433	$	881,868	$	875,348	$	9,587,845
30 - 59 days past due		172,355		582		59,988		80,684		510		22,586		7,148		171,498
60+ days past due		975,435		15,261		268,311		190,191		86,285		133,844		222,723		916,615
Total Loans, before general allowance for loan losses	$	10,780,189	$	590,350	$	3,679,345	$	3,680,518	$	582,228	$	1,038,298	$	1,105,219	$	10,675,958
General allowance for loan losses															$	(44,473)
Total Loans, net															$	10,631,485

The table below presents delinquency information on loans, net by portfolio.

(in thousands)	Current		30-59 days past due		60+ days past due		Total		Non-Accrual Loans		90+ days past due and Accruing
June 30, 2024
Bridge	$	5,752,441	$	25,074	$	292,393	$	6,069,908	$	103,996	$	119,009
Fixed rate		933,012		3,500		22,510		959,022		22,511		—
Construction		803,198		15,182		21,245		839,625		19,578		1,667
SBA - 7(a)		1,192,886		262		25,659		1,218,807		43,484		—
Other		389,277		1,890		4,377		395,544		2,822		—
Total Loans, before general allowance for loan losses	$	9,070,814	$	45,908	$	366,184	$	9,482,906	$	192,391	$	120,676
General allowance for loan losses							$	(36,618)
Total Loans, net							$	9,446,288
Percentage of loans outstanding		95.6%		0.5%		3.9%		100%		2.0%		1.3%
December 31, 2023
Bridge	$	6,186,367	$	87,163	$	522,552	$	6,796,082	$	339,073	$	—
Fixed rate		986,755		21,798		23,277		1,031,830		13,928		—
Construction		782,123		49,694		348,818		1,180,635		241,751		82,781
Freddie Mac		9,500		—		—		9,500		2,695		—
SBA - 7(a)		1,179,231		8,619		16,828		1,204,678		30,549		40
Other		443,869		4,224		5,140		453,233		6,005		—
Total Loans, before general allowance for loan losses	$	9,587,845	$	171,498	$	916,615	$	10,675,958	$	634,001	$	82,821
General allowance for loan losses							$	(44,473)
Total Loans, net							$	10,631,485
Percentage of loans outstanding		89.8%		1.6%		8.6%		100%		5.9%		0.8%

In addition to delinquency rates, the current estimated LTV ratio, geographic distribution of the loan collateral and collateral concentration are primary credit quality indicators that provide insight into a borrower’s capacity and willingness to meet its financial obligation. High LTV loans tend to have higher delinquency rates than loans where the borrower has equity in the collateral. The geographic distribution of the loan collateral considers factors such as the regional economy, property price changes and specific events such as natural disasters, which will affect credit quality. The collateral concentration of the loan portfolio considers economic factors or events may have a more pronounced impact on certain sectors or property types.

The table below presents quantitative information on the credit quality of loans, net.

	LTV(1)
(in thousands)	0.0 – 20.0%		20.1 – 40.0%		40.1 – 60.0%		60.1 – 80.0%		80.1 – 100.0%		Greater than 100.0%		Total
June 30, 2024
Bridge	$	2,243	$	85,672	$	721,964	$	4,974,660	$	179,286	$	106,083	$	6,069,908
Fixed rate		3,227		30,987		437,170		466,402		19,940		1,296		959,022
Construction		21,019		4,521		147,031		569,839		91,895		5,320		839,625
SBA - 7(a)		13,798		69,428		218,269		353,621		228,658		335,033		1,218,807
Other		108,028		135,847		67,757		67,845		14,729		1,338		395,544
Total Loans, before general allowance for loan losses	$	148,315	$	326,455	$	1,592,191	$	6,432,367	$	534,508	$	449,070	$	9,482,906
General allowance for loan losses													$	(36,618)
Total Loans, net													$	9,446,288
Percentage of loans outstanding		1.6%		3.4%		16.8%		67.8%		5.6%		4.8%
December 31, 2023
Bridge	$	2,308	$	97,309	$	756,353	$	5,781,651	$	82,517	$	75,944	$	6,796,082
Fixed rate		5,222		36,021		449,804		517,628		19,965		3,190		1,031,830
Construction		25,173		94,856		532,730		355,631		119,191		53,054		1,180,635
Freddie Mac		—		—		2,995		6,505		—		—		9,500
SBA - 7(a)		10,627		56,061		172,743		404,102		226,327		334,818		1,204,678
Other		127,310		159,386		81,291		68,451		14,124		2,671		453,233
Total Loans, before general allowance for loan losses	$	170,640	$	443,633	$	1,995,916	$	7,133,968	$	462,124	$	469,677	$	10,675,958
General allowance for loan losses													$	(44,473)
Total Loans, net													$	10,631,485
Percentage of loans outstanding		1.6%		4.2%		18.7%		66.8%		4.3%		4.4%
(1) LTV is calculated by dividing the current carrying amount by the most recent collateral value received. The most recent value for performing loans is often the third-party as-is valuation utilized during the original underwriting process.

The table below presents the geographic concentration of loans, net, secured by real estate.

Geographic Concentration (% of UPB)	June 30, 2024		December 31, 2023
Texas	18.8	%	18.6	%
California	11.8		11.4
Arizona	7.5		6.1
Florida	7.3		6.4
Georgia	6.8		7.1
Oregon	6.7		5.9
New York	4.6		4.8
North Carolina	4.3		4.1
Ohio	3.4		3.2
Washington	2.8		3.4
Other	26.0		29.0
Total	100.0	%	100.0	%

The table below presents the collateral type concentration of loans, net.

Collateral Concentration (% of UPB)	June 30, 2024		December 31, 2023
Multi-family	62.3	%	60.9	%
SBA	13.0		11.4
Mixed Use	8.5		8.4
Industrial	5.3		4.3
Retail	4.1		4.3
Office	3.5		4.4
Lodging	1.6		1.6
Other	1.7		4.7
Total	100.0	%	100.0	%

The table below presents the collateral type concentration of SBA loans within loans, net.

Collateral Concentration (% of UPB)	June 30, 2024		December 31, 2023
Lodging	22.0	%	23.4	%
Gasoline Service Stations	12.7		12.8
Eating Places	6.6		6.2
Child Day Care Services	5.6		5.6
Offices of Physicians	3.7		4.1
General Freight Trucking, Local	3.2		3.5
Grocery Stores	2.3		2.3
Coin-Operated Laundries and Drycleaners	1.7		1.9
Beer, Wine, and Liquor Stores	1.3		1.3
Funeral Service & Crematories	1.1		1.4
Other	39.8		37.5
Total	100.0	%	100.0	%

Allowance for credit losses

The allowance for credit losses consists of the allowance for losses on loans and lending commitments accounted for at amortized cost. Such loans and lending commitments are reviewed quarterly considering credit quality indicators, including probable and historical losses, collateral values, LTV ratios, and economic conditions.

The table below presents the allowance for loan losses by loan product and impairment methodology.

(in thousands)	Bridge		Fixed Rate		Construction		SBA - 7(a)		Other		Total
June 30, 2024
General	$	12,732	$	5,415	$	5,840	$	10,204	$	2,427	$	36,618
Specific		1,666		1,065		181		3,362		51		6,325
PCD		—		—		1,889		—		—		1,889
Ending balance	$	14,398	$	6,480	$	7,910	$	13,566	$	2,478	$	44,832
December 31, 2023
General	$	17,302	$	7,884	$	3,722	$	12,679	$	2,886	$	44,473
Specific		18,939		5,714		5,726		5,188		143		35,710
PCD		—		—		21,422		—		—		21,422
Ending balance	$	36,241	$	13,598	$	30,870	$	17,867	$	3,029	$	101,605

The table below presents a summary of the changes in the allowance for loan losses.

(in thousands)	Bridge		Fixed Rate		Construction		SBA - 7(a)		Other		Total
Three Months Ended June 30, 2024
Beginning balance	$	13,181	$	7,264	$	23,755	$	20,579	$	2,644	$	67,423
Provision for (recoveries of) loan losses		1,217		(784)		(12,579)		(4,409)		(166)		(16,721)
Charge-offs and sales		—		—		(3,266)		(2,680)		—		(5,946)
Recoveries		—		—		—		76		—		76
Ending balance	$	14,398	$	6,480	$	7,910	$	13,566	$	2,478	$	44,832
Three Months Ended June 30, 2023
Beginning balance	$	40,319	$	9,085	$	373	$	15,110	$	2,893	$	67,780
Provision for loan losses		3,538		4,523		7,935		2,012		466		18,474
PCD(1)		—		—		27,617		—		—		27,617
Charge-offs and sales		—		(1,404)		—		(402)		—		(1,806)
Recoveries		—		—		—		89		—		89
Ending balance	$	43,857	$	12,204	$	35,925	$	16,809	$	3,359	$	112,154
Six Months Ended June 30, 2024
Beginning balance	$	36,241	$	13,598	$	30,870	$	17,867	$	3,029	$	101,605
Recoveries of loan losses		(21,843)		(4,489)		(18,215)		(246)		(485)		(45,278)
Charge-offs and sales		—		(2,629)		(4,745)		(4,259)		(66)		(11,699)
Recoveries		—		—		—		204		—		204
Ending balance	$	14,398	$	6,480	$	7,910	$	13,566	$	2,478	$	44,832
Six Months Ended June 30, 2023
Beginning balance	$	49,905	$	6,531	$	17,334	$	14,299	$	2,450	$	90,519
Provision for (recoveries of) loan losses		(5,437)		7,177		7,872		3,407		909		13,928
PCD (1)		—		—		27,617		—		—		27,617
Charge-offs and sales		(611)		(1,504)		(16,898)		(1,015)		—		(20,028)
Recoveries		—		—		—		118		—		118
Ending balance	$	43,857	$	12,204	$	35,925	$	16,809	$	3,359	$	112,154
(1) Refer to Note 5 for further details on assets acquired and liabilities assumed in connection with the Broadmark Merger.

The table above excludes $0.6 million and $3.6 million of allowance for loan losses on unfunded lending commitments as of June 30, 2024 and June 30, 2023, respectively. Refer to Note 3 – Summary of Significant Accounting Policies for more information on accounting policies, methodologies and judgment applied to determine the allowance for loan losses and lending commitments.

Non-accrual loans

A loan is placed on nonaccrual status when it is probable that principal and interest will not be collected under the original contractual terms. At that time, interest income is no longer accrued.

The table below presents information on non-accrual loans.

(in thousands)	June 30, 2024		December 31, 2023
Non-accrual loans
With an allowance	$	178,046	$	607,292
Without an allowance		14,345		26,709
Total recorded carrying value of non-accrual loans	$	192,391	$	634,001
Allowance for loan losses related to non-accrual loans	$	(9,499)	$	(50,796)
UPB of non-accrual loans	$	203,666	$	688,282
	June 30, 2024		June 30, 2023
Interest income on non-accrual loans for the three months ended	$	52	$	6,841
Interest income on non-accrual loans for the six months ended	$	1,338	$	14,690

Loan modifications made to borrowers experiencing financial difficulty

In certain situations, the Company may provide loan modifications to borrowers experiencing financial difficulty. These modifications may include interest rate reductions, principal forgiveness, term extensions, and other-than-insignificant payment delays intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of collateral.

Three months ended June 30, 2024. During the three months ended June 30, 2024, the Company entered into 20 loan modifications with an aggregate carrying value of $519.0 million, or 5.5% of total loans, net. These modified loans include a combination of changes to the contractual terms which were in the form of term extensions, other-than-insignificant payment delays, and interest reductions.

There were 12 loans with an aggregate carrying value of $334.7 million, or 3.6% of loans, net, that were modified to include both term extensions and interest payment deferrals. The term extensions ranged between 3 and 27 months with a weighted average of 13 months added to the original loan term. Payment modifications include the reduction of interest payments to equal excess net operating income with the difference between the original rate and the interest collected due

at maturity. In most cases, cash management accounts are set up for the loans and default interest is waived. There was 1 loan with a carrying value of $75.0 million, or 0.8% of loans, net that was modified to include both a term extension and interest rate reduction. The term extension was for 18 months added to the original loan term and the interest rate decreased from SOFR + 3.25% to a fixed rate of 6.0% from June 2024 to December 2024 and 6.5% from January 2025 to July 2025. There were 3 loans with an aggregate carrying value of $58.3 million, or 0.6% of loans, net that were modified by interest payment deferrals. The number of interest payments deferred ranged between 10 and 28 months with a weighted average of 17 months and include periods before the modification date. Payment modifications include the reduction of interest payments to equal excess net operating income with the difference between the original rate and the interest collected due at maturity. In most cases, cash management accounts are set up for the loans and default interest is waived. There were 4 loans with an aggregate carrying value of $51.0 million, or 0.5% of loans, net that were modified by a term extension. The term extensions ranged between 10 and 24 months with a weighted average of 18 months added to the original loan term.

Of the loans that were modified during the three months ended June 30, 2024, substantially all were on accrual status. During the three months ended June 30, 2024, $7.2 million of total capital was invested by the borrowers, substantially all in the form of payment towards past due interest or contribution to various reserve accounts.

Six months ended June 30, 2024. During the six months ended June 30, 2024, the Company entered into 24 loan modifications with an aggregate carrying value of $555.6 million, or 5.9% of total loans, net. These modified loans include a combination of changes to the contractual terms which were in the form of term extensions, other-than-insignificant payment delays, and interest reductions.

There were 13 loans with an aggregate carrying value of $360.0 million, or 3.8% of loans, net, that were modified to include both term extensions and interest payment deferrals. The term extensions ranged between 3 and 27 months with a weighted average of 12 months added to the original loan term. Payment modifications include the reduction of interest payments to equal excess net operating income with the difference between the original rate and the interest collected due at maturity. In most cases, cash management accounts are set up for the loans and default interest is waived. There was 1 loan with a carrying value of $75.0 million, or 0.8% of loans, net that was modified to include both a term extension and interest rate reduction. The term extension was for 18 months added to the original loan term and the interest rate decreased from SOFR + 3.25% to a fixed rate of 6.0% from June 2024 to December 2024 and 6.5% from January 2025 to July 2025. There were 7 loans with an aggregate carrying value of $62.3 million, or 0.7% of loans, net that were modified to include term extensions. The term extensions ranged between 6 and 24 months with a weighted average of 17 months added to the original loan term. There were 3 loans with an aggregate carrying value of $58.3 million, or 0.6% of loans, net that were modified by interest payment deferrals. The number of interest payments deferred ranged between 10 and 28 months with a weighted average of 17 months and include payments for periods before the modification date. Payment modifications include the reduction of interest payments to equal excess net operating income with the difference between the original rate and the interest collected due at maturity. In most cases, cash management accounts are set up for the loans and default interest is waived.

Of the loans that were modified during the six months ended June 30, 2024, substantially all were on accrual status. During the six months ended June 30, 2024, $7.2 million of total capital was invested by the borrowers, substantially all in the form of payment towards past due interest or contribution to various reserve accounts.

Three months ended June 30, 2023. During the three months ended June 30, 2023, the Company entered into 5 loan modifications with an aggregate carrying value of $382.0 million, or 3.7% of total loans, net. These modified loans include a combination of changes to the contractual terms which were in the form of term extensions and other-than-insignificant payment delays.

There were 4 loans with an aggregate carrying value of $381.9 million, or 3.7% of loans, net that were modified by a term extension. The term extensions ranged between 12 and 36 months with a weighted average of 18 months added to the original loan term. The largest loan with a carrying value of $357.4 million was modified in May 2023 to extend the maturity date of the loan from June 2023 to December 2024, or 18 months. The borrower was required to contribute $17.0 million, or 3.9% of the total carrying value of the loan, towards various reserve accounts. There was 1 loan with a carrying value of $0.1 million, or less than 0.1% of loans, net that was modified by interest payment deferrals of 9 months.

Of the loans that were modified during the three months ended June 30, 2023, substantially all were on accrual status as of June 30, 2024.

Six months ended June 30, 2023. During the six months ended June 30, 2023, the Company entered into 12 loan modifications with an aggregate carrying value of $434.4 million, or 4.2% of total loans, net. These modified loans include a combination of changes to the contractual terms which were in the form of term extensions and other-than-insignificant payment delays.

There were 9 loans with an aggregate carrying value of $405.2 million, or 3.9% of loans, net that were modified by term extensions. The term extensions ranged between 12 and 120 months with a weighted average of 18 months added to the original loan term. The largest loan with a carrying value of $357.4 million was modified in May 2023 to extend the maturity date of the loan from June 2023 to December 2024, or 18 months. The borrower was required to contribute $17.0 million, or 3.9% of the total carrying value of the loan, towards various reserve accounts. There was 1 SBA loan with a carrying value of less than $0.1 million with a 10 year term extension, which is included in the range. There was 1 loan with a carrying value of $28.4 million, or 0.3% of loans, net, that was modified to include both a term extension and an interest payment deferral. The loan was modified by a term extension for 18 months added to the original loan term and an interest payment deferral of 12 months. There were 2 loans with an aggregate carrying value of $0.8 million, or less than 0.1% of loans, net that were modified by interest payment deferrals. The payment deferrals ranged between 6 and 9 months with a weighted average of 6 months.

Of the loans that were modified during the six months ended June 30, 2023, substantially all were on accrual status as of June 30, 2024.

The remaining elements of the Company’s modification programs are generally considered insignificant and do not have a material impact on financial results.

Allowance for loan losses. The Company’s allowance for loan losses reflects estimates of expected life-time loan losses, which considers historical loan losses including losses from modified loans to borrowers experiencing financial difficulty. The Company continues to estimate the allowance for loan losses after modification using loan-specific inputs. As of June 30, 2024 and June 30, 2023, substantially all of the modified loans were performing in accordance with the modified contractual terms.

All loans with modifications disclosed in the previous twelve months are performing in accordance with their modified terms as of June 30, 2024.

On loans for which the Company determines foreclosure of the collateral is probable, expected losses are measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. As of June 30, 2024 and December 31, 2023, the Company’s total carrying amount of loans in the foreclosure process was $65.8 million and $95.0 million, respectively.

Lending commitments. For the three and six months ended June 30, 2024, lending commitments to borrowers experiencing financial difficulty for which the Company has modified the loan terms were $22.8 million and $23.3 million, respectively. For the three and six months ended June 30, 2023, lending commitments to borrowers experiencing financial difficulty for which the Company has modified the loan terms were not material.

PCD loans

During the three months ended June 30, 2023, the Company acquired PCD loans in connection with the Broadmark merger. Subsequent to the determination of the preliminary purchase price allocation, based on updated valuations obtained, the Company recorded a measurement period adjustment of $5.2 million to increase the PCD allowance. Refer to Note 5 for further details on assets acquired and liabilities assumed in connection with the Broadmark Merger.

The table below presents a reconciliation of the Company’s purchase price with the par value of the purchased loans.

(in thousands)	Preliminary Purchase Price Allocation		Measurement Period Adjustments		Updated Purchase Price Allocation
UPB	$	244,932	$	38,750	$	283,682
Allowance for credit losses		(27,617)		(5,245)		(32,862)
Non-credit discount		(6,035)		(3,342)		(9,377)
Purchase price of loans classified as PCD	$	211,280	$	30,163	$	241,443

The Company did not acquire any PCD loans during the three months ended June 30, 2024.