Segment reporting

6 Months Ended

Jun. 30, 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. 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 and government guaranteed loans focused on the USDA. This segment also reflects the impact of SBA securitization activities.

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 June 30, 2024
			Small
	LMM Commercial		Business		Corporate-
(in thousands)	Real Estate		Lending		Other		Consolidated
Interest income	$	202,047	$	32,072	$	—	$	234,119
Interest expense		(158,344)		(24,823)		—		(183,167)
Net interest income before recovery of loan losses	$	43,703	$	7,249	$	—	$	50,952
Recovery of loan losses		14,414		4,457		—		18,871
Net interest income after recovery of loan losses	$	58,117	$	11,706	$	—	$	69,823
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned		(10,089)		17,339		—		7,250
Net unrealized gain (loss) on financial instruments		(1,497)		140		—		(1,357)
Valuation allowance, loans held for sale		(80,987)		—		—		(80,987)
Servicing income, net		1,255		2,016		—		3,271
Loss on bargain purchase		—		—		(18,306)		(18,306)
Income on unconsolidated joint ventures		1,139		—		—		1,139
Other income		4,796		376		1,425		6,597
Total non-interest income (loss)	$	(85,383)	$	19,871	$	(16,881)	$	(82,393)
Non-interest expense
Employee compensation and benefits		(7,142)		(8,328)		(2,329)		(17,799)
Allocated employee compensation and benefits from related party		(300)		—		(2,700)		(3,000)
Professional fees		(874)		(2,930)		(2,229)		(6,033)
Management fees – related party		—		—		(6,198)		(6,198)
Loan servicing expense		(10,896)		(116)		—		(11,012)
Transaction related expenses		—		—		(1,592)		(1,592)
Other operating expenses		(12,054)		(5,918)		(3,830)		(21,802)
Total non-interest expense	$	(31,266)	$	(17,292)	$	(18,878)	$	(67,436)
Income (loss) before provision for income taxes	$	(58,532)	$	14,285	$	(35,759)	$	(80,006)
Total assets	$	9,527,088	$	1,367,463	$	455,888	$	11,350,439

	Six Months Ended June 30, 2024
			Small
	LMM Commercial		Business		Corporate-
(in thousands)	Real Estate		Lending		Other		Consolidated
Interest income	$	402,810	$	63,663	$	—	$	466,473
Interest expense		(317,229)		(49,743)		—		(366,972)
Net interest income before recovery of loan losses	$	85,581	$	13,920	$	—	$	99,501
Recovery of loan losses		45,169		246				45,415
Net interest income after recovery of loan losses	$	130,750	$	14,166	$	—	$	144,916
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned		(4,334)		30,452		—		26,118
Net unrealized gain (loss) on financial instruments		1,489		1,786		—		3,275
Valuation allowance, loans held for sale		(227,167)		—		—		(227,167)
Servicing income, net		2,553		4,476		—		7,029
Loss on bargain purchase		—		—		(18,306)		(18,306)
Income on unconsolidated joint ventures		1,607		—		—		1,607
Other income		17,523		3,475		1,425		22,423
Total non-interest income (loss)	$	(208,329)	$	40,189	$	(16,881)	$	(185,021)
Non-interest expense
Employee compensation and benefits		(14,618)		(17,620)		(3,975)		(36,213)
Allocated employee compensation and benefits from related party		(550)		—		(4,950)		(5,500)
Professional fees		(2,515)		(6,145)		(4,438)		(13,098)
Management fees – related party		—		—		(12,846)		(12,846)
Loan servicing expense		(23,443)		(363)		—		(23,806)
Transaction related expenses		—		—		(2,242)		(2,242)
Other operating expenses		(33,588)		(11,271)		(7,130)		(51,989)
Total non-interest expense	$	(74,714)	$	(35,399)	$	(35,581)	$	(145,694)
Income (loss) before provision for income taxes	$	(152,293)	$	18,956	$	(52,462)	$	(185,799)
Total assets	$	9,527,088	$	1,367,463	$	455,888	$	11,350,439

	Three Months Ended June 30, 2023
			Small
	LMM Commercial		Business		Corporate-
(in thousands)	Real Estate		Lending		Other		Consolidated
Interest income	$	212,233	$	18,771	$	—	$	231,004
Interest expense		(160,503)		(9,718)		—		(170,221)
Net interest income before provision for loan losses	$	51,730	$	9,053	$	—	$	60,783
Provision for loan losses		(17,415)		(2,012)		—		(19,427)
Net interest income after provision for loan losses	$	34,315	$	7,041	$	—	$	41,356
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned		15,356		8,522		—		23,878
Net unrealized gain (loss) on financial instruments		(677)		(734)		—		(1,411)
Servicing income, net		1,890		3,149		—		5,039
Gain on bargain purchase		—		—		229,894		229,894
Income on unconsolidated joint ventures		33		—		—		33
Other income		8,167		10,185		280		18,632
Total non-interest income	$	24,769	$	21,122	$	230,174	$	276,065
Non-interest expense
Employee compensation and benefits		(8,724)		(11,614)		(2,076)		(22,414)
Allocated employee compensation and benefits from related party		(250)		—		(2,250)		(2,500)
Professional fees		(1,135)		(2,782)		(1,616)		(5,533)
Management fees – related party		—		—		(5,760)		(5,760)
Incentive fees – related party		—		—		(71)		(71)
Loan servicing expense		(10,746)		(148)		—		(10,894)
Transaction related expenses		—		—		(13,966)		(13,966)
Other operating expenses		(3,598)		(4,687)		(1,272)		(9,557)
Total non-interest expense	$	(24,453)	$	(19,231)	$	(27,011)	$	(70,695)
Income before provision for income taxes	$	34,631	$	8,932	$	203,163	$	246,726
Total assets	$	10,969,193	$	739,391	$	220,484	$	11,929,068

	Six Months Ended June 30, 2023
			Small
	LMM Commercial		Business		Corporate-
(in thousands)	Real Estate		Lending		Other		Consolidated
Interest income	$	410,272	$	36,700	$	—	$	446,972
Interest expense		(309,997)		(19,092)		—		(329,089)
Net interest income before provision for loan losses	$	100,275	$	17,608	$	—	$	117,883
Provision for loan losses		(9,286)		(3,407)		—		(12,693)
Net interest income after provision for loan losses	$	90,989	$	14,201	$	—	$	105,190
Non-interest income
Net realized gain (loss) on financial instruments and real estate owned		20,181		15,272		—		35,453
Net unrealized gain (loss) on financial instruments		(6,788)		(258)		—		(7,046)
Servicing income, net		2,983		6,698		—		9,681
Gain on bargain purchase		—		—		229,894		229,894
Income on unconsolidated joint ventures		689		—		—		689
Other income		17,260		21,153		611		39,024
Total non-interest income	$	34,325	$	42,865	$	230,505	$	307,695
Non-interest expense
Employee compensation and benefits		(14,930)		(22,889)		(4,322)		(42,141)
Allocated employee compensation and benefits from related party		(482)		—		(4,344)		(4,826)
Professional fees		(2,116)		(4,407)		(4,553)		(11,076)
Management fees – related party		—		—		(10,841)		(10,841)
Incentive fees – related party		—		—		(1,791)		(1,791)
Loan servicing expense		(18,804)		(245)		—		(19,049)
Transaction related expenses		—		—		(14,859)		(14,859)
Other operating expenses		(10,331)		(8,781)		(3,054)		(22,166)
Total non-interest expense	$	(46,663)	$	(36,322)	$	(43,764)	$	(126,749)
Income before provision for income taxes	$	78,651	$	20,744	$	186,741	$	286,136
Total assets	$	10,969,193	$	739,391	$	220,484	$	11,929,068