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Investment Portfolio Financing
 6 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
Investment Portfolio Financing Investment Portfolio Financing
The Company finances its portfolio of loans, or participation interests therein, and REO using secured financing agreements, including secured credit agreements, secured revolving credit facilities, asset-specific financing arrangements, mortgage loans payable, and collateralized loan obligations.
The following table summarizes the Company's investment portfolio financing (dollars in thousands):
Outstanding principal balance
June 30, 2022December 31, 2021
Collateralized loan obligations(1)
$2,651,920 $2,555,988 
Secured credit agreements1,089,655 1,166,211 
Secured revolving credit facility52,065 — 
Asset-specific financing arrangements124,202 — 
Total$3,917,842 $3,722,199 
________________________________
(1)See Note 5 for additional information regarding the Company's collateralized loan obligations.
Secured Credit Agreements
As of June 30, 2022 and December 31, 2021, the Company had secured credit agreements used to finance certain of the Company’s loan investments. These financing arrangements bear interest at rates equal to LIBOR or Term SOFR plus a credit spread negotiated between the Company and each lender, often a separate credit spread for each pledge of collateral, which is primarily based on property type and advance rate against the unpaid principal balance of the pledged loan. These borrowing arrangements contain defined mark-to-market provisions that permit our lenders to issue margin calls to the Company only in the event that the collateral properties underlying the Company’s loans pledged to the Company’s lenders experience a non-temporary decline in value (“credit marks”) due to reasons other than capital markets events that result in changing credit spreads for similar borrowing obligations. In connection with one of these borrowing arrangements, the lender is also permitted to issue margin calls to the Company in the event the lender determines capital markets events have caused credit spreads to change for similar borrowing obligations (“spread marks”). Furthermore, in connection with one of these borrowing arrangements, the lender has the right to re-margin the secured credit agreement based solely on appraised loan-to-values after the second anniversary date of the facility on October 30, 2022.
The following table presents certain information regarding the Company’s secured credit agreements. Except as otherwise noted, all agreements are on a partial (25%) recourse basis (dollars in thousands):
June 30, 2022
Secured credit agreements(1)
Initial
maturity date		Extended
maturity date		Index
rate		Weighted average
credit spread 		Interest
rate 		Commitment
amount		Maximum
current availability		Balance
outstanding		Principal balance
of collateral		Amortized cost
of collateral
Goldman Sachs08/19/2208/19/241 Month BR1.8 %3.5 %$500,000 $94,044 $405,956 $540,261 $539,727 
Wells Fargo(2)
04/18/2504/18/251 Month BR1.6 %3.3 %500,000 118,001 381,999 515,891 511,618 
Barclays(3)
08/13/2508/13/261 Month BR1.6 %3.3 %500,000 399,499 100,501 134,408 133,661 
Morgan Stanley(4)
05/04/2305/04/231 Month BR2.3 %4.0 %500,000 446,975 53,025 75,661 75,599 
JP Morgan10/30/2310/30/251 Month BR1.7 %3.4 %400,000 275,372 124,628 178,701 178,326 
Bank of America09/29/2209/29/221 Month BR— %— %200,000 200,000 — — — 
Institutional financing10/30/2310/30/251 Month BR4.5 %6.3 %249,546 226,000 23,546 43,092 43,092 
Totals$2,849,546 $1,759,891 $1,089,655 $1,488,014 $1,482,023 
________________________________
(1)Borrowings under secured credit agreements with a guarantee for 25% recourse from Holdco. Each secured credit agreement contains defined mark-to-market provisions that permit the lenders to issue margin calls based on credit marks. Under the JP Morgan secured credit agreement, the Company is also subject to spread marks. Index rate is the underlying benchmark interest rate ("BR"), currently LIBOR or Term SOFR, for the Company's borrowings on each secured credit agreement.
(2)On February 9, 2022 the secured credit agreement’s initial maturity was extended to April 18, 2025.
(3)On April 11, 2022 the secured credit agreement's initial maturity was extended to August 13, 2025 and the Company reduced the total commitment to $500.0 million from $750.0 million. The secured credit agreement includes a $250.0 million accordion feature subject to the lender's approval.
(4)On April 29, 2022 the secured credit agreement's initial maturity was extended to May 4, 2023.
December 31, 2021
Secured credit agreements(1)
Initial
maturity date		Extended
maturity date		Index
rate		Weighted average
credit spread 		Interest
rate 		Commitment
amount		Maximum
current availability		Balance
outstanding		Principal balance
of collateral		Amortized cost
of collateral
Goldman Sachs08/19/2208/19/241 Month
LIBOR		2.0 %2.1 %$250,000 $153,680 $96,320 $158,177 $157,550 
Wells Fargo(2)
04/18/2204/18/241 Month
LIBOR		1.6 %1.7 %750,000 179,784 570,216 779,791 773,868 
Barclays08/13/2208/13/231 Month
LIBOR		1.5 %1.7 %750,000 726,686 23,314 41,294 41,058 
Morgan Stanley05/04/2205/04/231 Month
LIBOR		2.0 %2.1 %500,000 319,269 180,731 255,125 254,559 
JP Morgan10/30/2310/30/251 Month
LIBOR		1.7 %1.8 %400,000 290,523 109,477 200,148 199,246 
US Bank07/09/2207/09/241 Month
LIBOR		1.4 %1.7 %44,730 10,748 33,982 59,060 59,060 
Bank of America(3)
09/29/2209/29/221 Month
LIBOR		1.8 %1.9 %128,625 — 128,625 183,750 183,750 
Institutional financing10/30/2310/30/251 Month
LIBOR		4.5 %4.8 %249,546 226,000 23,546 42,390 42,366 
Totals$3,072,901 $1,906,690 $1,166,211 $1,719,735 $1,711,457 
________________________________
(1)Borrowings under secured credit agreements with a guarantee for 25% recourse from Holdco. Each secured credit agreement contains defined mark-to-market provisions that permit the lenders to issue margin calls based on credit marks. Under the JP Morgan secured credit agreement, the Company is also subject to spread marks.
(2)On February 9, 2022 the secured credit agreement’s initial maturity was extended to April 18, 2025.
(3)Effective February 1, 2022 for the sole loan pledged to the secured credit agreement, the Company amended its financing arrangement to reduce its borrowing by $9.4 million and extend its term on a non-mark-to-market basis through March 31, 2022, with an option to further extend its maturity through April 15, 2022 in exchange for a further reduction in borrowings of $9.4 million.
Secured Credit Agreement Terms
As of June 30, 2022 and December 31, 2021, the Company had six and seven secured credit agreements, respectively, to finance its loan investing activities. Credit spreads vary depending upon the collateral type, advance rate and other factors. Assets pledged as of June 30, 2022 and December 31, 2021 consisted of 54 and 53 mortgage loans, or participation interests therein, respectively. Under five of the six secured credit agreements, the Company transfers all of its rights, title and interest in the loans to the secured credit agreement counterparty in exchange for cash, and simultaneously agrees to reacquire the asset at a future date for an amount equal to the cash exchanged plus an interest factor. The secured credit agreement lender collects all principal and interest on related loans and remits to the Company the net amount after the lender collects its interest and other fees. For the sixth secured credit agreement, which is a mortgage warehouse facility, the lender receives a security interest (pledge) in the loans financed under the arrangement. The secured credit agreements used to finance loan investments are 25% recourse to Holdco.
Under each of the Company’s secured credit agreements, including the mortgage warehouse facility, the Company is required to post margin for changes in conditions to specific loans that serve as collateral for those secured credit agreements. The lender’s margin amount is in all but one instance limited to collateral-specific credit marks based on non-temporary declines in the value of the properties securing the underlying loan collateral. Market value determinations and redeterminations may be made by the repurchase lender in its sole discretion subject to certain specified parameters. These considerations include credit-based factors (which are generally based on factors other than those related to the capital markets). In only one instance do the considerations include changes in observable credit spreads in the market for these assets.
The following table summarizes certain characteristics of the Company’s secured credit agreements secured by mortgage loan investments, including counterparty concentration risks (dollars in thousands):
June 30, 2022
Secured credit agreementsCommitment
amount		UPB of
collateral
Amortized cost
of collateral(1)
Amount
payable(2)
Net counterparty exposure(3)
Percent of
stockholders' equity 		Days to
extended maturity
Goldman Sachs Bank$500,000 $540,261 $542,450 $406,732 $135,718 9.4 %781
Wells Fargo500,000 515,891 514,144 382,320 131,824 9.1 %1023
Barclays500,000 134,408 133,922 100,648 33,274 2.3 %1505
Morgan Stanley Bank500,000 75,661 75,736 53,404 22,332 1.5 %308
JP Morgan Chase Bank649,546 221,793 222,590 149,001 73,589 5.1 %1218
Bank of America200,000 — — — — — %91
Total / weighted average$2,849,546 $1,488,014 $1,488,842 $1,092,105 $396,737 969
_______________________
(1)Loan amounts include interest receivable of $6.8 million and are net of premium, discount and origination fees of $6.0 million.
(2)Loan amounts include interest payable of $2.5 million and do not reflect unamortized deferred financing fees of $2.2 million.
(3)Loan amounts represent the net carrying value of the commercial real estate assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.
The following table summarizes certain characteristics of the Company’s secured credit agreements secured by mortgage loan investments, including counterparty concentration risks (dollars in thousands):
 December 31, 2021
Secured credit agreementsCommitment
amount		UPB of
collateral
Amortized cost
of collateral(1)
Amount
payable(2)
Net counterparty exposure(3)
Percent of
stockholders' equity		Days to
extended maturity
Goldman Sachs Bank$250,000 $158,177 $159,269 $96,389 $62,880 4.3 %962
Wells Fargo750,000 779,791 776,196 570,839 205,357 14.0 %839
Barclays750,000 41,294 41,019 23,330 17,689 1.2 %590
Morgan Stanley Bank500,000 255,125 255,858 180,891 74,967 5.1 %489
JP Morgan Chase Bank649,546 242,538 243,181 133,191 109,990 7.5 %1399
US Bank44,730 59,060 59,435 34,035 25,400 1.7 %921
Bank of America128,625 183,750 184,531 128,648 55,883 3.8 %272
Total / weighted average$3,072,901 $1,719,735 $1,719,489 $1,167,323 $552,165  794
_______________________
(1)Loan amounts include interest receivable of $8.0 million and are net of premium, discount and origination fees of $8.8 million.
(2)Loan amounts include interest payable of $1.1 million and do not reflect unamortized deferred financing fees of $4.0 million.
(3)Loan amounts represent the net carrying value of the commercial real estate assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.
As a result of contributing collateral into TRTX 2022-FL5 upon its issuance during the six months ended June 30, 2022, the Company accelerated $1.1 million of unamortized deferred transaction costs related to its secured credit agreements to interest expense in its consolidated statements of income and comprehensive income. See Note 5 for details regarding the Company's issuance of TRTX 2022-FL5.
On April 11, 2022, the Company repaid the $34.0 million outstanding under the US Bank secured credit agreement and simultaneously terminated the financing arrangement prior to its July 9, 2022 maturity date.
Secured Revolving Credit Facility
On February 22, 2022, the Company closed a $250.0 million secured revolving credit facility with a syndicate of 5 lenders. This facility has an initial term of 3 years, an interest rate of Term SOFR plus 2.00% that is payable monthly in arrears, and an unused fee of 15 or 20 basis points, depending upon whether utilization exceeds 50.0%. During the three and six months ended June 30, 2022, the weighted average unused fee was 20 basis points and 20 basis points, respectively. The facility generally provides the Company with interim financing of eligible loans for up to 180 days at an initial advance rate of 75.0%, which declines to 65.0%, 45.0%, and 0.0% after 90, 135, and 180 days from initial borrowing, respectively, depending on the permanent financing asset classification. This facility is 100% recourse to Holdco. As of June 30, 2022, the Company pledged two loan investments with an aggregate collateral principal balance of $69.4 million and outstanding Term SOFR-based borrowings of $52.1 million.
Asset-Specific Financing Arrangements
On April 26, 2022, the Company closed an asset-specific financing arrangement with Axos Bank secured by one performing first mortgage loan secured by an office property. The arrangement provides non-mark-to-market financing, a term of up to 2 years, and is 15% recourse to Holdco.
On June 30, 2022, the Company closed a $200.0 million loan financing facility with BMO Harris Bank ("BMO Facility"). The facility provides asset-specific financing on a non-mark-to-market basis with matched term. This facility is 25% recourse to Holdco. The advance rate and borrowing rate are determined separately for each loan financed under the facility.
The following table details the Company's asset-specific financing arrangements (dollars in thousands):
June 30, 2022
FinancingCollateral
Asset-specific financingCommitment amountOutstanding principal balance
Carrying
value(1)
Wtd. avg.
spread(2)
Wtd. avg.
term(3)
Outstanding principal balanceAmortized CostWtd. avg.
term
Axos Bank$89,802 $89,802 $89,351 4.4 %1.8$208,603 $204,519 0.2
BMO Facility200,000 34,400 34,228 1.5 %4.743,000 42,588 4.7
Total / weighted average$289,802 $124,202 $123,579 3.6 %2.6 years$251,603 $247,107 1.4 years
_______________________
(1)Net of $0.6 million unamortized deferred financing costs.
(2)Collateral loan assets and the financing provided are indexed to Term SOFR.
(3)Term under Axos Bank is based on the extended maturity date for the specific arrangement. Borrowings under the BMO Facility are term-matched to the corresponding collateral loan asset. The weighted-average term assumes all extension options of the collateral loan asset are exercised by the borrower.
Mortgage Loan Payable
The Company through a special purpose entity subsidiary was a borrower under a $50.0 million mortgage loan secured by a first deed of trust against the REO Property. The loan had an interest rate of LIBOR plus 4.50% and was subject to a LIBOR interest rate floor of 0.50% and a rate cap of 0.50%. The Company posted cash of $2.4 million to pre-fund interest payments due under the note during its initial term through December 15, 2021.
On November 12, 2021, the Company repaid the mortgage loan. See Note 4 for additional information.
Financial Covenant Compliance
The financial covenants and guarantees for outstanding borrowings related to the Company’s secured credit agreements and secured revolving credit facility require Holdco to maintain compliance with certain financial covenants. The uncertain long-term impact of global macroeconomic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, increased interest rates, currency fluctuations, labor shortages and challenges in the supply chain, coupled with the war in Ukraine and the lingering aftereffects of COVID-19, on the commercial real estate markets and global capital markets may make it more difficult to meet or satisfy these covenants, and there can be no assurance that the Company will remain in compliance with these covenants in the future.
Financial Covenant relating to the Series B Preferred Stock
For as long as the Series B Preferred Stock was outstanding, the Company was required to maintain a debt-to-equity ratio not greater than 3.0 to 1.0. For the purpose of determining this ratio, the aggregate liquidation preference of the outstanding shares of Series B Preferred Stock was excluded from the calculation of total indebtedness of the Company and its subsidiaries, and was included in the calculation of total stockholders’ equity. On June 16, 2021, the Company redeemed all 9,000,000 outstanding shares of the Series B Preferred Stock and this covenant no longer applied.
Financial Covenant Compliance
The Company was in compliance with all financial covenants for its secured credit agreements and secured revolving credit facility to the extent of outstanding balances as of June 30, 2022 and December 31, 2021.