Commercial Mortgage Loans Held for Investment

9 Months Ended

Sep. 30, 2022

Mortgage Loans On Real Estate [Abstract]

Commercial Mortgage Loans Held for Investment

Note 3 – Commercial Mortgage Loans Held for Investment

The tables below show the Company’s commercial mortgage loans held for investment as of September 30, 2022 and December 31, 2021:

September 30, 2022

Loan Type (1)	Number of Loans		Principal Balance		Unamortized (fees)/costs, net		Carrying Value		Weighted Average Interest Rate (2)			Weighted Average Years to Maturity
First mortgage loans		40	$	802,202	$	1,392	$	803,594		6.2	%		1.6
Credit loans		2		13,500		—		13,500		9.6	%		3.7
Total and average		42	$	815,702	$	1,392	$	817,094		6.3	%		1.6

December 31, 2021

Loan Type (1)	Number of Loans		Principal Balance		Unamortized (fees)/costs, net		Carrying Value		Weighted Average Interest Rate (2)			Weighted Average Years to Maturity
First mortgage loans		36	$	650,670	$	1,328	$	651,998		4.5	%		1.6
Credit loans		2		13,500		—		13,500		9.6	%		4.4
Total and average		38	$	664,170	$	1,328	$	665,498		4.6	%		1.7

(1)First mortgage loans are first position mortgage loans and credit loans are mezzanine and subordinated loans.

(2)Weighted average interest rate is based on the loan spreads plus the applicable indices as of the last interest reset date, which is typically the 15th of each month. On September 15, 2022, the LIBOR and SOFR rates reset to 2.818% and 2.845%, respectively. On December 15, 2021, the LIBOR and SOFR rates reset to 0.110% and 0.050%, respectively.

For the nine months ended September 30, 2022 and the year ended December 31, 2021, the activity in the Company’s commercial mortgage loans, held-for-investment portfolio was as follows:

	Nine Months Ended September 30, 2022			Year Ended December 31, 2021
Balance at Beginning of Year	$	665,498		$	441,814
Loan originations		269,107			337,033
Principal repayments		(117,576	)		(114,558	)
Amortization of loan origination, loan extension and deferred exit fees		395			1,440
Extension fees received on commercial loans		(330	)		(231	)
Balance at End of Period	$	817,094		$	665,498

Allowance for Loan Losses

During the nine-month periods ended September 30, 2022 and 2021, the Company determined that no loan losses were probable and, therefore, did not record an allowance for loan losses. For further information on the Company’s allowance for loan losses policy, see “Note 2 – Summary of Significant Accounting Policies” in its Annual Report.

Credit Characteristics

As part of the Company’s process for monitoring the credit quality of its investments, it performs a quarterly asset review of the investment portfolio and assigns risk ratings to each of its loans and certain securities it may own, such as CMBS. Risk factors include payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographic location, as well as national and regional economic factors. To determine the likelihood of loss, the loans are rated on a 5-point scale as follows:

Investment Grade	Investment Grade Definition
1	Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2	Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3	Performing investment requiring closer monitoring. Trends and risk factors show some deterioration. Collection of principal and interest is still expected.
4	Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5	Underperforming investment with expected loss of interest and some principal.

All investments are assigned an initial risk rating of 2 at origination or acquisition.

As of September 30, 2022, 37 loans had a risk rating of 2 and five had a risk rating of 3. As of December 31, 2021, 33 loans had a risk rating of 2 and five had a risk rating of 3.