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LOANS (Tables)
 6 Months Ended
Jun. 30, 2020
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]  
Loan Investment Activity
The following table presents the activity of the Company’s loan investments, including loans held for sale and excluding loans transferred or pledged to securitization vehicles, for the six months ended June 30, 2020:
 
Residential
 
Commercial
 
Corporate Debt
 
Total
 
(dollars in thousands)
Beginning balance January 1, 2020
$
1,647,787

 
$
669,713

 
$
2,144,850

 
$
4,462,350

Impact of adopting CECL

—

 
(3,600
)
 
(29,653
)
 
(33,253
)
Purchases / originations
841,507

 
187,195

 
663,396

 
1,692,098

Sales and transfers (1)
(1,184,947
)
 
(97,623
)
 
(299,628
)
 
(1,582,198
)
Principal payments
(98,636
)
 
(59,675
)
 
(273,556
)
 
(431,867
)
Gains / (losses) (2)
(33,035
)
 
(78,648
)
 
(26,917
)
 
(138,600
)
(Amortization) / accretion
(4,155
)
 
1,524

 
6,772

 
4,141

Ending balance June 30, 2020
$
1,168,521

 
$
618,886

 
$
2,185,264

 
$
3,972,671

 
 
 
 
 
 
 
 
(1)     Includes securitizations, syndications and transfers to securitization vehicles.
(2)     Includes loan loss allowances.
Fair Value and Unpaid Principal of Residential Mortgage Loan Portfolio
The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles, at June 30, 2020 and December 31, 2019:
 
June 30, 2020
December 31, 2019
 
(dollars in thousands)
Fair value
$
4,001,023

$
4,246,161

Unpaid principal balance
$
3,989,923

$
4,133,149
Summary of Comprehensive Income (Loss)
The following table provides information regarding the line items and amounts recognized in the Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2020 and 2019 for these investments:
 
For the Three Months Ended
 
For the Six Months Ended
 
June 30, 2020
 
June 30, 2019
 
June 30, 2020
 
June 30, 2019
 
(dollars in thousands)
Interest income
$
42,872

 
$
35,025

 
$
90,429

 
$
65,016

Net gains (losses) on disposal of investments and other
(5,376
)
 
(4,605
)
 
(17,376
)
 
(9,828
)
Net unrealized gains (losses) on instruments measured at fair value through earnings
110,545

 
25,891

 
(82,218
)
 
43,712

Total included in net income (loss)
$
148,041

 
$
56,311

 
$
(9,165
)
 
$
98,900

 
Geographic Concentrations Based on Unpaid Principal Balances
The following table provides the geographic concentrations based on the unpaid principal balances at June 30, 2020 and December 31, 2019 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:
 
Geographic Concentrations of Residential Mortgage Loans
June 30, 2020
 
December 31, 2019
Property location
% of Balance
 
Property location
% of Balance
California
51.1%
 
California
52.1%
New York
11.4%
 
New York
10.5%
Florida
5.7%
 
Florida
5.3%
All other (none individually greater than 5%)
31.8%
 
All other (none individually greater than 5%)
32.1%
Total
100.0%
 
 
100.0%
 
The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the Company’s VIEs, excluding the CLO, OBX Trusts and credit facility VIEs, at June 30, 2020 are as follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk
Commercial Trusts
 
Residential Trusts
Property Location
 
Principal Balance
 
% of Balance
 
Property Location
 
Principal Balance
 
% of Balance
(dollars in thousands)
California
 
$
1,270,544

 
38.7
%
 
California
 
$
27,442

 
45.0
%
Texas
 
478,457

 
14.6
%
 
Texas
 
8,309

 
13.6
%
New York
 
370,697

 
11.3
%
 
Illinois
 
6,534

 
10.7
%
Florida
 
196,495

 
6.0
%
 
Other (1)
 
18,695

 
30.7
%
Other (1)
 
968,561

 
29.4
%
 
 
 


 


Total
 
$
3,284,754

 
100.0
%
 
Total
 
$
60,980

 
100.0
%
 
(1) 
No individual state greater than 5%.
Residential Mortgage Loans
The following table provides additional data on the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, at June 30, 2020 and December 31, 2019:
 
June 30, 2020
 
December 31, 2019
 
Portfolio
Range
Portfolio Weighted
Average
 
Portfolio
Range
Portfolio Weighted Average
 
(dollars in thousands)
Unpaid principal balance
$1 - $3,448
 
$433
 
$1 - $3,448
 
$459
Interest rate
0.88% - 9.24%
 
4.90%
 
2.00% - 8.38%
 
4.94%
Maturity
7/1/2029 - 4/1/2060
 
4/15/2048
 
1/1/2028 - 12/1/2059
 
12/29/2047
FICO score at loan origination
505 - 829
 
757
 
505 - 829
 
758
Loan-to-value ratio at loan origination
8% - 105%
 
67%
 
8% - 105%
 
67%
Schedule of Commercial Mortgage Loans Held for Investment
The sector attributes of the Company’s commercial real estate investments held for investment at June 30, 2020 and December 31, 2019 were as follows:
 
Sector Dispersion
 
June 30, 2020
 
December 31, 2019
 
Carrying Value
 
% of Loan Portfolio
 
Carrying Value
 
% of Loan Portfolio
 
(dollars in thousands)
Office
$
660,994

 
44.2
%
 
$
681,129

 
42.4
%
Retail
326,695

 
21.9
%
 
389,076

 
24.2
%
Multifamily
279,943

 
18.7
%
 
262,302

 
16.3
%
Hotel
116,053

 
7.8
%
 
135,681

 
8.4
%
Industrial
59,137

 
4.0
%
 
82,441

 
5.1
%
Other
31,637

 
2.1
%
 
36,589

 
2.3
%
Healthcare
19,045

 
1.3
%
 
18,873

 
1.3
%
Total
$
1,493,504

 
100.0
%
 
$
1,606,091

 
100.0
%
 





At June 30, 2020 and December 31, 2019, commercial real estate investments held for investment were comprised of the following:
 
June 30, 2020
 
December 31, 2019
 
Outstanding Principal
 
Carrying
Value (1)
 
Percentage
of Loan
Portfolio (2)
 
Outstanding Principal
 
Carrying
Value (1)
 
Percentage
of Loan
Portfolio (2)
 
(dollars in thousands)
Senior mortgages
$
512,278

 
$
496,765

 
31.0
%
 
$
503,499

 
$
499,690

 
30.9
%
Senior securitized mortgages (3)
939,951

 
874,618

 
57.0
%
 
940,546

 
936,378

 
57.8
%
Mezzanine loans
198,075

 
122,121

 
12.0
%
 
183,064

 
170,023

 
11.3
%
Total
$
1,650,304

 
$
1,493,504

 
100.0
%
 
$
1,627,109

 
$
1,606,091

 
100.0
%
 
(1) 
Carrying value includes unamortized origination fees of $6.9 million and $8.3 million at June 30, 2020 and December 31, 2019, respectively.
(2) 
Based on outstanding principal.
(3) 
Represents assets of consolidated VIEs.

The following tables represent a rollforward of the activity for the Company’s commercial real estate investments held for investment at June 30, 2020 and December 31, 2019:
June 30, 2020
 
Senior
Mortgages
 
Senior
Securitized Mortgages (1)
 
Mezzanine
Loans
 
Total
 
(dollars in thousands)
Beginning balance (January 1, 2020) (2)
$
499,690

 
$
936,378

 
$
182,726

 
$
1,618,794

Originations & advances (principal)
176,077

 
—

 
12,010

 
188,087

Principal payments
(59,675
)
 
(55,719
)
 
—

 
(115,394
)
Principal write off
—

 
—

 
(7,000
)
 
(7,000
)
Transfers
(107,623
)
 
54,472

 
10,000

 
(43,151
)
Net (increase) decrease in origination fees
(812
)
 
—

 
(80
)
 
(892
)
Realized gain
204

 
—

 
—

 
204

Amortization of net origination fees
1,430

 
1,211

 
94

 
2,735

Allowance for loan losses
 
 
 
 
 
 
 
          Beginning allowance, prior to CECL adoption
—

 
—

 
(12,703
)
 
(12,703
)
          Impact of adopting CECL
(2,264
)
 
(4,166
)
 
(1,336
)
 
(7,766
)
          Current period allowance
(10,262
)
 
(57,558
)
 
(68,590
)
 
(136,410
)
          Write offs
—

 
—

 
7,000

 
7,000

          Ending allowance
(12,526
)
 
(61,724
)
 
(75,629
)
 
(149,879
)
Net carrying value (June 30, 2020)
$
496,765

 
$
874,618

 
$
122,121

 
$
1,493,504

 
December 31, 2019
 
Senior
Mortgages
 
Senior
Securitized Mortgages (1)
 
Mezzanine
Loans
 
Total
 
(dollars in thousands)
Net carrying value (January 1, 2019)
$
981,202

 
$
—

 
$
315,601

 
$
1,296,803

Originations & advances (principal)
572,204

 
—

 
21,709

 
593,913

Principal payments
(16,785
)
 
(150,245
)
 
(149,633
)
 
(316,663
)
Transfers
(1,034,754
)
 
1,083,487

 
(8,675
)
 
40,058

Net (increase) decrease in origination fees
(4,200
)
 
—

 
(184
)
 
(4,384
)
Amortization of net origination fees
2,023

 
3,136

 
412

 
5,571

Net (increase) decrease in allowance
—

 
—

 
(9,207
)
 
(9,207
)
Net carrying value (December 31, 2019)
$
499,690

 
$
936,378

 
$
170,023

 
$
1,606,091

 
(1)     Represents assets of consolidated VIEs.
(2)     Excludes loan loss allowances.
Commercial Real Estate, Held for Investments, Amortized Cost Basis by Risk Rating and Vintage
The Company’s internal risk rating rubric for corporate debt has nine categories as depicted below:
Risk Rating - Corporate Debt
Description
1-5 / Performing
Meets all present contractual obligations.
6 / Performing - Closely Monitored
Meets all present contractual obligations but exhibits a defined weakness in either leverage or liquidity, but not both. Loans at this rating will require closer monitoring, but where we expect no loss of interest or principal.

7 / Substandard
A loan that has a defined weakness in either leverage and/or liquidity, and which may require substantial changes to strengthen the asset. Loans at this rating level have a higher probability of loss, although no determination of the amount or timing of a loss is yet possible.

8 / Doubtful
A loan that has missed a scheduled principal or interest payment or is otherwise deemed a non-earning account. The probability of loss is increasingly certain due to significant performance issues.

9 / Loss
Considered uncollectible.


The Company’s internal loan risk ratings are based on the guidance provided by the Office of the Comptroller of the Currency for commercial real estate lending. The Company’s internal risk rating rubric for commercial loans has nine categories as depicted below:
Risk Rating - Commercial Loans
Description
1-4 / Performing
Meets all present contractual obligations.
5 / Performing - Closely Monitored
Meets all present contractual obligations, but are transitional or could be exhibiting some weaknesses in both leverage and liquidity.
6 / Performing - Special Mention
Meets all present contractual obligations, but exhibit potential weakness that deserves management’s close attention and, if uncorrected, may result in deterioration of repayment prospects.
7 / Substandard
Inadequately protected by sound worth and paying capacity of the obligor or of the collateral pledged with a distinct possibility that loss will be sustained if some of the deficiencies are not corrected.
8 / Doubtful
Substandard loans whereby collection of all contractual principal and interest is highly questionable or improbable.
9 / Loss
Considered uncollectible.

The following table provides the internal loan risk ratings of commercial real estate investments held for investment as of June 30, 2020.

Amortized Cost Basis by Risk Rating and Vintage (1)
Risk Rating
Vintage
Total
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
(dollars in thousands)
1-4 / Performing
$
350,361

 
$
91,417

 
$
166,518

 
$
—

 
$
12,675

 
$
—

 
$
79,751

5 / Performing - Closely Monitored
264,420

 
—

 
158,806

 
—

 
39,883

 
65,731

 
—

6 / Performing - Special Mention
666,561

 
67,312

 
218,925

 
268,236

 
60,565

 
—

 
51,523

7 / Substandard
67,003

 
—

 
—

 
67,003

 
—

 
—

 
—

8 / Doubtful
145,159

 
—

 
—

 
37,374

 
107,785

 
—

 
—

9 / Loss (2)
—

 
—

 
—

 
—

 
—

 
—

 
—

Total
$
1,493,504

 
$
158,729

 
$
544,249

 
$
372,613

 
$
220,908

 
$
65,731

 
$
131,274

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) The amortized cost basis excludes accrued interest. As of June 30, 2020, the Company had $4.3 million of accrued interest receivable on commercial loans which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition.
(2) Includes two commercial mezzanine loans for which the Company recorded a full loan loss allowance of $46.6 million.
Schedule of Industry and Rate Attributes of The Portfolio The industry and rate attributes of the portfolio at June 30, 2020 and December 31, 2019 are as follows:
 
Industry Dispersion
 
June 30, 2020
 
December 31, 2019
 
Total (1)
 
Total (1)
 
(dollars in thousands)
Computer Programming, Data Processing & Other Computer Related Services

$
406,827

 
$
394,193

Management & Public Relations Services

277,511

 
339,179

Industrial Inorganic Chemicals
147,622

 
—

Miscellaneous Business Services

122,279

 
164,033

Public Warehousing & Storage

116,967

 
107,029

Engineering, Architectural, and Surveying

110,926

 
124,201

Metal Cans & Shipping Containers

108,333

 
118,456

Offices & Clinics of Doctors of Medicine

104,000

 
106,993

Surgical, Medical & Dental Instruments & Supplies

99,657

 
102,182

Electronic Components & Accessories


77,788

 
24,000

Insurance Agents, Brokers and Service
70,978

 
75,410

Telephone Communications

57,482

 
61,210

Miscellaneous Health & Allied Services, not elsewhere classified
52,177

 
78,908

Miscellaneous Equipment Rental & Leasing

49,505

 
49,776

Electric Work
40,642

 
43,175

Medical & Dental Laboratories
35,231

 
41,344

Metal Forgings & Stampings
29,739

 
—

Research, Development & Testing Services

29,541

 
45,610

Home Health Care Services
28,896

 
29,361

Motor Vehicles and Motor Vehicle Parts & Supplies
28,415

 
28,815

Legal Services
27,923

 
—

Petroleum and Petroleum Products

24,745

 
24,923

Grocery Stores
22,948

 
23,248

Coating, Engraving and Allied Services
20,298

 
47,249

Schools & Educational Services, not elsewhere classified

19,331

 
19,586

Drugs
15,856

 
15,923

Chemicals & Allied Products
14,844

 
15,002

Machinery, Equipment & Supplies
12,419

 
—

Mailing, Reproduction, Commercial Art and Photography and Stenographic
12,356

 
14,755

Offices and Clinics of Other Health Practitioners
10,091

 
10,098

Miscellaneous Plastic Products
9,937

 
10,000

Nonferrous Foundries (Castings)
—

 
30,191

Total
$
2,185,264

 
$
2,144,850

 
(1)     All middle market lending positions are floating rate.
 
Aggregate Positions by Respective Place in the Capital Structure of the Borrowers
The table below reflects the Company’s aggregate positions by their respective place in the capital structure of the borrowers at June 30, 2020 and December 31, 2019.
 
 
June 30, 2020
 
December 31, 2019
 
(dollars in thousands)
First lien loans
$
1,357,123

 
$
1,396,140

Second lien loans
828,141

 
748,710

Total
$
2,185,264

 
$
2,144,850

 
Schedule of Corporate Loans Held for Investment
The following tables represent a rollforward of the activity for the Company’s corporate debt investments held for investment at June 30, 2020 and December 31, 2019:
June 30, 2020
 
First Lien
 
Second Lien
 
Total
 
(dollars in thousands)
Beginning balance (January 1, 2020) (1)
$
1,403,503

 
$
748,710

 
$
2,152,213

Originations & advances
484,393

 
179,003

 
663,396

Principal payments
(247,658
)
 
(25,898
)
 
(273,556
)
Amortization & accretion of (premium) discounts
4,898

 
1,874

 
6,772

Loan restructuring
(19,550
)
 
2,818

 
(16,732
)
Sales
(248,258
)
 
(47,382
)
 
(295,640
)
Syndications
5,600

 
—

 
5,600

Allowance for loan losses
 
 
 
 
—

         Beginning allowance, prior to CECL adoption
(7,363
)
 
—

 
(7,363
)
         Impact of adopting CECL
(10,787
)
 
(18,866
)
 
(29,653
)
         Current period allowance
(19,549
)
 
(12,118
)
 
(31,667
)
         Write offs
11,894

 
—

 
11,894

         Ending allowance
(25,805
)
 
(30,984
)
 
(56,789
)
Net carrying value (June 30, 2020)
$
1,357,123

 
$
828,141

 
$
2,185,264

 
(1) Excludes loan loss allowances.
December 31, 2019
 
First Lien
 
Second Lien
 
Total
 
(dollars in thousands)
Net carrying value (January 1, 2019)
$
1,346,356

 
$
540,826

 
$
1,887,182

Originations & advances
542,463

 
345,573

 
888,036

Principal payments
(228,302
)
 
(140,625
)
 
(368,927
)
Amortization & accretion of (premium) discounts
5,960

 
2,936

 
8,896

Sales
(262,974
)
 
—

 
(262,974
)
Net (increase) decrease in allowance
(7,363
)
 
—

 
(7,363
)
Net carrying value (December 31, 2019)
$
1,396,140

 
$
748,710

 
$
2,144,850

 
Debt Securities, Held-to-maturity, Amortized Costs Basis by Risk Rating and Vintage
The following table provides the amortized cost basis of corporate debt held for investment as of June 30, 2020 by vintage year and internal risk rating.
Amortized Cost Basis by Risk Rating and Vintage (1)
Risk Rating
Vintage
Total
 
2020
 
2019
 
2018
 
2017
 
2016
 
2015
 
Revolvers
(dollars in thousands)
1-5 / Performing
$
1,613,987

 
$
275,139

 
$
413,306

 
$
503,077

 
$
301,941

 
$
72,187

 
$
34,048

 
$
14,289

6 / Performing - Closely Monitored
382,619

 
—

 
77,211

 
221,072

 
38,366

 
44,728

 
—

 
1,242

7 / Substandard
172,548

 
—

 
23,911

 
108,333

 
40,304

 
—

 
—

 
—

8 / Doubtful
16,623

 
—

 
—

 
12,356

 
4,267

 
—

 
—

 
—

9 / Loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total
$
2,185,777

 
$
275,139

 
$
514,428

 
$
844,838

 
$
384,878

 
$
116,915

 
$
34,048

 
$
15,531

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) The amortized cost basis excludes accrued interest and costs related to unfunded loans. As of June 30, 2020, the Company had $11.4 million of accrued interest receivable on corporate loans which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition.