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LOANS (Tables)

6 Months Ended

Jun. 30, 2021

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

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, 2021:


	Residential		Commercial		Corporate Debt		Corporate Debt Held for Sale (1)		Total
	(dollars in thousands)
Beginning balance January 1, 2021	$	345,810	$	498,081	$	2,239,930	$	—	$	3,083,821

Purchases / originations	1,466,056		123,939		859,759		466,370		2,916,124
Sales and transfers (2)	(745,442)		(525,436)		(581,428)		—		(1,852,306)



Principal payments	(20,340)		(84,929)		(464,933)		—		(570,202)
Gains / (losses) (3)	(12,733)		(12,199)		5,693		—		(19,239)
(Amortization) / accretion	(3,422)		544		7,688		—		4,810

Ending balance June 30, 2021	$	1,029,929	$	—	$	2,066,709	$	466,370	$	3,563,008


(1) Represents loans the Company originated during the three months ended June 30, 2021 and subsequently syndicated and closed. At June 30, 2021, these loans were held at the lower of cost or fair value.
(2) Includes securitizations, syndications, transfers to securitization vehicles and commercial loan transfers to assets of disposal group held for sale. Includes transfer of residential loans to securitization vehicles with a carrying value of $987.0 million during the six months ended June 30, 2021.
(3) 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, 2021 and December 31, 2020:


	June 30, 2021		December 31, 2020
	(dollars in thousands)
Fair value	$	4,497,922	$	3,595,061
Unpaid principal balance	$	4,317,278	$	3,482,865

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, 2021 and 2020 for these investments:


	For the Three Months Ended				For the Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(dollars in thousands)
Interest income	$	38,963	$	42,872	$	76,072	$	90,429
Net gains (losses) on disposal of investments and other	(21,721)		(5,376)		(26,941)		(17,376)
Net unrealized gains (losses) on instruments measured at fair value through earnings	14,456		110,545		36,911		(82,218)
Total included in net income (loss)	$	31,698	$	148,041	$	86,042	$	(9,165)

Geographic Concentrations Based on Unpaid Principal Balances

The following table provides the geographic concentrations based on the unpaid principal balances at June 30, 2021 and December 31, 2020 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:

Geographic Concentrations of Residential Mortgage Loans

June 30, 2021

December 31, 2020

Property location

% of Balance

Property location

% of Balance

California

52.6%

California

48.9%

New York

11.7%

New York

14.0%

Florida

5.9%

Florida

6.0%

All other (none individually greater than 5%)

29.8%

All other (none individually greater than 5%)

31.1%

Total

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 multifamily securitization, OBX Trusts and credit facility VIEs, at June 30, 2021 are as follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk


Residential Trusts
	Property Location	Principal Balance		% of Balance

	California	$	14,222	51.4	%
	Illinois	3,542		12.8	%
	Texas	2,938		10.6	%

	Other (1)	6,983		25.2	%



	Total	$	27,685	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, 2021 and December 31, 2020:


	June 30, 2021		December 31, 2020
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$0 - $3,500	$525	$1 - $3,448	$473
Interest rate	0.50% - 9.24%	4.55%	0.50% - 9.24%	4.89%
Maturity	7/1/2029 - 7/1/2061	10/21/2049	7/1/2029 - 1/1/2061	4/17/2046
FICO score at loan origination	604 - 829	758	505 - 829	755
Loan-to-value ratio at loan origination	8% - 103%	66%	8% - 104%	67%

Schedule of Commercial Mortgage Loans Held for Sale and Investment

The sector attributes of the Company’s commercial real estate investments held for sale at June 30, 2021 and held for investment at December 31, 2020 were as follows:


	Sector Dispersion
	June 30, 2021				December 31, 2020
	Carrying Value		% of Loan Portfolio		Carrying Value		% of Loan Portfolio
	(dollars in thousands)
Office	$	581,039	43.3	%	$	650,034	47.4	%
Retail	249,676		18.6	%	256,493		18.7	%
Multifamily	220,331		16.4	%	250,095		18.2	%
Industrial	116,125		8.7	%	60,097		4.4	%
Hotel	100,942		7.5	%	115,536		8.4	%
Other	54,441		4.1	%	20,302		1.5	%
Healthcare	19,145		1.4	%	19,873		1.4	%
Total	$	1,341,699	100.0	%	$	1,372,430	100.0	%

Commercial real estate investments held for sale at June 30, 2021 and held for investment at December 31, 2020 were comprised of the following:


	June 30, 2021						December 31, 2020
	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	$	388,293	$	364,974	26.4	%	$	387,124	$	373,925	25.7	%
Senior securitized mortgages (3)	908,006		863,425		61.9	%	938,859		874,349		62.3	%
Mezzanine loans	171,979		113,300		11.7	%	181,261		124,156		12.0	%

Total	$	1,468,278	$	1,341,699	100.0	%	$	1,507,244	$	1,372,430	100.0	%

(1) Carrying value includes unamortized origination fees of $5.3 million and $4.9 million at June 30, 2021 and December 31, 2020, 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 sale at June 30, 2021 and held for investment at December 31, 2020:


June 30, 2021
	Senior Mortgages		Senior Securitized Mortgages (1)		Mezzanine Loans		Total
	(dollars in thousands)
Beginning balance (January 1, 2021) (2)	$	373,925	$	874,349	$	124,156	$	1,372,430

Originations & advances (principal)	124,701		69		641		125,411
Principal payments	(75,007)		(79,447)		(9,922)		(164,376)


Transfers (3)	(68,654)		5,819		(58,491)		(121,326)
Net (increase) decrease in origination fees	(1,403)		—		—		(1,403)

Amortization of net origination fees	501		486		43		1,030
Allowance for loan losses
Beginning allowance	(10,911)		(62,149)		(56,873)		(129,933)


Current period (allowance) reversal	10,911		62,149		56,873		129,933

Ending allowance	—		—		—		—
Net carrying value (June 30, 2021)	$	364,974	$	863,425	$	113,300	$	1,341,699


December 31, 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)	206,090		—		12,374		218,464
Principal payments	(77,344)		(144,308)		(78)		(221,730)
Principal write off	—		—		(7,000)		(7,000)


Transfers (3)	(245,120)		142,621		(7,100)		(109,599)
Net (increase) decrease in origination fees	(1,055)		(653)		(80)		(1,788)
Realized gain	204		—		—		204
Amortization of net origination fees	2,371		2,460		187		5,018
Allowance for loan losses
Beginning allowance, prior to CECL adoption	—		—		(12,703)		(12,703)
Impact of adopting CECL	(2,263)		(4,166)		(1,336)		(7,765)
Current period (allowance) reversal	(8,648)		(57,983)		(66,521)		(133,152)

Write offs	—		—		23,687		23,687
Ending allowance	(10,911)		(62,149)		(56,873)		(129,933)

Net carrying value (December 31, 2020)	$	373,925	$	874,349	$	124,156	$	1,372,430

(1) Represents assets of consolidated VIEs.
(2) Excludes loan loss allowances.
(3) Includes transfers to securitization vehicles.

Summary of Internal Risk Rating for Corporate Debt

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.

Schedule of Industry and Rate Attributes of The Portfolio

The industry and rate attributes of the portfolio at June 30, 2021 and December 31, 2020 are as follows:


	Industry Dispersion
	June 30, 2021		December 31, 2020
	Total (1)		Total (1)
	(dollars in thousands)




Computer Programming, Data Processing & Other Computer Related Services	$	457,776	$	483,142
Management & Public Relations Services	291,404		300,869
Industrial Inorganic Chemicals	156,642		156,391


Public Warehousing & Storage	121,314		132,397

Metal Cans & Shipping Containers	116,098		115,670
Surgical, Medical & Dental Instruments & Supplies	81,821		83,161
Electronic Components & Accessories	78,365		78,129
Engineering, Architectural, and Surveying	75,625		77,308

Offices & Clinics of Doctors of Medicine	73,532		104,781
Telephone Communications	58,100		58,450
Specialty Outpatient Facilities, not elsewhere classified	56,304		—
Miscellaneous Industrial and Commercial	53,120		77,163
Miscellaneous Equipment Rental & Leasing	49,693		49,587
Research, Development & Testing Services	45,558		62,008
Insurance Agents, Brokers and Service	43,978		67,193
Electric Work	42,347		41,128
Petroleum and Petroleum Products	33,784		33,890
Medical & Dental Laboratories	30,609		30,711
Schools & Educational Services, not elsewhere classified	29,172		29,040

Metal Forgings & Stampings	27,340		27,523
Legal Services	26,382		26,399
Grocery Stores	22,130		22,895
Coating, Engraving and Allied Services	19,535		19,484
Chemicals & Allied Products	14,720		14,686
Drugs	12,409		12,942
Mailing, Reproduction, Commercial Art and Photography and Stenographic	12,277		12,733
Machinery, Equipment & Supplies	11,708		12,096
Sanitary Services	10,763		—
Offices and Clinics of Other Health Practitioners	10,092		9,730
Miscellaneous Business Services	4,111		12,980

Miscellaneous Food Preparations	—		58,857
Home Health Care Services	—		28,587








Total	$	2,066,709	$	2,239,930

(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, 2021 and December 31, 2020.


	June 30, 2021		December 31, 2020
	(dollars in thousands)
First lien loans	$	1,395,995	$	1,489,125
Second lien loans	670,714		750,805



Total	$	2,066,709	$	2,239,930

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, 2021 and December 31, 2020:


June 30, 2021
	First Lien		Second Lien		Total
	(dollars in thousands)
Beginning balance (January 1, 2021) (1)	$	1,489,125	$	750,805	$	2,239,930

Originations & advances	793,278		66,481		859,759
Sales and transfers (2)	(556,980)		(24,448)		(581,428)
Principal payments	(336,054)		(128,879)		(464,933)
Amortization & accretion of (premium) discounts	4,989		2,699		7,688



Allowance for loan losses
Beginning allowance	(18,767)		(20,785)		(39,552)

Current period (allowance) reversal	1,637		4,056		5,693

Ending allowance	(17,130)		(16,729)		(33,859)

Net carrying value (June 30, 2021)	$	1,395,995	$	670,714	$	2,066,709


December 31, 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	834,211		227,433		1,061,644
Sales (2)	(273,887)		(79,203)		(353,090)
Principal payments	(444,759)		(132,000)		(576,759)
Amortization & accretion of (premium) discounts	8,374		3,832		12,206
Loan restructuring	(19,550)		2,818		(16,732)


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) reversal	(12,510)		(1,919)		(14,429)
Write offs	11,893		—		11,893
Ending allowance	(18,767)		(20,785)		(39,552)

Net carrying value (December 31, 2020)	$	1,489,125	$	750,805	$	2,239,930

(1) Excludes loan loss allowances.

(2) Includes syndications and the period ended June 30, 2021 includes transfers to held for sale.

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, 2021 by vintage year and internal risk rating.


Amortized Cost Basis by Risk Rating and Vintage (1)
Risk Rating	Vintage
	Total		2021		2020		2019		2018		2017		2016		2015
(dollars in thousands)
1-5 / Performing	$	1,617,470	$	325,936	$	432,931	$	301,054	$	385,586	$	119,939	$	23,432	$	28,592
6 / Performing - Closely Monitored	369,773		2,933		26,382		—		259,500		80,958		—		—
7 / Substandard	79,466		—		11,708		25,481		42,277		—		—		—
8 / Doubtful	—		—		—		—		—		—		—		—
9 / Loss	—		—		—		—		—		—		—		—
Total	$	2,066,709	$	328,869	$	471,021	$	326,535	$	687,363	$	200,897	$	23,432	$	28,592

(1) The amortized cost basis excludes accrued interest and includes deferred fees on unfunded loans. As of June 30, 2021, the Company had $8.7 million of accrued interest receivable on corporate loans which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition and $3.3 million of deferred loan fees on unfunded loans, which is reported in Loans, net in the Consolidated Statements of Financial Condition.