Loans Receivable

As discussed in Note 4, upon closing of the Combination on January 31, 2018, the Company contributed its interests in the CLNY Investment Entities to Colony Credit and deconsolidated these entities, including $1.29 billion of loans receivable.

The following table provides a summary of the Company’s loans held for investment, including purchased credit-impaired ("PCI") loans:



	December 31, 2018								December 31, 2017
($ in thousands)	Unpaid Principal Balance		Carrying Value			Weighted Average Coupon		Weighted Average Maturity in Years	Unpaid Principal Balance		Carrying Value			Weighted Average Coupon		Weighted Average Maturity in Years
Loans at amortized cost
Non-PCI Loans
Fixed rate
Mortgage loans	$	643,973	$	667,590		10.7	%	2.2	$	1,081,030	$	1,082,513		9.1	%	2.8
Securitized loans ⁽¹⁾	—		—			—	%	N/A	35,566		36,603			5.9	%	16.8
Mezzanine loans	357,590		354,326			12.5	%	1.5	459,433		456,463			12.2	%	2.3
Corporate loans	108,944		107,796			12.3	%	5.8	46,840		46,592			9.9	%	10.0
	1,110,507		1,129,712						1,622,869		1,622,171
Variable rate
Mortgage loans	178,650		179,711			4.3	%	0.1	414,428		423,199			6.0	%	1.7
Securitized loans ⁽¹⁾	—		—			—	%	N/A	461,489		462,203			6.4	%	3.5
Mezzanine loans	27,772		27,417			13.4	%	2.5	34,391		34,279			9.8	%	1.3
	206,422		207,128						910,308		919,681
	1,316,929		1,336,840						2,533,177		2,541,852
PCI Loans
Mortgage loans	1,324,287		351,646						1,865,423		682,125
Securitized loans	—								23,298		3,400
Mezzanine loans	7,425		3,671						7,425		3,671
	1,331,712		355,317						1,896,146		689,196
Allowance for loan losses			(32,940		)						(52,709		)
	2,648,641		1,659,217						4,429,323		3,178,339
Loans at fair value
Securitized loans ⁽²⁾	—		—						72,511		45,423
Total loans receivable	$	2,648,641	$	1,659,217					$	4,501,834	$	3,223,762

__________

⁽¹⁾

Represents loans held in securitization trusts consolidated by the Company (Note 15). The Company contributed its interests in three securitization trusts to Colony Credit in January 2018 and sold its interests in a remaining securitization trust to a third party in June 2018, resulting in the deconsolidation of these securitization trusts along with their underlying mortgage loans and bonds payable.

⁽²⁾

Represents loans held by a securitization trust that was consolidated by a N-Star CDO. The N-Star CDO was in turn consolidated by the Company at December 31, 2017. The Company had elected the fair value option and adopted the measurement alternative to value the loans receivable at the same fair value as the bonds payable issued by the consolidated securitization trust (Note 14). In May 2018, the Company sold its interests in the N-Star CDO and deconsolidated the N-Star CDO (Note 8) along with the securitization trust consolidated by the N-Star CDO.

Nonaccrual and Past Due Loans

Non-PCI loans, excluding loans carried at fair value, that are 90 days or more past due as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status.

The following table provides an aging summary of non-PCI loans held for investment at carrying values before allowance for loan losses, excluding loans carried at fair value:



(In thousands)	Current or Less Than 30 Days Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due and Nonaccrual		Total Non-PCI Loans
December 31, 2018	$	1,052,303	$	—	$	44,392	$	240,145	$	1,336,840
December 31, 2017	2,268,599		145,986		9,410		117,857		2,541,852

Troubled Debt Restructuring

During the year ended December 31, 2016, there was one loan with a carrying value of $37.6 million before allowance for loan loss that was modified as a TDR, in which the Company provided the borrower, who was experiencing financial difficulties, with concessions in interest rate and payment terms. During the years ended December 31, 2018, 2017 and 2016, there were no loans modified as TDRs.

At December 31, 2018 and 2017, carrying value of existing TDR loans before allowance for loan losses was $37.8 million and $66.4 million, respectively. At December 31, 2018, the one outstanding TDR loan was in maturity default, for which the Company recorded an allowance for loan loss. The Company has no additional lending commitment on this TDR loan.

Non-PCI Impaired Loans

Non-PCI loans, excluding loans carried at fair value, are identified as impaired when it is no longer probable that interest or principal will be collected according to the contractual terms of the original loan agreement. Non-PCI impaired loans include predominantly loans under nonaccrual, performing and nonperforming TDRs, as well as loans in maturity default.

The following table summarizes non-PCI impaired loans:



	Unpaid Principal Balance		Gross Carrying Value						Allowance for Loan Losses
(In thousands)	Unpaid Principal Balance		With Allowance for Loan Losses		Without Allowance for Loan Losses		Total		Allowance for Loan Losses
December 31, 2018	$	280,337	$	75,179	$	206,628	$	281,807	$	18,304
December 31, 2017	383,594		138,136		248,759		386,895		7,424

The average carrying value and interest income recognized on non-PCI impaired loans were as follows.



	Year Ended December 31,
(In thousands)	2018		2017		2016
Average carrying value before allowance for loan losses	$	282,325	$	202,397	$	90,447
Total interest income recognized during the period impaired	7,127		10,192		3,929
Cash basis interest income recognized	1,190		—		—

Purchased Credit-Impaired Loans

PCI loans are acquired loans with evidence of credit quality deterioration for which it is probable at acquisition that the Company will collect less than the contractually required payments. PCI loans are recorded at the initial investment in the loans and accreted to the estimated cash flows expected to be collected as measured at acquisition date. The excess of cash flows expected to be collected, measured as of acquisition date, over the estimated fair value represents the accretable yield and is recognized in interest income over the remaining life of the loan. The difference between contractually required payments as of the acquisition date and the cash flows expected to be collected, which represents the nonaccretable difference, is not recognized as an adjustment of yield, loss accrual or valuation allowance.

There were no PCI loans acquired in the year ended December 31, 2018:

In January 2017, the Company acquired additional PCI loans through the Merger as well as part of a loan portfolio secured by commercial properties in Ireland. Information about these PCI loans at the time of their acquisition is presented below:



(In thousands)	January 2017
Contractually required payments including interest	$	1,154,596
Less: Nonaccretable difference	(878,257		)
Cash flows expected to be collected	276,339
Less: Accretable yield	(23,594		)
Fair value of loans acquired	$	252,745

Changes in accretable yield of PCI loans were as follows:



	Year Ended December 31,
(In thousands)	2018			2017			2016
Beginning accretable yield	$	42,435		$	52,572		$	66,639
Additions	—			23,594			22,493
Dispositions	(5,484		)	—			—
Changes in accretable yield	1,882			25,720			31,171
Accretion recognized in earnings	(27,911		)	(61,809		)	(65,911		)
Deconsolidation	(991		)	—			—
Effect of changes in foreign exchange rates	(311		)	2,358			(1,820		)
Ending accretable yield	$	9,620		$	42,435		$	52,572

The Company applied either the cash basis or cost recovery method for recognition of interest income on PCI loans with carrying value before allowance for loan losses of $175.6 million at December 31, 2018 and $196.5 million at December 31, 2017, as the Company did not have reasonable expectations of the timing and amount of future cash receipts on these loans.

Allowance for Loan Losses

The allowance for loan losses and related carrying values of loans held for investment, excluding loans carried at fair value, were as follows:



	December 31, 2018				December 31, 2017
(In thousands)	Allowance for Loan Losses		Carrying Value		Allowance for Loan Losses		Carrying Value
Non-PCI loans	$	18,304	$	75,179	$	7,424	$	138,136
PCI loans	14,636		54,440		45,285		169,789
	$	32,940	$	129,619	$	52,709	$	307,925

Changes in allowance for loan losses is presented below:



	Year Ended December 31,
(In thousands)	2018			2017			2016
Allowance for loan losses at January 1	$	52,709		$	67,980		$	37,571
Contribution to Colony Credit (Note 4)	(518		)	—			—
Deconsolidation	(5,983		)	—			—
Provision for loan losses, net	43,034			19,741			34,864
Charge-off	(56,302		)	(35,012		)	(4,455		)
Allowance for loan losses at December 31	$	32,940		$	52,709		$	67,980

Provision for loan losses by loan type is as follows:



	Year Ended December 31,
(In thousands)	2018		2017		2016
Non-PCI loans	$	22,557	$	7,534	$	5,815
PCI loans ⁽¹⁾	20,477		12,207		29,190
Total provision for loan losses, net	$	43,034	$	19,741	$	35,005

__________


⁽¹⁾	Net of recoveries in provision for loan losses on PCI loans of $4.1 million and $6.3 million for the year ended December 31, 2018 and 2017, respectively. There were no recoveries in provision for loan losses on PCI loans for the year ended December 31, 2016.

Lending Commitments

The Company has lending commitments to borrowers pursuant to certain loan agreements in which the borrower may submit a request for funding contingent on achieving certain criteria, which must be approved by the Company as lender, such as leasing, performance of capital expenditures and construction in progress with an approved budget. At December 31, 2018, total unfunded lending commitments was $180.9 million, of which the Company's share was $77.8 million, net of amounts attributable to noncontrolling interests.