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Note 5 - Securitizations and Variable Interest Entities | 12 Months Ended
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Dec. 31, 2023
Securitizations and Variable Interest Entities |
Securitizations and Variable Interest Entities | Note 5. Secu ritizations and Variable Interest Entities ​ Freddie Mac M Series Securitization ​ On October 12, 2023, the Company entered into an arrangement with Freddie Mac, by which a $128.6 million portfolio of nontaxable LIHTC loans were securitized through Freddie Mac and sold to investors. The Company retained beneficial interests totaling $16.2 million, which are classified as trading securities on the consolidated balance sheets. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $2.4 million net loss on sale was recognized, which included the impact of the fair value of retained beneficial interests and transaction costs. ​ Two classes of M-Series certificates were issued. Freddie Mac guarantees timely payment of interest and scheduled principal on M-Series Class A Certificates, which were sold to third-party investors through a Freddie Mac Securitization SPE. M-Series Class B Certificates are subordinated to M-Series Class A Certificates and were issued to the Company, as discussed above, which in turn pledged the Class B Certificates to provide 12% first loss support to Freddie Mac on the Class A Certificates, or approximately $15.6 million. In addition, the Company pledged $7.5 million of related taxable loans providing an additional $3.8 million of first loss support on the Class A Certificates. The Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any indemnification for material breach in the Company’s representations. ​ As part of the securitization transaction, the Company released all mortgage servicing obligations and rights to a third party, which include obligations to collect and remit payments of principal and interest, manage payments of taxes and insurance, and otherwise administer the underlying loans. ​ Note 5. Securitizations and Variable Interest Entities (continued) ​ Freddie Mac Q Series Securitization ​ On November 16, 2023, the Company entered into an arrangement through a third-party trust and Freddie Mac, by which a $133.3 million portfolio of taxable LIHTC loans were sold to the trust and ultimately securitized through Freddie Mac and sold to investors. The Company retained beneficial interests totaling $6.2 million, which are classified as trading securities on the consolidated balance sheets. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $3.1 million net gain on sale was recognized, which included the impact of the fair value of retained beneficial interests, guarantee liabilities and transaction costs. ​ Two classes of Q-Series certificates were issued. Q-Series Class A Certificates, totaling $133.3 million, which include both principal and interest, were sold by Freddie Mac to third-party investors. Q-Series Class X Certificates totaling $6.2 million, consisted of interest-only certificates for the interest in excess of that earned by the Class A Certificates. The consideration received by the Company for the loans sold consisted of cash and the Company purchased the Class X Certificates as a retained beneficial interest. Freddie Mac guarantees timely payment of interest and scheduled principal on both Class A and Class X certificates. ​ The Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any material breach in the Company’s representations. In connection with the securitization, the Company also entered into a reimbursement agreement for a first loss position in the underlying loan portfolio, not to exceed 12% of the unpaid principal amount of the loans comprising the securitization pool at settlement or approximately $16.2 million. The Company is also required to hold collateral against the reimbursement agreement. Accordingly, the Company pledged an FHLB letter of credit as collateral. ​ As part of the securitization transaction, the Company released all mortgage servicing obligations and rights to a third party, which include obligations to collect and remit payments of principal and interest, manage payments of taxes and insurance, and otherwise administer the underlying loans. ​ Variable Interest Entities (VIEs) ​ A VIE is a corporation, partnership, limited liability company, or any other legal structure used to conduct activities or hold assets generally that either: ​ • Does not have equity investors with voting rights that can directly or indirectly make decisions about the entity’s activities through those voting rights or similar rights; or ​ • Has equity investors that do not provide sufficient equity for the entity to finance its activities without additional subordinated financial support. ​ In order to execute the Freddie Mac M series securitization transaction, CRBT created a new bankruptcy-remote special purpose entity (“Sponsor SPE”), CRBT TEBS Sponsor I LLC, a wholly owned subsidiary of CRBT and through which the assets were sold to the Freddie Mac Securitization SPE. The Company has a variable interest in the VIE. ​ The Company also has deemed a VIE, a real estate mortgage investment conduit trust that was established in connection with the Freddie Mac Q series LIHTC loan sale and securitization. The Company has a variable interest in the VIE. ​ The VIE entities for both the M and Q series securitizations were assessed for potential consolidation under the VIE model that requires primary beneficiaries to consolidate the entity’s results. A primary beneficiary is defined as the ​ Note 5. Securitizations and Variable Interest Entities (continued) ​ party that has both the power to direct the activities that most significantly impact the entity, and an interest that could be significant to the entity. To determine if an interest could be significant to the entity, both qualitative and quantitative factors regarding the nature, size and form of involvement with the entity are evaluated. ​ At December 31, 2023, the Company determined it was not the primary beneficiary of these VIEs primarily because the Company did not have the power to direct the activities that most significantly impact the VIEs. Evaluation and assessment of VIEs for consolidation is performed on an ongoing basis by management. Any changes in facts and circumstances occurring since the previous primary beneficiary determination will be considered as part of this ongoing assessment. ​ The Company’s total assets related to the VIEs as of December 31, 2023 were $22.4 million and there were no liabilities recorded. The Company’s maximum exposure to loss associated with these VIEs consists of the capital invested plus any unfunded equity commitments that are binding. As of December 31, 2023, the maximum exposure to loss was $31.8 million. ​

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