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Loans Receivable and Other Lending Investments, net | 9 Months Ended
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Sep. 30, 2014
Receivables [Abstract] |
Loans Receivable and Other Lending Investments, net | Loans Receivable and Other Lending Investments, net The following is a summary of the Company's loans receivable and other lending investments by class ($ in thousands):
| As of
Type of Investment | September 30, 2014 |  | December 31, 2013
Senior mortgages | $ | 588,984 |  |  | $ | 1,071,662 |
Subordinate mortgages | 46,476 |  |  | 60,679 |
Corporate/Partnership loans | 490,864 |  |  | 473,045 |
Total gross carrying value of loans | 1,126,324 |  |  | 1,605,386 |
Reserves for loan losses | (119,907 | ) |  | (377,204 | )
Total loans receivable, net | 1,006,417 |  |  | 1,228,182 |
Other lending investments—securities | 184,329 |  |  | 141,927 |
Total loans receivable and other lending investments, net(1) | $ | 1,190,746 |  |  | $ | 1,370,109 |
Explanatory Note: _______________________________________________________________________________
(1) | The Company's recorded investment in loans as of September 30, 2014 and December 31, 2013 also includes accrued interest of $6.5 million and $6.5 million, respectively, which are included in "Accrued interest and operating lease income receivable, net" on the Company's Consolidated Balance Sheets.
During the nine months ended September 30, 2014, the Company sold loans with total carrying values of $30.8 million, which resulted in a realized gain of $19.1 million. During the nine months ended September 30, 2013, the Company sold loans with total carrying values of $95.1 million, which resulted in a net realized loss of $0.6 million. Gains and losses on sales of loans are included in "Other income" on the Company's Consolidated Statements of Operations. Reserve for Loan Losses—Changes in the Company's reserve for loan losses were as follows ($ in thousands):
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
| 2014 |  | 2013 |  | 2014 |  | 2013
Reserve for loan losses at beginning of period | $ | 137,904 |  |  | $ | 479,826 |  |  | $ | 377,204 |  |  | $ | 524,499 |
Provision for (recovery of) loan losses(1) | (673 | ) |  | (9,834 | ) |  | (6,865 | ) |  | 5,392 |
Charge-offs | (17,324 | ) |  | (89,985 | ) |  | (250,432 | ) |  | (149,884 | )
Reserve for loan losses at end of period | $ | 119,907 |  |  | $ | 380,007 |  |  | $ | 119,907 |  |  | $ | 380,007 |
Explanatory Note: _______________________________________________________________________________
(1) | For the three and nine months ended September 30, 2014, the provision for loan losses includes recoveries of previously recorded loan loss reserves of $0.9 million and $8.5 million, respectively. For the three and nine months ended September 30, 2013, the provision for loan losses includes recoveries of previously recorded loan loss reserves of $44.1 million and $55.1 million, respectively.
The Company's recorded investment in loans (comprised of a loan's carrying value plus accrued interest) and the associated reserve for loan losses were as follows ($ in thousands):
| Individually Evaluated for Impairment(1) |  | Collectively Evaluated for Impairment(2) |  | Loans Acquired with Deteriorated Credit Quality(3) |  | Total
As of September 30, 2014 |  |  |  |  |  |  |
Loans | $ | 211,811 |  |  | $ | 921,033 |  |  | $ | — |  |  | $ | 1,132,844 |
Less: Reserve for loan losses | (89,107 | ) |  | (30,800 | ) |  | — |  |  | (119,907 | )
Total | $ | 122,704 |  |  | $ | 890,233 |  |  | $ | — |  |  | $ | 1,012,937 |
As of December 31, 2013 |  |  |  |  |  |  |
Loans | $ | 752,425 |  |  | $ | 849,613 |  |  | $ | 9,889 |  |  | $ | 1,611,927 |
Less: Reserve for loan losses | (348,004 | ) |  | (29,200 | ) |  | — |  |  | (377,204 | )
Total | $ | 404,421 |  |  | $ | 820,413 |  |  | $ | 9,889 |  |  | $ | 1,234,723 |
Explanatory Notes: _______________________________________________________________________________
(1) | The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs aggregating to a net discount of $0.2 million and a net premium of $0.5 million as of September 30, 2014 and December 31, 2013, respectively. The Company's loans individually evaluated for impairment primarily represent loans on non-accrual status and therefore, the unamortized amounts associated with these loans are not currently being amortized into income.
(2) | The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs aggregating to a net discount of $8.3 million and $4.6 million as of September 30, 2014 and December 31, 2013, respectively.
(3) | The carrying value of the loan includes unamortized discounts, premiums, deferred fees and costs aggregating to a net premium of $0.4 million as of December 31, 2013. The loan had a cumulative principal balance of $10.2 million as of December 31, 2013. The loan was repaid during the nine months ended September 30, 2014.
Credit Characteristics—As part of the Company's process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans. Risk ratings are based on judgments which are inherently uncertain and there can be no assurance that actual performance will be similar to current expectation. The Company's recorded investment in performing loans, presented by class and by credit quality, as indicated by risk rating, was as follows ($ in thousands):
| As of
| September 30, 2014 |  | December 31, 2013
| Performing Loans |  | Weighted Average Risk Ratings |  | Performing Loans |  | Weighted Average Risk Ratings
Senior mortgages | $ | 411,280 |  |  | 2.50 |  |  | $ | 591,145 |  |  | 2.50 |
Subordinate mortgages | 47,019 |  |  | 2.89 |  |  | 61,364 |  |  | 3.37 |
Corporate/Partnership loans | 494,584 |  |  | 3.83 |  |  | 438,831 |  |  | 3.88 |
Total | $ | 952,883 |  |  | 3.21 |  |  | $ | 1,091,340 |  |  | 3.11 |
As of September 30, 2014, the Company's recorded investment in loans, aged by payment status and presented by class, were as follows ($ in thousands):
| Current |  | Less Than and Equal to 90 Days |  | Greater Than 90 Days(1) |  | Total Past Due |  | Total
Senior mortgages | $ | 444,704 |  |  | $ | — |  |  | $ | 146,537 |  |  | $ | 146,537 |  |  | $ | 591,241 |
Subordinate mortgages | 47,019 |  |  | — |  |  | — |  |  | — |  |  | 47,019 |
Corporate/Partnership loans | 494,584 |  |  | — |  |  | — |  |  | — |  |  | 494,584 |
Total | $ | 986,307 |  |  | $ | — |  |  | $ | 146,537 |  |  | $ | 146,537 |  |  | $ | 1,132,844 |
Explanatory Note: _______________________________________________________________________________
(1) | As of September 30, 2014, the Company had 4 loans which were greater than 90 days delinquent and were in various stages of resolution, including legal proceedings, environmental concerns and foreclosure-related proceedings, and ranged from 5.0 to 6.0 years outstanding.
Impaired Loans—The Company's recorded investment in impaired loans, presented by class, were as follows ($ in thousands)(1):
| As of September 30, 2014 |  | As of December 31, 2013
| Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance |  | Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,012 |  |  | $ | 2,992 |  |  | $ | — |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | 181,380 |  |  | 180,454 |  |  | (86,975 | ) |  | 650,337 |  |  | 645,463 |  |  | (304,544 | )
Corporate/Partnership loans | 30,431 |  |  | 30,444 |  |  | (2,132 | ) |  | 99,076 |  |  | 99,067 |  |  | (43,460 | )
Subtotal | 211,811 |  |  | 210,898 |  |  | (89,107 | ) |  | 749,413 |  |  | 744,530 |  |  | (348,004 | )
Total: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | 181,380 |  |  | 180,454 |  |  | (86,975 | ) |  | 653,349 |  |  | 648,455 |  |  | (304,544 | )
Corporate/Partnership loans | 30,431 |  |  | 30,444 |  |  | (2,132 | ) |  | 99,076 |  |  | 99,067 |  |  | (43,460 | )
Total | $ | 211,811 |  |  | $ | 210,898 |  |  | $ | (89,107 | ) |  | $ | 752,425 |  |  | $ | 747,522 |  |  | $ | (348,004 | )
Explanatory Note: _______________________________________________________________________________
(1) | All of the Company's non-accrual loans are considered impaired and included in the table above. In addition, as of September 30, 2014 and December 31, 2013, certain loans modified through troubled debt restructurings with a recorded investment of $31.9 million and $231.8 million, respectively, are also included as impaired loans in accordance with GAAP although they are performing and on accrual status.
The Company's average recorded investment in impaired loans and interest income recognized, presented by class, were as follows ($ in thousands):
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
| 2014 |  | 2013 |  | 2014 |  | 2013
| Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | $ | 40,635 |  |  | $ | 1,234 |  |  | $ | 13,622 |  |  | $ | 166 |  |  | $ | 44,574 |  |  | $ | 1,922 |  |  | $ | 38,508 |  |  | $ | 9,223 |
Corporate/Partnership loans | — |  |  | — |  |  | 10,044 |  |  | 349 |  |  | — |  |  | — |  |  | 10,077 |  |  | 789 |
Subtotal | 40,635 |  |  | 1,234 |  |  | 23,666 |  |  | 515 |  |  | 44,574 |  |  | 1,922 |  |  | 48,585 |  |  | 10,012 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | 192,513 |  |  | 18 |  |  | 749,367 |  |  | 444 |  |  | 385,277 |  |  | 140 |  |  | 830,225 |  |  | 1,399 |
Subordinate mortgages | — |  |  | — |  |  | 27,068 |  |  | — |  |  | — |  |  | — |  |  | 40,478 |  |  | — |
Corporate/Partnership loans | 34,330 |  |  | 40 |  |  | 82,290 |  |  | 83 |  |  | 63,948 |  |  | 157 |  |  | 72,308 |  |  | 240 |
Subtotal | 226,843 |  |  | 58 |  |  | 858,725 |  |  | 527 |  |  | 449,225 |  |  | 297 |  |  | 943,011 |  |  | 1,639 |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | 233,148 |  |  | 1,252 |  |  | 762,989 |  |  | 610 |  |  | 429,851 |  |  | 2,062 |  |  | 868,733 |  |  | 10,622 |
Subordinate mortgages | — |  |  | — |  |  | 27,068 |  |  | — |  |  | — |  |  | — |  |  | 40,478 |  |  | — |
Corporate/Partnership loans | 34,330 |  |  | 40 |  |  | 92,334 |  |  | 432 |  |  | 63,948 |  |  | 157 |  |  | 82,385 |  |  | 1,029 |
Total | $ | 267,478 |  |  | $ | 1,292 |  |  | $ | 882,391 |  |  | $ | 1,042 |  |  | $ | 493,799 |  |  | $ | 2,219 |  |  | $ | 991,596 |  |  | $ | 11,651 |
There was no interest income related to the resolution of non-performing loans recorded during the nine months ended September 30, 2014. During the nine months ended September 30, 2013, the Company recorded interest income of $8.0 million related to the resolution of a non-performing loan. Interest income was not previously recorded while the loan was on non-accrual status. Troubled Debt Restructurings—During the three and nine months ended September 30, 2014 and September 30, 2013, the Company modified loans that were determined to be troubled debt restructurings. The recorded investment in these loans was impacted by the modifications as follows, presented by class ($ in thousands):
| For the Three Months Ended September 30, 2014 |  | For the Nine Months Ended September 30, 2014
| Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment |  | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
Senior mortgages | 1 |  |  | $ | 7,040 |  |  | $ | 7,040 |  |  | 1 |  |  | $ | 7,040 |  |  | $ | 7,040 |
| For the Three Months Ended September 30, 2013 |  | For the Nine Months Ended September 30, 2013
| Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment |  | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
Senior mortgages | 2 |  |  | $ | 9,020 |  |  | $ | 9,020 |  |  | 5 |  |  | $ | 153,452 |  |  | $ | 145,778 |
During the three and nine months ended September 30, 2014, the Company restructured one non-performing loan with a recorded investment of $7.0 million to grant a maturity extension of one year and included conditional extension options. During the three months ended September 30, 2013, the Company restructured one performing loan with a recorded investment of $1.4 million to grant a maturity extension of one year. The Company also extended a payoff option on a loan with a recorded investment of $7.6 million that was classified as non-performing. During the nine months ended September 30, 2013, the Company restructured five loans that were considered troubled debt restructurings. In addition to the loans modified during the three months ended September 30, 2013 that are described above, the Company also restructured one non-performing loan with a recorded investment of $72.7 million in which the Company received a $13.3 million paydown and accepted a discounted payoff option on this loan. At the time of the restructuring, the Company reclassified the loan from non-performing to performing status as the Company believed the borrower would perform under the modified terms of the agreement. The loan was repaid in January 2014 at the discounted payoff amount. The Company restructured one performing loan with a recorded investment of $3.2 million to grant a maturity extension of one year. The Company also extended a payoff option on a loan with a recorded investment of $68.6 million that was classified as non-performing. Generally when granting concessions, the Company will seek to protect its position by requiring incremental pay downs, additional collateral or guarantees and in some cases lookback features or equity kickers to offset concessions granted should conditions impacting the loan improve. The Company's determination of credit losses is impacted by troubled debt restructurings whereby loans that have gone through troubled debt restructurings are considered impaired, assessed for specific reserves, and are not included in the Company's assessment of general loan loss reserves. Loans previously restructured under troubled debt restructurings that subsequently default are reassessed to incorporate the Company's current assumptions on expected cash flows and additional provision expense is recorded to the extent necessary. As of September 30, 2014, there were no unfunded commitments associated with modified loans considered troubled debt restructurings. Securities—As of September 30, 2014, other lending investments—securities includes the following ($ in thousands):
| Face Value |  | Amortized Cost Basis |  | Net Unrealized Gain (Loss) |  | Estimated Fair Value |  | Net Carrying Value
Available-for-Sale Securities |  |  |  |  |  |  |  |  |
Municipal debt securities | $ | 1,020 |  |  | $ | 1,020 |  |  | $ | 115 |  |  | $ | 1,135 |  |  | $ | 1,135 |
Held-to-Maturity Securities |  |  |  |  |  |  |  |  |
Corporate debt securities | 175,506 |  |  | 183,194 |  |  | — |  |  | 183,194 |  |  | 183,194 |
Total | $ | 176,526 |  |  | $ | 184,214 |  |  | $ | 115 |  |  | $ | 184,329 |  |  | $ | 184,329 |

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