Loans Receivable and Other Lending Investments, net (Tables)

9 Months Ended

Sep. 30, 2022

Schedule of the company's loans and other lending investments by class

The following is a summary of the Company’s loans receivable and other lending investments by class ($ in thousands):


	As of
	September 30, 2022		December 31, 2021
Construction loans
Senior mortgages	$	133,468	$	184,643
Corporate/Partnership loans		—		618
Subtotal - gross carrying value of construction loans⁽¹⁾		133,468		185,261
Loans
Senior mortgages		—		14,965
Subordinate mortgages		13,107		12,457
Subtotal - gross carrying value of loans		13,107		27,422
Other lending investments
Held-to-maturity debt securities		32,938		96,838
Available-for-sale debt securities		—		28,092
Subtotal - other lending investments		32,938		124,930
Total gross carrying value of loans receivable and other lending investments		179,513		337,613
Allowance for loan losses		(2,890)		(4,769)
Total loans receivable and other lending investments, net	$	176,623	$	332,844

(1)	As of September 30, 2022, 100% of gross carrying value of construction loans had completed construction.

Schedule of changes in the company's allowance for loan losses


	General Allowance
					Held to
	Construction				Maturity Debt		Specific
Three Months Ended September 30, 2022	Loans		Loans		Securities		Allowance		Total
Allowance for loan losses at beginning of period	$	861	$	450	$	1,014	$	708	$	3,033
Provision for (recovery of) loan losses⁽¹⁾		(13)		(72)		(67)		9		(143)
Allowance for loan losses at end of period	$	848	$	378	$	947	$	717	$	2,890

Three Months Ended September 30, 2021
Allowance for loan losses at beginning of period	$	1,640	$	1,619	$	2,393	$	590	$	6,242
Provision for (recovery of) loan losses⁽¹⁾		(149)		(865)		145		50		(819)
Allowance for loan losses at end of period	$	1,491	$	754	$	2,538	$	640	$	5,423

(1)

During the three months ended September 30, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of ($0.2) million and ($1.6) million, respectively, in its consolidated statements of operations. The recovery in 2022 was due primarily to the repayment of loans during the three months ended September 30, 2022. The recovery in 2021 was due primarily to the repayment of loans during the three months ended September 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since June 30, 2021. Of this amount, $0.9 million related to a provision for loan losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities.”

Changes in the Company’s allowance for loan losses were as follows for the nine months ended September 30, 2022 and 2021 ($ in thousands):


	General Allowance
					Held to
	Construction				Maturity Debt		Specific
Nine Months Ended September 30, 2022	Loans		Loans		Securities		Allowance		Total
Allowance for loan losses at beginning of period	$	1,213	$	676	$	2,304	$	576	$	4,769
Provision for (recovery of) loan losses⁽¹⁾		(365)		(298)		23,643		141		23,121
Charge-offs		—		—		(25,000)		—		(25,000)
Allowance for loan losses at end of period	$	848	$	378	$	947	$	717	$	2,890

Nine Months Ended September 30, 2021
Allowance for loan losses at beginning of period	$	6,541	$	1,643	$	3,093	$	743	$	12,020
Recovery of loan losses⁽¹⁾		(5,050)		(889)		(555)		(103)		(6,597)
Allowance for loan losses at end of period	$	1,491	$	754	$	2,538	$	640	$	5,423

(1)

During the nine months ended September 30, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of $22.6 million and ($7.4) million, respectively, in its consolidated statements of operations. The provision in 2022 was due primarily to a $25.0 million charge-off on the Company’s held-to-maturity debt security, which is now recorded at its expected repayment proceeds. The recovery in 2021 was due primarily to the repayment of loans during the nine months ended September 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. Of this amount, $0.9 million related to a recovery of credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities.”

Schedule of recorded investment in loans and associated allowance for loan losses

The Company’s investment in loans and other lending investments and the associated allowance for loan losses were as follows as of September 30, 2022 and December 31, 2021 ($ in thousands):


	Individually		Collectively
	Evaluated for		Evaluated for
	Impairment⁽¹⁾		Impairment		Total
As of September 30, 2022
Construction loans⁽²⁾	$	61,159	$	72,309	$	133,468
Loans⁽²⁾		—		13,107		13,107
Held-to-maturity debt securities		—		32,938		32,938
Less: Allowance for loan losses		(717)		(2,173)		(2,890)
Total	$	60,442	$	116,181	$	176,623
As of December 31, 2021
Construction loans⁽²⁾	$	59,640	$	125,621	$	185,261
Loans⁽²⁾		—		27,422		27,422
Held-to-maturity debt securities		—		96,838		96,838
Available-for-sale debt securities⁽³⁾		—		28,092		28,092
Less: Allowance for loan losses		(576)		(4,193)		(4,769)
Total	$	59,064	$	273,780	$	332,844

(1)

The carrying value of this loan includes an amortized exit fee of $0.8 million and $0.8 million as of September 30, 2022 and December 31, 2021, respectively. The Company’s loans individually evaluated for impairment represent loans on non-accrual status and the unamortized amounts associated with these loans are not currently being amortized into income.

(2)	The carrying value of these loans includes unamortized discounts, premiums, deferred fees and costs totaling net premiums (discounts) of $0.3 million and ($0.2) million as of September 30, 2022 and December 31, 2021, respectively.

(3)

During the three and nine months ended September 30, 2022, the Company sold its available-for-sale securities and recognized a gain of $2.9 million, which is recorded in “Other income” in the Company’s consolidated statements of operations. Available-for-sale debt securities were evaluated for impairment under ASC 326-30 – Financial Instruments-Credit Losses.

Schedule of investment in performing loans, presented by class and by credit quality, as indicated by risk rating

The Company’s amortized cost basis in performing senior mortgages, corporate/partnership loans and subordinate mortgages, presented by year of origination and by credit quality, as indicated by risk rating, as of September 30, 2022 were as follows ($ in thousands):


	Year of Origination
	2022		2021		2020		2019		2018		Prior to 2018		Total
Senior mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		—		—		—		—
2.5		—		—		—		—		—		—		—
3.0		—		—		—		—		65,559		—		65,559
3.5		—		—		—		—		6,750		—		6,750
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal⁽¹⁾	$	—	$	—	$	—	$	—	$	72,309	$	—	$	72,309
Subordinate mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		—		—		—		—
2.5		—		—		—		—		—		—		—
3.0		—		—		—		—		—		13,107		13,107
3.5		—		—		—		—		—		—		—
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal	$	—	$	—	$	—	$	—	$	—	$	13,107	$	13,107
Total	$	—	$	—	$	—	$	—	$	72,309	$	13,107	$	85,416

(1)	As of September 30, 2022, excludes $61.2 million for one loan on non-accrual status.

Schedule of recorded investment in loans, aged by payment status and presented by class

The Company’s amortized cost basis in loans, aged by payment status and presented by class, was as follows ($ in thousands):


			Less Than		Greater
			or Equal		Than		Total
	Current		to 90 Days		90 Days		Past Due		Total
As of September 30, 2022
Senior mortgages	$	72,309	$	—	$	61,159		61,159	$	133,468
Subordinate mortgages		13,107		—		—		—		13,107
Total	$	85,416	$	—	$	61,159	$	61,159	$	146,575
As of December 31, 2021
Senior mortgages	$	139,968	$	—	$	59,640		59,640	$	199,608
Corporate/Partnership loans		618		—		—		—		618
Subordinate mortgages		12,457		—		—		—		12,457
Total	$	153,043	$	—	$	59,640	$	59,640	$	212,683

Schedule of recorded investment in impaired loans


	As of September 30, 2022						As of December 31, 2021
			Unpaid						Unpaid
	Amortized		Principal		Related		Amortized		Principal		Related
	Cost		Balance		Allowance		Cost		Balance		Allowance
With an allowance recorded:
Senior mortgages⁽¹⁾	$	61,159	$	60,409	$	(717)	$	59,640	$	58,888	$	(576)
Total	$	61,159	$	60,409	$	(717)	$	59,640	$	58,888	$	(576)

(1)	The Company has one non-accrual loan as of September 30, 2022 and December 31, 2021 that is considered impaired and included in the table above. The Company did not record any interest income on impaired loans for the three and nine months ended September 30, 2022 and 2021.

Schedule of other lending investments - securities


					Net				Net
			Amortized		Unrealized		Estimated		Carrying
	Face Value		Cost Basis		Gain (Loss)		Fair Value		Value
As of September 30, 2022
Held-to-Maturity Securities
Debt securities⁽¹⁾	$	32,938	$	32,938	$	—	$	32,938	$	32,938
Total	$	32,938	$	32,938	$	—	$	32,938	$	32,938
As of December 31, 2021
Available-for-Sale Securities
Municipal debt securities	$	23,855	$	23,855	$	4,237	$	28,092	$	28,092
Held-to-Maturity Securities
Debt securities		100,000		96,838		—		96,838		96,838
Total	$	123,855	$	120,693	$	4,237	$	124,930	$	124,930

Schedule of contractual maturities of securities

As of September 30, 2022, the contractual maturities of the Company’s securities were as follows ($ in thousands):


	Held-to-Maturity Debt Securities				Available-for-Sale Debt Securities
	Amortized		Estimated		Amortized		Estimated
	Cost Basis		Fair Value		Cost Basis		Fair Value
Maturities
Within one year	$	32,938	$	32,938	$	—	$	—
After one year through 5 years		—		—		—		—
After 5 years through 10 years		—		—		—		—
After 10 years		—		—		—		—
Total	$	32,938	$	32,938	$	—	$	—