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Loans Held for Investment, net | 3 Months Ended
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Mar. 31, 2023
Receivables [Abstract] |
Loans Held for Investment, net | Loans Held for Investment, net We originate first mortgage loans secured by middle market and transitional CRE, which are generally to be held as long term investments. We fund our loan portfolio using cash on hand and advancements under our Secured Financing Facilities, as defined in Note 4. See Note 4 for further information regarding our secured financing agreements. The table below provides overall statistics for our loan portfolio as of March 31, 2023 and December 31, 2022:
|  | As of March 31, 2023 |  | As of December 31, 2022
Number of loans |  | 25 |  | 27
Total loan commitments |  | $ | 674,475 |  | $ | 727,562
Unfunded loan commitments (1) |  | $ | 45,779 |  | $ | 49,007
Principal balance |  | $ | 628,696 |  | $ | 678,555
Carrying value |  | $ | 617,935 |  | $ | 669,929
Weighted average coupon rate |  | 8.57 | % |  | 8.07 | %
Weighted average all in yield (2) |  | 9.06 | % |  | 8.57 | %
Weighted average floor |  | 0.65 | % |  | 0.62 | %
Weighted average maximum maturity (years) (3) |  | 3.1 |  | 3.3
Weighted average risk rating |  | 2.9 |  | 2.9
(1)Unfunded loan commitments are primarily used to finance property improvements and leasing capital and are generally funded over the term of the loan. (2)All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion. (3) Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions. The tables below represent our loan activities during the three months ended March 31, 2023 and 2022:
|  | Principal Balance |  | Deferred Fees and Other Items |  | Amortized Cost
Balance at December 31, 2022 |  | $ | 678,555 |  |  | $ | (8,626) |  |  | $ | 669,929 |
Additional funding |  | 1,884 |  |  | (14) |  |  | 1,870 |
Repayments |  | (51,743) |  |  | (175) |  |  | (51,918) |
Net amortization of deferred fees |  | — |  |  | 1,004 |  |  | 1,004 |
Purchase discount accretion |  | — |  |  | 1,185 |  |  | 1,185 |
Balance at March 31, 2023 |  | $ | 628,696 |  |  | $ | (6,626) |  |  | $ | 622,070 |
|  | Principal Balance |  | Deferred Fees and Other Items |  | Amortized Cost
Balance at December 31, 2021 |  | $ | 590,590 |  |  | $ | (19,810) |  |  | $ | 570,780 |
Additional funding |  | 3,304 |  |  | — |  |  | 3,304 |
Originations |  | 91,184 |  |  | (1,148) |  |  | 90,036 |
Repayments |  | (48,247) |  |  | — |  |  | (48,247) |
Net amortization of deferred fees |  | — |  |  | 902 |  |  | 902 |
Purchase discount accretion |  | — |  |  | 5,935 |  |  | 5,935 |
Balance at March 31, 2022 |  | $ | 636,831 |  |  | $ | (14,121) |  |  | $ | 622,710 |
The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of March 31, 2023 and December 31, 2022:
|  | March 31, 2023 |  | December 31, 2022
Property Type |  | Number of Loans |  | Amortized Cost |  | Percentage of Value |  | Number of Loans |  | Amortized Cost |  | Percentage of Value
Office (1) |  | 10 |  | $ | 244,302 |  |  | 39 | % |  | 11 |  | $ | 252,796 |  |  | 38 | %
Multifamily |  | 8 |  | 198,390 |  |  | 32 | % |  | 8 |  | 197,229 |  |  | 29 | %
Retail |  | 4 |  | 110,037 |  |  | 18 | % |  | 4 |  | 109,248 |  |  | 16 | %
Industrial (1) |  | 3 |  | 69,341 |  |  | 11 | % |  | 4 |  | 110,656 |  |  | 17 | %
|  | 25 |  | $ | 622,070 |  |  | 100 | % |  | 27 |  | $ | 669,929 |  |  | 100 | %
(1) As of December 31, 2022, one loan investment secured by a mixed use property consisting of office space and an industrial warehouse in Aurora, IL was classified as office for the purpose of counting the number of loans in our portfolio because the majority of the square footage of the property consisted of office space. The amortized cost of this loan investment was reflected in office and industrial based on the fair value of the building at the time of origination relative to the total fair value of the property. During the three months ended March 31, 2023, our loan investment in Aurora, IL was repaid.
|  | March 31, 2023 |  | December 31, 2022
Geographic Location |  | Number of Loans |  | Amortized Cost |  | Percentage of Value |  | Number of Loans |  | Amortized Cost |  | Percentage of Value
Midwest |  | 8 |  | $ | 235,289 |  |  | 38 | % |  | 9 |  | $ | 251,208 |  |  | 37 | %
West |  | 8 |  | 148,085 |  |  | 24 | % |  | 8 |  | 146,837 |  |  | 22 | %
South |  | 5 |  | 133,243 |  |  | 21 | % |  | 6 |  | 166,616 |  |  | 25 | %
East |  | 4 |  | 105,453 |  |  | 17 | % |  | 4 |  | 105,268 |  |  | 16 | %
|  | 25 |  | $ | 622,070 |  |  | 100 | % |  | 27 |  | $ | 669,929 |  |  | 100 | %
Credit Quality Information We evaluate the credit quality of each of our loans at least quarterly by assessing a variety of risk factors in relation to each loan and assigning a risk rating to each loan based on those factors. The higher the number, the greater the risk level. See our 2022 Annual Report for more information regarding our loan risk ratings. As of March 31, 2023 and December 31, 2022, the amortized cost of our loan portfolio within each internal risk rating by year of origination was as follows:
March 31, 2023
Risk Rating |  | Number of Loans |  | Percentage of Portfolio |  | 2023 |  | 2022 |  | 2021 |  | Prior |  | Total
1 |  | 1 |  | 2 | % |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 9,496 |  |  | $ | 9,496 |
2 |  | 5 |  | 20 | % |  | — |  |  | 41,952 |  |  | 31,483 |  |  | 52,289 |  |  | 125,724 |
3 |  | 16 |  | 63 | % |  | — |  |  | 128,678 |  |  | 236,711 |  |  | 29,001 |  |  | 394,390 |
4 |  | 3 |  | 15 | % |  | — |  |  | 36,538 |  |  | 39,970 |  |  | 15,952 |  |  | 92,460 |
5 |  | — |  | — | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
|  | 25 |  | 100 | % |  | $ | — |  |  | $ | 207,168 |  |  | $ | 308,164 |  |  | $ | 106,738 |  |  | $ | 622,070 |
December 31, 2022
Risk Rating |  | Number of Loans |  | Percentage of Portfolio |  | 2022 |  | 2021 |  | 2020 |  | Prior |  | Total
1 |  | 1 |  | 1 | % |  | $ | — |  |  | $ | — |  |  | $ | 9,708 |  |  | $ | — |  |  | $ | 9,708 |
2 |  | 6 |  | 20 | % |  | — |  |  | 65,902 |  |  | 68,740 |  |  | — |  |  | 134,642 |
3 |  | 17 |  | 65 | % |  | 169,516 |  |  | 235,602 |  |  | — |  |  | 28,998 |  |  | 434,116 |
4 |  | 3 |  | 14 | % |  | 36,506 |  |  | 39,314 |  |  | — |  |  | 15,643 |  |  | 91,463 |
5 |  | — |  | — | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
|  | 27 |  | 100 | % |  | $ | 206,022 |  |  | $ | 340,818 |  |  | $ | 78,448 |  |  | $ | 44,641 |  |  | $ | 669,929 |
The weighted average risk rating of our loans by carrying value was 2.9 as of March 31, 2023 and December 31, 2022, respectively. Certain of our borrowers' business operations or tenants, particularly certain office and retail properties, were negatively impacted by the COVID-19 pandemic and continue to be impacted by market conditions that arose or intensified during or in response to the pandemic and which have continued to be impacted. Current inflationary pressures, rising or sustained high interest rates, supply chain issues or a prolonged economic slowdown or recession could amplify those negative impacts. Therefore, certain of our borrowers’ business plans have taken or will likely take longer to execute than initially expected, and as a result, certain of our borrowers may be unable to pay their debt service obligations owed and due to us as currently scheduled or at all. The table below represents the changes to the allowance for credit losses during the three months ended March 31, 2023:
|  | Loans Held For Investment, net |  | Unfunded Loan Commitments |  | Total
Balance at December 31, 2022 |  | $ | — |  |  | $ | — |  |  | $ | — |
Cumulative-effect adjustment upon adoption of ASU No. 2016-13 |  | 4,893 |  |  | 1,702 |  |  | 6,595 |
Reversal of credit losses |  | (758) |  |  | (229) |  |  | (987) |
Balance At March 31, 2023 |  | $ | 4,135 |  |  | $ | 1,473 |  |  | $ | 5,608 |
We may enter into loan modifications that include, among other changes, extensions of maturity dates, repurposing or required replenishment of reserves, increases or decreases in loan commitments and required pay downs of principal amounts outstanding. Loan modifications are evaluated to determine whether a modification results in a new loan or a continuation of an existing loan under ASC 310. There were no such modifications to our loan portfolio for borrowers experiencing financial difficulties during the three months ended March 31, 2023. We estimate credit losses over a reasonable and supportable forecast period of 12 months, followed by a straight-line reversion period of 12 months back to average historical losses. The decrease in the allowance for credit losses during the three months ended March 31, 2023, compared to the January 1, 2023 cumulative-effect adjustment upon adoption of ASU No. 2016-13, is primarily attributable to favorable changes in the macroeconomic outlook, most notably in near-term CRE pricing forecasts, and loan repayments. We have elected to exclude accrued interest receivable from amortized cost and not to measure an allowance for credit losses on accrued interest receivable. Accrued interest receivables are generally written off when payments are 120 days past due. Such amounts are reversed against interest income and no further interest will be recorded until it is collected. We did not have any past due loans or nonaccrual loans as of March 31, 2023 or December 31, 2022. As of March 31, 2023 and April 20, 2023, all of our borrowers had paid all of their debt service obligations owed and due to us. See our 2022 Annual Report for more information regarding our nonaccrual policy.

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