| Credit quality indicators for bank loans and commercial real estate loans |
The criteria set forth below should be used as general guidelines and, therefore, not every loan will have all of the characteristics described in each category below.
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Risk Rating |
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Risk Characteristics |
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1 |
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• Property performance has surpassed underwritten expectations. |
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• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high-quality tenant mix. |
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2 |
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• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded. |
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• Occupancy is stabilized, near stabilized or is on track with underwriting. |
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3 |
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• Property performance lags behind underwritten expectations. |
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• Occupancy is not stabilized and the property has some tenancy rollover. |
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4 |
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• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers. |
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• Occupancy is not stabilized and the property has a large amount of tenancy rollover. |
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5 |
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• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Expected sale proceeds would not be sufficient to pay off the loan at maturity. |
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• The property has a material vacancy rate and significant rollover of remaining tenants. |
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• An updated appraisal is required upon designation and updated on an as-needed basis. |
All CRE loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Mezzanine loans may experience greater credit risks due to their nature as subordinated investments. For the purpose of calculating the quarterly provision for credit losses under CECL, the Company pools CRE loans based on the underlying collateral property type and utilizes a probability of default and loss given default methodology for approximately one year after which it immediately reverts to a historical mean loss ratio. Credit risk profiles of CRE loans at amortized cost were as follows (in thousands, except amounts in the footnote):
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Rating 1 |
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Rating 2 |
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Rating 3 |
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Rating 4 |
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Rating 5 |
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Total (1) |
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At June 30, 2025: |
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Whole loans |
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$ |
28,102 |
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$ |
461,352 |
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$ |
442,551 |
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$ |
435,016 |
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$ |
5,614 |
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$ |
1,372,635 |
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Mezzanine loans |
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— |
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14,663 |
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— |
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— |
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4,700 |
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19,363 |
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Total |
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$ |
28,102 |
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$ |
476,015 |
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$ |
442,551 |
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$ |
435,016 |
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$ |
10,314 |
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$ |
1,391,998 |
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At December 31, 2024: |
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Whole loans |
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$ |
27,869 |
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$ |
565,968 |
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$ |
503,125 |
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$ |
380,116 |
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$ |
5,614 |
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$ |
1,482,692 |
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Mezzanine loan |
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— |
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— |
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— |
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— |
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4,700 |
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4,700 |
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Total |
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$ |
27,869 |
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$ |
565,968 |
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$ |
503,125 |
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$ |
380,116 |
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$ |
10,314 |
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$ |
1,487,392 |
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(1)The total amortized cost of CRE loans excluded accrued interest receivable of $19.1 million and $14.6 million at June 30, 2025 and December 31, 2024, respectively. Credit risk profiles of CRE loans by origination year at amortized cost were as follows (in thousands, except amounts in the footnotes):
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2025 (1) |
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2024 (2) |
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2023 |
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2022 |
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2021 |
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Prior |
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Total (3) |
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At June 30, 2025: |
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Whole loans: (4) |
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Rating 1 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
28,102 |
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$ |
— |
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$ |
28,102 |
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Rating 2 |
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24,624 |
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20,591 |
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48,998 |
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— |
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297,576 |
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69,563 |
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461,352 |
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Rating 3 |
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— |
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— |
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— |
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217,557 |
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213,982 |
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11,012 |
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442,551 |
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Rating 4 |
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78,079 |
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84,988 |
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15,838 |
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169,685 |
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41,537 |
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44,889 |
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435,016 |
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Rating 5 |
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— |
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— |
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— |
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— |
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— |
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5,614 |
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5,614 |
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Total whole loans |
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102,703 |
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105,579 |
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64,836 |
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387,242 |
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581,197 |
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131,078 |
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1,372,635 |
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Mezzanine loans: |
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Rating 2 |
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14,663 |
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— |
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— |
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— |
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— |
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— |
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14,663 |
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Rating 5 |
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— |
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— |
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— |
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— |
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— |
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4,700 |
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4,700 |
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Total mezzanine loans |
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14,663 |
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— |
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— |
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— |
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— |
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4,700 |
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19,363 |
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Total loans |
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$ |
117,366 |
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$ |
105,579 |
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$ |
64,836 |
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$ |
387,242 |
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$ |
581,197 |
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$ |
135,778 |
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$ |
1,391,998 |
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Current Period Gross Write-Offs |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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2024 (2) |
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2023 |
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2022 |
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2021 |
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2020 |
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Prior |
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Total (3) |
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At December 31, 2024: |
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Whole loans: (4) |
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Rating 1 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
27,869 |
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$ |
— |
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$ |
— |
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$ |
27,869 |
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Rating 2 |
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19,023 |
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48,106 |
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46,416 |
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382,195 |
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56,284 |
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13,944 |
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565,968 |
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Rating 3 |
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— |
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— |
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249,907 |
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242,155 |
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— |
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11,063 |
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503,125 |
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Rating 4 |
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80,672 |
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15,811 |
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85,004 |
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153,740 |
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— |
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44,889 |
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380,116 |
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Rating 5 |
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— |
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— |
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— |
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— |
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— |
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5,614 |
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5,614 |
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Total whole loans |
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99,695 |
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63,917 |
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381,327 |
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805,959 |
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56,284 |
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75,510 |
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1,482,692 |
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Mezzanine loan (rating 5) |
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— |
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— |
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— |
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— |
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— |
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4,700 |
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4,700 |
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Total |
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$ |
99,695 |
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$ |
63,917 |
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$ |
381,327 |
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$ |
805,959 |
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$ |
56,284 |
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$ |
80,210 |
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$ |
1,487,392 |
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Current Period Gross Write-Offs |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
(700 |
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$ |
— |
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$ |
— |
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$ |
(700 |
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(1)Includes one novated CRE whole loan that resulted from a loan workout. (2)Includes two novated CRE whole loans that resulted from loan workouts. (3)The total amortized cost of CRE whole loans excluded accrued interest receivable of $19.1 million and $14.6 million at June 30, 2025 and December 31, 2024, respectively. (4)Acquired CRE whole loans are grouped within each loan’s year of origination. The Company has one additional mezzanine loan that was included in other assets held for sale, and that loan had no carrying value at both June 30, 2025 and December 31, 2024.
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| Loan portfolios aging analysis |
The following table presents the CRE loan portfolio aging analysis at the dates indicated for CRE loans at amortized cost (in thousands, except amounts in footnotes):
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30-59 Days |
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60-89 Days |
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Greater than 90
Days |
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Total Past Due |
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Current |
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Total Loans Receivable (1) |
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Total Loans > 90 Days and Accruing (2) |
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At June 30, 2025: |
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Whole loans |
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$ |
10,300 |
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$ |
24,410 |
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$ |
80,871 |
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$ |
115,581 |
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$ |
1,257,054 |
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$ |
1,372,635 |
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$ |
75,257 |
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Mezzanine loans (3) |
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— |
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— |
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4,700 |
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4,700 |
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14,663 |
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19,363 |
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— |
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Total |
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$ |
10,300 |
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$ |
24,410 |
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$ |
85,571 |
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$ |
120,281 |
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$ |
1,271,717 |
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$ |
1,391,998 |
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$ |
75,257 |
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At December 31, 2024: |
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Whole loans |
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$ |
— |
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$ |
70,760 |
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$ |
5,614 |
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$ |
76,374 |
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$ |
1,406,318 |
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$ |
1,482,692 |
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$ |
— |
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Mezzanine loan (3) |
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— |
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— |
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4,700 |
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4,700 |
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— |
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|
4,700 |
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— |
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Total |
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$ |
— |
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$ |
70,760 |
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$ |
10,314 |
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$ |
81,074 |
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$ |
1,406,318 |
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$ |
1,487,392 |
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$ |
— |
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(1)The total amortized cost of CRE whole loans excluded accrued interest receivable of $19.1 million and $14.6 million at June 30, 2025 and December 31, 2024, respectively. (2)During the three and six months ended June 30, 2025, the Company recognized interest income of $1.5 million and $3.0 million, respectively, on two CRE whole loans with a principal payment past due greater than 90 days at June 30, 2025. (3)Includes one loan, with a total amortized cost of $4.7 million, that was fully reserved at both June 30, 2025 and December 31, 2024.
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