Commercial Mortgage Loans Held for Investment

3 Months Ended

Mar. 31, 2026

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Commercial Mortgage Loans Held for Investment

Note 3 – Commercial Mortgage Loans Held for Investment

The following tables show a summary of the Company’s commercial mortgage loans held for investment as of March 31, 2026 and December 31, 2025:

March 31, 2026


Loan Type (1)	Number of Loans		Principal Balance		Unamortized (fees)/costs, net		Allowance for credit losses			Carrying Value		Weighted Average Interest Rate (2)			Weighted Average Years to Maturity (3)
First mortgage loans		14	$	328,661	$	1,461	$	(8,818	)	$	321,304		7.4	%		0.5
Credit loans		1		7,500		—		—			7,500		9.2	%		1.5
Total and average		15	$	336,161	$	1,461	$	(8,818	)	$	328,804		7.5	%		0.5

December 31, 2025


Loan Type (1)	Number of Loans		Principal Balance		Unamortized (fees)/costs, net		Allowance for credit losses			Carrying Value		Weighted Average Interest Rate (2)			Weighted Average Years to Maturity (3)
First mortgage loans		14	$	343,175	$	1,148	$	(3,930	)	$	340,393		7.3	%		0.4
Credit loans		1		7,500		—		—			7,500		9.2	%		1.8
Total and average		15	$	350,675	$	1,148	$	(3,930	)	$	347,893		7.3	%		0.4

(1)

First mortgage loans are first position mortgage loans and credit loans are mezzanine and subordinated loans.

(2)

Weighted average interest rate is based on the loan spreads plus the applicable indices as of the last interest reset date, which is typically the 15th of each month. On March 15, 2026, the one-month term USD Secured Overnight Financing Rate (“SOFR”) rate reset to 3.67%. On December 15, 2025, the SOFR rate reset to 3.75%. Weighted average interest rate excludes maturity default interest and interest on loans placed on nonaccrual status.

(3)

Weighted average years to maturity excludes allowable extensions on the loans.

For the three months ended March 31, 2026, the activity in the Company’s commercial mortgage loans, held-for-investment portfolio was as follows:


	Commercial mortgage loans at cost			Allowance for credit losses			Carrying Value
Balance at Beginning of Year	$	351,823		$	(3,930	)	$	347,893
Loan originations/advances		11,400			—			11,400
Principal repayments		(25,916	)		—			(25,916	)
Amortization of loan origination and deferred exit fees		509			—			509
Origination fees and extension fees received on commercial loans		(194	)		—			(194	)
Provision for credit losses		—			(4,888	)		(4,888	)
Balance at End of Period	$	337,622		$	(8,818	)	$	328,804

Allowance for Credit Losses

The following table presents the activity in the Company’s allowance for credit losses for the three months ended March 31, 2026:


	Commercial Mortgage Loans			Unfunded Loan Commitments (1)			Total
Balance at beginning of period	$	(3,930	)	$	(22	)	$	(3,952	)
(Provision for) reversal of credit losses		(4,888	)		5			(4,883	)
Ending allowance for credit losses	$	(8,818	)	$	(17	)	$	(8,835	)

(1)

The reserve for expected credit losses related to unfunded loan commitments is recorded in “accrued expenses and other liabilities” on the consolidated balance sheets.

The following table presents the activity in the Company’s allowance for credit losses for the three months ended March 31, 2025:


	Commercial Mortgage Loans			Unfunded Loan Commitments (1)			Total
Balance at beginning of period	$	(13,898	)	$	(96	)	$	(13,994	)
Reversal of credit losses		1,481			15			1,496
Ending allowance for credit losses	$	(12,417	)	$	(81	)	$	(12,498	)

(1)

The reserve for expected credit losses related to unfunded loan commitments is recorded in “accrued expenses and other liabilities” on the consolidated balance sheets.

As of March 31, 2026, the Company had a total current expected credit loss (“CECL”) reserve of $8,835, which included an asset-specific component of $4,173 related to two loans. During the three months ended March 31, 2026, the Company increased the CECL reserve by $4,883. This CECL reserve reflects certain loans assessed for impairment in the Company’s portfolio as well as reserves determined based on an analysis of macroeconomic conditions. See “Asset-Specific CECL Reserve” section below for further discussion on the loans with asset-specific CECL reserve.

As of March 31, 2025, the Company had a total CECL reserve of $12,498, which included an asset-specific component of $8,180 related to four loans. During the three months ended March 31, 2025, the Company decreased the CECL reserve by $1,496. This CECL reserve reflects certain loans assessed for impairment in the Company’s portfolio as well as reserves determined based on an analysis of macroeconomic conditions.

Credit Characteristics

As part of the Company’s process for monitoring the credit quality of its investments, it performs a quarterly asset review of the investment portfolio and assigns risk ratings to each of its loans and certain securities it may own, such as CMBS. Risk factors include

payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographic location, as well as national and regional economic factors. To determine the likelihood of loss, the loans are rated on a 5-point scale as follows:


Investment Grade	Investment Grade Definition
1	Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2	Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3	Performing investment requiring closer monitoring. Trends and risk factors show some deterioration. Collection of principal and interest is still expected.
4	Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5	Underperforming investment with expected loss of interest and some principal.

All investments are assigned an initial risk rating of 2 at origination or acquisition.

As of March 31, 2026, six loans had a risk rating of 2, four had a risk rating of 3 and five had a risk rating of 4. As of December 31, 2025, five loans had a risk rating of 2, eight had a risk rating of 3 and two had a risk rating of 4.

Asset-Specific CECL Reserve

The table below provides the components of the asset-specific CECL reserve as of March 31, 2026 and December 31, 2025:


Loan Type	Collateral Type	March 31, 2026		December 31, 2025
Senior	Multifamily	$	3,615	$	942	(1)
Senior	Multifamily		558		—	(2)
Total		$	4,173	$	942
____________

(1)

The loan is secured by a multifamily property in Converse, TX with an outstanding balance of $24,946 and no unfunded commitment as of March 31, 2026, and a maturity date of May 9, 2026. The Company has recorded an asset-specific CECL reserve of $3,615 for the loan as of March 31, 2026 as the estimated value of the property securing the loan was below the loan balance. The loan has a risk rating of 4 as of March 31, 2026. The Company is negotiating an extension with the borrower.

(2)

The loan is secured by a multifamily property in Garland, TX with an outstanding balance of $20,102 and $598 unfunded commitment as of March 31, 2026, and a maturity date of May 9, 2026. The Company has recorded an asset-specific CECL reserve of $558 for the loan as of March 31, 2026 as the estimated value of the property securing the loan was below the loan balance. The loan has a risk rating of 4 as of March 31, 2026. The Company is negotiating an extension with the borrower.

There were no loans on nonaccrual status during the three months ended March 31, 2026. During the three months ended March 31, 2025, the Company recognized $767 in interest income related to the nonaccrual status loans prior to such loans being placed on nonaccrual status. During the three months ended March 31, 2025, there was no reversal of interest income as a result of placing the loans on nonaccrual status. For the three months ended March 31, 2025, the total interest income forgone after placing these loans on nonaccrual status was $572.

Loan Modifications

The Company may amend or modify a loan based on its specific facts and circumstances. These modifications are often in the form of a term extension to provide the borrower additional time to refinance or sell the collateral property in order to repay the principal balance of the loan. Such extensions are generally made at the loan’s contractual interest rate and may require an extension fee be paid to the Company.

During the three months ended March 31, 2026, the Company made no modification that is disclosable under ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). During the three months ended March 31, 2025, the Company made one such modification that is disclosable under ASU 2022-02, as it was considered an other-than-insignificant payment delay for a borrower experiencing financial difficulty. In this instance, the Company granted a term extension to February 9, 2026 for a senior loan secured by an office property located in Honolulu, HI described above. The modification provided for $750 in principal paydown and payments toward cash flow reserve deposit and modification fee of $600 and $50, respectively. The modification also provides for the accrued maturity default interest of $631 on the loan as of March 31, 2025 to be repaid as deferred commitment fee upon loan maturity. The loan’s modified terms were included in the determination of the CECL reserve. The loan had an amortized cost basis of $12,700, representing 3.9% of the Company’s commercial mortgage loans as of March 31, 2026. The loan matured on February 9, 2026 and was not repaid or extended. The Company sent the borrower a maturity default notice and began the foreclosure process.

- Definition

The entire disclosure for investment in mortgage loan on real estate by entity with substantial portion of business acquiring and holding investment real estate or interest in real estate. Includes, but is not limited to, information for each mortgage loan receivable equaling or exceeding 3 percent of carrying amount of mortgage.

+ References + Details