Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 09, 2023 | |
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-35845 | |
Entity Registrant Name | LUMENT FINANCE TRUST, INC. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 45-4966519 | |
Entity Address, Address Line One | 230 Park Avenue | |
Entity Address, Address Line Two | 20th Floor | |
Entity Address, City or Town | New York | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 10169 | |
City Area Code | 212 | |
Local Phone Number | 317-5700 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding (in shares) | 52,231,152 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001547546 | |
Current Fiscal Year End Date | --12-31 | |
Common Stock | ||
Entity Information [Line Items] | ||
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | LFT | |
Security Exchange Name | NYSE | |
Redeemable Preferred Stock | ||
Entity Information [Line Items] | ||
Title of 12(b) Security | 7.875% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share | |
Trading Symbol | LFTPrA | |
Security Exchange Name | NYSE |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 | |
ASSETS | |||
Cash and cash equivalents | [1] | $ 43,408,581 | $ 43,858,515 |
Restricted cash | [1] | 6,225,360 | 3,507,850 |
Commercial mortgage loans held-for-investment, at amortized cost | [1] | 1,355,547,986 | 1,076,148,186 |
Less: Allowance for credit losses | [1] | (4,716,230) | (4,258,668) |
Commercial mortgage loans held-for-investment, net of allowance for credit losses | [1] | 1,350,831,756 | 1,071,889,518 |
Mortgage servicing rights, at fair value | [1] | 748,307 | 795,656 |
Accrued interest receivable | [1] | 8,607,899 | 5,797,991 |
Investment related receivable | [1] | 31,121,852 | 0 |
Other assets | [1] | 2,388,093 | 2,116,007 |
Total assets | [1] | 1,443,331,848 | 1,127,965,537 |
LIABILITIES | |||
Collateralized loan obligations and secured financings, net | [1] | 1,145,317,374 | 829,310,498 |
Secured term loan, net | [1] | 47,157,418 | 46,971,042 |
Accrued interest payable | [1] | 3,832,841 | 2,360,809 |
Dividends payable | [1] | 4,657,473 | 4,131,369 |
Fees and expenses payable to Manager | [1] | 1,364,097 | 1,606,333 |
Other liabilities | [1],[2] | 407,298 | 583,989 |
Total liabilities | [1] | 1,202,736,501 | 884,964,040 |
COMMITMENTS AND CONTINGENCIES (NOTES 10 & 11) | [1] | ||
EQUITY | |||
Preferred Stock: par value $0.01 per share; 50,000,000 shares authorized; 7.875% Series A Cumulative Redeemable, $60,000,000 aggregate liquidation preference, 2,400,000 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | [1] | 57,254,935 | 57,254,935 |
Common Stock: par value $0.01 per share; 450,000,000 shares authorized, 52,231,152 shares issued and outstanding, at September 30, 2023 and December 31, 2022, respectively | [1] | 522,312 | 522,252 |
Additional paid-in capital | [1] | 314,561,930 | 314,598,384 |
Cumulative distributions to stockholders | [1] | (174,203,387) | (160,724,426) |
Accumulated earnings | [1] | 42,360,057 | 31,250,852 |
Total stockholders' equity | [1] | 240,495,847 | 242,901,997 |
Noncontrolling interests | [1] | 99,500 | 99,500 |
Total equity | [1] | 240,595,347 | 243,001,497 |
Total liabilities and equity | [1] | $ 1,443,331,848 | $ 1,127,965,537 |
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion.[2]Includes $35,480 and $0 of Current Expected Credit Loss ("CECL") allowance related to unfunded commitments on commercial mortgage loans, net as of September 30, 2023 and December 31, 2022, respectively. |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2023 | Dec. 31, 2022 | ||
Variable Interest Entity [Line Items] | |||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 | |
Preferred stock, dividend rate, percentage | 7.875% | 7.875% | |
Preferred stock, aggregate liquidation preference | $ 60,000,000 | $ 60,000,000 | |
Preferred stock, shares issued (in shares) | 2,400,000 | 2,400,000 | |
Preferred stock, shares outstanding (in shares) | 2,400,000 | 2,400,000 | |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 | |
Common stock, shares issued (in shares) | 52,231,152 | 52,231,152 | |
Common stock, shares outstanding (in shares) | 52,231,152 | 52,231,152 | |
Total | [1] | $ 1,443,331,848 | $ 1,127,965,537 |
Liabilities | [1] | 1,202,736,501 | 884,964,040 |
Unfunded Loan Commitment | |||
Variable Interest Entity [Line Items] | |||
Allowance for credit loss | 35,480 | 0 | |
Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd. | |||
Variable Interest Entity [Line Items] | |||
Total | 1,384,961,307 | 1,005,507,371 | |
Liabilities | $ 1,149,063,668 | $ 831,575,144 | |
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Interest income: | ||||
Commercial mortgage loans held-for-investment | $ 31,067,350 | $ 14,743,563 | $ 74,830,619 | $ 37,386,399 |
Cash and cash equivalents | 789,442 | 4,969 | 1,878,550 | 14,736 |
Interest expense: | ||||
Collateralized loan obligations and secured financings | (21,364,918) | (8,317,893) | (48,597,825) | (17,607,021) |
Secured term loan | (947,509) | (947,509) | (2,811,631) | (2,807,362) |
Net interest income | 9,544,365 | 5,483,130 | 25,299,713 | 16,986,752 |
Expenses: | ||||
Management and incentive fees | 1,072,569 | 1,096,144 | 3,253,205 | 3,111,413 |
General and administrative expenses | 861,447 | 851,528 | 2,692,236 | 2,664,680 |
Operating expenses reimbursable to Manager | 284,859 | 555,307 | 1,372,511 | 1,594,662 |
Other operating expenses | 168,062 | 83,574 | 2,042,346 | 237,572 |
Compensation expense | 58,750 | 73,016 | 182,444 | 178,797 |
Total expenses | 2,445,687 | 2,659,569 | 9,542,742 | 7,787,124 |
Other income and expense: | ||||
Provision for credit losses, net | (791,563) | (1,521,023) | (1,166,962) | (1,872,937) |
Change in unrealized (loss) gain on mortgage servicing rights | 1,573 | 37,312 | (47,350) | 265,910 |
Servicing income, net | 70,842 | 62,451 | 167,766 | 185,685 |
Total other income and expense | (719,148) | (1,421,260) | (1,046,546) | (1,421,342) |
Net income before provision for income taxes | 6,379,530 | 1,402,301 | 14,710,425 | 7,778,286 |
Benefit from (provision for) income taxes | (19,803) | 97,974 | (9,780) | 20,640 |
Net income | 6,359,727 | 1,500,275 | 14,700,645 | 7,798,926 |
Dividends accrued to preferred stockholders | (1,185,042) | (1,185,042) | (3,555,042) | (3,555,042) |
Net income attributable to common stockholders | 5,174,685 | 315,233 | 11,145,603 | 4,243,884 |
Earnings per share: | ||||
Net income attributable to common stockholders (basic) | 5,174,685 | 315,233 | 11,145,603 | 4,243,884 |
Net income attributable to common stockholders (diluted) | $ 5,174,685 | $ 315,233 | $ 11,145,603 | $ 4,243,884 |
Weighted average number of shares of common stock outstanding (in shares) | 52,231,152 | 52,231,152 | 52,231,152 | 47,031,833 |
Basic income per share (in dollars per share) | $ 0.10 | $ 0.01 | $ 0.21 | $ 0.09 |
Diluted income per share (in dollars per share) | 0.10 | 0.01 | 0.21 | 0.09 |
Dividends declared per share of common stock (in dollars per share) | $ 0.07 | $ 0.06 | $ 0.19 | $ 0.18 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Equity - USD ($) | Total | Transition adjustment | Total Stockholders' Equity | Total Stockholders' Equity Transition adjustment | Preferred Stock | Common Stock | Additional Paid-in Capital | Cumulative Distributions to Stockholders | Accumulated Earnings | Accumulated Earnings Transition adjustment | Noncontrolling interests | |
Beginning balance (in shares) at Dec. 31, 2021 | 2,400,000 | |||||||||||
Balance at Dec. 31, 2021 | $ 169,375,500 | $ 169,276,000 | $ 57,254,935 | $ 249,434 | $ 233,833,749 | $ (143,449,310) | $ 21,387,192 | $ 99,500 | ||||
Beginning balance (in shares) at Dec. 31, 2021 | 24,947,883 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Issuance of common stock (in shares) | 27,277,269 | |||||||||||
Issuance of common stock | 83,468,443 | 83,468,443 | $ 272,773 | 83,195,670 | ||||||||
Cost of issuing common stock | (2,404,070) | (2,404,070) | (2,404,070) | |||||||||
Restricted stock compensation expense | 4,638 | 4,638 | 4,638 | |||||||||
Net income | 2,954,799 | 2,954,799 | 2,954,799 | |||||||||
Common stock dividends | (3,133,509) | (3,133,509) | (3,133,509) | |||||||||
Preferred stock dividends | (1,184,958) | (1,184,958) | (1,184,958) | |||||||||
Ending balance (in shares) at Mar. 31, 2022 | 2,400,000 | |||||||||||
Balance at Mar. 31, 2022 | 249,080,843 | 248,981,343 | $ 57,254,935 | $ 522,207 | 314,629,987 | (147,767,777) | 24,341,991 | 99,500 | ||||
Ending balance (in shares) at Mar. 31, 2022 | 52,225,152 | |||||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 2,400,000 | |||||||||||
Balance at Dec. 31, 2021 | 169,375,500 | 169,276,000 | $ 57,254,935 | $ 249,434 | 233,833,749 | (143,449,310) | 21,387,192 | 99,500 | ||||
Beginning balance (in shares) at Dec. 31, 2021 | 24,947,883 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net income | 7,798,926 | |||||||||||
Common stock dividends | (9,401,247) | |||||||||||
Preferred stock dividends | (3,555,042) | |||||||||||
Ending balance (in shares) at Sep. 30, 2022 | 2,400,000 | |||||||||||
Balance at Sep. 30, 2022 | 245,266,509 | 245,167,009 | $ 57,254,935 | $ 522,252 | 314,609,303 | (156,405,599) | 29,186,118 | 99,500 | ||||
Ending balance (in shares) at Sep. 30, 2022 | 52,231,152 | |||||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 2,400,000 | |||||||||||
Balance at Dec. 31, 2021 | $ 169,375,500 | 169,276,000 | $ 57,254,935 | $ 249,434 | 233,833,749 | (143,449,310) | 21,387,192 | 99,500 | ||||
Beginning balance (in shares) at Dec. 31, 2021 | 24,947,883 | |||||||||||
Ending balance (in shares) at Dec. 31, 2022 | 2,400,000 | 2,400,000 | ||||||||||
Balance at Dec. 31, 2022 | $ 243,001,497 | [1] | $ (3,591,440) | 242,901,997 | $ (3,591,440) | $ 57,254,935 | $ 522,252 | 314,598,384 | (160,724,426) | 31,250,852 | $ (3,591,440) | 99,500 |
Ending balance (in shares) at Dec. 31, 2022 | 52,231,152 | 52,231,152 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Accounting Standards Update [Extensible Enumeration] | Accounting Standards Update 2016-13 | |||||||||||
Beginning balance (in shares) at Mar. 31, 2022 | 2,400,000 | |||||||||||
Balance at Mar. 31, 2022 | $ 249,080,843 | 248,981,343 | $ 57,254,935 | $ 522,207 | 314,629,987 | (147,767,777) | 24,341,991 | 99,500 | ||||
Beginning balance (in shares) at Mar. 31, 2022 | 52,225,152 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Issuance of common stock (in shares) | 6,000 | |||||||||||
Issuance of common stock | 18,810 | 18,810 | $ 45 | 18,765 | ||||||||
Cost of issuing common stock | (14,196) | (14,196) | (14,196) | |||||||||
Restricted stock compensation expense | (14,334) | (14,334) | (14,334) | |||||||||
Net income | 3,343,852 | 3,343,852 | 3,343,852 | |||||||||
Common stock dividends | (3,133,869) | (3,133,869) | (3,133,869) | |||||||||
Preferred stock dividends | (1,185,042) | (1,185,042) | (1,185,042) | |||||||||
Ending balance (in shares) at Jun. 30, 2022 | 2,400,000 | |||||||||||
Balance at Jun. 30, 2022 | 248,096,064 | 247,996,564 | $ 57,254,935 | $ 522,252 | 314,620,222 | (152,086,688) | 27,685,843 | 99,500 | ||||
Ending balance (in shares) at Jun. 30, 2022 | 52,231,152 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Issuance of common stock (in shares) | 0 | |||||||||||
Issuance of common stock | 0 | 0 | $ 0 | 0 | ||||||||
Cost of issuing common stock | (14,352) | (14,352) | (14,352) | |||||||||
Restricted stock compensation expense | 3,433 | 3,433 | 3,433 | |||||||||
Net income | 1,500,275 | 1,500,275 | 1,500,275 | |||||||||
Common stock dividends | (3,133,869) | (3,133,869) | (3,133,869) | |||||||||
Preferred stock dividends | (1,185,042) | (1,185,042) | (1,185,042) | |||||||||
Ending balance (in shares) at Sep. 30, 2022 | 2,400,000 | |||||||||||
Balance at Sep. 30, 2022 | $ 245,266,509 | 245,167,009 | $ 57,254,935 | $ 522,252 | 314,609,303 | (156,405,599) | 29,186,118 | 99,500 | ||||
Ending balance (in shares) at Sep. 30, 2022 | 52,231,152 | |||||||||||
Beginning balance (in shares) at Dec. 31, 2022 | 2,400,000 | 2,400,000 | ||||||||||
Balance at Dec. 31, 2022 | $ 243,001,497 | [1] | (3,591,440) | 242,901,997 | (3,591,440) | $ 57,254,935 | $ 522,252 | 314,598,384 | (160,724,426) | 31,250,852 | (3,591,440) | 99,500 |
Beginning balance (in shares) at Dec. 31, 2022 | 52,231,152 | 52,231,152 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Cost of issuing common stock | $ (14,040) | (14,040) | (14,040) | |||||||||
Restricted stock compensation expense | 3,358 | 3,358 | 3,358 | |||||||||
Net income | 5,766,691 | 5,766,691 | 5,766,691 | |||||||||
Common stock dividends | (3,133,869) | (3,133,869) | (3,133,869) | |||||||||
Preferred stock dividends | (1,184,958) | (1,184,958) | (1,184,958) | |||||||||
Ending balance (in shares) at Mar. 31, 2023 | 2,400,000 | |||||||||||
Balance at Mar. 31, 2023 | $ 240,847,239 | 240,747,739 | $ 57,254,935 | $ 522,252 | 314,587,702 | (165,043,253) | 33,426,103 | 99,500 | ||||
Ending balance (in shares) at Mar. 31, 2023 | 52,231,152 | |||||||||||
Beginning balance (in shares) at Dec. 31, 2022 | 2,400,000 | 2,400,000 | ||||||||||
Balance at Dec. 31, 2022 | $ 243,001,497 | [1] | $ (3,591,440) | 242,901,997 | $ (3,591,440) | $ 57,254,935 | $ 522,252 | 314,598,384 | (160,724,426) | 31,250,852 | $ (3,591,440) | 99,500 |
Beginning balance (in shares) at Dec. 31, 2022 | 52,231,152 | 52,231,152 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net income | $ 14,700,645 | |||||||||||
Common stock dividends | (9,923,919) | |||||||||||
Preferred stock dividends | $ (3,555,042) | |||||||||||
Ending balance (in shares) at Sep. 30, 2023 | 2,400,000 | 2,400,000 | ||||||||||
Balance at Sep. 30, 2023 | $ 240,595,347 | [1] | 240,495,847 | $ 57,254,935 | $ 522,312 | 314,561,930 | (174,203,387) | 42,360,057 | 99,500 | |||
Ending balance (in shares) at Sep. 30, 2023 | 52,231,152 | 52,231,152 | ||||||||||
Beginning balance (in shares) at Mar. 31, 2023 | 2,400,000 | |||||||||||
Balance at Mar. 31, 2023 | $ 240,847,239 | 240,747,739 | $ 57,254,935 | $ 522,252 | 314,587,702 | (165,043,253) | 33,426,103 | 99,500 | ||||
Beginning balance (in shares) at Mar. 31, 2023 | 52,231,152 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Issuance of common stock | 13,620 | 13,620 | $ 60 | 13,560 | ||||||||
Cost of issuing common stock | (14,196) | (14,196) | (14,196) | |||||||||
Restricted stock compensation expense | (10,784) | (10,784) | (10,784) | |||||||||
Net income | 2,574,227 | 2,574,227 | 2,574,227 | |||||||||
Common stock dividends | (3,133,869) | (3,133,869) | (3,133,869) | |||||||||
Preferred stock dividends | (1,185,042) | (1,185,042) | (1,185,042) | |||||||||
Ending balance (in shares) at Jun. 30, 2023 | 2,400,000 | |||||||||||
Balance at Jun. 30, 2023 | 239,091,195 | 238,991,695 | $ 57,254,935 | $ 522,312 | 314,576,282 | (169,362,164) | 36,000,330 | 99,500 | ||||
Ending balance (in shares) at Jun. 30, 2023 | 52,231,152 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Cost of issuing common stock | (14,352) | (14,352) | (14,352) | |||||||||
Net income | 6,359,727 | 6,359,727 | 6,359,727 | |||||||||
Common stock dividends | (3,656,181) | (3,656,181) | (3,656,181) | |||||||||
Preferred stock dividends | $ (1,185,042) | (1,185,042) | (1,185,042) | |||||||||
Ending balance (in shares) at Sep. 30, 2023 | 2,400,000 | 2,400,000 | ||||||||||
Balance at Sep. 30, 2023 | $ 240,595,347 | [1] | $ 240,495,847 | $ 57,254,935 | $ 522,312 | $ 314,561,930 | $ (174,203,387) | $ 42,360,057 | $ 99,500 | |||
Ending balance (in shares) at Sep. 30, 2023 | 52,231,152 | 52,231,152 | ||||||||||
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Cash flows from operating activities: | ||
Net income | $ 14,700,645 | $ 7,798,926 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Accretion of commercial mortgage loans held-for-investment discounts | (431,009) | (125,098) |
Amortization of commercial mortgage loans held-for-investment premiums | 16,201 | 55,804 |
Accretion of deferred loan fees | (195,022) | 0 |
Amortization of deferred offering costs | (42,588) | (100,219) |
Amortization of deferred financing costs | 2,302,706 | 2,072,877 |
Provision for credit losses, net | 1,166,962 | 1,872,937 |
Unrealized loss (gain) on mortgage servicing rights | 47,350 | (265,910) |
Restricted stock compensation expense | 6,194 | 12,547 |
Net change in: | ||
Accrued interest receivable | (2,809,908) | (281,273) |
Other assets | (272,085) | (310,623) |
Accrued interest payable | 1,472,032 | 958,090 |
Fees and expenses payable to Manager | (242,236) | (176,343) |
Other liabilities | (205,860) | 224,987 |
Net cash provided by operating activities | 15,513,382 | 11,736,702 |
Cash flows from investing activities: | ||
Purchase of commercial mortgage loans held-for-investment | (517,608,525) | (269,596,827) |
Principal payments from commercial mortgage loans held-for-investment | 203,425,029 | 247,335,751 |
Net cash (used in) investing activities | (314,183,496) | (22,261,076) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 0 | 81,136,045 |
Proceeds from collateralized loan obligations and secured financings | 317,700,000 | 0 |
Payment of deferred financing costs | (3,809,453) | (119,375) |
Dividends paid on common stock | (9,401,607) | (8,512,687) |
Dividends paid on preferred stock | (3,551,250) | (3,551,250) |
Net cash provided by financing activities | 300,937,690 | 68,952,733 |
Net increase in cash, cash equivalents and restricted cash | 2,267,576 | 58,428,359 |
Cash, cash equivalents and restricted cash, beginning of period | 47,366,365 | 18,279,052 |
Cash, cash equivalents and restricted cash, end of period | 49,633,941 | 76,707,411 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 47,634,719 | 17,383,416 |
Non-cash investing and financing activities information | ||
Dividends declared but not paid at end of period | $ 4,657,473 | $ 4,135,161 |
ORGANIZATION AND BUSINESS OPERA
ORGANIZATION AND BUSINESS OPERATIONS | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BUSINESS OPERATIONS | ORGANIZATION AND BUSINESS OPERATIONS Lument Finance Trust, Inc. (together with its consolidated subsidiaries, the "Company"), is a Maryland corporation that focuses primarily on investing in, originating, financing and managing a portfolio of commercial real estate ("CRE") debt investments. The Company is externally managed by Lument Investment Management, LLC (the "Manager" or "Lument IM"). The Company's common stock is listed on the NYSE under the symbol "LFT." The Company was incorporated on March 28, 2012 and commenced operations on May 16, 2012. The Company began trading as a publicly traded company on March 22, 2013. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited consolidated financial statements and related notes have been prepared in accordance with GAAP for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the financial statements prepared under GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission ('SEC") on March 23, 2023. Principles of Consolidation The accompanying consolidated financial statements of the Company include the accounts of the Company and all subsidiaries which it controls (i) through voting or similar rights or (ii) by means other than voting rights if the Company is the primary beneficiary of a variable interest entity ("VIE"). All significant intercompany transactions have been eliminated on consolidation. Use of Estimates The financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires the Company to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amount and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g. valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. The Company's estimates are inherently subjective in nature and actual results could differ from its estimates and the differences may be material. VIEs An entity is considered a VIE when any of the following applies: (1) the equity investors (if any) lack one or more essential characteristics of a controlling financial interest; (2) the equity investment at risk is not sufficient to finance that entity's activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both the following characteristics: (1) the power to direct activities that, when taken together, most significantly impact the VIE performance; and (2) the obligation to absorb losses and right to receive returns from the VIE that would be significant to the VIE. The Company evaluates quarterly its junior retained notes and preferred shares of LFT CRE 2021-FL1, Ltd. and LMF 2023-1, LLC for potential consolidation. At September 30, 2023, the Company determined it was the primary beneficiary of LFT CRE 2021-FL1, Ltd. and LMF 2023-1, LLC based on its power to direct the activities that most significantly impact the economic performance of LFT 2021-FL1, Ltd.and LMF 2023-1, LLC and its obligation to absorb losses derived from ownership of its junior retained notes and preferred shares. Accordingly, the Company consolidated the assets, liabilities, income and expenses of the underlying issuing entities. The Company's maximum exposure to loss from collateralized loan obligations ("CLO") and secured financings was $234,850,000 and $166,250,000 at September 30, 2023 and December 31, 2022, respectively. Collateralized Loan Obligations and Secured Financings CLOs and secured financings represent third-party liabilities of LFT CRE 2021-FL1, Ltd. and LFT CRE 2021-FL1, LLC (collectively, the "2021-FL1 CLO") and LMF 2023-1, LLC ("LMF 2023-1 Financing"). The 2021-FL1 CLO and LMF 2023-1 Financing are VIEs and management has determined that the Company is the primary beneficiary of the 2021-FL1 CLO and LMF 2023-1 Financing. Accordingly, the Company consolidates the assets, liabilities (other than the below investment grade-rated notes and preferred shares of the 2021-FL1 CLO and LMF 2023-1 Financing retained by the Company that are eliminated on consolidation), income and expense of the 2021-FL1 CLO and LMF 2023-1 Financing. The third-party obligations of the 2021-FL1 CLO and LMF 2023-1 Financing do not have any recourse to the Company as the consolidator of the CLO and secured financing issuing entities. The third-party obligations of the 2021-FL1 CLO and LMF 2023-1 Financing are carried at their outstanding unpaid principal balances, net of any deferred financing costs. Any premiums, discounts or deferred financing costs associated with these third-party obligations are amortized to interest expense using the effective interest method over the expected average life of the related obligations, or on a straight line basis when it approximates the effective interest method. The Company's maximum exposure to loss from CLOs and secured financings was $234,850,000 and $166,250,000 at September 30, 2023 and December 31, 2022, respectively. In the second quarter of 2023, $1,684,618 in costs related to a previously contemplated public CRE CLO were expensed as "Other operating expenses" in the statements of operations as a result abandoning the contemplated transaction due to then current capital market environment. Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents at time of purchase include cash held in bank accounts on an overnight basis and other short term deposit accounts with banks having maturities of 90 days or less at time of acquisition. The Company maintains its cash and cash equivalents with highly rated financial institutions, and at times these balances exceed insurable amounts. Restricted cash includes cash held within the 2021-FL1 CLO as of September 30, 2023 and December 31, 2022, respectively. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statements of cash flows. September 30, 2023 December 31, 2022 Cash and cash equivalents $ 43,408,581 $ 43,858,515 Restricted cash held within the 2021-FL1 CLO $ 6,225,360 $ 3,507,850 Total cash, cash equivalents and restricted cash $ 49,633,941 $ 47,366,365 Deferred Offering Costs Direct costs incurred to issue shares classified as equity, such as legal and accounting fees, are deducted from the related proceeds and the net amount recorded as stockholders' equity. Accordingly, payments made by the Company in respect of such costs related to the issuance of shares are recorded as an asset in the accompanying consolidated balance sheets in the line item "Other assets," for subsequent deduction from the related proceeds upon closing of the offering. To the extent that certain costs, in particular legal fees, are known to have been accrued but have not yet been invoiced and paid, they are included in "Other accounts payable and accrued expenses" on the accompanying consolidated balance sheets. Fair Value Measurements The "Fair Value Measurements and Disclosures" Topic 820 of the FASB, or ASC 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurement under GAAP. Specifically, the guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at measurement date. ASC 820 specifies a hierarchy of valuation techniques based on the inputs used in measuring fair value. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable market data from independent sources, while unobservable inputs reflect the Company's market assumptions. The three levels are defined as follows: • Level 1 Inputs – Quoted prices for identical instruments in active markets. • Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. • Level 3 Inputs – Instruments with primarily unobservable value drivers. Pursuant to ASC 820 we disclose fair value information about financial instruments, which are not otherwise reported at fair value in our consolidated balance sheet, to the extent it is practicable to estimate fair value for those certain instruments. The following methods and assumptions are used to estimate the fair value of each class of financial instrument, for which it is practicable to estimate that value: • Cash and cash equivalents : The carrying amount of cash and cash equivalents approximates fair value. • Restricted cash : The carrying amount of restricted cash approximates fair value. • Commercial mortgage loans : The Company determines the fair value of commercial mortgage loans by utilizing a pricing model based on discounted cash flow methodologies using discount rates, which reflect current market interest rates that would be offered for loans with similar characteristics and credit quality. Additionally, the Company may record fair value adjustments on a non-recurring basis when it has determined it necessary to record a specific impairment reserve or charge-off against a loan and the Company measures such specific reserve or charge-off using the fair value of the loan's collateral. To determine the fair value of loan collateral, the Company employs the income capitalization approach, appraised values, broker opinion of value, sale offers, letters of intention to purchase, or other valuation benchmarks, as applicable, depending upon the nature of such collateral and other relevant market factors. • Mortgage servicing rights : The Company determines the fair value of MSRs from a third-party pricing service on a recurring basis. The third-party pricing service uses common market pricing methods that include using discounted cash flow models to calculate present value, estimated net servicing income and observed market pricing for MSR purchase and sale transactions. The model considers contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. • Collateralized loan obligations : The Company determines the fair value of collateralized loan obligations by utilizing a third-party pricing service. In determining the value of a particular investment, pricing service providers may use market spreads, inventory levels, trade and bid history, as well as market insight from clients, trading desks and global research platform. • Secured term loan : The Company determines the fair value of its secured term loan based on a discounted cash flow methodology. Commercial Mortgage Loans Held-for-Investment Commercial mortgage loans held-for-investment represent floating-rate transitional loans and other commercial mortgage loans purchased or originated by the Company. These loans include loans sold into securitizations that the Company consolidates. Commercial mortgage loans held-for-investment are intended to be held-to-maturity and, accordingly, are carried at their unpaid principal balances, adjusted for net unamortized loan fees and costs (in respect of originated loans), premiums and discounts (in respect of purchased loans) and impairment, if any. Interest income is recognized as revenue using the effective interest method and is recorded on the accrual basis according to the terms of the underlying loan agreement. Any fees, costs, premiums and discounts associated with these loan investments are deferred and amortized over the term of the loan on a straight-line basis approximating the effective interest method. Income accrual is generally suspended and loans are placed on non-accrual status on the earlier of the date at which payment has become 90 days past due or when full and timely collection of interest and principal is considered not probable. The Company may return a loan to accrual status when repayment of principal and interest is reasonably assured under the terms of the underlying loan agreement. As of September 30, 2023, the Company held one loan, collateralized by a multifamily property, with an unpaid principal balance of $12.2 million on non-accrual status with interest collections accounted for under the cost recovery method. Additionally, as of September 30, 2023, the Company held two loans, collateralized by multifamily properties, with unpaid principal balances of $56.4 million on non-accrual status with interest collections accounted for on the cash basis method. On January 1, 2023, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") and amendments, which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model. CECL amends the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASC 2016-13 is included in "Allowance for credit losses" on our consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in "Other liabilities" in the consolidated balance sheets. The initial CECL reserve recorded on January 1, 2023 is reflected as a direct charge to retained earnings on our consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of operations. In connection with the adoption of ASU 2016-13, we recorded a $3.6 million decrease to accumulated earnings as of January 1, 2023. The Company's implementation process included a selection of a credit loss analytical model, completion and documentation of policies and procedures, changes to internal reporting processes and related internal controls and additional disclosures. A control framework for governance, data, forecast and model controls was developed to support the CECL process. Estimating an allowance for credit losses requires significant judgment and a variety of subjective assumptions, including (i) determination of relevant historical loan loss data sets, (ii) the current credit quality of loans and operating performance of loan collateral and the Company's expectations of performance and (iii) expectation of macroeconomic conditions over the relevant time period. In the absence of any Company history of valuation reserves or realized loan losses since our inception in 2013, other than on one office loan, the Company elected to utilize a widely-used analytical model incorporating a loss-given-default methodology and loan performance data for over 100,000 commercial real estate loans dating back to 1998. The Company expects to use this data set, or variants of it, unless the Company develops its own sufficient history of realized losses. The Company determines its CECL estimate based on macroeconomic forecasts that include baseline, optimistic and pessimistic scenarios during the reasonable forecast period. The Company determined the key variables driving its CECL loss estimate are debt service coverage ratio and LTV ratio. Other notable variables include property type, property location and loan vintage. The Company evaluates each loan rated Default Risk as to whether it is impaired on a quarterly basis. Impaired loans are individually evaluated based on the Company's quarterly assessment of each loan and assignment of a risk rating. Impairment occurs when the Company determines that the facts and circumstances of the loan deem it probable that the Company will not be able to collect all amounts due in accordance with the contractual terms of the loan. If a loan is considered to be impaired, an allowance is recorded to reduce the carrying value of the loan through a charge to the provision for (reversal of) credit losses. Impairment of these loans, all of which are deemed collateral dependent, is measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, actions of other lenders, and other factors deemed necessary by the Manager. Any loans deemed to be collateral dependent will be removed from the pool of assets measured under CECL. Actual losses, if any, could ultimately differ from estimated losses. The following table illustrates the day-one financial statement impact of the adoption of ASU 2016-13 on January 1, 2023: Pre-adoption Transition adjustment Post-adoption Assets Commercial mortgage loans, held-for-investment $ 1,076,148,186 $ — $ 1,076,148,186 Less: Allowance for credit losses (4,258,668) (3,549,501) (7,808,169) Commercial mortgage loans, held-for-investment, net of allowance for credit losses $ 1,071,889,518 $ (3,549,501) $ 1,068,340,017 Liabilities Other liabilities (1) $ 583,989 $ 41,939 $ 625,928 Equity Accumulated earnings $ 31,250,852 $ (3,591,440) $ 27,659,412 (1) Includes reserve for unfunded loan commitments Quarterly, the Company assesses the risk factors of each loan classified as held-for-investment and assigns a risk rating based on a variety of factors, including, without limitation, debt-service coverage ratio ("DSCR"), loan-to-value ratio ("LTV"), property type, geographic and local market dynamics, physical condition, leasing and tenant profile, adherence to business plan and exit plan, maturity default risk and project sponsorship. The Company's loans are rated on a 5-point scale, from least risk to greatest risk, respectively, which ratings are described as follows: 1. Very Low Risk : exceeds expectations and is outperforming underwriting or it is very likely that the underlying loan can be refinanced easily in the period's prevailing capital market conditions 2. Low Risk : meeting or exceeding underwritten expectation 3. Moderate Risk : consistent with underwritten expectations or the sponsor may be in the early stages of executing the business plan and the loan structure appropriately mitigates additional risks 4. High Risk : potential risk of default, a loss may occur in the event of default 5. Default Risk : imminent risk of default, a loss is likely in the event of default Mortgage Servicing Rights, at Fair Value Mortgage servicing rights ("MSRs") are associated with residential mortgage loans that the Company historically purchased and subsequently sold or securitized. MSRs are held and managed at Five Oaks Acquisition Corp. ("FOAC"), the Company's taxable REIT subsidiary ("TRS"). As the owner of MSRs, the Company is entitled to receive a portion of the interest payments from the associated residential mortgage loan, and is obligated to service, directly or through a subservicer, the associated loan. MSRs are reported at fair value. Residential mortgage loans for which the Company owns the MSRs are directly serviced by two sub-servicers retained by the Company. The Company does not directly service any residential mortgage loans. MSR income is recognized at the contractually agreed upon rate, net of the costs of sub-servicers retained by the Company. If a sub-servicer with which the Company contracts were to default, an evaluation of MSR assets for impairment would be undertaken at that time. Secured Term Loan The Company and certain of its subsidiaries are party to a $47.75 million credit and guaranty agreement with the lenders referred to therein and Cortland Capital Service LLC, as administrative agent and collateral agent for the lenders (the "Secured Term Loan"). The Secured Term Loan is carried at its unpaid principal balance, net of deferred financing costs. Deferred financing costs associated with this liability are amortized to interest expense on a straight line basis when it approximates the effective interest method. See Note 6 for additional information related to the Secured Term Loan. Common Stock At September 30, 2023 and December 31, 2022, the Company was authorized to issue up to 450,000,000 shares of common stock, par value $0.01 per share. On February 22, 2022, the Company closed a transferable common stock rights offering and issued 27,277,269 shares of common stock. The Company had 52,231,152 shares of common stock issued and outstanding at September 30, 2023 and December 31, 2022. Stock Repurchase Program On December 15, 2015, the Company's Board of Directors (the "Board") authorized a stock repurchase program ("Repurchase Program"), to repurchase up to $10 million of the Company's outstanding common stock. Subject to applicable securities laws, repurchase of common stock under the Repurchase Program may be made at times and in amounts as the Company deems appropriate, using available cash resources. Shares of common stock repurchased by the Company under the Repurchase Program, if any, will be canceled and, until reissued by the Company, will be deemed to be authorized but unissued shares of common stock. The Repurchase Program may be suspended or discontinued by the Company at any time and without prior notice. Preferred Stock At September 30, 2023 and December 31, 2022, the Company was authorized to issue up to 50,000,000 shares of preferred stock, par value $0.01 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Board. On May 5, 2021, the Company issued 2,400,000 shares of 7.875% Series A Cumulative Redeemable Preferred Stock (Series A Preferred Stock"). The Company had 2,400,000 shares of preferred stock issued and outstanding at September 30, 2023 and December 31, 2022, respectively. Our preferred stock is classified as permanent equity and carried at its liquidation preference less offering costs. See Note 12 for additional information related to our Series A Preferred Stock. Income Taxes The Company has elected to be taxed as a REIT under the Code for U.S. federal income tax purposes, commencing with the Company's short taxable period ended December 31, 2012. A REIT is generally taxable as a U.S. C-Corporation; however, so long as the Company qualifies as a REIT it is entitled to a special deduction for dividends paid to stockholders not otherwise available to corporations. Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent its distributions to stockholders equals, or exceeds, its REIT taxable income for the year. In addition, the Company must continue to meet certain REIT qualification requirements with respect to distributions, as well as certain asset, income and share ownership tests, in accordance with Sections 856 through 860 of the Code, as summarized below. In addition, the TRS is maintained to perform certain services and earn income for the Company that the Company is not permitted to engage in as a REIT. To maintain its qualification as a REIT, the Company must meet certain requirements, including but not limited to the following: (i) distribute at least 90% of its REIT taxable income to its stockholders; (ii) invest at least 75% of its assets in REIT qualifying assets, with additional restrictions with respect to asset concentration risk; and (iii) earn at least 95% of its gross income from qualifying sources of income, including at least 75% from qualifying real estate and real estate related sources. Regardless of the REIT election, the Company may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax as a U.S. C-Corporation, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. Certain activities of the Company are conducted through a TRS and therefore are taxed as a standalone U.S. C-Corporation. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The TRS is not subject to a distribution requirement with respect to its REIT owner. The TRS may retain earnings annually, resulting in an increase in the consolidated book equity of the Company and without a corresponding distribution requirement by the REIT. If the TRS generates net income, and declares dividends to the Company, such dividends will be included in its taxable income and necessitate a distribution to its stockholders in accordance with the REIT distribution requirements. The Company assesses its tax positions for all open tax years and determines whether the Company has any material unrecognized liabilities in accordance with ASC 740, Income Taxes. The Company records these liabilities to the extent the Company deems them more likely than not to be incurred. The Company's accounting policy with respect to interest and penalties is to classify these amounts as other interest expense. Earnings per Share The Company calculates basic and diluted earnings per share by dividing net income attributable to common stockholders for the period by the weighted-average shares of the Company's common stock outstanding for that period. Diluted earnings per share considers the effect of dilutive instruments, such as warrants, stock options, and unvested restricted stock, but use the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding. See Note 13 for details of the computation of basic and diluted earnings per share. Stock-Based Compensation The Company is required to recognize compensation costs relating to stock-based payment transactions in the consolidated financial statements. The Company accounts for share-based compensation using the fair-value based methodology prescribed by ASC 718, Share-Based Payment ("ASC 718"). Compensation cost related to restricted common stock issued to the Company's independent directors is measured at its estimated fair value at the grant date and amortized and expensed over the vesting period. See Note 9 for details of stock-based awards issuable under the Company's prior equity incentive, which expired on December 18, 2022 and is no longer being used to issue new equity awards. Comprehensive Income (Loss) Attributable to Common Stockholders For the three and nine months ended September 30, 2023 and 2022, comprehensive income equaled net income; therefore, a separate consolidated statement of comprehensive income is not included in the accompanying consolidated financial statements. Recently Issued and/or Adopted Accounting Standards Credit Losses On January 1, 2023, we adopted ASU 2016-13, which utilizes a current expected credit loss methodology ("CECL") for the recognition of credit losses for our commercial mortgage loans held-for-investment at amortized cost, at the time the financial asset is originated or acquired. The allowance for credit losses is adjusted for each period for changes in expected credit losses. This methodology replaces the multiple impairment methods in GAAP that generally required that a loss be incurred before it is recognized. We adopted ASU 2016-13 using the modified retrospective method, therefore, the results for reporting period prior to January 1, 2023 have been unadjusted and reported in accordance with previously applicable GAAP. Upon adoption of ASU 2016-13 on January 1, 2023, the Company recorded a cumulative-effect adjustment to accumulated earnings of $3.6 million, or $0.07 per common share. The CECL reserve required under ASU 2016-13 is a valuation account that is deducted from the amortized cost basis of related commercial mortgage loans on our balance sheet, which will reduce our stockholders' equity. The initial reserve recorded on January 1, 2023 was reflected as a direct charge against accumulated earnings; however, future net changes to the CECL reserve will be recognized in net income on our consolidated statements of operations. ASU 2016-13 does not require use of a particular method for determining the CECL reserve, but it does specify the allowance should be based on relevant information about past events, including historical loss experience, composition of current commercial mortgage loan portfolio, current conditions in real estate and capital markets, and reasonable and supportable forecasts for the expected term of each loan. Additionally, but for a few narrow exceptions, ASU 2016-13 requires that all financial instruments subject to CECL incur some amount of valuation reserve to reflect the underlying principle of the CECL model, that all loans, debt securities and similar financial assets bear some inherent risk of loss regardless of credit quality, amount of subordinate capital, or other risk mitigants. Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The standard was issued to ease the accounting effects of reform to the London Interbank Offered Rate ("LIBOR") and other reference rates. The standard provides optional expedients and exceptions for applying GAAP to debt instruments, leases, derivatives and other contracts affected by reference rate reform. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. The standard is effective for all entities as of March 12, 2020 through December 31, 2022 and may be elected over time as reference rate reform activities occur. In December 2022, the FASB issued ASU 2022-06, deferring the sunset date of ASC 848, Reference Rate Reform, from December 31, 2022 to December 31, 2024. ASC 848 provides temporary relief relating to potential accounting impact relating to replacement of LIBOR or other reference rates expected to be discounted as a result of reference rate reform. As of September 30, 2023, one-month term SOFR is utilized as the floating benchmark rate on all our floating rate loans and related financings. |
COMMERCIAL MORTGAGE LOANS HELD-
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT | 9 Months Ended |
Sep. 30, 2023 | |
Receivables [Abstract] | |
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT | COMMERCIAL MORTGAGE HELD-FOR-INVESTMENT The following tables summarize certain characteristics of the Company's investments in commercial mortgage loans as of September 30, 2023 and December 31, 2022: Weighted Average Loan Type Unpaid Principal Balance Carrying Value (1) Loan Count Floating Rate Loan % Coupon (2) Term (Years) (3) September 30, 2023 Loans held-for-investment Senior secured loans (4) $ 1,363,109,256 $ 1,355,547,986 87 100.0 % 8.8 % 3.1 Allowance for credit losses N/A (4,716,230) 1,363,109,256 1,350,831,756 87 100.0 % 8.8 % 3.1 Weighted Average Loan Type Unpaid Principal Balance Carrying Value Loan Count Floating Rate Loan % Coupon (2) Term (Years) (3) December 31, 2022 Loans held-for-investment Senior secured loans (4) $ 1,076,865,099 $ 1,076,148,186 71 100.0 % 7.6 % 3.5 Allowance for credit losses NA (4,258,668) 1,076,865,099 1,071,889,518 71 100.0 % 7.6 % 3.5 (1) Carrying Value includes $7,023,177 in unamortized purchase discounts as of September 30, 2023. (2) Weighted average coupon assumes applicable one-month LIBOR of 4.18% as of December 31, 2022 and 30-day Term Secured Overnight Financing Rate ("SOFR") of 5.33% and 4.19% as of September 30, 2023 and December 31, 2022, respectively, inclusive of weighted average interest rate floors of 0.41% and 0.27%, respectively. As of September 30, 2023, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. As of December 31, 2022, 77.4% of the investments by total investment exposure earned a floating rate indexed to one-month LIBOR and 22.6% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. (3) Weighted average remaining term assumes all extension options are exercised by the borrower, provided, however, that our loans may be repaid prior to such date. (4) As of September 30, 2023, $1,338,635,160 of the outstanding senior secured loans were held in VIEs and $12,196,596 of the outstanding senior secured loans were held outside of VIEs. As of December 31, 2022, $996,511,403 of the outstanding senior secured loans were held in VIEs and $75,378,115 of the outstanding senior secured loans were held outside VIEs. Activity: For the nine months ended September 30, 2023, the loan portfolio activity was as follows: Commercial Mortgage Loans Held-for-Investment Balance at December 31, 2022 $ 1,071,889,518 Purchases, advances and originations 517,608,525 Principal payments (234,559,887) Accretion of purchase discount 431,009 Amortization of purchase premium (16,201) Accretion of deferred loan fees 195,022 Cumulative-effect adjustment upon adoption of ASU 2016-13 (3,549,501) Provision for credit losses, net (1,166,729) Balance at September 30, 2023 $ 1,350,831,756 Loan Risk Ratings: As further described in Note 2, the Company evaluates the commercial mortgage loan portfolio on a quarterly basis and assigns a risk rating based on a variety of factors. The following table presents the principal balance and net book value of the loan portfolio based on the Company's internal risk ratings as of September 30, 2023 and December 31, 2022: September 30, 2023 Amortized Cost by Year of Origination Risk Rating Number of Loans Outstanding Principal 2023 2022 2021 2019 2017 1 — $ — — — — — — 2 7 113,292,630 — 111,578,471 — — — 3 59 914,218,238 — 391,872,631 493,653,236 — 19,631,380 4 18 266,994,932 — 102,420,800 163,078,861 — — 5 3 68,603,457 — — 31,814,789 36,781,588 — 87 $ 1,363,109,257 — 605,871,902 688,546,886 36,781,588 19,631,380 December 31, 2022 Amortized Cost by Year of Origination Risk Rating Number of Loans Outstanding Principal 2022 2021 2019 2018 2017 1 — $ — — — — — — 2 11 153,933,750 85,198,084 67,999,500 — — — 3 55 852,474,681 101,654,140 672,421,907 42,077,193 16,672,623 19,668,071 4 3 47,448,000 15,000,000 32,448,000 — — — 5 2 23,008,668 — 12,750,000 — 6,000,000 — 71 $ 1,076,865,099 201,852,224 785,619,407 42,077,193 22,672,623 19,668,071 As of September 30, 2023, the average risk rating of the commercial mortgage loan portfolio was 3.4 (Moderate Risk), weighted by investment carrying value, with 75.3% of the net carrying value of commercial loans held-for-investment rated 3 (Moderate Risk) or better by the Company's Manager. As of December 31, 2022, the average risk rating of the commercial mortgage loan portfolio was 3.0 (Moderate Risk), weighted by investment carrying value, with 93.8% of the net carrying value of commercial loans held-for-investment rated 3 (Moderate Risk) or better by the Company's Manager. The average risk rating of the portfolio has increased during the nine months ended September 30, 2023. The change in underlying risk rating consisted of loans that paid off with a risk rating of "2" of $34.3 million, "3" of $160.0 million and a risk rating of "5" of $10.8 million, offset by the purchase of commercial mortgage loans with a risk rating of "2" of $63.7 million, "3" of $395.3 million and "4" of $32.0 million during the nine months ended September 30, 2023. Additionally, $70.0 million of loans with a risk rating of "2" transitioned to a risk rating of "3," $187.6 million of loans with a risk rating of "3" transitioned to a risk rating of "4" and $56.0 million of loans with a risk rating of "3" transitioned to a risk rating of "5". Concentration of Credit Risk: The following tables present the geographic and property types of collateral underlying the Company's commercial mortgage loans as a percentage of the loans' carrying value as of September 30, 2023 and December 31, 2022: Loans Held-for-Investment September 30, 2023 December 31, 2022 Geography South 44.7 % 46.6 % Southwest 27.1 26.7 Mid-Atlantic 15.1 12.4 Midwest 7.3 8.0 West 5.8 6.3 Total 100.0 % 100.0 % September 30, 2023 December 31, 2022 Collateral Property Type Multifamily 93.0 % 89.6 % Seniors Housing and Healthcare 5.6 6.4 Self-Storage 1.4 1.8 Retail — 1.6 Office — 0.6 Total 100.0 % 100.0 % Allowance for Credit Losses: The following table presents the changes for the three and nine months ended September 30, 2023 and September 30, 2022 in the allowance for credit losses on the outstanding balances of the Company's loans held-for-investment: Three months ended Nine months ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Allowance for credit losses at beginning of period $ 3,897,895 $ 351,914 $ 4,258,668 $ — Cumulative-effect adjustment upon adoption of ASU 2016-13 — — 3,549,501 Provision for credit losses 818,335 1,521,023 1,179,734 1,872,937 Charge offs — — (4,271,673) Allowance for credit losses at end of period $ 4,716,230 $ 1,872,937 $ 4,716,230 $ 1,872,937 The following table presents the changes for the three and nine months ended September 30, 2023 and September 30, 2022 in the provision for (release of) credit losses on the unfunded commitments of the Company's loans held-for-investment: Three months ended Nine months ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Allowance for credit losses at beginning of period $ 55,941 $ — $ — $ — Cumulative-effect adjustment upon adoption of ASU 2016-13 — — 41,939 — (Reversal of) credit losses (26,772) — (12,770) — Charge offs — — — — Allowance for credit losses at end of period $ 29,169 $ — $ 29,169 $ — We did not have any impaired loans, non-accrual loans, or loans in maturity default other than the loans discussed below as of September 30, 2023 or December 31, 2022. In February 2023, in connection with the sale of the office building collateralizing an impaired loan by the borrower to an unaffiliated third-party, the Company accepted a discounted payoff of approximately $6.0 million on the impaired loan, which had an unpaid principal balance of $10.3 million. An allowance for credit loss of $4.3 million was recorded for this impaired loan in the year ended December 31, 2022. Upon the discounted payoff, a $4.3 million charge off against the allowance for credit losses was recorded, with de minimis impact to income in the nine months ended September 30, 2023. |
USE OF SPECIAL PURPOSE ENTITIES
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES | USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES We account for CLO transactions and secured financings on our consolidated balance sheet as financing facilities. The issuing entities for our CLOs and secured financings are VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade tranches are treated as secured financings, and are non-recourse to us. See Note 2 ("Summary of Significant Accounting Policies - Principles Consolidation - VIE" and "Collateralized Loan Obligations")) for further discussion. On June 14, 2021, the Company completed the 2021-FL1 CLO, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $903.8 million. Of the total CLO notes issued $833.8 million were investment grade notes issued to third party investors and $70 million were below investment-grade notes retained by us. In addition, a $96.25 million equity interest in the portfolio was retained by us. The financing has an initial two-and-a-half year reinvestment period that allows principal proceeds of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $330.3 million for the purpose of acquiring additional loan obligations or a period of up to 180 days from the 2021-FL1 CLO closing date, resulting in the issuer owning loan obligations with a face value of $1.0 billion, representing leverage of 83%. On July 12, 2023, the Company entered into and closed a matched-term non-recourse collateralized commercial real estate financing (the "LMF 2023-1 Financing"), secured by $386.4 million of first lien floating-rate multifamily mortgage assets and is not subject to margin calls or additional collateralization requirements. In connection with the LMF 2023-1 Financing, approximately $270.4 million of an investment grade-rated senior secured floating rate loan was provided by a private lender and approximately $47.3 million of investment grade-rated notes (collectively, the "Senior Debt") were issued and sold to an affiliate of LFT's external manager, Lument IM. A consolidated subsidiary of LFT retained the subordinate interests in the issuing vehicle of approximately $68.6 million. The Senior Debt has an initial weighted average spread of approximately 314 basis points over 30-day Term SOFR, excluding fees and transaction costs. The Senior Debt matures on the payment date in July 2032, unless it is sooner repaid or redeemed in accordance with its terms. The financing has an initial two year reinvestment period that allows principal proceeds of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. The 2021-FL1 CLO and LMF 2023-1 Financing are subject to collateralization and coverage tests that are customary for these types of securitizations. As of September 30, 2023 and December 31, 2022 all such collateralization and coverage tests in the 2021-FL1 CLO and LMF 2023-1 Financing were met. The carrying values of the Company's total assets and liabilities related to the 2021-FL1 CLO and LMF 2023-1 Financing at September 30, 2023 and December 31, 2022 included the following VIE assets and liabilities: ASSETS September 30, 2023 December 31, 2022 Cash, cash equivalents and restricted cash $ 6,225,360 $ 3,507,850 Accrued interest receivable 8,607,899 5,488,118 Investment related receivable 31,121,852 — Loans held for investment, net of allowance for credit losses 1,339,006,196 996,511,403 Total Assets $ 1,384,961,307 $ 1,005,507,371 LIABILITIES Accrued interest payable $ 3,746,294 $ 2,264,646 Collateralized loan obligations (1) 1,145,317,374 829,310,498 Total Liabilities $ 1,149,063,668 $ 831,575,144 Equity 235,897,639 173,932,227 Total liabilities and equity $ 1,384,961,307 $ 1,005,507,371 (1) The stated maturity of the collateral loan obligations per the terms of the underlying collateralized loan obligation agreement is June 14, 2039 for the 2021-FL1 CLO and the stated maturity of the secured financing per the terms of the underlying indenture is July 20, 2032. The following tables present certain loan and borrowing characteristics of the 2021-F1 CLO and LMF 2023-1 Financing as of September 30, 2023 and December 31, 2022: As of September 30, 2023 Collateralized Loan Obligations/Financings Count Principal Value Carrying Value (1) Wtd. Avg. Coupon (2) Collateral (loan investments) 86 $ 1,350,912,660 $ 1,339,006,196 8.89% Financing provided 2 $ 1,151,450,000 $ 1,145,317,374 7.32% As of December 31, 2022 Collateralized Loan Obligations Count Principal Value Carrying Value (1) Wtd. Avg. Coupon (2) Collateral (loan investments) 64 $ 996,492,150 $ 996,511,403 7.60% Financing provided 1 $ 833,750,000 $ 829,310,498 5.75% (1) The carrying value of the collateral is net of purchase discounts of $7,023,177 as of September 30, 2023. The carrying value for the 2021-FL1 CLO is net of debt issuance costs of $2,548,732 and $4,439,502 for September 30, 2023 and December 31, 2022, respectively and the carrying value for LMF 2023-1 Financing is net of debt issuance costs of $3,583,894. (2) Weighted average coupon for loan investments assumes applicable one-month LIBOR of 4.18% as of December 31, 2022 and 30-day SOFR of 5.33% and 4.19% as of September 30, 2023 and December 31, 2022, respectively, inclusive of weighted average interest rate floors of 0.41% and 0.25%, and spreads of 3.56% and 3.41%, respectively. As of September 30, 2023, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. As of December 31, 2022, 80.4% of the investments by total investment exposure earned a floating rate indexed to one-month LIBOR and 19.6% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. Weighted coupon for the financings assumes applicable 30-day SOFR of 5.34% as of September 30, 2023 and one-month LIBOR of 4.32% as of December 31, 2022 and spreads of 1.99% and 1.43% for September 30, 2023 and December 31, 2022, respectively. The statement of operations related to the 2021-FL1 CLO and LMF 2023-1 Financing for the three and nine months ended September 30, 2023 and September 30, 2022 include the following income and expense items: Statements of Operations Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Interest income $ 30,984,016 $ 13,907,856 Interest expense (21,364,918) (8,317,893) Net interest income $ 9,619,098 $ 5,589,963 Provision for credit losses (895,228) 351,914 General and administrative fees (201,928) (145,418) Net income $ 8,521,942 $ 5,796,459 Statements of Operations Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Interest income $ 73,312,906 $ 35,454,425 Interest expense (48,597,825) (17,607,021) Net interest income $ 24,715,081 $ 17,847,404 Provision for credit losses (1,403,015) — General and administrative fees (527,171) (469,785) Net income $ 22,784,895 $ 17,377,619 |
RESTRICTED CASH
RESTRICTED CASH | 9 Months Ended |
Sep. 30, 2023 | |
Cash and Cash Equivalents [Abstract] | |
RESTRICTED CASH | RESTRICTED CASHThe 2021-FL1 CLO and LMF 2023-1 Financing have reinvestment periods of 30 and 24 months that expire in December 2023 and July 2025, respectively. As loans payoff, during these reinvestment periods, cash received is restricted and the Company has the capability to reinvest the cash within the 2021-FL1 CLO or LMF 2023-1 Financing in accordance with the terms and conditions of their respective governing agreements. |
SECURED TERM LOAN
SECURED TERM LOAN | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
SECURED TERM LOAN | SECURED TERM LOAN On January 15, 2019, the Company, together with its FOAC and Lument CMT Equity subsidiaries (together with the Company, the "Credit Parties"), entered into the Secured Term Loan, as amended on February 13, 2019, July 9, 2020, April 21, 2021 and February 22, 2022 with the lenders party thereto and Cortland Capital Market Services, LLC, as administrative agent (in such capacity, the "Agent"), providing for a term facility ("Credit Agreement") to be drawn in an aggregate principal amount of $40.25 million with a maturity of 6 years. The borrowings under the Secured Term Loan are joint and several obligations of the Credit Parties. In addition, the Credit Parties' obligations under the Secured Term Loan are secured by substantially all the assets of the Credit Parties through pledge and security documentation. Amounts advanced under the Secured Term Loan are subject to compliance with a borrowing base comprised of assets of the Credit Parties and certain of their subsidiaries, and include senior and subordinated CRE mortgage loans, preferred equity in CRE assets (directly or indirectly), CRE construction mortgage loans and certain types of equity interests (the "Eligible Assets"). Borrowings under the Secured Term Loan bear interest at a fixed rate of 7.25% for the six-year period following the initial draw-down, which is subject to step up by 0.25% for the first four months after the sixth anniversary of the borrowing of the Senior Secured Term Loan, then by 0.375% for the following four months, then by 0.50% for the last four months until maturity. In response to the continued COVID-19 pandemic, on July 9, 2020, the Company entered into the Second Amendment to the Credit and Guaranty Agreement. This amendment provides the Company with additional flexibility to effectively manage any potential borrower distress related to COVID-19 that were not originally contemplated in loan documentation. On April 21, 2021, the Company, together with its Credit Parties, entered into an amendment (the "Third Amendment") to the Credit and Guaranty Agreement. The amendment, among other things, (i) provides the Company with an incremental secured term loan in the aggregate principal amount of $7.5 million; (ii) extends the maturity date of the Secured Term Loan from February 14, 2025 to February 14, 2026; (iii) amends certain asset concentration limits and (iv) amends certain financial covenants. On May 5, 2021 the Third Amendment became effective. On August 23, 2021, the Company drew down the $7.5 million incremental secured term loan. On February 14, 2019, the Company drew on the Secured Term Loan in the aggregate principal amount of $40.25 million generating net proceeds of $39.2 million. The outstanding balance of the Secured Term Loan in the table below is presented gross of deferred financing costs ($592,582 and $778,958 at September 30, 2023 and December 31, 2022, respectively). As of September 30, 2023 and December 31, 2022, the outstanding balance and total commitment under the Credit Agreement consisted of the following: September 30, 2023 December 31, 2022 Outstanding Balance Total Commitment Outstanding Balance Total Commitment Secured Term Loan $ 47,750,000 $ 47,750,000 $ 47,750,000 $ 47,750,000 Total $ 47,750,000 $ 47,750,000 $ 47,750,000 $ 47,750,000 On February 22, 2022, the Company, together with its Credit Parties, entered into a fourth amendment to the Credit and Guaranty Agreement. This amendment waived the step-down provisions of the maximum total net leverage financial covenant in connection with the February 2022 rights offering, however the step-down provision remains in place for future capital raises. The Credit Agreement contains affirmative and negative covenants binding the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to: minimum asset coverage ratio; minimum unencumbered assets ratio; maximum total net leverage ratio; minimum tangible net worth; and an interest charge coverage ratio. As of September 30, 2023 and December 31, 2022 we were in compliance with these covenants. The Credit Agreement contains events of default that are customary for facilities of this type, including, but not limited to, nonpayment of principal, interest, fees and other amounts when due, violation of covenants, cross default with material indebtedness, and change of control. |
MSRs
MSRs | 9 Months Ended |
Sep. 30, 2023 | |
Mortgage Servicing Rights MSR Disclosure [Abstract] | |
MSRs | MSRs As of September 30, 2023, the Company retained the servicing rights associated with an aggregate principal balance of $68,979,603 of residential mortgage loans that the Company had previously transferred to residential mortgage loan securitization trusts. The Company's MSRs are held and managed at the Company's taxable REIT subsidiary ("TRS"), and the Company employs two licensed sub-servicers to perform the related servicing activities. The following table presents the Company's MSR activity for the nine months ended September 30, 2023 and the nine months ended September 30, 2022: September 30, 2023 September 30, 2022 Balance at beginning of period $ 795,656 $ 551,997 Changes in fair value due to: Changes in valuation inputs or assumptions used in valuation model 14,744 358,436 Other changes to fair value (1) (62,093) (92,526) Balance at end of period $ 748,307 $ 817,907 Loans associated with MSRs (2) $ 68,979,603 $ 76,207,213 MSR values as percent of loans (3) 1.08 % 1.07 % (1) Amounts represent changes due to realization of expected cash flows and prepayment of principal of the underlying loan portfolio. (2) Amounts represent the unpaid principal balance of loans associated with MSRs outstanding at September 30, 2023 and September 30, 2022, respectively. (3) Amounts represent the carrying value of MSRs at September 30, 2023 and September 30, 2022, respectively divided by the outstanding balance of the loans associated with these MSRs. The following table presents the servicing income recorded on the Company's consolidated statements of operations for the three and nine months ended September 30, 2023 and September 30, 2022: Three Months Ended Three Months Ended Servicing income, net $ 70,842 $ 62,451 Total servicing income $ 70,842 $ 62,451 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Servicing income, net $ 167,766 $ 185,685 Total servicing income $ 167,766 $ 185,685 |
FAIR VALUE
FAIR VALUE | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | FAIR VALUEThe following tables summarize the valuation of the Company's assets and liabilities carried at fair value on a recurring basis within the fair value hierarchy levels as of September 30, 2023 and December 31, 2022: September 30, 2023 Quoted prices in Significant Unobservable Balance as of September 30, 2023 Assets: Mortgage servicing rights — — $ 748,307 $ 748,307 Total $ — $ — $ 748,307 $ 748,307 December 31, 2022 Quoted prices in Significant Unobservable Balance as of December 31, 2022 Assets: Mortgage servicing rights — — $ 795,656 $ 795,656 Total $ — $ — $ 795,656 $ 795,656 As of September 30, 2023 and December 31, 2022, the Company had $748,307 and $795,656, respectively, in Level 3 assets. The Company's Level 3 assets are comprised of MSRs. For more detail about Level 3 assets, also see Notes 2 and 7. The following table provides quantitative information about the significant unobservable inputs used in the fair value measurement of the Company's MSRs classified as Level 3 fair value assets at September 30, 2023 and December 31, 2022: As of September 30, 2023 Valuation Technique Unobservable Input Range Weighted Average Discounted cash flow Constant prepayment rate 8.0 - 8.4% 8.0 % Discount rate 12.0 % 12.0 % As of December 31, 2022 Valuation Technique Unobservable Input Range Weighted Average Discounted cash flow Constant prepayment rate 8.0 - 9.4% 8.1 % Discount rate 12.0 % 12.0 % As discussed in Note 2, GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate that value. The following table details the carrying amount, face amount and fair value of the financial instruments described in Note 2: September 30, 2023 Level in Fair Value Hierarchy Carrying Value Face Amount Fair Value Assets: Cash and cash equivalents 1 $ 43,408,581 $ 43,408,581 $ 43,408,581 Restricted cash 1 6,225,360 6,225,360 6,225,360 Commercial mortgage loans held-for-investment, net 3 1,350,831,756 1,363,586,916 1,350,607,602 Total $ 1,400,465,697 $ 1,413,220,857 $ 1,400,241,543 Liabilities: Collateralized loan obligations 2 $ 1,145,317,374 $ 1,151,450,000 $ 1,132,023,500 Secured Term Loan 3 47,157,418 47,750,000 44,901,940 Total $ 1,192,474,792 $ 1,199,200,000 $ 1,176,925,440 December 31, 2022 Level in Fair Value Hierarchy Carrying Value Face Amount Fair Value Assets: Cash and cash equivalents 1 $ 43,858,515 $ 43,858,515 $ 43,858,515 Restricted cash 1 3,507,850 3,507,850 3,507,850 Commercial mortgage loans held-for-investment, net 3 1,071,889,518 1,076,865,099 1,064,407,588 Total $ 1,119,255,883 $ 1,124,231,464 $ 1,111,773,953 Liabilities: Collateralized loan obligations 2 $ 829,310,498 $ 833,750,000 $ 803,308,375 Secured term loan 3 46,971,042 47,750,000 44,563,236 Total $ 876,281,540 $ 881,500,000 $ 847,871,611 Estimates of cash and cash equivalents and restricted cash are measured using quoted prices, or Level 1 inputs. Estimates of the fair value of collateralized loan obligations are measured using observable, quoted market prices, in active markets, or Level 2 inputs. All other fair value significant estimates are measured using unobservable inputs, or Level 3 inputs. See Note 2 for further discussion regarding fair value measurement of certain of our assets and liabilities. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Management and Incentive Fee The Company is externally managed and advised by the Manager. Pursuant to the terms of the management agreement, the Company pays the manager a management fee equal to 1.5% of Stockholders' Equity per annum, calculated and payable quarterly (0.375% per quarter) in arrears. For purposes of calculating the management fee, the Company's stockholders' equity includes the sum of the net proceeds from all issuances of the Company's equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus the Company's retained earnings at the end of the most recently completed calendar quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less any amount that the Company paid for repurchases of the Company's common stock since inception, and excluding any unrealized gains, losses or other items that did not affect realized net income (regardless of whether such items were included in other comprehensive income or loss, or in net income). This amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain non-cash items after discussions between the Manager and the Company's independent directors and approval by a majority of the Company's independent directors. To the extent asset impairment reduces the Company's retained earnings at the end of any completed calendar quarter, it will reduce the management fee for such quarter. The Company's stockholders' equity for the purposes of calculating the management fee could be greater than the amount of stockholders' equity shown on the consolidated financial statements. Additionally, starting in the first full calendar quarter following January 3, 2020, the Company is also required to pay the Manager a quarterly incentive fee equal to 20% of the excess of Core Earnings (as defined in the management agreement) over the product of (i) Stockholders' Equity as of the end of such fiscal quarter, and (ii) 8% per annum. The term of our management agreement expires on January 3, 2024, with automatic, one-year renewals thereafter. For the three months ended September 30, 2023, the Company incurred management fees of $1,072,569 (September 30, 2022: $1,096,144), recorded as "Management and incentive fees" in the consolidated statement of operations, of which $1,080,000 (September 30, 2022: $1,095,000) was accrued but had not been paid, included in "Fees and expenses payable to Manager" in the consolidated balance sheets. For the three months ended September 30, 2023 and the three months ended September 30, 2022, the Company did not incur any incentive fees. For the nine months ended September 30, 2023, the Company incurred management fees of $3,253,205 (September 30, 2022: $3,111,413), recorded as "Management and incentive fees" in the consolidated statement of operations, of which $1,080,000 (September 30, 2022: $1,095,000) was accrued but had not been paid, included in "Fees and expenses payable to Manager" in the consolidated balance sheets. For the nine months ended September 30, 2023 and the nine months ended September 30, 2022, the Company did not incur any incentive fees. Expense Reimbursement Pursuant to the management agreement, the Company is required to reimburse the Manager for operating expenses related to the Company incurred by the Manager, including accounting, auditing and tax services, technology and office facilities, operations, compliance, legal and filing fees, and miscellaneous general and administrative costs, including the cost of non-investment management personnel of the Manager who spend all or a portion of their time managing the Company's affairs. The Manager has agreed to certain limitations on manager expense reimbursement from the Company. For the three months ended September 30, 2023, the Company incurred reimbursable expenses of $284,859 (September 30, 2022: $555,307), recorded as "operating expenses reimbursable to Manager" in the consolidated statement of operations, of which $284,097 (September 30, 2022: $553,799) was accrued but had not yet been paid, included in "fees and expenses payable to Manager" in the consolidated balance sheets. Per the management agreement, any exit fees waived by the Company as a result of permanent financing by the Manager or any of its affiliates, shall result in a reduction to reimbursed expenses by an amount equal to 50% of the amount of any such waived exit fee. For the three months ended September 30, 2023, the Company waived $608,180 in gross exit fees, reducing reimbursed expenses by $304,090 and for the three months ended September 30, 2022, the Company waived $204,400 in gross exit fees, reducing reimbursed expenses due to the Manager by $102,200. For the nine months ended September 30, 2023, the Company incurred reimbursable expenses of $1,372,511 (September 30, 2022: $1,594,662), recorded as "operating expenses reimbursable to Manager" in the consolidated statement of operations, of which $284,097 (September 30, 2022: $553,799) was accrued but had not yet been paid, included in "fees and expenses payable to Manager" in the consolidated balance sheets. Per the management agreement, any exit fees waived by the Company as a result of permanent financing by the Manager or any of its affiliates, shall result in a reduction to reimbursed expenses by an amount equal to 50% of the amount of any such waived exit fee. For the nine months ended September 30, 2023, the Company waived $775,680 in gross exit fees, reducing reimbursed expenses by $387,840 and for the nine months ended September 30, 2022, the Company waived $903,947 in gross exit fees, reducing reimbursed expenses due to the Manager by $451,974. In connection with the LMF 2023-1 Financing, Lument IM absorbed approximately $1.1 million in debt issuance costs for which it did not seek reimbursement from the Company. Manager Equity Plan The Company had in place a Manager Equity Plan, which expired December 18, 2022, under which the Company had the ability to provide equity compensation to the Manager and the Company's independent directors, consultants, or officers. The Manager, in its sole discretion, could allocate any awards it received under the Manager Equity Plan to its directors, officers, employees or consultants. The Company was able to issue under the Manager Equity Plan up to 3.0% of the total number of issued and outstanding shares of common stock (on a fully diluted basis) at the time of each award. The following table summarizes the activity related to restricted common stock granted under the Manager Equity Plan for the nine months ended September 30, 2023 and September 30, 2022: Nine Months Ended September 30, 2023 2022 Shares Weighted Average Grant Date Fair Market Value Shares Weighted Average Grant Date Fair Market Value Outstanding Unvested Shares at Beginning of Period 6,000 $ 2.27 4,500 $ 4.18 Granted — — 6,000 2.27 Vested (6,000) 2.27 (4,500) $ 4.18 Outstanding Unvested Shares at End of Period — $ — 6,000 $ 2.27 For the period ended September 30, 2023, the Company recognized compensation expense related to restricted common stock of $6,194 (2022: $12,547). The Company has no unrecognized compensation expense of as of September 30, 2023 (2022: $9,627) for unvested shares of restricted common stock. Lument Structured Finance During the second quarter of 2023, the 2021-FL1 CLO purchased two loans with an aggregate unpaid principal balance of $48.6 million at par from LSF and purchased two funded loan advances with an unpaid principal balance of $1.7 million at par from LSF. Additionally, the 2021-FL1 CLO purchased one loan with an aggregate unpaid principal balance of $6.1 million at a discount of $0.1 million and purchased seventeen funded loan advances with an aggregate unpaid principal balance of $16.5 million at a discount of $0.2 million from LSF. During the third quarter of 2023, the 2021-FL1 CLO purchased one loan with an aggregate unpaid principal balance of $6.1 million at par and LMF 2023-1 Financing purchased three loans with an aggregate unpaid principal balance of $48.8 million at par from Lument Structured Finance ("LSF"), an affiliate of our Manager and the 2021-FL1 CLO purchased one funded loan advance with an unpaid principal balance of $4.0 million at par and from LSF. Additionally, the 2021-FL1 CLO purchased four loans with an unpaid principal balance of $66.0 million at a discount to par of $1.2 million and LMF 2023-1 Financing purchased twenty loans with an unpaid principal balance of $326.9 million at a discount to par of $5.9 million and one funded loan advance with an unpaid principal balance of $0.4 million at par from LSF. During the first quarter of 2022, (a) the 2021-FL1 CLO purchased eight loans with an aggregate unpaid principal balance of $108.9 million at par from LSF and (b) Lument Commercial Mortgage Trust ("LCMT") purchased six loans with an aggregate unpaid principal balance of $76.0 million at par from LSF. During the second quarter of 2022, (a) the 2021-FL1 CLO purchased three loans with an aggregate unpaid principal balance of $31.2 million at par from LSF and (b) LCMT purchased six loans with an unpaid principal balance of $76.0 million at par from LSF. During the third quarter of 2022, the 2021-FL1 CLO purchased five loans with an aggregate unpaid principal balance of $47.5 million at par from LSF. Lument Real Estate Capital Lument Real Estate Capital, LLC ("LREC"), an affiliate of the Manager, was appointed as the servicer and special servicer with respect to mortgage assets for the 2021-FL1 CLO in June 2021 and LMF 2023-1 Financing in July 2023 and continues to serve in this role. Lument IM Lument IM was appointed as the collateral manager with respect to the 2021-FL1 CLO in June 2021 and LMF 2023-1 Financing in July 2023, and continues to serve in this role. Lument IM has agreed to waive all its entitlements to collateral management fees for so long as Lument IM or an affiliate is the collateral manager and also the manager of Lument Finance Trust, Inc. In connection with the LMF 2023-1 Financing, Lument IM absorbed approximately $1.1 million in debt issuance costs for which it did not seek reimbursement from the Company. Lument Investment Holdings On February 22, 2022, Lument Investment Holdings purchased 13,071,895 shares of common stock from the transferable common stock rights offering at a price of $3.06 per share. Hunt Companies, Inc. One of the Company's directors is also Chief Executive Officer and President of Hunt Companies, Inc. ("Hunt") and is a member of the Hunt board of directors, with which affiliates of the Manager have a commercial business relationship. The Manager's affiliates may from time to time sell commercial mortgage loans to Hunt or various of its subsidiaries and affiliates. On February 22, 2022, an affiliate of Hunt Companies, Inc., purchased 3,524,851 shares of common stock from the transferable common stock rights offering at a price of $3.06 per share. |
GUARANTEES
GUARANTEES | 9 Months Ended |
Sep. 30, 2023 | |
Guarantees [Abstract] | |
GUARANTEES | GUARANTEES The Company, through FOAC, is party to customary and standard loan repurchase obligations in respect of residential mortgage loans that it has sold into securitizations or to third parties, to the extent it is determined that there has been a breach of standard seller representations and warranties in respect of such loans. To date, the Company has not been required to repurchase any loan due to a claim of breached seller reps and warranties. In July 2016, the Company announced that it would no longer aggregate and securitize residential mortgage loans; however, the Company sought to capitalize on its infrastructure and knowledge to become the provider of seller eligibility review and backstop services to MAXEX. MAXEX's wholly owned clearinghouse subsidiary, MAXEX Clearing LLC, formerly known as Central Clearing and Settlement LLC ("MAXEX Clearing LLC"), functions as the central counterparty with which buyers and sellers transact, and acts as the buyer's counterparty for each transaction. Pursuant to a Master Agreement dated June 15, 2016, as amended on August 29, 2016, January 30, 2017 and June 27, 2018, among MAXEX, MAXEX Clearing LLC and FOAC (the "Master Agreement"), FOAC provided seller eligibility review services under which it reviewed, approved and monitored sellers that sold loans via MAXEX Clearing LLC. Once approved, and having signed the standardized loan sale contract, the seller sold loan(s) to MAXEX Clearing LLC, and MAXEX Clearing LLC simultaneously sold loan(s) to the buyer on substantially the same terms including representations and warranties. The Master Agreement was terminated on November 28, 2018 (the "MAXEX Termination Date"). To the extent that a seller approved by FOAC prior to the MAXEX Termination Date failed to honor its obligations to repurchase a loan based on an arbitration finding that it breached its representations and warranties, FOAC was obligated to backstop the seller's repurchase obligation. The term of the backstop guarantee is the earlier of the contractual maturity of the underlying mortgage, or its earlier repayment in full; however, the incidence of claims for breaches of representations and warranties over time is considered unlikely to occur more than five years from the sale of a mortgage. FOAC's obligations to provide further seller eligibility review and backstop guarantee services terminated on the MAXEX Termination Date. Pursuant to an Assumption Agreement dated December 31, 2018, among MAXEX Clearing LLC and FOAC, MAXEX Clearing LLC assumed all of FOAC's obligations under its backstop guarantees and agreed to indemnify and hold FOAC harmless against any losses, liabilities, costs, expenses and obligations under the backstop guarantee. FOAC paid MAXEX Clearing LLC, as the replacement backstop provider, a fee of $426,770 (the "Alternate Backstop Fee"). MAXEX Clearing LLC represented to FOAC in the Assumption Agreement that it (i) is rated at least "A" (or equivalent) by at least one nationally recognized statistical rating agency or (ii) has (a) adjusted tangible net worth of at least $20 million and (b) minimum available liquidity equal to the greater of (x) $5 million and (y) 0.1% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. MAXEX's chief financial officer is required to certify ongoing compliance by MAXEX Clearing LLC with the aforementioned criteria on a quarterly basis and if MAXEX Clearing LLC fails to satisfy such criteria, MAXEX Clearing LLC is required to deposit into an escrow account for FOAC's benefit an amount equal to the greater of (A) the unamortized Alternate Backstop Fee for each outstanding loan covered by the backstop guarantee and (B) the product of 0.01% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. The maximum potential amount of future payments that the Company could be required to make under the outstanding backstop guarantees, which represents the outstanding balance of all underlying mortgage loans sold by approved sellers to MAXEX Clearing LLC, was estimated to be $145 million and $172 million as of September 30, 2023 and December 31, 2022, respectively, although the Company believes this amount is not indicative of the Company's actual potential losses. Amounts payable in excess of the outstanding principal balance of the related mortgage, for example any premium paid by the loan buyer or costs associated with collecting mortgage payments, are not currently estimable. Amounts that may become payable under the backstop guarantee are normally recoverable from the related seller, as well as from any payments received on (or from the sale of property securing) the mortgage loan repurchased and, as noted above, MAXEX Clearing LLC has assumed all of FOAC's obligations in respect of its backstop guarantees. Pursuant to the Master Agreement, FOAC is required to maintain minimum available liquidity equal to the greater of (i) $5.0 million or (ii) 0.10% of the aggregate unpaid principal balance of loans backstopped by FOAC, either directly or through a credit support agreement acceptable by MAXEX. As of September 30, 2023, the Company was not aware of any circumstances expected to lead to the triggering of a backstop guarantee obligation. In addition, the Company enters into certain contracts that contain a variety of indemnification obligations, principally with the Manager, brokers and counterparties to repurchase agreements. The maximum potential future payment amount the Company could be required to pay under these indemnification obligations is unlimited. The Company has not incurred any costs to defend lawsuits or settle claims related to the indemnification obligations. As a result, the estimated fair value of these agreements is minimal. Accordingly, the Company recorded no liabilities for these agreements as of September 30, 2023. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIESLitigation From time to time, LFT may be involved in various claims and legal actions arising in the ordinary course of business. LFT establishes an accrued liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable. As of September 30, 2023, LFT was not involved in any material legal proceedings regarding claims or legal actions against LFT. Unfunded Commitments As of September 30, 2023, LCMT had $6.7 million of unfunded commitments related to loans held in the 2021-FL1 CLO. These commitments are not reflected in the Company's consolidated balance sheets. As of September 30, 2023, LSF, an affiliate of the Manager, had $52.7 million of unfunded commitments related to loans held in the 2021-FL1 CLO. These commitments are not reflected on the Company's consolidated balance sheets. As of September 30, 2023, LSF, had $25.1 million of unfunded commitments related to loans held in LMF 2023-1 Financing. These commitments are not reflected on the Company's consolidated balance sheets. As of December 31, 2022, LSF, had $78.4 million of unfunded commitments related to loans held in the 2021-FL1 CLO. These commitments are not reflected on the Company's consolidated balance sheets. As of December 31, 2022, LSF, had $4.7 million of unfunded commitments related to loans held in LCMT. These commitments are not reflected on the Company's consolidated balance sheets. |
EQUITY
EQUITY | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
EQUITY | EQUITY Common Stock The Company has 450,000,000 authorized shares of common stock, par value $0.01 per share, with 52,231,152 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively. On February 22, 2022, the Company closed a transferable common stock rights offering. The Company issued and sold 27,277,269 shares of common stock at a price of $3.06 per share resulting in gross proceeds of approximately $83.5 million. Stock Repurchase Program On December 15, 2015, the Board authorized a stock repurchase program (or the "Repurchase Program"), to repurchase up to $10 million of the Company's outstanding common stock. Shares of the Company's common stock may be purchased in the open market, including through block purchases, or through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b-18(b)(1) of the Securities Exchange Act of 1934, as amended. The timing, manner, price and amount of any repurchases will be determined at the Company's discretion and the program may be suspended, terminated or modified at any time for any reason. Among other factors, the Company intends to only consider repurchasing shares of the Company's common stock when the purchase price is less than the Company's estimate of the Company's current net asset value per common share. Shares of common stock repurchased by the Company under the Repurchase Program, if any, will be canceled and, until reissued by the Company, will be deemed to be authorized but unissued shares of the Company's common stock. No share repurchases have been made since January 19, 2016. Through September 30, 2023, the Company had repurchased 126,856 shares of common stock at a weighted average share price of $5.09. No share repurchases have been made since January 19, 2016. As of September 30, 2023, $9.4 million of common stock remained authorized for future share repurchase under the Repurchase Program. Preferred Stock At September 30, 2023 and December 31, 2022, the Company was authorized to issue up to 50,000,000 shares of preferred stock, par value $0.01 per share, with 2,400,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 2023 and December 31, 2022, respectively. Voting and other rights and preferences will be determined by the Board upon issuance. On May 5, 2021, LFT issued 2,400,000 shares of Series A Preferred Stock, and received net proceeds, after underwriting discounts and commissions but before offering expenses payable by the Company, of $58.1 million. The Series A Preferred Stock is redeemable, at LFT's option, at a liquidation preference price of $25.00 per share plus accrued dividends commencing on May 5, 2026. Dividends on the Series A Preferred Stock are payable quarterly in arrears beginning on July 15, 2021. Distributions to Stockholders For the 2023 taxable year to date, the Company has declared dividends to common stockholders totaling $9,923,919, or $0.19 per share. The following table presents cash dividends declared by the Company on its common stock during the nine months ended September 30, 2023: Declaration Date Record Date Payment Date Dividend Amount Cash Dividend Per Weighted Average Share March 16, 2023 March 31, 2023 April 17, 2023 $ 3,133,869 $ 0.060 June 14, 2023 June 30, 2023 July 17, 2023 $ 3,133,869 $ 0.060 September 14, 2023 September 29, 2023 October 16, 2023 $ 3,656,181 $ 0.070 The following table presents cash dividends declared by the Company on its Series A Preferred stock for the nine months ended September 30, 2023: Declaration Date Record Date Payment Date Dividend Amount Cash Dividend Per Weighted Average Share March 16, 2023 April 3, 2023 April 17, 2023 $ 1,181,250 $ 0.49219 June 14, 2023 July 3, 2023 July 17, 2023 $ 1,181,250 $ 0.49219 September 14, 2023 October 2, 2023 October 16, 2023 $ 1,181,250 $ 0.49219 Non-controlling Interests On November 29, 2018, LCMT, which is an indirect wholly-owned subsidiary of the Company that has elected to be taxed as a REIT for U.S. Federal income tax purposes, issued 125 shares of Series A Preferred Shares ("LCMT Preferred Shares"). Net proceeds to LCMT were $99,500 representing $125,000 in equity raised, less $25,500 in expenses and is reflected as "Non-controlling interests" in the Company's consolidated balance sheets. Dividends on the LCMT Preferred Shares are cumulative annually, in an amount equal to 12% of the initial purchase price plus any accrued unpaid dividends. The LCMT Preferred Shares are redeemable at any time by LCMT. The redemption price through December 31, 2020 was 1.1x the initial purchase price plus all accrued and unpaid dividends, and the initial purchase price plus all accrued and unpaid dividends thereafter. The holders of the LCMT Preferred Shares have limited voting rights, which do not entitle the holders to participate or otherwise direct the management of LCMT or the Company. The LCMT Preferred Shares are not convertible into or exchangeable for any other property or securities of LCMT or the Company. Dividends on the LCMT Preferred Shares, which amounted to $15,000 for the year ended December 31, 2022 are reflected in "Dividends to preferred stockholders" in the Company's consolidated statements of operations. As of September 30, 2023, LCMT had $3,791 in accrued dividends on the LCMT Preferred Shares which are reflected in "dividends to preferred stockholders" in the Company's consolidated statements of operations of which $3,791 were accrued and unpaid dividends on the LCMT Preferred Shares which are reflected in "Dividends payable" in the Company's consolidated balance sheet. Independent Directors Stock-for-Fees Program Upon the recommendation of the Compensation Committee of the Board, on April 20, 2023, the Board has adopted the Independent Directors Stock-for-Fees Program (the “Stock-for-Fees Program”). The purpose of the Stock-for-Fees Program is to promote the long-term success of the Company and further align the interests of the Company’s independent directors with the interests of its stockholders by providing the independent directors with an opportunity to elect to receive their Director Fees (as defined below) in the form of shares of common stock. Pursuant to the Stock-for-Fees Program, an independent director may elect to exchange all or a portion of such director’s unpaid Director Fees for the right to receive payment of such unpaid fees in the form of shares of common stock. Such election will apply to all Director Fees that would otherwise have been paid (but for such election) in the fiscal quarter that commences after the date the independent director’s election form is filed with and received by the Company and will continue for each fiscal quarter through and until the fiscal quarter that commences after such time as the director files a new election form that is received by the Company modifying or terminating such prior election or, if earlier, the date such Director terminates service on the Board. Unless otherwise approved by the Board, an election by an independent directors will be made only in an open trading window pursuant to the Company’s insider trading policy. Unless otherwise approved by the Board, an independent director may not make more than one election in any six-month period of time. Any Director Fees that an independent director elects to receive in the form of shares of common stock are referred to as “Exchanged Fees.” Upon any Exchange Date (as defined below) that occurs after an independent director files an election form that is received by the Company, the independent director will be entitled to receive a number of shares of common stock determined by dividing (i) the amount of the Exchanged Fees that would otherwise have been paid to the independent director in cash on such Exchange Date but for such election, by (ii) the Fair Market Value (as defined below) of a share of common stock as of such Exchange Date, and rounding down to the nearest whole share. Any fractional amount less than the Fair Market Value of a share of common stock as of such Exchange Date will be paid in cash. Any shares of common stock acquired by an independent director pursuant to the Stock-for-Fees Program will be fully vested at all times. The maximum aggregate number of shares of common stock issuable pursuant to the Stock-for-Fees Program is 2,611,555. The maximum aggregate number of shares issuable to an independent director pursuant to the Stock-for-Fees Program shall not exceed 522,311 shares of common stock. The Company has not issued any shares pursuant to the Stock-for-Fees Program as of September 30, 2023. For purposes of this Stock-for-Fees Program, the following definitions apply: “Director Fees” means the annual retainer and meeting fees, to the extent otherwise payable in cash, payable to an independent director for services as a member of the Board. “Exchange Date” means any date on which the Company pays Director Fees to independent directors. “Fair Market Value” means, with respect to an Exchange Date, the average of the closing prices of a share of the Company’s common stock as reported on the composite tape for securities listed on the NYSE for the period of ten trading days ending on the trading day immediately preceding the Exchange Date. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE In accordance with ASC 260, outstanding instruments that contain rights to non-forfeitable dividends are considered participating securities. The Company is required to apply the two-class method or the treasury stock method of computing basic and diluted earnings per share when there are participating securities outstanding. The Company has determined that outstanding unvested restricted shares issued under the Manager Equity Plan are participating securities, and they are therefore included in the computation of basic and diluted earnings per share. The following tables provide additional disclosure regarding the computation for the three and nine months ended September 30, 2023 and September 30, 2022: Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Net income $ 6,359,727 $ 1,500,275 Less dividends: Common stock $ 3,656,181 $ 3,133,869 Preferred stock 1,185,042 1,185,042 4,841,223 4,318,911 Undistributed earnings (deficit) $ 1,518,504 $ (2,818,636) Unvested Share-Based Common Stock Unvested Share-Based Common Stock Distributed earnings $ 0.00 $ 0.07 $ 0.06 $ 0.06 Undistributed earnings (deficit) 0.00 0.03 0.00 (0.05) Total $ 0.00 $ 0.10 $ 0.06 $ 0.01 For the three months ended September 30, 2023 2022 Basic weighted average shares of common stock 52,231,152 52,225,152 Weighted average of non-vested restricted stock — 6,000 Diluted weighted average shares of common stock outstanding 52,231,152 52,231,152 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Net income $ 14,700,645 $ 7,798,926 Less dividends: Common stock $ 9,923,919 $ 9,401,247 Preferred stock 3,555,042 3,555,042 13,478,961 12,956,289 Undistributed earnings (deficit) $ 1,221,684 $ (5,157,363) Unvested Share-Based Common Stock Unvested Share-Based Common Stock Distributed earnings $ 0.19 $ 0.19 $ 0.20 $ 0.20 Undistributed earnings (deficit) 0.02 0.02 0.00 (0.11) Total $ 0.21 $ 0.21 $ 0.20 $ 0.09 For the nine months ended September 30, 2023 2022 Basic weighted average shares of common stock 52,227,504 47,026,745 Weighted average of non-vested restricted stock 3,648 5,088 Diluted weighted average shares of common stock outstanding 52,231,152 47,031,833 |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2023 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | SEGMENT REPORTINGThe Company invests in a portfolio comprised of commercial mortgage loans and other mortgage-related investments, and operates as a single reporting segment. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company has elected to be treated as a REIT under federal income tax laws. As a REIT, the Company must generally distribute annually at least 90% of our taxable income, subject to certain adjustments and excluding any capital net gain, in order for U.S. federal income not to apply to our earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Certain activities of the Company that produce prohibited income are conducted through a TRS, FOAC, to protect REIT election and FOAC is therefore subject to tax as a U.S. C-Corporation. To maintain our REIT election, the Company must continue to meet certain ownership, asset and income requirements set forth in the Code. As further discussed below, the Company may be subject to non-income taxes on excess amounts of assets or income that cause a failure of any of the REIT testing requirements. As of September 30, 2023 and December 31, 2022, we were in compliance with all REIT requirements. As of September 30, 2023, tax years 2019 through 2022 remain subject to examination by taxing authorities. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTSWe have evaluated subsequent events occurring through the date that these consolidated financial statements were issued, and determined that no subsequent events occurred that would require accrual or additional disclosure. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The unaudited consolidated financial statements and related notes have been prepared in accordance with GAAP for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the financial statements prepared under GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission ('SEC") on March 23, 2023. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements of the Company include the accounts of the Company and all subsidiaries which it controls (i) through voting or similar rights or (ii) by means other than voting rights if the Company is the primary beneficiary of a variable interest entity ("VIE"). All significant intercompany transactions have been eliminated on consolidation. |
Use of Estimates | Use of Estimates The financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires the Company to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amount and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g. valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. The Company's estimates are inherently subjective in nature and actual results could differ from its estimates and the differences may be material. |
VIEs | VIEs An entity is considered a VIE when any of the following applies: (1) the equity investors (if any) lack one or more essential characteristics of a controlling financial interest; (2) the equity investment at risk is not sufficient to finance that entity's activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both the following characteristics: (1) the power to direct activities that, when taken together, most significantly impact the VIE performance; and (2) the obligation to absorb losses and right to receive returns from the VIE that would be significant to the VIE. |
Collateralized Loan Obligations and Secured Term Loan | Collateralized Loan Obligations and Secured FinancingsCLOs and secured financings represent third-party liabilities of LFT CRE 2021-FL1, Ltd. and LFT CRE 2021-FL1, LLC (collectively, the "2021-FL1 CLO") and LMF 2023-1, LLC ("LMF 2023-1 Financing"). The 2021-FL1 CLO and LMF 2023-1 Financing are VIEs and management has determined that the Company is the primary beneficiary of the 2021-FL1 CLO and LMF 2023-1 Financing. Accordingly, the Company consolidates the assets, liabilities (other than the below investment grade-rated notes and preferred shares of the 2021-FL1 CLO and LMF 2023-1 Financing retained by the Company that are eliminated on consolidation), income and expense of the 2021-FL1 CLO and LMF 2023-1 Financing. The third-party obligations of the 2021-FL1 CLO and LMF 2023-1 Financing do not have any recourse to the Company as the consolidator of the CLO and secured financing issuing entities. The third-party obligations of the 2021-FL1 CLO and LMF 2023-1 Financing are carried at their outstanding unpaid principal balances, net of any deferred financing costs. Any premiums, discounts or deferred financing costs associated with these third-party obligations are amortized to interest expense using the effective interest method over the expected average life of the related obligations, or on a straight line basis when it approximates the effective interest method.Secured Term LoanThe Company and certain of its subsidiaries are party to a $47.75 million credit and guaranty agreement with the lenders referred to therein and Cortland Capital Service LLC, as administrative agent and collateral agent for the lenders (the "Secured Term Loan"). The Secured Term Loan is carried at its unpaid principal balance, net of deferred financing costs. Deferred financing costs associated with this liability are amortized to interest expense on a straight line basis when it approximates the effective interest method. |
Cash and Cash Equivalents and Restricted Cash | Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents at time of purchase include cash held in bank accounts on an overnight basis and other short term deposit accounts with banks having maturities of 90 days or less at time of acquisition. The Company maintains its cash and cash equivalents with highly rated financial institutions, and at times these balances exceed insurable amounts. Restricted cash includes cash held within the 2021-FL1 CLO as of September 30, 2023 and December 31, 2022, respectively. |
Deferred Offering Costs | Deferred Offering Costs Direct costs incurred to issue shares classified as equity, such as legal and accounting fees, are deducted from the related proceeds and the net amount recorded as stockholders' equity. Accordingly, payments made by the Company in respect of such costs related to the issuance of shares are recorded as an asset in the accompanying consolidated balance sheets in the line item "Other assets," for subsequent deduction from the related proceeds upon closing of the offering. To the extent that certain costs, in particular legal fees, are known to have been accrued but have not yet been invoiced and paid, they are included in "Other accounts payable and accrued expenses" on the accompanying consolidated balance sheets. |
Fair Value Measurements | Fair Value Measurements The "Fair Value Measurements and Disclosures" Topic 820 of the FASB, or ASC 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurement under GAAP. Specifically, the guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at measurement date. ASC 820 specifies a hierarchy of valuation techniques based on the inputs used in measuring fair value. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable market data from independent sources, while unobservable inputs reflect the Company's market assumptions. The three levels are defined as follows: • Level 1 Inputs – Quoted prices for identical instruments in active markets. • Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. • Level 3 Inputs – Instruments with primarily unobservable value drivers. Pursuant to ASC 820 we disclose fair value information about financial instruments, which are not otherwise reported at fair value in our consolidated balance sheet, to the extent it is practicable to estimate fair value for those certain instruments. The following methods and assumptions are used to estimate the fair value of each class of financial instrument, for which it is practicable to estimate that value: • Cash and cash equivalents : The carrying amount of cash and cash equivalents approximates fair value. • Restricted cash : The carrying amount of restricted cash approximates fair value. • Commercial mortgage loans : The Company determines the fair value of commercial mortgage loans by utilizing a pricing model based on discounted cash flow methodologies using discount rates, which reflect current market interest rates that would be offered for loans with similar characteristics and credit quality. Additionally, the Company may record fair value adjustments on a non-recurring basis when it has determined it necessary to record a specific impairment reserve or charge-off against a loan and the Company measures such specific reserve or charge-off using the fair value of the loan's collateral. To determine the fair value of loan collateral, the Company employs the income capitalization approach, appraised values, broker opinion of value, sale offers, letters of intention to purchase, or other valuation benchmarks, as applicable, depending upon the nature of such collateral and other relevant market factors. • Mortgage servicing rights : The Company determines the fair value of MSRs from a third-party pricing service on a recurring basis. The third-party pricing service uses common market pricing methods that include using discounted cash flow models to calculate present value, estimated net servicing income and observed market pricing for MSR purchase and sale transactions. The model considers contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. • Collateralized loan obligations : The Company determines the fair value of collateralized loan obligations by utilizing a third-party pricing service. In determining the value of a particular investment, pricing service providers may use market spreads, inventory levels, trade and bid history, as well as market insight from clients, trading desks and global research platform. • Secured term loan : The Company determines the fair value of its secured term loan based on a discounted cash flow methodology. |
Commercial Mortgage Loans Held-For-Investment | Commercial Mortgage Loans Held-for-Investment Commercial mortgage loans held-for-investment represent floating-rate transitional loans and other commercial mortgage loans purchased or originated by the Company. These loans include loans sold into securitizations that the Company consolidates. Commercial mortgage loans held-for-investment are intended to be held-to-maturity and, accordingly, are carried at their unpaid principal balances, adjusted for net unamortized loan fees and costs (in respect of originated loans), premiums and discounts (in respect of purchased loans) and impairment, if any. Interest income is recognized as revenue using the effective interest method and is recorded on the accrual basis according to the terms of the underlying loan agreement. Any fees, costs, premiums and discounts associated with these loan investments are deferred and amortized over the term of the loan on a straight-line basis approximating the effective interest method. Income accrual is generally suspended and loans are placed on non-accrual status on the earlier of the date at which payment has become 90 days past due or when full and timely collection of interest and principal is considered not probable. The Company may return a loan to accrual status when repayment of principal and interest is reasonably assured under the terms of the underlying loan agreement. As of September 30, 2023, the Company held one loan, collateralized by a multifamily property, with an unpaid principal balance of $12.2 million on non-accrual status with interest collections accounted for under the cost recovery method. Additionally, as of September 30, 2023, the Company held two loans, collateralized by multifamily properties, with unpaid principal balances of $56.4 million on non-accrual status with interest collections accounted for on the cash basis method. On January 1, 2023, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") and amendments, which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model. CECL amends the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASC 2016-13 is included in "Allowance for credit losses" on our consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in "Other liabilities" in the consolidated balance sheets. The initial CECL reserve recorded on January 1, 2023 is reflected as a direct charge to retained earnings on our consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of operations. In connection with the adoption of ASU 2016-13, we recorded a $3.6 million decrease to accumulated earnings as of January 1, 2023. The Company's implementation process included a selection of a credit loss analytical model, completion and documentation of policies and procedures, changes to internal reporting processes and related internal controls and additional disclosures. A control framework for governance, data, forecast and model controls was developed to support the CECL process. Estimating an allowance for credit losses requires significant judgment and a variety of subjective assumptions, including (i) determination of relevant historical loan loss data sets, (ii) the current credit quality of loans and operating performance of loan collateral and the Company's expectations of performance and (iii) expectation of macroeconomic conditions over the relevant time period. In the absence of any Company history of valuation reserves or realized loan losses since our inception in 2013, other than on one office loan, the Company elected to utilize a widely-used analytical model incorporating a loss-given-default methodology and loan performance data for over 100,000 commercial real estate loans dating back to 1998. The Company expects to use this data set, or variants of it, unless the Company develops its own sufficient history of realized losses. The Company determines its CECL estimate based on macroeconomic forecasts that include baseline, optimistic and pessimistic scenarios during the reasonable forecast period. The Company determined the key variables driving its CECL loss estimate are debt service coverage ratio and LTV ratio. Other notable variables include property type, property location and loan vintage. The Company evaluates each loan rated Default Risk as to whether it is impaired on a quarterly basis. Impaired loans are individually evaluated based on the Company's quarterly assessment of each loan and assignment of a risk rating. Impairment occurs when the Company determines that the facts and circumstances of the loan deem it probable that the Company will not be able to collect all amounts due in accordance with the contractual terms of the loan. If a loan is considered to be impaired, an allowance is recorded to reduce the carrying value of the loan through a charge to the provision for (reversal of) credit losses. Impairment of these loans, all of which are deemed collateral dependent, is measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, actions of other lenders, and other factors deemed necessary by the Manager. Any loans deemed to be collateral dependent will be removed from the pool of assets measured under CECL. Actual losses, if any, could ultimately differ from estimated losses. Quarterly, the Company assesses the risk factors of each loan classified as held-for-investment and assigns a risk rating based on a variety of factors, including, without limitation, debt-service coverage ratio ("DSCR"), loan-to-value ratio ("LTV"), property type, geographic and local market dynamics, physical condition, leasing and tenant profile, adherence to business plan and exit plan, maturity default risk and project sponsorship. The Company's loans are rated on a 5-point scale, from least risk to greatest risk, respectively, which ratings are described as follows: 1. Very Low Risk : exceeds expectations and is outperforming underwriting or it is very likely that the underlying loan can be refinanced easily in the period's prevailing capital market conditions 2. Low Risk : meeting or exceeding underwritten expectation 3. Moderate Risk : consistent with underwritten expectations or the sponsor may be in the early stages of executing the business plan and the loan structure appropriately mitigates additional risks 4. High Risk : potential risk of default, a loss may occur in the event of default 5. Default Risk : imminent risk of default, a loss is likely in the event of default |
Mortgage Servicing Rights, at Fair Value | Mortgage Servicing Rights, at Fair Value Mortgage servicing rights ("MSRs") are associated with residential mortgage loans that the Company historically purchased and subsequently sold or securitized. MSRs are held and managed at Five Oaks Acquisition Corp. ("FOAC"), the Company's taxable REIT subsidiary ("TRS"). As the owner of MSRs, the Company is entitled to receive a portion of the interest payments from the associated residential mortgage loan, and is obligated to service, directly or through a subservicer, the associated loan. MSRs are reported at fair value. Residential mortgage loans for which the Company owns the MSRs are directly serviced by two sub-servicers retained by the Company. The Company does not directly service any residential mortgage loans. MSR income is recognized at the contractually agreed upon rate, net of the costs of sub-servicers retained by the Company. If a sub-servicer with which the Company contracts were to default, an evaluation of MSR assets for impairment would be undertaken at that time. |
Common Stock, Stock Repurchase Program and Preferred Stock | Common Stock At September 30, 2023 and December 31, 2022, the Company was authorized to issue up to 450,000,000 shares of common stock, par value $0.01 per share. On February 22, 2022, the Company closed a transferable common stock rights offering and issued 27,277,269 shares of common stock. The Company had 52,231,152 shares of common stock issued and outstanding at September 30, 2023 and December 31, 2022. Stock Repurchase Program On December 15, 2015, the Company's Board of Directors (the "Board") authorized a stock repurchase program ("Repurchase Program"), to repurchase up to $10 million of the Company's outstanding common stock. Subject to applicable securities laws, repurchase of common stock under the Repurchase Program may be made at times and in amounts as the Company deems appropriate, using available cash resources. Shares of common stock repurchased by the Company under the Repurchase Program, if any, will be canceled and, until reissued by the Company, will be deemed to be authorized but unissued shares of common stock. The Repurchase Program may be suspended or discontinued by the Company at any time and without prior notice. Preferred Stock |
Income Taxes | Income Taxes The Company has elected to be taxed as a REIT under the Code for U.S. federal income tax purposes, commencing with the Company's short taxable period ended December 31, 2012. A REIT is generally taxable as a U.S. C-Corporation; however, so long as the Company qualifies as a REIT it is entitled to a special deduction for dividends paid to stockholders not otherwise available to corporations. Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent its distributions to stockholders equals, or exceeds, its REIT taxable income for the year. In addition, the Company must continue to meet certain REIT qualification requirements with respect to distributions, as well as certain asset, income and share ownership tests, in accordance with Sections 856 through 860 of the Code, as summarized below. In addition, the TRS is maintained to perform certain services and earn income for the Company that the Company is not permitted to engage in as a REIT. To maintain its qualification as a REIT, the Company must meet certain requirements, including but not limited to the following: (i) distribute at least 90% of its REIT taxable income to its stockholders; (ii) invest at least 75% of its assets in REIT qualifying assets, with additional restrictions with respect to asset concentration risk; and (iii) earn at least 95% of its gross income from qualifying sources of income, including at least 75% from qualifying real estate and real estate related sources. Regardless of the REIT election, the Company may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax as a U.S. C-Corporation, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. Certain activities of the Company are conducted through a TRS and therefore are taxed as a standalone U.S. C-Corporation. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The TRS is not subject to a distribution requirement with respect to its REIT owner. The TRS may retain earnings annually, resulting in an increase in the consolidated book equity of the Company and without a corresponding distribution requirement by the REIT. If the TRS generates net income, and declares dividends to the Company, such dividends will be included in its taxable income and necessitate a distribution to its stockholders in accordance with the REIT distribution requirements. |
Earnings per Share | Earnings per ShareThe Company calculates basic and diluted earnings per share by dividing net income attributable to common stockholders for the period by the weighted-average shares of the Company's common stock outstanding for that period. Diluted earnings per share considers the effect of dilutive instruments, such as warrants, stock options, and unvested restricted stock, but use the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding. |
Stock-Based Compensation | Stock-Based Compensation The Company is required to recognize compensation costs relating to stock-based payment transactions in the consolidated financial statements. The Company accounts for share-based compensation using the fair-value based methodology prescribed by ASC 718, Share-Based Payment |
Comprehensive Income (Loss) Attributable to Common Stockholders | Comprehensive Income (Loss) Attributable to Common Stockholders For the three and nine months ended September 30, 2023 and 2022, comprehensive income equaled net income; therefore, a separate consolidated statement of comprehensive income is not included in the accompanying consolidated financial statements. |
Recently Issued and/or Adopted Accounting Standards | Recently Issued and/or Adopted Accounting Standards Credit Losses On January 1, 2023, we adopted ASU 2016-13, which utilizes a current expected credit loss methodology ("CECL") for the recognition of credit losses for our commercial mortgage loans held-for-investment at amortized cost, at the time the financial asset is originated or acquired. The allowance for credit losses is adjusted for each period for changes in expected credit losses. This methodology replaces the multiple impairment methods in GAAP that generally required that a loss be incurred before it is recognized. We adopted ASU 2016-13 using the modified retrospective method, therefore, the results for reporting period prior to January 1, 2023 have been unadjusted and reported in accordance with previously applicable GAAP. Upon adoption of ASU 2016-13 on January 1, 2023, the Company recorded a cumulative-effect adjustment to accumulated earnings of $3.6 million, or $0.07 per common share. The CECL reserve required under ASU 2016-13 is a valuation account that is deducted from the amortized cost basis of related commercial mortgage loans on our balance sheet, which will reduce our stockholders' equity. The initial reserve recorded on January 1, 2023 was reflected as a direct charge against accumulated earnings; however, future net changes to the CECL reserve will be recognized in net income on our consolidated statements of operations. ASU 2016-13 does not require use of a particular method for determining the CECL reserve, but it does specify the allowance should be based on relevant information about past events, including historical loss experience, composition of current commercial mortgage loan portfolio, current conditions in real estate and capital markets, and reasonable and supportable forecasts for the expected term of each loan. Additionally, but for a few narrow exceptions, ASU 2016-13 requires that all financial instruments subject to CECL incur some amount of valuation reserve to reflect the underlying principle of the CECL model, that all loans, debt securities and similar financial assets bear some inherent risk of loss regardless of credit quality, amount of subordinate capital, or other risk mitigants. Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The standard was issued to ease the accounting effects of reform to the London Interbank Offered Rate ("LIBOR") and other reference rates. The standard provides optional expedients and exceptions for applying GAAP to debt instruments, leases, derivatives and other contracts affected by reference rate reform. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. The standard is effective for all entities as of March 12, 2020 through December 31, 2022 and may be elected over time as reference rate reform activities occur. In December 2022, the FASB issued ASU 2022-06, deferring the sunset date of ASC 848, Reference Rate Reform, from December 31, 2022 to December 31, 2024. ASC 848 provides temporary relief relating to potential accounting impact relating to replacement of LIBOR or other reference rates expected to be discounted as a result of reference rate reform. As of September 30, 2023, one-month term SOFR is utilized as the floating benchmark rate on all our floating rate loans and related financings. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Reconciliation of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statements of cash flows. September 30, 2023 December 31, 2022 Cash and cash equivalents $ 43,408,581 $ 43,858,515 Restricted cash held within the 2021-FL1 CLO $ 6,225,360 $ 3,507,850 Total cash, cash equivalents and restricted cash $ 49,633,941 $ 47,366,365 |
Schedule of Financial Impact of the Adoption of Accounting Standard Update | The following table illustrates the day-one financial statement impact of the adoption of ASU 2016-13 on January 1, 2023: Pre-adoption Transition adjustment Post-adoption Assets Commercial mortgage loans, held-for-investment $ 1,076,148,186 $ — $ 1,076,148,186 Less: Allowance for credit losses (4,258,668) (3,549,501) (7,808,169) Commercial mortgage loans, held-for-investment, net of allowance for credit losses $ 1,071,889,518 $ (3,549,501) $ 1,068,340,017 Liabilities Other liabilities (1) $ 583,989 $ 41,939 $ 625,928 Equity Accumulated earnings $ 31,250,852 $ (3,591,440) $ 27,659,412 (1) Includes reserve for unfunded loan commitments |
COMMERCIAL MORTGAGE LOANS HEL_2
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Receivables [Abstract] | |
Schedule of Commercial Mortgage Loans | The following tables summarize certain characteristics of the Company's investments in commercial mortgage loans as of September 30, 2023 and December 31, 2022: Weighted Average Loan Type Unpaid Principal Balance Carrying Value (1) Loan Count Floating Rate Loan % Coupon (2) Term (Years) (3) September 30, 2023 Loans held-for-investment Senior secured loans (4) $ 1,363,109,256 $ 1,355,547,986 87 100.0 % 8.8 % 3.1 Allowance for credit losses N/A (4,716,230) 1,363,109,256 1,350,831,756 87 100.0 % 8.8 % 3.1 Weighted Average Loan Type Unpaid Principal Balance Carrying Value Loan Count Floating Rate Loan % Coupon (2) Term (Years) (3) December 31, 2022 Loans held-for-investment Senior secured loans (4) $ 1,076,865,099 $ 1,076,148,186 71 100.0 % 7.6 % 3.5 Allowance for credit losses NA (4,258,668) 1,076,865,099 1,071,889,518 71 100.0 % 7.6 % 3.5 (1) Carrying Value includes $7,023,177 in unamortized purchase discounts as of September 30, 2023. (2) Weighted average coupon assumes applicable one-month LIBOR of 4.18% as of December 31, 2022 and 30-day Term Secured Overnight Financing Rate ("SOFR") of 5.33% and 4.19% as of September 30, 2023 and December 31, 2022, respectively, inclusive of weighted average interest rate floors of 0.41% and 0.27%, respectively. As of September 30, 2023, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. As of December 31, 2022, 77.4% of the investments by total investment exposure earned a floating rate indexed to one-month LIBOR and 22.6% of the investments by total investment exposure earned a floating rate indexed to 30-day Term SOFR. (3) Weighted average remaining term assumes all extension options are exercised by the borrower, provided, however, that our loans may be repaid prior to such date. (4) As of September 30, 2023, $1,338,635,160 of the outstanding senior secured loans were held in VIEs and $12,196,596 of the outstanding senior secured loans were held outside of VIEs. As of December 31, 2022, $996,511,403 of the outstanding senior secured loans were held in VIEs and $75,378,115 of the outstanding senior secured loans were held outside VIEs. Activity: For the nine months ended September 30, 2023, the loan portfolio activity was as follows: Commercial Mortgage Loans Held-for-Investment Balance at December 31, 2022 $ 1,071,889,518 Purchases, advances and originations 517,608,525 Principal payments (234,559,887) Accretion of purchase discount 431,009 Amortization of purchase premium (16,201) Accretion of deferred loan fees 195,022 Cumulative-effect adjustment upon adoption of ASU 2016-13 (3,549,501) Provision for credit losses, net (1,166,729) Balance at September 30, 2023 $ 1,350,831,756 |
Schedule of Loan Risk Ratings | The following table presents the principal balance and net book value of the loan portfolio based on the Company's internal risk ratings as of September 30, 2023 and December 31, 2022: September 30, 2023 Amortized Cost by Year of Origination Risk Rating Number of Loans Outstanding Principal 2023 2022 2021 2019 2017 1 — $ — — — — — — 2 7 113,292,630 — 111,578,471 — — — 3 59 914,218,238 — 391,872,631 493,653,236 — 19,631,380 4 18 266,994,932 — 102,420,800 163,078,861 — — 5 3 68,603,457 — — 31,814,789 36,781,588 — 87 $ 1,363,109,257 — 605,871,902 688,546,886 36,781,588 19,631,380 December 31, 2022 Amortized Cost by Year of Origination Risk Rating Number of Loans Outstanding Principal 2022 2021 2019 2018 2017 1 — $ — — — — — — 2 11 153,933,750 85,198,084 67,999,500 — — — 3 55 852,474,681 101,654,140 672,421,907 42,077,193 16,672,623 19,668,071 4 3 47,448,000 15,000,000 32,448,000 — — — 5 2 23,008,668 — 12,750,000 — 6,000,000 — 71 $ 1,076,865,099 201,852,224 785,619,407 42,077,193 22,672,623 19,668,071 |
Schedule of Geographic Concentrations | The following tables present the geographic and property types of collateral underlying the Company's commercial mortgage loans as a percentage of the loans' carrying value as of September 30, 2023 and December 31, 2022: Loans Held-for-Investment September 30, 2023 December 31, 2022 Geography South 44.7 % 46.6 % Southwest 27.1 26.7 Mid-Atlantic 15.1 12.4 Midwest 7.3 8.0 West 5.8 6.3 Total 100.0 % 100.0 % September 30, 2023 December 31, 2022 Collateral Property Type Multifamily 93.0 % 89.6 % Seniors Housing and Healthcare 5.6 6.4 Self-Storage 1.4 1.8 Retail — 1.6 Office — 0.6 Total 100.0 % 100.0 % |
Schedule of Allowance for Loan Losses | The following table presents the changes for the three and nine months ended September 30, 2023 and September 30, 2022 in the allowance for credit losses on the outstanding balances of the Company's loans held-for-investment: Three months ended Nine months ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Allowance for credit losses at beginning of period $ 3,897,895 $ 351,914 $ 4,258,668 $ — Cumulative-effect adjustment upon adoption of ASU 2016-13 — — 3,549,501 Provision for credit losses 818,335 1,521,023 1,179,734 1,872,937 Charge offs — — (4,271,673) Allowance for credit losses at end of period $ 4,716,230 $ 1,872,937 $ 4,716,230 $ 1,872,937 The following table presents the changes for the three and nine months ended September 30, 2023 and September 30, 2022 in the provision for (release of) credit losses on the unfunded commitments of the Company's loans held-for-investment: Three months ended Nine months ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Allowance for credit losses at beginning of period $ 55,941 $ — $ — $ — Cumulative-effect adjustment upon adoption of ASU 2016-13 — — 41,939 — (Reversal of) credit losses (26,772) — (12,770) — Charge offs — — — — Allowance for credit losses at end of period $ 29,169 $ — $ 29,169 $ — |
USE OF SPECIAL PURPOSE ENTITI_2
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Condensed Consolidated Balance Sheets | The carrying values of the Company's total assets and liabilities related to the 2021-FL1 CLO and LMF 2023-1 Financing at September 30, 2023 and December 31, 2022 included the following VIE assets and liabilities: ASSETS September 30, 2023 December 31, 2022 Cash, cash equivalents and restricted cash $ 6,225,360 $ 3,507,850 Accrued interest receivable 8,607,899 5,488,118 Investment related receivable 31,121,852 — Loans held for investment, net of allowance for credit losses 1,339,006,196 996,511,403 Total Assets $ 1,384,961,307 $ 1,005,507,371 LIABILITIES Accrued interest payable $ 3,746,294 $ 2,264,646 Collateralized loan obligations (1) 1,145,317,374 829,310,498 Total Liabilities $ 1,149,063,668 $ 831,575,144 Equity 235,897,639 173,932,227 Total liabilities and equity $ 1,384,961,307 $ 1,005,507,371 (1) The stated maturity of the collateral loan obligations per the terms of the underlying collateralized loan obligation agreement is June 14, 2039 for the 2021-FL1 CLO and the stated maturity of the secured financing per the terms of the underlying indenture is July 20, 2032. |
Schedule Of Loan And Borrowing Characteristics | The following tables present certain loan and borrowing characteristics of the 2021-F1 CLO and LMF 2023-1 Financing as of September 30, 2023 and December 31, 2022: As of September 30, 2023 Collateralized Loan Obligations/Financings Count Principal Value Carrying Value (1) Wtd. Avg. Coupon (2) Collateral (loan investments) 86 $ 1,350,912,660 $ 1,339,006,196 8.89% Financing provided 2 $ 1,151,450,000 $ 1,145,317,374 7.32% As of December 31, 2022 Collateralized Loan Obligations Count Principal Value Carrying Value (1) Wtd. Avg. Coupon (2) Collateral (loan investments) 64 $ 996,492,150 $ 996,511,403 7.60% Financing provided 1 $ 833,750,000 $ 829,310,498 5.75% (1) The carrying value of the collateral is net of purchase discounts of $7,023,177 as of September 30, 2023. The carrying value for the 2021-FL1 CLO is net of debt issuance costs of $2,548,732 and $4,439,502 for September 30, 2023 and December 31, 2022, respectively and the carrying value for LMF 2023-1 Financing is net of debt issuance costs of $3,583,894. (2) Weighted average coupon for loan investments assumes applicable one-month LIBOR of 4.18% as of December 31, 2022 and 30-day SOFR of 5.33% and 4.19% as of September 30, 2023 and December 31, 2022, respectively, inclusive of weighted average interest rate floors of 0.41% and 0.25%, and spreads of 3.56% and 3.41%, respectively. As of September 30, 2023, 100.0% of the investments by total investment exposure earned a |
Schedule of Condensed Consolidated Statements of Operations | The statement of operations related to the 2021-FL1 CLO and LMF 2023-1 Financing for the three and nine months ended September 30, 2023 and September 30, 2022 include the following income and expense items: Statements of Operations Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Interest income $ 30,984,016 $ 13,907,856 Interest expense (21,364,918) (8,317,893) Net interest income $ 9,619,098 $ 5,589,963 Provision for credit losses (895,228) 351,914 General and administrative fees (201,928) (145,418) Net income $ 8,521,942 $ 5,796,459 Statements of Operations Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Interest income $ 73,312,906 $ 35,454,425 Interest expense (48,597,825) (17,607,021) Net interest income $ 24,715,081 $ 17,847,404 Provision for credit losses (1,403,015) — General and administrative fees (527,171) (469,785) Net income $ 22,784,895 $ 17,377,619 |
SECURED TERM LOAN (Tables)
SECURED TERM LOAN (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Credit Agreement | As of September 30, 2023 and December 31, 2022, the outstanding balance and total commitment under the Credit Agreement consisted of the following: September 30, 2023 December 31, 2022 Outstanding Balance Total Commitment Outstanding Balance Total Commitment Secured Term Loan $ 47,750,000 $ 47,750,000 $ 47,750,000 $ 47,750,000 Total $ 47,750,000 $ 47,750,000 $ 47,750,000 $ 47,750,000 |
MSRs (Tables)
MSRs (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Mortgage Servicing Rights MSR Disclosure [Abstract] | |
Schedule of MSR Activity | The following table presents the Company's MSR activity for the nine months ended September 30, 2023 and the nine months ended September 30, 2022: September 30, 2023 September 30, 2022 Balance at beginning of period $ 795,656 $ 551,997 Changes in fair value due to: Changes in valuation inputs or assumptions used in valuation model 14,744 358,436 Other changes to fair value (1) (62,093) (92,526) Balance at end of period $ 748,307 $ 817,907 Loans associated with MSRs (2) $ 68,979,603 $ 76,207,213 MSR values as percent of loans (3) 1.08 % 1.07 % (1) Amounts represent changes due to realization of expected cash flows and prepayment of principal of the underlying loan portfolio. (2) Amounts represent the unpaid principal balance of loans associated with MSRs outstanding at September 30, 2023 and September 30, 2022, respectively. (3) Amounts represent the carrying value of MSRs at September 30, 2023 and September 30, 2022, respectively divided by the outstanding balance of the loans associated with these MSRs. |
Schedule of Components of Servicing Income | The following table presents the servicing income recorded on the Company's consolidated statements of operations for the three and nine months ended September 30, 2023 and September 30, 2022: Three Months Ended Three Months Ended Servicing income, net $ 70,842 $ 62,451 Total servicing income $ 70,842 $ 62,451 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Servicing income, net $ 167,766 $ 185,685 Total servicing income $ 167,766 $ 185,685 |
FAIR VALUE (Tables)
FAIR VALUE (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Carried at Fair Value on a Recurring Basis | The following tables summarize the valuation of the Company's assets and liabilities carried at fair value on a recurring basis within the fair value hierarchy levels as of September 30, 2023 and December 31, 2022: September 30, 2023 Quoted prices in Significant Unobservable Balance as of September 30, 2023 Assets: Mortgage servicing rights — — $ 748,307 $ 748,307 Total $ — $ — $ 748,307 $ 748,307 December 31, 2022 Quoted prices in Significant Unobservable Balance as of December 31, 2022 Assets: Mortgage servicing rights — — $ 795,656 $ 795,656 Total $ — $ — $ 795,656 $ 795,656 |
Schedule of Quantitative Information About the Significant Unobservable Inputs Used in the Fair Value Measurement of MSRs Classified as Level 3 | The following table provides quantitative information about the significant unobservable inputs used in the fair value measurement of the Company's MSRs classified as Level 3 fair value assets at September 30, 2023 and December 31, 2022: As of September 30, 2023 Valuation Technique Unobservable Input Range Weighted Average Discounted cash flow Constant prepayment rate 8.0 - 8.4% 8.0 % Discount rate 12.0 % 12.0 % As of December 31, 2022 Valuation Technique Unobservable Input Range Weighted Average Discounted cash flow Constant prepayment rate 8.0 - 9.4% 8.1 % Discount rate 12.0 % 12.0 % |
Schedule of Fair Value Schedule of Financial Instruments | The following table details the carrying amount, face amount and fair value of the financial instruments described in Note 2: September 30, 2023 Level in Fair Value Hierarchy Carrying Value Face Amount Fair Value Assets: Cash and cash equivalents 1 $ 43,408,581 $ 43,408,581 $ 43,408,581 Restricted cash 1 6,225,360 6,225,360 6,225,360 Commercial mortgage loans held-for-investment, net 3 1,350,831,756 1,363,586,916 1,350,607,602 Total $ 1,400,465,697 $ 1,413,220,857 $ 1,400,241,543 Liabilities: Collateralized loan obligations 2 $ 1,145,317,374 $ 1,151,450,000 $ 1,132,023,500 Secured Term Loan 3 47,157,418 47,750,000 44,901,940 Total $ 1,192,474,792 $ 1,199,200,000 $ 1,176,925,440 December 31, 2022 Level in Fair Value Hierarchy Carrying Value Face Amount Fair Value Assets: Cash and cash equivalents 1 $ 43,858,515 $ 43,858,515 $ 43,858,515 Restricted cash 1 3,507,850 3,507,850 3,507,850 Commercial mortgage loans held-for-investment, net 3 1,071,889,518 1,076,865,099 1,064,407,588 Total $ 1,119,255,883 $ 1,124,231,464 $ 1,111,773,953 Liabilities: Collateralized loan obligations 2 $ 829,310,498 $ 833,750,000 $ 803,308,375 Secured term loan 3 46,971,042 47,750,000 44,563,236 Total $ 876,281,540 $ 881,500,000 $ 847,871,611 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transactions [Abstract] | |
Schedule of Restricted Common Stock Activity | The following table summarizes the activity related to restricted common stock granted under the Manager Equity Plan for the nine months ended September 30, 2023 and September 30, 2022: Nine Months Ended September 30, 2023 2022 Shares Weighted Average Grant Date Fair Market Value Shares Weighted Average Grant Date Fair Market Value Outstanding Unvested Shares at Beginning of Period 6,000 $ 2.27 4,500 $ 4.18 Granted — — 6,000 2.27 Vested (6,000) 2.27 (4,500) $ 4.18 Outstanding Unvested Shares at End of Period — $ — 6,000 $ 2.27 |
EQUITY (Tables)
EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Schedule of Cash Dividends Declared | The following table presents cash dividends declared by the Company on its common stock during the nine months ended September 30, 2023: Declaration Date Record Date Payment Date Dividend Amount Cash Dividend Per Weighted Average Share March 16, 2023 March 31, 2023 April 17, 2023 $ 3,133,869 $ 0.060 June 14, 2023 June 30, 2023 July 17, 2023 $ 3,133,869 $ 0.060 September 14, 2023 September 29, 2023 October 16, 2023 $ 3,656,181 $ 0.070 The following table presents cash dividends declared by the Company on its Series A Preferred stock for the nine months ended September 30, 2023: Declaration Date Record Date Payment Date Dividend Amount Cash Dividend Per Weighted Average Share March 16, 2023 April 3, 2023 April 17, 2023 $ 1,181,250 $ 0.49219 June 14, 2023 July 3, 2023 July 17, 2023 $ 1,181,250 $ 0.49219 September 14, 2023 October 2, 2023 October 16, 2023 $ 1,181,250 $ 0.49219 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Computation of Basic and Diluted Earnings Per Share | The following tables provide additional disclosure regarding the computation for the three and nine months ended September 30, 2023 and September 30, 2022: Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Net income $ 6,359,727 $ 1,500,275 Less dividends: Common stock $ 3,656,181 $ 3,133,869 Preferred stock 1,185,042 1,185,042 4,841,223 4,318,911 Undistributed earnings (deficit) $ 1,518,504 $ (2,818,636) Unvested Share-Based Common Stock Unvested Share-Based Common Stock Distributed earnings $ 0.00 $ 0.07 $ 0.06 $ 0.06 Undistributed earnings (deficit) 0.00 0.03 0.00 (0.05) Total $ 0.00 $ 0.10 $ 0.06 $ 0.01 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Net income $ 14,700,645 $ 7,798,926 Less dividends: Common stock $ 9,923,919 $ 9,401,247 Preferred stock 3,555,042 3,555,042 13,478,961 12,956,289 Undistributed earnings (deficit) $ 1,221,684 $ (5,157,363) Unvested Share-Based Common Stock Unvested Share-Based Common Stock Distributed earnings $ 0.19 $ 0.19 $ 0.20 $ 0.20 Undistributed earnings (deficit) 0.02 0.02 0.00 (0.11) Total $ 0.21 $ 0.21 $ 0.20 $ 0.09 |
Schedule of Weighted Average Number of Shares | For the three months ended September 30, 2023 2022 Basic weighted average shares of common stock 52,231,152 52,225,152 Weighted average of non-vested restricted stock — 6,000 Diluted weighted average shares of common stock outstanding 52,231,152 52,231,152 For the nine months ended September 30, 2023 2022 Basic weighted average shares of common stock 52,227,504 47,026,745 Weighted average of non-vested restricted stock 3,648 5,088 Diluted weighted average shares of common stock outstanding 52,231,152 47,031,833 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Feb. 22, 2022 shares | May 05, 2021 shares | Jun. 30, 2023 USD ($) | Sep. 30, 2023 USD ($) loan sub-servicer realizedLoanLoss $ / shares shares | Dec. 31, 2022 USD ($) $ / shares shares | Jan. 01, 2023 USD ($) $ / shares | Feb. 14, 2019 USD ($) | Jan. 15, 2019 USD ($) | Dec. 15, 2015 USD ($) | ||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Accumulated Deficit | $ | [1] | $ (42,360,057) | $ (31,250,852) | |||||||
Number of realized loan losses since inception in 2013 | realizedLoanLoss | 1 | |||||||||
Number of commercial real estate loans included in loan performance analytical model | loan | 100,000 | |||||||||
Number of sub-servicers | sub-servicer | 2 | |||||||||
Principal amount | $ | $ 47,750,000 | $ 47,750,000 | ||||||||
Common stock, shares authorized (in shares) | shares | 450,000,000 | 450,000,000 | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||||
Common stock, shares issued (in shares) | shares | 52,231,152 | 52,231,152 | ||||||||
Common stock, shares outstanding (in shares) | shares | 52,231,152 | 52,231,152 | ||||||||
Stock repurchase program, authorized amount | $ | $ 10,000,000 | |||||||||
Preferred stock, shares authorized (in shares) | shares | 50,000,000 | 50,000,000 | ||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||||
Preferred stock, shares issued (in shares) | shares | 2,400,000 | 2,400,000 | ||||||||
Preferred stock, dividend rate, percentage | 7.875% | 7.875% | ||||||||
Preferred stock, shares outstanding (in shares) | shares | 2,400,000 | 2,400,000 | ||||||||
Cost Recovery Method | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Number of non accrual loans | loan | 1 | |||||||||
Unpaid principal value | $ | $ 12,200,000 | |||||||||
Cash Basis Method | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Number of non accrual loans | loan | 2 | |||||||||
Unpaid principal value | $ | $ 56,400,000 | |||||||||
Transition adjustment | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Share price (in dollars per share) | $ / shares | $ 0.07 | |||||||||
Common Stock | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Issuance of common stock (in shares) | shares | 27,277,269 | |||||||||
Series A Cumulative Redeemable Preferred Stock | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Preferred stock, shares authorized (in shares) | shares | 50,000,000 | 50,000,000 | ||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||||
Preferred stock, shares issued (in shares) | shares | 2,400,000 | 2,400,000 | 2,400,000 | |||||||
Preferred stock, dividend rate, percentage | 7.875% | |||||||||
Preferred stock, shares outstanding (in shares) | shares | 2,400,000 | 2,400,000 | ||||||||
Delayed Draw Facility | Credit Agreement | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Principal amount | $ | $ 47,750,000 | $ 40,250,000 | $ 40,250,000 | |||||||
Accounting Standards Update 2016-13 | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Accumulated Deficit | $ | $ 3,600,000 | |||||||||
Accounting Standards Update 2016-13 | Transition adjustment | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Accumulated Deficit | $ | $ 3,591,440 | |||||||||
Other Operating Expenses | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Payments of debt issuance costs | $ | $ 1,684,618 | |||||||||
Collateralized Loan Obligations | ||||||||||
Debt and Equity Securities, FV-NI [Line Items] | ||||||||||
Maximum exposure to loss from consolidated trusts | $ | $ 234,850,000 | $ 166,250,000 | ||||||||
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Accounting Policies [Abstract] | |||||
Cash and cash equivalents | [1] | $ 43,408,581 | $ 43,858,515 | ||
Restricted cash held within the 2021-FL1 CLO | [1] | 6,225,360 | 3,507,850 | ||
Total cash, cash equivalents and restricted cash | $ 49,633,941 | $ 47,366,365 | $ 76,707,411 | $ 18,279,052 | |
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Financial Impact of the Adoption of Accounting Standard Update (Details) - USD ($) | Sep. 30, 2023 | Jan. 01, 2023 | Dec. 31, 2022 | |
Debt and Equity Securities, FV-NI [Line Items] | ||||
Commercial mortgage loans, held-for-investment | [1] | $ 1,355,547,986 | $ 1,076,148,186 | |
Less: Allowance for credit losses | (4,258,668) | |||
Commercial mortgage loans held-for-investment, net of allowance for credit losses | [1] | 1,350,831,756 | 1,071,889,518 | |
Other liabilities | [1],[2] | 407,298 | 583,989 | |
Accumulated earnings | [1] | $ 42,360,057 | $ 31,250,852 | |
Accounting Standards Update 2016-13 | ||||
Debt and Equity Securities, FV-NI [Line Items] | ||||
Accumulated earnings | $ (3,600,000) | |||
Accounting Standards Update 2016-13 | Transition adjustment | ||||
Debt and Equity Securities, FV-NI [Line Items] | ||||
Commercial mortgage loans, held-for-investment | 0 | |||
Less: Allowance for credit losses | (3,549,501) | |||
Commercial mortgage loans held-for-investment, net of allowance for credit losses | (3,549,501) | |||
Other liabilities | 41,939 | |||
Accumulated earnings | (3,591,440) | |||
Accounting Standards Update 2016-13 | Post-adoption | ||||
Debt and Equity Securities, FV-NI [Line Items] | ||||
Commercial mortgage loans, held-for-investment | 1,076,148,186 | |||
Less: Allowance for credit losses | (7,808,169) | |||
Commercial mortgage loans held-for-investment, net of allowance for credit losses | 1,068,340,017 | |||
Other liabilities | 625,928 | |||
Accumulated earnings | $ 27,659,412 | |||
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion.[2]Includes $35,480 and $0 of Current Expected Credit Loss ("CECL") allowance related to unfunded commitments on commercial mortgage loans, net as of September 30, 2023 and December 31, 2022, respectively. |
COMMERCIAL MORTGAGE LOANS HEL_3
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT - Summary of Commercial Mortgage Loans (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2023 USD ($) mortgageLoan | Dec. 31, 2022 USD ($) mortgageLoan | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for credit losses | [1] | $ (4,716,230) | $ (4,258,668) |
Unamortized purchase discount | $ 7,023,177 | ||
One month LIBOR rate (as a percent) | 4.18% | ||
One month SOFR rate ( as a percent) | 5.33% | 4.19% | |
Weighted average LIBOR floor rate (as a percent) | 0.41% | 0.27% | |
Weighted average floating rate | 100% | 77.40% | |
Weighted average SOFR rate | 22.60% | ||
Commercial mortgage loans, held-for-investment, net of allowance for credit losses | [1] | $ 1,350,831,756 | $ 1,071,889,518 |
Commercial Real Estate Portfolio Segment | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Unpaid Principal Balance | 1,363,109,256 | 1,076,865,099 | |
Carrying Value | 1,355,547,986 | 1,076,148,186 | |
Carrying value, net | $ 1,350,831,756 | $ 1,071,889,518 | |
Loan Count | mortgageLoan | 87 | 71 | |
Financing receivable, floating Rate (as a percent) | 100% | 100% | |
Coupon | 8.80% | 7.60% | |
Term (Years) | 3 years 1 month 6 days | 3 years 6 months | |
Commercial mortgage loans, held-for-investment, net of allowance for credit losses | $ 1,350,831,756 | $ 1,071,889,518 | |
Outstanding senior secured loans from loan participations | 12,196,596 | 75,378,115 | |
Commercial Real Estate Portfolio Segment | Hunt CMT | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Commercial mortgage loans, held-for-investment, net of allowance for credit losses | $ 1,338,635,160 | $ 996,511,403 | |
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
COMMERCIAL MORTGAGE LOANS HEL_4
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT - Loan Portfolio Activity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | ||
Commercial Mortgage Loans Held-for-Investment | |||||
Balance at December 31, 2022 | [1] | $ 1,071,889,518 | |||
Purchases, advances and originations | 517,608,525 | $ 269,596,827 | |||
Principal payments | (203,425,029) | (247,335,751) | |||
Accretion of purchase discount | 431,009 | 125,098 | |||
Amortization of purchase premium | (16,201) | (55,804) | |||
Accretion of deferred loan fees | 195,022 | 0 | |||
Provision for credit losses, net | $ (791,563) | $ (1,521,023) | (1,166,962) | $ (1,872,937) | |
Balance at September 30, 2023 | [1] | 1,350,831,756 | 1,350,831,756 | ||
Commercial Real Estate Portfolio Segment | |||||
Commercial Mortgage Loans Held-for-Investment | |||||
Balance at December 31, 2022 | 1,071,889,518 | ||||
Purchases, advances and originations | 517,608,525 | ||||
Principal payments | (234,559,887) | ||||
Accretion of purchase discount | 431,009 | ||||
Amortization of purchase premium | (16,201) | ||||
Accretion of deferred loan fees | 195,022 | ||||
Provision for credit losses, net | (1,166,729) | ||||
Balance at September 30, 2023 | $ 1,350,831,756 | 1,350,831,756 | |||
Commercial Real Estate Portfolio Segment | Minimum | Accounting Standards Update 2016-13 | |||||
Commercial Mortgage Loans Held-for-Investment | |||||
Balance at December 31, 2022 | $ (3,549,501) | ||||
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
COMMERCIAL MORTGAGE LOANS HEL_5
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT - Summary of Commercial Loan Risk Ratings (Details) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 USD ($) mortgageLoan | Sep. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) mortgageLoan | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||||
Commercial mortgage loans held-for-investment, at amortized cost | [1] | $ 1,355,547,986 | $ 1,076,148,186 | |
Average risk rating, moderate | 3.4 | 3 | ||
Purchase of commercial loans held for investment | $ 517,608,525 | $ 269,596,827 | ||
Commercial Real Estate Portfolio Segment | ||||
Financing Receivable, Credit Quality Indicator [Line Items] | ||||
Number of Loans | mortgageLoan | 87 | 71 | ||
Commercial mortgage loans held-for-investment, at amortized cost | $ 1,363,109,257 | $ 1,076,865,099 | ||
Year 1 | 0 | 201,852,224 | ||
Year 2 | 605,871,902 | 785,619,407 | ||
Year 3 | 688,546,886 | |||
Year 4 | 42,077,193 | |||
Year 5 | 36,781,588 | 22,672,623 | ||
Before year 5 | 19,631,380 | $ 19,668,071 | ||
Purchase of commercial loans held for investment | $ 517,608,525 | |||
Commercial Real Estate Portfolio Segment | Risk rating, 1 | ||||
Financing Receivable, Credit Quality Indicator [Line Items] | ||||
Number of Loans | mortgageLoan | 0 | 0 | ||
Commercial mortgage loans held-for-investment, at amortized cost | $ 0 | $ 0 | ||
Year 1 | 0 | 0 | ||
Year 2 | 0 | 0 | ||
Year 3 | 0 | |||
Year 4 | 0 | |||
Year 5 | 0 | 0 | ||
Before year 5 | $ 0 | $ 0 | ||
Commercial Real Estate Portfolio Segment | Risk rating, 2 | ||||
Financing Receivable, Credit Quality Indicator [Line Items] | ||||
Number of Loans | mortgageLoan | 7 | 11 | ||
Commercial mortgage loans held-for-investment, at amortized cost | $ 113,292,630 | $ 153,933,750 | ||
Year 1 | 0 | 85,198,084 | ||
Year 2 | 111,578,471 | 67,999,500 | ||
Year 3 | 0 | |||
Year 4 | 0 | |||
Year 5 | 0 | 0 | ||
Before year 5 | 0 | $ 0 | ||
Commercial loans that paid off | 34,300,000 | |||
Purchase of commercial loans held for investment | $ 63,700,000 | |||
Commercial Real Estate Portfolio Segment | Risk rating, 3 | ||||
Financing Receivable, Credit Quality Indicator [Line Items] | ||||
Number of Loans | mortgageLoan | 59 | 55 | ||
Commercial mortgage loans held-for-investment, at amortized cost | $ 914,218,238 | $ 852,474,681 | ||
Year 1 | 0 | 101,654,140 | ||
Year 2 | 391,872,631 | 672,421,907 | ||
Year 3 | 493,653,236 | |||
Year 4 | 42,077,193 | |||
Year 5 | 0 | 16,672,623 | ||
Before year 5 | $ 19,631,380 | $ 19,668,071 | ||
Average risk rating, percentage | 75.30% | 93.80% | ||
Commercial loans that paid off | $ 160,000,000 | |||
Purchase of commercial loans held for investment | 395,300,000 | |||
Transition of commercial loans held for sale to a higher risk rating | $ 70,000,000 | |||
Commercial Real Estate Portfolio Segment | Risk rating, 4 | ||||
Financing Receivable, Credit Quality Indicator [Line Items] | ||||
Number of Loans | mortgageLoan | 18 | 3 | ||
Commercial mortgage loans held-for-investment, at amortized cost | $ 266,994,932 | $ 47,448,000 | ||
Year 1 | 0 | 15,000,000 | ||
Year 2 | 102,420,800 | 32,448,000 | ||
Year 3 | 163,078,861 | |||
Year 4 | 0 | |||
Year 5 | 0 | 0 | ||
Before year 5 | 0 | $ 0 | ||
Purchase of commercial loans held for investment | 32,000,000 | |||
Transition of commercial loans held for sale to a higher risk rating | $ 187,600,000 | |||
Commercial Real Estate Portfolio Segment | Risk rating, 5 | ||||
Financing Receivable, Credit Quality Indicator [Line Items] | ||||
Number of Loans | mortgageLoan | 3 | 2 | ||
Commercial mortgage loans held-for-investment, at amortized cost | $ 68,603,457 | $ 23,008,668 | ||
Year 1 | 0 | 0 | ||
Year 2 | 0 | 12,750,000 | ||
Year 3 | 31,814,789 | |||
Year 4 | 0 | |||
Year 5 | 36,781,588 | 6,000,000 | ||
Before year 5 | 0 | $ 0 | ||
Commercial loans that paid off | 10,800,000 | |||
Transition of commercial loans held for sale to a higher risk rating | $ 56,000,000 | |||
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
COMMERCIAL MORTGAGE LOANS HEL_6
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT - Summary of Concentration of Credit Risk (Details) - Commercial Loans Held-For-Investment - Commercial Real Estate Portfolio Segment | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Geography | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 100% | 100% |
Collateral Property Type | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 100% | 100% |
Multifamily | Collateral Property Type | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 93% | 89.60% |
Seniors Housing and Healthcare | Collateral Property Type | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 5.60% | 6.40% |
Self-Storage | Collateral Property Type | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 1.40% | 1.80% |
Retail | Collateral Property Type | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 0% | 1.60% |
Office | Collateral Property Type | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 0% | 0.60% |
South | Geography | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 44.70% | 46.60% |
Southwest | Geography | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 27.10% | 26.70% |
Mid-Atlantic | Geography | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 15.10% | 12.40% |
Midwest | Geography | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 7.30% | 8% |
West | Geography | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk, percent | 5.80% | 6.30% |
COMMERCIAL MORTGAGE LOANS HEL_7
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT - Allowance for Loan Losses (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | ||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |||||
Allowance for credit losses at beginning of period | [1] | $ 4,258,668 | |||
Provision (reversal of) credit losses | $ 791,563 | $ 1,521,023 | 1,166,962 | $ 1,872,937 | |
Allowance for credit losses at end of period | [1] | 4,716,230 | 4,716,230 | ||
Commercial Loans Held-For-Investment | |||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |||||
Allowance for credit losses at beginning of period | 3,897,895 | 351,914 | 4,258,668 | 0 | |
Provision (reversal of) credit losses | 818,335 | 1,521,023 | 1,179,734 | 1,872,937 | |
Charge offs | 0 | 0 | (4,271,673) | ||
Allowance for credit losses at end of period | 4,716,230 | 1,872,937 | 4,716,230 | 1,872,937 | |
Commercial Loans Held-For-Investment | Unfunded Loan Commitment | |||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |||||
Allowance for credit losses at beginning of period | 55,941 | 0 | 0 | 0 | |
Provision (reversal of) credit losses | (26,772) | 0 | (12,770) | 0 | |
Charge offs | 0 | 0 | 0 | 0 | |
Allowance for credit losses at end of period | 29,169 | 0 | 29,169 | 0 | |
Transition adjustment | Accounting Standards Update 2016-13 | Commercial Loans Held-For-Investment | |||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |||||
Allowance for credit losses at beginning of period | 0 | 0 | 3,549,501 | ||
Transition adjustment | Accounting Standards Update 2016-13 | Commercial Loans Held-For-Investment | Unfunded Loan Commitment | |||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |||||
Allowance for credit losses at beginning of period | $ 0 | $ 0 | $ 41,939 | $ 0 | |
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
COMMERCIAL MORTGAGE LOANS HEL_8
COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT - Additional Information (Details) $ in Millions | 1 Months Ended | 9 Months Ended | 12 Months Ended |
Feb. 28, 2023 USD ($) | Sep. 30, 2023 USD ($) loanParticipation | Dec. 31, 2022 USD ($) | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Sale of loans | $ 6 | ||
Reserve for impaired loan | $ 4.3 | ||
Office Building | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Impaired unpaid principal value | $ 10.3 | ||
Reserve for impaired loan | $ 4.3 | ||
Multifamily | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Impaired unpaid principal value | $ 68.6 | ||
Number of impaired office loans | loanParticipation | 3 |
USE OF SPECIAL PURPOSE ENTITI_3
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES - Narrative (Details) | Jul. 12, 2023 USD ($) | Jun. 14, 2021 USD ($) subsidiary tranche | Sep. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) |
Variable Interest Entity [Line Items] | ||||
Number of wholly-owned subsidiaries | subsidiary | 2 | |||
Equity interest retained | $ 96,250,000 | |||
Proceeds from issuance of long-term debt allocated to acquire additional loan obligations | $ 330,300,000 | |||
Period to acquire additional loan obligations from closing date | 180 days | |||
Collateralized loan obligation leverage ratio (as a percent) | 0.83 | |||
Secured Overnight Financing Rate | ||||
Variable Interest Entity [Line Items] | ||||
Debt, weighted average interest rate | 3.14% | |||
Debt weighted average, excluding fees and transaction costs, term | 30 days | |||
Commercial Real Estate Portfolio Segment | ||||
Variable Interest Entity [Line Items] | ||||
Unpaid Principal Balance | $ 1,363,109,256 | $ 1,076,865,099 | ||
LMF 2023-1 Financing | Internal Investment Grade | ||||
Variable Interest Entity [Line Items] | ||||
Unpaid Principal Balance | $ 47,300,000 | |||
LMF 2023-1 Financing | Internal Investment Grade | Private Placement | ||||
Variable Interest Entity [Line Items] | ||||
Unpaid Principal Balance | 270,400,000 | |||
LMF 2023-1 Financing | Multifamily | Commercial Real Estate Portfolio Segment | Internal Investment Grade | ||||
Variable Interest Entity [Line Items] | ||||
Unpaid Principal Balance | 386,400,000 | |||
Lument Finance Trust | ||||
Variable Interest Entity [Line Items] | ||||
Retained subordinated interests | $ 68,600,000 | |||
Financing initial reinvestment period | 2 years | |||
Collateralized Loan Obligations - LFT CRE 2021-FL1, Ltd. | ||||
Variable Interest Entity [Line Items] | ||||
Number of tranches of CLO notes issued | tranche | 8 | |||
Aggregate principal of CLO notes | $ 903,800,000 | |||
Initial investment period | 2 years 6 months | |||
Proceeds from issuance of collateralized loan obligations | $ 1,000,000,000 | |||
Collateralized Loan Obligations - LFT CRE 2021-FL1, Ltd. - Investment Grade | ||||
Variable Interest Entity [Line Items] | ||||
Aggregate principal of CLO notes | 833,800,000 | |||
Collateralized Loan Obligations - LFT CRE 2021-FL1, Ltd. - Below Investment Grade | ||||
Variable Interest Entity [Line Items] | ||||
Aggregate principal of CLO notes | $ 70,000,000 |
USE OF SPECIAL PURPOSE ENTITI_4
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES - Condensed Consolidated Balance Sheets (Details) - USD ($) | Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | |||
ASSETS | |||||||||||
Cash, cash equivalents and restricted cash | $ 49,633,941 | $ 47,366,365 | $ 76,707,411 | $ 18,279,052 | |||||||
Accrued interest receivable | [1] | 8,607,899 | 5,797,991 | ||||||||
Investment related receivable | [1] | 31,121,852 | 0 | ||||||||
Loans held for investment, net of allowance for credit losses | [1] | 1,350,831,756 | 1,071,889,518 | ||||||||
Total assets | [1] | 1,443,331,848 | 1,127,965,537 | ||||||||
LIABILITIES | |||||||||||
Accrued interest payable | [1] | 3,832,841 | 2,360,809 | ||||||||
Collateralized loan obligations | [1] | 1,145,317,374 | 829,310,498 | ||||||||
Total liabilities | [1] | 1,202,736,501 | 884,964,040 | ||||||||
Equity | 240,595,347 | [1] | $ 239,091,195 | $ 240,847,239 | 243,001,497 | [1] | $ 245,266,509 | $ 248,096,064 | $ 249,080,843 | $ 169,375,500 | |
Total liabilities and equity | [1] | 1,443,331,848 | 1,127,965,537 | ||||||||
2021-FL1 CLO | |||||||||||
ASSETS | |||||||||||
Cash, cash equivalents and restricted cash | 6,225,360 | 3,507,850 | |||||||||
Accrued interest receivable | 8,607,899 | 5,488,118 | |||||||||
Investment related receivable | 31,121,852 | 0 | |||||||||
Loans held for investment, net of allowance for credit losses | 1,339,006,196 | 996,511,403 | |||||||||
Total assets | 1,384,961,307 | 1,005,507,371 | |||||||||
LIABILITIES | |||||||||||
Accrued interest payable | 3,746,294 | 2,264,646 | |||||||||
Collateralized loan obligations | 1,145,317,374 | 829,310,498 | |||||||||
Total liabilities | 1,149,063,668 | 831,575,144 | |||||||||
Equity | 235,897,639 | 173,932,227 | |||||||||
Total liabilities and equity | $ 1,384,961,307 | $ 1,005,507,371 | |||||||||
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
USE OF SPECIAL PURPOSE ENTITI_5
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES - Summary of Loan and Borrowing Characteristics (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2023 USD ($) instrument contract mortgageLoan | Dec. 31, 2022 USD ($) contract mortgageLoan instrument | ||
Variable Interest Entity [Line Items] | |||
Collateralized loan obligations | [1] | $ 1,145,317,374 | $ 829,310,498 |
One month LIBOR rate (as a percent) | 4.18% | ||
One month SOFR rate ( as a percent) | 5.33% | 4.19% | |
Weighted average LIBOR floor rate (as a percent) | 0.41% | 0.25% | |
SOFR spread rate (as a percent) | 3.56% | 3.41% | |
Basis spread on one-month LIBOR (percent) | 1.99% | 1.43% | |
One-Month LIBOR Rate | |||
Variable Interest Entity [Line Items] | |||
One month LIBOR rate (as a percent) | 4.32% | ||
Financing receivable, floating Rate (as a percent) | 100% | 80.40% | |
Secured Overnight Financing Rate | |||
Variable Interest Entity [Line Items] | |||
Financing receivable, floating Rate (as a percent) | 19.60% | ||
30-Day SOFR | |||
Variable Interest Entity [Line Items] | |||
30-day SOFR rate | 0.0534 | ||
Commercial Real Estate Portfolio Segment | |||
Variable Interest Entity [Line Items] | |||
Collateral (loan investments) (Count) | mortgageLoan | 87 | 71 | |
Carrying Value | $ 1,355,547,986 | $ 1,076,148,186 | |
Financing receivable, floating Rate (as a percent) | 100% | 100% | |
2021-FL1 CLO | |||
Variable Interest Entity [Line Items] | |||
Financings provided, (Count) | instrument | 2 | 1 | |
Collateralized loan obligations | $ 1,145,317,374 | $ 829,310,498 | |
2021-FL1 CLO | One-Month LIBOR Rate | |||
Variable Interest Entity [Line Items] | |||
Weighted average yield (percent) | 8.89% | 7.60% | |
Weighted average yield (percent) | 7.32% | 5.75% | |
2021-FL1 CLO | Commercial Real Estate Portfolio Segment | |||
Variable Interest Entity [Line Items] | |||
Collateral (loan investments) (Count) | contract | 86 | 64 | |
Principal Value | 2021-FL1 CLO | |||
Variable Interest Entity [Line Items] | |||
Carrying Value | $ 1,350,912,660 | $ 996,492,150 | |
Collateralized loan obligations | 1,151,450,000 | 833,750,000 | |
Carrying Value | 2021-FL1 CLO | |||
Variable Interest Entity [Line Items] | |||
Carrying Value | 1,339,006,196 | 996,511,403 | |
Collateralized loan obligations | 1,145,317,374 | 829,310,498 | |
Debt issuance costs | 2,548,732 | 4,439,502 | |
Carrying Value | LMF 2023-1 Financing | |||
Variable Interest Entity [Line Items] | |||
Debt issuance costs | $ 3,583,894 | $ 3,583,894 | |
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
USE OF SPECIAL PURPOSE ENTITI_6
USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES - Condensed Consolidated Statement of Operations (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Variable Interest Entity [Line Items] | ||||
Net interest income | $ 9,544,365 | $ 5,483,130 | $ 25,299,713 | $ 16,986,752 |
Provision for credit losses | (791,563) | (1,521,023) | (1,166,962) | (1,872,937) |
General and administrative fees | (861,447) | (851,528) | (2,692,236) | (2,664,680) |
LFT CRE 2021-FL1, Ltd., Hunt Cre 2017-FL1, Ltd, and Hunt Cre 2018-FL2, Ltd. | ||||
Variable Interest Entity [Line Items] | ||||
Interest income | 30,984,016 | 13,907,856 | 73,312,906 | 35,454,425 |
Interest expense | (21,364,918) | (8,317,893) | (48,597,825) | (17,607,021) |
Net interest income | 9,619,098 | 5,589,963 | 24,715,081 | 17,847,404 |
Provision for credit losses | (895,228) | 351,914 | (1,403,015) | 0 |
General and administrative fees | (201,928) | (145,418) | (527,171) | (469,785) |
Net income | $ 8,521,942 | $ 5,796,459 | $ 22,784,895 | $ 17,377,619 |
RESTRICTED CASH (Details)
RESTRICTED CASH (Details) | 9 Months Ended |
Sep. 30, 2023 | |
LFT CRE 2021-FL1 | |
Restricted Cash and Cash Equivalents Items [Line Items] | |
Reinvestment period | 30 months |
LMF 2023-1 Financing | |
Restricted Cash and Cash Equivalents Items [Line Items] | |
Reinvestment period | 24 months |
SECURED TERM LOAN - Additional
SECURED TERM LOAN - Additional Information (Details) - USD ($) | Aug. 23, 2021 | Jan. 15, 2019 | Sep. 30, 2023 | Dec. 31, 2022 | Apr. 21, 2021 | Feb. 14, 2019 |
Debt Instrument [Line Items] | ||||||
Principal amount | $ 47,750,000 | $ 47,750,000 | ||||
Collateralized loan obligation, discount | $ 39,200,000 | |||||
Collateralized loan obligation, deferred financing costs | 592,582 | $ 778,958 | ||||
Delayed Draw Facility | Credit Agreement | ||||||
Debt Instrument [Line Items] | ||||||
Principal amount | $ 40,250,000 | $ 47,750,000 | $ 40,250,000 | |||
Maturity term | 6 years | |||||
Incremental increase in term loan | $ 7,500,000 | |||||
Proceeds from credit facility | $ 7,500,000 | |||||
Delayed Draw Facility | Credit Agreement | Six year period following initial draw | ||||||
Debt Instrument [Line Items] | ||||||
Maturity term | 6 years | |||||
Stated interest rate, percent | 7.25% | |||||
Delayed Draw Facility | Credit Agreement | First four months after sixth anniversary | ||||||
Debt Instrument [Line Items] | ||||||
Weighted average yield (percent) | 0.25% | |||||
Delayed Draw Facility | Credit Agreement | Second four months after sixth anniversary | ||||||
Debt Instrument [Line Items] | ||||||
Weighted average yield (percent) | 0.375% | |||||
Delayed Draw Facility | Credit Agreement | Last four months until maturity | ||||||
Debt Instrument [Line Items] | ||||||
Weighted average yield (percent) | 0.50% |
SECURED TERM LOAN - Summary of
SECURED TERM LOAN - Summary of Credit Agreement (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Debt Disclosure [Abstract] | ||
Outstanding Balance | $ 47,750,000 | $ 47,750,000 |
Total Commitment | $ 47,750,000 | $ 47,750,000 |
MSRs - Additional Information (
MSRs - Additional Information (Details) | 9 Months Ended | |
Sep. 30, 2023 USD ($) sub-servicer | Sep. 30, 2022 USD ($) | |
Mortgage Servicing Rights MSR [Line Items] | ||
Number of sub-servicers | sub-servicer | 2 | |
Mortgage servicing rights | ||
Mortgage Servicing Rights MSR [Line Items] | ||
Loans associated with MSRs | $ | $ 68,979,603 | $ 76,207,213 |
MSRs - MSR Activity (Details)
MSRs - MSR Activity (Details) - Mortgage Servicing Rights - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Movement in Mortgage Service Rights | ||
Balance at beginning of period | $ 795,656 | $ 551,997 |
Changes in fair value due to: | ||
Changes in valuation inputs or assumptions used in valuation model | 14,744 | 358,436 |
Other changes to fair value | (62,093) | (92,526) |
Balance at end of period | 748,307 | 817,907 |
Loans associated with MSRs | $ 68,979,603 | $ 76,207,213 |
MSR values as percent of loans | 1.08% | 1.07% |
MSRs - Components of Servicing
MSRs - Components of Servicing Income (Details) - Mortgages - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Schedule Of Components Of Servicing Income [Line Items] | ||||
Servicing income, net | $ 70,842 | $ 62,451 | $ 167,766 | $ 185,685 |
Total servicing income | $ 70,842 | $ 62,451 | $ 167,766 | $ 185,685 |
FAIR VALUE - Assets and Liabili
FAIR VALUE - Assets and Liabilities at Fair Value (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Assets: | ||
Total assets | $ 748,307 | $ 795,656 |
Quoted prices in active markets for identical assets Level 1 | ||
Assets: | ||
Total assets | 0 | 0 |
Significant other observable inputs Level 2 | ||
Assets: | ||
Total assets | 0 | 0 |
Unobservable inputs Level 3 | ||
Assets: | ||
Total assets | 748,307 | 795,656 |
Mortgage servicing rights | ||
Assets: | ||
Total assets | 748,307 | 795,656 |
Mortgage servicing rights | Quoted prices in active markets for identical assets Level 1 | ||
Assets: | ||
Total assets | 0 | 0 |
Mortgage servicing rights | Significant other observable inputs Level 2 | ||
Assets: | ||
Total assets | 0 | 0 |
Mortgage servicing rights | Unobservable inputs Level 3 | ||
Assets: | ||
Total assets | $ 748,307 | $ 795,656 |
FAIR VALUE - Additional Informa
FAIR VALUE - Additional Information (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | $ 748,307 | $ 795,656 |
Unobservable inputs Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 748,307 | 795,656 |
Mortgage Servicing Rights | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 748,307 | 795,656 |
Mortgage Servicing Rights | Unobservable inputs Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | $ 748,307 | $ 795,656 |
FAIR VALUE - Unobservable Input
FAIR VALUE - Unobservable Inputs Information (Details) - Mortgage servicing rights - Discounted cash flow - Unobservable inputs Level 3 | Sep. 30, 2023 | Dec. 31, 2022 |
Constant prepayment rate | Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Unobservable Input | 0.080 | 0.080 |
Constant prepayment rate | Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Unobservable Input | 0.084 | 0.094 |
Constant prepayment rate | Weighted Average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Unobservable Input | 0.080 | 0.081 |
Discount rate | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Unobservable Input | 0.120 | 0.120 |
Discount rate | Weighted Average | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Unobservable Input | 0.120 | 0.120 |
FAIR VALUE - Fair Value Informa
FAIR VALUE - Fair Value Information on Financial Instruments (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Cash and cash equivalents | [1] | $ 43,408,581 | $ 43,858,515 |
Restricted cash | [1] | 6,225,360 | 3,507,850 |
Total | [1] | 1,443,331,848 | 1,127,965,537 |
Collateralized loan obligations | [1] | 1,145,317,374 | 829,310,498 |
Secured Term Loan | [1] | 47,157,418 | 46,971,042 |
Total liabilities | [1] | 1,202,736,501 | 884,964,040 |
Carrying Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Total | 1,400,465,697 | 1,119,255,883 | |
Total liabilities | 1,192,474,792 | 876,281,540 | |
Carrying Value | Quoted prices in active markets for identical assets Level 1 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Cash and cash equivalents | 43,408,581 | 43,858,515 | |
Restricted cash | 6,225,360 | 3,507,850 | |
Carrying Value | Significant other observable inputs Level 2 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Collateralized loan obligations | 1,145,317,374 | 829,310,498 | |
Carrying Value | Unobservable inputs Level 3 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Commercial mortgage loans held-for-investment, net | 1,350,831,756 | ||
Secured Term Loan | 47,157,418 | 46,971,042 | |
Face Amount | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Total | 1,413,220,857 | 1,124,231,464 | |
Total liabilities | 1,199,200,000 | 881,500,000 | |
Face Amount | Quoted prices in active markets for identical assets Level 1 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Cash and cash equivalents | 43,408,581 | 43,858,515 | |
Restricted cash | 6,225,360 | 3,507,850 | |
Face Amount | Significant other observable inputs Level 2 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Collateralized loan obligations | 1,151,450,000 | 833,750,000 | |
Face Amount | Unobservable inputs Level 3 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Commercial mortgage loans held-for-investment, net | 1,363,586,916 | 1,076,865,099 | |
Secured Term Loan | 47,750,000 | 47,750,000 | |
Fair Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Total | 1,400,241,543 | 1,111,773,953 | |
Total liabilities | 1,176,925,440 | 847,871,611 | |
Fair Value | Quoted prices in active markets for identical assets Level 1 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Cash and cash equivalents | 43,408,581 | 43,858,515 | |
Restricted cash | 6,225,360 | 3,507,850 | |
Fair Value | Significant other observable inputs Level 2 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Collateralized loan obligations | 1,132,023,500 | 803,308,375 | |
Fair Value | Unobservable inputs Level 3 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Commercial mortgage loans held-for-investment, net | 1,350,607,602 | 1,064,407,588 | |
Secured Term Loan | $ 44,901,940 | $ 44,563,236 | |
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
RELATED PARTY TRANSACTIONS - Ad
RELATED PARTY TRANSACTIONS - Additional Information (Details) | 3 Months Ended | 9 Months Ended | |||||||
Feb. 22, 2022 $ / shares shares | Jan. 03, 2020 | Sep. 30, 2023 USD ($) loan | Jun. 30, 2023 USD ($) loan | Sep. 30, 2022 USD ($) loan shares | Jun. 30, 2022 USD ($) loan shares | Mar. 31, 2022 USD ($) loan shares | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | |
Related Party Transaction [Line Items] | |||||||||
Annual management fee (percentage) | 1.50% | ||||||||
Quarterly management fee percentage (as a percent) | 0.375% | ||||||||
Reimbursable expenses | $ 284,859 | $ 555,307 | $ 1,372,511 | $ 1,594,662 | |||||
Common Stock | |||||||||
Related Party Transaction [Line Items] | |||||||||
Issuance of common stock (in shares) | shares | 27,277,269 | 0 | 6,000 | 27,277,269 | |||||
Common stock, shares issued (in dollars per share) | $ / shares | $ 3.06 | ||||||||
Restricted Stock Units (RSUs) | |||||||||
Related Party Transaction [Line Items] | |||||||||
Compensation expense | $ 6,194 | 12,547 | |||||||
Manager Equity Plan | |||||||||
Related Party Transaction [Line Items] | |||||||||
Percentage of shares issued | 3% | ||||||||
Manager Equity Plan | Restricted Stock Units (RSUs) | |||||||||
Related Party Transaction [Line Items] | |||||||||
Unrecognized compensation expense | 0 | $ 9,627 | $ 0 | 9,627 | |||||
Affiliated Entity | |||||||||
Related Party Transaction [Line Items] | |||||||||
Management fee expense | 1,072,569 | 1,096,144 | 3,253,205 | 3,111,413 | |||||
Fees and expenses payable to Manager | 1,080,000 | 1,095,000 | 1,080,000 | 1,095,000 | |||||
Incentive fee expense | 0 | 0 | 0 | 0 | |||||
Reimbursable expenses | 284,859 | 555,307 | 1,372,511 | 1,594,662 | |||||
Reimbursable expenses payable | $ 284,097 | $ 553,799 | $ 284,097 | $ 553,799 | |||||
Reduction to reimbursable expenses as a percentage of exit fees waived (percent) | 50% | 50% | 50% | 50% | |||||
Reimbursable expenses waived | $ 608,180 | $ 204,400 | $ 775,680 | $ 903,947 | |||||
Reimbursable expense reduction | $ 304,090 | $ 102,200 | 387,840 | $ 451,974 | |||||
Affiliated Entity | Common Stock | |||||||||
Related Party Transaction [Line Items] | |||||||||
Issuance of common stock (in shares) | shares | 3,524,851 | ||||||||
Common stock, shares issued (in dollars per share) | $ / shares | $ 3.06 | ||||||||
Hunt Investment Management, LLC | Affiliated Entity | |||||||||
Related Party Transaction [Line Items] | |||||||||
Quarterly incentive fee percentage (as a percent) | 20% | ||||||||
Hurdle rate percentage (as a percent) | 8% | ||||||||
Length of renewal terms | 1 year | ||||||||
Lument Structured Finance | Affiliated Entity | 2021-FL1 CLO | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of loans purchased | loan | 5 | 3 | 8 | ||||||
Unpaid principal balance of purchased loans | $ 47,500,000 | $ 31,200,000 | $ 108,900,000 | ||||||
Lument Structured Finance | Affiliated Entity | 2021-FL1 CLO | Loan Purchase One | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of loans purchased | loan | 1 | 2 | |||||||
Unpaid principal balance of purchased loans | $ 6,100,000 | $ 48,600,000 | |||||||
Lument Structured Finance | Affiliated Entity | 2021-FL1 CLO | Loan Purchase Two | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of loans purchased | loan | 1 | 2 | |||||||
Unpaid principal balance of purchased loans | $ 4,000,000 | $ 1,700,000 | |||||||
Lument Structured Finance | Affiliated Entity | 2021-FL1 CLO | Loan Purchase Three | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of loans purchased | loan | 4 | 1 | |||||||
Unpaid principal balance of purchased loans | $ 66,000,000 | $ 6,100,000 | |||||||
Payments to acquire finance receivables, discount | $ 1,200,000 | $ 100,000 | |||||||
Lument Structured Finance | Affiliated Entity | 2021-FL1 CLO | Loan Purchase Four | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of loans purchased | loan | 17 | ||||||||
Unpaid principal balance of purchased loans | $ 16,500,000 | ||||||||
Payments to acquire finance receivables, discount | $ 200,000 | ||||||||
Number of loans funded | loan | 17 | ||||||||
Lument Structured Finance | Affiliated Entity | LMF 2023-1 Financing | Loan Purchase One | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of loans purchased | loan | 3 | ||||||||
Unpaid principal balance of purchased loans | $ 48,800,000 | ||||||||
Lument Structured Finance | Affiliated Entity | LMF 2021-1 Financing | Loan Purchase Three | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of loans purchased | loan | 20 | ||||||||
Unpaid principal balance of purchased loans | $ 326,900,000 | ||||||||
Payments to acquire finance receivables, discount | 5,900,000 | ||||||||
Lument Structured Finance | Affiliated Entity | LMF 2021-1 Financing | Loan Purchase Four | |||||||||
Related Party Transaction [Line Items] | |||||||||
Unpaid principal balance of purchased loans | $ 400,000 | ||||||||
Number of loans funded | loan | 1 | ||||||||
Lument Structured Finance | Affiliated Entity | Lument Commercial Mortgage Trust | |||||||||
Related Party Transaction [Line Items] | |||||||||
Number of loans purchased | loan | 6 | 6 | |||||||
Unpaid principal balance of purchased loans | $ 76,000,000 | $ 76,000,000 | |||||||
OREC Investment Holdings | Affiliated Entity | Common Stock | |||||||||
Related Party Transaction [Line Items] | |||||||||
Issuance of common stock (in shares) | shares | 13,071,895 | ||||||||
Common stock, shares issued (in dollars per share) | $ / shares | $ 3.06 | ||||||||
Lument IM | LMF 2023-1 Financing | |||||||||
Related Party Transaction [Line Items] | |||||||||
Debt issuance costs | $ 1,100,000 | $ 1,100,000 |
RELATED PARTY TRANSACTIONS - Un
RELATED PARTY TRANSACTIONS - Unvested Share Activity (Details) - Employee Stock Option - Affiliated Entity - $ / shares | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Shares | ||
Outstanding Unvested Shares at Beginning of Period (in shares) | 6,000 | 4,500 |
Granted (in shares) | 0 | 6,000 |
Vested (in shares) | (6,000) | (4,500) |
Outstanding Unvested Shares at End of Period (in shares) | 0 | 6,000 |
Weighted Average Grant Date Fair Market Value | ||
Outstanding Unvested Shares at Beginning of Period (in dollars per share) | $ 2.27 | $ 4.18 |
Granted (in dollars per share) | 0 | 2.27 |
Vested (in dollars per share) | 2.27 | 4.18 |
Outstanding Unvested Shares at End of Period (in dollars per share) | $ 0 | $ 2.27 |
GUARANTEES (Details)
GUARANTEES (Details) - USD ($) | 9 Months Ended | ||
Jun. 15, 2016 | Sep. 30, 2023 | Dec. 31, 2022 | |
Backstop Guarantee | |||
Guarantor Obligations [Line Items] | |||
Representation and warranty breach, threshold period for likely occurrence | 5 years | ||
Minimum adjusted tangible new worth | $ 20,000,000 | ||
Minimum available liquidity | $ 5,000,000 | ||
Minimum available liquidity, percentage of aggregate unpaid principal balance (as a percent) | 0.10% | ||
Maximum amount of estimated future payments under the backstop guarantees | $ 145,000,000 | $ 172,000,000 | |
Backstop Guarantee | Loan Review Services | |||
Guarantor Obligations [Line Items] | |||
Minimum available liquidity, percentage of aggregate unpaid principal balance (as a percent) | 0.01% | ||
Backstop Guarantee | Oak Circle Capital Partners, LLC | Loan Review Services | |||
Guarantor Obligations [Line Items] | |||
Alternative backstop fee | $ 426,770 | ||
Indemnification Agreement | |||
Guarantor Obligations [Line Items] | |||
Maximum amount of estimated future payments under the backstop guarantees | $ 0 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 |
LFT 2021-FL1, Ltd. | ||
Loss Contingencies [Line Items] | ||
Unfunded commitments | $ 6.7 | |
2021-FL1 CLO | ||
Loss Contingencies [Line Items] | ||
Unfunded commitments | $ 78.4 | |
Funded participation interests | 52.7 | |
LMF 2023-1 Financing | ||
Loss Contingencies [Line Items] | ||
Unfunded commitments | $ 25.1 | |
LCMT | ||
Loss Contingencies [Line Items] | ||
Unfunded commitments | $ 4.7 |
EQUITY - Additional Information
EQUITY - Additional Information (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 92 Months Ended | ||||||||||||||
Apr. 20, 2023 election tradingDay shares | Feb. 22, 2022 USD ($) $ / shares shares | May 05, 2021 USD ($) $ / shares shares | Nov. 29, 2018 USD ($) shares | Sep. 30, 2023 USD ($) $ / shares shares | Sep. 30, 2022 USD ($) $ / shares shares | Jun. 30, 2022 shares | Mar. 31, 2022 shares | Sep. 30, 2023 USD ($) $ / shares shares | Sep. 30, 2022 USD ($) $ / shares shares | Dec. 31, 2022 USD ($) $ / shares shares | Sep. 30, 2023 USD ($) $ / shares shares | Jun. 30, 2023 shares | Mar. 31, 2023 shares | Dec. 31, 2021 shares | Dec. 31, 2020 | Dec. 15, 2015 USD ($) | ||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 | 450,000,000 | 450,000,000 | ||||||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | ||||||||||||||
Common stock, shares issued (in shares) | 52,231,152 | 52,231,152 | 52,231,152 | 52,231,152 | ||||||||||||||
Common stock, shares outstanding (in shares) | 52,231,152 | 52,231,152 | 52,231,152 | 52,231,152 | ||||||||||||||
Stock repurchase program, authorized amount | $ | $ 10,000,000 | |||||||||||||||||
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | ||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | ||||||||||||||
Preferred stock, shares issued (in shares) | 2,400,000 | 2,400,000 | 2,400,000 | 2,400,000 | ||||||||||||||
Preferred stock, shares outstanding (in shares) | 2,400,000 | 2,400,000 | 2,400,000 | 2,400,000 | ||||||||||||||
Dividends payable | $ | [1] | $ 4,657,473 | $ 4,657,473 | $ 4,131,369 | $ 4,657,473 | |||||||||||||
Dividends declared per share of common stock (in dollars per share) | $ / shares | $ 0.07 | $ 0.06 | $ 0.19 | $ 0.18 | ||||||||||||||
Noncontrolling interests | $ | [1] | $ 99,500 | $ 99,500 | $ 99,500 | $ 99,500 | |||||||||||||
Dividends on the HCMT Preferred Shares | $ | $ 1,185,042 | $ 1,185,042 | $ 3,555,042 | $ 3,555,042 | ||||||||||||||
Number of trading days | tradingDay | 10 | |||||||||||||||||
Director | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Number of election | election | 1 | |||||||||||||||||
Stock repurchase program, period in force | 6 months | |||||||||||||||||
Redeemable Preferred Stock | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | ||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | ||||||||||||||
Preferred stock, shares issued (in shares) | 2,400,000 | 2,400,000 | 2,400,000 | 2,400,000 | 2,400,000 | |||||||||||||
Preferred stock, shares outstanding (in shares) | 2,400,000 | 2,400,000 | 2,400,000 | 2,400,000 | ||||||||||||||
Proceeds from issuance of redeemable preferred stock | $ | $ 58,100,000 | |||||||||||||||||
Series A Preferred Stock | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Preferred stock, liquidation preference (in dollars per share) | $ / shares | $ 25 | |||||||||||||||||
Stock Repurchase Program | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Stock repurchase program, authorized amount | $ | $ 10,000,000 | |||||||||||||||||
Common stock repurchase activity (in shares) | 0 | |||||||||||||||||
Number of shares repurchased (in shares) | 126,856 | 126,856 | 126,856 | |||||||||||||||
Weighted average share price of common stock repurchased (in dollars per share) | $ / shares | $ 5.09 | |||||||||||||||||
Stock repurchase program, remaining authorized amount | $ | $ 9,400,000 | $ 9,400,000 | $ 9,400,000 | |||||||||||||||
Common Stock | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Common stock, shares outstanding (in shares) | 52,231,152 | 52,231,152 | 52,231,152 | 52,225,152 | 52,231,152 | 52,231,152 | 52,231,152 | 52,231,152 | 52,231,152 | 52,231,152 | 24,947,883 | |||||||
Issuance of common stock (in shares) | 27,277,269 | 0 | 6,000 | 27,277,269 | ||||||||||||||
Common stock, shares issued (in dollars per share) | $ / shares | $ 3.06 | |||||||||||||||||
Proceeds from issuance of common stock | $ | $ 83,500,000 | |||||||||||||||||
Dividends payable | $ | $ 9,923,919 | $ 9,923,919 | $ 9,923,919 | |||||||||||||||
Common Stock | Stock-for-Fees Program | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Sale of stock, number of shares issued in transaction (in shares) | 2,611,555 | |||||||||||||||||
Common Stock | Stock-for-Fees Program | Director | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Sale of stock, number of shares issued in transaction (in shares) | 522,311 | |||||||||||||||||
Noncontrolling interests | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Dividends on the HCMT Preferred Shares | $ | $ 3,791 | |||||||||||||||||
Preferred dividends paid | $ | $ 3,791 | |||||||||||||||||
Noncontrolling interests | Series A Preferred Stock | ||||||||||||||||||
Stockholders' Equity Note [Line Items] | ||||||||||||||||||
Number of shares issued (in shares) | 125 | |||||||||||||||||
Noncontrolling interests | $ | $ 99,500 | |||||||||||||||||
Equity raised | $ | 125,000 | |||||||||||||||||
Non-controlling interests expenses | $ | $ 25,500 | |||||||||||||||||
Dividend rate percentage (as a percent) | 12% | |||||||||||||||||
Redemption price ratio | 1.1 | |||||||||||||||||
Dividends on the HCMT Preferred Shares | $ | $ 15,000 | |||||||||||||||||
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
EQUITY - Dividends Declared (De
EQUITY - Dividends Declared (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||||||||||
Oct. 16, 2023 | Jul. 17, 2023 | Apr. 17, 2023 | Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Oct. 02, 2023 | Sep. 29, 2023 | Jul. 03, 2023 | Jun. 30, 2023 | Apr. 03, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | ||
Dividends [Line Items] | |||||||||||||||
Dividend Amount | [1] | $ 4,657,473 | $ 4,657,473 | $ 4,131,369 | |||||||||||
Dividends declared per share of common stock (in dollars per share) | $ 0.07 | $ 0.06 | $ 0.19 | $ 0.18 | |||||||||||
Common Stock | |||||||||||||||
Dividends [Line Items] | |||||||||||||||
Dividend Amount | $ 9,923,919 | $ 9,923,919 | |||||||||||||
Common Stock | Distribution One | |||||||||||||||
Dividends [Line Items] | |||||||||||||||
Dividend Amount | $ 3,656,181 | $ 3,133,869 | $ 3,133,869 | ||||||||||||
Dividends declared per share of common stock (in dollars per share) | $ 0.060 | $ 0.060 | |||||||||||||
Cash Dividend Per Weighted Average Share (in dollars per share) | 0.060 | 0.060 | |||||||||||||
Common Stock | Distribution One | Subsequent Event | |||||||||||||||
Dividends [Line Items] | |||||||||||||||
Dividends declared per share of common stock (in dollars per share) | $ 0.070 | ||||||||||||||
Cash Dividend Per Weighted Average Share (in dollars per share) | 0.070 | ||||||||||||||
Preferred Stock | Distribution One | |||||||||||||||
Dividends [Line Items] | |||||||||||||||
Dividend Amount | $ 1,181,250 | $ 1,181,250 | |||||||||||||
Dividends declared per share of common stock (in dollars per share) | 0.49219 | 0.49219 | |||||||||||||
Cash Dividend Per Weighted Average Share (in dollars per share) | $ 0.49219 | $ 0.49219 | |||||||||||||
Preferred Stock | Distribution One | Subsequent Event | |||||||||||||||
Dividends [Line Items] | |||||||||||||||
Dividend Amount | $ 1,181,250 | ||||||||||||||
Dividends declared per share of common stock (in dollars per share) | 0.49219 | ||||||||||||||
Cash Dividend Per Weighted Average Share (in dollars per share) | $ 0.49219 | ||||||||||||||
[1]Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2023 and December 31, 2022, assets of consolidated VIEs totaled $1,384,961,307 and $1,005,507,371, respectively and the liabilities of consolidated VIEs totaled $1,149,063,668 and $831,575,144 respectively. See Note 4 for further discussion. |
EARNINGS PER SHARE - Earnings p
EARNINGS PER SHARE - Earnings per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||||||||
Net income | $ 6,359,727 | $ 2,574,227 | $ 5,766,691 | $ 1,500,275 | $ 3,343,852 | $ 2,954,799 | $ 14,700,645 | $ 7,798,926 |
Less dividends: | ||||||||
Common stock | 3,656,181 | 3,133,869 | 3,133,869 | 3,133,869 | 3,133,869 | 3,133,509 | 9,923,919 | 9,401,247 |
Preferred stock | 1,185,042 | $ 1,185,042 | $ 1,184,958 | 1,185,042 | $ 1,185,042 | $ 1,184,958 | 3,555,042 | 3,555,042 |
Dividends | 4,841,223 | 4,318,911 | 13,478,961 | 12,956,289 | ||||
Undistributed earnings (deficit) | $ 1,518,504 | $ (2,818,636) | $ 1,221,684 | $ (5,157,363) | ||||
Basic income per share (in dollars per share) | $ 0.10 | $ 0.01 | $ 0.21 | $ 0.09 | ||||
Common Stock | ||||||||
Less dividends: | ||||||||
Distributed earnings (in dollars per share) | 0.07 | 0.06 | 0.19 | 0.20 | ||||
Undistributed earnings (deficit) (in dollars per share) | 0.03 | (0.05) | 0.02 | (0.11) | ||||
Basic income per share (in dollars per share) | 0.10 | 0.01 | 0.21 | 0.09 | ||||
Unvested Share-Based Payment Awards | ||||||||
Less dividends: | ||||||||
Distributed earnings (in dollars per share) | 0 | 0.06 | 0.19 | 0.20 | ||||
Undistributed earnings (deficit) (in dollars per share) | 0 | 0 | 0.02 | 0 | ||||
Basic income per share (in dollars per share) | $ 0 | $ 0.06 | $ 0.21 | $ 0.20 |
EARNINGS PER SHARE - Weighted A
EARNINGS PER SHARE - Weighted Average Number of Shares (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Earnings Per Share [Abstract] | ||||
Basic weighted average shares of common stock (in shares) | 52,231,152 | 52,225,152 | 52,227,504 | 47,026,745 |
Weighted average of non-vested restricted stock (in shares) | 0 | 6,000 | 3,648 | 5,088 |
Diluted weighted average number of shares of common stock outstanding (in shares) | 52,231,152 | 52,231,152 | 52,231,152 | 47,031,833 |