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What changed in Lument Finance Trust, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Lument Finance Trust, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+319 added−316 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-23)

Top changes in Lument Finance Trust, Inc.'s 2023 10-K

319 paragraphs added · 316 removed · 227 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe following table details the overall statistics of our loan portfolio as of December 31, 2022: Weighted Average Loan Type Unpaid Principal Balance Carrying Value Loan Count Floating Rate Loan % Coupon (1) Term (Years) (2) LTV (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 71.5 % Allowance for loan losses N/A $ (4,258,668) $ 1,076,865,099 $ 1,071,889,518 71 100.0 % 7.6 % 3.5 71.5 % (1) Weighted average coupon assumes applicable one-month LIBOR of 4.18% and 30-day Term SOFR of 4.19% as of December 31, 2022 and inclusive of weighted average interest rate floors of 0.27%.
Biggest changeThe following table details the overall statistics of our loan portfolio as of December 31, 2023: Weighted Average Loan Type Unpaid Principal Balance Carrying Value (1) Loan Count Floating Rate Loan % Coupon (2) Term (Years) (3) December 31, 2023 Loans held-for-investment Senior secured loans (4) $ 1,397,385,160 $ 1,389,940,203 88 100.0 % 8.9 % 2.9 Allowance for credit losses N/A $ (6,059,006) $ 1,397,385,160 $ 1,383,881,197 88 100.0 % 8.9 % 2.9 (1) Carrying Value includes $7,000,863 in unaccreted purchase discounts as of December 31, 2023, there were no unaccreted purchase discounts as of December 31, 2022.
We are externally managed by our manager, Lument Investment Management (the "Manager" or "Lument IM") pursuant to the terms of our management agreement. Our Manager is a subsidiary of Lument Real Estate Capital Holdings, LLC ("Lument"). Lument is a subsidiary of ORIX Corporation USA ("ORIX USA"), a diversified financial company and a subsidiary of ORIX Corporation ("ORIX").
We are externally managed by our manager, Lument Investment Management, LLC (the "Manager" or "Lument IM") pursuant to the terms of our management agreement. Our Manager is a subsidiary of Lument Real Estate Capital Holdings, LLC ("Lument"). Lument is a subsidiary of ORIX Corporation USA ("ORIX USA"), a diversified financial company and a subsidiary of ORIX Corporation ("ORIX").
Key ESG initiatives we share with ORIX USA include considerations of ESG in the in the investment process, dedicated resources to ESG governance and oversight, industry engagement on ESG matters, corporate sustainability and environmental performance improvements at our office locations, and certain employee and community engagement and diversity, equity and inclusion ("DEI") programs.
Key ESG initiatives we share with ORIX USA include considerations of ESG in the investment process, dedicated resources to ESG governance and oversight, industry engagement on ESG matters, corporate sustainability and environmental performance improvements at our office locations, and certain employee and community engagement and diversity, equity and inclusion ("DEI") programs.
We also expect to opportunistically originate and selectively acquire other CRE-related debt instruments, subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act, as amended (the 'Investment Company Act"), including, but not limited to, the following: 1 • Mezzanine Loans.
We also expect to opportunistically originate and selectively acquire other CRE-related debt instruments, subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act, as amended (the 'Investment Company Act"), including, but not limited to, the following: • Mezzanine Loans.
The closely held prohibition requires that not more than 50% of the value of our outstanding shares be owned by five or fewer "individuals" (as defined for this purpose to 4 include certain trusts and foundations) during the last half of our taxable year.
The closely held prohibition requires that not more than 50% of the value of our outstanding shares be owned by five or fewer "individuals" (as defined for this purpose to include certain trusts and foundations) during the last half of our taxable year.
Fifth, not more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs to the extent those debt instruments would not be real estate assets but for the inclusion of debt instruments of publicly offered REITs in the meaning of real estate assets. Distribution Requirements .
Fifth, not more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs to the extent those debt instruments would not be real estate assets but for the inclusion of debt instruments of publicly offered REITs in the meaning of real estate assets. 4 Distribution Requirements .
These investments may encompass a whole commercial mortgage loan or may include a participation in a portion of a commercial mortgage loan. Other Commercial Real-Estate-Related Debt Instruments.
These investments may encompass a whole commercial mortgage loan or may include a participation in a portion of a commercial mortgage loan. 1 Other Commercial Real-Estate-Related Debt Instruments.
Even if we maintain our qualification as a REIT, we may be subject to some U.S. federal, state and local taxes on our income. Taxable income generated by our taxable REIT subsidiary ("TRS"), is subject to regular corporate income tax. For the fiscal year 2022, our TRS did not generate taxable income.
Even if we maintain our qualification as a REIT, we may be subject to some U.S. federal, state and local taxes on our income. Taxable income generated by our taxable REIT subsidiary ("TRS"), is subject to regular corporate income tax. For the fiscal year 2023, our TRS did not generate taxable income.
The carrying value of these MSRs at December 31, 2022 was approximately $0.8 million. The Company ceased the aggregation of residential mortgage loans in 2016 and other than servicing our existing portfolio, we do not anticipate any residential loan activity going forward. Our Financing Strategy We seek to use leverage to increase potential returns to our stockholders.
The carrying value of these MSRs at December 31, 2023 was approximately $0.7 million. The Company ceased the aggregation of residential mortgage loans in 2016 and other than servicing our existing portfolio, we do not anticipate any residential loan activity going forward. Our Financing Strategy We seek to use leverage to increase potential returns to our stockholders.
As of December 31, 2022, 77.4% of the investments by total 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.
As of December 31, 2023, 100.0% of the investments by total 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..
At December 31, 2022, Lument had approximately 600 employees located in over 30 offices throughout the United States. We have access to an extensive loan origination platform through our affiliation with Lument, which is a premier national mortgage originator and asset manager.
As of December 31, 2023, Lument had approximately 600 employees located in over 30 offices throughout the United States. We have access to an extensive loan origination platform through our affiliation with Lument, which is a premier national mortgage originator and asset manager.
We may use on-recourse CRE CLOs, secured revolving repurchase agreements, term loan facilities, warehouse facilities, asset-specific financing structures and other forms of leverage. As of December 31, 2022, our assets were financed with a match term, non-recourse CRE CLO and one senior corporate credit facility.
We may use non-recourse CRE CLOs, secured revolving repurchase agreements, term loan facilities, warehouse facilities, asset-specific financing structures and other forms of leverage. As of December 31, 2023, our assets were financed with match term, non-recourse CRE CLO and secured financings and one senior corporate credit facility.
The charts below present the geographic dispersion of our loan portfolio and the property types securing our loan portfolio as of December 31, 2022: 2 MSRs As of December 31, 2022, the Company retained the servicing rights associated with residential mortgage loans having an aggregate unpaid principal balance of approximately $74.8 million that we had previously transferred to three residential mortgage loan securitization trusts.
The charts below present the geographic dispersion of our loan portfolio and the property types securing our loan portfolio as of December 31, 2023: 2 MSRs As of December 31, 2023, the Company retained the servicing rights associated with residential mortgage loans having an aggregate unpaid principal balance of approximately $67.3 million that we had previously transferred to three residential mortgage loan securitization trusts.
Our investments typically have the following characteristics: • Sponsors with experience in particular real estate sectors and geographic markets; • Located in U.S. markets with multiple demand drivers, such as growth in employment and household formation; • Fully funded principal balance greater than $5 million and generally less than $75 million; • Loan to Value ratio up to 85% of as-is value and up to 75% of as-stabilized value; • Floating rate loans historically tied to one-month U.S. denominated LIBOR, more recently to one-month term SOFR, and/or in the future, potentially other index replacement; and • Three-year term with two one-year extension options.
Our investments typically have the following characteristics: • Sponsors with experience in particular real estate sectors and geographic markets; • Located in U.S. markets with multiple demand drivers, such as growth in employment and household formation; • Fully funded principal balance greater than $5 million and generally less than $75 million; • Loan to Value ratio up to 85% of as-is value and up to 75% of as-stabilized value; • Floating rate loans tied to one-month term Secured Overnight Financing Rate ("SOFR"), previously to one-month U.S. denominated LIBOR, and/or any applicable replacement index in the future; and • Three-year term with two one-year extension options.
(4) As of December 31, 2022, $996,511,403 of the outstanding senior secured loans were held in variable interest entities ("VIEs") and $75,378,115 of the outstanding senior secured loans were held outside 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 of VIEs.
While our organizational documents and our investment guidelines do not place any limits on the maximum amount of leverage that we may use, our financing facilities require us to maintain particular debt-to-equity leverage ratios. We may change our financing strategy and leverage without the consent of our stockholders. Competition We are engaged in a competitive business.
While our organizational documents and our investment guidelines do not place any limits on the maximum amount of leverage that we may use, our financing facilities require us to maintain particular debt-to-equity leverage ratios. We may change our financing strategy and leverage without the consent of our stockholders.
Under these investment guidelines and policies: • We will not make an investment that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes. • We will not make an investment that would cause us to be regulated as an “investment company” under the Investment Company Act. • We are permitted to invest in residential mortgage-backed securities, multi-family mortgage-backed securities, commercial mortgage-backed securities, residential mortgage loans, multi-family mortgage loans, CRE mortgage loans, mortgage servicing rights and other mortgage or real estate-related investments. • Our Manager may invest the net proceeds of any offerings of our securities in interest-bearing, short-term investments, including money market accounts or funds, that are consistent with our intention to qualify as a REIT for U.S. federal income tax purposes and maintain an exemption from registration under the Investment Company Act. 3 These investment guidelines may be amended, restated, modified, supplemented or waived by our board of directors (which must include a majority of the independent directors of our board of directors) without the approval of our stockholders.
Under these investment guidelines and policies: • We will not make an investment that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes. • We will not make an investment that would cause us to be regulated as an “investment company” under the Investment Company Act. • We are permitted to invest in residential mortgage-backed securities, multi-family mortgage-backed securities, commercial mortgage-backed securities, residential mortgage loans, multi-family mortgage loans, CRE mortgage loans, mortgage servicing rights and other mortgage or real estate-related investments. • Our Manager may invest the net proceeds of any offerings of our securities in interest-bearing, short-term investments, including money market accounts or funds, that are consistent with our intention to qualify as a REIT for U.S. federal income tax purposes and maintain an exemption from registration under the Investment Company Act.
ORIX is a publicly traded, Tokyo-based international financial services company with assets in excess of $102 billion as of September 2022 and was ranked number 345 on Forbes 2021 Global 2000: World's Biggest Public Companies. We are a Maryland corporation that was formed in March 2012 and commenced operations in May 2012.
ORIX is a publicly traded, Tokyo-based international financial services company with assets in excess of $111 billion as of December 2023 and was ranked number 371 on Forbes 2023 Global 2000: World's Biggest Public Companies. We are a Maryland corporation that was formed in March 2012 and commenced operations in May 2012.
Our Portfolio Transitional Multifamily and Commercial Real Estate Loans As of December 31, 2022, our mortgage loan investment portfolio consisted of 71 senior secured floating rate loans with an aggregate unpaid principal balance of $1.1 billion, collectively having a weighted average coupon of 7.6% and a weighted average term to maturity of 3.5 years.
Our Portfolio Transitional Multifamily and Commercial Real Estate Loans As of December 31, 2023, our mortgage loan investment portfolio consisted of 88 senior secured floating rate loans with an aggregate unpaid principal balance of $1.4 billion, collectively having a weighted average coupon of 8.9% and a weighted average term to maturity of 2.9 years.
In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments and offer more attractive pricing or other terms than we would. Furthermore, competition for investments we target may lead to decreasing yields, which may further limit our ability to generate targeted returns.
In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments and offer more attractive pricing or other terms than we would.
We may utilize warehouse repurchase agreements or other forms of financing in the future. Our primary sources of income are net interest from our investment portfolio and non-interest income from our mortgage loan-related activities. Net interest income represents the interest we earn on investments less the expense of funding these investments.
Our primary sources of income are net interest from our investment portfolio and non-interest income from our mortgage loan-related activities. Net interest income represents the interest we earn on investments less the expense of funding these investments.
As of December 31, 2022, 89.5% of the portfolio was supported by multifamily assets. During 2022, the Company originated or acquired $345.9 million in loans and realized $270.9 million of loan repayments. This activity resulted in net investments of $75.0 million.
As of December 31, 2023, 94.0% of the portfolio was supported by multifamily assets. During 2023, the Company originated or acquired $594.2 million in loans and realized $277.5 million of loan repayments. This activity resulted in net investments of $316.7 million.
Our day-to-day operations are externally managed by our Manager, a subsidiary of ORIX USA. As such, much of the ESG initiatives undertaken by ORIX USA impact or apply to us.
As such, much of the ESG initiatives undertaken by ORIX USA impact or apply to us.
We may also invest in other CRE-related investments including mezzanine loans, preferred equity, commercial mortgage-backed securities, fixed rate loans, construction loans and other CRE debt instruments. We finance our current investments in transitional multifamily and other CRE loans primarily through match term non-recourse CRE collateralized loan obligations ("CLO").
We may also invest in other CRE-related investments including mezzanine loans, preferred equity, commercial mortgage-backed securities, fixed rate loans, construction loans and other CRE debt instruments.
Environmental, Social and Governance We are committed to responsibly managing risk and preserving value for our shareholders. We make capital allocation decisions with environmental, social and governance ("ESG") factors of our potential collateral and borrowers in mind, and incorporate diligence practices as part of our investment process to identify material ESG matters related to a given asset.
We make capital allocation decisions with ESG factors of our potential collateral and borrowers in mind, and incorporate diligence practices as part of our investment process to identify material ESG matters related to a given asset. Our day-to-day operations are externally managed by our Manager, a subsidiary of ORIX USA.
In addition you may automatically receive email alerts and other information about Lument Finance Trust, Inc. when you enroll your email address by visiting "Investor Relations & Email Alerts" section of our website at https://www.lumentfinancetrust.com/investor-relations/email-alerts/. The contents of our website and any alerts are not, however, a part of this report. 5
Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings, public conference calls, and webcasts. In addition you may automatically receive email alerts and other information about Lument Finance Trust, Inc. when you enroll your email address by visiting "Investor Relations & Email Alerts" section of our website at https://www.lumentfinancetrust.com/investor-relations/email-alerts/.
We believe access to our Manager's professionals and their industry expertise and relationships provide us with competitive advantages in assessing risks and determining appropriate pricing for potential investments. We believe these relationships will enable us to compete effectively for attractive investment opportunities.
Furthermore, competition for investments we target may lead to decreasing yields, which may further limit our ability to generate targeted returns. 3 We believe access to our Manager's professionals and their industry expertise and relationships provide us with competitive advantages in assessing risks and determining appropriate pricing for potential investments.
Investors should consult their own tax advisors regarding the effect of this change on their effective tax rate with respect to REIT dividends. Corporate Offices and Personnel We were formed as a Maryland corporation in 2012. Our corporate headquarters are located at 230 Park Avenue, 20th Floor, New York, NY 10169 and our telephone number is (212) 317-5700.
Corporate Offices and Personnel We were formed as a Maryland corporation in 2012. Our corporate headquarters are located at 230 Park Avenue, 20th Floor, New York, NY 10169 and our telephone number is (212) 317-5700. We are externally managed by our Manager pursuant to the management agreement between us and our Manager. We have no employees.
(2) Weighted average term assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date. (3) LTV as of the date the loan was originated and is calculated after giving effect to capex and earnout reserves, if applicable.
(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 December 31, 2023, $1,375,277,312 of the outstanding senior secured loans were held in VIEs and $8,603,886 of the outstanding senior secured loans were held outside of VIEs.
However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.
We believe these relationships will enable us to compete effectively for attractive investment opportunities. However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face. Environmental, Social and Governance ("ESG") We are committed to responsibly managing risk and preserving value for our shareholders.
Website Disclosure We use our website ( www.lumentfinancetrust.com ) as a channel of distribution of company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings, public conference calls, and webcasts.
For further information on our Manager, please see the Manager's Form ADV filed with the SEC which can be found at https://adviserinfo.sec.gov/firm/summary/306487. Website Disclosure We use our website ( www.lumentfinancetrust.com ) as a channel of distribution of company information. The information we post through this channel may be deemed material.
Removed
LTV has not been updated for any subsequent draws or loan modifications and is not reflective of any changes in value which may have occurred subsequent to origination date.
Added
We finance our current investments in transitional multifamily and other CRE loans primarily through matched term non-recourse secured borrowings, including CRE collateralized loan obligations ("CLO"), which are not subject to margin calls or additional collateralization requirements. We may utilize warehouse repurchase agreements or other forms of financing in the future.
Removed
We are externally managed by our Manager pursuant to the management agreement between us and our Manager. We have no employees. Our executive officers, all of whom were provided by our Manager, are employees of Lument. Access to our Periodic SEC Reports and Other Corporate Information Our internet website address is www.lumentfinancetrust.com .
Added
(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 December 31, 2023 and December 31, 2022, respectively, inclusive of weighted average interest rate floors of 0.38% and 0.27%, respectively.
Added
These investment guidelines may be amended, restated, modified, supplemented or waived by our board of directors (which must include a majority of the independent directors of our board of directors) without the approval of our stockholders. Competition We are engaged in a competitive business.
Added
Our executive officers, all of whom were provided by our Manager, are employees of Lument.
Added
Investors should consult their own tax advisors regarding the effect of this change on their effective tax rate with respect to REIT dividends. Access to our Periodic SEC Reports and Other Corporate Information Our internet website address is www.lumentfinancetrust.com .
Added
The contents of our website and any alerts are not, however, a part of this report. 5

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks are discussed more fully below and include, but are not limited to, risks related to: Risks Related to Our Investment Strategy and Our Businesses • We may be unable to operate our business successfully or generate sufficient revenue to make or sustain distributions to our stockholders. • If we fail to develop, enhance and implement strategies to adapt to changing conditions in the mortgage industry and capital markets, our business, financial condition, results of operations and our ability to make distributions to our stockholder may be adversely affected. • We may change our target assets, investment or financing strategies and other operational policies without stockholder consent, which may adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders. • The ongoing outbreak of COVID-19 could have an adverse impact on our financial performance and results of operations. • Our floating-rate commercial mortgage loans are subject to various risks, such as interest rate risk, prepayment risk, real estate risk and credit risk. • Transitional mortgage loans involve greater risk than conventional mortgage loans. • An increase in interest rates may cause a decrease in the volume of certain of our target assets, which could adversely affect our ability to acquire assets that satisfy our investment objectives and to generate income and make distributions to our stockholders. • Increases in interest rates typically adversely affect the value of certain of our investments and cause our interest expense to increase, which could result in reduced earnings or losses and negatively affect our profitability as well as the cash available for distribution to our stockholders. • The planned discontinuation of LIBOR may affect the value of the financial obligations to be held or issued by us that are linked to LIBOR and could affect our results of operations and financial results. • Our real estate investments are subject to risks particular to real property.
Biggest changeThese risks are discussed more fully below and include, but are not limited to, risks related to: Risks Related to Our Investment Strategy and Our Businesses • We may be unable to operate our business successfully or generate sufficient revenue to make or sustain distributions to our stockholders. • If we fail to develop, enhance and implement strategies to adapt to changing conditions in the mortgage industry and capital markets, our business, financial condition, results of operations and our ability to make distributions to our stockholder may be adversely affected. • We may change our target assets, investment or financing strategies and other operational policies without stockholder consent, which may adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders. • Our floating-rate commercial mortgage loans are subject to various risks, such as interest rate risk, prepayment risk, real estate risk and credit risk. • Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer. • Transitional mortgage loans involve greater risk than conventional mortgage loans. • An increase in interest rates may cause a decrease in the volume of certain of our target assets, which could adversely affect our ability to acquire assets that satisfy our investment objectives and to generate income and make distributions to our stockholders. • Increases in interest rates typically adversely affect the value of certain of our investments and cause our interest expense to increase, which could result in reduced earnings or losses and negatively affect our profitability as well as the cash available for distribution to our stockholders. • Our real estate investments are subject to risks particular to real property.
Due to the generally short-term nature of transitional floating-rate commercial mortgage loans, our CLOs include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria.
Due to the generally short-term nature of transitional floating-rate commercial mortgage loans, our CLOs include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria.
In such situation, the Manager is incentivized to decline to enforce such remedies or take such actions on behalf of the senior securities we held in order to protect the value of the junior securities held by the other Investing Party, which could adversely affect the our returns.
In such situation, the Manager is incentivized to decline to enforce such remedies or take such actions on behalf of the senior securities we held in order to protect the value of the junior securities held by the other Investing Party, which could adversely affect our returns.
Incurring debt could subject us to many risks that, if realized, would adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal and interest on the debt or we may fail to comply with all of the other covenants contained in the debt, which is likely to result in (1) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (2) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, and/or (3) the loss of some or all of our assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase with higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, investments, stockholder distributions or other purposes; and • we may not be able to refinance debt that matures prior to the investment it was used to finance on favorable terms or at all.
Incurring debt could subject us to many risks that, if realized, would adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal and interest on the debt or we may fail to comply with all of the other covenants contained in the debt, which is likely to result in (1) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (2) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, and/or (3) the loss of some or all of our assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase with higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, investments, stockholder distributions or other purposes; and 17 • we may not be able to refinance debt that matures prior to the investment it was used to finance on favorable terms or at all.
Risks Related to Our Organization and Structure • Because of their significant ownership of our common stock, Lument Investment Holdings, LLC, an affiliate of our Manager, and Hunt Investors (as described herein) have the ability to influence the outcome of matters that require a vote of stockholders, including change of control. • Stockholders have limited control over changes in our policies and procedures. • Maintenance of our exclusion from the Investment Company Act will impose limits on our business. 6 • Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.
Risks Related to Our Organization and Structure • Because of their significant ownership of our common stock, Lument Investment Holdings, LLC, an affiliate of our Manager, and Hunt Investors (as described herein) have the ability to influence the outcome of matters that require a vote of stockholders, including change of control. • Stockholders have limited control over changes in our policies and procedures. • Maintenance of our exclusion from the Investment Company Act will impose limits on our business. • Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.
Tax Risks • If we failed to qualify as a REIT, we would be taxed at corporate rates and would not be able to take certain deductions when computing our taxable income. • If we failed to qualify as a REIT, we may default on our current financing facilities and be required to liquidate our assets, and we may face delays or inabilities to procure future financing. • Complying with REIT requirements may cause us to forgo otherwise attractive opportunities and may require us to dispose of our target assets sooner than originally anticipated. • Qualifying as a REIT involves highly technical and complex provisions of the Code.
Tax Risks 6 • If we failed to qualify as a REIT, we would be taxed at corporate rates and would not be able to take certain deductions when computing our taxable income. • If we failed to qualify as a REIT, we may default on our current financing facilities and be required to liquidate our assets, and we may face delays or inabilities to procure future financing. • Complying with REIT requirements may cause us to forgo otherwise attractive opportunities and may require us to dispose of our target assets sooner than originally anticipated. • Qualifying as a REIT involves highly technical and complex provisions of the Code.
The market values of commercial mortgage assets are subject to volatility and may be adversely affected by real estate risks, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; 8 changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes.
The market values of commercial mortgage assets are subject to volatility and may be adversely affected by real estate risks, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes.
Conducting our business so that we are not required to register under the Investment Company Act limits, among other things: the types of businesses in which we may engage through our subsidiaries; our organizational structure and business strategy; and the types of assets we and our subsidiaries originate, acquire or sell; and the timing of such originations, acquisitions and dispositions (including doing so when we would not otherwise choose to do so).
Conducting our business so that we are not required to register under the Investment Company Act limits, among other things: the types of businesses in which we may engage through our subsidiaries; our organizational structure and business strategy; and the types of assets we and our subsidiaries originate, 23 acquire or sell; and the timing of such originations, acquisitions and dispositions (including doing so when we would not otherwise choose to do so).
Because ORIX is the owner of the Manager, the Manager would experience a conflict of interest in making determinations regarding the senior securities we held, as decisions on behalf of such entity to enforce remedies or take other actions against the obligors under such senior securities or the related collateral could 21 adversely impact the value of the more junior securities held by another Investing Party.
Because ORIX is the owner of the Manager, the Manager would experience a conflict of interest in making determinations regarding the senior securities we held, as decisions on behalf of such entity to enforce remedies or take other actions against the obligors under such senior securities or the related collateral could adversely impact the value of the more junior securities held by another Investing Party.
To the extent that we hold securities or other financial interests (e.g., bank debt) in a company with rights, preferences and privileges that are different than interests held by an Investing Party in the same company, the Manager and its affiliates may be presented with decisions when and/or where our interests and the interests of the Investing Parties are in conflict.
To 20 the extent that we hold securities or other financial interests (e.g., bank debt) in a company with rights, preferences and privileges that are different than interests held by an Investing Party in the same company, the Manager and its affiliates may be presented with decisions when and/or where our interests and the interests of the Investing Parties are in conflict.
If our Manager is unable to execute on our investment and financing strategies, or we are unable to acquire assets that generate favorable spreads, our results of operations may be adversely affected, which could adversely affect our ability to make or sustain distributions to our stockholders. We seek to generate current income and attractive risk-adjusted returns for our stockholder.
If our Manager is unable to execute on our investment and financing strategies, or we are unable to acquire assets that generate favorable spreads, our results of operations may be adversely affected, which could adversely affect our ability to make or sustain distributions to our stockholders. We seek to generate current income and attractive risk-adjusted returns for our stockholders.
Our net interest margins will be dependent upon a positive spread between the returns on our asset portfolio and our overall cost of funding. Our Manager’s risk management tools include software and services licensed or purchased from third parties, in 18 addition to proprietary systems and analytical methods developed internally.
Our net interest margins will be dependent upon a positive spread between the returns on our asset portfolio and our overall cost of funding. Our Manager’s risk management tools include software and services licensed or purchased from third parties, in addition to proprietary systems and analytical methods developed internally.
The prices of lower credit quality securities are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to adverse economic downturns or individual issuer developments. Provisions for loan losses are difficult to estimate Our provision for loan losses is evaluated on a quarterly basis.
The prices of lower credit quality securities are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to adverse economic downturns or individual issuer developments. Provisions for credit losses are difficult to estimate. Our provision for credit losses is evaluated on a quarterly basis.
Moreover, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or Dodd- 19 Frank Act, contains a risk retention requirement for all asset-backed securities, which requires both public and private securitizers to retain not less than 5% of the credit risk of the assets collateralizing any asset-backed issuance.
Moreover, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or Dodd-Frank Act, contains a risk retention requirement for all asset-backed securities, which requires both public and private securitizers to retain not less than 5% of the credit risk of the assets collateralizing any asset-backed issuance.
Significant areas of accounting requiring the application of management’s judgment include, but are not limited to (1) determining the fair value of our investments, (2) assessing the adequacy of the allowance for loan losses or credit reserves and (3) appropriately consolidating VIEs for which we have determined we are the primary beneficiary.
Significant areas of accounting requiring the application of management’s judgment include, but are not limited to (1) determining the fair value of our investments, (2) assessing the adequacy of the allowance for credit losses or credit reserves and (3) appropriately consolidating VIEs for which we have determined we are the primary beneficiary.
In addition, we may suffer a loss due to the incurrence of transaction costs related to executing these transactions. To the extent that we incur a loss executing or participating in future securitizations for the reasons described above or for other reasons, it could materially and adversely impact our business and financial condition.
In addition, we may suffer a loss due to the incurrence of transaction costs related to executing these transactions. To the extent that we incur a loss executing or participating in future securitizations 18 for the reasons described above or for other reasons, it could materially and adversely impact our business and financial condition.
Governments have considerable discretion in implementing regulations, for example, the possible imposition or increase of taxes on income earned by a borrower or gains recognized by us on our investment in such borrower, that could impact a borrower’s business as well as our return on our investment with respect to such borrower.
Governments have considerable discretion in implementing regulations, for example, the possible imposition or 11 increase of taxes on income earned by a borrower or gains recognized by us on our investment in such borrower, that could impact a borrower’s business as well as our return on our investment with respect to such borrower.
Moreover, some of the mortgage-backed securities that we acquire may have been issued with original issue discount. We will be required to report such original issue discount based on a constant yield method and will be taxed based on the assumption that all future projected payments due on such mortgage-backed securities will be made.
Moreover, some of the mortgage-backed securities that we acquire may have been issued with original issue discount. We will be required to report such original issue discount based on a constant yield method and will be taxed based on the assumption that all future projected payments due on such mortgage- 27 backed securities will be made.
Additionally, any convertible or exchangeable securities that we 23 issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities.
Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities.
The "control share" provisions of the MGCL provide that holders of "control shares" of a Maryland corporation (defined as shares which, when aggregated with other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of "control shares") have no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and our employees who are also our 25 directors.
The "control share" provisions of the MGCL provide that holders of "control shares" of a Maryland corporation (defined as shares which, when aggregated with other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges 24 of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of "control shares") have no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and our employees who are also our directors.
Future revisions in the U.S. federal tax laws and interpretations thereof could affect or cause us to change our investments and commitments and affect the tax considerations of an investments in us. 29 Any such revisions could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets.
Future revisions in the U.S. federal tax laws and interpretations thereof could affect or cause us to change our investments and commitments and affect the tax considerations of an investments in us. Any such revisions could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets.
Changes in laws or regulations governing the operations of borrowers could affect our returns with respect to those borrowers. 12 Government counterparties or agencies may have the discretion to change or increase regulation of a borrower’s operations, or implement laws or regulations affecting a borrower’s operations, separate from any contractual rights it may have.
Changes in laws or regulations governing the operations of borrowers could affect our returns with respect to those borrowers. Government counterparties or agencies may have the discretion to change or increase regulation of a borrower’s operations, or implement laws or regulations affecting a borrower’s operations, separate from any contractual rights it may have.
The occurrence of cyber-incidents, or a deficiency in our Manager's cybersecurity or in those of any of our third party service providers, could negatively impact our business by causing a disruption to our operations, a compromise of our confidential information or damage to our business relationships or reputation, all of which could negatively impact our business and results of operations.
The occurrence of cyber-incidents, or a deficiency in our Manager's Cybersecurity or those of any of our third party service providers, could negatively affect our business by causing a disruption to our operations, a compromise of our confidential information or damage to our business relationships or reputation, all of which could negatively impact our business and results of operations.
These floating rate loans are insulated from changes in value specifically due to changes in interest rates; 20 however, the coupons they earn fluctuate based upon interest rates and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance.
These floating rate loans are insulated from changes in value specifically due to changes in interest rates; however, the coupons they earn fluctuate based upon interest rates and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance.
We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal tax law, regulations or administrative interpretations, will be adopted, promulgated of become effective and any such law, regulation or interpretation may take effect retroactively.
We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any 28 amendment to any existing U.S. federal tax law, regulations or administrative interpretations, will be adopted, promulgated of become effective and any such law, regulation or interpretation may take effect retroactively.
Risks Related to Our Securities The market price and trading volume of our securities may vary substantially. Our common stock is listed on the NYSE under the symbol "LFT." Stock markets, including the NYSE, have experienced significant price and volume fluctuations over the past several years.
Risks Related to Our Securities 21 The market price and trading volume of our securities may vary substantially. Our common stock is listed on the NYSE under the symbol "LFT." Stock markets, including the NYSE, have experienced significant price and volume fluctuations over the past several years.
While the interest-rate spreads of our collateralized loan obligations are fixed until they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions.
While the interest-rate spreads of our collateralized loan obligations are fixed until 7 they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions.
As a result, the market price of our securities has been and is likely to continue to be similarly volatile, and investors in 22 our securities have experienced since the initial offering of our securities and may continue to experience a decrease in the value of their securities.
As a result, the market price of our securities has been and is likely to continue to be similarly volatile, and investors in our securities have experienced since the initial offering of our securities and may continue to experience a decrease in the value of their securities.
Risks Associated with Our Relationship with Our Manager • Our board of directors has approved very broad investment guidelines for our Manager and will not approve each investment and financing decision made by our Manager. • We are dependent on our Manager and its key personnel for our success. • There are conflicts of interest in our relationship with ORIX, including with our Manager and in the allocation of investment opportunities to ORIX affiliates and us, which could result in decisions that are not in the best interests of our stockholders.
Risks Associated with Our Relationship with Our Manager • Our board of directors has approved very broad investment guidelines for our Manager and will not approve each investment and financing decision made by our Manager. • We are dependent on our Manager and its key personnel for our success. • There are conflicts of interest in our relationship with ORIX, including with our Manager and in the allocation of investment opportunities between ORIX affiliates and us, which could result in decisions that are not in the best interests of our stockholders.
Any sustained period of increased payment delinquencies, foreclosures or losses could have an adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders. 14 The lack of liquidity in our investments may adversely affect our business. We acquire assets that are not liquid or publicly traded.
Any sustained period of increased payment delinquencies, foreclosures or losses could have an adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders. The lack of liquidity in our investments may adversely affect our business. 13 We acquire assets that are not liquid or publicly traded.
Our Manager utilizes analytical models and data in connection with the valuation of certain of our assets, and any incorrect, misleading or incomplete information used in connection therewith would subject us to potential risks. 15 Given the complexity of certain of our target assets, our Manager may rely heavily on analytical models and information and data supplied by third parties.
Our Manager utilizes analytical models and data in connection with the valuation of certain of our assets, and any incorrect, misleading or incomplete information used in connection therewith would subject us to potential risks. 14 Given the complexity of certain of our target assets, our Manager may rely heavily on analytical models and information and data supplied by third parties.
As of December 31, 2022, 100% of our loans by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates.
As of December 31, 2023, 100% of our loans by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates.
Government, GSEs or certain European countries may adversely affect the value of our target assets and our business, financial condition, results of operations and our ability to make distributions to our stockholders. 17 Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations.
Government, GSEs or certain European countries may adversely affect the value of our target assets and our business, financial condition, results of operations and our ability to make distributions to our stockholders. 16 Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations.
Lument Investment Holdings and the Hunt Investors hold a significant interest in our outstanding common stock. As of March 1, 2023, Lument Investment Holdings owned 27.4% of our outstanding common stock and the Hunt Investors owned 12.2% of our outstanding common stock. In addition, James C. Hunt, one of the Hunt Investors, is a member of our board of directors.
Lument Investment Holdings and the Hunt Investors hold a significant interest in our outstanding common stock. As of March 1, 2024, Lument Investment Holdings owned 27.4% of our outstanding common stock and the Hunt Investors owned 12.2% of our outstanding common stock. In addition, James C. Hunt, one of the Hunt Investors, is a member of our board of directors.
The allocation of the net proceeds of any equity offering among our target assets, and the timing of the deployment of these proceeds is subject to, among other things, then prevailing market conditions and the availability of target assets. 16 Our allocation of the net proceeds from any equity offering among our target assets is subject to our investment guidelines and maintenance of our REIT qualification.
The allocation of the net proceeds of any equity offering among our target assets, and the timing of the deployment of these proceeds is subject to, among other things, then prevailing market conditions and the availability of target assets. 15 Our allocation of the net proceeds from any equity offering among our target assets is subject to our investment guidelines and maintenance of our REIT qualification.
There are conflicts of interest in our relationship with ORIX, including with our Manager and in the allocation of investment opportunities to ORIX affiliates and us, which could result in decisions that are not in the best interests of our stockholders.
There are conflicts of interest in our relationship with ORIX, including with our Manager and in the allocation of investment opportunities between ORIX affiliates and us, which could result in decisions that are not in the best interests of our stockholders.
The determination of our provision for loan losses requires us to make certain estimates and judgments, which may be difficult to determine.
The determination of our provision for credit losses requires us to make certain estimates and judgments, which may be difficult to determine.
Any or all of the above could materially and adversely affect us. 24 Although we monitor our holdings and organizational structure for ongoing compliance with the above, there can be no assurance that we will be able to continue to avoid registration as an investment company, or that the laws and regulations governing, or regulatory guidance pertaining to, investment company status will not change in a manner that materially and adversely affects us.
Although we monitor our holdings and organizational structure for ongoing compliance with the above, there can be no assurance that we will be able to continue to avoid registration as an investment company, or that the laws and regulations governing, or regulatory guidance pertaining to, investment company status will not change in a manner that materially and adversely affects us.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. 27 The maximum tax rate applicable to income from "qualified dividends" payable to U.S. stockholders that are individuals, trusts and estates is 20%, exclusive of a 3.8% investment tax surcharge. Dividends payable by REITs, however, generally are not eligible for the reduced rates.
The maximum tax rate applicable to income from "qualified dividends" payable to U.S. stockholders that are individuals, trusts and estates is 20%, exclusive of a 3.8% investment tax surcharge. Dividends payable by REITs, however, generally are not eligible for the reduced rates.
ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.
ASU 2016-13 significantly changed how entities measured credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.
As our financings mature, we will be required either to enter into new borrowings or to sell certain of our investments. In recent years, interest rates had remained at relatively low levels on a historical basis. However, in 2022, in light of increasing inflation, the U.S. Federal Reserve increased interest rates seven times. The U.S.
As our financings mature, we will be required either to enter into new borrowings or to sell certain of our investments. In recent years, interest rates had remained at relatively low levels on a historical basis. However, in 2022 and 2023, in light of increasing inflation, the U.S.
The CECL reserve required under ASU 2016-13 is a valuation account that is deducted from the related loans' and debt securities' amortized cost basis on our consolidated balance sheets, and which will reduce our total stockholders' equity.
The allowance for credit losses required under ASU 2016-13 is a valuation account that is deducted from the related loans' and debt securities' amortized cost basis on our consolidated balance sheets, and which will reduce our total stockholders' equity.
In certain situations, we may: • acquire investments subject to rights of senior classes, special servicers or collateral managers under intercreditor, servicing agreements or securitization documents; • pledge our investments as collateral for financing arrangements; • acquire only a minority and/or non-controlling participation in an underlying investment; 11 • co-invest with others through partnership, joint ventures or other entities, thereby acquiring non-controlling interests; or • rely on independent third party management or servicing with respect to the management of an asset.
In certain situations, we may: • acquire investments subject to rights of senior classes, special servicers or collateral managers under intercreditor, servicing agreements or securitization documents; • pledge our investments as collateral for financing arrangements; • acquire only a minority and/or non-controlling participation in an underlying investment; • co-invest with others through partnership, joint ventures or other entities, thereby acquiring non-controlling interests; or • rely on independent third party management or servicing with respect to the management of an asset. 10 Therefore, we may not be able to exercise control over all aspects of our loans or investments.
ASU 2016-13 will replace the incurred loss model under existing guidance with a current expected credit loss, or CECL, model for instruments measure at amortized cost, and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do under the other-than-temporary impairment model.
ASU 2016-13 replaced the incurred loss model under previous guidance with a current expected credit loss, or CECL, model for instruments measure at amortized cost, and required entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they previously did under the other-than-temporary impairment model.
Therefore ORIX or an affiliate may originate opportunities that are suitable for LFT but are allocated to entities primarily owned by ORIX or its affiliates. • In addition, we are expected, from time to time, to make an investment in, or a loan to, a company in which ORIX and its affiliates (each, an “Investing Party”) are also expected to invest, or already have invested, in a different part of the capital structure, which may mean that one investor’s interest in that company may have different rights, preferences and privileges than the company interests held by us.
In addition, we are expected, from time to time, to make an investment in, or a loan to, a company in which ORIX and its affiliates (each, an “Investing Party”) are also expected to invest, or already have invested, in a different part of the capital structure, which may mean that one investor’s interest in that company may have different rights, preferences and privileges than the company interests held by us.
Because our methodology for determining CECL may differ from the methodologies employed by other companies, our CECL allowances may not be comparable with the CECL allowances reported by other companies.
Because our methodology for determining the allowance for credit losses may differ from the methodologies employed by other companies, our allowance for credit losses may not be comparable with the allowance for credit losses reported by other companies.
Increases in interest rates typically adversely affect the value of certain of our investments and cause our interest expense to increase, which could result in reduced earnings or losses and negatively affect our profitability as well as the cash available for distribution to our stockholders.
Increases in interest rates typically adversely affect the value of certain of our investments and cause our interest expense to increase, which could result in reduced earnings or losses and negatively affect our profitability as well as the cash available for distribution to our stockholders. 8 We invest in transitional multifamily and other CRE loans, as well as other mortgage related investments.
These risks may result in a reduction or elimination of, or return from, a loan secured by a particular property. • We may invest or spend the net proceeds for our equity or debt offerings in ways with which our investors may not agree and in ways that may not earn a profit. • Changes in laws and regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes in certain of business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.
These risks may result in a reduction or elimination of, or return from, a loan secured by a particular property. • Changes in laws and regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes in certain of business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.
There can be no assurance of our ability to make distributions to our common stockholders, or that our board of directors will not determine to reduce such distributions, in the future. In addition, some of our distributions to our common stockholders may continue to include a return of capital.
There can be no assurance of our ability to make distributions to our common stockholders, or that our board of directors will not determine to reduce such distributions, in the future.
A reduction in the volume of mortgage loans originated may affect the volume of transitional floating-rate multifamily and CRE loans and other mortgage related investments available to us, which could adversely affect our ability to acquire assets that satisfy our investment objectives.
Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing. A reduction in the volume of mortgage loans originated may affect the volume of transitional floating-rate multifamily and CRE loans and other mortgage related investments available to us, which could adversely affect our ability to acquire assets that satisfy our investment objectives.
While ASU 2016-13 does not require any particular method for determining the CECL allowance, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan.
While ASU 2016-13 does not require any particular method for determining the allowance for credit losses, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the expected contractual term adjusted for prepayment and extensions, where applicable, of each loan.
Floating rate loans earn interest at rates that adjust from time to time based upon an index (typically LIBOR or Term SOFR).
Our assets include loans with either floating interest rates or fixed interest rates. Floating rate loans earn interest at rates that adjust from time to time based upon an index (typically Term SOFR).
Our portfolio may contain other concentrations of risk, and we may fail to identify, detect or hedge against those risks, resulting in large or unexpected losses. Lack of diversification can increase the correlation of non-performance and foreclosure risks among our investments. The ongoing outbreak of COVID-19 could have an adverse impact on our financial performance and results of operations.
Our portfolio may contain other concentrations of risk, and we may fail to identify, detect or hedge against those risks, resulting in large or unexpected losses. Lack of diversification can increase the correlation of non-performance and foreclosure risks among our investments.
If such mortgage-backed securities turn out not to be fully collectible, an offsetting loss deduction will become available only in the later year that lack of collectability is provable. 28 Finally, in the event that any debt instruments or mortgage-backed securities acquired by us are delinquent as to mandatory principal and interest payments, or in the event a borrower with respect to a particular debt instrument acquired by us encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income as it accrues, despite doubt as to its ultimate collectability.
Finally, in the event that any debt instruments or mortgage-backed securities acquired by us are delinquent as to mandatory principal and interest payments, or in the event a borrower with respect to a particular debt instrument acquired by us encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income as it accrues, despite doubt as to its ultimate collectability.
A new accounting standard will likely require us to increase our allowance for loan losses and may have a material adverse effect on our business, financial condition and results of operations In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, or ASU 2016-13.
Accounting standards have required us to increase our allowance for credit losses which has had an adverse effect on our business and results of operation and may in the future have a material adverse effect on our business, financial condition and results of operations. In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, or ASU 2016-13.
If we are unable to negotiate a waiver or replace or refinance our assets under a new credit facility or CLO on favorable terms or at all, our financial conditions, results of operations and cash flows could be adversely affected.
If we are unable to negotiate a waiver or replace or refinance our assets under a new credit facility or CLO on favorable terms or at all, our financial conditions, results of operations and cash flows could be adversely affected. 26 Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
We cannot assure you that we would be able to complete any such originations, acquisitions or on favorable terms, or at all.
We cannot assure you that we would be able to complete any such originations, acquisitions or on favorable terms, or at all. Any or all of the above could materially and adversely affect us.
For more information about our risks related to the planned discontinuation of LIBOR, see " Risks Related to Our Investment Strategies and Our Businesses—The planned discontinuation of LIBOR may affect the value of the financial obligations to be held or issued by us that are linked to LIBOR and could affect our results of operations or financial condition." Fixed interest rate loans, however, do not have adjusting interest rates and the relative value of the fixed cash flows from these loans will decrease as prevailing interest rates rise or increase as prevailing interest rates fall, causing potentially significant changes in value.
For more information about our risks related to the planned discontinuation of LIBOR, see " Risks Related to Our Investment Strategies and Our Businesses—The transition away from reference rates and the use of alternative replacement reference rates may adversely affect net interest income related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments." Fixed interest rate loans, however, do not have adjusting interest rates and the relative value of the fixed cash flows from these loans will decrease as prevailing interest rates rise or increase as prevailing interest rates fall, causing potentially significant changes in value.
Accordingly, we expect that the adoption of the CECL model will materially affect how we determine our allowance for loan losses and could require us to increase our allowance and recognize provisions for loan losses earlier in the lending cycle. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses.
Accordingly, the adoption of the CECL model has materially affected, and will continue to materially affect, how we determine our allowance for credit losses and could require us to significantly increase our allowance and recognize provisions for credit losses earlier in the lending cycle.
The nature and timing of interest rate risk mitigation transactions may influence the effectiveness of these strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses. In addition, interest rate risk mitigation activities could result in losses if the event against which we mitigate does not occur.
The nature and timing of interest rate risk mitigation transactions may influence the effectiveness of these strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses.
In addition, the occurrence of a natural disaster (such as an earthquake, tornado, hurricane, or a flood) or a significant adverse climate change may cause a sudden decrease in the value of real estate in the area or areas affected and would likely reduce the value of the properties securing debt instruments that we purchase.
If the properties that we invest in are unable to obtain affordable insurance coverage, the value of those investments could decline and in the event of an uninsured loss, we could lose all or a portion of our investment. 9 In addition, the occurrence of a natural disaster (such as an earthquake, tornado, hurricane, or a flood) or a significant adverse climate change may cause a sudden decrease in the value of real estate in the area or areas affected and would likely reduce the value of the properties securing debt instruments that we purchase.
Once we are no longer a smaller reporting company, our independent registered public accounting firm will be required to formally attest to the effectiveness of our internal controls over financial reporting on an annual basis. The process of designing, implementing and testing the internal controls over financial reporting required to comply with this obligation is time consuming, costly and complicated.
If we are no longer considered a smaller reporting company, our independent registered public accounting firm will be required to formally attest to the effectiveness of our internal controls over financial reporting on an annual basis.
Future offerings of debt or equity securities that rank senior to our common stock may adversely affect the market price of our common stock.
In addition, some of our distributions to our common stockholders may continue to include a return of capital. 22 Future offerings of debt or equity securities that rank senior to our common stock may adversely affect the market price of our common stock.
In addition, funding our distributions from our net proceeds may constitute a return of capital to our investors, which would have the effect of reducing each stockholder’s basis in its shares of equity securities.
In addition, funding our distributions from our net proceeds may constitute a return of capital to our investors, which would have the effect of reducing each stockholder’s basis in its shares of equity securities. 25 We are a "smaller reporting company” and we may avail ourselves of the reduced disclosure requirements, which may make the Company’s securities less attractive to investors.
Market values of our investments may decline without any general increase in interest rates for a number of reasons, such as increases or expected increases in defaults, or increases or expected increases in voluntary prepayments for those investments that are subject to prepayment risk or widening of credit spreads. 9 In addition, in a period of rising interest rates, our operating results will depend in large part on the difference between the income from our assets and our financing costs.
Market values of our investments may decline without any general increase in interest rates for a number of reasons, such as increases or expected increases in defaults, or increases or expected increases in voluntary prepayments for those investments that are subject to prepayment risk or widening of credit spreads.
The Company may continue to rely on such exemptions for so long as the Company remains a "smaller reporting company." These exemptions include reduced financial disclosure and reduced disclosure obligations regarding executive compensation. We may continue to rely on such exemptions for so long as we remain a smaller reporting company under applicable SEC rules and regulations.
As a "smaller reporting company," the Company has relied on exemptions from certain disclosure requirements that are applicable to other public companies. The Company may continue to rely on such exemptions for so long as the Company remains a "smaller reporting company." These exemptions include reduced financial disclosure and reduced disclosure obligations regarding executive compensation.
Our rights to control the process following a borrower default may be subject to the rights of senior or junior creditors or servicers whose interests may not be aligned with ours.
Such financial assets may involve risks not present in investments where senior creditors, junior creditors, servicers or third-party controlling investors are not involved. Our rights to control the process following a borrower default may be subject to the rights of senior or junior creditors or servicers whose interests may not be aligned with ours.
To the extent that such conditions result in lower spreads on the assets in which we reinvest, we may be subject to a reduction in interest income in the future. It is expected that in 2023 the U.S. Federal Reserve will continue raise benchmark overnight interest rates.
To the extent that such conditions result in lower spreads on the assets in which we reinvest, we may be subject to a reduction in interest income in the future.
We are subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act. These reporting and other obligations may place significant demands on our management, administrative, operational, internal audit and accounting resources and cause us to incur significant expenses.
These reporting and other obligations may place significant demands on our management, administrative, operational, internal audit and accounting resources and cause us to incur significant expenses.
In connection with the servicing of the specially serviced mortgage loans, the related special servicer may, at the direction of the directing certificate holder, take actions with respect to the specially serviced mortgage loans that could adversely affect our interests. 13 If the loans that we originate or acquire do not comply with applicable laws, we may be subject to penalties, which could materially and adversely affect us.
In connection with the servicing of the specially serviced mortgage loans, the related special servicer may, at the direction of the directing certificate holder, take actions with respect to the specially serviced mortgage loans that could adversely affect our interests.
We anticipate that, in most cases, the income from such assets will respond more slowly to interest rate fluctuations than the cost of our borrowings. Consequently, changes in interest rates, particularly short-term interest rates, may significantly influence our net income. Increases in these rates will tend to decrease our net income and market value of our assets.
Consequently, changes in interest rates, particularly short-term interest rates, may significantly influence our net income. Increases in these rates will tend to decrease our net income and market value of our assets.
Our real estate investments are subject to risks particular to real property. These risks may result in a reduction or elimination of, our return from, a loan secured by a particular property.
The elimination of USD LIBOR benchmarks and/or changes to another index could result in mismatches with the interest rate of investments that we are financing. Our real estate investments are subject to risks particular to real property. These risks may result in a reduction or elimination of, our return from, a loan secured by a particular property.
If such events or disruptions persist for a prolonged period of time, our overall business and results of operations may be adversely affected. Any or all of the foregoing could have material adverse effect on our financial condition, results of operations and cash flows, or the market price of our common stock.
Any or all of the foregoing could have material adverse effect on our financial condition, results of operations and cash flows, or the market price of our common stock.
Accordingly, our interest expense will generally increase as interest rates increase and decrease as interest rates decline. In recent years, interest rates had remained at relatively low levels on a historical basis. However, in 2022, in light of increasing inflation, the U.S. Federal Reserve increased interest rates seven times. The U.S.
In recent years, interest rates had remained at relatively low levels on a historical basis. However, in 2022 and 2023, in light of increasing inflation, the U.S. Federal Reserve increased benchmark interest rates eleven times and may further increase rates in 2024, which has increased, and could continue to increase, our borrowers' interest payments.
Before acquiring certain assets, such as transitional multifamily and other CRE loans or other mortgage-related assets, our Manager conducts (either directly or using third parties) due diligence.
Our Manager's due diligence may not reveal all of the risks associated with such assets and may not reveal other weaknesses in such assets, which could lead to losses. Before acquiring certain assets, such as transitional multifamily and other CRE loans or other mortgage-related assets, our Manager conducts (either directly or using third parties) due diligence.
The initial term of our management agreement with our Manager only extends until January 3, 2023, with automatic one-year renewals thereafter. If the management agreement is terminated and no suitable replacement is found to manage us, we may not be able to execute our business plan.
If the management agreement is terminated and no suitable replacement is found to manage us, we may not be able to execute our business plan.
It is also possible that short-term interest rates may exceed longer-term interest rates (a yield curve inversion), in which event our borrowing costs may exceed our interest income and we could incur operating losses.
It is also possible that short-term interest rates may exceed longer-term interest rates (a yield curve inversion), in which event our borrowing costs may exceed our interest income and we could incur operating losses. Given the current state of the U.S. economy due inflationary pressures, there can be no guarantee that the yield curve will not become and/or remain inverted.
As of December 31, 2022, 77.4% of our loans by principal balance earned a floating rate of interest indexed to one-month USD LIBOR and 22.6% of our loan by principal balance earned a floating rate of interest indexed to 30-day term SOFR, and all of our collateralized loan obligations were indexed to one-month USD LIBOR.
As of December 31, 2023, 100.0% of our loans by principal balance earned a floating rate of interest indexed to 30-day term SOFR, and all of our collateralized loan obligations were indexed to 30-day term SOFR. Accordingly, our interest expense will generally increase as interest rates increase and decrease as interest rates decline.
If we are required to materially increase our level of allowance for loan losses for any reason, such increase could adversely affect our business, financial condition and results of operations. Our Manager's due diligence may not reveal all of the risks associated with such assets and may not reveal other weaknesses in such assets, which could lead to losses.
Moreover, the CECL model may create more volatility in the level of our allowance for credit losses. If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition and results of operations.
If long-term rates increased significantly, the market value of these investments would decline, and the duration and weighted average life of the investments would increase. We could realize a loss if the securities were sold. At the same time, an increase in short-term interest rates would increase the amount of interest owed on any repurchase agreements we may enter into.
A significant risk associated with our target assets is the risk that both long-term and short-term interest rates will increase significantly. If long-term rates increased significantly, the market value of these investments would decline, and the duration and weighted average life of the investments would increase. We could realize a loss if the securities were sold.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 8. Financial Statements and Supplementary Data 46
Biggest changeItem 4. Mine Safety Disclosures 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 8. Financial Statements and Supplementary Data 47

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table presents cash dividends declared on our common stock from January 1, 2021 through December 31, 2022: Common Dividends Declared per Share Declaration Date Amount Record Date Date of Payment March 15, 2021 $ 0.090 March 31, 2021 April 15, 2021 June 15, 2021 $ 0.090 June 30, 2021 July 15, 2021 September 15, 2021 $ 0.090 September 30, 2021 October 15, 2021 December 15, 2021 $ 0.090 December 31, 2021 January 18, 2022 March 15, 2022 $ 0.060 March 31, 2022 April 15, 2022 June 15, 2022 $ 0.060 June 30, 2022 July 15, 2022 September 15, 2022 $ 0.060 September 30, 2022 October 17, 2022 December 15, 2022 $ 0.060 December 31, 2022 January 17, 2023 Purchases of Equity Securities by the Issuer and Affiliated Purchasers On December 16, 2015, we announced a share repurchase program, pursuant to which our Board authorized us to repurchase up to $10 million of our common shares.
Biggest changeThe following table presents cash dividends declared on our common stock from January 1, 2022 through December 31, 2023: Common Dividends Declared per Share Declaration Date Amount Record Date Date of Payment March 15, 2022 $ 0.060 March 31, 2022 April 15, 2022 June 15, 2022 $ 0.060 June 30, 2022 July 15, 2022 September 15, 2022 $ 0.060 September 30, 2022 October 17, 2022 December 15, 2022 $ 0.060 December 31, 2022 January 17, 2023 March 16, 2023 $ 0.060 March 31, 2023 April 17, 2023 June 14, 2023 $ 0.060 June 30, 2023 July 17, 2023 September 14, 2023 $ 0.070 September 29, 2023 October 16, 2023 December 12, 2023 $ 0.070 December 29, 2023 January 16, 2024 Purchases of Equity Securities by the Issuer and Affiliated Purchasers On December 16, 2015, we announced a share repurchase program, pursuant to which our Board authorized us to repurchase up to $10 million of our common shares.
See Item 1A, "Risk Factors," and Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations," of this Annual Report on Form 10-K, for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends at the same level in 2023 and thereafter.
See Item 1A, "Risk Factors," and Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations," of this Annual Report on Form 10-K, for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends at the same level in 2024 and thereafter.
Under this program, we have discretion to determine the dollar amount of common shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulations. The program does not have an expiration date. The Company did not purchase any common shares under the plan during the twelve months ended December 31, 2022. 31
Under this program, we have discretion to determine the dollar amount of common shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulations. The program does not have an expiration date. The Company did not purchase any common shares under the plan during the twelve months ended December 31, 2023. 31
As of March 21, 2023, there were 16 registered holders. The number of beneficial stockholders is substantially greater than the number of holders of record as a large portion of our stock is held in "street name" through banks or broker dealers. Dividends Dividends on our common stock are paid on a quarterly basis.
As of March 13, 2024, there were 17 registered holders. The number of beneficial stockholders is substantially greater than the number of holders of record as a large portion of our stock is held in "street name" through banks or broker dealers. Dividends Dividends on our common stock are paid on a quarterly basis.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information On March 21, 2023, the last reported sales price for our common stock on the New York Stock Exchange under symbol "LFT" was $1.94. Holders At December 31, 2022, there were 52,231,152 shares of our common stock outstanding.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information On March 13, 2024, the last reported sales price for our common stock on the New York Stock Exchange under symbol "LFT" was $2.28. Holders At December 31, 2023, there were 52,248,631 shares of our common stock outstanding.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

101 edited+62 added−45 removed72 unchanged
Biggest changeThe table below sets forth additional information relating to the Company's portfolio as of December 31, 2022: 36 Loan # Form of Investment Origination Date Total Loan Commitment (1) Current Principal Amount Location Property Type Coupon Max Remaining Term (Years) LTV (2) 1 Senior secured December 16, 2021 54,455,784 51,375,000 Daytona, FL Multi-Family 1mL + 3.1 4.1 71.7% 2 Senior secured November 22, 2019 42,600,000 36,781,588 Virginia Beach, VA Multi-Family 1mS + 3.3 2.0 77.1% 3 Senior secured June 28, 2021 39,263,000 34,690,000 Barrington, NJ Multi-Family 1mL + 3.1 3.6 78.1% 4 Senior secured November 2, 2021 33,500,000 33,500,000 Warner Robins, GA Multi-Family 1mL + 3.0 1.9 51.4% 5 Senior secured June 8, 2021 35,877,500 33,360,000 Chattanooga, TN Multi-Family 1mL + 3.7 3.6 79.8% 6 Senior secured June 8, 2021 32,500,000 30,576,666 Miami, FL Multi-Family 1mL + 3.2 3.6 74.3% 7 Senior secured May 20, 2021 33,000,000 27,803,800 Marietta, GA Multi-Family 1mL + 3.1 3.5 77.0% 8 Senior secured June 7, 2021 29,400,000 26,400,000 San Antonio, TX Multi-Family 1mL + 3.4 3.6 80.0% 9 Senior secured August 26, 2021 27,268,000 24,832,000 Clarkston, GA Multi-Family 1mL + 3.5 3.7 79.0% 10 Senior secured November 15, 2021 26,003,000 24,330,000 El Paso, TX Multi-Family 1mL + 3.1 4.0 76.0% 11 Senior secured October 18, 2021 28,250,000 23,348,000 Cherry Hill, NJ Multi-Family 1mL + 3.0 3.9 72.4% 12 Senior secured August 26, 2021 23,370,000 21,957,240 Union City, GA Multi-Family 1mL + 3.4 3.8 70.4% 13 Senior secured November 16, 2021 21,975,000 20,960,000 Dallas, TX Multi-Family 1mL + 3.2 4.0 73.5% 14 Senior secured August 31, 2021 21,750,000 20,700,000 Houston, TX Multi-Family 1mL + 3.3 3.8 74.2% 15 Senior secured October 29, 2021 20,500,000 20,500,000 Knoxville, TN Multi-Family 1mL + 3.8 3.9 70.0% 16 Senior secured November 29, 2022 21,283,348 20,360,000 Glendale, WI Healthcare 1mS + 4.0 4.0 45.0% 17 Senior secured June 30, 2021 21,968,000 20,188,700 Jacksonville, FL Multi-Family 1mL + 3.5 3.6 77.1% 18 Senior secured October 13, 2017 20,000,000 19,648,818 Seattle, WA Self Storage 1mL + 3.6 1.9 46.5% 19 Senior secured November 5, 2021 20,965,000 19,200,000 Orlando, FL Multi-Family 1mL + 3.0 3.9 78.1% 20 Senior secured November 21, 2022 21,135,000 18,920,000 Houston, TX Healthcare 1mS + 4.0 4.0 67.0% 21 Senior secured February 11, 2022 20,165,000 18,599,480 Tampa, FL Multi-Family 1mS + 3.6 4.3 78.0% 22 Senior secured November 23, 2021 19,925,000 18,400,000 Orange, NJ Multi-Family 1mL + 3.2 4.0 78.0% 23 Senior secured October 12, 2021 17,500,000 17,500,000 Atlanta, GA Multi-Family 1mL + 3.2 1.8 42.9% 24 Senior secured July 8, 2021 17,000,000 17,000,000 Knoxville, TN Multi-Family 1mL + 4.0 1.7 69.7% 25 Senior secured November 10, 2022 18,590,000 16,690,000 Austin, TX Healthcare 1mS + 4.0 4.0 65.0% 26 Senior secured December 28, 2018 24,123,000 16,672,623 Austin, TX Retail 1mL + 4.6 0.1 60.5% 27 Senior secured September 30, 2021 17,583,000 16,663,000 Hanahan, SC Multi-Family 1mL + 3.2 3.8 76.4% 28 Senior secured February 1, 2022 16,160,000 15,400,000 San Antonio, TX Multi-Family 1mS + 3.5 4.2 79.8% 29 Senior secured April 12, 2021 17,000,000 15,000,000 Cedar Park, TX Multi-Family 1mL + 3.8 3.4 66.7% 30 Senior secured February 22, 2022 18,241,527 15,000,000 Philadelphia, PA Multi-Family 1mS + 3.8 4.3 80.0% 31 Senior secured December 2, 2021 16,250,000 14,857,637 Colorado Springs, CO Multi-Family 1mL + 3.0 4.0 72.5% 32 Senior secured December 1, 2021 16,071,800 14,080,000 Horn Lake, MS Multi-Family 1mL + 3.3 4.0 75.7% 37 33 Senior secured November 21, 2022 15,735,000 14,030,000 Southlake, TX Healthcare 1mS + 4.0 4.0 48.0% 34 Senior secured November 3, 2021 13,870,000 13,720,000 Louisville, KY Multi-Family 1mL + 3.4 3.9 75.4% 35 Senior secured June 15, 2022 15,371,600 13,575,000 Denton, TX Multi-Family 1mS + 3.9 4.6 73.0% 36 Senior secured May 28, 2021 13,675,000 13,332,734 Houston, TX Multi-Family 1mL + 3.4 1.5 73.8% 37 Senior secured May 26, 2022 17,500,000 13,300,000 Brooklyn, NY Multi-Family 1mS + 3.8 2.5 64.3% 38 Senior secured May 12, 2021 13,930,000 13,026,000 Fort Worth, TX Multi-Family 1mL + 3.4 3.5 74.9% 39 Senior secured August 16, 2021 15,886,000 12,750,000 Columbus, OH Multi-Family 1mL + 3.7 3.8 75.0% 40 Senior secured December 13, 2021 15,656,650 12,600,000 Evansville, IN Multi-Family 1mL + 3.3 4.1 74.3% 41 Senior secured October 1, 2021 13,775,000 12,100,000 East Nashville, TN Multi-Family 1mL + 3.4 3.8 79.1% 42 Senior secured June 28, 2022 12,880,000 11,470,000 Colorado Springs, CO Multi-Family 1mS + 3.9 4.6 73.1% 43 Senior secured October 28, 2021 12,250,000 11,202,535 Tampa, FL Multi-Family 1mL + 3.0 3.9 75.7% 44 Senior secured September 30, 2021 11,300,000 10,795,000 Clearfield, UT Multi-Family 1mL + 3.2 3.8 68.0% 45 Senior secured April 23, 2021 11,600,000 10,497,000 Tualatin, OR Multi-Family 1mL + 3.2 3.4 73.9% 46 Senior secured July 23, 2018 16,200,000 10,258,668 Chicago, IL Office 1mL + 3.8 0.7 72.7% 47 Senior secured December 29, 2021 11,000,000 10,239,800 Phoenix, AZ Multi-Family 1mL + 3.7 4.1 75.9% 48 Senior secured December 2, 2021 9,975,000 9,975,000 Tomball, TX Multi-Family 1mL + 3.4 4.0 68.5% 49 Senior secured November 23, 2021 10,706,000 9,856,000 Atlanta, GA Multi-Family 1mL + 3.4 4.0 79.5% 50 Senior secured January 14, 2022 10,234,000 9,609,250 Houston, TX Multi-Family 1mS + 3.6 4.2 78.8% 51 Senior secured October 21, 2021 11,500,000 9,100,000 Madison, TN Multi-Family 1mL + 3.2 3.9 68.4% 52 Senior secured November 30, 2021 11,276,000 8,400,000 Lindenwood, NJ Multi-Family 1mL + 3.6 4.0 76.4% 53 Senior secured May 12, 2021 8,950,000 8,220,000 Lakeland, FL Multi-Family 1mL + 3.4 3.5 76.8% 54 Senior secured June 22, 2022 9,772,000 8,175,500 Des Moines, IA Multi-Family 1mS + 4.0 4.6 72.0% 55 Senior secured April 7, 2021 10,152,000 7,963,794 Phoenix, AZ Multi-Family 1mL + 3.6 3.4 69.5% 56 Senior secured June 24, 2022 7,934,160 7,934,160 Monks Corner, SC Multi-Family 1mS + 4.2 4.6 67.8% 57 Senior secured October 29, 2021 9,000,000 7,934,000 Riverside, MO Multi-Family 1mL + 3.4 3.9 76.6% 58 Senior secured November 16, 2021 7,680,000 7,680,000 Cape Coral, FL Multi-Family 1mL + 3.3 2.0 79.2% 59 Senior secured September 28, 2021 8,125,000 7,286,000 Chicago, IL Multi-Family 1mL + 3.7 3.8 75.9% 60 Senior secured February 18, 2022 7,800,000 7,200,000 Drexel Hills, PA Multi-Family 1mS + 4.0 4.3 78.1% 61 Senior secured December 19, 2022 6,325,000 6,325,000 Asheville, NC Multi-Family 1mS + 3.8 2.6 41.1% 62 Senior secured July 1, 2021 7,285,000 6,290,000 Harker Heights, TX Multi-Family 1mL + 3.6 3.6 72.3% 63 Senior secured April 27, 2022 55,220,000 6,000,000 North Brunswick, NJ Multi-Family 1mS + 3.4 4.4 79.9% 64 Senior secured May 21, 2021 7,172,000 5,994,000 Youngtown, AZ Multi-Family 1mL + 3.7 3.5 71.4% 65 Senior secured October 26, 2021 6,807,000 5,812,000 Indianapolis, IN Multi-Family 1mL + 3.9 3.9 77.1% 38 66 Senior secured June 10, 2019 6,000,000 5,295,605 San Antonio, TX Multi-Family 1mL + 2.9 1.6 62.9% 67 Senior secured April 30, 2021 5,472,000 5,285,500 Daytona Beach, FL Multi-Family 1mL + 3.7 3.4 77.4% 68 Senior secured December 13, 2021 6,799,000 5,250,000 Evansville, IN Multi-Family 1mL + 3.3 4.1 73.9% 69 Senior secured July 14, 2021 6,048,000 5,248,000 Birmingham, AL Multi-Family 1mL + 3.7 3.7 71.7% 70 Senior secured November 19, 2021 6,453,000 5,040,000 Huntsville, AL Multi-Family 1mL + 3.8 4.0 78.8% 71 Senior secured December 28, 2021 52,800,000 2,800,000 Houston, TX Multi-Family 1mS + 3.3 4.1 71.2% (1) See Note 11 Commitments and Contingencies to our consolidated financial statements for further discussion of unfunded commitments.
Biggest changeThe table below sets forth additional information relating to the Company's portfolio as of December 31, 2023: Loan # Form of Investment Origination Date Total Loan Commitment (1) Committed Principal Amount (2) Current Principal Amount Location Property Type Coupon Max Remaining Term (Years) LTV (3) 1 Senior secured December 16, 2021 54,455,784 51,375,000 51,375,000 Daytona, FL Multi-Family 1mS + 3.2 3.1 71.7 % 2 Senior secured November 22, 2019 42,600,000 42,600,000 36,781,588 Virginia Beach, VA Multi-Family 1mS + 3.3 0.0 77.1 % 36 3 Senior secured June 28, 2021 39,263,000 37,364,267 36,658,084 Barrington, NJ Multi-Family 1mS + 3.2 2.7 78.1 % 4 Senior secured June 8, 2021 35,877,500 35,148,793 33,360,000 Chattanooga, TN Multi-Family 1mS + 3.8 2.6 79.8 % 5 Senior secured March 22, 2022 32,996,700 32,053,323 31,876,244 Seneca, SC Multi-Family 1mS + 3.4 3.3 74.5 % 6 Senior secured June 28, 2022 33,550,000 31,940,124 31,602,808 Dallas, TX Multi-Family 1mS + 3.9 3.6 71.6 % 7 Senior secured December 29, 2021 34,464,000 30,709,146 30,709,146 Multi, NC Multi-Family 1mS + 4.0 3.1 59.9 % 8 Senior secured June 8, 2021 32,500,000 32,400,828 30,576,666 Miami, FL Multi-Family 1mS + 3.3 2.6 74.3 % 9 Senior secured May 20, 2021 33,000,000 30,220,508 30,220,508 Marietta, GA Multi-Family 1mS + 3.2 2.5 77.0 % 10 Senior secured August 25, 2022 30,700,000 29,251,966 28,653,440 Wilmington, NC Multi-Family 1mS + 4.0 3.8 71.5 % 11 Senior secured June 7, 2021 29,400,000 28,007,982 27,569,521 San Antonio, TX Multi-Family 1mS + 3.5 2.6 80.0 % 12 Senior secured November 2, 2021 26,728,000 26,049,291 26,049,291 Melbourne, FL Multi-Family 1mS + 3.8 2.9 72.1 % 13 Senior secured August 26, 2021 27,268,000 26,163,008 25,440,413 Clarkston, GA Multi-Family 1mS + 3.6 2.7 79.0 % 14 Senior secured November 15, 2021 26,003,000 25,607,252 24,330,000 El Paso, TX Multi-Family 1mS + 3.2 3.0 76.0 % 15 Senior secured October 18, 2021 28,250,000 24,252,193 23,348,000 Cherry Hill, NJ Multi-Family 1mS + 3.1 2.9 72.4 % 16 Senior secured August 26, 2021 23,370,000 23,006,417 22,872,354 Union City, GA Multi-Family 1mS + 3.5 2.8 70.4 % 17 Senior secured April 27, 2022 54,470,000 50,050,000 22,182,443 North Brunswick, NJ Multi-Family 1mS + 3.4 3.4 79.9 % 18 Senior secured March 22, 2022 22,845,000 22,242,924 21,934,375 York, PA Multi-Family 1mS + 3.3 3.3 79.2 % 19 Senior secured November 16, 2021 21,975,000 21,937,806 21,916,753 Dallas, TX Multi-Family 1mS + 3.3 3.0 73.5 % 20 Senior secured July 8, 2022 23,095,000 21,818,465 21,818,465 Arlington, TX Multi-Family 1mS + 3.8 3.7 67.1 % 21 Senior secured August 31, 2021 21,750,000 21,725,235 21,644,684 Houston, TX Multi-Family 1mS + 3.4 2.8 74.2 % 22 Senior secured November 29, 2022 21,283,348 20,360,000 20,360,000 Glendale, WI Healthcare 1mS + 4.0 3.0 45.0 % 23 Senior secured June 10, 2022 21,468,240 20,250,372 20,250,372 Various, GA Multi-Family 1mS + 3.8 3.6 75.8 % 24 Senior secured November 5, 2021 20,965,000 19,625,274 19,625,274 Orlando, FL Multi-Family 1mS + 3.1 2.9 78.1 % 25 Senior secured April 13, 2022 20,651,725 18,989,494 18,989,494 Decatur, GA Multi-Family 1mS + 3.6 3.4 75.7 % 26 Senior secured November 21, 2022 21,135,000 18,920,000 18,920,000 Houston, TX Healthcare 1mS + 4.0 3.0 67.0 % 27 Senior secured November 23, 2021 19,925,000 19,086,151 18,834,024 Orange, NJ Multi-Family 1mS + 3.3 3.0 78.0 % 28 Senior secured February 2, 2022 19,740,000 18,963,264 18,660,822 Houston, TX Multi-Family 1mS + 3.5 3.2 77.5 % 29 Senior secured February 11, 2022 20,165,000 19,346,365 18,599,480 Tampa, FL Multi-Family 1mS + 3.6 3.3 78.0 % 30 Senior secured October 12, 2021 17,500,000 17,500,000 17,500,000 Atlanta, GA Multi-Family 1mS + 3.3 0.8 42.9 % 31 Senior secured May 26, 2022 17,500,000 17,263,000 17,263,000 Brooklyn, NY Multi-Family 1mS + 3.8 1.5 64.3 % 32 Senior secured March 31, 2022 18,140,000 16,956,276 16,956,276 Tallahassee, FL Multi-Family 1mS + 3.3 3.3 74.8 % 33 Senior secured November 10, 2022 18,590,000 16,690,000 16,690,000 Austin, TX Healthcare 1mS + 4.0 3.0 65.0 % 34 Senior secured December 1, 2021 16,071,800 16,008,526 15,449,323 Horn Lake, MS Multi-Family 1mS + 3.4 3.0 75.7 % 35 Senior secured February 1, 2022 16,160,000 15,792,145 15,400,000 San Antonio, TX Multi-Family 1mS + 3.5 3.2 79.8 % 37 36 Senior secured April 6, 2022 16,400,000 15,674,743 15,347,180 Vineland, NJ Multi-Family 1mS + 3.8 3.3 77.0 % 37 Senior secured April 6, 2022 17,443,500 16,091,603 15,156,425 Haltom City, TX Multi-Family 1mS + 3.5 3.3 74.1 % 38 Senior secured December 2, 2021 16,250,000 15,010,343 15,010,343 Colorado Springs, CO Multi-Family 1mS + 3.1 3.0 72.5 % 39 Senior secured February 22, 2022 18,241,527 15,524,795 15,000,000 Philadelphia, PA Multi-Family 1mS + 3.8 3.3 80.0 % 40 Senior secured June 15, 2022 15,371,600 14,881,463 14,511,455 Denton, TX Multi-Family 1mS + 3.9 3.6 73.0 % 41 Senior secured July 26, 2022 17,100,000 14,886,485 14,351,599 Atlanta, GA Multi-Family 1mS + 3.7 3.7 65.2 % 42 Senior secured April 27, 2022 15,000,000 14,171,704 14,171,704 Houston, TX Multi-Family 1mS + 3.7 3.4 79.6 % 43 Senior secured January 13, 2022 15,180,000 14,341,699 14,119,842 Indianapolis, IN Multi-Family 1mS + 3.8 3.2 80.0 % 44 Senior secured November 21, 2022 15,735,000 14,030,000 14,030,000 Southlake, TX Healthcare 1mS + 4.0 3.0 48.0 % 45 Senior secured December 28, 2021 14,000,000 14,000,000 14,000,000 Houston, TX Multi-Family 1mS + 3.3 3.1 71.2 % 46 Senior secured May 13, 2022 18,500,000 15,108,835 13,885,769 Decatur, AL Multi-Family 1mS + 3.5 3.5 59.2 % 47 Senior secured April 12, 2021 15,000,000 13,666,721 13,666,721 Cedar Park, TX Multi-Family 1mS + 3.9 2.4 66.7 % 48 Senior secured June 10, 2022 15,250,000 13,880,081 13,625,505 Blakely, PA Multi-Family 1mS + 3.9 3.6 75.0 % 49 Senior secured October 6, 2023 13,191,852 13,191,852 13,191,852 Garfield, NJ Multi-Family 1mS + 4.0 1.8 65.5 % 50 Senior secured December 13, 2021 15,656,650 12,919,018 12,600,000 Evansville, IN Multi-Family 1mS + 3.4 3.1 74.3 % 51 Senior secured December 28, 2021 38,800,000 37,613,170 12,322,717 Houston, TX Multi-Family 1mS + 3.3 3.1 71.2 % 52 Senior secured January 25, 2022 13,000,000 12,406,810 12,249,079 Corpus Christi, TX Multi-Family 1mS + 3.6 3.2 78.8 % 53 Senior secured May 12, 2022 12,750,000 11,926,591 11,926,591 Ypsilanti, MI Multi-Family 1mS + 3.5 3.5 68.4 % 54 Senior secured December 10, 2021 13,000,000 11,815,776 11,662,582 Los Angeles, CA Multi-Family 1mS + 3.6 3.1 67.9 % 55 Senior secured March 4, 2022 12,047,625 11,738,608 11,467,505 Houston, TX Multi-Family 1mS + 3.5 3.3 78.3 % 56 Senior secured April 14, 2022 11,823,000 11,749,195 11,287,602 Irving, TX Multi-Family 1mS + 3.5 3.4 74.9 % 57 Senior secured October 28, 2021 12,250,000 11,828,154 11,202,535 Tampa, FL Multi-Family 1mS + 3.1 2.9 75.7 % 58 Senior secured April 23, 2021 11,600,000 11,245,262 10,986,357 Tualatin, OR Multi-Family 1mS + 3.3 2.4 73.9 % 59 Senior secured May 3, 2022 11,349,250 11,056,240 10,818,945 Port Richey, FL Multi-Family 1mS + 3.6 3.4 79.1 % 60 Senior secured September 30, 2021 11,300,000 11,022,226 10,795,000 Clearfield, UT Multi-Family 1mS + 3.3 2.8 68.0 % 61 Senior secured December 29, 2021 11,000,000 10,795,116 10,615,094 Phoenix, AZ Multi-Family 1mS + 3.8 3.1 75.9 % 62 Senior secured June 28, 2022 12,880,000 10,531,845 10,531,845 Colorado Springs, CO Multi-Family 1mS + 3.9 3.6 73.1 % 63 Senior secured December 2, 2021 9,975,000 9,975,000 9,975,000 Tomball, TX Multi-Family 1mS + 3.5 3.0 68.5 % 64 Senior secured November 23, 2021 10,706,000 10,433,651 9,856,000 Atlanta, GA Multi-Family 1mS + 3.5 3.0 79.5 % 65 Senior secured January 14, 2022 10,234,000 9,902,979 9,609,250 Houston, TX Multi-Family 1mS + 3.6 3.2 78.8 % 66 Senior secured July 14, 2022 10,153,000 9,580,765 9,429,206 Bradenton, FL Multi-Family 1mS + 3.9 3.7 74.4 % 67 Senior secured August 5, 2022 10,232,000 9,127,649 9,127,649 San Antonio, TX Multi-Family 1mS + 4.4 3.7 75.0 % 68 Senior secured October 21, 2021 11,500,000 9,699,777 9,100,000 Madison, TN Multi-Family 1mS + 3.3 2.9 68.4 % 38 69 Senior secured August 16, 2021 8,889,177 8,889,177 8,889,177 Columbus, OH Multi-Family 1mS + 0.0 2.8 75.0 % 70 Senior secured October 29, 2021 9,000,000 8,824,877 8,717,380 Riverside, MO Multi-Family 1mS + 3.5 2.9 76.6 % 71 Senior secured May 12, 2021 8,950,000 8,866,850 8,220,000 Lakeland, FL Multi-Family 1mS + 3.5 2.5 76.8 % 72 Senior secured June 22, 2022 9,772,000 8,499,173 8,175,500 Des Moines, IA Multi-Family 1mS + 4.0 3.6 72.0 % 73 Senior secured May 26, 2022 8,497,500 8,116,833 8,116,833 Haltom City, TX Multi-Family 1mS + 4.0 3.5 74.4 % 74 Senior secured June 24, 2022 7,934,160 7,934,160 7,934,160 Moncks Corner, SC Multi-Family 1mS + 4.2 3.6 67.8 % 75 Senior secured November 16, 2021 7,680,000 7,680,000 7,680,000 Cape Coral, FL Multi-Family 1mS + 3.4 1.0 79.2 % 76 Senior secured June 03, 2022 10,367,500 7,367,500 7,367,500 Deer Park, NY Self Storage 1mS + 3.6 3.5 72.5 % 77 Senior secured September 28, 2021 8,125,000 7,286,000 7,286,000 Chicago, IL Multi-Family 1mS + 3.8 2.8 75.9 % 78 Senior secured July 01, 2021 7,285,000 7,262,519 7,169,838 Harker Heights, TX Multi-Family 1mS + 3.7 2.6 72.3 % 79 Senior secured October 07, 2022 7,000,000 7,000,000 7,000,000 Fairborn, OH Multi-Family 1mS + 4.1 1.9 79.1 % 80 Senior secured October 24, 2022 6,100,000 6,100,000 6,100,000 Various, FL Healthcare 1mS + 4.5 1.9 71.0 % 81 Senior secured April 08, 2022 6,191,853 6,096,412 6,096,412 St.
Changes in market interest rates . Generally, our business model is such that rising interest rates will generally increase our net interest income, while declining interest rates will decrease our net interest income.
Changes in market interest rates . Generally, our business model is such that rising interest rates will increase our net interest income, while declining interest rates will decrease our net interest income.
On November 30, 2020, the ICE Benchmark Administration ("IBA"), with the support of the United States Federal Reserve and United Kingdom's Financial Conduct Authority ("FCA"), announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only one week and two month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors.
On November 30, 2020, the ICE Benchmark Administration ("IBA"), with the support of the United States Federal Reserve and United Kingdom's Financial Conduct Authority ("FCA"), announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors.
However, if a loan is considered to be impaired as the result of adverse credit performance, an allowance is recorded to reduce the carrying value through a charge to the provision for loan losses. Impairment is typically measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan.
However, if a loan is considered to be impaired as the result of adverse credit performance, an allowance is recorded to reduce the carrying value through a charge to the provision for credit losses. Impairment is typically measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan.
Expenses We incurred management and incentive fees of $4,197,819 for the year ended December 31, 2022 representing amounts payable to our Manager under our management agreement. We also incurred operating expenses of $6,135,066, of which $2,116,636 was payable to our Manager and $4,018,430 was payable to third parties.
For the year ended December 31, 2022, we incurred management and incentive fees of $4,197,819 representing amounts payable to our Manager under our management agreement. We also incurred operating expenses of $6,135,066, of which $2,116,636 was payable to our Manager and $4,018,430 was payable to third parties.
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 Alternative 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.
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 41 unamortized Alternative 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 market values of commercial mortgage assets are subject to volatility and may be adversely affected by a number 33 of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes.
The market values of commercial mortgage assets are subject to volatility and may be adversely affected by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes.
These transactions have enhanced the scale of LFT and are expected to generate shareholder value through leveraging ORIX USA's expansive originations, asset management and servicing platform. Lument IM is an affiliate of Lument, a nationally recognized leader in multifamily and seniors housing and care finance. The Company leverages Lument's broad platform and significant expertise when originating and underwriting investments.
These transactions have enhanced the scale of LFT and are expected to generate shareholder value through leveraging ORIX USA's expansive originations, asset management and servicing platform. Lument IM is an affiliate of Lument, a nationally recognized leader in multifamily and seniors housing and health care finance. The Company leverages Lument's broad platform and significant expertise when originating and underwriting investments.
In November 2022, the FCA announced a public consultation regarding whether it should compel the IBA to continue publishing "synthetic" USD LIBOR settings from June 2023 to the end of September 2024. The ARRC, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S.
In November 2022, the FCA announced a public consultation regarding whether it should compel the IBA to continue publishing "synthetic" USD LIBOR settings from June 2023 to the end of September 2024. The Alternative Reference Rate Committee ("ARRC"), a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S.
To monitor this risk, the Manager's asset management team reviews our portfolio and maintains regular contact with borrowers, co-lenders and local market experts to monitor the performance of the underlying collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as lender.
To monitor this risk, the Manager's asset management team reviews our portfolio and maintains regular contact with borrowers, co-lenders 33 and local market experts to monitor the performance of the underlying collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as lender.
The anticipated continual rise in interest rates and unpredictable geopolitical landscape may cause a further dislocation in the capital markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period of time could limit our ability to grow our business.
The anticipated continual rise in interest rates and unpredictable geopolitical landscape may cause a further dislocation in the capital markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period of time could limit our ability to grow this business.
Although our Manager is currently originating loans with SOFR floors, there can be no assurance that we will continue to obtain SOFR floors on future originations or LIBOR floors on future acquisitions.
Although our Manager is currently originating loans with SOFR floors, there can be no assurance that we will continue to obtain SOFR floors on future originations or acquisitions.
While Distributable Earnings excludes the impact of any unrealized provisions for credit losses, any loan losses are charged off and realized through Distributable Earnings when deemed non-recoverable.
While Distributable Earnings excludes the impact of any unrealized provisions for credit losses, any credit losses are charged off and realized through Distributable Earnings when deemed non-recoverable.
Provisions for loan losses will directly impact our earnings. Governmental actions . Since 2008, when both Fannie Mae and Freddie Mac were placed under the conservatorship of the U.S. government, there have been a number of proposals to reform the U.S. housing finance system in general, and Fannie Mae and Freddie Mac in particular.
Provisions for credit losses will directly impact our earnings. Governmental actions . Since 2008, when both Fannie Mae and Freddie Mac were placed under the conservatorship of the U.S. government, there have been a number of proposals to reform the U.S. housing finance system in general, and Fannie Mae and Freddie Mac in particular.
As of December 31, 2022, 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 guarantees. See Note 11 for further information.
As of December 31, 2023, 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 guarantees. See Note 11 for further information.
Recent Developments The year ended December 31, 2022 has been characterized by significant volatility in global markets, driven by heightened inflation, changes to fiscal and monetary policy, higher interest rates, slowing economic growth, currency fluctuations, labor shortages and challenges in the supply chain and geopolitical uncertainty.
Recent Developments The year ended December 31, 2023 has been characterized by significant volatility in global markets, driven by heightened inflation, changes to fiscal and monetary policy, higher interest rates, slowing economic growth, currency fluctuations, labor shortages and challenges in the supply chain and geopolitical uncertainty.
If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in our interest income recognition, allowance for loan losses, future impairment of our investments, and valuation of our investment portfolio, among other effects.
If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in our interest income recognition, allowance for credit losses, future impairment of our investments, and valuation of our investment portfolio, among other effects.
We anticipate debate on residential housing and mortgage reform to continue through 2023 and beyond, but a deep divide persists between factions in Congress and as such it remains unclear what shape any reform would take and what impact, if any, reform would have on mortgage REITs.
We anticipate debate on residential housing and mortgage reform to continue through 2024 and beyond, but a deep divide persists between factions in Congress and as such it remains unclear what shape any reform would take and what impact, if any, reform would have on mortgage REITs.
The Federal Reserve maintained the federal funds target range at 0.0% to 0.25% for much of 2021, however, in March 2022, the Federal Reserve approved a 0.25% rate increase and increased rates an additional six times during the year, raising the federal funds target range to 4.25% to 4.50%.
The Federal Reserve maintained the federal funds target range at 0.0% to 0.25% for much of 2021. However, in March 2022, the Federal Reserve approved a 0.25% rate increase and subsequently increased rates an additional six times during 2022, raising the federal funds target range to 4.25% to 4.50%.
Additionally, we have reviewed the loans designated as High Risk and Default Risk for impairment. Impairment of these loans, which are 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.
Additionally, we have reviewed the loans designated as Default Risk for impairment. Impairment of these loans, which are 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.
Investing Activities For the year ended December 31, 2022, net cash used in investing activities totaled $51.8 million. This was a result of the cash used for the purchase and funding of commercial mortgage loans held for investment exceeding the principal repayment of commercial mortgage loans held for investment during the period.
For the year ended December 31, 2022 net cash used in investing activities totaled $51.8 million. This was a result of the cash used for the purchase and funding of commercial mortgage loans held for investment exceeding the principal repayment of commercial mortgage loans held-for-investment for the year ended December 31, 2022.
(2) Weighted average term assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date. (3) LTV as of the date the loan was originated and is calculated after giving effect to capex and earnout reserves, if applicable.
(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) LTV as of the date the loan was originated and is calculated after giving effect to capex and earnout reserves, if applicable.
Financing Activities For the year ended December 31, 2022, net cash provided by financing activities totaled $64.6 million and primarily related to proceeds from issuance of common stock of $81.1 million, which more than offset payments of common and preferred dividends of $16.4 million payment of debt issuance costs of $0.1 million.
For the year ended December 31, 2022, net cash provided by financing activities totaled $64.6 million and primarily related to proceeds from issuance common stock of $81.1 million, which more than offset by payments of common stock dividends of $11.6 million, payment of preferred stock dividends of $4.7 million and payment of debt issuance costs of $0.1 million.
Additionally, the anticipated continual rise in interest rates and unpredictable geopolitical landscape may cause further dislocation in the capital markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period of time could limit our ability to grow our business.
Additionally, higher interest rates and unpredictable geopolitical landscape may cause further dislocation in the capital markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period of time could limit our ability to grow our business.
However, to the extent that we seek to invest in additional commercial mortgage loans, outside of our CLO, we will in part be dependent on our ability to issue additional collateralized loan obligations, to secure alternative financing facilities or to raise additional common or preferred equity.
However, to the extent that we seek to invest in additional commercial mortgage loans, outside of our secured borrowings, we will in part be dependent on our ability to issue additional collateralized loan obligations, to secure alternative financing facilities or to raise additional common or preferred equity.
As of December 31, 2022, 77.4% of the investments by total 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. As of December 31, 2021, 100% of the investments by total investment exposure earned a floating rate indexed to one-month LIBOR.
As of December 31, 2023, 100.0% of the investments by total 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..
Similarly, net interest income is also impacted by the spread in our commercial mortgage loan portfolio As of December 31, 2022, the weighted average spread of our commercial loan portfolio was 3.43%, but there is no assurance that these spreads will be maintained as market environments fluctuate.
Similarly, net interest income is also impacted by the spread in our commercial mortgage loan portfolio As of December 31, 2023, the weighted average spread of our commercial loan portfolio was 3.54%, but there is no assurance that these spreads will be maintained as market environments fluctuate.
We seek to limit our exposure to illiquidity risk to the extent possible, by ensuring that the collateralized loan obligations that we use to finance our commercial mortgage loans are not subject to margin calls or other limitations that are dependent on the market value of the related loan collateral.
We seek to limit our exposure to illiquidity risk to the extent possible, by ensuring that the secured borrowings that we use to finance our commercial mortgage loans are not subject to margin calls or other limitations that are dependent on the market value of the related loan collateral.
(2) LTV as of the date the loan was originated by a Hunt/ORIX affiliate and is calculated after giving effect to capex and earnout reserves, if applicable. LTV has not been updated for any subsequent draws or loan modifications and is not reflective of any changes in value which may have occurred subsequent to origination date.
(3) LTV as of the date the loan was originated by a Hunt/ORIX affiliate and is calculated after giving effect to capex and earn-out reserves, if applicable. LTV has not been updated for any subsequent draws or loan modifications and is not reflective of any changes in value, which may have occurred subsequent to origination date.
In particular, our strategy is influenced by the specific characteristics of the underlying real estate markets, including prepayment rates, credit market conditions and interest rate levels. This year has been characterized by significant volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty.
In particular, our strategy is influenced by the specific characteristics of the underlying real estate markets, including prepayment rates, credit market conditions and interest rates. This year has been characterized by significant volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth, geopolitical uncertainty and instability in the banking sector.
For the year ended December 31, 2022, our cash flows from operating activities were primarily driven by $26.1 million of interest received from the junior retained notes and preferred shares of LFT 2021-FL1, Ltd., a VIE we consolidated, $3.3 million of interest received from our senior secured loans held outside the VIE we consolidate and $0.3 million of cash received from mortgage servicing rights exceeding cash interest expense paid on our Secured Term Loan of $3.5 million, management fees of $4.2 million, expense reimbursements of $2.3 million and other operating expenditures of $3.5 million.
For the year ended December 31, 2022, our cash flows from operating activities were primarily driven by $26.1 million of interest received from the junior retained notes and preferred shares of 2021-FL1 CLO, $3.3 million of interest received from our senior secured loans held outside the VIE we consolidate and $0.3 million of cash received from mortgage servicing rights exceeding cash interest expense paid on our Secured Term Loan of $3.5 million, management fees of $4.2 million, expense reimbursement of $2.3 million and other operating expenditures of $3.5 million.
Other (Loss) For the year ended December 31, 2022, we incurred a loss of $3,667,171. This loss was driven by allowance for loan losses of $4,258,668 which more than offset the impact of net unrealized gains on mortgage servicing rights of $243,659 as a result of increased interest rates in the period and net mortgage servicing income of $347,838.
For the year ended December 31, 2022, we incurred a loss of $3,667,171. This loss was primarily driven by provision for credit losses of $4,258,668 which more than offset the impact of net unrealized gains on mortgage servicing rights of $243,659 as a result of increased interest rates in the period and net mortgage servicing income of $347,838.
See Notes 13 and 14 to our consolidated financial statements included in this Annual Report for a further description of MAXEX. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties.
See Note 10 to our consolidated financial statements included in this Annual Report for a further description of MAXEX. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties.
In addition, decreases in property values reduce the value of the collateral and potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. As of December 31, 2022, 100% of the commercial mortgage loans in our portfolio were current as to principal and interest.
In addition, decreases in property values reduce the value of the collateral and potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. As of December 31, 2023, 96.7% of the commercial mortgage loans in our portfolio were current as to principal and interest.
While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statements advising banks to stop new LIBOR issuance by the end of 2021.
While this announcement extended the transition period to June 2023, the United States Federal Reserve concurrently issued a statements advising banks to stop new LIBOR issuances by the end of 2021.
As of December 31, 2022, we had unrestricted cash and cash equivalents of $43.9 million, compared to $14.7 million as of December 31, 2021. As of December 31, 2022, we had $47.8 million in outstanding principal under our Senior Secured Term Loan, with a borrowing rate of 7.25%.
As of December 31, 2023, we had unrestricted cash and cash equivalents of $51.2 million, compared to $43.9 million as of December 31, 2022. 45 As of December 31, 2023, we had $47.8 million in outstanding principal under our Senior Secured Term Loan, with a borrowing rate of 7.25%.
If we were required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we previously recorded our assets, particularly in a financial market that has been significantly disrupted and less liquid as a result of the ongoing COVID-19 pandemic.
If we were required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we previously recorded our assets, particularly in a financial market that has been significantly disrupted and less liquid as a result of the current inflationary environment.
Earnings Per Share and Dividends Declared The following table sets forth the calculation of basic and diluted net income per share and dividends declared per share: 34 Three Months Ended December 31, Year Ended December 31, 2022 2022 2021 Net income attributable to common stockholders $ 879,776 $ 5,123,660 $ 7,414,722 Weighted-average shares outstanding, basic and diluted 52,231,152 48,342,347 24,945,824 Net income per share, basic and diluted $ 0.02 $ 0.11 $ 0.30 Dividends declared per share $ 0.06 $ 0.24 $ 0.36 Distributable Earnings Distributable Earnings is a non-GAAP financial measure, which we define as GAAP net income (loss) attributable to holders of common stock, or, without duplication, owners of our subsidiaries, computed in accordance with GAAP, including realized losses not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation, (ii) depreciation and amortization, (iii) any unrealized gains or losses or other similar non-cash items that are included in net income for that applicable reporting period, regardless of whether such items are included in other comprehensive income (loss) or net income (loss), and (iv) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items after discussions with the Company's board of directors and approved by a majority of the Company's independent directors.
Earnings Per Share and Dividends Declared The following table sets forth the calculation of basic and diluted net income per share and dividends declared per share: 34 Three Months Ended December 31, Year Ended December 31, 2023 2023 2022 Net income attributable to common stockholders $ 3,828,893 $ 14,974,496 $ 5,123,660 Weighted-average shares outstanding, basic and diluted 52,231,722 52,231,296 48,342,347 Net income per share, basic and diluted $ 0.07 $ 0.29 $ 0.11 Dividends declared per share $ 0.07 $ 0.26 $ 0.24 Distributable Earnings Distributable Earnings is a non-GAAP financial measure, which we define as GAAP net income (loss) attributable to holders of common stock, or, without duplication, owners of our subsidiaries, computed in accordance with GAAP, including realized losses not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation, (ii) depreciation and amortization, (iii) any unrealized gains or losses or other similar non-cash items that are included in net income for that applicable reporting period, regardless of whether such items are included in other comprehensive income (loss) or net income (loss), and (iv) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items after discussions with the Board and approved by a majority of the Company's independent directors.
Our net interest income currently benefits from LIBOR/SOFR floors in our commercial loan portfolio, with a weighted average LIBOR/SOFR floor of 0.27% as of December 31, 2022. As of December 31, 2022, 99.0% of the loans in our commercial loan portfolio are structured with LIBOR/SOFR floors, none of which currently has a floor greater than the current spot interest rate.
As of December 31, 2022, 99.0% of the loans in our commercial loan portfolio are structured with SOFR floors with a weighted average SOFR floor of 0.38%, none of which currently has a floor greater than the current spot interest rate.
Investment Portfolio Commercial Mortgage Loans As of December 31, 2022, we have determined that we are the primary beneficiary of LFT CRE 2021-FL1, Ltd. based on our obligation to absorb losses derived from ownership of our residual interests. Accordingly, the Company consolidated the assets, liabilities, income and expenses of the underlying issuing entities, collateralized loan obligations.
Investment Portfolio 35 Commercial Mortgage Loans As of December 31, 2023, we have determined that we are the primary beneficiary of the 2021-FL1 CLO and LMF 2023-1 Financing based on our obligation to absorb losses derived from ownership of our residual interests. Accordingly, the Company consolidated the assets, liabilities, income and expenses of the underlying issuing entities, collateralized loan obligations.
The performance and value of our loans and other investments depend upon the sponsor's ability to operate properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us.
Our commercial mortgage loans and other investments are also subject to credit risk. The performance and value of our loans and other investments depend upon the sponsor's ability to operate properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us.
Dollar LIBOR: the Secured Overnight Financing Rate ("SOFR"). On July 29, 2021 the RRC ratified term rates for the one-, three- and six-month tenors based on SOFR futures traded. As of December 31, 2022, 77.4% of our commercial loans by principal balance and 100% of our collateralized loan obligations bear interest related to one-month U.S. LIBOR.
Dollar LIBOR: the Secured Overnight Financing Rate ("SOFR"). On July 29, 2021 the RRC ratified term rates for the one-, three- and six-month tenors based on SOFR futures traded. As of December 31, 2023, 100.0% of our commercial loans by principal balance and 100% of our collateralized loan obligations bear interest related to 30-day term SOFR Credit risk .
We finance our commercial mortgage loans primarily with match term collateralized loan obligations, which are not subject to margin calls or additional collateralization requirements. On June 14, 2021, we closed LFT CRE 2021-FL1 issuing eight tranches of CLO notes totaling $903.8 million.
We finance our commercial mortgage loans primarily with non-recourse match term secured borrowings, which are not subject to margin calls or additional collateralization requirements. On June 14, 2021, we closed the 2021-FL1 CLO issuing eight tranches of CLO notes totaling $903.8 million.
For the three months ended December 31, 2022, we recorded earnings per share of $0.02, declared a quarterly common dividend of $0.06 per share, and reported $0.06 per share of Distributable Earnings. In addition, our book value per share was $3.50 per share.
For the three months ended December 31, 2023, we recorded earnings per share of $0.07, declared a quarterly common dividend of $0.07 per share, and reported $0.10 per share of Distributable Earnings. In addition, our book value per share was $3.46 per share.
Income Tax Expense For the year ended December 31, 2022 the Company recognized a provision for income taxes in the amount of $11,088 and for the year ended December 31, 2021, the Company recognized a provision for income taxes in the amount of $77,894.
Income Tax Expense For the year ended December 31, 2023 the Company recognized a provision for income taxes in the amount of $5,723 and for the year ended December 31, 2022, the Company recognized a provision for income taxes in the amount of $11,088.
We finance our commercial mortgage loans primarily with collateralized loan obligations, the maturities of which are matched to the maturities of the loans, and which are not subject to margin calls or additional collateralization requirements.
We finance our commercial mortgage loans primarily with non-recourse secured borrowings, the maturities of which are matched to the maturities of the loans, and which are not subject to margin calls or additional collateralization requirements.
As of December 31, 2022, 99.9% of our investments by total investment exposure earned a floating rate of interest, of which 77.4% were indexed to one-month LIBOR and 22.6% were indexed to 30-day term SOFR, and all of our collateralized loan obligations were indexed to one-month LIBOR, and as a result we are less sensitive to variability in our net interest income resulting from interest rate changes.
As of December 31, 2023, 99.9% of our investments by total investment exposure earned a floating rate of interest, of which 100.0% were indexed to 30-day term SOFR, and all of our collateralized loan obligations and secured financings were indexed to 30-day term SOFR, and as a result we are less sensitive to variability in our net interest income resulting from interest rate changes.
The change in underlying risk rating consisted of loans that paid off with a risk rating of "2" of $144.6 million, a risk rating of "3" of $103.5 million and a risk rating of "4" of $9.5 million, offset by purchases of commercial mortgage loans with a risk rating of "2" of $85.9 million, a risk rating of "3" of $231.7 million and a risk rating of "4" of $15.0 million during the year ended December 31, 2022.
The change in underlying risk rating consisted of loans that paid off with a risk rating of "2" of $41.2 million, a risk rating of "3" of $192.6 million and a risk rating of "5" of $14.1 million, offset by purchases of commercial mortgage loans with a risk rating of "2" of $7.0 million, a risk rating of "3" of $475.5 million and a risk rating of "4" of $85.9 million during the year ended December 31, 2023.
Operating Activities For the years ended December 31, 2022 and December 31, 2021, net cash provided by operating activities totaled $16.3 million and $13.8 million, respectively.
Operating Activities For the years ended December 31, 2023 and December 31, 2022, net cash provided by operating activities totaled $24.7 million and $16.3 million, respectively.
Due to the generally short-term nature of transitional floating-rate commercial mortgage loans, our CLOs include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria. The reinvestment period for LFT 2021-FL1 remains in place through December 2023.
Due to the generally short-term nature of transitional floating-rate commercial mortgage loans, our secured borrowings include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria.
For the year ended December 31, 2022, we recorded earnings per share of $0.11, declared aggregate common dividends of $0.24 per share, and reported $0.19 per share of Distributable Earnings.
For the year ended December 31, 2023, we recorded earnings per share of $0.29, declared aggregate common dividends of $0.26 per share, and reported $0.26 per share of Distributable Earnings.
For the year ended December 31, 2021, we experienced loan payoffs on 25 loans with net principal balances of $430.2 million which generated exit fees of $4.0 43 million included in interest income and 5 loans with net principal balances of $51.1 million which waived exit fees of $0.6 million resulting in a reduction to expense reimbursement of $0.3 million included in operating expenses reimbursable to Manager.
For the year ended December 31, 2023, we experienced loan payoffs on 12 loans with net principal balances of $152.6 million which generated exit fees of $1.9 million included in interest income and 7 loans with net principal balances of $112.7 million which waived exit fees 44 of $1.0 million resulting in a reduction to expense reimbursement of $0.5 million included in operating expenses reimbursable to Manager.
On December 15, 2022, we announced that our board of directors had declared a cash dividend rate for the fourth quarter of 2022 of $0.06 per share of common stock. Additionally, on March 16, 2023, we announced that our board of directors had declared a cash dividend for the first quarter of 2023 of $0.06 per share of common stock.
On December 12, 2023, we announced that our board of directors had declared a cash dividend rate for the fourth quarter of 2023 of $0.07 per share of common stock.
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 loan losses.
If a loan is considered to be collateral dependent, a specific allowance for credit losses is recorded to reduce the carrying value of the loan through a charge to the provision for (reversal of) credit losses.
Capital Allocation The following tables set forth our allocated capital by investment type at December 31, 2022 and December 31, 2021: This information constitutes non-GAAP financial measures within the meaning of Item 10(e) of Regulation S-K, as promulgated by the SEC.
Default Risk : imminent risk of default, a loss is likely in the event of default Capital Allocation The following tables set forth our allocated capital by investment type at December 31, 2023 and December 31, 2022: This information represents non-GAAP financial measures within the meaning of Item 10(e) of Regulation S-K, as promulgated by the SEC.
To maintain our qualification as a REIT, we generally must distribute annually at least 90% of our "REIT taxable income" (determined without regard to the deduction for dividends paid and excluding net capital gain). These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations.
To maintain our qualification as a REIT, we generally must distribute annually at least 90% of our "REIT taxable income" (determined without regard to the deduction for dividends paid and excluding net capital gain).
As of December 31, 2022, the ratio of our recourse debt to our equity was 0.2:1. 44 As of December 31, 2022, we consolidated the assets and liabilities of LFT 2021-FL1, Ltd.
As of December 31, 2023, the ratio of our recourse debt to equity was 0.2:1. As of December 31, 2023, we consolidated the assets and liabilities of the 2021-FL1 CLO and LMF 2023-1 collateralized financings.
LTV has not been updated for any subsequent draws or loan modifications and is not reflective of any changes in value which may have occurred subsequent to origination date. (4) 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.
LTV has not been updated for any subsequent draws or loan modifications and is not reflective of any changes in value which may have occurred subsequent to origination date. (5) As of December 31, 2023, $1,375,277,312 of the outstanding senior secured loans were held in VIEs and $8,603,886 of the outstanding senior secured loans were held outside of VIEs.
For the year ended December 31, 2021, our cash flows from operating activities were primarily driven by $23.8 million of interest received from the junior retained notes and preferred shares of Hunt CRE 2017-FL1, Ltd., Hunt CRE 2018-FL2, Ltd. and LFT 2021-FL1, Ltd., the CRE CLOs we consolidate, $0.6 million of interest received from our senior secured loans held outside the CRE CLOs we consolidate and $0.4 million of cash received from mortgage servicing rights exceeding cash interest expense paid on our Secured Term Loan of $3.1 million, management fees of $2.7 million, expense reimbursement of $1.7 million and other operating expenditures of $3.4 million.
For the year ended December 31, 2023, our cash flows from operating activities were primarily driven by interest received from the junior retained notes and preferred shares of the 2021-FL1 CLO and LMF 2023-1 Financing of $34.0 million interest received from our senior secured loans held outside the VIEs we consolidate of $1.5 million, interest received on cash accounts of $2.4 million and cash received from mortgage servicing rights of $0.2 million exceeding cash interest expense paid on our Secured Term Loan of $3.5 million, management and incentive fees of $4.3 million, expense reimbursements of $1.9 million and other operating expenditures of $3.5 million.
Net Interest Income For the years ended December 31, 2022 and December 31, 2021, our net interest income was $23,874,804 and $20,678,748, respectively.
Net Interest Income For the years ended December 31, 2023 and December 31, 2022, our net interest income was $34,392,996 and $23,874,804, respectively.
While the interest rate spreads of our collateralized loan obligations are fixed until they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions.
While the interest rate spreads of our secured borrowings are fixed until they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions, which remain uncertain and volatile in light of the current inflationary environment.
As disclosed above, we experienced a decrease of $2.5 million in exit/extension/prepayment fees for the year ended December 31, 2022. The primary driver of this change was attributed to exit fees.
As disclosed above, we experienced an increase of $0.6 million in exit and extension fees for the year ended December 31, 2023. The primary driver of this change was attributed to exit fees.
Off-Balance Sheet Arrangements As of December 31, 2022, we did not maintain any relationships with unconsolidated financial partnerships, or special purpose or variable interest entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations. 46 Off-Balance Sheet Arrangements As of December 31, 2023, we did not maintain any relationships with unconsolidated financial partnerships, or special purpose or variable interest entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
As of December 31, 2022, our aggregate unamortized purchase premium was $19,253 and our purchase discount was fully amortized, and accordingly we do not believe this to be a material risk for us at present. Additionally, we are subject to prepayment risk associated with the terms of our collateralized loan obligations.
As of December 31, 2023, our aggregate unaccreted purchase discount was $7.0 million, and accordingly we do not believe this to be a material risk to interest income for us at present. Additionally, we are subject to prepayment risk associated with the terms of our secured borrowings.
Further, as of December 31, 2022, we had not guaranteed any obligations of unconsolidated entities or entered into any commitment or intent to provide funding to any such entities. 45 In connection with the provision of seller eligibility and backstop guarantee services provided to MAXEX, we previously accounted for the related non-contingent liability at its fair value on our consolidated balance sheet as a liability.
In connection with the provision of seller eligibility and backstop guarantee services provided to MAXEX, we previously accounted for the related non-contingent liability at its fair value on our consolidated balance sheet as a liability.
For the year ended December 31, 2021 net cash provided by investing activities totaled $477.3 million. This was a result of the cash received from principal repayments of commercial mortgage loans held-for-investment exceeding the purchase and funding of commercial mortgage loans held for investment for the year ended December 31, 2021.
Investing Activities For the year ended December 31, 2023, net cash used in investing activities totaled $316.7 million. This was a result of cash used for the purchase and funding of commercial mortgage loans held for investment exceeding the principal repayment of commercial mortgage loans held for investment during the period.
Includes cash and cash equivalents. 2. Includes the carrying value of our Secured Term Loan. 3. Includes principal and interest receivable, prepaid and other assets, interest payable, dividends payable and accrued expenses and other liabilities. Results of Operations As of December 31, 2022, we consolidated the assets and liabilities of one CRE CLO, LFT CRE 202-FL1, Ltd.
Includes cash and cash equivalents. 2. Includes the carrying value of our Secured Term Loan. 3. Includes principal and interest receivable, prepaid and other assets, interest payable, dividends payable and accrued expenses and other liabilities.
The assets of the trust are restricted and can only be used to fulfill their respective obligations, and accordingly the obligations of the trust, which we classify as collateralized loan obligations, do not have any recourse to us as the consolidator of the trust. As of December 31, 2022, the carrying value of these non-recourse liabilities aggregated to $829.3 million.
The assets of the 2021-FL1 CLO and LMF 2023-1 are restricted and can only be used to fulfill their respective obligations, and accordingly the obligations of the trust, which we classify as collateralized loan obligations, do not have any recourse to us as the consolidator of the trust.
Cash Flows The following table sets forth changes in cash, cash equivalents and restricted cash for the years ended December 31, 2022 and December 31, 2021: For the years ended December 31, 2022 2021 Cash Flows From Operating Activities 16,289,054 13,846,947 Cash Flows From Investing Activities (51,831,854) (477,291,621) Cash Flows From Financing Activities 64,630,113 412,348,370 Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash $ 29,087,313 $ (51,096,304) During the year ended December 31, 2022, cash, cash equivalents and restricted cash increased by $29.1 million and for the year ended December 31, 2021, cash, cash equivalents and restricted cash decreased by $51.1 million.
Cash Flows The following table sets forth changes in cash, cash equivalents and restricted cash for the years ended December 31, 2023 and December 31, 2022: For the years ended December 31, 2023 2022 Cash Flows From Operating Activities 24,738,341 16,289,054 Cash Flows From Investing Activities (316,720,169) (51,831,854) Cash Flows From Financing Activities 296,132,655 64,630,113 Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash $ 4,150,827 $ 29,087,313 During the year ended December 31, 2023, cash, cash equivalents and restricted cash increased by $4.2 million and for the year ended December 31, 2022, cash, cash equivalents and restricted cash increased by $29.1 million.
With the exception of nine loans acquired with an initial aggregate unpaid principal balance of $117.0 million with an aggregate purchase premium of $538,146 and aggregate purchase discount of $171,186, all of our commercial mortgage loans were acquired at par.
With the exception of twenty-nine loans acquired and seventeen funded loan advances with an initial aggregate unpaid principal balance of $473.1 million with an aggregate purchase discount of $8.1 million, all of our commercial mortgage loans were acquired at par.
The initial CECL reserve recorded on January 1, 2023 will be reflected as a direct charge to retained earnings; however future changes to CECL reserve will be recognized through net income on our consolidated statements of operations.
The change to the allowance for credit loss 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 allowance for credit losses are recognized through net income on our consolidated statements of operations.
See Note 4 to our consolidated financial statements included in this Annual Report on Form 10-K for additional terms and details of our CLOs. 39 FOAC and Changes to Our Residential Mortgage Loan Business In June 2013, we established FOAC as a Taxable REIT Subsidiary, or TRS, to increase the range of our investments in mortgage-related assets.
FOAC and Changes to Our Residential Mortgage Loan Business In June 2013, we established FOAC as a Taxable REIT Subsidiary, or TRS, to increase the range of our investments in mortgage-related assets.
The principal drivers of this net income variance were an increase in total expenses from $8,440,963 for the year ended December 31, 2021 to $10,332,885 for the year ended December 31, 2022, an increase total other loss from $1,632,669 for the year ended December 31, 2021 to $3,667,171 for the year ended December 31, 2022, and an increase in preferred dividends from $3,112,500 for the year ended December 31, 2021 to $4,740,000 for the year ended December 31, 2022, which more than offset an increase in net interest income from $20,678,748 for the year ended December 31, 2021 to $23,874,804 for the year ended December 31, 2022.
The principal drivers of this net income variance were an increase in net interest income from $23,874,804 for the year ended December 31, 2022 to $34,392,996 for the year ended December 31, 2023 and a decrease in total other loss from $3,667,171 for the year ended December 31, 2022 to $2,418,903 for the year ended December 31, 2023, which more than offset an increase in total expenses from $10,332,885 for the year ended December 31, 2022 to $12,253,874 for the year ended December 31, 2023.
For the year ended December 31, 2021, net cash used in financing activities totaled $412.3 million and primarily related to proceeds from issuance of our Series A Preferred Stock of $57.3 million, proceeds from issuance of collateralized loan obligations of $833.8 million and proceeds from our Secured Term Loan of $7.5 million which more than offset by payments of common and preferred dividends of $12.1 million, repayment of collateralized loan obligations of $465.3 million and payment of debt issuance costs of $8.7 million.
Financing Activities For the year ended December 31, 2023, net cash provided by financing activities totaled $296.1 million and primarily related to proceeds from issuance of investment-grade senior secured floating rate loan of $270.4 million and issuance of $47.3 million in investment-grade rated notes, which more than offset payments of common stock dividends of $13.1 million, payments of preferred stock dividends of $4.7 million and payment of debt issuance costs of $3.8 million.
During the period ended December 31, 2022, management identified one loan, collateralized by a multifamily property, with an unpaid principal value of $12.8 million as impaired due to monetary default, however, no reserve is required after analysis of underlying collateral value. However, this loan was placed on non-accrual as a result of the impaired loan classification.
During the period ended December 31, 2023, management identified one loan, collateralized by a multifamily property in Virginia Beach, VA, with an unpaid principal balance of $36.8 million as impaired due to monetary default resulting in a risk rating of "5"; however no specific asset reserves were required after analysis of underlying collateral value.
The following table details our loan activity by unpaid principal balance: Year Ended December 31, 2022 Balance at December 31, 2021 $ 1,001,825,294 Purchases and advances 345,158,577 Proceeds from principal repayments (270,926,723) Accretion of purchase discount $ 125,098 Amortization of purchase discount $ (61,144) Accretion of deferred loan fees 27,084 Provision for loan losses (4,258,668) Balance at December 31, 2022 $ 1,071,889,518 The following table details overall statistics for our loan portfolio as of December 31, 2022 and December 31, 2021: Weighted Average Loan Type Unpaid Principal Balance Carrying Value Loan Count Floating Rate Loan % Coupon (1) Term (Years) (2) LTV (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 71.5 % Allowance for loan losses N/A $ (4,258,668) $ 1,076,865,099 $ 1,071,889,518 71 100.0 % 7.6 % 3.5 71.5 % Weighted Average Loan Type Unpaid Principal Balance Carrying Value Loan Count Floating Rate Loan % Coupon(1) Life (Years)(2) LTV (3) December 31, 2021 Loans held-for-investment Senior secured loans(4) $ 1,001,869,994 $ 1,001,825,294 66 100.0 % 3.9 % 3.7 71.2 % $ 1,001,869,994 $ — $ 1,001,825,294 66 71 100.0 % 3.9 % 3.7 71.2 % (1) Weighted average coupon assumes applicable one-month LIBOR of 4.18% and 0.10% as of December 31, 2022 and December 31, 2021, respectively and 30-day Term SOFR of 4.19% as of December 31, 2022 inclusive of weighted average interest rate floors of 0.27% and 0.49%, respectively.
The following table details our loan activity by unpaid principal balance: Year Ended December 31, 2023 Balance at December 31, 2022 $ 1,071,889,518 Purchases and advances 594,201,680 Proceeds from principal repayments (277,481,511) Accretion of purchase discount 1,070,701 Amortization of purchase discount (19,253) Accretion of deferred loan fees 292,073 Cumulative-effect adjustment upon adoption of ASU 2016-13 (3,549,501) Provision for credit losses (2,522,510) Balance at December 31, 2023 $ 1,383,881,197 The following table details overall statistics for our loan portfolio as of December 31, 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) LTV (4) December 31, 2023 Loans held-for-investment Senior secured loans (5) $ 1,397,385,160 $ 1,389,940,203 88 100.0 % 8.9 % 2.9 72.8 % Allowance for credit losses N/A $ (6,059,006) $ 1,397,385,160 $ 1,383,881,197 88 100.0 % 8.9 % 2.9 72.8 % Weighted Average Loan Type Unpaid Principal Balance Carrying Value Loan Count Floating Rate Loan % Coupon(1) Life (Years)(2) LTV (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 71.5 % Allowance for credit losses N/A $ (4,258,668) $ 1,076,865,099 $ 1,071,889,518 71 100.0 % 7.6 % 3.5 71.5 % (1) Carrying Value includes $7,000,863 in unaccreted purchase discounts as of December 31, 2023, there were no unaccreted purchase discounts as of December 31, 2022 (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 December 31, 2023 and December 31, 2022, respectively, inclusive of weighted average interest rate floors of 0.38% and 0.27%, respectively.
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. On August 23, 2021, we drew an additional $7.5 million of our Secured Term Loan pursuant to the Third Amendment.
Of the total CLO notes issued $833.8 million were investment grade notes issued to third-party investors and $70.0 million were below investment-grade notes retained by us.
We finance our current investments in transitional multifamily and other CRE loans primarily through match term non-recourse CRE collateralized loan obligations ("CLOs"). We may utilize warehouse repurchase agreements or other forms of financing in the future. Our primary sources of income are net interest from our investment portfolio and non-interest income from our mortgage loan-related activities.
We finance our current investments in transitional multifamily and other CRE loans primarily through matched term non-recourse secured borrowings, including collateralized loan obligations ("CLO"), which are not subject to margin calls or additional collateralization requirements. We may utilize warehouse repurchase agreements or other forms of financing in the future.
For the year ended December 31, 2021, we incurred management and incentive fees of $3,041,600 representing amounts payable to our Manager under our management agreement. We also incurred operating expenses of $5,399,363, of which $2,038,130 was payable to our Manager and $3,361,233 was payable to third parties.
Expenses We incurred management and incentive fees of $4,335,904 for the year ended December 31, 2023 representing amounts payable to our Manager under our management agreement. We also incurred operating expenses of $7,917,970, of which $1,897,699 was payable to our Manager and $6,020,271 was payable to third parties.
This was offset by (i) a $184.0 million increase in weighted-average principal balance of our CLO liabilities; (ii) a decrease in exit/extension/prepayment fees of $2.5 million for our loan portfolio; (iii) a decrease of 82bps in weighted-average LIBOR/SOFR floors on our CLO loan portfolio for the year-ended December 31, 2022 compared to the corresponding period in 2021; (iv) a 14bps decrease in weighted-average spread on the loan portfolio for the year ended December 31, 2022 compared to the corresponding period in 2021; (v) a 161bps increase in weighted-average LIBOR for our CLO liabilities and (vi) an increase of $0.5 million in amortized debt issuance costs.
The increase was primarily due to (i) a $151.5 million increase in weighted-average principal balance of our loan portfolio; (ii) a 328bps increase in weighted-average floating rate of our loan portfolio; (iii) a 13bps increase in weighted-average spread on the loan portfolio; (iv) an increase in exit/extension fees of $0.6 million for our loan portfolio for the year-ended December 31, 2023, compared to the corresponding period in 2022; (v) accretion of purchase discount of $1.0 million and (vi) an increase in interest earned on cash of $2.3 million for the year-ended December 31, 2023, compared to the corresponding period in 2022.

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