ACRES Commercial Realty(ACR) - 2021 Q3 - Quarterly Report

PART I ITEM 1. FINANCIAL STATEMENTS The unaudited consolidated financial statements for the period ended September 30, 2021, detail the company's financial position, performance, and cash flows Consolidated Balance Sheets Total assets and liabilities grew significantly due to increased CRE loans and borrowings, while equity rose from preferred stock issuances Balance Sheet Summary | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $2,061,750 | $1,654,084 | | Total Liabilities | $1,618,481 | $1,319,702 | | Total Stockholders' Equity | $443,269 | $334,382 | - Total assets increased by approximately $407.7 million (24.6%) from December 31, 2020, to September 30, 2021, primarily due to an increase in CRE loans[6] - Total liabilities increased by approximately $298.8 million (22.6%) over the same period, mainly from increased borrowings[6] - Stockholders' equity increased by approximately $108.9 million (32.6%) due to new preferred stock issuances[7] Consolidated Statements of Operations A net loss in Q3 2021 contrasts with prior-year income due to debt extinguishment costs, though nine-month results show a significant profit turnaround Operations Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $12,096 | $11,624 | $34,630 | $41,259 | | Total Operating Expenses | $8,089 | $324 | $5,240 | $68,881 | | Net (Loss) Income | $(4,928) | $8,159 | $21,767 | $(221,762) | | Net (Loss) Income Allocable to Common Shares | $(9,805) | $5,571 | $10,734 | $(229,525) | | Net (Loss) Income Per Common Share - Basic | $(1.03) | $0.51 | $1.09 | $(21.47) | - Net (loss) income allocable to common shares decreased significantly to $(9.8) million for the three months ended September 30, 2021, from $5.6 million in the prior year, primarily due to a $9.0 million loss on extinguishment of debt[11] - For the nine months ended September 30, 2021, net income allocable to common shares was $10.7 million, a substantial improvement from a $(229.5) million net loss in the prior year, largely driven by a net reversal of credit losses of $15.4 million[11] Consolidated Statements of Comprehensive Income (Loss) Comprehensive income for the nine-month period reflects a significant recovery from the prior year's loss, driven by reduced unrealized losses Comprehensive Income (Loss) Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income | $(4,928) | $8,159 | $21,767 | $(221,762) | | Total Other Comprehensive Income (Loss) | $466 | $573 | $1,384 | $(12,265) | | Comprehensive (Loss) Income Allocable to Common Shares | $(9,339) | $6,144 | $12,118 | $(241,790) | - Comprehensive (loss) income allocable to common shares was $(9.3) million for the three months ended September 30, 2021, compared to $6.1 million income in the prior year[13] - For the nine months ended September 30, 2021, comprehensive income allocable to common shares was $12.1 million, a significant improvement from a $(241.8) million loss in the prior year, largely due to the absence of large unrealized losses on investment securities and derivatives seen in 2020[13] Consolidated Statements of Changes in Stockholders' Equity Total equity increased significantly due to proceeds from preferred stock issuance and net income, partially offset by common stock repurchases Stockholders' Equity Summary | Metric (in thousands) | Dec 31, 2020 | Sep 30, 2021 | | :--- | :--- | :--- | | Total Stockholders' Equity | $334,382 | $443,269 | | Additional Paid-In Capital | $1,085,941 | $1,182,706 | | Distributions in Excess of Earnings | $(741,596) | $(730,862) | - Total stockholders' equity increased by $108.9 million from $334.4 million at December 31, 2020, to $443.3 million at September 30, 2021[16][18] - This increase was primarily due to $115.0 million in proceeds from the issuance of preferred stock and $13.0 million in net income, partially offset by $9.5 million in common stock repurchases[16] Consolidated Statements of Cash Flows A net increase in cash was driven by significant cash from financing activities, which more than offset cash used in investing activities Cash Flow Summary | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $25,494 | $20,289 | | Net cash (used in) provided by investing activities | $(316,421) | $154,725 | | Net cash provided by (used in) financing activities | $365,541 | $(113,567) | | Net increase in cash and cash equivalents and restricted cash | $74,614 | $61,447 | - Net cash provided by operating activities increased to $25.5 million for the nine months ended September 30, 2021, from $20.3 million in the prior year[20] - Investing activities shifted from providing $154.7 million in cash in 2020 to using $(316.4) million in 2021, mainly due to higher origination and purchase of loans[20] - Financing activities provided $365.5 million in cash in 2021, a significant turnaround from using $(113.6) million in 2020, driven by proceeds from preferred stock issuance and increased borrowings[20] Notes to Consolidated Financial Statements Detailed disclosures cover the company's organization, accounting policies, loan portfolio, borrowings, equity, and other key financial items NOTE 1 - ORGANIZATION The company operates as a REIT focused on CRE debt, undergoing a management change in 2020 and a reverse stock split in 2021 - ACRES Commercial Realty Corp. is a REIT primarily focused on originating, holding, and managing CRE mortgage loans and other CRE-related debt investments[22] - On July 31, 2020, ACRES Capital, LLC acquired the company's management contract, shifting focus to nationwide middle market CRE lending[22] - A one-for-three reverse stock split of outstanding common stock was effective February 16, 2021, with retroactive effect on financial statements[24] NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Key accounting policies include consolidation principles, use of estimates impacted by COVID-19, and recent adoption of LIBOR transition guidance - The consolidated financial statements are prepared in conformity with GAAP, including accounts of majority-owned or controlled subsidiaries and VIEs where the company is the primary beneficiary[25] - Estimates, particularly those related to investment and derivative fair values, credit losses, and useful lives, are subject to increased uncertainty due to the COVID-19 pandemic[27][28] - The company adopted guidance for LIBOR transition, replacing one-month LIBOR with Compounded SOFR plus a benchmark adjustment for certain senior notes in June 2021[40][41] - New FASB guidance on convertible debt instruments, effective after December 15, 2021, will remove certain separation models, potentially impacting the accounting for convertible debt as a single liability[42] NOTE 3 - VARIABLE INTEREST ENTITIES The company consolidates six CRE securitization VIEs for which it is the primary beneficiary, with assets and liabilities reflected on its balance sheet - The company was the primary beneficiary of six Consolidated VIEs at September 30, 2021, and December 31, 2020, which are CRE securitizations and CDOs[47] Consolidated VIE Metrics | Metric (in thousands) | Consolidated VIEs (Sep 30, 2021) | | :--- | :--- | | Total Assets | $1,231,607 | | Total Liabilities | $961,517 | - Creditors of Consolidated VIEs have no recourse to the general credit of the company, and the company did not provide financial support to any VIEs during the nine months ended September 30, 2021 or 2020[49] - The company holds a 100% interest in the common shares of unconsolidated VIEs, RCT I and RCT II, with an aggregate value of $1.5 million, and is not the primary beneficiary[53] NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION This note provides supplemental disclosures on cash interest paid and significant non-cash operating, investing, and financing activities Supplemental Cash Flow Data | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Interest expense paid in cash | $33,889 | $38,246 | | Income taxes paid in cash | $— | $— | | Distributions on preferred stock accrued but not paid | $3,260 | $6,900 | - Non-cash operating activities for the nine months ended September 30, 2021, included a receipt of right of use assets of $(479) thousand and execution of operating leases of $479 thousand[59] - Non-cash investing activities in 2020 included $369.9 million from the relinquishment of investment securities available-for-sale, with a corresponding non-cash financing activity of $(369.9) million for repayment of repurchase agreements[59] NOTE 5 - LOANS The company's loan portfolio, primarily CRE whole loans, increased significantly and is concentrated in the Southeast, Southwest, and Mountain regions Loan Portfolio Summary | Loan Type (in thousands) | Sep 30, 2021 (Carrying Value) | Dec 31, 2020 (Carrying Value) | | :--- | :--- | :--- | | CRE whole loans | $1,822,410 | $1,477,295 | | Mezzanine loan | $4,415 | $4,399 | | Preferred equity investments | $— | $25,988 | | Total CRE loans held for investment | $1,826,825 | $1,507,682 | - The total carrying value of CRE loans held for investment increased by approximately $319.1 million (21.2%) from December 31, 2020, to September 30, 2021[63] - At September 30, 2021, the CRE loan portfolio had a weighted-average one-month LIBOR floor of 1.03%, down from 1.88% at December 31, 2020[63] - The portfolio is concentrated in the Southeast (22.0%), Southwest (18.4%), and Mountain (15.7%) regions at September 30, 2021[66] NOTE 6 - FINANCING RECEIVABLES The allowance for credit losses decreased significantly due to net reversals reflecting improved macroeconomic conditions and loan performance Allowance for Credit Losses | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Allowance for credit losses at beginning of period | $34,310 | $1,460 | | (Reversal of) provision for credit losses | $(15,447) | $30,815 | | Allowance for credit losses at end of period | $18,863 | $34,310 | - A net reversal of expected credit losses of $15.4 million was recorded for the nine months ended September 30, 2021, driven by improved macroeconomic conditions, loan paydowns, and collateral performance[70] - At September 30, 2021, $39.8 million of whole loans were past due greater than 90 days, an increase from $11.4 million at December 31, 2020[85] - The company uses a 1-5 risk rating scale for CRE loans, with Rating 2 representing performance consistent with expectations and Rating 5 indicating significant underperformance or default[75][76] NOTE 7 - INVESTMENT IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES This note details investments in real estate, primarily a hotel property acquired via deed in lieu of foreclosure in November 2020 Real Estate Investment Summary | Asset Type (in thousands) | Sep 30, 2021 (Book Value) | Dec 31, 2020 (Book Value) | | :--- | :--- | :--- | | Investments in real estate | $32,799 | $33,806 | | Right of use assets | $5,529 | $5,592 | | Intangible assets | $3,041 | $3,294 | | Lease liabilities | $(3,072) | $(3,107) | - In November 2020, the company acquired a hotel property via deed in lieu of foreclosure, accounting for it as an asset acquisition with a fair value of total net assets acquired at $39.8 million[88] - Intangible assets include a franchise agreement and customer list, with expected amortization expenses of $375,000 in 2021 and 2022[93] NOTE 8 - LEASES The company holds operating leases for office space, equipment, and a ground lease, with terms expiring between 2024 and 2028 - Operating leases for office space and equipment have terms expiring between January 2024 and July 2028[94] Lease Metrics | Metric (in thousands) | Sep 30, 2021 | | :--- | :--- | | Right of use assets | $455 | | Lease liabilities | $(488) | | Weighted average remaining lease term | 6.8 years | | Weighted average discount rate | 10.65% | - Operating lease costs for the nine months ended September 30, 2021, totaled $50,000[98] NOTE 9 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE The company disposed of its CMBS portfolio due to COVID-19 market disruptions, incurring significant losses in 2020 but gains in 2021 - Substantially all CMBS available-for-sale were sold by April 2020 due to COVID-19 related liquidity shocks, resulting in $180.3 million in realized losses during the nine months ended September 30, 2020[101][102] - The remaining two CMBS securities were sold in March 2021 for $3.0 million cash proceeds, generating $878,000 in gains during the nine months ended September 30, 2021[102] NOTE 10 - INVESTMENTS IN UNCONSOLIDATED ENTITIES The company holds a 100% interest in the common shares of two unconsolidated entities, valued at $1.5 million and accounted for using the cost method - The company holds a 100% interest in RCT I and RCT II common shares, totaling $1.5 million, accounted for using the cost method[103] - Dividend income from these investments was $16,000 for the three months and $49,000 for the nine months ended September 30, 2021[103] NOTE 11 - BORROWINGS Borrowings increased significantly through new securitizations and senior notes, while existing convertible and senior notes were partially or fully redeemed Borrowings Summary | Borrowing Type (in thousands) | Sep 30, 2021 (Outstanding Borrowings) | Dec 31, 2020 (Outstanding Borrowings) | | :--- | :--- | :--- | | Total Borrowings | $1,602,602 | $1,304,727 | | Weighted Average Borrowing Rate | 2.62% | 2.83% | | Weighted Average Remaining Maturity | 9.9 years | 13.0 years | - Total outstanding borrowings increased by approximately $297.9 million (22.8%) from December 31, 2020, to September 30, 2021[107] - The company closed ACR 2021-FL1, a $802.6 million CRE debt securitization, and issued $150.0 million of 5.75% Senior Unsecured Notes in August 2021[116][121] - The 12.00% Senior Unsecured Notes were fully redeemed for $55.3 million, and $55.7 million of 4.50% Convertible Senior Notes were repurchased, resulting in a $9.0 million loss on extinguishment of debt[127][120] NOTE 12 - SHARE ISSUANCE AND REPURCHASE The company issued 4.6 million shares of Series D Preferred Stock and repurchased $14.7 million of common stock under an authorized program - Issued 4.6 million shares of 7.875% Series D Cumulative Redeemable Preferred Stock for net proceeds of $110.5 million[142] - Repurchased $14.7 million of common stock (approximately 1.1 million shares) during the nine months ended September 30, 2021, completing a $20.0 million program[144] - The Board reauthorized a new $20.0 million share repurchase program for common stock in November 2021[144][212] NOTE 13 - SHARE-BASED COMPENSATION Shareholders approved an increase in authorized shares for equity compensation plans, with $961,000 in related expense recognized for the nine-month period - Shareholders approved the Omnibus Plan and Manager Plan, increasing authorized shares for issuance to 1,700,817 shares of common stock combined[146] - Stock-based compensation expense was $771,000 for the three months and $961,000 for the nine months ended September 30, 2021[147] - At September 30, 2021, 333,329 unvested restricted common stock shares were outstanding, with $4.9 million in unrecognized compensation costs expected to be recognized over a weighted average of 3.7 years[148][149] NOTE 14 - EARNINGS PER SHARE The company reported a net loss per share for Q3 2021 and net income per share for the nine-month period Earnings Per Share Summary | Metric | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net (Loss) Income Allocable to Common Shares | $(9,805) (in thousands) | $10,734 (in thousands) | | Net (Loss) Income Per Common Share - Basic | $(1.03) | $1.09 | | Net (Loss) Income Per Common Share - Diluted | $(1.03) | $1.09 | - Weighted average common shares outstanding (basic) were 9,086,751 for the three months and 9,351,477 for the nine months ended September 30, 2021[155] - The 4.50% Convertible Senior Notes were excluded from diluted EPS calculations because the average market price of common stock did not exceed the conversion price[157] NOTE 15 - DISTRIBUTIONS The company paid preferred stock distributions but suspended common share distributions to preserve liquidity and utilize net operating loss carryforwards - The company must distribute at least 90% of its taxable income to qualify as a REIT[158] - No common share distributions were paid for the three or nine months ended September 30, 2021, or the year ended December 31, 2020, due to a focus on liquidity and net operating loss carryforwards[158][159] Preferred Stock Distributions | Preferred Stock Type | Date Paid | Total Distributions Paid (in thousands) - 2021 | Distributions Per Share - 2021 | | :--- | :--- | :--- | :--- | | Series C Preferred Stock | Nov 1 | $2,588 | $0.5390625 | | Series C Preferred Stock | Jul 30 | $2,588 | $0.5390625 | | Series C Preferred Stock | Apr 30 | $2,588 | $0.5390625 | | Series D Preferred Stock | Nov 1 | $2,264 | $0.4921875 | | Series D Preferred Stock | Jul 30 | $1,736 | $0.377344 | NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE LOSS The accumulated other comprehensive loss, comprising net unrealized loss on derivatives, decreased due to reclassification adjustments AOCI Reconciliation | Metric (in thousands) | Amount | | :--- | :--- | | Balance at January 1, 2021 | $(9,978) | | Amounts reclassified from accumulated other comprehensive loss | $1,384 | | Balance at September 30, 2021 | $(8,594) | - The accumulated other comprehensive loss decreased by $1.384 million during the nine months ended September 30, 2021, due to reclassification adjustments from unrealized losses on derivatives[165] NOTE 17 - RELATED PARTY TRANSACTIONS The company has significant related party transactions with its manager, ACRES Capital Corp., including management fees and expense reimbursements - The Manager (a subsidiary of ACRES Capital Corp.) earned base management fees of $1.7 million for the three months and $4.4 million for the nine months ended September 30, 2021[167] - The company reimbursed the Manager $899,000 for the three months and $3.5 million for the nine months ended September 30, 2021, for compensation and costs[167] - A $12.0 million loan to ACRES Capital Corp. (the 'ACRES Loan') had a principal balance of $11.7 million at September 30, 2021, accruing interest at 3.00% per annum[167][168][169] - ACRES Share Holdings, LLC, an affiliate of the Manager, was granted 299,999 shares under the Manager Incentive Plan during the nine months ended September 30, 2021[174] NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value measurements for financial instruments are provided, with most assets and liabilities valued using significant unobservable (Level 3) inputs Fair Value Summary | Asset/Liability (in thousands) | Carrying Value (Sep 30, 2021) | Fair Value (Sep 30, 2021) | Level 3 Fair Value (Sep 30, 2021) | | :--- | :--- | :--- | :--- | | CRE whole loans | $1,822,410 | $1,849,066 | $1,849,066 | | CRE mezzanine loan | $4,415 | $4,700 | $4,700 | | Loan receivable - related party | $11,675 | $10,473 | $10,473 | | Senior notes in CRE securitizations | $960,709 | $970,552 | $970,552 | | 4.50% Convertible Senior Notes | $85,810 | $87,935 | $87,935 | - The fair values of short-term financial instruments approximate their carrying values[185] - Fair values for CRE loans are estimated by discounting expected future cash flows using current interest rates for similar loans, with fixed-rate loans valued using third-party pricing sources[186][187] NOTE 19 - MARKET RISK AND DERIVATIVE INSTRUMENTS The company manages market risks using derivatives, though all interest rate swaps associated with its prior CMBS portfolio were terminated in 2020 - The company uses derivatives, primarily interest rate swaps, to mitigate interest rate risk[193] - All interest rate swap positions associated with the prior CMBS portfolio were terminated in April 2020, resulting in a realized loss of $11.8 million[195] - At September 30, 2021, the company had a $9.0 million loss recorded in accumulated other comprehensive (loss) income from terminated hedges, which will be amortized into earnings over the remaining debt life[195] Derivative Impact on Operations | Derivative Type | Consolidated Statements of Operations Location | Realized and Unrealized Gain (Loss) (in thousands) - 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Interest rate swap contracts, hedging | Interest expense | $(1,384) | NOTE 20 - OFFSETTING OF FINANCIAL LIABILITIES Warehouse financing facilities are presented on a gross basis on the balance sheet, though underlying agreements provide for a right of offset Offsetting Summary | Liability (in thousands) | Gross Amounts of Recognized Liabilities (Sep 30, 2021) | Net Amounts of Liabilities Included on the Consolidated Balance Sheets (Sep 30, 2021) | | :--- | :--- | :--- | | Warehouse financing facilities | $320,465 | $320,465 | - All balances associated with warehouse financing facilities are presented on a gross basis on the consolidated balance sheets[201] - Underlying agreements for certain warehouse financing facilities provide a right of offset in the event of default or bankruptcy[201] NOTE 21 - COMMITMENTS AND CONTINGENCIES The company faces potential litigation, has significant unfunded loan commitments, and acknowledges uncertain long-term impacts from the COVID-19 pandemic - Reserves for potential litigation related to loan repurchases or indemnifications totaled $1.4 million at September 30, 2021[203] - Unfunded commitments on originated CRE loans were $140.6 million at September 30, 2021, an increase from $67.2 million at December 31, 2020[207] - The COVID-19 pandemic's prolonged duration and impact may continue to have a long-term and material effect on the company's results of operations, financial condition, and cash flows[204] NOTE 22 - SUBSEQUENT EVENTS Subsequent events include an agreement to issue additional Series D Preferred Stock and the reauthorization of a common stock repurchase program - On October 4, 2021, the company entered into an Equity Distribution Agreement to issue and sell up to 2.2 million shares of Series D Preferred Stock[211] - On November 5, 2021, the Board authorized a $20.0 million common stock repurchase program[212] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses financial results, the impact of the ACRES acquisition, COVID-19 challenges, and the transition from LIBOR Overview The company resumed loan originations and restructured its capital following the 2020 ACRES acquisition while managing risks from the COVID-19 pandemic - The company is an externally managed REIT focused on originating, holding, and managing CRE mortgage loans and debt investments[215] - Resumed originating floating-rate CRE loans in November 2020, with 41 loans totaling $1.1 billion in commitments originated during the nine months ended September 30, 2021[219] - Issued 4.6 million shares of 7.875% Series D Preferred Stock for net proceeds of $110.5 million and $150.0 million of 5.75% Senior Unsecured Notes for net proceeds of $146.7 million[217][218] - Redeemed $50.0 million of 12.00% Senior Unsecured Notes and partially repurchased $55.7 million of 4.50% Convertible Senior Notes, incurring a $9.0 million loss on extinguishment[218] - The company has not paid common share distributions in 2020 or 2021 due to the impact of COVID-19 and resulting net operating loss carryforwards[216] Impact of COVID-19 The COVID-19 pandemic continues to create significant uncertainty for the CRE business, requiring active liquidity and credit risk management - The COVID-19 pandemic continues to cause uncertainty on the U.S. and global economies, and the CRE business in particular[232] - The company actively manages corporate liquidity and operations, using legal and structural options like forbearance and extension provisions to manage credit risk[232] - The pandemic's impact has had, and may continue to have, a long-term and material impact on the company's results of operations, financial condition, and liquidity[232] Impact of Reference Rate Reform The phase-out of LIBOR presents risks, with the company transitioning some borrowings to SOFR, which may increase financing costs - The company's CRE whole loans and asset-specific borrowings are primarily benchmarked to one-month LIBOR[233] - The U.K. Financial Conduct Authority announced the phase-out of LIBOR by the end of 2021 for one-week and two-month USD LIBOR, and by June 30, 2023, for remaining tenors[233] - In June 2021, two securitizations (XAN 2020-RSO8 and XAN 2020-RSO9) replaced one-month LIBOR with Compounded SOFR plus a benchmark adjustment[234] - The transition from LIBOR to SOFR or other alternative rates may cause financial market disruptions and increased financing costs, adversely affecting the company's business[235] Results of Operations A Q3 net loss was driven by debt extinguishment costs, while nine-month net income was boosted by credit loss reversals and new real estate income Operations Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income Allocable to Common Shares | $(9,805) | $5,571 | $10,734 | $(229,525) | | Net (Loss) Income Per Common Share - Basic | $(1.03) | $0.51 | $1.09 | $(21.47) | Net Interest Income Net interest income decreased due to lower interest from paid-off investments and CMBS dispositions, partially offset by higher interest expense Net Interest Income Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Interest Income | $23,986 | $24,638 | $74,528 | $85,171 | | Total Interest Expense | $14,534 | $13,033 | $46,960 | $43,974 | | Net Interest Income | $9,452 | $11,605 | $27,568 | $41,197 | - Aggregate interest income decreased by $652,000 for the three months and $10.6 million for the nine months ended September 30, 2021, primarily due to payoffs of preferred equity investments and disposition of the CMBS portfolio[242][244] - Aggregate interest expense increased by $1.5 million for the three months and $3.0 million for the nine months ended September 30, 2021, mainly due to new securitizations and the issuance of 5.75% Senior Unsecured Notes[244][245][246] Average Net Yield and Average Cost of Funds The average net yield on interest-earning assets decreased for the quarter but increased for the nine-month period, while the cost of funds rose Yield and Cost of Funds | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total interest income/average net yield | 5.25% | 5.43% | 5.78% | 5.67% | | Total interest expense/average cost of funds | (3.67)% | (3.32)% | (4.25)% | (3.48)% | - The average net yield on interest-earning assets decreased from 5.43% to 5.25% for the three months ended September 30, 2021, but increased from 5.67% to 5.78% for the nine months[250][252] - The average cost of funds increased from (3.32)% to (3.67)% for the three months and from (3.48)% to (4.25)% for the nine months ended September 30, 2021[250][252] Real Estate Income and Other Revenue Real estate income increased significantly due to sales revenue from a hotel property acquired in late 2020 and reopened in Q1 2021 Revenue Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Real estate income | $2,627 | $— | $7,013 | $— | | Other revenue | $17 | $19 | $49 | $62 | | Total | $2,644 | $19 | $7,062 | $62 | - Real estate income increased by $2.6 million for the three months and $7.0 million for the nine months ended September 30, 2021, attributable to sales revenue from a hotel property acquired in November 2020[255] - The hotel property reopened in Q1 2021, initially benefiting from a federal government contract and later from increased occupancy as the economy reopened[255] Operating Expenses Operating expenses rose for the quarter due to hotel operations but decreased for the nine-month period, driven by lower G&A and equity compensation Operating Expenses Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Management fees | $1,700 | $1,284 | $4,405 | $4,728 | | Equity compensation | $771 | $1,905 | $961 | $3,118 | | Real estate operating expenses | $2,401 | $— | $6,713 | $— | | General and administrative | $2,664 | $5,295 | $8,533 | $11,552 | | Provision for (reversal of) credit losses, net | $537 | $(8,172) | $(15,447) | $49,449 | | Total Operating Expenses | $8,089 | $324 | $5,240 | $68,881 | - Real estate operating expenses increased by $2.4 million for the three months and $6.7 million for the nine months ended September 30, 2021, due to the acquired hotel property[260] - Equity compensation decreased by $1.1 million for the three months and $2.2 million for the nine months, primarily due to the acceleration of unvested stock awards upon the ACRES acquisition[259] - General and administrative expenses decreased by $2.6 million for the three months and $3.0 million for the nine months, mainly due to lower professional services and rent/utilities post-ACRES acquisition[262] - A provision for credit losses of $537,000 was recorded for the three months, while a reversal of $15.4 million was recorded for the nine months ended September 30, 2021, reflecting improved macroeconomic conditions[264] Other Income (Expense) A $9.0 million loss on debt extinguishment drove other expenses for the quarter, while nine-month results improved due to the absence of prior-year investment losses Other Income (Expense) Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net realized and unrealized gain (loss) on investment securities available-for-sale and loans and derivatives | $— | $96 | $878 | $(186,243) | | Fair value and other adjustments on asset held for sale | $— | $(3,371) | $— | $(8,089) | | Loss on extinguishment of debt | $(9,006) | $— | $(9,006) | $— | | Total Other Income (Expense) | $(8,935) | $(3,141) | $(7,623) | $(194,140) | - A $9.0 million loss on extinguishment of debt was recorded for the three and nine months ended September 30, 2021, due to the redemption of 12.00% Senior Unsecured Notes and partial repurchase of 4.50% Convertible Senior Notes[268] - The nine-month period saw a $187.1 million decrease in losses from investment securities and derivatives compared to 2020, which included $180.3 million in losses from CMBS portfolio disposition[267] Financial Condition Total assets grew to $2.1 billion, driven by an expanding CRE loan portfolio, while stockholders' equity increased due to a preferred stock issuance - Total assets increased to $2.1 billion at September 30, 2021, from $1.7 billion at December 31, 2020[269] - The leverage ratio (borrowings to stockholders' equity) decreased to 3.6 times at September 30, 2021, from 3.9 times at December 31, 2020, primarily due to the Series D Preferred Stock issuance[365] - Common stock book value was $22.68 per share at September 30, 2021, an increase of $2.11 per share from December 31, 2020[230][337] Summary The company's total assets increased to $2.1 billion at September 30, 2021, from $1.7 billion at December 31, 2020 - Total assets were $2.1 billion at September 30, 2021, compared to $1.7 billion at December 31, 2020[269] Investment Portfolio The investment portfolio grew to $1.87 billion, driven by CRE whole loan originations, while preferred equity and CMBS holdings were fully divested Investment Portfolio Summary | Asset Type (in thousands) | Sep 30, 2021 (Net Carrying Amount) | Dec 31, 2020 (Net Carrying Amount) | | :--- | :--- | :--- | | CRE whole loans | $1,822,410 | $1,477,295 | | CRE mezzanine loan | $4,415 | $4,399 | | Preferred equity investments | $— | $25,988 | | Total investment portfolio | $1,866,670 | $1,555,704 | - The net carrying amount of the investment portfolio increased by approximately $311.0 million (20.0%) from December 31, 2020, to September 30, 2021[271] - During the nine months ended September 30, 2021, the company originated $1.1 billion in floating-rate CRE whole loan commitments and received $670.6 million from loan payoffs and paydowns[272] - Preferred equity investments paid off, generating $28.8 million in proceeds, and the remaining CMBS securities were sold in March 2021[276][278] Financing Receivables The allowance for credit losses decreased significantly due to net reversals, reflecting improved macroeconomic conditions and loan performance Allowance for Credit Losses | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Allowance for credit losses at beginning of period | $34,310 | $1,460 | | (Reversal of) provision for credit losses | $(15,447) | $30,815 | | Allowance for credit losses at end of period | $18,863 | $34,310 | - A net reversal of expected credit losses of $15.4 million was recorded for the nine months ended September 30, 2021, due to improved macroeconomic conditions and loan performance[281] - At September 30, 2021, $39.8 million of whole loans were past due greater than 90 days, an increase from $11.4 million at December 31, 2020[295] - No TDRs occurred during the nine months ended September 30, 2021, but 13 loans received term extensions with a weighted average of 11 months[297] Restricted Cash Restricted cash decreased by $6.0 million, primarily due to paydowns on CRE securitization senior notes and a securitization liquidation - Restricted cash decreased by $6.0 million from $38.4 million at December 31, 2020, to $32.4 million at September 30, 2021[298] - The decrease was mainly attributable to paydowns on CRE securitization senior notes and the liquidation of XAN 2019-RSO7[298] Accrued Interest Receivable Accrued interest receivable decreased due to lower coupon rates on floating-rate loans and the sale of remaining CMBS securities Accrued Interest Receivable Summary | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Accrued interest receivable from loans | $6,643 | $7,310 | | Accrued interest receivable from securities | $— | $56 | | Total | $6,678 | $7,372 | - Accrued interest receivable decreased by $694,000, primarily due to declines in coupon rates of CRE floating-rate loans and the sale of remaining CMBS[301] Other Assets Other assets decreased due to the sale of fixed-rate CRE whole loans, partially offset by increased receivables related to the acquired hotel Other Assets Summary | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Tax receivables and prepaid taxes | $2,120 | $2,244 | | Other receivables | $1,133 | $804 | | Other prepaid expenses | $2,305 | $568 | | CRE fixed-rate whole loans, held for sale | $— | $4,809 | | Total | $5,835 | $8,783 | - Other assets decreased by $2.9 million, primarily due to the sale of two fixed-rate CRE whole loans for $4.8 million[303] - This decrease was partially offset by a $329,000 increase in other receivables and a $1.7 million increase in other prepaid expenses related to the acquired hotel property[303] Core and Non-Core Asset Classes The company's strategy targets core CRE assets while exiting legacy non-core asset classes like residential real estate and commercial finance - Core asset classes include first mortgage loans (whole loans), A notes, B notes, mezzanine debt, preferred equity investments, and CRE equity investments[305] - A strategic plan approved in November 2016 focused on CRE debt investments, disposing of legacy CRE debt, and exiting non-core asset classes[305] - Non-core asset classes historically included residential real estate-related assets (mortgage loans, MBS) and commercial finance assets (secured corporate loans, ABS, CDOs, structured notes)[306][307] Derivative Instruments All interest rate swaps associated with the prior CMBS portfolio were terminated in 2020, with remaining unrealized losses being amortized - The company historically used interest rate swaps to hedge interest rate risk, classifying them as cash flow hedges[308] - All interest rate swap positions associated with the CMBS portfolio were terminated in April 2020, realizing an $11.8 million loss[309] - At September 30, 2021, a $9.0 million loss from terminated hedges was recorded in accumulated other comprehensive (loss) income, amortized into earnings over the remaining debt life[309] Senior Secured Financing Facility and Term Warehouse Financing Facilities The company utilizes senior secured and term warehouse financing facilities, with borrowings increasing significantly and a new facility added Financing Facilities Summary | Facility (in thousands) | Sep 30, 2021 (Outstanding Borrowings) | Dec 31, 2020 (Outstanding Borrowings) | | :--- | :--- | :--- | | Senior Secured Financing Facility | $37,596 | $29,314 | | CRE - Term Warehouse Financing Facilities | $320,465 | $12,258 | - Outstanding borrowings under term warehouse financing facilities increased significantly from $12.3 million at December 31, 2020, to $320.5 million at September 30, 2021[314] - The JPMorgan Chase Facility's maturity was extended to October 2024, and a new $250.0 million Morgan Stanley Facility was entered into in November 2021[318][319] - The Morgan Stanley Facility includes margin call provisions and financial covenants, with the company guaranteeing payment up to 25% of the unpaid aggregate repurchase price[320][321] Securitizations The company retains equity in six securitizations, recently closing a new $802.6 million CRE debt securitization and transitioning two others to SOFR - The company retains equity in six securitization entities, three of which are substantially liquidated[323] - XAN 2019-RSO7 was optionally redeemed in May 2021 in conjunction with the closing of ACR 2021-FL1[324] - ACR 2021-FL1, a new $802.6 million CRE debt securitization, includes a reinvestment period ending May 2023[327] - XAN 2020-RSO8 and XAN 2020-RSO9 transitioned their senior notes' benchmark rate from one-month LIBOR to Compounded SOFR plus a benchmark adjustment in June 2021[325][326] Corporate Debt The company repurchased convertible notes, issued new senior unsecured notes, and fully redeemed its 12.00% senior unsecured notes - Repurchased $55.7 million of 4.50% Convertible Senior Notes during the three months ended September 30, 2021, resulting in a $1.5 million charge to earnings[330] - Issued $150.0 million of 5.75% Senior Unsecured Notes in August 2021, which are redeemable at the company's option with a make-whole premium prior to May 15, 2026[331] - Fully redeemed the 12.00% Senior Unsecured Notes for $55.3 million in August 2021, incurring an $8.0 million charge to earnings, including a $5.0 million make-whole amount[334] Stockholders' Equity Total stockholders' equity increased to $443.3 million, driven by proceeds from the Series D Preferred Stock offering and retained earnings - Total stockholders' equity was $443.3 million at September 30, 2021, up from $334.4 million at December 31, 2020[335] - The increase was primarily attributable to $110.5 million in net proceeds from the Series D Preferred Stock offering and an increase in retained earnings, offset by common stock repurchases[335] Balance Sheet - Book Value Reconciliation Common stock book value per share increased to $22.68, primarily due to net income and changes in other comprehensive income Book Value Reconciliation | Metric | 9 Months Ended Sep 30, 2021 (Total Amount in thousands) | 9 Months Ended Sep 30, 2021 (Per Share Amount) | | :--- | :--- | :--- | | Common stock book value at beginning of period | $218,427 | $20.57 | | Net (loss) income allocable to common shares | $10,734 | $1.12 | | Change in other comprehensive income on derivatives | $1,384 | $0.15 | | Repurchase of common stock | $(14,725) | $0.77 | | Common stock book value at end of period | $216,765 | $22.68 | - Common stock book value increased by $2.11 per share, from $20.57 at December 31, 2020, to $22.68 at September 30, 2021[337] Management Agreement Equity The monthly base management fee is calculated based on the company's equity, which was $447.2 million at September 30, 2021 - The monthly base management fee is the greater of 1/12 of the company's equity multiplied by 1.50% or $442,000 through July 31, 2022[338] Management Agreement Equity Calculation | Metric (in thousands) | Amount | | :--- | :--- | | Proceeds from capital stock issuances, net | $1,330,524 | | Retained earnings, net | $(656,225) | | Payments for repurchases of capital stock, net | $(227,103) | | Total Equity (as defined in Management Agreement) | $447,196 | Core Earnings Core Earnings, a non-GAAP measure, improved significantly from the prior year, though still showing a slight loss for the nine-month period - Core Earnings is a non-GAAP financial measure used to evaluate operating performance, excluding non-cash equity compensation, unrealized gains/losses, non-cash credit loss provisions, and income/loss from non-core assets[340][341] Core Earnings Reconciliation | Metric | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net (loss) income allocable to common shares - GAAP | $(9,805) (in thousands) | $10,734 (in thousands) | | Core Earnings allocable to common shares | $(3,396) (in thousands) | $(2,546) (in thousands) | | Core Earnings per common share - diluted | $(0.36) | $(0.26) | - For the nine months ended September 30, 2021, Core Earnings allocable to common shares was $(2.5) million, a substantial improvement from $(162.3) million in the prior year[343] Incentive Compensation Hurdle Core Earnings for the quarter did not exceed the defined hurdle, resulting in no incentive compensation payable to the Manager - Incentive compensation is earned when Core Earnings per common share (as defined in the Management Agreement) exceeds a specific Incentive Compensation Hurdle[346] - For the three months ended September 30, 2021, Core Earnings did not exceed the Incentive Compensation Hurdle, so no incentive compensation was payable[345][347] - A new incentive compensation calculation methodology will be effective starting with the quarter ending December 31, 2022, based on 20% of Core Earnings exceeding 7% per annum of book value equity[347] Liquidity and Capital Resources Liquidity is supported by warehouse financing, debt issuances, and preferred stock offerings, while the company explores utilizing significant tax assets - Principal liquidity sources for the nine months ended September 30, 2021, included $591.2 million from warehouse financing, $147.0 million from 5.75% Senior Unsecured Notes, and $110.5 million from Series D Preferred Stock offering[349] - At October 31, 2021, liquidity consisted of $117.9 million in unrestricted cash, $47.9 million in unlevered financeable CRE loans, and $75.0 million in availability under the Oaktree and MassMutual 12.00% Senior Unsecured Notes[364] - The company had approximately $47.7 million of NOL carryforwards and an estimated $136.9 million of net capital losses as of December 31, 2020, and is exploring investments to utilize these tax assets[366][367] - The company uses senior secured financing facilities, term warehouse financing facilities, and securitizations for financing, and was in compliance with all covenants at September 30, 2021[351][352][353][354] Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements but has significant unfunded commitments on CRE loans totaling $140.6 million - The company does not maintain relationships with unconsolidated entities for off-balance sheet arrangements[372] - Unfunded commitments on originated CRE loans totaled $140.6 million at September 30, 2021, subject to borrowers meeting specified criteria[374] - The company provides guarantees and indemnifications in the ordinary course of business, such as an indemnification agreement for up to $536,000 on a mezzanine loan (extinguished in October 2020)[375][376] Guarantees and Indemnifications The company provides guarantees and indemnifications in the ordinary course of business, which contingently obligate it to make payments - The company provides guarantees and indemnifications that contingently obligate it to make payments based on changes in asset value or another entity's failure to perform[375] - A previous indemnification agreement for up to $4.3 million (reduced to $536,000) on a mezzanine loan was extinguished in October 2020 upon the loan's payoff[376] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exposed to credit, counterparty, financing, and interest rate risks, which are exacerbated by the COVID-19 pandemic and LIBOR transition - Primary market risks include credit risk, counterparty risk, financing risk, and interest rate risk[377] - The company manages interest rate risk by monitoring and adjusting the reset index and interest rate of borrowings, and historically used interest rate swaps[386] - The COVID-19 pandemic has significantly impacted CRE markets, causing reduced occupancy and potential borrower non-compliance, particularly affecting multifamily, hotel, and retail properties[379] Credit Risks The company's loans are subject to credit risk from collateral performance and market conditions, exacerbated by the COVID-19 pandemic - Loans and investments are subject to credit risk, dependent on sponsors' ability to operate collateral properties to generate adequate cash flows[378] - The COVID-19 pandemic has significantly impacted CRE markets, causing reduced occupancy, rent deferral requests, and construction delays, particularly affecting multifamily (66.2% of portfolio), hotel (9.9%), and retail (2.6%) properties[379] - The company mitigates credit risk through underwriting, asset management processes, and proactive engagement with borrowers, especially those with near-term maturities[378][381] Counterparty Risk Counterparty risk from financial institutions is mitigated by engaging with high credit-quality institutions for cash holdings and financing - The company is exposed to counterparty risk from financial institutions that hold its cash and provide financing[382] - This risk is mitigated by depositing cash and entering into financing agreements with high credit-quality institutions[382] Financing Risk The company relies on various financing facilities, and market volatility, exacerbated by COVID-19, could increase financing costs or reduce availability - The company finances target assets using CRE debt securitizations, a senior secured financing facility, and warehouse financing facilities[383] - Weakness or volatility in financial markets, including the impact of COVID-19, could adversely affect lenders, potentially increasing financing costs or decreasing available financing[383] Interest Rate Risk The company's floating-rate loan portfolio is sensitive to interest rate changes, with rising rates generally increasing net income - Rising interest rates generally increase net income, while declining rates decrease it, subject to interest rate floors[384] - At September 30, 2021, 98.6% of the CRE loan portfolio earned a floating rate of interest, with a weighted-average one-month LIBOR floor of 1.03%; all interest rate floors were in the money[384] Interest Rate Sensitivity Analysis | Metric (in thousands) | 100 Basis Point Decrease | 100 Basis Point Increase | | :--- | :--- | :--- | | Increase (Decrease) to Net Interest Income | $261 | $(1,130) | | Increase (Decrease) to Net Interest Income per Share | $0.03 | $(0.11) | - Two securitizations transitioned from LIBOR to compounded SOFR plus a benchmark adjustment in June 2021[385] Risk Management The company manages interest rate risk by monitoring and adjusting the reset index and interest rate of its borrowings - The company manages interest rate risk exposure by monitoring and adjusting the reset index and interest rate related to its borrowings[386] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective at the reasonable assurance level as of September 30, 2021[388] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2021[389] PART II ITEM 1. LEGAL PROCEEDINGS A subsidiary is subject to potential litigation for loan repurchases, with reserves of $1.4 million maintained at September 30, 2021 - PCM is subject to potential litigation related to claims for repurchases or indemnifications on loans sold to third parties[392] - Reserves for such litigation demands totaled $1.4 million at September 30, 2021[392] - No pending litigation matters or general litigation reserve existed at September 30, 2021, or December 31, 2020[393] ITEM 1A. RISK FACTORS The company updated risk factors to highlight the adverse effects of the LIBOR transition, which may increase financing costs - The company updated its risk factor regarding changes in LIBOR determination or its replacement, which may adversely affect the value of loans, investments, and borrowings[394] - The U.K. FCA announced the phase-out of LIBOR by the end of 2021 and June 30, 2023, with SOFR identified as a preferred alternative rate[395] - The transition from LIBOR to SOFR or other alternative rates may result in financial market disruptions and significant increases in benchmark rates, leading to increased financing costs[395] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company completed a $20.0 million common stock repurchase program in July 2021 and authorized a new one in November 2021 - The company completed its $20.0 million common stock repurchase program in July 2021, repurchasing 1,607,382 shares[144][396] - The Board authorized a new $20.0 million common stock repurchase program in November 2021[396] Share Repurchase Summary | Period | Total Number of Shares Purchased | Average Price Paid per Share (in thousands) | | :--- | :--- | :--- | | Jan 4, 2021 - Jan 29, 2021 | 283,374 | $12.30 | | Feb 1, 2021 - Feb 26, 2021 | 281,912 | $12.21 | | Mar 1, 2021 - Mar 31, 2021 | 179,379 | $14.44 | | Apr 1, 2021 - Apr 30, 2021 | 140,260 | $15.41 | | May 3, 2021 - May 12, 2021 | 47,820 | $15.51 | | Jun 2, 2021 - Jun 30, 2021 | 85,709 | $16.52 | | Jul 1, 2021 - Jul 9, 2021 | 53,443 | $16.64 | ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities during the period - No defaults upon senior securities occurred during the period[400] ITEM 5. OTHER INFORMATION A subsidiary entered into a new $250.0 million Master Repurchase Agreement to finance its core CRE lending business - In November 2021, the company's subsidiary entered into a new $250.0 million Master Repurchase and Securities Contract Agreement (Morgan Stanley Facility) to finance its core commercial real estate lending business[400] - The Morgan Stanley Facility matures in November 2022 with two one-year automatic extensions and includes margin call provisions[400][401] - The company guaranteed the subsidiary's payment and performance under the facility, subject to a 25% limit of the unpaid aggregate repurchase price, and the guaranty includes financial covenants[402] ITEM 6. EXHIBITS This section lists all exhibits filed with the report, including key corporate documents, agreements, and officer certifications - The exhibits include key corporate documents such as Amended and Restated Articles of Incorporation, Bylaws, and various Articles Supplementary for preferred stock[404][405] - Significant agreements filed include the Fourth Amended and Restated Management Agreement, Loan and Servicing Agreements, and the new Master Repurchase and Securities Contract Agreement with Morgan Stanley[405][407][408] - Certifications from the Chief Executive Officer and Chief Financial Officer (Rule 13a-14(a)/Rule 15d-14(a) and 18 U.S.C. Section 1350) are included[408] SIGNATURES The report is certified by the registrant's authorized officers as of November 8, 2021 - The report is signed by Mark Fogel (President & Chief Executive Officer), David J. Bryant (Senior Vice President, Chief Financial Officer and Treasurer), and Eldron C. Blackwell (Vice President)[416] - All signatures are dated November 8, 2021[416]