Credit loss reserve on unfunded loan commitments

[Table of Contents](#ifa3dff468a15495db7b57c65ada0de74_7)The following table summarizes, by year of origination, the Company’s internal ratings for loans receivable, net of unamortized discounts, fees, and reserves for loan losses, as of March 31, 2022 (in thousands):

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| Investment Type |  | Year of Origination |  | Total |
|  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 | Prior |  |
| Secured loans |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Performing loans |  | $ | —  |  |  | $ | 301,796  |  |  | $ | 79,512  |  |  | $ | 2,199  |  |  | $ | —  |  | $ | —  |  |  | $ | 383,507  |  |
| Watch list loans |  | —  |  |  | —  |  |  | —  |  |  | —  |  |  | —  |  | —  |  |  | —  |  |
| Workout loans |  | —  |  |  | —  |  |  | —  |  |  | —  |  |  | —  |  | —  |  |  | —  |  |
| Total secured loans |  | $ | —  |  |  | $ | 301,796  |  |  | $ | 79,512  |  |  | $ | 2,199  |  |  | $ | —  |  | $ | —  |  |  | $ | 383,507  |  |
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| Mezzanine and other |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Performing loans |  | $ | 12,521  |  |  | $ | 12,284  |  |  | $ | 1,441  |  |  | $ | —  |  |  | $ | —  |  | $ | —  |  |  | $ | 26,246  |  |
| Watch list loans |  | —  |  |  | —  |  |  | —  |  |  | —  |  |  | —  |  | —  |  |  | —  |  |
| Workout loans |  | —  |  |  | —  |  |  | —  |  |  | —  |  |  | —  |  | —  |  |  | —  |  |
| Total mezzanine and other |  | $ | 12,521  |  |  | $ | 12,284  |  |  | $ | 1,441  |  |  | $ | —  |  |  | $ | —  |  | $ | —  |  |  | $ | 26,246  |  |
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Reserve for Loan LossesThe Company evaluates the liquidity and creditworthiness of its borrowers on a quarterly basis to determine whether any updates to the future expected losses recognized upon inception are necessary. The Company’s evaluation considers industry and economic conditions, individual and portfolio property performance, credit enhancements, liquidity, and other factors. The determination of loan losses also considers concentration of credit risk associated with the senior housing industry to which its loans receivable relate. The Company’s borrowers furnish property, portfolio, and guarantor/operator-level financial statements, among other information, on a monthly or quarterly basis, which the Company utilizes to calculate the debt service coverages used in its assessment of internal ratings, which is a primary credit quality indicator. Debt service coverage information is evaluated together with other property, portfolio, and operator performance information, including revenue, expense, NOI, occupancy, rental rates, capital expenditures, and EBITDA (defined as earnings before interest, tax, and depreciation and amortization), along with other liquidity measures.In its assessment of current expected credit losses for loans receivable and unfunded loan commitments, the Company utilizes past payment history of its borrowers, current economic conditions, and forecasted economic conditions through the maturity date of each loan to estimate a probability of default and a resulting loss for each loan receivable. Future economic conditions are based primarily on near-term economic forecasts from the Federal Reserve and reasonable assumptions for long-term economic trends. The following table summarizes the Company’s reserve for loan losses (in thousands):

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|   | March 31, 2022 |  | December 31, 2021 |
|   | Secured Loans |  | Mezzanine and Other |  | Total |  | Secured Loans |  | Mezzanine and Other |  | Total |
| Reserve for loan losses, beginning of period | $ | 1,804  |  |  | $ | 9  |  |  | $ | 1,813  |  |  | $ | 3,152  |  |  | $ | 7,128  |  |  | $ | 10,280  |  |
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| Provision for expected loan losses | 134  |  |  | (3) |  |  | 131  |  |  | 793  |  |  | 896  |  |  | 1,689  |  |
| Expected loan losses related to loans sold or repaid(1) | —  |  |  | —  |  |  | —  |  |  | (2,141) |  |  | (8,015) |  |  | (10,156) |  |
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| Reserve for loan losses, end of period | $ | 1,938  |  |  | $ | 6  |  |  | $ | 1,944  |  |  | $ | 1,804  |  |  | $ | 9  |  |  | $ | 1,813  |  |

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)Includes six loans sold or repaid during the year ended December 31, 2021.Additionally, at each of March 31, 2022 and December 31, 2021, a liability of $0.3 million related to expected credit losses for unfunded loan commitments was included in accounts payable, accrued liabilities, and other liabilities.16
