Company: CMCT
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0000908311-25-000096
Chunk: 55

Company: Creative Media & Community Trust Corp
Filing Date: 2025-11-14
Form: 10-Q
Item: Item 1
Chunk 55
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 a few narrow exceptions, ASU 2016-13 requires that all financial instruments subject to the credit loss model have some 

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Table of ContentsCREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2025 (Unaudited) – (Continued)

amount of loss reserve to reflect the GAAP principal underlying the credit loss model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors.The Company adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost. As of September 30, 2025 and December 31, 2024, the Company had a total CECL of $2.6 million and $2.0 million, respectively.The Company estimates CECL for its loans primarily using its historical experience with loan write-offs, historical charge-offs from third-party firms, and the weighted average remaining maturity method, which has been identified as an acceptable method for estimating CECL reserves in the Financial Accounting Standards Board (“FASB”) Staff Q&A Topic 326, No. 1. This method requires the Company to reference historical loan loss data across a comparable data set and apply such loss rate to each loan investment over its expected remaining term, taking into consideration expected economic conditions over the relevant timeframe. The Company considers loans that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For loans that the Company determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral less costs to sell and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans with respect to which the Company determines foreclosure is not probable, the Company applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. The Company may use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral and availability of relevant historical market loan loss data. Quarterly, the Company evaluates the risk of all loans receivable and assigns a risk rating based