Creative Media & Community Trust Corp 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk Our future income, cash flow and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We are exposed to market risk in the form of changes in interest rates and the potential impact such changes may have on the cash flows from our floating rate debt or the fair values of our fixed rate debt. As of June 30, 2023 and December 31, 2022 (excluding premiums, discounts, and deferred loan costs), $97.1 million (or 19.7%) and $97.1 million (or 52.1%) of our debt, respectively, was fixed rate borrowings, and $395.3 million (or 80.3%) and $89.3 million (or 47.9%), respectively, was floating rate borrowings. Based on the level of floating rate debt outstanding as of June 30, 2023 and December 31, 2022, a 50 basis point change in LIBOR and SOFR would result in an annual impact to our earnings of approximately $2.0 million and $446,000, respectively. We calculate interest rate sensitivity by multiplying the amount of floating rate debt by the respective change in rate.