QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
Title of Each Class: | Trading Symbol(s) | Name of Exchange on Which Registered: | ||||||||||||
☒ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
Page | ||||||||
PART I - FINANCIAL INFORMATION | ||||||||
Item 1. | Financial Statements (unaudited) | |||||||
PART II - OTHER INFORMATION | ||||||||
September 30, 2023 | December 31, 2022 | ||||||||||
ASSETS | (unaudited) | ||||||||||
Available-for-sale securities, at fair value (amortized cost $ | $ | $ | |||||||||
Mortgage servicing rights, at fair value | |||||||||||
Cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Accrued interest receivable | |||||||||||
Due from counterparties | |||||||||||
Derivative assets, at fair value | |||||||||||
Reverse repurchase agreements | |||||||||||
Other assets | |||||||||||
Total Assets (1) | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Liabilities: | |||||||||||
Repurchase agreements | $ | $ | |||||||||
Revolving credit facilities | |||||||||||
Term notes payable | |||||||||||
Convertible senior notes | |||||||||||
Derivative liabilities, at fair value | |||||||||||
Due to counterparties | |||||||||||
Dividends payable | |||||||||||
Accrued interest payable | |||||||||||
Commitments and contingencies (see Note 16) | |||||||||||
Other liabilities | |||||||||||
Total Liabilities (1) | |||||||||||
Stockholders’ Equity: | |||||||||||
Preferred stock, par value $ | |||||||||||
Common stock, par value $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Cumulative earnings | |||||||||||
Cumulative distributions to stockholders | ( | ( | |||||||||
Total Stockholders’ Equity | |||||||||||
Total Liabilities and Stockholders’ Equity | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Interest income: | |||||||||||||||||||||||
Available-for-sale securities | $ | $ | $ | $ | |||||||||||||||||||
Other | |||||||||||||||||||||||
Total interest income | |||||||||||||||||||||||
Interest expense: | |||||||||||||||||||||||
Repurchase agreements | |||||||||||||||||||||||
Revolving credit facilities | |||||||||||||||||||||||
Term notes payable | |||||||||||||||||||||||
Convertible senior notes | |||||||||||||||||||||||
Total interest expense | |||||||||||||||||||||||
Net interest (expense) income | ( | ( | |||||||||||||||||||||
Other income: | |||||||||||||||||||||||
(Loss) gain on investment securities | ( | ( | ( | ||||||||||||||||||||
Servicing income | |||||||||||||||||||||||
Gain (loss) on servicing asset | ( | ||||||||||||||||||||||
Gain on interest rate swap and swaption agreements | |||||||||||||||||||||||
Gain (loss) on other derivative instruments | ( | ( | |||||||||||||||||||||
Other income (loss) | ( | ||||||||||||||||||||||
Total other income | |||||||||||||||||||||||
Expenses: | |||||||||||||||||||||||
Servicing expenses | |||||||||||||||||||||||
Compensation and benefits | |||||||||||||||||||||||
Other operating expenses | |||||||||||||||||||||||
Total expenses | |||||||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
Provision for income taxes | |||||||||||||||||||||||
Net income | |||||||||||||||||||||||
Dividends on preferred stock | ( | ( | ( | ( | |||||||||||||||||||
Gain on repurchase and retirement of preferred stock | |||||||||||||||||||||||
Net income attributable to common stockholders | $ | $ | $ | $ | |||||||||||||||||||
Basic earnings per weighted average common share | $ | $ | $ | $ | |||||||||||||||||||
Diluted earnings per weighted average common share | $ | $ | $ | $ | |||||||||||||||||||
Dividends declared per common share | $ | $ | $ | $ | |||||||||||||||||||
Weighted average number of shares of common stock: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Comprehensive loss: | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Other comprehensive loss: | |||||||||||||||||||||||
Unrealized loss on available-for-sale securities | ( | ( | ( | ( | |||||||||||||||||||
Other comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||
Comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||
Dividends on preferred stock | ( | ( | ( | ( | |||||||||||||||||||
Gain on repurchase and retirement of preferred stock | |||||||||||||||||||||||
Comprehensive loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( |
Preferred Stock | Common Stock Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Earnings | Cumulative Distributions to Stockholders | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss before reclassifications | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Non-cash equity award compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Other comprehensive loss before reclassifications | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Non-cash equity award compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss before reclassifications | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Non-cash equity award compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ |
Preferred Stock | Common Stock Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Earnings | Cumulative Distributions to Stockholders | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Other comprehensive income before reclassifications | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Non-cash equity award compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss before reclassifications | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Repurchase and retirement of preferred stock | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Repurchase of common stock | — | ( | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Non-cash equity award compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2023 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss before reclassifications | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Non-cash equity award compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2023 | $ | $ | $ | $ | ( | $ | $ | ( | $ |
Nine Months Ended | |||||||||||
September 30, | |||||||||||
2023 | 2022 | ||||||||||
Cash Flows From Operating Activities: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Amortization of premiums and discounts on investment securities, net | |||||||||||
Amortization of deferred debt issuance costs on term notes payable and convertible senior notes | |||||||||||
(Reversal of) provision for credit losses on investment securities | ( | ||||||||||
Realized and unrealized (gains) losses on investment securities | ( | ||||||||||
Gain on servicing asset | ( | ( | |||||||||
Realized and unrealized gain on interest rate swaps and swaptions | ( | ( | |||||||||
Unrealized gains on other derivative instruments | ( | ( | |||||||||
Gain on repurchase of outstanding borrowings | ( | ||||||||||
Equity based compensation | |||||||||||
Net change in assets and liabilities: | |||||||||||
Increase in accrued interest receivable | ( | ( | |||||||||
Decrease in deferred income taxes, net | |||||||||||
(Decrease) increase in accrued interest payable | ( | ||||||||||
Change in other operating assets and liabilities, net | |||||||||||
Net cash provided by operating activities | |||||||||||
Cash Flows From Investing Activities: | |||||||||||
Purchases of available-for-sale securities | ( | ( | |||||||||
Proceeds from sales of available-for-sale securities | |||||||||||
Principal payments on available-for-sale securities | |||||||||||
Purchases of mortgage servicing rights, net of purchase price adjustments | ( | ( | |||||||||
Proceeds from sales of mortgage servicing rights | |||||||||||
(Purchases) short sales of derivative instruments, net | ( | ( | |||||||||
Proceeds from sales and settlement (payments for termination and settlement) of derivative instruments, net | |||||||||||
Payments for reverse repurchase agreements | ( | ( | |||||||||
Proceeds from reverse repurchase agreements | |||||||||||
Acquisition of RoundPoint Mortgage Servicing LLC, net of cash acquired | |||||||||||
(Decrease) increase in due to counterparties, net | ( | ||||||||||
Net cash used in investing activities | $ | ( | $ | ( | |||||||
Nine Months Ended | |||||||||||
September 30, | |||||||||||
2023 | 2022 | ||||||||||
Cash Flows From Financing Activities: | |||||||||||
Proceeds from repurchase agreements | $ | $ | |||||||||
Principal payments on repurchase agreements | ( | ( | |||||||||
Proceeds from revolving credit facilities | |||||||||||
Principal payments on revolving credit facilities | ( | ( | |||||||||
Repurchase of term notes payable | ( | ||||||||||
Repurchase/repayment of convertible senior notes | ( | ( | |||||||||
Repurchase and retirement of preferred stock | ( | ||||||||||
Proceeds from issuance of common stock, net of offering costs | |||||||||||
Repurchase of common stock | ( | ||||||||||
Dividends paid on preferred stock | ( | ( | |||||||||
Dividends paid on common stock | ( | ( | |||||||||
Net cash provided by financing activities | |||||||||||
Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
Supplemental Disclosure of Cash Flow Information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid (received) for taxes, net | $ | $ | ( | ||||||||
Noncash Activities: | |||||||||||
Dividends declared but not paid at end of period | $ | $ |
September 30, 2023 | |||||||||||||||||
(in thousands) | Acquisition Date Amounts Recognized | Subsequent Measurement Period Adjustments | Acquisition Date Amounts Recognized, as adjusted | ||||||||||||||
Total Consideration | $ | $ | $ | ||||||||||||||
Assets | |||||||||||||||||
Cash and cash equivalents | $ | $ | $ | ||||||||||||||
Intangible assets | |||||||||||||||||
Other assets | |||||||||||||||||
Total Assets Acquired | $ | $ | $ | ||||||||||||||
Liabilities | |||||||||||||||||
Accrued expenses | $ | $ | $ | ||||||||||||||
Other liabilities | |||||||||||||||||
Total Liabilities Assumed | $ | $ | $ | ||||||||||||||
Net Assets | $ | $ | $ | ||||||||||||||
Goodwill | $ | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Revenue (1) | $ | $ | $ | $ | |||||||||||||||||||
Income before income taxes | $ | $ | $ | $ |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Note receivable (1) | $ | $ | |||||||||
Restricted cash | |||||||||||
Accrued interest receivable (1) | |||||||||||
Other assets | |||||||||||
Total Assets | $ | $ | |||||||||
Term notes payable | $ | $ | |||||||||
Revolving credit facilities | |||||||||||
Accrued interest payable | |||||||||||
Other liabilities | |||||||||||
Total Liabilities | $ | $ |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Agency: | |||||||||||
Federal National Mortgage Association | $ | $ | |||||||||
Federal Home Loan Mortgage Corporation | |||||||||||
Government National Mortgage Association | |||||||||||
Non-Agency | |||||||||||
Total available-for-sale securities | $ | $ |
September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Principal/ Current Face | Un-amortized Premium | Accretable Purchase Discount | Amortized Cost | Allowance for Credit Losses | Unrealized Gain | Unrealized Loss | Carrying Value | |||||||||||||||||||||||||||||||||||||||
Agency: | |||||||||||||||||||||||||||||||||||||||||||||||
Principal and interest | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
Interest-only | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Total Agency | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Non-Agency | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ |
December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Principal/ Current Face | Un-amortized Premium | Accretable Purchase Discount | Amortized Cost | Allowance for Credit Losses | Unrealized Gain | Unrealized Loss | Carrying Value | |||||||||||||||||||||||||||||||||||||||
Agency: | |||||||||||||||||||||||||||||||||||||||||||||||
Principal and interest | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
Interest-only | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Total Agency | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Non-Agency | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ |
September 30, 2023 | |||||||||||||||||
(in thousands) | Agency | Non-Agency | Total | ||||||||||||||
< 1 year | $ | $ | $ | ||||||||||||||
≥ 1 and < 3 years | |||||||||||||||||
≥ 3 and < 5 years | |||||||||||||||||
≥ 5 and < 10 years | |||||||||||||||||
≥ 10 years | |||||||||||||||||
Total | $ | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||
September 30, 2023 | September 30, 2023 | ||||||||||||||||||||||||||||||||||
(in thousands) | Agency | Non-Agency | Total | Agency | Non-Agency | Total | |||||||||||||||||||||||||||||
Allowance for credit losses at beginning of period | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
Additions on securities for which credit losses were not previously recorded | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
(Increase) decrease on securities with previously recorded credit losses | ( | ||||||||||||||||||||||||||||||||||
Write-offs | |||||||||||||||||||||||||||||||||||
Allowance for credit losses at end of period | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||
September 30, 2022 | September 30, 2022 | ||||||||||||||||||||||||||||||||||
(in thousands) | Agency | Non-Agency | Total | Agency | Non-Agency | Total | |||||||||||||||||||||||||||||
Allowance for credit losses at beginning of period | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
Additions on securities for which credit losses were not previously recorded | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
(Increase) decrease on securities with previously recorded credit losses | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Write-offs | |||||||||||||||||||||||||||||||||||
Allowance for credit losses at end of period | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( |
September 30, 2023 | |||||||||||||||||||||||||||||||||||
Unrealized Loss Position for | |||||||||||||||||||||||||||||||||||
Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||
(in thousands) | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||
Agency | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||
Non-Agency | ( | ( | |||||||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | $ | $ | ( |
December 31, 2022 | |||||||||||||||||||||||||||||||||||
Unrealized Loss Position for | |||||||||||||||||||||||||||||||||||
Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||
(in thousands) | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||
Agency | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||
Non-Agency | ( | ( | |||||||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | $ | $ | ( |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Proceeds from sales of available-for-sale securities | $ | $ | $ | $ | |||||||||||||||||||
Amortized cost of available-for-sale securities sold | ( | ( | ( | ( | |||||||||||||||||||
Total realized gains (losses) on sales, net | $ | $ | $ | ( | $ | ( | |||||||||||||||||
Gross realized gains | $ | $ | $ | $ | |||||||||||||||||||
Gross realized losses | ( | ( | ( | ( | |||||||||||||||||||
Total realized gains (losses) on sales, net | $ | $ | $ | ( | $ | ( |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
Purchases of mortgage servicing rights | |||||||||||||||||||||||
Sales of mortgage servicing rights (1) | ( | ( | ( | ( | |||||||||||||||||||
Changes in fair value due to: | |||||||||||||||||||||||
Changes in valuation inputs or assumptions used in the valuation model (2) | |||||||||||||||||||||||
( | ( | ( | ( | ||||||||||||||||||||
Other changes (4) | ( | ( | ( | ||||||||||||||||||||
Balance at end of period (5) | $ | $ | $ | $ |
(dollars in thousands, except per loan data) | September 30, 2023 | December 31, 2022 | |||||||||
Weighted average prepayment speed: | % | % | |||||||||
Impact on fair value of 10% adverse change | $ | ( | $ | ( | |||||||
Impact on fair value of 20% adverse change | $ | ( | $ | ( | |||||||
Weighted average delinquency: | % | % | |||||||||
Impact on fair value of 10% adverse change | $ | ( | $ | ( | |||||||
Impact on fair value of 20% adverse change | $ | ( | $ | ( | |||||||
Weighted average option-adjusted spread: | % | % | |||||||||
Impact on fair value of 10% adverse change | $ | ( | $ | ( | |||||||
Impact on fair value of 20% adverse change | $ | ( | $ | ( | |||||||
Weighted average per loan annual cost to service: | $ | $ | |||||||||
Impact on fair value of 10% adverse change | $ | ( | $ | ( | |||||||
Impact on fair value of 20% adverse change | $ | ( | $ | ( |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Servicing fee income | $ | $ | $ | $ | |||||||||||||||||||
Ancillary and other fee income | |||||||||||||||||||||||
Float income | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
(dollars in thousands) | Number of Loans | Unpaid Principal Balance | Number of Loans | Unpaid Principal Balance | |||||||||||||||||||
Mortgage servicing rights | $ | $ | |||||||||||||||||||||
Residential mortgage loans | |||||||||||||||||||||||
Other assets | |||||||||||||||||||||||
Total serviced mortgage assets | $ | $ |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Restricted cash balances held by trading counterparties: | |||||||||||
For securities trading activity | $ | $ | |||||||||
For derivatives trading activity | |||||||||||
For servicing activities | |||||||||||
As restricted collateral for borrowings | |||||||||||
Total restricted cash balances held by trading counterparties | |||||||||||
Restricted cash balance pursuant to letter of credit on office lease | |||||||||||
Total | $ | $ |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Total cash, cash equivalents and restricted cash | $ | $ |
September 30, 2023 | ||||||||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||
(in thousands) | Fair Value | Notional | Fair Value | Notional | ||||||||||||||||||||||
Inverse interest-only securities | $ | $ | $ | $ | ||||||||||||||||||||||
Interest rate swap agreements | ||||||||||||||||||||||||||
Swaptions, net | ( | |||||||||||||||||||||||||
TBAs | ( | |||||||||||||||||||||||||
Futures, net | ( | |||||||||||||||||||||||||
Total | $ | $ | $ | ( | $ |
December 31, 2022 | ||||||||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||
(in thousands) | Fair Value | Notional | Fair Value | Notional | ||||||||||||||||||||||
Inverse interest-only securities | $ | $ | $ | $ | ||||||||||||||||||||||
Interest rate swap agreements | ||||||||||||||||||||||||||
Swaptions, net | ||||||||||||||||||||||||||
TBAs | ( | ( | ||||||||||||||||||||||||
Futures, net | ( | |||||||||||||||||||||||||
Total | $ | $ | ( | $ | ( | $ |
Derivative Instruments | Location of Gain (Loss) Recognized in Income | Amount of Gain (Loss) Recognized in Income | ||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
(in thousands) | September 30, | September 30, | ||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
Interest rate risk management: | ||||||||||||||||||||||||||||||||
TBAs | Gain (loss) on other derivative instruments | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
Futures | Gain (loss) on other derivative instruments | |||||||||||||||||||||||||||||||
Options on futures | Gain (loss) on other derivative instruments | ( | ( | ( | ||||||||||||||||||||||||||||
Interest rate swaps - Payers | Gain on interest rate swap and swaption agreements | |||||||||||||||||||||||||||||||
Interest rate swaps - Receivers | Gain on interest rate swap and swaption agreements | ( | ( | ( | ( | |||||||||||||||||||||||||||
Swaptions | Gain on interest rate swap and swaption agreements | ( | ( | |||||||||||||||||||||||||||||
Non-risk management: | ||||||||||||||||||||||||||||||||
Inverse interest-only securities | Gain (loss) on other derivative instruments | ( | ( | ( | ( | |||||||||||||||||||||||||||
Total | $ | $ | $ | $ | ( |
Three Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||
(in thousands) | Beginning of Period Notional Amount | Additions | Settlement, Termination, Expiration or Exercise | End of Period Notional Amount | Average Notional Amount | Realized Gain (Loss), net (1) | |||||||||||||||||||||||||||||
Inverse interest-only securities | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
Interest rate swap agreements | ( | ( | |||||||||||||||||||||||||||||||||
Swaptions, net | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
TBAs, net | ( | ( | |||||||||||||||||||||||||||||||||
Futures, net | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Options on futures, net | ( | ||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | ( | $ | $ | $ |
Three Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||
(in thousands) | Beginning of Period Notional Amount | Additions | Settlement, Termination, Expiration or Exercise | End of Period Notional Amount | Average Notional Amount | Realized Gain (Loss), net (1) | |||||||||||||||||||||||||||||
Inverse interest-only securities | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
Interest rate swap agreements | ( | ( | |||||||||||||||||||||||||||||||||
Swaptions, net | ( | ( | ( | ||||||||||||||||||||||||||||||||
TBAs, net | ( | ( | |||||||||||||||||||||||||||||||||
Futures, net | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Options on futures, net | |||||||||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ |
Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||
(in thousands) | Beginning of Period Notional Amount | Additions | Settlement, Termination, Expiration or Exercise | End of Period Notional Amount | Average Notional Amount | Realized Gain (Loss), net (1) | |||||||||||||||||||||||||||||
Inverse interest-only securities | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
Interest rate swap agreements | ( | ( | |||||||||||||||||||||||||||||||||
Swaptions, net | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
TBAs, net | ( | ( | |||||||||||||||||||||||||||||||||
Futures, net | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Options on futures, net | ( | ||||||||||||||||||||||||||||||||||
Total | $ | ( | $ | $ | ( | $ | $ | $ | ( |
Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||
(in thousands) | Beginning of Period Notional Amount | Additions | Settlement, Termination, Expiration or Exercise | End of Period Notional Amount | Average Notional Amount | Realized Gain (Loss), net (1) | |||||||||||||||||||||||||||||
Inverse interest-only securities | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
Interest rate swap agreements | ( | ||||||||||||||||||||||||||||||||||
Swaptions, net | ( | ( | ( | ||||||||||||||||||||||||||||||||
TBAs, net | ( | ( | |||||||||||||||||||||||||||||||||
Futures, net | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Options on futures, net | ( | ( | |||||||||||||||||||||||||||||||||
Total | $ | $ | $ | ( | $ | ( | $ | $ | ( |
September 30, 2023 | |||||||||||||||||||||||||||||
Net Carrying Value (4) | |||||||||||||||||||||||||||||
(in thousands) | Notional Amount (1) | Cost Basis (2) | Market Value (3) | Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||||
Purchase contracts | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||
Sale contracts | ( | ( | ( | ||||||||||||||||||||||||||
TBAs, net | $ | $ | $ | $ | $ | ( |
December 31, 2022 | |||||||||||||||||||||||||||||
Net Carrying Value (4) | |||||||||||||||||||||||||||||
(in thousands) | Notional Amount (1) | Cost Basis (2) | Market Value (3) | Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||||
Purchase contracts | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||
Sale contracts | ( | ( | ( | ||||||||||||||||||||||||||
TBAs, net | $ | $ | $ | $ | $ | ( |
(dollars in thousands) | September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||
Type & Maturity | Notional Amount | Carrying Value | Weighted Average Days to Expiration | Notional Amount | Carrying Value | Weighted Average Days to Expiration | ||||||||||||||||||||||||||||||||
U.S. Treasury futures - 2 year | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
U.S. Treasury futures - 5 year | ( | ( | ||||||||||||||||||||||||||||||||||||
U.S. Treasury futures - 10 year | ( | ( | ||||||||||||||||||||||||||||||||||||
U.S. Treasury futures - 20 year | ( | |||||||||||||||||||||||||||||||||||||
Federal Funds futures | ( | |||||||||||||||||||||||||||||||||||||
SOFR/Eurodollar futures (1) | ||||||||||||||||||||||||||||||||||||||
≤ 1 year | ( | ( | ||||||||||||||||||||||||||||||||||||
> 1 and ≤ 2 years | ( | ( | ||||||||||||||||||||||||||||||||||||
> 2 and ≤ 3 years | ||||||||||||||||||||||||||||||||||||||
Total futures | $ | ( | $ | $ | ( | $ |
(notional in thousands) | ||||||||||||||||||||||||||
September 30, 2023 | ||||||||||||||||||||||||||
Swaps Maturities | Notional Amount (1) | Weighted Average Fixed Pay Rate (2) | Weighted Average Receive Rate | Weighted Average Maturity (Years) | ||||||||||||||||||||||
2023 | $ | % | % | |||||||||||||||||||||||
2024 | % | % | ||||||||||||||||||||||||
2025 | % | % | ||||||||||||||||||||||||
2026 | % | % | ||||||||||||||||||||||||
2027 and Thereafter | % | % | ||||||||||||||||||||||||
Total | $ | % | % |
(notional in thousands) | ||||||||||||||||||||||||||
September 30, 2023 | ||||||||||||||||||||||||||
Swaps Maturities | Notional Amount (1) | Weighted Average Pay Rate (2) | Weighted Average Fixed Receive Rate (2) | Weighted Average Maturity (Years) (2) | ||||||||||||||||||||||
2023 | $ | % | % | |||||||||||||||||||||||
2024 | % | % | ||||||||||||||||||||||||
2025 | % | % | ||||||||||||||||||||||||
2026 | % | % | ||||||||||||||||||||||||
2027 and Thereafter | % | % | ||||||||||||||||||||||||
Total | $ | % | % |
September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
(notional and dollars in thousands) | Option | Underlying Swap | ||||||||||||||||||||||||||||||||||||||||||
Swaption | Expiration | Cost Basis | Fair Value | Average Months to Expiration | Notional Amount | Average Fixed Rate (1) | Average Term (Years) | |||||||||||||||||||||||||||||||||||||
Purchase contracts: | ||||||||||||||||||||||||||||||||||||||||||||
Payer | < 6 Months | $ | $ | 5.40 | $ | % | ||||||||||||||||||||||||||||||||||||||
Sale contracts: | ||||||||||||||||||||||||||||||||||||||||||||
Payer | < 6 Months | $ | ( | $ | ( | 5.40 | $ | ( | % | |||||||||||||||||||||||||||||||||||
September 30, 2023 | |||||||||||||||||||||||||||||||||||
Gross Amounts Not Offset with Financial Assets (Liabilities) in the Balance Sheets (1) | |||||||||||||||||||||||||||||||||||
(in thousands) | Gross Amounts of Recognized Assets (Liabilities) | Gross Amounts Offset in the Balance Sheets | Net Amounts of Assets (Liabilities) Presented in the Balance Sheets | Financial Instruments | Cash Collateral (Received) Pledged | Net Amount | |||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||
Derivative assets | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||
Reverse repurchase agreements | ( | ||||||||||||||||||||||||||||||||||
Total Assets | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||
Repurchase agreements | $ | ( | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||
Derivative liabilities | ( | ( | ( | ||||||||||||||||||||||||||||||||
Total Liabilities | $ | ( | $ | $ | ( | $ | $ | $ | ( |
December 31, 2022 | |||||||||||||||||||||||||||||||||||
Gross Amounts Not Offset with Financial Assets (Liabilities) in the Balance Sheets (1) | |||||||||||||||||||||||||||||||||||
(in thousands) | Gross Amounts of Recognized Assets (Liabilities) | Gross Amounts Offset in the Balance Sheets | Net Amounts of Assets (Liabilities) Presented in the Balance Sheets | Financial Instruments | Cash Collateral (Received) Pledged | Net Amount | |||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||
Derivative assets | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||
Reverse repurchase agreements | ( | ( | |||||||||||||||||||||||||||||||||
Total Assets | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||
Repurchase agreements | $ | ( | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||
Derivative liabilities | ( | ( | ( | ||||||||||||||||||||||||||||||||
Total Liabilities | $ | ( | $ | $ | ( | $ | $ | $ | ( |
Recurring Fair Value Measurements | |||||||||||||||||||||||
September 30, 2023 | |||||||||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
Assets: | |||||||||||||||||||||||
Available-for-sale securities | $ | $ | $ | $ | |||||||||||||||||||
Mortgage servicing rights | |||||||||||||||||||||||
Derivative assets | |||||||||||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Derivative liabilities | $ | $ | $ | $ | |||||||||||||||||||
Total liabilities | $ | $ | $ | $ |
Recurring Fair Value Measurements | |||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
Assets: | |||||||||||||||||||||||
Available-for-sale securities | $ | $ | $ | $ | |||||||||||||||||||
Mortgage servicing rights | |||||||||||||||||||||||
Derivative assets | |||||||||||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Derivative liabilities | $ | $ | $ | $ | |||||||||||||||||||
Total liabilities | $ | $ | $ | $ |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, 2023 | September 30, 2023 | |||||||||||||||||||||||||
(in thousands) | Available-For-Sale Securities | Mortgage Servicing Rights | Available-For-Sale Securities | Mortgage Servicing Rights | ||||||||||||||||||||||
Beginning of period level 3 fair value | $ | $ | $ | $ | ||||||||||||||||||||||
Gains (losses) included in net income: | ||||||||||||||||||||||||||
Realized | ( | ( | ( | ( | ||||||||||||||||||||||
Unrealized | ( | (1) | (2) | (1) | (2) | |||||||||||||||||||||
Reversal of provision for credit losses | ( | ( | ||||||||||||||||||||||||
Net gains (losses) included in net income | ( | |||||||||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||||
Purchases | ||||||||||||||||||||||||||
Sales | ( | ( | ( | ( | ||||||||||||||||||||||
Settlements | ( | ( | ||||||||||||||||||||||||
Gross transfers into level 3 | ||||||||||||||||||||||||||
Gross transfers out of level 3 | ||||||||||||||||||||||||||
End of period level 3 fair value | $ | $ | $ | $ | ||||||||||||||||||||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | $ | (3) | $ | (4) | $ | (3) | $ | (4) | ||||||||||||||||||
Change in unrealized gains or losses for the period included in other comprehensive loss for assets held at the end of the reporting period | $ | $ | $ | $ |
September 30, 2023 | ||||||||||||||||||||||||||
Valuation Technique | Unobservable Input | Range | Weighted Average (1) | |||||||||||||||||||||||
Discounted cash flow | Constant prepayment speed | - | ||||||||||||||||||||||||
Option-adjusted spread | - | |||||||||||||||||||||||||
Per loan annual cost to service | $ | - | $ | $ |
December 31, 2022 | ||||||||||||||||||||||||||
Valuation Technique | Unobservable Input | Range | Weighted Average (1) | |||||||||||||||||||||||
Discounted cash flow | Constant prepayment speed | - | ||||||||||||||||||||||||
Option-adjusted spread | - | |||||||||||||||||||||||||
Per loan annual cost to service | $ | - | $ | $ |
September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
(in thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||
Assets: | |||||||||||||||||||||||
Available-for-sale securities | $ | $ | $ | $ | |||||||||||||||||||
Mortgage servicing rights | $ | $ | $ | $ | |||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
Restricted cash | $ | $ | $ | $ | |||||||||||||||||||
Derivative assets | $ | $ | $ | $ | |||||||||||||||||||
Reverse repurchase agreements | $ | $ | $ | $ | |||||||||||||||||||
Other assets | $ | $ | $ | $ | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Repurchase agreements | $ | $ | $ | $ | |||||||||||||||||||
Revolving credit facilities | $ | $ | $ | $ | |||||||||||||||||||
Term notes payable | $ | $ | $ | $ | |||||||||||||||||||
Convertible senior notes | $ | $ | $ | $ | |||||||||||||||||||
Derivative liabilities | $ | $ | $ | $ |
September 30, 2023 | |||||||||||||||||||||||||||||||||||
Collateral Type | |||||||||||||||||||||||||||||||||||
(in thousands) | Agency RMBS | Non-Agency Securities | Agency Derivatives | Mortgage Servicing Rights | U.S. Treasuries (1) | Total Amount Outstanding | |||||||||||||||||||||||||||||
Within 30 days | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
30 to 59 days | |||||||||||||||||||||||||||||||||||
60 to 89 days | |||||||||||||||||||||||||||||||||||
90 to 119 days | |||||||||||||||||||||||||||||||||||
120 to 364 days | |||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Weighted average borrowing rate | % | % | % | % | % | % |
December 31, 2022 | |||||||||||||||||||||||||||||||||||
Collateral Type | |||||||||||||||||||||||||||||||||||
(in thousands) | Agency RMBS | Non-Agency Securities | Agency Derivatives | Mortgage Servicing Rights | U.S. Treasuries (1) | Total Amount Outstanding | |||||||||||||||||||||||||||||
Within 30 days | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
30 to 59 days | |||||||||||||||||||||||||||||||||||
60 to 89 days | |||||||||||||||||||||||||||||||||||
90 to 119 days | |||||||||||||||||||||||||||||||||||
120 to 364 days | |||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Weighted average borrowing rate | % | % | % | % | % | % |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Available-for-sale securities, at fair value | $ | $ | |||||||||
Mortgage servicing rights, at fair value (1) | |||||||||||
Restricted cash | |||||||||||
Due from counterparties | |||||||||||
Derivative assets, at fair value | |||||||||||
U.S. Treasuries (2) | |||||||||||
Total | $ | $ |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Within 30 days | $ | $ | |||||||||
30 to 59 days | |||||||||||
60 to 89 days | |||||||||||
90 to 119 days | |||||||||||
120 to 364 days | |||||||||||
One year and over | |||||||||||
Total | $ | $ |
(dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Class of Stock | Issuance Date | Shares Issued and Outstanding | Carrying Value | Contractual Rate | Redemption Eligible Date (1) | Fixed to Floating Rate Conversion Date (2) | Floating Annual Rate (3) | |||||||||||||||||||||||||||||||||||||
Series A | March 14, 2017 | $ | % | April 27, 2027 | April 27, 2027 | 3M Rate + | ||||||||||||||||||||||||||||||||||||||
Series B | July 19, 2017 | % | July 27, 2027 | July 27, 2027 | 3M Rate + | |||||||||||||||||||||||||||||||||||||||
Series C | November 27, 2017 | % | January 27, 2025 | January 27, 2025 | 3M Rate + | |||||||||||||||||||||||||||||||||||||||
Total | $ |
Number of common shares | |||||
Common shares outstanding, December 31, 2021 | |||||
Issuance of common stock | |||||
Non-cash equity award compensation (1) | |||||
Common shares outstanding, September 30, 2022 | |||||
Common shares outstanding, December 31, 2022 | |||||
Issuance of common stock | |||||
Repurchase of common stock | ( | ||||
Non-cash equity award compensation (1) | |||||
Common shares outstanding, September 30, 2023 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Class of Stock | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | ||||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Series B Preferred Stock | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Series C Preferred Stock | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Common Stock | $ | $ | $ | $ | $ | $ | $ | $ |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Available-for-sale securities: | |||||||||||
Unrealized gains | $ | $ | |||||||||
Unrealized losses | ( | ( | |||||||||
Accumulated other comprehensive loss | $ | ( | $ | ( |
Nine Months Ended September 30, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Units | Weighted Average Grant Date Fair Market Value | Units | Weighted Average Grant Date Fair Market Value | ||||||||||||||||||||
Outstanding at Beginning of Period | $ | $ | |||||||||||||||||||||
Granted | |||||||||||||||||||||||
Vested | ( | ( | ( | ( | |||||||||||||||||||
Forfeited | ( | ( | ( | ( | |||||||||||||||||||
Outstanding at End of Period | $ | $ |
Nine Months Ended September 30, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Target Units | Weighted Average Grant Date Fair Market Value | Target Units | Weighted Average Grant Date Fair Market Value | ||||||||||||||||||||
Outstanding at Beginning of Period | $ | $ | |||||||||||||||||||||
Granted | |||||||||||||||||||||||
Vested | |||||||||||||||||||||||
Forfeited | ( | ( | ( | ( | |||||||||||||||||||
Outstanding at End of Period | $ | $ |
Nine Months Ended September 30, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Shares | Weighted Average Grant Date Fair Market Value | Shares | Weighted Average Grant Date Fair Market Value | ||||||||||||||||||||
Outstanding at Beginning of Period | $ | $ | |||||||||||||||||||||
Granted | |||||||||||||||||||||||
Vested | ( | ( | ( | ( | |||||||||||||||||||
Forfeited | ( | ( | |||||||||||||||||||||
Outstanding at End of Period | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands, except share data) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Basic Earnings Per Share: | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Dividends on preferred stock | ( | ( | ( | ( | |||||||||||||||||||
Gain on repurchase and retirement of preferred stock | |||||||||||||||||||||||
Dividends and undistributed earnings allocated to participating restricted stock units | ( | ( | ( | ( | |||||||||||||||||||
Net income attributable to common stockholders, basic | $ | $ | $ | $ | |||||||||||||||||||
Basic weighted average common shares | |||||||||||||||||||||||
Basic earnings per weighted average common share | $ | $ | $ | $ | |||||||||||||||||||
Diluted Earnings Per Share: | |||||||||||||||||||||||
Net income attributable to common stockholders, basic | $ | $ | $ | $ | |||||||||||||||||||
Reallocation impact of undistributed earnings to participating restricted stock units | ( | ||||||||||||||||||||||
Interest expense attributable to convertible notes | |||||||||||||||||||||||
Net income attributable to common stockholders, diluted | $ | $ | $ | $ | |||||||||||||||||||
Basic weighted average common shares | |||||||||||||||||||||||
Effect of dilutive shares issued in an assumed vesting of performance share units | |||||||||||||||||||||||
Effect of dilutive shares issued in an assumed conversion | |||||||||||||||||||||||
Diluted weighted average common shares | |||||||||||||||||||||||
Diluted earnings per weighted average common share | $ | $ | $ | $ |
(dollars in thousands) | September 30, 2023 | December 31, 2022 | |||||||||||||||||||||
Agency RMBS | $ | 8,832,783 | 73.3 | % | $ | 7,668,752 | 71.1 | % | |||||||||||||||
Mortgage servicing rights | 3,213,113 | 26.6 | % | 2,984,937 | 27.7 | % | |||||||||||||||||
Other | 7,861 | 0.1 | % | 125,158 | 1.2 | % | |||||||||||||||||
Total | $ | 12,053,757 | $ | 10,778,847 |
Three Months Ended | ||||||||||||||||||||||||||||||||
September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | ||||||||||||||||||||||||||||
Agency RMBS | 6.5 | % | 6.5 | % | 5.3 | % | 5.9 | % | 9.1 | % | ||||||||||||||||||||||
Mortgage servicing rights | 4.9 | % | 5.5 | % | 4.1 | % | 4.6 | % | 6.9 | % |
September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Principal/ Current Face | Carrying Value | Weighted Average CPR (1) | % Prepayment Protected | Gross Weighted Average Coupon Rate | Amortized Cost | Allowance for Credit Losses | Weighted Average Loan Age (months) | |||||||||||||||||||||||||||||||||||||||
Agency RMBS AFS: | |||||||||||||||||||||||||||||||||||||||||||||||
30-Year Fixed: | |||||||||||||||||||||||||||||||||||||||||||||||
≤ 2.5% | $ | 427,654 | $ | 341,167 | 4.6 | % | — | % | 3.3 | % | $ | 364,679 | $ | — | 27 | ||||||||||||||||||||||||||||||||
3.0% | 242,835 | 202,017 | 2.6 | % | 85.4 | % | 3.7 | % | 215,065 | — | 23 | ||||||||||||||||||||||||||||||||||||
3.5% | 78,583 | 67,820 | 5.9 | % | 75.3 | % | 4.3 | % | 72,738 | — | 20 | ||||||||||||||||||||||||||||||||||||
4.0% | 515,147 | 463,216 | 7.4 | % | 100.0 | % | 4.6 | % | 520,190 | — | 46 | ||||||||||||||||||||||||||||||||||||
4.5% | 2,819,807 | 2,612,842 | 6.0 | % | 100.0 | % | 5.2 | % | 2,877,270 | — | 34 | ||||||||||||||||||||||||||||||||||||
5.0% | 2,737,960 | 2,598,841 | 6.2 | % | 100.0 | % | 5.8 | % | 2,789,422 | — | 17 | ||||||||||||||||||||||||||||||||||||
5.5% | 1,380,493 | 1,339,397 | 6.6 | % | 99.8 | % | 6.4 | % | 1,394,088 | — | 15 | ||||||||||||||||||||||||||||||||||||
6.0% | 792,092 | 785,314 | 4.5 | % | 99.8 | % | 6.9 | % | 812,174 | — | 14 | ||||||||||||||||||||||||||||||||||||
≥ 6.5% | 8,941 | 9,229 | 18.1 | % | 97.7 | % | 7.8 | % | 9,629 | — | 248 | ||||||||||||||||||||||||||||||||||||
9,003,512 | 8,419,843 | 6.0 | % | 95.4 | % | 5.6 | % | 9,055,255 | — | 24 | |||||||||||||||||||||||||||||||||||||
Other P&I | 382,042 | 351,222 | 1.1 | % | — | % | 5.1 | % | 372,772 | — | 11 | ||||||||||||||||||||||||||||||||||||
Interest-only | 906,996 | 51,800 | 7.7 | % | — | % | 4.4 | % | 60,945 | (4,255) | 97 | ||||||||||||||||||||||||||||||||||||
Agency Derivatives | 171,507 | 9,918 | 9.5 | % | — | % | 6.7 | % | 18,205 | — | 223 | ||||||||||||||||||||||||||||||||||||
Total Agency RMBS | $ | 10,464,057 | $ | 8,832,783 | 90.9 | % | $ | 9,507,177 | $ | (4,255) |
December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Principal/ Current Face | Carrying Value | Weighted Average CPR (1) | % Prepayment Protected | Gross Weighted Average Coupon Rate | Amortized Cost | Allowance for Credit Losses | Weighted Average Loan Age (months) | |||||||||||||||||||||||||||||||||||||||
Agency RMBS AFS: | |||||||||||||||||||||||||||||||||||||||||||||||
30-Year Fixed: | |||||||||||||||||||||||||||||||||||||||||||||||
≤ 2.5% | $ | — | $ | — | — | % | — | % | — | % | $ | — | $ | — | — | ||||||||||||||||||||||||||||||||
3.0% | — | — | — | % | — | % | — | % | — | — | — | ||||||||||||||||||||||||||||||||||||
3.5% | — | — | — | % | — | % | — | % | — | — | — | ||||||||||||||||||||||||||||||||||||
4.0% | 1,459,733 | 1,382,120 | 3.9 | % | 100.0 | % | 4.6 | % | 1,474,169 | — | 20 | ||||||||||||||||||||||||||||||||||||
4.5% | 3,087,310 | 3,006,356 | 5.9 | % | 100.0 | % | 5.2 | % | 3,152,567 | — | 25 | ||||||||||||||||||||||||||||||||||||
5.0% | 2,439,709 | 2,430,470 | 6.5 | % | 100.0 | % | 5.7 | % | 2,506,339 | — | 10 | ||||||||||||||||||||||||||||||||||||
5.5% | 206,504 | 209,351 | 2.0 | % | 98.4 | % | 6.2 | % | 211,992 | — | 41 | ||||||||||||||||||||||||||||||||||||
6.0% | 194,834 | 199,467 | 5.3 | % | 99.2 | % | 6.7 | % | 200,776 | — | 18 | ||||||||||||||||||||||||||||||||||||
≥ 6.5% | 10,561 | 11,138 | 13.1 | % | 97.7 | % | 7.8 | % | 11,431 | — | 243 | ||||||||||||||||||||||||||||||||||||
7,398,651 | 7,238,902 | 5.6 | % | 99.9 | % | 5.3 | % | 7,557,274 | — | 19 | |||||||||||||||||||||||||||||||||||||
Other P&I | 382,626 | 378,558 | 1.3 | % | 88.5 | % | 5.4 | % | 379,837 | — | 30 | ||||||||||||||||||||||||||||||||||||
Interest-only | 963,865 | 36,116 | 8.1 | % | — | % | 4.9 | % | 45,882 | (6,785) | 143 | ||||||||||||||||||||||||||||||||||||
Agency Derivatives | 196,457 | 15,176 | 8.4 | % | — | % | 6.7 | % | 20,696 | — | 216 | ||||||||||||||||||||||||||||||||||||
Total Agency RMBS | $ | 8,941,599 | $ | 7,668,752 | 98.7 | % | $ | 8,003,689 | $ | (6,785) |
Three Months Ended | ||||||||||||||||||||||||||||||||
(in thousands) | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | |||||||||||||||||||||||||||
UPB at beginning of period | $ | 222,622,177 | $ | 212,444,503 | $ | 204,876,693 | $ | 206,613,560 | $ | 227,074,413 | ||||||||||||||||||||||
Purchases of mortgage servicing rights | 472,154 | 14,773,601 | 11,381,496 | 2,677,674 | 4,448,870 | |||||||||||||||||||||||||||
Sales of mortgage servicing rights | — | — | (142,598) | — | (19,807,427) | |||||||||||||||||||||||||||
Scheduled payments | (1,639,871) | (1,594,693) | (1,527,309) | (1,538,046) | (1,564,465) | |||||||||||||||||||||||||||
Prepaid | (2,786,904) | (2,993,493) | (2,119,541) | (2,439,936) | (3,709,416) | |||||||||||||||||||||||||||
Other changes | (5,286) | (7,741) | (24,238) | (436,559) | 171,585 | |||||||||||||||||||||||||||
UPB at end of period | $ | 218,662,270 | $ | 222,622,177 | $ | 212,444,503 | $ | 204,876,693 | $ | 206,613,560 |
(in thousands, except share data) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
Income Statement Data: | September 30, | September 30, | ||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||||
Available-for-sale securities | $ | 107,827 | $ | 88,472 | $ | 309,060 | $ | 188,518 | ||||||||||||||||||
Other | 15,781 | 5,916 | 48,903 | 7,719 | ||||||||||||||||||||||
Total interest income | 123,608 | 94,388 | 357,963 | 196,237 | ||||||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||||
Repurchase agreements | 129,298 | 57,868 | 350,599 | 85,480 | ||||||||||||||||||||||
Revolving credit facilities | 32,526 | 15,178 | 87,866 | 29,960 | ||||||||||||||||||||||
Term notes payable | 6,634 | 5,427 | 22,516 | 12,608 | ||||||||||||||||||||||
Convertible senior notes | 4,636 | 4,877 | 14,164 | 14,720 | ||||||||||||||||||||||
Total interest expense | 173,094 | 83,350 | 475,145 | 142,768 | ||||||||||||||||||||||
Net interest (expense) income | (49,486) | 11,038 | (117,182) | 53,469 | ||||||||||||||||||||||
Other income: | ||||||||||||||||||||||||||
(Loss) gain on investment securities | (471) | (6,426) | 12,499 | (256,487) | ||||||||||||||||||||||
Servicing income | 178,625 | 148,833 | 507,168 | 442,985 | ||||||||||||||||||||||
Gain (loss) on servicing asset | 67,369 | (6,720) | 60,969 | 489,461 | ||||||||||||||||||||||
Gain on interest rate swap and swaption agreements | 111,909 | 34,806 | 86,288 | 29,499 | ||||||||||||||||||||||
Gain (loss) on other derivative instruments | 86,212 | 159,044 | (22,398) | (43,991) | ||||||||||||||||||||||
Other income (loss) | 2,903 | — | 5,103 | (117) | ||||||||||||||||||||||
Total other income | 446,547 | 329,537 | 649,629 | 661,350 | ||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||
Servicing expenses | 29,903 | 21,152 | 83,459 | 68,847 | ||||||||||||||||||||||
Compensation and benefits | 8,617 | 10,100 | 31,568 | 33,312 | ||||||||||||||||||||||
Other operating expenses | 15,984 | 10,688 | 38,354 | 26,465 | ||||||||||||||||||||||
Total expenses | 54,504 | 41,940 | 153,381 | 128,624 | ||||||||||||||||||||||
Income before income taxes | 342,557 | 298,635 | 379,066 | 586,195 | ||||||||||||||||||||||
Provision for income taxes | 36,365 | 21,023 | 52,237 | 95,733 | ||||||||||||||||||||||
Net income | 306,192 | 277,612 | 326,829 | 490,462 | ||||||||||||||||||||||
Dividends on preferred stock | (12,115) | (13,747) | (36,595) | (41,242) | ||||||||||||||||||||||
Gain on repurchase and retirement of preferred stock | — | — | 2,454 | — | ||||||||||||||||||||||
Net income attributable to common stockholders | $ | 294,077 | $ | 263,865 | $ | 292,688 | $ | 449,220 | ||||||||||||||||||
Basic earnings per weighted average common share | $ | 3.04 | $ | 3.04 | $ | 3.06 | $ | 5.19 | ||||||||||||||||||
Diluted earnings per weighted average common share | $ | 2.81 | $ | 2.78 | $ | 2.91 | $ | 4.80 | ||||||||||||||||||
Dividends declared per common share | $ | 0.45 | $ | 0.68 | $ | 1.50 | $ | 2.04 | ||||||||||||||||||
Weighted average number of shares of common stock: | ||||||||||||||||||||||||||
Basic | 96,176,287 | 86,252,104 | 95,059,856 | 86,107,979 | ||||||||||||||||||||||
Diluted | 105,628,130 | 96,132,100 | 104,849,018 | 96,120,844 |
(in thousands) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
Income Statement Data: | September 30, | September 30, | ||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||
Net income | $ | 306,192 | $ | 277,612 | $ | 326,829 | $ | 490,462 | ||||||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||||||||
Unrealized loss on available-for-sale securities | (350,922) | (551,673) | (381,297) | (887,729) | ||||||||||||||||||||||
Other comprehensive loss | (350,922) | (551,673) | (381,297) | (887,729) | ||||||||||||||||||||||
Comprehensive loss | (44,730) | (274,061) | (54,468) | (397,267) | ||||||||||||||||||||||
Dividends on preferred stock | (12,115) | (13,747) | (36,595) | (41,242) | ||||||||||||||||||||||
Gain on repurchase and retirement of preferred stock | — | — | 2,454 | — | ||||||||||||||||||||||
Comprehensive loss attributable to common stockholders | $ | (56,845) | $ | (287,808) | $ | (88,609) | $ | (438,509) |
(in thousands) | September 30, 2023 | December 31, 2022 | ||||||||||||
Balance Sheet Data: | ||||||||||||||
(unaudited) | ||||||||||||||
Available-for-sale securities | $ | 8,830,726 | $ | 7,778,734 | ||||||||||
Mortgage servicing rights | $ | 3,213,113 | $ | 2,984,937 | ||||||||||
Total assets | $ | 13,916,729 | $ | 13,466,160 | ||||||||||
Repurchase agreements | $ | 9,113,270 | $ | 8,603,011 | ||||||||||
Revolving credit facilities | $ | 1,410,671 | $ | 1,118,831 | ||||||||||
Term notes payable | $ | 295,025 | $ | 398,011 | ||||||||||
Convertible senior notes | $ | 268,179 | $ | 282,496 | ||||||||||
Total stockholders’ equity | $ | 2,117,228 | $ | 2,183,525 | ||||||||||
Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
(dollars in thousands) | Average Balance (1) | Interest Income/Expense | Net Yield/Cost of Funds | Average Balance (1) | Interest Income/Expense | Net Yield/Cost of Funds | |||||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||||||
Available-for-sale securities | $ | 9,284,380 | $ | 107,827 | 4.6 | % | $ | 8,964,101 | $ | 309,060 | 4.6 | % | |||||||||||||||||||||||
Reverse repurchase agreements | 284,142 | 3,833 | 5.4 | % | 464,744 | 16,050 | 4.6 | % | |||||||||||||||||||||||||||
Other | 11,948 | 32,853 | |||||||||||||||||||||||||||||||||
Total interest income/net asset yield | $ | 9,568,522 | $ | 123,608 | 5.2 | % | $ | 9,428,845 | $ | 357,963 | 5.1 | % | |||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
Borrowings collateralized by: | |||||||||||||||||||||||||||||||||||
Available-for-sale securities | $ | 8,757,647 | $ | 122,746 | 5.6 | % | $ | 8,490,795 | $ | 325,859 | 5.1 | % | |||||||||||||||||||||||
Agency Derivatives (2) | 11,679 | 173 | 5.9 | % | 12,146 | 507 | 5.6 | % | |||||||||||||||||||||||||||
Mortgage servicing rights and advances (3) | 2,021,279 | 45,539 | 9.0 | % | 1,967,497 | 127,986 | 8.7 | % | |||||||||||||||||||||||||||
U.S. Treasuries (4) | — | — | — | % | 192,060 | 6,629 | 4.6 | % | |||||||||||||||||||||||||||
Unsecured borrowings: | |||||||||||||||||||||||||||||||||||
Convertible senior notes | 268,043 | 4,636 | 6.9 | % | 274,508 | 14,164 | 6.9 | % | |||||||||||||||||||||||||||
Total interest expense/cost of funds | $ | 11,058,648 | $ | 173,094 | 6.3 | % | $ | 10,937,006 | $ | 475,145 | 5.8 | % | |||||||||||||||||||||||
Net interest expense/spread | $ | (49,486) | (1.1) | % | $ | (117,182) | (0.7) | % |
Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||
(dollars in thousands) | Average Balance (1) | Interest Income/Expense | Net Yield/Cost of Funds | Average Balance (1) | Interest Income/Expense | Net Yield/Cost of Funds | |||||||||||||||||||||||||||||
Interest-earning assets | |||||||||||||||||||||||||||||||||||
Available-for-sale securities | $ | 9,323,193 | $ | 88,472 | 3.8 | % | $ | 7,961,316 | $ | 188,518 | 3.2 | % | |||||||||||||||||||||||
Reverse repurchase agreements | 199,199 | 1,082 | 2.2 | % | 158,550 | 1,360 | 1.1 | % | |||||||||||||||||||||||||||
Other | 4,834 | 6,359 | |||||||||||||||||||||||||||||||||
Total interest income/net asset yield | $ | 9,522,392 | $ | 94,388 | 4.0 | % | $ | 8,119,866 | $ | 196,237 | 3.2 | % | |||||||||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
Borrowings collateralized by: | |||||||||||||||||||||||||||||||||||
Available-for-sale securities | $ | 8,951,012 | $ | 51,769 | 2.3 | % | $ | 7,851,349 | $ | 69,511 | 1.2 | % | |||||||||||||||||||||||
Agency Derivatives (2) | 21,601 | 125 | 2.3 | % | 27,865 | 283 | 1.4 | % | |||||||||||||||||||||||||||
Mortgage servicing rights and advances (3) | 1,718,842 | 26,579 | 6.2 | % | 1,521,022 | 58,254 | 5.1 | % | |||||||||||||||||||||||||||
Unsecured borrowings: | |||||||||||||||||||||||||||||||||||
Convertible senior notes | 281,961 | 4,877 | 6.9 | % | 289,078 | 14,720 | 6.8 | % | |||||||||||||||||||||||||||
Total interest expense/cost of funds | $ | 10,973,416 | $ | 83,350 | 3.0 | % | $ | 9,689,314 | $ | 142,768 | 2.0 | % | |||||||||||||||||||||||
Net interest income/spread | $ | 11,038 | 1.0 | % | $ | 53,469 | 1.2 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Gross yield/stated coupon | 4.9 | % | 4.4 | % | 4.9 | % | 4.4 | % | |||||||||||||||
Net (premium amortization) discount accretion | (0.3) | % | (0.6) | % | (0.3) | % | (1.2) | % | |||||||||||||||
Net yield | 4.6 | % | 3.8 | % | 4.6 | % | 3.2 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Proceeds from sales | $ | 119,095 | $ | 683,746 | $ | 1,694,891 | $ | 5,022,894 | |||||||||||||||
Amortized cost of securities sold | (118,999) | (664,781) | (1,730,866) | (5,246,865) | |||||||||||||||||||
Total realized gains (losses) on sales | 96 | 18,965 | (35,975) | (223,971) | |||||||||||||||||||
Reversal of (provision for) credit losses | 98 | (1,397) | 217 | (3,048) | |||||||||||||||||||
Other | (665) | (23,994) | 48,257 | (29,468) | |||||||||||||||||||
(Loss) gain on investment securities | $ | (471) | $ | (6,426) | $ | 12,499 | $ | (256,487) |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Servicing fee income | $ | 141,816 | $ | 138,140 | $ | 415,423 | $ | 426,974 | |||||||||||||||
Ancillary and other fee income | 476 | 483 | 2,236 | 1,514 | |||||||||||||||||||
Float income | 36,333 | 10,210 | 89,509 | 14,497 | |||||||||||||||||||
Total | $ | 178,625 | $ | 148,833 | $ | 507,168 | $ | 442,985 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model | $ | 111,186 | $ | 75,887 | $ | 213,803 | $ | 800,072 | |||||||||||||||
Changes in fair value due to realization of cash flows (runoff) | (63,999) | (82,111) | (172,177) | (310,115) | |||||||||||||||||||
Gains (losses) on sales (1) | 20,182 | (496) | 19,343 | (496) | |||||||||||||||||||
Gain (loss) on servicing asset | $ | 67,369 | $ | (6,720) | $ | 60,969 | $ | 489,461 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Net interest spread | $ | 6,851 | $ | 178 | $ | 13,914 | $ | (4,830) | |||||||||||||||
Early termination, agreement maturation and option expiration (losses) gains | (5,176) | (146,750) | (23,756) | 43,197 | |||||||||||||||||||
Change in unrealized gain (loss) on interest rate swap and swaption agreements, at fair value | 110,234 | 181,378 | 96,130 | (8,868) | |||||||||||||||||||
Gain on interest rate swap and swaption agreements | $ | 111,909 | $ | 34,806 | $ | 86,288 | $ | 29,499 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
(in thousands) | September 30, | September 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
TBAs | $ | (90,662) | $ | (227,668) | $ | (184,909) | $ | (535,946) | |||||||||||||||
Futures | 179,697 | 392,044 | 166,533 | 509,451 | |||||||||||||||||||
Options on futures | (779) | — | (779) | (2,224) | |||||||||||||||||||
Inverse interest-only securities | (2,044) | (5,332) | (3,243) | (15,272) | |||||||||||||||||||
Gain (loss) on other derivative instruments | $ | 86,212 | $ | 159,044 | $ | (22,398) | $ | (43,991) |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Servicing expenses | $ | 29,903 | $ | 21,152 | $ | 83,459 | $ | 68,847 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Compensation and benefits: | |||||||||||||||||||||||
Non-cash equity compensation expenses | $ | 1,576 | $ | 2,355 | $ | 9,363 | $ | 9,977 | |||||||||||||||
All other compensation and benefits | 7,041 | 7,745 | 22,205 | 23,335 | |||||||||||||||||||
Total compensation and benefits | $ | 8,617 | $ | 10,100 | $ | 31,568 | $ | 33,312 | |||||||||||||||
Other operating expenses: | |||||||||||||||||||||||
Certain operating expenses (1) | $ | 10,396 | $ | 5,029 | $ | 22,948 | $ | 8,146 | |||||||||||||||
All other operating expenses | 5,588 | 5,659 | 15,406 | 18,319 | |||||||||||||||||||
Total other operating expenses | $ | 15,984 | $ | 10,688 | $ | 38,354 | $ | 26,465 | |||||||||||||||
Annualized operating expense ratio | 4.5 | % | 3.4 | % | 4.2 | % | 3.1 | % | |||||||||||||||
Annualized operating expense ratio, excluding non-cash equity compensation and certain operating expenses (1) | 2.3 | % | 2.2 | % | 2.2 | % | 2.2 | % |
September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands, except purchase price) | Principal/ Current Face | Net (Discount) Premium | Amortized Cost | Allowance for Credit Losses | Unrealized Gain | Unrealized Loss | Carrying Value | Weighted Average Coupon Rate | Weighted Average Purchase Price | ||||||||||||||||||||||||||||||||||||||||||||
P&I securities | $ | 9,385,554 | $ | 42,473 | $ | 9,428,027 | $ | — | $ | 2 | $ | (656,964) | $ | 8,771,065 | 4.78 | % | $ | 100.81 | |||||||||||||||||||||||||||||||||||
Interest-only securities | 906,996 | 60,945 | 60,945 | (4,255) | 703 | (5,593) | 51,800 | 2.03 | % | $ | 17.07 | ||||||||||||||||||||||||||||||||||||||||||
Total | $ | 10,292,550 | $ | 103,418 | $ | 9,488,972 | $ | (4,255) | $ | 705 | $ | (662,557) | $ | 8,822,865 |
September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Number of Loans | Unpaid Principal Balance | Weighted Average Gross Coupon Rate | Weighted Average Current Loan Size | Weighted Average Loan Age (months) | Weighted Average Original FICO | Weighted Average Original LTV | 60+ Day Delinquencies | 3-Month CPR | Net Servicing Fee (bps) | |||||||||||||||||||||||||||||||||||||||||||||||||
30-Year Fixed: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
≤ 3.25% | 302,169 | $ | 96,220,799 | 2.8 | % | $ | 376 | 32 | 768 | 70.9 | % | 0.4 | % | 3.9 | % | 25.1 | |||||||||||||||||||||||||||||||||||||||||||
> 3.25 - 3.75% | 147,636 | 38,587,916 | 3.4 | % | 331 | 45 | 753 | 74.1 | % | 0.7 | % | 5.1 | % | 25.2 | |||||||||||||||||||||||||||||||||||||||||||||
> 3.75 - 4.25% | 107,554 | 22,550,015 | 3.9 | % | 275 | 67 | 751 | 75.8 | % | 1.0 | % | 6.0 | % | 25.5 | |||||||||||||||||||||||||||||||||||||||||||||
> 4.25 - 4.75% | 60,608 | 11,217,278 | 4.4 | % | 264 | 66 | 739 | 77.3 | % | 1.8 | % | 6.8 | % | 25.3 | |||||||||||||||||||||||||||||||||||||||||||||
> 4.75 - 5.25% | 41,743 | 9,778,069 | 4.9 | % | 355 | 35 | 746 | 78.7 | % | 1.5 | % | 5.2 | % | 25.2 | |||||||||||||||||||||||||||||||||||||||||||||
> 5.25% | 60,436 | 16,920,064 | 5.9 | % | 382 | 17 | 745 | 80.2 | % | 1.2 | % | 5.7 | % | 25.9 | |||||||||||||||||||||||||||||||||||||||||||||
720,146 | 195,274,141 | 3.5 | % | 349 | 39 | 758 | 73.7 | % | 0.7 | % | 4.8 | % | 25.2 | ||||||||||||||||||||||||||||||||||||||||||||||
15-Year Fixed: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
≤ 2.25% | 22,852 | 6,073,892 | 2.0 | % | 313 | 29 | 777 | 59.1 | % | 0.1 | % | 3.8 | % | 25.0 | |||||||||||||||||||||||||||||||||||||||||||||
> 2.25 - 2.75% | 38,633 | 8,235,531 | 2.4 | % | 262 | 33 | 772 | 58.8 | % | 0.2 | % | 5.2 | % | 25.0 | |||||||||||||||||||||||||||||||||||||||||||||
> 2.75 - 3.25% | 34,763 | 4,780,731 | 2.9 | % | 193 | 59 | 766 | 61.4 | % | 0.3 | % | 7.1 | % | 25.3 | |||||||||||||||||||||||||||||||||||||||||||||
> 3.25 - 3.75% | 19,957 | 2,011,345 | 3.4 | % | 152 | 72 | 756 | 64.0 | % | 0.5 | % | 8.9 | % | 25.4 | |||||||||||||||||||||||||||||||||||||||||||||
> 3.75 - 4.25% | 9,350 | 800,145 | 3.9 | % | 141 | 68 | 742 | 65.2 | % | 0.8 | % | 8.4 | % | 25.3 | |||||||||||||||||||||||||||||||||||||||||||||
> 4.25% | 6,515 | 784,576 | 4.9 | % | 224 | 31 | 741 | 65.2 | % | 0.9 | % | 9.2 | % | 27.0 | |||||||||||||||||||||||||||||||||||||||||||||
132,070 | 22,686,220 | 2.6 | % | 246 | 42 | 768 | 60.3 | % | 0.3 | % | 5.8 | % | 25.2 | ||||||||||||||||||||||||||||||||||||||||||||||
Total ARMs | 2,600 | 701,909 | 4.4 | % | 359 | 54 | 761 | 70.4 | % | 1.0 | % | 16.6 | % | 25.4 | |||||||||||||||||||||||||||||||||||||||||||||
Total | 854,816 | $ | 218,662,270 | 3.4 | % | $ | 338 | 40 | 759 | 72.3 | % | 0.7 | % | 4.9 | % | 25.2 |
(dollars in thousands) | September 30, 2023 | |||||||||||||||||||
Borrowing Type | Amount Outstanding | Weighted Average Borrowing Rate | Weighted Average Years to Maturity | |||||||||||||||||
Repurchase agreements | $ | 9,113,270 | 5.65 | % | 0.3 | |||||||||||||||
Revolving credit facilities | 1,410,671 | 8.65 | % | 1.3 | ||||||||||||||||
Term notes payable | 295,025 | 8.23 | % | 0.7 | ||||||||||||||||
Convertible senior notes (1) | 268,179 | 6.25 | % | 2.3 | ||||||||||||||||
Total | $ | 11,087,145 | 6.11 | % | 0.5 |
(dollars in thousands) | September 30, 2023 | |||||||||||||||||||
Collateral Type | Amount Outstanding | Weighted Average Borrowing Rate | Weighted Average Haircut on Collateral Value | |||||||||||||||||
Agency RMBS | $ | 8,823,621 | 5.56 | % | 3.7 | % | ||||||||||||||
Non-Agency securities | 233 | 6.36 | % | 44.2 | % | |||||||||||||||
Agency Derivatives | 11,600 | 5.81 | % | 18.6 | % | |||||||||||||||
Mortgage servicing rights | 1,949,212 | 8.56 | % | 32.6 | % | |||||||||||||||
Mortgage servicing advances | 34,300 | 8.65 | % | 12.6 | % | |||||||||||||||
Other (1) | 268,179 | 6.25 | % | N/A | ||||||||||||||||
Total | $ | 11,087,145 | 6.11 | % | 8.8 | % |
(dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended | Quarterly Average | End of Period Balance | Maximum Balance of Any Month-End | End of Period Total Borrowings to Equity Ratio | End of Period Net Long (Short) TBA Cost Basis | End of Period Net Payable (Receivable) for Unsettled RMBS | End of Period Economic Debt-to-Equity Ratio (1) | |||||||||||||||||||||||||||||||||||||
September 30, 2023 | $ | 11,058,648 | $ | 11,087,145 | $ | 11,138,859 | 5.2:1.0 | $ | 2,147,540 | $ | — | 6.3:1.0 | ||||||||||||||||||||||||||||||||
June 30, 2023 | $ | 10,820,230 | $ | 11,189,689 | $ | 11,189,689 | 5.0:1.0 | $ | 2,905,852 | $ | 54,739 | 6.4:1.0 | ||||||||||||||||||||||||||||||||
March 31, 2023 | $ | 10,354,624 | $ | 10,857,943 | $ | 11,162,257 | 4.8:1.0 | $ | 3,644,540 | $ | — | 6.5:1.0 | ||||||||||||||||||||||||||||||||
December 31, 2022 | $ | 9,878,254 | $ | 9,514,054 | $ | 10,672,731 | 4.4:1.0 | $ | 3,923,298 | $ | 342,964 | 6.3:1.0 | ||||||||||||||||||||||||||||||||
September 30, 2022 | $ | 10,973,416 | $ | 11,844,972 | $ | 11,844,972 | 5.5:1.0 | $ | 4,153,582 | $ | 34,576 | 7.5:1.0 |
(in millions, except per share amounts) | Book Value | Common Shares Outstanding | Common Book Value Per Share | ||||||||||||||
Common stockholders’ equity at June 30, 2023 | $ | 1,576.5 | 96.2 | $ | 16.39 | ||||||||||||
Net income | 306.2 | ||||||||||||||||
Other comprehensive loss | (350.9) | ||||||||||||||||
Comprehensive loss | (44.7) | ||||||||||||||||
Dividends on preferred stock | (12.1) | ||||||||||||||||
Comprehensive loss attributable to common stockholders | (56.8) | ||||||||||||||||
Dividend declaration | (43.6) | ||||||||||||||||
Other | 1.6 | — | |||||||||||||||
Balance before capital transactions | 1,477.7 | 96.2 | |||||||||||||||
Issuance of common stock, net of offering costs | — | — | |||||||||||||||
Common stockholders’ equity at September 30, 2023 | $ | 1,477.7 | 96.2 | $ | 15.36 | ||||||||||||
Total preferred stock liquidation preference | 639.5 | ||||||||||||||||
Total stockholders’ equity at September 30, 2023 | $ | 2,117.2 |
(dollars in thousands) | ||||||||||||||||||||||||||||||||
September 30, 2023 | ||||||||||||||||||||||||||||||||
Expiration Date (1) | Amount Outstanding | Unused Committed Capacity (2) | Unused Uncommitted Capacity | Total Capacity | Eligible Collateral | |||||||||||||||||||||||||||
March 31, 2025 | $ | 725,731 | $ | — | $ | 174,269 | $ | 900,000 | Mortgage servicing rights | |||||||||||||||||||||||
March 17, 2025 | $ | 327,640 | $ | 22,360 | $ | 150,000 | $ | 500,000 | Mortgage servicing rights (3) | |||||||||||||||||||||||
June 29, 2024 | $ | 323,000 | $ | 77,000 | $ | — | $ | 400,000 | Mortgage servicing rights | |||||||||||||||||||||||
December 29, 2023 | $ | 219,750 | $ | — | $ | 80,250 | $ | 300,000 | Mortgage servicing rights (4) | |||||||||||||||||||||||
September 28, 2024 | $ | 34,300 | $ | 165,700 | $ | — | $ | 200,000 | Mortgage servicing advances |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Available-for-sale securities, at fair value | $ | 8,822,484 | $ | 7,426,953 | |||||||
Mortgage servicing rights, at fair value | 3,209,284 | 2,958,057 | |||||||||
Restricted cash | 343,292 | 324,854 | |||||||||
Due from counterparties | 34,942 | 22,055 | |||||||||
Derivative assets, at fair value | 9,631 | 14,738 | |||||||||
Other assets | 42,675 | 67,819 | |||||||||
U.S. Treasuries (1) | — | 877,632 | |||||||||
Total | $ | 12,462,308 | $ | 11,692,108 |
(in thousands) | September 30, 2023 | December 31, 2022 | |||||||||
Within 30 days | $ | 1,717,602 | $ | 2,691,195 | |||||||
30 to 59 days | 1,129,033 | 2,160,737 | |||||||||
60 to 89 days | — | 2,536,636 | |||||||||
90 to 119 days | 2,570,637 | 905,443 | |||||||||
120 to 364 days | 4,348,323 | 509,000 | |||||||||
One to three years | 1,321,550 | 1,316,842 | |||||||||
Three to five years | — | 282,496 | |||||||||
Total | $ | 11,087,145 | $ | 10,402,349 |
Changes in Interest Rates | |||||||||||||||||||||||
(dollars in thousands) | -50 bps | -25 bps | +25 bps | +50 bps | |||||||||||||||||||
Change in annualized net interest income (1): | $ | 11,091 | $ | 5,536 | $ | (5,553) | $ | (11,092) | |||||||||||||||
% change in net interest income (1) | 7.4 | % | 3.7 | % | (3.7) | % | (7.4) | % | |||||||||||||||
Change in value of financial position: | |||||||||||||||||||||||
Available-for-sale securities | $ | 243,532 | $ | 123,510 | $ | (126,360) | $ | (254,950) | |||||||||||||||
As a % of common equity | 16.5 | % | 8.4 | % | (8.5) | % | (17.2) | % | |||||||||||||||
Mortgage servicing rights (2) | $ | (55,132) | $ | (25,102) | $ | 18,316 | $ | 31,539 | |||||||||||||||
As a % of common equity (2) | (3.7) | % | (1.7) | % | 1.2 | % | 2.1 | % | |||||||||||||||
Derivatives, net | $ | (216,859) | $ | (106,056) | $ | 101,987 | $ | 200,431 | |||||||||||||||
As a % of common equity | (14.7) | % | (7.2) | % | 6.9 | % | 13.6 | % | |||||||||||||||
Reverse repurchase agreements | $ | 59 | $ | 30 | $ | (29) | $ | (59) | |||||||||||||||
As a % of common equity | — | % | — | % | — | % | — | % | |||||||||||||||
Repurchase agreements | $ | (10,742) | $ | (5,371) | $ | 5,371 | $ | 10,743 | |||||||||||||||
As a % of common equity | (0.7) | % | (0.4) | % | 0.4 | % | 0.7 | % | |||||||||||||||
Revolving credit facilities | $ | (527) | $ | (263) | $ | 262 | $ | 524 | |||||||||||||||
As a % of common equity | (0.1) | % | — | % | — | % | — | % | |||||||||||||||
Term notes payable | $ | (104) | $ | (52) | $ | 52 | $ | 103 | |||||||||||||||
As a % of common equity | — | % | — | % | — | % | — | % | |||||||||||||||
Convertible senior notes | $ | (1,222) | $ | (611) | $ | 593 | $ | 1,204 | |||||||||||||||
As a % of common equity | (0.1) | % | — | % | — | % | 0.1 | % | |||||||||||||||
Total Net Assets | $ | (40,995) | $ | (13,915) | $ | 192 | $ | (10,465) | |||||||||||||||
As a % of total assets | (0.3) | % | (0.1) | % | — | % | (0.1) | % | |||||||||||||||
As a % of common equity | (2.8) | % | (0.9) | % | — | % | (0.7) | % |
Exhibit Number | Exhibit Description | |||||||
3.1 | ||||||||
3.2 | ||||||||
3.3 | ||||||||
3.4 | ||||||||
3.5 | ||||||||
3.6 | ||||||||
3.7 | ||||||||
3.8 | ||||||||
3.9 | ||||||||
3.10 | ||||||||
3.11 | ||||||||
3.12 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
32.2 | ||||||||
Exhibit Number | Exhibit Description | |||||||
101 | Financial statements from the Quarterly Report on Form 10-Q of Two Harbors Investment Corp. for the three months ended September 30, 2023, filed with the SEC on October 31, 2023, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Loss, (iii) the Condensed Consolidated Statements of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements. (filed herewith) | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). (filed herewith) | |||||||
TWO HARBORS INVESTMENT CORP. | |||||||||||
Dated: | October 31, 2023 | By: | /s/ William Greenberg | ||||||||
William Greenberg President and Chief Executive Officer (Principal Executive Officer) | |||||||||||
Dated: | October 31, 2023 | By: | /s/ Mary Riskey | ||||||||
Mary Riskey Chief Financial Officer (Principal Financial and Accounting Officer) |
Date: | October 31, 2023 | /s/ William Greenberg | ||||||||||||
William Greenberg | ||||||||||||||
President and Chief Executive Officer |
Date: | October 31, 2023 | /s/ Mary Riskey | ||||||||||||
Mary Riskey | ||||||||||||||
Chief Financial Officer |
Date: | October 31, 2023 | /s/ William Greenberg | ||||||||||||
William Greenberg | ||||||||||||||
President and Chief Executive Officer |
Date: | October 31, 2023 | /s/ Mary Riskey | ||||||||||||
Mary Riskey | ||||||||||||||
Chief Financial Officer |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Interest income: | ||||
Available-for-sale securities | $ 107,827 | $ 88,472 | $ 309,060 | $ 188,518 |
Other | 15,781 | 5,916 | 48,903 | 7,719 |
Total interest income | 123,608 | 94,388 | 357,963 | 196,237 |
Interest expense: | ||||
Repurchase agreements | 129,298 | 57,868 | 350,599 | 85,480 |
Revolving credit facilities | 32,526 | 15,178 | 87,866 | 29,960 |
Term notes payable | 6,634 | 5,427 | 22,516 | 12,608 |
Convertible senior notes | 4,636 | 4,877 | 14,164 | 14,720 |
Total interest expense | 173,094 | 83,350 | 475,145 | 142,768 |
Net interest (expense) income | (49,486) | 11,038 | (117,182) | 53,469 |
Other income: | ||||
(Loss) gain on investment securities | (471) | (6,426) | 12,499 | (256,487) |
Servicing income | 178,625 | 148,833 | 507,168 | 442,985 |
Gain (loss) on servicing asset | 67,369 | (6,720) | 60,969 | 489,461 |
Gain on interest rate swap and swaption agreements | 111,909 | 34,806 | 86,288 | 29,499 |
Gain (loss) on other derivative instruments | 86,212 | 159,044 | (22,398) | (43,991) |
Other income (loss) | 2,903 | 0 | 5,103 | (117) |
Total other income | 446,547 | 329,537 | 649,629 | 661,350 |
Expenses: | ||||
Servicing expenses | 29,903 | 21,152 | 83,459 | 68,847 |
Compensation and benefits | 8,617 | 10,100 | 31,568 | 33,312 |
Other operating expenses | 15,984 | 10,688 | 38,354 | 26,465 |
Total expenses | 54,504 | 41,940 | 153,381 | 128,624 |
Income before income taxes | 342,557 | 298,635 | 379,066 | 586,195 |
Provision for income taxes | 36,365 | 21,023 | 52,237 | 95,733 |
Net income | 306,192 | 277,612 | 326,829 | 490,462 |
Dividends on preferred stock | (12,115) | (13,747) | (36,595) | (41,242) |
Gain on repurchase and retirement of preferred stock | 0 | 0 | 2,454 | 0 |
Net income attributable to common stockholders | $ 294,077 | $ 263,865 | $ 292,688 | $ 449,220 |
Basic earnings per weighted average common share | $ 3.04 | $ 3.04 | $ 3.06 | $ 5.19 |
Diluted earnings per weighted average common share | $ 2.81 | $ 2.78 | $ 2.91 | $ 4.80 |
Weighted average basic common shares (in shares) | 96,176,287 | 86,252,104 | 95,059,856 | 86,107,979 |
Weighted average diluted common shares (in shares) | 105,628,130 | 96,132,100 | 104,849,018 | 96,120,844 |
Comprehensive loss: | ||||
Net income | $ 306,192 | $ 277,612 | $ 326,829 | $ 490,462 |
Other comprehensive loss: | ||||
Unrealized loss on available-for-sale securities | (350,922) | (551,673) | (381,297) | (887,729) |
Other comprehensive loss | (350,922) | (551,673) | (381,297) | (887,729) |
Comprehensive loss | (44,730) | (274,061) | (54,468) | (397,267) |
Dividends on preferred stock | (12,115) | (13,747) | (36,595) | (41,242) |
Gain on repurchase and retirement of preferred stock | 0 | 0 | 2,454 | 0 |
Comprehensive loss attributable to common stockholders | $ (56,845) | $ (287,808) | $ (88,609) | $ (438,509) |
Organization and Operations |
9 Months Ended |
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Sep. 30, 2023 | |
Organization and Operations [Abstract] | |
Organization and Operations | Organization and Operations Two Harbors Investment Corp. is a Maryland corporation that, through its wholly owned subsidiaries (collectively, the Company), invests in and manages Agency residential mortgage-backed securities, or Agency RMBS, mortgage servicing rights, or MSR, and other financial assets. Agency refers to a U.S. government sponsored enterprise, or GSE, such as the Federal National Mortgage Association (or Fannie Mae) or the Federal Home Loan Mortgage Corporation (or Freddie Mac), or a U.S. government agency such as the Government National Mortgage Association (or Ginnie Mae). The investment portfolio is managed as a whole and resources are allocated and financial performance is assessed on a consolidated basis. The Company’s common stock is listed on the NYSE under the symbol “TWO”. On August 2, 2022, Matrix Financial Services Corporation, or Matrix, a wholly owned subsidiary of the Company, entered into a definitive stock purchase agreement to acquire RoundPoint Mortgage Servicing LLC (formerly RoundPoint Mortgage Servicing Corporation), or RoundPoint, from Freedom Mortgage Corporation, or Freedom. In connection with the acquisition, Matrix agreed to pay a purchase price upon closing in an amount equal to the tangible net book value of RoundPoint, plus a premium amount of $10.5 million, subject to certain additional post-closing adjustments. In connection with the transaction, RoundPoint divested its retail origination business as well as its RPX servicing exchange platform. Matrix also agreed to engage RoundPoint as a subservicer prior to the closing date and began transferring loans to RoundPoint in the fourth quarter of 2022. Management believes this acquisition will add value for stakeholders of the Company through cost savings achieved by bringing the servicing of its MSR portfolio in-house, greater control over the Company’s MSR portfolio and the associated cash flows, and the ability to participate more fully in the mortgage finance space as opportunities arise. Effective September 30, 2023, the parties had satisfied customary closing conditions and received the required regulatory and GSE approvals to close the transaction. Upon closing, all servicing and origination licenses and operational capabilities remained with RoundPoint, and RoundPoint became a wholly owned subsidiary of Matrix. The provisional purchase price recognized was $44.7 million, with $23.6 million paid upon closing and $21.1 million recognized as a payable to Freedom within the other liabilities line item on the Company’s condensed consolidated balance sheets. The Company has elected to be treated as a real estate investment trust, or REIT, as defined under the Internal Revenue Code of 1986, as amended, or the Code, for U.S. federal income tax purposes. As long as the Company continues to comply with a number of requirements under federal tax law and maintains its qualification as a REIT, the Company generally will not be subject to U.S. federal income taxes to the extent that the Company distributes its taxable income to its stockholders on an annual basis and does not engage in prohibited transactions. However, certain activities that the Company may perform may cause it to earn income which will not be qualifying income for REIT purposes. The Company has designated certain of its subsidiaries as taxable REIT subsidiaries, or TRSs, as defined in the Code, to engage in such activities.
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Basis of Presentation and Significant Accounting Policies |
9 Months Ended |
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Sep. 30, 2023 | |
Basis of Presentation and Significant Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies Consolidation and Basis of Presentation The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, have been condensed or omitted according to such SEC rules and regulations. However, management believes that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The condensed consolidated financial statements of the Company include the accounts of all subsidiaries; inter-company accounts and transactions have been eliminated. All trust entities in which the Company holds investments that are considered variable interest entities, or VIEs, for financial reporting purposes were reviewed for consolidation under the applicable consolidation guidance. Whenever the Company has both the power to direct the activities of a trust that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, the Company consolidates the trust. Certain prior period amounts have been reclassified to conform to the current period presentation. All per share amounts, common shares outstanding and common equity-based awards for all prior periods reflect the Company’s one-for-four reverse stock split effected on November 1, 2022 at 5:01 p.m. Eastern Time (refer to Note 17 - Stockholders’ Equity for additional information). The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2023 and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2023 should not be construed as indicative of the results to be expected for future periods or the full year. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amount and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand in the market, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. The Company’s estimates are inherently subjective in nature and actual results could differ from its estimates and the differences may be material. Significant Accounting Policies Included in Note 2 to the Consolidated Financial Statements of the Company’s 2022 Annual Report on Form 10-K is a summary of the Company’s significant accounting policies. Provided below is a summary of additional accounting policies that are significant to the Company’s financial condition and results of operations for the nine months ended September 30, 2023. Business Combinations Under Accounting Standards Codification (ASC) 805, Business Combinations, or ASC 805, an acquisition is considered a business combination when the assets acquired and liabilities assumed constitute a business. The acquisition method prescribed in ASC 805 requires, among other things, that the assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. In a business combination, the initial allocation of the purchase price is considered preliminary and therefore subject to change until the end of the measurement period (up to one year from the acquisition date). Goodwill is calculated as the excess of the consideration transferred over the net assets acquired that meet the criteria for separate recognition and represents the estimated future economic benefits arising from these and other assets acquired that could not be individually identified or do not qualify for recognition as a separate asset. Goodwill is included within the other assets line item on the Company’s condensed consolidated balance sheets. Acquisition-related costs are expensed as incurred. The results of operations of acquired businesses are included from the date of acquisition. Goodwill and Intangible Assets On an annual basis, the Company qualitatively assesses its goodwill assigned to each of its reporting units during the fourth quarter of each year. This qualitative assessment evaluates various events and circumstances, such as macro-economic conditions, industry and market conditions, cost factors, relevant events and financial trends, that may impact a reporting unit’s fair value. Using this qualitative assessment, the Company determines whether it is more-likely-than-not that the reporting unit’s fair value exceeds its carrying value. If it is determined that it is not more-likely-than-not that the reporting unit’s fair value exceeds the carrying value, or upon consideration of other factors, including recent acquisition, restructuring or divestiture activity, the Company performs a quantitative, “step one” goodwill impairment analysis. In addition, the Company may test goodwill in between annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce the fair value of a reporting unit below its carrying value. The Company did not recognize any goodwill impairment during the three and nine months ended September 30, 2023. As a result of the RoundPoint acquisition, the Company identified intangible assets in the form of state licenses, GSE approvals and trade names. Intangible assets are included within the other assets line item on the Company’s condensed consolidated balance sheets. The Company recorded the intangible assets at fair value at the acquisition date and amortizes the value of finite-lived intangibles into expense over the expected useful life. Amortization of acquired intangible assets is included within the other operating expenses line item in the Company’s condensed consolidated statements of comprehensive loss. If impairment events occur, they could accelerate the timing of acquired intangible asset charges. Licenses and approvals acquired are deemed to have an indefinite useful life and are evaluated for impairment annually during the fourth quarter and in interim periods if indicators of impairment exist. The Company did not recognize any impairment on its intangible assets during the three and nine months ended September 30, 2023. Recently Issued and/or Adopted Accounting Standards Facilitation of the Effects of Reference Rate Reform on Financial Reporting The London Interbank Offered Rate, or LIBOR, has been used extensively in the U.S. and globally as a “benchmark” or “reference rate” for various commercial and financial contracts, including corporate and municipal bonds and loans, floating rate mortgages, asset-backed securities, consumer loans, and interest rate swaps and other derivatives. On March 5, 2021, Intercontinental Exchange Inc. announced that ICE Benchmark Administration Limited, the administrator of LIBOR, intended to stop publication of the majority of USD-LIBOR tenors on June 30, 2023. In the U.S., the Alternative Reference Rates Committee, or ARRC, has identified the Secured Overnight Financing Rate, or SOFR, and, in some cases, the forward-looking term rate based on SOFR published by CME Group Benchmark Administration Limited, or Term SOFR, plus, in each case, a recommended spread adjustment, as its preferred alternative rates for U.S. dollar-based LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Numerous industry wide and company-specific transitions as it relates to derivatives and cash markets exposed to LIBOR were completed in connection with its phase-out on June 30, 2023. In March 2020, the FASB issued Accounting Standards Update (ASU) No. 2020-04, which provides temporary optional expedients and exceptions on accounting for contract modifications and hedging relationships for the purpose of the replacement of LIBOR with another reference rate. The guidance also provides a one-time election to sell held-to-maturity debt securities or to transfer such securities to the available-for-sale or trading category. The Company’s material contracts that are or were indexed to USD-LIBOR have been amended to transition to an alternative benchmark, where necessary. Any other unmodified agreements that incorporate LIBOR as the referenced rate either (i) already had provisions in place that provide for an alternative to LIBOR upon its phase-out or that are governed by the Adjustable Interest Rate (LIBOR) Act, or the LIBOR Act, (ii) matured or (iii) were terminated prior to June 30, 2023. The ASU was effective immediately for all entities and expires after December 31, 2024. The Company’s adoption of this ASU did not have an impact on the Company’s financial condition, results of operations or financial statement disclosures.
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Acquisition of RoundPoint Mortgage Servicing LLC |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition of RoundPoint Mortgage Servicing LLC | Acquisition of RoundPoint Mortgage Servicing LLC Effective September 30, 2023, the Company acquired RoundPoint from Freedom after the completion of customary closing conditions and receiving the required regulatory and GSE approvals. The provisional purchase price recognized was $44.7 million, with $23.6 million paid upon closing and $21.1 million recognized as a payable to Freedom within the other liabilities line item on the Company’s condensed consolidated balance sheets. The Company has performed a provisional allocation of the total consideration of $44.7 million to RoundPoint’s assets and liabilities, as set forth below. The final amount and allocation of total consideration may differ from the amounts included herein to reflect new information, assets acquired and liabilities assumed and the fair value of intangible assets that existed as of the acquisition date. The estimate of fair value of assets and liabilities required the use of significant assumptions and estimates. Significant estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and discount rates. These estimates were based on assumptions that management believes to be reasonable as well as a third party-prepared valuation analysis; however, actual results may differ from these estimates. No measurement period adjustments were made during the three months ended September 30, 2023.
As a result of the RoundPoint acquisition, the Company identified intangible assets in the form of mortgage servicing and origination state licenses, insurance state licenses, GSE servicing approvals and trade names. The Company recorded the intangible assets at fair value at the acquisition date and amortizes the value of finite-lived intangibles into expense over the expected useful life. Trade names, with a total acquisition date fair value of $0.2 million, will be amortized straight-line over a finite life of six months based on the Company’s determination of the time to change a trade name. The Company determined the licenses and approvals, with a total acquisition date fair value of $0.6 million, have indefinite useful lives and will be periodically evaluated for impairment given there are no legal, regulatory, contractual, competitive, or economic factors that would limit their useful lives. The total goodwill of $27.7 million was calculated as the excess of the consideration transferred over the net assets acquired and primarily includes the existence of an assembled workforce, synergies and benefits expected to result from combining operations with RoundPoint and adding in-house servicing. The full amount of goodwill for tax purposes of $29.0 million is expected to be deductible. The Company will assess the goodwill annually during the fourth quarter and in interim periods whenever events or circumstances make it more likely than not that an impairment may have occurred. Acquisition-related costs are expensed in the period incurred and included within the other operating expenses line item in the Company’s condensed consolidated statements of comprehensive loss. During the three and nine months ended September 30, 2023, the Company recognized $1.1 million and $1.2 million, respectively, of acquisition-related costs. During both the three and nine months ended September 30, 2022, the Company recognized $0.8 million of acquisition-related costs. As discussed above, the acquisition of RoundPoint closed effective September 30, 2023. Accordingly, RoundPoint’s consolidated balance sheet is included within the Company’s consolidated balance sheet as of September 30, 2023; however, RoundPoint’s results of operations are not included within the Company’s results of operations for the periods presented. Beginning October 1, 2023, RoundPoint’s results of operations will be consolidated with the Company’s in accordance with U.S. GAAP. The following table presents unaudited pro forma combined revenues and income before income taxes for the three and nine months ended September 30, 2023 prepared as if the RoundPoint acquisition had been consummated on January 1, 2022.
____________________ (1)The Company’s revenue is defined as the sum of the total interest income and total other income line items on the condensed consolidated statements of comprehensive loss. The above unaudited supplemental pro forma financial information has not been adjusted for transactions that are now considered inter-company as a result of the acquisition, the conforming of accounting policies, nor the divestiture of RoundPoint’s retail origination business and RPX servicing exchange platform, as required by the stock purchase agreement. The unaudited supplemental pro forma financial information also does not include any anticipated synergies or other anticipated benefits of the RoundPoint acquisition and, accordingly, the unaudited supplemental pro forma financial information is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated on January 1, 2022.
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Variable Interest Entities |
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Variable Interest Entities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | Variable Interest Entities The Company enters into transactions with subsidiary trust entities that are established for limited purposes. One of the Company’s subsidiary trust entities, MSR Issuer Trust, was formed for the purpose of financing MSR through securitization, pursuant to which, through two of the Company’s wholly owned subsidiaries, MSR is pledged to MSR Issuer Trust and in return, MSR Issuer Trust issues term notes to qualified institutional buyers and a variable funding note, or VFN, to one of the subsidiaries, in each case secured on a pari passu basis. The Company has one repurchase facility that is secured by the VFN, which is collateralized by the Company’s MSR. Another of the Company’s subsidiary trust entities, Servicing Advance Receivables Issuer Trust, was formed for the purpose of financing servicing advances through a revolving credit facility, pursuant to which Servicing Advance Receivables Issuer Trust issued a VFN backed by servicing advances pledged to the financing counterparty. Both MSR Issuer Trust and Servicing Advance Receivables Issuer Trust are considered VIEs for financial reporting purposes and were reviewed for consolidation under the applicable consolidation guidance. As the Company has both the power to direct the activities of the trusts that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, the Company is the primary beneficiary and, thus, consolidates the trusts. Additionally, in accordance with arrangements entered into in connection with the securitization transaction and the servicing advance revolving credit facility, the Company has direct financial obligations payable to both MSR Issuer Trust and Servicing Advance Receivables Issuer Trust, which, in turn, support MSR Issuer Trust’s obligations to noteholders under the securitization transaction and Servicing Advance Receivables Issuer Trust’s obligations to the financing counterparty. The following table presents a summary of the assets and liabilities of all consolidated trusts as reported on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:
____________________ (1)Receivables due from a wholly owned subsidiary of the Company to the trusts are eliminated in consolidation in accordance with U.S. GAAP. Additionally, as discussed in Note 1 - Organization and Operations, the Company entered into a definitive stock purchase agreement to acquire RoundPoint whereby the preliminary purchase price was subject to a post-closing adjustment based on RoundPoint’s aggregate “earnings” (as defined in the stock purchase agreement) from October 1, 2022 through the closing date, or the Interim Period, in addition to other post-closing adjustments. During the Interim Period, the manner in which the purchase price is calculated represented an implicit guarantee of the value of RoundPoint’s net book value, in which the Company held the variable interests. These terms also indicated that RoundPoint met the criteria to be considered a VIE that the Company must review for consolidation. As the Company had the obligation to absorb losses and the right to receive benefits of RoundPoint during the Interim Period that could be significant, but not the power to direct the activities of RoundPoint that most significantly impacted its performance, the Company was not the primary beneficiary and, thus, did not consolidate RoundPoint during the Interim Period. Effective September 30, 2023, the parties had satisfied customary closing conditions and received the required regulatory and GSE approvals to close the transaction. Upon closing, RoundPoint became a consolidated wholly owned subsidiary of the Company and was no longer considered a VIE.
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Available-for-Sale Securities, at Fair Value |
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Debt Securities, Available-for-Sale [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-Sale Securities, at Fair Value | Available-for-Sale Securities, at Fair Value The Company holds both Agency and non-Agency available-for sale, or AFS, investment securities which are carried at fair value on the condensed consolidated balance sheets. The following table presents the Company’s AFS investment securities by collateral type as of September 30, 2023 and December 31, 2022:
At September 30, 2023 and December 31, 2022, the Company pledged AFS securities with a carrying value of $8.8 billion and $7.4 billion, respectively, as collateral for repurchase agreements. See Note 12 - Repurchase Agreements. At September 30, 2023 and December 31, 2022, the Company did not have any securities purchased from and financed with the same counterparty that did not meet the conditions of ASC 860, Transfers and Servicing, to be considered linked transactions and, therefore, classified as derivatives. The Company is not required to consolidate VIEs for which it has concluded it does not have both the power to direct the activities of the VIEs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant. The Company’s investments in these unconsolidated VIEs include all non-Agency securities, which are classified within available-for-sale securities, at fair value on the condensed consolidated balance sheets. As of September 30, 2023 and December 31, 2022, the carrying value, which also represents the maximum exposure to loss, of all non-Agency securities in unconsolidated VIEs was $7.9 million and $125.2 million, respectively. The following tables present the amortized cost and carrying value of AFS securities by collateral type as of September 30, 2023 and December 31, 2022:
The following table presents the Company’s AFS securities according to their estimated weighted average life classifications as of September 30, 2023:
Measurement of Allowances for Credit Losses on AFS Securities The Company uses a discounted cash flow method to estimate and recognize an allowance for credit losses on both Agency and non-Agency AFS securities that are not accounted for under the fair value option. The following tables present the changes for the three and nine months ended September 30, 2023 and 2022 in the allowance for credit losses on Agency and non-Agency AFS securities:
The following tables present the components comprising the carrying value of AFS securities for which an allowance for credit losses has not been recorded by length of time that the securities had an unrealized loss position as of September 30, 2023 and December 31, 2022. At September 30, 2023 and December 31, 2022, the Company held 659 and 704 AFS securities, respectively; of the securities for which an allowance for credit losses has not been recorded, 553 and 553 were in an unrealized loss position for less than twelve consecutive months. At both September 30, 2023 and December 31, 2022, none of the Company’s AFS securities were in an unrealized loss position for more than twelve months without an allowance for credit losses recorded.
Gross Realized Gains and Losses Gains and losses from the sale of AFS securities are recorded as realized gains (losses) within (loss) gain on investment securities in the Company’s condensed consolidated statements of comprehensive loss. The following table presents details around sales of AFS securities during the three and nine months ended September 30, 2023 and 2022:
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Servicing Activities |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosures Pertaining to Servicing Assets and Servicing Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Servicing Activities | Servicing Activities Mortgage Servicing Rights, at Fair Value One of the Company’s wholly owned subsidiaries, Matrix, has approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent the right to control the servicing of residential mortgage loans. Matrix acquires MSR from third-party originators through flow and bulk purchases but does not directly service mortgage loans; instead, it contracts with appropriately licensed subservicers to handle substantially all servicing functions in the name of the subservicer for the mortgage loans underlying the Company’s MSR. On October 1, 2023, the Company, through its newly acquired subsidiary RoundPoint, began directly servicing a portion of the mortgage loans underlying the Company’s MSR portfolio as well as servicing mortgage loans underlying MSR owned by third parties. RoundPoint has approvals from Fannie Mae and Freddie Mac to service residential mortgage loans. The following table summarizes activity related to MSR for the three and nine months ended September 30, 2023 and 2022.
____________________ (1)During the three and nine months ended September 30, 2023, excess MSR was transferred to Agency-sponsored trusts in exchange for stripped mortgage backed securities, or SMBS. In each transaction, a portion of the SMBS was acquired by third parties and the Company acquired the remaining balance of those SMBS, which are included within Agency AFS securities unless sold prior to September 30, 2023. (2)Includes the impact of acquiring MSR at a cost different from fair value. (3)Primarily represents changes due to the realization of cash flows. (4)Includes purchase price adjustments, contractual prepayment protection, and changes due to the Company’s purchase of the underlying collateral. (5)Based on the principal balance of the loans underlying the MSR reported by servicers on a month lag, adjusted for current month purchases. At September 30, 2023 and December 31, 2022, the Company pledged MSR with a carrying value of $3.2 billion and $3.0 billion, respectively, as collateral for repurchase agreements, revolving credit facilities and term notes payable. See Note 12 - Repurchase Agreements, Note 13 - Revolving Credit Facilities and Note 14 - Term Notes Payable. As of September 30, 2023 and December 31, 2022, the key economic assumptions and sensitivity of the fair value of MSR to immediate 10% and 20% adverse changes in these assumptions were as follows:
These assumptions and sensitivities are hypothetical and should be considered with caution. Changes in fair value based on 10% and 20% variations in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of MSR is calculated without changing any other assumptions. In reality, changes in one factor may result in changes in another (e.g., increased market interest rates may result in lower prepayments and increased credit losses) that could magnify or counteract the sensitivities. Further, these sensitivities show only the change in the asset balances and do not show any expected change in the fair value of the instruments used to manage the interest rates and prepayment risks associated with these assets. Risk Mitigation Activities The primary risks associated with the Company’s MSR are changes in interest rates, mortgage spreads and prepayments. The Company economically hedges interest rate and mortgage spread risk primarily with its Agency RMBS portfolio. Prepayment risk is carefully monitored and partially mitigated through the Company’s ability to retain the MSR, in certain circumstances, through recapture agreements with its subservicers if the underlying loan is refinanced. Mortgage Servicing Income The following table presents the components of servicing income recorded on the Company’s condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2023 and 2022:
Mortgage Servicing Advances As the servicer of record for the MSR assets, the Company may be required to advance principal and interest payments to security holders, and intermittent tax and insurance payments to local authorities and insurance companies on mortgage loans that are in forbearance, delinquency or default. The Company is responsible for funding these advances, potentially for an extended period of time, before receiving reimbursement from Fannie Mae and Freddie Mac. Servicing advances are priority cash flows in the event of a loan principal reduction or foreclosure and ultimate liquidation of the real estate-owned property, thus making their collection reasonably assured. These servicing advances totaled $72.4 million and $119.0 million and were included in other assets on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively. At September 30, 2023 and December 31, 2022, mortgage loans in 60+ day delinquent status (whether or not subject to forbearance) accounted for approximately 0.7% and 0.8%, respectively, of the aggregate principal balance of loans for which the Company had servicing advance funding obligations. The Company has one revolving credit facility to finance its servicing advance obligations. At September 30, 2023 and December 31, 2022, the Company had pledged servicing advances with a carrying value of $42.7 million and $67.8 million, respectively, as collateral for this revolving credit facility. See Note 13 - Revolving Credit Facilities. Serviced Mortgage Assets The Company’s total serviced mortgage assets consist of residential mortgage loans underlying its MSR assets, off-balance sheet residential mortgage loans owned by other entities for which the Company acts as servicing administrator and other assets. The following table presents the number of loans and unpaid principal balance of the mortgage assets for which the Company manages the servicing as of September 30, 2023 and December 31, 2022:
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Cash, Cash Equivalents and Restricted Cash |
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Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash held in bank accounts and cash held in money market funds on an overnight basis. The Company is required to maintain certain cash balances with counterparties for securities and derivatives trading activity, servicing activities and collateral for the Company’s borrowings in restricted accounts. The Company has also placed cash in a restricted account pursuant to a letter of credit on an office space lease. The following table presents the Company’s restricted cash balances as of September 30, 2023 and December 31, 2022:
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company’s condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022 that sum to the total of the same such amounts shown in the statements of cash flows:
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Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company enters into a variety of derivative and non-derivative instruments in connection with its risk management activities. The primary objective for executing these derivative and non-derivative instruments is to mitigate the Company’s economic exposure to future events that are outside its control, principally cash flow volatility associated with interest rate risk (including associated prepayment risk). Specifically, the Company enters into derivative and non-derivative instruments to economically hedge interest rate risk or “duration mismatch (or gap)” by adjusting the duration of its floating-rate borrowings into fixed-rate borrowings to more closely match the duration of its assets. This particularly applies to floating-rate borrowing agreements with maturities or interest rate resets of less than six months. Typically, the interest receivable terms (e.g., Overnight Index Swap Rate, or OIS, or SOFR) of certain derivatives match the terms of the underlying debt, resulting in an effective conversion of the rate of the related borrowing agreement from floating to fixed. The objective is to manage the cash flows associated with current and anticipated interest payments on borrowings, as well as the ability to roll or refinance borrowings at the desired amount by adjusting the duration. To help manage the adverse impact of interest rate changes on the value of the Company’s portfolio as well as its cash flows, the Company may, at times, enter into various forward contracts, including short securities, Agency to-be-announced securities, or TBAs, options, futures, swaps, caps and total return swaps. In executing on the Company’s current risk management strategy, the Company has entered into TBAs, interest rate swap and swaption agreements, futures and options on futures. The Company has also entered into a number of non-derivative instruments to manage interest rate risk, principally MSR and interest-only securities (see discussion below). The following summarizes the Company’s significant asset and liability classes, the risk exposure for these classes, and the Company’s risk management activities used to mitigate these risks. The discussion includes both derivative and non-derivative instruments used as part of these risk management activities. Any of the Company’s derivative and non-derivative instruments may be entered into in conjunction with one another in order to mitigate risks. As a result, the following discussions of each type of instrument should be read as a collective representation of the Company’s risk mitigation efforts and should not be considered independent of one another. While the Company uses derivative and non-derivative instruments to achieve the Company’s risk management activities, it is possible that these instruments will not effectively mitigate all or a substantial portion of the Company’s market rate risk. In addition, the Company might elect, at times, not to enter into certain hedging arrangements in order to maintain compliance with REIT requirements. Balance Sheet Presentation In accordance with ASC 815, the Company records derivative financial instruments on its condensed consolidated balance sheets as assets or liabilities at fair value. Changes in fair value are accounted for depending on the use of the derivative instruments and whether they are designated or qualifying as hedge instruments. Due to the volatility of the interest rate and credit markets and difficulty in effectively matching pricing or cash flows, the Company has not designated any current derivatives as hedging instruments. The following tables present the gross fair value and notional amounts of the Company’s derivative financial instruments treated as trading derivatives as of September 30, 2023 and December 31, 2022:
Comprehensive Loss Statement Presentation The Company has not applied hedge accounting to its current derivative portfolio held to mitigate interest rate risk and credit risk. As a result, the Company is subject to volatility in its earnings due to movement in the unrealized gains and losses associated with its derivative instruments. The following table summarizes the location and amount of gains and losses on derivative instruments reported in the condensed consolidated statements of comprehensive loss:
For the three and nine months ended September 30, 2023, the Company recognized income of $6.9 million and $13.9 million, respectively, for the accrual and/or settlement of the net interest expense associated with its interest rate swaps and caps. The income/expense results from receiving either a floating interest rate (OIS or SOFR) or a fixed interest rate and paying either a fixed interest rate or a floating interest rate (OIS or SOFR) on an average $8.9 billion and $6.9 billion notional, respectively. For the three and nine months ended September 30, 2022, the Company recognized expense of $0.2 million and $4.8 million respectively, for the accrual and/or settlement of the net interest expense associated with its interest rate swaps. The expense results from receiving either a floating interest rate (OIS or SOFR) or a fixed interest rate and paying either a fixed interest rate or a floating interest rate (OIS or SOFR) on an average $5.0 billion and $16.6 billion notional, respectively. The following tables present information with respect to the volume of activity in the Company’s derivative instruments during the three and nine months ended September 30, 2023 and 2022:
____________________ (1)Excludes net interest paid or received in full settlement of the net interest spread liability. Cash flow activity related to derivative instruments is reflected within the operating activities and investing activities sections of the condensed consolidated statements of cash flows. Realized gains and losses and derivative fair value adjustments are reflected within the realized and unrealized gain on interest rate swaps and swaptions and unrealized gains on other derivative instruments line items within the operating activities section of the condensed consolidated statements of cash flows. The remaining cash flow activity related to derivative instruments is reflected within the (purchases) short sales of derivative instruments, net; proceeds from sales and settlement (payments for termination and settlement) of derivative instruments, net; and (decrease) increase in due to counterparties, net line items within the investing activities section of the condensed consolidated statements of cash flows. Interest Rate Sensitive Assets/Liabilities The Company’s Agency RMBS portfolio is generally subject to change in value when interest rates or prepayment speeds decrease or increase, depending on the type of investment. Periods of rising interest rates with corresponding decreasing prepayment speeds generally result in a decline in the value of the Company’s fixed-rate Agency principal and interest (P&I) RMBS. The impact of this effect on the Company’s fixed-rate Agency P&I RMBS portfolio is partially mitigated by the presence of fixed-rate interest-only Agency RMBS, which generally increase in value when prepayment speeds decrease and MSR, which generally increase in value when prepayment speeds decrease and interest rates increase. As of September 30, 2023 and December 31, 2022, the Company had $46.0 million and $23.8 million, respectively, of interest-only securities, and $3.2 billion and $3.0 billion, respectively, of MSR. Interest-only securities are included in AFS securities, at fair value, in the condensed consolidated balance sheets. The Company monitors its borrowings under repurchase agreements and revolving credit facilities, which are generally floating-rate debt, in relation to the rate profile of its portfolio. In connection with its risk management activities, the Company enters into a variety of derivative and non-derivative instruments to economically hedge interest rate risk or duration mismatch (or gap) by adjusting the duration of its floating-rate borrowings into fixed-rate borrowings to more closely match the duration of its assets. This particularly applies to borrowing agreements with maturities or interest rate resets of less than six months. Typically, the interest receivable terms (e.g., OIS or SOFR) of certain derivatives match the terms of the underlying debt, resulting in an effective conversion of the rate of the related borrowing agreement from floating to fixed. The objective is to manage the cash flows associated with current and anticipated interest payments on borrowings, as well as the ability to roll or refinance borrowings at the desired amount by adjusting the duration. To help manage the adverse impact of interest rate changes on the value of the Company’s portfolio as well as its cash flows, the Company may, at times, enter into various forward contracts, including short securities, TBAs, options, futures, swaps, caps, credit default swaps and total return swaps. In executing on the Company’s current interest rate risk management strategy, the Company has entered into TBAs, interest rate swap and swaption agreements, futures and options on futures. The Company’s derivative contracts that are or were indexed to USD-LIBOR have been amended to transition to an alternative benchmark, where necessary. Any other unmodified agreements that incorporate LIBOR as the referenced rate either (i) already had provisions in place that provide for an alternative to LIBOR upon its phase-out, (ii) matured or (iii) were terminated prior to June 30, 2023. See Note 2 - Basis of Presentation and Significant Accounting Policies for further discussion of the transition away from LIBOR. TBAs. The Company may use TBAs as a means of deploying capital until targeted investments are available or to take advantage of temporary displacements, funding advantages or valuation differentials in the marketplace. Additionally, the Company may use TBAs independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. TBAs are forward contracts for the purchase (long notional positions) or sale (short notional positions) of Agency RMBS. The issuer, coupon and stated maturity of the Agency RMBS are predetermined as well as the trade price, face amount and future settle date (published each month by the Securities Industry and Financial Markets Association). However, the specific Agency RMBS to be delivered upon settlement is not known at the time of the TBA transaction. As a result, and because physical delivery of the Agency RMBS upon settlement cannot be assured, the Company accounts for TBAs as derivative instruments. The Company may hold both long and short notional TBA positions, which are disclosed on a gross basis according to the unrealized gain or loss position of each TBA contract regardless of long or short notional position. The following tables present the notional amount, cost basis, market value and carrying value (which approximates fair value) of the Company’s TBA positions as of September 30, 2023 and December 31, 2022:
___________________ (1)Notional amount represents the face amount of the underlying Agency RMBS. (2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS. (3)Market value represents the current market value of the TBA (or of the underlying Agency RMBS) as of period end. (4)Net carrying value represents the difference between the market value of the TBA as of period end and its cost basis, and is reported in derivative assets / (liabilities), at fair value, in the condensed consolidated balance sheets. Futures. The Company may use a variety of types of futures independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. The following table summarizes certain characteristics of the Company’s futures as of September 30, 2023 and December 31, 2022:
___________________ (1)During the three months ended June 30, 2023, all of the Company’s outstanding Eurodollar futures contracts with maturities after June 30, 2023 were converted into three-month SOFR futures contracts with similar characteristics. Interest Rate Swap Agreements. The Company may use interest rate swaps independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. The Company did not hold any interest rate swaps as of December 31, 2022. As of September 30, 2023, the Company held the following interest rate swaps that were utilized as economic hedges of interest rate exposure (or duration) whereby the Company receives interest at a floating interest rate (OIS or SOFR):
Additionally, as of September 30, 2023, the Company held the following interest rate swaps in order to mitigate mortgage interest rate exposure (or duration) risk whereby the Company pays interest at a floating interest rate (OIS or SOFR):
____________________ (1)Notional amount includes $398.0 million in forward starting interest rate swaps as of September 30, 2023. (2)Weighted averages exclude forward starting interest rate swaps. As of September 30, 2023, the weighted average fixed receive rate on forward starting interest rate swaps was 3.8%. Interest Rate Swaptions. The Company may use interest rate swaptions (which provide the option to enter into interest rate swap agreements for a predetermined notional amount, stated term and pay and receive interest rates in the future) independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. The Company did not hold any interest rate swaptions as of December 31, 2022. As of September 30, 2023, the Company had the following outstanding interest rate swaptions:
____________________ (1)As of September 30, 2023, all underlying swap floating rates were tied to SOFR. Credit Risk The Company’s exposure to credit losses on its Agency RMBS portfolio is limited due to implicit or explicit backing from either a GSE or a U.S. government agency. The payment of principal and interest on the Freddie Mac and Fannie Mae mortgage-backed securities are guaranteed by those respective agencies, and the payment of principal and interest on the Ginnie Mae mortgage-backed securities are backed by the full faith and credit of the U.S. government. In future periods, the Company could enhance its credit risk protection, enter into further paired derivative positions, including both long and short credit default swaps, and/or seek opportunistic trades in the event of a market disruption (see discussion under “Non-Risk Management Activities” below). The Company also has processes and controls in place to monitor, analyze, manage and mitigate its credit risk with respect to non-Agency securities. Derivative financial instruments contain an element of credit risk if counterparties are unable to meet the terms of the agreements. Credit risk associated with derivative financial instruments is measured as the net replacement cost should the counterparties that owe the Company under such contracts completely fail to perform under the terms of these contracts, assuming there are no recoveries of underlying collateral, as measured by the market value of the derivative financial instruments. As of September 30, 2023, the fair value of derivative financial instruments as an asset and liability position was $20.6 million and $23.6 million, respectively. The Company attempts to mitigate its credit risk exposure on derivative financial instruments by limiting its counterparties to banks and financial institutions that meet established internal credit guidelines. The Company also seeks to spread its credit risk exposure across multiple counterparties in order to reduce its exposure to any single counterparty. Additionally, the Company reduces credit risk on the majority of its derivative instruments by entering into agreements that permit the closeout and netting of transactions with the same counterparty or clearing agency upon the occurrence of certain events. To further mitigate the risk of counterparty default, the Company maintains collateral agreements with certain of its counterparties and clearing agencies, which require both parties to maintain cash deposits in the event the fair values of the derivative financial instruments exceed established thresholds. The Company’s centrally cleared interest rate swaps and exchange-traded futures and options on futures require the Company to post an “initial margin” amount determined by the clearing exchange, which is generally intended to be set at a level sufficient to protect the exchange from the derivative instrument’s maximum estimated single-day price movement. The Company also exchanges “variation margin” based upon daily changes in fair value, as measured by the exchange. The exchange of variation margin is considered a settlement of the derivative instrument, as opposed to pledged collateral. Accordingly, the Company accounts for the receipt or payment of variation margin as a direct reduction to the carrying value of the centrally cleared or exchange-traded derivative asset or liability.
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Reverse Repurchase Agreements |
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Sep. 30, 2023 | |
Reverse Repurchase Agreements [Abstract] | |
Reverse Repurchase Agreements | Reverse Repurchase AgreementsAs of September 30, 2023 and December 31, 2022, the Company had $270.5 million and $189.5 million in amounts due to counterparties as collateral for reverse repurchase agreements that could be pledged, delivered or otherwise used, with a fair value of $282.8 million and $189.3 million, respectively. Additionally, as of December 31, 2022, the Company had entered into $877.6 million in reverse repurchase agreements in order to effectively borrow U.S. Treasury securities and pledge them as collateral for $888.3 million of repurchase agreements (see Note 12 - Repurchase Agreements for further detail). These reverse repurchase agreements had the same maturities as the corresponding repurchase agreements, which were all short term as of December 31, 2022. As of September 30, 2023, the Company had no reverse repurchase agreements in place to effectively borrow U.S. Treasury securities and pledge them as collateral for repurchase agreements. |
Offsetting Assets and Liabilities |
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Offsetting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offsetting Assets and Liabilities | Offsetting Assets and Liabilities Certain of the Company’s repurchase agreements are governed by underlying agreements that provide for a right of setoff in the event of default by either party to the agreement. The Company also has netting arrangements in place with all derivative counterparties pursuant to standard documentation developed by the International Swap and Derivatives Association, or ISDA, or central clearing exchange agreements. The Company and the counterparty or clearing agency are required to post cash collateral based upon the net underlying market value of the Company’s open positions with the counterparty. Additionally, the Company’s centrally cleared interest rate swaps and exchange-traded futures and options on futures require the Company to post an initial margin amount determined by the clearing exchange, which is generally intended to be set at a level sufficient to protect the exchange from the derivative instrument’s maximum estimated single-day price movement. The Company also exchanges variation margin based upon daily changes in fair value, as measured by the exchange. Under U.S. GAAP, if the Company has a valid right of setoff, it may offset the related asset and liability and report the net amount. Based on rules governing certain central clearing and exchange-trading activities, the exchange of variation margin is considered a settlement of the derivative instrument, as opposed to pledged collateral. Accordingly, the Company accounts for the receipt or payment of variation margin on Chicago Mercantile Exchange, or CME, and London Clearing House, or LCH, cleared positions as a direct reduction to the carrying value of the centrally cleared or exchange-traded derivative asset or liability. The receipt or payment of initial margin is accounted for separate from the derivative asset or liability. Reverse repurchase agreements and repurchase agreements with the same counterparty and the same maturity are presented net in the Company’s condensed consolidated balance sheets when the terms of the agreements meet the criteria to permit netting. The Company reports cash flows on repurchase agreements as financing activities and cash flows on reverse repurchase agreements as investing activities in the condensed consolidated statements of cash flows. The Company presents derivative assets and liabilities (other than centrally cleared or exchange-traded derivative instruments) subject to master netting arrangements or similar agreements on a net basis, based on derivative type and counterparty, in its condensed consolidated balance sheets. Separately, the Company presents cash collateral subject to such arrangements (other than variation margin on centrally cleared or exchange-traded derivative instruments) on a net basis, based on counterparty, in its condensed consolidated balance sheets. However, the Company does not offset repurchase agreements, reverse repurchase agreements or derivative assets and liabilities (other than centrally cleared or exchange-traded derivative instruments) with the associated cash collateral on its condensed consolidated balance sheets. The following tables present information about the Company’s assets and liabilities that are subject to master netting arrangements or similar agreements and can potentially be offset on the Company’s condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:
____________________ (1)Amounts presented are limited in total to the net amount of assets or liabilities presented in the condensed consolidated balance sheets by instrument. Excess cash collateral or financial assets that are pledged to counterparties may exceed the financial liabilities subject to a master netting arrangement or similar agreement, or counterparties may have pledged excess cash collateral to the Company that exceed the corresponding financial assets. These excess amounts are excluded from the table above, although separately reported within restricted cash, due from counterparties, or due to counterparties in the Company’s condensed consolidated balance sheets.
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value Fair Value Measurements ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). Additionally, ASC 820 requires an entity to consider all aspects of nonperformance risk, including the entity’s own credit standing, when measuring fair value of a liability. ASC 820 establishes a three-level hierarchy to be used when measuring and disclosing fair value. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three levels: Level 1Inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date under current market conditions. Additionally, the entity must have the ability to access the active market and the quoted prices cannot be adjusted by the entity. Level 2Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full-term of the assets or liabilities. Level 3Unobservable inputs are supported by little or no market activity. The unobservable inputs represent the assumptions that market participants would use to price the assets and liabilities, including risk. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation. The following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized. Available-for-sale securities. The Company holds a portfolio of AFS securities that are carried at fair value in the condensed consolidated balance sheets and primarily comprised of Agency and non-Agency investment securities. The Company determines the fair value of its Agency securities based upon prices obtained from third-party brokers and pricing vendors received using bid price, which are deemed indicative of market activity. The third-party pricing vendors use pricing models that generally incorporate such factors as coupons, primary and secondary mortgage rates, rate reset period, issuer, prepayment speeds, credit enhancements and expected life of the security. In determining the fair value of its non-Agency securities, management judgment may be used to arrive at fair value that considers prices obtained from third-party pricing vendors and other applicable market data. If observable market prices are not available or insufficient to determine fair value due principally to illiquidity in the marketplace, then fair value is based upon models that are primarily based on observable market-based inputs but also include unobservable market data inputs (including prepayment speeds, delinquency levels, and credit losses). The Company classified 99.9% and 0.1% of its AFS securities as Level 2 and Level 3 fair value assets, respectively, at September 30, 2023. Mortgage servicing rights. The Company holds a portfolio of MSR that are carried at fair value on the condensed consolidated balance sheets. The Company determines fair value of its MSR based on prices obtained from third-party pricing vendors. Although MSR transactions may be observable in the marketplace, the details of those transactions are not necessarily reflective of the value of the Company’s MSR portfolio. Third-party vendors use both observable market data and unobservable market data (including forecasted prepayment speeds; option-adjusted spread, or OAS; and cost to service) as inputs into models, which help to inform their best estimates of fair value market price. As a result, the Company classified 100% of its MSR as Level 3 fair value assets at September 30, 2023. Derivative instruments. The Company may enter into a variety of derivative financial instruments as part of its hedging strategies. The Company principally executes over-the-counter, or OTC, derivative contracts, such as interest rate swaps and swaptions. The Company utilizes third-party brokers to value its financial derivative instruments. The Company classified 100% of its interest rate swaps and swaptions reported at fair value as Level 2 at September 30, 2023. The Company may also enter into certain other derivative financial instruments, such as inverse interest-only securities, TBAs, futures and options on futures. The Company utilizes third-party pricing vendors to value inverse interest-only securities, as these instruments are similar in form to the Company’s AFS securities. The Company classified 100% of its inverse interest-only securities at fair value as Level 2 at September 30, 2023. TBAs, futures and options on futures are considered to be active markets such that participants transact with sufficient frequency and volume to provide transparent pricing information for identical instruments. The Company utilizes third-party pricing vendors to value TBAs, futures and options on futures. The Company reported 100% of its TBAs and futures as Level 1 as of September 30, 2023. The Company did not hold any options on futures at September 30, 2023. The Company’s policy is to minimize credit exposure related to financial derivatives used for hedging by limiting the hedge counterparties to major banks, financial institutions, exchanges, and private investors who meet established capital and credit guidelines as well as by limiting the amount of exposure to any individual counterparty. The Company has netting arrangements in place with all derivative counterparties pursuant to standard documentation developed by ISDA or central clearing exchange agreements. Additionally, both the Company and the counterparty or clearing agency are required to post cash margin based upon the net underlying market value of the Company’s open positions with the counterparty. Posting of cash margin typically occurs daily, subject to certain dollar thresholds. Due to the existence of netting arrangements, as well as frequent cash margin posting at low posting thresholds, credit exposure to the Company and/or to the counterparty or clearing agency is considered materially mitigated. Based on the Company’s assessment, there is no requirement for any additional adjustment to derivative valuations specifically for credit. The following tables display the Company’s assets and liabilities measured at fair value on a recurring basis. The Company often economically hedges the fair value change of its assets or liabilities with derivatives and other financial instruments. The tables below display the hedges separately from the hedged items, and therefore do not directly display the impact of the Company’s risk management activities:
The Company may be required to measure certain assets or liabilities at fair value from time to time. These periodic fair value measures typically result from application of certain impairment measures under U.S. GAAP. These items would constitute nonrecurring fair value measures under ASC 820. As of September 30, 2023, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis in the periods presented. The valuation of Level 3 instruments requires significant judgment by the third-party pricing vendors and/or management. The third-party pricing vendors and/or management rely on inputs such as market price quotations from market makers (either market or indicative levels), original transaction price, recent transactions in the same or similar instruments, and changes in financial ratios or cash flows to determine fair value. Level 3 instruments may also be discounted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the third-party pricing vendors in the absence of market information. Assumptions used by the third-party pricing vendors due to lack of observable inputs may significantly impact the resulting fair value and therefore the Company’s condensed consolidated financial statements. The Company’s valuation committee reviews all valuations that are based on pricing information received from third-party pricing vendors. As part of this review, prices are compared against other pricing or input data points in the marketplace, along with internal valuation expertise, to ensure the pricing is reasonable. In addition, the Company performs back-testing of pricing information to validate price information and identify any pricing trends of a third-party pricing vendors. In determining fair value, third-party pricing vendors use various valuation approaches, including market and income approaches. Inputs that are used in determining fair value of an instrument may include pricing information, credit data, volatility statistics, and other factors. In addition, inputs can be either observable or unobservable. The availability of observable inputs can vary by instrument and is affected by a wide variety of factors, including the type of instrument, whether the instrument is new and not yet established in the marketplace and other characteristics particular to the instrument. The third-party pricing vendor uses prices and inputs that are current as of the measurement date, including during periods of market dislocations. In periods of market dislocation, the availability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified to or from various levels within the fair value hierarchy. Securities that are priced using third-party broker quotations are valued at the bid price (in the case of long positions) or the ask price (in the case of short positions) at the close of trading on the date as of which value is determined. Exchange-traded securities for which no bid or ask price is available are valued at the last traded price. OTC derivative contracts, including interest rate swap and swaption agreements, are valued by the Company using observable inputs, specifically quotations received from third-party brokers. Exchange-traded derivative instruments, including futures and options on futures, are valued based on quoted prices for identical instruments in active markets. The following table presents the reconciliation for the Company’s Level 3 assets measured at fair value on a recurring basis:
____________________ (1)The change in unrealized gains or losses on available-for-sale securities accounted for under the fair value option was recorded in (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss. (2)The change in unrealized gains or losses on MSR was recorded in gain (loss) on servicing asset on the condensed consolidated statements of comprehensive loss. (3)The change in unrealized gains or losses on available-for-sale securities accounted for under the fair value option that were held at the end of the reporting period was recorded in (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss. (4)The change in unrealized gains or losses on MSR that were held at the end of the reporting period was recorded in gain (loss) on servicing asset on the condensed consolidated statements of comprehensive loss. No transfers between Level 1, Level 2 or Level 3 were made during the nine months ended September 30, 2023. Transfers between Levels are deemed to take place on the first day of the reporting period in which the transfer has taken place. The Company used multiple third-party pricing vendors in the fair value measurement of its Level 3 AFS securities. The significant unobservable inputs used by the third-party pricing vendors included expected default, severity and discount rate. Significant increases (decreases) in any of the inputs in isolation may result in significantly lower (higher) fair value measurement. The Company also used multiple third-party pricing vendors in the fair value measurement of its Level 3 MSR. The tables below present information about the significant unobservable market data used by the third-party pricing vendors as inputs into models utilized to inform their best estimates of the fair value measurement of the Company’s MSR classified as Level 3 fair value assets at September 30, 2023 and December 31, 2022:
___________________ (1)Calculated by averaging the weighted average significant unobservable inputs used by the multiple third-party pricing vendors in the fair value measurement of MSR. Certain assets are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances, such as when there is evidence of impairment. Upon the occurrence of certain events, the Company re-measures the fair value of long-lived assets, including property, plant and equipment, operating lease right of use assets, intangible assets and goodwill if an impairment or observable price adjustment is recognized in the current period. Fair Value of Financial Instruments In accordance with ASC 820, the Company is required to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the condensed consolidated balance sheets, for which fair value can be estimated. The following describes the Company’s methods for estimating the fair value for financial instruments. •AFS securities, MSR, and derivative assets and liabilities are recurring fair value measurements; carrying value equals fair value. See discussion of valuation methods and assumptions within the Fair Value Measurements section of this Note 11. •Cash and cash equivalents and restricted cash have a carrying value which approximates fair value because of the short maturities of these instruments. The Company categorizes the fair value measurement of these assets as Level 1. •Reverse repurchase agreements have a carrying value which approximates fair value due to their short-term nature. The Company categorizes the fair value measurement of these assets as Level 2. •The carrying value of repurchase agreements and revolving credit facilities that mature in less than one year generally approximates fair value due to the short maturities. As of September 30, 2023, the Company had outstanding borrowings of $1.1 billion under revolving credit facilities that are considered long-term. The Company’s long-term revolving credit facilities have floating rates based on an index plus a spread and the credit spread is typically consistent with those demanded in the market. Accordingly, the interest rates on these borrowings are at market and thus carrying value approximates fair value. The Company categorizes the fair value measurement of these liabilities as Level 2. •Term notes payable are recorded at outstanding principal balance, net of any unamortized deferred debt issuance costs. In determining the fair value of term notes payable, management judgment may be used to arrive at fair value that considers prices obtained from third-party pricing vendors, broker quotes received and other applicable market data. If observable market prices are not available or insufficient to determine fair value due principally to illiquidity in the marketplace, then fair value is based upon internally developed models that are primarily based on observable market-based inputs but also include unobservable market data inputs (including prepayment speeds, delinquency levels, and credit losses). The Company categorizes the fair value measurement of these liabilities as Level 2. •Convertible senior notes are carried at their unpaid principal balance, net of any unamortized deferred issuance costs. The Company estimates the fair value of its convertible senior notes using the market transaction price nearest to September 30, 2023. The Company categorizes the fair value measurement of these assets as Level 2. The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at September 30, 2023 and December 31, 2022:
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Repurchase Agreements |
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Disclosure of Repurchase Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase Agreements | Repurchase Agreements As of September 30, 2023 and December 31, 2022, the Company had outstanding $9.1 billion and $8.6 billion, respectively, of repurchase agreements. Excluding the effect of the Company’s interest rate swaps, the repurchase agreements had a weighted average borrowing rate of 5.65% and 3.95% and weighted average remaining maturities of 98 and 59 days as of September 30, 2023 and December 31, 2022, respectively. The Company’s repurchase agreements that are or were indexed to USD-LIBOR have been amended to transition to an alternative benchmark, where necessary. Any other unmodified agreements that incorporate LIBOR as the referenced rate either (i) already had provisions in place that provide for an alternative to LIBOR upon its phase-out, (ii) matured or (iii) were terminated prior to June 30, 2023. See Note 2 - Basis of Presentation and Significant Accounting Policies for further discussion of the transition away from LIBOR. At September 30, 2023 and December 31, 2022, the Company’s repurchase agreements had the following characteristics and remaining maturities:
____________________ (1)U.S. Treasury securities effectively borrowed under reverse repurchase agreements. The following table summarizes assets at carrying values that are pledged or restricted as collateral for the future payment obligations of the Company’s repurchase agreements:
____________________ (1)As of September 30, 2023 and December 31, 2022, MSR repurchase agreements of $219.8 million and $309.0 million, respectively, were secured by a VFN issued in connection with the Company’s securitization of MSR. Additionally, as of September 30, 2023, MSR repurchase agreements of $58.1 million were secured by a portion of the term notes issued in connection with the Company’s securitization of MSR and repurchased by the Company. The VFN and the term notes are both collateralized by the Company’s MSR. (2)U.S. Treasury securities effectively borrowed under reverse repurchase agreements. Although the transactions under repurchase agreements represent committed borrowings until maturity, the respective lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or fund margin calls. As of both September 30, 2023 and December 31, 2022, the net carrying value of assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest, with any individual counterparty or group of related counterparties did not exceed 10% of total stockholders’ equity. The Company does not anticipate any defaults by its repurchase agreement counterparties. There can be no assurance, however, that any such default or defaults will not occur.
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Revolving Credit Facilities |
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Revolving Credit Facilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revolving Credit Facilities | Revolving Credit Facilities To finance MSR assets and related servicing advance obligations, the Company has entered into revolving credit facilities collateralized by the value of the MSR and/or servicing advances pledged. As of September 30, 2023 and December 31, 2022, the Company had outstanding short- and long-term borrowings under revolving credit facilities of $1.4 billion and $1.1 billion with a weighted average borrowing rate of 8.65% and 7.68% and weighted average remaining maturities of 1.3 and 1.1 years, respectively. The Company’s revolving credit facilities that are or were indexed to USD-LIBOR have been amended to transition to an alternative benchmark, where necessary. Any other unmodified agreements that incorporate LIBOR as the referenced rate either (i) already had provisions in place that provide for an alternative to LIBOR upon its phase-out, (ii) matured or (iii) were terminated prior to June 30, 2023. See Note 2 - Basis of Presentation and Significant Accounting Policies for further discussion of the transition away from LIBOR. At September 30, 2023 and December 31, 2022, borrowings under revolving credit facilities had the following remaining maturities:
Although the transactions under revolving credit facilities represent committed borrowings from the time of funding until maturity, the respective lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets below a designated threshold would require the Company to provide additional collateral or pay down the facility. As of September 30, 2023 and December 31, 2022, MSR with a carrying value of $2.3 billion and $1.8 billion, respectively, was pledged as collateral for the Company’s future payment obligations under its MSR revolving credit facilities. As of September 30, 2023 and December 31, 2022, servicing advances with a carrying value of $42.7 million and $67.8 million, respectively, were pledged as collateral for the Company’s future payment obligations under its servicing advance revolving credit facility. The Company does not anticipate any defaults by its revolving credit facility counterparties, although there can be no assurance that any such default or defaults will not occur.
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Term Notes Payable |
9 Months Ended |
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Sep. 30, 2023 | |
Term Notes Payable [Abstract] | |
Term Notes Payable | Term Notes Payable The debt issued in connection with the Company’s on-balance sheet MSR securitization is classified as term notes payable and carried at outstanding principal balance, which was $295.8 million as of September 30, 2023 and $400.0 million as of December 31, 2022, respectively, net of any unamortized deferred debt issuance costs, on the Company’s condensed consolidated balance sheets. During both the three and nine months ended September 30, 2023, the Company repurchased $104.2 million principal amount of its MSR term notes in open market transactions for an aggregate cost of $101.0 million, resulting in a gain, net of unamortized deferred issuance costs, of $2.9 million recorded within the other income (loss) line item on the condensed consolidated statements of comprehensive loss. No notes were repurchased during the three and nine months ended September 30, 2022. As of September 30, 2023 and December 31, 2022, the outstanding amount due on term notes payable was $295.0 million and $398.0 million, net of deferred debt issuance costs, with a weighted average interest rate of 8.23% and 7.19% and weighted average remaining maturities of 0.7 years and 1.5 years. The Company’s term notes previously incorporated LIBOR as the referenced rate, which was replaced with Term SOFR, plus a spread adjustment, during the three months ended June 30, 2023. See Note 2 - Basis of Presentation and Significant Accounting Policies for further discussion of the transition away from LIBOR. At September 30, 2023 and December 31, 2022, the Company pledged MSR with a carrying value of $398.4 million and $500.0 million and weighted average underlying loan coupon of 3.28% and 3.33%, respectively, as collateral for term notes payable. Additionally, as of September 30, 2023 and December 31, 2022, $0.2 million and $0.2 million of cash was held in restricted accounts as collateral for the future payment obligations of outstanding term notes payable, respectively.
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Convertible Senior Notes |
9 Months Ended |
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Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Convertible Senior Notes | Convertible Senior Notes In February 2021, the Company closed an underwritten public offering of $287.5 million aggregate principal amount of convertible senior notes due 2026, or the 2026 notes. The net proceeds from the offering were approximately $279.9 million after deducting underwriting discounts and estimated offering expenses payable by the Company. The 2026 notes are unsecured, pay interest semiannually at a rate of 6.25% per annum and are convertible at the option of the holder into shares of the Company’s common stock. As of September 30, 2023 and December 31, 2022, the 2026 notes had a conversion rate of 33.8752 and 33.8752 shares of common stock per $1,000 principal amount of the notes, respectively. The 2026 notes will mature in January 2026, unless earlier converted or repurchased in accordance with their terms. The Company does not have the right to redeem the 2026 notes prior to maturity, but may repurchase the 2026 notes in open market or privately negotiated transactions at the same or differing price without giving prior notice to or obtaining any consent of the holders. The Company may also be required to repurchase the notes from holders under certain circumstances. During the nine months ended September 30, 2023, the Company repurchased $15.6 million principal amount of its 2026 notes in open market transactions for an aggregate cost of $13.2 million, resulting in a gain, net of unamortized deferred issuance costs, of $2.2 million recorded within the other income (loss) line item on the condensed consolidated statements of comprehensive loss. No notes were repurchased during the three months ended September 30, 2023 or the three and nine months ended September 30, 2022. As of September 30, 2023, $271.9 million principal amount of the 2026 notes remained outstanding. The outstanding amount due on the 2026 notes as of September 30, 2023 and December 31, 2022 was $268.2 million and $282.5 million, respectively, net of unamortized deferred issuance costs.
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Commitment and Contingencies |
9 Months Ended |
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Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The following represent the material commitments and contingencies of the Company as of September 30, 2023: Legal and regulatory. From time to time, the Company may be subject to liability under laws and government regulations and various claims and legal actions arising in the ordinary course of business. Under ASC 450, Contingencies, or ASC 450, liabilities are established for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts established or the range of reasonably possible loss disclosed for those claims. As previously disclosed, on July 15, 2020, the Company provided PRCM Advisers with a notice of termination of the Management Agreement for “cause” in accordance with Section 15(a) of the Management Agreement. The Company terminated the Management Agreement for “cause” on the basis of certain material breaches and certain events of gross negligence on the part of PRCM Advisers in the performance of its duties under the Management Agreement. On July 21, 2020, PRCM Advisers filed a complaint against the Company in the United States District Court for the Southern District of New York, or the Court. Subsequently, Pine River Domestic Management L.P. and Pine River Capital Management L.P. were added as plaintiffs to the matter. As amended, the complaint, or the Federal Complaint, alleges, among other things, the misappropriation of trade secrets in violation of both the Defend Trade Secrets Act and New York common law, breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition and business practices, unjust enrichment, conversion, and tortious interference with contract. The Federal Complaint seeks, among other things, an order enjoining the Company from making any use of or disclosing PRCM Advisers’ trade secret, proprietary, or confidential information; damages in an amount to be determined at a hearing and/or trial; disgorgement of the Company’s wrongfully obtained profits; and fees and costs incurred by the plaintiffs in pursuing the action. The Company has filed its answer to the Federal Complaint and made counterclaims against PRCM Advisers and Pine River Capital Management L.P. On May 5, 2022, the plaintiffs filed a motion for judgment on the pleadings, seeking judgment in their favor on all but one of the Company’s counterclaims and on one of the Company’s affirmative defenses. The Company opposed the motion for judgment on the pleadings. On August 10, 2023, the motion for judgment on the pleadings was granted in part and denied in part. The discovery period has ended. The Company’s board of directors believes the Federal Complaint is without merit and that the Company has fully complied with the terms of the Management Agreement. As of September 30, 2023, the Company’s condensed consolidated financial statements do not recognize a contingency liability or disclose a range of reasonably possible loss under ASC 450 because management does not believe that a loss or expense related to the Federal Complaint is probable or reasonably estimable. The specific factors that limit the Company’s ability to reasonably estimate a loss or expense related to the Federal Complaint is that the matter is not sufficiently advanced and the outcome of litigation is uncertain. If and when management believes losses associated with the Federal Complaint are a probable future event that may result in a loss or expense to the Company and the loss or expense is reasonably estimable, the Company will recognize a contingency liability and resulting loss in such period. Based on information currently available, management is not aware of any other legal or regulatory claims that would have a material effect on the Company’s condensed consolidated financial statements and therefore no accrual is required as of September 30, 2023.
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Stockholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Redeemable Preferred Stock The following is a summary of the Company’s series of cumulative redeemable preferred stock issued and outstanding as of September 30, 2023. In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Company, each series of preferred stock will rank on parity with one another and rank senior to the Company’s common stock with respect to the payment of the dividends and the distribution of assets.
____________________ (1)Subject to the Company’s right under limited circumstances to redeem the preferred stock earlier than the redemption eligible date disclosed in order to preserve its qualification as a REIT or following a change in control of the Company. (2)The dividend rate on the fixed-to-floating rate redeemable preferred stock will remain at an annual fixed rate of the $25.00 per share liquidation preference from the issuance date up to but not including the transition date disclosed within. Effective as of the fixed-to-floating rate conversion date and onward, dividends will accumulate on a floating rate basis according to the terms disclosed in footnote (3) below. (3)On and after the fixed-to-floating rate conversion date, dividends will accumulate and be payable quarterly at a percentage of the $25.00 per share liquidation preference equal to a floating base rate plus the spread indicated with respect to each series of preferred stock. The original floating base rate applicable to each preferred series was three-month USD-LIBOR, which ceased to be published on June 30, 2023. Under the LIBOR Act, and the regulations promulgated thereunder, the replacement reference rate for three-month USD-LIBOR is three-month CME Term SOFR plus a tenor spread adjustment of 0.26161%. As a result, based on the terms of the LIBOR Act, the Company expects that the floating base rate with respect to each series of preferred stock, following the applicable conversion date, will be three-month CME SOFR plus a tenor spread of 0.26161%. For each series of preferred stock, the Company may redeem the stock on or after the redemption date in whole or in part, at any time or from time to time. The Company may also purchase shares of preferred stock from time to time in the open market by tender or in privately negotiated transactions. Each series of preferred stock has a par value of $0.01 per share and a liquidation and redemption price of $25.00, plus any accumulated and unpaid dividends thereon up to, but excluding, the redemption date. Through September 30, 2023, the Company had declared and paid all required quarterly dividends on the Company’s preferred stock. Preferred Share Repurchase Program On June 22, 2022, the Company’s board of directors authorized the repurchase of up to an aggregate of 5,000,000 shares of the Company’s preferred stock, which includes each series shown in the table above under the heading Redeemable Preferred Stock. Preferred shares may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to trading plans in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, or by any combination of such methods. The manner, price, number and timing of preferred share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. The preferred share repurchase program does not require the purchase of any minimum number of shares, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice. The preferred share repurchase program does not have an expiration date. As of September 30, 2023, a total of 654,435 shares of the Company’s 8.125% Series A Cumulative Redeemable Preferred Stock, 1,001,918 shares of the Company’s 7.625% Series B Cumulative Redeemable Preferred Stock and 1,815,415 shares of the Company’s 7.25% Series C Cumulative Redeemable Preferred Stock had been repurchased by the Company under the program for an aggregate cost of $12.3 million, $17.9 million and $31.2 million, respectively, of which 225,886, 215,072 and 72,860 shares were repurchased for a total cost of $4.5 million, $4.1 million and $1.4 million, respectively, during the nine months ended September 30, 2023. The difference between the consideration transferred and the carrying value of the preferred stock resulted in a gain attributable to common stockholders of $2.5 million for the nine months ended September 30, 2023. No preferred shares were repurchased during the three months ended September 30, 2023 or the three and nine months ended September 30, 2022. Common Stock Reverse Stock Split On September 21, 2022, the Company’s board of directors approved a one-for-four reverse stock split of its outstanding shares of common stock. The reverse stock split was effected on November 1, 2022 at 5:01 p.m. Eastern Time. At the effective time, every four issued and outstanding shares of the Company’s common stock were converted into one share of common stock. No fractional shares were issued in connection with the reverse stock split; instead, each stockholder holding fractional shares was entitled to receive, in lieu of such fractional shares, cash in an amount determined on the basis of the volume weighted average price of the Company’s common stock on the NYSE on November 1, 2022. In connection with the reverse stock split, the number of authorized shares of the Company’s common stock was also reduced on a one-for-four basis, from 700,000,000 to 175,000,000. The par value of each share of common stock remained unchanged. All per share amounts, common shares outstanding and common equity-based awards for all periods presented have been adjusted on a retroactive basis to reflect the reverse stock split. Public Offerings On February 6, 2023, the Company completed a public offering of 10,000,000 shares of its common stock. The underwriters purchased the shares from the Company at a price of $17.59 per share, for net proceeds to the Company of approximately $175.6 million after deducting offering expenses. The underwriters did not exercise any portion of their 30-day overallotment option to purchase up to 1,500,000 additional shares. As of September 30, 2023, the Company had 96,186,425 shares of common stock outstanding. The following table presents a reconciliation of the common shares outstanding for the nine months ended September 30, 2023 and 2022:
____________________ (1)See Note 18 - Equity Incentive Plans for further details regarding the Company’s Equity Incentive Plans. Distributions to Stockholders The following table presents cash dividends declared by the Company on its preferred and common stock during the three and nine months ended September 30, 2023 and 2022:
Dividend Reinvestment and Direct Stock Purchase Plan The Company sponsors a dividend reinvestment and direct stock purchase plan through which stockholders may purchase additional shares of the Company’s common stock by reinvesting some or all of the cash dividends received on shares of the Company’s common stock. Stockholders may also make optional cash purchases of shares of the Company’s common stock subject to certain limitations detailed in the plan prospectus. The plan allows for the issuance of up to an aggregate of 937,500 shares of the Company’s common stock. As of September 30, 2023, 125,696 shares have been issued under the plan for total proceeds of approximately $6.2 million, of which 3,583 and 12,031 shares were issued for total proceeds of $48 thousand and $0.2 million during the three and nine months ended September 30, 2023, respectively. During the three and nine months ended September 30, 2022, 4,309 and 13,347 shares were issued for a total proceeds of $0.1 million and $0.3 million, respectively. Common Share Repurchase Program The Company’s common share repurchase program allows for the repurchase of up to an aggregate of 9,375,000 shares of the Company’s common stock. Common shares may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act, or by any combination of such methods. The manner, price, number and timing of common share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. The common share repurchase program does not require the purchase of any minimum number of shares, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice. The common share repurchase program does not have an expiration date. As of September 30, 2023, a total of 3,637,028 shares had been repurchased by the Company under the program for an aggregate cost of $208.5 million, of which 593,453 shares were repurchased for a total cost of $7.1 million during the nine months ended September 30, 2023. No common shares were repurchased during the three months ended September 30, 2023 or the three and nine months ended September 30, 2022. At-the-Market Offerings The Company is party to an equity distribution agreement under which the Company is authorized to sell up to an aggregate of 11,000,000 shares of its common stock from time to time in any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. As of September 30, 2023, 2,300,605 shares of common stock had been sold under the current or prior equity distribution agreements for total accumulated net proceeds of approximately $136.9 million, of which, 117,427 shares were sold for net proceeds of $2.1 million during the nine months ended September 30, 2023. No shares were sold during the three months ended September 30, 2023. During both the three and nine months ended September 30, 2022, 259,500 shares were sold for net proceeds of $5.3 million. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss at September 30, 2023 and December 31, 2022 was as follows:
Reclassifications out of Accumulated Other Comprehensive Loss The Company reclassifies unrealized gains and losses on AFS securities in accumulated other comprehensive loss to net income upon the recognition of any realized gains and losses on sales as individual securities are sold. The Company did not sell any AFS securities with unrealized gains and losses included in accumulated other comprehensive loss during the three months ended September 30, 2023. For the nine months ended September 30, 2023 the Company reclassified $63.2 million in unrealized losses on sold AFS securities from accumulated other comprehensive loss to (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss. For the three and nine months ended September 30, 2022 the Company reclassified $16.8 million in unrealized gains and $112.5 million in unrealized losses, respectively, on sold AFS securities from accumulated other comprehensive loss to (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss.
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Equity Incentive Plans |
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Equity Incentive Plans | Equity Incentive Plans All per share amounts, common shares outstanding and common equity-based awards for all periods presented have been adjusted on a retroactive basis to reflect the reverse stock split. The Company’s Second Restated 2009 Equity Incentive Plan (the 2009 Plan) and the Company’s 2021 Equity Incentive Plan (the 2021 Plan), or collectively, the Equity Incentive Plans, provide incentive compensation to attract and retain qualified directors, officers, personnel and other parties who may provide significant services to the Company. The Equity Incentive Plans are administered by the compensation committee of the Company’s board of directors. The compensation committee has the full authority to administer and interpret the Equity Incentive Plans, to authorize the granting of awards, to determine the eligibility of potential recipients to receive an award, to determine the number of shares of common stock to be covered by each award (subject to the individual participant limitations provided in the Equity Incentive Plans), to determine the terms, provisions and conditions of each award (which may not be inconsistent with the terms of the Equity Incentive Plans), to prescribe the form of instruments evidencing awards and to take any other actions and make all other determinations that it deems necessary or appropriate in connection with the Equity Incentive Plans or the administration or interpretation thereof. In connection with this authority, the compensation committee may, among other things, establish performance goals that must be met in order for awards to be granted or to vest, or for the restrictions on any such awards to lapse. The Equity Incentive Plans provide for grants of restricted common stock, restricted stock units, or RSUs, performance-based awards (including performance share units, or PSUs), phantom shares, dividend equivalent rights and other equity-based awards. The 2021 Plan is subject to a ceiling of 4,250,000 shares and the 2009 Plan is subject to a ceiling of 1,625,000 shares of the Company’s common stock; however, following stockholder approval of the 2021 Plan in May 2021, no new awards will be granted under the 2009 Plan. Awards previously granted under the 2009 Plan remain outstanding and valid in accordance with their terms. The Equity Incentive Plans allow for the Company’s board of directors to expand the types of awards available under the Equity Incentive Plans to include long-term incentive plan units in the future. If an award granted under the Equity Incentive Plans expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards. Unless earlier terminated by the Company’s board of directors, no new award may be granted under the Equity Incentive Plans after the tenth anniversary of the date that the Equity Incentive Plans were approved by the Company’s board of directors. No award may be granted under the Equity Incentive Plans to any person who, assuming payment of all awards held by such person, would own or be deemed to own more than 9.8% of the outstanding shares of the Company’s common stock. Restricted Stock Units The following table summarizes the activity related to RSUs for the nine months ended September 30, 2023 and 2022:
The estimated fair value of RSUs on grant date is based on the closing market price of the Company’s common stock on the NYSE on such date. The shares underlying RSUs granted to independent directors are subject to a -year vesting period. RSUs granted to certain eligible employees vest in equal annual installments commencing on the first anniversary of the grant date, as long as such grantee complies with the terms and conditions of the applicable RSU agreement. All RSUs entitle the grantee to receive dividend equivalent rights, or DERs, during the vesting period. A DER represents the right to receive a payment equal to the amount of cash dividends declared and payable on the grantee’s unvested and outstanding equity incentive awards. In the case of RSUs, DERs are paid in cash within 60 days of the quarterly dividend payment date based on the number of unvested and outstanding RSUs held by the grantee on the applicable dividend record date. In the event that an RSU is forfeited, the related DERs which have not yet been paid shall be forfeited. Performance Share Units The following table summarizes the activity related to PSUs for the nine months ended September 30, 2023 and 2022:
The estimated fair value of PSUs on grant date is determined using a Monte Carlo simulation. PSUs vest promptly following the completion of a year performance period, as long as such grantee complies with the terms and conditions of the applicable PSU award agreement. The number of underlying shares of common stock that vest and that the grantee becomes entitled to receive at the time of vesting will be determined based on the level of achievement of certain Company performance goals during the performance period and will generally range from 0% to 200% of the target number of PSUs granted. All PSUs entitle the grantee to DERs during the vesting period, which accrue in the form of additional PSUs reflecting the value of any dividends declared on the Company’s common stock during the vesting period. In the event that a PSU is forfeited, the related accrued DERs shall be forfeited. Restricted Common Stock The following table summarizes the activity related to restricted common stock for the nine months ended September 30, 2023 and 2022:
The estimated fair value of restricted common stock on grant date is based on the closing market price of the Company’s common stock on the NYSE on such date. The shares underlying restricted common stock grants to the Company’s executive officers and other eligible individuals vested in equal annual installments commencing on the first anniversary of the grant date, as long as such grantee complied with the terms and conditions of the applicable restricted stock award agreement. Non-Cash Equity Compensation Expense For the three and nine months ended September 30, 2023, the Company recognized compensation related to RSUs, PSUs and restricted common stock granted pursuant to the Equity Incentive Plans of $1.6 million and $9.4 million, respectively. For the three and nine months ended September 30, 2022, the Company recognized compensation related to restricted common stock granted pursuant to the Equity Incentive Plans of $2.4 million and $10.0 million, respectively. As of September 30, 2023, the Company had $5.6 million of total unrecognized compensation cost related to unvested share-based compensation arrangements. This cost is expected to be recognized over a weighted average period of 1.5 years.
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Income Taxes |
9 Months Ended |
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Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the three and nine months ended September 30, 2023 and 2022, the Company qualified to be taxed as a REIT under the Code for U.S. federal income tax purposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes its net taxable income to stockholders, and does not engage in prohibited transactions. The Company intends to distribute 100% of its REIT taxable income and comply with all requirements to continue to qualify as a REIT. The majority of states also recognize the Company’s REIT status. The Company’s TRSs file separate tax returns and are fully taxed as standalone U.S. C corporations. It is assumed that the Company will retain its REIT status and will incur no REIT level taxation as it intends to comply with the REIT regulations and annual distribution requirements. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, or the IRA, sweeping legislation addressing healthcare, climate change and renewable energy incentives, and inflation, among other priorities. The bill includes numerous tax provisions that impact corporations, including the implementation of a corporate alternative minimum tax as well as a 1% excise tax on certain stock repurchases and economically similar transactions. However, REITs are excluded from the definition of an “applicable corporation” and therefore are not subject to the corporate alternative minimum tax. Additionally, stock repurchases by REITs are specifically excepted from the 1% excise tax. The Company’s TRSs operate as standalone corporations and therefore could be adversely affected by the tax law changes. The Company’s preliminary analysis of the accounting implications of the IRA result in no impact being recorded to its 2023 financial statements. As the Company completes its analysis of the IRA, collects and prepares necessary data, and interprets any additional guidance, it may make adjustments to the provisional amounts. Technical corrections or other amendments to the IRA or administrative guidance interpreting the IRA may be forthcoming at any time. While the Company does not anticipate a material effect on its operations, it will continue to analyze and monitor the application of the IRA to its business. During the three and nine months ended September 30, 2023, the Company’s TRSs recognized a provision for income taxes of $36.4 million and $52.2 million, respectively, which was primarily due to income from MSR servicing activities and net gains recognized on MSR, offset by net losses recognized on derivative instruments and operating expenses. During the three and nine months ended September 30, 2022, the Company’s TRSs recognized a provision for income taxes of $21.0 million and $95.7 million, respectively, which was primarily due to income from MSR servicing activities and gains recognized on MSR, offset by net losses recognized on derivative instruments and operating expenses. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s condensed consolidated financial statements of a contingent tax liability for uncertain tax positions. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in these condensed consolidated financial statements.
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022. All per share amounts, common shares outstanding and common equity-based awards for all periods presented have been adjusted on a retroactive basis to reflect the reverse stock split.
___________________ (1)If applicable, includes a nondiscretionary adjustment for the assumed change in the management fee calculation. For the three and nine months ended September 30, 2023 and 2022, participating RSUs were included in the calculations of basic and diluted earnings per share under the two-class method, as it was more dilutive than the alternative treasury stock method. For the three and nine months ended September 30, 2023 and 2022, the assumed vesting of outstanding PSUs was included in the calculation of diluted earnings per share under the two-class method, as it was more dilutive than the alternative treasury stock method. For the three and nine months ended September 30, 2023 and 2022, the assumed conversion of the Company’s convertible senior notes was included in the calculation of diluted earnings per share under the if-converted method.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsEvents subsequent to September 30, 2023 were evaluated through the date these condensed consolidated financial statements were issued and no other additional events were identified requiring further disclosure in these condensed consolidated financial statements. |
Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | |||||
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Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
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Pay vs Performance Disclosure | ||||||
Net income (loss) | $ 306,192 | $ 197,445 | $ (176,808) | $ 277,612 | $ (72,420) | $ 285,270 |
Insider Trading Arrangements |
3 Months Ended |
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Sep. 30, 2023 | |
Trading Arrangements, by Individual | |
Material Terms of Trading Arrangement | During the three months ended September 30, 2023, the following directors and executive officers adopted or terminated a written plan intended to satisfy affirmative defense conditions of Rule 10b5–1(c) of the Exchange Act. Each of these written plans relates to the sale of Two Harbors common stock for the purpose of satisfying tax obligations associated with future vestings of equity compensation, as permitted pursuant to the stock ownership guidelines applicable to our directors and executive officers, and replaces and supersedes a prior written plan entered into by the referenced individual related to the same. In addition, each of these written plans or terminations was entered into during an open trading window and shall take effect ninety days after adoption. The new plans shall remain in effect until amended or terminated. On August 3, 2023, Rebecca Sandberg, our Chief Legal Officer and Secretary, adopted a written plan pursuant to which Ms. Sandberg has elected to sell a number of shares sufficient to cover the local, state and federal tax liability associated with each future vesting of equity compensation, subject to the maximum of fifty percent of shares vesting. On August 3, 2023, James Bender, an independent director, terminated a written plan pursuant to which Mr. Bender had previously elected to sell 30% of shares vesting in connection with vestings of equity compensation. On August 10, 2023, Stephen Kasnet, our Chairman and an independent director, adopted a written plan pursuant to which Mr. Kasnet has elected to sell 40% of shares vesting in connection with future vestings of equity compensation. Except as set forth above, none of our directors or executive officers adopted or terminated a contract, instruction or written plan for the purchase or sale of our securities during the three months ended September 30, 2023.
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Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Rebecca Sandberg [Member] | |
Trading Arrangements, by Individual | |
Name | Rebecca Sandberg |
Title | Chief Legal Officer and Secretary |
Rule 10b5-1 Arrangement Adopted | true |
Adoption Date | August 3, 2023 |
James Bender [Member] | |
Trading Arrangements, by Individual | |
Name | James Bender |
Title | independent director |
Rule 10b5-1 Arrangement Adopted | true |
Adoption Date | August 3, 2023 |
Stephen Kasnet [Member] | |
Trading Arrangements, by Individual | |
Name | Stephen Kasnet |
Title | Chairman and an independent director |
Rule 10b5-1 Arrangement Adopted | true |
Adoption Date | August 10, 2023 |
Basis of Presentation and Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2023 | |
Basis of Presentation and Significant Accounting Policies [Abstract] | |
Consolidation and Basis of Presentation | Consolidation and Basis of Presentation The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, have been condensed or omitted according to such SEC rules and regulations. However, management believes that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The condensed consolidated financial statements of the Company include the accounts of all subsidiaries; inter-company accounts and transactions have been eliminated. All trust entities in which the Company holds investments that are considered variable interest entities, or VIEs, for financial reporting purposes were reviewed for consolidation under the applicable consolidation guidance. Whenever the Company has both the power to direct the activities of a trust that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, the Company consolidates the trust. Certain prior period amounts have been reclassified to conform to the current period presentation. All per share amounts, common shares outstanding and common equity-based awards for all prior periods reflect the Company’s one-for-four reverse stock split effected on November 1, 2022 at 5:01 p.m. Eastern Time (refer to Note 17 - Stockholders’ Equity for additional information). The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2023 and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2023 should not be construed as indicative of the results to be expected for future periods or the full year.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amount and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand in the market, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. The Company’s estimates are inherently subjective in nature and actual results could differ from its estimates and the differences may be material.
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Business Combinations, Policy | Business Combinations Under Accounting Standards Codification (ASC) 805, Business Combinations, or ASC 805, an acquisition is considered a business combination when the assets acquired and liabilities assumed constitute a business. The acquisition method prescribed in ASC 805 requires, among other things, that the assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. In a business combination, the initial allocation of the purchase price is considered preliminary and therefore subject to change until the end of the measurement period (up to one year from the acquisition date). Goodwill is calculated as the excess of the consideration transferred over the net assets acquired that meet the criteria for separate recognition and represents the estimated future economic benefits arising from these and other assets acquired that could not be individually identified or do not qualify for recognition as a separate asset. Goodwill is included within the other assets line item on the Company’s condensed consolidated balance sheets. Acquisition-related costs are expensed as incurred. The results of operations of acquired businesses are included from the date of acquisition.
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Goodwill and Intangible Assets, Policy | Goodwill and Intangible Assets On an annual basis, the Company qualitatively assesses its goodwill assigned to each of its reporting units during the fourth quarter of each year. This qualitative assessment evaluates various events and circumstances, such as macro-economic conditions, industry and market conditions, cost factors, relevant events and financial trends, that may impact a reporting unit’s fair value. Using this qualitative assessment, the Company determines whether it is more-likely-than-not that the reporting unit’s fair value exceeds its carrying value. If it is determined that it is not more-likely-than-not that the reporting unit’s fair value exceeds the carrying value, or upon consideration of other factors, including recent acquisition, restructuring or divestiture activity, the Company performs a quantitative, “step one” goodwill impairment analysis. In addition, the Company may test goodwill in between annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce the fair value of a reporting unit below its carrying value. The Company did not recognize any goodwill impairment during the three and nine months ended September 30, 2023. As a result of the RoundPoint acquisition, the Company identified intangible assets in the form of state licenses, GSE approvals and trade names. Intangible assets are included within the other assets line item on the Company’s condensed consolidated balance sheets. The Company recorded the intangible assets at fair value at the acquisition date and amortizes the value of finite-lived intangibles into expense over the expected useful life. Amortization of acquired intangible assets is included within the other operating expenses line item in the Company’s condensed consolidated statements of comprehensive loss. If impairment events occur, they could accelerate the timing of acquired intangible asset charges. Licenses and approvals acquired are deemed to have an indefinite useful life and are evaluated for impairment annually during the fourth quarter and in interim periods if indicators of impairment exist. The Company did not recognize any impairment on its intangible assets during the three and nine months ended September 30, 2023.
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Recently Issued and/or Adopted Accounting Standards | Recently Issued and/or Adopted Accounting Standards Facilitation of the Effects of Reference Rate Reform on Financial Reporting The London Interbank Offered Rate, or LIBOR, has been used extensively in the U.S. and globally as a “benchmark” or “reference rate” for various commercial and financial contracts, including corporate and municipal bonds and loans, floating rate mortgages, asset-backed securities, consumer loans, and interest rate swaps and other derivatives. On March 5, 2021, Intercontinental Exchange Inc. announced that ICE Benchmark Administration Limited, the administrator of LIBOR, intended to stop publication of the majority of USD-LIBOR tenors on June 30, 2023. In the U.S., the Alternative Reference Rates Committee, or ARRC, has identified the Secured Overnight Financing Rate, or SOFR, and, in some cases, the forward-looking term rate based on SOFR published by CME Group Benchmark Administration Limited, or Term SOFR, plus, in each case, a recommended spread adjustment, as its preferred alternative rates for U.S. dollar-based LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Numerous industry wide and company-specific transitions as it relates to derivatives and cash markets exposed to LIBOR were completed in connection with its phase-out on June 30, 2023. In March 2020, the FASB issued Accounting Standards Update (ASU) No. 2020-04, which provides temporary optional expedients and exceptions on accounting for contract modifications and hedging relationships for the purpose of the replacement of LIBOR with another reference rate. The guidance also provides a one-time election to sell held-to-maturity debt securities or to transfer such securities to the available-for-sale or trading category. The Company’s material contracts that are or were indexed to USD-LIBOR have been amended to transition to an alternative benchmark, where necessary. Any other unmodified agreements that incorporate LIBOR as the referenced rate either (i) already had provisions in place that provide for an alternative to LIBOR upon its phase-out or that are governed by the Adjustable Interest Rate (LIBOR) Act, or the LIBOR Act, (ii) matured or (iii) were terminated prior to June 30, 2023. The ASU was effective immediately for all entities and expires after December 31, 2024. The Company’s adoption of this ASU did not have an impact on the Company’s financial condition, results of operations or financial statement disclosures.
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Acquisition of RoundPoint Mortgage Servicing LLC (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination, Segment Allocation | The Company has performed a provisional allocation of the total consideration of $44.7 million to RoundPoint’s assets and liabilities, as set forth below. The final amount and allocation of total consideration may differ from the amounts included herein to reflect new information, assets acquired and liabilities assumed and the fair value of intangible assets that existed as of the acquisition date. The estimate of fair value of assets and liabilities required the use of significant assumptions and estimates. Significant estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and discount rates. These estimates were based on assumptions that management believes to be reasonable as well as a third party-prepared valuation analysis; however, actual results may differ from these estimates. No measurement period adjustments were made during the three months ended September 30, 2023.
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Business Acquisition, Pro Forma Information | The following table presents unaudited pro forma combined revenues and income before income taxes for the three and nine months ended September 30, 2023 prepared as if the RoundPoint acquisition had been consummated on January 1, 2022.
____________________ (1)The Company’s revenue is defined as the sum of the total interest income and total other income line items on the condensed consolidated statements of comprehensive loss.
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Variable Interest Entities (Tables) |
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Schedule of Variable Interest Entities | The following table presents a summary of the assets and liabilities of all consolidated trusts as reported on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:
____________________ (1)Receivables due from a wholly owned subsidiary of the Company to the trusts are eliminated in consolidation in accordance with U.S. GAAP.
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Available-for-Sale Securities, at Fair Value (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities, Available-for-Sale [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities, Available-for-sale | The following table presents the Company’s AFS investment securities by collateral type as of September 30, 2023 and December 31, 2022:
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Schedule of Available-for-sale Securities Reconciliation | The following tables present the amortized cost and carrying value of AFS securities by collateral type as of September 30, 2023 and December 31, 2022:
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Debt Securities, Available-for-sale, Weighted Average Life Classifications | The following table presents the Company’s AFS securities according to their estimated weighted average life classifications as of September 30, 2023:
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Debt Securities, Available-for-sale, Allowance for Credit Losses | The following tables present the changes for the three and nine months ended September 30, 2023 and 2022 in the allowance for credit losses on Agency and non-Agency AFS securities:
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Debt Securities, Available-for-sale, in Unrealized Loss Positions | The following tables present the components comprising the carrying value of AFS securities for which an allowance for credit losses has not been recorded by length of time that the securities had an unrealized loss position as of September 30, 2023 and December 31, 2022. At September 30, 2023 and December 31, 2022, the Company held 659 and 704 AFS securities, respectively; of the securities for which an allowance for credit losses has not been recorded, 553 and 553 were in an unrealized loss position for less than twelve consecutive months. At both September 30, 2023 and December 31, 2022, none of the Company’s AFS securities were in an unrealized loss position for more than twelve months without an allowance for credit losses recorded.
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Schedule of Realized Gain (Loss) on Sales of Debt Securities, Available-for-sale | The following table presents details around sales of AFS securities during the three and nine months ended September 30, 2023 and 2022:
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Servicing Activities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosures Pertaining to Servicing Assets and Servicing Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Servicing Assets at Fair Value | The following table summarizes activity related to MSR for the three and nine months ended September 30, 2023 and 2022.
____________________ (1)During the three and nine months ended September 30, 2023, excess MSR was transferred to Agency-sponsored trusts in exchange for stripped mortgage backed securities, or SMBS. In each transaction, a portion of the SMBS was acquired by third parties and the Company acquired the remaining balance of those SMBS, which are included within Agency AFS securities unless sold prior to September 30, 2023. (2)Includes the impact of acquiring MSR at a cost different from fair value. (3)Primarily represents changes due to the realization of cash flows. (4)Includes purchase price adjustments, contractual prepayment protection, and changes due to the Company’s purchase of the underlying collateral. (5)Based on the principal balance of the loans underlying the MSR reported by servicers on a month lag, adjusted for current month purchases.
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Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets | As of September 30, 2023 and December 31, 2022, the key economic assumptions and sensitivity of the fair value of MSR to immediate 10% and 20% adverse changes in these assumptions were as follows:
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Components of Servicing Revenue | The following table presents the components of servicing income recorded on the Company’s condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2023 and 2022:
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Schedule of Total Serviced Mortgage Assets | The following table presents the number of loans and unpaid principal balance of the mortgage assets for which the Company manages the servicing as of September 30, 2023 and December 31, 2022:
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Cash, Cash Equivalents and Restricted Cash (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restricted Cash and Cash Equivalents | The following table presents the Company’s restricted cash balances as of September 30, 2023 and December 31, 2022:
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Schedule of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company’s condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022 that sum to the total of the same such amounts shown in the statements of cash flows:
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Derivative Instruments and Hedging Activities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The following tables present the gross fair value and notional amounts of the Company’s derivative financial instruments treated as trading derivatives as of September 30, 2023 and December 31, 2022:
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Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance | The following table summarizes the location and amount of gains and losses on derivative instruments reported in the condensed consolidated statements of comprehensive loss:
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Schedule of Notional Amounts of Outstanding Derivative Positions | The following tables present information with respect to the volume of activity in the Company’s derivative instruments during the three and nine months ended September 30, 2023 and 2022:
____________________ (1)Excludes net interest paid or received in full settlement of the net interest spread liability.
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Schedule of TBA Positions | The following tables present the notional amount, cost basis, market value and carrying value (which approximates fair value) of the Company’s TBA positions as of September 30, 2023 and December 31, 2022:
___________________ (1)Notional amount represents the face amount of the underlying Agency RMBS. (2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS. (3)Market value represents the current market value of the TBA (or of the underlying Agency RMBS) as of period end. (4)Net carrying value represents the difference between the market value of the TBA as of period end and its cost basis, and is reported in derivative assets / (liabilities), at fair value, in the condensed consolidated balance sheets.
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Schedule of Futures | The following table summarizes certain characteristics of the Company’s futures as of September 30, 2023 and December 31, 2022:
___________________ (1)During the three months ended June 30, 2023, all of the Company’s outstanding Eurodollar futures contracts with maturities after June 30, 2023 were converted into three-month SOFR futures contracts with similar characteristics.
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Schedule of Interest Rate Swap Payers | As of September 30, 2023, the Company held the following interest rate swaps that were utilized as economic hedges of interest rate exposure (or duration) whereby the Company receives interest at a floating interest rate (OIS or SOFR):
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Schedule of Interest Rate Swap Receivers | Additionally, as of September 30, 2023, the Company held the following interest rate swaps in order to mitigate mortgage interest rate exposure (or duration) risk whereby the Company pays interest at a floating interest rate (OIS or SOFR):
____________________ (1)Notional amount includes $398.0 million in forward starting interest rate swaps as of September 30, 2023. (2)Weighted averages exclude forward starting interest rate swaps. As of September 30, 2023, the weighted average fixed receive rate on forward starting interest rate swaps was 3.8%.
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Schedule of Interest Rate Swaptions | As of September 30, 2023, the Company had the following outstanding interest rate swaptions:
____________________ (1)As of September 30, 2023, all underlying swap floating rates were tied to SOFR.
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Offsetting Assets and Liabilities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offsetting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offsetting Assets | The following tables present information about the Company’s assets and liabilities that are subject to master netting arrangements or similar agreements and can potentially be offset on the Company’s condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:
____________________ (1)Amounts presented are limited in total to the net amount of assets or liabilities presented in the condensed consolidated balance sheets by instrument. Excess cash collateral or financial assets that are pledged to counterparties may exceed the financial liabilities subject to a master netting arrangement or similar agreement, or counterparties may have pledged excess cash collateral to the Company that exceed the corresponding financial assets. These excess amounts are excluded from the table above, although separately reported within restricted cash, due from counterparties, or due to counterparties in the Company’s condensed consolidated balance sheets.
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Offsetting Liabilities | The following tables present information about the Company’s assets and liabilities that are subject to master netting arrangements or similar agreements and can potentially be offset on the Company’s condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:
____________________ (1)Amounts presented are limited in total to the net amount of assets or liabilities presented in the condensed consolidated balance sheets by instrument. Excess cash collateral or financial assets that are pledged to counterparties may exceed the financial liabilities subject to a master netting arrangement or similar agreement, or counterparties may have pledged excess cash collateral to the Company that exceed the corresponding financial assets. These excess amounts are excluded from the table above, although separately reported within restricted cash, due from counterparties, or due to counterparties in the Company’s condensed consolidated balance sheets.
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Fair Value (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following tables display the Company’s assets and liabilities measured at fair value on a recurring basis. The Company often economically hedges the fair value change of its assets or liabilities with derivatives and other financial instruments. The tables below display the hedges separately from the hedged items, and therefore do not directly display the impact of the Company’s risk management activities:
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Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | The following table presents the reconciliation for the Company’s Level 3 assets measured at fair value on a recurring basis:
____________________ (1)The change in unrealized gains or losses on available-for-sale securities accounted for under the fair value option was recorded in (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss. (2)The change in unrealized gains or losses on MSR was recorded in gain (loss) on servicing asset on the condensed consolidated statements of comprehensive loss. (3)The change in unrealized gains or losses on available-for-sale securities accounted for under the fair value option that were held at the end of the reporting period was recorded in (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss. (4)The change in unrealized gains or losses on MSR that were held at the end of the reporting period was recorded in gain (loss) on servicing asset on the condensed consolidated statements of comprehensive loss.
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Fair Value Inputs, Assets, Quantitative Information | The tables below present information about the significant unobservable market data used by the third-party pricing vendors as inputs into models utilized to inform their best estimates of the fair value measurement of the Company’s MSR classified as Level 3 fair value assets at September 30, 2023 and December 31, 2022:
___________________ (1)Calculated by averaging the weighted average significant unobservable inputs used by the multiple third-party pricing vendors in the fair value measurement of MSR.
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Fair Value, by Balance Sheet Grouping | The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at September 30, 2023 and December 31, 2022:
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Repurchase Agreements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Repurchase Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Repurchase Agreements by Maturity | At September 30, 2023 and December 31, 2022, the Company’s repurchase agreements had the following characteristics and remaining maturities:
____________________ (1)U.S. Treasury securities effectively borrowed under reverse repurchase agreements.
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Schedule of Underlying Assets of Repurchase Agreements when Amount of Repurchase Agreements Exceeds 10 Percent of Assets | The following table summarizes assets at carrying values that are pledged or restricted as collateral for the future payment obligations of the Company’s repurchase agreements:
____________________ (1)As of September 30, 2023 and December 31, 2022, MSR repurchase agreements of $219.8 million and $309.0 million, respectively, were secured by a VFN issued in connection with the Company’s securitization of MSR. Additionally, as of September 30, 2023, MSR repurchase agreements of $58.1 million were secured by a portion of the term notes issued in connection with the Company’s securitization of MSR and repurchased by the Company. The VFN and the term notes are both collateralized by the Company’s MSR. (2)U.S. Treasury securities effectively borrowed under reverse repurchase agreements.
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Revolving Credit Facilities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revolving Credit Facilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Line of Credit Facilities | At September 30, 2023 and December 31, 2022, borrowings under revolving credit facilities had the following remaining maturities:
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Stockholders' Equity (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | The following is a summary of the Company’s series of cumulative redeemable preferred stock issued and outstanding as of September 30, 2023. In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Company, each series of preferred stock will rank on parity with one another and rank senior to the Company’s common stock with respect to the payment of the dividends and the distribution of assets.
____________________ (1)Subject to the Company’s right under limited circumstances to redeem the preferred stock earlier than the redemption eligible date disclosed in order to preserve its qualification as a REIT or following a change in control of the Company. (2)The dividend rate on the fixed-to-floating rate redeemable preferred stock will remain at an annual fixed rate of the $25.00 per share liquidation preference from the issuance date up to but not including the transition date disclosed within. Effective as of the fixed-to-floating rate conversion date and onward, dividends will accumulate on a floating rate basis according to the terms disclosed in footnote (3) below. (3)On and after the fixed-to-floating rate conversion date, dividends will accumulate and be payable quarterly at a percentage of the $25.00 per share liquidation preference equal to a floating base rate plus the spread indicated with respect to each series of preferred stock. The original floating base rate applicable to each preferred series was three-month USD-LIBOR, which ceased to be published on June 30, 2023. Under the LIBOR Act, and the regulations promulgated thereunder, the replacement reference rate for three-month USD-LIBOR is three-month CME Term SOFR plus a tenor spread adjustment of 0.26161%. As a result, based on the terms of the LIBOR Act, the Company expects that the floating base rate with respect to each series of preferred stock, following the applicable conversion date, will be three-month CME SOFR plus a tenor spread of 0.26161%.
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Rollforward of Common Stock | The following table presents a reconciliation of the common shares outstanding for the nine months ended September 30, 2023 and 2022:
____________________ (1)See Note 18 - Equity Incentive Plans for further details regarding the Company’s Equity Incentive Plans.
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Dividends Declared | The following table presents cash dividends declared by the Company on its preferred and common stock during the three and nine months ended September 30, 2023 and 2022:
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Schedule of Accumulated Other Comprehensive Income (Loss) | Accumulated other comprehensive loss at September 30, 2023 and December 31, 2022 was as follows:
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Equity Incentive Plans (Tables) |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Nonvested Restricted Stock Units Activity | The following table summarizes the activity related to RSUs for the nine months ended September 30, 2023 and 2022:
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Schedule of Nonvested Performance Share Units Activity | The following table summarizes the activity related to PSUs for the nine months ended September 30, 2023 and 2022:
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Nonvested Restricted Stock Shares Activity | The following table summarizes the activity related to restricted common stock for the nine months ended September 30, 2023 and 2022:
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Earnings Per Share (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022. All per share amounts, common shares outstanding and common equity-based awards for all periods presented have been adjusted on a retroactive basis to reflect the reverse stock split.
___________________ (1)If applicable, includes a nondiscretionary adjustment for the assumed change in the management fee calculation.
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Acquisition of Entity (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Aug. 02, 2022 |
Sep. 30, 2023 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Amount of premium expected to be paid for proposed acquisition of entity | $ 10,500 | |
Total provisional purchase price for acquisition of entity | $ 44,732 | |
Cash payment for acquisition of entity | 23,600 | |
Payable recognized for acquisition of entity | $ 21,100 |
Reverse Stock Split (Details) |
Nov. 01, 2022 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reverse stock split, conversion ratio | 0.25 |
Summary of Unaudited Pro Forma Combined Revenue and Income Before Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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Business Combination and Asset Acquisition [Abstract] | ||||
Revenue | $ 585,641 | $ 435,563 | $ 1,044,039 | $ 979,098 |
Income before income taxes | $ 339,009 | $ 271,426 | $ 357,636 | $ 540,740 |
Available-for-Sale Securities, at Fair Value (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale securities, at fair value | $ 8,830,726 | $ 7,778,734 |
Federal National Mortgage Association Certificates and Obligations (FNMA) [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale securities, at fair value | 5,267,666 | 4,112,556 |
Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale securities, at fair value | 3,491,117 | 3,332,314 |
Government National Mortgage Association Certificates and Obligations (GNMA) [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale securities, at fair value | 64,082 | 208,706 |
Mortgage-backed Securities, Issued by Private Enterprises [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale securities, at fair value | $ 7,861 | $ 125,158 |
Available-for-Sale Securities Pledged as Collateral for Financing (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
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Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Available-for-sale securities, at fair value | $ 8,830,726 | $ 7,778,734 |
Asset Pledged as Collateral | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Available-for-sale securities, at fair value | $ 8,800,000 | $ 7,400,000 |
Available-for-Sale Securities, at Fair Value Nonconsolidated Variable Interest Entities (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Available-for-sale securities, at fair value | $ 8,830,726 | $ 7,778,734 |
Variable Interest Entity, Not Primary Beneficiary | ||
Variable Interest Entity [Line Items] | ||
Available-for-sale securities, at fair value | 7,900 | 125,200 |
Maximum exposure to loss of nonconsolidated Variable Interest Entities | $ 7,900 | $ 125,200 |
Available-for-Sale Securities, at Fair Value Schedule of Realized Gain (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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Debt Securities, Available-for-Sale [Abstract] | ||||
Proceeds from sales of available-for-sale securities | $ 119,095 | $ 683,746 | $ 1,694,891 | $ 5,022,894 |
Amortized cost of available-for-sale securities sold | (118,999) | (664,781) | (1,730,866) | (5,246,865) |
Total realized gains (losses) on sales, net | 96 | 18,965 | (35,975) | (223,971) |
Gross realized gains | 1,348 | 18,995 | 15,418 | 40,574 |
Gross realized losses | $ (1,252) | $ (30) | $ (51,393) | $ (264,545) |
Rollforward of Mortgage Servicing Rights, at Fair Value (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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Servicing Asset at Fair Value, Amount [Roll Forward] | ||||
Mortgage servicing rights, at fair value, at beginning of period | $ 3,273,956 | $ 3,226,191 | $ 2,984,937 | $ 2,191,578 |
Purchases of mortgage servicing rights | 6,756 | 56,391 | 305,729 | 601,141 |
Sales of mortgage servicing rights (1) | (112,351) | (259,059) | (115,044) | (259,059) |
Changes in valuation inputs or assumptions used in the valuation model | 111,186 | 75,887 | $ 213,803 | $ 800,072 |
Servicing Asset, At Fair Value, Other Change In Fair Value, Statement Of Income Or Comprehensive Income Extensible Enumeration Not Disclosed Flag | Other changes in fair value (3) | Other changes in fair value (3) | ||
Other changes in fair value | (63,999) | (82,111) | $ (172,177) | $ (310,115) |
Other changes | (2,435) | 4,491 | (4,135) | (1,827) |
Mortgage servicing rights, at fair value, at end of period | $ 3,213,113 | $ 3,021,790 | $ 3,213,113 | $ 3,021,790 |
Mortgage Servicing Rights Pledged as Collateral for Financing (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Jun. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Dec. 31, 2021 |
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Assets that Continue to be Recognized, Securitized or Asset-backed Financing Arrangement Assets and any Other Financial Assets Managed Together [Line Items] | ||||||
Mortgage servicing rights, at fair value | $ 3,213,113 | $ 3,273,956 | $ 2,984,937 | $ 3,021,790 | $ 3,226,191 | $ 2,191,578 |
Asset Pledged as Collateral | ||||||
Assets that Continue to be Recognized, Securitized or Asset-backed Financing Arrangement Assets and any Other Financial Assets Managed Together [Line Items] | ||||||
Mortgage servicing rights, at fair value | $ 3,200,000 | $ 3,000,000 |
Components of Servicing Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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Disclosures Pertaining to Servicing Assets and Servicing Liabilities [Abstract] | ||||
Servicing fee income | $ 141,816 | $ 138,140 | $ 415,423 | $ 426,974 |
Ancillary and other fee income | 476 | 483 | 2,236 | 1,514 |
Float income | 36,333 | 10,210 | 89,509 | 14,497 |
Servicing income | $ 178,625 | $ 148,833 | $ 507,168 | $ 442,985 |
Mortgage Servicing Advances (Details) - USD ($) $ in Millions |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Assets that Continue to be Recognized, Securitized or Asset-backed Financing Arrangement Assets and any Other Financial Assets Managed Together [Line Items] | ||
Servicing advances | $ 72.4 | $ 119.0 |
Mortgage servicing rights, delinquency rate | 0.70% | 0.80% |
Line of Credit [Member] | Asset Pledged as Collateral | ||
Assets that Continue to be Recognized, Securitized or Asset-backed Financing Arrangement Assets and any Other Financial Assets Managed Together [Line Items] | ||
Servicing advances | $ 42.7 | $ 67.8 |
Schedule of Total Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract] | ||||
Cash and cash equivalents | $ 644,184 | $ 683,479 | ||
Restricted cash | 400,777 | 443,026 | ||
Total cash, cash equivalents and restricted cash | $ 1,044,961 | $ 1,126,505 | $ 1,575,016 | $ 2,088,670 |
Derivative Instruments and Hedging Activities Interest Spread on Interest Rate Swaps (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Interest Rate Contract [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net interest expense (income) on interest rate swaps and caps | $ (6,900,000) | $ (200,000) | $ (13,900,000) | $ (4,800,000) |
Net Long Position [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Average Notional Amount | 4,568,757,000 | 666,376,000 | 7,176,645,000 | |
Net Long Position [Member] | Interest Rate Contract [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Average Notional Amount | $ 8,900,000,000 | $ 5,000,000,000 | $ 6,900,000,000 | $ 16,600,000,000 |
Derivative Instruments and Hedging Activities Interest Rate Sensitive Assets/Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Jun. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|---|---|
Derivatives, Fair Value [Line Items] | ||||||
Available-for-sale securities, at fair value | $ 8,830,726 | $ 7,778,734 | ||||
Mortgage servicing rights, at fair value | 3,213,113 | $ 3,273,956 | 2,984,937 | $ 3,021,790 | $ 3,226,191 | $ 2,191,578 |
Interest-Only-Strip [Member] | ||||||
Derivatives, Fair Value [Line Items] | ||||||
Available-for-sale securities, at fair value | $ 46,000 | $ 23,800 |
Derivative Instruments and Hedging Activities Schedule of Interest Rate Swaptions (Details) - Variable Income Interest Rate [Member] - Less Than Six Months Remaining Maturity [Member] |
9 Months Ended |
---|---|
Sep. 30, 2023
USD ($)
| |
Interest Rate Swaption [Member] | Long [Member] | |
Derivative [Line Items] | |
Cost Basis | $ 480,000 |
Fair Value | $ 550,000 |
Weighted Average Remaining Maturity | 5 months 12 days |
Interest Rate Swaption [Member] | Short [Member] | |
Derivative [Line Items] | |
Cost Basis | $ 332,000 |
Fair Value | $ 379,000 |
Weighted Average Remaining Maturity | 5 months 12 days |
Underlying Swap [Member] | Long [Member] | |
Derivative [Line Items] | |
Weighted Average Remaining Maturity | 1 year |
Derivative, Notional Amount | $ 200,000,000 |
Weighted Average Fixed Interest Rate | 5.13% |
Underlying Swap [Member] | Short [Member] | |
Derivative [Line Items] | |
Weighted Average Remaining Maturity | 1 year |
Derivative, Notional Amount | $ 400,000,000 |
Weighted Average Fixed Interest Rate | 5.61% |
Derivative Instruments and Hedging Activities Credit Risk - Counterparty Exposure (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivative assets, at fair value | $ 20,592 | $ 26,438 |
Derivative liabilities, at fair value | $ (23,550) | $ (34,048) |
Reverse Repurchase Agreements (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Assets Sold under Agreements to Repurchase [Line Items] | ||
Amounts due to counterparties as collateral for reverse repurchase agreements | $ 312,248 | $ 541,709 |
Reverse repurchase agreements | 282,767 | 1,066,935 |
Repurchase agreements | 9,113,270 | 8,603,011 |
US Treasury Securities | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | 0 | 888,295 |
Collateral Pledged | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Reverse repurchase agreements | 282,800 | 189,300 |
US Treasury Securities | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Reverse repurchase agreements | 0 | 877,600 |
Collateral Pledged | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Amounts due to counterparties as collateral for reverse repurchase agreements | $ 270,500 | $ 189,500 |
Repurchase Agreements (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Sep. 30, 2023 |
|
Disclosure of Repurchase Agreements [Abstract] | ||
Repurchase agreements | $ 8,603,011 | $ 9,113,270 |
Weighted average borrowing rate | 3.95% | 5.65% |
Weighted average remaining maturity | 59 days | 98 days |
Repurchase Agreement Counterparties with Whom Amount at Risk Exceeds 10 Percent of Stockholders' Equity (Details) |
Sep. 30, 2023 |
---|---|
Disclosure of Repurchase Agreements [Abstract] | |
Percent of equity of the amount at risk under repurchase agreements | 10.00% |
Revolving Credit Facilities (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Sep. 30, 2023 |
|
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | $ 1,118,831 | $ 1,410,671 |
Weighted average borrowing rate | 7.68% | 8.65% |
Weighted average remaining maturity | 1 year 1 month 6 days | 1 year 3 months 18 days |
Assets Pledged as Collateral for Revolving Credit Facilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Jun. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|---|---|
Line of Credit Facility [Line Items] | ||||||
Mortgage servicing rights, at fair value | $ 3,213,113 | $ 3,273,956 | $ 2,984,937 | $ 3,021,790 | $ 3,226,191 | $ 2,191,578 |
Servicing advances | 72,400 | 119,000 | ||||
Asset Pledged as Collateral | ||||||
Line of Credit Facility [Line Items] | ||||||
Mortgage servicing rights, at fair value | 3,200,000 | 3,000,000 | ||||
Line of Credit [Member] | Asset Pledged as Collateral | ||||||
Line of Credit Facility [Line Items] | ||||||
Mortgage servicing rights, at fair value | 2,300,000 | 1,800,000 | ||||
Servicing advances | $ 42,700 | $ 67,800 |
Convertible Senior Notes (Details) $ in Thousands |
9 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2022
USD ($)
|
Feb. 01, 2021
USD ($)
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2022
USD ($)
|
|
Debt Instrument, Redemption [Line Items] | ||||
Aggregate principal amount | $ 400,000 | $ 295,800 | ||
Repurchase/repayment of convertible senior notes | 13,169 | $ 143,774 | ||
Convertible senior notes | $ 282,496 | $ 268,179 | ||
Maturity Year 2026 | ||||
Debt Instrument, Redemption [Line Items] | ||||
Convertible senior notes conversion ratio | 0.0338752 | 0.0338752 | ||
Convertible Debt [Member] | Maturity Year 2026 | ||||
Debt Instrument, Redemption [Line Items] | ||||
Aggregate principal amount | $ 287,500 | $ 271,900 | ||
Proceeds from convertible senior notes | $ 279,900 | |||
Convertible senior notes interest rate per annum | 6.25% | |||
Principal amount repurchased | $ 15,600 | |||
Repurchase/repayment of convertible senior notes | 13,200 | |||
Gain on repurchase of convertible notes | $ 2,200 |
Stockholders' Equity Reverse Stock Split (Details) |
Nov. 01, 2022
shares
|
Sep. 30, 2023
shares
|
Dec. 31, 2022
shares
|
Oct. 31, 2022
shares
|
---|---|---|---|---|
Equity [Abstract] | ||||
Reverse stock split, conversion ratio | 0.25 | |||
Common shares authorized prior to reverse stock split (in shares) | 700,000,000 | |||
Common shares authorized (in shares) | 175,000,000 | 175,000,000 | 175,000,000 |
Stockholders' Equity Public Offerings (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Feb. 06, 2023 |
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Class of Stock [Line Items] | |||||||||
Issuance of stock, net of offering costs | $ 48 | $ 149 | $ 177,729 | $ 5,357 | $ 82 | $ 323 | |||
Common Stock [Member] | |||||||||
Class of Stock [Line Items] | |||||||||
Number of shares of stock issued during period (in shares) | 10,000,000 | 10,129,458 | 272,847 | ||||||
Price per share of common stock issued during period (in usd per share) | $ 17.59 | ||||||||
Issuance of stock, net of offering costs | $ 175,600 | ||||||||
Days within which shares may be purchased by underwriters | 30 days | ||||||||
Common Stock [Member] | Over-Allotment Option [Member] | |||||||||
Class of Stock [Line Items] | |||||||||
Number of shares of stock issued during period (in shares) | 1,500,000 |
Stockholders' Equity Common Stock Rollforward (Details) - shares |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Feb. 06, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Increase (Decrease) in Common Stock Outstanding [Roll Forward] | |||||
Common shares outstanding at beginning of period (in shares) | 86,428,845 | ||||
Common shares outstanding at end of period (in shares) | 96,186,425 | 96,186,425 | |||
Common Stock [Member] | |||||
Increase (Decrease) in Common Stock Outstanding [Roll Forward] | |||||
Common shares outstanding at beginning of period (in shares) | 86,428,845 | 85,977,831 | |||
Number of shares of stock issued during period (in shares) | 10,000,000 | 10,129,458 | 272,847 | ||
Number of shares of common stock repurchased during period (in shares) | 0 | 0 | (593,453) | 0 | |
Number of shares of restricted common stock issued during period (in shares) | 221,575 | 121,189 | |||
Common shares outstanding at end of period (in shares) | 96,186,425 | 86,371,867 | 96,186,425 | 86,371,867 |
Stockholders' Equity Dividend Reinvestment and Direct Stock Purchase Plan (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Equity [Abstract] | ||||
Number of common shares reserved for issuance under dividend reinvestment plan (in shares) | 937,500 | 937,500 | ||
Number of common shares issued from dividend reinvestment plan and outstanding as of period-end (in shares) | 125,696 | 125,696 | ||
Accumulated proceeds from issuance of common shares from dividend reinvestment plan | $ 6,200 | $ 6,200 | ||
Number of common shares issued during period from dividend reinvestment plan (in shares) | 3,583 | 4,309 | 12,031 | 13,347 |
Proceeds from issuance of common shares during period from dividend reinvestment plan | $ 48 | $ 100 | $ 200 | $ 300 |
Stockholders' Equity Common Share Repurchase Program (Details) - Common Stock [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Class of Stock [Line Items] | |||||
Number of shares authorized to be repurchased under stock repurchase program (in shares) | 9,375,000 | 9,375,000 | |||
Number of shares repurchased and retired to date (in shares) | 3,637,028 | 3,637,028 | |||
Cost of shares repurchased and retired to date | $ 208,500 | $ 208,500 | |||
Number of shares of common stock repurchased during period (in shares) | 0 | 0 | 593,453 | 0 | |
Repurchase of stock | $ 0 | $ 7,056 | $ 0 | $ 7,100 | $ 0 |
Stockholders' Equity At-the-Market Offering (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Subsidiary, Sale of Stock [Line Items] | ||||||||
Number of shares authorized to be sold under equity distribution agreement (in shares) | 11,000,000 | 11,000,000 | ||||||
Number of common shares issued under equity distribution agreement and outstanding as of period-end (in shares) | 2,300,605 | 2,300,605 | ||||||
Accumulated proceeds from issuance of common shares under equity distribution agreement | $ 136,900 | $ 136,900 | ||||||
Issuance of stock, net of offering costs | $ 48 | $ 149 | $ 177,729 | $ 5,357 | $ 82 | $ 323 | ||
At the Market Offering [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Number of shares of stock issued during period (in shares) | 0 | 259,500 | 117,427 | 259,500 | ||||
Issuance of stock, net of offering costs | $ 0 | $ 5,300 | $ 2,100 | $ 5,300 |
Stockholders' Equity Schedule of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Equity [Abstract] | ||
Unrealized gains | $ 594 | $ 47,656 |
Unrealized losses | (660,602) | (326,367) |
Accumulated other comprehensive loss | $ (660,008) | $ (278,711) |
Stockholders' Equity Reclassifications out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Reclassification out of Accumulated Other Comprehensive Income [Member] | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax | $ (16,800) | $ 63,200 | $ 112,500 |
Share-Based Compensation Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Share-Based Payment Arrangement [Abstract] | ||||
Compensation costs related to equity awards | $ 1,600 | $ 2,400 | $ 9,400 | $ 10,000 |
Compensation cost not yet recognized | $ 5,600 | $ 5,600 | ||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 1 year 6 months |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Income Tax Disclosure [Abstract] | ||||
Percent of REIT taxable income the entity intends to distribute | 100.00% | 100.00% | ||
Percent of excise tax on certain stock repurchases and similar transactions | 1.00% | |||
Provision for income taxes | $ 36,365 | $ 21,023 | $ 52,237 | $ 95,733 |
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