Financing Agreements

12 Months Ended

Dec. 31, 2022

Disclosure of Repurchase Agreements [Abstract]

The following tables present the components of the Company’s financing agreements at December 31, 2022 and 2021:


		December 31, 2022
(In Thousands)	Collateral	Unpaid Principal Balance		Fair Value/Carrying Value (1)		Weighted Average Cost of Funding (2)		Weighted Average Term to Maturity (Months)

Agreements with mark-to-market collateral provisions	Residential Whole Loans and REO	$	2,111,647	$	2,111,396	3.63	%	6.9
Agreements with mark-to-market collateral provisions	Securities	111,651		111,651		3.34	%	1.5
Total Agreements with mark-to-market collateral provisions		2,223,298		2,223,047		3.62	%
Agreements with non-mark-to-market collateral provisions	Residential Whole Loans and REO	1,004,260		1,003,604		5.00	%	16.8
Securitized debt	Residential Whole Loans	3,586,397		3,357,590		2.99	%	See Note 14
Convertible senior notes	Unsecured	229,989		227,845		6.94	%	See below
Total Financing agreements (2)		$	7,043,944	$	6,812,086	3.46	%


		December 31, 2021
(In Thousands)	Collateral	Unpaid Principal Balance		Fair Value/Carrying Value (1)		Weighted Average Cost of Funding (2)		Weighted Average Term to Maturity (Months)

Agreements with mark-to-market collateral provisions	Residential Whole Loans and REO	$	2,403,724	$	2,403,151	2.15	%	6.6
Agreements with mark-to-market collateral provisions	Securities	159,148		159,148		1.78	%	1.4
Total Agreements with mark-to-market collateral provisions		2,562,872		2,562,299		2.11	%
Agreements with non-mark-to-market collateral provisions	Residential Whole Loans and REO	939,003		939,540		3.57	%	9.8
Securitized debt	Residential Whole Loans	2,645,495		2,650,473		1.94	%	See Note 14
Convertible senior notes	Unsecured	230,000		226,470		6.94	%	See below
Total Financing agreements (2)		$	6,377,370	$	6,378,782	2.58	%

(1)The Company has both financing agreements held at fair value and financings agreements held at their carrying value (amortized cost basis). Financing agreements held at fair value are reported at estimated fair value each period as a result of the Company’s fair value option election. The fair value option was not elected for financing agreements held at carrying value. Consequently, total financing agreements as presented reflects a summation of balances reported at fair and carrying value. At December 31, 2022, the Company had $884.5 million of agreements with mark-to-market collateral provisions held at fair value, $578.9 million of agreements with non-mark-to-market collateral provisions held at fair value, and $2.4 billion of securitized debt held at fair value, with amortized cost bases of $884.5 million, $578.9 million, and, $2.6 billion respectively. At December 31, 2021, the Company had the $1.3 billion of agreements with mark-to-market collateral provisions held at fair value, $628.3 million of agreements with non-mark-to-market collateral provisions held at fair value, and $1.3 billion of securitized debt held at fair value, with amortized cost bases of $1.3 billion, $627.0 million, and $1.3 billion, respectively.

(2)Weighted average cost of funding reflects year-to-date interest expense divided by average balance for the financing agreements. The cost of funding for the total financing agreements includes the impact of the net carry (the difference between swap interest income received and swap interest expense paid) on the Company’s Swaps. For the year ended December 31, 2022, this decreased the overall funding cost by 14 basis points, and for the year ended December 31, 2021, this increased the overall funding cost by two basis points. The Company does not allocate the impact of the net carry by type of financing agreement.

The following table presents maturities with respect to the Company’s financing agreements with mark-to-market and non-mark-to-market collateral provisions:


	As of December 31, 2022
	Unpaid Principal Balance, Maturing In
(In Thousands)	Collateral	0-3 Months (1)		3-6 Months (1)		6-12 Months		Greater than 12 Months (2)		Total
Agreements with mark-to-market collateral provisions	Residential Whole Loans	$	828,804	$	53,247	$	939,434	$	290,162	$	2,111,647
Agreements with mark-to-market collateral provisions	Securities	111,651		—		—		—		111,651
Total Agreements with mark-to-market collateral provisions		940,455		53,247		939,434		290,162		2,223,298
Agreements with non-mark-to-market collateral provisions	Residential Whole Loans	9,268		184,576		415,041		395,375		1,004,260

(1)$304.1 million of the mark-to-market agreements ($250.9 million and $53.2 million included in the 0-3 and 3-6 months categories, respectively) can be terminated by either party.

(2)$290.2 million of the mark-to-market agreements (included in the greater than 12 months category) have a one year extension option to September 2024.

The following table presents information with respect to the Company’s financing agreements with mark-to-market collateral provisions and associated assets pledged as collateral at December 31, 2022 and 2021:


(Dollars in Thousands)	December 31, 2022			December 31, 2021
Mark-to-market financing agreements secured by residential whole loans	$	2,095,002		$	2,391,602
Fair value of residential whole loans pledged as collateral under financing agreements	$	2,632,489		$	3,301,288
Weighted average haircut on residential whole loans (1)	18.33		%	25.27		%
Mark-to-market financing agreements secured by securities at fair value	$	111,651		$	159,148
Securities at fair value pledged as collateral under financing agreements	$	177,111		$	256,685
Weighted average haircut on securities at fair value (1)	37.43		%	37.00		%
Mark-to-market financing agreements secured by real estate owned	$	16,394		$	11,549
Fair value of real estate owned pledged as collateral under financing agreements	$	33,367		$	34,606
Weighted average haircut on real estate owned (1)	48.07		%	58.46		%

(1)Haircut represents the percentage amount by which the collateral value is contractually required to exceed the loan amount.

The following table presents information with respect to the Company’s financing agreements with non-mark-to-market collateral provisions and associated assets pledged as collateral at December 31, 2022 and 2021:


(Dollars in Thousands)	December 31, 2022			December 31, 2021
Non-mark-to-market financing secured by residential whole loans	$	994,494		$	928,055
Fair value of residential whole loans pledged as collateral under financing agreements	$	1,301,685		$	1,420,283
Weighted average haircut on residential whole loans	21.43		%	29.98		%
Non-mark-to-market financing secured by real estate owned	$	9,109		$	11,485
Fair value of real estate owned pledged as collateral under financing agreements	$	22,902		$	29,894
Weighted average haircut on real estate owned	60.23		%	61.28		%

In addition, the Company had aggregate restricted cash held in connection with its financing agreements of $16.0 million and $10.2 million at December 31, 2022 and 2021, respectively.

The following table presents repricing information (excluding the impact of associated derivative hedging instruments, if any) about the Company’s financing agreements that have non-mark-to-market collateral provisions as well as those that have mark-to-market collateral provisions, at December 31, 2022 and 2021:


	December 31, 2022				December 31, 2021
	Unpaid Principal Balance		Weighted Average Interest Rate		Unpaid Principal Balance		Weighted Average Interest Rate
Time Until Interest Rate Reset
(Dollars in Thousands)
Within 30 days	$	3,060,111	6.60	%	$	3,222,268	2.36	%
Over 30 days to 3 months	167,447		6.19		257,444		2.49
Over 3 months to 12 months	—		—		22,163		4.50
Over 12 months	—		—		—		—
Total financing agreements	$	3,227,558	6.58	%	$	3,501,875	2.38	%

(a) Other Information on Financing Agreements

Convertible Senior Notes

On June 3, 2019, the Company issued $230.0 million in aggregate principal amount of its Convertible Senior Notes in an underwritten public offering, including an additional $30.0 million issued pursuant to the exercise of the underwriters’ option to purchase additional Convertible Senior Notes. The total net proceeds the Company received from the offering were approximately $223.3 million, after deducting offering expenses and the underwriting discount. The Convertible Senior Notes bear interest at a fixed rate of 6.25% per year, paid semiannually on June 15 and December 15 of each year commencing December 15, 2019 and will mature on June 15, 2024, unless earlier converted, redeemed or repurchased in accordance with their terms. The Convertible Senior Notes are convertible at the option of the holders at any time until the close of business on the business day immediately preceding the maturity date into shares of the Company’s common stock based on a conversion rate of 31.4346 shares (which reflects an adjustment resulting from the Company’s Reverse Stock Split) of the Company’s common stock for each $1,000 principal amount of the Convertible Senior Notes, which is equivalent to a conversion price of approximately $31.81 per share of common stock. The Convertible Senior Notes have an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 6.94%. The Company does not have the right to redeem the Convertible Senior Notes prior to maturity, except to the extent necessary to preserve its status as a REIT, in which case the Company may redeem the Convertible Senior Notes, in whole or in part, at a redemption price equal to the principal amount redeemed plus accrued and unpaid interest. During the year ended December 31, 2022, $11,000 of convertible senior notes were converted into 345 shares of the Company’s common stock.

The Convertible Senior Notes are the Company’s senior unsecured obligations and are (i) effectively junior to all of the Company’s secured indebtedness, which includes the Company’s repurchase agreements and other financing arrangements, to the extent of the value of the collateral securing such indebtedness and (ii) equal in right of payment to the Company’s existing and future senior unsecured obligations, if any.

Senior Notes

On April 11, 2012, the Company issued $100.0 million in aggregate principal amount of its Senior Notes in an underwritten public offering. On January 6, 2021, the Company redeemed all of its outstanding Senior Notes. The Senior Notes bore interest at a fixed rate of 8.00% per year, paid quarterly in arrears on January 15, April 15, July 15 and October 15. The Senior Notes had an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 8.31%.

Senior Secured Term Loan Facility

On June 26, 2020, the Company entered into a $500 million senior secured term loan facility (the “Term Loan Facility”). The outstanding balance of the Term Loan Facility was repaid and the Term Loan Facility was terminated prior to December 31, 2020.

(b) Counterparties

The Company had financing agreements, including repurchase agreements and other forms of secured financing, with 12 and 14 counterparties at December 31, 2022 and 2021, respectively. The following table presents information with respect to each counterparty under financing agreements for which the Company had greater than 5% of stockholders’ equity at risk in the aggregate at December 31, 2022:


	December 31, 2022
	Counterparty Rating (1)	Amount at Risk (2)		Weighted Average Months to Repricing for Repurchase Agreements	Percent of Stockholders’ Equity
Counterparty
(Dollars in Thousands)
Barclays Bank (3)	BBB/Aa3/A	$	309,463	1	15.6	%
Wells Fargo	A+/Aa2/AA-	234,826		1	11.8
Credit Suisse	BBB-/Baa2/BBB	192,129		1	9.7

(1)As rated at December 31, 2022 by S&P, Moody’s and Fitch, Inc., respectively. The counterparty rating presented is the lowest published rating for these entities.

(2)The amount at risk reflects the difference between (a) the amount loaned to the Company through financing agreements, including interest payable, and (b) the cash and the fair value of the assets pledged by the Company as collateral, including accrued interest receivable on such assets.

(3)Includes amounts at risk with various affiliates of Athene Holding, Ltd., held via participation in a loan syndication administered by Barclays Bank.

The following tables present the Company’s assets (based on carrying value) pledged as collateral for its various financing arrangements as of December 31, 2022 and 2021:


	December 31, 2022
	Financing Agreements
(In Thousands)	Non-Mark-to-Market (1)		Mark-to-Market (1)		Securitized		Total
Assets:
Residential whole loans, at carrying value	$	215,993	$	284,683	$	1,314,104	$	1,814,780
Residential whole loans, at fair value	1,095,556		2,164,158		2,720,757		5,980,471
Securities, at fair value	—		177,111		—		177,111
Other assets: REO	19,837		28,490		36,486		84,813
Total	$	1,331,386	$	2,654,442	$	4,071,347	$	8,057,175


	December 31, 2021
	Financing Agreements
(In Thousands)	Non-Mark-to-Market (1)		Mark-to-Market (1)		Securitized		Total
Assets:
Residential whole loans, at carrying value	$	693,982	$	459,349	$	1,476,588	$	2,629,919
Residential whole loans, at fair value	706,377		2,810,865		1,525,114		5,042,356
Securities, at fair value	—		256,685		—		256,685
Other assets: REO	25,692		29,374		35,379		90,445
Total	$	1,426,051	$	3,556,273	$	3,037,081	$	8,019,405

(1)An aggregate of $30.9 million and $25.7 million of accrued interest on those assets pledged against non-mark-to-market and mark-to-market financings agreements had also been pledged as of December 31, 2022 and 2021, respectively.

The Company pledges securities or cash as collateral to its counterparties in relation to certain of its financing arrangements. The Company exchanges collateral with its counterparties based on changes in the fair value, notional amount and term of the associated financing arrangements and Swap contracts, as applicable. In connection with these margining practices, either the Company or its counterparty may be required to pledge cash or securities as collateral. When the Company’s pledged collateral exceeds the required margin, the Company may initiate a reverse margin call, at which time the counterparty may either return the excess collateral or provide collateral to the Company in the form of cash or equivalent securities. The Company’s assets pledged as collateral are also described in Notes 2(e) - Restricted Cash and 5(d) - Derivative Instruments.

Certain of the Company’s financing arrangements and derivative transactions are governed by underlying agreements that generally provide for a right of setoff in the event of default or in the event of a bankruptcy of either party to the transaction. In the Company’s consolidated balance sheets, all balances associated with repurchase agreements are presented on a gross basis.