Maryland | 27-0312904 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
575 Lexington Avenue, Suite 2930 New York, New York | 10022 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company o | |
Emerging growth company o |
Title of Each Class: | Trading Symbol(s) | Name of Exchange on Which Registered: | ||
Common Stock, par value $0.01 per share | TWO | New York Stock Exchange | ||
8.125% Series A Cumulative Redeemable Preferred Stock | TWO PRA | New York Stock Exchange | ||
7.625% Series B Cumulative Redeemable Preferred Stock | TWO PRB | New York Stock Exchange | ||
7.25% Series C Cumulative Redeemable Preferred Stock | TWO PRC | New York Stock Exchange | ||
7.75% Series D Cumulative Redeemable Preferred Stock | TWO PRD | New York Stock Exchange | ||
7.50% Series E Cumulative Redeemable Preferred Stock | TWO PRE | New York Stock Exchange |
Page | ||
PART I - FINANCIAL INFORMATION | ||
PART II - OTHER INFORMATION | ||
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | (unaudited) | ||||||
Available-for-sale securities, at fair value | $ | $ | |||||
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 | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Liabilities | |||||||
Repurchase agreements | $ | $ | |||||
Federal Home Loan Bank advances | |||||||
Revolving credit facilities | |||||||
Convertible senior notes | |||||||
Derivative liabilities, at fair value | |||||||
Due to counterparties | |||||||
Dividends payable | |||||||
Accrued interest payable | |||||||
Other liabilities | |||||||
Total Liabilities | |||||||
Stockholders’ Equity | |||||||
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized and 40,050,000 and 40,050,000 shares issued and outstanding, respectively ($1,001,250 and $1,001,250 liquidation preference, respectively) | |||||||
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 272,826,604 and 248,085,721 shares issued and outstanding, respectively | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive income | |||||||
Cumulative earnings | |||||||
Cumulative distributions to stockholders | ( | ) | ( | ) | |||
Total Stockholders’ Equity | |||||||
Total Liabilities and Stockholders’ Equity | $ | $ |
Three Months Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Interest income: | |||||||
Available-for-sale securities | $ | $ | |||||
Other | |||||||
Total interest income | |||||||
Interest expense: | |||||||
Repurchase agreements | |||||||
Federal Home Loan Bank advances | |||||||
Revolving credit facilities | |||||||
Convertible senior notes | |||||||
Total interest expense | |||||||
Net interest income | |||||||
Other-than-temporary impairments: | |||||||
Total other-than-temporary impairment losses | ( | ) | ( | ) | |||
Other (loss) income: | |||||||
Loss on investment securities | ( | ) | ( | ) | |||
Servicing income | |||||||
(Loss) gain on servicing asset | ( | ) | |||||
(Loss) gain on interest rate swap, cap and swaption agreements | ( | ) | |||||
Gain on other derivative instruments | |||||||
Other income | |||||||
Total other (loss) income | ( | ) | |||||
Expenses: | |||||||
Management fees | |||||||
Servicing expenses | |||||||
Other operating expenses | |||||||
Total expenses | |||||||
(Loss) income before income taxes | ( | ) | |||||
(Benefit from) provision for income taxes | ( | ) | |||||
Net (loss) income | ( | ) | |||||
Dividends on preferred stock | |||||||
Net (loss) income attributable to common stockholders | $ | ( | ) | $ | |||
Basic (loss) earnings per weighted average common share | $ | ( | ) | $ | |||
Diluted (loss) earnings per weighted average common share | $ | ( | ) | $ | |||
Dividends declared per common share | $ | $ | |||||
Weighted average number of shares of common stock: | |||||||
Basic | |||||||
Diluted |
Three Months Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Comprehensive income (loss): | |||||||
Net (loss) income | $ | ( | ) | $ | |||
Other comprehensive income (loss), net of tax: | |||||||
Unrealized gain (loss) on available-for-sale securities | ( | ) | |||||
Other comprehensive income (loss) | ( | ) | |||||
Comprehensive income (loss) | ( | ) | |||||
Dividends on preferred stock | |||||||
Comprehensive income (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, 2017 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
Cumulative effect of adoption of new accounting principle | — | — | — | ( | ) | — | |||||||||||||||||||||
Adjusted Balance, January 1, 2018 | ( | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||
Other comprehensive loss before reclassifications, net of tax benefit of $510 | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax benefit of $0 | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Other comprehensive loss, net of tax benefit of $510 | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Issuance of preferred stock, net of offering costs | — | — | — | — | — | ||||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | — | — | ||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Non-cash equity award compensation | — | — | — | — | |||||||||||||||||||||||
Balance, March 31, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||
Balance, December 31, 2018 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
Cumulative effect of adoption of new accounting principle | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Adjusted Balance, January 1, 2019 | ( | ) | |||||||||||||||||||||||||
Net loss | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Other comprehensive income before reclassifications, net of tax expense of $30 | — | — | — | — | — | ||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax benefit of $0 | — | — | — | — | — | ||||||||||||||||||||||
Other comprehensive income, net of tax expense of $30 | — | — | — | — | — | ||||||||||||||||||||||
Issuance of common stock, net of offering costs | — | — | — | — | |||||||||||||||||||||||
Preferred dividends declared | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Common dividends declared | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Non-cash equity award compensation | — | — | — | — | |||||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | $ | $ | $ | ( | ) | $ |
Three Months Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Cash Flows From Operating Activities: | |||||||
Net (loss) income | $ | ( | ) | $ | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
Amortization of premiums and discounts on investment securities, net | |||||||
Amortization of deferred debt issuance costs on convertible senior notes | |||||||
Other-than-temporary impairment losses | |||||||
Realized and unrealized losses on investment securities | |||||||
Loss (gain) on servicing asset | ( | ) | |||||
Realized and unrealized loss (gain) on interest rate swaps, caps and swaptions | ( | ) | |||||
Unrealized (gain) loss on other derivative instruments | ( | ) | |||||
Equity based compensation | |||||||
Net change in assets and liabilities: | |||||||
Decrease in accrued interest receivable | |||||||
(Increase) decrease in deferred income taxes, net | ( | ) | |||||
Decrease 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 | ( | ) | ( | ) | |||
(Payments for termination and settlement) proceeds from sales and settlement of derivative instruments, net | ( | ) | |||||
Proceeds from reverse repurchase agreements | |||||||
Repayments of reverse repurchase agreements | ( | ) | |||||
Increase in due to counterparties, net | |||||||
Change in other investing assets and liabilities, net | |||||||
Net cash provided by investing activities | $ | $ |
Three Months Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Cash Flows From Financing Activities: | |||||||
Proceeds from repurchase agreements | $ | $ | |||||
Principal payments on repurchase agreements | ( | ) | ( | ) | |||
Principal payments on Federal Home Loan Bank advances | ( | ) | |||||
Proceeds from revolving credit facilities | |||||||
Principal payments on revolving credit facilities | ( | ) | |||||
Proceeds from issuance of preferred stock, net of offering costs | |||||||
Proceeds from issuance of common stock, net of offering costs | |||||||
Dividends paid on preferred stock | ( | ) | ( | ) | |||
Dividends paid on common stock | ( | ) | ( | ) | |||
Net cash used in financing activities | ( | ) | ( | ) | |||
Net (decrease) increase 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 for taxes | $ | $ | |||||
Noncash Activities: | |||||||
Cumulative-effect adjustment to equity for adoption of new accounting principle | $ | $ | |||||
Dividends declared but not paid at end of period | $ | $ |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Agency | |||||||
Federal National Mortgage Association | $ | $ | |||||
Federal Home Loan Mortgage Corporation | |||||||
Government National Mortgage Association | |||||||
Non-Agency | |||||||
Total available-for-sale securities | $ | $ |
March 31, 2019 | |||||||||||||||||||||||||||||||
(in thousands) | Principal/ Current Face | Un-amortized Premium | Accretable Purchase Discount | Credit Reserve Purchase Discount | Amortized Cost | Unrealized Gain | Unrealized Loss | Carrying Value | |||||||||||||||||||||||
Agency | |||||||||||||||||||||||||||||||
Principal and interest | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
Interest-only | ( | ) | |||||||||||||||||||||||||||||
Total Agency | ( | ) | ( | ) | |||||||||||||||||||||||||||
Non-Agency | |||||||||||||||||||||||||||||||
Principal and interest | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Interest-only | ( | ) | |||||||||||||||||||||||||||||
Total Non-Agency | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ |
December 31, 2018 | |||||||||||||||||||||||||||||||
(in thousands) | Principal/ Current Face | Un-amortized Premium | Accretable Purchase Discount | Credit Reserve Purchase Discount | Amortized Cost | Unrealized Gain | Unrealized Loss | Carrying Value | |||||||||||||||||||||||
Agency | |||||||||||||||||||||||||||||||
Principal and interest | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
Interest-only | ( | ) | |||||||||||||||||||||||||||||
Total Agency | ( | ) | ( | ) | |||||||||||||||||||||||||||
Non-Agency | |||||||||||||||||||||||||||||||
Principal and interest | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Interest-only | ( | ) | |||||||||||||||||||||||||||||
Total Non-Agency | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ |
March 31, 2019 | |||||||||||
(in thousands) | Agency | Non-Agency | Total | ||||||||
Adjustable Rate | $ | $ | $ | ||||||||
Fixed Rate | |||||||||||
Total | $ | $ | $ |
December 31, 2018 | |||||||||||
(in thousands) | Agency | Non-Agency | Total | ||||||||
Adjustable Rate | $ | $ | $ | ||||||||
Fixed Rate | |||||||||||
Total | $ | $ | $ |
March 31, 2019 | |||||||||||
(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 March 31, | |||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||
(in thousands) | Designated Credit Reserve | Net Unamortized Discount/Premium | Total | Designated Credit Reserve | Net Unamortized Discount/Premium | Total | |||||||||||||||||
Beginning balance at January 1 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Acquisitions | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Accretion of net discount | |||||||||||||||||||||||
Realized credit losses | |||||||||||||||||||||||
Reclassification adjustment for other-than-temporary impairments | ( | ) | ( | ) | |||||||||||||||||||
Transfers from (to) | ( | ) | ( | ) | |||||||||||||||||||
Sales, calls, other | ( | ) | |||||||||||||||||||||
Ending balance at March 31 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
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 | |||||||||||||||||
March 31, 2019 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||
December 31, 2018 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) |
Three Months Ended | |||||||
March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Cumulative credit loss at beginning of period | $ | ( | ) | $ | ( | ) | |
Additions: | |||||||
Other-than-temporary impairments not previously recognized | ( | ) | |||||
Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments | ( | ) | ( | ) | |||
Reductions: | |||||||
Decreases related to other-than-temporary impairments on securities paid down | |||||||
Decreases related to other-than-temporary impairments on securities sold | |||||||
Cumulative credit loss at end of period | $ | ( | ) | $ | ( | ) |
Three Months Ended | |||||||
March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Gross realized gains | $ | $ | |||||
Gross realized losses | ( | ) | ( | ) | |||
Total realized losses on sales, net | $ | ( | ) | $ | ( | ) |
Three Months Ended | |||||||
March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Balance at beginning of period | $ | $ | |||||
Additions from purchases of mortgage servicing rights | |||||||
Changes in fair value due to: | |||||||
Changes in valuation inputs or assumptions used in the valuation model | ( | ) | |||||
Other changes in fair value (1) | ( | ) | ( | ) | |||
Other changes (2) | ( | ) | ( | ) | |||
Balance at end of period | $ | $ |
(1) | Other changes in fair value primarily represents changes due to the realization of expected cash flows. |
(2) | Other changes includes purchase price adjustments, contractual prepayment protection, and changes due to the Company’s purchase of the underlying collateral. |
(dollars in thousands) | March 31, 2019 | December 31, 2018 | ||||
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 discount rate: | % | % | ||||
Impact on fair value of 10% adverse change | $ | ( | ) | ( | ) | |
Impact on fair value of 20% adverse change | $ | ( | ) | ( | ) |
Three Months Ended | |||||||
March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Servicing fee income | $ | $ | |||||
Ancillary and other fee income | |||||||
Float income | |||||||
Total | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||||||||
(dollars in thousands) | Number of Loans | Unpaid Principal Balance | Number of Loans | Unpaid Principal Balance | |||||||||
Mortgage servicing rights | $ | $ | |||||||||||
Residential mortgage loans in securitization trusts | |||||||||||||
Other assets | |||||||||||||
Total serviced mortgage assets | $ | $ |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Restricted cash balances held by trading counterparties: | |||||||
For securities and loan trading activity | $ | $ | |||||
For derivatives trading activity | |||||||
As restricted collateral for repurchase agreements and Federal Home Loan Bank advances | |||||||
Total restricted cash balances held by trading counterparties | |||||||
Restricted cash balance pursuant to letter of credit on office lease | |||||||
Total | $ | $ |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash | |||||||
Total cash, cash equivalents and restricted cash | $ | $ |
March 31, 2019 | ||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||
(in thousands) | Fair Value | Notional | Fair Value | Notional | ||||||||||||
Inverse interest-only securities | $ | $ | $ | $ | ||||||||||||
Interest rate swap agreements | ||||||||||||||||
Interest rate cap contracts | ||||||||||||||||
Swaptions, net | ||||||||||||||||
TBAs | ||||||||||||||||
U.S. Treasury futures | ||||||||||||||||
Markit IOS total return swaps | ( | ) | ||||||||||||||
Total | $ | $ | $ | ( | ) | $ |
December 31, 2018 | ||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||
(in thousands) | Fair Value | Notional | Fair Value | Notional | ||||||||||||
Inverse interest-only securities | $ | $ | $ | $ | ||||||||||||
Interest rate swap agreements | ||||||||||||||||
Interest rate cap contracts | ||||||||||||||||
Swaptions, net | ( | ) | ||||||||||||||
TBAs | ||||||||||||||||
Put and call options for TBAs, net | ( | ) | ||||||||||||||
Short U.S. Treasuries | ( | ) | ||||||||||||||
Markit IOS total return swaps | ( | ) | ||||||||||||||
Total | $ | $ | $ | ( | ) | $ |
Derivative Instruments | Location of Gain (Loss) Recognized in Income on Derivatives | Amount of Gain (Loss) Recognized in Income on Derivatives | ||||||||
Three Months Ended | ||||||||||
(in thousands) | March 31, | |||||||||
2019 | 2018 | |||||||||
Interest rate risk management | ||||||||||
TBAs | Gain on other derivative instruments | $ | $ | ( | ) | |||||
Short U.S. Treasuries | Gain on other derivative instruments | ( | ) | |||||||
U.S. Treasury futures | Gain on other derivative instruments | |||||||||
Put and call options for TBAs | Gain on other derivative instruments | ( | ) | |||||||
Interest rate swaps - Payers | (Loss) gain on interest rate swap, cap and swaption agreements | ( | ) | |||||||
Interest rate swaps - Receivers | (Loss) gain on interest rate swap, cap and swaption agreements | ( | ) | |||||||
Swaptions | (Loss) gain on interest rate swap, cap and swaption agreements | ( | ) | |||||||
Interest rate caps | (Loss) gain on interest rate swap, cap and swaption agreements | ( | ) | |||||||
Markit IOS total return swaps | Gain on other derivative instruments | ( | ) | |||||||
Non-risk management | ||||||||||
Inverse interest-only securities | Gain on other derivative instruments | ( | ) | |||||||
Total | $ | $ |
Three Months Ended March 31, 2019 | |||||||||||||||||||||||
(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 | ( | ) | ( | ) | |||||||||||||||||||
Interest rate cap contracts | |||||||||||||||||||||||
Swaptions, net | ( | ) | ( | ) | |||||||||||||||||||
TBAs, net | ( | ) | |||||||||||||||||||||
Short U.S. Treasuries | ( | ) | ( | ) | ( | ) | |||||||||||||||||
U.S. Treasury futures | |||||||||||||||||||||||
Put and call options for TBAs, net | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Markit IOS total return swaps | ( | ) | |||||||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) |
Three Months Ended March 31, 2018 | |||||||||||||||||||||||
(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 | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Put and call options for TBAs, net | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Markit IOS total return swaps | ( | ) | |||||||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | $ | $ |
(1) |
March 31, 2019 | |||||||||||||||||||
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, 2018 | |||||||||||||||||||
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 | $ | $ | $ | $ | $ |
(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) |
(notional in thousands) | ||||||||||||
March 31, 2019 | ||||||||||||
Swaps Maturities | Notional Amount | Weighted Average Fixed Pay Rate | Weighted Average Receive Rate | Weighted Average Maturity (Years) | ||||||||
2019 | $ | % | % | |||||||||
2020 | % | % | ||||||||||
2021 | % | % | ||||||||||
2022 | % | % | ||||||||||
2023 and Thereafter | % | % | ||||||||||
Total | $ | % | % |
(notional in thousands) | ||||||||||||
December 31, 2018 | ||||||||||||
Swaps Maturities | Notional Amount (1) | Weighted Average Fixed Pay Rate (2) | Weighted Average Receive Rate (2) | Weighted Average Maturity (Years) (2) | ||||||||
2019 | $ | % | % | |||||||||
2020 | % | % | ||||||||||
2021 | % | % | ||||||||||
2022 | % | % | ||||||||||
2023 and Thereafter | % | % | ||||||||||
Total | $ | % | % |
(1) | Notional amount includes $ |
(2) | Weighted averages exclude forward starting interest rate swaps. As of December 31, 2018, the weighted average fixed pay rate on forward starting interest rate swaps was |
(notional in thousands) | ||||||||||||
March 31, 2019 | ||||||||||||
Swaps Maturities | Notional Amounts | Weighted Average Pay Rate | Weighted Average Fixed Receive Rate | Weighted Average Maturity (Years) | ||||||||
2020 | $ | % | % | |||||||||
2021 | % | % | ||||||||||
2022 | % | % | ||||||||||
2023 and Thereafter | % | % | ||||||||||
Total | $ | % | % |
(notional in thousands) | ||||||||||||
December 31, 2018 | ||||||||||||
Swaps Maturities | Notional Amounts | Weighted Average Pay Rate | Weighted Average Fixed Receive Rate | Weighted Average Maturity (Years) | ||||||||
2020 | $ | % | % | |||||||||
2021 | % | % | ||||||||||
2022 | % | % | ||||||||||
2023 and Thereafter | % | % | ||||||||||
Total | $ | % | % |
March 31, 2019 | |||||||||||||||||||||||||
(notional and dollars in thousands) | Option | Underlying Swap | |||||||||||||||||||||||
Swaption | Expiration | Cost Basis | Fair Value | Average Months to Expiration | Notional Amount | Average Pay Rate | Average Receive Rate | Average Term (Years) | |||||||||||||||||
Purchase contracts: | |||||||||||||||||||||||||
Payer | < 6 Months | $ | $ | 5.30 | $ | % | 3M Libor | ||||||||||||||||||
Total Payer | $ | $ | 5.30 | $ | % | 3M Libor | |||||||||||||||||||
Receiver | < 6 Months | $ | $ | 5.46 | $ | 3M Libor | % | ||||||||||||||||||
Receiver | ≥ 6 Months | 11.77 | 3M Libor | % | |||||||||||||||||||||
Total Receiver | $ | $ | 7.85 | $ | 3M Libor | % | |||||||||||||||||||
Sale contracts: | |||||||||||||||||||||||||
Receiver | < 6 Months | $ | ( | ) | $ | ( | ) | 5.30 | $ | ( | ) | 3M Libor | % | ||||||||||||
Total Receiver | $ | ( | ) | $ | ( | ) | 5.30 | $ | ( | ) | 3M Libor | % |
December 31, 2018 | |||||||||||||||||||||||||
(notional and dollars in thousands) | Option | Underlying Swap | |||||||||||||||||||||||
Swaption | Expiration | Cost | Fair Value | Average Months to Expiration | Notional Amount | Average Fixed Pay Rate | Average Receive Rate | Average Term (Years) | |||||||||||||||||
Purchase contracts: | |||||||||||||||||||||||||
Payer | < 6 Months | $ | $ | 5.13 | $ | % | 3M Libor | ||||||||||||||||||
Payer | ≥ 6 Months | 8.60 | % | 3M Libor | |||||||||||||||||||||
Total Payer | $ | $ | 7.92 | $ | % | 3M Libor | |||||||||||||||||||
Sale contracts: | |||||||||||||||||||||||||
Receiver | < 6 Months | $ | ( | ) | $ | ( | ) | 4.74 | $ | ( | ) | 3M Libor | % | ||||||||||||
Receiver | ≥ 6 Months | ( | ) | ( | ) | 8.60 | ( | ) | 3M Libor | % | |||||||||||||||
Total Receiver | $ | ( | ) | $ | ( | ) | 7.52 | $ | ( | ) | 3M Libor | % |
(notional in thousands) | ||||||||||||
March 31, 2019 | ||||||||||||
Caps Maturities | Notional Amount | Weighted Average Cap Rate | Weighted Average Receive Rate | Weighted Average Maturity (Years) | ||||||||
2019 | $ | % | % | |||||||||
2020 | % | % | ||||||||||
Total | $ | % | % |
(notional in thousands) | ||||||||||||
December 31, 2018 | ||||||||||||
Caps Maturities | Notional Amount | Weighted Average Cap Rate | Weighted Average Receive Rate | Weighted Average Maturity (Years) | ||||||||
2019 | $ | % | % | |||||||||
2020 | % | % | ||||||||||
Total | $ | % | % |
(notional and dollars in thousands) | ||||||||||||||||
March 31, 2019 | ||||||||||||||||
Maturity Date | Current Notional Amount | Fair Value | Cost Basis | Unrealized Gain (Loss) | ||||||||||||
January 12, 2043 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
January 12, 2044 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(notional and dollars in thousands) | ||||||||||||||||
December 31, 2018 | ||||||||||||||||
Maturity Date | Current Notional Amount | Fair Value | Cost Basis | Unrealized Gain (Loss) | ||||||||||||
January 12, 2043 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
January 12, 2044 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
March 31, 2019 | |||||||||||||||||||||||
Gross Amounts Not Offset with Financial Assets (Liabilities) in the Consolidated Balance Sheets (1) | |||||||||||||||||||||||
(in thousands) | Gross Amounts of Recognized Assets (Liabilities) | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets (Liabilities) Presented in the Consolidated Balance Sheets | Financial Instruments | Cash Collateral (Received) Pledged | Net Amount | |||||||||||||||||
Assets | |||||||||||||||||||||||
Derivative assets | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||
Total Assets | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||
Liabilities | |||||||||||||||||||||||
Repurchase agreements | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Derivative liabilities | ( | ) | ( | ) | |||||||||||||||||||
Total Liabilities | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ |
December 31, 2018 | |||||||||||||||||||||||
Gross Amounts Not Offset with Financial Assets (Liabilities) in the Consolidated Balance Sheets (1) | |||||||||||||||||||||||
(in thousands) | Gross Amounts of Recognized Assets (Liabilities) | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets (Liabilities) Presented in the Consolidated 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 | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ |
(1) |
Level 1 | Inputs 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 2 | Inputs 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 3 | Unobservable 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. |
Recurring Fair Value Measurements | |||||||||||||||
March 31, 2019 | |||||||||||||||
(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, 2018 | |||||||||||||||
(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 | ||||||||
March 31, 2019 | ||||||||
(in thousands) | Available-For-Sale Securities | Mortgage Servicing Rights | ||||||
Beginning of period level 3 fair value | $ | $ | ||||||
Gains (losses) included in net (loss) income: | ||||||||
Realized (losses) gains, net | ( | ) | ( | ) | ||||
Unrealized (losses) gains, net | ( | ) | (1) | |||||
Net gains (losses) included in net (loss) income | ( | ) | ( | ) | ||||
Other comprehensive income (loss) | ||||||||
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 | $ | $ | ( | ) | (2) | |||
Change in unrealized gains or losses for the period included in other comprehensive (loss) income for assets held at the end of the reporting period | $ | ( | ) | $ |
(1) | The change in unrealized gains or losses on MSR was recorded in (loss) gain on servicing asset on the condensed consolidated statements of comprehensive income (loss). |
(2) |
March 31, 2019 | |||||||||
Valuation Technique | Unobservable Input (1) | Range | Weighted Average (2) | ||||||
Discounted cash flow | Constant prepayment speed | - | % | ||||||
Delinquency | - | % | |||||||
Discount rate | - | % |
December 31, 2018 | |||||||||||
Valuation Technique | Unobservable Input (1) | Range | Weighted Average (2) | ||||||||
Discounted cash flow | Constant prepayment speed | - | % | ||||||||
Delinquency | - | % | |||||||||
Discount rate | - | % |
(1) | Significant increases (decreases) in any of the inputs in isolation may result in significantly lower (higher) fair value measurement. A change in the assumption used for discount rates may be accompanied by a directionally similar change in the assumption used for the probability of delinquency and a directionally opposite change in the assumption used for prepayment rates. |
(2) |
• | 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 8. |
• | 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, FHLB advances and revolving credit facilities that mature in less than one year generally approximates fair value due to the short maturities. As of March 31, 2019, the Company held $ |
• | 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 March 31, 2019. The Company categorizes the fair value measurement of these assets as Level 2. |
March 31, 2019 | December 31, 2018 | ||||||||||||||
(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 | $ | $ | $ | $ | |||||||||||
Federal Home Loan Bank advances | $ | $ | $ | $ | |||||||||||
Revolving credit facilities | $ | $ | $ | $ | |||||||||||
Convertible senior notes | $ | $ | $ | $ | |||||||||||
Derivative liabilities | $ | $ | $ | $ |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Short-term | $ | $ | |||||
Long-term | |||||||
Total | $ | $ |
March 31, 2019 | |||||||||||||||||||
Collateral Type | |||||||||||||||||||
(in thousands) | Agency RMBS | Non-Agency Securities | Agency Derivatives | Mortgage Servicing Rights | Total Amount Outstanding | ||||||||||||||
Within 30 days | $ | $ | $ | $ | $ | ||||||||||||||
30 to 59 days | |||||||||||||||||||
60 to 89 days | |||||||||||||||||||
90 to 119 days | |||||||||||||||||||
120 to 364 days | |||||||||||||||||||
One year and over | |||||||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||||||
Weighted average borrowing rate | % | % | % | % | % |
December 31, 2018 | |||||||||||||||||||
Collateral Type | |||||||||||||||||||
(in thousands) | Agency RMBS | Non-Agency Securities | Agency Derivatives | Mortgage Servicing Rights | Total Amount Outstanding | ||||||||||||||
Within 30 days | $ | $ | $ | $ | $ | ||||||||||||||
30 to 59 days | |||||||||||||||||||
60 to 89 days | |||||||||||||||||||
90 to 119 days | |||||||||||||||||||
120 to 364 days | |||||||||||||||||||
One year and over | |||||||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||||||
Weighted average borrowing rate | % | % | % | % | % |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Available-for-sale securities, at fair value | $ | $ | |||||
Mortgage servicing rights, at fair value | |||||||
Restricted cash | |||||||
Due from counterparties | |||||||
Derivative assets, at fair value | |||||||
U.S. Treasuries (1) | |||||||
Total | $ | $ |
(1) |
March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||||
(dollars in thousands) | Amount Outstanding | Net Counterparty Exposure (1) | Percent of Equity | Weighted Average Days to Maturity | Amount Outstanding | Net Counterparty Exposure (1) | Percent of Equity | Weighted Average Days to Maturity | |||||||||||||||||
Royal Bank of Canada | $ | $ | % | $ | $ | % | |||||||||||||||||||
All other counterparties (2) | % | % | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
(1) | Represents the net carrying value of the 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. Payables due to broker counterparties for unsettled securities purchases of $ |
(2) |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
≤ 1 year | $ | $ | |||||
> 1 and ≤ 3 years | |||||||
> 3 and ≤ 5 years | |||||||
> 5 and ≤ 10 years | |||||||
> 10 years | |||||||
Total | $ | $ |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Within 30 days | $ | $ | |||||
30 to 59 days | |||||||
60 to 89 days | |||||||
90 to 119 days | |||||||
120 to 364 days | |||||||
One year and over | |||||||
Total | $ | $ |
As of March 31, 2019 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
Class of Stock | Issuance Date | Shares Issued and Outstanding | Carrying Value | Contractual Rate | Redemption Date (1) | Fixed to Floating Rate Conversion Date (2) | Floating Annual Rate (3) | ||||||||||||
Fixed-to-Floating Rate | |||||||||||||||||||
Series A | March 14, 2017 | $ | % | April 27, 2027 | April 27, 2027 | 3M LIBOR + 5.660% | |||||||||||||
Series B | July 19, 2017 | % | July 27, 2027 | July 27, 2027 | 3M LIBOR + 5.352% | ||||||||||||||
Series C | November 27, 2017 | % | January 27, 2025 | January 27, 2025 | 3M LIBOR + 5.011% | ||||||||||||||
Fixed Rate | |||||||||||||||||||
Series D | July 31, 2018 | % | July 31, 2018 | N/A | N/A | ||||||||||||||
Series E | July 31, 2018 | % | July 31, 2018 | N/A | N/A | ||||||||||||||
Total | $ |
(1) | Subject to the Company’s right under limited circumstances to redeem the preferred stock earlier than the redemption date disclosed in order to preserve its qualification as a REIT or following a change in control of the Company. |
(2) | For the fixed-to-floating rate redeemable preferred stock, the dividend rate will remain at a annual fixed rate of the $ |
(3) |
Declaration Date | Record Date | Payment Date | Cash Dividend Per Preferred Share | |||||
Series A Preferred Stock: | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
Series B Preferred Stock: | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
Series C Preferred Stock: | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
Series D Preferred Stock: | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
Series E Preferred Stock: | ||||||||
$ | ||||||||
$ | ||||||||
$ |
Number of common shares | ||
Common shares outstanding, December 31, 2017 | ||
Issuance of common stock | ||
Issuance of restricted stock (1) | ||
Common shares outstanding, March 31, 2018 | ||
Common shares outstanding, December 31, 2018 | ||
Issuance of common stock | ||
Issuance of restricted stock (1) | ||
Common shares outstanding, March 31, 2019 |
(1) |
Declaration Date | Record Date | Payment Date | Cash Dividend Per Common Share | |||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
$ |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Available-for-sale securities | |||||||
Unrealized gains | $ | $ | |||||
Unrealized losses | ( | ) | ( | ) | |||
Accumulated other comprehensive income | $ | $ |
Affected Line Item in the Condensed Consolidated Statements of Comprehensive Income (Loss) | Amount Reclassified out of Accumulated Other Comprehensive Income | |||||||||
Three Months Ended | ||||||||||
(in thousands) | March 31, | |||||||||
2019 | 2018 | |||||||||
Other-than-temporary impairments on AFS securities | Total other-than-temporary impairment losses | $ | $ | |||||||
Realized losses (gains) on sales of certain AFS securities, net of tax | Loss on investment securities | ( | ) | |||||||
Total | $ | $ | ( | ) |
Three Months Ended March 31, | |||||||||||||
2019 | 2018 | ||||||||||||
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 | |||||||
March 31, | |||||||
(in thousands, except share data) | 2019 | 2018 | |||||
Numerator: | |||||||
Net (loss) income | $ | ( | ) | $ | |||
Dividends on preferred stock | |||||||
Net (loss) income attributable to common stockholders - basic | ( | ) | |||||
Interest expense attributable to convertible notes (1) | |||||||
Net (loss) income attributable to common stockholders - diluted | $ | ( | ) | $ | |||
Denominator: | |||||||
Weighted average common shares outstanding | |||||||
Weighted average restricted stock shares | |||||||
Basic weighted average shares outstanding | |||||||
Effect of dilutive shares issued in an assumed conversion | |||||||
Diluted weighted average shares outstanding | |||||||
(Loss) Earnings Per Share | |||||||
Basic | $ | ( | ) | $ | |||
Diluted | $ | ( | ) | $ |
(1) |
• | Agency RMBS (which includes inverse interest-only Agency securities classified as “Agency Derivatives” for purposes of U.S. generally accepted accounting principles, or U.S. GAAP), meaning RMBS whose principal and interest payments are guaranteed by the Government National Mortgage Association (or Ginnie Mae), the Federal National Mortgage Association (or Fannie Mae), or the Federal Home Loan Mortgage Corporation (or Freddie Mac), or collectively, the government sponsored entities, or GSEs; |
• | Non-Agency securities, meaning securities that are not issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac; |
• | MSR; and |
• | Other financial assets comprising approximately 5% to 10% of the portfolio. |
Capital Allocations(1) as of | |||||||||
March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | |||||
Rates strategy | 77% | 74% | 76% | 68% | 69% | ||||
Credit strategy | 23% | 26% | 24% | 32% | 31% |
(1) | Capital allocation percentages reflect management’s assessment regarding the extent to which each asset class contributes to total portfolio risk. Does not represent funding allocation or balance sheet financing of such assets. |
Three Months Ended | |||||||||
March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | |||||
Average annualized portfolio yield (1) | 4.25% | 4.14% | 3.76% | 3.91% | 3.77% | ||||
Cost of financing (2) | 2.47% | 2.53% | 2.28% | 1.98% | 1.84% | ||||
Net portfolio yield | 1.78% | 1.61% | 1.48% | 1.93% | 1.93% |
(1) | Average annualized yield incorporates future prepayment, credit loss and other assumptions, all of which are estimates and subject to change. |
(2) | Cost of financing includes swap and cap interest rate spread. |
• | changes in interest rates and the market value of our target assets; |
• | changes in prepayment rates of mortgages underlying our target assets; |
• | the occurrence, extent and timing of credit losses within our portfolio; |
• | our exposure to adjustable-rate and negative amortization mortgage loans underlying our target assets; |
• | the state of the credit markets and other general economic conditions, particularly as they affect the price of earning assets and the credit status of borrowers; |
• | the concentration of the credit risks to which we are exposed; |
• | legislative and regulatory actions affecting our business; |
• | the availability and cost of our target assets; |
• | the availability and cost of financing for our target assets, including repurchase agreement financing, lines of credit, revolving credit facilities and financing through the FHLB; |
• | declines in home prices; |
• | increases in payment delinquencies and defaults on the mortgages comprising and underlying our target assets; |
• | changes in liquidity in the market for real estate securities, the re-pricing of credit risk in the capital markets, inaccurate ratings of securities by rating agencies, rating agency downgrades of securities, and increases in the supply of real estate securities available-for-sale; |
• | changes in the values of securities we own and the impact of adjustments reflecting those changes on our condensed consolidated statements of comprehensive income (loss) and balance sheets, including our stockholders’ equity; |
• | our ability to generate cash flow from our target assets; |
• | our ability to effectively execute and realize the benefits of strategic transactions and initiatives we have pursued or may in the future pursue; |
• | changes in the competitive landscape within our industry, including changes that may affect our ability to attract and retain personnel; |
• | our exposure to legal and regulatory claims, penalties or enforcement activities, including those arising from our ownership and management of MSR and prior securitization transactions; |
• | our exposure to counterparties involved in our MSR business and prior securitization transactions and our ability to enforce representations and warranties made by them; |
• | our ability to acquire MSR and successfully operate our seller-servicer subsidiary and oversee the activities of our subservicers; |
• | our ability to successfully diversify our business into new asset classes, and manage the new risks to which they may expose us; |
• | our ability to manage various operational and regulatory risks associated with our business; |
• | interruptions in or impairments to our communications and information technology systems; |
• | our ability to maintain appropriate internal controls over financial reporting; |
• | our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio; |
• | our ability to maintain our REIT qualification for U.S. federal income tax purposes; and |
• | limitations imposed on our business due to our REIT status and our status as exempt from registration under the 1940 Act. |
(dollars in thousands) | March 31, 2019 | December 31, 2018 | |||||||||||
Agency | |||||||||||||
Fixed Rate | $ | 21,515,529 | 85.6 | % | $ | 21,665,960 | 84.6 | % | |||||
Hybrid ARM | 17,669 | 0.1 | % | 19,073 | 0.1 | % | |||||||
Total Agency | 21,533,198 | 85.7 | % | 21,685,033 | 84.7 | % | |||||||
Agency Derivatives | 71,764 | 0.3 | % | 70,257 | 0.3 | % | |||||||
Non-Agency | |||||||||||||
Senior | 2,885,449 | 11.5 | % | 2,854,731 | 11.1 | % | |||||||
Mezzanine | 576,130 | 2.3 | % | 928,632 | 3.6 | % | |||||||
Interest-only securities | 82,933 | 0.3 | % | 84,208 | 0.3 | % | |||||||
Total Non-Agency | 3,544,512 | 14.1 | % | 3,867,571 | 15.0 | % | |||||||
Total | $ | 25,149,474 | $ | 25,622,861 |
Three Months Ended | |||||||||||||||
Agency RMBS | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | ||||||||||
Weighted Average CPR | 6.5 | % | 6.8 | % | 8.1 | % | 9.2 | % | 7.0 | % |
March 31, 2019 | |||||||||||||||||||||||
(dollars in thousands) | Principal/ Current Face | Carrying Value | % of Agency Portfolio | % Prepayment Protected | Weighted Average Coupon Rate | Amortized Cost | Weighted Average Loan Age (months) | ||||||||||||||||
Agency RMBS AFS: | |||||||||||||||||||||||
30-Year Fixed | |||||||||||||||||||||||
3.0-3.5% | $ | 3,218 | $ | 3,227 | — | % | 100.0 | % | 3.0 | % | $ | 3,275 | 50 | ||||||||||
4.0% | 9,910,679 | 10,305,017 | 47.7 | % | 87.3 | % | 4.0 | % | 10,316,296 | 21 | |||||||||||||
4.5% | 8,499,068 | 8,997,894 | 41.6 | % | 100.0 | % | 4.5 | % | 8,907,073 | 16 | |||||||||||||
≥ 5% | 1,769,727 | 1,896,704 | 8.8 | % | 77.5 | % | 5.1 | % | 1,873,031 | 21 | |||||||||||||
20,182,692 | 21,202,842 | 98.1 | % | 91.8 | % | 4.3 | % | 21,099,675 | 19 | ||||||||||||||
Other P&I | 147,379 | 163,346 | 0.8 | % | 0.5 | % | 6.3 | % | 164,258 | 198 | |||||||||||||
Interest-only | 3,011,335 | 167,010 | 0.8 | % | — | % | 2.0 | % | 201,152 | 95 | |||||||||||||
Agency Derivatives | 456,433 | 71,764 | 0.3 | % | — | % | 4.0 | % | 66,276 | 176 | |||||||||||||
Total Agency RMBS | $ | 23,797,839 | $ | 21,604,962 | 100.0 | % | 90.1 | % | $ | 21,531,361 |
December 31, 2018 | |||||||||||||||||||||||
(dollars in thousands) | Principal/ Current Face | Carrying Value | % of Agency Portfolio | % Prepayment Protected | Weighted Average Coupon Rate | Amortized Cost | Weighted Average Loan Age (months) | ||||||||||||||||
Agency RMBS AFS: | |||||||||||||||||||||||
30-Year Fixed | |||||||||||||||||||||||
3.0-3.5% | $ | 234,323 | $ | 234,521 | 1.1 | % | 100.0 | % | 3.5 | % | $ | 235,514 | 19 | ||||||||||
4.0% | 8,640,859 | 8,846,367 | 40.7 | % | 83.0 | % | 4.0 | % | 9,047,282 | 22 | |||||||||||||
4.5% | 10,237,108 | 10,686,699 | 49.1 | % | 99.0 | % | 4.5 | % | 10,765,144 | 16 | |||||||||||||
≥ 5% | 1,367,700 | 1,452,170 | 6.7 | % | 74.4 | % | 5.1 | % | 1,449,256 | 24 | |||||||||||||
20,479,990 | 21,219,757 | 97.6 | % | 90.7 | % | 4.3 | % | 21,497,196 | 19 | ||||||||||||||
Other P&I | 295,800 | 289,860 | 1.3 | % | 0.3 | % | 4.7 | % | 291,290 | 151 | |||||||||||||
Interest-only | 3,115,967 | 175,416 | 0.8 | % | — | % | 2.0 | % | 209,901 | 92 | |||||||||||||
Agency Derivatives | 476,299 | 70,257 | 0.3 | % | — | % | 4.0 | % | 69,496 | 173 | |||||||||||||
Total Agency RMBS | $ | 24,368,056 | $ | 21,755,290 | 100.0 | % | 88.4 | % | $ | 22,067,883 |
March 31, 2019 | |||||||||||||||||||
(in thousands) | Principal/ Current Face | Un-amortized Premium | Accretable Purchase Discount | Credit Reserve Purchase Discount | Amortized Cost | ||||||||||||||
Principal and interest securities | |||||||||||||||||||
Senior | $ | 4,287,846 | $ | 5,560 | $ | (439,365 | ) | $ | (1,277,534 | ) | $ | 2,576,507 | |||||||
Mezzanine | 729,715 | 164 | (135,820 | ) | (116,201 | ) | 477,858 | ||||||||||||
Total P&I securities | 5,017,561 | 5,724 | (575,185 | ) | (1,393,735 | ) | 3,054,365 | ||||||||||||
Interest-only | 5,011,522 | 83,466 | — | — | 83,466 | ||||||||||||||
Total Non-Agency | $ | 10,029,083 | $ | 89,190 | $ | (575,185 | ) | $ | (1,393,735 | ) | $ | 3,137,831 |
December 31, 2018 | |||||||||||||||||||
(in thousands) | Principal/ Current Face | Un-amortized Premium | Accretable Purchase Discount | Credit Reserve Purchase Discount | Amortized Cost | ||||||||||||||
Principal and interest securities | |||||||||||||||||||
Senior | $ | 4,227,631 | $ | 5,381 | $ | (477,682 | ) | $ | (1,204,325 | ) | $ | 2,551,005 | |||||||
Mezzanine | 1,132,493 | 1,301 | (216,437 | ) | (118,437 | ) | 798,920 | ||||||||||||
Total P&I securities | 5,360,124 | 6,682 | (694,119 | ) | (1,322,762 | ) | 3,349,925 | ||||||||||||
Interest-only | 5,137,169 | 83,846 | — | — | 83,846 | ||||||||||||||
Total Non-Agency | $ | 10,497,293 | $ | 90,528 | $ | (694,119 | ) | $ | (1,322,762 | ) | $ | 3,433,771 |
(in thousands, except share data) | Three Months Ended | |||||||
Income Statement Data: | March 31, | |||||||
2019 | 2018 | |||||||
(unaudited) | ||||||||
Interest income: | ||||||||
Available-for-sale securities | $ | 235,886 | $ | 190,716 | ||||
Other | 9,597 | 3,303 | ||||||
Total interest income | 245,483 | 194,019 | ||||||
Interest expense: | ||||||||
Repurchase agreements | 147,560 | 86,580 | ||||||
Federal Home Loan Bank advances | 6,074 | 4,458 | ||||||
Revolving credit facilities | 5,156 | 804 | ||||||
Convertible senior notes | 4,735 | 4,718 | ||||||
Total interest expense | 163,525 | 96,560 | ||||||
Net interest income | 81,958 | 97,459 | ||||||
Other-than-temporary impairment losses | (206 | ) | (94 | ) | ||||
Other (loss) income: | ||||||||
Loss on investment securities | (19,292 | ) | (20,671 | ) | ||||
Servicing income | 116,948 | 71,190 | ||||||
(Loss) gain on servicing asset | (188,974 | ) | 71,807 | |||||
(Loss) gain on interest rate swap, cap and swaption agreements | (83,259 | ) | 150,545 | |||||
Gain on other derivative instruments | 104,278 | 8,053 | ||||||
Other income | 123 | 1,058 | ||||||
Total other (loss) income | (70,176 | ) | 281,982 | |||||
Expenses: | ||||||||
Management fees | 12,082 | 11,708 | ||||||
Servicing expenses | 19,912 | 14,554 | ||||||
Other operating expenses | 15,556 | 14,492 | ||||||
Total expenses | 47,550 | 40,754 | ||||||
(Loss) income before taxes | (35,974 | ) | 338,593 | |||||
(Benefit from) provision for income taxes | (10,039 | ) | 3,784 | |||||
Net (loss) income | (25,935 | ) | 334,809 | |||||
Dividends on preferred stock | 18,950 | 13,747 | ||||||
Net (loss) income attributable to common stockholders | $ | (44,885 | ) | $ | 321,062 | |||
Basic (loss) earnings per weighted average common share | $ | (0.18 | ) | $ | 1.83 | |||
Diluted (loss) earnings per weighted average common share | $ | (0.18 | ) | $ | 1.69 | |||
Dividends declared per common share | $ | 0.47 | $ | 0.47 | ||||
Weighted average number of shares of common stock: | ||||||||
Basic | 252,357,878 | 175,145,964 | ||||||
Diluted | 252,357,878 | 192,818,531 |
(in thousands) | Three Months Ended | |||||||
Income Statement Data: | March 31, | |||||||
2019 | 2018 | |||||||
(unaudited) | ||||||||
Comprehensive income (loss): | ||||||||
Net (loss) income | $ | (25,935 | ) | $ | 334,809 | |||
Other comprehensive income (loss), net of tax: | ||||||||
Unrealized gain (loss) on available-for-sale securities | 356,152 | (344,777 | ) | |||||
Other comprehensive income (loss) | 356,152 | (344,777 | ) | |||||
Comprehensive income (loss) | 330,217 | (9,968 | ) | |||||
Dividends on preferred stock | 18,950 | 13,747 | ||||||
Comprehensive income (loss) attributable to common stockholders | $ | 311,267 | $ | (23,715 | ) |
(in thousands) | March 31, 2019 | December 31, 2018 | ||||||
Balance Sheet Data: | ||||||||
(unaudited) | ||||||||
Available-for-sale securities | $ | 25,077,710 | $ | 25,552,604 | ||||
Mortgage servicing rights | $ | 2,014,370 | $ | 1,993,440 | ||||
Total assets | $ | 28,500,550 | $ | 30,132,479 | ||||
Repurchase agreements | $ | 19,729,691 | $ | 23,133,476 | ||||
Federal Home Loan Bank advances | $ | 865,024 | $ | 865,024 | ||||
Total stockholders’ equity | $ | 4,774,224 | $ | 4,254,489 |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||||||||||||||||
(dollars in thousands) | Average Balance (1) | Interest Income/Expense | Net Yield/Cost of Funds (2) | Average Balance (1) | Interest Income/Expense | Net Yield/Cost of Funds (2) | |||||||||||||||
Interest-earning assets | |||||||||||||||||||||
Agency available-for-sale securities | $ | 20,293,227 | $ | 181,515 | 3.6 | % | $ | 18,335,230 | $ | 140,729 | 3.1 | % | |||||||||
Non-Agency available-for-sale securities | 3,235,660 | 54,371 | 6.7 | % | 2,506,443 | 49,987 | 8.0 | % | |||||||||||||
Other | 28,163 | 9,597 | 4.3 | % | 32,099 | 3,303 | 3.8 | % | |||||||||||||
Total interest income/net asset yield | $ | 23,557,050 | $ | 245,483 | 4.2 | % | $ | 20,873,772 | $ | 194,019 | 3.7 | % | |||||||||
Interest-bearing liabilities | |||||||||||||||||||||
Repurchase agreements, FHLB advances, revolving credit facilities and borrowings in securitization trusts collateralized by: | |||||||||||||||||||||
Agency available-for-sale securities | $ | 19,211,709 | $ | 126,627 | 2.6 | % | $ | 17,605,519 | $ | 72,984 | 1.7 | % | |||||||||
Non-Agency available-for-sale securities | 2,503,462 | 23,296 | 3.7 | % | 2,020,125 | 15,597 | 3.1 | % | |||||||||||||
Agency derivatives (3) | 46,492 | 400 | 3.4 | % | 65,345 | 395 | 2.4 | % | |||||||||||||
Mortgage servicing rights (4) | 615,971 | 8,467 | 5.5 | % | 220,333 | 2,866 | 5.2 | % | |||||||||||||
Other unassignable | |||||||||||||||||||||
Convertible senior notes | 284,022 | 4,735 | 6.7 | % | 282,982 | 4,718 | 6.7 | % | |||||||||||||
Total interest expense/cost of funds | $ | 22,661,656 | 163,525 | 2.9 | % | $ | 20,194,304 | 96,560 | 1.9 | % | |||||||||||
Net interest income/spread (5) | $ | 81,958 | 1.3 | % | $ | 97,459 | 1.8 | % |
(1) | Average asset balance represents average amortized cost on AFS securities and Agency Derivatives and average unpaid principal balance, adjusted for purchase price changes, on other assets. |
(2) | Cost of funds does not include the accrual and settlement of interest associated with interest rate swaps. In accordance with U.S. GAAP, those costs are included in (loss) gain on interest rate swap, cap and swaption agreements in the condensed consolidated statements of comprehensive income (loss). For the three months ended March 31, 2019, our total average cost of funds on the assets assigned as collateral for borrowings shown in the table above, including interest spread expense associated with interest rate swaps, was 2.9%, compared to 1.9% for the same period in 2018. |
(3) | Yields on Agency Derivatives not shown as interest income is included in gain on other derivative instruments in the condensed consolidated statements of comprehensive income (loss). |
(4) | Yields on mortgage servicing rights not shown as these assets do not earn interest. |
(5) | Net interest spread does not include the accrual and settlement of interest associated with interest rate swaps. In accordance with U.S. GAAP, those costs are included in (loss) gain on interest rate swap, cap and swaption agreements in the condensed consolidated statements of comprehensive income (loss). For the three months ended March 31, 2019, our total average net interest rate spread on the assets and liabilities shown in the table above, including interest spread expense associated with interest rate swaps, was 1.1%, compared to 1.8% for the same period in 2018. |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||||||||||||
Agency (1) | Non-Agency | Total | Agency (1) | Non-Agency | Total | ||||||||||||
Gross yield/stated coupon | 4.3 | % | 4.8 | % | 4.4 | % | 4.0 | % | 4.4 | % | 4.1 | % | |||||
Net (premium amortization) discount accretion | (0.7 | )% | 1.9 | % | (0.4 | )% | (0.9 | )% | 3.6 | % | (0.4 | )% | |||||
Net yield (2) | 3.6 | % | 6.7 | % | 4.0 | % | 3.1 | % | 8.0 | % | 3.7 | % |
(1) | Excludes Agency Derivatives. For the three months ended March 31, 2019, the average annualized net yield on total Agency RMBS, including Agency Derivatives, was 3.6%, compared to 3.1% for the same period in 2018. |
(2) | These yields have not been adjusted for cost of delay and cost to carry purchase premiums. |
Three Months Ended | |||||||
March 31, | |||||||
(in thousands) | 2019 | 2018 | |||||
Net interest spread | $ | 23,709 | $ | 3,809 | |||
Early termination, agreement maturation and option expiration (losses) gains | (34,499 | ) | 92,479 | ||||
Change in unrealized (loss) gain on interest rate swap, cap and swaption agreements, at fair value | (72,469 | ) | 54,257 | ||||
(Loss) gain on interest rate swap, cap and swaption agreements | $ | (83,259 | ) | $ | 150,545 |
March 31, 2019 | ||||||||||||||||||||||||||||||
(dollars in thousands, except purchase price) | Principal/ Current Face | Net (Discount) Premium | Amortized Cost | Unrealized Gain | Unrealized Loss | Carrying Value | Weighted Average Coupon Rate | Weighted Average Purchase Price | ||||||||||||||||||||||
P&I securities | ||||||||||||||||||||||||||||||
Fixed | $ | 20,313,484 | $ | 933,017 | $ | 21,246,501 | $ | 205,537 | $ | (103,519 | ) | $ | 21,348,519 | 4.32 | % | $ | 104.86 | |||||||||||||
Hybrid ARM | 16,587 | 845 | 17,432 | 314 | (77 | ) | 17,669 | 5.72 | % | $ | 107.75 | |||||||||||||||||||
Total P&I securities | 20,330,071 | 933,862 | 21,263,933 | 205,851 | (103,596 | ) | 21,366,188 | 4.32 | % | $ | 104.87 | |||||||||||||||||||
Interest-only securities | ||||||||||||||||||||||||||||||
Fixed | 751,685 | 56,120 | 56,120 | 3,820 | (423 | ) | 59,517 | 2.84 | % | $ | 33.58 | |||||||||||||||||||
Fixed Other (1) | 2,259,650 | 145,032 | 145,032 | 9,925 | (47,464 | ) | 107,493 | 1.57 | % | $ | 8.81 | |||||||||||||||||||
Total | $ | 23,341,406 | $ | 1,135,014 | $ | 21,465,085 | $ | 219,596 | $ | (151,483 | ) | $ | 21,533,198 |
(1) | Fixed Other represents weighted-average coupon interest-only securities that are not generally used for our interest-rate risk management purposes. These securities pay variable coupon interest based on the weighted average of the fixed rates of the underlying loans of the security, less the weighted average rates of the applicable issued P&I securities. |
March 31, 2019 | |||||||||||||||||||||||||||||||
(in thousands) | Principal/Current Face | Un-amortized Premium | Accretable Purchase Discount | Credit Reserve Purchase Discount | Amortized Cost | Unrealized Gain | Unrealized Loss | Carrying Value | |||||||||||||||||||||||
P&I securities | |||||||||||||||||||||||||||||||
Senior | $ | 4,287,846 | $ | 5,560 | $ | (439,365 | ) | $ | (1,277,534 | ) | $ | 2,576,507 | $ | 334,637 | $ | (25,695 | ) | $ | 2,885,449 | ||||||||||||
Mezzanine | 729,715 | 164 | (135,820 | ) | (116,201 | ) | 477,858 | 99,532 | (1,260 | ) | 576,130 | ||||||||||||||||||||
Total P&I | 5,017,561 | 5,724 | (575,185 | ) | (1,393,735 | ) | 3,054,365 | 434,169 | (26,955 | ) | 3,461,579 | ||||||||||||||||||||
Interest-only securities | 5,011,522 | 83,466 | — | — | 83,466 | 2,714 | (3,247 | ) | 82,933 | ||||||||||||||||||||||
Total | $ | 10,029,083 | $ | 89,190 | $ | (575,185 | ) | $ | (1,393,735 | ) | $ | 3,137,831 | $ | 436,883 | $ | (30,202 | ) | $ | 3,544,512 |
March 31, 2019 | ||
AAA | 0.6 | % |
AA | — | % |
A | — | % |
BBB | — | % |
BB | 0.1 | % |
B | 5.2 | % |
Below B | 76.3 | % |
Not rated | 17.8 | % |
Total | 100.0 | % |
March 31, 2019 | ||||||||||||
Non-Agency P&I Securities | Senior | Mezzanine | Total | |||||||||
Carrying value (in thousands) | $ | 2,885,449 | $ | 576,130 | $ | 3,461,579 | ||||||
% of total | 83.4 | % | 16.6 | % | 100.0 | % | ||||||
Average purchase price (1) | $ | 61.46 | $ | 64.97 | $ | 62.04 | ||||||
Average coupon | 3.3 | % | 3.2 | % | 3.3 | % | ||||||
Average fixed coupon | 5.7 | % | 5.1 | % | 5.6 | % | ||||||
Average floating coupon | 3.1 | % | 3.0 | % | 3.1 | % | ||||||
Average hybrid coupon | 4.2 | % | 5.5 | % | 4.4 | % | ||||||
Collateral attributes | ||||||||||||
Average loan age (months) | 150 | 159 | 152 | |||||||||
Average loan size (in thousands) | $ | 371 | $ | 434 | $ | 382 | ||||||
Average original loan-to-value | 67.1 | % | 65.1 | % | 66.8 | % | ||||||
Average original FICO (2) | 608 | 600 | 607 | |||||||||
Current performance | ||||||||||||
60+ day delinquencies | 19.1 | % | 17.1 | % | 18.7 | % | ||||||
Average credit enhancement (3) | 4.2 | % | 10.5 | % | 5.3 | % | ||||||
3-month CPR (4) | 4.7 | % | 6.0 | % | 4.9 | % |
(1) | Average purchase price utilized carrying value for weighting purposes. If current face were utilized for weighting purposes, the average purchase price for senior, mezzanine, and total non-Agency securities, excluding our non-Agency interest-only portfolio, would be $58.53, $61.41 and $58.95, respectively, at March 31, 2019. |
(2) | FICO represents a mortgage industry accepted credit score of a borrower, which was developed by Fair Isaac Corporation. |
(3) | Average credit enhancement remaining on our non-Agency P&I securities portfolio, which is the average amount of protection available to absorb future credit losses due to defaults on the underlying collateral. |
(4) | Three-month CPR is reflective of the prepayment speed on the underlying securitization; however, it does not necessarily indicate the proceeds received on our investment tranche. Proceeds received for each security are dependent on the position of the individual security within the structure of each deal. |
March 31, 2019 | |||||||||||||||||||||
Non-Agency P&I Securities | |||||||||||||||||||||
(dollars in thousands) | Senior | Mezzanine | Total | ||||||||||||||||||
Collateral Type | Carrying Value | % of Senior | Carrying Value | % of Mezzanine | Carrying Value | % of Total | |||||||||||||||
Prime | $ | 34,986 | 1.2 | % | $ | 13,851 | 2.4 | % | $ | 48,837 | 1.4 | % | |||||||||
Alt-A | 362,370 | 12.6 | % | 89,268 | 15.5 | % | 451,638 | 13.0 | % | ||||||||||||
POA | 211,159 | 7.3 | % | 167,985 | 29.2 | % | 379,144 | 11.0 | % | ||||||||||||
Subprime | 2,272,506 | 78.8 | % | 305,026 | 52.9 | % | 2,577,532 | 74.5 | % | ||||||||||||
Other | 4,428 | 0.1 | % | — | — | % | 4,428 | 0.1 | % | ||||||||||||
Total | $ | 2,885,449 | 100.0 | % | $ | 576,130 | 100.0 | % | $ | 3,461,579 | 100.0 | % |
March 31, 2019 | |||||||||||||||||||||
Non-Agency P&I Securities | |||||||||||||||||||||
(dollars in thousands) | Senior | Mezzanine | Total | ||||||||||||||||||
Coupon Type | Carrying Value | % of Senior | Carrying Value | % of Mezzanine | Carrying Value | % of Total | |||||||||||||||
Fixed rate | $ | 249,554 | 8.6 | % | $ | 27,382 | 4.8 | % | $ | 276,936 | 8.0 | % | |||||||||
Hybrid or floating | 2,635,895 | 91.4 | % | 548,748 | 95.2 | % | 3,184,643 | 92.0 | % | ||||||||||||
Total | $ | 2,885,449 | 100.0 | % | $ | 576,130 | 100.0 | % | $ | 3,461,579 | 100.0 | % |
March 31, 2019 | |||||||||||||||||||||
Non-Agency P&I Securities | |||||||||||||||||||||
(dollars in thousands) | Senior | Mezzanine | Total | ||||||||||||||||||
Origination Year | Carrying Value | % of Senior | Carrying Value | % of Mezzanine | Carrying Value | % of Total | |||||||||||||||
2006 and thereafter | $ | 2,705,566 | 93.8 | % | $ | 284,380 | 49.3 | % | $ | 2,989,946 | 86.4 | % | |||||||||
2002-2005 | 174,427 | 6.0 | % | 290,181 | 50.4 | % | 464,608 | 13.4 | % | ||||||||||||
Pre-2002 | 5,456 | 0.2 | % | 1,569 | 0.3 | % | 7,025 | 0.2 | % | ||||||||||||
Total | $ | 2,885,449 | 100.0 | % | $ | 576,130 | 100.0 | % | $ | 3,461,579 | 100.0 | % |
March 31, 2019 | |||
Unpaid principal balance (in thousands) | $ | 174,147,259 | |
Number of loans | 765,372 | ||
Average coupon | 4.1 | % | |
Average loan age (months) | 30 | ||
Average loan size (in thousands) | $ | 228 | |
Average original loan-to-value | 74.9 | % | |
Average original FICO | 751 | ||
60+ day delinquencies | 0.3 | % | |
3-month CPR | 7.7 | % |
(dollars in thousands) | March 31, 2019 | |||||||||
Collateral Type | Amount Outstanding | Weighted Average Borrowing Rate | Weighted Average Haircut on Collateral Value | |||||||
Agency RMBS | $ | 18,066,314 | 2.71 | % | 4.4 | % | ||||
Non-Agency securities | 2,182,094 | 3.74 | % | 24.4 | % | |||||
Agency Derivatives | 46,307 | 3.51 | % | 26.4 | % | |||||
Mortgage servicing rights | 675,294 | 4.94 | % | 39.6 | % | |||||
Other (1) | 284,099 | 6.25 | % | NA | ||||||
Total | $ | 21,254,108 | 2.94 | % | 7.5 | % |
(1) | Includes unsecured convertible senior notes paying interest semiannually at a rate of 6.25% per annum on the aggregate principal amount of $287.5 million. |
(dollars in thousands) | ||||||||||||||||||||||
For the Three Months Ended | Quarterly Average (1) | End of Period Balance (1) | Maximum Balance of Any Month-End (1) | End of Period Total Borrowings to Equity Ratio | End of Period Net Long (Short) TBA Notional | End of Period Economic Debt-to-Equity Ratio (2) | ||||||||||||||||
March 31, 2019 | $ | 22,661,656 | $ | 21,254,108 | $ | 23,685,031 | 4.5:1.0 | $ | 10,168,000 | 6.5:1.0 | ||||||||||||
December 31, 2018 | $ | 23,276,768 | $ | 24,592,356 | $ | 24,592,356 | 5.8:1.0 | $ | 6,484,000 | 7.2:1.0 | ||||||||||||
September 30, 2018 | $ | 23,921,989 | $ | 25,265,210 | $ | 27,528,323 | 5.4:1.0 | $ | 9,324,000 | 7.3:1.0 | ||||||||||||
June 30, 2018 | $ | 19,123,370 | $ | 18,524,115 | $ | 19,237,474 | 5.3:1.0 | $ | 3,049,000 | 6.2:1.0 | ||||||||||||
March 31, 2018 | $ | 20,194,305 | $ | 20,316,757 | $ | 20,466,930 | 5.9:1.0 | (3) | $ | 445,000 | 6.0:1.0 |
(1) | Includes borrowings under repurchase agreements, FHLB advances, revolving credit facilities and convertible senior notes and excludes collateralized borrowings in securitization trusts. |
(2) | Defined as total borrowings under repurchase agreements, FHLB advances, revolving credit facilities and convertible senior notes, plus implied debt on net TBA notional, divided by total equity. |
(dollars in millions, except per share amounts) | Book Value | Common Shares Outstanding | Common Book Value Per Share | |||||||
Common stockholders' equity at December 31, 2018 | $ | 3,253.2 | 248.1 | $ | 13.11 | |||||
Core Earnings, including dollar roll income, net of tax expense of $0.6 million ⁽¹⁾ | 141.6 | |||||||||
Dividends on preferred stock | (18.9 | ) | ||||||||
Core Earnings attributable to common stockholders, including dollar roll income, net of tax expense of $0.6 million ⁽¹⁾ | 122.7 | |||||||||
Realized and unrealized gains and losses, net of tax benefit of $10.7 million | (167.6 | ) | ||||||||
Other comprehensive income, net of tax | 356.2 | |||||||||
Dividend declaration | (128.2 | ) | ||||||||
Other | 1.4 | 0.4 | ||||||||
Issuance of common stock, net of offering costs | 335.3 | 24.4 | ||||||||
Common stockholders' equity at March 31, 2019 | $ | 3,773.0 | 272.9 | $ | 13.83 | |||||
Total preferred stock liquidation preference | 1,001.3 | |||||||||
Total equity at March 31, 2019 | $ | 4,774.3 |
Three Months Ended | |||
(in millions) | March 31, 2019 | ||
Comprehensive income attributable to common stockholders | $ | 311.3 | |
Adjustment for other comprehensive income attributable to common stockholders: | |||
Unrealized gains on available-for-sale securities | (356.2 | ) | |
Net loss attributable to common stockholders | (44.9 | ) | |
Adjustments for non-Core Earnings: | |||
Other-than-temporary impairment loss | 0.2 | ||
Realized loss on investment securities | 17.5 | ||
Unrealized loss on investment securities | 1.8 | ||
Realized and unrealized losses on mortgage servicing rights | 124.6 | ||
Realized loss on termination or expiration of interest rate swaps, caps and swaptions | 34.5 | ||
Unrealized loss on interest rate swaps, caps and swaptions | 72.5 | ||
Gains on other derivative instruments | (75.6 | ) | |
Other loss | 0.4 | ||
Change in servicing reserves | 0.5 | ||
Non-cash equity compensation expense | 1.9 | ||
Net benefit from income taxes on non-Core Earnings | (10.7 | ) | |
Core Earnings attributable to common stockholders, including dollar roll income (1) | $ | 122.7 |
(1) | Core Earnings, including dollar roll income, is a non-U.S. GAAP measure that we define as comprehensive income (loss) attributable to common stockholders, excluding “realized and unrealized gains and losses” (impairment losses, realized and unrealized gains and losses on the aggregate portfolio, reserve expense for representation and warranty obligations on MSR and non-cash compensation expense related to restricted common stock). As defined, Core Earnings, including dollar roll income, includes interest income or expense and premium income or loss on derivative instruments and servicing income, net of estimated amortization on MSR. Dollar roll income is the economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. |
March 31, 2019 | December 31, 2018 | ||||||||||||||||||||
(dollars in thousands) | Amount Outstanding | Net Counterparty Exposure(1) | Percent of Funding | Amount Outstanding | Net Counterparty Exposure(1) | Percent of Funding | |||||||||||||||
North America | $ | 9,953,781 | $ | 974,870 | 57.0 | % | $ | 12,061,693 | $ | 1,120,101 | 55.4 | % | |||||||||
Europe (2) | 5,945,768 | 522,710 | 30.5 | % | 6,728,245 | 646,000 | 31.9 | % | |||||||||||||
Asia (2) | 3,830,142 | 214,585 | 12.5 | % | 4,343,538 | 255,973 | 12.7 | % | |||||||||||||
Total | $ | 19,729,691 | $ | 1,712,165 | 100.0 | % | $ | 23,133,476 | $ | 2,022,074 | 100.0 | % |
(1) | Represents the net carrying value of the 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. Payables due to broker counterparties for unsettled securities purchases of $2.1 billion are not included in the March 31, 2019 amounts presented above. We did not have any such payables at December 31, 2018. |
(2) | Exposure to European and Asian domiciled banks and their U.S. subsidiaries. |
(dollars in thousands) | ||||||||||||||||
March 31, 2019 | ||||||||||||||||
Expiration Date (1) | Committed | Amount Outstanding | Unused Capacity | Total Capacity | Eligible Collateral | |||||||||||
December 1, 2020 | Yes (2) | $ | 300,000 | $ | 100,000 | $ | 400,000 | Mortgage servicing rights (3) | ||||||||
June 22, 2023 | Yes (2) | $ | 280,294 | $ | 49,706 | $ | 330,000 | Mortgage servicing rights | ||||||||
March 12, 2021 | Yes (2) | $ | 75,000 | $ | 275,000 | $ | 350,000 | Mortgage servicing rights | ||||||||
December 16, 2019 | No | $ | 20,000 | $ | 20,000 | $ | 40,000 | Mortgage servicing rights |
(1) | The facilities are set to mature on the stated expiration date, unless extended pursuant to their terms. |
(2) | Commitment fee charged on unused capacity. |
(3) | This repurchase facility is secured by MSR notes, which are collateralized by our MSR. |
• | Total indebtedness to net worth must be less than a specified threshold ratio in a repurchase agreement. As of March 31, 2019, our debt to net worth, as defined, was 4.9:1.0 while our threshold ratio, as defined, was 6.8:1.0. |
• | Cash liquidity must be greater than $100.0 million. As of March 31, 2019, our liquidity, as defined, was $512.2 million. |
• | Net worth must be greater than $1.5 billion or 50% of the highest net worth during the 24 calendar months prior, whichever is higher. As of March 31, 2019, 50% of the highest net worth during the 24 calendar months prior was $2.4 billion and our net worth, as defined, was $4.8 billion. |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Available-for-sale securities, at fair value | $ | 21,843,525 | $ | 25,157,999 | |||
Mortgage servicing rights, at fair value | 1,580,878 | 1,143,918 | |||||
Restricted cash | 66,296 | 416,696 | |||||
Due from counterparties | 35,619 | 110,695 | |||||
Derivative assets, at fair value | 71,696 | 70,191 | |||||
U.S. Treasuries, at fair value | 4,260 | 6,457 | |||||
Total | $ | 23,602,274 | $ | 26,905,956 |
(in thousands) | March 31, 2019 | December 31, 2018 | |||||
Within 30 days | $ | 4,852,492 | $ | 7,488,869 | |||
30 to 59 days | 4,309,411 | 5,077,598 | |||||
60 to 89 days | 5,316,669 | 5,655,060 | |||||
90 to 119 days | 2,790,671 | 1,938,859 | |||||
120 to 364 days | 2,995,472 | 3,508,114 | |||||
One to three years | 584,099 | 300,000 | |||||
Three to five years | 355,294 | 573,856 | |||||
Five to ten years | — | — | |||||
Ten years and over | 50,000 | 50,000 | |||||
Total | $ | 21,254,108 | $ | 24,592,356 |
• | Cash flows from operating activities. For the three months ended March 31, 2019, operating activities increased our cash balances by approximately $165.8 million, primarily driven by our financial results for the quarter. |
• | Cash flows from investing activities. For the three months ended March 31, 2019, investing activities increased our cash balances by approximately $2.7 billion, primarily driven by an increase in payables due to broker counterparties for unsettled securities purchases. |
• | Cash flows from financing activities. For the three months ended March 31, 2019, financing activities decreased our cash balance by approximately $3.1 billion, primarily driven by repayment of repurchase agreements as a result of the repositioning of financing on AFS securities to TBA positions and unsettled purchases of AFS securities not yet financed as of March 31, 2019. |
March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||
Index Type | Floating | Hybrid (1) | Total | Index % | Floating | Hybrid (1) | Total | Index % | ||||||||||||||||||||||
CMT | $ | 8,990 | $ | 14,517 | $ | 23,507 | 1 | % | $ | 9,502 | $ | 15,423 | $ | 24,925 | 1 | % | ||||||||||||||
LIBOR | 3,159,544 | 8,976 | 3,168,520 | 93 | % | 3,374,141 | 9,278 | 3,383,419 | 93 | % | ||||||||||||||||||||
Other (2) | 49,237 | 163,417 | 212,654 | 6 | % | 50,597 | 165,054 | 215,651 | 6 | % | ||||||||||||||||||||
Total | $ | 3,217,771 | $ | 186,910 | $ | 3,404,681 | 100 | % | $ | 3,434,240 | $ | 189,755 | $ | 3,623,995 | 100 | % |
(1) | “Hybrid” amounts reflect those assets with greater than twelve months to reset. |
(2) | “Other” includes COFI, MTA and other indices. |
Changes in Interest Rates | |||||||||||||||
(dollars in thousands) | -50 bps | -25 bps | +25 bps | +50 bps | |||||||||||
Change in annualized net interest income (1): | $ | (22,395 | ) | $ | (11,229 | ) | $ | 11,211 | $ | 22,421 | |||||
% change in net interest income (1) | (4.7 | )% | (2.4 | )% | 2.3 | % | 4.7 | % | |||||||
Change in value of financial position: | |||||||||||||||
Available-for-sale securities | $ | 279,566 | $ | 132,330 | $ | (155,093 | ) | $ | (368,857 | ) | |||||
As a % of common equity | 7.4 | % | 3.5 | % | (4.1 | )% | (9.8 | )% | |||||||
Mortgage servicing rights | $ | (311,219 | ) | $ | (151,633 | ) | $ | 139,466 | $ | 265,357 | |||||
As a % of common equity | (8.2 | )% | (4.0 | )% | 3.7 | % | 7.0 | % | |||||||
Derivatives, net | $ | 52,702 | $ | 5,077 | $ | (67,558 | ) | $ | (111,091 | ) | |||||
As a % of common equity | 1.4 | % | 0.1 | % | (1.8 | )% | (2.9 | )% | |||||||
Repurchase agreements | $ | (18,820 | ) | $ | (9,410 | ) | $ | 9,410 | $ | 18,819 | |||||
As a % of common equity | (0.5 | )% | (0.2 | )% | 0.2 | % | 0.5 | % | |||||||
Federal Home Loan Bank advances | $ | (180 | ) | $ | (90 | ) | $ | 90 | $ | 180 | |||||
As a % of common equity | — | % | — | % | — | % | — | % | |||||||
Revolving credit facilities | $ | (141 | ) | $ | (70 | ) | $ | 70 | $ | 141 | |||||
As a % of common equity | — | % | — | % | — | % | — | % | |||||||
Convertible senior notes | $ | (3,312 | ) | $ | (1,649 | ) | $ | 1,637 | $ | 3,260 | |||||
As a % of common equity | (0.1 | )% | — | % | — | % | 0.1 | % | |||||||
Total Net Assets | $ | (1,404 | ) | $ | (25,445 | ) | $ | (71,978 | ) | $ | (192,191 | ) | |||
As a % of total assets | — | % | (0.1 | )% | (0.3 | )% | (0.7 | )% | |||||||
As a % of common equity | — | % | (0.7 | )% | (1.9 | )% | (5.1 | )% |
(1) | Amounts include the effect of interest spread from our interest rate swaps and caps and float income from custodial accounts associated with our MSR, but do not reflect any potential changes to dollar roll income associated with our TBA positions, which are accounted for as derivative instruments in accordance with U.S. GAAP. |
Exhibit Number | Exhibit Index | |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
3.6 | ||
3.7 | ||
3.8 | ||
3.9 | ||
3.10 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | Financial statements from the Quarterly Report on Form 10-Q of Two Harbors Investment Corp. for the three months ended March 31, 2019, filed with the SEC on May 8, 2019, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income (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) |
* | Management or compensatory agreement |
TWO HARBORS INVESTMENT CORP. | |||
Dated: | May 8, 2019 | By: | /s/ Thomas E. Siering |
Thomas E. Siering Chief Executive Officer, President and Director (Principal Executive Officer) | |||
Dated: | May 8, 2019 | By: | /s/ Mary Riskey |
Mary Riskey Chief Financial Officer (Principal Financial and Accounting Officer) |
Date: | May 8, 2019 | /s/ Thomas E. Siering | ||
Thomas E. Siering | ||||
Chief Executive Officer and President |
Date: | May 8, 2019 | /s/ Mary Riskey | ||
Mary Riskey | ||||
Chief Financial Officer |
Date: | May 8, 2019 | /s/ Thomas E. Siering | ||
Thomas E. Siering | ||||
Chief Executive Officer and President |
Date: | May 8, 2019 | /s/ Mary Riskey | ||
Mary Riskey | ||||
Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 07, 2019 |
|
Entity Information [Line Items] | ||
Entity Registrant Name | TWO HARBORS INVESTMENT CORP. | |
Entity Central Index Key | 0001465740 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 272,833,177 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders' Equity | ||
Preferred stock par value per share (in usd per share) | $ 0.01 | $ 0.01 |
Preferred shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred shares issued (in shares) | 40,050,000 | 40,050,000 |
Preferred shares outstanding (in shares) | 40,050,000 | 40,050,000 |
Preferred stock liquidation preference | $ 1,001,250 | $ 1,001,250 |
Common stock par value per share (in usd per share) | $ 0.01 | $ 0.01 |
Common shares authorized (in shares) | 450,000,000 | 450,000,000 |
Common shares issued (in shares) | 272,826,604 | 248,085,721 |
Common shares outstanding (in shares) | 272,826,604 | 248,085,721 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Stockholders' Equity [Abstract] | ||
Tax benefit from (expense on) other comprehensive income before reclassifications | $ (30) | $ 510 |
Tax benefit from (expense on) amounts reclassified from accumulated other comprehensive income | 0 | 0 |
Tax benefit from (expense on) other comprehensive income | $ (30) | $ 510 |
Organization and Operations |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization and Operations [Abstract] | |
Organization and Operations | Organization and Operations Two Harbors Investment Corp., or the Company, is a Maryland corporation investing in and managing Agency residential mortgage-backed securities, or Agency RMBS, non-Agency securities, mortgage servicing rights, or MSR, and other financial assets. The Company’s Chief Investment Officer manages the investment portfolio as a whole and resources are allocated and financial performance is assessed on a consolidated basis. The Company is externally managed and advised by PRCM Advisers LLC, or PRCM Advisers, which is a subsidiary of Pine River Capital Management L.P., or Pine River. The Company’s common stock is listed on the NYSE under the symbol “TWO”. The Company was incorporated on May 21, 2009, and commenced operations as a publicly traded company on October 28, 2009, upon completion of a merger with Capitol Acquisition Corp., or Capitol, which became a wholly owned indirect subsidiary of the Company as a result of the merger. 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. On April 26, 2018, the Company announced that it had entered into a definitive merger agreement to acquire CYS Investments, Inc., or CYS, a Maryland corporation that invested primarily in Agency RMBS and was treated as a REIT for U.S. federal income tax purposes. The transaction was approved by the stockholders of both the Company and CYS on July 27, 2018, and the merger was completed on July 31, 2018, at which time CYS became a wholly owned subsidiary of the Company. In exchange for all of the shares of CYS common stock outstanding immediately prior to the effective time of the merger, the Company issued approximately 72.6 million new shares of common stock, as well as aggregate cash consideration of $15.0 million, to CYS common stockholders. In addition, the Company issued 3 million shares of newly classified Series D cumulative redeemable preferred stock and 8 million shares of newly classified Series E cumulative redeemable preferred stock in exchange for all shares of CYS’s Series A and Series B cumulative redeemable preferred stock outstanding prior to the effective time of the merger.
|
Basis of Presentation and Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
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 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. Certain prior period amounts have been reclassified to conform to the current period presentation. 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, 2018. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at March 31, 2019 and results of operations for all periods presented have been made. The results of operations for the three months ended March 31, 2019 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, the period of time during which the Company anticipates an increase in the fair values of real estate securities sufficient to recover unrealized losses in those securities, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the 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, 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 2018 Annual Report on Form 10-K is a summary of the Company’s significant accounting policies. Recently Issued and/or Adopted Accounting Standards Lease Classification and Accounting In February 2016, the FASB issued ASU No. 2016-02, which requires lessees to recognize on their balance sheets both a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The ASU is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2018, with early adoption permitted. The Company’s adoption of this ASU was applied by recording a cumulative-effect adjustment to retained earnings as of January 1, 2019, which did not have a material impact on the Company’s financial condition, results of operations or financial statement disclosures. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued ASU No. 2016-13, which changes the impairment model for most financial assets and certain other instruments. Valuation allowances for credit losses on AFS debt securities will be recognized, rather than direct reductions in the amortized cost of the investments, regardless of whether the impairment is considered to be other-than-temporary. The new model also requires the estimation of lifetime expected credit losses and corresponding recognition of allowance for losses on trade and other receivables, held-to-maturity debt securities, loans, and other instruments held at amortized cost. The ASU requires certain recurring disclosures and is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2019, with early adoption permitted for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2018. The Company is evaluating the adoption of this ASU to determine the impact it may have on its condensed consolidated financial statements, which at the date of adoption, will establish an allowance for credit losses on AFS securities which will be derived from the current designated credit reserve with a resulting increase to amortized cost on the securities. The Company also expects adoption of this ASU to impact the recording for the purchase of certain non-Agency securities with purchased credit deterioration by recording an allowance for credit losses with an increase in amortized cost above the purchase price of the same amount. Subsequent changes in expected credit losses will be recognized immediately in earnings as a provision for credit losses until the allowance is reduced to zero. Further favorable changes will result in prospective yield adjustments. SEC Disclosure Update and Simplification In August 2018, the SEC adopted a final rule that amends certain disclosure requirements that have become duplicative, overlapping, or outdated in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. However, the guidance also added requirements for entities to include in their interim financial statements a reconciliation of changes in stockholders’ equity for each period for which an income statement is required (both year-to-date and quarterly periods). The final rule is effective for all filings made on or after November 5, 2018. However, the SEC staff said it would not object to a registrant waiting to comply with the new interim disclosure requirement until the filing of its Form 10-Q for the quarter that begins after the effective date. As a result, the Company adopted the new interim disclosure requirement during the current period. The Company’s adoption of this final rule did not have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.
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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 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 March 31, 2019 and December 31, 2018:
At March 31, 2019 and December 31, 2018, the Company pledged AFS securities with a carrying value of $21.8 billion and $25.2 billion, respectively, as collateral for repurchase agreements and advances from the Federal Home Loan Bank of Des Moines, or the FHLB. See Note 9 - Repurchase Agreements and Note 11 - Federal Home Loan Bank of Des Moines Advances. At March 31, 2019 and December 31, 2018, the Company did not have any securities purchased from and financed with the same counterparty that did not meet the conditions of ASC 860, to be considered linked transactions and, therefore, classified as derivatives. The Company is not required to consolidate variable interest entities, or 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 March 31, 2019 and December 31, 2018, the carrying value, which also represents the maximum exposure to loss, of all non-Agency securities in unconsolidated VIEs was $3.5 billion and $3.9 billion, respectively. The following tables present the amortized cost and carrying value of AFS securities by collateral type as of March 31, 2019 and December 31, 2018:
The following tables present the carrying value of the Company’s AFS securities by rate type as of March 31, 2019 and December 31, 2018:
The following table presents the Company’s AFS securities according to their estimated weighted average life classifications as of March 31, 2019:
When the Company purchases a credit-sensitive AFS security at a significant discount to its face value, the Company often does not amortize into income a significant portion of this discount that the Company is entitled to earn because the Company does not expect to collect the entire discount due to the inherent credit risk of the security. The Company may also record an other-than-temporary impairment, or OTTI, for a portion of its investment in the security to the extent the Company believes that the amortized cost will exceed the present value of expected future cash flows. The amount of principal that the Company does not amortize into income is designated as a credit reserve on the security, with unamortized net discounts or premiums amortized into income over time to the extent realizable. The following table presents the changes for the three months ended March 31, 2019 and 2018 of the net unamortized discount/premium and designated credit reserves on non-Agency AFS securities.
The following table presents the components comprising the carrying value of AFS securities not deemed to be other than temporarily impaired by length of time that the securities had an unrealized loss position as of March 31, 2019 and December 31, 2018. At March 31, 2019, the Company held 1,442 AFS securities, of which 100 were in an unrealized loss position for less than twelve consecutive months and 452 were in an unrealized loss position for more than twelve consecutive months. At December 31, 2018, the Company held 1,550 AFS securities, of which 290 were in an unrealized loss position for less than twelve consecutive months and 489 were in an unrealized loss position for more than twelve consecutive months.
Evaluating AFS Securities for Other-Than-Temporary Impairments In evaluating AFS securities for OTTI, the Company determines whether there has been a significant adverse quarterly change in the cash flow expectations for a security. The Company compares the amortized cost of each security in an unrealized loss position against the present value of expected future cash flows of the security. The Company also considers whether there has been a significant adverse change in the regulatory and/or economic environment as part of this analysis. If the amortized cost of the security is greater than the present value of expected future cash flows using the original yield as the discount rate, an other-than-temporary credit impairment has occurred. If the Company does not intend to sell and will not be more likely than not required to sell the security, the credit loss is recognized in earnings and the balance of the unrealized loss is recognized in either other comprehensive income (loss), net of tax, or loss on investment securities, depending on the accounting treatment. If the Company intends to sell the security or will be more likely than not required to sell the security, the full unrealized loss is recognized in earnings. During the three months ended March 31, 2019 and 2018, the Company recorded $0.2 million and $0.1 million in other-than-temporary credit impairments on two and one non-Agency securities, respectively, where the future expected cash flows for each security were less than its amortized cost. As of March 31, 2019, impaired securities with a carrying value of $133.7 million had actual weighted average cumulative losses of 6.6%, weighted average three-month prepayment speed of 5.8%, weighted average 60+ day delinquency of 18.9% of the pool balance, and weighted average FICO score of 673. At March 31, 2019, the Company did not intend to sell the securities and determined that it was not more likely than not that the Company will be required to sell the securities; therefore, only the projected credit loss was recognized in earnings. The following table presents the changes in OTTI included in earnings for the three months ended March 31, 2019 and 2018:
Cumulative credit losses related to OTTI may be reduced for securities sold as well as for securities that mature, are paid down, or are prepaid such that the outstanding principal balance is reduced to zero. Additionally, increases in cash flows expected to be collected over the remaining life of the security cause a reduction in the cumulative credit loss. Gross Realized Gains and Losses Gains and losses from the sale of AFS securities are recorded as realized gains (losses) within loss on investment securities in the Company’s condensed consolidated statements of comprehensive income (loss). For the three months ended March 31, 2019 and 2018, the Company sold AFS securities for $4.9 billion and $2.0 billion with an amortized cost of $4.9 billion and $2.1 billion for net realized losses of $17.5 million and $19.6 million, respectively. The following table presents the gross realized gains and losses on sales of AFS securities for the three months ended March 31, 2019 and 2018:
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Servicing Activities |
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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 has approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent the right to control the servicing of mortgage loans. The Company and its subsidiaries do not originate or directly service mortgage loans, and instead contract with appropriately licensed subservicers to handle substantially all servicing functions in the name of the subservicer for the loans underlying the Company’s MSR. The following table summarizes activity related to MSR for the three months ended March 31, 2019 and 2018.
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At March 31, 2019 and December 31, 2018, the Company pledged MSR with a carrying value of $1.6 billion and $1.1 billion, respectively, as collateral for repurchase agreements and revolving credit facilities. See Note 9 - Repurchase Agreements and Note 12 - Revolving Credit Facilities. As of March 31, 2019 and December 31, 2018, 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 risk associated with the Company’s MSR is interest rate risk and the resulting impact on prepayments. A significant decline in interest rates could lead to higher-than-expected prepayments that could reduce the value of the MSR. The Company economically hedges the impact of these risks with its Agency RMBS portfolio. Mortgage Servicing Income The following table presents the components of servicing income recorded on the Company’s condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2019 and 2018:
Mortgage Servicing Advances In connection with the servicing of loans, the Company’s subservicers make certain payments for property taxes and insurance premiums, default and property maintenance payments, as well as advances of principal and interest payments before collecting them from individual borrowers. Servicing advances, including contractual interest, 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, which are funded by the Company, totaled $37.6 million and $39.7 million and were included in other assets on the condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018, respectively. Serviced Mortgage Assets The Company’s total serviced mortgage assets consist of residential mortgage loans underlying MSR, residential mortgage loans held in previous on-balance sheet securitization trusts for which the Company is the named 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 March 31, 2019 and December 31, 2018:
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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 and collateral for the Company’s repurchase agreements and FHLB advances 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 March 31, 2019 and December 31, 2018:
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company’s condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018 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 market risk and 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., LIBOR) 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 interest rate swap, cap and swaption agreements, TBAs, put and call options for TBAs, U.S. Treasury futures and total return swaps (based on the Markit IOS Index). The Company has also entered into a number of non-derivative instruments to manage interest rate risk, principally MSR and Agency 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, Derivatives and Hedging, or 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 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 March 31, 2019 and December 31, 2018.
Comprehensive Income (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 income (loss):
For the three months ended March 31, 2019 and 2018, the Company recognized $23.7 million and $3.8 million of income, respectively, for the accrual and/or settlement of the net interest expense associated with its interest rate swaps and caps. The income resulted from paying either a fixed interest rate or LIBOR interest and receiving either LIBOR interest or a fixed interest rate on an average $37.6 billion and $27.8 billion notional, respectively. The following tables present information with respect to the volume of activity in the Company’s derivative instruments during the three months ended March 31, 2019 and 2018:
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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 loss (gain) on interest rate swaps, caps and swaptions and unrealized (gain) loss 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 other derivative instruments, proceeds from sales (payments for termination) of other derivative instruments, net and 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 mortgage rates decline or increase, depending on the type of investment. Rising mortgage rates generally result in a slowing of refinancing activity, which slows prepayments and results in a decline in the value of the Company’s fixed-rate Agency pools. To mitigate the impact of this risk on the Company’s fixed-rate Agency pool portfolio, the Company maintains a portfolio of fixed-rate interest-only securities and MSR, which increase in value when interest rates increase. As of March 31, 2019 and December 31, 2018, the Company had $142.4 million and $147.6 million, respectively, of interest-only securities, and $2.0 billion and $2.0 billion, respectively, of MSR in place to economically hedge its Agency RMBS. 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, FHLB advances 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., LIBOR) 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, put and call options for TBAs, interest rate swap, cap and swaption agreements, U.S. Treasury futures and Markit IOS total return swaps. TBAs. At times, 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 March 31, 2019 and December 31, 2018:
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Short U.S. Treasuries. The Company may use short U.S. Treasury securities independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. As of December 31, 2018, the Company had short-sold U.S. Treasuries with a notional amount of $800.0 million and a fair market value of $781.5 million included in derivative liabilities, at fair value, on the condensed consolidated balance sheet as of December 31, 2018. The Company did not hold any short U.S. Treasuries as of March 31, 2019. U.S. Treasury Futures. The Company may use U.S. Treasury futures independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. As of March 31, 2019, the Company had purchased U.S. Treasury futures with a notional amount of $1.3 billion and a fair market value of $3.7 million included in derivative assets, at fair value, on the condensed consolidated balance sheet as of March 31, 2019. The Company did not hold any U.S. Treasury futures as of December 31, 2018. Put and Call Options for TBAs. The Company may use put and call options for TBAs independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. As of December 31, 2018, the Company had purchased put and call options for TBAs with a notional amount of $5.4 billion and short sold put and call options for TBAs with a notional amount of $7.2 billion. The put and call options had a fair market value of $25.3 million included in derivative liabilities, at fair value, on the condensed consolidated balance sheet as of December 31, 2018. The Company did not hold any put and call options for TBAs as of March 31, 2019. 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. As of March 31, 2019 and December 31, 2018, 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 three-month LIBOR rate:
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Additionally, as of March 31, 2019 and December 31, 2018, 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 three-month LIBOR rate:
Interest Rate Swaptions. The Company may use interest rate swaptions (agreements to enter into interest rate swaps in the future for which the Company would either pay or receive a fixed rate) independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. As of March 31, 2019 and December 31, 2018, the Company had the following outstanding interest rate swaptions that were utilized as macro-economic hedges:
Interest Rate Cap Contracts. The Company may use interest rate caps independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. As of March 31, 2019, the Company held the following interest rate caps that were utilized as economic hedges of interest rate exposure (or duration) whereby the Company receives interest at a three-month LIBOR rate, net of a fixed cap rate:
Markit IOS Total Return Swaps. The Company may use total return swaps (agreements whereby the Company receives or makes payments based on the total return of an underlying instrument or index, such as the Markit IOS Index, in exchange for fixed or floating rate interest payments) independently, or in conjunction with other derivative and non-derivative instruments, in order to mitigate risks. The Company enters into total return swaps to help mitigate the potential impact of larger increases or decreases in interest rates on the performance of our portfolio (referred to as “convexity risk”). Total return swaps based on the Markit IOS Index are intended to synthetically replicate the performance of interest-only securities. The Company had the following total return swap agreements in place at March 31, 2019 and December 31, 2018:
Credit Risk The Company’s exposure to credit losses on its Agency RMBS portfolio is limited due to implicit or explicit backing from the GSEs. 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. For non-Agency investment securities, the Company may enter into credit default swaps to hedge credit risk. 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 March 31, 2019, the fair value of derivative financial instruments as an asset and liability position was $336.1 million and $0.2 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, in the case of centrally cleared interest rate swaps, 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 require that the Company posts 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 interest rate swap’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. As a result of amendments to rules governing certain central clearing activities, the exchange of variation margin is considered a settlement of the interest rate swap, as opposed to pledged collateral. Accordingly, beginning in the first quarter of 2018, the Company began accounting for the receipt or payment of variation margin as a direct reduction to the carrying value of the interest rate swap asset or liability.
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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, in the case of centrally cleared interest rate swaps. 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 require that the Company posts 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 interest rate swap’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. As a result of amendments to rules governing certain central clearing activities, the exchange of variation margin is considered a settlement of the interest rate swap, as opposed to pledged collateral. Accordingly, beginning in the first quarter of 2018, the Company began accounting for the receipt or payment of variation margin on CME and LCH cleared positions as a direct reduction to the carrying value of the interest rate swap asset or liability. The receipt or payment of initial margin will continue to be accounted for separate from the interest rate swap asset or liability. The Company presents repurchase agreements subject to master netting arrangements or similar agreements on a gross basis and derivative assets and liabilities (other than centrally cleared interest rate swaps) subject to such arrangements 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 interest rate swaps) on a net basis, based on counterparty, in its condensed consolidated balance sheets. However, the Company does not offset repurchase agreements or derivative assets and liabilities (other than centrally cleared interest rate swaps) 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 March 31, 2019 and December 31, 2018:
____________________ (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 |
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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. Following is a description of the three levels:
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 RMBS and non-Agency securities. The Company determines the fair value of its Agency RMBS based upon prices obtained from third-party pricing providers received using bid price, which are deemed indicative of market activity. The third-party pricing providers 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 providers 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 classified 99.4% and 0.6% of its AFS securities as Level 2 and Level 3 fair value assets, respectively, at March 31, 2019. AFS securities account for 91.4% of all assets reported at fair value at March 31, 2019. 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 providers. Although MSR transactions are observable in the marketplace, the valuation is based upon cash flow models that include unobservable market data inputs (including prepayment speeds, delinquency levels and discount rates). As a result, the Company classified 100% of its MSR as Level 3 fair value assets at March 31, 2019. 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, caps, swaptions, put and call options for TBAs and Markit IOS total return swaps. The Company utilizes third-party pricing providers to value its financial derivative instruments. The Company classified 100% of the interest rate swaps, caps, swaptions, and Markit IOS total return swaps reported at fair value as Level 2 at March 31, 2019. The Company did not hold any put and call options for TBAs at March 31, 2019. The Company may also enter into certain other derivative financial instruments, such as TBAs, short U.S. Treasuries, U.S. Treasury futures and inverse interest-only securities. These instruments are similar in form to the Company’s AFS securities and the Company utilizes a pricing service to value TBAs, short U.S. Treasuries, U.S. Treasury futures and inverse interest-only securities. The Company classified 100% of its inverse interest-only securities at fair value as Level 2 at March 31, 2019. The Company reported 100% of its TBAs and U.S. Treasury futures as Level 1 as of March 31, 2019. The Company did not hold any short U.S. Treasuries at March 31, 2019. The Company’s risk management committee governs trading activity relating to derivative instruments. 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, in the case of centrally cleared interest rate swaps. Additionally, both 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. Posting of cash collateral typically occurs daily, subject to certain dollar thresholds. Due to the existence of netting arrangements, as well as frequent cash collateral 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 March 31, 2019, 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 providers and/or management. The third-party pricing providers 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 providers in the absence of market information. Assumptions used by the third-party pricing providers 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 providers. 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 price provider. In determining fair value, third-party pricing providers 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 provider 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 for which market quotations are readily available 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 swaps, caps and swaption agreements, put and call options for TBAs and U.S. Treasuries, constant maturity swaps, credit default swaps, U.S. Treasury futures and Markit IOS total return swaps, are valued by the Company using observable inputs, specifically quotations received from third-party pricing providers, and are therefore classified within Level 2. The following table presents the reconciliation for all of the Company’s Level 3 assets measured at fair value on a recurring basis:
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The Company transferred certain AFS from Level 2 to Level 3 and from Level 3 to Level 2 based the observability of inputs during the three months ended March 31, 2019. No additional AFS transfers between Level 1, Level 2 or Level 3 were made during the three months ended March 31, 2019. The Company did not transfer AFS between Level 1, Level 2 or Level 3 during the three months ended March 31, 2018. 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 third-party pricing providers in the fair value measurement of its Level 3 available-for-sale securities. The significant unobservable inputs used by the third-party pricing provider 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 providers in the fair value measurement of its Level 3 MSR. The tables below present information about the significant unobservable inputs used by the third-party pricing providers in the fair value measurement of the Company’s MSR classified as Level 3 fair value assets at March 31, 2019:
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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.
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 March 31, 2019 and December 31, 2018.
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Repurchase Agreements |
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Disclosure of Repurchase Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase Agreements | Repurchase Agreements As of March 31, 2019 and December 31, 2018, the Company had outstanding $19.7 billion and $23.1 billion, respectively, of repurchase agreements. Excluding the effect of the Company’s interest rate swaps and caps, the repurchase agreements had a weighted average borrowing rate of 2.85% and 2.68% and weighted average remaining maturities of 75 and 66 days as of March 31, 2019 and December 31, 2018, respectively. At March 31, 2019 and December 31, 2018, the repurchase agreement balances were as follows:
At March 31, 2019 and December 31, 2018, the repurchase agreements had the following characteristics and remaining maturities:
The following table summarizes assets at carrying values that are pledged or restricted as collateral for the future payment obligations of repurchase agreements and derivative instruments:
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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. The following table summarizes certain characteristics of the Company’s repurchase agreements and counterparty concentration at March 31, 2019 and December 31, 2018:
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Reverse Repurchase Agreements Reverse Repurchase Agreements |
3 Months Ended |
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Mar. 31, 2019 | |
Reverse Repurchase Agreements [Abstract] | |
Reverse Repurchase Agreements | Reverse Repurchase Agreements |
Federal Home Loan Bank of Des Moines Advances |
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Advances from Federal Home Loan Banks [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Federal Home Loan Bank of Des Moines Advances | Federal Home Loan Bank of Des Moines Advances The Company’s wholly owned subsidiary, TH Insurance Holdings Company LLC, or TH Insurance, is a member of the FHLB. As a member of the FHLB, TH Insurance has access to a variety of products and services offered by the FHLB, including secured advances. As of March 31, 2019 and December 31, 2018, TH Insurance had $865.0 million and $865.0 million in outstanding secured advances with a weighted average borrowing rate of 2.80% and 2.79%, respectively. As of March 31, 2019 and December 31, 2018, TH Insurance had an additional $3.1 billion and $3.1 billion of available uncommitted capacity for borrowings, respectively, insofar as TH Insurance holds adequate total assets to support a new advance. To the extent TH Insurance has uncommitted capacity, it may be adjusted at the sole discretion of the FHLB. The ability to borrow from the FHLB is subject to the Company’s continued creditworthiness, pledging of sufficient eligible collateral to secure advances, and compliance with certain agreements with the FHLB. Each advance requires approval by the FHLB and is secured by collateral in accordance with the FHLB’s credit and collateral guidelines, as may be revised from time to time by the FHLB. Eligible collateral may include conventional 1-4 family residential mortgage loans, Agency RMBS and certain non-Agency securities with a rating of A and above. On January 11, 2016, the Federal Housing Finance Agency, or FHFA, released a final rule regarding membership in the Federal Home Loan Bank system. Among other effects, the final rule excludes captive insurers from membership eligibility, including the Company’s subsidiary member, TH Insurance. Since TH Insurance was admitted as a member in 2013, it is eligible for a membership grace period that runs through February 19, 2021, during which new advances or renewals that mature beyond the grace period will be prohibited; however, any existing advances that mature beyond this grace period will be permitted to remain in place subject to their terms insofar as the Company maintains good standing with the FHLB. If any new advances or renewals occur, TH Insurance’s outstanding advances will be limited to 40% of its total assets. At March 31, 2019 and December 31, 2018, FHLB advances had the following remaining maturities:
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Revolving Credit Facilities |
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Revolving Credit Facilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revolving Credit Facilities | Revolving Credit Facilities To finance MSR, the Company has entered into revolving credit facilities collateralized by the value of the MSR pledged. As of March 31, 2019 and December 31, 2018, the Company had outstanding short- and long-term borrowings under revolving credit facilities of $375.3 million and $310.0 million with a weighted average borrowing rate of 5.50% and 5.60% and weighted average remaining maturities of 3.59 and 4.25 years, respectively. At March 31, 2019 and December 31, 2018, borrowings under revolving credit facilities had the following remaining maturities:
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Convertible Senior Notes |
3 Months Ended |
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Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Convertible Senior Notes | Convertible Senior NotesIn January 2017, the Company closed an underwritten public offering of $287.5 million aggregate principal amount of convertible senior notes due 2022. The net proceeds from the offering were approximately $282.2 million after deducting underwriting discounts and estimated offering expenses payable by the Company. The 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. The notes will mature in January 2022, unless earlier converted or repurchased in accordance with their terms. The Company does not have the right to redeem the notes prior to maturity, but may be required to repurchase the notes from holders under certain circumstances. As of March 31, 2019 and December 31, 2018, the notes had a conversion rate of 63.1227 and 62.4003 shares of common stock per $1,000 principal amount of the notes, respectively. The outstanding amount due on the convertible senior notes as of March 31, 2019 and December 31, 2018 was $284.1 million and $283.9 million, respectively, net of deferred issuance costs. |
Stockholders' Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Equity Redeemable Preferred Stock The following is a summary of the Company’s series of cumulative redeemable preferred stock issued and outstanding as of March 31, 2019. 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.
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On July 31, 2018, upon the closing of the merger with CYS, the Company issued 3,000,000 shares of newly classified 7.75% Series D Cumulative Redeemable Preferred Stock, par value $0.01 per share, and 8,000,000 shares of newly classified 7.50% Series E Cumulative Redeemable Preferred Stock, par value $0.01 per share, in exchange for all shares of CYS’s Series A and Series B cumulative redeemable preferred stock outstanding prior to the effective time of the merger. Pursuant to the terms of the merger agreement with CYS, the terms of the Company’s Series D and Series E Cumulative Redeemable Preferred Stock are substantially similar to the terms of CYS’s Series A and Series B Cumulative Redeemable Preferred Stock. 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. 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 March 31, 2019, the Company had declared and paid all required quarterly dividends on the Company’s preferred stock. Distributions to Preferred Stockholders The following table presents cash dividends declared by the Company on its preferred stock from December 31, 2017 through March 31, 2019:
Common Stock Public Offering On March 21, 2019, the Company completed a public offering of 18,000,000 shares of its common stock at a price of $13.76 per share. On March 22, 2019, an additional 2,700,000 shares were sold by the Company to the underwriters of the offering pursuant to an overallotment option. The net proceeds to the Company were approximately $284.5 million, after deducting offering expenses of approximately $0.3 million. Issuance of Common Stock in Connection with Acquisition of CYS Investments, Inc. On July 31, 2018, in exchange for all of the shares of CYS common stock outstanding immediately prior to the effective time of the merger, the Company issued approximately 72.6 million new shares of common stock, as well as aggregate cash consideration of $15.0 million, to CYS common stockholders. As of March 31, 2019, the Company had 272,826,604 shares of common stock outstanding. The following table presents a reconciliation of the common shares outstanding for the three months ended March 31, 2019 and 2018:
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Distributions to Common Stockholders The following table presents cash dividends declared by the Company on its common stock from December 31, 2017 through March 31, 2019:
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 3,750,000 shares of the Company’s common stock. As of March 31, 2019, 240,082 shares have been issued under the plan for total proceeds of approximately $4.6 million, of which 12,230 and 4,921 shares were issued for total proceeds of $0.2 million and $0.1 million during the three months ended March 31, 2019 and 2018, respectively. Share Repurchase Program The Company’s share repurchase program allows for the repurchase of up to an aggregate of 37,500,000 shares of the Company’s common stock. 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 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 share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. The 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 share repurchase program does not have an expiration date. As of March 31, 2019, a total of 12,067,500 shares had been repurchased by the Company under the program for an aggregate cost of $200.4 million. No shares were repurchased during the three months ended March 31, 2019 and 2018. At-the-Market Offerings As of December 31, 2018, the Company was party to an equity distribution agreement under which the Company was authorized to sell up to an aggregate of 10,000,000 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. During the three months ended March 31, 2019, the Company terminated its prior equity distribution agreement and entered into a new equity distribution agreement pursuant to which a total of 35,000,000 shares of common stock are authorized for issuance. As of March 31, 2019, 7,458,235 shares of common stock had been sold under the equity distribution agreements for total accumulated net proceeds of approximately $128.2 million, of which 3,665,300 shares were sold for net proceeds of $50.6 million during the three months ended March 31, 2019. No shares were sold during the three months ended March 31, 2018. Accumulated Other Comprehensive Income Accumulated other comprehensive income at March 31, 2019 and December 31, 2018 was as follows:
Reclassifications out of Accumulated Other Comprehensive Income The Company reclassifies unrealized gains and losses on AFS securities in accumulated other comprehensive income to net (loss) income upon the recognition of any other-than-temporary impairments and realized gains and losses on sales, net of income tax effects, as individual securities are impaired or sold. The following table summarizes reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2019 and 2018:
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Equity Incentive Plan |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Incentive Plan | Equity Incentive Plan The Company’s Plan provides incentive compensation to attract and retain qualified directors, officers, advisors, consultants and other personnel, including PRCM Advisers and affiliates and employees of PRCM Advisers and its affiliates, and any joint venture affiliates of the Company. The Plan is administered by the compensation committee of the Company’s board of directors. The compensation committee has the full authority to administer and interpret the Plan, 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 Plan), to determine the terms, provisions and conditions of each award (which may not be inconsistent with the terms of the Plan), 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 Plan 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 Company’s Plan provides for grants of restricted common stock, phantom shares, dividend equivalent rights and other equity-based awards, subject to a ceiling of 6,500,000 shares available for issuance under the Plan. The Plan allows for the Company’s board of directors to expand the types of awards available under the Plan to include long-term incentive plan units in the future. If an award granted under the Plan 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 Plan after the tenth anniversary of the date that the Plan was approved by the Company’s board of directors. No award may be granted under the Plan 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. During the three months ended March 31, 2019 and 2018, the Company granted 455,174 and 941,371 shares of restricted common stock, respectively, to the Company’s executive officers and key employees of PRCM Advisers who provide services to the Company, pursuant to the terms of the Plan and the associated award agreements. The estimated fair value of these awards was $14.40 and $15.12 per share on grant date, based on the adjusted closing market price of the Company’s common stock on the NYSE on such date. The shares underlying the grants vest in three equal annual installments commencing on the first anniversary of the grant date, as long as such grantee complies with the terms and conditions of his or her applicable restricted stock award agreement. The following table summarizes the activity related to restricted common stock for the three months ended March 31, 2019 and 2018:
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Income Taxes |
3 Months Ended |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the three months ended March 31, 2019 and 2018, 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. During the three months ended March 31, 2019, the Company’s TRSs recognized a benefit from income taxes of $10.0 million, which was primarily due to losses recognized on MSR, offset by net gains recognized on derivative instruments held in the Company’s TRSs. During the three months ended March 31, 2018, the Company’s TRSs recognized a provision for income taxes of $3.8 million, which was primarily due to gains recognized on MSR, offset by net losses incurred on derivative instruments held in the Company’s TRSs. 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 | Earnings Per Share The following table presents a reconciliation of the (loss) earnings and shares used in calculating basic and diluted (loss) earnings per share for the three months ended March 31, 2019 and 2018:
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Related Party Transactions |
3 Months Ended |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The following summary provides disclosure of the material transactions with affiliates of the Company. In accordance with the Management Agreement between the Company and PRCM Advisers dated as of October 28, 2009 and subsequently amended, the Company incurred $12.1 million and $11.7 million as a management fee to PRCM Advisers for the three months ended March 31, 2019 and 2018, respectively, which represents approximately 1.5% of stockholders’ equity on an annualized basis as defined by the Management Agreement. For purposes of calculating the management fee, stockholders’ equity is adjusted as discussed below, and to exclude any common stock repurchases, as well as any unrealized gains, losses or other items that do not affect realized net (loss) income, among other adjustments, in accordance with the Management Agreement. In connection with the acquisition of CYS, the Management Agreement was amended to (i) reduce PRCM Advisers’ base management fee with respect to the additional equity under management resulting from the merger to 0.75% from the effective time through the first anniversary of the effective time and (ii) for the fiscal quarter in which closing of the merger occurred, to make a one-time downward adjustment of Pine River’s management fees payable by Two Harbors for such quarter by $15.0 million to offset the cash consideration payable to stockholders of CYS, plus an additional downward adjustment of up to $3.3 million for certain transaction-related expenses. For the year ended December 31, 2018, the total downward adjustment to management fees was $17.5 million. The Company does not anticipate any further downward adjustments to management fees for transaction-related expenses. In addition, the Company reimbursed PRCM Advisers for direct and allocated costs incurred by PRCM Advisers on behalf of the Company. These direct and allocated costs totaled approximately $13.2 million and $11.3 million for the three months ended March 31, 2019 and 2018, respectively. The Company will continue to have certain costs allocated to it by PRCM Advisers for compensation, data services, technology and certain office lease payments, however, the Company has direct relationships with most of its third party vendors and pays those expenses directly. The Company recognized $1.9 million and $2.3 million of compensation during the three months ended March 31, 2019 and 2018, respectively, related to restricted common stock issued to employees of PRCM Advisers and the Company’s independent directors pursuant to the Plan. See Note 15 - Equity Incentive Plan for additional information.
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsEvents subsequent to March 31, 2019 were evaluated through the date these condensed consolidated financial statements were issued and no other additional events were identified requiring further disclosure in these consolidated financial statements. |
Basis of Presentation and Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
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 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. Certain prior period amounts have been reclassified to conform to the current period presentation. 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, 2018. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at March 31, 2019 and results of operations for all periods presented have been made. The results of operations for the three months ended March 31, 2019 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 EstimatesThe 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, the period of time during which the Company anticipates an increase in the fair values of real estate securities sufficient to recover unrealized losses in those securities, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the 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, 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. |
Recently Issued and/or Adopted Accounting Standards | Recently Issued and/or Adopted Accounting Standards Lease Classification and Accounting In February 2016, the FASB issued ASU No. 2016-02, which requires lessees to recognize on their balance sheets both a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The ASU is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2018, with early adoption permitted. The Company’s adoption of this ASU was applied by recording a cumulative-effect adjustment to retained earnings as of January 1, 2019, which did not have a material impact on the Company’s financial condition, results of operations or financial statement disclosures. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued ASU No. 2016-13, which changes the impairment model for most financial assets and certain other instruments. Valuation allowances for credit losses on AFS debt securities will be recognized, rather than direct reductions in the amortized cost of the investments, regardless of whether the impairment is considered to be other-than-temporary. The new model also requires the estimation of lifetime expected credit losses and corresponding recognition of allowance for losses on trade and other receivables, held-to-maturity debt securities, loans, and other instruments held at amortized cost. The ASU requires certain recurring disclosures and is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2019, with early adoption permitted for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2018. The Company is evaluating the adoption of this ASU to determine the impact it may have on its condensed consolidated financial statements, which at the date of adoption, will establish an allowance for credit losses on AFS securities which will be derived from the current designated credit reserve with a resulting increase to amortized cost on the securities. The Company also expects adoption of this ASU to impact the recording for the purchase of certain non-Agency securities with purchased credit deterioration by recording an allowance for credit losses with an increase in amortized cost above the purchase price of the same amount. Subsequent changes in expected credit losses will be recognized immediately in earnings as a provision for credit losses until the allowance is reduced to zero. Further favorable changes will result in prospective yield adjustments. SEC Disclosure Update and Simplification In August 2018, the SEC adopted a final rule that amends certain disclosure requirements that have become duplicative, overlapping, or outdated in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. However, the guidance also added requirements for entities to include in their interim financial statements a reconciliation of changes in stockholders’ equity for each period for which an income statement is required (both year-to-date and quarterly periods). The final rule is effective for all filings made on or after November 5, 2018. However, the SEC staff said it would not object to a registrant waiting to comply with the new interim disclosure requirement until the filing of its Form 10-Q for the quarter that begins after the effective date. As a result, the Company adopted the new interim disclosure requirement during the current period. The Company’s adoption of this final rule did not have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.
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Available-for-Sale Securities, at Fair Value (Tables) |
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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 March 31, 2019 and December 31, 2018:
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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 March 31, 2019 and December 31, 2018:
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Debt Securities, Available-for-sale, Classified by Rate Type | The following tables present the carrying value of the Company’s AFS securities by rate type as of March 31, 2019 and December 31, 2018:
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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 March 31, 2019:
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Schedule of Available-for-sale Securities Reconciliation, Non-Agency Unamortized Net Discount and Designated Credit Reserves | The following table presents the changes for the three months ended March 31, 2019 and 2018 of the net unamortized discount/premium and designated credit reserves on non-Agency AFS securities.
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Schedule of Unrealized Loss on Investments | The following table presents the components comprising the carrying value of AFS securities not deemed to be other than temporarily impaired by length of time that the securities had an unrealized loss position as of March 31, 2019 and December 31, 2018. At March 31, 2019, the Company held 1,442 AFS securities, of which 100 were in an unrealized loss position for less than twelve consecutive months and 452 were in an unrealized loss position for more than twelve consecutive months. At December 31, 2018, the Company held 1,550 AFS securities, of which 290 were in an unrealized loss position for less than twelve consecutive months and 489 were in an unrealized loss position for more than twelve consecutive months.
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Other than Temporary Impairment, Credit Losses Recognized in Earnings | The following table presents the changes in OTTI included in earnings for the three months ended March 31, 2019 and 2018:
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Schedule of Realized Gain (Loss) | The following table presents the gross realized gains and losses on sales of AFS securities for the three months ended March 31, 2019 and 2018:
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Servicing Activities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 months ended March 31, 2019 and 2018.
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Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets | As of March 31, 2019 and December 31, 2018, 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 income (loss) for the three months ended March 31, 2019 and 2018:
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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 March 31, 2019 and December 31, 2018:
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Cash, Cash Equivalents and Restricted Cash (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 March 31, 2019 and December 31, 2018:
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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 March 31, 2019 and December 31, 2018 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) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 March 31, 2019 and December 31, 2018.
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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 income (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 months ended March 31, 2019 and 2018:
____________________ (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 March 31, 2019 and December 31, 2018:
___________________
(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 Interest Rate Swap Payers | As of March 31, 2019 and December 31, 2018, 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 three-month LIBOR rate:
____________________
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Schedule of Interest Rate Swap Receivers | Additionally, as of March 31, 2019 and December 31, 2018, 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 three-month LIBOR rate:
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Schedule of Interest Rate Swaptions | As of March 31, 2019 and December 31, 2018, the Company had the following outstanding interest rate swaptions that were utilized as macro-economic hedges:
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Schedule of Interest Rate Caps | As of March 31, 2019, the Company held the following interest rate caps that were utilized as economic hedges of interest rate exposure (or duration) whereby the Company receives interest at a three-month LIBOR rate, net of a fixed cap rate:
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Schedule of Total Return Swaps | The Company had the following total return swap agreements in place at March 31, 2019 and December 31, 2018:
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Offsetting Assets and Liabilities Offsetting Assets and Liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 March 31, 2019 and December 31, 2018:
____________________ (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 March 31, 2019 and December 31, 2018:
____________________ (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) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 all of the Company’s Level 3 assets measured at fair value on a recurring basis:
____________________
(2) The change in unrealized gains or losses on MSR that were held at the end of the reporting period was recorded in (loss) gain on servicing asset on the condensed consolidated statements of comprehensive income (loss).
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Fair Value Inputs, Assets, Quantitative Information | The tables below present information about the significant unobservable inputs used by the third-party pricing providers in the fair value measurement of the Company’s MSR classified as Level 3 fair value assets at March 31, 2019:
___________________
(2) Calculated by averaging the weighted average significant unobservable inputs used by the multiple third-party pricing providers 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 March 31, 2019 and December 31, 2018.
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Repurchase Agreements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Repurchase Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Repurchase Agreements By Term, Short or Long | At March 31, 2019 and December 31, 2018, the repurchase agreement balances were as follows:
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Schedule of Repurchase Agreements by Maturity | At March 31, 2019 and December 31, 2018, the repurchase agreements had the following characteristics and remaining maturities:
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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 repurchase agreements and derivative instruments:
____________________ (1) U.S. Treasuries received as collateral and re-pledged.
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Schedule of Repurchase Agreement Counterparties with Whom Repurchase Agreements Exceed 10 Percent of Stockholders' Equity | . The following table summarizes certain characteristics of the Company’s repurchase agreements and counterparty concentration at March 31, 2019 and December 31, 2018:
____________________
(2) Represents amounts outstanding with 29 and 29 counterparties at March 31, 2019 and December 31, 2018, respectivel
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Federal Home Loan Bank of Des Moines Advances (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advances from Federal Home Loan Banks [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Federal Home Loan Bank Advances | At March 31, 2019 and December 31, 2018, FHLB advances had the following remaining maturities:
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Revolving Credit Facilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revolving Credit Facilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Line of Credit Facilities | At March 31, 2019 and December 31, 2018, borrowings under revolving credit facilities had the following remaining maturities:
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Stockholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | The following is a summary of the Company’s series of cumulative redeemable preferred stock issued and outstanding as of March 31, 2019. 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.
____________________
(3) On and after the fixed to floating rate conversion date, the dividend will accumulate and be payable quarterly at a percentage of the $25.00 per share liquidation preference equal to an annual floating rate of three-month LIBOR plus the spread indicated within each preferred class.
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Preferred Dividends Declared | The following table presents cash dividends declared by the Company on its preferred stock from December 31, 2017 through March 31, 2019:
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Schedule of Stock by Class | The following table presents a reconciliation of the common shares outstanding for the three months ended March 31, 2019 and 2018:
____________________ (1) Represents shares of restricted stock granted under the Second Restated 2009 Equity Incentive Plan, net of forfeitures, of which 1,186,669 restricted shares remained subject to vesting requirements at March 31, 2019.
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Common Dividends Declared | The following table presents cash dividends declared by the Company on its common stock from December 31, 2017 through March 31, 2019:
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Schedule of Accumulated Other Comprehensive Income (Loss) | Accumulated other comprehensive income at March 31, 2019 and December 31, 2018 was as follows:
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Reclassification out of Accumulated Other Comprehensive Income | The following table summarizes reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2019 and 2018:
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Equity Incentive Plan (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | The following table summarizes the activity related to restricted common stock for the three months ended March 31, 2019 and 2018:
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table presents a reconciliation of the (loss) earnings and shares used in calculating basic and diluted (loss) earnings per share for the three months ended March 31, 2019 and 2018:
___________________ (1) Includes a nondiscretionary adjustment for the assumed change in the management fee calculation.
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Organization and Operations Acquisition of CYS Investments, Inc. (Details) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | ||
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Mar. 22, 2019 |
Jul. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
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Class of Stock [Line Items] | ||||
Aggregate cash consideration exchanged for shares of CYS common stock | $ 15.0 | |||
Common Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Number of shares of stock issued during period (in shares) | 18,000,000 | 72,600,000 | 24,377,530 | 4,921 |
Series D Preferred Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Number of shares of stock issued during period (in shares) | 3,000,000 | |||
Series E Preferred Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Number of shares of stock issued during period (in shares) | 8,000,000 |
Available-for-Sale Securities, at Fair Value Nonconsolidated Variable Interest Entities (Details) - Mortgage-backed Securities, Issued by Private Enterprises [Member] - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
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Variable Interest Entity [Line Items] | ||
Assets of nonconsolidated Variable Interest Entities | $ 3,500,000 | $ 3,900,000 |
Maximum exposure to loss of nonconsolidated Variable Interest Entities | $ 3,544,512 | $ 2,982,094 |
Available-for-sale Securities Classified by Rate Type (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Adjustable Rate | $ 3,275,799 | $ 3,494,244 |
Fixed Rate | 21,801,911 | 22,058,360 |
Available-for-sale securities, at fair value | 25,077,710 | 25,552,604 |
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Adjustable Rate | 17,669 | 19,073 |
Fixed Rate | 21,515,529 | 21,665,960 |
Available-for-sale securities, at fair value | 21,533,198 | 21,685,033 |
Mortgage-backed Securities, Issued by Private Enterprises [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Adjustable Rate | 3,258,130 | 3,475,171 |
Fixed Rate | 286,382 | 392,400 |
Available-for-sale securities, at fair value | $ 3,544,512 | $ 3,867,571 |
Available-for-Sale Securities, at Fair Value Schedule of Realized Gain (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Debt Securities, Available-for-sale [Abstract] | ||
Proceeds from sales of available-for-sale securities | $ 4,853,189 | $ 2,047,032 |
Amortized cost of available-for-sale securities sold | 4,900,000 | 2,100,000 |
Gross realized gains | 101,298 | 8,195 |
Gross realized losses | (118,755) | (27,758) |
Total realized losses on sales, net | $ (17,457) | $ (19,563) |
Rollforward of Mortgage Servicing Rights, at Fair Value (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Servicing Asset at Fair Value, Amount [Roll Forward] | |||
Mortgage servicing rights, at fair value, at beginning of period | $ 1,993,440 | $ 1,086,717 | |
Additions from purchases of mortgage servicing rights | 220,812 | 146,899 | |
Changes in valuation inputs or assumptions used in the valuation model | (151,614) | 100,709 | |
Other changes in fair value | (37,649) | (29,202) | |
Other changes | (10,619) | (4,100) | |
Mortgage servicing rights, at fair value, at end of period | 2,014,370 | $ 1,301,023 | |
Mortgage servicing rights, at fair value, pledged as collateral for borrowings | $ 1,600,000 | $ 1,100,000 |
Components of Servicing Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Disclosures Pertaining to Servicing Assets and Servicing Liabilities [Abstract] | |||
Servicing fee income | $ 105,936 | $ 66,449 | |
Ancillary and other fee income | 310 | 322 | |
Float income | 10,702 | 4,419 | |
Servicing income | 116,948 | $ 71,190 | |
Servicing advances | $ 37,600 | $ 39,700 |
Schedule of Total Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract] | ||||
Cash and cash equivalents | $ 512,183 | $ 409,758 | ||
Restricted cash | 266,752 | 688,006 | ||
Total cash, cash equivalents and restricted cash | $ 778,935 | $ 1,097,764 | $ 1,101,241 | $ 1,054,995 |
Derivative Instruments and Hedging Activities Interest Spread on Interest Rate Swaps and Caps (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||
Average Notional Amount | $ 47,549,415,000 | $ 26,619,080,000 |
Interest Rate Contract [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Net interest expense (income) on interest rate swaps and caps | 23,700,000 | 3,800,000 |
Net Long Position [Member] | Interest Rate Contract [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Average Notional Amount | $ 37,600,000,000 | $ 27,800,000,000 |
Derivative Instruments and Hedging Activities Interest Rate Sensitive Assets/Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Derivatives, Fair Value [Line Items] | ||||
Available-for-sale securities, at fair value | $ 25,077,710 | $ 25,552,604 | ||
Mortgage servicing rights, at fair value | 2,014,370 | 1,993,440 | $ 1,301,023 | $ 1,086,717 |
Interest-Only-Strip [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Available-for-sale securities, at fair value | $ 142,400 | $ 147,600 |
Derivative Instruments and Hedging Activities Short U.S. Treasury Securities (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Derivative [Line Items] | ||||
Notional | $ 58,777,783,000 | $ 36,528,169,000 | $ 18,429,288,000 | $ 31,226,878,000 |
Derivative Financial Instruments, Liabilities [Member] | ||||
Derivative [Line Items] | ||||
Notional | 47,073,000 | 5,403,265,000 | ||
Fair Value | $ (231,000) | (820,590,000) | ||
Short US Treasuries [Member] | Derivative Financial Instruments, Liabilities [Member] | ||||
Derivative [Line Items] | ||||
Notional | 800,000,000.0 | |||
Fair Value | $ (781,455,000) |
Derivative Instruments and Hedging Activities U.S. Treasury Futures (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Derivative [Line Items] | ||||
Notional | $ 58,777,783,000 | $ 36,528,169,000 | $ 18,429,288,000 | $ 31,226,878,000 |
Derivative Financial Instruments, Assets [Member] | ||||
Derivative [Line Items] | ||||
Notional | 58,730,710,000 | 36,258,904,000 | ||
Fair Value | 336,112,000 | $ 319,981,000 | ||
U.S. Treasury Futures [Member] | Derivative Financial Instruments, Assets [Member] | ||||
Derivative [Line Items] | ||||
Notional | 1,310,000,000 | |||
Fair Value | $ 3,727,000 |
Derivative Instruments and Hedging Activities Put and Call Options for TBAs (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Derivative [Line Items] | ||||
Notional | $ 58,777,783,000 | $ 36,528,169,000 | $ 18,429,288,000 | $ 31,226,878,000 |
Derivative Financial Instruments, Liabilities [Member] | ||||
Derivative [Line Items] | ||||
Notional | 47,073,000 | 5,403,265,000 | ||
Fair Value | $ (231,000) | (820,590,000) | ||
Put and Call Options for TBAs [Member] | Derivative Financial Instruments, Liabilities [Member] | ||||
Derivative [Line Items] | ||||
Notional | 1,767,000,000 | |||
Fair Value | (25,296,000) | |||
Put and Call Options for TBAs [Member] | Long [Member] | ||||
Derivative [Line Items] | ||||
Notional | 5,400,000,000 | |||
Put and Call Options for TBAs [Member] | Short [Member] | ||||
Derivative [Line Items] | ||||
Notional | $ 7,200,000,000 |
Derivative Instruments and Hedging Activities Schedule of Total Return Swaps (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Derivative [Line Items] | ||||
Notional | $ 58,777,783,000 | $ 36,528,169,000 | $ 18,429,288,000 | $ 31,226,878,000 |
Markit IOS Total Return Swap [Member] | ||||
Derivative [Line Items] | ||||
Notional | 47,073,000 | 48,265,000 | ||
Fair Value | (231,000) | (383,000) | ||
Cost Basis | (59,000) | (59,000) | ||
Derivative, Unrealized Gains (Losses) | (172,000) | (324,000) | ||
Markit IOS Total Return Swap [Member] | Maturity Date, 1/12/2043 [Member] | ||||
Derivative [Line Items] | ||||
Notional | 20,877,000 | 21,395,000 | ||
Fair Value | (101,000) | (153,000) | ||
Cost Basis | (30,000) | (30,000) | ||
Derivative, Unrealized Gains (Losses) | (71,000) | (123,000) | ||
Markit IOS Total Return Swap [Member] | Maturity Date, 1/12/2044 [Member] | ||||
Derivative [Line Items] | ||||
Notional | 26,196,000 | 26,870,000 | ||
Fair Value | (130,000) | (230,000) | ||
Cost Basis | (29,000) | (29,000) | ||
Derivative, Unrealized Gains (Losses) | $ (101,000) | $ (201,000) |
Derivative Instruments and Hedging Activities Credit Risk - Counterparty Exposure (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivative assets, at fair value | $ 336,112 | $ 319,981 |
Derivative liabilities, at fair value | $ (231) | $ (820,590) |
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Repurchase agreements | $ 19,729,691 | $ 23,133,476 |
Long-term Federal Home Loan Bank Advances | 50,000 | |
Revolving credit facilities | 375,294 | 310,000 |
Maturity Over One Year [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Revolving credit facilities | 355,294 | 290,000 |
Maturity Over One Year [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Repurchase agreements | $ 300,000 | $ 300,000 |
Repurchase Agreements (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Disclosure of Repurchase Agreements [Abstract] | ||
Repurchase agreements | $ 19,729,691 | $ 23,133,476 |
Weighted average borrowing rate | 2.85% | 2.68% |
Weighted average remaining maturity | 75 days | 66 days |
Schedule of Repurchase Agreements by Term, Short or Long (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | $ 19,729,691 | $ 23,133,476 |
Maturity up to One Year [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | 19,429,691 | 22,833,476 |
Maturity Over One Year [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Repurchase agreements | $ 300,000 | $ 300,000 |
Reverse Repurchase Agreements Reverse Repurchase Agreements (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Reverse repurchase agreements | $ 0 | $ 761,815 |
Federal Home Loan Bank of Des Moines Advances (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items] | ||
Federal Home Loan Bank advances | $ 865,024 | $ 865,024 |
Maximum percent of FHLB advances to total assets | 40.00% | |
Federal Home Loan Bank of Des Moines [Member] | ||
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items] | ||
Federal Home Loan Bank advances | $ 865,000 | $ 865,000 |
Weighted average borrowing rate | 2.80% | 2.79% |
Available uncommitted capacity for borrowings | $ 3,100,000 | $ 3,100,000 |
Schedule of Maturities of Federal Home Loan Bank Advances (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Schedule of Maturities of Federal Home Loan Bank Advances [Line Items] | ||
Federal Home Loan Bank advances | $ 865,024 | $ 865,024 |
Maturity Within One Year [Member] | ||
Schedule of Maturities of Federal Home Loan Bank Advances [Line Items] | ||
Federal Home Loan Bank advances | 815,024 | 815,024 |
Maturity One to Three Years [Member] | ||
Schedule of Maturities of Federal Home Loan Bank Advances [Line Items] | ||
Federal Home Loan Bank advances | 0 | 0 |
Maturity Three to Five Years [Member] | ||
Schedule of Maturities of Federal Home Loan Bank Advances [Line Items] | ||
Federal Home Loan Bank advances | 0 | 0 |
Maturity Five to Ten Years [Member] | ||
Schedule of Maturities of Federal Home Loan Bank Advances [Line Items] | ||
Federal Home Loan Bank advances | 0 | 0 |
Maturity Over Ten Years [Member] | ||
Schedule of Maturities of Federal Home Loan Bank Advances [Line Items] | ||
Federal Home Loan Bank advances | $ 50,000 | $ 50,000 |
Underlying Assets of Federal Home Loan Bank Advances (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Federal Home Loan Bank of Des Moines [Member] | ||
Schedule of Assets Underlying Federal Home Loan Bank Advances [Line Items] | ||
Federal Home Loan Bank stock | $ 38,700 | $ 40,800 |
Available-for-sale Securities [Member] | ||
Schedule of Assets Underlying Federal Home Loan Bank Advances [Line Items] | ||
Assets pledged as collateral for Federal Home Loan Bank advances | $ 918,300 | $ 917,500 |
Revolving Credit Facilities (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | $ 375,294 | $ 310,000 |
Weighted average borrowing rate | 5.50% | 5.60% |
Weighted average remaining maturity | 3 years 7 months 2 days | 4 years 3 months |
Mortgage servicing rights, at fair value, pledged as collateral for borrowings | $ 1,600,000 | $ 1,100,000 |
Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Mortgage servicing rights, at fair value, pledged as collateral for borrowings | $ 824,300 | $ 458,200 |
Schedule of Revolving Credit Facilities by Maturity (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | $ 375,294 | $ 310,000 |
Maturity up to 30 days [Member] | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | 0 | 0 |
Maturity 30 to 59 Days [Member] | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | 0 | 0 |
Maturity 60 to 89 Days [Member] | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | 0 | 0 |
Maturity 90 to 119 Days [Member] | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | 0 | 0 |
Maturity 120 to 364 days [Member] | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | 20,000 | 20,000 |
Maturity Over One Year [Member] | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facilities | $ 355,294 | $ 290,000 |
Convertible Senior Notes (Details) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Debt Instrument, Redemption [Line Items] | ||
Proceeds from convertible senior notes | $ 282,200 | |
Convertible senior notes conversion ratio | 0.0631227 | 0.0624003 |
Convertible senior notes | $ 284,099 | $ 283,856 |
Convertible Debt [Member] | ||
Debt Instrument, Redemption [Line Items] | ||
Convertible senior notes aggregate principal amount | $ 287,500 | |
Convertible senior notes interest rate per annum | 6.25% |
Stockholders' Equity Schedule of Preferred Dividends Declared (Details) - $ / shares |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
|
Series A Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Declaration Date | Mar. 19, 2019 | Dec. 18, 2018 | Sep. 20, 2018 | Jun. 19, 2018 | Mar. 20, 2018 |
Record Date | Apr. 12, 2019 | Dec. 31, 2018 | Oct. 12, 2018 | Jul. 12, 2018 | Apr. 12, 2018 |
Payment Date | Apr. 29, 2019 | Jan. 28, 2019 | Oct. 29, 2018 | Jul. 27, 2018 | Apr. 27, 2018 |
Dividends declared per preferred share (in usd per share) | $ 0.507810 | $ 0.507810 | $ 0.507810 | $ 0.507810 | $ 0.507810 |
Series B Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Declaration Date | Mar. 19, 2019 | Dec. 18, 2018 | Sep. 20, 2018 | Jun. 19, 2018 | Mar. 20, 2018 |
Record Date | Apr. 12, 2019 | Dec. 31, 2018 | Oct. 12, 2018 | Jul. 12, 2018 | Apr. 12, 2018 |
Payment Date | Apr. 29, 2019 | Jan. 28, 2019 | Oct. 29, 2018 | Jul. 27, 2018 | Apr. 27, 2018 |
Dividends declared per preferred share (in usd per share) | $ 0.476560 | $ 0.476560 | $ 0.476560 | $ 0.476560 | $ 0.476560 |
Series C Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Declaration Date | Mar. 19, 2019 | Dec. 18, 2018 | Sep. 20, 2018 | Jun. 19, 2018 | Mar. 20, 2018 |
Record Date | Apr. 12, 2019 | Dec. 31, 2018 | Oct. 12, 2018 | Jul. 12, 2018 | Apr. 12, 2018 |
Payment Date | Apr. 29, 2019 | Jan. 28, 2019 | Oct. 29, 2018 | Jul. 27, 2018 | Apr. 27, 2018 |
Dividends declared per preferred share (in usd per share) | $ 0.453130 | $ 0.453130 | $ 0.453130 | $ 0.453130 | $ 0.453130 |
Series D Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Declaration Date | Mar. 19, 2019 | Dec. 18, 2018 | Sep. 20, 2018 | ||
Record Date | Apr. 01, 2019 | Dec. 31, 2018 | Oct. 01, 2018 | ||
Payment Date | Apr. 15, 2019 | Jan. 28, 2019 | Oct. 15, 2018 | ||
Dividends declared per preferred share (in usd per share) | $ 0.484375 | $ 0.484375 | $ 0.484375 | ||
Series E Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Declaration Date | Mar. 19, 2019 | Dec. 18, 2018 | Sep. 20, 2018 | ||
Record Date | Apr. 01, 2019 | Dec. 31, 2018 | Oct. 01, 2018 | ||
Payment Date | Apr. 15, 2019 | Jan. 28, 2019 | Oct. 15, 2018 | ||
Dividends declared per preferred share (in usd per share) | $ 0.468750 | $ 0.468750 | $ 0.468750 |
Stockholders' Equity Public Offering (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | |||
---|---|---|---|---|---|
Mar. 22, 2019 |
Jul. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 21, 2019 |
|
Class of Stock [Line Items] | |||||
Proceeds from issuance of common stock, net of offering costs | $ 284,500 | $ 335,278 | $ 76 | ||
Issuance costs incurred in common stock offering | $ 300 | ||||
Common Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Number of shares of stock issued during period (in shares) | 18,000,000 | 72,600,000 | 24,377,530 | 4,921 | |
Price per share of common stock issued during period (in usd per share) | $ 13.76 | ||||
Over-Allotment Option [Member] | Common Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Number of shares of stock issued during period (in shares) | 2,700,000 |
Stockholders' Equity Issuance of Common Stock in Connection with Acquisition of CYS Investments, Inc. (Details) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | ||
---|---|---|---|---|
Mar. 22, 2019 |
Jul. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Class of Stock [Line Items] | ||||
Aggregate cash consideration exchanged for shares of CYS common stock | $ 15.0 | |||
Common Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Number of shares of stock issued during period (in shares) | 18,000,000 | 72,600,000 | 24,377,530 | 4,921 |
Stockholders' Equity Common Stock Rollforward (Details) - shares |
1 Months Ended | 3 Months Ended | ||||
---|---|---|---|---|---|---|
Mar. 22, 2019 |
Jul. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Increase (Decrease) in Common Stock Outstanding [Roll Forward] | ||||||
Common shares outstanding at beginning of period (in shares) | 248,085,721 | |||||
Common shares outstanding at end of period (in shares) | 272,826,604 | |||||
Number of nonvested restricted common shares outstanding (in shares) | 1,186,669 | 1,739,397 | 1,593,701 | 1,284,010 | ||
Common Stock [Member] | ||||||
Increase (Decrease) in Common Stock Outstanding [Roll Forward] | ||||||
Common shares outstanding at beginning of period (in shares) | 248,085,721 | 174,496,587 | ||||
Number of shares of stock issued during period (in shares) | 18,000,000 | 72,600,000 | 24,377,530 | 4,921 | ||
Number of shares of restricted common stock issued during period (in shares) | 363,353 | 933,270 | ||||
Common shares outstanding at end of period (in shares) | 272,826,604 | 175,434,778 |
Stockholders' Equity Schedule of Common Dividends Declared (Details) - $ / shares |
1 Months Ended | 2 Months Ended | 3 Months Ended | |||
---|---|---|---|---|---|---|
Jul. 31, 2018 |
Sep. 30, 2018 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
|
Class of Stock [Line Items] | ||||||
Dividends declared per common share (in usd per share) | $ 0.47 | $ 0.47 | ||||
Common Stock [Member] | ||||||
Class of Stock [Line Items] | ||||||
Declaration Date | Jul. 13, 2018 | Sep. 20, 2018 | Mar. 19, 2019 | Dec. 18, 2018 | Jun. 19, 2018 | Mar. 20, 2018 |
Record Date | Jul. 25, 2018 | Oct. 01, 2018 | Mar. 29, 2019 | Dec. 31, 2018 | Jun. 29, 2018 | Apr. 02, 2018 |
Payment Date | Jul. 30, 2018 | Oct. 29, 2018 | Apr. 29, 2019 | Jan. 28, 2019 | Jul. 27, 2018 | Apr. 27, 2018 |
Dividends declared per common share (in usd per share) | $ 0.158370 | $ 0.311630 | $ 0.470000 | $ 0.470000 | $ 0.470000 | $ 0.470000 |
Stockholders' Equity Dividend Reinvestment and Direct Stock Purchase Plan (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Equity [Abstract] | ||
Number of common shares reserved for issuance under dividend reinvestment plan (in shares) | 3,750,000 | |
Number of common shares issued from dividend reinvestment plan and outstanding as of period-end (in shares) | 240,082 | |
Accumulated proceeds from issuance of common shares from dividend reinvestment plan | $ 4,600 | |
Number of common shares issued during period from dividend reinvestment plan (in shares) | 12,230 | 4,921 |
Proceeds from issuance of common shares during period from dividend reinvestment plan | $ 200 | $ 100 |
Stockholders' Equity Share Repurchase Program (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
shares
|
---|---|
Equity [Abstract] | |
Number of shares authorized to be repurchased under stock repurchase program (in shares) | 37,500,000 |
Number of shares repurchased and retired to date (in shares) | 12,067,500 |
Cost of shares repurchased and retired to date | $ | $ 200,400 |
Stockholders' Equity At-the-Market Offering (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Subsidiary, Sale of Stock [Line Items] | ||
Number of shares authorized to be sold under equity distribution agreement (in shares) | 35,000,000 | 10,000,000 |
Number of common shares issued under equity distribution agreement and outstanding as of period-end (in shares) | 7,458,235 | |
Accumulated proceeds from issuance of common shares under equity distribution agreement | $ 128,200 | |
At the Market Offering [Member] | ||
Subsidiary, Sale of Stock [Line Items] | ||
Number of shares of stock issued during period (in shares) | 3,665,300 | |
Issuance of stock, net of offering costs | $ 50,600 |
Stockholders' Equity Schedule of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Equity [Abstract] | ||
Unrealized gains | $ 601,080 | $ 498,744 |
Unrealized losses | (134,111) | (387,927) |
Accumulated other comprehensive income | $ 466,969 | $ 110,817 |
Stockholders' Equity Reclassifications out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Realized losses (gains) on sales of certain AFS securities, net of tax | $ 19,292 | $ 20,671 |
Amounts reclassified from accumulated other comprehensive income (loss) | (28,312) | (1,235) |
Reclassification out of Accumulated Other Comprehensive Income [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Other-than-temporary impairments on AFS securities | 206 | 94 |
Realized losses (gains) on sales of certain AFS securities, net of tax | $ 28,106 | $ (1,329) |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Percent of REIT taxable income the entity intends to distribute | 100.00% | |
(Benefit from) provision for income taxes | $ (10,039) | $ 3,784 |
Schedule of Related Party Transactions, by Related Party (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Sep. 30, 2018 |
|
Related Party Transactions [Abstract] | |||
Management fees | $ 12,082 | $ 11,708 | |
Percent per annum of equity used to calculate management fees | 1.50% | ||
Percent per annum of additional equity used to calculate management fees | 0.75% | ||
One time downward adjustment to management fees payable | $ 15,000 | ||
Maximum additional one time downward adjustment to management fees payable | $ 3,300 | ||
Total one time downward adjustment to management fees payable | $ 17,500 | ||
Direct and allocated costs incurred by manager | 13,200 | 11,300 | |
Compensation costs related to restricted common stock | $ 1,900 | $ 2,300 |