Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 01, 2018 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | Sutherland Asset Management Corp | ||
Entity Central Index Key | 1,527,590 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Common Stock, Shares Outstanding | 31,996,440 | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 245,625,504 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Assets | ||
Cash and cash equivalents | $ 63,425 | $ 59,566 |
Restricted cash | 11,666 | 20,190 |
Short-term investments | 319,984 | |
Loans, net (including $188,150 and $81,592 held at fair value) | 1,017,920 | 1,011,121 |
Loans, held for sale, at fair value | 216,022 | 181,797 |
Mortgage backed securities, at fair value | 39,922 | 32,391 |
Loans eligible for repurchase from Ginnie Mae | 95,158 | 137,986 |
Investment in unconsolidated joint venture | 55,369 | |
Derivative instruments | 4,725 | 5,785 |
Servicing rights (including $72,295 and $61,376 held at fair value) | 94,038 | 83,854 |
Receivable from third parties | 6,756 | 7,220 |
Other assets | 56,840 | 54,277 |
Assets of consolidated VIEs | 861,662 | 691,096 |
Total Assets | 2,523,503 | 2,605,267 |
Liabilities | ||
Secured borrowings | 631,286 | 927,462 |
Promissory note | 6,107 | 7,378 |
Securitized debt obligations of consolidated VIEs, net | 598,148 | 492,942 |
Convertible note, net | 108,991 | |
Senior secured notes, net | 138,078 | |
Guaranteed loan financing | 293,045 | 390,555 |
Contingent consideration | 10,016 | 14,487 |
Liabilities for loans eligible for repurchase from Ginnie Mae | 95,158 | 137,986 |
Derivative instruments | 282 | 643 |
Dividends payable | 12,289 | 11,505 |
Accounts payable and other accrued liabilities | 74,636 | 70,207 |
Total Liabilities | 1,968,036 | 2,053,165 |
Stockholders’ Equity | ||
Common stock, $0.0001 par value, 500,000,000 shares authorized, 31,996,440 and 30,549,084 shares issued and outstanding, respectively | 3 | 3 |
Additional paid-in capital | 539,455 | 513,295 |
Deficit | (3,385) | (201) |
Total Sutherland Asset Management Corporation equity | 536,073 | 513,097 |
Non-controlling interests | 19,394 | 39,005 |
Total Stockholders’ Equity | 555,467 | 552,102 |
Total Liabilities and Stockholders’ Equity | $ 2,523,503 | $ 2,605,267 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Parenthetical information | ||
Loan receivable allowance | $ 188,150 | $ 81,592 |
Servicing rights held at fair value | $ 72,295 | $ 61,376 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized capital | 500,000,000 | 500,000,000 |
Common stock, issued | 31,996,440 | 30,549,084 |
Common stock, outstanding | 31,996,440 | 30,549,084 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CONSOLIDATED STATEMENTS OF INCOME | |||
Interest income | $ 138,305 | $ 137,023 | $ 148,955 |
Interest expense | (74,646) | (57,772) | (47,806) |
Net interest income before provision for loan losses | 63,659 | 79,251 | 101,149 |
Provision for loan losses | (2,363) | (7,819) | (19,643) |
Net interest income after provision for loan losses | 61,296 | 71,432 | 81,506 |
Non-interest income | |||
Gains on residential mortgage banking activities, net of variable loan expenses | 41,700 | 7,033 | |
Other income | 8,458 | 9,161 | 14,431 |
Servicing income, net of amortization and impairment of $6,020, $7,732 and $10,499 | 22,994 | 8,658 | 5,133 |
Gain on bargain purchase | 15,218 | ||
Total non-interest income | 73,152 | 40,070 | 19,564 |
Non-interest expense | |||
Employee compensation and benefits | (55,039) | (24,827) | (18,949) |
Allocated employee compensation and benefits from related party | (3,843) | (3,668) | (3,323) |
Professional fees | (8,921) | (13,420) | (6,954) |
Management fees – related party | (8,059) | (7,432) | (7,260) |
Incentive fees – related party | (965) | ||
Loan servicing expense | (10,323) | (4,611) | (4,347) |
Other operating expenses | (26,939) | (17,180) | (11,954) |
Total non-interest expense | (113,124) | (71,138) | (53,752) |
Net realized gain on financial instruments | 19,329 | 6,914 | 181 |
Net unrealized gain on financial instruments | 7,000 | 17,937 | 5,732 |
Income from continuing operations before provision for income taxes | 47,653 | 65,215 | 53,231 |
Provision for income taxes | (1,839) | (9,651) | (7,810) |
Net income from continuing operations | 45,814 | 55,564 | 45,421 |
Discontinued operations | |||
Loss from discontinued operations (including loss on disposal of $2,695 in 2016) | (3,538) | (5,103) | |
Income tax benefit | 1,380 | 4,450 | |
Loss from discontinued operations | (2,158) | (653) | |
Net income | 45,814 | 53,406 | 44,768 |
Less: Net income attributable to non-controlling interest | 2,524 | 4,237 | 4,385 |
Net income attributable to Sutherland Asset Management Corporation | $ 43,290 | $ 49,169 | $ 40,383 |
Earnings (loss) per basic common share | |||
Continuing operations | $ 1.38 | $ 1.93 | $ 1.62 |
Discontinued operations | (0.08) | (0.03) | |
Earnings per basic common share | 1.38 | 1.85 | 1.59 |
Earnings (loss) per diluted common share | |||
Continuing operations | 1.38 | 1.93 | 1.62 |
Discontinued operations | (0.08) | (0.03) | |
Earnings per diluted common share | $ 1.38 | $ 1.85 | $ 1.59 |
Weighted-average shares outstanding | |||
Basic | 31,350,102 | 26,647,981 | 25,287,277 |
Diluted | 31,351,611 | 26,647,981 | 25,287,277 |
Dividends declared per share of common stock | $ 1.48 | $ 1.61 | $ 1.78 |
CONSOLIDATED STATEMENTS OF INC5
CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CONSOLIDATED STATEMENTS OF INCOME | |||
Amortization and impairment of servicing rights | $ 6,020 | $ 7,732 | $ 10,499 |
Gain (loss) on disposal of discontinued operations | $ (2,695) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands | Total Sutherland Asset Management Corporation Equity | Common Stock | Preferred stock | Additional Paid-in-Capital | Retained Earnings (Deficit) | Noncontrolling Interests | Total |
Balance at beginning of period at Dec. 31, 2014 | $ 425,560 | $ 2 | $ 125 | $ 426,271 | $ (838) | $ 49,131 | $ 474,691 |
Balance at beginning of period (in shares) at Dec. 31, 2014 | 24,595,200 | 125 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Dividend declared on common stock ($1.48, $1.61 and $1.78 per share 2017, 2016 and 2015, respectively) | (45,444) | (45,444) | (45,444) | ||||
Dividend reinvestment in common stock | 7,448 | 7,448 | 7,448 | ||||
Dividend reinvestment in common stock (shares) | 418,942 | ||||||
Conversion of OP units into common stock | 13,484 | 13,484 | (13,484) | ||||
Conversion of OP units into common stock (in shares) | 725,705 | ||||||
Offering costs allocated to Additional Paid-In Capital | (110) | (110) | (11) | (121) | |||
Dividend declared on OP units | (3,869) | (3,869) | |||||
Dividend reinvestment in OP units | 2,740 | 2,740 | |||||
Net Income | 40,383 | 40,383 | 4,385 | 44,768 | |||
Balance at end of period at Dec. 31, 2015 | 441,321 | $ 2 | $ 125 | 447,093 | (5,899) | 38,892 | 480,213 |
Balance at end of period (in shares) at Dec. 31, 2015 | 25,739,847 | 125 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Shares issued pursuant to reverse merger transaction | 62,329 | $ 1 | 62,328 | 62,329 | |||
Shares issued pursuant to reverse merger transaction (in shares) | 4,651,424 | ||||||
Shares redeemed pursuant to reverse merger transaction | (1) | (1) | (1) | ||||
Shares redeemed pursuant to reverse merger transaction (in shares) | (66) | ||||||
Dividend declared on common stock ($1.48, $1.61 and $1.78 per share 2017, 2016 and 2015, respectively) | (43,463) | (43,463) | (43,463) | ||||
Dividend reinvestment in common stock | 1,806 | 1,806 | 1,806 | ||||
Dividend reinvestment in common stock (shares) | 103,440 | ||||||
Incentive shares issued | 482 | 482 | 482 | ||||
Incentive shares issued (in shares) | 27,199 | ||||||
Conversion of OP units into common stock | 458 | 458 | (458) | ||||
Conversion of OP units into common stock (in shares) | 27,240 | ||||||
Transfer of Additional Paid-In Capital | 1,134 | 1,134 | (1,134) | ||||
OP units issued pursuant to reverse merger transaction | 816 | 816 | |||||
Dividend declared on preferred stock | (8) | (8) | (8) | ||||
Redemption of preferred stock | (130) | $ (125) | (5) | (130) | |||
Redemption of preferred stock (in shares) | (125) | ||||||
Dividend declared on OP units | (3,707) | (3,707) | |||||
Dividend reinvestment in OP units | 359 | 359 | |||||
Net Income | 49,169 | 49,169 | 4,237 | 53,406 | |||
Balance at end of period at Dec. 31, 2016 | 513,097 | $ 3 | 513,295 | (201) | 39,005 | 552,102 | |
Balance at end of period (in shares) at Dec. 31, 2016 | 30,549,084 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Dividend declared on common stock ($1.48, $1.61 and $1.78 per share 2017, 2016 and 2015, respectively) | (46,474) | (46,474) | (46,474) | ||||
Conversion of OP units into common stock | 19,581 | 19,581 | (19,581) | ||||
Conversion of OP units into common stock (in shares) | 1,171,494 | ||||||
Offering costs allocated to Additional Paid-In Capital | (68) | (68) | (2) | (70) | |||
Dividend declared on OP units | (2,570) | (2,570) | |||||
Shares issued in exchange of litigation settlement | 4,000 | 4,000 | 4,000 | ||||
Shares issued in exchange of litigation settlement (in shares) | 275,862 | ||||||
Equity component of 2017 convertible note issuance | 2,065 | 2,065 | 74 | 2,139 | |||
Distributions, net | (56) | (56) | |||||
Stock-based compensation | 582 | 582 | 582 | ||||
Net Income | 43,290 | 43,290 | 2,524 | 45,814 | |||
Balance at end of period at Dec. 31, 2017 | $ 536,073 | $ 3 | $ 539,455 | $ (3,385) | $ 19,394 | $ 555,467 | |
Balance at end of period (in shares) at Dec. 31, 2017 | 31,996,440 |
CONSOLIDATED STATEMENTS OF CHA7
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) - $ / shares | Dec. 13, 2017 | Sep. 12, 2017 | Jun. 15, 2017 | Mar. 14, 2017 | Dec. 21, 2016 | Oct. 11, 2016 | Aug. 23, 2016 | May 20, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Stockholders' Equity | |||||||||||
Dividends declared per share of common stock | $ 0.37 | $ 0.37 | $ 0.37 | $ 0.37 | $ 0.35 | $ 0.36 | $ 0.45 | $ 0.45 | $ 1.48 | $ 1.61 | $ 1.78 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash Flows From Operating Activities: | |||
Net income | $ 45,814 | $ 53,406 | $ 44,768 |
Less: Loss from discontinued operations | (2,158) | (653) | |
Net income from continuing operations | 45,814 | 55,564 | 45,421 |
Adjustments to reconcile net income to net cash provided (used in) operating activities: | |||
Discount accretion and premium amortization of financial instruments, net | (7,553) | (17,978) | (22,195) |
Amortization of guaranteed loan financing, deferred financing costs, and intangible assets | 22,078 | 19,457 | 9,782 |
Provision for loan losses | 2,363 | 7,819 | 19,643 |
Charge off of real estate acquired in settlement of loans | 756 | 1,833 | 849 |
Purchase of short-term investments and trading securities | (839,425) | (1,569,614) | (253,752) |
Proceeds from sale or maturity of short-term investments and trading securities | 1,159,819 | 1,569,992 | 255,087 |
Net settlement of derivative instruments | (1,256) | (2,058) | (4,621) |
Purchase of loans, held for sale, at fair value | (11,195) | ||
Origination of loans, held for sale, at fair value | (2,508,153) | (621,343) | |
Proceeds from disposition and principal payments of loans, held for sale, at fair value | 2,571,583 | 645,954 | |
Income on unconsolidated joint venture | (1,048) | ||
Gain on sale of mortgages held for sale included in gains on residential mortgage banking activities, net of variable loan expenses | (63,024) | (2,943) | |
Gain (loss) on derivatives included in Gains on residential mortgage banking activities, net of variable loan expenses | 2,699 | (126) | |
Creation of servicing rights, net of payoffs | (14,919) | (3,157) | |
Gain on bargain purchase | (15,218) | ||
Net realized gains on financial instruments | (19,329) | (6,914) | (181) |
Net unrealized gains on financial instruments | (7,000) | (17,937) | (5,732) |
Net changes in operating assets and liabilities | |||
Assets of consolidated VIEs (excluding loans, net), accrued interest and due from servicers | 24,319 | (21,817) | (1,983) |
Receivable from third parties | 464 | (2,328) | (608) |
Other assets | (13,898) | (12,284) | (4,887) |
Accounts payable and other accrued liabilities | 9,394 | 9,580 | (8,322) |
Net cash provided by operating activities | 352,489 | 16,482 | 28,501 |
Net cash (used in) provided by operating activities of discontinued operations | 0 | (1,719) | 428 |
Cash Flow From Investing Activities: | |||
Origination of loans | (454,975) | (315,339) | (452,280) |
Purchase of loans | (147,327) | (98,683) | (172,097) |
Purchase of mortgage backed securities, at fair value | (14,448) | (17,388) | (77,918) |
Funding of unconsolidated joint venture | (54,321) | ||
Payment of liability under participation agreements, net of proceeds received | (1,100) | (2,318) | (3,729) |
Proceeds from disposition and principal payment of loans | 422,064 | 479,965 | 488,610 |
Proceeds from sale and principal payment of mortgage backed securities, at fair value | 9,577 | 297,250 | 17,908 |
Proceeds from sale of real estate | 4,802 | 6,633 | 7,565 |
Proceeds from sale of intangible assets | 2,500 | ||
(Increase) Decrease in restricted cash | (6,506) | (357) | 2,016 |
Cash acquired in connection with the reverse merger with ZFC | 34,932 | ||
Net cash (used in) provided by investing activities | (242,234) | 384,695 | (187,425) |
Net cash used in investing activities of discontinued operations | 0 | 0 | (1,264) |
Cash Flows From Financing Activities: | |||
Proceeds from secured borrowings | 4,555,957 | 4,460,652 | 9,014,674 |
Proceeds from issuance of securitized debt obligations of consolidated VIEs | 338,043 | 150,367 | 374,818 |
Proceeds from promissory note | 9,164 | ||
Proceeds from senior secured note offering | 141,917 | ||
Proceeds from convertible note issuance | 115,000 | ||
Payment of secured borrowings | (4,852,132) | (4,648,201) | (9,029,152) |
Payment of securitized debt obligations of consolidated VIEs | (227,694) | (123,093) | (91,407) |
Payment of guaranteed loan financing | (110,945) | (122,603) | (86,039) |
Payment of promissory note | (1,271) | (1,786) | |
Payment of senior exchangeable note | (57,500) | ||
Payment of deferred financing costs | (16,885) | (1,456) | (2,575) |
Payment of offering costs | (70) | (121) | |
Redemption of preferred stock | (130) | ||
Dividend payments | (48,260) | (46,874) | (35,609) |
Distributions | (56) | ||
Shares redeemed pursuant to reverse merger transaction | (1) | ||
Net cash (used in) provided by financing activities | (106,396) | (381,461) | 144,589 |
Net increase (decrease) in cash and cash equivalents | 3,859 | 17,997 | (15,171) |
Cash and cash equivalents at beginning of period | 59,566 | 41,569 | 56,740 |
Cash and cash equivalents at end of period | 63,425 | 59,566 | 41,569 |
Supplemental disclosure of operating cash flow | |||
Cash paid for interest | 62,106 | 54,686 | 45,334 |
Cash paid for income taxes | 3,773 | 6,161 | 6,995 |
Stock-based compensation | 582 | ||
Supplemental disclosure of non-cash investing activities | |||
Loans, net and borrowings brought on books as a result of the ReadyCap Lending Small Business Trust 2015-1 securitization | 474,198 | ||
Loans transferred from Loans, held for sale, at fair value to Loans, net | 366 | 482 | |
Loans transferred from Loans, net to Loans, held for sale, at fair value | 4,493 | 11,499 | |
Supplemental disclosure of non-cash financing activities | |||
Shares issued in exchange of litigation settlement | $ 4,000 | ||
Dividend reinvestment in common stock | 1,806 | 7,448 | |
Dividend reinvestment in OP units | 359 | $ 2,740 | |
Common stock issued in connection with the reverse merger with ZAIS Financial Corp | $ 62,329 | ||
Incentive shares issued to investment manager pursuant to management agreement | 482 |
Organization
Organization | 12 Months Ended |
Dec. 31, 2017 | |
Organization | |
Organization | SUTHERLAND ASSET MANAGEMENT CORPORATION NOTES TO the CONS OLIDATED FINANCIAL STATEMENTS Note 1 – Organization Sutherland Asset Management Corporation (the “Company” or “Sutherland” and together with its subsidiaries “we,” “us” and “our”) is a Maryland corporation. On October 31, 2016, we completed our path to becoming a publicly traded company through our merger with and into a subsidiary of ZAIS Financial Corp. (“ZAIS Financial”), with ZAIS Financial legally surviving the merger and changing its name to Sutherland Asset Management Corporation. On November 1, 2016, our common stock began trading on the New York Stock Exchange (“NYSE”) under ticker symbol “SLD”. See further discussion in Note 5, Business Combinations. The Company is externally managed and advised by Waterfall Asset Management, LLC (“Waterfall” or the “Manager”), an investment advisor registered with the United States Securities and Exchange Commission under the Investment Advisors Act of 1940, as amended. Sutherland Partners, LP (the “Operating Partnership”) holds substantially all of our assets and conducts substantially all of our business. As of December 31, 2017 and 2016, the Company owned approximately 96.5% and 92.9%, respectively, of the operating partnership units (“OP units”) of the Operating Partnership. The Company, as sole general partner of the Operating Partnership, has responsibility and discretion in the management and control of the Operating Partnership, and the limited partners of the Operating Partnership, in such capacity, have no authority to transact business for, or participate in the management activities of the Operating Partnership. Therefore, the Company consolidates the Operating Partnership. The Company, together with its consolidated subsidiaries and variable interest entities (“VIEs”), is a specialty-finance company which acquires, originates, manages, services and finances small balance commercial (“SBC”) loans, Small Business Administration (“SBA”) loans, residential mortgage loans, and to a lesser extent, mortgage backed securities (“MBS”) collateralized primarily by SBC loans, or other real estate-related investments. SBC loans represent a special category of commercial loans, sharing both commercial and residential loan characteristics. SBC loans are generally secured by first mortgages on commercial properties, but because SBC loans are also often accompanied by collateralization of personal assets and subordinate lien positions, aspects of residential mortgage credit analysis are utilized in the underwriting process. The Company reports its results of operations through the following four business segments: i) Loan Acquisitions , ii) SBC Originations , iii) SBA Originations, Acquisitions and Servicing , and iv) Residential Mortgage Banking, with the remaining amounts recorded in Corporate-Other . Our acquisition and origination platforms consist of the following four operating segments: · Loan Acquisitions . We acquire performing and non-performing SBC loans and intend to continue to acquire these loans as part of our business strategy. We hold performing SBC loans to term, and we seek to maximize the value of the non-performing SBC loans acquired by us through proprietary loan modification programs. We typically acquire non-performing loans at a discount to their unpaid principal balance (“UPB”) when we believe that resolution of the loans will provide attractive risk-adjusted returns. · SBC Originations . We originate SBC loans secured by stabilized or transitional investor properties using multiple loan origination channels through our wholly-owned subsidiary, ReadyCap Commercial, LLC (“RCC”), a wholly-owned subsidiary of ReadyCap Holdings, LLC (collectively, “ReadyCap”). Additionally, as part of this segment, we originate and service multi-family loan products under the newly launched small balance loan program of the Federal Home Loan Mortgage Corporation (“Freddie Mac” and the “Freddie Mac program”). These originated loans are generally held-for-investment or placed into securitization structures. · SBA Originations, Acquisitions, and Servicing . We acquire, originate and service owner-occupied loans guaranteed by the SBA under its Section 7(a) loan program (the “SBA Section 7(a) Program”) through our wholly-owned subsidiary, ReadyCap Lending (“RCL”). We hold an SBA license as one of only 14 non-bank Small Business Lending Companies and have been granted preferred lender status by the SBA. In the future, we may originate SBC loans for real estate under the SBA 504 loan program, under which the SBA guarantees subordinated, long-term financing. These originated loans are either held-for-investment, placed into securitization structures, or sold. · Residential Mortgage Banking . In connection with our merger with ZAIS Financial on October 31, 2016, as described in greater detail below, we added a residential mortgage loan origination segment through our wholly-owned subsidiary, GMFS, LLC ("GMFS"). GMFS originates residential mortgage loans eligible to be purchased, guaranteed or insured by the Federal National Mortgage Association (“Fannie Mae”), Freddie Mac, Federal Housing Administration (“FHA”), U.S. Department of Agriculture (“USDA”) and U.S. Department of Veterans Affairs (“VA”) through retail, correspondent and broker channels. These originated loans are then sold to third parties. The Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with its first taxable year ended December 31, 2011. To maintain its tax status as a real estate investment trust (“REIT”), the Company distributes at least 90% of its taxable income in the form of distributions to shareholders. In the fourth quarter of 2015, Silverthread Falls, LLC (“Silverthread”) , a brokerage subsidiary, was classified as held-for-sale due to management’s intent to sell the business, and the Company has included Silverthread in discontinued operations. The trade date of the Silverthread sale was February 28, 2016 and the closing occurred in May of 2016. |
Basis of Presentation
Basis of Presentation | 12 Months Ended |
Dec. 31, 2017 | |
Basis of Presentation | |
Basis of Presentation | Note 2 – Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”)—as prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the U.S. Securities and Exchange Commission. Per ASC 805-40-45-1, we were designated as the accounting acquirer (accounting survivor) because of our larger pre-merger size relative to ZAIS Financial, the relative voting interests of our stockholders after consummation of the merger, and our senior management and board continuing on after the consummation of the merger. As the accounting acquirer, our historical financial statements (and not those of ZAIS Financial) are the historical financial statements following the consummation of the merger and are included in this annual report on Form 10-K. Historical stockholders’ equity of the Company prior to the reverse acquisition has been retrospectively adjusted (a recapitalization) for the equivalent number of shares received by the Company after giving effect to any difference in par value of ZAIS Financial and the Company’s stock with any such difference recognized in equity. Retained earnings of the Company have been carried forward after the acquisition. Operations prior to the merger are those of the Company. Under the terms of the merger agreement: (1) stockholders of ZAIS Financial and unitholders in the ZAIS Financial operating partnership retained their existing shares and partnership units following the merger, (2) each outstanding share of Sutherland common stock was converted into 0.8356 of ZAIS Financial common stock and (3) each outstanding partnership unit of Sutherland operating partnership was converted into 0.8356 units of limited partnership interests in the operating partnership. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 3 – Summary of Significant Accounting Policies Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Basis of Consolidation The accompanying consolidated financial statements of the Company include the accounts and results of operations of the Operating Partnership and other consolidated subsidiaries and VIEs in which we are the primary beneficiary. The consolidated financial statements are prepared in accordance with ASC 810, Consolidations. Intercompany accounts and transactions have been eliminated. Reclassifications Certain amounts reported for the prior periods in the accompanying consolidated financial statements have been reclassified in order to conform to the current period’s presentation. Loans, held-for-investment and loans, held at fair value are now presented on the consolidated balance sheets as Loans, net. These amounts have been presented by loan program type and accounting category, within Note 6. Servicing rights and residential mortgage servicing rights, at fair value, are now included on the consolidated balance sheets as Servicing rights. These amounts have been presented by loan servicing program and accounting category, within Note 9. The amounts reported for the prior periods have been reclassified in order to conform to the current period’s presentation. Borrowings under repurchase agreements and borrowings under credit facilities are now included on the consolidated balance sheets as Secured borrowings. The amounts reported for the prior periods have been reclassified in order to conform to the current period’s presentation. As described in Note 10, the historical results of our Residential mortgage banking segment has been reclassified in the consolidated statements of income to conform to our current period’s presentation of Gains on residential mortgage banking activities, net of variable loan expenses. As described in Note 26, effective at the beginning of the third quarter of 2017, the Company implemented organizational changes to align its segment financial reporting more closely with its current business practices. These organizational changes resulted in securitization activities on originated SBC and SBA loans being transferred out of the Loan Acquisitions segment and into either the SBC originations or SBA originations, acquisitions, and servicing segment, based on the loan type. These organizational changes also resulted in the Company presenting Corporate- Other amounts separately and no longer reflecting these amounts as part of the four business segments. Prior period numbers were revised to conform to the new segment alignment and to be consistent with our current period’s presentation. As described in Note 27, the historical results of Silverthread has been reflected in the accompanying consolidated statements of income for the years ended December 31, 2016 and 2015 as discontinued operations and financial information related to discontinued operations has been excluded from the notes to consolidated financial statements for all periods presented. Cash and Cash Equivalents The Company has accounted for cash and cash equivalents in accordance with ASC 305, Cash and Cash Equivalents. The Company defines cash and cash equivalents as cash, demand deposits, and short-term, highly liquid investments with original maturities of 90 days or less when purchased. Cash and cash equivalents are exposed to concentrations of credit risk. We deposit our cash with institutions that we believe to have highly valuable and defensible business franchises, strong financial fundamentals, and predictable and stable operating environments. As of December 31, 2017 and 2016, the Company had $0.6 million and $0.6 million, respectively, in money market mutual funds, and substantially all of the Company’s cash and cash equivalents not held in money market funds were comprised of cash balances with banks that are in excess of the Federal Deposit Insurance Corporation insurance limits. Restricted Cash Restricted cash represents cash held by the Company as collateral against its derivatives, borrowings under repurchase agreements, borrowings under credit facilities with counterparties, construction and mortgage escrows, as well as cash held for remittance on loans serviced for third parties. Restricted cash is not available for general corporate purposes, but may be applied against amounts due to counterparties under existing swaps and repurchase agreement borrowings, or returned to the Company when the restriction requirements no longer exist or at the maturity of the swap or repurchase agreement. Short term investments The Company accounts for short-term investments as trading securities under ASC 320, Investments-Debt and Equity Securities . Short-term investments consist of U.S. Treasury Bills with original maturities of less than a year but greater than three months. The Company holds short-term investments at fair value. Interest received and accrued as well as the accretion of purchase discount in connection with short-term investments is recorded as interest income on the consolidated statements of income. Changes in the fair value of short-term investments are recorded as net unrealized gain (loss) on the consolidated statements of income. Loans, net Loans, net consists of loans, held-for-investment, net of allowance for loan losses, and loans, held at fair value. Loans, held-for-investment Loans, held-for-investment are loans acquired from third parties (“acquired loans”), loans originated by ReadyCap that we do not intend to securitize or sell, or securitized loans that were previously originated by ReadyCap. Securitized loans remain on the Company’s balance sheet because the securitization vehicles are consolidated under ASC 810. Acquired loans are recorded at cost at the time they are acquired. Acquired loans are accounted for in accordance with ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”) and referred to as “purchased credit impaired loans” (PCI loans) if both of the following conditions are met as of the acquisition date: (i) there is evidence of deterioration in credit quality of the loan since its origination and (ii) it is probable that we will not collect all contractual cash flows on the loan. Acquired loans without evidence of these conditions, securitized loans, and loans originated by ReadyCap that we do not intend to securitize are accounted for under ASC 310-10, Receivables-Overall , (“ASC 310-10”) and are referred to as “Non-purchased credit impaired loans” (non-PCI loans). Purchased Credit Impaired (PCI) Loans The estimated cash flow expected for each loan is estimated at the time the loan is acquired. The excess of the cash flows expected to be collected on PCI loans, measured as of the acquisition date, over the initial investment is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan using the interest method of accretion. The difference between contractually required payments as of the acquisition date and the cash flows expected to be collected is referred to as the non-accretable difference and is not accreted over time. The Company estimates expected cash flows to be collected over the life of individual PCI loans on a quarterly basis. If the Company determines that discounted expected cash flows have decreased, the PCI loans would be considered impaired, which would result in a provision for loan loss and a corresponding increase in the allowance for loan losses. If discounted expected cash flows have increased, or improved, in subsequent evaluations, the increase in cash flows is first used to reverse the amount of any related allowance for loan losses before the yield is adjusted. Additionally, the Company will increase the accretable yield to account for the increase in expected cash flows. The estimate of the amount and timing of cash flows for our PCI loans is based on historical information available and expected future performance of the loans, and may include the timing of expected future cash flows, prepayment speed, default rates, loss severities, delinquency rates, percentage of non-performing loans, extent of credit support available, Fair Isaac Corporation scores at loan origination, year of origination, loan-to-value ratios, geographic concentrations, as well as reports by credit rating agencies, such as Moody’s, Standard & Poor’s Corporation, or Fitch, general market assessments and dialogue with market participants. As a result, substantial judgment is used in the analysis to determine the expected cash flows. Non-PCI Loans The Company uses the interest method to recognize, as a constant effective yield adjustment, the difference between the initial recorded investment in the loan and the principal amount of the loan. The calculation of the constant effective yield necessary to apply the interest method uses the payment terms required by the loan contract, and prepayments of principal are not anticipated to shorten the loan term. For non-PCI loans, recognition of interest income is suspended when any loans are placed on non-accrual status. Generally, all classes of loans are placed on non-accrual status when principal or interest has been delinquent for 90 days or when full collection is determined not to be probable. Interest income accrued, but not collected, at the date loans are placed on non-accrual status is reversed and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. However, where there is doubt regarding the ultimate collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Loans are restored to accrual status only when contractually current and the collection of future payments is reasonably assured. Loans, held at fair value Loans, held at fair value are loans originated by ReadyCap. The Company has elected the fair value option because of the intent to transfer to securitizations in the near term. Interest is recognized as interest income on the consolidated statements of income when earned and deemed collectible. Changes in fair value are recurring and are reported as net unrealized gain (loss) on the consolidated statements of income. The Company transfers loans held at fair value to loans, held-for-investment upon the completion of securitization. Allowance for loan losses The allowance for loan losses is intended to provide for credit losses inherent in the loans, held-for-investment portfolio and is reviewed quarterly for adequacy considering credit quality indicators, including probable and historical losses, collateral values, loan-to-value ratio and economic conditions. The allowance for loan losses is increased through provisions for loan losses charged to earnings and reduced by charge-offs, net of recoveries. We determine the allowance for loan losses by measuring credit impairment on (1) an individual basis for non-accrual status loans, and (2) on a collective basis for all other loans with similar risk characteristics. The allowance for loan losses on an individual basis is assessed when a loan is on non-accrual and the recoverability of the loan is less than its carrying value. The Company considers the loans to be collateral dependent and relies on the current fair value of the collateral as the basis for determining impairment. Loans that are not assessed individually for impairment are assessed on a collective basis. For the acquired loans we perform a historical analysis on both cumulative defaults and severity upon default for all loans that were current as of November 4, 2013 when the Company was formed or acquired thereafter. We calculated the cumulative default and loss severity on the acquired loans with delinquency statuses of 90+ days and applied those factors to the current acquired loan population. For the originated loans, our historical data shows a minimal number of defaults, therefore we used an analysis performed on the latest ReadyCap securitization to determine the likelihood of default and to determine loss severity we stressed collateral value to the current principal balance based on the total valuation decline of SBC properties from the peak valuation in 2007 through their post-crisis low in 2010. The determination of allowances for SBA loans is based upon the assignment of a probability of default on a rating scale. Each loan rating is re-evaluated at least annually for loan performance, underlying borrower financial performance or data from third party credit bureaus. The probability of default is compared to the underlying collateral value securing each loan and compared to each loan carrying value to calculate a loss estimate. Collectively the estimated probability of default and recovery value is compared to actual portfolio default and recovery rates as well as economic factors and adjusted when needed. The determination of whether an allowance for loan loss is necessary is based on whether or not there is a decrease in cash flows based on consideration of factual information available at the time of assessment as well as management’s estimates of the future performance and projected amount and timing of cash flows expected to be collected on the loan. While we have a formal methodology to determine the adequate and appropriate level of the allowance for loan losses, estimates of inherent loan losses involve judgment and assumptions as to various factors, including current economic conditions. Our determination of adequacy of the allowance for loan losses is based on quarterly evaluations of the above factors. Accordingly, the provision for loan losses will vary from period to period based on management's ongoing assessment of the adequacy of the allowance for loan losses. Non-accrual loans Non-accrual loans are the loans for which we are not accruing or accreting interest income. Non-accrual loans include non-PCI loans when principal or interest has been delinquent for 90 days or more or when it is determined that full collection of contractual cash flows is not probable. Additionally, PCI loans for which the Company is unable to reasonably estimate the timing and amount of expected cash flows are considered to be non-accrual loans. Troubled Debt Restructurings In situations where, for economic or legal reasons related to the borrower’s financial difficulties, we grant concessions for a period of time to the borrower that we would not otherwise consider, the related loans are classified as troubled debt restructurings (“TDR”). These modified terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance and other actions intended to minimize our economic loss and to avoid foreclosure or repossession of collateral. For modifications where we forgive principal, the entire amount of such principal forgiveness is immediately charged off. Loans classified as TDRs, are considered impaired loans. Other than resolutions such as foreclosures and sales, we may remove loans held-for-investment from TDR classification, but only if they have been refinanced or restructured at market terms and qualify as a new loan. Generally, all loans modified in a TDR are placed or remain on non-accrual status at the time of the restructuring. However, certain accruing loans modified in a TDR that are current at the time of restructuring may remain on accrual status if payment in full under the restructured terms is expected. Impaired loans The Company considers a loan to be impaired when the Company does not expect to collect all of the contractual interest and principal payments as scheduled in the loan agreements. This includes certain non-PCI loans where we do not expect to collect all of the contractual interest and principal payments, as well as PCI loans, which experienced credit deterioration prior to acquisition. Loans, held for sale, at fair value Loans, held for sale, at fair value are loans that are expected to be sold to third parties in the near term. Interest is recognized as interest income on the consolidated statements of income when earned and deemed collectible. For loans originated by our SBC originations and SBA originations segments, changes in fair value are recurring and are reported as net unrealized gain (loss) on the consolidated statements of income. For originated SBA loans, the guaranteed portion is held for sale, at fair value. For loans originated by GMFS, changes in fair value are reported as gains on residential mortgage banking activities, net of variable loan expenses, on the consolidated statements of income. The Company transfers loans held for sale, at fair value to loans, held-for-investment when the Company no longer intends to sell the loans. Mortgage backed securities, at fair value The Company accounts for MBS as trading securities and are carried at fair value under ASC 320, Investments-Debt and Equity Securities. Our MBS portfolio is comprised of asset-backed securities collateralized by interest in or obligations backed by pools of SBC loans. Purchases and sales of MBS are recorded on the trade date. Our MBS securities pledged as collateral against borrowings under repurchase agreements are included in mortgage backed securities, at fair value on our consolidated balance sheets. MBS are recorded at fair value as determined by market prices provided by independent broker dealers or other independent valuation service providers. The fair values assigned to these investments are based upon available information and may not reflect amounts that may be realized. We generally intend to hold our investment in MBS to generate interest income; however, we have and may continue to sell certain of our investment securities as part of the overall management of our assets and liabilities and operating our business. Loans eligible for repurchase from Ginnie Mae When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company then records the right to repurchase the loan as an asset and liability in its consolidated balance sheets. Such amounts reflect the unpaid principal balance of the loans. Derivative instruments, at fair value Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we utilize derivative financial instruments, currently comprised of credit default swaps (“CDSs”), interest rate swaps, and interest rate lock commitments (“IRLCs”) as part of our risk management. The Company accounts for derivative instruments under ASC 815, Derivatives and Hedges . All derivatives are reported as either assets or liabilities on the consolidated balance sheets at the estimated fair value with the changes in the fair value recorded in earnings. Although permitted under certain circumstances, generally the Company does not offset cash collateral receivable or payables against our gross derivative positions. As of December 31, 2017 and 2016, the cash collateral receivable held for derivative instruments is $0.8 million and $1.7 million, respectively, and is included in restricted cash on the consolidated balance sheets. Interest Rate Swap Agreements An interest rate swap is an agreement between two counterparties to exchange periodic interest payments where one party to the contract makes a fixed-rate payment in exchange for a floating-rate payment from the other party. The dollar amount each party pays is an agreed-upon periodic interest rate multiplied by some pre-determined dollar principal (notional amount). No principal (notional amount) is exchanged between the two parties at trade initiation date. Only interest payments are exchanged. Interest rate swaps are classified as Level 2 in the fair value hierarchy. The fair value adjustments, along with the related interest income or interest expense, are reported as net gain/(loss) on financial instruments. Interest Rate Lock Commitments (“IRLCs”) IRLCs are agreements under which GMFS agrees to extend credit to a borrower under certain specified terms and conditions in which the interest rate and the maximum amount of the loan are set prior to funding. Unrealized gains and losses on the IRLCs, reflected as derivative assets and derivative liabilities, respectively, are measured based on the value of the underlying mortgage loan, quoted government-sponsored enterprise (Fannie Mae, Freddie Mac, and the Government National Mortgage Association (“Ginnie Mae”), collectively, “GSEs”) or MBS prices, estimates of the fair value of the mortgage servicing rights (“MSRs”) and the probability that the mortgage loan will fund within the terms of the IRLC, net of commission expense and broker fees. The realized and unrealized gains or losses are reported on the consolidated statements of income as gains on residential mortgage banking activities, net of variable loan expenses. IRLCs are classified as Level 3 in the fair value hierarchy. CDS CDS are contracts between two parties, a protection buyer who makes fixed periodic payments, and a protection seller, who collects the premium in exchange for making the protection buyer whole in the case of default. The fair value adjustments, along with the related interest income or interest expense, are reported as net gain/(loss) on financial instruments. CDS are classified as Level 2 in the fair value hierarchy. Servicing rights Servicing rights initially represent the fair value of expected future cash flows for performing servicing activities for others. The fair value considers estimated future servicing fees and ancillary revenue, offset by estimated costs to service the loans, and generally declines over time as net servicing cash flows are received, effectively amortizing the servicing right asset against contractual servicing and ancillary fee income. Servicing rights are recognized upon sale or securitization of loans if servicing is retained. For servicing rights, gains related to servicing rights retained is included in net realized gain/(loss) on the consolidated statements of income. For residential mortgage servicing rights, gains on servicing rights retained upon sale of a loan are included in gains on residential mortgage banking activities, net of variable loan expenses, on the consolidated statements of income. The Company treats its servicing rights and residential mortgage servicing rights as two separate classes of servicing assets based on the class of the underlying mortgages and it treats these assets as two separate pools for risk management purposes. Servicing rights relating to the Company’s servicing of loans guaranteed by the SBA under its Section 7(a) loan program and servicing rights related to the Freddie Mac program are accounted for under ASC 860, Transfers and Servicing, while the Company’s residential mortgage servicing rights are accounted for under the fair value option under ASC 825, Financial Instruments. Servicing rights – SBA and Freddie Mac SBA and Freddie Mac servicing rights are initially recorded at fair value and subsequently carried at amortized cost. We capitalize the value expected to be realized from performing specified servicing activities for others. Servicing rights are amortized in proportion to and over the period of estimated servicing income, and are evaluated for potential impairment quarterly. For purposes of testing our servicing rights for impairment, we first determine whether facts and circumstances exist that would suggest the carrying value of the servicing asset is not recoverable. If so, we then compare the net present value of servicing cash flow with its carrying value. The estimated net present value of servicing cash flows is determined using discounted cash flow modeling techniques, which require management to make estimates regarding future net servicing cash flows, taking into consideration historical and forecasted loan prepayment rates, delinquency rates and anticipated maturity defaults. If the carrying value of the servicing rights exceeds the net present value of servicing cash flows, the servicing rights are considered impaired and an impairment loss is recognized in earnings for the amount by which carrying value exceeds the net present value of servicing cash flows. We leverage all available relevant market data to determine the fair value of our recognized servicing assets. Since quoted market prices for servicing rights are not readily available, we estimate the fair value of servicing rights by determining the present value of future expected servicing cash flows using modeling techniques that incorporate management's best estimates of key variables including estimates regarding future net servicing cash flows, forecasted loan prepayment rates, delinquency rates, and return requirements commensurate with the risks involved. Cash flow assumptions are modeled using our internally forecasted revenue and expenses, and where possible, the reasonableness of assumptions is periodically validated through comparisons to market data. Prepayment speed estimates are determined from historical prepayment rates or obtained from third-party industry data. Return requirement assumptions are determined using data obtained from market participants, where available, or based on current relevant interest rates plus a risk-adjusted spread. We also consider other factors that can impact the value of the servicing rights, such as surety provider termination clauses and servicer terminations that could result if we failed to materially comply with the covenants or conditions of our servicing agreements and did not remedy the failure. Since many factors can affect the estimate of the fair value of servicing rights, we regularly evaluate the major assumptions and modeling techniques used in our estimate and review these assumptions against market comparables, if available. We monitor the actual performance of our servicing rights by regularly comparing actual cash flow, credit, and prepayment experience to modeled estimates. Servicing rights - Residential (carried at fair value) The Company’s residential mortgage servicing rights consist of conforming conventional residential loans sold to Fannie Mae and Freddie Mac or loans securitized in Ginnie Mae securities. Government insured loans serviced by the Company are securitized through Ginnie Mae, whereby the Company is insured against loss by the Federal Housing Administration or partially guaranteed against loss by the Department of Veterans Affairs. The Company has elected to account for its portfolio of residential mortgage servicing rights (“MSRs”) at fair value. For these assets, the Company uses a third-party vendor to assist management in estimating the fair value. The third-party vendor uses a discounted cash flow approach which consists of projecting servicing cash flows discounted at a rate that management believes market participants would use in their determinations of fair value. The key assumptions used in the estimation of the fair value of MSRs include prepayment rates, discount rates, and cost of servicing rates. Residential MSRs are classified as Level 3 in the fair value hierarchy. Intangible assets Intangible assets are accounted for under ASC 350, Intangibles-Goodwill and Other . As of December 31, 2017 and 2016, the Company’s identifiable intangible assets include SBA license for our lending operations as well as a trade name, a favorable lease, and other licenses relating to our residential mortgage banking segment, obtained as part of the ZAIS Financial merger transaction. The Company determined that its SBA license has an indefinite life, while the other intangibles acquired as part of the ZAIS Financial merger transaction are finite-lived. The Company amortizes intangible assets with identified estimated useful lives on a straight-line basis over their estimated useful lives. The Company initially records its intangible assets at cost and subsequently tests for impairment on an annual basis. Intangible assets are included within other assets on the consolidated balance sheets. Investment in unconsolidated joint venture In November of 2017, the Company acquired an interest in an SBC loan pool through a joint venture, WFLLA, LLC, which the Company has a 50% interest. According to ASC 323, Equity Method and Joint Ventures , investors in unincorporated entities such as partnerships and unincorporated joint ventures generally shall account for their investments using the equity method of accounting if the investor has the ability to exercise significant influence over the investee. Under the equity method, we recognize our share of the earnings or losses of the investment monthly in earnings and adjust the carrying amount for our share of the earnings or losses based on our equity ownership. Pursuant to the consolidation guidance, we determined our interest in the entity is a VIE, however, we do not consolidate the entity as we determined that we are not the primary beneficiary. The Company is determined to be the primary beneficiary only when it has a controlling financial interest in the VIE, which is defined as possessing both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Deferred financing costs Costs incurred in connection with our secured borrowings are accounted for under ASC 340, Other Assets and Deferred Costs . Deferred costs are capitalized and amortized using the effective interest method over the respective financing term with such amortization reflected on our consolidated statements of income as a component of interest expense. Our deferred financing costs may include legal, accounting and other related fees. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Pursuant to the adoption of ASU 2015-03, unamortized deferred financing costs related to securitizations and note issuances are presented on the consolidated balance sheets as a direct deduction from the associated liability. Due from Servicers The loan-servicing activities of the Company’s SBC Loan Acquisitions and SBC Originations reportable segments are performed primarily by third-party servicers. SBA loans originated by and held at RCL are internally serviced. Residential mortgage loans originated by and held at GMFS are both serviced by third-party servicers and internally serviced. The Company’s servicers hold substantially all of the cash owned by the Company related to loan servicing activities. These amounts include principal and interest payments made by borrowers, net of advances and servicing fees. Cash is generally received within thirty days of recording the receivable. The Company is subject to credit risk to the extent any servicer with whom the Company conducts business is unable to deliver cash balances or process loan-related transactions on the Company’s behalf. The Company monitors the financial condition of the servicers with whom the Company conducts business and believes the likelihood of loss under the aforementioned circumstances is remote. Secured borrowings Secured borrowings include borrowings under credit facilities and borrowings under repurchase agreements. Borrowings under credit facilities The Company accounts for borrowings under credit facilities under ASC 470, Debt. The Company partially finances its loans, net through credit agreements with various counterparties. These borrowings are collateralized by loans, held-for-investment, and loans, held for sale, at fair value and have maturity dates within two years from the consolidated balance sheet date. If the fair value (as determined by the applicable counterparty) of the collateral securing these borrowings decreases, we may be subject to margin calls during the period the borrowings are outstanding. In instances where we do not satisfy the margin calls within the required time frame, the counterparty may retain the collateral and pursue collection of any outstanding debt amo |
Recently Issued Accounting Pron
Recently Issued Accounting Pronouncements | 12 Months Ended |
Dec. 31, 2017 | |
Recently Issued Accounting Pronouncements | |
Recently Issued Accounting Pronouncements | Note 4 – Recently Issued Accounting Pronouncements Financial Accounting Standards Board (“FASB”) Standards adopted during 2017 Standard Summary of guidance Effects on financial statements ASU 2016-09, Compensation—Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting Simplifies the accounting for employee share-based payment transactions, including the accounting for associated income taxes and forfeitures. The adoption of this standard did not have an impact on our consolidated financial statements. Issued March 2016 ASU 2016-17, Consolidation (Topic 810) – Interests Held through Related Parties That Are under Common Control When assessing which party is the primary beneficiary in a VIE requires that the decision maker considers interests held by entities under common control on a proportionate basis instead of treating those interests as if they were that of the decision maker itself, as current GAAP requires. The adoption of this standard did not have an impact on our consolidated financial statements. Issued October 2016 FASB Standards issued, but not yet adopted Standard Summary of guidance Effects on financial statements ASU 2014-09, Revenue from Contracts with Customers (Topic 606) Outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Required effective date: Annual reporting periods beginning after December 15, 2017 Issued May 2014 The standard clarifies the required factors that an entity must consider when recognizing revenue and also requires additional disclosures. Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other U.S. GAAP, the Company does not expect the new revenue recognition guidance to have a material impact on the elements of its consolidated statements of income most closely associated with financial instruments, including interest income, gains and losses on financial instruments, residential mortgage banking activities, servicing and origination income. May be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company has evaluated the impact of this standard and we do not anticipate that the adoption will have a material impact on our consolidated financial statements. To the extent an adjustment is warranted, we will adjust for the cumulative effect recognized as of the date of adoption. ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments Requires the use of an “expected loss” credit model for estimating future credit losses of certain financial instruments instead of the “incurred loss” credit model that existing GAAP currently requires. Required effective date: Annual reporting periods, and interim periods therein, beginning after December 15, 2019. Early adoption is permitted for periods beginning after December 15, 2018. Issued June 2016 The “expected loss” model requires the consideration of possible credit losses over the life of an instrument compared to only estimating credit losses upon the occurrence of a discrete loss event in accordance with the current “incurred loss” methodology. The Company is evaluating the impact ASU 2016-13 will have on our consolidated financial statements. ASU 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments Provides guidance on the disclosure and classification of certain items within the statement of cash flows, including beneficial interests obtained in a securitization of financial assets, debt prepayment or extinguishment costs, and distributions received from equity-method investees. Required effective date: Annual reporting periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted. Issued August 2016 Required to be applied retrospectively to all periods presented beginning in the year of adoption. The Company is evaluating the impact this standard will have on our consolidated statement of cash flows. ASU 2016-16, Income Taxes (Topic 740) – Intra-Entity Transfers of Assets Other Than Inventory Requires that an entity recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time of the transfer instead of deferring the tax consequences until the asset has been sold to an outside party, as current GAAP requires. Required effective date: Annual reporting periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted. Issued October 2016 The Company is evaluating the impact this standard will have on our consolidated financial statements. ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash Requires that restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Required effective date: Annual reporting periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted. Issued November 2016 The Company is evaluating the impact this standard will have on our consolidated financial statements. ASU 2017-01, Business Combinations (Topic 805) – Clarifying the Definition of a Business Amends the definition of a business to exclude acquisitions of groups of assets where substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Required effective date: Annual reporting periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted. Issued January 2017 This ASU results in most real estate acquisitions no longer being considered business combinations and instead being accounted for as asset acquisitions. The Company is evaluating the impact this standard will have on our consolidated financial statements. ASU 2017-05, Other Income – Gains and Losses from the De-recognition of Nonfinancial Assets Requires that all entities account for the de-recognition of a business in accordance with ASC 810, including instances in which the business is considered in substance real estate. Required effective date: Annual reporting periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted. Issued February 2017 The Company is evaluating the impact this standard will have on our consolidated financial statements. ASU 2017-09, Compensation—Stock Compensation (Topic 718) Scope of Modification Accounting Provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Required effective date: Annual reporting periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted. Issued May 2017 There is currently no impact as there have been no modifications to share-based compensation. ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815)—Accounting for Certain Financial Instruments with Down Round Features Issued July 2017 Provides guidance which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. Required effective date: Annual reporting periods, and interim periods therein, beginning after December 15, 2018. Early adoption is permitted. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity's own stock. This standard currently would not have an impact on our consolidated financial statements. None of our issued equity or debt (in particular our convertible notes), contain down round features. ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities Provides guidance on simplifying the accounting and presentation for hedging activities. This standard currently would not have an impact on our consolidated financial statements. We do not apply hedge accounting to any of our derivative instruments. Issued August 2017 |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2017 | |
Business Combinations | |
Business Combinations | Note 5 – Business Combinations On October 31, 2016, Sutherland merged with and into a subsidiary of ZAIS Financial Corp. (“ZAIS Financial”), with ZAIS Financial legally surviving the merger and changing its name to Sutherland Asset Management Corporation (the “Combined Company”). Per the terms of the Agreement and Plan of Merger (“Merger Agreement”), dated as of April 6, 2016, as amended as of May 9, 2016 and August 4, 2016, (i) Sutherland merged with and into ZAIS Merger Sub, LLC, with ZAIS Merger Sub, LLC surviving the merger transaction and continuing as a wholly-owned subsidiary of ZAIS and (ii) Sutherland Partners, L.P. merged with and into ZAIS Financial Partners, L.P., with ZAIS Financial Partners, L.P. legally surviving the merger transaction, continuing as a wholly-owned subsidiary of ZAIS Financial, and changing its name to Sutherland Partners, L.P. ZAIS Financial was re-named Sutherland Asset Management Corporation as part of the merger transaction (as a whole, the “Merger Transaction” or “merger”). Prior to and as a condition to the merger, ZAIS Financial disposed of its seasoned re-performing mortgage loan portfolio, such that upon the completion of the merger, ZAIS Financial’s assets largely consisted of its GMFS origination subsidiary, cash, conduit loans and residential mortgage backed securities. Additionally, prior to the closing, ZAIS Financial completed a tender offer, purchasing 4,185,478 shares of common stock from existing ZAIS Financial stockholders at a purchase price of $15.37 per share. In connection with the merger, 25,870,420 shares of common stock were issued to our pre-merger common stockholders, and 2,288,663 units in the operating partnership subsidiary (“OP units”) were issued to our pre-merger OP unit holders. Our pre-merger stockholders held approximately 86% of our stockholders’ equity as a result of the merger, with continuing ZAIS Financial stockholders holding approximately 14% of our stockholders’ equity, on a fully diluted basis. Under the terms of the Merger Agreement, in connection with the Merger Transaction, each outstanding share of the Company and each outstanding unit of Sutherland Partners, L.P. was converted into the right to receive 0.8356 (the “Exchange Ratio”) shares of common stock in ZAIS Financial or units in ZAIS Financial Partners, L.P., respectively. The Exchange Ratio was determined by dividing the Company’s adjusted book value per share on July 31, 2016 (the “Determination Date”) by the ZAIS Financial adjusted book on the Determination Date. Additionally, the Merger Agreement provided for a cash tender offer to existing ZAIS Financial shareholders for cash proceeds up to $64.3 million. The tender offer was completed at a price of $15.37 equal to 95% of ZAIS Financial’s adjusted book value per share, as further adjusted by ZAIS Financial’s pro-rata share of (i) an $8.0 million payment to ZAIS REIT Management, LLC relating to the termination of ZAIS Financial’s existing advisory agreement, and (ii) approximately $4.0 million related to intangible assets. The tender offer resulted in the tender of 4,185,478 shares of ZAIS Financial common stock. The primary purpose of the merger was to increase the Combined Company’s scale, with a stockholders’ equity base in excess of $550 million, which was expected to enhance operational efficiencies, substantially increase the liquidity in the combined company common stock and reduce operating costs. Sutherland management believes that stockholders of the combined company benefit from lower base management fees and that the incentive distribution fee structure further aligns stakeholder interests. The following table summarizes the fair value of assets acquired and liabilities assumed from the merger: (In Thousands) October 31, 2016 Assets: Cash and cash equivalents $ 34,932 Short term investments 69,992 Restricted cash 4,522 Loans, held-for-investment, at cost 1,496 Loans, held for sale, at fair value 189,197 Mortgage backed securities, at fair value 97,936 Loans eligible for repurchase from GNMA 79,530 Residential mortgage servicing rights, at fair value 51,302 Derivative assets, at fair value 2,699 Other assets 7,741 Identifiable Intangibles 2,703 Total assets 542,050 Liabilities: Borrowings under credit facilities 142,463 Borrowings under repurchase agreements 153,105 Exchangeable senior notes 57,500 Contingent consideration 14,422 Accounts payable and other liabilities 16,667 Liability for loans eligible for repurchase from GNMA 79,530 Total liabilities 463,687 Fair Value of Net Assets Acquired $ 78,363 The Company determined that the most identifiable value for consideration transferred was the share price of ZAIS Financial common shares as of the market close of October 31, 2016. To determine the total consideration transferred, the Company multiplied the total remaining ZAIS Financial common shares and ZAIS Partners, L.P. OP units, after the completion of the tender offer, times the closing price. The aggregate consideration transferred, net assets acquired, and related bargain purchase gain was as follows (in thousands, except share and per share amounts): ZAIS Financial closing share price on October 31, 2016 $ 13.40 ZAIS Financial common shares and OP units acquired Fair value of consideration transferred $ 63,145 Fair Value of Net Asset Acquired $ 78,363 Bargain purchase gain $ 15,218 Based on the calculation, the Company has determined the transaction resulted in a bargain purchase gain. The Company’s Valuation Committee reviewed the results of the identified net assets acquired, liabilities assumed, and the calculation and conclusion of consideration transferred and determined that it was appropriate to recognize a bargain purchase gain of $15.2 million. This bargain purchase gain is reflected separately within the consolidated statements of income under gain on bargain purchase. Acquisition-related costs directly attributable to the Sutherland Merger, including legal, accounting, valuation, and other professional or consulting fees, among other general and administrative expenses, were $4.2 million for the twelve months ended December 31, 2016 were expensed as incurred and are reflected within professional fees and operating expenses within the consolidated statements of income. The following table summarizes income and earnings from the net assets acquired as part of the reverse merger with ZFC. These net assets include those of GMFS and are for two months of activity following the reverse merger. This activity is included in the consolidated statements of income: For the year ended (In Thousands) December 31, 2016 Interest income $ 1,054 Interest expense (681) Other income (expense) Realized gain (loss) 6,036 Unrealized gain (loss) 4,902 Net income $ The following pro-forma income and earnings (unaudited) of the Combined Company are presented as if the merger had occurred on January 1, 2015: For the year ended December 31, (In Thousands) 2016 2015 Selected Financial Data Interest income $ 145,767 $ 161,174 Interest expense $ (66,372) $ (57,551) Provision for loan losses $ (7,713) $ (19,643) Other income (expense) $ (37,641) $ (27,760) Realized gain (loss) $ 14,030 $ 46 Unrealized gain (loss) $ 5,772 $ (3,817) Net income from continuing operations before income taxes $ 53,843 $ 52,449 Non-recurring pro forma transaction costs directly attributable to the merger were $4.6 million for the year ended December 31, 2016 and have been deducted from the other income (expense) amount above. The Company excluded the bargain purchase gain of $15.2 million from the other income (expense) amount above. |
Loans and Allowance for Loan Lo
Loans and Allowance for Loan Losses | 12 Months Ended |
Dec. 31, 2017 | |
Loans and Allowance for Loan Losses | |
Loans and Allowance for Loan Losses | Note 6 – Loans and Allowance for Loan Losses The accounting for a loan depends on management’s strategy for the loan, and on whether the loan was credit-impaired at the date of acquisition. The Company accounts for loans based on the following loan program categories: · Originated or purchased loans held-for-investment, other than PCI loans – originated transitional loans, originated conventional SBC and SBA loans that have been securitized, or acquired loans with no signs of credit deterioration at time of purchase. · Loans at fair value – originated conventional SBC and SBA loans that we intend to securitize · Loans held-for-sale, at fair value – originated or acquired that we intend to sell in the near term · PCI loans held-for-investment – acquired loans with signs of credit deterioration at time of purchase Loan Portfolio The following table summarizes the classification, unpaid principal balance (“UPB”), and carrying value of loans held by the Company including loans of consolidated VIEs: December 31, 2017 December 31, 2016 Loans (In Thousands) Carrying Value UPB Carrying Value UPB Loans Acquired SBA 7(a) loans $ 331,083 $ 353,556 $ 440,731 $ 471,189 Acquired loans 191,327 209,694 310,286 355,660 Originated Transitional loans 246,076 248,190 163,155 162,270 Originated Transitional loans, at fair value — — 14,505 13,958 Originated SBC loans, at fair value 188,150 182,045 67,087 65,131 Originated SBC loans 27,610 27,349 10,426 10,749 Originated SBA 7(a) loans 41,208 43,439 15,414 16,112 Originated Residential Agency loans 2,013 2,014 2,238 2,413 Total Loans, before allowance for loan losses $ 1,027,467 $ 1,066,287 $ 1,023,842 $ 1,097,482 Allowance for loan losses $ (9,547) — $ (12,721) — Total Loans, net $ 1,017,920 $ 1,066,287 $ 1,011,121 $ 1,097,482 Loans in consolidated VIEs Loans Originated SBC loans $ 382,873 $ 373,996 $ 448,722 $ 436,220 Acquired loans 189,545 204,497 92,844 101,481 Acquired SBA 7(a) loans 69,523 95,605 91,978 127,963 Originated Transitional loans 196,438 196,070 25,424 24,486 Total Loans, in consolidated VIEs, before allowance for loan losses $ 838,379 $ 870,168 $ 658,968 $ 690,150 Allowance for loan losses on loans in consolidated VIEs $ (2,199) — $ (3,409) — Total Loans, net, in consolidated VIEs $ 836,180 $ 870,168 $ 655,559 $ 690,150 Total Loans, net, and Loans, net in consolidated VIEs $ 1,854,100 $ 1,936,455 $ 1,666,680 $ 1,787,632 Held for sale, at fair value, loans Originated Residential Agency loans $ 129,096 $ 124,758 $ 127,773 $ 125,012 Originated Freddie Mac loans 67,591 66,642 17,311 17,161 Originated SBA 7(a) loans 16,791 15,472 — — Acquired loans 2,544 2,662 36,713 36,734 Total Loans, held for sale, at fair value $ 216,022 $ 209,534 $ 181,797 $ 178,907 Total Loan portfolio $ 2,070,122 $ 2,145,989 $ 1,848,477 $ 1,966,539 Credit Quality Indicators The Company monitors credit quality of our loan portfolio based on primary credit quality indicators. Delinquency rates are a primary credit quality indicator for our types of loans. Loans that are more than 30 days past due provide an early warning of borrowers who may be experiencing financial difficulties and/or who may be unable or unwilling to repay the loan. As the loan continues to age, it becomes more clear that the borrower is likely either unable or unwilling to pay. The following tables display delinquency information on loans, net as of the consolidated balance sheet dates: December 31, 2017 Loans (In Thousands) Current and 30-89 Days 90+ Days Total Loans Carrying Value Non-Accrual 90+ Days Past Due but Accruing Loans (1)(2) Acquired SBA 7(a) loans $ 376,102 $ 15,953 $ 5,542 $ 397,597 $ 16,782 $ 176 Acquired loans 348,271 6,891 19,263 374,425 16,405 4,090 Originated Transitional loans 435,252 7,263 — 442,515 — — Originated SBC loans, at fair value 188,150 — — 188,150 — — Originated SBC loans 402,004 7,702 608 410,314 608 — Originated SBA 7(a) loans 40,871 311 — 41,182 671 — Originated Residential Agency loans 1,226 — 787 2,013 289 498 Total Loans, before general allowance for loans losses $ 1,791,876 $ 38,120 $ 26,200 $ 1,856,196 $ 34,755 $ 4,764 General allowance for loan losses $ (2,096) Total Loans, net $ 1,854,100 Percentage of outstandings (1) Loan balances include specific allowance for loan losses. (2) Includes Loans, net in consolidated VIEs December 31, 2016 Loans (In Thousands) Current and 30-89 Days 90+ Days Total Loans Carrying Value Non-Accrual 90+ Days Past Due but Accruing Loans (1)(2) Acquired SBA 7(a) loans $ 501,651 $ 15,715 $ 10,590 $ 527,956 $ 20,673 $ 2,127 Acquired loans 354,123 7,230 32,476 393,829 25,669 9,677 Originated Transitional loans, at fair value 14,505 — — 14,505 — — Originated Transitional loans 179,700 8,879 — 188,579 — — Originated SBC loans, at fair value 67,087 — — 67,087 — — Originated SBC loans 458,371 — 712 459,083 — Originated SBA 7(a) loans 15,192 — 222 15,414 — Originated Residential Agency loans 931 744 563 2,238 176 Total Loans, before allowance for loans losses $ 1,591,560 $ 32,568 $ 44,563 $ 1,668,691 $ 47,663 $ 11,980 General allowance for loan losses $ (2,011) Total Loans, net $ 1,666,680 Percentage of outstandings (1) Loan balances include specific allowance for loan losses. (2) Includes Loans, net in consolidated VIEs In addition to delinquency rates, the current estimated LTV ratio is another indicator that can provide insight into a borrower’s continued willingness to pay, as the delinquency rate of high LTV loans tends to be greater than that for loans where the borrower has equity in the collateral. The geographic distribution of the loan collateral also provides insight as to the credit quality of the portfolio, as factors such as the regional economy, property price changes and specific events such as natural disasters, will affect credit quality. The Company monitors the loan-to-value ratio and associated risks on a monthly basis. The following tables presents quantitative information on the credit quality of loans, net as of December 31, 2017 and December 31, 2016: Loan-to-Value (a) (In Thousands) 0.0 – 20.0% 20.1 – 40.0% 40.1 – 60.0% 60.1 – 80.0% 80.1 – 100.0% Greater than 100.0% Total December 31, 2017 Loans (1) (2) Acquired SBA 7(a) loans $ 8,978 $ 37,880 $ 125,234 $ 106,199 $ 56,676 $ 62,630 $ 397,597 Acquired loans 54,463 102,498 114,010 67,037 18,745 17,672 374,425 Originated Transitional loans — 26,735 171,227 212,830 21,639 10,084 442,515 Originated SBC loans, at fair value — 17,294 31,245 115,653 21,245 2,713 188,150 Originated SBC loans 2,661 49,281 192,796 158,047 7,529 — 410,314 Originated SBA 7(a) loans 52 954 5,227 15,583 5,766 13,600 41,182 Originated Residential Agency loans — 60 166 609 823 355 2,013 Total Loans, before general allowance for loans losses $ 66,154 $ 234,702 $ 639,905 $ 675,958 $ 132,423 $ 107,054 $ 1,856,196 General allowance for loan losses $ (2,096) Total Loans, net $ 1,854,100 December 31, 2016 Loans (1) (2) Acquired SBA 7(a) loans $ 9,301 $ 42,617 $ 153,710 $ 141,586 $ 86,085 $ 94,657 $ 527,956 Acquired loans 46,776 90,574 109,330 106,432 20,335 20,382 393,829 Originated Transitional loans, at fair value — — 1,475 13,030 — — 14,505 Originated Transitional loans — 17,187 78,219 44,730 32,967 15,476 188,579 Originated SBC loans, at fair value — 11,303 5,728 34,150 15,906 — 67,087 Originated SBC loans 2,709 56,050 187,823 190,473 20,258 1,770 459,083 Originated SBA 7(a) loans 145 375 2,995 3,351 2,456 6,092 15,414 Originated Residential Agency loans — — 217 434 1,399 188 2,238 Total Loans, before allowance for loans losses $ 58,931 $ 218,106 $ 539,497 $ 534,186 $ 179,406 $ 138,565 $ 1,668,691 General allowance for loan losses $ (2,011) Total Loans, net $ 1,666,680 (a) Loan-to-value is calculated as carrying amount as a percentage of current collateral value. (1) Loan balances include specific allowance for loan loss reserves. (2) Includes Loans, net in consolidated VIEs. As of December 31, 2017 and 2016, the Company’s total carrying amount of loans in the foreclosure process was $0.4 million and $2.3 million, respectively. The following table displays the geographic concentration of the Company’s loans, net, secured by real estate recorded on our consolidated balance sheets. Geographic Concentration (Unpaid Principal Balance) December 31, 2017 December 31, 2016 California 13.5 % 13.6 % Texas 12.4 14.0 Florida 11.7 9.9 New York 6.8 6.9 Georgia 6.2 5.9 Arizona 5.1 5.2 Illinois 3.9 2.8 North Carolina 3.7 3.7 Ohio 2.7 2.9 Virginia 2.6 2.9 Other 31.4 32.2 Total 100.0 % 100.0 % The following table displays the collateral type concentration of the Company’s loans, net, on our consolidated balance sheets. Collateral Concentration (Unpaid Principal Balance) December 31, 2017 December 31, 2016 SBA (1) 25.4 % 34.4 % Multi-family 21.1 13.8 Retail 17.6 14.3 Office 15.6 14.9 Industrial 6.9 6.9 Mixed Use 6.3 5.0 Lodging/Residential 2.9 4.8 Other 4.2 5.9 Total 100.0 % 100.0 % (1) Further detail provided on SBA collateral concentration is included in table below. The following table displays the collateral type concentration of the Company’s SBA loans within loans, net, on our consolidated balance sheets. Collateral Concentration (Unpaid Principal Balance) December 31, 2017 December 31, 2016 Offices of Physicians 16.0 % 15.8 % Child Day Care Services 12.3 14.3 Lodging 10.5 11.4 Veterinarians 7.0 6.7 Eating Places 5.5 6.3 Grocery Stores 4.7 4.3 Auto 3.2 3.2 Funeral Service & Crematories 2.2 1.7 Accounting Auditing & Bookkeeping 2.1 2.4 Gasoline Service Stations 1.9 1.8 Other 34.6 32.1 Total 100.0 % 100.0 % Allowance for Loan Losses The allowance for loan losses represents the Company’s estimate of probable credit losses inherent in the Company’s held-for-investment loan portfolio. This is assessed by considering credit quality indicators, including probable and historical losses, collateral values, loan-to-value (“LTV”) ratios, and economic conditions. The allowance for loan losses includes an asset-specific component, a general formula-based component, and a component related to PCI loans. The following tables detail the allowance for loan losses by loan product and impairment methodology as of the consolidated balance sheet dates: December 31, 2017 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for General $ 468 $ - $ 819 $ 518 $ 291 $ 2,096 Specific 169 - 586 1,564 27 2,346 PCI - - 5,859 1,445 - 7,304 Ending balance $ 637 $ - $ 7,264 $ 3,527 $ 318 $ 11,746 December 31, 2016 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for General $ 739 $ - $ 847 $ 253 $ 172 $ 2,011 Specific 65 - 1,110 2,489 - 3,664 PCI - - 8,193 2,262 - 10,455 Ending balance $ 804 $ - $ 10,150 $ 5,004 $ 172 $ 16,130 The following tables detail the activity of the allowance for loan losses for loans: Year ended December 31, 2017 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for Beginning balance $ 804 $ - $ 10,150 $ 5,004 $ 172 $ 16,130 Provision for (Recoveries of) loan losses (166) - 2,387 (4) 146 2,363 Charge-offs and sales - - (1,356) (1,473) - (2,829) Recoveries (1) - (3,917) - - (3,918) Ending balance $ 637 $ - $ 7,264 $ 3,527 $ 318 $ 11,746 Year ended December 31, 2016 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for Beginning balance $ - $ - $ 10,967 $ 6,155 $ - $ 17,122 Provision for loan losses 804 - 5,702 1,141 172 7,819 Charge-offs and sales - - (685) (2,292) - (2,977) Recoveries - - (5,834) - - (5,834) Ending balance $ 804 $ - $ 10,150 $ 5,004 $ 172 $ 16,130 Impaired Loans - Non-PCI loans The Company considers a loan to be impaired when the Company does not expect to collect all the contractual and principal payments as scheduled in the loan agreements. Impaired loans include loans that have been modified in a TDR or loans that are placed on non-accrual status. All impaired loans are evaluated for an asset-specific allowance as described in Note 3. (In Thousands) December 31, 2017 December 31, 2016 Impaired loans With an allowance $ 9,222 $ 14,772 Without an allowance 12,659 17,653 Total recorded carrying value of impaired loans $ 21,881 $ 32,425 Allowance for loan losses related to impaired loans $ (2,346) $ (3,664) Unpaid principal balance of impaired loans $ 29,853 $ 33,185 Impaired loans on non-accrual status $ 21,881 $ 32,425 Average carrying value of impaired loans (1) $ 28,693 $ 28,891 December 31, 2017 December 31, 2016 Interest income on impaired loans for the year ended $ 610 $ 1,165 (1) Average for the year ended December 31, 2017 and 2016. Troubled Debt Restructurings If the borrower is determined to be in financial difficulty, then the Company will determine whether a financial concession has been granted to the borrower by analyzing the value of the loan as compared to the recorded investment, modifications of the interest rate as compared to market rates, modification of the stated maturity date, modification of the timing of principal and interest payments and the partial forgiveness of the loan. Modified loans that are classified as TDRs are individually evaluated and measured for impairment. The following table summarizes the recorded investment of TDRs on the consolidated balance sheet dates by loan type. December 31, 2017 December 31, 2016 (In Thousands) SBC SBA Total SBC SBA Total Recorded carrying value modified loans classified as TDRs $ 3,727 $ 12,398 $ 16,125 $ 7,918 $ 11,135 $ 19,053 Allowance for loan losses on loans classified as TDRs $ 883 $ 695 $ 1,578 $ 656 $ 1,544 $ 2,200 Carrying value of modified loans classified as TDRs Carrying value of modified loans classified as TDRs on accrual status $ 1,804 $ 4,791 $ 6,595 $ 5,196 $ 359 $ 5,555 Carrying value of modified loans classified as TDRs on non-accrual status 1,923 7,607 9,530 2,722 10,776 13,498 Total carrying value of modified loans classified as TDRs $ 3,727 $ 12,398 $ 16,125 $ 7,918 $ 11,135 $ 19,053 The following table summarizes the TDR activity that occurred during the years ended December 31, 2017 and 2016 and the financial effects of these modifications. Year Ended December 31, 2017 Year Ended December 31, 2016 (In Thousands, except number of loans) SBC SBA Total SBC SBA Total Number of loans permanently modified 14 47 61 9 40 49 Pre-modification recorded balance (a) $ 3,518 $ 6,187 $ 9,705 $ 9,041 $ 4,387 $ 13,428 Post-modification recorded balance (a) 3,041 6,132 9,173 7,532 1,740 9,272 Number of loans that remain in default as of December 31, 2017 (b) 10 18 28 3 15 18 Balance of loans that remain in default as of December 31, 2017 (b) $ 1,590 $ 672 $ 2,262 $ 359 $ 362 $ 721 Concession granted (a) : Term extension $ 413 $ 4,931 $ 5,344 $ 930 $ 8,748 $ 9,678 Interest rate reduction 100 239 339 307 49 356 Principal reduction 601 286 887 - 90 90 Foreclosure 920 554 1,474 961 412 1,373 Total $ 2,034 $ 6,010 $ 8,044 $ 2,198 $ 9,299 $ 11,497 (a) Represents carrying value. (b) Represents the December 31, 2017 carrying values of the TDRs that occurred during the year ended December 31, 2017 and 2016 that remained in default as of December 31, 2017. Generally, all loans modified in a TDR are placed or remain on non-accrual status at the time of the restructuring. However, certain accruing loans modified in a TDR that are current at the time of restructuring may remain on accrual status if payment in full under the restructured terms is expected. For purposes of this schedule, a loan is considered in default if it is 30 or more days past due. The Company does not believe the financial impact of the presented TDRs to be material. The other elements of the Company’s modification programs do not have a significant impact on financial results given their relative size, or do not have a direct financial impact as in the case of covenant changes. Loans, held-for-investment are accounted for under ASC 310-10 or ASC 310-30 depending on whether there is evidence of credit deterioration at the time of acquisition. The outstanding carrying amount of our held-for-investment loan portfolio broken down by ASC 310-10 (non-PCI loans) and ASC 310-30 (PCI loans) is as follows: December 31, 2017 December 31, 2016 Non-PCI PCI Non-PCI PCI (In Thousands) Loans Loans Loans Loans Unpaid principal balance $ 1,624,395 $ 130,015 $ 1,536,245 $ 172,298 Non-accretable discount — (8,336) — (24,784) Accretable discount (44,629) (23,749) (55,563) (26,978) Loans, held-for-investment 1,579,766 97,930 1,480,682 120,536 Allowance for loan losses (4,442) (7,304) (5,675) (10,455) Loans, held-for-investment $ 1,575,324 $ 90,626 $ 1,475,007 $ 110,081 PCI Loans The following table details the activity of the accretable yield on PCI loans, held-for-investment. The amount of accretable yield is affected by changes in credit outlooks, including metrics such as default and loss severities, prepayment speeds, which can change the amount and period of time over which interest payments are expected to be received, and the interest rates on variable loans. Year Ended December 31, (In Thousands) 2017 2016 Beginning accretable discount- PCI loans $ 26,978 $ 42,031 Purchases/Originations 1,234 676 Sales (2,835) (7,655) Accretion (4,735) (6,635) Other 1,466 4,459 Transfers 1,641 (5,898) Ending accretable discount- PCI loans $ 23,749 $ 26,978 In 2016, the Company acquired credit impaired loans with contractually required principal and interest payments receivable of $2.3 million; expected cash flows of $1.8 million; and a fair value (initial carrying amount) of $1.1 million. In 2017, the Company acquired credit impaired loans with contractually required principal and interest payments receivable of $12.5 million; expected cash flows of $8.9 million; and a fair value (initial carrying amount) of $6.2 million. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | Note 7 – Fair Value Measurements The Company adopted the provisions of ASC 820 Fair Value Measurement , which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows: Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access. Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs. Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments are determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The following table presents the Company’s financial instruments carried at fair value on a recurring basis as of December 31, 2017: (In Thousands) Level 1 Level 2 Level 3 Total Assets: Cash held in money market funds $ 632 $ — $ — $ 632 Loans, held for sale, at fair value — 216,022 — 216,022 Loans, net, at fair value — — 188,150 188,150 Mortgage backed securities, at fair value — 31,859 8,063 39,922 Derivative instruments, at fair value — 2,898 1,827 4,725 Residential mortgage servicing rights, at fair value — — 72,295 72,295 Total assets $ 632 $ 250,779 $ 270,335 $ 521,746 Liabilities: Derivative instruments, at fair value $ — $ 282 $ — $ 282 Contingent consideration — — 10,016 10,016 Total liabilities $ — $ 282 $ 10,016 $ 10,298 The following table presents the Company’s financial instruments carried at fair value on a recurring basis as of December 31, 2016: (In Thousands) Level 1 Level 2 Level 3 Total Assets: Cash held in money market funds $ 632 $ — $ — $ 632 Short term investments 319,984 — — 319,984 Loans, held for sale, at fair value — 164,485 17,312 181,797 Loans, net, at fair value — — 81,592 81,592 Mortgage backed securities, at fair value — — 32,391 32,391 Derivative instruments, at fair value — 3,095 2,690 5,785 Residential mortgage servicing rights, at fair value — — 61,376 61,376 Total assets $ 320,616 $ 167,580 $ 195,361 $ 683,557 Liabilities: Derivative instruments, at fair value $ — $ 643 $ — $ 643 Contingent consideration — — 14,487 14,487 Total liabilities $ — $ 643 $ 14,487 $ 15,130 The following table presents a summary of changes in the fair value of loans, held at fair value classified as Level 3: Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 81,592 $ 155,134 Realized gains (losses), net (90) 6 Unrealized gains, net 5,328 4,131 Originations 152,339 147,823 Sales — (4,776) Principal payments (10,114) (34,895) Transfer to loans, held for sale, at fair value — (11,499) Transfer to loans, held-for-investment (40,905) (174,332) Ending Balance $ 188,150 $ 81,592 Unrealized gains on loans, held at fair value held on December 31, 2017 and 2016 and classified as Level 3 were $6.0 million and $2.5 million, respectively. The following table presents a summary of changes in the fair value of loans, held for sale, at fair value classified as Level 3: Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 17,312 $ — Realized gains, net 9,005 5,260 Unrealized gains, net 2,595 — Originations 352,975 257,993 Sales (284,707) (257,281) Principal payments (10,429) (159) Transfer from loans, held at fair value — 11,499 Transfer from loans, held-for-investment, net 5,937 — Transfer from Level 3 (92,688) — Ending Balance $ — $ 17,312 Unrealized gains on loans, held for sale at fair value held on December 31, 2016 and classified as Level 3 were $0.1 million. There were no loans, held for sale classified as Level 3 on December 31, 2017. The following table presents a summary of changes in the fair value of MBS, at fair value classified as Level 3: Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 32,391 $ 213,504 Accreted discount, net 224 201 Realized gains (losses), net 522 (3,068) Unrealized gains, net 1,344 3,680 Purchases 14,448 17,388 Acquired in connection with reverse merger — 97,936 Sales / Principal payments (7,785) (297,250) Transfer from Level 3 (33,081) — Ending Balance $ 8,063 $ 32,391 Unrealized losses on MBS, at fair value held on December 31, 2017 and 2016 and classified as Level 3 were $0.6 million and $0.3 million, respectively. Refer to “Note 9 – Servicing rights” for activity relating to the changes in the fair value of the Company’s residential mortgage servicing rights. Unrealized gains (losses) on residential mortgage servicing rights, at fair value held on December 31, 2017 and 2016 and classified as Level 3 were $(8.5) million and $6.9 million, respectively. The following table presents a summary of changes in the fair value of derivatives instruments, at fair value classified as Level 3, or interest rate lock commitments: Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 2,690 $ — Acquired in connection with reverse merger — 3,498 Unrealized gains (losses) (863) (808) Ending Balance $ 1,827 $ 2,690 Unrealized gains (losses) on derivatives held on December 31, 2017 and 2016 and classified as Level 3 were $(1.7) million and $0.8 million, respectively. The following table presents a summary of changes in the fair value of contingent consideration classified as Level 3: Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 14,487 $ — Acquired in connection with reverse merger — 14,422 Adjustment for legal settlement (5,744) — Amortization 1,273 65 Ending Balance $ 10,016 $ 14,487 As of December 31, 2017 and 2016, there was no unrealized gain (loss) on contingent consideration. The Company’s policy is to recognize transfers in and transfers out as of the beginning of the period of the event or the change in circumstances that caused the transfer. Transfers between Level 2 and Level 3 generally relate to whether there were changes in the significant relevant observable and unobservable inputs that are available for the fair value measurements of such financial instruments. Transfers into or out of Level 3 of the fair value hierarchy are recorded at the end of the reporting period. In December 2017, the Company determined that, based a more liquid market for these financial instruments, a transfer from Level 3 was necessary. Based on this determination, as of December 31, 2017, we have applied Level 2 classification to these financial instruments. Valuation Process for Fair Value Measurements The Company establishes valuation processes and procedures designed so that fair value measurements are appropriate and reliable, that they are based on observable inputs where possible, and that valuation approaches are consistently applied and the assumptions and inputs are reasonable. The Company has also established processes to provide that the valuation methodologies, techniques and approaches for investments that are categorized within Level 3 of the fair value hierarchy are fair, consistent and verifiable. The Company’s processes provide a framework that ensures the oversight of the Company’s fair value methodologies, techniques, validation procedures, and results. The Company designates a valuation committee (the “Committee”) to oversee the entire valuation process of the Company’s Level 3 investments. The Committee is comprised of various personnel who are responsible for developing the Company’s written valuation policies, processes and procedures, conducting periodic reviews of the valuation policies, and performing validation procedures on the overall fairness and consistent application of the valuation policies and processes and that the assumptions and inputs used in valuation are reasonable. The validation procedures overseen by the Committee are also intended to provide that the values received from external third-party pricing sources are consistent with the Company’s Valuation Policy and are carried at fair value. To the extent that there are no exchange pricing, vendor marks or broker quotes readily available, the Company may use an internal valuation model or other valuation methodology that may be based on unobservable market inputs to fair value the investment. The values provided by a third-party pricing service are calculated based on key inputs provided by the Company including collateral values, unpaid principal balances, cash flow velocity, contractual status and anticipated disposition timelines. In addition, the Company performs an internal valuation used to assess and review the reasonableness and validity of the fair values provided by a third party. The Company also performs analytical procedures, which include automated checks consisting of prior-period variance analysis, comparisons of actual prices to internally calculate expected prices based on observable market changes, analysis of changes in pricing ranges, and relative value and yield comparisons using the Company’s proprietary valuation models. Upon completion of the review process described above, the Company may provide additional quantitative and qualitative data to the third-party pricing service to consider in valuing certain financial assets and liabilities, as applicable. Such data may include deal specific information not included in the data tape provided to the third party, outliers when compared to the unpaid principal balance and collateral value and knowledge of any impending liquidation of an investment. If deemed necessary by the third party and management, the investments are re-valued by the third party to account for the updated information. The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level 3 of the fair value hierarchy as of December 31, 2017 using third party information without adjustment: Predominant Weighted Valuation Average Price (In Thousands, except price) Fair Value Technique Type Price Range (a) Loans, held at fair value $ 188,150 Single External Source Third Party Mark $ 101.05 – 104.00 $ Mortgage backed securities, at fair value 7,937 Broker Quotes Third Party Mark 70.92 – 70.92 70.92 Mortgage backed securities, at fair value 126 Transaction Price Transaction Price 99.00 – 99.00 99.00 Residential mortgage servicing rights, at fair value 72,295 Single external source Discounted cash flow N/A N/A Contingent consideration 10,016 Single external source Discounted cash flow N/A N/A (a) The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level 3 of the fair value hierarchy as of December 31, 2016 using third-party information without adjustment: Predominant Weighted Valuation Average Price (In Thousands, except price) Fair Value Technique Type Price Range (a) Loans, held at fair value $ 81,592 Single External Source Third Party Mark $ 98.47 – 105.00 $ 103.16 Loans, held for sale, at fair value 17,312 Single External Source Third Party Mark 100.04 – 102.97 100.87 Mortgage backed securities, at fair value (b) 29,883 Broker Quotes Third Party Mark 17.91 – 101.00 68.90 Mortgage backed securities, at fair value 2,508 Transaction Price Transaction Price 99.00 – 99.00 99.00 Residential mortgage servicing rights, at fair value 61,376 Single external source Discounted cash flow N/A N/A Contingent consideration 14,487 Single external source Discounted cash flow N/A N/A (a) (b) The fair value measurements of these assets are sensitive to changes in assumptions regarding prepayment, probability of default, loss severity in the event of default, forecasts of home prices, and significant activity or developments in the real estate market. Significant changes in any of those inputs in isolation may result in significantly higher or lower fair value measurements. Generally, an increase in the probability of default and loss severity in the event of default would result in a lower fair value measurement. A decrease in these assumptions would have the opposite effect. Conversely, an assumption that the home prices will increase would result in a higher fair value measurement. A decrease in the assumption for home prices would have the opposite effect. Financial instruments not carried at fair value The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the consolidated balance sheets and are classified as Level 3: December 31, 2017 December 31, 2016 (In Thousands) Carrying Value Fair Value Carrying Value Fair Value Assets: Loans, net $ 1,665,950 $ 1,737,361 $ 1,585,088 $ 1,639,982 Investment in unconsolidated joint venture 55,369 55,369 — — Servicing rights 21,743 23,432 22,478 23,470 Total assets $ 1,743,062 $ 1,816,162 $ 1,607,566 $ 1,663,452 Liabilities: Secured borrowings $ 631,286 $ 631,286 $ 927,462 $ 927,462 Promissory note 6,107 6,107 7,378 7,378 Securitized debt obligations of consolidated VIEs, net 598,148 613,676 492,942 483,381 Senior secured note, net 138,078 144,376 — — Guaranteed loan financing 293,045 306,964 390,555 409,751 Convertible note, net 108,991 108,301 — — Total liabilities $ 1,775,655 $ 1,810,710 $ 1,818,337 $ 1,827,972 Other assets totaling $16.5 million at December 31, 2017 and $32.6 million at December 31, 2016 are not carried at fair value and include Due from servicers and Accrued interest, which are reflected in Note 20. Receivable from third parties totaling $6.8 million at December 31, 2017 and $7.2 million at December 31, 2016 are not carried at fair value. For these instruments, carrying value approximates fair value and are classified as Level 3. Accounts payable and other accrued liabilities totaling $12.4 million at December 31, 2017 and $8.4 million at December 31, 2016 are not carried at fair value and include Payable to related parties and Accrued interest payable which are included in Note 20. For these instruments, carrying value approximates fair value and are classified as Level 3. |
Mortgage Backed Securities
Mortgage Backed Securities | 12 Months Ended |
Dec. 31, 2017 | |
Mortgage Backed Securities | |
Mortgage Backed Securities | Note 8 – Mortgage Backed Securities The following table presents certain information about the Company’s MBS portfolio, which are classified as trading securities and carried at fair value, as of December 31, 2017. December 31, 2017 Weighted Weighted Average Gross Gross Average Interest Principal Amortized Unrealized Unrealized (In Thousands) Maturity (a) Rate (a) Balance Cost Fair Value Gains Losses MBS Freddie Mac Loans 12/2034 5.3 % $ 49,767 $ 37,287 $ 38,568 $ 2,529 $ (1,248) Commercial Loans 06/2043 5.5 4,513 1,054 1,228 174 — Tax Liens 09/2026 6.0 127 127 126 — (1) Total 08/2035 5.3 % $ 54,407 $ 38,468 $ 39,922 $ 2,703 $ (1,249) (a) Weighted based on current principal balance The following table presents certain information about the Company’s MBS portfolio as of December 31, 201 6 . December 31, 2016 Weighted Weighted Average Gross Gross Average Interest Principal Amortized Unrealized Unrealized (In Thousands) Maturity (a) Rate (a) Balance Cost Fair Value Gains Losses MBS Freddie Mac Loans 06/2032 5.6 % $ 34,932 $ 28,676 $ 28,752 $ 1,605 $ (1,528) Commercial Loans 06/2043 5.5 6,314 1,472 1,131 (342) Tax Liens 03/2031 6.5 2,534 2,533 2,508 — (25) Total 12/2033 5.7 % $ 43,780 $ 32,681 $ 32,391 $ 1,605 $ (1,895) (a) Weighted based on current principal balance The following table presents certain information about the maturity of the Company’s MBS portfolio as of December 31, 2017. December 31, 2017 Weighted Average Interest Principal Amortized (In Thousands) Rate (a) Balance Cost Fair Value After five years through ten years 8.9 % $ 8,919 $ 8,205 $ 8,904 After ten years 4.6 45,488 30,263 31,018 Total 5.3 % $ 54,407 $ 38,468 $ 39,922 The following table presents certain information about the maturity of the Company’s MBS portfolio as of December 31, 2016. December 31, 2016 Weighted Average Interest Principal Amortized (In Thousands) Rate (a) Balance Cost Fair Value After five years through ten years 8.9 % $ 13,616 $ 12,579 $ 12,709 After ten years 4.2 30,164 20,102 19,682 Total 5.7 % $ 43,780 $ 32,681 $ 32,391 |
Servicing rights
Servicing rights | 12 Months Ended |
Dec. 31, 2017 | |
Servicing rights | |
Servicing Rights | Note 9 – Servicing rights The Company performs servicing activities for third parties, which primarily include collecting principal, interest and other payments from borrowers, remitting the corresponding payments to investors and monitoring delinquencies. The Company’s servicing fees are specified by pooling and servicing Agreements. The following table presents information about the Company’s portfolios of servicing rights: Year Ended December 31, (In Thousands) 2017 2016 SBA servicing rights, at amortized cost Beginning net carrying amount $ 20,276 $ 26,329 Additions due to loans sold, servicing retained 1,996 951 Amortization (4,034) (5,110) Impairment (1,554) (1,894) Ending net carrying value of SBA servicing rights $ 16,684 $ 20,276 Freddie Mac servicing rights, at amortized cost Beginning net carrying amount $ 2,202 $ 921 Additions due to loans sold, servicing retained 3,290 2,009 Amortization (610) (550) Recovery (Impairment) 177 (178) Ending net carrying value of Freddie Mac servicing rights $ 5,059 $ 2,202 Ending net carrying value of SBA and Freddie Mac servicing rights, at amortized cost $ 21,743 $ 22,478 Residential mortgage servicing rights, at fair value Beginning Balance $ 61,376 $ — Acquired in connection with reverse merger — 51,302 Additions due to loans sold, servicing retained 20,565 3,157 Loan pay-offs (5,646) — Unrealized gains (losses) (4,000) 6,917 Ending fair value of residential mortgage servicing rights $ 72,295 $ 61,376 Total servicing rights $ 94,038 $ 83,854 Servicing rights – SBA and Freddie Mac The Company’s SBA and Freddie Mac servicing rights are carried at the lower of cost or amortized cost. The Company estimates the fair value of the SBA and Freddie Mac servicing rights carried at amortized cost using a combination of internal models and data provided by third-party valuation experts. The assumptions used in our internal models include forward prepayment rates, forward default rates, discount rates, and servicing expenses. The Company’s models calculate the present value of expected future cash flows utilizing assumptions that we believe are used by market participants. We derive forward prepayment rates, forward default rates and discount rates from historical experience adjusted for prevailing market conditions. Components of the estimated future cash flows include servicing fees, late fees, other ancillary fees and cost of servicing. The following table presents additional information about the Company’s SBA and Freddie Mac servicing rights: As of December 31, 2017 As of December 31, 2016 Unpaid Principal Unpaid Principal (In Thousands) Amount Carrying Value Amount Carrying Value SBA $ 427,623 $ 16,684 $ 449,115 $ 20,276 Freddie Mac 559,823 5,059 224,826 2,202 Total $ 987,446 $ 21,743 $ 673,941 $ 22,478 The significant assumptions used in the December 31, 2017 and 2016 estimated valuation of the Company’s SBA and Freddie Mac commercial servicing rights carried at amortized cost include: December 31, 2017 December 31, 2016 Range of input Weighted Range of input Weighted SBA servicing rights (at amortized cost) • Forward prepayment rate - % % - % % • Forward default rate - % % - % % • Discount rate - % % - % % • Servicing expense - % % - % % Freddie Mac commercial servicing rights (at amortized cost) • Forward prepayment rate - % % - % % • Forward default rate - % % - % % • Discount rate - % % - % % • Servicing expense - % % - % % These assumptions can change between and at each reporting period as market conditions and projected interest rates change. The following table reflects the possible impact of 10% and 20% adverse changes to key assumptions on the carrying amount of the Company’s SBA and Freddie Mac servicing rights. (In Thousands) December 31, 2017 December 31, 2016 SBA servicing rights (at amortized cost) • Forward prepayment rate 10% adverse change $ (514) $ (664) 20% adverse change (998) (1,290) • Default rate 10% adverse change $ (24) $ (12) 20% adverse change (48) (24) • Discount rate 10% adverse change $ (520) $ (576) 20% adverse change (1,008) (1,290) Freddie Mac commercial servicing rights (at amortized cost) • Forward prepayment rate 10% adverse change $ (43) $ (55) 20% adverse change (84) (107) • Default rate 10% adverse change $ (6) $ (2) 20% adverse change (12) (4) • Discount rate 10% adverse change $ (270) $ (54) 20% adverse change (518) (104) The estimated future amortization expense for the servicing rights is expected to be as follows: (In Thousands) December 31, 2017 2018 $ 4,353 2019 3,675 2020 3,087 2021 2,585 2022 2,145 Thereafter 5,898 Total $ 21,743 Residential mortgage servicing rights The Company's residential mortgage servicing rights consist of conforming conventional loans sold to Fannie Mae and Freddie Mac or loans securitized in Ginnie Mae securities. Similarly, the government loans serviced by the Company are securitized through Ginnie Mae, whereby the Company is insured against loss by the Federal Housing Administration or partially guaranteed against loss by the Department of Veterans Affairs. The following table presents additional information about the Company’s residential mortgage servicing rights carried at fair value: As of December 31, 2017 As of December 31, 2016 Unpaid Principal Unpaid Principal (In Thousands) Amount Fair Value Amount Fair Value Fannie Mae $ 2,524,897 $ 26,929 $ 2,211,493 $ 23,924 Ginnie Mae 2,134,772 24,135 1,817,009 21,205 Freddie Mac 1,898,786 21,231 1,452,902 16,247 Total $ 6,558,455 $ 72,295 $ 5,481,404 $ 61,376 The significant assumptions used in the valuation of the Company’s residential mortgage servicing rights carried at fair include: December 31, 2017 December 31, 2016 Range of input Weighted Range of input Weighted Residential mortgage servicing rights (at fair value) • Forward prepayment rate - % % - % % • Discount rate - % % - % % • Servicing expense - % % - % % The following table reflects the possible impact of 10% and 20% adverse changes to key assumptions on the fair value of the Company’s residential mortgage servicing rights. (In Thousands) December 31, 2017 December 31, 2016 Prepayment rate 10% adverse change $ (2,721) $ (2,038) 20% adverse change (4,928) (3,983) Discount rate 10% adverse change $ (3,029) $ (2,299) 20% adverse change (5,823) (4,438) Cost of servicing 10% adverse change $ (1,230) $ (1,304) 20% adverse change (2,460) (2,607) |
Gains on residential mortgage b
Gains on residential mortgage banking activities, net of variable loan expenses | 12 Months Ended |
Dec. 31, 2017 | |
Gains on residential mortgage banking activities, net of variable loan expenses | |
Gains on residential mortgage banking activities, net of variable loan expenses | Note 10 – Gains on residential mortgage banking activities, net of variable loan expenses Gains on residential mortgage banking activities, net of variable loan expenses, reflects revenue and expense within our residential mortgage banking business directly related to loan origination and sale activity. This primarily consists of the realized gains on sales of residential loans held for sale and loan origination fee income, offset by direct costs, such as correspondent fee expenses and other direct expenses relating to these loans, which vary based on loan origination volumes. Gains on residential mortgage banking activities, net of direct, variable loan expenses, also consists of unrealized gains and losses associated with the changes in fair value of the loans held for sale, the fair value of retained MSR additions, and the realized and unrealized gains and losses from derivative instruments. The following table presents the components of gains on residential mortgage banking activities, net of variable loan expenses, recorded in the Company’s consolidated statements of operations. For the Year Ended December 31, (In Thousands) 2017 2016 Realized and unrealized gains and losses of residential mortgage loans held for sale, at fair value $ 63,024 $ 2,943 Creation of new mortgage servicing rights, net of payoffs 14,919 3,157 Loan origination fee income on residential mortgage loans 8,193 1,404 Correspondent fees and other direct loan expenses, including provision for loan indemnification (41,737) (597) Unrealized gains (loss) on IRLCs and other derivatives (2,699) 126 Total gains on residential mortgage banking activities, net of variable loan expenses $ 41,700 $ 7,033 |
Secured Borrowings and Promisso
Secured Borrowings and Promissory Note | 12 Months Ended |
Dec. 31, 2017 | |
Secured Borrowings and Promissory Note | |
Secured Borrowings and Promissory Note | Note 11 – Secured Borrowings and Promissory Note The following tables present certain characteristics of our secured borrowings and promissory note: Pledged Assets Carrying Value (In Thousands) Maturity Pricing Facility December 31, December 31, December 31, December 31, Borrowings under credit facilities JPMorgan - Commercial (1) June 2018 L+ 3.25 to 3.50% $ 250,000 $ 107,697 $ 226,253 $ 60,459 $ 190,066 Keybank - Commercial (2) September 2018 L + 1.75% 100,000 67,589 17,311 66,642 17,162 Comerica - Residential (3) March 2018 L + 2.125% 150,000 71,035 35,102 67,336 33,575 UBS - Residential loans (3) November 2017 L + 2.30% 65,000 — 43,121 — 39,750 Associated Bank - Residential loans (3) August 2018 L + 2.125% 40,000 29,242 28,575 27,699 27,869 Origin Bank - Residential loans (3) May 2018 L + 2.25% 40,000 27,891 18,910 26,538 18,188 Total borrowings under credit facilities (9) $ 645,000 $ 303,454 $ 369,272 $ 248,674 $ 326,610 Borrowings under repurchase agreements Deutsche Bank- Commercial (4) February 2018 L + 2.50 to 3.50% $ 275,000 $ 252,499 $ 118,962 $ 173,811 $ 82,716 JPMorgan - Commercial (5) December 2020 L + 2.50 to 4.50% 200,000 90,829 93,691 55,355 52,169 Citibank - Commercial (6) June 2018 L + 2.25 to 3.00% 200,000 150,707 119,376 88,095 102,576 JPMorgan - MBS (7) February 2018 2.56 to 5.00% 53,325 80,690 42,253 53,325 30,363 Citibank - MBS (7) February 2018 3.42% 5,957 11,496 11,496 5,957 5,226 Bank of America - MBS (7) January 2018 3.38 to 3.48% 8,112 8,778 11,815 6,069 8,112 Mizuho - STI (8) N/A N/A 99,950 — 100,000 — 99,950 Societe Generale - STI (8) N/A N/A 19,940 — 19,994 — 19,940 RBC - STI (8) N/A N/A 199,800 — 199,990 — 199,800 Total borrowings under repurchase agreements (10) $ 1,062,084 $ 594,999 $ 717,577 $ 382,612 $ 600,852 Total secured borrowings $ 1,707,084 $ 898,453 $ 1,086,849 $ 631,286 $ 927,462 Promissory note payable FCB - Commercial June 2021 2.75% $ 6,554 $ 7,752 $ 9,144 $ 6,107 $ 7,378 Total promissory note payable $ 6,554 $ 7,752 $ 9,144 $ 6,107 $ 7,378 (1) Borrowings are used to finance SBC and SBA loan acquisitions, and SBA loan originations. (2) Borrowings are used to finance Freddie Mac SBC loan originations. (3) Borrowings are used to finance Residential Agency loan originations. (4) Borrowings are used to finance SBC loan originations. (5) Borrowings are used to finance SBC loan originations, Transitional loan originations, and SBC loan acquisitions. (6) Borrowings are used to finance SBC loan originations and SBC loan acquisitions. (7) Borrowings are used to finance Mortgage backed securities and Retained interests in consolidated VIE's. (8) Borrowings are used to finance Short-term investments. (9) The weighted average interest rate of borrowings under credit facilities was 3.9% and 4.2% as of December 31, 2017 and 2016, respectively. (10) The weighted average interest rate of borrowings under repurchase agreements was 3.1% and 1.8% as of December 31, 2017 and 2016, respectively. The following table presents the carrying value of the Company’s collateral pledged with respect to secured borrowings and promissory note payable outstanding with our lenders: Pledged Assets (In Thousands) December 31, December 31, Collateral pledged - borrowings under credit facilities Loans, net $ 303,133 $ 369,272 Real estate acquired in settlement of loans 321 — Total collateral pledged on borrowings under credit facilities $ 303,454 $ 369,272 Collateral pledged - borrowings under repurchase agreements Short-term investments $ — $ 319,984 Loans, net 494,035 332,029 Mortgage backed securities 37,397 11,815 Retained interest in assets of consolidated VIEs 63,567 53,749 Total collateral pledged on borrowings under repurchase agreements $ 594,999 $ 717,577 Total collateral pledged on secured borrowings $ 898,453 $ 1,086,849 Collateral pledged - promissory note payable Loans, net $ 7,752 $ 9,144 Total collateral pledged on promissory note payable $ 7,752 $ 9,144 The agreements governing the Company’s secured borrowings and promissory note require the Company to maintain certain financial and debt covenants. The Company was in compliance with all debt and financial covenants as of December 31, 2017 and 2016. |
Offsetting Assets and Liabiliti
Offsetting Assets and Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Offsetting Assets and Liabilities | |
Offsetting Assets and Liabilities | Note 12 – Offsetting Assets and Liabilities In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company may enter into an International Swaps and Derivatives Association (“ISDA”) Master Agreement with multiple derivative counterparties. An ISDA Master Agreement, published by ISDA, is a bilateral trading agreement between two parties that allow both parties to enter into over-the-counter (“OTC”), derivative contracts. The ISDA Master Agreement contains a Schedule to the Master Agreement and a Credit Support Annex, which governs the maintenance, reporting, collateral management and default process (netting provisions in the event of a default and/or a termination event). Under an ISDA Master Agreement, the Company may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default, including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Company’s stockholders’ equity declines by a stated percentage or the Company fails to meet the terms of its ISDA Master Agreements, which would cause the Company to accelerate payment of any net liability owed to the counterparty. As of December 31, 2017 and 2016 and for the periods then ended, the Company was in good standing on all of its ISDA Master Agreements or similar arrangements with its counterparties. For derivatives traded under an ISDA Master Agreement, the collateral requirements are listed under the Credit Support Annex, which is the sum of the mark to market for each derivative contract, the independent amount due to the derivative counterparty and any thresholds, if any. Collateral may be in the form of cash or any eligible securities, as defined in the respective ISDA agreements. Cash collateral pledged to and by the Company with the counterparty, if any, is reported separately on the consolidated balance sheets as restricted cash. All margin call amounts must be made before the notification time and must exceed a minimum transfer amount threshold before a transfer is required. All margin calls must be responded to and completed by the close of business on the same day of the margin call, unless otherwise specified. Any margin calls after the notification time must be completed by the next business day. Typically, the Company and its counterparties are not permitted to sell, rehypothecate or use the collateral posted. To the extent amounts due to the Company from its counterparties are not fully collateralized, the Company bears exposure and the risk of loss from a defaulting counterparty. The Company attempts to mitigate counterparty risk by establishing ISDA agreements with only high grade counterparties that have the financial health to honor their obligations and diversification, entering into agreements with multiple counterparties. In accordance with ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities , the Company is required to disclose the impact of offsetting of assets and liabilities represented in the consolidated balance sheets to enable users of the consolidated financial statements to evaluate the effect or potential effect of netting arrangements on its financial position for recognized assets and liabilities. These recognized assets and liabilities are financial instruments and derivative instruments that are either subject to enforceable master netting arrangements or ISDA Master Agreements or meet the following right of setoff criteria: (a) the amounts owed by the Company to another party are determinable, (b) the Company has the right to set off the amounts owed with the amounts owed by the counterparty, (c) the Company intends to set off, and (d) the Company’s right of setoff is enforceable at law. As of December 31, 2017 and 2016, the Company has elected to offset assets and liabilities associated with its OTC derivative contracts in the consolidated balances sheets. The following table provides disclosure regarding the effect of offsetting of the Company’s recognized assets and liabilities presented in the consolidated balance sheet as of December 31, 2017: Gross Assets Amounts Presented in Gross Amounts Not Offset in the Consolidated Gross Offset in the the Balance Sheets (1) Amounts of Consolidated Consolidated Cash Recognized Balance Balance Financial Collateral (In Thousands) Assets Sheets Sheets Instruments Received Net Amount Interest rate swaps $ 2,898 $ — $ 2,898 $ — $ 2,898 $ — Total $ 2,898 $ — $ 2,898 $ — $ 2,898 $ — Gross Liabilities Amounts Presented in Gross Amounts Not Offset in the Consolidated Gross Offset in the the Balance Sheets (1) Amounts of Consolidated Consolidated Cash Recognized Balance Balance Financial Collateral (In Thousands) Liabilities Sheets Sheets Instruments Paid Net Amount Interest rate swaps $ 216 $ — $ 216 $ — $ 216 $ — Credit default swaps 66 — 66 — 66 — Secured borrowings 631,286 — 631,286 631,286 — — Promissory note, net 6,107 — 6,107 6,107 — — Total $ 637,675 $ — $ 637,675 $ 637,393 $ 282 $ — The following table provides disclosure regarding the effect of offsetting of the Company’s recognized assets and liabilities presented in the consolidated balance sheet as of December 31, 201 6 : Gross Assets Amounts Presented in Gross Amounts Not Offset in the Consolidated Gross Offset in the the Balance Sheets (1) Amounts of Consolidated Consolidated Cash Recognized Balance Balance Financial Collateral (In Thousands) Assets Sheets Sheets Instruments Received Net Amount Credit default swaps $ 173 $ — $ 173 $ — $ — $ 173 Interest rate swaps 2,924 2 2,922 — — 2,922 Total $ 3,097 $ 2 $ 3,095 $ — $ — $ 3,095 Liabilities Gross Presented in Gross Amounts Not Offset in the Consolidated Gross Amounts the Balance Sheets (1) Amounts of Offset in the Consolidated Cash Recognized Consolidated Balance Financial Collateral (In Thousands) Liabilities Balance Sheets Sheets Instruments Paid Net Amount Interest rate swaps $ 643 $ — $ 643 $ — $ 643 $ — Secured borrowings 927,462 — 927,462 925,602 1,860 — Promissory note, net 7,378 — 7,378 7,378 — — Total $ 935,483 $ — $ 935,483 $ 932,980 $ 2,503 $ — |
Derivative Instruments
Derivative Instruments | 12 Months Ended |
Dec. 31, 2017 | |
Derivative Instruments | |
Derivative Instruments | Note 13 – Derivative Instruments The Company is exposed to changing interest rates and market conditions, which affect cash flows associated with borrowings. The Company uses derivative instruments to manage interest rate risk and conditions in the commercial mortgage market and, as such, views them as economic hedges. Interest rate swaps are used to mitigate the exposure to changes in interest rates and involve the receipt of variable-rate interest amounts from a counterparty in exchange for making payments based on a fixed interest rate over the life of the swap contract. CDS are executed in order to mitigate the risk of deterioration in the current credit health of the commercial mortgage market. IRLCs are entered into with customers who have applied for residential mortgage loans and meet certain underwriting criteria. These commitments expose GMFS to market risk if interest rates change, and if the loan is not economically hedged or committed to an investor. The Company has not elected hedge accounting for these derivative instruments and, as a result, the fair value adjustments on such instruments are recorded in earnings. The fair value adjustments for interest rate swaps and CDS, along with the related interest income, interest expense and gains/(losses) on termination of such instruments, are reported as a net realized gain on financial instruments on the consolidated statements of income. The fair value adjustments for IRLCs, along with the related interest income, interest expense and gains/(losses) on termination of such instruments, are reported in gains on residential mortgage banking activities, net of variable loan expenses on the consolidated statements of income. The following tables summarize the Company’s use of derivatives and their effect on the consolidated financial statements. Notional amounts included in the table are the average notional amounts on the consolidated balance sheet dates. We believe these are the most relevant measure of volume or derivative activity as they best represent the Company’s exposure to underlying instruments. As of December 31, 2017 the Company had one open credit default swap contract and 52 open interest rate swap contracts with counterparties. As of December 31, 2016 the Company had one open credit default swap contract and 49 open interest rate swap contracts with counterparties. As of December 31, 2017 As of December 31, 2016 Asset Liability Asset Liability Notional Derivatives Derivatives Notional Derivatives Derivatives (In Thousands) Primary Underlying Risk Amount Fair Value Fair Value Amount Fair Value Fair Value Credit Default Swaps Credit Risk $ 15,000 $ — $ (66) $ 15,000 $ 173 $ – Interest Rate Swaps Interest rate risk 391,381 2,898 (216) 378,050 2,922 (643) Interest rate lock commitments Interest rate risk 167,533 1,827 — 212,530 2,690 — Total $ 573,914 $ 4,725 $ (282) $ 605,580 $ 5,785 $ (643) The following tables summarize the gains and losses on the Company’s derivatives: Year Ended December 31, 2017 Net Change in Net Realized Unrealized (In Thousands) (Loss) Gain (Loss) Credit default swaps (1) $ — $ (238) Interest rate swaps (1) (1,256) 2,238 Residential mortgage banking activities interest rate swaps (2) — (1,836) Interest rate lock commitments (2) — (863) Total $ (1,256) $ (699) (1) Gains (losses) are recorded in net unrealized gain (loss) on financial instruments or net realized gain (loss) on financial instruments in the consolidated statements of income. |
Senior secured notes, net and C
Senior secured notes, net and Convertible notes, net | 12 Months Ended |
Dec. 31, 2017 | |
Senior secured notes, net and Convertible notes, net | |
Senior secured notes, net and Convertible notes, net | Note 14 – Senior secured notes, net and Convertible notes, net Senior secured notes, net On February 13, 2017, ReadyCap Holdings LLC, a subsidiary of the Company, issued $75.0 million in 7.50% Senior Secured Notes due 2022. On June 13, 2017, ReadyCap Holdings LLC, issued an additional $65.0 million in aggregate principal amount of 7.50% Senior Secured Notes due 2022, which have identical terms (other than issue date and issue price) to the notes issued on February 13, 2017 (collectively “the Senior Secured Notes”). The additional $65.0 million in Senior Secured Notes were priced with a yield-to-maturity of 6.75%. Payments of the amounts due on the Senior Secured Notes are fully and unconditionally guaranteed by the Company and its subsidiaries: Sutherland Partners LP, Sutherland Asset I, LLC, and RCC. The funds were used to fund new SBC and SBA loan originations. As of December 31, 2017, we were in compliance with all covenants with respect to the Senior Secured Notes. Convertible notes, net On August 9, 2017, the Company closed an underwritten public sale of $115.0 million aggregate principal amount of its 7.00% convertible senior notes due 2023 (“Convertible Notes”). The Convertible Notes will mature on August 15, 2023, unless earlier repurchased, redeemed or converted. During certain periods and subject to certain conditions, the notes will be convertible by holders into shares of the Company's common stock at an initial conversion rate of 1.4997 shares of common stock per $25 principal amount of the notes, which is equivalent to an initial conversion price of approximately $16.67 per share of common stock. Upon conversion, holders will receive, at the Company's discretion, cash, shares of the Company's common stock or a combination thereof. The Company may redeem all or any portion of the Convertible Notes, at its option, on or after August 15, 2021, at a redemption price payable in cash equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest. Additionally, upon the occurrence of certain corporate transactions, holders may require the Company to purchase the Convertible Notes for cash at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus accrued and unpaid interest. The Convertible Notes will be convertible only upon satisfaction of one or more of the following conditions: (1) the closing market price of the Company’s common stock is greater than or equal to 120% of the conversion price of the respective Convertible Notes for at least 20 out of 30 days prior to the end of the preceding fiscal quarter, (2) the trading price of the Convertible Notes is less than 98% of the product of (i) the conversion rate and (ii) the closing price of the Company’s common stock during any five consecutive trading day period, (3) the Company issues certain equity instruments at less than the 10-day average closing market price of its common stock or the per-share value of certain distributions exceeds the market price of the Company’s common stock by more than 10%, or (4) certain other specified corporate events (significant consolidation, sale, merger share exchange, etc.) occur. At issuance, we allocated $112.7 million and $2.3 million of the carrying value of the Convertible Notes to its debt and equity components, respectively, before the allocation of deferred financing costs. As of December 31, 2017, we were in compliance with all covenants with respect to the Convertible Notes. The following table presents the components of the Senior Secured Notes and Convertible Notes, including the carrying value for the aggregate contractual maturities, on the consolidated balance sheet: (in thousands, except rates) Coupon Rate Maturity Date December 31, 2017 2017 Senior secured notes principal amount (1) 7.50 % 2/15/2022 $ 140,000 Unamortized premium - Senior secured notes 1,735 Unamortized deferred financing costs - Senior secured notes (3,657) Total Senior secured notes, net $ 138,078 2017 Convertible notes- principal amount (2) 7.00 % 8/15/2023 115,000 Unamortized discount - Convertible notes (3) (2,139) Unamortized deferred financing costs - Convertible notes (3,870) Total Convertible notes, net $ 108,991 Total carrying amount of debt components $ 247,069 Total carrying amount of conversion option of equity components recorded in equity $ 2,139 (1) Interest on the Senior Secured Notes is payable semiannually on each February 15 and August 15, beginning on August 15, 2017. (2) Interest on the Convertible Notes is payable quarterly on February 15, May 15, August 15, and November 15 of each year, beginning on November 15, 2017. (3) Represents the discount created by separating the conversion option from the debt host instrument. |
Guaranteed loan financing
Guaranteed loan financing | 12 Months Ended |
Dec. 31, 2017 | |
Guaranteed loan financing | |
Guaranteed loan financing | Note 15 – Guaranteed loan financing Participations or other partial loan sales which do not meet the definition of a participating interest remain as an investment on the consolidated balance sheets and the portion sold is recorded as guaranteed loan financing in the liabilities section of the consolidated balance sheets. For these partial loan sales, the interest earned on the entire loan balance is recorded as interest income and the interest earned by the buyer in the partial loan sale is recorded within interest expense in the accompanying consolidated statements of income. The following table presents guaranteed loan financing and the related interest rates and maturity dates: Weighted Range of Average Interest Range of (In Thousands) Interest Rate Rates Maturities (Years) Ending Balance December 31, 2017 3.51 % 1.62 – 7.00 % 2018 - 2038 $ 293,045 December 31, 2016 2.79 % 3.50 – 8.75 % 2017 - 2038 $ 390,555 The following table summarizes contractual maturities of total guaranteed loan financing outstanding: (In Thousands) December 31, 2017 2018 $ 1,990 2019 2,713 2020 3,251 2021 4,767 2022 4,810 Thereafter 275,514 Total $ 293,045 Our guaranteed loan financings are secured by loans, net of $296.9 million and $396.9 million as of December 31, 2017 and 2016, respectively. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Related-Party Transactions | |
Related Party Transactions | Note 16 – Related Party Transactions Management Agreement The Company has entered into a management agreement with the Manager (the “Management Agreement”), which describes the services to be provided to us by the Manager and compensation for such services. The Manager is responsible for managing the Company’s day-to-day operations, subject to the direction and oversight of the Company’s board of directors. Management Fee Pursuant to the terms of the Management Agreement, our Manager is paid a management fee calculated and payable quarterly in arrears equal to 1.5% per annum of the Company’s stockholders’ equity (as defined in the Management Agreement) up to $500 million and 1.00% per annum of stockholders’ equity in excess of $500 million. The following table presents certain information on the management fee payable to our Manager: For the Year Ended December 31, 2017 2016 Management fee - total $ 8.1 million $ 7.4 million Management fee - amount unpaid $ 2.0 million $ 3.7 million Incentive Distribution The Manager is entitled to an incentive distribution in an amount equal to the product of (i) 15% and (ii) the excess of (a) core earnings (as defined in the partnership agreement or our operating partnership) on a rolling four-quarter basis over (b) an amount equal to 8.00% per annum multiplied by the weighted average of the issue price per share of the common stock or OP units multiplied by the weighted average number of shares of common stock outstanding, provided that core earnings over the prior twelve calendar quarters (or the period since the closing of the ZAIS Financial merger, whichever is shorter) is greater than zero. For purposes of determining the incentive distribution payable to our Manager, core earnings is defined under the partnership agreement of our operating partnership in a manner that is similar to the definition of Core Earnings described above under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” included in this annual report on Form 10-K but with the following additional adjustments which (i) further exclude: (a) the incentive distribution, (b) non-cash equity compensation expense, if any, (c) unrealized gains or losses on SBC loans (not just MBS and MSRs), (d) depreciation and amortization (to the extent we foreclose on any property), and (e) one-time events pursuant to changes in U.S. GAAP and certain other non-cash charges after discussions between our Manager and our independent directors and after approval by a majority of the independent directors and (ii) add back any realized gains or losses on the sales of MBS and on discontinued operations which were excluded from the definition of Core Earnings described under "Non-GAAP Financial Measures". There was no incentive fee distribution for the years ended December 31, 2017 or 2016. The initial term of the Management Agreement extends for three years from the closing of the ZAIS Financial merger and is automatically renewed for one-year terms on each anniversary thereafter. Following the initial term, the Management Agreement may be terminated upon the affirmative vote of at least two-thirds of our independent directors or the holders of a majority of the outstanding common stock (excluding shares held by employees and affiliates of the Manager), based upon (1) unsatisfactory performance by our Manager that is materially detrimental to the Company or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Expense Reimbursement In addition to the management fees and incentive distribution described above, the Company is also responsible for reimbursing the Manager for certain expenses paid by our Manager on behalf of the Company and for certain services provided by the Manager to the Company. Expenses incurred by the Manager and reimbursed by us are typically included in salaries and benefits or general and administrative expense on the consolidated statements of income. The following table presents certain information on reimbursable expenses payable to our Manager: For the Year Ended December 31, 2017 2016 Reimbursable expenses payable to our Manager - total $ 4.9 million $ 4.1 million Reimbursable expenses payable to our Manager - amount unpaid $ 2.4 million $ 3.4 million Other In June of 2017, the Company acquired four loans, net, from RCSF III, LLC, an entity also managed by our Manager for $57.3 million. The total unpaid principal balance of the loans was $57.0 million. In November of 2017, the Company acquired an interest in an SBC loan pool through a joint venture, WFLLA, LLC, with Waterfall Victoria Master Fund, Ltd., a fund also managed by our Manager. The Company’s investment in the joint venture was $54.2 million. |
Financial Instruments with Off-
Financial Instruments with Off-balance Sheet Risk, Credit Risk, and Certain Other Risks | 12 Months Ended |
Dec. 31, 2017 | |
Financial Instruments with Off-balance Sheet Risk, Credit Risk, and Certain Other Risks | |
Financial Instruments with Off-balance Sheet Risk, Credit Risk, and Certain Other Risks | Note 17 – Financial Instruments with Off-balance Sheet Risk, Credit Risk, and Certain Other Risks In the normal course of business, the Company enters into transactions in various financial instruments that expose us to various types of risk, both on and off balance sheet. Such risks are associated with financial instruments and markets in which the Company invests. These financial instruments expose us to varying degrees of market risk, credit risk, interest rate risk, liquidity risk, off balance sheet risk and prepayment risk. Market Risk — Market risk is the potential adverse changes in the values of the financial instrument due to unfavorable changes in the level or volatility of interest rates, foreign currency exchange rates, or market values of the underlying financial instruments. We attempt to mitigate our exposure to market risk by entering into offsetting transactions, which may include purchase or sale of interest-bearing securities and equity securities. Credit Risk — The Company is subject to credit risk in connection with our investments in SBC loans and SBC MBS and other target assets we may acquire in the future. The credit risk related to these investments pertains to the ability and willingness of the borrowers to pay, which is assessed before credit is granted or renewed and periodically reviewed throughout the loan or security term. We believe that loan credit quality is primarily determined by the borrowers' credit profiles and loan characteristics. We seek to mitigate this risk by seeking to acquire assets at appropriate prices given anticipated and unanticipated losses and by deploying a value−driven approach to underwriting and diligence, consistent with our historical investment strategy, with a focus on projected cash flows and potential risks to cash flow. We further mitigate our risk of potential losses while managing and servicing our loans by performing various workout and loss mitigation strategies with delinquent borrowers. Nevertheless, unanticipated credit losses could occur which could adversely impact operating results. The Company is also subject to credit risk with respect to the counterparties to derivative contracts. If a counterparty becomes bankrupt or otherwise fails to perform its obligation under a derivative contract due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative contract in a dissolution, assignment for the benefit of creditors, liquidation, winding-up, bankruptcy, or other analogous proceeding. In the event of the insolvency of a counterparty to a derivative transaction, the derivative transaction would typically be terminated at its fair market value. If we are owed this fair market value in the termination of the derivative transaction and its claim is unsecured, we will be treated as a general creditor of such counterparty, and will not have any claim with respect to the underlying security. We may obtain only a limited recovery or may obtain no recovery in such circumstances. In addition, the business failure of a counterparty with whom we enter a hedging transaction will most likely result in its default, which may result in the loss of potential future value and the loss of our hedge and force us to cover our commitments, if any, at the then current market price. Counterparty credit risk is the risk that counterparties may fail to fulfill their obligations, including their inability to post additional collateral in circumstances where their pledged collateral value becomes inadequate. The Company attempts to manage its exposure to counterparty risk through diversification, use of financial instruments and monitoring the creditworthiness of counterparties. The Company finances the acquisition of a significant portion of its loans and investments with repurchase agreements and borrowings under credit facilities. In connection with these financing arrangements, the Company pledges its loans, securities and cash as collateral to secure the borrowings. The amount of collateral pledged will typically exceed the amount of the borrowings (i.e., the haircut) such that the borrowings will be over-collateralized. As a result, the Company is exposed to the counterparty if, during the term of the repurchase agreement financing, a lender should default on its obligation and the Company is not able to recover its pledged assets. The amount of this exposure is the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged by the Company to the lender including accrued interest receivable on such collateral. GMFS sells loans to investors without recourse. As such, the investors have assumed the risk of loss or default by the borrower. However, GMFS is usually required by these investors to make certain standard representations and warranties relating to credit information, loan documentation and collateral. To the extent that GMFS does not comply with such representations, or there are early payment defaults, GMFS may be required to repurchase the loans or indemnify these investors for any losses from borrower defaults. In addition, if loans pay-off within a specified time frame, GMFS may be required to refund a portion of the sales proceeds to the investors. Liquidity Risk — Liquidity risk arises in our investments and the general financing of our investing activities. It includes the risk of not being able to fund acquisition and origination activities at settlement dates and/or liquidate positions in a timely manner at reasonable prices, in addition to potential increases in collateral requirements during times of heightened market volatility. If we were forced to dispose of an illiquid investment at an inopportune time, we might be forced to do so at a substantial discount to the market value, resulting in a realized loss. We attempt to mitigate our liquidity risk by regularly monitoring the liquidity of our investments in SBC loans, MBS and other financial instruments. Factors such as our expected exit strategy for, the bid to offer spread of, and the number of broker dealers making an active market in a particular strategy and the availability of long-term funding, are considered in analyzing liquidity risk. To reduce any perceived disparity between the liquidity and the terms of the debt instruments in which we invest, we attempt to minimize our reliance on short-term financing arrangements. While we may finance certain investment in security positions using traditional margin arrangements and borrowings under repurchase agreements, other financial instruments such as collateralized debt obligations, and other longer term financing vehicles may be utilized to attempt to provide us with sources of long-term financing. Off‑Balance Sheet Risk —The Company has undrawn commitments on outstanding loans which are disclosed in Note 18. Interest Rate — Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Our operating results will depend, in part, on differences between the income from our investments and our financing costs. Generally, our debt financing is based on a floating rate of interest calculated on a fixed spread over the relevant index, subject to a floor, as determined by the particular financing arrangement. In the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in credit losses to us, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects. Furthermore, such defaults could have an adverse effect on the spread between our interest-earning assets and interest-bearing liabilities. Additionally, non-performing SBC loans are not as interest rate sensitive as performing loans, as earnings on non-performing loans are often generated from restructuring the assets through loss mitigation strategies and opportunistically disposing of them. Because non-performing SBC loans are short-term assets, the discount rates used for valuation are based on short-term market interest rates, which may not move in tandem with long-term market interest rates. A rising rate environment often means an improving economy, which might have a positive impact on commercial property values, resulting in increased gains on the disposition of these assets. While rising rates could make it more costly to refinance these assets, we expect that the impact of this would be mitigated by higher property values. Moreover, small business owners are generally less interest rate sensitive than large commercial property owners, and interest cost is a relatively small component of their operating expenses. An improving economy will likely spur increased property values and sales, thereby increasing the need for SBC financing. Prepayment Risk — As we receive prepayments of principal on our investments, premiums paid on such investments will be amortized against interest income. In general, an increase in prepayment rates will accelerate the amortization of purchase premiums, thereby reducing the interest income earned on the investments and this is also affected by interest rate movements. Conversely, discounts on such investments are accreted into interest income. In general, an increase in prepayment rates will accelerate the accretion of purchase discounts, thereby increasing the interest income earned on the investments. An increase in prepayment rates will also adversely affect the fair value of our MSRs. |
Commitments, Contingencies and
Commitments, Contingencies and Indemnifications | 12 Months Ended |
Dec. 31, 2017 | |
Commitments, Contingencies and Indemnifications | |
Commitments, Contingencies and Indemnifications | Note 18 – Commitments, Contingencies and Indemnifications Litigation The Company may be subject to litigation and administrative proceedings arising in the ordinary course of its business. The Company has entered into agreements, which provide for indemnifications against losses, costs, claims, and liabilities arising from the performance of individual obligations under such agreements. The Company has had no prior claims or payments pursuant to these agreements. The Company’s individual maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, based on history and experience, the Company expects the risk of loss to be remote. Management is not aware of any other contingencies that would require accrual or disclosure in the consolidated financial statements. Unfunded Loan Commitments As of December 31, 2017 and 2016, the Company had $9.6 million and $14.9 million of unfunded loan commitments related to loans, held at fair value, respectively. As of December 31, 2017 and 2016, the Company had $84.7 million and $29.3 million of unfunded loan commitments related to loans, held-for-investment, respectively. Commitments to Originate Loans GMFS enters into IRLCs with customers who have applied for residential mortgage loans and meet certain credit and underwriting criteria. These commitments expose GMFS to market risk if interest rates change, and the loan is not economically hedged or committed to an investor. GMFS is also exposed to credit loss if the loan is originated and not sold to an investor and the borrower does not perform. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon. As of December 31, 2017 and 2016, total commitments to originate loans were $147.6 million and $200.0 million, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes | |
Income Taxes | Note 19 – Income Taxes The Company is a REIT pursuant to IRC Section 856. Our qualification as a REIT depends on our ability to meet various requirements imposed by the Internal Revenue Code, which relate to our organizational structure, diversity of stock ownership and certain requirements with regard to the nature of our assets and the sources of our income. As a REIT, we generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal income tax not to apply to our earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state and local income tax on our taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four taxable years. As of December 31, 2017 and 2016, we are in compliance with all REIT requirements. Certain of our subsidiaries have elected to be treated as taxable REIT subsidiaries (“TRSs”). TRSs permit us to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Code, and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, we will continue to maintain our qualification as a REIT. Our TRSs engage in various real estate related operations, including originating and securitizing commercial and residential mortgage loans, and investments in real property. The majority of our TRSs are held within the SBC Originations, SBA Originations, Acquisitions and Servicing, and Residential Mortgage Banking segments. Our TRSs are not consolidated for federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred income taxes is established for the portion of earnings recognized by us with respect to our interest in TRSs. The Tax Cuts and Jobs Act (the “TCJA”) was signed into law on December 22, 2017. The TCJA changed many aspects of U.S. corporate income taxation, including a reduction of the corporate income tax rate from 35% to 21%, implementation of a territorial tax system, and imposition of a tax on deemed repatriated earnings of foreign subsidiaries. We recognized the tax effects of the TCJA in our year ended December 31, 2017 results and recorded a $1.0 million income tax benefit which relates entirely to the re-measurement of deferred tax balances to the 21% tax rate. Our income tax provision consists of the following: Year Ended December 31, (In Thousands) 2017 2016 2015 Current Federal income tax (benefit) $ (1,235) $ 6,441 $ 5,234 State and local income tax (benefit) (171) 947 710 Net current tax provision (benefit) (1,406) 7,388 5,944 Deferred Federal income tax 3,779 1,401 750 State and local income tax 613 583 248 Valuation allowance (1,147) 279 868 Net deferred tax provision 3,245 2,263 1,866 Total income tax provision $ 1,839 $ 9,651 $ 7,810 The following table is a reconciliation of our federal income tax determined using our statutory federal tax rate to our reported income tax provision for the years ended December 31, 2017, 2016 and 2015: Year Ended December 31, (In Thousands) 2017 2016 2015 U.S. statutory tax $ 16,679 $ 22,825 $ 18,099 State and local income tax 569 2,322 721 Income attributable to REIT (10,795) (14,522) (10,138) Income attributable to Non-controlling interests (568) (1,251) (1,491) Nondeductible 748 21 18 Change in tax rate (a) (727) — — Change in valuation allowance (1,147) 279 868 Return to Provision (2,547) — — Other (373) (23) (267) Effective income tax $ 1,839 $ 9,651 $ 7,810 (a) For 2017 the amount relates to the effects of revaluing our net deferred tax balances for the TCJA that was enacted on December 22, 2017 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are presented net by tax jurisdiction and are reported in other assets and other liabilities, respectively. The following table presents the tax effects of temporary differences on their respective net deferred tax assets and liabilities (in thousands): (In Thousands) December 31, 2017 December 31, 2016 Deferred tax assets: Net operating loss carryforwards $ 4,989 $ 4,159 Unrealized losses — 488 Impairment and reserves — 7,826 Depreciation and amortization 997 668 Goodwill 3,110 7,134 Compensation 1,226 1,669 Intangibles — 896 Other 1,240 859 Total deferred tax assets $ 11,562 $ 23,699 Deferred tax liabilities: Accruals $ 216 $ (402) Loan / servicing rights balance 12,014 20,995 Derivative instruments 373 1,152 Other taxable temporary difference 310 69 Total deferred tax liabilities $ 12,913 $ 21,814 Valuation allowance — (1,147) Net deferred tax assets (liabilities) $ (1,351) $ 738 The Company has $34.7 million of net operating loss carryforwards that will begin to expire in 2033. In 2016 as result of the ZAIS Financial merger, our deferred tax assets increased by approximately $2.9 million. Based on our analysis of limitations imposed by Section 382 of the Internal Revenue Code, we estimate we are able to fully utilize this net operating loss, limited to $1.1 million per year. We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under GAAP and their respective tax bases. We evaluate our deferred tax assets for recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including our historical profitability and projections of future taxable income. As of December 31, 2017, we continued to conclude that the positive evidence in favor of the recoverability of our deferred tax asset outweighed the negative evidence and that it is more likely than not that our deferred tax assets will be realized. Our framework for assessing the recoverability of deferred tax assets requires us to weigh all available evidence, including the sustainability of recent profitability required to realize the deferred tax assets, the cumulative net income in our consolidated statements of income in recent years, and the carryforward periods for any carryforwards of net operating losses. The tables above do not include tax information on discontinued operations. The tax rate on discontinued operations is approximately 39%. The difference between the statutory rate of 35% and the effective income tax rate is primarily due to state and local taxes. As of December 31, 2017 and 2016, the Company had no uncertain tax positions recorded or disclosed in financial statements. Additionally, it is the belief of management that the total amount of uncertain tax positions, if any, will not materially change over the next 12 months. Our major tax jurisdictions where we file income tax returns include Federal, New York State and New York City. Our 2014 and forward tax years are subject to examination. The TRS major tax jurisdictions are Federal, New York State, New York City, New Jersey and California. For Federal and state purposes, with the exception of New Jersey, the TRS entities are subject to examination for the 2014 and forward tax years. For New Jersey, the TRS entities are subject to examination for the 2013 and forward tax years. |
Other Asset and Other Liabiliti
Other Asset and Other Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Other Asset and Other Liabilities | |
Other Asset and Other Liabilities | Note 20 – Other Assets and Other Liabilities The following table details the Company’s other assets and other liabilities as of the consolidated balance sheet dates. (In Thousands) December 31, 2017 December 31, 2016 Other assets: Due from servicers $ 9,964 $ 27,029 Intangible assets 3,264 3,636 Accrued interest 6,494 5,606 Real estate acquired in settlement of loans 1,644 3,933 Deferred financing costs 446 3,376 Deferred tax asset 17,155 1,371 Prepaid taxes 6,014 1,456 Other 11,859 7,870 Total other assets $ 56,840 $ 54,277 Accounts payable and other accrued liabilities: Accrued salaries, wages and commissions $ 16,508 $ 17,450 Servicing principal and interest payable 5,659 10,664 Repair and denial reserve 5,687 6,813 Liability under subservicing agreements 1,496 6,757 Unapplied cash 2,445 6,278 Accrued interest payable 10,317 4,680 Payable to related parties 2,042 3,762 Deferred tax liability 18,506 632 Other accounts payable and accrued liabilities 11,976 13,171 Total accounts payable and other accrued liabilities $ 74,636 $ 70,207 Real Estate Acquired in Settlement of Loans The Company acquires real estate through the foreclosure of its loans and the occasional purchase of real estate. The Company’s real estate properties are held in the Company’s consolidated TRSs. The following tables summarize the carrying amount of the Company’s real estate holdings as of the consolidated balance sheet dates: (In Thousands) December 31, 2017 December 31, 2016 North Carolina — 1,850 Florida 303 1,320 Illinois 863 19 Other 478 744 Total $ 1,644 $ 3,933 Intangible assets The following table presents information about the intangible assets held by the Company: (In Thousands) December 31, 2017 December 31, 2016 Estimated Useful Life Trade name $ 1,017 $ 1,190 15 years Favorable lease 1,247 1,446 12 years SBA license 1,000 1,000 Indefinite life Total Intangible Assets $ 3,264 $ 3,636 Amortization expense related to the intangible assets acquired for the years ended December 31, 2017 and 2016 was $0.4 and $0.1 million, respectively. Such amounts are recorded as other operating expenses in the consolidated statements of income. At December 31, 2017, accumulated amortization for finite-lived intangible assets is as follows: (In Thousands) December 31, 2017 Trade name $ 206 Favorable lease 233 Total Accumulated Amortization $ 439 Amortization expense related to the finite-lived intangible assets for the five years subsequent to December 31, 2017 is as follows: (In Thousands) December 31, 2017 2018 $ 349 2019 311 2020 277 2021 248 2022 222 Thereafter 857 Total $ 2,264 Loan indemnification reserve A liability has been established for potential losses related to representations and warranties made by GMFS for loans sold with a corresponding provision recorded for loan indemnification losses. The liability is included in accounts payable and other accrued liabilities in the Company's consolidated balance sheets and the provision for loan indemnification losses is included in gains on residential mortgage banking activities, net of variable loan expenses, in the Company's consolidated statements of income. In assessing the adequacy of the liability, management evaluates various factors including historical repurchases and indemnifications, historical loss experience, known delinquent and other problem loans, outstanding repurchase demand, historical rescission rates and economic trends and conditions in the industry. Actual losses incurred are reflected as a reduction of the reserve liability. At December 31, 2017 and 2016, the loan indemnification reserve was $3.0 million and $2.8 million, respectively. Because of the uncertainty in the various estimates underlying the loan indemnification reserve, there is a range of losses in excess of the recorded loan indemnification reserve that is reasonably possible. The estimate of the range of possible losses for representations and warranties does not represent a probable loss, and is based on current available information, significant judgment, and a number of assumptions that are subject to change. At December 31, 2017 and 2016, the reasonably possible loss above the recorded loan indemnification reserve was not considered material. |
Other Income and Other Operatin
Other Income and Other Operating Expenses | 12 Months Ended |
Dec. 31, 2017 | |
Other Income and Other Operating Expenses | |
Other Income and Other Operating Expenses | Note 21 – Other Income and Operating Expenses The following table details the Company’s other income and operating expenses for the consolidated statements of income. For the Year Ended December 31, (In Thousands) 2017 2016 2015 Other income Origination income $ 4,302 $ 4,144 $ 2,935 Release/(Increase) of repair and denial reserve 1,013 1,258 10,120 Other 3,143 3,759 1,376 Total other income $ 8,458 $ 9,161 $ 14,431 Other operating expenses Origination costs $ 6,862 $ 4,098 $ 2,779 Technology expense 3,692 2,945 2,414 Charge off of real estate acquired in settlement of loans 756 1,833 849 Rent expense 2,314 1,449 996 Recruiting, training and travel expenses 2,389 1,320 1,223 Other 10,926 5,535 3,693 Total other operating expenses $ 26,939 $ 17,180 $ 11,954 |
Variable Interest Entities and
Variable Interest Entities and Securitization Activities | 12 Months Ended |
Dec. 31, 2017 | |
Variable Interest Entities and Securitization Activities | |
Variable Interest Entities and Securitization Activities | Note 22 – Variable Interest Entities and Securitization Activities In the normal course of business, we enter into certain types of transactions with entities that are considered to be VIEs. Our primary involvement with VIEs has been related to our securitization transactions in which we transfer assets to securitization trusts. We primarily securitize acquired SBC loans, originated transitional loans, and acquired SBA loans, which provides a source of funding for us and has enabled us to transfer a certain portion of the economic risk of the loans or related debt securities to third parties. We also transfer originated loans to securitization trusts sponsored by third parties, most notably Freddie Mac. Third-party securitizations are securitization entities in which we maintain an economic interest but do not sponsor. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE. The majority of the VIEs in which we have been involved in are consolidated in our financial statements. See Note 3 for a discussion of our accounting policies applied to the consolidation of the VIE and transfer of the loans in connection with the securitization. Securitization-Related VIEs Company sponsored securitizations In a securitization transaction, assets are transferred to a trust, which generally meets the definition of a VIE. Our primary securitization activity is in the form of SBC and SBA loan securitizations, conducted through securitization trusts which we consolidate, as we determined that we are the primary beneficiary. For financial statement reporting purposes, since the underlying trust is consolidated, the securitization is effectively viewed as a financing of the loans that were securitized to enable the senior security to be created and sold to a third-party investor. As such, the senior security is presented on the consolidated balance sheets as securitized debt obligations of consolidated VIEs. The third-party beneficial interest holders in the VIE have no recourse against the Company, except that the Company has an obligation to repurchase assets from the VIE in the event that certain representations and warranties in relation to the loans sold to the VIE are breached. In the absence of such a breach, the Company has no obligation to provide any other explicit or implicit support to any VIE. The securitization trust receives principal and interest on the underlying loans and distributes those payments to the certificate holders. The assets and other instruments held by the securitization trust are restricted in that they can only be used to fulfill the obligations of the securitization trust. The risks associated with the Company’s involvement with the VIE is limited to the risks and rights as a certificate holder of the securities retained by the Company. The consolidation of the securitization transactions includes the senior securities issued to third parties which are shown as securitized debt obligations of consolidated VIEs on the consolidated balance sheets. The following table presents additional information on the Company’s securitized debt obligations: December 31, 2017 December 31, 2016 Current Weighted Current Weighted Principal Carrying Average Principal Carrying Average (In Thousands) Balance value Interest Rate Balance value Interest Rate Waterfall Victoria Mortgage Trust 2011-SBC2 $ 16,010 $ 16,010 5.3 % $ 24,472 $ 24,472 5.2 % Sutherland Commercial Mortgage Loans 2015-SBC4 10,049 9,687 4.0 39,464 38,402 3.9 Sutherland Commercial Mortgage Trust 2017-SBC6 119,784 117,868 3.3 — — — ReadyCap Commercial Mortgage Trust 2014-1 33,953 33,951 3.6 84,320 83,885 3.4 ReadyCap Commercial Mortgage Trust 2015-2 151,993 147,271 4.1 166,232 160,699 4.0 ReadyCap Commercial Mortgage Trust 2016-3 98,733 95,907 3.5 133,774 129,914 3.5 Ready Capital Mortgage Financing 2017-FL1 158,978 154,721 2.8 — — — ReadyCap Lending Small Business Trust 2015-1 25,057 22,733 2.5 56,055 55,570 2.0 Total $ 614,557 $ 598,148 3.4 % $ 504,317 $ 492,942 % Repayment of our securitized debt will be dependent upon the cash flows generated by the loans in the securitization trust that collateralize such debt. The actual cash flows from the securitized loans are comprised of coupon interest, scheduled principal payments, prepayments and liquidations of the underlying loans. The actual term of the securitized debt may differ significantly from our estimate given that actual interest collections, mortgage prepayments and/or losses on liquidation of mortgages may differ significantly from those expected. Third-party sponsored securitizations For Freddie Mac sponsored securitizations, we determined that we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact the economic performance of these entities. Specifically, we do not service or manage these entities or otherwise solely hold decision making powers that are significant, which include special servicing decisions. As a result of this assessment, we do not consolidate any of the underlying assets and liabilities of these trusts, we only account for our specific interests in them. Other VIEs Other VIEs include a variable interest that we hold in an acquired joint venture investment that we account for as an equity method investment. We do not consolidate these entities because we do not have the power to direct the activities that most significantly impact their economic performance, we only account for our specific interest in them. Assets and Liabilities of Consolidated VIEs The following table reflects the securitized assets and liabilities for VIEs that we consolidate on our consolidated balance sheets: (In Thousands) December 31, 2017 December 31, 2016 Assets: Cash and cash equivalents $ 25 $ 131 Restricted cash 15,838 808 Loans, net 836,180 655,559 Real estate acquired in settlement of loans 3,443 4,103 Accrued interest 4,261 2,835 Due from servicers 1,915 27,660 Total assets 861,662 691,096 Liabilities: Securitized debt obligations of consolidated VIEs, net 598,148 492,942 Total liabilities 598,148 492,942 Equity $ 263,514 $ 198,154 Assets of Unconsolidated VIEs The following table reflects our variable interests in identified VIEs, of which we are not the primary beneficiary, as of December 31, 2017: (In Thousands) Carrying Maximum (1) Assets: Mortgage backed securities, at fair value (2) $ 38,568 $ 38,568 Investment in unconsolidated joint venture 55,369 55,369 Total assets in unconsolidated VIEs $ 93,937 93,937 (1) Maximum exposure to loss is limited to the greater of the fair value or carrying value of the assets as of the consolidated balance sheet date. (2) Retained interest in Freddie Mac sponsored securitizations. |
Stockholders_ Equity
Stockholders’ Equity | 12 Months Ended |
Dec. 31, 2017 | |
Stockholders’ Equity | |
Stockholders’ Equity | Note 23 – Stockholders’ Equity Common stock dividends The following table presents cash dividends declared by our board of directors on our common stock from January 1, 2016 through December 31, 2017: Dividend per Declaration Date Record Date Payment Date Share May 20, 2016 June 3, 2016 June 17, 2016 $ 0.45 August 23, 2016 September 2, 2016 September 16, 2016 $ 0.45 October 11, 2016 October 14, 2016 October 25, 2016 $ 0.36 December 21, 2016 December 30, 2016 January 27, 2017 $ 0.35 March 14, 2017 March 31, 2017 April 13, 2017 $ 0.37 June 15, 2017 June 30, 2017 July 31, 2017 $ 0.37 September 12, 2017 September 29, 2017 October 20, 2017 $ 0.37 December 13, 2017 December 29, 2017 January 31, 2018 $ 0.37 (1) Retrospectively adjusted for the equivalent number of shares after the reverse merger. Incentive fee stock issuance On January 8, 2016, the Company issued 27,199 shares at $17.74 per share to the Manager for the incentive distribution fee earned for the second and third quarters of 2015. As discussed above, the Manager is entitled to an incentive distribution fee as defined in the Management Agreement. Stock incentive plan In connection with the reverse merger, the Company adopted ZAIS Financial’s 2012 equity incentive plan (“the 2012 Plan”). The 2012 Plan authorizes the Compensation Committee to approve grants of equity-based awards to our officers, directors, and employees of the Manager and its affiliates. The equity incentive plan provides for grants of equity-based awards up to an aggregate of 5% of the shares of the Company’s common stock issued and outstanding from time to time on a fully diluted basis. During the first quarter of 2017, the Company issued restricted stock units (“RSUs”) to its independent directors as compensation for their service on the board of directors. RSUs are awarded at no cost to the recipient upon their grant. Each of our four independent directors received a one-time grant of 5,000 RSUs vesting immediately on a one-for-one basis for 5,000 shares of our common stock. Each independent director also received an annual grant of 5,000 RSUs that vested or will vest on a one-for-one basis for shares of our common stock in equal quarterly installments over a one year period ending December 31, 2017. The shares of stock associated with RSUs are not issued and are unvested until the directors, officers or employees meet certain vesting conditions and earn the right to those shares. Dividend equivalent rights will be paid on unvested RSUs at the same rate and at the same time as dividends on the Company’s common stock. During the second quarter of 2017, the Company issued restricted stock awards (“RSAs”) to certain employees as compensation for their employment services. The RSAs are awarded at no cost to the recipient upon their grant. A total of 25,851 shares were awarded and will vest in equal installments over a three year period ending May 9, 2020. The shares of stock were issued during the second quarter of 2017, but remain unvested until those service conditions are met, where upon such employees will then earn the right to such shares. Dividend equivalent rights will be paid on unvested RSAs at the same rate and at the same time as dividends on the Company’s common stock. The Company’s current policy for issuing shares upon settlement of stock-based incentive awards is to issue new shares. The fair value of the RSUs and RSAs granted, which is determined based upon the stock price on the grant date, is recorded as compensation expense on a straight - line basis over the vesting periods for the awards, with an offsetting increase in stockholders’ equity. The following table summarizes the Company’s RSU and RSA activity for the year ended December 31, 2017: Independent Director RSUs Employee RSAs (In Thousands, except share data) Number of Weighted-average grant date fair value Weighted-average grant date fair value (per share) Number of Weighted-average grant date fair value Weighted-average grant date fair value (per share) Outstanding, January 1 — $ — $ — — $ — $ — Granted 40,000 580 14.50 — — — Vested (25,000) (363) 14.50 — — — Forfeited — — — — — — Canceled — — — — — — Outstanding, March 31, 2017 15,000 $ 217 $ 14.50 — $ — $ — Granted — — — 25,851 380 14.70 Vested (5,000) (72) 14.50 — — — Forfeited — — — — — — Canceled — — — — — — Outstanding, June 30, 2017 10,000 $ 145 $ 14.50 25,851 $ 380 $ 14.70 Granted — — — — — — Vested (5,000) (72) 14.50 — — — Forfeited — — — — — — Canceled — — — — — — Outstanding, September 30, 2017 5,000 $ 73 $ 14.50 25,851 $ 380 $ 14.70 Granted — — — — — — Vested (5,000) (73) 14.50 — — — Forfeited — — — — — — Canceled — — — — — — Outstanding, December 31, 2017 — $ — $ — 25,851 $ 380 $ 14.70 During the year ended December 31, 2017, the Company recognized $0.7 million of noncash compensation expense related to its stock-based incentive plan in our consolidated statements of income. As of December 31, 2017, approximately $0.3 million of noncash compensation expense related to unvested awards had not yet been charged to net income. These costs are expected to be amortized into compensation expense ratably over the course of the remainder of the respective vesting periods. Litigation settlement On May 2, 2017, the Company issued approximately $4.0 million in shares of the Company's common stock (275,862 shares issued) to a counterparty in connection with a litigation settlement. |
Earnings per Share of Common St
Earnings per Share of Common Stock | 12 Months Ended |
Dec. 31, 2017 | |
Earnings per Share of Common Stock | |
Earnings per Share of Common Stock | Note 24 – Earnings per Share of Common Stock The number of shares of common stock used in the computation of basic income per share. This reconciliation has been retrospectively adjusted for the equivalent number of shares after the reverse acquisition. Year Ended December 31, (In Thousands, except for share and per share amounts) 2017 2016 2015 Basic Earnings Continuing Operations Income from continuing operations $ 45,814 $ 55,564 $ 45,421 Less: Income attributable to non-controlling interest 2,524 4,237 4,385 Less: Income attributable to participating shares 62 - - Basic - Income from continuing operations $ 43,228 $ 51,327 $ 41,036 Discontinued Operations Loss from discontinued operations - (2,158) (653) Basic — Net income attributable to common stockholders after allocation to participating shares $ 43,228 $ 49,169 $ 40,383 Diluted Earnings Continuing Operations Basic — Income from continuing operations $ 45,814 $ 55,564 $ 45,421 Less: Income attributable to non-controlling interest 2,524 4,237 4,385 Less: Income attributable to participating shares 62 - - Diluted — Income from continuing operations $ 43,228 $ 51,327 $ 41,036 Discontinued Operations Basic — Loss from discontinued operations - (2,158) (653) Diluted — Net income attributable to common stockholders after allocation to participating shares $ 43,228 $ 49,169 $ 40,383 Number of Shares Basic — Average shares outstanding 31,350,102 26,647,981 (1) 25,287,277 (1) Effect of dilutive securities — Unvested participating shares 1,509 - - Diluted — Average shares outstanding 31,351,611 26,647,981 25,287,277 Basic Income from continuing operations $ 1.38 $ 1.93 $ 1.62 Loss from discontinued operations - (0.08) (0.03) Diluted Income from continuing operations $ 1.38 $ 1.93 $ 1.62 Loss from discontinued operations - (0.08) (0.03) (1) Retroactively adjusted for the equivalent number of shares after the reverse acquisition using an exchange rate of 0.8356. Participating unvested RSUs were excluded from the computation of diluted shares as their effect was already considered under the more dilutive two-class method used above. Additionally, as of December 31, 2017, there are potential shares of common stock contingently issuable upon the conversion of the Convertible Notes in the future. The Company has asserted its intent and ability to settle the principal amount of the Convertible Notes in cash. Based on this assessment, the Company determined that it would be appropriate to apply a method similar to the treasury stock method, such that contingently issuable common stock is assessed quarterly along with our other potentially dilutive instruments. In order to compute the dilutive effect, the number of shares included in the denominator of diluted EPS is determined by dividing the “conversion spread value” of the share-settled portion (value above accreted value of face value and interest component) of the instrument by the share price. The “conversion spread value” is the value that would be delivered to investors in shares based on the terms of the bond upon an assumed conversion. As of December 31, 2017, the conversion spread value is currently zero, since the closing price of our common stock does not exceed the conversion rate (strike price) and is “out-of-the-money”, resulting in no impact on diluted EPS. Certain investors own OP units in our operating partnership. An OP unit and a share of common stock of the Company have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the operating partnership. OP unit holders have the right to redeem their OP units, subject to certain restrictions. The redemption is required to be satisfied in shares of common stock or cash at the Company's option, calculated as follows: one share of the Company's common stock, or cash equal to the fair value of a share of the Company's common stock at the time of redemption, for each OP unit. When an OP unit holder redeems an OP unit, non-controlling interests in the Operating Partnership is reduced and the Company's equity is increased. At December 31, 2017 and 2016, the non-controlling interest OP unit holders owned 1,150,827 and 2,349,561, OP units, respectively, or 3.5% and 7.1% of the OP units issued by our operating partnership. |
Interest Income and Interest Ex
Interest Income and Interest Expense | 12 Months Ended |
Dec. 31, 2017 | |
Interest Income and Interest Expense | |
Interest Income and Interest Expense | Note 25 – Interest Income and Interest Expense Interest income and interest expense are recorded in the consolidated statements of income and classified based on the nature of the underlying asset or liability. The following table presents the components of interest income and expense: Year Ended December 31, (In Thousands) 2017 2016 2015 Interest income Loans Acquired SBA 7(a) loans $ 37,110 $ 46,417 $ 54,565 Acquired loans 34,720 44,122 50,920 Originated Transitional loans 25,323 8,608 1,698 Originated SBC loans, at fair value 7,769 13,457 14,858 Originated SBC loans 22,564 17,902 14,793 Originated SBA 7(a) loans 998 — — Originated Residential Agency loans 255 — — Total loans (1) $ 128,739 $ 130,506 $ 136,834 Held for sale, at fair value, loans Originated Residential Agency loans $ 3,723 $ 709 $ — Originated Freddie loans 1,507 619 — Originated SBA 7(a) loans — — 40 Acquired loans 993 299 — Total loans, held for sale, at fair value $ 6,223 $ 1,627 $ 40 Mortgage backed securities, at fair value 3,343 4,890 12,081 Total interest income $ 138,305 $ 137,023 $ 148,955 Interest expense Secured borrowings $ (26,092) $ (25,839) $ (24,481) Securitized debt obligations of consolidated VIEs (23,387) (17,619) (11,018) Guaranteed loan financing (13,435) (13,971) (12,307) Senior secured note (8,069) — — Convertible note (3,427) — — Promissory note (236) (164) — Exchangeable senior notes — (179) — Total interest expense $ (74,646) $ (57,772) $ (47,806) Net interest income before provision for loan losses $ 63,659 $ 79,251 $ 101,149 (1) Includes interest income on loans in consolidated VIEs. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2017 | |
Segment Reporting | |
Segment Reporting | Note 26 – Segment Reporting The Company reports its results of operations through the following four business segments: i) Loan Acquisitions , ii) SBC Originations , iii) SBA Originations, Acquisitions and Servicing , and iv) Residential Mortgage Banking . The Company’s organizational structure is based on a number of factors that the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), uses to evaluate, view, and run its business operations, which includes customer base and nature of loan program types. The segments are based on this organizational structure and the information reviewed by CODM and management to evaluate segment results. Loan Acquisitions Through the Loan Acquisitions segment, the Company acquires performing and non-performing SBC loans and intends to continue to acquire these loans as part of the Company’s business strategy. SBC Originations Through the SBC Originations segment, the Company originates SBC loans secured by stabilized or transitional investor properties using multiple loan origination channels. Additionally, as part of this segment, we originate and service multi-family loan products under the Freddie Mac program. This segment also reflects the impact of our SBC securitization activities. SBA Originations, Acquisitions, and Servicing Through the SBA Originations, Acquisitions, and Servicing segment, the Company acquires, originates and services loans guaranteed by the SBA under the SBA Section 7(a) Program. This segment also reflects the impact of our SBA securitization activities. Residential Mortgage Banking Through the Residential Mortgage Banking segment, the Company originates residential mortgage loans eligible to be purchased, guaranteed or insured by Fannie Mae, Freddie Mac, FHA, USDA and VA through retail, correspondent and broker channels. Corporate - Other Corporate - Other consists primarily of unallocated corporate financing, including interest expense relating to our senior secured and convertible notes on funds yet to be deployed, allocated employee compensation from our Manager, management and incentive fees paid to our Manager and other general corporate overhead expenses, as well as the provision for income taxes. Segment Realignment Effective at the beginning of the third quarter of 2017, the Company implemented organizational changes to align its segment financial reporting more closely with its current business practices. Securitization activities on originated SBC and SBA loans were transferred out of the Loan Acquisitions segment and into either the SBC originations or SBA originations, acquisitions, and servicing segment, based on loan type. The other change presents Corporate- Other amounts separately and no longer reflecting these amounts as part of the four business segments. Prior period numbers were revised to conform to the new segment alignment and to be consistent with our current period’s presentation. In accordance with ASC 280, Segment Reporting , the Company has not included discontinued operations in the segment reporting. The Company uses segment income from continuing operations before provision for income taxes as the measure of profitability of its reportable segments. Results of Business Segments and All Other Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the year ended December 31, 2017 are summarized in the below table. SBA Originations, Residential Loan SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 37,198 $ 59,021 $ 38,108 $ 3,978 $ — $ 138,305 Interest expense (16,741) (35,121) (16,098) (3,145) (3,541) (74,646) Net interest income before provision for loan losses $ 20,457 $ 23,900 $ 22,010 $ 833 $ (3,541) $ 63,659 Provision for loan losses (2,026) (195) (142) — — (2,363) Net interest income after provision for loan losses $ 18,431 $ 23,705 $ 21,868 $ 833 $ (3,541) $ 61,296 Non-interest income Gains on residential mortgage banking activities, net of variable loan expenses $ — $ — $ — $ 41,700 $ — $ 41,700 Other income 2,814 3,983 1,513 148 — 8,458 Servicing income 197 824 4,624 17,349 — 22,994 Gain on bargain purchase — — — — — — Total non-interest income $ 3,011 $ 4,807 $ 6,137 $ 59,197 $ — $ 73,152 Non-interest expense Employee compensation and benefits (576) (8,509) (10,505) (34,601) (848) (55,039) Allocated employee compensation and benefits from related party (384) — — — (3,459) (3,843) Professional fees (1,501) (1,351) (1,973) (865) (3,231) (8,921) Management fees – related party — — — — (8,059) (8,059) Loan servicing expense (2,981) (2,355) 1,454 (6,441) — (10,323) Other operating expenses (4,285) (9,666) (4,076) (6,677) (2,235) (26,939) Total non-interest expense $ (9,727) $ (21,881) $ (15,100) $ (48,584) $ (17,832) $ (113,124) Net realized (loss) gain on financial instruments (323) 9,665 9,509 — 478 19,329 Net unrealized gain (loss) on financial instruments 1,628 8,125 1,315 (4,000) (68) 7,000 Income from continuing operations before provision for income taxes $ 13,020 $ 24,421 $ 23,729 $ 7,446 $ (20,963) $ 47,653 Total Assets $ 511,427 $ 1,154,509 $ 510,006 $ 324,392 $ 23,169 $ 2,523,503 Reportable segments for the year ended December 31, 2016 are summarized in the below table. SBA Originations, Residential Loan SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 49,311 $ 40,586 $ 46,417 $ 709 $ — $ 137,023 Interest expense (18,327) (20,347) (17,397) (557) (1,144) (57,772) Net interest income before provision for loan losses $ 30,984 $ 20,239 $ 29,020 $ 152 $ (1,144) $ 79,251 Provision for loan losses (6,419) (86) (1,314) — — (7,819) Net interest income after provision for loan losses $ 24,565 $ 20,153 $ 27,706 $ 152 $ (1,144) $ 71,432 Non-interest income Gains on residential mortgage banking activities, net of variable loan expenses $ — $ — $ — $ 7,033 $ — $ 7,033 Other income 2,246 5,059 1,845 11 — 9,161 Servicing income 49 518 5,555 2,536 — 8,658 Gain on bargain purchase — — — — 15,218 15,218 Total non-interest income $ 2,295 $ 5,577 $ 7,400 $ 9,580 $ 15,218 $ 40,070 Non-interest expense Employee compensation and benefits (337) (9,359) (9,391) (5,578) (162) (24,827) Allocated employee compensation and benefits from related party (366) — — — (3,302) (3,668) Professional fees (2,735) (1,537) (3,693) 359 (5,814) (13,420) Management fees – related party — — — — (7,432) (7,432) Loan servicing expense (2,743) (1,348) 479 (999) — (4,611) Other operating expenses (3,604) (6,864) (3,798) (1,074) (1,840) (17,180) Total non-interest expense $ (9,785) $ (19,108) $ (16,403) $ (7,292) $ (18,550) $ (71,138) Net realized (loss) gain on financial instruments (293) 2,290 4,604 — 313 6,914 Net unrealized gain on financial instruments 4,528 6,424 — 6,917 68 17,937 Income from continuing operations before provision for income taxes $ 21,310 $ 15,336 $ 23,307 $ 9,357 $ (4,095) $ 65,215 Total Assets $ 542,643 $ 796,408 $ 593,091 $ 353,141 $ 319,984 $ 2,605,267 Reportable segments for the year ended December 31, 2015 are summarized in the below table. SBA Originations, Residential Loan SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 63,001 $ 31,349 $ 54,605 $ — $ — $ 148,955 Interest expense (17,404) (11,538) (18,233) — (631) (47,806) Net interest income before provision for loan losses $ 45,597 $ 19,811 $ 36,372 $ — $ (631) $ 101,149 Provision for loan losses (13,153) — (6,490) — — (19,643) Net interest income after provision for loan losses $ 32,444 $ 19,811 $ 29,882 $ — $ (631) $ 81,506 Non-interest income Gains on residential mortgage banking activities, net of variable loan expenses $ — $ — $ — $ — $ — $ — Other income 583 2,938 10,910 — — 14,431 Servicing income 418 139 4,576 — — 5,133 Total non-interest income $ 1,001 $ 3,077 $ 15,486 $ — $ — $ 19,564 Non-interest expense Employee compensation and benefits — (9,291) (9,510) — (148) (18,949) Allocated employee compensation and benefits from related party (333) — — — (2,990) (3,323) Professional fees (651) (714) (3,319) — (2,270) (6,954) Management fees – related party — — — — (7,260) (7,260) Incentive fees – related party — — — — (965) (965) Loan servicing expense (4,829) (969) 1,451 — — (4,347) Other operating expenses 832 (5,578) (3,402) — (3,806) (11,954) Total non-interest expense $ (4,981) $ (16,552) $ (14,780) $ — $ (17,439) $ (53,752) Net realized (loss) gain on financial instruments 2,388 (3,534) 1,317 — 10 181 Net unrealized gain on financial instruments (4,617) 10,353 — — (4) 5,732 Income from continuing operations before provision for income taxes $ 26,235 $ 13,155 $ 31,905 $ — $ (18,064) $ 53,231 Total Assets $ 711,618 $ 623,043 $ 745,131 $ — $ 249,989 $ 2,329,781 |
Discontinued Operations
Discontinued Operations | 12 Months Ended |
Dec. 31, 2017 | |
Discontinued Operations | |
Discontinued Operations | Note 27 – Discontinued Operations In the fourth quarter of 2015, the Company determined Silverthread should be classified as held-for-sale due to management’s intent to sell the segment, the availability and active marketing of the segment for immediate sale and the high probability of a successful sale. The sale of Silverthread closed in May of 2016, with an effective economic date of March 1, 2016. We negotiated an agreement with the buyer to receive $4.0 million. The net estimated receivable of $2.3 million is included in Receivable from Third Parties on the consolidated balance sheet as of December 31, 2017. Through the reporting date, $0.2 million of the balance has been received, and the remaining balance is expected in April of 2018. The operating results during the years ended December, 2017, 2016, and 2015 did not have a material impact on our consolidated financial statements. As of December 31, 2017 and 2016, there were no assets or liabilities of the discontinued segment. The primary components of discontinued operations are detailed in the table below: For the Year Ended December 31, (In Thousands) 2017 2016 2015 Non-interest income (expense) Commission income $ — $ 2,984 $ 16,208 Property management income — 263 2,034 Other — 16 386 Total other income $ — $ 3,263 $ 18,628 Employee compensation and benefits — (1,071) (5,038) Professional fees — (138) (599) Management fees – related party — — — Operating expenses Acquisition costs — — — Commission expense — (1,844) (10,596) Technology expense — (171) (871) Rent expense — (268) (1,607) Tax expense — (3) (33) Recruiting, training, and travel expenses — (46) (164) Marketing expense — (29) (70) Insurance expense — — — Other — (536) (3,103) Total other operating expenses $ — $ (2,897) $ (16,444) Loss on sale — (2,695) (1,650) Loss before income tax benefit — (3,538) (5,103) Income tax benefit — 1,380 4,450 Loss on discontinued operations presented on the statements of income $ — $ (2,158) $ (653) |
Quarterly Financial Data (Unaud
Quarterly Financial Data (Unaudited) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Data (Unaudited) | |
Quarterly Financial Data (Unaudited) | Note 28 – Quarterly Financial Data (Unaudited) The following table summarizes our quarterly financial data which, in the opinion of management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our results of operations (amounts in thousands, except per share amounts): March 31 June 30 September 30 December 31 2017 Interest income $ 33,884 $ 33,248 $ 35,038 $ 36,135 Net interest income after provision for loan losses $ 16,211 $ 15,859 $ 14,664 $ 14,562 Non-interest income (expense) $ (9,868) $ (9,102) $ (11,003) $ (9,999) Net income from continuing operations $ 9,557 $ 11,153 $ 12,374 $ 12,730 Net income $ 9,557 $ 11,153 $ 12,374 $ 12,730 Net income attributable to Sutherland Asset Management Corporation $ 8,856 $ 10,496 $ 11,841 $ 12,097 Earnings per share - Basic and diluted (1) $ 0.29 $ 0.34 $ 0.37 $ 0.38 2016 Interest income $ 37,866 $ 34,526 $ 31,890 $ 32,741 Net interest income after provision for loan losses $ 21,381 $ 18,864 $ 17,305 $ 13,882 Non-interest income (expense) $ (9,685) $ (12,332) $ (11,863) $ 2,703 Net income from continuing operations $ 9,390 $ 8,724 $ 9,569 $ 27,881 Net income $ 9,039 $ 8,724 $ 9,569 $ 26,074 Net income attributable to Sutherland Asset Management Corporation $ 8,302 $ 8,021 $ 8,792 $ 24,054 Earnings per share - Basic and diluted (1) $ 0.32 $ 0.31 $ 0.34 $ 0.83 (1) Retroactively adjusted for the equivalent number of shares after reverse acquisition using an exchange rate of 0.8356 Annual EPS may not equal the sum of each quarter’s EPS due to rounding and other computational factors. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events | |
Subsequent Events | Note 29 – Subsequent Events On January 30, 2018, ReadyCap Holdings, LLC, an indirect wholly owned subsidiary of the Company, issued $40 million in 7.50% Senior Secured Notes due 2022 (the “Notes”) with identical terms (other than issue date, issue price, the first interest payment date and the date from which interest shall initially accrue) to the notes issued on February 13, 2017 (in an aggregate principal amount of $75 million) and June 13, 2017 (in an aggregate principal amount of $65 million). In February 2018, the Company extended its borrowings pursuant to a repurchase agreement with Deutsche Bank AG through February 14, 2020. The Fifth Amended and Restated Master Repurchase Agreement has a $300 million maximum advance amount and a pricing rate of LIBOR plus 2.5% - 3.5% depending on asset type. In March 2018, the Company extended one of our borrowings pursuant to a committed warehouse line of credit agreement used within our Residential mortgage banking business. The amended agreement has a maximum advance amount of $125 million and a pricing rate of LIBOR plus 2.1%. In March 2018, the Company declared a first quarter cash dividend of $0.37 per share of common stock and OP unit for the quarter ended March 31, 2018 to common stockholders and OP unit holders of record as of March 31, 2018. The dividend is payable on April 30, 2018. In March 2018, the Company completed the securitization of $165.0 million of fixed-rate SBC loans and issued $148.5 million of senior bonds at a weighted average pass-through rate of 3.8%. |
Schedule IV _ Mortgage Loans on
Schedule IV – Mortgage Loans on Real Estate | 12 Months Ended |
Dec. 31, 2017 | |
Schedule IV – Mortgage Loans on Real Estate | |
Schedule IV – Mortgage Loans on Real Estate | Schedule IV – Mortgage Loans on Real Estate There are no individual loans that exceed 1% of the total carrying amount of all mortgages. For applicable information on our loan portfolio for the years ended December 31, 2017 and December 31, 2016, such as description, interest rates, maturities, payment terms, face amount, carrying amount, delinquencies, and geographic locations, refer to the loan disclosures in Note 6 of our Consolidated Financial Statements. Reconciliation of mortgage loans on real estate: The following tables reconcile mortgage loans on real estate, including loans in consolidated VIEs, from December 31, 2015 to December 31, 2017 ($ in thousands): Loans, net Loans, held for sale, at fair value Total Loan Receivables Balance at December 31, 2015 $ 1,716,072 $ - $ 1,716,072 Origination of loan receivables 315,339 621,343 936,682 Purchases of loan receivables 98,683 - 98,683 Loans acquired in connection with reverse merger - 189,197 189,197 Proceeds from disposition and principal payment of loan receivables (479,965) (645,954) (1,125,919) Net realized gain (loss) on sale of loan receivables 6,349 14,342 20,691 Net unrealized gain (loss) on loan receivables 4,131 (2,982) 1,149 Non-cash proceeds on creation of MSR (951) (5,166) (6,117) Accretion/amortization of discount, premium and other fees 26,809 - 26,809 Transfers (11,968) 11,017 (951) Provision for loan losses (7,819) - (7,819) Balance at December 31, 2016 $ 1,666,680 $ 181,797 $ 1,848,477 Loans, net Loans, held for sale, at fair value Total Loan Receivables Balance at December 31, 2016 $ 1,666,680 $ 181,797 $ 1,848,477 Origination of loan receivables 454,975 2,508,153 2,963,128 Purchases of loan receivables 147,327 11,195 158,522 Proceeds from disposition and principal payment of loan receivables (422,059) (2,571,583) (2,993,642) Net realized gain (loss) on sale of loan receivables (3,203) 78,798 75,595 Net unrealized gain (loss) on loan receivables 5,328 3,537 8,865 Accretion/amortization of discount, premium and other fees 13,825 - 13,825 Transfers (6,410) 4,124 (2,286) Provision for loan losses (2,363) - (2,363) Balance at December 31, 2017 $ 1,854,100 $ 216,021 $ 2,070,121 |
Summary of Significant Accoun39
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Significant Accounting Policies | |
Use of Estimates | Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. |
Basis of Consolidation | Basis of Consolidation The accompanying consolidated financial statements of the Company include the accounts and results of operations of the Operating Partnership and other consolidated subsidiaries and VIEs in which we are the primary beneficiary. The consolidated financial statements are prepared in accordance with ASC 810, Consolidations. Intercompany accounts and transactions have been eliminated. |
Reclassifications | Reclassifications Certain amounts reported for the prior periods in the accompanying consolidated financial statements have been reclassified in order to conform to the current period’s presentation. Loans, held-for-investment and loans, held at fair value are now presented on the consolidated balance sheets as Loans, net. These amounts have been presented by loan program type and accounting category, within Note 6. Servicing rights and residential mortgage servicing rights, at fair value, are now included on the consolidated balance sheets as Servicing rights. These amounts have been presented by loan servicing program and accounting category, within Note 9. The amounts reported for the prior periods have been reclassified in order to conform to the current period’s presentation. Borrowings under repurchase agreements and borrowings under credit facilities are now included on the consolidated balance sheets as Secured borrowings. The amounts reported for the prior periods have been reclassified in order to conform to the current period’s presentation. As described in Note 10, the historical results of our Residential mortgage banking segment has been reclassified in the consolidated statements of income to conform to our current period’s presentation of Gains on residential mortgage banking activities, net of variable loan expenses. As described in Note 26, effective at the beginning of the third quarter of 2017, the Company implemented organizational changes to align its segment financial reporting more closely with its current business practices. These organizational changes resulted in securitization activities on originated SBC and SBA loans being transferred out of the Loan Acquisitions segment and into either the SBC originations or SBA originations, acquisitions, and servicing segment, based on the loan type. These organizational changes also resulted in the Company presenting Corporate- Other amounts separately and no longer reflecting these amounts as part of the four business segments. Prior period numbers were revised to conform to the new segment alignment and to be consistent with our current period’s presentation. As described in Note 27, the historical results of Silverthread has been reflected in the accompanying consolidated statements of income for the years ended December 31, 2016 and 2015 as discontinued operations and financial information related to discontinued operations has been excluded from the notes to consolidated financial statements for all periods presented. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company has accounted for cash and cash equivalents in accordance with ASC 305, Cash and Cash Equivalents. The Company defines cash and cash equivalents as cash, demand deposits, and short-term, highly liquid investments with original maturities of 90 days or less when purchased. Cash and cash equivalents are exposed to concentrations of credit risk. We deposit our cash with institutions that we believe to have highly valuable and defensible business franchises, strong financial fundamentals, and predictable and stable operating environments. As of December 31, 2017 and 2016, the Company had $0.6 million and $0.6 million, respectively, in money market mutual funds, and substantially all of the Company’s cash and cash equivalents not held in money market funds were comprised of cash balances with banks that are in excess of the Federal Deposit Insurance Corporation insurance limits. |
Restricted Cash | Restricted Cash Restricted cash represents cash held by the Company as collateral against its derivatives, borrowings under repurchase agreements, borrowings under credit facilities with counterparties, construction and mortgage escrows, as well as cash held for remittance on loans serviced for third parties. Restricted cash is not available for general corporate purposes, but may be applied against amounts due to counterparties under existing swaps and repurchase agreement borrowings, or returned to the Company when the restriction requirements no longer exist or at the maturity of the swap or repurchase agreement. |
Short term investments | Short term investments The Company accounts for short-term investments as trading securities under ASC 320, Investments-Debt and Equity Securities . Short-term investments consist of U.S. Treasury Bills with original maturities of less than a year but greater than three months. The Company holds short-term investments at fair value. Interest received and accrued as well as the accretion of purchase discount in connection with short-term investments is recorded as interest income on the consolidated statements of income. Changes in the fair value of short-term investments are recorded as net unrealized gain (loss) on the consolidated statements of income. |
Loans, net | Loans, net Loans, net consists of loans, held-for-investment, net of allowance for loan losses, and loans, held at fair value. Loans, held-for-investment Loans, held-for-investment are loans acquired from third parties (“acquired loans”), loans originated by ReadyCap that we do not intend to securitize or sell, or securitized loans that were previously originated by ReadyCap. Securitized loans remain on the Company’s balance sheet because the securitization vehicles are consolidated under ASC 810. Acquired loans are recorded at cost at the time they are acquired. Acquired loans are accounted for in accordance with ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”) and referred to as “purchased credit impaired loans” (PCI loans) if both of the following conditions are met as of the acquisition date: (i) there is evidence of deterioration in credit quality of the loan since its origination and (ii) it is probable that we will not collect all contractual cash flows on the loan. Acquired loans without evidence of these conditions, securitized loans, and loans originated by ReadyCap that we do not intend to securitize are accounted for under ASC 310-10, Receivables-Overall , (“ASC 310-10”) and are referred to as “Non-purchased credit impaired loans” (non-PCI loans). Purchased Credit Impaired (PCI) Loans The estimated cash flow expected for each loan is estimated at the time the loan is acquired. The excess of the cash flows expected to be collected on PCI loans, measured as of the acquisition date, over the initial investment is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan using the interest method of accretion. The difference between contractually required payments as of the acquisition date and the cash flows expected to be collected is referred to as the non-accretable difference and is not accreted over time. The Company estimates expected cash flows to be collected over the life of individual PCI loans on a quarterly basis. If the Company determines that discounted expected cash flows have decreased, the PCI loans would be considered impaired, which would result in a provision for loan loss and a corresponding increase in the allowance for loan losses. If discounted expected cash flows have increased, or improved, in subsequent evaluations, the increase in cash flows is first used to reverse the amount of any related allowance for loan losses before the yield is adjusted. Additionally, the Company will increase the accretable yield to account for the increase in expected cash flows. The estimate of the amount and timing of cash flows for our PCI loans is based on historical information available and expected future performance of the loans, and may include the timing of expected future cash flows, prepayment speed, default rates, loss severities, delinquency rates, percentage of non-performing loans, extent of credit support available, Fair Isaac Corporation scores at loan origination, year of origination, loan-to-value ratios, geographic concentrations, as well as reports by credit rating agencies, such as Moody’s, Standard & Poor’s Corporation, or Fitch, general market assessments and dialogue with market participants. As a result, substantial judgment is used in the analysis to determine the expected cash flows. Non-PCI Loans The Company uses the interest method to recognize, as a constant effective yield adjustment, the difference between the initial recorded investment in the loan and the principal amount of the loan. The calculation of the constant effective yield necessary to apply the interest method uses the payment terms required by the loan contract, and prepayments of principal are not anticipated to shorten the loan term. For non-PCI loans, recognition of interest income is suspended when any loans are placed on non-accrual status. Generally, all classes of loans are placed on non-accrual status when principal or interest has been delinquent for 90 days or when full collection is determined not to be probable. Interest income accrued, but not collected, at the date loans are placed on non-accrual status is reversed and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. However, where there is doubt regarding the ultimate collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Loans are restored to accrual status only when contractually current and the collection of future payments is reasonably assured. Loans, held at fair value Loans, held at fair value are loans originated by ReadyCap. The Company has elected the fair value option because of the intent to transfer to securitizations in the near term. Interest is recognized as interest income on the consolidated statements of income when earned and deemed collectible. Changes in fair value are recurring and are reported as net unrealized gain (loss) on the consolidated statements of income. The Company transfers loans held at fair value to loans, held-for-investment upon the completion of securitization. |
Allowance for loan losses | Allowance for loan losses The allowance for loan losses is intended to provide for credit losses inherent in the loans, held-for-investment portfolio and is reviewed quarterly for adequacy considering credit quality indicators, including probable and historical losses, collateral values, loan-to-value ratio and economic conditions. The allowance for loan losses is increased through provisions for loan losses charged to earnings and reduced by charge-offs, net of recoveries. We determine the allowance for loan losses by measuring credit impairment on (1) an individual basis for non-accrual status loans, and (2) on a collective basis for all other loans with similar risk characteristics. The allowance for loan losses on an individual basis is assessed when a loan is on non-accrual and the recoverability of the loan is less than its carrying value. The Company considers the loans to be collateral dependent and relies on the current fair value of the collateral as the basis for determining impairment. Loans that are not assessed individually for impairment are assessed on a collective basis. For the acquired loans we perform a historical analysis on both cumulative defaults and severity upon default for all loans that were current as of November 4, 2013 when the Company was formed or acquired thereafter. We calculated the cumulative default and loss severity on the acquired loans with delinquency statuses of 90+ days and applied those factors to the current acquired loan population. For the originated loans, our historical data shows a minimal number of defaults, therefore we used an analysis performed on the latest ReadyCap securitization to determine the likelihood of default and to determine loss severity we stressed collateral value to the current principal balance based on the total valuation decline of SBC properties from the peak valuation in 2007 through their post-crisis low in 2010. The determination of allowances for SBA loans is based upon the assignment of a probability of default on a rating scale. Each loan rating is re-evaluated at least annually for loan performance, underlying borrower financial performance or data from third party credit bureaus. The probability of default is compared to the underlying collateral value securing each loan and compared to each loan carrying value to calculate a loss estimate. Collectively the estimated probability of default and recovery value is compared to actual portfolio default and recovery rates as well as economic factors and adjusted when needed. The determination of whether an allowance for loan loss is necessary is based on whether or not there is a decrease in cash flows based on consideration of factual information available at the time of assessment as well as management’s estimates of the future performance and projected amount and timing of cash flows expected to be collected on the loan. While we have a formal methodology to determine the adequate and appropriate level of the allowance for loan losses, estimates of inherent loan losses involve judgment and assumptions as to various factors, including current economic conditions. Our determination of adequacy of the allowance for loan losses is based on quarterly evaluations of the above factors. Accordingly, the provision for loan losses will vary from period to period based on management's ongoing assessment of the adequacy of the allowance for loan losses. |
Non-accrual loans | Non-accrual loans Non-accrual loans are the loans for which we are not accruing or accreting interest income. Non-accrual loans include non-PCI loans when principal or interest has been delinquent for 90 days or more or when it is determined that full collection of contractual cash flows is not probable. Additionally, PCI loans for which the Company is unable to reasonably estimate the timing and amount of expected cash flows are considered to be non-accrual loans. |
Troubled Debt Restructurings | Troubled Debt Restructurings In situations where, for economic or legal reasons related to the borrower’s financial difficulties, we grant concessions for a period of time to the borrower that we would not otherwise consider, the related loans are classified as troubled debt restructurings (“TDR”). These modified terms may include interest rate reductions, principal forgiveness, term extensions, payment forbearance and other actions intended to minimize our economic loss and to avoid foreclosure or repossession of collateral. For modifications where we forgive principal, the entire amount of such principal forgiveness is immediately charged off. Loans classified as TDRs, are considered impaired loans. Other than resolutions such as foreclosures and sales, we may remove loans held-for-investment from TDR classification, but only if they have been refinanced or restructured at market terms and qualify as a new loan. Generally, all loans modified in a TDR are placed or remain on non-accrual status at the time of the restructuring. However, certain accruing loans modified in a TDR that are current at the time of restructuring may remain on accrual status if payment in full under the restructured terms is expected. |
Impaired loans | Impaired loans The Company considers a loan to be impaired when the Company does not expect to collect all of the contractual interest and principal payments as scheduled in the loan agreements. This includes certain non-PCI loans where we do not expect to collect all of the contractual interest and principal payments, as well as PCI loans, which experienced credit deterioration prior to acquisition. |
Loans, held for sale, at fair value | Loans, held for sale, at fair value Loans, held for sale, at fair value are loans that are expected to be sold to third parties in the near term. Interest is recognized as interest income on the consolidated statements of income when earned and deemed collectible. For loans originated by our SBC originations and SBA originations segments, changes in fair value are recurring and are reported as net unrealized gain (loss) on the consolidated statements of income. For originated SBA loans, the guaranteed portion is held for sale, at fair value. For loans originated by GMFS, changes in fair value are reported as gains on residential mortgage banking activities, net of variable loan expenses, on the consolidated statements of income. The Company transfers loans held for sale, at fair value to loans, held-for-investment when the Company no longer intends to sell the loans. |
Mortgage backed securities, at fair value | Mortgage backed securities, at fair value The Company accounts for MBS as trading securities and are carried at fair value under ASC 320, Investments-Debt and Equity Securities. Our MBS portfolio is comprised of asset-backed securities collateralized by interest in or obligations backed by pools of SBC loans. Purchases and sales of MBS are recorded on the trade date. Our MBS securities pledged as collateral against borrowings under repurchase agreements are included in mortgage backed securities, at fair value on our consolidated balance sheets. MBS are recorded at fair value as determined by market prices provided by independent broker dealers or other independent valuation service providers. The fair values assigned to these investments are based upon available information and may not reflect amounts that may be realized. We generally intend to hold our investment in MBS to generate interest income; however, we have and may continue to sell certain of our investment securities as part of the overall management of our assets and liabilities and operating our business. |
Loans eligible for repurchase from Ginnie Mae | Loans eligible for repurchase from Ginnie Mae When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company then records the right to repurchase the loan as an asset and liability in its consolidated balance sheets. Such amounts reflect the unpaid principal balance of the loans. |
Derivative instruments, at fair value | Derivative instruments, at fair value Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we utilize derivative financial instruments, currently comprised of credit default swaps (“CDSs”), interest rate swaps, and interest rate lock commitments (“IRLCs”) as part of our risk management. The Company accounts for derivative instruments under ASC 815, Derivatives and Hedges . All derivatives are reported as either assets or liabilities on the consolidated balance sheets at the estimated fair value with the changes in the fair value recorded in earnings. Although permitted under certain circumstances, generally the Company does not offset cash collateral receivable or payables against our gross derivative positions. As of December 31, 2017 and 2016, the cash collateral receivable held for derivative instruments is $0.8 million and $1.7 million, respectively, and is included in restricted cash on the consolidated balance sheets. Interest Rate Swap Agreements An interest rate swap is an agreement between two counterparties to exchange periodic interest payments where one party to the contract makes a fixed-rate payment in exchange for a floating-rate payment from the other party. The dollar amount each party pays is an agreed-upon periodic interest rate multiplied by some pre-determined dollar principal (notional amount). No principal (notional amount) is exchanged between the two parties at trade initiation date. Only interest payments are exchanged. Interest rate swaps are classified as Level 2 in the fair value hierarchy. The fair value adjustments, along with the related interest income or interest expense, are reported as net gain/(loss) on financial instruments. Interest Rate Lock Commitments (“IRLCs”) IRLCs are agreements under which GMFS agrees to extend credit to a borrower under certain specified terms and conditions in which the interest rate and the maximum amount of the loan are set prior to funding. Unrealized gains and losses on the IRLCs, reflected as derivative assets and derivative liabilities, respectively, are measured based on the value of the underlying mortgage loan, quoted government-sponsored enterprise (Fannie Mae, Freddie Mac, and the Government National Mortgage Association (“Ginnie Mae”), collectively, “GSEs”) or MBS prices, estimates of the fair value of the mortgage servicing rights (“MSRs”) and the probability that the mortgage loan will fund within the terms of the IRLC, net of commission expense and broker fees. The realized and unrealized gains or losses are reported on the consolidated statements of income as gains on residential mortgage banking activities, net of variable loan expenses. IRLCs are classified as Level 3 in the fair value hierarchy. CDS CDS are contracts between two parties, a protection buyer who makes fixed periodic payments, and a protection seller, who collects the premium in exchange for making the protection buyer whole in the case of default. The fair value adjustments, along with the related interest income or interest expense, are reported as net gain/(loss) on financial instruments. CDS are classified as Level 2 in the fair value hierarchy. |
Servicing rights | Servicing rights Servicing rights initially represent the fair value of expected future cash flows for performing servicing activities for others. The fair value considers estimated future servicing fees and ancillary revenue, offset by estimated costs to service the loans, and generally declines over time as net servicing cash flows are received, effectively amortizing the servicing right asset against contractual servicing and ancillary fee income. Servicing rights are recognized upon sale or securitization of loans if servicing is retained. For servicing rights, gains related to servicing rights retained is included in net realized gain/(loss) on the consolidated statements of income. For residential mortgage servicing rights, gains on servicing rights retained upon sale of a loan are included in gains on residential mortgage banking activities, net of variable loan expenses, on the consolidated statements of income. The Company treats its servicing rights and residential mortgage servicing rights as two separate classes of servicing assets based on the class of the underlying mortgages and it treats these assets as two separate pools for risk management purposes. Servicing rights relating to the Company’s servicing of loans guaranteed by the SBA under its Section 7(a) loan program and servicing rights related to the Freddie Mac program are accounted for under ASC 860, Transfers and Servicing, while the Company’s residential mortgage servicing rights are accounted for under the fair value option under ASC 825, Financial Instruments. Servicing rights – SBA and Freddie Mac SBA and Freddie Mac servicing rights are initially recorded at fair value and subsequently carried at amortized cost. We capitalize the value expected to be realized from performing specified servicing activities for others. Servicing rights are amortized in proportion to and over the period of estimated servicing income, and are evaluated for potential impairment quarterly. For purposes of testing our servicing rights for impairment, we first determine whether facts and circumstances exist that would suggest the carrying value of the servicing asset is not recoverable. If so, we then compare the net present value of servicing cash flow with its carrying value. The estimated net present value of servicing cash flows is determined using discounted cash flow modeling techniques, which require management to make estimates regarding future net servicing cash flows, taking into consideration historical and forecasted loan prepayment rates, delinquency rates and anticipated maturity defaults. If the carrying value of the servicing rights exceeds the net present value of servicing cash flows, the servicing rights are considered impaired and an impairment loss is recognized in earnings for the amount by which carrying value exceeds the net present value of servicing cash flows. We leverage all available relevant market data to determine the fair value of our recognized servicing assets. Since quoted market prices for servicing rights are not readily available, we estimate the fair value of servicing rights by determining the present value of future expected servicing cash flows using modeling techniques that incorporate management's best estimates of key variables including estimates regarding future net servicing cash flows, forecasted loan prepayment rates, delinquency rates, and return requirements commensurate with the risks involved. Cash flow assumptions are modeled using our internally forecasted revenue and expenses, and where possible, the reasonableness of assumptions is periodically validated through comparisons to market data. Prepayment speed estimates are determined from historical prepayment rates or obtained from third-party industry data. Return requirement assumptions are determined using data obtained from market participants, where available, or based on current relevant interest rates plus a risk-adjusted spread. We also consider other factors that can impact the value of the servicing rights, such as surety provider termination clauses and servicer terminations that could result if we failed to materially comply with the covenants or conditions of our servicing agreements and did not remedy the failure. Since many factors can affect the estimate of the fair value of servicing rights, we regularly evaluate the major assumptions and modeling techniques used in our estimate and review these assumptions against market comparables, if available. We monitor the actual performance of our servicing rights by regularly comparing actual cash flow, credit, and prepayment experience to modeled estimates. Servicing rights - Residential (carried at fair value) The Company’s residential mortgage servicing rights consist of conforming conventional residential loans sold to Fannie Mae and Freddie Mac or loans securitized in Ginnie Mae securities. Government insured loans serviced by the Company are securitized through Ginnie Mae, whereby the Company is insured against loss by the Federal Housing Administration or partially guaranteed against loss by the Department of Veterans Affairs. The Company has elected to account for its portfolio of residential mortgage servicing rights (“MSRs”) at fair value. For these assets, the Company uses a third-party vendor to assist management in estimating the fair value. The third-party vendor uses a discounted cash flow approach which consists of projecting servicing cash flows discounted at a rate that management believes market participants would use in their determinations of fair value. The key assumptions used in the estimation of the fair value of MSRs include prepayment rates, discount rates, and cost of servicing rates. Residential MSRs are classified as Level 3 in the fair value hierarchy. |
Intangible assets | Intangible assets Intangible assets are accounted for under ASC 350, Intangibles-Goodwill and Other . As of December 31, 2017 and 2016, the Company’s identifiable intangible assets include SBA license for our lending operations as well as a trade name, a favorable lease, and other licenses relating to our residential mortgage banking segment, obtained as part of the ZAIS Financial merger transaction. The Company determined that its SBA license has an indefinite life, while the other intangibles acquired as part of the ZAIS Financial merger transaction are finite-lived. The Company amortizes intangible assets with identified estimated useful lives on a straight-line basis over their estimated useful lives. The Company initially records its intangible assets at cost and subsequently tests for impairment on an annual basis. Intangible assets are included within other assets on the consolidated balance sheets. |
Investment in unconsolidated joint venture | Investment in unconsolidated joint venture In November of 2017, the Company acquired an interest in an SBC loan pool through a joint venture, WFLLA, LLC, which the Company has a 50% interest. According to ASC 323, Equity Method and Joint Ventures , investors in unincorporated entities such as partnerships and unincorporated joint ventures generally shall account for their investments using the equity method of accounting if the investor has the ability to exercise significant influence over the investee. Under the equity method, we recognize our share of the earnings or losses of the investment monthly in earnings and adjust the carrying amount for our share of the earnings or losses based on our equity ownership. Pursuant to the consolidation guidance, we determined our interest in the entity is a VIE, however, we do not consolidate the entity as we determined that we are not the primary beneficiary. The Company is determined to be the primary beneficiary only when it has a controlling financial interest in the VIE, which is defined as possessing both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. |
Deferred financing costs | Deferred financing costs Costs incurred in connection with our secured borrowings are accounted for under ASC 340, Other Assets and Deferred Costs . Deferred costs are capitalized and amortized using the effective interest method over the respective financing term with such amortization reflected on our consolidated statements of income as a component of interest expense. Our deferred financing costs may include legal, accounting and other related fees. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Pursuant to the adoption of ASU 2015-03, unamortized deferred financing costs related to securitizations and note issuances are presented on the consolidated balance sheets as a direct deduction from the associated liability. |
Due from Servicers | Due from Servicers The loan-servicing activities of the Company’s SBC Loan Acquisitions and SBC Originations reportable segments are performed primarily by third-party servicers. SBA loans originated by and held at RCL are internally serviced. Residential mortgage loans originated by and held at GMFS are both serviced by third-party servicers and internally serviced. The Company’s servicers hold substantially all of the cash owned by the Company related to loan servicing activities. These amounts include principal and interest payments made by borrowers, net of advances and servicing fees. Cash is generally received within thirty days of recording the receivable. The Company is subject to credit risk to the extent any servicer with whom the Company conducts business is unable to deliver cash balances or process loan-related transactions on the Company’s behalf. The Company monitors the financial condition of the servicers with whom the Company conducts business and believes the likelihood of loss under the aforementioned circumstances is remote. |
Secured borrowings | Secured borrowings Secured borrowings include borrowings under credit facilities and borrowings under repurchase agreements. Borrowings under credit facilities The Company accounts for borrowings under credit facilities under ASC 470, Debt. The Company partially finances its loans, net through credit agreements with various counterparties. These borrowings are collateralized by loans, held-for-investment, and loans, held for sale, at fair value and have maturity dates within two years from the consolidated balance sheet date. If the fair value (as determined by the applicable counterparty) of the collateral securing these borrowings decreases, we may be subject to margin calls during the period the borrowings are outstanding. In instances where we do not satisfy the margin calls within the required time frame, the counterparty may retain the collateral and pursue collection of any outstanding debt amount from us. Interest paid and accrued in connection with credit facilities is recorded as interest expense on the consolidated statements of income. Borrowing under repurchase agreements Borrowings under repurchase agreements are accounted for under ASC 860, Transfers and Servicing . Investment securities financed under repurchase agreements are treated as collateralized borrowings, unless they meet sale treatment or are deemed to be linked transactions. Through December 31, 2017, none of our repurchase agreements have been accounted for as components of linked transactions. All securities financed through a repurchase agreement have remained on our consolidated balance sheets as an asset and cash received from the lender was recorded on our consolidated balance sheets as a liability. Interest paid and accrued in connection with our repurchase agreements is recorded as interest expense on the consolidated statements of income. |
Promissory note | Promissory note The Company accounts for promissory notes under ASC 470, Debt. There are no debt issuance costs associated with the outstanding note. The note is collateralized by loans, held-for-investment and have maturity dates within five years from the consolidated balance sheet date. Interest paid and accrued in connection with the promissory note is recorded as interest expense on the consolidated statements of income. |
Securitized debt obligations of consolidated VIEs, net | Securitized debt obligations of consolidated VIEs, net Since 2011, we have engaged in several securitization transactions, which the Company accounts for under ASC 810. Securitization involves transferring assets to an SPE, or securitization trust, to convert all or a portion of those assets into cash before they would have been realized in the normal course of business, through the SPE’s issuance of debt instruments. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE. The consolidation of the SPE includes the issuance of senior securities to third parties, which are shown as securitized debt obligations of consolidated VIEs on the consolidated balance sheets. Debt issuance costs related to securitizations are presented as a direct deduction from the carrying value of the related debt. Debt issuance costs are amortized using the effective interest method and are included in interest expense from securitized debt obligations on the consolidated financial statements. |
Convertible note, net | Convertible note, net ASC 470, Debt , requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. ASC 470-20 requires that the initial proceeds from the sale of these convertible debt instruments be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by the Company at such time. We measured the estimated fair value of the debt component of our convertible notes as of the issuance date based primarily on our nonconvertible debt borrowing rate. The equity components of the convertible notes have been reflected within additional paid-in capital in our consolidated balance sheet, and the resulting debt discount is amortized over the period during which the convertible notes are expected to be outstanding (through the maturity date) as additional non-cash interest expense. Upon repurchase of convertible debt instruments, ASC 470-20 requires the issuer to allocate total settlement consideration, inclusive of transaction costs, amongst the liability and equity components of the instrument based on the fair value of the liability component immediately prior to repurchase. The difference between the settlement consideration allocated to the liability component and the net carrying value of the liability component, including unamortized debt issuance costs, would be recognized as gain (loss) on extinguishment of debt in our consolidated statements of income. The remaining settlement consideration allocated to the equity component would be recognized as a reduction of additional paid-in capital in our consolidated balance sheets. |
Senior secured note, net | Senior secured note, net The Company accounts for secured debt offerings under ASC 470, Debt. Pursuant to the adoption of ASU 2015-03, the Company’s senior secured note is presented net of debt issuance costs. These senior secured notes are collateralized by loans, MBS, and retained interests of consolidated VIE’s. Interest paid and accrued in connection with senior secured notes is recorded as interest expense on the consolidated statements of income. |
Guaranteed loan financing | Guaranteed loan financing Certain partial loan sales do not qualify for sale accounting under ASC 860, Transfers and Servicing because these sales do not meet the definition of a “participating interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain as an investment on the consolidated balance sheets and the proceeds from the portion sold is recorded as guaranteed loan financing in the liabilities section of the consolidated balance sheets. For these partial loan sales, the interest earned on the entire loan balance is recorded as interest income and the interest earned by the buyer in the partial loan sale is recorded within interest expense in the accompanying consolidated statements of income. |
Contingent consideration | Contingent consideration Contingent consideration represents future payments of cash or equity interests to the former owners of GMFS, which was acquired on October 31, 2016. The contingent consideration was initially recorded on the date of acquisition at fair value in the consolidated balance sheet and is subsequently remeasured each reporting period at fair value with the change in the fair value recorded in earnings in the accompanying consolidated statements of income. |
Repair and denial reserve | Repair and denial reserve The repair and denial reserve represents the potential liability to the SBA in the event that we are required to make whole the SBA for reimbursement of the guaranteed portion of SBA loans. We may be responsible for the guaranteed portion of SBA loans if there are lien and collateral issues, unauthorized use of proceeds, liquidation deficiencies, undocumented servicing actions or denial of SBA eligibility. This reserve is calculated using an estimated frequency of a repair and denial event upon default, as well as an estimate of the severity of the repair and denial as a percentage of the guaranteed balance. |
Variable Interest Entities | Variable Interest Entities VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE. An entity is deemed to be the primary beneficiary of a VIE if that entity has both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. In determining whether we are the primary beneficiary of a VIE, we consider both qualitative and quantitative factors regarding the nature, size and form of our involvement with the VIE, such as our role establishing the VIE and our ongoing rights and responsibilities, the design of the VIE, our economic interests, servicing fees and servicing responsibilities, and other factors. We perform ongoing reassessments to evaluate whether changes in the entity’s capital structure or changes in the nature of our involvement with the entity result in a change to the VIE designation or a change to our consolidation conclusion. |
Non-controlling Interests | Non-controlling Interests Non-controlling interests, which are presented on the consolidated balance sheets and the consolidated statements of income, represent direct investment in the Operating Partnership by Sutherland OP Holdings II, Ltd. and third parties. |
Fair Value Option | Fair Value Option The guidance in ASC 825, Financial Instruments , provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument by instrument basis and must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in our consolidated balance sheets from those instruments using another accounting method. We have elected the fair value option for certain loans held-for-sale originated by ReadyCap that the Company intends to securitize or sell in the near term. The fair value elections for loans, held at fair value originated by ReadyCap were made due to the short-term nature of these instruments. We have elected the fair value option for loans held-for-sale originated by GMFS that the Company intends to sell in the near term. We have elected the fair value option for certain residential mortgage servicing rights acquired as part of the merger transaction. |
Earnings per Share | Earnings per Share We present both basic and diluted earnings per share (“EPS”) amounts in our consolidated financial statements. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from our share-based compensation, consisting of unvested restricted stock units (“RSUs”), unvested restricted stock awards (“RSAs”), as well as “in-the-money” conversion options associated with our outstanding convertible senior notes. Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. The Company’s earnings per share has been updated retroactively as a result of the reverse merger. All of the Company’s unvested RSUs and unvested RSAs contain rights to receive non-forfeitable dividends and, thus, are participating securities. Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. Under the two-class method, undistributed earnings are reallocated between shares of common stock and participating securities. |
Income Taxes | Income Taxes GAAP establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current period and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s consolidated financial statements or tax returns. We assess the recoverability of deferred tax assets through evaluation of carryback availability, projected taxable income and other factors as applicable. Significant judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns as well as the recoverability of amounts we record, including deferred tax assets. We provide for exposure in connection with uncertain tax positions, which requires significant judgment by management including determination, based on the weight of the tax law and available evidence, that it is more-likely-than-not that a tax result will be realized. Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense on our consolidated statements of income. As of December 31, 2017 and 2016, we accrued no taxes, interest or penalties related to uncertain tax positions. In addition, we do not anticipate a change in this position in the next 12 months. |
Revenue Recognition | Revenue Recognition Revenue is accounted for under ASC 605, Revenue Recognition, which provides among other things that revenue be recognized when there is persuasive evidence an arrangement exists, delivery and services have been rendered, price is fixed and determinable and collectability is reasonably assured. Interest Income Interest income on non-PCI loans, held-for-investment, loans, held at fair value, loans, held for sale, at fair value, and MBS, at fair value is accrued based on the outstanding principal amount and contractual terms of the instrument. Discounts or premiums associated with the loans and investment securities are amortized or accreted into interest income as a yield adjustment on the effective interest method, based on contractual cash flows through the maturity date of the investment. On at least a quarterly basis, we review and, if appropriate, make adjustments to the accrual status of the asset. If the asset has been delinquent for the previous 90 days, the asset status will turn to non-accrual, and recognition of interest income will be suspended until the asset resumes contractual payments for three consecutive months. Realized Gains (Losses) Upon the sale or disposition (not including the prepayment of outstanding principal balance) of loans or securities, the excess (or deficiency) of net proceeds over the net carrying value or cost basis of such loans or securities is recognized as a realized gain/loss. Origination Income and Expense Origination income represents fees received for origination of either loans, held at fair value, loans, held for sale, at fair value, or loans, held-for-investment. For loans held, at fair value, and loans, held for sale, at fair value, pursuant to ASC 825, the Company reports origination fee income as revenue and fees charged and costs incurred as expenses. These fees and costs are excluded from the fair value. For originated loans, held-for-investment, under ASC 310-10, the Company defers these origination fees and costs at origination and amortizes them under the effective interest method over the life of the loan. Origination fees and expenses for ReadyCap loans, held at fair value and loans, held for sale, at fair value, are presented in the consolidated statements of income in other income and operating expenses. Origination fees and expenses for residential mortgage loans originated by GMFS are presented in the consolidated statements of income in gains of residential mortgage banking activities, net of variable loan expenses. The amortization of net origination fees and expenses for loans, held-for-investment are presented in the consolidated statements of income in interest income. |
Gains on Residential Mortgage Banking Activities, net of variable loan expenses | Gains on Residential Mortgage Banking Activities, net of variable loan expenses Gains on residential mortgage banking activities, net of variable loan expenses, reflects variable revenue and expense within our residential mortgage banking business directly related to loan origination and sale activity. This primarily consists of the realized gains on sales of residential loans held for sale and loan origination fee income, offset by direct costs, such as correspondent fee expenses and other direct expenses relating to these loans, which vary based on loan origination volumes. Gains on residential mortgage banking activities, net of variable loan expenses, also consists of unrealized gains and losses associated with the changes in fair value of the loans held for sale, the fair value of retained MSR additions, and the realized and unrealized gains and losses from derivative instruments. Gains and losses from the sale of mortgage loans held for sale are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale and is included in gains on residential mortgage banking activities, net of variable loan expenses in the consolidated statements of income. Sales proceeds reflect the cash received from investors from the sale of a loan plus the servicing release premium if the related MSR is sold. Gains and losses also includes the unrealized gains and losses associated with the mortgage loans held for sale and the realized and unrealized gains and losses from IRLCs. Loan origination costs directly attributable to the processing, underwriting, and closing of a loan are included in the gain on sale of mortgage loans held for sale when loans are sold. Loan expenses include indirect costs related to loan origination activities, such as correspondent fees, and are expensed as incurred and are included in gains on residential mortgage banking activities, net of variable loan expenses, in the Company’s consolidated statements of income. The provision for loan indemnification includes the fair value of the incurred liability for mortgage repurchases and indemnifications recognized at the time of loan sale and any other provisions recorded against the loan indemnification reserve and are included in gains on residential mortgage banking activities, net of variable loan expenses, in the Company’s consolidated statements of income. Loan origination fee income represents revenue earned from originating mortgage loans held for sale and are reflected in gains on residential mortgage banking activities, net of variable loan expenses, when loans are sold. |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Business Combinations | |
Schedule of fair value of assets acquired and liabilities acquired | (In Thousands) October 31, 2016 Assets: Cash and cash equivalents $ 34,932 Short term investments 69,992 Restricted cash 4,522 Loans, held-for-investment, at cost 1,496 Loans, held for sale, at fair value 189,197 Mortgage backed securities, at fair value 97,936 Loans eligible for repurchase from GNMA 79,530 Residential mortgage servicing rights, at fair value 51,302 Derivative assets, at fair value 2,699 Other assets 7,741 Identifiable Intangibles 2,703 Total assets 542,050 Liabilities: Borrowings under credit facilities 142,463 Borrowings under repurchase agreements 153,105 Exchangeable senior notes 57,500 Contingent consideration 14,422 Accounts payable and other liabilities 16,667 Liability for loans eligible for repurchase from GNMA 79,530 Total liabilities 463,687 Fair Value of Net Assets Acquired $ 78,363 |
Schedule of aggregate consideration transferred, net assets acquired, and related bargain purchase gain | The aggregate consideration transferred, net assets acquired, and related bargain purchase gain was as follows (in thousands, except share and per share amounts): ZAIS Financial closing share price on October 31, 2016 $ 13.40 ZAIS Financial common shares and OP units acquired Fair value of consideration transferred $ 63,145 Fair Value of Net Asset Acquired $ 78,363 Bargain purchase gain $ 15,218 |
Schedule of revenue and earnings from the net assets acquired | For the year ended (In Thousands) December 31, 2016 Interest income $ 1,054 Interest expense (681) Other income (expense) Realized gain (loss) 6,036 Unrealized gain (loss) 4,902 Net income $ |
Schedule of pro-forma revenue and earnings | For the year ended December 31, (In Thousands) 2016 2015 Selected Financial Data Interest income $ 145,767 $ 161,174 Interest expense $ (66,372) $ (57,551) Provision for loan losses $ (7,713) $ (19,643) Other income (expense) $ (37,641) $ (27,760) Realized gain (loss) $ 14,030 $ 46 Unrealized gain (loss) $ 5,772 $ (3,817) Net income from continuing operations before income taxes $ 53,843 $ 52,449 |
Loans and Allowance for Loan 41
Loans and Allowance for Loan Losses (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Schedule of classification, unpaid principal balance, and carrying value of loans held including loans of consolidated VIEs | December 31, 2017 December 31, 2016 Loans (In Thousands) Carrying Value UPB Carrying Value UPB Loans Acquired SBA 7(a) loans $ 331,083 $ 353,556 $ 440,731 $ 471,189 Acquired loans 191,327 209,694 310,286 355,660 Originated Transitional loans 246,076 248,190 163,155 162,270 Originated Transitional loans, at fair value — — 14,505 13,958 Originated SBC loans, at fair value 188,150 182,045 67,087 65,131 Originated SBC loans 27,610 27,349 10,426 10,749 Originated SBA 7(a) loans 41,208 43,439 15,414 16,112 Originated Residential Agency loans 2,013 2,014 2,238 2,413 Total Loans, before allowance for loan losses $ 1,027,467 $ 1,066,287 $ 1,023,842 $ 1,097,482 Allowance for loan losses $ (9,547) — $ (12,721) — Total Loans, net $ 1,017,920 $ 1,066,287 $ 1,011,121 $ 1,097,482 Loans in consolidated VIEs Loans Originated SBC loans $ 382,873 $ 373,996 $ 448,722 $ 436,220 Acquired loans 189,545 204,497 92,844 101,481 Acquired SBA 7(a) loans 69,523 95,605 91,978 127,963 Originated Transitional loans 196,438 196,070 25,424 24,486 Total Loans, in consolidated VIEs, before allowance for loan losses $ 838,379 $ 870,168 $ 658,968 $ 690,150 Allowance for loan losses on loans in consolidated VIEs $ (2,199) — $ (3,409) — Total Loans, net, in consolidated VIEs $ 836,180 $ 870,168 $ 655,559 $ 690,150 Total Loans, net, and Loans, net in consolidated VIEs $ 1,854,100 $ 1,936,455 $ 1,666,680 $ 1,787,632 Held for sale, at fair value, loans Originated Residential Agency loans $ 129,096 $ 124,758 $ 127,773 $ 125,012 Originated Freddie Mac loans 67,591 66,642 17,311 17,161 Originated SBA 7(a) loans 16,791 15,472 — — Acquired loans 2,544 2,662 36,713 36,734 Total Loans, held for sale, at fair value $ 216,022 $ 209,534 $ 181,797 $ 178,907 Total Loan portfolio $ 2,070,122 $ 2,145,989 $ 1,848,477 $ 1,966,539 |
Schedule of impaired loans, held for investment | December 31, 2017 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for General $ 468 $ - $ 819 $ 518 $ 291 $ 2,096 Specific 169 - 586 1,564 27 2,346 PCI - - 5,859 1,445 - 7,304 Ending balance $ 637 $ - $ 7,264 $ 3,527 $ 318 $ 11,746 December 31, 2016 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for General $ 739 $ - $ 847 $ 253 $ 172 $ 2,011 Specific 65 - 1,110 2,489 - 3,664 PCI - - 8,193 2,262 - 10,455 Ending balance $ 804 $ - $ 10,150 $ 5,004 $ 172 $ 16,130 |
Schedule of activity of the allowance for loan losses for loans, held-for investment | Year ended December 31, 2017 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for Beginning balance $ 804 $ - $ 10,150 $ 5,004 $ 172 $ 16,130 Provision for (Recoveries of) loan losses (166) - 2,387 (4) 146 2,363 Charge-offs and sales - - (1,356) (1,473) - (2,829) Recoveries (1) - (3,917) - - (3,918) Ending balance $ 637 $ - $ 7,264 $ 3,527 $ 318 $ 11,746 Year ended December 31, 2016 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for Beginning balance $ - $ - $ 10,967 $ 6,155 $ - $ 17,122 Provision for loan losses 804 - 5,702 1,141 172 7,819 Charge-offs and sales - - (685) (2,292) - (2,977) Recoveries - - (5,834) - - (5,834) Ending balance $ 804 $ - $ 10,150 $ 5,004 $ 172 $ 16,130 |
Schedule of recorded investment of TDRs | December 31, 2017 December 31, 2016 (In Thousands) SBC SBA Total SBC SBA Total Recorded carrying value modified loans classified as TDRs $ 3,727 $ 12,398 $ 16,125 $ 7,918 $ 11,135 $ 19,053 Allowance for loan losses on loans classified as TDRs $ 883 $ 695 $ 1,578 $ 656 $ 1,544 $ 2,200 Carrying value of modified loans classified as TDRs Carrying value of modified loans classified as TDRs on accrual status $ 1,804 $ 4,791 $ 6,595 $ 5,196 $ 359 $ 5,555 Carrying value of modified loans classified as TDRs on non-accrual status 1,923 7,607 9,530 2,722 10,776 13,498 Total carrying value of modified loans classified as TDRs $ 3,727 $ 12,398 $ 16,125 $ 7,918 $ 11,135 $ 19,053 |
Schedule of TDR modifications by primary modification type and related financial effects | Year Ended December 31, 2017 Year Ended December 31, 2016 (In Thousands, except number of loans) SBC SBA Total SBC SBA Total Number of loans permanently modified 14 47 61 9 40 49 Pre-modification recorded balance (a) $ 3,518 $ 6,187 $ 9,705 $ 9,041 $ 4,387 $ 13,428 Post-modification recorded balance (a) 3,041 6,132 9,173 7,532 1,740 9,272 Number of loans that remain in default as of December 31, 2017 (b) 10 18 28 3 15 18 Balance of loans that remain in default as of December 31, 2017 (b) $ 1,590 $ 672 $ 2,262 $ 359 $ 362 $ 721 Concession granted (a) : Term extension $ 413 $ 4,931 $ 5,344 $ 930 $ 8,748 $ 9,678 Interest rate reduction 100 239 339 307 49 356 Principal reduction 601 286 887 - 90 90 Foreclosure 920 554 1,474 961 412 1,373 Total $ 2,034 $ 6,010 $ 8,044 $ 2,198 $ 9,299 $ 11,497 (a) Represents carrying value. (b) Represents the December 31, 2017 carrying values of the TDRs that occurred during the year ended December 31, 2017 and 2016 that remained in default as of December 31, 2017. Generally, all loans modified in a TDR are placed or remain on non-accrual status at the time of the restructuring. However, certain accruing loans modified in a TDR that are current at the time of restructuring may remain on accrual status if payment in full under the restructured terms is expected. For purposes of this schedule, a loan is considered in default if it is 30 or more days past due. |
Loans, held-for-investment | |
Schedule of monitoring credit quality of loans | Loan-to-Value (a) (In Thousands) 0.0 – 20.0% 20.1 – 40.0% 40.1 – 60.0% 60.1 – 80.0% 80.1 – 100.0% Greater than 100.0% Total December 31, 2017 Loans (1) (2) Acquired SBA 7(a) loans $ 8,978 $ 37,880 $ 125,234 $ 106,199 $ 56,676 $ 62,630 $ 397,597 Acquired loans 54,463 102,498 114,010 67,037 18,745 17,672 374,425 Originated Transitional loans — 26,735 171,227 212,830 21,639 10,084 442,515 Originated SBC loans, at fair value — 17,294 31,245 115,653 21,245 2,713 188,150 Originated SBC loans 2,661 49,281 192,796 158,047 7,529 — 410,314 Originated SBA 7(a) loans 52 954 5,227 15,583 5,766 13,600 41,182 Originated Residential Agency loans — 60 166 609 823 355 2,013 Total Loans, before general allowance for loans losses $ 66,154 $ 234,702 $ 639,905 $ 675,958 $ 132,423 $ 107,054 $ 1,856,196 General allowance for loan losses $ (2,096) Total Loans, net $ 1,854,100 December 31, 2016 Loans (1) (2) Acquired SBA 7(a) loans $ 9,301 $ 42,617 $ 153,710 $ 141,586 $ 86,085 $ 94,657 $ 527,956 Acquired loans 46,776 90,574 109,330 106,432 20,335 20,382 393,829 Originated Transitional loans, at fair value — — 1,475 13,030 — — 14,505 Originated Transitional loans — 17,187 78,219 44,730 32,967 15,476 188,579 Originated SBC loans, at fair value — 11,303 5,728 34,150 15,906 — 67,087 Originated SBC loans 2,709 56,050 187,823 190,473 20,258 1,770 459,083 Originated SBA 7(a) loans 145 375 2,995 3,351 2,456 6,092 15,414 Originated Residential Agency loans — — 217 434 1,399 188 2,238 Total Loans, before allowance for loans losses $ 58,931 $ 218,106 $ 539,497 $ 534,186 $ 179,406 $ 138,565 $ 1,668,691 General allowance for loan losses $ (2,011) Total Loans, net $ 1,666,680 (a) Loan-to-value is calculated as carrying amount as a percentage of current collateral value. (1) Loan balances include specific allowance for loan loss reserves. (2) Includes Loans, net in consolidated VIEs. |
Schedule of outstanding amounts and details of carrying amount of acquired loans, held for investment | December 31, 2017 December 31, 2016 Non-PCI PCI Non-PCI PCI (In Thousands) Loans Loans Loans Loans Unpaid principal balance $ 1,624,395 $ 130,015 $ 1,536,245 $ 172,298 Non-accretable discount — (8,336) — (24,784) Accretable discount (44,629) (23,749) (55,563) (26,978) Loans, held-for-investment 1,579,766 97,930 1,480,682 120,536 Allowance for loan losses (4,442) (7,304) (5,675) (10,455) Loans, held-for-investment $ 1,575,324 $ 90,626 $ 1,475,007 $ 110,081 |
Loans, held-for-investment | |
Schedule of delinquency information of loans | December 31, 2017 Loans (In Thousands) Current and 30-89 Days 90+ Days Total Loans Carrying Value Non-Accrual 90+ Days Past Due but Accruing Loans (1)(2) Acquired SBA 7(a) loans $ 376,102 $ 15,953 $ 5,542 $ 397,597 $ 16,782 $ 176 Acquired loans 348,271 6,891 19,263 374,425 16,405 4,090 Originated Transitional loans 435,252 7,263 — 442,515 — — Originated SBC loans, at fair value 188,150 — — 188,150 — — Originated SBC loans 402,004 7,702 608 410,314 608 — Originated SBA 7(a) loans 40,871 311 — 41,182 671 — Originated Residential Agency loans 1,226 — 787 2,013 289 498 Total Loans, before general allowance for loans losses $ 1,791,876 $ 38,120 $ 26,200 $ 1,856,196 $ 34,755 $ 4,764 General allowance for loan losses $ (2,096) Total Loans, net $ 1,854,100 Percentage of outstandings (1) Loan balances include specific allowance for loan losses. (2) Includes Loans, net in consolidated VIEs December 31, 2016 Loans (In Thousands) Current and 30-89 Days 90+ Days Total Loans Carrying Value Non-Accrual 90+ Days Past Due but Accruing Loans (1)(2) Acquired SBA 7(a) loans $ 501,651 $ 15,715 $ 10,590 $ 527,956 $ 20,673 $ 2,127 Acquired loans 354,123 7,230 32,476 393,829 25,669 9,677 Originated Transitional loans, at fair value 14,505 — — 14,505 — — Originated Transitional loans 179,700 8,879 — 188,579 — — Originated SBC loans, at fair value 67,087 — — 67,087 — — Originated SBC loans 458,371 — 712 459,083 — Originated SBA 7(a) loans 15,192 — 222 15,414 — Originated Residential Agency loans 931 744 563 2,238 176 Total Loans, before allowance for loans losses $ 1,591,560 $ 32,568 $ 44,563 $ 1,668,691 $ 47,663 $ 11,980 General allowance for loan losses $ (2,011) Total Loans, net $ 1,666,680 Percentage of outstandings (1) Loan balances include specific allowance for loan losses. (2) Includes Loans, net in consolidated VIEs |
Non - PCI Loans | |
Schedule of impaired loans are evaluated for an asset specific allowance | (In Thousands) December 31, 2017 December 31, 2016 Impaired loans With an allowance $ 9,222 $ 14,772 Without an allowance 12,659 17,653 Total recorded carrying value of impaired loans $ 21,881 $ 32,425 Allowance for loan losses related to impaired loans $ (2,346) $ (3,664) Unpaid principal balance of impaired loans $ 29,853 $ 33,185 Impaired loans on non-accrual status $ 21,881 $ 32,425 Average carrying value of impaired loans (1) $ 28,693 $ 28,891 December 31, 2017 December 31, 2016 Interest income on impaired loans for the year ended $ 610 $ 1,165 (1) Average for the year ended December 31, 2017 and 2016. |
PCI Loans | |
Schedule of activity of accretable yield of loans, held for investment | Year Ended December 31, (In Thousands) 2017 2016 Beginning accretable discount- PCI loans $ 26,978 $ 42,031 Purchases/Originations 1,234 676 Sales (2,835) (7,655) Accretion (4,735) (6,635) Other 1,466 4,459 Transfers 1,641 (5,898) Ending accretable discount- PCI loans $ 23,749 $ 26,978 |
Geographical concentration | Loans, held-for-investment | |
Schedule of concentration risk of loans secured by real estate | Geographic Concentration (Unpaid Principal Balance) December 31, 2017 December 31, 2016 California 13.5 % 13.6 % Texas 12.4 14.0 Florida 11.7 9.9 New York 6.8 6.9 Georgia 6.2 5.9 Arizona 5.1 5.2 Illinois 3.9 2.8 North Carolina 3.7 3.7 Ohio 2.7 2.9 Virginia 2.6 2.9 Other 31.4 32.2 Total 100.0 % 100.0 % |
Collateral concentration | Loans, held-for-investment | |
Schedule of concentration risk of loans secured by real estate | The following table displays the collateral type concentration of the Company’s loans, net, on our consolidated balance sheets. Collateral Concentration (Unpaid Principal Balance) December 31, 2017 December 31, 2016 SBA (1) 25.4 % 34.4 % Multi-family 21.1 13.8 Retail 17.6 14.3 Office 15.6 14.9 Industrial 6.9 6.9 Mixed Use 6.3 5.0 Lodging/Residential 2.9 4.8 Other 4.2 5.9 Total 100.0 % 100.0 % (1) Further detail provided on SBA collateral concentration is included in table below. The following table displays the collateral type concentration of the Company’s SBA loans within loans, net, on our consolidated balance sheets. Collateral Concentration (Unpaid Principal Balance) December 31, 2017 December 31, 2016 Offices of Physicians 16.0 % 15.8 % Child Day Care Services 12.3 14.3 Lodging 10.5 11.4 Veterinarians 7.0 6.7 Eating Places 5.5 6.3 Grocery Stores 4.7 4.3 Auto 3.2 3.2 Funeral Service & Crematories 2.2 1.7 Accounting Auditing & Bookkeeping 2.1 2.4 Gasoline Service Stations 1.9 1.8 Other 34.6 32.1 Total 100.0 % 100.0 % |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Fair value measurements | |
Schedule of financial instruments carried at fair value on a recurring basis | The following table presents the Company’s financial instruments carried at fair value on a recurring basis as of December 31, 2017: (In Thousands) Level 1 Level 2 Level 3 Total Assets: Cash held in money market funds $ 632 $ — $ — $ 632 Loans, held for sale, at fair value — 216,022 — 216,022 Loans, net, at fair value — — 188,150 188,150 Mortgage backed securities, at fair value — 31,859 8,063 39,922 Derivative instruments, at fair value — 2,898 1,827 4,725 Residential mortgage servicing rights, at fair value — — 72,295 72,295 Total assets $ 632 $ 250,779 $ 270,335 $ 521,746 Liabilities: Derivative instruments, at fair value $ — $ 282 $ — $ 282 Contingent consideration — — 10,016 10,016 Total liabilities $ — $ 282 $ 10,016 $ 10,298 The following table presents the Company’s financial instruments carried at fair value on a recurring basis as of December 31, 2016: (In Thousands) Level 1 Level 2 Level 3 Total Assets: Cash held in money market funds $ 632 $ — $ — $ 632 Short term investments 319,984 — — 319,984 Loans, held for sale, at fair value — 164,485 17,312 181,797 Loans, net, at fair value — — 81,592 81,592 Mortgage backed securities, at fair value — — 32,391 32,391 Derivative instruments, at fair value — 3,095 2,690 5,785 Residential mortgage servicing rights, at fair value — — 61,376 61,376 Total assets $ 320,616 $ 167,580 $ 195,361 $ 683,557 Liabilities: Derivative instruments, at fair value $ — $ 643 $ — $ 643 Contingent consideration — — 14,487 14,487 Total liabilities $ — $ 643 $ 14,487 $ 15,130 |
Summary of the valuation techniques and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level 3 of the fair value hierarchy | The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level 3 of the fair value hierarchy as of December 31, 2017 using third party information without adjustment: Predominant Weighted Valuation Average Price (In Thousands, except price) Fair Value Technique Type Price Range (a) Loans, held at fair value $ 188,150 Single External Source Third Party Mark $ 101.05 – 104.00 $ Mortgage backed securities, at fair value 7,937 Broker Quotes Third Party Mark 70.92 – 70.92 70.92 Mortgage backed securities, at fair value 126 Transaction Price Transaction Price 99.00 – 99.00 99.00 Residential mortgage servicing rights, at fair value 72,295 Single external source Discounted cash flow N/A N/A Contingent consideration 10,016 Single external source Discounted cash flow N/A N/A (a) The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level 3 of the fair value hierarchy as of December 31, 2016 using third-party information without adjustment: Predominant Weighted Valuation Average Price (In Thousands, except price) Fair Value Technique Type Price Range (a) Loans, held at fair value $ 81,592 Single External Source Third Party Mark $ 98.47 – 105.00 $ 103.16 Loans, held for sale, at fair value 17,312 Single External Source Third Party Mark 100.04 – 102.97 100.87 Mortgage backed securities, at fair value (b) 29,883 Broker Quotes Third Party Mark 17.91 – 101.00 68.90 Mortgage backed securities, at fair value 2,508 Transaction Price Transaction Price 99.00 – 99.00 99.00 Residential mortgage servicing rights, at fair value 61,376 Single external source Discounted cash flow N/A N/A Contingent consideration 14,487 Single external source Discounted cash flow N/A N/A (a) (b) |
Summary of the carrying value and estimated fair value of financial instruments not carried at fair value on the consolidated balance sheets and are classified as Level 3 | December 31, 2017 December 31, 2016 (In Thousands) Carrying Value Fair Value Carrying Value Fair Value Assets: Loans, net $ 1,665,950 $ 1,737,361 $ 1,585,088 $ 1,639,982 Investment in unconsolidated joint venture 55,369 55,369 — — Servicing rights 21,743 23,432 22,478 23,470 Total assets $ 1,743,062 $ 1,816,162 $ 1,607,566 $ 1,663,452 Liabilities: Secured borrowings $ 631,286 $ 631,286 $ 927,462 $ 927,462 Promissory note 6,107 6,107 7,378 7,378 Securitized debt obligations of consolidated VIEs, net 598,148 613,676 492,942 483,381 Senior secured note, net 138,078 144,376 — — Guaranteed loan financing 293,045 306,964 390,555 409,751 Convertible note, net 108,991 108,301 — — Total liabilities $ 1,775,655 $ 1,810,710 $ 1,818,337 $ 1,827,972 |
Loans, held at fair value | |
Fair value measurements | |
Summary of changes in the fair value of financial instruments held at fair value classified as Level 3 | Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 81,592 $ 155,134 Realized gains (losses), net (90) 6 Unrealized gains, net 5,328 4,131 Originations 152,339 147,823 Sales — (4,776) Principal payments (10,114) (34,895) Transfer to loans, held for sale, at fair value — (11,499) Transfer to loans, held-for-investment (40,905) (174,332) Ending Balance $ 188,150 $ 81,592 |
Loans, held for sale, at fair value | |
Fair value measurements | |
Summary of changes in the fair value of financial instruments held at fair value classified as Level 3 | Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 17,312 $ — Realized gains, net 9,005 5,260 Unrealized gains, net 2,595 — Originations 352,975 257,993 Sales (284,707) (257,281) Principal payments (10,429) (159) Transfer from loans, held at fair value — 11,499 Transfer from loans, held-for-investment, net 5,937 — Transfer from Level 3 (92,688) — Ending Balance $ — $ 17,312 |
MBS | |
Fair value measurements | |
Summary of changes in the fair value of financial instruments held at fair value classified as Level 3 | Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 32,391 $ 213,504 Accreted discount, net 224 201 Realized gains (losses), net 522 (3,068) Unrealized gains, net 1,344 3,680 Purchases 14,448 17,388 Acquired in connection with reverse merger — 97,936 Sales / Principal payments (7,785) (297,250) Transfer from Level 3 (33,081) — Ending Balance $ 8,063 $ 32,391 |
Derivatives | |
Fair value measurements | |
Summary of changes in the fair value of financial instruments held at fair value classified as Level 3 | Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 2,690 $ — Acquired in connection with reverse merger — 3,498 Unrealized gains (losses) (863) (808) Ending Balance $ 1,827 $ 2,690 |
Contingent Consideration | |
Fair value measurements | |
Summary of changes in the fair value of financial instruments held at fair value classified as Level 3 | Year Ended December 31, (In Thousands) 2017 2016 Beginning Balance $ 14,487 $ — Acquired in connection with reverse merger — 14,422 Adjustment for legal settlement (5,744) — Amortization 1,273 65 Ending Balance $ 10,016 $ 14,487 |
Mortgage Backed Securities (Tab
Mortgage Backed Securities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Mortgage Backed Securities | |
Schedule of information about the Company's MBS portfolio | The following table presents certain information about the Company’s MBS portfolio, which are classified as trading securities and carried at fair value, as of December 31, 2017. December 31, 2017 Weighted Weighted Average Gross Gross Average Interest Principal Amortized Unrealized Unrealized (In Thousands) Maturity (a) Rate (a) Balance Cost Fair Value Gains Losses MBS Freddie Mac Loans 12/2034 5.3 % $ 49,767 $ 37,287 $ 38,568 $ 2,529 $ (1,248) Commercial Loans 06/2043 5.5 4,513 1,054 1,228 174 — Tax Liens 09/2026 6.0 127 127 126 — (1) Total 08/2035 5.3 % $ 54,407 $ 38,468 $ 39,922 $ 2,703 $ (1,249) (a) Weighted based on current principal balance The following table presents certain information about the Company’s MBS portfolio as of December 31, 201 6 . December 31, 2016 Weighted Weighted Average Gross Gross Average Interest Principal Amortized Unrealized Unrealized (In Thousands) Maturity (a) Rate (a) Balance Cost Fair Value Gains Losses MBS Freddie Mac Loans 06/2032 5.6 % $ 34,932 $ 28,676 $ 28,752 $ 1,605 $ (1,528) Commercial Loans 06/2043 5.5 6,314 1,472 1,131 (342) Tax Liens 03/2031 6.5 2,534 2,533 2,508 — (25) Total 12/2033 5.7 % $ 43,780 $ 32,681 $ 32,391 $ 1,605 $ (1,895) (a) Weighted based on current principal balance |
Schedule of information about the maturity of the Company's MBS portfolio | The following table presents certain information about the maturity of the Company’s MBS portfolio as of December 31, 2017. December 31, 2017 Weighted Average Interest Principal Amortized (In Thousands) Rate (a) Balance Cost Fair Value After five years through ten years 8.9 % $ 8,919 $ 8,205 $ 8,904 After ten years 4.6 45,488 30,263 31,018 Total 5.3 % $ 54,407 $ 38,468 $ 39,922 The following table presents certain information about the maturity of the Company’s MBS portfolio as of December 31, 2016. December 31, 2016 Weighted Average Interest Principal Amortized (In Thousands) Rate (a) Balance Cost Fair Value After five years through ten years 8.9 % $ 13,616 $ 12,579 $ 12,709 After ten years 4.2 30,164 20,102 19,682 Total 5.7 % $ 43,780 $ 32,681 $ 32,391 |
Servicing rights (Tables)
Servicing rights (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Schedule of beginning and ending balances of servicing rights | Year Ended December 31, (In Thousands) 2017 2016 SBA servicing rights, at amortized cost Beginning net carrying amount $ 20,276 $ 26,329 Additions due to loans sold, servicing retained 1,996 951 Amortization (4,034) (5,110) Impairment (1,554) (1,894) Ending net carrying value of SBA servicing rights $ 16,684 $ 20,276 Freddie Mac servicing rights, at amortized cost Beginning net carrying amount $ 2,202 $ 921 Additions due to loans sold, servicing retained 3,290 2,009 Amortization (610) (550) Recovery (Impairment) 177 (178) Ending net carrying value of Freddie Mac servicing rights $ 5,059 $ 2,202 Ending net carrying value of SBA and Freddie Mac servicing rights, at amortized cost $ 21,743 $ 22,478 Residential mortgage servicing rights, at fair value Beginning Balance $ 61,376 $ — Acquired in connection with reverse merger — 51,302 Additions due to loans sold, servicing retained 20,565 3,157 Loan pay-offs (5,646) — Unrealized gains (losses) (4,000) 6,917 Ending fair value of residential mortgage servicing rights $ 72,295 $ 61,376 Total servicing rights $ 94,038 $ 83,854 |
Schedule of future amortization expense for the servicing rights | (In Thousands) December 31, 2017 2018 $ 4,353 2019 3,675 2020 3,087 2021 2,585 2022 2,145 Thereafter 5,898 Total $ 21,743 |
Residential | |
Schedule of servicing rights | As of December 31, 2017 As of December 31, 2016 Unpaid Principal Unpaid Principal (In Thousands) Amount Fair Value Amount Fair Value Fannie Mae $ 2,524,897 $ 26,929 $ 2,211,493 $ 23,924 Ginnie Mae 2,134,772 24,135 1,817,009 21,205 Freddie Mac 1,898,786 21,231 1,452,902 16,247 Total $ 6,558,455 $ 72,295 $ 5,481,404 $ 61,376 |
Schedule Of Mortgage Servicing Rights Portfolio | December 31, 2017 December 31, 2016 Range of input Weighted Range of input Weighted Residential mortgage servicing rights (at fair value) • Forward prepayment rate - % % - % % • Discount rate - % % - % % • Servicing expense - % % - % % |
Schedule of adverse changes to key assumptions on the carrying amount of the servicing rights | (In Thousands) December 31, 2017 December 31, 2016 Prepayment rate 10% adverse change $ (2,721) $ (2,038) 20% adverse change (4,928) (3,983) Discount rate 10% adverse change $ (3,029) $ (2,299) 20% adverse change (5,823) (4,438) Cost of servicing 10% adverse change $ (1,230) $ (1,304) 20% adverse change (2,460) (2,607) |
SBA | Freddie Mac | |
Schedule of servicing rights | As of December 31, 2017 As of December 31, 2016 Unpaid Principal Unpaid Principal (In Thousands) Amount Carrying Value Amount Carrying Value SBA $ 427,623 $ 16,684 $ 449,115 $ 20,276 Freddie Mac 559,823 5,059 224,826 2,202 Total $ 987,446 $ 21,743 $ 673,941 $ 22,478 |
Schedule of adverse changes to key assumptions on the carrying amount of the servicing rights | (In Thousands) December 31, 2017 December 31, 2016 SBA servicing rights (at amortized cost) • Forward prepayment rate 10% adverse change $ (514) $ (664) 20% adverse change (998) (1,290) • Default rate 10% adverse change $ (24) $ (12) 20% adverse change (48) (24) • Discount rate 10% adverse change $ (520) $ (576) 20% adverse change (1,008) (1,290) Freddie Mac commercial servicing rights (at amortized cost) • Forward prepayment rate 10% adverse change $ (43) $ (55) 20% adverse change (84) (107) • Default rate 10% adverse change $ (6) $ (2) 20% adverse change (12) (4) • Discount rate 10% adverse change $ (270) $ (54) 20% adverse change (518) (104) |
SBA | Freddie Mac | Commercial | |
Schedule of adverse changes to key assumptions on the carrying amount of the servicing rights | December 31, 2017 December 31, 2016 Range of input Weighted Range of input Weighted SBA servicing rights (at amortized cost) • Forward prepayment rate - % % - % % • Forward default rate - % % - % % • Discount rate - % % - % % • Servicing expense - % % - % % Freddie Mac commercial servicing rights (at amortized cost) • Forward prepayment rate - % % - % % • Forward default rate - % % - % % • Discount rate - % % - % % • Servicing expense - % % - % % |
Gains on residential mortgage45
Gains on residential mortgage banking activities, net of variable loan expenses (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Gains on residential mortgage banking activities, net of variable loan expenses | |
Schedule of the components of gains on residential mortgage banking activities, net of variable loan expenses | For the Year Ended December 31, (In Thousands) 2017 2016 Realized and unrealized gains and losses of residential mortgage loans held for sale, at fair value $ 63,024 $ 2,943 Creation of new mortgage servicing rights, net of payoffs 14,919 3,157 Loan origination fee income on residential mortgage loans 8,193 1,404 Correspondent fees and other direct loan expenses, including provision for loan indemnification (41,737) (597) Unrealized gains (loss) on IRLCs and other derivatives (2,699) 126 Total gains on residential mortgage banking activities, net of variable loan expenses $ 41,700 $ 7,033 |
Secured Borrowings and Promis46
Secured Borrowings and Promissory Note (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Secured Borrowings and Promissory Note | |
Schedule of characteristics of our credit facilities and promissory note payable | Pledged Assets Carrying Value (In Thousands) Maturity Pricing Facility December 31, December 31, December 31, December 31, Borrowings under credit facilities JPMorgan - Commercial (1) June 2018 L+ 3.25 to 3.50% $ 250,000 $ 107,697 $ 226,253 $ 60,459 $ 190,066 Keybank - Commercial (2) September 2018 L + 1.75% 100,000 67,589 17,311 66,642 17,162 Comerica - Residential (3) March 2018 L + 2.125% 150,000 71,035 35,102 67,336 33,575 UBS - Residential loans (3) November 2017 L + 2.30% 65,000 — 43,121 — 39,750 Associated Bank - Residential loans (3) August 2018 L + 2.125% 40,000 29,242 28,575 27,699 27,869 Origin Bank - Residential loans (3) May 2018 L + 2.25% 40,000 27,891 18,910 26,538 18,188 Total borrowings under credit facilities (9) $ 645,000 $ 303,454 $ 369,272 $ 248,674 $ 326,610 Borrowings under repurchase agreements Deutsche Bank- Commercial (4) February 2018 L + 2.50 to 3.50% $ 275,000 $ 252,499 $ 118,962 $ 173,811 $ 82,716 JPMorgan - Commercial (5) December 2020 L + 2.50 to 4.50% 200,000 90,829 93,691 55,355 52,169 Citibank - Commercial (6) June 2018 L + 2.25 to 3.00% 200,000 150,707 119,376 88,095 102,576 JPMorgan - MBS (7) February 2018 2.56 to 5.00% 53,325 80,690 42,253 53,325 30,363 Citibank - MBS (7) February 2018 3.42% 5,957 11,496 11,496 5,957 5,226 Bank of America - MBS (7) January 2018 3.38 to 3.48% 8,112 8,778 11,815 6,069 8,112 Mizuho - STI (8) N/A N/A 99,950 — 100,000 — 99,950 Societe Generale - STI (8) N/A N/A 19,940 — 19,994 — 19,940 RBC - STI (8) N/A N/A 199,800 — 199,990 — 199,800 Total borrowings under repurchase agreements (10) $ 1,062,084 $ 594,999 $ 717,577 $ 382,612 $ 600,852 Total secured borrowings $ 1,707,084 $ 898,453 $ 1,086,849 $ 631,286 $ 927,462 Promissory note payable FCB - Commercial June 2021 2.75% $ 6,554 $ 7,752 $ 9,144 $ 6,107 $ 7,378 Total promissory note payable $ 6,554 $ 7,752 $ 9,144 $ 6,107 $ 7,378 (1) Borrowings are used to finance SBC and SBA loan acquisitions, and SBA loan originations. (2) Borrowings are used to finance Freddie Mac SBC loan originations. (3) Borrowings are used to finance Residential Agency loan originations. (4) Borrowings are used to finance SBC loan originations. (5) Borrowings are used to finance SBC loan originations, Transitional loan originations, and SBC loan acquisitions. (6) Borrowings are used to finance SBC loan originations and SBC loan acquisitions. (7) Borrowings are used to finance Mortgage backed securities and Retained interests in consolidated VIE's. (8) Borrowings are used to finance Short-term investments. (9) The weighted average interest rate of borrowings under credit facilities was 3.9% and 4.2% as of December 31, 2017 and 2016, respectively. (10) The weighted average interest rate of borrowings under repurchase agreements was 3.1% and 1.8% as of December 31, 2017 and 2016, respectively. |
Schedule of carrying value of collateral pledged with respect to borrowings under credit facilities and promissory note payable outstanding | Pledged Assets (In Thousands) December 31, December 31, Collateral pledged - borrowings under credit facilities Loans, net $ 303,133 $ 369,272 Real estate acquired in settlement of loans 321 — Total collateral pledged on borrowings under credit facilities $ 303,454 $ 369,272 Collateral pledged - borrowings under repurchase agreements Short-term investments $ — $ 319,984 Loans, net 494,035 332,029 Mortgage backed securities 37,397 11,815 Retained interest in assets of consolidated VIEs 63,567 53,749 Total collateral pledged on borrowings under repurchase agreements $ 594,999 $ 717,577 Total collateral pledged on secured borrowings $ 898,453 $ 1,086,849 Collateral pledged - promissory note payable Loans, net $ 7,752 $ 9,144 Total collateral pledged on promissory note payable $ 7,752 $ 9,144 |
Offsetting Assets and Liabili47
Offsetting Assets and Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Offsetting Assets and Liabilities | |
Schedule of effect of offsetting recognized assets | The following table provides disclosure regarding the effect of offsetting of the Company’s recognized assets presented in the consolidated balance sheet as of December 31, 2017: Gross Assets Amounts Presented in Gross Amounts Not Offset in the Consolidated Gross Offset in the the Balance Sheets (1) Amounts of Consolidated Consolidated Cash Recognized Balance Balance Financial Collateral (In Thousands) Assets Sheets Sheets Instruments Received Net Amount Interest rate swaps $ 2,898 $ — $ 2,898 $ — $ 2,898 $ — Total $ 2,898 $ — $ 2,898 $ — $ 2,898 $ — The following table provides disclosure regarding the effect of offsetting of the Company’s recognized assets presented in the consolidated balance sheet as of December 31, 2016: Gross Assets Amounts Presented in Gross Amounts Not Offset in the Consolidated Gross Offset in the the Balance Sheets (1) Amounts of Consolidated Consolidated Cash Recognized Balance Balance Financial Collateral (In Thousands) Assets Sheets Sheets Instruments Received Net Amount Credit default swaps $ 173 $ — $ 173 $ — $ — $ 173 Interest rate swaps 2,924 2 2,922 — — 2,922 Total $ 3,097 $ 2 $ 3,095 $ — $ — $ 3,095 |
Schedule of effect of offsetting recognized liabilities | The following table provides disclosure regarding the effect of offsetting of the Company’s recognized liabilities presented in the consolidated balance sheet as of December 31, 2017: Gross Liabilities Amounts Presented in Gross Amounts Not Offset in the Consolidated Gross Offset in the the Balance Sheets (1) Amounts of Consolidated Consolidated Cash Recognized Balance Balance Financial Collateral (In Thousands) Liabilities Sheets Sheets Instruments Paid Net Amount Interest rate swaps $ 216 $ — $ 216 $ — $ 216 $ — Credit default swaps 66 — 66 — 66 — Secured borrowings 631,286 — 631,286 631,286 — — Promissory note, net 6,107 — 6,107 6,107 — — Total $ 637,675 $ — $ 637,675 $ 637,393 $ 282 $ — The following table provides disclosure regarding the effect of offsetting of the Company’s recognized liabilities presented in the consolidated balance sheet as of December 31, 2016: Liabilities Gross Presented in Gross Amounts Not Offset in the Consolidated Gross Amounts the Balance Sheets (1) Amounts of Offset in the Consolidated Cash Recognized Consolidated Balance Financial Collateral (In Thousands) Liabilities Balance Sheets Sheets Instruments Paid Net Amount Interest rate swaps $ 643 $ — $ 643 $ — $ 643 $ — Secured borrowings 927,462 — 927,462 925,602 1,860 — Promissory note, net 7,378 — 7,378 7,378 — — Total $ 935,483 $ — $ 935,483 $ 932,980 $ 2,503 $ — |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Derivative Instruments | |
Schedule of the Company’s derivatives | As of December 31, 2017 As of December 31, 2016 Asset Liability Asset Liability Notional Derivatives Derivatives Notional Derivatives Derivatives (In Thousands) Primary Underlying Risk Amount Fair Value Fair Value Amount Fair Value Fair Value Credit Default Swaps Credit Risk $ 15,000 $ — $ (66) $ 15,000 $ 173 $ – Interest Rate Swaps Interest rate risk 391,381 2,898 (216) 378,050 2,922 (643) Interest rate lock commitments Interest rate risk 167,533 1,827 — 212,530 2,690 — Total $ 573,914 $ 4,725 $ (282) $ 605,580 $ 5,785 $ (643) |
Schedule of gains and losses on derivatives | Year Ended December 31, 2017 Net Change in Net Realized Unrealized (In Thousands) (Loss) Gain (Loss) Credit default swaps (1) $ — $ (238) Interest rate swaps (1) (1,256) 2,238 Residential mortgage banking activities interest rate swaps (2) — (1,836) Interest rate lock commitments (2) — (863) Total $ (1,256) $ (699) (1) Gains (losses) are recorded in net unrealized gain (loss) on financial instruments or net realized gain (loss) on financial instruments in the consolidated statements of income. |
Senior secured notes, net and49
Senior secured notes, net and Convertible notes, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Senior secured notes, net and Convertible notes, net | |
Schedule of components of the senior secured note and convertible notes | (in thousands, except rates) Coupon Rate Maturity Date December 31, 2017 2017 Senior secured notes principal amount (1) 7.50 % 2/15/2022 $ 140,000 Unamortized premium - Senior secured notes 1,735 Unamortized deferred financing costs - Senior secured notes (3,657) Total Senior secured notes, net $ 138,078 2017 Convertible notes- principal amount (2) 7.00 % 8/15/2023 115,000 Unamortized discount - Convertible notes (3) (2,139) Unamortized deferred financing costs - Convertible notes (3,870) Total Convertible notes, net $ 108,991 Total carrying amount of debt components $ 247,069 Total carrying amount of conversion option of equity components recorded in equity $ 2,139 (1) Interest on the Senior Secured Notes is payable semiannually on each February 15 and August 15, beginning on August 15, 2017. (2) Interest on the Convertible Notes is payable quarterly on February 15, May 15, August 15, and November 15 of each year, beginning on November 15, 2017. Represents the discount created by separating the conversion option from the debt host instrument. |
Guaranteed loan financing (Tabl
Guaranteed loan financing (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Guaranteed loan financing | |
Schedule of guaranteed loan financing and the related interest rates and maturity dates | Weighted Range of Average Interest Range of (In Thousands) Interest Rate Rates Maturities (Years) Ending Balance December 31, 2017 3.51 % 1.62 – 7.00 % 2018 - 2038 $ 293,045 December 31, 2016 2.79 % 3.50 – 8.75 % 2017 - 2038 $ 390,555 |
Summary of contractual maturities of total guaranteed loan financing outstanding | (In Thousands) December 31, 2017 2018 $ 1,990 2019 2,713 2020 3,251 2021 4,767 2022 4,810 Thereafter 275,514 Total $ 293,045 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Management Fee | |
Related-party transactions | |
Schedule of related party transactions | For the Year Ended December 31, 2017 2016 Management fee - total $ 8.1 million $ 7.4 million Management fee - amount unpaid $ 2.0 million $ 3.7 million |
Expense Reimbursement | |
Related-party transactions | |
Schedule of related party transactions | For the Year Ended December 31, 2017 2016 Reimbursable expenses payable to our Manager - total $ 4.9 million $ 4.1 million Reimbursable expenses payable to our Manager - amount unpaid $ 2.4 million $ 3.4 million |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes | |
Schedule of income tax provision | Year Ended December 31, (In Thousands) 2017 2016 2015 Current Federal income tax (benefit) $ (1,235) $ 6,441 $ 5,234 State and local income tax (benefit) (171) 947 710 Net current tax provision (benefit) (1,406) 7,388 5,944 Deferred Federal income tax 3,779 1,401 750 State and local income tax 613 583 248 Valuation allowance (1,147) 279 868 Net deferred tax provision 3,245 2,263 1,866 Total income tax provision $ 1,839 $ 9,651 $ 7,810 |
Schedule of income tax reconciliation | Year Ended December 31, (In Thousands) 2017 2016 2015 U.S. statutory tax $ 16,679 $ 22,825 $ 18,099 State and local income tax 569 2,322 721 Income attributable to REIT (10,795) (14,522) (10,138) Income attributable to Non-controlling interests (568) (1,251) (1,491) Nondeductible 748 21 18 Change in tax rate (a) (727) — — Change in valuation allowance (1,147) 279 868 Return to Provision (2,547) — — Other (373) (23) (267) Effective income tax $ 1,839 $ 9,651 $ 7,810 (a) For 2017 the amount relates to the effects of revaluing our net deferred tax balances for the TCJA that was enacted on December 22, 2017 |
Schedule showing temporary differences with respect to deferred tax assets and liabilities | (In Thousands) December 31, 2017 December 31, 2016 Deferred tax assets: Net operating loss carryforwards $ 4,989 $ 4,159 Unrealized losses — 488 Impairment and reserves — 7,826 Depreciation and amortization 997 668 Goodwill 3,110 7,134 Compensation 1,226 1,669 Intangibles — 896 Other 1,240 859 Total deferred tax assets $ 11,562 $ 23,699 Deferred tax liabilities: Accruals $ 216 $ (402) Loan / servicing rights balance 12,014 20,995 Derivative instruments 373 1,152 Other taxable temporary difference 310 69 Total deferred tax liabilities $ 12,913 $ 21,814 Valuation allowance — (1,147) Net deferred tax assets (liabilities) $ (1,351) $ 738 |
Other Asset and Other Liabili53
Other Asset and Other Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Other Asset and Other Liabilities | |
Schedule of other assets and other liabilities | (In Thousands) December 31, 2017 December 31, 2016 Other assets: Due from servicers $ 9,964 $ 27,029 Intangible assets 3,264 3,636 Accrued interest 6,494 5,606 Real estate acquired in settlement of loans 1,644 3,933 Deferred financing costs 446 3,376 Deferred tax asset 17,155 1,371 Prepaid taxes 6,014 1,456 Other 11,859 7,870 Total other assets $ 56,840 $ 54,277 Accounts payable and other accrued liabilities: Accrued salaries, wages and commissions $ 16,508 $ 17,450 Servicing principal and interest payable 5,659 10,664 Repair and denial reserve 5,687 6,813 Liability under subservicing agreements 1,496 6,757 Unapplied cash 2,445 6,278 Accrued interest payable 10,317 4,680 Payable to related parties 2,042 3,762 Deferred tax liability 18,506 632 Other accounts payable and accrued liabilities 11,976 13,171 Total accounts payable and other accrued liabilities $ 74,636 $ 70,207 |
Schedule of real estate acquired in settlement of loans | (In Thousands) December 31, 2017 December 31, 2016 North Carolina — 1,850 Florida 303 1,320 Illinois 863 19 Other 478 744 Total $ 1,644 $ 3,933 |
Schedule of Intangible assets | (In Thousands) December 31, 2017 December 31, 2016 Estimated Useful Life Trade name $ 1,017 $ 1,190 15 years Favorable lease 1,247 1,446 12 years SBA license 1,000 1,000 Indefinite life Total Intangible Assets $ 3,264 $ 3,636 |
Schedule of other operating expenses | (In Thousands) December 31, 2017 Trade name $ 206 Favorable lease 233 Total Accumulated Amortization $ 439 |
Amortization expense related to the intangible assets | (In Thousands) December 31, 2017 2018 $ 349 2019 311 2020 277 2021 248 2022 222 Thereafter 857 Total $ 2,264 |
Other Income and Other Operat54
Other Income and Other Operating Expenses (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Other Income and Other Operating Expenses | |
Schedule of other income and operating expenses | For the Year Ended December 31, (In Thousands) 2017 2016 2015 Other income Origination income $ 4,302 $ 4,144 $ 2,935 Release/(Increase) of repair and denial reserve 1,013 1,258 10,120 Other 3,143 3,759 1,376 Total other income $ 8,458 $ 9,161 $ 14,431 Other operating expenses Origination costs $ 6,862 $ 4,098 $ 2,779 Technology expense 3,692 2,945 2,414 Charge off of real estate acquired in settlement of loans 756 1,833 849 Rent expense 2,314 1,449 996 Recruiting, training and travel expenses 2,389 1,320 1,223 Other 10,926 5,535 3,693 Total other operating expenses $ 26,939 $ 17,180 $ 11,954 |
Variable Interest Entities an55
Variable Interest Entities and Securitization Activities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
VIEs | |
Summary of information on securitized debt obligations of consolidated VIEs | December 31, 2017 December 31, 2016 Current Weighted Current Weighted Principal Carrying Average Principal Carrying Average (In Thousands) Balance value Interest Rate Balance value Interest Rate Waterfall Victoria Mortgage Trust 2011-SBC2 $ 16,010 $ 16,010 5.3 % $ 24,472 $ 24,472 5.2 % Sutherland Commercial Mortgage Loans 2015-SBC4 10,049 9,687 4.0 39,464 38,402 3.9 Sutherland Commercial Mortgage Trust 2017-SBC6 119,784 117,868 3.3 — — — ReadyCap Commercial Mortgage Trust 2014-1 33,953 33,951 3.6 84,320 83,885 3.4 ReadyCap Commercial Mortgage Trust 2015-2 151,993 147,271 4.1 166,232 160,699 4.0 ReadyCap Commercial Mortgage Trust 2016-3 98,733 95,907 3.5 133,774 129,914 3.5 Ready Capital Mortgage Financing 2017-FL1 158,978 154,721 2.8 — — — ReadyCap Lending Small Business Trust 2015-1 25,057 22,733 2.5 56,055 55,570 2.0 Total $ 614,557 $ 598,148 3.4 % $ 504,317 $ 492,942 % |
Consolidated balance sheets of VIEs | (In Thousands) December 31, 2017 December 31, 2016 Assets: Cash and cash equivalents $ 25 $ 131 Restricted cash 15,838 808 Loans, net 836,180 655,559 Real estate acquired in settlement of loans 3,443 4,103 Accrued interest 4,261 2,835 Due from servicers 1,915 27,660 Total assets 861,662 691,096 Liabilities: Securitized debt obligations of consolidated VIEs, net 598,148 492,942 Total liabilities 598,148 492,942 Equity $ 263,514 $ 198,154 |
VIE not primary beneficiary | |
Consolidated balance sheets of VIEs | (In Thousands) Carrying Maximum (1) Assets: Mortgage backed securities, at fair value (2) $ 38,568 $ 38,568 Investment in unconsolidated joint venture 55,369 55,369 Total assets in unconsolidated VIEs $ 93,937 93,937 (1) Maximum exposure to loss is limited to the greater of the fair value or carrying value of the assets as of the consolidated balance sheet date. (2) Retained interest in Freddie Mac sponsored securitizations. |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Stockholders’ Equity | |
Schedule of cash dividends declared by the Board of Directors | Dividend per Declaration Date Record Date Payment Date Share May 20, 2016 June 3, 2016 June 17, 2016 $ 0.45 August 23, 2016 September 2, 2016 September 16, 2016 $ 0.45 October 11, 2016 October 14, 2016 October 25, 2016 $ 0.36 December 21, 2016 December 30, 2016 January 27, 2017 $ 0.35 March 14, 2017 March 31, 2017 April 13, 2017 $ 0.37 June 15, 2017 June 30, 2017 July 31, 2017 $ 0.37 September 12, 2017 September 29, 2017 October 20, 2017 $ 0.37 December 13, 2017 December 29, 2017 January 31, 2018 $ 0.37 (1) Retrospectively adjusted for the equivalent number of shares after the reverse merger. |
Schedule of Restricted Stock Unit RSU and RSA activity | Independent Director RSUs Employee RSAs (In Thousands, except share data) Number of Weighted-average grant date fair value Weighted-average grant date fair value (per share) Number of Weighted-average grant date fair value Weighted-average grant date fair value (per share) Outstanding, January 1 — $ — $ — — $ — $ — Granted 40,000 580 14.50 — — — Vested (25,000) (363) 14.50 — — — Forfeited — — — — — — Canceled — — — — — — Outstanding, March 31, 2017 15,000 $ 217 $ 14.50 — $ — $ — Granted — — — 25,851 380 14.70 Vested (5,000) (72) 14.50 — — — Forfeited — — — — — — Canceled — — — — — — Outstanding, June 30, 2017 10,000 $ 145 $ 14.50 25,851 $ 380 $ 14.70 Granted — — — — — — Vested (5,000) (72) 14.50 — — — Forfeited — — — — — — Canceled — — — — — — Outstanding, September 30, 2017 5,000 $ 73 $ 14.50 25,851 $ 380 $ 14.70 Granted — — — — — — Vested (5,000) (73) 14.50 — — — Forfeited — — — — — — Canceled — — — — — — Outstanding, December 31, 2017 — $ — $ — 25,851 $ 380 $ 14.70 |
Earnings per Share of Common 57
Earnings per Share of Common Stock (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Earnings per Share of Common Stock | |
Schedule of reconciliation of both income from continuing operations and loss from discontinued operations | Year Ended December 31, (In Thousands, except for share and per share amounts) 2017 2016 2015 Basic Earnings Continuing Operations Income from continuing operations $ 45,814 $ 55,564 $ 45,421 Less: Income attributable to non-controlling interest 2,524 4,237 4,385 Less: Income attributable to participating shares 62 - - Basic - Income from continuing operations $ 43,228 $ 51,327 $ 41,036 Discontinued Operations Loss from discontinued operations - (2,158) (653) Basic — Net income attributable to common stockholders after allocation to participating shares $ 43,228 $ 49,169 $ 40,383 Diluted Earnings Continuing Operations Basic — Income from continuing operations $ 45,814 $ 55,564 $ 45,421 Less: Income attributable to non-controlling interest 2,524 4,237 4,385 Less: Income attributable to participating shares 62 - - Diluted — Income from continuing operations $ 43,228 $ 51,327 $ 41,036 Discontinued Operations Basic — Loss from discontinued operations - (2,158) (653) Diluted — Net income attributable to common stockholders after allocation to participating shares $ 43,228 $ 49,169 $ 40,383 Number of Shares Basic — Average shares outstanding 31,350,102 26,647,981 (1) 25,287,277 (1) Effect of dilutive securities — Unvested participating shares 1,509 - - Diluted — Average shares outstanding 31,351,611 26,647,981 25,287,277 Basic Income from continuing operations $ 1.38 $ 1.93 $ 1.62 Loss from discontinued operations - (0.08) (0.03) Diluted Income from continuing operations $ 1.38 $ 1.93 $ 1.62 Loss from discontinued operations - (0.08) (0.03) (1) Retroactively adjusted for the equivalent number of shares after the reverse acquisition using an exchange rate of 0.8356. |
Interest Income and Interest 58
Interest Income and Interest Expense (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Interest Income and Interest Expense | |
Schedule of components of interest income and expense | Year Ended December 31, (In Thousands) 2017 2016 2015 Interest income Loans Acquired SBA 7(a) loans $ 37,110 $ 46,417 $ 54,565 Acquired loans 34,720 44,122 50,920 Originated Transitional loans 25,323 8,608 1,698 Originated SBC loans, at fair value 7,769 13,457 14,858 Originated SBC loans 22,564 17,902 14,793 Originated SBA 7(a) loans 998 — — Originated Residential Agency loans 255 — — Total loans (1) $ 128,739 $ 130,506 $ 136,834 Held for sale, at fair value, loans Originated Residential Agency loans $ 3,723 $ 709 $ — Originated Freddie loans 1,507 619 — Originated SBA 7(a) loans — — 40 Acquired loans 993 299 — Total loans, held for sale, at fair value $ 6,223 $ 1,627 $ 40 Mortgage backed securities, at fair value 3,343 4,890 12,081 Total interest income $ 138,305 $ 137,023 $ 148,955 Interest expense Secured borrowings $ (26,092) $ (25,839) $ (24,481) Securitized debt obligations of consolidated VIEs (23,387) (17,619) (11,018) Guaranteed loan financing (13,435) (13,971) (12,307) Senior secured note (8,069) — — Convertible note (3,427) — — Promissory note (236) (164) — Exchangeable senior notes — (179) — Total interest expense $ (74,646) $ (57,772) $ (47,806) Net interest income before provision for loan losses $ 63,659 $ 79,251 $ 101,149 (1) Includes interest income on loans in consolidated VIEs. |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Segment Reporting | |
Schedule of segment reporting information | Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the year ended December 31, 2017 are summarized in the below table. SBA Originations, Residential Loan SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 37,198 $ 59,021 $ 38,108 $ 3,978 $ — $ 138,305 Interest expense (16,741) (35,121) (16,098) (3,145) (3,541) (74,646) Net interest income before provision for loan losses $ 20,457 $ 23,900 $ 22,010 $ 833 $ (3,541) $ 63,659 Provision for loan losses (2,026) (195) (142) — — (2,363) Net interest income after provision for loan losses $ 18,431 $ 23,705 $ 21,868 $ 833 $ (3,541) $ 61,296 Non-interest income Gains on residential mortgage banking activities, net of variable loan expenses $ — $ — $ — $ 41,700 $ — $ 41,700 Other income 2,814 3,983 1,513 148 — 8,458 Servicing income 197 824 4,624 17,349 — 22,994 Gain on bargain purchase — — — — — — Total non-interest income $ 3,011 $ 4,807 $ 6,137 $ 59,197 $ — $ 73,152 Non-interest expense Employee compensation and benefits (576) (8,509) (10,505) (34,601) (848) (55,039) Allocated employee compensation and benefits from related party (384) — — — (3,459) (3,843) Professional fees (1,501) (1,351) (1,973) (865) (3,231) (8,921) Management fees – related party — — — — (8,059) (8,059) Loan servicing expense (2,981) (2,355) 1,454 (6,441) — (10,323) Other operating expenses (4,285) (9,666) (4,076) (6,677) (2,235) (26,939) Total non-interest expense $ (9,727) $ (21,881) $ (15,100) $ (48,584) $ (17,832) $ (113,124) Net realized (loss) gain on financial instruments (323) 9,665 9,509 — 478 19,329 Net unrealized gain (loss) on financial instruments 1,628 8,125 1,315 (4,000) (68) 7,000 Income from continuing operations before provision for income taxes $ 13,020 $ 24,421 $ 23,729 $ 7,446 $ (20,963) $ 47,653 Total Assets $ 511,427 $ 1,154,509 $ 510,006 $ 324,392 $ 23,169 $ 2,523,503 Reportable segments for the year ended December 31, 2016 are summarized in the below table. SBA Originations, Residential Loan SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 49,311 $ 40,586 $ 46,417 $ 709 $ — $ 137,023 Interest expense (18,327) (20,347) (17,397) (557) (1,144) (57,772) Net interest income before provision for loan losses $ 30,984 $ 20,239 $ 29,020 $ 152 $ (1,144) $ 79,251 Provision for loan losses (6,419) (86) (1,314) — — (7,819) Net interest income after provision for loan losses $ 24,565 $ 20,153 $ 27,706 $ 152 $ (1,144) $ 71,432 Non-interest income Gains on residential mortgage banking activities, net of variable loan expenses $ — $ — $ — $ 7,033 $ — $ 7,033 Other income 2,246 5,059 1,845 11 — 9,161 Servicing income 49 518 5,555 2,536 — 8,658 Gain on bargain purchase — — — — 15,218 15,218 Total non-interest income $ 2,295 $ 5,577 $ 7,400 $ 9,580 $ 15,218 $ 40,070 Non-interest expense Employee compensation and benefits (337) (9,359) (9,391) (5,578) (162) (24,827) Allocated employee compensation and benefits from related party (366) — — — (3,302) (3,668) Professional fees (2,735) (1,537) (3,693) 359 (5,814) (13,420) Management fees – related party — — — — (7,432) (7,432) Loan servicing expense (2,743) (1,348) 479 (999) — (4,611) Other operating expenses (3,604) (6,864) (3,798) (1,074) (1,840) (17,180) Total non-interest expense $ (9,785) $ (19,108) $ (16,403) $ (7,292) $ (18,550) $ (71,138) Net realized (loss) gain on financial instruments (293) 2,290 4,604 — 313 6,914 Net unrealized gain on financial instruments 4,528 6,424 — 6,917 68 17,937 Income from continuing operations before provision for income taxes $ 21,310 $ 15,336 $ 23,307 $ 9,357 $ (4,095) $ 65,215 Total Assets $ 542,643 $ 796,408 $ 593,091 $ 353,141 $ 319,984 $ 2,605,267 Reportable segments for the year ended December 31, 2015 are summarized in the below table. SBA Originations, Residential Loan SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 63,001 $ 31,349 $ 54,605 $ — $ — $ 148,955 Interest expense (17,404) (11,538) (18,233) — (631) (47,806) Net interest income before provision for loan losses $ 45,597 $ 19,811 $ 36,372 $ — $ (631) $ 101,149 Provision for loan losses (13,153) — (6,490) — — (19,643) Net interest income after provision for loan losses $ 32,444 $ 19,811 $ 29,882 $ — $ (631) $ 81,506 Non-interest income Gains on residential mortgage banking activities, net of variable loan expenses $ — $ — $ — $ — $ — $ — Other income 583 2,938 10,910 — — 14,431 Servicing income 418 139 4,576 — — 5,133 Total non-interest income $ 1,001 $ 3,077 $ 15,486 $ — $ — $ 19,564 Non-interest expense Employee compensation and benefits — (9,291) (9,510) — (148) (18,949) Allocated employee compensation and benefits from related party (333) — — — (2,990) (3,323) Professional fees (651) (714) (3,319) — (2,270) (6,954) Management fees – related party — — — — (7,260) (7,260) Incentive fees – related party — — — — (965) (965) Loan servicing expense (4,829) (969) 1,451 — — (4,347) Other operating expenses 832 (5,578) (3,402) — (3,806) (11,954) Total non-interest expense $ (4,981) $ (16,552) $ (14,780) $ — $ (17,439) $ (53,752) Net realized (loss) gain on financial instruments 2,388 (3,534) 1,317 — 10 181 Net unrealized gain on financial instruments (4,617) 10,353 — — (4) 5,732 Income from continuing operations before provision for income taxes $ 26,235 $ 13,155 $ 31,905 $ — $ (18,064) $ 53,231 Total Assets $ 711,618 $ 623,043 $ 745,131 $ — $ 249,989 $ 2,329,781 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Discontinued Operations | |
Schedule of reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued segment | For the Year Ended December 31, (In Thousands) 2017 2016 2015 Non-interest income (expense) Commission income $ — $ 2,984 $ 16,208 Property management income — 263 2,034 Other — 16 386 Total other income $ — $ 3,263 $ 18,628 Employee compensation and benefits — (1,071) (5,038) Professional fees — (138) (599) Management fees – related party — — — Operating expenses Acquisition costs — — — Commission expense — (1,844) (10,596) Technology expense — (171) (871) Rent expense — (268) (1,607) Tax expense — (3) (33) Recruiting, training, and travel expenses — (46) (164) Marketing expense — (29) (70) Insurance expense — — — Other — (536) (3,103) Total other operating expenses $ — $ (2,897) $ (16,444) Loss on sale — (2,695) (1,650) Loss before income tax benefit — (3,538) (5,103) Income tax benefit — 1,380 4,450 Loss on discontinued operations presented on the statements of income $ — $ (2,158) $ (653) |
Quarterly Financial Data (Una61
Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Data (Unaudited) | |
Summary of quarterly financial data | The following table summarizes our quarterly financial data which, in the opinion of management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our results of operations (amounts in thousands, except per share amounts): March 31 June 30 September 30 December 31 2017 Interest income $ 33,884 $ 33,248 $ 35,038 $ 36,135 Net interest income after provision for loan losses $ 16,211 $ 15,859 $ 14,664 $ 14,562 Non-interest income (expense) $ (9,868) $ (9,102) $ (11,003) $ (9,999) Net income from continuing operations $ 9,557 $ 11,153 $ 12,374 $ 12,730 Net income $ 9,557 $ 11,153 $ 12,374 $ 12,730 Net income attributable to Sutherland Asset Management Corporation $ 8,856 $ 10,496 $ 11,841 $ 12,097 Earnings per share - Basic and diluted (1) $ 0.29 $ 0.34 $ 0.37 $ 0.38 2016 Interest income $ 37,866 $ 34,526 $ 31,890 $ 32,741 Net interest income after provision for loan losses $ 21,381 $ 18,864 $ 17,305 $ 13,882 Non-interest income (expense) $ (9,685) $ (12,332) $ (11,863) $ 2,703 Net income from continuing operations $ 9,390 $ 8,724 $ 9,569 $ 27,881 Net income $ 9,039 $ 8,724 $ 9,569 $ 26,074 Net income attributable to Sutherland Asset Management Corporation $ 8,302 $ 8,021 $ 8,792 $ 24,054 Earnings per share - Basic and diluted (1) $ 0.32 $ 0.31 $ 0.34 $ 0.83 (1) Retroactively adjusted for the equivalent number of shares after reverse acquisition using an exchange rate of 0.8356 |
Organization (Details)
Organization (Details) - segment | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Ownership percentage in operating partnership | 96.50% | 92.90% |
Number of reportable segments | 4 | |
Minimum | ||
Percentage of taxable income distributed in the form of qualifying distributions | 90.00% |
Basis of Presentation (Details)
Basis of Presentation (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Exchange ratio | 0.8356 |
Sutherland | Common Stock | |
Exchange ratio | 0.8356 |
Operating Partnership | Limited Partners | Partnership Units | |
Exchange ratio | 0.8356 |
Summary of Significant Accoun64
Summary of Significant Accounting Policies (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017USD ($)segmentclassitem | Dec. 31, 2016USD ($) | |
Number of reportable segments | segment | 4 | |
Amount in money market mutual funds | $ 600 | $ 600 |
Number of days loans must be delinquent to be placed on nonaccrual status | 90 days | |
Number of separate classes of servicing rights used for risk management purposes | class | 2 | |
Investment in unconsolidated joint venture ownership percentage | 50.00% | |
Debt issuance costs | $ 446 | 3,376 |
Number of repurchase agreements accounted for as components of linked transactions | item | 0 | |
Unrecognized accrued taxes, interest and penalties | $ 0 | 0 |
The number of consecutive months contractual payments that must be received on a loan in non-accrual status before resuming recognition of interest income | item | 3 | |
Borrowings under credit facilities | Maximum | ||
Maturity period | 2 years | |
Promissory note | ||
Debt issuance costs | $ 0 | |
Promissory note | Maximum | ||
Maturity period | 5 years | |
Restricted cash | ||
Cash collateral receivable | $ 800 | $ 1,700 |
Business Combinations - ZAIS Fi
Business Combinations - ZAIS Financial Corp Merger (Details) $ / shares in Units, $ in Millions | Oct. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2017 |
Business Combinations | ||
Exchange ratio | 0.8356 | |
ZAIS Merger | ||
Business Combinations | ||
Purchase price per share | $ / shares | $ 15.37 | |
Exchange ratio | 0.8356 | |
ZAIS Merger | Minimum | ||
Business Combinations | ||
Stockholders' equity base of combined company | $ 550 | |
ZAIS Merger | Pre-merger Sutherland Asset Management Shareholders | ||
Business Combinations | ||
Common stock shares issued | shares | 25,870,420 | |
Ownership interest held by former members of subsidiary (as a percent) | 86.00% | |
ZAIS Merger | Pre-merger Zais Financial Shareholders | ||
Business Combinations | ||
Ownership interest after merger (as a percent) | 14.00% | |
OP Units | Pre-merger Operating Partnership Unit Holders | ||
Business Combinations | ||
Common stock shares issued | shares | 2,288,663 | |
ZAIS Financial Corp | ||
Business Combinations | ||
Shares repurchased | shares | 4,185,478 | |
Purchase price per share | $ / shares | $ 15.37 | |
Percentage of adjusted ZAIS book value | 95.00% | |
Pro-rata share of cost relating to termination of existing advisory agreement | $ 8 | |
Pro-rata share of intangible assets adjustment | 4 | |
ZAIS Financial Corp | Maximum | ||
Business Combinations | ||
Cash tender to existing shareholders | $ 64.3 |
Business Combinations - Fair va
Business Combinations - Fair value of assets and liabilities assumed (Details) - ZAIS Merger $ in Thousands | Oct. 31, 2016USD ($) |
Assets: | |
Cash and cash equivalents | $ 34,932 |
Short term investments | 69,992 |
Restricted cash | 4,522 |
Loans, held-for-investment, at cost | 1,496 |
Loans, held for sale, at fair value | 189,197 |
Mortgage backed securities, at fair value | 97,936 |
Loans eligible for repurchase from GNMA | 79,530 |
Residential mortgage servicing rights, at fair value | 51,302 |
Derivative assets, at fair value | 2,699 |
Other assets | 7,741 |
Identifiable Intangibles | 2,703 |
Total assets | 542,050 |
Borrowings under credit facilities | 142,463 |
Borrowings under repurchase agreements | 153,105 |
Exchangeable senior notes | 57,500 |
Contingent consideration | 14,422 |
Accounts payable and other liabilities | 16,667 |
Liability for loans eligible for repurchase from GNMA | 79,530 |
Total liabilities | 463,687 |
Fair Value of Net Assets Acquired | $ 78,363 |
Business Combinations - Bargain
Business Combinations - Bargain purchase gain (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 31, 2016 | Dec. 31, 2016 |
Aggregate consideration transferred, net of assets acquired and bargain purchase gain | ||
Bargain purchase gain | $ 15,218 | |
ZAIS Merger | ||
Aggregate consideration transferred, net of assets acquired and bargain purchase gain | ||
ZAIS Financial closing share price on October 31, 2016 | $ 13.40 | |
ZAIS Financial common shares and OP units acquired | 4,712,322 | |
Fair value of consideration transferred | $ 63,145 | |
Fair Value of Net Asset Acquired | 78,363 | |
Bargain purchase gain | $ 15,218 | |
Acquisition-related costs | $ 4,200 |
Business Combinations - Schedul
Business Combinations - Schedule of revenue and earnings from the net assets acquired (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Business Combinations | ||
Other income (expense) | $ (37,641) | $ (27,760) |
ZAIS Merger | ||
Business Combinations | ||
Interest income | 1,054 | |
Interest expense | (681) | |
Other income (expense) | (4,482) | |
Realized gain (loss) | 6,036 | |
Unrealized gain (loss) | 4,902 | |
Net income | $ 6,829 |
Business Combinations - Sched69
Business Combinations - Schedule of pro-forma income and earnings (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Selected Financial Data | ||
Interest income | $ 145,767 | $ 161,174 |
Interest expense | (66,372) | (57,551) |
Provision for loan losses | (7,713) | (19,643) |
Other income (expense) | (37,641) | (27,760) |
Realized gain (loss) | 14,030 | 46 |
Unrealized gain (loss) | 5,772 | (3,817) |
Net income from continuing operations before income taxes | 53,843 | $ 52,449 |
Non-recurring pro forma transaction costs | 4,600 | |
Gain on bargain purchase | $ 15,218 |
Loans and Allowance for Loan 70
Loans and Allowance for Loan Losses - Classification, unpaid principal balance, and carrying value (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Carrying Value | |||
Total Loans, before allowance for loan losses | $ 1,027,467 | $ 1,023,842 | |
Allowance for loan losses | (9,547) | (12,721) | |
Total Loans, net | 1,017,920 | 1,011,121 | |
Allowance for loan losses on loans in consolidated VIEs | (11,746) | (16,130) | $ (17,122) |
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | 1,854,100 | 1,666,680 | |
Loans, held for sale, at fair value | 216,022 | 181,797 | |
Loans, held-for-investment | 2,070,122 | 1,848,477 | |
UPB | |||
Total Loans, before allowance for loan losses | 1,066,287 | 1,097,482 | |
Total Loans, net | 1,066,287 | 1,097,482 | |
Total Loans, held for sale, at fair value | 209,534 | 178,907 | |
Total Loan portfolio | 2,145,989 | 1,966,539 | |
VIEs | |||
Carrying Value | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 838,379 | 658,968 | |
Allowance for loan losses on loans in consolidated VIEs | (2,199) | (3,409) | |
Total Loans, net, in consolidated VIEs | 836,180 | 655,559 | |
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | 1,854,100 | 1,666,680 | |
UPB | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 870,168 | 690,150 | |
Total Loans, net, in consolidated VIEs | 870,168 | 690,150 | |
Total Loans, net, and Loans, net in consolidated VIEs | 1,936,455 | 1,787,632 | |
Acquired SBA 7(a) loans | |||
Carrying Value | |||
Total Loans, before allowance for loan losses | 331,083 | 440,731 | |
Allowance for loan losses on loans in consolidated VIEs | (3,527) | (5,004) | (6,155) |
UPB | |||
Total Loans, before allowance for loan losses | 353,556 | 471,189 | |
Acquired SBA 7(a) loans | VIEs | |||
Carrying Value | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 69,523 | 91,978 | |
UPB | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 95,605 | 127,963 | |
Acquired loans | |||
Carrying Value | |||
Total Loans, before allowance for loan losses | 191,327 | 310,286 | |
Allowance for loan losses on loans in consolidated VIEs | (7,264) | (10,150) | $ (10,967) |
Loans, held for sale, at fair value | 2,544 | 36,713 | |
UPB | |||
Total Loans, before allowance for loan losses | 209,694 | 355,660 | |
Total Loans, held for sale, at fair value | 2,662 | 36,734 | |
Acquired loans | VIEs | |||
Carrying Value | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 189,545 | 92,844 | |
UPB | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 204,497 | 101,481 | |
Originated Transitional loans | |||
Carrying Value | |||
Total Loans, before allowance for loan losses | 246,076 | 163,155 | |
UPB | |||
Total Loans, before allowance for loan losses | 248,190 | 162,270 | |
Originated Transitional loans | VIEs | |||
Carrying Value | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 196,438 | 25,424 | |
UPB | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 196,070 | 24,486 | |
Originated Transitional loans, at fair value | |||
Carrying Value | |||
Total Loans, before allowance for loan losses | 14,505 | ||
UPB | |||
Total Loans, before allowance for loan losses | 13,958 | ||
Originated SBC loans, at fair value | |||
Carrying Value | |||
Total Loans, before allowance for loan losses | 188,150 | 67,087 | |
UPB | |||
Total Loans, before allowance for loan losses | 182,045 | 65,131 | |
Originated SBC loans | |||
Carrying Value | |||
Total Loans, before allowance for loan losses | 27,610 | 10,426 | |
Allowance for loan losses on loans in consolidated VIEs | (637) | (804) | |
UPB | |||
Total Loans, before allowance for loan losses | 27,349 | 10,749 | |
Originated SBC loans | VIEs | |||
Carrying Value | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 382,873 | 448,722 | |
UPB | |||
Total Loans, in consolidated VIEs, before allowance for loan losses | 373,996 | 436,220 | |
Originated SBA 7(a) loans | |||
Carrying Value | |||
Total Loans, before allowance for loan losses | 41,208 | 15,414 | |
Allowance for loan losses on loans in consolidated VIEs | (318) | (172) | |
Loans, held for sale, at fair value | 16,791 | ||
UPB | |||
Total Loans, before allowance for loan losses | 43,439 | 16,112 | |
Total Loans, held for sale, at fair value | 15,472 | ||
Originated Residential Agency loans | |||
Carrying Value | |||
Total Loans, before allowance for loan losses | 2,013 | 2,238 | |
Loans, held for sale, at fair value | 129,096 | 127,773 | |
UPB | |||
Total Loans, before allowance for loan losses | 2,014 | 2,413 | |
Total Loans, held for sale, at fair value | 124,758 | 125,012 | |
Originated Freddie Mac loans | |||
Carrying Value | |||
Loans, held for sale, at fair value | 67,591 | 17,311 | |
UPB | |||
Total Loans, held for sale, at fair value | $ 66,642 | $ 17,161 |
Loans and Allowance for Loan 71
Loans and Allowance for Loan Losses - Delinquency (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Loan delinquency information | ||
Total Loans Carrying Value | $ 1,856,196 | $ 1,668,691 |
Non-Accrual Loans | 34,755 | 47,663 |
90+ Days Past Due but Accruing | 4,764 | 11,980 |
General allowance for loan losses | (2,096) | (2,011) |
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | $ 1,854,100 | $ 1,666,680 |
Percentage of outstandings | 100.00% | 100.00% |
Percentage of outstandings - Non accrual loans | 1.90% | 2.90% |
Percentage of outstandings - Accruing | 0.30% | 0.70% |
Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | $ 1,791,876 | $ 1,591,560 |
Percentage of outstandings | 96.50% | 95.40% |
30-89 Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | $ 38,120 | $ 32,568 |
Percentage of outstandings | 2.10% | 2.00% |
90+ Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | $ 26,200 | $ 44,563 |
Percentage of outstandings | 1.40% | 2.70% |
Acquired SBA 7(a) loans | ||
Loan delinquency information | ||
Total Loans Carrying Value | $ 397,597 | $ 527,956 |
Non-Accrual Loans | 16,782 | 20,673 |
90+ Days Past Due but Accruing | 176 | 2,127 |
General allowance for loan losses | (518) | (253) |
Acquired SBA 7(a) loans | Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 376,102 | 501,651 |
Acquired SBA 7(a) loans | 30-89 Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 15,953 | 15,715 |
Acquired SBA 7(a) loans | 90+ Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 5,542 | 10,590 |
Acquired loans | ||
Loan delinquency information | ||
Total Loans Carrying Value | 374,425 | 393,829 |
Non-Accrual Loans | 16,405 | 25,669 |
90+ Days Past Due but Accruing | 4,090 | 9,677 |
General allowance for loan losses | (819) | (847) |
Acquired loans | Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 348,271 | 354,123 |
Acquired loans | 30-89 Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 6,891 | 7,230 |
Acquired loans | 90+ Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 19,263 | 32,476 |
Originated Transitional loans, at fair value | ||
Loan delinquency information | ||
Total Loans Carrying Value | 14,505 | |
Originated Transitional loans, at fair value | Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 14,505 | |
Originated Transitional loans | ||
Loan delinquency information | ||
Total Loans Carrying Value | 442,515 | 188,579 |
Originated Transitional loans | Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 435,252 | 179,700 |
Originated Transitional loans | 30-89 Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 7,263 | 8,879 |
Originated SBC loans, at fair value | ||
Loan delinquency information | ||
Total Loans Carrying Value | 188,150 | 67,087 |
Originated SBC loans, at fair value | Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 188,150 | 67,087 |
Originated SBC loans | ||
Loan delinquency information | ||
Total Loans Carrying Value | 410,314 | 459,083 |
Non-Accrual Loans | 608 | 712 |
General allowance for loan losses | (468) | (739) |
Originated SBC loans | Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 402,004 | 458,371 |
Originated SBC loans | 30-89 Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 7,702 | |
Originated SBC loans | 90+ Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 608 | 712 |
Originated SBA 7(a) loans | ||
Loan delinquency information | ||
Total Loans Carrying Value | 41,182 | 15,414 |
Non-Accrual Loans | 671 | 222 |
General allowance for loan losses | (291) | (172) |
Originated SBA 7(a) loans | Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 40,871 | 15,192 |
Originated SBA 7(a) loans | 30-89 Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 311 | |
Originated SBA 7(a) loans | 90+ Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 222 | |
Originated Residential Agency loans | ||
Loan delinquency information | ||
Total Loans Carrying Value | 2,013 | 2,238 |
Non-Accrual Loans | 289 | 387 |
90+ Days Past Due but Accruing | 498 | 176 |
Originated Residential Agency loans | Current and less than 30 days past due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 1,226 | 931 |
Originated Residential Agency loans | 30-89 Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | 744 | |
Originated Residential Agency loans | 90+ Days Past Due | ||
Loan delinquency information | ||
Total Loans Carrying Value | $ 787 | $ 563 |
Loans and Allowance for Loan 72
Loans and Allowance for Loan Losses - Credit Quality (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 1,856,196 | $ 1,668,691 |
General allowance for loan losses | (2,096) | (2,011) |
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | 1,854,100 | 1,666,680 |
Carrying amount of loan foreclosure in process | 400 | 2,300 |
0.0 - 20.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 66,154 | 58,931 |
20.1 - 40.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 234,702 | 218,106 |
40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 639,905 | 539,497 |
60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 675,958 | 534,186 |
80.1 - 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 132,423 | 179,406 |
Greater than 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 107,054 | 138,565 |
Acquired SBA 7(a) loans | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 397,597 | 527,956 |
General allowance for loan losses | (518) | (253) |
Acquired SBA 7(a) loans | 0.0 - 20.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 8,978 | 9,301 |
Acquired SBA 7(a) loans | 20.1 - 40.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 37,880 | 42,617 |
Acquired SBA 7(a) loans | 40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 125,234 | 153,710 |
Acquired SBA 7(a) loans | 60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 106,199 | 141,586 |
Acquired SBA 7(a) loans | 80.1 - 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 56,676 | 86,085 |
Acquired SBA 7(a) loans | Greater than 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 62,630 | 94,657 |
Acquired loans | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 374,425 | 393,829 |
General allowance for loan losses | (819) | (847) |
Acquired loans | 0.0 - 20.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 54,463 | 46,776 |
Acquired loans | 20.1 - 40.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 102,498 | 90,574 |
Acquired loans | 40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 114,010 | 109,330 |
Acquired loans | 60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 67,037 | 106,432 |
Acquired loans | 80.1 - 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 18,745 | 20,335 |
Acquired loans | Greater than 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 17,672 | 20,382 |
Originated Transitional loans, at fair value | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 14,505 | |
Originated Transitional loans, at fair value | 40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 1,475 | |
Originated Transitional loans, at fair value | 60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 13,030 | |
Originated Transitional loans | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 442,515 | 188,579 |
Originated Transitional loans | 20.1 - 40.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 26,735 | 17,187 |
Originated Transitional loans | 40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 171,227 | 78,219 |
Originated Transitional loans | 60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 212,830 | 44,730 |
Originated Transitional loans | 80.1 - 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 21,639 | 32,967 |
Originated Transitional loans | Greater than 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 10,084 | 15,476 |
Originated SBC loans, at fair value | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 188,150 | 67,087 |
Originated SBC loans, at fair value | 20.1 - 40.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 17,294 | 11,303 |
Originated SBC loans, at fair value | 40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 31,245 | 5,728 |
Originated SBC loans, at fair value | 60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 115,653 | 34,150 |
Originated SBC loans, at fair value | 80.1 - 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 21,245 | 15,906 |
Originated SBC loans, at fair value | Greater than 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 2,713 | |
Originated SBC loans | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 410,314 | 459,083 |
General allowance for loan losses | (468) | (739) |
Originated SBC loans | 0.0 - 20.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 2,661 | 2,709 |
Originated SBC loans | 20.1 - 40.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 49,281 | 56,050 |
Originated SBC loans | 40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 192,796 | 187,823 |
Originated SBC loans | 60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 158,047 | 190,473 |
Originated SBC loans | 80.1 - 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 7,529 | 20,258 |
Originated SBC loans | Greater than 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 1,770 | |
Originated SBA 7(a) loans | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 41,182 | 15,414 |
General allowance for loan losses | (291) | (172) |
Originated SBA 7(a) loans | 0.0 - 20.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 52 | 145 |
Originated SBA 7(a) loans | 20.1 - 40.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 954 | 375 |
Originated SBA 7(a) loans | 40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 5,227 | 2,995 |
Originated SBA 7(a) loans | 60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 15,583 | 3,351 |
Originated SBA 7(a) loans | 80.1 - 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 5,766 | 2,456 |
Originated SBA 7(a) loans | Greater than 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 13,600 | 6,092 |
Originated Residential Agency loans | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 2,013 | 2,238 |
Originated Residential Agency loans | 20.1 - 40.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 60 | |
Originated Residential Agency loans | 40.1 - 60.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 166 | 217 |
Originated Residential Agency loans | 60.1 - 80.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 609 | 434 |
Originated Residential Agency loans | 80.1 - 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 823 | 1,399 |
Originated Residential Agency loans | Greater than 100.0% | ||
Credit quality of loans | ||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 355 | $ 188 |
Loans and Allowance for Loan 73
Loans and Allowance for Loan Losses - Geographic and Collateral Concentration (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Geographical concentration | ||
Concentration risk | ||
Percentage of loan | 100.00% | 100.00% |
Geographical concentration | CALIFORNIA | ||
Concentration risk | ||
Percentage of loan | 13.50% | 13.60% |
Geographical concentration | TEXAS | ||
Concentration risk | ||
Percentage of loan | 12.40% | 14.00% |
Geographical concentration | FLORIDA | ||
Concentration risk | ||
Percentage of loan | 11.70% | 9.90% |
Geographical concentration | NEW YORK | ||
Concentration risk | ||
Percentage of loan | 6.80% | 6.90% |
Geographical concentration | GEORGIA | ||
Concentration risk | ||
Percentage of loan | 6.20% | 5.90% |
Geographical concentration | ARIZONA | ||
Concentration risk | ||
Percentage of loan | 5.10% | 5.20% |
Geographical concentration | ILLINOIS | ||
Concentration risk | ||
Percentage of loan | 3.90% | 2.80% |
Geographical concentration | NORTH CAROLINA | ||
Concentration risk | ||
Percentage of loan | 3.70% | 3.70% |
Geographical concentration | OHIO | ||
Concentration risk | ||
Percentage of loan | 2.70% | 2.90% |
Geographical concentration | VIRGINIA | ||
Concentration risk | ||
Percentage of loan | 2.60% | 2.90% |
Geographical concentration | Other | ||
Concentration risk | ||
Percentage of loan | 31.40% | 32.20% |
Collateral concentration | ||
Concentration risk | ||
Percentage of loan | 100.00% | 100.00% |
Percentage of SBA loan | 100.00% | 100.00% |
Collateral concentration | Offices of Physicians | ||
Concentration risk | ||
Percentage of SBA loan | 16.00% | 15.80% |
Collateral concentration | Child Day Care Services | ||
Concentration risk | ||
Percentage of SBA loan | 12.30% | 14.30% |
Collateral concentration | Lodging | ||
Concentration risk | ||
Percentage of SBA loan | 10.50% | 11.40% |
Collateral concentration | Veterinarians | ||
Concentration risk | ||
Percentage of SBA loan | 7.00% | 6.70% |
Collateral concentration | Eating Places | ||
Concentration risk | ||
Percentage of SBA loan | 5.50% | 6.30% |
Collateral concentration | Grocery Stores | ||
Concentration risk | ||
Percentage of SBA loan | 4.70% | 4.30% |
Collateral concentration | Auto | ||
Concentration risk | ||
Percentage of SBA loan | 3.20% | 3.20% |
Collateral concentration | Funeral Service and Crematories | ||
Concentration risk | ||
Percentage of SBA loan | 2.20% | 1.70% |
Collateral concentration | Accounting, Auditing and Bookkeeping | ||
Concentration risk | ||
Percentage of SBA loan | 2.10% | 2.40% |
Collateral concentration | Gasoline Service Stations | ||
Concentration risk | ||
Percentage of SBA loan | 1.90% | 1.80% |
Collateral concentration | Other | ||
Concentration risk | ||
Percentage of SBA loan | 34.60% | 32.10% |
Collateral concentration | SBA | ||
Concentration risk | ||
Percentage of SBA loan | 25.40% | 34.40% |
Collateral concentration | Multi-family | ||
Concentration risk | ||
Percentage of SBA loan | 21.10% | 13.80% |
Collateral concentration | Retail | ||
Concentration risk | ||
Percentage of SBA loan | 17.60% | 14.30% |
Collateral concentration | Office | ||
Concentration risk | ||
Percentage of SBA loan | 15.60% | 14.90% |
Collateral concentration | Industrial | ||
Concentration risk | ||
Percentage of SBA loan | 6.90% | 6.90% |
Collateral concentration | Mixed Use | ||
Concentration risk | ||
Percentage of SBA loan | 6.30% | 5.00% |
Collateral concentration | Lodging/Residential | ||
Concentration risk | ||
Percentage of SBA loan | 2.90% | 4.80% |
Collateral concentration | Other | ||
Concentration risk | ||
Percentage of SBA loan | 4.20% | 5.90% |
Loans and Allowance for Loan 74
Loans and Allowance for Loan Losses - Allowance for loan losses by loan product and impairment methodology (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Allowance for loan losses | |||
General | $ 2,096 | $ 2,011 | |
Specific | 2,346 | 3,664 | |
PCI | 7,304 | 10,455 | |
Ending Balance | 11,746 | 16,130 | $ 17,122 |
Originated SBC loans | |||
Allowance for loan losses | |||
General | 468 | 739 | |
Specific | 169 | 65 | |
Ending Balance | 637 | 804 | |
Acquired loans | |||
Allowance for loan losses | |||
General | 819 | 847 | |
Specific | 586 | 1,110 | |
PCI | 5,859 | 8,193 | |
Ending Balance | 7,264 | 10,150 | 10,967 |
Acquired SBA 7(a) loans | |||
Allowance for loan losses | |||
General | 518 | 253 | |
Specific | 1,564 | 2,489 | |
PCI | 1,445 | 2,262 | |
Ending Balance | 3,527 | 5,004 | $ 6,155 |
Originated SBA 7(a) loans | |||
Allowance for loan losses | |||
General | 291 | 172 | |
Specific | 27 | ||
Ending Balance | $ 318 | $ 172 |
Loans and Allowance for Loan 75
Loans and Allowance for Loan Losses - Investment Loans Allowance Activity (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance for loan losses | ||
Beginning Balance | $ 16,130 | $ 17,122 |
Provision for (Recoveries of) loan losses | 2,363 | 7,819 |
Charge-offs and sales | (2,829) | (2,977) |
Recoveries | (3,918) | (5,834) |
Ending Balance | 11,746 | 16,130 |
Originated SBC loans | ||
Allowance for loan losses | ||
Beginning Balance | 804 | |
Provision for (Recoveries of) loan losses | (166) | 804 |
Recoveries | (1) | |
Ending Balance | 637 | 804 |
Acquired loans | ||
Allowance for loan losses | ||
Beginning Balance | 10,150 | 10,967 |
Provision for (Recoveries of) loan losses | 2,387 | 5,702 |
Charge-offs and sales | (1,356) | (685) |
Recoveries | (3,917) | (5,834) |
Ending Balance | 7,264 | 10,150 |
Acquired SBA 7(a) loans | ||
Allowance for loan losses | ||
Beginning Balance | 5,004 | 6,155 |
Provision for (Recoveries of) loan losses | (4) | 1,141 |
Charge-offs and sales | (1,473) | (2,292) |
Ending Balance | 3,527 | 5,004 |
Originated SBA 7(a) loans | ||
Allowance for loan losses | ||
Beginning Balance | 172 | |
Provision for (Recoveries of) loan losses | 146 | 172 |
Ending Balance | $ 318 | $ 172 |
Loans and Allowance for Loan 76
Loans and Allowance for Loan Losses - Investment Loans Impairment (Details) - Non - PCI Loans - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Impaired loans | ||
Impaired loans with an allowance | $ 9,222 | $ 14,772 |
Impaired loans without an allowance | 12,659 | 17,653 |
Total recorded carrying value of impaired loans | 21,881 | 32,425 |
Allowance for loan losses related to impaired loans | (2,346) | (3,664) |
Unpaid principal balance of impaired loans | 29,853 | 33,185 |
Impaired loans on non-accrual status | 21,881 | 32,425 |
Average carrying amount of impaired loans | 28,693 | 28,891 |
Interest income recognized on impaired loans | $ 610 | $ 1,165 |
Loans and Allowance for Loan 77
Loans and Allowance for Loan Losses - TDR Accrual Status (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Troubled debt restructurings (TDRs) | ||
Recorded carrying value modified loans classified as TDR | $ 16,125 | $ 19,053 |
Allowance for loan losses on loans classified as TDRs | 1,578 | 2,200 |
Carrying value of modified loans classified as TDRs | ||
Carrying value of modified loans classified as TDRs on accrual status | 6,595 | 5,555 |
Carrying value of modified loans classified as TDRs on non-accrual status | 9,530 | 13,498 |
Total carrying value of modified loans classified as TDRs | 16,125 | 19,053 |
SBC | ||
Troubled debt restructurings (TDRs) | ||
Recorded carrying value modified loans classified as TDR | 3,727 | 7,918 |
Allowance for loan losses on loans classified as TDRs | 883 | 656 |
Carrying value of modified loans classified as TDRs | ||
Carrying value of modified loans classified as TDRs on accrual status | 1,804 | 5,196 |
Carrying value of modified loans classified as TDRs on non-accrual status | 1,923 | 2,722 |
Total carrying value of modified loans classified as TDRs | 3,727 | 7,918 |
SBA | ||
Troubled debt restructurings (TDRs) | ||
Recorded carrying value modified loans classified as TDR | 12,398 | 11,135 |
Allowance for loan losses on loans classified as TDRs | 695 | 1,544 |
Carrying value of modified loans classified as TDRs | ||
Carrying value of modified loans classified as TDRs on accrual status | 4,791 | 359 |
Carrying value of modified loans classified as TDRs on non-accrual status | 7,607 | 10,776 |
Total carrying value of modified loans classified as TDRs | $ 12,398 | $ 11,135 |
Loans and Allowance for Loan 78
Loans and Allowance for Loan Losses - TDR Activity (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017USD ($)loan | Dec. 31, 2016USD ($)loan | |
Troubled debt restructurings (TDRs) | ||
Number of loans permanently modified | loan | 61 | 49 |
Pre-modification recorded balance | $ 9,705 | $ 13,428 |
Post-modification recorded balance | $ 9,173 | $ 9,272 |
Number of loans that remain in default as of December 31, 2017 | loan | 28 | 18 |
Balance of loans that remain in default as of December 31, 2017 | $ 2,262 | $ 721 |
TDR Modifications including financial effects | $ 8,044 | $ 11,497 |
SBC | ||
Troubled debt restructurings (TDRs) | ||
Number of loans permanently modified | loan | 14 | 9 |
Pre-modification recorded balance | $ 3,518 | $ 9,041 |
Post-modification recorded balance | $ 3,041 | $ 7,532 |
Number of loans that remain in default as of December 31, 2017 | loan | 10 | 3 |
Balance of loans that remain in default as of December 31, 2017 | $ 1,590 | $ 359 |
TDR Modifications including financial effects | $ 2,034 | $ 2,198 |
SBA | ||
Troubled debt restructurings (TDRs) | ||
Number of loans permanently modified | loan | 47 | 40 |
Pre-modification recorded balance | $ 6,187 | $ 4,387 |
Post-modification recorded balance | $ 6,132 | $ 1,740 |
Number of loans that remain in default as of December 31, 2017 | loan | 18 | 15 |
Balance of loans that remain in default as of December 31, 2017 | $ 672 | $ 362 |
TDR Modifications including financial effects | 6,010 | 9,299 |
Term Extension | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 5,344 | 9,678 |
Term Extension | SBC | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 413 | 930 |
Term Extension | SBA | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 4,931 | 8,748 |
Interest Rate Reduction | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 339 | 356 |
Interest Rate Reduction | SBC | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 100 | 307 |
Interest Rate Reduction | SBA | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 239 | 49 |
Principal Reduction | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 887 | 90 |
Principal Reduction | SBC | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 601 | |
Principal Reduction | SBA | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 286 | 90 |
Foreclosure | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 1,474 | 1,373 |
Foreclosure | SBC | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 920 | 961 |
Foreclosure | SBA | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | $ 554 | $ 412 |
Loans and Allowance for Loan 79
Loans and Allowance for Loan Losses - Investment Loans (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Acquired loans | |||
Allowance for loan losses on loans in consolidated VIEs | $ (11,746) | $ (16,130) | $ (17,122) |
Non - PCI Loans | |||
Acquired loans | |||
Unpaid principal balance | 1,624,395 | 1,536,245 | |
Accretable discount | (44,629) | (55,563) | |
Loans, held-for-investment | 1,579,766 | 1,480,682 | |
Allowance for loan losses on loans in consolidated VIEs | (4,442) | (5,675) | |
Loans, held-for-investment | 1,575,324 | 1,475,007 | |
PCI Loans | |||
Acquired loans | |||
Unpaid principal balance | 130,015 | 172,298 | |
Non-accretable discount | (8,336) | (24,784) | |
Accretable discount | (23,749) | (26,978) | $ (42,031) |
Loans, held-for-investment | 97,930 | 120,536 | |
Allowance for loan losses on loans in consolidated VIEs | (7,304) | (10,455) | |
Loans, held-for-investment | $ 90,626 | $ 110,081 |
Loans and Allowance for Loan 80
Loans and Allowance for Loan Losses - Investment Loans Value and Yield Activity (Details) - PCI Loans - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Accretable yield | ||
Beginning accretable yield- PCI loans | $ 26,978 | $ 42,031 |
Purchases/Originations | 1,234 | 676 |
Sales | (2,835) | (7,655) |
Accretion | (4,735) | (6,635) |
Other | 1,466 | 4,459 |
Transfers | 1,641 | (5,898) |
Ending accretable yield | 23,749 | 26,978 |
Contractually required principal and interest payments receivable | 12,500 | 2,300 |
Expected cash flows | 8,900 | 1,800 |
Fair value (initial carrying amount) | $ 6,200 | $ 1,100 |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Instruments Carried at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Assets: | ||
Short-term investments | $ 319,984 | |
Loans, held for sale, at fair value | $ 216,022 | 181,797 |
Derivative instruments | 4,725 | 5,785 |
Residential mortgage servicing rights, at fair value | 72,295 | 61,376 |
Liabilities: | ||
Derivative instruments | 282 | 643 |
Contingent consideration | 10,016 | 14,487 |
Recurring basis | ||
Assets: | ||
Cash held in money market funds | 632 | 632 |
Short-term investments | 319,984 | |
Loans, held for sale, at fair value | 216,022 | 181,797 |
Loans, held at fair value | 188,150 | 81,592 |
Mortgage backed securities, at fair value | 39,922 | 32,391 |
Derivative instruments | 4,725 | 5,785 |
Residential mortgage servicing rights, at fair value | 72,295 | 61,376 |
Total assets | 521,746 | 683,557 |
Liabilities: | ||
Derivative instruments | 282 | 643 |
Contingent consideration | 10,016 | 14,487 |
Total liabilities | 10,298 | 15,130 |
Recurring basis | Level 1 | ||
Assets: | ||
Cash held in money market funds | 632 | 632 |
Short-term investments | 319,984 | |
Total assets | 632 | 320,616 |
Recurring basis | Level 2 | ||
Assets: | ||
Loans, held for sale, at fair value | 216,022 | 164,485 |
Mortgage backed securities, at fair value | 31,859 | |
Derivative instruments | 2,898 | 3,095 |
Total assets | 250,779 | 167,580 |
Liabilities: | ||
Derivative instruments | 282 | 643 |
Total liabilities | 282 | 643 |
Recurring basis | Level 3 | ||
Assets: | ||
Loans, held for sale, at fair value | 17,312 | |
Loans, held at fair value | 188,150 | 81,592 |
Mortgage backed securities, at fair value | 8,063 | 32,391 |
Derivative instruments | 1,827 | 2,690 |
Residential mortgage servicing rights, at fair value | 72,295 | 61,376 |
Total assets | 270,335 | 195,361 |
Liabilities: | ||
Contingent consideration | 10,016 | 14,487 |
Total liabilities | $ 10,016 | $ 14,487 |
Fair Value Measurements - Chang
Fair Value Measurements - Changes in Fair Value (Details) - Level 3 - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Loans, held at fair value | ||
Changes in fair value of assets | ||
Beginning Balance | $ 81,592 | $ 155,134 |
Realized gains (losses), net | (90) | 6 |
Unrealized gains (losses), net | 5,328 | 4,131 |
Originations | 152,339 | 147,823 |
Sales | (4,776) | |
Principal payments | (10,114) | (34,895) |
Transfers to loans, held for sale, at fair value | (11,499) | |
Transfer from loans, held-for-investment, net | (40,905) | (174,332) |
Ending Balance | 188,150 | 81,592 |
Total unrealized gain (loss) | 6,000 | 2,500 |
Loans, held for sale, at fair value | ||
Changes in fair value of assets | ||
Beginning Balance | 17,312 | |
Realized gains (losses), net | 9,005 | 5,260 |
Unrealized gains (losses), net | 2,595 | |
Originations | 352,975 | 257,993 |
Sales | (284,707) | (257,281) |
Principal payments | (10,429) | (159) |
Transfer from loans, held-for-investment, net | 5,937 | |
Transfer from loans, held at fair value | 11,499 | |
Assets transferred out of Level 3 | (92,688) | |
Ending Balance | 17,312 | |
Total unrealized gain (loss) | 0 | 100 |
MBS | ||
Changes in fair value of assets | ||
Beginning Balance | 32,391 | 213,504 |
Accreted discount, net | 224 | 201 |
Realized gains (losses), net | 522 | (3,068) |
Unrealized gains (losses), net | 1,344 | 3,680 |
Purchases | 14,448 | 17,388 |
Acquired in connection with reverse merger | 97,936 | |
Sales / Principal payments | (7,785) | (297,250) |
Assets transferred out of Level 3 | (33,081) | |
Ending Balance | 8,063 | 32,391 |
Total unrealized gain (loss) | (600) | (300) |
Residential MRSs | ||
Changes in fair value of assets | ||
Total unrealized gain (loss) | (8,500) | 6,900 |
Derivatives | ||
Changes in fair value of assets | ||
Beginning Balance | 2,690 | |
Unrealized gains (losses), net | (863) | (808) |
Acquired in connection with reverse merger | 3,498 | |
Ending Balance | 1,827 | 2,690 |
Total unrealized gain (loss) | (1,700) | 800 |
Contingent Consideration | ||
Changes in fair value of assets | ||
Total unrealized gain (loss) | 0 | 0 |
Changes in fair value of liabilities | ||
Beginning Balance | 14,487 | |
Acquired in connection with reverse merger | 14,422 | |
Adjustment for legal settlement | (5,744) | |
Amortization | 1,273 | 65 |
Ending Balance | $ 10,016 | $ 14,487 |
Fair Value Measurements - Valua
Fair Value Measurements - Valuation and Inputs, at FV (Details) - Recurring basis - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Fair value inputs, quantitative information | ||
Asset, fair value | $ 521,746 | $ 683,557 |
Liabilities, fair value | 10,298 | 15,130 |
Level 3 | ||
Fair value inputs, quantitative information | ||
Asset, fair value | 270,335 | 195,361 |
Liabilities, fair value | 10,016 | 14,487 |
Loans, held at fair value | Level 3 | Third Party Mark | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 188,150 | $ 81,592 |
Loans, held at fair value | Level 3 | Third Party Mark | Minimum | ||
Fair value inputs, quantitative information | ||
Price | $ 101.05 | $ 98.47 |
Loans, held at fair value | Level 3 | Third Party Mark | Maximum | ||
Fair value inputs, quantitative information | ||
Price | 104 | 105 |
Loans, held at fair value | Level 3 | Third Party Mark | Weighted Average | ||
Fair value inputs, quantitative information | ||
Price | $ 103.35 | $ 103.16 |
Loans, held for sale, at fair value | Level 3 | Third Party Mark | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 17,312 | |
Loans, held for sale, at fair value | Level 3 | Third Party Mark | Minimum | ||
Fair value inputs, quantitative information | ||
Price | $ 100.04 | |
Loans, held for sale, at fair value | Level 3 | Third Party Mark | Maximum | ||
Fair value inputs, quantitative information | ||
Price | 102.97 | |
Loans, held for sale, at fair value | Level 3 | Third Party Mark | Weighted Average | ||
Fair value inputs, quantitative information | ||
Price | $ 100.87 | |
MBS | Level 3 | Third Party Mark | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 7,937 | $ 29,883 |
MBS | Level 3 | Third Party Mark | Minimum | ||
Fair value inputs, quantitative information | ||
Price | $ 70.92 | $ 17.91 |
MBS | Level 3 | Third Party Mark | Maximum | ||
Fair value inputs, quantitative information | ||
Price | 70.92 | 101 |
MBS | Level 3 | Third Party Mark | Weighted Average | ||
Fair value inputs, quantitative information | ||
Price | $ 70.92 | $ 68.90 |
MBS | Level 3 | Transaction Price | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 126 | $ 2,508 |
MBS | Level 3 | Transaction Price | Minimum | ||
Fair value inputs, quantitative information | ||
Price | $ 99 | $ 99 |
MBS | Level 3 | Transaction Price | Maximum | ||
Fair value inputs, quantitative information | ||
Price | 99 | 99 |
MBS | Level 3 | Transaction Price | Weighted Average | ||
Fair value inputs, quantitative information | ||
Price | $ 99 | $ 99 |
Interest-Only-Strips | Level 3 | Third Party Mark | Weighted Average | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 1,500 | |
Residential MRSs | Level 3 | Discounted Cash Flow | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 72,295 | 61,376 |
Contingent Consideration | Level 3 | Discounted Cash Flow | ||
Fair value inputs, quantitative information | ||
Liabilities, fair value | $ 10,016 | $ 14,487 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities, Not at FV (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Assets: | ||
Receivable from third parties | $ 6,756 | $ 7,220 |
Liabilities: | ||
Promissory note | 6,107 | 7,378 |
Senior secured notes, net | 138,078 | |
Carrying Value | ||
Assets: | ||
Loans, held-for-investment | 1,665,950 | 1,585,088 |
Investment in unconsolidated joint venture | 55,369 | |
Servicing rights | 21,743 | 22,478 |
Total assets | 1,743,062 | 1,607,566 |
Due from servicers and accrued interest | 16,500 | 32,600 |
Receivable from third parties | 6,800 | 7,200 |
Liabilities: | ||
Borrowings under credit facilities | 631,286 | 927,462 |
Promissory note | 6,107 | 7,378 |
Securitized debt obligations of consolidated VIEs | 598,148 | 492,942 |
Senior secured notes, net | 138,078 | |
Guaranteed loan financing | 293,045 | 390,555 |
Convertible note, net | 108,991 | |
Total liabilities | 1,775,655 | 1,818,337 |
Payable to related parties and accrued interest payable | 12,400 | 8,400 |
Fair Value | Level 3 | ||
Assets: | ||
Loans, held-for-investment | 1,737,361 | 1,639,982 |
Investment in unconsolidated joint venture | 55,369 | |
Servicing rights | 23,432 | 23,470 |
Total assets | 1,816,162 | 1,663,452 |
Liabilities: | ||
Borrowings under credit facilities | 631,286 | 927,462 |
Promissory note | 6,107 | 7,378 |
Securitized debt obligations of consolidated VIEs | 613,676 | 483,381 |
Senior secured notes, net | 144,376 | |
Guaranteed loan financing | 306,964 | 409,751 |
Convertible note, net | 108,301 | |
Total liabilities | $ 1,810,710 | $ 1,827,972 |
Mortgage Backed Securities (Det
Mortgage Backed Securities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Mortgage Backed Securities | ||
Weighted Average Interest Rate | 5.30% | 5.70% |
Principal Balance | $ 54,407 | $ 43,780 |
Amortized Cost | 38,468 | 32,681 |
Fair Value | 39,922 | 32,391 |
Gross Unrealized Gains | 2,703 | 1,605 |
Gross Unrealized Losses | $ (1,249) | $ (1,895) |
Mortgage Backed Securities Weighted Average Interest Rate | ||
After five years through ten years (as percent) | 8.90% | 8.90% |
After ten years (as percent) | 4.60% | 4.20% |
Mortgage Backed Securities Principal Balance | ||
After five years through ten years | $ 8,919 | $ 13,616 |
After ten years | 45,488 | 30,164 |
Mortgage Backed Securities Amortized Cost | ||
After five years through ten years | 8,205 | 12,579 |
After ten years | 30,263 | 20,102 |
Mortgage Backed Securities Estimated Fair Value | ||
After five years through ten years | 8,904 | 12,709 |
After ten years | $ 31,018 | $ 19,682 |
Freddie Mac Loans | ||
Mortgage Backed Securities | ||
Weighted Average Interest Rate | 5.30% | 5.60% |
Principal Balance | $ 49,767 | $ 34,932 |
Amortized Cost | 37,287 | 28,676 |
Fair Value | 38,568 | 28,752 |
Gross Unrealized Gains | 2,529 | 1,605 |
Gross Unrealized Losses | $ (1,248) | $ (1,528) |
Commercial Loans | ||
Mortgage Backed Securities | ||
Weighted Average Interest Rate | 5.50% | 5.50% |
Principal Balance | $ 4,513 | $ 6,314 |
Amortized Cost | 1,054 | 1,472 |
Fair Value | 1,228 | 1,131 |
Gross Unrealized Gains | $ 174 | |
Gross Unrealized Losses | $ (342) | |
Tax Liens | ||
Mortgage Backed Securities | ||
Weighted Average Interest Rate | 6.00% | 6.50% |
Principal Balance | $ 127 | $ 2,534 |
Amortized Cost | 127 | 2,533 |
Fair Value | 126 | 2,508 |
Gross Unrealized Losses | $ (1) | $ (25) |
Servicing rights (Details)
Servicing rights (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Servicing rights | ||||
Unpaid Principal Amount | $ 987,446 | $ 673,941 | ||
Carrying Value | $ 22,478 | $ 22,478 | 21,743 | 22,478 |
Total servicing rights | 94,038 | 83,854 | ||
Servicing rights activity at amortized cost | ||||
Beginning net carrying value at amortized cost | 22,478 | |||
Ending net carrying value at amortized cost | 21,743 | 22,478 | ||
Residential | ||||
Servicing rights | ||||
Unpaid Principal Amount | 6,558,455 | 5,481,404 | ||
Servicing rights activity at fair value | ||||
Beginning net carrying value at fair value | 61,376 | |||
Acquired in connection with reverse merger | 51,302 | |||
Additions due to loans sold, servicing retained | 20,565 | 3,157 | ||
Loan pay-offs | (5,646) | |||
Unrealized gains (losses) | (4,000) | 6,917 | ||
Ending net carrying value at fair value | 72,295 | 61,376 | ||
Freddie Mac | ||||
Servicing rights | ||||
Unpaid Principal Amount | 559,823 | 224,826 | ||
Carrying Value | 2,202 | 921 | 5,059 | 2,202 |
Servicing rights activity at amortized cost | ||||
Beginning net carrying value at amortized cost | 2,202 | 921 | ||
Additions due to loans sold, servicing retained | 3,290 | 2,009 | ||
Amortization | (610) | (550) | ||
Impairment | 177 | (178) | ||
Ending net carrying value at amortized cost | 5,059 | 2,202 | ||
Freddie Mac | Residential | ||||
Servicing rights | ||||
Unpaid Principal Amount | 1,898,786 | 1,452,902 | ||
Servicing rights activity at fair value | ||||
Beginning net carrying value at fair value | 16,247 | |||
Ending net carrying value at fair value | 21,231 | 16,247 | ||
SBA | ||||
Servicing rights | ||||
Unpaid Principal Amount | 427,623 | 449,115 | ||
Carrying Value | 20,276 | 26,329 | 16,684 | 20,276 |
Servicing rights activity at amortized cost | ||||
Beginning net carrying value at amortized cost | 20,276 | 26,329 | ||
Additions due to loans sold, servicing retained | 1,996 | 951 | ||
Amortization | (4,034) | (5,110) | ||
Impairment | (1,554) | (1,894) | ||
Ending net carrying value at amortized cost | 16,684 | 20,276 | ||
SBA | Freddie Mac | ||||
Servicing rights | ||||
Carrying Value | 22,478 | 22,478 | $ 21,743 | $ 22,478 |
Servicing rights activity at amortized cost | ||||
Beginning net carrying value at amortized cost | 22,478 | |||
Ending net carrying value at amortized cost | $ 21,743 | $ 22,478 |
Servicing rights - Estimated va
Servicing rights - Estimated valuation (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Minimum | Freddie Mac | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 0.00% | 10.00% |
Forward default rate | 0.00% | 1.10% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.20% | 0.20% |
Maximum | Freddie Mac | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 13.00% | 10.00% |
Forward default rate | 2.00% | 1.10% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.20% | 0.20% |
Weighted Average | Freddie Mac | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 4.20% | 10.00% |
Forward default rate | 2.00% | 1.10% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.20% | 0.20% |
SBA | Minimum | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 2.40% | 2.10% |
Forward default rate | 0.00% | 0.00% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.40% | 0.40% |
SBA | Maximum | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 20.50% | 19.10% |
Forward default rate | 9.50% | 10.80% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.40% | 0.40% |
SBA | Weighted Average | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 11.50% | 13.10% |
Forward default rate | 2.70% | 1.20% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.40% | 0.40% |
Servicing rights - Assumptions
Servicing rights - Assumptions (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Residential | ||
Adverse changes to key assumptions on the carrying amount of the servicing rights | ||
Prepayment rate (10% adverse change) | $ (2,721) | $ (2,038) |
Prepayment rate (20% adverse change) | (4,928) | (3,983) |
Discount rate (10% adverse change) | (3,029) | (2,299) |
Discount rate (20% adverse change) | (5,823) | (4,438) |
Freddie Mac | ||
Adverse changes to key assumptions on the carrying amount of the servicing rights | ||
Prepayment rate (10% adverse change) | (43) | (55) |
Prepayment rate (20% adverse change) | (84) | (107) |
Default rate (10% adverse change) | (6) | (2) |
Default rate (20% adverse change) | (12) | (4) |
Discount rate (10% adverse change) | (270) | (54) |
Discount rate (20% adverse change) | (518) | (104) |
SBA | ||
Adverse changes to key assumptions on the carrying amount of the servicing rights | ||
Prepayment rate (10% adverse change) | (514) | (664) |
Prepayment rate (20% adverse change) | (998) | (1,290) |
Default rate (10% adverse change) | (24) | (12) |
Default rate (20% adverse change) | (48) | (24) |
Discount rate (10% adverse change) | (520) | (576) |
Discount rate (20% adverse change) | $ (1,008) | $ (1,290) |
Servicing rights - Amortization
Servicing rights - Amortization (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Future amortization expense for the servicing rights | ||
2,018 | $ 4,353 | |
2,019 | 3,675 | |
2,020 | 3,087 | |
2,021 | 2,585 | |
2,022 | 2,145 | |
Thereafter | 5,898 | |
Total | $ 21,743 | $ 22,478 |
Servicing rights - Residential
Servicing rights - Residential mortgage servicing rights (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Servicing rights | ||
Unpaid Principal Amount | $ 987,446 | $ 673,941 |
Residential | ||
Servicing rights | ||
Unpaid Principal Amount | 6,558,455 | 5,481,404 |
Fair Value | 72,295 | 61,376 |
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Abstract] | ||
Prepayment rate (10% adverse change) | (2,721) | (2,038) |
Prepayment rate (20% adverse change) | (4,928) | (3,983) |
Discount rate (10% adverse change) | (3,029) | (2,299) |
Discount rate (20% adverse change) | (5,823) | (4,438) |
Cost of servicing (10% adverse change) | (1,230) | (1,304) |
Cost of servicing (20% adverse change) | (2,460) | (2,607) |
Fannie Mae | Residential | ||
Servicing rights | ||
Unpaid Principal Amount | 2,524,897 | 2,211,493 |
Fair Value | 26,929 | 23,924 |
Ginnie Mae | Residential | ||
Servicing rights | ||
Unpaid Principal Amount | 2,134,772 | 1,817,009 |
Fair Value | 24,135 | 21,205 |
Freddie Mac | ||
Servicing rights | ||
Unpaid Principal Amount | 559,823 | 224,826 |
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Abstract] | ||
Prepayment rate (10% adverse change) | (43) | (55) |
Prepayment rate (20% adverse change) | (84) | (107) |
Discount rate (10% adverse change) | (270) | (54) |
Discount rate (20% adverse change) | (518) | (104) |
Freddie Mac | Residential | ||
Servicing rights | ||
Unpaid Principal Amount | 1,898,786 | 1,452,902 |
Fair Value | $ 21,231 | $ 16,247 |
Minimum | Residential | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 7.00% | 6.90% |
Discount rate | 10.50% | 10.50% |
Servicing expense (as a percent) | 0.70% | 0.40% |
Minimum | Freddie Mac | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 0.00% | 10.00% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.20% | 0.20% |
Maximum | Residential | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 29.20% | 11.70% |
Discount rate | 13.00% | 11.50% |
Servicing expense (as a percent) | 0.80% | 1.70% |
Maximum | Freddie Mac | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 13.00% | 10.00% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.20% | 0.20% |
Weighted Average | Residential | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 8.80% | 9.30% |
Discount rate | 10.90% | 10.80% |
Servicing expense (as a percent) | 0.70% | 0.50% |
Weighted Average | Freddie Mac | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 4.20% | 10.00% |
Discount rate | 12.00% | 12.00% |
Servicing expense (as a percent) | 0.20% | 0.20% |
Gains on residential mortgage91
Gains on residential mortgage banking activities, net of variable loan expenses(Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Gains on residential mortgage banking activities, net of variable loan expenses | ||
Realized and unrealized gains and losses of residential mortgage loans held for sale, at fair value | $ 63,024 | $ 2,943 |
Creation of new mortgage servicing rights, net of payoffs | 14,919 | 3,157 |
Loan origination fee income on residential mortgage loans | 8,193 | 1,404 |
Correspondent fees and other direct loan expenses, including provision for loan indemnification | (41,737) | (597) |
Unrealized gains (loss) on IRLCs and other derivatives | (2,699) | 126 |
Total gains on residential mortgage banking activities, net of variable loan expenses | $ 41,700 | $ 7,033 |
Secured Borrowings and Promis92
Secured Borrowings and Promissory Note (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Secured borrowings and promissory note | ||
Carrying Value, Secured borrowings | $ 631,286 | $ 927,462 |
Carrying Value, Promissory note | 6,107 | 7,378 |
Secured borrowings | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 1,707,084 | |
Pledged Assets Carrying Value | 898,453 | 1,086,849 |
Borrowings under credit facilities | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 645,000 | |
Pledged Assets Carrying Value | 303,454 | 369,272 |
Carrying Value, Secured borrowings | $ 248,674 | $ 326,610 |
Weighted average interest rate of borrowings (as a percent) | 3.90% | 4.20% |
Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 1,062,084 | |
Pledged Assets Carrying Value | 594,999 | $ 717,577 |
Carrying Value, Secured borrowings | $ 382,612 | $ 600,852 |
Weighted average interest rate of borrowings (as a percent) | 3.10% | 1.80% |
Promissory note | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 6,554 | |
Pledged Assets Carrying Value | 7,752 | $ 9,144 |
JPMorgan | Commercial | Borrowings under credit facilities | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 250,000 | |
Pledged Assets Carrying Value | 107,697 | 226,253 |
Carrying Value, Secured borrowings | $ 60,459 | 190,066 |
JPMorgan | Commercial | Borrowings under credit facilities | Minimum | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 3.25% | |
JPMorgan | Commercial | Borrowings under credit facilities | Maximum | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 3.50% | |
JPMorgan | Commercial | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 200,000 | |
Pledged Assets Carrying Value | 90,829 | 93,691 |
Carrying Value, Secured borrowings | $ 55,355 | 52,169 |
JPMorgan | Commercial | Borrowings under repurchase agreements | Minimum | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 2.50% | |
JPMorgan | Commercial | Borrowings under repurchase agreements | Maximum | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 4.50% | |
Keybank | Commercial | Borrowings under credit facilities | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 100,000 | |
Pledged Assets Carrying Value | 67,589 | 17,311 |
Carrying Value, Secured borrowings | $ 66,642 | 17,162 |
Keybank | Commercial | Borrowings under credit facilities | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 1.75% | |
Comerica | Residential | Borrowings under credit facilities | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 150,000 | |
Pledged Assets Carrying Value | 71,035 | 35,102 |
Carrying Value, Secured borrowings | $ 67,336 | 33,575 |
Comerica | Residential | Borrowings under credit facilities | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 2.125% | |
UBS | Residential | Borrowings under credit facilities | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 65,000 | |
Pledged Assets Carrying Value | 43,121 | |
Carrying Value, Secured borrowings | $ 39,750 | |
UBS | Residential | Borrowings under credit facilities | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 2.30% | |
Associated Bank | Residential | Borrowings under credit facilities | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 40,000 | |
Pledged Assets Carrying Value | 29,242 | $ 28,575 |
Carrying Value, Secured borrowings | $ 27,699 | 27,869 |
Associated Bank | Residential | Borrowings under credit facilities | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 2.125% | |
Origin Bank | Residential | Borrowings under credit facilities | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 40,000 | |
Pledged Assets Carrying Value | 27,891 | 18,910 |
Carrying Value, Secured borrowings | $ 26,538 | 18,188 |
Origin Bank | Residential | Borrowings under credit facilities | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 2.25% | |
Deutsche Bank | Commercial | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 275,000 | |
Pledged Assets Carrying Value | 252,499 | 118,962 |
Carrying Value, Secured borrowings | $ 173,811 | 82,716 |
Deutsche Bank | Commercial | Borrowings under repurchase agreements | Minimum | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 2.50% | |
Deutsche Bank | Commercial | Borrowings under repurchase agreements | Maximum | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 3.50% | |
Citibank | Commercial | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | $ 200,000 | |
Pledged Assets Carrying Value | 150,707 | 119,376 |
Carrying Value, Secured borrowings | $ 88,095 | 102,576 |
Citibank | Commercial | Borrowings under repurchase agreements | Minimum | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 2.25% | |
Citibank | Commercial | Borrowings under repurchase agreements | Maximum | LIBOR | ||
Secured borrowings and promissory note | ||
Pricing, spread on variable (as a percent) | 3.00% | |
FCB | Commercial | Promissory note | ||
Secured borrowings and promissory note | ||
Pricing, stated rate (as a percent) | 2.75% | |
Maximum Facility Size | $ 6,554 | |
Pledged Assets Carrying Value | 7,752 | 9,144 |
Carrying Value, Promissory note | 6,107 | 7,378 |
MBS | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Pledged Assets Carrying Value | 37,397 | 11,815 |
MBS | JPMorgan | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 53,325 | |
Pledged Assets Carrying Value | 80,690 | 42,253 |
Carrying Value, Secured borrowings | $ 53,325 | 30,363 |
MBS | JPMorgan | Borrowings under repurchase agreements | Minimum | ||
Secured borrowings and promissory note | ||
Pricing, stated rate (as a percent) | 2.56% | |
MBS | JPMorgan | Borrowings under repurchase agreements | Maximum | ||
Secured borrowings and promissory note | ||
Pricing, stated rate (as a percent) | 5.00% | |
MBS | Citibank | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Pricing, stated rate (as a percent) | 3.42% | |
Maximum Facility Size | $ 5,957 | |
Pledged Assets Carrying Value | 11,496 | 11,496 |
Carrying Value, Secured borrowings | 5,957 | 5,226 |
MBS | Bank of America | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 8,112 | |
Pledged Assets Carrying Value | 8,778 | 11,815 |
Carrying Value, Secured borrowings | $ 6,069 | 8,112 |
MBS | Bank of America | Borrowings under repurchase agreements | Minimum | ||
Secured borrowings and promissory note | ||
Pricing, stated rate (as a percent) | 3.38% | |
MBS | Bank of America | Borrowings under repurchase agreements | Maximum | ||
Secured borrowings and promissory note | ||
Pricing, stated rate (as a percent) | 3.48% | |
STI | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Pledged Assets Carrying Value | 319,984 | |
STI | Mizuho | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 99,950 | |
Pledged Assets Carrying Value | 100,000 | |
Carrying Value, Secured borrowings | 99,950 | |
STI | Societe Generale | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 19,940 | |
Pledged Assets Carrying Value | 19,994 | |
Carrying Value, Secured borrowings | 19,940 | |
STI | RBC Bank | Borrowings under repurchase agreements | ||
Secured borrowings and promissory note | ||
Maximum Facility Size | 199,800 | |
Pledged Assets Carrying Value | 199,990 | |
Carrying Value, Secured borrowings | $ 199,800 |
Secured Borrowings and Promis93
Secured Borrowings and Promissory Note - Collateral Pledged (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Secured borrowings | ||
Collateral pledged | ||
Pledged Assets Carrying Value | $ 898,453 | $ 1,086,849 |
Borrowings under credit facilities | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 303,454 | 369,272 |
Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 594,999 | 717,577 |
Promissory note | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 7,752 | 9,144 |
STI | Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 319,984 | |
Loans, net | Borrowings under credit facilities | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 303,133 | 369,272 |
Loans, net | Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 494,035 | 332,029 |
Loans, net | Promissory note | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 7,752 | 9,144 |
Real estate | Borrowings under credit facilities | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 321 | |
MBS | Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 37,397 | 11,815 |
Retained interest in assets of consolidated VIEs | Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | $ 63,567 | $ 53,749 |
Offsetting Assets and Liabili94
Offsetting Assets and Liabilities - Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Effect of offsetting of the Company’s recognized assets | ||
Gross Amounts of Recognized Assets | $ 2,898 | $ 3,097 |
Gross Amounts Offset in the Consolidated Balance Sheets | 2 | |
Assets Presented in the Consolidated Balance Sheets | 2,898 | 3,095 |
Cash Collateral Received | 2,898 | |
Net Amount | 3,095 | |
Credit default swaps | ||
Effect of offsetting of the Company’s recognized assets | ||
Gross Amounts of Recognized Assets | 173 | |
Assets Presented in the Consolidated Balance Sheets | 173 | |
Net Amount | 173 | |
Interest rate swaps | ||
Effect of offsetting of the Company’s recognized assets | ||
Gross Amounts of Recognized Assets | 2,898 | 2,924 |
Gross Amounts Offset in the Consolidated Balance Sheets | 2 | |
Assets Presented in the Consolidated Balance Sheets | 2,898 | 2,922 |
Cash Collateral Received | $ 2,898 | |
Net Amount | $ 2,922 |
Offsetting Assets and Liabili95
Offsetting Assets and Liabilities - Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Effect of offsetting recognized liabilities, Derivative | ||
Gross Amounts of Recognized Liabilities, Derivative | $ 282 | $ 643 |
Effect of offsetting recognized liabilities, Total | ||
Gross Amounts of Recognized Liabilities, Total | 637,675 | 935,483 |
Liabilities Presented in the Consolidated Balance Sheets, Total | 637,675 | 935,483 |
Financial Instruments, Total | 637,393 | 932,980 |
Cash Collateral Paid, Total | 282 | 2,503 |
Interest rate swaps | ||
Effect of offsetting recognized liabilities, Derivative | ||
Gross Amounts of Recognized Liabilities, Derivative | 216 | 643 |
Liabilities Presented in the Consolidated Balance Sheets, Derivative | 216 | 643 |
Cash Collateral Paid, Derivative | 216 | 643 |
Credit default swaps | ||
Effect of offsetting recognized liabilities, Derivative | ||
Gross Amounts of Recognized Liabilities, Derivative | 66 | |
Liabilities Presented in the Consolidated Balance Sheets, Derivative | 66 | |
Cash Collateral Paid, Derivative | 66 | |
Secured borrowings | ||
Effect of offsetting recognized liabilities, Borrowings | ||
Gross Amounts of Recognized Liabilities, Borrowings | 631,286 | 927,462 |
Liabilities Presented in the Consolidated Balance Sheets, Borrowings | 631,286 | 927,462 |
Financial Instruments, Borrowings | 631,286 | 925,602 |
Cash Collateral Paid, Borrowings | 1,860 | |
Promissory note | ||
Effect of offsetting recognized liabilities, Borrowings | ||
Gross Amounts of Recognized Liabilities, Borrowings | 6,107 | 7,378 |
Liabilities Presented in the Consolidated Balance Sheets, Borrowings | 6,107 | 7,378 |
Financial Instruments, Borrowings | $ 6,107 | $ 7,378 |
Derivative Instruments (Details
Derivative Instruments (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017USD ($)item | Dec. 31, 2016USD ($)item | |
Notional Amount | $ 573,914 | $ 605,580 |
Asset Derivatives Fair Value | 4,725 | 5,785 |
Liabilities Derivatives Fair Value | (282) | $ (643) |
Net Realized Gain (Loss) on Financial Instruments | ||
Net Realized Gain (Loss) | (1,256) | |
Net Unrealized Gain (Loss) on Financial Instruments | ||
Net Realized Gain (Loss) | $ (699) | |
Credit default swaps | ||
Number of derivative instrument held | item | 1 | 1 |
Liabilities Derivatives Fair Value | $ (66) | |
Credit default swaps | Credit Risk | ||
Notional Amount | 15,000 | $ 15,000 |
Asset Derivatives Fair Value | $ 173 | |
Liabilities Derivatives Fair Value | (66) | |
Credit default swaps | Net Unrealized Gain (Loss) on Financial Instruments | ||
Net Realized Gain (Loss) | $ (238) | |
Interest rate swaps | ||
Number of derivative instrument held | item | 52 | 49 |
Liabilities Derivatives Fair Value | $ (216) | $ (643) |
Interest rate swaps | Interest Rate Risk | ||
Notional Amount | 391,381 | 378,050 |
Asset Derivatives Fair Value | 2,898 | 2,922 |
Liabilities Derivatives Fair Value | (216) | (643) |
Interest rate swaps | Net Realized Gain (Loss) on Financial Instruments | ||
Net Realized Gain (Loss) | (1,256) | |
Interest rate swaps | Net Unrealized Gain (Loss) on Financial Instruments | ||
Net Realized Gain (Loss) | 2,238 | |
Residential mortgage banking activities interest rate swaps | Net Unrealized Gain (Loss) on Financial Instruments | ||
Net Realized Gain (Loss) | (1,836) | |
Interest rate lock commitments (IRLCs) | Interest Rate Risk | ||
Notional Amount | 167,533 | 212,530 |
Asset Derivatives Fair Value | 1,827 | $ 2,690 |
Interest rate lock commitments (IRLCs) | Net Unrealized Gain (Loss) on Financial Instruments | ||
Net Realized Gain (Loss) | $ (863) |
Senior secured notes, net and97
Senior secured notes, net and Convertible notes, net (Details) | Aug. 09, 2017USD ($)$ / shares | Dec. 31, 2017USD ($)item | Jun. 13, 2017USD ($) | Feb. 13, 2017USD ($) | Dec. 31, 2016USD ($) |
Senior secured notes,net and Convertible notes, net | |||||
Unamortized deferred financing costs | $ (446,000) | $ (3,376,000) | |||
Total Senior secured notes, net | 138,078,000 | ||||
Total Convertible notes, net | 108,991,000 | ||||
Total carrying amount of debt components | 247,069,000 | ||||
Total carrying amount of conversion option of equity components recorded in additional paid-in capital | 2,139,000 | ||||
Senior Secured Notes | |||||
Senior secured notes,net and Convertible notes, net | |||||
Face amount | $ 140,000,000 | ||||
Interest rate (as a percent) | 7.50% | ||||
Unamortized premium - Senior secured notes | $ 1,735,000 | ||||
Unamortized deferred financing costs | (3,657,000) | ||||
Total Senior secured notes, net | 138,078,000 | ||||
Convertible Notes | |||||
Senior secured notes,net and Convertible notes, net | |||||
Face amount | $ 115,000,000 | $ 115,000,000 | |||
Interest rate (as a percent) | 7.00% | 7.00% | |||
Conversion ratio | 1.4997 | ||||
Principal amount of notes for conversion | $ 25 | ||||
Initial conversion price | $ / shares | $ 16.67 | ||||
Principal amount of the notes to be redeemed (as a percent) | 100.00% | ||||
Threshold period of specified consecutive trading days within which common stock price to conversion price of convertible debt instruments must exceed threshold percentage for a specified number of trading days to trigger conversion feature | 30 days | ||||
Threshold period of specified consecutive trading days within which the common stock price, used in a calculation with with the conversion rate, the result of which must exceed the threshold percentage | 5 days | ||||
Specified period of time used to calculate average closing market price of common stock to be used as a factor in determining potential trigger of conversion feature | 10 days | ||||
Gross carrying value of convertible notes | $ 112,700,000 | ||||
Gross carrying value of the equity component | $ 2,300,000 | ||||
Unamortized discount - Convertible notes | $ (2,139,000) | ||||
Unamortized deferred financing costs | (3,870,000) | ||||
Total Convertible notes, net | $ 108,991,000 | ||||
Convertible Notes | Minimum | |||||
Senior secured notes,net and Convertible notes, net | |||||
Percentage of common stock price to conversion price of convertible debt instruments to determine eligibility of conversion | 120.00% | ||||
Threshold number of specified trading days that common stock price to conversion price of convertible debt instruments must exceed threshold percentage within a specified consecutive trading period to trigger conversion feature | item | 20 | ||||
The threshold percentage that per share value of distributions exceeds the average market price which may trigger the conversion feature | 10.00% | ||||
Convertible Notes | Maximum | |||||
Senior secured notes,net and Convertible notes, net | |||||
Threshold percentage of the trading price of the convertible debt instrument to the product of the conversion rate and the closing stock price during any five consecutive trading day period | 98.00% | ||||
ReadyCap Holdings LLC | Senior Secured Notes | |||||
Senior secured notes,net and Convertible notes, net | |||||
Face amount | $ 65,000,000 | $ 75,000,000 | |||
Interest rate (as a percent) | 7.50% | 7.50% | |||
Yeld-to-maturity (as a percent) | 6.75% |
Guaranteed Loan Financing (Deta
Guaranteed Loan Financing (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Ending balance | $ 293,045 | $ 390,555 |
Guaranteed loan financing | ||
Ending balance | $ 293,045 | $ 390,555 |
Guaranteed loan financing | Weighted Average | ||
Interest Rates | 3.51% | 2.79% |
Guaranteed loan financing | Minimum | ||
Interest Rates | 1.62% | 3.50% |
Guaranteed loan financing | Maximum | ||
Interest Rates | 7.00% | 8.75% |
Guaranteed Loan Financing - Mat
Guaranteed Loan Financing - Maturities (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Contractual maturities of total guaranteed loan financing outstanding | ||
2,018 | $ 1,990 | |
2,019 | 2,713 | |
2,020 | 3,251 | |
2,021 | 4,767 | |
2,022 | 4,810 | |
Thereafter | 275,514 | |
Total | 293,045 | |
Guaranteed loan financing | ||
Contractual maturities of total guaranteed loan financing outstanding | ||
Loans held-for-investment pledged as security against guaranteed loan financing | $ 296,900 | $ 396,900 |
Related Party Transactions (Det
Related Party Transactions (Details) | 1 Months Ended | 12 Months Ended | |||
Jun. 30, 2017USD ($)loan | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Nov. 30, 2017USD ($) | |
Related-party transactions | |||||
Amount unpaid | $ 2,042,000 | $ 3,762,000 | |||
Purchase of loans, held-for-investment | 147,327,000 | 98,683,000 | $ 172,097,000 | ||
Investment in unconsolidated joint venture | $ 55,369,000 | ||||
Management Agreement | |||||
Related-party transactions | |||||
Term of agreement | 3 years | ||||
Automatically renewal period | 1 year | ||||
Minimum notice period for termination | 180 days | ||||
Termination fee multiplier | 3 | ||||
Period immediately preceding the termination used as basis for determination of the termination fee due | 24 months | ||||
Management Fee | |||||
Related-party transactions | |||||
Fee percentage for results up to threshold | 1.50% | ||||
Fee threshold | $ 500,000,000 | ||||
Fee percentage for results in excess of threshold | 1.00% | ||||
Incentive Distribution | |||||
Related-party transactions | |||||
Incentive multiplier | 15.00% | ||||
Core earnings period | 12 months | ||||
Percentage of Incentive fee multiplied by the weighted average of issue price | 8.00% | ||||
Minimum core earnings threshold | $ 0 | ||||
Minimum | Management Agreement | |||||
Related-party transactions | |||||
Independent director votes required for approval | 66.70% | ||||
Manager | Management Fee | |||||
Related-party transactions | |||||
Fees | $ 8,100,000 | 7,400,000 | |||
Amount unpaid | 2,000,000 | 3,700,000 | |||
Manager | Incentive Distribution | |||||
Related-party transactions | |||||
Incentive distribution paid | 0 | 0 | |||
Manager | Expense Reimbursement | |||||
Related-party transactions | |||||
Amount unpaid | 4,900,000 | 4,100,000 | |||
Reimbursable expenses | $ 2,400,000 | $ 3,400,000 | |||
RCSF III, LLC | |||||
Related-party transactions | |||||
Number of loans acquired | loan | 4 | ||||
Purchase of loans, held-for-investment | $ 57,300,000 | ||||
Unpaid principal balance | $ 57,000,000 | ||||
WFLLA LLC | |||||
Related-party transactions | |||||
Investment in unconsolidated joint venture | $ 54,200,000 |
Commitments, Contingencies a101
Commitments, Contingencies and Indemnifications (Details) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Commitments, contingencies and indemnifications | ||
Commitments to originate loans | $ 147.6 | $ 200 |
Unfunded loan commitments | ||
Commitments, contingencies and indemnifications | ||
Unfunded loan commitments, loans held at fair value | 9.6 | 14.9 |
Unfunded loan commitments, loans held-for-investment | $ 84.7 | $ 29.3 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
REIT requirements and income tax information | |||
Percentage of nondeductible excise tax the entity would be subject to if they fail to meet the minimum distributions requirement | 4.00% | ||
Number of taxable years an entity would not be able to qualify as a REIT if qualification lapses | 4 years | ||
Statutory federal income tax rate (as a percent) | 35.00% | ||
Income tax benefit related to remeasurement of deferred tax balances | $ 1,000 | ||
Operating loss carryforwards | 34,700 | ||
Increase in deferred tax assets | $ 2,900 | ||
Net operating loss limited per year | 1,100 | ||
Uncertain tax positions | $ 0 | $ 0 | |
Income tax rate on discontinued operations | 39.00% | ||
Forecast | |||
REIT requirements and income tax information | |||
Statutory federal income tax rate (as a percent) | 21.00% | ||
Minimum | |||
REIT requirements and income tax information | |||
Percentage of taxable income distributed in the form of qualifying distributions | 90.00% | ||
Maximum | |||
REIT requirements and income tax information | |||
Percentage of taxable income distributed in the form of qualifying distributions | 100.00% |
Income Taxes - Income Tax Provi
Income Taxes - Income Tax Provision (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Current: | |||
Federal income tax (benefit) | $ (1,235) | $ 6,441 | $ 5,234 |
State and local income tax (benefit) | (171) | 947 | 710 |
Net current tax provision (benefit) | (1,406) | 7,388 | 5,944 |
Deferred: | |||
Federal income tax | 3,779 | 1,401 | 750 |
State and local income tax | 613 | 583 | 248 |
Valuation allowance | (1,147) | 279 | 868 |
Net deferred tax provision | 3,245 | 2,263 | 1,866 |
Total income tax provision | $ 1,839 | $ 9,651 | $ 7,810 |
Income Taxes - Effective Income
Income Taxes - Effective IncomeTax Rate Reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Reconciliation of federal income tax determined using statutory federal tax rate to our reported income tax provision | |||
U.S. statutory tax | $ 16,679 | $ 22,825 | $ 18,099 |
State and local income tax | 569 | 2,322 | 721 |
Income attributable to REIT | (10,795) | (14,522) | (10,138) |
Income attributable to Non-controlling interests | (568) | (1,251) | (1,491) |
Nondeductible | 748 | 21 | 18 |
Change in tax rate | (727) | ||
Change in valuation allowance | (1,147) | 279 | 868 |
Return to Provision | (2,547) | ||
Other | (373) | (23) | (267) |
Total income tax provision | $ 1,839 | $ 9,651 | $ 7,810 |
Income Taxes - Schedule Of Defe
Income Taxes - Schedule Of Deferred Tax Assets And Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 4,989 | $ 4,159 |
Unrealized losses | 488 | |
Impairment and reserves | 7,826 | |
Depreciation and amortization | 997 | 668 |
Goodwill | 3,110 | 7,134 |
Compensation | 1,226 | 1,669 |
Intangibles | 896 | |
Other | 1,240 | 859 |
Total deferred tax assets | 11,562 | 23,699 |
Deferred tax liabilities: | ||
Accruals | 216 | (402) |
Loan / servicing rights balance | 12,014 | 20,995 |
Derivative instruments | 373 | 1,152 |
Other taxable temporary difference | 310 | 69 |
Total deferred tax liabilities | 12,913 | 21,814 |
Valuation allowance | (1,147) | |
Net deferred tax assets | $ 738 | |
Net deferred tax (liabilities) | $ (1,351) |
Other Asset and Other Liabil106
Other Asset and Other Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Other assets: | ||
Due from servicers | $ 9,964 | $ 27,029 |
Intangible assets | 3,264 | 3,636 |
Accrued interest | 6,494 | 5,606 |
Real estate accrued in settlement of loans | 1,644 | 3,933 |
Deferred financing costs | 446 | 3,376 |
Deferred tax asset | 17,155 | 1,371 |
Prepaid taxes | 6,014 | 1,456 |
Other | 11,859 | 7,870 |
Total other assets | 56,840 | 54,277 |
Accounts payable and other accrued liabilities: | ||
Accrued salaries, wages and commissions | 16,508 | 17,450 |
Servicing principal and interest payable | 5,659 | 10,664 |
Repair and denial reserve | 5,687 | 6,813 |
Liability under subservicing agreements | 1,496 | 6,757 |
Unapplied cash | 2,445 | 6,278 |
Accrued interest payable | 10,317 | 4,680 |
Payable to related parties | 2,042 | 3,762 |
Deferred tax liability | 18,506 | 632 |
Other accounts payable and accrued liabilities | 11,976 | 13,171 |
Total accounts payable and other accrued liabilities | $ 74,636 | $ 70,207 |
Other Asset and Other Liabil107
Other Asset and Other Liabilities - Real Estate Acquired in Settlement of Loans (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Real estate accrued in settlement of loans | ||
Real estate accrued in settlement of loans | $ 1,644 | $ 3,933 |
NORTH CAROLINA | ||
Real estate accrued in settlement of loans | ||
Real estate accrued in settlement of loans | 1,850 | |
FLORIDA | ||
Real estate accrued in settlement of loans | ||
Real estate accrued in settlement of loans | 303 | 1,320 |
ILLINOIS | ||
Real estate accrued in settlement of loans | ||
Real estate accrued in settlement of loans | 863 | 19 |
Other | ||
Real estate accrued in settlement of loans | ||
Real estate accrued in settlement of loans | $ 478 | $ 744 |
Other Asset and Other Liabil108
Other Asset and Other Liabilities - Intangible assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Finite-lived intangible assets | $ 2,264 | |
Total Intangible Assets | 3,264 | $ 3,636 |
Amortization expense | 400 | 100 |
Total Accumulated Amortization | 439 | |
Future amortization of lease intangibles | ||
2,018 | 349 | |
2,019 | 311 | |
2,020 | 277 | |
2,021 | 248 | |
2,022 | 222 | |
Thereafter | 857 | |
Net amount | 2,264 | |
Loan indemnification reserve | ||
Loan indemnification reserve | 3,000 | 2,800 |
SBA license | ||
Indefinite-lived intangible assets | 1,000 | 1,000 |
Trade name | ||
Finite-lived intangible assets | $ 1,017 | 1,190 |
Estimated Useful Life | 15 years | |
Total Accumulated Amortization | $ 206 | |
Future amortization of lease intangibles | ||
Net amount | 1,017 | 1,190 |
Favorable lease | ||
Finite-lived intangible assets | $ 1,247 | 1,446 |
Estimated Useful Life | 12 years | |
Total Accumulated Amortization | $ 233 | |
Future amortization of lease intangibles | ||
Net amount | $ 1,247 | $ 1,446 |
Other Income and Other Opera109
Other Income and Other Operating Expenses (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Other income | |||
Origination income | $ 4,302 | $ 4,144 | $ 2,935 |
Release/(Increase) of repair and denial reserve | 1,013 | 1,258 | 10,120 |
Other | 3,143 | 3,759 | 1,376 |
Total other income | 8,458 | 9,161 | 14,431 |
Other operating expenses | |||
Origination costs | 6,862 | 4,098 | 2,779 |
Technology expense | 3,692 | 2,945 | 2,414 |
Charge off of real estate acquired in settlement of loans | 756 | 1,833 | 849 |
Rent expense | 2,314 | 1,449 | 996 |
Recruiting, training and travel expenses | 2,389 | 1,320 | 1,223 |
Other | 10,926 | 5,535 | 3,693 |
Total other operating expenses | $ 26,939 | $ 17,180 | $ 11,954 |
Variable Interest Entities a110
Variable Interest Entities and Securitization Activities - VIE Securitized Debt Obligations (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Variable interest entities | ||
Current Principal Balance | $ 987,446 | $ 673,941 |
Carrying value | 598,148 | 492,942 |
VIEs | ||
Variable interest entities | ||
Current Principal Balance | 614,557 | 504,317 |
Carrying value | $ 598,148 | $ 492,942 |
Weighted Average Rate | 3.40% | 3.60% |
Waterfall Victoria Mortgage Trust 2011-SBC2 | ||
Variable interest entities | ||
Current Principal Balance | $ 16,010 | $ 24,472 |
Carrying value | $ 16,010 | $ 24,472 |
Weighted Average Rate | 5.30% | 5.20% |
Sutherland Commercial Mortgage Loans 2015-SBC4 | ||
Variable interest entities | ||
Current Principal Balance | $ 10,049 | $ 39,464 |
Carrying value | $ 9,687 | $ 38,402 |
Weighted Average Rate | 4.00% | 3.90% |
Sutherland Commercial Mortgage Loans 2017-SBC6 | ||
Variable interest entities | ||
Current Principal Balance | $ 119,784 | |
Carrying value | $ 117,868 | |
Weighted Average Rate | 3.30% | |
ReadyCap Commercial Mortgage Trust 2014-1 | ||
Variable interest entities | ||
Current Principal Balance | $ 33,953 | $ 84,320 |
Carrying value | $ 33,951 | $ 83,885 |
Weighted Average Rate | 3.60% | 3.40% |
ReadyCap Commercial Mortgage Trust 2015-2 | ||
Variable interest entities | ||
Current Principal Balance | $ 151,993 | $ 166,232 |
Carrying value | $ 147,271 | $ 160,699 |
Weighted Average Rate | 4.10% | 4.00% |
ReadyCap Commercial Mortgage Trust 2016-3 | ||
Variable interest entities | ||
Current Principal Balance | $ 98,733 | $ 133,774 |
Carrying value | $ 95,907 | $ 129,914 |
Weighted Average Rate | 3.50% | 3.50% |
Readycap Capital Financing 2017-FL1 | ||
Variable interest entities | ||
Current Principal Balance | $ 158,978 | |
Carrying value | $ 154,721 | |
Weighted Average Rate | 2.80% | |
ReadyCap Lending Small Business Trust 2015-1 | ||
Variable interest entities | ||
Current Principal Balance | $ 25,057 | $ 56,055 |
Carrying value | $ 22,733 | $ 55,570 |
Weighted Average Rate | 2.50% | 2.00% |
Variable Interest Entities a111
Variable Interest Entities and Securitization Activities - Consolidated VIE Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Assets | ||||
Cash and cash equivalents | $ 63,425 | $ 59,566 | $ 41,569 | $ 56,740 |
Restricted cash | 11,666 | 20,190 | ||
Accrued interest | 6,494 | 5,606 | ||
Total assets | 861,662 | 691,096 | ||
Liabilities | ||||
Securitized debt obligations of consolidated VIEs, net | 598,148 | 492,942 | ||
VIEs | ||||
Assets | ||||
Cash and cash equivalents | 25 | 131 | ||
Restricted cash | 15,838 | 808 | ||
Loans, net | 836,180 | 655,559 | ||
Real estate acquired in settlement of loans | 3,443 | 4,103 | ||
Accrued interest | 4,261 | 2,835 | ||
Due from servicers | 1,915 | 27,660 | ||
Total assets | 861,662 | 691,096 | ||
Liabilities | ||||
Securitized debt obligations of consolidated VIEs, net | 598,148 | 492,942 | ||
Total liabilities | 598,148 | 492,942 | ||
Equity | $ 263,514 | $ 198,154 |
Variable Interest Entities a112
Variable Interest Entities and Securitization Activities - Assets of Unconsolidated VIEs (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Carrying amount | ||
Mortgage backed securities, at fair value | $ 39,922 | $ 32,391 |
Investment in unconsolidated joint venture | 55,369 | |
VIE not primary beneficiary | ||
Carrying amount | ||
Mortgage backed securities, at fair value | 38,568 | |
Investment in unconsolidated joint venture | 55,369 | |
Total assets in unconsolidated VIEs carrying amount | 93,937 | |
Maximum Exposure to Loss | ||
Mortgage backed securities, at fair value | 38,568 | |
Investment in unconsolidated joint venture | 55,369 | |
Total assets in unconsolidated VIEs maximum exposure to loss | $ 93,937 |
Stockholders_ Equity - Common S
Stockholders’ Equity - Common Stock Dividends (Details) - $ / shares | Jan. 31, 2018 | Dec. 13, 2017 | Oct. 20, 2017 | Sep. 12, 2017 | Jul. 31, 2017 | Jun. 15, 2017 | Apr. 13, 2017 | Mar. 14, 2017 | Jan. 27, 2017 | Dec. 21, 2016 | Oct. 25, 2016 | Oct. 11, 2016 | Sep. 16, 2016 | Aug. 23, 2016 | Jun. 17, 2016 | May 20, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Dividends | |||||||||||||||||||
Dividend per Share, declared | $ 0.37 | $ 0.37 | $ 0.37 | $ 0.37 | $ 0.35 | $ 0.36 | $ 0.45 | $ 0.45 | $ 1.48 | $ 1.61 | $ 1.78 | ||||||||
Dividend per Share, paid | $ 0.37 | $ 0.37 | $ 0.37 | $ 0.37 | $ 0.35 | $ 0.36 | $ 0.45 | $ 0.45 |
Stockholders_ Equity - Manager
Stockholders’ Equity - Manager Equity Incentive (Details) - $ / shares | Jan. 08, 2016 | Dec. 31, 2017 |
Equity incentive | ||
Percentage of shares of common stock issued and outstanding on a fully diluted basis | 5.00% | |
Manager | Incentive Distribution | ||
Equity incentive | ||
Number of shares issued (shares) | 27,199 | |
Share Price | $ 17.74 |
Stockholders_ Equity - RSU acti
Stockholders’ Equity - RSU activity (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Dec. 31, 2017USD ($)$ / sharesshares | Sep. 30, 2017USD ($)$ / sharesshares | Jun. 30, 2017USD ($)$ / sharesshares | Mar. 31, 2017USD ($)director$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016shares | |
Share-Based Compensation | ||||||
Common stock, issued | 31,996,440 | 31,996,440 | 30,549,084 | |||
Weighted-average grant date fair value (per share) | ||||||
Stock-based compensation | $ | $ 700 | |||||
Non-cash compensation expense not yet charged to net income | $ | $ 300 | |||||
Independent director | ||||||
Share-Based Compensation | ||||||
Number of independent directors | director | 4 | |||||
RSU | Independent director | ||||||
Number of shares | ||||||
Outstanding, Beginning balance | 5,000 | 10,000 | 15,000 | |||
Granted (in shares) | 40,000 | |||||
Vested (in shares) | (5,000) | (5,000) | (5,000) | (25,000) | ||
Outstanding, Ending balance | 5,000 | 10,000 | 15,000 | |||
Weighted-average grant date fair value | ||||||
Beginning balance | $ | $ 73 | $ 145 | $ 217 | |||
Granted | $ | $ 580 | |||||
Vested | $ | $ (73) | (72) | (72) | (363) | ||
Ending balance | $ | $ 73 | $ 145 | $ 217 | |||
Weighted-average grant date fair value (per share) | ||||||
Beginning balance | $ / shares | $ 14.50 | $ 14.50 | $ 14.50 | |||
Granted (in per share) | $ / shares | $ 14.50 | |||||
Vested (in per share) | $ / shares | $ 14.50 | 14.50 | 14.50 | 14.50 | ||
Ending balance | $ / shares | $ 14.50 | $ 14.50 | $ 14.50 | |||
RSUs - One-Time Award | Independent director | ||||||
Share-Based Compensation | ||||||
Common stock, issued | 5,000 | |||||
RSU award issue ratio | 1 | |||||
Number of shares | ||||||
Granted (in shares) | 5,000 | |||||
RSUs, Annual Awards | Independent director | ||||||
Share-Based Compensation | ||||||
RSU award issue ratio | 1 | |||||
Vesting period | 1 year | |||||
Number of shares | ||||||
Granted (in shares) | 5,000 | |||||
RSAs | Certain employees | ||||||
Share-Based Compensation | ||||||
Vesting period | 3 years | |||||
Number of shares | ||||||
Outstanding, Beginning balance | 25,851 | 25,851 | ||||
Granted (in shares) | 25,851 | |||||
Outstanding, Ending balance | 25,851 | 25,851 | 25,851 | 25,851 | ||
Weighted-average grant date fair value | ||||||
Beginning balance | $ | $ 380 | $ 380 | ||||
Granted | $ | $ 380 | |||||
Ending balance | $ | $ 380 | $ 380 | $ 380 | $ 380 | ||
Weighted-average grant date fair value (per share) | ||||||
Beginning balance | $ / shares | $ 14.70 | $ 14.70 | ||||
Granted (in per share) | $ / shares | $ 14.70 | |||||
Ending balance | $ / shares | $ 14.70 | $ 14.70 | $ 14.70 | $ 14.70 |
Stockholders_ Equity - Litigati
Stockholders’ Equity - Litigation Settlement (Details) - USD ($) $ in Thousands | May 02, 2017 | Dec. 31, 2017 |
Stockholders’ Equity | ||
Shares issued in exchange of litigation settlement | $ 4,000 | $ 4,000 |
Shares issued in exchange of litigation settlement (in shares) | 275,862 |
Earnings per Share of Common117
Earnings per Share of Common Stock (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2015USD ($)$ / sharesshares | |
Continuing Operations | |||||||||||
Income from continued operations | $ 12,730 | $ 12,374 | $ 11,153 | $ 9,557 | $ 27,881 | $ 9,569 | $ 8,724 | $ 9,390 | $ 45,814 | $ 55,564 | $ 45,421 |
Less: Net income attributable to non-controlling interest | 2,524 | 4,237 | 4,385 | ||||||||
Less: Income attributable to participating shares | 62 | ||||||||||
Basic - Income from continuing operations | 43,228 | 51,327 | 41,036 | ||||||||
Discontinued Operations | |||||||||||
Loss from discontinued operations | (2,158) | (653) | |||||||||
Basic — Net income attributable to common stockholders after allocation to participating shares | 43,228 | 49,169 | 40,383 | ||||||||
Diluted Earnings | |||||||||||
Diluted - Income from continuing operations | 43,228 | 51,327 | 41,036 | ||||||||
Diluted — Net income attributable to common stockholders after allocation to participating shares | $ 43,228 | $ 49,169 | $ 40,383 | ||||||||
Basic — Average shares outstanding | shares | 31,350,102 | 26,647,981 | 25,287,277 | ||||||||
Effect of dilutive securities — Unvested participating shares | shares | 1,509 | ||||||||||
Diluted — Average shares outstanding | shares | 31,351,611 | 26,647,981 | 25,287,277 | ||||||||
Earnings (loss) per share | |||||||||||
Continuing operations, Basic | $ / shares | $ 1.38 | $ 1.93 | $ 1.62 | ||||||||
Discontinued operations, Basic | $ / shares | (0.08) | (0.03) | |||||||||
Continuing operations, Diluted | $ / shares | $ 1.38 | 1.93 | 1.62 | ||||||||
Discontinued operations, Diluted | $ / shares | $ (0.08) | $ (0.03) | |||||||||
Exchange ratio | 0.8356 | ||||||||||
Conversion spread value on Convertible Notes | $ 0 | ||||||||||
Impact of Convertible Notes on diluted EPS | $ 0 |
Earnings per Common Share - Ope
Earnings per Common Share - Operating Partnership Units (Details) - Operating Partnership - Noncontrolling Interests - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Noncontrolling interest | ||
Number of common shares issued for OP unit redeemed by a noncontrolling interest unit holder | 1 | |
Units held by noncontrolling interest unit holders | 1,150,827 | 2,349,561 |
Percentage of OP Units issued by the Operating Partnership | 3.50% | 7.10% |
Interest Income and Interest119
Interest Income and Interest Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Interest income | |||
Total loans | $ 128,739 | $ 130,506 | $ 136,834 |
Total loans, held for sale, at fair value | 6,223 | 1,627 | 40 |
Mortgage backed securities, at fair value | 3,343 | 4,890 | 12,081 |
Total interest income | 138,305 | 137,023 | 148,955 |
Interest expense | |||
Secured borrowings | (26,092) | (25,839) | (24,481) |
Securitized debt obligations of consolidated VIEs | (23,387) | (17,619) | (11,018) |
Guaranteed loan financing | (13,435) | (13,971) | (12,307) |
Senior secured note | (8,069) | ||
Convertible note | (3,427) | ||
Promissory note payable | (236) | (164) | |
Exchangeable senior notes | (179) | ||
Total interest expense | (74,646) | (57,772) | (47,806) |
Net interest income before provision for loan losses | 63,659 | 79,251 | 101,149 |
Acquired SBA 7(a) loans | |||
Interest income | |||
Total loans | 37,110 | 46,417 | 54,565 |
Acquired loans | |||
Interest income | |||
Total loans | 34,720 | 44,122 | 50,920 |
Total loans, held for sale, at fair value | 993 | 299 | |
Originated Transitional loans | |||
Interest income | |||
Total loans | 25,323 | 8,608 | 1,698 |
Originated SBC loans, at fair value | |||
Interest income | |||
Total loans | 7,769 | 13,457 | 14,858 |
Originated SBC loans | |||
Interest income | |||
Total loans | 22,564 | 17,902 | 14,793 |
Originated SBA 7(a) loans | |||
Interest income | |||
Total loans | 998 | ||
Total loans, held for sale, at fair value | $ 40 | ||
Originated Residential Agency loans | |||
Interest income | |||
Total loans | 255 | ||
Total loans, held for sale, at fair value | 3,723 | 709 | |
Originated Freddie Mac loans | |||
Interest income | |||
Total loans, held for sale, at fair value | $ 1,507 | $ 619 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2017USD ($)segment | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Segment reporting | |||||||||||
Number of Reportable Segments | segment | 4 | ||||||||||
Interest income | $ 138,305 | $ 137,023 | $ 148,955 | ||||||||
Interest expense | (74,646) | (57,772) | (47,806) | ||||||||
Net interest income before provision for loan losses | 63,659 | 79,251 | 101,149 | ||||||||
Provision for loan losses | (2,363) | (7,819) | (19,643) | ||||||||
Net interest income after provision for loan losses | $ 14,562 | $ 14,664 | $ 15,859 | $ 16,211 | $ 13,882 | $ 17,305 | $ 18,864 | $ 21,381 | 61,296 | 71,432 | 81,506 |
Non-interest income | |||||||||||
Gains on residential mortgage banking activities, net of variable loan expenses | 41,700 | 7,033 | |||||||||
Servicing income | 22,994 | 8,658 | 5,133 | ||||||||
Other income | 8,458 | 9,161 | 14,431 | ||||||||
Gain on bargain purchase | 15,218 | ||||||||||
Total non-interest income | 73,152 | 40,070 | 19,564 | ||||||||
Non-interest expense | |||||||||||
Employee compensation and benefits | (55,039) | (24,827) | (18,949) | ||||||||
Allocated employee compensation and benefits from related party | (3,843) | (3,668) | (3,323) | ||||||||
Professional fees | (8,921) | (13,420) | (6,954) | ||||||||
Management fees – related party | (8,059) | (7,432) | (7,260) | ||||||||
Incentive fees – related party | (965) | ||||||||||
Loan servicing expense | (10,323) | (4,611) | (4,347) | ||||||||
Other operating expenses | (26,939) | (17,180) | (11,954) | ||||||||
Total non-interest expense | (113,124) | (71,138) | (53,752) | ||||||||
Net realized gain (loss) on financial instruments | 19,329 | 6,914 | 181 | ||||||||
Net unrealized gain (loss) on financial instruments | 7,000 | 17,937 | 5,732 | ||||||||
Net income (loss) before provision for income taxes | 47,653 | 65,215 | 53,231 | ||||||||
Total Assets | 2,523,503 | 2,605,267 | 2,523,503 | 2,605,267 | 2,329,781 | ||||||
Corporate-Other | |||||||||||
Segment reporting | |||||||||||
Interest expense | (3,541) | (1,144) | (631) | ||||||||
Net interest income before provision for loan losses | (3,541) | (1,144) | (631) | ||||||||
Net interest income after provision for loan losses | (3,541) | (1,144) | (631) | ||||||||
Non-interest income | |||||||||||
Gain on bargain purchase | 15,218 | ||||||||||
Total non-interest income | 15,218 | ||||||||||
Non-interest expense | |||||||||||
Employee compensation and benefits | (848) | (162) | (148) | ||||||||
Allocated employee compensation and benefits from related party | (3,459) | (3,302) | (2,990) | ||||||||
Professional fees | (3,231) | (5,814) | (2,270) | ||||||||
Management fees – related party | (8,059) | (7,432) | (7,260) | ||||||||
Incentive fees – related party | (965) | ||||||||||
Other operating expenses | (2,235) | (1,840) | (3,806) | ||||||||
Total non-interest expense | (17,832) | (18,550) | (17,439) | ||||||||
Net realized gain (loss) on financial instruments | 478 | 313 | 10 | ||||||||
Net unrealized gain (loss) on financial instruments | (68) | 68 | (4) | ||||||||
Net income (loss) before provision for income taxes | (20,963) | (4,095) | (18,064) | ||||||||
Total Assets | 23,169 | 319,984 | 23,169 | 319,984 | 249,989 | ||||||
Loan Acquisitions | Operating Segments | |||||||||||
Segment reporting | |||||||||||
Interest income | 37,198 | 49,311 | 63,001 | ||||||||
Interest expense | (16,741) | (18,327) | (17,404) | ||||||||
Net interest income before provision for loan losses | 20,457 | 30,984 | 45,597 | ||||||||
Provision for loan losses | (2,026) | (6,419) | (13,153) | ||||||||
Net interest income after provision for loan losses | 18,431 | 24,565 | 32,444 | ||||||||
Non-interest income | |||||||||||
Servicing income | 197 | 49 | 418 | ||||||||
Other income | 2,814 | 2,246 | 583 | ||||||||
Total non-interest income | 3,011 | 2,295 | 1,001 | ||||||||
Non-interest expense | |||||||||||
Employee compensation and benefits | (576) | (337) | |||||||||
Allocated employee compensation and benefits from related party | (384) | (366) | (333) | ||||||||
Professional fees | (1,501) | (2,735) | (651) | ||||||||
Loan servicing expense | (2,981) | (2,743) | (4,829) | ||||||||
Other operating expenses | (4,285) | (3,604) | 832 | ||||||||
Total non-interest expense | (9,727) | (9,785) | (4,981) | ||||||||
Net realized gain (loss) on financial instruments | (323) | (293) | 2,388 | ||||||||
Net unrealized gain (loss) on financial instruments | 1,628 | 4,528 | (4,617) | ||||||||
Net income (loss) before provision for income taxes | 13,020 | 21,310 | 26,235 | ||||||||
Total Assets | 511,427 | 542,643 | 511,427 | 542,643 | 711,618 | ||||||
SBC Originations | Operating Segments | |||||||||||
Segment reporting | |||||||||||
Interest income | 59,021 | 40,586 | 31,349 | ||||||||
Interest expense | (35,121) | (20,347) | (11,538) | ||||||||
Net interest income before provision for loan losses | 23,900 | 20,239 | 19,811 | ||||||||
Provision for loan losses | (195) | (86) | |||||||||
Net interest income after provision for loan losses | 23,705 | 20,153 | 19,811 | ||||||||
Non-interest income | |||||||||||
Servicing income | 824 | 518 | 139 | ||||||||
Other income | 3,983 | 5,059 | 2,938 | ||||||||
Total non-interest income | 4,807 | 5,577 | 3,077 | ||||||||
Non-interest expense | |||||||||||
Employee compensation and benefits | (8,509) | (9,359) | (9,291) | ||||||||
Professional fees | (1,351) | (1,537) | (714) | ||||||||
Loan servicing expense | (2,355) | (1,348) | (969) | ||||||||
Other operating expenses | (9,666) | (6,864) | (5,578) | ||||||||
Total non-interest expense | (21,881) | (19,108) | (16,552) | ||||||||
Net realized gain (loss) on financial instruments | 9,665 | 2,290 | (3,534) | ||||||||
Net unrealized gain (loss) on financial instruments | 8,125 | 6,424 | 10,353 | ||||||||
Net income (loss) before provision for income taxes | 24,421 | 15,336 | 13,155 | ||||||||
Total Assets | 1,154,509 | 796,408 | 1,154,509 | 796,408 | 623,043 | ||||||
SBA Loan Origination, Acquisitions, and Servicing | Operating Segments | |||||||||||
Segment reporting | |||||||||||
Interest income | 38,108 | 46,417 | 54,605 | ||||||||
Interest expense | (16,098) | (17,397) | (18,233) | ||||||||
Net interest income before provision for loan losses | 22,010 | 29,020 | 36,372 | ||||||||
Provision for loan losses | (142) | (1,314) | (6,490) | ||||||||
Net interest income after provision for loan losses | 21,868 | 27,706 | 29,882 | ||||||||
Non-interest income | |||||||||||
Servicing income | 4,624 | 5,555 | 4,576 | ||||||||
Other income | 1,513 | 1,845 | 10,910 | ||||||||
Total non-interest income | 6,137 | 7,400 | 15,486 | ||||||||
Non-interest expense | |||||||||||
Employee compensation and benefits | (10,505) | (9,391) | (9,510) | ||||||||
Professional fees | (1,973) | (3,693) | (3,319) | ||||||||
Loan servicing expense | 1,454 | 479 | 1,451 | ||||||||
Other operating expenses | (4,076) | (3,798) | (3,402) | ||||||||
Total non-interest expense | (15,100) | (16,403) | (14,780) | ||||||||
Net realized gain (loss) on financial instruments | 9,509 | 4,604 | 1,317 | ||||||||
Net unrealized gain (loss) on financial instruments | 1,315 | ||||||||||
Net income (loss) before provision for income taxes | 23,729 | 23,307 | 31,905 | ||||||||
Total Assets | 510,006 | 593,091 | 510,006 | 593,091 | $ 745,131 | ||||||
Residential Mortgage Banking | Operating Segments | |||||||||||
Segment reporting | |||||||||||
Interest income | 3,978 | 709 | |||||||||
Interest expense | (3,145) | (557) | |||||||||
Net interest income before provision for loan losses | 833 | 152 | |||||||||
Net interest income after provision for loan losses | 833 | 152 | |||||||||
Non-interest income | |||||||||||
Gains on residential mortgage banking activities, net of variable loan expenses | 41,700 | 7,033 | |||||||||
Servicing income | 17,349 | 2,536 | |||||||||
Other income | 148 | 11 | |||||||||
Total non-interest income | 59,197 | 9,580 | |||||||||
Non-interest expense | |||||||||||
Employee compensation and benefits | (34,601) | (5,578) | |||||||||
Professional fees | (865) | 359 | |||||||||
Loan servicing expense | (6,441) | (999) | |||||||||
Other operating expenses | (6,677) | (1,074) | |||||||||
Total non-interest expense | (48,584) | (7,292) | |||||||||
Net unrealized gain (loss) on financial instruments | (4,000) | 6,917 | |||||||||
Net income (loss) before provision for income taxes | 7,446 | 9,357 | |||||||||
Total Assets | $ 324,392 | $ 353,141 | $ 324,392 | $ 353,141 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) $ in Thousands | 2 Months Ended | 12 Months Ended | |||
Mar. 15, 2018 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2017 | May 31, 2016 | |
Discontinued operations | |||||
Amount due | $ 7,220 | $ 6,756 | |||
Non-interest income (expense) | |||||
Loss on sale | (2,695) | ||||
Loss before income tax benefit | (3,538) | $ (5,103) | |||
Income tax benefit | 1,380 | 4,450 | |||
Loss from discontinued operations | (2,158) | (653) | |||
Silverthread | Discontinued operations sold | |||||
Discontinued operations | |||||
Consideration from sale of discontinued operations | $ 4,000 | ||||
Payment received | $ 200 | ||||
Assets: | |||||
Assets | 0 | 0 | |||
Liabilities: | |||||
Liabilities | 0 | 0 | |||
Non-interest income (expense) | |||||
Commission income | 2,984 | 16,208 | |||
Property management income | 263 | 2,034 | |||
Other | 16 | 386 | |||
Total other income | 3,263 | 18,628 | |||
Employee compensation and benefits | (1,071) | (5,038) | |||
Professional fees | (138) | (599) | |||
Commission expense | (1,844) | (10,596) | |||
Technology expense | (171) | (871) | |||
Rent expense | (268) | (1,607) | |||
Tax expense | (3) | (33) | |||
Recruiting, training, and travel expenses | (46) | (164) | |||
Marketing expense | (29) | (70) | |||
Other | (536) | (3,103) | |||
Total other operating expenses | (2,897) | (16,444) | |||
Loss on sale | (2,695) | (1,650) | |||
Loss before income tax benefit | (3,538) | (5,103) | |||
Income tax benefit | 1,380 | 4,450 | |||
Loss from discontinued operations | $ (2,158) | $ (653) | |||
Silverthread | Discontinued operations sold | Receivable from Third Parties | |||||
Discontinued operations | |||||
Amount due | $ 2,300 |
Quarterly Financial Data (Un122
Quarterly Financial Data (Unaudited) (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017USD ($)$ / shares | Sep. 30, 2017USD ($)$ / shares | Jun. 30, 2017USD ($)$ / shares | Mar. 31, 2017USD ($)$ / shares | Dec. 31, 2016USD ($)$ / shares | Sep. 30, 2016USD ($)$ / shares | Jun. 30, 2016USD ($)$ / shares | Mar. 31, 2016USD ($)$ / shares | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Interest income | $ 36,135 | $ 35,038 | $ 33,248 | $ 33,884 | $ 32,741 | $ 31,890 | $ 34,526 | $ 37,866 | |||
Net interest income after provision for loan losses | 14,562 | 14,664 | 15,859 | 16,211 | 13,882 | 17,305 | 18,864 | 21,381 | $ 61,296 | $ 71,432 | $ 81,506 |
Non-interest income (expense) | (9,999) | (11,003) | (9,102) | (9,868) | 2,703 | (11,863) | (12,332) | (9,685) | |||
Net income from continuing operations | 12,730 | 12,374 | 11,153 | 9,557 | 27,881 | 9,569 | 8,724 | 9,390 | 45,814 | 55,564 | 45,421 |
Net Income | 12,730 | 12,374 | 11,153 | 9,557 | 26,074 | 9,569 | 8,724 | 9,039 | 45,814 | 53,406 | 44,768 |
Net income attributable to Sutherland Asset Management Corporation | $ 12,097 | $ 11,841 | $ 10,496 | $ 8,856 | $ 24,054 | $ 8,792 | $ 8,021 | $ 8,302 | $ 43,290 | $ 49,169 | $ 40,383 |
Earnings per share - Basic and diluted | $ / shares | $ 0.38 | $ 0.37 | $ 0.34 | $ 0.29 | $ 0.83 | $ 0.34 | $ 0.31 | $ 0.32 | |||
Exchange ratio | 0.8356 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands | Dec. 13, 2017 | Sep. 12, 2017 | Jun. 15, 2017 | Mar. 14, 2017 | Dec. 21, 2016 | Oct. 11, 2016 | Aug. 23, 2016 | May 20, 2016 | Mar. 31, 2018 | Feb. 28, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Jan. 30, 2018 | Jun. 13, 2017 | Feb. 13, 2017 |
Subsequent Event | ||||||||||||||||
Current Principal Balance | $ 987,446 | $ 673,941 | ||||||||||||||
Dividends | ||||||||||||||||
Dividend per Share, declared | $ 0.37 | $ 0.37 | $ 0.37 | $ 0.37 | $ 0.35 | $ 0.36 | $ 0.45 | $ 0.45 | $ 1.48 | $ 1.61 | $ 1.78 | |||||
Subsequent event | ||||||||||||||||
Dividends | ||||||||||||||||
Dividend per Share, declared | $ 0.37 | |||||||||||||||
Senior Secured Notes | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Face amount | $ 140,000 | |||||||||||||||
Interest rate (as a percent) | 7.50% | |||||||||||||||
Senior bonds | Subsequent event | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Face amount | $ 148,500 | |||||||||||||||
Weighted average pass-through rate | 3.80% | |||||||||||||||
ReadyCap Holdings LLC | Senior Secured Notes | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Face amount | $ 65,000 | $ 75,000 | ||||||||||||||
Interest rate (as a percent) | 7.50% | 7.50% | ||||||||||||||
ReadyCap Holdings LLC | Senior Secured Notes | Subsequent event | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Face amount | $ 40,000 | |||||||||||||||
Interest rate (as a percent) | 7.50% | |||||||||||||||
Residential | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Current Principal Balance | $ 6,558,455 | $ 5,481,404 | ||||||||||||||
Fixed-rate SBC loans | Securitized assets | Subsequent event | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Current Principal Balance | $ 165,000 | |||||||||||||||
Secured borrowings | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Maximum advance amount | 1,707,084 | |||||||||||||||
Borrowings under credit facilities | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Maximum advance amount | 645,000 | |||||||||||||||
Borrowings under credit facilities | Residential | Subsequent event | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Maximum advance amount | $ 125,000 | |||||||||||||||
Borrowings under credit facilities | Residential | LIBOR | Subsequent event | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Pricing, spread on variable (as a percent) | 2.10% | |||||||||||||||
Borrowings under repurchase agreements | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Maximum advance amount | $ 1,062,084 | |||||||||||||||
Borrowings under repurchase agreements | Deutsche Bank AG | Subsequent event | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Maximum advance amount | $ 300,000 | |||||||||||||||
Borrowings under repurchase agreements | Deutsche Bank AG | LIBOR | Minimum | Subsequent event | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Pricing, spread on variable (as a percent) | 2.50% | |||||||||||||||
Borrowings under repurchase agreements | Deutsche Bank AG | LIBOR | Maximum | Subsequent event | ||||||||||||||||
Subsequent Event | ||||||||||||||||
Pricing, spread on variable (as a percent) | 3.50% |
Schedule IV _ Mortgage Loans124
Schedule IV – Mortgage Loans on Real Estate (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017USD ($)loan | Dec. 31, 2016USD ($) | |
Schedule IV – Mortgage Loans on Real Estate | ||
Number of Loans that exceed one percent of total carrying amount | loan | 0 | |
Percentage of total carrying amount of all mortgages | 1 | |
Reconcile mortgage loans on real estate | ||
Balance at beginning | $ 1,848,477 | $ 1,716,072 |
Origination of loan receivables | 2,963,128 | 936,682 |
Purchases of loan receivables | 158,522 | 98,683 |
Loans acquired in connection with reverse merger | 189,197 | |
Proceeds from disposition and principal payment of loan receivables | (2,993,642) | (1,125,919) |
Net realized gain (loss) on sale of loan receivables | 75,595 | 20,691 |
Net unrealized gain (loss) on loan receivables | 8,865 | 1,149 |
Non-cash proceeds on creation of MSR | (6,117) | |
Accretion/amortization of discount, premium and other fees | 13,825 | 26,809 |
Transfers | (2,286) | (951) |
Provision for loan losses | (2,363) | (7,819) |
Balance at Ending | 2,070,121 | 1,848,477 |
Loans, net | ||
Reconcile mortgage loans on real estate | ||
Balance at beginning | 1,666,680 | 1,716,072 |
Origination of loan receivables | 454,975 | 315,339 |
Purchases of loan receivables | 147,327 | 98,683 |
Proceeds from disposition and principal payment of loan receivables | (422,059) | (479,965) |
Net realized gain (loss) on sale of loan receivables | (3,203) | 6,349 |
Net unrealized gain (loss) on loan receivables | 5,328 | 4,131 |
Non-cash proceeds on creation of MSR | (951) | |
Accretion/amortization of discount, premium and other fees | 13,825 | 26,809 |
Transfers | (6,410) | (11,968) |
Provision for loan losses | (2,363) | (7,819) |
Balance at Ending | 1,854,100 | 1,666,680 |
Loans, held for sale, at fair value | ||
Reconcile mortgage loans on real estate | ||
Balance at beginning | 181,797 | |
Origination of loan receivables | 2,508,153 | 621,343 |
Purchases of loan receivables | 11,195 | |
Loans acquired in connection with reverse merger | 189,197 | |
Proceeds from disposition and principal payment of loan receivables | (2,571,583) | (645,954) |
Net realized gain (loss) on sale of loan receivables | 78,798 | 14,342 |
Net unrealized gain (loss) on loan receivables | 3,537 | (2,982) |
Non-cash proceeds on creation of MSR | (5,166) | |
Transfers | 4,124 | 11,017 |
Balance at Ending | $ 216,021 | $ 181,797 |