Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 30, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Entity Registrant Name | READY CAPITAL CORPORATION | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 54,796,599 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001527590 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and cash equivalents | $ 122,265 | $ 67,928 |
Restricted cash | 93,164 | 51,728 |
Loans, net (including $19,813 and $20,212 held at fair value) | 1,969,052 | 1,727,984 |
Loans, held-for-sale, at fair value | 306,328 | 188,077 |
Mortgage backed securities, at fair value | 78,540 | 92,466 |
Loans eligible for repurchase from Ginnie Mae | 77,605 | 77,953 |
Investment in unconsolidated joint ventures | 53,379 | 58,850 |
Purchased future receivables, net | 49,150 | 43,265 |
Derivative instruments | 17,756 | 2,814 |
Servicing rights (including $78,631 and $91,174 held at fair value) | 110,111 | 121,969 |
Real estate, held for sale | 48,292 | 58,573 |
Other assets | 114,891 | 106,925 |
Total Assets | 5,270,050 | 4,977,018 |
Liabilities | ||
Secured borrowings | 1,698,937 | 1,189,392 |
Convertible notes, net | 111,310 | 111,040 |
Senior secured notes, net | 179,387 | 179,289 |
Corporate debt, net | 150,074 | 149,986 |
Guaranteed loan financing | 457,032 | 485,461 |
Liabilities for loans eligible for repurchase from Ginnie Mae | 77,605 | 77,953 |
Derivative instruments | 16,585 | 5,250 |
Dividends payable | 21,747 | 21,302 |
Accounts payable and other accrued liabilities | 89,740 | 97,407 |
Total Liabilities | 4,494,491 | 4,132,234 |
Stockholders’ Equity | ||
Common stock, $0.0001 par value, 500,000,000 shares authorized, 52,091,850 and 51,127,326 shares issued and outstanding, respectively | 5 | 5 |
Additional paid-in capital | 837,064 | 822,837 |
Retained earnings | (69,605) | 8,746 |
Accumulated other comprehensive loss | (9,536) | (6,176) |
Total Ready Capital Corporation equity | 757,928 | 825,412 |
Non-controlling interests | 17,631 | 19,372 |
Total Stockholders’ Equity | 775,559 | 844,784 |
Total Liabilities and Stockholders’ Equity | 5,270,050 | 4,977,018 |
Consolidated VIEs | ||
Assets | ||
Total Assets | 2,229,517 | 2,378,486 |
Liabilities | ||
Secured borrowings | $ 1,692,074 | $ 1,815,154 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Parenthetical information | ||
Loan receivable allowance | $ 19,813 | $ 20,212 |
Servicing rights held at fair value | $ 78,631 | $ 91,174 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized capital | 500,000,000 | 500,000,000 |
Common stock, issued | 52,091,850 | 51,127,326 |
Common stock, outstanding | 52,091,850 | 51,127,326 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CONSOLIDATED STATEMENTS OF INCOME | ||
Interest income | $ 69,551 | $ 48,753 |
Interest expense | (46,930) | (35,775) |
Net interest income before provision for loan losses | 22,621 | 12,978 |
Provision for loan losses | (39,804) | (518) |
Net interest income after provision for loan losses | (17,183) | 12,460 |
Non-interest income | ||
Residential mortgage banking activities | 36,669 | 14,587 |
Net realized gain (loss) on financial instruments and real estate owned | 7,172 | 7,282 |
Net unrealized gain (loss) on financial instruments | (33,434) | (6,912) |
Servicing income, net of amortization and impairment of $1,725 and $1,763 | 8,097 | 6,752 |
Income on purchased future receivables, net of allowance for doubtful accounts of $6,917 | 3,483 | |
Income (loss) on unconsolidated joint ventures | (3,537) | 2,929 |
Other income | 4,073 | 900 |
Gain on bargain purchase | 30,728 | |
Total non-interest income | 22,523 | 56,266 |
Non-interest expense | ||
Employee compensation and benefits | (18,936) | (11,448) |
Allocated employee compensation and benefits from related party | (1,250) | (853) |
Variable expenses on residential mortgage banking activities | (20,129) | (9,176) |
Professional fees | (2,556) | (1,829) |
Management fees – related party | (2,561) | (1,997) |
Loan servicing expense | (5,570) | (3,648) |
Merger related expenses | (47) | (5,467) |
Other operating expenses | (13,744) | (6,861) |
Total non-interest expense | (64,793) | (41,279) |
Income (loss) before provision for income taxes | (59,453) | 27,447 |
Income tax benefit | 7,937 | 3,003 |
Net income (loss) | (51,516) | 30,450 |
Less: Net income (loss) attributable to non-controlling interest | (1,064) | 983 |
Net income (loss) attributable to Ready Capital Corporation | $ (50,452) | $ 29,467 |
Earnings (loss) per basic common share | ||
Earnings (loss) per common share - basic | $ (0.98) | $ 0.90 |
Earnings (loss) per diluted common share | ||
Earnings (loss) per common share - basic | (0.98) | 0.90 |
Earnings (loss) per common share - diluted | $ (0.98) | $ 0.90 |
Weighted-average shares outstanding | ||
Basic | 51,984,040 | 32,556,875 |
Diluted | 51,990,013 | 32,563,644 |
Dividends declared per share of common stock | $ 0.40 | $ 0.40 |
CONSOLIDATED STATEMENTS OF IN_2
CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CONSOLIDATED STATEMENTS OF INCOME | ||
Servicing income, amortization and impairment | $ 1,725 | $ 1,763 |
Income on purchased future receivable, allowance for doubtful accounts | $ 6,917 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Net income (loss) | $ (51,516) | $ 30,450 |
Other comprehensive income (loss) - net change by component | ||
Net change in hedging derivatives (cash flow hedges) | (3,128) | (420) |
Foreign currency translation adjustment | (304) | |
Other comprehensive (loss) | (3,432) | (420) |
Comprehensive income (loss) | (54,948) | 30,030 |
Comprehensive income (loss) attributable to non-controlling interests | (1,136) | 969 |
Comprehensive income (loss) attributable to Ready Capital Corporation | $ (53,812) | $ 29,061 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands | Total Ready Capital Corporation Equity | Common Stock | Additional Paid-in-Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total |
Balance at beginning of period at Dec. 31, 2018 | $ 544,831 | $ 3 | $ 540,478 | $ 5,272 | $ (922) | $ 19,244 | $ 564,075 |
Balance at beginning of period (in shares) at Dec. 31, 2018 | 32,105,112 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Dividend declared on common stock | (12,949) | (12,949) | (12,949) | ||||
Dividend declared on OP units | (447) | (447) | |||||
Shares issued pursuant to merger transactions | 179,321 | $ 1 | 179,320 | 179,321 | |||
Common stock issued in connection with merger transactions | 12,223,552 | ||||||
Distributions, net | (20) | (20) | |||||
Equity component of 2017 convertible note issuance | (84) | (84) | (84) | ||||
Stock-based compensation | 733 | 733 | 733 | ||||
Stock-based compensation (shares) | 52,110 | ||||||
Manager incentive fee paid in stock | 233 | 233 | (3) | 230 | |||
Manager incentive fee paid in stock (in shares) | 14,939 | ||||||
Net income (loss) | 29,467 | 29,467 | 983 | 30,450 | |||
Other comprehensive loss | (406) | (406) | (14) | (420) | |||
Balance at end of period at Mar. 31, 2019 | 741,146 | $ 4 | 720,680 | 21,790 | (1,328) | 19,743 | 760,889 |
Balance at end of period (in shares) at Mar. 31, 2019 | 44,395,713 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Cumulative-effect adjustment upon adoption of ASU 2016-13, net of taxes (note 4) | (6,599) | (6,599) | (155) | (6,754) | |||
Balance at beginning of period at Dec. 31, 2019 | 825,412 | $ 5 | 822,837 | 8,746 | (6,176) | 19,372 | 844,784 |
Balance at beginning of period (in shares) at Dec. 31, 2019 | 51,127,326 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Dividend declared on common stock | (21,300) | (21,300) | (21,300) | ||||
Dividend declared on OP units | (447) | (447) | |||||
Equity issuances | 13,410 | 13,410 | 13,410 | ||||
Equity issuances (shares) | 900,000 | ||||||
Offering costs | (38) | (38) | (1) | (39) | |||
Equity component of 2017 convertible note issuance | (92) | (92) | (2) | (94) | |||
Stock-based compensation | 894 | 894 | 894 | ||||
Stock-based compensation (shares) | 60,370 | ||||||
Manager incentive fee paid in stock | 53 | 53 | 53 | ||||
Manager incentive fee paid in stock (in shares) | 4,154 | ||||||
Net income (loss) | (50,452) | (50,452) | (1,064) | (51,516) | |||
Other comprehensive loss | (3,360) | (3,360) | (72) | (3,432) | |||
Balance at end of period at Mar. 31, 2020 | $ 757,928 | $ 5 | $ 837,064 | $ (69,605) | $ (9,536) | $ 17,631 | $ 775,559 |
Balance at end of period (in shares) at Mar. 31, 2020 | 52,091,850 |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) - $ / shares | Mar. 11, 2020 | Dec. 11, 2019 | Sep. 10, 2019 | Jun. 11, 2019 | Mar. 12, 2019 | Dec. 12, 2018 | Mar. 31, 2020 | Mar. 31, 2019 |
Statement of Stockholders' Equity | ||||||||
Dividends declared per share of common stock | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash Flows From Operating Activities: | ||
Net income (loss) | $ (51,516) | $ 30,450 |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||
Amortization of premiums, discounts, and debt issuance costs, net | 9,366 | 7,975 |
Provision for loan losses | 39,804 | 518 |
Impairment loss on real estate, held for sale | 2,969 | 305 |
Change in repair and denial reserve | (136) | 89 |
Net settlement of derivative instruments | (8,818) | (795) |
Origination of loans, held for sale, at fair value | (881,549) | (445,455) |
Proceeds from disposition and principal payments of loans, held for sale, at fair value | 793,428 | 458,503 |
Realized gains, net | (40,538) | (20,126) |
Unrealized losses, net | 33,488 | 6,912 |
Gain on bargain purchase | (30,728) | |
Equity in net loss (income) of unconsolidated joint ventures, net of distributions | 3,537 | (2,707) |
Purchased future receivables, net of payoffs | (12,802) | |
Allowance for doubtful accounts on purchased future receivables | 6,917 | |
Net changes in operating assets and liabilities | ||
Assets of consolidated VIEs (excluding loans, net), accrued interest and due from servicers | 17,764 | 2,406 |
Receivable from third parties | 674 | 8,170 |
Other assets | (8,646) | (7,814) |
Accounts payable and other accrued liabilities | (3,954) | (6,647) |
Net cash (used in) provided by operating activities | (100,012) | 1,056 |
Cash Flow From Investing Activities: | ||
Origination of loans | (328,509) | (245,367) |
Purchase of loans | (52,067) | (128,991) |
Purchase of mortgage backed securities, at fair value | (1,576) | |
Funding of unconsolidated joint ventures | (1,644) | |
Proceeds on unconsolidated joint venture in excess of earnings recognized | 3,578 | 5,739 |
Proceeds from disposition and principal payment of loans | 222,868 | 183,800 |
Proceeds from sale and principal payment of mortgage backed securities, at fair value | 5,031 | 3,277 |
Proceeds from sale of real estate | 7,851 | 285 |
Cash acquired in connection with the ORM Merger | 10,822 | |
Net cash (used in) investing activities | (144,468) | (170,435) |
Cash Flows From Financing Activities: | ||
Proceeds from secured borrowings | 1,866,732 | 951,342 |
Payment of secured borrowings | (1,356,573) | (950,377) |
Proceeds from issuance of securitized debt obligations of consolidated VIEs | 355,846 | |
Payment of securitized debt obligations of consolidated VIEs | (125,468) | (118,893) |
Payment of guaranteed loan financing | (34,672) | (20,526) |
Payment of deferred financing costs | (1,602) | (7,538) |
Equity issuance, net of offering costs | 13,372 | |
Payment of contingent consideration | (1,207) | |
Distributions from non-controlling interests, net | (20) | |
Dividend payments | (21,302) | (13,346) |
Net cash (used in) provided by financing activities | 340,487 | 195,281 |
Net increase (decrease) in cash, cash equivalents, and restricted cash | 96,007 | 25,902 |
Cash, cash equivalents, and restricted cash at beginning of period | 127,980 | 94,970 |
Cash, cash equivalents, and restricted cash at end of period | 223,987 | 120,872 |
Supplemental disclosure of operating cash flow | ||
Cash paid for interest | 44,576 | 34,471 |
Cash (received) paid for income taxes | (3,125) | |
Stock-based compensation | 894 | 733 |
Supplemental disclosure of non-cash investing activities | ||
Loans transferred from Loans, held for sale, at fair value to Loans, net | 509 | |
Deconsolidation of assets in securitization trusts | 177,815 | |
Supplemental disclosure of non-cash financing activities | ||
Common stock issued in connection with merger transactions | 179,321 | |
Deconsolidation of borrowings in securitization trusts | 177,815 | |
Share-based component of incentive fees | 53 | 233 |
Cash and restricted cash reconciliation | ||
Cash and cash equivalents | 122,265 | 47,597 |
Restricted cash | 93,164 | 29,979 |
Cash, cash equivalents, and restricted cash in Assets of consolidated VIEs | 8,558 | 43,296 |
Cash, cash equivalents, and restricted cash at end of period | $ 223,987 | $ 120,872 |
Organization
Organization | 3 Months Ended |
Mar. 31, 2020 | |
Organization | |
Organization | Note 1 – Organization Ready Capital Corporation (the “Company” or “Ready Capital” and together with its subsidiaries “we”, “us” and “our”) is a Maryland corporation. The Company is a multi-strategy real estate finance company that originates, acquires, finances and services small to medium 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. 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 March 31, 2020 and December 31, 2019, the Company owned approximately 97.9% 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. 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) 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: · Acquisitions . We acquire performing and non-performing SBC 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 borrower based resolution strategies. 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. We also acquire purchased future receivables through our Knight Capital, LLC (“Knight Capital”) funding platform. · 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 (“ReadyCap Commercial”). These originated loans are generally held-for-investment or placed into securitization structures. Additionally, as part of this segment, we originate and service multi-family loan products under the Federal Home Loan Mortgage Corporation’s Small Balance Loan Program (“Freddie Mac” and the “Freddie Mac program”). These originated loans are held for sale, then sold to Freddie Mac. · 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, LLC (“ReadyCap Lending”). We hold an SBA license as one of only 14 non-bank Small Business Lending Companies (“SBLCs”) and have been granted preferred lender status by the SBA. These originated loans are either held-for-investment, placed into securitization structures, or sold. · Residential Mortgage Banking . We operate our 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, primarily agency lending programs. On March 29, 2019, the Company completed the acquisition of Owens Realty Mortgage, Inc. (“ORM”), through a merger of ORM with and into a wholly-owned subsidiary of the Company, in exchange for approximately 12.2 million shares of the Company’s common stock (“ORM Merger”). In accordance with the Merger Agreement, the number of shares of the Company’s common stock issued was based on an exchange ratio of 1.441 per share. The total purchase price for the merger of $179.3 million consists exclusively of the Company’s common stock issued in exchange for shares of ORM common stock and cash paid in lieu of fractional shares of the Company’s common stock, and was based on the $14.67 closing price of the Company’s common stock on March 29, 2019. Upon the closing of the transaction, the Company’s historical stockholders owned approximately 72% of the combined Company’s stock, while historical ORM stockholders owned approximately 28% of the combined Company’s stock. The acquisition of ORM increased the Company’s equity capitalization, supported continued growth of the Company’s platform and execution of the Company’s strategy, and provided the Company with improved scale, liquidity and capital alternatives, including additional borrowing capacity. Also, the stockholder base resulting from the acquisition of ORM enhanced the trading volume and liquidity for our stockholders. The combination of the Company and ORM created cost savings and efficiencies resulting from the allocation of operating expenses over a larger portfolio and has allowed the Company to harvest value from ORM's real property assets. On October 25, 2019, the Company acquired Knight Capital. Knight Capital is a technology-driven platform that provides working capital to small and medium businesses across the U.S. Through its platform, Knight Capital supports business operations by offering a faster alternative to conventional bank funding. The total purchase price for the merger of $27.8 million consists of $17.5 million of cash and $10.3 million of Ready Capital common stock. The Company qualifies as a real estate investment trust (“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 REIT, the Company distributes at least 90% of its taxable income in the form of distributions to shareholders. |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Basis of Presentation | |
Basis of Presentation | Note 2 – Basis of Presentation The unaudited interim consolidated financial statements presented herein are as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019. These unaudited 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. The accompanying interim consolidated financial statements, including the notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements have been condensed or omitted. In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the results for the interim periods presented. Such operating results may not be indicative of the expected results for any other interim period or the entire year. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the Securities and Exchange Commission, or the SEC. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 3 – Summary of Significant Accounting Policies Risks and uncertainties The recent outbreak of the coronavirus pandemic (“COVID-19”) around the globe continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The impact of the outbreak has been rapidly evolving around the globe, with several countries taking drastic measures to limit the spread of the virus by instituting quarantines or lockdowns and imposing travel restrictions. Such actions are creating significant disruptions to global supply chains, and adversely impacting several industries, including but not limited to, airlines, hospitality, retail and the broader real estate industry. The major disruption caused by COVID-19 halted most economic activity in most of the United States resulting in a significant increase in unemployment claims and will likely result in a significant decline in the U.S. Gross Domestic Product (“GDP”). COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and trigger a period of global economic slowdown which could have a material adverse effect on the Company’s results and financial condition. The full impact of COVID-19 on the real estate industry, the credit markets and consequently on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity and duration of the outbreak, (ii) the effectiveness of the United States public health response, (iii) the pandemic’s impact on U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic, (v) the timing and speed of economic recovery, (vi) the availability of a treatment or vaccination for COVID-19, and (vii) the negative impact on our borrowers, real estate values and cost of capital. Use of estimates The preparation of the Company’s unaudited interim 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 unaudited interim consolidated financial statements and the reported amounts of income and expenses during the reporting period. Management makes subjective estimates to project cash flows the Company expects to receive on its loans and securities as well as the related market discount rates, which significantly impacts the interest income, impairments, allowance for loan loss, and fair values recorded or disclosed. The effects of COVID-19 may negatively and materially impact significant estimates and assumptions used by the Company including, but not limited to estimates of expected credit losses, valuation of our equity method investments and the fair value estimates of the Company’s assets and liabilities . The uncertainty over the ultimate impact COVID-19 will have on the U.S. economony and global economy generally, and on our business in particular, makes any estimates and assumptions as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19 . Actual results could materially differ from those estimates. Basis of consolidation The accompanying unaudited interim 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 unaudited interim 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 unaudited interim consolidated financial statements have been reclassified in order to conform to the current period’s presentation. Cash and cash equivalents The Company accounts 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. 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. 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 the Company that we do not intend to sell, or securitized loans that were previously originated by us. 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. 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. 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 to be not 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 the loan 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 represent certain loans originated by the Company for which we have elected the fair value option. Interest is recognized as interest income in the unaudited interim 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 unaudited interim consolidated statements of income. 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 (“LTV”) 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. On January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses, and subsequent amendments (“ASU 2016-13”), which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model. CECL amends the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost. The allowance for loan losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on our unaudited consolidated balance sheets. The guidance also requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. In connection with the Company’s adoption of ASU 2016-13 on January 1, 2020, the Company implemented new processes including the utilization of loan loss forecasting models, updates to the Company’s reserve policy documentation, changes to internal reporting processes and related internal controls. The Company has implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for its loan portfolio. The CECL forecasting methods used by the Company include (i) a probability of default and loss given default method using underlying third-party CMBS/CRE loan database with historical loan losses from 1998 to 2019 and (ii) probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. The Company might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data. The Company estimates the CECL expected credit losses for its loan portfolio at the individual loan level. Significant inputs to the Company’s forecasting methods include (i) key loan-specific inputs such as LTV, vintage year, loan-term, underlying property type, occupancy, geographic location, and others, and (ii) a macro-economic forecast, including unemployment rates, interest rates, commercial real estate prices, and others. These estimates may change in future periods based on available future macro-economic data and might result in a material change in the Company’s future estimates of expected credit losses for its loan portfolio. In certain instances, the Company considers relevant loan-specific qualitative factors to certain loans to estimate its CECL expected credit losses. The Company considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that the Company determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that the Company determines foreclosure is not probable, the Company applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of 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 interest income. Non-accrual loans include PCD (“purchased credit-deteriorated”) loans when principal or interest has been delinquent for 90 days or more. 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. 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. Additionally, based on recently issued regulatory guidance provided by federal and state regulatory agencies, loan modifications made in response to the COVID-19 pandemic are not considered TDRs if loans were considered current at the date the modification program was implemented. 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 in the unaudited interim 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) in the unaudited interim 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 residential mortgage banking activities in the unaudited interim consolidated statements of income. Mortgage backed securities, at fair value The Company accounts for MBS as trading securities and carries them 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 as of 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 unaudited interim 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 unaudited interim 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 in the unaudited interim consolidated balance sheets at the estimated fair value with the changes in the fair value recorded in earnings, unless hedge accounting is elected. As of March 31, 2020, the Company has offset $8.4 million of cash collateral receivable against our gross derivative liability positions. As of March 31, 2020 and December 31, 2019, the cash collateral receivable for derivatives that has not been offset againt our derivative liability positions is $11.7 million and $9.5 million, respectively, and is included in restricted cash in the unaudited interim 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 are reported within net unrealized gain (loss) on financial instruments, while the related interest income or interest expense, are reported within net realized gain (loss) on financial instruments in the unaudited interim consolidated statements of income. 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 in the unaudited interim consolidated statements of income as residential mortgage banking activities. IRLCs are classified as Level 3 in the fair value hierarchy. FX forwards FX forwards are agreements between two counterparties to exchange a pair of currencies at a set rate on a future date. FX forward contracts are used to convert the foreign currency risk to U.S. dollars to mitigate exposure to fluctuations in FX rates. The fair value adjustments are reported within net unrealized gain (loss) on financial instruments in the consolidated statements of income. FX forwards are classified as Level 2 in the fair value hierarchy. CDSs CDSs 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 are reported within net unrealized gain (loss) on financial instruments, while the related interest income or interest expense, are reported within net realized gain (loss) on financial instruments in the unaudited interim consolidated statements of income. CDS are classified as Level 2 in the fair value hierarchy. Hedge accounting As a general rule, hedge accounting is permitted where the Company is exposed to a particular risk, such as interest rate risk, that causes changes in the fair value of an asset or liability or variability in the expected future cash flows of an existing asset, liability, or forecasted transaction that may affect earnings. To qualify as an accounting hedge under the hedge accounting rules (versus an economic hedge where hedge accounting is not applied), a hedging relationship must be highly effective in offsetting the risk designated as being hedged. We use cash flow hedges to hedge the exposure to variability in cash flows from forecasted transactions, including the anticipated issuance of securitized debt obligations. ASC 815 requires that a forecasted transaction be identified as either: 1) a single transaction, or 2) a group of individual transactions that share the same risk exposures for which they are designated as being hedged. Hedges of forecasted transactions are considered cash flow hedges since the price is not fixed, hence involve variability of cash flows. For qualifying cash flow hedges, the change in the fair value of the derivative (the hedging instrument) is recorded in other comprehensive income (loss) ("OCI"), and is reclassified out of OCI and into the consolidated statements of income when the hedged cash flows affect earnings. These amounts are recognized consistent with the classification of the hedged item, primarily interest expense (for hedges of interest rate risk). If the hedge relationship is terminated, then the value of the derivative recorded in accumulated other comprehensive income (loss) ("AOCI") is recognized in earnings when the cash flows that were hedged affect earnings, so long as the forecasted transaction remains probable of occurring. For hedge relationships that are discontinued because a forecasted transaction is probable of not occurring according to the original hedge forecast (including an additional two month window), any related derivative values recorded in AOCI are immediately recognized in earnings. Hedge accounting is generally terminated at the debt issuance date because we are no longer exposed to cash flow variability subsequent to issuance. Accumulated amounts recorded in AOCI at that date are then released to earnings in future periods to reflect the difference in 1) the fixed rates economically locked in at the inception of the hedge and 2) the actual fixed rates established in the debt instrument at issuance. Because of the effects of the time value of money, the actual interest expense reported in earnings will not equal the effective yield locked in at hedge inception multiplied by the par value. Similarly, this hedging strategy does not actually fix the interest payments associated with the forecasted debt issuance. 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 of loans, including a securitization of loans accounted for as a sale in accordance with GAAP, if servicing is retained. For servicing rights, gains related to servicing rights retained is included in net realized gain (loss) in the unaudited interim consolidated statements of income. For residential mortgage servicing rights, gains on servicing rights retained upon sale of a loan are included in residential mortgage banking activities in the unaudited interim 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 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, default rates, and cost of servicing rates. Residential MSRs are classified as Level 3 in the fair value hierarchy. Real estate, held for sale Real estate, held for sale, includes purchased real estate and real estate acquired in full or partial settlement of loan obligations, generally through foreclosure, that is being marketed for sale. Real estate, held for sale is recorded at acquisition at the property’s estimated fair value less estimated costs to sell. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. After acquisition, real estate held for sale is analyzed periodically for changes in fair values and any subsequent write down is charged through impairment. The Company records a gain or loss from the sale of real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of real estate to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether the collectability of the transaction price is probable. Once these criteria are met, the real estate is derecognized and the gain or loss on sale is recorded upon transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. This adjustment is based on management’s estimate of the fair value of the loan extended to the buyer to finance the sale. Investment in unconsolidated joint ventures 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 allocable share of the earnings or losses of the investment monthly in earnings and adjust the carrying amount for our share of the distributions that exceed our earnings. Purchased future receivables Through Knight Capital, the Company provides working capital advances to small businesses through the purchase of their future revenues. The Company enters into a contract with the business whereby the Company pays the business an upfront amount in return for a specific amount of the business’s future revenue receivables, known as payback amounts. The payback amounts are primarily received through daily payments initiated by automated clearing house (“ACH”) transactions. Revenues from purchased future receivables are realized when funds are received under each contract. The allocation of the amount received is determined by apportioning the amount received based upon the factor (discount) rate of the business's contract. Management believes that this methodology best reflects the effective interest method. The Company has established an allowance for doubtful purchased future receivables. An increase in the allowance for doubtful purchased future receivables results in a charge to income and is reduced when purchased future receivables are charged-off. Purchased future receivables are charged-off after 90 days past due. Management believes that the allowance reflects the risk elements and is adequate to absorb losses inherent in the portfolio. Although management has performed this evaluation, future adjustments may be necessary based on changes in economic conditions or other factors. Intangible assets The Company accounts for intangible assets under ASC 350, Intangibles- Goodwill and Other . The Company’s intangible assets include an SBA license, capitalized software, a broker network, trade names, and an acquired favorable lease. The Company capitalizes software costs expected to result in long-term operational benefits, such as replacement systems or new applications that result in significantly increased operational efficiencies o |
Recently Issued Accounting Pron
Recently Issued Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2020 | |
Recently Issued Accounting Pronouncements | |
Recently Issued Accounting Pronouncements | Note 4 – Recently issued accounting pronouncements Financial Accounting Standards Board ("FASB") Standards adopted during 2020 Standard Summary of guidance Effects on financial statements ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments Replaces existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost, which will reflect management's estimate of credit losses over the full remaining expected life of the financial assets and will consider expected future changes in macroeconomic conditions. Adopted January 1, 2020. Issued June 2016 Eliminates existing guidance for PCI loans, and requires recognition of the accretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, with a corresponding increase in the recorded investment of related loans. The Company adopted ASU 2016-13 using the modified retrospective method for all loans carried at amortized cost. We recorded a $6.8 million cumulative-effect adjustment to the opening retained earnings (net of taxes) in our consolidated statement of equity as of January 1, 2020. The Company's total increase in the allowance for loan losses was $11.1 million, which included a $3.6 million allowance for loan loss balance sheet gross up, relating to purchased credit deteriorated loans. Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets). Requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. ASU 2017-4, Intangibles — Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment Requires an impairment loss to be recognized when the estimated fair value of a reporting unit falls below its carrying value. Adopted January 1, 2020. Issued January 2017 Eliminates the second condition in the current guidance that requires an impairment loss to be recognized only if the estimated implied fair value of the goodwill is below its carrying value. Based on current impairment test results, the adoption did not have a material effect on the consolidated financial statements. The guidance may result in more frequent goodwill impairment losses in future periods due to the removal of the second condition. ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement Provides guidance on increasing the transparency and comparability of the disclosure requirements for fair value measurement. The adoption did not have a material impact on our consolidated financial statements. Issued August 2018 |
Business Combinations
Business Combinations | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations | |
Business Combinations | Note 5 – Business Combinations Acquisition of Owens Realty Mortgage, Inc. On November 7, 2018, the Company entered into an Agreement and Plan of Merger as amended, (the “Merger Agreement”) with ORM, a specialty finance company that focused on the origination, investment, and management of commercial real estate loans. Pursuant to the Merger Agreement, the Company acquired ORM in a stock-for-stock transaction with an aggregate purchase price equal to 99.0% of ORM’s book value. Upon the closing, each outstanding share of ORM’s common stock was converted into the right to receive 1.441 shares of the Company common stock, based on a fixed exchange ratio. On March 29, 2019, the Company completed the acquisition of ORM, through a merger of ORM with and into a wholly owned subsidiary of the Company, in exchange for approximately 12.2 million shares of the Company’s common stock. The total purchase price for the merger of $179.3 million consisted exclusively of the Company’s common stock issued in exchange for shares of ORM common stock and cash paid in lieu of fractional shares of the Company’s common stock, and was based on the $14.67 closing price of the Company’s common stock on March 29, 2019. The consideration transferred was allocated to the assets acquired and liabilities assumed based on their respective fair values. The methodologies used and key assumptions made to estimate the fair value of the assets acquired and liabilities assumed are primarily based on future cash flows and discount rates. The following table summarizes the fair value of assets acquired and liabilities assumed from the merger: (In Thousands) March 29, 2019 Assets Cash and cash equivalents $ 10,822 Loans 130,449 Real estate, held for sale 67,973 Investment in unconsolidated joint ventures 8,619 Other assets Deferred tax assets 4,660 Accrued interest 1,209 Other 379 Total assets acquired $ 224,111 Liabilities Secured borrowings 12,713 Accounts payable and other accrued liabilities 1,000 Due to Manager 228 Deferred tax liabilities 123 Total liabilities assumed $ 14,064 Net assets acquired $ 210,047 For acquired loan receivables, the gross contractual unpaid principal acquired is $134.8 million and we expect to collect all contractual amounts. The aggregate consideration transferred, net assets acquired, and the related bargain purchase gain was as follows: Total consideration transferred (in thousands, except share and per share data) FV of net assets acquired $ 210,047 ORM shares outstanding at March 29, 2019 8,482,880 Exchange ratio x 1.441 Shares issued 12,223,830 Market price as of March 29, 2019 $ 14.67 Total consideration transferred based on value of shares issued $ 179,324 Bargain purchase gain $ 30,728 Based on the calculation, the Company has determined the transaction resulted in a bargain purchase gain, which is predominantly the result of changes in the market price of the Company’s common stock between the determination date and the closing date of the transaction. This gain is reflected separately within the unaudited interim consolidated statements of income under gain on bargain purchase. Acquisition-related costs directly attributable to the ORM Merger, including legal, accounting, valuation, and other professional or consulting fees, totaling $5.5 million for the three months ended March 31, 2019, were expensed as incurred and are reflected separately within the unaudited interim consolidated statements of income. The following pro-forma income and earnings (unaudited) of the combined company are presented for the three months ended March 31, 2019, as if the merger had occurred on January 1, 2019: For the three months ended (In Thousands) March 31, 2019 Selected Financial Data Interest income $ 51,543 Interest expense (36,323) Provision for loan losses (518) Non-interest income 27,031 Non-interest expense (37,721) Income before provision for income taxes 4,012 Income tax benefit (provision) 2,996 Net income $ 7,008 Non-recurring pro-forma transaction costs directly attributable to the merger were $8.4 million for the three months ended March 31, 2019, and have been deducted from the non-interest expense amount above. These costs included legal, accounting, valuation, and other professional or consulting fees directly attributable to the merger. The Company excluded the bargain purchase gain of $30.7 million from the amount above. Acquisition of Knight Capital On October 25, 2019, the Company acquired Knight Capital. Knight Capital is a technology-driven platform that provides working capital to small and medium businesses across the U.S. Through its platform, Knight Capital supports business operations by offering a faster alternative to conventional bank funding. The total purchase price for the merger of $27.8 million consists of $17.5 million of cash and $10.3 million of Ready Capital common stock. The purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values. The following table summarizes the fair value of assets acquired and liabilities assumed from the merger: (In Thousands) October 25, 2019 Assets Cash and cash equivalents $ 1,673 Purchased future receivables, 39,540 Prepaid expenses and other 1,265 Intangible assets 5,880 Total assets acquired $ 48,358 Liabilities Secured borrowings 30,600 Accounts payable and other accrued liabilities 1,173 Total liabilities assumed $ 31,773 Net assets acquired $ 16,585 The aggregate consideration transferred, net assets acquired, and the related goodwill was as follows: Total Consideration Transferred (in thousands) Cash consideration $ 17,500 Common stock consideration 10,290 Total consideration transferred $ 27,790 Net Tangible Assets $ 10,705 Identified Intangible Assets 5,880 FV of Net Assets Acquired $ 16,585 Goodwill $ 11,205 The acquired intangible assets are definite-lived assets consisting of technology, brokers network and trade name. The estimated fair values of the technology and brokers network were determined using the cost replacement method, and the fair value of the trade name was determined using the relief from royalty method. The estimated fair value of the intangible assets were primarily based on cost assumptions such as replacement costs, which management believes are reasonable. The fair value of the intangible assets with definite lives is as follows (dollars in thousands): (In Thousands) Fair Value Weighted Average Amortization Life Internally developed software $ 3,800 6 years Broker network 1,200 4.5 years Trade name 880 6 years Total Intangible Assets $ 5,880 6 years Goodwill of $11.2 million was recognized in connection with the Company’s acquisition of Knight Capital as the consideration paid exceeded the fair value of the net assets acquired. The following pro-forma income and earnings (unaudited) of the combined company are presented as if the merger had occurred on January 1, 2019: For the three months ended (In Thousands) March 31, 2019 Selected Financial Data Interest income $ 48,753 Interest expense (35,775) Provision for loan losses (518) Non-interest income 71,925 Non-interest expense (57,600) Income before provision for income taxes 26,785 Income tax benefit 3,003 Net income $ 29,788 |
Loans and Allowance for Loan Lo
Loans and Allowance for Loan Losses | 3 Months Ended |
Mar. 31, 2020 | |
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-deteriorated at the date of acquisition. The Company accounts for loans based on the following loan program categories: · Originated or purchased loans held-for-investment– originated transitional loans, originated conventional SBC and SBA loans, or acquired loans with no signs of credit deterioration at time of purchase. · Loans at fair value – certain originated conventional SBC loans for which the Company has elected the fair value option · Loans, held-for-sale, at fair value – originated or acquired that we intend to sell in the near term 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: March 31, 2020 December 31, 2019 Loans (In Thousands) Carrying Value UPB Carrying Value UPB Loans Acquired SBA 7(a) loans $ 239,627 $ 250,687 $ 255,240 $ 269,396 Acquired loans 439,957 440,314 430,307 433,079 Originated Transitional loans 799,640 807,732 593,657 600,226 Originated SBC loans, at fair value 19,813 19,558 20,212 19,565 Originated SBC loans 207,050 205,146 133,118 132,227 Originated SBA 7(a) loans 295,873 298,050 297,934 299,580 Originated Residential Agency loans 4,113 4,113 3,396 3,395 Total Loans, before allowance for loan losses $ 2,006,073 $ 2,025,600 $ 1,733,864 $ 1,757,468 Allowance for loan losses $ (37,021) — $ (5,880) — Total Loans, net $ 1,969,052 $ 2,025,600 $ 1,727,984 $ 1,757,468 Loans in consolidated VIEs Loans Originated SBC loans $ 1,008,011 $ 998,420 $ 1,037,844 $ 1,026,921 Acquired loans 622,213 628,044 666,226 671,698 Originated Transitional loans 461,131 463,039 490,913 493,217 Originated SBA 7(a) loans 75,337 79,520 79,457 83,559 Acquired SBA 7(a) loans 49,432 61,672 53,320 66,997 Total Loans, in consolidated VIEs, before allowance for loan losses $ 2,216,124 $ 2,230,695 $ 2,327,760 $ 2,342,392 Allowance for loan losses on loans in consolidated VIEs $ (20,947) — $ (1,561) — Total Loans, net, in consolidated VIEs $ 2,195,177 $ 2,230,695 $ 2,326,199 $ 2,342,392 Total Loans, net, and Loans, net in consolidated VIEs $ 4,164,229 $ 4,256,295 $ 4,054,183 $ 4,099,860 Loans, held for sale, at fair value Originated Residential Agency loans $ 213,969 $ 204,351 $ 136,506 $ 132,016 Originated Freddie Mac loans 79,524 78,726 21,775 21,513 Originated SBA 7(a) loans 12,324 11,525 28,551 26,669 Acquired loans 511 525 1,245 1,208 Total Loans, held for sale, at fair value $ 306,328 $ 295,127 $ 188,077 $ 181,406 Loans, held for sale, at fair value in consolidated VIEs Loans, held for sale, at fair value Acquired loans $ 4,017 $ 4,011 $ 4,434 $ 4,400 Total Loans, held for sale, at fair value in consolidated VIEs $ 4,017 $ 4,011 $ 4,434 $ 4,400 Total Loans, held for sale, at fair value, and Loans, held for sale, at fair value in consolidated VIEs $ 310,345 $ 299,138 $ 192,511 $ 185,806 Total Loan portfolio $ 4,474,574 $ 4,555,433 $ 4,246,694 $ 4,285,666 Loan vintage and 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 clearer that the borrower is likely either unable or unwilling to pay. The following table summarizes the classification, UPB, and carrying value of loans by year of origination: Carrying Value by Year of Origination (In Thousands) UPB 2020 2019 2018 2017 2016 Pre 2016 Total March 31, 2020 Loans (1) (2) Originated Transitional loans $ 1,270,771 $ 192,598 $ 637,419 $ 338,373 $ 64,266 $ 27,001 $ 1,104 $ 1,260,761 Originated SBC loans 1,203,566 71,747 544,513 273,536 131,266 47,191 144,564 1,212,817 Acquired loans 1,068,358 — 48,837 38,872 29,764 15,447 928,731 1,061,651 Acquired SBA 7(a) loans 312,359 94 25,941 19,151 296 35 238,561 284,078 Originated SBC loans, at fair value 19,558 — — — 1,666 11,807 6,340 19,813 Originated SBA 7(a) loans 377,570 9,883 101,208 147,629 80,782 23,324 4,603 367,429 Originated Residential Agency loans 4,113 899 1,797 710 218 287 205 4,116 Total Loans, before general allowance for loans losses $ 4,256,295 $ 275,221 $ 1,359,715 $ 818,271 $ 308,258 $ 125,092 $ 1,324,108 $ 4,210,665 General allowance for loan losses $ (46,436) Total Loans, net $ 4,164,229 (1) Loan balances include specific allowance for loan losses of $11.5 million. (2) Includes Loans, net in consolidated VIEs The following table displays delinquency information on loans, net by year of origination: Carrying Value by Year of Origination (In Thousands) UPB 2020 2019 2018 2017 2016 Pre 2016 Total March 31, 2020 Loans (1) (2) Current and less than 30 days past due $ 4,086,485 $ 275,042 $ 1,351,822 $ 805,023 $ 290,520 $ 89,149 $ 1,243,278 $ 4,054,834 30-89 Days Past Due 95,211 179 4,202 6,149 9,704 18,536 53,566 92,336 90+ Days 74,599 — 3,691 7,099 8,034 17,407 27,264 63,495 Total Loans, before general allowance for loans losses $ 4,256,295 $ 275,221 $ 1,359,715 $ 818,271 $ 308,258 $ 125,092 $ 1,324,108 $ 4,210,665 General allowance for loan losses $ (46,436) Total Loans, net $ 4,164,229 (1) Loan balances include specific allowance for loan losses of $11.5 million. (2) Includes Loans, net in consolidated VIEs The following tables display delinquency information on loans, net as of the unaudited interim consolidated balance sheet dates: March 31, 2020 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) Originated Transitional loans $ 1,228,782 $ 22,089 $ 9,890 $ 1,260,761 $ 9,890 $ — Originated SBC loans 1,184,204 11,045 17,568 1,212,817 17,568 — Acquired loans 999,330 40,759 21,562 1,061,651 24,375 608 Acquired SBA 7(a) loans 267,249 11,606 5,223 284,078 9,527 1,315 Originated SBC loans, at fair value 14,317 — 5,496 19,813 — 5,496 Originated SBA 7(a) loans 359,411 6,257 1,761 367,429 6,484 — Originated Residential Agency loans 1,541 580 1,995 4,116 2,575 — Total Loans, before general allowance for loans losses $ 4,054,834 $ 92,336 $ 63,495 $ 4,210,665 $ 70,419 $ 7,419 General allowance for loan losses $ (46,436) Total Loans, net $ 4,164,229 Percentage of outstanding (1) Loan balances include specific allowance for loan losses of $11.5 million. (2) Includes Loans, net in consolidated VIEs December 31, 2019 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) Originated Transitional loans $ 1,074,955 $ 5,728 $ 5,645 $ 1,086,328 $ 24,587 $ — Originated SBC loans 1,137,140 15,670 16,089 1,168,899 16,089 — Acquired loans 1,032,259 45,894 16,130 1,094,283 23,500 3,382 Acquired SBA 7(a) loans 297,172 4,646 5,042 306,860 9,177 1,326 Originated SBC loans, at fair value 20,212 — — 20,212 — — Originated SBA 7(a) loans 370,101 5,238 1,290 376,629 8,882 — Originated Residential Agency loans 582 635 2,179 3,396 2,105 74 Total Loans, before allowance for loans losses $ 3,932,421 $ 77,811 $ 46,375 $ 4,056,607 $ 84,340 $ 4,782 General allowance for loan losses $ (2,424) Total Loans, net $ 4,054,183 Percentage of outstanding (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 collateral concentration of the loan portfolio also provides insight as to the credit quality of the portfolio, as certain economic factors or events may have a more pronounced impact on certain sectors or property types. The following tables presents quantitative information on the credit quality of loans, net as of the unaudited interim consolidated balance sheet dates: 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 March 31, 2020 Loans (1) (2) Originated Transitional loans $ 5,564 $ 34,044 $ 246,284 $ 869,073 $ 105,043 $ 753 $ 1,260,761 Originated SBC loans — 63,255 472,162 650,758 18,886 7,756 1,212,817 Acquired loans 223,696 401,626 242,357 130,586 47,238 16,148 1,061,651 Acquired SBA 7(a) loans 7,750 38,603 99,308 78,322 29,623 30,472 284,078 Originated SBC loans, at fair value — 8,006 — 6,311 5,496 — 19,813 Originated SBA 7(a) loans 1,169 14,730 46,168 139,658 61,067 104,637 367,429 Originated Residential Agency loans — 51 91 1,030 2,668 276 4,116 Total Loans, before general allowance for loans losses $ 238,179 $ 560,315 $ 1,106,370 $ 1,875,738 $ 270,021 $ 160,042 $ 4,210,665 General allowance for loan losses $ (46,436) Total Loans, net $ 4,164,229 Percentage of outstanding 5.7 % 13.3 % 26.3 % 44.5 % 6.4 % 3.8 % December 31, 2019 Loans (1) (2) Originated Transitional loans $ 1,736 $ 28,108 $ 277,388 $ 750,298 $ 28,059 $ 739 $ 1,086,328 Originated SBC loans — 60,601 431,312 660,733 8,045 8,208 1,168,899 Acquired loans 218,679 371,471 293,216 161,431 35,731 13,755 1,094,283 Acquired SBA 7(a) loans 7,712 39,566 103,590 83,954 39,726 32,312 306,860 Originated SBC loans, at fair value — 8,192 — 6,422 5,598 — 20,212 Originated SBA 7(a) loans 865 13,843 41,166 130,177 78,544 112,034 376,629 Originated Residential Agency loans — 51 — 830 2,393 122 3,396 Total Loans, before allowance for loans losses $ 228,992 $ 521,832 $ 1,146,672 $ 1,793,845 $ 198,096 $ 167,170 $ 4,056,607 General allowance for loan losses $ (2,424) Total Loans, net $ 4,054,183 Percentage of outstanding 5.6 % 12.9 % 28.3 % 44.2 % 4.9 % 4.1 % (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 March 31, 2020 and December 31, 2019, the Company’s total carrying amount of loans in the foreclosure process was $3.8 million and $0.8 million, respectively. The following table displays the geographic concentration of the Company’s loans, net, secured by real estate recorded on our unaudited interim consolidated balance sheets. Geographic Concentration (% of Unpaid Principal Balance) March 31, 2020 December 31, 2019 California 17.7 % 16.9 % Texas 15.2 15.2 New York 8.4 8.3 Florida 8.1 8.3 Illinois 5.3 5.2 Georgia 4.6 4.8 Arizona 3.4 3.4 North Carolina 3.2 3.2 Washington 2.9 2.8 Colorado 2.6 2.8 Other 28.6 29.1 Total 100.0 % 100.0 % The following table displays the collateral type concentration of the Company’s loans, net, on our unaudited interim consolidated balance sheets. Collateral Concentration (% of Unpaid Principal Balance) March 31, 2020 December 31, 2019 Multi-family 26.6 % 26.6 % Retail 17.4 17.5 SBA (1) 16.2 17.6 Office 12.2 12.9 Mixed Use 12.0 10.4 Industrial 7.0 6.4 Lodging/Residential 3.2 3.3 Other 5.4 5.3 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 unaudited interim consolidated balance sheets. Collateral Concentration (% of Unpaid Principal Balance) March 31, 2020 December 31, 2019 Lodging 19.4 % 17.3 % Offices of Physicians 13.9 14.1 Child Day Care Services 7.6 8.1 Eating Places 6.3 6.1 Veterinarians 3.9 4.1 Gasoline Service Stations 3.8 3.7 Funeral Service & Crematories 2.1 2.0 Grocery Stores 2.1 2.0 Auto 1.2 1.3 Other 39.7 41.3 Total 100.0 % 100.0 % Allowance for loan losses The following tables detail the activity of the allowance for loan losses for loans: Three Months Ended March 31, 2020 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for Beginning balance $ 304 $ 188 $ 3,054 $ 2,114 $ 1,781 $ 7,441 Cumulative-effect adjustment upon adoption of ASU 2016-13 2,400 1,906 1,878 3,562 1,379 11,125 Provision for (recoveries of) loan losses 7,658 22,170 5,722 12 4,242 39,804 Charge-offs and sales - - (8) (131) (329) (468) Recoveries - - - 65 1 66 Ending balance $ 10,362 $ 24,264 $ 10,646 $ 5,622 $ 7,074 $ 57,968 Three Months Ended March 31, 2019 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for Beginning balance $ 11 $ 353 $ 5,052 $ 2,318 $ 586 $ 8,320 Provision for (recoveries of) loan losses (11) (131) 235 271 154 518 Charge-offs and sales - - - (329) - (329) Recoveries - - (246) 14 - (232) Ending balance $ - $ 222 $ 5,041 $ 2,274 $ 740 $ 8,277 Non-accrual loans The following table details information about the Company’s non-accrual loans: (In Thousands) March 31, 2020 December 31, 2019 Non-accrual loans With an allowance $ 25,914 $ 18,063 Without an allowance 44,505 60,036 Total recorded carrying value of non-accrual loans $ 70,419 $ 78,099 Allowance for loan losses related to non-accrual loans $ (10,916) $ (2,093) Unpaid principal balance of non-accrual loans $ 88,596 $ 83,991 March 31, 2020 March 31, 2019 Interest income on non-accrual loans for the three months ended $ 157 $ 12 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 in the unaudited interim consolidated balance sheet by loan type as of the unaudited interim consolidated balance sheet dates. March 31, 2020 December 31, 2019 (In Thousands) SBC SBA Total SBC SBA Total Recorded carrying value modified loans classified as TDRs $ 2,161 $ 13,221 $ 15,382 $ 6,258 $ 14,204 $ 20,462 Allowance for loan losses on loans classified as TDRs $ 15 $ 3,825 $ 3,840 $ 274 $ 454 $ 728 Carrying value of modified loans classified as TDRs Carrying value of modified loans classified as TDRs on accrual status $ 247 $ 6,813 $ 7,060 $ 333 $ 7,437 $ 7,770 Carrying value of modified loans classified as TDRs on non-accrual status 1,914 6,408 8,322 5,925 6,767 12,692 Total carrying value of modified loans classified as TDRs $ 2,161 $ 13,221 $ 15,382 $ 6,258 $ 14,204 $ 20,462 The following table summarizes the TDR activity that occurred during the three months ended March 31, 2020 and 2019 and the financial effects of these modifications. Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 (In Thousands, except number of loans) SBC SBA Total SBC SBA Total Number of loans permanently modified 1 7 8 1 9 10 Pre-modification recorded balance (a) $ 151 $ 2,767 $ 2,918 $ 103 $ 1,265 $ 1,368 Post-modification recorded balance (a) $ 151 2,769 $ 2,920 $ 103 $ 1,250 $ 1,353 Number of loans that remain in default as of March 31, 2020 (b) 1 3 4 1 1 2 Balance of loans that remain in default as of March 31, 2020 (b) $ 151 $ 160 $ 311 $ 103 $ 55 $ 158 Concession granted (a) : Term extension $ - $ 1,564 $ 1,564 $ - $ 1,187 $ 1,187 Interest rate reduction - - - 103 - 103 Principal reduction - - - - - - Foreclosure 151 152 303 - 55 55 Total $ 151 $ 1,716 $ 1,867 $ 103 $ 1,242 $ 1,345 (a) Represents carrying value. (b) Represents the March 31, 2020 carrying values of the TDRs that occurred during the three months ended March 31, 2020 and 2019 that remained in default as of March 31, 2020. 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. PCD loans In the three months ended March 31, 2020 and 2019, the Company did not acquire any PCD loans. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020: (In Thousands) Level 1 Level 2 Level 3 Total Assets: Loans, held for sale, at fair value $ — $ 310,345 $ — $ 310,345 Loans, net, at fair value — — 19,813 19,813 Mortgage backed securities, at fair value — 78,437 103 78,540 Derivative instruments, at fair value — 506 17,250 17,756 Residential mortgage servicing rights, at fair value — — 78,631 78,631 Total assets $ — $ 389,288 $ 115,797 $ 505,085 Liabilities: Derivative instruments, at fair value $ — $ 16,585 $ — $ 16,585 Total liabilities $ — $ 16,585 $ — $ 16,585 The following table presents the Company’s financial instruments carried at fair value on a recurring basis as of December 31, 2019: (In Thousands) Level 1 Level 2 Level 3 Total Assets: Loans, held for sale, at fair value $ — $ 192,510 $ — $ 192,510 Loans, net, at fair value — — 20,212 20,212 Mortgage backed securities, at fair value — 92,006 460 92,466 Derivative instruments, at fair value — — 2,814 2,814 Residential mortgage servicing rights, at fair value — — 91,174 91,174 Total assets $ — $ 284,516 $ 114,660 $ 399,176 Liabilities: Derivative instruments, at fair value $ — $ 5,250 $ — $ 5,250 Total liabilities $ — $ 5,250 $ — $ 5,250 The following tables present a summary of changes in our Level 3 assets and liabilities: Three Months Ended March 31, 2020 (In Thousands) MBS Derivatives Loans, held at fair value Residential MSRs, at fair value Beginning Balance $ 460 $ 2,814 $ 20,212 $ 91,174 Purchases or Originations — — — - Additions due to loans sold, servicing retained — — — 7,147 Sales / Principal payments (2) — (8) (3,253) Unrealized gains (losses), net (40) 14,436 (391) (16,437) Transfer to (from) Level 3 (315) — — — Ending Balance $ 103 $ 17,250 $ 19,813 $ 78,631 Unrealized gains (losses), net on assets or liabilities held at the end of the period $ (1) $ 17,250 $ 255 $ (26,392) Three Months Ended March 31, 2019 (In Thousands) MBS Derivatives Loans, held at fair value Residential MSRs, at fair value Contingent consideration Beginning Balance $ 12,148 $ 1,776 $ 22,664 $ 93,065 $ 1,207 Purchases or Originations — — — — — Additions due to loans sold, servicing retained — — — 3,593 — Sales / Principal payments (102) — (29) (1,312) — Realized gains (losses), net (20) — (1) — — Unrealized gains (losses), net 89 707 (39) (7,128) — Accreted discount, net 2 — — — — Amortization and adjustment for earn-out payments — — — — (1,207) Transfer to (from) Level 3 15,083 — — — — Ending Balance $ 27,200 $ 2,483 $ 22,595 $ 88,218 $ — Unrealized gains (losses), net on assets or liabilities held at the end of the period $ 2,501 $ 2,483 $ 300 $ 1,502 $ — The Company’s policy is to recognize transfers in and transfers out as of the end of the period of the event or the date of 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. 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 is 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 March 31, 2020 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 $ 19,813 Single External Source Third Party Mark $ 99.77 – 105.70 $ 101.31 Mortgage backed securities, at fair value 103 Transaction Price Transaction Price 99.00 – 99.00 99.00 Residential mortgage servicing rights, at fair value 78,631 Single external source Discounted cash flow N/A N/A (a) Prices are weighted based on the unpaid principal balance of the loans and securities included in the range for each class 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, 2019 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 $ 20,212 Single External Source Third Party Mark $ 100.47 – 110.83 $ 103.31 Mortgage backed securities, at fair value (b) 357 Broker Quotes Third Party Mark 1.00 – 1.00 1.00 Mortgage backed securities, at fair value 103 Transaction Price Transaction Price 99.00 – 99.00 99.00 Residential mortgage servicing rights, at fair value 91,174 Single external source Discounted cash flow N/A N/A (a) Prices are weighted based on the unpaid principal balance of the loans and securities included in the range for each class (b) Price ranges and weighted averages represent interest-only strips with a fair value of $0.4 million as of December 31, 2019 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 in the unaudited interim consolidated balance sheets and are classified as Level 3: March 31, 2020 December 31, 2019 (In Thousands) Carrying Value Estimated Carrying Value Estimated Assets: Loans, net $ 4,144,416 $ 4,073,947 $ 4,033,972 $ 4,147,831 Purchased future receivables, net 49,150 49,150 43,265 43,265 Servicing rights 31,480 35,006 30,795 34,723 Total assets $ 4,225,046 $ 4,158,103 $ 4,108,032 $ 4,225,819 Liabilities: Secured borrowings $ 1,698,937 $ 1,698,937 $ 1,189,392 $ 1,189,392 Securitized debt obligations of consolidated VIEs, net 1,692,074 1,665,922 1,815,154 1,859,047 Senior secured note, net 179,387 181,708 179,289 190,923 Guaranteed loan financing 457,032 472,466 485,461 515,182 Convertible notes, net 111,310 67,720 111,040 116,654 Corporate debt, net 150,074 95,109 149,986 161,098 Total liabilities $ 4,288,814 $ 4,181,862 $ 3,930,322 $ 4,032,296 Other assets totaling $16.0 million at March 31, 2020 and $20.7 million at December 31, 2019 are not carried at fair value and include due from servicers and accrued interest, which are reflected in Note 19. Receivable from third parties totaling $0.6 million at March 31, 2020 and $1.2 million at December 31, 2019 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 $26.4 million at March 31, 2020 and $20.0 million at December 31, 2019 are not carried at fair value and include Payable to related parties and Accrued interest payable which are included in Note 19. For these instruments, carrying value approximates fair value and are classified as Level 3. |
Mortgage Backed Securities
Mortgage Backed Securities | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020 and December 31, 2019. Weighted Weighted Average Gross Gross Average Interest Principal Amortized Unrealized Unrealized (In Thousands) Maturity (a) Rate (a) Balance Cost Fair Value Gains Losses March 31, 2020 Mortgage backed securities, at fair value Freddie Mac Loans 06/2037 4.0 % $ 78,234 $ 57,681 $ 55,685 $ 1,169 $ (3,165) Commercial Loans 10/2049 4.9 47,107 26,816 22,752 — (4,064) Tax Liens 09/2026 6.0 104 104 103 — (1) Total Mortgage backed securities, at fair value 01/2042 4.3 % $ 125,445 $ 84,601 $ 78,540 $ 1,169 $ (7,230) December 31, 2019 Mortgage backed securities, at fair value Freddie Mac Loans 06/2037 4.3 % $ 83,149 $ 61,207 $ 66,108 $ 4,915 $ (14) Commercial Loans 02/2051 5.4 35,984 25,358 26,255 924 (27) Tax Liens 09/2026 6.0 104 104 103 — (1) Total Mortgage backed securities, at fair value 07/2041 4.6 % $ 119,237 $ 86,669 $ 92,466 $ 5,839 $ (42) (a) Weighted based on current principal balance The following table presents certain information about the maturity of the Company’s MBS portfolio as of March 31, 2020 and December 31, 2019 . Weighted Average Interest Principal Amortized (In Thousands) Rate (a) Balance Cost Fair Value March 31, 2020 Mortgage backed securities, at fair value After five years through ten years 3.6 % $ 2,869 $ 2,644 $ 2,598 After ten years 4.3 122,576 81,957 75,942 Total Mortgage backed securities, at fair value 4.3 % $ 125,445 $ 84,601 $ 78,540 December 31, 2019 Mortgage backed securities, at fair value After five years through ten years 3.8 % $ 2,869 $ 2,641 $ 2,825 After ten years 4.7 116,368 84,028 89,641 Total 4.6 % $ 119,237 $ 86,669 $ 92,466 (a) Weighted based on current principal balance. |
Servicing Rights
Servicing Rights | 3 Months Ended |
Mar. 31, 2020 | |
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: Three Months Ended March 31, (In Thousands) 2020 2019 SBA servicing rights, at amortized cost Beginning net carrying amount $ 17,660 $ 16,749 Additions due to loans sold, servicing retained 961 933 Amortization (873) (822) Impairment (212) (412) Ending net carrying value of SBA servicing rights $ 17,536 $ 16,448 Freddie Mac multi-family servicing rights, at amortized cost Beginning net carrying amount $ 13,135 $ 10,248 Additions due to loans sold, servicing retained 1,449 1,267 Amortization (640) (529) Ending net carrying value of Freddie Mac multi-family servicing rights $ 13,944 $ 10,986 Ending net carrying value of SBA and Freddie Mac multi-family servicing rights, at amortized cost $ 31,480 $ 27,434 Residential mortgage servicing rights, at fair value Beginning Balance $ 91,174 $ 93,065 Additions due to loans sold, servicing retained 7,147 3,593 Loan pay-offs (3,253) (1,312) Unrealized losses (16,437) (7,128) Ending fair value of residential mortgage servicing rights $ 78,631 $ 88,218 Total servicing rights $ 110,111 $ 115,652 Servicing rights – SBA and Freddie Mac The Company’s SBA and Freddie Mac multi-family servicing rights are carried at the lower of cost or amortized cost. The Company estimates the fair value of the SBA and Freddie Mac multi-family 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 multi-family servicing rights: As of March 31, 2020 As of December 31, 2019 Unpaid Principal Unpaid Principal (In Thousands) Amount Carrying Value Amount Carrying Value SBA $ 583,614 $ 17,536 $ 568,017 $ 17,660 Freddie Mac multi-family 1,193,274 13,944 1,167,476 13,135 Total $ 1,776,888 $ 31,480 $ 1,735,493 $ 30,795 The significant assumptions used in the March 31, 2020 and December 31, 2019 estimated valuation of the Company’s SBA and Freddie Mac multi-family servicing rights carried at amortized cost include: March 31, 2020 December 31, 2019 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 multi-family 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 multi-family servicing rights. (In Thousands) March 31, 2020 December 31, 2019 SBA servicing rights (at amortized cost) • Forward prepayment rate 10% adverse change $ (558) $ (563) 20% adverse change (1,086) (1,097) • Default rate 10% adverse change $ (97) $ (94) 20% adverse change (193) (186) • Discount rate 10% adverse change $ (529) $ (520) 20% adverse change (1,027) (1,011) Freddie Mac multi-family servicing rights (at amortized cost) • Forward prepayment rate 10% adverse change $ (287) $ (285) 20% adverse change (568) (558) • Default rate 10% adverse change $ (1) $ (5) 20% adverse change (4) (10) • Discount rate 10% adverse change $ (381) $ (381) 20% adverse change (752) (746) The estimated future amortization expense for the servicing rights is expected to be as follows: (In Thousands) March 31, 2020 2020 $ 4,369 2021 5,167 2022 4,491 2023 3,882 2024 3,337 Thereafter 10,234 Total $ 31,480 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 Veteran Affairs. The following table presents additional information about the Company’s residential mortgage servicing rights carried at fair value: As of March 31, 2020 As of December 31, 2019 Unpaid Principal Unpaid Principal (In Thousands) Amount Fair Value Amount Fair Value Fannie Mae $ 3,536,350 $ 33,084 $ 3,388,630 $ 37,309 Ginnie Mae 2,513,271 25,587 2,504,993 29,869 Freddie Mac 2,277,047 19,960 2,270,981 23,996 Total $ 8,326,668 $ 78,631 $ 8,164,604 $ 91,174 The significant assumptions used in the March 31, 2020 and December 31, 2019 valuation of the Company’s residential mortgage servicing rights carried at fair value include: March 31, 2020 December 31, 2019 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) March 31, 2020 December 31, 2019 Prepayment rate 10% adverse change $ (4,245) $ (4,195) 20% adverse change (8,110) (8,091) Discount rate 10% adverse change $ (2,849) $ (3,450) 20% adverse change (5,501) (6,654) Cost of servicing 10% adverse change $ (1,562) $ (1,648) 20% adverse change (3,123) (3,297) |
Residential mortgage banking ac
Residential mortgage banking activities and variable expenses on residential mortgage banking activities | 3 Months Ended |
Mar. 31, 2020 | |
Residential mortgage banking activities and variable expenses on residential mortgage banking activities | |
Gains on residential mortgage banking activities, net of variable loan expenses | Note 10 – Residential mortgage banking activities and variable expenses on residential mortgage banking activities Residential mortgage banking activities, reflects revenue 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. Residential mortgage banking activities 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. Variable expenses include correspondent fee expenses and other direct expenses relating to these loans, which vary based on loan origination volumes. The following table presents the components of residential mortgage banking activities and variable expenses on residential mortgage banking activities recorded in the Company’s unaudited interim consolidated statements of operations. Three Months Ended March 31, (In Thousands) 2020 2019 Realized and unrealized gains and losses of residential mortgage loans held for sale, at fair value $ 25,166 $ 10,199 Creation of new mortgage servicing rights, net of payoffs 3,894 2,281 Loan origination fee income on residential mortgage loans 3,303 1,743 Unrealized gains (loss) on IRLCs and other derivatives 4,306 364 Residential mortgage banking activities $ 36,669 $ 14,587 Variable expenses on residential mortgage banking activities $ (20,129) $ (9,176) |
Secured Borrowings
Secured Borrowings | 3 Months Ended |
Mar. 31, 2020 | |
Secured Borrowings | |
Secured borrowings | Note 11 – Secured borrowings The following tables present certain characteristics of our secured borrowings: Carrying Value at Lender Asset Class Current Maturity Pricing Facility Size Pledged Assets March 31, 2020 December 31, 2019 JPMorgan Acquired loans, SBA loans August 2020 1M L + 2.00 to 2.50% $ 250,000 $ 104,668 $ 82,204 $ 88,972 Keybank Freddie Mac loans February 2021 1M L + 1.30% 100,000 79,524 78,726 21,513 East West Bank SBA loans July 2020 Prime - 0.821 to + 0.29% 50,000 39,285 30,911 13,294 Credit Suisse Acquired loans (non USD) December 2021 Euribor + 2.50% 224,500 (a) 51,274 37,030 37,646 FCB Acquired loans June 2021 2.75% 1,218 1,737 1,218 1,354 Comerica Bank Residential loans March 2021 1M L + 1.75% 100,000 82,991 77,926 56,822 TBK Bank Residential loans July 2020 Variable Pricing 150,000 78,585 76,358 52,151 Origin Bank Residential loans May 2020 Variable Pricing 50,000 17,885 16,143 15,343 Associated Bank Residential loans November 2020 1M L + 1.50% 40,000 36,697 34,228 5,823 East West Bank Residential MSRs September 2023 1M L + 2.50% 50,000 53,044 49,200 39,900 Credit Suisse Purchased future receivables June 2021 1M L + 4.50% 50,000 49,150 43,250 34,900 Rabobank Real estate January 2021 4.22% 14,500 18,953 12,386 12,485 Total borrowings under credit facilities (b) $ 1,080,218 $ 613,793 $ 539,580 $ 380,203 Citibank Fixed rate, Transitional, Acquired loans August 2020 1M L + 1.875 to 2.125% $ 500,000 $ 305,046 $ 246,417 $ 124,718 Deutsche Bank Fixed rate, Transitional loans November 2021 3M L + 2.00 to 2.40% 425,000 472,064 331,181 141,356 JPMorgan Transitional loans December 2020 1M L + 2.25 to 4.00% 400,000 423,990 297,342 250,466 JPMorgan MBS September 2020 2.87 to 4.52% 90,507 122,070 90,507 93,715 Deutsche Bank MBS January 2021 3.14 to 3.81% 47,612 52,173 47,612 44,730 Citibank MBS April 2020 2.89 to 4.01% 55,275 76,566 55,275 56,189 Bank of America MBS April 2020 1.31 to 1.61% 34,886 33,968 34,886 38,954 RBC MBS August 2020 3.03 to 3.71% 56,137 63,200 56,137 59,061 Total borrowings under repurchase agreements (c) $ 1,609,417 $ 1,549,077 $ 1,159,357 $ 809,189 Total secured borrowings $ 2,689,635 $ 2,162,870 $ 1,698,937 $ 1,189,392 (a) The current facility size is €200.0 million, but has been converted into USD for purposes of this disclosure. (b) The weighted average interest rate of borrowings under credit facilities was 2.9% and 4.0% as of March 31, 2020 and December 31, 2019, respectively. (c) The weighted average interest rate of borrowings under repurchase agreements was 3.4% and 4.2% as of March 31, 2020 and December 31, 2019, respectively. The following table presents the carrying value of the Company’s collateral pledged with respect to secured borrowings outstanding with our lenders: Pledged Assets (In Thousands) March 31, 2020 December 31, 2019 Collateral pledged - borrowings under credit facilities Loans, net $ 492,646 $ 436,738 Mortgage servicing rights 53,044 61,304 Purchased future receivables 49,150 43,265 Real estate, held for sale 18,953 19,950 Total collateral pledged on borrowings under credit facilities $ 613,793 $ 561,257 Collateral pledged - borrowings under repurchase agreements Loans, net $ 1,201,100 $ 721,887 Mortgage backed securities 74,439 113,436 Retained interest in assets of consolidated VIEs 273,538 271,880 Total collateral pledged on borrowings under repurchase agreements $ 1,549,077 $ 1,107,203 Total collateral pledged on secured borrowings $ 2,162,870 $ 1,668,460 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 March 31, 2020 and December 31, 2019. |
Senior secured notes, convertib
Senior secured notes, convertible notes, and corporate debt, net | 3 Months Ended |
Mar. 31, 2020 | |
Senior secured notes, convertible notes, and corporate debt, net | |
Senior secured notes, convertible notes, and corporate debt, net | Note 12 – Senior secured notes, convertible notes, and corporate debt, net Senior secured notes, net During 2017, ReadyCap Holdings LLC, a subsidiary of the Company, issued $140.0 million in 7.50% Senior Secured Notes due 2022. On January 30, 2018 ReadyCap Holdings LLC, issued an additional $40.0 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 during 2017 (collectively “the Senior Secured Notes”). The additional $40.0 million in Senior Secured Notes were priced with a yield to par call date of 6.5%. 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 ReadyCap Commercial, LLC. The funds were used to fund new SBC and SBA loan originations and new SBC loan acquisitions. As of March 31, 2020, 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 Convertible 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 Convertible 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 March 31, 2020, we were in compliance with all covenants with respect to the Convertible Notes. Corporate debt, net On April 27, 2018, the Company completed the public offer and sale of $50,000,000 aggregate principal amount of its 6.50% Senior Notes due 2021 ( the “2021 Notes”). The Company issued the 2021 Notes under a base indenture, dated August 9, 2017, as supplemented by the second supplemental indenture, dated as of April 27, 2018, between the Company and U.S. Bank National Association, as trustee. The 2021 Notes bear interest at a rate of 6.50% per annum, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, beginning on July 30, 2018. The 2021 Notes will mature on April 30, 2021, unless earlier redeemed or repurchased. The Company may redeem for cash all or any portion of the 2021 Notes, at its option, on or after April 30, 2019 and before April 30, 2020 at a redemption price equal to 101% of the principal amount of the 2021 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. On or after April 30, 2020, the Company may redeem for cash all or any portion of the 2021 Notes, at its option, at a redemption price equal to 100% of the principal amount of the 2021 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company undergoes a change of control repurchase event, holders may require it to purchase the 2021 Notes, in whole or in part, for cash at a repurchase price equal to 101% of the aggregate principal amount of the 2021 Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase, as described in greater detail in the Indenture. The 2021 Notes are the Company’s senior direct unsecured obligations and will not be guaranteed by any of its subsidiaries, except to the extent described in the Indenture upon the occurrence of certain events. The 2021 Notes rank equal in right of payment to any of the Company’s existing and future unsecured and unsubordinated indebtedness; effectively junior in right of payment to any of its existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness, other liabilities (including trade payables) and (to the extent not held by the Company) preferred stock, if any, of its subsidiaries. On July 22, 2019, the Company completed the public offer and sale of $57.5 million aggregate principal amount of its 6.20% Senior Notes due 2026 (the “2026 Notes” and together with the 2021 Notes, the “Corporate Debt”), which includes $7.5 million aggregate principal amount of the 2026 Notes relating to the full exercise of the underwriters’ over-allotment option. The net proceeds from the sale of the 2026 Notes are approximately $55.3 million, after deducting underwriters’ discount and estimated offering expenses. The Company will contribute the net proceeds to Sutherland Partners, L.P. (the “Operating Partnership”), its operating partnership subsidiary, in exchange for the issuance by the Operating Partnership of a senior unsecured note with terms that are substantially equivalent to the terms of the 2026 Notes. The Operating Partnership intends to use the net proceeds to originate or acquire the Company’s target assets and for general business purposes. The 2026 Notes bear interest at a rate of 6.20% per annum, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, beginning on October 30, 2019. The 2026 Notes will mature on July 30, 2026, unless earlier repurchased or redeemed. The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on or after July 30, 2022 and before July 30, 2025 at a redemption price equal to 101% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. On or after July 30, 2025, the Company may redeem for cash all or any portion of the 2026 Notes, at its option, at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company undergoes a change of control repurchase event, holders may require it to purchase the 2026 Notes, in whole or in part, for cash at a repurchase price equal to 101% of the aggregate principal amount of the 2026 Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase, as described in greater detail in the Indenture. The 2026 Notes are the Company’s senior unsecured obligations and will not be guaranteed by any of its subsidiaries, except to the extent described in the Indenture upon the occurrence of certain events. The 2026 Notes rank equal in right of payment to any of the Company’s existing and future unsecured and unsubordinated indebtedness; effectively junior in right of payment to any of its existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness, other liabilities (including trade payables) and (to the extent not held by the Company) preferred stock, if any, of its subsidiaries. On December 2, 2019, the Company completed the public offer and sale of $45.0 million aggregate principal amount of the 2026 Notes. The new notes have the same terms (expect with respect to issue date, issue price and the date from which interest will accrue) as, are fully fungible with and are treated as a single series of debt securities as, the 6.20% Senior Notes due 2026 the Company issued on July 22, 2019. As of March 31, 2020, we were in compliance with all covenants with respect to the corporate debt. The following table presents the components of the Senior Secured Notes, Convertible Notes, and Corporate Debt, including the carrying value for the aggregate contractual maturities, in the consolidated balance sheet: (in thousands, except rates) Coupon Rate Maturity Date March 31, 2020 Senior secured notes principal amount (1) 7.50 % 2/15/2022 $ 180,000 Unamortized premium - Senior secured notes 1,479 Unamortized deferred financing costs - Senior secured notes (2,092) Total Senior secured notes, net $ 179,387 Convertible notes - principal amount (2) 7.00 % 8/15/2023 115,000 Unamortized discount - Convertible notes (3) (1,352) Unamortized deferred financing costs - Convertible notes (2,338) Total Convertible notes, net $ 111,310 Corporate debt principal amount (4) 6.50 % 4/30/2021 $ 50,000 Corporate debt principal amount (5) 6.20 % 7/30/2026 104,250 Unamortized discount - Corporate debt 420 Unamortized deferred financing costs - Corporate debt (4,596) Total Corporate debt, net $ 150,074 Total carrying amount of debt components $ 440,771 Total carrying amount of conversion option of equity components recorded in equity $ 1,352 (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. (4) Interest on the corporate debt is payable January 30, April 30, July 30, and October 30 of each year, beginning on July 30, 2018. (5) Interest on the corporate debt is payable January 30, April 30, July 30, and October 30 of each year, beginning on October 30, 2019. The following table presents the contractual maturities of the Senior Secured Notes, Convertible Notes, and Corporate debt: (In Thousands) March 31, 2020 2020 $ — 2021 50,000 2022 180,000 2023 115,000 2024 — Thereafter 104,250 Total contractual amounts 449,250 Unamortized deferred financing costs, discounts, and premiums, net (8,479) Total carrying amount of debt components $ 440,771 |
Guaranteed loan financing
Guaranteed loan financing | 3 Months Ended |
Mar. 31, 2020 | |
Guaranteed loan financing. | |
Guaranteed loan financing | Note 13 – Guaranteed loan financing Participations or other partial loan sales which do not meet the definition of a participating interest remain as an investment in the unaudited interim consolidated balance sheets and the portion sold is recorded as guaranteed loan financing in the liabilities section of the unaudited interim 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 unaudited interim 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 March 31, 2020 5.21 % 1.70 - 6.50 % 2020 - 2044 $ 457,032 December 31, 2019 5.45 % 1.70 - 7.50 % 2020 - 2044 $ 485,461 The following table summarizes contractual maturities of total guaranteed loan financing outstanding: (In Thousands) March 31, 2020 2020 $ 314 2021 1,326 2022 2,369 2023 3,329 2024 4,614 Thereafter 445,080 Total $ 457,032 Our guaranteed loan financings are secured by loans, net of $458.6 million and $487.2 million as of March 31, 2020 and December 31, 2019, respectively. |
Variable interest entities and
Variable interest entities and securitization activities | 3 Months Ended |
Mar. 31, 2020 | |
Variable interest entities and securitization activities | |
Variable interest entities and securitization activities | Note 14 – 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 our acquired and originated 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 within 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 in 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 in the unaudited interim consolidated balance sheets. The following table presents additional information on the Company’s securitized debt obligations: March 31, 2020 December 31, 2019 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 $ 6,131 $ 6,131 5.5 % $ 6,399 $ 6,399 5.5 % ReadyCap Lending Small Business Trust 2019-2 117,876 117,876 4.3 131,032 129,007 4.3 Sutherland Commercial Mortgage Trust 2017-SBC6 38,679 37,958 3.5 42,309 41,486 3.4 Sutherland Commercial Mortgage Trust 2018-SBC7 114,938 113,166 4.7 138,235 136,212 4.7 Sutherland Commercial Mortgage Trust 2019-SBC8 210,516 207,679 2.9 219,617 216,981 2.9 ReadyCap Commercial Mortgage Trust 2014-1 18,406 18,411 5.8 18,626 18,632 5.6 ReadyCap Commercial Mortgage Trust 2015-2 60,344 57,772 4.5 64,239 61,443 4.5 ReadyCap Commercial Mortgage Trust 2016-3 27,295 25,927 3.6 32,269 30,777 4.7 ReadyCap Commercial Mortgage Trust 2018-4 114,670 111,058 3.9 121,179 117,428 3.9 ReadyCap Commercial Mortgage Trust 2019-5 282,994 273,342 4.1 309,296 299,273 4.1 ReadyCap Commercial Mortgage Trust 2019-6 378,765 371,539 3.2 379,400 371,939 3.2 Ready Capital Mortgage Financing 2018-FL2 80,042 79,202 3.3 115,381 114,057 3.8 Ready Capital Mortgage Financing 2019-FL3 267,904 264,837 3.0 267,904 264,249 3.5 Total (1) $ 1,718,560 $ 1,684,898 3.6 % $ 1,845,886 $ 1,807,883 3.7 % (1) Excludes non-company sponsored securitized debt obligations of $7.2 million and $7.3 million that are consolidated in the unaudited interim consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively. 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 third-party 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 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) March 31, 2020 December 31, 2019 Assets: Cash and cash equivalents $ 20 $ 23 Restricted cash 8,538 8,301 Loans, net 2,195,177 2,326,199 Loans, held for sale, at fair value 4,017 4,434 Due from servicers 10,279 27,964 Accrued interest 11,486 11,565 Total assets $ 2,229,517 $ 2,378,486 Liabilities: Securitized debt obligations of consolidated VIEs, net 1,692,074 1,815,154 Total liabilities $ 1,692,074 $ 1,815,154 Assets of unconsolidated VIEs The following table reflects our variable interests in identified VIEs, of which we are not the primary beneficiary, as of March 31, 2020 and December 31, 2019: Carrying Maximum (1) (In Thousands) March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 Assets: Mortgage backed securities, at fair value (2) $ 55,685 $ 66,108 $ 55,685 $ 66,108 Investment in unconsolidated joint ventures 53,379 58,850 53,379 58,850 Total assets in unconsolidated VIEs $ 109,064 $ 124,958 $ 109,064 $ 124,958 (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. |
Interest income and interest ex
Interest income and interest expense | 3 Months Ended |
Mar. 31, 2020 | |
Interest income and interest expense | |
Interest income and interest expense | Note 15 – Interest income and interest expense Interest income and interest expense are recorded in the unaudited interim 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: Three Months Ended March 31, (In Thousands) 2020 2019 Interest income Loans Acquired SBA 7(a) loans $ 6,202 $ 7,181 Acquired loans 15,411 10,254 Originated Transitional loans 22,219 14,185 Originated SBC loans, at fair value 317 366 Originated SBC loans 15,998 12,282 Originated SBA 7(a) loans 6,269 1,928 Originated Residential Agency loans 20 6 Total loans (1) $ 66,436 $ 46,202 Held for sale, at fair value, loans Originated Residential Agency loans $ 1,297 $ 776 Originated Freddie loans 271 257 Acquired loans 68 36 Total loans, held for sale, at fair value (1) $ 1,636 $ 1,069 Mortgage backed securities, at fair value 1,479 1,482 Total interest income $ 69,551 $ 48,753 Interest expense Secured borrowings $ (12,758) $ (9,909) Securitized debt obligations of consolidated VIEs (19,529) (16,501) Guaranteed loan financing (6,243) (2,710) Senior secured note (3,472) (3,484) Convertible note (2,188) (2,188) Corporate debt (2,740) (983) Total interest expense $ (46,930) $ (35,775) Net interest income before provision for loan losses $ 22,621 $ 12,978 (1) Includes interest income on loans in consolidated VIEs. |
Derivative instruments
Derivative instruments | 3 Months Ended |
Mar. 31, 2020 | |
Derivative instruments | |
Derivative instruments | Note 16 – 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. For derivative instruments that the Company has not elected hedge accounting, 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 in the unaudited interim 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 residential mortgage banking activities on the unaudited interim consolidated statements of income. As described in Note 3, for qualifying cash flow hedges, the entire change in the fair value of the derivative is recorded in OCI and recognized in the consolidated statements of income when the hedged cash flows affect earnings. Derivative amounts affecting earnings are recognized consistent with the classification of the hedged item, primarily interest expense. The ineffective portions of the cash flow hedges are immediately recognized in earnings. The following tables summarize the Company’s use of derivatives and their effect in the unaudited interim consolidated financial statements. Notional amounts included in the table are the average notional amounts on the unaudited interim 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. The following table summarizes our derivatives, by type, as of March 31, 2020 and December 31, 2019: As of March 31, 2020 As of December 31, 2019 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 Interest rate lock commitments Interest rate risk $ 660,770 17,261 $ — $ 238,283 $ 2,814 $ — Interest Rate Swaps - not designated as hedges Interest rate risk 623,543 — (9,882) 291,001 — (3,181) Interest Rate Swaps - designated as hedges Interest rate risk 143,215 — (6,703) 158,325 — (1,709) Credit Default Swaps Credit risk 15,000 260 — 15,000 — (110) FX forwards Foreign exchange rate risk 16,908 235 15,000 — (250) Total $ 1,459,436 $ 17,756 $ (16,585) $ 717,609 $ 2,814 $ (5,250) The following tables summarize the gains and losses on the Company’s derivatives: Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Net Realized Unrealized Net Realized Unrealized (In Thousands) Gain (Loss) Gain (Loss) Gain (Loss) Gain (Loss) Credit default swaps (1) $ — $ 370 $ — $ (323) Interest rate swaps (1)(2) (247) (9,988) (796) 604 Residential mortgage banking activities interest rate swaps (3) — (10,180) — (343) Interest rate lock commitments (3) — 14,487 — 708 FX forwards (1) (137) 485 — — Total $ (384) $ (4,826) $ (796) $ 646 (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. The following tables summarize the gains and losses on the Company’s derivatives which have qualified for hedge accounting: (In Thousands) Derivatives - effective portion reclassified from AOCI to income Hedge ineffectiveness recorded directly in income (2) Total income statement impact Derivatives- effective portion recorded in OCI (3) Total change in OCI for period (3) Hedge type Interest rate - forecasted transactions (1) $ (367) $ (1,694) $ (2,061) $ (5,189) $ (3,128) Total - Three Months Ended March 31, 2020 $ (367) $ (1,694) $ (2,061) $ (5,189) $ (3,128) Hedge type Interest rate - forecasted transactions (1) $ 41 $ — $ 41 $ (461) $ (420) Total - Three Months Ended March 31, 2019 $ 41 $ — $ 41 $ (461) $ (420) (1) Consists of benchmark interest rate hedges of LIBOR-indexed floating-rate liabilities. (2) Hedge ineffectiveness is the amount by which the cumulative gain or loss on the designated derivative instrument exceeds the present value of the cumulative expected change in cash flows on the hedged item attributable to the hedged risk. (3) Represents after tax amounts recorded in OCI. |
Real estate, held for sale
Real estate, held for sale | 3 Months Ended |
Mar. 31, 2020 | |
Real estate, held for sale | |
Real estate, held for sale | Note 17 – Real estate, held for sale The following table summarizes the carrying amount of the Company’s real estate holdings as of the unaudited interim consolidated balance sheet dates: (In Thousands) March 31, 2020 December 31, 2019 Acquired ORM Portfolio: Retail $ 18,953 $ 19,950 Mixed Use 16,604 17,478 Land 7,362 7,919 Lodging/Residential 3,230 6,280 Office 981 1,256 Total Acquired ORM REO $ 47,130 $ 52,883 Other REO held for sale: Office $ 151 4,465 SBA 351 286 Mixed Use — 279 Retail 660 660 Total Other REO $ 1,162 $ 5,690 Total Real estate, held for sale $ 48,292 $ 58,573 |
Agreements and transactions wit
Agreements and transactions with related parties | 3 Months Ended |
Mar. 31, 2020 | |
Agreements and transactions with related parties | |
Agreements and transactions with related parties | Note 18 – Agreements and transactions with related parties Management Agreement The Company has entered into a management agreement with our Manager (the “Management Agreement”), which describes the services to be provided to us by our Manager and compensation for such services. Our 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 Three Months Ended March 31, 2020 2019 Management fee - total $ 2.6 million $ 2.0 million Management fee - amount unpaid $ 2.6 million $ 4.1 million Incentive distribution Our 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 the 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 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 the operating partnership in a manner that is similar to the definition of Core Earnings described below under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” included in this quarterly report on Form 10-Q 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". The following table presents certain information on the incentive fee payable to our Manager: For the Three Months Ended March 31, 2020 2019 Incentive fee distribution - total $ - $ - Incentive fee distribution - amount unpaid $ - $ 0.2 million 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 our Manager is not fair, subject to our 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. Additionally, upon such a termination by the Company without cause (or upon termination by the Manager due to the Company’s material breach), the management agreement provides that the Company will pay the Manager a termination fee equal to three times the average annual base management fee earned by our Manager during the prior 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, except upon an internalization. Additionally, if the management agreement is terminated under circumstances in which the Company is obligated to make a termination payment to the Manager, the operating partnership shall repurchase, concurrently with such termination, the Class A special unit for an amount equal to three times the average annual amount of the incentive distribution paid or payable in respect of the Class A special unit during the 24-month period immediately preceding such termination, calculated as of the end of the most recently completed fiscal quarter before the date of termination. The current term of the Management Agreement will expire on October 31, 2020 and is automatically renewed for successive one-year terms on each anniversary thereafter; provided, however, that either the Company, under the certain limited circumstances described above that would require the Company and the operating partnership to make the payments described above, or the Manager may terminate the Management Agreement annually upon 180 days prior notice. Expense reimbursement In addition to the management fees and incentive distribution described above, the Company is also responsible for reimbursing our Manager for certain expenses paid by our Manager on behalf of the Company and for certain services provided by our Manager to the Company. Expenses incurred by our Manager and reimbursed by us are typically included in salaries and benefits or general and administrative expense in the unaudited interim consolidated statements of income. The following table presents certain information on reimbursable expenses payable to our Manager: For the Three Months Ended March 31, 2020 2019 Reimbursable expenses payable to our Manager - total $ 1.3 million $ 0.8 million Reimbursable expenses payable to our Manager - amount unpaid $ 0.2 million $ 1.0 million |
Other assets and other liabilit
Other assets and other liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Other assets and other liabilities | |
Other assets and other liabilities | Note 19 – Other assets and other liabilities The following table details the Company’s other assets and other liabilities as of the unaudited interim consolidated balance sheet dates. (In Thousands) March 31, 2020 December 31, 2019 Other assets: Deferred tax asset $ 31,803 $ 31,803 Tax receivable 14,184 4,019 Deferred loan exit fees 14,374 13,039 Accrued interest 11,383 10,583 Goodwill 11,206 11,206 Due from servicers 4,641 10,127 Right-of-use lease asset 4,586 4,531 Intangible assets 7,978 8,309 Deferred financing costs 2,440 2,046 Other assets 12,296 11,262 Total other assets $ 114,891 $ 106,925 Accounts payable and other accrued liabilities: Deferred tax liability $ 18,757 $ 18,757 Accrued salaries, wages and commissions 12,871 21,146 Accrued interest payable 23,836 17,305 Servicing principal and interest payable 6,661 14,145 Repair and denial reserve 5,043 5,179 Payable to related parties 2,561 2,697 Accrued professional fees 2,525 1,809 Lease payable 4,673 4,618 Other liabilities 12,813 11,751 Total accounts payable and other accrued liabilities $ 89,740 $ 97,407 Intangible assets The following table presents information about the intangible assets held by the Company: (In Thousands) March 31, 2020 December 31, 2019 Estimated Useful Life Internally developed software - Knight Capital $ 3,536 $ 3,694 6 years Broker network - Knight Capital 1,089 1,156 4.5 years SBA license 1,000 1,000 Indefinite life Favorable lease 871 905 12 years Trade name - Knight Capital 819 855 6 years Trade name - GMFS 663 699 15 years Total Intangible Assets $ 7,978 $ 8,309 Amortization expense related to the intangible assets previously acquired for the three months ended March 31, 2020 and 2019 was $0.3 million and $0.1 million, respectively. Such amounts are recorded as other operating expenses in the consolidated statements of income. At March 31, 2020, accumulated amortization for finite-lived intangible assets is as follows: (In Thousands) March 31, 2020 Favorable lease $ 609 Trade name - GMFS 559 Internally developed software - Knight Capital 264 Broker network - Knight Capital 111 Trade name - Knight Capital 61 Total Accumulated Amortization $ 1,604 Amortization expense related to the finite-lived intangible assets for the five years subsequent to March 31, 2020 is as follows: (In Thousands) March 31, 2020 2020 $ 992 2021 1,295 2022 1,268 2023 1,242 2024 1,210 Thereafter 971 Total $ 6,978 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 unaudited interim consolidated balance sheets and the provision for loan indemnification losses is included in variable expenses on residential mortgage banking activities, in the Company's unaudited interim 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 March 31, 2020 and December 31, 2019, the loan indemnification reserve was $2.3 million and $2.1 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 March 31, 2020 and December 31, 2019, the reasonably possible loss above the recorded loan indemnification reserve was not considered material. |
Other income and operating expe
Other income and operating expenses | 3 Months Ended |
Mar. 31, 2020 | |
Other income and operating expenses | |
Other income and operating expenses | Note 20 – Other income and operating expenses The following table details the Company’s other income and operating expenses for the unaudited interim consolidated statements of income. Three Months Ended March 31, (In Thousands) 2020 2019 Other income Origination income $ 2,495 808 Change in repair and denial reserve 136 (89) Other 1,442 181 Total other income $ 4,073 $ 900 Other operating expenses Origination costs 3,025 1,189 Technology expense 1,580 1,101 Impairment on real estate 2,969 305 Rent and property tax expense 1,184 691 Recruiting, training and travel expense 624 587 Marketing expense 546 545 Loan acquisition costs 98 110 Financing costs on purchased future receivables 624 — Other 3,094 2,333 Total other operating expenses $ 13,744 $ 6,861 |
Stockholders Equity
Stockholders Equity | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders’ Equity | |
Stockholders’ Equity | Note 21 – Stockholders’ Equity Equity offering In December 2019, we completed a public offering of 6,000,000 shares of our common stock at a public offering price of $15.30 per share and an additional 900,000 shares of common stock at a public offering price of $15.30 per share pursuant to the underwriter’s full exercise of the over-allotment option in January 2020. Proceeds, net of offering costs and expenses were $91.8 million and $13.8 million for December 2019 and January 2020, respectively. There were no equity offerings during 2018. Common stock dividends The following table presents cash dividends declared by our board of directors on our common stock from December 12, 2018 through March 31, 2020: Dividend per Declaration Date Record Date Payment Date Share December 12, 2018 December 31, 2018 January 31, 2019 $ 0.40 March 12, 2019 March 28, 2019 April 30, 2019 $ 0.40 June 11, 2019 June 28, 2019 July 31, 2019 $ 0.40 September 10, 2019 September 30, 2019 October 31, 2019 $ 0.40 December 11, 2019 December 31, 2019 January 31, 2020 $ 0.40 March 11, 2020 March 31, 2020 April 30, 2020 $ 0.40 (1) (1) Dividends paid in a combination of cash, not to exceed 20% in the aggregate, and common stock. Stock incentive plan The Company currently maintains the 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 our 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. 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 RSA activity for the three months ended March 31, 2020: Restricted Stock Awards (In Thousands, except share data) Number of Grant date fair value Weighted-average grant date fair value (per share) Outstanding, January 1 1,009,617 $ 15,722 $ 15.57 Granted 208,514 3,298 15.82 Vested (60,370) (894) 14.81 Forfeited — — — Outstanding, March 31, 2020 1,157,761 $ 18,126 $ 15.66 During the three months ended March 31, 2020, the Company recognized $0.9 million of noncash compensation expense related to its stock-based incentive plan in our unaudited interim consolidated statements of income. During the three months ended March 31, 2019, the Company recognized $0.7 million of noncash compensation. At March 31, 2020 and 2019, approximately $18.1 million and $2.7 million of noncash compensation expense related to unvested awards had not yet been charged to net income, respectively. These costs are expected to be amortized into compensation expense ratably over the course of the remainder of the respective vesting periods. |
Earnings per Share of Common St
Earnings per Share of Common Stock | 3 Months Ended |
Mar. 31, 2020 | |
Earnings per Share of Common Stock | |
Earnings per Share of Common Stock | Note 22 – Earnings per Share of Common Stock The following table provides information on the basic and diluted earnings per share computations, including the number of shares of common stock used for purposes of these computations: Three Months Ended March 31, (In Thousands, except for share and per share amounts) 2020 2019 Basic Earnings Net income $ (51,516) $ 30,450 Less: Income attributable to non-controlling interest (1,064) 983 Less: Income attributable to participating shares 463 82 Basic earnings $ (50,915) $ 29,385 Diluted Earnings Net income $ (51,516) $ 30,450 Less: Income attributable to non-controlling interest (1,064) 983 Less: Income attributable to participating shares 463 82 Diluted earnings $ (50,915) $ 29,385 Number of Shares Basic — Average shares outstanding 51,984,040 32,556,875 Effect of dilutive securities — Unvested participating shares 5,973 6,769 Diluted — Average shares outstanding 51,990,013 32,563,644 Earnings Per Share Attributable to RC Common Stockholders: Basic $ (0.98) $ 0.90 Diluted $ (0.98) $ 0.90 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 March 31, 2020, 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 March 31, 2020, 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 March 31, 2020 and December 31, 2019, the non-controlling interest OP unit holders owned 1,117,169 OP units. |
Offsetting assets and liabiliti
Offsetting assets and liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Offsetting assets and liabilities | |
Offsetting assets and liabilities | Note 23 – 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 March 31, 2020 and December 31, 2019 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 in the unaudited interim 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 unaudited interim consolidated balance sheets to enable users of the unaudited interim 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 offset, and (d) the Company’s right of offset is enforceable at law. As of March 31, 2020 and December 31, 2019, the Company has elected to offset assets and liabilities associated with its OTC derivative contracts in the unaudited interim consolidated balances sheets. The following table provides disclosure regarding the effect of offsetting of the Company’s recognized assets and liabilities presented in the unaudited interim consolidated balance sheets: Gross amounts not offset in the Consolidated Balance Sheets (1) (in thousands) Gross amounts of recognized Assets / Liabilities Gross amounts offset in the Consolidated Balance Sheets Amounts presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received / Paid March 31, 2020 Assets Derivative instruments - Credit default swaps $ 260 $ — $ 260 $ — $ — Derivative instruments - FX forwards 235 — 235 — — Total $ 495 $ — $ 495 $ — $ — Liabilities Derivative instruments - Interest rate swaps $ 25,017 $ 8,432 $ 16,585 $ — $ 11,656 Secured borrowings 1,698,937 — 1,698,937 1,698,937 — Total $ 1,723,954 $ 8,432 $ 1,715,522 $ 1,698,937 $ 11,656 December 31, 2019 Assets Derivative instruments - Interest rate swaps $ 2,814 $ — $ 2,814 $ — $ 2,814 Total $ 2,814 $ — $ 2,814 $ — $ 2,814 Liabilities Derivative instruments - Interest rate swaps $ 4,890 $ — $ 4,890 $ — $ 4,890 Derivative instruments - Credit default swaps 110 — 110 — 110 Derivative instruments - FX forwards 250 — 250 — 250 Secured borrowings 1,189,392 — 1,189,392 1,189,392 — Total $ 1,194,642 $ — $ 1,194,642 $ 1,189,392 $ 5,250 (1) Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, there is excess cash collateral or financial assets we have pledged to a counterparty that exceed the financial liabilities subject to a master netting repurchase arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, any of these excess amounts are excluded from the table although they are separately reported in our unaudited interim consolidated balance sheets as assets or liabilities, respectively. |
Financial Instruments with off-
Financial Instruments with off-balance sheet risk, credit risk, and certain other risks | 3 Months Ended |
Mar. 31, 2020 | |
Financial Instruments off-balance sheet risk, credit risk, and certain other risks | |
Financial Instruments with off-balance sheet risk, credit risk, and certain other risks | Note 24 – 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 25. 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 | 3 Months Ended |
Mar. 31, 2020 | |
Commitments, Contingencies and Indemnifications | |
Commitments, Contingencies and Indemnifications | Note 25 – 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 unaudited interim consolidated financial statements. Unfunded Loan Commitments As of March 31, 2020 and December 31, 2019, unfunded loan commitments for SBC loans were as follows: March 31, December 31, (In Thousands) 2020 2019 Loans, net $ 329,809 $ 128,719 Loans, held for sale at fair value $ 8,855 $ 6,982 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 March 31, 2020 and December 31, 2019, total commitments to originate loans were as follows: March 31, December 31, (In Thousands) 2020 2019 Commitments to originate residential agency loans $ 601,633 $ 190,806 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Income Taxes | Note 26 – Income Taxes The Company is a REIT pursuant to Internal Revenue Code 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 March 31, 2020 and December 31, 2019, 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 that would not be qualifying income if earned directly by the parent REIT, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Internal Revenue Code, and are conducted in entities which elect to be treated as taxable subsidiaries under the Internal Revenue 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. On March 27, 2020, President Trump signed into law the ‘Coronavirus Aid, Relief, and Economic Security Act’ (the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impact the CARES Act may have on our business. As of March 31, 2020, we have recognized a benefit of $2.9 million due to changes in net operating loss carryback provisions which allow net operating losses from tax years beginning in 2018, 2019, or 2020 to be carried back for five years. During the three months ended March 31, 2020 and 2019, we recorded an income tax benefit of $7.9 million and $3.0 million, respectively. The income tax expense for the above periods primarily related to activities of our taxable REIT subsidiaries, including the impact of our ability to carry back net operating losses to pre-tax reform years as a result of the CARES Act in the first quarter of 2020, and various state and local taxes. There were no material changes to uncertain tax positions or valuation allowance assessments during the quarter. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting | |
Segment Reporting | Note 27 – 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, 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 the CODM and management to evaluate segment results. Acquisitions Through the 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. The Company also acquires purchased future receivables through our Knight Capital platform. 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. Results of business segments and all other Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the three months ended March 31, 2020 are summarized in the below table. SBA Originations, Residential SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 16,494 $ 39,269 $ 12,471 $ 1,317 $ — $ 69,551 Interest expense (11,205) (25,627) (8,513) (1,585) — (46,930) Net interest income before provision for loan losses $ 5,289 $ 13,642 $ 3,958 $ (268) $ — $ 22,621 Provision for loan losses (5,722) (29,828) (4,254) — — (39,804) Net interest income after provision for loan losses $ (433) $ (16,186) $ (296) $ (268) $ — $ (17,183) Non-interest income Residential mortgage banking activities $ — $ — $ — $ 36,669 $ — $ 36,669 Net realized gain (loss) on financial instruments (739) 3,649 4,262 — — 7,172 Net unrealized gain (loss) on financial instruments (9,423) (6,491) (1,082) (16,438) — (33,434) Servicing income 355 532 1,074 6,136 — 8,097 Income on purchased future receivables, net of allowance for doubtful accounts 3,483 — — — — 3,483 Loss from unconsolidated joint ventures (3,537) — — — — (3,537) Other income 2,336 1,283 295 60 99 4,073 Total non-interest income (loss) $ (7,525) $ (1,027) $ 4,549 $ 26,427 $ 99 $ 22,523 Non-interest expense Employee compensation and benefits $ (2,833) $ (2,710) $ (3,910) $ (8,741) $ (742) $ (18,936) Allocated employee compensation and benefits from related party (125) — — — (1,125) (1,250) Variable expenses on residential mortgage banking activities — — — (20,129) — (20,129) Professional fees (235) (338) (289) (287) (1,407) (2,556) Management fees – related party — — — — (2,561) (2,561) Loan servicing expense (1,365) (1,580) (335) (2,258) (32) (5,570) Merger related expenses — — — — (47) (47) Other operating expenses (6,245) (3,457) (1,559) (1,785) (698) (13,744) Total non-interest expense $ (10,803) $ (8,085) $ (6,093) $ (33,200) $ (6,612) $ (64,793) Net loss before provision for income taxes $ (18,761) $ (25,298) $ (1,840) $ (7,041) $ (6,513) $ (59,453) Total assets $ 1,209,617 $ 2,704,301 $ 703,331 $ 418,421 $ 234,380 $ 5,270,050 Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the three months ended March 31, 2019 are summarized in the below table. SBA Originations, Residential SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 10,674 $ 28,188 $ 9,109 $ 782 $ — $ 48,753 Interest expense (7,705) (20,666) (6,490) (914) — (35,775) Net interest income before provision for loan losses $ 2,969 $ 7,522 $ 2,619 $ (132) $ — $ 12,978 Provision for loan losses (133) 41 (426) — — (518) Net interest income after provision for loan losses $ 2,836 $ 7,563 $ 2,193 $ (132) $ — $ 12,460 Non-interest income Residential mortgage banking activities $ — $ — $ — $ 14,587 $ — $ 14,587 Net realized gain (loss) on financial instruments (49) 3,540 3,791 — — 7,282 Net unrealized gain (loss) on financial instruments (19) 810 (575) (7,128) — (6,912) Servicing income 1 436 1,015 5,300 — 6,752 Income on unconsolidated joint ventures 2,929 — — — — 2,929 Other income 68 786 14 17 15 900 Gain on bargain purchase — — — — 30,728 30,728 Total non-interest income $ 2,930 $ 5,572 $ 4,245 $ 12,776 $ 30,743 $ 56,266 Non-interest expense Employee compensation and benefits $ (1) $ (2,260) $ (3,768) $ (4,595) $ (824) $ (11,448) Allocated employee compensation and benefits from related party (85) — — — (768) (853) Variable expenses on residential mortgage banking activities — — — (9,176) — (9,176) Professional fees (170) (301) (187) (236) (935) (1,829) Management fees – related party — — — — (1,997) (1,997) Loan servicing expense (801) (1,215) 143 (1,740) (35) (3,648) Merger related expenses — — — — (5,467) (5,467) Other operating expenses (421) (2,117) (1,050) (2,073) (1,200) (6,861) Total non-interest expense $ (1,478) $ (5,893) $ (4,862) $ (17,820) $ (11,226) $ (41,279) Net income (loss) before provision for income taxes $ 4,288 $ 7,242 $ 1,576 $ (5,176) $ 19,517 $ 27,447 Total assets $ 864,881 $ 1,823,166 $ 251,778 $ 277,727 $ 61,462 $ 3,279,014 |
Supplemental Financial Data
Supplemental Financial Data | 3 Months Ended |
Mar. 31, 2020 | |
Supplemental Financial Data | |
Supplemental Financial Data | Note 28 – Supplemental Financial Data Summarized financial information of our unconsolidated subsidiaries 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. 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. WFLLA, LLC holds a 49.9% interest in another company, Girod HoldCo, LLC, whom owns and manages the day-to-day affairs and business associated with the SBC loan pool. In accordance with Regulation S-X section 10-01(b)-1, unconsolidated entities that meet certain significance tests are required to have supplemental disclosures included in our unaudited interim financial statements, including condensed financial information for the three months ended March 31, 2020 and 2019. Statements of Income Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 (In Thousands) Girod HoldCo, LLC WFLLA, LLC Girod HoldCo, LLC WFLLA, LLC Interest income $ 381 $ 190 $ 1,157 $ 577 Realized gains 149 74 201 100 Unrealized gain (loss) (1,987) (992) 11,278 5,628 Servicing expense and other (1,588) (794) (898) (447) Income (loss) before provision for income taxes $ (3,045) $ (1,522) $ 11,738 $ 5,858 Three Months Ended March 31, (In Thousands) 2020 2019 Income (loss) on unconsolidated joint ventures WFLLA, LLC $ (761) $ 2,929 Other unconsolidated joint ventures (2,776) — Income (loss) on unconsolidated joint ventures $ (3,537) $ 2,929 During the three months ended March 31, 2020 and 2019, the Company recorded a loss of $3.5 million and $2.9 million of income, respectively, which is based on our proportional ownership interest in the entities above. These amounts are reflected in Income on unconsolidated joint ventures within the interim unaudited statement of income. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events | |
Subsequent Events | Note 29 – Subsequent events As of May 11, 2020, the Company has facilitated the fundings of approximately $2.1 billion of loans through the U.S. Small Business Administration's Paycheck Protection Program ("PPP"). Through the CARES Act, the initiative calls for existing SBA lenders to extend loans to small businesses to cover payroll, occupancy and operating expenses through the PPP. Furthermore, the PPP includes a 100% guarantee from the federal government for loans up to $10 million and principal forgiveness for borrowers if the funds are used primarily for retaining employees. Since the Company opened its PPP loan portal, it has accepted more than 40,000 applications and has obtained SBA approvals to fund in excess of $2.9 billion of loans across the U.S. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies | |
Use of estimates | Use of estimates The preparation of the Company’s unaudited interim 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 unaudited interim consolidated financial statements and the reported amounts of income and expenses during the reporting period. Management makes subjective estimates to project cash flows the Company expects to receive on its loans and securities as well as the related market discount rates, which significantly impacts the interest income, impairments, allowance for loan loss, and fair values recorded or disclosed. The effects of COVID-19 may negatively and materially impact significant estimates and assumptions used by the Company including, but not limited to estimates of expected credit losses, valuation of our equity method investments and the fair value estimates of the Company’s assets and liabilities . The uncertainty over the ultimate impact COVID-19 will have on the U.S. economony and global economy generally, and on our business in particular, makes any estimates and assumptions as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19 . Actual results could materially differ from those estimates. |
Basis of consolidation | Basis of consolidation The accompanying unaudited interim 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 unaudited interim 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 unaudited interim consolidated financial statements have been reclassified in order to conform to the current period’s presentation. |
Cash and cash equivalents | Cash and cash equivalents The Company accounts 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. |
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. |
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 the Company that we do not intend to sell, or securitized loans that were previously originated by us. 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. 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. 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 to be not 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 the loan 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 represent certain loans originated by the Company for which we have elected the fair value option. Interest is recognized as interest income in the unaudited interim 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 unaudited interim consolidated statements of income. |
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 (“LTV”) 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. On January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses, and subsequent amendments (“ASU 2016-13”), which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model. CECL amends the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost. The allowance for loan losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on our unaudited consolidated balance sheets. The guidance also requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. In connection with the Company’s adoption of ASU 2016-13 on January 1, 2020, the Company implemented new processes including the utilization of loan loss forecasting models, updates to the Company’s reserve policy documentation, changes to internal reporting processes and related internal controls. The Company has implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for its loan portfolio. The CECL forecasting methods used by the Company include (i) a probability of default and loss given default method using underlying third-party CMBS/CRE loan database with historical loan losses from 1998 to 2019 and (ii) probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. The Company might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data. The Company estimates the CECL expected credit losses for its loan portfolio at the individual loan level. Significant inputs to the Company’s forecasting methods include (i) key loan-specific inputs such as LTV, vintage year, loan-term, underlying property type, occupancy, geographic location, and others, and (ii) a macro-economic forecast, including unemployment rates, interest rates, commercial real estate prices, and others. These estimates may change in future periods based on available future macro-economic data and might result in a material change in the Company’s future estimates of expected credit losses for its loan portfolio. In certain instances, the Company considers relevant loan-specific qualitative factors to certain loans to estimate its CECL expected credit losses. The Company considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that the Company determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that the Company determines foreclosure is not probable, the Company applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of 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 interest income. Non-accrual loans include PCD (“purchased credit-deteriorated”) loans when principal or interest has been delinquent for 90 days or more. |
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. 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. Additionally, based on recently issued regulatory guidance provided by federal and state regulatory agencies, loan modifications made in response to the COVID-19 pandemic are not considered TDRs if loans were considered current at the date the modification program was implemented. |
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 in the unaudited interim 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) in the unaudited interim 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 residential mortgage banking activities in the unaudited interim consolidated statements of income. |
Mortgage backed securities, at fair value | Mortgage backed securities, at fair value The Company accounts for MBS as trading securities and carries them 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 as of 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 unaudited interim 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 unaudited interim 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 in the unaudited interim consolidated balance sheets at the estimated fair value with the changes in the fair value recorded in earnings, unless hedge accounting is elected. As of March 31, 2020, the Company has offset $8.4 million of cash collateral receivable against our gross derivative liability positions. As of March 31, 2020 and December 31, 2019, the cash collateral receivable for derivatives that has not been offset againt our derivative liability positions is $11.7 million and $9.5 million, respectively, and is included in restricted cash in the unaudited interim 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 are reported within net unrealized gain (loss) on financial instruments, while the related interest income or interest expense, are reported within net realized gain (loss) on financial instruments in the unaudited interim consolidated statements of income. 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 in the unaudited interim consolidated statements of income as residential mortgage banking activities. IRLCs are classified as Level 3 in the fair value hierarchy. FX forwards FX forwards are agreements between two counterparties to exchange a pair of currencies at a set rate on a future date. FX forward contracts are used to convert the foreign currency risk to U.S. dollars to mitigate exposure to fluctuations in FX rates. The fair value adjustments are reported within net unrealized gain (loss) on financial instruments in the consolidated statements of income. FX forwards are classified as Level 2 in the fair value hierarchy. CDSs CDSs 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 are reported within net unrealized gain (loss) on financial instruments, while the related interest income or interest expense, are reported within net realized gain (loss) on financial instruments in the unaudited interim consolidated statements of income. CDS are classified as Level 2 in the fair value hierarchy. Hedge accounting As a general rule, hedge accounting is permitted where the Company is exposed to a particular risk, such as interest rate risk, that causes changes in the fair value of an asset or liability or variability in the expected future cash flows of an existing asset, liability, or forecasted transaction that may affect earnings. To qualify as an accounting hedge under the hedge accounting rules (versus an economic hedge where hedge accounting is not applied), a hedging relationship must be highly effective in offsetting the risk designated as being hedged. We use cash flow hedges to hedge the exposure to variability in cash flows from forecasted transactions, including the anticipated issuance of securitized debt obligations. ASC 815 requires that a forecasted transaction be identified as either: 1) a single transaction, or 2) a group of individual transactions that share the same risk exposures for which they are designated as being hedged. Hedges of forecasted transactions are considered cash flow hedges since the price is not fixed, hence involve variability of cash flows. For qualifying cash flow hedges, the change in the fair value of the derivative (the hedging instrument) is recorded in other comprehensive income (loss) ("OCI"), and is reclassified out of OCI and into the consolidated statements of income when the hedged cash flows affect earnings. These amounts are recognized consistent with the classification of the hedged item, primarily interest expense (for hedges of interest rate risk). If the hedge relationship is terminated, then the value of the derivative recorded in accumulated other comprehensive income (loss) ("AOCI") is recognized in earnings when the cash flows that were hedged affect earnings, so long as the forecasted transaction remains probable of occurring. For hedge relationships that are discontinued because a forecasted transaction is probable of not occurring according to the original hedge forecast (including an additional two month window), any related derivative values recorded in AOCI are immediately recognized in earnings. Hedge accounting is generally terminated at the debt issuance date because we are no longer exposed to cash flow variability subsequent to issuance. Accumulated amounts recorded in AOCI at that date are then released to earnings in future periods to reflect the difference in 1) the fixed rates economically locked in at the inception of the hedge and 2) the actual fixed rates established in the debt instrument at issuance. Because of the effects of the time value of money, the actual interest expense reported in earnings will not equal the effective yield locked in at hedge inception multiplied by the par value. Similarly, this hedging strategy does not actually fix the interest payments associated with the forecasted debt issuance. |
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 of loans, including a securitization of loans accounted for as a sale in accordance with GAAP, if servicing is retained. For servicing rights, gains related to servicing rights retained is included in net realized gain (loss) in the unaudited interim consolidated statements of income. For residential mortgage servicing rights, gains on servicing rights retained upon sale of a loan are included in residential mortgage banking activities in the unaudited interim 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 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, default rates, and cost of servicing rates. Residential MSRs are classified as Level 3 in the fair value hierarchy. |
Real estate, held for sale | Real estate, held for sale Real estate, held for sale, includes purchased real estate and real estate acquired in full or partial settlement of loan obligations, generally through foreclosure, that is being marketed for sale. Real estate, held for sale is recorded at acquisition at the property’s estimated fair value less estimated costs to sell. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. After acquisition, real estate held for sale is analyzed periodically for changes in fair values and any subsequent write down is charged through impairment. The Company records a gain or loss from the sale of real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of real estate to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether the collectability of the transaction price is probable. Once these criteria are met, the real estate is derecognized and the gain or loss on sale is recorded upon transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. This adjustment is based on management’s estimate of the fair value of the loan extended to the buyer to finance the sale. |
Investment in unconsolidated joint venture | Investment in unconsolidated joint ventures 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 allocable share of the earnings or losses of the investment monthly in earnings and adjust the carrying amount for our share of the distributions that exceed our earnings. |
Purchased future receivables | Purchased future receivables Through Knight Capital, the Company provides working capital advances to small businesses through the purchase of their future revenues. The Company enters into a contract with the business whereby the Company pays the business an upfront amount in return for a specific amount of the business’s future revenue receivables, known as payback amounts. The payback amounts are primarily received through daily payments initiated by automated clearing house (“ACH”) transactions. Revenues from purchased future receivables are realized when funds are received under each contract. The allocation of the amount received is determined by apportioning the amount received based upon the factor (discount) rate of the business's contract. Management believes that this methodology best reflects the effective interest method. The Company has established an allowance for doubtful purchased future receivables. An increase in the allowance for doubtful purchased future receivables results in a charge to income and is reduced when purchased future receivables are charged-off. Purchased future receivables are charged-off after 90 days past due. Management believes that the allowance reflects the risk elements and is adequate to absorb losses inherent in the portfolio. Although management has performed this evaluation, future adjustments may be necessary based on changes in economic conditions or other factors. |
Intangible assets | Intangible assets The Company accounts for intangible assets under ASC 350, Intangibles- Goodwill and Other . The Company’s intangible assets include an SBA license, capitalized software, a broker network, trade names, and an acquired favorable lease. The Company capitalizes software costs expected to result in long-term operational benefits, such as replacement systems or new applications that result in significantly increased operational efficiencies or functionality. All other costs incurred in connection with internal use software are expensed as incurred. The Company initially records its intangible assets at cost or fair value and will test for impairment if a triggering event occurs. Intangible assets are included within other assets in the consolidated balance sheets. The Company amortizes intangible assets with identified estimated useful lives on a straight-line basis over their estimated useful lives. |
Goodwill | Goodwill The Company recorded goodwill in connection with the Company’s acquisition of Knight Capital. Goodwill is not amortized, but rather, is tested for impairment annually or more frequently if events or changes in circumstances indicate potential impairment. Goodwill represents the excess of the consideration paid over the fair value of net assets acquired in connection with the acquisition of Knight. In testing goodwill for impairment, the Company follows ASC 350, Intangibles- Goodwill and Other, which permits a qualitative assessment of whether it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill. If the qualitative assessment determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value including |
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 unaudited interim consolidated statements of income as a component of interest expense. 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 in the unaudited interim 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 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, borrowings under repurchase agreements, and promissory notes. 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 unaudited interim 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 in the unaudited interim 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 March 31, 2020, 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 unaudited interim consolidated balance sheets as an asset and cash received from the lender was recorded on our unaudited interim consolidated balance sheets as a liability. Interest paid and accrued in connection with our repurchase agreements is recorded as interest expense in the unaudited interim 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, and this SPE issues 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 in the consolidated balance sheets. Debt issuance costs related to securitizations are presented as a direct deduction from the carrying value of the related debt liability. Debt issuance costs are amortized using the effective interest method and are included in interest expense in the unaudited interim consolidated statements of income. |
Convertible note, net | Convertible note, net ASC 470 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 notes 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 on our nonconvertible debt borrowing rate. The equity components of the convertible senior notes have been reflected within additional paid-in capital in our unaudited interim 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 unaudited interim consolidated statements of operations. The remaining settlement consideration allocated to the equity component would be recognized as a reduction of additional paid-in capital in our unaudited interim consolidated balance sheets. |
Senior secured notes, net | Senior secured notes, net The Company accounts for secured debt offerings under ASC 470 . Pursuant to the adoption of ASU 2015-03, the Company’s senior secured notes are 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 in the unaudited interim consolidated statements of income. |
Corporate debt, net | Corporate debt, net The Company accounts for corporate debt offerings under ASC 470. The Company’s corporate debt is presented net of debt issuance costs. Interest paid and accrued in connection with corporate debt is recorded as interest expense in the unaudited interim consolidated statements of income. |
Guaranteed loan financing | Guaranteed loan financing Certain partial loan sales do not qualify for sale accounting under ASC 860 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 in the unaudited interim consolidated balance sheets and the proceeds from the portion sold is recorded as guaranteed loan financing in the liabilities section of the unaudited interim 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 unaudited interim 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 the SBA whole 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 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 the 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 in the unaudited interim consolidated balance sheets and the unaudited interim consolidated statements of income, represent direct investment in the Operating Partnership by Sutherland OP Holdings II, Ltd., which is managed by our Manager, and third parties. |
Fair value option | Fair value option ASC 825, Financial Instruments , provides a fair value option election that allows entities to make an 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 unaudited interim 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 the Company that we intend to sell in the near term. The fair value elections for loans, held for sale at fair value originated by the Company 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 unaudited interim 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. 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 unaudited interim 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 unaudited interim 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 unaudited interim consolidated statements of income. As of March 31, 2020 and December 31, 2019, 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 recognized upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized through the following five-step process: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Since the updated guidance does not apply to revenue associated with financial instruments, including interest income, realized or unrealized gains on financial instruments, loan servicing fees, loan origination fees, among other revenue streams, the adoption of this standard did not have a material impact on our unaudited interim consolidated financial statements. The revenue recognition guidance also included revisions to existing accounting rules regarding the determination of whether a company is acting as a principal or agent in an arrangement and accounting for sales of nonfinancial assets where the seller has continuing involvement. These additional revisions also did not materially impact the Company. Interest income Interest income on 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 loans, held at fair value and loans, held for sale, at fair value, are presented in the unaudited interim consolidated statements of income as components of other income and operating expenses. Origination fees for residential mortgage loans originated by GMFS are presented in the unaudited interim consolidated statements of income in residential mortgage banking activities, while origination expenses are presented within variable expenses on residential mortgage banking activities. The amortization of net origination fees and expenses for loans, held-for-investment are presented in the unaudited interim consolidated statements of income as a component of interest income. |
Residential Mortgage Banking Activities | Residential mortgage banking activities Residential mortgage banking activities, reflects revenue 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, Residential mortgage banking activities 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 residential mortgage banking activities, in the unaudited interim 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 fee income represents revenue earned from originating mortgage loans held for sale and are reflected in residential mortgage banking activities, when loans are sold. Variable expenses on residential mortgage banking activities Loan expenses include indirect costs related to loan origination activities, such as correspondent fees, and are expensed as incurred and are included within variable expenses on residential mortgage banking activities on the Company’s unaudited interim 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. 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. |
Foreign currency transactions | Foreign currency transactions Assets and liabilities denominated in non-U.S. currencies are translated into U.S. dollars using foreign currency exchange rates prevailing at the end of the reporting period. Revenue and expenses are translated at the average exchange rates for each reporting period. Foreign currency remeasurement gains or losses on transactions in nonfunctional currencies are recognized in earnings. Gains or losses on translation of the financial statements of a non-U.S. operation, when the functional currency is other than the U.S. dollar, are included, net of taxes, in the consolidated statements of comprehensive income. |
Recently Issued Accounting Pr_2
Recently Issued Accounting Pronouncements (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Recently Issued Accounting Pronouncements | |
Schedule of FASB Standards | Financial Accounting Standards Board ("FASB") Standards adopted during 2020 Standard Summary of guidance Effects on financial statements ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments Replaces existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost, which will reflect management's estimate of credit losses over the full remaining expected life of the financial assets and will consider expected future changes in macroeconomic conditions. Adopted January 1, 2020. Issued June 2016 Eliminates existing guidance for PCI loans, and requires recognition of the accretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, with a corresponding increase in the recorded investment of related loans. The Company adopted ASU 2016-13 using the modified retrospective method for all loans carried at amortized cost. We recorded a $6.8 million cumulative-effect adjustment to the opening retained earnings (net of taxes) in our consolidated statement of equity as of January 1, 2020. The Company's total increase in the allowance for loan losses was $11.1 million, which included a $3.6 million allowance for loan loss balance sheet gross up, relating to purchased credit deteriorated loans. Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets). Requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. ASU 2017-4, Intangibles — Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment Requires an impairment loss to be recognized when the estimated fair value of a reporting unit falls below its carrying value. Adopted January 1, 2020. Issued January 2017 Eliminates the second condition in the current guidance that requires an impairment loss to be recognized only if the estimated implied fair value of the goodwill is below its carrying value. Based on current impairment test results, the adoption did not have a material effect on the consolidated financial statements. The guidance may result in more frequent goodwill impairment losses in future periods due to the removal of the second condition. ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement Provides guidance on increasing the transparency and comparability of the disclosure requirements for fair value measurement. The adoption did not have a material impact on our consolidated financial statements. Issued August 2018 |
Business Combinations (Tables)
Business Combinations (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Owens Realty Mortgage, Inc. | |
Acquisitions | |
Schedule of fair value of assets acquired and liabilities acquired | (In Thousands) March 29, 2019 Assets Cash and cash equivalents $ 10,822 Loans 130,449 Real estate, held for sale 67,973 Investment in unconsolidated joint ventures 8,619 Other assets Deferred tax assets 4,660 Accrued interest 1,209 Other 379 Total assets acquired $ 224,111 Liabilities Secured borrowings 12,713 Accounts payable and other accrued liabilities 1,000 Due to Manager 228 Deferred tax liabilities 123 Total liabilities assumed $ 14,064 Net assets acquired $ 210,047 |
Schedule of aggregate consideration transferred, net assets acquired, and related bargain purchase gain | Total consideration transferred (in thousands, except share and per share data) FV of net assets acquired $ 210,047 ORM shares outstanding at March 29, 2019 8,482,880 Exchange ratio x 1.441 Shares issued 12,223,830 Market price as of March 29, 2019 $ 14.67 Total consideration transferred based on value of shares issued $ 179,324 Bargain purchase gain $ 30,728 |
Schedule of pro-forma revenue and earnings | For the three months ended (In Thousands) March 31, 2019 Selected Financial Data Interest income $ 51,543 Interest expense (36,323) Provision for loan losses (518) Non-interest income 27,031 Non-interest expense (37,721) Income before provision for income taxes 4,012 Income tax benefit (provision) 2,996 Net income $ 7,008 |
Knight Capital | |
Acquisitions | |
Schedule of fair value of assets acquired and liabilities acquired | (In Thousands) October 25, 2019 Assets Cash and cash equivalents $ 1,673 Purchased future receivables, 39,540 Prepaid expenses and other 1,265 Intangible assets 5,880 Total assets acquired $ 48,358 Liabilities Secured borrowings 30,600 Accounts payable and other accrued liabilities 1,173 Total liabilities assumed $ 31,773 Net assets acquired $ 16,585 |
Schedule of aggregate consideration transferred, net assets acquired, and related bargain purchase gain | Total Consideration Transferred (in thousands) Cash consideration $ 17,500 Common stock consideration 10,290 Total consideration transferred $ 27,790 Net Tangible Assets $ 10,705 Identified Intangible Assets 5,880 FV of Net Assets Acquired $ 16,585 Goodwill $ 11,205 |
Schedule of pro-forma revenue and earnings | For the three months ended (In Thousands) March 31, 2019 Selected Financial Data Interest income $ 48,753 Interest expense (35,775) Provision for loan losses (518) Non-interest income 71,925 Non-interest expense (57,600) Income before provision for income taxes 26,785 Income tax benefit 3,003 Net income $ 29,788 |
Schedule of acquired intangible assets are definite-lived assets | (In Thousands) Fair Value Weighted Average Amortization Life Internally developed software $ 3,800 6 years Broker network 1,200 4.5 years Trade name 880 6 years Total Intangible Assets $ 5,880 6 years |
Loans and Allowance for Loan _2
Loans and Allowance for Loan Losses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Schedule of classification, unpaid principal balance, and carrying value of loans held including loans of consolidated VIEs | March 31, 2020 December 31, 2019 Loans (In Thousands) Carrying Value UPB Carrying Value UPB Loans Acquired SBA 7(a) loans $ 239,627 $ 250,687 $ 255,240 $ 269,396 Acquired loans 439,957 440,314 430,307 433,079 Originated Transitional loans 799,640 807,732 593,657 600,226 Originated SBC loans, at fair value 19,813 19,558 20,212 19,565 Originated SBC loans 207,050 205,146 133,118 132,227 Originated SBA 7(a) loans 295,873 298,050 297,934 299,580 Originated Residential Agency loans 4,113 4,113 3,396 3,395 Total Loans, before allowance for loan losses $ 2,006,073 $ 2,025,600 $ 1,733,864 $ 1,757,468 Allowance for loan losses $ (37,021) — $ (5,880) — Total Loans, net $ 1,969,052 $ 2,025,600 $ 1,727,984 $ 1,757,468 Loans in consolidated VIEs Loans Originated SBC loans $ 1,008,011 $ 998,420 $ 1,037,844 $ 1,026,921 Acquired loans 622,213 628,044 666,226 671,698 Originated Transitional loans 461,131 463,039 490,913 493,217 Originated SBA 7(a) loans 75,337 79,520 79,457 83,559 Acquired SBA 7(a) loans 49,432 61,672 53,320 66,997 Total Loans, in consolidated VIEs, before allowance for loan losses $ 2,216,124 $ 2,230,695 $ 2,327,760 $ 2,342,392 Allowance for loan losses on loans in consolidated VIEs $ (20,947) — $ (1,561) — Total Loans, net, in consolidated VIEs $ 2,195,177 $ 2,230,695 $ 2,326,199 $ 2,342,392 Total Loans, net, and Loans, net in consolidated VIEs $ 4,164,229 $ 4,256,295 $ 4,054,183 $ 4,099,860 Loans, held for sale, at fair value Originated Residential Agency loans $ 213,969 $ 204,351 $ 136,506 $ 132,016 Originated Freddie Mac loans 79,524 78,726 21,775 21,513 Originated SBA 7(a) loans 12,324 11,525 28,551 26,669 Acquired loans 511 525 1,245 1,208 Total Loans, held for sale, at fair value $ 306,328 $ 295,127 $ 188,077 $ 181,406 Loans, held for sale, at fair value in consolidated VIEs Loans, held for sale, at fair value Acquired loans $ 4,017 $ 4,011 $ 4,434 $ 4,400 Total Loans, held for sale, at fair value in consolidated VIEs $ 4,017 $ 4,011 $ 4,434 $ 4,400 Total Loans, held for sale, at fair value, and Loans, held for sale, at fair value in consolidated VIEs $ 310,345 $ 299,138 $ 192,511 $ 185,806 Total Loan portfolio $ 4,474,574 $ 4,555,433 $ 4,246,694 $ 4,285,666 |
Schedule of summary of the classification, UPB, and carrying value of loans by year of origination | Carrying Value by Year of Origination (In Thousands) UPB 2020 2019 2018 2017 2016 Pre 2016 Total March 31, 2020 Loans (1) (2) Originated Transitional loans $ 1,270,771 $ 192,598 $ 637,419 $ 338,373 $ 64,266 $ 27,001 $ 1,104 $ 1,260,761 Originated SBC loans 1,203,566 71,747 544,513 273,536 131,266 47,191 144,564 1,212,817 Acquired loans 1,068,358 — 48,837 38,872 29,764 15,447 928,731 1,061,651 Acquired SBA 7(a) loans 312,359 94 25,941 19,151 296 35 238,561 284,078 Originated SBC loans, at fair value 19,558 — — — 1,666 11,807 6,340 19,813 Originated SBA 7(a) loans 377,570 9,883 101,208 147,629 80,782 23,324 4,603 367,429 Originated Residential Agency loans 4,113 899 1,797 710 218 287 205 4,116 Total Loans, before general allowance for loans losses $ 4,256,295 $ 275,221 $ 1,359,715 $ 818,271 $ 308,258 $ 125,092 $ 1,324,108 $ 4,210,665 General allowance for loan losses $ (46,436) Total Loans, net $ 4,164,229 (1) Loan balances include specific allowance for loan losses of $11.5 million. (2) Includes Loans, net in consolidated VIEs |
Schedule of delinquency information on loans by year of origination | Carrying Value by Year of Origination (In Thousands) UPB 2020 2019 2018 2017 2016 Pre 2016 Total March 31, 2020 Loans (1) (2) Current and less than 30 days past due $ 4,086,485 $ 275,042 $ 1,351,822 $ 805,023 $ 290,520 $ 89,149 $ 1,243,278 $ 4,054,834 30-89 Days Past Due 95,211 179 4,202 6,149 9,704 18,536 53,566 92,336 90+ Days 74,599 — 3,691 7,099 8,034 17,407 27,264 63,495 Total Loans, before general allowance for loans losses $ 4,256,295 $ 275,221 $ 1,359,715 $ 818,271 $ 308,258 $ 125,092 $ 1,324,108 $ 4,210,665 General allowance for loan losses $ (46,436) Total Loans, net $ 4,164,229 (1) Loan balances include specific allowance for loan losses of $11.5 million. (2) Includes Loans, net in consolidated VIEs |
Schedule of delinquency information on loans, net | March 31, 2020 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) Originated Transitional loans $ 1,228,782 $ 22,089 $ 9,890 $ 1,260,761 $ 9,890 $ — Originated SBC loans 1,184,204 11,045 17,568 1,212,817 17,568 — Acquired loans 999,330 40,759 21,562 1,061,651 24,375 608 Acquired SBA 7(a) loans 267,249 11,606 5,223 284,078 9,527 1,315 Originated SBC loans, at fair value 14,317 — 5,496 19,813 — 5,496 Originated SBA 7(a) loans 359,411 6,257 1,761 367,429 6,484 — Originated Residential Agency loans 1,541 580 1,995 4,116 2,575 — Total Loans, before general allowance for loans losses $ 4,054,834 $ 92,336 $ 63,495 $ 4,210,665 $ 70,419 $ 7,419 General allowance for loan losses $ (46,436) Total Loans, net $ 4,164,229 Percentage of outstanding (1) Loan balances include specific allowance for loan losses of $11.5 million. (2) Includes Loans, net in consolidated VIEs December 31, 2019 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) Originated Transitional loans $ 1,074,955 $ 5,728 $ 5,645 $ 1,086,328 $ 24,587 $ — Originated SBC loans 1,137,140 15,670 16,089 1,168,899 16,089 — Acquired loans 1,032,259 45,894 16,130 1,094,283 23,500 3,382 Acquired SBA 7(a) loans 297,172 4,646 5,042 306,860 9,177 1,326 Originated SBC loans, at fair value 20,212 — — 20,212 — — Originated SBA 7(a) loans 370,101 5,238 1,290 376,629 8,882 — Originated Residential Agency loans 582 635 2,179 3,396 2,105 74 Total Loans, before allowance for loans losses $ 3,932,421 $ 77,811 $ 46,375 $ 4,056,607 $ 84,340 $ 4,782 General allowance for loan losses $ (2,424) Total Loans, net $ 4,054,183 Percentage of outstanding (1) Loan balances include specific allowance for loan losses. (2) Includes Loans, net in consolidated VIEs |
Schedule of information on 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 March 31, 2020 Loans (1) (2) Originated Transitional loans $ 5,564 $ 34,044 $ 246,284 $ 869,073 $ 105,043 $ 753 $ 1,260,761 Originated SBC loans — 63,255 472,162 650,758 18,886 7,756 1,212,817 Acquired loans 223,696 401,626 242,357 130,586 47,238 16,148 1,061,651 Acquired SBA 7(a) loans 7,750 38,603 99,308 78,322 29,623 30,472 284,078 Originated SBC loans, at fair value — 8,006 — 6,311 5,496 — 19,813 Originated SBA 7(a) loans 1,169 14,730 46,168 139,658 61,067 104,637 367,429 Originated Residential Agency loans — 51 91 1,030 2,668 276 4,116 Total Loans, before general allowance for loans losses $ 238,179 $ 560,315 $ 1,106,370 $ 1,875,738 $ 270,021 $ 160,042 $ 4,210,665 General allowance for loan losses $ (46,436) Total Loans, net $ 4,164,229 Percentage of outstanding 5.7 % 13.3 % 26.3 % 44.5 % 6.4 % 3.8 % December 31, 2019 Loans (1) (2) Originated Transitional loans $ 1,736 $ 28,108 $ 277,388 $ 750,298 $ 28,059 $ 739 $ 1,086,328 Originated SBC loans — 60,601 431,312 660,733 8,045 8,208 1,168,899 Acquired loans 218,679 371,471 293,216 161,431 35,731 13,755 1,094,283 Acquired SBA 7(a) loans 7,712 39,566 103,590 83,954 39,726 32,312 306,860 Originated SBC loans, at fair value — 8,192 — 6,422 5,598 — 20,212 Originated SBA 7(a) loans 865 13,843 41,166 130,177 78,544 112,034 376,629 Originated Residential Agency loans — 51 — 830 2,393 122 3,396 Total Loans, before allowance for loans losses $ 228,992 $ 521,832 $ 1,146,672 $ 1,793,845 $ 198,096 $ 167,170 $ 4,056,607 General allowance for loan losses $ (2,424) Total Loans, net $ 4,054,183 Percentage of outstanding 5.6 % 12.9 % 28.3 % 44.2 % 4.9 % 4.1 % (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 activity of the allowance for loan losses for loans | Three Months Ended March 31, 2020 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for Beginning balance $ 304 $ 188 $ 3,054 $ 2,114 $ 1,781 $ 7,441 Cumulative-effect adjustment upon adoption of ASU 2016-13 2,400 1,906 1,878 3,562 1,379 11,125 Provision for (recoveries of) loan losses 7,658 22,170 5,722 12 4,242 39,804 Charge-offs and sales - - (8) (131) (329) (468) Recoveries - - - 65 1 66 Ending balance $ 10,362 $ 24,264 $ 10,646 $ 5,622 $ 7,074 $ 57,968 Three Months Ended March 31, 2019 (In Thousands) Originated Originated Transitional loans Acquired Acquired Originated Total Allowance for Beginning balance $ 11 $ 353 $ 5,052 $ 2,318 $ 586 $ 8,320 Provision for (recoveries of) loan losses (11) (131) 235 271 154 518 Charge-offs and sales - - - (329) - (329) Recoveries - - (246) 14 - (232) Ending balance $ - $ 222 $ 5,041 $ 2,274 $ 740 $ 8,277 |
Schedule of non-accrual loans | (In Thousands) March 31, 2020 December 31, 2019 Non-accrual loans With an allowance $ 25,914 $ 18,063 Without an allowance 44,505 60,036 Total recorded carrying value of non-accrual loans $ 70,419 $ 78,099 Allowance for loan losses related to non-accrual loans $ (10,916) $ (2,093) Unpaid principal balance of non-accrual loans $ 88,596 $ 83,991 March 31, 2020 March 31, 2019 Interest income on non-accrual loans for the three months ended $ 157 $ 12 |
Schedule of recorded investment of TDRs | March 31, 2020 December 31, 2019 (In Thousands) SBC SBA Total SBC SBA Total Recorded carrying value modified loans classified as TDRs $ 2,161 $ 13,221 $ 15,382 $ 6,258 $ 14,204 $ 20,462 Allowance for loan losses on loans classified as TDRs $ 15 $ 3,825 $ 3,840 $ 274 $ 454 $ 728 Carrying value of modified loans classified as TDRs Carrying value of modified loans classified as TDRs on accrual status $ 247 $ 6,813 $ 7,060 $ 333 $ 7,437 $ 7,770 Carrying value of modified loans classified as TDRs on non-accrual status 1,914 6,408 8,322 5,925 6,767 12,692 Total carrying value of modified loans classified as TDRs $ 2,161 $ 13,221 $ 15,382 $ 6,258 $ 14,204 $ 20,462 |
Schedule of TDR modifications by primary modification type and related financial effects | Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 (In Thousands, except number of loans) SBC SBA Total SBC SBA Total Number of loans permanently modified 1 7 8 1 9 10 Pre-modification recorded balance (a) $ 151 $ 2,767 $ 2,918 $ 103 $ 1,265 $ 1,368 Post-modification recorded balance (a) $ 151 2,769 $ 2,920 $ 103 $ 1,250 $ 1,353 Number of loans that remain in default as of March 31, 2020 (b) 1 3 4 1 1 2 Balance of loans that remain in default as of March 31, 2020 (b) $ 151 $ 160 $ 311 $ 103 $ 55 $ 158 Concession granted (a) : Term extension $ - $ 1,564 $ 1,564 $ - $ 1,187 $ 1,187 Interest rate reduction - - - 103 - 103 Principal reduction - - - - - - Foreclosure 151 152 303 - 55 55 Total $ 151 $ 1,716 $ 1,867 $ 103 $ 1,242 $ 1,345 (a) Represents carrying value. (b) Represents the March 31, 2020 carrying values of the TDRs that occurred during the three months ended March 31, 2020 and 2019 that remained in default as of March 31, 2020. 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. |
Geographical concentration | |
Schedule of concentration risk of loans secured by real estate | Geographic Concentration (% of Unpaid Principal Balance) March 31, 2020 December 31, 2019 California 17.7 % 16.9 % Texas 15.2 15.2 New York 8.4 8.3 Florida 8.1 8.3 Illinois 5.3 5.2 Georgia 4.6 4.8 Arizona 3.4 3.4 North Carolina 3.2 3.2 Washington 2.9 2.8 Colorado 2.6 2.8 Other 28.6 29.1 Total 100.0 % 100.0 % |
Collateral concentration | |
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 unaudited interim consolidated balance sheets. Collateral Concentration (% of Unpaid Principal Balance) March 31, 2020 December 31, 2019 Multi-family 26.6 % 26.6 % Retail 17.4 17.5 SBA (1) 16.2 17.6 Office 12.2 12.9 Mixed Use 12.0 10.4 Industrial 7.0 6.4 Lodging/Residential 3.2 3.3 Other 5.4 5.3 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 unaudited interim consolidated balance sheets. Collateral Concentration (% of Unpaid Principal Balance) March 31, 2020 December 31, 2019 Lodging 19.4 % 17.3 % Offices of Physicians 13.9 14.1 Child Day Care Services 7.6 8.1 Eating Places 6.3 6.1 Veterinarians 3.9 4.1 Gasoline Service Stations 3.8 3.7 Funeral Service & Crematories 2.1 2.0 Grocery Stores 2.1 2.0 Auto 1.2 1.3 Other 39.7 41.3 Total 100.0 % 100.0 % |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020: (In Thousands) Level 1 Level 2 Level 3 Total Assets: Loans, held for sale, at fair value $ — $ 310,345 $ — $ 310,345 Loans, net, at fair value — — 19,813 19,813 Mortgage backed securities, at fair value — 78,437 103 78,540 Derivative instruments, at fair value — 506 17,250 17,756 Residential mortgage servicing rights, at fair value — — 78,631 78,631 Total assets $ — $ 389,288 $ 115,797 $ 505,085 Liabilities: Derivative instruments, at fair value $ — $ 16,585 $ — $ 16,585 Total liabilities $ — $ 16,585 $ — $ 16,585 The following table presents the Company’s financial instruments carried at fair value on a recurring basis as of December 31, 2019: (In Thousands) Level 1 Level 2 Level 3 Total Assets: Loans, held for sale, at fair value $ — $ 192,510 $ — $ 192,510 Loans, net, at fair value — — 20,212 20,212 Mortgage backed securities, at fair value — 92,006 460 92,466 Derivative instruments, at fair value — — 2,814 2,814 Residential mortgage servicing rights, at fair value — — 91,174 91,174 Total assets $ — $ 284,516 $ 114,660 $ 399,176 Liabilities: Derivative instruments, at fair value $ — $ 5,250 $ — $ 5,250 Total liabilities $ — $ 5,250 $ — $ 5,250 |
Summary of changes in the fair value of financial instruments held at fair value classified as Level 3 | Three Months Ended March 31, 2020 (In Thousands) MBS Derivatives Loans, held at fair value Residential MSRs, at fair value Beginning Balance $ 460 $ 2,814 $ 20,212 $ 91,174 Purchases or Originations — — — - Additions due to loans sold, servicing retained — — — 7,147 Sales / Principal payments (2) — (8) (3,253) Unrealized gains (losses), net (40) 14,436 (391) (16,437) Transfer to (from) Level 3 (315) — — — Ending Balance $ 103 $ 17,250 $ 19,813 $ 78,631 Unrealized gains (losses), net on assets or liabilities held at the end of the period $ (1) $ 17,250 $ 255 $ (26,392) Three Months Ended March 31, 2019 (In Thousands) MBS Derivatives Loans, held at fair value Residential MSRs, at fair value Contingent consideration Beginning Balance $ 12,148 $ 1,776 $ 22,664 $ 93,065 $ 1,207 Purchases or Originations — — — — — Additions due to loans sold, servicing retained — — — 3,593 — Sales / Principal payments (102) — (29) (1,312) — Realized gains (losses), net (20) — (1) — — Unrealized gains (losses), net 89 707 (39) (7,128) — Accreted discount, net 2 — — — — Amortization and adjustment for earn-out payments — — — — (1,207) Transfer to (from) Level 3 15,083 — — — — Ending Balance $ 27,200 $ 2,483 $ 22,595 $ 88,218 $ — Unrealized gains (losses), net on assets or liabilities held at the end of the period $ 2,501 $ 2,483 $ 300 $ 1,502 $ — |
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 March 31, 2020 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 $ 19,813 Single External Source Third Party Mark $ 99.77 – 105.70 $ 101.31 Mortgage backed securities, at fair value 103 Transaction Price Transaction Price 99.00 – 99.00 99.00 Residential mortgage servicing rights, at fair value 78,631 Single external source Discounted cash flow N/A N/A (a) Prices are weighted based on the unpaid principal balance of the loans and securities included in the range for each class 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, 2019 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 $ 20,212 Single External Source Third Party Mark $ 100.47 – 110.83 $ 103.31 Mortgage backed securities, at fair value (b) 357 Broker Quotes Third Party Mark 1.00 – 1.00 1.00 Mortgage backed securities, at fair value 103 Transaction Price Transaction Price 99.00 – 99.00 99.00 Residential mortgage servicing rights, at fair value 91,174 Single external source Discounted cash flow N/A N/A (a) Prices are weighted based on the unpaid principal balance of the loans and securities included in the range for each class (b) Price ranges and weighted averages represent interest-only strips with a fair value of $0.4 million as of December 31, 2019 |
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 | March 31, 2020 December 31, 2019 (In Thousands) Carrying Value Estimated Carrying Value Estimated Assets: Loans, net $ 4,144,416 $ 4,073,947 $ 4,033,972 $ 4,147,831 Purchased future receivables, net 49,150 49,150 43,265 43,265 Servicing rights 31,480 35,006 30,795 34,723 Total assets $ 4,225,046 $ 4,158,103 $ 4,108,032 $ 4,225,819 Liabilities: Secured borrowings $ 1,698,937 $ 1,698,937 $ 1,189,392 $ 1,189,392 Securitized debt obligations of consolidated VIEs, net 1,692,074 1,665,922 1,815,154 1,859,047 Senior secured note, net 179,387 181,708 179,289 190,923 Guaranteed loan financing 457,032 472,466 485,461 515,182 Convertible notes, net 111,310 67,720 111,040 116,654 Corporate debt, net 150,074 95,109 149,986 161,098 Total liabilities $ 4,288,814 $ 4,181,862 $ 3,930,322 $ 4,032,296 |
Mortgage Backed Securities (Tab
Mortgage Backed Securities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020 and December 31, 2019. Weighted Weighted Average Gross Gross Average Interest Principal Amortized Unrealized Unrealized (In Thousands) Maturity (a) Rate (a) Balance Cost Fair Value Gains Losses March 31, 2020 Mortgage backed securities, at fair value Freddie Mac Loans 06/2037 4.0 % $ 78,234 $ 57,681 $ 55,685 $ 1,169 $ (3,165) Commercial Loans 10/2049 4.9 47,107 26,816 22,752 — (4,064) Tax Liens 09/2026 6.0 104 104 103 — (1) Total Mortgage backed securities, at fair value 01/2042 4.3 % $ 125,445 $ 84,601 $ 78,540 $ 1,169 $ (7,230) December 31, 2019 Mortgage backed securities, at fair value Freddie Mac Loans 06/2037 4.3 % $ 83,149 $ 61,207 $ 66,108 $ 4,915 $ (14) Commercial Loans 02/2051 5.4 35,984 25,358 26,255 924 (27) Tax Liens 09/2026 6.0 104 104 103 — (1) Total Mortgage backed securities, at fair value 07/2041 4.6 % $ 119,237 $ 86,669 $ 92,466 $ 5,839 $ (42) (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 March 31, 2020 and December 31, 2019 . Weighted Average Interest Principal Amortized (In Thousands) Rate (a) Balance Cost Fair Value March 31, 2020 Mortgage backed securities, at fair value After five years through ten years 3.6 % $ 2,869 $ 2,644 $ 2,598 After ten years 4.3 122,576 81,957 75,942 Total Mortgage backed securities, at fair value 4.3 % $ 125,445 $ 84,601 $ 78,540 December 31, 2019 Mortgage backed securities, at fair value After five years through ten years 3.8 % $ 2,869 $ 2,641 $ 2,825 After ten years 4.7 116,368 84,028 89,641 Total 4.6 % $ 119,237 $ 86,669 $ 92,466 (a) Weighted based on current principal balance. |
Servicing rights (Tables)
Servicing rights (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Schedule of information regarding portfolio of servicing rights | Three Months Ended March 31, (In Thousands) 2020 2019 SBA servicing rights, at amortized cost Beginning net carrying amount $ 17,660 $ 16,749 Additions due to loans sold, servicing retained 961 933 Amortization (873) (822) Impairment (212) (412) Ending net carrying value of SBA servicing rights $ 17,536 $ 16,448 Freddie Mac multi-family servicing rights, at amortized cost Beginning net carrying amount $ 13,135 $ 10,248 Additions due to loans sold, servicing retained 1,449 1,267 Amortization (640) (529) Ending net carrying value of Freddie Mac multi-family servicing rights $ 13,944 $ 10,986 Ending net carrying value of SBA and Freddie Mac multi-family servicing rights, at amortized cost $ 31,480 $ 27,434 Residential mortgage servicing rights, at fair value Beginning Balance $ 91,174 $ 93,065 Additions due to loans sold, servicing retained 7,147 3,593 Loan pay-offs (3,253) (1,312) Unrealized losses (16,437) (7,128) Ending fair value of residential mortgage servicing rights $ 78,631 $ 88,218 Total servicing rights $ 110,111 $ 115,652 |
Schedule of future amortization expense for the servicing rights | (In Thousands) March 31, 2020 2020 $ 4,369 2021 5,167 2022 4,491 2023 3,882 2024 3,337 Thereafter 10,234 Total $ 31,480 |
Residential MSRs | |
Schedule of servicing rights | As of March 31, 2020 As of December 31, 2019 Unpaid Principal Unpaid Principal (In Thousands) Amount Fair Value Amount Fair Value Fannie Mae $ 3,536,350 $ 33,084 $ 3,388,630 $ 37,309 Ginnie Mae 2,513,271 25,587 2,504,993 29,869 Freddie Mac 2,277,047 19,960 2,270,981 23,996 Total $ 8,326,668 $ 78,631 $ 8,164,604 $ 91,174 |
Schedule of mortgage servicing rights portfolio | March 31, 2020 December 31, 2019 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) March 31, 2020 December 31, 2019 Prepayment rate 10% adverse change $ (4,245) $ (4,195) 20% adverse change (8,110) (8,091) Discount rate 10% adverse change $ (2,849) $ (3,450) 20% adverse change (5,501) (6,654) Cost of servicing 10% adverse change $ (1,562) $ (1,648) 20% adverse change (3,123) (3,297) |
SBA | Freddie Mac | |
Schedule of servicing rights | As of March 31, 2020 As of December 31, 2019 Unpaid Principal Unpaid Principal (In Thousands) Amount Carrying Value Amount Carrying Value SBA $ 583,614 $ 17,536 $ 568,017 $ 17,660 Freddie Mac multi-family 1,193,274 13,944 1,167,476 13,135 Total $ 1,776,888 $ 31,480 $ 1,735,493 $ 30,795 |
Schedule of mortgage servicing rights portfolio | March 31, 2020 December 31, 2019 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 multi-family servicing rights (at amortized cost) • Forward prepayment rate - % % - % % • Forward default rate - % % - % % • Discount rate - % % - % % • Servicing expense - % % - % % |
Schedule of adverse changes to key assumptions on the carrying amount of the servicing rights | (In Thousands) March 31, 2020 December 31, 2019 SBA servicing rights (at amortized cost) • Forward prepayment rate 10% adverse change $ (558) $ (563) 20% adverse change (1,086) (1,097) • Default rate 10% adverse change $ (97) $ (94) 20% adverse change (193) (186) • Discount rate 10% adverse change $ (529) $ (520) 20% adverse change (1,027) (1,011) Freddie Mac multi-family servicing rights (at amortized cost) • Forward prepayment rate 10% adverse change $ (287) $ (285) 20% adverse change (568) (558) • Default rate 10% adverse change $ (1) $ (5) 20% adverse change (4) (10) • Discount rate 10% adverse change $ (381) $ (381) 20% adverse change (752) (746) |
Residential mortgage banking _2
Residential mortgage banking activities and variable expenses on residential mortgage banking activities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Residential mortgage banking activities and variable expenses on residential mortgage banking activities | |
Schedule of the components of gains on residential mortgage banking activities, net of variable loan expenses | Three Months Ended March 31, (In Thousands) 2020 2019 Realized and unrealized gains and losses of residential mortgage loans held for sale, at fair value $ 25,166 $ 10,199 Creation of new mortgage servicing rights, net of payoffs 3,894 2,281 Loan origination fee income on residential mortgage loans 3,303 1,743 Unrealized gains (loss) on IRLCs and other derivatives 4,306 364 Residential mortgage banking activities $ 36,669 $ 14,587 Variable expenses on residential mortgage banking activities $ (20,129) $ (9,176) |
Secured Borrowings (Tables)
Secured Borrowings (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Secured Borrowings | |
Schedule of characteristics of secured borrowings | Carrying Value at Lender Asset Class Current Maturity Pricing Facility Size Pledged Assets March 31, 2020 December 31, 2019 JPMorgan Acquired loans, SBA loans August 2020 1M L + 2.00 to 2.50% $ 250,000 $ 104,668 $ 82,204 $ 88,972 Keybank Freddie Mac loans February 2021 1M L + 1.30% 100,000 79,524 78,726 21,513 East West Bank SBA loans July 2020 Prime - 0.821 to + 0.29% 50,000 39,285 30,911 13,294 Credit Suisse Acquired loans (non USD) December 2021 Euribor + 2.50% 224,500 (a) 51,274 37,030 37,646 FCB Acquired loans June 2021 2.75% 1,218 1,737 1,218 1,354 Comerica Bank Residential loans March 2021 1M L + 1.75% 100,000 82,991 77,926 56,822 TBK Bank Residential loans July 2020 Variable Pricing 150,000 78,585 76,358 52,151 Origin Bank Residential loans May 2020 Variable Pricing 50,000 17,885 16,143 15,343 Associated Bank Residential loans November 2020 1M L + 1.50% 40,000 36,697 34,228 5,823 East West Bank Residential MSRs September 2023 1M L + 2.50% 50,000 53,044 49,200 39,900 Credit Suisse Purchased future receivables June 2021 1M L + 4.50% 50,000 49,150 43,250 34,900 Rabobank Real estate January 2021 4.22% 14,500 18,953 12,386 12,485 Total borrowings under credit facilities (b) $ 1,080,218 $ 613,793 $ 539,580 $ 380,203 Citibank Fixed rate, Transitional, Acquired loans August 2020 1M L + 1.875 to 2.125% $ 500,000 $ 305,046 $ 246,417 $ 124,718 Deutsche Bank Fixed rate, Transitional loans November 2021 3M L + 2.00 to 2.40% 425,000 472,064 331,181 141,356 JPMorgan Transitional loans December 2020 1M L + 2.25 to 4.00% 400,000 423,990 297,342 250,466 JPMorgan MBS September 2020 2.87 to 4.52% 90,507 122,070 90,507 93,715 Deutsche Bank MBS January 2021 3.14 to 3.81% 47,612 52,173 47,612 44,730 Citibank MBS April 2020 2.89 to 4.01% 55,275 76,566 55,275 56,189 Bank of America MBS April 2020 1.31 to 1.61% 34,886 33,968 34,886 38,954 RBC MBS August 2020 3.03 to 3.71% 56,137 63,200 56,137 59,061 Total borrowings under repurchase agreements (c) $ 1,609,417 $ 1,549,077 $ 1,159,357 $ 809,189 Total secured borrowings $ 2,689,635 $ 2,162,870 $ 1,698,937 $ 1,189,392 (a) The current facility size is €200.0 million, but has been converted into USD for purposes of this disclosure. (b) The weighted average interest rate of borrowings under credit facilities was 2.9% and 4.0% as of March 31, 2020 and December 31, 2019, respectively. (c) The weighted average interest rate of borrowings under repurchase agreements was 3.4% and 4.2% as of March 31, 2020 and December 31, 2019, respectively. |
Schedule of carrying value of collateral pledged with respect to borrowings under credit facilities and promissory note payable outstanding | Pledged Assets (In Thousands) March 31, 2020 December 31, 2019 Collateral pledged - borrowings under credit facilities Loans, net $ 492,646 $ 436,738 Mortgage servicing rights 53,044 61,304 Purchased future receivables 49,150 43,265 Real estate, held for sale 18,953 19,950 Total collateral pledged on borrowings under credit facilities $ 613,793 $ 561,257 Collateral pledged - borrowings under repurchase agreements Loans, net $ 1,201,100 $ 721,887 Mortgage backed securities 74,439 113,436 Retained interest in assets of consolidated VIEs 273,538 271,880 Total collateral pledged on borrowings under repurchase agreements $ 1,549,077 $ 1,107,203 Total collateral pledged on secured borrowings $ 2,162,870 $ 1,668,460 |
Senior secured notes, convert_2
Senior secured notes, convertible notes, and corporate debt, net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Senior secured notes, convertible notes, and corporate debt, net | |
Schedule of components of the Senior Secured Notes, Convertible Notes, and Corporate debt | (in thousands, except rates) Coupon Rate Maturity Date March 31, 2020 Senior secured notes principal amount (1) 7.50 % 2/15/2022 $ 180,000 Unamortized premium - Senior secured notes 1,479 Unamortized deferred financing costs - Senior secured notes (2,092) Total Senior secured notes, net $ 179,387 Convertible notes - principal amount (2) 7.00 % 8/15/2023 115,000 Unamortized discount - Convertible notes (3) (1,352) Unamortized deferred financing costs - Convertible notes (2,338) Total Convertible notes, net $ 111,310 Corporate debt principal amount (4) 6.50 % 4/30/2021 $ 50,000 Corporate debt principal amount (5) 6.20 % 7/30/2026 104,250 Unamortized discount - Corporate debt 420 Unamortized deferred financing costs - Corporate debt (4,596) Total Corporate debt, net $ 150,074 Total carrying amount of debt components $ 440,771 Total carrying amount of conversion option of equity components recorded in equity $ 1,352 (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. (4) Interest on the corporate debt is payable January 30, April 30, July 30, and October 30 of each year, beginning on July 30, 2018. (5) Interest on the corporate debt is payable January 30, April 30, July 30, and October 30 of each year, beginning on October 30, 2019. |
Schedule of contractual maturities of the Senior Secured Notes, Convertible Notes, and Corporate debt | (In Thousands) March 31, 2020 2020 $ — 2021 50,000 2022 180,000 2023 115,000 2024 — Thereafter 104,250 Total contractual amounts 449,250 Unamortized deferred financing costs, discounts, and premiums, net (8,479) Total carrying amount of debt components $ 440,771 |
Guaranteed loan financing (Tabl
Guaranteed loan financing (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020 5.21 % 1.70 - 6.50 % 2020 - 2044 $ 457,032 December 31, 2019 5.45 % 1.70 - 7.50 % 2020 - 2044 $ 485,461 |
Summary of contractual maturities of total guaranteed loan financing outstanding | (In Thousands) March 31, 2020 2020 $ 314 2021 1,326 2022 2,369 2023 3,329 2024 4,614 Thereafter 445,080 Total $ 457,032 |
Variable interest entities an_2
Variable interest entities and securitization activities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Summary of information on securitized debt obligations | March 31, 2020 December 31, 2019 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 $ 6,131 $ 6,131 5.5 % $ 6,399 $ 6,399 5.5 % ReadyCap Lending Small Business Trust 2019-2 117,876 117,876 4.3 131,032 129,007 4.3 Sutherland Commercial Mortgage Trust 2017-SBC6 38,679 37,958 3.5 42,309 41,486 3.4 Sutherland Commercial Mortgage Trust 2018-SBC7 114,938 113,166 4.7 138,235 136,212 4.7 Sutherland Commercial Mortgage Trust 2019-SBC8 210,516 207,679 2.9 219,617 216,981 2.9 ReadyCap Commercial Mortgage Trust 2014-1 18,406 18,411 5.8 18,626 18,632 5.6 ReadyCap Commercial Mortgage Trust 2015-2 60,344 57,772 4.5 64,239 61,443 4.5 ReadyCap Commercial Mortgage Trust 2016-3 27,295 25,927 3.6 32,269 30,777 4.7 ReadyCap Commercial Mortgage Trust 2018-4 114,670 111,058 3.9 121,179 117,428 3.9 ReadyCap Commercial Mortgage Trust 2019-5 282,994 273,342 4.1 309,296 299,273 4.1 ReadyCap Commercial Mortgage Trust 2019-6 378,765 371,539 3.2 379,400 371,939 3.2 Ready Capital Mortgage Financing 2018-FL2 80,042 79,202 3.3 115,381 114,057 3.8 Ready Capital Mortgage Financing 2019-FL3 267,904 264,837 3.0 267,904 264,249 3.5 Total (1) $ 1,718,560 $ 1,684,898 3.6 % $ 1,845,886 $ 1,807,883 3.7 % (1) Excludes non-company sponsored securitized debt obligations of $7.2 million and $7.3 million that are consolidated in the unaudited interim consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively. |
Schedule of assets and liabilities for VIEs | (In Thousands) March 31, 2020 December 31, 2019 Assets: Cash and cash equivalents $ 20 $ 23 Restricted cash 8,538 8,301 Loans, net 2,195,177 2,326,199 Loans, held for sale, at fair value 4,017 4,434 Due from servicers 10,279 27,964 Accrued interest 11,486 11,565 Total assets $ 2,229,517 $ 2,378,486 Liabilities: Securitized debt obligations of consolidated VIEs, net 1,692,074 1,815,154 Total liabilities $ 1,692,074 $ 1,815,154 |
Unconsolidated VIEs | |
Schedule of assets and liabilities for VIEs | Carrying Maximum (1) (In Thousands) March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 Assets: Mortgage backed securities, at fair value (2) $ 55,685 $ 66,108 $ 55,685 $ 66,108 Investment in unconsolidated joint ventures 53,379 58,850 53,379 58,850 Total assets in unconsolidated VIEs $ 109,064 $ 124,958 $ 109,064 $ 124,958 (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. |
Interest income and interest _2
Interest income and interest expense (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Interest income and interest expense | |
Schedule of components of interest income and expense | Three Months Ended March 31, (In Thousands) 2020 2019 Interest income Loans Acquired SBA 7(a) loans $ 6,202 $ 7,181 Acquired loans 15,411 10,254 Originated Transitional loans 22,219 14,185 Originated SBC loans, at fair value 317 366 Originated SBC loans 15,998 12,282 Originated SBA 7(a) loans 6,269 1,928 Originated Residential Agency loans 20 6 Total loans (1) $ 66,436 $ 46,202 Held for sale, at fair value, loans Originated Residential Agency loans $ 1,297 $ 776 Originated Freddie loans 271 257 Acquired loans 68 36 Total loans, held for sale, at fair value (1) $ 1,636 $ 1,069 Mortgage backed securities, at fair value 1,479 1,482 Total interest income $ 69,551 $ 48,753 Interest expense Secured borrowings $ (12,758) $ (9,909) Securitized debt obligations of consolidated VIEs (19,529) (16,501) Guaranteed loan financing (6,243) (2,710) Senior secured note (3,472) (3,484) Convertible note (2,188) (2,188) Corporate debt (2,740) (983) Total interest expense $ (46,930) $ (35,775) Net interest income before provision for loan losses $ 22,621 $ 12,978 (1) Includes interest income on loans in consolidated VIEs. |
Derivative instruments (Tables)
Derivative instruments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative instruments | |
Schedule of the Company’s derivatives | As of March 31, 2020 As of December 31, 2019 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 Interest rate lock commitments Interest rate risk $ 660,770 17,261 $ — $ 238,283 $ 2,814 $ — Interest Rate Swaps - not designated as hedges Interest rate risk 623,543 — (9,882) 291,001 — (3,181) Interest Rate Swaps - designated as hedges Interest rate risk 143,215 — (6,703) 158,325 — (1,709) Credit Default Swaps Credit risk 15,000 260 — 15,000 — (110) FX forwards Foreign exchange rate risk 16,908 235 15,000 — (250) Total $ 1,459,436 $ 17,756 $ (16,585) $ 717,609 $ 2,814 $ (5,250) |
Schedule of gains and losses on derivatives | Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Net Realized Unrealized Net Realized Unrealized (In Thousands) Gain (Loss) Gain (Loss) Gain (Loss) Gain (Loss) Credit default swaps (1) $ — $ 370 $ — $ (323) Interest rate swaps (1)(2) (247) (9,988) (796) 604 Residential mortgage banking activities interest rate swaps (3) — (10,180) — (343) Interest rate lock commitments (3) — 14,487 — 708 FX forwards (1) (137) 485 — — Total $ (384) $ (4,826) $ (796) $ 646 (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. |
Schedule of gains and losses on the Company’s derivatives which have qualified for hedge accounting | (In Thousands) Derivatives - effective portion reclassified from AOCI to income Hedge ineffectiveness recorded directly in income (2) Total income statement impact Derivatives- effective portion recorded in OCI (3) Total change in OCI for period (3) Hedge type Interest rate - forecasted transactions (1) $ (367) $ (1,694) $ (2,061) $ (5,189) $ (3,128) Total - Three Months Ended March 31, 2020 $ (367) $ (1,694) $ (2,061) $ (5,189) $ (3,128) Hedge type Interest rate - forecasted transactions (1) $ 41 $ — $ 41 $ (461) $ (420) Total - Three Months Ended March 31, 2019 $ 41 $ — $ 41 $ (461) $ (420) (1) Consists of benchmark interest rate hedges of LIBOR-indexed floating-rate liabilities. (2) Hedge ineffectiveness is the amount by which the cumulative gain or loss on the designated derivative instrument exceeds the present value of the cumulative expected change in cash flows on the hedged item attributable to the hedged risk. (3) Represents after tax amounts recorded in OCI. |
Real estate, held for sale (Tab
Real estate, held for sale (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Real estate, held for sale | |
Summary of the carrying amount of the Company’s real estate holdings | (In Thousands) March 31, 2020 December 31, 2019 Acquired ORM Portfolio: Retail $ 18,953 $ 19,950 Mixed Use 16,604 17,478 Land 7,362 7,919 Lodging/Residential 3,230 6,280 Office 981 1,256 Total Acquired ORM REO $ 47,130 $ 52,883 Other REO held for sale: Office $ 151 4,465 SBA 351 286 Mixed Use — 279 Retail 660 660 Total Other REO $ 1,162 $ 5,690 Total Real estate, held for sale $ 48,292 $ 58,573 |
Agreements and transactions w_2
Agreements and transactions with related parties (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Management fee | |
Related-party transactions | |
Schedule of related party transactions | For the Three Months Ended March 31, 2020 2019 Management fee - total $ 2.6 million $ 2.0 million Management fee - amount unpaid $ 2.6 million $ 4.1 million |
Incentive distribution | |
Related-party transactions | |
Schedule of related party transactions | For the Three Months Ended March 31, 2020 2019 Incentive fee distribution - total $ - $ - Incentive fee distribution - amount unpaid $ - $ 0.2 million |
Expense reimbursement | |
Related-party transactions | |
Schedule of related party transactions | For the Three Months Ended March 31, 2020 2019 Reimbursable expenses payable to our Manager - total $ 1.3 million $ 0.8 million Reimbursable expenses payable to our Manager - amount unpaid $ 0.2 million $ 1.0 million |
Other assets and other liabil_2
Other assets and other liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other assets and other liabilities | |
Schedule of other assets and other liabilities | (In Thousands) March 31, 2020 December 31, 2019 Other assets: Deferred tax asset $ 31,803 $ 31,803 Tax receivable 14,184 4,019 Deferred loan exit fees 14,374 13,039 Accrued interest 11,383 10,583 Goodwill 11,206 11,206 Due from servicers 4,641 10,127 Right-of-use lease asset 4,586 4,531 Intangible assets 7,978 8,309 Deferred financing costs 2,440 2,046 Other assets 12,296 11,262 Total other assets $ 114,891 $ 106,925 Accounts payable and other accrued liabilities: Deferred tax liability $ 18,757 $ 18,757 Accrued salaries, wages and commissions 12,871 21,146 Accrued interest payable 23,836 17,305 Servicing principal and interest payable 6,661 14,145 Repair and denial reserve 5,043 5,179 Payable to related parties 2,561 2,697 Accrued professional fees 2,525 1,809 Lease payable 4,673 4,618 Other liabilities 12,813 11,751 Total accounts payable and other accrued liabilities $ 89,740 $ 97,407 |
Schedule of Intangible assets | (In Thousands) March 31, 2020 December 31, 2019 Estimated Useful Life Internally developed software - Knight Capital $ 3,536 $ 3,694 6 years Broker network - Knight Capital 1,089 1,156 4.5 years SBA license 1,000 1,000 Indefinite life Favorable lease 871 905 12 years Trade name - Knight Capital 819 855 6 years Trade name - GMFS 663 699 15 years Total Intangible Assets $ 7,978 $ 8,309 |
Schedule of accumulated amortization for finite-lived intangible assets | (In Thousands) March 31, 2020 Favorable lease $ 609 Trade name - GMFS 559 Internally developed software - Knight Capital 264 Broker network - Knight Capital 111 Trade name - Knight Capital 61 Total Accumulated Amortization $ 1,604 |
Amortization expense related to the intangible assets | (In Thousands) March 31, 2020 2020 $ 992 2021 1,295 2022 1,268 2023 1,242 2024 1,210 Thereafter 971 Total $ 6,978 |
Other income and operating ex_2
Other income and operating expenses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other income and operating expenses | |
Schedule of other income and operating expenses | Three Months Ended March 31, (In Thousands) 2020 2019 Other income Origination income $ 2,495 808 Change in repair and denial reserve 136 (89) Other 1,442 181 Total other income $ 4,073 $ 900 Other operating expenses Origination costs 3,025 1,189 Technology expense 1,580 1,101 Impairment on real estate 2,969 305 Rent and property tax expense 1,184 691 Recruiting, training and travel expense 624 587 Marketing expense 546 545 Loan acquisition costs 98 110 Financing costs on purchased future receivables 624 — Other 3,094 2,333 Total other operating expenses $ 13,744 $ 6,861 |
Stockholders Equity (Tables)
Stockholders Equity (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders’ Equity | |
Schedule of cash dividends declared by the Board of Directors | The following table presents cash dividends declared by our board of directors on our common stock from December 12, 2018 through March 31, 2020: Dividend per Declaration Date Record Date Payment Date Share December 12, 2018 December 31, 2018 January 31, 2019 $ 0.40 March 12, 2019 March 28, 2019 April 30, 2019 $ 0.40 June 11, 2019 June 28, 2019 July 31, 2019 $ 0.40 September 10, 2019 September 30, 2019 October 31, 2019 $ 0.40 December 11, 2019 December 31, 2019 January 31, 2020 $ 0.40 March 11, 2020 March 31, 2020 April 30, 2020 $ 0.40 (1) (1) Dividends paid in a combination of cash, not to exceed 20% in the aggregate, and common stock. |
Schedule of Restricted Stock Unit RSU and RSA activity | Restricted Stock Awards (In Thousands, except share data) Number of Grant date fair value Weighted-average grant date fair value (per share) Outstanding, January 1 1,009,617 $ 15,722 $ 15.57 Granted 208,514 3,298 15.82 Vested (60,370) (894) 14.81 Forfeited — — — Outstanding, March 31, 2020 1,157,761 $ 18,126 $ 15.66 |
Earnings per Share of Common _2
Earnings per Share of Common Stock (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings per Share of Common Stock | |
Schedule of computation of basic and diluted earnings per share | Three Months Ended March 31, (In Thousands, except for share and per share amounts) 2020 2019 Basic Earnings Net income $ (51,516) $ 30,450 Less: Income attributable to non-controlling interest (1,064) 983 Less: Income attributable to participating shares 463 82 Basic earnings $ (50,915) $ 29,385 Diluted Earnings Net income $ (51,516) $ 30,450 Less: Income attributable to non-controlling interest (1,064) 983 Less: Income attributable to participating shares 463 82 Diluted earnings $ (50,915) $ 29,385 Number of Shares Basic — Average shares outstanding 51,984,040 32,556,875 Effect of dilutive securities — Unvested participating shares 5,973 6,769 Diluted — Average shares outstanding 51,990,013 32,563,644 Earnings Per Share Attributable to RC Common Stockholders: Basic $ (0.98) $ 0.90 Diluted $ (0.98) $ 0.90 |
Offsetting assets and liabili_2
Offsetting assets and liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Offsetting assets and liabilities | |
Schedule of effect of offsetting recognized assets and liabilities | Gross amounts not offset in the Consolidated Balance Sheets (1) (in thousands) Gross amounts of recognized Assets / Liabilities Gross amounts offset in the Consolidated Balance Sheets Amounts presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received / Paid March 31, 2020 Assets Derivative instruments - Credit default swaps $ 260 $ — $ 260 $ — $ — Derivative instruments - FX forwards 235 — 235 — — Total $ 495 $ — $ 495 $ — $ — Liabilities Derivative instruments - Interest rate swaps $ 25,017 $ 8,432 $ 16,585 $ — $ 11,656 Secured borrowings 1,698,937 — 1,698,937 1,698,937 — Total $ 1,723,954 $ 8,432 $ 1,715,522 $ 1,698,937 $ 11,656 December 31, 2019 Assets Derivative instruments - Interest rate swaps $ 2,814 $ — $ 2,814 $ — $ 2,814 Total $ 2,814 $ — $ 2,814 $ — $ 2,814 Liabilities Derivative instruments - Interest rate swaps $ 4,890 $ — $ 4,890 $ — $ 4,890 Derivative instruments - Credit default swaps 110 — 110 — 110 Derivative instruments - FX forwards 250 — 250 — 250 Secured borrowings 1,189,392 — 1,189,392 1,189,392 — Total $ 1,194,642 $ — $ 1,194,642 $ 1,189,392 $ 5,250 (1) Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, there is excess cash collateral or financial assets we have pledged to a counterparty that exceed the financial liabilities subject to a master netting repurchase arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, any of these excess amounts are excluded from the table although they are separately reported in our unaudited interim consolidated balance sheets as assets or liabilities, respectively. |
Commitments, Contingencies an_2
Commitments, Contingencies and Indemnifications (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Commitments, Contingencies and Indemnifications | |
Schedule of unfunded loan commitments and commitments to originate loans | March 31, December 31, (In Thousands) 2020 2019 Loans, net $ 329,809 $ 128,719 Loans, held for sale at fair value $ 8,855 $ 6,982 March 31, December 31, (In Thousands) 2020 2019 Commitments to originate residential agency loans $ 601,633 $ 190,806 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting | |
Schedule of segment reporting information | Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the three months ended March 31, 2020 are summarized in the below table. SBA Originations, Residential SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 16,494 $ 39,269 $ 12,471 $ 1,317 $ — $ 69,551 Interest expense (11,205) (25,627) (8,513) (1,585) — (46,930) Net interest income before provision for loan losses $ 5,289 $ 13,642 $ 3,958 $ (268) $ — $ 22,621 Provision for loan losses (5,722) (29,828) (4,254) — — (39,804) Net interest income after provision for loan losses $ (433) $ (16,186) $ (296) $ (268) $ — $ (17,183) Non-interest income Residential mortgage banking activities $ — $ — $ — $ 36,669 $ — $ 36,669 Net realized gain (loss) on financial instruments (739) 3,649 4,262 — — 7,172 Net unrealized gain (loss) on financial instruments (9,423) (6,491) (1,082) (16,438) — (33,434) Servicing income 355 532 1,074 6,136 — 8,097 Income on purchased future receivables, net of allowance for doubtful accounts 3,483 — — — — 3,483 Loss from unconsolidated joint ventures (3,537) — — — — (3,537) Other income 2,336 1,283 295 60 99 4,073 Total non-interest income (loss) $ (7,525) $ (1,027) $ 4,549 $ 26,427 $ 99 $ 22,523 Non-interest expense Employee compensation and benefits $ (2,833) $ (2,710) $ (3,910) $ (8,741) $ (742) $ (18,936) Allocated employee compensation and benefits from related party (125) — — — (1,125) (1,250) Variable expenses on residential mortgage banking activities — — — (20,129) — (20,129) Professional fees (235) (338) (289) (287) (1,407) (2,556) Management fees – related party — — — — (2,561) (2,561) Loan servicing expense (1,365) (1,580) (335) (2,258) (32) (5,570) Merger related expenses — — — — (47) (47) Other operating expenses (6,245) (3,457) (1,559) (1,785) (698) (13,744) Total non-interest expense $ (10,803) $ (8,085) $ (6,093) $ (33,200) $ (6,612) $ (64,793) Net loss before provision for income taxes $ (18,761) $ (25,298) $ (1,840) $ (7,041) $ (6,513) $ (59,453) Total assets $ 1,209,617 $ 2,704,301 $ 703,331 $ 418,421 $ 234,380 $ 5,270,050 Reportable business segments, along with remaining unallocated amounts recorded within Corporate- Other, for the three months ended March 31, 2019 are summarized in the below table. SBA Originations, Residential SBC Acquisitions, Mortgage Corporate- (In Thousands) Acquisitions Originations and Servicing Banking Other Consolidated Interest income $ 10,674 $ 28,188 $ 9,109 $ 782 $ — $ 48,753 Interest expense (7,705) (20,666) (6,490) (914) — (35,775) Net interest income before provision for loan losses $ 2,969 $ 7,522 $ 2,619 $ (132) $ — $ 12,978 Provision for loan losses (133) 41 (426) — — (518) Net interest income after provision for loan losses $ 2,836 $ 7,563 $ 2,193 $ (132) $ — $ 12,460 Non-interest income Residential mortgage banking activities $ — $ — $ — $ 14,587 $ — $ 14,587 Net realized gain (loss) on financial instruments (49) 3,540 3,791 — — 7,282 Net unrealized gain (loss) on financial instruments (19) 810 (575) (7,128) — (6,912) Servicing income 1 436 1,015 5,300 — 6,752 Income on unconsolidated joint ventures 2,929 — — — — 2,929 Other income 68 786 14 17 15 900 Gain on bargain purchase — — — — 30,728 30,728 Total non-interest income $ 2,930 $ 5,572 $ 4,245 $ 12,776 $ 30,743 $ 56,266 Non-interest expense Employee compensation and benefits $ (1) $ (2,260) $ (3,768) $ (4,595) $ (824) $ (11,448) Allocated employee compensation and benefits from related party (85) — — — (768) (853) Variable expenses on residential mortgage banking activities — — — (9,176) — (9,176) Professional fees (170) (301) (187) (236) (935) (1,829) Management fees – related party — — — — (1,997) (1,997) Loan servicing expense (801) (1,215) 143 (1,740) (35) (3,648) Merger related expenses — — — — (5,467) (5,467) Other operating expenses (421) (2,117) (1,050) (2,073) (1,200) (6,861) Total non-interest expense $ (1,478) $ (5,893) $ (4,862) $ (17,820) $ (11,226) $ (41,279) Net income (loss) before provision for income taxes $ 4,288 $ 7,242 $ 1,576 $ (5,176) $ 19,517 $ 27,447 Total assets $ 864,881 $ 1,823,166 $ 251,778 $ 277,727 $ 61,462 $ 3,279,014 |
Supplemental Financial Data (Ta
Supplemental Financial Data (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Schedule of income from unconsolidated joint ventures within the consolidated statement of income | Three Months Ended March 31, (In Thousands) 2020 2019 Income (loss) on unconsolidated joint ventures WFLLA, LLC $ (761) $ 2,929 Other unconsolidated joint ventures (2,776) — Income (loss) on unconsolidated joint ventures $ (3,537) $ 2,929 |
Unconsolidated VIEs | |
Schedule of condensed financial information for unconsolidated subsidiaries | Statements of Income Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 (In Thousands) Girod HoldCo, LLC WFLLA, LLC Girod HoldCo, LLC WFLLA, LLC Interest income $ 381 $ 190 $ 1,157 $ 577 Realized gains 149 74 201 100 Unrealized gain (loss) (1,987) (992) 11,278 5,628 Servicing expense and other (1,588) (794) (898) (447) Income (loss) before provision for income taxes $ (3,045) $ (1,522) $ 11,738 $ 5,858 |
Organization (Details)
Organization (Details) - segment | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Number of reportable segments | 4 | |
Number of operating segments | 4 | |
Operating Partnership | ||
Ownership percentage in operating partnership | 97.90% | 97.90% |
Organization - Acquisitions (De
Organization - Acquisitions (Details) $ / shares in Units, $ in Thousands | Oct. 25, 2019USD ($) | Mar. 29, 2019USD ($)$ / sharesshares | Mar. 31, 2020 |
Owens Realty Mortgage, Inc. | |||
Organization | |||
Common share fixed exchange ratio | 1.441 | ||
Number of common shares issued in acquisition | shares | 12,223,830 | ||
Common stock consideration | $ 179,324 | ||
Closing share price | $ / shares | $ 14.67 | ||
Knight Capital | |||
Organization | |||
Common stock consideration | $ 10,290 | ||
Total purchase price | 27,790 | ||
Cash consideration | $ 17,500 | ||
Ready Capital Shareholders | |||
Organization | |||
Closing share price | $ / shares | $ 14.67 | ||
Percentage of equity interests held after closing | 72.00% | ||
Owens Realty Shareholders | |||
Organization | |||
Percentage of equity interests held after closing | 28.00% | ||
Minimum | |||
Organization | |||
Percentage of taxable income distributed in the form of qualifying distributions | 90.00% |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)segmentclassitem | Dec. 31, 2019USD ($) | |
Number of reportable segments | segment | 4 | |
Number of days loans must be delinquent to be placed on nonaccrual status | 90 days | |
Cash collateral offset against derivative liability positions | $ 8,400 | |
Number of separate classes of servicing rights used for risk management purposes | class | 2 | |
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 | |
Restricted cash | ||
Cash collateral not offset against derivative liability positions | $ 11,700 | $ 9,500 |
Recently Issued Accounting Pr_3
Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Retained earnings | $ (69,605) | $ 8,746 | |
ASU 2016-13 | |||
Increase in allowance for loan losses | $ 11,100 | ||
ASU 2016-13 | PCD Loans | |||
Increase in allowance for loan losses | 3,600 | ||
Restatement Adjustment | ASU 2016-13 | |||
Retained earnings | $ (6,800) |
Business Combinations - Acquisi
Business Combinations - Acquisitions (Details) $ / shares in Units, $ in Thousands | Oct. 25, 2019USD ($) | Mar. 29, 2019USD ($)$ / sharesshares | Nov. 07, 2018 |
Ready Capital Shareholders | |||
Acquisitions | |||
Closing share price | $ / shares | $ 14.67 | ||
Percentage of equity interests held after closing | 72.00% | ||
Owens Realty Shareholders | |||
Acquisitions | |||
Percentage of equity interests held after closing | 28.00% | ||
Owens Realty Mortgage, Inc. | |||
Acquisitions | |||
Percentage of adjusted OMR book value | 99.00% | ||
Number of common shares issued in acquisition | shares | 12,223,830 | ||
Common share fixed exchange ratio | 1.441 | ||
Common stock consideration | $ 179,324 | ||
Closing share price | $ / shares | $ 14.67 | ||
Knight Capital | |||
Acquisitions | |||
Common stock consideration | $ 10,290 | ||
Cash consideration | 17,500 | ||
Total consideration transferred | $ 27,790 |
Business Combinations - Fair Va
Business Combinations - Fair Value of Assets and Liabilities Assumed (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Oct. 25, 2019 | Mar. 29, 2019 |
Assets: | ||||
Real estate, held for sale | $ 47,130 | $ 52,883 | ||
Liabilities: | ||||
Goodwill | $ 11,206 | $ 11,206 | ||
Owens Realty Mortgage, Inc. | ||||
Assets: | ||||
Cash and cash equivalents | $ 10,822 | |||
Loans | 130,449 | |||
Real estate, held for sale | 67,973 | |||
Investment in unconsolidated joint ventures | 8,619 | |||
Deferred tax assets | 4,660 | |||
Accrued interest | 1,209 | |||
Other | 379 | |||
Total assets acquired | 224,111 | |||
Liabilities: | ||||
Secured borrowings | 12,713 | |||
Accounts payable and other accrued liabilities | 1,000 | |||
Due to Manager | 228 | |||
Deferred tax liabilities | 123 | |||
Total liabilities assumed | 14,064 | |||
Net assets acquired | 210,047 | |||
Gross contractual principal of acquired loan receivables. | $ 134,800 | |||
Knight Capital | ||||
Assets: | ||||
Cash and cash equivalents | $ 1,673 | |||
Purchased future receivables, | 39,540 | |||
Prepaid expenses and other | 1,265 | |||
Intangible assets | 5,880 | |||
Total assets acquired | 48,358 | |||
Liabilities: | ||||
Secured borrowings | 30,600 | |||
Accounts payable and other accrued liabilities | 1,173 | |||
Total liabilities assumed | 31,773 | |||
Net assets acquired | 16,585 | |||
Goodwill | $ 11,205 |
Business Combinations - Bargain
Business Combinations - Bargain Purchase (Details) $ / shares in Units, $ in Thousands | Oct. 25, 2019USD ($) | Mar. 29, 2019USD ($)$ / sharesshares | Mar. 31, 2019USD ($) |
Aggregate consideration transferred, net of assets acquired and bargain purchase gain | |||
Bargain purchase gain | $ 30,728 | ||
Owens Realty Mortgage, Inc. | |||
Aggregate consideration transferred, net of assets acquired and bargain purchase gain | |||
FV of Net Assets Acquired | $ 210,047 | ||
ORM shares outstanding at March 29, 2019 | shares | 8,482,880 | ||
Exchange ratio | 1.441 | ||
Shares issued | shares | 12,223,830 | ||
Closing share price | $ / shares | $ 14.67 | ||
Bargain purchase gain | $ 30,728 | 30,700 | |
Acquisition related costs | $ 5,500 | ||
Knight Capital | |||
Aggregate consideration transferred, net of assets acquired and bargain purchase gain | |||
FV of Net Assets Acquired | $ 16,585 | ||
Net Tangible Assets | 10,705 | ||
Identified Intangible Assets | 5,880 | ||
Total consideration transferred based on value of shares issued | $ 27,790 |
Business Combinations - Intangi
Business Combinations - Intangible Assets and Goodwill (Details) - Knight Capital $ in Thousands | Oct. 25, 2019USD ($) |
Acquisitions | |
Intangible assets | $ 5,880 |
Weighted Average Amortization Life | 6 years |
Internally developed software | |
Acquisitions | |
Intangible assets | $ 3,800 |
Weighted Average Amortization Life | 6 years |
Broker network | |
Acquisitions | |
Intangible assets | $ 1,200 |
Weighted Average Amortization Life | 4 years 6 months |
Trade name | |
Acquisitions | |
Intangible assets | $ 880 |
Weighted Average Amortization Life | 6 years |
Business Combinations - Pro-for
Business Combinations - Pro-forma Information (Details) - USD ($) $ in Thousands | Mar. 29, 2019 | Mar. 31, 2019 |
Pro-forma information | ||
Bargain purchase gain | $ 30,728 | |
Owens Realty Mortgage, Inc. | ||
Pro-forma information | ||
Interest income | 51,543 | |
Interest expense | (36,323) | |
Provision for loan losses | (518) | |
Noninterest income | 27,031 | |
Noninterest expense | (37,721) | |
Income before provision for income taxes | 4,012 | |
Income tax benefit (provision) | 2,996 | |
Net income | 7,008 | |
Nonrecurring transaction costs excluded from pro forma non-interest expense | 8,400 | |
Bargain purchase gain | $ 30,728 | 30,700 |
Knight Capital | ||
Pro-forma information | ||
Interest income | 48,753 | |
Interest expense | (35,775) | |
Provision for loan losses | (518) | |
Noninterest income | 71,925 | |
Noninterest expense | (57,600) | |
Income before provision for income taxes | 26,785 | |
Income tax benefit (provision) | 3,003 | |
Net income | $ 29,788 |
Loans and Allowance for Loan _3
Loans and Allowance for Loan Losses - Classification, unpaid principal balance, and carrying value (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Carrying Value | |||||
Total Loans, before allowance for loan losses | $ 2,006,073 | $ 1,733,864 | |||
Allowance for loan losses | (37,021) | (5,880) | |||
Total Loans, net | 1,969,052 | 1,727,984 | |||
Allowance for loan losses on loans in consolidated VIEs | (57,968) | (7,441) | $ (8,277) | $ (8,320) | |
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | $ 4,164,229 | 4,164,229 | 4,054,183 | ||
Loans, held for sale, at fair value | 306,328 | 188,077 | |||
Total Loans, held for sale, at fair value in consolidated VIEs | 4,017 | 4,434 | |||
Total Loans, held for sale, at fair value, and Loans, held for sale, at fair value in consolidated VIEs | 310,345 | 192,511 | |||
Loans, held-for-investment | 4,474,574 | 4,246,694 | |||
UPB | |||||
Total Loans, before allowance for loan losses | 2,025,600 | 1,757,468 | |||
Total Loans, net | 2,025,600 | 1,757,468 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 4,256,295 | ||||
Total Loans, held for sale, at fair value | 295,127 | 181,406 | |||
Total Loans, held for sale, at fair value in consolidated VIEs | 4,011 | 4,400 | |||
Total Loans, held for sale, at fair value, and Loans, held for sale, at fair value in consolidated VIEs | 299,138 | 185,806 | |||
Total Loan portfolio | 4,555,433 | 4,285,666 | |||
Consolidated VIEs | |||||
Carrying Value | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 2,216,124 | 2,327,760 | |||
Allowance for loan losses on loans in consolidated VIEs | (20,947) | (1,561) | |||
Total Loans, net, in consolidated VIEs | 2,195,177 | 2,326,199 | |||
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | 4,164,229 | 4,054,183 | |||
UPB | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 2,230,695 | 2,342,392 | |||
Total Loans, net, in consolidated VIEs | 2,230,695 | 2,342,392 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 4,256,295 | 4,099,860 | |||
Acquired SBA 7(a) loans | |||||
Carrying Value | |||||
Total Loans, before allowance for loan losses | 239,627 | 255,240 | |||
Allowance for loan losses on loans in consolidated VIEs | (5,622) | (2,114) | (2,274) | (2,318) | |
UPB | |||||
Total Loans, before allowance for loan losses | 250,687 | 269,396 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 312,359 | ||||
Acquired SBA 7(a) loans | Consolidated VIEs | |||||
Carrying Value | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 49,432 | 53,320 | |||
UPB | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 61,672 | 66,997 | |||
Acquired loans | |||||
Carrying Value | |||||
Total Loans, before allowance for loan losses | 439,957 | 430,307 | |||
Allowance for loan losses on loans in consolidated VIEs | (10,646) | (3,054) | (5,041) | (5,052) | |
Loans, held for sale, at fair value | 511 | 1,245 | |||
Total Loans, held for sale, at fair value in consolidated VIEs | 4,017 | 4,434 | |||
UPB | |||||
Total Loans, before allowance for loan losses | 440,314 | 433,079 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 1,068,358 | ||||
Total Loans, held for sale, at fair value | 525 | 1,208 | |||
Total Loans, held for sale, at fair value in consolidated VIEs | 4,011 | 4,400 | |||
Acquired loans | Consolidated VIEs | |||||
Carrying Value | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 622,213 | 666,226 | |||
UPB | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 628,044 | 671,698 | |||
Originated Transitional loans | |||||
Carrying Value | |||||
Total Loans, before allowance for loan losses | 799,640 | 593,657 | |||
Allowance for loan losses on loans in consolidated VIEs | (24,264) | (188) | (222) | (353) | |
UPB | |||||
Total Loans, before allowance for loan losses | 807,732 | 600,226 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 1,270,771 | ||||
Originated Transitional loans | Consolidated VIEs | |||||
Carrying Value | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 461,131 | 490,913 | |||
UPB | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 463,039 | 493,217 | |||
Originated SBC loans, at fair value | |||||
Carrying Value | |||||
Total Loans, before allowance for loan losses | 19,813 | 20,212 | |||
UPB | |||||
Total Loans, before allowance for loan losses | 19,558 | 19,565 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 19,558 | ||||
Originated SBC loans | |||||
Carrying Value | |||||
Total Loans, before allowance for loan losses | 207,050 | 133,118 | |||
Allowance for loan losses on loans in consolidated VIEs | (10,362) | (304) | (11) | ||
UPB | |||||
Total Loans, before allowance for loan losses | 205,146 | 132,227 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 1,203,566 | ||||
Originated SBC loans | Consolidated VIEs | |||||
Carrying Value | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 1,008,011 | 1,037,844 | |||
UPB | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 998,420 | 1,026,921 | |||
Originated SBA 7(a) loans | |||||
Carrying Value | |||||
Total Loans, before allowance for loan losses | 295,873 | 297,934 | |||
Allowance for loan losses on loans in consolidated VIEs | (7,074) | (1,781) | $ (740) | $ (586) | |
Loans, held for sale, at fair value | 12,324 | 28,551 | |||
UPB | |||||
Total Loans, before allowance for loan losses | 298,050 | 299,580 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 377,570 | ||||
Total Loans, held for sale, at fair value | 11,525 | 26,669 | |||
Originated SBA 7(a) loans | Consolidated VIEs | |||||
Carrying Value | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 75,337 | 79,457 | |||
UPB | |||||
Total Loans, in consolidated VIEs, before allowance for loan losses | 79,520 | 83,559 | |||
Originated Residential Agency loans | |||||
Carrying Value | |||||
Total Loans, before allowance for loan losses | 4,113 | 3,396 | |||
Loans, held for sale, at fair value | 213,969 | 136,506 | |||
UPB | |||||
Total Loans, before allowance for loan losses | 4,113 | 3,395 | |||
Total Loans, net, and Loans, net in consolidated VIEs | 4,113 | ||||
Total Loans, held for sale, at fair value | 204,351 | 132,016 | |||
Originated Freddie Mac loans | |||||
Carrying Value | |||||
Loans, held for sale, at fair value | 79,524 | 21,775 | |||
UPB | |||||
Total Loans, held for sale, at fair value | $ 78,726 | $ 21,513 |
Loans and Allowance for Loan _4
Loans and Allowance for Loan Losses - Loan Vintage (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Loan classification and delinquency by year of origination | |||
UPB | $ 4,256,295 | ||
2020 | 275,221 | ||
2019 | 1,359,715 | ||
2018 | 818,271 | ||
2017 | 308,258 | ||
2016 | 125,092 | ||
Pre 2016 | 1,324,108 | ||
Total | 4,210,665 | $ 4,056,607 | |
General allowance for loan losses | $ (46,436) | (46,436) | (2,424) |
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | $ 4,164,229 | 4,164,229 | 4,054,183 |
Specific allowance for loan losses | 11,500 | ||
Current and less than 30 days past due | |||
Loan classification and delinquency by year of origination | |||
UPB | 4,086,485 | ||
2020 | 275,042 | ||
2019 | 1,351,822 | ||
2018 | 805,023 | ||
2017 | 290,520 | ||
2016 | 89,149 | ||
Pre 2016 | 1,243,278 | ||
Total | 4,054,834 | 3,932,421 | |
30-89 Days Past Due | |||
Loan classification and delinquency by year of origination | |||
UPB | 95,211 | ||
2020 | 179 | ||
2019 | 4,202 | ||
2018 | 6,149 | ||
2017 | 9,704 | ||
2016 | 18,536 | ||
Pre 2016 | 53,566 | ||
Total | 92,336 | 77,811 | |
90+ Days Past Due | |||
Loan classification and delinquency by year of origination | |||
UPB | 74,599 | ||
2019 | 3,691 | ||
2018 | 7,099 | ||
2017 | 8,034 | ||
2016 | 17,407 | ||
Pre 2016 | 27,264 | ||
Total | 63,495 | 46,375 | |
Originated Transitional loans | |||
Loan classification and delinquency by year of origination | |||
UPB | 1,270,771 | ||
2020 | 192,598 | ||
2019 | 637,419 | ||
2018 | 338,373 | ||
2017 | 64,266 | ||
2016 | 27,001 | ||
Pre 2016 | 1,104 | ||
Total | 1,260,761 | 1,086,328 | |
Originated Transitional loans | Current and less than 30 days past due | |||
Loan classification and delinquency by year of origination | |||
Total | 1,228,782 | 1,074,955 | |
Originated Transitional loans | 30-89 Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 22,089 | 5,728 | |
Originated Transitional loans | 90+ Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 9,890 | 5,645 | |
Originated SBC loans | |||
Loan classification and delinquency by year of origination | |||
UPB | 1,203,566 | ||
2020 | 71,747 | ||
2019 | 544,513 | ||
2018 | 273,536 | ||
2017 | 131,266 | ||
2016 | 47,191 | ||
Pre 2016 | 144,564 | ||
Total | 1,212,817 | 1,168,899 | |
Originated SBC loans | Current and less than 30 days past due | |||
Loan classification and delinquency by year of origination | |||
Total | 1,184,204 | 1,137,140 | |
Originated SBC loans | 30-89 Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 11,045 | 15,670 | |
Originated SBC loans | 90+ Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 17,568 | 16,089 | |
Acquired loans | |||
Loan classification and delinquency by year of origination | |||
UPB | 1,068,358 | ||
2019 | 48,837 | ||
2018 | 38,872 | ||
2017 | 29,764 | ||
2016 | 15,447 | ||
Pre 2016 | 928,731 | ||
Total | 1,061,651 | 1,094,283 | |
Acquired loans | Current and less than 30 days past due | |||
Loan classification and delinquency by year of origination | |||
Total | 999,330 | 1,032,259 | |
Acquired loans | 30-89 Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 40,759 | 45,894 | |
Acquired loans | 90+ Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 21,562 | 16,130 | |
Acquired SBA 7(a) loans | |||
Loan classification and delinquency by year of origination | |||
UPB | 312,359 | ||
2020 | 94 | ||
2019 | 25,941 | ||
2018 | 19,151 | ||
2017 | 296 | ||
2016 | 35 | ||
Pre 2016 | 238,561 | ||
Total | 284,078 | 306,860 | |
Acquired SBA 7(a) loans | Current and less than 30 days past due | |||
Loan classification and delinquency by year of origination | |||
Total | 267,249 | 297,172 | |
Acquired SBA 7(a) loans | 30-89 Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 11,606 | 4,646 | |
Acquired SBA 7(a) loans | 90+ Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 5,223 | 5,042 | |
Originated SBC loans, at fair value | |||
Loan classification and delinquency by year of origination | |||
UPB | 19,558 | ||
2017 | 1,666 | ||
2016 | 11,807 | ||
Pre 2016 | 6,340 | ||
Total | 19,813 | 20,212 | |
Originated SBC loans, at fair value | Current and less than 30 days past due | |||
Loan classification and delinquency by year of origination | |||
Total | 14,317 | 20,212 | |
Originated SBC loans, at fair value | 90+ Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 5,496 | ||
Originated SBA 7(a) loans | |||
Loan classification and delinquency by year of origination | |||
UPB | 377,570 | ||
2020 | 9,883 | ||
2019 | 101,208 | ||
2018 | 147,629 | ||
2017 | 80,782 | ||
2016 | 23,324 | ||
Pre 2016 | 4,603 | ||
Total | 367,429 | 376,629 | |
Originated SBA 7(a) loans | Current and less than 30 days past due | |||
Loan classification and delinquency by year of origination | |||
Total | 359,411 | 370,101 | |
Originated SBA 7(a) loans | 30-89 Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 6,257 | 5,238 | |
Originated SBA 7(a) loans | 90+ Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 1,761 | 1,290 | |
Originated Residential Agency loans | |||
Loan classification and delinquency by year of origination | |||
UPB | 4,113 | ||
2020 | 899 | ||
2019 | 1,797 | ||
2018 | 710 | ||
2017 | 218 | ||
2016 | 287 | ||
Pre 2016 | 205 | ||
Total | 4,116 | 3,396 | |
Originated Residential Agency loans | Current and less than 30 days past due | |||
Loan classification and delinquency by year of origination | |||
Total | 1,541 | 582 | |
Originated Residential Agency loans | 30-89 Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | 580 | 635 | |
Originated Residential Agency loans | 90+ Days Past Due | |||
Loan classification and delinquency by year of origination | |||
Total | $ 1,995 | $ 2,179 |
Loans and Allowance for Loan _5
Loans and Allowance for Loan Losses - Delinquency (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | |
Loan delinquency information | |||
Total Loans Carrying Value | $ 4,210,665 | $ 4,056,607 | |
Non-Accrual Loans | 70,419 | 84,340 | |
90+ Days Past Due but Accruing | 7,419 | 4,782 | |
General allowance for loan losses | (46,436) | (2,424) | $ (46,436) |
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | $ 4,164,229 | $ 4,054,183 | $ 4,164,229 |
Percentage of outstanding | 100.00% | 100.00% | |
Percentage of outstanding, 90+Days Past Due Accruing | 0.20% | 0.10% | |
Percentage of outstanding, Non-Accrual Loans | 1.70% | 2.10% | |
Specific allowance for loan losses | $ 11,500 | ||
Current and less than 30 days past due | |||
Loan delinquency information | |||
Total Loans Carrying Value | $ 4,054,834 | $ 3,932,421 | |
Percentage of outstanding | 96.30% | 97.00% | |
30-89 Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | $ 92,336 | $ 77,811 | |
Percentage of outstanding | 2.20% | 1.90% | |
90+ Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | $ 63,495 | $ 46,375 | |
Percentage of outstanding | 1.50% | 1.10% | |
Originated Transitional loans | |||
Loan delinquency information | |||
Total Loans Carrying Value | $ 1,260,761 | $ 1,086,328 | |
Non-Accrual Loans | 9,890 | 24,587 | |
Originated Transitional loans | Current and less than 30 days past due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 1,228,782 | 1,074,955 | |
Originated Transitional loans | 30-89 Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 22,089 | 5,728 | |
Originated Transitional loans | 90+ Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 9,890 | 5,645 | |
Originated SBC loans | |||
Loan delinquency information | |||
Total Loans Carrying Value | 1,212,817 | 1,168,899 | |
Non-Accrual Loans | 17,568 | 16,089 | |
Originated SBC loans | Current and less than 30 days past due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 1,184,204 | 1,137,140 | |
Originated SBC loans | 30-89 Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 11,045 | 15,670 | |
Originated SBC loans | 90+ Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 17,568 | 16,089 | |
Acquired loans | |||
Loan delinquency information | |||
Total Loans Carrying Value | 1,061,651 | 1,094,283 | |
Non-Accrual Loans | 24,375 | 23,500 | |
90+ Days Past Due but Accruing | 608 | 3,382 | |
Acquired loans | Current and less than 30 days past due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 999,330 | 1,032,259 | |
Acquired loans | 30-89 Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 40,759 | 45,894 | |
Acquired loans | 90+ Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 21,562 | 16,130 | |
Acquired SBA 7(a) loans | |||
Loan delinquency information | |||
Total Loans Carrying Value | 284,078 | 306,860 | |
Non-Accrual Loans | 9,527 | 9,177 | |
90+ Days Past Due but Accruing | 1,315 | 1,326 | |
Acquired SBA 7(a) loans | Current and less than 30 days past due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 267,249 | 297,172 | |
Acquired SBA 7(a) loans | 30-89 Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 11,606 | 4,646 | |
Acquired SBA 7(a) loans | 90+ Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 5,223 | 5,042 | |
Originated SBC loans, at fair value | |||
Loan delinquency information | |||
Total Loans Carrying Value | 19,813 | 20,212 | |
90+ Days Past Due but Accruing | 5,496 | ||
Originated SBC loans, at fair value | Current and less than 30 days past due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 14,317 | 20,212 | |
Originated SBC loans, at fair value | 90+ Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 5,496 | ||
Originated SBA 7(a) loans | |||
Loan delinquency information | |||
Total Loans Carrying Value | 367,429 | 376,629 | |
Non-Accrual Loans | 6,484 | 8,882 | |
Originated SBA 7(a) loans | Current and less than 30 days past due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 359,411 | 370,101 | |
Originated SBA 7(a) loans | 30-89 Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 6,257 | 5,238 | |
Originated SBA 7(a) loans | 90+ Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 1,761 | 1,290 | |
Originated Residential Agency loans | |||
Loan delinquency information | |||
Total Loans Carrying Value | 4,116 | 3,396 | |
Non-Accrual Loans | 2,575 | 2,105 | |
90+ Days Past Due but Accruing | 74 | ||
Originated Residential Agency loans | Current and less than 30 days past due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 1,541 | 582 | |
Originated Residential Agency loans | 30-89 Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | 580 | 635 | |
Originated Residential Agency loans | 90+ Days Past Due | |||
Loan delinquency information | |||
Total Loans Carrying Value | $ 1,995 | $ 2,179 |
Loans and Allowance for Loan _6
Loans and Allowance for Loan Losses - Credit Quality (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | |
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 4,210,665 | $ 4,056,607 | |
General allowance for loan losses | (46,436) | (2,424) | $ (46,436) |
Total Loans, net of allowance for loan losses, including loans in consolidated VIEs | $ 4,164,229 | $ 4,054,183 | $ 4,164,229 |
Percentage of outstanding | 100.00% | 100.00% | |
Carrying amount of loan foreclosure in process | $ 3,800 | $ 800 | |
0.0 - 20.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 238,179 | $ 228,992 | |
Percentage of outstanding | 5.70% | 5.60% | |
20.1 - 40.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 560,315 | $ 521,832 | |
Percentage of outstanding | 13.30% | 12.90% | |
40.1 - 60.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 1,106,370 | $ 1,146,672 | |
Percentage of outstanding | 26.30% | 28.30% | |
60.1 - 80.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 1,875,738 | $ 1,793,845 | |
Percentage of outstanding | 44.50% | 44.20% | |
80.1 - 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 270,021 | $ 198,096 | |
Percentage of outstanding | 6.40% | 4.90% | |
Greater than 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 160,042 | $ 167,170 | |
Percentage of outstanding | 3.80% | 4.10% | |
Originated Transitional loans | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 1,260,761 | $ 1,086,328 | |
Originated Transitional loans | 0.0 - 20.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 5,564 | 1,736 | |
Originated Transitional loans | 20.1 - 40.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 34,044 | 28,108 | |
Originated Transitional loans | 40.1 - 60.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 246,284 | 277,388 | |
Originated Transitional loans | 60.1 - 80.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 869,073 | 750,298 | |
Originated Transitional loans | 80.1 - 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 105,043 | 28,059 | |
Originated Transitional loans | Greater than 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 753 | 739 | |
Originated SBC loans | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 1,212,817 | 1,168,899 | |
Originated SBC loans | 20.1 - 40.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 63,255 | 60,601 | |
Originated SBC loans | 40.1 - 60.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 472,162 | 431,312 | |
Originated SBC loans | 60.1 - 80.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 650,758 | 660,733 | |
Originated SBC loans | 80.1 - 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 18,886 | 8,045 | |
Originated SBC loans | Greater than 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 7,756 | 8,208 | |
Acquired loans | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 1,061,651 | 1,094,283 | |
Acquired loans | 0.0 - 20.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 223,696 | 218,679 | |
Acquired loans | 20.1 - 40.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 401,626 | 371,471 | |
Acquired loans | 40.1 - 60.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 242,357 | 293,216 | |
Acquired loans | 60.1 - 80.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 130,586 | 161,431 | |
Acquired loans | 80.1 - 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 47,238 | 35,731 | |
Acquired loans | Greater than 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 16,148 | 13,755 | |
Acquired SBA 7(a) loans | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 284,078 | 306,860 | |
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 | 7,750 | 7,712 | |
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 | 38,603 | 39,566 | |
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 | 99,308 | 103,590 | |
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 | 78,322 | 83,954 | |
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 | 29,623 | 39,726 | |
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 | 30,472 | 32,312 | |
Originated SBC loans, at fair value | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 19,813 | 20,212 | |
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 | 8,006 | 8,192 | |
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 | 6,311 | 6,422 | |
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 | 5,496 | 5,598 | |
Originated SBA 7(a) loans | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 367,429 | 376,629 | |
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 | 1,169 | 865 | |
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 | 14,730 | 13,843 | |
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 | 46,168 | 41,166 | |
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 | 139,658 | 130,177 | |
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 | 61,067 | 78,544 | |
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 | 104,637 | 112,034 | |
Originated Residential Agency loans | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 4,116 | 3,396 | |
Originated Residential Agency loans | 20.1 - 40.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 51 | 51 | |
Originated Residential Agency loans | 40.1 - 60.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 91 | ||
Originated Residential Agency loans | 60.1 - 80.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 1,030 | 830 | |
Originated Residential Agency loans | 80.1 - 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | 2,668 | 2,393 | |
Originated Residential Agency loans | Greater than 100.0% | |||
Credit quality of loans | |||
Total Loans, before allowance for loan losses, including loans in consolidated VIEs | $ 276 | $ 122 |
Loans and Allowance for Loan _7
Loans and Allowance for Loan Losses - Geographic and Collateral Concentration (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Concentration risk | ||
Percentage of SBA loan | 100.00% | 100.00% |
Lodging | ||
Concentration risk | ||
Percentage of SBA loan | 19.40% | 17.30% |
Offices of Physicians | ||
Concentration risk | ||
Percentage of SBA loan | 13.90% | 14.10% |
Child Day Care Services | ||
Concentration risk | ||
Percentage of SBA loan | 7.60% | 8.10% |
Eating Places | ||
Concentration risk | ||
Percentage of SBA loan | 6.30% | 6.10% |
Veterinarians | ||
Concentration risk | ||
Percentage of SBA loan | 3.90% | 4.10% |
Gasoline Service Stations | ||
Concentration risk | ||
Percentage of SBA loan | 3.80% | 3.70% |
Funeral Service and Crematories | ||
Concentration risk | ||
Percentage of SBA loan | 2.10% | 2.00% |
Grocery Stores | ||
Concentration risk | ||
Percentage of SBA loan | 2.10% | 2.00% |
Auto | ||
Concentration risk | ||
Percentage of SBA loan | 1.20% | 1.30% |
Other | ||
Concentration risk | ||
Percentage of SBA loan | 39.70% | 41.30% |
Geographical concentration | ||
Concentration risk | ||
Percentage of loan | 100.00% | 100.00% |
Geographical concentration | California | ||
Concentration risk | ||
Percentage of loan | 17.70% | 16.90% |
Geographical concentration | Texas | ||
Concentration risk | ||
Percentage of loan | 15.20% | 15.20% |
Geographical concentration | New York | ||
Concentration risk | ||
Percentage of loan | 8.40% | 8.30% |
Geographical concentration | Florida | ||
Concentration risk | ||
Percentage of loan | 8.10% | 8.30% |
Geographical concentration | Illinois | ||
Concentration risk | ||
Percentage of loan | 5.30% | 5.20% |
Geographical concentration | Georgia | ||
Concentration risk | ||
Percentage of loan | 4.60% | 4.80% |
Geographical concentration | Arizona | ||
Concentration risk | ||
Percentage of loan | 3.40% | 3.40% |
Geographical concentration | North Carolina | ||
Concentration risk | ||
Percentage of loan | 3.20% | 3.20% |
Geographical concentration | Washington | ||
Concentration risk | ||
Percentage of loan | 2.90% | 2.80% |
Geographical concentration | Colorado | ||
Concentration risk | ||
Percentage of loan | 2.60% | 2.80% |
Geographical concentration | Other | ||
Concentration risk | ||
Percentage of loan | 28.60% | 29.10% |
Collateral concentration | ||
Concentration risk | ||
Percentage of loan | 100.00% | 100.00% |
Collateral concentration | Multi-family | ||
Concentration risk | ||
Percentage of loan | 26.60% | 26.60% |
Collateral concentration | Retail | ||
Concentration risk | ||
Percentage of loan | 17.40% | 17.50% |
Collateral concentration | SBA | ||
Concentration risk | ||
Percentage of loan | 16.20% | 17.60% |
Collateral concentration | Office | ||
Concentration risk | ||
Percentage of loan | 12.20% | 12.90% |
Collateral concentration | Mixed Use | ||
Concentration risk | ||
Percentage of loan | 12.00% | 10.40% |
Collateral concentration | Industrial | ||
Concentration risk | ||
Percentage of loan | 7.00% | 6.40% |
Collateral concentration | Lodging/Residential | ||
Concentration risk | ||
Percentage of loan | 3.20% | 3.30% |
Collateral concentration | Other | ||
Concentration risk | ||
Percentage of loan | 5.40% | 5.30% |
Loans and Allowance for Loan _8
Loans and Allowance for Loan Losses - Investment Loans Allowance Activity (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Allowance for loan losses | ||
Beginning Balance | $ 7,441 | $ 8,320 |
Cumulative-effect adjustment upon adoption of ASU 2016-13 | 11,125 | |
Provision for (recoveries of) loan losses | 39,804 | 518 |
Charge-offs and sales | (468) | (329) |
Recoveries | 66 | (232) |
Ending Balance | 57,968 | 8,277 |
Originated SBC loans | ||
Allowance for loan losses | ||
Beginning Balance | 304 | 11 |
Cumulative-effect adjustment upon adoption of ASU 2016-13 | 2,400 | |
Provision for (recoveries of) loan losses | 7,658 | (11) |
Ending Balance | 10,362 | |
Originated Transitional loans | ||
Allowance for loan losses | ||
Beginning Balance | 188 | 353 |
Cumulative-effect adjustment upon adoption of ASU 2016-13 | 1,906 | |
Provision for (recoveries of) loan losses | 22,170 | (131) |
Ending Balance | 24,264 | 222 |
Acquired loans | ||
Allowance for loan losses | ||
Beginning Balance | 3,054 | 5,052 |
Cumulative-effect adjustment upon adoption of ASU 2016-13 | 1,878 | |
Provision for (recoveries of) loan losses | 5,722 | 235 |
Charge-offs and sales | (8) | |
Recoveries | (246) | |
Ending Balance | 10,646 | 5,041 |
Acquired SBA 7(a) loans | ||
Allowance for loan losses | ||
Beginning Balance | 2,114 | 2,318 |
Cumulative-effect adjustment upon adoption of ASU 2016-13 | 3,562 | |
Provision for (recoveries of) loan losses | 12 | 271 |
Charge-offs and sales | (131) | (329) |
Recoveries | 65 | 14 |
Ending Balance | 5,622 | 2,274 |
Originated SBA 7(a) loans | ||
Allowance for loan losses | ||
Beginning Balance | 1,781 | 586 |
Cumulative-effect adjustment upon adoption of ASU 2016-13 | 1,379 | |
Provision for (recoveries of) loan losses | 4,242 | 154 |
Charge-offs and sales | (329) | |
Recoveries | 1 | |
Ending Balance | $ 7,074 | $ 740 |
Loans and Allowance for Loan _9
Loans and Allowance for Loan Losses - Non-accrual Loans (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Loans and Allowance for Loan Losses | |||
Non-accrual loans with an allowance | $ 25,914 | $ 18,063 | |
Non-accrual loans without an allowance | 44,505 | 60,036 | |
Total recorded carrying value of non-accrual loans | 70,419 | 78,099 | |
Allowance for loan losses related to non-accrual loans | (10,916) | (2,093) | |
Unpaid principal balance of non-accrual loans | 88,596 | $ 83,991 | |
Interest income on non-accrual loans | $ 157 | $ 12 |
Loans and Allowance for Loan_10
Loans and Allowance for Loan Losses - TDR Accrual Status (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Troubled debt restructurings (TDRs) | ||
Recorded carrying value modified loans classified as TDR | $ 15,382 | $ 20,462 |
Allowance for loan losses on loans classified as TDRs | 3,840 | 728 |
Carrying value of modified loans classified as TDRs | ||
Carrying value of modified loans classified as TDRs on accrual status | 7,060 | 7,770 |
Carrying value of modified loans classified as TDRs on non-accrual status | 8,322 | 12,692 |
Total carrying value of modified loans classified as TDRs | 15,382 | 20,462 |
SBC | ||
Troubled debt restructurings (TDRs) | ||
Recorded carrying value modified loans classified as TDR | 2,161 | 6,258 |
Allowance for loan losses on loans classified as TDRs | 15 | 274 |
Carrying value of modified loans classified as TDRs | ||
Carrying value of modified loans classified as TDRs on accrual status | 247 | 333 |
Carrying value of modified loans classified as TDRs on non-accrual status | 1,914 | 5,925 |
Total carrying value of modified loans classified as TDRs | 2,161 | 6,258 |
SBA | ||
Troubled debt restructurings (TDRs) | ||
Recorded carrying value modified loans classified as TDR | 13,221 | 14,204 |
Allowance for loan losses on loans classified as TDRs | 3,825 | 454 |
Carrying value of modified loans classified as TDRs | ||
Carrying value of modified loans classified as TDRs on accrual status | 6,813 | 7,437 |
Carrying value of modified loans classified as TDRs on non-accrual status | 6,408 | 6,767 |
Total carrying value of modified loans classified as TDRs | $ 13,221 | $ 14,204 |
Loans and Allowance for Loan_11
Loans and Allowance for Loan Losses - TDR Activity (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)loan | Mar. 31, 2019USD ($)loan | |
Troubled debt restructurings (TDRs) | ||
Number of loans permanently modified | loan | 8 | 10 |
Pre-modification recorded balance | $ 2,918 | $ 1,368 |
Post-modification recorded balance | $ 2,920 | $ 1,353 |
Number of loans that remain in default | loan | 4 | 2 |
Balance of loans that remain in default | $ 311 | $ 158 |
TDR Modifications including financial effects | $ 1,867 | $ 1,345 |
SBC | ||
Troubled debt restructurings (TDRs) | ||
Number of loans permanently modified | loan | 1 | 1 |
Pre-modification recorded balance | $ 151 | $ 103 |
Post-modification recorded balance | $ 151 | $ 103 |
Number of loans that remain in default | loan | 1 | 1 |
Balance of loans that remain in default | $ 151 | $ 103 |
TDR Modifications including financial effects | $ 151 | $ 103 |
SBA | ||
Troubled debt restructurings (TDRs) | ||
Number of loans permanently modified | loan | 7 | 9 |
Pre-modification recorded balance | $ 2,767 | $ 1,265 |
Post-modification recorded balance | $ 2,769 | $ 1,250 |
Number of loans that remain in default | loan | 3 | 1 |
Balance of loans that remain in default | $ 160 | $ 55 |
TDR Modifications including financial effects | 1,716 | 1,242 |
Term Extension | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 1,564 | 1,187 |
Term Extension | SBA | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 1,564 | 1,187 |
Interest Rate Reduction | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 103 | |
Interest Rate Reduction | SBC | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 103 | |
Foreclosure | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 303 | 55 |
Foreclosure | SBC | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | 151 | |
Foreclosure | SBA | ||
Troubled debt restructurings (TDRs) | ||
TDR Modifications including financial effects | $ 152 | $ 55 |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Instruments Carried at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets: | ||
Loans, held for sale, at fair value | $ 306,328 | $ 188,077 |
Derivative instruments, at fair value | 17,756 | 2,814 |
Residential mortgage servicing rights, at fair value | 78,631 | 91,174 |
Liabilities: | ||
Derivative instruments, at fair value | 16,585 | 5,250 |
Recurring | ||
Assets: | ||
Loans, held for sale, at fair value | 310,345 | 192,510 |
Loans, net at fair value | 19,813 | 20,212 |
Mortgage backed securities, at fair value | 78,540 | 92,466 |
Derivative instruments, at fair value | 17,756 | 2,814 |
Residential mortgage servicing rights, at fair value | 78,631 | 91,174 |
Total assets | 505,085 | 399,176 |
Liabilities: | ||
Derivative instruments, at fair value | 16,585 | 5,250 |
Total liabilities | 16,585 | 5,250 |
Recurring | Level 2 inputs | ||
Assets: | ||
Loans, held for sale, at fair value | 310,345 | 192,510 |
Mortgage backed securities, at fair value | 78,437 | 92,006 |
Derivative instruments, at fair value | 506 | |
Total assets | 389,288 | 284,516 |
Liabilities: | ||
Derivative instruments, at fair value | 16,585 | 5,250 |
Total liabilities | 16,585 | 5,250 |
Recurring | Level 3 inputs | ||
Assets: | ||
Loans, net at fair value | 19,813 | 20,212 |
Mortgage backed securities, at fair value | 103 | 460 |
Derivative instruments, at fair value | 17,250 | 2,814 |
Residential mortgage servicing rights, at fair value | 78,631 | 91,174 |
Total assets | $ 115,797 | $ 114,660 |
Fair Value Measurements - Chang
Fair Value Measurements - Changes in Fair Value (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Mortgage backed securities | ||
Changes in fair value of assets | ||
Beginning Balance | $ 460 | $ 12,148 |
Sales / Principal payments | (2) | (102) |
Realized gains, net | (20) | |
Unrealized gains (losses), net | (40) | 89 |
Accreted discount, net | 2 | |
Transfer to (from) Level 3 | (315) | 15,083 |
Ending Balance | 103 | 27,200 |
Total unrealized gain (loss) | (1) | 2,501 |
Derivatives | ||
Changes in fair value of assets | ||
Beginning Balance | 2,814 | 1,776 |
Unrealized gains (losses), net | 14,436 | 707 |
Ending Balance | 17,250 | 2,483 |
Total unrealized gain (loss) | 17,250 | 2,483 |
Loans, held at fair value | ||
Changes in fair value of assets | ||
Beginning Balance | 20,212 | 22,664 |
Sales / Principal payments | (8) | (29) |
Realized gains, net | (1) | |
Unrealized gains (losses), net | (391) | (39) |
Ending Balance | 19,813 | 22,595 |
Total unrealized gain (loss) | 255 | 300 |
Mortgage servicing rights | ||
Changes in fair value of assets | ||
Beginning Balance | 91,174 | 93,065 |
Additions due to loans sold, servicing retained | 7,147 | 3,593 |
Sales / Principal payments | (3,253) | (1,312) |
Unrealized gains (losses), net | (16,437) | (7,128) |
Ending Balance | 78,631 | 88,218 |
Total unrealized gain (loss) | $ (26,392) | 1,502 |
Contingent Consideration | ||
Changes in fair value of assets | ||
Beginning Balance | 1,207 | |
Amortization and adjustment for earn-out payments | $ (1,207) |
Fair Value Measurements - Valua
Fair Value Measurements - Valuation and Inputs, at FV (Details) - Recurring $ in Thousands | Mar. 31, 2020USD ($)item | Dec. 31, 2019USD ($)$ / sharesitem |
Fair value inputs, quantitative information | ||
Asset, fair value | $ 505,085 | $ 399,176 |
Liabilities, fair value | 16,585 | 5,250 |
Level 3 inputs | ||
Fair value inputs, quantitative information | ||
Asset, fair value | 115,797 | 114,660 |
Loans, held at fair value | Level 3 inputs | Third Party Mark | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 19,813 | $ 20,212 |
Debt Instrument, Measurement Input [Extensible List] | Third Party Mark | Third Party Mark |
Loans, held at fair value | Level 3 inputs | Third Party Mark | Measurement Input, Share Price | Minimum | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | item | 99.77 | 100.47 |
Loans, held at fair value | Level 3 inputs | Third Party Mark | Measurement Input, Share Price | Maximum | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | item | 105.70 | 110.83 |
Loans, held at fair value | Level 3 inputs | Third Party Mark | Measurement Input, Share Price | Weighted Average | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | item | 101.31 | 103.31 |
Mortgage backed securities | Level 3 inputs | Third Party Mark | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 357 | |
Debt Instrument, Measurement Input [Extensible List] | Third Party Mark | |
Mortgage backed securities | Level 3 inputs | Third Party Mark | Measurement Input, Share Price | Minimum | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | item | 1 | |
Mortgage backed securities | Level 3 inputs | Third Party Mark | Measurement Input, Share Price | Maximum | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | item | 1 | |
Mortgage backed securities | Level 3 inputs | Third Party Mark | Measurement Input, Share Price | Weighted Average | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | $ / shares | 1 | |
Mortgage backed securities | Level 3 inputs | Transaction Price | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 103 | $ 103 |
Debt Instrument, Measurement Input [Extensible List] | Transaction Price | Transaction Price |
Mortgage backed securities | Level 3 inputs | Transaction Price | Measurement Input, Share Price | Minimum | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | item | 99 | 99 |
Mortgage backed securities | Level 3 inputs | Transaction Price | Measurement Input, Share Price | Maximum | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | item | 99 | 99 |
Mortgage backed securities | Level 3 inputs | Transaction Price | Measurement Input, Share Price | Weighted Average | ||
Fair value inputs, quantitative information | ||
Debt instrument, measurement input | 99 | 99 |
Interest-Only-Strips | Level 3 inputs | Third Party Mark | Weighted Average | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 400 | |
Mortgage servicing rights | Level 3 inputs | Discounted Cash Flow | ||
Fair value inputs, quantitative information | ||
Asset, fair value | $ 78,631 | $ 91,174 |
Debt Instrument, Measurement Input [Extensible List] | Discounted Cash Flow | Discounted Cash Flow |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities, Not at FV (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets: | ||
Purchased future receivables, net | $ 49,150 | $ 43,265 |
Liabilities: | ||
Senior secured notes, net | 179,387 | 179,289 |
Carrying Amount | ||
Assets: | ||
Loans, held-for-investment | 4,144,416 | 4,033,972 |
Purchased future receivables, net | 49,150 | 43,265 |
Servicing rights | 31,480 | 30,795 |
Total assets | 4,225,046 | 4,108,032 |
Liabilities: | ||
Secured borrowings | 1,698,937 | 1,189,392 |
Securitized debt obligations of consolidated VIEs | 1,692,074 | 1,815,154 |
Senior secured notes, net | 179,387 | 179,289 |
Guaranteed loan financing | 457,032 | 485,461 |
Convertible note, net | 111,310 | 111,040 |
Corporate debt, net | 150,074 | 149,986 |
Total liabilities | 4,288,814 | 3,930,322 |
Carrying Amount | Level 3 inputs | ||
Assets: | ||
Due from servicers and accrued interest | 16,000 | 20,700 |
Receivable from third parties | 600 | 1,200 |
Liabilities: | ||
Payable to related parties and accrued interest payable | 26,400 | 20,000 |
Fair Value | Level 3 inputs | ||
Assets: | ||
Loans, held-for-investment | 4,073,947 | 4,147,831 |
Purchased future receivables, net | 49,150 | 43,265 |
Servicing rights | 35,006 | 34,723 |
Total assets | 4,158,103 | 4,225,819 |
Liabilities: | ||
Secured borrowings | 1,698,937 | 1,189,392 |
Securitized debt obligations of consolidated VIEs | 1,665,922 | 1,859,047 |
Senior secured notes, net | 181,708 | 190,923 |
Guaranteed loan financing | 472,466 | 515,182 |
Convertible note, net | 67,720 | 116,654 |
Corporate debt, net | 95,109 | 161,098 |
Total liabilities | $ 4,181,862 | $ 4,032,296 |
Mortgage Backed Securities (Det
Mortgage Backed Securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Mortgage Backed Securities | ||
Fair Value | $ 78,540 | $ 92,466 |
Mortgage backed securities | ||
Mortgage Backed Securities | ||
Weighted Average Interest Rate | 4.30% | 4.60% |
Principal Balance | $ 125,445 | $ 119,237 |
Amortized Cost | 84,601 | 86,669 |
Fair Value | 78,540 | 92,466 |
Gross Unrealized Gains | 1,169 | 5,839 |
Gross Unrealized Losses | $ (7,230) | $ (42) |
Mortgage Backed Securities Weighted Average Interest Rate | ||
After five years through ten years (as percent) | 3.60% | 3.80% |
After ten years (as percent) | 4.30% | 4.70% |
Mortgage Backed Securities Principal Balance | ||
After five years through ten years | $ 2,869 | $ 2,869 |
After ten years | 122,576 | 116,368 |
Mortgage Backed Securities Amortized Cost | ||
After five years through ten years | 2,644 | 2,641 |
After ten years | 81,957 | 84,028 |
Mortgage Backed Securities Estimated Fair Value | ||
After five years through ten years | 2,598 | 2,825 |
After ten years | $ 75,942 | $ 89,641 |
Freddie Mac Loans | ||
Mortgage Backed Securities | ||
Weighted Average Interest Rate | 4.00% | 4.30% |
Principal Balance | $ 78,234 | $ 83,149 |
Amortized Cost | 57,681 | 61,207 |
Fair Value | 55,685 | 66,108 |
Gross Unrealized Gains | 1,169 | 4,915 |
Gross Unrealized Losses | $ (3,165) | $ (14) |
Commercial Loans | ||
Mortgage Backed Securities | ||
Weighted Average Interest Rate | 4.90% | 5.40% |
Principal Balance | $ 47,107 | $ 35,984 |
Amortized Cost | 26,816 | 25,358 |
Fair Value | 22,752 | 26,255 |
Gross Unrealized Gains | 924 | |
Gross Unrealized Losses | $ (4,064) | $ (27) |
Tax Liens | ||
Mortgage Backed Securities | ||
Weighted Average Interest Rate | 6.00% | 6.00% |
Principal Balance | $ 104 | $ 104 |
Amortized Cost | 104 | 104 |
Fair Value | 103 | 103 |
Gross Unrealized Losses | $ (1) | $ (1) |
Servicing rights (Details)
Servicing rights (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | |
Servicing rights | |||||
Unpaid Principal Amount | $ 1,776,888 | $ 1,735,493 | |||
Carrying Value | $ 31,480 | 31,480 | 30,795 | ||
Total servicing rights | 110,111 | 121,969 | $ 115,652 | ||
Servicing rights activity at amortized cost | |||||
Beginning net carrying value at amortized cost | 30,795 | ||||
Ending net carrying value at amortized cost | 31,480 | ||||
Residential MSRs | |||||
Servicing rights | |||||
Unpaid Principal Amount | 8,326,668 | 8,164,604 | |||
Servicing rights activity at fair value | |||||
Beginning net carrying value at fair value | 91,174 | $ 93,065 | |||
Additions due to loans sold, servicing retained | 7,147 | 3,593 | |||
Loan pay-offs | (3,253) | (1,312) | |||
Unrealized gains (losses) | (16,437) | (7,128) | |||
Ending net carrying value at fair value | 78,631 | 88,218 | |||
Freddie Mac | |||||
Servicing rights | |||||
Unpaid Principal Amount | 1,193,274 | 1,167,476 | |||
Carrying Value | 13,944 | 10,986 | 13,944 | 13,135 | 10,986 |
Servicing rights activity at amortized cost | |||||
Beginning net carrying value at amortized cost | 13,135 | 10,248 | |||
Additions due to loans sold, servicing retained | 1,449 | 1,267 | |||
Amortization | (640) | (529) | |||
Ending net carrying value at amortized cost | 13,944 | 10,986 | |||
Freddie Mac | Residential MSRs | |||||
Servicing rights | |||||
Unpaid Principal Amount | 2,277,047 | 2,270,981 | |||
Servicing rights activity at fair value | |||||
Beginning net carrying value at fair value | 23,996 | ||||
Ending net carrying value at fair value | 19,960 | ||||
SBA | |||||
Servicing rights | |||||
Unpaid Principal Amount | 583,614 | 568,017 | |||
Carrying Value | 17,536 | 16,448 | 17,536 | $ 17,660 | 16,448 |
Servicing rights activity at amortized cost | |||||
Beginning net carrying value at amortized cost | 17,660 | 16,749 | |||
Additions due to loans sold, servicing retained | 961 | 933 | |||
Amortization | (873) | (822) | |||
Impairment | (212) | (412) | |||
Ending net carrying value at amortized cost | 17,536 | 16,448 | |||
SBA | Freddie Mac | |||||
Servicing rights | |||||
Carrying Value | 31,480 | 27,434 | $ 31,480 | $ 27,434 | |
Servicing rights activity at amortized cost | |||||
Ending net carrying value at amortized cost | $ 31,480 | $ 27,434 |
Servicing rights - Estimated va
Servicing rights - Estimated valuation (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Freddie Mac | Minimum | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 0.50% | 0.50% |
Forward default rate | 0.00% | 0.00% |
Discount rate | 6.00% | 6.00% |
Servicing expense (as a percent) | 0.20% | 0.20% |
Freddie Mac | Maximum | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 15.90% | 15.90% |
Forward default rate | 0.50% | 0.50% |
Discount rate | 6.00% | 6.00% |
Servicing expense (as a percent) | 0.30% | 0.30% |
Freddie Mac | Weighted Average | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 6.70% | 6.60% |
Forward default rate | 0.30% | 0.40% |
Discount rate | 6.00% | 6.00% |
Servicing expense (as a percent) | 0.20% | 0.20% |
SBA | Minimum | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 6.60% | 6.30% |
Forward default rate | 0.00% | 0.00% |
Discount rate | 9.10% | 8.80% |
Servicing expense (as a percent) | 0.40% | 0.40% |
SBA | Maximum | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 21.50% | 21.20% |
Forward default rate | 10.60% | 10.80% |
Discount rate | 9.10% | 8.80% |
Servicing expense (as a percent) | 0.40% | 0.40% |
SBA | Weighted Average | ||
Servicing rights, valuation assumptions | ||
Forward prepayment assumptions | 9.10% | 9.30% |
Forward default rate | 7.50% | 7.30% |
Discount rate | 9.10% | 8.80% |
Servicing expense (as a percent) | 0.40% | 0.40% |
Servicing rights - Assumptions
Servicing rights - Assumptions (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Freddie Mac | ||
Adverse changes to key assumptions on the carrying amount of the servicing rights | ||
Prepayment rate (10% adverse change) | $ (287) | $ (285) |
Prepayment rate (20% adverse change) | (568) | (558) |
Default rate (10% adverse change) | (1) | (5) |
Default rate (20% adverse change) | (4) | (10) |
Discount rate (10% adverse change) | (381) | (381) |
Discount rate (20% adverse change) | (752) | (746) |
SBA | ||
Adverse changes to key assumptions on the carrying amount of the servicing rights | ||
Prepayment rate (10% adverse change) | (558) | (563) |
Prepayment rate (20% adverse change) | (1,086) | (1,097) |
Default rate (10% adverse change) | (97) | (94) |
Default rate (20% adverse change) | (193) | (186) |
Discount rate (10% adverse change) | (529) | (520) |
Discount rate (20% adverse change) | $ (1,027) | $ (1,011) |
Servicing rights - Amortization
Servicing rights - Amortization (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Future amortization expense for the servicing rights | ||
2020 | $ 4,369 | |
2021 | 5,167 | |
2022 | 4,491 | |
2023 | 3,882 | |
2024 | 3,337 | |
Thereafter | 10,234 | |
Total | $ 31,480 | $ 30,795 |
Servicing rights - Residential
Servicing rights - Residential mortgage servicing rights (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | |
Servicing rights | ||||
Unpaid Principal Amount | $ 1,776,888 | $ 1,735,493 | ||
Residential MSRs | ||||
Servicing rights | ||||
Unpaid Principal Amount | 8,326,668 | 8,164,604 | ||
Fair Value | 78,631 | 91,174 | $ 88,218 | $ 93,065 |
Possible impact of adverse changes to key assumptions | ||||
Prepayment rate (10% adverse change) | (4,245) | (4,195) | ||
Prepayment rate (20% adverse change) | (8,110) | (8,091) | ||
Discount rate (10% adverse change) | (2,849) | (3,450) | ||
Discount rate (20% adverse change) | (5,501) | (6,654) | ||
Cost of servicing (10% adverse change) | (1,562) | (1,648) | ||
Cost of servicing (20% adverse change) | (3,123) | (3,297) | ||
Fannie Mae | Residential MSRs | ||||
Servicing rights | ||||
Unpaid Principal Amount | 3,536,350 | 3,388,630 | ||
Fair Value | 33,084 | 37,309 | ||
Ginnie Mae | Residential MSRs | ||||
Servicing rights | ||||
Unpaid Principal Amount | 2,513,271 | 2,504,993 | ||
Fair Value | 25,587 | 29,869 | ||
Freddie Mac | ||||
Servicing rights | ||||
Unpaid Principal Amount | 1,193,274 | 1,167,476 | ||
Possible impact of adverse changes to key assumptions | ||||
Prepayment rate (10% adverse change) | (287) | (285) | ||
Prepayment rate (20% adverse change) | (568) | (558) | ||
Discount rate (10% adverse change) | (381) | (381) | ||
Discount rate (20% adverse change) | (752) | (746) | ||
Freddie Mac | Residential MSRs | ||||
Servicing rights | ||||
Unpaid Principal Amount | 2,277,047 | 2,270,981 | ||
Fair Value | $ 19,960 | $ 23,996 | ||
Minimum | Residential MSRs | ||||
Servicing rights, valuation assumptions | ||||
Forward prepayment assumptions | 8.50% | 7.10% | ||
Discount rate | 9.00% | 9.00% | ||
Servicing expense | $ 70 | $ 70 | ||
Minimum | Freddie Mac | ||||
Servicing rights, valuation assumptions | ||||
Forward prepayment assumptions | 0.50% | 0.50% | ||
Discount rate | 6.00% | 6.00% | ||
Servicing expense (as a percent) | 0.20% | 0.20% | ||
Maximum | Residential MSRs | ||||
Servicing rights, valuation assumptions | ||||
Forward prepayment assumptions | 18.90% | 18.70% | ||
Discount rate | 11.00% | 11.00% | ||
Servicing expense | $ 85 | $ 85 | ||
Maximum | Freddie Mac | ||||
Servicing rights, valuation assumptions | ||||
Forward prepayment assumptions | 15.90% | 15.90% | ||
Discount rate | 6.00% | 6.00% | ||
Servicing expense (as a percent) | 0.30% | 0.30% | ||
Weighted Average | Residential MSRs | ||||
Servicing rights, valuation assumptions | ||||
Forward prepayment assumptions | 11.10% | 10.10% | ||
Discount rate | 9.60% | 9.60% | ||
Servicing expense | $ 75 | $ 75 | ||
Weighted Average | Freddie Mac | ||||
Servicing rights, valuation assumptions | ||||
Forward prepayment assumptions | 6.70% | 6.60% | ||
Discount rate | 6.00% | 6.00% | ||
Servicing expense (as a percent) | 0.20% | 0.20% |
Residential mortgage banking _3
Residential mortgage banking activities and variable expenses on residential mortgage banking activities (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Residential mortgage banking activities | ||
Realized and unrealized gains and losses of residential mortgage loans held for sale, at fair value | $ 25,166 | $ 10,199 |
Creation of new mortgage servicing rights, net of payoffs | 3,894 | 2,281 |
Loan origination fee income on residential mortgage loans | 3,303 | 1,743 |
Unrealized gains (loss) on IRLCs and other derivatives | 4,306 | 364 |
Residential mortgage banking activities | 36,669 | 14,587 |
Variable expenses on residential mortgage banking activities | $ (20,129) | $ (9,176) |
Secured Borrowings (Details)
Secured Borrowings (Details) $ in Thousands, € in Millions | 3 Months Ended | ||
Mar. 31, 2020EUR (€) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Secured borrowings and promissory note | |||
Current facility size | $ 2,689,635 | ||
Pledged Assets Carrying Value | 2,162,870 | $ 1,668,460 | |
Carrying Value, Secured borrowings | 1,698,937 | 1,189,392 | |
Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 1,080,218 | ||
Pledged Assets Carrying Value | 613,793 | 561,257 | |
Carrying Value, Secured borrowings | $ 539,580 | $ 380,203 | |
Weighted average interest rate of borrowings (as a percent) | 2.90% | 2.90% | 4.00% |
Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | $ 1,609,417 | ||
Pledged Assets Carrying Value | 1,549,077 | $ 1,107,203 | |
Carrying Value, Secured borrowings | $ 1,159,357 | $ 809,189 | |
Weighted average interest rate of borrowings (as a percent) | 3.40% | 3.40% | 4.20% |
Purchased future receivables | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Pledged Assets Carrying Value | $ 49,150 | $ 43,265 | |
Mortgage backed securities | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Pledged Assets Carrying Value | 74,439 | 113,436 | |
Lender 1 | |||
Secured borrowings and promissory note | |||
Carrying Value, Secured borrowings | 312,020 | 312,019 | |
JPMorgan | Acquired SBA Loans | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 250,000 | ||
Pledged Assets Carrying Value | 104,668 | ||
Carrying Value, Secured borrowings | 82,204 | 88,972 | |
JPMorgan | Acquired SBA Loans | Borrowings under credit facilities | One Month LIBOR | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.00% | ||
JPMorgan | Acquired SBA Loans | Borrowings under credit facilities | One Month LIBOR | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.50% | ||
JPMorgan | Transitional loans | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | 400,000 | ||
Pledged Assets Carrying Value | 423,990 | ||
Carrying Value, Secured borrowings | 297,342 | 250,466 | |
JPMorgan | Transitional loans | Borrowings under repurchase agreements | One Month LIBOR | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.25% | ||
JPMorgan | Transitional loans | Borrowings under repurchase agreements | One Month LIBOR | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 4.00% | ||
JPMorgan | Mortgage backed securities | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | 90,507 | ||
Pledged Assets Carrying Value | 122,070 | ||
Carrying Value, Secured borrowings | 90,507 | 93,715 | |
JPMorgan | Mortgage backed securities | Borrowings under repurchase agreements | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.87% | ||
JPMorgan | Mortgage backed securities | Borrowings under repurchase agreements | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 4.52% | ||
Keybank | Freddie Mac Loans | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 100,000 | ||
Pledged Assets Carrying Value | 79,524 | ||
Carrying Value, Secured borrowings | 78,726 | 21,513 | |
Keybank | Freddie Mac Loans | Borrowings under credit facilities | One Month LIBOR | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 1.30% | ||
East West Bank | SBA loans | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 50,000 | ||
Pledged Assets Carrying Value | 39,285 | ||
Carrying Value, Secured borrowings | 30,911 | 13,294 | |
East West Bank | SBA loans | Borrowings under credit facilities | Prime rate | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | (0.821%) | ||
East West Bank | SBA loans | Borrowings under credit facilities | Prime rate | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 0.29% | ||
East West Bank | Residential MSRs | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 50,000 | ||
Pledged Assets Carrying Value | 53,044 | ||
Carrying Value, Secured borrowings | 49,200 | 39,900 | |
East West Bank | Residential MSRs | Borrowings under credit facilities | One Month LIBOR | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.50% | ||
Credit Suisse | Acquired loans (non USD) | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | € 200 | 224,500 | |
Pledged Assets Carrying Value | 51,274 | ||
Carrying Value, Secured borrowings | 37,030 | 37,646 | |
Credit Suisse | Acquired loans (non USD) | Borrowings under credit facilities | Euribor Rate | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.50% | ||
Credit Suisse | Purchased future receivables | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 50,000 | ||
Pledged Assets Carrying Value | 49,150 | ||
Carrying Value, Secured borrowings | $ 43,250 | 34,900 | |
Credit Suisse | Purchased future receivables | Borrowings under credit facilities | One Month LIBOR | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 4.50% | ||
FCB | Acquired loans | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Pricing, stated rate (as a percent) | 2.75% | 2.75% | |
Current facility size | $ 1,218 | ||
Pledged Assets Carrying Value | 1,737 | ||
Carrying Value, Secured borrowings | 1,218 | 1,354 | |
Comerica Bank | Residential loans | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 100,000 | ||
Pledged Assets Carrying Value | 82,991 | ||
Carrying Value, Secured borrowings | 77,926 | 56,822 | |
Comerica Bank | Residential loans | Borrowings under credit facilities | One Month LIBOR | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 1.75% | ||
TBK Bank | Residential loans | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 150,000 | ||
Pledged Assets Carrying Value | 78,585 | ||
Carrying Value, Secured borrowings | 76,358 | 52,151 | |
Origin Bank | Residential loans | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 50,000 | ||
Pledged Assets Carrying Value | 17,885 | ||
Carrying Value, Secured borrowings | 16,143 | 15,343 | |
Associated Bank | Residential loans | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Current facility size | 40,000 | ||
Pledged Assets Carrying Value | 36,697 | ||
Carrying Value, Secured borrowings | $ 34,228 | 5,823 | |
Associated Bank | Residential loans | Borrowings under credit facilities | One Month LIBOR | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 1.50% | ||
Rabobank | Real estate | Borrowings under credit facilities | |||
Secured borrowings and promissory note | |||
Pricing, stated rate (as a percent) | 4.22% | 4.22% | |
Current facility size | $ 14,500 | ||
Pledged Assets Carrying Value | 18,953 | ||
Carrying Value, Secured borrowings | 12,386 | 12,485 | |
Citibank | Fixed rate, Transitional, Acquired loans | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | 500,000 | ||
Pledged Assets Carrying Value | 305,046 | ||
Carrying Value, Secured borrowings | 246,417 | 124,718 | |
Citibank | Fixed rate, Transitional, Acquired loans | Borrowings under repurchase agreements | One Month LIBOR | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 1.875% | ||
Citibank | Fixed rate, Transitional, Acquired loans | Borrowings under repurchase agreements | One Month LIBOR | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.125% | ||
Citibank | Mortgage backed securities | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | 55,275 | ||
Pledged Assets Carrying Value | 76,566 | ||
Carrying Value, Secured borrowings | 55,275 | 56,189 | |
Citibank | Mortgage backed securities | Borrowings under repurchase agreements | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.89% | ||
Citibank | Mortgage backed securities | Borrowings under repurchase agreements | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 4.01% | ||
Deutsche Bank | Fixed rate, Transitional loans | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | 425,000 | ||
Pledged Assets Carrying Value | 472,064 | ||
Carrying Value, Secured borrowings | 331,181 | 141,356 | |
Deutsche Bank | Fixed rate, Transitional loans | Borrowings under repurchase agreements | Three Month LIBOR | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.00% | ||
Deutsche Bank | Fixed rate, Transitional loans | Borrowings under repurchase agreements | Three Month LIBOR | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 2.40% | ||
Deutsche Bank | Mortgage backed securities | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | 47,612 | ||
Pledged Assets Carrying Value | 52,173 | ||
Carrying Value, Secured borrowings | 47,612 | 44,730 | |
Deutsche Bank | Mortgage backed securities | Borrowings under repurchase agreements | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 3.14% | ||
Deutsche Bank | Mortgage backed securities | Borrowings under repurchase agreements | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 3.81% | ||
Bank of America | Mortgage backed securities | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | 34,886 | ||
Pledged Assets Carrying Value | 33,968 | ||
Carrying Value, Secured borrowings | 34,886 | 38,954 | |
Bank of America | Mortgage backed securities | Borrowings under repurchase agreements | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 1.31% | ||
Bank of America | Mortgage backed securities | Borrowings under repurchase agreements | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 1.61% | ||
RBC | Mortgage backed securities | Borrowings under repurchase agreements | |||
Secured borrowings and promissory note | |||
Current facility size | 56,137 | ||
Pledged Assets Carrying Value | 63,200 | ||
Carrying Value, Secured borrowings | $ 56,137 | $ 59,061 | |
RBC | Mortgage backed securities | Borrowings under repurchase agreements | Minimum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 3.03% | ||
RBC | Mortgage backed securities | Borrowings under repurchase agreements | Maximum | |||
Secured borrowings and promissory note | |||
Pricing, spread on variable (as a percent) | 3.71% |
Secured Borrowings - Collateral
Secured Borrowings - Collateral Pledged (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Collateral pledged | ||
Pledged Assets Carrying Value | $ 2,162,870 | $ 1,668,460 |
Borrowings under credit facilities | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 613,793 | 561,257 |
Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 1,549,077 | 1,107,203 |
Loans, net | Borrowings under credit facilities | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 492,646 | 436,738 |
Loans, net | Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 1,201,100 | 721,887 |
Mortgage servicing rights | Borrowings under credit facilities | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 53,044 | 61,304 |
Purchased future receivables | Borrowings under credit facilities | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 49,150 | 43,265 |
Real estate, held for sale | Borrowings under credit facilities | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 18,953 | 19,950 |
Mortgage backed securities | Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | 74,439 | 113,436 |
Retained interest in assets of consolidated VIEs | Borrowings under repurchase agreements | ||
Collateral pledged | ||
Pledged Assets Carrying Value | $ 273,538 | $ 271,880 |
Senior secured notes, convert_3
Senior secured notes, convertible notes, and corporate debt, net (Details) | Jul. 22, 2019USD ($) | Apr. 29, 2018 | Apr. 27, 2018USD ($) | Aug. 09, 2017USD ($)$ / shares | Mar. 31, 2020USD ($)item | Dec. 31, 2019USD ($) | Dec. 02, 2019USD ($) | Jan. 30, 2018USD ($) | Dec. 31, 2017USD ($) |
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Unamortized deferred financing costs | $ (2,440,000) | $ (2,046,000) | |||||||
Total Senior secured notes, net | 179,387,000 | 179,289,000 | |||||||
Total Corporate debt, net | 150,074,000 | 149,986,000 | |||||||
Total Convertible notes, net | 111,310,000 | $ 111,040,000 | |||||||
Total carrying amount of debt components | 440,771,000 | ||||||||
Total carrying amount of conversion option of equity components recorded in additional paid-in capital | 1,352,000 | ||||||||
Contractual maturities of the Senior Secured Notes, Convertible Notes, and Corporate debt | |||||||||
2021 | 50,000,000 | ||||||||
2022 | 180,000,000 | ||||||||
2023 | 115,000,000 | ||||||||
Thereafter | 104,250,000 | ||||||||
Total contractual amounts | 449,250,000 | ||||||||
Unamortized deferred financing costs, discounts, and premiums, net | (8,479,000) | ||||||||
Total carrying amount of debt components | 440,771,000 | ||||||||
On or after July 30, 2022 and before July 30, 2025 | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Principal amount of the notes to be redeemed (as a percent) | 101.00% | ||||||||
Senior Secured Notes | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Debt instrument, face value | $ 180,000,000 | ||||||||
Interest rate (as a percent) | 7.50% | ||||||||
Unamortized premium | $ 1,479,000 | ||||||||
Unamortized deferred financing costs | (2,092,000) | ||||||||
Total Senior secured notes, net | 179,387,000 | ||||||||
Convertible Notes | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Debt instrument, face value | $ 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 | item | 30 | ||||||||
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 | $ (1,352,000) | ||||||||
Unamortized deferred financing costs | (2,338,000) | ||||||||
Total Convertible notes, net | $ 111,310,000 | ||||||||
Convertible Notes | Minimum | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
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, Convertible notes, and Corporate debt | |||||||||
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% | ||||||||
Corporate Debt | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Unamortized premium | $ 420,000 | ||||||||
Unamortized deferred financing costs | (4,596,000) | ||||||||
Total Corporate debt, net | 150,074,000 | ||||||||
6.50% Senior Notes due 2021 | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Debt instrument, face value | $ 50,000,000 | $ 50,000,000 | |||||||
Interest rate (as a percent) | 6.50% | 6.50% | |||||||
6.50% Senior Notes due 2021 | On or after April 30, 2019 and before April 30, 2020 | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Principal amount of the notes to be redeemed (as a percent) | 101.00% | 101.00% | |||||||
6.50% Senior Notes due 2021 | On or after April 30, 2020 | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Principal amount of the notes to be redeemed (as a percent) | 100.00% | ||||||||
6.20% Senior Notes due 2026 | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Debt instrument, face value | $ 57,500,000 | $ 104,250,000 | $ 45,000,000 | ||||||
Interest rate (as a percent) | 6.20% | 6.20% | |||||||
Proceeds from Issuance of Secured Debt | $ 55,300,000 | ||||||||
6.20% Senior Notes due 2026 | On or after July 30, 2022 and before July 30, 2025 | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Principal amount of the notes to be redeemed (as a percent) | 101.00% | ||||||||
6.20% Senior Notes due 2026 | On or after July 30, 2025 | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Principal amount of the notes to be redeemed (as a percent) | 100.00% | ||||||||
6.20% Senior Notes due 2026 | Over-allotment option | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Proceeds from Issuance of Secured Debt | $ 7,500,000 | ||||||||
ReadyCap Holdings LLC | Senior Secured Notes | |||||||||
Senior secured notes, Convertible notes, and Corporate debt | |||||||||
Debt instrument, face value | $ 40,000,000 | $ 140,000,000 | |||||||
Interest rate (as a percent) | 7.50% | 7.50% | |||||||
Yield-to-maturity (as a percent) | 6.50% |
Guaranteed Loan Financing (Deta
Guaranteed Loan Financing (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Ending balance | $ 457,032 | $ 485,461 |
Guaranteed loan financing | ||
Ending balance | $ 457,032 | $ 485,461 |
Guaranteed loan financing | Weighted Average | ||
Interest Rates | 5.21% | 5.45% |
Guaranteed loan financing | Minimum | ||
Interest Rates | 1.70% | 1.70% |
Guaranteed loan financing | Maximum | ||
Interest Rates | 6.50% | 7.50% |
Guaranteed Loan Financing - Mat
Guaranteed Loan Financing - Maturities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Contractual maturities of total guaranteed loan financing outstanding | ||
2020 | $ 314 | |
2021 | 1,326 | |
2022 | 2,369 | |
2023 | 3,329 | |
2024 | 4,614 | |
Thereafter | 445,080 | |
Total | 457,032 | |
Guaranteed loan financing | ||
Contractual maturities of total guaranteed loan financing outstanding | ||
Loans held-for-investment pledged as security against guaranteed loan financing | $ 458,600 | $ 487,200 |
Variable interest entities an_3
Variable interest entities and securitization activities - Securitized Debt Obligations (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Variable interest entities | ||
Current Principal Balance | $ 1,776,888 | $ 1,735,493 |
Current principal balance of non-company sponsored securitized loans | 7,200 | 7,300 |
Consolidated VIEs | ||
Variable interest entities | ||
Current Principal Balance | 1,718,560 | 1,845,886 |
Carrying value | $ 1,684,898 | $ 1,807,883 |
Weighted Average Rate | 3.60% | 3.70% |
Waterfall Victoria Mortgage Trust 2011-SBC2 | ||
Variable interest entities | ||
Current Principal Balance | $ 6,131 | $ 6,399 |
Carrying value | $ 6,131 | $ 6,399 |
Weighted Average Rate | 5.50% | 5.50% |
ReadyCap Lending Small Business Trust 2019-2 | ||
Variable interest entities | ||
Current Principal Balance | $ 117,876 | $ 131,032 |
Carrying value | $ 117,876 | $ 129,007 |
Weighted Average Rate | 4.30% | 4.30% |
Sutherland Commercial Mortgage Trust 2017-SBC6 | ||
Variable interest entities | ||
Current Principal Balance | $ 38,679 | $ 42,309 |
Carrying value | $ 37,958 | $ 41,486 |
Weighted Average Rate | 3.50% | 3.40% |
Sutherland Commercial Mortgage Trust 2018-SBC7 | ||
Variable interest entities | ||
Current Principal Balance | $ 114,938 | $ 138,235 |
Carrying value | $ 113,166 | $ 136,212 |
Weighted Average Rate | 4.70% | 4.70% |
Sutherland Commercial Mortgage Trust 2019-SBC8 | ||
Variable interest entities | ||
Current Principal Balance | $ 210,516 | $ 219,617 |
Carrying value | $ 207,679 | $ 216,981 |
Weighted Average Rate | 2.90% | 2.90% |
ReadyCap Commercial Mortgage Trust 2014-1 | ||
Variable interest entities | ||
Current Principal Balance | $ 18,406 | $ 18,626 |
Carrying value | $ 18,411 | $ 18,632 |
Weighted Average Rate | 5.80% | 5.60% |
ReadyCap Commercial Mortgage Trust 2015-2 | ||
Variable interest entities | ||
Current Principal Balance | $ 60,344 | $ 64,239 |
Carrying value | $ 57,772 | $ 61,443 |
Weighted Average Rate | 4.50% | 4.50% |
ReadyCap Commercial Mortgage Trust 2016-3 | ||
Variable interest entities | ||
Current Principal Balance | $ 27,295 | $ 32,269 |
Carrying value | $ 25,927 | $ 30,777 |
Weighted Average Rate | 3.60% | 4.70% |
ReadyCap Commercial Mortgage Trust 2018-4 | ||
Variable interest entities | ||
Current Principal Balance | $ 114,670 | $ 121,179 |
Carrying value | $ 111,058 | $ 117,428 |
Weighted Average Rate | 3.90% | 3.90% |
ReadyCap Commercial Mortgage Trust 2019-5 | ||
Variable interest entities | ||
Current Principal Balance | $ 282,994 | $ 309,296 |
Carrying value | $ 273,342 | $ 299,273 |
Weighted Average Rate | 4.10% | 4.10% |
ReadyCap Commercial Mortgage Trust 2019-6 | ||
Variable interest entities | ||
Current Principal Balance | $ 378,765 | $ 379,400 |
Carrying value | $ 371,539 | $ 371,939 |
Weighted Average Rate | 3.20% | 3.20% |
Ready Capital Mortgage Financing 2018-FL2 | ||
Variable interest entities | ||
Current Principal Balance | $ 80,042 | $ 115,381 |
Carrying value | $ 79,202 | $ 114,057 |
Weighted Average Rate | 3.30% | 3.80% |
Ready Capital Mortgage Financing 2019-FL3 | ||
Variable interest entities | ||
Current Principal Balance | $ 267,904 | $ 267,904 |
Carrying value | $ 264,837 | $ 264,249 |
Weighted Average Rate | 3.00% | 3.50% |
Variable interest entities an_4
Variable interest entities and securitization activities - Consolidated VIE Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 |
Assets | |||
Cash and cash equivalents | $ 122,265 | $ 67,928 | $ 47,597 |
Restricted cash | 93,164 | 51,728 | $ 29,979 |
Loans, held for sale, at fair value | 306,328 | 188,077 | |
Accrued interest | 11,383 | 10,583 | |
Real estate, held for sale | 48,292 | 58,573 | |
Total Assets | 5,270,050 | 4,977,018 | |
Liabilities | |||
Secured borrowings | 1,698,937 | 1,189,392 | |
Total Liabilities | 4,494,491 | 4,132,234 | |
Consolidated VIEs | |||
Assets | |||
Total Assets | 2,229,517 | 2,378,486 | |
Liabilities | |||
Secured borrowings | 1,692,074 | 1,815,154 | |
Consolidated VIEs | |||
Assets | |||
Loans, net | 2,195,177 | 2,326,199 | |
Reportable Legal Entities | Consolidated VIEs | |||
Assets | |||
Cash and cash equivalents | 20 | 23 | |
Restricted cash | 8,538 | 8,301 | |
Loans, held for sale, at fair value | 4,017 | 4,434 | |
Due from servicers | 10,279 | 27,964 | |
Accrued interest | 11,486 | 11,565 | |
Total Assets | 2,229,517 | 2,378,486 | |
Liabilities | |||
Secured borrowings | 1,692,074 | 1,815,154 | |
Total Liabilities | 1,692,074 | 1,815,154 | |
Reportable Legal Entities | Consolidated VIEs | Consolidated VIEs | |||
Assets | |||
Loans, net | $ 2,195,177 | $ 2,326,199 |
Variable interest entities an_5
Variable interest entities and securitization activities - Assets of Unconsolidated VIEs (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Carrying amount | ||
Mortgage backed securities, at fair value | $ 78,540 | $ 92,466 |
Investment in unconsolidated joint ventures | 53,379 | 58,850 |
Unconsolidated VIEs | ||
Carrying amount | ||
Mortgage backed securities, at fair value | 55,685 | 66,108 |
Investment in unconsolidated joint ventures | 53,379 | 58,850 |
Total assets in unconsolidated VIEs carrying amount | 109,064 | 124,958 |
Maximum Exposure to Loss | ||
Mortgage backed securities, at fair value | 55,685 | 66,108 |
Investment in unconsolidated joint venture | 53,379 | 58,850 |
Total assets in unconsolidated VIEs maximum exposure to loss | $ 109,064 | $ 124,958 |
Interest income and interest _3
Interest income and interest expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Interest income | ||
Total loans | $ 66,436 | $ 46,202 |
Total loans, held for sale, at fair value | 1,636 | 1,069 |
Mortgage backed securities, at fair value | 1,479 | 1,482 |
Total interest income | 69,551 | 48,753 |
Interest expense | ||
Secured borrowings | (12,758) | (9,909) |
Securitized debt obligations of consolidated VIEs | (19,529) | (16,501) |
Guaranteed loan financing | (6,243) | (2,710) |
Senior secured note | (3,472) | (3,484) |
Convertible note | (2,188) | (2,188) |
Corporate debt | (2,740) | (983) |
Total interest expense | (46,930) | (35,775) |
Net interest income before provision for loan losses | 22,621 | 12,978 |
Acquired SBA 7(a) loans | ||
Interest income | ||
Total loans | 6,202 | 7,181 |
Acquired loans | ||
Interest income | ||
Total loans | 15,411 | 10,254 |
Total loans, held for sale, at fair value | 68 | 36 |
Originated Transitional loans | ||
Interest income | ||
Total loans | 22,219 | 14,185 |
Originated SBC loans, at fair value | ||
Interest income | ||
Total loans | 317 | 366 |
Originated SBC loans | ||
Interest income | ||
Total loans | 15,998 | 12,282 |
Originated SBA 7(a) loans | ||
Interest income | ||
Total loans | 6,269 | 1,928 |
Originated Residential Agency loans | ||
Interest income | ||
Total loans | 20 | 6 |
Total loans, held for sale, at fair value | 1,297 | 776 |
Originated Freddie Mac loans | ||
Interest income | ||
Total loans, held for sale, at fair value | $ 271 | $ 257 |
Derivative instruments (Details
Derivative instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Notional Amount | $ 1,459,436 | $ 717,609 | |
Asset Derivatives Fair Value | 17,756 | 2,814 | |
Liabilities Derivatives Fair Value | (16,585) | (5,250) | |
Derivative gain (loss) | |||
Net Realized (Loss) | (384) | $ (796) | |
Unrealized Gain (Loss) | (4,826) | 646 | |
Total change in OCI for period | (3,128) | (420) | |
Designated as Hedging | |||
Derivative gain (loss) | |||
Derivatives - effective portion reclassified from AOCI to income | (367) | 41 | |
Hedge ineffectiveness recorded directly in income | (1,694) | ||
Total income statement impact | (2,061) | 41 | |
Derivatives- effective portion recorded in OCI | (5,189) | (461) | |
Total change in OCI for period | (3,128) | (420) | |
Designated as Hedging | Interest Rate Risk | |||
Derivative gain (loss) | |||
Derivatives - effective portion reclassified from AOCI to income | (367) | 41 | |
Hedge ineffectiveness recorded directly in income | (1,694) | ||
Total income statement impact | (2,061) | 41 | |
Derivatives- effective portion recorded in OCI | (5,189) | (461) | |
Total change in OCI for period | (3,128) | (420) | |
Credit default swaps | |||
Liabilities Derivatives Fair Value | (110) | ||
Derivative gain (loss) | |||
Unrealized Gain (Loss) | 370 | (323) | |
Credit default swaps | Credit Risk | |||
Notional Amount | 15,000 | 15,000 | |
Asset Derivatives Fair Value | 260 | ||
Liabilities Derivatives Fair Value | (110) | ||
Interest Rate Swap | |||
Liabilities Derivatives Fair Value | (25,017) | (4,890) | |
Derivative gain (loss) | |||
Net Realized (Loss) | (247) | (796) | |
Unrealized Gain (Loss) | (9,988) | 604 | |
Interest Rate Swap | Not Designated as Hedging | Interest Rate Risk | |||
Notional Amount | 623,543 | 291,001 | |
Liabilities Derivatives Fair Value | (9,882) | (3,181) | |
Interest Rate Swap | Designated as Hedging | |||
Notional Amount | 143,215 | 158,325 | |
Liabilities Derivatives Fair Value | (6,703) | (1,709) | |
Residential mortgage banking activities interest rate swaps | |||
Derivative gain (loss) | |||
Unrealized Gain (Loss) | (10,180) | (343) | |
Interest rate lock commitments (IRLCs) | |||
Derivative gain (loss) | |||
Unrealized Gain (Loss) | 14,487 | $ 708 | |
Interest rate lock commitments (IRLCs) | Interest Rate Risk | |||
Notional Amount | 660,770 | 238,283 | |
Asset Derivatives Fair Value | 17,261 | 2,814 | |
FX forwards | |||
Liabilities Derivatives Fair Value | (250) | ||
Derivative gain (loss) | |||
Net Realized (Loss) | (137) | ||
Unrealized Gain (Loss) | 485 | ||
FX forwards | Foreign Exchange Rate Risk | |||
Notional Amount | 16,908 | 15,000 | |
Asset Derivatives Fair Value | $ 235 | ||
Liabilities Derivatives Fair Value | $ (250) |
Real estate, held for sale (Det
Real estate, held for sale (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Real estate acquired | ||
Acquired ORM portfolio | $ 47,130 | $ 52,883 |
Other REO held for sale | 1,162 | 5,690 |
Total Real estate, held for sale | 48,292 | 58,573 |
Retail | ||
Real estate acquired | ||
Acquired ORM portfolio | 18,953 | 19,950 |
Other REO held for sale | 660 | 660 |
Mixed Use | ||
Real estate acquired | ||
Acquired ORM portfolio | 16,604 | 17,478 |
Other REO held for sale | 279 | |
Land | ||
Real estate acquired | ||
Acquired ORM portfolio | 7,362 | 7,919 |
Lodging/Residential | ||
Real estate acquired | ||
Acquired ORM portfolio | 3,230 | 6,280 |
Office | ||
Real estate acquired | ||
Acquired ORM portfolio | 981 | 1,256 |
Other REO held for sale | 151 | 4,465 |
SBA | ||
Real estate acquired | ||
Other REO held for sale | $ 351 | $ 286 |
Agreements and transactions w_3
Agreements and transactions with related parties (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Related-party transactions | |||
Amount unpaid | $ 2,561 | $ 2,697 | |
Purchase of loans, held-for-investment | 52,067 | $ 128,991 | |
Investment in unconsolidated joint ventures | $ 53,379 | $ 58,850 | |
Management agreement | |||
Related-party transactions | |||
Minimum notice period for termination | 180 days | ||
Management fee | |||
Related-party transactions | |||
Fee percentage for results up to threshold | 1.50% | ||
Fee threshold | $ 500,000 | ||
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% | ||
The period over which core earnings must exceed the minimum threshold per the terms of the agreement | 48 months | ||
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 | $ 2,600 | 2,000 | |
Amount unpaid | 2,600 | 4,100 | |
Manager | Incentive distribution | |||
Related-party transactions | |||
Amount unpaid | 200 | ||
Manager | Expense reimbursement | |||
Related-party transactions | |||
Reimbursable expenses | 1,300 | 800 | |
Amount unpaid | $ 200 | $ 1,000 |
Other assets and other liabil_3
Other assets and other liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Other assets: | ||
Deferred tax asset | $ 31,803 | $ 31,803 |
Tax receivable | 14,184 | 4,019 |
Deferred loan exit fees | 14,374 | 13,039 |
Accrued interest | 11,383 | 10,583 |
Due from servicers | 4,641 | 10,127 |
Right-of-use assets | 4,586 | 4,531 |
Goodwill | 11,206 | 11,206 |
Intangible assets | 7,978 | 8,309 |
Deferred financing costs | 2,440 | 2,046 |
Other assets | 12,296 | 11,262 |
Total other assets | 114,891 | 106,925 |
Accounts payable and other accrued liabilities: | ||
Deferred tax liability | 18,757 | 18,757 |
Accrued salaries, wages and commissions | 12,871 | 21,146 |
Accrued interest payable | 23,836 | 17,305 |
Servicing principal and interest payable | 6,661 | 14,145 |
Repair and denial reserve | 5,043 | 5,179 |
Payable to related parties | 2,561 | 2,697 |
Accrued professional fees | 2,525 | 1,809 |
Lease payable | 4,673 | 4,618 |
Other liabilities | 12,813 | 11,751 |
Total accounts payable and other accrued liabilities | 89,740 | 97,407 |
Loan indemnification reserve | ||
Loan indemnification reserve | $ 2,300 | $ 2,100 |
Other Asset and Other Liabiliti
Other Asset and Other Liabilities - Intangible assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Finite-lived intangible assets | $ 6,978 | ||
Total Intangible Assets | 7,978 | $ 8,309 | |
Amortization expense | 300 | $ 100 | |
Total Accumulated Amortization | 1,604 | ||
Future amortization of lease intangibles | |||
2020 | 992 | ||
2021 | 1,295 | ||
2022 | 1,268 | ||
2023 | 1,242 | ||
2024 | 1,210 | ||
Thereafter | 971 | ||
Net amount | 6,978 | ||
SBA license | |||
Indefinite-lived intangible assets | 1,000 | 1,000 | |
Internally developed software | Knight Capital | |||
Finite-lived intangible assets | $ 3,536 | 3,694 | |
Estimated Useful Life | 6 years | ||
Total Accumulated Amortization | $ 264 | ||
Future amortization of lease intangibles | |||
Net amount | 3,536 | 3,694 | |
Broker network | Knight Capital | |||
Finite-lived intangible assets | $ 1,089 | 1,156 | |
Estimated Useful Life | 4 years 6 months | ||
Total Accumulated Amortization | $ 111 | ||
Future amortization of lease intangibles | |||
Net amount | 1,089 | 1,156 | |
Trade name | Knight Capital | |||
Finite-lived intangible assets | $ 819 | 855 | |
Estimated Useful Life | 6 years | ||
Total Accumulated Amortization | $ 61 | ||
Future amortization of lease intangibles | |||
Net amount | 819 | 855 | |
Trade name | GMFS | |||
Finite-lived intangible assets | $ 663 | 699 | |
Estimated Useful Life | 15 years | ||
Total Accumulated Amortization | $ 559 | ||
Future amortization of lease intangibles | |||
Net amount | 663 | 699 | |
Favorable lease | |||
Finite-lived intangible assets | $ 871 | 905 | |
Estimated Useful Life | 12 years | ||
Total Accumulated Amortization | $ 609 | ||
Future amortization of lease intangibles | |||
Net amount | $ 871 | $ 905 |
Other income and operating ex_3
Other income and operating expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Other income | ||
Origination income | $ 2,495 | $ 808 |
Release of repair and denial reserve | 136 | (89) |
Other | 1,442 | 181 |
Total other income | 4,073 | 900 |
Other operating expenses | ||
Origination costs | 3,025 | 1,189 |
Technology expense | 1,580 | 1,101 |
Impairment on real estate | 2,969 | 305 |
Rent and property tax expense | 1,184 | 691 |
Recruiting, training and travel expenses | 624 | 587 |
Marketing expense | 546 | 545 |
Loan acquisition costs | 98 | 110 |
Financing costs on purchased future receivables | 624 | |
Other | 3,094 | 2,333 |
Total other operating expenses | $ 13,744 | $ 6,861 |
Stockholders Equity - Equity Of
Stockholders Equity - Equity Offering (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Jan. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2020 | Dec. 31, 2018 | |
Equity issuances (shares) | 6,000,000 | 0 | ||
Shares issued, price per share | $ 15.30 | |||
Proceeds from issuance of common stock | $ 91,800 | $ 13,372 | ||
Over-allotment option | ||||
Equity issuances (shares) | 900,000 | |||
Shares issued, price per share | $ 15.30 | |||
Proceeds from issuance of common stock | $ 13,800 |
Stockholders Equity - Common St
Stockholders Equity - Common Stock Dividends (Details) - $ / shares | Apr. 30, 2020 | Mar. 11, 2020 | Jan. 31, 2020 | Dec. 11, 2019 | Oct. 31, 2019 | Sep. 10, 2019 | Jul. 31, 2019 | Jun. 11, 2019 | Apr. 30, 2019 | Mar. 12, 2019 | Jan. 31, 2019 | Dec. 12, 2018 | Mar. 31, 2020 | Mar. 31, 2019 |
Dividends | ||||||||||||||
Dividend per Share, declared | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | ||||||
Dividend per Share, paid | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.40 |
Stockholders Equity - Manager E
Stockholders Equity - Manager Equity Incentive (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders’ Equity | |
Percentage of shares of common stock issued and outstanding on a fully diluted basis | 5.00% |
Stockholders Equity - RSU activ
Stockholders Equity - RSU activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Weighted-average grant date fair value (per share) | ||
Stock-based compensation | $ 900 | $ 700 |
Non-cash compensation expense not yet charged to net income | $ 18,100 | $ 2,700 |
RSUs and RSAs | ||
Number of shares | ||
Outstanding, Beginning balance | 1,009,617 | |
Granted (in shares) | 208,514 | |
Vested (in shares) | (60,370) | |
Outstanding, Ending balance | 1,157,761 | |
Grant date fair value | ||
Beginning balance | $ 15,722 | |
Granted | 3,298 | |
Vested | (894) | |
Ending balance | $ 18,126 | |
Weighted-average grant date fair value (per share) | ||
Beginning balance | $ 15.57 | |
Granted (in per share) | 15.82 | |
Vested (in per share) | 14.81 | |
Ending balance | $ 15.66 |
Earnings per Share of Common _3
Earnings per Share of Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Continuing Operations | ||
Net income | $ (51,516) | $ 30,450 |
Less: Income attributable to non-controlling interest | (1,064) | 983 |
Less: Income attributable to participating shares | 463 | 82 |
Basic earnings | (50,915) | 29,385 |
Diluted Earnings | ||
Net income | (51,516) | 30,450 |
Less: Income attributable to non-controlling interest | (1,064) | 983 |
Less: Income attributable to participating shares | 463 | 82 |
Diluted earnings | $ (50,915) | $ 29,385 |
Basic — Average shares outstanding | 51,984,040 | 32,556,875 |
Effect of dilutive securities — Unvested participating shares | 5,973 | 6,769 |
Diluted — Average shares outstanding | 51,990,013 | 32,563,644 |
Earnings Per Share Attributable to RC Common Stockholders: | ||
Basic | $ (0.98) | $ 0.90 |
Diluted | $ (0.98) | $ 0.90 |
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 | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
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 | 1,117,169 | 1,117,169 |
Offsetting assets and liabili_3
Offsetting assets and liabilities - Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Effect of offsetting of the Company’s recognized assets | ||
Gross Amounts of Recognized Assets | $ 495 | $ 2,814 |
Amounts presented in the Consolidated Balance Sheets | 495 | 2,814 |
Cash Collateral Received | 2,814 | |
Interest Rate Swap | ||
Effect of offsetting of the Company’s recognized assets | ||
Gross Amounts of Recognized Assets | 2,814 | |
Amounts presented in the Consolidated Balance Sheets | 2,814 | |
Cash Collateral Received | $ 2,814 | |
Credit default swaps | ||
Effect of offsetting of the Company’s recognized assets | ||
Gross Amounts of Recognized Assets | 260 | |
Amounts presented in the Consolidated Balance Sheets | 260 | |
FX forwards | ||
Effect of offsetting of the Company’s recognized assets | ||
Gross Amounts of Recognized Assets | 235 | |
Amounts presented in the Consolidated Balance Sheets | $ 235 |
Offsetting assets and liabili_4
Offsetting assets and liabilities - Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Effect of offsetting recognized liabilities, Derivative | ||
Gross Amounts of Recognized Liabilities | $ 16,585 | $ 5,250 |
Effect of offsetting recognized liabilities, Total | ||
Gross Amounts of Recognized Liabilities, Total | 1,723,954 | 1,194,642 |
Gross Amounts Offset in the Consolidated Balance Sheets, Total | 8,432 | |
Liabilities Presented in the Consolidated Balance Sheets, Total | 1,715,522 | 1,194,642 |
Financial Instruments, Total | 1,698,937 | 1,189,392 |
Cash Collateral Paid, Total | 11,656 | 5,250 |
Credit default swaps | ||
Effect of offsetting recognized liabilities, Derivative | ||
Gross Amounts of Recognized Liabilities | 110 | |
Liabilities Presented in the Consolidated Balance Sheets, Derivative | 110 | |
Cash Collateral Paid, Derivative | 110 | |
Interest Rate Swap | ||
Effect of offsetting recognized liabilities, Derivative | ||
Gross Amounts of Recognized Liabilities | 25,017 | 4,890 |
Gross Amounts Offset in the Consolidated Balance Sheets, Derivative | 8,432 | |
Liabilities Presented in the Consolidated Balance Sheets, Derivative | 16,585 | 4,890 |
Cash Collateral Paid, Derivative | 11,656 | 4,890 |
FX forwards | ||
Effect of offsetting recognized liabilities, Derivative | ||
Gross Amounts of Recognized Liabilities | 250 | |
Liabilities Presented in the Consolidated Balance Sheets, Derivative | 250 | |
Cash Collateral Paid, Derivative | 250 | |
Secured borrowings | ||
Effect of offsetting recognized liabilities, Borrowings | ||
Gross Amounts of Recognized Liabilities, Borrowings | 1,698,937 | 1,189,392 |
Liabilities Presented in the Consolidated Balance Sheets, Borrowings | 1,698,937 | 1,189,392 |
Financial Instruments, Borrowings | $ 1,698,937 | $ 1,189,392 |
Commitments, Contingencies an_3
Commitments, Contingencies and Indemnifications (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Originated Residential Agency loans | ||
Commitments, contingencies and indemnifications | ||
Commitments to originate residential agency loans | $ 601,633 | $ 190,806 |
Unfunded loan commitments | ||
Commitments, contingencies and indemnifications | ||
Loans, net | 329,809 | 128,719 |
Loans, held for sale at fair value | $ 8,855 | $ 6,982 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
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% | |
Income tax benefit relating to changes in NOL carryback provisions pursuant to the CARES Act | $ 2,900 | |
Income tax benefit | $ 7,937 | $ 3,003 |
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% |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)segment | Mar. 31, 2019USD ($) | |
Segment reporting | ||
Number of Reportable Segments | segment | 4 | |
Interest income | $ 69,551 | $ 48,753 |
Interest expense | (46,930) | (35,775) |
Net interest income before provision for loan losses | 22,621 | 12,978 |
Provision for loan losses | (39,804) | (518) |
Net interest income after provision for loan losses | (17,183) | 12,460 |
Non-interest income | ||
Residential mortgage banking activities | 36,669 | 14,587 |
Net realized gain (loss) on financial instruments and real estate owned | 7,172 | 7,282 |
Net unrealized gain (loss) on financial instruments | (33,434) | (6,912) |
Servicing income | 8,097 | 6,752 |
Income on purchased future receivables, net of allowance for doubtful accounts | 3,483 | |
Income (Loss) from unconsolidated joint ventures | (3,537) | 2,929 |
Other income | 4,073 | 900 |
Gain on bargain purchase | 30,728 | |
Total non-interest income | 22,523 | 56,266 |
Non-interest expense | ||
Employee compensation and benefits | (18,936) | (11,448) |
Allocated employee compensation and benefits from related party | (1,250) | (853) |
Variable expenses on residential mortgage banking activities | (20,129) | (9,176) |
Professional fees | (2,556) | (1,829) |
Management fees – related party | (2,561) | (1,997) |
Loan servicing expense | (5,570) | (3,648) |
Merger related expenses | (47) | (5,467) |
Other operating expenses | (13,744) | (6,861) |
Total non-interest expense | (64,793) | (41,279) |
Net income (loss) before provision for income taxes | (59,453) | 27,447 |
Total Assets | 5,270,050 | 3,279,014 |
Corporate- Other | ||
Non-interest income | ||
Other income | 99 | 15 |
Gain on bargain purchase | 30,728 | |
Total non-interest income | 99 | 30,743 |
Non-interest expense | ||
Employee compensation and benefits | (742) | (824) |
Allocated employee compensation and benefits from related party | (1,125) | (768) |
Professional fees | (1,407) | (935) |
Management fees – related party | (2,561) | (1,997) |
Loan servicing expense | (32) | (35) |
Merger related expenses | (47) | (5,467) |
Other operating expenses | (698) | (1,200) |
Total non-interest expense | (6,612) | (11,226) |
Net income (loss) before provision for income taxes | (6,513) | 19,517 |
Total Assets | 234,380 | 61,462 |
Loan Acquisitions | Operating Segments | ||
Segment reporting | ||
Interest income | 16,494 | 10,674 |
Interest expense | (11,205) | (7,705) |
Net interest income before provision for loan losses | 5,289 | 2,969 |
Provision for loan losses | (5,722) | (133) |
Net interest income after provision for loan losses | (433) | 2,836 |
Non-interest income | ||
Net realized gain (loss) on financial instruments and real estate owned | (739) | (49) |
Net unrealized gain (loss) on financial instruments | (9,423) | (19) |
Servicing income | 355 | 1 |
Income on purchased future receivables, net of allowance for doubtful accounts | 3,483 | |
Income (Loss) from unconsolidated joint ventures | (3,537) | 2,929 |
Other income | 2,336 | 68 |
Total non-interest income | (7,525) | 2,930 |
Non-interest expense | ||
Employee compensation and benefits | (2,833) | (1) |
Allocated employee compensation and benefits from related party | (125) | (85) |
Professional fees | (235) | (170) |
Loan servicing expense | (1,365) | (801) |
Other operating expenses | (6,245) | (421) |
Total non-interest expense | (10,803) | (1,478) |
Net income (loss) before provision for income taxes | (18,761) | 4,288 |
Total Assets | 1,209,617 | 864,881 |
SBC Originations | Operating Segments | ||
Segment reporting | ||
Interest income | 39,269 | 28,188 |
Interest expense | (25,627) | (20,666) |
Net interest income before provision for loan losses | 13,642 | 7,522 |
Provision for loan losses | (29,828) | 41 |
Net interest income after provision for loan losses | (16,186) | 7,563 |
Non-interest income | ||
Net realized gain (loss) on financial instruments and real estate owned | 3,649 | 3,540 |
Net unrealized gain (loss) on financial instruments | (6,491) | 810 |
Servicing income | 532 | 436 |
Other income | 1,283 | 786 |
Total non-interest income | (1,027) | 5,572 |
Non-interest expense | ||
Employee compensation and benefits | (2,710) | (2,260) |
Professional fees | (338) | (301) |
Loan servicing expense | (1,580) | (1,215) |
Other operating expenses | (3,457) | (2,117) |
Total non-interest expense | (8,085) | (5,893) |
Net income (loss) before provision for income taxes | (25,298) | 7,242 |
Total Assets | 2,704,301 | 1,823,166 |
SBA Originations, Acquisitions, and Servicing | Operating Segments | ||
Segment reporting | ||
Interest income | 12,471 | 9,109 |
Interest expense | (8,513) | (6,490) |
Net interest income before provision for loan losses | 3,958 | 2,619 |
Provision for loan losses | (4,254) | (426) |
Net interest income after provision for loan losses | (296) | 2,193 |
Non-interest income | ||
Net realized gain (loss) on financial instruments and real estate owned | 4,262 | 3,791 |
Net unrealized gain (loss) on financial instruments | (1,082) | (575) |
Servicing income | 1,074 | 1,015 |
Other income | 295 | 14 |
Total non-interest income | 4,549 | 4,245 |
Non-interest expense | ||
Employee compensation and benefits | (3,910) | (3,768) |
Professional fees | (289) | (187) |
Loan servicing expense | (335) | 143 |
Other operating expenses | (1,559) | (1,050) |
Total non-interest expense | (6,093) | (4,862) |
Net income (loss) before provision for income taxes | (1,840) | 1,576 |
Total Assets | 703,331 | 251,778 |
Residential Mortgage Banking | Operating Segments | ||
Segment reporting | ||
Interest income | 1,317 | 782 |
Interest expense | (1,585) | (914) |
Net interest income before provision for loan losses | (268) | (132) |
Net interest income after provision for loan losses | (268) | (132) |
Non-interest income | ||
Residential mortgage banking activities | 36,669 | 14,587 |
Net unrealized gain (loss) on financial instruments | (16,438) | (7,128) |
Servicing income | 6,136 | 5,300 |
Other income | 60 | 17 |
Total non-interest income | 26,427 | 12,776 |
Non-interest expense | ||
Employee compensation and benefits | (8,741) | (4,595) |
Variable expenses on residential mortgage banking activities | (20,129) | (9,176) |
Professional fees | (287) | (236) |
Loan servicing expense | (2,258) | (1,740) |
Other operating expenses | (1,785) | (2,073) |
Total non-interest expense | (33,200) | (17,820) |
Net income (loss) before provision for income taxes | (7,041) | (5,176) |
Total Assets | $ 418,421 | $ 277,727 |
Supplemental Financial Data (De
Supplemental Financial Data (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Supplemental Financial Data | ||
Realized gains | $ 7,172 | $ 7,282 |
Unrealized gains | (33,434) | (6,912) |
Income (loss) before provision for income taxes | (59,453) | 27,447 |
Income (loss) on unconsolidated joint ventures | $ (3,537) | 2,929 |
WFLLA LLC | ||
Supplemental Financial Data | ||
Ownership percentage | 50.00% | |
Girod HoldCo, LLC | ||
Supplemental Financial Data | ||
Interest income | $ 381 | 1,157 |
Realized gains | 149 | 201 |
Unrealized gains | (1,987) | 11,278 |
Servicing expense and other | (1,588) | (898) |
Income (loss) before provision for income taxes | (3,045) | 11,738 |
WFLLA LLC | ||
Supplemental Financial Data | ||
Interest income | 190 | 577 |
Realized gains | 74 | 100 |
Unrealized gains | (992) | 5,628 |
Servicing expense and other | (794) | (447) |
Income (loss) before provision for income taxes | (1,522) | 5,858 |
Income (loss) on unconsolidated joint ventures | $ (761) | $ 2,929 |
WFLLA LLC | Girod HoldCo, LLC | ||
Supplemental Financial Data | ||
Ownership percentage | 49.90% | |
Other Unconsolidated Joint Ventures | ||
Supplemental Financial Data | ||
Income (loss) on unconsolidated joint ventures | $ (2,776) |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent event - Paycheck Protection Program $ in Billions | 2 Months Ended |
May 11, 2020USD ($)item | |
Subsequent Event | |
Loans funded | $ 2.1 |
Minimum | |
Subsequent Event | |
Number of loan applications accepted | item | 40,000 |
Loans approved by the SBA | $ 2.9 |