NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(unaudited)
1. Organization
New York Mortgage Trust, Inc., together with its consolidated subsidiaries (“NYMT,” “we,” “our,” or the “Company”), is a real estate investment trust ("REIT") in the business of acquiring, investing in, financing and managing primarily mortgage-related single-family and multi-family residential assets. Our objective is to deliver long-term stable distributions to our stockholders over changing economic conditions through a combination of net interest spread and capital gains from a diversified investment portfolio. Our investment portfolio includes credit sensitive single-family and multi-family assets.
The Company conducts its business through the parent company, New York Mortgage Trust, Inc., and several subsidiaries, including taxable REIT subsidiaries (“TRSs”), qualified REIT subsidiaries (“QRSs”) and special purpose subsidiaries established for securitization purposes. The Company consolidates all of its subsidiaries under generally accepted accounting principles in the United States of America (“GAAP”).
The Company is organized and conducts its operations to qualify as a REIT for U.S. federal income tax purposes. As such, the Company will generally not be subject to federal income taxes on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by the due date of its federal income tax return and complies with various other requirements.
2. Summary of Significant Accounting Policies
Definitions – The following defines certain of the commonly used terms in these financial statements:
“RMBS” refers to residential mortgage-backed securities backed by adjustable-rate, hybrid adjustable-rate, or fixed-rate residential loans;
“Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of residential loans guaranteed by a government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. government, such as the Government National Mortgage Association (“Ginnie Mae”);
“non-Agency RMBS” refers to RMBS that are not guaranteed by any agency of the U.S. Government or GSE;
“IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the right to the interest component of the cash flow from a pool of mortgage loans;
“POs” refers to mortgage-backed securities that represent the right to the principal component of the cash flow from a pool of mortgage loans;
“ABS” refers to debt and/or equity tranches of securitizations backed by various asset classes including, but not limited to, automobiles, aircraft, credit cards, equipment, franchises, recreational vehicles and student loans;
“CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities issued by a GSE, as well as PO, IO or mezzanine securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans;
“CDO” refers to collateralized debt obligation and includes debt that permanently finances the residential loans held in Consolidated SLST and the Company's residential loans held in securitization trusts that we consolidate, or consolidated, in our financial statements in accordance with GAAP;
“business purpose loans” refers to (i) short-term loans that are collateralized by residential properties and are made to investors who intend to rehabilitate and sell the residential property for a profit or (ii) loans that finance (or refinance) non-owner occupied residential properties that are rented to one or more tenants;
“Consolidated SLST” refers to a Freddie Mac-sponsored residential loan securitization, comprised of seasoned re-performing and non-performing residential loans, of which we own or owned the first loss subordinated securities and certain IOs and senior securities that we consolidate in our financial statements in accordance with GAAP; and
“SOFR” refers to Secured Overnight Funding Rate.
Basis of Presentation – On March 9, 2023, the Company effected a one-for-four reverse stock split of its issued, outstanding and authorized shares of common stock (the "Reverse Stock Split"). Accordingly, all common share and per common share data for all periods presented in these condensed consolidated financial statements and notes thereto have been adjusted on a retroactive basis to reflect the impact of the Reverse Stock Split.
The accompanying condensed consolidated balance sheet as of December 31, 2022 has been derived from audited financial statements. The accompanying condensed consolidated balance sheet as of March 31, 2023, the accompanying condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022, the accompanying condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2023 and 2022, the accompanying condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2023 and 2022 and the accompanying condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 are unaudited. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission (“SEC”). Accordingly, significant accounting policies and other disclosures have been omitted since such items are disclosed in Note 2 in the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. Provided in this section is a summary of additional accounting policies that are significant to, or newly adopted by, the Company for the three months ended March 31, 2023. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results for the full year.
The accompanying condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management has made significant estimates in several areas, including fair valuation of its residential loans, multi-family loans, certain equity investments, real estate held by Consolidated VIEs and Consolidated SLST CDOs. Although the Company’s estimates contemplate current conditions and how it expects those conditions to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition.
Reclassifications – Certain prior period amounts have been reclassified in the accompanying condensed consolidated financial statements to conform to current period presentation. In particular, prior period disclosures have been adjusted for the aforementioned Reverse Stock Split. Additionally, prior period disclosures have been conformed to the current period presentation of interest expense, mortgages payable on real estate. Starting in the fourth quarter of 2022, interest expense, mortgages payable on real estate is presented in expenses related to real estate on the Company's condensed consolidated statements of operations. Previously, interest expense, mortgages payable on real estate was presented in interest expense and net interest income on the Company's condensed consolidated statements of operations.
Principles of Consolidation and Variable Interest Entities – The accompanying condensed consolidated financial statements of the Company include the accounts of all its subsidiaries which are majority-owned, controlled by the Company or a variable interest entity (“VIE”) where the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation (see Note 7).
A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE in accordance with ASC 810, Consolidation ("ASC 810") when it is the primary beneficiary of such VIE, herein referred to as a "Consolidated VIE". As primary beneficiary, the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.
The Company evaluates the initial consolidation of each Consolidated VIE, which includes a determination of whether the VIE constitutes the definition of a business in accordance with ASC 805, Business Combinations ("ASC 805"), by considering if substantially all of the fair value of the gross assets within the VIE are concentrated in either a single identifiable asset or group of single identifiable assets. Upon consolidation, the Company recognizes the assets acquired, the liabilities assumed, and any third-party ownership of membership interests as non-controlling interest as of the consolidation or acquisition date, measured at their relative fair values (see Note 7). Non-controlling interest in Consolidated VIEs is adjusted prospectively for its share of the allocation of income or loss and equity contributions and distributions from each respective Consolidated VIE. The third-party owners of certain of the non-controlling interests in Consolidated VIEs have the ability to sell their ownership interests to the Company, at their election, subject to certain conditions. The Company has classified these third-party ownership interests as redeemable non-controlling interest in Consolidated VIEs in mezzanine equity on the accompanying condensed consolidated balance sheets.
Derivative Financial Instruments – The Company enters into various types of derivative financial instruments in connection with its risk management activities which are recorded on the accompanying condensed consolidated balance sheets as assets or liabilities at fair value in accordance with ASC 815, Derivatives and Hedging (“ASC 815”). Changes in fair value are accounted for depending on the use of the derivative financial instruments and whether they qualify for hedge accounting treatment. The Company elected not to apply hedge accounting for its derivative financial instruments; accordingly, all changes in fair value are reported on the accompanying condensed consolidated statements of operations as unrealized gains (losses), net.
The Company is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Primarily to help mitigate interest rate risk, the Company may enter into interest rate swaps. Interest rate swaps are contractual agreements whereby one party pays a floating interest rate on a notional principal amount and receives a fixed-rate payment on the same notional principal, or vice versa, for a fixed period of time. Interest rate swaps change in value with movements in interest rates. All of the Company’s interest rate swaps are cleared through a central clearing house which requires that the Company post an initial margin amount determined by the central clearing house, which is generally intended to be set at a level sufficient to protect the exchange from the derivative financial instrument’s maximum estimated single-day price movement. The Company also exchanges variation margin based upon daily changes in fair value, as measured by the central clearing house. The exchange of variation margin is treated as a legal settlement of the exposure under the interest rate swap contract, as opposed to pledged collateral. Accordingly, the Company accounts for the receipt or payment of variation margin as a direct reduction to or increase in the carrying value of the interest rate swap asset or liability. The receipt or payment of initial margin is accounted for separate from the interest rate swap asset or liability and classified within restricted cash and included in other assets on the accompanying condensed consolidated balance sheets. Any additional margin fundings, in excess of initial margin and variation margin, are included in other assets on the accompanying condensed consolidated balance sheets.
Summary of Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides optional expedients and exceptions to GAAP requirements for modifications to debt agreements, leases, derivatives and other contracts, related to the expected market transition from LIBOR, and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"). ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the "discounting transition" (i.e., changes in the interest rates used for margining, discounting, or contract price alignment for derivative instruments that are being implemented as part of the market-wide transition to new reference rates). Once ASU 2020-04 is elected, the guidance must be applied prospectively for all eligible contract modifications. The amendments in ASU 2021-01 were effective immediately and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or on a prospective basis for eligible contract modifications. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 ("ASU 2022-06"), which allows ASU 2020-04 to be adopted and applied prospectively to contract modifications made on or before December 31, 2024. The Company continues to evaluate the impact of ASU 2020-04 and ASU 2021-01 on its financing transactions that are subject to LIBOR and may apply elections, as applicable, as the expected market transition from IBORs to alternative reference rates continues to develop.
3. Residential Loans, at Fair Value
The Company’s acquired residential loans, including performing, re-performing and non-performing residential loans, and business purpose loans, are presented at fair value on its condensed consolidated balance sheets as a result of a fair value election. Subsequent changes in fair value are reported in current period earnings and presented in unrealized gains (losses), net on the Company’s condensed consolidated statements of operations.
The following table presents the Company’s residential loans, at fair value, which consist of residential loans held by the Company, Consolidated SLST and other securitization trusts, as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Residential loans (1) | | Consolidated SLST (2) | | Residential loans held in securitization trusts (3) | | Total | | Residential loans (1) | | Consolidated SLST (2) | | Residential loans held in securitization trusts (3) | | Total |
| Principal | $ | 992,993 | | | $ | 941,329 | | | $ | 1,766,819 | | | $ | 3,701,141 | | | $ | 1,152,502 | | | $ | 955,579 | | | $ | 1,790,179 | | | $ | 3,898,260 | |
| (Discount)/premium | (21,949) | | | (5,801) | | | (59,147) | | | (86,897) | | | (22,179) | | | (5,815) | | | (60,745) | | | (88,739) | |
| Unrealized (losses) gains | (50,044) | | | (106,375) | | | (82,969) | | | (239,388) | | | (48,939) | | | (122,182) | | | (113,320) | | | (284,441) | |
| Carrying value | $ | 921,000 | | | $ | 829,153 | | | $ | 1,624,703 | | | $ | 3,374,856 | | | $ | 1,081,384 | | | $ | 827,582 | | | $ | 1,616,114 | | | $ | 3,525,080 | |
(1)Certain of the Company's residential loans, at fair value are pledged as collateral for repurchase agreements as of March 31, 2023 and December 31, 2022 (see Note 12).
(2)The Company invests in first loss subordinated securities and certain IOs issued by a Freddie Mac-sponsored residential loan securitization. In accordance with GAAP, the Company has consolidated the underlying seasoned re-performing and non-performing residential loans held in the securitization and the CDOs issued to permanently finance these residential loans, representing Consolidated SLST. Consolidated SLST CDOs are included in collateralized debt obligations on the Company's condensed consolidated balance sheets (see Note 13).
(3)The Company's residential loans held in securitization trusts are pledged as collateral for CDOs issued by the Company. These CDOs are accounted for as financings and included in collateralized debt obligations on the Company's condensed consolidated balance sheets (see Note 13).
The following table presents the unrealized gains (losses), net attributable to residential loans, at fair value for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended |
| March 31, 2023 | | March 31, 2022 |
| Residential loans | | Consolidated SLST (1) | | Residential loans held in securitization trusts | | Residential loans | | Consolidated SLST (1) | | Residential loans held in securitization trusts |
| Unrealized (losses) gains, net | $ | (1,307) | | | $ | 15,807 | | | $ | 30,554 | | | $ | (25,524) | | | $ | (66,645) | | | $ | (37,774) | |
(1)In accordance with the practical expedient in ASC 810, the Company determines the fair value of the residential loans held in Consolidated SLST based on the fair value of the CDOs issued by Consolidated SLST, including investment securities we own, as the fair value of these instruments is more observable (see Note 16). See Note 7 for unrealized gains (losses), net recognized by the Company on its investment in Consolidated SLST, which include unrealized gains (losses) on the residential loans held in Consolidated SLST presented in the table above and unrealized gains (losses) on the CDOs issued by Consolidated SLST.
The Company recognized $2.0 million and $3.9 million of net realized gains on the payoff of residential loans, at fair value during the three months ended March 31, 2023 and 2022, respectively.
The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of residential loans, at fair value as of March 31, 2023 and December 31, 2022, respectively, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Residential loans | | Consolidated SLST | | Residential loans held in securitization trusts | | Residential loans | | Consolidated SLST | | Residential loans held in securitization trusts |
| California | 23.5 | % | | 10.6 | % | | 17.9 | % | | 24.3 | % | | 10.6 | % | | 19.2 | % |
| Florida | 14.3 | % | | 10.3 | % | | 10.0 | % | | 13.2 | % | | 10.3 | % | | 10.2 | % |
| New York | 8.4 | % | | 9.8 | % | | 8.4 | % | | 8.0 | % | | 9.8 | % | | 8.6 | % |
| New Jersey | 6.4 | % | | 7.5 | % | | 5.6 | % | | 6.3 | % | | 7.4 | % | | 5.6 | % |
| Texas | 6.4 | % | | 3.9 | % | | 7.8 | % | | 7.0 | % | | 4.0 | % | | 7.3 | % |
| | | | | | | | | | | |
| Illinois | 2.6 | % | | 7.2 | % | | 3.5 | % | | 2.6 | % | | 7.2 | % | | 3.2 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
The following table presents the fair value and aggregate unpaid principal balance of the Company's residential loans and residential loans held in securitization trusts in non-accrual status as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Greater than 90 days past due | | Less than 90 days past due | | |
| Fair Value | | Unpaid Principal Balance | | Fair Value | | Unpaid Principal Balance | | |
| March 31, 2023 | $ | 187,929 | | | $ | 209,673 | | | $ | 9,594 | | | $ | 10,397 | | | |
| December 31, 2022 | 149,076 | | | 159,981 | | | 8,382 | | | 9,132 | | | |
Residential loans held in Consolidated SLST with an aggregate unpaid principal balance of $122.1 million and $143.2 million were 90 days or more delinquent as of March 31, 2023 and December 31, 2022, respectively.
4. Multi-family Loans, at Fair Value
The Company's multi-family loans consisting of its preferred equity in, and mezzanine loans to, entities that have multi-family real estate assets are presented at fair value on the Company's condensed consolidated balance sheets as a result of a fair value election. Accordingly, changes in fair value are presented in unrealized gains (losses), net on the Company's condensed consolidated statements of operations. Multi-family loans consist of the following as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Investment amount | $ | 95,640 | | | $ | 88,249 | |
| Deferred loan fees, net | (497) | | | (428) | |
| Unrealized gains (losses), net | 166 | | | (287) | |
| Total, at Fair Value | $ | 95,309 | | | $ | 87,534 | |
For the three months ended March 31, 2023 and 2022, the Company recognized $0.5 million in net unrealized gains and $0.5 million in net unrealized losses on multi-family loans, respectively.
For the three months ended March 31, 2023, the Company recognized no premiums resulting from early redemption of multi-family loans. For the three months ended March 31, 2022, the Company recognized $0.8 million in premiums resulting from early redemption of multi-family loans, which are included in other income on the accompanying condensed consolidated statements of operations.
The table below presents the fair value and aggregate unpaid principal balance of the Company's multi-family loans in non-accrual status as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2023 | | December 31, 2022 |
| Days Late | | | Fair Value | | Unpaid Principal Balance | | Fair Value | | Unpaid Principal Balance |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| 90 + | | | $ | 4,753 | | | $ | 3,363 | | | $ | 4,523 | | | $ | 3,363 | |
The geographic concentrations of credit risk exceeding 5% of the total multi-family loan investment amounts as of March 31, 2023 and December 31, 2022, respectively, are as follows:
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Texas | 35.0 | % | | 30.1 | % |
| Tennessee | 14.6 | % | | 15.6 | % |
| Florida | 10.2 | % | | 10.9 | % |
| Ohio | 8.9 | % | | 9.7 | % |
| Louisiana | 7.0 | % | | 7.5 | % |
| Alabama | 6.7 | % | | 7.1 | % |
| North Carolina | 5.7 | % | | 6.1 | % |
| Indiana | 5.3 | % | | 5.7 | % |
5. Investment Securities Available For Sale, at Fair Value
The Company accounts for certain of its investment securities available for sale using the fair value election pursuant to ASC 825, Financial Instruments ("ASC 825"), where changes in fair value are recorded in unrealized gains (losses), net on the Company's condensed consolidated statements of operations. The Company also has investment securities available for sale where the fair value option has not been elected, which we refer to as CECL Securities. CECL Securities are reported at fair value with unrealized gains and losses recorded in other comprehensive income (loss) on the Company's condensed consolidated statements of comprehensive income (loss). The Company's investment securities available for sale consisted of the following as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| Amortized Cost | | Unrealized | | Fair Value | | Amortized Cost | | Unrealized | | Fair Value |
| | | Gains | | Losses | | | | Gains | | Losses | |
| Fair Value Option | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Agency RMBS | $ | 106,116 | | | $ | 1,084 | | | $ | — | | | $ | 107,200 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Non-Agency RMBS | 44,483 | | | 8,878 | | | (13,434) | | | 39,927 | | | 48,958 | | | 9,436 | | | (13,469) | | | 44,925 | |
| CMBS | 32,025 | | | — | | | (1,357) | | | 30,668 | | | 32,033 | | | — | | | (1,900) | | | 30,133 | |
ABS | 683 | | | — | | | (191) | | | 492 | | | 797 | | | 59 | | | — | | | 856 | |
Total investment securities available for sale - fair value option | 183,307 | | | 9,962 | | | (14,982) | | | 178,287 | | | 81,788 | | | 9,495 | | | (15,369) | | | 75,914 | |
| | | | | | | | | | | | | | | |
| CECL Securities | | | | | | | | | | | | | | | |
| Non-Agency RMBS | 25,663 | | | — | | | (1,379) | | | 24,284 | | | 25,616 | | | — | | | (1,971) | | | 23,645 | |
| | | | | | | | | | | | | | | |
Total investment securities available for sale - CECL Securities | 25,663 | | | — | | | (1,379) | | | 24,284 | | | 25,616 | | | — | | | (1,971) | | | 23,645 | |
Total | $ | 208,970 | | | $ | 9,962 | | | $ | (16,361) | | | $ | 202,571 | | | $ | 107,404 | | | $ | 9,495 | | | $ | (17,340) | | | $ | 99,559 | |
Accrued interest receivable for investment securities available for sale in the amount of $0.9 million and $0.4 million as of March 31, 2023 and December 31, 2022, respectively, is included in other assets on the Company's condensed consolidated balance sheets.
For the three months ended March 31, 2023 and 2022, the Company recognized $0.9 million in net unrealized gains and $4.6 million in net unrealized losses on investment securities available for sale accounted for under the fair value option, respectively.
Realized Gain and Loss Activity
The Company did not sell investment securities during the three months ended March 31, 2023. The following table summarizes our investment securities sold during the three months ended March 31, 2022 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Sales Proceeds | | Realized Gains | | Realized Losses | | Net Realized Gains (Losses) |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Non-Agency RMBS | $ | 24,374 | | | $ | 374 | | | $ | — | | | $ | 374 | |
| | | | | | | |
| Total | $ | 24,374 | | | $ | 374 | | | $ | — | | | $ | 374 | |
Weighted Average Life
Actual maturities of our investment securities available for sale are generally shorter than stated contractual maturities (with contractual maturities up to 36 years), as they are affected by periodic payments and prepayments of principal on the underlying mortgages. As of March 31, 2023 and December 31, 2022, based on management’s estimates, the weighted average life of the Company’s investment securities available for sale portfolio was approximately 8.6 years and 7.6 years, respectively.
The following table sets forth the weighted average lives of our investment securities available for sale as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | |
| Weighted Average Life | March 31, 2023 | | December 31, 2022 |
| 0 to 5 years | $ | 35,025 | | | $ | 39,655 | |
| Over 5 to 10 years | 152,858 | | | 46,558 | |
| 10+ years | 14,688 | | | 13,346 | |
| Total | $ | 202,571 | | | $ | 99,559 | |
Unrealized Losses in Other Comprehensive Income (Loss)
The Company evaluated its CECL Securities that were in an unrealized loss position as of March 31, 2023 and December 31, 2022, respectively, and determined that no allowance for credit losses was necessary. The Company did not recognize credit losses for its CECL Securities through earnings for the three months ended March 31, 2023 and 2022.
The following table presents the Company's CECL Securities in an unrealized loss position with no credit losses reported, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | Less than 12 months | | Greater than 12 months | | Total | | |
| Carrying
Value | | Gross
Unrealized
Losses | | Carrying
Value | | Gross
Unrealized
Losses | | Carrying
Value | | Gross
Unrealized
Losses | | | | |
| Non-Agency RMBS | $ | 15,997 | | | $ | (533) | | | $ | 8,287 | | | $ | (846) | | | $ | 24,284 | | | $ | (1,379) | | | | | |
Total | $ | 15,997 | | | $ | (533) | | | $ | 8,287 | | | $ | (846) | | | $ | 24,284 | | | $ | (1,379) | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 | Less than 12 months | | Greater than 12 months | | Total |
| | Carrying
Value | | Gross
Unrealized
Losses | | Carrying
Value | | Gross
Unrealized
Losses | | Carrying
Value | | Gross
Unrealized
Losses |
| Non-Agency RMBS | $ | 23,609 | | | $ | (1,966) | | | $ | 36 | | | $ | (5) | | | $ | 23,645 | | | $ | (1,971) | |
| Total | $ | 23,609 | | | $ | (1,966) | | | $ | 36 | | | $ | (5) | | | $ | 23,645 | | | $ | (1,971) | |
At March 31, 2023, the Company did not intend to sell any of its investment securities available for sale that were in an unrealized loss position, and it was “more likely than not” that the Company would not be required to sell these securities before recovery of their amortized cost basis, which may be at their maturity.
Credit risk associated with non-Agency RMBS is regularly assessed as new information regarding the underlying collateral becomes available and based on updated estimates of cash flows generated by the underlying collateral. In performing its assessment, the Company considers past and expected future performance of the underlying collateral, including timing of expected future cash flows, prepayment rates, default rates, loss severities, delinquency rates, current levels of subordination, volatility of the security's fair value, temporary declines in liquidity for the asset class and interest rate changes since purchase. Based upon the most recent evaluation, the Company does not believe that these unrealized losses are credit related but are rather a reflection of current market yields and/or marketplace bid-ask spreads.
6. Equity Investments, at Fair Value
The Company's equity investments consist of, or have consisted of, preferred equity ownership interests in entities that invest in multi-family properties where the risks and payment characteristics are equivalent to an equity investment (or multi-family preferred equity ownership interests), equity ownership interests in entities that invest in single-family properties and originate residential loans (or single-family equity ownership interests) and joint venture equity investments in multi-family properties. The Company's equity investments are accounted for under the equity method and are presented at fair value on its condensed consolidated balance sheets as a result of a fair value election.
The following table presents the Company's equity investments as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| Investment Name | | Ownership Interest | | Fair Value | | Ownership Interest | | Fair Value |
| Multi-Family Preferred Equity Ownership Interests | | | | | | | | |
| 1122 Chicago DE, LLC | | 53% | | $ | 8,426 | | | 53% | | $ | 8,276 | |
| Bighaus, LLC | | 42% | | 16,739 | | | 42% | | 16,482 | |
| FF/RMI 20 Midtown, LLC | | 51% | | 27,525 | | | 51% | | 27,079 | |
| Palms at Cape Coral, LLC | | 34% | | 5,530 | | | 34% | | 5,429 | |
| America Walks at Port St. Lucie, LLC | | 62% | | 25,177 | | | 62% | | 29,873 | |
| EHOF-NYMT Sunset Apartments Preferred, LLC | | 57% | | 18,510 | | | 57% | | 18,139 | |
| Lucie at Tradition Holdings, LLC | | 70% | | 18,016 | | | 70% | | 17,576 | |
| Syracuse Apartments and Townhomes, LLC | | 58% | | 20,478 | | | 58% | | 20,115 | |
| Hudson Bridge Apartments, LLC - Series A, Briar Hill Apartments, LLC, Kings Glen Apartments, LLC, Flagstone Apartments, LLC, Brookfield Apartments II, LLC - Series B, and Silber JBSM Properties, LLC (collectively) | | 58% | | 9,422 | | | 58% | | 9,277 | |
| Tides on 27th Investors, LLC | | 54% | | 16,325 | | | — | | — | |
| Total - Multi-Family Preferred Equity Ownership Interests | | | | 166,148 | | | | | 152,246 | |
| | | | | | | | |
| Single-Family Equity Ownership Interests | | | | | | | | |
Constructive Loans, LLC (1) | | 50% | | 25,000 | | | — | | 27,500 | |
| Total - Single-Family Equity Ownership Interests | | | | 25,000 | | | | | 27,500 | |
| Total | | | | $ | 191,148 | | | | | $ | 179,746 | |
(1)The Company exercised its option to purchase 50% of the issued and outstanding interests of an entity that originates residential loans during the three months ended March 31, 2023. The Company purchased $16.0 million and $170.2 million of residential loans from the entity during the three months ended March 31, 2023 and 2022, respectively.
The Company records its equity in earnings or losses from its multi-family preferred equity ownership interests under the hypothetical liquidation of book value method of accounting due to the structures and the preferences it receives on the distributions from these entities pursuant to the respective agreements. Under this method, the Company recognizes income or loss in each period based on the change in liquidation proceeds it would receive from a hypothetical liquidation of its investment. Pursuant to the fair value election, changes in fair value of the Company's multi-family preferred equity ownership interests are reported in current period earnings.
The following table presents income from multi-family preferred equity ownership interests for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands). Income from these investments is presented in income from equity investments in the Company's accompanying condensed consolidated statements of operations. Income from these investments during the three months ended March 31, 2023 and 2022 includes $0.6 million and $0.1 million of net unrealized gains, respectively.
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | |
| Investment Name | | 2023 | | 2022 | | | | | |
1122 Chicago DE, LLC | | $ | 251 | | | $ | 237 | | | | | | |
| Bighaus, LLC | | 537 | | | 465 | | | | | | |
| FF/RMI 20 Midtown, LLC | | 799 | | | 798 | | | | | | |
| Palms at Cape Coral, LLC | | 177 | | | 155 | | | | | | |
| America Walks at Port St. Lucie, LLC | | 1,126 | | | 902 | | | | | | |
| EHOF-NYMT Sunset Apartments Preferred, LLC | | 625 | | | 549 | | | | | | |
| Lucie at Tradition Holdings, LLC | | 684 | | | 601 | | | | | | |
| Syracuse Apartments and Townhomes, LLC | | 654 | | | 516 | | | | | | |
| Hudson Bridge Apartments, LLC - Series A, Briar Hill Apartments, LLC, Kings Glen Apartments, LLC, Flagstone Apartments, LLC, Brookfield Apartments II, LLC - Series B, and Silber JBSM Properties, LLC (collectively) | | 301 | | | — | | | | | | |
| Tides on 27th Investors, LLC | | 797 | | | — | | | | | | |
DCP Gold Creek, LLC | | — | | | 853 | | | | | | |
| Rigsbee Ave Holdings, LLC | | — | | | (174) | | | | | | |
| Walnut Creek Properties Holdings, L.L.C. | | — | | | (153) | | | | | | |
| Lurin-RMI, LLC | | — | | | 280 | | | | | | |
| Somerset Deerfield Investor, LLC | | — | | | 587 | | | | | | |
RS SWD Owner, LLC, RS SWD Mitchell Owner, LLC, RS SWD IF Owner, LLC, RS SWD Mullis Owner, LLC, RS SWD JH Mullis Owner, LLC and RS SWD Saltzman Owner, LLC (collectively) | | — | | | 159 | | | | | | |
| Total Income - Multi-Family Preferred Equity Ownership Interests | | $ | 5,951 | | | $ | 5,775 | | | | | | |
For the three months ended March 31, 2023, the Company recognized no premiums resulting from early redemption of multi-family preferred equity ownership interests included in equity investments. For the three months ended March 31, 2022, the Company recognized $0.7 million in premiums resulting from early redemption of multi-family preferred equity ownership interests included in equity investments, which are included in other income on the accompanying condensed consolidated statement of operations.
Income from single-family equity ownership interests and joint venture equity investments in multi-family properties that are accounted for under the equity method using the fair value option is presented in income from equity investments in the Company's accompanying condensed consolidated statements of operations. The following table presents income (loss) from these investments for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| Investment Name | | 2023 | | 2022 | | | | |
| Single-Family Equity Ownership Interests | | | | | | | | |
Constructive Loans, LLC (1) | | $ | (2,500) | | | $ | — | | | | | |
Morrocroft Neighborhood Stabilization Fund II, LP (2) | | — | | | 28 | | | | | |
| Total (Loss) Income - Single-Family Equity Ownership Interests | | $ | (2,500) | | | $ | 28 | | | | | |
| | | | | | | | |
Joint Venture Equity Investments in Multi-Family Properties (3) | | | | | | | | |
| GWR Cedars Partners, LLC | | $ | 413 | | | $ | 100 | | | | | |
| GWR Gateway Partners, LLC | | 647 | | | 150 | | | | | |
| Total Income - Joint Venture Equity Investments in Multi-Family Properties | | $ | 1,060 | | | $ | 250 | | | | | |
(1)Includes a net unrealized loss of $3.2 million for the three months ended March 31, 2023. The Company did not recognize any unrealized gains or losses for the three months ended March 31, 2022.
(2)The Company's equity investment was redeemed during the year ended December 31, 2022.
(3)The Company's joint venture equity investments in multi-family properties were transferred to assets of disposal group held for sale during the year ended December 31, 2022 (see Note 9). Includes net unrealized gains of $1.1 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively.
7.Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)
Financing VIEs
The Company uses SPEs to facilitate transactions that involve securitizing financial assets or re-securitizing previously securitized financial assets. The objective of such transactions may include obtaining non-recourse financing, obtaining liquidity or refinancing the underlying securitized financial assets on improved terms. Securitization involves transferring assets to an SPE to convert all or a portion of those assets into cash before they would have been realized in the normal course of business through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE and depending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excess assets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or other form of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement.
The Company has entered into financing transactions, including residential loan securitizations and re-securitizations, which required the Company to analyze and determine whether the SPEs that were created to facilitate the transactions are VIEs in accordance with ASC 810 and if so, whether the Company is the primary beneficiary requiring consolidation.
As of March 31, 2023 and December 31, 2022, the Company evaluated its residential loan securitizations and concluded that the entities created to facilitate each of the financing transactions are VIEs and that the Company is the primary beneficiary of these VIEs (each a “Financing VIE” and collectively, the “Financing VIEs”). Accordingly, the Company consolidated the then-outstanding Financing VIEs as of March 31, 2023 and December 31, 2022.
Consolidated SLST
The Company invests in subordinated securities that represent the first loss position of the Freddie Mac-sponsored residential loan securitization from which they were issued, and certain IOs and senior securities issued from the securitization. The Company has evaluated its investments in this securitization trust to determine whether it is a VIE and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that the Freddie Mac-sponsored residential loan securitization trust, which we refer to as Consolidated SLST, is a VIE as of March 31, 2023 and December 31, 2022, and that the Company is the primary beneficiary of the VIE within Consolidated SLST. Accordingly, the Company has consolidated the assets, liabilities, income and expenses of such VIE in the accompanying condensed consolidated financial statements (see Notes 2, 3 and 13). The Company has elected the fair value option on the assets and liabilities held within Consolidated SLST, which requires that changes in valuations in the assets and liabilities of Consolidated SLST be reflected in the Company’s condensed consolidated statements of operations.
As of March 31, 2023 and December 31, 2022, the Consolidated SLST securities owned by the Company had a fair value of $188.5 million and $191.5 million, respectively (see Note 16). The Company’s investments in Consolidated SLST securities were not included as collateral to any Financing VIE as of March 31, 2023 and December 31, 2022.
Consolidated Real Estate VIEs
The Company owns joint venture equity investments in entities that own multi-family apartment communities, which the Company determined to be VIEs and for which the Company is the primary beneficiary. Accordingly, the Company consolidates the assets, liabilities, income and expenses of these VIEs in the accompanying condensed consolidated financial statements with non-controlling interests or redeemable non-controlling interests for the third-party ownership of the joint ventures' membership interests. The Company accounted for the initial consolidation of the joint venture equity investments and real estate acquisitions by a Consolidated VIE in accordance with asset acquisition provisions of ASC 805, as substantially all of the fair value of the assets within the entities are concentrated in either a single identifiable asset or group of similar identifiable assets.
During the year ended December 31, 2020, the Company reconsidered its evaluation of its variable interest in a VIE that owned a multi-family apartment community and in which the Company held a preferred equity investment. The Company determined that it gained the power to direct the activities, and became primary beneficiary, of the VIE and consolidated this VIE into its condensed consolidated financial statements. Subsequently, in July 2021, the VIE redeemed its non-controlling interest which resulted in an equity transaction accounted for by the Company in accordance with ASC 810. In addition, the Company reconsidered its evaluation of its investment in the entity and determined that the entity no longer met the criteria for being characterized as a VIE and is a wholly-owned subsidiary of the Company. In March 2022, the entity completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment (see Note 8).
The following table summarizes the aggregate estimated fair value of the assets, liabilities and non-controlling interests associated with the initial consolidation of the joint venture entities and real estate acquisitions by a Consolidated VIE during the three months ended March 31, 2022 (dollar amounts in thousands):
| | | | | | | | | | | | | | |
| | | | | | |
| | | | | | | | |
Cash (1) | | | | $ | 7,102 | | | | | |
Operating real estate (1) (2) | | | | 528,768 | | | | | |
Lease intangibles (1) (3) | | | | 27,461 | | | | | |
Other assets (1) | | | | 6,130 | | | | | |
| Total assets | | | | 569,461 | | | | | |
| | | | | | | | |
Mortgages payable on real estate, net (1) | | | | 409,756 | | | | | |
Other liabilities (1) | | | | 3,180 | | | | | |
| Total liabilities | | | | 412,936 | | | | | |
| | | | | | | | |
| | | | | | | | |
Non-controlling interests (4) | | | | 10,488 | | | | | |
| Net assets consolidated | | | | $ | 146,037 | | | | | |
(1)In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, the Company determined that certain joint venture equity investments met the criteria to be classified as held for sale and transferred the assets and liabilities of the respective Consolidated VIEs to assets and liabilities of disposal group held for sale in the accompanying condensed consolidated balance sheets. See Note 9 for additional information.
(2)For joint venture equity investments that are not held for sale, operating real estate is included in real estate, net in the accompanying condensed consolidated balance sheets.
(3)For joint venture equity investments that are not held for sale, lease intangibles are included in other assets in the accompanying condensed consolidated balance sheets.
(4)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.
In analyzing whether the Company is the primary beneficiary of the Financing VIEs, Consolidated SLST and Consolidated Real Estate VIEs, the Company considered its involvement in each of the VIEs, including the design and purpose of each VIE, and whether its involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the VIEs. In determining whether the Company would be considered the primary beneficiary, the following factors were assessed:
•whether the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE; and
•whether the Company has a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE.
The following table presents a summary of the assets, liabilities and non-controlling interests of the Company's residential loan securitizations, Consolidated SLST and Consolidated Real Estate VIEs as of March 31, 2023 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Financing VIEs | | Other VIEs | | |
| Residential
Loan Securitizations | | | | Consolidated SLST | | Consolidated Real Estate | | Total |
| Cash and cash equivalents | $ | — | | | | | $ | — | | | $ | 11,971 | | | $ | 11,971 | |
| Residential loans, at fair value | 1,624,703 | | | | | 829,153 | | | — | | | 2,453,856 | |
Real estate, net held in Consolidated VIEs (1) | — | | | | | — | | | 543,471 | | | 543,471 | |
Assets of disposal group held for sale (2) | — | | | | | — | | | 1,140,308 | | | 1,140,308 | |
| Other assets | 96,699 | | | | | 3,122 | | | 9,396 | | | 109,217 | |
| Total assets | $ | 1,721,402 | | | | | $ | 832,275 | | | $ | 1,705,146 | | | $ | 4,258,823 | |
| | | | | | | | | |
Collateralized debt obligations ($1,390,991 at amortized cost, net and $638,513 at fair value) | $ | 1,390,991 | | | | | $ | 638,513 | | | $ | — | | | $ | 2,029,504 | |
Mortgages payable on real estate, net in Consolidated VIEs (3) | — | | | | | — | | | 397,316 | | | 397,316 | |
Liabilities of disposal group held for sale (2) | — | | | | | — | | | 896,983 | | | 896,983 | |
| Other liabilities | 6,624 | | | | | 3,883 | | | 6,149 | | | 16,656 | |
| Total liabilities | $ | 1,397,615 | | | | | $ | 642,396 | | | $ | 1,300,448 | | | $ | 3,340,459 | |
Redeemable non-controlling interest in Consolidated VIEs (4) | $ | — | | | | | $ | — | | | $ | 54,352 | | | $ | 54,352 | |
Non-controlling interest in Consolidated VIEs (5) | $ | — | | | | | $ | — | | | $ | 31,309 | | | $ | 31,309 | |
Net investment (6) | $ | 323,787 | | | | | $ | 189,879 | | | $ | 319,037 | | | $ | 832,703 | |
(1)Included in real estate, net in the accompanying condensed consolidated balance sheets.
(2)Represents assets and liabilities, respectively, of certain Consolidated Real Estate VIEs included in disposal group held for sale (see Note 9).
(3)Included in mortgages payable on real estate, net in the accompanying condensed consolidated balance sheets.
(4)Represents redeemable third-party ownership of membership interests in Consolidated Real Estate VIEs. See Redeemable Non-Controlling Interest in Consolidated VIEs below.
(5)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.
(6)The net investment amount is the maximum amount of the Company's investment that is at risk to loss and represents the difference between the carrying value of total assets and total liabilities held by VIEs, less non-controlling interests, if any.
The following table presents a summary of the assets, liabilities and non-controlling interests of the Company's residential loan securitizations, Consolidated SLST and Consolidated Real Estate VIEs as of December 31, 2022 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.
| | | | | | | | | | | | | | | | | | | | | | | |
| Financing VIEs | | Other VIEs | | |
| Residential
Loan Securitizations | | Consolidated SLST | | Consolidated Real Estate | | Total |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 21,129 | | | $ | 21,129 | |
| Residential loans, at fair value | 1,616,114 | | | 827,582 | | | — | | | 2,443,696 | |
Real estate, net held in Consolidated VIEs (1) | — | | | — | | | 543,739 | | | 543,739 | |
Assets of disposal group held for sale (2) | — | | | — | | | 1,142,773 | | | 1,142,773 | |
| Other assets | 92,906 | | | 3,168 | | | 13,686 | | | 109,760 | |
| Total assets | $ | 1,709,020 | | | $ | 830,750 | | | $ | 1,721,327 | | | $ | 4,261,097 | |
| | | | | | | |
Collateralized debt obligations ($1,468,222 at amortized cost, net and $634,495 at fair value) | $ | 1,468,222 | | | $ | 634,495 | | | $ | — | | | $ | 2,102,717 | |
Mortgages payable on real estate, net in Consolidated VIEs (3) | — | | | — | | | 394,707 | | | 394,707 | |
Liabilities of disposal group held for sale (2) | — | | | — | | | 883,812 | | | 883,812 | |
| Other liabilities | 8,168 | | | 3,342 | | | 10,511 | | | 22,021 | |
| Total liabilities | $ | 1,476,390 | | | $ | 637,837 | | | $ | 1,289,030 | | | $ | 3,403,257 | |
Redeemable non-controlling interest in Consolidated VIEs (4) | $ | — | | | $ | — | | | $ | 63,803 | | | $ | 63,803 | |
Non-controlling interest in Consolidated VIEs (5) | $ | — | | | $ | — | | | $ | 32,967 | | | $ | 32,967 | |
Net investment (6) | $ | 232,630 | | | $ | 192,913 | | | $ | 335,527 | | | $ | 761,070 | |
(1)Included in real estate, net in the accompanying condensed consolidated balance sheets.
(2)Represents assets and liabilities, respectively, of certain Consolidated Real Estate VIEs included in disposal group held for sale (see Note 9).
(3)Included in mortgages payable on real estate, net in the accompanying condensed consolidated balance sheets.
(4)Represents redeemable third-party ownership of membership interests in Consolidated Real Estate VIEs. See Redeemable Non-Controlling Interest in Consolidated VIEs below.
(5)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.
(6)The net investment amount is the maximum amount of the Company's investment that is at risk to loss and represents the difference between the carrying value of total assets and total liabilities held by VIEs, less non-controlling interests, if any.
The following table presents condensed statements of operations for non-Company-sponsored VIEs for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands). The following table includes net (loss) income from assets and liabilities of disposal group held for sale and intercompany balances have been eliminated for purposes of this presentation.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2023 | | 2022 |
| | Consolidated SLST | | Consolidated Real Estate | | Total | | Consolidated SLST | | Consolidated Real Estate | | Total |
| Interest income | | $ | 8,733 | | | $ | — | | | $ | 8,733 | | | $ | 9,380 | | | $ | — | | | $ | 9,380 | |
| Interest expense | | 6,315 | | | — | | | 6,315 | | | 5,978 | | | — | | | 5,978 | |
| Total net interest income | | 2,418 | | | — | | | 2,418 | | | 3,402 | | | — | | | 3,402 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Unrealized gains (losses), net | | 2,299 | | | (1,298) | | | 1,001 | | | (15,279) | | | — | | | (15,279) | |
| Income from real estate | | — | | | 39,075 | | | 39,075 | | | — | | | 23,637 | | | 23,637 | |
| Other losses | | — | | | (10,259) | | | (10,259) | | | — | | | — | | | — | |
| Total non-interest income (loss) | | 2,299 | | | 27,518 | | | 29,817 | | | (15,279) | | | 23,637 | | | 8,358 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Expenses related to real estate | | — | | | 48,062 | | | 48,062 | | | — | | | 53,281 | | | 53,281 | |
| | | | | | | | | | | | |
| Net income (loss) | | 4,717 | | | (20,544) | | | (15,827) | | | (11,877) | | | (29,644) | | | (41,521) | |
| Net loss attributable to non-controlling interest in Consolidated VIEs | | — | | | 6,701 | | | 6,701 | | | — | | | 14,869 | | | 14,869 | |
| Net income (loss) attributable to Company | | $ | 4,717 | | | $ | (13,843) | | | $ | (9,126) | | | $ | (11,877) | | | $ | (14,775) | | | $ | (26,652) | |
Redeemable Non-Controlling Interest in Consolidated VIEs
The third-party owners of certain of the non-controlling interests in Consolidated VIEs have the ability to sell their ownership interests to the Company, at their election. The Company has classified these third-party ownership interests as redeemable non-controlling interests in Consolidated VIEs in mezzanine equity on the accompanying condensed consolidated balance sheets. The holders of the redeemable non-controlling interests may elect to sell their ownership interests to the Company at fair value once a year and the sales are subject to annual minimum and maximum amount limitations.
The following table presents activity in redeemable non-controlling interest in Consolidated VIEs for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
| Beginning balance | $ | 63,803 | | | $ | 66,392 | |
| Contributions | — | | | 274 | |
| Distributions | (3,950) | | | (677) | |
| Net loss attributable to redeemable non-controlling interest in Consolidated VIEs | (5,501) | | | (12,628) | |
| Ending balance | $ | 54,352 | | | $ | 53,361 | |
Unconsolidated VIEs
As of March 31, 2023 and December 31, 2022, the Company evaluated its investment securities available for sale, preferred equity and other equity investments to determine whether they are VIEs and should be consolidated by the Company. Based on a number of factors, the Company determined that, as of March 31, 2023 and December 31, 2022, it does not have a controlling financial interest and is not the primary beneficiary of these VIEs. The following tables present the classification and carrying value of unconsolidated VIEs as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
| Multi-family loans | | Investment
securities
available for
sale, at fair value | | Equity investments | | Assets of disposal group held for sale | | Total |
ABS | $ | — | | | $ | 492 | | | $ | — | | | $ | — | | | $ | 492 | |
| Non-Agency RMBS | — | | | 28,125 | | | — | | | — | | | 28,125 | |
Preferred equity investments in multi-family properties | 95,309 | | | — | | | 166,148 | | | — | | | 261,457 | |
Joint venture equity investments in multi-family properties | — | | | — | | | — | | | 10,070 | | | 10,070 | |
| Maximum exposure | $ | 95,309 | | | $ | 28,617 | | | $ | 166,148 | | | $ | 10,070 | | | $ | 300,144 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Multi-family loans | | Investment
securities
available for
sale, at fair value | | Equity investments | | Assets of disposal group held for sale | | Total |
| ABS | $ | — | | | $ | 856 | | | $ | — | | | $ | — | | | $ | 856 | |
| Non-Agency RMBS | — | | | 29,290 | | | — | | | — | | | 29,290 | |
Preferred equity investments in multi-family properties | 87,534 | | | — | | | 152,246 | | | — | | | 239,780 | |
Joint venture equity investments in multi-family properties | — | | | — | | | — | | | 9,010 | | | 9,010 | |
| Maximum exposure | $ | 87,534 | | | $ | 30,146 | | | $ | 152,246 | | | $ | 9,010 | | | $ | 278,936 | |
8. Real Estate, Net
The following is a summary of real estate, net, collectively, as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | March 31, 2023 | | | | | | December 31, 2022 |
| Land | | | | | | $ | 89,550 | | | | | | | $ | 89,550 | |
| Building and improvements | | | | | | 629,123 | | | | | | | 611,102 | |
| Furniture, fixture and equipment | | | | | | 14,496 | | | | | | | 13,540 | |
| Real estate | | | | | | $ | 733,169 | | | | | | | $ | 714,192 | |
| Accumulated depreciation | | | | | | (27,263) | | | | | | | (21,224) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Real estate, net (1) | | | | | | $ | 705,906 | | | | | | | $ | 692,968 | |
(1)In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, the real estate, net related to certain joint venture equity investments in multi-family properties is included in assets of disposal group held for sale on the accompanying condensed consolidated balance sheets. See Note 9 for additional information.
Multi-family Apartment Properties
As of March 31, 2023 and December 31, 2022, the Company owned joint venture equity investments in entities that own multi-family apartment communities, which the Company determined to be VIEs and for which the Company is the primary beneficiary. Accordingly, the Company consolidated the joint venture entities into its condensed consolidated financial statements (see Note 7).
In March 2022, a wholly-owned subsidiary of the Company completed the sale of its multi-family apartment community for approximately $52.0 million, subject to certain prorations and adjustments typical in such real estate transactions, repaid the related mortgage payable in the amount of approximately $37.0 million and redeemed the Company's preferred equity investment (see Note 7). The sale generated a net gain of approximately $0.4 million and a loss on extinguishment of debt of approximately $0.6 million, both of which are included in other income on the accompanying condensed consolidated statements of operations.
The multi-family apartment communities generally lease their apartment units to individual tenants at market rates for the production of rental income. These apartment units are generally leased at a fixed monthly rate with no option for the lessee to purchase the leased unit at any point.
Single-family Rental Properties
As of March 31, 2023 and December 31, 2022, the Company owned single-family rental homes. These units are leased to individual tenants for the production of rental income and are generally leased at a fixed monthly rate with no option for the lessee to purchase the leased unit at any point.
Lease Intangibles
Intangibles related to multi-family properties consist of the value of in-place leases and are included in other assets on the accompanying condensed consolidated balance sheets. Lease intangibles included in other assets were fully amortized as of March 31, 2023 and December 31, 2022.
In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, the lease intangibles, net related to certain joint venture equity investments in multi-family properties are included in assets of disposal group held for sale on the accompanying condensed consolidated balance sheets. See Note 9 for additional information.
Depreciation and Amortization Expense
Depreciation and amortization expenses related to operating real estate are included in expenses related to real estate on the accompanying condensed consolidated statements of operations. The following table presents depreciation and amortization expenses for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
| Depreciation expense on operating real estate | | $ | 6,039 | | | $ | 10,111 | | | | | |
| Amortization of lease intangibles related to operating real estate | | — | | | 25,475 | | | | | |
Total depreciation and amortization (1) | | $ | 6,039 | | | $ | 35,586 | | | | | |
(1)Amounts for the three months ended March 31, 2022 include depreciation and amortization of multi-family properties that have been reclassified to assets held in the disposal group held for sale.
9. Assets and Liabilities of Disposal Group Held for Sale
In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, the Company determined that certain joint venture equity investments met the criteria to be classified as held for sale, transferred either the assets and liabilities of the respective Consolidated VIEs or its equity investment in the joint venture entity to assets and liabilities of disposal group held for sale in the accompanying condensed consolidated balance sheets and recognized no loss.
The following table presents the carrying values of the major classes of assets and liabilities of disposal group held for sale as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Cash and cash equivalents (1) | | $ | 12,236 | | | $ | 13,944 | |
| Equity investments | | 10,070 | | | 9,010 | |
Real estate, net (1) | | 1,082,722 | | | 1,079,942 | |
Other assets (1) | | 45,351 | | | 48,888 | |
| Total assets of disposal group held for sale | | $ | 1,150,379 | | | $ | 1,151,784 | |
| | | | |
| Mortgages payable on real estate | | $ | 878,060 | | | $ | 865,414 | |
| Other liabilities | | 18,923 | | | 18,398 | |
Total liabilities of disposal group held for sale (1) | | $ | 896,983 | | | $ | 883,812 | |
(1)Certain assets and liabilities of the disposal group held for sale are in Consolidated VIEs because the Company is the primary beneficiary.
Also included in the disposal group held for sale are non-controlling interests in Consolidated VIEs in the amount of $23.0 million and $23.9 million as of March 31, 2023 and December 31, 2022, respectively.
Real estate, net included in assets of disposal group held for sale is recorded at the lower of the net carrying amount of the assets or the estimated fair value, net of selling costs. Fair value for real estate, net was based upon a discounted cash flow analysis using property financial information and assumptions regarding market rent, revenue and expense growth, capitalization rates and return rates. As of March 31, 2023, the fair value, net of selling costs of multi-family properties owned by two of the joint venture equity investments was less than the properties' net carrying values. Accordingly, the Company recognized a $11.1 million impairment in the three months ended March 31, 2023. As of March 31, 2023, the fair value, net of selling costs of the multi-family property owned by one of the joint venture equity investments that had previously been impaired was more than the property's net carrying value. Accordingly, the Company recognized a $0.8 million recovery of value in the three months ended March 31, 2023. See Note 16 for descriptions of valuation methodologies utilized for other classes of assets and liabilities of disposal group held for sale.
The following table presents the pretax losses of the disposal group held for sale for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
| Pretax loss of disposal group held for sale | | $ | (16,368) | | | $ | (16,649) | | | | | |
| Pretax loss of disposal group attributable to non-controlling interest in Consolidated VIEs | | 1,214 | | | 1,786 | | | | | |
| Pretax loss of disposal group attributable to Company's common stockholders | | $ | (15,154) | | | $ | (14,863) | | | | | |
10. Derivative Instruments and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company enters into derivative financial instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, interest rate caps, futures and options contracts such as options on credit default swap indices, equity index options, swaptions and options on futures. The Company may also pursue forward-settling purchases or sales of Agency RMBS where the underlying pools of mortgage loans are “To-Be-Announced,” or TBAs, purchase options on U.S. Treasury futures or invest in other types of mortgage derivative securities. The Company elected not to apply hedge accounting for its derivative instruments.
Derivatives Not Designated as Hedging Instruments
The Company and the entities that own multi-family properties in which the Company owns joint venture equity investments are required by lenders on certain repurchase agreement financing and variable-rate mortgages payable on real estate to enter into interest rate cap contracts. See Notes 12 and 14 for information regarding these interest rate cap contracts.
The Company uses interest rate swaps to hedge the variable cash flows associated with our variable-rate borrowings. Interest rate swaps generally involve the receipt of variable-rate amounts from a counterparty, based on SOFR, in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. Notwithstanding the foregoing, in order to manage its position with regard to its liabilities, the Company may enter into interest rate swaps which involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments, based on SOFR, over the life of the interest rate swap without exchange of the underlying notional amount. The variable rate the Company pays or receives under its swap agreements has the effect of offsetting the repricing characteristics and cash flows of the Company's financing arrangements.
The Company has credit default swap index options that allow the Company to enter into a fixed rate payer position in the underlying credit default swap index at the agreed strike level, as well as equity index put options that gives the Company the right to sell the underlying index at a specified strike price.
The Company did not have any interest rate swap or option transactions in 2022.
The following table summarizes the Company's derivative instruments as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | | | Fair Value |
| Type of Derivative Instrument | | Consolidated Balance Sheet Location | | March 31, 2023 | | December 31, 2022 |
Interest rate caps (1) | | Other assets | | $ | 2,002 | | | $ | 2,473 | |
| Options | | Other assets | | 1,120 | | | — | |
| Total derivative assets | | | | $ | 3,122 | | | $ | 2,473 | |
| | | | | | |
| Interest rate swaps | | Other liabilities | | $ | — | | | $ | — | |
| Total derivative liabilities | | | | $ | — | | | $ | — | |
(1)See Notes 12 and 14 for information regarding interest rate cap contracts.
The Company elects to net the fair value of its derivative contracts by counterparty when appropriate. These contracts contain legally enforceable provisions that allow for netting or setting off of all individual derivative receivables and payables with each counterparty and therefore, the fair values of those derivative contracts are reported net by counterparty. All of the Company’s interest rate swaps are cleared through a central clearing house, CME Group Inc. ("CME Clearing") which is the parent company of the Chicago Mercantile Exchange Inc. CME Clearing serves as the counterparty to every cleared transaction, becoming the buyer to each seller and the seller to each buyer, limiting the credit risk by guaranteeing the financial performance of both parties and netting down exposures. The following table presents a reconciliation of gross derivative assets and liabilities to net amounts presented in the accompanying condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
| Gross Amount of Recognized Assets (Liabilities) | | Gross Amounts Offset in Balance Sheets | | Variation Margin | | Net Amounts of Assets (Liabilities) Presented in Balance Sheets |
| Derivative assets | | | | | | | |
| Interest rate caps | $ | 2,002 | | | $ | — | | | $ | — | | | $ | 2,002 | |
| Options | 1,120 | | | — | | | — | | | 1,120 | |
| Interest rate swaps | 412 | | | (412) | | | — | | | — | |
| Total derivative assets | $ | 3,534 | | | $ | (412) | | | $ | — | | | $ | 3,122 | |
| | | | | | | |
| Derivative liabilities | | | | | | | |
| Interest rate swaps | $ | (2,899) | | | $ | 412 | | | $ | 2,487 | | | $ | — | |
| Total derivative liabilities | $ | (2,899) | | | $ | 412 | | | $ | 2,487 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Gross Amount of Recognized Assets (Liabilities) | | Gross Amounts Offset in Balance Sheets | | Variation Margin | | Net Amounts of Assets (Liabilities) Presented in Balance Sheets |
| Derivative assets | | | | | | | |
| Interest rate caps | $ | 2,473 | | | $ | — | | | $ | — | | | $ | 2,473 | |
| Total derivative assets | $ | 2,473 | | | $ | — | | | $ | — | | | $ | 2,473 | |
The use of derivatives exposes the Company to counterparty credit risks in the event of a default by a counterparty. If a counterparty defaults under the applicable derivative agreement, the Company may be unable to collect payments to which it is entitled under its derivative agreements and may have difficulty collecting the assets it pledged as collateral against such derivatives.
The Company is required to post an initial margin amount for its interest rate swaps determined by CME Clearing, which is generally intended to be set at a level sufficient to protect the exchange from the derivative financial instrument’s maximum estimated single-day price movement. As of March 31, 2023, an initial margin account balance of approximately $5.3 million and excess margin in the amount of approximately $2.6 million are included in other assets on the accompanying condensed consolidated balance sheets.
The table below summarizes the activity of derivative instruments not designated as hedging instruments for the three months ended March 31, 2022 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Notional Amount For the Three Months Ended March 31, 2023 |
| Type of Derivative Instrument | | December 31, 2022 | | Additions | | Terminations | | March 31, 2023 |
| | | | | | | | |
| Options | | $ | — | | | $ | 500,053 | | | $ | — | | | $ | 500,053 | |
| Interest rate swaps | | — | | | 341,300 | | | — | | | 341,300 | |
The following table presents the components of realized gains (losses), net and unrealized gains (losses), net related to our derivative instruments that were not designated as hedging instruments, which are included in non-interest income (loss) in our condensed consolidated statements of operations for the three months ended March 31, 2023 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | | | For the Three Months Ended March 31, 2023 |
| | | | |
| Type of Derivative Instrument | | | | | | Realized Gains (Losses) | | Unrealized Gains (Losses) |
| Options | | | | | | $ | — | | | $ | (420) | |
| Interest rate swaps | | | | | | — | | | (2,487) | |
| Total | | | | | | $ | — | | | $ | (2,907) | |
The following table presents information about our interest rate swaps whereby we receive floating rate payments in exchange for fixed rate payments as of March 31, 2023 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| Swap Maturities | | Notional Amount | | Weighted Average Fixed Interest Rate | | Weighted Average Variable Interest Rate |
| 2025 | | $ | 255,700 | | | 4.31 | % | | 4.71 | % |
| 2028 | | 28,900 | | | 3.87 | % | | 4.66 | % |
| 2033 | | 32,700 | | | 3.60 | % | | 4.65 | % |
| Total | | $ | 317,300 | | | 4.20 | % | | 4.70 | % |
The following table presents information about our interest rate swaps whereby we receive fixed rate payments in exchange for floating rate payments as of March 31, 2023 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| Swap Maturities | | Notional Amount | | Weighted Average Fixed Interest Rate | | Weighted Average Variable Interest Rate |
| 2028 | | $ | 8,000 | | | 3.36 | % | | 4.83 | % |
| 2033 | | 16,000 | | | 3.21 | % | | 4.83 | % |
| Total | | $ | 24,000 | | | 3.26 | % | | 4.83 | % |
Certain of the Company’s derivative contracts are subject to International Swaps and Derivatives Association Master Agreements or other similar agreements which may contain provisions that grant counterparties certain rights with respect to the applicable agreement upon the occurrence of certain events including a decline in Company's stockholders’ equity (as defined in the respective agreements) in excess of specified thresholds or dollar amounts over set periods of time, the Company’s failure to maintain its REIT status, the Company’s failure to comply with limits on the amount of leverage and the Company’s stock being delisted from Nasdaq.
Cash flow activity related to derivative instruments is reflected within the operating activities and investing activities sections of the Company's condensed consolidated statements of cash flows. Realized gains or losses, if any, and unrealized gains or losses, if any, on the Company's derivative instruments are included in the realized (gains) losses, net and unrealized (gains) losses, net line items within the operating activities section of the condensed consolidated statements of cash flows. Additionally, any changes in excess margin amounts due from or due to counterparties in connection with the Company's interest rate swaps are included in the changes in operating assets and liabilities line item of the condensed consolidated statements of cash flows. The remaining cash flow activity related to derivative instruments is reflected within the net payments received from (made on) derivative instruments line item within the investing activities section of the condensed consolidated statements of cash flows.
11. Other Assets and Other Liabilities
Other Assets
The following table presents the components of the Company's other assets as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Restricted cash (1) | | $ | 115,249 | | | $ | 136,220 | |
| Accrued interest receivable | | 31,578 | | | 34,067 | |
| Collections receivable from residential loan servicers | | 16,150 | | | 15,374 | |
| Recoverable advances on residential loans | | 15,611 | | | 13,979 | |
| Other receivables | | 13,326 | | | 11,357 | |
| Other assets in consolidated multi-family properties | | 8,631 | | | 13,681 | |
| Operating lease right-of-use assets | | 7,524 | | | 7,831 | |
| Real estate owned | | 3,743 | | | 18,588 | |
Derivative assets (2) | | 3,122 | | | 2,473 | |
| Deferred tax assets | | 2,448 | | | 2,671 | |
| Other | | 4,945 | | | 3,115 | |
| Total | | $ | 222,327 | | | $ | 259,356 | |
(1)Restricted cash represents cash held by third parties, including cash held by the Company's securitization trusts and consolidated multi-family properties.
(2)Includes derivative asset held in a consolidated multi-family property.
Other Liabilities
The following table presents the components of the Company's other liabilities as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| Dividends and dividend equivalents payable | | $ | 49,129 | | | $ | 49,996 | |
| Accrued interest payable | | 12,109 | | | 10,629 | |
| Operating lease liabilities | | 8,070 | | | 8,383 | |
| Accrued expenses | | 6,960 | | | 15,576 | |
| Accrued expenses and other liabilities in consolidated multi-family properties | | 6,149 | | | 10,511 | |
| Deferred revenue | | 5,953 | | | 7,131 | |
| Advanced remittances from residential loan servicers | | 1,116 | | | 9,098 | |
| Unfunded commitments for residential loans | | 554 | | | 2,950 | |
| Deferred tax liabilities | | — | | | 394 | |
| Other | | 2,651 | | | 1,323 | |
| Total | | $ | 92,691 | | | $ | 115,991 | |
12. Repurchase Agreements
The following table presents the carrying value of the Company's repurchase agreements as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | |
| Repurchase Agreements Secured By: | | March 31, 2023 | | December 31, 2022 |
| Residential loans | | $ | 561,124 | | | $ | 686,946 | |
| Investment securities | | 226,778 | | | 50,077 | |
| Total carrying value | | $ | 787,902 | | | $ | 737,023 | |
As of March 31, 2023, the Company's only repurchase agreement exposure where the amount at risk was in excess of 5% of the Company's stockholders’ equity was to Bank of America at 6.88%. The amount at risk is defined as the fair value of assets pledged as collateral to the financing arrangement in excess of the financing arrangement liability.
The financings under certain of our repurchase agreements are subject to margin calls to the extent the market value of the collateral subject to repurchase agreement falls below specified levels and repurchase may be accelerated upon an event of default under the repurchase agreements. As of March 31, 2023, the Company had assets available to be posted as margin which included liquid assets, such as unrestricted cash and cash equivalents, and unencumbered securities that could be monetized to pay down or collateralize the liability immediately. As of March 31, 2023, the Company had $215.8 million included in cash and cash equivalents and $127.5 million in unencumbered investment securities available to meet additional haircuts or market valuation requirements. The following table presents information about the Company's unencumbered securities at March 31, 2023 (dollar amounts in thousands):
| | | | | | | |
| Unencumbered Securities | March 31, 2023 | | |
| Agency RMBS | $ | 6,914 | | | |
Non-Agency RMBS (1) (2) | 89,425 | | | |
| CMBS | 30,667 | | | |
| ABS | 492 | | | |
| Total | $ | 127,498 | | | |
(1)Includes IOs in Consolidated SLST with a fair value of $19.1 million as of March 31, 2023. Consolidated SLST securities owned by the Company are eliminated in consolidation in accordance with GAAP.
(2)Includes CDOs repurchased from our residential loan securitizations with a fair value of $6.1 million as of March 31, 2023. Repurchased CDOs are eliminated in consolidation in accordance with GAAP.
The Company also had unencumbered residential loans with a fair value of $225.3 million at March 31, 2023.
Residential Loans
The Company has repurchase agreements with four financial institutions to fund the purchase of residential loans. The following table presents detailed information about the Company’s financings under these repurchase agreements and associated residential loans pledged as collateral at March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Maximum Aggregate Uncommitted Principal Amount | | Outstanding Repurchase Agreements (1) | | Net Deferred Finance Costs (2) | | Carrying Value of Repurchase Agreements | | Fair Value of Loans Pledged | | Weighted Average Rate | | Weighted Average Months to Maturity (3) |
| March 31, 2023 | $ | 1,975,000 | | | $ | 562,371 | | | $ | (1,247) | | | $ | 561,124 | | | $ | 695,701 | | | 7.34 | % | | 17.21 |
| December 31, 2022 | $ | 2,030,879 | | | $ | 688,487 | | | $ | (1,541) | | | $ | 686,946 | | | $ | 867,033 | | | 6.65 | % | | 16.69 |
(1)Includes non-mark-to-market repurchase agreements with an aggregate outstanding balance of $317.3 million, a weighted average rate of 7.45%, and weighted average months to maturity of 23.05 months as of March 31, 2023. Includes non-mark-to-market repurchase agreements with an aggregate outstanding balance of $446.8 million, a weighted average rate of 6.77%, and weighted average months to maturity of 23.96 months as of December 31, 2022.
(2)Costs related to the repurchase agreements, which include commitment, underwriting, legal, accounting and other fees, are reflected as deferred charges. Such costs are presented as a deduction from the corresponding debt liability on the Company’s accompanying condensed consolidated balance sheets and are amortized as an adjustment to interest expense using the effective interest method, or straight line-method, if the result is not materially different.
(3)The Company expects to roll outstanding amounts under these repurchase agreements into new repurchase agreements or other financings, or to repay outstanding amounts, prior to or at maturity.
During the terms of the repurchase agreements, proceeds from the residential loans will be applied to pay any price differential and to reduce the aggregate repurchase price of the collateral. The financings under the repurchase agreements with one of the counterparties with an aggregate outstanding balance of $245.0 million as of March 31, 2023 are subject to margin calls to the extent the market value of the residential loans falls below specified levels and repurchase may be accelerated upon an event of default under the repurchase agreements.
The Company, as required by a repurchase agreement with one counterparty, has entered into an interest rate cap contract that limits the indexed portion of the interest rate on the related repurchase agreement to a strike price of Term SOFR of 4.10% on the $111.0 million notional amount with an expiration date of November 17, 2024. The fair value of the interest rate cap contract of $1.2 million and $1.5 million is included in other assets in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively. The Company recognized unrealized losses of $0.2 million for the three months ended March 31, 2023 which is included in non-interest (loss) income in the condensed consolidated statements of operations.
As of March 31, 2023, the Company's repurchase agreements contain various covenants, including among other things, the maintenance of certain amounts of liquidity and total stockholders' equity. The Company is in compliance with such covenants as of March 31, 2023 and through the date of this Quarterly Report on Form 10-Q.
Investment Securities
The Company has entered into repurchase agreements with financial institutions to finance certain investment securities available for sale, securities owned in Consolidated SLST and CDOs repurchased from our residential loan securitizations. These repurchase agreements provide short-term financing that bear interest rates typically based on a spread to SOFR and are secured by the investment securities which they finance and additional collateral pledged, if any. As of March 31, 2023 and December 31, 2022, the Company had amounts outstanding under repurchase agreements with three counterparties.
The following table presents detailed information about the amounts outstanding under the Company’s repurchase agreements secured by investment securities and associated assets pledged as collateral at March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | | | December 31, 2022 |
| Outstanding Repurchase Agreements | | Fair Value of Collateral Pledged | | Amortized Cost of Collateral Pledged | | | | Outstanding Repurchase Agreements | | Fair Value of Collateral Pledged | | Amortized Cost of Collateral Pledged | | |
| Agency RMBS | $ | 94,306 | | | $ | 100,286 | | | $ | 99,278 | | | | | $ | — | | | $ | — | | | $ | — | | | |
Non-Agency RMBS (1) (2) | 132,472 | | | 268,590 | | | 309,778 | | | | | 50,077 | | | 170,551 | | | 210,733 | | | |
| Balance at end of the period | $ | 226,778 | | | $ | 368,876 | | | $ | 409,056 | | | | | $ | 50,077 | | | $ | 170,551 | | | $ | 210,733 | | | |
(1)Includes first loss subordinated securities in Consolidated SLST with a fair value of $169.4 million as of March 31, 2023. Consolidated SLST securities owned by the Company are eliminated in consolidation in accordance with GAAP.
(2)Includes securities repurchased from our residential loan securitizations with a fair value of $99.2 million as of March 31, 2023. Repurchased CDOs are eliminated in consolidation in accordance with GAAP.
As of March 31, 2023 and December 31, 2022, the outstanding balances under our repurchase agreements secured by investment securities were funded at a weighted average advance rate of 76.6% and 30.0%, respectively, that implies an average "haircut" of 23.4% and 70.0%, respectively. As of March 31, 2023, the weighted average "haircut" related to our repurchase agreement financing for our Agency RMBS and non-Agency RMBS was approximately 5.0% and 36.5%, respectively.
As of March 31, 2023 and December 31, 2022, the average days to maturity for repurchase agreements secured by investment securities were 55 days and 9 days, respectively, and the weighted average interest rates were 5.74% and 5.28%, respectively. The Company’s accrued interest payable on outstanding repurchase agreements secured by investment securities at March 31, 2023 and December 31, 2022 amounted to $1.3 million and $0.6 million, respectively, and is included in other liabilities on the Company’s condensed consolidated balance sheets.
The following table presents contractual maturity information about the Company’s outstanding repurchase agreements secured by investment securities at March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | |
| Contractual Maturity | March 31, 2023 | | December 31, 2022 |
| Within 30 days | $ | 49,950 | | | $ | 50,077 | |
| Over 30 day to 90 days | 176,828 | | | — | |
| Over 90 days | — | | | — | |
| Total | $ | 226,778 | | | $ | 50,077 | |
13. Collateralized Debt Obligations
The Company's collateralized debt obligations, or CDOs, are accounted for as financings and are non-recourse debt to the Company. See Note 7 for further discussion regarding the collateral pledged for the Company's CDOs as well as the Company's net investments in the related securitizations.
The following tables present a summary of the Company's CDOs as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
| Outstanding Face Amount | | Carrying Value | | Weighted Average Interest Rate (1) | | | | Stated Maturity (2) |
Consolidated SLST (3) | $ | 688,916 | | | $ | 638,513 | | | 2.75 | % | | | | 2059 |
| Residential loan securitizations | 1,416,155 | | | 1,390,991 | | | 3.58 | % | | | | 2026 - 2062 |
| Total collateralized debt obligations | $ | 2,105,071 | | | $ | 2,029,504 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Outstanding Face Amount | | Carrying Value | | Weighted Average Interest Rate (1) | | | | Stated Maturity (2) |
Consolidated SLST (3) | $ | 699,408 | | | $ | 634,495 | | | 2.75 | % | | | | 2059 |
| Residential loan securitizations | 1,498,198 | | | 1,468,222 | | | 3.54 | % | | | | 2026 - 2062 |
| Total collateralized debt obligations | $ | 2,197,606 | | | $ | 2,102,717 | | | | | | | |
(1)Weighted average interest rate is calculated using the outstanding face amount and stated interest rate of notes issued by the securitization and not owned by the Company.
(2)The actual maturity of the Company's CDOs are primarily determined by the rate of principal prepayments on the assets of the issuing entity. The CDOs are also subject to redemption prior to the stated maturity according to the terms of the respective governing documents. As a result, the actual maturity of the CDOs may occur earlier than the stated maturity.
(3)The Company has elected the fair value option for CDOs issued by Consolidated SLST (see Note 16).
The Company's CDOs as of March 31, 2023 had stated maturities as follows:
| | | | | | | | |
| Year ending December 31, | | Total |
| 2023 | | $ | — | |
| 2024 | | — | |
| 2025 | | — | |
| 2026 | | 113,000 | |
| 2027 | | 225,000 | |
| Thereafter | | 1,767,071 | |
| Total | | $ | 2,105,071 | |
14. Debt
Senior Unsecured Notes
On April 27, 2021, the Company completed the issuance and sale to various qualified institutional investors of $100.0 million aggregate principal amount of its unregistered 5.75% Senior Notes due 2026 (the "Unregistered Notes") in a private placement offering at 100% of the principal amount. The net proceeds to the Company from the sale of the Unregistered Notes, after deducting offering expenses, were approximately $96.3 million. Subsequent to the issuance of the Unregistered Notes, the Company conducted an exchange offer wherein the Company exchanged its registered 5.75% Senior Notes due 2026 (the "Registered Notes" and, together with the aggregate principal amount of Unregistered Notes that remain outstanding, the "Senior Unsecured Notes") for an equal principal amount of Unregistered Notes.
As of March 31, 2023, the Company had $100.0 million aggregate principal amount of its Senior Unsecured Notes outstanding. Costs related to the issuance of the Senior Unsecured Notes which include underwriting, legal, accounting and other fees, are reflected as deferred charges. The deferred charges, net of amortization, are presented as a deduction from the corresponding debt liability on the Company's accompanying condensed consolidated balance sheets in the amount of $2.4 million and $2.6 million as of March 31, 2023 and December 31, 2022, respectively. The deferred charges are amortized as an adjustment to interest expense using the effective interest method, resulting in a total cost to the Company of approximately 6.64%.
The Senior Unsecured Notes bear interest at a rate of 5.75% per year, subject to adjustment from time to time based on changes in the ratings of the Senior Unsecured Notes by one or more nationally recognized statistical rating organizations (a “NRSRO”). The annual interest rate on the Senior Unsecured Notes will increase by (i) 0.50% per year beginning on the first day of any six-month interest period if as of such day the Senior Unsecured Notes have a rating of BB+ or below and above B+ from any NRSRO and (ii) 0.75% per year beginning on the first day of any six-month interest period if as of such day the Senior Unsecured Notes have a rating of B+ or below or no rating from any NRSRO. Interest on the Senior Unsecured Notes is paid semi-annually in arrears on April 30 and October 30 of each year and the Senior Unsecured Notes will mature on April 30, 2026.
The Company had the right to redeem the Senior Unsecured Notes, in whole or in part, at any time prior to April 30, 2023 at a redemption price equal to 100% of the principal amount of the Senior Unsecured Notes to be redeemed, plus the applicable "make-whole" premium, plus accrued but unpaid interest, if any, to, but excluding, the redemption date. The "make-whole" premium is equal to the present value of all interest that would have accrued between the redemption date and up to, but excluding, April 30, 2023, plus an amount equal to the principal amount of such Senior Unsecured Notes multiplied by 2.875%. The Company did not exercise its redemption right prior to April 30, 2023. On and after April 30, 2023, the Company has the right to redeem the Senior Unsecured Notes, in whole or in part, at 100% of the principal amount of the Senior Unsecured Notes to be redeemed, plus accrued but unpaid interest, if any, to, but excluding, the redemption date, plus an amount equal to the principal amount of such Senior Unsecured Notes multiplied by a date-dependent multiple as detailed in the following table:
| | | | | | | | |
| Redemption Period | | Multiple |
April 30, 2023 - April 29, 2024 | | 2.875 | % |
April 30, 2024 - April 29, 2025 | | 1.4375 | % |
April 30, 2025 - April 29, 2026 | | — | |
No sinking fund is provided for the Senior Unsecured Notes. The Senior Unsecured Notes are senior unsecured obligations of the Company that are structurally subordinated in right of payment to the Company's subordinated debentures.
As of March 31, 2023, the Company's Senior Unsecured Notes contain various covenants including the maintenance of a minimum net asset value, ratio of unencumbered assets to unsecured indebtedness and senior debt service coverage ratio and limit the amount of leverage the Company may utilize and its ability to transfer the Company’s assets substantially as an entirety or merge into or consolidate with another person. The Company is in compliance with such covenants as of March 31, 2023 and through the date of this Quarterly Report on Form 10-Q.
Subordinated Debentures
Subordinated debentures are trust preferred securities that are fully guaranteed by the Company with respect to distributions and amounts payable upon liquidation, redemption or repayment. The following table summarizes the key details of the Company’s subordinated debentures as of March 31, 2023 and December 31, 2022 (dollar amounts in thousands):
| | | | | | | | | | | |
| NYM Preferred Trust I | | NYM Preferred Trust II |
| Principal value of trust preferred securities | $ | 25,000 | | | $ | 20,000 | |
| Interest rate | Three month LIBOR plus 3.75%, resetting quarterly | | Three month LIBOR plus 3.95%, resetting quarterly |
| Scheduled maturity | March 30, 2035 | | October 30, 2035 |
As of May 5, 2023, the Company has not been notified, and is not aware, of any event of default under the indenture for the subordinated debentures.
Convertible Notes
The Company redeemed its $138.0 million aggregate principal amount of 6.25% Senior Convertible Notes (the "Convertible Notes") at maturity on January 15, 2022. None of the Convertible Notes were converted prior to maturity.
The following table presents interest expense from the Convertible Notes for the three months ended March 31, 2022 (dollar amounts in thousands):
| | | | | | | | | | | | |
| | For the Three Months Ended March 31, 2022 | | |
| Contractual interest expense | | $ | 335 | | | | | |
| Amortization of underwriter's discount and deferred charges | | 103 | | | | | |
| Total | | $ | 438 | | | | | |
Mortgages Payable on Real Estate
As of March 31, 2023 and December 31, 2022, the Company owned joint venture equity investments in entities that own multi-family apartment communities, which the Company determined to be VIEs and for which the Company is the primary beneficiary. Accordingly, the Company consolidated the joint venture entities into its condensed consolidated financial statements (see Note 7).
In March 2022, a wholly-owned subsidiary of the Company completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment (see Note 7). In conjunction with the sale, the entity repaid the related mortgage payable in the amount of approximately $37.0 million and recorded a loss on extinguishment of debt of approximately $0.6 million, which is included in other income on the accompanying condensed consolidated statements of operations.
The consolidated multi-family apartment communities are subject to mortgages payable collateralized by the associated real estate assets. The Company has no obligation for repayment of the mortgages payable but, with respect to certain of the mortgages payable, it may execute a guaranty related to commitment of bad acts. The following table presents detailed information for these mortgages payable on real estate as of March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Maximum Committed Mortgage Principal Amount | | Outstanding Mortgage Balance | | Net Deferred Finance Cost | | Mortgage Payable, Net (1) | | Stated Maturity | | Weighted Average Interest Rate (2) (3) | | |
| March 31, 2023 | $ | 401,362 | | | $ | 400,112 | | | $ | (2,796) | | | $ | 397,316 | | | 2025 - 2032 | | 4.29 | % | | |
| December 31, 2022 | 398,703 | | | 397,453 | | | (2,746) | | | 394,707 | | | 2025 - 2032 | | 4.21 | % | | |
(1)In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, the mortgages payable on real estate related to certain joint venture equity investments in multi-family properties are included in liabilities of disposal group held for sale on the accompanying condensed consolidated balance sheets. See Note 9 for additional information.
(2)Weighted average interest rate is calculated using the outstanding mortgage balance and interest rate as of the date indicated.
(3)For variable-rate mortgages payable, the joint venture entity, as required by the loan agreement, entered into an interest rate cap contract with a counterparty that limits the indexed portion of the interest rate to a strike price of Term SOFR of 2.0% on the $29.0 million notional amount with an expiration date of April 1, 2024. The fair value of the interest rate cap contract of $0.8 million and $1.0 million is included in other assets in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively. The consolidated multi-family apartment communities recognized an unrealized loss on interest rate contracts of $0.1 million for the three months ended March 31, 2023, which is included in non-interest income (loss) in the condensed consolidated statements of operations.
Debt Maturities
As of March 31, 2023, maturities for debt on the Company's condensed consolidated balance sheet are as follows (dollar amounts in thousands):
| | | | | | | | |
| Year Ending December 31, | | Outstanding Balance |
| 2023 | | $ | — | |
| 2024 | | — | |
| 2025 | | 27,750 | |
| 2026 | | 127,209 | |
| 2027 | | — | |
| 2028 | | — | |
| Thereafter | | 390,153 | |
| | $ | 545,112 | |
15. Commitments and Contingencies
Outstanding Litigation
The Company is at times subject to various legal proceedings arising in the ordinary course of business. As of March 31, 2023, the Company does not believe that any of its current legal proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s operations, financial condition or cash flows.
Investment Commitment
On December 7, 2021, the Company entered into an agreement with certain members of its existing joint ventures to fund joint venture equity investments in multi-family properties totaling $40.0 million, to the extent investment opportunities meet defined investment standards. The commitment expires on December 7, 2023 and the Company has not funded any joint venture equity investments per the agreement as of May 5, 2023.
16. Fair Value of Financial Instruments
The Company has established and documented processes for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, then fair value is based upon internally developed models that primarily use inputs that are market-based or independently-sourced market parameters, including interest rate yield curves.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy are defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The following describes the valuation methodologies used for the Company’s financial instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.
a.Residential Loans Held in Consolidated SLST – Residential loans held in Consolidated SLST are carried at fair value and classified as Level 3 fair values. In accordance with the practical expedient in ASC 810, the Company determines the fair value of residential loans held in Consolidated SLST based on the fair value of the CDOs issued by the securitization and its investment in the securitization (eliminated in consolidation in accordance with GAAP), as the fair value of these instruments is more observable.
The investment securities (eliminated in consolidation in accordance with GAAP) that we own in the securitization are generally illiquid and trade infrequently. As such, they are classified as Level 3 in the fair value hierarchy. The fair valuation of these investment securities is determined based on an internal valuation model that considers expected cash flows from the underlying loans and yields required by market participants. The significant unobservable inputs used in the measurement of these investments are projected losses within the pool of loans and a discount rate. The discount rate used in determining fair value incorporates default rate, loss severity, prepayment rate and current market interest rates. Significant increases or decreases in these inputs would result in a significantly lower or higher fair value measurement.
b.Residential Loans and Residential Loans Held in Securitization Trusts – The Company’s acquired residential loans are recorded at fair value and classified as Level 3 in the fair value hierarchy. The fair value for residential loans is determined using valuations obtained from a third party that specializes in providing valuations of residential loans. The valuation approach depends on whether the residential loan is considered performing, re-performing or non-performing at the date the valuation is performed.
For performing and re-performing loans, estimates of fair value are derived using a discounted cash flow model, where estimates of cash flows are determined from scheduled payments for each loan, adjusted using forecast prepayment rates, default rates and rates for loss upon default. For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, expected liquidation costs and home price appreciation. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset. Indications of loan value such as actual trades, bids, offers and generic market color may be used in determining the appropriate discount yield.
c.Preferred Equity and Mezzanine Loan Investments – Fair value for preferred equity and mezzanine loan investments is determined by both market comparable pricing and discounted cash flows. The discounted cash flows are based on the underlying estimated cash flows and estimated changes in market yields. The fair value also reflects consideration of changes in credit risk since origination or time of initial investment. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 in the fair value hierarchy.
d.Investment Securities Available for Sale – The Company determines the fair value of all of its investment securities available for sale based on discounted cash flows utilizing an internal pricing model. The methodology considers the characteristics of the particular security and its underlying collateral, which are observable inputs. These inputs include, but are not limited to, delinquency status, coupon, loan-to-value ("LTV"), historical performance, periodic and life caps, collateral type, rate reset period, seasoning, prepayment speeds and credit enhancement levels. The Company also considers several observable market data points, including prices obtained from third-party pricing services or dealers who make markets in similar financial instruments, trading activity, and dialogue with market participants. Third-party pricing services typically incorporate commonly used market pricing methods, trading activity observed in the marketplace and other data inputs similar to those used in the Company's internal pricing model. The Company has established thresholds to compare internally generated prices with independent third-party prices and any differences that exceed the thresholds are reviewed both internally and with the third-party pricing service. The Company reconciles and resolves all pricing differences in excess of the thresholds before a final price is established. The Company’s investment securities available for sale are valued based upon readily observable market parameters and are classified as Level 2 fair values.
e.Equity Investments – Fair value for equity investments is determined (i) by the valuation process for preferred equity and mezzanine loan investments as described in c. above or (ii) using weighted multiples of origination volume and earnings before taxes, depreciation and amortization of the entity. These fair value measurements are generally based on unobservable inputs and, as such, are classified as Level 3 in the fair value hierarchy.
f.Derivative Instruments – The fair values of the Company's interest rate cap agreements are measured using models developed by either third-party pricing providers or the respective counterparty that use the market-standard methodology of discounting the future expected cash receipts which would occur if floating interest rates rise above the strike rate of the caps. The floating interest rates used in the calculation of projected receipts on the interest rate caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The inputs used in the valuation of interest rate caps fall within Level 2 of the fair value hierarchy.
The Company's interest rate swaps are classified as Level 2 fair values and are measured using valuations reported by CME Clearing. The derivatives are presented net of variation margin payments pledged or received.
The Company's options are classified as Level 2 fair values and are measured using prices obtained from the counterparty.
g.Collateralized Debt Obligations – CDOs issued by Consolidated SLST are classified as Level 3 fair values for which fair value is determined by considering several market data points, including prices obtained from third-party pricing services or dealers who make markets in similar financial instruments. The third-party pricing service or dealers incorporate common market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlying characteristics of the particular security. They will also consider contractual cash payments and yields expected by market participants.
Refer to a. above for a description of the fair valuation of CDOs issued by Consolidated SLST that are eliminated in consolidation.
Management reviews all prices used in determining fair value to ensure they represent current market conditions. This review includes surveying similar market transactions and comparisons to interest pricing models as well as offerings of like securities by dealers. Any changes to the valuation methodology are reviewed by management to ensure the changes are appropriate. As markets and products develop and the pricing for certain products becomes more transparent, the Company continues to refine its valuation methodologies. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of each reporting date, which may include periods of market dislocation, during which time price transparency may be reduced. This condition could cause the Company’s financial instruments to be reclassified from Level 2 to Level 3 in future periods.
The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022, respectively, on the Company’s condensed consolidated balance sheets (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Measured at Fair Value on a Recurring Basis at |
| March 31, 2023 | | December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Assets carried at fair value | | | | | | | | | | | | | | | |
| Residential loans: | | | | | | | | | | | | | | | |
Residential loans | $ | — | | | $ | — | | | $ | 921,000 | | | $ | 921,000 | | | $ | — | | | $ | — | | | $ | 1,081,384 | | | $ | 1,081,384 | |
Consolidated SLST | — | | | — | | | 829,153 | | | 829,153 | | | — | | | — | | | 827,582 | | | 827,582 | |
Residential loans held in securitization trusts | — | | | — | | | 1,624,703 | | | 1,624,703 | | | — | | | — | | | 1,616,114 | | | 1,616,114 | |
| Multi-family loans | — | | | — | | | 95,309 | | | 95,309 | | | — | | | — | | | 87,534 | | | 87,534 | |
| | | | | | | | | | | | | | | |
| Investment securities available for sale: | | | | | | | | | | | | | | | |
Agency RMBS | — | | | 107,200 | | | — | | | 107,200 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
Non-Agency RMBS | — | | | 64,211 | | | — | | | 64,211 | | | — | | | 68,570 | | | — | | | 68,570 | |
CMBS | — | | | 30,668 | | | — | | | 30,668 | | | — | | | 30,133 | | | — | | | 30,133 | |
ABS | — | | | 492 | | | — | | | 492 | | | — | | | 856 | | | — | | | 856 | |
Equity investments (1) | — | | | — | | | 191,148 | | | 191,148 | | | — | | | — | | | 179,746 | | | 179,746 | |
| Derivative assets: | | | | | | | | | | | | | | | |
Interest rate caps (1) (2) | — | | | 2,002 | | | — | | | 2,002 | | | — | | | 2,473 | | | — | | | 2,473 | |
Options (2) | — | | | 1,120 | | | — | | | 1,120 | | | — | | | — | | | — | | | — | |
Assets of disposal group held for sale (3) | — | | | 22,800 | | | 10,070 | | | 32,870 | | | — | | | 29,418 | | | 9,010 | | | 38,428 | |
Total | $ | — | | | $ | 228,493 | | | $ | 3,671,383 | | | $ | 3,899,876 | | | $ | — | | | $ | 131,450 | | | $ | 3,801,370 | | | $ | 3,932,820 | |
Liabilities carried at fair value | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Consolidated SLST CDOs | $ | — | | | $ | — | | | $ | 638,513 | | | $ | 638,513 | | | $ | — | | | $ | — | | | $ | 634,495 | | | $ | 634,495 | |
| Derivative liabilities: | | | | | | | | | | | | | | | |
Interest rate swaps (2) (4) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | $ | — | | | $ | — | | | $ | 638,513 | | | $ | 638,513 | | | $ | — | | | $ | — | | | $ | 634,495 | | | $ | 634,495 | |
(1)Excludes assets of disposal group held for sale (see Note 9).
(2)Included in other assets in the condensed consolidated balance sheets.
(3)Includes derivative assets classified as Level 2 instruments in the amount of $22.8 million and $29.4 million as of March 31, 2023 and December 31, 2022, respectively, and equity investments classified as Level 3 instruments in the amount of $10.1 million and $9.0 million as of March 31, 2023 and December 31, 2022, respectively.
(4)All of the Company’s interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $2.9 million and derivative assets of $0.4 million netted against a variation margin of $2.5 million at March 31, 2023.
The following tables detail changes in valuation for the Level 3 assets for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands):
Level 3 Assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2023 |
| Residential loans | | | | | | | |
| | Residential loans | | Consolidated SLST | | Residential loans held in securitization trusts | | Multi-family loans | | Equity investments | | Equity investments in disposal group held for sale | | Total |
| Balance at beginning of period | $ | 1,081,384 | | | $ | 827,582 | | | $ | 1,616,114 | | | $ | 87,534 | | | $ | 179,746 | | | $ | 9,010 | | | $ | 3,801,370 | |
| Total (losses)/gains (realized/unrealized) | | | | | | | | | | | | | |
| Included in earnings | (599) | | | 15,121 | | | 33,041 | | | 2,889 | | | 3,451 | | | 1,060 | | | 54,963 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Transfers out (1) | (93) | | | — | | | (233) | | | — | | | — | | | — | | | (326) | |
Transfer to securitization trust, net (2) | (86,110) | | | — | | | 86,110 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | |
| Funding/Contributions | — | | | — | | | — | | | 6,420 | | | 15,528 | | | — | | | 21,948 | |
| Paydowns/Distributions | (141,355) | | | (13,550) | | | (130,911) | | | (1,534) | | | (7,577) | | | — | | | (294,927) | |
| | | | | | | | | | | | | |
| Sales | (166) | | | — | | | — | | | — | | | — | | | | | (166) | |
| Purchases | 67,939 | | | — | | | 20,582 | | | — | | | — | | | — | | | 88,521 | |
| Balance at the end of period | $ | 921,000 | | | $ | 829,153 | | | $ | 1,624,703 | | | $ | 95,309 | | | $ | 191,148 | | | $ | 10,070 | | | $ | 3,671,383 | |
(1)Transfers out of Level 3 assets represents the transfer of residential loans to real estate owned.
(2)During the three months ended March 31, 2023, the Company transferred certain business purpose loans into residential loan securitizations (see Note 7 for further discussion of the Company's residential loan securitizations).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2022 |
| Residential loans | | | | | |
| | Residential loans | | Consolidated SLST | | Residential loans held in securitization trusts | | Multi-family loans | | Equity investments | | Total |
| Balance at beginning of period | $ | 1,703,290 | | | $ | 1,070,882 | | | $ | 801,429 | | | $ | 120,021 | | | $ | 239,631 | | | $ | 3,935,253 | |
| Total (losses)/gains (realized/unrealized) | | | | | | | | | | | |
| Included in earnings | (24,571) | | | (67,685) | | | (33,729) | | | 3,258 | | | 6,793 | | | (115,934) | |
| | | | | | | | | | | |
Transfers out (1) | (90) | | | — | | | (789) | | | — | | | — | | | (879) | |
| | | | | | | | | | | |
Transfer to securitization trust, net (2) | (598,430) | | | — | | | 598,430 | | | — | | | — | | | — | |
| Funding/Contributions | — | | | — | | | — | | | — | | | 19,191 | | | 19,191 | |
| Paydowns/Distributions | (126,575) | | | (33,344) | | | (117,548) | | | (13,071) | | | (40,315) | | | (330,853) | |
| | | | | | | | | | | |
| Sales | (320) | | | — | | | — | | | — | | | — | | | (320) | |
| Purchases | 767,914 | | | — | | | 14,563 | | | — | | | — | | | 782,477 | |
| Balance at the end of period | $ | 1,721,218 | | | $ | 969,853 | | | $ | 1,262,356 | | | $ | 110,208 | | | $ | 225,300 | | | $ | 4,288,935 | |
(1)Transfers out of Level 3 assets represents the transfer of residential loans to real estate owned.
(2)During the three months ended March 31, 2022, the Company completed two securitizations of certain performing, re-performing and business purpose loans (see Note 7 for further discussion of the Company's residential loan securitizations).
The following table details changes in valuation for the Level 3 liabilities for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands):
Level 3 Liabilities:
| | | | | | | | | | | |
| Consolidated SLST CDOs |
| | Three Months Ended March 31, |
| | 2023 | | 2022 |
| Balance at beginning of period | $ | 634,495 | | | $ | 839,419 | |
| Total gains (realized/unrealized) | | | |
| Included in earnings | 14,511 | | | (51,438) | |
| | | |
| | | |
| Paydowns | (10,493) | | | (33,717) | |
| | | |
| | | |
| Balance at the end of period | $ | 638,513 | | | $ | 754,264 | |
The following table discloses quantitative information regarding the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value (dollar amounts in thousands, except input values):
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| March 31, 2023 | | Fair Value | | Valuation Technique | | Unobservable Input | | Weighted Average | | Range |
| Assets | | | | | | | | | | | | |
| Residential loans: | | | | | | | | | | | | |
Residential loans and residential loans held in securitization trusts (1) | | $2,392,768 | | Discounted cash flow | | Lifetime CPR | | 4.6% | | — | - | 34.9% |
| | | | | | Lifetime CDR | | 0.7% | | — | - | 26.9% |
| | | | | | Loss severity | | 7.9% | | — | - | 96.6% |
| | | | | | Yield | | 7.9% | | 5.3% | - | 92.0% |
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| | $152,935 | | Liquidation model | | Annual home price appreciation/(depreciation) | | 0.1% | | (1.0)% | - | 5.2% |
| | | | | | Liquidation timeline (months) | | 20 | | 9 | - | 50 |
| | | | | | Property value | | $1,931,405 | | $15,300 | - | $13,800,000 |
| | | | | | Yield | | 7.6% | | 7.5% | - | 29.3% |
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Consolidated SLST (3) | | $829,153 | | | | Liability price | | N/A | | | | |
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| Total | | $3,374,856 | | | | | | | | | | |
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Multi-family loans (1) | | $95,309 | | Discounted cash flow | | Discount rate | | 12.4% | | 11.0% | - | 20.5% |
| | | | | | Months to assumed redemption | | 35 | | 6 | - | 52 |
| | | | | | Loss severity | | — | | | | |
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Equity investments (1) (2) | | $166,148 | | Discounted cash flow | | Discount rate | | 13.5% | | 13.0% | - | 15.5% |
| | | | | | Months to assumed redemption | | 20 | | 1 | - | 59 |
| | | | | | Loss severity | | — | | | | |
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Equity investments in disposal group held for sale (2) | | $10,070 | | Discounted cash flow | | Discount rate | | 16.0% | | 16.0% | - | 16.0% |
| | | | | | Months to assumed redemption | | 18 | | 18 | - | 18 |
| | | | | | Loss severity | | — | | | | |
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| Liabilities | | | | | | | | | | | | |
Consolidated SLST CDOs (3) (4) | | $638,513 | | Discounted cash flow | | Yield | | 5.0% | | 4.3% | - | 10.0% |
| | | | | | Collateral prepayment rate | | 5.8% | | 2.6% | - | 6.7% |
| | | | | | Collateral default rate | | 1.5% | | — | - | 11.5% |
| | | | | | Loss severity | | 22.0% | | 2.3% | - | 27.2% |
(1)Weighted average amounts are calculated based on the weighted average fair value of the assets.
(2)Equity investments do not include equity ownership interests in an entity that originates residential loans. The fair value of this investment is determined using weighted multiples of origination volume and earnings before taxes, depreciation and amortization of the entity.
(3)In accordance with the practical expedient in ASC 810, the Company determines the fair value of the residential loans held in Consolidated SLST based on the fair value of the CDOs issued by Consolidated SLST, including investment securities we own, as the fair value of these instruments is more observable. At March 31, 2023, the fair value of investment securities we own in Consolidated SLST amounts to $188.5 million.
(4)Weighted average yield calculated based on the weighted average fair value of the CDOs issued by Consolidated SLST, including investment securities we own. Weighted average collateral prepayment rate, weighted average collateral default rate, and weighted average loss severity are calculated based on the weighted average unpaid balance of the CDOs issued by Consolidated SLST, including investment securities we own.
The following table details the changes in unrealized gains (losses) included in earnings for the three months ended March 31, 2023 and 2022, respectively, for our Level 3 assets and liabilities held as of March 31, 2023 and 2022, respectively (dollar amounts in thousands):
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| | Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
| Assets | | | | | | | |
| Residential loans: | | | | | | | |
Residential loans (1) | $ | (3,320) | | | $ | (25,440) | | | | | |
Consolidated SLST (1) | 15,807 | | | (66,645) | | | | | |
Residential loans held in securitization trusts (1) | 30,077 | | | (32,566) | | | | | |
Multi-family loans (1) | 453 | | | 291 | | | | | |
Equity investments (2) | (2,577) | | | 1,115 | | | | | |
Equity investments in disposal group held for sale (2) | 1,060 | | | — | | | | | |
| Liabilities | | | | | | | |
Consolidated SLST CDOs (1) | (13,508) | | | 51,366 | | | | | |
(1)Presented in unrealized gains (losses), net on the Company's condensed consolidated statements of operations.
(2)Presented in income from equity investments on the Company's condensed consolidated statements of operations.
The following table presents the carrying value and estimated fair value of the Company’s financial instruments at March 31, 2023 and December 31, 2022, respectively (dollar amounts in thousands):
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| | | | March 31, 2023 | | December 31, 2022 |
| | Fair Value
Hierarchy Level | | Carrying
Value | | Estimated
Fair Value | | Carrying
Value | | Estimated
Fair Value |
| Financial Assets: | | | | | | | | | |
| Cash and cash equivalents | Level 1 | | $ | 227,753 | | | $ | 227,753 | | | $ | 244,718 | | | $ | 244,718 | |
| Residential loans | Level 3 | | 3,374,856 | | | 3,374,856 | | | 3,525,080 | | | 3,525,080 | |
| Multi-family loans | Level 3 | | 95,309 | | | 95,309 | | | 87,534 | | | 87,534 | |
| Investment securities available for sale | Level 2 | | 202,571 | | | 202,571 | | | 99,559 | | | 99,559 | |
| Equity investments | Level 3 | | 191,148 | | | 191,148 | | | 179,746 | | | 179,746 | |
| Equity investments in disposal group held for sale | Level 3 | | 10,070 | | | 10,070 | | | 9,010 | | | 9,010 | |
| Derivative assets | Level 2 | | 3,122 | | | 3,122 | | | 2,473 | | | 2,473 | |
| Derivative assets in disposal group held for sale | Level 2 | | 22,800 | | | 22,800 | | | 29,418 | | | 29,418 | |
| Financial Liabilities: | | | | | | | | | |
| Repurchase agreements | Level 2 | | 787,902 | | | 787,902 | | | 737,023 | | | 737,023 | |
| Collateralized debt obligations: | | | | | | | | | |
| Residential loan securitizations at amortized cost, net | Level 3 | | 1,390,991 | | | 1,321,342 | | | 1,468,222 | | | 1,383,715 | |
| Consolidated SLST | Level 3 | | 638,513 | | | 638,513 | | | 634,495 | | | 634,495 | |
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| Subordinated debentures | Level 3 | | 45,000 | | | 33,500 | | | 45,000 | | | 32,721 | |
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| Senior unsecured notes | Level 2 | | 97,561 | | | 91,732 | | | 97,384 | | | 91,104 | |
| Mortgages payable on real estate | Level 3 | | 397,316 | | | 374,605 | | | 394,707 | | | 377,327 | |
| Mortgages payable on real estate in disposal group held for sale | Level 3 | | 878,060 | | | 877,360 | | | 865,414 | | | 864,758 | |
In addition to the methodology to determine the fair value of the Company’s financial assets and liabilities reported at fair value, as previously described, the following methods and assumptions were used by the Company in arriving at the fair value of the Company’s other financial instruments in the table immediately above:
a.Cash and cash equivalents – Estimated fair value approximates the carrying value of such assets.
b.Repurchase agreements – The fair value of these repurchase agreements approximates cost as they are short term in nature.
c.Residential loan securitizations at amortized cost, net – The fair value of these CDOs is based on discounted cash flows as well as market pricing on comparable obligations.
d.Subordinated debentures – The fair value of these subordinated debentures is based on discounted cash flows using management’s estimate for market yields.
e.Senior unsecured notes – The fair value is based on quoted prices provided by dealers who make markets in similar financial instruments.
f.Mortgages payable on real estate – The fair value of consolidated variable-rate mortgages payable approximates the carrying value of such liabilities. The fair value of consolidated fixed-rate mortgages payable is estimated based upon discounted cash flows at current borrowing rates.
17. Stockholders' Equity
(a) Preferred Stock
The Company had 200,000,000 authorized shares of preferred stock, par value $0.01 per share (the "Preferred Stock"), with 22,265,817 and 22,284,994 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.
As of March 31, 2023, the Company has four outstanding series of cumulative redeemable preferred stock: 8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”), 7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series E Preferred Stock”), 6.875% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) and 7.000% Series G Cumulative Redeemable Preferred Stock (“Series G Preferred Stock”). Each series of the Preferred Stock is senior to the Company’s common stock with respect to dividends and distributions upon liquidation, dissolution or winding up.
In March 2023, the Board of Directors approved a $100.0 million preferred stock repurchase program. The program, which expires March 31, 2024, allows the Company to make repurchases of shares of Preferred Stock from time to time in open market transactions, including through block purchases or privately negotiated transactions. During the three months ended March 31, 2023, the Company repurchased 19,177 shares of Series G Preferred Stock pursuant to the preferred stock repurchase program for a total cost of approximately $0.3 million, including fees and commissions paid to the broker, representing an average repurchase price of $16.64 per preferred share. The difference between the consideration transferred and the carrying value of the preferred stock resulted in a gain attributable to common stockholders of approximately $0.1 million during the three months ended March 31, 2023. As of March 31, 2023, $99.7 million of the approved amount remained available for the repurchase of shares of Preferred Stock under the preferred stock repurchase program.
The following tables summarize the Company’s Preferred Stock issued and outstanding as of March 31, 2023 and December 31, 2022 (dollar amounts in thousands):
March 31, 2023
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| Class of Preferred Stock | | Shares Authorized | | Shares Issued and Outstanding | | Carrying Value | | Liquidation Preference | | Contractual Rate (1) | | Optional Redemption Date (2) | | Fixed-to-Floating Rate Conversion Date (1)(3) | | Floating Annual Rate (4) |
| Fixed-to-Floating Rate | | | | | | | | | | | | | | |
| Series D | | 8,400,000 | | | 6,123,495 | | | $ | 148,134 | | | $ | 153,087 | | | 8.000 | % | | October 15, 2027 | | October 15, 2027 | | 3M LIBOR + 5.695% |
| Series E | | 9,900,000 | | | 7,411,499 | | | 179,349 | | | 185,288 | | | 7.875 | % | | January 15, 2025 | | January 15, 2025 | | 3M LIBOR + 6.429% |
| Series F | | 7,750,000 | | | 5,750,000 | | | 138,650 | | | 143,750 | | | 6.875 | % | | October 15, 2026 | | October 15, 2026 | | 3M SOFR + 6.130% |
| Fixed Rate | | | | | | | | | | | | | | | | |
| Series G | | 5,450,000 | | | 2,980,823 | | | 71,756 | | | 74,520 | | | 7.000 | % | | January 15, 2027 | | | | |
| Total | | 31,500,000 | | | 22,265,817 | | | $ | 537,889 | | | $ | 556,645 | | | | | | | | | |
December 31, 2022
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| Class of Preferred Stock | | Shares Authorized | | Shares Issued and Outstanding | | Carrying Value | | Liquidation Preference | | Contractual Rate (1) | | Optional Redemption Date (2) | | Fixed-to-Floating Rate Conversion Date (1)(3) | | Floating Annual Rate (4) |
| Fixed-to-Floating Rate | | | | | | | | | | | | | | |
| Series D | | 8,400,000 | | | 6,123,495 | | | $ | 148,134 | | | $ | 153,087 | | | 8.000 | % | | October 15, 2027 | | October 15, 2027 | | 3M LIBOR + 5.695% |
| Series E | | 9,900,000 | | | 7,411,499 | | | 179,349 | | | 185,288 | | | 7.875 | % | | January 15, 2025 | | January 15, 2025 | | 3M LIBOR + 6.429% |
| Series F | | 7,750,000 | | | 5,750,000 | | | 138,650 | | | 143,750 | | | 6.875 | % | | October 15, 2026 | | October 15, 2026 | | 3M SOFR + 6.130% |
| Fixed Rate | | | | | | | | | | | | | | | | |
| Series G | | 5,450,000 | | | 3,000,000 | | | 72,218 | | | 75,000 | | | 7.000 | % | | January 15, 2027 | | | | |
| Total | | 31,500,000 | | | 22,284,994 | | | $ | 538,351 | | | $ | 557,125 | | | | | | | | | |
(1)Each series of fixed rate preferred stock is entitled to receive a dividend at the contractual rate shown, respectively, per year on its $25 liquidation preference. Each series of fixed-to-floating rate preferred stock is entitled to receive a dividend at the contractual rate shown, respectively, per year on its $25 liquidation preference up to, but excluding, the fixed-to-floating rate conversion date.
(2)Each series of Preferred Stock is not redeemable by the Company prior to the respective optional redemption date disclosed except under circumstances intended to preserve the Company’s qualification as a REIT and except upon occurrence of a Change in Control (as defined in the Articles Supplementary designating the Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock, respectively).
(3)Beginning on the respective fixed-to-floating rate conversion date, each of the Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock is entitled to receive a dividend on a floating rate basis according to the terms disclosed in footnote (4) below.
(4)On and after the fixed-to-floating rate conversion date, each of the Series D Preferred Stock and Series E Preferred Stock is entitled to receive a dividend at a floating rate equal to three-month LIBOR plus the respective spread disclosed above per year on its $25 liquidation preference. On and after the fixed-to-floating rate conversion date, the Series F Preferred Stock is entitled to receive a dividend at a floating rate equal to three-month SOFR plus the spread disclosed above per year on its $25 liquidation preference.
For each series of Preferred Stock, on or after the respective optional redemption date disclosed, the Company may, at its option, redeem the respective series of Preferred Stock in whole or in part, at any time or from time to time, for cash at a redemption price equal to $25.00 per share, plus any accumulated and unpaid dividends. In addition, upon the occurrence of a change of control, the Company may, at its option, redeem the Preferred Stock in whole or in part, within 120 days after the first date on which such change of control occurred, for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends.
The Preferred Stock generally do not have any voting rights, subject to an exception in the event the Company fails to pay dividends on such stock for six or more quarterly periods (whether or not consecutive). Under such circumstances, holders of the Preferred Stock voting together as a single class with the holders of all other classes or series of our preferred stock upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Preferred Stock will be entitled to vote to elect two additional directors to the Company’s Board of Directors (the "Board") until all unpaid dividends have been paid or declared and set apart for payment. In addition, certain material and adverse changes to the terms of any series of the Preferred Stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of the series of Preferred Stock whose terms are being changed.
The Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless repurchased or redeemed by the Company or converted into the Company’s common stock in connection with a change of control.
Upon the occurrence of a change of control, each holder of Preferred Stock will have the right (unless the Company has exercised its right to redeem the Preferred Stock) to convert some or all of the Preferred Stock held by such holder into a number of shares of our common stock per share of the applicable series of Preferred Stock determined by a formula, in each case, on the terms and subject to the conditions described in the applicable Articles Supplementary for such series.
(b) Dividends on Preferred Stock
The following table presents the relevant information with respect to quarterly cash dividends declared on the Preferred Stock commencing January 1, 2022 through March 31, 2023:
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| | | | | | Cash Dividend Per Share | |
| Declaration Date | | Record Date | | Payment Date | | Series D Preferred Stock | | Series E Preferred Stock | | Series F Preferred Stock | | Series G Preferred Stock | |
| March 9, 2023 | | April 1, 2023 | | April 15, 2023 | | $ | 0.50 | | | $ | 0.4921875 | | | $ | 0.4296875 | | | $ | 0.43750 | | |
| December 12, 2022 | | January 1, 2023 | | January 15, 2023 | | 0.50 | | | 0.4921875 | | | 0.4296875 | | | 0.43750 | | |
| September 16, 2022 | | October 1, 2022 | | October 15, 2022 | | 0.50 | | | 0.4921875 | | | 0.4296875 | | | 0.43750 | | |
| June 17, 2022 | | July 1, 2022 | | July 15, 2022 | | 0.50 | | | 0.4921875 | | | 0.4296875 | | | 0.43750 | | |
| March 14, 2022 | | April 1, 2022 | | April 15, 2022 | | 0.50 | | | 0.4921875 | | | 0.4296875 | | | 0.43750 | | |
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(c) Common Stock
The Company had 200,000,000 authorized shares of common stock, par value $0.01 per share, with 91,180,096 and 91,193,688 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.
On February 22, 2023, the Company announced that the Board of Directors approved the Reverse Stock Split. The Reverse Stock Split was effected as of 12:01 a.m., New York City time, on March 9, 2023 (the “Effective Time”). Accordingly, at the Effective Time, every four issued and outstanding shares of the Company’s common stock were converted into one share of the Company’s common stock, with a proportionate reduction in the Company’s authorized shares of common stock, outstanding equity awards and number of shares remaining available for issuance under the Company's 2017 Equity Incentive Plan (as amended, the "2017 Plan"). In connection with the reverse stock split, the number of authorized shares of the Company’s common stock was also reduced on a one-for-four basis, from 800,000,000 to 200,000,000. The par value of each share of common stock remained unchanged. No fractional shares were issued in connection with the Reverse Stock Split. Instead, each stockholder holding fractional shares as a result of the Reverse Stock Split was entitled to receive, in lieu of such fractional shares, cash in an amount based on the closing price of the Company's common stock on the Nasdaq Global Select Market on March 8, 2023. The Reverse Stock Split applied to all of the Company’s outstanding shares of common stock and therefore did not affect any stockholder’s ownership percentage of shares of the Company’s common stock, except for de minimis changes resulting from the payment of cash in lieu of fractional shares. All common share and per common share data included in these condensed consolidated financial statements and notes thereto have been adjusted on a retroactive basis to reflect the impact of the Reverse Stock Split.
In February 2022, the Board of Directors approved a $200.0 million stock repurchase program. The program, which expires March 31, 2024, allows the Company to make repurchases of shares of common stock from time to time in open market transactions, including through block purchases, through privately negotiated transactions or pursuant to any Rule 10b-18 or 10b5-1 plans. In March 2023, the Board of Directors approved an upsize of the stock repurchase program to $246.0 million. During the three months ended March 31, 2023, the Company repurchased 377,508 shares of its common stock pursuant to the stock repurchase program for a total cost of approximately $3.6 million, including fees and commissions paid to the broker, representing an average repurchase price of $9.56 per common share. The Company did not repurchase any shares of its common stock during the three months ended March 31, 2022. As of March 31, 2023, $199.8 million of the approved amount remained available for the repurchase of shares of the Company's common stock under the stock repurchase program.
(d) Dividends on Common Stock
The following table presents cash dividends declared by the Company on its common stock with respect to the quarterly periods commencing January 1, 2022 through March 31, 2023:
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| Period | | Declaration Date | | Record Date | | Payment Date | | Cash Dividend Per Share |
| First Quarter 2023 | | March 9, 2023 | | March 20, 2023 | | April 26, 2023 | | $ | 0.40 | |
| Fourth Quarter 2022 | | December 12, 2022 | | December 27, 2022 | | January 26, 2023 | | 0.40 | |
| Third Quarter 2022 | | September 16, 2022 | | September 26, 2022 | | October 26, 2022 | | 0.40 | |
| Second Quarter 2022 | | June 17, 2022 | | June 27, 2022 | | July 25, 2022 | | 0.40 | |
| First Quarter 2022 | | March 14, 2022 | | March 24, 2022 | | April 25, 2022 | | 0.40 | |
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(e) Equity Distribution Agreements
On August 10, 2021, the Company entered into an equity distribution agreement (the “Common Equity Distribution Agreement”) with a sales agent, pursuant to which the Company may offer and sell shares of its common stock, par value $0.01 per share, having a maximum aggregate sales price of up to $100.0 million from time to time through the sales agent. The Company has no obligation to sell any of the shares of common stock issuable under the Common Equity Distribution Agreement and may at any time suspend solicitations and offers under the Common Equity Distribution Agreement.
There were no shares of the Company's common stock issued under the Common Equity Distribution Agreement during the three months ended March 31, 2023 and 2022. As of March 31, 2023, approximately $100.0 million of common stock remains available for issuance under the Common Equity Distribution Agreement.
On March 29, 2019, the Company entered into an equity distribution agreement (the "Preferred Equity Distribution Agreement") with a sales agent, pursuant to which the Company may offer and sell shares of the Company's Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, having a maximum aggregate gross sales price of up to $50.0 million, from time to time through the sales agent. On November 27, 2019, the Company entered into an amendment to the Preferred Equity Distribution Agreement that increased the maximum aggregate sales price to $131.5 million. The amendment also provided for the inclusion of sales of the Company’s Series E Preferred Stock. On August 10, 2021, the Company entered into an amendment to the Preferred Equity Distribution Agreement that increased the maximum aggregate sales price to $149.1 million. The amendment also provided for the inclusion of sales of the Company's Series F Preferred Stock and the exclusion of sales of the Company's Series C Preferred Stock. On March 2, 2022, the Company entered into an amendment to the Preferred Equity Distribution Agreement that provided for the inclusion of sales of the Company's Series G Preferred Stock and the exclusion of sales of the Company's Series B Preferred Stock. The Company has no obligation to sell any of the shares of Preferred Stock issuable under the Preferred Equity Distribution Agreement and may at any time suspend solicitations and offers under the Preferred Equity Distribution Agreement.
There were no shares of Preferred Stock issued under the Preferred Equity Distribution Agreement during the three months ended March 31, 2023 and 2022. As of March 31, 2023, approximately $100.0 million of Preferred Stock remains available for issuance under the Preferred Equity Distribution Agreement.
18. Earnings (Loss) Per Common Share
The Company calculates basic earnings (loss) per common share by dividing net income (loss) attributable to the Company's common stockholders for the period by weighted-average shares of common stock outstanding for that period. Diluted earnings (loss) per common share takes into account the effect of dilutive instruments, such as convertible notes, performance share units ("PSUs") and restricted stock units ("RSUs"), and the number of incremental shares that are to be added to the weighted-average number of shares outstanding.
The Company redeemed the Convertible Notes at maturity in the amount of $138.0 million on January 15, 2022. During the three months ended March 31, 2022, the Company's Convertible Notes were determined to be anti-dilutive and were not included in the calculation of diluted loss per common share.
During the three months ended March 31, 2023, certain of the PSUs awarded under the 2017 Plan were determined to be dilutive and were included in the calculation of diluted earnings per common share under the treasury stock method. Under this method, common equivalent shares are calculated assuming that target PSUs and outstanding RSUs vest according to the respective PSU and RSU agreements and unrecognized compensation cost is used to repurchase shares of the Company’s outstanding common stock at the average market price during the reported period. During the three months ended March 31, 2023, the RSUs awarded under the 2017 Plan were determined to be anti-dilutive and were not included in the calculation of diluted loss per common share. During the three months ended March 31, 2022, the PSUs and RSUs awarded under the 2017 Plan were determined to be anti-dilutive and were not included in the calculation of diluted loss per common share.
The following table presents the computation of basic and diluted earnings (loss) per common share for the periods indicated (dollar and share amounts in thousands, except per share amounts):
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| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
| Basic Earnings (Loss) per Common Share: | | | | | | | |
| Net income (loss) attributable to Company | $ | 20,863 | | | $ | (73,850) | | | | | |
| Less: Preferred Stock dividends | (10,484) | | | (10,493) | | | | | |
| Plus: Gain on repurchase of preferred stock | 142 | | | — | | | | | |
| Net income (loss) attributable to Company's common stockholders | $ | 10,521 | | | $ | (84,343) | | | | | |
Basic weighted average common shares outstanding | 91,314 | | | 95,199 | | | | | |
| Basic Earnings (Loss) per Common Share | $ | 0.12 | | | $ | (0.89) | | | | | |
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| Diluted Earnings (Loss) per Common Share: | | | | | | | |
| Net income (loss) attributable to Company | $ | 20,863 | | | $ | (73,850) | | | | | |
| Less: Preferred Stock dividends | (10,484) | | | (10,493) | | | | | |
| Plus: Gain on repurchase of preferred stock | 142 | | | — | | | | | |
| Net income (loss) attributable to Company's common stockholders | $ | 10,521 | | | $ | (84,343) | | | | | |
Weighted average common shares outstanding | 91,314 | | | 95,199 | | | | | |
| Net effect of assumed PSUs vested | 358 | | | — | | | | | |
Net effect of assumed RSUs vested | — | | | — | | | | | |
Diluted weighted average common shares outstanding | 91,672 | | | 95,199 | | | | | |
| Diluted Earnings (Loss) per Common Share | $ | 0.11 | | | $ | (0.89) | | | | | |
19. Stock Based Compensation
Pursuant to the 2017 Plan, as approved by the Company's stockholders, eligible employees, officers and directors of the Company and individuals who provide services to the Company are offered the opportunity to acquire the Company's common stock through equity awards under the 2017 Plan. The maximum number of shares that may be issued under the 2017 Plan is 10,792,500.
Of the common stock authorized at March 31, 2023, 7,203,330 shares remain available for issuance under the 2017 Plan. The Company’s non-employee directors have been issued 229,754 shares under the 2017 Plan as of March 31, 2023. The Company’s employees have been issued 1,220,850 shares of restricted stock under the 2017 Plan as of March 31, 2023. At March 31, 2023, there were 550,536 shares of non-vested restricted stock outstanding, 1,159,901 common shares reserved for issuance in connection with outstanding PSUs under the 2017 Plan and 119,064 common shares reserved for issuance in connection with outstanding RSUs under the 2017 Plan.
Of the common stock authorized at December 31, 2022, 7,199,024 shares were reserved for issuance under the 2017 Plan. The Company's non-employee directors had been issued 229,754 shares under the 2017 Plan as of December 31, 2022. The Company’s employees had been issued 952,350 shares of restricted stock under the 2017 Plan as of December 31, 2022. At December 31, 2022, there were 526,074 shares of non-vested restricted stock outstanding, 1,558,343 common shares reserved for issuance in connection with outstanding PSUs under the 2017 Plan and 263,708 common shares reserved for issuance in connection with outstanding RSUs under the 2017 Plan.
(a) Restricted Common Stock Awards
During the three months ended March 31, 2023 and 2022, the Company recognized non-cash compensation expense on its restricted common stock awards of $1.0 million and $1.1 million, respectively. Dividends are paid on all restricted stock issued, whether those shares have vested or not. Non-vested restricted stock is forfeited upon the recipient's termination of employment, subject to certain exceptions.
A summary of the activity of the Company's non-vested restricted stock under the 2017 Plan for the three months ended March 31, 2023 and 2022, respectively, is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | 2022 |
| Number of
Non-vested
Restricted
Shares | | Weighted Average Per Share Grant Date Fair Value (1) | | Number of
Non-vested
Restricted
Shares | | Weighted Average Per Share Grant Date Fair Value (1) |
| Non-vested shares as of January 1 | 526,074 | | | $ | 16.34 | | | 477,276 | | | $ | 20.20 | |
| Granted | 275,248 | | | 12.36 | | | 304,417 | | | 14.36 | |
| Vested | (244,015) | | | 18.18 | | | (221,239) | | | 21.97 | |
| Forfeited | (6,771) | | | 13.04 | | | (5,370) | | | 16.75 | |
Non-vested shares as of March 31 | 550,536 | | | $ | 13.57 | | | 555,084 | | | $ | 16.31 | |
Restricted stock granted during the period | 275,248 | | | $ | 12.36 | | | 304,417 | | | $ | 14.36 | |
(1)The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date.
At March 31, 2023 and 2022, the Company had unrecognized compensation expense of $6.8 million and $8.2 million, respectively, related to the non-vested shares of restricted common stock under the 2017 Plan. The unrecognized compensation expense at March 31, 2023 is expected to be recognized over a weighted average period of 2.2 years. The total fair value of restricted shares vested during the three months ended March 31, 2023 and 2022 was approximately $3.0 million and $3.2 million, respectively. The requisite service period for restricted stock awards at issuance is three years and the restricted common stock either vests ratably over the requisite service period or at the end of the requisite service period.
(b) Performance Share Units
Under the 2017 Plan, PSUs are instruments that provide the holder the right to receive one share of the Company's common stock once a performance condition has been satisfied. The awards were issued pursuant to and are consistent with the terms and conditions of the 2017 Plan.
The grant date fair value of the PSUs was determined through a Monte-Carlo simulation of the Company’s common stock total shareholder return and the common stock total shareholder return of its identified performance peer companies to determine the relative total shareholder return of the Company’s common stock over a future period of three years. For PSUs granted, the inputs used by the model to determine the fair value are (i) historical stock price volatilities of the Company and its identified performance peer companies over the most recent three year period and correlation between each company's stock and the identified performance peer group over the same time series and (ii) a risk free rate for the period interpolated from the U.S. Treasury yield curve on grant date.
The PSUs include dividend equivalent rights ("DERs") which shall remain outstanding from the grant date until the earlier of the settlement or forfeiture of the PSU to which the DER corresponds. Each vested DER entitles the holder to receive payments in an amount equal to any dividends paid by the Company in respect of the share of the Company’s common stock underlying the PSU to which such DER relates. Upon vesting of the PSUs, the DER will also vest. DERs will be forfeited upon forfeiture of the corresponding PSUs. The DERs may be settled in cash or stock at the discretion of the Compensation Committee.
A summary of the activity of the target PSU awards under the 2017 Plan for the three months ended March 31, 2023 and 2022, respectively, is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | 2022 |
| Number of
Non-vested
Target
Shares | | Weighted Average Per Share Grant Date Fair Value (1) | | Number of
Non-vested
Target
Shares | | Weighted Average Per Share Grant Date Fair Value (1) |
| Non-vested target PSUs as of January 1 | 786,577 | | | $ | 23.06 | | | 844,185 | | | $ | 21.70 | |
| Granted | — | | | — | | | 211,133 | | | 19.47 | |
| Vested | (201,978) | | | 28.18 | | | (268,729) | | | 16.00 | |
| | | | | | | |
Non-vested target PSUs as of March 31 | 584,599 | | | $ | 21.29 | | | 786,589 | | | $ | 23.05 | |
(1)The grant date fair value of the PSUs was determined through a Monte-Carlo simulation of the Company’s common stock total shareholder return and the common stock total shareholder return of its identified performance peer companies to determine the relative total shareholder return of the Company’s common stock over a future period of three years.
The three-year performance period for PSUs granted in 2020 ended on December 31, 2022, resulting in the vesting of 161,583 shares of common stock during the three months ended March 31, 2023 with a fair value of $2.0 million on the vesting date. The number of vested shares related to PSUs granted in 2020 was less than the target PSUs of 201,978. The three-year performance period for PSUs granted in 2019 ended on December 31, 2021, resulting in the vesting of 183,374 shares of common stock during the three months ended March 31, 2022 with a fair value of $2.6 million on the vesting date. The number of vested shares related to PSUs granted in 2019 was less than the target PSUs of 268,729. Non-vested PSUs are forfeited upon the recipient's termination of employment, subject to certain exceptions.
As of March 31, 2023 and 2022, there was $4.6 million and $10.3 million of unrecognized compensation cost related to the non-vested portion of the PSUs, respectively. The unrecognized compensation cost related to the non-vested portion of the PSUs at March 31, 2023 is expected to be recognized over a weighted average period of 1.3 years. Compensation expense related to the PSUs was $1.1 million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively.
(c) Restricted Stock Units
Under the 2017 Plan, each RSU represents an unfunded promise to receive one share of the Company's common stock upon satisfaction of the vesting provisions. The awards were issued pursuant to and are consistent with the terms and conditions of the 2017 Plan. The requisite service period for RSUs at issuance is three years and the RSUs vest ratably over the requisite service period.
The RSUs include DERs which shall remain outstanding from the grant date until the earlier of the settlement or forfeiture of the RSU to which the DER corresponds. Each vested DER entitles the holder to receive payments in an amount equal to any dividends paid by the Company in respect of the share of the Company’s common stock underlying the RSU to which such DER relates. Upon vesting of the RSUs, the DER will also vest. DERs will be forfeited upon forfeiture of the corresponding RSUs. The DERs may be settled in cash or stock at the discretion of the Compensation Committee.
A summary of the activity of the RSU awards under the 2017 Plan for the three months ended March 31, 2023 and 2022, respectively, is presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2023 | | 2022 | | |
| | Number of
Non-vested
Shares | | Weighted Average Per Share Grant Date Fair Value (1) | | Number of
Non-vested
Shares | | Weighted Average Per Share Grant Date Fair Value (1) | | | | |
| Non-vested RSUs as of January 1 | | 263,708 | | | $ | 16.11 | | | 254,052 | | | $ | 17.45 | | | | | |
| Granted | | — | | | — | | | 105,566 | | | 14.88 | | | | | |
| Vested | | (131,094) | | | 17.40 | | | (95,910) | | | 18.32 | | | | | |
| Forfeited | | (13,550) | | | 14.76 | | | — | | | — | | | | | |
Non-vested RSUs as of March 31 | | 119,064 | | | $ | 14.83 | | | 263,708 | | | $ | 16.10 | | | | | |
(1)The grant date fair value of RSUs is based on the closing market price of the Company’s common stock at the grant date.
During the three months ended March 31, 2023, 131,094 shares of common stock were issued in connection with the vesting of RSUs at a fair value of $1.4 million on the vesting date. During the three months ended March 31, 2022, 95,910 shares of common stock were issued in connection with the vesting of RSUs at a fair value of $1.4 million on the vesting date. Non-vested RSUs are forfeited upon the recipient's termination of employment, subject to certain exceptions.
As of March 31, 2023 and 2022, there was $1.5 million and $3.8 million of unrecognized compensation cost related to the non-vested portion of the RSUs, respectively. The unrecognized compensation cost related to the non-vested portion of the RSUs at March 31, 2023 is expected to be recognized over a weighted average period of 1.4 years. Compensation expense related to the RSUs was $0.3 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.
20. Income Taxes
For the three months ended March 31, 2023 and 2022, the Company qualified to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes at least 100% of its taxable income to stockholders and does not engage in prohibited transactions. Certain activities the Company performs may produce income that will not be qualifying income for REIT purposes. The Company has designated its TRSs to engage in these activities. The tables below reflect the taxes accrued at the TRS level and the tax attributes included in the condensed consolidated financial statements.
The income tax (benefit)/provision for the three months ended March 31, 2023 and 2022, respectively, is comprised of the following components (dollar amounts in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
| Current income tax expense | $ | 187 | | | $ | 65 | | | | | |
| Deferred income tax benefit | (171) | | | (87) | | | | | |
| Total income tax provision/(benefit) | $ | 16 | | | $ | (22) | | | | | |
Deferred Tax Assets and Liabilities
The major sources of temporary differences included in the deferred tax assets (liabilities) and their deferred tax effect as of March 31, 2023 and December 31, 2022, respectively, are as follows (dollar amounts in thousands):
| | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| Deferred tax assets | | | |
| Net operating loss carryforward | $ | 4,455 | | | $ | 3,513 | |
| Capital loss carryover | 16,117 | | | 16,045 | |
| GAAP/Tax basis differences | 6,596 | | | 1,869 | |
Total deferred tax assets (1) | 27,168 | | | 21,427 | |
| Deferred tax liabilities | | | |
| GAAP/Tax basis differences | — | | | 394 | |
Total deferred tax liabilities (2) | — | | | 394 | |
Valuation allowance (1) | (24,720) | | | (18,756) | |
| Total net deferred tax asset | $ | 2,448 | | | $ | 2,277 | |
(1)Included in other assets in the accompanying condensed consolidated balance sheets.
(2)Included in other liabilities in the accompanying condensed consolidated balance sheets.
As of March 31, 2023, the Company, through wholly-owned TRSs, had incurred net operating losses in the aggregate amount of approximately $13.1 million. The Company’s carryforward net operating losses can be carried forward indefinitely until they are offset by future taxable income. Additionally, as of March 31, 2023, the Company, through its wholly-owned TRSs, had also incurred approximately $47.3 million in capital losses. The Company's carryforward capital losses will expire between 2025 and 2028 if they are not offset by future capital gains.
At March 31, 2023, the Company has recorded a valuation allowance against certain deferred tax assets as management does not believe that it is more likely than not that these deferred tax assets will be realized. The change in the valuation for the current year is an increase of approximately $6.0 million. We will continue to monitor positive and negative evidence related to the utilization of the remaining deferred tax assets for which a valuation allowance continues to be provided.
The Company files income tax returns with the U.S. federal government and various state and local jurisdictions. The Company's federal, state and city income tax returns are subject to examination by the Internal Revenue Service and related tax authorities generally for three years after they were filed. The Company has assessed its tax positions for all open years and concluded that there are no material uncertainties to be recognized.
Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. To the extent that the Company incurs interest and accrued penalties in connection with its tax obligations, including expenses related to the Company’s evaluation of unrecognized tax positions, such amounts will be included in income tax expense.
21. Net Interest Income
The following table details the components of the Company's interest income and interest expense for the three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands):
| | | | | | | | | | | | | | | |
| For the Three Months Ended
March 31, | | |
| 2023 | | 2022 | | | | |
| Interest income | | | | | | | |
| Residential loans | | | | | | | |
| Residential loans | $ | 16,954 | | | $ | 24,834 | | | | | |
| Consolidated SLST | 8,733 | | | 9,380 | | | | | |
| Residential loans held in securitization trusts | 24,721 | | | 16,633 | | | | | |
| Total residential loans | 50,408 | | | 50,847 | | | | | |
| Multi-family loans | 2,436 | | | 2,951 | | | | | |
| Investment securities available for sale | 3,169 | | | 4,675 | | | | | |
| Other | 1,123 | | | 28 | | | | | |
| Total interest income | 57,136 | | | 58,501 | | | | | |
| Interest expense | | | . | | | | |
| Repurchase agreements | 13,068 | | | 5,531 | | | | | |
| Collateralized debt obligations | | | | | | | |
| Consolidated SLST | 6,315 | | | 5,978 | | | | | |
| Residential loan securitizations | 17,376 | | | 7,456 | | | | | |
| Total collateralized debt obligations | 23,691 | | | 13,434 | | | | | |
| Convertible notes | — | | | 438 | | | | | |
| Senior unsecured notes | 1,614 | | | 1,603 | | | | | |
| Subordinated debentures | 962 | | | 459 | | | | | |
| Total interest expense | 39,335 | | | 21,465 | | | | | |
| Net interest income | $ | 17,801 | | | $ | 37,036 | | | | | |