|
|
|
|
|
Maryland
|
|
27-0312904
|
(State or Other Jurisdiction of Incorporation or Organization)
|
|
(I.R.S. Employer Identification No.)
|
575 Lexington Avenue, Suite 2930
New York, New York
|
|
10022
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
Title of Each Class:
|
|
Name of Exchange on Which Registered:
|
Common Stock, par value $0.01 per share
|
|
New York Stock Exchange
|
8.125% Series A Cumulative Redeemable Preferred Stock
|
|
New York Stock Exchange
|
7.625% Series B Cumulative Redeemable Preferred Stock
|
|
New York Stock Exchange
|
7.25% Series C Cumulative Redeemable Preferred Stock
|
|
New York Stock Exchange
|
7.75% Series D Cumulative Redeemable Preferred Stock
|
|
New York Stock Exchange
|
7.50% Series E Cumulative Redeemable Preferred Stock
|
|
New York Stock Exchange
|
Large accelerated filer x
|
|
|
Accelerated filer o
|
Non-accelerated filer o
|
|
|
Smaller reporting company o
|
|
|
|
Emerging growth company o
|
|
|
|
|
|
|
|
Page
|
PART I
|
|
|
PART II
|
|
|
PART III
|
|
|
PART IV
|
|
|
•
|
Agency RMBS, meaning RMBS whose principal and interest payments are guaranteed by the Government National Mortgage Association (or Ginnie Mae), the Federal National Mortgage Association (or Fannie Mae), or the Federal Home Loan Mortgage Corporation (or Freddie Mac);
|
•
|
Non-Agency securities that are not issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac;
|
•
|
MSR; and
|
•
|
Other financial assets comprising approximately 5% to 10% of the portfolio.
|
•
|
changes in interest rates and the market value of our target assets;
|
•
|
changes in prepayment rates of mortgages underlying our target assets;
|
•
|
the occurrence, extent and timing of credit losses within our portfolio;
|
•
|
our exposure to adjustable-rate and negative amortization mortgage loans underlying our target assets;
|
•
|
the state of the credit markets and other general economic conditions, particularly as they affect the price of earning assets and the credit status of borrowers;
|
•
|
the concentration of the credit risks to which we are exposed;
|
•
|
legislative and regulatory actions affecting our business;
|
•
|
the availability and cost of our target assets;
|
•
|
the availability and cost of financing for our target assets, including repurchase agreement financing, lines of credit, revolving credit facilities and financing through the FHLB;
|
•
|
declines in home prices;
|
•
|
increases in payment delinquencies and defaults on the mortgages comprising and underlying our target assets;
|
•
|
changes in liquidity in the market for real estate securities, the re-pricing of credit risk in the capital markets, inaccurate ratings of securities by rating agencies, rating agency downgrades of securities, and increases in the supply of real estate securities available-for-sale;
|
•
|
changes in the values of securities we own and the impact of adjustments reflecting those changes on our consolidated statements of comprehensive (loss) income and balance sheets, including our stockholders’ equity;
|
•
|
our ability to generate cash flow from our target assets;
|
•
|
our ability to effectively execute and realize the benefits of strategic transactions and initiatives we have pursued or may in the future pursue;
|
•
|
changes in the competitive landscape within our industry, including changes that may affect our ability to attract and retain personnel;
|
•
|
our exposure to legal and regulatory claims, penalties or enforcement activities, including those arising from our ownership and management of MSR and prior securitization transactions;
|
•
|
our exposure to counterparties involved in our MSR business and prior securitization transactions and our ability to enforce representations and warranties made by them;
|
•
|
our ability to acquire MSR and successfully operate our seller-servicer subsidiary and oversee the activities of our subservicers;
|
•
|
our ability to successfully diversify our business into new asset classes, and manage the new risks to which they may expose us;
|
•
|
our ability to manage various operational and regulatory risks associated with our business;
|
•
|
interruptions in or impairments to our communications and information technology systems;
|
•
|
our ability to maintain appropriate internal controls over financial reporting;
|
•
|
our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio;
|
•
|
our ability to maintain our REIT qualification for U.S. federal income tax purposes; and
|
•
|
limitations imposed on our business due to our REIT status and our status as exempt from registration under the 1940 Act.
|
•
|
Rates Strategy - Includes Agency RMBS, MSR and related hedging transactions. The performance of this strategy is most affected by changes in interest rates, prepayments and mortgage spreads. These assets have minimal exposure to the underlying credit performance of the investments.
|
Agency RMBS
|
Agency RMBS collateralized by fixed rate mortgage loans, adjustable-rate mortgage (or ARM) loans or hybrid mortgage loans, or derivatives thereof, including:
|
|
|
•
|
mortgage pass-through certificates;
|
|
•
|
collateralized mortgage obligations;
|
|
•
|
Freddie Mac gold certificates;
|
|
•
|
Fannie Mae certificates;
|
|
•
|
Ginnie Mae certificates;
|
|
•
|
“to-be-announced” forward contracts, or TBAs, which are pools of mortgages with specific investment terms to be issued by government sponsored entities, or GSEs, at a future date; and
|
|
•
|
interest-only and inverse interest-only securities.
|
MSR
|
The right to control the servicing of mortgage loans and receive the servicing income therefrom; the actual servicing functions are outsourced to appropriately licensed third-party subservicers, which service the loans in their own names.
|
•
|
Credit Strategy - Includes non-Agency securities and related hedging transactions. The performance of this strategy is most affected by changes in credit performance of the underlying collateral. These assets have interest rate and mortgage spread exposure, although such exposures are not viewed to be the main drivers of performance.
|
Non-Agency securities
|
Non-Agency securities collateralized by prime mortgage loans, Alt-A mortgage loans, pay-option ARM loans and subprime mortgage loans, which may have fixed rate, adjustable rate or hybrid rate terms.
|
|
|
Non-Agency securities includes both senior and mezzanine securities. Senior refers to non-Agency securities that represent the senior-most tranches (that is, the tranches which have the highest priority claim to cash flows from the related collateral pool) within the securities’ structure. Mezzanine refers to subordinated tranches within the collateral pool. The non-Agency securities we purchase may include investment-grade and non-investment grade classes, including non-rated securities.
|
|
|
Hybrid mortgage loans have terms with interest rates that are fixed for a specified period of time and, thereafter, generally adjust annually to an increment over a specified interest rate index. ARMs refer to hybrid and adjustable-rate mortgage loans which typically have interest rates that adjust annually to an increment over a specified interest rate index.
|
•
|
no investment shall be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes;
|
•
|
no investment shall be made that would cause us to be regulated as an investment company under the 1940 Act;
|
•
|
we will primarily invest within our target assets, consisting primarily of Agency RMBS, non-Agency securities, residential mortgage loans, MSR and commercial real estate assets, inclusive of commercial real estate loans, commercial real property, CMBS, commercial corporate debt and loans and other commercial real estate related investments in the U.S; approximately 5% to 10% of our portfolio may include other financial assets; and
|
•
|
until appropriate investments can be identified, we will invest available cash in interest-bearing and short-term investments that are consistent with (i) our intention to qualify as a REIT and (ii) our exemption from investment company status under the 1940 Act.
|
•
|
build an investment portfolio consisting of Agency RMBS, non-Agency securities, MSR and other financial assets that will generate attractive returns while having a moderate risk profile;
|
•
|
manage financing, interest, prepayment rate, credit and similar risks;
|
•
|
capitalize on discrepancies in the relative valuations in the mortgage and housing markets; and
|
•
|
provide regular quarterly dividend distributions to stockholders.
|
•
|
hedging can be expensive, particularly during periods of volatile or rapidly changing interest rates;
|
•
|
available hedges may not correspond directly with the risks for which protection is sought;
|
•
|
the duration of the hedge may not match the duration of the related liability;
|
•
|
the amount of income that a REIT may earn from certain hedging transactions (other than through our TRSs) is limited by U.S. federal income tax provisions;
|
•
|
the credit quality of a hedging counterparty may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and
|
•
|
the hedging counterparty may default on its obligations.
|
•
|
We may purchase securities that have a higher interest rate than the market interest rate at the time. In exchange for this higher interest rate, we may pay a premium over the par value to acquire the security. In accordance with U.S. GAAP, we may amortize this premium over the estimated term of the security. If the security is prepaid in whole or in part prior to its maturity date, however, we may be required to expense the premium that was prepaid at the time of the prepayment.
|
•
|
A substantial portion of our adjustable-rate Agency RMBS and non-Agency securities may bear interest rates that are lower than their fully indexed rates, which are equivalent to the applicable index rate plus a margin. If an adjustable-rate security is prepaid prior to or soon after the time of adjustment to a fully-indexed rate, we will have held that security while it was least profitable and lost the opportunity to receive interest at the fully indexed rate over the remainder of its expected life.
|
•
|
If we are unable to acquire new Agency RMBS and non-Agency securities similar to the prepaid security, our financial condition, results of operations and cash flows would suffer.
|
•
|
actual receipt of an improper benefit or profit in money, property or services; or
|
•
|
a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.
|
•
|
changes in financial estimates by analysts;
|
•
|
fluctuations in our results of operations or financial condition or the results of operations or financial condition of companies perceived to be similar to us;
|
•
|
general economic and financial and real estate market conditions;
|
•
|
changes in market valuations of similar companies;
|
•
|
monetary policy and regulatory developments in the U.S.; and
|
•
|
additions or departures of key personnel at Pine River.
|
Quarter Ended
|
|
Common Stock
|
||||||
2018
|
|
High
|
|
Low
|
||||
December 31
|
|
$
|
15.06
|
|
|
$
|
12.63
|
|
September 30
|
|
$
|
16.23
|
|
|
$
|
14.48
|
|
June 30
|
|
$
|
16.27
|
|
|
$
|
15.02
|
|
March 31
|
|
$
|
16.30
|
|
|
$
|
13.85
|
|
2017
|
|
|
|
|
||||
December 31
|
|
$
|
20.42
|
|
|
$
|
15.21
|
|
September 30
|
|
$
|
20.51
|
|
|
$
|
19.16
|
|
June 30
|
|
$
|
21.08
|
|
|
$
|
19.10
|
|
March 31
|
|
$
|
19.64
|
|
|
$
|
17.02
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Cash Dividend Per Share
|
||
December 18, 2018
|
|
December 31, 2018
|
|
January 28, 2019
|
|
$
|
0.47000
|
|
September 20, 2018
|
|
October 1, 2018
|
|
October 29, 2018
|
|
$
|
0.31163
|
|
July 13, 2018
|
|
July 25, 2018
|
|
July 30, 2018
|
|
$
|
0.15837
|
|
June 19, 2018
|
|
June 29, 2018
|
|
July 27, 2018
|
|
$
|
0.47000
|
|
March 20, 2018
|
|
April 2, 2018
|
|
April 27, 2018
|
|
$
|
0.47000
|
|
December 14, 2017
|
|
December 26, 2017
|
|
December 29, 2017
|
|
$
|
0.47000
|
|
September 14, 2017
|
|
September 29, 2017
|
|
October 27, 2017
|
|
$
|
0.52000
|
|
June 15, 2017
|
|
June 30, 2017
|
|
July 27, 2017
|
|
$
|
0.52000
|
|
March 14, 2017
|
|
March 31, 2017
|
|
April 27, 2017
|
|
$
|
0.50000
|
|
|
|
December 31, 2018
|
||||||||
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
Weighted-average exercise price of outstanding options, warrants and rights
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column of this table)
|
||||
Equity compensation plans approved by stockholders (1)
|
|
—
|
|
|
$
|
—
|
|
|
2,125,725
|
|
Equity compensation plans not approved by stockholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
—
|
|
|
$
|
—
|
|
|
2,125,725
|
|
(1)
|
For a detailed description of the Plan, see Note 17 - Equity Incentive Plan of the consolidated financial statements included under Item 8 of this Annual Report on Form 10-K.
|
|
|
December 31,
|
||||||||||||||||||
Index
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Two Harbors Investment Corp.
|
|
$
|
146.62
|
|
|
$
|
163.79
|
|
|
$
|
129.51
|
|
|
$
|
107.80
|
|
|
$
|
119.47
|
|
S&P 500
|
|
$
|
150.27
|
|
|
$
|
157.17
|
|
|
$
|
129.02
|
|
|
$
|
115.24
|
|
|
$
|
113.68
|
|
Bloomberg REIT Mortgage Index
|
|
$
|
153.65
|
|
|
$
|
158.25
|
|
|
$
|
131.58
|
|
|
$
|
107.61
|
|
|
$
|
119.43
|
|
(in thousands)
|
For the Years Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Interest income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Available-for-sale securities (1)
|
$
|
847,325
|
|
|
$
|
631,853
|
|
|
$
|
414,050
|
|
|
$
|
458,515
|
|
|
$
|
506,268
|
|
Residential mortgage loans held-for-investment in securitization trusts
|
—
|
|
|
102,886
|
|
|
133,993
|
|
|
95,740
|
|
|
41,220
|
|
|||||
Other (1)
|
22,707
|
|
|
10,350
|
|
|
27,037
|
|
|
38,624
|
|
|
29,719
|
|
|||||
Total interest income
|
870,032
|
|
|
745,089
|
|
|
575,080
|
|
|
592,879
|
|
|
577,207
|
|
|||||
Interest expense:
|
|
|
|
|
|
|
|
|
|
||||||||||
Repurchase agreements (1)
|
469,437
|
|
|
210,430
|
|
|
88,850
|
|
|
72,653
|
|
|
76,177
|
|
|||||
Collateralized borrowings in securitization trusts
|
—
|
|
|
82,573
|
|
|
97,729
|
|
|
57,216
|
|
|
26,760
|
|
|||||
Federal Home Loan Bank advances
|
20,417
|
|
|
36,911
|
|
|
26,101
|
|
|
11,921
|
|
|
4,513
|
|
|||||
Revolving credit facilities
|
10,820
|
|
|
2,341
|
|
|
604
|
|
|
—
|
|
|
—
|
|
|||||
Convertible senior notes
|
18,997
|
|
|
17,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total interest expense
|
519,671
|
|
|
350,188
|
|
|
213,284
|
|
|
141,790
|
|
|
107,450
|
|
|||||
Net interest income
|
350,361
|
|
|
394,901
|
|
|
361,796
|
|
|
451,089
|
|
|
469,757
|
|
|||||
Other-than-temporary impairment losses
|
(470
|
)
|
|
(789
|
)
|
|
(1,822
|
)
|
|
(535
|
)
|
|
(392
|
)
|
|||||
Other (loss) income:
|
|
|
|
|
|
|
|
|
|
||||||||||
(Loss) gain on investment securities (1)
|
(341,312
|
)
|
|
(34,695
|
)
|
|
(107,374
|
)
|
|
363,379
|
|
|
87,201
|
|
|||||
Servicing income
|
343,096
|
|
|
209,065
|
|
|
143,579
|
|
|
127,398
|
|
|
128,160
|
|
|||||
Loss on servicing asset
|
(69,033
|
)
|
|
(91,033
|
)
|
|
(83,531
|
)
|
|
(99,584
|
)
|
|
(128,388
|
)
|
|||||
Gain (loss) on interest rate swap, cap and swaption agreements
|
16,043
|
|
|
(9,753
|
)
|
|
45,371
|
|
|
(210,621
|
)
|
|
(345,647
|
)
|
|||||
(Loss) gain on other derivative instruments
|
(54,857
|
)
|
|
(70,159
|
)
|
|
99,379
|
|
|
(5,049
|
)
|
|
(17,529
|
)
|
|||||
Other income (loss)
|
3,037
|
|
|
30,141
|
|
|
9,964
|
|
|
(7,686
|
)
|
|
35,836
|
|
|||||
Total other (loss) income
|
(103,026
|
)
|
|
33,566
|
|
|
107,388
|
|
|
167,837
|
|
|
(240,367
|
)
|
|||||
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Management fees
|
30,272
|
|
|
40,472
|
|
|
39,261
|
|
|
49,116
|
|
|
48,803
|
|
|||||
Servicing expenses
|
61,136
|
|
|
35,289
|
|
|
32,119
|
|
|
28,028
|
|
|
25,925
|
|
|||||
Securitization deal costs
|
—
|
|
|
—
|
|
|
6,152
|
|
|
8,971
|
|
|
4,638
|
|
|||||
Other operating expenses
|
62,983
|
|
|
54,160
|
|
|
56,605
|
|
|
56,764
|
|
|
56,231
|
|
|||||
Merger transaction costs (1)
|
86,703
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges (1)
|
8,238
|
|
|
—
|
|
|
2,990
|
|
|
—
|
|
|
—
|
|
|||||
Total expenses
|
249,332
|
|
|
129,921
|
|
|
137,127
|
|
|
142,879
|
|
|
135,597
|
|
|||||
(Loss) income from continuing operations before income taxes
|
(2,467
|
)
|
|
297,757
|
|
|
330,235
|
|
|
475,512
|
|
|
93,401
|
|
|||||
Provision for (benefit from) income taxes
|
41,823
|
|
|
(10,482
|
)
|
|
12,314
|
|
|
(16,560
|
)
|
|
(73,738
|
)
|
|||||
Net (loss) income from continuing operations
|
(44,290
|
)
|
|
308,239
|
|
|
317,921
|
|
|
492,072
|
|
|
167,139
|
|
|||||
Income from discontinued operations, net of tax
|
—
|
|
|
44,146
|
|
|
35,357
|
|
|
138
|
|
|
—
|
|
|||||
Net (loss) income
|
(44,290
|
)
|
|
352,385
|
|
|
353,278
|
|
|
492,210
|
|
|
167,139
|
|
|||||
Income from discontinued operations attributable to noncontrolling interest
|
—
|
|
|
3,814
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net (loss) income attributable to Two Harbors Investment Corp.
|
(44,290
|
)
|
|
348,571
|
|
|
353,278
|
|
|
492,210
|
|
|
167,139
|
|
|||||
Dividends on preferred stock
|
65,395
|
|
|
25,122
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net (loss) income attributable to common stockholders
|
$
|
(109,685
|
)
|
|
$
|
323,449
|
|
|
$
|
353,278
|
|
|
$
|
492,210
|
|
|
$
|
167,139
|
|
(1)
|
During the year-ended December 31, 2018, the activity disclosed within was impacted by the acquisition of CYS, on July 31, 2018. Refer to Note 3 - Acquisition of CYS Investments, Inc. for further information.
|
(in thousands, except share data)
|
For the Years Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Basic (loss) earnings per weighted average share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
$
|
(0.53
|
)
|
|
$
|
1.62
|
|
|
$
|
1.83
|
|
|
$
|
2.70
|
|
|
$
|
0.91
|
|
Discontinued operations
|
—
|
|
|
0.23
|
|
|
0.20
|
|
|
—
|
|
|
—
|
|
|||||
Net (loss) income
|
$
|
(0.53
|
)
|
|
$
|
1.85
|
|
|
$
|
2.03
|
|
|
$
|
2.70
|
|
|
$
|
0.91
|
|
Diluted (loss) earnings per weighted average share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
$
|
(0.53
|
)
|
|
$
|
1.60
|
|
|
$
|
1.83
|
|
|
$
|
2.70
|
|
|
$
|
0.91
|
|
Discontinued operations
|
—
|
|
|
0.21
|
|
|
0.20
|
|
|
—
|
|
|
—
|
|
|||||
Net (loss) income
|
$
|
(0.53
|
)
|
|
$
|
1.81
|
|
|
$
|
2.03
|
|
|
$
|
2.70
|
|
|
$
|
0.91
|
|
Dividends declared per common share
|
$
|
1.88
|
|
|
$
|
2.01
|
|
|
$
|
1.86
|
|
|
$
|
2.08
|
|
|
$
|
2.08
|
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
206,020,502
|
|
|
174,433,999
|
|
|
174,036,852
|
|
|
182,623,869
|
|
|
183,005,928
|
|
|||||
Diluted
|
206,020,502
|
|
|
188,133,341
|
|
|
174,036,852
|
|
|
182,623,869
|
|
|
183,005,928
|
|
|||||
Comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net (loss) income
|
$
|
(44,290
|
)
|
|
$
|
352,385
|
|
|
$
|
353,278
|
|
|
$
|
492,210
|
|
|
$
|
167,139
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unrealized (loss) gain on available-for-sale securities, net
|
(233,914
|
)
|
|
135,586
|
|
|
(159,834
|
)
|
|
(496,728
|
)
|
|
411,054
|
|
|||||
Other comprehensive (loss) income
|
(233,914
|
)
|
|
135,586
|
|
|
(159,834
|
)
|
|
(496,728
|
)
|
|
411,054
|
|
|||||
Comprehensive (loss) income
|
(278,204
|
)
|
|
487,971
|
|
|
193,444
|
|
|
(4,518
|
)
|
|
578,193
|
|
|||||
Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
3,814
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Comprehensive (loss) income attributable to Two Harbors Investment Corp.
|
(278,204
|
)
|
|
484,157
|
|
|
193,444
|
|
|
(4,518
|
)
|
|
578,193
|
|
|||||
Dividends on preferred stock
|
65,395
|
|
|
25,122
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Comprehensive (loss) income attributable to common stockholders
|
$
|
(343,599
|
)
|
|
$
|
459,035
|
|
|
$
|
193,444
|
|
|
$
|
(4,518
|
)
|
|
$
|
578,193
|
|
|
At December 31,
|
||||||||||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Available-for-sale securities
|
$
|
25,552,604
|
|
|
$
|
21,220,819
|
|
|
$
|
13,116,171
|
|
|
$
|
7,825,320
|
|
|
$
|
14,341,102
|
|
Mortgage servicing rights
|
$
|
1,993,440
|
|
|
$
|
1,086,717
|
|
|
$
|
693,815
|
|
|
$
|
493,688
|
|
|
$
|
452,006
|
|
Total assets
|
$
|
30,132,479
|
|
|
$
|
24,789,313
|
|
|
$
|
20,112,056
|
|
|
$
|
14,575,772
|
|
|
$
|
21,084,309
|
|
Repurchase agreements
|
$
|
23,133,476
|
|
|
$
|
19,451,207
|
|
|
$
|
8,865,184
|
|
|
$
|
4,948,926
|
|
|
$
|
12,932,463
|
|
Federal Home Loan Bank advances
|
$
|
865,024
|
|
|
$
|
1,215,024
|
|
|
$
|
4,000,000
|
|
|
$
|
3,785,000
|
|
|
$
|
2,500,000
|
|
Total stockholders’ equity
|
$
|
4,254,489
|
|
|
$
|
3,571,424
|
|
|
$
|
3,401,112
|
|
|
$
|
3,576,561
|
|
|
$
|
4,068,042
|
|
•
|
Agency RMBS (which includes inverse interest-only Agency securities classified as “Agency Derivatives” for purposes of U.S. generally accepted accounting principles, or U.S. GAAP), meaning RMBS whose principal and interest payments are guaranteed by the Government National Mortgage Association (or Ginnie Mae), the Federal National Mortgage Association (or Fannie Mae), or the Federal Home Loan Mortgage Corporation (or Freddie Mac), or collectively, the government sponsored entities, or GSEs;
|
•
|
Non-Agency securities, meaning securities that are not issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac;
|
•
|
MSR; and
|
•
|
Other financial assets comprising approximately 5% to 10% of the portfolio.
|
|
As of
|
||||||||
|
December 31,
2018 |
|
September 30,
2018 |
|
June 30,
2018 |
|
March 31,
2018 |
|
December 31,
2017 |
Rates strategy
|
74%
|
|
76%
|
|
68%
|
|
69%
|
|
68%
|
Credit strategy
|
26%
|
|
24%
|
|
32%
|
|
31%
|
|
32%
|
|
Three Months Ended
|
||||||||
|
December 31,
2018 |
|
September 30,
2018 |
|
June 30,
2018 |
|
March 31,
2018 |
|
December 31,
2017 |
Average annualized portfolio yield (1)
|
4.14%
|
|
3.76%
|
|
3.91%
|
|
3.77%
|
|
3.69%
|
Cost of financing (2)
|
2.53%
|
|
2.28%
|
|
1.98%
|
|
1.84%
|
|
1.72%
|
Net portfolio yield
|
1.61%
|
|
1.48%
|
|
1.93%
|
|
1.93%
|
|
1.97%
|
(1)
|
Average annualized yield incorporates future prepayment, credit loss and other assumptions, all of which are estimates and subject to change.
|
(2)
|
Cost of financing includes swap and cap interest rate spread.
|
•
|
Managing an investment portfolio to generate attractive returns with balanced risks. We operate a hybrid REIT model, diversifying our portfolio across Agency RMBS and non-Agency securities in combination with MSR and derivative hedging instruments. We manage to an overall low level of interest rate exposure and leverage relative to our peers. We believe effectively managing an appropriate balance of risks within our portfolio is critical to providing attractive risk-adjusted returns to our stockholders and our ability to adjust our allocations and deploy capital across sectors allows us to optimize portfolio results over time.
|
•
|
Continuing to grow shareholder base and market capitalization. In 2018, we completed the acquisition of CYS, growing the company’s market capitalization and shareholder base, increasing the liquidity of the company’s stock and driving expense lower.
|
•
|
Maintaining “best in class” corporate governance, investor relations and disclosure practices.
|
(dollars in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||||||||
Agency
|
|
|
|
|
|
|
|
||||||
Fixed Rate
|
$
|
21,665,960
|
|
|
84.6
|
%
|
|
18,215,505
|
|
|
85.5
|
%
|
|
Hybrid ARM
|
19,073
|
|
|
0.1
|
%
|
|
23,220
|
|
|
0.1
|
%
|
||
Total Agency
|
21,685,033
|
|
|
84.7
|
%
|
|
18,238,725
|
|
|
85.6
|
%
|
||
Agency Derivatives
|
70,257
|
|
|
0.3
|
%
|
|
90,975
|
|
|
0.4
|
%
|
||
Non-Agency
|
|
|
|
|
|
|
|
||||||
Senior
|
2,854,731
|
|
|
11.1
|
%
|
|
1,956,145
|
|
|
9.2
|
%
|
||
Mezzanine
|
928,632
|
|
|
3.6
|
%
|
|
960,865
|
|
|
4.5
|
%
|
||
Interest-only securities
|
84,208
|
|
|
0.3
|
%
|
|
65,084
|
|
|
0.3
|
%
|
||
Total Non-Agency
|
3,867,571
|
|
|
15.0
|
%
|
|
2,982,094
|
|
|
14.0
|
%
|
||
Total
|
$
|
25,622,861
|
|
|
|
|
$
|
21,311,794
|
|
|
|
|
|
Three Months Ended
|
|||||||||||||
Agency RMBS
|
|
December 31,
2018 |
|
September 30,
2018 |
|
June 30,
2018 |
|
March 31,
2018 |
|
December 31,
2017 |
|||||
Weighted Average CPR
|
|
6.8
|
%
|
|
8.1
|
%
|
|
9.2
|
%
|
|
7.0
|
%
|
|
7.6
|
%
|
|
December 31, 2018
|
||||||||||||||||||||||
(dollars in thousands)
|
Principal/ Current Face
|
|
Carrying Value
|
|
% of Agency Portfolio
|
|
% Prepayment Protected
|
|
Weighted Average Coupon Rate
|
|
Amortized Cost
|
|
Weighted Average Loan Age (months)
|
||||||||||
Agency RMBS AFS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
30-Year Fixed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
3.0-3.5%
|
$
|
234,323
|
|
|
$
|
234,521
|
|
|
1.1
|
%
|
|
100.0
|
%
|
|
3.5
|
%
|
|
$
|
235,514
|
|
|
19
|
|
4.0-4.5%
|
18,877,967
|
|
|
19,533,066
|
|
|
89.8
|
%
|
|
91.8
|
%
|
|
4.3
|
%
|
|
19,812,426
|
|
|
19
|
|
|||
≥ 5%
|
1,367,700
|
|
|
1,452,170
|
|
|
6.7
|
%
|
|
74.4
|
%
|
|
5.1
|
%
|
|
1,449,256
|
|
|
24
|
|
|||
|
20,479,990
|
|
|
21,219,757
|
|
|
97.6
|
%
|
|
90.7
|
%
|
|
4.3
|
%
|
|
21,497,196
|
|
|
19
|
|
|||
15-Year & Other Fixed
|
277,860
|
|
|
270,787
|
|
|
1.2
|
%
|
|
0.3
|
%
|
|
4.7
|
%
|
|
272,435
|
|
|
149
|
|
|||
Hybrid ARM
|
17,940
|
|
|
19,073
|
|
|
0.1
|
%
|
|
—
|
%
|
|
5.1
|
%
|
|
18,855
|
|
|
177
|
|
|||
Interest-only
|
3,115,967
|
|
|
175,416
|
|
|
0.8
|
%
|
|
—
|
%
|
|
2.0
|
%
|
|
209,901
|
|
|
92
|
|
|||
Agency Derivatives
|
476,299
|
|
|
70,257
|
|
|
0.3
|
%
|
|
—
|
%
|
|
4.0
|
%
|
|
69,496
|
|
|
173
|
|
|||
Total Agency RMBS
|
$
|
24,368,056
|
|
|
$
|
21,755,290
|
|
|
100.0
|
%
|
|
88.4
|
%
|
|
|
|
$
|
22,067,883
|
|
|
|
|
December 31, 2017
|
||||||||||||||||||||||
(dollars in thousands)
|
Principal/ Current Face
|
|
Carrying Value
|
|
% of Agency Portfolio
|
|
% Prepayment Protected
|
|
Weighted Average Coupon Rate
|
|
Amortized Cost
|
|
Weighted Average Loan Age (months)
|
||||||||||
Agency RMBS AFS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
30-Year Fixed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
3.0-3.5%
|
$
|
4,370,847
|
|
|
$
|
4,509,743
|
|
|
24.6
|
%
|
|
95.9
|
%
|
|
3.5
|
%
|
|
$
|
4,569,946
|
|
|
13
|
|
4.0-4.5%
|
11,990,911
|
|
|
12,764,960
|
|
|
69.7
|
%
|
|
99.1
|
%
|
|
4.2
|
%
|
|
12,812,335
|
|
|
17
|
|
|||
≥ 5%
|
453,054
|
|
|
500,880
|
|
|
2.7
|
%
|
|
100.0
|
%
|
|
5.4
|
%
|
|
489,312
|
|
|
90
|
|
|||
|
16,814,812
|
|
|
17,775,583
|
|
|
97.0
|
%
|
|
98.3
|
%
|
|
4.1
|
%
|
|
17,871,593
|
|
|
18
|
|
|||
15-Year & Other Fixed
|
245,383
|
|
|
244,834
|
|
|
1.3
|
%
|
|
0.6
|
%
|
|
4.9
|
%
|
|
242,033
|
|
|
153
|
|
|||
Hybrid ARM
|
21,654
|
|
|
23,220
|
|
|
0.1
|
%
|
|
—%
|
|
|
5.0
|
%
|
|
22,831
|
|
|
166
|
|
|||
Interest-only
|
2,941,772
|
|
|
195,088
|
|
|
1.1
|
%
|
|
—%
|
|
|
2.2
|
%
|
|
223,289
|
|
|
77
|
|
|||
Agency Derivatives
|
588,246
|
|
|
90,975
|
|
|
0.5
|
%
|
|
—%
|
|
|
4.9
|
%
|
|
86,734
|
|
|
163
|
|
|||
Total Agency RMBS
|
$
|
20,611,867
|
|
|
$
|
18,329,700
|
|
|
100.0
|
%
|
|
95.4
|
%
|
|
|
|
$
|
18,446,480
|
|
|
|
|
December 31, 2018
|
||||||||||||||||||
(in thousands)
|
Principal/ Current Face
|
|
Un-amortized Premium
|
|
Accretable Purchase Discount
|
|
Credit Reserve Purchase Discount
|
|
Amortized Cost
|
||||||||||
Principal and interest securities
|
|
|
|
|
|
|
|
|
|
||||||||||
Senior
|
$
|
4,227,631
|
|
|
$
|
5,381
|
|
|
$
|
(477,682
|
)
|
|
$
|
(1,204,325
|
)
|
|
$
|
2,551,005
|
|
Mezzanine
|
1,132,493
|
|
|
1,301
|
|
|
(216,437
|
)
|
|
(118,437
|
)
|
|
798,920
|
|
|||||
Total P&I securities
|
5,360,124
|
|
|
6,682
|
|
|
(694,119
|
)
|
|
(1,322,762
|
)
|
|
3,349,925
|
|
|||||
Interest-only
|
5,137,169
|
|
|
83,846
|
|
|
—
|
|
|
—
|
|
|
83,846
|
|
|||||
Total Non-Agency
|
$
|
10,497,293
|
|
|
$
|
90,528
|
|
|
$
|
(694,119
|
)
|
|
$
|
(1,322,762
|
)
|
|
$
|
3,433,771
|
|
|
December 31, 2017
|
||||||||||||||||||
(in thousands)
|
Principal/ Current Face
|
|
Un-amortized Premium
|
|
Accretable Purchase Discount
|
|
Credit Reserve Purchase Discount
|
|
Amortized Cost
|
||||||||||
Principal and interest securities
|
|
|
|
|
|
|
|
|
|
||||||||||
Senior
|
$
|
2,552,972
|
|
|
$
|
2,435
|
|
|
$
|
(424,580
|
)
|
|
$
|
(534,160
|
)
|
|
$
|
1,596,667
|
|
Mezzanine
|
1,205,162
|
|
|
322
|
|
|
(251,453
|
)
|
|
(119,453
|
)
|
|
834,578
|
|
|||||
Total P&I securities
|
3,758,134
|
|
|
2,757
|
|
|
(676,033
|
)
|
|
(653,613
|
)
|
|
2,431,245
|
|
|||||
Interest-only
|
5,614,925
|
|
|
65,667
|
|
|
—
|
|
|
—
|
|
|
65,667
|
|
|||||
Total Non-Agency
|
$
|
9,373,059
|
|
|
$
|
68,424
|
|
|
$
|
(676,033
|
)
|
|
$
|
(653,613
|
)
|
|
$
|
2,496,912
|
|
(in thousands, except share data)
|
|
Three Months Ended
|
|
Year Ended
|
||||||||||||||||
Income Statement Data:
|
|
December 31,
|
|
December 31,
|
||||||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2016
|
||||||||||
Interest income:
|
|
|
|
|
||||||||||||||||
Available-for-sale securities
|
|
$
|
242,535
|
|
|
$
|
182,712
|
|
|
$
|
847,325
|
|
|
$
|
631,853
|
|
|
$
|
414,050
|
|
Residential mortgage loans held-for-investment in securitization trusts
|
|
—
|
|
|
10,567
|
|
|
—
|
|
|
102,886
|
|
|
133,993
|
|
|||||
Other
|
|
9,420
|
|
|
1,826
|
|
|
22,707
|
|
|
10,350
|
|
|
27,037
|
|
|||||
Total interest income
|
|
251,955
|
|
|
195,105
|
|
|
870,032
|
|
|
745,089
|
|
|
575,080
|
|
|||||
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Repurchase agreements
|
|
146,702
|
|
|
74,674
|
|
|
469,437
|
|
|
210,430
|
|
|
88,850
|
|
|||||
Collateralized borrowings in securitization trusts
|
|
—
|
|
|
8,374
|
|
|
—
|
|
|
82,573
|
|
|
97,729
|
|
|||||
Federal Home Loan Bank advances
|
|
5,762
|
|
|
6,357
|
|
|
20,417
|
|
|
36,911
|
|
|
26,101
|
|
|||||
Revolving credit facilities
|
|
5,044
|
|
|
614
|
|
|
10,820
|
|
|
2,341
|
|
|
604
|
|
|||||
Convertible senior notes
|
|
4,793
|
|
|
4,776
|
|
|
18,997
|
|
|
17,933
|
|
|
—
|
|
|||||
Total interest expense
|
|
162,301
|
|
|
94,795
|
|
|
519,671
|
|
|
350,188
|
|
|
213,284
|
|
|||||
Net interest income
|
|
89,654
|
|
|
100,310
|
|
|
350,361
|
|
|
394,901
|
|
|
361,796
|
|
|||||
Other-than-temporary impairment losses
|
|
(107
|
)
|
|
(360
|
)
|
|
(470
|
)
|
|
(789
|
)
|
|
(1,822
|
)
|
|||||
Other (loss) income:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss on investment securities
|
|
(245,763
|
)
|
|
(19,210
|
)
|
|
(341,312
|
)
|
|
(34,695
|
)
|
|
(107,374
|
)
|
|||||
Servicing income
|
|
104,623
|
|
|
60,597
|
|
|
343,096
|
|
|
209,065
|
|
|
143,579
|
|
|||||
Loss on servicing asset
|
|
(171,284
|
)
|
|
(593
|
)
|
|
(69,033
|
)
|
|
(91,033
|
)
|
|
(83,531
|
)
|
|||||
(Loss) gain on interest rate swap, cap and swaption agreements
|
|
(239,492
|
)
|
|
57,237
|
|
|
16,043
|
|
|
(9,753
|
)
|
|
45,371
|
|
|||||
(Loss) gain on other derivative instruments
|
|
(39,122
|
)
|
|
(3,831
|
)
|
|
(54,857
|
)
|
|
(70,159
|
)
|
|
99,379
|
|
|||||
Other income
|
|
342
|
|
|
9,088
|
|
|
3,037
|
|
|
30,141
|
|
|
9,964
|
|
|||||
Total other (loss) income
|
|
(590,696
|
)
|
|
103,288
|
|
|
(103,026
|
)
|
|
33,566
|
|
|
107,388
|
|
|||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Management fees
|
|
12,152
|
|
|
10,671
|
|
|
30,272
|
|
|
40,472
|
|
|
39,261
|
|
|||||
Servicing expenses
|
|
18,610
|
|
|
10,135
|
|
|
61,136
|
|
|
35,289
|
|
|
32,119
|
|
|||||
Securitization deal costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,152
|
|
|||||
Other operating expenses
|
|
15,943
|
|
|
9,787
|
|
|
62,983
|
|
|
54,160
|
|
|
56,605
|
|
|||||
Acquisition transaction costs
|
|
—
|
|
|
—
|
|
|
86,703
|
|
|
—
|
|
|
|
||||||
Restructuring charges
|
|
—
|
|
|
—
|
|
|
8,238
|
|
|
—
|
|
|
2,990
|
|
|||||
Total expenses
|
|
46,705
|
|
|
30,593
|
|
|
249,332
|
|
|
129,921
|
|
|
137,127
|
|
|||||
(Loss) income from continuing operations before income taxes
|
|
(547,854
|
)
|
|
172,645
|
|
|
(2,467
|
)
|
|
297,757
|
|
|
330,235
|
|
|||||
Provision for (benefit from) income taxes
|
|
6,681
|
|
|
10,618
|
|
|
41,823
|
|
|
(10,482
|
)
|
|
12,314
|
|
|||||
Net (loss) income from continuing operations
|
|
(554,535
|
)
|
|
162,027
|
|
|
(44,290
|
)
|
|
308,239
|
|
|
317,921
|
|
|||||
Income from discontinued operations, net of tax
|
|
—
|
|
|
4,977
|
|
|
—
|
|
|
44,146
|
|
|
35,357
|
|
|||||
Net (loss) income
|
|
(554,535
|
)
|
|
167,004
|
|
|
(44,290
|
)
|
|
352,385
|
|
|
353,278
|
|
|||||
Income from discontinued operations attributable to noncontrolling interest
|
|
—
|
|
|
1,100
|
|
|
—
|
|
|
3,814
|
|
|
—
|
|
|||||
Net (loss) income attributable to Two Harbors Investment Corp.
|
|
(554,535
|
)
|
|
165,904
|
|
|
(44,290
|
)
|
|
348,571
|
|
|
353,278
|
|
|||||
Dividends on preferred stock
|
|
18,950
|
|
|
11,949
|
|
|
65,395
|
|
|
25,122
|
|
|
—
|
|
|||||
Net (loss) income attributable to common stockholders
|
|
$
|
(573,485
|
)
|
|
$
|
153,955
|
|
|
$
|
(109,685
|
)
|
|
$
|
323,449
|
|
|
$
|
353,278
|
|
(in thousands)
|
|
Three Months Ended
|
|
Year Ended
|
||||||||||||||||
Income Statement Data:
|
|
December 31,
|
|
December 31,
|
||||||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2016
|
||||||||||
Basic (loss) earnings per weighted average share:
|
|
(unaudited)
|
|
|
||||||||||||||||
Continuing operations
|
|
$
|
(2.31
|
)
|
|
$
|
0.86
|
|
|
$
|
(0.53
|
)
|
|
$
|
1.62
|
|
|
$
|
1.83
|
|
Discontinued operations
|
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.23
|
|
|
0.20
|
|
|||||
Net (loss) income
|
|
$
|
(2.31
|
)
|
|
$
|
0.88
|
|
|
$
|
(0.53
|
)
|
|
$
|
1.85
|
|
|
$
|
2.03
|
|
Diluted (loss) earnings per weighted average share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
$
|
(2.31
|
)
|
|
$
|
0.82
|
|
|
$
|
(0.53
|
)
|
|
$
|
1.60
|
|
|
$
|
1.83
|
|
Discontinued operations
|
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.21
|
|
|
0.20
|
|
|||||
Net (loss) income
|
|
$
|
(2.31
|
)
|
|
$
|
0.84
|
|
|
$
|
(0.53
|
)
|
|
$
|
1.81
|
|
|
$
|
2.03
|
|
Dividends declared per common share
|
|
$
|
0.47
|
|
|
$
|
0.47
|
|
|
$
|
1.88
|
|
|
$
|
2.01
|
|
|
$
|
1.86
|
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
248,081,168
|
|
|
174,490,106
|
|
|
206,020,502
|
|
|
174,433,999
|
|
|
174,036,852
|
|
|||||
Diluted
|
|
248,081,168
|
|
|
188,938,030
|
|
|
206,020,502
|
|
|
188,133,341
|
|
|
174,036,852
|
|
|||||
Comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net (loss) income
|
|
$
|
(554,535
|
)
|
|
$
|
167,004
|
|
|
$
|
(44,290
|
)
|
|
$
|
352,385
|
|
|
$
|
353,278
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Unrealized gain (loss) on available-for-sale securities
|
|
265,546
|
|
|
(88,227
|
)
|
|
(233,914
|
)
|
|
135,586
|
|
|
(159,834
|
)
|
|||||
Other comprehensive income (loss)
|
|
265,546
|
|
|
(88,227
|
)
|
|
(233,914
|
)
|
|
135,586
|
|
|
(159,834
|
)
|
|||||
Comprehensive (loss) income
|
|
(288,989
|
)
|
|
78,777
|
|
|
(278,204
|
)
|
|
487,971
|
|
|
$
|
193,444
|
|
||||
Comprehensive income attributable to noncontrolling interest
|
|
—
|
|
|
1,100
|
|
|
—
|
|
|
3,814
|
|
|
—
|
|
|||||
Comprehensive (loss) income attributable to Two Harbors Investment Corp.
|
|
(288,989
|
)
|
|
77,677
|
|
|
(278,204
|
)
|
|
484,157
|
|
|
193,444
|
|
|||||
Dividends on preferred stock
|
|
18,950
|
|
|
11,949
|
|
|
65,395
|
|
|
25,122
|
|
|
—
|
|
|||||
Comprehensive (loss) income attributable to common stockholders
|
|
$
|
(307,939
|
)
|
|
$
|
65,728
|
|
|
$
|
(343,599
|
)
|
|
$
|
459,035
|
|
|
$
|
193,444
|
|
(in thousands)
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Balance Sheet Data:
|
|
|
||||||
|
|
(unaudited)
|
|
|
||||
Available-for-sale securities
|
|
$
|
25,552,604
|
|
|
$
|
21,220,819
|
|
Mortgage servicing rights
|
|
$
|
1,993,440
|
|
|
$
|
1,086,717
|
|
Total assets
|
|
$
|
30,132,479
|
|
|
$
|
24,789,313
|
|
Repurchase agreements
|
|
$
|
23,133,476
|
|
|
$
|
19,451,207
|
|
Federal Home Loan Bank advances
|
|
$
|
865,024
|
|
|
$
|
1,215,024
|
|
Total stockholders’ equity
|
|
$
|
4,254,489
|
|
|
$
|
3,571,424
|
|
|
Three Months Ended December 31, 2018
|
|
Year Ended December 31, 2018
|
||||||||||||||||||
(dollars in thousands)
|
Average Balance (1)
|
|
Interest Income/Expense
|
|
Net Yield/Cost of Funds (2)
|
|
Average Balance (1)
|
|
Interest Income/Expense
|
|
Net Yield/Cost of Funds (2)
|
||||||||||
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Agency available-for-sale securities
|
$
|
21,401,757
|
|
|
$
|
176,997
|
|
|
3.3
|
%
|
|
$
|
19,782,775
|
|
|
$
|
620,582
|
|
|
3.1
|
%
|
Non-Agency available-for-sale securities
|
3,405,550
|
|
|
65,538
|
|
|
7.7
|
%
|
|
2,935,601
|
|
|
226,743
|
|
|
7.7
|
%
|
||||
Other
|
28,551
|
|
|
9,420
|
|
|
4.1
|
%
|
|
30,148
|
|
|
22,707
|
|
|
4.2
|
%
|
||||
Total interest income/net asset yield
|
$
|
24,835,858
|
|
|
$
|
251,955
|
|
|
4.1
|
%
|
|
$
|
22,748,524
|
|
|
$
|
870,032
|
|
|
3.8
|
%
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Repurchase agreements, FHLB advances, revolving credit facilities and borrowings in securitization trusts collateralized by:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Agency available-for-sale securities
|
$
|
19,796,348
|
|
|
$
|
125,014
|
|
|
2.5
|
%
|
|
$
|
18,603,631
|
|
|
$
|
396,786
|
|
|
2.1
|
%
|
Non-Agency available-for-sale securities
|
2,569,298
|
|
|
23,802
|
|
|
3.7
|
%
|
|
2,278,651
|
|
|
79,772
|
|
|
3.5
|
%
|
||||
Agency derivatives (3)
|
48,018
|
|
|
404
|
|
|
3.4
|
%
|
|
56,393
|
|
|
1,650
|
|
|
2.9
|
%
|
||||
Mortgage servicing rights (4)
|
579,348
|
|
|
8,288
|
|
|
5.7
|
%
|
|
407,085
|
|
|
22,466
|
|
|
5.5
|
%
|
||||
Other unassignable
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Convertible senior notes
|
283,755
|
|
|
4,793
|
|
|
6.8
|
%
|
|
283,347
|
|
|
18,997
|
|
|
6.7
|
%
|
||||
Total interest expense/cost of funds
|
$
|
23,276,767
|
|
|
162,301
|
|
|
2.8
|
%
|
|
$
|
21,629,107
|
|
|
519,671
|
|
|
2.4
|
%
|
||
Net interest income/spread (5)
|
|
|
$
|
89,654
|
|
|
1.3
|
%
|
|
|
|
$
|
350,361
|
|
|
1.4
|
%
|
|
Three Months Ended December 31, 2017
|
|
Year Ended December 31, 2017
|
||||||||||||||||||
(dollars in thousands)
|
Average Balance (1)
|
|
Interest Income/Expense
|
|
Net Yield/Cost of Funds (2)
|
|
Average Balance (1)
|
|
Interest Income/Expense
|
|
Net Yield/Cost of Funds (2)
|
||||||||||
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Agency available-for-sale securities
|
$
|
17,842,609
|
|
|
$
|
137,331
|
|
|
3.1
|
%
|
|
$
|
15,561,985
|
|
|
$
|
470,619
|
|
|
3.0
|
%
|
Non-Agency available-for-sale securities
|
2,381,956
|
|
|
45,381
|
|
|
7.6
|
%
|
|
1,970,055
|
|
|
161,234
|
|
|
8.2
|
%
|
||||
Residential mortgage loans held-for-investment in securitization trusts
|
1,103,946
|
|
|
10,567
|
|
|
3.8
|
%
|
|
2,641,277
|
|
|
102,886
|
|
|
3.9
|
%
|
||||
Other
|
33,124
|
|
|
1,826
|
|
|
3.9
|
%
|
|
35,517
|
|
|
10,350
|
|
|
4.8
|
%
|
||||
Total interest income/net asset yield
|
$
|
21,361,635
|
|
|
$
|
195,105
|
|
|
3.7
|
%
|
|
$
|
20,208,834
|
|
|
$
|
745,089
|
|
|
3.7
|
%
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Repurchase agreements, FHLB advances, revolving credit facilities and borrowings in securitization trusts collateralized by:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Agency available-for-sale securities
|
$
|
17,254,668
|
|
|
$
|
65,788
|
|
|
1.5
|
%
|
|
$
|
14,877,129
|
|
|
$
|
193,283
|
|
|
1.3
|
%
|
Non-Agency available-for-sale securities
|
1,876,009
|
|
|
14,169
|
|
|
3.0
|
%
|
|
1,522,437
|
|
|
44,691
|
|
|
2.9
|
%
|
||||
Residential mortgage loans held-for-investment in securitization trusts
|
1,084,285
|
|
|
8,774
|
|
|
3.2
|
%
|
|
2,593,750
|
|
|
85,940
|
|
|
3.3
|
%
|
||||
Agency derivatives (3)
|
73,545
|
|
|
401
|
|
|
2.2
|
%
|
|
82,387
|
|
|
1,661
|
|
|
2.0
|
%
|
||||
Mortgage servicing rights (4)
|
58,071
|
|
|
856
|
|
|
5.9
|
%
|
|
43,033
|
|
|
2,582
|
|
|
6.0
|
%
|
||||
Other unassignable
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Convertible senior notes
|
282,733
|
|
|
4,776
|
|
|
6.8
|
%
|
|
272,376
|
|
|
17,933
|
|
|
6.6
|
%
|
||||
Other
|
|
|
31
|
|
|
|
|
|
|
4,098
|
|
|
|
|
|||||||
Total interest expense/cost of funds
|
$
|
20,629,311
|
|
|
94,795
|
|
|
1.8
|
%
|
|
$
|
19,391,112
|
|
|
350,188
|
|
|
1.8
|
%
|
||
Net interest income/spread (5)
|
|
|
$
|
100,310
|
|
|
1.9
|
%
|
|
|
|
$
|
394,901
|
|
|
1.9
|
%
|
(1)
|
Average asset balance represents average amortized cost on AFS securities and Agency Derivatives and average unpaid principal balance, adjusted for purchase price changes, on residential mortgage loans held-for-investment in securitization trusts.
|
(2)
|
Cost of funds does not include the accrual and settlement of interest associated with interest rate swaps and caps. In accordance with U.S. GAAP, those costs are included in (loss) gain on interest rate swap, cap and swaption agreements in the consolidated statements of comprehensive (loss) income. For the three and twelve months ended December 31, 2018, our total average cost of funds on the assets assigned as collateral for borrowings shown in the table above, including interest spread expense associated with interest rate swaps and caps, was 2.8% and 2.3%, respectively, compared to 1.9% and 1.9% for the same periods in 2017.
|
(3)
|
Yields on Agency Derivatives not shown as interest income is included in (loss) gain on other derivative instruments in the consolidated statements of comprehensive (loss) income.
|
(4)
|
Yields on mortgage servicing rights not shown as these assets do not earn interest.
|
(5)
|
Net interest spread does not include the accrual and settlement of interest associated with interest rate swaps and caps. In accordance with U.S. GAAP, those costs are included in (loss) gain on interest rate swap, cap and swaption agreements in the consolidated statements of comprehensive (loss) income. For the three and twelve months ended December 31, 2018, our total average net interest rate spread on the assets and liabilities shown in the table above, including interest spread expense associated with interest rate swaps and caps, was 1.1% and 1.5%, respectively, compared to 1.8% and 1.8% for the same periods in 2017.
|
|
Three Months Ended December 31, 2018
|
|
Year Ended December 31, 2018
|
||||||||||||||
|
Agency (1)
|
|
Non-Agency
|
|
Total
|
|
Agency (1)
|
|
Non-Agency
|
|
Total
|
||||||
Gross yield/stated coupon
|
4.1
|
%
|
|
4.8
|
%
|
|
4.2
|
%
|
|
4.1
|
%
|
|
4.7
|
%
|
|
4.1
|
%
|
Net (premium amortization) discount accretion
|
(0.8
|
)%
|
|
2.9
|
%
|
|
(0.3
|
)%
|
|
(1.0
|
)%
|
|
3.0
|
%
|
|
(0.4
|
)%
|
Net yield (2)
|
3.3
|
%
|
|
7.7
|
%
|
|
3.9
|
%
|
|
3.1
|
%
|
|
7.7
|
%
|
|
3.7
|
%
|
|
Three Months Ended December 31, 2017
|
|
Year Ended December 31, 2017
|
||||||||||||||
|
Agency (1)
|
|
Non-Agency
|
|
Total
|
|
Agency (1)
|
|
Non-Agency
|
|
Total
|
||||||
Gross yield/stated coupon
|
4.0
|
%
|
|
4.1
|
%
|
|
4.1
|
%
|
|
4.0
|
%
|
|
3.7
|
%
|
|
4.0
|
%
|
Net (premium amortization) discount accretion
|
(0.9
|
)%
|
|
3.5
|
%
|
|
(0.5
|
)%
|
|
(1.0
|
)%
|
|
4.5
|
%
|
|
(0.4
|
)%
|
Net yield (2)
|
3.1
|
%
|
|
7.6
|
%
|
|
3.6
|
%
|
|
3.0
|
%
|
|
8.2
|
%
|
|
3.6
|
%
|
(1)
|
Excludes Agency Derivatives. For the three and twelve months ended December 31, 2018, the average annualized net yield on total Agency RMBS, including Agency Derivatives, was 3.3% and 3.2%, respectively, compared to 3.1% and 3.1% for the same periods in 2017.
|
(2)
|
These yields have not been adjusted for cost of delay and cost to carry purchase premiums.
|
|
Three Months Ended
|
|
Year Ended
|
||||||||||||
|
December 31,
|
|
December 31,
|
||||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net interest spread
|
$
|
15,331
|
|
|
$
|
2,044
|
|
|
$
|
49,217
|
|
|
$
|
(8,823
|
)
|
Early termination, agreement maturation and option expiration (losses) gains
|
(35,757
|
)
|
|
(5,685
|
)
|
|
(3,593
|
)
|
|
63,169
|
|
||||
Change in unrealized (loss) gain on interest rate swap, cap and swaption agreements, at fair value
|
(219,066
|
)
|
|
60,878
|
|
|
(29,581
|
)
|
|
(64,099
|
)
|
||||
(Loss) gain on interest rate swap, cap and swaption agreements
|
$
|
(239,492
|
)
|
|
$
|
57,237
|
|
|
$
|
16,043
|
|
|
$
|
(9,753
|
)
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
||||||||||||||||||
(dollars in thousands)
|
Average Balance (1)
|
|
Interest Income/Expense
|
|
Net Yield/Cost of Funds (2)
|
|
Average Balance (1)
|
|
Interest Income/Expense
|
|
Net Yield/Cost of Funds (2)
|
||||||||||
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Agency available-for-sale securities
|
$
|
15,561,985
|
|
|
$
|
470,619
|
|
|
3.0
|
%
|
|
$
|
10,341,218
|
|
|
$
|
293,498
|
|
|
2.8
|
%
|
Non-Agency available-for-sale securities
|
1,970,055
|
|
|
161,234
|
|
|
8.2
|
%
|
|
1,436,769
|
|
|
120,552
|
|
|
8.4
|
%
|
||||
Residential mortgage loans held-for-investment in securitization trusts
|
2,641,277
|
|
|
102,886
|
|
|
3.9
|
%
|
|
3,470,272
|
|
|
133,993
|
|
|
3.9
|
%
|
||||
Other
|
35,517
|
|
|
10,350
|
|
|
4.8
|
%
|
|
566,239
|
|
|
27,037
|
|
|
4.8
|
%
|
||||
Total interest income/net asset yield
|
$
|
20,208,834
|
|
|
$
|
745,089
|
|
|
3.7
|
%
|
|
$
|
15,814,498
|
|
|
$
|
575,080
|
|
|
3.6
|
%
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Repurchase agreements, FHLB advances, revolving credit facilities and borrowings in securitization trusts collateralized by:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Agency available-for-sale securities
|
$
|
14,877,129
|
|
|
$
|
193,283
|
|
|
1.3
|
%
|
|
$
|
9,834,224
|
|
|
$
|
73,864
|
|
|
0.8
|
%
|
Non-Agency available-for-sale securities
|
1,522,437
|
|
|
44,691
|
|
|
2.9
|
%
|
|
1,165,498
|
|
|
28,897
|
|
|
2.5
|
%
|
||||
Residential mortgage loans held-for-investment in securitization trusts
|
2,593,750
|
|
|
85,940
|
|
|
3.3
|
%
|
|
3,377,687
|
|
|
103,039
|
|
|
3.1
|
%
|
||||
Agency derivatives (3)
|
82,387
|
|
|
1,661
|
|
|
2.0
|
%
|
|
111,770
|
|
|
1,729
|
|
|
1.5
|
%
|
||||
Mortgage servicing rights (4)
|
43,033
|
|
|
2,582
|
|
|
6.0
|
%
|
|
11,311
|
|
|
604
|
|
|
5.3
|
%
|
||||
Convertible senior notes
|
272,376
|
|
|
17,933
|
|
|
6.6
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Other
|
|
|
4,098
|
|
|
|
|
|
376,513
|
|
|
5,151
|
|
|
1.4
|
%
|
|||||
Total interest expense/cost of funds
|
$
|
19,391,112
|
|
|
$
|
350,188
|
|
|
1.8
|
%
|
|
$
|
14,877,003
|
|
|
$
|
213,284
|
|
|
1.4
|
%
|
Net interest income/spread (5)
|
|
|
$
|
394,901
|
|
|
1.9
|
%
|
|
|
|
$
|
361,796
|
|
|
2.2
|
%
|
(1)
|
Average asset balance represents average amortized cost on AFS securities and Agency Derivatives and average unpaid principal balance, adjusted for purchase price changes, on residential mortgage loans held-for-investment in securitization trusts.
|
(2)
|
Cost of funds does not include the accrual and settlement of interest associated with interest rate swaps. In accordance with U.S. GAAP, those costs are included in gain (loss) on interest rate swap, cap and swaption agreements in the consolidated statements of comprehensive (loss) income. For the years ended December 31, 2017 and 2016, our total average cost of funds on the assets assigned as collateral for borrowings shown in the table above, including interest spread expense associated with interest rate swaps, was 1.9% and 1.6%, respectively.
|
(3)
|
Yields on Agency Derivatives not shown as interest income is included in (loss) gain on other derivative instruments in the consolidated statements of comprehensive (loss) income.
|
(4)
|
Yields on mortgage servicing rights not shown as these assets do not earn interest.
|
(5)
|
Net interest spread does not include the accrual and settlement of interest associated with interest rate swaps. In accordance with U.S. GAAP, those costs are included in (loss) gain on interest rate swap, cap and swaption agreements in the consolidated statements of comprehensive (loss) income. For the years ended December 31, 2017 and 2016, our total average net interest rate spread on the assets and liabilities shown in the table above, including interest spread expense associated with interest rate swaps, was 1.8% and 2.1%, respectively.
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
||||||||||||||
|
Agency (1)
|
|
Non-Agency
|
|
Total
|
|
Agency (1)
|
|
Non-Agency
|
|
Total
|
||||||
Gross yield/stated coupon
|
4.0
|
%
|
|
3.7
|
%
|
|
4.0
|
%
|
|
3.9
|
%
|
|
3.5
|
%
|
|
3.9
|
%
|
Net (premium amortization) discount accretion
|
(1.0
|
)%
|
|
4.5
|
%
|
|
(0.4
|
)%
|
|
(1.1
|
)%
|
|
4.9
|
%
|
|
(0.4
|
)%
|
Net yield (2)
|
3.0
|
%
|
|
8.2
|
%
|
|
3.6
|
%
|
|
2.8
|
%
|
|
8.4
|
%
|
|
3.5
|
%
|
(1)
|
Excludes Agency Derivatives. For the years ended December 31, 2017 and 2016, the average annualized net yield on total Agency RMBS, including Agency Derivatives, was 3.1% and 3.0%, respectively.
|
(2)
|
These yields have not been adjusted for cost of delay and cost to carry purchase premiums.
|
|
Year Ended
|
||||||
|
December 31,
|
||||||
(in thousands)
|
2017
|
|
2016
|
||||
Net interest spread
|
$
|
(8,823
|
)
|
|
$
|
(21,074
|
)
|
Early termination, agreement maturation and option expiration gains (losses)
|
63,169
|
|
|
(81,984
|
)
|
||
Change in unrealized (loss) gain on interest rate swap and swaption agreements, at fair value
|
(64,099
|
)
|
|
148,429
|
|
||
(Loss) gain on interest rate swap and swaption agreements
|
$
|
(9,753
|
)
|
|
$
|
45,371
|
|
|
December 31, 2018
|
|||||||||||||||||||||||||||||
(dollars in thousands, except purchase price)
|
Principal/ Current Face
|
|
Net (Discount) Premium
|
|
Amortized Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Carrying Value
|
|
Weighted Average Coupon Rate
|
|
Weighted Average Purchase Price
|
|||||||||||||||
P&I securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Fixed
|
$
|
20,757,850
|
|
|
$
|
1,011,781
|
|
|
$
|
21,769,631
|
|
|
$
|
60,819
|
|
|
$
|
(339,906
|
)
|
|
$
|
21,490,544
|
|
|
4.33
|
%
|
|
$
|
105.19
|
|
Hybrid ARM
|
17,940
|
|
|
915
|
|
|
18,855
|
|
|
309
|
|
|
(91
|
)
|
|
19,073
|
|
|
5.12
|
%
|
|
$
|
107.63
|
|
||||||
Total P&I securities
|
20,775,790
|
|
|
1,012,696
|
|
|
21,788,486
|
|
|
61,128
|
|
|
(339,997
|
)
|
|
21,509,617
|
|
|
4.33
|
%
|
|
$
|
105.20
|
|
||||||
Interest-only securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Fixed
|
794,144
|
|
|
58,886
|
|
|
58,886
|
|
|
4,880
|
|
|
(403
|
)
|
|
63,363
|
|
|
2.84
|
%
|
|
$
|
33.15
|
|
||||||
Fixed Other (1)
|
2,321,823
|
|
|
151,015
|
|
|
151,015
|
|
|
9,290
|
|
|
(48,252
|
)
|
|
112,053
|
|
|
1.55
|
%
|
|
$
|
8.82
|
|
||||||
Total
|
$
|
23,891,757
|
|
|
$
|
1,222,597
|
|
|
$
|
21,998,387
|
|
|
$
|
75,298
|
|
|
$
|
(388,652
|
)
|
|
$
|
21,685,033
|
|
|
|
|
|
|
December 31, 2017
|
|||||||||||||||||||||||||||||
(dollars in thousands, except purchase price)
|
Principal/ Current Face
|
|
Net (Discount) Premium
|
|
Amortized Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Carrying Value
|
|
Weighted Average Coupon Rate
|
|
Weighted Average Purchase Price
|
|||||||||||||||
Principal and interest securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Fixed
|
$
|
17,060,195
|
|
|
$
|
1,053,431
|
|
|
$
|
18,113,626
|
|
|
$
|
41,705
|
|
|
$
|
(134,914
|
)
|
|
$
|
18,020,417
|
|
|
4.06
|
%
|
|
$
|
106.56
|
|
Hybrid ARM
|
21,654
|
|
|
1,177
|
|
|
22,831
|
|
|
444
|
|
|
(55
|
)
|
|
23,220
|
|
|
4.97
|
%
|
|
$
|
108.20
|
|
||||||
Total P&I Securities
|
17,081,849
|
|
|
1,054,608
|
|
|
18,136,457
|
|
|
42,149
|
|
|
(134,969
|
)
|
|
18,043,637
|
|
|
4.06
|
%
|
|
$
|
106.56
|
|
||||||
Interest-only securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Fixed
|
332,772
|
|
|
50,981
|
|
|
50,981
|
|
|
2,410
|
|
|
(648
|
)
|
|
52,743
|
|
|
3.81
|
%
|
|
$
|
17.56
|
|
||||||
Fixed Other (1)
|
2,609,000
|
|
|
172,308
|
|
|
172,308
|
|
|
8,545
|
|
|
(38,508
|
)
|
|
142,345
|
|
|
1.57
|
%
|
|
$
|
8.84
|
|
||||||
Total
|
$
|
20,023,621
|
|
|
$
|
1,277,897
|
|
|
$
|
18,359,746
|
|
|
$
|
53,104
|
|
|
$
|
(174,125
|
)
|
|
$
|
18,238,725
|
|
|
|
|
|
(1)
|
Fixed Other represents weighted-average coupon interest-only securities that are not generally used for our interest-rate risk management purposes. These securities pay variable coupon interest based on the weighted average of the fixed rates of the underlying loans of the security, less the weighted average rates of the applicable issued P&I securities.
|
|
December 31, 2018
|
||||||||||||||||||||||||||||||
(in thousands)
|
Principal/Current Face
|
|
Un-amortized Premium
|
|
Accretable Purchase Discount
|
|
Credit Reserve Purchase Discount
|
|
Amortized Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Carrying Value
|
||||||||||||||||
P&I securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Senior
|
$
|
4,227,631
|
|
|
$
|
5,381
|
|
|
$
|
(477,682
|
)
|
|
$
|
(1,204,325
|
)
|
|
$
|
2,551,005
|
|
|
$
|
343,358
|
|
|
$
|
(39,632
|
)
|
|
$
|
2,854,731
|
|
Mezzanine
|
1,132,493
|
|
|
1,301
|
|
|
(216,437
|
)
|
|
(118,437
|
)
|
|
798,920
|
|
|
134,737
|
|
|
(5,025
|
)
|
|
928,632
|
|
||||||||
Total P&I
|
5,360,124
|
|
|
6,682
|
|
|
(694,119
|
)
|
|
(1,322,762
|
)
|
|
3,349,925
|
|
|
478,095
|
|
|
(44,657
|
)
|
|
3,783,363
|
|
||||||||
Interest-only securities
|
5,137,169
|
|
|
83,846
|
|
|
—
|
|
|
—
|
|
|
83,846
|
|
|
3,655
|
|
|
(3,293
|
)
|
|
84,208
|
|
||||||||
Total
|
$
|
10,497,293
|
|
|
$
|
90,528
|
|
|
$
|
(694,119
|
)
|
|
$
|
(1,322,762
|
)
|
|
$
|
3,433,771
|
|
|
$
|
481,750
|
|
|
$
|
(47,950
|
)
|
|
$
|
3,867,571
|
|
|
December 31, 2017
|
||||||||||||||||||||||||||||||
(in thousands)
|
Principal/Current Face
|
|
Un-amortized Premium
|
|
Accretable Purchase Discount
|
|
Credit Reserve Purchase Discount
|
|
Amortized Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Carrying Value
|
||||||||||||||||
Principal and interest securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Senior
|
$
|
2,552,972
|
|
|
$
|
2,435
|
|
|
$
|
(424,580
|
)
|
|
$
|
(534,160
|
)
|
|
$
|
1,596,667
|
|
|
$
|
361,561
|
|
|
$
|
(2,083
|
)
|
|
$
|
1,956,145
|
|
Mezzanine
|
1,205,162
|
|
|
322
|
|
|
(251,453
|
)
|
|
(119,453
|
)
|
|
834,578
|
|
|
127,370
|
|
|
(1,083
|
)
|
|
960,865
|
|
||||||||
Total P&I
|
3,758,134
|
|
|
2,757
|
|
|
(676,033
|
)
|
|
(653,613
|
)
|
|
2,431,245
|
|
|
488,931
|
|
|
(3,166
|
)
|
|
2,917,010
|
|
||||||||
Interest-only securities
|
5,614,925
|
|
|
65,667
|
|
|
—
|
|
|
—
|
|
|
65,667
|
|
|
2,163
|
|
|
(2,746
|
)
|
|
65,084
|
|
||||||||
Total
|
$
|
9,373,059
|
|
|
$
|
68,424
|
|
|
$
|
(676,033
|
)
|
|
$
|
(653,613
|
)
|
|
$
|
2,496,912
|
|
|
$
|
491,094
|
|
|
$
|
(5,912
|
)
|
|
$
|
2,982,094
|
|
|
|
December 31, 2018
|
||||||||||
“Legacy” Non-Agency P&I Securities
|
|
Senior
|
|
Mezzanine
|
|
Total
|
||||||
Carrying value (in thousands)
|
|
$
|
2,842,712
|
|
|
$
|
799,939
|
|
|
$
|
3,642,651
|
|
% of total
|
|
78.0
|
%
|
|
22.0
|
%
|
|
100.0
|
%
|
|||
Average purchase price (1)
|
|
$
|
60.72
|
|
|
$
|
65.96
|
|
|
$
|
61.87
|
|
Average coupon
|
|
3.4
|
%
|
|
3.2
|
%
|
|
3.3
|
%
|
|||
Average fixed coupon
|
|
5.8
|
%
|
|
5.5
|
%
|
|
5.8
|
%
|
|||
Average floating coupon
|
|
3.1
|
%
|
|
3.1
|
%
|
|
3.1
|
%
|
|||
Average hybrid coupon
|
|
4.6
|
%
|
|
—
|
%
|
|
4.6
|
%
|
|||
Collateral attributes
|
|
|
|
|
|
|
||||||
Average loan age (months)
|
|
148
|
|
|
157
|
|
|
150
|
|
|||
Average loan size (in thousands)
|
|
$
|
373
|
|
|
$
|
385
|
|
|
$
|
376
|
|
Average original loan-to-value
|
|
67.3
|
%
|
|
66.9
|
%
|
|
67.2
|
%
|
|||
Average original FICO (2)
|
|
608
|
|
|
574
|
|
|
601
|
|
|||
Current performance
|
|
|
|
|
|
|
||||||
60+ day delinquencies
|
|
19.6
|
%
|
|
17.7
|
%
|
|
19.2
|
%
|
|||
Average credit enhancement (3)
|
|
5.1
|
%
|
|
15.8
|
%
|
|
7.5
|
%
|
|||
3-month CPR (4)
|
|
4.9
|
%
|
|
6.4
|
%
|
|
5.2
|
%
|
|
|
December 31, 2017
|
||||||||||
“Legacy” Non-Agency P&I Securities
|
|
Senior
|
|
Mezzanine
|
|
Total P&I
|
||||||
Carrying Value (in thousands)
|
|
$
|
1,790,481
|
|
|
$
|
762,352
|
|
|
$
|
2,552,833
|
|
% of Total
|
|
70.1
|
%
|
|
29.9
|
%
|
|
100.0
|
%
|
|||
Average Purchase Price (1)
|
|
$
|
57.57
|
|
|
$
|
65.36
|
|
|
$
|
59.89
|
|
Average Coupon
|
|
2.8
|
%
|
|
2.3
|
%
|
|
2.6
|
%
|
|||
Average Fixed Coupon
|
|
5.9
|
%
|
|
5.6
|
%
|
|
5.8
|
%
|
|||
Average Floating Coupon
|
|
2.5
|
%
|
|
2.2
|
%
|
|
2.4
|
%
|
|||
Average Hybrid Coupon
|
|
3.2
|
%
|
|
—
|
%
|
|
3.2
|
%
|
|||
Collateral Attributes
|
|
|
|
|
|
|
||||||
Average Loan Age (months)
|
|
137
|
|
|
145
|
|
|
139
|
|
|||
Average Loan Size (in thousands)
|
|
$
|
370
|
|
|
$
|
356
|
|
|
$
|
366
|
|
Average Original Loan-to-Value
|
|
69.3
|
%
|
|
68.8
|
%
|
|
69.1
|
%
|
|||
Average Original FICO (2)
|
|
636
|
|
|
573
|
|
|
617
|
|
|||
Current Performance
|
|
|
|
|
|
|
||||||
60+ day delinquencies
|
|
22.9
|
%
|
|
20.3
|
%
|
|
22.1
|
%
|
|||
Average Credit Enhancement (3)
|
|
7.5
|
%
|
|
16.1
|
%
|
|
10.0
|
%
|
|||
3-Month CPR (4)
|
|
6.1
|
%
|
|
7.1
|
%
|
|
6.4
|
%
|
(1)
|
Average purchase price utilized carrying value for weighting purposes. If current face were utilized for weighting purposes, the average purchase price for senior, mezzanine, and total “legacy” non-Agency securities, excluding our non-Agency interest-only portfolio, would be $58.12, $63.19 and $59.07, respectively, at December 31, 2018 and $55.07, $62.73 and $57.27, respectively at December 31, 2017.
|
(2)
|
FICO represents a mortgage industry accepted credit score of a borrower, which was developed by Fair Isaac Corporation.
|
(3)
|
Average credit enhancement remaining on our “legacy” non-Agency securities portfolio, which is the average amount of protection available to absorb future credit losses due to defaults on the underlying collateral.
|
(4)
|
Three-month CPR is reflective of the prepayment speed on the underlying securitization; however, it does not necessarily indicate the proceeds received on our investment tranche. Proceeds received for each security are dependent on the position of the individual security within the structure of each deal.
|
|
December 31, 2018
|
|||||||||||||||||||
|
“Legacy” Non-Agency P&I Securities
|
|||||||||||||||||||
(dollars in thousands)
|
Senior
|
|
Mezzanine
|
|
Total
|
|||||||||||||||
Collateral Type
|
Carrying Value
|
|
% of Senior
|
|
Carrying Value
|
|
% of Mezzanine
|
|
Carrying Value
|
|
% of Total
|
|||||||||
Prime
|
$
|
27,878
|
|
|
1.0
|
%
|
|
$
|
13,797
|
|
|
1.7
|
%
|
|
$
|
41,675
|
|
|
1.1
|
%
|
Alt-A
|
367,985
|
|
|
12.9
|
%
|
|
89,785
|
|
|
11.3
|
%
|
|
457,770
|
|
|
12.6
|
%
|
|||
POA
|
214,683
|
|
|
7.6
|
%
|
|
171,348
|
|
|
21.4
|
%
|
|
386,031
|
|
|
10.6
|
%
|
|||
Subprime
|
2,232,166
|
|
|
78.5
|
%
|
|
525,009
|
|
|
65.6
|
%
|
|
2,757,175
|
|
|
75.7
|
%
|
|||
Total
|
$
|
2,842,712
|
|
|
100.0
|
%
|
|
$
|
799,939
|
|
|
100.0
|
%
|
|
$
|
3,642,651
|
|
|
100.0
|
%
|
|
December 31, 2017
|
|||||||||||||||||||
|
“Legacy” Non-Agency P&I Securities
|
|||||||||||||||||||
(dollars in thousands)
|
Senior
|
|
Mezzanine
|
|
Total
|
|||||||||||||||
Collateral Type
|
Carrying Value
|
|
% of Senior
|
|
Carrying Value
|
|
% of Mezzanine
|
|
Carrying Value
|
|
% of Total
|
|||||||||
Prime
|
$
|
21,181
|
|
|
1.2
|
%
|
|
$
|
13,829
|
|
|
1.8
|
%
|
|
$
|
35,010
|
|
|
1.4
|
%
|
Alt-A
|
133,357
|
|
|
7.4
|
%
|
|
92,399
|
|
|
12.1
|
%
|
|
225,756
|
|
|
8.8
|
%
|
|||
POA
|
87,054
|
|
|
4.9
|
%
|
|
141,834
|
|
|
18.6
|
%
|
|
228,888
|
|
|
9.0
|
%
|
|||
Subprime
|
1,548,889
|
|
|
86.5
|
%
|
|
514,290
|
|
|
67.5
|
%
|
|
2,063,179
|
|
|
80.8
|
%
|
|||
Total
|
$
|
1,790,481
|
|
|
100.0
|
%
|
|
$
|
762,352
|
|
|
100.0
|
%
|
|
$
|
2,552,833
|
|
|
100.0
|
%
|
|
December 31, 2018
|
|||||||||||||||||||
|
“Legacy” Non-Agency P&I Securities
|
|||||||||||||||||||
(dollars in thousands)
|
Senior
|
|
Mezzanine
|
|
Total
|
|||||||||||||||
Coupon Type
|
Carrying Value
|
|
% of Senior
|
|
Carrying Value
|
|
% of Mezzanine
|
|
Carrying Value
|
|
% of Total
|
|||||||||
Fixed rate
|
$
|
219,245
|
|
|
7.7
|
%
|
|
$
|
20,396
|
|
|
2.5
|
%
|
|
$
|
239,641
|
|
|
6.6
|
%
|
Hybrid or floating
|
2,623,467
|
|
|
92.3
|
%
|
|
779,543
|
|
|
97.5
|
%
|
|
3,403,010
|
|
|
93.4
|
%
|
|||
Total
|
$
|
2,842,712
|
|
|
100.0
|
%
|
|
$
|
799,939
|
|
|
100.0
|
%
|
|
$
|
3,642,651
|
|
|
100.0
|
%
|
|
December 31, 2017
|
|||||||||||||||||||
|
“Legacy” Non-Agency P&I Securities
|
|||||||||||||||||||
(dollars in thousands)
|
Senior
|
|
Mezzanine
|
|
Total
|
|||||||||||||||
Coupon Type
|
Carrying Value
|
|
% of Senior
|
|
Carrying Value
|
|
% of Mezzanine
|
|
Carrying Value
|
|
% of Total
|
|||||||||
Fixed Rate
|
$
|
147,883
|
|
|
8.3
|
%
|
|
$
|
19,957
|
|
|
2.6
|
%
|
|
$
|
167,840
|
|
|
6.6
|
%
|
Hybrid or Floating
|
1,642,598
|
|
|
91.7
|
%
|
|
742,395
|
|
|
97.4
|
%
|
|
2,384,993
|
|
|
93.4
|
%
|
|||
Total
|
$
|
1,790,481
|
|
|
100.0
|
%
|
|
$
|
762,352
|
|
|
100.0
|
%
|
|
$
|
2,552,833
|
|
|
100.0
|
%
|
|
December 31, 2018
|
|||||||||||||||||||
|
“Legacy” Non-Agency P&I Securities
|
|||||||||||||||||||
(dollars in thousands)
|
Senior
|
|
Mezzanine
|
|
Total
|
|||||||||||||||
Origination Year
|
Carrying Value
|
|
% of Senior
|
|
Carrying Value
|
|
% of Mezzanine
|
|
Carrying Value
|
|
% of Total
|
|||||||||
2006 and thereafter
|
$
|
2,618,076
|
|
|
92.1
|
%
|
|
$
|
315,314
|
|
|
39.4
|
%
|
|
$
|
2,933,390
|
|
|
80.5
|
%
|
2002-2005
|
219,183
|
|
|
7.7
|
%
|
|
483,061
|
|
|
60.4
|
%
|
|
702,244
|
|
|
19.3
|
%
|
|||
Pre-2002
|
5,453
|
|
|
0.2
|
%
|
|
1,564
|
|
|
0.2
|
%
|
|
7,017
|
|
|
0.2
|
%
|
|||
Total
|
$
|
2,842,712
|
|
|
100.0
|
%
|
|
$
|
799,939
|
|
|
100.0
|
%
|
|
$
|
3,642,651
|
|
|
100.0
|
%
|
|
December 31, 2017
|
|||||||||||||||||||
|
“Legacy” Non-Agency P&I Securities
|
|||||||||||||||||||
(dollars in thousands)
|
Senior
|
|
Mezzanine
|
|
Total
|
|||||||||||||||
Origination Year
|
Carrying Value
|
|
% of Senior
|
|
Carrying Value
|
|
% of Mezzanine
|
|
Carrying Value
|
|
% of Total
|
|||||||||
2006 and Thereafter
|
$
|
1,594,088
|
|
|
89.0
|
%
|
|
$
|
293,916
|
|
|
38.6
|
%
|
|
$
|
1,888,004
|
|
|
73.9
|
%
|
2002-2005
|
191,288
|
|
|
10.7
|
%
|
|
466,923
|
|
|
61.2
|
%
|
|
658,211
|
|
|
25.8
|
%
|
|||
Pre-2002
|
5,105
|
|
|
0.3
|
%
|
|
1,513
|
|
|
0.2
|
%
|
|
6,618
|
|
|
0.3
|
%
|
|||
Total
|
$
|
1,790,481
|
|
|
100.0
|
%
|
|
$
|
762,352
|
|
|
100.0
|
%
|
|
$
|
2,552,833
|
|
|
100.0
|
%
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||
(dollars in thousands)
|
Carrying Value
|
|
% of Total Non-Agency Securities
|
|
Carrying Value
|
|
% of Total Non-Agency Securities
|
||||||
California
|
$
|
1,041,464
|
|
|
26.9
|
%
|
|
$
|
694,757
|
|
|
23.8
|
%
|
New York
|
529,738
|
|
|
13.7
|
%
|
|
367,353
|
|
|
12.6
|
%
|
||
Florida
|
393,936
|
|
|
10.2
|
%
|
|
266,329
|
|
|
9.1
|
%
|
||
New Jersey
|
176,265
|
|
|
4.6
|
%
|
|
125,794
|
|
|
4.3
|
%
|
||
Texas
|
153,687
|
|
|
4.0
|
%
|
|
101,606
|
|
|
3.5
|
%
|
||
Total
|
$
|
2,295,090
|
|
|
59.4
|
%
|
|
$
|
1,555,839
|
|
|
53.3
|
%
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Unpaid principal balance (in thousands)
|
$
|
163,102,308
|
|
|
$
|
101,344,054
|
|
Number of loans
|
717,167
|
|
|
454,028
|
|
||
Average coupon
|
4.1
|
%
|
|
3.9
|
%
|
||
Average loan age (months)
|
28
|
|
|
26
|
|
||
Average loan size (in thousands)
|
$
|
227
|
|
|
$
|
223
|
|
Average original loan-to-value
|
75.0
|
%
|
|
73.8
|
%
|
||
Average original FICO
|
752
|
|
|
753
|
|
||
60+ day delinquencies
|
0.3
|
%
|
|
0.5
|
%
|
||
3-month CPR
|
7.3
|
%
|
|
10.0
|
%
|
(dollars in thousands)
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||
Collateral Type
|
|
Amount Outstanding
|
|
Weighted Average Borrowing Rate
|
|
Weighted Average Haircut on Collateral Value
|
|
Amount Outstanding
|
|
Weighted Average Borrowing Rate
|
|
Weighted Average Haircut on Collateral Value
|
||||||||
Agency RMBS
|
|
$
|
20,954,730
|
|
|
2.53
|
%
|
|
4.6
|
%
|
|
$
|
18,538,953
|
|
|
1.55
|
%
|
|
4.8
|
%
|
Non-Agency securities
|
|
2,697,254
|
|
|
3.65
|
%
|
|
24.2
|
%
|
|
1,943,535
|
|
|
2.98
|
%
|
|
27.1
|
%
|
||
Agency Derivatives
|
|
46,516
|
|
|
3.34
|
%
|
|
26.4
|
%
|
|
71,243
|
|
|
2.15
|
%
|
|
26.7
|
%
|
||
Mortgage servicing rights
|
|
610,000
|
|
|
5.06
|
%
|
|
40.6
|
%
|
|
132,500
|
|
|
3.99
|
%
|
|
48.8
|
%
|
||
Other (1)
|
|
283,856
|
|
|
6.25
|
%
|
|
NA
|
|
|
282,827
|
|
|
6.25
|
%
|
|
NA
|
|
||
Total
|
|
$
|
24,592,356
|
|
|
2.76
|
%
|
|
7.6
|
%
|
|
$
|
20,969,058
|
|
|
1.76
|
%
|
|
7.1
|
%
|
(1)
|
Includes unsecured convertible senior notes paying interest semiannually at a rate of 6.25% per annum on the aggregate principal amount of $287.5 million.
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
For the Three Months Ended
|
|
Quarterly Average (1)
|
|
End of Period Balance (1)
|
|
Maximum Balance of Any Month-End (1)
|
|
End of Period Total Borrowings to Equity Ratio
|
|
End of Period Net Long (Short) TBA Notional
|
|
End of Period Economic Debt-to-Equity Ratio (2)
|
||||||||||
December 31, 2018
|
|
$
|
23,276,768
|
|
|
$
|
24,592,356
|
|
|
$
|
24,592,356
|
|
|
5.8:1.0
|
|
|
$
|
6,484,000
|
|
|
7.2:1.0
|
|
September 30, 2018
|
|
$
|
23,921,989
|
|
|
$
|
25,265,210
|
|
|
$
|
27,528,323
|
|
|
5.4:1.0
|
|
|
$
|
9,324,000
|
|
|
7.3:1.0
|
|
June 30, 2018
|
|
$
|
19,123,370
|
|
|
$
|
18,524,115
|
|
|
$
|
19,237,474
|
|
|
5.3:1.0
|
|
|
$
|
3,049,000
|
|
|
6.2:1.0
|
|
March 31, 2018
|
|
$
|
20,194,305
|
|
|
$
|
20,316,757
|
|
|
$
|
20,466,930
|
|
|
5.9:1.0
|
|
|
$
|
445,000
|
|
|
6.0:1.0
|
|
December 31, 2017
|
|
$
|
19,270,237
|
|
|
$
|
20,969,058
|
|
|
$
|
20,969,058
|
|
|
5.9:1.0
|
(3)
|
|
$
|
(573,000
|
)
|
|
5.7:1.0
|
|
(1)
|
Includes borrowings under repurchase agreements, FHLB advances, revolving credit facilities and convertible senior notes and excludes collateralized borrowings in securitization trusts.
|
(2)
|
Defined as total borrowings under repurchase agreements, FHLB advances, revolving credit facilities and convertible senior notes, plus implied debt on net TBA notional, divided by total equity.
|
(dollars in millions, except per share amounts)
|
Book Value
|
|
Common Shares Outstanding
|
|
Common Book Value Per Share
|
|||||
Common stockholders' equity at December 31, 2017
|
$
|
2,845.1
|
|
|
174.5
|
|
|
$
|
16.31
|
|
Reconciliation of non-GAAP measures to GAAP net loss and Comprehensive loss:
|
|
|
|
|
|
|||||
Core Earnings, net of tax expense of $2.4 million (1)
|
384.0
|
|
|
|
|
|
||||
Dividends on preferred stock
|
(65.4
|
)
|
|
|
|
|
||||
Core Earnings attributable to common stockholders (1)
|
318.6
|
|
|
|
|
|
||||
Dollar roll income
|
86.9
|
|
|
|
|
|
||||
Core Earnings attributable to common stockholders, including dollar roll income (1)
|
405.5
|
|
|
|
|
|
||||
Realized and unrealized gains and losses, net of tax expense of $39.4 million
|
(428.4
|
)
|
|
|
|
|
||||
Transaction expenses and purchase premium associated with the acquisition of CYS Investments, Inc.
|
(86.7
|
)
|
|
|
|
|
||||
Other comprehensive loss, net of tax
|
(233.9
|
)
|
|
|
|
|
||||
Dividend declaration
|
(386.6
|
)
|
|
|
|
|
||||
Other
|
12.9
|
|
|
1.0
|
|
|
|
|||
Acquisition of CYS Investments, Inc.
|
1,125.1
|
|
|
72.6
|
|
|
|
|||
Issuance of common stock, net of offering costs
|
0.2
|
|
|
—
|
|
|
|
|||
Common stockholders' equity at December 31, 2018
|
$
|
3,253.2
|
|
|
248.1
|
|
|
$
|
13.11
|
|
Total preferred stock liquidation preference
|
1,001.3
|
|
|
|
|
|
||||
Total stockholders' equity at December 31, 2018
|
$
|
4,254.5
|
|
|
|
|
|
(1)
|
Core Earnings is a non-U.S. GAAP measure that we define as comprehensive (loss) income attributable to common stockholders, excluding “realized and unrealized gains and losses” (impairment losses, realized and unrealized gains and losses on the aggregate portfolio, reserve expense for representation and warranty obligations on MSR, non-cash compensation expense related to restricted common stock and restructuring charges) and transaction costs associated with the acquisition of CYS. As defined, Core Earnings includes interest income or expense and premium income or loss on derivative instruments and servicing income, net of estimated amortization on MSR. “Dollar roll income” is the economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. We believe the presentation of Core Earnings, including dollar roll income, provides investors greater transparency into our period-over-period financial performance and facilitates comparisons to peer REITs.
|
|
Year Ended
|
||
(in millions)
|
December 31,
2018 |
||
Comprehensive loss attributable to common stockholders
|
$
|
(343.6
|
)
|
Adjustment for other comprehensive loss attributable to common stockholders:
|
|
||
Unrealized losses on available-for-sale securities
|
233.9
|
|
|
Net loss attributable to common stockholders
|
(109.7
|
)
|
|
Adjustments for non-Core Earnings:
|
|
||
Realized loss on investment securities
|
348.4
|
|
|
Unrealized loss on investment securities
|
(6.4
|
)
|
|
Other-than-temporary impairment loss
|
0.5
|
|
|
Realized loss on termination or expiration of interest rate swaps, caps and swaptions
|
3.6
|
|
|
Unrealized loss on interest rate swaps, caps and swaptions
|
29.6
|
|
|
Loss on other derivative instruments
|
52.0
|
|
|
Realized and unrealized gains on mortgage servicing rights
|
(130.1
|
)
|
|
Change in servicing reserves
|
1.5
|
|
|
Non-cash equity compensation expense
|
12.3
|
|
|
Management fee reduction associated with the acquisition of CYS Investments, Inc.
|
(17.5
|
)
|
|
Transaction expenses and purchase premium associated with the acquisition of CYS Investments, Inc.
|
86.7
|
|
|
Restructuring charges
|
8.2
|
|
|
Net provision for income taxes on non-Core Earnings
|
39.4
|
|
|
Core Earnings attributable to common stockholders (1)
|
318.5
|
|
|
Dollar roll income
|
86.9
|
|
|
Core Earnings attributable to common stockholders, including dollar roll income (1)
|
$
|
405.4
|
|
(1)
|
Core Earnings is a non-U.S. GAAP measure that we define as comprehensive (loss) income attributable to common stockholders, excluding “realized and unrealized gains and losses” (impairment losses, realized and unrealized gains and losses on the aggregate portfolio, reserve expense for representation and warranty obligations on MSR, non-cash compensation expense related to restricted common stock and restructuring charges) and transaction costs associated with the acquisition of CYS. As defined, Core Earnings includes interest income or expense and premium income or loss on derivative instruments and servicing income, net of estimated amortization on MSR. Dollar roll income is the economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. We believe the presentation of Core Earnings, including dollar roll income, provides investors greater transparency into our period-over-period financial performance and facilitates comparisons to peer REITs.
|
|
Year Ended December 31, 2018
|
||||||||||||||
(dollars in millions)
|
TRS
|
|
REIT
|
|
Securitization Trusts & Eliminations
|
|
Consolidated
|
||||||||
GAAP net income (loss), pre-tax
|
$
|
114.2
|
|
|
$
|
(59.4
|
)
|
|
$
|
(57.3
|
)
|
|
$
|
(2.5
|
)
|
State taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Adjusted GAAP net income (loss), pre-tax
|
114.2
|
|
|
(59.4
|
)
|
|
(57.3
|
)
|
|
(2.5
|
)
|
||||
Permanent differences
|
|
|
|
|
|
|
|
||||||||
Intercompany RMBS sales
|
—
|
|
|
—
|
|
|
57.3
|
|
|
57.3
|
|
||||
Other permanent differences
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
(0.8
|
)
|
||||
Temporary differences
|
|
|
|
|
|
|
|
||||||||
CYS transaction costs
|
—
|
|
|
82.4
|
|
|
—
|
|
|
82.4
|
|
||||
Net accretion of OID and market discount
|
0.1
|
|
|
76.3
|
|
|
—
|
|
|
76.4
|
|
||||
Net unrealized gains and losses on derivatives
|
(68.0
|
)
|
|
(1.3
|
)
|
|
—
|
|
|
(69.3
|
)
|
||||
Other temporary differences
|
(13.3
|
)
|
|
(0.6
|
)
|
|
—
|
|
|
(13.9
|
)
|
||||
Capital loss carryforward (utilized) deferral
|
(8.0
|
)
|
|
393.7
|
|
|
—
|
|
|
385.7
|
|
||||
Net operating loss carryforward (utilized) deferral
|
(15.3
|
)
|
|
—
|
|
|
—
|
|
|
(15.3
|
)
|
||||
Estimated taxable income
|
9.7
|
|
|
490.3
|
|
|
—
|
|
|
500.0
|
|
||||
Dividend declaration deduction
|
—
|
|
|
(490.3
|
)
|
|
—
|
|
|
(490.3
|
)
|
||||
Estimated taxable income post-dividend deduction
|
$
|
9.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9.7
|
|
|
Year Ended December 31, 2017
|
||||||||||||||
(dollars in millions)
|
TRS
|
|
REIT
|
|
Securitization Trusts & Eliminations
|
|
Consolidated
|
||||||||
GAAP net (loss) income, pre-tax
|
$
|
(72.0
|
)
|
|
$
|
409.4
|
|
|
$
|
4.5
|
|
|
$
|
341.9
|
|
State taxes
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
||||
Adjusted GAAP net (loss) income, pre-tax
|
(72.1
|
)
|
|
409.4
|
|
|
4.5
|
|
|
341.8
|
|
||||
Permanent differences
|
|
|
|
|
|
|
|
||||||||
Granite Point stock distribution and dividends
|
|
|
(26.6
|
)
|
|
|
|
(26.6
|
)
|
||||||
Securitization trusts consolidated for U.S. GAAP purposes only
|
—
|
|
|
—
|
|
|
(4.5
|
)
|
|
(4.5
|
)
|
||||
Other permanent differences
|
—
|
|
|
(7.4
|
)
|
|
—
|
|
|
(7.4
|
)
|
||||
Temporary differences
|
|
|
|
|
|
|
|
||||||||
Net accretion of OID and market discount
|
0.1
|
|
|
36.2
|
|
|
—
|
|
|
36.3
|
|
||||
Net unrealized gains and losses on derivatives
|
129.5
|
|
|
(57.1
|
)
|
|
—
|
|
|
72.4
|
|
||||
Other temporary differences
|
(8.1
|
)
|
|
(7.1
|
)
|
|
—
|
|
|
(15.2
|
)
|
||||
Capital loss carryforward (utilized) deferral
|
(33.3
|
)
|
|
(17.0
|
)
|
|
—
|
|
|
(50.3
|
)
|
||||
Net operating loss carryforward (utilized) deferral
|
(24.1
|
)
|
|
—
|
|
|
—
|
|
|
(24.1
|
)
|
||||
Estimated taxable (loss) income
|
(8.0
|
)
|
|
330.4
|
|
|
—
|
|
|
322.4
|
|
||||
Dividend declaration deduction
|
—
|
|
|
(330.4
|
)
|
|
—
|
|
|
(330.4
|
)
|
||||
Estimated taxable loss post-dividend deduction
|
$
|
(8.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(8.0
|
)
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Cash Dividend Per Share
|
||
December 18, 2018
|
|
December 31, 2018
|
|
January 28, 2019
|
|
$
|
0.47
|
|
September 20, 2018
|
|
October 1, 2018
|
|
October 29, 2018
|
|
$
|
0.31
|
|
July 13, 2018
|
|
July 25, 2018
|
|
July 30, 2018
|
|
$
|
0.16
|
|
June 19, 2018
|
|
June 29, 2018
|
|
July 27, 2018
|
|
$
|
0.47
|
|
March 20, 2018
|
|
April 2, 2018
|
|
April 27, 2018
|
|
$
|
0.47
|
|
December 14, 2017
|
|
December 26, 2017
|
|
December 29, 2017
|
|
$
|
0.47
|
|
September 14, 2017
|
|
September 29, 2017
|
|
October 27, 2017
|
|
$
|
0.52
|
|
June 15, 2017
|
|
June 30, 2017
|
|
July 27, 2017
|
|
$
|
0.52
|
|
March 14, 2017
|
|
March 31, 2017
|
|
April 27, 2017
|
|
$
|
0.50
|
|
December 15, 2016
|
|
December 30, 2016
|
|
January 27, 2017
|
|
$
|
0.48
|
|
September 15, 2016
|
|
September 30, 2016
|
|
October 20, 2016
|
|
$
|
0.46
|
|
June 16, 2016
|
|
June 30, 2016
|
|
July 20, 2016
|
|
$
|
0.46
|
|
March 15, 2016
|
|
March 31, 2016
|
|
April 21, 2016
|
|
$
|
0.46
|
|
|
|
|
|
Tax Characterization
|
||||||||||||||||
Year Ended December 31,
|
|
Dividends Declared Per Common Share
|
|
Ordinary Dividends (Non-Qualified)
|
|
Qualified Ordinary Dividends
|
|
Capital Gain Distribution
|
|
Nondividend Distribution
|
||||||||||
2018
|
|
$
|
1.88
|
|
|
$
|
1.88
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2017
|
|
$
|
5.57
|
|
|
$
|
2.02
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.55
|
|
2016
|
|
$
|
1.86
|
|
|
$
|
1.86
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||
(dollars in thousands)
|
Amount Outstanding
|
|
Net Counterparty Exposure(1)
|
|
Percent of Funding
|
|
Amount Outstanding
|
|
Net Counterparty Exposure(1)
|
|
Percent of Funding
|
||||||||||
North America
|
$
|
12,061,693
|
|
|
$
|
1,120,101
|
|
|
55.4
|
%
|
|
$
|
10,746,447
|
|
|
$
|
993,279
|
|
|
57.0
|
%
|
Europe (2)
|
6,728,245
|
|
|
646,000
|
|
|
31.9
|
%
|
|
6,109,169
|
|
|
615,150
|
|
|
35.3
|
%
|
||||
Asia (2)
|
4,343,538
|
|
|
255,973
|
|
|
12.7
|
%
|
|
2,595,591
|
|
|
134,694
|
|
|
7.7
|
%
|
||||
Total
|
$
|
23,133,476
|
|
|
$
|
2,022,074
|
|
|
100.0
|
%
|
|
$
|
19,451,207
|
|
|
$
|
1,743,123
|
|
|
100.0
|
%
|
(1)
|
Represents the net carrying value of the assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest. Payables due to broker counterparties for unsettled securities purchased are not included in the amounts presented above. We did not have any such payables at December 31, 2018 or December 31, 2017.
|
(2)
|
Exposure to European and Asian domiciled banks and their U.S. subsidiaries.
|
(1)
|
The facilities are set to mature on the stated expiration date, unless extended pursuant to their terms.
|
(2)
|
Commitment fee charged on unused capacity.
|
(3)
|
This repurchase facility is secured by MSR notes, which are collateralized by our MSR.
|
•
|
Total indebtedness to net worth must be less than a specified threshold ratio in a repurchase agreement. As of December 31, 2018, our debt to net worth, as defined, was 5.9:1.0 while our threshold ratio, as defined, was 6.5:1.0.
|
•
|
Cash liquidity must be greater than $100.0 million. As of December 31, 2018, our liquidity, as defined, was $409.8 million.
|
•
|
Net worth must be greater than $1.75 billion. As of December 31, 2018, our net worth, as defined, was $4.3 billion.
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Available-for-sale securities, at fair value
|
$
|
25,157,999
|
|
|
$
|
20,990,890
|
|
Mortgage servicing rights, at fair value
|
1,143,918
|
|
|
584,247
|
|
||
Cash and cash equivalents
|
—
|
|
|
15,000
|
|
||
Restricted cash
|
416,696
|
|
|
417,018
|
|
||
Due from counterparties
|
110,695
|
|
|
836,381
|
|
||
Derivative assets, at fair value
|
70,191
|
|
|
90,895
|
|
||
U.S. Treasuries, at fair value
|
$
|
6,457
|
|
|
$
|
—
|
|
Total
|
$
|
26,905,956
|
|
|
$
|
22,934,431
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Within 30 days
|
$
|
7,488,869
|
|
|
$
|
4,269,464
|
|
30 to 59 days
|
5,077,598
|
|
|
3,831,111
|
|
||
60 to 89 days
|
5,655,060
|
|
|
3,458,940
|
|
||
90 to 119 days
|
1,938,859
|
|
|
2,452,426
|
|
||
120 to 364 days
|
3,508,114
|
|
|
5,346,766
|
|
||
One to three years
|
300,000
|
|
|
927,524
|
|
||
Three to five years
|
573,856
|
|
|
282,827
|
|
||
Five to ten years
|
—
|
|
|
—
|
|
||
Ten years and over
|
50,000
|
|
|
400,000
|
|
||
Total
|
$
|
24,592,356
|
|
|
$
|
20,969,058
|
|
•
|
Cash flows from operating activities. For the year ended December 31, 2018, operating activities increased our cash balances by approximately $702.9 million, primarily driven by our financial results for the year.
|
•
|
Cash flows from investing activities. For the year ended December 31, 2018, investing activities increased our cash balances by approximately $4.8 billion, primarily driven by sales of AFS securities.
|
•
|
Cash flows from financing activities. For the year ended December 31, 2018, financing activities decreased our cash balance by approximately $5.5 billion, primarily driven by repayment of repurchase agreements as a result of sales of AFS securities.
|
|
Due During the Year Ended December 31,
|
||||||||||||||||||||||||||
(in thousands)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
||||||||||||||
Repurchase agreements
|
$
|
22,833,476
|
|
|
$
|
300,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23,133,476
|
|
Federal Home Loan Bank advances
|
815,024
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
865,024
|
|
|||||||
Revolving credit facilities
|
20,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
290,000
|
|
|
—
|
|
|
310,000
|
|
|||||||
Convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
283,856
|
|
|
—
|
|
|
—
|
|
|
283,856
|
|
|||||||
Interest expense on borrowings (1)
|
160,734
|
|
|
48,953
|
|
|
36,228
|
|
|
18,979
|
|
|
9,571
|
|
|
19,008
|
|
|
293,473
|
|
|||||||
Long-term operating lease obligations
|
1,564
|
|
|
1,595
|
|
|
1,513
|
|
|
1,122
|
|
|
501
|
|
|
—
|
|
|
6,295
|
|
|||||||
Management fee - PRCM Advisers (2)
|
156,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
156,600
|
|
|||||||
Total
|
$
|
23,987,398
|
|
|
$
|
350,548
|
|
|
$
|
37,741
|
|
|
$
|
303,957
|
|
|
$
|
300,072
|
|
|
$
|
69,008
|
|
|
$
|
25,048,724
|
|
(1)
|
Interest expense on repurchase agreements, FHLB advances, revolving credit facilities and convertible senior notes calculated based on rates at December 31, 2018.
|
(2)
|
Contractual obligation for the management fee is estimated through the contract expiration date of October 28, 2019, inclusive of the termination fee as defined in the management agreement between us and PRCM Advisers. Disclosure assumes agreement not renewed or terminated without cause.
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||||||||
Index Type
|
|
Floating
|
|
Hybrid (1)
|
|
Total
|
|
Index %
|
|
Floating
|
|
Hybrid (1)
|
|
Total
|
|
Index %
|
||||||||||||||
CMT
|
|
$
|
9,502
|
|
|
$
|
15,423
|
|
|
$
|
24,925
|
|
|
1
|
%
|
|
$
|
11,832
|
|
|
$
|
18,497
|
|
|
$
|
30,329
|
|
|
1
|
%
|
LIBOR
|
|
3,374,141
|
|
|
9,278
|
|
|
3,383,419
|
|
|
93
|
%
|
|
2,563,850
|
|
|
13,284
|
|
|
2,577,134
|
|
|
92
|
%
|
||||||
Other (2)
|
|
50,597
|
|
|
165,054
|
|
|
215,651
|
|
|
6
|
%
|
|
48,894
|
|
|
142,502
|
|
|
191,396
|
|
|
7
|
%
|
||||||
Total
|
|
$
|
3,434,240
|
|
|
$
|
189,755
|
|
|
$
|
3,623,995
|
|
|
100
|
%
|
|
$
|
2,624,576
|
|
|
$
|
174,283
|
|
|
$
|
2,798,859
|
|
|
100
|
%
|
(1)
|
“Hybrid” amounts reflect those assets with greater than twelve months to reset.
|
(2)
|
“Other” includes COFI, MTA and other indices.
|
(1)
|
Amounts include the effect of interest spread from our interest rate swaps and caps and float income from custodial accounts associated with our MSR, but do not reflect any potential changes to dollar roll income associated with our TBA positions, which are accounted for as derivative instruments in accordance with U.S. GAAP.
|
|
|
Page
|
|
||
|
||
|
||
|
||
|
||
|
ASSETS
|
December 31,
2018 |
|
December 31,
2017 |
||||
Available-for-sale securities, at fair value
|
$
|
25,552,604
|
|
|
$
|
21,220,819
|
|
Mortgage servicing rights, at fair value
|
1,993,440
|
|
|
1,086,717
|
|
||
Cash and cash equivalents
|
409,758
|
|
|
419,159
|
|
||
Restricted cash
|
688,006
|
|
|
635,836
|
|
||
Accrued interest receivable
|
86,589
|
|
|
68,309
|
|
||
Due from counterparties
|
154,626
|
|
|
842,303
|
|
||
Derivative assets, at fair value
|
319,981
|
|
|
309,918
|
|
||
Reverse repurchase agreements
|
761,815
|
|
|
—
|
|
||
Other assets
|
165,660
|
|
|
206,252
|
|
||
Total Assets
|
$
|
30,132,479
|
|
|
$
|
24,789,313
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Repurchase agreements
|
$
|
23,133,476
|
|
|
$
|
19,451,207
|
|
Federal Home Loan Bank advances
|
865,024
|
|
|
1,215,024
|
|
||
Revolving credit facilities
|
310,000
|
|
|
20,000
|
|
||
Convertible senior notes
|
283,856
|
|
|
282,827
|
|
||
Derivative liabilities, at fair value
|
820,590
|
|
|
31,903
|
|
||
Due to counterparties
|
130,210
|
|
|
88,898
|
|
||
Dividends payable
|
135,551
|
|
|
12,552
|
|
||
Accrued interest payable
|
160,005
|
|
|
87,698
|
|
||
Other liabilities
|
39,278
|
|
|
27,780
|
|
||
Total Liabilities
|
25,877,990
|
|
|
21,217,889
|
|
||
Stockholders’ Equity
|
|
|
|
||||
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized and 40,050,000 and 29,050,000 shares issued and outstanding, respectively ($1,001,250 and $726,250 liquidation preference, respectively)
|
977,501
|
|
|
702,537
|
|
||
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 248,085,721 and 174,496,587 shares issued and outstanding, respectively
|
2,481
|
|
|
1,745
|
|
||
Additional paid-in capital
|
4,809,616
|
|
|
3,672,003
|
|
||
Accumulated other comprehensive income
|
110,817
|
|
|
334,813
|
|
||
Cumulative earnings
|
2,332,371
|
|
|
2,386,604
|
|
||
Cumulative distributions to stockholders
|
(3,978,297
|
)
|
|
(3,526,278
|
)
|
||
Total Stockholders’ Equity
|
4,254,489
|
|
|
3,571,424
|
|
||
Total Liabilities and Stockholders’ Equity
|
$
|
30,132,479
|
|
|
$
|
24,789,313
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Interest income:
|
|
|
|
|
|
||||||
Available-for-sale securities
|
$
|
847,325
|
|
|
$
|
631,853
|
|
|
$
|
414,050
|
|
Residential mortgage loans held-for-investment in securitization trusts
|
—
|
|
|
102,886
|
|
|
133,993
|
|
|||
Other
|
22,707
|
|
|
10,350
|
|
|
27,037
|
|
|||
Total interest income
|
870,032
|
|
|
745,089
|
|
|
575,080
|
|
|||
Interest expense:
|
|
|
|
|
|
||||||
Repurchase agreements
|
469,437
|
|
|
210,430
|
|
|
88,850
|
|
|||
Collateralized borrowings in securitization trusts
|
—
|
|
|
82,573
|
|
|
97,729
|
|
|||
Federal Home Loan Bank advances
|
20,417
|
|
|
36,911
|
|
|
26,101
|
|
|||
Revolving credit facilities
|
10,820
|
|
|
2,341
|
|
|
604
|
|
|||
Convertible senior notes
|
18,997
|
|
|
17,933
|
|
|
—
|
|
|||
Total interest expense
|
519,671
|
|
|
350,188
|
|
|
213,284
|
|
|||
Net interest income
|
350,361
|
|
|
394,901
|
|
|
361,796
|
|
|||
Other-than-temporary impairments:
|
|
|
|
|
|
||||||
Total other-than-temporary impairment losses
|
(470
|
)
|
|
(789
|
)
|
|
(1,822
|
)
|
|||
Other (loss) income:
|
|
|
|
|
|
||||||
Loss on investment securities
|
(341,312
|
)
|
|
(34,695
|
)
|
|
(107,374
|
)
|
|||
Servicing income
|
343,096
|
|
|
209,065
|
|
|
143,579
|
|
|||
Loss on servicing asset
|
(69,033
|
)
|
|
(91,033
|
)
|
|
(83,531
|
)
|
|||
Gain (loss) on interest rate swap, cap and swaption agreements
|
16,043
|
|
|
(9,753
|
)
|
|
45,371
|
|
|||
(Loss) gain on other derivative instruments
|
(54,857
|
)
|
|
(70,159
|
)
|
|
99,379
|
|
|||
Other income
|
3,037
|
|
|
30,141
|
|
|
9,964
|
|
|||
Total other (loss) income
|
(103,026
|
)
|
|
33,566
|
|
|
107,388
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Management fees
|
30,272
|
|
|
40,472
|
|
|
39,261
|
|
|||
Servicing expenses
|
61,136
|
|
|
35,289
|
|
|
32,119
|
|
|||
Securitization deal costs
|
—
|
|
|
—
|
|
|
6,152
|
|
|||
Other operating expenses
|
62,983
|
|
|
54,160
|
|
|
56,605
|
|
|||
Acquisition transaction costs
|
86,703
|
|
|
—
|
|
|
—
|
|
|||
Restructuring charges
|
8,238
|
|
|
—
|
|
|
2,990
|
|
|||
Total expenses
|
249,332
|
|
|
129,921
|
|
|
137,127
|
|
|||
(Loss) income from continuing operations before income taxes
|
(2,467
|
)
|
|
297,757
|
|
|
330,235
|
|
|||
Provision for (benefit from) income taxes
|
41,823
|
|
|
(10,482
|
)
|
|
12,314
|
|
|||
Net (loss) income from continuing operations
|
(44,290
|
)
|
|
308,239
|
|
|
317,921
|
|
|||
Income from discontinued operations, net of tax
|
—
|
|
|
44,146
|
|
|
35,357
|
|
|||
Net (loss) income
|
(44,290
|
)
|
|
352,385
|
|
|
353,278
|
|
|||
Income from discontinued operations attributable to noncontrolling interest
|
—
|
|
|
3,814
|
|
|
—
|
|
|||
Net (loss) income attributable to Two Harbors Investment Corp.
|
(44,290
|
)
|
|
348,571
|
|
|
353,278
|
|
|||
Dividends on preferred stock
|
65,395
|
|
|
25,122
|
|
|
—
|
|
|||
Net (loss) income attributable to common stockholders
|
$
|
(109,685
|
)
|
|
$
|
323,449
|
|
|
$
|
353,278
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Basic (loss) earnings per weighted average common share:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
(0.53
|
)
|
|
$
|
1.62
|
|
|
$
|
1.83
|
|
Discontinued operations
|
—
|
|
|
0.23
|
|
|
0.20
|
|
|||
Net (loss) income
|
$
|
(0.53
|
)
|
|
$
|
1.85
|
|
|
$
|
2.03
|
|
Diluted (loss) earnings per weighted average common share:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
(0.53
|
)
|
|
$
|
1.60
|
|
|
$
|
1.83
|
|
Discontinued operations
|
—
|
|
|
0.21
|
|
|
0.20
|
|
|||
Net (loss) income
|
$
|
(0.53
|
)
|
|
$
|
1.81
|
|
|
$
|
2.03
|
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
||||||
Basic
|
206,020,502
|
|
|
174,433,999
|
|
|
174,036,852
|
|
|||
Diluted
|
206,020,502
|
|
|
188,133,341
|
|
|
174,036,852
|
|
|||
Comprehensive (loss) income:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(44,290
|
)
|
|
$
|
352,385
|
|
|
$
|
353,278
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
||||||
Unrealized (loss) gain on available-for-sale securities
|
(233,914
|
)
|
|
135,586
|
|
|
(159,834
|
)
|
|||
Other comprehensive (loss) income
|
(233,914
|
)
|
|
135,586
|
|
|
(159,834
|
)
|
|||
Comprehensive (loss) income
|
(278,204
|
)
|
|
487,971
|
|
|
193,444
|
|
|||
Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
3,814
|
|
|
—
|
|
|||
Comprehensive (loss) income attributable to Two Harbors Investment Corp.
|
(278,204
|
)
|
|
484,157
|
|
|
193,444
|
|
|||
Dividends on preferred stock
|
65,395
|
|
|
25,122
|
|
|
—
|
|
|||
Comprehensive (loss) income attributable to common stockholders
|
$
|
(343,599
|
)
|
|
$
|
459,035
|
|
|
$
|
193,444
|
|
|
Preferred Stock
|
|
Common Stock Par Value
|
|
Additional Paid-in Capital
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Cumulative Earnings
|
|
Cumulative Distributions to Stockholders
|
|
Total Stockholders’ Equity
|
|
Non-
controlling Interest
|
|
Total Equity
|
||||||||||||||||||
Balance, December 31, 2015
|
$
|
—
|
|
|
$
|
1,770
|
|
|
$
|
3,707,288
|
|
|
$
|
359,061
|
|
|
$
|
1,684,755
|
|
|
$
|
(2,176,313
|
)
|
|
$
|
3,576,561
|
|
|
$
|
—
|
|
|
$
|
3,576,561
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
353,278
|
|
|
—
|
|
|
353,278
|
|
|
—
|
|
|
353,278
|
|
|||||||||
Other comprehensive loss before reclassifications, net of tax benefit of $20,435
|
—
|
|
|
—
|
|
|
—
|
|
|
(58,804
|
)
|
|
—
|
|
|
—
|
|
|
(58,804
|
)
|
|
—
|
|
|
(58,804
|
)
|
|||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax benefit of $6,373
|
—
|
|
|
—
|
|
|
—
|
|
|
(101,030
|
)
|
|
—
|
|
|
—
|
|
|
(101,030
|
)
|
|
—
|
|
|
(101,030
|
)
|
|||||||||
Other comprehensive loss, net of tax benefit of $26,809
|
—
|
|
|
—
|
|
|
—
|
|
|
(159,834
|
)
|
|
—
|
|
|
—
|
|
|
(159,834
|
)
|
|
—
|
|
|
(159,834
|
)
|
|||||||||
Issuance of common stock, net of offering costs
|
—
|
|
|
1
|
|
|
501
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
502
|
|
|
—
|
|
|
502
|
|
|||||||||
Repurchase of common stock
|
—
|
|
|
(40
|
)
|
|
(61,267
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(61,307
|
)
|
|
—
|
|
|
(61,307
|
)
|
|||||||||
Common dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(323,286
|
)
|
|
(323,286
|
)
|
|
—
|
|
|
(323,286
|
)
|
|||||||||
Non-cash equity award compensation
|
—
|
|
|
8
|
|
|
15,189
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,197
|
|
|
—
|
|
|
15,197
|
|
|||||||||
Balance, December 31, 2016
|
$
|
—
|
|
|
$
|
1,739
|
|
|
$
|
3,661,711
|
|
|
$
|
199,227
|
|
|
$
|
2,038,033
|
|
|
$
|
(2,499,599
|
)
|
|
$
|
3,401,111
|
|
|
$
|
—
|
|
|
$
|
3,401,111
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
348,571
|
|
|
—
|
|
|
348,571
|
|
|
3,814
|
|
|
352,385
|
|
|||||||||
Other comprehensive income before reclassifications, net of tax expense of $45,157
|
—
|
|
|
—
|
|
|
—
|
|
|
129,590
|
|
|
—
|
|
|
—
|
|
|
129,590
|
|
|
—
|
|
|
129,590
|
|
|||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax benefit of $2,722
|
—
|
|
|
—
|
|
|
—
|
|
|
5,996
|
|
|
—
|
|
|
—
|
|
|
5,996
|
|
|
—
|
|
|
5,996
|
|
|||||||||
Other comprehensive income, net of tax expense of $42,435
|
—
|
|
|
—
|
|
|
—
|
|
|
135,586
|
|
|
—
|
|
|
—
|
|
|
135,586
|
|
|
—
|
|
|
135,586
|
|
|||||||||
Contribution of TH Commercial Holdings LLC to Granite Point Mortgage Trust Inc.
|
—
|
|
|
—
|
|
|
(13,771
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,771
|
)
|
|
195,646
|
|
|
181,875
|
|
|||||||||
Acquisition of noncontrolling interests
|
—
|
|
|
—
|
|
|
181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
181
|
|
|
(11,542
|
)
|
|
(11,361
|
)
|
|||||||||
Issuance of preferred stock, net of offering costs
|
702,537
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
702,537
|
|
|
—
|
|
|
702,537
|
|
|||||||||
Issuance of common stock, net of offering costs
|
—
|
|
|
—
|
|
|
449
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
449
|
|
|
—
|
|
|
449
|
|
|||||||||
Preferred dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,122
|
)
|
|
(25,122
|
)
|
|
—
|
|
|
(25,122
|
)
|
|||||||||
Common dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(350,709
|
)
|
|
(350,709
|
)
|
|
(3,177
|
)
|
|
(353,886
|
)
|
|||||||||
Special dividend of Granite Point Mortgage Trust Inc. common stock
|
—
|
|
|
—
|
|
|
11,267
|
|
|
—
|
|
|
—
|
|
|
(650,848
|
)
|
|
(639,581
|
)
|
|
(184,741
|
)
|
|
(824,322
|
)
|
|||||||||
Non-cash equity award compensation
|
—
|
|
|
6
|
|
|
12,165
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,171
|
|
|
—
|
|
|
12,171
|
|
|||||||||
Balance, December 31, 2017
|
$
|
702,537
|
|
|
$
|
1,745
|
|
|
$
|
3,672,003
|
|
|
$
|
334,813
|
|
|
$
|
2,386,604
|
|
|
$
|
(3,526,278
|
)
|
|
$
|
3,571,424
|
|
|
$
|
—
|
|
|
$
|
3,571,424
|
|
Cumulative effect of adoption of new accounting principles
|
—
|
|
|
—
|
|
|
25
|
|
|
9,918
|
|
|
(9,943
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
Adjusted balance, January 1, 2018
|
702,537
|
|
|
1,745
|
|
|
3,672,028
|
|
|
344,731
|
|
|
2,376,661
|
|
|
(3,526,278
|
)
|
|
3,571,424
|
|
|
—
|
|
|
3,571,424
|
|
|||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44,290
|
)
|
|
—
|
|
|
(44,290
|
)
|
|
—
|
|
|
(44,290
|
)
|
|||||||||
Other comprehensive loss before reclassifications, net of tax benefit of $14,890
|
—
|
|
|
—
|
|
|
—
|
|
|
(488,253
|
)
|
|
—
|
|
|
—
|
|
|
(488,253
|
)
|
|
—
|
|
|
(488,253
|
)
|
|||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax benefit of $0
|
—
|
|
|
—
|
|
|
—
|
|
|
254,339
|
|
|
—
|
|
|
—
|
|
|
254,339
|
|
|
—
|
|
|
254,339
|
|
|||||||||
Other comprehensive loss, net of tax benefit of $14,890
|
—
|
|
|
—
|
|
|
—
|
|
|
(233,914
|
)
|
|
—
|
|
|
—
|
|
|
(233,914
|
)
|
|
—
|
|
|
(233,914
|
)
|
|||||||||
Acquisition of CYS Investments, Inc.
|
274,950
|
|
|
726
|
|
|
1,124,388
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,400,064
|
|
|
—
|
|
|
1,400,064
|
|
|||||||||
Issuance of preferred stock, net of offering costs
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|||||||||
Issuance of common stock, net of offering costs
|
—
|
|
|
—
|
|
|
215
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215
|
|
|
—
|
|
|
215
|
|
|||||||||
Preferred dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(65,395
|
)
|
|
(65,395
|
)
|
|
—
|
|
|
(65,395
|
)
|
|||||||||
Common dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(386,624
|
)
|
|
(386,624
|
)
|
|
—
|
|
|
(386,624
|
)
|
|||||||||
Non-cash equity award compensation
|
—
|
|
|
10
|
|
|
12,985
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,995
|
|
|
—
|
|
|
12,995
|
|
|||||||||
Balance, December 31, 2018
|
$
|
977,501
|
|
|
$
|
2,481
|
|
|
$
|
4,809,616
|
|
|
$
|
110,817
|
|
|
$
|
2,332,371
|
|
|
$
|
(3,978,297
|
)
|
|
$
|
4,254,489
|
|
|
$
|
—
|
|
|
$
|
4,254,489
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash Flows From Operating Activities:
|
|
|
|
|
|
||||||
Net (loss) income from continuing operations
|
$
|
(44,290
|
)
|
|
$
|
308,239
|
|
|
$
|
317,921
|
|
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities:
|
|
|
|
|
|
|
|||||
Amortization of premiums and discounts on investment securities, net
|
93,830
|
|
|
67,651
|
|
|
42,888
|
|
|||
Amortization of deferred debt issuance costs on convertible senior notes
|
1,029
|
|
|
714
|
|
|
—
|
|
|||
Other-than-temporary impairment losses
|
470
|
|
|
789
|
|
|
1,822
|
|
|||
Realized and unrealized losses on investment securities
|
344,468
|
|
|
35,401
|
|
|
107,374
|
|
|||
Loss on servicing asset
|
69,033
|
|
|
91,033
|
|
|
83,531
|
|
|||
(Gain) loss on residential mortgage loans held-for-investment and collateralized borrowings in securitization trusts
|
—
|
|
|
(22,683
|
)
|
|
11,834
|
|
|||
Realized and unrealized losses (gains) on interest rate swaps, caps and swaptions
|
33,174
|
|
|
930
|
|
|
(66,444
|
)
|
|||
Unrealized loss (gain) on other derivative instruments
|
23,489
|
|
|
50,099
|
|
|
(37,463
|
)
|
|||
Equity based compensation
|
12,995
|
|
|
11,330
|
|
|
15,197
|
|
|||
Excess consideration in the acquisition of CYS Investments, Inc.
|
77,602
|
|
|
—
|
|
|
—
|
|
|||
Net change in assets and liabilities:
|
|
|
|
|
|
|
|||||
Decrease (increase) in accrued interest receivable
|
12,366
|
|
|
(24,689
|
)
|
|
(10,603
|
)
|
|||
Decrease (increase) in deferred income taxes, net
|
41,988
|
|
|
(11,030
|
)
|
|
13,766
|
|
|||
Increase in accrued interest payable
|
44,820
|
|
|
67,118
|
|
|
10,200
|
|
|||
Increase (decrease) in other, net
|
(8,104
|
)
|
|
(229
|
)
|
|
(270,513
|
)
|
|||
Net cash provided by operating activities from discontinued operations
|
—
|
|
|
32,108
|
|
|
20,169
|
|
|||
Net cash provided by operating activities
|
$
|
702,870
|
|
|
$
|
606,781
|
|
|
239,679
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash Flows From Investing Activities:
|
|
|
|
|
|
||||||
Purchases of available-for-sale securities
|
$
|
(12,621,282
|
)
|
|
$
|
(18,232,105
|
)
|
|
$
|
(21,310,083
|
)
|
Proceeds from sales of available-for-sale securities
|
15,202,406
|
|
|
8,708,941
|
|
|
14,404,458
|
|
|||
Principal payments on available-for-sale securities
|
2,434,071
|
|
|
1,553,051
|
|
|
1,276,159
|
|
|||
Purchases of mortgage servicing rights, net of purchase price adjustments
|
(976,393
|
)
|
|
(484,261
|
)
|
|
(317,709
|
)
|
|||
Proceeds from sales of mortgage servicing rights
|
637
|
|
|
355
|
|
|
40,137
|
|
|||
(Purchases) short sales of derivative instruments, net
|
(83,887
|
)
|
|
(103,175
|
)
|
|
(19,240
|
)
|
|||
Proceeds from sales and settlement (payments for termination and settlement) of derivative instruments, net
|
354,822
|
|
|
85,811
|
|
|
76,040
|
|
|||
Proceeds from reverse repurchase agreements
|
4,085,127
|
|
|
—
|
|
|
—
|
|
|||
Repayments of reverse repurchase agreements
|
(4,085,482
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from sales of beneficial interests in securitization trusts
|
—
|
|
|
190,160
|
|
|
—
|
|
|||
Proceeds from repayment of residential mortgage loans held-for-investment in securitization trusts
|
—
|
|
|
332,085
|
|
|
913,894
|
|
|||
Net cash paid for the acquisition of CYS Investments, Inc.
|
(13,552
|
)
|
|
—
|
|
|
—
|
|
|||
Increase (decrease) in due to counterparties, net
|
449,274
|
|
|
(805,158
|
)
|
|
34,665
|
|
|||
Increase (decrease) in other, net
|
44,257
|
|
|
83,976
|
|
|
(11,206
|
)
|
|||
Net cash used in investing activities from discontinued operations
|
—
|
|
|
(813,939
|
)
|
|
(757,393
|
)
|
|||
Net cash provided by (used in) investing activities
|
4,789,998
|
|
|
(9,484,259
|
)
|
|
$
|
(5,670,278
|
)
|
||
Cash Flows From Financing Activities:
|
|
|
|
|
|
||||||
Proceeds from repurchase agreements
|
151,887,922
|
|
|
139,559,059
|
|
|
$
|
111,505,422
|
|
||
Principal payments on repurchase agreements
|
(156,949,180
|
)
|
|
(128,973,036
|
)
|
|
(107,589,163
|
)
|
|||
Proceeds from issuance of collateralized borrowings in securitization trusts
|
—
|
|
|
—
|
|
|
1,877,399
|
|
|||
Principal payments on collateralized borrowings in securitization trusts
|
—
|
|
|
(328,978
|
)
|
|
(832,405
|
)
|
|||
Proceeds from Federal Home Loan Bank advances
|
—
|
|
|
—
|
|
|
215,000
|
|
|||
Principal payments on Federal Home Loan Bank advances
|
(350,000
|
)
|
|
(2,784,976
|
)
|
|
—
|
|
|||
Proceeds from revolving credit facilities
|
397,400
|
|
|
123,000
|
|
|
70,000
|
|
|||
Principal payments on revolving credit facilities
|
(107,400
|
)
|
|
(173,000
|
)
|
|
—
|
|
|||
Proceeds from convertible senior notes
|
—
|
|
|
282,113
|
|
|
—
|
|
|||
Proceeds from issuance of preferred stock, net of offering costs
|
(36
|
)
|
|
702,537
|
|
|
—
|
|
|||
Proceeds from issuance of common stock, net of offering costs
|
215
|
|
|
449
|
|
|
502
|
|
|||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(61,307
|
)
|
|||
Dividends paid on preferred stock
|
(58,394
|
)
|
|
(13,173
|
)
|
|
—
|
|
|||
Dividends paid on common stock
|
(270,626
|
)
|
|
(422,885
|
)
|
|
(331,865
|
)
|
|||
Net cash provided by financing activities from discontinued operations
|
—
|
|
|
1,146,168
|
|
|
391,818
|
|
|||
Net cash (used in) provided by financing activities
|
(5,450,099
|
)
|
|
9,117,278
|
|
|
5,245,401
|
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
42,769
|
|
|
239,800
|
|
|
(185,198
|
)
|
|||
Cash, cash equivalents and restricted cash of continuing operations at beginning of period
|
1,054,995
|
|
|
758,916
|
|
|
944,055
|
|
|||
Cash, cash equivalents and restricted cash of discontinued operations at beginning of period
|
—
|
|
|
56,279
|
|
|
56,338
|
|
|||
Cash, cash equivalents and restricted cash at beginning of period
|
1,054,995
|
|
|
815,195
|
|
|
1,000,393
|
|
|||
Cash, cash equivalents and restricted cash at end of period
|
$
|
1,097,764
|
|
|
$
|
1,054,995
|
|
|
$
|
815,195
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
||||||||
Cash paid for interest
|
$
|
419,878
|
|
|
$
|
227,518
|
|
|
$
|
116,147
|
|
Cash paid (received) for taxes
|
$
|
397
|
|
|
$
|
(856
|
)
|
|
$
|
(5,146
|
)
|
Noncash Activities:
|
|
|
|
|
|
||||||
Acquisition of the assets and liabilities of CYS Investments, Inc.
|
|
|
|
|
|
||||||
Available-for-sale securities
|
$
|
10,034,557
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash and cash equivalents
|
$
|
386
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
|
$
|
1,062
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest receivable
|
$
|
30,646
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Reverse repurchase agreements
|
$
|
761,460
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other assets
|
$
|
11,977
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Repurchase agreements
|
$
|
(8,743,527
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative liabilities, net
|
$
|
(451,026
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Due to counterparties, net
|
$
|
(279,715
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest payable
|
$
|
(27,487
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Other liabilities
|
$
|
(821
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Issuance of preferred stock in connection with the acquisition of CYS Investments, Inc.
|
$
|
275,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Issuance of common stock in connection with the acquisition of CYS Investments, Inc.
|
$
|
1,125,114
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Deconsolidation of the assets and liabilities of variable interest entities
|
|
|
|
|
|
||||||
Residential mortgage loans held-for-investment in securitization trusts
|
$
|
—
|
|
|
$
|
2,894,507
|
|
|
$
|
—
|
|
Accrued interest receivable
|
$
|
—
|
|
|
$
|
15,386
|
|
|
$
|
—
|
|
Collateralized borrowings in securitization trusts
|
$
|
—
|
|
|
$
|
2,920,970
|
|
|
$
|
—
|
|
Accrued interest payable
|
$
|
—
|
|
|
$
|
8,271
|
|
|
$
|
—
|
|
Accrued expenses and other liabilities
|
$
|
—
|
|
|
$
|
10,826
|
|
|
$
|
—
|
|
Recognition of beneficial interests in securitization trusts
|
$
|
—
|
|
|
$
|
59,826
|
|
|
$
|
—
|
|
Distribution of TH Commercial Holdings LLC to Granite Point Mortgage Trust Inc. in exchange for common shares
|
$
|
—
|
|
|
$
|
651,000
|
|
|
$
|
—
|
|
Distribution of Granite Point Mortgage Trust Inc. common stock
|
$
|
—
|
|
|
$
|
650,848
|
|
|
$
|
—
|
|
Transfers of residential mortgage loans held-for-sale to residential mortgage loans held-for-investment in securitization trusts
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,031,226
|
|
Cumulative-effect adjustment to equity for adoption of new accounting principle
|
$
|
9,918
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Dividends declared but not paid at end of period
|
$
|
135,551
|
|
|
$
|
12,552
|
|
|
$
|
83,437
|
|
(dollars in thousands, except per share prices)
|
July 31,
2018 |
||||||
Common Stock Exchange:
|
|
|
|
||||
CYS common stock outstanding
|
155,102,543
|
|
|
|
|||
Common exchange ratio
|
0.4680
|
|
|
|
|||
Two Harbors common stock to be issued
|
72,587,990
|
|
|
|
|||
Less: fractional shares
|
218
|
|
|
|
|||
Two Harbors common stock issued
|
72,587,772
|
|
|
|
|||
Two Harbors share price
|
$
|
15.50
|
|
|
|
||
|
|
|
$
|
1,125,114
|
|
||
Cash in Lieu of Common Stock:
|
|
|
|
||||
Fractional shares
|
218
|
|
|
|
|||
Cash in lieu rate
|
$
|
15.59
|
|
|
|
||
|
|
|
$
|
3
|
|
||
Per Share Cash Consideration:
|
|
|
|
||||
CYS common stock outstanding
|
155,102,543
|
|
|
|
|||
Per share cash consideration
|
0.0965
|
|
|
|
|||
|
|
|
|
$
|
14,967
|
|
|
|
|
|
|
||||
Preferred Stock Exchange:
|
Shares
|
|
|
||||
Series D preferred stock
|
3,000,000
|
|
|
$
|
75,000
|
|
|
Series E preferred stock
|
8,000,000
|
|
|
$
|
200,000
|
|
|
|
|
|
|
||||
Total Purchase Price
|
|
|
$
|
1,415,084
|
|
(in thousands)
|
July 31,
2018 |
||
Assets:
|
|
||
Available-for-sale securities, at fair value
|
$
|
10,034,557
|
|
Cash and cash equivalents
|
386
|
|
|
Restricted cash
|
1,062
|
|
|
Accrued interest receivable
|
30,646
|
|
|
Due from counterparties
|
21,572
|
|
|
Derivative assets, at fair value
|
314,811
|
|
|
Reverse repurchase agreements
|
761,460
|
|
|
Other assets
|
11,947
|
|
|
Total Assets
|
$
|
11,176,441
|
|
Liabilities:
|
|
||
Repurchase agreements
|
$
|
8,743,527
|
|
Derivative liabilities, at fair value
|
765,837
|
|
|
Due to counterparties
|
301,287
|
|
|
Accrued interest payable
|
27,487
|
|
|
Other liabilities
|
821
|
|
|
Total Liabilities
|
9,838,959
|
|
|
Stockholders’ Equity
|
|
||
Cumulative deficit (acquisition transaction costs)
|
(77,602
|
)
|
|
Total Stockholders’ Equity
|
$
|
(77,602
|
)
|
|
|
||
Total Purchase Price
|
$
|
1,415,084
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Agency
|
|
|
|
||||
Federal National Mortgage Association
|
$
|
15,812,696
|
|
|
$
|
13,920,721
|
|
Federal Home Loan Mortgage Corporation
|
4,930,963
|
|
|
3,616,967
|
|
||
Government National Mortgage Association
|
941,374
|
|
|
701,037
|
|
||
Non-Agency
|
3,867,571
|
|
|
2,982,094
|
|
||
Total available-for-sale securities
|
$
|
25,552,604
|
|
|
$
|
21,220,819
|
|
|
December 31, 2018
|
||||||||||||||||||||||||||||||
(in thousands)
|
Principal/ Current Face
|
|
Un-amortized Premium
|
|
Accretable Purchase Discount
|
|
Credit Reserve Purchase Discount
|
|
Amortized Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Carrying Value
|
||||||||||||||||
Agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Principal and interest
|
$
|
20,775,790
|
|
|
$
|
1,037,781
|
|
|
$
|
(25,085
|
)
|
|
$
|
—
|
|
|
$
|
21,788,486
|
|
|
$
|
61,128
|
|
|
$
|
(339,997
|
)
|
|
$
|
21,509,617
|
|
Interest-only
|
3,115,967
|
|
|
209,901
|
|
|
—
|
|
|
—
|
|
|
209,901
|
|
|
14,170
|
|
|
(48,655
|
)
|
|
175,416
|
|
||||||||
Total Agency
|
23,891,757
|
|
|
1,247,682
|
|
|
(25,085
|
)
|
|
—
|
|
|
21,998,387
|
|
|
75,298
|
|
|
(388,652
|
)
|
|
21,685,033
|
|
||||||||
Non-Agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Principal and interest
|
5,360,124
|
|
|
6,682
|
|
|
(694,119
|
)
|
|
(1,322,762
|
)
|
|
3,349,925
|
|
|
478,095
|
|
|
(44,657
|
)
|
|
3,783,363
|
|
||||||||
Interest-only
|
5,137,169
|
|
|
83,846
|
|
|
—
|
|
|
—
|
|
|
83,846
|
|
|
3,655
|
|
|
(3,293
|
)
|
|
84,208
|
|
||||||||
Total Non-Agency
|
10,497,293
|
|
|
90,528
|
|
|
(694,119
|
)
|
|
(1,322,762
|
)
|
|
3,433,771
|
|
|
481,750
|
|
|
(47,950
|
)
|
|
3,867,571
|
|
||||||||
Total
|
$
|
34,389,050
|
|
|
$
|
1,338,210
|
|
|
$
|
(719,204
|
)
|
|
$
|
(1,322,762
|
)
|
|
$
|
25,432,158
|
|
|
$
|
557,048
|
|
|
$
|
(436,602
|
)
|
|
$
|
25,552,604
|
|
|
December 31, 2017
|
||||||||||||||||||||||||||||||
(in thousands)
|
Principal/ Current Face
|
|
Un-amortized Premium
|
|
Accretable Purchase Discount
|
|
Credit Reserve Purchase Discount
|
|
Amortized Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Carrying Value
|
||||||||||||||||
Agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Principal and interest
|
$
|
17,081,849
|
|
|
$
|
1,079,246
|
|
|
$
|
(24,638
|
)
|
|
$
|
—
|
|
|
$
|
18,136,457
|
|
|
$
|
42,149
|
|
|
$
|
(134,969
|
)
|
|
$
|
18,043,637
|
|
Interest-only
|
2,941,772
|
|
|
223,289
|
|
|
—
|
|
|
—
|
|
|
223,289
|
|
|
10,955
|
|
|
(39,156
|
)
|
|
195,088
|
|
||||||||
Total Agency
|
20,023,621
|
|
|
1,302,535
|
|
|
(24,638
|
)
|
|
—
|
|
|
18,359,746
|
|
|
53,104
|
|
|
(174,125
|
)
|
|
18,238,725
|
|
||||||||
Non-Agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Principal and interest
|
3,758,134
|
|
|
2,757
|
|
|
(676,033
|
)
|
|
(653,613
|
)
|
|
2,431,245
|
|
|
488,931
|
|
|
(3,166
|
)
|
|
2,917,010
|
|
||||||||
Interest-only
|
5,614,925
|
|
|
65,667
|
|
|
—
|
|
|
—
|
|
|
65,667
|
|
|
2,163
|
|
|
(2,746
|
)
|
|
65,084
|
|
||||||||
Total Non-Agency
|
9,373,059
|
|
|
68,424
|
|
|
(676,033
|
)
|
|
(653,613
|
)
|
|
2,496,912
|
|
|
491,094
|
|
|
(5,912
|
)
|
|
2,982,094
|
|
||||||||
Total
|
$
|
29,396,680
|
|
|
$
|
1,370,959
|
|
|
$
|
(700,671
|
)
|
|
$
|
(653,613
|
)
|
|
$
|
20,856,658
|
|
|
$
|
544,198
|
|
|
$
|
(180,037
|
)
|
|
$
|
21,220,819
|
|
|
December 31, 2018
|
||||||||||
(in thousands)
|
Agency
|
|
Non-Agency
|
|
Total
|
||||||
Adjustable Rate
|
$
|
19,073
|
|
|
$
|
3,475,171
|
|
|
$
|
3,494,244
|
|
Fixed Rate
|
21,665,960
|
|
|
392,400
|
|
|
22,058,360
|
|
|||
Total
|
$
|
21,685,033
|
|
|
$
|
3,867,571
|
|
|
$
|
25,552,604
|
|
|
December 31, 2017
|
||||||||||
(in thousands)
|
Agency
|
|
Non-Agency
|
|
Total
|
||||||
Adjustable Rate
|
$
|
23,220
|
|
|
$
|
2,622,710
|
|
|
$
|
2,645,930
|
|
Fixed Rate
|
18,215,505
|
|
|
359,384
|
|
|
18,574,889
|
|
|||
Total
|
$
|
18,238,725
|
|
|
$
|
2,982,094
|
|
|
$
|
21,220,819
|
|
|
December 31, 2018
|
||||||||||
(in thousands)
|
Agency
|
|
Non-Agency
|
|
Total
|
||||||
≤ 1 year
|
$
|
6,301
|
|
|
$
|
97,955
|
|
|
$
|
104,256
|
|
> 1 and ≤ 3 years
|
124,121
|
|
|
135,457
|
|
|
259,578
|
|
|||
> 3 and ≤ 5 years
|
260,886
|
|
|
428,851
|
|
|
689,737
|
|
|||
> 5 and ≤ 10 years
|
19,550,827
|
|
|
2,582,835
|
|
|
22,133,662
|
|
|||
> 10 years
|
1,742,898
|
|
|
622,473
|
|
|
2,365,371
|
|
|||
Total
|
$
|
21,685,033
|
|
|
$
|
3,867,571
|
|
|
$
|
25,552,604
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||
|
2018
|
|
2017
|
||||||||||||||||||||
(in thousands)
|
Designated Credit Reserve
|
|
Net Unamortized Discount/Premium
|
|
Total
|
|
Designated Credit Reserve
|
|
Net Unamortized Discount/Premium
|
|
Total
|
||||||||||||
Beginning balance at January 1
|
$
|
(653,613
|
)
|
|
$
|
(607,609
|
)
|
|
$
|
(1,261,222
|
)
|
|
$
|
(367,437
|
)
|
|
$
|
(623,440
|
)
|
|
$
|
(990,877
|
)
|
Acquisitions
|
(737,765
|
)
|
|
(60,894
|
)
|
|
(798,659
|
)
|
|
(373,051
|
)
|
|
(57,732
|
)
|
|
(430,783
|
)
|
||||||
Accretion of net discount
|
—
|
|
|
89,111
|
|
|
89,111
|
|
|
—
|
|
|
88,037
|
|
|
88,037
|
|
||||||
Realized credit losses
|
26,457
|
|
|
—
|
|
|
26,457
|
|
|
17,539
|
|
|
—
|
|
|
17,539
|
|
||||||
Reclassification adjustment for other-than-temporary impairments
|
(470
|
)
|
|
—
|
|
|
(470
|
)
|
|
(789
|
)
|
|
—
|
|
|
(789
|
)
|
||||||
Transfers from (to)
|
42,629
|
|
|
(42,629
|
)
|
|
—
|
|
|
66,537
|
|
|
(66,537
|
)
|
|
—
|
|
||||||
Sales, calls, other
|
—
|
|
|
18,430
|
|
|
18,430
|
|
|
3,588
|
|
|
52,063
|
|
|
55,651
|
|
||||||
Ending balance at December 31
|
$
|
(1,322,762
|
)
|
|
$
|
(603,591
|
)
|
|
$
|
(1,926,353
|
)
|
|
$
|
(653,613
|
)
|
|
$
|
(607,609
|
)
|
|
$
|
(1,261,222
|
)
|
|
Unrealized Loss Position for
|
||||||||||||||||||||||
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
(in thousands)
|
Estimated Fair Value
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
|
Gross Unrealized Losses
|
||||||||||||
December 31, 2018
|
$
|
4,386,946
|
|
|
$
|
(66,520
|
)
|
|
$
|
9,501,123
|
|
|
$
|
(370,082
|
)
|
|
$
|
13,888,069
|
|
|
$
|
(436,602
|
)
|
December 31, 2017
|
$
|
12,198,870
|
|
|
$
|
(65,313
|
)
|
|
$
|
2,464,544
|
|
|
$
|
(114,724
|
)
|
|
$
|
14,663,414
|
|
|
$
|
(180,037
|
)
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Cumulative credit loss at beginning of period
|
$
|
(6,395
|
)
|
|
$
|
(5,606
|
)
|
|
$
|
(6,499
|
)
|
Additions:
|
|
|
|
|
|
||||||
Other-than-temporary impairments not previously recognized
|
(264
|
)
|
|
(429
|
)
|
|
(1,307
|
)
|
|||
Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments
|
(206
|
)
|
|
(360
|
)
|
|
(515
|
)
|
|||
Reductions:
|
|
|
|
|
|
||||||
Decreases related to other-than-temporary impairments on securities paid down
|
—
|
|
|
—
|
|
|
1,387
|
|
|||
Decreases related to other-than-temporary impairments on securities sold
|
—
|
|
|
—
|
|
|
1,328
|
|
|||
Cumulative credit loss at end of period
|
$
|
(6,865
|
)
|
|
$
|
(6,395
|
)
|
|
$
|
(5,606
|
)
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Gross realized gains
|
$
|
70,076
|
|
|
$
|
67,764
|
|
|
$
|
97,049
|
|
Gross realized losses
|
(419,638
|
)
|
|
(100,255
|
)
|
|
(223,277
|
)
|
|||
Total realized losses on sales, net
|
$
|
(349,562
|
)
|
|
$
|
(32,491
|
)
|
|
$
|
(126,228
|
)
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at beginning of period
|
$
|
1,086,717
|
|
|
$
|
693,815
|
|
|
$
|
493,688
|
|
Additions from purchases of mortgage servicing rights
|
988,283
|
|
|
499,866
|
|
|
312,580
|
|
|||
Additions from sales of residential mortgage loans
|
—
|
|
|
20
|
|
|
924
|
|
|||
Subtractions from sales of mortgage servicing rights
|
—
|
|
|
(946
|
)
|
|
(61,511
|
)
|
|||
Changes in fair value due to:
|
|
|
|
|
|
||||||
Changes in valuation inputs or assumptions used in the valuation model
|
80,209
|
|
|
6,339
|
|
|
16,572
|
|
|||
Other changes in fair value (1)
|
(149,879
|
)
|
|
(96,781
|
)
|
|
(78,729
|
)
|
|||
Other changes (2)
|
(11,890
|
)
|
|
(15,596
|
)
|
|
10,291
|
|
|||
Balance at end of period
|
$
|
1,993,440
|
|
|
$
|
1,086,717
|
|
|
$
|
693,815
|
|
(1)
|
Other changes in fair value primarily represents changes due to the realization of expected cash flows.
|
(2)
|
Other changes includes purchase price adjustments, contractual prepayment protection, and changes due to the Company’s purchase of the underlying collateral.
|
(dollars in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Weighted average prepayment speed:
|
8.6
|
%
|
|
9.8
|
%
|
||
Impact on fair value of 10% adverse change
|
$
|
(67,245
|
)
|
|
$
|
(40,100
|
)
|
Impact on fair value of 20% adverse change
|
$
|
(130,371
|
)
|
|
$
|
(77,483
|
)
|
Weighted average delinquency:
|
1.3
|
%
|
|
1.7
|
%
|
||
Impact on fair value of 10% adverse change
|
$
|
(6,911
|
)
|
|
$
|
(4,274
|
)
|
Impact on fair value of 20% adverse change
|
$
|
(13,688
|
)
|
|
$
|
(8,875
|
)
|
Weighted average discount rate:
|
9.4
|
%
|
|
9.9
|
%
|
||
Impact on fair value of 10% adverse change
|
$
|
(62,528
|
)
|
|
$
|
(35,137
|
)
|
Impact on fair value of 20% adverse change
|
$
|
(121,135
|
)
|
|
$
|
(68,246
|
)
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Servicing fee income
|
$
|
312,100
|
|
|
$
|
197,902
|
|
|
$
|
138,430
|
|
Ancillary and other fee income
|
1,280
|
|
|
1,009
|
|
|
1,631
|
|
|||
Float income
|
29,716
|
|
|
10,154
|
|
|
3,518
|
|
|||
Total
|
$
|
343,096
|
|
|
$
|
209,065
|
|
|
$
|
143,579
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||
(dollars in thousands)
|
Number of Loans
|
|
Unpaid Principal Balance
|
|
Number of Loans
|
|
Unpaid Principal Balance
|
||||||
Mortgage servicing rights
|
717,167
|
|
|
$
|
163,102,308
|
|
|
454,028
|
|
|
$
|
101,344,054
|
|
Residential mortgage loans in securitization trusts
|
3,612
|
|
|
2,392,471
|
|
|
3,845
|
|
|
2,618,016
|
|
||
Other assets
|
220
|
|
|
34,374
|
|
|
260
|
|
|
40,222
|
|
||
Total serviced mortgage assets
|
720,999
|
|
|
$
|
165,529,153
|
|
|
458,133
|
|
|
$
|
104,002,292
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Restricted cash balances held by trading counterparties:
|
|
|
|
||||
For securities and loan trading activity
|
$
|
51,350
|
|
|
$
|
27,050
|
|
For derivatives trading activity
|
219,900
|
|
|
191,421
|
|
||
As restricted collateral for repurchase agreements and Federal Home Loan Bank advances
|
416,696
|
|
|
417,018
|
|
||
Total restricted cash balances held by trading counterparties
|
687,946
|
|
|
635,489
|
|
||
Restricted cash balance pursuant to letter of credit on office lease
|
60
|
|
|
347
|
|
||
Total
|
$
|
688,006
|
|
|
$
|
635,836
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Cash and cash equivalents
|
$
|
409,758
|
|
|
$
|
419,159
|
|
Restricted cash
|
688,006
|
|
|
635,836
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
1,097,764
|
|
|
$
|
1,054,995
|
|
|
|
December 31, 2018
|
||||||||||||||
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||||
(in thousands)
|
|
Fair Value
|
|
Notional
|
|
Fair Value
|
|
Notional
|
||||||||
Inverse interest-only securities
|
|
$
|
70,813
|
|
|
$
|
476,299
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
187,231
|
|
|
26,798,605
|
|
|
—
|
|
|
2,725,000
|
|
||||
Interest rate cap contracts
|
|
40,335
|
|
|
2,500,000
|
|
|
—
|
|
|
—
|
|
||||
Swaptions, net
|
|
—
|
|
|
—
|
|
|
(13,456
|
)
|
|
63,000
|
|
||||
TBAs
|
|
21,602
|
|
|
6,484,000
|
|
|
—
|
|
|
—
|
|
||||
Put and call options for TBAs, net
|
|
—
|
|
|
—
|
|
|
(25,296
|
)
|
|
1,767,000
|
|
||||
Markit IOS total return swaps
|
|
—
|
|
|
—
|
|
|
(383
|
)
|
|
48,265
|
|
||||
Short U.S. Treasuries
|
|
—
|
|
|
—
|
|
|
(781,455
|
)
|
|
800,000
|
|
||||
Total
|
|
$
|
319,981
|
|
|
$
|
36,258,904
|
|
|
$
|
(820,590
|
)
|
|
$
|
5,403,265
|
|
|
|
December 31, 2017
|
||||||||||||||
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||||
(in thousands)
|
|
Fair Value
|
|
Notional
|
|
Fair Value
|
|
Notional
|
||||||||
Inverse interest-only securities
|
|
$
|
91,827
|
|
|
$
|
588,246
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
206,773
|
|
|
21,516,125
|
|
|
(29,867
|
)
|
|
6,966,000
|
|
||||
Swaptions, net
|
|
10,405
|
|
|
2,666,000
|
|
|
—
|
|
|
—
|
|
||||
TBAs
|
|
913
|
|
|
733,000
|
|
|
(1,930
|
)
|
|
1,306,000
|
|
||||
Markit IOS total return swaps
|
|
—
|
|
|
—
|
|
|
(106
|
)
|
|
63,507
|
|
||||
Total
|
|
$
|
309,918
|
|
|
$
|
25,503,371
|
|
|
$
|
(31,903
|
)
|
|
$
|
8,335,507
|
|
Derivative Instruments
|
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
|
Amount of Gain (Loss) Recognized in Income on Derivatives
|
||||||||||
|
|
|
|
Year Ended
|
||||||||||
(in thousands)
|
|
|
|
December 31,
|
||||||||||
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Interest rate risk management
|
|
|
|
|
|
|
||||||||
TBAs
|
|
(Loss) gain on other derivative instruments
|
|
$
|
(12,521
|
)
|
|
$
|
(46,778
|
)
|
|
$
|
51,816
|
|
Short U.S. Treasuries
|
|
(Loss) gain on other derivative instruments
|
|
(26,988
|
)
|
|
—
|
|
|
—
|
|
|||
Put and call options for TBAs
|
|
(Loss) gain on other derivative instruments
|
|
(18,457
|
)
|
|
(22,623
|
)
|
|
64,920
|
|
|||
Interest rate swaps - Payers
|
|
Gain (loss) on interest rate swap, cap and swaption agreements
|
|
48,995
|
|
|
67,124
|
|
|
(3,110
|
)
|
|||
Interest rate swaps - Receivers
|
|
Gain (loss) on interest rate swap, cap and swaption agreements
|
|
(74,407
|
)
|
|
(17,677
|
)
|
|
37,272
|
|
|||
Swaptions
|
|
Gain (loss) on interest rate swap, cap and swaption agreements
|
|
45,954
|
|
|
(59,200
|
)
|
|
11,209
|
|
|||
Interest rate caps
|
|
Gain (loss) on interest rate swap, cap and swaption agreements
|
|
(4,499
|
)
|
|
—
|
|
|
—
|
|
|||
Markit IOS total return swaps
|
|
(Loss) gain on other derivative instruments
|
|
125
|
|
|
(870
|
)
|
|
(36,898
|
)
|
|||
Credit risk management
|
|
|
|
|
|
|
|
|
||||||
Credit default swaps - Receive protection
|
|
(Loss) gain on other derivative instruments
|
|
—
|
|
|
—
|
|
|
962
|
|
|||
Non-risk management
|
|
|
|
|
|
|
|
|
||||||
Inverse interest-only securities
|
|
(Loss) gain on other derivative instruments
|
|
2,984
|
|
|
112
|
|
|
18,579
|
|
|||
Forward purchase commmitments
|
|
(Loss) gain on other derivative instruments
|
|
—
|
|
|
—
|
|
|
2,418
|
|
|||
Total
|
|
|
|
$
|
(38,814
|
)
|
|
$
|
(79,912
|
)
|
|
$
|
147,168
|
|
|
Year Ended December 31, 2018
|
||||||||||||||||||||||
(in thousands)
|
Beginning of Period Notional Amount
|
|
Additions
|
|
Settlement, Termination, Expiration or Exercise
|
|
End of Period Notional Amount
|
|
Average Notional Amount
|
|
Realized Gain (Loss), net (1)
|
||||||||||||
Inverse interest-only securities
|
$
|
588,246
|
|
|
$
|
—
|
|
|
$
|
(111,947
|
)
|
|
$
|
476,299
|
|
|
$
|
530,509
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
28,482,125
|
|
|
49,269,781
|
|
|
(48,228,301
|
)
|
|
29,523,605
|
|
|
28,317,793
|
|
|
(71,578
|
)
|
||||||
Interest rate cap contracts
|
—
|
|
|
2,500,000
|
|
|
—
|
|
|
2,500,000
|
|
|
1,054,795
|
|
|
—
|
|
||||||
Swaptions, net
|
2,666,000
|
|
|
(35,000
|
)
|
|
(2,568,000
|
)
|
|
63,000
|
|
|
(1,495,421
|
)
|
|
67,985
|
|
||||||
TBAs, net
|
(573,000
|
)
|
|
64,988,000
|
|
|
(57,931,000
|
)
|
|
6,484,000
|
|
|
4,502,888
|
|
|
(35,140
|
)
|
||||||
Short U.S. Treasuries
|
—
|
|
|
(800,000
|
)
|
|
—
|
|
|
(800,000
|
)
|
|
(337,534
|
)
|
|
—
|
|
||||||
Put and call options for TBAs, net
|
—
|
|
|
(451,000
|
)
|
|
(1,316,000
|
)
|
|
(1,767,000
|
)
|
|
(804,997
|
)
|
|
6,839
|
|
||||||
Markit IOS total return swaps
|
63,507
|
|
|
—
|
|
|
(15,242
|
)
|
|
48,265
|
|
|
55,143
|
|
|
(765
|
)
|
||||||
Total
|
$
|
31,226,878
|
|
|
$
|
115,471,781
|
|
|
$
|
(110,170,490
|
)
|
|
$
|
36,528,169
|
|
|
$
|
31,823,176
|
|
|
$
|
(32,659
|
)
|
|
Year Ended December 31, 2017
|
||||||||||||||||||||||
(in thousands)
|
Beginning of Period Notional Amount
|
|
Additions
|
|
Settlement, Termination, Expiration or Exercise
|
|
End of Period Notional Amount
|
|
Average Notional Amount
|
|
Realized Gain (Loss), net (1)
|
||||||||||||
Inverse interest-only securities
|
$
|
740,844
|
|
|
$
|
—
|
|
|
$
|
(152,598
|
)
|
|
$
|
588,246
|
|
|
$
|
662,273
|
|
|
$
|
(40
|
)
|
Interest rate swap agreements
|
20,371,063
|
|
|
36,642,245
|
|
|
(28,531,183
|
)
|
|
28,482,125
|
|
|
19,447,067
|
|
|
54,476
|
|
||||||
Swaptions, net
|
225,000
|
|
|
4,306,000
|
|
|
(1,865,000
|
)
|
|
2,666,000
|
|
|
1,014,578
|
|
|
8,694
|
|
||||||
TBAs, net
|
(1,489,000
|
)
|
|
(7,249,400
|
)
|
|
8,165,400
|
|
|
(573,000
|
)
|
|
(1,256,424
|
)
|
|
(51,810
|
)
|
||||||
Put and call options for TBAs, net
|
(1,136,000
|
)
|
|
4,460,000
|
|
|
(3,324,000
|
)
|
|
—
|
|
|
11,978
|
|
|
20,010
|
|
||||||
Markit IOS total return swaps
|
90,593
|
|
|
—
|
|
|
(27,086
|
)
|
|
63,507
|
|
|
74,183
|
|
|
(181
|
)
|
||||||
Total
|
$
|
18,802,500
|
|
|
$
|
38,158,845
|
|
|
$
|
(25,734,467
|
)
|
|
$
|
31,226,878
|
|
|
$
|
19,953,655
|
|
|
$
|
31,149
|
|
(1)
|
Excludes net interest paid or received in full settlement of the net interest spread liability.
|
|
December 31, 2018
|
||||||||||||||||||
|
|
|
|
|
|
|
Net Carrying Value (4)
|
||||||||||||
(in thousands)
|
Notional Amount (1)
|
|
Cost Basis (2)
|
|
Market Value (3)
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||
Purchase contracts
|
$
|
6,484,000
|
|
|
$
|
6,734,858
|
|
|
$
|
6,756,460
|
|
|
$
|
21,602
|
|
|
$
|
—
|
|
Sale contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
TBAs, net
|
$
|
6,484,000
|
|
|
$
|
6,734,858
|
|
|
$
|
6,756,460
|
|
|
$
|
21,602
|
|
|
$
|
—
|
|
|
December 31, 2017
|
||||||||||||||||||
|
|
|
|
|
|
|
Net Carrying Value (4)
|
||||||||||||
(in thousands)
|
Notional Amount (1)
|
|
Cost Basis (2)
|
|
Market Value (3)
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||
Purchase contracts
|
$
|
733,000
|
|
|
$
|
769,446
|
|
|
$
|
770,359
|
|
|
$
|
913
|
|
|
$
|
—
|
|
Sale contracts
|
(1,306,000
|
)
|
|
(1,316,368
|
)
|
|
(1,318,297
|
)
|
|
—
|
|
|
(1,930
|
)
|
|||||
TBAs, net
|
$
|
(573,000
|
)
|
|
$
|
(546,922
|
)
|
|
$
|
(547,938
|
)
|
|
$
|
913
|
|
|
$
|
(1,930
|
)
|
(1)
|
Notional amount represents the face amount of the underlying Agency RMBS.
|
(2)
|
Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.
|
(3)
|
Market value represents the current market value of the TBA (or of the underlying Agency RMBS) as of period-end.
|
(4)
|
Net carrying value represents the difference between the market value of the TBA as of period-end and its cost basis, and is reported in derivative assets / (liabilities), at fair value, in the consolidated balance sheets.
|
(notional in thousands)
|
|
|
|
|
|
|
||||||
December 31, 2017
|
||||||||||||
Swaps Maturities
|
|
Notional Amount (1)
|
|
Weighted Average Fixed Pay Rate (2)
|
|
Weighted Average Receive Rate (2)
|
|
Weighted Average Maturity (Years) (2)
|
||||
2018
|
|
$
|
4,320,000
|
|
|
1.155
|
%
|
|
1.508
|
%
|
|
0.50
|
2019
|
|
5,448,135
|
|
|
1.767
|
%
|
|
1.386
|
%
|
|
1.79
|
|
2020
|
|
5,490,000
|
|
|
1.945
|
%
|
|
1.509
|
%
|
|
2.87
|
|
2021
|
|
2,417,000
|
|
|
1.788
|
%
|
|
1.628
|
%
|
|
3.92
|
|
2022 and Thereafter
|
|
5,245,000
|
|
|
1.764
|
%
|
|
1.516
|
%
|
|
6.44
|
|
Total
|
|
$
|
22,920,135
|
|
|
1.694
|
%
|
|
1.493
|
%
|
|
3.01
|
(1)
|
Notional amount includes $572.0 million and $570.0 million in forward starting interest rate swaps as of December 31, 2018 and December 31, 2017, respectively.
|
(2)
|
Weighted averages exclude forward starting interest rate swaps. As of December 31, 2018 and December 31, 2017, the weighted average fixed pay rate on forward starting interest rate swaps was 2.8% and 2.1%, respectively.
|
(notional in thousands)
|
|
|
|
|
|
|
||||||
December 31, 2018
|
||||||||||||
Swaps Maturities
|
|
Notional Amounts
|
|
Weighted Average Pay Rate
|
|
Weighted Average Fixed Receive Rate
|
|
Weighted Average Maturity (Years)
|
||||
2020
|
|
$
|
250,000
|
|
|
2.469
|
%
|
|
2.258
|
%
|
|
1.06
|
2021
|
|
$
|
2,477,438
|
|
|
2.538
|
%
|
|
2.736
|
%
|
|
2.24
|
2022
|
|
800,000
|
|
|
2.653
|
%
|
|
2.975
|
%
|
|
3.39
|
|
2023 and Thereafter
|
|
4,590,000
|
|
|
2.653
|
%
|
|
2.757
|
%
|
|
7.37
|
|
Total
|
|
$
|
8,117,438
|
|
|
2.612
|
%
|
|
2.757
|
%
|
|
5.22
|
(notional in thousands)
|
|
|
|
|
|
|
||||||
December 31, 2017
|
||||||||||||
Swaps Maturities
|
|
Notional Amounts
|
|
Weighted Average Pay Rate
|
|
Weighted Average Fixed Receive Rate
|
|
Weighted Average Maturity (Years)
|
||||
2020
|
|
$
|
200,000
|
|
|
1.391
|
%
|
|
1.642
|
%
|
|
2.60
|
2021
|
|
500,000
|
|
|
1.357
|
%
|
|
1.327
|
%
|
|
3.05
|
|
2022 and Thereafter
|
|
4,861,990
|
|
|
1.475
|
%
|
|
2.325
|
%
|
|
8.34
|
|
Total
|
|
$
|
5,561,990
|
|
|
1.462
|
%
|
|
2.211
|
%
|
|
7.66
|
|
|
December 31, 2018
|
|||||||||||||||||||||||
(notional and dollars in thousands)
|
|
Option
|
|
Underlying Swap
|
|||||||||||||||||||||
Swaption
|
|
Expiration
|
|
Cost Basis
|
|
Fair Value
|
|
Average Months to Expiration
|
|
Notional Amount
|
|
Average Pay Rate
|
|
Average Receive Rate
|
|
Average Term (Years)
|
|||||||||
Purchase contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Payer
|
|
< 6 Months
|
|
$
|
4,855
|
|
|
$
|
2,430
|
|
|
5.13
|
|
|
$
|
900,000
|
|
|
3.16
|
%
|
|
3M Libor
|
|
10.0
|
|
Payer
|
|
≥ 6 Months
|
|
8,400
|
|
|
5,992
|
|
|
8.60
|
|
|
800,000
|
|
|
3.14
|
%
|
|
3M Libor
|
|
10.0
|
||||
Total Payer
|
|
|
|
$
|
13,255
|
|
|
$
|
8,422
|
|
|
7.92
|
|
|
$
|
1,700,000
|
|
|
3.15
|
%
|
|
3M Libor
|
|
10.0
|
|
Sale contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Receiver
|
|
< 6 Months
|
|
$
|
(4,855
|
)
|
|
$
|
(9,001
|
)
|
|
4.74
|
|
|
$
|
(845,000
|
)
|
|
3M Libor
|
|
2.66
|
%
|
|
10.0
|
|
Receiver
|
|
≥ 6 Months
|
|
$
|
(8,400
|
)
|
|
$
|
(12,877
|
)
|
|
8.60
|
|
|
$
|
(792,000
|
)
|
|
3M Libor
|
|
2.64
|
%
|
|
10.0
|
|
Total Receiver
|
|
|
|
$
|
(13,255
|
)
|
|
$
|
(21,878
|
)
|
|
7.52
|
|
|
$
|
(1,637,000
|
)
|
|
3M Libor
|
|
2.65
|
%
|
|
10.0
|
|
|
December 31, 2017
|
|||||||||||||||||||||||
(notional and dollars in thousands)
|
|
Option
|
|
Underlying Swap
|
|||||||||||||||||||||
Swaption
|
|
Expiration
|
|
Cost
|
|
Fair Value
|
|
Average Months to Expiration
|
|
Notional Amount
|
|
Average Fixed Pay Rate
|
|
Average Receive Rate
|
|
Average Term (Years)
|
|||||||||
Purchase contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Payer
|
|
< 6 Months
|
|
$
|
21,380
|
|
|
$
|
17,736
|
|
|
4.03
|
|
|
$
|
7,200,000
|
|
|
2.27
|
%
|
|
3M Libor
|
|
3.8
|
|
Receiver
|
|
< 6 Months
|
|
$
|
4,660
|
|
|
$
|
2,982
|
|
|
3.72
|
|
|
$
|
2,300,000
|
|
|
3M Libor
|
|
2.10
|
%
|
|
10.0
|
|
Sale contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Payer
|
|
< 6 Months
|
|
$
|
(7,950
|
)
|
|
$
|
(5,619
|
)
|
|
4.66
|
|
|
$
|
(1,693,000
|
)
|
|
2.70
|
%
|
|
3M Libor
|
|
10.0
|
|
Receiver
|
|
< 6 Months
|
|
$
|
(16,260
|
)
|
|
$
|
(4,694
|
)
|
|
5.17
|
|
|
$
|
(5,141,000
|
)
|
|
3M Libor
|
|
1.89
|
%
|
|
5.6
|
(notional and dollars in thousands)
|
|
|
|
|
|
|||||||||||
December 31, 2017
|
||||||||||||||||
Maturity Date
|
|
Current Notional Amount
|
|
Fair Value
|
|
Cost Basis
|
|
Unrealized Gain (Loss)
|
||||||||
January 12, 2043
|
|
$
|
(24,362
|
)
|
|
$
|
(24
|
)
|
|
$
|
201
|
|
|
$
|
(225
|
)
|
January 12, 2044
|
|
(39,145
|
)
|
|
(82
|
)
|
|
366
|
|
|
(448
|
)
|
||||
Total
|
|
$
|
(63,507
|
)
|
|
$
|
(106
|
)
|
|
$
|
567
|
|
|
$
|
(673
|
)
|
|
December 31, 2018
|
||||||||||||||||||||||
|
|
|
|
|
|
|
Gross Amounts Not Offset with Financial Assets (Liabilities) in the Consolidated Balance Sheets (1)
|
|
|
||||||||||||||
(in thousands)
|
Gross Amounts of Recognized Assets (Liabilities)
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts of Assets (Liabilities) Presented in the Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral (Received) Pledged
|
|
Net Amount
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative assets
|
$
|
599,573
|
|
|
$
|
(279,592
|
)
|
|
$
|
319,981
|
|
|
$
|
(58,775
|
)
|
|
$
|
—
|
|
|
$
|
261,206
|
|
Reverse repurchase agreements
|
761,815
|
|
|
$
|
—
|
|
|
$
|
761,815
|
|
|
(761,815
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
||
Total Assets
|
$
|
1,361,388
|
|
|
$
|
(279,592
|
)
|
|
$
|
1,081,796
|
|
|
$
|
(820,590
|
)
|
|
$
|
—
|
|
|
$
|
261,206
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Repurchase agreements
|
$
|
(23,133,476
|
)
|
|
$
|
—
|
|
|
$
|
(23,133,476
|
)
|
|
$
|
23,133,476
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative liabilities
|
(1,100,182
|
)
|
|
279,592
|
|
|
(820,590
|
)
|
|
820,590
|
|
|
—
|
|
|
—
|
|
||||||
Total Liabilities
|
$
|
(24,233,658
|
)
|
|
$
|
279,592
|
|
|
$
|
(23,954,066
|
)
|
|
$
|
23,954,066
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
December 31, 2017
|
||||||||||||||||||||||
|
|
|
|
|
|
|
Gross Amounts Not Offset with Financial Assets (Liabilities) in the Consolidated Balance Sheets (1)
|
|
|
||||||||||||||
(in thousands)
|
Gross Amounts of Recognized Assets (Liabilities)
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts of Assets (Liabilities) Presented in the Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral (Received) Pledged
|
|
Net Amount
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative assets
|
$
|
340,576
|
|
|
$
|
(30,658
|
)
|
|
$
|
309,918
|
|
|
$
|
(31,903
|
)
|
|
$
|
—
|
|
|
$
|
278,015
|
|
Total Assets
|
$
|
340,576
|
|
|
$
|
(30,658
|
)
|
|
$
|
309,918
|
|
|
$
|
(31,903
|
)
|
|
$
|
—
|
|
|
$
|
278,015
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Repurchase agreements
|
$
|
(19,451,207
|
)
|
|
$
|
—
|
|
|
$
|
(19,451,207
|
)
|
|
$
|
19,451,207
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative liabilities
|
(62,561
|
)
|
|
30,658
|
|
|
(31,903
|
)
|
|
31,903
|
|
|
—
|
|
|
—
|
|
||||||
Total Liabilities
|
$
|
(19,513,768
|
)
|
|
$
|
30,658
|
|
|
$
|
(19,483,110
|
)
|
|
$
|
19,483,110
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
Amounts presented are limited in total to the net amount of assets or liabilities presented in the consolidated balance sheets by instrument. Excess cash collateral or financial assets that are pledged to counterparties may exceed the financial liabilities subject to a master netting arrangement or similar agreement, or counterparties may have pledged excess cash collateral to the Company that exceed the corresponding financial assets. These excess amounts are excluded from the table above, although separately reported within restricted cash, due from counterparties, or due to counterparties in the Company’s consolidated balance sheets.
|
Level 1
|
Inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date under current market conditions. Additionally, the entity must have the ability to access the active market and the quoted prices cannot be adjusted by the entity.
|
Level 2
|
Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full-term of the assets or liabilities.
|
Level 3
|
Unobservable inputs are supported by little or no market activity. The unobservable inputs represent the assumptions that market participants would use to price the assets and liabilities, including risk. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.
|
|
Recurring Fair Value Measurements
|
||||||||||||||
|
December 31, 2018
|
||||||||||||||
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Available-for-sale securities
|
$
|
—
|
|
|
$
|
25,447,447
|
|
|
$
|
105,157
|
|
|
$
|
25,552,604
|
|
Mortgage servicing rights
|
—
|
|
|
—
|
|
|
1,993,440
|
|
|
1,993,440
|
|
||||
Derivative assets
|
21,602
|
|
|
298,379
|
|
|
—
|
|
|
319,981
|
|
||||
Total assets
|
$
|
21,602
|
|
|
$
|
25,745,826
|
|
|
$
|
2,098,597
|
|
|
$
|
27,866,025
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
$
|
—
|
|
|
$
|
820,590
|
|
|
$
|
—
|
|
|
$
|
820,590
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
820,590
|
|
|
$
|
—
|
|
|
$
|
820,590
|
|
|
Recurring Fair Value Measurements
|
||||||||||||||
|
December 31, 2017
|
||||||||||||||
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Available-for-sale securities
|
$
|
—
|
|
|
$
|
21,067,678
|
|
|
$
|
153,141
|
|
|
$
|
21,220,819
|
|
Mortgage servicing rights
|
—
|
|
|
—
|
|
|
1,086,717
|
|
|
1,086,717
|
|
||||
Derivative assets
|
913
|
|
|
309,005
|
|
|
—
|
|
|
309,918
|
|
||||
Other assets
|
29,413
|
|
|
—
|
|
|
—
|
|
|
29,413
|
|
||||
Total assets
|
$
|
30,326
|
|
|
$
|
21,376,683
|
|
|
$
|
1,239,858
|
|
|
$
|
22,646,867
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
1,930
|
|
|
29,973
|
|
|
—
|
|
|
31,903
|
|
||||
Total liabilities
|
$
|
1,930
|
|
|
$
|
29,973
|
|
|
$
|
—
|
|
|
$
|
31,903
|
|
|
Year Ended
|
||||||
|
December 31, 2018
|
||||||
(in thousands)
|
Available-For-Sale Securities
|
|
Mortgage Servicing Rights
|
||||
Beginning of period level 3 fair value
|
$
|
153,141
|
|
|
$
|
1,086,717
|
|
Gains (losses) included in net (loss) income:
|
|
|
|
||||
Realized gains and losses, net
|
(2,538
|
)
|
|
(149,242
|
)
|
||
Unrealized gains and losses, net
|
—
|
|
|
80,209
|
|
||
Net gains (losses) included in net (loss) income
|
(2,538
|
)
|
|
(69,033
|
)
|
||
Other comprehensive (loss) income
|
(1,960
|
)
|
|
—
|
|
||
Purchases
|
17,861
|
|
|
988,283
|
|
||
Sales
|
—
|
|
|
(637
|
)
|
||
Settlements
|
(153,000
|
)
|
|
(11,890
|
)
|
||
Gross transfers into level 3
|
91,653
|
|
|
—
|
|
||
Gross transfers out of level 3
|
—
|
|
|
—
|
|
||
End of period level 3 fair value
|
$
|
105,157
|
|
|
$
|
1,993,440
|
|
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period
|
—
|
|
|
$
|
68,518
|
|
|
Change in unrealized gains or losses for the period included in other comprehensive (loss) income for assets held at the end of the reporting period
|
(1,818
|
)
|
|
$
|
—
|
|
|
Year Ended
|
||||||
|
December 31, 2017
|
||||||
(in thousands)
|
Available-For-Sale Securities
|
|
Mortgage Servicing Rights
|
||||
Beginning of period level 3 fair value
|
$
|
—
|
|
|
$
|
693,815
|
|
Gains (losses) included in net (loss) income:
|
|
|
|
||||
Realized gains and (losses), net
|
—
|
|
|
(97,372
|
)
|
||
Unrealized gains and (losses), net
|
—
|
|
|
6,339
|
|
||
Net gains (losses) included in net (loss) income
|
—
|
|
|
(91,033
|
)
|
||
Other comprehensive (loss) income
|
141
|
|
|
—
|
|
||
Purchases
|
153,000
|
|
|
499,886
|
|
||
Sales
|
—
|
|
|
(355
|
)
|
||
Settlements
|
—
|
|
|
(15,596
|
)
|
||
Gross transfers into level 3
|
—
|
|
|
—
|
|
||
Gross transfers out of level 3
|
—
|
|
|
—
|
|
||
End of period level 3 fair value
|
$
|
153,141
|
|
|
$
|
1,086,717
|
|
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period
|
$
|
—
|
|
|
$
|
5,870
|
|
Change in unrealized gains or losses for the period included in other comprehensive (loss) income for assets held at the end of the reporting period
|
141
|
|
|
$
|
—
|
|
(1)
|
The change in unrealized gains or losses on MSR was recorded in loss on servicing asset on the consolidated statements of comprehensive (loss) income.
|
(2)
|
The change in unrealized gains or losses on MSR that were held at the end of the reporting period was recorded in loss on servicing asset on the consolidated statements of comprehensive (loss) income.
|
December 31, 2018
|
|||||||||
Valuation Technique
|
|
Unobservable Input (1)
|
|
Range
|
|
Weighted Average (2)
|
|||
Discounted cash flow
|
|
Constant prepayment speed
|
|
7.6
|
-
|
9.6
|
%
|
|
8.6%
|
|
|
Delinquency
|
|
1.0
|
-
|
1.5
|
%
|
|
1.3%
|
|
|
Discount rate
|
|
8.2
|
-
|
10.7
|
%
|
|
9.4%
|
December 31, 2017
|
|||||||||
Valuation Technique
|
|
Unobservable Input (1)
|
|
Range
|
|
Weighted Average (2)
|
|||
Discounted cash flow
|
|
Constant prepayment speed
|
|
8.2
|
-
|
11.2
|
%
|
|
9.8%
|
|
|
Delinquency
|
|
1.3
|
-
|
2.0
|
%
|
|
1.7%
|
|
|
Discount rate
|
|
8.3
|
-
|
11.2
|
%
|
|
9.9%
|
(1)
|
Significant increases (decreases) in any of the inputs in isolation may result in significantly lower (higher) fair value measurement. A change in the assumption used for discount rates may be accompanied by a directionally similar change in the assumption used for the probability of delinquency and a directionally opposite change in the assumption used for prepayment rates.
|
(2)
|
Calculated by averaging the weighted average significant unobservable inputs used by the multiple third-party pricing providers in the fair value measurement of MSR.
|
|
Year Ended December 31, 2017
|
||||||||||||||||
(in thousands)
|
Interest income (expense)
|
|
Other income
|
|
Total included in net (loss) income
|
|
Change in fair value due to credit risk
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||
Residential mortgage loans held-for-investment in securitization trusts
|
102,886
|
|
(1)
|
|
45,275
|
|
|
148,161
|
|
|
$
|
—
|
|
(2)
|
|||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||
Collateralized borrowings in securitization trusts
|
(82,573
|
)
|
|
|
(22,592
|
)
|
|
(105,165
|
)
|
|
—
|
|
(2)
|
||||
Total
|
$
|
20,313
|
|
|
|
$
|
22,683
|
|
|
$
|
42,996
|
|
|
$
|
—
|
|
|
|
Year Ended December 31, 2016
|
||||||||||||||||
(in thousands)
|
Interest income (expense)
|
|
Other income
|
|
Total included in net (loss) income
|
|
Change in fair value due to credit risk
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||
Residential mortgage loans held-for-investment in securitization trusts
|
133,993
|
|
(1)
|
|
(19,741
|
)
|
|
114,252
|
|
|
—
|
|
(2)
|
||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||
Collateralized borrowings in securitization trusts
|
(97,729
|
)
|
|
|
7,907
|
|
|
(89,822
|
)
|
|
—
|
|
(2)
|
||||
Total
|
$
|
36,264
|
|
|
|
$
|
(11,834
|
)
|
|
$
|
24,430
|
|
|
$
|
—
|
|
|
(1)
|
Interest income on residential mortgage loans held-for-investment in securitization trusts is measured by multiplying the unpaid principal balance on the loans by the coupon rate and the number of days of interest due.
|
(2)
|
The change in fair value on residential mortgage loans held-for-investment in securitization trusts and collateralized borrowings in securitization trusts was due entirely to changes in market interest rates.
|
•
|
AFS securities, MSR, and derivative assets and liabilities are recurring fair value measurements; carrying value equals fair value. See discussion of valuation methods and assumptions within the Fair Value Measurements section of this Note 9.
|
•
|
Cash and cash equivalents and restricted cash have a carrying value which approximates fair value because of the short maturities of these instruments. The Company categorizes the fair value measurement of these assets as Level 1.
|
•
|
Reverse repurchase agreements have a carrying value which approximates fair value due to their short-term nature. The Company categorizes the fair value measurement of these assets as Level 2.
|
•
|
The carrying value of repurchase agreements, FHLB advances and revolving credit facilities that mature in less than one year generally approximates fair value due to the short maturities. As of December 31, 2018, the Company held $300.0 million of repurchase agreements, $50.0 million of FHLB advances and $290.0 million of revolving credit facilities that are considered long-term. The Company’s long-term repurchase agreements, FHLB advances and revolving credit facilities have floating rates based on an index plus a spread and, for members of the FHLB, the credit spread is typically consistent with those demanded in the market. Accordingly, the interest rates on these borrowings are at market and thus carrying value approximates fair value. The Company categorizes the fair value measurement of these liabilities as Level 2.
|
•
|
Convertible senior notes are carried at their unpaid principal balance, net of any unamortized deferred issuance costs. The Company estimates the fair value of its convertible senior notes using the market transaction price nearest to December 31, 2018. The Company categorizes the fair value measurement of these assets as Level 2.
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||
(in thousands)
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Available-for-sale securities
|
$
|
25,552,604
|
|
|
$
|
25,552,604
|
|
|
$
|
21,220,819
|
|
|
$
|
21,220,819
|
|
Mortgage servicing rights
|
$
|
1,993,440
|
|
|
$
|
1,993,440
|
|
|
$
|
1,086,717
|
|
|
$
|
1,086,717
|
|
Cash and cash equivalents
|
$
|
409,758
|
|
|
$
|
409,758
|
|
|
$
|
419,159
|
|
|
$
|
419,159
|
|
Restricted cash
|
$
|
688,006
|
|
|
$
|
688,006
|
|
|
$
|
635,836
|
|
|
$
|
635,836
|
|
Derivative assets
|
$
|
319,981
|
|
|
$
|
319,981
|
|
|
$
|
309,918
|
|
|
$
|
309,918
|
|
Reverse repurchase agreements
|
$
|
761,815
|
|
|
$
|
761,815
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other assets
|
$
|
74,412
|
|
|
$
|
74,412
|
|
|
116,653
|
|
|
116,653
|
|
||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Repurchase agreements
|
$
|
23,133,476
|
|
|
$
|
23,133,476
|
|
|
$
|
19,451,207
|
|
|
$
|
19,451,207
|
|
Federal Home Loan Bank advances
|
$
|
865,024
|
|
|
$
|
865,024
|
|
|
$
|
1,215,024
|
|
|
$
|
1,215,024
|
|
Revolving credit facilities
|
$
|
310,000
|
|
|
$
|
310,000
|
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
Convertible senior notes
|
$
|
283,856
|
|
|
$
|
281,951
|
|
|
$
|
282,827
|
|
|
$
|
306,351
|
|
Derivative liabilities
|
$
|
820,590
|
|
|
$
|
820,590
|
|
|
$
|
31,903
|
|
|
$
|
31,903
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Short-term
|
$
|
22,833,476
|
|
|
$
|
19,338,707
|
|
Long-term
|
300,000
|
|
|
112,500
|
|
||
Total
|
$
|
23,133,476
|
|
|
$
|
19,451,207
|
|
|
December 31, 2018
|
||||||||||||||||||
|
Collateral Type
|
|
|
||||||||||||||||
(in thousands)
|
Agency RMBS
|
|
Non-Agency Securities
|
|
Agency Derivatives
|
|
Mortgage Servicing Rights
|
|
Total Amount Outstanding
|
||||||||||
Within 30 days
|
$
|
6,712,021
|
|
|
$
|
770,287
|
|
|
$
|
6,561
|
|
|
$
|
—
|
|
|
$
|
7,488,869
|
|
30 to 59 days
|
4,557,688
|
|
|
496,466
|
|
|
23,444
|
|
|
—
|
|
|
5,077,598
|
|
|||||
60 to 89 days
|
5,410,967
|
|
|
242,473
|
|
|
1,621
|
|
|
—
|
|
|
5,655,061
|
|
|||||
90 to 119 days
|
1,209,395
|
|
|
722,399
|
|
|
7,065
|
|
|
—
|
|
|
1,938,859
|
|
|||||
120 to 364 days
|
2,201,325
|
|
|
463,939
|
|
|
7,825
|
|
|
—
|
|
|
2,673,089
|
|
|||||
One year and over
|
—
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|
300,000
|
|
|||||
Total
|
$
|
20,091,396
|
|
|
$
|
2,695,564
|
|
|
$
|
46,516
|
|
|
$
|
300,000
|
|
|
$
|
23,133,476
|
|
Weighted average borrowing rate
|
2.52
|
%
|
|
3.65
|
%
|
|
3.34
|
%
|
|
4.51
|
%
|
|
2.68
|
%
|
|
December 31, 2017
|
||||||||||||||||||
|
Collateral Type
|
|
|
||||||||||||||||
(in thousands)
|
Agency RMBS
|
|
Non-Agency Securities
|
|
Agency Derivatives
|
|
Mortgage Servicing Rights
|
|
Total Amount Outstanding
|
||||||||||
Within 30 days
|
$
|
3,634,541
|
|
|
$
|
613,500
|
|
|
$
|
21,423
|
|
|
$
|
—
|
|
|
$
|
4,269,464
|
|
30 to 59 days
|
3,522,256
|
|
|
261,835
|
|
|
47,020
|
|
|
—
|
|
|
3,831,111
|
|
|||||
60 to 89 days
|
3,165,834
|
|
|
290,628
|
|
|
2,478
|
|
|
—
|
|
|
3,458,940
|
|
|||||
90 to 119 days
|
2,119,490
|
|
|
332,614
|
|
|
322
|
|
|
—
|
|
|
2,452,426
|
|
|||||
120 to 364 days
|
4,883,432
|
|
|
443,334
|
|
|
—
|
|
|
—
|
|
|
5,326,766
|
|
|||||
One year and over
|
—
|
|
|
—
|
|
|
—
|
|
|
112,500
|
|
|
112,500
|
|
|||||
Total
|
$
|
17,325,553
|
|
|
$
|
1,941,911
|
|
|
$
|
71,243
|
|
|
$
|
112,500
|
|
|
$
|
19,451,207
|
|
Weighted average borrowing rate
|
1.53
|
%
|
|
2.98
|
%
|
|
2.15
|
%
|
|
3.78
|
%
|
|
1.69
|
%
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Available-for-sale securities, at fair value
|
$
|
24,240,507
|
|
|
$
|
19,780,175
|
|
Mortgage servicing rights, at fair value
|
685,683
|
|
|
424,740
|
|
||
Cash and cash equivalents
|
—
|
|
|
15,000
|
|
||
Restricted cash
|
416,696
|
|
|
417,018
|
|
||
Due from counterparties
|
110,695
|
|
|
773,422
|
|
||
Derivative assets, at fair value
|
70,191
|
|
|
90,895
|
|
||
U.S. Treasuries (1)
|
6,457
|
|
|
—
|
|
||
Total
|
$
|
25,530,229
|
|
|
$
|
21,501,250
|
|
(1)
|
U.S. Treasuries received as collateral and re-pledged.
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||||
(dollars in thousands)
|
Amount Outstanding
|
|
Net Counterparty Exposure (1)
|
|
Percent of Equity
|
|
Weighted Average Days to Maturity
|
|
Amount Outstanding
|
|
Net Counterparty Exposure (1)
|
|
Percent of Equity
|
|
Weighted Average Days to Maturity
|
||||||||||
Royal Bank of Canada
|
$
|
2,504,438
|
|
|
$
|
342,739
|
|
|
8
|
%
|
|
94
|
|
$
|
1,261,956
|
|
|
$
|
223,347
|
|
|
6
|
%
|
|
75
|
All other counterparties (2)
|
20,629,038
|
|
|
1,679,335
|
|
|
39
|
%
|
|
63
|
|
18,189,251
|
|
|
1,519,776
|
|
|
43
|
%
|
|
84
|
||||
Total
|
$
|
23,133,476
|
|
|
$
|
2,022,074
|
|
|
|
|
|
|
$
|
19,451,207
|
|
|
$
|
1,743,123
|
|
|
|
|
|
(1)
|
Represents the net carrying value of the assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest. The Company did not have any such payables at December 31, 2018 nor December 31, 2017.
|
(2)
|
Represents amounts outstanding with 29 and 26 counterparties at December 31, 2018 and December 31, 2017, respectively.
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
≤ 1 year
|
$
|
815,024
|
|
|
$
|
—
|
|
> 1 and ≤ 3 years
|
—
|
|
|
815,024
|
|
||
> 3 and ≤ 5 years
|
—
|
|
|
—
|
|
||
> 5 and ≤ 10 years
|
—
|
|
|
—
|
|
||
> 10 years
|
50,000
|
|
|
400,000
|
|
||
Total
|
$
|
865,024
|
|
|
$
|
1,215,024
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Available-for-sale securities, at fair value
|
$
|
917,492
|
|
|
$
|
1,210,715
|
|
Due from counterparties
|
—
|
|
|
62,959
|
|
||
Total
|
$
|
917,492
|
|
|
$
|
1,273,674
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Within 30 days
|
$
|
—
|
|
|
$
|
—
|
|
30 to 59 days
|
—
|
|
|
—
|
|
||
60 to 89 days
|
—
|
|
|
—
|
|
||
90 to 119 days
|
—
|
|
|
—
|
|
||
120 to 364 days
|
20,000
|
|
|
20,000
|
|
||
One year and over
|
290,000
|
|
|
—
|
|
||
Total
|
$
|
310,000
|
|
|
$
|
20,000
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Class of Stock
|
Issuance Date
|
|
Shares issued and outstanding
|
|
Carrying Value
|
|
Contractual rate
|
|
Redemption date (1)
|
|
Fixed to floating rate conversion date (2)
|
|
Floating annual rate (3)
|
||||
Fixed-to-Floating rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Series A
|
March 14, 2017
|
|
5,750
|
|
|
138,872
|
|
|
8.125
|
%
|
|
April 27, 2027
|
|
April 27, 2027
|
|
3M LIBOR + 5.660%
|
|
Series B
|
July 19, 2017
|
|
11,500
|
|
|
278,094
|
|
|
7.625
|
%
|
|
July 27, 2027
|
|
July 27, 2027
|
|
3M LIBOR + 5.352%
|
|
Series C
|
November 27, 2017
|
|
11,800
|
|
|
285,584
|
|
|
7.250
|
%
|
|
January 27, 2025
|
|
January 27, 2025
|
|
3M LIBOR + 5.011%
|
|
Fixed Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series D
|
July 31, 2018
|
|
3,000
|
|
|
74,964
|
|
|
7.750
|
%
|
|
July 31, 2018
|
|
N/A
|
|
N/A
|
|
Series E
|
July 31, 2018
|
|
8,000
|
|
|
199,987
|
|
|
7.500
|
%
|
|
July 31, 2018
|
|
N/A
|
|
N/A
|
|
|
Total
|
|
|
40,050
|
|
|
$977,501
|
|
|
|
|
|
|
|
|
(1)
|
Subject to the Company's right under limited circumstances to redeem the preferred stock earlier than the redemption date disclosed in order to preserve its qualification as a REIT or following a change in control of the Company.
|
(2)
|
For the fixed-to-floating rate redeemable preferred stock, the dividend rate will remain at a annual fixed rate of the $25.00 per share liquidation preference from the issuance date up to but not including the transition date disclosed within. Effective the conversion date and onward, dividends will accumulate on a floating rate basis according to the terms disclosed within (3) below.
|
(3)
|
On and after the fixed to floating rate conversion date, the dividend will accumulate and be payable quarterly at a percentage of the $25.00 per share liquidation preference equal to an annual floating rate of three-month LIBOR plus the spread indicated within each preferred class.
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Cash Dividend Per Preferred Share
|
||
Series A Preferred Stock:
|
|
|
|
|
|
|
||
December 18, 2018
|
|
December 31, 2018
|
|
January 28, 2019
|
|
$
|
0.507810
|
|
September 20, 2018
|
|
October 12, 2018
|
|
October 29, 2018
|
|
$
|
0.507810
|
|
June 19, 2018
|
|
July 12, 2018
|
|
July 27, 2018
|
|
$
|
0.507810
|
|
March 20, 2018
|
|
April 12, 2018
|
|
April 27, 2018
|
|
$
|
0.507810
|
|
December 14, 2017
|
|
January 12, 2018
|
|
January 29, 2018
|
|
$
|
0.507810
|
|
September 14, 2017
|
|
October 12, 2017
|
|
October 27, 2017
|
|
$
|
0.507810
|
|
June 15, 2017
|
|
July 12, 2017
|
|
July 27, 2017
|
|
$
|
0.750430
|
|
Series B Preferred Stock:
|
|
|
|
|
|
|
||
December 18, 2018
|
|
December 31, 2018
|
|
January 28, 2019
|
|
$
|
0.476560
|
|
September 20, 2018
|
|
October 12, 2018
|
|
October 29, 2018
|
|
$
|
0.476560
|
|
June 19, 2018
|
|
July 12, 2018
|
|
July 27, 2018
|
|
$
|
0.476560
|
|
March 20, 2018
|
|
April 12, 2018
|
|
April 27, 2018
|
|
$
|
0.476560
|
|
December 14, 2017
|
|
January 12, 2018
|
|
January 29, 2018
|
|
$
|
0.476560
|
|
September 14, 2017
|
|
October 12, 2017
|
|
October 27, 2017
|
|
$
|
0.518920
|
|
Series C Preferred Stock:
|
|
|
|
|
|
|
||
December 18, 2018
|
|
December 31, 2018
|
|
January 28, 2019
|
|
$
|
0.453130
|
|
September 20, 2018
|
|
October 12, 2018
|
|
October 29, 2018
|
|
$
|
0.453130
|
|
June 19, 2018
|
|
July 12, 2018
|
|
July 27, 2018
|
|
$
|
0.453130
|
|
March 20, 2018
|
|
April 12, 2018
|
|
April 27, 2018
|
|
$
|
0.453130
|
|
December 14, 2017
|
|
January 12, 2018
|
|
January 29, 2018
|
|
$
|
0.302080
|
|
Series D Preferred Stock:
|
|
|
|
|
|
|
||
December 18, 2018
|
|
December 31, 2018
|
|
January 28, 2019
|
|
$
|
0.484375
|
|
September 20, 2018
|
|
October 1, 2018
|
|
October 15, 2018
|
|
$
|
0.484375
|
|
Series E Preferred Stock:
|
|
|
|
|
|
|
||
December 18, 2018
|
|
December 31, 2018
|
|
January 28, 2019
|
|
$
|
0.468750
|
|
September 20, 2018
|
|
October 1, 2018
|
|
October 15, 2018
|
|
$
|
0.468750
|
|
|
Number of common shares
|
|
Common shares outstanding, December 31, 2015
|
176,953,403
|
|
Issuance of common stock
|
30,301
|
|
Issuance of restricted stock (1)
|
852,459
|
|
Repurchase of common stock
|
(4,010,000
|
)
|
Common shares outstanding, December 31, 2016
|
173,826,163
|
|
Issuance of common stock
|
26,950
|
|
Issuance of restricted stock (1)
|
643,474
|
|
Common shares outstanding, December 31, 2017
|
174,496,587
|
|
Issuance of common stock
|
72,616,483
|
|
Issuance of restricted stock (1)
|
972,651
|
|
Common shares outstanding, December 31, 2018
|
248,085,721
|
|
(1)
|
Represents shares of restricted stock granted under the Second Restated 2009 Equity Incentive Plan, net of forfeitures, of which 1,593,701 restricted shares remained subject to vesting requirements at December 31, 2018.
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Cash Dividend Per Common Share
|
||
December 18, 2018
|
|
December 31, 2018
|
|
January 28, 2019
|
|
$
|
0.470000
|
|
September 20, 2018
|
|
October 1, 2018
|
|
October 29, 2018
|
|
$
|
0.311630
|
|
July 13, 2018
|
|
July 25, 2018
|
|
July 30, 2018
|
|
$
|
0.158370
|
|
June 19, 2018
|
|
June 29, 2018
|
|
July 27, 2018
|
|
$
|
0.470000
|
|
March 20, 2018
|
|
April 2, 2018
|
|
April 27, 2018
|
|
$
|
0.470000
|
|
December 14, 2017
|
|
December 26, 2017
|
|
December 29, 2017
|
|
$
|
0.470000
|
|
September 14, 2017
|
|
September 29, 2017
|
|
October 27, 2017
|
|
$
|
0.520000
|
|
June 15, 2017
|
|
June 30, 2017
|
|
July 27, 2017
|
|
$
|
0.520000
|
|
March 14, 2017
|
|
March 31, 2017
|
|
April 27, 2017
|
|
$
|
0.500000
|
|
December 15, 2016
|
|
December 30, 2016
|
|
January 27, 2017
|
|
$
|
0.480000
|
|
September 15, 2016
|
|
September 30, 2016
|
|
October 20, 2016
|
|
$
|
0.460000
|
|
June 16, 2016
|
|
June 30, 2016
|
|
July 20, 2016
|
|
$
|
0.460000
|
|
March 15, 2016
|
|
March 31, 2016
|
|
April 21, 2016
|
|
$
|
0.460000
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Available-for-sale securities
|
|
|
|
||||
Unrealized gains
|
$
|
498,744
|
|
|
$
|
475,694
|
|
Unrealized losses
|
(387,927
|
)
|
|
(140,881
|
)
|
||
Accumulated other comprehensive (loss) income
|
$
|
110,817
|
|
|
$
|
334,813
|
|
|
|
Affected Line Item in the Consolidated Statements of Comprehensive (Loss) Income
|
|
Amount Reclassified out of Accumulated Other Comprehensive (Loss) Income
|
||||||||||
|
|
|
|
Year Ended
|
||||||||||
(in thousands)
|
|
|
|
December 31,
|
||||||||||
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Other-than-temporary impairments on AFS securities
|
|
Total other-than-temporary impairment losses
|
|
$
|
470
|
|
|
$
|
789
|
|
|
$
|
1,822
|
|
Realized losses (gains) on sales of certain AFS securities, net of tax
|
|
Loss on investment securities
|
|
253,869
|
|
|
5,207
|
|
|
(102,852
|
)
|
|||
Total
|
|
|
|
$
|
254,339
|
|
|
$
|
5,996
|
|
|
$
|
(101,030
|
)
|
|
Year Ended December 31,
|
||||||||||||
|
2018
|
|
2017
|
||||||||||
|
Shares
|
|
Weighted Average Grant Date Fair Market Value
|
|
Shares
|
|
Weighted Average Grant Date Fair Market Value
|
||||||
Outstanding at Beginning of Period
|
1,284,010
|
|
|
$
|
17.15
|
|
|
1,319,712
|
|
|
$
|
17.10
|
|
Granted
|
996,924
|
|
|
14.96
|
|
|
671,845
|
|
|
17.60
|
|
||
Vested
|
(673,118
|
)
|
|
(17.12
|
)
|
|
(684,727
|
)
|
|
(17.47
|
)
|
||
Forfeited
|
(14,115
|
)
|
|
(15.59
|
)
|
|
(22,820
|
)
|
|
(17.90
|
)
|
||
Outstanding at End of Period
|
1,593,701
|
|
|
$
|
15.81
|
|
|
1,284,010
|
|
|
$
|
17.15
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Current tax (benefit) provision:
|
|
|
|
|
|
||||||
Federal
|
$
|
52
|
|
|
$
|
492
|
|
|
$
|
(1,616
|
)
|
State
|
1
|
|
|
57
|
|
|
164
|
|
|||
Total current tax (benefit) provision
|
53
|
|
|
549
|
|
|
(1,452
|
)
|
|||
Deferred tax (benefit) provision
|
41,770
|
|
|
(11,031
|
)
|
|
13,766
|
|
|||
Total (benefit from) provision for income taxes
|
$
|
41,823
|
|
|
$
|
(10,482
|
)
|
|
$
|
12,314
|
|
|
Year Ended
|
|||||||||||||||||||
|
December 31,
|
|||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
(dollars in thousands)
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|||||||||
Computed income tax expense at federal rate
|
$
|
(518
|
)
|
|
21
|
%
|
|
$
|
104,215
|
|
|
35
|
%
|
|
$
|
127,957
|
|
|
35
|
%
|
State taxes, net of federal benefit, if applicable
|
1
|
|
|
—
|
%
|
|
37
|
|
|
—
|
%
|
|
106
|
|
|
—
|
%
|
|||
Permanent differences in taxable income from GAAP net income (1)
|
28,414
|
|
|
(1,152
|
)%
|
|
1,208
|
|
|
—
|
%
|
|
401
|
|
|
—
|
%
|
|||
Dividends paid deduction
|
13,926
|
|
|
(565
|
)%
|
|
(115,942
|
)
|
|
(39
|
)%
|
|
(116,150
|
)
|
|
(32
|
)%
|
|||
(Benefit from) provision for income taxes/ Effective Tax Rate(2)
|
$
|
41,823
|
|
|
(1,696
|
)%
|
|
$
|
(10,482
|
)
|
|
(4
|
)%
|
|
$
|
12,314
|
|
|
3
|
%
|
(1)
|
For the year ended December 31, 2018, permanent differences include a provision of 17.8 million related to the write-down of the net deferred tax assets resulting from the deemed liquidation of three of the Company’s TRSs due to their election revocation, offset by the reversal of the valuation allowance upon TRS revocation. For the year ended December 31, 2017, permanent differences include a provision of $17.5 million related to the effect of the federal tax reform statutory rate change from 35% to 21%.
|
(2)
|
The provision for (benefit from) income taxes is recorded at the taxable subsidiary level.
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Income taxes receivable
|
|
|
|
||||
Federal income taxes receivable
|
$
|
690
|
|
|
$
|
130
|
|
State and local income taxes receivable
|
—
|
|
|
—
|
|
||
Income taxes receivable, net
|
690
|
|
|
130
|
|
||
Deferred tax assets (liabilities)
|
|
|
|
||||
Deferred tax asset
|
17,196
|
|
|
50,419
|
|
||
Deferred tax liability
|
(18,333
|
)
|
|
(24,463
|
)
|
||
Total net deferred tax (liabilities) assets
|
(1,137
|
)
|
|
25,956
|
|
||
Total tax assets (liabilities), net
|
$
|
(447
|
)
|
|
$
|
26,086
|
|
(in thousands)
|
December 31,
2018 |
|
December 31,
2017 |
||||
Available-for-sale securities
|
$
|
19
|
|
|
$
|
(11,917
|
)
|
Mortgage servicing rights
|
(18,333
|
)
|
|
(9,054
|
)
|
||
Derivative assets and liabilities
|
33
|
|
|
4,870
|
|
||
Other assets
|
9
|
|
|
139
|
|
||
Other liabilities
|
652
|
|
|
545
|
|
||
Intangibles
|
101
|
|
|
108
|
|
||
Alternative minimum tax credit
|
—
|
|
|
2,386
|
|
||
Net operating loss carryforward
|
16,354
|
|
|
21,853
|
|
||
Capital loss carryforward
|
28
|
|
|
19,766
|
|
||
Total deferred tax (liabilities) assets
|
(1,137
|
)
|
|
28,696
|
|
||
Valuation allowance
|
—
|
|
|
(2,740
|
)
|
||
Total net deferred tax (liabilities) assets
|
$
|
(1,137
|
)
|
|
$
|
25,956
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
(in thousands, except share data)
|
2018
|
|
2017
|
|
2016
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net (loss) income from continuing operations
|
$
|
(44,290
|
)
|
|
$
|
308,239
|
|
|
$
|
317,921
|
|
Income from discontinued operations, net of tax
|
—
|
|
|
44,146
|
|
|
35,357
|
|
|||
Net (loss) income
|
(44,290
|
)
|
|
352,385
|
|
|
353,278
|
|
|||
Income from discontinued operations attributable to noncontrolling interest
|
—
|
|
|
3,814
|
|
|
—
|
|
|||
Net (loss) income attributable to Two Harbors Investment Corp.
|
(44,290
|
)
|
|
348,571
|
|
|
353,278
|
|
|||
Dividends on preferred stock
|
65,395
|
|
|
25,122
|
|
|
—
|
|
|||
Net (loss) income attributable to common stockholders - basic
|
(109,685
|
)
|
|
323,449
|
|
|
353,278
|
|
|||
Interest expense attributable to convertible notes (1)
|
—
|
|
|
17,867
|
|
|
—
|
|
|||
Net (loss) income attributable to common stockholders - diluted
|
$
|
(109,685
|
)
|
|
$
|
341,316
|
|
|
353,278
|
|
|
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
204,409,853
|
|
|
173,063,178
|
|
|
172,523,497
|
|
|||
Weighted average restricted stock shares
|
1,610,649
|
|
|
1,370,821
|
|
|
1,513,355
|
|
|||
Basic weighted average shares outstanding
|
206,020,502
|
|
|
174,433,999
|
|
|
174,036,852
|
|
|||
Effect of dilutive shares issued in an assumed conversion
|
—
|
|
|
13,699,342
|
|
|
—
|
|
|||
Diluted weighted average shares outstanding
|
206,020,502
|
|
|
188,133,341
|
|
|
174,036,852
|
|
|||
Basic (Loss) Earnings Per Share:
|
|
|
|
|
|
|
|
||||
Net (loss) income
|
$
|
(0.53
|
)
|
|
$
|
1.85
|
|
|
$
|
2.03
|
|
Diluted (Loss) Earnings Per Share:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(0.53
|
)
|
|
$
|
1.81
|
|
|
$
|
2.03
|
|
(1)
|
Includes a nondiscretionary adjustment for the assumed change in the management fee calculation.
|
|
2018 Quarter Ended
|
||||||||||||||
(in thousands, except share data)
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Total interest income
|
$
|
194,019
|
|
|
$
|
187,360
|
|
|
$
|
236,698
|
|
|
$
|
251,955
|
|
Total interest expense
|
96,560
|
|
|
108,414
|
|
|
152,396
|
|
|
162,301
|
|
||||
Net interest income
|
97,459
|
|
|
78,946
|
|
|
84,302
|
|
|
89,654
|
|
||||
Other-than-temporary impairment losses
|
(94
|
)
|
|
(174
|
)
|
|
(95
|
)
|
|
(107
|
)
|
||||
Total other income (loss)
|
281,982
|
|
|
93,174
|
|
|
112,514
|
|
|
(590,696
|
)
|
||||
Total expenses
|
40,754
|
|
|
38,507
|
|
|
123,366
|
|
|
46,705
|
|
||||
Provision for (benefit from) income taxes
|
3,784
|
|
|
(6,051
|
)
|
|
37,409
|
|
|
6,681
|
|
||||
Dividends on preferred stock
|
13,747
|
|
|
13,747
|
|
|
18,951
|
|
|
18,950
|
|
||||
Net income (loss) attributable to common stockholders
|
$
|
321,062
|
|
|
$
|
125,743
|
|
|
$
|
16,995
|
|
|
$
|
(573,485
|
)
|
Basic earnings per share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.83
|
|
|
$
|
0.72
|
|
|
$
|
0.08
|
|
|
$
|
(2.31
|
)
|
Net income (loss)
|
$
|
1.83
|
|
|
$
|
0.72
|
|
|
$
|
0.08
|
|
|
$
|
(2.31
|
)
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.69
|
|
|
$
|
0.68
|
|
|
$
|
0.08
|
|
|
$
|
(2.31
|
)
|
Net income (loss)
|
$
|
1.69
|
|
|
$
|
0.68
|
|
|
$
|
0.08
|
|
|
$
|
(2.31
|
)
|
|
2017 Quarter Ended
|
||||||||||||||
(in thousands, except share data)
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Total interest income
|
$
|
169,154
|
|
|
$
|
184,741
|
|
|
$
|
196,089
|
|
|
$
|
195,105
|
|
Total interest expense
|
70,685
|
|
|
85,281
|
|
|
99,427
|
|
|
94,795
|
|
||||
Net interest income
|
98,469
|
|
|
99,460
|
|
|
96,662
|
|
|
100,310
|
|
||||
Other-than-temporary impairment losses
|
—
|
|
|
(429
|
)
|
|
—
|
|
|
(360
|
)
|
||||
Total other (loss) income
|
(35,585
|
)
|
|
(57,197
|
)
|
|
23,060
|
|
|
103,288
|
|
||||
Total expenses
|
28,870
|
|
|
38,614
|
|
|
31,844
|
|
|
30,593
|
|
||||
(Benefit from) provision for income taxes
|
(24,517
|
)
|
|
8,759
|
|
|
(5,342
|
)
|
|
10,618
|
|
||||
Income from discontinued operations (net of noncontrolling), net of tax
|
13,454
|
|
|
14,157
|
|
|
8,844
|
|
|
3,877
|
|
||||
Dividends on preferred stock
|
—
|
|
|
4,285
|
|
|
8,888
|
|
|
11,949
|
|
||||
Net income attributable to common stockholders
|
$
|
71,985
|
|
|
$
|
4,333
|
|
|
$
|
93,176
|
|
|
$
|
153,955
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.33
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.48
|
|
|
$
|
0.86
|
|
Discontinued operations
|
0.08
|
|
|
0.08
|
|
|
0.05
|
|
|
0.02
|
|
||||
Net income
|
$
|
0.41
|
|
|
$
|
0.02
|
|
|
$
|
0.53
|
|
|
$
|
0.88
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.33
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.47
|
|
|
$
|
0.82
|
|
Discontinued operations
|
0.08
|
|
|
0.08
|
|
|
0.05
|
|
|
0.02
|
|
||||
Net income
|
$
|
0.41
|
|
|
$
|
0.02
|
|
|
$
|
0.52
|
|
|
$
|
0.84
|
|
•
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|
|
Year Ended
|
||||||
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Audit fees (1)
|
$
|
1,301,476
|
|
|
$
|
1,753,745
|
|
Audit-related fees (2)
|
56,144
|
|
|
47,300
|
|
||
Tax fees (3)
|
536,267
|
|
|
381,908
|
|
||
Total principal accountant fees
|
$
|
1,893,887
|
|
|
$
|
2,182,953
|
|
(1)
|
Audit fees pertain to the audit of our annual Consolidated Financial Statements, including review of the interim financial statements contained in our Quarterly Reports on Form 10-Q, comfort letters to underwriters in connection with our registration statements and common stock offerings, attest services, consents to the incorporation of the EY audit report in publicly filed documents and assistance with and review of documents filed with the SEC.
|
(2)
|
Audit-related fees pertain to assurance and related services that are traditionally performed by the principal accountant, including accounting consultations and audits in connection with proposed or consummated acquisitions, internal control reviews and consultation concerning financial accounting and reporting standards.
|
(3)
|
Tax fees pertain to services performed for tax compliance, including REIT compliance, tax planning and tax advice, including preparation of tax returns and claims for refund and tax-payment planning services. Tax planning and advice also includes assistance with tax audits and appeals, and tax advice related to specific transactions.
|
Exhibit Number
|
|
Exhibit Index
|
1.1
|
|
|
2.1
|
|
|
2.2
|
|
|
2.3
|
|
|
2.4
|
|
Agreement and Plan of Merger, by and among Two Harbors Investment Corp., Eiger Merger Subsidiary LLC and CYS Investments, Inc., dated as of April 25, 2018 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 26, 2018).
|
3.1
|
|
|
3.2
|
|
|
3.3
|
|
|
3.4
|
|
|
3.5
|
|
|
3.6
|
|
|
3.7
|
|
|
3.8
|
|
|
3.9
|
|
|
3.10
|
|
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
Exhibit Number
|
|
Exhibit Index
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7*
|
|
|
10.8*
|
|
|
10.9*
|
|
|
10.10
|
|
|
21.1
|
|
|
23.1
|
|
|
24.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
|
101
|
|
Financial statements from the Annual Report on Form 10-K of Two Harbors Investment Corp. for the year ended December 31, 2018, formatted in Inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive (Loss) Income, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements. (filed herewith)
|
*
|
Management or compensatory agreement
|
|
|
|
TWO HARBORS INVESTMENT CORP.
|
Dated:
|
April 4, 2019
|
By:
|
/s/ Thomas E. Siering
|
|
|
|
Thomas E. Siering
Chief Executive Officer, President and
Director (principal executive officer)
|
Name
|
State of Organization
|
Percent Ownership
|
Agate Bay Residential Mortgage Securities LLC
|
Delaware
|
100%
|
Area RE Partners Columbus LLC
|
Delaware
|
20%
|
Capitol Acquisition Corp.
|
Delaware
|
100%
|
CYS/Area LP
|
Delaware
|
99%
|
CYS Condo GP LLC
|
Delaware
|
100%
|
CYS Investments LLC
|
Delaware
|
100%
|
Eiger Holdings Company LLC
|
Delaware
|
100%
|
Eiger Partnership LLC
|
Delaware
|
100%
|
Matrix Financial Services Corporation
|
Arizona
|
100%
|
North Shore Assets LLC
|
Delaware
|
100%
|
North Shore Mortgage Opportunity LLC
|
Delaware
|
100%
|
TH Asset Holdings LLC
|
Delaware
|
100%
|
TH Asset Investment Corp.
|
Delaware
|
100%
|
TH Insurance Holdings Company LLC
|
Missouri
|
100%
|
TH TRS Corp.
|
Delaware
|
100%
|
Two Harbors Asset I, LLC
|
Delaware
|
100%
|
Two Harbors Asset II, LLC
|
Delaware
|
100%
|
Two Harbors Operating Company LLC
|
Delaware
|
100%
|
•
|
Registration Statements (Form S-8 No. 333-204220 and 333-188875) pertaining to the Second Restated 2009 Equity Incentive Plan of Two Harbors Investment Corp.,
|
•
|
Registration Statement (Form S-4 No. 333-225242) pertaining to the registration of common stock and preferred stock of Two Harbors Investment Corp.,
|
•
|
Registration Statement (Form S-3 No. 333-215177) pertaining to the Dividend Reinvestment and Direct Stock Purchase Plan of Two Harbors Investment Corp., and
|
•
|
Registration Statement (Form S-3 No. 333-223311) pertaining to the registration of common stock, preferred stock, debt securities, and depositary shares of Two Harbors Investment Corp.;
|
Date:
|
April 4, 2019
|
|
/s/ Thomas E. Siering
|
|
|
|
|
Thomas E. Siering
|
|
|
|
|
Chief Executive Officer and President
|
|
Date:
|
April 4, 2019
|
|
/s/ Mary Riskey
|
|
|
|
|
Mary Riskey
|
|
|
|
|
Chief Financial Officer
|
|
Date:
|
April 4, 2019
|
|
/s/ Thomas E. Siering
|
|
|
|
|
Thomas E. Siering
|
|
|
|
|
Chief Executive Officer and President
|
|
Date:
|
April 4, 2019
|
|
/s/ Mary Riskey
|
|
|
|
|
Mary Riskey
|
|
|
|
|
Chief Financial Officer
|
|