XML 51 R12.htm IDEA: XBRL DOCUMENT
v3.20.1

REAL ESTATE SECURITIES | 3 Months Ended
--- | ---
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract] |
REAL ESTATE SECURITIES | 4. REAL ESTATE SECURITIES Due to the recent market volatility, there has been a significant decrease in liquidity across all types of securities. There was a significant reduction in trading activity with the turbulent and uncertain market conditions that existed at the end of March as restrictive responsive measures related to the COVID-19 pandemic impacted the overall economy. The credit profile of our portfolio is predominantly AAA-rated and almost entirely investment grade. We expect the subordination structure of the investments, as well as the hyperamortization provision included in our senior CRE-CLO security positions, to help mitigate potential losses in the current market conditions. Spreads in the commercial mortgage backed securities (“CMBS”) market have generally tightened from the widest levels seen in March 2020 and that has continued to be the trend with the introduction of Term Asset-Backed Securities Loan Facility (“TALF”) for financing certain CMBS securities. The reduction in liquidity and overall trading activity during this period resulted in a decline of approximately $78.2 million in market value of the Company’s real estate securities through March 31, 2020. This decline was reflected in our consolidated financial statements as other comprehensive income. CMBS, CMBS interest-only securities, Agency securities, Government National Mortgage Association (“GNMA”) construction securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income. GNMA and Federal Home Loan Mortgage Corp (“FHLMC”) securities (collectively, “Agency interest-only securities”) are recorded at fair value with changes in fair value recorded in current period earnings. Equity securities are reported at fair value with changes in fair value recorded in current period earnings. The following is a summary of the Company’s securities at March 31, 2020 and December 31, 2019 ($ in thousands): March 31, 2020
|  |  |  |  |  | Gross Unrealized |  |  |  |  |  | Weighted Average
Asset Type |  | Outstanding Face Amount |  | Amortized Cost Basis/Purchase Price |  | Gains |  | Losses |  | Carrying Value |  | # of Securities |  | Rating (1) |  | Coupon % |  | Yield % |  | Remaining Duration (years)
CMBS(2) |  | $ | 1,943,507 |  |  | $ | 1,943,359 |  |  | $ | 1,476 |  |  | $ | (76,686 | ) |  | $ | 1,868,149 |  | (3) | 127 |  |  | AAA |  | 2.20 | % |  | 2.21 | % |  | 2.31
CMBS interest-only(2)(4) |  | 1,550,358 |  |  | 26,800 |  |  | 1,044 |  |  | (9 | ) |  | 27,835 |  | (5) | 15 |  |  | AAA |  | 0.60 | % |  | 2.99 | % |  | 2.46
GNMA interest-only(4)(6) |  | 105,009 |  |  | 1,661 |  |  | 139 |  |  | (193 | ) |  | 1,607 |  |  | 11 |  |  | AA+ |  | 0.46 | % |  | 4.86 | % |  | 3.05
Agency securities(2) |  | 621 |  |  | 631 |  |  | 2 |  |  | (5 | ) |  | 628 |  |  | 2 |  |  | AA+ |  | 2.63 | % |  | 1.70 | % |  | 1.70
GNMA permanent securities(2) |  | 31,159 |  |  | 31,345 |  |  | 866 |  |  | — |  |  | 32,211 |  |  | 6 |  |  | AA+ |  | 3.90 | % |  | 3.50 | % |  | 2.61
Total debt securities |  | $ | 3,630,654 |  |  | $ | 2,003,796 |  |  | $ | 3,527 |  |  | $ | (76,893 | ) |  | $ | 1,930,430 |  |  | 161 |  |  |  |  | 1.48 | % |  | 2.25 | % |  | 2.32
Equity securities(7) |  | N/A |  |  | 598 |  |  | — |  |  | (401 | ) |  | 197 |  |  | 3 |  |  | N/A |  | N/A |  |  | N/A |  |  | N/A
Provision for current expected credit losses |  | N/A |  |  | — |  |  | — |  |  | (22 | ) |  | (22 | ) |  |  |  |  |  |  |  |  |  |
Total real estate securities |  | $ | 3,630,654 |  |  | $ | 2,004,394 |  |  | $ | 3,527 |  |  | $ | (77,316 | ) |  | $ | 1,930,605 |  |  | 164 |  |  |  |  |  |  |  |  |
(1) | Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. For each security rated by multiple rating agencies, the highest rating is used. Ratings provided were determined by third-party rating agencies as of a particular date, may not be current and are subject to change (including the assignment of a “negative outlook” or “credit watch”) at any time.
(2) | CMBS, CMBS interest-only securities, Agency securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.
(3) | Includes $11.6 million of restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust and are classified as held-to-maturity and reported at amortized cost.
(4) | The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.
(5) | Includes $0.8 million of restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust and are classified as held-to-maturity and reported at amortized cost.
(6) | Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings. The Company’s Agency interest-only securities are considered to be hybrid financial instruments that contain embedded derivatives. As a result, the Company has elected to account for them as hybrid instruments in their entirety at fair value with changes in fair value recognized in unrealized gain (loss) on Agency interest-only securities in the consolidated statements of income in accordance with ASC 815.
(7) | The Company has elected to account for equity securities at fair value with changes in fair value recorded in current period earnings.
December 31, 2019
|  |  |  |  |  | Gross Unrealized |  |  |  |  |  | Weighted Average
Asset Type |  | Outstanding Face Amount |  | Amortized Cost Basis |  | Gains |  | Losses |  | Carrying Value |  | # of Securities |  | Rating (1) |  | Coupon % |  | Yield % |  | Remaining Duration (years)
CMBS(2) |  | $ | 1,640,597 |  |  | $ | 1,640,905 |  |  | $ | 4,337 |  |  | $ | (920 | ) |  | $ | 1,644,322 |  | (3) | 125 |  |  | AAA |  | 3.06 | % |  | 3.08 | % |  | 2.41
CMBS interest-only(2)(4) |  | 1,559,160 |  |  | 28,553 |  |  | 630 |  |  | (37 | ) |  | 29,146 |  | (5) | 15 |  |  | AAA |  | 0.60 | % |  | 3.04 | % |  | 2.53
GNMA interest-only(4)(6) |  | 109,783 |  |  | 1,982 |  |  | 123 |  |  | (254 | ) |  | 1,851 |  |  | 11 |  |  | AA+ |  | 0.49 | % |  | 4.59 | % |  | 2.77
Agency securities(2) |  | 629 |  |  | 640 |  |  | 1 |  |  | (4 | ) |  | 637 |  |  | 2 |  |  | AA+ |  | 2.65 | % |  | 1.73 | % |  | 1.83
GNMA permanent securities(2) |  | 31,461 |  |  | 31,681 |  |  | 688 |  |  | — |  |  | 32,369 |  |  | 6 |  |  | AA+ |  | 3.91 | % |  | 3.17 | % |  | 1.93
Total debt securities |  | $ | 3,341,630 |  |  | $ | 1,703,761 |  |  | $ | 5,779 |  |  | $ | (1,215 | ) |  | $ | 1,708,325 |  |  | 159 |  |  |  |  | 1.84 | % |  | 3.06 | % |  | 2.39
Equity securities(7) |  | N/A |  |  | 12,848 |  |  | 292 |  |  | (160 | ) |  | 12,980 |  |  | 2 |  |  | N/A |  | N/A |  |  | N/A |  |  | N/A
Total real estate securities |  | $ | 3,341,630 |  |  | $ | 1,716,609 |  |  | $ | 6,071 |  |  | $ | (1,375 | ) |  | $ | 1,721,305 |  |  | 161 |  |  |  |  |  |  |  |  |
(1) | Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. For each security rated by multiple rating agencies, the highest rating is used. Ratings provided were determined by third-party rating agencies as of a particular date, may not be current and are subject to change (including the assignment of a “negative outlook” or “credit watch”) at any time.
(2) | CMBS, CMBS interest-only securities, Agency securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.
(3) | Includes $11.6 million of restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust and are classified as held-to-maturity and reported at amortized cost.
(4) | The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.
(5) | Includes $0.8 million of restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust and are classified as held-to-maturity and reported at amortized cost.
(6) | Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings. The Company’s Agency interest-only securities are considered to be hybrid financial instruments that contain embedded derivatives. As a result, the Company accounts for them as hybrid instruments in their entirety at fair value with changes in fair value recognized in unrealized gain (loss) on Agency interest-only securities in the consolidated statements of income in accordance with ASC 815.
(7) | The Company has elected to account for equity securities at fair value with changes in fair value recorded in current period earnings.
The following is a breakdown of the carrying value of the Company’s debt securities by remaining maturity based upon expected cash flows at March 31, 2020 and December 31, 2019 ($ in thousands): March 31, 2020
Asset Type |  | Within 1 year |  | 1-5 years |  | 5-10 years |  | After 10 years |  | Total
CMBS |  | $ | 262,830 |  |  | $ | 1,552,917 |  |  | $ | 52,402 |  |  | $ | — |  |  | $ | 1,868,149 |
CMBS interest-only |  | 1,151 |  |  | 26,684 |  |  | — |  |  | — |  |  | 27,835 |
GNMA interest-only |  | 135 |  |  | 1,189 |  |  | 283 |  |  | — |  |  | 1,607 |
Agency securities |  | — |  |  | 628 |  |  | — |  |  | — |  |  | 628 |
GNMA permanent securities |  | 324 |  |  | 31,887 |  |  | — |  |  | — |  |  | 32,211 |
Total debt securities |  | $ | 264,440 |  |  | $ | 1,613,305 |  |  | $ | 52,685 |  |  | $ | — |  |  | $ | 1,930,430 |
December 31, 2019
Asset Type |  | Within 1 year |  | 1-5 years |  | 5-10 years |  | After 10 years |  | Total
CMBS |  | $ | 177,193 |  |  | $ | 1,389,392 |  |  | $ | 77,737 |  |  | $ | — |  |  | $ | 1,644,322 |
CMBS interest-only |  | 1,439 |  |  | 27,707 |  |  | — |  |  | — |  |  | 29,146 |
GNMA interest-only |  | 91 |  |  | 1,504 |  |  | 256 |  |  | — |  |  | 1,851 |
Agency securities |  | — |  |  | 637 |  |  | — |  |  | — |  |  | 637 |
GNMA permanent securities |  | 416 |  |  | 31,953 |  |  | — |  |  | — |  |  | 32,369 |
Total debt securities |  | $ | 179,139 |  |  | $ | 1,451,193 |  |  | $ | 77,993 |  |  | $ | — |  |  | $ | 1,708,325 |
During the three months ended March 31, 2020 and 2019, the Company realized a gain (loss) on the sale of equity securities of $1.3 million and $0.1 million, respectively, which is included in realized gain (loss) on securities on the Company’s consolidated statements of income. During the three months ended March 31, 2020, the Company realized losses on securities recorded as other than temporary impairments of $0.2 million which are included in realized gain (loss) on securities on the Company’s consolidated statements of income. During the three months ended March 31, 2019 the Company realized no losses on securities recorded as other than temporary impairments.

X
- References No definition available. + Details
Name: | us-gaap_InvestmentsDebtAndEquitySecuritiesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI http://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2176304 + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration