XML 24 R13.htm IDEA: XBRL DOCUMENT
v3.21.2

Investments | 6 Months Ended
--- | ---
Jun. 30, 2021
Investments, Debt and Equity Securities [Abstract] |
Investments | Investments The Company holds investments in various debt securities and beneficial interests which are the net residual interest of the Company’s investments in securitization trusts holding pools of mortgage loans. The Company's debt securities and beneficial interests are issued by securitization trusts, which are VIEs, that the Company has sponsored but which the Company does not consolidate since it has determined it is not the primary beneficiary. See Note 10 — Related party transactions. The Company marks its debt securities to fair value using prices provided by financing counterparties, and believes any unrealized losses to be temporary. Risks inherent in the Company's debt securities portfolio, affecting both the valuation of its securities as well as the portfolio's interest income include the risk of default, delays and inconsistency in the frequency and amount of payments, risks affecting borrowers such as man-made or natural disasters, or the COVID-19 pandemic, and damage to or delay in realizing the value of the underlying collateral. The Company monitors the credit quality of the mortgage loans underlying its debt securities on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluates whether and when it becomes probable that all amounts contractually due will not be collected. The following table presents information regarding the Company's investments in debt securities and investments in beneficial interests ($ in thousands):
|  | As of June 30, 2021
|  | Basis(1) |  | Gross unrealized gains |  | Gross unrealized losses |  | Carrying value (fair value)
Debt securities |  | $ | 422,981 |  |  | $ | 1,877 |  |  | $ | (226) |  |  | $ | 424,632 |
Beneficial interests in securitization trusts |  | 133,484 |  |  | — |  |  | — |  |  | 133,484 |
Total investments |  | $ | 556,465 |  |  | $ | 1,877 |  |  | $ | (226) |  |  | $ | 558,116 |
(1)Basis amount is net of amortized discount, allowance for credit losses, principal paydowns and interest receivable on securities of $0.3 million.
|  | As of December 31, 2020
|  | Basis(1) |  | Gross unrealized gains |  | Gross unrealized losses |  | Carrying value (fair value)
Debt securities |  | $ | 273,459 |  |  | $ | 1,152 |  |  | $ | (777) |  |  | $ | 273,834 |
Beneficial interests in securitization trusts |  | 91,418 |  |  | — |  |  | — |  |  | 91,418 |
Total investments |  | $ | 364,877 |  |  | $ | 1,152 |  |  | $ | (777) |  |  | $ | 365,252 |
(1)Basis amount is net of amortized costs, principal paydowns and interest receivable on securities of $0.2 million. The following table presents a breakdown of the Company's gross unrealized losses ($ in thousands):
|  | As of June 30, 2021
|  | Step-up date(1) |  | Basis(2) |  | Gross unrealized losses |  | Carrying value (fair value)
Debt securities due September 2059(3) |  | February 2023/April 2023 |  | $ | 20,243 |  |  | $ | (213) |  |  | $ | 20,030 |
Debt securities due March 2060(4) |  | February 2025 |  | 43,231 |  |  | (4) |  |  | 43,227 |
Debt securities due January 2061(4) |  | September 2024 |  | 15,206 |  |  | (1) |  |  | 15,205 |
Debt securities due June 2061(5) |  | January 2025/February 2025 |  | 134,702 |  |  | (8) |  |  | 134,694 |
Total |  |  |  | $ | 213,382 |  |  | $ | (226) |  |  | $ | 213,156 |
(1)Step-up date is the date at which the coupon interest rate on the security increases. The Company expects the security to be called before the step-up date. (2)Basis amount is net of any realized amortized costs and principal paydowns. (3)This line is comprised of two securities that are both due in September 2059 and both have been in an unrealized loss position for 12 months or longer. (4)This security has been in an unrealized loss position for less than 12 months. (5)This line is comprised of two securities that are both due in June 2061 and both have been in an unrealized loss position for less than 12 months.
|  | As of December 31, 2020
|  | Step-up date(1) |  | Basis(2) |  | Gross unrealized losses |  | Carrying value (fair value)
Debt securities due September 2059(3) |  | February 2023/April 2023 |  | $ | 22,216 |  |  | $ | (238) |  |  | $ | 21,978 |
Debt securities due November 2059(4) |  | April 2023 |  | 14,738 |  |  | (61) |  |  | 14,677 |
Debt securities due December 2059(4) |  | July 2023 |  | 47,270 |  |  | (315) |  |  | 46,955 |
Debt securities due September 2060(4) |  | March 2024 |  | 34,970 |  |  | (44) |  |  | 34,926 |
Debt securities due June 2060(4) |  | March 2024 |  | 35,127 |  |  | (119) |  |  | 35,008 |
Total |  |  |  | $ | 154,321 |  |  | $ | (777) |  |  | $ | 153,544 |
(1)Step-up date is the date at which the coupon interest rate on the security increases. The Company expects the security to be called before the step-up date. (2)Basis amount is net of any realized amortized costs and principal paydowns. (3)This line is comprised of two securities that are both due September 2059. One security with a balance of $0.2 million has been in an unrealized loss position for less than 12 months and has a step-up date in April 2023, and the other security of $0.1 million has been in a loss position for 12 months or longer and has a step-up date in February 2023. (4)This security has been in an unrealized loss position for less than 12 months. As of June 30, 2021, the Company recorded $1.9 million gross unrealized gains and a gross unrealized loss of $0.2 million in fair valuation adjustments in accumulated other comprehensive income on the consolidated balance sheet at a fair value of $424.6 million, which includes $0.3 million in interest receivable. As of December 31, 2020, the Company recorded $1.2 million gross unrealized gains and a gross unrealized loss of $0.8 million in fair valuation adjustments in accumulated other comprehensive income on the consolidated balance sheet at fair value of $273.8 million, which includes $0.2 million in interest receivable. During both the three and six months ended June 30, 2021, the Company acquired $232.9 million of debt securities and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors. Each joint venture issued senior notes and beneficial interests, which are trust certificates representing the residual investment in the trust. In certain transactions, the joint ventures also issued subordinated notes. Of the $232.9 million acquired in both the three and six months ended June 30, 2021, the Company acquired $170.0 million in senior notes, $23.5 million in subordinate notes and $39.5 million in beneficial interest issued by joint ventures. Comparatively during the three and six months ended June 30, 2020, the Company acquired zero and $61.3 million, respectively, in debt securities and beneficial interests issued by joint ventures between the Company and third party institutional accredited investors. Each joint venture issued senior notes and beneficial interests, which are trust certificates representing the residual investment in the trust. In certain transactions, the joint ventures also issued subordinated notes. Of the $61.3 million of debt securities acquired in the six months ended June 30, 2020, the Company acquired $49.6 million in senior notes, $4.6 million in subordinate notes and $7.1 million in beneficial interests issued by joint ventures. As of June 30, 2021, the investments in debt securities and beneficial interests were carried on the Company's consolidated balance sheet at $424.6 million and $133.5 million, respectively. At December 31, 2020, the investments in debt securities and beneficial interests were carried on the Company's consolidated balance sheet at $273.8 million and $91.4 million, respectively. As of June 30, 2021 and December 31, 2020, the Company had no securities that were past due. The following table presents a reconciliation between the purchase price and par value for the Company's beneficial interests acquisitions for the three and six months ended June 30, 2021 and 2020 ($ in thousands):
|  | Three months ended June 30, |  | Six months ended June 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Par |  | $ | 46,485 |  |  | $ | — |  |  | $ | 46,485 |  |  | $ | 11,970 |
Discount |  | (5,425) |  |  | — |  |  | (5,425) |  |  | (2,335) |
Allowance |  | (1,593) |  |  | — |  |  | (1,593) |  |  | (2,553) |
Purchase Price |  | $ | 39,467 |  |  | $ | — |  |  | $ | 39,467 |  |  | $ | 7,082 |
The Company adopted CECL using the prospective transition approach for PCD assets for its beneficial interests on January 1, 2020, at the time $1.7 million was reclassified from discount to allowance for credit losses for its Investments in beneficial interests. Under CECL, the Company recognizes increases and decreases in the net present value of expected cash flows in earnings in the period they occur. An expense will be recorded to increase the allowance for losses when there is a reduction in the Company’s expected future cash flows. Income will be recognized if there is an increase in expected future cash flows. A decrease in the allowance is generally facilitated by reclassifying amounts from non-credit discount to the allowance and then recording the reduction to the allowance. Management assesses the credit quality of the portfolio and the adequacy of loss reserves on a quarterly basis, or more frequently as necessary. During both the three and six months ended June 30, 2021, the Company recorded $2.0 million reversal of the allowance for losses for beneficial interests. During the three and six months ended June 30, 2020, the Company recorded reversals of the allowance for losses for beneficial interests of $3.1 million and $0.2 million, respectively. An analysis of the balance in the allowance for beneficial interest losses account follows ($ in thousands):
|  | Three months ended June 30, |  | Six months ended June 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Allowance for beneficial interests credit losses, beginning balance |  | $ | (5,530) |  |  | $ | (7,208) |  |  | $ | (4,453) |  |  | $ | — |
Beginning period adjustment for CECL adoption |  | — |  |  | — |  |  | — |  |  | (1,668) |
Incremental change in allowance for beneficial interests |  | 2,388 |  |  | — |  |  | 1,435 |  |  | — |
Increase in allowance for beneficial interest credit losses for acquisitions |  | (1,593) |  |  | — |  |  | (1,593) |  |  | (2,553) |
Credit loss expense on beneficial interests |  | (216) |  |  | (260) |  |  | (355) |  |  | (429) |
Reclassification from non-credit discount to the allowance for losses for increases in the net present value of expected cash flows |  | — |  |  | (2,553) |  |  | — |  |  | (2,553) |
Net reversal of provision for credit losses due to increases in actual and/or forecasted cash flows |  | 1,992 |  |  | 3,062 |  |  | 2,007 |  |  | 244 |
Allowance for beneficial interests credit losses, end balance |  | $ | (2,959) |  |  | $ | (6,959) |  |  | $ | (2,959) |  |  | $ | (6,959) |

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 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration