Quarterly report pursuant to Section 13 or 15(d)

Fair Value (Tables)

v3.23.3
Fair Value (Tables)
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following tables display the Company’s assets and liabilities measured at fair value on a recurring basis. The Company often economically hedges the fair value change of its assets or liabilities with derivatives and other financial instruments. The tables below display the hedges separately from the hedged items, and therefore do not directly display the impact of the Company’s risk management activities:
Recurring Fair Value Measurements
September 30, 2023
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
Available-for-sale securities $ —  $ 8,822,865  $ 7,861  $ 8,830,726 
Mortgage servicing rights —  —  3,213,113  3,213,113 
Derivative assets 10,454  10,138  —  20,592 
Total assets $ 10,454  $ 8,833,003  $ 3,220,974  $ 12,064,431 
Liabilities:
Derivative liabilities $ 23,550  $ —  $ —  $ 23,550 
Total liabilities $ 23,550  $ —  $ —  $ 23,550 
Recurring Fair Value Measurements
December 31, 2022
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
Available-for-sale securities $ —  $ 7,653,576  $ 125,158  $ 7,778,734 
Mortgage servicing rights —  —  2,984,937  2,984,937 
Derivative assets 11,145  15,293  —  26,438 
Total assets $ 11,145  $ 7,668,869  $ 3,110,095  $ 10,790,109 
Liabilities:
Derivative liabilities $ 34,048  $ —  $ —  $ 34,048 
Total liabilities $ 34,048  $ —  $ —  $ 34,048 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation
The following table presents the reconciliation for the Company’s Level 3 assets measured at fair value on a recurring basis:
Three Months Ended Nine Months Ended
September 30, 2023 September 30, 2023
(in thousands) Available-For-Sale Securities Mortgage Servicing Rights Available-For-Sale Securities Mortgage Servicing Rights
Beginning of period level 3 fair value
 $ 87,808  $ 3,273,956  $ 125,158  $ 2,984,937 
Gains (losses) included in net income:
Realized (221) (43,817) (1,249) (152,834)
Unrealized (169)
(1)
 111,186 
(2)
 5,294 
(1)
 213,803 
(2)
Reversal of provision for credit losses (28) —  (127) — 
Net gains (losses) included in net income (418) 67,369  3,918  60,969 
Other comprehensive income 113  —  886  — 
Purchases —  6,756  —  305,729 
Sales (79,642) (132,533) (122,101) (134,387)
Settlements —  (2,435) —  (4,135)
Gross transfers into level 3 —  —  —  — 
Gross transfers out of level 3 —  —  —  — 
End of period level 3 fair value $ 7,861  $ 3,213,113  $ 7,861  $ 3,213,113 
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period
 $ 69 
(3)
 $ 134,663 
(4)
 $ 58 
(3)
 $ 235,431 
(4)
Change in unrealized gains or losses for the period included in other comprehensive loss for assets held at the end of the reporting period
 $ 114  $ —  $ 886  $ — 
____________________
(1)The change in unrealized gains or losses on available-for-sale securities accounted for under the fair value option was recorded in (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss.
(2)The change in unrealized gains or losses on MSR was recorded in gain (loss) on servicing asset on the condensed consolidated statements of comprehensive loss.
(3)The change in unrealized gains or losses on available-for-sale securities accounted for under the fair value option that were held at the end of the reporting period was recorded in (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss.
(4)The change in unrealized gains or losses on MSR that were held at the end of the reporting period was recorded in gain (loss) on servicing asset on the condensed consolidated statements of comprehensive loss.
Fair Value Inputs, Assets, Quantitative Information The tables below present information about the significant unobservable market data used by the third-party pricing vendors as inputs into models utilized to inform their best estimates of the fair value measurement of the Company’s MSR classified as Level 3 fair value assets at September 30, 2023 and December 31, 2022:
September 30, 2023
Valuation Technique Unobservable Input Range
Weighted Average (1)
Discounted cash flow Constant prepayment speed 5.1% - 6.3% 5.7%
Option-adjusted spread 5.1% - 8.6% 5.3%
Per loan annual cost to service $67.55 - $80.91 $68.05
December 31, 2022
Valuation Technique Unobservable Input Range
Weighted Average (1)
Discounted cash flow Constant prepayment speed 6.2% - 7.6% 6.9%
Option-adjusted spread 5.1% - 8.5% 5.3%
Per loan annual cost to service $67.41 - $80.96 $67.92
___________________
(1)Calculated by averaging the weighted average significant unobservable inputs used by the multiple third-party pricing vendors in the fair value measurement of MSR.
Fair Value, by Balance Sheet Grouping
The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at September 30, 2023 and December 31, 2022:
September 30, 2023 December 31, 2022
(in thousands) Carrying Value Fair Value Carrying Value Fair Value
Assets:
Available-for-sale securities $ 8,830,726  $ 8,830,726  $ 7,778,734  $ 7,778,734 
Mortgage servicing rights $ 3,213,113  $ 3,213,113  $ 2,984,937  $ 2,984,937 
Cash and cash equivalents $ 644,184  $ 644,184  $ 683,479  $ 683,479 
Restricted cash $ 400,777  $ 400,777  $ 443,026  $ 443,026 
Derivative assets $ 20,592  $ 20,592  $ 26,438  $ 26,438 
Reverse repurchase agreements $ 282,767  $ 282,767  $ 1,066,935  $ 1,066,935 
Other assets $ 31,982  $ 31,982  $ 3,493  $ 3,493 
Liabilities:
Repurchase agreements $ 9,113,270  $ 9,113,270  $ 8,603,011  $ 8,603,011 
Revolving credit facilities $ 1,410,671  $ 1,410,671  $ 1,118,831  $ 1,118,831 
Term notes payable $ 295,025  $ 288,353  $ 398,011  $ 361,905 
Convertible senior notes $ 268,179  $ 250,883  $ 282,496  $ 246,727 
Derivative liabilities $ 23,550  $ 23,550  $ 34,048  $ 34,048