TWO Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value (Tables)

Fair Value (Tables)

3 Months Ended

Mar. 31, 2024

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
	March 31, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	—	$	8,178,591	$	3,953	$	8,182,544

Mortgage servicing rights	—		—		3,084,879		3,084,879

Derivative assets	14,512		9,885		—		24,397

Total assets	$	14,512	$	8,188,476	$	3,088,832	$	11,291,820
Liabilities:

Derivative liabilities	$	3,027	$	—	$	—	$	3,027
Total liabilities	$	3,027	$	—	$	—	$	3,027


	Recurring Fair Value Measurements
	December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	—	$	8,322,999	$	4,150	$	8,327,149

Mortgage servicing rights	—		—		3,052,016		3,052,016

Derivative assets	72,980		12,311		—		85,291

Total assets	$	72,980	$	8,335,310	$	3,056,166	$	11,464,456
Liabilities:

Derivative liabilities	$	21,506	$	—	$	—	$	21,506
Total liabilities	$	21,506	$	—	$	—	$	21,506

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

	March 31, 2024
(in thousands)		Available-For-Sale Securities			Mortgage Servicing Rights
Beginning of period level 3 fair value		$	4,150		$	3,052,016
Gains (losses) included in net income (loss):
Realized		(155)			(43,418)
Unrealized		—		(1)	54,430		(2)
Reversal of provision for credit losses		(65)			—
Net gains (losses) included in net income (loss)		(220)			11,012
Other comprehensive income		23			—
Purchases		—			40,335
Sales		—			(18,221)
Settlements		—			(263)
Gross transfers into level 3		—			—
Gross transfers out of level 3		—			—
End of period level 3 fair value		$	3,953		$	3,084,879
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period		$	—	(3)	$	61,247	(4)
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		$	23		$	—

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(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 income (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 income (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 income (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 income (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 March 31, 2024 and December 31, 2023:


March 31, 2024
Valuation Technique	Unobservable Input	Range			Weighted Average (1)
Discounted cash flow	Constant prepayment speed	5.6%	-	6.8%		6.2%

	Option-adjusted spread	5.2%	-	8.7%		5.4%
	Per loan annual cost to service	$67.90	-	$81.54		$68.47


December 31, 2023
Valuation Technique	Unobservable Input	Range			Weighted Average (1)
Discounted cash flow	Constant prepayment speed	5.0%	-	6.9%		6.2%

	Option-adjusted spread	4.8%	-	8.6%		5.3%
	Per loan annual cost to service	$66.31	-	$81.30		$68.27

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(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 March 31, 2024 and December 31, 2023:


	March 31, 2024				December 31, 2023
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Available-for-sale securities	$	8,182,544	$	8,182,544	$	8,327,149	$	8,327,149


Mortgage servicing rights	$	3,084,879	$	3,084,879	$	3,052,016	$	3,052,016

Cash and cash equivalents	$	666,244	$	666,244	$	729,732	$	729,732
Restricted cash	$	72,184	$	72,184	$	65,101	$	65,101
Derivative assets	$	24,397	$	24,397	$	85,291	$	85,291
Reverse repurchase agreements	$	351,843	$	351,843	$	284,091	$	284,091
Other assets	$	31,562	$	31,562	$	31,704	$	31,704
Liabilities:
Repurchase agreements	$	8,361,638	$	8,361,638	$	8,020,207	$	8,020,207


Revolving credit facilities	$	1,357,671	$	1,357,671	$	1,329,171	$	1,329,171
Term notes payable	$	295,520	$	292,552	$	295,271	$	289,653
Convertible senior notes	$	268,953	$	259,507	$	268,582	$	254,232
Derivative liabilities	$	3,027	$	3,027	$	21,506	$	21,506

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details