ARBOR REALTY TRUST INC
For the period ended Sep 30, 2024. Filed Nov 1, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 1, 2024
ABR$1.61-3.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001628280-24-034905
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001628280-24-044661
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 154 previous paragraphs and 150 current paragraphs.
81 unchanged; 55 reworded; 13 added; 12 removed; 6 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
Financing and Capital Markets Activity. We entered into two new Structured Business debt facilities totaling $650.0 million of warehouse capacity.
Current report
Recent Developments in October 2024. Raised $100.0 million from the issuance of our 9.00% senior unsecured notes due 2027, and redeemed our 4.75% senior unsecured notes.
Current report
The Federal Reserve lowered the federal funds rate by 50 basis points in September 2024, which marks the first rate cut since 2020, and it is possible that rates will continue to decline during the remainder of 2024 and 2025. Although rates have started to decline, we currently remain in a high interest rate environment which could remain higher for longer than expected if inflation and other economic indicators do not continue to meet the Federal Reserve’s expectations.
Current report
As discussed earlier, the Federal Reserve began lowering interest rates in September 2024 and may continue to cut interest rates during the remainder of 2024 and 2025. If these rate reductions continue, this would likely lead to immediate decreases in net interest income on our floating rate loan book and reduce earnings on our cash and escrow balances. However, the prolonged rate reductions could also lead to increases in our loan originations and improved credit, resulting in decreases in delinquencies and potential future losses. For additional details, please see “Quantitative and Qualitative Disclosures about Market Risk” below.
Current report
Capitalized mortgage servicing rights decreased $14.9 million, primarily due to amortization and prepayment write-downs exceeding additions from new originations, as a result of a decline in the weighted average servicing fee rate.
Current report
Real estate owned increased $40.9 million, primarily due to the foreclosure of two multifamily bridge loans, which we took back the underlying collateral, partially offset by the sale of an office property.
Current report
Other assets increased $70.0 million, primarily due to additional fundings of unsecured line of credit loans totaling $39.6 million, an increase in interest receivables from fundings on existing loans and an increase in deferred interest on modified loans.
Current report
Other liabilities decreased $28.4 million, primarily due to a decrease in accrued interest payable as a result of the unwind of CLO 15, paydowns on remaining securitizations and interest payments made on our convertible notes, along with a decrease in deferred tax liabilities.
Current report
The increase in selling and administrative expenses was primarily due to increases in professional and legal costs.
Current report
The provision for credit losses (net of recoveries) in 2024 includes $13.9 million in specific loan reserves and a $1.4 million increase related to forecasted economic and market conditions, while 2023 includes $12.8 million in specific loan reserves and a $4.5 million increase related to forecasted economic and market conditions.
Current report
The decrease in servicing revenue, net was primarily due to a decrease in average escrow balances largely due to runoff, partially offset by an increase in interest rates.
Current report
Inflation. The Federal Reserve lowered the federal funds rate by 50 basis points in September 2024, which marks the first rate cut since 2020, and it is possible that rates will continue to decline during the remainder of 2024 and 2025. Although rates have started to decline, we currently remain in a high interest rate environment which could remain higher for longer than expected if inflation and other economic indicators do not continue to meet the Federal Reserve’s expectations. If these rate reductions continue, this would likely lead to immediate decreases in net interest income on our floating rate loan book and reduce earnings on our cash and escrow balances. However, if a prolonged rate cut occurs, this could lead to increases in our loan origination business and improved credit, resulting in decreases in delinquencies and potential future losses. For additional details, please see “Current Market Conditions, Risks and Recent Trends” above and “Quantitative and Qualitative Disclosures about Market Risk” below.
Current report
•Entered into three new debt facilities totaling $900.0 million;
Removed paragraphs (12)
Previous report
Financing and Capital Markets Activity.
Previous report
•We repurchased $11.4 million of our common stock at an average price of $12.19 per share;
Previous report
•We entered into a new equity distribution agreement with JMP and may offer and sell up to 30,000,000 shares of our common stock;
Previous report
•We unwound CLO 15 redeeming the remaining outstanding notes, which were repaid primarily from the refinancing of the remaining assets within our other CLO vehicles and credit and repurchase facilities; and
Previous report
•Our 5.75% senior unsecured notes, totaling $90.0 million, matured and were repaid for cash.
Previous report
We are currently in a high interest rate environment, as the Federal Reserve has raised interest rates several times over the past two years to combat inflation and restore price stability. Based on the latest comments from the Federal Reserve in June 2024, we expect they may begin to lower interest rates at some point during 2024. Interest rates could remain higher for longer than expected if inflation and other economic indicators do not meet the Federal Reserve’s expectations.
Previous report
Other liabilities decreased $39.2 million, primarily due to payments of accrued incentive compensation and commissions during the first half of 2024, related to 2023 performance and a decrease in deferred tax liabilities.
Previous report
The decrease in gain on sales, including fee-based services, net was primarily due to a 5% decrease in loan sales volume ($122.8 million) and a 3% decrease in the sales margin from 1.59% to 1.54%. The decrease in the sales margin was primarily driven by a lower percentage of Fannie Mae loans sold, which contain higher sales margins.
Previous report
The decrease in other income, net was from a $2.1 million decrease from our Agency Business, partially offset by a $1.6 million increase from our Structured Business. The Agency Business decrease was primarily due to a $2.2 million mark-to-market recovery on Private Label and SFR loans in 2023. The Structured Business increase was primarily due to loan modification fees.
Previous report
Loss on Extinguishment of Debt
Previous report
Inflation. We are currently in a high interest rate environment, as the Federal Reserve has raised interest rates several times over the past two years to combat inflation and restore price stability. Based on the latest comments from the Federal Reserve in June 2024, we expect they may begin to lower interest rates at some point during 2024. Interest rates could remain higher for longer than expected if inflation and other economic indicators do not meet the Federal Reserve's expectations. Currently, rising interest rates will positively impact our net interest income since our structured loan portfolio exceeds our corresponding debt balances and the vast majority of our loan portfolio is floating-rate based on SOFR. In addition, a greater portion of our debt is fixed-rate (convertible and senior unsecured notes), as compared to our structured loan portfolio, and will not reset as interest rates rise. Therefore, increases in interest income due to rising interest rates is likely to be greater than the corresponding increase in interest expense on our variable rate debt. See “Quantitative and Qualitative Disclosures about Market Risk” below for additional details. Conversely, such rising interest rates have negatively impacted real estate values and have limited certain borrowers abilities to make debt service payments, which may limit new mortgage loan originations and increase the likelihood of additional delinquencies and losses incurred on defaulted loans if the reduction in the collateral value is insufficient to repay their loans in full.
Previous report
•Entered into a new $250.0 million debt facility and terminated a $50.0 million debt facility;
Reworded paragraphs (55)
Previous wording
We conduct our operations to qualify as a REIT. A REIT is generally not subject to federal income tax on its REIT—taxable income that is distributed to its stockholders, provided that at least 90% of its REIT—taxable income is distributed and provided that certain other requirements are met.
Current wording
We conduct our operations to qualify as a REIT. A REIT is generally not subject to federal income tax on its taxable income that is distributed to its stockholders, provided that at least 90% of its taxable income is distributed and provided that certain other requirements are met.
Previous wording
Significant Developments During the Second Quarter of 2024
Current wording
Significant Developments During the Third Quarter of 2024
Previous wording
•We reduced our balance sheet portfolio by 3% to $11.87 billion, as loan runoff of $629.6 million outpaced loan originations totaling $227.2 million;
Current wording
•We reduced our balance sheet portfolio by 3% to $11.57 billion, as loan runoff of $521.3 million outpaced loan originations totaling $258.5 million; and
Previous wording
•We modified twenty-eight loans with a total UPB of $733.3 million. For fifteen of these loans with a total UPB of $398.1 million, borrowers invested additional capital to recapitalize their deals in exchange for temporary rate relief, which we provided through a pay and accrual feature. See Note 3 for details; and
Current wording
•We modified twenty-four loans with a total UPB of $1.15 billion. Borrowers of eighteen of these loans with a total UPB of $710.7 million invested additional capital to recapitalize their deals in exchange for temporary rate relief, which we provided through a pay and accrual feature. See Note 3 for details.
Previous wording
•Loan originations totaled $1.15 billion and includes $489.9 million of new agency loans that were recaptured from our Structured Business runoff; and
Current wording
•Loan originations totaled $1.10 billion and includes $383.1 million of new Agency loans that were recaptured from our Structured Business runoff; and
Previous wording
•Grew our fee-based servicing portfolio approximately 3%, or $893.7 million, to $32.28 billion.
Current wording
•Grew our fee-based servicing portfolio $733.1 million, or 2%, to $33.01 billion.
Previous wording
Inflation, rising interest rates, bank failures, and geopolitical uncertainty has caused significant disruptions in many market segments, including the financial services, real estate and credit markets, which has, and may continue, to result in a further dislocation in capital markets and a continual reduction of available liquidity. Despite these periodic disruptions, we have been successful in raising capital through various vehicles, when needed, to grow our business.
Current wording
Inflation, high interest rates, bank failures, and geopolitical uncertainty has caused significant disruptions in many market segments, including the financial services, real estate and credit markets, which has, and may continue, to result in a further dislocation in capital markets and a continual reduction of available liquidity. Despite these periodic disruptions, we have been successful in raising capital through various vehicles, when needed, to continue to operate and grow our business.
Previous wording
Recent instability in the banking sector, such as the multiple regional bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability and increased the cost of capital. The increased cost of credit, or degradation in debt financing terms, may impact our ability to identify and execute investments on attractive terms, or at all. Additionally, although the majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits. We limit the exposure relating to these balances by diversifying them among various counterparties. Generally, deposits may be redeemed upon demand and are maintained at financial institutions with reputable credit and therefore we believe bear minimal credit risk.
Current wording
Instability in the banking sector, such as the multiple regional bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability, and increased the cost of, capital. The increased cost of credit, or degradation in debt financing terms, has impacted, and may continue to impact, our ability to identify and execute investments on attractive terms, or at all. Additionally, although the majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits. We limit the exposure relating to these balances by diversifying them among various counterparties. Generally, deposits may be redeemed upon demand and are maintained at financial institutions with reputable credit and therefore we believe bear minimal credit risk.
Previous wording
As a result of the current high interest rate environment, some of our borrowers have experienced, and may continue to experience, financial stress that has resulted in an increase in payment delinquencies, loan loss reserves and realized losses on certain loans within our portfolio. We employ rigorous risk management and underwriting practices to proactively maintain the quality of our loan portfolio and work very closely with borrowers to mitigate potential losses while safeguarding the integrity of our portfolio. Given the current elevated interest rate environment, we cannot guarantee that our loan portfolio will perform under the terms originally established.
Current wording
These adverse economic conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which has impacted, and may continue to impact, our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders. We employ rigorous risk management and underwriting practices to proactively maintain the quality of our loan portfolio and work very closely with borrowers to mitigate potential losses, while safeguarding the integrity of our portfolio, which may include modifying original loan terms. Given the current elevated interest rate environment, we cannot guarantee that our loan portfolio will perform under the terms originally established.
Previous wording
Currently, the high interest rate environment positively impacts our net interest income since our structured loan portfolio exceeds our corresponding debt balances and the vast majority of our loan portfolio is floating rate based on SOFR. In addition, a greater portion of our debt is fixed rate (convertible and senior unsecured notes), as compared to our structured loan portfolio, and does not reset as interest rates rise. Therefore, increases in interest income due to rising interest rates is likely to be greater than the corresponding increase in interest expense on our variable rate debt. Additionally, we earn interest on our escrow and cash balances, so a high interest rate environment will increase our earnings on such balances. See “Quantitative and Qualitative Disclosures about Market Risk” below for additional details. Conversely, such rising interest rates have negatively impacted real estate values and have limited certain borrowers abilities to make debt service payments, which may limit new mortgage loan originations and increase the likelihood of additional delinquencies and losses incurred on defaulted loans if the reduction in the collateral value is insufficient to repay their loans in full.
Current wording
Historically, the high interest rate environment has positively impacted our net interest income since our structured loan portfolio exceeds our corresponding debt balances and the vast majority of our loan portfolio is floating rate based on SOFR. Additionally, since a greater portion of our debt consists of fixed-rate instruments (such as convertible and senior unsecured notes), as compared to our structured loan portfolio, the increase in interest income from high interest rates tends to outpace the rise in interest expense on our debt. Furthermore, our earnings on escrows and cash balances also benefit from an elevated rate environment. However, the prolonged period of elevated interest rates has led to an increase in loan delinquencies, a decrease in loan originations and lower cash and escrow balances, which is having, and may continue to have, a negative impact on our net interest income. Additionally, the prolonged high interest rate environment has contributed to a decline in certain commercial real estate values, leading to increased reserves, as the collateral value is insufficient to fully repay the loans.
Previous wording
Our Structured loan and investment portfolio balance was $11.87 billion and $12.62 billion at June 30, 2024 and December 31, 2023, respectively. This decrease was primarily due to loan runoff exceeding loan originations by $786.6 million. See below for details.
Current wording
Our Structured loan and investment portfolio balance was $11.57 billion and $12.62 billion at September 30, 2024 and December 31, 2023, respectively. This decrease was primarily due to loan runoff exceeding loan originations by $1.05 billion. See below for details.
Previous wording
Our portfolio had a weighted average current interest pay rate of 7.79% and 8.42% at June 30, 2024 and December 31, 2023, respectively. Including certain fees earned and costs associated with the structured portfolio, the weighted average current interest rate was 8.60% and 8.98% at June 30, 2024 and December 31, 2023, respectively. Our debt that finances our loans and investment portfolio totaled $10.26 billion and $11.57 billion at June 30, 2024 and December 31, 2023, respectively, with a weighted average funding cost of 7.22% and 7.14%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 7.53% and 7.45% at June 30, 2024 and December 31, 2023, respectively.
Current wording
The portfolio had a weighted average current interest pay rate of 7.25% and 8.42% at September 30, 2024 and December 31, 2023, respectively. Including certain fees earned and costs, the weighted average current interest rate was 8.16% and 8.98% at September 30, 2024 and December 31, 2023, respectively. Our debt that finances our Structured loan and investment portfolio totaled $9.97 billion and $11.57 billion at September 30, 2024 and December 31, 2023, respectively, with a weighted average funding cost of 6.86% and 7.14%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 7.18% and 7.45% at September 30, 2024 and December 31, 2023, respectively.
Previous wording
Loans held-for-sale from the Agency Business decreased $208.8 million, primarily from loan sales exceeding loan originations by $225.1 million as noted in the following table. Activity from our Agency Business portfolio is comprised of the following (in thousands):
Current wording
Loans held-for-sale from the Agency Business decreased $225.6 million, primarily from loan sales exceeding loan originations by $247.5 million as noted in the following table. Activity from our Agency Business portfolio is comprised of the following (in thousands):
Previous wording
Investments in equity affiliates decreased $6.4 million, primarily due to distributions received from our investments in AWC and a residential mortgage banking business totaling $19.0 million, partially offset by contributions made in our investments in AWC and AMAC III totaling $11.1 million.
Current wording
Investments in equity affiliates decreased $3.0 million, primarily due to distributions received from our investments in AWC and a residential mortgage banking business totaling $19.0 million, substantially offset by contributions made in our investments in AWC and AMAC III totaling $16.3 million.
Previous wording
Due from related party increased $40.7 million, due to an increase in funds from payoffs to be remitted by our affiliated servicing operations related to real estate transactions at the end of the reporting period, which were remitted to us subsequent to quarter end.
Current wording
Due from related party increased $32.4 million, due to an increase in funds from payoffs to be remitted by our affiliated servicing operations related to real estate transactions at the end of the reporting period, which were remitted to us subsequent to quarter end.
Previous wording
Credit and repurchase facilities decreased $77.4 million, primarily due to loan runoff in our Structured Business portfolio as well as loan sales exceeding originations in our Agency Business.
Current wording
Credit and repurchase facilities increased $19.9 million, primarily due to refinancing loans from the unwind of CLOs in our Structured Business, substantially offset by loan sales exceeding originations in our Agency Business.
Previous wording
Securitized debt decreased $1.22 billion, primarily due to the unwind of CLO 15 and paydowns on certain remaining securitizations.
Current wording
Securitized debt decreased $1.62 billion, primarily due to the unwind of CLO 15 and paydowns on our remaining securitizations.
Previous wording
Senior unsecured notes decreased $88.0 million, due to the repayment at maturity of our 5.75% notes.
Current wording
Senior unsecured notes decreased $87.1 million, due to the repayment at maturity of our 5.75% notes.
Previous wording
Due to related party decreased $11.1 million, due to the timing of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations.
Current wording
Due to related party increased $11.7 million, due to the timing of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations.
Previous wording
Due to borrowers decreased $45.9 million, primarily due to the funding of previously committed originations in our Structured Business.
Current wording
Due to borrowers decreased $64.7 million, primarily due to the funding of previously committed originations in our Structured Business.
Previous wording
(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At June 30, 2024 and December 31, 2023, delinquent loans totaled $413.7 million and $411.1 million, respectively. At June 30, 2024, there were two loans totaling $4.8 million in bankruptcy and three loans totaling $5.4 million in foreclosure. At December 31, 2023, there were two loans totaling $4.8 million in bankruptcy and no loans in foreclosure.
Current wording
(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At September 30, 2024 and December 31, 2023, delinquent loans totaled $427.0 million and $411.1 million, respectively. At September 30, 2024, there were two loans totaling $4.8 million in bankruptcy and three loans totaling $21.4 million have been foreclosed. At December 31, 2023, there were two loans totaling $4.8 million in bankruptcy and no loans in foreclosure.
Previous wording
The decrease in interest income was mainly due to a $40.0 million decrease from our Structured Business. The Structured Business decline was primarily from a decrease in the average balance of our core interest-earning assets as a result of loan runoff exceeding loan originations and a decrease in the average yield on core interest-earning assets from a rise in non-performing and other non-accrued loans, partially offset by increases in SOFR.
Current wording
The decrease in interest income was mainly due to a $48.7 million decrease from our Structured Business. The decline was primarily from a decrease in the average balance of our core interest-earning assets as loan runoff exceeds loan originations, a decrease in the average yield on core interest-earning assets from a rise in non-performing and other non-accrued loans and a reduction in interest earned on cash balances due to lower average bank balances.
Previous wording
The decrease in interest expense was mainly due to a $17.9 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities, primarily due to loan runoff and note paydowns in our securitizations and senior unsecured notes, substantially offset by an increase in the average cost of interest-bearing liabilities, mainly from increases in SOFR.
Current wording
The decrease in interest expense was mainly due to a $30.1 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities from loan runoff and note paydowns in our securitizations and senior unsecured notes, partially offset by an increase in the average cost of interest-bearing liabilities, mainly from increases in SOFR.
Previous wording
The decrease in income from MSRs was primarily due to a 23% decrease in loan commitment volume ($599.5 million) and an 8% decrease in the MSR rate from 1.32% to 1.22%. The decrease in the MSR rate was primarily due to a higher percentage of Fannie Mae loan commitments in the prior year period, which contain higher servicing fees.
Current wording
The decrease in income from MSRs was primarily due to a 13% decrease in loan commitment volume ($154.9 million), partially offset by an 8% increase in the MSR rate from 1.16% to 1.25%. The increase in the MSR rate was primarily due to higher rates on Fannie Mae loan volume from an increase in servicing fees retained.
Previous wording
The decrease in servicing revenue, net was primarily due to a decrease in the average escrow balances, partially offset by an increase in interest rates.
Current wording
The decrease in servicing revenue, net was primarily due to a decrease in the average escrow balances largely due to runoff, partially offset by an increase in interest rates.
Previous wording
The losses on derivative instruments in 2024 and 2023 were related to changes in the fair values of our forward sale commitments and swaps held by our Agency Business as a result of changes in market interest rates as well as from the timing of GSE Agency loan sales.
Current wording
The gains and losses on derivative instruments relate to changes in the fair values of forward sale commitments and swaps held by our Agency Business as a result of changes in market interest rates as well as from the timing of GSE Agency loan sales.
Previous wording
The increase in employee compensation and benefits expense was primarily due to increases in incentive compensation, including commissions, from increases in headcount and annual merit increases.
Current wording
The increase in employee compensation and benefits expense was primarily due to increases in incentive compensation and commissions from higher bonus allocation targets, annual merit increases and commission rates.
Previous wording
The increase in the provision for credit losses (net of recoveries) primarily reflects an increase in reserves on specifically impaired loans.
Current wording
The increase in the provision for loss sharing (net of recoveries) primarily reflects an increase in reserves related to general economic and market conditions.
Previous wording
Income from equity affiliates in 2024 primarily reflects a $4.2 million distribution received from our Lexford joint venture, partially offset by losses from our investments in a residential mortgage banking business and our AMAC III investment totaling $1.5 million, while income in 2023 primarily reflects income from our investment in a residential mortgage banking business of $3.5 million and a $2.5 million distribution received from our Lexford joint venture.
Current wording
Income from equity affiliates in 2024 primarily reflects a $4.9 million distribution received from our Lexford joint venture, partially offset by losses from our investments in a residential mortgage banking business and our AMAC III investment totaling $1.5 million, while income in 2023 primarily reflects $3.5 million received from an equity participation interest on a property that was sold, substantially offset by an aggregate loss of $2.7 million from our ongoing equity investments.
Previous wording
In the three months ended June 30, 2024, we recorded a tax provision of $3.9 million, which consisted of a current tax provision of $6.8 million and a deferred tax benefit of $2.9 million. In the three months ended June 30, 2023, we recorded a tax provision of $5.6 million, which consisted of a current tax provision of $13.0 million and a deferred tax benefit of $7.4 million.
Current wording
In the three months ended September 30, 2024, we recorded a tax provision of $5.2 million, which consisted of a current tax provision of $7.2 million and a deferred tax benefit of $2.0 million. In the three months ended September 30, 2023, we recorded a tax provision of $5.9 million, which consisted of a current tax provision of $8.3 million and a deferred tax benefit of $2.4 million.
Previous wording
The noncontrolling interest relates to the outstanding OP Units (see Note 15). There were 16,293,589 OP Units outstanding at both June 30, 2024 and 2023, which represented 8.0% and 8.2% of our outstanding stock at June 30, 2024 and 2023, respectively.
Current wording
The noncontrolling interest relates to the outstanding OP Units (see Note 16). There were 16,293,589 OP Units outstanding at both September 30, 2024 and 2023, which represented 8.0% of our outstanding stock at both September 30, 2024 and 2023.
Previous wording
Comparison of Results of Operations for the Six Months Ended June 30, 2024 and 2023
Current wording
Comparison of Results of Operations for the Nine Months Ended September 30, 2024 and 2023
Previous wording
The decrease in interest income was mainly due to a $49.5 million decrease from our Structured Business. The Structured Business decline was primarily from a decrease in the average balance of our core interest-earning assets, as a result of loan runoff exceeding loan originations, partially offset by an increase in the average yield on core interest-earning assets from an increase in SOFR, partially offset by a rise in non-performing and other non-accrued loans.
Current wording
The decrease in interest income was mainly due to a $98.2 million decrease from our Structured Business. The decline was primarily from a decrease in the average balance of our core interest-earning assets as loan runoff exceeded loan originations, slightly offset by an increase in the average yield on core interest-earning assets from an increase in SOFR, partially offset by a rise in non-performing and other non-accrued loans.
Previous wording
The decrease in interest expense was mainly due to a $20.2 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities, primarily due to loan runoff and note paydowns in our securitizations and senior unsecured notes, substantially offset by an increase in the average cost of interest-bearing liabilities, mainly from increases in SOFR.
Current wording
The decrease in interest expense was mainly due to a $50.2 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities from loan runoff and note paydowns in our securitizations and senior unsecured notes, partially offset by an increase in the average cost of interest-bearing liabilities, mainly from increases in SOFR.
Previous wording
The decrease in gain on sales, including fee-based services, net was primarily due to a 20% decrease in loan sales volume ($275.4 million).
Current wording
The decrease in gain on sales, including fee-based services, net was primarily due to an 8% decrease in loan sales volume ($279.2 million), partially offset by a 3% increase in the sales margin from 1.54% to 1.58%.
Previous wording
The decrease in income from MSRs was primarily due to an 8% decrease in the MSR rate from 1.43% to 1.32% and a 3% decrease in loan commitment volume ($33.6 million). The decrease in the MSR rate was primarily due to a higher percentage of Fannie Mae loan commitments in the prior year period, which contain higher servicing fees.
Current wording
The decrease in income from MSRs was primarily due to a 20% decrease in loan commitment volume ($754.3 million) and a 3% decrease in the MSR rate from 1.27% to 1.23%. The decrease in the MSR rate was primarily due to a higher percentage of Freddie Mac loan commitments, which contain lower servicing fees.
Previous wording
Other income, net in 2024 primarily reflects loan origination and modification fees from our Structured Business.
Current wording
The increase in other income, net was primarily from an increase in loan origination and modification fees from our Structured Business
Previous wording
The increase in employee compensation and benefits expense was primarily due to increases in incentive compensation from increases in headcount and annual merit increases, partially offset by a decrease in commissions as a result of lower GSE/Agency loan sales volume.
Current wording
The increase in employee compensation and benefits expense was primarily due to increases in incentive compensation and commissions from higher bonus allocation targets, annual merit increases and commission rates.
Previous wording
The decrease in the provision for loss sharing (net of recoveries) reflects less specific loan impairment reserves taken in the current year period as well as a decrease in reserves related to general economic and market conditions.
Current wording
The decrease in the provision for loss sharing (net of recoveries) reflects less specific loan impairment reserves taken in the current year period as well as a decrease in general reserves.
Previous wording
The increase in the provision for credit losses (net of recoveries) substantially reflects greater stress in general economic and market conditions, and to a lesser extent, an increase in reserves on specifically impaired loans.
Current wording
The increase in the provision for credit losses (net of recoveries) primarily reflects an increase in reserves on specifically impaired loans due to a decline in general economic and market conditions.
Showing the first 40 of 55 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Other income, net in 2024 primarily reflects loan origination and modification fees from our Structured Business and reserve recoveries on SFR and Private Label loans from our Agency Business.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
•We sold a real estate owned asset for $14.2 million and recognized a $3.8 million gain.
Previous report — wording carried elsewhere
These adverse economic conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which could have a significant impact on our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.
Previous report — wording carried elsewhere
The decrease in the provision for loss sharing (net of recoveries) primarily reflects less specific loan impairment reserves taken in the current year period.
Previous report — wording carried elsewhere
The loss on extinguishment of debt in both 2024 and 2023 reflect deferred financing fees recognized in connection with the unwind of CLOs.
Previous report — wording carried elsewhere
Gain on Sale of Real Estate
Previous report — wording carried elsewhere
In 2024, we sold a real estate owned asset for $14.2 million and recognized a $3.8 million gain.