10 unchanged sentences
The performance and value of our loan and investment and servicing portfolios depend on the borrowers’ ability to operate the properties that serve as collateral so that they produce adequate cash flow to pay their loans.
−Removed: We attempt to mitigate these risks through our underwriting and asset management processes.
+Added: We attempt to mitigate these risks through our underwriting and asset
+Added: management processes.
Our asset management team reviews our portfolios consistently and is in regular contact with borrowers to monitor the performance of the collateral and enforce our rights as necessary.
2 unchanged sentences
The operating results of our Structured Business depend in large part on differences between the income from our loans and our borrowing costs.
−Removed: Most of our Structured Business loans and borrowings are variable-rate instruments, that are currently based on SOFR as we continue to transition away from LIBOR (collectively referred to as the “Index Rates” below).
+Added: Most of our Structured Business loans and borrowings are variable-rate instruments based on SOFR.
The objective of this strategy is to minimize the impact of interest rate changes on our net interest income.
5 unchanged sentences
As a result, the impact of a change in interest rates may be different on our interest income than on our interest expense.
−Removed: We have utilized interest rate swaps in the past to limit interest rate risk.
+Added: We have utilized treasury futures and interest rate and credit default swaps in the past to limit interest rate risk.
Derivatives are used for hedging purposes rather than speculation.
We do not enter into financial instruments for trading purposes.
−Removed: The following table projects the potential impact on interest (in thousands) for a 12-month period, assuming hypothetical instantaneous increases of 50 basis points and 100 basis points in the Index Rates.
−Removed: Since it is unlikely that the Index Rates will decrease in the near future as a result of the current economic environment, we have excluded the impact of decreases in the Index Rates.
+Added: Additionally, the interest rates on our cash, restricted cash and escrow balances are not indexed to a benchmark index rate and are negotiated periodically with each corresponding bank, therefore, the interest rates may change frequently and may not necessarily change in conjunction with changes in SOFR.
+Added: As a result, the impact in the table below is for illustrative purposes only.
+Added: The following table projects the potential impact on interest (in thousands) for a 12-month period, assuming a hypothetical instantaneous increase or decrease of 50 basis points and a decrease of 100 basis points in corresponding interest rates.
+Added: Since it is unlikely that interest rates will significantly increase in the near future as a result of the current high interest rate environment, we have excluded the impact of a 100 basis point increase in corresponding interest rates.
Assets (Liabilities)
Subject to Interest
−Removed: 50 Basis Point
−Removed: 100 Basis Point
−Removed: Rate Sensitivity (1)
+Added: Rate Sensitivity (1) 50 Basis Point
+Added: Increase 50 Basis Point
+Added: Decrease 100 Basis Point
Interest income from loans and investments $ 12,615,006 $ 56,099 $ (55,288) $ (109,762)
Interest expense from debt obligations (11,572,461) 49,785 (49,785) (99,569)
−Removed: Impact to net interest income (2)
−Removed: Represents the UPB of our loan portfolio and the principal balance of our debt.
−Removed: The impact of hypothetical rate changes to net interest income are further benefited by interest income earned on our cash, restricted cash and escrow balances.
−Removed: At December 31, 2022, we had $2.50 billion of cash, restricted cash and escrows, which is earning interest at a weighted average rate of approximately 3.75%, or approximately $94 million annually.
−Removed: The interest rates on these balances are not indexed to an Index Rate and are negotiated periodically with each corresponding bank, therefore, the interest rates may not change in conjunction with changes in Index Rates.
−Removed: We enter into interest rate swaps to hedge our exposure to changes in interest rates inherent in (1) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization, and (2) our Agency Business SFR – fixed rate loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt.
−Removed: Our interest rate swaps are tied to the five-year and ten-year swap rates and hedge our exposure to Private Label loans, until the time they are securitized, and changes in the fair value of our held-for-sale Agency Business SFR – fixed rate loans.
−Removed: A 50 basis point and a 100 basis point increase to the five-year and ten-year swap rates on our interest rate swaps held at December 31, 2022 would have resulted in a gain of $5.0 million and $10.0 million, respectively, in 2022, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a loss of $5.0 million and $10.0 million, respectively.
+Added: Impact to net interest income from loans and investments $ 6,314 $ (5,503) $ (10,193)
+Added: Interest income from cash, restricted cash and escrow balances (2) $ 3,076,723 15,384 (15,384) (30,767)
+Added: Total impact from hypothetical changes in interest rates $ 21,698 $ (20,887) $ (40,960)
+Added: ________________________________________
+Added: (1) Represents the UPB of our loan portfolio, the principal balance of our debt and the account balances of our cash, restricted cash and escrows at December 31, 2023.
+Added: (2) Our cash, restricted cash and escrows are currently earning interest at a weighted average blended rate of approximately 5.0%, or approximately $155.0 million annually.
+Added: Interest income earned on our cash and restricted cash is included as a component of interest income and interest income earned on escrows is included as a component of servicing revenue, net in the consolidated statements of income.
+Added: The interest earned on our cash, restricted cash and escrows is based on an average daily balance and may be different from the end of period balance.
+Added: We entered into treasury futures to hedge our exposure to changes in interest rates inherent in (1) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization, and (2) our Agency Business SFR – fixed rate loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt.
+Added: Our treasury futures are tied to the five-year and ten-year treasury rates and hedge our exposure to Private Label loans, until the time they are securitized, and changes in the fair value of our held-for-sale Agency Business SFR – fixed rate loans.
+Added: A 50 basis point and a 100 basis point increase to the five-year and ten-year treasury rates on our treasury futures held at December 31, 2023 would have resulted in a gain of $0.8 million and $1.2 million, respectively, during 2023, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a gain of less than $0.1 million and a loss of $0.3 million, respectively.
Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD.
5 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.