Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the years ended December 31, 2025, 2024 and 2023, the Company qualified to be taxed as a REIT under the Code for U.S. federal income tax purposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes its net taxable income to stockholders, and does not engage in prohibited transactions. The Company intends to distribute 100% of its REIT taxable income and comply with all requirements to continue to qualify as a REIT. The majority of states also recognize the Company’s REIT status. The Company’s TRSs file separate tax returns and are fully taxed as standalone U.S. C corporations. It is assumed that the Company will retain its REIT status and will incur no REIT level taxation as it intends to comply with the REIT regulations and annual distribution requirements.
Certain activities the Company performs may produce income that will not be qualifying income for REIT purposes. These activities include the designated portion of MSR treated as normal mortgage servicing, residential mortgage loans, certain derivative financial instruments and other risk-management instruments. The Company has designated its TRSs to engage in these activities.
On July 4, 2025, the President signed into law the One Big Beautiful Bill Act (the “OBBBA”), which includes a broad range of tax reform provisions affecting businesses. The OBBBA extends or makes permanent certain tax law changes enacted as part of the 2017 Tax Cuts and Jobs Act, as well as makes other changes to the current tax code. The effects of the OBBBA have not had a material impact on the Company’s financial condition, results of operations or financial statement disclosures, nor are they expected to have a material impact on future periods.
The following table summarizes the tax provision (benefit) recorded primarily at the taxable subsidiary level for the years ended December 31, 2025, 2024 and 2023:
Year Ended
December 31,
(in thousands) 2025 2024 2023
Current tax provision (benefit):
Federal $ 17,554  $ 9,541  $ 3,498 
State (395) 3,351  4,976 
Total current tax provision (benefit)
17,159  12,892  8,474 
Deferred tax provision (benefit):
Federal (5,213) 26,892  16,602 
State (3,074) 6,802  (2,098)
Total deferred tax provision
(8,287) 33,694  14,504 
Total provision for income taxes
 $ 8,872  $ 46,586  $ 22,978 

During the year ended December 31, 2025, the Company recognized a provision for income taxes of $8.9 million, which was primarily due to net income from MSR servicing and mortgage loan origination activities, partially offset by net losses recognized on MSR and operating expenses incurred in the Company’s TRSs. During the year ended December 31, 2024, the Company recognized a provision for income taxes of $46.6 million, which was primarily due to net income from MSR servicing and mortgage loan origination activities, partially offset by operating expenses in the Company’s TRSs. During the year ended December 31, 2023, the Company recognized a provision for income taxes of $23.0 million, which was primarily due to net income from MSR servicing activity, partially offset by net losses recognized on MSR and operating expenses in the Company’s TRSs.
The Company’s cumulative book to tax differences in the REIT are primarily due to unrealized gains and losses, the deferral/utilization of capital losses for tax purposes, differences in timing of income recognition due to market discount and original issue discount and the calculations surrounding each, dividends paid from the Company’s TRSs to the REIT, the deferral/utilization of net operating losses for tax purposes and differences in treatment of compensation expense. These book to tax differences in the REIT are not reflected in the consolidated financial statements as the Company intends to retain its REIT status.
As of December 31, 2025, the Company had $329.4 million of net operating loss carryforwards for federal income tax purposes at the REIT, which may be utilized to offset future taxable income after consideration for the dividends paid deduction. These federal net operating loss carryforwards do not have an expiration date and can be carried forward indefinitely. As of December 31, 2025, the Company had $1.5 billion of net capital loss carryforwards for federal income tax purposes at the REIT, which may be utilized to offset future net gains from the sale of capital assets. These federal net capital loss carryforwards have an expiration date of five years, of which the majority of these losses will expire between 2027 and 2028. The potential utilization of the net capital loss carryforwards depends on the REIT’s ability to generate sufficient net capital gains prior to the expiration of the carryforward period.
The following tables present a reconciliation of the statutory federal rate to the effective rates for the years ended December 31, 2025, 2024 and 2023:
Year Ended
December 31, 2025
(dollars in thousands) Amount Percent
Benefit from income taxes at statutory federal tax rate
 $ (93,540) 21.0  %
State and local taxes, net of federal benefit, if applicable(1)
(2,741) 0.6  %
Nondeductible compensation expenses
 5,469  (1.2) %
Other nondeductible expenses
 900  (0.2) %
Other permanent differences in taxable income from net income for U.S. GAAP purposes(2)
(1,417) 0.3  %
REIT loss not subject to corporate income tax
 100,201  (22.5) %
Provision for income taxes/ effective tax rate(3)
$ 8,872  (2.0) %
____________________
(1)For the year ended December 31, 2025, state and local taxes in New York State and New York City made up the majority (greater than 50%) of the tax effect in this category.
(2)For the year ended December 31, 2025, other permanent differences in taxable income from net income (loss) for U.S. GAAP purposes included amortization of goodwill for tax purposes and dividends paid on unvested and outstanding equity incentive awards, as applicable.
(3)The provision for income taxes is primarily recorded at the taxable subsidiary level.
Year Ended
December 31,
2024 2023
(dollars in thousands) Amount Percent Amount Percent
Provision for (benefit from) income taxes at statutory federal tax rate
 $ 72,398  21.0  % $ (17,513) 21.0  %
State and local taxes, net of federal benefit, if applicable
 8,027  2.3  % 2,358  (2.8) %
Permanent differences in taxable income from net income for U.S. GAAP purposes(1)
21,794  6.3  % 65,670  (78.8) %
REIT income not subject to corporate income tax
 (55,633) (16.1) % (27,537) 33.0  %
Provision for income taxes/ effective tax rate(2)
$ 46,586  13.5  % $ 22,978  (27.6) %
____________________
(1)For the years ended December 31, 2024 and 2023, permanent differences in taxable income from net income (loss) for U.S. GAAP purposes included dividends paid from the Company’s TRSs to the REIT, the dividends paid deduction for tax purposes, amortization of goodwill for tax purposes, and a difference in compensation expense related to the officer’s compensation limitation, dividends paid on unvested and outstanding equity incentive awards, as applicable, and non-cash equity compensation expense for tax purposes.
(2)The provision for income taxes is primarily recorded at the taxable subsidiary level.
The Company’s consolidated balance sheets as of December 31, 2025 and December 31, 2024 contain the following current and deferred tax liabilities and assets, which are included in other assets and other liabilities, and are recorded at the taxable subsidiary level:
(in thousands) December 31,
2025		 December 31,
2024
Income taxes receivable (payable):
Federal income taxes receivable (payable)
 $ 2,457  $ (3,440)
State and local income taxes receivable (payable)
 786  (777)
Income taxes receivable (payable), net
 3,243  (4,217)
Deferred tax assets (liabilities):
Deferred tax asset 5,276  4,751 
Deferred tax liability (92,470) (100,231)
Total net deferred tax assets (liabilities) (87,194) (95,480)
Total tax assets (liabilities), net $ (83,951) $ (99,697)

For the year ended December 31, 2025, the Company paid cash for income taxes, net of refunds, of $24.6 million, of which, $23.5 million related to federal income taxes and $1.2 million related to state income taxes. No payments to any individual state jurisdiction exceeded five percent of total income taxes paid, net of refunds.

Deferred Tax Assets and Liabilities
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes at the TRS level. Components of the Company’s net deferred tax liabilities and assets as of December 31, 2025 and December 31, 2024 were as follows:
(in thousands) December 31,
2025		 December 31,
2024
Mortgage servicing rights $ (91,564) $ (99,980)
Net operating loss carryforward 2,351  2,444 
Other 2,019  2,056 
Total deferred tax assets (liabilities) (87,194) (95,480)
Valuation allowance —  — 
Total net deferred tax assets (liabilities) $ (87,194) $ (95,480)

As of December 31, 2025 and December 31, 2024, the Company had not recorded a valuation allowance for any portion of its deferred tax assets as it did not believe, at a more-likely-than-not level, that any portion of its deferred tax assets would not be realized.
Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements of a contingent tax liability for uncertain tax positions. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in these consolidated financial statements. The Company and its TRSs file income tax returns with the U.S. federal government and various state and local jurisdictions. Generally, the Company is no longer subject to tax examinations by tax authorities for tax years ended prior to December 31, 2022.