INTEREST INCOME AND INTEREST EXPENSE

9 Months Ended

Sep. 30, 2019

Banking and Thrift, Interest [Abstract]

15. INTEREST INCOME AND INTEREST EXPENSE

Refer to the note titled “Significant Accounting Policies” for details surrounding the Company’s accounting policy related to net interest income on securities and loans.

The following table summarizes the interest income recognition methodology for Residential Securities:



	Interest Income Methodology
Agency
Fixed-rate pass-through ⁽¹⁾	Effective yield ⁽³⁾
Adjustable-rate pass-through ⁽¹⁾	Effective yield ⁽³⁾
Multifamily ⁽¹⁾	Contractual Cash Flows
CMO ⁽¹⁾	Effective yield ⁽³⁾
Reverse mortgages ⁽²⁾	Prospective
Interest-only ⁽²⁾	Prospective
Residential credit
CRT ⁽²⁾	Prospective
Alt-A ⁽²⁾	Prospective
Prime ⁽²⁾	Prospective
Subprime ⁽²⁾	Prospective
NPL/RPL ⁽²⁾	Prospective
Prime jumbo ⁽²⁾	Prospective
Prime jumbo interest-only ⁽²⁾	Prospective
⁽¹⁾ Changes in fair value are recognized in Other comprehensive income (loss) on the accompanying Consolidated Statements of Comprehensive Income (Loss). ⁽²⁾ Changes in fair value are recognized in Net unrealized gains (losses) on instruments measured at fair value through earnings on the accompanying Consolidated Statements of Comprehensive Income (Loss). ⁽³⁾ Effective yield is recalculated for differences between estimated and actual prepayments and the amortized cost is adjusted as if the new effective yield had been applied since inception.

The following presents the components of the Company’s interest income and interest expense for the three and nine months ended September 30, 2019 and September 30, 2018.



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
Interest income	(dollars in thousands)
Residential Securities	$	784,228	$	680,037	$	2,271,893	$	2,122,375
Residential mortgage loans⁽¹⁾	37,673		21,184		102,689		55,557
Commercial investment portfolio^{(1) (2)}	87,946		97,531		281,029		249,331
U.S. Treasury securities	—		160		—		160
Reverse repurchase agreements	9,452		17,684		57,472		45,466
Total interest income	$	919,299	$	816,596	$	2,713,083	$	2,472,889
Interest expense
Repurchase agreements	699,838		445,535		1,962,999		1,177,384
Debt issued by securitization vehicles	34,524		29,391		102,882		63,244
Other	32,543		26,047		98,936		70,458
Total interest expense	766,905		500,973		2,164,817		1,311,086
Net interest income	$	152,394	$	315,623	$	548,266	$	1,161,803

⁽¹⁾ Includes assets transferred or pledged to securitization vehicles. ⁽²⁾ Includes commercial real estate debt and preferred equity and corporate debt.