INTEREST INCOME AND INTEREST EXPENSE

12 Months Ended

Dec. 31, 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 years ended December 31, 2019, 2018 and 2017.



	For the Years Ended December 31,
	2019		2018		2017
Interest income	(dollars in thousands)
Residential Securities⁽¹⁾	$	3,195,546	$	2,830,521	$	2,170,041
Residential mortgage loans⁽¹⁾	150,066		83,260		30,540
Commercial investment portfolio^{(1) (2)}	378,395		356,981		273,884
U.S. Treasury securities	—		160		—
Reverse repurchase agreements	63,290		61,641		18,661
Total interest income	$	3,787,297	$	3,332,563	$	2,493,126
Interest expense
Repurchase agreements	2,513,282		1,698,930		891,819
Debt issued by securitization vehicles	141,981		98,013		60,304
Participation sold	—		—		195
Other	129,612		100,917		56,036
Total interest expense	2,784,875		1,897,860		1,008,354
Net interest income	$	1,002,422	$	1,434,703	$	1,484,772

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