Investment Securities Available For Sale, at Fair Value

9 Months Ended

Sep. 30, 2024

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available For Sale, at Fair Value

4. Investment Securities Available For Sale, at Fair Value

The Company accounts for certain of its investment securities available for sale using the fair value election pursuant to ASC 825, where changes in fair value are recorded in unrealized gains (losses), net on the Company's condensed consolidated statements of operations. The Company also had investment securities available for sale where the fair value option had not been elected, which we refer to as CECL Securities. CECL Securities are reported at fair value with unrealized gains and losses recorded in other comprehensive income (loss) on the Company's condensed consolidated statements of comprehensive income (loss). The Company's investment securities available for sale consisted of the following as of September 30, 2024 and December 31, 2023, respectively (dollar amounts in thousands):

	September 30, 2024								December 31, 2023
	Amortized Cost		Unrealized				Fair Value		Amortized Cost		Unrealized				Fair Value
			Gains		Losses						Gains		Losses
Fair Value Option
Agency RMBS
Fixed rate
Fannie Mae	$	1,401,283	$	28,596	$	(185)	$	1,429,694	$	1,084,702	$	15,902	$	(723)	$	1,099,881
Freddie Mac	1,304,533		20,523		(30)		1,325,026		676,436		5,679		(1,106)		681,009
Total Fixed rate	2,705,816		49,119		(215)		2,754,720		1,761,138		21,581		(1,829)		1,780,890
Adjustable rate
Fannie Mae	100,537		2,224		—		102,761		110,036		1,299		—		111,335
Freddie Mac	34,893		668		—		35,561		37,424		442		—		37,866
Total Adjustable rate	135,430		2,892		—		138,322		147,460		1,741		—		149,201
Interest-only
Ginnie Mae	79,846		2,526		(11,405)		70,967		52,623		6,813		(203)		59,233
Freddie Mac	5,511		—		(1,554)		3,957		—		—		—		—
Total Interest-only	85,357		2,526		(12,959)		74,924		52,623		6,813		(203)		59,233
Total Agency RMBS	2,926,603		54,537		(13,174)		2,967,966		1,961,221		30,135		(2,032)		1,989,324
Non-Agency RMBS	64,998		6,054		(2,836)		68,216		22,097		6,646		(4,281)		24,462
U.S. Treasury securities	352,829		678		(4,419)		349,088		—		—		—		—
Total investment securities available for sale - fair value option	3,344,430		61,269		(20,429)		3,385,270		1,983,318		36,781		(6,313)		2,013,786
CECL Securities
Non-Agency RMBS	—		—		—		—		35		—		(4)		31
Total investment securities available for sale - CECL Securities	—		—		—		—		35		—		(4)		31
Total	$	3,344,430	$	61,269	$	(20,429)	$	3,385,270	$	1,983,353	$	36,781	$	(6,317)	$	2,013,817

Accrued interest receivable for investment securities available for sale in the amount of $17.5 million and $9.8 million as of September 30, 2024 and December 31, 2023, respectively, is included in other assets on the Company's condensed consolidated balance sheets.

For the three and nine months ended September 30, 2024, the Company recognized $58.3 million and $10.4 million in net unrealized gains on investment securities available for sale accounted for under the fair value option, respectively. For the three and nine months ended September 30, 2023, the Company recognized $30.5 million and $38.2 million in net unrealized losses on investment securities available for sale accounted for under the fair value option, respectively.

The Company's investment securities available for sale pledged as collateral against interest rate swap agreements and repurchase agreements are included in investment securities available for sale on the accompanying condensed consolidated balance sheets with the fair value of securities pledged disclosed in Notes 10 and 12, respectively.

Realized Gain and Loss Activity

The Company did not sell investment securities during the three and nine months ended September 30, 2024. The following tables summarize our investment securities sold during the three and nine months ended September 30, 2023, respectively (dollar amounts in thousands):

	Three Months Ended September 30, 2023
	Sales Proceeds		Realized Gains			Realized Losses		Net Realized Gains (Losses)
CMBS	$	24,772	$	—	`	$	(1,035)	$	(1,035)
Total	$	24,772	$	—		$	(1,035)	$	(1,035)

	Nine Months Ended September 30, 2023
	Sales Proceeds		Realized Gains		Realized Losses		Net Realized Gains (Losses)
ABS	$	595	$	—	$	(41)	$	(41)
CMBS	24,772		—		(1,035)		(1,035)
Total	$	25,367	$	—	$	(1,076)	$	(1,076)

The Company recognized write-downs of non-Agency RMBS for a loss of $0.4 million and $0.9 million for the three and nine months ended September 30, 2024, respectively. The Company did not recognize any write-downs for the three and nine months ended September 30, 2023.

Weighted Average Life

Actual maturities of our investment securities available for sale are generally shorter than stated contractual maturities (with contractual maturities up to 39 years), as they are affected by periodic payments and prepayments of principal on the underlying mortgages. As of September 30, 2024 and December 31, 2023, based on management’s estimates, the weighted average life of the Company’s investment securities available for sale portfolio was approximately 5.4 years and 6.9 years, respectively.

The following table sets forth the weighted average lives of our investment securities available for sale as of September 30, 2024 and December 31, 2023, respectively (dollar amounts in thousands):

Weighted Average Life	September 30, 2024		December 31, 2023
0 to 5 years	$	2,795,776	$	283,554
Over 5 to 10 years	261,736		1,727,269
10+ years	327,758		2,994
Total	$	3,385,270	$	2,013,817

Unrealized Losses in Other Comprehensive Income (Loss)

The Company had no CECL Securities as of September 30, 2024. The Company evaluated its CECL Securities that were in an unrealized loss position as of December 31, 2023 and determined that no allowance for credit losses was necessary. The Company did not recognize credit losses for its CECL Securities through earnings for the three and nine months ended September 30, 2024 and 2023.

The following table presents the Company's CECL Securities in an unrealized loss position with no credit losses reported, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2023 (dollar amounts in thousands):

December 31, 2023	Less than 12 months				Greater than 12 months				Total
	Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses
Non-Agency RMBS	$	—	$	—	$	31	$	(4)	$	31	$	(4)
Total	$	—	$	—	$	31	$	(4)	$	31	$	(4)

Credit risk associated with non-Agency RMBS was regularly assessed as new information regarding the underlying collateral became available and based on updated estimates of cash flows generated by the underlying collateral. In performing its assessment, the Company considered past and expected future performance of the underlying collateral, including timing of expected future cash flows, prepayment rates, default rates, loss severities, delinquency rates, current levels of subordination, volatility of the security's fair value, temporary declines in liquidity for the asset class and interest rate changes since purchase.