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Investment in Securities
 9 Months Ended
Sep. 30, 2019
Investments, Debt and Equity Securities [Abstract]  
Investment in Securities
Investment in Securities
The Company's securities portfolio primarily consists of Agency RMBS, non-Agency RMBS, CMBS, CLOs, ABS backed by consumer loans, and corporate debt and equity. The following table details the Company's investment in securities as of September 30, 2019.
 
 
 
 
 
 
 
 
Gross Unrealized
 
 
 
Weighted Average
($ in thousands)
 
Current Principal
 
Unamortized Premium (Discount)
 
Amortized Cost
 
Gains
 
Losses
 
Fair Value
 
Coupon(1)
 
Yield
 
Life (Years)(2)
Long:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15-year fixed-rate mortgages
 
$
176,990

 
$
3,542

 
$
180,532

 
$
1,710

 
$
(250
)
 
$
181,992

 
3.09
%
 
2.41
%
 
3.27
20-year fixed-rate mortgages
 
820

 
53

 
873

 
8

 
—

 
881

 
4.54
%
 
3.00
%
 
4.75
30-year fixed-rate mortgages
 
1,132,923

 
55,885

 
1,188,808

 
13,225

 
(2,593
)
 
1,199,440

 
4.24
%
 
3.13
%
 
5.64
Adjustable rate mortgages
 
10,772

 
387

 
11,159

 
83

 
(62
)
 
11,180

 
3.98
%
 
2.26
%
 
2.56
Reverse mortgages
 
123,557

 
8,606

 
132,163

 
2,325

 
(22
)
 
134,466

 
4.45
%
 
2.86
%
 
6.84
Interest only securities
 
 n/a

 
 n/a

 
35,775

 
1,920

 
(647
)
 
37,048

 
2.40
%
 
9.03
%
 
3.50
Non-Agency RMBS
 
250,196

 
(106,851
)
 
143,345

 
12,937

 
(2,668
)
 
153,614

 
3.63
%
 
6.66
%
 
5.26
CMBS
 
71,217

 
(38,214
)
 
33,003

 
3,115

 
(26
)
 
36,092

 
3.44
%
 
9.38
%
 
8.66
Non-Agency interest only securities
 
 n/a

 
 n/a

 
5,146

 
1,936

 
—

 
7,082

 
0.98
%
 
20.49
%
 
3.41
CLOs
 
 n/a

 
 n/a

 
68,187

 
569

 
(1,356
)
 
67,400

 
3.23
%
 
15.56
%
 
5.58
ABS backed by consumer loans
 
47,785

 
(8,817
)
 
38,968

 
628

 
(280
)
 
39,316

 
14.86
%
 
14.43
%
 
1.19
Corporate debt
 
24,067

 
(20,990
)
 
3,077

 
106

 
(1
)
 
3,182

 
—
%
 
11.06
%
 
1.34
Corporate equity
 
 n/a

 
 n/a

 
3,804

 
432

 
—

 
4,236

 
n/a

 
n/a

 
n/a
Total Long
 
1,838,327

 
(106,399
)
 
1,844,840

 
38,994

 
(7,905
)
 
1,875,929

 
4.20
%
 
4.29
%
 
5.34
Short:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
 
(450
)
 
(6
)
 
(456
)
 
1

 
(18
)
 
(473
)
 
5.46
%
 
5.21
%
 
5.17
U.S. Treasury securities
 
(26,260
)
 
(29
)
 
(26,289
)
 
—

 
(441
)
 
(26,730
)
 
2.00
%
 
2.00
%
 
5.61
European sovereign bonds
 
(9,484
)
 
(158
)
 
(9,642
)
 
—

 
(64
)
 
(9,706
)
 
0.75
%
 
0.12
%
 
1.83
Total Short
 
(36,194
)
 
(193
)
 
(36,387
)
 
1

 
(523
)
 
(36,909
)
 
1.72
%
 
1.54
%
 
4.61
Total
 
$
1,802,133

 
$
(106,592
)
 
$
1,808,453

 
$
38,995

 
$
(8,428
)
 
$
1,839,020

 
4.25
%
 
4.24
%
 
5.35
(1)
Weighted average coupon represents the weighted average coupons of the securities, rather than, in the case of collateralized securities, the coupon rates or loan rates on the underlying collateral.
(2)
Average lives of MBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.
The following table details weighted average life of the Company's Agency RMBS as of September 30, 2019.
($ in thousands)
 
Agency RMBS
 
Agency Interest Only Securities
Estimated Weighted Average Life(1)
 
Fair Value
 
Amortized Cost
 
Weighted Average Coupon(2)
 
Fair Value
 
Amortized Cost
 
Weighted Average Coupon(2)
Less than three years
 
$
305,530

 
$
303,273

 
4.46
%
 
$
12,616

 
$
12,400

 
3.02
%
Greater than three years and less than seven years
 
721,685

 
714,126

 
4.12
%
 
24,432

 
23,375

 
2.07
%
Greater than seven years and less than eleven years
 
495,138

 
490,615

 
3.91
%
 
—

 
—

 
—
%
Greater than eleven years
 
5,606

 
5,521

 
3.55
%
 
—

 
—

 
—
%
Total
 
$
1,527,959

 
$
1,513,535

 
4.12
%
 
$
37,048

 
$
35,775

 
2.40
%
(1)
Average lives of RMBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.
(2)
Weighted average coupon represents the weighted average coupons of the securities, rather than the coupon rates or loan rates on the underlying collateral.
The following table details weighted average life of the Company's long non-Agency RMBS, CMBS, and CLOs and other securities as of September 30, 2019.
($ in thousands)
 
Non-Agency RMBS and CMBS
 
Non-Agency IOs
 
CLOs and Other Securities(2)
Estimated Weighted Average Life(1)
 
Fair Value
 
Amortized Cost
 
Weighted Average Coupon(3)
 
Fair Value
 
Amortized Cost
 
Weighted Average Coupon(3)
 
Fair Value
 
Amortized Cost
 
Weighted Average Coupon(3)
Less than three years
 
$
45,363

 
$
42,229

 
2.48
%
 
$
3,290

 
$
1,983

 
—
%
 
$
45,890

 
$
45,239

 
12.96
%
Greater than three years and less than seven years
 
73,889

 
66,788

 
4.92
%
 
3,792

 
3,163

 
1.59
%
 
62,386

 
63,584

 
3.35
%
Greater than seven years and less than eleven years
 
55,218

 
51,072

 
3.57
%
 
—

 
—

 
—
%
 
1,622

 
1,409

 
—
%
Greater than eleven years
 
15,236

 
16,259

 
1.13
%
 
—

 
—

 
—
%
 
—

 
—

 
—
%
Total
 
$
189,706

 
$
176,348

 
3.60
%
 
$
7,082

 
$
5,146

 
0.98
%
 
$
109,898

 
$
110,232

 
7.25
%
(1)
Average lives of MBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.
(2)
Other Securities includes asset-backed securities, backed by consumer loans, corporate debt, and U.S. Treasury securities.
(3)
Weighted average coupon represents the weighted average coupons of the securities, rather than the coupon rates or loan rates on the underlying collateral.
The following table details the components of interest income by security type for the three- and nine-month periods ended September 30, 2019:
(In thousands)
 
Three-Month Period Ended
September 30, 2019
 
Nine-Month Period Ended
September 30, 2019
Security Type
 
Coupon Interest
 
Net Amortization
 
Interest Income
 
Coupon Interest
 
Net Amortization
 
Interest Income
Agency RMBS
 
$
16,026

 
$
(6,290
)
 
$
9,736

 
$
42,681

 
$
(15,883
)
 
$
26,798

Non-Agency RMBS and CMBS
 
3,383

 
430

 
3,813

 
10,514

 
1,666

 
12,180

CLOs
 
3,480

 
(627
)
 
2,853

 
11,391

 
(1,138
)
 
10,253

Other securities(1)
 
1,670

 
(611
)
 
1,059

 
4,706

 
(1,528
)
 
3,178

Total
 
$
24,559

 
$
(7,098
)
 
$
17,461

 
$
69,292

 
$
(16,883
)
 
$
52,409

(1)
Other securities includes asset-backed securities, backed by consumer loans, corporate debt, and U.S. Treasury securities.
For the three- and nine-month periods ended September 30, 2019 the Catch-Up Premium Amortization Adjustment was $(1.5) million and $(2.9) million, respectively.
The following table presents proceeds from sales and the resulting realized gains and (losses) of the Company's securities for the three- and nine-month periods ended September 30, 2019.
(In thousands)
 
Three-Month Period Ended
September 30, 2019
 
Nine-Month Period Ended
September 30, 2019
Security Type
 
Proceeds(1)
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gain (Loss)
 
Proceeds(1)
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gain (Loss)
Agency RMBS
 
$
331,572

 
$
4,511

 
$
(696
)
 
$
3,815

 
$
719,082

 
$
6,955

 
$
(3,800
)
 
$
3,155

Non-Agency RMBS and CMBS
 
16,496

 
9,606

 
(1,093
)
 
8,513

 
165,180

 
11,356

 
(5,726
)
 
5,630

CLOs
 
2,060

 
1,287

 
(7,267
)
 
(5,980
)
 
58,157

 
1,169

 
(10,999
)
 
(9,830
)
Other securities(2)
 
138,000

 
63

 
(1,575
)
 
(1,512
)
 
602,443

 
800

 
(3,368
)
 
(2,568
)
Total
 
$
488,128

 
$
15,467

 
$
(10,631
)
 
$
4,836

 
$
1,544,862

 
$
20,280

 
$
(23,893
)
 
$
(3,613
)
(1)
Includes proceeds on sales of securities not yet settled as of period end.
(2)
Other securities includes asset-backed securities, backed by consumer loans, corporate debt and equity, exchange-traded equity, and U.S. Treasury securities.
The following table presents the fair value and gross unrealized losses of our long securities by length of time that such securities have been in an unrealized loss position at September 30, 2019.
(In thousands)
 
Less than 12 Months
 
Greater than 12 Months
 
Total
Security Type
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
Agency RMBS
 
$
65,476

 
$
(578
)
 
$
185,049

 
$
(2,996
)
 
$
250,525

 
$
(3,574
)
Non-Agency RMBS and CMBS
 
26,133

 
(842
)
 
42,111

 
(1,852
)
 
68,244

 
(2,694
)
CLOs
 
17,905

 
(1,174
)
 
4,222

 
(182
)
 
22,127

 
(1,356
)
Other securities(1)
 
9,522

 
(108
)
 
3,003

 
(173
)
 
12,525

 
(281
)
Total
 
$
119,036

 
$
(2,702
)
 
$
234,385

 
$
(5,203
)
 
$
353,421

 
$
(7,905
)
(1)
Other securities includes asset-backed securities, backed by consumer loans, corporate debt and equity, and U.S. Treasury securities.
As described in Note 2, the Company evaluates the cost basis of its securities for impairment on at least a quarterly basis. For the three- and nine-month periods ended September 30, 2019, the Company recognized an impairment charge of $10.1 million and $16.1 million, respectively, on the cost basis of its securities, which is included in Realized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations. For each of the remaining securities in a loss position at September 30, 2019, the unrealized loss is due to market conditions and not to a change in the credit quality of the securities. In addition, any unrealized losses on the Company’s Agency RMBS accounted for under ASC 320 are not due to credit losses given their explicit guarantee of principal and interest by the issuing government agency or government-sponsored enterprise, but rather are due to changes in interest rates and prepayment expectations.