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Investment in Securities
 6 Months Ended
Jun. 30, 2020
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 tables detail the Company's investment in securities as of June 30, 2020 and December 31, 2019.
June 30, 2020:
 
 
 
 
 
 
 
 
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
 
$
52,013

 
$
1,639

 
$
53,652

 
$
1,128

 
$
—

 
$
54,780

 
3.55
%
 
2.26
%
 
3.50
20-year fixed-rate mortgages
 
740

 
39

 
779

 
34

 
—

 
813

 
4.70
%
 
2.93
%
 
3.96
30-year fixed-rate mortgages
 
613,258

 
27,869

 
641,127

 
28,531

 
(495
)
 
669,163

 
4.23
%
 
2.58
%
 
3.95
Adjustable rate mortgages
 
7,573

 
208

 
7,781

 
123

 
(5
)
 
7,899

 
3.78
%
 
1.48
%
 
2.87
Reverse mortgages
 
119,233

 
6,825

 
126,058

 
5,477

 
—

 
131,535

 
4.23
%
 
2.33
%
 
5.88
Interest only securities
 
 n/a

 
 n/a

 
45,080

 
5,086

 
(1,159
)
 
49,007

 
3.22
%
 
16.62
%
 
3.92
Non-Agency RMBS
 
323,967

 
(127,637
)
 
196,330

 
10,994

 
(10,285
)
 
197,039

 
2.77
%
 
6.06
%
 
5.18
CMBS
 
155,202

 
(53,471
)
 
101,731

 
201

 
(28,664
)
 
73,268

 
2.28
%
 
7.89
%
 
9.35
Non-Agency interest only securities
 
 n/a

 
 n/a

 
6,381

 
1,709

 
(275
)
 
7,815

 
1.00
%
 
16.62
%
 
0.97
CLOs
 
 n/a

 
 n/a

 
205,772

 
156

 
(52,215
)
 
153,713

 
3.65
%
 
8.11
%
 
4.11
ABS backed by consumer loans
 
71,688

 
(22,541
)
 
49,147

 
184

 
(1,390
)
 
47,941

 
11.58
%
 
16.93
%
 
1.09
Corporate debt
 
24,338

 
(23,098
)
 
1,240

 
711

 
—

 
1,951

 
—
%
 
—
%
 
1.25
Corporate equity
 
 n/a

 
 n/a

 
1,601

 
161

 
(678
)
 
1,084

 
n/a

 
n/a

 
n/a
Total Long
 
1,368,012

 
(190,167
)
 
1,436,679

 
54,495

 
(95,166
)
 
1,396,008

 
3.98
%
 
5.20
%
 
4.46
Short:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
 
(450
)
 
(6
)
 
(456
)
 
3

 
(6
)
 
(459
)
 
5.31
%
 
5.21
%
 
4.36
U.S. Treasury securities
 
(4,000
)
 
(300
)
 
(4,300
)
 
—

 
(24
)
 
(4,324
)
 
1.51
%
 
0.69
%
 
9.64
European sovereign bonds
 
(26,448
)
 
533

 
(25,915
)
 
—

 
(773
)
 
(26,688
)
 
0.29
%
 
0.04
%
 
3.29
Total Short
 
(30,898
)
 
227

 
(30,671
)
 
3

 
(803
)
 
(31,471
)
 
0.53
%
 
0.21
%
 
4.18
Total
 
$
1,337,114

 
$
(189,940
)
 
$
1,406,008

 
$
54,498

 
$
(95,969
)
 
$
1,364,537

 
4.05
%
 
5.10
%
 
4.47
(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.
December 31, 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
 
$
314,636

 
$
6,369

 
$
321,005

 
$
2,604

 
$
(203
)
 
$
323,406

 
3.05
%
 
2.28
%
 
3.05
20-year fixed-rate mortgages
 
804

 
49

 
853

 
24

 
—

 
877

 
4.62
%
 
2.99
%
 
4.80
30-year fixed-rate mortgages
 
1,358,762

 
64,846

 
1,423,608

 
13,821

 
(2,830
)
 
1,434,599

 
4.20
%
 
2.95
%
 
6.63
Adjustable rate mortgages
 
9,651

 
315

 
9,966

 
90

 
(54
)
 
10,002

 
3.99
%
 
2.03
%
 
4.09
Reverse mortgages
 
122,670

 
8,133

 
130,803

 
2,023

 
(26
)
 
132,800

 
4.43
%
 
2.78
%
 
6.67
Interest only securities
 
 n/a

 
 n/a

 
34,044

 
1,624

 
(389
)
 
35,279

 
2.81
%
 
9.27
%
 
3.86
Non-Agency RMBS
 
274,353

 
(122,685
)
 
151,668

 
12,549

 
(1,081
)
 
163,136

 
3.41
%
 
7.25
%
 
5.31
CMBS
 
185,417

 
(67,961
)
 
117,456

 
2,990

 
(480
)
 
119,966

 
3.31
%
 
6.62
%
 
8.94
Non-Agency interest only securities
 
 n/a

 
 n/a

 
6,517

 
1,817

 
(18
)
 
8,316

 
1.10
%
 
8.18
%
 
4.14
CLOs
 
 n/a

 
 n/a

 
169,238

 
4,219

 
(3,014
)
 
170,443

 
5.05
%
 
9.62
%
 
4.75
ABS backed by consumer loans
 
67,080

 
(19,154
)
 
47,926

 
1,596

 
(912
)
 
48,610

 
12.17
%
 
14.00
%
 
1.22
Corporate debt
 
22,125

 
(21,241
)
 
884

 
229

 
—

 
1,113

 
—
%
 
—
%
 
0.33
Corporate equity
 
 n/a

 
 n/a

 
1,242

 
152

 
—

 
1,394

 
n/a

 
n/a

 
n/a
Total Long
 
2,355,498

 
(151,329
)
 
2,415,210

 
43,738

 
(9,007
)
 
2,449,941

 
4.15
%
 
4.09
%
 
5.88
Short:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
 
(450
)
 
(6
)
 
(456
)
 
—

 
(15
)
 
(471
)
 
5.44
%
 
5.21
%
 
4.90
U.S. Treasury securities
 
(63,140
)
 
381

 
(62,759
)
 
63

 
(298
)
 
(62,994
)
 
1.76
%
 
1.87
%
 
6.11
European sovereign bonds
 
(9,759
)
 
133

 
(9,626
)
 
—

 
(318
)
 
(9,944
)
 
0.77
%
 
0.12
%
 
1.58
Total Short
 
(73,349
)
 
508

 
(72,841
)
 
63

 
(631
)
 
(73,409
)
 
1.65
%
 
1.66
%
 
5.49
Total
 
$
2,282,149

 
$
(150,821
)
 
$
2,342,369

 
$
43,801

 
$
(9,638
)
 
$
2,376,532

 
4.23
%
 
4.01
%
 
5.90
(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 tables detail weighted average life of the Company's Agency RMBS as of June 30, 2020 and December 31, 2019.
June 30, 2020:
($ 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
 
$
192,643

 
$
188,125

 
4.36
%
 
$
10,475

 
$
9,281

 
4.13
%
Greater than three years and less than seven years
 
627,526

 
598,428

 
4.16
%
 
37,983

 
35,259

 
3.03
%
Greater than seven years and less than eleven years
 
44,021

 
42,844

 
3.69
%
 
549

 
540

 
0.36
%
Greater than eleven years
 
—

 
—

 
—
%
 
—

 
—

 
—
%
Total
 
$
864,190

 
$
829,397

 
4.18
%
 
$
49,007

 
$
45,080

 
3.22
%
(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.
December 31, 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
 
$
188,593

 
$
187,099

 
3.39
%
 
$
9,011

 
$
8,611

 
3.35
%
Greater than three years and less than seven years
 
961,839

 
953,031

 
4.25
%
 
25,334

 
24,512

 
2.66
%
Greater than seven years and less than eleven years
 
713,862

 
708,805

 
3.89
%
 
934

 
921

 
1.90
%
Greater than eleven years
 
37,390

 
37,300

 
3.51
%
 
—

 
—

 
—
%
Total
 
$
1,901,684

 
$
1,886,235

 
4.02
%
 
$
35,279

 
$
34,044

 
2.81
%
(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 tables detail weighted average life of the Company's long non-Agency RMBS, CMBS, and CLOs and other securities as of June 30, 2020 and December 31, 2019.
June 30, 2020:
($ 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
 
$
47,749

 
$
46,689

 
3.35
%
 
$
7,815

 
$
6,381

 
1.00
%
 
$
56,679

 
$
59,678

 
9.84
%
Greater than three years and less than seven years
 
110,397

 
106,938

 
2.92
%
 
—

 
—

 
—
%
 
145,439

 
194,713

 
3.77
%
Greater than seven years and less than eleven years
 
91,283

 
119,028

 
2.34
%
 
—

 
—

 
—
%
 
1,487

 
1,768

 
—
%
Greater than eleven years
 
20,878

 
25,406

 
1.08
%
 
—

 
—

 
—
%
 
—

 
—

 
—
%
Total
 
$
270,307

 
$
298,061

 
2.60
%
 
$
7,815

 
$
6,381

 
1.00
%
 
$
203,605

 
$
256,159

 
5.16
%
(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.
December 31, 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
 
$
50,120

 
$
48,213

 
2.73
%
 
$
439

 
$
401

 
1.37
%
 
$
54,446

 
$
54,090

 
11.11
%
Greater than three years and less than seven years
 
87,436

 
79,326

 
4.42
%
 
7,877

 
6,116

 
1.08
%
 
157,384

 
155,651

 
5.38
%
Greater than seven years and less than eleven years
 
127,533

 
123,924

 
3.31
%
 
—

 
—

 
—
%
 
8,336

 
8,307

 
—
%
Greater than eleven years
 
18,013

 
17,661

 
0.81
%
 
—

 
—

 
—
%
 
—

 
—

 
—
%
Total
 
$
283,102

 
$
269,124

 
3.37
%
 
$
8,316

 
$
6,517

 
1.10
%
 
$
220,166

 
$
218,048

 
6.60
%
(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 tables detail the components of interest income by security type for the three- and six-month periods ended June 30, 2020 and 2019:
 
 
Three-Month Period Ended
(In thousands)
 
June 30, 2020
 
June 30, 2019
Security Type
 
Coupon Interest
 
Net Amortization
 
Interest Income
 
Coupon Interest
 
Net Amortization
 
Interest Income
Agency RMBS
 
$
12,603

 
$
(9,218
)
 
$
3,385

 
$
14,466

 
$
(4,965
)
 
$
9,501

Non-Agency RMBS and CMBS
 
3,631

 
1,377

 
5,008

 
3,282

 
689

 
3,971

CLOs
 
3,987

 
376

 
4,363

 
3,666

 
(576
)
 
3,090

Other securities(1)
 
3,098

 
(1,104
)
 
1,994

 
1,443

 
(355
)
 
1,088

Total
 
$
23,319

 
$
(8,569
)
 
$
14,750

 
$
22,857

 
$
(5,207
)
 
$
17,650


 
 
Six-Month Period Ended
(In thousands)
 
June 30, 2020
 
June 30, 2019
Security Type
 
Coupon Interest
 
Net Amortization
 
Interest Income
 
Coupon Interest
 
Net Amortization
 
Interest Income
Agency RMBS
 
$
33,515

 
$
(18,062
)
 
$
15,453

 
$
26,656

 
$
(9,593
)
 
$
17,063

Non-Agency RMBS and CMBS
 
7,684

 
2,090

 
9,774

 
7,131

 
1,236

 
8,367

CLOs
 
9,406

 
(635
)
 
8,771

 
7,910

 
(511
)
 
7,399

Other securities(1)
 
6,023

 
(2,149
)
 
3,874

 
3,036

 
(917
)
 
2,119

Total
 
$
56,628

 
$
(18,756
)
 
$
37,872

 
$
44,733

 
$
(9,785
)
 
$
34,948

(1)
Other securities includes ABS backed by consumer loans, corporate debt securities, and U.S. Treasury securities.
For the three-month periods ended June 30, 2020 and 2019, the Catch-Up Premium Amortization Adjustment was $(3.6) million and $(0.9) million, respectively. For the six-month periods ended June 30, 2020 and 2019, the Catch-Up Premium Amortization Adjustment was $(4.8) million and $(1.4) million, respectively.
The following tables present proceeds from sales and the resulting realized gains and (losses) of the Company's securities for the three- and six-month periods ended June 30, 2020 and 2019.
 
 
Three-Month Period Ended
(In thousands)
 
June 30, 2020
 
June 30, 2019(1)
Security Type
 
Proceeds(2)
 
Gross Realized Gains
 
Gross Realized Losses(3)
 
Net Realized Gain (Loss)
 
Proceeds(2)
 
Gross Realized Gains
 
Gross Realized Losses(3)
 
Net Realized Gain (Loss)
Agency RMBS
 
$
140,109

 
$
4,673

 
$
(614
)
 
$
4,059

 
$
259,207

 
$
1,872

 
$
(629
)
 
$
1,243

Non-Agency RMBS and CMBS
 
20,621

 
1,031

 
(2,769
)
 
(1,738
)
 
19,139

 
825

 
(688
)
 
137

CLOs
 
7,172

 
—

 
(3,178
)
 
(3,178
)
 
11,275

 
54

 
(497
)
 
(443
)
Other securities(4)
 
36,727

 
264

 
(55
)
 
209

 
76,440

 
127

 
(514
)
 
(387
)
Total
 
$
204,629

 
$
5,968

 
$
(6,616
)
 
$
(648
)
 
$
366,061

 
$
2,878

 
$
(2,328
)
 
$
550

(1)
Conformed to current period presentation.
(2)
Includes proceeds on sales of securities not yet settled as of period end.
(3)
Excludes realized losses of $(13.8) million and $(4.7) million, for the three-month periods ended June 30, 2020 and 2019, respectively, related to adjustments to the cost basis of certain securities for which the Company has determined all or a portion of such securities cost basis to be uncollectible.
(4)
Other securities includes ABS backed by consumer loans, corporate debt and equity, exchange-traded equity, and U.S. Treasury securities.
 
 
Six-Month Period Ended
(In thousands)
 
June 30, 2020
 
June 30, 2019(1)
Security Type
 
Proceeds(2)
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gain (Loss)
 
Proceeds(2)
 
Gross Realized Gains
 
Gross Realized Losses(3)
 
Net Realized Gain (Loss)
Agency RMBS
 
$
1,425,590

 
$
13,698

 
$
(3,231
)
 
$
10,467

 
$
387,511

 
$
2,578

 
$
(2,051
)
 
$
527

Non-Agency RMBS and CMBS
 
98,423

 
9,432

 
(3,729
)
 
5,703

 
148,684

 
2,092

 
(3,835
)
 
(1,743
)
CLOs
 
41,714

 
1,122

 
(3,202
)
 
(2,080
)
 
56,097

 
152

 
(1,113
)
 
(961
)
Other securities(4)
 
157,311

 
900

 
(254
)
 
646

 
479,428

 
744

 
(1,045
)
 
(301
)
Total
 
$
1,723,038

 
$
25,152

 
$
(10,416
)
 
$
14,736

 
$
1,071,720

 
$
5,566

 
$
(8,044
)
 
$
(2,478
)
(1)
Conformed to current period presentation.
(2)
Includes proceeds on sales of securities not yet settled as of period end.
(3)
Excludes realized losses of $(13.8) million and $(6.0) million, for the six-month periods ended June 30, 2020 and 2019, respectively, related to adjustments to the cost basis of certain securities for which the Company has determined all or a portion of such securities cost basis to be uncollectible.
(4)
Other securities includes ABS 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, excluding those where there are expected credit losses as of the balance sheet date in relation to such securities' cost bases, by length of time that such securities have been in an unrealized loss position at June 30, 2020.
June 30, 2020:
(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
 
$
64,974

 
$
(520
)
 
$
1,119

 
$
(38
)
 
$
66,093

 
$
(558
)
Non-Agency RMBS and CMBS
 
11,381

 
(2,119
)
 
19,277

 
(856
)
 
30,658

 
(2,975
)
CLOs
 
2,633

 
(10,609
)
 
—

 
—

 
2,633

 
(10,609
)
Other securities(1)
 
682

 
(395
)
 
—

 
—

 
682

 
(395
)
Total
 
$
79,670

 
$
(13,643
)
 
$
20,396

 
$
(894
)
 
$
100,066

 
$
(14,537
)
(1)
Other securities includes ABS backed by consumer loans, corporate debt and 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 December 31, 2019.
December 31, 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
 
$
328,968

 
$
(1,503
)
 
$
125,095

 
$
(1,999
)
 
$
454,063

 
$
(3,502
)
Non-Agency RMBS and CMBS
 
88,495

 
(880
)
 
27,218

 
(699
)
 
115,713

 
(1,579
)
CLOs
 
37,354

 
(1,911
)
 
9,245

 
(1,103
)
 
46,599

 
(3,014
)
Other securities(1)
 
16,562

 
(852
)
 
1,380

 
(60
)
 
17,942

 
(912
)
Total
 
$
471,379

 
$
(5,146
)
 
$
162,938

 
$
(3,861
)
 
$
634,317

 
$
(9,007
)
(1)
Other securities includes ABS 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. As of June 30, 2020, the Company had expected future credit losses, which it tracks for purposes of calculating interest income, of $27.1 million related to adverse changes in estimated future cash flows on its securities, primarily due to the economic impact of the COVID-19 pandemic. Certain of the Company's securities, at the date of acquisition, have experienced or are expected to experience more-than-insignificant deterioration in credit quality since origination and the Company has established an initial estimate for credit losses on such securities; as of June 30, 2020, the estimated credit losses on such
securities was $5.9 million. As of June 30, 2020, the Company determined for certain securities that a portion of such securities cost basis is not collectible; the Company recognized a realized loss of $(13.8) million, which is reflected in Net realized gains (losses) on securities and loans, net, on the Consolidated Statement of Operations.
For the three- and six-month periods ended June 30, 2019, the Company recognized an impairment charge of $4.7 million and $6.0 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.