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Investment in Securities

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

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 September 30, 2020 and December 31, 2019.

September 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	$	69,491	$	2,641	$	72,132	$	1,890	$	(27)	$	73,995	3.31	%	1.89	%	3.38
20-year fixed-rate mortgages	587		39		626		29		—		655		4.71	%	2.94	%	3.88
30-year fixed-rate mortgages	625,882		30,133		656,015		26,286		(371)		681,930		4.06	%	2.42	%	4.06
Adjustable rate mortgages	6,751		173		6,924		123		(1)		7,046		3.65	%	2.15	%	3.35
Reverse mortgages	94,741		5,466		100,207		4,317		—		104,524		4.02	%	2.36	%	5.10
Interest only securities	n/a		n/a		47,507		5,682		(1,484)		51,705		3.47	%	10.17	%	4.58
Non-Agency RMBS	336,997		(131,976)		205,021		12,488		(7,959)		209,550		3.16	%	6.35	%	4.68
CMBS	184,695		(62,938)		121,757		803		(24,307)		98,253		2.54	%	7.74	%	8.43
Non-Agency interest only securities	n/a		n/a		8,367		1,832		(250)		9,949		1.17	%	16.73	%	2.75
CLOs	n/a		n/a		211,236		1		(47,943)		163,294		3.25	%	8.48	%	3.84
ABS backed by consumer loans	71,617		(24,277)		47,340		1,052		(1,094)		47,298		11.82	%	17.39	%	1.08
Corporate debt	24,174		(23,187)		987		1,220		—		2,207		—	%	—	%	2.85
Corporate equity	n/a		n/a		1,604		160		(750)		1,014		n/a		n/a		n/a
Total Long	1,414,935		(203,926)		1,479,723		55,883		(84,186)		1,451,420		3.86	%	5.05	%	4.37
Short:
Corporate debt	(450)		(6)		(456)		5		(10)		(461)		5.32	%	5.21	%	4.14
U.S. Treasury securities	(14,000)		(273)		(14,273)		—		(37)		(14,310)		0.63	%	0.41	%	6.21
European sovereign bonds	(36,280)		1,622		(34,658)		—		(2,064)		(36,722)		0.22	%	0.06	%	3.36
Total Short	(50,730)		1,343		(49,387)		5		(2,111)		(51,493)		0.39	%	0.21	%	4.16
Total	$	1,364,205	$	(202,583)	$	1,430,336	$	55,888	$	(86,297)	$	1,399,927	3.98	%	4.89	%	4.38

(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

The following tables detail weighted average life of the Company's Agency RMBS as of September 30, 2020 and December 31, 2019.

September 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	$	150,492	$	146,624	4.26	%	$	8,893	$	8,267	3.90	%
Greater than three years and less than seven years	706,422		678,227		3.95	%	39,604		36,038		3.63	%
Greater than seven years and less than eleven years	11,236		11,053		3.01	%	1,048		1,049		0.28	%
Greater than eleven years	—		—		—	%	2,160		2,153		0.78	%
Total	$	868,150	$	835,904	3.99	%	$	51,705	$	47,507	3.47	%

(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	%

(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 September 30, 2020 and December 31, 2019.

September 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	$	80,873	$	77,739	3.67	%	$	4,079	$	2,685	0.55	%	$	61,222	$	63,694	9.43	%
Greater than three years and less than seven years	106,561		102,374		3.38	%	5,870		5,682		1.47	%	150,175		193,955		3.38	%
Greater than seven years and less than eleven years	96,327		119,267		2.48	%	—		—		—	%	1,402		1,914		—	%
Greater than eleven years	24,042		27,398		1.04	%	—		—		—	%	—		—		—	%
Total	$	307,803	$	326,778	2.93	%	$	9,949	$	8,367	1.17	%	$	212,799	$	259,563	4.84	%

(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	%

(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 nine-month periods ended September 30, 2020 and 2019:


	Three-Month Period Ended
(In thousands)	September 30, 2020						September 30, 2019
Security Type	Coupon Interest		Net Amortization		Interest Income		Coupon Interest		Net Amortization		Interest Income
Agency RMBS	$	14,117	$	(7,454)	$	6,663	$	16,026	$	(6,290)	$	9,736
Non-Agency RMBS and CMBS	3,311		1,911		5,222		3,383		430		3,813
CLOs	2,256		2,179		4,435		3,480		(627)		2,853
Other securities(1)	2,970		(1,435)		1,535		1,670		(611)		1,059
Total	$	22,654	$	(4,799)	$	17,855	$	24,559	$	(7,098)	$	17,461


	Nine-Month Period Ended
(In thousands)	September 30, 2020						September 30, 2019
Security Type	Coupon Interest		Net Amortization		Interest Income		Coupon Interest		Net Amortization		Interest Income
Agency RMBS	$	47,632	$	(25,516)	$	22,116	$	42,681	$	(15,883)	$	26,798
Non-Agency RMBS and CMBS	10,995		4,001		14,996		10,514		1,666		12,180
CLOs	11,662		1,543		13,205		11,391		(1,138)		10,253
Other securities(1)	8,992		(3,584)		5,408		4,706		(1,528)		3,178
Total	$	79,281	$	(23,556)	$	55,725	$	69,292	$	(16,883)	$	52,409

(1)Other securities includes ABS backed by consumer loans, corporate debt securities, and U.S. Treasury securities.

For the three-month periods ended September 30, 2020 and 2019, the Catch-Up Premium Amortization Adjustment was $0.3 million and $(1.5) million, respectively. For the nine-month periods ended September 30, 2020 and 2019, the Catch-Up Premium Amortization Adjustment was $(4.4) million and $(2.9) 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 nine-month periods ended September 30, 2020 and 2019.


	Three-Month Period Ended
(In thousands)	September 30, 2020								September 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	$	10,675	$	2,467	$	(564)	$	1,903	$	331,572	$	4,511	$	(34)	$	4,477
Non-Agency RMBS and CMBS	17,926		1,669		(171)		1,498		16,496		9,606		(341)		9,265
CLOs	—		—		256		256		2,060		1,287		27		1,314
Other securities(4)	11,861		373		(74)		299		138,000		63		(220)		(157)
Total	$	40,462	$	4,509	$	(553)	$	3,956	$	488,128	$	15,467	$	(568)	$	14,899

(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 $(2.5) million and $(10.1) million, for the three-month periods ended September 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.


	Nine-Month Period Ended
(In thousands)	September 30, 2020								September 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	$	1,438,469	$	15,982	$	(3,369)	$	12,613	$	719,082	$	6,954	$	(1,950)	$	5,004
Non-Agency RMBS and CMBS	116,349		11,081		(3,880)		7,201		165,180		11,356		(3,835)		7,521
CLOs	41,714		1,122		(2,928)		(1,806)		58,157		1,169		(816)		353
Other securities(4)	169,172		1,273		(329)		944		602,443		801		(1,206)		(405)
Total	$	1,765,704	$	29,458	$	(10,506)	$	18,952	$	1,544,862	$	20,280	$	(7,807)	$	12,473

(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 $(16.3) million and $(16.1) million, for the nine-month periods ended September 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 September 30, 2020.

September 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	$	138,286	$	(673)	$	1,881	$	(112)	$	140,167	$	(785)
Non-Agency RMBS and CMBS	18,887		(1,560)		1,665		(84)		20,552		(1,644)
CLOs	10,204		(10,069)		54		—		10,258		(10,069)
Other securities(1)	647		(431)		—		—		647		(431)
Total	$	168,024	$	(12,733)	$	3,600	$	(196)	$	171,624	$	(12,929)

(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 September 30, 2020, the Company had expected future credit losses, which it tracks for purposes of calculating interest income, of $28.4 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 September 30, 2020, the estimated credit losses on such securities was $4.0 million. As of September 30, 2020, the Company determined for certain securities that a portion of such

securities cost basis is not collectible; for the three- and nine-month periods ended September 30, 2020, the Company recognized realized losses on these securities of $(2.5) million and $(16.3) million, respectively, which are reflected in Net realized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations.

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.