XML 22 R11.htm IDEA: XBRL DOCUMENT

Investment in Securities

9 Months Ended

Sep. 30, 2021

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, 2021 and December 31, 2020.

September 30, 2021:


							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	$	219,169	$	10,304	$	229,473	$	1,491	$	(1,033)	$	229,931	2.65	%	1.42	%	4.47
20-year fixed-rate mortgages	48,893		2,892		51,785		20		(852)		50,953		2.45	%	1.22	%	5.50
30-year fixed-rate mortgages	1,079,522		55,479		1,135,001		14,478		(5,847)		1,143,632		3.21	%	2.09	%	6.61
Adjustable rate mortgages	10,436		558		10,994		36		(150)		10,880		3.21	%	2.28	%	4.65
Reverse mortgages	59,894		3,683		63,577		759		(802)		63,534		3.21	%	2.28	%	4.28
Interest only securities	n/a		n/a		35,948		4,640		(2,511)		38,077		3.51	%	7.90	%	4.50
Non-Agency RMBS	311,561		(131,975)		179,586		10,730		(5,306)		185,010		4.63	%	7.12	%	7.13
CMBS	33,801		(22,359)		11,442		282		(926)		10,798		2.91	%	10.47	%	8.69
Non-Agency interest only securities	n/a		n/a		9,999		1,598		(248)		11,349		0.98	%	14.00	%	6.28
CLOs	n/a		n/a		74,021		6,888		(13,631)		67,278		3.57	%	9.15	%	3.23
ABS backed by consumer loans	112,732		(38,471)		74,261		1,383		(4,349)		71,295		11.49	%	14.99	%	1.26
Corporate debt	27,837		(23,748)		4,089		865		(122)		4,832		0.76	%	7.50	%	2.13
Corporate equity	n/a		n/a		5,470		2,686		(162)		7,994		n/a		n/a		n/a
Total Long	1,903,845		(143,637)		1,885,646		45,856		(35,939)		1,895,563		3.57	%	3.50	%	5.89
Short:
European sovereign bonds	(29,989)		553		(29,436)		227		(1,085)		(30,294)		0.02	%	0.05	%	3.48
Total Short	(29,989)		553		(29,436)		227		(1,085)		(30,294)		0.02	%	0.05	%	3.48
Total	$	1,873,856	$	(143,084)	$	1,856,210	$	46,083	$	(37,024)	$	1,865,269	3.63	%	3.45	%	5.93

(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)Expected 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, 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	$	67,875	$	2,543	$	70,418	$	1,832	$	(36)	$	72,214	3.30	%	1.83	%	3.24
20-year fixed-rate mortgages	50,131		3,097		53,228		182		—		53,410		2.57	%	1.08	%	4.46
30-year fixed-rate mortgages	626,021		30,738		656,759		25,765		(444)		682,080		3.99	%	2.35	%	4.17
Adjustable rate mortgages	6,171		159		6,330		124		—		6,454		3.66	%	2.27	%	3.42
Reverse mortgages	89,383		5,152		94,535		3,123		(29)		97,629		3.97	%	2.37	%	4.60
Interest only securities	n/a		n/a		43,406		5,808		(1,558)		47,656		3.36	%	10.01	%	4.85
Non-Agency RMBS	321,842		(131,083)		190,759		15,880		(5,549)		201,090		3.15	%	6.40	%	5.46
CMBS	188,085		(61,763)		126,322		1,655		(16,910)		111,067		2.71	%	7.47	%	8.09
Non-Agency interest only securities	n/a		n/a		8,123		1,792		(305)		9,610		1.17	%	18.85	%	3.49
CLOs	n/a		n/a		208,907		2,563		(30,199)		181,271		3.67	%	8.50	%	3.50
ABS backed by consumer loans	69,646		(24,936)		44,710		221		(6)		44,925		11.95	%	18.57	%	1.11
Corporate debt	27,083		(23,187)		3,896		1,296		(3)		5,189		2.13	%	6.75	%	3.10
Corporate equity	n/a		n/a		1,604		376		(390)		1,590		n/a		n/a		n/a
Total Long	1,446,237		(199,280)		1,508,997		60,617		(55,429)		1,514,185		3.84	%	4.88	%	4.45
Short:
Corporate debt	(200)		(1)		(201)		—		(17)		(218)		5.09	%	4.67	%	6.42
European sovereign bonds	(37,804)		3,163		(34,641)		—		(3,783)		(38,424)		0.23	%	0.06	%	3.11
Total Short	(38,004)		3,162		(34,842)		—		(3,800)		(38,642)		0.26	%	0.09	%	3.13
Total	$	1,408,233	$	(196,118)	$	1,474,155	$	60,617	$	(59,229)	$	1,475,543	3.92	%	4.77	%	4.49

The following tables detail weighted average life of the Company's Agency RMBS as of September 30, 2021 and December 31 2020.

September 30, 2021:


($ 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	$	48,284	$	47,527	4.05	%	$	7,496	$	7,032	3.54	%
Greater than three years and less than seven years	977,274		970,123		3.31	%	28,763		27,162		3.63	%
Greater than seven years and less than eleven years	472,327		472,137		2.56	%	1,818		1,754		1.43	%
Greater than eleven years	1,045		1,043		2.00	%	—		—		—	%
Total	$	1,498,930	$	1,490,830	3.10	%	$	38,077	$	35,948	3.51	%

(1)Expected 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, 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	$	139,059	$	135,844	4.15	%	$	8,143	$	7,314	3.99	%
Greater than three years and less than seven years	770,173		742,946		3.79	%	32,669		29,362		3.74	%
Greater than seven years and less than eleven years	2,555		2,480		3.01	%	5,165		5,063		1.04	%
Greater than eleven years	—		—		—	%	1,679		1,667		0.83	%
Total	$	911,787	$	881,270	3.84	%	$	47,656	$	43,406	3.36	%

(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, 2021 and December 31, 2020.

September 30, 2021:


($ 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	$	73,102	$	68,824	5.06	%	$	2,172	$	1,324	—	%	$	108,880	$	112,891	8.73	%
Greater than three years and less than seven years	56,905		54,286		3.57	%	4,142		3,980		2.18	%	34,525		39,480		3.43	%
Greater than seven years and less than eleven years	54,517		56,473		5.33	%	5,035		4,695		0.23	%	—		—		—	%
Greater than eleven years	11,284		11,445		1.93	%	—		—		—	%	—		—		—	%
Total	$	195,808	$	191,028	4.53	%	$	11,349	$	9,999	0.98	%	$	143,405	$	152,371	7.36	%

(1)Expected 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 and corporate debt.

(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, 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	$	58,350	$	54,339	3.39	%	$	5,163	$	3,754	0.92	%	$	89,235	$	90,869	7.73	%
Greater than three years and less than seven years	114,815		109,161		3.45	%	4,447		4,369		1.37	%	139,830		163,670		3.69	%
Greater than seven years and less than eleven years	109,519		123,782		2.74	%	—		—		—	%	2,320		2,974		1.14	%
Greater than eleven years	29,473		29,799		1.46	%	—		—		—	%	—		—		—	%
Total	$	312,157	$	317,081	2.98	%	$	9,610	$	8,123	1.17	%	$	231,385	$	257,513	5.09	%

(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, 2021 and 2020:


	Three-Month Period Ended
(In thousands)	September 30, 2021						September 30, 2020
Security Type	Coupon Interest		Net Amortization		Interest Income		Coupon Interest		Net Amortization		Interest Income
Agency RMBS	$	14,797	$	(9,551)	$	5,246	$	14,117	$	(7,454)	$	6,663
Non-Agency RMBS and CMBS	3,307		748		4,055		3,311		1,911		5,222
CLOs	3,532		(1,456)		2,076		2,256		2,179		4,435
Other securities(1)	4,590		(1,813)		2,777		2,970		(1,435)		1,535
Total	$	26,226	$	(12,072)	$	14,154	$	22,654	$	(4,799)	$	17,855


	Nine-Month Period Ended
(In thousands)	September 30, 2021						September 30, 2020
Security Type	Coupon Interest		Net Amortization		Interest Income		Coupon Interest		Net Amortization		Interest Income
Agency RMBS	$	43,449	$	(20,123)	$	23,326	$	47,632	$	(25,516)	$	22,116
Non-Agency RMBS and CMBS	10,321		3,179		13,500		10,995		4,001		14,996
CLOs	7,978		59		8,037		11,662		1,543		13,205
Other securities(1)	12,296		(3,796)		8,500		8,992		(3,584)		5,408
Total	$	74,044	$	(20,681)	$	53,363	$	79,281	$	(23,556)	$	55,725

(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, 2021 and 2020, the Catch-Up Premium Amortization Adjustment was $(2.9) million and $0.3 million, respectively. For the nine-month periods ended September 30, 2021 and 2020, the Catch-Up Premium Amortization Adjustment was $10 thousand and $(4.4) 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 nine-month periods ended September 30, 2021 and 2020.


	Three-Month Period Ended
(In thousands)	September 30, 2021								September 30, 2020
Security Type	Proceeds(1)		Gross Realized Gains		Gross Realized Losses(2)		Net Realized Gain (Loss)		Proceeds(1)		Gross Realized Gains		Gross Realized Losses		Net Realized Gain (Loss)
Agency RMBS	$	128,510	$	831	$	(1,860)	$	(1,029)	$	10,675	$	2,467	$	(564)	$	1,903
Non-Agency RMBS and CMBS	55,122		3,887		(1,081)		2,806		17,926		1,669		(171)		1,498
CLOs	—		2,846		—		2,846		—		—		256		256
Other securities(3)	145,131		2,460		(313)		2,147		11,861		373		(74)		299
Total	$	328,763	$	10,024	$	(3,254)	$	6,770	$	40,462	$	4,509	$	(553)	$	3,956

(1)Includes proceeds on sales of securities not yet settled as of period end.

(2)Excludes realized losses of $(0.3) million and $(2.5) million, for the three-month periods ended September 30, 2021 and 2020, 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.

(3)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, 2021								September 30, 2020
Security Type	Proceeds(1)		Gross Realized Gains		Gross Realized Losses(2)		Net Realized Gain (Loss)		Proceeds(1)		Gross Realized Gains		Gross Realized Losses		Net Realized Gain (Loss)
Agency RMBS	$	620,728	$	4,171	$	(9,114)	$	(4,943)	$	1,438,469	$	15,982	$	(3,369)	$	12,613
Non-Agency RMBS and CMBS	196,874		13,396		(2,598)		10,798		116,349		11,081		(3,880)		7,201
CLOs	129,001		3,882		(973)		2,909		41,714		1,122		(2,928)		(1,806)
Other securities(3)	169,812		2,705		(185)		2,520		169,172		1,273		(329)		944
Total	$	1,116,415	$	24,154	$	(12,870)	$	11,284	$	1,765,704	$	29,458	$	(10,506)	$	18,952

(1)Includes proceeds on sales of securities not yet settled as of period end.

(2)Excludes realized losses of $(1.5) million and $(16.3) million for the nine-month periods ended September 30, 2021 and 2020, 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.

(3)Other securities includes ABS backed by consumer loans, corporate debt and equity, exchange-traded equity, and U.S. Treasury securities.

The following tables present 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, 2021 and December 31, 2020.

September 30, 2021:


(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	$	663,008	$	(7,783)	$	31,177	$	(972)	$	694,185	$	(8,755)
Non-Agency RMBS and CMBS	41,556		(812)		4,050		(200)		45,606		(1,012)
CLOs	—		—		1,264		(1,006)		1,264		(1,006)
Total	$	704,564	$	(8,595)	$	36,491	$	(2,178)	$	741,055	$	(10,773)

December 31, 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	$	126,926	$	(981)	$	832	$	(44)	$	127,758	$	(1,025)
Non-Agency RMBS and CMBS	20,474		(2,616)		2,599		(348)		23,073		(2,964)
CLOs	5,279		(753)		1,196		(1,131)		6,475		(1,884)
Other securities(1)	1,107		(8)		—		—		1,107		(8)
Total	$	153,786	$	(4,358)	$	4,627	$	(1,523)	$	158,413	$	(5,881)

(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, 2021 and December 31, 2020, the Company had expected future credit losses, which it tracks for purposes of calculating interest income, of $19.2 million and $24.9 million, respectively, related to adverse changes in estimated future cash flows on its securities. 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 December 31, 2020, the estimated credit losses on such securities was $2.6 million. There were no estimated credit losses on such securities as of September 30, 2021.

The Company has determined for certain securities that a portion of such securities cost basis is not collectible. For the three-month periods ended September 30, 2021 and 2020, the Company recognized realized losses on these securities of $(0.3) million and $(2.5) million, respectively. For the nine-month periods ended September 30, 2021 and 2020, the Company recognized realized losses on these securities of $(1.5) million and $(16.3) million, respectively. Such losses are reflected in Net realized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations.