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Mortgage-Backed Securities (Tables)
 6 Months Ended
Jun. 30, 2014
Investments, Debt and Equity Securities [Abstract]  
Summary of Investment Portfolio
The following tables present certain information about the Company’s MBS portfolio as of June 30, 2014 and December 31, 2013.
June 30, 2014
$ in thousands
Principal
Balance
 
Unamortized
Premium
(Discount)
 
Amortized
Cost
 
Unrealized
Gain/
(Loss), net
 
Fair
Value
 
Net
Weighted
Average
Coupon (1)
 
Period-
end
Weighted
Average
Yield (2)
 
Quarterly
Weighted
Average
Yield (3)
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
1,395,263

 
69,737

 
1,465,000

 
30,999

 
1,495,999

 
4.04
%
 
2.60
%
 
2.57
%
30 year fixed-rate
5,848,240

 
394,803

 
6,243,043

 
(3,048
)
 
6,239,995

 
4.17
%
 
3.01
%
 
3.03
%
ARM
545,715

 
9,431

 
555,146

 
6,138

 
561,284

 
2.86
%
 
2.55
%
 
2.29
%
Hybrid ARM
2,555,585

 
37,078

 
2,592,663

 
20,674

 
2,613,337

 
2.79
%
 
2.52
%
 
2.23
%
Total Agency pass-through
10,344,803

 
511,049

 
10,855,852

 
54,763

 
10,910,615

 
3.74
%
 
2.81
%
 
2.75
%
Agency-CMO(4)
1,789,639

 
(1,270,882
)
 
518,757

 
(8,322
)
 
510,435

 
2.57
%
 
4.46
%
 
3.42
%
Non-Agency RMBS(5)(6)(7)
3,816,728

 
(632,014
)
 
3,184,714

 
97,811

 
3,282,525

 
3.63
%
 
4.14
%
 
4.70
%
GSE CRT(8)
431,000

 
28,798

 
459,798

 
46,837

 
506,635

 
5.17
%
 
4.07
%
 
4.04
%
CMBS(9)
4,928,396

 
(2,023,533
)
 
2,904,863

 
132,716

 
3,037,579

 
3.52
%
 
4.56
%
 
4.54
%
Total
21,310,566

 
(3,386,582
)
 
17,923,984

 
323,805

 
18,247,789

 
3.60
%
 
3.41
%
 
3.36
%
 
(1)
Net weighted average coupon (“WAC”) as of June 30, 2014 is presented net of servicing and other fees.
(2)
Period-end weighted average yield is based on amortized cost as of June 30, 2014 and incorporates future prepayment and loss assumptions.
(3)
Quarterly weighted average portfolio yield for the period was calculated by dividing interest income, including amortization of premiums and discounts, by the Company's average of the amortized cost of the investments. All yields are annualized.
(4)
Included in Agency-CMO are interest-only securities, which represent 23.6% of the balance based on fair value.
(5)
Included in non-Agency RMBS are securities of $26.0 million for a future securitization not yet settled.
(6)
Non-Agency RMBS held by the Company is 63.4% variable rate, 30.9% fixed rate, and 5.7% floating rate based on fair value (excluding securities for a future securitization not yet settled).
(7)
Of the total discount in non-Agency RMBS, $390.5 million is non-accretable.
(8)
GSE CRT are general obligations of Fannie Mae or Freddie Mac that are structured to provide credit protection to the GSE issuer with respect to defaults and other credit events within reference pools of residential mortgage loans that collateralize MBS issued and guaranteed by such GSE.
(9)
Included in the CMBS are interest-only securities and commercial real estate mezzanine loan pass-through certificates which represent 6.2% and 1.5% of the balance based on fair value, respectively.
December 31, 2013
$ in thousands
Principal
Balance
 
Unamortized
Premium
(Discount)
 
Amortized
Cost
 
Unrealized
Gain/
(Loss), net
 
Fair
Value
 
Net
Weighted
Average
Coupon (1)
 
Period-
end
Weighted
Average
Yield (2)
 
Quarterly
Weighted
Average
Yield (3)
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
1,637,988

 
83,799

 
1,721,787

 
22,494

 
1,744,281

 
4.02
%
 
2.54
%
 
2.61
%
30 year fixed-rate
6,494,723

 
435,680

 
6,930,403

 
(228,250
)
 
6,702,153

 
4.11
%
 
2.96
%
 
3.13
%
ARM
251,693

 
992

 
252,685

 
597

 
253,282

 
2.80
%
 
2.62
%
 
2.41
%
Hybrid ARM
1,764,472

 
9,470

 
1,773,942

 
(3,384
)
 
1,770,558

 
2.69
%
 
2.46
%
 
2.06
%
Total Agency pass-through
10,148,876

 
529,941

 
10,678,817

 
(208,543
)
 
10,470,274

 
3.82
%
 
2.80
%
 
2.90
%
Agency-CMO(4)
1,532,474

 
(1,051,777
)
 
480,697

 
(6,183
)
 
474,514

 
2.76
%
 
3.82
%
 
3.47
%
Non-Agency RMBS(5)(6)
4,217,230

 
(640,797
)
 
3,576,433

 
30,895

 
3,607,328

 
3.72
%
 
2.80
%
 
4.63
%
GSE CRT
144,500

 
22,163

 
166,663

 
1,318

 
167,981

 
7.13
%
 
5.17
%
 
5.85
%
CMBS(7)
4,630,363

 
(2,032,945
)
 
2,597,418

 
31,142

 
2,628,560

 
3.38
%
 
4.62
%
 
4.51
%
Total
20,673,443

 
(3,173,415
)
 
17,500,028

 
(151,371
)
 
17,348,657

 
3.63
%
 
3.30
%
 
3.51
%
 
(1)
Net WAC as of December 31, 2013 is presented net of servicing and other fees.
(2)
Period-end weighted average yield based on amortized cost as of December 31, 2013 incorporates future prepayment and loss assumptions.
(3)
Quarterly weighted average portfolio yield for the period was calculated by dividing interest income, including amortization of premiums and discounts, by the Company's average of the amortized cost of the investments. All yields are annualized.
(4)
Included in Agency-CMO are interest-only securities, which represent 25.0% of the balance based on fair value.
(5)
Non-Agency RMBS held by the Company is 61.1% variable rate, 33.9% fixed rate, and 5.0% floating rate based on fair value.
(6)
Of the total discount in non-Agency RMBS, $438.1 million is non-accretable.
(7)
Included in the CMBS are interest-only securities and commercial real estate mezzanine loan pass-through certificates which represent 7.5% and 1.0% of the balance based on fair value, respectively.
Components of Non-Agency RMBS Portfolio by Asset Type
The following table summarizes the Company's non-Agency RMBS portfolio by asset type as of June 30, 2014 and December 31, 2013, respectively:
$ in thousands
June 30, 2014
 
% of Non-Agency
 
December 31, 2013
 
% of Non-Agency
Re-REMIC
1,295,129

 
39.7
%
 
1,444,376

 
40.0
%
Prime
1,138,352

 
35.1
%
 
1,336,821

 
37.1
%
Alt-A
802,754

 
24.6
%
 
801,919

 
22.2
%
Subprime
20,240

 
0.6
%
 
24,212

 
0.7
%
Total Non-Agency(1)
3,256,475

 
100.0
%
 
3,607,328

 
100.0
%

(1)
Excluded from non-Agency RMBS are securities of $26.0 million for a future securitization not yet settled.
Components of Senior Re-REMIC at Fair Value
The following table summarizes certain characteristics of the Company's re-securitization of real estate mortgage investment conduit ("Re-REMIC") holdings as of June 30, 2014 and December 31, 2013:
  
 
Percentage of Re-REMIC Holdings at Fair Value
Re-REMIC Subordination(1)
 
June 30, 2014
 
December 31, 2013
0-10
 
5.4
%
 
4.8
%
10-20
 
3.7
%
 
3.5
%
20-30
 
15.1
%
 
14.7
%
30-40
 
25.3
%
 
25.2
%
40-50
 
36.5
%
 
38.6
%
50-60
 
9.3
%
 
8.5
%
60-70
 
4.7
%
 
4.7
%
Total
 
100.0
%
 
100.0
%
 
(1)
Subordination refers to the credit enhancement provided to the Re-REMIC tranche by any junior Re-REMIC tranche or tranches in a resecuritization. This figure reflects the percentage of the balance of the underlying security represented by any junior tranche or tranches at the time of resecuritization. Generally, principal losses on the underlying security in excess of the subordination amount would result in principal losses on the Re-REMIC tranche.
Components of Carrying Value of Investment Portfolio
The components of the carrying value of the Company’s MBS portfolio at June 30, 2014 and December 31, 2013 are presented below:
 
$ in thousands
June 30, 2014
 
December 31, 2013
Principal balance
21,310,566

 
20,673,443

Unamortized premium
641,091

 
646,189

Unamortized discount
(4,027,673
)
 
(3,819,604
)
Gross unrealized gains
493,772

 
291,725

Gross unrealized losses
(169,967
)
 
(443,096
)
Fair value
18,247,789

 
17,348,657
Fair Value of Mortgage-Backed Securities According to Weighted Average Life Classification
The following table summarizes certain characteristics of the Company’s investment portfolio, at fair value, according to estimated weighted average life classifications as of June 30, 2014 and December 31, 2013:
 
$ in thousands
June 30, 2014
 
December 31, 2013
Less than one year
245,994

 
101,251

Greater than one year and less than five years
7,620,772

 
5,958,852

Greater than or equal to five years
10,381,023

 
11,288,554

Total
18,247,789

 
17,348,657
Unrealized Losses and Estimated Fair Value of MBS by Length of Time
The following tables present the estimated fair value, the gross unrealized losses and the number of securities of the Company’s MBS by length of time that such securities have been in a continuous unrealized loss position at June 30, 2014 and December 31, 2013, respectively:

June 30, 2014
  
Less than 12 Months
 
12 Months or More
 
Total
$ in thousands
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
1,010

 
(4
)
 
1

 
125,311

 
(1,873
)
 
7

 
126,321

 
(1,877
)
 
8

30 year fixed-rate
23,639

 
(47
)
 
2

 
3,133,497

 
(114,344
)
 
101

 
3,157,136

 
(114,391
)
 
103

ARM
24,699

 
(89
)
 
1

 
13,671

 
(67
)
 
2

 
38,370

 
(156
)
 
3

Hybrid ARM
337,694

 
(1,013
)
 
19

 
28,686

 
(278
)
 
2

 
366,380

 
(1,291
)
 
21

Total Agency pass-through
387,042

 
(1,153
)
 
23

 
3,301,165

 
(116,562
)
 
112

 
3,688,207

 
(117,715
)
 
135

Agency-CMO
309,450

 
(14,490
)
 
22

 
76,203

 
(5,762
)
 
5

 
385,653

 
(20,252
)
 
27

Non-Agency RMBS
262,404

 
(3,940
)
 
30

 
489,584

 
(18,939
)
 
30

 
751,988

 
(22,879
)
 
60

GSE CRT
76,750

 
(228
)
 
2

 
—

 
—

 
—

 
76,750

 
(228
)
 
2

CMBS
141,482

 
(1,562
)
 
13

 
481,510

 
(7,331
)
 
36

 
622,992

 
(8,893
)
 
49

Total
1,177,128

 
(21,373
)
 
90

 
4,348,462

 
(148,594
)
 
183

 
5,525,590

 
(169,967
)
 
273

December 31, 2013
  
Less than 12 Months
 
12 Months or More
 
Total
$ in thousands
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
431,527

 
(4,964
)
 
18

 
11,100

 
(259
)
 
1

 
442,627

 
(5,223
)
 
19

30 year fixed-rate
3,710,679

 
(228,167
)
 
126

 
641,259

 
(56,754
)
 
27

 
4,351,938

 
(284,921
)
 
153

ARM
94,447

 
(968
)
 
7

 
—

 
—

 
—

 
94,447

 
(968
)
 
7

Hybrid ARM
1,129,488

 
(9,715
)
 
48

 
—

 
—

 
—

 
1,129,488

 
(9,715
)
 
48

Total Agency pass-through
5,366,141

 
(243,814
)
 
199

 
652,359

 
(57,013
)
 
28

 
6,018,500

 
(300,827
)
 
227

Agency-CMO
311,935

 
(16,599
)
 
13

 
8,883

 
(3,736
)
 
4

 
320,818

 
(20,335
)
 
17

Non-Agency RMBS
1,307,036

 
(58,326
)
 
76

 
91,651

 
(1,726
)
 
8

 
1,398,687

 
(60,052
)
 
84

GSE CRT
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

CMBS
1,118,270

 
(61,882
)
 
84

 
—

 
—

 
—

 
1,118,270

 
(61,882
)
 
84

Total
8,103,382

 
(380,621
)
 
372

 
752,893

 
(62,475
)
 
40

 
8,856,275

 
(443,096
)
 
412
Impact of MBS on Accumulated other Comprehensive Income
The following table presents the impact of the Company’s MBS on its accumulated other comprehensive income for the three and six months ended June 30, 2014 and 2013.
 
$ in thousands
Three Months 
 ended 
 June 30, 2014
 
Three Months 
 ended 
 June 30, 2013
 
Six Months 
 ended 
 June 30, 2014
 
Six Months 
 ended 
 June 30, 2013
Accumulated other comprehensive income from investment securities:
 
 
 
 
 
 
 
Unrealized gain (loss) on MBS at beginning of period
29,817

 
453,590

 
(151,368
)
 
523,725

Unrealized gain (loss) on MBS, net
293,988

 
(710,992
)
 
475,173

 
(781,127
)
Balance at the end of period
323,805

 
(257,402
)
 
323,805

 
(257,402
)
Components of MBS Interest Income
The following table presents components of interest income on the Company’s MBS portfolio for the three and six months ended June 30, 2014 and 2013.
For the three months ended June 30, 2014
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
105,094

 
(27,064
)
 
78,030

Non-Agency
34,917

 
3,733

 
38,650

GSE CRT
4,993

 
(1,361
)
 
3,632

CMBS
41,514

 
(9,901
)
 
31,613

Other
(5
)
 
—

 
(5
)
Total
186,513

 
(34,593
)
 
151,920

For the three months ended June 30, 2013
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
142,846

 
(46,956
)
 
95,890

Non-Agency
41,325

 
2,001

 
43,326

GSE CRT
—

 
—

 
—

CMBS
35,670

 
(6,252
)
 
29,418

Other
102

 
—

 
102

Total
219,943

 
(51,207
)
 
168,736

For the six months ended June 30, 2014
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
210,577

 
(50,728
)
 
159,849

Non-Agency
70,472

 
4,668

 
75,140

GSE CRT
9,369

 
(1,361
)
 
8,008

CMBS
80,126

 
(19,562
)
 
60,564

Other
98

 
—

 
98

Total
370,642

 
(66,983
)
 
303,659

For the six months ended June 30, 2013
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
286,259

 
(92,069
)
 
194,190

Non-Agency
77,737

 
3,142

 
80,879

GSE CRT
—

 
—

 
—

CMBS
62,320

 
(8,452
)
 
53,868

Other
143

 
—

 
143

Total
426,459

 
(97,379
)
 
329,080