| Schedule of Financial Instruments Measured at Fair Value |
The following tables present the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2022 and 2021 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value as of December 31, 2022 | | | Level 1 | | Level 2 | | Level 3 | | Total | | Assets: | | | | | | | | | Securitized residential mortgage loans | $ | — | | | $ | — | | | $ | 3,707,146 | | | $ | 3,707,146 | | | Residential mortgage loans (1) | — | | | 754 | | | 420,697 | | | 421,451 | | | Non-Agency RMBS (2) | — | | | 9,678 | | | 9,859 | | | 19,537 | | | Non-Agency RMBS Interest Only | — | | | — | | | 5,058 | | | 5,058 | | | Agency Interest Only | — | | | 19,124 | | | — | | | 19,124 | | | Derivative assets (3) | — | | | 18,401 | | | 98 | | | 18,499 | | | Cash equivalents (4) | 442 | | | — | | | — | | | 442 | | | AG Arc (5) | — | | | — | | | 39,680 | | | 39,680 | | | Total Assets Measured at Fair Value | $ | 442 | | | $ | 47,957 | | | $ | 4,182,538 | | | $ | 4,230,937 | | | | | | | | | | | Liabilities: | | | | | | | | | Securitized debt | $ | — | | | $ | — | | | $ | (3,262,352) | | | $ | (3,262,352) | | | Derivative liabilities | — | | | — | | | (9) | | | (9) | | | Total Liabilities Measured at Fair Value | $ | — | | | $ | — | | | $ | (3,262,361) | | | $ | (3,262,361) | | | | | | | | | | | Fair value as of December 31, 2021 | | Level 1 | | Level 2 | | Level 3 | | Total | | Assets: | | | | | | | | | Securitized residential mortgage loans | $ | — | | | $ | — | | | $ | 1,158,134 | | | $ | 1,158,134 | | | Residential mortgage loans | — | | | 915 | | | 1,476,057 | | | 1,476,972 | | | Non-Agency RMBS (2) | — | | | — | | | 15,362 | | | 15,362 | | | Non-Agency RMBS Interest Only | — | | | — | | | 3,395 | | | 3,395 | | | 30 Year Fixed Rate Agency RMBS | — | | | 495,713 | | | — | | | 495,713 | | | Derivative assets (3) | — | | | 19,781 | | | — | | | 19,781 | | | AG Arc (5) | — | | | — | | | 53,435 | | | 53,435 | | | Total Assets Measured at Fair Value | $ | — | | | $ | 516,409 | | | $ | 2,706,383 | | | $ | 3,222,792 | | | | | | | | | | | Liabilities: | | | | | | | | | Securitized debt | $ | — | | | $ | — | | | $ | (999,215) | | | $ | (999,215) | | | | | | | | | | | Derivative liabilities (3) | — | | | (897) | | | (79) | | | (976) | | | Total Liabilities Measured at Fair Value | $ | — | | | $ | (897) | | | $ | (999,294) | | | $ | (1,000,191) | |
(1)Includes Residential mortgage loans held for sale. (2)Non-Agency RMBS is comprised of Non-Agency, Agency-Eligible, and Re/Non-Performing Securities. (3)As of December 31, 2022, the Company applied a reduction in fair value of $17.3 million to its interest rate swap assets related to variation margin with a corresponding increase in restricted cash, net of collateral posted by the Company's derivative counterparties. As of December 31, 2021, the Company applied a reduction in fair value of $19.6 million and $0.9 million to its interest rate swap assets and liabilities, respectively, related to variation margin with a corresponding increase or decrease in restricted cash, respectively. Derivative assets and liabilities are included in the "Other assets" and "Other liabilities" line items on the consolidated balance sheets, respectively. Refer to Note 2 and Note 7 for more information on the Company's accounting policies with regard to derivatives. (4)Refer to Note 2 for more information on the Company's accounting policies with regard to cash equivalents. (5)Refer to Note 2 for more information on the Company's accounting policies with regard to AG Arc. The table above includes the Company's investment in AG Arc, which is included in its "Investments in debt and equity of affiliates" line item on the consolidated balance sheets, as the Company has chosen to elect the fair value option with respect to its investment pursuant to ASC 825.
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| Schedule of Assets and Liabilities Measured on a Recurring Basis |
The following tables present additional information about the Company’s assets and liabilities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2022 (in thousands) | | | | | Residential
Mortgage
Loans (1) | | Non-Agency
RMBS | | Non-Agency
RMBS Interest Only | | Derivative assets (2) | | AG Arc | | Securitized
debt | | Derivative liabilities (2) | | Beginning balance | $ | 2,634,191 | | | $ | 15,362 | | | $ | 3,395 | | | $ | — | | | $ | 53,435 | | | $ | (999,215) | | | $ | (79) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Purchases | 2,557,440 | | | — | | | — | | | — | | | — | | | — | | | — | | | Issuances of Securitized Debt | — | | | — | | | — | | | — | | | — | | | (3,040,283) | | | — | | | Capital distributions | — | | | — | | | — | | | — | | | (6,053) | | | — | | | — | | | | | | | | | | | | | | | | | Proceeds from sales | (53,767) | | | — | | | — | | | — | | | — | | | — | | | — | | | Principal repayments | (464,332) | | | (664) | | | — | | | (2,700) | | | — | | | 379,979 | | | 16,044 | | | Total net gains/(losses) (3) | | | | | | | | | | | | | | | Included in net income | (545,689) | | | (4,839) | | | 1,663 | | | 2,798 | | (7,702) | | | 397,167 | | | (15,974) | | | Ending Balance | $ | 4,127,843 | | | $ | 9,859 | | | $ | 5,058 | | | $ | 98 | | | $ | 39,680 | | | $ | (3,262,352) | | | $ | (9) | | | | | | | | | | | | | | | | Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of December 31, 2022 (4) | $ | (542,629) | | | $ | (4,740) | | | $ | 1,663 | | | $ | 98 | | | $ | (7,702) | | | $ | 397,167 | | | $ | (9) | |
(1)Includes Securitized residential mortgage loans and Residential mortgage loans held for sale. (2)Derivative assets and derivative liabilities are included in the "Other assets" and "Other liabilities" line items, respectively, on the consolidated balance sheets. (3)Gains/(losses) are recorded in the following line items in the consolidated statement of operations: | | | | | | | Net unrealized gain/(loss) | $ | (148,010) | | | Net realized gain/(loss) | (16,864) | | | Equity in earnings/(loss) from affiliates | (7,702) | | | Total | $ | (172,576) | |
(4)Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations: | | | | | | | Net unrealized gain/(loss) | $ | (148,450) | | | Equity in earnings/(loss) from affiliates | (7,702) | | | Total | $ | (156,152) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2021 (in thousands) | | | | | Residential Mortgage
Loans (1) | | Non-Agency
RMBS | | Non-Agency
RMBS Interest Only | | Commercial
Loans | | Excess
Mortgage
Servicing
Rights | | AG Arc | | Securitized
debt | | Derivative liabilities (2) | | Beginning balance | $ | 433,307 | | | $ | 3,100 | | | $ | — | | | $ | 125,508 | | | $ | 3,158 | | | $ | 45,341 | | | $ | (355,159) | | | $ | — | | | Transfers (3): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Transfers out of level 3 | — | | | (1,499) | | | — | | | — | | | — | | | — | | | — | | | — | | | Purchases | 2,463,685 | | | 14,657 | | | 3,778 | | | 5,100 | | | — | | | — | | | — | | | — | | | Issuances of Securitized Debt | — | | | — | | | — | | | — | | | — | | | — | | | (811,455) | | | — | | | | | | | | | | | | | | | | | | | Capital distributions | — | | | — | | | — | | | — | | | — | | | (893) | | | — | | | — | | | Proceeds from sales | (138,304) | | | — | | | — | | | (74,342) | | | (2,364) | | | — | | | — | | | — | | | Principal repayments | (147,710) | | | (899) | | | — | | | (70,232) | | | — | | | — | | | 163,922 | | | — | | | Total net gains/(losses) (4) | | | | | | | | | | | | | | | | | Included in net income | 23,213 | | | 3 | | | (383) | | | 13,966 | | | (794) | | | 8,987 | | | 3,477 | | | (79) | | | Ending Balance | $ | 2,634,191 | | | $ | 15,362 | | | $ | 3,395 | | | $ | — | | | $ | — | | | $ | 53,435 | | | $ | (999,215) | | | $ | (79) | | | | | | | | | | | | | | | | | | Change in unrealized appreciation/(depreciation) for level 3 assets still held as of December 31, 2021 (5) | $ | 18,437 | | | $ | 3 | | | $ | (383) | | | $ | — | | | $ | — | | | $ | 8,987 | | | $ | 3,477 | | | $ | (79) | |
(1)Includes Securitized residential mortgage loans (2)Derivative liabilities are included in the "Other liabilities" line item on the consolidated balance sheets. (3)Transfers are assumed to occur at the beginning of the period. For the year ended December 31, 2021, the Company transferred one Non-Agency RMBS into the Level 2 category from the Level 3 category under the fair value hierarchy of ASC 820. (4)Gains/(losses) are recorded in the following line items in the consolidated statement of operations: | | | | | | | Net unrealized gain/(loss) | $ | 38,606 | | | Net realized gain/(loss) | 797 | | | Equity in earnings/(loss) from affiliates | 8,987 | | | Total | $ | 48,390 | |
(5)Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations: | | | | | | | Net unrealized gain/(loss) | $ | 21,455 | | | Equity in earnings/(loss) from affiliates | 8,987 | | | Total | $ | 30,442 | |
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| Schedule of Valuation Techniques |
The following tables present a summary of quantitative information about the significant unobservable inputs used in the fair value measurement of investments for which the Company has utilized Level 3 inputs to determine fair value. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset Class | | Fair Value at December 31, 2022 (in thousands) | | Valuation Technique | | Unobservable Input | | Range
(Weighted Average) (1) | | | | | | | Yield | | 4.75% - 7.32% (6.40%) | | Securitized Residential Mortgage Loans | | $ | 3,707,146 | | | Discounted Cash Flows | | Projected Collateral Prepayments | | 4.81% - 10.19% (6.44%) | | | | | | Projected Collateral Losses | | 0.05% - 1.40% (0.22%) | | | | | | | Projected Collateral Severities | | -4.16% - 20.00% (15.40%) | | | | | | | Yield | | 6.29% - 9.82% (7.16%) | | Residential Mortgage Loans (2) | | $ | 418,023 | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 1.38% - 31.28% (16.37%) | | | | | | Projected Collateral Losses | | 0.00% - 14.44% (0.48%) | | | | | | | Projected Collateral Severities | | -2.64% - 10.19% (9.99%) | | | $ | 2,674 | | | Consensus Pricing | | Broker Quotes | | 93.46 - 107.05 (101.11) | | | | | | | | | | | | | | | | Yield | | 7.18% - 11.93% (9.22%) | | Non-Agency RMBS | | $ | 9,859 | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 8.14% - 8.14% (8.14%) | | | | | | | Projected Collateral Losses | | 0.18% - 0.18% (0.18%) | | | | | | | Projected Collateral Severities | | 10.00% - 10.00% (10.00%) | | | | | | | | | | | | | | | | | | | | | | | | | Yield | | 10.00% - 14.00% (13.25%) | | Non-Agency RMBS Interest Only | | $ | 5,058 | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 8.14% - 8.14% (8.14%) | | | | | | Projected Collateral Losses | | 0.18% - 0.18% (0.18%) | | | | | | | Projected Collateral Severities | | 10.00% - 10.00% (10.00%) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Yield | | 6.69% - 7.68% (7.54%) | | Derivative Assets (3) | | $ | 98 | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 12.63% - 34.19% (26.71%) | | | | | | | Projected Collateral Losses | | 0.01% - 0.96% (0.39%) | | | | | | | Projected Collateral Severities | | 10.00% - 10.00% (10.00%) | | | | | | | Pull through Percentages | | 55.00% - 100.00% (72.78%) | | AG Arc | | $ | 39,680 | | | Comparable Multiple | | Book Value Multiple | | 0.94x - 0.94x (0.94x) | | | | | | | | | | | Liability Class | | Fair Value at December 31, 2022 (in thousands) | | Valuation Technique | | Unobservable Input | | Range
(Weighted Average) | | | | | | | Yield | | 5.25% - 15.00% (6.07%) | | Securitized Debt | | $ | (3,262,352) | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 4.81% - 10.19% (6.36%) | | | | | | | Projected Collateral Losses | | 0.05% - 1.40% (0.19%) | | | | | | | Projected Collateral Severities | | -4.16% - 20.00% (15.81%) | | | | | | | Yield | | 7.29% - 7.61% (7.36%) | | Derivative Liabilities (3) | | $ | (9) | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 21.51% - 31.31% (27.92%) | | | | | | | Projected Collateral Losses | | 0.01% - 0.46% (0.16%) | | | | | | | Projected Collateral Severities | | 10.00% - 10.00% (10.00%) | | | | | | | Pull Through Percentages | | 100.00% - 100.00% (100.00%) |
(1)Amounts are weighted based on fair value. (2)Includes Residential mortgage loans held for sale. (3)Derivative assets and derivative liabilities are included in the "Other assets" and "Other liabilities" line items, respectively, on the consolidated balance sheets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset Class | | Fair Value at December 31, 2021 (in thousands) | | Valuation Technique | | Unobservable Input | | Range
(Weighted Average) (1) | | | | | | | Yield | | 2.26% - 13.00% (3.12%) | | Securitized Residential Mortgage Loans | | $ | 1,158,134 | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 4.75% - 11.05% (9.51%) | | | | | | Projected Collateral Losses | | 0.38% - 4.40% (0.83%) | | | | | | | Projected Collateral Severities | | -18.08% - 29.11% (10.10%) | | | | | | | Yield | | 2.77% - 7.50% (3.37%) | | Residential Mortgage Loans | | $ | 1,465,523 | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 0.00% - 25.89% (15.28%) | | | | | | Projected Collateral Losses | | 0.00% - 15.37% (0.30%) | | | | | | | Projected Collateral Severities | | -14.86% - 10.00% (9.97%) | | | $ | 4,405 | | | Consensus Pricing | | Broker Quotes | | 88.57 - 112.89 (102.59) | | | $ | 6,129 | | | Recent Transaction | | Cost | | N/A | | | | | | | Yield | | 3.42% - 15.00% (5.32%) | | Non-Agency RMBS | | $ | 15,362 | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 5.70% - 12.99% (12.63%) | | | | | | | Projected Collateral Losses | | 0.23% - 2.66% (0.35%) | | | | | | | Projected Collateral Severities | | -43.98% - 10.00% (7.32%) | | | | | | | | | | | | | | | | | | | | | | | | | Yield | | 10.00% - 12.50% (12.10%) | | Non-Agency RMBS Interest Only | | $ | 3,395 | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 12.99% - 12.99% (12.99%) | | | | | | Projected Collateral Losses | | 0.23% - 0.23% (0.23%) | | | | | | | Projected Collateral Severities | | 10.00% - 10.00% (10.00%) | | AG Arc | | $ | 53,435 | | | Comparable Multiple | | Book Value Multiple | | 1.06x - 1.06x (1.06x) | | | | | | | | | | | Liability Class | | Fair Value at December 31, 2021 (in thousands) | | Valuation Technique | | Unobservable Input | | Range
(Weighted Average) | | | | | | | Yield | | 1.56% - 4.49% (2.15%) | | Securitized Debt | | $ | (999,215) | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 5.86% - 11.05% (9.66%) | | | | | | | Projected Collateral Losses | | 0.38% - 2.93% (0.83%) | | | | | | | Projected Collateral Severities | | 6.36% - 12.89% (10.15%) | | | | | | | Yield | | 3.02% - 3.11% (3.03%) | | Derivative Liabilities (2) | | $ | (79) | | | Discounted Cash Flow | | Projected Collateral Prepayments | | 14.08% - 15.14% (14.23%) | | | | | | | Projected Collateral Losses | | 0.15% - 0.20% (0.15%) | | | | | | | Projected Collateral Severities | | 10.00% - 10.00% (10.00%) | | | | | | | Pull Through Percentages | | 90.00% - 95.00% (90.69%) |
(1)Amounts are weighted based on fair value. (2)Derivative liabilities are included in the "Other liabilities" line item on the consolidated balance sheets.
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