The Company classifies its Non-Agency RMBS as senior, subordinated, or Interest-only. The Company also invests in Agency MBS which it classifies as Agency RMBS to include residential and residential interest-only MBS and Agency CMBS to include commercial and commercial interest-only MBS. Senior interests in Non-Agency RMBS are generally entitled to the first principal repayments in their pro-rata ownership interests at the acquisition date. The tables below present amortized cost, allowance for credit losses, fair value and unrealized gain/losses of the Company's MBS investments as of June 30, 2023 and December 31, 2022.


June 30, 2023
(dollars in thousands)
	Principal or Notional Value		Total Premium		Total Discount		Amortized Cost		Allowance for credit losses		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gain/(Loss)
Non-Agency RMBS
Senior	$	1,109,831	$	11,193	$	(602,852)	$	518,172	$	(9,847)	$	717,620	$	216,269	$	(6,974)	$	209,295
Subordinated	594,038		3,651		(297,522)		300,167		(3,166)		279,459		20,952		(38,494)		(17,542)
Interest-only	2,983,593		160,318		—		160,318		—		95,126		16,640		(81,832)		(65,192)
Agency RMBS

Interest-only	401,285		18,955		—		18,955		—		12,924		—		(6,031)		(6,031)
Agency CMBS
Project loans	123,579		1,872		—		125,451		—		114,210		—		(11,241)		(11,241)
Interest-only	484,297		8,575		—		8,575		—		9,192		1,334		(717)		617
Total	$	5,696,623	$	204,564	$	(900,374)	$	1,131,638	$	(13,013)	$	1,228,531	$	255,195	$	(145,289)	$	109,906



December 31, 2022
(dollars in thousands)
	Principal or Notional Value		Total Premium		Total Discount		Amortized Cost		Allowance for credit losses		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gain/(Loss)
Non-Agency RMBS
Senior	$	1,153,458	$	7,377	$	(624,803)	$	536,032	$	(4,418)	$	761,808	$	237,127	$	(6,933)	$	230,194
Subordinated	611,206		3,872		(310,757)		304,321		(2,770)		286,909		22,035		(36,677)		(14,642)
Interest-only	3,114,930		162,820		—		162,820		—		98,764		15,968		(80,024)		(64,056)
Agency RMBS

Interest-only	409,940		18,768		—		18,768		—		15,148		1,371		(4,991)		(3,620)
Agency CMBS
Project loans	302,685		5,805		(192)		308,298		—		289,418		—		(18,880)		(18,880)
Interest-only	2,669,396		139,738		—		139,738		—		126,378		1,654		(15,014)		(13,360)
Total	$	8,261,615	$	338,380	$	(935,752)	$	1,469,977	$	(7,188)	$	1,578,425	$	278,155	$	(162,519)	$	115,636

The following tables present the gross unrealized losses and estimated fair value of the Company’s Agency and Non-Agency MBS by length of time that such securities have been in a continuous unrealized loss position at June 30, 2023 and December 31, 2022. All Non-Agency RMBS held as available-for-sale, and not accounted under the fair value option election in an unrealized loss position have been evaluated by the Company for current expected credit losses.


June 30, 2023
(dollars in thousands)
	Unrealized Loss Position for Less than 12 Months					Unrealized Loss Position for 12 Months or More					Total
	Estimated Fair Value		Unrealized Losses		Number of Positions	Estimated Fair Value		Unrealized Losses		Number of Positions	Estimated Fair Value		Unrealized Losses		Number of Positions
Non-Agency RMBS
Senior	$	33,660	$	(171)	8	$	41,449	$	(6,803)	5	$	75,109	$	(6,974)	13
Subordinated	31,010		(4,583)		6	159,744		(33,911)		31	190,754		(38,494)		37
Interest-only	17,721		(5,970)		33	36,119		(75,862)		95	53,840		(81,832)		128
Agency RMBS

Interest-only	8,069		(1,050)		6	4,855		(4,981)		6	12,924		(6,031)		12
Agency CMBS
Project loans	83,375		(6,738)		78	30,835		(4,503)		31	114,210		(11,241)		109
Interest-only	3,120		(446)		2	175		(271)		2	3,295		(717)		4
Total	$	176,955	$	(18,958)	133	$	273,177	$	(126,331)	170	$	450,132	$	(145,289)	303



December 31, 2022
(dollars in thousands)
	Unrealized Loss Position for Less than 12 Months					Unrealized Loss Position for 12 Months or More					Total
	Estimated Fair Value		Unrealized Losses		Number of Positions	Estimated Fair Value		Unrealized Losses		Number of Positions	Estimated Fair Value		Unrealized Losses		Number of Positions
Non-Agency RMBS
Senior	$	83,553	$	(6,170)	13	$	7,577	$	(763)	1	$	91,130	$	(6,933)	14
Subordinated	161,959		(27,120)		28	37,025		(9,557)		8	198,984		(36,677)		36
Interest-only	41,890		(24,411)		79	15,213		(55,613)		50	57,103		(80,024)		129
Agency RMBS

Interest-only	6,062		(500)		4	2,825		(4,491)		4	8,887		(4,991)		8
Agency CMBS
Project loans	281,307		(18,880)		131	—		—		—	281,307		(18,880)		131
Interest-only	81,472		(10,503)		5	35,234		(4,511)		3	116,706		(15,014)		8
Total	$	656,243	$	(87,584)	260	$	97,874	$	(74,935)	66	$	754,117	$	(162,519)	326

At June 30, 2023, the Company did not intend to sell any of its Agency and Non-Agency MBS classified as available-for-sale that were in an unrealized loss position, and it was not more likely than not that the Company would be required to sell these MBS investments before recovery of their amortized cost basis, which may be at their maturity. With respect to RMBS held by consolidated VIEs, the ability of any entity to cause the sale by the VIE prior to the maturity of these RMBS is either expressly prohibited, not probable, or is limited to specified events of default, none of which have occurred as of June 30, 2023.

The Company had $18 thousand and $3 million gross unrealized losses on its Agency MBS (excluding Agency MBS which are reported at fair value with changes in fair value recorded in earnings) as of June 30, 2023 and December 31, 2022, respectively. Given the inherent credit quality of Agency MBS, the Company does not consider any of the current impairments on its Agency MBS to be credit related. In evaluating whether it is more likely than not that it will be required to sell any impaired security before its anticipated recovery, which may be at their maturity, the Company considers the significance of each investment, the amount of impairment, the projected future performance of such impaired securities, as well as the Company’s current and anticipated leverage capacity and liquidity position. Based on these analyses, the Company determined that at June 30, 2023 unrealized losses on its Agency MBS were temporary.

Gross unrealized losses on the Company’s Non-Agency RMBS (excluding Non-Agency RMBS which are reported at fair value with changes in fair value recorded in earnings), net of any allowance for credit losses, were $19 million and $20 million, at June 30, 2023 and December 31, 2022, respectively. After evaluating the securities and recording any allowance for credit losses, the Company concluded that the remaining unrealized losses reflected above were non-credit related and would be recovered from the securities' estimated future cash flows. The Company considered a number of factors in reaching this conclusion, including that it did not intend to sell the securities, it was not considered more likely than not that it would be required to sell the securities prior to recovering the amortized cost, and there were no material credit events that would have caused the Company to otherwise conclude that it would not recover the amortized cost. The allowance for credit losses are calculated by comparing the estimated future cash flows of each security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to the net amortized cost basis. Significant judgment is used in projecting cash flows for Non-Agency RMBS.

The Company has reviewed its Non-Agency RMBS that are in an unrealized loss position to identify those securities with losses that are credit related based on an assessment of changes in cash flows expected to be collected for such RMBS, which considers recent bond performance and expected future performance of the underlying collateral. A summary of the credit losses allowance on available-for-sale securities for the quarters and six months ended June 30, 2023 and 2022 is presented below.


	For the Quarter Ended				For the Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(dollars in thousands)				(dollars in thousands)
Beginning allowance for credit losses	$	10,251	$	453	$	7,188	$	213


Additions to the allowance for credit losses on securities for which credit losses were not previously recorded	502		1,253		1,099		1,592
Allowance on purchased financial assets with credit deterioration	—		—		—		—
Reductions for the securities sold during the period	—		—		—		—
Increase/(decrease) on securities with an allowance in the prior period	3,459		3,062		7,551		3,021
Write-offs charged against the allowance	(1,228)		(18)		(2,858)		(76)
Recoveries of amounts previously written off	29		140		33		140

Ending allowance for credit losses	$	13,013	$	4,890	$	13,013	$	4,890

The increase in the allowance for credit losses for the quarter and six months ended June 30, 2023 is primarily due to increases in expected losses and delinquencies as compared to the same periods of 2022. In addition, certain Non-Agency RMBS positions now have higher unrealized losses and resulted in the recognition of an allowance for credit losses which was previously limited by unrealized gains on these investments.


			June 30, 2023
			(dollars in thousands)
	Gross Unrealized Gain Included in Accumulated Other Comprehensive Income		Gross Unrealized Gain Included in Cumulative Earnings		Total Gross Unrealized Gain		Gross Unrealized Loss Included in Accumulated Other Comprehensive Income		Gross Unrealized Loss Included in Cumulative Earnings		Total Gross Unrealized Loss
Non-Agency RMBS
Senior	$	216,269	$	—	$	216,269	$	(5,391)	$	(1,583)	$	(6,974)
Subordinated	13,465		7,487		20,952		(13,649)		(24,845)		(38,494)
Interest-only	—		16,640		16,640		—		(81,832)		(81,832)
Agency RMBS

Interest-only	—		—		—		—		(6,031)		(6,031)
Agency CMBS
Project loans	—		—		—		(18)		(11,223)		(11,241)
Interest-only	—		1,334		1,334		—		(717)		(717)
Total	$	229,734	$	25,461	$	255,195	$	(19,058)	$	(126,231)	$	(145,289)


			December 31, 2022
			(dollars in thousands)
	Gross Unrealized Gain Included in Accumulated Other Comprehensive Income		Gross Unrealized Gain Included in Cumulative Earnings		Total Gross Unrealized Gain		Gross Unrealized Loss Included in Accumulated Other Comprehensive Income		Gross Unrealized Loss Included in Cumulative Earnings		Total Gross Unrealized Loss
Non-Agency RMBS
Senior	$	237,127	$	—	$	237,127	$	(5,132)	$	(1,801)	$	(6,933)
Subordinated	14,600		7,435		22,035		(14,418)		(22,259)		(36,677)
Interest-only	—		15,968		15,968		—		(80,024)		(80,024)
Agency RMBS

Interest-only	—		1,371		1,371		—		(4,991)		(4,991)
Agency CMBS
Project loans	—		—		—		(2,832)		(16,048)		(18,880)
Interest-only	—		1,654		1,654		—		(15,014)		(15,014)
Total	$	251,727	$	26,428	$	278,155	$	(22,382)	$	(140,137)	$	(162,519)

Changes in prepayments, actual cash flows, and cash flows expected to be collected, among other items, are affected by the collateral characteristics of each asset class. The Company chooses assets for the portfolio after carefully evaluating each investment’s risk profile.


	June 30, 2023
	Principal or Notional Value at Period-End (dollars in thousands)		Weighted Average Amortized Cost Basis		Weighted Average Fair Value	Weighted Average Coupon		Weighted Average Yield at Period-End (1)
Non-Agency RMBS
Senior	$	1,109,831	$	45.80	64.66	5.5	%	16.5	%
Subordinated	594,038		50.00		47.04	3.8	%	6.6	%
Interest-only	2,983,593		5.37		3.19	0.5	%	6.9	%
Agency RMBS

Interest-only	401,285		4.72		3.22	0.1	%	6.8	%
Agency CMBS
Project loans	123,579		101.51		92.42	4.1	%	4.0	%
Interest-only	484,297		1.77		1.90	0.6	%	7.9	%


	December 31, 2022
	Principal or Notional Value at Period-End (dollars in thousands)		Weighted Average Amortized Cost Basis		Weighted Average Fair Value		Weighted Average Coupon		Weighted Average Yield at Period-End (1)
Non-Agency RMBS
Senior	$	1,153,458	$	46.09	$	66.05	5.3	%	16.4	%
Subordinated	611,206		49.79		46.94		3.1	%	6.8	%
Interest-only	3,114,930		5.14		3.17		0.7	%	5.3	%
Agency RMBS

Interest-only	409,940		4.58		3.70		0.9	%	5.0	%
Agency CMBS
Project loans	302,685		101.85		95.62		4.3	%	4.1	%
Interest-only	2,669,396		5.23		4.73		0.7	%	3.4	%

Actual maturities of MBS are generally shorter than the stated contractual maturities. Actual maturities of the Company’s MBS are affected by the underlying mortgages, periodic payments of principal, realized losses and prepayments of principal. The following tables provide a summary of the fair value and amortized cost of the Company’s MBS at June 30, 2023 and December 31, 2022 according to their estimated weighted-average life classifications. The weighted-average lives of the MBS in the tables below are based on lifetime expected prepayment rates using the Company's prepayment assumptions for the Agency MBS and Non-Agency RMBS. The prepayment model considers current yield, forward yield, steepness of the interest rate curve, current mortgage rates, mortgage rates of the outstanding loan, loan age, margin, and volatility.


	June 30, 2023
	(dollars in thousands)
	Weighted Average Life
	Less than one year		Greater than one year and less than five years		Greater than five years and less than ten years		Greater than ten years		Total
Fair value
Non-Agency RMBS
Senior	$	15,762	$	123,866	$	275,676	$	302,316	$	717,620
Subordinated	2,528		15,999		100,800		160,132		279,459
Interest-only	392		23,502		68,504		2,728		95,126
Agency RMBS

Interest-only	—		—		12,924		—		12,924
Agency CMBS
Project loans	7,950		—		—		106,260		114,210
Interest-only	738		8,454		—		—		9,192
Total fair value	$	27,370	$	171,821	$	457,904	$	571,436	$	1,228,531
Amortized cost
Non-Agency RMBS
Senior	$	6,719	$	105,871	$	198,732	$	206,850	$	518,172
Subordinated	335		12,163		105,536		182,133		300,167
Interest-only	7,331		48,517		96,150		8,320		160,318
Agency RMBS

Interest-only	—		—		18,955		—		18,955
Agency CMBS
Project loans	7,968		—		—		117,483		125,451
Interest-only	1,063		7,512		—		—		8,575
Total amortized cost	$	23,416	$	174,063	$	419,373	$	514,786	$	1,131,638


	December 31, 2022
	(dollars in thousands)
	Weighted Average Life
	Less than one year		Greater than one year and less than five years		Greater than five years and less than ten years		Greater than ten years		Total
Fair value
Non-Agency RMBS
Senior	$	6,727	$	152,811	$	308,351	$	293,919	$	761,808
Subordinated	3,957		6,829		113,903		162,220		286,909
Interest-only	205		30,780		65,038		2,741		98,764
Agency RMBS

Interest-only	—		—		15,148		—		15,148
Agency CMBS
Project loans	8,112		—		—		281,306		289,418
Interest-only	139		126,239		—		—		126,378
Total fair value	$	19,140	$	316,659	$	502,440	$	740,186	$	1,578,425
Amortized cost
Non-Agency RMBS
Senior	$	6,336	$	122,916	$	206,615	$	200,165	$	536,032
Subordinated	1,184		5,008		118,700		179,429		304,321
Interest-only	6,249		64,172		89,266		3,133		162,820
Agency RMBS

Interest-only	—		—		18,768		—		18,768
Agency CMBS
Project loans	8,112		—		—		300,186		308,298
Interest-only	200		139,538		—		—		139,738
Total amortized cost	$	22,081	$	331,634	$	433,349	$	682,913	$	1,469,977

The Non-Agency RMBS investments are secured by pools of mortgage loans which are subject to credit risk. The following table summarizes the delinquency, bankruptcy, foreclosure and Real estate owned, or REO, total of the pools of mortgage loans securing the Company’s investments in Non-Agency RMBS at June 30, 2023 and December 31, 2022. When delinquency rates increase, it is expected that the Company will incur additional credit losses.


	June 30, 2023				December 31, 2022
Weighted average maturity (years)		20.8				21.4
Weighted average amortized loan to value (1)		57.6		%		58.2		%
Weighted average FICO (2)		713				713
Weighted average loan balance (in thousands)		$	255			$	258
Weighted average percentage owner-occupied		84.4		%		84.4		%
Weighted average percentage single family residence		61.5		%		61.4		%
Weighted average current credit enhancement		1.1		%		1.1		%
Weighted average geographic concentration of top four states	CA	32.8		%	CA	32.7		%
	NY	11.4		%	NY	11.3		%
	FL	7.6		%	FL	7.6		%
	NJ	4.5		%	NJ	4.5		%

Gross realized gains and losses are recorded in “Net realized gains (losses) on sales of investments” on the Company’s Consolidated Statements of Operations. The proceeds and gross realized gains and gross realized losses from sales of investments for the quarters and six months ended June 30, 2023 and 2022 are as follows:


	For the Quarter Ended				For the Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(dollars in thousands)				(dollars in thousands)
Proceeds from sales:


Agency MBS	$	113,172	$	—	280,848		—

Gross realized gains:


Agency MBS	—		—		—		—
Gross realized losses:


Agency MBS	(21,758)		—		(27,022)		—
Net realized gain (loss)	$	(21,758)	$	—	$	(27,022)	$	—