Mortgage-Backed Securities and other securities

12 Months Ended

Dec. 31, 2021

Investments, Debt and Equity Securities [Abstract]

Mortgage-Backed Securities and other securities

Mortgage-Backed Securities and other securities    The following tables present certain information about the Company's investment portfolio at December 31, 2021 and December 31, 2020 (dollars in thousands):

	December 31, 2021
	Principal Balance		Unamortized Premium (Discount), net		Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value		Net Weighted Average Coupon(4)
Agency RMBS Interest-Only Strips(1)	N/A		N/A		$	59	$	55	$	—	$	114	1.3	%
Agency RMBS Interest-Only Strips, accounted for as derivatives(1)(2)	N/A		N/A		N/A		N/A		N/A		1,058		1.3	%
Total Agency MBS	—		—		59		55		—		1,172		1.3	%
Non-Agency RMBS	36,147		(13,936)		22,211		3,476		(35)		25,652		4.3	%
Non-Agency RMBS Interest- Only Strips(1)	N/A		N/A		5,608		—		(3,491)		2,117		0.3	%
Subtotal Non-Agency RMBS	36,147		(13,936)		27,819		3,476		(3,526)		27,769		1.0	%
Non-Agency CMBS	179,619		(13,088)		166,531		1,543		(62,716)		105,358		5.4	%
Total Non-Agency MBS	215,766		(27,024)		194,350		5,019		(66,242)		133,127		3.0	%
Other securities(3)	51,159		(8,229)		47,652		4,209		(213)		51,648		5.6	%
Total	$	266,925	$	(35,253)	$	242,061	$	9,283	$	(66,455)	$	185,947	3.2	%

	December 31, 2020
	Principal Balance		Unamortized Premium (Discount), net		Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value		Net Weighted Average Coupon(4)
Agency RMBS Interest-Only Strips(1)	N/A		N/A		$	89	$	54	$	—	$	143	2.1	%
Agency RMBS Interest-Only Strips, accounted for as derivatives(1)(2)	N/A		N/A		N/A		N/A		N/A		1,565		2.6	%
Total Agency MBS	—		—		89		54		—		1,708		2.5	%
Non-Agency RMBS	38,112		(14,649)		23,463		451		(2,498)		21,416		1.6	%
Non-Agency RMBS Interest- Only Strips(1)	N/A		N/A		6,271		—		(2,306)		3,965		0.4	%
Subtotal Non-Agency RMBS	38,112		(14,649)		29,734		451		(4,804)		25,381		0.6	%
Non-Agency CMBS	235,497		(25,258)		210,239		2,850		(49,008)		164,081		5.0	%
Total Non-Agency MBS	273,609		(39,907)		239,973		3,301		(53,812)		189,462		2.4	%
Other securities(3)	51,537		(8,239)		49,420		1,152		(1,818)		48,754		4.4	%
Total	$	325,146	$	(48,146)	$	289,482	$	4,507	$	(55,630)	$	239,924	2.5	%

(1)IOs and IIOs have no principal balances and bear interest based on a notional balance. The notional balance is used solely to determine interest distributions on interest-only class of securities. At December 31, 2021, the notional balance for Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, and Agency RMBS IOs and IIOs, accounted for as derivatives was $2.9 million, $181.0 million and $16.8 million, respectively. At December 31, 2020, the notional balance for Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs and Agency RMBS IOs and IIOs accounted for as derivatives was $3.7 million, $306.0 million and $21.6 million, respectively.

(2)Interest on these securities is reported as a component of "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

(3)Other securities include residual interests in asset-backed securities which have no principal balance and an amortized cost of approximately $4.7 million and $6.1 million, as of December 31, 2021 and December 31, 2020, respectively.

(4)The calculation of the weighted average coupon rate includes the weighted average coupon rates of IOs and IIOs accounted for as derivatives using their notional amounts.

    As of December 31, 2021 and December 31, 2020, the weighted average expected remaining term of the MBS and other securities investment portfolio was 5.9 years and 5.5 years, respectively.

    Prior to the adoption of CECL on January 1, 2020, the Company recorded Other Than Temporary Impairment ("OTTI") when the credit quality of the underlying collateral of the beneficial interest deteriorates and or the scheduled

payments are faster than previously projected. As of January 1, 2020, since we elected the fair value option for these investment a credit loss adjustment, if any, would be reflected in the fair value of these securities and reported as "Unrealized gain (loss), net" in the Consolidated Statements of Operations.     

    The following table presents the changes in the components of the Company's purchase discount and amortizable premium on its Non-Agency RMBS, Non-Agency CMBS and other securities for the year ended December 31, 2019 (dollars in thousands):

	Discount Designated as Credit Reserve and OTTI			Accretable Discount(1)		Amortizable Premium(1)
Balance at beginning of period	$	(53,523)		$	(29,465)	$	14,928
Accretion of discount	—			4,364		—
Amortization of premium	—			—		(1,215)
Realized credit losses	7,290			—		—
Purchases	(28)			(7,953)		819
Sales	26,706			—		(19,640)
Net impairment losses recognized in earnings	(6,612)			—		—
Transfers/release of credit reserve(2)	(22,308)			2,889		19,419
Balance at end of period	$	(48,475)	-48475000	$	(30,165)	$	14,311

(1)Together with coupon interest, accretable purchase discount and amortizable premium is recognized as interest income over the life of the security.

(2)Subsequent reductions of a security's non-accretable discount results in a corresponding reduction in its amortizable premium.

    The following tables present the fair value and contractual maturities of the Company's investment securities at December 31, 2021 and December 31, 2020 (dollars in thousands):

	December 31, 2021
	< or equal to 10 years		> 10 years and < or equal to 20 years		> 20 years and < or equal to 30 years		> 30 years		Total
Agency RMBS Interest-Only Strips	$	—	$	—	$	114	$	—	$	114
Agency RMBS Interest-Only Strips, accounted for as derivatives	—		1,058		—		—		1,058
Subtotal Agency	—		1,058		114		—		1,172
Non-Agency CMBS	66,384		17,644		21,171		159		105,358
Non-Agency RMBS	—		—		10,282		15,370		25,652
Non-Agency RMBS Interest-Only Strips	—		—		106		2,011		2,117
Subtotal Non-Agency	66,384		17,644		31,559		17,540		133,127
Other securities	9,255		4,266		25,653		12,474		51,648
Total	$	75,639	$	22,968	$	57,326	$	30,014	$	185,947

	December 31, 2020
	< or equal to 10 years		> 10 years and < or equal to 20 years		> 20 years and < or equal to 30 years		> 30 years		Total
Agency RMBS Interest-Only Strips	$	—	$	—	$	143	$	—	$	143
Agency RMBS Interest-Only Strips, accounted for as derivatives	—		1,565		—		—		1,565
Subtotal Agency	—		1,565		143		—		1,708
Non-Agency CMBS	59,724		50,408		53,269		680		164,081
Non-Agency RMBS	—		—		7,958		13,458		21,416
Non-Agency RMBS Interest-Only Strips	—		—		472		3,493		3,965
Subtotal Non-Agency	59,724		50,408		61,699		17,631		189,462
Other securities	7,247		6,203		24,610		10,694		48,754
Total	$	66,971	$	58,176	$	86,452	$	28,325	$	239,924

    The following tables present the gross unrealized losses and estimated fair value of the Company's MBS and other securities by length of time that such securities have been in a continuous unrealized loss position at December 31, 2021 and December 31, 2020 (dollars in thousands):

	December 31, 2021
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities
Non-Agency CMBS	$	—	$	—	—	$	96,080	$	(62,716)	16	$	96,080	$	(62,716)	16
Non-Agency RMBS	—		—		—	201		(35)		1	201		(35)		1
Non-Agency RMBS Interest-Only Strips	—		—		—	2,117		(3,491)		4	2,117		(3,491)		4
Subtotal Non-Agency	—		—		—	98,398		(66,242)		21	98,398		(66,242)		21
Other securities	—		—		—	9,022		(213)		4	9,022		(213)		4
Total	$	—	$	—	—	$	107,420	$	(66,455)	25	$	107,420	$	(66,455)	25

	December 31, 2020
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities
Non-Agency CMBS	$	102,935	$	(33,602)	16	$	50,887	$	(15,406)	15	$	153,822	$	(49,008)	31
Non-Agency RMBS	18,242		(2,498)		4	—		—		—	18,242		(2,498)		4
Non-Agency RMBS Interest-Only Strips	3,492		(790)		3	472		(1,516)		1	3,964		(2,306)		4
Subtotal Non-Agency	124,669		(36,890)		23	51,359		(16,922)		16	176,028		(53,812)		39
Other securities	26,365		(1,818)		6	—		—		—	26,365		(1,818)		6
Total	$	151,034	$	(38,708)	29	$	51,359	$	(16,922)	16	$	202,393	$	(55,630)	45

The following table presents the OTTI the Company recorded on its securities portfolio prior to the adoption of CECL (dollars in thousands):

	For the year ended December 31, 2019
Agency RMBS(1)	$	74
Non-Agency RMBS	1,331
Non-Agency CMBS	6,565
Other securities	604
Total	$	8,574

(1)     Other-than-temporary impairment on Agency RMBS includes impairments on Agency RMBS IOs and unrealized loss on Agency RMBS securities that the Company had the intent to sell at the end of the period, if applicable.

    The following table presents components of interest income on the Company's MBS and other securities for the three years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively (dollars in thousands):

	For the year ended December 31, 2021						For the year ended December 31, 2020						For the year ended December 31, 2019
	Coupon Interest		Net (Premium Amortization/ Amortization Basis) Discount Amortization		Interest Income		Coupon Interest		Net (Premium Amortization/ Amortization Basis) Discount Amortization		Interest Income		Coupon Interest		Net (Premium Amortization/ Amortization Basis) Discount Amortization		Interest Income
Agency CMBS	$	—	$	—	$	—	$	11,336	$	(636)	$	10,700	$	51,286	$	(2,327)	$	48,959
Agency RMBS	47		(30)		17		2,975		(987)		1,988		12,181		(3,053)		9,128
Non-Agency CMBS	9,874		6,535		16,409		15,331		6,467		21,798		14,178		4,017		18,195
Non-Agency RMBS	2,127		(670)		1,457		2,732		(1,193)		1,539		4,682		(2,214)		2,468
Other securities	4,685		(1,574)		3,111		8,263		(4,781)		3,482		11,633		(6,472)		5,161
Total	$	16,733	$	4,261	$	20,994	$	40,637	$	(1,130)	$	39,507	$	93,960	$	(10,049)	$	83,911

    The following tables present the sales and realized gains (losses) of the Company's MBS and other securities for the three years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively (dollars in thousands):

	For the year ended December 31, 2021
	Proceeds		Gross Gains		Gross Losses		Net Gain (Loss)
Non-Agency CMBS	$	27,488	$	—	$	(9,266)	$	(9,266)
Total	$	27,488	$	—	$	(9,266)	$	(9,266)

	For the year ended December 31, 2020
	Proceeds		Gross Gains		Gross Losses		Net Gain (Loss)
Agency CMBS	$	1,668,149	$	116,463	$	(6,486)	$	109,977
Agency RMBS	400,948		12,552		(506)		12,046
Non-Agency CMBS	111,804		1		(23,624)		(23,623)
Non-Agency RMBS	12,658		—		(60)		(60)
Other securities	35,957		113		(6,223)		(6,110)
Total	$	2,229,516	$	129,129	$	(36,899)	$	92,230

	For the year ended December 31, 2019
	Proceeds		Gross Gains		Gross Losses		Net Gain (Loss)
Agency CMBS	891,072		32,793		(4,190)		28,603
Agency RMBS	$	205,310	$	1,559	$	—	$	1,559
Non-Agency CMBS	40,235		317		(1,624)		(1,307)
Total	$	1,136,617	$	34,669	$	(5,814)	$	28,855

Unconsolidated CMBS VIEs

    The Company’s economic interests held in unconsolidated CMBS VIEs are limited in nature to those of a passive holder of CMBS issued by securitization trusts; the Company was not involved in the design or creation of the securitization trusts. The Company evaluates its CMBS holdings for potential consolidation of the securitized trust, in which it owns the most subordinate tranche or a portion of the controlling class. As of December 31, 2021 and December 31, 2020, the Company held five and seven variable interests in unconsolidated CMBS VIEs, respectively, in which it either owned the most subordinate class or a portion of the controlling class. The Company determined it was not the primary beneficiary and accordingly, the CMBS VIEs were not consolidated in the Company’s consolidated financial statements. As of December 31, 2021 and December 31, 2020, the Company’s maximum exposure to loss from these variable interests did not exceed the carrying value of these investments of $26.5 million and $48.9 million, respectively. These investments are classified in "Non-Agency mortgage-backed securities, at fair value" in the Company’s Consolidated Balance Sheets. Further, as of December 31, 2021 and December 31, 2020, the Company did not guarantee any obligations of unconsolidated entities or enter into any commitment or intent to provide funding to any such entities.