Valuation (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of Fair Value Measurements

The following tables present the Company's financial instruments measured at fair value on:

December 31, 2022:

(In thousands)
Description	Level 1		Level 2		Level 3		Total
Assets:
Mortgage-backed securities, at fair value:
Agency RMBS:
15-year fixed-rate mortgages	$	—	$	45,324	$	—	$	45,324
20-year fixed-rate mortgages	—		9,691		—		9,691
30-year fixed-rate mortgages	—		781,754		—		781,754
Adjustable rate mortgages	—		8,663		—		8,663
Reverse mortgages	—		17,852		—		17,852
Interest only securities	—		5,228		4,085		9,313
Non-Agency RMBS	—		8,870		11,834		20,704
Mortgage-backed securities, at fair value	—		877,382		15,919		893,301
Other investments, at fair value:
Preferred equity securities	208		—		—		208
Total other investments, at fair value	208		—		—		208
Financial derivatives–assets, at fair value:
TBAs	—		3,568		—		3,568
Interest rate swaps	—		65,202		—		65,202
Total financial derivatives–assets, at fair value	—		68,770		—		68,770
Total mortgage-backed securities, other investments, and financial derivatives–assets, at fair value	$	208	$	946,152	$	15,919	$	962,279
Liabilities:
U.S. Treasury securities sold short, at fair value	$	—	$	(498)	$	—	$	(498)
Financial derivatives–liabilities, at fair value:
TBAs	—		(664)		—		(664)
Interest rate swaps	—		(2,373)		—		(2,373)
Futures	(82)		—		—		(82)
Total financial derivatives–liabilities, at fair value	(82)		(3,037)		—		(3,119)
Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value	$	(82)	$	(3,535)	$	—	$	(3,617)

December 31, 2021:

(In thousands)
Description	Level 1		Level 2		Level 3		Total
Assets:
Mortgage-backed securities, at fair value:
Agency RMBS:
15-year fixed-rate mortgages	$	—	$	130,710	$	—	$	130,710
20-year fixed-rate mortgages	—		36,347		—		36,347
30-year fixed-rate mortgages	—		1,072,904		—		1,072,904
Adjustable rate mortgages	—		11,960		—		11,960
Reverse mortgages	—		37,297		—		37,297
Interest only securities	—		4,635		5,654		10,289
Non-Agency RMBS	—		4,595		7,259		11,854
Mortgage-backed securities, at fair value	—		1,298,448		12,913		1,311,361
Other investments, at fair value:
Preferred equity securities	309		—		—		309
Total other investments, at fair value	309		—		—		309
Financial derivatives–assets, at fair value:
TBAs	—		908		—		908
Interest rate swaps	—		5,454		—		5,454
Futures	276		—		—		276
Total financial derivatives–assets, at fair value	276		6,362		—		6,638
Total mortgage-backed securities and financial derivatives–assets, at fair value	$	585	$	1,304,810	$	12,913	$	1,318,308
Liabilities:
U.S. Treasury securities sold short, at fair value	$	—	$	(117,195)	$	—	$	(117,195)
Financial derivatives–liabilities, at fair value:
TBAs	—		(350)		—		(350)
Interest rate swaps	—		(608)		—		(608)
Futures	(145)		—		—		(145)
Total financial derivatives–liabilities, at fair value	(145)		(958)		—		(1,103)
Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value	$	(145)	$	(118,153)	$	—	$	(118,298)

Unobservable Input Reconciliation

The following tables present additional information about the Company's investments which are measured at fair value for which the Company has utilized Level 3 inputs to determine fair value.

Year Ended December 31, 2022:

(In thousands)	Non-Agency RMBS		Agency RMBS
Beginning balance as of December 31, 2021	$	7,259	$	5,654
Purchases	12,807		2,726
Proceeds from sales	(6,502)		(761)
Principal repayments	(128)		(133)
(Amortization)/accretion, net	(71)		(1,358)
Net realized gains (losses)	23		(1,062)
Change in net unrealized gains (losses)	82		1,748
Transfers:
Transfers into level 3	3,060		621
Transfers out of level 3	(4,696)		(3,350)
Ending balance as of December 31, 2022	$	11,834	$	4,085

All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company at December 31, 2022, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2022. For Level 3 financial instruments held by the Company as of December 31, 2022, change in net unrealized gains (losses) of $0.3 million and $1.2 million, for the year ended December 31, 2022 relate to non-Agency RMBS and Agency RMBS, respectively.

At December 31, 2022, the Company transferred $8.0 million of RMBS from Level 3 to Level 2 and $3.7 million of RMBS from Level 2 to Level 3. Transfers between hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

Year Ended December 31, 2021:

(In thousands)	Non-Agency RMBS		Agency RMBS
Beginning balance as of December 31, 2020	$	13,296	$	8,196
Purchases	2,701		1,845
Proceeds from sales	(4,040)		—
Principal repayments	(1,115)		—
(Amortization)/accretion, net	546		(2,566)
Net realized gains (losses)	270		(1,043)
Change in net unrealized gains (losses)	(141)		172
Transfers:
Transfers into level 3	337		1,055
Transfers out of level 3	(4,595)		(2,005)
Ending balance as of December 31, 2021	$	7,259	$	5,654

All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company as of December 31, 2021, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2021. For Level 3 financial instruments held by the Company as of December 31, 2021, change in net unrealized gains (losses) of $(0.2) million and $0.2 million, for the year ended December 31, 2021 relate to non-Agency RMBS and Agency RMBS, respectively.

At December 31, 2021, the Company transferred $6.6 million of RMBS from Level 3 to Level 2 and $1.4 million of RMBS from Level 2 to Level 3. Transfers between these hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

Quantitative Information

The following tables identify the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of December 31, 2022 and 2021:

December 31, 2022:

					Range
Description	Fair Value		Valuation Technique	Significant Unobservable Input	Min			Max			Weighted Average(1)
	(In thousands)
Non-Agency RMBS	$	10,127	Market quotes	Non-Binding Third-Party Valuation	$	0.75		$	81.42		$	34.63
	1,707		Discounted Cash Flows
	$	11,834		Yield	5.3		%	21.6		%	9.4		%
				Projected Collateral Prepayments	25.1		%	56.9		%	31.1		%
				Projected Collateral Losses	0.0		%	8.7		%	5.7		%
				Projected Collateral Recoveries	1.6		%	15.4		%	11.1		%
Agency RMBS–Interest Only Securities	2,362		Market quotes	Non-Binding Third-Party Valuation	$	13.94		$	18.58		$	17.62
	1,723		Option Adjusted Spread ("OAS")	LIBOR OAS (2)(3)	92			5,070			644
	4,085			Projected Collateral Prepayments	21.2		%	76.6		%	51.5		%

(1)Averages are weighted based on the fair value of the related instrument.

(2)Shown in basis points.

(3)For the range minimum, the range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $3 thousand. Including these securities, the weighted average was 641 basis points.

December 31, 2021:

					Range
Description	Fair Value		Valuation Technique	Significant Unobservable Input	Min			Max			Weighted Average(1)
	(In thousands)
Non-Agency RMBS	$	2,643	Market quotes	Non-Binding Third-Party Valuation	$	52.43		$	92.28		$	88.18
	4,616		Discounted Cash Flows
	$	7,259		Yield	2.2		%	31.8		%	6.0		%
				Projected Collateral Prepayments	35.7		%	79.1		%	49.2		%
				Projected Collateral Losses	0.0		%	9.2		%	5.9		%
				Projected Collateral Recoveries	1.1		%	14.0		%	9.3		%
Agency RMBS–Interest Only Securities	$	3,713	Market quotes	Non-Binding Third-Party Valuation	$	6.64		$	15.90		$	13.42
	1,941		Option Adjusted Spread ("OAS")	LIBOR OAS (2)(3)	224			5,020			953
	$	5,654		Projected Collateral Prepayments	17.3		%	85.4		%	72.4		%

(1)Averages are weighted based on the fair value of the related instrument.

(2)Shown in basis points.

(3)For the range minimum, the range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $15 thousand. Including these securities, the weighted average was 950 basis points.

Fair Value, Other Financial Instruments

The following table summarizes the estimated fair value of all other financial instruments not included in the disclosures above as of December 31, 2022 and 2021:

	December 31, 2022				December 31, 2021
(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
Assets:
Cash and cash equivalents	$	34,816	$	34,816	$	69,028	$	69,028
Due from brokers	18,824		18,824		88,662		88,662
Reverse repurchase agreements	499		499		117,505		117,505
Liabilities:
Repurchase agreements	842,455		842,455		1,064,835		1,064,835
Due to brokers	45,666		45,666		1,959		1,959

Cash and cash equivalents includes cash held in interest bearing overnight accounts, for which fair value equals the carrying value, and cash held in money market accounts, which are liquid in nature and for which fair value equals the carrying value; such assets are considered Level 1 assets. Due from brokers and Due to brokers include collateral transferred to or received from counterparties, along with receivables and payables for open and/or closed derivative positions. These receivables and payables are short term in nature and any collateral transferred consists primarily of cash; fair value of these items approximates carrying value and such items are considered Level 1 assets and liabilities. The Company's repurchase and reverse repurchase agreements are carried at cost, which approximates fair value due to their short term nature. Repurchase agreements and reverse repurchase agreements are classified as Level 2 assets and liabilities based on the adequacy of the collateral and their short term nature.