Investments in RMBS

12 Months Ended

Dec. 31, 2023

Note 4 — Investments in RMBS

At December 31, 2023, the Company’s investments in RMBS consist solely of Agency RMBS. The Company’s investments in RMBS may also include, from time to time, any of the following: Collateralized mortgage obligations (“CMOs”), which are either loss share securities issued by Fannie Mae or Freddie Mac; or non-Agency RMBS, sometimes called “private label MBS,” which are structured debt instruments representing interests in specified pools of mortgage loans subdivided into multiple classes, or tranches, of securities, with each tranche having different maturities or risk profiles and different ratings by one or more nationally recognized statistical rating organizations.

The following is a summary of the Company’s investments in RMBS as of the dates indicated (dollars in thousands):

Summary of RMBS Assets

As of December 31, 2023

					Gross Unrealized									Weighted Average
Asset Type	Original Face Value		Book Value		Gains		Losses			Carrying Value^(A)		Number of Securities		Rating	Coupon			Yield^(C)			Maturity (Years)
RMBS, available-for-sale, measured at fair value through OCI
Fannie Mae	$	211,773	$	187,746	$	2,970	$	(1,607	)	$	189,109		15	(B)		4.55	%		4.70	%		28
Freddie Mac		262,695		235,260		1,075		(4,865	)		231,470		19	(B)		4.45	%		4.50	%		28
RMBS, measured at fair value through earnings
Fannie Mae		221,965		208,487		4,606		(1,076	)		212,017		17	(B)		4.78	%		4.94	%		28
Freddie Mac		401,287		373,310		7,515		(1,291	)		379,534		29	(B)		4.72	%		4.88	%		29
Total/weighted average RMBS	$	1,097,720	$	1,004,803	$	16,166	$	(8,839	)	$	1,012,130		80			4.64	%		4.77	%		28

As of December 31, 2022

					Gross Unrealized									Weighted Average
Asset Type	Original Face Value		Book Value		Gains		Losses			Carrying Value^(A)		Number of Securities		Rating	Coupon			Yield^(C)			Maturity (Years)
RMBS, available-for-sale, measured at fair value through OCI
Fannie Mae	$	550,740	$	497,038	$	2,843	$	(16,484	)	$	483,397		45	(B)		4.27	%		4.34	%		29
Freddie Mac		500,873		463,380		1,384		(16,730	)		448,034		38	(B)		4.18	%		4.24	%		29
Total/weighted average RMBS	$	1,051,613	$	960,418	$	4,227	$	(33,214	)	$	931,431		83			4.23	%		4.29	%		29

(A)	See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities.

(B)	The Company used an implied AAA rating for the Agency RMBS.

(C)	The weighted average yield is based on the most recent gross monthly interest income, which is then annualized and divided by the book value of settled securities.

Summary of RMBS Assets by Maturity

As of December 31, 2023

					Gross Unrealized									Weighted Average
Years to Maturity	Original Face Value		Book Value		Gains		Losses			Carrying Value^(A)		Number of Securities		Rating	Coupon			Yield^(C)			Maturity (Years)
RMBS, available-for-sale, measured at fair value through OCI
Over 10 Years	$	474,467	$	423,007	$	4,045	$	(6,472	)	$	420,579		34	(B)		4.49	%		4.59	%		28
RMBS, measured at fair value through earnings
Over 10 Years		623,253		581,796		12,121		(2,367	)		591,551		46	(B)		4.74	%		4.90	%		28
Total/weighted average RMBS	$	1,097,720	$	1,004,803	$	16,166	$	(8,839	)	$	1,012,130		80			4.64	%		4.77	%		28

As of December 31, 2022

					Gross Unrealized									Weighted Average
Years to Maturity	Original Face Value		Book Value		Gains		Losses			Carrying Value^(A)		Number of Securities		Rating	Coupon			Yield^(C)			Maturity (Years)
RMBS, available-for-sale, measured at fair value through OCI
Over 10 Years	$	1,051,613	$	960,418	$	4,227	$	(33,214	)	$	931,431		83	(B)		4.23	%		4.29	%		29
Total/weighted average RMBS	$	1,051,613	$	960,418	$	4,227	$	(33,214	)	$	931,431		83			4.23	%		4.29	%		29

(A)	See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities.

(B)	The Company used an implied AAA rating for the Agency RMBS.

(C)	The weighted average yield is based on the most recent gross monthly interest income, which is then annualized and divided by the book value of settled securities.

At December 31, 2023 and December 31, 2022, the Company pledged Agency RMBS with a carrying value of approximately $973.2 million and $815.2 million, respectively, as collateral for borrowings under repurchase agreements. At December 31, 2023 and December 31, 2022, the Company did not have any securities purchased from and financed with the same counterparty that did not meet the conditions of ASC 860, Transfers and Servicing, to be considered linked transactions and, therefore, classified as derivatives.

Based on management’s analysis of the Company’s available-for-sale designated securities, the performance of the underlying loans and changes in market factors, management determined that unrealized losses as of the balance sheet date on the Company’s available-for-sale designated securities were primarily the result of changes in market factors, rather than issuer-specific credit impairment. The Company performed analyses in relation to such securities, using management’s best estimate of their cash flows, which support its belief that the carrying values of such securities were fully recoverable over their expected holding periods. Such market factors include changes in market interest rates and credit spreads and certain macroeconomic events, none of which will directly impact the Company’s ability to collect amounts contractually due. Management continually evaluates the credit status of each of the Company’s securities and the collateral supporting those securities. This evaluation includes a review of the credit of the issuer of the security (if applicable), the credit rating of the security (if applicable), the key terms of the security (including credit support), debt service coverage and loan to value ratios, the performance of the pool of underlying loans and the estimated value of the collateral supporting such loans, including the effect of local, industry and broader economic trends and factors. Significant judgment is required in this analysis for available-for-sale designated investments in RMBS that are not guaranteed by U.S. government agencies or U.S. government sponsored enterprises. All of the Company’s available-for-sale designated investments in RMBS are guaranteed by U.S. government agencies or U.S. government sponsored enterprises.

Both credit related and non-credit related unrealized losses on available-for-sale securities that the Company (i) intends to sell, or (ii) will more likely than not be required to sell before recovering their cost basis, are recognized in earnings. The Company did not record an allowance for credit losses on the balance sheet at December 31, 2023 and December 31, 2022, nor any impairment charges in earnings during the years ended December 31, 2023 and December 31, 2022.

The following tables summarize the Company’s available-for-sale securities measured at fair value through OCI in an unrealized loss position as of the dates indicated (dollars in thousands):

Available-For-Sale RMBS Unrealized Loss Positions

As of December 31, 2023

												Weighted Average
Duration in Loss Position	Original Face Value		Book Value		Gross Unrealized Losses			Carrying Value^(A)		Number of Securities		Rating	Coupon			Yield^(C)			Maturity (Years)
RMBS, available-for-sale, measured at fair value through OCI
Less than Twelve Months	$	126,949	$	109,425	$	(813	)	$	108,612		8	(B)		4.23	%		4.35	%		28
Twelve or More Months		163,190		148,241		(5,659	)		142,582		12	(B)		4.08	%		4.10	%		28
Total/weighted average RMBS, available-for-sale, measured at fair value through OCI	$	290,139	$	257,666	$	(6,472	)	$	251,194		20			4.14	%		4.21	%		28

As of December 31, 2022

												Weighted Average
Duration in Loss Position	Original Face Value		Book Value		Gross Unrealized Losses			Carrying Value^(A)		Number of Securities		Rating	Coupon			Yield^(C)			Maturity (Years)
RMBS, available-for-sale, measured at fair value through OCI
Less than Twelve Months	$	848,768	$	767,412	$	(33,214	)	$	734,198		67	(B)		4.06	%		4.10	%		29
Total/weighted average RMBS, available-for-sale, measured at fair value through OCI	$	848,768	$	767,412	$	(33,214	)	$	734,198		67			4.06	%		4.10	%		29

(A)	See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities.

(B)	The Company used an implied AAA rating for the Agency RMBS.

(C)	The weighted average yield is based on the most recent gross monthly interest income, which is then annualized and divided by the book value of settled securities.