Mortgage-Backed Securities

3 Months Ended

Mar. 31, 2024

Mortgage-Backed Securities

Mortgage-Backed Securities

Note 8—Mortgage-Backed Securities

During the quarter ended March 31, 2024, the Company began to invest in Agency principal-only stripped MBS for the purpose of hedging the fair value of its MSRs. MBS are carried at fair value with changes in fair value recognized in current period income. Changes in fair value arising from accrual of unearned discounts are recognized using the interest method and are included in Interest income. Changes in fair value arising from other factors are included in Mortgage servicing rights hedging results. All of the principal-only stripped MBS had contractual maturities of over ten years and were pledged to secure sales of assets under agreements to repurchase.

Following is a summary of the Company’s investment in principal-only stripped MBS:

	March 31, 2024
	(in thousands)
Principal balance	$	654,884
Unearned discounts		(129,997)
Cumulative valuation changes		(311)
Fair value	$	524,576