Principal-Only Stripped Mortgage-Backed Securities

9 Months Ended

Sep. 30, 2024

Principal-Only Stripped Mortgage-Backed Securities

Principal-Only Stripped Mortgage-Backed Securities

Note 8— Principal-Only Stripped Mortgage-Backed Securities

During the nine months ended September 30, 2024, the Company began to invest in Agency principal-only stripped MBS for the purpose of economically 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:

	September 30, 2024
	(in thousands)
Principal balance	$	1,121,494
Unearned discounts		(193,425)
Cumulative valuation changes		32,198
Fair value	$	960,267