INVESTMENTS IN DEBT SECURITIES

The majority of the Company’s debt securities are pledged as collateral for the Company’s repurchase agreements. The following tables present the Company’s debt securities by investment type as of the dates indicated:



	June 30, 2018
	Par		Net Premium (Discount)			Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		WAC ⁽¹⁾
RMBS:
Agency	$	1,161,063	$	41,778		$	1,202,841	$	886	$	(29,114	)	$	1,174,613	3.79	%
Non-Agency	952		—			952		28		(20		)	960		6.75	%
	1,162,015		41,778			1,203,793		914		(29,134		)	1,175,573
CMBS:
Agency	998,502		10,385			1,008,887		563		(43,926		)	965,524		3.05	%
Non-Agency	7,322		(3,384		)	3,938		1,675		—			5,613		10.83	%
	1,005,824		7,001			1,012,825		2,238		(43,926		)	971,137
CMBS IO ⁽²⁾:
Agency	—		338,476			338,476		3,611		(594		)	341,493		0.61	%
Non-Agency	—		268,976			268,976		3,328		(613		)	271,691		0.60	%
	—		607,452			607,452		6,939		(1,207		)	613,184

U.S. Treasuries:	59,000		(1,027		)	57,973		—		(50		)	57,923		2.50	%

Total AFS securities:	$	2,226,839	$	655,204		$	2,882,043	$	10,091	$	(74,317	)	$	2,817,817


(1)	The weighted average coupon (“WAC”) is the gross interest rate of the security weighted by the outstanding principal balance (or by notional balance in the case of an IO security).


(2)	The notional balance for Agency CMBS IO and non-Agency CMBS IO was $14,084,428 and $10,517,357 respectively, as of June 30, 2018.



	December 31, 2017
	Par		Net Premium (Discount)			Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		WAC ⁽¹⁾
RMBS:
Agency ⁽²⁾	$	1,146,553	$	46,021		$	1,192,574	$	1,626	$	(9,939	)	$	1,184,261	3.56	%
Non-Agency	1,070		—			1,070		41		(20		)	1,091		6.75	%
	1,147,623		46,021			1,193,644		1,667		(9,959		)	1,185,352
CMBS:
Agency	1,123,967		10,442			1,134,409		3,514		(13,572		)	1,124,351		3.03	%
Non-Agency	26,501		(4,035		)	22,466		2,298		—			24,764		5.47	%
	1,150,468		6,407			1,156,875		5,812		(13,572		)	1,149,115
CMBS IO ⁽³⁾:
Agency	—		375,361			375,361		5,238		(293		)	380,306		0.62	%
Non-Agency	—		308,472			308,472		4,468		(724		)	312,216		0.61	%
	—		683,833			683,833		9,706		(1,017		)	692,522

U.S. Treasuries:	148,400		(133		)	148,267		—		(1,737		)	146,530		2.13	%

Total AFS securities:	$	2,446,491	$	736,128		$	3,182,619	$	17,185	$	(26,285	)	$	3,173,519


(1)	The WAC is the gross interest rate of the security weighted by the outstanding principal balance (or by notional balance in the case of an IO security).


(2)	Includes purchased securities pending settlement.


(3)	The notional balance for the Agency CMBS IO and non-Agency CMBS IO was $14,196,122 and $11,006,463, respectively, as of December 31, 2017.

Actual maturities of MBS are affected by the contractual lives of the underlying mortgage collateral, periodic payments of principal, prepayments of principal, and the payment priority structure of the security; therefore, actual maturities are generally shorter than the securities' stated contractual maturities. The following table categorizes the Company’s debt securities according to their stated maturity as of the dates indicated:



	June 30, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year	$	37,630	$	37,723	$	4,480	$	4,542
>1 and <5 years	180,549		182,064		208,046		210,727
>5 and <10 years	1,074,637		1,037,864		1,334,795		1,326,178
> 10 years	1,589,227		1,560,166		1,635,298		1,632,072
	$	2,882,043	$	2,817,817	$	3,182,619	$	3,173,519

The following table presents information regarding the sales that generated the “loss on sale of investments, net” on the Company’s consolidated statements of comprehensive income for the periods indicated:



	Three Months Ended
	June 30,
	2018					2017
	Proceeds Received		Realized Gain (Loss)			Proceeds Received		Realized Gain (Loss)
Agency RMBS	$	217,837	$	(7,785	)	$	265,893	$	(5,524	)
Agency CMBS	—		—			24,305		574
Non-Agency CMBS	—		—			35,705		1,199
Non-Agency RMBS	—		—			16,407		42
Non-Agency CMBS IO	8,695		51			—		—
U.S. Treasuries	144,461		(4,710		)	—		—
	$	370,993	$	(12,444	)	$	342,310	$	(3,709	)

	Six Months Ended
	June 30,
	2018					2017
	Proceeds Received		Realized Gain (Loss)			Proceeds Received		Realized Gain (Loss)
Agency RMBS	$	217,837	$	(7,785	)	$	323,057	$	(7,232	)
Agency CMBS	108,758		(2,052		)	24,305		574
Non-Agency CMBS	—		—			35,705		1,199
Non-Agency RMBS	—		—			16,407		42
Non-Agency CMBS IO	8,695		51			—		—
U.S. Treasuries	190,960		(6,433		)	—		—
	$	526,250	$	(16,219	)	$	399,474	$	(5,417	)

The following table presents certain information for the AFS securities in an unrealized loss position as of the dates indicated:



	June 30, 2018						December 31, 2017
	Fair Value		Gross Unrealized Losses			# of Securities	Fair Value		Gross Unrealized Losses			# of Securities
Continuous unrealized loss position for less than 12 months:
Agency MBS	$	1,907,732	$	(54,067	)	113	$	1,293,798	$	(9,769	)	71
Non-Agency MBS	59,125		(377		)	17	51,406		(421		)	11
U.S. Treasuries	57,923		(50		)	1	146,530		(1,737		)	1

Continuous unrealized loss position for 12 months or longer:
Agency MBS	$	257,394	$	(19,567	)	16	$	423,698	$	(14,035	)	30
Non-Agency MBS	13,105		(256		)	10	20,414		(323		)	12

Because the principal related to Agency MBS is guaranteed by the government-sponsored entities Fannie Mae and Freddie Mac which have the implicit guarantee of the U.S. government, the Company does not consider any of the unrealized losses on its Agency MBS to be credit related. Although the unrealized losses are not credit related, the Company assesses its ability and intent to hold any Agency MBS with an unrealized loss until the recovery in its value in accordance with GAAP. This assessment is based on the amount of the unrealized loss and significance of the related investment as well as the Company’s leverage and liquidity position. Based on this analysis, the Company has determined that the unrealized losses on its Agency MBS as of June 30, 2018 and December 31, 2017 were temporary.

The Company reviews any non-Agency MBS in an unrealized loss position to evaluate whether any decline in fair value represents an OTTI. The evaluation includes a review of the credit ratings of the non-Agency MBS, the credit characteristics of the mortgage loans collateralizing these securities, and the estimated future cash flows including projected collateral losses. The Company performed this evaluation for its non-Agency MBS in an unrealized loss position and has determined that there have not been any adverse changes in the timing or amount of estimated future cash flows that necessitate a recognition of OTTI amounts as of June 30, 2018 or December 31, 2017.