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Investments in Debt Securities (Notes)
 9 Months Ended
Sep. 30, 2018
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt Securities
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:
 
September 30, 2018
 
Par
 
Net Premium (Discount)
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
 
WAC (1)
RMBS:
 
 
 
 


 
 
 
 
 
 
 
 
Agency
$
1,761,274

 
$
55,092

 
$
1,816,366

 
$
1,214

 
$
(42,428
)
 
$
1,775,152

 
3.92
%
Non-Agency
909

 
—

 
909

 
24

 
(20
)
 
913

 
6.75
%
 
1,762,183

 
55,092

 
1,817,275

 
1,238

 
(42,448
)
 
1,776,065

 
 
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
987,266

 
9,792

 
997,058

 
363

 
(49,125
)
 
948,296

 
3.08
%
Non-Agency
7,027

 
(3,103
)
 
3,924

 
1,399

 
—

 
5,323

 
8.90
%
 
994,293

 
6,689

 
1,000,982

 
1,762

 
(49,125
)
 
953,619

 
 
CMBS IO (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
—

 
308,174

 
308,174

 
2,197

 
(1,141
)
 
309,230

 
0.59
%
Non-Agency
—

 
254,153

 
254,153

 
2,403

 
(960
)
 
255,596

 
0.59
%
 
—

 
562,327

 
562,327

 
4,600

 
(2,101
)
 
564,826

 
 
 
 
 
 
 
 
 
 
 
 
 


 


U.S. Treasuries:
—

 
—

 
—

 
—

 
—

 
—

 
—
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total AFS securities:
$
2,756,476

 
$
624,108

 
$
3,380,584

 
$
7,600

 
$
(93,674
)
 
$
3,294,510

 
 
(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 $13,238,960 and $10,391,240 respectively, as of September 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:
 
 
September 30, 2018
 
December 31, 2017
 
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Less than 1 year
 
$
47,271

 
$
47,217

 
$
4,480

 
$
4,542

>1 and <5 years
 
158,325

 
159,007

 
208,046

 
210,727

>5 and <10 years
 
935,687

 
893,930

 
1,334,795

 
1,326,178

> 10 years
 
2,239,301

 
2,194,356

 
1,635,298

 
1,632,072

 
 
$
3,380,584

 
$
3,294,510

 
$
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
 
September 30,
 
2018
 
2017
 
Proceeds Received
 
Realized Gain (Loss)
 
Proceeds Received
 
Realized Gain (Loss)
Agency RMBS
$
—

 
$
—

 
$
393,502

 
$
(5,160
)
Agency CMBS
48,237

 
(1,720
)
 
13,433

 
(51
)
Agency CMBS IO
10,571

 
127

 
—

 
—

U.S. Treasuries
57,843

 
(133
)
 
—

 
—

 
$
116,651

 
$
(1,726
)
 
$
406,935

 
$
(5,211
)
 

 
 
 
 
 
 
 
Nine Months Ended
 
September 30,
 
2018
 
2017
 
Proceeds Received
 
Realized Gain (Loss)
 
Proceeds Received
 
Realized Gain (Loss)
Agency RMBS
$
217,837

 
$
(7,785
)
 
$
716,560

 
$
(12,392
)
Agency CMBS
156,995

 
(3,771
)
 
206,993

 
523

Agency CMBS IO
10,571

 
127

 
—

 
—

Non-Agency CMBS
—

 
—

 
35,705

 
1,199

Non-Agency RMBS
—

 
—

 
16,407

 
42

Non-Agency CMBS IO
8,695

 
51

 
—

 
—

U.S. Treasuries
248,802

 
(6,567
)
 
—

 
—


$
642,900

 
$
(17,945
)
 
$
975,665

 
$
(10,628
)


The following table presents certain information for the AFS securities in an unrealized loss position as of the dates indicated:
 
September 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
$
1,540,220

 
$
(29,765
)
 
91
 
$
1,293,798

 
$
(9,769
)
 
71
Non-Agency MBS
79,326

 
(447
)
 
23
 
51,406

 
(421
)
 
11
U.S. Treasuries
—

 
—

 
0
 
146,530

 
(1,737
)
 
1
 
 
 
 
 
 
 
 
 
 
 
 
Continuous unrealized loss position for 12 months or longer:
 
 
 
 
 
 
 
 
 
 
 
Agency MBS
$
1,064,620

 
$
(62,929
)
 
58
 
$
423,698

 
$
(14,035
)
 
30
Non-Agency MBS
31,282

 
(533
)
 
13
 
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 September 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 September 30, 2018 or December 31, 2017.