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 (including securities pending settlement) as of the dates indicated:



	March 31, 2019
	Par		Net Premium (Discount)			Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		WAC ⁽¹⁾
RMBS:
Agency	$	2,683,276	$	77,584		$	2,760,860	$	31,813	$	(11,403	)	$	2,781,270	4.04	%
Non-Agency	803		—			803		27		(21		)	809		6.75	%
	2,684,079		77,584			2,761,663		31,840		(11,424		)	2,782,079
CMBS:
Agency	1,507,835		10,775			1,518,610		30,766		(9,864		)	1,539,512		3.23	%
Non-Agency	2,910		(1,927		)	983		677		—			1,660		6.27	%
	1,510,745		8,848			1,519,593		31,443		(9,864		)	1,541,172
CMBS IO ⁽²⁾:
Agency	—		282,636			282,636		5,982		(154		)	288,464		0.53	%
Non-Agency	—		227,868			227,868		3,249		(385		)	230,732		0.56	%
	—		510,504			510,504		9,231		(539		)	519,196

Total AFS securities:	$	4,194,824	$	596,936		$	4,791,760	$	72,514	$	(21,827	)	$	4,842,447


(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 $13,146,249 and $10,158,055 respectively, as of March 31, 2019.



	December 31, 2018
	Par		Net Premium (Discount)			Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		WAC ⁽¹⁾
RMBS:
Agency	$	2,118,639	$	56,744		$	2,175,383	$	8,902	$	(26,264	)	$	2,158,021	3.95	%
Non-Agency	856		—			856		24		(22		)	858		6.75	%
	2,119,495		56,744			2,176,239		8,926		(26,286		)	2,158,879
CMBS:
Agency	1,071,906		8,518			1,080,424		6,141		(29,550		)	1,057,015		3.22	%
Non-Agency	3,040		(2,037		)	1,003		413		—			1,416		6.47	%
	1,074,946		6,481			1,081,427		6,554		(29,550		)	1,058,431
CMBS IO ⁽²⁾:
Agency	—		287,062			287,062		4,281		(239		)	291,104		0.55	%
Non-Agency	—		240,681			240,681		1,675		(1,306		)	241,050		0.57	%
	—		527,743			527,743		5,956		(1,545		)	532,154

Total AFS securities:	$	3,194,441	$	590,968		$	3,785,409	$	21,436	$	(57,381	)	$	3,749,464


(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)	The notional balance for the Agency CMBS IO and non-Agency CMBS IO was $13,048,666 and $10,275,494, respectively, as of December 31, 2018.

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:



	March 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year	$	119,121	$	121,882	$	39,868	$	39,808
>1 and <5 years	151,888		154,615		151,041		152,917
>5 and <10 years	911,278		910,315		828,543		806,015
> 10 years	3,609,473		3,655,635		2,765,957		2,750,724
	$	4,791,760	$	4,842,447	$	3,785,409	$	3,749,464

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 (loss) for the periods indicated:



	Three Months Ended
	March 31,
	2019				2018
	Proceeds Received		Realized Gain (Loss)		Proceeds Received		Realized Gain (Loss)
Agency CMBS	—		—		$	108,758	$	(2,052	)
U.S. Treasuries	—		—		46,498		(1,723		)
	$	—	$	—	$	155,256	$	(3,775	)

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



	March 31, 2019						December 31, 2018
	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	$	46,127	$	(174	)	9	$	581,440	$	(1,793	)	28
Non-Agency MBS	25,130		(177		)	7	70,876		(581		)	22

Continuous unrealized loss position for 12 months or longer:
Agency MBS	$	1,293,417	$	(21,248	)	61	$	1,543,892	$	(54,260	)	88
Non-Agency MBS	21,512		(228		)	13	46,154		(747		)	19

Because the principal related to Agency MBS is guaranteed by the government-sponsored entities Fannie Mae and Freddie Mac which have AAA ratings due to the Treasury’s commitment of capital under the Senior Preferred Stock Purchase Agreement, 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 March 31, 2019 and December 31, 2018 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 also assesses its ability and intent to hold any non-Agency MBS with an unrealized loss until the recovery in its value in accordance with GAAP. 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 March 31, 2019 or December 31, 2018.