Investment Securities Available For Sale, at Fair Value

12 Months Ended

Dec. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available For Sale, at Fair Value

The Company accounts for certain of its investment securities available for sale using the fair value election pursuant to ASC 825 where changes in fair value are recorded in unrealized gains (losses), net on the Company's consolidated statements of operations. The Company also has investment securities available for sale where the fair value option has not been elected, or CECL Securities. CECL Securities are reported at fair value with unrealized gains and losses recorded in other comprehensive income (loss) on the Company's consolidated statements of comprehensive income. The Company's investment securities available for sale consisted of the following as of December 31, 2020 and 2019, respectively (dollar amounts in thousands):


	December 31, 2020								December 31, 2019
	Amortized Cost		Unrealized				Fair Value		Amortized Cost		Unrealized				Fair Value
			Gains		Losses						Gains		Losses
Fair Value Option
Agency RMBS:
Agency Fixed-Rate	$	138,541	$	854	$	—	$	139,395	$	21,033	$	—	$	(55)	$	20,978
Total Agency RMBS	138,541		854		—		139,395		21,033		—		(55)		20,978
Agency CMBS	—		—		—		—		31,076		—		(395)		30,681
Total Agency	138,541		854		—		139,395		52,109		—		(450)		51,659
Non-Agency RMBS (1)	100,465		170		(10,786)		89,849		122,628		2,435		(1,248)		123,815
CMBS (2)	139,019		5,685		(3,731)		140,973		20,096		563		(19)		20,640
ABS	34,139		9,086		—		43,225		49,902		—		(688)		49,214
Total investment securities available for sale - fair value option	412,164		15,795		(14,517)		413,442		244,735		2,998		(2,405)		245,328

CECL Securities
Agency RMBS:
Agency ARMs (3)	—		—		—		—		55,740		13		(1,347)		54,406
Agency Fixed-Rate	—		—		—		—		846,203		7,397		(6,107)		847,493
Total Agency RMBS	—		—		—		—		901,943		7,410		(7,454)		901,899
Agency CMBS	—		—		—		—		20,258		19		—		20,277
Total Agency	—		—		—		—		922,201		7,429		(7,454)		922,176
Non-Agency RMBS (4)	266,855		4,336		(5,374)		265,817		578,955		12,557		(13)		591,499
CMBS	43,435		2,032		—		45,467		234,524		12,737		(124)		247,137

Total investment securities available for sale - CECL Securities	310,290		6,368		(5,374)		311,284		1,735,680		32,723		(7,591)		1,760,812
Total	$	722,454	$	22,163	$	(19,891)	$	724,726	$	1,980,415	$	35,721	$	(9,996)	$	2,006,140

(1)Includes non-Agency RMBS held in a securitization trust with a total fair value of $37.6 million as of December 31, 2020 (see Note 7).

(2)Includes IOs and mezzanine securities transferred from the Consolidated K-Series as a result of de-consolidation during the year ended December 31, 2020, with a total fair value of $97.6 million as of December 31, 2020.

(3)For the Company's Agency ARMs with stated reset period, the weighted average reset period was 26 months as of December 31, 2019.

(4)Includes non-Agency RMBS held in a securitization trust with a total fair value of $71.5 million as of December 31, 2020 (see Note 7).

Accrued interest receivable for investment securities available for sale in the amount of $2.4 million and $5.9 million as of December 31, 2020 and 2019, respectively, is included in other assets on the Company's consolidated balance sheets.

Realized Gain or Loss Activity

The following tables summarize our investment securities sold during the years ended December 31, 2020, 2019, and 2018, respectively (dollar amounts in thousands):


	Year Ended December 31, 2020
	Sales Proceeds		Realized Gains			Realized Losses		Net Realized Gains (Losses)
Agency RMBS:
Agency ARMs	$	49,892	$	44		$	(4,157)	$	(4,113)
Agency Fixed-Rate (1)	943,074		5,358		`	(11,697)		(6,339)
Total Agency RMBS	992,966		5,402			(15,854)		(10,452)
Agency CMBS (2)	145,411		5,666			(209)		5,457
Total Agency	1,138,377		11,068			(16,063)		(4,995)
Non-Agency RMBS (3)	433,076		435			(34,856)		(34,421)
CMBS	248,741		8,176			(30,289)		(22,113)
Total	$	1,820,194	$	19,679		$	(81,208)	$	(61,529)

(1)Includes Agency RMBS securities issued by Consolidated SLST (see Note 3).

(2)Includes Agency CMBS securities transferred from the Consolidated K-Series (see Note 4).

(3)Includes the sale of non-Agency RMBS held in a securitization trust for total proceeds of $67.6 million and a net realized gain of $0.2 million.


	Year Ended December 31, 2019
	Sales Proceeds		Realized Gains		Realized Losses		Net Realized Gains (Losses)
Non-Agency RMBS	$	1,021	$	33	$	—	$	33
CMBS	96,930		21,938		(156)		21,782
Total	$	97,951	$	21,971	$	(156)	$	21,815


	Year Ended December 31, 2018
	Sales Proceeds		Realized Gains		Realized Losses		Net Realized Gains (Losses)
Agency IOs	$	26,899	$	88	$	(12,358)	$	(12,270)

Total	$	26,899	$	88	$	(12,358)	$	(12,270)

Weighted Average Life

Actual maturities of our investment securities available for sale are generally shorter than stated contractual maturities (with contractual maturities up to 39 years), as they are affected by periodic payments and prepayments of principal on the underlying mortgages. As of December 31, 2020 and 2019, based on management’s estimates, the weighted average life of the Company’s investment securities available for sale portfolio was approximately 5.6 years and 5.0 years, respectively.

The following table sets forth the weighted average lives of our investment securities available for sale as of December 31, 2020 and 2019, respectively (dollar amounts in thousands):


Weighted Average Life	December 31, 2020		December 31, 2019
0 to 5 years	$	332,934	$	1,359,894
Over 5 to 10 years	320,361		521,517
10+ years	71,431		124,729
Total	$	724,726	$	2,006,140

Unrealized Losses in Other Comprehensive Income

As of January 1, 2020, the Company adopted ASU 2016-13 to account for its investments in CECL Securities (see Note 2). The Company evaluated its CECL Securities that were in an unrealized loss position as of December 31, 2020 and determined that no allowance for credit losses was necessary. Accordingly, the Company did not recognize credit losses through earnings for the year ended December 31, 2020.

The following tables present the Company’s CECL securities in an unrealized loss position with no credit losses reported, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2020 (dollar amounts in thousands):


December 31, 2020	Less than 12 Months				Greater than 12 months				Total
	Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses
Non-Agency RMBS	$	159,841	$	(4,526)	$	8,234	$	(848)	$	168,075	$	(5,374)

Total	$	159,841	$	(4,526)	$	8,234	$	(848)	$	168,075	$	(5,374)

At December 31, 2020, the Company did not intend to sell any of its investment securities available for sale that were in an unrealized loss position, and it was “more likely than not” that the Company would not be required to sell these securities before recovery of their amortized cost basis, which may be at their maturity.

Gross unrealized losses in other comprehensive income on the Company’s non-Agency RMBS were $5.4 million at December 31, 2020. Credit risk associated with non-Agency RMBS and CMBS is regularly assessed as new information regarding the underlying collateral becomes available and based on updated estimates of cash flows generated by the underlying collateral. In performing its assessment, the Company considers past and expected future performance of the underlying collateral, including timing of expected future cash flows, prepayment rates, default rates, loss severities, delinquency rates, current levels of subordination, volatility of the security's fair value, temporary declines in liquidity for the asset class and interest rate changes since purchase. Based upon the most recent evaluation, the Company does not believe that the unrealized losses are credit related but are rather a reflection of current market yields and/or marketplace bid-ask spreads.

The following table presents the Company's investment securities available for sale in an unrealized loss position reported through other comprehensive income, aggregated by investment category and length of time that individual securities were in a continuous unrealized loss position as of December 31, 2019 (dollar amounts in thousands):


December 31, 2019	Less than 12 months				Greater than 12 months				Total
	Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses
Agency RMBS	$	—	$	—	$	222,286	$	(7,454)	$	222,286	$	(7,454)
Non-Agency RMBS	—		—		104		(13)		104		(13)
CMBS	25,507		(124)		—		—		25,507		(124)
Total	$	25,507	$	(124)	$	222,390	$	(7,467)	$	247,897	$	(7,591)

Other than Temporary Impairment

For the years ended December 31, 2019 and 2018, the Company did not recognize other-than-temporary impairment through earnings.