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Investment Securities Available for Sale, at Fair Value

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available for Sale, at Fair Value

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, Financial Instruments ("ASC 825"), where changes in fair value are recorded in unrealized gains (losses), net on the Company's condensed consolidated statements of operations. The Company also has investment securities available for sale where the fair value option has not been elected, which we refer to as CECL Securities. CECL Securities are reported at fair value with unrealized gains and losses recorded in other comprehensive income (loss) on the Company's condensed consolidated statements of comprehensive income. The Company's investment securities available for sale consisted of the following as of June 30, 2021 and December 31, 2020, respectively (dollar amounts in thousands):

			June 30, 2021																								December 31, 2020
			Amortized Cost						Unrealized												Fair Value						Amortized Cost						Unrealized												Fair Value
									Gains						Losses																		Gains						Losses
Fair Value Option
Agency RMBS			$	134,461					$	—					$	(3,162)					$	131,299					$	138,541					$	854					$	—					$	139,395
Non-Agency RMBS (1)			100,379						674						(8,560)						92,493						100,465						170						(10,786)						89,849
CMBS (2)			111,977						4,156						(405)						115,728						139,019						5,685						(3,731)						140,973
ABS			27,917						14,703						—						42,620						34,139						9,086						—						43,225
Total investment securities available for sale - fair value option			374,734						19,533						(12,127)						382,140						412,164						15,795						(14,517)						413,442
CECL Securities
Non-Agency RMBS (3)			189,398						6,742						(645)						195,495						266,855						4,336						(5,374)						265,817
CMBS			28,420						1,734						(382)						29,772						43,435						2,032						—						45,467
Total investment securities available for sale - CECL Securities			217,818						8,476						(1,027)						225,267						310,290						6,368						(5,374)						311,284
Total			$	592,552					$	28,009					$	(13,154)					$	607,407					$	722,454					$	22,163					$	(19,891)					$	724,726

(1)Includes non-Agency RMBS held in a securitization trust with a total fair value of $37.6 million as of December 31, 2020. During the six months ended June 30, 2021, the Company exercised its right to an optional redemption of its non-Agency RMBS re-securitization, returning the non-Agency RMBS held by the re-securitization trust to the Company (see Note 7).

(2)Includes IO and mezzanine securities transferred from the Consolidated K-Series as a result of de-consolidation during the six months ended June 30, 2020, with a total fair value of $72.6 million and $97.6 million as of June 30, 2021 and December 31, 2020 respectively.

(3)Includes non-Agency RMBS held in a securitization trust with a total fair value of $71.5 million as of December 31, 2020. During the six months ended June 30, 2021, the Company exercised its right to an optional redemption of its non-Agency RMBS re-securitization, returning the non-Agency RMBS held by the re-securitization trust to the Company (see Note 7).

Accrued interest receivable for all investment securities available for sale in the amount of $2.0 million and $2.4 million as of June 30, 2021 and December 31, 2020, respectively, is included in other assets on the Company's condensed consolidated balance sheets.

Realized Gain and Loss Activity

The following tables summarize our investment securities sold during the three months ended June 30, 2021 and 2020, respectively (dollar amounts in thousands):

			Three Months Ended June 30, 2021
			Sales Proceeds						Realized Gains						Realized Losses						Net Realized Gains (Losses)
CMBS			$	3,770					$	392					$	—					$	392
Total			$	3,770					$	392					$	—					$	392

			Three Months Ended June 30, 2020
			Sales Proceeds						Realized Gains						Realized Losses						Net Realized Gains (Losses)
Non-Agency RMBS			$	37,810					$	294					$	(1,690)					$	(1,396)
CMBS			24,022						1,327						—						1,327
Total			$	61,832					$	1,621					$	(1,690)					$	(69)

The following tables summarize our investment securities sold during the six months ended June 30, 2021 and 2020, respectively (dollar amounts in thousands):

			Six Months Ended June 30, 2021
			Sales Proceeds						Realized Gains						Realized Losses						Net Realized Gains (Losses)
Non-Agency RMBS			$	72,083					$	12					$	(833)					$	(821)
CMBS			43,315						5,587						—						5,587
Total			$	115,398					$	5,599					$	(833)					$	4,766

			Six Months Ended June 30, 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			168,758						294						(25,821)						(25,527)
CMBS			138,061						1,327						(29,584)						(28,257)
Total			$	1,445,196					$	12,689					$	(71,468)					$	(58,779)

(1)Includes Agency RMBS securities issued by Consolidated SLST (see Note 7).

(2)Includes Agency CMBS securities transferred from the Consolidated K-Series (see Note 7).

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 June 30, 2021 and December 31, 2020, based on management’s estimates, the weighted average life of the Company’s investment securities available for sale portfolio was approximately 5.6 years.

The following table sets forth the weighted average lives of our investment securities available for sale as of June 30, 2021 and December 31, 2020, respectively (dollar amounts in thousands):

Weighted Average Life			June 30, 2021						December 31, 2020
0 to 5 years			$	248,347					$	332,934
Over 5 to 10 years			317,620						320,361
10+ years			41,440						71,431
Total			$	607,407					$	724,726

Unrealized Losses in Other Comprehensive Income

The Company evaluated its CECL Securities that were in an unrealized loss position as of June 30, 2021 and December 31, 2020, respectively, and determined that no allowance for credit losses was necessary. The Company did not recognize credit losses through earnings for the three and six months ended June 30, 2021 and 2020.

The following table presents 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 as of June 30, 2021 and December 31, 2020, respectively (dollar amounts in thousands):

June 30, 2021			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			$	35,532					$	(25)					$	36,175					$	(620)					$	71,707					$	(645)
CMBS			22,488						(382)						—						—						22,488						(382)
Total			$	58,020					$	(407)					$	36,175					$	(620)					$	94,195					$	(1,027)

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 June 30, 2021, 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 and CMBS were $0.6 million and $0.4 million, respectively, at June 30, 2021. 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 these unrealized losses are credit related but are rather a reflection of current market yields and/or marketplace bid-ask spreads.

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- Definition

The entire disclosure for investments in certain debt and equity securities.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 320
-URI http://asc.fasb.org/subtopic&trid=2209399

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 946
-SubTopic 320
-URI http://asc.fasb.org/subtopic&trid=2324412

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-URI http://asc.fasb.org/topic&trid=2196928

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 940
-SubTopic 320
-URI http://asc.fasb.org/subtopic&trid=2176304

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher SEC
-Name Regulation S-K (SK)
-Number 229
-Section 1403
-Paragraph (b)

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