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Valuation (Tables) | 3 Months Ended
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Mar. 31, 2020
Fair Value Disclosures [Abstract] |
Schedule of Fair Value Measurements | The following tables present the Company's financial instruments measured at fair value on: March 31, 2020:
(In thousands) |  |  |  |  |  |  |  |
Description |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Mortgage-backed securities, at fair value: |  |  |  |  |  |  |  |
Agency RMBS: |  |  |  |  |  |  |  |
15-year fixed-rate mortgages |  | $ | — |  |  | $ | 132,375 |  |  | $ | — |  |  | $ | 132,375 |
20-year fixed-rate mortgages |  | — |  |  | 1,187 |  |  | — |  |  | 1,187 |
30-year fixed-rate mortgages |  | — |  |  | 765,220 |  |  | — |  |  | 765,220 |
Adjustable rate mortgages |  | — |  |  | 30,233 |  |  | — |  |  | 30,233 |
Reverse mortgages |  | — |  |  | 98,357 |  |  | — |  |  | 98,357 |
Interest only securities |  | — |  |  | 8,663 |  |  | 6,966 |  |  | 15,629 |
Non-Agency RMBS |  | — |  |  | 4,519 |  |  | 3,001 |  |  | 7,520 |
Mortgage-backed securities, at fair value |  | — |  |  | 1,040,554 |  |  | 9,967 |  |  | 1,050,521 |
Other investments, at fair value: |  |  |  |  |  |  |  |
Preferred equity securities |  | 355 |  |  | — |  |  | — |  |  | 355 |
Financial derivatives–assets, at fair value: |  |  |  |  |  |  |  |
TBAs |  | — |  |  | 782 |  |  | — |  |  | 782 |
Interest rate swaps |  | — |  |  | 619 |  |  | — |  |  | 619 |
Futures |  | 331 |  |  | — |  |  | — |  |  | 331 |
Total financial derivatives–assets, at fair value |  | 331 |  |  | 1,401 |  |  | — |  |  | 1,732 |
Total mortgage-backed securities, other investments, and financial derivatives–assets, at fair value |  | $ | 686 |  |  | $ | 1,041,955 |  |  | $ | 9,967 |  |  | $ | 1,052,608 |
Liabilities: |  |  |  |  |  |  |  |
U.S. Treasury securities sold short, at fair value |  | $ | — |  |  | $ | (2,154 | ) |  | $ | — |  |  | $ | (2,154 | )
Financial derivatives–liabilities, at fair value: |  |  |  |  |  |  |  |
TBAs |  | — |  |  | (3,582 | ) |  | — |  |  | (3,582 | )
Interest rate swaps |  | — |  |  | (12,952 | ) |  | — |  |  | (12,952 | )
Futures |  | (3,700 | ) |  | — |  |  | — |  |  | (3,700 | )
Total financial derivatives–liabilities, at fair value |  | (3,700 | ) |  | (16,534 | ) |  | — |  |  | (20,234 | )
Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value |  | $ | (3,700 | ) |  | $ | (18,688 | ) |  | $ | — |  |  | $ | (22,388 | )
December 31, 2019:
(In thousands) |  |  |  |  |  |  |  |
Description |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Mortgage-backed securities, at fair value: |  |  |  |  |  |  |  |
Agency RMBS: |  |  |  |  |  |  |  |
15-year fixed-rate mortgages |  | $ | — |  |  | $ | 181,231 |  |  | $ | — |  |  | $ | 181,231 |
20-year fixed-rate mortgages |  | — |  |  | 1,385 |  |  | — |  |  | 1,385 |
30-year fixed-rate mortgages |  | — |  |  | 1,058,878 |  |  | — |  |  | 1,058,878 |
Adjustable rate mortgages |  | — |  |  | 33,255 |  |  | — |  |  | 33,255 |
Reverse mortgages |  | — |  |  | 99,934 |  |  | — |  |  | 99,934 |
Interest only securities |  | — |  |  | 10,605 |  |  | 7,639 |  |  | 18,244 |
Non-Agency RMBS |  | — |  |  | 5,578 |  |  | 3,273 |  |  | 8,851 |
Mortgage-backed securities, at fair value |  | — |  |  | 1,390,866 |  |  | 10,912 |  |  | 1,401,778 |
Financial derivatives–assets, at fair value: |  |  |  |  |  |  |  |
TBAs |  | — |  |  | 122 |  |  | — |  |  | 122 |
Interest rate swaps |  | — |  |  | 3,624 |  |  | — |  |  | 3,624 |
Futures |  | 434 |  |  | — |  |  | — |  |  | 434 |
Total financial derivatives–assets, at fair value |  | 434 |  |  | 3,746 |  |  | — |  |  | 4,180 |
Total mortgage-backed securities and financial derivatives–assets, at fair value |  | $ | 434 |  |  | $ | 1,394,612 |  |  | $ | 10,912 |  |  | $ | 1,405,958 |
Liabilities: |  |  |  |  |  |  |  |
U.S. Treasury securities sold short, at fair value |  | $ | — |  |  | $ | (2,070 | ) |  | $ | — |  |  | $ | (2,070 | )
Financial derivatives–liabilities, at fair value: |  |  |  |  |  |  |  |
TBAs |  | — |  |  | (304 | ) |  | — |  |  | (304 | )
Interest rate swaps |  | — |  |  | (1,647 | ) |  | — |  |  | (1,647 | )
Futures |  | (96 | ) |  | — |  |  | — |  |  | (96 | )
Total financial derivatives–liabilities, at fair value |  | (96 | ) |  | (1,951 | ) |  | — |  |  | (2,047 | )
Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value |  | $ | (96 | ) |  | $ | (4,021 | ) |  | $ | — |  |  | $ | (4,117 | )
Unobservable Input Reconciliation | The following tables present additional information about the Company's investments which are measured at fair value for which the Company has utilized Level 3 inputs to determine fair value. Three-Month Period Ended March 31, 2020:
(In thousands) | Non-Agency RMBS |  | Agency RMBS
Beginning balance as of December 31, 2019 | $ | 3,273 |  |  | $ | 7,639 |
Purchases | — |  |  | 77 |
Proceeds from sales | — |  |  | — |
Principal repayments | (93 | ) |  | — |
(Amortization)/accretion, net | 91 |  |  | (587 | )
Net realized gains (losses) | — |  |  | (1 | )
Change in net unrealized gains (losses) | (270 | ) |  | (461 | )
Transfers: |  |  |
Transfers into level 3 | — |  |  | 1,643 |
Transfers out of level 3 | — |  |  | (1,344 | )
Ending balance as of March 31, 2020 | $ | 3,001 |  |  | $ | 6,966 |
All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company at March 31, 2020, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended March 31, 2020. For Level 3 financial instruments held by the Company as of March 31, 2020, change in net unrealized gains (losses) of $(0.3) million and $(1.2) million, for the three-month period ended March 31, 2020 relate to non-Agency RMBS and Agency RMBS, respectively. At March 31, 2020, the Company transferred $1.3 million of RMBS from Level 3 to Level 2 and $1.6 million of RMBS from Level 2 to Level 3. Transfers between hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources. Three-Month Period Ended March 31, 2019:
(In thousands) | Non-Agency RMBS |  | Agency RMBS
Beginning balance as of December 31, 2018 | $ | 4,634 |  |  | $ | 2,832 |
Purchases | — |  |  | — |
Proceeds from sales | — |  |  | — |
Principal repayments | (453 | ) |  | — |
(Amortization)/accretion, net | 85 |  |  | (250 | )
Net realized gains (losses) | — |  |  | (663 | )
Change in net unrealized gains (losses) | 344 |  |  | 535 |
Transfers: |  |  |
Transfers into level 3 | — |  |  | 862 |
Transfers out of level 3 | — |  |  | — |
Ending balance as of March 31, 2019 | $ | 4,610 |  |  | $ | 3,316 |
All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company as of March 31, 2019, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended March 31, 2019. For Level 3 financial instruments held by the Company as of March 31, 2019, change in net unrealized gains (losses) of $0.3 million and $0.4 million, for the three-month period ended March 31, 2019 relate to non-Agency RMBS and Agency RMBS, respectively. At March 31, 2019, the Company transferred $0.9 million of RMBS from Level 2 to Level 3. Transfers between these hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.
Quantitative Information | The following tables identify the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of March 31, 2020 and December 31, 2019: March 31, 2020:
|  | Range |  |
Description |  | Fair Value |  | Valuation Technique |  | Significant Unobservable Input |  | Min |  | Max |  | Weighted Average(1)
|  | (In thousands) |  |  |  |  |  |  |  |  |  |
Non-Agency RMBS |  | $ | 1,042 |  |  | Market quotes |  | Non-Binding Third-Party Valuation |  | $ | 77.00 |  |  | $ | 81.57 |  |  | $ | 79.74 |
Agency RMBS–Interest Only Securities |  | 4,641 |  |  | Market quotes |  | Non-Binding Third-Party Valuation |  | 5.71 |  |  | 19.18 |  |  | 11.05 |
Non-Agency RMBS |  | 1,959 |  |  | Discounted Cash Flows |  | Yield |  | 2.5 | % |  | 9.8 | % |  | 7.3 | %
|  |  |  |  |  | Projected Collateral Prepayments |  | 48.4 | % |  | 61.1 | % |  | 55.6 | %
|  |  |  |  |  | Projected Collateral Losses |  | 3.1 | % |  | 8.7 | % |  | 7.1 | %
|  |  |  |  |  | Projected Collateral Recoveries |  | 8.1 | % |  | 13.1 | % |  | 11.1 | %
|  |  |  |  |  | Projected Collateral Scheduled Amortization |  | 18.1 | % |  | 40.4 | % |  | 26.2 | %
|  |  |  |  |  |  |  |  |  |  |  | 100.0 | %
Agency RMBS–Interest Only Securities |  | 2,325 |  |  | Option Adjusted Spread ("OAS") |  | LIBOR OAS (2)(3) |  | 164 |  |  | 943 |  |  | 386 |
|  |  |  |  |  | Projected Collateral Prepayments |  | 55.5 | % |  | 89.3 | % |  | 81.7 | %
|  |  |  |  |  | Projected Collateral Scheduled Amortization |  | 10.7 | % |  | 44.5 | % |  | 18.3 | %
|  |  |  |  |  |  |  |  |  |  |  | 100.0 | %
(1) | Averages are weighted based on the fair value of the related instrument.
(2) | Shown in basis points.
(3) | For the range minimum, the range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $0.5 million. Including these securities the weighted average was 55 basis points.
December 31, 2019:
|  | Range |  |
Description |  | Fair Value |  | Valuation Technique |  | Significant Unobservable Input |  | Min |  | Max |  | Weighted Average(1)
|  | (In thousands) |  |  |  |  |  |  |  |  |  |
Non-Agency RMBS |  | $ | 1,558 |  |  | Market quotes |  | Non-Binding Third-Party Valuation |  | $ | 64.56 |  |  | $ | 89.04 |  |  | $ | 81.56 |
Agency RMBS–Interest Only Securities |  | 2,615 |  |  | Market quotes |  | Non-Binding Third-Party Valuation |  | 6.67 |  |  | 17.14 |  |  | 11.96 |
Non-Agency RMBS |  | 1,715 |  |  | Discounted Cash Flows |  | Yield |  | 1.3 | % |  | 9.9 | % |  | 4.4 | %
|  |  |  |  |  | Projected Collateral Prepayments |  | 50.5 | % |  | 61.8 | % |  | 57.7 | %
|  |  |  |  |  | Projected Collateral Losses |  | 2.2 | % |  | 2.2 | % |  | 2.2 | %
|  |  |  |  |  | Projected Collateral Recoveries |  | 6.6 | % |  | 14.5 | % |  | 11.6 | %
|  |  |  |  |  | Projected Collateral Scheduled Amortization |  | 21.6 | % |  | 40.7 | % |  | 28.5 | %
|  |  |  |  |  |  |  |  |  |  |  | 100.0 | %
Agency RMBS–Interest Only Securities |  | 5,024 |  |  | Option Adjusted Spread ("OAS") |  | LIBOR OAS (2) |  | 77 |  |  | 25,553 |  |  | 824 |
|  |  |  |  |  | Projected Collateral Prepayments |  | 41.7 | % |  | 80.3 | % |  | 73.4 | %
|  |  |  |  |  | Projected Collateral Scheduled Amortization |  | 19.7 | % |  | 58.3 | % |  | 26.6 | %
|  |  |  |  |  |  |  |  |  |  |  | 100.0 | %
(1) | Averages are weighted based on the fair value of the related instrument.
(2) Shown in basis points.
Fair Value, Other Financial Instruments | The following table summarizes the estimated fair value of all other financial instruments not included in the disclosures above as of March 31, 2020 and December 31, 2019:
|  | March 31, 2020 |  | December 31, 2019
(In thousands) |  | Fair Value |  | Carrying Value |  | Fair Value |  | Carrying Value
Assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 59,671 |  |  | $ | 59,671 |  |  | $ | 35,351 |  |  | $ | 35,351 |
Due from brokers |  | 49,966 |  |  | 49,966 |  |  | 34,596 |  |  | 34,596 |
Reverse repurchase agreements |  | 2,218 |  |  | 2,218 |  |  | 2,084 |  |  | 2,084 |
Liabilities: |  |  |  |  |  |  |  |
Repurchase agreements |  | 1,109,342 |  |  | 1,109,342 |  |  | 1,296,272 |  |  | 1,296,272 |
Due to brokers |  | 2,348 |  |  | 2,348 |  |  | 33 |  |  | 33 |
Cash and cash equivalents includes cash held in interest bearing overnight accounts, for which fair value equals the carrying value, and cash held in money market accounts, which are liquid in nature and for which fair value equals the carrying value; such assets are considered Level 1 assets. Due from brokers and Due to brokers include collateral transferred to or received from counterparties, along with receivables and payables for open and/or closed derivative positions. These receivables and payables are short term in nature and any collateral transferred consists primarily of cash; fair value of these items approximates carrying value and such items are considered Level 1 assets and liabilities. The Company's repurchase and reverse repurchase agreements are carried at cost, which approximates fair value due to their short term nature. Repurchase agreements and reverse repurchase agreements are classified as Level 2 assets and liabilities based on the adequacy of the collateral and their short term nature.

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- Definition Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19279-110258 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2C -URI http://asc.fasb.org/extlink&oid=117815213&loc=SL7498348-110258 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (bb) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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