XML 13 R10.htm IDEA: XBRL DOCUMENT
v3.20.1

Valuation | 3 Months Ended
--- | ---
Mar. 31, 2020
Fair Value Disclosures [Abstract] |
Valuation | Valuation 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 | )
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. 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.
Third-party non-binding valuations are validated by comparing such valuations to internally generated prices based on the Company's models and, when available, to recent trading activity in the same or similar instruments. For those instruments valued using discounted cash flows, collateral prepayments, losses, recoveries, and scheduled amortization are projected over the remaining life of the collateral and expressed as a percentage of the collateral's current principal balance. For those assets valued using the LIBOR Option Adjusted Spread, or "OAS," valuation methodology, cash flows are projected using the Company's models over multiple interest rate scenarios, and these projected cash flows are then discounted using the LIBOR rates implied by each interest rate scenario. The LIBOR OAS of an asset is then computed as the unique constant yield spread that, when added to all LIBOR rates in each interest rate scenario generated by the model, will equate (a) the expected present value of the projected asset cash flows over all model scenarios to (b) the actual current market price of the asset. LIBOR OAS is therefore model-dependent. Generally speaking, LIBOR OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any interest rate options embedded in the asset. Material changes in any of the inputs above in isolation could result in a significant change to reported fair value measurements. Fair value measurements are impacted by the interrelationships of these inputs. For example, a higher expectation of collateral prepayments will generally result in a lower expectation of collateral losses. Conversely, higher losses will generally result in lower prepayments. 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.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration