v3.25.4

Debt Securities | 12 Months Ended
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Dec. 31, 2025
Investments, Debt and Equity Securities [Abstract] |
Debt Securities | Debt Securities The Company holds investments in various classes of non-agency RMBS, CMBS and other holdings. The Company designates its investments in RMBS as AFS, HTM and as RMBS investments in beneficial interests, based on the Company’s intent and ability to hold each security to maturity. Beneficial interests are the residual interest of the Company’s investments in securitization trusts holding pools of residential mortgage loans. The Company carries its RMBS AFS debt securities at fair value with changes in fair value recorded in other comprehensive income in the period in which they occur. The Company carries its RMBS HTM and beneficial interests at amortized cost, net of any required allowance for credit losses. Beneficial interests may be trust certificates and/or subordinated notes depending on the structure of the securitization. The Company adopted the fair value option for its investments in CMBS and any changes in fair value are recorded in earnings in the period incurred. Interest income on CMBS is recognized using the effective interest method. The Company adopted the fair value option as its Manager believes it is the appropriate measure of accounting for securities as it transitions the balance sheet away from residential mortgage loans. The Company’s investments in RMBS are investments in unconsolidated VIEs, and the Company’s maximum exposure to loss is limited to the amount of its investment. The Company’s investments in RMBS HTM represent the 5.01% the Company is required to retain under the European risk retention rules for the Company’s secured bonds payable (the “EU Retained Interest”). Under the European risk retention rules, the Company must hold at least 5.0% of the nominal value of each class of securities offered or sold to investors, and the Company is prohibited from selling, transferring or otherwise surrendering all or part of the EU Retained Interest until all such classes are paid in full or redeemed. The Company’s RMBS AFS and HTM all have stated maturities of more than 10 years. The securities are subject to prepayments on the underlying collateral and varying call provisions held by the majority certificate holders. The Company is not a majority certificate holder and cannot influence the timing of any call provisions. During the years ended December 31, 2025 and 2024, the Company reported $(8.7) million and $0.1 million, respectively, of fair value gains (losses) in current period earnings on securities carried at fair value of which $(3.6) million was reclassified from other comprehensive loss to realized loss due to the sale of RMBS AFS with par of $20.7 million in the first quarter of 2025. The changes in unrealized gains and losses are recorded in other income (loss) in the consolidated statements of operations. There were no sales of RMBS in the year ended December 31, 2024. During the years ended December 31, 2025 and 2024, the Company acquired $49.1 million and $255.9 million in par of CMBS, respectively. The following table presents information regarding the Company’s investments in debt securities:
($ in thousands) | As of December 31, 2025
| Basis(1) |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Commercial mortgage-backed securities, at fair value | $ | 273,421 |  |  | $ | 596 |  |  | $ | (234) |  |  | $ | 273,783 |
RMBS available-for-sale, at fair value | 48,810 |  |  | 648 |  |  | (218) |  |  | 49,240 |
Debt securities held-to-maturity at amortized cost, net of allowance for credit losses of $0 | 41,528 |  |  | — |  |  | (1,210) |  |  | 40,318 |
Investment in beneficial interests at amortized cost, net of allowance for credit losses of $0 | 99,179 |  |  | 9,327 |  |  | (42,257) |  |  | 66,249 |
Residential mortgage-backed securities | 189,517 |  |  | 9,975 |  |  | (43,685) |  |  | 155,807 |
Total debt securities | $ | 462,938 |  |  | $ | 10,571 |  |  | $ | (43,919) |  |  | $ | 429,590 |
(1)Basis amount is net of amortized discount, principal paydowns and interest receivable on CMBS, RMBS AFS and HTM before any fair value adjustment.
($ in thousands) | As of December 31, 2024
| Basis(1) |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Commercial mortgage-backed securities, at fair value | $ | 245,540 |  |  | $ | 1,074 |  |  | $ | — |  |  | $ | 246,614 |
RMBS available-for-sale, at fair value | 68,226 |  |  | 273 |  |  | (6,330) |  |  | 62,169 |
Debt securities held-to-maturity at amortized cost, net of allowance for credit losses of $0 | 46,043 |  |  | 8 |  |  | (2,104) |  |  | 43,947 |
Investment in beneficial interests at amortized cost, net of allowance for credit losses of $9,082 | 89,704 |  |  | 1,001 |  |  | (23,661) |  |  | 67,044 |
Residential mortgage-backed securities | 203,973 |  |  | 1,282 |  |  | (32,095) |  |  | 173,160 |
Total debt securities | $ | 449,513 |  |  | $ | 2,356 |  |  | $ | (32,095) |  |  | $ | 419,774 |
(1)Basis amount is net of amortized discount, principal paydowns and interest receivable on CMBS, RMBS AFS and HTM before any fair value adjustment. The following table presents a breakdown of the Company’s gross unrealized gains and losses on its investments in RMBS AFS grouped by due date:
($ in thousands) | As of December 31, 2025
| Step-up date(s)(1) |  | Basis(2) |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
RMBS due March 2060 | n/a |  | $ | 3,916 |  |  | $ | 67 |  |  | $ | — |  |  | $ | 3,983 |
RMBS due January 2061(3) | n/a |  | 5,268 |  |  | — |  |  | (68) |  |  | 5,200 |
RMBS due June 2061 | n/a |  | 8,833 |  |  | 154 |  |  | — |  |  | 8,987 |
RMBS due October 2061(3) | April 2029 |  | 5,389 |  |  | — |  |  | (77) |  |  | 5,312 |
RMBS due March 2062(3) | May 2029 |  | 5,789 |  |  | — |  |  | (73) |  |  | 5,716 |
RMBS due July 2062 | February 2030 |  | 8,915 |  |  | 256 |  |  | — |  |  | 9,171 |
RMBS due October 2062 | October 2026 |  | 4,389 |  |  | 32 |  |  | — |  |  | 4,421 |
RMBS due May 2063 | July 2030 |  | 6,311 |  |  | 139 |  |  | — |  |  | 6,450 |
RMBS Available-for-Sale, at Fair Value |  | $ | 48,810 |  |  | $ | 648 |  |  | $ | (218) |  |  | $ | 49,240 |
(1)When applicable, the step-up date is the date at which the coupon interest rate on the security increases. (2)Basis amount is net of any realized amortized costs, accrued interest and principal paydowns or additional investment into security. (3)These securities have been in an unrealized loss position for 12 months or longer.
($ in thousands) | As of December 31, 2024
| Step-up date(s)(1) |  | Basis(2) |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
RMBS due March 2060(3) | February 2025 |  | $ | 3,825 |  |  | $ | — |  |  | $ | (362) |  |  | $ | 3,463 |
RMBS due December 2060(3) | July 2029 |  | 7,521 |  |  | — |  |  | (3,133) |  |  | 4,388 |
RMBS due January 2061(3) | n/a |  | 4,886 |  |  | — |  |  | (384) |  |  | 4,502 |
RMBS due June 2061(3) | January 2025/February 2025 |  | 8,674 |  |  | — |  |  | (762) |  |  | 7,912 |
RMBS due October 2061(3) | April 2029 |  | 6,015 |  |  | — |  |  | (371) |  |  | 5,644 |
RMBS due March 2062(3) | May 2029 |  | 9,397 |  |  | — |  |  | (585) |  |  | 8,812 |
RMBS due July 2062(3) | February 2030 |  | 12,081 |  |  | — |  |  | (733) |  |  | 11,348 |
RMBS due October 2062 | October 2026 |  | 4,673 |  |  | 221 |  |  | — |  |  | 4,894 |
RMBS due May 2063 | July 2030 |  | 11,154 |  |  | 52 |  |  | — |  |  | 11,206 |
RMBS Available-for-Sale, at Fair Value |  | $ | 68,226 |  |  | $ | 273 |  |  | $ | (6,330) |  |  | $ | 62,169 |
(1)When applicable, the step-up date is the date at which the coupon interest rate on the security increases. (2)Basis amount is net of any realized amortized costs, accrued interest and principal paydowns or additional investment into security. (3)These securities have been in an unrealized loss position for 12 months or longer. The following table presents accretable interest income on debt securities and accretable yield on beneficial interests recognized for the years ended December 31, 2025 and 2024:
($ in thousands) |  |  | Year ended December 31, |  |
|  |  |  |  | 2025 |  | 2024 |  |
Interest income on CMBS |  |  |  |  | $ | 16,585 |  |  | $ | 4,476 |  |  |
Interest income on RMBS AFS and HTM |  |  |  |  | 5,530 |  |  | 7,611 |  |  |
RMBS Beneficial interests |  |  |  |  | 6,540 |  |  | 5,178 |  |  |
|  |  |  |  | $ | 28,655 |  |  | $ | 17,265 |  |  |
The Company generally recognizes accretable yield on its beneficial interests and increases and decreases in the net present value of expected cash flows in earnings in the period in which they occur. Under CECL, an expense is recorded to increase the allowance for expected credit losses when there is a reduction in the Company’s expected future cash flows compared to contractual amounts due. Income is recognized if there is an increase in expected future cash flows to the extent an allowance has been recorded against the beneficial interest or RMBS HTM. If there is no allowance for expected credit losses recorded against a beneficial interest or RMBS HTM, any increase in expected cash flows is recognized prospectively as a change in yield. Management assesses the credit quality of the portfolio and the adequacy of loss reserves on a quarterly basis, or more frequently as necessary. During the years ended December 31, 2025 and 2024, the Company had no activity and no balance related to the allowance for expected credit losses for investments in RMBS HTM. The following table presents the activity in the allowance for expected credit losses for beneficial interests:
($ in thousands) |  |  | Year ended December 31, |  |
|  |  |  |  | 2025 |  | 2024 |  |
Allowance for expected credit losses, beginning balance |  |  |  |  | $ | (9,082) |  |  | $ | (6,880) |  |  |
Credit loss expense |  |  |  |  | (388) |  |  | — |  |  |
Reclassification to non-credit discount from the allowance for changes in payment expectations |  |  |  |  | 2,467 |  |  | 1,773 |  |  |
Net change in the allowance for credit losses |  |  |  |  | 7,003 |  |  | (3,975) |  |  |
Allowance for expected credit losses, ending balance |  |  |  |  | $ | — |  |  | $ | (9,082) |  |  |

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