Quarterly report pursuant to Section 13 or 15(d)

Available-for-Sale Securities, at Fair Value

v3.22.1
Available-for-Sale Securities, at Fair Value
 3 Months Ended
Mar. 31, 2022
Debt Securities, Available-for-sale [Abstract]  
Available-for-Sale Securities, at Fair Value Available-for-Sale Securities, at Fair Value
The Company holds both Agency and non-Agency available-for sale, or AFS, investment securities which are carried at fair value on the condensed consolidated balance sheets. The following table presents the Company’s AFS investment securities by collateral type as of March 31, 2022 and December 31, 2021:
(in thousands) March 31,
2022		 December 31,
2021
Agency:
Federal National Mortgage Association $ 5,191,909  $ 5,040,988 
Federal Home Loan Mortgage Corporation 1,604,687  1,922,809 
Government National Mortgage Association 161,592  185,602 
Non-Agency 12,530  12,304 
Total available-for-sale securities $ 6,970,718  $ 7,161,703 

At March 31, 2022 and December 31, 2021, the Company pledged AFS securities with a carrying value of $6.5 billion and $7.0 billion, respectively, as collateral for repurchase agreements. See Note 11 - Repurchase Agreements.
At March 31, 2022 and December 31, 2021, the Company did not have any securities purchased from and financed with the same counterparty that did not meet the conditions of ASC 860, Transfers and Servicing, to be considered linked transactions and, therefore, classified as derivatives.
The Company is not required to consolidate VIEs for which it has concluded it does not have both the power to direct the activities of the VIEs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant. The Company’s investments in these unconsolidated VIEs include all non-Agency securities, which are classified within available-for-sale securities, at fair value on the condensed consolidated balance sheets. As of March 31, 2022 and December 31, 2021, the carrying value, which also represents the maximum exposure to loss, of all non-Agency securities in unconsolidated VIEs was $12.5 million and $12.3 million, respectively.
The following tables present the amortized cost and carrying value of AFS securities by collateral type as of March 31, 2022 and December 31, 2021:
March 31, 2022
(in thousands) Principal/ Current Face Un-amortized Premium Accretable Purchase Discount Amortized Cost Allowance for Credit Losses Unrealized Gain Unrealized Loss Carrying Value
Agency:
Principal and interest
 $ 6,674,287  $ 291,087  $ (12) $ 6,965,362  $ —  $ 21,881  $ (186,039) $ 6,801,204 
Interest-only 2,016,996  157,625  —  157,625  (11,567) 17,047  (6,121) 156,984 
Total Agency 8,691,283  448,712  (12) 7,122,987  (11,567) 38,928  (192,160) 6,958,188 
Non-Agency
 1,823,102  15,770  (25) 16,519  (6) 304  (4,287) 12,530 
Total $ 10,514,385  $ 464,482  $ (37) $ 7,139,506  $ (11,573) $ 39,232  $ (196,447) $ 6,970,718 
December 31, 2021
(in thousands) Principal/ Current Face Un-amortized Premium Accretable Purchase Discount Amortized Cost Allowance for Credit Losses Unrealized Gain Unrealized Loss Carrying Value
Agency:
Principal and interest
 $ 6,411,363  $ 270,699  $ (12) $ 6,682,050  $ —  $ 171,308  $ (4,855) $ 6,848,503 
Interest-only 3,198,447  305,577  —  305,577  (12,851) 20,699  (12,529) 300,896 
Total Agency 9,609,810  576,276  (12) 6,987,627  (12,851) 192,007  (17,384) 7,149,399 
Non-Agency
 1,940,815  16,533  (27) 17,386  (1,387) 33  (3,728) 12,304 
Total $ 11,550,625  $ 592,809  $ (39) $ 7,005,013  $ (14,238) $ 192,040  $ (21,112) $ 7,161,703 

The following table presents the Company’s AFS securities according to their estimated weighted average life classifications as of March 31, 2022:
March 31, 2022
(in thousands)  Agency  Non-Agency  Total
< 1 year $ 1,216  $ —  $ 1,216 
≥ 1 and < 3 years 55,273  1,144  56,417 
≥ 3 and < 5 years 322,925  1,308  324,233 
≥ 5 and < 10 years 6,577,846  10,078  6,587,924 
≥ 10 years 928  —  928 
Total $ 6,958,188  $ 12,530  $ 6,970,718 
Measurement of Allowances for Credit Losses on AFS Securities
The Company uses a discounted cash flow method to estimate and recognize an allowance for credit losses on both Agency and non-Agency AFS securities that are not accounted for under the fair value option. The following table presents the changes for the three months ended March 31, 2022 and 2021 in the allowance for credit losses on Agency and non-Agency AFS securities:
Three Months Ended Three Months Ended
March 31, 2022 March 31, 2021
(in thousands) Agency Non-Agency Total Agency Non-Agency Total
Allowance for credit losses at beginning of period
 $ (12,851) $ (1,387) $ (14,238) $ (17,889) $ (4,639) $ (22,528)
Additions on securities for which credit losses were not previously recorded
 (2) —  (2) (20) —  (20)
(Increase) decrease on securities with previously recorded credit losses
 (2,493) 1,381  (1,112) (1,840) 2,995  1,155 
Write-offs
 3,779  —  3,779  3,050  173  3,223 
Allowance for credit losses at end of period
 $ (11,567) $ (6) $ (11,573) $ (16,699) $ (1,471) $ (18,170)

The following tables present the components comprising the carrying value of AFS securities for which an allowance for credit losses has not been recorded by length of time that the securities had an unrealized loss position as of March 31, 2022 and December 31, 2021. At March 31, 2022 and December 31, 2021, the Company held 755 and 756 AFS securities, respectively; of the securities for which an allowance for credit losses has not been recorded, 241 and 45 were in an unrealized loss position for less than twelve consecutive months. At both March 31, 2022 and December 31, 2021, none of the Company’s AFS securities were in an unrealized loss position for more than twelve months without an allowance for credit losses recorded.
March 31, 2022
Unrealized Loss Position for
Less than 12 Months 12 Months or More Total
(in thousands) Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses
Agency $ 5,145,937  $ (188,535) $ —  $ —  $ 5,145,937  $ (188,535)
Non-Agency 8,865  (4,168) —  —  8,865  (4,168)
Total $ 5,154,802  $ (192,703) $ —  $ —  $ 5,154,802  $ (192,703)
December 31, 2021
Unrealized Loss Position for
Less than 12 Months 12 Months or More Total
(in thousands) Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses
Agency $ 2,371,216  $ (12,031) $ —  $ —  $ 2,371,216  $ (12,031)
Non-Agency 9,613  (1,230) —  —  9,613  (1,230)
Total $ 2,380,829  $ (13,261) $ —  $ —  $ 2,380,829  $ (13,261)
Gross Realized Gains and Losses
Gains and losses from the sale of AFS securities are recorded as realized gains (losses) within (loss) gain on investment securities in the Company’s condensed consolidated statements of comprehensive loss. The following table presents details around sales of AFS securities during the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31,
(in thousands) 2022 2021
Proceeds from sales of available-for-sale securities $ 2,012,620  $ 2,050,943 
Amortized cost of available-for-sale securities sold (2,067,471) (1,984,745)
Total realized (losses) gains on sales, net $ (54,851) $ 66,198 
Gross realized gains $ 14,695  $ 66,217 
Gross realized losses (69,546) (19)
Total realized (losses) gains on sales, net $ (54,851) $ 66,198