TWO Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Available-for-Sale Securities, at Fair Value

Available-for-Sale Securities, at Fair Value

3 Months Ended

Mar. 31, 2024

Debt Securities, Available-for-Sale [Abstract]

Available-for-Sale Securities, at Fair Value

The Company holds both Agency and non-Agency 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, 2024 and December 31, 2023:


(in thousands)	March 31, 2024		December 31, 2023
Agency:
Federal National Mortgage Association	$	5,205,459	$	5,467,684
Federal Home Loan Mortgage Corporation	2,913,167		2,790,662
Government National Mortgage Association	59,965		64,653

Non-Agency	3,953		4,150
Total available-for-sale securities	$	8,182,544	$	8,327,149

At March 31, 2024 and December 31, 2023, the Company pledged AFS securities with a carrying value of $8.2 billion and $8.1 billion, respectively, as collateral for repurchase agreements. See Note 12 - Repurchase Agreements.

At March 31, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, the carrying value, which also represents the maximum exposure to loss, of all non-Agency securities in unconsolidated VIEs was $4.0 million and $4.2 million, respectively.

The following tables present the amortized cost and carrying value of AFS securities by collateral type as of March 31, 2024 and December 31, 2023:


	March 31, 2024
(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	$	8,380,115	$	151,096	$	(123,837)	$	8,407,374	$	—	$	6,079	$	(283,136)	$	8,130,317
Interest-only	787,501		55,875		—		55,875		(3,217)		620		(5,004)		48,274
Total Agency	9,167,616		206,971		(123,837)		8,463,249		(3,217)		6,699		(288,140)		8,178,591



Non-Agency	551,699		4,082		(19)		4,689		(390)		164		(510)		3,953
Total	$	9,719,315	$	211,053	$	(123,856)	$	8,467,938	$	(3,607)	$	6,863	$	(288,650)	$	8,182,544


	December 31, 2023
(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	$	8,421,733	$	155,171	$	(130,932)	$	8,445,972	$	—	$	22,677	$	(196,748)	$	8,271,901
Interest-only	840,723		58,567		—		58,567		(3,619)		907		(4,757)		51,098
Total Agency	9,262,456		213,738		(130,932)		8,504,539		(3,619)		23,584		(201,505)		8,322,999



Non-Agency	569,897		4,199		(19)		4,844		(324)		173		(543)		4,150
Total	$	9,832,353	$	217,937	$	(130,951)	$	8,509,383	$	(3,943)	$	23,757	$	(202,048)	$	8,327,149

The following table presents the Company’s AFS securities according to their estimated weighted average life classifications as of March 31, 2024:


	March 31, 2024
(in thousands)	Agency		Non-Agency		Total
< 1 year	$	282	$	—	$	282
≥ 1 and < 3 years	16,243		—		16,243
≥ 3 and < 5 years	177,196		—		177,196
≥ 5 and < 10 years	7,984,870		3,631		7,988,501
≥ 10 years	—		322		322
Total	$	8,178,591	$	3,953	$	8,182,544

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, 2024 and 2023 in the allowance for credit losses on Agency and non-Agency AFS securities:


	Three Months Ended						Three Months Ended
	March 31, 2024						March 31, 2023

(in thousands)	Agency		Non-Agency		Total			Agency		Non-Agency		Total
Allowance for credit losses at beginning of period	$	(3,619)	$	(324)	$	(3,943)		$	(6,785)	$	(173)	$	(6,958)

Additions on securities for which credit losses were not previously recorded	(37)		(17)		(54)			—		(318)		(318)




Decrease (increase) on securities with previously recorded credit losses	24		(50)		(26)			827		(367)		460
Write-offs	415		1		416			684		210		894

Allowance for credit losses at end of period	$	(3,217)	$	(390)	$	(3,607)		$	(5,274)	$	(648)	$	(5,922)

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, 2024 and December 31, 2023. At March 31, 2024 and December 31, 2023, the Company held 647 and 646 AFS securities, respectively; of the securities for which an allowance for credit losses has not been recorded, 530 and 477 were in an unrealized loss position for less than twelve consecutive months. At both March 31, 2024 and December 31, 2023, 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, 2024
	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	$	7,023,251	$	(285,881)	$	—	$	—	$	7,023,251	$	(285,881)
Non-Agency	249		(73)		—		—		249		(73)
Total	$	7,023,500	$	(285,954)	$	—	$	—	$	7,023,500	$	(285,954)


	December 31, 2023
	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	$	6,269,848	$	(199,276)	$	—	$	—	$	6,269,848	$	(199,276)
Non-Agency	883		(173)		—		—		883		(173)
Total	$	6,270,731	$	(199,449)	$	—	$	—	$	6,270,731	$	(199,449)

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 income (loss). The following table presents details around sales of AFS securities during the three months ended March 31, 2024 and 2023:


	Three Months Ended
	March 31,
(in thousands)		2024		2023
Proceeds from sales of available-for-sale securities		$	333,082	$	1,360,742
Amortized cost of available-for-sale securities sold		(343,245)		(1,393,484)
Total realized losses on sales, net		$	(10,163)	$	(32,742)

Gross realized gains		$	—	$	14,070
Gross realized losses		(10,163)		(46,812)
Total realized losses on sales, net		$	(10,163)	$	(32,742)