| REAL ESTATE SECURITIES |
REAL ESTATE SECURITIES
The following is a summary of the Company’s real estate securities at December 31, 2017 and 2016, all of which are classified as available-for-sale and are, therefore, reported at fair value with changes in fair value recorded in other comprehensive income, except for securities that are other-than-temporarily impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost Basis |
|
Gross Unrealized |
|
|
|
|
|
Weighted Average |
Asset Type |
|
Outstanding
Face Amount |
|
Before
Impairment |
|
Other-Than-
Temporary-
Impairment (A) |
|
After
Impairment |
|
Gains |
|
Losses |
|
Carrying Value
(B) |
|
Number of
Securities |
|
Rating
(C) |
|
Coupon |
|
Yield |
|
Life
(Years)
(D) |
|
Principal
Subordination
(E) |
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABS - Non-Agency RMBS |
|
$ |
4,000 |
|
|
$ |
2,445 |
|
|
$ |
(1,521 |
) |
|
$ |
924 |
|
|
$ |
1,370 |
|
|
$ |
— |
|
|
$ |
2,294 |
|
|
1 |
|
CCC |
|
1.94 |
% |
|
22.69 |
% |
|
7.5 |
|
33.0 |
% |
Total Securities, Available-for-Sale (F) |
|
$ |
4,000 |
|
|
$ |
2,445 |
|
|
$ |
(1,521 |
) |
|
$ |
924 |
|
|
$ |
1,370 |
|
|
$ |
— |
|
|
$ |
2,294 |
|
|
1 |
|
CCC |
|
1.94 |
% |
|
22.69 |
% |
|
7.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABS - Non-Agency RMBS |
|
4,000 |
|
|
2,303 |
|
|
(1,521 |
) |
|
782 |
|
|
1,168 |
|
|
— |
|
|
1,950 |
|
|
1 |
|
C |
|
1.15 |
% |
|
25.45 |
% |
|
9.0 |
|
27.9 |
% |
FNMA/FHLMC (A) |
|
619,808 |
|
|
650,432 |
|
|
(23,128 |
) |
|
627,304 |
|
|
— |
|
|
— |
|
|
627,304 |
|
|
15 |
|
AAA |
|
3.28 |
% |
|
2.65 |
% |
|
8.4 |
|
N/A |
|
Total Securities, Available-for-Sale (F) |
|
$ |
623,808 |
|
|
$ |
652,735 |
|
|
$ |
(24,649 |
) |
|
$ |
628,086 |
|
|
$ |
1,168 |
|
|
$ |
— |
|
|
$ |
629,254 |
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
In December 2016, the Company reclassified gross unrealized losses of $23.1 million from other comprehensive income into earnings on FNMA/FHLMC securities that the Company intends to sell and recorded in realized and unrealized (gain) loss on investments in the Consolidated Statements of Operations.
|
|
|
(B) |
See Note 11 regarding the estimation of fair value, which is equal to carrying value for all securities. |
|
|
(C) |
Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. For each security rated by multiple rating agencies, the lowest rating is used. The Company used an implied AAA rating for the FNMA/FHLMC securities. Ratings provided were determined by third party rating agencies, represent the most recent credit ratings available as of the reporting date and may not be current.
|
|
|
(D) |
The weighted average life is based on the timing of expected cash flows on the assets. |
|
|
(E) |
Percentage of the outstanding face amount of securities and residual interests that is subordinate to the Company’s investments. |
|
|
(F) |
As of December 31, 2017 and 2016, the total outstanding face amount of fixed rate securities was zero and $619.8 million, respectively, and of floating rate securities were $4.0 million for both years. The collateral securing the ABS - Non-Agency RMBS is located in various geographic regions in the US. The Company does not have significant investments in any geographic region, thus a downturn in market conditions would not have a material negative impact on the Company.
|
Unrealized losses that are considered other-than-temporary are recognized currently in earnings. During the years ended December 31, 2017, 2016 and 2015, the Company recorded other-than-temporary impairment charges (“OTTI”) of $0.6 million, $23.1 million and $2.4 million, respectively, (gross of less than $0.1 million of other-than-temporary impairment recognized in other comprehensive income in 2015, with no amounts recognized in 2017 and 2016). Based on management’s analysis of the securities, the performance of the underlying loans and changes in market factors, the Company noted adverse changes in the expected cash flows on certain of these securities and concluded that they were other-than-temporarily impaired. The Company had no securities in an unrealized loss position as of December 31, 2017. The Company had no activity related to credit losses on securities for the year ended December 31, 2017.
The following table summarizes the activity related to credit losses on debt securities (the Company had no activity related to credit losses on securities for the year ended December 31, 2017).
|
|
|
|
|
|
2016 |
Credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income, Balance at January 1, 2016 |
$ |
(3,010 |
) |
|
|
Additions to credit losses on securities for which an OTTI was previously recognized and a portion of an OTTI was recognized in other comprehensive income |
(110 |
) |
|
|
Reduction for securities deconsolidated during the period |
3,120 |
|
|
|
Credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income, Balance at December 31, 2016 |
$ |
— |
|
The table below summarizes the FNMA/FHLMC activity for the years ended December 31, 2017 and 2016 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement Date |
|
Activity |
|
Face Amount of FNMA/FHLMC Purchased (Sold) |
|
Average Price % of Par |
|
Total Proceeds (Payment) |
|
Gain (Loss) |
|
Repurchase Agreement Financed (Repaid) |
January 2016 (B)
|
|
Sale |
|
$ |
(350.3 |
) |
|
103.2 |
% |
|
$ |
361.3 |
|
|
$ |
(3.9 |
) |
|
$ |
(348.6 |
) |
January 2016 |
|
Purchase |
|
$ |
102.7 |
|
|
103.2 |
% |
|
$ |
(105.9 |
) |
|
N/A |
|
|
$ |
102.2 |
|
January 2016 |
|
Purchase |
|
$ |
250.1 |
|
|
103.2 |
% |
|
$ |
(258.1 |
) |
|
N/A |
|
|
$ |
249.1 |
|
April 2016 (B)
|
|
Sale |
|
$ |
(347.5 |
) |
|
104.9 |
% |
|
$ |
364.3 |
|
|
$ |
5.9 |
|
|
$ |
(352.0 |
) |
April 2016 |
|
Purchase |
|
$ |
363.1 |
|
|
105.0 |
% |
|
$ |
(381.1 |
) |
|
N/A |
|
|
$ |
366.4 |
|
July 2016 (B)
|
|
Sale |
|
$ |
(353.6 |
) |
|
105.5 |
% |
|
$ |
373.1 |
|
|
$ |
1.8 |
|
|
$ |
(361.1 |
) |
July 2016 |
|
Purchase |
|
$ |
428.9 |
|
|
105.7 |
% |
|
$ |
(453.1 |
) |
|
N/A |
|
|
$ |
434.9 |
|
August 2016 |
|
Purchase |
|
$ |
249.6 |
|
|
103.9 |
% |
|
$ |
(259.3 |
) |
|
N/A |
|
|
$ |
248.7 |
|
August 2016 |
|
Purchase |
|
$ |
116.8 |
|
|
105.7 |
% |
|
$ |
(123.5 |
) |
|
N/A |
|
|
$ |
118.6 |
|
September 2016 |
|
Purchase |
|
$ |
35.6 |
|
|
103.8 |
% |
|
$ |
(37.0 |
) |
|
N/A |
|
|
$ |
35.4 |
|
October 2016 |
|
Purchase |
|
$ |
776.9 |
|
|
103.6 |
% |
|
$ |
(805.1 |
) |
|
N/A |
|
|
$ |
769.6 |
|
October 2016 |
|
Purchase |
|
$ |
632.2 |
|
|
104.9 |
% |
|
$ |
(663.5 |
) |
|
N/A |
|
|
$ |
628.2 |
|
October 2016 (B)
|
|
Sale |
|
$ |
(817.2 |
) |
|
105.0 |
% |
|
$ |
858.2 |
|
|
$ |
0.1 |
|
|
$ |
(831.7 |
) |
November 2016 (A)
|
|
Sale |
|
$ |
(779.0 |
) |
|
101.5 |
% |
|
$ |
790.7 |
|
|
$ |
(16.2 |
) |
|
$ |
(773.7 |
) |
March 2017 (A)
|
|
Sale |
|
$ |
(289.7 |
) |
|
98.8 |
% |
|
$ |
286.1 |
|
|
$ |
(2.8 |
) |
|
$ |
(277.8 |
) |
August 2017 (A)
|
|
Sale |
|
$ |
(299.5 |
) |
|
103.2 |
% |
|
$ |
309.0 |
|
|
$ |
2.3 |
|
|
$ |
(302.1 |
) |
|
|
(A) |
The gain (loss) on these sales was recorded on the trade date. |
|
|
(B) |
The gain (loss) on these sales was recorded on the trade date which occurred in the month prior to the settlement date. |
FNMA/FHLMC Agency Securities
These government agency securities were sold under agreements to repurchase which are treated as collateralized financing transactions. Although being pledged as collateral, securities financed through a repurchase agreement remains on the Company's Consolidated Balance Sheets as an asset and cash received from the purchaser is recorded on the Company's Consolidated Balance Sheets as a liability.
|