NOTE 4. VARIABLE INTEREST ENTITIES

As discussed in Note 1, “Summary of Significant Accounting Policies,” we have determined that we are the primary beneficiary of certain securitization trusts. The following table presents a summary of the assets and liabilities of our consolidated securitization trusts as of September 30, 2015. Intercompany balances have been eliminated for purposes of this presentation.

	September 30, 2015
	(in thousands)
Residential mortgage loans held-for-investment	$	690,958
Accrued interest receivable		2,235
Total assets	$	693,193
Accrued interest payable	$	2,050
Asset-backed securities issued by securitization trusts		640,283
Total liabilities	$	642,333

Our risk with respect to each investment in a securitization trust is limited to our direct ownership in the securitization trust. We own all of the subordinate classes of the trusts (Class B-1 through B-5). The residential mortgage loans held by the consolidated securitization trusts are held solely to satisfy the liabilities of the securitization trusts, and the investors in the securitization trusts have no recourse to the general credit of the Company for the ABS issued by the securitization trusts. The assets of a consolidated securitization trust can only be used to satisfy the obligations of that trust. ABS are not paid down according to any schedule but rather as payments are made on the underlying mortgages. The final distribution dates for the two trusts are May 2045 and August 2045, respectively. We are not contractually required and have not provided any additional financial support to the securitization trusts for the period ended September 30, 2015.

Residential Mortgage Loans Held by Consolidated Securitization Trusts

Residential mortgage loans held by consolidated securitization trusts are carried at unpaid principal balances net of any premiums or discounts and allowances for loan losses. The residential mortgage loans are secured by first liens on the underlying residential properties.

The following table details the carrying value for residential mortgage loans held-for-investment at September 30, 2015:

	September 30, 2015
	(in thousands)
Principal balance	$	680,919
Paydowns receivable		83
Unamortized premium net of discount		10,096
Allowance for loan losses		(140	)
Carrying value	$	690,958

The following table details various portfolio characteristics of the residential mortgage loans held-for-investment at September 30, 2015:

	September 30, 2015
Portfolio Characteristics:	(dollar amounts in thousands)
Number of loans		948
Current principal balance	$	680,919
Average loan balance	$	718
Net weighted average coupon rate		3.94	%
Weighted average maturity (years)		29.5
Weighted average FICO score		761
Current Performance:
Current	$	680,090
30 days delinquent		829
60 days delinquent		-
90+ days delinquent		-
Bankruptcy/foreclosure		-
Total	$	680,919

The following table summarizes the geographic concentrations of residential mortgage loans held-for-investment at September 30, 2015 based on principal balance outstanding:

State	Percent
California		48.7	%
Florida		5.7
Other states (none greater than 5%)		45.6
Total		100.0	%

Allowance for Loan Losses on Residential Mortgage Loans Held by Consolidated Securitization Trusts

As discussed in Note 1, “Summary of Significant Accounting Policies,” the Company establishes and maintains an allowance for loan losses on residential mortgage loans held by consolidated securitization trusts based on the Company’s estimate of credit losses.

The following table summarizes the activity in the allowance for loan losses for the three and nine months ended September 30, 2015:

	Three Months Ended September 30, 2015			Nine Months Ended September 30, 2015
	(in thousands)
Balance at beginning of period	$	(70	)	$	-
Additions		(70	)		(140	)
Charge-offs, net		-			-
Reduction in (provision) for loan losses		-			-
Balance at end of period	$	(140	)	$	(140	)

Asset-Backed Securities Issued by Securitization Trusts

Asset-backed securities issued by securitization trusts are recorded at principal balances net of unamortized premiums and discounts. Asset-backed securities issued by securitization trusts are issued in various tranches and have a principal balance of $640.3 million at September 30, 2015. The investors in the asset-backed securities are not affiliated with the Company and have no recourse to the general credit of the Company.