Note 9 - Financing Arrangements, Portfolio Investments

9 Months Ended

Sep. 30, 2014

Disclosure Text Block [Abstract]

Repurchase Agreements, Resale Agreements, Securities Borrowed, and Securities Loaned Disclosure [Text Block]

9.                Financing Arrangements, Portfolio Investments

The Company has entered into repurchase agreements with third party financial institutions to finance its investment portfolio. The repurchase agreements are short-term borrowings that bear interest rates typically based on a spread to LIBOR, and are secured by the securities which they finance. At September 30, 2014, the Company had repurchase agreements with an outstanding balance of $627.9 million and a weighted average interest rate of 0.42%.  At December 31, 2013, the Company had repurchase agreements with an outstanding balance of $791.1 million and a weighted average interest rate of 0.49%. As of September 30, 2014 and December 31, 2013, the average days to maturity for all repurchase agreements were 41 days and 31 days, respectively. The Company’s accrued interest payable on outstanding repurchase agreements at September 30, 2014 and December 31, 2013 amounts to $0.2 million and $0.6 million, respectively, and is included in accrued expenses and other liabilities on the Company’s condensed consolidated balance sheets.

The following table presents detailed information about the Company’s borrowings under repurchase agreements and associated assets pledged as collateral at September 30, 2014 and December 31, 2013 (dollar amounts in thousands):

	September 30, 2014						December 31, 2013
	Outstanding Repurchase Agreements		Fair Value of Collateral Pledged		Amortized Cost Of Collateral Pledged		Outstanding Repurchase Agreements		Fair Value of Collateral Pledged		Amortized Cost Of Collateral Pledged
Agency RMBS
Agency ARMs	$	152,735	$	163,112	$	165,517	$	197,974	$	208,703	$	214,039
Agency Fixed Rate		393,141		419,560		433,849		489,953		516,010		541,580
Agency IOs		82,005		101,242		111,540		94,698		113,721		122,878
CLOs		—		—		—		8,500		14,789		8,947
Balance at end of the period	$	627,881	$	683,914	$	710,906	$	791,125	$	853,223	$	887,444

The following table presents contractual maturity information about the Company’s outstanding repurchase agreements at September 30, 2014 and December 31, 2013 (dollar amounts in thousands):

Contractual Maturity	September 30, 2014		December 31, 2013
Within 30 days	$	379,951	$	509,564
Over 30 days to 90 days		181,544		281,561
Over 90 days		66,386		—
Total	$	627,881	$	791,125

As of September 30, 2014 and December 31, 2013, the outstanding balance under our repurchase agreements was funded at an advance rate of 92.2% that implies an average haircut of 7.8%. The weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS (excluding Agency IOs), Agency IOs and CLOs was approximately 5%, 25% and 35%, respectively, for a total weighted average “haircut” of 7.8%.   

In the event we are unable to obtain sufficient short-term financing through repurchase agreements or otherwise, or our lenders start to require additional collateral, we may have to liquidate our investment securities at a disadvantageous time, which could result in losses. Any losses resulting from the disposition of our investment securities in this manner could have a material adverse effect on our operating results and net profitability. At September 30, 2014 and December 31, 2013, the Company had repurchase agreements with 11 counterparties. As of September 30, 2014 and December 31, 2013, we had no counterparties where the amount at risk was in excess of 5% of Stockholders’ Equity. The amount at risk is defined as the fair value of securities pledged as collateral to the repurchase agreement in excess of the repurchase agreement liability.

As of September 30, 2014, the Company had $28.5 million in cash and $208.4 million in unencumbered investment securities to meet additional haircut or market valuation requirements, including $127.3 million of RMBS, of which $125.2 million are Agency RMBS, and $46.0 million of CMBS. The $28.5 million of cash, the $127.3 million in RMBS, $46.0 million of CMBS and $46.7 million held in overnight deposits in our Agency IO portfolio included in restricted cash (that is available to meet margin calls as it relates to our Agency IO portfolio repurchase agreements), which collectively represent 39.6% of our financing arrangements, are liquid and could be monetized to pay down or collateralize the liability immediately.