Collateralized Loan Obligations (CLOs) and Consolidated Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The table below represents the assets and liabilities of the consolidated CLOs that are included in the Company’s consolidated balance sheet as of the dates indicated:



	As of
	June 30, 2015		December 31, 2014
Assets:
Cash and cash equivalents – restricted	$	100,319	$	146,281
Investment in loans, at fair value	1,745,934		1,803,205
Investment in trading assets, at fair value	10,392		21,858
Due from brokers	22,229		2,138
Accrued interest receivable	4,145		4,496
Other assets	11		116
Total assets of consolidated CLOs	$	1,883,030	$	1,978,094

Liabilities:
Notes payable	$	1,789,223	$	1,785,207
Due to brokers	31,211		81,623
Accrued interest payable	14,202		10,098
Other liabilities	602		449
Total liabilities of consolidated CLOs	$	1,835,238	$	1,877,377

Net	$	47,792	$	100,717

The tables below provide further details regarding the CLOs notes payable amounts of $1,789,223 and $1,785,207 as of June 30, 2015 and December 31, 2014, respectively:



	As of
	June 30, 2015							December 31, 2014
Description	Aggregate principal amount			Spread over three months LIBOR				Aggregate principal amount			Spread over three months LIBOR
Telos 6 (maturity January 2027)
Class A-1	$	161,500		1.50	%			$	161,500		1.50	%
Class A-2	60,000			N/A		⁽¹	⁾	60,000			N/A
Class B-1	8,000			2.10	%			8,000			2.10	%
Class B-2	34,000			N/A		⁽²	⁾	34,000			N/A
Class C	22,000			3.00	%			22,000			3.00	%
Class D	20,500			3.90	%			20,500			3.90	%
Class E	16,500			5.00	%			16,500			5.00	%
Subordinated	12,400			N/A				12,400			N/A
Mark to market adjustment	(8,814		)					(14,772		)
Telos 6 Fair Value	$	326,086						$	320,128

Telos 5 (maturity April 2025)
Class A	$	252,000		1.55	%			$	252,000		1.55	%
Class B-1	39,000			N/A		⁽³	⁾	39,000			N/A
Class B-2	7,500			2.15	%			7,500			2.15	%
Class C	32,750			3.00	%			32,750			3.00	%
Class D	19,750			3.65	%			19,750			3.65	%
Class E	18,000			5.00	%			18,000			5.00	%
Class F	7,750			5.50	%			7,750			5.50	%
Subordinated	10,500			N/A				10,500			N/A
Mark to market adjustment	(10,428		)					(15,078		)
Telos 5 Fair Value	$	376,822						$	372,172

Telos 4 (maturity July 2024)
Class A	$	214,000		1.30	%			$	214,000		1.30	%
Class B	46,500			1.80	%			46,500			1.80	%
Class C	29,000			2.75	%			29,000			2.75	%
Class D	19,250			3.50	%			19,250			3.50	%
Class E	16,000			5.00	%			16,000			5.00	%
Class X	1,050			0.95	%			1,750			0.95	%
Subordinated	37,000			N/A				10,700			N/A
Mark to market adjustment	(14,349		)					(14,023		)
Telos 4 Fair Value	$	348,451						$	323,177

Telos 3 (maturity October 2024)
Class A	$	225,000		1.42	%			$	225,000		1.42	%
Class B	36,500			2.25	%			36,500			2.25	%
Class C	26,500			3.00	%			26,500			3.00	%
Class D	18,000			4.25	%			18,000			4.25	%
Class E	15,000			5.50	%			15,000			5.50	%



	As of
	June 30, 2015					December 31, 2014
Class F	6,000			5.50	%	6,000			5.50	%
Subordinated	34,350			N/A		34,350			N/A
Mark to market adjustment	(11,705		)			(13,995		)
Telos 3 Fair Value	$	349,645				$	347,355

Telos 2 (maturity April 2022)
Class A-1	$	66,726		0.26	%	$	97,181		0.26	%
Class A-2	40,000			0.40	%	40,000			0.40	%
Class B	27,500			0.55	%	27,500			0.55	%
Class C	22,000			0.95	%	22,000			0.95	%
Class D	22,000			2.20	%	22,000			2.20	%
Class E	16,000			5.00	%	16,000			5.00	%
Subordinated	44,000			N/A		2,000			N/A
Mark to market adjustment	(15,955		)			(142		)
Telos 2 Fair Value	$	222,271				$	226,539

Telos 1 (maturity October 2021)
Class A-1D	$	—		—	%	$	2,927		0.27	%
Class A-1R	—			—	%	7,805			0.29	%
Class A-1T	—			—	%	10,732			0.27	%
Class A-2	50,797			0.40	%	60,000			0.40	%
Class B	27,200			0.49	%	27,200			0.49	%
Class C	22,000			0.85	%	22,000			0.85	%
Class D	22,000			1.70	%	22,000			1.70	%
Class E	16,000			4.25	%	16,000			4.25	%
Subordinated	40,223			N/A		40,223			N/A
Mark to market adjustment	(12,272		)			(13,051		)
Telos 1 Fair Value	$	165,948				$	195,836

Total notes payable - CLOs	$	1,789,223				$	1,785,207


(1)	Tranche A-2 Notes in Telos 6 have a fixed rate of 3.46% over the life of the CLO. This fixed rate exposure is partially hedged by a $60,000 interest rate swap with BNP Paribas.


(2)	Tranche B-2 Notes in Telos 6 have a fixed rate of 4.78% over the life of the CLO. This fixed rate exposure is partially hedged by a $60,000 interest rate swap with BNP Paribas.


(3)	Tranche B-1 Notes in Telos 5 have a fixed rate of 4.45% over the life of the CLO.

The following table represents revenue and expenses of the consolidated CLOs included in the Company’s consolidated statements of operations for the periods indicated:



	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Income:
Net realized and unrealized losses	$	(5,670	)	$	(1,836	)	$	(14,668	)	$	(5,945	)
Interest income	24,703			19,919			49,364			38,643
Total revenue	19,033			18,083			34,696			32,698
Expenses:
Interest expense	16,506			10,674			30,751			20,340
Other expense	611			338			1,287			644
Total expense	17,117			11,012			32,038			20,984

Net income attributable to consolidated CLOs	$	1,916		$	7,071		$	2,658		$	11,714

The beneficial interests retained by Tiptree include (i) ownership in the subordinated notes and related participations in management fees of the CLOs and (ii) accrued management fees. Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative as prescribed by ASU 2014-13 (see Note 2) results in the net amount of the CLOs shown above to be equivalent to the beneficial interests retained by Tiptree as illustrated in the below table:



Beneficial interests:	As of
	June 30, 2015		December 31, 2014
Subordinated notes	$	45,040	$	97,935
Accrued management fees	2,752		2,782
Total beneficial interests	$	47,792	$	100,717

As summarized in the table below, the application of the measurement alternative as prescribed by ASU 2014-13 (see Note 2) results in the consolidated net income summarized above to be equivalent to Tiptree’s own economic interests in the CLOs which are eliminated upon consolidation:



Economic interests:	Three months ended June 30,					Six months ended June 30,
	2015			2014		2015			2014
Distributions received and realized and unrealized gains and losses on the subordinated notes held by the Company, net	$	(836	)	$	4,061	$	(2,915	)	$	5,582
Management fee income	2,752			3,010		5,573			6,132
Total economic interests	$	1,916		$	7,071	$	2,658		$	11,714

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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