Borrowings

9 Months Ended

Sep. 30, 2019

Secured Borrowings

The Company's secured borrowings consist of repurchase agreements, Other secured borrowings, and Other secured borrowings, at fair value. As of September 30, 2019, the Company's total secured borrowings were $2.586 billion.

Repurchase Agreements

The Company enters into repurchase agreements. A repurchase agreement involves the sale of an asset to a counterparty together with a simultaneous agreement to repurchase the transferred asset or similar asset from such counterparty at a future date. The Company accounts for its repurchase agreements as collateralized borrowings, with the transferred assets effectively serving as collateral for the related borrowing. The Company's repurchase agreements typically range in term from 30 to 180 days, although the Company also has repurchase agreements that provide for longer or shorter terms. The principal economic terms of each repurchase agreement—such as loan amount, interest rate, and maturity date—are typically negotiated on a transaction-by-transaction basis. Other terms and conditions, such as those relating to events of default, are typically governed under the Company's master repurchase agreements. Absent an event of default, the Company maintains beneficial ownership of the transferred securities during the term of the repurchase agreement and receives the related principal and interest payments. Interest rates on these borrowings are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and for most repurchase agreements, interest is generally paid at the termination of the repurchase agreement, at which time the Company may enter into a new repurchase agreement at prevailing market rates with the same counterparty, repay that counterparty and possibly negotiate financing terms with a different counterparty, or choose to no longer finance the related asset. Some repurchase agreements provide for periodic payments of interest, such as monthly payments. In response to a decline in the fair value of the transferred securities, whether as a result of changes in market conditions, security paydowns, or other factors, repurchase agreement counterparties will typically make a margin call, whereby the Company will be required to post additional securities and/or cash as collateral with the counterparty in order to re-establish the agreed-upon collateralization requirements. In the event of increases in fair value of the transferred securities, the Company can generally require the counterparty to post collateral with it in the form of cash or securities. The Company is generally permitted to sell or re-pledge any securities posted by the counterparty as collateral; however, upon termination of the repurchase agreement, or other circumstance in which the counterparty is no longer required to post such margin, the Company must return to the counterparty the same security that had been posted.

At any given time, the Company seeks to have its outstanding borrowings under repurchase agreements with several different counterparties in order to reduce the exposure to any single counterparty. The Company had outstanding borrowings under repurchase agreements with 26 counterparties as of September 30, 2019.

As of September 30, 2019 remaining days to maturity on the Company's open repurchase agreements ranged from 1 day to 963 days. Interest rates on the Company's open repurchase agreements ranged from 0.11% to 5.36% as of September 30, 2019.

The following table details the Company's outstanding borrowings under repurchase agreements for Agency RMBS and credit assets (which include non-Agency RMBS, CMBS, CLOs, consumer loans, corporate debt, residential mortgage loans, and commercial mortgage loans and REO), by remaining maturity as of September 30, 2019:



(In thousands)	September 30, 2019
			Weighted Average
Remaining Maturity	Outstanding Borrowings		Interest Rate		Remaining Days to Maturity
Agency RMBS:
30 Days or Less	$	450,874	2.47	%	14
31-60 Days	559,853		2.28	%	47
61-90 Days	474,877		2.20	%	74
91-120 Days	10,548		2.34	%	94
151-180 Days	4,058		2.15	%	169
Total Agency RMBS	1,500,210		2.31	%	46
Credit:
30 Days or Less	8,077		3.76	%	28
31-60 Days	46,017		3.16	%	47
61-90 Days	73,982		3.42	%	80
91-120 Days	112,620		3.99	%	100
121-150 Days	2,417		3.96	%	142
151-180 Days	15,050		3.81	%	165
181-360 Days	108,752		4.33	%	270
> 360 Days	189,297		4.11	%	666
Total Credit Assets	556,212		3.95	%	320
Total	$	2,056,422	2.75	%	120

Repurchase agreements involving underlying investments that the Company sold prior to period end, for settlement following period end, are shown using their original maturity dates even though such repurchase agreements may be expected to be terminated early upon settlement of the sale of the underlying investment.

As of September 30, 2019, the fair value of investments transferred as collateral under outstanding borrowings under repurchase agreements was $2.370 billion. Collateral transferred under outstanding borrowings under repurchase agreements as of September 30, 2019 include investments in the amount of $145.0 million that were sold prior to period end but for which such sale had not yet settled. In addition the Company posted net cash collateral of $17.7 million and additional securities with a fair value of $0.2 million as of September 30, 2019 to its counterparties.

As of September 30, 2019, there were no counterparties for which the amount at risk relating to our repurchase agreements was greater than 10% of total equity.

Other Secured Borrowings

In February 2018, the Company entered into agreements to finance a portfolio of unsecured loans through a recourse secured borrowing facility. The facility has a two-year term ending in February 2021. The facility accrues interest on a floating-rate basis. As of September 30, 2019, the Company had outstanding borrowings under this facility in the amount of $14.5 million which is included under the caption Other secured borrowings, on the Company's Condensed Consolidated Balance Sheet, and the effective interest rate, inclusive of related deferred financing costs, was 4.14%. As of September 30, 2019, the fair value of unsecured loans collateralizing this borrowing was $22.5 million.

In December 2017, the Company amended its non-recourse secured borrowing facility that is used to finance a portfolio of unsecured loans. The facility includes a reinvestment period ending in December 2019 (or earlier following an early amortization event), whereby the Company can vary its borrowings based on the size of its portfolio, subject to certain maximum limits. Following the reinvestment period, the facility will begin to amortize based on the collections from the underlying loans. The facility accrues interest on a floating rate basis. As of September 30, 2019, the Company had outstanding borrowings under this facility in the amount of $76.6 million, which is included under the caption Other secured borrowings, on the Company's Condensed Consolidated Balance Sheet, and the effective interest rate on this facility, inclusive of related deferred financing costs, was 4.06%. As of September 30, 2019, the fair value of unsecured loans collateralizing this borrowing was $111.0 million.

The Company has completed securitization transactions, as discussed in Note 10, whereby it financed portfolios of non-QM loans. As of September 30, 2019, the fair value of the Company's outstanding liabilities associated with these securitization transactions was $438.6 million, representing the fair value of the securitization trust certificates held by third parties as of such date, and is included on the Company's Condensed Consolidated Balance Sheet in Other secured borrowings, at fair value. The weighted average coupon of the Certificates held by third parties was 3.42% as of September 30, 2019. As of September 30, 2019, the fair value of non-QM loans and the carrying value of REO held in the consolidated securitization trusts was $467.0 million.

Unsecured Borrowings

Senior Notes

On August 18, 2017, the Company issued $86.0 million in aggregate principal amount of unsecured senior notes (the "Old Senior Notes"). The total net proceeds to the Company from the issuance of the Old Senior Notes was approximately $84.7 million, after deducting debt issuance costs. The Old Senior Notes had an interest rate of 5.25%, subject to adjustment based on changes in the ratings, if any, of the Old Senior Notes. On February 13, 2019, in connection with the REIT Election, the Company exchanged all $86.0 million in principal amount of the Old Senior Notes for new unsecured long-term debt jointly and severally co-issued by certain of its consolidated subsidiaries and fully guaranteed by the Company (the "Senior Notes"). At any time, the Company is permitted to add others of its consolidated subsidiaries as co-issuers of the Senior Notes. The Senior Notes bear interest at a rate of 5.50%, subject to adjustment based on changes, if any, in the ratings of the Senior Notes. Interest on the Senior Notes is payable semi-annually in arrears on March 1 and September 1 of each year. The Senior Notes mature on September 1, 2022. The Company may redeem the Senior Notes, at its option, in whole or in part, prior to March 1, 2022 at a price equal to 100% of the principal amount thereof, plus the applicable "make-whole" premium as of the applicable date of redemption. At any time on or after March 1, 2022, the Company may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100% of the aggregate principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest. The Senior Notes are carried at amortized cost. There are a number of covenants, including several financial covenants, associated with the Senior Notes. As of September 30, 2019, the Company was in compliance with all of its covenants.

The Company amortizes debt issuance costs over the life of the associated debt; the amortized portion of debt issuance costs is included in Interest expense on the Condensed Consolidated Statement of Operations. The Senior Notes have an effective interest rate of 5.80%, inclusive of debt issuance costs.

The Senior Notes are unsecured and are effectively subordinated to secured indebtedness of the Company, to the extent of the value of the collateral securing such indebtedness.

Schedule of Principal Repayments

The following table details the Company's principal repayment schedule for outstanding borrowings as of September 30, 2019:



Year	Repurchase Agreements⁽¹⁾		Other Secured Borrowings⁽²⁾		Senior Notes⁽¹⁾		Total
(In thousands)
2019	$	1,621,376	$	171,941	$	—	$	1,793,317
2020	350,369		109,920		—		460,289
2021	—		187,562		—		187,562
2022	84,677		80,336		86,000		251,013
2023	—		—		—		—
Total	$	2,056,422	$	549,759	$	86,000	$	2,692,181


(1)	Reflects the Company's contractual principal repayment dates.


(2)	Reflects the Company's expected principal repayment dates.

Borrowings

Secured Borrowings

The Company's secured borrowings consist of reverse repurchase agreements, Other secured borrowings, and Other secured borrowings, at fair value. As of December 31, 2018 the Company's total secured borrowings were $1.911 billion.

Reverse Repurchase Agreements

The Company enters into reverse repurchase agreements. A reverse repurchase agreement involves the sale of an asset to a counterparty together with a simultaneous agreement to repurchase the transferred asset or similar asset from such counterparty at a future date. The Company accounts for its reverse repurchase agreements as collateralized borrowings, with the transferred assets effectively serving as collateral for the related borrowing. The Company's reverse repurchase agreements typically range in term from 30 to 180 days, although the Company also has reverse repurchase agreements that provide for longer or shorter terms. The principal economic terms of each reverse repurchase agreement—such as loan amount, interest rate, and maturity date—are typically negotiated on a transaction-by-transaction basis. Other terms and conditions, such as those relating to events of default, are typically governed under the Company's master repurchase agreements. Absent an event of default, the Company maintains beneficial ownership of the transferred securities during the term of the reverse repurchase agreement and receives the related principal and interest payments. Interest rates on these borrowings are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and for most reverse repurchase agreements, interest is generally paid at the termination of the reverse repurchase agreement, at which time the Company may enter into a new reverse repurchase agreement at prevailing market rates with the same counterparty, repay that counterparty and possibly negotiate financing terms with a different counterparty, or choose to no longer finance the related asset. Some reverse repurchase agreements provide for periodic payments of interest, such as monthly payments. In response to a decline in the fair value of the transferred securities, whether as a result of changes in market conditions, security paydowns, or other factors, reverse repurchase agreement counterparties will typically make a margin call, whereby the Company will be required to post additional securities and/or cash as collateral with the counterparty in order to re-establish the agreed-upon collateralization requirements. In the event of increases in fair value of the transferred securities, the Company can generally require the counterparty to post collateral with it in the form of cash or securities. The Company is generally permitted to sell or re-pledge any securities posted by the counterparty as collateral; however, upon termination of the reverse repurchase agreement, or other circumstance in which the counterparty is no longer required to post such margin, the Company must return to the counterparty the same security that had been posted.

At any given time, the Company seeks to have its outstanding borrowings under reverse repurchase agreements with several different counterparties in order to reduce the exposure to any single counterparty. The Company had outstanding borrowings under reverse repurchase agreements with 23 counterparties as of December 31, 2018.

At December 31, 2018, approximately 21% of open reverse repurchase agreements were with one counterparty. As of December 31, 2018 remaining days to maturity on the Company's open reverse repurchase agreements ranged from 2 days to 871 days. Interest rates on the Company's open reverse repurchase agreements ranged from 0.23% to 6.07% as of December 31, 2018.

The following table details the Company's outstanding borrowings under reverse repurchase agreements for Agency RMBS, credit assets (which include non-Agency MBS, CLOs, consumer loans, corporate debt, residential mortgage loans, and commercial mortgage loans and REO), and U.S. Treasury securities, by remaining maturity as of December 31, 2018:



(In thousands)	December 31, 2018
			Weighted Average
Remaining Maturity	Outstanding Borrowings		Interest Rate		Remaining Days to Maturity
Agency RMBS:
30 Days or Less	$	245,956	2.46	%	17
31-60 Days	415,379		2.58	%	46
61-90 Days	255,421		2.74	%	76
91-120 Days	506		3.31	%	91
Total Agency RMBS	917,262		2.59	%	47
Credit:
30 Days or Less	30,426		2.55	%	22
31-60 Days	189,937		3.32	%	48
61-90 Days	93,202		3.21	%	74
121-150 Days	26,222		4.60	%	123
151-180 Days	9,491		4.64	%	166
181-360 Days	91,730		4.54	%	316
> 360 Days	140,306		5.15	%	636
Total Credit Assets	581,314		3.98	%	240
U.S. Treasury Securities:
30 Days or Less	273		3.10	%	2
Total U.S. Treasury Securities	273		3.10	%	2
Total	$	1,498,849	3.13	%	122

Reverse repurchase agreements involving underlying investments that the Company sold prior to period end, for settlement following period end, are shown using their original maturity dates even though such reverse repurchase agreements may be expected to be terminated early upon settlement of the sale of the underlying investment.

As of December 31, 2018, the fair value of investments transferred as collateral under outstanding borrowings under reverse repurchase agreements was $1.79 billion. Collateral transferred under outstanding borrowings as of December 31, 2018 include investments in the amount of $86.7 million that were sold prior to period end but for which such sale had not yet settled. In addition the Company posted net cash collateral of $17.0 million and additional securities with a fair value of $0.2 million as of December 31, 2018 to its counterparties.

As of December 31, 2018, there were no counterparties for which the amount at risk relating to our repurchase agreements was greater than 10% of total equity.

Other Secured Borrowings

In February 2018, the Company entered into agreements to finance a portfolio of unsecured loans through a recourse secured borrowing facility. The facility includes a one year revolving period (or earlier following an early amortization event or event of default), whereby the Company can vary its borrowings based on the size of its portfolio, subject to certain maximum limits. After the revolving period ends, the facility has a two-year term ending in February 2021. The facility accrues interest on a floating rate basis. As of December 31, 2018, the Company had outstanding borrowings under this facility in the amount of $13.2 million which is included under the caption Other secured borrowings, on the Company's Consolidated Statement of Assets, Liabilities, and Equity, and the effective interest rate, inclusive of related deferred financing costs, was 4.72%. As of December 31, 2018, the fair value of unsecured loans collateralizing this borrowing was $20.3 million.

In December 2017, the Company amended its non-recourse secured borrowing facility that is used to finance a portfolio of unsecured loans. The facility includes a reinvestment period ending in December 2019 (or earlier following an early amortization event), whereby the Company can vary its borrowings based on the size of its portfolio, subject to certain maximum limits. Following the reinvestment period, the facility will begin to amortize based on the collections from the underlying loans. The facility accrues interest on a floating rate basis. As of December 31, 2018 the Company had outstanding borrowings under this facility in the amount of $101.0 million which is included under the caption Other secured borrowings, on the Company's Consolidated Statement of Assets, Liabilities, and Equity, and the effective interest rate on this facility, inclusive of related deferred financing costs, was 4.68% as of December 31, 2018. As of December 31, 2018 the fair value of unsecured loans collateralizing this borrowing was $149.0 million.

The Company has completed securitization transactions, as discussed in Note 6, whereby it financed portfolios of non-QM loans. As of December 31, 2018 the fair value of the Company’s outstanding liabilities associated with these securitization transactions were $297.9 million, representing the fair value of the securitization trust certificates held by third parties as of such date, and is included on Company's Consolidated Statement of Assets, Liabilities, and Equity in Other Secured Borrowings, at fair value. The weighted average coupon on the Certificates held by third parties was 3.72% as of December 31, 2018. As of December 31, 2018 the fair value of non-QM loans held in the securitization trusts were $314.2 million.

Unsecured Borrowings

Senior Notes

On August 18, 2017, the Company issued $86.0 million in aggregate principal amount of Senior Notes. The total net proceeds to the Company from the issuance of the Senior Notes was approximately $84.7 million, after deducting debt issuance costs. The Senior Notes bear an interest rate of 5.25%, subject to adjustment based on changes in the ratings, if any, of the Senior Notes. Interest on the Senior notes is payable semi-annually in arrears on March 1 and September 1 of each year. The Senior Notes mature on September 1, 2022. The Company may redeem the Senior Notes, at its option, in whole or in part, prior to March 1, 2022 at a price equal to 100% of the principal amount thereof, plus the applicable "make-whole" premium as of the applicable date of redemption. At any time on or after March 1, 2022, the Company may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100% of the aggregate principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest. The Senior Notes are carried at amortized cost. There are a number of covenants, including several financial covenants, associated with the Senior Notes. As of December 31, 2018 the Company was in compliance with all of its covenants.

The Company amortizes debt issuance costs over the life of the associated debt; the amortized portion of debt issuance costs is included in Interest expense on the Consolidated Statement of Operations. The Senior Notes have an effective interest rate of 5.55%, inclusive of debt issuance costs.

The Senior Notes are unsecured and are effectively subordinated to secured indebtedness of the Company, to the extent of the value of the collateral securing such indebtedness.

Schedule of Principal Repayments

The following table details the Company's principal repayment schedule for outstanding borrowings as of December 31, 2018:



Year	Reverse Repurchase Agreements⁽¹⁾		Other Secured Borrowings⁽²⁾		Senior Notes⁽¹⁾		Total
(In thousands)
2019	$	1,358,542	$	194,135	$	—	$	1,552,677
2020	78,530		205,198		—		283,728
2021	61,776		13,150		—		74,926
2022	—		—		86,000		86,000
2023	—		—		—		—
Total	$	1,498,848	$	412,483	$	86,000	$	1,997,331


(1)	Reflects the Company's contractual principal repayment dates.


(2)	Reflects the Company's expected principal repayment dates.