MARYLAND
|
26-0630461
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
Part I. FINANCIAL INFORMATION | |||
Item 1. Consolidated Financial Statements: | |||
1
|
|||
2
|
|||
3
|
|||
4
|
|||
5
|
|||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
37
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||
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
62
|
||
Item 4. Controls and Procedures |
66
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||
Part II. OTHER INFORMATION |
67
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||
Item 1. Legal Proceedings |
67
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Item 1A. Risk Factors |
67
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||
Item 5. Other Information |
67
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Item 6. Exhibits |
68
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SIGNATURES |
S-1
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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
||||||||
(dollars in thousands, except share and per share data)
|
||||||||
June 30, 2014
(Unaudited)
|
December 31, 2013
(1)
|
|||||||
Assets:
|
||||||||
Cash and cash equivalents
|
$ | 73,871 | $ | 77,629 | ||||
Non-Agency RMBS, at fair value
|
||||||||
Senior
|
230,465 | 89,687 | ||||||
Senior interest-only
|
220,131 | 229,065 | ||||||
Subordinated
|
485,544 | 457,569 | ||||||
Subordinated interest-only
|
15,609 | 16,571 | ||||||
Agency RMBS, at fair value
|
||||||||
Pass-through
|
7,976,923 | 1,954,796 | ||||||
Interest-only
|
38,627 | 42,782 | ||||||
Receivable for investments sold
|
- | 253,541 | ||||||
Accrued interest receivable
|
31,105 | 15,821 | ||||||
Other assets (includes Due from FIDAC of $2 million and $0, respectively)
|
82,182 | 8,297 | ||||||
Derivatives, at fair value, net
|
- | 8,095 | ||||||
Subtotal
|
9,154,457 | 3,153,853 | ||||||
Assets of Consolidated VIEs:
|
||||||||
Non-Agency RMBS transferred to consolidated variable interest entities ("VIEs"), at fair value
|
2,682,308 | 2,981,571 | ||||||
Securitized loans held for investment, net of allowance for loan losses of $9 million, respectively
|
714,471 | 783,484 | ||||||
Accrued interest receivable
|
14,681 | 17,173 | ||||||
Subtotal
|
3,411,460 | 3,782,228 | ||||||
Total assets
|
$ | 12,565,917 | $ | 6,936,081 | ||||
Liabilities:
|
||||||||
Repurchase agreements, RMBS ($6.1 billion and $1.7 billion pledged as collateral, respectively)
|
$ | 5,564,554 | $ | 1,658,561 | ||||
Payable for investments purchased
|
2,030,128 | - | ||||||
Accrued interest payable
|
9,018 | 1,397 | ||||||
Dividends payable
|
92,455 | 297,904 | ||||||
Accounts payable and other liabilities
|
1,094 | 1,861 | ||||||
Investment management fees and expenses payable to affiliate
|
6,280 | 5,658 | ||||||
Derivatives, at fair value
|
25,325 | 30,199 | ||||||
Subtotal
|
7,728,854 | 1,995,580 | ||||||
Non-Recourse Liabilities of Consolidated VIEs
|
||||||||
Securitized debt, collateralized by Non-Agency RMBS ($2.7 billion and $3.0 billion pledged as
collateral, respectively)
|
787,162 | 933,732 | ||||||
Securitized debt, collateralized by loans held for investment ($703 million and $763 million pledged as
collateral, respectively)
|
604,655 | 669,981 | ||||||
Accrued interest payable
|
4,545 | 5,278 | ||||||
Subtotal
|
1,396,362 | 1,608,991 | ||||||
Total liabilities
|
$ | 9,125,216 | $ | 3,604,571 | ||||
Commitments and Contingencies (See Note 16)
|
||||||||
Stockholders' Equity:
|
||||||||
Preferred Stock: par value $0.01 per share; 100,000,000 shares authorized, 0 shares issued and outstanding,
respectively
|
$ | - | $ | - | ||||
Common stock: par value $0.01 per share; 1,500,000,000 shares authorized, 1,027,534,449 and 1,027,626,237
shares issued and
outstanding, respectively
|
10,273 | 10,272 | ||||||
Additional paid-in-capital
|
3,605,358 | 3,605,241 | ||||||
Accumulated other comprehensive income (loss)
|
1,079,648 | 990,803 | ||||||
Retained earnings (accumulated deficit)
|
(1,254,578 | ) | (1,274,806 | ) | ||||
Total stockholders' equity
|
$ | 3,440,701 | $ | 3,331,510 | ||||
Total liabilities and stockholders' equity
|
$ | 12,565,917 | $ | 6,936,081 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||
(dollars in thousands, except share and per share data)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
For the Quarter Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30, 2014
|
June 30, 2013
|
June 30, 2014
|
June 30, 2013
|
|||||||||||||
Net Interest Income:
|
||||||||||||||||
Interest income
|
$ | 49,056 | $ | 33,629 | $ | 84,512 | $ | 62,696 | ||||||||
Interest expense
|
(3,504 | ) | (1,629 | ) | (5,230 | ) | (3,462 | ) | ||||||||
Interest income, Assets of consolidated VIEs
|
85,262 | 93,936 | 170,473 | 190,664 | ||||||||||||
Interest expense, Non-recourse liabilities of consolidated VIEs
|
(17,176 | ) | (24,982 | ) | (37,875 | ) | (51,978 | ) | ||||||||
Net interest income (expense)
|
113,638 | 100,954 | 211,880 | 197,920 | ||||||||||||
Other-than-temporary impairments:
|
||||||||||||||||
Total other-than-temporary impairment losses
|
(3,813 | ) | - | (4,213 | ) | - | ||||||||||
Portion of loss recognized in other comprehensive income (loss)
|
(1,534 | ) | - | (2,668 | ) | (6,163 | ) | |||||||||
Net other-than-temporary credit impairment losses
|
(5,347 | ) | - | (6,881 | ) | (6,163 | ) | |||||||||
Other gains (losses):
|
||||||||||||||||
Net unrealized gains (losses) on derivatives
|
(22,497 | ) | 13,178 | (24,695 | ) | 18,580 | ||||||||||
Net realized gains (losses) on derivatives
|
(19,792 | ) | (5,391 | ) | (25,540 | ) | (10,921 | ) | ||||||||
Net gains (losses) on derivatives
|
(42,289 | ) | 7,787 | (50,235 | ) | 7,659 | ||||||||||
Net unrealized gains (losses) on interest-only RMBS
|
5,791 | (12,974 | ) | 20,801 | (13,987 | ) | ||||||||||
Net realized gains (losses) on sales of investments
|
(4,339 | ) | 54,117 | 4,038 | 54,123 | |||||||||||
Gain on deconsolidation | 47,846 | - | 47,846 | - | ||||||||||||
Loss on Extinguishment of Debt
|
- | - | (2,184 | ) | - | |||||||||||
Total other gains (losses)
|
7,009 | 48,930 | 20,266 | 47,795 | ||||||||||||
Net investment income (loss)
|
115,300 | 149,884 | 225,265 | 239,552 | ||||||||||||
Other expenses:
|
||||||||||||||||
Management fees
|
6,271 | 6,498 | 12,492 | 12,947 | ||||||||||||
Expense recoveries from Manager
|
(2,164 | ) | (3,315 | ) | (2,845 | ) | (5,170 | ) | ||||||||
Net management fees
|
4,107 | 3,183 | 9,647 | 7,777 | ||||||||||||
Provision for loan losses, net
|
214 | (1,703 | ) | 533 | (1,279 | ) | ||||||||||
General and administrative expenses
|
6,210 | 5,197 | 9,946 | 10,044 | ||||||||||||
Total other expenses
|
10,531 | 6,677 | 20,126 | 16,542 | ||||||||||||
Income (loss) before income taxes
|
104,769 | 143,207 | 205,139 | 223,010 | ||||||||||||
Income taxes
|
- | - | 2 | 2 | ||||||||||||
Net income (loss)
|
$ | 104,769 | $ | 143,207 | $ | 205,137 | $ | 223,008 | ||||||||
Net income (loss) per share available to common shareholders:
|
||||||||||||||||
Basic
|
$ | 0.10 | $ | 0.14 | $ | 0.20 | $ | 0.22 | ||||||||
Diluted
|
$ | 0.10 | $ | 0.14 | $ | 0.20 | $ | 0.22 | ||||||||
Weighted average number of common shares outstanding:
|
||||||||||||||||
Basic
|
1,027,208,949 | 1,027,066,041 | 1,027,235,633 | 1,027,052,341 | ||||||||||||
Diluted
|
1,027,534,449 | 1,027,593,441 | 1,027,561,456 | 1,027,594,472 | ||||||||||||
Dividends declared per share of common stock
|
$ | 0.09 | $ | 0.09 | $ | 0.18 | $ | 0.18 | ||||||||
Comprehensive income (loss):
|
||||||||||||||||
Net income (loss)
|
$ | 104,769 | $ | 143,207 | $ | 205,137 | $ | 223,008 | ||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
100,647 | (22,582 | ) | 138,150 | 95,012 | |||||||||||
Reclassification adjustment for net losses included in net income (loss) for other-than-
temporary credit impairment losses
|
5,347 | - | 6,881 | 6,163 | ||||||||||||
Reclassification adjustment for net realized losses (gains) included in net income (loss)
|
37 | (54,117 | ) | (8,340 | ) | (54,123 | ) | |||||||||
Reclassification adjustment for gain on deconsolidation included in net income | (47,846 | ) | - | (47,846 | ) | - | ||||||||||
Other comprehensive income (loss)
|
58,185 | (76,699 | ) | 88,845 | 47,052 | |||||||||||
Comprehensive income (loss)
|
$ | 162,954 | $ | 66,508 | $ | 293,982 | $ | 270,060 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||||||
Common Stock
Par Value
|
Additional
Paid-in Capital
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Retained
Earnings
(Accumulated
Deficit)
|
Total
|
||||||||||||||||
Balance, December 31, 2012
|
$ | 10,268 | $ | 3,604,554 | $ | 989,936 | $ | (1,062,279 | ) | $ | 3,542,479 | |||||||||
Net income
|
- | - | - | 223,008 | 223,008 | |||||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
- | - | 95,012 | - | 95,012 | |||||||||||||||
Reclassification adjustment for net losses included in net
income (loss) for other-than-temporary credit impairment
losses
|
- | - | 6,163 | - | 6,163 | |||||||||||||||
Reclassification adjustment for net realized losses (gains)
included in net income (loss)
|
- | - | (54,123 | ) | - | (54,123 | ) | |||||||||||||
Proceeds from restricted stock grants
|
3 | 160 | - | - | 163 | |||||||||||||||
Common dividends declared, $0.18 per share
|
- | - | - | (184,869 | ) | (184,869 | ) | |||||||||||||
Balance, June 30, 2013
|
$ | 10,271 | $ | 3,604,714 | $ | 1,036,988 | $ | (1,024,140 | ) | $ | 3,627,833 | |||||||||
Balance, December 31, 2013
|
$ | 10,272 | $ | 3,605,241 | $ | 990,803 | $ | (1,274,806 | ) | $ | 3,331,510 | |||||||||
Net income
|
- | - | - | 205,137 | 205,137 | |||||||||||||||
Unrealized gains (losses) on available-for-sale securities, net
|
- | - | 138,150 | - | 138,150 | |||||||||||||||
Reclassification adjustment for net losses included in net income
(loss) for other-than-
temporary credit impairment losses
|
- | - | 6,881 | - | 6,881 | |||||||||||||||
Reclassification adjustment for net realized losses (gains)
included in net income (loss)
|
- | - | (8,340 | ) | - | (8,340 | ) | |||||||||||||
Reclassification adjustment for gain on
deconsolidation
included in net income
|
- | - | (47,846 | ) | - | (47,846 | ) | |||||||||||||
Proceeds from restricted stock grants
|
1 | 117 | - | - | 118 | |||||||||||||||
Common dividends declared, $0.18 per share
|
- | - | - | (184,909 | ) | (184,909 | ) | |||||||||||||
Balance, June 30, 2014
|
$ | 10,273 | $ | 3,605,358 | $ | 1,079,648 | $ | (1,254,578 | ) | $ | 3,440,701 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(dollars in thousands)
|
||||||||
For the Six Months Ended
|
||||||||
June 30, 2014 |
June 30, 2013
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net income (loss)
|
$ | 205,137 | $ | 223,008 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
(Accretion) amortization of investment discounts/premiums, net
|
(39,925 | ) | (40,603 | ) | ||||
Amortization of deferred financing costs
|
1,177 | 3,850 | ||||||
Accretion (amortization) of securitized debt discounts/premiums, net
|
5,064 | 4,753 | ||||||
Net unrealized losses (gains) on derivatives
|
24,695 | (18,580 | ) | |||||
Net realized losses (gains) on option contracts settled
|
1,246 | - | ||||||
Proceeds (payments) for derivative sales and settlements
|
5,477 | - | ||||||
Margin (paid) received on derivatives | (99,817 | ) | - | |||||
Net unrealized losses (gains) on interest-only RMBS
|
(20,801 | ) | 13,987 | |||||
Net realized losses (gains) on sales of investments
|
(4,038 | ) | (54,123 | ) | ||||
Gain on deconsolidation | (47,846 | ) | - | |||||
Net other-than-temporary credit impairment losses
|
6,881 | 6,163 | ||||||
Loss on extinguishment of securitized debt
|
2,184 | - | ||||||
Provision for loan losses, net
|
533 | (1,279 | ) | |||||
Equity-based compensation expense
|
118 | 163 | ||||||
Changes in operating assets:
|
||||||||
Decrease (increase) in accrued interest receivable, net
|
(10,176 | ) | 1,795 | |||||
Decrease (increase) in other assets
|
(2,420 | ) | 675 | |||||
Changes in operating liabilities:
|
||||||||
Increase (decrease) in accounts payable and other liabilities
|
(767 | ) | 1,129 | |||||
Increase (decrease) in investment management fees and expenses payable to affiliate
|
622 | (1,877 | ) | |||||
Increase (decrease) in accrued interest payable, net
|
6,888 | (3,008 | ) | |||||
Net cash provided by (used in) operating activities
|
$ | 34,232 | $ | 136,053 | ||||
Cash Flows From Investing Activities:
|
||||||||
Agency RMBS portfolio:
|
||||||||
Purchases
|
$ | (4,333,388 | ) | $ | (934,685 | ) | ||
Sales
|
578,848 | 285,698 | ||||||
Principal payments
|
121,100 | 300,187 | ||||||
Non-Agency RMBS portfolio:
|
||||||||
Purchases
|
(188,779 | ) | (174,661 | ) | ||||
Sales
|
49,446 | 143,864 | ||||||
Principal payments
|
16,927 | 3,323 | ||||||
Non-Agency RMBS transferred to consolidated VIEs:
|
||||||||
Sales
|
212,394 | - | ||||||
Principal payments
|
141,323 | 230,947 | ||||||
Securitized loans held for investment:
|
||||||||
Principal payments
|
67,423 | 367,765 | ||||||
Net cash provided by (used in) investing activities
|
$ | (3,334,706 | ) | $ | 222,438 | |||
Cash Flows From Financing Activities:
|
||||||||
Proceeds from repurchase agreements
|
$ | 8,805,230 | $ | 3,633,247 | ||||
Payments on repurchase agreements
|
(4,899,237 | ) | (3,683,131 | ) | ||||
Payments on securitized debt borrowings, collateralized by loans held for investment
|
(65,545 | ) | (363,451 | ) | ||||
Payments on securitized debt borrowings, collateralized by Non-Agency RMBS
|
(97,302 | ) | (213,292 | ) | ||||
Repurchase of securitized debt borrowings, collateralized by Non-Agency RMBS
|
(56,072 | ) | - | |||||
Common dividends paid
|
(390,358 | ) | (184,864 | ) | ||||
Net cash provided by (used in) financing activities
|
$ | 3,296,716 | (811,491 | ) | ||||
Net increase (decrease) in cash and cash equivalents
|
(3,758 | ) | (453,000 | ) | ||||
Cash and cash equivalents at beginning of period
|
77,629 | 621,153 | ||||||
Cash and cash equivalents at end of period
|
$ | 73,871 | $ | 168,153 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Interest received
|
$ | 202,267 | $ | 214,552 | ||||
Interest paid
|
$ | 29,976 | $ | 49,846 | ||||
Management fees and expenses paid to affiliate
|
$ | 11,870 | $ | 14,824 | ||||
Non-cash investing activities:
|
||||||||
Payable for investments purchased
|
$ | 2,030,128 | $ | - | ||||
Net change in unrealized gain (loss) on available-for sale securities
|
$ | 88,845 | $ | 47,052 | ||||
Non-cash financing activities:
|
||||||||
Common dividends declared, not yet paid
|
$ | 92,455 | $ | 92,436 |
●
|
Agency RMBS
|
●
|
Non-Agency RMBS that meet all of the following conditions at the acquisition date (referred to hereafter as “Non-Agency RMBS of High Credit Quality”):
|
1.
|
Rated AA or higher by a nationally recognized credit rating agency. The Company uses the lowest rating available.
|
2.
|
The Company expects to collect all of the security’s contractual cash flows.
|
3.
|
The security cannot be contractually prepaid such that the Company would not recover substantially all of its recorded investment.
|
1.
|
There is evidence of deterioration in credit quality of the security from its inception.
|
2.
|
It is probable that the Company will be unable to collect all contractual cash flows of the security.
|
1.
|
The security is not of high credit quality (defined as rated below AA or is unrated), or
|
2.
|
The security can contractually be prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment.
|
June 30, 2014
|
||||||||||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||||||
Principal or
Notional Value
|
Total
Premium
|
Total
Discount
|
Amortized
Cost
|
Fair
Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Net
Unrealized
Gain/(Loss)
|
|||||||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||||||||||||||
Senior
|
$ | 317,544 | $ | - | $ | (99,313 | ) | $ | 218,231 | $ | 230,465 | $ | 12,251 | $ | (17 | ) | $ | 12,234 | ||||||||||||||
Senior interest-only
|
5,605,322 | 252,851 | - | 252,851 | 220,131 | 14,739 | (47,459 | ) | (32,720 | ) | ||||||||||||||||||||||
Subordinated
|
807,222 | - | (465,550 | ) | 341,672 | 485,544 | 144,534 | (662 | ) | 143,872 | ||||||||||||||||||||||
Subordinated interest-only
|
266,766 | 13,364 | - | 13,364 | 15,609 | 2,717 | (472 | ) | 2,245 | |||||||||||||||||||||||
RMBS transferred to consolidated VIEs
|
3,471,222 | 6,989 | (1,568,428 | ) | 1,834,492 | 2,682,308 | 847,816 | - | 847,816 | |||||||||||||||||||||||
Agency RMBS
|
||||||||||||||||||||||||||||||||
Pass-through
|
7,522,103 | 374,289 | - | 7,896,392 | 7,976,923 | 103,000 | (22,469 | ) | 80,531 | |||||||||||||||||||||||
Interest-only
|
219,301 | 41,273 | - | 41,273 | 38,627 | 329 | (2,975 | ) | (2,646 | ) | ||||||||||||||||||||||
Total | $ | 18,209,480 | $ | 688,766 | $ | (2,133,291 | ) | $ | 10,598,275 | $ | 11,649,607 | $ | 1,125,386 | $ | (74,054 | ) | $ | 1,051,332 |
December 31, 2013
|
||||||||||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||||||
Principal or
Notional Value
|
Total
Premium
|
Total
Discount
|
Amortized
Cost
|
Fair
Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Net
Unrealized
Gain/(Loss)
|
|||||||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||||||||||||||
Senior
|
$ | 128,217 | $ | - | $ | (39,395 | ) | $ | 88,822 | $ | 89,687 | $ | 974 | $ | (109 | ) | $ | 865 | ||||||||||||||
Senior interest-only
|
5,742,781 | 283,271 | - | 283,271 | 229,065 | 11,802 | (66,008 | ) | (54,206 | ) | ||||||||||||||||||||||
Subordinated
|
830,632 | - | (490,400 | ) | 340,232 | 457,569 | 119,233 | (1,896 | ) | 117,337 | ||||||||||||||||||||||
Subordinated interest-only
|
274,462 | 14,666 | - | 14,666 | 16,571 | 2,483 | (578 | ) | 1,905 | |||||||||||||||||||||||
RMBS transferred to consolidated VIEs
|
3,912,376 | 7,490 | (1,763,401 | ) | 2,075,628 | 2,981,571 | 905,943 | - | 905,943 | |||||||||||||||||||||||
Agency RMBS
|
||||||||||||||||||||||||||||||||
Pass-through
|
1,898,131 | 90,843 | (5,004 | ) | 1,983,970 | 1,954,796 | 22,320 | (51,494 | ) | (29,174 | ) | |||||||||||||||||||||
Interest-only
|
247,344 | 43,766 | - | 43,766 | 42,782 | 332 | (1,316 | ) | (984 | ) | ||||||||||||||||||||||
Total | $ | 13,033,943 | $ | 440,036 | $ | (2,298,200 | ) | $ | 4,830,355 | $ | 5,772,041 | $ | 1,063,087 | $ | (121,401 | ) | $ | 941,686 |
For the Quarter Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30, 2014
|
June 30, 2013
|
June 30, 2014
|
June 30, 2013
|
|||||||||||||
(dollars in thousands)
|
(dollars in thousands)
|
|||||||||||||||
Balance at beginning of period
|
$ | 1,726,475 | $ | 2,014,789 | $ | 1,794,577 | $ | 2,107,387 | ||||||||
Purchases
|
15,275 | - | 39,564 | - | ||||||||||||
Accretion
|
(73,164 | ) | (82,995 | ) | (150,449 | ) | (168,930 | ) | ||||||||
Reclassification (to) from non-accretable difference
|
53,356 | 18,297 | 39,376 | 11,665 | ||||||||||||
Sales and deconsolidation
|
(91,789 | ) | (28,404 | ) | (92,915 | ) | (28,435 | ) | ||||||||
Balance at end of period
|
$ | 1,630,153 | $ | 1,921,687 | $ | 1,630,153 | $ | 1,921,687 |
For the Quarter Ended
|
For the Year Ended
|
|||||||
June 30, 2014
|
December 31, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Outstanding principal balance:
|
||||||||
Beginning of period
|
$ | 3,936,908 | $ | 4,508,475 | ||||
End of period
|
$ | 3,664,543 | $ | 3,949,664 | ||||
Amortized cost:
|
||||||||
Beginning of period
|
$ | 2,043,076 | $ | 2,268,751 | ||||
End of period
|
$ | 1,891,872 | $ | 2,027,738 |
June 30, 2014
|
||||||||||||||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||||||||||
Unrealized Loss Position for Less than 12 Months
|
Unrealized Loss Position for 12 Months or More
|
Total
|
||||||||||||||||||||||||||||||||||
Estimated
Fair Value
|
Unrealized
Losses
|
Number of Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of Securities
|
||||||||||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||||||||||||||||||
Senior
|
$ | 13,534 | $ | (17 | ) | 1 | $ | - | $ | - | - | $ | 13,534 | $ | (17 | ) | 1 | |||||||||||||||||||
Senior interest-only
|
46,481 | (7,236 | ) | 39 | 93,967 | (40,223 | ) | 43 | 140,448 | (47,459 | ) | 82 | ||||||||||||||||||||||||
Subordinated
|
- | - | - | 11,398 | (662 | ) | 3 | 11,398 | (662 | ) | 3 | |||||||||||||||||||||||||
Subordinated interest-only
|
1,291 | (472 | ) | 3 | - | - | - | 1,291 | (472 | ) | 3 | |||||||||||||||||||||||||
RMBS transferred to consolidated VIEs
|
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Agency RMBS
|
||||||||||||||||||||||||||||||||||||
Pass-through
|
212,680 | (87 | ) | 3 | 738,346 | (22,382 | ) | 14 | 951,026 | (22,469 | ) | 17 | ||||||||||||||||||||||||
Interest-only
|
23,682 | (1,099 | ) | 3 | 10,896 | (1,876 | ) | 3 | 34,578 | (2,975 | ) | 6 | ||||||||||||||||||||||||
Total
|
$ | 297,668 | $ | (8,911 | ) | 49 | $ | 854,607 | $ | (65,143 | ) | 63 | $ | 1,152,275 | $ | (74,054 | ) | 112 |
December 31, 2013
|
||||||||||||||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||||||||||
Unrealized Loss Position for Less than 12 Months
|
Unrealized Loss Position for 12 Months or More
|
Total
|
||||||||||||||||||||||||||||||||||
Estimated
Fair Value
|
Unrealized
Losses
|
Number of Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of Securities
|
||||||||||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||||||||||||||||||
Senior
|
$ | 28,163 | $ | (109 | ) | 3 | $ | - | $ | - | - | $ | 28,163 | $ | (109 | ) | 3 | |||||||||||||||||||
Senior interest-only
|
119,913 | (35,252 | ) | 54 | 45,167 | (30,756 | ) | 28 | 165,080 | (66,008 | ) | 82 | ||||||||||||||||||||||||
Subordinated
|
- | - | - | 17,661 | (1,896 | ) | 2 | 17,661 | (1,896 | ) | 2 | |||||||||||||||||||||||||
Subordinated interest-only
|
1,062 | (578 | ) | 2 | - | - | - | 1,062 | (578 | ) | 2 | |||||||||||||||||||||||||
RMBS transferred to consolidated VIEs
|
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Agency RMBS
|
||||||||||||||||||||||||||||||||||||
Pass-through
|
1,126,881 | (51,494 | ) | 30 | - | - | - | 1,126,881 | (51,494 | ) | 30 | |||||||||||||||||||||||||
Interest-only
|
22,246 | (1,018 | ) | 4 | 491 | (298 | ) | 3 | 22,737 | (1,316 | ) | 7 | ||||||||||||||||||||||||
Total
|
$ | 1,298,265 | $ | (88,451 | ) | 93 | $ | 63,319 | $ | (32,950 | ) | 33 | $ | 1,361,584 | $ | (121,401 | ) | 126 |
For the Quarter Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Total other-than-temporary impairment losses
|
$ | (3,813 | ) | $ | - | |||
Portion of loss recognized in other comprehensive income (loss)
|
(1,534 | ) | - | |||||
Net other-than-temporary credit impairment losses
|
$ | (5,347 | ) | $ | - |
For the Six Months Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Total other-than-temporary impairment losses
|
$ | (4,213 | ) | $ | - | |||
Portion of loss recognized in other comprehensive income (loss)
|
(2,668 | ) | (6,163 | ) | ||||
Net other-than-temporary credit impairment losses
|
$ | (6,881 | ) | $ | (6,163 | ) |
For the Quarter Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Cumulative credit loss beginning balance
|
$ | 521,483 | $ | 513,946 | ||||
Additions:
|
||||||||
Other-than-temporary impairments not previously recognized
|
5,347 | - | ||||||
Reductions for securities sold or deconsolidated during the period
|
(11,214 | ) | (10,760 | ) | ||||
Increases related to other-than-temporary impairments on securities with
previously recognized other-than-temporary impairments
|
- | - | ||||||
Reductions for increases in cash flows expected to be collected that are
recognized over the remaining life of the security
|
(3,033 | ) | (4,934 | ) | ||||
Cumulative credit loss ending balance
|
$ | 512,583 | $ | 498,252 |
For the Six Months Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Cumulative credit loss beginning balance
|
$ | 524,432 | $ | 510,089 | ||||
Additions:
|
||||||||
Other-than-temporary impairments not previously recognized
|
6,881 | 712 | ||||||
Reductions for securities sold or deconsolidated during the period
|
(12,884 | ) | (11,119 | ) | ||||
Increases related to other-than-temporary impairments on securities with
previously recognized other-than-temporary impairments
|
- | 5,451 | ||||||
Reductions for increases in cash flows expected to be collected over the
remaining life of the securities
|
(5,846 | ) | (6,881 | ) | ||||
Cumulative credit impairment loss ending balance
|
$ | 512,583 | $ | 498,252 |
June 30, 2014
|
||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Gross Unrealized
Gain Included in Accumulated Other Comprehensive Income
|
Gross Unrealized
Gain Included in Accumulated Deficit
|
Total Gross
Unrealized Gain
|
Gross Unrealized
Loss Included in Accumulated Other Comprehensive Income
|
Gross Unrealized
Loss Included in Accumulated Deficit
|
Total Gross
Unrealized Loss
|
|||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||||||
Senior
|
$ | 12,251 | $ | - | $ | 12,251 | $ | (17 | ) | $ | - | $ | (17 | ) | ||||||||||
Senior interest-only
|
- | 14,739 | 14,739 | - | (47,459 | ) | (47,459 | ) | ||||||||||||||||
Subordinated
|
144,534 | - | 144,534 | (662 | ) | - | (662 | ) | ||||||||||||||||
Subordinated interest-only
|
- | 2,717 | 2,717 | - | (472 | ) | (472 | ) | ||||||||||||||||
RMBS transferred to consolidated VIEs
|
843,011 | 4,805 | 847,816 | - | - | - | ||||||||||||||||||
Agency RMBS
|
||||||||||||||||||||||||
Pass-through
|
103,000 | - | 103,000 | (22,469 | ) | - | (22,469 | ) | ||||||||||||||||
Interest-only
|
- | 329 | 329 | - | (2,975 | ) | (2,975 | ) | ||||||||||||||||
Total | $ | 1,102,796 | $ | 22,590 | $ | 1,125,386 | $ | (23,148 | ) | $ | (50,906 | ) | $ | (74,054 | ) |
December 31, 2013
|
||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Gross Unrealized
Gain Included in
Accumulated Other Comprehensive Income
|
Gross Unrealized
Gain Included in Accumulated Deficit
|
Total Gross
Unrealized Gain
|
Gross Unrealized
Loss Included in Accumulated Other Comprehensive Income
|
Gross Unrealized
Loss Included in Accumulated Deficit
|
Total Gross
Unrealized Loss
|
|||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||||||
Senior
|
$ | 974 | $ | - | $ | 974 | $ | (109 | ) | $ | - | $ | (109 | ) | ||||||||||
Senior interest-only
|
- | 11,802 | 11,802 | - | (66,008 | ) | (66,008 | ) | ||||||||||||||||
Subordinated
|
119,233 | - | 119,233 | (1,896 | ) | - | (1,896 | ) | ||||||||||||||||
Subordinated interest-only
|
- | 2,483 | 2,483 | - | (578 | ) | (578 | ) | ||||||||||||||||
RMBS transferred to consolidated VIEs
|
901,773 | 4,170 | 905,943 | - | - | - | ||||||||||||||||||
Agency RMBS
|
||||||||||||||||||||||||
Pass-through
|
22,320 | - | 22,320 | (51,494 | ) | - | (51,494 | ) | ||||||||||||||||
Interest-only
|
2 | 330 | 332 | - | (1,316 | ) | (1,316 | ) | ||||||||||||||||
Total | $ | 1,044,302 | $ | 18,785 | $ | 1,063,087 | $ | (53,499 | ) | $ | (67,902 | ) | $ | (121,401 | ) |
June 30, 2014
|
December 31, 2013
|
|
AAA
|
0.9%
|
0.0%
|
AA
|
0.5%
|
0.7%
|
A
|
0.0%
|
0.0%
|
BBB
|
0.4%
|
0.0%
|
BB
|
1.8%
|
1.4%
|
B
|
4.1%
|
4.3%
|
Below B or not rated
|
92.3%
|
93.6%
|
Total
|
100.0%
|
100.0%
|
June 30, 2014
|
||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Weighted Average Life
|
||||||||||||||||||||
Less than
one year
|
Greater than one
year and less
than
five years
|
Greater than five
years and less
than ten years
|
Greater than
ten years
|
Total
|
||||||||||||||||
Fair value
|
||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||
Senior
|
$ | 3,475 | $ | 45,531 | $ | 114,469 | $ | 66,990 | $ | 230,465 | ||||||||||
Senior interest-only
|
561 | 60,617 | 122,899 | 36,054 | 220,131 | |||||||||||||||
Subordinated
|
2,164 | 92,838 | 269,407 | 121,135 | 485,544 | |||||||||||||||
Subordinated interest-only
|
- | - | 9,704 | 5,905 | 15,609 | |||||||||||||||
RMBS transferred to consolidated VIEs
|
- | 305,598 | 1,601,161 | 775,549 | 2,682,308 | |||||||||||||||
Agency RMBS
|
||||||||||||||||||||
Pass-through
|
- | 677,111 | 7,299,812 | - | 7,976,923 | |||||||||||||||
Interest-only
|
- | 544 | 38,083 | - | 38,627 | |||||||||||||||
Total fair value
|
$ | 6,200 | $ | 1,182,239 | $ | 9,455,535 | $ | 1,005,633 | $ | 11,649,607 | ||||||||||
Amortized cost
|
||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||
Senior
|
$ | 3,310 | $ | 42,449 | $ | 109,923 | $ | 62,549 | $ | 218,231 | ||||||||||
Senior interest-only
|
1,119 | 71,163 | 141,538 | 39,031 | 252,851 | |||||||||||||||
Subordinated
|
1,740 | 70,066 | 191,607 | 78,259 | 341,672 | |||||||||||||||
Subordinated interest-only
|
- | - | 8,916 | 4,448 | 13,364 | |||||||||||||||
RMBS transferred to consolidated VIEs
|
- | 232,553 | 1,087,722 | 514,217 | 1,834,492 | |||||||||||||||
Agency RMBS
|
||||||||||||||||||||
Pass-through
|
- | 655,843 | 7,240,549 | - | 7,896,392 | |||||||||||||||
Interest-only
|
- | 706 | 40,567 | - | 41,273 | |||||||||||||||
Total amortized cost
|
$ | 6,169 | $ | 1,072,780 | $ | 8,820,822 | $ | 698,504 | $ | 10,598,275 |
December 31, 2013
|
||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Weighted Average Life
|
||||||||||||||||||||
Less than
one year
|
Greater than
one
year and less
than five years
|
Greater than five
years and less
than ten years
|
Greater than
ten years
|
Total
|
||||||||||||||||
Fair value
|
||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||
Senior
|
$ | - | $ | 29,283 | $ | 60,404 | $ | - | $ | 89,687 | ||||||||||
Senior interest-only
|
376 | 103,688 | 96,968 | 28,033 | 229,065 | |||||||||||||||
Subordinated
|
3,359 | 63,177 | 321,333 | 69,700 | 457,569 | |||||||||||||||
Subordinated interest-only
|
- | - | 14,862 | 1,709 | 16,571 | |||||||||||||||
RMBS transferred to consolidated VIEs
|
5,724 | 276,752 | 1,986,879 | 712,216 | 2,981,571 | |||||||||||||||
Agency RMBS
|
||||||||||||||||||||
Pass-through
|
- | 20,375 | 1,808,346 | 126,075 | 1,954,796 | |||||||||||||||
Interest-only
|
54 | 636 | 42,092 | - | 42,782 | |||||||||||||||
Total fair value
|
$ | 9,513 | $ | 493,911 | $ | 4,330,884 | $ | 937,733 | $ | 5,772,041 | ||||||||||
Amortized cost
|
||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||
Senior
|
$ | - | $ | 28,900 | $ | 59,922 | $ | - | $ | 88,822 | ||||||||||
Senior interest-only
|
1,017 | 131,159 | 117,008 | 34,087 | 283,271 | |||||||||||||||
Subordinated
|
2,877 | 50,483 | 243,350 | 43,522 | 340,232 | |||||||||||||||
Subordinated interest-only
|
- | - | 13,344 | 1,322 | 14,666 | |||||||||||||||
RMBS transferred to consolidated VIEs
|
4,744 | 211,925 | 1,356,981 | 501,978 | 2,075,628 | |||||||||||||||
Agency RMBS
|
||||||||||||||||||||
Pass-through
|
- | 18,608 | 1,837,611 | 127,751 | 1,983,970 | |||||||||||||||
Interest-only
|
122 | 825 | 42,819 | - | 43,766 | |||||||||||||||
Total amortized cost
|
$ | 8,760 | $ | 441,900 | $ | 3,671,035 | $ | 708,660 | $ | 4,830,355 |
For the Quarter Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Proceeds from sales
|
$ | 33,212 | $ | 429,380 | ||||
Gross realized gains
|
29 | 54,117 | ||||||
Gross realized losses
|
(4,368 | ) | - | |||||
Net realized gain
|
$ | (4,339 | ) | $ | 54,117 |
For the Six Months Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands) | ||||||||
Proceeds from sales
|
$ | 133,468 | $ | 429,562 | ||||
Gross realized gains
|
8,498 | 54,126 | ||||||
Gross realized losses
|
(4,460 | ) | (3 | ) | ||||
Net realized gain
|
$ | 4,038 | $ | 54,123 |
For the Six Months Ended
|
For the Year Ended
|
|||||||
June 30, 2014
|
December 31, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Balance, beginning of period
|
$ | 783,484 | $ | 1,300,131 | ||||
Purchases
|
- | - | ||||||
Principal paydowns
|
(67,423 | ) | (507,683 | ) | ||||
Net periodic amortization (accretion)
|
(1,057 | ) | (10,763 | ) | ||||
Change to loan loss provision
|
(533 | ) | 1,799 | |||||
Balance, end of period
|
$ | 714,471 | $ | 783,484 |
June 30, 2014
|
December 31, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Securitized loans, at amortized cost
|
$ | 723,089 | $ | 792,547 | ||||
Less: allowance for loan losses
|
8,618 | 9,063 | ||||||
Securitized loans held for investment
|
$ | 714,471 | $ | 783,484 |
For the Six Months Ended
|
For the Year Ended
|
|||||||
June 30, 2014
|
December 31, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Balance, beginning of period
|
$ | 9,063 | $ | 11,624 | ||||
Provision for loan losses
|
533 | (1,799 | ) | |||||
Charge-offs
|
(978 | ) | (762 | ) | ||||
Balance, end of period
|
$ | 8,618 | $ | 9,063 |
30 Days
Delinquent
|
60 Days
Delinquent
|
90+ Days
Delinquent
|
Bankruptcy
|
Foreclosure
|
REO
|
Total
|
||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||
June 30, 2014
|
$ | 571 | $ | 1,720 | $ | 4,691 | $ | 0 | $ | 6,535 | $ | 816 | $ | 14,333 | ||||||||||||||
December 31, 2013
|
$ | 999 | $ | 570 | $ | 2,087 | $ | 473 | $ | 7,530 | $ | 1,179 | $ | 12,838 |
Number of Loans
Modified During
Period
|
Unpaid Principal
Balance of Modified
Loans (Pre-
modification)
|
Unpaid Principal
Balance of Modified
Loans (Post-
modification)
|
Amortized Cost of
Modified Loans
|
Amortized Cost of
Modified Loans For Which
There is an Allowance
for Loan Losses
|
Amortized Cost of
Modified Loans For Which There is No Allowance
for
Loan Losses
|
|||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Six Months Ended
|
||||||||||||||||||||||||
June 30, 2014
|
2 | $ | 1,139 | $ | 1,256 | $ | 1,173 | $ | 1,173 | $ | 0 | |||||||||||||
June 30, 2013
|
3 | $ | 2,349 | $ | 2,358 | $ | 2,248 | $ | 2,248 | $ | 0 |
December 31, 2013 | ||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Counterparty and Cash
Collateral, netting
|
Total
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Assets:
|
||||||||||||||||||||
Non-Agency RMBS
|
||||||||||||||||||||
Senior
|
$ | - | $ | - | $ | 89,687 | $ | - | $ | 89,687 | ||||||||||
Senior interest-only
|
- | - | 229,065 | - | $ | 229,065 | ||||||||||||||
Subordinated
|
- | - | 457,569 | - | $ | 457,569 | ||||||||||||||
Subordinated interest-only
|
- | - | 16,571 | - | $ | 16,571 | ||||||||||||||
RMBS transferred to consolidated VIEs
|
- | - | 2,981,571 | - | $ | 2,981,571 | ||||||||||||||
Agency RMBS
|
||||||||||||||||||||
Pass-through
|
- | 1,954,796 | - | - | $ | 1,954,796 | ||||||||||||||
Interest-only
|
- | 42,782 | - | - | $ | 42,782 | ||||||||||||||
Derivatives, net
|
10,629 | - | - | (2,534 | ) | $ | 8,095 | |||||||||||||
Liabilities:
|
||||||||||||||||||||
Derivatives, net
|
- | (30,199 | ) | - | - | $ | (30,199 | ) | ||||||||||||
Total
|
$ | 10,629 | $ | 1,967,379 | $ | 3,774,463 | $ | (2,534 | ) | $ | 5,749,937 |
Fair Value Reconciliation, Level 3
|
||||||||||||
For the Six Months Ended
|
||||||||||||
June 30, 2014
|
||||||||||||
(dollars in thousands)
|
||||||||||||
Non-Agency RMBS
|
Derivatives
|
Total
|
||||||||||
Beginning balance Level 3 assets
|
$ | 3,774,463 | $ | - | $ | 3,774,463 | ||||||
Transfers in to Level 3 assets
|
- | - | - | |||||||||
Transfers out of Level 3 assets
|
- | - | - | |||||||||
Purchases
|
188,779 | - | 188,779 | |||||||||
Principal payments
|
(159,117 | ) | - | (159,117 | ) | |||||||
Sales and Settlements
|
(260,973 | ) | (8,374 | ) | (269,347 | ) | ||||||
Accretion of purchase discounts
|
49,884 | - | 49,884 | |||||||||
Gains (losses) included in net income
|
||||||||||||
Other than temporary credit impairment losses
|
(6,881 | ) | - | (6,881 | ) | |||||||
Realized gains (losses) on sales and settlements
|
(1,655 | ) | 2,898 | 1,243 | ||||||||
Realized gain on deconsolidation | 47,846 | - | 47,846 | |||||||||
Net unrealized gains (losses) included in income
|
22,462 | - | 22,462 | |||||||||
Gains (losses) included in other comprehensive income
|
||||||||||||
Total unrealized gains (losses) for the period
|
(20,751 | ) | 4,339 | (16,412 | ) | |||||||
Ending balance Level 3 assets
|
$ | 3,634,057 | $ | (1,137 | ) | $ | 3,632,920 |
Fair Value Reconciliation, Level 3
|
||||||||||||
For the Year Ended
|
||||||||||||
December 31, 2013
|
||||||||||||
(dollars in thousands)
|
||||||||||||
Non-Agency RMBS | Derivatives |
Total
|
||||||||||
Beginning balance Level 3 assets
|
$ | 3,961,208 | - | $ | 3,961,208 | |||||||
Transfers in to Level 3 assets
|
- | - | - | |||||||||
Transfers out of Level 3 assets
|
- | - | - | |||||||||
Purchases
|
317,299 | - | 317,299 | |||||||||
Principal payments
|
(475,092 | ) | - | (475,092 | ) | |||||||
Sales and Settlements
|
(181,215 | ) | (10,221 | ) | (191,436 | ) | ||||||
Accretion of purchase discounts
|
106,290 | - | 106,290 | |||||||||
Gains (losses) included in net income
|
||||||||||||
Other than temporary credit impairment losses
|
(45,167 | ) | - | (45,167 | ) | |||||||
Realized gains (losses) on sales and settlements
|
36,645 | 10,221 | 46,866 | |||||||||
Realized losses on principal write-downs of Non-Agency RMBS
|
(18,316 | ) | - | (18,316 | ) | |||||||
Net unrealized gains (losses) included in income
|
(43,252 | ) | - | (43,252 | ) | |||||||
Gains (losses) included in other comprehensive income
|
||||||||||||
Total unrealized gains (losses) for the period
|
116,063 | - | 116,063 | |||||||||
Ending balance Level 3 assets
|
$ | 3,774,463 | $ | - | $ | 3,774,463 |
June 30, 2014
|
December 31, 2013
|
|||||||
Significant Inputs
|
Significant Inputs
|
|||||||
Weighted
Average
Discount Rate
|
CPR
|
CDR
|
Loss
Severity
|
Weighted
Average
Discount Rate
|
CPR
|
CDR
|
Loss
Severity
|
|
Range
|
Range
|
|||||||
Non-Agency RMBS
|
||||||||
Senior
|
4.9%
|
1% - 8%
|
0% - 33%
|
50% - 85%
|
6.4%
|
1% - 6%
|
0% - 33%
|
50% - 85%
|
Senior interest-only
|
13.5%
|
2% - 26%
|
0% - 34%
|
50% - 85%
|
14.1%
|
1% - 28%
|
0% - 33%
|
50% - 85%
|
Subordinated
|
6.1%
|
2% - 24%
|
0% - 33%
|
50% - 85%
|
6.1%
|
1% - 22%
|
0% - 38%
|
50% - 85%
|
Subordinated interest-only
|
13.7%
|
3% - 10%
|
0% - 18%
|
50% - 68%
|
12.7%
|
2% - 13%
|
0% - 18%
|
50% - 73%
|
RMBS transferred to consolidated VIEs
|
4.6%
|
1% - 18%
|
0% - 32%
|
50% - 85%
|
5.3%
|
1% - 20%
|
0% - 33%
|
50% - 85%
|
June 30, 2014
|
||||||||||||
(dollars in thousands)
|
||||||||||||
Level in Fair Value
Hierarchy
|
Carrying Amount
|
Fair Value
|
||||||||||
Securitized loans held for investment
|
3 | 714,471 | 703,455 | |||||||||
Repurchase agreements
|
2 | (5,564,554 | ) | (5,571,505 | ) | |||||||
Securitized debt, collateralized by Non-Agency RMBS
|
3 | (787,162 | ) | (800,457 | ) | |||||||
Securitized debt, collateralized by loans held for investment
|
3 | (604,655 | ) | (591,967 | ) |
December 31, 2013
|
||||||||||||
(dollars in thousands)
|
||||||||||||
Level in Fair Value
Hierarchy
|
Carrying Amount
|
Fair Value
|
||||||||||
Securitized loans held for investment
|
3 | 783,484 | 762,550 | |||||||||
Repurchase agreements
|
2 | (1,658,561 | ) | (1,660,941 | ) | |||||||
Securitized debt, collateralized by Non-Agency RMBS
|
3 | (933,732 | ) | (940,712 | ) | |||||||
Securitized debt, collateralized by loans held for investment
|
3 | (669,981 | ) | (647,628 | ) |
June 30, 2014
|
December 31, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Overnight
|
$ | - | $ | - | ||||
1-29 days
|
1,694,284 | 644,332 | ||||||
30 to 59 days
|
1,085,418 | 606,945 | ||||||
60 to 89 days
|
1,684,618 | - | ||||||
90 to 119 days
|
63,545 | 129,049 | ||||||
Greater than or equal to 120 days
|
1,036,689 | 278,235 | ||||||
Total
|
$ | 5,564,554 | $ | 1,658,561 |
June 30, 2014
|
December 31, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Within One Year
|
$ | 295,142 | $ | 370,250 | ||||
One to Three Years
|
405,518 | 497,943 | ||||||
Three to Five Years
|
228,650 | 264,456 | ||||||
Greater Than or Equal to Five Years
|
376,409 | 396,916 | ||||||
Total
|
$ | 1,305,719 | $ | 1,529,565 |
June 30, 2014
|
December 31, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Assets
|
||||||||
Non-Agency RMBS transferred to consolidated VIEs
|
$ | 2,682,308 | $ | 2,981,571 | ||||
Securitized loans held for investment
|
714,471 | 783,484 | ||||||
Accrued interest receivable
|
14,681 | 17,173 | ||||||
Liabilities
|
||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
$ | 787,162 | $ | 933,732 | ||||
Securitized debt, collateralized by loans held for investment
|
604,655 | 669,981 | ||||||
Accrued interest payable
|
4,545 | 5,278 |
For the Quarter Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Interest income, Assets of consolidated VIEs
|
$ | 85,262 | $ | 93,936 | ||||
Interest expense, Non-recourse liabilities of VIEs
|
(17,176 | ) | (24,982 | ) | ||||
Net interest income
|
$ | 68,086 | $ | 68,954 | ||||
Total other-than-temporary impairment losses
|
(479 | ) | - | |||||
Portion of loss recognized in other comprehensive income (loss)
|
(3,471 | ) | - | |||||
Net other-than-temporary credit impairment losses
|
$ | (3,950 | ) | $ | - |
For the Six Months Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Interest income, Assets of consolidated VIEs
|
$ | 170,473 | $ | 190,664 | ||||
Interest expense, Non-recourse liabilities of VIEs
|
(37,875 | ) | (51,978 | ) | ||||
Net interest income
|
$ | 132,598 | $ | 138,686 | ||||
Total other-than-temporary impairment losses
|
(479 | ) | - | |||||
Portion of loss recognized in other comprehensive income (loss)
|
(3,471 | ) | (135 | ) | ||||
Net other-than-temporary credit impairment losses
|
$ | (3,950 | ) | $ | (135 | ) |
June 30, 2014
|
||||||||||||||
Derivative Assets
|
Derivative Liabilities
|
|||||||||||||
Derivative Instruments
|
Notional Amount Outstanding
|
Location on Consolidated
Statements of Financial Condition
|
Net Estimated Fair Value/Carrying Value
|
Location on Consolidated
Statements of Financial Condition
|
Net Estimated Fair Value/Carrying Value
|
|||||||||
(dollars in thousands)
|
||||||||||||||
Interest Rate Swaps
|
$ | 3,360,000 |
Derivatives, at fair value, net
|
$ | - |
Derivatives, at fair value
|
$ | (24,188 | ) | |||||
Mortgage Options
|
2,000,000 |
Derivatives, at fair value, net
|
- |
Derivatives, at fair value
|
(1,137 | ) | ||||||||
Treasury Futures
|
1,230,000 |
Derivatives, at fair value, net
|
- |
Derivatives, at fair value
|
- | |||||||||
Total
|
$ | 6,590,000 | $ | - | $ | (25,325 | ) |
December 31, 2013
|
||||||||||||||
Derivative Assets
|
Derivative Liabilities
|
|||||||||||||
Derivative Instruments
|
Notional Amount Outstanding
|
Location on Consolidated
Statements of Financial Condition
|
Net Estimated Fair Value/Carrying Value
|
Location on Consolidated
Statements of Financial Condition
|
Net Estimated Fair Value/Carrying Value
|
|||||||||
(dollars in thousands)
|
||||||||||||||
Interest Rate Swaps
|
$ | 1,355,000 |
Derivatives, at fair value, net
|
$ | - |
Derivatives, at fair value
|
$ | (30,199 | ) | |||||
Treasury Futures
|
550,000 |
Derivatives, at fair value, net
|
8,095 |
Derivatives, at fair value
|
- | |||||||||
Total
|
$ | 1,905,000 | $ | 8,095 | $ | (30,199 | ) |
For the Quarter Ended
|
|||||||||
June 30, 2014
|
June 30, 2013
|
||||||||
Derivative Instruments
|
Location on Consolidated Statements of Operations
and Comprehensive Income (Loss)
|
Net gains (losses)
on derivatives
|
Net gains (losses)
on derivatives
|
||||||
(dollars in thousands)
|
|||||||||
Interest Rate Swaps
|
Net unrealized gains (losses) on derivatives
|
$ | (19,834 | ) | $ | 13,178 | |||
Interest Rate Swaps
|
Net realized gains (losses) on derivatives
|
(12,061 | ) | (5,391 | ) | ||||
Mortgage Options
|
Net unrealized gains (losses) on derivatives
|
3,593 | - | ||||||
Mortgage Options
|
Net realized gains (losses) on derivatives
|
1,050 | - | ||||||
Treasury Futures
|
Net unrealized gains (losses) on derivatives
|
(6,256 | ) | - | |||||
Treasury Futures
|
Net realized gains (losses) on derivatives
|
(8,781 | ) | - | |||||
Total
|
$ | (42,289 | ) | $ | 7,787 |
For the Six Months Ended
|
|||||||||
June 30, 2014 |
June 30, 2013
|
||||||||
Derivative Instruments
|
Location on Consolidated Statements of Operations
and Comprehensive Income (Loss)
|
Net gains (losses)
on derivatives
|
Net gains (losses)
on derivatives
|
||||||
(dollars in thousands)
|
|||||||||
Interest Rate Swaps
|
Net unrealized gains (losses) on derivatives
|
$ | (15,769 | ) | $ | 18,580 | |||
Interest Rate Swaps
|
Net realized gains (losses) on derivatives
|
(17,711 | ) | (10,921 | ) | ||||
Mortgage Options
|
Net unrealized gains (losses) on derivatives
|
4,339 | - | ||||||
Mortgage Options
|
Net realized gains (losses) on derivatives
|
1,653 | - | ||||||
Treasury Futures
|
Net unrealized gains (losses) on derivatives
|
(13,265 | ) | - | |||||
Treasury Futures
|
Net realized gains (losses) on derivatives
|
(9,482 | ) | - | |||||
Total
|
$ | (50,235 | ) | $ | 7,659 |
For the Quarter Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Numerator:
|
||||||||
Net income
|
$ | 104,769 | $ | 143,207 | ||||
Effect of dilutive securities:
|
- | - | ||||||
Dilutive net income available to stockholders
|
$ | 104,769 | $ | 143,207 | ||||
Denominator:
|
||||||||
Weighted average basic shares
|
1,027,208,949 | 1,027,066,041 | ||||||
Effect of dilutive securities
|
325,500 | 527,400 | ||||||
Weighted average diluted shares
|
1,027,534,449 | 1,027,593,441 | ||||||
Net income per average share attributable to common stockholders - Basic
|
$ | 0.10 | $ | 0.14 | ||||
Net income per average share attributable to common stockholders - Diluted
|
$ | 0.10 | $ | 0.14 |
For the Six Months Ended
|
||||||||
June 30, 2014
|
June 30, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Numerator:
|
||||||||
Net income
|
$ | 205,137 | $ | 223,008 | ||||
Effect of dilutive securities:
|
- | - | ||||||
Dilutive net income available to stockholders
|
$ | 205,137 | $ | 223,008 | ||||
Denominator:
|
||||||||
Weighted average basic shares
|
1,027,235,633 | 1,027,052,341 | ||||||
Effect of dilutive securities
|
325,823 | 542,131 | ||||||
Weighted average dilutive shares
|
1,027,561,456 | 1,027,594,472 | ||||||
Net income per average share attributable to common stockholders - Basic
|
$ | 0.20 | $ | 0.22 | ||||
Net income per average share attributable to common stockholders - Diluted
|
$ | 0.20 | $ | 0.22 |
June 30, 2014
|
||||||||
(dollars in thousands)
|
||||||||
Unrealized gains
(losses) on available-
for-sale securities, net
|
Total Accumulated
OCI Balance
|
|||||||
Balance as of December 31, 2013
|
$ | 990,803 | $ | 990,803 | ||||
OCI before reclassifications
|
138,150 | 138,150 | ||||||
Amounts reclassified from AOCI
|
(49,305 | ) | (49,305 | ) | ||||
Net current period OCI
|
88,845 | 88,845 | ||||||
Balance as of June 31, 2014
|
$ | 1,079,648 | $ | 1,079,648 |
June 30, 2013
|
||||||||
(dollars in thousands)
|
||||||||
Unrealized gains
(losses) on available-
for-sale securities, net
|
Total Accumulated
OCI Balance
|
|||||||
Balance as of December 31, 2012
|
$ | 989,936 | $ | 989,936 | ||||
OCI before reclassifications
|
95,012 | 95,012 | ||||||
Amounts reclassified from AOCI
|
(47,960 | ) | (47,960 | ) | ||||
Net current period OCI
|
47,052 | 47,052 | ||||||
Balance as of June 30, 2013
|
$ | 1,036,988 | $ | 1,036,988 |
June 30, 2014
|
June 30, 2013
|
||||||||
Details about Accumulated OCI Components
|
Amounts
Reclassified from
Accumulated OCI
|
Amounts
Reclassified from
Accumulated OCI
|
Affected Line on the Consolidated Statements Of Operations And Comprehensive Income (Loss)
|
||||||
Unrealized gains and losses on available-for-sale securities
|
(dollars in thousands)
|
||||||||
$ | 8,340 | $ | 54,123 |
Net realized gains (losses) on sales of investments
|
|||||
47,846 | - | Realized gain on deconsolidation | |||||||
(6,881 | ) | (6,163 | ) |
Net other-than-temporary credit impairment losses
|
|||||
$ | 49,305 | $ | 47,960 |
Income (loss) before income taxes
|
|||||
- | - |
Income taxes
|
|||||||
$ | 49,305 | $ | 47,960 |
Net of tax
|
December 31, 2013
|
||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Gross Amounts Not Offset with
Financial Assets (Liabilities) in the
Consolidated Statements of Financial Position
|
||||||||||||||||||||||||
Gross Amounts of Recognized Assets (Liabilities)
|
Gross Amounts Offset
in the Consolidated Statements of
Financial Position
|
Net Amounts Offset
in the Consolidated Statements of
Financial Position
|
Financial
Instruments
|
Cash Collateral (Received) Pledged
|
Net Amount
|
|||||||||||||||||||
Repurchase agreements
|
$ | (1,658,561 | ) | $ | - | $ | (1,658,561 | ) | $ | 1,737,381 | $ | - | $ | 78,820 | ||||||||||
Interest Rate Swaps
|
(30,199 | ) | - | (30,199 | ) | 39,470 | - | 9,271 | ||||||||||||||||
Mortgage Options
|
- | - | - | - | - | - | ||||||||||||||||||
Treasury Futures
|
10,629 | (2,534 | ) | 8,095 | - | - | 8,095 | |||||||||||||||||
Total Liabilities
|
$ | (1,678,131 | ) | $ | (2,534 | ) | $ | (1,680,665 | ) | $ | 1,776,851 | $ | - | $ | 96,186 |
●
|
our business and investment strategy;
|
●
|
our ability to maintain existing financing arrangements and our ability to obtain future financing arrangements;
|
●
|
our ability to timely file our periodic reports with the Securities and Exchange Commission, or SEC;
|
●
|
our expectations regarding materiality or significance;
|
●
|
the effectiveness of our disclosure controls and procedures;
|
●
|
material weaknesses in our internal controls over financial reporting;
|
●
|
additional information that may arise from the preparation of our financial statements;
|
●
|
inadequacy of or weakness in our internal controls over financial reporting of which we are not currently aware or which have not been detected;
|
●
|
general volatility of the securities markets in which we invest;
|
●
|
the impact of and changes to various government programs;
|
●
|
our expected investments;
|
●
|
changes in the value of our investments;
|
●
|
interest rate mismatches between our investments and our borrowings used to finance such purchases;
|
●
|
changes in interest rates and mortgage prepayment rates;
|
●
|
effects of interest rate caps on our adjustable-rate investments;
|
●
|
rates of default, delinquencies or decreased recovery rates on our investments;
|
●
|
prepayments of the mortgage and other loans underlying our mortgage-backed securities, or RMBS, or other asset-backed securities, or ABS;
|
●
|
the degree to which our hedging strategies may or may not protect us from interest rate volatility;
|
●
|
impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters;
|
●
|
availability of investment opportunities in real estate-related and other securities;
|
●
|
availability of qualified personnel;
|
●
|
estimates relating to our ability to make distributions to our stockholders in the future;
|
●
|
our understanding of our competition;
|
●
|
market trends in our industry, interest rates, the debt securities markets or the general economy;
|
●
|
our ability to maintain our classification as a real estate investment trust, or REIT, for federal income tax purposes; and
|
●
|
our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or 1940 Act.
|
Commercial Mortgage Loans
|
● |
First or second lien loans secured by multifamily properties, which are residential rental properties consisting of five or more dwelling units; and mixed residential or other commercial properties; retail properties; office properties; or industrial properties, which may or may not conform to the Agency Guidelines
|
Other Asset-Backed Securities | ● |
CMBS
|
● | Debt and equity tranches of CDOs | |
|
● |
Consumer and non-consumer ABS, including investment-grade and non-investment grade classes, including the BB-rated, B-rated and non-rated classes
|
Hedging Instruments
|
● |
Swaps
|
● |
Swaptions
|
|
● |
Futures
|
|
● |
Index options
|
|
● |
Mortgage options
|
Net Income (Loss)
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
For the Quarter Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30, 2014
|
June 30, 2013
|
June 30, 2014
|
June 30, 2013
|
|||||||||||||
Net Interest Income:
|
||||||||||||||||
Interest income
|
$ | 49,056 | $ | 33,629 | $ | 84,512 | $ | 62,696 | ||||||||
Interest expense
|
(3,504 | ) | (1,629 | ) | (5,230 | ) | (3,462 | ) | ||||||||
Interest income, Assets of consolidated VIEs
|
85,262 | 93,936 | 170,473 | 190,664 | ||||||||||||
Interest expense, Non-recourse liabilities of consolidated VIEs
|
(17,176 | ) | (24,982 | ) | (37,875 | ) | (51,978 | ) | ||||||||
Net interest income (expense)
|
113,638 | 100,954 | 211,880 | 197,920 | ||||||||||||
Other-than-temporary impairments:
|
||||||||||||||||
Total other-than-temporary impairment losses
|
(3,813 | ) | - | (4,213 | ) | - | ||||||||||
Portion of loss recognized in other comprehensive income (loss)
|
(1,534 | ) | - | (2,668 | ) | (6,163 | ) | |||||||||
Net other-than-temporary credit impairment losses
|
(5,347 | ) | - | (6,881 | ) | (6,163 | ) | |||||||||
Other gains (losses):
|
||||||||||||||||
Net unrealized gains (losses) on derivatives
|
(22,497 | ) | 13,178 | (24,695 | ) | 18,580 | ||||||||||
Net realized gains (losses) on derivatives
|
(19,792 | ) | (5,391 | ) | (25,540 | ) | (10,921 | ) | ||||||||
Net gains (losses) on derivatives
|
(42,289 | ) | 7,787 | (50,235 | ) | 7,659 | ||||||||||
Net unrealized gains (losses) on interest-only RMBS
|
5,791 | (12,974 | ) | 20,801 | (13,987 | ) | ||||||||||
Net realized gains (losses) on sales of investments
|
(4,339 | ) | 54,117 | 4,038 | 54,123 | |||||||||||
Gain on deconsolidation | 47,846 | - | 47,846 | - | ||||||||||||
Loss on extinguishment of Debt
|
- | - | (2,184 | ) | - | |||||||||||
Total other gains (losses)
|
7,009 | 48,930 | 20,266 | 47,795 | ||||||||||||
Net investment income (loss)
|
115,300 | 149,884 | 225,265 | 239,552 | ||||||||||||
Other expenses:
|
||||||||||||||||
Management fees
|
6,271 | 6,498 | 12,492 | 12,947 | ||||||||||||
Expense recoveries from Manager
|
(2,164 | ) | (3,315 | ) | (2,845 | ) | (5,170 | ) | ||||||||
Net management fees
|
4,107 | 3,183 | 9,647 | 7,777 | ||||||||||||
Provision for loan losses, net
|
214 | (1,703 | ) | 533 | (1,279 | ) | ||||||||||
General and administrative expenses
|
6,210 | 5,197 | 9,946 | 10,044 | ||||||||||||
Total other expenses
|
10,531 | 6,677 | 20,126 | 16,542 | ||||||||||||
Income (loss) before income taxes
|
104,769 | 143,207 | 205,139 | 223,010 | ||||||||||||
Income taxes
|
- | - | 2 | 2 | ||||||||||||
Net income (loss)
|
$ | 104,769 | $ | 143,207 | $ | 205,137 | $ | 223,008 |
December 31, 2013
|
||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||
GAAP Book
Value
|
Adjustments
|
Estimated Economic Book Value
|
||||||||||
Assets:
|
||||||||||||
Non-Agency RMBS, at fair value
|
||||||||||||
Senior
|
$ | 89,687 | $ | 12,365 | $ | 102,052 | ||||||
Senior interest-only
|
229,065 | 116,951 | 346,016 | |||||||||
Subordinated
|
457,569 | 1,593,924 | 2,051,493 | |||||||||
Subordinated interest-only
|
16,571 | 280 | 16,851 | |||||||||
RMBS transferred to consolidated VIEs
|
2,981,571 | (2,981,571 | ) | - | ||||||||
Agency RMBS, at fair value
|
||||||||||||
Pass-through
|
1,954,796 | - | 1,954,796 | |||||||||
Interest-only
|
42,782 | - | 42,782 | |||||||||
Securitized loans held for investment, net of allowance for loan losses
|
783,484 | (783,484 | ) | - | ||||||||
Other assets
|
380,556 | - | 380,556 | |||||||||
Total assets
|
$ | 6,936,081 | $ | (2,041,535 | ) | $ | 4,894,546 | |||||
Liabilities:
|
||||||||||||
Repurchase agreements, RMBS
|
1,658,561 | - | 1,658,561 | |||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
933,732 | (933,732 | ) | - | ||||||||
Securitized debt, collateralized by loans held for investment
|
669,981 | (669,981 | ) | - | ||||||||
Other liabilities
|
342,297 | - | 342,297 | |||||||||
Total liabilities
|
3,604,571 | (1,603,713 | ) | 2,000,858 | ||||||||
Total stockholders' equity
|
3,331,510 | (437,822 | ) | 2,893,688 | ||||||||
Total liabilities and stockholders' equity
|
$ | 6,936,081 | $ | (2,041,535 | ) | $ | 4,894,546 | |||||
Book Value Per Share
|
$ | 3.24 | $ | (0.42 | ) | $ | 2.82 |
June 30, 2014
|
December 31, 2013
|
|||||||
Interest earning assets at period-end (1)
|
$ | 12,364,078 | $ | 6,555,525 | ||||
Interest bearing liabilities at period-end
|
$ | 6,956,371 | $ | 3,262,274 | ||||
Leverage at period-end
|
2.6:1
|
1.0:1
|
||||||
Leverage at period-end (recourse)
|
2.4:1
|
0.5:1
|
||||||
Portfolio Composition, at amortized cost
|
||||||||
Non-Agency RMBS
|
23.5 | % | 49.8 | % | ||||
Senior
|
1.9 | % | 1.5 | % | ||||
Senior, interest only
|
2.2 | % | 5.1 | % | ||||
Subordinated
|
3.0 | % | 6.0 | % | ||||
Subordinated, interest only
|
0.1 | % | 0.3 | % | ||||
RMBS transferred to consolidated VIEs
|
16.3 | % | 36.9 | % | ||||
Agency RMBS
|
70.1 | % | 36.1 | % | ||||
Pass-through
|
69.7 | % | 35.3 | % | ||||
Interest-only
|
0.4 | % | 0.8 | % | ||||
Securitized loans
|
6.4 | % | 14.1 | % | ||||
Fixed-rate percentage of portfolio
|
88.0 | % | 76.3 | % | ||||
Adjustable-rate percentage of portfolio
|
12.0 | % | 23.7 | % | ||||
(1) Excludes cash and cash equivalents.
|
For the Quarter Ended
|
||||||||||||||||||||
June 30, 2014
|
March 31, 2014
|
December 31, 2013
|
September 30, 2013
|
June 30, 2013
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Accretable Discount
|
||||||||||||||||||||
Balance, beginning of period
|
$ | 990,202 | $ | 996,694 | $ | 1,012,513 | $ | 1,026,921 | $ | 1,088,157 | ||||||||||
Accretion of discount
|
(42,101 | ) | (40,304 | ) | (40,812 | ) | (40,001 | ) | (40,042 | ) | ||||||||||
Purchases
|
(6,773 | ) | 18,815 | - | - | - | ||||||||||||||
Sales and deconsolidation
|
(669 | ) | (3,843 | ) | - | (6,655 | ) | (46,125 | ) | |||||||||||
Transfers from credit reserve
|
17,134 | 31,666 | 28,962 | 35,054 | 30,744 | |||||||||||||||
Transfers to credit reserve
|
(6,488 | ) | (12,826 | ) | (3,969 | ) | (2,806 | ) | (5,813 | ) | ||||||||||
Balance, end of period
|
$ | 951,305 | $ | 990,202 | $ | 996,694 | $ | 1,012,513 | $ | 1,026,921 |
For the Quarter Ended
|
||||||||||||||||||||
June 30, 2014
|
March 31, 2014
|
December 31, 2013
|
September 30, 2013
|
June 30, 2013
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Non-Accretable Difference
|
||||||||||||||||||||
Balance, beginning of period
|
$ | 1,171,130 | $ | 1,217,793 | $ | 1,261,945 | $ | 1,370,792 | $ | 1,464,558 | ||||||||||
Principal Writedowns
|
(41,155 | ) | (47,079 | ) | (41,708 | ) | (93,054 | ) | (68,835 | ) | ||||||||||
Purchases
|
(6,773 | ) | 18,815 | - | - | - | ||||||||||||||
Sales and deconsolidation
|
(71,384 | ) | (1,093 | ) | - | - | - | |||||||||||||
Net other-than-temporary credit impairment losses
|
5,347 | 1,534 | 22,549 | 16,455 | - | |||||||||||||||
Transfers from credit reserve
|
(17,134 | ) | (31,666 | ) | (28,962 | ) | (35,054 | ) | (30,744 | ) | ||||||||||
Transfers to credit reserve
|
6,488 | 12,826 | 3,969 | 2,806 | 5,813 | |||||||||||||||
Balance, end of period
|
$ | 1,046,519 | $ | 1,171,130 | $ | 1,217,793 | $ | 1,261,945 | $ | 1,370,792 |
For the Quarter Ended
|
||||||||||||||||||||||||
June 30, 2014
|
June 30, 2013
|
|||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Average
Balance
|
Interest
|
Average
Yield/Cost
|
Average
Balance
|
Interest
|
Average
Yield/Cost
|
|||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Interest-earning assets(
¹
):
|
||||||||||||||||||||||||
Agency RMBS
|
$ | 3,351,225 | $ | 29,217 | 3.49 | % | $ | 1,815,333 | $ | 17,307 | 3.81 | % | ||||||||||||
Non-Agency RMBS
|
829,490 | 19,835 | 9.56 | % | 646,725 | 16,310 | 10.09 | % | ||||||||||||||||
Non-Agency RMBS transferred to consolidated VIEs
|
1,934,640 | 76,898 | 15.90 | % | 2,322,905 | 85,492 | 14.72 | % | ||||||||||||||||
Securitized loans held for investment
|
740,122 | 8,364 | 4.52 | % | 1,014,216 | 8,444 | 3.33 | % | ||||||||||||||||
Total | $ | 6,855,477 | $ | 134,314 | 7.84 | % | $ | 5,799,179 | $ | 127,553 | 8.80 | % | ||||||||||||
Liabilities and stockholders' equity:
|
||||||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Agency Repurchase Agreements(
²
)
|
$ | 2,883,892 | $ | 14,788 | 2.05 | % | $ | 1,449,257 | $ | 7,020 | 1.94 | % | ||||||||||||
Non-Agency Repurchase Agreements
|
170,844 | 777 | 1.82 | % | - | - | - | |||||||||||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
807,913 | 10,865 | 5.38 | % | 1,185,025 | 18,182 | 6.14 | % | ||||||||||||||||
Securitized debt, collateralized by loans
|
620,923 | 6,311 | 4.07 | % | 882,416 | 6,800 | 3.08 | % | ||||||||||||||||
Total | $ | 4,483,572 | $ | 32,741 | 2.92 | % | $ | 3,516,698 | $ | 32,002 | 3.64 | % | ||||||||||||
Net economic interest income/net interest rate spread
|
$ | 101,573 | 4.92 | % | $ | 95,551 | 5.16 | % | ||||||||||||||||
Net interest-earning assets/net interest margin
|
$ | 2,371,905 | 5.93 | % | $ | 2,282,481 | 6.59 | % | ||||||||||||||||
Ratio of interest-earning assets to interest bearing liabilities
|
1.53 | 1.65 |
For the Six Months Ended
|
||||||||||||||||||||||||
June 30, 2014
|
June 30, 2013
|
|||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Average
Balance
|
Interest
|
Average
Yield/Cost
|
Average
Balance
|
Interest
|
Average
Yield/Cost
|
|||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Interest-earning assets(
¹
):
|
||||||||||||||||||||||||
Agency RMBS
|
$ | 2,647,226 | $ | 45,257 | 3.42 | % | $ | 1,783,753 | $ | 30,792 | 3.45 | % | ||||||||||||
Non-Agency RMBS
|
795,323 | 39,247 | 9.87 | % | 639,539 | 31,878 | 9.97 | % | ||||||||||||||||
Non-Agency RMBS transferred to consolidated VIEs
|
1,981,636 | 154,309 | 15.57 | % | 2,360,953 | 174,331 | 14.77 | % | ||||||||||||||||
Securitized loans held for investment
|
757,597 | 16,164 | 4.27 | % | 1,113,396 | 16,333 | 2.93 | % | ||||||||||||||||
Total | $ | 6,181,782 | $ | 254,977 | 8.25 | % | $ | 5,897,641 | $ | 253,334 | 8.59 | % | ||||||||||||
Liabilities and stockholders' equity:
|
||||||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Agency Repurchase Agreements(
²
)
|
$ | 2,273,024 | $ | 22,164 | 1.95 | % | $ | 1,475,514 | $ | 14,383 | 1.95 | % | ||||||||||||
Non-Agency Repurchase Agreements
|
86,371 | 777 | 1.80 | % | - | - | - | |||||||||||||||||
Securitized debt, collateralized by Non-Agency RMBS
|
849,852 | 26,019 | 6.12 | % | 1,235,437 | 37,252 | 6.03 | % | ||||||||||||||||
Securitized debt, collateralized by loans
|
637,275 | 11,856 | 3.72 | % | 978,180 | 14,726 | 3.01 | % | ||||||||||||||||
Total | $ | 3,846,522 | $ | 60,816 | 3.16 | % | $ | 3,689,131 | $ | 66,361 | 3.60 | % | ||||||||||||
Net economic interest income/net interest rate spread
|
$ | 194,161 | 5.09 | % | $ | 186,973 | 4.99 | % | ||||||||||||||||
Net interest-earning assets/net interest margin
|
$ | 2,335,260 | 6.28 | % | $ | 2,208,511 | 6.34 | % | ||||||||||||||||
Ratio of interest-earning assets to interest bearing liabilities
|
1.61 | 1.60 |
Average Debt Balance
|
Economic
Interest
Expense (1)
|
Average
Cost of
Funds
|
Average
One-Month
LIBOR
|
Average
Six-Month
LIBOR
|
Average
One-Month
LIBOR
Relative to
Average
Six-Month
LIBOR
|
Average
Cost of
Funds
Relative to
Average
One-Month
LIBOR
|
Average
Cost of
Funds
Relative to
Average
Six-Month
LIBOR
|
|||||||||||||||||||||||||
(Ratios have been annualized, dollars in thousands)
|
||||||||||||||||||||||||||||||||
For The Quarter Ended June 30, 2014
|
$ | 4,483,572 | $ | 32,741 | 2.92 | % | 0.15 | % | 0.32 | % | (0.17 | %) | 2.77 | % | 2.60 | % | ||||||||||||||||
For The Quarter Ended March 31, 2014
|
$ | 3,145,025 | $ | 28,075 | 3.57 | % | 0.16 | % | 0.33 | % | (0.17 | %) | 3.41 | % | 3.24 | % | ||||||||||||||||
For The Quarter Ended December 31, 2013
|
$ | 3,285,584 | $ | 26,962 | 3.28 | % | 0.17 | % | 0.35 | % | (0.18 | %) | 3.11 | % | 2.93 | % | ||||||||||||||||
For The Quarter Ended September 30, 2013
|
$ | 3,360,508 | $ | 30,533 | 3.63 | % | 0.19 | % | 0.39 | % | (0.20 | %) | 3.44 | % | 3.24 | % | ||||||||||||||||
For The Quarter Ended June 30, 2013
|
$ | 3,516,698 | $ | 32,002 | 3.64 | % | 0.20 | % | 0.42 | % | (0.22 | %) | 3.44 | % | 3.22 | % | ||||||||||||||||
(1) Includes effect of realized losses on interest rate swaps.
|
For the Quarter Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30, 2014
|
June 30, 2013
|
June 30, 2014
|
June 30, 2013
|
|||||||||||||
Periodic interest cost of interest rate swaps, net
|
$ | (12,061 | ) | $ | (5,391 | ) | $ | (17,711 | ) | $ | (10,921 | ) | ||||
Realized gain on derivative instruments, net:
|
||||||||||||||||
Mortgage Options
|
1,050 | - | 1,653 | - | ||||||||||||
Treasury Futures
|
(8,781 | ) | - | (9,482 | ) | - | ||||||||||
Total realized gain (loss) on derivative instruments, net
|
(7,731 | ) | - | (7,829 | ) | - | ||||||||||
Unrealized gain on derivative instruments, net:
|
||||||||||||||||
Interest Rate Swaps
|
(19,834 | ) | 13,178 | (15,769 | ) | 18,580 | ||||||||||
Mortgage Options
|
3,593 | - | 4,339 | - | ||||||||||||
Treasury Futures
|
(6,256 | ) | - | (13,265 | ) | - | ||||||||||
Total unrealized gain (loss) on derivative instruments, net:
|
(22,497 | ) | 13,178 | (24,695 | ) | 18,580 | ||||||||||
Total gain (loss) on derivative instruments, net
|
$ | (42,289 | ) | $ | 7,787 | $ | (50,235 | ) | $ | 7,659 |
Total
Management Fee
and G&A
Expenses
|
Total
Management Fee
and G&A
Expenses/Total
Assets
|
Total
Management
Fee
and G&A
Expenses/Average
Equity
|
||||||||||
(Ratios have been annualized, dollars in thousands)
|
||||||||||||
For The Quarter Ended June 30, 2014
|
$ | 10,317 | 0.42 | % | 1.22 | % | ||||||
For The Quarter Ended March 31, 2014
|
$ | 9,276 | 0.54 | % | 1.11 | % | ||||||
For The Quarter Ended December 31, 2013
|
$ | 8,965 | 0.51 | % | 1.04 | % | ||||||
For The Quarter Ended September 30, 2013
|
$ | 9,112 | 0.51 | % | 1.01 | % | ||||||
For The Quarter Ended June 30, 2013
|
$ | 8,380 | 0.46 | % | 0.92 | % |
Economic Net Interest
Income/Average Equity *
|
Realized Gains
(Losses) on
Sales and
OTTI/Average
Equity
|
Realized and
Unrealized Gains
(Losses) on
Interest Rate
Swaps and
IOs/Average
Equity
|
Total
Management Fee
& G&A
Expenses/Average
Equity
|
Return on Average Equity
|
|
(Ratios have been annualized)
|
|||||
For The Quarter Ended June 30, 2014
|
12.00%
|
(1.17%)
|
2.55%
|
(1.22%)
|
12.38%
|
For The Quarter Ended March 31, 2014
|
11.04%
|
0.78%
|
1.31%
|
(1.11%)
|
11.98%
|
For The Quarter Ended December 31, 2013
|
13.13%
|
(3.12%)
|
1.55%
|
(1.04%)
|
8.39%
|
For The Quarter Ended September 30, 2013
|
11.33%
|
0.27%
|
(3.10%)
|
(1.01%)
|
7.49%
|
For The Quarter Ended June 30, 2013
|
10.50%
|
6.14%
|
0.02%
|
(0.92%)
|
15.73%
|
June 30, 2014
|
December 31, 2013
|
|||||||
(dollars in thousands)
|
||||||||
Overnight
|
$ | - | $ | - | ||||
1-29 days
|
1,694,284 | 644,332 | ||||||
30 to 59 days
|
1,085,418 | 606,945 | ||||||
60 to 89 days
|
1,684,618 | - | ||||||
90 to 119 days
|
63,545 | 129,049 | ||||||
Greater than or equal to 120 days
|
1,036,689 | 278,235 | ||||||
Total
|
$ | 5,564,554 | $ | 1,658,561 |
Period
|
Average
Repurchase
Balance
|
Repurchase
Balance at
Period End
|
||||||
(dollars in thousands)
|
||||||||
Quarter End June 30, 2014
|
$ | 3,054,737 | $ | 5,564,554 | ||||
Quarter End March 31, 2014
|
$ | 1,648,425 | $ | 1,561,920 | ||||
Quarter Ended December 31, 2013
|
$ | 1,574,872 | $ | 1,658,561 | ||||
Quarter Ended September 30, 2013
|
$ | 1,464,677 | $ | 1,589,325 | ||||
Quarter Ended June 30, 2013
|
$ | 1,422,485 | $ | 1,478,141 |
June 30, 2014
|
||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Contractual Obligations
|
Within One
Year
|
One to Three
Years
|
Three to Five
Years
|
Greater Than
or Equal to
Five Years
|
Total
|
|||||||||||||||
Repurchase agreements for RMBS
|
$ | 5,564,554 | $ | - | $ | - | $ | - | $ | 5,564,554 | ||||||||||
Securitized debt
|
295,142 | 405,518 | 228,650 | 376,409 | 1,305,719 | |||||||||||||||
Interest expense on RMBS repurchase agreements (1)
|
6,951 | - | - | - | 6,951 | |||||||||||||||
Interest expense on securitized debt (1)
|
49,677 | 73,835 | 54,509 | 174,695 | 352,716 | |||||||||||||||
Total
|
$ | 5,916,324 | $ | 479,353 | $ | 283,159 | $ | 551,104 | $ | 7,229,940 | ||||||||||
(1) Interest is based on variable rates in effect as of June 30, 2014.
|
●
|
Limit the initial margin and premiums required to establish its commodity interest positions to no more than five percent of the fair market value of the mortgage real estate investment trust’s total assets;
|
●
|
Limit the net income derived annually from its commodity interest positions that are not qualifying hedging transactions to less than five percent of the mortgage real estate investment trust’s gross income;
|
●
|
Ensure that interests in the mortgage real estate investment trust are not marketed to the public as or in a commodity pool or otherwise as or in a vehicle for trading in the commodity futures, commodity options, or swaps markets; and
|
●
|
Either:
|
o
|
identify itself as a “mortgage REIT” in Item G of its last U.S. income tax return on Form 1120-REIT; or
|
o
|
if it has not yet filed its first U.S. income tax return on Form 1120-REIT, disclose to its shareholders that it intends to identify itself as a “mortgage REIT” in its first U.S. income tax return on Form 1120-REIT.
|
●
|
monitoring and adjusting, if necessary, the reset index and interest rate related to our RMBS and our financings;
|
●
|
attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;
|
●
|
using derivatives, financial futures, swaps, options, caps, floors and forward sales to adjust the interest rate sensitivity of our investments and our borrowings;
|
●
|
using securitization financing to lower average cost of funds relative to short-term financing vehicles further allowing us to receive the benefit of attractive terms for an extended period of time in contrast to short term financing and maturity dates of the investments not included in the securitization; and
|
●
|
actively managing, on an aggregate basis, the interest rate indices, interest rate adjustment periods, and gross reset margins of our investments and the interest rate indices and adjustment periods of our financings.
|
Exhibit 101.INS XBRL
|
Instance Document **
|
Exhibit 101.SCH XBRL
|
Taxonomy Extension Schema Document **
|
Exhibit 101.CAL XBRL
|
Taxonomy Extension Calculation Linkbase Document **
|
Exhibit 101.DEF XBRL
|
Additional Taxonomy Extension Definition Linkbase Document Created**
|
Exhibit 101.LAB XBRL
|
Taxonomy Extension Label Linkbase Document **
|
Exhibit 101.PRE XBRL
|
Taxonomy Extension Presentation Linkbase Document **
|
CHIMERA INVESTMENT CORPORATION
|
|||
By:
|
/s/ Matthew Lambiase
|
||
Matthew Lambiase
|
|||
|
(Chief Executive Officer and President
|
||
and duly authorized officer of the registrant)
|
|||
Date: August 11, 2014
|
|||
By:
|
/s/
Rob Colligan
|
||
Rob Colligan
|
|||
|
(Chief Financial Officer
|
||
and principal financial officer of the registrant)
|
|||
Date: August 11, 2014
|
CHIMERA INVESTMENT CORPORATION
|
||||
By:
|
/s/ Matthew Lambiase
|
|||
Name:
|
Matthew Lambiase
|
|||
Title:
|
Chief Executive Officer and President
|
|||
FIXED INCOME DISCOUNT ADVISORY COMPANY
|
||||
By:
|
/s/ Glenn A. Votek
|
|||
Name:
|
Glenn A. Votek
|
|||
Title:
|
Chief Financial Officer
|
●
|
No investment shall be made that would cause the Company to fail to qualify as a REIT for federal income tax purposes;
|
●
|
No investment shall be made that would cause the Company to be regulated as an investment company under the Investment Company Act;
|
●
|
With the exception of real estate and housing, no single industry shall represent greater than 20% of the securities or aggregate risk exposure in the Company’s portfolio; and
|
●
|
Investments in non-rated or deeply subordinated Asset-Backed Securities or other securities that are non-qualifying assets for purposes of the 75% REIT asset test will be limited to an amount not to exceed 50% of the Company’s stockholders’ equity.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Chimera Investment Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
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a.
|
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
August 11, 2014
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|
/s/ Matthew Lambiase
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|
Matthew Lambiase
|
|
Chief Executive Officer and President (Principal Executive Officer)
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1.
|
I have reviewed this quarterly report on Form 10-Q of Chimera Investment Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
August 11, 2014
|
|
/s/
Rob Colligan
|
|
Rob Colligan
|
|
Chief Financial Officer (Principal Financial Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
/s/ Matthew Lambiase
|
|
Matthew Lambiase
|
|
Chief Executive Officer and President
|
|
August 11, 2014
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
/s/ Rob Colligan
|
|
Rob Colligan
|
|
Chief Financial Officer
|
|
August 11, 2014
|