5. Commercial Mortgage-Backed Securities

As of December 31, 2011, the Company classifies all of its commercial mortgage-backed securities as “available for sale” for financial accounting purposes and carries those securities on the Consolidated Balance Sheet at fair value with the net unrealized gains or losses included in Accumulated Other Comprehensive Income (Loss), a component of Stockholders’ Equity on the Company’s Consolidated Balance Sheet.

A detailed schedule of the Company’s securities investments at December 31, 2011 follows:

	Face Amount (1)				Cost Basis				Fair Value
Description	Dec 31, 2011		Dec 31, 2010		Dec 31, 2011		Dec 31, 2010		Dec 31, 2011		Dec 31, 2010
Certificated Mortgage Loan (with Alcatel-Lucent USA Inc. as tenant in Highlands Ranch, CO)	$	24,527	$	34,722	$	24,818	$	35,172	$	20,648	$	27,947
Certificated Mortgage Loan (with CVS Corporation as tenant / multi-property) (rated BBB+)		16,867		17,480		16,867		17,480		17,410		17,507
Certificated Mortgage Loan (with Koninklijke Ahold, N.V. as tenant / multi-property) (rated BB		7,489		8,032		7,578		8,142		8,395		8,875
BAC M 2006-4, Class H (rated CCC)		4,000		8,000		–		400		800		400
BAC MS 2002-2, Class V-1 (7-Eleven, Inc.) (rated AA-)		656		602		555		493		555		493
BAC MS 2002-2, Class V-2 (Sterling Jewelers) (not rated)		1,001		920		828		735		828		735
CALFS 1997-CTL1, Class D (rated B-)		3,000		6,000		3,000		5,951		1,200		4,501
CapLease CD O 2005-1, Class A (rated BBB+) (2)		2,661		–		2,326		–		2,345		–
CapLease CD O 2005-1, Class B (rated BBB-) (2)		2,000		–		1,400		–		1,410		–
CMLBC 2001-CMLB-1, Class H (rated B-)		11,907		11,907		7,139		6,978		2,639		1,109
CMLBC 2001-CMLB-1, Class J (rated D)		6,383		6,383		756		1,149		672		320
NLFC 1999-LTL-1, Class X (IO) (rated AAA)		3,916		4,392		3,916		4,392		2,533		3,917
Certificated Mortgage Loan (with Yahoo! Inc. as tenant) (rated BBB-)		–		21,739		–		21,497		–		20,868
Banc of America 2007-1, Class C (rated B)		–		500		–		173		–		225
BSC MS 1999 CLF1, Class E (rated D)		–		3,326		–		–		–		–
BSC MS 1999 CLF1, Class F (not rated)		–		251		–		–		–		–
CMLBC 2001-CMLB-1, Class E (rated BBB+)		–		9,526		–		10,033		–		5,456
CMLBC 2001-CMLB-1, Class G (rated BB-)		–		9,526		–		8,953		–		2,789
JP Morgan 2006-LDP9, Class AJ (rated B+)		–		200		–		99		–		166
NLFC 1999-LTL-1, Class E (rated BB)		–		11,081		–		5,926		–		3,880
W achovia 2007-C30, Class AJ (rated B)		–		200		–		95		–		109
W achovia 2007-C31, Class AJ (rated B+)		–		200		–		96		–		110
W achovia 2007-C33, Class AJ (rated B+)		–		200		–		96		–		134
W BCMT 2004-C15, Class 180ML-D (rated CCC+)		–		15,000		–		15,013		–		13,800
W BCMT 2004-C15, Class 180ML-E (rated CCC )		–		8,000		–		8,008		–		7,223
W BCMT 2006-C27, Class C (rated BB)		–		11,000		–		11,148		–		6,600
Total	$	84,405	$	189,187	$	69,181	$	162,029	$	59,435	$	127,164

(1)

Reflects face amount, or, in the case of the NLFC 1999-LTL-1 Class X (IO) bond, amortized cost.

(2)

Represents investments in the note classes of the CDO that the Company did not sell as part of the CDO sale transaction completed during the third quarter of 2011. Prior to such sale, for financial accounting purposes the note classes were reported as a reduction in the amount of debt the Company had outstanding in the CDO. The Company has no continuing involvement in the CDO transaction.

All credit ratings in the above table are as of December 31, 2011.

During 2011, the Company significantly reduced the size and number of its securities available for sale, including through the sale of its CDO during September. See Note 6.

The Company evaluated each of its securities for other-than-temporary impairment at December 31, 2011, and determined that no additional other-than-temporary impairment charges on its securities were appropriate. During the quarter ended September 30, 2011, the Company determined to recognize an other-than-temporary impairment of $48 on the BACM 2006-4, Class H bond which reduced the Company’s cost basis on the bond to zero. The loss is included as a component of “Gain (loss) on investments, net” in the Company’s Consolidated Statement of Operations, and is in addition to other-than-temporary impairment losses of $7,741 of the same bond at December 31, 2010. To the extent the Company continues to receive debt service payments from the bond, it will record those payments as interest income. During the quarter ended December 31, 2011, the Company received debt service payments of $91 from the bond, all of which were recorded as interest income.

At December 31, 2010, the Company also recognized an other-than-temporary impairment of $208 on the BSCMS, Class E bond, thereby reducing the Company’s cost basis on the bond to zero. The 2010 loss on the BSCMS, Class E bond is in addition to losses of $133 during the year ended December 31, 2009, and $1,000 during the year ended December 31, 2008, on the same bond class. During the quarter ended December 31, 2010, the BSCMS trust stopped paying scheduled interest on the Class E bond and the Company does not expect to receive any future interest or principal payments on this bond class.

Unrealized gains and losses on securities at December 31, 2011 and December 31, 2010, included as a component of Other Comprehensive Income (Loss) on the Company’s Consolidated Balance Sheet, consisted of the following:

	December 31,
	2011			2010
Unrealized gains on securities previously available for sale	$	–		$	750
Unrealized losses on securities previously available for sale		–			(8,857	)
Unrealized gains on securities available for sale		2,189			–
Unrealized losses on securities available for sale		(11,936	)		(7,958	)

The following table summarizes the Company’s securities in an unrealized loss position as of December 31, 2011.

		Aggregate Fair Value				Aggregate Unrealized Loss				Number of Securities
In unrealized loss position 12 or more months		$	27,692			$	11,936				5

The following table summarizes the Company’s securities in an unrealized loss position as of December 31, 2010.

		Aggregate Fair Value				Aggregate Unrealized Loss				Number of Securities
In unrealized loss position 12 or more months		$	98,411			$	35,810				12

Credit ratings on the 5 securities in a continuous unrealized loss position for more than 12 months as of December 31, 2011, range from AAA to D with a weighted average of B+ and those securities have a weighted average maturity of approximately 6.6 years. The Company believes that none of the unrealized losses on investment securities are other-than-temporary because management expects the Company will receive all contractual principal and interest related to these investments. In addition, the Company did not have the intent to sell the securities or believe it would be required to sell them as of December 31, 2011.

At December 31, 2011 and December 31, 2010, the weighted average effective interest rate (yield to maturity on adjusted cost basis) on securities was approximately 8.4% and 8.0%, respectively.