Securities Held-to-Maturity

3 Months Ended

Mar. 31, 2018

Note 7 — Securities Held-to-Maturity

Freddie Mac may choose to hold, sell or securitize loans we sell to them under the Freddie Mac SBL program. As part of the securitizations under the SBL program, we are required to purchase the bottom tranche bond, generally referred to as the “B Piece,” that represents the bottom 10%, or highest risk, of the securitization. During the three months ended March 31, 2018, we purchased a B Piece bond with an initial face value of $12.3 million, at a discount, for $8.4 million. As of March 31, 2018, we retained 49%, or $53.3 million initial face value, of four B Piece bonds, at a discount, for $35.6 million and sold the remaining 51% to a third party at par. These held-to-maturity securities are carried at cost, net of unamortized discounts, and are collateralized by a pool of multifamily mortgage loans, bear interest at an initial weighted average variable rate of 3.64% and have an estimated weighted average maturity of 5.7 years. The weighted average effective interest rate was 11.43% and 12.97% at March 31, 2018 and December 31, 2017, respectively, including the accretion of discount. Approximately $8.0 million is estimated to mature within one year, $25.4 million is estimated to mature after one year through five years, $12.3 million is estimated to mature after five years through ten years and $7.0 million is estimated to mature after ten years.

The following is a summary of the held-to-maturity securities we held (in thousands):

March 31, 2018
	Face Value		Carrying Value		Unrealized Gain		Estimated Fair Value
B Piece bonds	$	52,673	$	36,764	$	509	$	37,273

December 31, 2017
B Piece bonds	$	40,566	$	27,837	$	602	$	28,439

As of March 31, 2018, no impairment was recorded on these held-to-maturity securities. During the three months ended March 31, 2018 and 2017, we recorded interest income of $0.6 million and less than $0.1 million, respectively, related to these investments.