NOTE 4. SECURITIES

The Company accounts for securities based on the following categories: (i) securities available-for-sale, which are carried at estimated fair value, with unrealized gains and losses reported in accumulated other comprehensive loss; (ii) other securities, at estimated fair value, with unrealized gains and losses recorded in the condensed consolidated statements of operations; and (iii) RMBS, at estimated fair value, with unrealized gains and losses recorded in the condensed consolidated statements of operations.

The following table summarizes the Company’s securities as of March 31, 2013, which are carried at estimated fair value (amounts in thousands):

	March 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities available-for-sale	$	335,968	$	25,039	$	(2,042	)	$	358,965
Other securities, at estimated fair value(1)	41,436		15,456		(689		)	56,203
Residential mortgage-backed securities, at estimated fair value(1)	162,483		4,423		(79,878		)	87,028
Total securities	$	539,887	$	44,918	$	(82,609	)	$	502,196

(1) Unrealized gains and losses are recorded in earnings.

The following table summarizes the Company’s securities as of December 31, 2012, which are carried at estimated fair value (amounts in thousands):

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities available-for-sale	$	394,821	$	27,281	$	(9,809	)	$	412,293
Other securities, at estimated fair value(1)	27,991		9,768		(374		)	37,385
Residential mortgage-backed securities, at estimated fair value(1)	171,385		3,762		(91,305		)	83,842
Total securities	$	594,197	$	40,811	$	(101,488	)	$	533,520

(1) Unrealized gains and losses are recorded in earnings.

The following table shows the gross unrealized losses and fair value of the Company’s available-for-sale securities, aggregated by length of time that the individual securities have been in a continuous unrealized loss position as of March 31, 2013 and December 31, 2012 (amounts in thousands):

	Less Than 12 months					12 Months or More					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
March 31, 2013
Corporate debt securities	$	33,970	$	(665	)	$	27,809	$	(1,377	)	$	61,779	$	(2,042	)
December 31, 2012
Corporate debt securities	$	45,900	$	(4,398	)	$	37,500	$	(5,411	)	$	83,400	$	(9,809	)

The unrealized losses in the table above are considered to be temporary impairments due to market factors and are not reflective of credit deterioration. The Company considers many factors when evaluating whether an impairment is other-than-temporary. For corporate debt securities included in the table above, the Company does not intend to sell them and does not believe that it is more likely than not that the Company will be required to sell any of its corporate debt securities prior to recovery. In addition, based on the analyses performed by the Company on each of its corporate debt securities, the Company believes that it is able to recover the entire amortized cost amount of the corporate debt securities included in the table above.

During the three months ended March 31, 2013 and 2012, the Company recognized losses totaling $5.9 million and $0.7 million, respectively, for corporate debt securities that it determined to be other-than-temporarily impaired. The Company intends to sell these securities and as a result, the entire amount is recorded through earnings in net realized and unrealized gain on investments in the condensed consolidated statements of operations.

For common and preferred stock, the Company considers many factors when evaluating whether an impairment is other-than-temporary, including its intent and ability to hold the common and preferred stock for a period of time sufficient for recovery to cost. If the Company believes it will not recover the cost basis based on its intent or ability, an other-than-temporary loss will be recorded through earnings in net realized and unrealized gain on investments in the condensed consolidated statements of operations.

During the three months ended March 31, 2012, the Company recognized no losses for common and preferred stock that it determined to be other-than-temporarily impaired. As of March 31, 2013, the Company had no investments in common or preferred stock.

As of both March 31, 2013 and December 31, 2012, the Company had no corporate debt securities in default.

Securities available-for-sale sold at a loss typically include those that the Company determined to be other-than-temporarily impaired or had a deterioration in credit quality. The following table shows the net realized gains on the sales of securities available-for-sale (amounts in thousands):

	For the three months ended March 31, 2013		For the three months ended March 31, 2012
Gross realized gains	$	2,150	$	7,581
Gross realized losses	—		—
Net realized gains(1)	$	2,150	$	7,581

(1) Excludes net realized gains from paydowns and restructurings totaling $1.6 million, including a $1.0 million premium on bond redemption, and $16.2 million, including a $0.8 million premium on bond redemption, for the three months ended March 31, 2013 and 2012, respectively. Also excludes an impairment charge of $5.9 million and $0.7 million for investments which were determined to be other-than-temporarily impaired for the three months ended March 31, 2013 and 2012, respectively.

Concentration Risk

The Company’s securities available-for-sale portfolio has certain credit risk concentrated in a limited number of issuers. As of March 31, 2013, approximately 55% of the estimated fair value of the Company’s securities available-for-sale portfolio was concentrated in ten issuers, with the three largest concentrations of securities available-for-sale in securities issued by Avaya, Inc., iPayment, Inc. and Supervalu, Inc., which combined represented $78.2 million, or approximately 22% of the estimated fair value of the Company’s securities available-for-sale. As of December 31, 2012, approximately 54% of the estimated fair value of the Company’s securities available-for-sale portfolio was concentrated in ten issuers, with the three largest concentrations of securities available-for-sale in securities issued by Sanmina Corporation, Avaya, Inc. and iPayment, Inc., which combined represented $87.0 million, or approximately 21% of the estimated fair value of the Company’s securities available-for-sale.

Pledged Assets

Note 7 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged securities for borrowings. The following table summarizes the estimated fair value of securities available-for-sale pledged as collateral as of March 31, 2013 and December 31, 2012 (amounts in thousands):

	As of March 31, 2013		As of December 31, 2012
Pledged as collateral for collateralized loan obligation secured debt and junior secured notes to affiliates	$	310,941	$	354,088
Total	$	310,941	$	354,088

As of March 31, 2013 and December 31, 2012, no other securities, at estimated fair value or RMBS were pledged as collateral for the Company’s borrowings.