NOTE 10 – BORROWINGS

With effect from January 1, 2015, ASU 2014-11 changed the basis on which the Company accounts for repurchase to maturity transactions and linked repurchase financings to be consistent with the basis on which the Company accounts for secured borrowings. Accordingly, the assets and repurchase agreements that encompass linked transactions that were previously accounted for on a net basis and recorded as a forward purchase (derivative) contract are now bifurcated, and the gross amounts are reported in available-for-sale securities and repurchase agreements separately. Consequently, the Company’s GAAP financial statements as of and for the period ended December 31, 2015 are not directly comparable to prior period GAAP financials.

Repurchase Agreements

The Company has entered into repurchase agreements (including two residential loan warehouse facilities) to finance its portfolio of investments. The repurchase agreements bear interest at a contractually agreed rate. The repurchase obligations mature and typically reinvest every 30 days to one year and have a weighted average aggregate interest rate of 1.19% at December 31, 2015. Repurchase agreements are being accounted for as secured borrowings since the Company maintains effective control of the financed assets. The following table summarizes certain characteristics of the Company’s repurchase agreements at December 31, 2015 and December 31, 2014:

	December 31, 2015							December 31, 2014
			Weighted							Weighted
	Amount		average				Market value	Amount		average				Market value
	outstanding			interest rate			of collateral held	outstanding			interest rate			of collateral held
Agency	$	358,239,000			0.66	%	374,952,510	$	298,783,000			0.36	%	312,618,152
Non-Agency⁽¹⁾		114,512,000			2.24	%	121,475,112		200,347,000			1.25	%	249,788,301
Multi-Family⁽²⁾		86,177,000			1.83	%	190,056,347		45,484,000			1.85	%	79,933,551
Mortgage loans		9,504,457			2.87	%	10,900,403		50,263,852			2.86	%	53,081,951
Total	$	568,432,457			1.19	%	697,384,372	$	594,877,852			0.99	%	695,421,955

(1)

At December 31, 2014, the Company had repurchase agreements of $85,497,000 that were linked to Non-Agency RMBS purchases and were accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 3).

(2)

At December 31, 2014, the Company had repurchase agreements of $63,796,000 that were linked to Multi-Family MBS purchases and were accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 3).

At December 31, 2015 and December 31, 2014, the repurchase agreements had the following remaining maturities:

	December 31, 2015		December 31, 2014
< 30 days	$	449,063,000	$	465,817,820
31 to 60 days		76,044,000		86,025,327
61 to 90 days		37,873,540		-
> 90 days		5,451,917		43,034,705
Total	$	568,432,457	$	594,877,852

Under the repurchase agreements (including residential loan warehouse facilities), the respective lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or fund margin calls. In addition, the repurchase agreements are subject to certain financial covenants , the most restrictive of which requires that, on the last day of any fiscal quarter, our total stockholders’ equity shall not be less than the greater of (1) $75,000,000 or (2) 50% of the highest stockholders’ equity on the last day of the preceding eight fiscal quarters. The Company is in compliance with these covenants as of December 31, 2015 , and December 31, 2014.

The following tables summarize certain characteristics of the Company’s repurchase agreements at December 31, 2015 and December 31, 2014:

	December 31, 2015
	Amount		Percent of total			Weighted average		Market Value
Repurchase Agreement Counterparties	Outstanding		amount outstanding			days to maturity		of collateral held
Merrill Lynch	$	99,770,000		17.55	%		30	$	154,005,234
Wells Fargo Securities		32,192,000		5.66	%		10		53,711,547
Other North America		291,806,000		51.34	%		25		315,040,818
Europe ⁽¹⁾		56,099,457		9.87	%		46		76,656,547
Asia ⁽¹⁾		88,565,000		15.58	%		16		97,970,226
Total	$	568,432,457		100.00	%		26	$	697,384,372

(1)

Counterparties domiciled in Europe and Asia, or their U.S. subsidiaries.

	December 31, 2014
	Amount		Percent of total			Weighted average		Market Value
Repurchase Agreement Counterparties	Outstanding⁽¹⁾		amount outstanding			days to maturity		of collateral held
Merrill Lynch	$	75,964,000		12.77	%		15	$	119,883,045
Other North America		312,174,820		52.48	%		19		343,732,641
Europe ⁽²⁾		93,350,032		15.69	%		21		113,286,452
Asia ⁽²⁾		113,389,000		19.06	%		122		118,519,817
Total	$	594,877,852		100.00	%		36	$	695,421,955

(1) At December 31, 2014, the Company had repurchase agreements of $85,497,000 and $63,796,000 that were linked to Non-Agency RMBS and Multi-Family MBS purchases, respectively, and were accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 3).

(2) Counterparties domiciled in Europe and Asia, or their U.S. subsidiaries.

Secured Loans

As of December 31, 2015, FOI had $49.7 million in outstanding secured advances from FHLBI. The secured advances are due in three months and have floating rates based on three-month LIBOR plus a spread. For the year ended December 31, 2015, FOI had average borrowings of $30.1 million with a weighted average borrowing rate of 0.40%.

As of December 31, 2015, the FHLBI advances were collateralized by RMBS with a fair value of $51.7million.

FHLBI retains the right to mark the underlying collateral for FHLBI advances to fair value. A reduction in the value of pledged assets would require FOI to provide additional collateral.

An additional requirement of FHLBI membership is to purchase and hold a certain amount of FHLBI stock, which is based in part, upon the outstanding principal balance of secured advances from FHLBI.

As of December 31, 2014, the Company had no outstanding secured advances or FHLBI stock.