XML 25 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
AVAILABLE-FOR-SALE SECURITIES (as restated)
 12 Months Ended
Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE 4 –
AVAILABLE-FOR-SALE SECURITIES (as restated)
 
The following table presents the Company’s AFS investment securities by collateral type at fair value as of December 31, 2016 and December 31, 2015:
 
 
 
December 31, 2016
 
 
December 31, 2015
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency
 
 
 
 
 
 
 
 
Federal Home Loan Mortgage Corporation
 
$
326,958,046
 
 
$
148,760,159
 
Federal National Mortgage Association
 
 
463,232,187
 
 
 
182,867,134
 
Government National Mortgage Association
 
 
-
 
 
 
43,705,764
 
Non-Agency
 
 
7,592,802
 
 
 
92,107,727
 
Multi-Family
 
 
73,146,566
 
 
 
104,025,797
 
Total mortgage-backed securities
 
$
870,929,601
 
 
$
571,466,581
 
 
The following tables present the amortized cost and fair value of the Company’s AFS investment securities by collateral type as of December 31, 2016 and December 31, 2015:
 
 
 
December 31, 2016
 
 
 
Agency
 
 
Non-Agency
(1)
 
 
Multi-Family
 
 
Total
 
Face Value
 
$
779,219,115
 
 
$
4,393,771
 
 
$
100,907,815
 
 
$
884,520,701
 
Unamortized premium
 
 
17,748,138
 
 
 
-
 
 
 
-
 
 
 
17,748,138
 
Unamortized discount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Designated credit reserve and OTTI
(2)
 
 
-
 
 
 
(1,929,833
)
 
 
-
 
 
 
(1,929,833
)
Net, unamortized
 
 
(1,311,292
)
 
 
(369,887
)
 
 
(26,160,083
)
 
 
(27,841,262
)
Amortized Cost
 
 
795,655,961
 
 
 
2,094,051
 
 
 
74,747,732
 
 
 
872,497,744
 
Gross unrealized gain
 
 
2,663,975
 
 
 
234,647
 
 
 
509,519
 
 
 
3,408,141
 
Gross unrealized (loss)
 
 
(8,129,703
)
 
 
-
 
 
 
(2,110,685
)
 
 
(10,240,388
)
Fair Value
 
$
790,190,233
 
 
$
2,328,698
 
 
$
73,146,566
 
 
$
865,665,497
 
 
 
 
December 31, 2015
 
 
 
Agency
 
 
Non-Agency
(1)
 
 
Multi - Family
 
 
Total
 
Face Value
 
$
370,394,525
 
 
$
116,954,842
 
 
$
138,829,925
 
 
$
626,179,292
 
Unamortized premium
 
 
5,745,862
 
 
 
80,257
 
 
 
-
 
 
 
5,826,119
 
Unamortized discount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Designated credit reserve and OTTI
(2)
 
 
-
 
 
 
(8,891,565
)
 
 
-
 
 
 
(8,891,565
)
Net, unamortized
 
 
(1,929,145
)
 
 
(22,101,062
)
 
 
(33,250,068
)
 
 
(57,280,275
)
Amortized Cost
 
 
374,211,242
 
 
 
86,042,472
 
 
 
105,579,857
 
 
 
565,833,571
 
Gross unrealized gain
 
 
3,234,673
 
 
 
1,099,957
 
 
 
913,556
 
 
 
5,248,186
 
Gross unrealized (loss)
 
 
(2,112,858
)
 
 
(1,808,973
)
 
 
(2,467,616
)
 
 
(6,389,447
)
Fair Value
 
$
375,333,057
 
 
$
85,333,456
 
 
$
104,025,797
 
 
$
564,692,310
 
 
(1)
Non-Agency AFS does not include interest-only securities with a notional amount of $509,109,248, book value of $14,712,374 unrealized loss of $9,448,271 and a fair value of $5,264,104 at December 31, 2016 and a notional amount of $428,230,275, book value of $7,815,919 unrealized loss of $1,041,649 and a fair value of $6,774,271 at December 31, 2015
(2)
Discount designated as Credit Reserve and amount related to OTTI are generally not expected to be accreted into interest income. Amounts disclosed reflect Credit Reserve of $1,929,833 and $8,146,073 at December 31, 2016 and December 31, 2015, respectively, and OTTI of ($745,492) and $745,492 at December 31, 2016 and December 31, 2015, respectively.
 
At December 31, 2016, the Company did not intend to sell any of its MBS that were in an unrealized loss position, and it is “more likely than not” that the Company will not be required to sell these MBS before recovery of their amortized cost basis, which may be at their maturity.
 
The Company recognized credit-related OTTI 
gains 
through earnings of $0.56 million 
related to the release of credit reserves on certain legacy Non-Agency RMBS, all of which had been sold at year end and 
$3.64 million on four Non-Agency RMBS during the years ended December 31, 2016 and December 31, 2015, respectively.
 
Non-Agency RMBS on which OTTI is recognized have experienced, or are expected to experience, credit-related adverse cash flow changes, or credit impairment. The Company’s estimate of cash flows for its Non-Agency RMBS is based on its review of the underlying mortgage loans securing these RMBS. The Company considers information available about the structure of the securitization, including structural credit enhancement, if any, and the past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, prepayment rates, default rates, loss severities, delinquency rates, percentage of non-performing loans, FICO scores at loan origination, year of origination, loan-to-value ratios, geographic concentrations, as well as Rating Agency reports, general market assessments, and dialogue with market participants. Significant judgment is used in both the Company’s analysis of the expected cash flows for its Non-Agency RMBS and any determination of OTTI that is the result, at least in part, of credit impairment.
 
The following table present the composition of OTTI charges recorded by the Company for the years ended December 31, 2016, 2015, and 2014:
 
 
 
Year Ended
 
 
 
December 31,
 
 
 
2016
 
 
2015
 
 
2014
 
Cumulative credit loss at beginning of period
 
$
(3,636,431
)
 
$
-
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additions:
 
 
 
 
 
 
 
 
 
 
 
 
Initial (increase) in credit reserves
 
 
(541,342
)
 
 
(745,492
)
 
 
-
 
Subsequent (increase) in credit reserves
 
 
 
 
 
 
-
 
 
 
-
 
Initial additional other-than-temporary credit impairment losses
 
 
(183,790
)
 
 
(2,890,939
)
 
 
-
 
Subsequent additional other-than-temporary credit impairment losses
 
 
 
 
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reductions:
 
 
 
 
 
 
 
 
 
 
 
 
For securities sold decrease in credit reserves
 
 
1,286,835
 
 
 
-
 
 
 
-
 
For securities sold decrease in other-than-temporary impairment
 
 
-
 
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative credit (loss) at end of period
 
$
(3,074,728
)
 
$
(3,636,431
)
 
 
-
 
 
Unrealized losses on the Company’s legacy Non-Agency RMBS were $0.0 million at December 31, 2016 (2015: $1.8 million; 2014: $12,611).
 
The following table presents the components comprising the carrying value of AFS securities not deemed to be other than temporarily impaired by length of time the securities had an unrealized loss position as of December 31, 2016, and December 31, 2015. At December 31, 2016 the Company held 46 AFS securities, of which 31 were in an unrealized loss position for less than twelve consecutive months and five were in an unrealized loss for more than twelve months. All of these securities were either Agency RMBS or Multi-Family MBS. As such, credit-related adverse cash flow changes are not applicable and consequently no OTTI is recognized. At December 31, 2015, the Company held 67 AFS securities, of which 35 were in an unrealized loss position for less than twelve consecutive months and five were in an unrealized loss position for more than twelve months.
 
 
 
Less than 12 months
 
 
Greater than 12 months
 
 
Total
 
 
 
Estimated Fair


Value
 
 
Gross Unrealized


Losses
 
 
Estimated Fair


Value
 
 
Gross Unrealized


Losses
 
 
Estimated Fair


Value
 
 
Gross Unrealized


Losses
 
December 31, 2016
 
$
619,414,077
 
 
$
(8,129,704
)
 
$
45,879,433
 
 
$
(2,110,684
)
 
$
665,293,510
 
 
$
(10,240,388
)
December 31, 2015
 
$
348,120,251
 
 
$
(5,983,726
)
 
$
6,939,257
 
 
$
(405,720
)
 
$
355,059,508
 
 
$
(6,389,446
)
 
To the extent the Company determines there are likely to be decreases in cash flows expected to be collected, and as a result of non-credit impairment, such changes are generally recognized prospectively through adjustment of the security’s yield over its remaining life.
 
The following table presents a summary of the Company’s net realized gain (loss) from the sale of AFS securities, inclusive of securities previously booked as linked, for the years ended December 2016, December 2015, and December 2014.
 
 
 
December 31, 2016
 
 
December 31, 2015
 
 
December 31, 2014
 
AFS securities sold, at cost
 
$
268,849,640
 
 
$
267,741,325
 
 
$
462,470,753
 
Proceeds from AFS securities sold
 
 
263,143,871
 
 
 
267,567,905
 
 
 
466,239,975
 
Net realized gain (loss) on sale of AFS securities
 
$
(5,705,769
)
 
$
(173,420
)
 
$
3,769,222
 
 
The following tables present the fair value of AFS investment securities by rate type as of December 31, 2016 and December 31, 2015:
 
 
 
December 31, 2016
 
 
 
Agency
 
 
Non-Agency
 
 
Multi-Family
 
 
Total
 
Adjustable rate
 
$
788,727,476
 
 
$
7,592,802
 
 
$
-
 
 
$
796,320,278
 
Fixed rate
 
 
1,462,757
 
 
 
-
 
 
 
73,146,566
 
 
 
74,609,323
 
Total
 
$
790,190,233
 
 
$
7,592,802
 
 
$
73,146,566
 
 
$
870,929,601
 
 
 
 
December 31, 2015
 
 
 
Agency
 
 
Non-Agency
 
 
Multi- Family
 
 
Total
 
Adjustable rate
 
$
360,057,377
 
 
$
92,107,727
 
 
$
-
 
 
$
452,165,104
 
Fixed rate
 
 
15,275,680
 
 
 
-
 
 
 
104,025,797
 
 
 
119,301,477
 
Total
 
$
375,333,057
 
 
$
92,107,727
 
 
$
104,025,797
 
 
$
571,466,581
 
 
The following tables present the fair value of AFS investment securities by maturity date as December 31, 2016 and December 31, 2015:
 
 
 
December 31, 2016
 
 
December 31, 2015
 
Less than one year
 
$
-
 
 
$
-
 
Greater than one year and less than five years
 
 
399,872,894
 
 
 
211,800,340
 
Greater than or equal to five years
 
 
471,056,707
 
 
 
359,666,241
 
Total
 
$
870,929,601
 
 
$
571,466,581
 
 
As described in Note 2, when the Company purchases a credit-sensitive AFS security at a significant discount to its face value, the Company generally does not amortize into income a significant portion of this discount that the Company is entitled to earn because it does not expect to collect it due to the inherent credit risk of the security. The Company may also record an OTTI for a portion of its investment in the security to the extent the Company believes that the amortized cost will exceed the present value of expected future cash flows. The amount of principal that the Company does not amortize into income is designated as an off balance sheet credit reserve on the security, with unamortized net discounts or premiums amortized into income over time to the extent realizable.
 
Actual maturities of AFS securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, and prepayments of principal. Therefore actual maturities of available-for-sale securities are generally shorter than stated contractual maturities. Stated contractual maturities are generally greater than ten years.
 
The following tables present the changes for the year ended December 31, 2016 and the year ended December 31, 2015 of the unamortized net discount and designated credit reserves on the Company’s MBS.
 
 
 
December 31, 2016
 
 
 
Designated
 
 
Unamortized
 
 
 
 
 
 
credit reserve
 
 
net discount
 
 
Total
 
Beginning Balance as of January 1, 2016
 
$
(8,891,565
)
 
$
(57,280,275
)
 
$
(66,171,840
)
Acquisitions
 
 
-
 
 
 
-
 
 
 
-
 
Dispositions
 
 
4,893,913
 
 
 
21,637,637
 
 
 
26,531,550
 
Accretion of net discount
 
 
-
 
 
 
6,703,365
 
 
 
6,703,365
 
Realized gain on paydowns
 
 
-
 
 
 
325,709
 
 
 
325,709
 
Realized credit losses
 
 
3,023,911
 
 
 
(183,790
)
 
 
2,840,121
 
Addition to credit reserves
 
 
(1,021,433
)
 
 
1,021,433
 
 
 
-
 
Release of credit reserves
 
 
65,341
 
 
 
(65,341
)
 
 
-
 
Ending balance at December 31, 2016
 
$
(1,929,833
)
 
$
(27,841,262
)
 
$
(29,771,095
)
 
 
 
December 31, 2015
 
 
 
Designated
 
 
Unamortized
 
 
 
 
 
 
credit reserve
 
 
net discount
 
 
Total
 
Beginning Balance as of January 1, 2015
 
$
(12,697,796
)
 
$
(17,454,022
)
 
$
(30,151,818
)
Cumulative - effect adjustment for Linked Transactions
 
 
(36,627,321
)
 
 
(47,091,958
)
 
 
(83,719,279
)
Adjusted beginning Balance as of January 1, 2015
 
 
(49,325,117
)
 
 
(64,545,980
)
 
 
(113,871,097
)
Acquisitions
 
 
-
 
 
 
(24,446,013
)
 
 
(24,446,013
)
Dispositions
 
 
-
 
 
 
20,963,895
 
 
 
20,963,895
 
Accretion of net discount
 
 
30,201,676
 
 
 
13,061,839
 
 
 
43,263,515
 
Realized gain on paydowns
 
 
-
 
 
 
226,553
 
 
 
226,553
 
Realized credit losses
 
 
10,582,246
 
 
 
(2,890,939
)
 
 
7,691,307
 
Addition to credit reserves
 
 
(2,669,938
)
 
 
2,669,938
 
 
 
-
 
Release of credit reserves
 
 
2,319,568
 
 
 
(2,319,568
)
 
 
-
 
Ending balance at December 31, 2015
 
$
(8,891,565
)
 
$
(57,280,275
)
 
$
(66,171,840
)
 
Gains and losses from the sale of AFS securities are recorded within realized gain (loss) on sale of investments, net in the Company's consolidated statements of operations.
 
Unrealized gains and losses on the Company’s AFS securities except Non-Agency RMBS IOs are recorded as unrealized gain (loss) on available-for-sale securities, net in the Company's consolidated statement of comprehensive income (loss). For the year ended December 31, 2016 the Company had unrealized gains (losses) on AFS securities of ($6,436,169). For the years ended December 31, 2015, and December 31, 2014, the Company had unrealized gains (losses) on AFS securities of ($7,604,122) and $18,303,304​​​​​​​, respectively.
 
The following tables present components of interest income on the Company’s AFS securities for the years December 31, 2016, December 31, 2015, December 31, 2014:
 
 
 
Year Ended December 31, 2016
 
 
 
 
 
 
Net (premium
 
 
 
 
 
 
Coupon
 
 
amortization)/
 
 
Interest
 
 
 
interest
 
 
discount accretion
 
 
income
 
Agency
 
$
13,138,828
 
 
$
341,020
 
 
$
13,479,848
 
Non-Agency
 
 
2,579,344
 
 
 
1,343,594
 
 
 
3,922,938
 
Multi-Family
 
 
1,006,106
 
 
 
5,066,873
 
 
 
6,072,979
 
Total
 
$
16,724,278
 
 
$
6,751,487
 
 
$
23,475,765
 
 
 
 
Year Ended December 31, 2015
 
 
 
 
 
 
Net (premium
 
 
 
 
 
 
Coupon
 
 
amortization)/
 
 
Interest
 
 
 
interest
 
 
discount accretion
 
 
income
 
Agency
 
$
7,286,166
 
 
$
241,550
 
 
$
7,527,716
 
Non-Agency
 
 
2,357,814
 
 
 
7,653,839
 
 
 
10,011,653
 
Multi-Family
 
 
1,443,326
 
 
 
5,315,461
 
 
 
6,758,787
 
Total
 
$
11,087,306
 
 
$
13,210,850
 
 
$
24,298,156
 
 
 
 
Year Ended December 31, 2014
 
 
 
 
 
 
Net (premium
 
 
 
 
 
 
Coupon
 
 
amortization)/
 
 
Interest
 
 
 
interest
 
 
discount accretion
 
 
income
 
Agency
 
$
11,409,239
 
 
$
603,547
 
 
$
12,012,786
 
Non-Agency
 
 
261,050
 
 
 
4,077,481
 
 
 
4,338,531
 
Multi-Family
 
 
184,411
 
 
 
24,610
 
 
 
209,021
 
Total
 
$
11,854,700
 
 
$
4,705,638
 
 
$
16,560,338