BORROWINGS

12 Months Ended

Dec. 31, 2016

NOTE 10 – BORROWINGS

Repurchase Agreements

The Company has entered into repurchase agreements at December 31, 2016 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 1.07% at December 31, 2016. Repurchase agreements are 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, 2016 and December 31, 2015:

	December 31, 2016							December 31, 2015
			Weighted							Weighted
	Amount		average			Market value		Amount		average			Market value
	outstanding		interest rate			of collateral held		outstanding		interest rate			of collateral held
Agency	$	755,221,000		0.97	%	$	790,190,232	$	358,239,000		0.66	%	$	374,952,510
Non-Agency		7,313,000		2.39	%		12,784,707		114,512,000		2.24	%		121,475,112
Multi-Family		42,277,000		2.52	%		73,146,566		86,177,000		1.83	%		190,056,347
Mortgage loans		-		0.00	%		-		9,504,457		2.87	%		10,900,403
Total	$	804,811,000		1.07	%	$	876,121,505	$	568,432,457		1.19	%	$	697,384,372

At December 31, 2016 and December 31, 2015, the repurchase agreements had the following remaining maturities:

	December 31, 2016		December 31, 2015
< 30 days	$	737,823,000	$	449,063,000
31 to 60 days		19,897,000		76,044,000
61 to 90 days		47,091,000		37,873,540
> 90 days		-		5,451,917
Total	$	804,811,000	$	568,432,457

Under the repurchase agreements, 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, which include minimum net worth and/or profitability requirements, maximum debt-to-equity ratios and minimum market capitalization requirements. The most restrictive of these covenants 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 was in compliance with these covenants as of December 31, 2016 and December 31, 2015.

The following tables summarize certain characteristics of the Company’s repurchase agreements at December 31, 2016 and December 31, 2015:

	December 31, 2016
	Amount		Percent of total			Weighted average		Market Value
Repurchase Agreement Counterparties	Outstanding		amount outstanding			days to maturity		of collateral held
Wells Fargo Securities	$	33,666,000		4.18	%		8	$	57,627,433
Other North America		703,788,000		87.45	%		16		742,690,286
Asia (1)		62,733,000		7.79	%		14		66,198,478
Europe (1)		4,624,000		0.57	%		44		9,605,308
Total	$	804,811,000		100.00	%		16	$	876,121,505

(1)

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

	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
Asia (1)		88,565,000		15.58	%		16		97,970,226
Europe (1)		56,099,457		9.87	%		46		76,656,547
Total	$	568,432,457		100.00	%		26	$	697,384,372

(1)

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

Secured Loans

On February 24, 2015, our wholly owned captive insurance subsidiary, FOI, became a member of the FHLBI. A condition of FOI’s membership was the purchase of FHLBI membership stock. On January 12, 2016, the regulator of the FHLB system, the Federal Housing Finance Agency, or the FHFA, published a Final Rule that amended FHLB membership regulations for captive insurance subsidiaries. Under the regulations, FOI was required to terminate its membership and repay its advances on or before February 19, 2017. FOI was dissolved on July 18, 2016 and accordingly, at December 31, 2016, FOI had repaid all secured FHLBI advances and replaced them with repurchase agreements.