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RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
 12 Months Ended
Dec. 31, 2016
Accounting Changes and Error Corrections [Abstract]  
Accounting Changes and Error Corrections [Text Block]
NOTE 21 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
 
In connection with the preparation of the Quarterly Report on Form 10-Q for the period ended September 30, 2018, the Company determined that it had improperly accounted for unrealized losses on Residential Mortgage-Backed Securities (“RMBS”) Interest Only Certificates (“RMBS IOs”) upon our deconsolidation of the JPMMT 2014-OAK4 Trust and incorrectly reported releases of credit reserves relating to certain RMBS upon their sale in 2016. The unrealized losses on the RMBS IOs were incorrectly reported through other comprehensive income (loss) instead of through unrealized gain (loss) on fair value options securities for the fiscal year ended December 31, 2016. The release of credit reserves was incorrectly reported through other comprehensive income (loss) instead of through our consolidated statement of operations for the fiscal year ended December 31, 2016. While having no impact on total stockholders’ equity, as a result of these errors, accumulated other comprehensive income (loss) and accumulated earnings (deficit) were incorrectly stated by equal and offsetting amounts in our consolidated balance sheet as of December 31, 2016.
 
The following tables represent the restated audited consolidated balance sheet, restated audited consolidated statement of operations, restated audited statement of other comprehensive income and restated statement of cash flows as of, and for the year ended December 31, 2016.
 
  
 
FIVE OAKS INVESTMENT CORP. AND SUBSIDIARIES
 
Consolidated Balance Sheets
 
 
 
December 31, 2016
 
 
 
As previously

reported
 
 
Restatement

adjustments
 
 
As restated
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities, at fair value (includes pledged securities of $876,121,505 for December 31, 2016
 
$
870,929,601
 
 
$
-
 
 
$
870,929,601
 
Mortgage loans held-for-sale, at fair value
 
 
2,849,536
 
 
 
-
 
 
 
2,849,536
 
Multi-family loans held in securitization trusts, at fair value
 
 
1,222,905,433
 
 
 
-
 
 
 
1,222,905,433
 
Residential loans held in securitization trusts, at fair value
 
 
141,126,720
 
 
 
-
 
 
 
141,126,720
 
Mortgage servicing rights, at fair value
 
 
3,440,809
 
 
 
-
 
 
 
3,440,809
 
Cash and cash equivalents
 
 
27,534,374
 
 
 
-
 
 
 
27,534,374
 
Restricted cash
 
 
10,355,222
 
 
 
-
 
 
 
10,355,222
 
Deferred offering costs
 
 
96,489
 
 
 
-
 
 
 
96,489
 
Accrued interest receivable
 
 
7,619,717
 
 
 
-
 
 
 
7,619,717
 
Dividends receivable
 
 
122
 
 
 
-
 
 
 
122
 
Investment related receivable
 
 
3,914,458
 
 
 
-
 
 
 
3,914,458
 
Derivative assets, at fair value
 
 
8,053,813
 
 
 
-
 
 
 
8,053,813
 
Other assets
 
 
774,909
 
 
 
-
 
 
 
774,909
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
2,299,601,203
 
 
$
-
 
 
$
2,299,601,203
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
 
 
 
 
 
 
Repurchase agreements:
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
$
804,811,000
 
 
$
-
 
 
$
804,811,000
 
Multi-family securitized debt obligations
 
 
1,204,583,678
 
 
 
-
 
 
 
1,204,583,678
 
Residential securitized debt obligations
 
 
134,846,348
 
 
 
-
 
 
 
134,846,348
 
Accrued interest payable
 
 
5,467,916
 
 
 
-
 
 
 
5,467,916
 
Dividends payable
 
 
39,132
 
 
 
-
 
 
 
39,132
 
Deferred income
 
 
203,743
 
 
 
-
 
 
 
203,743
 
Due to broker
 
 
4,244,678
 
 
 
-
 
 
 
4,244,678
 
Fees and expenses payable to Manager
 
 
880,000
 
 
 
-
 
 
 
880,000
 
Other accounts payable and accrued expenses
 
 
2,057,843
 
 
 
-
 
 
 
2,057,843
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
 
 
2,157,134,338
 
 
 
-
 
 
 
2,157,134,338
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STOCKHOLDERS' EQUITY:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock: par value $0.01 per share; 50,000,000 shares authorized, 8.75% Series A cumulative redeemable, $25 liquidation preference, 1,610,000 issued and outstanding at December 31, 2016
 
 
37,156,972
 
 
 
-
 
 
 
37,156,972
 
Common Stock: par value $0.01 per share; 450,000,000 shares authorized, 17,539,258 shares issued and outstanding, at December 31, 2016
 
 
175,348
 
 
 
-
 
 
 
175,348
 
Additional paid-in capital
 
 
204,264,868
 
 
 
-
 
 
 
204,264,868
 
Accumulated other comprehensive income (loss)
 
 
(9,268,630
)
 
 
2,436,690
 
 
 
(6,831,940
)
Cumulative distributions to stockholders
 
 
(89,224,194
)
 
 
-
 
 
 
(89,224,194
)
Accumulated earnings (deficit)
 
 
(637,499
)
 
 
(2,436,690
)
 
 
(3,074,189
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total stockholders' equity
 
 
142,466,865
 
 
 
-
 
 
 
142,466,865
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders' equity
 
$
2,299,601,203
 
 
$
-
 
 
$
2,299,601,203
 
 
 
FIVE OAKS INVESTMENT CORP. AND SUBSIDIARIES
 
Consolidated Statements of Operations
 
 
 
Year Ended December 31, 2016
 
 
 
As previously

reported
 
 
Restatement

adjustments
 
 
As restated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
$
23,475,765
 
 
$
-
 
 
$
23,475,765
 
Mortgage loans held-for-sale
 
 
430,986
 
 
 
-
 
 
 
430,986
 
Multi-family loans held in securitization trusts
 
 
58,587,780
 
 
 
-
 
 
 
58,587,780
 
Residential loans held in securitization trusts
 
 
10,585,191
 
 
 
-
 
 
 
10,585,191
 
Cash and cash equivalents
 
 
41,994
 
 
 
-
 
 
 
41,994
 
Interest expense:
 
 
-
 
 
 
 
 
 
 
 
 
Repurchase agreements - available-for-sale securities
 
 
(6,237,777
)
 
 
-
 
 
 
(6,237,777
)
Repurchase agreements - mortgage loans held-for-sale
 
 
(237,807
)
 
 
-
 
 
 
(237,807
)
Multi-family securitized debt obligations
 
 
(54,940,386
)
 
 
-
 
 
 
(54,940,386
)
Residential securitized debt obligations
 
 
(8,117,402
)
 
 
-
 
 
 
(8,117,402
)
Net interest income
 
 
23,588,344
 
 
 
-
 
 
 
23,588,344
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairments
 
 
 
 
 
 
 
 
 
 
 
 
Increase in credit reserves
 
 
(541,342
)
 
 
1,286,834
 
 
 
745,492
 
Additional other-than-temporary credit impairment losses
 
 
(183,790
)
 
 
-
 
 
 
(183,790
)
Total impairment losses recognized in earnings
 
 
(725,132
)
 
 
1,286,834
 
 
 
561,702
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income:
 
 
 
 
 
 
 
 
 
 
 
 
Realized gain (loss) on sale of investments, net
 
 
(7,216,137
)
 
 
-
 
 
 
(7,216,137
)
Change in unrealized gain (loss) on fair value option securities
 
 
(4,683,410
)
 
 
(3,723,524
)
 
 
(8,406,934
)
Realized gain (loss) on derivative contracts, net
 
 
(3,089,001
)
 
 
-
 
 
 
(3,089,001
)
Change in unrealized gain (loss) on derivative contracts, net
 
 
5,495,463
 
 
 
-
 
 
 
5,495,463
 
Realized gain (loss) on mortgage loans held-for-sale
 
 
94,187
 
 
 
-
 
 
 
94,187
 
Change in unrealized gain (loss) on mortgage loans held-for-sale
 
 
(151,023
)
 
 
-
 
 
 
(151,023
)
Change in unrealized gain (loss) on mortgage service rights
 
 
(827,864
)
 
 
-
 
 
 
(827,864
)
Change in unrealized gain (loss) on multi-family loans held in securitization trusts
 
 
(5,219,530
)
 
 
-
 
 
 
(5,219,530
)
Change in unrealized gain (loss) on residential loans held in securitization trusts
 
 
404,720
 
 
 
-
 
 
 
404,720
 
Tax interest expense
 
 
(1,860,000
)
 
 
-
 
 
 
(1,860,000
)
Servicing income
 
 
932,424
 
 
 
-
 
 
 
932,424
 
Other income
 
 
32,276
 
 
 
-
 
 
 
32,276
 
Total other income (loss)
 
 
(16,087,895
)
 
 
(3,723,524
)
 
 
(19,811,419
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Management fee
 
 
2,472,353
 
 
 
-
 
 
 
2,472,353
 
General and administrative expenses
 
 
5,867,851
 
 
 
-
 
 
 
5,867,851
 
Operating expenses reimbursable to Manager
 
 
4,747,275
 
 
 
-
 
 
 
4,747,275
 
Other operating expenses
 
 
1,480,341
 
 
 
-
 
 
 
1,480,341
 
Compensation expense
 
 
197,452
 
 
 
-
 
 
 
197,452
 
Total expenses
 
 
14,765,272
 
 
 
-
 
 
 
14,765,272
 
Net income (loss)
 
 
(7,989,955
)
 
 
(2,436,690
)
 
 
(10,426,645
)
Dividends to preferred stockholders
 
 
(3,522,036
)
 
 
-
 
 
 
(3,522,036
)
Net income (loss) attributable to common stockholders
 
$
(11,511,991
)
 
$
(2,436,690
)
 
$
(13,948,681
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders (basic and diluted)
 
$
(11,511,991
)
 
$
(2,436,690
)
 
$
(13,948,681
)
Weighted average number of shares of common stock outstanding
 
 
14,641,701
 
 
 
14,641,701
 
 
 
14,641,701
 
Basic and diluted income per share
 
$
(0.79
)
 
$
(0.17
)
 
$
(0.95
)
Dividends declared per share of common stock
 
$
2.04
 
 
$
-
 
 
$
2.04
 
  
FIVE OAKS INVESTMENT CORP. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
 
 
 
Year Ended December 31, 2016
 
 
 
As previously

reported
 
 
Restatement

adjustments
 
 
As restated
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
(7,989,955
)
 
$
(2,436,690
)
 
$
(10,426,645
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in net unrealized gain on available-for-sale securities, net
 
 
(3,824,461
)
 
 
3,723,524
 
 
 
(100,937
)
Reclassification adjustment for net gain (loss) included in net income
 
 
(5,589,740
)
 
 
-
 
 
 
(5,589,740
)
Reclassification adjustment for other-than-temporary impairments included in net income
 
 
541,342
 
 
 
(1,286,834
)
 
 
(745,492
)
Total other comprehensive income (loss)
 
 
(8,872,859
)
 
 
2,436,690
 
 
 
(6,436,169
)
Less: Dividends to preferred stockholders
 
 
(3,522,036
)
 
 
-
 
 
 
(3,522,036
)
Comprehensive income (loss) attributable to common stockholders
 
$
(20,384,850
)
 
$
-
 
 
$
(20,384,850
)
  
FIVE OAKS INVESTMENT CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
 
 
 
December 31, 2016
 
 
 
As previously

reported
 
 
Restatement

adjustments
 
 
As restated
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(7,989,955
)
 
$
(2,436,690
)
 
$
(10,426,645
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairment charges
 
 
725,132
 
 
 
(1,286,834
)
 
 
(561,702
)
Amortization/accretion of available-for-sale securities premiums and discounts, net
 
 
(6,751,667
)
 
 
-
 
 
 
(6,751,667
)
Realized (gain) loss on sale of investments, net
 
 
7,216,137
 
 
 
-
 
 
 
7,216,137
 
Realized (gain) loss on derivative contracts
 
 
3,089,001
 
 
 
-
 
 
 
3,089,001
 
Realized (gain) loss on mortgage loans held-for-sale
 
 
(94,187
)
 
 
-
 
 
 
(94,187
)
Unrealized (gain) loss on fair value option securities
 
 
4,683,410
 
 
 
3,723,524
 
 
 
8,406,934
 
Unrealized (gain) loss on derivative contracts
 
 
(5,495,463
)
 
 
-
 
 
 
(5,495,463
)
Unrealized (gain) loss on mortgage loans held-for-sale
 
 
151,023
 
 
 
-
 
 
 
151,023
 
Unrealized (gain) loss on mortgage service rights
 
 
827,864
 
 
 
-
 
 
 
827,864
 
Unrealized (gain) loss on multi-family loans held in securitization trusts
 
 
5,219,530
 
 
 
-
 
 
 
5,219,530
 
Unrealized (gain) loss on residential loans held in securitization trusts
 
 
(404,720
)
 
 
-
 
 
 
(404,720
)
Restricted stock compensation expense
 
 
35,785
 
 
 
-
 
 
 
35,785
 
Net change in:
 
 
 
 
 
 
 
 
 
 
 
 
Accrued interest receivable
 
 
(707,019
)
 
 
-
 
 
 
(707,019
)
Deferred offering costs
 
 
(96,489
)
 
 
-
 
 
 
(96,489
)
Dividends receivable
 
 
25,900
 
 
 
-
 
 
 
25,900
 
Other assets
 
 
(244,441
)
 
 
-
 
 
 
(244,441
)
Accrued interest payable
 
 
119,993
 
 
 
-
 
 
 
119,993
 
Deferred income
 
 
203,743
 
 
 
-
 
 
 
203,743
 
Fees and expenses payable to Manager
 
 
37,097
 
 
 
-
 
 
 
37,097
 
Other accounts payable and accrued expenses
 
 
1,790,336
 
 
 
-
 
 
 
1,790,336
 
Net cash provided by operating activities
 
 
2,341,010
 
 
 
-
 
 
 
2,341,010
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
 
Purchase of available-for-sale securities
 
 
(585,984,081
)
 
 
-
 
 
 
(585,984,081
)
Purchase of mortgage loans held-for-sale
 
 
(14,772,535
)
 
 
-
 
 
 
(14,772,535
)
Proceeds from sales of available-for-sale securities
 
 
263,153,843
 
 
 
-
 
 
 
263,153,843
 
Proceeds from mortgage loans held-for-sale
 
 
22,490,929
 
 
 
-
 
 
 
22,490,929
 
Proceeds from FHLBI stock
 
 
2,403,000
 
 
 
-
 
 
 
2,403,000
 
Net proceeds from (payments for) derivative contracts
 
 
(3,089,001
)
 
 
-
 
 
 
(3,089,001
)
Principal payments from available-for-sale securities
 
 
96,655,967
 
 
 
-
 
 
 
96,655,967
 
Principal payments from mortgage loans held-for-sale
 
 
275,636
 
 
 
-
 
 
 
275,636
 
Investment related receivable
 
 
(2,323,115
)
 
 
-
 
 
 
(2,323,115
)
Restricted cash
 
 
(2,180,584
)
 
 
-
 
 
 
(2,180,584
)
Due to broker
 
 
4,244,678
 
 
 
-
 
 
 
4,244,678
 
Net cash used in investing activities
 
 
(219,125,263
)
 
 
-
 
 
 
(219,125,263
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
 
Net proceeds from issuance of common stock
 
 
15,503,885
 
 
 
-
 
 
 
15,503,885
 
Purchase of treasury stock
 
 
(283,565
)
 
 
-
 
 
 
(283,565
)
Dividends paid on common stock
 
 
(29,898,918
)
 
 
-
 
 
 
(29,898,918
)
Dividends paid on preferred stock
 
 
(3,522,036
)
 
 
-
 
 
 
(3,522,036
)
Proceeds from repurchase agreements - available-for-sale securities
 
 
7,940,492,000
 
 
 
-
 
 
 
7,940,492,000
 
Proceeds from repurchase agreements - mortgage loans held-for-sale
 
 
16,405,081
 
 
 
-
 
 
 
16,405,081
 
Payments for FHLBI advances
 
 
(49,697,000
)
 
 
-
 
 
 
(49,697,000
)
Principal repayments of repurchase agreements - available-for-sale securities
 
 
(7,644,912,000
)
 
 
-
 
 
 
(7,644,912,000
)
Principal repayments of repurchase agreements - mortgage loans held-for-sale
 
 
(25,909,538
)
 
 
-
 
 
 
(25,909,538
)
Net cash provided by financing activities
 
 
218,177,909
 
 
 
-
 
 
 
218,177,909
 
Net increase (decrease) in cash and cash equivalents
 
 
1,393,656
 
 
 
-
 
 
 
1,393,656
 
Cash and cash equivalents, beginning of period
 
 
26,140,718
 
 
 
-
 
 
 
26,140,718
 
Cash and cash equivalents, end of period
 
$
27,534,374
 
 
$
-
 
 
$
27,534,374
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of cash flow information
 
 
 
 
 
 
 
 
 
 
 
 
Cash paid for interest
 
$
6,355,591
 
 
$
-
 
 
$
6,355,591
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cash investing and financing activities information
 
$
 
 
 
$
 
 
 
$
 
 
Dividends declared but not paid at end of period
 
$
39,132
 
 
$
-
 
 
$
39,132
 
Net change in unrealized gain (loss) on available-for-sale securities
 
$
(8,872,859
)
 
$
2,436,690
 
 
$
(6,436,169
)
Consolidation of multi-family loans held in securitization trusts
 
$
1,227,523,075
 
 
$
-
 
 
$
1,227,523,075
 
Consolidation of residential loans held in securitization trusts
 
$
141,597,866
 
 
$
-
 
 
$
141,597,866
 
Consolidation of multi-family securitized debt obligations
 
$
1,209,181,035
 
 
$
-
 
 
$
1,209,181,035
 
Consolidation of residential securitized debt obligations
 
$
135,223,045
 
 
$
-
 
 
$
135,223,045