Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Financial Instruments

Schedule of Disclosure About Significant Unobservable Inputs

Valuation Technique	Unobservable Input	Range (Weighted Average)
Market comparable companies	Enterprise value/Revenue multiple	2.9x - 7.2x (6.0x)
	Discount applied to multiples	25% - 35% (27%)

Schedule of categorization of the financial instruments within the fair value hierarchy

The following table summarizes the categorization of the financial instruments within the fair value hierarchy including those for which the Company accounts for under the fair value option at December 31, 2012:

	Assets at Fair Value
(In thousands of dollars)	Level 1		Level 2		Level 3		Total
Financial instruments owned
Agency mortgage-backed securities	$	—	$	903,928	$	1,110	$	905,038
Loans	—		77,573		—		77,573
Federal agency obligations	—		46,021		—		46,021
Corporate debt securities	—		30,246		—		30,246
Residential mortgage-backed securities	—		23,077		149		23,226
Commercial mortgage-backed securities	—		4,880		18		4,898
Preferred stock	2,439		—		—		2,439
U.S. government obligations	1,996		100		—		2,096
Other debt obligations	—		2,074		—		2,074
Equity securities	675		—		28		703
Collateralized debt obligations	—		—		671		671
Derivatives	232		—		964		1,196
Total financial instruments owned, at fair value	5,342		1,087,899		2,940		1,096,181
Investments	—		—		20,478		20,478
Total	$	5,342	$	1,087,899	$	23,418	$	1,116,659

	Liabilities at Fair Value
(In thousands of dollars)	Level 1		Level 2		Level 3		Total
Securities sold, but not yet purchased
U.S. Government obligations	$	128,504	$	—	$	—	$	128,504
Corporate debt securities	—		2,520		—		2,520
Equity securities	2		—		—		2
Derivatives	1,704		—		—		1,704
Total financial liabilities, at fair value	$	130,210	$	2,520	$	—	$	132,730

Schedule of changes in the company's Level 3 financial instruments

The following table summarizes the changes in the Company’s Level 3 financial instruments for the three months ended June 30, 2013:

(In thousands of dollars)	Balance at March 31, 2013		Total gains or (losses) (realized and unrealized)			Purchases		Sales			Settlements		Transfers in and/or out of Level 3		Balance at June 30, 2013		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date
Agency mortgage-backed securities	$	5	$	(5	)	$	—	$	—		$	—	$	—	$	—	$	—
Collateralized debt obligations	659		(555		)	—		(104		)	—		—		—		—
Residential mortgage-backed securities	91		(90		)	—		(1		)	—		—		—		—
Equities	28		(28		)	—		—			—		—		—		—
Commercial mortgage-backed securities	18		(15		)	—		(3		)	—		—		—		—
Investments	21,597		(601		)	—		(1		)	—		—		20,995		(542		)
Total	$	22,398	$	(1,294	)	$	—	$	(109	)	$	—	$	—	$	20,995	$	(542	)

The following table summarizes the changes in the Company’s Level 3 financial instruments for the three months ended June 30, 2012:

(In thousands of dollars)	Balance at March 31, 2012		Total gains or (losses) (realized and unrealized)			Purchases		Sales			Settlements			Transfers in and/or out of Level 3(1)			Balance at June 30, 2012		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date
Commercial mortgage-backed securities	$	27,850	$	(2,638	)	$	16,746	$	(34,171	)	$	(4	)	$	(2,101	)	$	5,682	$	(1,036	)
Residential mortgage-backed securities	26,603		(2,871		)	12,203		(24,878		)	(702		)	—			10,355		(882		)
Other debt obligations	318		(26		)	2,770		(504		)	(5		)	—			2,553		(15		)
Agency mortgage-backed securities	362		(361		)	1,750		(264		)	(1		)	—			1,486		(177		)
Collateralized debt obligations	585		(31		)	61		(61		)	—			—			554		(31		)
Equities	103		9			—		—			—			—			112		9
Investments	18,440		(150		)	800		—			—			—			19,090		(478		)
Derivatives	885		1,737			—		—			(885		)	—			1,737		1,737
Total	$	75,146	$	(4,331	)	$	34,330	$	(59,878	)	$	(1,597	)	$	(2,101	)	$	41,569	$	(873	)

(1) During the three months ended June 30, 2012, the Company transferred approximately $2.1 million of commercial mortgage backed securities from Level 3 to Level 2 due to price discovery resulting from Company trading activity occurring in close proximity to June 30, 2012.

The following table summarizes the changes in the Company’s Level 3 financial instruments for the six months ended June 30, 2013:

(In thousands of dollars)	Balance at December 31, 2012		Total gains or (losses) (realized and unrealized)			Purchases		Sales			Settlements			Transfers in and/or out of Level 3		Balance at June  30, 2013		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date
Agency mortgage-backed securities	$	1,110	$	(50	)	$	—	$	(1,060	)	$	—		$	—	$	—	$	—
Collateralized debt obligations	671		(567		)	—		(104		)	—			—		—		—
Residential mortgage-backed securities	149		(86		)	—		(51		)	(12		)	—		—		—
Equities	28		(28		)	—		—			—			—		—		—
Commercial mortgage-backed securities	18		(15		)	—		(3		)	—			—		—		—
Investments	20,478		(429		)	947		(1		)	—			—		20,995		(354		)
Derivatives	964		—			—		—			(964		)	—		—		—
Total	$	23,418	$	(1,175	)	$	947	$	(1,219	)	$	(976	)	$	—	$	20,995	$	(354	)

The following table summarizes the changes in the Company’s Level 3 financial instruments for the six months ended June 30, 2012:

(In thousands of dollars)	Balance at December 31, 2011		Total gains or (losses) (realized and unrealized)			Purchases		Sales			Settlements			Transfers in and/or out of Level 3(1)			Balance at June 30, 2012		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date
Commercial mortgage-backed securities	$	38,154	$	(6,081	)	$	10,108	$	(34,339	)	$	(59	)	$	(2,101	)	$	5,682	$	(1,253	)
Residential mortgage-backed securities	18,419		(1,403		)	11,067		(17,224		)	(504		)	—			10,355		(859		)
Other debt obligations	192		(16		)	6,357		(3,976		)	(4		)	—			2,553		(15		)
Agency mortgage-backed securities	1,367		(408		)	1,760		(1,232		)	(1		)	—			1,486		(208		)
Collateralized debt obligations	647		(93		)	61		(61		)	—			—			554		(93		)
Equities	112		—			—		—			—			—			112		—
Preferred stock	571		188			5,624		(6,383		)	—			—			—		—
Investments	18,310		(20		)	800		—			—			—			19,090		(153		)
Derivatives	1,696		2,622			—		—			(2,581		)	—			1,737		1,737
Total	$	79,468	$	(5,211	)	$	35,777	$	(63,215	)	$	(3,149	)	$	(2,101	)	$	41,569	$	(844	)

(1) During the six months ended June 30, 2012, the Company transferred approximately $2.1 million of commercial mortgage backed securities from Level 3 to Level 2 due to price discovery resulting from Company trading activity occurring in close proximity to June 30, 2012.