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Financial Instruments (Tables)
9 Months Ended
Sep. 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

 

2.7x — 6.7x (5.4x)

 

 

Discount applied to multiples

 

30.0% - 35.0% (31.0%)

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

 

 

 

 

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 September 30, 2013:

 

(In thousands of dollars)

 

Balance at
June 30,
2013

 

Total gains or
(losses)
(realized and
unrealized)

 

Purchases

 

Sales

 

Settlements

 

Transfers in
and/or out of
Level 3

 

Balance at
September 30,
2013

 

Changes in
unrealized
gains/(losses)
on Level 3
assets still
held at the
reporting date

 

Investments

 

$

20,995

 

$

92

 

$

 

$

 

$

(3,203

)

$

 

$

17,884

 

$

(1,326

)

 

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

 

(In thousands of dollars)

 

Balance at
June 30,
2012

 

Total gains or
(losses)
(realized and
unrealized)

 

Purchases

 

Sales

 

Settlements

 

Transfers in
and/or out of
Level 3

 

Balance at
September 30,
2012

 

Changes in
unrealized
gains/(losses)
on Level 3
assets still
held at the
reporting date

 

Commercial mortgage-backed securities

 

$

5,682

 

$

(424

)

$

133

 

$

(1,568

)

$

(4

)

$

 

$

3,819

 

$

(380

)

Residential mortgage-backed securities

 

10,355

 

331

 

12,700

 

(11,482

)

(623

)

 

11,281

 

37

 

Other debt obligations

 

2,553

 

20

 

11,362

 

(3,420

)

(28

)

 

10,487

 

3

 

Agency mortgage-backed securities

 

1,486

 

(80

)

3

 

(1,401

)

 

 

8

 

35

 

Collateralized debt obligations

 

554

 

(3

)

 

 

 

 

551

 

234

 

Equities

 

112

 

(14

)

 

 

 

 

98

 

(14

)

Investments

 

19,090

 

163

 

 

 

 

 

19,253

 

32

 

Derivatives

 

1,737

 

2,953

 

 

 

(1,737

)

 

2,953

 

2,953

 

Total

 

$

41,569

 

$

2,946

 

$

24,198

 

$

(17,871

)

$

(2,392

)

$

 

$

48,450

 

$

2,900

 

 

The following table summarizes the changes in the Company’s Level 3 financial instruments for the nine months ended September 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
September
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

 

(338

)

947

 

 

(3,203

)

 

17,884

 

(1,670

)

Derivatives

 

964

 

 

 

 

(964

)

 

 

 

Total

 

$

23,418

 

$

(1,084

)

$

947

 

$

(1,218

)

$

(4,179

)

$

 

$

17,884

 

$

(1,670

)

 

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

 

Changes in
unrealized
gains/(losses)
on Level 3
assets still
held at the
reporting date

 

Commercial mortgage-backed securities

 

$

38,154

 

$

(6,497

)

$

7,383

 

$

(33,058

)

$

(62

)

$

(2,101

)

$

3,819

 

$

(1,322

)

Residential mortgage-backed securities

 

18,419

 

(555

)

11,680

 

(17,329

)

(934

)

 

11,281

 

12

 

Other debt obligations

 

192

 

10

 

16,153

 

(5,848

)

(20

)

 

10,487

 

(1

)

Agency mortgage-backed securities

 

1,367

 

(140

)

15

 

(1,232

)

(2

)

 

8

 

4

 

Collateralized debt obligations

 

647

 

(96

)

60

 

(60

)

 

 

551

 

(93

)

Equities

 

112

 

(14

)

 

 

 

 

98

 

(14

)

Preferred stock

 

571

 

188

 

5,624

 

(6,383

)

 

 

 

 

Investments

 

18,310

 

156

 

800

 

 

(13

)

 

19,253

 

210

 

Derivatives

 

1,696

 

5,575

 

 

 

(4,318

)

 

2,953

 

2,953

 

Total

 

$

79,468

 

$

(1,373

)

$

41,715

 

$

(63,910

)

$

(5,349

)

$

(2,101

)

$

48,450

 

$

1,749

 

 

(1)         During the nine months ended September 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 the respective quarter-end.