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Debt Securities | 12 Months Ended
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Dec. 31, 2012
Debt Securities | Note 4 – Debt Securities During June 2012, the Company purchased CMBS with a face amount of $74,854 for which the obligors are certain special purpose entities formed in 2010 to hold substantially all of the assets of Hilton Worldwide, Inc. (the “Hilton CMBS”). The Hilton CMBS has a current interest rate of one-month LIBOR+1.75% which increases to LIBOR+2.30% on November 12, 2012, LIBOR+3.30% on November 12, 2013 and LIBOR+3.80% on November 12, 2014. The Hilton CMBS receives principal repayments according to a schedule that is approximately equivalent to a 16-year amortization schedule and has a yield of 5.6%. The Hilton CMBS was purchased for $70,655 and financed with $49,459 of borrowings under the Company’s master repurchase agreement with Wells Fargo Bank, N.A. (the “Wells Facility”), which was amended to provide up to $100,000 of additional financing for the Hilton CMBS. See Note 8 – Borrowings for a description of the Wells Facility. The Company has elected the fair value option for the Hilton CMBS. During March 2012, the Company sold CMBS with an amortized cost of $137,423 resulting in a net realized gain of $262, which was comprised of realized gains of $345 and realized losses of $83. The sale generated proceeds of $14,621 after the repayment of $123,064 of borrowings under the Wells Facility. At December 31, 2012, the Company had AAA-rated CMBS with an aggregate face value of $273,343, which were also pledged to secure borrowings under the Wells Facility. See Note 8 – Borrowings for further discussion of the Wells Facility. The amortized cost and estimated fair value of the Company’s debt securities at December 31, 2012 are summarized as follows:
Security Description |  | Face Amount |  |  | Amortized Cost |  |  | Gross Unrealized Gain |  |  | Gross Unrealized Loss |  |  | Estimated Fair Value |
CMBS – AAA-rated (Available-for-Sale) |  | $ | 65,410 |  |  | $ | 67,109 |  |  | $ | 249 |  |  | $ | (279 | ) |  | $ | 67,079 |
CMBS – AAA-rated (Fair Value Option) |  |  | 134,694 |  |  |  | 136,354 |  |  |  | 2,061 |  |  |  | (167 | ) |  |  | 138,248 |
CMBS – Hilton (Fair Value Option) |  |  | 73,239 |  |  |  | 70,250 |  |  |  | 3,311 |  |  |  | — |  |  |  | 73,561 |
Total |  | $ | 273,343 |  |  | $ | 273,713 |  |  | $ | 5,621 |  |  | $ | (446 | ) |  | $ | 278,888 |
The amortized cost and estimated fair value of the Company’s debt securities at December 31, 2011 are summarized as follows:
Security Description |  | Face Amount |  |  | Amortized Cost |  |  | Gross Unrealized Gain |  |  | Gross Unrealized Loss |  |  | Estimated Fair Value |
AAA-rated CMBS (Available-for-Sale) |  | $ | 298,598 |  |  | $ | 301,980 |  |  | $ | 810 |  |  | $ | (247 | ) |  | $ | 302,543 |
AAA-rated CMBS (Fair Value Option) |  |  | 248,209 |  |  |  | 252,736 |  |  |  | — |  |  |  | (1,284 | ) |  |  | 251,452 |
Total |  | $ | 546,807 |  |  | $ | 554,716 |  |  | $ | 810 |  |  | $ | (1,531 | ) |  | $ | 553,995 |
The temporary impairment of the available-for-sale securities results from the fair value of the securities falling below the amortized cost basis. These unrealized losses are primarily the result of market factors other than credit impairment and the Company believes the carrying value of the securities are fully recoverable over their expected holding period. Management does not intend to sell or expect to be forced to sell the securities prior to the Company recovering the amortized cost. Additionally, all unrealized losses on securities available-for-sale at December 31, 2011 have existed for less than twelve months. As such, management does not believe any of the securities are other than temporarily impaired. The overall statistics for the Company’s AAA-rated CMBS investments calculated on a weighted average basis assuming no early prepayments or defaults as of December 31, 2012 and 2011 are as follows:
|  | December 31, 2012 |  |  | December 31, 2011 |
Credit Ratings * |  |  | AAA |  |  |  | AAA |
Coupon |  |  | 5.6 | % |  |  | 5.6 | %
Yield |  |  | 4.1 | % |  |  | 4.3 | %
Weighted Average Life |  |  | 1.8 years |  |  |  | 1.2 years |
* | Ratings per Fitch, Moody’s or S&P
The percentage vintage, property type, and location of the collateral securing the Company’s AAA-rated CMBS investments calculated on a weighted average basis as of December 31, 2012 and 2011 are as follows:
Vintage |  | December 31, 2012 |  |  | December 31, 2011 |
2006 |  |  | 1 | % |  |  | 7 | %
2007 |  |  | 99 |  |  |  | 93 |
Total |  |  | 100 | % |  |  | 100 | %
Property Type |  | December 31, 2012 |  |  | December 31, 2011 |
Office |  |  | 40.5 | % |  |  | 36.5 | %
Retail |  |  | 23.2 |  |  |  | 26.6 |
Multifamily |  |  | 12.9 |  |  |  | 13.1 |
Hotel |  |  | 10.5 |  |  |  | 10.8 |
Other * |  |  | 12.9 |  |  |  | 13.0 |
Total |  |  | 100 | % |  |  | 100 | %
* | No other individual category comprises more than 10% of the total.
Location |  | December 31, 2012 |  |  | December 31, 2011 |
South Atlantic |  |  | 21.8 | % |  |  | 23.0 | %
Middle Atlantic |  |  | 21.4 |  |  |  | 21.9 |
Pacific |  |  | 23.8 |  |  |  | 21.0 |
Other * |  |  | 33.0 |  |  |  | 34.1 |
Total |  |  | 100 | % |  |  | 100 | %
* | No other individual category comprises more than 10% of the total.

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