Repurchase Agreements

12 Months Ended

Dec. 31, 2019

Investment Securities

The Company has entered into repurchase agreements with third party financial institutions to finance its investment securities portfolio. These repurchase agreements are short-term borrowings that bear interest rates typically based on a spread to LIBOR and are secured by the investment securities which they finance.

The following table presents detailed information about the Company’s borrowings under repurchase agreements secured by investment securities and associated assets pledged as collateral at December 31, 2019 and 2018, respectively (dollar amounts in thousands):



	December 31,
	2019						2018
	Outstanding Borrowings		Fair Value of Collateral Pledged		Amortized Cost Of Collateral Pledged		Outstanding Borrowings		Fair Value of Collateral Pledged		Amortized Cost Of Collateral Pledged
Agency RMBS ⁽¹⁾	$	812,742	$	865,765	$	864,428	$	925,230	$	978,357	$	1,014,284
Agency CMBS ⁽²⁾	133,184		139,317		140,118		—		—		—
Non-Agency RMBS ⁽³⁾	594,286		797,784		785,952		88,730		117,958		118,414
CMBS ⁽⁴⁾	811,890		1,036,513		853,043		529,617		687,876		539,788
Balance at end of the period	$	2,352,102	$	2,839,379	$	2,643,541	$	1,543,577	$	1,784,191	$	1,672,486


⁽¹⁾	Includes senior RMBS securities with a fair value amounting to $26.2 million included in Consolidated SLST as of December 31, 2019.


(2)	Includes senior CMBS securities with a fair value amounting to $88.4 million included in the Consolidated K-Series as of December 31, 2019.


(3)	Includes first loss subordinated RMBS securities with a fair value amounting to $214.8 million included in Consolidated SLST as of December 31, 2019.


(4)	Includes first loss PO, IO and mezzanine CMBS securities with a fair value amounting to $848.2 million and $543.0 million included in the Consolidated K-Series as of December 31, 2019 and 2018, respectively.

As of December 31, 2019 and 2018, the average days to maturity and the weighted average interest rate for repurchase agreements secured by investment securities were 73 days and 62 days, respectively and 2.72% and 3.41%, respectively. The Company’s accrued interest payable on outstanding financing arrangements secured by investment securities at December 31, 2019 and 2018 amounts to $8.8 million and $3.9 million, respectively, and is included in accrued expenses and other liabilities on the Company’s consolidated balance sheets.

The following table presents contractual maturity information about the Company’s outstanding repurchase agreements secured by investment securities at December 31, 2019 and 2018, respectively (dollar amounts in thousands):



Contractual Maturity	December 31, 2019		December 31, 2018
Within 30 days	$	449,474	$	732,051
Over 30 days to 90 days	1,647,683		677,906
Over 90 days	254,945		133,620
Total	$	2,352,102	$	1,543,577

As of December 31, 2019, the outstanding balance under our repurchase agreements secured by investment securities was funded at a weighted average advance rate of 85.1% that implies an average haircut of 14.9%. As of December 31, 2019, the weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS, Agency CMBS, non-Agency RMBS, and CMBS was approximately 5%, 5%, 25%, and 19%, respectively.

In the event we are unable to obtain sufficient short-term financing through existing repurchase agreements, or our lenders start to require additional collateral, we may have to liquidate our investment securities at a disadvantageous time, which could result in losses. Any losses resulting from the disposition of our investment securities in this manner could have a material adverse effect on our operating results and net profitability. At December 31, 2019 and 2018, the Company had financing arrangements with fourteen and eleven counterparties, respectively. As of December 31, 2019, the Company had no exposure where the amount at risk was in excess of 5% of the Company’s stockholders’ equity. As of December 31, 2018 the Company’s only exposure where the amount at risk was in excess of 5% was to Jefferies & Company, Inc. at 5.04%.

As of December 31, 2019, the Company had assets available to be posted as margin which included liquid assets, such as unrestricted cash and cash equivalents, and unencumbered securities that could be monetized to pay down or collateralize a liability immediately. The Company had $118.8 million in cash and cash equivalents and $535.8 million in unencumbered investment securities to meet additional haircuts or market valuation requirements, which collectively represent 27.8% of our outstanding repurchase agreements secured by investment securities. The following table presents information about the Company’s unencumbered investment securities at December 31, 2019 and 2018, respectively (dollar amounts in thousands):



Unencumbered Securities	December 31, 2019		December 31, 2018
Agency RMBS	$	83,351	$	59,372
CMBS	235,199		107,040
Non-Agency RMBS	168,063		96,081
ABS	49,214		—
Total	$	535,827	$	262,493

Distressed and Other Residential Mortgage Loans

The Company has master repurchase agreements with third party financial institutions to fund the purchase of distressed and other residential mortgage loans, including both first and second mortgages. The following table presents detailed information about the Company’s borrowings under these repurchase agreements and associated distressed and other residential mortgage loans pledged as collateral at December 31, 2019 and 2018, respectively (dollar amounts in thousands):



	Maximum Aggregate Uncommitted Principal Amount		Outstanding Repurchase Agreements		Carrying Value of Loans Pledged ⁽¹⁾		Weighted Average Rate		Weighted Average Months to Maturity
December 31, 2019	$	1,200,000	$	754,132	$	961,749	3.67	%	11.20
December 31, 2018	$	950,000	$	589,148	$	754,352	4.67	%	9.24


⁽¹⁾	Includes distressed and other residential mortgage loans at fair value of $881.2 million and $626.2 million and distressed and other residential mortgage loans, net of $80.6 million and $128.1 million at December 31, 2019 and 2018, respectively.

During the terms of the master repurchase agreements, proceeds from the distressed and other residential mortgage loans will be applied to pay any price differential and to reduce the aggregate repurchase price of the collateral. The financings under the master repurchase agreements are subject to margin calls to the extent the market value of the distressed and other residential mortgage loans falls below specified levels and repurchase may be accelerated upon an event of default under the master repurchase agreements. The master repurchase agreements contain various covenants, including among other things, the maintenance of certain amounts of liquidity, market capitalization, and total stockholders’ equity. The Company is in compliance with such covenants as of February 28, 2020. The Company expects to roll outstanding borrowings under these master repurchase agreements into new repurchase agreements or other financings prior to or at maturity.

Costs related to the establishment of the repurchase agreements which include commitment, underwriting, legal, accounting and other fees are reflected as deferred charges. Such costs are presented as a deduction from the corresponding debt liability on the Company’s accompanying consolidated balance sheets in the amount of $0.8 million as of December 31, 2019 and $1.2 million as of December 31, 2018. These deferred charges are amortized as an adjustment to interest expense using the effective interest method, or straight line-method, if the result is not materially different.