Repurchase Agreements

6 Months Ended

Jun. 30, 2020

Carrying Value of Federal Funds Sold, Securities Purchased under Agreements to Resell, and Deposits Paid for Securities Borrowed [Abstract]

Repurchase Agreements

Investment Securities

The Company has entered into repurchase agreements with financial institutions to finance its investment securities portfolio (including investment securities available for sale and securities owned in Consolidated SLST and the Consolidation K-Series). These repurchase agreements provide short-term financings that bear interest rates typically based on a spread to LIBOR and are secured by the investment securities which they finance and additional collateral pledged, if any. During the three and six months ended June 30, 2020, in connection with the significant market disruption caused by the COVID-19 pandemic, the repurchase agreement counterparties for our investment securities increased haircuts, started to require additional collateral or determined to not roll our financing. As a result, we liquidated our investment securities at a disadvantageous time, which resulted in losses. At June 30, 2020 and December 31, 2019, the Company had financing arrangements with one and fourteen counterparties, respectively. As of June 30, 2020 and December 31, 2019, the Company had no exposure to an individual counterparty where the amount at risk was in excess of 5% of the Company's stockholders’ equity.

The following table presents detailed information about the amounts outstanding under the Company’s repurchase agreements secured by investment securities and associated assets pledged as collateral at June 30, 2020 and December 31, 2019, respectively (dollar amounts in thousands):



	June 30, 2020						December 31, 2019
	Outstanding Repurchase Agreements		Fair Value of Collateral Pledged		Amortized Cost of Collateral Pledged		Outstanding Repurchase Agreements		Fair Value of Collateral Pledged		Amortized Cost of Collateral Pledged
Agency RMBS ⁽¹⁾	$	—	$	—	$	—	$	812,742	$	865,765	$	864,428
Agency CMBS ⁽²⁾	—		—		—		133,184		139,317		140,118
Non-Agency RMBS⁽³⁾	87,571		156,523		214,328		594,286		797,784		785,952
CMBS ⁽⁴⁾	—		—		—		811,890		1,036,513		853,043
Balance at end of the period	$	87,571	$	156,523	$	214,328	$	2,352,102	$	2,839,379	$	2,643,541


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


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


⁽³⁾	Collateral pledged includes first loss subordinated RMBS securities with a fair value amounting to $156.5 million and $214.8 million included in Consolidated SLST as of June 30, 2020 and December 31, 2019, respectively.


⁽⁴⁾	Collateral pledged includes first loss POs, IOs and mezzanine CMBS securities with a fair value amounting to $848.2 million included in the Consolidated K-Series as of December 31, 2019.

As of June 30, 2020 and December 31, 2019, the average days to maturity for repurchase agreements secured by investment securities were 55 days and 73 days, respectively, and the weighted average interest rate was 2.72%. The Company expects to roll outstanding amounts under its repurchase agreements into new repurchase agreements or other financings, or to repay outstanding amounts, prior to or at maturity. The Company’s accrued interest payable on outstanding repurchase agreements secured by investment securities at June 30, 2020 and December 31, 2019 amounts to $0.2 million and $8.8 million, respectively, and is included in accrued expenses and other liabilities on the Company’s condensed consolidated balance sheets.

The following table presents contractual maturity information about the Company’s outstanding repurchase agreements secured by investment securities at June 30, 2020 and December 31, 2019 (dollar amounts in thousands):



Contractual Maturity	June 30, 2020		December 31, 2019
Within 30 days	$	—	$	449,474
Over 30 days to 90 days	87,571		1,647,683
Over 90 days	—		254,945
Total	$	87,571	$	2,352,102

As of June 30, 2020, the outstanding balance under our repurchase agreements secured by investment securities was funded at an advance rate of 55.0% that implies a “haircut” of 45.0%.

As of June 30, 2020, 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. As of June 30, 2020, the Company had $371.7 million in cash and cash equivalents and $812.5 million in unencumbered investment securities to meet additional haircuts or market valuation requirements, which collectively represent greater than 100% of our outstanding repurchase agreements secured by investment securities. The following table presents information about the Company's unencumbered securities at June 30, 2020 and December 31, 2019, respectively (dollar amounts in thousands):



Unencumbered Securities	June 30, 2020		December 31, 2019
Agency RMBS	$	—	$	83,351
CMBS	288,112		235,199
Non-Agency RMBS	481,849		168,063
ABS	42,500		49,214
Total	$	812,461	$	535,827

Residential Loans

The Company has repurchase agreements with two financial institutions to fund the purchase of residential loans, including both first and second mortgages. The following table presents detailed information about the Company’s financings under these repurchase agreements and associated residential loans pledged as collateral at June 30, 2020 and December 31, 2019, 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
June 30, 2020	$	1,450,000	$	876,923	$	1,199,652	2.36	%	5.18
December 31, 2019	$	1,200,000	$	754,132	$	961,749	3.67	%	11.20


⁽¹⁾	Includes residential loans, at fair value of $1.2 billion and $881.2 million at June 30, 2020 and December 31, 2019, respectively, and residential loans, net of $80.6 million at December 31, 2019.

At June 30, 2020, the Company had an amount at risk under a repurchase agreement with Credit Suisse AG, Cayman Islands Branch of $255.2 million. This repurchase agreement matures on November 26, 2020.

During the terms of the repurchase agreements, proceeds from the residential loans will be applied to pay any price differential and to reduce the aggregate repurchase price of the collateral. The financings under the repurchase agreements are subject to margin calls to the extent the market value of the residential loans falls below specified levels and repurchase may be accelerated upon an event of default under the repurchase agreements.

During the three months ended March 31, 2020, the Company was not in compliance with the market capitalization covenants in its repurchase agreements with both counterparties. In March 2020, the Company executed an amended repurchase agreement with one counterparty to modify the terms of financial covenants. The Company also agreed to a reservation of rights with the other counterparty during the three months ended March 31, 2020 in which the counterparty elected not to declare an event of default in accordance with the terms of the repurchase agreement for non-compliance with a financial covenant. The Company subsequently executed an amended repurchase agreement with this counterparty in April to modify the terms of financial covenants. Subsequent to the amendments, the repurchase agreements contain various covenants, including among other things, the maintenance of certain amounts of liquidity and total stockholders' equity. The Company is in compliance with such covenants as of August 7, 2020. The Company expects to roll outstanding amounts under these repurchase agreements into new repurchase agreements or other financings, or to repay outstanding amounts, prior to or at maturity.

Costs related to 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 condensed consolidated balance sheets in the amount of $1.4 million as of June 30, 2020 and $0.8 million as of December 31, 2019. 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.