Available-for-Sale Securities, at Fair Value (Notes)
|3 Months Ended|
Mar. 31, 2012
|Available for Sale Securities at Fair Value [Abstract]|
|Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]||
Available-for-Sale Securities, at Fair Value
The following table presents the Company's available-for-sale, or AFS, investment securities by collateral type, which were carried at their fair value as of March 31, 2012 and December 31, 2011:
At March 31, 2012 and December 31, 2011, the Company pledged investment securities with a carrying value of $8.6 billion and $6.2 billion, respectively, as collateral for repurchase agreements. See Note 12 - Repurchase Agreements.
At March 31, 2012 and December 31, 2011, the Company did not have any securities purchased from and financed with the same counterparty that did not meet the conditions of ASC 860, Transfers and Servicing, to be considered linked transactions and therefore classified as derivatives.
The following tables present the amortized cost and carrying value (which approximates fair value) of AFS securities by collateral type as of March 31, 2012 and December 31, 2011:
The following tables present the carrying value of the Company's AFS investment securities by rate type as of March 31, 2012 and December 31, 2011:
When the Company purchases a credit-sensitive AFS security at a significant discount to its face value, the Company often does not amortize into income a significant portion of this discount that the Company is entitled to earn because it does not expect to collect it due to the inherent credit risk of the security. The Company may also record an other-than-temporary impairment, or OTTI, for a portion of its investment in the security to the extent the Company believes that the amortized cost will exceed the present value of expected future cash flows. The amount of principal that the Company does not amortize into income is designated as an off balance sheet credit reserve on the security, with unamortized net discounts or premiums amortized into income over time to the extent realizable.
The following table presents the changes for the three months ended March 31, 2012 and 2011 of the unamortized net discount and designated credit reserves on non-Agency AFS securities.
The following table presents the components comprising the carrying value of AFS securities not deemed to be other than temporarily impaired by length of time the securities had an unrealized loss position as of March 31, 2012 and December 31, 2011. At March 31, 2012, the Company held 1,074 AFS securities, of which 315 were in an unrealized loss position for less than twelve consecutive months and 41 were in an unrealized loss position for more than twelve consecutive months. At December 31, 2011, the Company held 854 AFS securities, of which 264 were in an unrealized loss position for less than twelve months and 20 were in an unrealized loss position for more than twelve consecutive months.
Evaluating AFS Securities for Other-than-Temporary Impairments
In order to evaluate AFS securities for OTTI, the Company determines whether there has been a significant adverse quarterly change in the cash flow expectations for a security. The Company compares the amortized cost of each security in an unrealized loss position against the present value of expected future cash flows of the security. The Company also considers whether there has been a significant adverse change in the regulatory and/or economic environment as part of this analysis. If the amortized cost of the security is greater than the present value of expected future cash flows using the original yield as the discount rate, an other-than-temporary credit impairment has occurred. If the Company does not intend to sell and is not more likely than not required to sell the security, the credit loss is recognized in earnings and the balance of the unrealized loss is recognized in other comprehensive income. If the Company intends to sell the security or will be more likely than not required to sell the security, the full unrealized loss is recognized in earnings.
The Company recorded a $4.3 million other-than-temporary credit impairment during three months ended March 31, 2012 on a total of fifteen non-Agency RMBS where the future expected cash flows for each security was less than its amortized cost. As of March 31, 2012, the impaired securities had weighted average cumulative losses of 2.5%, weighted average three-month prepayment speed of 2.31, weighted average 60+ day delinquency of 37.5% of the pool balance, and weighted average FICO score of 650. At March 31, 2012 the Company did not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities, therefore, only the projected credit loss was recognized in earnings. The Company did not record an other-than-temporary credit impairment during the three months ended March 31, 2011.
The following table presents the OTTI included in earnings for three months ended March 31, 2012 and 2011:
Gross Realized Gains and Losses
Gains and losses from the sale of AFS securities are recorded as realized gains (losses) within gain on investment securities, net in the Company's condensed consolidated statements of comprehensive income. For the three months ended March 31, 2012, the Company sold AFS securities for $170.1 million with an amortized cost of $159.0 million, for a net realized gain of $11.1 million. For the three months ended March 31, 2011, the Company sold AFS securities for $71.4 million with an amortized cost of $69.8 million, for a net realized gain of $1.6 million.
The following table presents the gross realized gains and losses on sales of AFS securities for the three months ended March 31, 2012 and 2011:
Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).
Reference 1: http://www.xbrl.org/2003/role/presentationRef