Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 11, 2014 | |
Document and Entity Information [Abstract] | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Jun-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
Entity Registrant Name | 'ZAIS Financial Corp. | ' |
Entity Central Index Key | '0001527590 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Non-accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 7,970,886 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Assets | ' | ' |
Cash | $27,619,043 | $57,060,806 |
Restricted cash | 8,144,052 | 2,128,236 |
Mortgage loans, at fair value - $433,299,627 and $331,522,165 pledged as collateral, respectively | 433,553,720 | 331,785,542 |
Real estate securities, at fair value - $197,404,343 and $183,722,511 pledged as collateral, respectively | 227,293,536 | 226,155,221 |
Other investment securities, at fair value, $12,034,003 and $0 pledged as collateral, respectively | 12,034,003 | ' |
Derivative assets, at fair value | 368,136 | 284,454 |
Other assets | 4,148,627 | 2,666,799 |
Total assets | 713,161,117 | 620,081,058 |
Liabilities | ' | ' |
Loan repurchase facility | 293,609,481 | 236,058,976 |
Securities repurchase agreements | 156,343,944 | 138,591,678 |
Exchangeable Senior Notes | 54,995,215 | 54,539,051 |
Derivative liabilities, at fair value | 1,550,129 | 1,471,607 |
Dividends and distributions payable | 3,559,120 | 8,452,910 |
Accounts payable and other liabilities | 2,547,654 | 1,828,947 |
Accrued interest payable | 1,550,258 | 1,369,327 |
Total liabilities | 514,155,801 | 442,312,496 |
Commitments and Contingencies (Note 14) | ' | ' |
Stockholders' equity | ' | ' |
12.5% Series A cumulative non-voting preferred stock, $0.0001 par value; 50,000,000 shares authorized; zero shares issued and outstanding | ' | ' |
Common stock, $0.0001 par value; 500,000,000 shares authorized; 7,970,886 shares issued and outstanding | 798 | 798 |
Additional paid-in capital | 164,207,617 | 164,207,617 |
Retained earnings (accumulated deficit) | 14,062,821 | -4,958,607 |
Total ZAIS Financial Corp. stockholders' equity | 178,271,236 | 159,249,808 |
Non-controlling interests in operating partnership | 20,734,080 | 18,518,754 |
Total stockholders' equity | 199,005,316 | 177,768,562 |
Total liabilities and stockholders' equity | $713,161,117 | $620,081,058 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Consolidated Balance Sheets [Abstract] | ' | ' |
Mortgage loans, pledged as collateral | $433,299,627 | $331,522,165 |
Real estate securities, pledged as collateral | 197,404,343 | 183,722,511 |
Other investment securities, pledged as collateral | $12,034,003 | $0 |
12.5% Series A cumulative non-voting preferred stock, par or stated value per share | $0.00 | $0.00 |
12.5% Series A cumulative non-voting preferred stock, shares authorized | 50,000,000 | 50,000,000 |
12.5% Series A cumulative non-voting preferred stock, shares issued | 0 | 0 |
12.5% Series A cumulative non-voting preferred stock, shares outstanding | 0 | 0 |
Common stock, par value per share | $0.00 | $0.00 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 7,970,886 | 7,970,886 |
Common stock, shares outstanding | 7,970,886 | 7,970,886 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Interest income | ' | ' | ' | ' |
Mortgage loans | $6,819,954 | $903,953 | $12,469,507 | $932,859 |
Real estate securities | 3,832,576 | 5,031,558 | 7,573,191 | 8,438,685 |
Other investment securities | 178,690 | ' | 281,555 | ' |
Total interest income | 10,831,220 | 5,935,511 | 20,324,253 | 9,371,544 |
Interest expense | ' | ' | ' | ' |
Loan repurchase facility | 2,260,080 | 289,296 | 4,090,987 | 289,296 |
Securities repurchase agreements | 737,290 | 867,484 | 1,397,692 | 1,381,519 |
Exchangeable senior notes | 1,419,015 | ' | 2,831,658 | ' |
Total interest expense | 4,416,385 | 1,156,780 | 8,320,337 | 1,670,815 |
Net interest income | 6,414,835 | 4,778,731 | 12,003,916 | 7,700,729 |
Other gains/(losses) | ' | ' | ' | ' |
Change in unrealized gain or loss on mortgage loans | 21,960,921 | 1,596,197 | 22,650,525 | 1,567,291 |
Change in unrealized gain or loss on real estate securities | 1,548,195 | -15,642,642 | 4,284,253 | -14,739,365 |
Change in unrealized gain or loss on other investment securities | 905,862 | ' | 1,276,626 | ' |
Realized gain on mortgage loans | 176,667 | 66,244 | 407,404 | 66,244 |
Realized gain/(loss) on real estate securities | ' | -246,055 | 73,619 | -246,055 |
(Loss)/gain on derivative instruments | -1,902,949 | 3,698,381 | -5,011,630 | 3,979,525 |
Total other gains/(losses) | 22,688,696 | -10,527,875 | 23,680,797 | -9,372,360 |
Expenses | ' | ' | ' | ' |
Professional fees | 939,744 | 231,389 | 2,751,595 | 1,492,573 |
Advisory fee - related party | 710,563 | 704,687 | 1,413,318 | 1,193,072 |
Loan servicing fees | 600,747 | 114,534 | 972,879 | 114,534 |
General and administrative expenses | 980,342 | 769,123 | 2,191,927 | 1,123,372 |
Total expenses | 3,231,396 | 1,819,733 | 7,329,719 | 3,923,551 |
Net income/(loss) | 25,872,135 | -7,568,877 | 28,354,994 | -5,595,182 |
Net income/(loss) allocated to non-controlling interests | 2,698,204 | -788,476 | 2,956,858 | -489,382 |
Preferred dividends | ' | ' | ' | 15,379 |
Net income/(loss) attributable to ZAIS Financial Corp common stockholders | $23,173,931 | ($6,780,401) | $25,398,136 | ($5,121,179) |
Net income/(loss) per share applicable to common stockholders: | ' | ' | ' | ' |
Basic | $2.91 | ($0.85) | $3.19 | ($0.78) |
Diluted | $2.47 | ($0.85) | $2.79 | ($0.78) |
Weighted average number of shares of common stock: | ' | ' | ' | ' |
Basic | 7,970,886 | 7,970,886 | 7,970,886 | 6,564,284 |
Diluted | 10,677,360 | 8,897,800 | 10,677,360 | 7,491,198 |
Consolidated_Statements_of_Sto
Consolidated Statements of Stockholders' Equity (USD $) | Total | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings / (Accumulated Deficit) [Member] | Total ZAIS Financial Corp. Stockholders' Equity [Member] | Non-controlling Interests in Operating Partnership [Member] |
Balance at Dec. 31, 2012 | $65,140,795 | ' | $207 | $39,759,770 | $5,281,941 | $45,041,918 | $20,098,877 |
Balance, shares at Dec. 31, 2012 | ' | 133 | 2,071,096 | ' | ' | ' | ' |
Reversal of common stock repurchase liability | 5,440,175 | ' | 25 | 5,440,150 | ' | 5,440,175 | ' |
Reversal of common stock repurchase liability, shares | ' | ' | 249,790 | ' | ' | ' | ' |
Repurchase of preferred shares | -133,000 | ' | ' | -133,000 | ' | -133,000 | ' |
Repurchase of preferred shares, shares | ' | -133 | ' | ' | ' | ' | ' |
Net proceeds from initial public offering | 118,862,500 | ' | 566 | 118,861,934 | ' | 118,862,500 | ' |
Net proceeds from initial public offering, shares | ' | ' | 5,650,000 | ' | ' | ' | ' |
Equity raise payments | -216,658 | ' | ' | -216,658 | ' | -216,658 | ' |
Distributions on OP units | -1,965,060 | ' | ' | ' | ' | ' | -1,965,060 |
Dividends on common stock | -16,898,276 | ' | ' | ' | -16,898,276 | -16,898,276 | ' |
Rebalancing of ownership percentage between the Company and operating partnership | ' | ' | ' | 495,421 | ' | 495,421 | -495,421 |
Net income | 7,538,086 | ' | ' | ' | 6,657,728 | 6,657,728 | 880,358 |
Balance at Dec. 31, 2013 | 177,768,562 | ' | 798 | 164,207,617 | -4,958,607 | 159,249,808 | 18,518,754 |
Balance, shares at Dec. 31, 2013 | ' | ' | 7,970,886 | ' | ' | ' | ' |
Distributions on OP units | -741,532 | ' | ' | ' | ' | ' | -741,532 |
Dividends on common stock | -6,376,708 | ' | ' | ' | -6,376,708 | -6,376,708 | ' |
Net income | 28,354,994 | ' | ' | ' | 25,398,136 | 25,398,136 | 2,956,858 |
Balance at Jun. 30, 2014 | $199,005,316 | ' | $798 | $164,207,617 | $14,062,821 | $178,271,236 | $20,734,080 |
Balance, shares at Jun. 30, 2014 | ' | ' | 7,970,886 | ' | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Cash flows from operating activities | ' | ' |
Net income / (loss) | $28,354,994 | ($5,595,182) |
Adjustments to reconcile net income / (loss) to net cash (used in) / provided by operating activities | ' | ' |
Net (accretion)/amortization of (discounts)/premiums related to mortgage loans | -3,423,653 | -259,435 |
Net (accretion)/amortization of (discounts)/premiums related to real estate securities | -2,603,804 | -1,566,256 |
Net (accretion)/amortization of (discounts)/premiums related to other investment securities | -80,424 | ' |
Change in unrealized gain or loss on mortgage loans | -22,650,525 | -1,567,291 |
Change in unrealized gain or loss on real estate securities | -4,284,253 | 14,739,365 |
Change in unrealized gain or loss on other investment securities | -1,276,626 | ' |
Realized gain on mortgage loans | -407,404 | -66,244 |
Realized (gains) / loss on real estate securities | -73,619 | 246,055 |
Change in unrealized gain or loss on derivative instruments | 4,798,590 | -3,244,803 |
Amortization of Exchangeable Senior Notes discount | 456,164 | ' |
Changes in operating assets and liabilities | ' | ' |
Increase in other assets | -1,481,828 | -302,375 |
Increase in accounts payable and other liabilities | 718,707 | 788,610 |
Increase in accrued interest payable | 180,931 | 361,927 |
Net cash (used in) / provided by operating activities | -1,772,750 | 3,534,371 |
Cash flows from investing activities | ' | ' |
Acquisitions of mortgage loans | -84,795,975 | -119,758,049 |
Proceeds from principal repayments on mortgage loans | 9,509,379 | 867,594 |
Acquisitions of real estate securities, net of change in payable for real estate securities purchased | -11,830,958 | -344,623,655 |
Proceeds from principal repayments on real estate securities | 15,582,121 | 24,639,160 |
Proceeds from sales of real estate securities, net of changes in receivable for real estate securities sold | 2,072,198 | 53,913,098 |
Acquisitions of other investment securities | -10,676,953 | ' |
Premium paid for interest rate swaption | -4,803,750 | ' |
Restricted cash used in investment activities | -6,015,816 | -8,777,793 |
Net cash used in investing activities | -90,959,754 | -393,739,645 |
Cash flows from financing activities | ' | ' |
Proceeds from issuance of common stock, net | ' | 118,862,500 |
Payment of common stock repurchase liability | ' | -5,750,512 |
Net borrowings from loan repurchase facility | 57,550,505 | 89,112,325 |
Borrowings from securities repurchase agreements | 71,542,192 | 287,941,369 |
Repayments of securities repurchase agreements | -53,789,926 | -95,524,421 |
Dividends on common stock and distributions on OP Units (net of change in dividends and distributions payable) | -12,012,030 | -1,957,516 |
Repurchase of preferred stock including dividend | ' | -148,379 |
Equity raise payments | ' | -216,658 |
Net cash provided by financing activities | 63,290,741 | 392,318,708 |
Net (decrease)/increase in cash | -29,441,763 | 2,113,434 |
Cash | ' | ' |
Beginning of period | 57,060,806 | 19,061,110 |
End of period | 27,619,043 | 21,174,544 |
Supplemental disclosure of cash flow information | ' | ' |
Interest paid on loan repurchase facility, securities repurchase agreements and Exchangeable Senior Notes | 7,607,762 | 1,308,888 |
Taxes paid | ' | ' |
Supplemental disclosure of noncash investing and financing activities | ' | ' |
Increase in dividends and distributions payable | $3,559,120 | ' |
Formation_and_Organization
Formation and Organization | 6 Months Ended |
Jun. 30, 2014 | |
Formation and Organization [Abstract] | ' |
Formation and Organization | ' |
1. Formation and Organization | |
ZAIS Financial Corp. (the "Company") was incorporated in Maryland on May 24, 2011, and has elected to be taxed and to qualify as a real estate investment trust ("REIT") beginning with the taxable year ended December 31, 2011. The Company completed its formation transaction and commenced operations on July 29, 2011. On February 13, 2013, the Company completed its initial public offering ("IPO"), pursuant to which the Company sold 5,650,000 shares of its common stock at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of $1.2 million were $118.9 million. | |
The Company primarily invests in, finances and manages performing and re-performing residential mortgage loans, which may be seasoned or recently originated. The Company also invests in, finances and manages residential mortgage-backed securities ("RMBS") that are not issued or guaranteed by a federally chartered corporation, such as the Federal National Mortgage Association ("Fannie Mae"), or the Federal Home Loan Mortgage Corporation ("Freddie Mac"), or an agency of the U.S. Government, such as the Government National Mortgage Association ("Ginnie Mae") ("non-Agency RMBS") with an emphasis on securities that, when originally issued, were rated in the highest rating category by one or more of the nationally recognized statistical rating organizations. The Company also has the discretion to invest in mortgage servicing rights ("MSRs"), RMBS that are issued or guaranteed by a federally chartered corporation or a U.S. Government agency ("Agency RMBS"), including through To-Be-Announced ("TBA") contracts, and in other real estate-related and financial assets, such as interest only strips created from RMBS ("IOs"), commercial mortgage-backed securities ("CMBS") and asset-backed securities ("ABS"). The Company refers collectively to the assets it targets for acquisition as its target assets. | |
The Company is externally managed by ZAIS REIT Management, LLC (the "Advisor"), a subsidiary of ZAIS Group, LLC ("ZAIS"), and has no employees. The Company is the sole general partner of, and conducts substantially all of its business through, ZAIS Financial Partners, L.P., the Company's consolidated operating partnership subsidiary (the "Operating Partnership"). | |
The Company's charter authorizes the issuance of up to 500,000,000 shares of common stock with a par value of $0.0001 per share, and 50,000,000 shares of preferred stock, with a par value of $0.0001 per share. The Company's board of directors is authorized to amend its charter, without the approval of stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series of capital stock or to classify and reclassify any unissued shares of its capital stock into other classes or series of stock that the Company has authority to issue. | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 6 Months Ended | |
Jun. 30, 2014 | ||
Summary of Significant Accounting Policies [Abstract] | ' | |
Summary of Significant Accounting Policies | ' | |
2. Summary of Significant Accounting Policies | ||
Basis of Quarterly Presentation | ||
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial reporting. In the opinion of management, all adjustments considered necessary for a fair statement of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for the interim period are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Certain prior period amounts have been reclassified to conform to the current period's presentation. | ||
The Company currently operates as one business segment. | ||
Estimates | ||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates. | ||
Principles of Consolidation | ||
The consolidated financial statements include the accounts of the Company and all of the wholly owned subsidiaries of the Operating Partnership. The Company, which serves as the sole general partner of and conducts substantially all of its business through the Operating Partnership, holds approximately 89.6% of the operating partnership units ("OP units") in the Operating Partnership at June 30, 2014 and December 31, 2013. The Operating Partnership in turn holds directly or indirectly all of the equity interests in its subsidiaries. All intercompany balances have been eliminated in consolidation. | ||
Changes in the Company's ownership interest (and transactions with non-controlling interest unit holders in the Operating Partnership) while the Company retains its controlling interest in its subsidiary, are accounted for as equity transactions. The carrying amount of the non-controlling interest is adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the Company. | ||
Variable Interest Entities | ||
A variable interest entity ("VIE") is an entity that lacks one or more of the characteristics of a voting interest entity. The Company evaluates each of its investments to determine whether it is a VIE based on: (1) the sufficiency of the entity's equity investment at risk to finance its activities without additional subordinated financial support provided by any parties, including the equity holders; (2) whether as a group the holders of the equity investment at risk have (a) the power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impacts the entity's economic performance, (b) the obligation to absorb the expected losses of the legal entity and (c) the right to receive the expected residual returns of the legal entity; and (3) whether the voting rights of these investors are proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected returns of their equity, or both, and whether substantially all of the entity's activities involve or are conducted on behalf of an investor that has disproportionately fewer voting rights. An investment that lacks one or more of the above three characteristics is considered to be a VIE. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. | ||
A VIE is subject to consolidation if the equity investors either do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, are unable to direct the entity's activities, or are not exposed to the entity's losses or entitled to its residual returns. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses. | ||
The Company has evaluated its real estate securities investments to determine if each represents a variable interest in a VIE. The Company monitors these investments and analyzes them for potential consolidation. The Company's real estate securities investments represent variable interests in VIEs. At June 30, 2014 and December 31, 2013, no VIEs required consolidation as the Company was not the primary beneficiary of any of these VIEs. At June 30, 2014 and December 31, 2013, the maximum exposure of the Company to VIEs is limited to the fair value of its investments in real estate securities as disclosed in the consolidated balance sheets. | ||
Cash and Cash Equivalents | ||
The Company considers highly liquid short-term interest bearing instruments with original maturities of three months or less and other instruments readily convertible into cash to be cash equivalents. The Company's deposits with financial institutions may exceed federally insurable limits of $250,000 per institution. The Company mitigates this risk by depositing funds with major financial institutions. At June 30, 2014, the Company's cash was held with two custodians. | ||
Restricted Cash | ||
Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or securities repurchase agreements. Cash held by counterparties as collateral is not available to the Company for general corporate purposes, but may be applied against amounts due to derivative or securities repurchase agreement counterparties or returned to the Company when the collateral requirements are exceeded or at the maturity of the derivatives or securities repurchase agreements. | ||
Other Investment Securities | ||
Other investment securities are comprised of investments in Fannie Mae's Risk Transfer Notes ("FMRT Notes" or "Other Investment Securities"). The FMRT Notes represent unsecured general obligations of Fannie Mae and are structured to be subject to the performance of a certain pool of residential mortgage loans. | ||
Mortgage Loans, Real Estate Securities and Other Investment Securities-Fair Value Election | ||
U.S. GAAP permits entities to choose to measure certain eligible financial instruments at fair value. The Company has elected the fair value option for each of its mortgage loans, real estate securities and Other Investment Securities at the date of purchase. The fair value option election is irrevocable and requires the Company to measure these mortgage loans, real estate securities and Other Investment Securities at estimated fair value with the change in estimated fair value recognized in earnings. The Company has established a policy for these assets to separate interest income from the full change in fair value in the consolidated statements of operations. The interest income component is presented as interest income on mortgage loans, real estate securities and Other Investment Securities and the remainder of the change in fair value is presented separately as change in unrealized gain or loss in the Company's consolidated statements of operations. | ||
Determination of Fair Value Measurement | ||
The "Fair Value Measurements and Disclosures" Topic of the FASB ASC defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. | ||
Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values. Furthermore, the analysis of whether it is more likely than not that the Company will be required to sell securities in an unrealized loss position prior to an expected recovery in fair value (if any), the amount of such expected required sales, and the projected identification of which securities would be sold is also subject to significant judgment. | ||
Any proposed changes to the valuation methodology will be reviewed by the Advisor to ensure changes are consistent with the applicable accounting guidance and approved as appropriate. The fair value methodology may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the Advisor's valuation methods will be appropriate and consistent with other market participants, the use of different methodologies, or assumptions by other market participants, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. | ||
The Company categorizes its financial instruments in accordance with U.S. GAAP, based on the priority of the inputs to the valuation, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. | ||
Financial assets and liabilities recorded in the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: | ||
Level 1 | Quoted prices for identical assets or liabilities in an active market. | |
Level 2 | Financial assets and liabilities whose values are based on the following: | |
Quoted prices for similar assets or liabilities in active markets | ||
Quoted prices for identical or similar assets or liabilities in nonactive markets. | ||
Pricing models whose inputs are observable for substantially the full term of the asset or liability. | ||
Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability. | ||
Level 3 | Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement. | |
The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment. The Company utilizes proprietary modeling analysis to support the independent third party broker quotes selected to determine the fair value of its real estate securities, Other Investment Securities and derivative instruments. | ||
The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy. | ||
Mortgage Loans | ||
The fair value of the Company's mortgage loans considers data such as loan origination information and additional updated borrower and loan servicing data, as available, forward interest rates, general economic conditions, home price index forecasts and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans include market-implied discount rates, projections of default rates, delinquency rates, loss severity (considering mortgage insurance) and prepayment rates. The Company uses loan level data, macro-economic inputs and forward interest rates to generate loss adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair values established for mortgage loans held by the Company may differ from the fair values that would have been established if a ready market existed for these mortgage loans. Accordingly, mortgage loans are classified as Level 3 in the fair value hierarchy. | ||
At June 30, 2014, approximately 10.7% in unpaid principal balance of the Company's mortgage loans carries mortgage insurance. | ||
Real Estate Securities and Other Investment Securities | ||
The fair value of the Company's real estate securities and Other Investment Securities considers the underlying characteristics of each security including coupon, maturity date and collateral. The Company estimates the fair value of its RMBS and Other Investment Securities based upon a combination of observable prices in active markets, multiple indicative quotes from brokers and executable bids. In evaluating broker quotes the Company also considers additional observable market data points including recent observed trading activity for identical and similar securities, back-testing, broker challenges and other interactions with market participants, as well as yield levels generated by model-based valuation techniques. In the absence of observable quotes, the Company utilizes model-based valuation techniques that may contain unobservable valuation inputs. | ||
When available, the fair value of real estate securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from either broker quotes, observed traded levels or model-based valuation techniques using observable inputs such as benchmark yields or issuer spreads. | ||
While the Company's non-Agency RMBS and Other Investment Securities are valued using the same process with similar inputs as the Agency RMBS as described below, a significant amount of inputs are unobservable due to relatively low levels of market activity. The fair value of these securities is typically based on broker quotes or the Company's model-based valuation. Accordingly, the Company's non-Agency RMBS and Other Investment Securities are classified as Level 3 in the fair value hierarchy. Model-based valuation consists primarily of discounted cash flow and yield analyses. Significant model inputs and assumptions include constant voluntary prepayment rates, constant default rates, delinquency rates, loss severity, market-implied discount rates, default rates, expected loss severity, weighted average life, collateral composition, borrower characteristics and prepayment rates, and may also include general economic conditions, including home price index forecasts, servicing data and other relevant information. Where possible, collateral-related assumptions are determined on an individual loan level basis. | ||
The Company's Agency RMBS, if any, are valued using the market data described above, which includes inputs determined to be observable or whose significant fair value drivers are observable. Accordingly, Agency RMBS securities are classified as Level 2 in the fair value hierarchy. | ||
Derivative Instruments | ||
Interest Rate Swaption Agreements | ||
An interest rate swaption agreement represents an option that gives the Company the right, but not the obligation, to enter into a previously agreed upon interest rate swap agreement on a future date. If exercised the Company will enter into an interest rate swap agreement and is obligated to pay a fixed rate of interest and receive a floating rate of interest. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations received for interest rate swaption agreements. These counterparty valuations are generally based on models with observable market inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's interest rate swaption agreements are governed by International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. At June 30, 2014, no credit valuation adjustment was made in determining the fair value of the derivative. | ||
Interest Rate Swap Agreements | ||
An interest rate swap is an agreement between the Company and a counterparty to exchange periodic interest payments where one party to the contract makes a fixed rate payment in exchange for a floating rate payment from the other party. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations received for interest rate swap agreements. These counterparty valuations are generally based on models with observable market inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's interest rate swap agreements are governed by International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. At June 30, 2014 and December 31, 2013, no credit valuation adjustment was made in determining the fair value of the derivative. | ||
TBA Securities | ||
A TBA security is a forward contract for the purchase of Agency RMBS at a predetermined price with a stated face amount, coupon and stated maturity at an agreed upon future date. The specific Agency RMBS delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association ("SIFMA"), are not known at the time of the transaction. The Company estimates the fair value of TBA securities based on independent third party closing levels. Accordingly, TBAs are classified as Level 2 in the fair value hierarchy. | ||
Interest Income Recognition and Impairment-Mortgage Loans | ||
Pursuant to the Company's policy for separately presenting interest income on mortgage loans, the Company follows acceptable methods under U.S. GAAP for allocating a portion of the change in fair value of mortgage loans to interest income. | ||
When the Company purchases mortgage loans that have shown evidence of credit deterioration since origination and management determines that it is probable the Company will not collect all contractual cash flows on those assets, the Company will apply the guidance that addresses accounting for differences between contractual cash flows and cash flows expected to be collected if those differences are attributable to, at least in part, credit quality. | ||
Interest income is recognized on a level-yield basis over the life of the loan as long as cash flows can be reasonably estimated. The level-yield is determined by the excess of the Company's initial estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the Company's initial investment in the mortgage loan (accretable yield). The amount of interest income to be recognized cannot result in a carrying amount that exceeds the payoff amount of the loan. The excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) will not be recognized as an adjustment of yield. | ||
On a quarterly basis, the Company updates its estimate of the cash flows expected to be collected. For purposes of interest income recognition, any subsequent increases in cash flows expected to be collected are generally recognized as prospective yield adjustments (which establishes a new level yield) and any subsequent decreases in cash flows expected to be collected are recognized as an impairment to be recorded through change in unrealized gain or loss in the consolidated statements of operations. | ||
Income recognition is suspended for a loan when cash flows cannot be reasonably estimated. | ||
Interest Income Recognition and Impairment-Real Estate Securities and Other Investment Securities | ||
Pursuant to the Company's policy for separately presenting interest income on real estate securities and Other Investment Securities, the Company follows acceptable methods under U.S. GAAP for allocating a portion of the change in fair value of real estate securities and Other Investment Securities to interest income. | ||
Interest income on Agency RMBS, if any, is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency RMBS at the time of purchase are amortized into interest income over the life of such securities using the effective yield method and adjusted for actual prepayments. | ||
Interest income on the non-Agency RMBS and Other Investment Securities, which were purchased at a discount to par value and/or were rated below AA at the time of purchase, is recognized based on the effective yield method. The effective yield on these securities is based on the projected cash flows from each security, which are estimated based on the Company's observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On a monthly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. Therefore, actual maturities of the securities are generally shorter than stated contractual maturities. | ||
Based on the projected cash flows from the Company's non-Agency RMBS purchased at a discount to par value, a portion of the purchase discount may be designated as credit protection against future credit losses and, therefore, not accreted into interest income. The amount designated as credit discount is determined, and may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively. | ||
RMBS and Other Investment Securities are evaluated for other-than-temporary impairment ("OTTI") each quarter. A security with a fair value that is less than amortized cost is considered impaired. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a security has been deemed to be other-than-temporarily impaired, the amount of OTTI is bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses is recognized in the consolidated statements of operations as a realized loss on real estate securities and realized loss on Other Investment Securities. The remaining OTTI related to the valuation adjustment is recognized as a component of change in unrealized gain or loss in the consolidated statements of operations. Realized gains and losses on sale of real estate securities and Other Investment Securities are determined using the specific identification method. Real estate securities and Other Investment Securities transactions are recorded on the trade date. | ||
Expense Recognition | ||
Expenses are recognized when incurred. Expenses include, but are not limited to, loan servicing fees, advisory fees, professional fees for legal, accounting and consulting services, and general and administrative expenses such as insurance, custodial and miscellaneous fees. | ||
Offering Costs | ||
Offering costs are accounted for as a reduction of additional paid-in capital. Offering costs in connection with the Company's IPO were paid out of the proceeds of the IPO. Costs incurred to organize the Company were expensed as incurred. The Company's obligation to pay for organization and offering expenses directly related to the IPO was capped at $1.2 million and the Advisor paid for such expenses incurred above the cap. | ||
Loan Repurchase Facility | ||
The Company finances a portion of its mortgage loan portfolio through the use of repurchase agreements entered into under a master repurchase agreement with Citibank, N.A. ("Citi"), pursuant to which the Company may sell, and later repurchase trust certificates representing interests in residential mortgage loans (the "Trust Certificates") in an aggregate principal amount of up to $325.0 million (the "Loan Repurchase Facility"). The borrowings under the Loan Repurchase Facility are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreement. The borrowings under the Loan Repurchase Facility are recorded on the trade date at the contract amount. | ||
The Company pledges cash and certain of its Trust Certificates as collateral under the Loan Repurchase Facility. The amounts available to be borrowed are dependent upon the fair value of the Trust Certificates pledged as collateral, which fluctuates with changes in interest rates, type of underlying mortgage loans and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in the fair value of pledged Trust Certificates, the lender may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. At June 30, 2014 and December 31, 2013, the Company has met all margin call requirements. | ||
Securities Repurchase Agreements-Real Estate Securities and Other Investment Securities | ||
The Company finances a portion of its RMBS portfolio and Other Investment Securities through the use of securities repurchase agreements entered into under master repurchase agreements with four financial institutions at June 30, 2014. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Repurchase agreements are recorded on trade date at the contract amount. | ||
The Company pledges cash and certain of its RMBS and Other Investment Securities as collateral under these securities repurchase agreements. The amounts available to be borrowed are dependent upon the fair value of the RMBS and Other Investment Securities pledged as collateral, which fluctuates with changes in interest rates, type of securities and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in the fair value of pledged RMBS and Other Investment Securities, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. At June 30, 2014 and December 31, 2013, the Company has met all margin call requirements. | ||
Derivatives and Hedging Activities | ||
The Company accounts for its derivative financial instruments in accordance with derivative accounting guidance, which requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and to measure those instruments at fair value. The Company has not designated any of its derivative agreements as hedging instruments for accounting purposes. As a result, changes in the fair value of derivatives are recorded through current period earnings. | ||
Interest Rate Swaption Agreements | ||
The credit support annex provisions of the Company's interest rate swaption agreement allows the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. At June 30, 2014, all collateral provided under this agreement consisted of cash collateral. | ||
Interest Rate Swap Agreements | ||
The Company's interest rate swap agreements contain legally enforceable provisions that allow for netting or setting off of all individual interest rate swap receivables and payables with each respective counterparty and, therefore, the fair value of those interest rate swap agreements are netted. The credit support annex provisions of the Company's interest rate swap agreements allow the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. At June 30, 2014 and December 31, 2013, all collateral provided under these agreements consisted of cash collateral. | ||
TBA Securities | ||
The Company may, and has in the past, entered into TBA contracts as a means of acquiring exposure to Agency RMBS and may, from time to time, utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company may choose, prior to settlement, to move the settlement of these securities to a later date by entering into an offsetting position (referred to as a "pair off"), settling the paired off positions against each other for cash, and simultaneously entering into a similar TBA contract for a later settlement date, which is commonly and collectively referred to as a "dollar roll" transaction. At June 30, 2014 and December 31, 2013, the Company did not have any TBA contracts outstanding. | ||
8% Exchangeable Senior Notes Due 2016 | ||
On November 25, 2013, the Operating Partnership issued $57.5 million aggregate principal amount of unsecured 8.00% Exchangeable Senior Notes due 2016 (the "Exchangeable Senior Notes"). The Exchangeable Senior Notes are carried at amortized cost. Interest expense on the Exchangeable Senior Notes is computed using the effective interest method. The conversion features of the Exchangeable Senior Notes are deemed to be an embedded derivative. Accordingly, the Company is required to bifurcate the embedded derivative related to the conversion features of the Exchangeable Senior Notes. The Company recognized the embedded derivative as a liability in its consolidated balance sheets at June 30, 2014 and December 31, 2013, measures it at its estimated fair value and recognizes changes in its estimated fair value in gain/(loss) on derivative instruments in the Company's consolidated statements of operations. | ||
Net Income (Loss) Per Share | ||
The Company's basic earnings per share ("EPS") is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding OP units and Exchangeable Senior Notes were converted to common stock, where such exercise or conversion would result in a lower EPS. The dilutive effect of OP units is computed assuming all units are converted to common stock. The dilutive effect of the Exchangeable Senior Notes is computed assuming shares converted are limited to 1,779,560 pursuant to New York Stock Exchange ("NYSE") restrictions. The 1,779,560 shares of common stock were included in the calculation of diluted EPS as such inclusion was dilutive for the three and six months ended June 30, 2014. | ||
Income Taxes | ||
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 2011. The Company was organized and has operated and intends to continue to operate in a manner that will enable it to qualify to be taxed as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company's annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. GAAP). As a REIT, the Company will not be subject to federal income tax on its taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. However, the Company intends to continue to operate in a manner that will enable it to qualify for treatment as a REIT. | ||
The Company evaluates uncertain income tax positions when applicable. Based upon its analysis of income tax positions, the Company concluded that it does not have any uncertain tax positions that meet the recognition or measurement criteria at either June 30, 2014 or December 31, 2013. | ||
The Company has elected to treat two of its subsidiaries, ZAIS Funding, Inc. and ZFC Trust TRS I, LLC, as taxable REIT subsidiaries (the "TRS entities"). The Company may perform certain activities through these TRS entities that could adversely impact the Company's REIT qualification if performed other than through a TRS. Earnings from activities conducted through the TRS entities are subject to federal and state income taxes irrespective of the dividends-paid deduction available to REITs for federal income tax purposes. In addition, for the Company to continue to qualify to be taxed as a REIT, the Company's total investment in all TRS entities may not exceed 25% of the value of the total assets of the Company determined for federal income tax purposes. | ||
For the three months ended June 30, 2014 and June 30, 2013, and the six months ended June 30, 2014 and June 30, 2013, the Company did not have any significant activity in the TRS entities. No provision for federal income taxes has been made in the accompanying consolidated financial statements, as the TRS entities did not generate taxable income for the periods presented. | ||
Recent Accounting Pronouncements | ||
In January 2014, the FASB issued ASU 2014-04: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure ("ASU 2014-04"), to reduce diversity in practice by clarifying when an in substance repossession or foreclosure has occurred and when a creditor should derecognize the associated loan receivable and recognize the real estate property. ASU 2014-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Adoption of ASU 2014-04 is not expected to have a material effect on the Company's consolidated financial statements. | ||
In June 2014, the FASB issued Accounting Standards Update No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures ("ASU 2014-11") which amends the accounting guidance for repo-to-maturity ("RTM") transactions and repurchase agreements executed as repurchase financings. Under this new accounting guidance, RTMs will be accounted for as secured borrowings rather than sales of an asset, and transfers of financial assets with a contemporaneous repurchase agreement will no longer be evaluated to determine whether they should be accounted for on a combined basis as forward contracts. The new guidance also prescribes additional disclosures particularly on the nature of collateral pledged in repurchase agreements accounted for as secured borrowings. ASU 2014-11 is effective for the first interim or annual reporting periods beginning after December 15, 2014. Adoption of ASU 2014-11 is not expected to have a material effect on the Company's consolidated financial statements. | ||
Fair_Value
Fair Value | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||
Fair Value [Abstract] | ' | ||||||||||||||||||||
Fair Value | ' | ||||||||||||||||||||
3. Fair Value | |||||||||||||||||||||
Fair Value Measurement | |||||||||||||||||||||
Financial assets and liabilities recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. | |||||||||||||||||||||
The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis at June 30, 2014, by level within the fair value hierarchy: | |||||||||||||||||||||
Assets and Liabilities at Fair Value | |||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||
Mortgage loans | $ | - | $ | - | $ | 433,553,720 | $ | 433,553,720 | |||||||||||||
Non-Agency RMBS | - | - | 227,293,536 | 227,293,536 | |||||||||||||||||
Other Investment Securities | - | - | 12,034,003 | 12,034,003 | |||||||||||||||||
Derivative assets | - | 368,136 | - | 368,136 | |||||||||||||||||
Total | $ | - | $ | 368,136 | $ | 672,881,259 | $ | 673,249,395 | |||||||||||||
Liabilities | |||||||||||||||||||||
Derivative liabilities | $ | - | $ | 1,550,129 | $ | - | $ | 1,550,129 | |||||||||||||
Total | $ | - | $ | 1,550,129 | $ | - | $ | 1,550,129 | |||||||||||||
The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis at December 31, 2013, by level within the fair value hierarchy: | |||||||||||||||||||||
Assets and Liabilities at Fair Value | |||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||
Mortgage loans | $ | - | $ | - | $ | 331,785,542 | $ | 331,785,542 | |||||||||||||
Non-Agency RMBS | - | - | 226,155,221 | 226,155,221 | |||||||||||||||||
Derivative assets | - | 284,454 | - | 284,454 | |||||||||||||||||
Total | $ | - | $ | 284,454 | $ | 557,940,763 | $ | 558,225,217 | |||||||||||||
Liabilities | |||||||||||||||||||||
Derivative liabilities | $ | - | $ | 1,471,607 | $ | - | $ | 1,471,607 | |||||||||||||
Total | $ | - | $ | 1,471,607 | $ | - | $ | 1,471,607 | |||||||||||||
The following table presents additional information about the Company's financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||
Six Months Ended June 30, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||
Other | |||||||||||||||||||||
Mortgage | Investment | Mortgage | |||||||||||||||||||
Loans | RMBS | Securities | Loans | RMBS | |||||||||||||||||
Beginning balance | $ | 331,785,542 | $ | 226,155,221 | $ | - | $ | - | $ | 100,911,651 | |||||||||||
Total net transfers into/out of Level 3 | - | - | - | - | - | ||||||||||||||||
Acquisitions | 84,795,975 | 11,830,958 | 10,676,953 | 334,162,044 | 234,397,506 | ||||||||||||||||
Proceeds from sales | - | (2,072,198 | ) | - | - | (68,190,593 | ) | ||||||||||||||
Net accretion of discounts | 3,423,653 | 2,603,804 | 80,424 | 3,059,231 | 3,727,702 | ||||||||||||||||
Proceeds from principal repayments | (9,509,379 | ) | (15,582,121 | ) | - | (13,871,059 | ) | (39,338,730 | ) | ||||||||||||
Total losses (realized/unrealized) included in | |||||||||||||||||||||
earnings | (4,302,177 | ) | (468,061 | ) | - | (6,344,877 | ) | (9,138,009 | ) | ||||||||||||
Total gains (realized/unrealized) included in | |||||||||||||||||||||
earnings | 27,360,106 | 4,825,933 | 1,276,626 | 14,780,203 | 3,785,694 | ||||||||||||||||
Ending balance | $ | 433,553,720 | $ | 227,293,536 | $ | 12,034,003 | $ | 331,785,542 | $ | 226,155,221 | |||||||||||
Six Months Ended June 30, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||
Other | |||||||||||||||||||||
Mortgage | Investment | Mortgage | |||||||||||||||||||
Loans | RMBS | Securities | Loans | RMBS | |||||||||||||||||
The amount of total gains or (losses) for the | |||||||||||||||||||||
period included in earnings attributable to | |||||||||||||||||||||
the change in unrealized gains or losses | |||||||||||||||||||||
relating to assets or liabilities still held at | |||||||||||||||||||||
the reporting date | $ | 22,695,371 | $ | 4,316,518 | $ | 1,276,626 | $ | 7,136,482 | $ | (2,822,969 | ) | ||||||||||
There were no financial assets or liabilities that were accounted for at fair value on a nonrecurring basis at June 30, 2014 and December 31, 2013. There were no transfers into or out of Level 1, Level 2 or Level 3 during the three and six months ended June 30, 2014. | |||||||||||||||||||||
The following table presents quantitative information about the Company's mortgage loans which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||||
Fair Value at | Valuation | Weighted | |||||||||||||||||||
30-Jun-14 | Technique(s) | Unobservable Input | Min/Max | Average | |||||||||||||||||
Mortgage Loans | $ | 433,553,720 | Model | Constant voluntary prepayment | 1.3 | % | 8.4 | % | 3.8 | % | |||||||||||
Constant default rate | 0.3 | % | 4.3 | % | 2.9 | % | |||||||||||||||
Loss severity | 6.8 | % | 46 | % | 26 | % | |||||||||||||||
Delinquency | 3.2 | % | 12.8 | % | 10.4 | % | |||||||||||||||
The following table presents quantitative information about the Company's real estate securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||||
Fair Value at | Valuation | Weighted | |||||||||||||||||||
30-Jun-14 | Technique(s) | Unobservable Input | Min/Max | Average | |||||||||||||||||
Non-Agency RMBS(1) | |||||||||||||||||||||
Alternative - A | $ | 87,957,373 | Broker quotes/ | Constant voluntary prepayment | 1.2 | % | 27.1 | % | 12.2 | % | |||||||||||
comparable trades | Constant default rate | 0.1 | % | 15.6 | % | 3.1 | % | ||||||||||||||
Loss severity | 0 | % | 93.6 | % | 26.1 | % | |||||||||||||||
Delinquency | 1.2 | % | 28 | % | 10.3 | % | |||||||||||||||
Pay option adjustable rate | 27,446,408 | Broker quotes/ | Constant voluntary prepayment | 1.4 | % | 19.7 | % | 9.1 | % | ||||||||||||
comparable trades | Constant default rate | 2 | % | 9.2 | % | 4.6 | % | ||||||||||||||
Loss severity | 0.1 | % | 63.1 | % | 42 | % | |||||||||||||||
Delinquency | 7.4 | % | 32.6 | % | 15.9 | % | |||||||||||||||
Prime | 93,817,617 | Broker quotes/ | Constant voluntary prepayment | 2.1 | % | 17.6 | % | 9.4 | % | ||||||||||||
comparable trades | Constant default rate | 0.1 | % | 8.3 | % | 4 | % | ||||||||||||||
Loss severity | 0.1 | % | 78.4 | % | 30.6 | % | |||||||||||||||
Delinquency | 2.4 | % | 25.3 | % | 12.4 | % | |||||||||||||||
Subprime | 18,072,138 | Broker quotes/ | Constant voluntary prepayment | 1.7 | % | 13 | % | 6.6 | % | ||||||||||||
comparable trades | Constant default rate | 3.1 | % | 13.2 | % | 4.4 | % | ||||||||||||||
Loss severity | 7.5 | % | 93.1 | % | 46.9 | % | |||||||||||||||
Delinquency | 12.5 | % | 24 | % | 16.2 | % | |||||||||||||||
Total Non-Agency RMBS | $ | 227,293,536 | |||||||||||||||||||
____________________ | |||||||||||||||||||||
-1 | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. | ||||||||||||||||||||
The following table presents quantitative information about the Company's Other Investment Securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||||
Fair Value at | Weighted | ||||||||||||||||||||
30-Jun-14 | Valuation Technique(s) | Unobservable Input | Average | ||||||||||||||||||
Broker quotes/ | |||||||||||||||||||||
Other Investment Securities(1) | $ | 12,034,003 | comparable trades | Constant voluntary prepayment | 10 | % | |||||||||||||||
____________________ | |||||||||||||||||||||
-1 | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. | ||||||||||||||||||||
The fair value measurements of these assets are sensitive to changes in assumptions regarding prepayment, probability of default, loss severity in the event of default, forecasts of home prices, and significant activity or developments in the real estate market. Significant changes in any of those inputs in isolation may result in significantly higher or lower fair value measurements. A change in the assumption used for forecasts of home price changes is accompanied by directionally opposite changes in the assumptions used for probability of default and loss severity. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. | |||||||||||||||||||||
Fair Value Option | |||||||||||||||||||||
Changes in fair value for assets and liabilities for which the fair value option was elected are recognized in earnings as they occur. The fair value option may be elected on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. | |||||||||||||||||||||
The following table presents the difference between the fair value and the aggregate unpaid principal amount and/or notional balance of assets for which the fair value option was elected at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||||
Unpaid | Unpaid | ||||||||||||||||||||
Principal | Principal | ||||||||||||||||||||
and/or | and/or | ||||||||||||||||||||
Notional | Notional | ||||||||||||||||||||
Fair Value | Balance(1) | Difference | Fair Value | Balance(1) | Difference | ||||||||||||||||
Financial instruments, at fair value | |||||||||||||||||||||
Assets | |||||||||||||||||||||
Mortgage loans | $ | 433,553,720 | $ | 489,964,409 | $ | (56,410,689 | ) | $ | 331,785,542 | $ | 398,828,497 | $ | (67,042,955 | ) | |||||||
Non-Agency RMBS | 227,293,536 | 310,577,527 | (83,283,991 | ) | 226,155,221 | 324,241,597 | (98,086,376 | ) | |||||||||||||
Other Investment Securities | 12,034,003 | 10,000,000 | 2,034,003 | - | - | - | |||||||||||||||
Total financial instruments, at fair value | $ | 672,881,259 | $ | 810,541,936 | $ | (137,660,677 | ) | $ | 557,940,763 | $ | 723,070,094 | $ | (165,129,331 | ) | |||||||
____________________ | |||||||||||||||||||||
-1 | Non-Agency RMBS includes an IO with a notional balance of $55.8 million and $64.3 million at June 30, 2014 and December 31, 2013, respectively. | ||||||||||||||||||||
Fair Value of Other Financial Instruments | |||||||||||||||||||||
In addition to the above disclosures regarding assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure about the fair value of all other financial instruments. Estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair values. | |||||||||||||||||||||
The following table summarizes the estimated fair value for all other financial instruments at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||||
Other financial instruments | |||||||||||||||||||||
Assets | |||||||||||||||||||||
Cash | $ | 27,619,043 | $ | 57,060,806 | |||||||||||||||||
Restricted cash | 8,144,052 | 2,128,236 | |||||||||||||||||||
Liabilities | |||||||||||||||||||||
Loan Repurchase Facility | $ | 293,609,481 | $ | 236,727,512 | |||||||||||||||||
Securities repurchase agreements | 156,520,762 | 138,790,158 | |||||||||||||||||||
Exchangeable Senior Notes | 56,438,289 | 54,737,573 | |||||||||||||||||||
Cash includes cash on hand for which fair value equals carrying value (a Level 1 measurement). Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives, Loan Repurchase Facility and securities repurchase agreements. Due to the short-term nature of the restrictions, fair value approximates carrying value (a Level 1 measurement). The fair value of securities repurchase agreements and of the Loan Repurchase Facility is based on an expected present value technique using observable market interest rates. As such, the Company considers the estimated fair value to be a Level 2 measurement. This method discounts future estimated cash flows using rates the Company determined best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality. The fair value of the Exchangeable Senior Notes is based on observable market prices (a Level 2 measurement). | |||||||||||||||||||||
Mortgage_Loans
Mortgage Loans | 6 Months Ended | ||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||
Mortgage Loans [Abstract] | ' | ||||||||||||||||||||||||||
Mortgage Loans | ' | ||||||||||||||||||||||||||
4. Mortgage Loans | |||||||||||||||||||||||||||
During the six months ended June 30, 2014 and year ended December 31, 2013, the Company's acquisition of mortgage loans were as follows: | |||||||||||||||||||||||||||
Aggregate Unpaid | Loan Repurchase | ||||||||||||||||||||||||||
Principal Balance | Facility Used | ||||||||||||||||||||||||||
Acquisition Date | (in millions) | (in millions) | |||||||||||||||||||||||||
Year ended December 31, 2013: | |||||||||||||||||||||||||||
22-Mar-13 | $ | 17.7 | $ | - | |||||||||||||||||||||||
30-May-13 | - | - | -1 | ||||||||||||||||||||||||
31-May-13 | 134.5 | 78.5 | |||||||||||||||||||||||||
25-Jul-13 | 162.4 | 98.7 | |||||||||||||||||||||||||
28-Aug-13 | 98.2 | 54.8 | |||||||||||||||||||||||||
Six months ended June 30, 2014: | |||||||||||||||||||||||||||
27-Mar-14 | 100.4 | 60.6 | |||||||||||||||||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | On May 30, 2013, the Company entered into the Loan Repurchase Facility and utilized $10.6 million of the Loan Repurchase Facility to finance its then existing residential mortgage loan portfolio. | ||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's mortgage loan portfolio at June 30, 2014: | |||||||||||||||||||||||||||
Unpaid | |||||||||||||||||||||||||||
Principal | Premium | Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||
Balance | (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||
Mortgage Loans | |||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||
Fixed | $ | 282,361,337 | $ | (54,730,082 | ) | $ | 227,631,255 | $ | 24,102,606 | $ | (1,640,726 | ) | $ | 250,093,135 | 4.51 | % | 7.03 | % | |||||||||
ARM | 176,654,287 | (23,903,555 | ) | 152,750,732 | 10,012,628 | (830,771 | ) | 161,932,589 | 3.68 | 6.94 | |||||||||||||||||
Total performing | 459,015,624 | (78,633,637 | ) | 380,381,987 | 34,115,234 | (2,471,497 | ) | 412,025,724 | 4.19 | 7 | |||||||||||||||||
Non-performing(3) | 30,948,785 | (7,564,059 | ) | 23,384,726 | 1,013,933 | (2,870,663 | ) | 21,527,996 | 5.09 | 7.65 | |||||||||||||||||
Total Mortgage Loans | $ | 489,964,409 | $ | (86,197,696 | ) | $ | 403,766,713 | $ | 35,129,167 | $ | (5,342,160 | ) | $ | 433,553,720 | 4.25 | % | 7.03 | % | |||||||||
____________________ | |||||||||||||||||||||||||||
-1 | The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans. The Company recorded a gain of $22.0 million and a gain of $1.6 million for the three months ended June 30, 2014 and June 30, 2013, respectively, and $22.7 million and $1.6 million for the six months ended June 30, 2014 and June 30, 2013, respectively, as change in unrealized gain or loss on mortgage loans in the consolidated statements of operations. | ||||||||||||||||||||||||||
-2 | Unleveraged yield. | ||||||||||||||||||||||||||
-3 | Loans that are delinquent for 60 days or more are considered non-performing. | ||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's mortgage loan portfolio at December 31, 2013: | |||||||||||||||||||||||||||
Unpaid | |||||||||||||||||||||||||||
Principal | Premium | Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||
Balance | (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||
Mortgage Loans | |||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||
Fixed | $ | 212,701,494 | $ | (43,530,581 | ) | $ | 169,170,913 | $ | 7,842,598 | $ | (3,558,171 | ) | $ | 173,455,340 | 4.56 | % | 7.05 | % | |||||||||
ARM | 170,178,466 | (25,617,563 | ) | 144,560,903 | 5,088,302 | (1,556,430 | ) | 148,092,775 | 3.76 | 6.67 | |||||||||||||||||
Total performing | 382,879,960 | (69,148,144 | ) | 313,731,816 | 12,930,900 | (5,114,601 | ) | 321,548,115 | 4.2 | 6.88 | |||||||||||||||||
Non-performing(3) | 15,948,537 | (5,031,293 | ) | 10,917,244 | 456,024 | (1,135,841 | ) | 10,237,427 | 5.06 | 8.03 | |||||||||||||||||
Total Mortgage Loans | $ | 398,828,497 | $ | (74,179,437 | ) | $ | 324,649,060 | $ | 13,386,924 | $ | (6,250,442 | ) | $ | 331,785,542 | 4.24 | % | 6.91 | % | |||||||||
____________________ | |||||||||||||||||||||||||||
-1 | The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans. | ||||||||||||||||||||||||||
-2 | Unleveraged yield. | ||||||||||||||||||||||||||
-3 | Loans that are delinquent for 60 days or more are considered non-performing. | ||||||||||||||||||||||||||
The following table presents the difference between the fair value and the aggregate unpaid principal balance of the Company's mortgage loan portfolio at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||||||||||
Unpaid | Unpaid | ||||||||||||||||||||||||||
Principal | Principal | ||||||||||||||||||||||||||
Fair Value | Balance | Difference | Fair Value | Balance | Difference | ||||||||||||||||||||||
Loan Type | |||||||||||||||||||||||||||
Performing loans: | |||||||||||||||||||||||||||
Fixed | $ | 250,093,135 | $ | 282,361,337 | $ | (32,268,202 | ) | $ | 173,455,340 | $ | 212,701,494 | $ | (39,246,154 | ) | |||||||||||||
ARM | 161,932,589 | 176,654,287 | (14,721,698 | ) | 148,092,775 | 170,178,466 | (22,085,691 | ) | |||||||||||||||||||
Total performing loans | 412,025,724 | 459,015,624 | (46,989,900 | ) | 321,548,115 | 382,879,960 | (61,331,845 | ) | |||||||||||||||||||
Non-performing loans | 21,527,996 | 30,948,785 | (9,420,789 | ) | 10,237,427 | 15,948,537 | (5,711,110 | ) | |||||||||||||||||||
Total | $ | 433,553,720 | $ | 489,964,409 | $ | (56,410,689 | ) | $ | 331,785,542 | $ | 398,828,497 | $ | (67,042,955 | ) | |||||||||||||
At June 30, 2014 and December 31, 2013, the Company's mortgage loan portfolio consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of certain concentrations of credit risk in the mortgage loan portfolio at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||||||||||
Concentration | |||||||||||||||||||||||||||
Percentage of fair value of mortgage loans with unpaid principal balance to current property value | |||||||||||||||||||||||||||
in excess of 100% | 65.5 | % | 73.6 | % | |||||||||||||||||||||||
Percentage of fair value of mortgage loans secured by properties in the following states: | |||||||||||||||||||||||||||
Each representing 10% or more of fair value: | |||||||||||||||||||||||||||
California | 25.4 | % | 25.6 | % | |||||||||||||||||||||||
Florida | 16.5 | % | 17.8 | % | |||||||||||||||||||||||
Additional state representing more than 5% of fair value: | |||||||||||||||||||||||||||
Georgia | 6.4 | % | 6.8 | % | |||||||||||||||||||||||
At June 30, 2014, the interest rates on the Company's mortgage loan portfolio ranged from 1.75% - 12.20% and the contractual maturities ranged from 1 - 46 years. | |||||||||||||||||||||||||||
The following table presents the change in accretable yield for the six months ended June 30, 2014: | |||||||||||||||||||||||||||
Accretable yield, January 1, 2014 | $ | 223,401,697 | |||||||||||||||||||||||||
Acquisitions | 55,532,098 | ||||||||||||||||||||||||||
Accretion | (12,469,507 | ) | |||||||||||||||||||||||||
Reclassifications from nonaccretable difference | 9,851,517 | ||||||||||||||||||||||||||
Accretable yield, June 30, 2014 | $ | 276,315,805 |
Real_Estate_Securities_and_Oth
Real Estate Securities and Other Investment Securities | 6 Months Ended | ||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||
Real Estate Securities and Other Investment Securities [Abstract] | ' | ||||||||||||||||||||||||||
Real Estate Securities and Other Investment Securities | ' | ||||||||||||||||||||||||||
5. Real Estate Securities and Other Investment Securities | |||||||||||||||||||||||||||
The Company's non-Agency RMBS portfolio is not issued or guaranteed by Fannie Mae, Freddie Mac or any other U.S. Government agency or a federally chartered corporation and is therefore subject to additional credit risks. | |||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's RMBS and Other Investment Securities at June 30, 2014: | |||||||||||||||||||||||||||
Principal or | |||||||||||||||||||||||||||
Notional | Premium | Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||
Balance | (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||
Real estate securities | |||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||
Alternative - A(3) | $ | 156,601,029 | $ | (72,068,376 | ) | $ | 84,532,653 | $ | 3,650,686 | $ | (225,966 | ) | $ | 87,957,373 | 4.13 | % | 7.41 | % | |||||||||
Pay option adjustable rate | 33,037,784 | (6,243,093 | ) | 26,794,691 | 771,606 | (119,889 | ) | 27,446,408 | 0.73 | 6.92 | |||||||||||||||||
Prime | 101,800,879 | (12,419,696 | ) | 89,381,183 | 4,482,363 | (45,929 | ) | 93,817,617 | 4.68 | 6.73 | |||||||||||||||||
Subprime | 19,137,835 | (1,499,380 | ) | 17,638,455 | 563,759 | (130,076 | ) | 18,072,138 | 1.07 | 6.08 | |||||||||||||||||
Total RMBS | $ | 310,577,527 | $ | (92,230,545 | ) | $ | 218,346,982 | $ | 9,468,414 | $ | (521,860 | ) | $ | 227,293,536 | 3.7 | % | 6.96 | % | |||||||||
Other investment securities | $ | 10,000,000 | $ | 757,377 | $ | 10,757,377 | $ | 1,276,626 | $ | - | $ | 12,034,003 | 5.4 | % | 6.66 | % | |||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | The Company has elected the fair value option pursuant to ASC 825 for its real estate securities and Other Investment Securities. The Company recorded a gain of $1.5 million and a loss of $15.6 million for the three months ended June 30, 2014 and June 30, 2013, respectively, and a gain of $4.3 million and a loss of $14.7 for the six months ended June 30, 2014 and June 30, 2013, respectively, as change in unrealized gain or loss on real estate securities in the consolidated statements of operations. The Company also recorded a gain of $0.9 million for the three months ended June 30, 2014 and a gain of $1.3 million for the six months ended June 30, 2014 as change in unrealized gain or loss on other investment securities in the consolidated statements of operations. | ||||||||||||||||||||||||||
-2 | Unleveraged yield. | ||||||||||||||||||||||||||
-3 | Alternative - A RMBS includes an IO with a notional balance of $55.8 million. | ||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's RMBS at December 31, 2013: | |||||||||||||||||||||||||||
Principal or | |||||||||||||||||||||||||||
Notional | Premium | Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||
Balance | (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||
Real estate securities | |||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||
Alternative - A(3) | $ | 160,590,487 | $ | (80,206,745 | ) | $ | 80,383,742 | $ | 2,414,864 | $ | (1,112,077 | ) | $ | 81,686,529 | 4.26 | % | 6.77 | % | |||||||||
Pay option adjustable rate | 34,374,028 | (7,057,026 | ) | 27,317,002 | 464,756 | (345,915 | ) | 27,435,843 | 0.76 | 6.8 | |||||||||||||||||
Prime | 109,136,108 | (13,590,489 | ) | 95,545,619 | 3,751,248 | (767,825 | ) | 98,529,042 | 4.77 | 6.45 | |||||||||||||||||
Subprime | 20,140,974 | (1,894,417 | ) | 18,246,557 | 536,407 | (279,157 | ) | 18,503,807 | 1.07 | 5.97 | |||||||||||||||||
Total RMBS | $ | 324,241,597 | $ | (102,748,677 | ) | $ | 221,492,920 | $ | 7,167,275 | $ | (2,504,974 | ) | $ | 226,155,221 | 3.8 | % | 6.57 | % | |||||||||
____________________ | |||||||||||||||||||||||||||
-1 | The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. | ||||||||||||||||||||||||||
-2 | Unleveraged yield. | ||||||||||||||||||||||||||
-3 | Alternative - A RMBS includes an IO with a notional balance of $64.3 million. | ||||||||||||||||||||||||||
The following table presents certain information regarding the Company's non-Agency RMBS at June 30, 2014 by weighted average life: | |||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||
Weighted Average | |||||||||||||||||||||||||||
Fair Value | Amortized Cost | Yield | |||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||
Greater than 5 years | $ | 227,293,536 | $ | 218,346,982 | 6.96% | ||||||||||||||||||||||
$ | 227,293,536 | $ | 218,346,982 | 6.96% | |||||||||||||||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | ||||||||||||||||||||||||||
At June 30, 2014, the contractual maturities of the real estate securities ranged from 7.1 to 32.6 years, with a weighted average maturity of 23.7 years. All real estate securities held by the Company at June 30, 2014 were issued by issuers based in the United States. | |||||||||||||||||||||||||||
The following table presents certain information regarding the Company's Other Investment Securities at June 30, 2014 by weighted average life: | |||||||||||||||||||||||||||
Other Investment Securities | |||||||||||||||||||||||||||
Weighted Average | |||||||||||||||||||||||||||
Fair Value | Amortized Cost | Yield | |||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||
Greater than 5 years | $ | 12,034,003 | $ | 10,757,377 | 6.66 | % | |||||||||||||||||||||
$ | 12,034,003 | $ | 10,757,377 | 6.66 | % | ||||||||||||||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | Actual maturities of other investment securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | ||||||||||||||||||||||||||
At June 30, 2014, the contractual maturity of the Other Investment Securities was 9.3 years. All Other Investment Securities held by the Company at June 30, 2014 were issued by issuers based in the United States. | |||||||||||||||||||||||||||
The following table presents certain information regarding the Company's non-Agency RMBS at December 31, 2013 by weighted average life: | |||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||
Weighted Average | |||||||||||||||||||||||||||
Fair Value | Amortized Cost | Yield | |||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||
Greater than 5 years | $ | 226,155,221 | $ | 221,492,920 | 6.57 | % | |||||||||||||||||||||
$ | 226,155,221 | $ | 221,492,920 | 6.57 | % | ||||||||||||||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | ||||||||||||||||||||||||||
At December 31, 2013, the contractual maturities of the real estate securities ranged from 7.7 to 33.0 years, with a weighted average maturity of 24.0 years. All real estate securities held by the Company at December 31, 2013 were issued by issuers based in the United States. | |||||||||||||||||||||||||||
The following table presents certain additional information regarding the Company's RMBS: | |||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | ||||||||||||||||||||||||
Proceeds from the sale of real estate securities | $ | - | $ | 47,111,700 | $ | 2,072,198 | $ | 53,913,098 | |||||||||||||||||||
Realized gain (loss) on the sale of real estate securities | - | (206,876 | ) | 73,619 | (206,876 | ) | |||||||||||||||||||||
Realized loss on OTTI | - | (39,179 | ) | - | (39,179 | ) | |||||||||||||||||||||
There were no sales or realized losses for OTTI on Other Investment Securities for the three and six months ended June 30, 2014. | |||||||||||||||||||||||||||
Loan_Repurchase_Facility
Loan Repurchase Facility | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Loan Repurchase Facility [Abstract] | ' | ||||||||||||||||
Loan Repurchase Facility | ' | ||||||||||||||||
6. Loan Repurchase Facility | |||||||||||||||||
The Loan Repurchase Facility is used to fund purchases of the Company's mortgage loans. The Loan Repurchase Facility closed on May 30, 2013 with a borrowing capacity of $250.0 million, and was committed for a period of 364 days from inception. On March 27, 2014, the Company entered into an amendment of the Loan Repurchase Facility providing it with an additional $75.0 million of uncommitted borrowing capacity. On May 23, 2014 the Company entered into an amendment with Citi extending the termination date of the facility to May 22, 2015. The obligations are fully guaranteed by the Company. | |||||||||||||||||
The principal amount paid by Citi under the Loan Repurchase Facility for the Trust Certificate, which represent interests in residential mortgage loans, is based on a percentage of the lesser of the market value or the unpaid principal balance of such mortgage loans backing the Trust Certificate. Upon the Company's repurchase of a Trust Certificate sold to Citi under the Loan Repurchase Facility, the Company is required to repay Citi a repurchase amount based on the purchase price plus accrued interest. The Company is also required to pay Citi a commitment fee for the Loan Repurchase Facility, as well as certain other administrative costs and expenses in connection with Citi's structuring, management and ongoing administration of the Loan Repurchase Facility. The commitment fee is included in interest expense in the consolidated statements of operations. | |||||||||||||||||
The Loan Repurchase Facility contains margin call provisions that provide Citi with certain rights in the event of a decline in the market value of the mortgage loans backing the purchased Trust Certificate, subject to a floor amount. Under these provisions, Citi may require the Company to transfer cash sufficient to eliminate any margin deficit resulting from such a decline. | |||||||||||||||||
The following table presents certain information regarding the Company's Loan Repurchase Facility at June 30, 2014 and December 31, 2013, by remaining maturity: | |||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||
Weighted Average | Weighted Average | ||||||||||||||||
Balance | Rate | Balance | Rate | ||||||||||||||
Loan Repurchase Facility borrowings maturing within | |||||||||||||||||
91-180 days | $ | - | - | % | $ | 236,058,976 | 2.92 | % | |||||||||
Greater than 180 days to 1 year | 293,609,481 | 2.90 | - | - | |||||||||||||
Total/weighted average | $ | 293,609,481 | 2.9 | % | $ | 236,058,976 | 2.92 | % | |||||||||
The following table presents information with respect to the Company's posting of mortgage loan collateral for the Loan Repurchase Facility at June 30, 2014 and December 31, 2013: | |||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||
Loan Repurchase Facility secured by mortgage loans | $ | 293,609,481 | $ | 236,058,976 | |||||||||||||
Fair value of Trust Certificates pledged as collateral under Loan Repurchase Facility | 433,299,627 | 331,522,165 | |||||||||||||||
Fair value of mortgage loans not pledged as collateral under Loan Repurchase Facility | 254,093 | 263,377 | |||||||||||||||
Cash pledged as collateral under Loan Repurchase Facility | - | - | |||||||||||||||
Unused Amount(1) | 31,390,519 | 13,941,024 | |||||||||||||||
____________________ | |||||||||||||||||
-1 | The amount the Company is able to borrow under the Loan Repurchase Facility is tied to the fair value of unencumbered Trust Certificates eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold. | ||||||||||||||||
The following table presents additional information with respect to the Loan Repurchase Facility: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | ||||||||||||||
Weighted average interest rate | 2.93 | % | 2.94 | % | 2.92 | % | 2.94 | % | |||||||||
Average balance of loans sold under | |||||||||||||||||
agreements to repurchase | $ | - | $ | 266,499 | $ | 192,380 | $ | 266,499 | |||||||||
Maximum daily amount outstanding | $ | 297,401,891 | $ | 89,112,325 | $ | 297,401,891 | $ | 89,112,325 | |||||||||
Total interest expense | $ | 2,260,080 | $ | 289,296 | $ | 4,090,987 | $ | 289,296 |
Securities_Repurchase_Agreemen
Securities Repurchase Agreements | 6 Months Ended | ||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||
Securities Repurchase Agreements [Abstract] | ' | ||||||||||||||||||
Securities Repurchase Agreements | ' | ||||||||||||||||||
7. Securities Repurchase Agreements | |||||||||||||||||||
Repurchase agreements related to real estate securities and Other Investment Securities involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date. The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." Repurchase agreements related to real estate securities and Other Investment Securities entered into by the Company are accounted for as financings and require the repurchase of the transferred securities at the end of each arrangement's term, typically 30 to 90 days. The Company maintains the beneficial interest in the specific securities pledged during the term of the repurchase arrangement and receives the related principal and interest payments. Interest rates on these borrowings are fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the repurchase arrangement at which time the Company may enter into a new repurchase arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty. In response to declines in fair value of pledged securities due to changes in market conditions or the publishing of monthly security paydown factors, the lender requires the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparty in order to re-establish the agreed-upon collateral requirements, referred to as margin calls. Under the terms of the Company's master repurchase agreements related to real estate securities and Other Investment Securities, the counterparty may sell or re-hypothecate the pledged collateral. | |||||||||||||||||||
The following table presents certain information regarding the Company's securities repurchase agreements at June 30, 2014 and December 31, 2013 by remaining maturity and collateral type: | |||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||
Non-Agency RMBS | Other Investment Securities | Non-Agency RMBS | |||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||
Balance | Average Rate | Balance | Average Rate | Balance | Average Rate | ||||||||||||||
Securities repurchase | |||||||||||||||||||
agreements maturing | |||||||||||||||||||
within | |||||||||||||||||||
30 days or less | $ | 81,648,945 | 1.79 | % | $ | 8,360,999 | 1.75 | % | $ | 121,913,678 | 1.90 | % | |||||||
31-60 days | 5,858,000 | 1.77 | - | - | 6,415,000 | 1.84 | |||||||||||||
61-90 days | 19,862,000 | 1.83 | - | - | 10,263,000 | 1.85 | |||||||||||||
Greater than 90 days | 40,614,000 | 1.73 | - | - | - | - | |||||||||||||
Total/weighted average | $ | 147,982,945 | 1.78 | % | $ | 8,360,999 | 1.75 | % | $ | 138,591,678 | 1.89 | % | |||||||
Although securities repurchase agreements are committed borrowings until maturity, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or cash to fund margin calls. | |||||||||||||||||||
The following table presents information with respect to the Company's posting of collateral under its securities repurchase agreements at June 30, 2014 and December 31, 2013: | |||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||
Securities repurchase agreements secured by non-Agency RMBS | $ | 147,982,945 | $ | 138,591,678 | |||||||||||||||
Securities repurchase agreements secured by Other Investment Securities | 8,360,999 | - | |||||||||||||||||
Fair value of non-Agency RMBS pledged as collateral | 197,404,343 | 183,722,511 | |||||||||||||||||
Fair value of Other Investment Securities pledged as collateral | 12,034,003 | - | |||||||||||||||||
Fair value of non-Agency RMBS not pledged as collateral | 29,889,193 | 42,432,710 | |||||||||||||||||
Cash pledged as collateral | 2,531,630 | 1,360,528 |
80_Exchangeable_Senior_Notes_d
8.0% Exchangeable Senior Notes due 2016 | 6 Months Ended |
Jun. 30, 2014 | |
8.0% Exchangeable Senior Notes due 2016 [Abstract] | ' |
8.0% Exchangeable Senior Notes due 2016 | ' |
8. 8.0% Exchangeable Senior Notes due 2016 | |
On November 25, 2013, the Operating Partnership issued the Exchangeable Senior Notes with an aggregate principal amount of $57.5 million. The Exchangeable Senior Notes were issued pursuant to an Indenture, dated November 25, 2013, between the Company, as guarantor, the Operating Partnership and U.S. Bank National Association, as trustee. The sale of the Exchangeable Senior Notes generated net proceeds of approximately $55.3 million. Aggregate estimated offering expenses in connection with the transaction, including the initial purchasers' discount of approximately $1.7 million, were approximately $2.2 million. At June 30, 2014 and December 31, 2013, the carrying value of the Exchangeable Senior Notes was $55.0 million and $54.5 million, respectively. | |
The Exchangeable Senior Notes bear interest at a rate of 8.0% per year, payable semiannually in arrears on May 15 and November 15 of each year, beginning on May 15, 2014. The effective interest rate of the Exchangeable Senior Notes, which is equal to the stated rate of 8.0% plus the amortization of the original issue discount and associated costs, is 10.2%. For the three and six months ended June 30, 2014, the interest incurred on this indebtedness was $1.4 million and $2.8 million, respectively. The Exchangeable Senior Notes will mature on November 15, 2016 (the "Maturity Date"), unless previously exchanged or repurchased in accordance with their terms. The Exchangeable Senior Notes are the Company's senior unsecured obligations and rank senior in right of payment to the Company's existing and future indebtedness that is expressly subordinated in right of payment to the Exchangeable Senior Notes; equal in right of payment to the Company's existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness (including existing unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities. | |
The Exchangeable Senior Notes are exchangeable for shares of the Company's common stock or, to the extent necessary to satisfy NYSE listing requirements, cash, at the applicable exchange rate at any time prior to the close of business on the scheduled trading day prior to the Maturity Date. The Company may not elect to issue shares of common stock upon exchange of the Exchangeable Senior Notes to the extent such election would result in the issuance of 20% or more of the common stock outstanding immediately prior to the issuance of the Exchangeable Senior Notes (or more than 1,779,560 shares of common stock) unless the Company receives stockholder approval for issuances above this threshold. | |
As a result of the NYSE related limitation on the use of share-settlement for the full conversion option, the embedded conversion option does not qualify for equity classification and instead is separately valued and accounted for as a derivative liability. The initial value allocated to the derivative liability was $1.3 million, which represents a discount to the debt to be amortized through interest expense using the effective interest method through the Maturity Date. During each reporting period, the derivative liability is marked to fair value through earnings. At June 30, 2014 and December 31, 2013, the derivative liability had a fair value of $1.1 million and $1.5 million, respectively. | |
The exchange rate was initially 52.5417 shares of common stock per $1,000 principal amount of Exchangeable Senior Notes (equivalent to an initial exchange price of approximately $19.03 per share of common stock). The exchange rate will be subject to adjustment for certain events, including for regular quarterly dividends in excess of $0.50 per share, but will not be adjusted for any accrued and unpaid interest. In addition, if certain corporate events occur prior to the Maturity Date, the exchange rate will be increased but will in no event exceed 60.4229 shares of common stock per $1,000 principal amount of Exchangeable Senior Notes. The exchange rate was adjusted on December 27, 2013 to 54.3103 shares of common stock per $1,000 principal amount of Exchangeable Senior Notes pursuant to the Company's special dividend of $0.55 per share of common stock and OP unit declared on December 19, 2013. | |
The Company does not have the right to redeem the Exchangeable Senior Notes prior to the Maturity Date, except to the extent necessary to preserve its qualification as a REIT for U.S. federal income tax purposes. No sinking fund is provided for the Exchangeable Senior Notes. In addition, if the Company undergoes certain corporate events that constitute a "fundamental change," the holders of the Exchangeable Senior Notes may require the Company to repurchase for cash all or part of their Exchangeable Senior Notes at a repurchase price equal to 100% of the principal amount of the Exchangeable Senior Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. | |
Derivative_Instruments
Derivative Instruments | 6 Months Ended | ||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||
Derivative Instruments [Abstract] | ' | ||||||||||||||||||
Derivative Instruments | ' | ||||||||||||||||||
9. Derivative Instruments | |||||||||||||||||||
Interest Rate Swap and Swaption Agreements | |||||||||||||||||||
To help mitigate exposure to higher short-term interest rates, the Company uses currently-paying and forward-starting, three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. Additionally, the Company enters into interest rate swaption agreements which gives the Company the right, but not the obligation, to enter into a previously agreed upon swap contract on a future date. If exercised the Company will enter into an interest rate swap agreement and is obligated to pay a fixed rate of interest and receive a floating rate of interest. These swap agreements establish an economic fixed rate on related borrowings because the variable-rate payments received on the interest rate swap agreements largely offset interest accruing on the related borrowings, leaving the fixed-rate payments to be paid on the interest rate swap agreements as the Company's effective borrowing rate, subject to certain adjustments including changes in spreads between variable rates on the interest rate swap agreements and actual borrowing rates. | |||||||||||||||||||
The Company's interest rate swap agreements and interest rate swaption agreement have not been designated as hedging instruments. | |||||||||||||||||||
TBA Securities | |||||||||||||||||||
The Company may, and has in the past, entered into TBA contracts as a means of acquiring exposure to Agency RMBS and may, from time to time, utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company accounts for its TBA contracts as derivative instruments due to the fact that it does not intend to take physical delivery of the securities. The Company had no exposure to TBA contracts at any time during the three and six months ended June 30, 2014. During the three months ended June 30, 2013, the Company paired off purchases of TBA securities with a combined notional amount of $388.0 million by entering into simultaneous sales of TBA securities and as a result, realized gains of $0.9 million and recognized unrealized losses of $4.1 million. During the six months ended June 30, 2013, the Company paired off purchases of TBA securities with a combined notional amount of $473.0 million by entering into simultaneous sales of TBA securities and as a result, realized gains of $0.8 million and recognized unrealized losses of $3.7 million. For the three and six months ended June 30, 2013, the Company recognized unrealized losses of $1.4 million and $1.4 million, respectively on TBA securities that had not been paired off at June 30, 2013. | |||||||||||||||||||
Conversion Option - 8% Exchangeable Senior Notes Due 2016 | |||||||||||||||||||
Changes in the fair value of the conversion option derivative related to the Exchangeable Senior Notes are recorded through earnings. | |||||||||||||||||||
Derivative Instruments | |||||||||||||||||||
The following table summarizes information related to derivative instruments at June 30, 2014 and December 31, 2013: | |||||||||||||||||||
Non-hedge derivatives | 30-Jun-14 | 31-Dec-13 | |||||||||||||||||
Notional amount of interest rate swaption | $ | 225,000,000 | $ | - | |||||||||||||||
Notional amount of interest rate swaps | 17,200,000 | 17,200,000 | |||||||||||||||||
Total notional amount | $ | 242,200,000 | $ | 17,200,000 | |||||||||||||||
The following table presents the fair value of the Company's derivative instruments and their balance sheet location at June 30, 2014 and December 31, 2013: | |||||||||||||||||||
Derivative instruments | Designation | Balance Sheet Location | 30-Jun-14 | 31-Dec-13 | |||||||||||||||
Interest rate swaption | Non-hedge | Derivative assets, at fair value | $ | 368,136 | $ | - | |||||||||||||
Interest rate swaps | Non-hedge | Derivative (liabilities)/assets, at fair value | $ | (442,585 | ) | $ | 284,454 | ||||||||||||
Exchangeable Senior Notes | |||||||||||||||||||
conversion option | Non-hedge | Derivative liabilities, at fair value | $ | (1,107,544 | ) | $ | (1,471,607 | ) | |||||||||||
The following table summarizes gains and losses related to derivatives: | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
Income Statement | |||||||||||||||||||
Non-hedge derivatives | Location | 30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | ||||||||||||||
Gain/(loss) on derivative | |||||||||||||||||||
Interest rate swaption | instruments | $ | (1,893,322 | ) | $ | - | $ | (4,435,614 | ) | $ | - | ||||||||
Gain/(loss) on derivative | |||||||||||||||||||
Interest rate swaps | instruments | $ | (482,794 | ) | $ | 8,272,229 | $ | (940,079 | ) | $ | 8,216,927 | ||||||||
Exchangeable Senior Notes | Gain/(loss) on derivative | ||||||||||||||||||
conversion option | instruments | $ | 473,167 | $ | - | $ | 364,063 | $ | - | ||||||||||
Gain/(loss) on derivative | |||||||||||||||||||
TBAs(1) | instruments | $ | - | $ | (4,573,848 | ) | $ | - | $ | (4,237,402 | ) | ||||||||
____________________ | |||||||||||||||||||
-1 | Gains and losses from purchases and sales of TBAs consist of $0.8 million of net TBA dollar roll net interest income and a net loss of $5.4 million due to price reductions. | ||||||||||||||||||
The following table presents information about the Company's interest rate swaption agreement at June 30, 2014: | |||||||||||||||||||
Notional | |||||||||||||||||||
Swaption Expiration | Amount | Strike Rate | Swap Maturity | ||||||||||||||||
2015 | $ | 225,000,000 | 3.64% | 2025 | |||||||||||||||
Restricted cash at June 30, 2014 included $4.4 million of cash pledged as collateral against an interest rate swaption agreement. | |||||||||||||||||||
The following table presents information about the Company's interest rate swap agreements at June 30, 2014: | |||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||
Notional | Average Pay | Average | Average Years | ||||||||||||||||
Maturity | Amount | Rate | Receive Rate | to Maturity | |||||||||||||||
2023 | $ | 17,200,000 | 2.72% | 0.23% | 9.1 | ||||||||||||||
Total/Weighted average | $ | 17,200,000 | 2.72% | 0.23% | 9.1 | ||||||||||||||
Restricted cash at June 30, 2014 included $1.2 million of cash pledged as collateral against interest rate swap agreements. | |||||||||||||||||||
The following table presents information about the Company's interest rate swap agreements at December 31, 2013: | |||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||
Notional | Average Pay | Average | Average Years | ||||||||||||||||
Maturity | Amount | Rate | Receive Rate | to Maturity | |||||||||||||||
2023 | $ | 17,200,000 | 2.72% | 0.24% | 9.6 | ||||||||||||||
Total/Weighted average | $ | 17,200,000 | 2.72% | 0.24% | 9.6 | ||||||||||||||
Restricted cash at December 31, 2013 included $0.8 million of cash pledged as collateral against interest rate swaps. | |||||||||||||||||||
Earnings_Per_Share
Earnings Per Share | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||||||
Earnings Per Share | ' | ||||||||||||||||
10. Earnings Per Share | |||||||||||||||||
The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | ||||||||||||||
Numerator: | |||||||||||||||||
Net income (loss) attributable to ZAIS Financial Corp. common | |||||||||||||||||
stockholders | $ | 23,173,931 | $ | (6,780,401 | ) | $ | 25,398,136 | $ | (5,121,179 | ) | |||||||
Effect of dilutive securities: | |||||||||||||||||
Net income allocated to non-controlling interests | 2,698,204 | (788,476 | ) | 2,956,858 | (489,382 | ) | |||||||||||
Exchangeable Senior Notes | |||||||||||||||||
Interest expense | 808,629 | - | 1,613,628 | - | |||||||||||||
Gain on derivative instruments | (269,635 | ) | - | (207,462 | ) | - | |||||||||||
Total - Exchangeable Senior Notes | 538,994 | - | 1,406,166 | - | |||||||||||||
Dilutive net income available to stockholders | $ | 26,411,129 | $ | (7,568,877 | ) | $ | 29,761,160 | $ | (5,610,561 | ) | |||||||
Denominator: | |||||||||||||||||
Weighted average number of shares of common stock | 7,970,886 | 7,970,886 | 7,970,886 | 6,564,284 | |||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Weighted average number of OP units | 926,914 | 926,914 | 926,914 | 926,914 | |||||||||||||
Weighted average number of shares convertible under | |||||||||||||||||
Exchangeable Senior Notes | 1,779,560 | - | 1,779,560 | - | |||||||||||||
Weighted average dilutive shares | 10,677,360 | 8,897,800 | 10,677,360 | 7,491,198 | |||||||||||||
Net income per share applicable to ZAIS Financial Corp. | |||||||||||||||||
common stockholders - Basic | $ | 2.91 | $ | (0.85 | ) | $ | 3.19 | $ | (0.78 | ) | |||||||
Net income per share applicable to ZAIS Financial Corp. | |||||||||||||||||
common stockholders - Diluted | $ | 2.47 | $ | (0.85 | ) | $ | 2.79 | $ | (0.78 | ) |
Related_Party_Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2014 | |
Related Party Transactions [Abstract] | ' |
Related Party Transactions | ' |
11. Related Party Transactions | |
ZAIS REIT Management, LLC | |
The Company is externally managed and advised by the Advisor, a subsidiary of ZAIS. Subject to certain restrictions and limitations, the Advisor is responsible for managing the Company's affairs on a day-to-day basis including, among other responsibilities, (i) the selection, purchase and sale of the Company's portfolio of assets, (ii) the Company's financing activities and (iii) providing the Company with advisory services. | |
The Company pays to its Advisor an advisory fee, calculated and payable quarterly in arrears, equal to 1.5% per annum of the Company's stockholders' equity, as defined in the amended and restated investment advisory agreement between the Company and the Advisor, as amended from time to time (the "Investment Advisory Agreement"). Prior to the Company's IPO, the advisory fee paid to the Advisor was calculated based on the Company's net asset value, as set forth in the Investment Advisory Agreement. | |
The Advisor may be paid or reimbursed for the documented cost of its performing certain services for the Company, which may include legal, accounting, due diligence tasks and other services, that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm's-length basis. In addition, the Company may be required to pay its portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Advisor and its affiliates required for the Company's operations. To date, the Advisor has not sought reimbursement for the services and expenses described in the two preceding sentences. The Company is also required to pay directly, or reimburse the Advisor for, products and services, including hardware and software, provided by third parties, other than those operating expenses required to be borne by the Advisor under the Investment Advisory Agreement. The Advisor has in the past also declined full reimbursement for the costs of such products and services. In the future, however, the Advisor may seek reimbursement for all of the services, cost and expenses described in this paragraph, as a result of which the total expenses and the expense ratio of the Company may increase. | |
After an initial three-year term, the Advisor may be terminated annually upon the affirmative vote of at least two-thirds of the Company's independent directors or by a vote of the holders of at least two-thirds of the outstanding shares of the Company's common stock based upon (i) unsatisfactory performance by the Advisor that is materially detrimental to the Company or (ii) a determination that the advisory fees payable to the Advisor are not fair, subject to the Advisor's right to prevent such termination due to unfair fees by accepting a reduction of advisory fees agreed to by at least two-thirds of the Company's independent directors. Additionally, upon such a termination without cause, the Investment Advisory Agreement provides that the Company will pay the Advisor a termination fee equal to three times the average annual advisory fee earned by the Advisor during the prior 24-month period immediately preceding such termination, calculated as of the end of the most recently completed fiscal year before the date of termination. | |
For the three months ended June 30, 2014 and June 30, 2013, the Company incurred $0.7 million and $0.7 million in advisory fee expense, respectively. For the six months ended June 30, 2014 and June 30, 2013, the Company incurred $1.4 million and $1.2 million in advisory fee expense, respectively. At June 30, 2014, $0.7 million in advisory fee expense was included in accounts payable and other liabilities in the consolidated balance sheet. The advisory fee was calculated and payable as set forth above. | |
Stockholders_Equity
Stockholders' Equity | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Stockholders' Equity [Abstract] | ' | |||||||
Stockholders' Equity | ' | |||||||
12. Stockholders' Equity | ||||||||
Common Stock | ||||||||
The holders of shares of the Company's common stock are entitled to one vote per share on all matters voted on by common stockholders, including election of the Company's directors. The Company's charter does not provide for cumulative voting in the election of directors. Therefore, the holders of a majority of the outstanding shares of the Company's common stock can elect its entire board of directors. Subject to any preferential rights of any outstanding series of preferred stock, the holders of shares of the Company's common stock are entitled to such distributions as may be authorized from time to time by the Company's board of directors out of legally available funds and declared by the Company and, upon liquidation, are entitled to receive all assets available for distribution to stockholders. Holders of shares of the Company's common stock do not have preemptive rights. This means that stockholders do not have an automatic option to purchase any new shares of common stock that the Company issues. In addition, stockholders only have appraisal rights under circumstances specified by the Company's board of directors or where mandated by law. | ||||||||
Initial Public Offering | ||||||||
On February 13, 2013, the Company completed its IPO, pursuant to which the Company sold 5,650,000 shares of its common stock to the public at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of approximately $1.2 million were $118.9 million. In connection with the IPO, the Advisor paid $6.3 million in underwriting fees. The Company did not pay any underwriting fees, discounts or commissions in connection with the IPO above those paid by the Advisor. | ||||||||
Common Stock Repurchase | ||||||||
In January 2013, the Company's agreement with one of its stockholders to repurchase 515,035 shares of common stock was amended to require the Company to repurchase only 265,245 shares of the Company's common stock. The amended repurchase amount was approximately $5.8 million which was predominantly paid to such stockholder during the three months ended March 31, 2013 with the remaining amount paid during the three months ended June 30, 2013. | ||||||||
Private Placements | ||||||||
In October 2012, the Company completed a private placement in which it sold 195,458 shares of common stock and the Operating Partnership sold 22,492 OP units. In December 2012, the Company completed a private placement in which it sold 36,581 shares of common stock and the Operating Partnership sold 904,422 OP units. Net proceeds from the two private placements were $25,151,174, net of approximately $763,000 in offering costs. | ||||||||
Dividends and Distributions | ||||||||
During the six months ended June 30, 2014 and year ended December 31, 2013, the Company declared the following dividends: | ||||||||
Amount | ||||||||
Declaration Date | Record Date | Payment Date | per Share | |||||
Year ended December 31, 2013: | ||||||||
14-May-13 | 24-May-13 | 31-May-13 | $ | 0.22 | ||||
25-Jun-13 | 9-Jul-13 | 23-Jul-13 | $ | 0.45 | ||||
18-Sep-13 | 30-Sep-13 | 11-Oct-13 | $ | 0.5 | ||||
December 19, 2013(1) | 31-Dec-13 | 15-Jan-14 | $ | 0.95 | ||||
Six months ended June 30, 2014: | ||||||||
20-Mar-14 | 31-Mar-14 | 14-Apr-14 | $ | 0.4 | ||||
18-Jun-14 | 30-Jun-14 | 15-Jul-14 | $ | 0.4 | ||||
____________________ | ||||||||
-1 | Regular cash dividend of $0.40 per share of common stock and OP unit for the quarter ending December 31, 2013, and an additional special cash dividend of $0.55 per share of its common stock and OP unit. The Company declared the special cash dividend to distribute taxable income from 2013 attributable to the termination of interest rate swap contracts. | |||||||
Preferred Shares | ||||||||
The Company's charter authorizes its board of directors to classify and reclassify any unissued shares of its common stock and preferred stock into other classes or series of stock. Prior to issuance of shares of each class or series, the board of directors is required by the Company's charter to set, subject to the charter restrictions on transfer of its stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of common stock or preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or change in control that might involve a premium price for holders of the Company's common stock or otherwise be in their best interest. | ||||||||
On January 18, 2012 the Company completed a private placement of 133 shares of its 12.5% Series A Cumulative Non-Voting Preferred Stock (the "Series A Preferred Stock") raising net proceeds of $115,499, net of $17,501 in offering fees. | ||||||||
On February 15, 2013, the Company redeemed all 133 shares of its 12.5% Series A Preferred Stock outstanding for an aggregate redemption price, including preferred dividend, of $148,379. | ||||||||
Noncontrolling_Interests_in_Op
Non-controlling Interests in Operating Partnership | 6 Months Ended |
Jun. 30, 2014 | |
Non-controlling Interests in Operating Partnership [Abstract] | ' |
Non-controlling Interests in Operating Partnership | ' |
13. Non-controlling Interests in Operating Partnership | |
Non-controlling interests in the Operating Partnership in the accompanying consolidated financial statements relate to OP units in the Operating Partnership held by parties other than the Company. | |
Certain entities own OP units in the Operating Partnership. An OP unit and a share of common stock of the Company have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership. OP unit holders have the right to redeem their OP units, subject to certain restrictions. The redemption is required to be satisfied in shares of common stock or cash at the Company's option, calculated as follows: one share of the Company's common stock, or cash equal to the fair value of a share of the Company's common stock at the time of redemption, for each OP unit. When an OP unit holder redeems an OP unit, non-controlling interest in the Operating Partnership is reduced and the Company's equity is increased. At June 30, 2014 and December 31, 2013, the non-controlling interest OP unit holders owned 926,914 OP units, or 10.4% of the OP Units issued by the Operating Partnership. | |
Commitments_and_Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2014 | |
Commitments and Contingencies [Abstract] | ' |
Commitments and Contingencies | ' |
14. Commitments and Contingencies | |
Advisor Services | |
The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company's investment portfolio including determination of fair value; and other general and administrative responsibilities. In the event that the Advisor is unable to provide the respective services, the Company will be required to obtain such services from an alternative source. | |
Litigation | |
From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any contingencies that would require accrual or disclosure in the consolidated financial statements at June 30, 2014 or December 31, 2013. | |
Counterparty_Risk_and_Concentr
Counterparty Risk and Concentration | 6 Months Ended |
Jun. 30, 2014 | |
Counterparty Risk and Concentration [Abstract] | ' |
Counterparty Risk and Concentration | ' |
15. Counterparty Risk and Concentration | |
Counterparty risk is the risk that counterparties may fail to fulfill their obligations, including their inability to post additional collateral in circumstances where their pledged collateral value becomes inadequate. The Company attempts to manage its exposure to counterparty risk through diversification, use of financial instruments and monitoring the creditworthiness of counterparties. | |
The Company finances the acquisition of a significant portion of its residential mortgage loans, RMBS and Other Investment Securities with repurchase agreements. In connection with these financing arrangements, the Company pledges its residential mortgage loans and securities as collateral to secure the borrowings. The amount of collateral pledged will typically exceed the amount of the borrowings (i.e., the haircut) such that the borrowings will be over-collateralized. As a result, the Company is exposed to the counterparty if, during the term of the repurchase agreement financing, a lender should default on its obligation and the Company is not able to recover its pledged assets. The amount of this exposure is the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged by the Company to the lender including accrued interest receivable on such collateral. | |
As explained in the notes above, while the Company engages in repurchase financing activities with several financial institutions, the Company maintains custody accounts with two custodians at June 30, 2014. There is no guarantee that these custodians will not become insolvent. While there are certain regulations that seek to protect customer property in the event of a failure, insolvency or liquidation of a custodian, there is no certainty that the Company would not incur losses due to its assets being unavailable for a period of time in the event of a failure of a custodian that has custody of the Company's assets. Although management monitors the credit worthiness of its custodians, such losses could be significant and could materially impair the ability of the Company to achieve its investment objective. | |
Offsetting_Assets_and_Liabilit
Offsetting Assets and Liabilities | 6 Months Ended | |||||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||||
Offsetting Assets and Liabilities [Abstract] | ' | |||||||||||||||||||||
Offsetting Assets and Liabilities | ' | |||||||||||||||||||||
16. Offsetting Assets and Liabilities | ||||||||||||||||||||||
The following tables present information about certain assets and liabilities that are subject to master netting arrangements (or similar agreements) and can potentially be offset in the Company's consolidated balance sheets at June 30, 2014 and December 31, 2013: | ||||||||||||||||||||||
Offsetting of Assets | ||||||||||||||||||||||
Net Amounts of | ||||||||||||||||||||||
Gross Amounts | Assets Presented | Gross Amounts Not Offset in the | ||||||||||||||||||||
Gross Amounts | Offset in the | in the | Consolidated Balance Sheets | |||||||||||||||||||
of Recognized | Consolidated | Consolidated | Financial | Cash Collateral | ||||||||||||||||||
Assets | Balance Sheets | Balance Sheets | Instruments | Received(1) | Net Amount | |||||||||||||||||
30-Jun-14 | ||||||||||||||||||||||
Interest rate swaption | $ | 368,136 | $ | - | $ | 368,136 | $ | - | $ | - | $ | 368,136 | ||||||||||
Total | $ | 368,136 | $ | - | $ | 368,136 | $ | - | $ | - | $ | 368,136 | ||||||||||
31-Dec-13 | ||||||||||||||||||||||
Interest rate swap agreements | $ | 396,068 | $ | (111,614 | ) | $ | 284,454 | $ | - | $ | - | $ | 284,454 | |||||||||
Total | $ | 396,068 | $ | (111,614 | ) | $ | 284,454 | $ | - | $ | - | $ | 284,454 | |||||||||
____________________ | ||||||||||||||||||||||
-1 | At June 30, 2014, the Company pledged $4,401,503 of cash collateral in relation to its interest rate swaption; with the total net counterparty exposure for this position totaling $4,769,639. At December 31, 2013, the Company pledged $767,708 of cash collateral in relation to its interest rate swap agreements; with the total net counterparty exposure for this position totaling $1,052,162. | |||||||||||||||||||||
Offsetting of Liabilities | ||||||||||||||||||||||
Net Amounts of | ||||||||||||||||||||||
Gross Amounts | Liabilities Presented | Gross Amounts Not Offset in the | ||||||||||||||||||||
Gross Amounts | Offset in the | in the | Consolidated Balance Sheets | |||||||||||||||||||
of Recognized | Consolidated | Consolidated | Financial | Cash Collateral | ||||||||||||||||||
Liabilities | Balance Sheets | Balance Sheets | Instruments | Received | Net Amount | |||||||||||||||||
30-Jun-14 | ||||||||||||||||||||||
Loan Repurchase Facility | $ | 293,609,481 | $ | - | $ | 293,609,481 | $ | (293,609,481 | ) | $ | - | $ | - | |||||||||
Securities repurchase agreements | 156,343,944 | - | 156,343,944 | (153,812,314 | ) | (2,531,630 | ) | - | ||||||||||||||
Interest rate swap agreements | 547,268 | (104,683 | ) | 442,585 | - | (442,585 | ) | - | ||||||||||||||
Total | $ | 450,500,693 | $ | (104,683 | ) | $ | 450,396,010 | $ | (447,421,795 | ) | $ | (2,974,215 | ) | $ | - | |||||||
31-Dec-13 | ||||||||||||||||||||||
Loan Repurchase Facility | $ | 236,058,976 | $ | - | $ | 236,058,976 | $ | (236,058,976 | ) | $ | - | $ | - | |||||||||
Securities repurchase agreements | 138,591,678 | - | 138,591,678 | (137,231,150 | ) | (1,360,528 | ) | - | ||||||||||||||
$ | 374,650,654 | $ | - | $ | 374,650,654 | $ | (373,290,126 | ) | $ | (1,360,528 | ) | $ | - |
Subsequent_Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2014 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
17. Subsequent Events | |
GMFS Transaction | |
On August 5, 2014, the Company, in its capacity as guarantor, entered into an agreement and plan of merger (the "Merger Agreement") among ZFC Honeybee TRS, LLC ("Honeybee TRS"), an indirect subsidiary of the Company, ZFC Honeybee Acquisitions, LLC ("Honeybee Acquisitions"), a wholly owned subsidiary of Honeybee TRS, GMFS, LLC ("GMFS"), and Honeyrep, LLC, solely in its capacity as the Securityholder Representative (as defined in the Merger Agreement). Subject to the terms and conditions of the Merger Agreement, Honeybee Acquisitions will merge with and into GMFS (the "Merger"), with GMFS surviving the Merger as an indirect subsidiary of the Company. | |
GMFS is an approved Fannie Mae Seller-Servicer, Freddie Mac Seller-Servicer, Ginnie Mae issuer, Department of Housing and Urban Development ("HUD") / Federal Housing Administration ("FHA") Mortgagee, U.S. Department of Agriculture ("USDA") approved originator and U.S. Department of Veterans Affairs ("VA") Lender. GMFS currently originates loans that are eligible to be purchased, guaranteed or insured by Fannie Mae, Freddie Mac, FHA, VA and USDA through retail, correspondent and broker channels. GMFS also originates and sells reverse mortgage loans as part of its existing operations. | |
Under the terms of the Merger Agreement, the purchase price will consist of cash payable at closing, estimated at approximately $61 million, two contingent $1 million deferred premium payments payable in cash over two years, plus potential additional consideration based on future loan production and profits which will be payable over a four-year period if certain conditions are met. The cash payable at closing will include the actual market value of GMFS's MSR portfolio, which was $30.1 million at June 30, 2014. In addition to the value of the MSR portfolio, the purchase price will reflect the actual value of GMFS's net tangible assets as of the closing date. The $2 million of deferred premium payments is contingent on GMFS remaining profitable and retaining certain key employees. The additional contingent consideration is dependent on GMFS achieving certain profitability and loan production goals and is capped at $20 million. Up to 50% of the additional contingent consideration may be paid in common stock of the Company, at the Company's option. The Company intends to fund the closing payment from existing cash and the sale of non-Agency RMBS holdings. | |
The obligation of each party to the Merger Agreement to consummate the Merger is subject to a number of conditions, including the receipt of regulatory and seller/servicer related approvals relating to the transfer of GMFS's licenses, the delivery of certain documents and consents, the representations and warranties of the parties being true and correct, subject to the materiality standards contained in the Merger Agreement, and the absence of a material adverse effect on GMFS. | |
The Company anticipates that the closing of the Merger will occur in the fourth quarter of 2014. Upon closing, the Company expects GMFS to continue to operate under its existing name, and under the leadership of the current management team. The Merger Agreement contains customary representations and warranties by the parties, as well as customary covenants, including non-competition and non-solicitation covenants by GMFS's key managers, a covenant by GMFS to conduct its business and operations in the ordinary course between the date of the Merger Agreement and the closing of the Merger and indemnification covenants by both parties, subject to stated thresholds and limitations. | |
Amendment to Investment Advisory Agreement | |
On August 11, 2014, the Company amended its Investment Advisory Agreement to provide that the Company shall pay its Advisor a loan sourcing fee quarterly in arrears in lieu of any payments or reimbursements that would otherwise be due to the Advisor or its affiliates pursuant to Investment Advisory Agreement for loan sourcing services provided. The loan sourcing fee is equal to 0.50% of the principal balance of newly originated residential mortgage loans sourced by the Advisor or its affiliates through its conduit program and acquired by the Company's subsidiaries. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 6 Months Ended | |
Jun. 30, 2014 | ||
Summary of Significant Accounting Policies [Abstract] | ' | |
Basis of Quarterly Presentation | ' | |
Basis of Quarterly Presentation | ||
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial reporting. In the opinion of management, all adjustments considered necessary for a fair statement of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for the interim period are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Certain prior period amounts have been reclassified to conform to the current period's presentation. | ||
The Company currently operates as one business segment. | ||
Estimates | ' | |
Estimates | ||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates. | ||
Principles of Consolidation | ' | |
Principles of Consolidation | ||
The consolidated financial statements include the accounts of the Company and all of the wholly owned subsidiaries of the Operating Partnership. The Company, which serves as the sole general partner of and conducts substantially all of its business through the Operating Partnership, holds approximately 89.6% of the operating partnership units ("OP units") in the Operating Partnership at June 30, 2014 and December 31, 2013. The Operating Partnership in turn holds directly or indirectly all of the equity interests in its subsidiaries. All intercompany balances have been eliminated in consolidation. | ||
Changes in the Company's ownership interest (and transactions with non-controlling interest unit holders in the Operating Partnership) while the Company retains its controlling interest in its subsidiary, are accounted for as equity transactions. The carrying amount of the non-controlling interest is adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the Company. | ||
Variable Interest Entities | ' | |
Variable Interest Entities | ||
A variable interest entity ("VIE") is an entity that lacks one or more of the characteristics of a voting interest entity. The Company evaluates each of its investments to determine whether it is a VIE based on: (1) the sufficiency of the entity's equity investment at risk to finance its activities without additional subordinated financial support provided by any parties, including the equity holders; (2) whether as a group the holders of the equity investment at risk have (a) the power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impacts the entity's economic performance, (b) the obligation to absorb the expected losses of the legal entity and (c) the right to receive the expected residual returns of the legal entity; and (3) whether the voting rights of these investors are proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected returns of their equity, or both, and whether substantially all of the entity's activities involve or are conducted on behalf of an investor that has disproportionately fewer voting rights. An investment that lacks one or more of the above three characteristics is considered to be a VIE. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. | ||
A VIE is subject to consolidation if the equity investors either do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, are unable to direct the entity's activities, or are not exposed to the entity's losses or entitled to its residual returns. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses. | ||
The Company has evaluated its real estate securities investments to determine if each represents a variable interest in a VIE. The Company monitors these investments and analyzes them for potential consolidation. The Company's real estate securities investments represent variable interests in VIEs. At June 30, 2014 and December 31, 2013, no VIEs required consolidation as the Company was not the primary beneficiary of any of these VIEs. At June 30, 2014 and December 31, 2013, the maximum exposure of the Company to VIEs is limited to the fair value of its investments in real estate securities as disclosed in the consolidated balance sheets. | ||
Cash and Cash Equivalents | ' | |
Cash and Cash Equivalents | ||
The Company considers highly liquid short-term interest bearing instruments with original maturities of three months or less and other instruments readily convertible into cash to be cash equivalents. The Company's deposits with financial institutions may exceed federally insurable limits of $250,000 per institution. The Company mitigates this risk by depositing funds with major financial institutions. At June 30, 2014, the Company's cash was held with two custodians. | ||
Restricted Cash | ' | |
Restricted Cash | ||
Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or securities repurchase agreements. Cash held by counterparties as collateral is not available to the Company for general corporate purposes, but may be applied against amounts due to derivative or securities repurchase agreement counterparties or returned to the Company when the collateral requirements are exceeded or at the maturity of the derivatives or securities repurchase agreements. | ||
Other Investment Securities | ' | |
Other Investment Securities | ||
Other investment securities are comprised of investments in Fannie Mae's Risk Transfer Notes ("FMRT Notes" or "Other Investment Securities"). The FMRT Notes represent unsecured general obligations of Fannie Mae and are structured to be subject to the performance of a certain pool of residential mortgage loans. | ||
Fair Value Election and Determination of Fair Value Measurement | ' | |
Mortgage Loans, Real Estate Securities and Other Investment Securities-Fair Value Election | ||
U.S. GAAP permits entities to choose to measure certain eligible financial instruments at fair value. The Company has elected the fair value option for each of its mortgage loans, real estate securities and Other Investment Securities at the date of purchase. The fair value option election is irrevocable and requires the Company to measure these mortgage loans, real estate securities and Other Investment Securities at estimated fair value with the change in estimated fair value recognized in earnings. The Company has established a policy for these assets to separate interest income from the full change in fair value in the consolidated statements of operations. The interest income component is presented as interest income on mortgage loans, real estate securities and Other Investment Securities and the remainder of the change in fair value is presented separately as change in unrealized gain or loss in the Company's consolidated statements of operations. | ||
Determination of Fair Value Measurement | ||
The "Fair Value Measurements and Disclosures" Topic of the FASB ASC defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. | ||
Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values. Furthermore, the analysis of whether it is more likely than not that the Company will be required to sell securities in an unrealized loss position prior to an expected recovery in fair value (if any), the amount of such expected required sales, and the projected identification of which securities would be sold is also subject to significant judgment. | ||
Any proposed changes to the valuation methodology will be reviewed by the Advisor to ensure changes are consistent with the applicable accounting guidance and approved as appropriate. The fair value methodology may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the Advisor's valuation methods will be appropriate and consistent with other market participants, the use of different methodologies, or assumptions by other market participants, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. | ||
The Company categorizes its financial instruments in accordance with U.S. GAAP, based on the priority of the inputs to the valuation, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. | ||
Financial assets and liabilities recorded in the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: | ||
Level 1 | Quoted prices for identical assets or liabilities in an active market. | |
Level 2 | Financial assets and liabilities whose values are based on the following: | |
Quoted prices for similar assets or liabilities in active markets | ||
Quoted prices for identical or similar assets or liabilities in nonactive markets. | ||
Pricing models whose inputs are observable for substantially the full term of the asset or liability. | ||
Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability. | ||
Level 3 | Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement. | |
The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment. The Company utilizes proprietary modeling analysis to support the independent third party broker quotes selected to determine the fair value of its real estate securities, Other Investment Securities and derivative instruments. | ||
The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy. | ||
Mortgage Loans | ||
The fair value of the Company's mortgage loans considers data such as loan origination information and additional updated borrower and loan servicing data, as available, forward interest rates, general economic conditions, home price index forecasts and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans include market-implied discount rates, projections of default rates, delinquency rates, loss severity (considering mortgage insurance) and prepayment rates. The Company uses loan level data, macro-economic inputs and forward interest rates to generate loss adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair values established for mortgage loans held by the Company may differ from the fair values that would have been established if a ready market existed for these mortgage loans. Accordingly, mortgage loans are classified as Level 3 in the fair value hierarchy. | ||
At June 30, 2014, approximately 10.7% in unpaid principal balance of the Company's mortgage loans carries mortgage insurance. | ||
Real Estate Securities and Other Investment Securities | ||
The fair value of the Company's real estate securities and Other Investment Securities considers the underlying characteristics of each security including coupon, maturity date and collateral. The Company estimates the fair value of its RMBS and Other Investment Securities based upon a combination of observable prices in active markets, multiple indicative quotes from brokers and executable bids. In evaluating broker quotes the Company also considers additional observable market data points including recent observed trading activity for identical and similar securities, back-testing, broker challenges and other interactions with market participants, as well as yield levels generated by model-based valuation techniques. In the absence of observable quotes, the Company utilizes model-based valuation techniques that may contain unobservable valuation inputs. | ||
When available, the fair value of real estate securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from either broker quotes, observed traded levels or model-based valuation techniques using observable inputs such as benchmark yields or issuer spreads. | ||
While the Company's non-Agency RMBS and Other Investment Securities are valued using the same process with similar inputs as the Agency RMBS as described below, a significant amount of inputs are unobservable due to relatively low levels of market activity. The fair value of these securities is typically based on broker quotes or the Company's model-based valuation. Accordingly, the Company's non-Agency RMBS and Other Investment Securities are classified as Level 3 in the fair value hierarchy. Model-based valuation consists primarily of discounted cash flow and yield analyses. Significant model inputs and assumptions include constant voluntary prepayment rates, constant default rates, delinquency rates, loss severity, market-implied discount rates, default rates, expected loss severity, weighted average life, collateral composition, borrower characteristics and prepayment rates, and may also include general economic conditions, including home price index forecasts, servicing data and other relevant information. Where possible, collateral-related assumptions are determined on an individual loan level basis. | ||
The Company's Agency RMBS, if any, are valued using the market data described above, which includes inputs determined to be observable or whose significant fair value drivers are observable. Accordingly, Agency RMBS securities are classified as Level 2 in the fair value hierarchy. | ||
Derivative Instruments | ||
Interest Rate Swaption Agreements | ||
An interest rate swaption agreement represents an option that gives the Company the right, but not the obligation, to enter into a previously agreed upon interest rate swap agreement on a future date. If exercised the Company will enter into an interest rate swap agreement and is obligated to pay a fixed rate of interest and receive a floating rate of interest. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations received for interest rate swaption agreements. These counterparty valuations are generally based on models with observable market inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's interest rate swaption agreements are governed by International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. At June 30, 2014, no credit valuation adjustment was made in determining the fair value of the derivative. | ||
Interest Rate Swap Agreements | ||
An interest rate swap is an agreement between the Company and a counterparty to exchange periodic interest payments where one party to the contract makes a fixed rate payment in exchange for a floating rate payment from the other party. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations received for interest rate swap agreements. These counterparty valuations are generally based on models with observable market inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's interest rate swap agreements are governed by International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. At June 30, 2014 and December 31, 2013, no credit valuation adjustment was made in determining the fair value of the derivative. | ||
TBA Securities | ||
A TBA security is a forward contract for the purchase of Agency RMBS at a predetermined price with a stated face amount, coupon and stated maturity at an agreed upon future date. The specific Agency RMBS delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association ("SIFMA"), are not known at the time of the transaction. The Company estimates the fair value of TBA securities based on independent third party closing levels. Accordingly, TBAs are classified as Level 2 in the fair value hierarchy. | ||
Interest Income Recognition and Impairment | ' | |
Interest Income Recognition and Impairment-Mortgage Loans | ||
Pursuant to the Company's policy for separately presenting interest income on mortgage loans, the Company follows acceptable methods under U.S. GAAP for allocating a portion of the change in fair value of mortgage loans to interest income. | ||
When the Company purchases mortgage loans that have shown evidence of credit deterioration since origination and management determines that it is probable the Company will not collect all contractual cash flows on those assets, the Company will apply the guidance that addresses accounting for differences between contractual cash flows and cash flows expected to be collected if those differences are attributable to, at least in part, credit quality. | ||
Interest income is recognized on a level-yield basis over the life of the loan as long as cash flows can be reasonably estimated. The level-yield is determined by the excess of the Company's initial estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the Company's initial investment in the mortgage loan (accretable yield). The amount of interest income to be recognized cannot result in a carrying amount that exceeds the payoff amount of the loan. The excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) will not be recognized as an adjustment of yield. | ||
On a quarterly basis, the Company updates its estimate of the cash flows expected to be collected. For purposes of interest income recognition, any subsequent increases in cash flows expected to be collected are generally recognized as prospective yield adjustments (which establishes a new level yield) and any subsequent decreases in cash flows expected to be collected are recognized as an impairment to be recorded through change in unrealized gain or loss in the consolidated statements of operations. | ||
Income recognition is suspended for a loan when cash flows cannot be reasonably estimated. | ||
Interest Income Recognition and Impairment-Real Estate Securities and Other Investment Securities | ||
Pursuant to the Company's policy for separately presenting interest income on real estate securities and Other Investment Securities, the Company follows acceptable methods under U.S. GAAP for allocating a portion of the change in fair value of real estate securities and Other Investment Securities to interest income. | ||
Interest income on Agency RMBS, if any, is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency RMBS at the time of purchase are amortized into interest income over the life of such securities using the effective yield method and adjusted for actual prepayments. | ||
Interest income on the non-Agency RMBS and Other Investment Securities, which were purchased at a discount to par value and/or were rated below AA at the time of purchase, is recognized based on the effective yield method. The effective yield on these securities is based on the projected cash flows from each security, which are estimated based on the Company's observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On a monthly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. Therefore, actual maturities of the securities are generally shorter than stated contractual maturities. | ||
Based on the projected cash flows from the Company's non-Agency RMBS purchased at a discount to par value, a portion of the purchase discount may be designated as credit protection against future credit losses and, therefore, not accreted into interest income. The amount designated as credit discount is determined, and may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively. | ||
RMBS and Other Investment Securities are evaluated for other-than-temporary impairment ("OTTI") each quarter. A security with a fair value that is less than amortized cost is considered impaired. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a security has been deemed to be other-than-temporarily impaired, the amount of OTTI is bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses is recognized in the consolidated statements of operations as a realized loss on real estate securities and realized loss on Other Investment Securities. The remaining OTTI related to the valuation adjustment is recognized as a component of change in unrealized gain or loss in the consolidated statements of operations. Realized gains and losses on sale of real estate securities and Other Investment Securities are determined using the specific identification method. Real estate securities and Other Investment Securities transactions are recorded on the trade date. | ||
Expense Recognition | ' | |
Expense Recognition | ||
Expenses are recognized when incurred. Expenses include, but are not limited to, loan servicing fees, advisory fees, professional fees for legal, accounting and consulting services, and general and administrative expenses such as insurance, custodial and miscellaneous fees. | ||
Offering Costs | ' | |
Offering Costs | ||
Offering costs are accounted for as a reduction of additional paid-in capital. Offering costs in connection with the Company's IPO were paid out of the proceeds of the IPO. Costs incurred to organize the Company were expensed as incurred. The Company's obligation to pay for organization and offering expenses directly related to the IPO was capped at $1.2 million and the Advisor paid for such expenses incurred above the cap. | ||
Repurchase Agreements | ' | |
Loan Repurchase Facility | ||
The Company finances a portion of its mortgage loan portfolio through the use of repurchase agreements entered into under a master repurchase agreement with Citibank, N.A. ("Citi"), pursuant to which the Company may sell, and later repurchase trust certificates representing interests in residential mortgage loans (the "Trust Certificates") in an aggregate principal amount of up to $325.0 million (the "Loan Repurchase Facility"). The borrowings under the Loan Repurchase Facility are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreement. The borrowings under the Loan Repurchase Facility are recorded on the trade date at the contract amount. | ||
The Company pledges cash and certain of its Trust Certificates as collateral under the Loan Repurchase Facility. The amounts available to be borrowed are dependent upon the fair value of the Trust Certificates pledged as collateral, which fluctuates with changes in interest rates, type of underlying mortgage loans and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in the fair value of pledged Trust Certificates, the lender may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. At June 30, 2014 and December 31, 2013, the Company has met all margin call requirements. | ||
Securities Repurchase Agreements-Real Estate Securities and Other Investment Securities | ||
The Company finances a portion of its RMBS portfolio and Other Investment Securities through the use of securities repurchase agreements entered into under master repurchase agreements with four financial institutions at June 30, 2014. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Repurchase agreements are recorded on trade date at the contract amount. | ||
The Company pledges cash and certain of its RMBS and Other Investment Securities as collateral under these securities repurchase agreements. The amounts available to be borrowed are dependent upon the fair value of the RMBS and Other Investment Securities pledged as collateral, which fluctuates with changes in interest rates, type of securities and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in the fair value of pledged RMBS and Other Investment Securities, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. At June 30, 2014 and December 31, 2013, the Company has met all margin call requirements. | ||
Derivatives and Hedging Activities | ' | |
Derivatives and Hedging Activities | ||
The Company accounts for its derivative financial instruments in accordance with derivative accounting guidance, which requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and to measure those instruments at fair value. The Company has not designated any of its derivative agreements as hedging instruments for accounting purposes. As a result, changes in the fair value of derivatives are recorded through current period earnings. | ||
Interest Rate Swaption Agreements | ||
The credit support annex provisions of the Company's interest rate swaption agreement allows the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. At June 30, 2014, all collateral provided under this agreement consisted of cash collateral. | ||
Interest Rate Swap Agreements | ||
The Company's interest rate swap agreements contain legally enforceable provisions that allow for netting or setting off of all individual interest rate swap receivables and payables with each respective counterparty and, therefore, the fair value of those interest rate swap agreements are netted. The credit support annex provisions of the Company's interest rate swap agreements allow the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. At June 30, 2014 and December 31, 2013, all collateral provided under these agreements consisted of cash collateral. | ||
TBA Securities | ||
The Company may, and has in the past, entered into TBA contracts as a means of acquiring exposure to Agency RMBS and may, from time to time, utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company may choose, prior to settlement, to move the settlement of these securities to a later date by entering into an offsetting position (referred to as a "pair off"), settling the paired off positions against each other for cash, and simultaneously entering into a similar TBA contract for a later settlement date, which is commonly and collectively referred to as a "dollar roll" transaction. At June 30, 2014 and December 31, 2013, the Company did not have any TBA contracts outstanding. | ||
8% Exchangeable Senior Notes Due 2016 | ' | |
8% Exchangeable Senior Notes Due 2016 | ||
On November 25, 2013, the Operating Partnership issued $57.5 million aggregate principal amount of unsecured 8.00% Exchangeable Senior Notes due 2016 (the "Exchangeable Senior Notes"). The Exchangeable Senior Notes are carried at amortized cost. Interest expense on the Exchangeable Senior Notes is computed using the effective interest method. The conversion features of the Exchangeable Senior Notes are deemed to be an embedded derivative. Accordingly, the Company is required to bifurcate the embedded derivative related to the conversion features of the Exchangeable Senior Notes. The Company recognized the embedded derivative as a liability in its consolidated balance sheets at June 30, 2014 and December 31, 2013, measures it at its estimated fair value and recognizes changes in its estimated fair value in gain/(loss) on derivative instruments in the Company's consolidated statements of operations. | ||
Net Income (Loss) Per Share | ' | |
Net Income (Loss) Per Share | ||
The Company's basic earnings per share ("EPS") is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding OP units and Exchangeable Senior Notes were converted to common stock, where such exercise or conversion would result in a lower EPS. The dilutive effect of OP units is computed assuming all units are converted to common stock. The dilutive effect of the Exchangeable Senior Notes is computed assuming shares converted are limited to 1,779,560 pursuant to New York Stock Exchange ("NYSE") restrictions. The 1,779,560 shares of common stock were included in the calculation of diluted EPS as such inclusion was dilutive for the three and six months ended June 30, 2014. | ||
Income Taxes | ' | |
Income Taxes | ||
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 2011. The Company was organized and has operated and intends to continue to operate in a manner that will enable it to qualify to be taxed as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company's annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. GAAP). As a REIT, the Company will not be subject to federal income tax on its taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. However, the Company intends to continue to operate in a manner that will enable it to qualify for treatment as a REIT. | ||
The Company evaluates uncertain income tax positions when applicable. Based upon its analysis of income tax positions, the Company concluded that it does not have any uncertain tax positions that meet the recognition or measurement criteria at either June 30, 2014 or December 31, 2013. | ||
The Company has elected to treat two of its subsidiaries, ZAIS Funding, Inc. and ZFC Trust TRS I, LLC, as taxable REIT subsidiaries (the "TRS entities"). The Company may perform certain activities through these TRS entities that could adversely impact the Company's REIT qualification if performed other than through a TRS. Earnings from activities conducted through the TRS entities are subject to federal and state income taxes irrespective of the dividends-paid deduction available to REITs for federal income tax purposes. In addition, for the Company to continue to qualify to be taxed as a REIT, the Company's total investment in all TRS entities may not exceed 25% of the value of the total assets of the Company determined for federal income tax purposes. | ||
For the three months ended June 30, 2014 and June 30, 2013, and the six months ended June 30, 2014 and June 30, 2013, the Company did not have any significant activity in the TRS entities. No provision for federal income taxes has been made in the accompanying consolidated financial statements, as the TRS entities did not generate taxable income for the periods presented. | ||
Recent Accounting Pronouncements | ' | |
Recent Accounting Pronouncements | ||
In January 2014, the FASB issued ASU 2014-04: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure ("ASU 2014-04"), to reduce diversity in practice by clarifying when an in substance repossession or foreclosure has occurred and when a creditor should derecognize the associated loan receivable and recognize the real estate property. ASU 2014-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Adoption of ASU 2014-04 is not expected to have a material effect on the Company's consolidated financial statements. | ||
In June 2014, the FASB issued Accounting Standards Update No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures ("ASU 2014-11") which amends the accounting guidance for repo-to-maturity ("RTM") transactions and repurchase agreements executed as repurchase financings. Under this new accounting guidance, RTMs will be accounted for as secured borrowings rather than sales of an asset, and transfers of financial assets with a contemporaneous repurchase agreement will no longer be evaluated to determine whether they should be accounted for on a combined basis as forward contracts. The new guidance also prescribes additional disclosures particularly on the nature of collateral pledged in repurchase agreements accounted for as secured borrowings. ASU 2014-11 is effective for the first interim or annual reporting periods beginning after December 15, 2014. Adoption of ASU 2014-11 is not expected to have a material effect on the Company's consolidated financial statements. | ||
Fair_Value_Tables
Fair Value (Tables) | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||
Fair Value [Abstract] | ' | ||||||||||||||||||||
Schedule of Financial Instruments Accounted for at Fair Value on a Recurring Basis | ' | ||||||||||||||||||||
The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis at June 30, 2014, by level within the fair value hierarchy: | |||||||||||||||||||||
Assets and Liabilities at Fair Value | |||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||
Mortgage loans | $ | - | $ | - | $ | 433,553,720 | $ | 433,553,720 | |||||||||||||
Non-Agency RMBS | - | - | 227,293,536 | 227,293,536 | |||||||||||||||||
Other Investment Securities | - | - | 12,034,003 | 12,034,003 | |||||||||||||||||
Derivative assets | - | 368,136 | - | 368,136 | |||||||||||||||||
Total | $ | - | $ | 368,136 | $ | 672,881,259 | $ | 673,249,395 | |||||||||||||
Liabilities | |||||||||||||||||||||
Derivative liabilities | $ | - | $ | 1,550,129 | $ | - | $ | 1,550,129 | |||||||||||||
Total | $ | - | $ | 1,550,129 | $ | - | $ | 1,550,129 | |||||||||||||
The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis at December 31, 2013, by level within the fair value hierarchy: | |||||||||||||||||||||
Assets and Liabilities at Fair Value | |||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||
Mortgage loans | $ | - | $ | - | $ | 331,785,542 | $ | 331,785,542 | |||||||||||||
Non-Agency RMBS | - | - | 226,155,221 | 226,155,221 | |||||||||||||||||
Derivative assets | - | 284,454 | - | 284,454 | |||||||||||||||||
Total | $ | - | $ | 284,454 | $ | 557,940,763 | $ | 558,225,217 | |||||||||||||
Liabilities | |||||||||||||||||||||
Derivative liabilities | $ | - | $ | 1,471,607 | $ | - | $ | 1,471,607 | |||||||||||||
Total | $ | - | $ | 1,471,607 | $ | - | $ | 1,471,607 | |||||||||||||
Schedule of Financial Instruments Utilizing Level 3 Inputs | ' | ||||||||||||||||||||
The following table presents additional information about the Company's financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||
Six Months Ended June 30, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||
Other | |||||||||||||||||||||
Mortgage | Investment | Mortgage | |||||||||||||||||||
Loans | RMBS | Securities | Loans | RMBS | |||||||||||||||||
Beginning balance | $ | 331,785,542 | $ | 226,155,221 | $ | - | $ | - | $ | 100,911,651 | |||||||||||
Total net transfers into/out of Level 3 | - | - | - | - | - | ||||||||||||||||
Acquisitions | 84,795,975 | 11,830,958 | 10,676,953 | 334,162,044 | 234,397,506 | ||||||||||||||||
Proceeds from sales | - | (2,072,198 | ) | - | - | (68,190,593 | ) | ||||||||||||||
Net accretion of discounts | 3,423,653 | 2,603,804 | 80,424 | 3,059,231 | 3,727,702 | ||||||||||||||||
Proceeds from principal repayments | (9,509,379 | ) | (15,582,121 | ) | - | (13,871,059 | ) | (39,338,730 | ) | ||||||||||||
Total losses (realized/unrealized) included in | |||||||||||||||||||||
earnings | (4,302,177 | ) | (468,061 | ) | - | (6,344,877 | ) | (9,138,009 | ) | ||||||||||||
Total gains (realized/unrealized) included in | |||||||||||||||||||||
earnings | 27,360,106 | 4,825,933 | 1,276,626 | 14,780,203 | 3,785,694 | ||||||||||||||||
Ending balance | $ | 433,553,720 | $ | 227,293,536 | $ | 12,034,003 | $ | 331,785,542 | $ | 226,155,221 | |||||||||||
Six Months Ended June 30, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||
Other | |||||||||||||||||||||
Mortgage | Investment | Mortgage | |||||||||||||||||||
Loans | RMBS | Securities | Loans | RMBS | |||||||||||||||||
The amount of total gains or (losses) for the | |||||||||||||||||||||
period included in earnings attributable to | |||||||||||||||||||||
the change in unrealized gains or losses | |||||||||||||||||||||
relating to assets or liabilities still held at | |||||||||||||||||||||
the reporting date | $ | 22,695,371 | $ | 4,316,518 | $ | 1,276,626 | $ | 7,136,482 | $ | (2,822,969 | ) | ||||||||||
Schedule of Quantitative Information about Level 3 Fair Value Measurements | ' | ||||||||||||||||||||
The following table presents quantitative information about the Company's mortgage loans which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||||
Fair Value at | Valuation | Weighted | |||||||||||||||||||
30-Jun-14 | Technique(s) | Unobservable Input | Min/Max | Average | |||||||||||||||||
Mortgage Loans | $ | 433,553,720 | Model | Constant voluntary prepayment | 1.3 | % | 8.4 | % | 3.8 | % | |||||||||||
Constant default rate | 0.3 | % | 4.3 | % | 2.9 | % | |||||||||||||||
Loss severity | 6.8 | % | 46 | % | 26 | % | |||||||||||||||
Delinquency | 3.2 | % | 12.8 | % | 10.4 | % | |||||||||||||||
The following table presents quantitative information about the Company's real estate securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||||
Fair Value at | Valuation | Weighted | |||||||||||||||||||
30-Jun-14 | Technique(s) | Unobservable Input | Min/Max | Average | |||||||||||||||||
Non-Agency RMBS(1) | |||||||||||||||||||||
Alternative - A | $ | 87,957,373 | Broker quotes/ | Constant voluntary prepayment | 1.2 | % | 27.1 | % | 12.2 | % | |||||||||||
comparable trades | Constant default rate | 0.1 | % | 15.6 | % | 3.1 | % | ||||||||||||||
Loss severity | 0 | % | 93.6 | % | 26.1 | % | |||||||||||||||
Delinquency | 1.2 | % | 28 | % | 10.3 | % | |||||||||||||||
Pay option adjustable rate | 27,446,408 | Broker quotes/ | Constant voluntary prepayment | 1.4 | % | 19.7 | % | 9.1 | % | ||||||||||||
comparable trades | Constant default rate | 2 | % | 9.2 | % | 4.6 | % | ||||||||||||||
Loss severity | 0.1 | % | 63.1 | % | 42 | % | |||||||||||||||
Delinquency | 7.4 | % | 32.6 | % | 15.9 | % | |||||||||||||||
Prime | 93,817,617 | Broker quotes/ | Constant voluntary prepayment | 2.1 | % | 17.6 | % | 9.4 | % | ||||||||||||
comparable trades | Constant default rate | 0.1 | % | 8.3 | % | 4 | % | ||||||||||||||
Loss severity | 0.1 | % | 78.4 | % | 30.6 | % | |||||||||||||||
Delinquency | 2.4 | % | 25.3 | % | 12.4 | % | |||||||||||||||
Subprime | 18,072,138 | Broker quotes/ | Constant voluntary prepayment | 1.7 | % | 13 | % | 6.6 | % | ||||||||||||
comparable trades | Constant default rate | 3.1 | % | 13.2 | % | 4.4 | % | ||||||||||||||
Loss severity | 7.5 | % | 93.1 | % | 46.9 | % | |||||||||||||||
Delinquency | 12.5 | % | 24 | % | 16.2 | % | |||||||||||||||
Total Non-Agency RMBS | $ | 227,293,536 | |||||||||||||||||||
____________________ | |||||||||||||||||||||
-1 | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. | ||||||||||||||||||||
The following table presents quantitative information about the Company's Other Investment Securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||||
Fair Value at | Weighted | ||||||||||||||||||||
30-Jun-14 | Valuation Technique(s) | Unobservable Input | Average | ||||||||||||||||||
Broker quotes/ | |||||||||||||||||||||
Other Investment Securities(1) | $ | 12,034,003 | comparable trades | Constant voluntary prepayment | 10 | % | |||||||||||||||
____________________ | |||||||||||||||||||||
-1 | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. | ||||||||||||||||||||
Schedule of Fair Value Option | ' | ||||||||||||||||||||
The following table presents the difference between the fair value and the aggregate unpaid principal amount and/or notional balance of assets for which the fair value option was elected at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||||
Unpaid | Unpaid | ||||||||||||||||||||
Principal | Principal | ||||||||||||||||||||
and/or | and/or | ||||||||||||||||||||
Notional | Notional | ||||||||||||||||||||
Fair Value | Balance(1) | Difference | Fair Value | Balance(1) | Difference | ||||||||||||||||
Financial instruments, at fair value | |||||||||||||||||||||
Assets | |||||||||||||||||||||
Mortgage loans | $ | 433,553,720 | $ | 489,964,409 | $ | (56,410,689 | ) | $ | 331,785,542 | $ | 398,828,497 | $ | (67,042,955 | ) | |||||||
Non-Agency RMBS | 227,293,536 | 310,577,527 | (83,283,991 | ) | 226,155,221 | 324,241,597 | (98,086,376 | ) | |||||||||||||
Other Investment Securities | 12,034,003 | 10,000,000 | 2,034,003 | - | - | - | |||||||||||||||
Total financial instruments, at fair value | $ | 672,881,259 | $ | 810,541,936 | $ | (137,660,677 | ) | $ | 557,940,763 | $ | 723,070,094 | $ | (165,129,331 | ) | |||||||
____________________ | |||||||||||||||||||||
-1 | Non-Agency RMBS includes an IO with a notional balance of $55.8 million and $64.3 million at June 30, 2014 and December 31, 2013, respectively. | ||||||||||||||||||||
Schedule of Fair Value of Other Financial Instruments | ' | ||||||||||||||||||||
The following table summarizes the estimated fair value for all other financial instruments at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||||
Other financial instruments | |||||||||||||||||||||
Assets | |||||||||||||||||||||
Cash | $ | 27,619,043 | $ | 57,060,806 | |||||||||||||||||
Restricted cash | 8,144,052 | 2,128,236 | |||||||||||||||||||
Liabilities | |||||||||||||||||||||
Loan Repurchase Facility | $ | 293,609,481 | $ | 236,727,512 | |||||||||||||||||
Securities repurchase agreements | 156,520,762 | 138,790,158 | |||||||||||||||||||
Exchangeable Senior Notes | 56,438,289 | 54,737,573 |
Mortgage_Loans_Tables
Mortgage Loans (Tables) | 6 Months Ended | ||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||
Mortgage Loans [Abstract] | ' | ||||||||||||||||||||||||||
Schedule of Mortgage Loan Acquisitions | ' | ||||||||||||||||||||||||||
During the six months ended June 30, 2014 and year ended December 31, 2013, the Company's acquisition of mortgage loans were as follows: | |||||||||||||||||||||||||||
Aggregate Unpaid | Loan Repurchase | ||||||||||||||||||||||||||
Principal Balance | Facility Used | ||||||||||||||||||||||||||
Acquisition Date | (in millions) | (in millions) | |||||||||||||||||||||||||
Year ended December 31, 2013: | |||||||||||||||||||||||||||
22-Mar-13 | $ | 17.7 | $ | - | |||||||||||||||||||||||
30-May-13 | - | - | -1 | ||||||||||||||||||||||||
31-May-13 | 134.5 | 78.5 | |||||||||||||||||||||||||
25-Jul-13 | 162.4 | 98.7 | |||||||||||||||||||||||||
28-Aug-13 | 98.2 | 54.8 | |||||||||||||||||||||||||
Six months ended June 30, 2014: | |||||||||||||||||||||||||||
27-Mar-14 | 100.4 | 60.6 | |||||||||||||||||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | On May 30, 2013, the Company entered into the Loan Repurchase Facility and utilized $10.6 million of the Loan Repurchase Facility to finance its then existing residential mortgage loan portfolio. | ||||||||||||||||||||||||||
Schedule of Information about Investments in Mortgage Loans | ' | ||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's mortgage loan portfolio at June 30, 2014: | |||||||||||||||||||||||||||
Unpaid | |||||||||||||||||||||||||||
Principal | Premium | Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||
Balance | (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||
Mortgage Loans | |||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||
Fixed | $ | 282,361,337 | $ | (54,730,082 | ) | $ | 227,631,255 | $ | 24,102,606 | $ | (1,640,726 | ) | $ | 250,093,135 | 4.51 | % | 7.03 | % | |||||||||
ARM | 176,654,287 | (23,903,555 | ) | 152,750,732 | 10,012,628 | (830,771 | ) | 161,932,589 | 3.68 | 6.94 | |||||||||||||||||
Total performing | 459,015,624 | (78,633,637 | ) | 380,381,987 | 34,115,234 | (2,471,497 | ) | 412,025,724 | 4.19 | 7 | |||||||||||||||||
Non-performing(3) | 30,948,785 | (7,564,059 | ) | 23,384,726 | 1,013,933 | (2,870,663 | ) | 21,527,996 | 5.09 | 7.65 | |||||||||||||||||
Total Mortgage Loans | $ | 489,964,409 | $ | (86,197,696 | ) | $ | 403,766,713 | $ | 35,129,167 | $ | (5,342,160 | ) | $ | 433,553,720 | 4.25 | % | 7.03 | % | |||||||||
____________________ | |||||||||||||||||||||||||||
-1 | The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans. The Company recorded a gain of $22.0 million and a gain of $1.6 million for the three months ended June 30, 2014 and June 30, 2013, respectively, and $22.7 million and $1.6 million for the six months ended June 30, 2014 and June 30, 2013, respectively, as change in unrealized gain or loss on mortgage loans in the consolidated statements of operations. | ||||||||||||||||||||||||||
-2 | Unleveraged yield. | ||||||||||||||||||||||||||
-3 | Loans that are delinquent for 60 days or more are considered non-performing. | ||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's mortgage loan portfolio at December 31, 2013: | |||||||||||||||||||||||||||
Unpaid | |||||||||||||||||||||||||||
Principal | Premium | Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||
Balance | (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||
Mortgage Loans | |||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||
Fixed | $ | 212,701,494 | $ | (43,530,581 | ) | $ | 169,170,913 | $ | 7,842,598 | $ | (3,558,171 | ) | $ | 173,455,340 | 4.56 | % | 7.05 | % | |||||||||
ARM | 170,178,466 | (25,617,563 | ) | 144,560,903 | 5,088,302 | (1,556,430 | ) | 148,092,775 | 3.76 | 6.67 | |||||||||||||||||
Total performing | 382,879,960 | (69,148,144 | ) | 313,731,816 | 12,930,900 | (5,114,601 | ) | 321,548,115 | 4.2 | 6.88 | |||||||||||||||||
Non-performing(3) | 15,948,537 | (5,031,293 | ) | 10,917,244 | 456,024 | (1,135,841 | ) | 10,237,427 | 5.06 | 8.03 | |||||||||||||||||
Total Mortgage Loans | $ | 398,828,497 | $ | (74,179,437 | ) | $ | 324,649,060 | $ | 13,386,924 | $ | (6,250,442 | ) | $ | 331,785,542 | 4.24 | % | 6.91 | % | |||||||||
____________________ | |||||||||||||||||||||||||||
-1 | The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans. | ||||||||||||||||||||||||||
-2 | Unleveraged yield. | ||||||||||||||||||||||||||
-3 | Loans that are delinquent for 60 days or more are considered non-performing. | ||||||||||||||||||||||||||
Schedule of Difference Between Fair Value and Aggregate Unpaid Principal Balance | ' | ||||||||||||||||||||||||||
The following table presents the difference between the fair value and the aggregate unpaid principal balance of the Company's mortgage loan portfolio at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||||||||||
Unpaid | Unpaid | ||||||||||||||||||||||||||
Principal | Principal | ||||||||||||||||||||||||||
Fair Value | Balance | Difference | Fair Value | Balance | Difference | ||||||||||||||||||||||
Loan Type | |||||||||||||||||||||||||||
Performing loans: | |||||||||||||||||||||||||||
Fixed | $ | 250,093,135 | $ | 282,361,337 | $ | (32,268,202 | ) | $ | 173,455,340 | $ | 212,701,494 | $ | (39,246,154 | ) | |||||||||||||
ARM | 161,932,589 | 176,654,287 | (14,721,698 | ) | 148,092,775 | 170,178,466 | (22,085,691 | ) | |||||||||||||||||||
Total performing loans | 412,025,724 | 459,015,624 | (46,989,900 | ) | 321,548,115 | 382,879,960 | (61,331,845 | ) | |||||||||||||||||||
Non-performing loans | 21,527,996 | 30,948,785 | (9,420,789 | ) | 10,237,427 | 15,948,537 | (5,711,110 | ) | |||||||||||||||||||
Total | $ | 433,553,720 | $ | 489,964,409 | $ | (56,410,689 | ) | $ | 331,785,542 | $ | 398,828,497 | $ | (67,042,955 | ) | |||||||||||||
Schedule of Concentrations of Credit Risk | ' | ||||||||||||||||||||||||||
At June 30, 2014 and December 31, 2013, the Company's mortgage loan portfolio consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of certain concentrations of credit risk in the mortgage loan portfolio at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||||||||||
Concentration | |||||||||||||||||||||||||||
Percentage of fair value of mortgage loans with unpaid principal balance to current property value | |||||||||||||||||||||||||||
in excess of 100% | 65.5 | % | 73.6 | % | |||||||||||||||||||||||
Percentage of fair value of mortgage loans secured by properties in the following states: | |||||||||||||||||||||||||||
Each representing 10% or more of fair value: | |||||||||||||||||||||||||||
California | 25.4 | % | 25.6 | % | |||||||||||||||||||||||
Florida | 16.5 | % | 17.8 | % | |||||||||||||||||||||||
Additional state representing more than 5% of fair value: | |||||||||||||||||||||||||||
Georgia | 6.4 | % | 6.8 | % | |||||||||||||||||||||||
Schedule of Change in Accretable Yield | ' | ||||||||||||||||||||||||||
The following table presents the change in accretable yield for the six months ended June 30, 2014: | |||||||||||||||||||||||||||
Accretable yield, January 1, 2014 | $ | 223,401,697 | |||||||||||||||||||||||||
Acquisitions | 55,532,098 | ||||||||||||||||||||||||||
Accretion | (12,469,507 | ) | |||||||||||||||||||||||||
Reclassifications from nonaccretable difference | 9,851,517 | ||||||||||||||||||||||||||
Accretable yield, June 30, 2014 | $ | 276,315,805 |
Real_Estate_Securities_and_Oth1
Real Estate Securities and Other Investment Securities (Tables) | 6 Months Ended | ||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||
Real Estate Securities and Other Investment Securities [Abstract] | ' | ||||||||||||||||||||||||||
Schedule of Information Regarding Real Estate Securities | ' | ||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's RMBS and Other Investment Securities at June 30, 2014: | |||||||||||||||||||||||||||
Principal or | |||||||||||||||||||||||||||
Notional | Premium | Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||
Balance | (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||
Real estate securities | |||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||
Alternative - A(3) | $ | 156,601,029 | $ | (72,068,376 | ) | $ | 84,532,653 | $ | 3,650,686 | $ | (225,966 | ) | $ | 87,957,373 | 4.13 | % | 7.41 | % | |||||||||
Pay option adjustable rate | 33,037,784 | (6,243,093 | ) | 26,794,691 | 771,606 | (119,889 | ) | 27,446,408 | 0.73 | 6.92 | |||||||||||||||||
Prime | 101,800,879 | (12,419,696 | ) | 89,381,183 | 4,482,363 | (45,929 | ) | 93,817,617 | 4.68 | 6.73 | |||||||||||||||||
Subprime | 19,137,835 | (1,499,380 | ) | 17,638,455 | 563,759 | (130,076 | ) | 18,072,138 | 1.07 | 6.08 | |||||||||||||||||
Total RMBS | $ | 310,577,527 | $ | (92,230,545 | ) | $ | 218,346,982 | $ | 9,468,414 | $ | (521,860 | ) | $ | 227,293,536 | 3.7 | % | 6.96 | % | |||||||||
Other investment securities | $ | 10,000,000 | $ | 757,377 | $ | 10,757,377 | $ | 1,276,626 | $ | - | $ | 12,034,003 | 5.4 | % | 6.66 | % | |||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | The Company has elected the fair value option pursuant to ASC 825 for its real estate securities and Other Investment Securities. The Company recorded a gain of $1.5 million and a loss of $15.6 million for the three months ended June 30, 2014 and June 30, 2013, respectively, and a gain of $4.3 million and a loss of $14.7 for the six months ended June 30, 2014 and June 30, 2013, respectively, as change in unrealized gain or loss on real estate securities in the consolidated statements of operations. The Company also recorded a gain of $0.9 million for the three months ended June 30, 2014 and a gain of $1.3 million for the six months ended June 30, 2014 as change in unrealized gain or loss on other investment securities in the consolidated statements of operations. | ||||||||||||||||||||||||||
-2 | Unleveraged yield. | ||||||||||||||||||||||||||
-3 | Alternative - A RMBS includes an IO with a notional balance of $55.8 million. | ||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's RMBS at December 31, 2013: | |||||||||||||||||||||||||||
Principal or | |||||||||||||||||||||||||||
Notional | Premium | Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||
Balance | (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||
Real estate securities | |||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||
Alternative - A(3) | $ | 160,590,487 | $ | (80,206,745 | ) | $ | 80,383,742 | $ | 2,414,864 | $ | (1,112,077 | ) | $ | 81,686,529 | 4.26 | % | 6.77 | % | |||||||||
Pay option adjustable rate | 34,374,028 | (7,057,026 | ) | 27,317,002 | 464,756 | (345,915 | ) | 27,435,843 | 0.76 | 6.8 | |||||||||||||||||
Prime | 109,136,108 | (13,590,489 | ) | 95,545,619 | 3,751,248 | (767,825 | ) | 98,529,042 | 4.77 | 6.45 | |||||||||||||||||
Subprime | 20,140,974 | (1,894,417 | ) | 18,246,557 | 536,407 | (279,157 | ) | 18,503,807 | 1.07 | 5.97 | |||||||||||||||||
Total RMBS | $ | 324,241,597 | $ | (102,748,677 | ) | $ | 221,492,920 | $ | 7,167,275 | $ | (2,504,974 | ) | $ | 226,155,221 | 3.8 | % | 6.57 | % | |||||||||
____________________ | |||||||||||||||||||||||||||
-1 | The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. | ||||||||||||||||||||||||||
-2 | Unleveraged yield. | ||||||||||||||||||||||||||
-3 | Alternative - A RMBS includes an IO with a notional balance of $64.3 million. | ||||||||||||||||||||||||||
Schedule of Information Regarding Gains and Losses on Securities | ' | ||||||||||||||||||||||||||
The following table presents certain additional information regarding the Company's RMBS: | |||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | ||||||||||||||||||||||||
Proceeds from the sale of real estate securities | $ | - | $ | 47,111,700 | $ | 2,072,198 | $ | 53,913,098 | |||||||||||||||||||
Realized gain (loss) on the sale of real estate securities | - | (206,876 | ) | 73,619 | (206,876 | ) | |||||||||||||||||||||
Realized loss on OTTI | - | (39,179 | ) | - | (39,179 | ) | |||||||||||||||||||||
Schedule of Information Regarding Real Estate Securities by Weighted Average Life | ' | ||||||||||||||||||||||||||
The following table presents certain information regarding the Company's non-Agency RMBS at June 30, 2014 by weighted average life: | |||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||
Weighted Average | |||||||||||||||||||||||||||
Fair Value | Amortized Cost | Yield | |||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||
Greater than 5 years | $ | 227,293,536 | $ | 218,346,982 | 6.96% | ||||||||||||||||||||||
$ | 227,293,536 | $ | 218,346,982 | 6.96% | |||||||||||||||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | ||||||||||||||||||||||||||
The following table presents certain information regarding the Company's Other Investment Securities at June 30, 2014 by weighted average life: | |||||||||||||||||||||||||||
Other Investment Securities | |||||||||||||||||||||||||||
Weighted Average | |||||||||||||||||||||||||||
Fair Value | Amortized Cost | Yield | |||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||
Greater than 5 years | $ | 12,034,003 | $ | 10,757,377 | 6.66 | % | |||||||||||||||||||||
$ | 12,034,003 | $ | 10,757,377 | 6.66 | % | ||||||||||||||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | Actual maturities of other investment securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | ||||||||||||||||||||||||||
The following table presents certain information regarding the Company's non-Agency RMBS at December 31, 2013 by weighted average life: | |||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||
Weighted Average | |||||||||||||||||||||||||||
Fair Value | Amortized Cost | Yield | |||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||
Greater than 5 years | $ | 226,155,221 | $ | 221,492,920 | 6.57 | % | |||||||||||||||||||||
$ | 226,155,221 | $ | 221,492,920 | 6.57 | % | ||||||||||||||||||||||
____________________ | |||||||||||||||||||||||||||
-1 | Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. |
Loan_Repurchase_Facility_Table
Loan Repurchase Facility (Tables) (Line of Credit [Member]) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Line of Credit [Member] | ' | ||||||||||||||||
Debt Instrument [Line Items] | ' | ||||||||||||||||
Schedule of Information Regarding Repurchase Agreements | ' | ||||||||||||||||
The following table presents certain information regarding the Company's Loan Repurchase Facility at June 30, 2014 and December 31, 2013, by remaining maturity: | |||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||
Weighted Average | Weighted Average | ||||||||||||||||
Balance | Rate | Balance | Rate | ||||||||||||||
Loan Repurchase Facility borrowings maturing within | |||||||||||||||||
91-180 days | $ | - | - | % | $ | 236,058,976 | 2.92 | % | |||||||||
Greater than 180 days to 1 year | 293,609,481 | 2.90 | - | - | |||||||||||||
Total/weighted average | $ | 293,609,481 | 2.9 | % | $ | 236,058,976 | 2.92 | % | |||||||||
Schedule of Information Regarding Posting of Collateral | ' | ||||||||||||||||
The following table presents information with respect to the Company's posting of mortgage loan collateral for the Loan Repurchase Facility at June 30, 2014 and December 31, 2013: | |||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||
Loan Repurchase Facility secured by mortgage loans | $ | 293,609,481 | $ | 236,058,976 | |||||||||||||
Fair value of Trust Certificates pledged as collateral under Loan Repurchase Facility | 433,299,627 | 331,522,165 | |||||||||||||||
Fair value of mortgage loans not pledged as collateral under Loan Repurchase Facility | 254,093 | 263,377 | |||||||||||||||
Cash pledged as collateral under Loan Repurchase Facility | - | - | |||||||||||||||
Unused Amount(1) | 31,390,519 | 13,941,024 | |||||||||||||||
____________________ | |||||||||||||||||
-1 | The amount the Company is able to borrow under the Loan Repurchase Facility is tied to the fair value of unencumbered Trust Certificates eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold. | ||||||||||||||||
Schedule of Financial Information | ' | ||||||||||||||||
The following table presents additional information with respect to the Loan Repurchase Facility: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | ||||||||||||||
Weighted average interest rate | 2.93 | % | 2.94 | % | 2.92 | % | 2.94 | % | |||||||||
Average balance of loans sold under | |||||||||||||||||
agreements to repurchase | $ | - | $ | 266,499 | $ | 192,380 | $ | 266,499 | |||||||||
Maximum daily amount outstanding | $ | 297,401,891 | $ | 89,112,325 | $ | 297,401,891 | $ | 89,112,325 | |||||||||
Total interest expense | $ | 2,260,080 | $ | 289,296 | $ | 4,090,987 | $ | 289,296 |
Securities_Repurchase_Agreemen1
Securities Repurchase Agreements (Tables) (Securities Sold under Agreements to Repurchase [Member]) | 6 Months Ended | ||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||
Securities Sold under Agreements to Repurchase [Member] | ' | ||||||||||||||||||
Debt Instrument [Line Items] | ' | ||||||||||||||||||
Schedule of Information Regarding Repurchase Agreements | ' | ||||||||||||||||||
The following table presents certain information regarding the Company's securities repurchase agreements at June 30, 2014 and December 31, 2013 by remaining maturity and collateral type: | |||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||
Non-Agency RMBS | Other Investment Securities | Non-Agency RMBS | |||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||
Balance | Average Rate | Balance | Average Rate | Balance | Average Rate | ||||||||||||||
Securities repurchase | |||||||||||||||||||
agreements maturing | |||||||||||||||||||
within | |||||||||||||||||||
30 days or less | $ | 81,648,945 | 1.79 | % | $ | 8,360,999 | 1.75 | % | $ | 121,913,678 | 1.90 | % | |||||||
31-60 days | 5,858,000 | 1.77 | - | - | 6,415,000 | 1.84 | |||||||||||||
61-90 days | 19,862,000 | 1.83 | - | - | 10,263,000 | 1.85 | |||||||||||||
Greater than 90 days | 40,614,000 | 1.73 | - | - | - | - | |||||||||||||
Total/weighted average | $ | 147,982,945 | 1.78 | % | $ | 8,360,999 | 1.75 | % | $ | 138,591,678 | 1.89 | % | |||||||
Schedule of Information Regarding Posting of Collateral | ' | ||||||||||||||||||
The following table presents information with respect to the Company's posting of collateral under its securities repurchase agreements at June 30, 2014 and December 31, 2013: | |||||||||||||||||||
30-Jun-14 | 31-Dec-13 | ||||||||||||||||||
Securities repurchase agreements secured by non-Agency RMBS | $ | 147,982,945 | $ | 138,591,678 | |||||||||||||||
Securities repurchase agreements secured by Other Investment Securities | 8,360,999 | - | |||||||||||||||||
Fair value of non-Agency RMBS pledged as collateral | 197,404,343 | 183,722,511 | |||||||||||||||||
Fair value of Other Investment Securities pledged as collateral | 12,034,003 | - | |||||||||||||||||
Fair value of non-Agency RMBS not pledged as collateral | 29,889,193 | 42,432,710 | |||||||||||||||||
Cash pledged as collateral | 2,531,630 | 1,360,528 |
Derivative_Instruments_Tables
Derivative Instruments (Tables) | 6 Months Ended | ||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||
Derivative Instruments [Abstract] | ' | ||||||||||||||||||
Schedule of Notional Amounts of Derivative Instruments | ' | ||||||||||||||||||
The following table summarizes information related to derivative instruments at June 30, 2014 and December 31, 2013: | |||||||||||||||||||
Non-hedge derivatives | 30-Jun-14 | 31-Dec-13 | |||||||||||||||||
Notional amount of interest rate swaption | $ | 225,000,000 | $ | - | |||||||||||||||
Notional amount of interest rate swaps | 17,200,000 | 17,200,000 | |||||||||||||||||
Total notional amount | $ | 242,200,000 | $ | 17,200,000 | |||||||||||||||
Schedule of Fair Value of Derivative Instruments | ' | ||||||||||||||||||
The following table presents the fair value of the Company's derivative instruments and their balance sheet location at June 30, 2014 and December 31, 2013: | |||||||||||||||||||
Derivative instruments | Designation | Balance Sheet Location | 30-Jun-14 | 31-Dec-13 | |||||||||||||||
Interest rate swaption | Non-hedge | Derivative assets, at fair value | $ | 368,136 | $ | - | |||||||||||||
Interest rate swaps | Non-hedge | Derivative (liabilities)/assets, at fair value | $ | (442,585 | ) | $ | 284,454 | ||||||||||||
Exchangeable Senior Notes | |||||||||||||||||||
conversion option | Non-hedge | Derivative liabilities, at fair value | $ | (1,107,544 | ) | $ | (1,471,607 | ) | |||||||||||
Schedule of Gains / (Losses) Related to Derivatives | ' | ||||||||||||||||||
The following table summarizes gains and losses related to derivatives: | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
Income Statement | |||||||||||||||||||
Non-hedge derivatives | Location | 30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | ||||||||||||||
Gain/(loss) on derivative | |||||||||||||||||||
Interest rate swaption | instruments | $ | (1,893,322 | ) | $ | - | $ | (4,435,614 | ) | $ | - | ||||||||
Gain/(loss) on derivative | |||||||||||||||||||
Interest rate swaps | instruments | $ | (482,794 | ) | $ | 8,272,229 | $ | (940,079 | ) | $ | 8,216,927 | ||||||||
Exchangeable Senior Notes | Gain/(loss) on derivative | ||||||||||||||||||
conversion option | instruments | $ | 473,167 | $ | - | $ | 364,063 | $ | - | ||||||||||
Gain/(loss) on derivative | |||||||||||||||||||
TBAs(1) | instruments | $ | - | $ | (4,573,848 | ) | $ | - | $ | (4,237,402 | ) | ||||||||
____________________ | |||||||||||||||||||
-1 | Gains and losses from purchases and sales of TBAs consist of $0.8 million of net TBA dollar roll net interest income and a net loss of $5.4 million due to price reductions. | ||||||||||||||||||
Schedule of Information Related to Derivative Instruments, by Maturity | ' | ||||||||||||||||||
The following table presents information about the Company's interest rate swaption agreement at June 30, 2014: | |||||||||||||||||||
Notional | |||||||||||||||||||
Swaption Expiration | Amount | Strike Rate | Swap Maturity | ||||||||||||||||
2015 | $ | 225,000,000 | 3.64% | 2025 | |||||||||||||||
Restricted cash at June 30, 2014 included $4.4 million of cash pledged as collateral against an interest rate swaption agreement. | |||||||||||||||||||
The following table presents information about the Company's interest rate swap agreements at June 30, 2014: | |||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||
Notional | Average Pay | Average | Average Years | ||||||||||||||||
Maturity | Amount | Rate | Receive Rate | to Maturity | |||||||||||||||
2023 | $ | 17,200,000 | 2.72% | 0.23% | 9.1 | ||||||||||||||
Total/Weighted average | $ | 17,200,000 | 2.72% | 0.23% | 9.1 | ||||||||||||||
Restricted cash at June 30, 2014 included $1.2 million of cash pledged as collateral against interest rate swap agreements. | |||||||||||||||||||
The following table presents information about the Company's interest rate swap agreements at December 31, 2013: | |||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||
Notional | Average Pay | Average | Average Years | ||||||||||||||||
Maturity | Amount | Rate | Receive Rate | to Maturity | |||||||||||||||
2023 | $ | 17,200,000 | 2.72% | 0.24% | 9.6 | ||||||||||||||
Total/Weighted average | $ | 17,200,000 | 2.72% | 0.24% | 9.6 |
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||||||
Reconciliation of Earnings and Shares Used in Calculating Basic and Diluted Earnings Per Share | ' | ||||||||||||||||
The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | ||||||||||||||
Numerator: | |||||||||||||||||
Net income (loss) attributable to ZAIS Financial Corp. common | |||||||||||||||||
stockholders | $ | 23,173,931 | $ | (6,780,401 | ) | $ | 25,398,136 | $ | (5,121,179 | ) | |||||||
Effect of dilutive securities: | |||||||||||||||||
Net income allocated to non-controlling interests | 2,698,204 | (788,476 | ) | 2,956,858 | (489,382 | ) | |||||||||||
Exchangeable Senior Notes | |||||||||||||||||
Interest expense | 808,629 | - | 1,613,628 | - | |||||||||||||
Gain on derivative instruments | (269,635 | ) | - | (207,462 | ) | - | |||||||||||
Total - Exchangeable Senior Notes | 538,994 | - | 1,406,166 | - | |||||||||||||
Dilutive net income available to stockholders | $ | 26,411,129 | $ | (7,568,877 | ) | $ | 29,761,160 | $ | (5,610,561 | ) | |||||||
Denominator: | |||||||||||||||||
Weighted average number of shares of common stock | 7,970,886 | 7,970,886 | 7,970,886 | 6,564,284 | |||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Weighted average number of OP units | 926,914 | 926,914 | 926,914 | 926,914 | |||||||||||||
Weighted average number of shares convertible under | |||||||||||||||||
Exchangeable Senior Notes | 1,779,560 | - | 1,779,560 | - | |||||||||||||
Weighted average dilutive shares | 10,677,360 | 8,897,800 | 10,677,360 | 7,491,198 | |||||||||||||
Net income per share applicable to ZAIS Financial Corp. | |||||||||||||||||
common stockholders - Basic | $ | 2.91 | $ | (0.85 | ) | $ | 3.19 | $ | (0.78 | ) | |||||||
Net income per share applicable to ZAIS Financial Corp. | |||||||||||||||||
common stockholders - Diluted | $ | 2.47 | $ | (0.85 | ) | $ | 2.79 | $ | (0.78 | ) |
Stockholders_Equity_Tables
Stockholders' Equity (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Stockholders' Equity [Abstract] | ' | |||||||
Schedule of Dividends Declared | ' | |||||||
During the six months ended June 30, 2014 and year ended December 31, 2013, the Company declared the following dividends: | ||||||||
Amount | ||||||||
Declaration Date | Record Date | Payment Date | per Share | |||||
Year ended December 31, 2013: | ||||||||
14-May-13 | 24-May-13 | 31-May-13 | $ | 0.22 | ||||
25-Jun-13 | 9-Jul-13 | 23-Jul-13 | $ | 0.45 | ||||
18-Sep-13 | 30-Sep-13 | 11-Oct-13 | $ | 0.5 | ||||
December 19, 2013(1) | 31-Dec-13 | 15-Jan-14 | $ | 0.95 | ||||
Six months ended June 30, 2014: | ||||||||
20-Mar-14 | 31-Mar-14 | 14-Apr-14 | $ | 0.4 | ||||
18-Jun-14 | 30-Jun-14 | 15-Jul-14 | $ | 0.4 | ||||
____________________ | ||||||||
-1 | Regular cash dividend of $0.40 per share of common stock and OP unit for the quarter ending December 31, 2013, and an additional special cash dividend of $0.55 per share of its common stock and OP unit. The Company declared the special cash dividend to distribute taxable income from 2013 attributable to the termination of interest rate swap contracts. |
Offsetting_Assets_and_Liabilit1
Offsetting Assets and Liabilities (Tables) | 6 Months Ended | |||||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||||
Offsetting Assets and Liabilities [Abstract] | ' | |||||||||||||||||||||
Schedule of Offsetting of Assets | ' | |||||||||||||||||||||
Offsetting of Assets | ||||||||||||||||||||||
Net Amounts of | ||||||||||||||||||||||
Gross Amounts | Assets Presented | Gross Amounts Not Offset in the | ||||||||||||||||||||
Gross Amounts | Offset in the | in the | Consolidated Balance Sheets | |||||||||||||||||||
of Recognized | Consolidated | Consolidated | Financial | Cash Collateral | ||||||||||||||||||
Assets | Balance Sheets | Balance Sheets | Instruments | Received(1) | Net Amount | |||||||||||||||||
30-Jun-14 | ||||||||||||||||||||||
Interest rate swaption | $ | 368,136 | $ | - | $ | 368,136 | $ | - | $ | - | $ | 368,136 | ||||||||||
Total | $ | 368,136 | $ | - | $ | 368,136 | $ | - | $ | - | $ | 368,136 | ||||||||||
31-Dec-13 | ||||||||||||||||||||||
Interest rate swap agreements | $ | 396,068 | $ | (111,614 | ) | $ | 284,454 | $ | - | $ | - | $ | 284,454 | |||||||||
Total | $ | 396,068 | $ | (111,614 | ) | $ | 284,454 | $ | - | $ | - | $ | 284,454 | |||||||||
____________________ | ||||||||||||||||||||||
-1 | At June 30, 2014, the Company pledged $4,401,503 of cash collateral in relation to its interest rate swaption; with the total net counterparty exposure for this position totaling $4,769,639. At December 31, 2013, the Company pledged $767,708 of cash collateral in relation to its interest rate swap agreements; with the total net counterparty exposure for this position totaling $1,052,162. | |||||||||||||||||||||
Schedule of Offsetting of Liabilities | ' | |||||||||||||||||||||
Offsetting of Liabilities | ||||||||||||||||||||||
Net Amounts of | ||||||||||||||||||||||
Gross Amounts | Liabilities Presented | Gross Amounts Not Offset in the | ||||||||||||||||||||
Gross Amounts | Offset in the | in the | Consolidated Balance Sheets | |||||||||||||||||||
of Recognized | Consolidated | Consolidated | Financial | Cash Collateral | ||||||||||||||||||
Liabilities | Balance Sheets | Balance Sheets | Instruments | Received | Net Amount | |||||||||||||||||
30-Jun-14 | ||||||||||||||||||||||
Loan Repurchase Facility | $ | 293,609,481 | $ | - | $ | 293,609,481 | $ | (293,609,481 | ) | $ | - | $ | - | |||||||||
Securities repurchase agreements | 156,343,944 | - | 156,343,944 | (153,812,314 | ) | (2,531,630 | ) | - | ||||||||||||||
Interest rate swap agreements | 547,268 | (104,683 | ) | 442,585 | - | (442,585 | ) | - | ||||||||||||||
Total | $ | 450,500,693 | $ | (104,683 | ) | $ | 450,396,010 | $ | (447,421,795 | ) | $ | (2,974,215 | ) | $ | - | |||||||
31-Dec-13 | ||||||||||||||||||||||
Loan Repurchase Facility | $ | 236,058,976 | $ | - | $ | 236,058,976 | $ | (236,058,976 | ) | $ | - | $ | - | |||||||||
Securities repurchase agreements | 138,591,678 | - | 138,591,678 | (137,231,150 | ) | (1,360,528 | ) | - | ||||||||||||||
$ | 374,650,654 | $ | - | $ | 374,650,654 | $ | (373,290,126 | ) | $ | (1,360,528 | ) | $ | - |
Formation_and_Organization_Det
Formation and Organization (Details) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | 0 Months Ended | 1 Months Ended | ||
Dec. 31, 2012 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Feb. 13, 2013 | Dec. 31, 2012 | Oct. 31, 2012 | |
Common Stock [Member] | Common Stock [Member] | Common Stock [Member] | |||||
Formation and Organization [Abstract] | ' | ' | ' | ' | ' | ' | ' |
Common stock, shares authorized | ' | 500,000,000 | ' | 500,000,000 | ' | ' | ' |
Common stock, par value per share | ' | $0.00 | ' | $0.00 | ' | ' | ' |
Preferred Stock, Shares Authorized | ' | 50,000,000 | ' | 50,000,000 | ' | ' | ' |
Preferred Stock, Par or Stated Value Per Share | ' | $0.00 | ' | $0.00 | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Shares of stock issued | ' | ' | ' | ' | 5,650,000 | 36,581 | 195,458 |
Common stock issued, price per share | ' | ' | ' | ' | $21.25 | ' | ' |
Gross proceeds from issuance initial public offering | ' | ' | ' | ' | $120,100,000 | ' | ' |
Offering fees | 763,000 | ' | 216,658 | ' | 1,200,000 | ' | ' |
Value of stock issued | ' | ' | ' | $118,862,500 | $118,900,000 | ' | ' |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended | 6 Months Ended | 6 Months Ended | |||||||
In Millions, except Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | 30-May-13 | Jun. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 |
Exchangeable Senior Notes [Member] | Loan Repurchase Facility [Member] | Loan Repurchase Facility [Member] | Mortgage Receivable [Member] | ZAIS Financial Partners, LP. [Member] | ZAIS Financial Partners, LP. [Member] | |||||
Insured Loans, Credit Concentration Risk [Member] | ||||||||||
Noncontrolling Interest [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Equity interest held | ' | ' | ' | ' | ' | ' | ' | ' | 89.60% | 89.60% |
Concentration Risk [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Concentration risk, percentage | ' | ' | ' | ' | ' | ' | ' | 10.70% | ' | ' |
Offering Costs | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Deferred offering costs | $1.20 | ' | $1.20 | ' | ' | ' | ' | ' | ' | ' |
Line of Credit Facility [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum amount of facility | ' | ' | ' | ' | ' | 325 | 250 | ' | ' | ' |
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Principal amount | ' | ' | ' | ' | $57.50 | ' | ' | ' | ' | ' |
Net Income (Loss) Per Share | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Dilutive effect of the Exchangeable Senior Notes | 1,779,560 | ' | 1,779,560 | ' | ' | ' | ' | ' | ' | ' |
Fair_Value_Schedule_of_Financi
Fair Value (Schedule of Financial Instruments Accounted for at Fair Value on a Recurring Basis) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Assets | ' | ' |
Derivative assets | $368,136 | $284,454 |
Liabilities | ' | ' |
Derivative liabilities | 1,550,129 | 1,471,607 |
Fair Value, Measurements, Recurring [Member] | ' | ' |
Assets | ' | ' |
Mortgage loans | 433,553,720 | 331,785,542 |
Derivative assets | 368,136 | 284,454 |
Total | 673,249,395 | 558,225,217 |
Liabilities | ' | ' |
Derivative liabilities | 1,550,129 | 1,471,607 |
Total | 1,550,129 | 1,471,607 |
Fair Value, Measurements, Recurring [Member] | Non-Agency RMBS [Member] | ' | ' |
Assets | ' | ' |
Investment securities | 227,293,536 | 226,155,221 |
Fair Value, Measurements, Recurring [Member] | Other Investment Securities [Member] | ' | ' |
Assets | ' | ' |
Investment securities | 12,034,003 | ' |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | ' | ' |
Assets | ' | ' |
Mortgage loans | ' | ' |
Derivative assets | ' | ' |
Total | ' | ' |
Liabilities | ' | ' |
Derivative liabilities | ' | ' |
Total | ' | ' |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Non-Agency RMBS [Member] | ' | ' |
Assets | ' | ' |
Investment securities | ' | ' |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Other Investment Securities [Member] | ' | ' |
Assets | ' | ' |
Investment securities | ' | ' |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | ' | ' |
Assets | ' | ' |
Mortgage loans | ' | ' |
Derivative assets | 368,136 | 284,454 |
Total | 368,136 | 284,454 |
Liabilities | ' | ' |
Derivative liabilities | 1,550,129 | 1,471,607 |
Total | 1,550,129 | 1,471,607 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Non-Agency RMBS [Member] | ' | ' |
Assets | ' | ' |
Investment securities | ' | ' |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Other Investment Securities [Member] | ' | ' |
Assets | ' | ' |
Investment securities | ' | ' |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | ' | ' |
Assets | ' | ' |
Mortgage loans | 433,553,720 | 331,785,542 |
Derivative assets | ' | ' |
Total | 672,881,259 | 557,940,763 |
Liabilities | ' | ' |
Derivative liabilities | ' | ' |
Total | ' | ' |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Non-Agency RMBS [Member] | ' | ' |
Assets | ' | ' |
Investment securities | 227,293,536 | 226,155,221 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Other Investment Securities [Member] | ' | ' |
Assets | ' | ' |
Investment securities | $12,034,003 | ' |
Fair_Value_Schedule_of_Financi1
Fair Value (Schedule of Financial Instruments Utilizing Level 3 Inputs) (Details) (USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Mortgage Loans [Member] | ' | ' |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' |
Beginning balance | $331,785,542 | ' |
Total net transfers into/out of Level 3 | ' | ' |
Acquisitions | 84,795,975 | 334,162,044 |
Proceeds from sales | ' | ' |
Net accretion of discounts | 3,423,653 | 3,059,231 |
Proceeds from principal repayments | -9,509,379 | -13,871,059 |
Total losses (realized / unrealized) included in earnings | -4,302,177 | -6,344,877 |
Total gains (realized / unrealized) included in earnings | 27,360,106 | 14,780,203 |
Ending balance | 433,553,720 | 331,785,542 |
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | 22,695,371 | 7,136,482 |
Residential Mortgage Backed Securities [Member] | ' | ' |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' |
Beginning balance | 226,155,221 | 100,911,651 |
Total net transfers into/out of Level 3 | ' | ' |
Acquisitions | 11,830,958 | 234,397,506 |
Proceeds from sales | -2,072,198 | -68,190,593 |
Net accretion of discounts | 2,603,804 | 3,727,702 |
Proceeds from principal repayments | -15,582,121 | -39,338,730 |
Total losses (realized / unrealized) included in earnings | -468,061 | -9,138,009 |
Total gains (realized / unrealized) included in earnings | 4,825,933 | 3,785,694 |
Ending balance | 227,293,536 | 226,155,221 |
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | 4,316,518 | -2,822,969 |
Other Investment Securities [Member] | ' | ' |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' |
Beginning balance | ' | ' |
Total net transfers into/out of Level 3 | ' | ' |
Acquisitions | 10,676,953 | ' |
Proceeds from sales | ' | ' |
Net accretion of discounts | 80,424 | ' |
Proceeds from principal repayments | ' | ' |
Total losses (realized / unrealized) included in earnings | ' | ' |
Total gains (realized / unrealized) included in earnings | 1,276,626 | ' |
Ending balance | 12,034,003 | ' |
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | $1,276,626 | ' |
Fair_Value_Schedule_of_Quantit
Fair Value (Schedule of Quantitative Information about Level 3 Fair Value Measurements) (Details) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | ||
Mortgage Loans [Member] | Level 3 [Member] | ' | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' | |
Fair Value | 433,553,720 | |
Mortgage Loans [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 1.30% | |
Constant default rate | 0.30% | |
Loss severity | 6.80% | |
Delinquency | 3.20% | |
Mortgage Loans [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 8.40% | |
Constant default rate | 4.30% | |
Loss severity | 46.00% | |
Delinquency | 12.80% | |
Mortgage Loans [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 3.80% | |
Constant default rate | 2.90% | |
Loss severity | 26.00% | |
Delinquency | 10.40% | |
Non-Agency RMBS [Member] | Level 3 [Member] | ' | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' | |
Fair Value | 227,293,536 | [1] |
Alternative - A [Member] | Level 3 [Member] | ' | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' | |
Fair Value | 87,957,373 | [1] |
Alternative - A [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 1.20% | [1] |
Constant default rate | 0.10% | [1] |
Loss severity | 0.00% | [1] |
Delinquency | 1.20% | [1] |
Alternative - A [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 27.10% | [1] |
Constant default rate | 15.60% | [1] |
Loss severity | 93.60% | [1] |
Delinquency | 28.00% | [1] |
Alternative - A [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 12.20% | [1] |
Constant default rate | 3.10% | [1] |
Loss severity | 26.10% | [1] |
Delinquency | 10.30% | [1] |
Pay Option Adjustable Rate [Member] | Level 3 [Member] | ' | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' | |
Fair Value | 27,446,408 | [1] |
Pay Option Adjustable Rate [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 1.40% | [1] |
Constant default rate | 2.00% | [1] |
Loss severity | 0.10% | [1] |
Delinquency | 7.40% | [1] |
Pay Option Adjustable Rate [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 19.70% | [1] |
Constant default rate | 9.20% | [1] |
Loss severity | 63.10% | [1] |
Delinquency | 32.60% | [1] |
Pay Option Adjustable Rate [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 9.10% | [1] |
Constant default rate | 4.60% | [1] |
Loss severity | 42.00% | [1] |
Delinquency | 15.90% | [1] |
Prime [Member] | Level 3 [Member] | ' | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' | |
Fair Value | 93,817,617 | [1] |
Prime [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 2.10% | [1] |
Constant default rate | 0.10% | [1] |
Loss severity | 0.10% | [1] |
Delinquency | 2.40% | [1] |
Prime [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 17.60% | [1] |
Constant default rate | 8.30% | [1] |
Loss severity | 78.40% | [1] |
Delinquency | 25.30% | [1] |
Prime [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 9.40% | [1] |
Constant default rate | 4.00% | [1] |
Loss severity | 30.60% | [1] |
Delinquency | 12.40% | [1] |
Subprime [Member] | Level 3 [Member] | ' | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' | |
Fair Value | 18,072,138 | [1] |
Subprime [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 1.70% | [1] |
Constant default rate | 3.10% | [1] |
Loss severity | 7.50% | [1] |
Delinquency | 12.50% | [1] |
Subprime [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 13.00% | [1] |
Constant default rate | 13.20% | [1] |
Loss severity | 93.10% | [1] |
Delinquency | 24.00% | [1] |
Subprime [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 6.60% | [1] |
Constant default rate | 4.40% | [1] |
Loss severity | 46.90% | [1] |
Delinquency | 16.20% | [1] |
Other Investment Securities [Member] | Level 3 [Member] | ' | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' | |
Fair Value | 12,034,003 | [1] |
Other Investment Securities [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ' | |
Unobservable Input | ' | |
Constant voluntary prepayment | 10.00% | [1] |
[1] | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. |
Fair_Value_Schedule_of_Fair_Va
Fair Value (Schedule of Fair Value Option) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | ||
Mortgage Loans [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | $433,553,720 | $331,785,542 | ||
Unpaid Principal and/or Notional Balance | 489,964,409 | 398,828,497 | ||
Difference | -56,410,689 | -67,042,955 | ||
Non-Agency RMBS [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | 227,293,536 | 226,155,221 | ||
Unpaid Principal and/or Notional Balance | 310,577,527 | [1] | 324,241,597 | [1] |
Difference | -83,283,991 | -98,086,376 | ||
Other Investment Securities [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | 12,034,003 | ' | ||
Unpaid Principal and/or Notional Balance | 10,000,000 | ' | ||
Difference | 2,034,003 | ' | ||
Financial Instruments [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | 672,881,259 | 557,940,763 | ||
Unpaid Principal and/or Notional Balance | 810,541,936 | [1] | 723,070,094 | [1] |
Difference | -137,660,677 | -165,129,331 | ||
Interest-Only Securities [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Unpaid Principal and/or Notional Balance | $55,800,000 | $64,300,000 | ||
[1] | Non-Agency RMBS includes an IO with a notional balance of $55.8 million and $64.3 million at June 30, 2014 and December 31, 2013, respectively. |
Fair_Value_Schedule_of_Fair_Va1
Fair Value (Schedule of Fair Value of Other Financial Instruments) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Assets | ' | ' |
Restricted cash | $8,144,052 | $2,128,236 |
Estimate of Fair Value Measurement [Member] | ' | ' |
Assets | ' | ' |
Cash | 27,619,043 | 57,060,806 |
Restricted cash | 8,144,052 | 2,128,236 |
Liabilities | ' | ' |
Loan repurchase facility | 293,609,481 | 236,727,512 |
Securities repurchase agreements | 156,520,762 | 138,790,158 |
Exchangeable Senior Notes | $56,438,289 | $54,737,573 |
Mortgage_Loans_Schedule_of_Acq
Mortgage Loans (Schedule of Acquisition of Mortgage Loans) (Details) (USD $) | 0 Months Ended | ||||||
In Millions, unless otherwise specified | Mar. 27, 2014 | Aug. 28, 2013 | Jul. 25, 2013 | 30-May-13 | 31-May-13 | Mar. 22, 2013 | |
Mortgage Loans on Real Estate [Line Items] | ' | ' | ' | ' | ' | ' | |
Unpaid principal balance of loans acquired | $100.40 | $98.20 | $162.40 | ' | $134.50 | $17.70 | |
Line of Credit Facility [Line Items] | ' | ' | ' | ' | ' | ' | |
Utilization of facility | ' | ' | ' | 10.6 | ' | ' | |
Loan Repurchase Facility [Member] | ' | ' | ' | ' | ' | ' | |
Line of Credit Facility [Line Items] | ' | ' | ' | ' | ' | ' | |
Utilization of facility | $60.60 | $54.80 | $98.70 | ' | [1] | $78.50 | ' |
[1] | On May 30, 2013, the Company entered into the Loan Repurchase Facility and utilized $10.6 million of the Loan Repurchase Facility to finance its then existing residential mortgage loan portfolio. |
Mortgage_Loans_Schedule_of_Fai
Mortgage Loans (Schedule of Fair Value, Principal Balance and Weighted Average Coupon and Yield) (Details) (Mortgage Receivable [Member], USD $) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2014 | Dec. 31, 2013 | |||
Mortgage Loans on Real Estate [Line Items] | ' | ' | ||
Unpaid Principal Balance | $489,964,409 | $398,828,497 | ||
Premium (Discount) | -86,197,696 | -74,179,437 | ||
Amortized Cost | 403,766,713 | 324,649,060 | ||
Gross Unrealized | ' | ' | ||
Gains | 35,129,167 | [1] | 13,386,924 | [2] |
Losses | -5,342,160 | [1] | -6,250,442 | [2] |
Fair Value | 433,553,720 | 331,785,542 | ||
Weighted Average Coupon | 4.25% | 4.24% | ||
Weighted Average Yield | 7.03% | [3] | 6.91% | [3] |
Fixed [Member] | ' | ' | ||
Mortgage Loans on Real Estate [Line Items] | ' | ' | ||
Unpaid Principal Balance | 282,361,337 | 212,701,494 | ||
Premium (Discount) | -54,730,082 | -43,530,581 | ||
Amortized Cost | 227,631,255 | 169,170,913 | ||
Gross Unrealized | ' | ' | ||
Gains | 24,102,606 | [1] | 7,842,598 | [2] |
Losses | -1,640,726 | [1] | -3,558,171 | [2] |
Fair Value | 250,093,135 | 173,455,340 | ||
Weighted Average Coupon | 4.51% | 4.56% | ||
Weighted Average Yield | 7.03% | [3] | 7.05% | [3] |
ARM [Member] | ' | ' | ||
Mortgage Loans on Real Estate [Line Items] | ' | ' | ||
Unpaid Principal Balance | 176,654,287 | 170,178,466 | ||
Premium (Discount) | -23,903,555 | -25,617,563 | ||
Amortized Cost | 152,750,732 | 144,560,903 | ||
Gross Unrealized | ' | ' | ||
Gains | 10,012,628 | [1] | 5,088,302 | [2] |
Losses | -830,771 | [1] | -1,556,430 | [2] |
Fair Value | 161,932,589 | 148,092,775 | ||
Weighted Average Coupon | 3.68% | 3.76% | ||
Weighted Average Yield | 6.94% | [3] | 6.67% | [3] |
Performing Loans [Member] | ' | ' | ||
Mortgage Loans on Real Estate [Line Items] | ' | ' | ||
Unpaid Principal Balance | 459,015,624 | 382,879,960 | ||
Premium (Discount) | -78,633,637 | -69,148,144 | ||
Amortized Cost | 380,381,987 | 313,731,816 | ||
Gross Unrealized | ' | ' | ||
Gains | 34,115,234 | [1] | 12,930,900 | [2] |
Losses | -2,471,497 | [1] | -5,114,601 | [2] |
Fair Value | 412,025,724 | 321,548,115 | ||
Weighted Average Coupon | 4.19% | 4.20% | ||
Weighted Average Yield | 7.00% | [3] | 6.88% | [3] |
Nonperforming Loans [Member] | ' | ' | ||
Mortgage Loans on Real Estate [Line Items] | ' | ' | ||
Unpaid Principal Balance | 30,948,785 | [4] | 15,948,537 | [4] |
Premium (Discount) | -7,564,059 | [4] | -5,031,293 | [4] |
Amortized Cost | 23,384,726 | [4] | 10,917,244 | [4] |
Gross Unrealized | ' | ' | ||
Gains | 1,013,933 | [1],[4] | 456,024 | [2],[4] |
Losses | -2,870,663 | [1],[4] | -1,135,841 | [2],[4] |
Fair Value | $21,527,996 | [4] | $10,237,427 | [4] |
Weighted Average Coupon | 5.09% | [4] | 5.06% | [4] |
Weighted Average Yield | 7.65% | [3],[4] | 8.03% | [3],[4] |
[1] | The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans. The Company recorded a gain of $22.0 million and a gain of $1.6 million for the three months ended June 30, 2014 and June 30, 2013, respectively, and $22.7 million and $1.6 million for the six months ended June 30, 2014 and June 30, 2013, respectively, as change in unrealized gain or loss on mortgage loans in the consolidated statements of operations. | |||
[2] | The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans. | |||
[3] | Unleveraged yield. | |||
[4] | Loans that are delinquent for 60 days or more are considered non-performing. |
Mortgage_Loans_Parenthetical_I
Mortgage Loans (Parenthetical Information) (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Mortgage Loans [Abstract] | ' | ' | ' | ' |
Change in unrealized gain or loss on mortgage loans | $21,960,921 | $1,596,197 | $22,650,525 | $1,567,291 |
Threshold period past due after which loans are considered considered non-performing | ' | ' | '60 days | ' |
Mortgage_Loans_Schedule_of_Mor
Mortgage Loans (Schedule of Mortgage Loans at Fair Value) (Details) (Mortgage Receivable [Member], USD $) | Jun. 30, 2014 | Dec. 31, 2013 | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | $433,553,720 | $331,785,542 | ||
Unpaid Principal Balance | 489,964,409 | 398,828,497 | ||
Difference | -56,410,689 | -67,042,955 | ||
Fixed [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | 250,093,135 | 173,455,340 | ||
Unpaid Principal Balance | 282,361,337 | 212,701,494 | ||
Difference | -32,268,202 | -39,246,154 | ||
ARM [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | 161,932,589 | 148,092,775 | ||
Unpaid Principal Balance | 176,654,287 | 170,178,466 | ||
Difference | -14,721,698 | -22,085,691 | ||
Performing Loans [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | 412,025,724 | 321,548,115 | ||
Unpaid Principal Balance | 459,015,624 | 382,879,960 | ||
Difference | -46,989,900 | -61,331,845 | ||
Nonperforming Loans [Member] | ' | ' | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ' | ' | ||
Fair Value | 21,527,996 | [1] | 10,237,427 | [1] |
Unpaid Principal Balance | 30,948,785 | [1] | 15,948,537 | [1] |
Difference | ($9,420,789) | ($5,711,110) | ||
[1] | Loans that are delinquent for 60 days or more are considered non-performing. |
Mortgage_Loans_Narrative_Detai
Mortgage Loans (Narrative) (Details) | 6 Months Ended |
Jun. 30, 2014 | |
Mortgage Loans on Real Estate [Line Items] | ' |
Mortgage loan interest rate, minimum | 1.75% |
Mortgage loan interest rate, maximum | 12.20% |
Minimum [Member] | ' |
Mortgage Loans on Real Estate [Line Items] | ' |
Mortgage loan interest rate maturity | '1 year |
Maximum [Member] | ' |
Mortgage Loans on Real Estate [Line Items] | ' |
Mortgage loan interest rate maturity | '46 years |
Mortgage_Loans_Schedule_of_Con
Mortgage Loans (Schedule of Concentrations of Credit Risk) (Details) (Mortgage Receivable [Member]) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Loans with Unpaid Principal Balance in Excess of Fair Value of Collateral [Member] | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration risk, percentage | 65.50% | 73.60% |
Geographic Concentration Risk [Member] | California [Member] | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration risk, percentage | 25.40% | 25.60% |
Geographic Concentration Risk [Member] | Florida [Member] | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration risk, percentage | 16.50% | 17.80% |
Geographic Concentration Risk [Member] | Georgia [Member] | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration risk, percentage | 6.40% | 6.80% |
Mortgage_Loans_Schedule_of_Cha
Mortgage Loans (Schedule of Change in Accretable Yield) (Details) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Change in accretable yield: | ' |
Accretable yield, beginning balance | $223,401,697 |
Acquisitions | 55,532,098 |
Accretion | -12,469,507 |
Reclassifications from nonaccretable difference | 9,851,517 |
Accretable yield, ending balance | $276,315,805 |
Real_Estate_Securities_and_Oth2
Real Estate Securities and Other Investment Securities (Schedule of Information Regarding Real Estate Securities) (Details) (USD $) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2014 | Dec. 31, 2013 | |||
Alternative - A [Member] | ' | ' | ||
Investment Holdings [Line Items] | ' | ' | ||
Principal or Notional Balance | $156,601,029 | [1] | $160,590,487 | [2] |
Premium (Discount) | -72,068,376 | [1] | -80,206,745 | [2] |
Amortized Cost | 84,532,653 | [1] | 80,383,742 | [2] |
Gross Unrealized | ' | ' | ||
Gains | 3,650,686 | [1],[3] | 2,414,864 | [2],[4] |
Losses | -225,966 | [1],[3] | -1,112,077 | [2],[4] |
Fair Value | 87,957,373 | [1] | 81,686,529 | [2] |
Weighted Average Coupon | 4.13% | [1] | 4.26% | [2] |
Weighted Average Yield | 7.41% | [1],[5] | 6.77% | [2],[5] |
Pay Option Adjustable Rate [Member] | ' | ' | ||
Investment Holdings [Line Items] | ' | ' | ||
Principal or Notional Balance | 33,037,784 | 34,374,028 | ||
Premium (Discount) | -6,243,093 | -7,057,026 | ||
Amortized Cost | 26,794,691 | 27,317,002 | ||
Gross Unrealized | ' | ' | ||
Gains | 771,606 | [3] | 464,756 | [4] |
Losses | -119,889 | [3] | -345,915 | [4] |
Fair Value | 27,446,408 | 27,435,843 | ||
Weighted Average Coupon | 0.73% | 0.76% | ||
Weighted Average Yield | 6.92% | [5] | 6.80% | [5] |
Prime [Member] | ' | ' | ||
Investment Holdings [Line Items] | ' | ' | ||
Principal or Notional Balance | 101,800,879 | 109,136,108 | ||
Premium (Discount) | -12,419,696 | -13,590,489 | ||
Amortized Cost | 89,381,183 | 95,545,619 | ||
Gross Unrealized | ' | ' | ||
Gains | 4,482,363 | [3] | 3,751,248 | [4] |
Losses | -45,929 | [3] | -767,825 | [4] |
Fair Value | 93,817,617 | 98,529,042 | ||
Weighted Average Coupon | 4.68% | 4.77% | ||
Weighted Average Yield | 6.73% | [5] | 6.45% | [5] |
Subprime [Member] | ' | ' | ||
Investment Holdings [Line Items] | ' | ' | ||
Principal or Notional Balance | 19,137,835 | 20,140,974 | ||
Premium (Discount) | -1,499,380 | -1,894,417 | ||
Amortized Cost | 17,638,455 | 18,246,557 | ||
Gross Unrealized | ' | ' | ||
Gains | 563,759 | [3] | 536,407 | [4] |
Losses | -130,076 | [3] | -279,157 | [4] |
Fair Value | 18,072,138 | 18,503,807 | ||
Weighted Average Coupon | 1.07% | 1.07% | ||
Weighted Average Yield | 6.08% | [5] | 5.97% | [5] |
Total RMBS [Member] | ' | ' | ||
Investment Holdings [Line Items] | ' | ' | ||
Principal or Notional Balance | 310,577,527 | 324,241,597 | ||
Premium (Discount) | -92,230,545 | -102,748,677 | ||
Amortized Cost | 218,346,982 | 221,492,920 | ||
Gross Unrealized | ' | ' | ||
Gains | 9,468,414 | [3] | 7,167,275 | [4] |
Losses | -521,860 | [3] | -2,504,974 | [4] |
Fair Value | 227,293,536 | 226,155,221 | ||
Weighted Average Coupon | 3.70% | 3.80% | ||
Weighted Average Yield | 6.96% | [5] | 6.57% | [5] |
Other Investment Securities [Member] | ' | ' | ||
Investment Holdings [Line Items] | ' | ' | ||
Principal or Notional Balance | 10,000,000 | ' | ||
Premium (Discount) | 757,377 | ' | ||
Amortized Cost | 10,757,377 | [6] | ' | |
Gross Unrealized | ' | ' | ||
Gains | 1,276,626 | [3] | ' | |
Losses | ' | [3] | ' | |
Fair Value | $12,034,003 | [6] | ' | |
Weighted Average Coupon | 5.40% | ' | ||
Weighted Average Yield | 6.66% | [5],[6] | ' | |
[1] | Alternative - A RMBS includes an IO with a notional balance of $55.8 million. | |||
[2] | Alternative - A RMBS includes an IO with a notional balance of $64.3 million. | |||
[3] | The Company has elected the fair value option pursuant to ASC 825 for its real estate securities and Other Investment Securities. The Company recorded a gain of $1.5 million and a loss of $15.6 million for the three months ended June 30, 2014 and June 30, 2013, respectively, and a gain of $4.3 million and a loss of $14.7 for the six months ended June 30, 2014 and June 30, 2013, respectively, as change in unrealized gain or loss on real estate securities in the consolidated statements of operations. The Company also recorded a gain of $0.9 million for the three months ended June 30, 2014 and a gain of $1.3 million for the six months ended June 30, 2014 as change in unrealized gain or loss on other investment securities in the consolidated statements of operations. | |||
[4] | The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. | |||
[5] | Unleveraged yield. | |||
[6] | Actual maturities of other investment securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. |
Real_Estate_Securities_and_Oth3
Real Estate Securities and Other Investment Securities (Parenthetical Information Regarding Real Estate Securities) (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | |
Interest-Only Securities [Member] | Interest-Only Securities [Member] | |||||
Investment Holdings [Line Items] | ' | ' | ' | ' | ' | ' |
Principal or Notional Balance | ' | ' | ' | ' | $55,800,000 | $64,300,000 |
Change in unrealized gain or loss on real estate securities | 1,548,195 | -15,642,642 | 4,284,253 | -14,739,365 | ' | ' |
Change in unrealized gain or loss on other investment securities | $905,862 | ' | $1,276,626 | ' | ' | ' |
Real_Estate_Securities_and_Oth4
Real Estate Securities and Other Investment Securities (Schedule of Certain Information Regarding Real Estate Securities) (Details) (USD $) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2014 | Dec. 31, 2013 | |||
Non-Agency RMBS [Member] | ' | ' | ||
Greater than 5 years | ' | ' | ||
Fair Value | $227,293,536 | [1] | $226,155,221 | [1] |
Amortized Cost | 218,346,982 | [1] | 221,492,920 | [1] |
Weighted Average Yield | 6.96% | [1] | 6.57% | [1] |
Fair Value | 227,293,536 | [1] | 226,155,221 | [1] |
Amortized Cost | 218,346,982 | [1] | 221,492,920 | [1] |
Weighted Average Yield | 6.96% | [1] | 6.57% | [1] |
Other Investment Securities [Member] | ' | ' | ||
Greater than 5 years | ' | ' | ||
Fair Value | 12,034,003 | [2] | ' | |
Amortized Cost | 10,757,377 | [2] | ' | |
Weighted Average Yield | 6.66% | [2] | ' | |
Fair Value | 12,034,003 | [2] | ' | |
Amortized Cost | $10,757,377 | [2] | ' | |
Weighted Average Yield | 6.66% | [2],[3] | ' | |
[1] | Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||
[2] | Actual maturities of other investment securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||
[3] | Unleveraged yield. |
Real_Estate_Securities_and_Oth5
Real Estate Securities and Other Investment Securities (Narrative) (Details) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | |||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | |
Residential Mortgage Backed Securities [Member] | Residential Mortgage Backed Securities [Member] | Residential Mortgage Backed Securities [Member] | Residential Mortgage Backed Securities [Member] | Residential Mortgage Backed Securities [Member] | Residential Mortgage Backed Securities [Member] | Other Investment Securities [Member] | |||||
Minimum [Member] | Minimum [Member] | Maximum [Member] | Maximum [Member] | Weighted Average [Member] | Weighted Average [Member] | ||||||
Investment Holdings [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Contractual maturities | ' | ' | ' | ' | '7 years 1 month 6 days | '7 years 8 months 12 days | '32 years 7 months 6 days | '33 years | '23 years 8 months 12 days | '24 years | '9 years 3 months 18 days |
Proceeds from the sale of real estate securities | ' | $47,111,700 | $2,072,198 | $53,913,098 | ' | ' | ' | ' | ' | ' | ' |
Realized gain (loss) on the sale of real estate securities | ' | -206,876 | 73,619 | -206,876 | ' | ' | ' | ' | ' | ' | ' |
Realized loss on OTTI | ' | ($39,179) | ' | ($39,179) | ' | ' | ' | ' | ' | ' | ' |
Loan_Repurchase_Facility_Narra
Loan Repurchase Facility (Narrative) (Details) (USD $) | 0 Months Ended | 6 Months Ended | ||||||
In Millions, unless otherwise specified | Mar. 27, 2014 | Aug. 28, 2013 | Jul. 25, 2013 | 30-May-13 | 31-May-13 | Mar. 22, 2013 | Jun. 30, 2014 | 30-May-13 |
Loan Repurchase Facility [Member] | Loan Repurchase Facility [Member] | |||||||
Line of Credit Facility [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' |
Unpaid principal balance of loans acquired | $100.40 | $98.20 | $162.40 | ' | $134.50 | $17.70 | ' | ' |
Term of facility | ' | ' | ' | ' | ' | ' | '364 days | ' |
Increase in borrowing capacity | ' | ' | ' | ' | ' | ' | 75 | ' |
Maximum amount of facility | ' | ' | ' | ' | ' | ' | $325 | $250 |
Loan_Repurchase_Facility_Sched
Loan Repurchase Facility (Schedule of Certain Information Regarding Loan Repo Facility) (Details) (Mortgage Loans [Member], USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | $293,609,481 | $236,058,976 |
Weighted Average Rate | 2.90% | 2.92% |
91-180 Days [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | ' | 236,058,976 |
Weighted Average Rate | ' | 2.92% |
Greater than 180 Days to 1 Year [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | $293,609,481 | ' |
Weighted Average Rate | 2.90% | ' |
Loan_Repurchase_Facility_Sched1
Loan Repurchase Facility (Schedule of Information Regarding Posting of Mortgage Loan Collateral) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | ||
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' | ||
Fair value of Trust Certificates pledged as collateral under Loan Repurchase Facility | $433,299,627 | $331,522,165 | ||
Cash pledged as collateral under Loan Repurchase Facility | 2,531,630 | 1,360,528 | ||
Loan Repurchase Facility [Member] | ' | ' | ||
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' | ||
Unused Amount | 31,390,519 | [1] | 13,941,024 | [1] |
Mortgage Loans [Member] | ' | ' | ||
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' | ||
Repurchase agreements secured by mortgage loans | 293,609,481 | 236,058,976 | ||
Fair value of Trust Certificates pledged as collateral under Loan Repurchase Facility | 433,299,627 | 331,522,165 | ||
Fair value of mortgage loans not pledged as collateral under Loan Repurchase Facility | 254,093 | 263,377 | ||
Cash pledged as collateral under Loan Repurchase Facility | ' | ' | ||
[1] | The amount the Company is able to borrow under the Loan Repurchase Facility is tied to the fair value of unencumbered Trust Certificates eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold. |
Loan_Repurchase_Facility_Sched2
Loan Repurchase Facility (Schedule of Financial Information) (Details) (Loan Repurchase Facility [Member], USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Loan Repurchase Facility [Member] | ' | ' | ' | ' |
Line of Credit Facility [Line Items] | ' | ' | ' | ' |
Weighted-average interest rate | 2.93% | 2.94% | 2.92% | 2.94% |
Average balance of loans sold under the agreements to repurchase | ' | $266,499 | $192,380 | $266,499 |
Maximum daily amount outstanding | 297,401,891 | 89,112,325 | 297,401,891 | 89,112,325 |
Total interest expense | $2,260,080 | $289,296 | $4,090,987 | $289,296 |
Securities_Repurchase_Agreemen2
Securities Repurchase Agreements (Schedule of Certain Information Regarding Repurchase Agreements) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Non-Agency RMBS [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | $147,982,945 | $138,591,678 |
Weighted Average Rate | 1.78% | 1.89% |
Other Investment Securities [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | 8,360,999 | ' |
Weighted Average Rate | 1.75% | ' |
30 Days or Less [Member] | Non-Agency RMBS [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | 81,648,945 | 121,913,678 |
Weighted Average Rate | 1.79% | 1.90% |
30 Days or Less [Member] | Other Investment Securities [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | 8,360,999 | ' |
Weighted Average Rate | 1.75% | ' |
31-60 Days [Member] | Non-Agency RMBS [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | 5,858,000 | 6,415,000 |
Weighted Average Rate | 1.77% | 1.84% |
31-60 Days [Member] | Other Investment Securities [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | ' | ' |
Weighted Average Rate | ' | ' |
61-90 Days [Member] | Non-Agency RMBS [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | 19,862,000 | 10,263,000 |
Weighted Average Rate | 1.83% | 1.85% |
61-90 Days [Member] | Other Investment Securities [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | ' | ' |
Weighted Average Rate | ' | ' |
Greater Than 90 Days [Member] | Non-Agency RMBS [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | 40,614,000 | ' |
Weighted Average Rate | 1.73% | ' |
Greater Than 90 Days [Member] | Other Investment Securities [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Balance | ' | ' |
Weighted Average Rate | ' | ' |
Securities_Repurchase_Agreemen3
Securities Repurchase Agreements (Schedule of Information Regarding Posting of Collateral) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Fair value of investment securities pledged as collateral | $197,404,343 | $183,722,511 |
Cash pledged as collateral | 2,531,630 | 1,360,528 |
Non-Agency RMBS [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Securities repurchase agreements secured by investment securities | 147,982,945 | 138,591,678 |
Fair value of investment securities pledged as collateral | 197,404,343 | 183,722,511 |
Fair value of investment securities not pledged as collateral | 29,889,193 | 42,432,710 |
Other Investment Securities [Member] | ' | ' |
Assets Sold under Agreements to Repurchase [Line Items] | ' | ' |
Securities repurchase agreements secured by investment securities | 8,360,999 | ' |
Fair value of investment securities pledged as collateral | $12,034,003 | ' |
80_Exchangeable_Senior_Notes_d1
8.0% Exchangeable Senior Notes due 2016 (Details) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | 3 Months Ended | 6 Months Ended | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 18, 2014 | Mar. 20, 2014 | Dec. 31, 2013 | Dec. 19, 2013 | Sep. 18, 2013 | Jun. 25, 2013 | 14-May-13 | Dec. 19, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Nov. 25, 2013 | Dec. 27, 2013 | Nov. 25, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | ||
Special Cash Dividend [Member] | Exchangeable Senior Notes Conversion Option [Member] | Exchangeable Senior Notes Conversion Option [Member] | Exchangeable Senior Notes Conversion Option [Member] | Exchangeable Senior Notes [Member] | Exchangeable Senior Notes [Member] | Exchangeable Senior Notes [Member] | Exchangeable Senior Notes [Member] | Exchangeable Senior Notes [Member] | Exchangeable Senior Notes [Member] | |||||||||||||
Maximum [Member] | ||||||||||||||||||||||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Principal amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $57,500,000 | $57,500,000 | ' | ' | |
Proceeds from sale of debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 55,300,000 | ' | ' | ' | ' | |
Initial purchasers' discount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,700,000 | ' | ' | ' | ' | |
Aggregate estimated offering expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,200,000 | ' | ' | ' | ' | |
Carrying value of debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 55,000,000 | 55,000,000 | 54,500,000 | ' | |
Stated interest rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 8.00% | 8.00% | ' | ' | |
Effective annual rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10.20% | 10.20% | ' | ' | |
Interest expense on notes | 1,419,015 | ' | 2,831,658 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,400,000 | 2,800,000 | ' | ' | |
Maturity date | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15-Nov-16 | ' | ' | |
Percentage of shares outstanding issuable upon exchange | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20.00% | ' | ' | |
Number of shares issuable upon exchange | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,779,560 | ' | ' | |
Derivative liabilities, at fair value | $1,550,129 | ' | $1,550,129 | ' | ' | ' | $1,471,607 | ' | ' | ' | ' | ' | $1,100,000 | $1,500,000 | $1,300,000 | ' | ' | ' | ' | ' | ' | |
Conversion ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 54.3103 | 52.5417 | ' | ' | ' | 60.4229 | |
Exchange price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $19.03 | ' | ' | ' | ' | |
Dividend threshold requiring adjustment to exchange rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.50 | ' | ' | |
Dividend declared, amount per share | ' | ' | ' | ' | $0.40 | $0.40 | ' | $0.95 | [1] | $0.50 | $0.45 | $0.22 | $0.55 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Repurchase price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' | |
[1] | Regular cash dividend of $0.40 per share of common stock and OP unit for the quarter ending December 31, 2013, and an additional special cash dividend of $0.55 per share of its common stock and OP unit. The Company declared the special cash dividend to distribute taxable income from 2013 attributable to the termination of interest rate swap contracts. |
Derivative_Instruments_Narrati
Derivative Instruments (Narrative) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2014 |
Interest Rate Swaps [Member] | Interest Rate Swaps [Member] | TBAs [Member] | TBAs [Member] | TBAs [Member] | TBAs [Member] | Interest Rate Swaption [Member] | |
Short [Member] | Short [Member] | Long [Member] | Long [Member] | ||||
Derivative [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Notional amount of contracts paired off and sold | ' | ' | $388,000,000 | $473,000,000 | ' | ' | ' |
Realized gains (losses) on sale of derivative | ' | ' | 900,000 | 800,000 | ' | ' | ' |
Unrealized gains (losses) recognized | ' | ' | -4,100,000 | -3,700,000 | -1,400,000 | -1,400,000 | ' |
Cash pledged as collateral | $1,200,000 | $800,000 | ' | ' | ' | ' | $4,400,000 |
Derivative_Instruments_Schedul
Derivative Instruments (Schedule of Information Related to Derivative Instruments) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Derivative [Line Items] | ' | ' |
Notional amount | $242,200,000 | $17,200,000 |
Interest Rate Swaption [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Notional amount | 225,000,000 | ' |
Interest Rate Swaps [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Notional amount | $17,200,000 | $17,200,000 |
Derivative_Instruments_Schedul1
Derivative Instruments (Schedule of Fair Value of Derivative Instruments) (Details) (Not Designated as Hedging Instrument [Member], USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Interest Rate Swaption [Member] | ' | ' |
Derivatives, Fair Value [Line Items] | ' | ' |
Derivative assets (liabilities), at fair value | $368,136 | ' |
Interest Rate Swap [Member] | ' | ' |
Derivatives, Fair Value [Line Items] | ' | ' |
Derivative assets (liabilities), at fair value | -442,585 | 284,454 |
Exchangeable Senior Notes Conversion Option [Member] | ' | ' |
Derivatives, Fair Value [Line Items] | ' | ' |
Derivative assets (liabilities), at fair value | ($1,107,544) | ($1,471,607) |
Derivative_Instruments_Schedul2
Derivative Instruments (Schedule of Losses and Gains of Derivative Instruments) (Details) (Not Designated as Hedging Instrument [Member], USD $) | 3 Months Ended | 6 Months Ended | ||||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |||||
Interest Rate Swaption [Member] | ' | ' | ' | ' | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ' | ' | ' | ' | ||||
Gain (loss) on derivative instruments | ($1,893,322) | ' | ($4,435,614) | ' | ||||
Interest Rate Swap [Member] | ' | ' | ' | ' | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ' | ' | ' | ' | ||||
Gain (loss) on derivative instruments | -482,794 | 8,272,229 | -940,079 | 8,216,927 | ||||
Exchangeable Senior Notes Conversion Option [Member] | ' | ' | ' | ' | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ' | ' | ' | ' | ||||
Gain (loss) on derivative instruments | 473,167 | ' | 364,063 | ' | ||||
TBAs [Member] | ' | ' | ' | ' | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ' | ' | ' | ' | ||||
Gain (loss) on derivative instruments | ' | [1] | -4,573,848 | [1] | ' | [1] | -4,237,402 | [1] |
Realized gains (losses) on sale of derivative | ' | ' | ' | 800,000 | ||||
Unrealized gains (losses) recognized | ' | ' | ' | ($5,400,000) | ||||
[1] | Gains and losses from purchases and sales of TBAs consist of $0.8 million of net TBA dollar roll net interest income and a net loss of $5.4 million due to price reductions. |
Derivative_Instruments_Schedul3
Derivative Instruments (Schedule of Information About Interest Rate Swaps) (Details) (USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Derivative [Line Items] | ' | ' |
Notional Amount | $242,200,000 | $17,200,000 |
Swap [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Notional Amount | 17,200,000 | 17,200,000 |
Weighted Average Pay Rate | 2.72% | 2.72% |
Weighted Average Receive Rate | 0.23% | 0.24% |
Weighted Average Years to Maturity | '9 years 1 month 6 days | '9 years 7 months 6 days |
Swap [Member] | Derivative - Maturity Date Five [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Maturity | 31-Dec-23 | 31-Dec-23 |
Notional Amount | 17,200,000 | 17,200,000 |
Weighted Average Pay Rate | 2.72% | 2.72% |
Weighted Average Receive Rate | 0.23% | 0.24% |
Weighted Average Years to Maturity | '9 years 1 month 6 days | '9 years 7 months 6 days |
Interest Rate Swaption [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Notional Amount | 225,000,000 | ' |
Interest Rate Swaption [Member] | Derivative - Maturity Date Four [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Swaption Expiration | 31-Dec-15 | ' |
Maturity | 31-Dec-25 | ' |
Notional Amount | $225,000,000 | ' |
Strike Rate | 3.64% | ' |
Earnings_Per_Share_Details
Earnings Per Share (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Numerator: | ' | ' | ' | ' |
Net income (loss) attributable to ZAIS Financial Corp. common stockholders | $23,173,931 | ($6,780,401) | $25,398,136 | ($5,121,179) |
Effect of dilutive securities: | ' | ' | ' | ' |
Net income allocated to non-controlling interests | 2,698,204 | -788,476 | 2,956,858 | -489,382 |
Exchangeable Senior Notes | ' | ' | ' | ' |
Interest expense | 808,629 | ' | 1,613,628 | ' |
Gain on derivative instruments | -269,635 | ' | -207,462 | ' |
Total - Exchangeable Senior Notes | 538,994 | ' | 1,406,166 | ' |
Dilutive net income available to stockholders | $26,411,129 | ($7,568,877) | $29,761,160 | ($5,610,561) |
Denominator: | ' | ' | ' | ' |
Weighted average number of shares of common stock | 7,970,886 | 7,970,886 | 7,970,886 | 6,564,284 |
Effect of dilutive securities: | ' | ' | ' | ' |
Weighted average number of OP units | 926,914 | 926,914 | 926,914 | 926,914 |
Weighted average number of shares convertible under Exchangeable Senior Notes | 1,779,560 | ' | 1,779,560 | ' |
Weighted average dilutive shares | 10,677,360 | 8,897,800 | 10,677,360 | 7,491,198 |
Net income per share applicable to ZAIS Financial Corp. common stockholders - Basic | $2.91 | ($0.85) | $3.19 | ($0.78) |
Net income per share applicable to ZAIS Financial Corp. common stockholders - Diluted | $2.47 | ($0.85) | $2.79 | ($0.78) |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Related Party Transaction [Line Items] | ' | ' | ' | ' |
Advisory fee - related party | $710,563 | $704,687 | $1,413,318 | $1,193,072 |
ZAIS REIT Management, LLC [Member] | ' | ' | ' | ' |
Related Party Transaction [Line Items] | ' | ' | ' | ' |
Advisory fee, rate | ' | ' | 1.50% | ' |
Advisory fee - related party | 700,000 | 700,000 | 1,400,000 | 1,200,000 |
Advisory fees due to related party | $700,000 | ' | $700,000 | ' |
Stockholders_Equity_Details
Stockholders' Equity (Details) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | ||||||||||||||
Dec. 31, 2012 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jun. 18, 2014 | Mar. 20, 2014 | Dec. 19, 2013 | Sep. 18, 2013 | Jun. 25, 2013 | 14-May-13 | Jan. 31, 2013 | Dec. 19, 2013 | Dec. 19, 2013 | Dec. 31, 2012 | Oct. 31, 2012 | Feb. 13, 2013 | Feb. 13, 2013 | Dec. 31, 2012 | Oct. 31, 2012 | Feb. 15, 2013 | Jan. 18, 2012 | ||
Regular Cash Dividend [Member] | Special Cash Dividend [Member] | ZAIS Financial Partners, L.P. [Member] | ZAIS Financial Partners, L.P. [Member] | ZAIS REIT Management, LLC [Member] | Common Stock [Member] | Common Stock [Member] | Common Stock [Member] | Series A Preferred Stock [Member] | Series A Preferred Stock [Member] | |||||||||||||
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Shares of stock issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,650,000 | 36,581 | 195,458 | ' | 133 | |
Common stock issued, price per share | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $21.25 | ' | ' | ' | ' | |
Gross proceeds from issuance initial public offering | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $120,100,000 | ' | ' | ' | ' | |
Value of stock issued | ' | ' | ' | 118,862,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 118,900,000 | ' | ' | ' | 115,499 | |
Value of OP units and common stock issued | 25,151,174 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Offering fees | 763,000 | ' | 216,658 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,300,000 | 1,200,000 | ' | ' | ' | 17,501 | |
Common stock repurchase liability, common shares | 515,035 | ' | ' | ' | ' | ' | ' | ' | ' | ' | 265,245 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Other liabilities | 5,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Payment of common stock repurchase liability | ' | ' | 5,750,512 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Common stock, shares outstanding | ' | 7,970,886 | ' | 7,970,886 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Number of shares repurchased | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 133 | ' | |
Payments for Repurchase of Preferred Stock and Preference Stock | ' | ' | $148,379 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $148,379 | ' | |
Limited Partners' Capital Account [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Issuance of OP units | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 904,422 | 22,492 | ' | ' | ' | ' | ' | ' | |
Dividends Payable [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |
Dividend declared, amount per share | ' | ' | ' | ' | $0.40 | $0.40 | $0.95 | [1] | $0.50 | $0.45 | $0.22 | ' | $0.40 | $0.55 | ' | ' | ' | ' | ' | ' | ' | ' |
[1] | Regular cash dividend of $0.40 per share of common stock and OP unit for the quarter ending December 31, 2013, and an additional special cash dividend of $0.55 per share of its common stock and OP unit. The Company declared the special cash dividend to distribute taxable income from 2013 attributable to the termination of interest rate swap contracts. |
Noncontrolling_Interests_in_Op1
Non-controlling Interests in Operating Partnership (Details) (ZAIS Financial Partners, L.P. [Member]) | Jun. 30, 2014 | Dec. 31, 2013 |
ZAIS Financial Partners, L.P. [Member] | ' | ' |
Noncontrolling Interest [Line Items] | ' | ' |
Units issued and outstanding | 926,914 | 926,914 |
Non-controlling interest equity interest | 10.40% | 10.40% |
Offsetting_Assets_and_Liabilit2
Offsetting Assets and Liabilities (Schedule of Offsetting of Assets) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | ||||
Interest Rate Swap [Member] | Interest Rate Swaption [Member] | |||||||
Derivatives | ' | ' | ' | ' | ||||
Gross Amounts of Recognized Assets | $368,136 | $396,068 | $396,068 | $368,136 | ||||
Gross Amounts Offset in the Consolidated Balance Sheet | ' | -111,614 | -111,614 | ' | ||||
Net Amounts of Assets Presented in the Consolidated Balance Sheet | 368,136 | 284,454 | 284,454 | 368,136 | ||||
Gross Amounts Not Offset in the Consolidated Balance Sheets | ' | ' | ' | ' | ||||
Financial Instruments | ' | ' | ' | ' | ||||
Cash Collateral Received | ' | [1] | ' | [1] | ' | [1] | ' | [1] |
Net Amount | 368,136 | 284,454 | 284,454 | 368,136 | ||||
Cash collateral pledged | ' | ' | 767,708 | 4,401,503 | ||||
Derivative, maximum exposure | ' | ' | $1,052,162 | $4,769,639 | ||||
[1] | At June 30, 2014, the Company pledged $4,401,503 of cash collateral in relation to its interest rate swaption; with the total net counterparty exposure for this position totaling $4,769,639. At December 31, 2013, the Company pledged $767,708 of cash collateral in relation to its interest rate swap agreements; with the total net counterparty exposure for this position totaling $1,052,162. |
Offsetting_Assets_and_Liabilit3
Offsetting Assets and Liabilities (Schedule of Offsetting of Liabilities) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Repurchase agreements | ' | ' |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | $156,343,944 | $138,591,678 |
Total | ' | ' |
Gross Amounts of Recognized Liabilities | 450,500,693 | 374,650,654 |
Gross Amounts Offset in the Consolidated Balance Sheets | -104,683 | ' |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 450,396,010 | 374,650,654 |
Gross Amounts Not Offset in the Consolidated Balance Sheets | ' | ' |
Financial Instruments | -447,421,795 | -373,290,126 |
Cash Collateral Received | -2,974,215 | -1,360,528 |
Net Amount | ' | ' |
Mortgage Loans [Member] | ' | ' |
Repurchase agreements | ' | ' |
Gross Amounts of Recognized Liabilities | 293,609,481 | 236,058,976 |
Gross Amounts Offset in the Consolidated Balance Sheets | ' | ' |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 293,609,481 | 236,058,976 |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' |
Financial Instruments | -293,609,481 | -236,058,976 |
Cash Collateral Received | ' | ' |
Net Amount | ' | ' |
Agency and Non-Agency Securities [Member] | ' | ' |
Repurchase agreements | ' | ' |
Gross Amounts of Recognized Liabilities | 156,343,944 | 138,591,678 |
Gross Amounts Offset in the Consolidated Balance Sheets | ' | ' |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 156,343,944 | 138,591,678 |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' |
Financial Instruments | -153,812,314 | -137,231,150 |
Cash Collateral Received | -2,531,630 | -1,360,528 |
Net Amount | ' | ' |
Interest Rate Swap [Member] | ' | ' |
Derivatives | ' | ' |
Gross Amounts of Recognized Liabilities | 547,268 | ' |
Gross Amounts Offset in the Consolidated Balance Sheet | -104,683 | ' |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 442,585 | ' |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' |
Financial Instruments | ' | ' |
Cash Collateral Received | -442,585 | ' |
Net Amount | ' | ' |
Subsequent_Events_Details
Subsequent Events (Details) (USD $) | 6 Months Ended | 1 Months Ended | ||
In Millions, unless otherwise specified | Jun. 30, 2014 | Aug. 11, 2014 | Aug. 05, 2014 | Aug. 05, 2014 |
ZAIS REIT Management, LLC [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | |
ZAIS REIT Management, LLC [Member] | GMFS, LLC [Member] | GMFS, LLC [Member] | ||
Scenario, Forecast [Member] | Each Discrete Payment [Member] | |||
Scenario, Forecast [Member] | ||||
Subsequent Event [Line Items] | ' | ' | ' | ' |
Cash payments to acquire entity | ' | ' | $61 | ' |
Contingent consideration | ' | ' | 2 | 1 |
Value of MSR portfolio | ' | ' | 30.1 | ' |
Maximum contigent consideration | ' | ' | $20 | ' |
Percentage of price which may be paid in stock | ' | ' | 50.00% | ' |
Advisory fee, rate | 1.50% | 0.50% | ' | ' |