LOANS (Tables)

9 Months Ended

Sep. 30, 2018

Mortgage Loans on Real Estate [Abstract]

The following table presents the activity of the Company’s loan investments for the nine months ended September 30, 2018:



	Residential			Commercial			Corporate			Total
	(dollars in thousands)
Beginning balance January 1, 2018	$	958,546		$	1,029,327		$	1,011,275		$	2,999,148
Purchases	430,854			528,835			788,213			1,747,902
Syndications	—			—			(44,125		)	(44,125		)
Principal Payments	(156,198		)	(124,559		)	(235,423		)	(516,180		)
Change in fair value	(13,812		)	—			—			(13,812		)
Amortization	(2,251		)	2,262			8,934			8,945
Ending balance September 30, 2018	$	1,217,139		$	1,435,865		$	1,528,874		$	4,181,878

Fair Value and Unpaid Principal of Residential Mortgage Loan Portfolio

The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles, at September 30, 2018 and December 31, 2017:



	September 30, 2018		December 31, 2017
	(dollars in thousands)
Fair value	$	1,983,015	$	1,438,322
Unpaid principal balance	$	1,976,077	$	1,419,807

Summary of Comprehensive Income (Loss)

The following table provides information regarding the line items and amounts recognized in the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017 for these investments:



	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
	(dollars in thousands)
Net interest income	$	16,423		$	8,226		$	45,702		$	18,935
Net gains (losses) on disposal of investments ⁽¹⁾	(2,975		)	(2,093		)	(7,924		)	(3,407		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	(3,633		)	(725		)	(14,802		)	5,400
Total included in net income (loss)	$	9,815		$	5,408		$	22,976		$	20,928

⁽¹⁾ Includes loan premium write offs.

Geographic Concentrations Based on Unpaid Principal Balances

The following table provides the geographic concentrations based on the unpaid principal balances at September 30, 2018 and December 31, 2017, for the residential mortgage loans, including loans transferred or pledged to securitization trusts:



Geographic Concentrations of Residential Mortgage Loans
September 30, 2018			December 31, 2017
Property Location	% of Balance		Property Location	% of Balance
California	54.5	%	California	49.8	%
New York	8.1	%	Florida	9.3	%
Florida	6.6	%	New York	7.1	%
All other (none individually greater than 5%)	30.8	%	All other (none individually greater than 5%)	33.8	%
Total	100.0	%	Total	100.0	%

The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the Company’s VIEs, excluding the credit facility VIEs and OBX Trusts, at September 30, 2018 are as follows:



FREMF Trusts					Residential Mortgage Loan Trusts
Property Location	Principal Balance		% of Balance		Property Location	Principal Balance		% of Balance
(dollars in thousands)
Texas	$	478,593	13.7	%	California	$	48,718	44.9	%
Maryland	448,646		12.8	%	Texas	13,981		12.9	%
California	360,279		10.3	%	Illinois	8,297		7.6	%
Virginia	347,002		9.9	%	Washington	7,559		7.0	%
Pennsylvania	281,384		8.1	%	Florida	5,424		5.0	%
New York	280,925		8.0	%	Other ⁽¹⁾	24,501		22.6	%
North Carolina	251,187		7.2	%
Massachusetts	179,440		5.1	%
Other ⁽¹⁾	867,774		24.9	%
Total	$	3,495,230	100.0	%		$	108,480	100.0	%


⁽¹⁾	No individual state greater than 5%.

Residential Mortgage Loans

The following table provides additional data on the Company’s residential mortgage loans, including loans transferred or pledged to securitization trusts, at September 30, 2018 and December 31, 2017:



	September 30, 2018		December 31, 2017
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$1 - $3,500	$494	$1 - $3,663	$514
Interest rate	2.00% - 7.50%	4.74%	1.63% - 7.50%	4.25%
Maturity	1/1/2028 - 9/1/2058	1/5/2045	1/1/2028 - 5/1/2057	2/1/2043
FICO score at loan origination	510 - 823	754	468 - 823	748
Loan-to-value ratio at loan origination	11% - 100%	67%	11% - 100%	68%

Commercial Real Estate Investments Held for Investment

At September 30, 2018 and December 31, 2017, commercial real estate investments held for investment were comprised of the following:



	September 30, 2018						December 31, 2017
	Outstanding Principal		Carrying Value ⁽¹⁾		Percentage of Loan Portfolio ⁽²⁾		Outstanding Principal		Carrying Value ⁽¹⁾		Percentage of Loan Portfolio ⁽²⁾
(dollars in thousands)
Senior mortgages	$	1,090,849	$	1,084,167	75.6	%	$	629,143	$	625,900	60.9	%
Mezzanine loans	343,354		342,700		23.8	%	395,015		394,442		38.2	%
Preferred equity	9,000		8,998		0.6	%	9,000		8,985		0.9	%
Total	$	1,443,203	$	1,435,865	100.0	%	$	1,033,158	$	1,029,327	100.0	%


⁽¹⁾	Carrying value includes unamortized origination fees of $5.7 million and $3.8 million at September 30, 2018 and December 31, 2017, respectively.


⁽²⁾	Based on outstanding principal.

The following tables represent a rollforward of the activity for the Company’s commercial real estate investments held for investment at September 30, 2018 and December 31, 2017:



	September 30, 2018
	Senior Mortgages			Mezzanine Loans			Preferred Equity		Total
	(dollars in thousands)
Beginning balance (January 1, 2018)	$	625,900		$	394,442		$	8,985	$	1,029,327
Originations & advances (principal)	489,271			45,334			—		534,605
Principal payments	(27,565		)	(96,993		)	—		(124,558		)
Net (increase) decrease in origination fees	(5,400		)	(370		)	—		(5,770		)
Amortization of net origination fees	1,961			287			13		2,261
Net carrying value (September 30, 2018)	$	1,084,167		$	342,700		$	8,998	$	1,435,865



	December 31, 2017
	Senior Mortgages			Mezzanine Loans			Preferred Equity		Total
	(dollars in thousands)
Beginning balance (January 1, 2017)	$	510,071		$	451,467		$	8,967	$	970,505
Originations & advances (principal)	338,242			69,121			—		407,363
Principal payments	(221,421		)	(127,799		)	—		(349,220		)
Amortization & accretion of (premium) discounts	(44		)	28			—		(16		)
Net (increase) decrease in origination fees	(3,317		)	(605		)	—		(3,922		)
Amortization of net origination fees	2,369			2,230			18		4,617
Net carrying value (December 31, 2017)	$	625,900		$	394,442		$	8,985	$	1,029,327

Internal Loan and Preferred Equity Ratings

The following table provides the internal loan risk ratings of commercial real estate investments held for investment as of September 30, 2018 and December 31, 2017.



September 30, 2018
	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Performing		Performing - Closely Monitored		Performing - Special Mention		Substandard ⁽¹⁾		Doubtful		Loss		Total
(dollars in thousands)
Senior mortgages	$	1,090,849	75.6	%	$	724,111	$	302,348	$	—	$	64,390	$	—	$	—	$	1,090,849
Mezzanine loans	343,354		23.8	%	135,334		64,323		107,094		36,603		—		—		343,354
Preferred equity	9,000		0.6	%	—		—		9,000		—		—		—		9,000
Total	$	1,443,203	100.0	%	$	859,445	$	366,671	$	116,094	$	100,993	$	—	$	—	$	1,443,203



December 31, 2017
	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Performing		Performing - Closely Monitored		Performing - Special Mention		Substandard ⁽¹⁾		Doubtful		Loss		Total
(dollars in thousands)
Senior mortgages	$	629,143	60.9	%	$	409,878	$	115,075	$	36,800	$	67,390	$	—	$	—	$	629,143
Mezzanine loans	395,015		38.2	%	206,169		66,498		122,348		—		—		—		395,015
Preferred equity	9,000		0.9	%	—		—		9,000		—		—		—		9,000
Total	$	1,033,158	100.0	%	$	616,047	$	181,573	$	168,148	$	67,390	$	—	$	—	$	1,033,158


⁽¹⁾	The Company rated two loans as Substandard as of September 30, 2018. The Company evaluated whether an impairment exists and determined in each case that, based on quantitative and qualitative factors, the Company expects repayment of contractual amounts due.

Schedule of Industry and Rate Sensitivity

The industry and rate attributes of the portfolio at September 30, 2018 and December 31, 2017 are as follows:



	Industry Dispersion
	September 30, 2018						December 31, 2017
	Fixed Rate		Floating Rate		Total		Fixed Rate		Floating Rate		Total
	(dollars in thousands)
Aircraft and Parts	$	—	$	41,344	$	41,344	$	—	$	34,814	$	34,814
Coating, Engraving and Allied Services	—		58,850		58,850		—		64,034		64,034
Computer Programming, Data Processing & Other Computer Related Services	—		212,969		212,969		—		209,624		209,624
Drugs	—		38,735		38,735		—		38,708		38,708
Electrical Work	—		43,266		43,266		—		—		—
Electronic Components & Accessories	—		24,029		24,029		—		23,916		23,916
Engineering, Architectural & Surveying	—		80,741		80,741		—		—		—
Groceries and Related Products	—		14,725		14,725		—		14,794		14,794
Grocery Stores	—		23,461		23,461		—		23,531		23,531
Home Health Care Services	—		—		—		—		23,779		23,779
Insurance Agents, Brokers and Services	—		49,211		49,211		—		28,872		28,872
Mailing, Reproduction, Commercial Art and Photography, and Stenographic	—		14,855		14,855		—		—		—
Management and Public Relations Services	—		240,740		240,740		—		94,871		94,871
Medical and Dental Laboratories	—		26,876		26,876		—		26,956		26,956
Metal Cans & Shipping Containers	—		118,006		118,006		—		—		—
Miscellaneous Business Services	—		19,650		19,650		—		19,723		19,723
Miscellaneous Equipment Rental and Leasing	—		49,433		49,433		—		49,129		49,129
Miscellaneous Health and Allied Services, not elsewhere classified	—		54,189		54,189		—		25,963		25,963
Miscellaneous Nonmetallic Minerals, except Fuels	—		—		—		—		25,992		25,992
Miscellaneous Plastic Products	—		9,963		9,963		—		9,879		9,879
Motor Vehicles and Motor Vehicle Equipment	—		16,937		16,937		—		—		—
Motor Vehicles and Motor Vehicle Parts and Supplies	—		27,979		27,979		—		12,212		12,212
Nonferrous Foundries (Castings)	—		12,953		12,953		—		—		—
Offices and Clinics of Doctors of Medicine	—		97,760		97,760		—		600		600
Offices and Clinics of Other Health Practitioners	—		21,122		21,122		—		18,979		18,979
Public Warehousing and Storage	—		61,912		61,912		—		48,890		48,890
Research, Development and Testing Services	—		33,334		33,334		—		33,155		33,155
Schools and Educational Services, not elsewhere classified	—		19,794		19,794		—		20,625		20,625
Services Allied with the Exchange of Securities	—		14,895		14,895		—		13,960		13,960
Surgical, Medical, and Dental Instruments and Supplies	—		39,806		39,806		—		29,687		29,687
Telephone Communications	—		61,339		61,339		—		59,182		59,182
Total	$	—	$	1,528,874	$	1,528,874	$	—	$	1,011,275	$	1,011,275

Aggregate positions by Respective Place in the Capital Structure of the Borrowers

The table below reflects the Company’s aggregate positions by their respective place in the capital structure of the borrowers at September 30, 2018 and December 31, 2017.



	September 30, 2018		December 31, 2017
	(dollars in thousands)
First lien loans	$	888,860	$	582,724
Second lien loans	640,014		428,551
Total	$	1,528,874	$	1,011,275