Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of the entity's financial instruments carried at fair value based upon the balance sheet by the valuation hierarchy

The following tables present the Company's financial instruments carried at fair value as of December 31, 2017 and December 31, 2016, based upon the valuation hierarchy (dollars in thousands):



	December 31, 2017
	Fair Value
Assets	Level I		Level II		Level III		Total
Agency RMBS:
20-Year mortgage	$	—	$	53,783	$	—	$	53,783
30-Year mortgage	—		241,642		—		241,642
40-Year mortgage	—		376,752		—		376,752
Agency RMBS Interest-Only Strips	—		15,437		—		15,437
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		10,419		—		10,419
Agency CMBS	—		2,137,583		17,217		2,154,800
Agency CMBS Interest-Only Strips	—		10		—		10
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		5,757		—		5,757
Subtotal Agency MBS	—		2,841,383		17,217		2,858,600

Non-Agency RMBS	—		90,819		13		90,832
Non-Agency RMBS Interest-Only Strips	—		—		8,722		8,722
Non-Agency CMBS	—		278,604		—		278,604
Subtotal Non-Agency MBS	—		369,423		8,735		378,158

Other securities	—		112,826		9,239		122,065
Total mortgage-backed securities and other securities	—		3,323,632		35,191		3,358,823

Residential Whole-Loans	—		—		237,423		237,423
Residential Bridge Loans	—		—		64,526		64,526
Securitized commercial loan	—		—		24,876		24,876
Derivative assets	728		—		—		728
Total Assets	$	728	$	3,323,632	$	362,016	$	3,686,376

Liabilities
Derivative liabilities	$	50	$	4,296	$	—	$	4,346
Securitized debt	—		—		10,945		10,945
Total Liabilities	$	50	$	4,296	$	10,945	$	15,291



	December 31, 2016
	Fair Value
Assets	Level I		Level II		Level III		Total
Agency RMBS:
20-Year mortgage	$	—	$	498,470	$	—	$	498,470
30-Year mortgage	—		935,207		—		935,207
Agency RMBS Interest-Only Strips	—		19,790		—		19,790
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		16,503		—		16,503
Agency CMBS	—		290,605		73,059		363,664
Agency CMBS Interest-Only Strips	—		231		—		231
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		7,729		—		7,729
Subtotal Agency MBS	—		1,768,535		73,059		1,841,594

Non-Agency RMBS	—		240,422		619		241,041
Non-Agency RMBS Interest-Only Strips	—		—		64,116		64,116
Non-Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		—		3,085		3,085
Non-Agency CMBS	—		351,163		7,756		358,919
Subtotal Non-Agency MBS	—		591,585		75,576		667,161

Other securities	—		36,406		31,356		67,762
Total mortgage-backed securities and other securities	—		2,396,526		179,991		2,576,517

Residential Whole-Loans	—		—		192,136		192,136
Securitized commercial loan	—		—		24,225		24,225
Derivative assets	71		20,500		—		20,571
Total Assets	$	71	$	2,417,026	$	396,352	$	2,813,449

Liabilities
Derivative liabilities	$	2,487	$	177,998	$	1,673	$	182,158
Securitized debt	—		—		10,659		10,659
Total Liabilities	$	2,487	$	177,998	$	12,332	$	192,817

Schedule of additional information about the entity's financial instruments, which are measured at fair value on a recurring basis for which the entity has utilized Level III inputs to determine fair value

The following tables present 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 III inputs to determine fair value:



	Year ended December 31, 2017
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential Whole-Loans			Residential Bridge Loans			Securitized Commercial Loan			Securitized Debt			Derivative Liability
Beginning balance	$	73,059		$	75,576		$	31,356		$	192,136		$	—		$	24,225		$	10,659		$	1,673
Transfers into Level III from Level II	—			—			9,470			—			—			—			—			—
Transfers from Level III into Level II	(73,714		)	(7,433		)	(33,080		)	—			—			—			—			—
Purchases	17,217			8,937			—			86,921			63,969			—			—			—
Sales and settlements	—			(60,132		)	—			—			—			—			—			552
Principal repayments	—			(378		)	(425		)	(41,312		)	—			(154		)	(68		)	—
Total net gains/losses included in net income
Realized gains/(losses), net	—			2,623			—			—			—			—			—			(552		)
Other than temporary impairment	—			—			(1,823		)	—			—			—			—			—
Unrealized gains/(losses), net on assets⁽¹⁾	635			(9,415		)	1,522			724			571			805			—			—
Unrealized (gains)/losses, net on liabilities⁽²⁾	—			—			—			—			—			—			354			(1,673		)
Premium and discount amortization, net	20			(1,043		)	2,219			(1,046		)	(14		)	—			—			—
Ending balance	$	17,217		$	8,735		$	9,239		$	237,423		$	64,526		$	24,876		$	10,945		$	—

(1)

For Agency MBS, Non-Agency MBS, other securities, Residential Whole-Loans, Residential Bridge Loans and Securitized commercial loan classified as Level III at December 31, 2017, the Company recorded gross unrealized gains of approximately $0, $0, $43 thousand, $1.8 million, $655 thousand and $805 thousand and gross unrealized losses of approximately $0, $16 thousand, $0, $400 thousand, $84 thousand and $0, respectively. These gains and losses are included in "Unrealized gain (loss), net" in the Consolidated Statements of Operations.


(2)	For securitized debt and derivative liability classified as Level III at December 31, 2017, the Company recorded gross unrealized gains of $0 and $0 and gross unrealized losses of $354 thousand and $0, respectively. These gains and losses are included in "Unrealized gain (loss), net" in the Consolidated Statements of Operations.



	Year ended December 31, 2016
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential Whole-Loans			Securitized commercial loan			Securitized debt			Derivative liability
Beginning balance	$	24,690		$	369,650		$	71,996		$	218,538		$	25,000		$	11,000		$	—
Transfers into Level III from Level II	—			—			—			—			—			—			—
Transfers from Level III into Level II	(16,730		)	(198,078		)	(6,079		)	—			—			—			—
Purchases	72,642			94			—			28,226			—			—			—
Sales and settlements	(6,776		)	(49,560		)	(32,226		)	—			—			—			(38		)
Principal repayments	(141		)	(15,508		)	(2,049		)	(52,573		)	—			—			—
Total net gains / (losses) included in net income
Realized gains/(losses), net	(56		)	(9,345		)	45			—			—			—			38
Other than temporary impairment	—			(3,436		)	(3,301		)	—			—			—			—
Unrealized gains/(losses), net on assets⁽¹⁾	(570		)	(4,889		)	(86		)	(42		)	(775		)	—			—
Unrealized (gains)/losses, net on liabilities⁽²⁾	—			—			—			—			—			(341		)	1,673
Premium and discount amortization, net	—			(13,352		)	3,056			(2,013		)	—			—			—
Ending balance	$	73,059		$	75,576		$	31,356		$	192,136		$	24,225		$	10,659		$	1,673

(1)

For Agency MBS, Non-Agency MBS, other securities, Residential Whole-Loans and Securitized commercial loan classified as Level III at December 31, 2016, the Company recorded gross unrealized gains of approximately $417 thousand, $492 thousand, $420 thousand, $1.2 million and $0 and gross unrealized losses of approximately $0, $6.8 million, $823 thousand, $663 thousand and $775 thousand, respectively. These gains and losses are included in "Unrealized gain (loss), net" in the Consolidated Statements of Operations.


(2)	For securitized debt and derivative liability classified as Level III at December 31, 2016, the Company recorded gross unrealized gains of 341 thousand and $0 and gross unrealized losses of $0 and $1.7 million, respectively. These gains and losses are included in "Unrealized gain (loss), net" in the Consolidated Statements of Operations.

Schedule of Other Fair Value Disclosures

The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value, as of December 31, 2017, in the consolidated financial statements (dollars in thousands):



	Carrying Value		Estimated Fair Value
Assets
Residential Bridge Loans	$	42,147	$	42,881
Total	$	42,147	$	42,881

Liabilities
Borrowings under repurchase agreements	$	3,251,686	$	3,257,956
Convertible senior unsecured notes	108,743		114,819
Total	$	3,360,429	$	3,372,775

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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