Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2019

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, 2019 and December 31, 2018, based upon the valuation hierarchy (dollars in thousands):



	December 31, 2019
	Fair Value
Assets	Level I		Level II		Level III		Total
Agency CMBS	$	—	$	1,435,477	$	—	$	1,435,477
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		3,092		—		3,092
Agency RMBS	—		340,771		—		340,771
Agency RMBS Interest-Only Strips	—		—		10,343		10,343
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		—		5,572		5,572
Subtotal Agency MBS	—		1,779,340		15,915		1,795,255

Non-Agency RMBS	—		—		38,131		38,131
Non-Agency RMBS Interest-Only Strips	—		—		7,683		7,683
Non-Agency CMBS	—		316,019		—		316,019
Subtotal Non-Agency MBS	—		316,019		45,814		361,833

Other securities	—		62,965		17,196		80,161
Total mortgage-backed securities and other securities	—		2,158,324		78,925		2,237,249

Residential Whole Loans	—		—		1,375,860		1,375,860
Residential Bridge Loans	—		—		33,269		33,269
Commercial loans	—		—		370,213		370,213
Securitized commercial loans	—		—		909,040		909,040
Derivative assets	—		5,111		—		5,111
Total Assets	$	—	$	2,163,435	$	2,767,307	$	4,930,742

Liabilities
Derivative liabilities	$	—	$	6,370	$	—	$	6,370
Securitized debt	—		680,586		1,057		681,643
Total Liabilities	$	—	$	686,956	$	1,057	$	688,013



	December 31, 2018
	Fair Value
Assets	Level I		Level II		Level III		Total
Agency CMBS	$	—	$	1,481,984	$	—	$	1,481,984
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		4,158		—		4,158
Agency RMBS Interest-Only Strips	—		—		12,135		12,135
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		—		7,702		7,702
Subtotal Agency MBS	—		1,486,142		19,837		1,505,979

Non-Agency RMBS	—		—		39,026		39,026
Non-Agency RMBS Interest-Only Strips	—		—		11,529		11,529
Non-Agency CMBS	—		200,301		—		200,301
Subtotal Non-Agency MBS	—		200,301		50,555		250,856

Other securities	—		50,955		8,951		59,906
Total mortgage-backed securities and other securities	—		1,737,398		79,343		1,816,741

Residential Whole Loans	—		—		1,041,885		1,041,885
Residential Bridge Loans			—		211,999		211,999
Commercial loans	—		—		216,123		216,123
Securitized commercial loan	—		—		1,013,511		1,013,511
Derivative assets	—		2,606		—		2,606
Total Assets	$	—	$	1,740,004	$	2,562,861	$	4,302,865

Liabilities
Derivative liabilities	$	4,657	$	5,473	$	—	$	10,130
Securitized debt	—		947,340		2,286		949,626
Total Liabilities	$	4,657	$	952,813	$	2,286	$	959,756

Summary of quantitative information about the significant unobservable inputs used in the fair value measurement of financial instruments

The following tables present a summary of the available quantitative information about the significant unobservable inputs used in the fair value measurement of financial instruments for which the Company has utilized Level III inputs to determine fair value as of December 31, 2019 and December 31, 2018 (dollars in thousands).



	Fair Value at			Range
	December 31, 2019	Valuation Technique	Unobservable Input	Minimum		Maximum			Weighted Average
Residential Whole-Loans⁽²⁾	1,200,566	Discounted Cash Flow	Yield	3.4	%	7.0	%		3.7	%
			Weighted Average Life	1.4		7.8			3.0
Residential Bridge Loans⁽³⁾	33,269	Discounted Cash Flow	Yield	7.5	%	27.0	%	⁽¹⁾	9.8	%
			Weighted Average Life	0.3		1.8			0.8
Commercial Loans	370,213	Discounted Cash Flow	Yield	4.7	%	10.9	%		7.5	%
			Weighted Average Lie	0.4		2.9			1.6



	Fair Value at			Range
	December 31, 2018	Valuation Technique	Unobservable Input	Minimum		Maximum			Weighted Average
Residential Whole-Loans	1,041,885	Discounted Cash Flow	Yield	3.5	%	7.9	%		5.5	%
			Weighted Average Life	0.8		10.3			2.8
Residential Bridge Loans	211,999	Discounted Cash Flow	Yield	5.6	%	145.3	%	⁽¹⁾	11.3	%
			Weighted Average Life	0.1		1.6			0.5
Commercial Loans:	216,123	Discounted Cash Flow	Yield	6.7	%	9.2	%		7.6	%
			Weighted Average Life	0.9		2.7			2.1


(1)	Yield to maturity is the total return on the loan expressed as an annual rate. Delinquent Bridge Loans that are nearing maturity and with fair value that is significantly less than the principal amount have a higher yield to maturity.

(2)

Excludes $175,294 Conforming Residential Whole Loans, which are valued using TBA prices, adjusted for delivery to Fannie Mae using Fannie Mae's loan-level price adjustment matrix.

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, 2019
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential Whole Loans			Residential Bridge Loans			Commercial Loans			Securitized Commercial Loans			Securitized Debt
Beginning balance	$	19,837		$	50,555		$	8,951		$	1,041,885		$	211,999		$	216,123		$	1,013,511		$	2,286
Transfers into Level III from Level II	—			—			8,386			—			—			—			—			—
Transfers from Level III into Level II	—			—			—			—			—			—			—			—
Purchases	—			—			—			544,426			—			274,422			1,113,231			—
Sales and settlements	(401		)	—			—			—			—			—			—			3,769
Transfers to REO	—			—			—			—			(2,677		)	—			—			—
Principal repayments	—			(965		)	(555		)	(228,163		)	(175,422		)	(121,245		)	(1,214,688		)	—
Total net gains/losses included in net income
Realized gains/(losses), net on assets	—			—			—			—			(351		)	—			—			—
Other than temporary impairment	(222		)	(1,332		)	—			—			—			—			—			—
Unrealized gains/(losses), net on assets⁽¹⁾	762			(229		)	693			20,887			397			(122		)	(1,070		)	—
Unrealized (gains)/losses, net on liabilities⁽²⁾	—			—			—			—			—			—			—			(2,373		)
Premium and discount amortization, net	(4,061		)	(2,215		)	(279		)	(3,175		)	(677		)	1,035			(1,944		)	(2,625		)
Ending balance	$	15,915		$	45,814		$	17,196		$	1,375,860		$	33,269		$	370,213		$	909,040		$	1,057

Unrealized gains/(losses), net on assets held at the end of the period⁽¹⁾	$	780		$	(229	)	$	693		$	21,768		$	(488	)	$	128		$	(1,042	)	$	—
Unrealized gains/(losses), net on liabilities held at the end of the period⁽²⁾	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	375



	Year ended December 31, 2018
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential Whole Loans			Residential Bridge Loans			Commercial Loans		Securitized Commercial Loans			Securitized Debt
Beginning balance	$	17,217		$	8,735		$	9,239		$	237,423		$	64,526		$	—	$	24,876		$	10,945
Transfers into Level III from Level II	22,795			39,084			9,708			—			—			—		—			—
Transfers from Level III into Level II	(16,805		)	—			(8,697		)	—			—			—		—			(10,899		)
Purchases	2,093			8,602			—			860,576			207,705			215,322		1,353,020			—
Sales and settlements	—			(4,180		)	—			—			—			—		—			12
Principal repayments	(53		)	(307		)	(604		)	(55,186		)	(57,528		)	—		(361,782		)	(44		)
Total net gains / (losses) included in net income
Realized gains/(losses), net on assets	—			258			—			—			—			—		—			—
Other than temporary impairment	(735		)	(918		)	(161		)	—			—			—		—			—
Unrealized gains/(losses), net on assets⁽¹⁾	(630		)	1,183			(532		)	(415		)	(1,806		)	631		(16		)	—
Unrealized (gains)/losses, net on liabilities⁽²⁾	—			—			—			—			—			—		—			1,996
Premium and discount amortization, net	(4,045		)	(1,902		)	(2		)	(513		)	(898		)	170		(2,587		)	276
Ending balance	$	19,837		$	50,555		$	8,951		$	1,041,885		$	211,999		$	216,123	$	1,013,511		$	2,286

Unrealized gains/(losses), net on assets held at the end of the period⁽¹⁾	$	(272	)	$	1,184		$	(464	)	$	351		$	(1,370	)	$	631	$	(16	)	$	—
Unrealized gains/(losses), net on liabilities held at the end of the period⁽²⁾	$	—		$	—		$	—		$	—		$	—		$	—	$	—		$	(1,998	)


(1)	Gains and losses are included in "Unrealized gain (loss), net" in the Consolidated Statements of Operations.


(2)	Gains and losses on securitized debt 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, 2019 and December 31, 2018, in the consolidated financial statements (dollars in thousands):



	December 31, 2019				December 31, 2018
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets
Residential Bridge Loans	$	3,150	$	3,148	$	9,720	$	9,603
Total	$	3,150	$	3,148	$	9,720	$	9,603

Liabilities
Borrowings under repurchase agreements	$	2,824,801	$	2,829,093	$	2,818,837	$	2,823,615
Convertible senior unsecured notes	197,299		209,172		110,060		108,531
Securitized debt⁽¹⁾	801,109		810,914		—		—
Total	$	3,823,209	$	3,849,179	$	2,928,897	$	2,932,146

^{(1) Carrying value excludes}^{$5.3 million}^{of deferred financing costs}

- 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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