The Company enters into a variety of derivative instruments in connection with its risk management activities. The Company's primary objective for executing these derivatives and non-derivative instruments is to mitigate the Company's economic exposure to future events that are outside its control. The Company's derivative financial instruments are utilized principally to manage market risk and cash flow volatility associated with interest rate risk (including associated prepayment risk) related to certain assets and liabilities. As part of its risk management activities, the Company may, at times, enter into various forward contracts, including short securities, Agency to-be-announced securities, or TBAs, options, futures, swaps, swaptions and caps. In executing on the Company's current risk management strategy, the Company has entered into interest rate swap, swaption agreements, TBA’s and futures contracts. Amounts receivable and payable under interest rate swap agreements are accounted for as unrealized gain (loss) on derivative contracts, net in the consolidated statement of operations. Premiums on swaptions are amortized on a straight line basis between trade date and expiration date and are recognized in the consolidated statement of operations as a realized loss on derivative contracts.

The following summarizes the Company's significant asset and liability derivatives, the risk exposure for these derivatives and the Company's risk management activities used to mitigate certain of these risks. While the Company uses derivative instruments to achieve the Company's risk management activities, it is possible that these instruments will not effectively mitigate all or a substantial portion of the Company's market rate risk. In addition, the Company might elect, at times, not to enter into certain hedging arrangements in order to maintain compliance with REIT requirements.

	December 31, 2015
	Derivative Assets						Derivative Liabilities
	Contracts		Fair value		Notional		Contracts		Fair value		Notional
Deliverable Swap Futures		70		27,343		7,000,000		-		-		-
Eurodollar Futures		5,908		2,425,538		5,908,000,000		-		-		-
Treasury Note Futures		300		105,469		30,000,000		-		-		-
Total		6,278	$	2,558,350		5,945,000,000		-	$	-		-

The Company’s repurchase agreements are governed by underlying agreements that provide for a right of setoff in the event of default of either counterparty to the agreement. The Company also has in place with its counterparties ISDA Master Agreements (“Master Agreements”) for its derivative contracts. In accordance with the Master Agreements with each counterparty, if on any date amounts would otherwise be payable in the same currency and in respect of the same transaction by each party to the other, then, on such date, each party’s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, is replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The Company has pledged financial instruments and financial collateral as restricted cash to its counterparties for its derivative contracts and repurchase agreements. See Note 2 for specific details on the terms of restricted cash with counterparties and Note 9 for the amounts of restricted cash outstanding.

Under GAAP, if the Company has a valid right of setoff, it may offset the related asset and liability and report the net amount. The Company presents repurchase agreements subject to Master Agreements or similar agreements on a gross basis, and derivative assets and liabilities subject to such arrangements on a net basis, based on derivative type and counterparty, in its consolidated balance sheets. Separately, the company presents cash collateral subject to such arrangements on a net basis, based on counterparty, in its

onsolidated balance sheets. However, the Company does not offset financial assets and liabilities with the associated cash collateral on its consolidated balance sheets.

	December 31, 2016
							Gross amounts not offset
							in the Balance Sheet (1)
					Net amounts
	Gross amounts		Gross amounts		of assets				Cash collateral
	of recognized		offset in the		presented in the		Financial		(Received)/		Net
Description	assets		Balance Sheet		Balance Sheet		instruments		Pledged		amount
Futures	$	8,053,813	$	-	$	8,053,813	$	-	$	-	$	8,053,813
Total	$	8,053,813	$	-	$	8,053,813	$	-	$	-	$	8,053,813

	December 31, 2015
							Gross amounts not offset
							in the Balance Sheet (1)
					Net amounts
	Gross amounts		Gross amounts		of assets				Cash collateral
	of recognized		offset in the		presented in the		Financial		(Received)/		Net
Description	assets		Balance Sheet		Balance Sheet		instruments		Pledged		amount
Futures	$	2,558,350	$	-	$	2,558,350	$	-	$	-	$	2,558,350
Total	$	2,558,350	$	-	$	2,558,350	$	-	$	-	$	2,558,350

	December 31, 2016
									Gross amounts not offset
									in the Balance Sheet (1)
						Net amounts
	Gross amounts			Gross amounts		of liabilities					Cash collateral
	of recognized			offset in the		presented in the			Financial		(Received)/		Net
Description	liabilities			Balance Sheet		Balance Sheet			instruments		Pledged		amount
Repurchase agreements	$	(804,811,000	)	$	-	$	(804,811,000	)	$	-	$	-	$	(804,811,000	)
Total	$	(804,811,000	)	$	-	$	(804,811,000	)	$	-	$	-	$	(804,811,000	)

	December 31, 2015
									Gross amounts not offset
									in the Balance Sheet (1)
						Net amounts
	Gross amounts			Gross amounts		of liabilities					Cash collateral
	of recognized			offset in the		presented in the			Financial		(Received)/		Net
Description	liabilities			Balance Sheet		Balance Sheet			instruments		Pledged		amount
Repurchase agreements	$	(518,735,457	)	$	-	$	(518,735,457	)	$	-	$	-	$	(518,735,457	)
FHLB advances		(49,697,000	)		-		(49,697,000	)		-		-		(49,697,000	)
Total	$	(568,432,457	)	$	-	$	(568,432,457	)	$	-	$	-	$	(568,432,457	)

(1) Amounts presented are limited in total to the net amount of assets or liabilities presented in the consolidated balance sheets by instrument. Excess cash collateral or financial assets that are pledged to counterparties may exceed the financial liabilities subject to Master Agreements or similar agreements, or counterparties may have pledged excess cash collateral to the Company that exceed the corresponding financial assets. These excess amounts are excluded from the tables above.

In June 2014, the FASB issued financial guidance for repurchase financings, ASU 2014-11, “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures,” which required separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty. If all de-recognition criteria were met, the initial transferee accounted for the initial transfer as a purchase and the related repurchase agreement component of the transaction was accounted for as a secured borrowing. ASU 2014-11 also required repurchase-to-maturity transactions to be accounted for as secured borrowings as if the transferor retained effective control, even though the transferred financial assets are not returned to the transferor at settlement. The accounting changes were effective for public business entities for the first interim or annual period beginning after December 15, 2014. Entities were required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment for retained earnings as of the beginning of the period of adoption.

The Company adopted the guidance as of January 1, 2015. This change had no effect on net income or stockholder’s equity, but did impact the amounts reported on the consolidated balance sheet and the consolidated statement of operations. The Company disaggregated amounts previously netted together in the “Linked transactions, net, at fair value” line item on the consolidated balance sheet and has presented these amounts gross. As of January 1, 2015, the Company made a cumulative-effect adjustment to transfer real estate securities with values of $210,238,657 to the “Available-for-sale securities, at fair value” line item, and to transfer secured borrowings of $149,293,000 to the “Repurchase agreements” line item on the consolidated balance sheet. As part of the cumulative-effect adjustment the Company also transferred interest receivable and payable of $0.2 million and $0.3 million to the “Accrued interest receivable” and “Accrued interest payable” line items, respectively. There was no effect on prior periods as the FASB did not require full retrospective application. As a result, disclosures for periods prior to January 1, 2015, are not comparable to disclosures subsequent to that date.

Under previous GAAP, when the initial transfer of a financial asset and repurchase agreement financings were entered into contemporaneously with, or in contemplation of, one another, the transaction was considered linked unless all of the criteria found in ASC 860-10 were met at the inception of the transaction. If the transaction was determined to be linked, the Company recorded the initial transfer and repurchase financing on a net basis and recorded a forward commitment to purchase assets as a derivative instrument. Gains and losses were recorded together with net interest income in the “Unrealized gain (loss) and net interest income from Linked Transactions” line item on the consolidated statement of operations. When, or if a transaction was no longer considered linked, the security and related repurchase agreement was recorded on a gross basis. The fair value of linked transactions reflected the value of the underlying security’s fair market value netted with the respective linked repurchase agreement borrowings and net accrued interest. Disclosures required under previous GAAP have been presented for periods under which the superseded guidance applied.

	December 31, 2014
	Non-Agency			Multi-Family			Total
Face Value	$	186,532,050		$	102,968,560		$	289,500,610
Unamortized premium		-			-			-
Unamortized discount
Designated credit reserve and OTTI		(36,627,428	)		-			(36,627,428	)
Net, unamortized		(28,768,448	)		(18,323,619	)		(47,092,067	)
Amortized Cost		121,136,174			84,644,941			205,781,115
Gross unrealized gain		5,676,815			1,770,361			7,447,176
Gross unrealized (loss)		(2,384,676	)		(604,957	)		(2,989,633	)
Fair Value	$	124,428,313			85,810,345		$	210,238,658

	December 31, 2014
	Designated			Unamortized
	credit reserve			net discount			Total
Beginning Balance as of January 1, 2014	$	(29,857,597	)	$	(30,770,386	)	$	(60,627,983	)
Acquisitions		(19,384,939	)		(47,651,628	)		(67,036,567	)
Dispositions		9,468,964			15,465,093			24,934,057
Accretion of net discount		-			12,122,919			12,122,919
Realized credit losses		3,146,144			-			3,146,144
Release of credit reserves		-			3,741,935			3,741,935
Ending balance at December 31, 2014	$	(36,627,428	)	$	(47,092,067	)	$	(83,719,495	)

	Amount		Percent of total			Weighted average		Market Value
Repurchase Agreement Counterparties	Outstanding		amount outstanding			days to maturity		of collateral held
North America	$	86,985,000		58.26	%		33	$	124,620,917
Europe (1)		46,381,000		31.07	%		15		62,487,229
Asia (1)		15,927,000		10.67	%		9		23,130,512
Total	$	149,293,000		100.00	%		25	$	210,238,658

	Year Ended
	December 31, 2014
Interest income attributable to AFS underlying Linked Transactions	$	15,427,632
Interest expense attributable to linked repurchase agreement borrowings underlying Linked Transactions		(2,893,375	)
Change in fair value of Linked Transactions included in earnings		(1,928,409	)
Unrealized gain (loss) and net interest income from Linked Transactions	$	10,605,848

The Company has not applied hedge accounting to its current derivative portfolio held to mitigate the interest rate risk associated with its debt portfolio. As a result, the Company is subject to volatility in its earnings due to movement in the unrealized gains and losses associated with its interest rate swaps, swaptions and any other derivative instruments.

The following table summarizes the underlying hedged risks and the amount of gains and losses on derivative instruments reported net in the consolidated statement of operations as realized gain (loss) on derivative contracts, net and unrealized gain (loss) on derivative contracts, net for the years ended December 31, 2016, December 31, 2015, and December 31, 2014:

	Year Ended December 31, 2015
	Amount of realized			Amount of unrealized
Primary underlying risk	gain (loss)			appreciation (depreciation)		Total

Interest rate:
Interest rate swaps (1)	$	(7,047,875	)	$	1,755,108	$	(5,292,767	)
Swaptions		(84,000	)		62,450		(21,550	)
Futures		(4,892,855	)		3,092,300		(1,800,555	)
Total	$	(12,024,730	)	$	4,909,858	$	(7,114,872	)

	Year Ended December 31, 2014
	Amount of realized			Amount of unrealized
Primary underlying risk	gain (loss)			appreciation (depreciation)			Total

Interest rate:
Interest rate swaps (1)	$	(9,705,847	)	$	(761,429	)	$	(10,467,276	)
Swaptions		(336,000	)		(1,413,244	)		(1,749,244	)
Futures		(8,621,211	)		(688,217	)		(9,309,428	)
TBAs		448,598			(68,359	)		380,239
Total	$	(18,214,460	)	$	(2,931,249	)	$	(21,145,709	)

(1) In the year ended December 31, 2015,net swap interest expense totaled $2,216,417 comprised of $2,719,563 in interest expense paid (included in realized gain (loss)) and $503,146 in accrued interest income (included in unrealized gain (loss)). In the year ended December 31, 2014, net swap interest expense totaled $3,495,232 comprised of $3,329,219 in interest expense paid (included in realized gain (loss)) and $166,013 in accrued interest income (included in unrealized gain (loss)).