Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of financial instruments carried at fair value on a recurring basis

The following table presents the Company's financial instruments carried at fair value on a recurring basis in the consolidated balance sheets by its level in the fair value hierarchy as of March 31, 2020 and December 31, 2019 (dollars in thousands):



	Total		Level I		Level II		Level III
March 31, 2020
Real estate securities, available for sale, measured at fair value	$	441,160	$	—	$	441,160	$	—
Commercial mortgage loans, held-for-sale, measured at fair value	91,813		—		—		91,813
Other real estate investments, measured at fair value	2,496		—		—		2,496
Credit default swaps	1,173		—		1,173		—
Interest rate swaps	—		—		—		—
Total assets, at fair value	$	536,642	$	—	$	442,333	$	94,309

Liabilities, at fair value
Credit default swaps	$	4,016	$	—	$	4,016	$	—
Interest rate swaps	1,512		—		1,512		—
Treasury note futures	—		—		—		$	—
Total liabilities, at fair value	$	5,528	$	—	$	5,528	$	—

December 31, 2019
Real estate securities, available for sale, measured at fair value	$	386,316	$	—	$	386,316	$	—
Commercial mortgage loans, held-for-sale, measured at fair value	112,562		—		—		112,562
Other real estate investments, measured at fair value	2,557		—		—		2,557
Credit default swaps	59		—		59		—
Interest rate swaps	325		—		325		—
Treasury Note Futures	735		735		—		—
Total assets, at fair value	$	502,554	$	735	$	386,700	$	115,119

Liabilities, at fair value
Credit Default Swaps	$	1,581	$	—	$	1,581	$	—
Total liabilities, at fair value	$	1,581	$	—	$	1,581	$	—

The following table presents additional information about the Company’s financial instruments which are measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 for which the Company has used Level III inputs to determine fair value (dollars in thousands):



	March 31, 2020
	Commercial Mortgage Loans, held-for-sale, measured at fair value			Other Real Estate Investments, measured at fair value
Beginning balance, January 1, 2020	$	112,562		$	2,557
Transfers into Level III	—			—
Total realized and unrealized gain (loss) included in earnings:
Realized gain (loss) on sale of commercial mortgage loans held-for-sale	9,404			—
Unrealized gain (loss) on commercial mortgage loans held-for-sale and other real estate investments	(1,934		)	(61		)
Net accretion	—			—
Purchases	119,349			—
Sales / paydowns	(147,568		)	—
Cash repayments/receipts	—			—
Transfers out of Level III	—			—
Ending Balance, March 31, 2020	$	91,813		$	2,496

	December 31, 2019
	Commercial Mortgage Loans, held-for-sale, measured at fair value			Other Real Estate Investments, measured at fair value
Beginning balance, January 1, 2019	$	76,863		$	—
Transfers into Level III	—			—
Total realized and unrealized gain (loss) included in earnings:
Realized gain (loss) on sale of real estate securities	37,832			—
Realized gain (loss) on sale of commercial mortgage loan held-for-sale	—			—
Unrealized gain (loss) on commercial mortgage loans held-for-sale	312			47
Net accretion	—			—
Purchases	1,015,677			2,510
Sales / paydowns	(1,008,050		)	—
Cash repayments/receipts	—			—
Transfers out of Level III	(10,072		)	—
Ending Balance, December 31, 2019	$	112,562		$	2,557

Schedule of fair value measurements, recurring and nonrecurring, valuation techniques

The following table summarizes the valuation method and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level III of the fair value hierarchy as of March 31, 2020 and December 31, 2019 (dollars in thousands):



Asset Category	Fair Value	Valuation Methodologies	Unobservable Inputs ⁽¹⁾	Weighted Average ⁽²⁾	Range
March 31, 2020
Commercial mortgage loans, held-for-sale, measured at fair value	$91,813	Discounted Cash Flow	Yield	4.2%	2.4% - 5.6%
Other real estate investments, measured at fair value	2,496	Discounted Cash Flow	Yield	13.4%	12.4% - 14.4%

December 31, 2019
Commercial mortgage loans, held-for-sale, measured at fair value	$112,562	Discounted Cash Flow	Yield	4.9%	4.7% - 5.2%
Other real estate investments, measured at fair value	2,557	Discounted Cash Flow	Yield	12.4%	11.4% - 13.4%

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⁽¹⁾ In determining certain of these inputs, the Company evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. The Company has determined that market participants would take these inputs into account when valuing the investments.

⁽²⁾ Inputs were weighted based on the fair value of the investments included in the range.

Schedule of financial instruments not carried at fair value

The fair values of the Company's commercial mortgage loans, held for investment and collateralized loan obligations, which are not reported at fair value on the consolidated balance sheets are reported below as of March 31, 2020 and December 31, 2019 (dollars in thousands):



		Level	Carrying Amount ⁽¹⁾⁽²⁾		Fair Value
March 31, 2020
Commercial mortgage loans, held for investment	Asset	III	$	2,672,300	$	2,673,611
Collateralized loan obligations	Liability	III	1,739,009		1,610,761
Mortgage Note Payable	Liability	III	40,167		40,167
December 31, 2019
Commercial mortgage loans, held for investment	Asset	III	$	2,762,963	$	2,784,650
Collateralized loan obligations	Liability	III	1,803,185		1,822,386
Mortgage Note Payable	Liability	III	29,167		29,167

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⁽¹⁾ The carrying value is gross of $21.7 million and $0.9 million of allowance for credit losses as of March 31, 2020 and December 31, 2019, respectively.

⁽²⁾ The carrying value is inclusive of $9.6 million of commercial mortgage loans, held-for-sale as of March 31, 2020.