Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the fair value of the Company’s financial instruments segregated by the hierarchy level of the fair value estimate that are measured at fair value on a recurring basis as of the dates indicated:



	September 30, 2017
	Fair Value		Level 1 - Unadjusted Quoted Prices in Active Markets		Level 2 - Observable Inputs		Level 3 - Unobservable Inputs
Assets:
Mortgage-backed securities	$	2,921,444	$	—	$	2,913,877	$	7,567
Interest rate swaps	368		—		368		—
Total assets carried at fair value	$	2,921,812	$	—	$	2,914,245	$	7,567
Liabilities:
TBA securities	133		—		133		—
Total liabilities carried at fair value	$	133	$	—	$	133	$	—

	December 31, 2016
	Fair Value		Level 1 - Unadjusted Quoted Prices in Active Markets		Level 2 - Observable Inputs		Level 3 - Unobservable Inputs
Assets:
Mortgage-backed securities	$	3,212,084	$	—	$	3,201,157	$	10,927
Interest rate swaps	28,534		—		28,534		—
Total assets carried at fair value	$	3,240,618	$	—	$	3,229,691	$	10,927
Liabilities:
Interest rate swaps	$	6,922	$	—	$	6,922	$	—
Total liabilities carried at fair value	$	6,922	$	—	$	6,922	$	—

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The activity of the instruments measured at fair value on a recurring basis using Level 3 inputs is presented in the following table for the period indicated:



	Level 3 Fair Value
	Non-Agency CMBS			Non-Agency RMBS			Total
Balance as of December 31, 2016	$	9,669		$	1,258		$	10,927
Unrealized loss included in OCI ⁽¹⁾	(1,422		)	16			(1,406		)
Principal payments	(3,896		)	(133		)	(4,029		)
Accretion	2,075			—			2,075
Balance as of September 30, 2017	$	6,426		$	1,141		$	7,567


(1)	Amount included in "unrealized gain on available-for-sale investments, net" on consolidated statements of comprehensive income (loss).

Fair Value, by Balance Sheet Grouping

The following table presents a summary of the carrying value and estimated fair values of the Company’s financial instruments as of the dates indicated:



	September 30, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Mortgage-backed securities	$	2,921,444	$	2,921,444	$	3,212,084	$	3,212,084
Mortgage loans held for investment, net ⁽¹⁾	16,523		13,674		19,036		15,971
Derivative assets	368		368		28,534		28,534
Liabilities:
Repurchase agreements ⁽²⁾	$	2,519,230	$	2,519,230	$	2,898,952	$	2,898,952
Non-recourse collateralized financing ⁽¹⁾	5,706		5,722		6,440		6,357
Derivative liabilities	133		133		6,922		6,922


(1)	The Company determines the fair value of its mortgage loans held for investment, net and its non-recourse collateralized financing using internally developed cash flow models with inputs similar to those used to estimate the fair value of the Company's Level 3 non-Agency MBS.


(2)	The carrying value of repurchase agreements generally approximates fair value due to their short term maturities.