Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 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:



	December 31, 2017
	Fair Value		Level 1 - Unadjusted Quoted Prices in Active Markets		Level 2 - Observable Inputs		Level 3 - Unobservable Inputs
Assets carried at fair value:
Investments in securities:
Mortgage-backed securities	$	3,026,989	$	—	$	3,019,746	$	7,243
U.S. Treasuries	146,530		146,530		—		—
Derivative assets:
Interest rate swaps	791		—		791		—
Eurodollar futures	666		666		—		—
TBA securities	1,483		—		1,483		—
Total assets carried at fair value	$	3,176,459	$	147,196	$	3,022,020	$	7,243

Liabilities carried at fair value:
TBA securities	269		—		269		—
Total liabilities carried at fair value	$	269	$	—	$	269	$	—

	December 31, 2016
	Fair Value		Level 1 - Unadjusted Quoted Prices in Active Markets		Level 2 - Observable Inputs		Level 3 - Unobservable Inputs
Assets carried at fair value:
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 carried at fair value:
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 Company’s non-Agency MBS measured at fair value on a recurring basis using Level 3 inputs is presented in the following table for the periods indicated:



	Year Ended
	December 31,
	2017			2016			2015
Balance as of beginning of period	$	10,927		$	16,435		$	43,957
Unrealized (loss) gain included in OCI ⁽¹⁾	(1,733		)	(1,057		)	2,608
Principal payments	(4,351		)	(6,019		)	(30,602		)
Accretion	2,400			1,568			472
Balance as of end of period	$	7,243		$	10,927		$	16,435


(1)	Amount included in “unrealized gain (loss) 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:



	December 31, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Mortgage-backed securities	$	3,026,989	$	3,026,989	$	3,212,084	$	3,212,084
U.S. Treasuries	146,530		146,530		—		—
Mortgage loans held for investment, net ⁽¹⁾	15,738		12,973		19,036		15,971
Derivative assets	2,940		2,940		28,534		28,534
Liabilities:
Repurchase agreements ⁽²⁾	$	2,565,902	$	2,565,902	$	2,898,952	$	2,898,952
Non-recourse collateralized financing ⁽¹⁾	5,520		5,554		6,440		6,357
Derivative liabilities	269		269		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.