Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

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

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



	September 30, 2018
	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	$	3,294,510	$	—	$	3,288,274	$	6,236
U.S. Treasuries	—		—		—		—
Derivative assets:
Interest rate swaps	694		—		694		—
Eurodollar futures	—		—		—		—
TBA securities	871		—		871		—
Options on U.S. Treasury futures	1,047		1,047		—		—
Total assets carried at fair value	$	3,297,122	$	1,047	$	3,289,839	$	6,236

Liabilities carried at fair value:
TBA securities	2,039		—		2,039		—
Total liabilities carried at fair value	$	2,039	$	—	$	2,039	$	—

	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	$	—

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:



	Nine Months Ended
	September 30, 2018
Balance as of beginning of period	$	7,243
Unrealized loss included in OCI	(862		)
Principal payments	(1,031		)
Accretion	886
Balance as of end of period	$	6,236

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, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Mortgage-backed securities	$	3,294,510	$	3,294,510	$	3,026,989	$	3,026,989
U.S. Treasuries	—		—		146,530		146,530
Mortgage loans held for investment, net ⁽¹⁾	12,342		9,165		15,738		12,973
Derivative assets	2,612		2,612		2,940		2,940
Liabilities:
Repurchase agreements ⁽²⁾	$	2,690,858	$	2,690,858	$	2,565,902	$	2,565,902
Non-recourse collateralized financing ⁽¹⁾	3,709		3,742		5,520		5,554
Derivative liabilities	2,039		2,039		269		269


(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.