LOANS (Tables)

9 Months Ended

Sep. 30, 2019

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

The following table presents the activity of the Company’s loan investments, including loans held for sale and excluding loans transferred or pledged to securitization vehicles, for the nine months ended September 30, 2019:



	Residential			Commercial			Corporate			Total
	(dollars in thousands)
Beginning balance January 1, 2019	$	1,359,806		$	1,338,987		$	1,887,182		$	4,585,975
Purchases	1,894,303			395,058			631,065			2,920,426
Sales and transfers⁽¹⁾	(1,878,218		)	(958,912		)	(268,403		)	(3,105,533		)
Principal payments	(156,579		)	(156,437		)	(143,284		)	(456,300		)
Gains / (losses)	1,671			(9,207		)	5,260			(2,276		)
(Amortization) / accretion	(1,581		)	1,940			3,963			4,322
Ending balance September 30, 2019	$	1,219,402		$	611,429		$	2,115,783		$	3,946,614

⁽¹⁾ Includes securitizations, syndications and transfers to securitization vehicles.

Fair Value and Unpaid Principal of Residential Mortgage Loan Portfolio

The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles, at September 30, 2019 and December 31, 2018:



	September 30, 2019		December 31, 2018
	(dollars in thousands)
Fair value	$	3,596,133	$	2,454,637
Unpaid principal balance	$	3,475,799	$	2,425,657

Summary of Comprehensive Income (Loss)

The following table provides information regarding the line items and amounts recognized in the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019 and 2018 for these investments:



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(dollars in thousands)
Interest income	$	37,673		$	16,423		$	102,689		$	45,702
Net gains (losses) on disposal of investments	(9,671		)	(2,975		)	(19,499		)	(7,924		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	18,093			(3,633		)	61,805			(14,802		)
Total included in net income (loss)	$	46,095		$	9,815		$	144,995		$	22,976

Geographic Concentrations Based on Unpaid Principal Balances

The following table provides the geographic concentrations based on the unpaid principal balances at September 30, 2019 and December 31, 2018 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:



Geographic Concentrations of Residential Mortgage Loans
September 30, 2019		December 31, 2018
Property location	% of Balance	Property location	% of Balance
California	51.9%	California	53.7%
New York	10.4%	Florida	7.1%
Florida	5.7%	New York	6.6%
All other (none individually greater than 5%)	32.0%	All other (none individually greater than 5%)	32.6%
Total	100.0%		100.0%

The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the Company’s VIEs, excluding the credit facility VIEs, OBX Trusts and CLO, at September 30, 2019 are as follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk



Commercial Trusts					Residential Trusts
Property Location	Principal Balance		% of Balance		Property Location	Principal Balance		% of Balance
(dollars in thousands)
Texas	$	476,312	20.2	%	California	$	37,268	44.2	%
California	459,310		19.5	%	Texas	11,202		13.3	%
New York	353,800		15.0	%	Illinois	7,102		8.4	%
Florida	163,995		7.0	%	Washington	5,895		7.0	%
North Carolina	123,026		5.2	%	Other ⁽¹⁾	22,889		27.1	%
Other ⁽¹⁾	779,654		33.1	%
Total	$	2,356,097	100.0	%	Total	$	84,356	100.0	%

⁽¹⁾

No individual state greater than 5%.

Residential Mortgage Loans

The following table provides additional data on the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, at September 30, 2019 and December 31, 2018:



	September 30, 2019		December 31, 2018
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$1 - $3,448	$463	$0 - $3,500	$457
Interest rate	2.00% - 9.25%	5.03%	2.00% - 7.75%	4.72%
Maturity	1/1/2028 - 9/1/2059	5/29/2047	1/1/2028 - 11/1/2058	1/11/2046
FICO score at loan origination	505 - 825	756	505 - 823	752
Loan-to-value ratio at loan origination	8% - 111%	67%	8% - 111%	68%

Commercial Real Estate Investments Held for Investment

At September 30, 2019 and December 31, 2018, commercial real estate investments held for investment were comprised of the following:



	September 30, 2019						December 31, 2018
	Outstanding Principal		Carrying Value ⁽¹⁾		Percentage of Loan Portfolio ⁽²⁾		Outstanding Principal		Carrying Value ⁽¹⁾		Percentage of Loan Portfolio ⁽²⁾
	(dollars in thousands)
Senior mortgages	$	434,949	$	432,460	30.2	%	$	988,248	$	981,202	75.6	%
Senior securitized mortgages ⁽³⁾	814,423		810,005		56.5	%	—		—		—	%
Mezzanine loans	192,065		178,969		13.3	%	319,663		315,601		24.4	%
Total	$	1,441,437	$	1,421,434	100.0	%	$	1,307,911	$	1,296,803	100.0	%


⁽¹⁾	Carrying value includes unamortized origination fees of $7.3 million and $7.6 million at September 30, 2019 and December 31, 2018, respectively.


⁽²⁾	Based on outstanding principal.


⁽³⁾	Assets of a consolidated VIE.

The following tables represent a rollforward of the activity for the Company’s commercial real estate investments held for investment at September 30, 2019 and December 31, 2018:



September 30, 2019
	Senior Mortgages			Senior Securitized Mortgages ⁽¹⁾			Mezzanine Loans			Total
	(dollars in thousands)
Net carrying value (January 1, 2019)	$	981,202		$	—		$	315,601		$	1,296,803
Originations & advances (principal)	376,651			964,473			21,032			1,362,156
Principal payments	(16,099		)	(150,050		)	(139,955		)	(306,104		)
Transfers	(913,849		)	—			(8,675		)	(922,524		)
Net (increase) decrease in origination fees	2,972			(6,999		)	(184		)	(4,211		)
Amortization of net origination fees	1,583			2,581			357			4,521
Allowance for loan losses	—			—			(9,207		)	(9,207		)
Net carrying value (September 30, 2019)	$	432,460		$	810,005		$	178,969		$	1,421,434



December 31, 2018
	Senior Mortgages			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Net carrying value (January 1, 2018)	$	625,900		$	394,442		$	8,985		$	1,029,327
Originations & advances (principal)	575,953			52,224			—			628,177
Principal payments	(216,849		)	(127,575		)	(9,000		)	(353,424		)
Net (increase) decrease in origination fees	(6,624		)	(370		)	—			(6,994		)
Amortization of net origination fees	2,822			376			15			3,213
Allowance for loan losses	—			(3,496		)	—			(3,496		)
Net carrying value (December 31, 2018)	$	981,202		$	315,601		$	—		$	1,296,803

⁽¹⁾Assets of a consolidated VIE.

The Company’s residential mortgage loans are primarily comprised of performing adjustable-rate and fixed-rate whole loans. Additionally, the Company consolidates a collateralized financing entity that securitized prime adjustable-rate jumbo residential mortgage loans. The Company also consolidates securitization trusts in which it had purchased subordinated securities because it also has certain powers and rights to direct the activities of such trusts. Refer to the “Variable Interest Entities” Note for further information related to the Company’s consolidated residential mortgage loan trusts.

Schedule of Commercial Mortgage Loans Held for Investment

The following table provides the internal loan risk ratings of commercial real estate investments held for investment as of September 30, 2019 and December 31, 2018.



September 30, 2019
					Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Performing		Performing - Closely Monitored		Performing - Special Mention		Substandard ⁽¹⁾		Doubtful ⁽²⁾		Loss ⁽³⁾		Total
(dollars in thousands)
Senior mortgages	$	434,949	30.2	%	$	141,505	$	185,954	$	64,390	$	43,100	$	—	$	—	$	434,949
Senior securitized mortgages⁽⁴⁾	814,423		56.5	%	322,193		316,710		125,520		50,000		—		—		814,423
Mezzanine loans	192,065		13.3	%	61,063		70,299		—		17,100		36,603		7,000		192,065
Total	$	1,441,437	100.0	%	$	524,761	$	572,963	$	189,910	$	110,200	$	36,603	7,000		$	1,441,437



December 31, 2018
					Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Performing		Performing - Closely Monitored		Performing - Special Mention		Substandard ⁽¹⁾		Doubtful ⁽²⁾		Loss		Total
(dollars in thousands)
Senior mortgages	$	988,248	75.6	%	$	653,066	$	215,792	$	55,000	$	64,390	$	—	$	—	$	988,248
Mezzanine loans	319,663		24.4	%	140,776		38,884		96,400		36,603		7,000		—		319,663
Total	$	1,307,911	100.0	%	$	793,842	$	254,676	$	151,400	$	100,993	$	7,000	$	—	$	1,307,911


⁽¹⁾	The Company rated three loans as of September 30, 2019 and two loans as of December 31, 2018 as Substandard. The Company evaluated whether an impairment exists and determined in each case that, based on quantitative and qualitative factors, the Company expects repayment of contractual amounts due.


⁽²⁾	The Company rated one loan as Doubtful and evaluated for impairment as of September 30, 2019. The Company rated one loan as Doubtful and evaluated for impairment as of December 31, 2018. The allowance for loan losses for Doubtful loans was $5.7 million and $3.5 million as of September 30, 2019 and December 31, 2018, respectively.

⁽³⁾ The Company transferred a loan from Doubtful to Loss during the three months ended September 30, 2019.


⁽⁴⁾	Assets of a consolidated VIE.

Schedule of Industry and Rate Attributes of The Portfolio

The industry and rate attributes of the portfolio at September 30, 2019 and December 31, 2018 are as follows:



	Industry Dispersion
	September 30, 2019						December 31, 2018
	Fixed Rate		Floating Rate		Total		Fixed Rate		Floating Rate		Total
	(dollars in thousands)
Aircraft and Parts	$	—	$	41,064	$	41,064	$	—	$	41,342	$	41,342
Arrangement of Transportation of Freight & Cargo	—		—		—		—		21,632		21,632
Coating, Engraving & Allied Services	—		49,767		49,767		—		57,223		57,223
Commercial Fishing	—		—		—		—		242,185		242,185
Computer Programming, Data Processing & Other Computer Related Services	—		347,287		347,287		—		—		—
Drugs	—		35,918		35,918		—		35,882		35,882
Electrical Work	—		42,372		42,372		—		41,760		41,760
Electronic Components & Accessories	—		24,000		24,000		—		24,059		24,059
Engineering, Architectural, and Surveying	—		77,284		77,284		—		80,748		80,748
Grocery Stores	—		23,292		23,292		—		23,431		23,431
Home Health Care Services	—		29,391		29,391		—		—		—
Insurance Agents, Brokers and Service	—		76,444		76,444		—		48,942		48,942
Mailing, Reproduction, Commercial Art and Photography, and Stenographic	—		14,770		14,770		—		14,843		14,843
Management & Public Relations Services	—		339,319		339,319		—		487,046		487,046
Medical & Dental Laboratories	—		41,467		41,467		—		26,858		26,858
Metal Cans & Shipping Containers	—		118,420		118,420		—		118,248		118,248
Miscellaneous Business Services	—		215,709		215,709		—		19,622		19,622
Miscellaneous Equipment Rental & Leasing	—		49,732		49,732		—		49,552		49,552
Miscellaneous Health & Allied Services, not elsewhere classified	—		77,551		77,551		—		56,003		56,003
Miscellaneous Plastic Products	—		10,000		10,000		—		9,953		9,953
Motor Vehicles and Motor Vehicle Equipment	—		—		—		—		16,563		16,563
Motor Vehicles and Motor Vehicle Parts & Supplies	—		28,877		28,877		—		29,046		29,046
Nonferrous Foundries (Castings)	—		12,918		12,918		—		12,948		12,948
Offices & Clinics of Doctors of Medicine	—		107,066		107,066		—		97,877		97,877
Offices & Clinics of other Health Practitioners	—		10,123		10,123		—		21,100		21,100
Petroleum and Petroleum Products	—		24,957		24,957		—		—		—
Public Warehousing & Storage	—		94,877		94,877		—		84,278		84,278
Research, Development & Testing Services	—		45,610		45,610		—		33,381		33,381
Schools & Educational Services, not elsewhere classified	—		19,635		19,635		—		19,805		19,805
Services Allied with the Exchange of Securities	—		—		—		—		14,877		14,877
Surgical, Medical & Dental Instruments & Supplies	—		96,702		96,702		—		96,607		96,607
Telephone Communications	—		61,231		61,231		—		61,371		61,371
Total	$	—	$	2,115,783	$	2,115,783	$	—	$	1,887,182	$	1,887,182

Aggregate positions by Respective Place in the Capital Structure of the Borrowers

The table below reflects the Company’s aggregate positions by their respective place in the capital structure of the borrowers at September 30, 2019 and December 31, 2018.



	September 30, 2019		December 31, 2018
	(dollars in thousands)
First lien loans	$	1,305,810	$	1,346,356
Second lien loans	809,973		540,826
Total	$	2,115,783	$	1,887,182