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Fair Value (Tables)

6 Months Ended

Jun. 30, 2014

Summary of the carrying values and the estimated fair values of the Company's financial instruments

	June 30, 2014				December 31, 2013
			Estimated				Estimated
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Loans and investments, net	$	1,502,586,691	$	1,541,435,025	$	1,523,699,653	$	1,550,248,793
Available-for-sale securities	2,805,471		2,805,471		37,315,652		37,315,652
Derivative financial instruments	3,747		3,747		6,402,336		6,402,336

Financial liabilities:
Credit facilities and repurchase agreements	$	22,204,000	$	22,166,998	$	159,125,023	$	158,735,570
Collateralized debt obligations	433,297,191		329,472,786		639,622,981		521,938,885
Collateralized loan obligations	545,750,000		546,679,375		264,500,000		266,436,250
Senior unsecured notes	58,637,625		58,567,260		—		—
Junior subordinated notes	159,557,894		101,934,775		159,291,427		101,240,185
Notes payable	2,498,542		2,485,696		2,500,000		2,487,287
Mortgage note payable - real estate owned and held-for-sale	53,538,637		53,228,140		53,751,004		52,943,305
Derivative financial instruments	19,551,436		19,551,436		24,794,051		24,794,051

Schedule of certain financial assets and financial liabilities measured at fair value on a recurring basis

The Company measures certain financial assets and financial liabilities at fair value on a recurring basis. The fair value of these financial assets and liabilities was determined using the following inputs as of June 30, 2014:

					Fair Value Measurements
	Carrying		Fair		Using Fair Value Hierarchy
	Value		Value		Level 1		Level 2		Level 3
Financial assets:
Available-for-sale securities (1)	$	2,805,471	$	2,805,471	$	705,471	$	—	$	2,100,000
Derivative financial instruments	3,747		3,747		—		3,747		—
Financial liabilities:
Derivative financial instruments	$	19,551,436	$	19,551,436	$	—	$	19,551,436	$	—

(1) The Company’s equity securities were measured using Level 1 inputs and the Company’s CMBS investment was measured using Level 3 inputs.

Schedule of financial assets measured at fair value on a recurring basis using Level 3 inputs

	Available-for-sale			Derivative
	Securities			Financial Instruments

Balance as of December 31, 2013	$	36,580,786		$	6,396,853
Adjustments to fair value:
Paydowns (1)	(663,684		)	1,483,387
Net changes in fair value (2)	—			511,012
Sales and settlements (3)	(33,817,102		)	(8,391,252		)
Balance as of June 30, 2014	$	2,100,000		$	—

(1) Includes an addition of $1.7 million to the derivative financial instruments as a result of a decrease in the amount financed under the respective repurchase agreement.

(2) Represents the net change in fair value recorded to other income during the six months ended June 30, 2014.

(3) Represents the sale of RMBS investments and the settlement of forward contract derivatives for which the Company recorded a gain of $0.5 million and $0.1 million, respectively, to other income during the six months ended June 30, 2014.

Schedule of certain financial and non-financial assets measured at fair value on a nonrecurring basis

The Company measures certain financial and non-financial assets at fair value on a nonrecurring basis. The fair value of these financial assets was determined using the following inputs as of June 30, 2014:

	Net				Fair Value Measurements
	Carrying		Fair		Using Fair Value Hierarchy
	Value		Value		Level 1		Level 2		Level 3
Financial assets:
Impaired loans, net (1)	$	122,502,384	$	122,502,384	$	—	$	—	$	122,502,384

(1) The Company had an allowance for loan losses of $115.1 million relating to 14 loans with an aggregate carrying value, before loan loss reserves, of approximately $237.6 million at June 30, 2014.

Schedule of quantitative information about Level 3 Fair Value Measurements on a recurring and non-recurring basis

	June 30, 2014
			Valuation	Significant Unobservable	Range
	Fair Value		Technique(s)	Inputs	(Weighted Average)

Financial assets:

Impaired loans (1):

Multi-family	$	10,396,939	Direct capitalization analysis and discounted cash flows	Discount rate Capitalization rate Revenue growth rate	8.00% 6.75% to 8.25% (7.22%) 2.00%

Office	13,483,327		Discounted cash flows	Discount rate Capitalization rate Revenue growth rate	8.50% to 10.50% (9.39%) 7.00% to 8.50% (7.89%) 2.50% to 3.00% (2.97%)

Land	64,882,222		Discounted cash flows	Discount rate Capitalization rate Revenue growth rate	15.00% 7.25% 3.00%

Hotel	33,739,896		Discounted cash flows	Discount rate Capitalization rate Revenue growth rate	9.00% 7.25% 3.00%

CMBS	2,100,000		Discounted cash flows	Discount rate	14.16%

(1) Includes all impaired loans regardless of the period in which a loan loss provision was recorded.

Schedule of fair value of assets and liabilities

The Company measures certain assets and liabilities for which fair value is only disclosed. The fair value of these assets and liabilities was determined using the following inputs as of June 30, 2014:

					Fair Value Measurements
	Carrying		Fair		Using Fair Value Hierarchy
	Value		Value		Level 1		Level 2		Level 3
Financial assets:
Loans and investments, net	$	1,502,586,691	$	1,541,435,025	$	—	$	—	$	1,541,435,025
Financial liabilities:
Credit facilities	$	22,204,000	$	22,166,998	$	—	$	—	$	22,166,998
Collateralized debt obligations	433,297,191		329,472,786		—		—		329,472,786
Collateralized loan obligation	545,750,000		546,679,375		—		—		546,679,375
Senior unsecured notes	58,637,625		58,567,260		58,567,260		—		—
Junior subordinated notes	159,557,894		101,934,775		—		—		101,934,775
Notes payable	2,498,542		2,485,696		—		—		2,485,696
Mortgage note payable — real estate owned	53,538,637		53,228,140		—		—		53,228,140

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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