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Fair Value of Financial Instruments (Tables)
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Schedule of Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018, respectively, on the Company’s condensed consolidated balance sheets (dollar amounts in thousands):
 
Measured at Fair Value on a Recurring Basis at
 
June 30, 2019
 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets carried at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency RMBS
$

 
$
994,200

 
$

 
$
994,200

 
$

 
$
1,037,730

 
$

 
$
1,037,730

Non-Agency RMBS

 
432,840

 

 
432,840

 

 
214,037

 

 
214,037

CMBS

 
292,090

 

 
292,090

 

 
207,785

 
52,700

 
260,485

ABS

 
24,739

 

 
24,739

 

 

 

 

Multi-family loans held in securitization trusts

 

 
14,573,925

 
14,573,925

 

 

 
11,679,847

 
11,679,847

Distressed and other residential mortgage loans, at fair value

 

 
1,061,954

 
1,061,954

 

 

 
737,523

 
737,523

Derivative assets:
 
 
 
 
 
 


 
 
 
 
 
 
 


Interest rate swaps (1)

 
14,047

 

 
14,047

 

 
10,263

 

 
10,263

Investments in unconsolidated entities

 

 
88,108

 
88,108

 

 

 
32,994

 
32,994

Total
$

 
$
1,757,916

 
$
15,723,987

 
$
17,481,903

 
$

 
$
1,469,815

 
$
12,503,064

 
$
13,972,879

Liabilities carried at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-family collateralized debt obligations
$

 
$

 
$
13,772,726

 
$
13,772,726

 
$

 
$

 
$
11,022,248

 
$
11,022,248

Total
$

 
$

 
$
13,772,726

 
$
13,772,726

 
$

 
$

 
$
11,022,248

 
$
11,022,248


    
(1) 
All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $27.8 million netted against a variation margin of $41.9 million at June 30, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.
Changes in Valuation of Level 3 Assets
    
(1) 
All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $27.8 million netted against a variation margin of $41.9 million at June 30, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.
The following tables detail changes in valuation for the Level 3 assets for the six months ended June 30, 2019 and 2018, respectively (amounts in thousands):

Level 3 Assets:
 
Six Months Ended June 30, 2019
 
Multi-family loans held in securitization trusts
Distressed and other residential mortgage loans
Investments in unconsolidated entities
CMBS held in securitization trusts
 
Total
Balance at beginning of period
$
11,679,847

$
737,523

$
32,994

$
52,700

 
$
12,503,064

Total gains/(losses) (realized/unrealized)
 
 
 
 
 
 
Included in earnings
574,231

25,359

5,753

17,734

 
623,077

Included in other comprehensive income (loss)



(13,665
)
 
(13,665
)
Transfers in




 

Transfers out

(182
)


 
(182
)
Contributions


50,000


 
50,000

Paydowns/Distributions
(106,363
)
(61,275
)
(639
)

 
(168,277
)
Sales

(19,814
)

(56,769
)
 
(76,583
)
Purchases (1)
2,426,210

380,343



 
2,806,553

Balance at the end of period
$
14,573,925

$
1,061,954

$
88,108

$

 
$
15,723,987


(1) 
During the six months ended June 30, 2019, the Company purchased first loss PO securities and certain IOs and mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $2.4 billion during the six months ended June 30, 2019 (see Notes 2 and 6)
Changes in Valuation of Level 3 Liabilities
 
Six Months Ended June 30, 2018
 
Multi-family loans held in securitization trusts
Distressed and other residential mortgage loans
Investments in unconsolidated entities
CMBS held in securitization trusts
 
Total
Balance at beginning of period
$
9,657,421

$
87,153

$
42,823

$
47,922

 
$
9,835,319

Total (losses)/gains (realized/unrealized)
 
 
 
 
 
 
Included in earnings
(244,181
)
(475
)
3,575

1,915

 
(239,166
)
Included in other comprehensive income (loss)



297

 
297

Transfers in




 

Transfers out




 

Contributions




 

Paydowns/Distributions
(67,880
)
(9,371
)
(1,246
)

 
(78,497
)
Sales

(2,185
)


 
(2,185
)
Purchases

94,075



 
94,075

Balance at the end of period
$
9,345,360

$
169,197

$
45,152

$
50,134

 
$
9,609,843


The following table details changes in valuation for the Level 3 liabilities (Multi-family CDOs) for the six months ended June 30, 2019 and 2018, respectively (amounts in thousands):

Level 3 Liabilities:
 
Six Months Ended June 30,
 
2019
 
2018
Balance at beginning of period
$
11,022,248

 
$
9,189,459

Total losses (gains) (realized/unrealized)
 
 
 
Included in earnings (1)
531,930

 
(282,738
)
Purchases (2)
2,324,639

 

Paydowns
(106,091
)
 
(67,880
)
Balance at the end of period
$
13,772,726

 
$
8,838,841


(1) 
Amounts included in interest expense on Multi-Family CDOs and unrealized gain on multi-family loans and debt held in securitization trusts.
(2) 
During the six months ended June 30, 2019, the Company purchased PO securities and certain IOs and mezzanine CMBS securities issued from securitizations that it determined to consolidate and include in the Consolidated K-Series. As a result, the Company consolidated liabilities of these securitizations in the amount of $2.3 billion (see Notes 2 and 6)
Changes in Unrealized Gains (Losses) Included in Earnings for Level 3 Assets and Liabilities
The following table details the changes in unrealized gains (losses) included in earnings for the three and six months ended June 30, 2019 and 2018 for our Level 3 assets and liabilities held as of June 30, 2019 and 2018, respectively (dollar amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Assets
 
 
 
 
 
 
 
Multi-family loans held in securitization trusts (1)
$
330,105

 
$
(47,200
)
 
$
604,788

 
$
(219,746
)
Investments in unconsolidated entities (2)
1,698

 
1,858

 
5,359

 
2,896

Distressed and other residential mortgage loans, at fair value (3)
10,329

 
(34
)
 
19,666

 
(126
)
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Multi-family debt held in securitization trusts (1)
(324,898
)
 
59,219

 
(590,171
)
 
239,310



(1) 
Presented in unrealized gain on multi-family loans and debt held in securitization trusts, net on the Company's condensed consolidated statements of operations.
(2) 
Presented in other income on the Company's condensed consolidated statements of operations.
(3) 
Presented in net gain (loss) on distressed and other residential mortgage loans at fair value on the Company's condensed consolidated statements of operations.
Schedule of Assets Measured at Fair Value on a Non-recurring Basis

The following table presents assets measured at fair value on a non-recurring basis as of June 30, 2019 and December 31, 2018, respectively, on the Company's condensed consolidated balance sheets (dollar amounts in thousands):
 
Assets Measured at Fair Value on a Non-Recurring Basis at
 
June 30, 2019
 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Residential mortgage loans held in securitization trusts – impaired loans, net

 

 
$
5,590

 
$
5,590

 

 

 
$
5,921

 
$
5,921



Schedule of Gains (Losses) Incurred for Assets Measured at Fair Value on a Non-recurring Basis

The following table presents gains (losses) incurred for assets measured at fair value on a non-recurring basis for the three and six months ended June 30, 2019 and 2018, respectively, on the Company’s condensed consolidated statements of operations (dollar amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Residential mortgage loans held in securitization trusts – impaired loans, net

 

 
$
(38
)
 
$
110


Schedule of Carrying Value and Estimated Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of the Company’s financial instruments at June 30, 2019 and December 31, 2018, respectively (dollar amounts in thousands):
 
 
 
June 30, 2019
 
December 31, 2018
 
Fair Value
Hierarchy Level
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
Level 1
 
$
134,993

 
$
134,993

 
$
103,724

 
$
103,724

Investment securities available for sale
Level 2 or 3
 
1,743,869

 
1,743,869

 
1,512,252

 
1,512,252

Distressed and other residential mortgage loans, at fair value
Level 3
 
1,061,954

 
1,061,954

 
737,523

 
737,523

Distressed and other residential mortgage loans, net
Level 3
 
218,094

 
221,615

 
285,261

 
289,376

Investments in unconsolidated entities
Level 3
 
166,148

 
166,983

 
73,466

 
73,833

Preferred equity and mezzanine loan investments
Level 3
 
191,387

 
193,875

 
165,555

 
167,739

Multi-family loans held in securitization trusts
Level 3
 
14,573,925

 
14,573,925

 
11,679,847

 
11,679,847

Derivative assets
Level 2
 
14,047

 
14,047

 
10,263

 
10,263

Mortgage loans held for sale, net (1)
Level 3
 
2,460

 
2,621

 
3,414

 
3,584

Mortgage loans held for investment (1)
Level 3
 
1,580

 
1,580

 
1,580

 
1,580

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Repurchase agreements
Level 2
 
2,604,356

 
2,604,356

 
2,131,505

 
2,131,505

Residential collateralized debt obligations
Level 3
 
45,280

 
43,468

 
53,040

 
50,031

Multi-family collateralized debt obligations
Level 3
 
13,772,726

 
13,772,726

 
11,022,248

 
11,022,248

Securitized debt
Level 3
 

 

 
42,335

 
45,030

Subordinated debentures
Level 3
 
45,000

 
45,044

 
45,000

 
44,897

Convertible notes
Level 2
 
131,839

 
138,773

 
130,762

 
135,689



(1) 
Included in receivables and other assets in the accompanying condensed consolidated balance sheets.