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Valuation

6 Months Ended

Jun. 30, 2022

Valuation

The tables below reflect the value of the Company's Level 1, Level 2, and Level 3 financial instruments that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021:

June 30, 2022:


Description	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Securities, at fair value:
Agency RMBS	$	—	$	1,322,989	$	12,389	$	1,335,378
Non-Agency RMBS	—		111,977		131,449		243,426
CMBS	—		19,245		9,380		28,625
CLOs	—		12,189		23,378		35,567
Asset-backed securities, backed by consumer loans	—		—		78,183		78,183
Corporate debt securities	—		—		1,767		1,767
Corporate equity securities	—		—		10,276		10,276
U.S. Treasury securities	—		24,291		—		24,291
Loans, at fair value:
Residential mortgage loans	—		—		2,995,584		2,995,584
Commercial mortgage loans	—		—		477,378		477,378
Consumer loans	—		—		7,410		7,410
Corporate loans	—		—		10,448		10,448
Investment in unconsolidated entities, at fair value	—		—		192,269		192,269
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	—		—		202		202
Credit default swaps on asset-backed indices	—		2,089		—		2,089
Credit default swaps on corporate bonds	—		201		—		201
Credit default swaps on corporate bond indices	—		1,405		—		1,405
Interest rate swaps	—		72,754		—		72,754
TBAs	—		3,169		—		3,169

Warrants	—		803		—		803
Futures	316		—		—		316
Forwards	—		244		—		244
Total assets	$	316	$	1,571,356	$	3,950,113	$	5,521,785
Liabilities:
Securities sold short, at fair value:
Government debt	$	—	$	(176,155)	$	—	$	(176,155)
Financial derivatives–liabilities, at fair value:
Credit default swaps on asset-backed indices	—		(34)		—		(34)
Credit default swaps on corporate bonds	—		(338)		—		(338)
Credit default swaps on corporate bond indices	—		—		—		—
Interest rate swaps	—		(17,196)		—		(17,196)
TBAs	—		(2,778)		—		(2,778)
Futures	(96)		—		—		(96)

Other secured borrowings, at fair value	—		—		(1,448,182)		(1,448,182)
Senior notes, at fair value	—		—		(202,650)		(202,650)
Total liabilities	$	(96)	$	(196,501)	$	(1,650,832)	$	(1,847,429)

December 31, 2021:


Description	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Securities, at fair value:
Agency RMBS	$	—	$	1,686,906	$	9,710	$	1,696,616
Non-Agency RMBS	—		81,666		134,888		216,554
CMBS	—		12,509		13,134		25,643
CLOs	—		35,651		26,678		62,329
Asset-backed securities, backed by consumer loans	—		—		73,108		73,108
Corporate debt securities	—		356		5,198		5,554
Corporate equity securities	—		—		7,556		7,556
Loans, at fair value:
Residential mortgage loans	—		—		2,016,228		2,016,228
Commercial mortgage loans	—		—		326,197		326,197
Consumer loans	—		—		62,365		62,365
Corporate loans	—		—		10,531		10,531
Investment in unconsolidated entities, at fair value	—		—		195,643		195,643
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	—		—		303		303
Credit default swaps on asset-backed indices	—		1,751		—		1,751
Credit default swaps on corporate bond indices	—		156		—		156
Interest rate swaps	—		13,993		—		13,993
TBAs	—		1,229		—		1,229
Options	—		278		—		278
Warrants	—		706		—		706
Futures	478		—		—		478
Total assets	$	478	$	1,835,201	$	2,881,539	$	4,717,218
Liabilities:
Securities sold short, at fair value:
Government debt	$	—	$	(120,525)	$	—	$	(120,525)
Financial derivatives–liabilities, at fair value:
Credit default swaps on asset-backed indices	—		(39)		—		(39)
Credit default swaps on corporate bonds	—		(99)		—		(99)
Credit default swaps on corporate bond indices	—		(1,870)		—		(1,870)
Interest rate swaps	—		(9,098)		—		(9,098)
TBAs	—		(909)		—		(909)
Futures	(75)		—		—		(75)
Forwards	—		(208)		—		(208)
Other secured borrowings, at fair value	—		—		(984,168)		(984,168)
Total liabilities	$	(75)	$	(132,748)	$	(984,168)	$	(1,116,991)

The following tables identify the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of June 30, 2022 and December 31, 2021:

June 30, 2022:


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
	(In thousands)
Non-Agency RMBS	$	87,132	Market Quotes	Non Binding Third-Party Valuation	$	0.49		$	179.67		$	75.52
	44,317		Discounted Cash Flows
	131,449			Yield(1)	—		%	100.2		%	10.2		%
				Projected Collateral Prepayments	—		%	70.4		%	33.2		%
				Projected Collateral Losses	—		%	93.1		%	24.6		%
				Projected Collateral Recoveries	—		%	75.3		%	20.4		%
Non-Agency CMBS	7,454		Market Quotes	Non Binding Third-Party Valuation	$	6.63		$	82.46		$	41.01
	1,926		Discounted Cash Flows
	9,380			Yield	10.3		%	24.0		%	13.4		%
				Projected Collateral Losses	0.9		%	29.8		%	4.6		%
				Projected Collateral Recoveries	70.2		%	96.7		%	93.5		%
CLOs	15,250		Market Quotes	Non Binding Third-Party Valuation	$	3.00		$	100.00		$	62.30
	8,128		Discounted Cash Flows
	23,378			Yield	14.9		%	107.7		%	29.7		%
Agency interest only RMBS	7,978		Market Quotes	Non Binding Third-Party Valuation	$	0.63		$	18.69		$	8.41
	4,411		Option Adjusted Spread ("OAS")
	12,389			LIBOR OAS(2)(3)	39			4,176			460
				Projected Collateral Prepayments	22.8		%	100.0		%	64.5		%
ABS backed by consumer loans	78,183		Discounted Cash Flows	Yield	2.6		%	25.4		%	12.6		%
				Projected Collateral Prepayments	0.0		%	18.3		%	13.8		%
				Projected Collateral Losses	0.9		%	29.0		%	22.9		%
Corporate debt and equity	12,043		Discounted Cash Flows	Yield	10.0		%	27.6		%	11.1		%
Performing and re-performing residential mortgage loans	1,414,837		Discounted Cash Flows	Yield	3.9		%	53.3		%	6.6		%




Securitized residential mortgage loans(4)(5)	$	1,504,652	Market Quotes	Non Binding Third-Party Valuation	$	0.56		$	98.79		$	89.54
	57,167		Discounted Cash Flows
	1,561,819			Yield	4.2		%	20.3		%	7.0		%
Non-performing residential mortgage loans	18,928		Discounted Cash Flows	Yield	3.2		%	69.3		%	14.5		%
				Recovery Amount	0.5		%	205.0		%	36.5		%
				Months to Resolution	5.8			91.2			24.2
Performing commercial mortgage loans	445,913		Discounted Cash Flows	Yield	6.7		%	13.3		%	8.8		%
Non-performing commercial mortgage loans	31,465		Discounted Cash Flows	Yield	15.2		%	23.0		%	19.2		%
				Recovery Amount	99.9		%	100.4		%	100.1		%
				Months to Resolution	2.9			2.9			2.9


	Fair Value	Valuation Technique	Unobservable Input	Range						Weighted Average
Description				Min			Max
(continued)	(In thousands)
Consumer loans	7,410	Discounted Cash Flows	Yield	8.1		%	54.1		%	10.6		%
			Projected Collateral Prepayments	0.0		%	25.0		%	14.9		%
			Projected Collateral Losses	1.2		%	39.7		%	9.6		%
Corporate loans	7,000	Market Quotes	Non Binding Third-Party Valuation	$	100.00		$	100.00		$	100.00
	3,448	Discounted Cash Flows
	10,448		Yield	6.0		%	20.1		%	15.6		%
Investment in unconsolidated entities—Loan origination entities	98,759	Enterprise Value	Equity Price-to-Book(6)	1.3x			3.3x			1.4x
Investment in unconsolidated entities—Other	80,579	Enterprise Value	Net Asset Value	n/a			n/a			n/a
Investment in unconsolidated entities—Loan origination-related entities	12,931	Recent Transactions	Transaction Price	n/a			n/a			n/a
	192,269
Credit default swaps on asset-backed securities	202	Net Discounted Cash Flows	Projected Collateral Prepayments	24.3		%	31.7		%	29.2		%
			Projected Collateral Losses	6.8		%	8.9		%	7.5		%
			Projected Collateral Recoveries	12.2		%	15.3		%	12.2		%
Other secured borrowings, at fair value(4)	(1,448,182)	Market Quotes	Non Binding Third-Party Valuation	$	57.86		$	98.79		$	91.80
			Yield	5.5%			9.1%			6.3%
			Projected Collateral Prepayments	—%			99.9%			98.9%
Senior notes, at fair value	(202,650)	Market Quotes	Non Binding Third-Party Valuation	$	96.50		$	96.50		$	96.50

(1)For the range minimum, the range maximum, and the weighted average yield, excludes non-Agency RMBS with a negative yield, with a total fair value of $0.3 million. Including these securities the weighted average yield was 10.1%.

(2)Shown in basis points.

(3)For range minimum, range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $0.9 million. Including these securities the weighted average was 386 basis points.

(4)Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFEs as discussed in Note 2.

(5)Includes $7.7 million of non-performing securitized residential mortgage loans.

(6)Represents an estimation of where market participants might value an enterprise on a price-to-book basis.

December 31, 2021:


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
	(In thousands)
Non-Agency RMBS	$	89,344	Market Quotes	Non Binding Third-Party Valuation	$	0.34		$	222.87		$	85.17
	45,544		Discounted Cash Flows
	134,888			Yield(1)	—		%	38.6		%	6.8		%
				Projected Collateral Prepayments	—		%	74.4		%	39.1		%
				Projected Collateral Losses	—		%	82.9		%	22.5		%
				Projected Collateral Recoveries	—		%	91.5		%	17.5		%
Non-Agency CMBS	12,866		Market Quotes	Non Binding Third-Party Valuation	$	7.00		$	90.77		$	56.98
	268		Discounted Cash Flows
	13,134			Yield	7.6		%	26.3		%	10.3		%
				Projected Collateral Losses	—		%	6.5		%	2.3		%
				Projected Collateral Recoveries	10.0		%	100.0		%	95.0		%
CLOs	18,664		Market Quotes	Non Binding Third-Party Valuation	$	14.00		$	99.75		$	54.99
	8,014		Discounted Cash Flows
	26,678			Yield(2)	9.0		%	292.1		%	32.8		%
				Projected Collateral Prepayments	13.4		%	94.5		%	91.3		%
				Projected Collateral Losses	1.9		%	68.9		%	4.4		%
				Projected Collateral Recoveries	1.3		%	17.8		%	3.4		%
Agency interest only RMBS	3,558		Market Quotes	Non Binding Third-Party Valuation	$	0.72		$	20.36		$	7.31
	6,152		Option Adjusted Spread ("OAS")
	9,710			LIBOR OAS(3)(4)	135			19,247			683
				Projected Collateral Prepayments	49.5		%	100.0		%	78.8		%
ABS backed by consumer loans	73,108		Discounted Cash Flows	Yield	9.5		%	22.8		%	15.7		%
				Projected Collateral Prepayments	0.0		%	11.6		%	9.0		%
				Projected Collateral Losses	1.0		%	31.1		%	20.9		%
Corporate debt and equity	12,754		Discounted Cash Flows	Yield	8.1		%	44.3		%	14.7		%
Performing and re-performing residential mortgage loans	933		Recent Transactions	Transaction Price	n/a			n/a			n/a
	951,723		Discounted Cash Flows
	952,656			Yield	0.9		%	57.5		%	4.7		%
Securitized residential mortgage loans(5)(6)	1,003,164		Market Quotes	Non Binding Third-Party Valuation	$	88.36		$	102.14		$	99.83
	38,381		Discounted Cash Flows
	1,041,545			Yield	1.3		%	23.5		%	4.2		%


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
(Continued)	(In thousands)
Non-performing residential mortgage loans	$	22,027	Discounted Cash Flows	Yield	0.8		%	35.9		%	11.5		%
				Recovery Amount	0.5		%	174.8		%	34.8		%
				Months to Resolution	5.8			100.8			29.5
Performing commercial mortgage loans	310,735		Discounted Cash Flows	Yield	5.1		%	10.6		%	7.2		%
Non-performing commercial mortgage loans	15,462		Discounted Cash Flows	Yield	10.6		%	10.6		%	10.6		%
				Recovery Amount	100.2		%	100.2		%	100.2		%
				Months to Resolution	1.8			1.8			1.8
Consumer loans	62,365		Discounted Cash Flows	Yield	5.2		%	75.6		%	9.3		%
				Projected Collateral Prepayments	0.0		%	28.4		%	14.1		%
				Projected Collateral Losses	0.9		%	86.6		%	9.7		%
Corporate loans	7,000		Market Quotes	Non Binding Third-Party Valuation	$	100.00		$	100.00		$	100.00
	3,531		Discounted Cash Flows
	10,531			Yield	3.0		%	21.9		%	16.1		%
Investment in unconsolidated entities—Loan Originators(6)	123,779		Enterprise Value	Equity Price-to-Book(7)	1.2x			1.9x			1.5x
Investment in unconsolidated entities—Other(6)	57,828		Enterprise Value	Net Asset Value	n/a			n/a			n/a
	14,036		Recent Transactions	Transaction Price	n/a			n/a			n/a
	195,643
Credit default swaps on asset-backed securities	303		Net Discounted Cash Flows	Projected Collateral Prepayments	33.9		%	41.9		%	40.1		%
				Projected Collateral Losses	6.5		%	8.8		%	7.0		%
				Projected Collateral Recoveries	11.2		%	11.4		%	11.3		%
Other secured borrowings, at fair value(5)	(984,168)		Market Quotes	Non Binding Third-Party Valuation	$	93.34		$	102.14		$	99.94
				Yield	1.8%			2.5%			2.1%
				Projected Collateral Prepayments	—%			97.2%			68.1%

(1)For the range minimum, the range maximum, and the weighted average yield, excludes non-Agency RMBS with a negative yield, with a total fair value of $2.1 million. Including these securities the weighted average yield was 6.5%.

(2)For the range minimum, the range maximum, and the weighted average yield, excludes CLOs with a negative yield, with a total fair value of $14 thousand. Including these securities the weighted average yield was 32.7%.

(3)Shown in basis points.

(4)For range minimum, range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $2.1 million. Including these securities the weighted average was 485 basis points.

(5)Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFEs as discussed in Note 2.

(6)Includes $8.8 million of non-performing securitized residential mortgage loans.

(7)Represent an estimation of where market participants might value an enterprise on a price-to-book basis.

Third-party non-binding valuations are validated by comparing such valuations to internally generated prices based on the Company's models and, when available, to recent trading activity in the same or similar instruments.

For those instruments valued using discounted and net discounted cash flows, collateral prepayments, losses, recoveries, and scheduled amortization are projected over the remaining life of the collateral and expressed as a percentage of the collateral's current principal balance. Averages are weighted based on the fair value of the related instrument. In the case of credit default swaps on asset-backed securities, averages are weighted based on each instrument's bond equivalent value. Bond equivalent value represents the investment amount of a corresponding position in the reference obligation, calculated as the difference between the outstanding principal balance of the underlying reference obligation and the fair value, inclusive of accrued interest, of the derivative contract. For those assets valued using the LIBOR Option Adjusted Spread ("LIBOR OAS") valuation methodology, cash flows are projected using the Company's models over multiple interest rate scenarios, and these projected cash flows are then discounted using the LIBOR rates implied by each interest rate scenario. The LIBOR OAS of an

asset is then computed as the unique constant yield spread that, when added to all LIBOR rates in each interest rate scenario generated by the model, will equate (a) the expected present value of the projected asset cash flows over all model scenarios to (b) the actual current market price of the asset. LIBOR OAS is therefore model-dependent. Generally speaking, LIBOR OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any interest rate options embedded in the asset. The Company considers the expected timeline to resolution in the determination of fair value for its non-performing commercial and residential mortgage loans.

Material changes in any of the inputs above in isolation could result in a significant change to reported fair value measurements. Additionally, fair value measurements are impacted by the interrelationships of these inputs. For example, for instruments subject to prepayments and credit losses, such as non-Agency RMBS and consumer loans and ABS backed by consumer loans, a higher expectation of collateral prepayments will generally be accompanied by a lower expectation of collateral losses. Conversely, higher losses will generally be accompanied by lower prepayments. Because the Company's credit default swaps on asset-backed security holdings represent credit default swap contracts whereby the Company has purchased credit protection, such credit default swaps on asset-backed securities generally have the directionally opposite sensitivity to prepayments, losses, and recoveries as compared to the Company's long securities holdings. Prepayments do not represent a significant input for the Company's commercial mortgage-backed securities and commercial mortgage loans. Losses and recoveries do not represent a significant input for the Company's Agency RMBS interest only securities, given the guarantee of the issuing government agency or government-sponsored enterprise.

The tables below includes a roll-forward of the Company's financial instruments for the three- and six-month periods ended June 30, 2022 and 2021 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.

Three-Month Period Ended June 30, 2022


(In thousands)	Beginning Balance as of March 31, 2022		Accreted Discounts / (Amortized Premiums)		Net Realized Gain/ (Loss)		Change in Net Unrealized Gain/(Loss)		Purchases/Payments(1)		Sales/Issuances(2)		Transfers Into Level 3		Transfers Out of Level 3		Ending Balance as of June 30, 2022
Assets:
Securities, at fair value:
Agency RMBS	$	8,621	$	(672)	$	(250)	$	206	$	441	$	—	$	4,043	$	—	$	12,389
Non-Agency RMBS	116,776		208		2,076		(6,407)		15,577		(5,096)		12,048		(3,733)		131,449
CMBS	9,526		32		(24)		(533)		—		—		379		—		9,380
CLOs	22,824		(557)		2,067		(3,915)		26		(4,724)		9,861		(2,204)		23,378
Asset-backed securities backed by consumer loans	76,504		(1,040)		(26)		(3,608)		17,444		(11,091)		—		—		78,183
Corporate debt securities	500		—		(1)		(172)		3,584		(2,144)		—		—		1,767
Corporate equity securities	9,841		—		114		(535)		856		—		—		—		10,276
Loans, at fair value:
Residential mortgage loans	2,433,007		(4,544)		105		(112,735)		896,384		(216,633)		—		—		2,995,584
Commercial mortgage loans	429,954		—		—		(1,388)		66,164		(17,352)		—		—		477,378
Consumer loans	9,878		(384)		(518)		94		37		(1,697)		—		—		7,410
Corporate loan	11,788		—		(1,000)		—		675		(1,015)		—		—		10,448
Investments in unconsolidated entities, at fair value	219,303		—		262		(23,527)		56,701		(60,470)		—		—		192,269
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	304		—		(6)		(102)		6		—		—		—		202
Total assets, at fair value	$	3,348,826	$	(6,957)	$	2,799	$	(152,622)	$	1,057,895	$	(320,222)	$	26,331	$	(5,937)	$	3,950,113
Liabilities:
Other secured borrowings, at fair value	$	(1,216,542)	$	—	$	—	$	67,258	$	99,198	$	(398,096)	$	—	$	—	$	(1,448,182)
Senior notes, at fair value	(210,000)		—		—		7,350		—		—		—		—		(202,650)
Total liabilities, at fair value	$	(1,426,542)	$	—	$	—	$	74,608	$	99,198	$	(398,096)	$	—	$	—	$	(1,650,832)

(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.

(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at June 30, 2022, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended June 30, 2022. For Level 3 financial instruments held by the Company at June 30, 2022, change in net unrealized gain (loss) of $(17.9) million, $(114.0) million, $(26.2) million, $(0.1) million, $67.3 million, and $7.4 million, for the three-month period ended June 30, 2022 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, other secured borrowings, at fair value, and senior notes, at fair value, respectively.

At June 30, 2022, the Company transferred $5.9 million of assets from Level 3 to Level 2 and $26.3 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.

Three-Month Period Ended June 30, 2021


(In thousands)	Beginning Balance as of March 31, 2021		Accreted Discounts / (Amortized Premiums)		Net Realized Gain/ (Loss)		Change in Net Unrealized Gain/(Loss)		Purchases/Payments(1)		Sales/Issuances(2)		Transfers Into Level 3		Transfers Out of Level 3		Ending Balance as of June 30, 2021
Assets:
Securities, at fair value:
Agency RMBS	$	17,402	$	(833)	$	1,510	$	(1,389)	$	—	$	(4,528)	$	1,897	$	(4,123)	$	9,936
Non-Agency RMBS	127,329		604		2,576		(137)		1,782		(14,497)		4,299		(7,492)		114,464
CMBS	17,294		(13)		—		1,249		—		—		3,353		(4,858)		17,025
CLOs	37,585		272		(2,497)		9,155		140		—		4,257		(14,923)		33,989
Asset-backed securities backed by consumer loans	59,473		(1,326)		146		(1,098)		21,478		(9,419)		—		—		69,254
Corporate debt securities	4,761		—		47		177		591		(132)		—		—		5,444
Corporate equity securities	4,120		—		—		1,711		2,666		—		—		—		8,497
Loans, at fair value:
Residential mortgage loans	1,280,637		(3,240)		267		(528)		327,697		(159,182)		—		—		1,445,651
Commercial mortgage loans	235,948		15		(130)		334		90,332		(98,049)		—		—		228,450
Consumer loans	52,705		(1,993)		(11)		129		9,319		(8,133)		—		—		52,016
Corporate loan	13,226		—		—		—		3,360		(2)		—		—		16,584
Investments in unconsolidated entities, at fair value	147,684		—		33		18,569		69,464		(56,771)		—		—		178,979
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	320		—		16		(17)		3		(19)		—		—		303
Total return swaps	2		—		—		518		—		—		—		—		520
Total assets, at fair value	$	1,998,486	$	(6,514)	$	1,957	$	28,673	$	526,832	$	(350,732)	$	13,806	$	(31,396)	$	2,181,112
Liabilities:
Financial derivatives–liabilities, at fair value:
Total return swaps	$	(338)	$	—	$	(860)	$	282	$	860	$	—	$	—	$	—	$	(56)
Other secured borrowings, at fair value(3)	(911,256)		—		—		2,197		230,661		(324,639)		—		—		(1,003,037)
Total liabilities, at fair value	$	(911,594)	$	—	$	(860)	$	2,479	$	231,521	$	(324,639)	$	—	$	—	$	(1,003,093)

(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.

(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.

(3)Conformed to current period presentation.

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Condensed Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at June 30, 2021, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended June 30, 2021. For Level 3 financial instruments held by the Company at June 30, 2021, change in net unrealized gain (loss) of $10.4 million, $0.1 million, $16.4 million, $0.4 million, $0.3 million, and $2.2 million, for the three-month period ended June 30, 2021 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, financial derivatives–liabilities, and other secured borrowings, at fair value, respectively.

At June 30, 2021, the Company transferred $31.4 million of assets from Level 3 to Level 2 and $13.8 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.

Six-Month Period Ended June 30, 2022


(In thousands)	Beginning Balance as of December 31, 2021		Accreted Discounts / (Amortized Premiums)		Net Realized Gain/ (Loss)		Change in Net Unrealized Gain/(Loss)		Purchases/Payments(1)		Sales/Issuances(2)		Transfers Into Level 3		Transfers Out of Level 3		Ending Balance as of June 30, 2022
Assets:
Securities, at fair value:
Agency RMBS	$	9,710	$	(1,088)	$	133	$	(1,182)	$	840	$	(514)	$	4,805	$	(315)	$	12,389
Non-Agency RMBS	134,888		783		1,951		(9,458)		18,614		(12,160)		17,710		(20,879)		131,449
CMBS	13,134		61		1,118		(1,281)		620		(2,234)		5,119		(7,157)		9,380
CLOs	26,678		(1,420)		3,020		(2,947)		—		(10,480)		10,731		(2,204)		23,378
Asset-backed securities backed by consumer loans	73,108		(2,153)		(299)		(5,632)		36,237		(23,078)		—		—		78,183
Corporate debt securities	5,198		—		1,533		(1,680)		5,312		(8,596)		—		—		1,767
Corporate equity securities	7,556		—		1,739		(1,365)		4,983		(2,637)		—		—		10,276
Loans, at fair value:
Residential mortgage loans	2,016,228		(9,011)		1,617		(183,248)		1,619,479		(449,481)		—		—		2,995,584
Commercial mortgage loans	326,197		—		10		(1,224)		333,806		(181,411)		—		—		477,378
Consumer loans	62,365		(2,523)		(698)		(371)		10,982		(62,345)		—		—		7,410
Corporate loan	10,531		—		(1,000)		—		2,325		(1,408)		—		—		10,448
Investments in unconsolidated entities, at fair value	195,643		—		1,140		(29,911)		195,909		(170,512)		—		—		192,269
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	303		—		(11)		(101)		11		—		—		—		202
Total assets, at fair value	$	2,881,539	$	(15,351)	$	10,253	$	(238,400)	$	2,229,118	$	(924,856)	$	38,365	$	(30,555)	$	3,950,113
Liabilities:
Other secured borrowings, at fair value	$	(984,168)	$	—	$	—	$	122,899	$	213,953	$	(800,866)	$	—	$	—	$	(1,448,182)
Senior notes, at fair value	—		—		—		7,350		—		(210,000)		—		—		(202,650)
Total liabilities, at fair value	$	(984,168)	$	—	$	—	$	130,249	$	213,953	$	(1,010,866)	$	—	$	—	$	(1,650,832)

(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.

(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at June 30, 2022, as well as Level 3 financial instruments disposed of by the Company during the six-month period ended June 30, 2022. For Level 3 financial instruments held by the Company at June 30, 2022, change in net unrealized gain (loss) of $(22.6) million, $(184.4) million, $(34.0) million, $(0.1) million, $122.9 million, and $7.4 million, for the six-month period ended June 30, 2022 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, other secured borrowings, at fair value, and senior notes, at fair value, respectively.

At June 30, 2022, the Company transferred $30.6 million of assets from Level 3 to Level 2 and $38.4 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.

Six-Month Period Ended June 30, 2021


(In thousands)	Beginning Balance as of December 31, 2020		Accreted Discounts / (Amortized Premiums)		Net Realized Gain/ (Loss)		Change in Net Unrealized Gain/(Loss)		Purchases/Payments(1)		Sales/Issuances(2)		Transfers Into Level 3		Transfers Out of Level 3		Ending Balance as of June 30, 2021
Assets:
Securities, at fair value:
Agency RMBS	$	11,663	$	(1,779)	$	959	$	(1,571)	$	555	$	(1,533)	$	4,567	$	(2,925)	$	9,936
Non-Agency RMBS	127,838		1,248		2,351		(740)		22,392		(33,076)		5,834		(11,383)		114,464
CMBS	63,148		319		1,931		5,029		—		(41,088)		—		(12,314)		17,025
CLOs	111,100		1,240		(1,754)		16,208		104		(70,002)		1,604		(24,511)		33,989
Asset-backed securities backed by consumer loans	44,925		(1,983)		179		(1,583)		45,812		(18,096)		—		—		69,254
Corporate debt securities	4,082		—		227		183		1,617		(665)		—		—		5,444
Corporate equity securities	1,590		—		(385)		2,315		4,977		—		—		—		8,497
Loans, at fair value:
Residential mortgage loans	1,187,069		(5,711)		462		1,686		549,778		(287,633)		—		—		1,445,651
Commercial mortgage loans	213,031		24		306		70		147,499		(132,480)		—		—		228,450
Consumer loans	47,525		(3,836)		(1,276)		457		26,068		(16,922)		—		—		52,016
Corporate loan	5,855		—		—		—		10,731		(2)		—		—		16,584
Investment in unconsolidated entities, at fair value	141,620		—		161		25,076		82,333		(70,211)		—		—		178,979
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	347		—		42		(44)		7		(49)		—		—		303
Total return swaps	9		—		141		512		—		(142)		—		—		520
Total assets, at fair value	$	1,959,802	$	(10,478)	$	3,344	$	47,598	$	891,873	$	(671,899)	$	12,005	$	(51,133)	$	2,181,112
Liabilities:
Financial derivatives–liabilities, at fair value:
Total return swaps	$	(484)	$	—	$	(1,360)	$	428	$	1,360	$	—	$	—	$	—	$	(56)
Other secured borrowings, at fair value(3)	(754,921)		—		—		3,377		323,654		(575,147)		—		—		(1,003,037)
Total liabilities, at fair value	$	(755,405)	$	—	$	(1,360)	$	3,805	$	325,014	$	(575,147)	$	—	$	—	$	(1,003,093)

(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.

(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.

(3)Conformed to current period presentation.

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at June 30, 2021, as well as Level 3 financial instruments disposed of by the Company during the six-month period ended June 30, 2021. For Level 3 financial instruments held by the Company at June 30, 2021, change in net unrealized gain (loss) of $11.9 million, $2.3 million, $22.7 million, $0.5 million, $0.4 million, and $3.2 million, for the six-month period ended June 30, 2021 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, financial derivatives–liabilities, and other secured borrowings, at fair value, respectively.

At June 30, 2021, the Company transferred $51.1 million of assets from Level 3 to Level 2 and $12.0 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.

The following table summarizes the estimated fair value of all other financial instruments not measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021:


	As of
	June 30, 2022				December 31, 2021
(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
Other financial instruments
Assets:
Cash and cash equivalents	$	224,451	$	224,451	$	92,661	$	92,661
Restricted cash	—		—		175		175
Due from brokers	93,939		93,939		93,549		93,549
Reverse repurchase agreements	179,394		179,394		123,250		123,250
Liabilities:
Repurchase agreements	2,865,222		2,865,222		2,469,763		2,469,763
Other secured borrowings	45,455		45,455		96,622		96,622
Senior notes, net	86,043		85,956		86,249		85,802
Due to brokers	31,124		31,124		2,233		2,233

Cash and cash equivalents generally includes cash held in interest bearing overnight accounts, for which fair value equals the carrying value, and investments which are liquid in nature, such as investments in money market accounts or U.S. Treasury Bills, for which fair value equals the carrying value; such assets are considered Level 1. Restricted cash includes cash held in a segregated account for which fair value equals the carrying value; such assets are considered Level 1. Due from brokers and Due to brokers include collateral transferred to or received from counterparties, along with receivables and payables for open and/or closed derivative positions. These receivables and payables are short term in nature and any collateral transferred consists primarily of cash; fair value of these items is approximated by carrying value and such items are considered Level 1. The Company's reverse repurchase agreements, repurchase agreements, and other secured borrowings are carried at cost, which approximates fair value due to their short term nature. Reverse repurchase agreements, repurchase agreements, and other secured borrowings are classified as Level 2 based on the adequacy of the collateral and their short term nature. Senior notes, net are considered Level 3 liabilities given the relative unobservability of the most significant inputs to valuation estimation as well as the lack of trading activity of these instruments. As of June 30, 2022 and December 31, 2021 of the estimated fair value of the Company's Senior notes, net was based on a third-party valuation.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details