Fair Value of Financial Instruments (Tables)
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3 Months Ended |
Mar. 31, 2017 |
Fair Value Disclosures [Abstract] |
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Fair Value Measured on Recurring Basis |
The following tables present our assets and liabilities measured at fair value on a recurring basis. | | | | | | | | | | | | | | | | | March 31, 2017 | | | | Fair Value Measurements Using: | | | $ in thousands | Level 1 | | Level 2 | | Level 3 | | NAV as a practical expedient(3) | | Total at Fair Value | Assets: | | | | | | | | | | Mortgage-backed and credit risk transfer securities(1)(2) | — |
| | 15,889,854 |
| | 31,243 |
| | — |
| | 15,921,097 |
| Derivative assets | — |
| | 5,799 |
| | — |
| | — |
| | 5,799 |
| Other assets(4) | 4,017 |
| | — |
| | — |
| | 33,336 |
| | 37,353 |
| Total assets | 4,017 |
| | 15,895,653 |
| | 31,243 |
| | 33,336 |
| | 15,964,249 |
| Liabilities: | | | | | | | | | | Derivative liabilities | — |
| | 45,623 |
| | — |
| | — |
| | 45,623 |
| Total liabilities | — |
| | 45,623 |
| | — |
| | — |
| | 45,623 |
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| | | | | | | | | | | | | | | | | December 31, 2016 | | | | Fair Value Measurements Using: | | | $ in thousands | Level 1 | | Level 2 | | Level 3 | | NAV as a practical expedient(3) | | Total at Fair Value | Assets: | | | | | | | | | | Mortgage-backed and credit risk transfer securities(1)(2) | — |
| | 14,964,236 |
| | 17,095 |
| | — |
| | 14,981,331 |
| Derivative assets | — |
| | 3,186 |
| | — |
| | — |
| | 3,186 |
| Other assets(4) | 500 |
| | — |
| | — |
| | 33,301 |
| | 33,801 |
| Total assets | 500 |
| | 14,967,422 |
| | 17,095 |
| | 33,301 |
| | 15,018,318 |
| Liabilities: | | | | | | | | | | Derivative liabilities | — |
| | 134,228 |
| | — |
| | — |
| | 134,228 |
| Total liabilities | — |
| | 134,228 |
| | — |
| | — |
| | 134,228 |
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| | (1) | For more detail about the fair value of our MBS and GSE CRTs, refer to Note 4 - "Mortgage-Backed and Credit Risk Transfer Securities." |
| | (2) | Our GSE CRTs purchased prior to August 24, 2015 are accounted for as hybrid financial instruments with an embedded derivative. The hybrid instruments consist of debt host contracts classified as Level 2 and embedded derivatives classified as Level 3. As of March 31, 2017, the net embedded derivative asset position of $31.2 million includes |
$32.8 million of embedded derivatives in an asset position and $1.6 million of embedded derivatives in a liability position. As of December 31, 2016, the net embedded derivative liability position of $17.1 million includes $21.0 million of embedded derivatives in an asset position and $3.9 million of embedded derivatives in a liability position. | | (3) | Investments in unconsolidated ventures are valued using the net asset value ("NAV") as a practical expedient and are not subject to redemption, although investors may sell or transfer their interest at the approval of the general partner of the underlying funds. As of March 31, 2017 and December 31, 2016, the weighted average remaining term of investments in unconsolidated ventures is 1.3 and 1.3 years, respectively. |
| | (4) | Includes $4.0 million and $0.5 million of investment in an exchange-traded fund as of March 31, 2017 and December 31, 2016, respectively. |
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Embedded Derivatives Level 3 Roll Forward |
The following table shows a reconciliation of the beginning and ending fair value measurements of our GSE CRT embedded derivatives, which we have valued utilizing Level 3 inputs: | | | | | | | | Three Months Ended March 31, | $ in thousands | 2017 | | 2016 | Beginning balance | 17,095 |
| | (25,722 | ) | Sales and settlements | — |
| | 920 |
| Total net gains / (losses) included in net income: |
| |
| Realized gains/(losses), net | — |
| | (920 | ) | Unrealized gains/(losses), net(1) | 14,148 |
| | 3,016 |
| Ending balance | 31,243 |
| | (22,706 | ) |
| | (1) | Included in realized and unrealized credit derivative income (loss), net in the condensed consolidated statements of operations are $14.1 million in net unrealized gains and $2.1 million in net unrealized gains attributable to assets still held as of March 31, 2017 and March 31, 2016, respectively. During the thee months ended March 31, 2016, we reversed $920,000 in net unrealized losses on securities sold during the period. We did not reverse any unrealized gains or losses on securities sold in the three months ended March 31, 2017. |
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Embedded Derivatives Fair Value Inputs |
The following table summarizes significant unobservable inputs used in the fair value measurement of our GSE CRT embedded derivatives: | | | | | | | | | | | | | Fair Value at | | Valuation | | Unobservable | | | | Weighted | $ in thousands | March 31, 2017 | | Technique | | Input | | Range | | Average | GSE CRT Embedded Derivatives | 31,243 |
| | Market Comparables, Vendor Pricing | | Weighted average life | | 4.1 - 7.7 | | 6.1 |
| | | | | | | | | | | | | Fair Value at | | Valuation | | Unobservable | | | | Weighted | $ in thousands | December 31, 2016 | | Technique | | Input | | Range | | Average | GSE CRT Embedded Derivatives | 17,095 |
| | Market Comparables, Vendor Pricing | | Weighted average life | | 2.5 - 7.7 | | 5.3 |
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Carrying Value and Estimated Fair Value of Financial Instruments |
The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the condensed consolidated balance sheets at March 31, 2017 and December 31, 2016: | | | | | | | | | | | | | | March 31, 2017 | | December 31, 2016 | $ in thousands | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | Financial Assets | | | | | | | | Commercial loans, held-for-investment | 275,944 |
| | 277,340 |
| | 273,355 |
| | 275,319 |
| Other assets | 74,250 |
| | 74,250 |
| | 74,250 |
| | 74,250 |
| Total | 350,194 |
| | 351,590 |
| | 347,605 |
| | 349,569 |
| Financial Liabilities | | | | | | | | Repurchase agreements | 12,289,899 |
| | 12,289,777 |
| | 11,160,669 |
| | 11,161,034 |
| Secured loans | 1,650,000 |
| | 1,650,000 |
| | 1,650,000 |
| | 1,650,000 |
| Exchangeable senior notes | 248,530 |
| | 252,188 |
| | 397,041 |
| | 400,000 |
| Total | 14,188,429 |
| | 14,191,965 |
| | 13,207,710 |
| | 13,211,034 |
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