10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2018

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from         to         

Commission File Number:  001-35543

Western Asset Mortgage Capital Corporation

(Exact name of Registrant as specified in its charter)

Delaware	27-0298092
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

Western Asset Mortgage Capital Corporation

385 East Colorado Boulevard

Pasadena, California 91101

(Address of Registrant’s principal executive offices)

(626) 844-9400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one). 

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer (Do not check if a smaller reporting company)	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 under the Securities Exchange Act of 1934).  Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

As of November 6, 2018 there were 48,116,379 shares, par value $0.01, of the registrant’s common stock outstanding.

TABLE OF CONTENTS

		Page
	Part I — FINANCIAL INFORMATION
ITEM 1.	Financial Statements	2
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	92
ITEM 4.	Controls and Procedures	98
	Part II — OTHER INFORMATION	99
ITEM 1.	Legal Proceedings	99
ITEM 1A.	Risk Factors	99
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	99
ITEM 3.	Defaults Upon Senior Securities	99
ITEM 4.	Mine Safety Disclosures	99
ITEM 5.	Other Information	99
ITEM 6.	Exhibits	100
Signatures		102

Part I

ITEM I. Financial Statements

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands—except share and per share data)

(Unaudited)

	September 30, 2018			December 31, 2017
Assets:
Cash and cash equivalents	$	12,817		$	48,024
Restricted cash	100,138			—
Agency mortgage-backed securities, at fair value ($2,325,859 and $2,833,595 pledged as collateral, at fair value, respectively)	2,475,533			2,858,600
Non-Agency mortgage-backed securities, at fair value ($351,032 and $266,189 pledged as collateral, at fair value, respectively)	365,710			378,158
Other securities, at fair value ($92,391 and $89,823 pledged as collateral, at fair value, respectively)	92,528			122,065
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)	684,463			237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)	249,471			106,673
Securitized commercial loans, at fair value	1,191,048			24,876
Commercial Loans, at fair value ($123,677 and $0 pledged as collateral, at fair value, respectively)	143,951			—
Investment related receivable ($34,559 and $0 pledged as collateral, respectively)	113,341			7,665
Interest receivable	21,869			13,603
Due from counterparties	81,513			86,930
Derivative assets, at fair value	2,700			728
Other assets	2,903			2,161
Total Assets (1)	$	5,537,985		$	3,886,906
Liabilities and Stockholders’ Equity:
Liabilities:
Repurchase agreements, net	$	3,469,319		$	3,251,686
Convertible senior unsecured notes, net	109,731			108,743
Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)	1,119,089			10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)	10,027			8,322
Investment related payables	169,499			17,217
Due to counterparties	1,068			1,490
Derivative liability, at fair value	2,159			4,346
Accounts payable and accrued expenses	3,513			3,118
Payable to affiliate	2,489			2,041
Dividend payable	14,916			12,960
Other liabilities	100,530			—
Total Liabilities (2)	5,002,340			3,420,868
Commitments and contingencies
Stockholders’ Equity:
Common stock: $0.01 par value, 500,000,000 shares authorized, 48,116,379 and 41,794,079 outstanding, respectively	481			419
Preferred stock, $0.01 par value, 100,000,000 shares authorized and no shares outstanding	—			—
Treasury stock, at cost, 0 and 125,722 shares held, respectively	—			(1,232		)
Additional paid-in capital	833,840			768,763
Retained earnings (accumulated deficit)	(298,676		)	(301,912		)
Total Stockholders’ Equity	535,645			466,038
Total Liabilities and Stockholders’ Equity	$	5,537,985		$	3,886,906

 See notes to unaudited consolidated financial statements.

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets (Continued)

(in thousands—except share and per share data)

(Unaudited)

	September 30, 2018		December 31, 2017
(1) Assets of consolidated VIEs included in the total assets above:
Restricted cash	$	100,138	$	—
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)	684,463		237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)	249,471		106,673
Securitized commercial loans, at fair value	1,191,048		24,876
Commercial Loans, at fair value ($123,677 and $0 pledged as collateral, at fair value, respectively)	123,677		—
Investment related receivable	33,430		7,665
Interest receivable	12,418		3,358
Other assets	203		—
Total assets of consolidated VIEs	$	2,394,848	$	379,995
(2) Liabilities of consolidated VIEs included in the total liabilities above:
Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)	$	1,119,089	$	10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)	2,487		70
Accounts payable and accrued expenses	737		189
Other liabilities	100,531		—
Total liabilities of consolidated VIEs	$	1,222,844	$	11,204

See notes to unaudited consolidated financial statements.

2

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Statements of Operations

(in thousands—except share and per share data)

(Unaudited)

	For the three months ended September 30, 2018			For the three months ended September 30, 2017			For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Net Interest Income
Interest income	$	54,461		$	30,928		$	151,342		$	89,413
Interest expense (includes $4,465, $251, $9,672 and $745 on securitized debt held by affiliates, respectively)	38,517			12,363			97,348			31,507
Net Interest Income	15,944			18,565			53,994			57,906
Other Income (Loss)
Realized gain (loss) on sale of investments, net	(24,229		)	1,830			(29,262		)	20,600
Other than temporary impairment	(2,533		)	(7,225		)	(8,423		)	(19,901		)
Unrealized gain (loss), net	13,128			5,249			(87,526		)	35,126
Gain (loss) on derivative instruments, net	24,625			7,217			132,697			(16,035		)
Other, net	(2		)	216			(100		)	841
Other Income (Loss)	10,989			7,287			7,386			20,631
Expenses
Management fee to affiliate	2,284			1,853			6,723			6,159
Other operating expenses	1,609			702			4,133			1,855
General and administrative expenses:
Compensation expense	552			660			1,634			2,064
Professional fees	1,065			781			3,178			2,501
Other general and administrative expenses	335			244			1,093			993
Total general and administrative expenses	1,952			1,685			5,905			5,558
Total Expenses	5,845			4,240			16,761			13,572
Income before income taxes	21,088			21,612			44,619			64,965
Income tax provision (benefit)	206			(1,155		)	555			1,272
Net income	$	20,882		$	22,767		$	44,064		$	63,693
Net income per Common Share — Basic	$	0.50		$	0.54		$	1.05		$	1.52
Net income per Common Share — Diluted	$	0.50		$	0.54		$	1.05		$	1.52

See notes to unaudited consolidated financial statements.

3

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands—except shares and share data)

(Unaudited)

	Common Stock Outstanding				Additional  Paid-In Capital			Retained  Earnings  (Accumulated Deficit)			Treasury Stock
	Shares		Par											Total
Balance at December 31, 2016	41,919,801		$	419	$	765,042		$	(334,979	)	$	—		$	430,482
Vesting of restricted stock	—		—		981			—			—			981
Equity component of convertible senior unsecured notes	—		—		2,656			—			—			2,656
Treasury stock	(125,722	)	—		—			—			(1,232		)	(1,232		)
Net income	—		—		—			85,097			—			85,097
Dividends declared on common stock	—		—		84			(52,030		)	—			(51,946		)
Balance at December 31, 2017	41,794,079		$	419	$	768,763		$	(301,912	)	$	(1,232	)	$	466,038
Proceeds from public offerings of common stock	6,196,578		62		64,818			—			—			64,880
Offering costs, public offerings of common stock	—		—		(239		)	—			—			(239		)
Vesting of restricted stock	—		—		195			—			—			195
Treasury stock	125,722		—		213			—			1,232			1,445
Net income	—		—		—			44,064			—			44,064
Dividends declared on common stock	—		—		90			(40,828		)	—			(40,738		)
Balance at September 30, 2018	48,116,379		$	481	$	833,840		$	(298,676	)	$	—		$	535,645

See notes to unaudited consolidated financial statements.

4

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Statements of Cash Flows (inthousands)

(Unaudited)

	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Cash flows from operating activities:
Net income	$	44,064		$	63,693
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Premium amortization and (discount accretion), net	2,884			(2,658		)
Interest income earned added to principal of securities	—			(46		)
Amortization of deferred financing costs	576			—
Amortization of discount on convertible senior notes	412			—
Restricted stock amortization	195			795
Interest payments and basis recovered on MAC interest rate swaps	1,064			358
Premium on purchase of Residential Whole-Loans	(8,863		)	(354		)
Premium on purchase of Residential Bridge Loans	(3,191		)	(425		)
Premium on purchase of securitized commercial loans	(3,019		)	—
Unrealized (gain) loss, net	87,526			(35,126		)
Unrealized (gain) loss on derivative instruments, net	1,460			(156,098		)
Other than temporary impairment	8,423			19,901
Realized (gain) loss on sale of securities, net	29,262			(20,600		)
(Gain) loss on derivatives, net	(12,905		)	156,655
Loss on foreign currency transactions, net	—			1
Changes in operating assets and liabilities:
(Increase) decrease in interest receivable	(8,266		)	5,787
(Increase) decrease in other assets	(599		)	(3,736		)
Increase (decrease) in interest payable	1,705			(11,182		)
Increase (decrease) in accounts payable and accrued expenses	221			(667		)
Increase (decrease) in payable to affiliate	448			(664		)
Net cash provided by operating activities	141,397			15,634
Cash flows from investing activities:
Purchase of securities	(846,680		)	(2,473,379		)
Proceeds from sale of securities	1,111,547			1,189,824
Principal repayments and basis recovered on securities	109,938			187,157
Purchase of Residential Whole-Loans	(493,365		)	(35,323		)
Principal repayments on Residential Whole-Loans	42,867			32,287
Purchase of Commercial Loans	(164,570		)	—
Principal repayments on commercial loans	20,638			—
Purchase of securitized commercial loans	(1,350,000		)	—
Principal repayments on securitized commercial loans	196,007			59
Purchase of Residential Bridge Loans	(356,584		)	(73,565		)
Principal repayments on Residential Bridge Loans	197,099			16,251
Payment of premium for option derivatives	(829		)	(14,995		)
Premium received from option derivatives	298			13,721
Premium received from credit default swaps	(174		)	—
Net settlements of TBAs	136			3,135
Proceeds from (Payments on) termination of futures, net	8,823			(9,230		)
Interest payments and basis recovered on MAC interest rate swaps	(1,064		)	(358		)
Due from counterparties	—			8,449
Payments on total return swaps, net	—			(552		)
Premium for interest rate swaptions, net	—			(115		)
Net cash used in investing activities	(1,525,913		)	(1,156,634		)

5

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Continued) (inthousands)

(Unaudited)

	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Cash flows from financing activities:
Proceeds from issuance of common stock	64,880			—
Payment of offering costs	(65		)	—
Repurchase of common stock	(1,733		)	—
Proceeds from sale of treasury stock	3,177			—
Proceeds from repurchase agreement borrowings	15,469,118			13,054,995
Repayments of repurchase agreement borrowings	(15,251,485		)	(11,874,382		)
Proceeds from securitized debt	1,285,219			—
Repayments of securitized debt	(186,015		)	(26		)
Proceeds from forward contracts	—			6,875
Repayments of forward contracts	—			(6,850		)
Due from counterparties, net	5,417			(11,709		)
Due to counterparties, net	(422		)	1,580
Increase in other liabilities	100,138			—
Dividends paid on common stock	(38,782		)	(38,985		)
Net cash provided by financing activities	1,449,447			1,131,498
Effect of exchange rate changes on cash and cash equivalents	—			(1		)
Net increase (decrease) in cash, cash equivalents and restricted cash	64,931			(9,503		)
Cash, cash equivalents and restricted cash, beginning of period	48,024			46,172
Cash, cash equivalents and restricted cash, end of period	$	112,955		$	36,669
Supplemental disclosure of operating cash flow information:
Interest paid	$	96,030		$	30,010
Income taxes paid	$	1,635		$	4,966
Supplemental disclosure of non-cash financing/investing activities:
Underwriting and offering costs payable	$	174		$	—
Principal payments of securities, not settled	$	42		$	16
Securities sold, not settled	$	34,559		$	—
Securities purchased, not settled	$	(124,036	)	$	(293,959	)
Net unsettled TBAs	$	(10	)	$	(2	)
Dividends and distributions declared, not paid	$	14,916		$	12,995
Principal payments of Residential Whole-Loans, not settled	$	11,061		$	4,580
Principal payments of Residential Bridge Loans, not settled	$	22,227		$	2,598
Derivative collateral offset against derivatives	$	—		$	(157,913	)
Other assets	$	143		$	—

See notes to unaudited consolidated financial statements.

6

Western Asset Mortgage Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

(in thousands- except share and per share data)

The following defines certain of the commonly used terms in these Notes to Consolidated Financial Statements: “Agency” or “Agencies” refer to a federally chartered corporation, such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”), or an agency of the U.S. Government, such as the Government National Mortgage Association (“Ginnie Mae” or “GNMA”); references to “MBS” refer to mortgage backed securities, including residential mortgage-backed securities or “RMBS,” commercial mortgage-backed securities or “CMBS,” and “Interest-Only Strips” (as defined herein); “Agency MBS” refer to RMBS, CMBS and Interest-Only Strips issued or guaranteed by the Agencies while “Non-Agency MBS” refer to RMBS, CMBS and Interest-Only Strips that are not issued or guaranteed by the Agencies; references to “ARMs” refers to adjustable rate mortgages; references to “Interest-Only Strips” refer to interest-only (“IO”) and inverse interest-only (“IIO”) securities issued as part of or collateralized with MBS; references to “TBA” refer to To-Be-Announced Securities; and references to “Residential Whole-Loans”, “Residential Bridge Loans” and “Commercial Loans” (collectively “Whole-Loans”) refer to individual mortgage loans secured by single family, multifamily and commercial properties.

Note 1 — Organization

Western Asset Mortgage Capital Corporation, a Delaware corporation, and its subsidiaries (the “Company”), commenced operations in May 2012. The Company invests in, finances and manages a diversified portfolio of real estate related securities, whole-loans and other financial assets.  The Company’s portfolio is comprised of Agency CMBS, Agency RMBS (including TBAs), Non-Agency RMBS, Non-Agency CMBS, Residential Whole-Loans, Residential Bridge Loans and Commercial Loans. In addition, and to a significantly lesser extent, the Company has invested in other securities including certain Agency obligations that are not technically MBS as well as certain Non U.S. CMBS and in asset-backed securities (“ABS”) investments secured by a portfolio of private student loans.  The Company’s investment strategy is based on Western Asset Management Company LLC’s (the “Manager”) perspective of which mix of portfolio assets it believes provides the Company with the best risk-reward opportunities at any given time.  The Manager will vary the allocation among various asset classes subject to maintaining the Company’s qualification as a REIT and maintaining its exemption from the Investment Company Act of 1940, as amended (the “1940 Act”).  These restrictions limit the Company’s ability to invest in non-qualifying MBS, non-real estate assets and/or assets which are not secured by real estate.  Accordingly, the Company’s portfolio will continue to be principally invested in qualifying MBS, Whole-Loans and other real estate related assets.

The Company is externally managed by the Manager, an investment advisor registered with the Securities and Exchange Commission (“SEC”).  The Manager is a wholly-owned subsidiary of Legg Mason, Inc.  The Company operates and has elected to be taxed as a real estate investment trust or “REIT” commencing with its taxable year ended December 31, 2012.

Note 2 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited financial statements and related notes have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q.  Certain prior period amounts have been reclassified to conform to the current period’s presentation. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary have been made to state fairly the Company’s financial position, results of operations and cash flows. The results of operations for the period ended September 30, 2018, are not necessarily indicative of the results to be expected for the full year or any future period. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 29, 2018.

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary and variable interest entities (“VIEs”) in which it is considered the primary beneficiary.  All intercompany amounts between the Company and its subsidiary and consolidated VIEs have been eliminated in consolidation.

7

Variable Interest Entities

VIEs are defined as entities that by design either lack sufficient equity for the entity to finance its activities without additional subordinated financial support or are unable to direct the entity’s activities or are not exposed to the entity’s losses or entitled to its residual returns. The Company evaluates all of its interests in VIEs for consolidation. When the interests are determined to be variable interests, the Company assesses whether it is deemed the primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, it considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes: first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers is deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, it considers all of its economic interests. This assessment requires the Company to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

In instances where the Company and its related parties have variable interests in a VIE, the Company considers whether there is a single party in the related party group that meets both the power and losses or benefits criteria on its own as though no related party relationship existed.  If one party within the related party group meets both these criteria, such reporting entity is the primary beneficiary of the VIE and no further analysis is needed.  If no party within the related party group on its own meets both the power and losses or benefits criteria, but the related party group as a whole meets these two criteria, the determination of primary beneficiary within the related party group requires significant judgment. The analysis is based upon qualitative as well as quantitative factors, such as the relationship of the VIE to each of the members of the related-party group, as well as the significance of the VIE's activities to those members, with the objective of determining which party is most closely associated with the VIE. 

Ongoing assessments of whether an enterprise is the primary beneficiary of a VIE are required.

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.

Significant Accounting Policies

There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our

Annual Report on Form 10-K for the year ended December 31, 2017, other than the significant accounting policies disclosed below.

Restricted Cash

Restricted cash represents cash held by the trustee or servicer for mortgage escrows in connection with the Company's securitized loan and commercial loan investments held in two consolidated VIEs. These escrows consist of principal and interest escrows, capital improvement reserves, repair reserves, real estate tax and insurance reserves and tenant reserves. The corresponding liability is recorded in "Other liabilities" in the Consolidated Balance Sheets. The restricted cash is not available for general corporate use.

8

Securitized Commercial Loans

Securitized commercial loans are comprised of commercial loans of consolidated variable interest entities which were sponsored by third parties. These loans are recorded in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs". The Company has chosen to make the fair value election pursuant to ASC 825. Accordingly, these loans are recorded at fair value with periodic changes in fair value being recorded in earnings as a component of "Unrealized gain (loss), net".

The securitized commercial loans are typically collateralized by commercial real estate. As a result, the Company regularly evaluates the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. On a quarterly basis, the Company evaluates the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the Company does not record an allowance for loan loss as the Company has elected the fair value option.  However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed. Interest income accrual is resumed when the loan becomes contractually current and performance is demonstrated. A loan is written off when it is no longer realizable and/or legally discharged.

Commercial Loans

Investments in Commercial Loans, which are comprised of first lien commercial mortgage loans and commercial mezzanine loans, are recorded in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs". The Company has chosen to make the fair value election pursuant to ASC 825 for its Commercial Loan portfolio. Accordingly, these loans are recorded at fair value with periodic changes in fair value being recorded in earnings as a component of "Unrealized gain (loss), net". All other costs incurred in connection with acquiring the Commercial Loans or committing to purchase these loans are charged to expense as incurred.

The Company’s loans are typically collateralized by commercial real estate. As a result, the Company regularly evaluates the extent and impact of any credit migration associated with the performance and or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. On a quarterly basis, the Company evaluates the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the Company does not record an allowance for loan loss as the Company has elected the fair value option.  However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed. Interest income accrual is resumed when the loan becomes contractually current and performance is demonstrated. A loan is written off when it is no longer realizable and/or legally discharged.

Interest Income Recognition

Loan Portfolio

Interest income on the Company's residential loan portfolio and commercial loan portfolio is recorded using the effective interest method based on the contractual payment terms of the loan. Any premium amortization or discount accretion will be reflected as a component of "Interest income" in the Consolidated Statements of Operations.

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Recently adopted accounting pronouncements

Description	Adoption Date	Effect on Financial Statements
In May 2014, the FASB issued ASU 2014-9, “Revenue from Contracts with Customers (Topic 606).” The guidance changes an entity’s recognition of revenue from contracts with customers.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In addition, the new guidance requires improved disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, the FASB issued implementation guidance which clarifies principal versus agent considerations in reporting revenue gross versus net (ASU 2016-8). In April 2016, the FASB issued implementation guidance which clarifies the identification of performance obligations (ASU 2016-10). In May 2016, the FASB issued amendments that affect only the narrow aspects of Topic 606 (ASU2016-12).	First quarter 2018.	The Company's revenue is mainly derived from interest income on our investments and to a lesser extent gains on sales of investments, which are not impacted by this standard. Therefore, the adoption of this standard did not have a material impact on the Company's consolidated financial statements.
In January 2016, the FASB issued ASU 2016-1, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The guidance improves certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. In February 2018, the FASB issued a separate Update for technical corrections and improvements related to the ASU 2016-01 to increase stakeholders' awareness of the amendments and to expedite the improvements (ASU 2018-3).	First quarter 2018.	The standard does not change the guidance for classifying and measuring investments in debt securities and loans as well nonrecourse liabilities of consolidated collateralized financing entities. Therefore, the adoption of this standard did not have a material impact on the Company's consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230)." The guidance is intended to reduce diversity in practice in how certain transactions are classified on the statement of cash flows.	First quarter 2018 and requires retrospective adoption.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In November 2016, the FASB issued ASU 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB's Emerging Issues Task Force." The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents as well as disclose information about the nature of the restrictions on its cash and cash equivalents.	First quarter 2018 and requires retrospective adoption.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In January 2017, the FASB issued ASU 2017-01 "Business Combinations (Topic 805): Clarifying the Definition of a Business." This ASU provides a more robust framework to use in determining when a set of assets and activities constitutes a business.	First quarter 2018. The guidance should be applied prospectively on or after the effective date.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In May 2017, the FASB issued ASU 2017-09 "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting." The amendments in this update provide guidance about which changes to the terms or conditions of a shared-based payment award require an entity to apply modification accounting in Topic 718.	First quarter 2018.	There are no changes to the terms and conditions of the Company's share-based compensation. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

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Recently issued accounting pronouncements

Description	Effective Date	Effect on Financial Statements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard significantly changes how an entity will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through the income statement. The standard will replace the current "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available for sale debt securities, entities will be required to record an allowance rather than reduce the carrying amount, as is currently done under the other than temporary impairment model. It also simplifies the accounting model for purchased credit impaired debt securities and loans.	First quarter 2020.	The Company is currently evaluating the impact the standard may have on its consolidated financial statements when adopted.
In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivative and Hedges (Topic 815): Part I - Accounting for Certain Financial Instruments with Down Round Features and Part II - Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatory Redeemable Noncontrolling Interest with a Scope Exception". Part I of this update changes the classification analysis of certain financial instruments (such as warrants and convertible instruments) with down round features. Down round features are features of certain equity-linked financial instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. Entities that present earnings per share are required to recognize the effect of the down round feature when it is triggered. The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting." The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-09, "Codification Improvements." The amendments in this update affect a wide variety of Topics in the Codification including derivatives and hedging, stock compensation-income taxes, distinguishing liabilities from equity, debt modification and extinguishment, reporting comprehensive income, business combinations-income taxes, financial services and Plan accounting.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this update modify the disclosure requirements on fair value measurements including the consideration of costs and benefits.	First quarter 2020.	The Company is evaluating the impact this standard may have on its consolidated financial statements.

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Note 3 — Fair Value of Financial Instruments

The following tables present the Company’s financial instruments carried at fair value as of September 30, 2018 and December 31, 2017, based upon the valuation hierarchy (dollars in thousands):

	September 30, 2018
	Fair Value
	Level I		Level II		Level III		Total
Assets
Agency RMBS	$	—	$	385,008	$	—	$	385,008
Agency RMBS Interest-Only Strips	—		—		12,203		12,203
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		—		8,006		8,006
Agency CMBS	—		1,958,951		107,124		2,066,075
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		4,241		—		4,241
Subtotal Agency MBS	—		2,348,200		127,333		2,475,533
Non-Agency RMBS	—		26,076		57,274		83,350
Non-Agency RMBS Interest-Only Strips	—		—		15,513		15,513
Non-Agency CMBS	—		266,847		—		266,847
Subtotal Non-Agency MBS	—		292,923		72,787		365,710
Other securities	—		82,820		9,708		92,528
Total mortgage-backed securities and other securities	—		2,723,943		209,828		2,933,771
Residential Whole-Loans	—		—		684,463		684,463
Residential Bridge Loans	—		—		234,747		234,747
Securitized commercial loans	—		—		1,191,048		1,191,048
Commercial Loans	—		—		143,951		143,951
Derivative assets	1,812		888		—		2,700
Total Assets	$	1,812	$	2,724,831	$	2,464,037	$	5,190,680
Liabilities
Derivative liabilities	$	—	$	2,159	$	—	$	2,159
Securitized debt	—		1,116,483		2,606		1,119,089
Total Liabilities	$	—	$	1,118,642	$	2,606	$	1,121,248

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	December 31, 2017
	Fair Value
	Level I		Level II		Level III		Total
Assets
Agency RMBS	$	—	$	672,177	$	—	$	672,177
Agency RMBS Interest-Only Strips	—		15,437		—		15,437
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		10,419		—		10,419
Agency CMBS	—		2,137,583		17,217		2,154,800
Agency CMBS Interest-Only Strips	—		10		—		10
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		5,757		—		5,757
Subtotal Agency MBS	—		2,841,383		17,217		2,858,600
Non-Agency RMBS	—		90,819		13		90,832
Non-Agency RMBS Interest-Only Strips	—		—		8,722		8,722
Non-Agency CMBS	—		278,604		—		278,604
Subtotal Non-Agency MBS	—		369,423		8,735		378,158
Other securities	—		112,826		9,239		122,065
Total mortgage-backed securities and other securities	—		3,323,632		35,191		3,358,823
Residential Whole-Loans	—		—		237,423		237,423
Residential Bridge Loans	—		—		64,526		64,526
Securitized commercial loan	—		—		24,876		24,876
Derivative assets	728		—		—		728
Total Assets	$	728	$	3,323,632	$	362,016	$	3,686,376
Liabilities
Derivative liabilities	$	50	$	4,296	$	—	$	4,346
Securitized debt	—		—		10,945		10,945
Total Liabilities	$	50	$	4,296	$	10,945	$	15,291

When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will use independent pricing services and if the independent pricing service cannot price a particular asset or liability, the Company will obtain third party broker quotes.  The Manager’s pricing group, which functions independently from its portfolio management personnel, reviews the third party broker quotes by comparing the broker quotes for reasonableness to alternate sources when available.  If independent pricing service, or third party broker quotes are not available, the Company determines the fair value of the securities using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and when applicable, estimates of prepayments and credit losses.

In instances when the Company is required to consolidate a VIE that is determined to be a qualifying collateralized financing entity ("CFE"), under GAAP, the Company will measure both the financial assets and financial liabilities of the VIE using the fair value of either the VIE’s financial assets or financial liabilities, whichever is more observable.

Mortgage-backed securities and other securities

In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. Agency RMBS, given the amount of available observable market data, are classified in Level II.  For Non-Agency RMBS, CMBS and other securities, to determine whether a security should be a Level II, the securities are grouped by

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security type and the Manager reviews the internal trade history, for the quarter, for each security type. If there is sufficient trade data above a predetermined threshold of a security type, the Manager determines it has sufficient observable market data and the security will be categorized as a Level II.

Values for the Company’s securities are based upon prices obtained from independent third party pricing services. The valuation methodology of the third party pricing services incorporates a commonly used market pricing method. Depending on the type of asset and the underlying collateral, the primary inputs to the model include yields for TBAs, Agency RMBS, the U.S. Treasury market and floating rate indices such as LIBOR, the Constant Maturity Treasury rate and the prime rate as a benchmark yield. In addition, the model may incorporate the current weighted average maturity and additional pool level information such as prepayment speeds, default frequencies and default severities, if applicable. When the third party pricing service cannot adequately price a particular security, the Company utilizes a broker’s quote which is reviewed for reasonableness by the Manager’s pricing group.

Residential Whole-Loans and Residential Bridge Loans

Values for the Company's Residential Whole-Loans and Bridge Loans are based upon prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a discounted cash flow valuation model that is calibrated to recent loan trade execution. Their valuation methodology incorporates commonly used market pricing methods, including loan to value ("LTV"), debt to income, maturity, interest rates, collateral location, and unpaid principal balance, prepayment penalties, FICO scores, lien position and times late. Due to the inherent uncertainty of such valuation, the fair values established for residential loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's loans are classified as Level III.

Commercial Loans

Values for the Company's Commercial Loans are based upon either prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a valuation model that is calibrated to recent loan trade execution or a broker quote. The third party pricing service uses a discounted cash flow valuation methodology that incorporates commonly used market pricing methods, including LTV, debt to income, maturity, interest rates, collateral location, and unpaid principal balance, prepayment penalties, lien position and times late. Due to the inherent uncertainty of such valuation, the fair values established for commercial loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's commercial loans are classified as a Level III.

Securitized commercial loans

Values for the Company’s securitized commercial loans are based on the CFE valuation methodology.  Since there is an extremely limited market for the securitized commercial loans, the Company determined the securitized debt is more actively traded and therefore was more observable.  Due to the inherent uncertainty of such valuation, the Company classifies its securitized commercial loans as Level III.

Securitized debt

In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. Since the securitized debt represents traded debt securities, the Manager's pricing team reviews the trade activity during the quarter for each security to determine the appropriate level within the fair value hierarchy. If there is sufficient trade data above a predetermined threshold, the Manager determines it has sufficient observable market data and the debt security will be categorized as a Level II. If there is not sufficient observable market data the debt security will be categorized as a Level III.

Derivatives

Values for the Company's derivatives are based upon prices from third party pricing services, whose pricing is subject to review by the Manager’s pricing committee. In valuing its over-the-counter interest rate derivatives, such as swaps and swaptions, its currency derivatives, such as swaps and forwards and credit derivatives such as total return swaps, the Company considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each derivative agreement, from the perspective of both the Company and its counterparties. No credit valuation adjustment was made in determining the fair value of interest rate and/or currency derivatives for the periods ended September 30, 2018 and December 31, 2017.

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The Company performs quarterly reviews of the independent third party pricing data. These reviews may consist of a review of the daily change in the prices provided by the independent pricing vendor which exceed established tolerances or comparisons to executed transaction prices, utilizing the Manager’s pricing group.  The Manager’s pricing group, which functions independently from its portfolio management personnel, reviews the price differences or changes in price by comparing the vendor price to alternate sources including other independent pricing services or broker quotations.  If the price change or difference cannot be corroborated, the Manager’s pricing group consults with the portfolio management team for market color in reviewing such pricing data as warranted.  To the extent that the Manager has information, typically in the form of broker quotations that would indicate that a price received from the independent pricing service is outside of a tolerance range, the Manager generally challenges the independent pricing service price.

15

The following tables present additional information about the Company’s financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level III inputs to determine fair value:

	Three months ended September 30, 2018
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Residential Bridge Loans			Commercial Loans			Securitized  commercial  loans			Securitized debt
Beginning balance	$	75,043		$	16,307		$	8,955		$	335,149		$	236,359		$	70,717		$	1,309,195		$	2,870
Transfers into Level III from Level II	—			57,275			9,708			—			—			—			—			—
Transfers from Level III into Level II	(51,976		)	—			(8,697		)	—			—			—			—			—
Purchases	107,034			—			—			372,348			70,465			94,313			—			—
Principal repayments	(42		)	(14		)	(285		)	(21,258		)	(70,341		)	(20,638		)	(117,100		)	—
Total net gains / losses included in net income
Other than temporary impairment	(384		)	(142		)	—			—			—			—			—			—
Unrealized gains/(losses), net on assets(1)	(1,007		)	(95		)	(15		)	(1,469		)	(1,103		)	(575		)	282			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			—			—			(330		)
Premium and discount amortization, net	(1,335		)	(544		)	42			(307		)	(633		)	134			(1,329		)	66
Ending balance	$	127,333		$	72,787		$	9,708		$	684,463		$	234,747		$	143,951		$	1,191,048		$	2,606
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	(668	)	$	(94	)	$	—		$	(1,231	)	$	(844	)	$	(618	)	$	282		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	330

	Three months ended September 30, 2017
$ in thousands	Agency MBS		Non-Agency MBS			Other Securities			Residential  Whole-Loans			Securitized  commercial  loan			Securitized debt			Derivative liability
Beginning balance	$	—	$	14,326		$	22,405		$	203,540		$	24,875		$	10,945		$	329
Transfers into Level III from Level II	—		—			9,470			—			—			—			—
Transfers from Level III into Level II	—		—			(23,852		)	—			—			—			—
Purchases	2,009		—			—			—			—			—			—
Sales and settlements	—		—			—			—			—			—			(53		)
Principal repayments	—		(388		)	—			(11,264		)	(59		)	(26		)	—
Total net gains / losses included in net income						0
Realized (gains)/losses, net on liabilities	—		—			—			—			—			—			53
Other than temporary impairment	—		—			(121		)	—			—			—			—
Unrealized gains/(losses), net on assets(1)	—		291			1,094			(575		)	136			—			—
Unrealized (gains)/losses, net on liabilities(2)	—		—			—			—			—			60			(329		)
Premium and discount amortization, net	—		33			474			(262		)	—			—			—
Ending balance	$	2,009	$	14,262		$	9,470		$	191,439		$	24,952		$	10,979		$	—
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	—	$	291		$	—		$	(356	)	$	136		$	—		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—	$	—		$	—		$	—		$	—		$	(60	)	$	—

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	Nine months ended September 30, 2018
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Residential Bridge Loans			Commercial Loans			Securitized  commercial  loans			Securitized debt
Beginning balance	$	17,217		$	8,735		$	9,239		$	237,423		$	64,526		$	—		$	24,876		$	10,945
Transfers into Level III from Level II	22,794			57,275			9,708			—			—			—			—			—
Transfers from Level III into Level II	(16,805		)	—			(8,697		)	—			—			—			—			(10,899		)
Purchases	109,002			8,602			—			486,354			221,619			144,035			1,353,019			—
Sales and settlements	—			—			—			—			—			—			—			12
Principal repayments	(53		)	(14		)	(604		)	(36,092		)	(49,503		)	—			(196,007		)	(44		)
Total net gains / losses included in net income
Other than temporary impairment	(590		)	(191		)	—			—			—			—			—			—
Unrealized gains/(losses), net on assets(1)	(1,447		)	(149		)	(68		)	(2,644		)	(1,217		)	(159		)	11,152			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			—			—			2,502
Premium and discount amortization, net	(2,785		)	(1,471		)	130			(578		)	(678		)	75			(1,992		)	90
Ending balance	$	127,333		$	72,787		$	9,708		$	684,463		$	234,747		$	143,951		$	1,191,048		$	2,606
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	(1,089	)	$	(148	)	$	—		$	(2,101	)	$	(832	)	$	(159	)	$	11,152		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	(2,504	)

	Nine months ended September 30, 2017
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Securitized  commercial  loan			Securitized debt			Derivative liability
Beginning balance	$	73,059		$	75,576		$	31,356		$	192,136		$	24,225		$	10,659		$	1,673
Transfers into Level III from Level II	—			15,610			9,470			—			—			—			—
Transfers from Level III into Level II	(73,715		)	(7,434		)	(33,080		)	—			—			—			—
Purchases	2,009			—			—			33,718			—			—			—
Sales and settlements	—			(60,132		)	—			—			—			—			(552		)
Principal repayments	—			(2,463		)	(172		)	(33,718		)	(59		)	(26		)	—
Total net gains / losses included in net income
Realized gains/(losses), net on assets	—			2,623			—			—			—			—			—
Realized (gains)/losses, net on liabilities	—			—			—			—			—			—			552
Other than temporary impairment	—			—			(1,823		)	—			—			—			—
Unrealized gains/(losses), net on assets(1)	636			(8,715		)	1,550			97			786			—			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			346			(1,673		)
Premium and discount amortization, net	20			(803		)	2,169			(794		)	—			—			—
Ending balance	$	2,009		$	14,262		$	9,470		$	191,439		$	24,952		$	10,979		$	—
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	—		$	684		$	72		$	347		$	786		$	—		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	(346	)	$	—

(1) Gains and losses are included in "Unrealized gain (loss), net" in the Consolidated Statements of Operations.

(2) Gains and losses on securitized debt and derivative liability are included in "Unrealized gain (loss), net" and "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations, respectively.

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Transfers between hierarchy levels during operations for the three and nine months ended September 30, 2018 and September 30, 2017 were based on the availability of sufficient observable inputs. Movements from Level II to Level III was based on information received from a third party pricing service which, along with the back-testing of historical sales transactions performed by the Manager, which did not provide sufficient observable data to meet Level II versus Level III criteria, resulting in the movement from Level II to Level III. Movements form Level III to Level II was based on information received from a third party pricing service which, along with the back-testing of historical sales transactions performed by the Manager, which provided the sufficient observable data for the movement from Level III to Level II. The Company did not have transfers between either Level I and Level II or Level I and Level III for the three and nine months ended September 30, 2018 and September 30, 2017.

Other Fair Value Disclosures

Certain Residential Bridge Loans, repurchase agreement borrowings and convertible senior unsecured notes are not carried at fair value in the consolidated financial statements. The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value as of September 30, 2018 and December 31, 2017 in the consolidated financial statements (dollars in thousands):

	September 30, 2018				December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets
Residential Bridge Loans	$	14,724	$	14,479	$	42,147	$	42,881
Total	$	14,724	$	14,479	$	42,147	$	42,881
Liabilities
Borrowings under repurchase agreements	$	3,469,319	$	3,591,751	$	3,251,686	$	3,257,956
Convertible senior unsecured notes	109,731		115,385		108,743		114,819
Total	$	3,579,050	$	3,707,136	$	3,360,429	$	3,372,775

"Due from counterparties" and "Due to counterparties" in the Company’s Consolidated Balance Sheets are reflected at cost which approximates fair value.

Residential Bridge Loans

The fair values of the Residential Bridge Loans are based upon prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a valuation model that is calibrated to recent loan trade execution. Their valuation methodology uses a discounted cash flow model and incorporates commonly used market pricing methods, including LTV debt to income, maturity, interest rates, collateral location, and unpaid principal balance, prepayment penalties, FICO scores, lien position and times late. Due to the inherent uncertainty of such valuation, the fair values established for residential bridge loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's loans are classified as Level III.

Borrowings under repurchase agreements

The fair values of the borrowings under repurchase agreements are based on a net present value technique. This method discounts future estimated cash flows using rates the Company determined best estimates current market interest rates that would be offered for loans with similar characteristics and credit quality. The use of different market assumptions or estimation methodologies could have a material effect on the fair value amounts. This fair value measurement is based on observable inputs, and as such, are classified as Level II.

Convertible senior unsecured notes

The fair value of the convertible senior unsecured notes is based on quoted market prices. Accordingly, the Company's convertible senior unsecured notes are classified as Level I.

Note 4 – Mortgage-Backed Securities and other securities

18

The following tables present certain information about the Company’s investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Principal Balance		Unamortized Premium (Discount), net			Discount Designated as Credit Reserve and OTTI			Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Net Weighted Average Coupon
Agency RMBS	$	389,756	$	13,133		$	—		$	402,889	$	—	$	(17,881	)	$	385,008	3.6	%
Agency RMBS Interest-Only Strips (2)	N/A		N/A			N/A			12,377		724		(898		)	12,203		2.3	%	(1)
Agency RMBS Interest-Only Strips, accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			8,006		2.8	%	(1)
Subtotal Agency RMBS	389,756		13,133			—			415,266		724		(18,779		)	405,217		3.2	%
Agency CMBS	2,124,942		4,970			—			2,129,912		563		(64,400		)	2,066,075		3.2	%
Agency CMBS Interest-Only Strips accounted for as derivatives(1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			4,241		0.4	%	(1)
Subtotal Agency CMBS	2,124,942		4,970			—			2,129,912		563		(64,400		)	2,070,316		3.0	%
Total Agency MBS	2,514,698		18,103			—			2,545,178		1,287		(83,179		)	2,475,533		3.0	%
Non-Agency RMBS	113,606		5,568			(39,585		)	79,589		4,344		(583		)	83,350		4.4	%
Non-Agency RMBS Interest- Only Strips (1)	N/A		N/A			N/A			15,677		—		(164		)	15,513		0.5	%	(1)
Subtotal Non-Agency RMBS	113,606		5,568			(39,585		)	95,266		4,344		(747		)	98,863		1.0	%
Non-Agency CMBS	322,255		(29,014		)	(24,976		)	268,265		3,959		(5,377		)	266,847		5.9	%
Total Non-Agency MBS	435,861		(23,446		)	(64,561		)	363,531		8,303		(6,124		)	365,710		2.2	%
Other securities (3)	71,420		2,116			(9,891		)	82,349		10,247		(68		)	92,528		9.0	%
Total	$	3,021,979	$	(3,227	)	$	(74,452	)	$	2,991,058	$	19,837	$	(89,371	)	$	2,933,771	2.9	%

19

	December 31, 2017
	Principal Balance		Unamortized Premium (Discount), net			Discount  Designated as Credit Reserve and OTTI			Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Net Weighted Average Coupon
Agency RMBS	$	641,044	$	28,876		$	—		$	669,920	$	4,571	$	(2,314	)	$	672,177	3.9	%
Agency RMBS Interest-Only Strips (1)	N/A		N/A			N/A			14,750		878		(191		)	15,437		2.9	%	(1)
Agency RMBS Interest-Only Strips, accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			10,419		2.9	%	(1)
Subtotal Agency RMBS	641,044		28,876			—			684,670		5,449		(2,505		)	698,033		3.6	%
Agency CMBS	2,145,139		2,142			—			2,147,281		16,913		(9,394		)	2,154,800		2.9	%
Agency CMBS Interest-Only Strips(1)	N/A		N/A			N/A			—		10		—			10		3.2	%	(1)
Agency CMBS Interest-Only Strips accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			5,757		0.5	%	(1)
Subtotal Agency CMBS	2,145,139		2,142			—			2,147,281		16,923		(9,394		)	2,160,567		2.7	%
Total Agency MBS	2,786,183		31,018			—			2,831,951		22,372		(11,899		)	2,858,600		3.0	%
Non-Agency RMBS	119,748		5,263			(39,491		)	85,520		5,473		(161		)	90,832		3.8	%
Non-Agency RMBS Interest- Only Strips (1)	N/A		N/A			N/A			8,738		—		(16		)	8,722		0.9	%	(1)
Subtotal Non-Agency RMBS	119,748		5,263			(39,491		)	94,258		5,473		(177		)	99,554		1.8	%
Non-Agency CMBS	379,183		(59,129		)	(28,020		)	292,034		1,702		(15,132		)	278,604		4.8	%
Total Non-Agency MBS	498,931		(53,866		)	(67,511		)	386,292		7,175		(15,309		)	378,158		3.3	%
Other securities (3)	86,305		6,300			(5,404		)	110,091		12,161		(187		)	122,065		7.8	%
Total	$	3,371,419	$	(16,548	)	$	(72,915	)	$	3,328,334	$	41,708	$	(27,395	)	$	3,358,823	3.1	%

(1) IOs and IIOs have no principal balances and bear interest based on a notional balance.  The notional balance is used solely to determine interest distributions on interest-only class of securities.  At September 30, 2018, the notional balance for Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, Agency RMBS IOs and IIOs, accounted for as derivatives and Agency CMBS IOs and IIOs, accounted for as derivatives was $166.4 million, $822.0 million, $96.2 million and $173.9 million, respectively.  At December 31, 2017, the notional balance for Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, Agency RMBS IOs and IIOs, accounted for as derivatives, Agency CMBS IOs and IIOs, accounted for as derivatives and Agency CMBS IOs and IIOs was $165.5 million, $278.4 million, $122.0 million, $192.5 million and $3.3 million, respectively.

(2) Interest on these securities is reported as a component of "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

(3) Other securities include residual interests in asset-backed securities which have no principal balance and an amortized cost of approximately $18.7 million and $22.9 million, as of September 30, 2018 and December 31, 2017, respectively.

20

As of September 30, 2018 and December 31, 2017 the weighted average expected remaining term of the MBS and other securities investment portfolio was 9.0 years and 8.6 years, respectively.

The following tables present the changes in the components of the Company’s purchase discount and amortizable premium on its Non-Agency RMBS, Non-Agency CMBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	Three months ended September 30, 2018									Three months ended September 30, 2017
	Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)			Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)
Balance at beginning of period	$	(78,837	)	$	(68,677	)	$	21,723		$	(49,830	)	$	(76,778	)	$	15,186
Accretion of discount	—			1,314			—			—			2,588			—
Amortization of premium	—			—			(97		)	—			—			(87		)
Realized credit losses	3,305			—			—			25			—			—
Purchases	—			—			—			—			—			—
Sales	2,334			25,624			(400		)	187			1,931			(18		)
Net impairment losses recognized in earnings	(2,071		)	—			—			(2,345		)	—			—
Transfers/release of credit reserve(2)	817			8			(825		)	(866		)	953			(87		)
Balance at end of period	$	(74,452	)	$	(41,731	)	$	20,401		$	(52,829	)	$	(71,306	)	$	14,994

	Nine months ended September 30, 2018									Nine months ended September 30, 2017
	Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)			Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)
Balance at beginning of period	$	(72,915	)	$	(68,438	)	$	20,872		$	(130,484	)	$	(109,822	)	$	44,527
Accretion of discount	—			6,483			—			—			8,542			—
Amortization of premium	—			—			(461		)	—			—			(776		)
Realized credit losses	5,526			—			—			1,854			—			—
Purchases	(7,182		)	(6,473		)	435			(1,724		)	(668		)	1,522
Sales	5,673			29,352			(1,084		)	89,628			32,016			(31,060		)
Net impairment losses recognized in earnings	(7,570		)	—			—			(12,696		)	—			—
Transfers/release of credit reserve(2)	2,016			(2,655		)	639			593			(1,374		)	781
Balance at end of period	$	(74,452	)	$	(41,731	)	$	20,401		$	(52,829	)	$	(71,306	)	$	14,994

(1) Together with coupon interest, accretable purchase discount and amortizable premium is recognized as interest income over the life of the security.

(2) Subsequent reductions of a security’s non-accretable discount results in a corresponding reduction in its amortizable premium.

21

The following tables present the fair value and contractual maturities of the Company’s investment securities at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	< or equal to 10 years		> 10 years and < or equal to 20 years		> 20 years and < or equal to 30 years		> 30 years		Total
Agency RMBS	$	—	$	—	$	57,572	$	327,436	$	385,008
Agency RMBS Interest-Only Strips	3,937		2,436		5,830		—		12,203
Agency RMBS Interest-Only Strips, accounted for as derivatives	1,223		4,104		2,679		—		8,006
Agency CMBS	1,507,428		558,647		—		—		2,066,075
Agency CMBS Interest-Only Strips accounted for as derivatives	—		—		—		4,241		4,241
Subtotal Agency	1,512,588		565,187		66,081		331,677		2,475,533
Non-Agency RMBS	—		24,752		16,757		41,841		83,350
Non-Agency RMBS Interest- Only Strips	—		—		7,900		7,613		15,513
Non-Agency CMBS	28,752		80,180		104,617		53,298		266,847
Subtotal Non-Agency	28,752		104,932		129,274		102,752		365,710
Other securities	3,782		59,908		—		28,838		92,528
Total	$	1,545,122	$	730,027	$	195,355	$	463,267	$	2,933,771

	December 31, 2017
	< or equal to 10  years		> 10 years and < or  equal to 20 years		> 20 years and < or  equal to 30 years		> 30 years		Total
Agency RMBS	$	—	$	56,228	$	239,197	$	376,752	$	672,177
Agency RMBS Interest-Only Strips	3,920		4,591		6,926		—		15,437
Agency RMBS Interest-Only Strips, accounted for as derivatives	1,686		5,139		3,594		—		10,419
Agency CMBS	1,599,620		555,180		—		—		2,154,800
Agency CMBS Interest-Only Strips	10		—		—		—		10
Agency CMBS Interest-Only Strips accounted for as derivatives	—		—		—		5,757		5,757
Subtotal Agency	1,605,236		621,138		249,717		382,509		2,858,600
Non-Agency RMBS	13		51,092		4,184		35,543		90,832
Non-Agency RMBS Interest- Only Strips	—		—		—		8,722		8,722
Non-Agency CMBS	—		60,583		139,209		78,812		278,604
Subtotal Non-Agency	13		111,675		143,393		123,077		378,158
Other securities	—		99,062		—		23,003		122,065
Total	$	1,605,249	$	831,875	$	393,110	$	528,589	$	3,358,823

22

The following tables present the gross unrealized losses and estimated fair value of the Company’s MBS and other securities by length of time that such securities have been in a continuous unrealized loss position at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Less than 12 Months						12 Months or More						Total
	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities
Agency RMBS	$	115,378	$	(3,131	)	8	$	269,630	$	(14,750	)	2	$	385,008	$	(17,881	)	10
Agency RMBS Interest-Only Strips	3,588		(394		)	9	2,753		(504		)	6	6,341		(898		)	15
Agency CMBS	1,135,925		(32,175		)	76	516,838		(32,225		)	37	1,652,763		(64,400		)	113
Subtotal Agency	1,254,891		(35,700		)	93	789,221		(47,479		)	45	2,044,112		(83,179		)	138
Non-Agency RMBS	29,798		(583		)	5	—		—			—	29,798		(583		)	5
Non-Agency RMBS Interest-Only Strips	8,003		(164		)	2	—		—			—	8,003		(164		)	2
Non-Agency CMBS	70,410		(894		)	15	57,263		(4,483		)	12	127,673		(5,377		)	27
Subtotal Non-Agency	108,211		(1,641		)	22	57,263		(4,483		)	12	165,474		(6,124		)	34
Other securities	8,697		(68		)	1	—		—			—	8,697		(68		)	1
Total	$	1,371,799	$	(37,409	)	116	$	846,484	$	(51,962	)	57	$	2,218,283	$	(89,371	)	173

	December 31, 2017
	Less than 12 Months						12 Months or More						Total
	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities
Agency RMBS	$	330,259	$	(2,179	)	11	$	1,632	$	(135	)	5	$	331,891	$	(2,314	)	16
Agency RMBS Interest-Only Strips	3,095		(142		)	6	1,703		(49		)	3	4,798		(191		)	9
Agency CMBS	955,559		(9,394		)	57	—		—			—	955,559		(9,394		)	57
Subtotal Agency	1,288,913		(11,715		)	74	3,335		(184		)	8	1,292,248		(11,899		)	82
Non-Agency RMBS	28,508		(161		)	3	—		—			—	28,508		(161		)	3
Non-Agency RMBS Interest-Only Strips	8,722		(16		)	3	—		—			—	8,722		(16		)	3
Non-Agency CMBS	69,661		(1,753		)	15	119,729		(13,379		)	35	189,390		(15,132		)	50
Subtotal Non-Agency	106,891		(1,930		)	21	119,729		(13,379		)	35	226,620		(15,309		)	56
Other securities	23,800		(187		)	3	—		—			—	23,800		(187		)	3
Total	$	1,419,604	$	(13,832	)	98	$	123,064	$	(13,563	)	43	$	1,542,668	$	(27,395	)	141

The Company identified two securities with an unpaid principal balance of $4.1 million which it intended to sell that were in an unrealized loss position held at September 30, 2018, and as a result, the Company recognized an impairment charge of approximately $161 thousand on Non-Agency CMBS which is included in "Other than temporary impairment" in the Company's Consolidated Statements of Operations.

Generally, the Company records Other Than Temporary Impairment ("OTTI") when the credit quality of the underlying collateral deteriorates and or the scheduled payments are faster than previously projected.  The credit deterioration could be as a result of, but not limited to, increased projected realized losses, foreclosures, delinquencies and the likelihood of the borrower being able to make payments in the future.  Generally, a prepayment occurs when a loan has a higher interest rate relative to current interest rates

23

and lenders are willing to extend credit at the lower current interest rate or the underlying collateral for the loan is sold or transferred. Refer to Note 2 "Summary of Significant Accounting Policies - Mortgage-Backed Securities and Other Securities."

The following table presents the OTTI the Company recorded on its securities portfolio (dollars in thousands):

	Three months ended September 30, 2018		Three months ended September 30, 2017		Nine months ended September 30, 2018		Nine months ended September 30, 2017
Agency RMBS (1)	$	320	$	4,760	$	663	$	5,420
Non-Agency RMBS	159		—		269		—
Non-Agency CMBS	2,054		2,344		7,491		12,658
Other securities	—		121		—		1,823
Total	$	2,533	$	7,225	$	8,423	$	19,901

(1) Normally, unrealized losses on Agency securities (excluding Agency IO's) with the explicit guarantee of principal and interest by the governmental sponsored entity are not credit losses but rather due to changes in interest rates and prepayment expectations. These securities would not be considered other than temporarily impaired provided the Company did not intend to sell the security. For the three and nine months ended September 30, 2018 and September 30, 2017, $0, $0, $4.7 million and $4.7 million, respectively, of OTTI related to Agency RMBS securities the Company intended to sell.

The following tables present components of interest income on the Company’s MBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017, respectively (dollars in thousands):

	For the three months ended September 30, 2018							For the three months ended September 30, 2017
	Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income		Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income
Agency RMBS	$	4,551	$	(1,138	)	$	3,413	$	8,886	$	(2,995	)	$	5,891
Agency CMBS	13,812		(298		)	13,514		11,071		110			11,181
Non-Agency RMBS	2,139		(536		)	1,603		571		372			943
Non-Agency CMBS	5,379		1,469			6,848		4,242		2,139			6,381
Other securities	3,674		(1,660		)	2,014		2,160		464			2,624
Total	$	29,555	$	(2,163	)	$	27,392	$	26,930	$	90		$	27,020

	Nine months ended September 30, 2018							Nine months ended September 30, 2017
	Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income		Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income
Agency RMBS	$	17,471	$	(4,112	)	$	13,359	$	30,513	$	(10,662	)	$	19,851
Agency CMBS	45,753		(266		)	45,487		24,408		717			25,125
Non-Agency RMBS	5,616		(685		)	4,931		4,482		303			4,785
Non-Agency CMBS	15,362		5,873			21,235		14,675		6,572			21,247
Other securities	11,610		(4,825		)	6,785		5,300		2,112			7,412
Total	$	95,812	$	(4,015	)	$	91,797	$	79,378	$	(958	)	$	78,420

24

The following tables present the sales and realized gain (loss) of the Company’s MBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017, respectively (dollars in thousands):

	For the three months ended September 30, 2018										For the three months ended September 30, 2017
	Proceeds		Gross Gains		Gross Losses			Net Gain  (Loss)			Proceeds			Gross Gains			Gross Losses			Net Gain (Loss)
Agency RMBS(1)	$	—	$	—	$	—		$	—		$	(2,906	)	$	(3	)	$	51		$	48
Agency CMBS	641,677		—		(25,640		)	(25,640		)	—			—			—			—
Non-Agency CMBS	73,848		2,411		(2,712		)	(301		)	10,597			1,641			(278		)	1,363
Other securities	13,712		1,712		—			1,712			10,419			419			—			419
Total	$	729,237	$	4,123	$	(28,352	)	$	(24,229	)	$	18,110		$	2,057		$	(227	)	$	1,830

(1) For the three months ended September 30, 2017 reflects a reclassification of proceeds from a sale on the trade date to reflect subsequent Agency RMBS paydowns.

	Nine months ended September 30, 2018										Nine months ended September 30, 2017
	Proceeds		Gross Gains		Gross Losses			Net Gain  (Loss)			Proceeds		Gross Gains		Gross Losses			Net Gain (Loss)
Agency RMBS(1)	$	209,581	$	18	$	(4,531	)	$	(4,513	)	$	862,245	$	4,376	$	(7,314	)	$	(2,938	)
Agency CMBS	768,544		—		(30,656		)	(30,656		)	—		—		—			—
Non-Agency RMBS(2)	51,958		3,114		—			3,114			243,811		24,389		(2,242		)	22,147
Non-Agency CMBS	80,554		2,472		(3,148		)	(676		)	45,634		2,377		(1,351		)	1,026
Other securities	35,469		3,469		—			3,469			33,365		419		(54		)	365
Total	$	1,146,106	$	9,073	$	(38,335	)	$	(29,262	)	$	1,185,055	$	31,561	$	(10,961	)	$	20,600

(1) For the nine months ended September 30, 2017, excludes proceeds for Agency RMBS Interest-Only Strips, accounted for as derivatives, of approximately $2.6 million and gross realized gains of $432 thousand, respectively.

(2) For the nine months ended September 30, 2017, excludes proceeds for Non-Agency RMBS Interest-Only Strips, accounted for as derivatives, of approximately $2.2 million, gross realized gains of $274 thousand and gross realized losses of $180 thousand, respectively.

Unconsolidated CMBS VIEs

The Company’s economic interests held in unconsolidated CMBS VIEs are limited in nature to those of a passive holder of CMBS issued by securitization trusts; the Company was not involved in the design or creation of the securitization trusts. The Company evaluates its CMBS holdings, for potential consolidation of the securitized trust, in which it owns the most subordinate tranche or a portion of the controlling class. As of September 30, 2018, the Company held seven variable interest in CMBS VIEs and had three variable interests in CMBS VIE's as of December 31, 2017, in which it either owned the most subordinate class or a portion of the controlling class. The Company determined it was not the primary beneficiary and accordingly, the CMBS VIEs were not consolidated in the Company’s consolidated financial statements. As of September 30, 2018 and December 31, 2017, the Company’s maximum exposure to loss from these variable interests did not exceed the carrying value of these investments of $116.1 million and $62.1 million. These investments are classified in "Non-Agency mortgage-backed securities, at fair value" in the Company’s Consolidated Balance Sheets. Further, as of September 30, 2018 and December 31, 2017, the Company did not guarantee any obligations of unconsolidated entities or enter into any commitment or intent to provide funding to any such entities.

Note 5 — Residential Whole-Loans and Bridge Loans

Residential Whole-Loan Trust

The consolidated financial statements include the consolidation of Revolving Mortgage Investment Trust 2015-1QR2 ("RMI 2015 Trust") since it met the definition of a VIE and the Company determined that it was the primary beneficiary of the trust because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust.  RMI 2015 Trust has issued a trust certificate that is wholly owned by the Company and represents the entire beneficial interest in pools of Non-QM Residential Whole-Loans and the Commercial Loan held by the trust. As of September 30, 2018, the Company financed the trust certificate with $334.9

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million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying Residential Whole-Loans owned by the trust in "Residential Whole-Loans, at fair value" and the Commercial Loan in "Commercial Loans, at fair value" in the Consolidated Balance Sheets and has eliminated the intercompany trust certificate in consolidation. Refer to Note 6 - "Commercial Loans" for details on the commercial real estate mortgage loan.

In August 2018, the Company formed Revolving Mortgage Investment Trust 2018-RCR ("RCR Trust") to acquire conforming Residential Whole-Loans. The Company determined that RCR Trust was a VIE and that the Company was the primary beneficiary of the trust because it was involved in the design of the trust of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $258.1 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying conforming mortgages owned by the trust in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

In September 2018, the Company formed Revolving Mortgage Investment Trust 2018-RNR ("RNR Trust") to acquire Non-QM Residential Whole-Loans. The Company determined that RNR Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $15.3 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying Non-QM Residential Whole-Loans in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

Residential Bridge Loan Trust

In February 2017, The Company formed Revolving Mortgage Investment Trust 2017-BRQ1 ("RMI 2017 Trust") and acquired the trust certificate, which represents the beneficial interest in pools of Residential Bridge Loans and certain Residential Whole-Loans held by the trust. Residential Bridge Loans are mortgage loans secured by residences, typically short-term. The Company determined that RMI Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $219.7 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies both the underlying Residential Bridge Loans carried at amortized cost and the Residential Bridge Loans that it elected the fair value option in "Residential Bridge Loans" and the Residential Whole-Loans in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

Consolidated Residential Whole-Loan and Residential Bridge Loan Trusts

The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.  The three consolidated Residential Whole-Loan trusts collectively hold 1,936 Residential Whole-Loans and one commercial loan and the consolidated Bridge Loan Trust holds 673 Residential Bridge Loans and 13 Residential Whole-Loans as of September 30, 2018. 

The following table presents a summary of the assets and liabilities of the consolidated residential whole-loan trusts, residential bridge loan trust included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

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	September 30, 2018		December 31, 2017
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)	$	684,463	$	237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)	249,471		106,673
Commercial loan, at fair value	29,831		—
Investment related receivable	33,430		7,665
Interest receivable	8,874		3,197
Other assets	203		—
Total assets	$	1,006,272	$	354,958
Accounts payable and accrued expenses	722		188
Other liabilities	393		—
Total liabilities	$	1,115	$	188

The Company’s risk with respect to its investment in each residential loan trust is limited to its direct ownership in the trust. The Residential Whole-Loans, Residential Bridge Loans and Commercial Loan held by the consolidated trusts are held solely to satisfy the liabilities of the trust, and creditors of the trust have no recourse to the general credit of the Company. The Company is not contractually required and has not provided any additional financial support to the trusts for the three and nine months ended September 30, 2018 and September 30, 2017. 

The following table presents the components of the carrying value of Residential Whole-Loans and Residential Bridge Loans as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	Residential Whole-Loans, at Fair Value						Residential Bridge Loans, at Fair Value(1)						Residential Bridge Loans, at Amortized Cost(1)
	September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017
Principal balance	$	674,763		$	232,270		$	234,445		$	63,802		$	14,734		$	42,066
Unamortized premium	10,592			2,021			1,426			293			28			122
Unamortized discount	(2,499		)	(1,190		)	(434		)	(128		)	(38		)	(41		)
Amortized cost	682,856			233,101			235,437			63,967			14,724			42,147
Gross unrealized gains	5,506			4,463			525			655			N/A			N/A
Gross unrealized losses	(3,899		)	(141		)	(1,215		)	(96		)	N/A			N/A
Fair value	$	684,463		$	237,423		$	234,747		$	64,526		N/A			N/A

(1) These loans are classified in "Residential Bridge Loans" in the Consolidated Balance Sheets.

Residential Whole-Loans

The Residential Whole-Loans have low LTV's and are comprised of 1,034 non-qualifying adjustable rate mortgages, 902 conforming fixed rate mortgages and 13 investor fixed rate mortgages.  The following tables present certain information about the Company’s Residential Whole-Loan investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

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September 30, 2018
				Weighted Average
Current Coupon Rate	Number of Loans	Principal  Balance		Original LTV		Original  FICO Score(1)	Expected  Life (years)	Contractual  Maturity  (years)	Coupon  Rate
3.01 – 4.00%	69	$	22,732	61.4	%	738	7.5	29.3	3.9	%
4.01– 5.00%	1,159	405,934		62.2	%	734	3.6	28.8	4.7	%
5.01 – 6.00%	708	238,961		63.2	%	709	2.8	28.0	5.4	%
6.01 – 7.00%	11	6,685		64.9	%	748	1.4	25.4	6.3	%
7.01 - 8.00%	1	357		70.0	%	777	1.9	29.3	7.2	%
8.01 - 9.00%	1	94		70.0	%	689	1.9	29.3	8.4	%
Total	1,949	$	674,763	62.6	%	727	3.4	28.5	4.9	%

(1) The original FICO score is not available for 240 loans with a principal balance of approximately $81.6 million at September 30, 2018. The Company has excluded these loans from the weighted average computations.

December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal  Balance		Original LTV		Original  FICO Score(1)	Expected  Life (years)	Contractual  Maturity  (years)	Coupon  Rate
3.01 – 4.00%	142	$	55,593	55.5	%	751	1.7	29.1	3.9	%
4.01– 5.00%	338	125,860		56.9	%	725	1.4	26.5	4.5	%
5.01 – 6.00%	132	48,553		58.2	%	728	1.6	27.0	5.2	%
6.01 – 7.00%	4	2,264		71.1	%	758	1.3	20.5	6.3	%
Total	616	$	232,270	57.0	%	734	1.5	27.1	4.5	%

(1) The original FICO score is not available for 141 loans with a principal balance of approximately $56.5 million at December 31, 2017. The Company has excluded these loans from the weighted average computations.

The following table presents the various states across the United States in which the collateral securing the Company’s Residential Whole-Loans at September 30, 2018 and December 31, 2017, based on principal balance, is located (dollars in thousands):

September 30, 2018					December 31, 2017
State	State Concentration		Principal Balance		State	State Concentration		Principal Balance
California	68.8	%	$	463,638	California	62.2	%	$	144,321
New York	15.6	%	105,435		New York	24.4	%	56,631
Georgia	2.9	%	19,324		Georgia	4.3	%	10,061
Washington	2.2	%	14,886		Washington	4.0	%	9,244
Massachusetts	1.3	%	8,504		Massachusetts	3.9	%	9,114
Other	9.2	%	62,976		Other	1.2	%	2,899
Total	100.0	%	$	674,763	Total	100.0	%	$	232,270

Residential Bridge Loans

The Residential Bridge Loans are comprised of short-term non-owner occupied fixed rate loans secured by single or multi-unit residential properties, with LTVs generally not to exceed 85%. The following tables present certain information about the Company’s Residential Bridge Loan investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

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September 30, 2018
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
6.01 – 7.00%	14	$	5,264	61.8	%	2.6	6.7	%
7.01 – 8.00%	127	57,820		72.9	%	6.5	7.7	%
8.01 – 9.00%	213	94,873		70.2	%	5.4	8.7	%
9.01 – 10.00%	189	59,927		72.3	%	5.5	9.7	%
10.01 – 11.00%	71	16,651		71.3	%	5.0	10.6	%
11.01 – 12.00%	37	9,121		63.5	%	6.1	11.4	%
12.01 – 13.00%	9	1,866		73.3	%	6.8	12.7	%
13.01 – 14.00%	1	88		65.0	%	7.0	14.0	%
17.01 – 18.00%	12	3,569		74.0	%	4.3	18.0	%
Total	673	$	249,179	71.1	%	5.6	9.1	%

December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
5.01 - 6.00%	9	$	4,016	64.5	%	10.8	5.9	%
6.01 - 7.00%	64	18,420		67.8	%	10.6	6.7	%
7.01 – 8.00%	98	25,608		66.4	%	9.5	7.6	%
8.01 – 9.00%	56	19,728		70.3	%	11.9	8.9	%
9.01 – 10.00%	67	25,001		73.3	%	6.8	9.7	%
10.01 – 11.00%	36	10,656		75.4	%	5.0	10.8	%
11.01 – 12.00%	2	919		89.8	%	8.2	11.4	%
17.01 – 18.00%	8	1,520		73.8	%	5.9	18.0	%
Total	340	$	105,868	70.1	%	9.0	8.6	%

The following table presents the U.S. states in which the collateral securing the Company’s Residential Bridge Loans at September 30, 2018 and December 31, 2017, based on principal balance, is located (dollars in thousands):

September 30, 2018					December 31, 2017
State	Concentration		Principal Balance		State	Concentration		Principal Balance
California	48.2	%	$	119,784	California	48.2	%	$	51,080
New York	9.5	%	23,791		Florida	13.4	%	14,199
Florida	6.6	%	16,354		Washington	6.3	%	6,645
New Jersey	5.5	%	13,723		New York	4.4	%	4,703
Texas	4.8	%	11,964		Texas	4.4	%	4,660
Other	25.4	%	63,563		Other	23.3	%	24,581
Total	100.0	%	$	249,179	Total	100.0	%	$	105,868

Non-performing Loans

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Residential Whole-Loans

As of September 30, 2018, there was one Residential Whole-Loan in non-accrual status with a current unpaid principal balance of $806 thousand and a fair value of $787 thousand. This nonperforming loan represents approximately 0.1% of the total outstanding principal balance. No allowance and provision for credit losses was recorded for this loan as of and for the three and nine months ended September 30, 2018 since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

As of December 31, 2017, there was one Residential Whole-Loan in non-accrual status with a current unpaid principal balance of $579 thousand and a fair value of $570 thousand. This nonperforming loan represents approximately 0.2% of the total outstanding principal balance. No allowance for credit losses for this loan as of December 31, 2017 and no provision for credit losses for the three and nine months ended September 30, 2017 was recorded since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

Residential Bridge Loans

As of September 30, 2018, there were 11 Residential Bridge Loans carried at amortized cost in non-accrual status with an unpaid principal balance of approximately $4.2 million and 4 Residential Bridge Loans carried at fair value in non-accrual status with an unpaid principal balance of approximately $727 thousand. These nonperforming loans represent approximately 2.0% of the total outstanding principal balance. These loans are collateral dependent with a weighted average original LTV of 74%. No allowance and provision for credit losses was recorded for loans carried at amortized costs as of and for the three and nine months ended September 30, 2018 since the fair value of the collateral balance less the cost to sell was in excess of the outstanding principal and interest balances. No allowance and provision for credit losses was recorded for loans carried at fair value as of and for the three and nine months ended September 30, 2018 since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

As of December 31, 2017, there were 9 Residential Bridge Loans carried at amortized cost in non-accrual status with an unpaid principal balance of approximately $1.8 million. These nonperforming loans represent approximately 1.7% of the total outstanding principal balance. These loans are collateral dependent with a weighted average original LTV of 74%. No allowance for credit losses as of as December 31, 2017 and no provision for credit losses for the three and nine months ended September 30, 2017 was recorded since the fair value of the collateral balance less the cost to sell was in excess of the outstanding principal and interest balances.

Note 6 — Commercial Loans

Securitized Commercial Loans

Securitized commercial loans is comprised of commercial loans from consolidated third party sponsored CMBS VIE's. At September 30, 2018, the Company had variable interests in two CMBS VIEs, CMSC Trust 2015 - Longhouse MZ and RETL 2018- RVP, that it determined it was the primary beneficiary and was required to consolidate. The commercial loans that serve as collateral for the securitized debt issued by these VIE's can only be used to settle the securitized debt. Refer to Note 7 - "Financings" for details on the associated securitized debt. The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.

CMSC Trust 2015 - Longhouse MZ

In November 2015, the Company acquired a $14.0 million interest in the trust certificate issued by CMSC Trust 2015 - Longhouse MZ (“CMSC Trust”), with an outstanding balance of $13.8 million and a fair value of $13.8 million at September 30, 2018. The Company determined that CMSC Trust was a VIE and that the Company was the primary beneficiary because it was involved in certain aspects of the design of the trust, has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that the Company believes could potentially be significant to the trust. As the primary beneficiary, the Company was required to consolidate CMSC Trust and accordingly its $13.8 million investment in CMSC Trust was eliminated in consolidation. The CMSC Trust holds a $24.6 million mezzanine loan collateralized by interests in commercial

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real estate.  The mezzanine loan serves as collateral for the $24.6 million of trust certificates issued. Refer to Note 7 - "Financings" for details on the associated securitized debt.

RETL 2018-RVP

In March 2018, the Company acquired a $67.8 million interest in the trust certificate issued by RETL 2018-RVP (“RETL Trust”), which represents the 5% eligible horizontal residual interest under the Credit Risk Retention Rules of Section 15G of the Exchange Act. Under the credit risk retention rules, the Company must retain its investment for five years and is limited in its ability to finance and hedge its investment. The trust certificate's pass-through rate is one month LIBOR plus 9.5%. The outstanding balance and the fair value of the Company's interest in the trust were $58.0 million and $58.2 million, respectively, at September 30, 2018. The Company determined that RETL Trust was a VIE and that the Company was the primary beneficiary because the Manager was involved in certain aspects of the design of the trust and the Company together with other related party entities own more than 50% of the controlling class. The owner of 50% or more of the controlling class has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest from the trust that the Company believes could potentially be significant to the trust. As the primary beneficiary, the Company was required to consolidate RETL and accordingly its investment in RETL was eliminated in consolidation. The RETL Trust holds a commercial loan collateralized by first mortgages, deeds of trusts and interests in commercial real estate. The outstanding principal balance on this commercial loan is $1.15 billion as of September 30, 2018. The loan's stated maturity date is February 9, 2021 (subject to the borrower's option to extend the initial stated maturity date for two successive one-year terms) and bears an interest rate of one month LIBOR plus 3.15%. The commercial loan serves as collateral for the $1.15 billion of securitized debt issued. Refer to Note 7 - "Financings" for details on the associated securitized debt.

Commercial Loans

In March 2018, the Company acquired a $20.0 million interest-only mezzanine loan secured by a partnership interest in an entity that owns a hotel. The mezzanine loan has a maturity date of December 9, 2019 with three one-year extension options and bears an interest rate of one month LIBOR plus 6.5%.

In June 2018, the Company acquired a $30.0 million interest-only commercial loan. The loan is secured by a hotel. The loan has a maturity date of June 9, 2020 with a one-year extension option and bears an interest rate of one month LIBOR plus 4.5%. On August 3, 2018 the loan was transfered into our Residential Whole Loan Trust RMI 2015 Trust.

Commercial Loan Trust

Revolving Small Balance Commercial Trust 2018-1

In March 2018, the Company formed the Revolving Small Balance Commercial Trust 2018-1 ("RSBC Trust") to acquire commercial real estate mortgage loans. In March 2018, RSBC Trust acquired a $20.6 million interest-only first lien commercial mortgage loan ("SBC-Loan 1") collateralized by three assisted care living facilities. The loan matures on March 6, 2019 and bears an interest rate of one month LIBOR plus 4.75%. In August 2018, SBC-Loan 1 was paid in full.

In July 2018, RSBC Trust acquired a $45.2 million interest-only commercial real estate mortgage loan ("SBC-Loan 2") secured by skilled nursing facilities. SBC-Loan 2 matures on July 6, 2020 with two extension options of one year each and bears an interest rate of one month LIBOR plus 4.25% subject to a LIBOR floor of 1.25%.

In September 2018, RSBC Trust acquired a $49.6 million interest-only commercial real estate mortgage loan ("SBC-Loan 3") secured by assisted care living facilities. SBC-Loan 3 matures on September 6, 2021 with a one extension option of one year and bears an interest rate of one month LIBOR plus 5.30%, subject to a LIBOR floor of 1.90% and a LIBOR cap of 3.50%.

The Company determined that the wholly owned RSBC Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust and holds significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $61.6 million of repurchase agreement borrowings, which is a liability held outside the trust.

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Consolidated Securitized Commercial Loan Trusts and Commercial Loan Trust

The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.  The three consolidated trusts, CMSC Trust, RETL Trust and RSBC Trust collectively hold four commercial loans as of September 30, 2018. 

The following table presents a summary of the assets and liabilities of the three consolidated trusts included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Restricted cash	$	100,138	$	—
Securitized commercial loans, at fair value	1,191,048		24,876
Commercial Loans, at fair value	93,846		—
Interest receivable	3,544		161
Total assets	$	1,388,576	$	25,037
Securitized debt, at fair value	$	1,119,089	$	10,945
Interest payable	2,487		70
Accounts payable and accrued expenses	15		1
Other liabilities	100,138		—
Total liabilities	$	1,221,729	$	11,016

The Company’s risk with respect to its investment in each commercial loan trust is limited to its direct ownership in the trust. The commercial loans held by the consolidated trusts are held solely to satisfy the liabilities of the trust, and creditors of the trust have no recourse to the general credit of the Company. The assets of a consolidated trust can only be used to satisfy the obligations of that trust. The Company is not contractually required and has not provided any additional financial support to the trusts for the three and nine months ended September 30, 2018 and September 30, 2017. 

The following table presents the components of the carrying value of the commercial real estate loans as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	CMSC Trust Securitized Commercial Loan, at Fair Value				RETL Trust Securitized Commercial Loan, at Fair Value				RSBC Trust Commercial Loans, at Fair Value					Commercial Loans, at Fair Value
	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018			December 31, 2017		September 30, 2018			December 31, 2017
Principal balance	$	24,556	$	24,846	$	1,154,283	$	—	$	94,787		$	—	$	50,000		$	—
Unamortized premium	—		—		1,027		—		—			—		—			—
Unamortized discount	—		—		—		—		(445		)	—		(232		)	—
Amortized cost	24,556		24,846		1,155,310		—		94,342			—		49,768			—
Gross unrealized gains	86		30		11,096		—		—			—		380			—
Gross unrealized losses	—		—		—		—		(496		)	—		(43		)	—
Fair value	$	24,642	$	24,876	$	1,166,406	$	—	$	93,846		$	—	$	50,105		$	—

Note 7— Financings

Repurchase Agreements

The Company primarily finances its investment acquisitions with repurchase agreements. The repurchase agreements bear interest at a contractually agreed-upon rate and typically have terms ranging from one month to six months.  The Company’s

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repurchase agreement borrowings are accounted for as secured borrowings when the Company maintains effective control of the financed assets.  Under the repurchase agreements, the respective counterparties retain the right to determine the fair value of the underlying collateral. A reduction in the value of pledged assets requires the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements, and is referred to as a margin call.  The inability of the Company to post adequate collateral for a margin call by a counterparty, in a timeframe as short as the close of the same business day, could result in a condition of default under the Company’s repurchase agreements, thereby enabling the counterparty to liquidate the collateral pledged by the Company, which may have a material adverse effect on the Company’s financial position, results of operations and cash flows. 

     Certain of the repurchase agreements provide the counterparty with the right to terminate the agreement if the Company does not maintain certain equity and leverage metrics, the most restrictive of which include a limit on leverage based on the composition of the Company’s portfolio.  For all the repurchase agreements with outstanding borrowings, the Company was in compliance with the terms of such financial tests as of September 30, 2018.

As of September 30, 2018, the Company had master repurchase agreements with 28 counterparties.  As of September 30, 2018, the Company had borrowings under repurchase agreements with 16 counterparties. The following table summarizes certain characteristics of the Company’s repurchase agreements at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018					December 31, 2017
Securities Pledged	Repurchase Agreement Borrowings		Weighted Average Interest Rate on Borrowings Outstanding at  end of period		Weighted Average Remaining Maturity (days)	Repurchase Agreement Borrowings		Weighted Average Interest Rate on Borrowings Outstanding at end of period		Weighted Average Remaining Maturity (days)
Agency RMBS	$	393,486	2.39	%	60	$	665,919	1.62	%	61
Agency CMBS	1,833,352		2.36	%	62	2,035,222		1.53	%	53
Non-Agency RMBS	71,117		3.70	%	31	46,530		2.76	%	41
Non-Agency CMBS (1)	212,282		3.79	%	48	154,325		2.98	%	40
Residential Whole-Loans (2)	585,178		3.65	%	35	189,270		3.66	%	8
Residential Bridge Loans (2)	216,917		4.37	%	26	100,183		4.05	%	59
Commercial loans (2)	87,567		4.33	%	27	—		—	%	—
Securitized commercial loans (2)	7,599		3.99	%	12	—		—	%	—
Other securities	61,821		3.86	%	29	60,237		2.94	%	23
Borrowings under repurchase agreements	$	3,469,319	2.90	%	52	$	3,251,686	1.86	%	51

(1) Includes approximately $22.6 million of repurchase agreement borrowings related to securities sold in September 2018 that was paid off when the sale settled in October 2018.

(2) Repurchase agreement borrowings on loans owned are through trust certificates.  The trust certificates are eliminated upon consolidation.

      At September 30, 2018 and December 31, 2017, repurchase agreements collateralized by investments had the following remaining maturities:

(dollars in thousands)	September 30, 2018		December 31, 2017
Overnight	$	—	$	—
1 to 29 days	1,494,121		1,387,599
30 to 59 days	332,521		665,656
60 to 89 days	1,531,084		871,819
90 to 119 days	111,593		—
Greater than or equal to 120 days	—		326,612
Total	$	3,469,319	$	3,251,686

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At September 30, 2018, the following table reflects amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty (dollars in thousands):

	September 30, 2018
Counterparty	Amount of  Collateral at Risk, at fair value		Weighted Average Remaining Maturity (days)	Percentage of  Stockholders’  Equity
Credit Suisse AG, Cayman Islands Branch	$	88,584	29	16.5	%
Nomura Securities International Inc.	72,697		29	13.6	%
UBS AG, London Branch	65,095		33	12.2	%
Citigroup Global Markets Inc.	56,038		80	10.5	%

Collateral for Borrowings under Repurchase Agreements

The following table summarizes the Company’s collateral positions, with respect to its borrowings under repurchase agreements at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018						December 31, 2017
	Assets Pledged		Accrued Interest		Assets Pledged and Accrued Interest		Assets Pledged		Accrued Interest		Assets Pledged and Accrued Interest
Assets pledged for borrowings under repurchase agreements:
Agency RMBS, at fair value	$	403,339	$	1,608	$	404,947	$	690,255	$	2,601	$	692,856
Agency CMBS, at fair value	1,922,520		5,391		1,927,911		2,143,340		5,454		2,148,794
Non-Agency RMBS, at fair value	98,863		718		99,581		58,127		160		58,287
Non-Agency CMBS, at fair value(3)	286,728		1,223		287,951		208,062		1,100		209,162
Residential Whole-Loans, at fair value (1)	684,463		4,778		689,241		237,423		1,754		239,177
Residential Bridge Loans (1)	249,471		3,975		253,446		106,673		1,443		108,116
Commercial Loans, at fair value (1)	123,677		789		124,466		—		—		—
Securitized commercial loans, at fair value (1)	13,800		85		13,885		—		—		—
Other securities, at fair value	92,391		179		92,570		89,823		105		89,928
Cash (2)	18,625		—		18,625		23,591		—		23,591
Total	$	3,893,877	$	18,746	$	3,912,623	$	3,557,294	$	12,617	$	3,569,911

(1) Loans owned through trust certificates are pledged as collateral. The trust certificates are eliminated upon consolidation.

(2) Cash posted as collateral is included in "Due from counterparties" in the Company’s Consolidated Balance Sheets.

(3) Assets pledge included $35 million of investment related receivable related to the unsettled sale of Non-Agency CMBS.

A reduction in the value of pledged assets typically results in the repurchase agreement counterparties initiating a margin call.  At September 30, 2018 and December 31, 2017, investments held by counterparties as security for repurchase agreements totaled approximately $3.9 billion and approximately $3.5 billion, respectively.  Cash collateral held by counterparties at September 30, 2018 and December 31, 2017 was approximately $18.6 million and approximately $23.6 million, respectively.  Cash posted by repurchase agreement counterparties at September 30, 2018 and December 31, 2017, was $700 thousand and approximately $1.5 million, respectively.  In addition, at September 30, 2018 and December 31, 2017, the Company held securities with a fair value of $168 thousand and $306 thousand, respectively, received as collateral from its repurchase agreement counterparties to satisfy margin requirements.  The Company has the ability to repledge collateral received from its repurchase counterparties.

Convertible Senior Unsecured Notes

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In October 2017, the Company issued $115.0 million aggregate principal amount of 6.75% convertible senior unsecured notes, which included the underwriter’s option to purchase $15.0 million aggregate principal amount of the notes for net proceeds of $111.1 million. The notes mature on October 1, 2022, unless earlier converted, redeemed or repurchased by the holders pursuant to their terms, and are not redeemable by the Company except during the final three months prior to maturity.

The notes are convertible into, at the Company's election, cash, shares of the Company's common stock or a combination of both, subject to the satisfaction of certain conditions and during specified periods. The conversion rate is subject to adjustment upon the occurrence of certain specified events and the holders may require the Company to repurchase all or any portion of their notes for cash equal to 100% of the principal amount of the notes, plus accrued and unpaid interest, if the Company undergoes a fundamental change as specified in the agreement. The initial conversion rate was 83.1947 shares of common stock per $1,000 principal amount of notes and represented a conversion price of $12.02 per share of common stock.

Securitized Debt

CMSC Trust 2015 - Longhouse MZ

CMSC Trust issued $25.0 million in commercial pass-through certificates. The outstanding balance of the trust certificates was $24.6 million at September 30, 2018, with a fair value of $24.6 million. The trust certificates bear a fixed interest rate of 8.9% and mature on July 6, 2020. The Company owns $13.8 million of the trust certificates which was eliminated in consolidation and the remaining $10.8 million is held by related parties and is carried at a fair value of $10.8 million.

RETL 2018-RVP

The following table summarizes RETL Trust's commercial mortgage pass-through certificates at September 30, 2018 (dollars in thousands):

Classes	Principal Balance		Coupon	Fair Value		Contractual Maturity
Class A	$	448,033	3.3%	$	449,570	2/15/2021
Class B	136,120		3.9%	136,800		2/15/2021
Class C	117,908		4.2%	118,718		2/15/2021
Class D	104,228		4.9%	105,141		2/15/2021
Class E	141,507		6.7%	143,456		2/15/2021
Class F	137,060		8.2%	138,948		2/15/2021
Class G	11,457		9.7%	11,592		2/15/2021
Class HRR	57,971		11.7%	58,156		2/15/2021
Class X-CP(1)	N/A		2.6%	1,420		3/11/2019
Class X-EXT(1)	N/A		—%	2,606		2/15/2021
	$	1,154,284		$	1,166,407

(1) Class X-CP and Class X-EXT are interest-only classes with a notional balance of $104.2 million each.

The Company owns the HRR certificates which are eliminated in consolidation. Of the remaining outstanding principal balance of $1.1 billion, excluding the interest-only securities, of trust certificates, $298.5 million is owned by related parties and $797.9 million owned by third parties. The securitized debt of the RETL Trust can only be settled with the commercial loan that serves as collateral for the securitized debt and is non-recourse to the Company.

Note 8 — Derivative Instruments

The Company’s derivatives may include interest rate swaps, options, futures contracts, TBAs, Agency and Non-Agency Interest-Only Strips that are classified as derivatives, credit default swaps and total return swaps.

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The following table summarizes the Company’s derivative instruments at September 30, 2018 and December 31, 2017 (dollars in thousands):

			September 30, 2018					December 31, 2017
Derivative Instrument	Accounting Designation	Consolidated Balance Sheets Location	Notional Amount		Fair Value			Notional Amount		Fair Value
Interest rate swaps, asset	Non-Hedge	Derivative assets, at fair value	$	572,400	$	200		$	—	$	—
Options, asset	Non-Hedge	Derivative assets, at fair value	100,000		109			320,000		100
Futures contracts, asset	Non-Hedge	Derivative assets, at fair value	280,000		1,703			480,000		628
TBA securities, asset	Non-Hedge	Derivative assets, at fair value	600,000		688			—		—
Total derivative instruments, assets					2,700					728
Interest rate swaps, liability	Non-Hedge	Derivative liability, at fair value	3,739,400		(1,414		)	3,252,200		(4,191		)
Options, liability	Non-Hedge	Derivative liability, at fair value	—		—			320,000		(50		)
Credit default swaps, liability	Non-Hedge	Derivative liability, at fair value	64,747		(362		)	14,815		(95		)
TBA securities, liability	Non-Hedge	Derivative liability, at fair value	200,000		(383		)	125,000		(10		)
Total derivative instruments, liabilities					(2,159		)			(4,346		)
Total derivative instruments, net					$	541				$	(3,618	)

The following tables summarize the effects of the Company’s derivative positions, including Interest-Only Strips characterized as derivatives and TBAs, which are reported in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

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	Realized Gain (Loss), net
Description	Other Settlements / Expirations			Variation Margin Settlement		Return (Recovery) of Basis			Mark-to-Market			Contractual interest income (expense), net(1)			Total
Three months ended September 30, 2018
Interest rate swaps	$	95		$	25,250	$	772		$	(3,742	)	$	1,190		$	23,565
Interest-Only Strips— accounted for as derivatives	—			—		(996		)	(929		)	1,209			(716		)
Options	—			—		—			(253		)	—			(253		)
Futures contracts	4,232			—		—			(1,994		)	—			2,238
Credit default swaps	(83		)	—		—			(492		)	—			(575		)
TBAs	(8		)	—		—			374			—			366
Total	$	4,236		$	25,250	$	(224	)	$	(7,036	)	$	2,399		$	24,625
Three months ended September 30, 2017
Interest rate swaps	$	(38	)	$	9,564	$	92		$	(2,028	)	$	(1,764	)	$	5,826
Interest-Only Strips— accounted for as derivatives	—			—		(1,486		)	351			1,816			681
Options	(957		)	—		—			477			—			(480		)
Futures contracts	(77		)	—		—			—			—			(77		)
Foreign currency forwards	45			—		—			(15		)	—			30
Total return swaps	(52		)	—		—			329			95			372
TBAs	577			—		—			288			—			865
Total	$	(502	)	$	9,564	$	(1,394	)	$	(598	)	$	147		$	7,217

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	Realized Gain (Loss), net
Description	Other Settlements / Expirations			Variation Margin Settlement			Return (Recovery) of Basis			Mark-to-Market			Contractual interest income  (expense), net			Total
Nine months ended September 30, 2018
Interest rate swaps	$	114		$	123,114		$	1,064		$	(1,497	)	$	886		$	123,681
Interest-Only Strips— accounted for as derivatives	—			—			(2,970		)	(959		)	3,642			(287		)
Options	(518		)	—			—			47			—			(471		)
Futures contracts	8,824			—			—			1,075			—			9,899
Credit default swaps	(125		)	—			—			(441		)	—			(566		)
TBAs	126			—			—			315			—			441
Total	$	8,421		$	123,114		$	(1,906	)	$	(1,460	)	$	4,528		$	132,697
Nine months ended September 30, 2017
Interest rate swaps	$	(150,593	)	$	(7,966	)	$	378		$	156,102		$	(12,662	)	$	(14,741	)
Interest rate swaptions	(115		)	—			—			—			—			(115		)
Interest-Only Strips— accounted for as derivatives	526			—			(5,055		)	(783		)	6,229			917
Options	(892		)	—			—			(134		)	—			(1,026		)
Futures contracts	(9,230		)	—			—			2,416			—			(6,814		)
Foreign currency forwards	25			—			—			43			—			68
Total return swaps	(552		)	—			—			1,673			469			1,590
TBAs	3,148			—			—			938			—			4,086
Total	$	(157,683	)	$	(7,966	)	$	(4,677	)	$	160,255		$	(5,964	)	$	(16,035	)

At September 30, 2018 and December 31, 2017, the Company had cash pledged as collateral for derivatives which represents upfront cash collateral upon the Company entering into the derivative transaction and cash collateral for derivatives not cleared through the Chicago Mercantile Exchange ("CME"), of approximately $62.9 million and approximately $63.3 million, respectively, which is reported in "Due from counterparties" in the Consolidated Balance Sheets. The Company also held cash collateral against derivatives of $368 thousand and $0 at September 30, 2018 and December 31, 2017, respectively, which is reported in "Due to counterparties" in the Consolidated Balance Sheets.

Interest rate swaps and interest rate swaptions

The Company enters into interest rate swaps and interest rate swaptions to mitigate its exposure to higher short-term interest rates in connection with its repurchase agreements.  Interest rate swaps generally involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount.  Notwithstanding the foregoing, in order to manage its hedge position with regard to its liabilities, the Company on occasion will enter into interest rate swaps which involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. The Company also enters into forward starting swaps and interest rate swaptions to help mitigate the effects of changes in interest rates on a portion of its borrowings under repurchase agreements. Interest rate swaptions provide the Company the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future.  The Company generally enters into MAC (Market Agreed Coupon) interest rate swaps in which it may receive or make a payment at the time of entering such interest rate swap to compensate for

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the out of the market nature of such interest rate swap.  Similar to all other interest rate swaps, these interest rate swaps are also subject to margin requirements as previously described.

The Company has not elected to account for its interest rate swaps as “hedges” under GAAP, accordingly the change in fair value of the interest rate swaps not designated in hedging relationships are recorded together with periodic net interest settlement amounts in "Gain (loss) on derivatives instruments, net" in the Consolidated Statements of Operations.

Interest Rate Swaps

The following tables provide additional information on our fixed pay interest rate swaps and the variable pay interest rate swap as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
Fixed Pay Interest Rate Swap Remaining Term	Notional Amount		Average Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)	Forward Starting (1)
1 year or less	$	400,000	1.5	%	2.3	%	0.8	—	%
Greater than 1 year and less than 3 years	200,000		1.8	%	2.3	%	1.7	—	%
Greater than 3 years and less than 5 years	1,164,700		2.4	%	2.3	%	4.1	—	%
Greater than 5 years	2,064,700		2.7	%	2.3	%	10.2	29.0	%
Total	$	3,829,400	2.4	%	2.3	%	6.9	15.6	%

	September 30, 2018
Variable Pay Interest Rate Swap Remaining Term	Notional Amount		Average  Variable Pay Rate		Average Fixed Receive Rate		Average Maturity (Years)	Forward Starting (1)
Greater than 5 years	$	482,400	2.3	%	2.4	%	8.6	—	%
Total	$	482,400	2.3	%	2.4	%	8.6	—	%

	December 31, 2017
Fixed Pay Interest Rate Swap Remaining Term	Notional Amount		Average Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)	Forward Starting (1)
Greater than 1 year and less than 3 years	$	600,000	1.6	%	1.5	%	1.8	—	%
Greater than 3 years and less than 5 years	960,000		2.0	%	1.4	%	4.3	—	%
Greater than 5 years	1,692,200		2.5	%	1.4	%	10.5	90.2	%
Total	$	3,252,200	2.2	%	1.4	%	7.1	46.9	%

(1) Represents the percentage of notional that is forward starting.

The Company had no variable pay interest rate swap as of December 31, 2017.

As of September 30, 2018 and December 31, 2017, the Company has entered into fixed-pay forward starting interest rate swaps of approximately $599.3 million and $1.5 billion, respectively, which have weighted average forward starting dates of 2.6 months and 4.0 months, respectively.

Options

The Company may enter into options on U.S. Treasuries and Eurodollar instruments. As of September 30, 2018, the Company had long position options on U.S. Treasuries with a notional amount of $100.0 million and a fair value in an asset position of $109 thousand. As of December 31, 2017, the Company had long position options on U.S. Treasuries with a notional amount of $320.0 million and a fair value in an asset position of $100 thousand and short position options on U.S. Treasuries with a notional amount of $320.0 million and a fair value in a liability position of $50 thousand.

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Futures Contracts

The Company may enter into Eurodollar, Volatility Index, and U.S. Treasury futures. As of September 30, 2018, the Company entered into contracts to sell or short positions for U.S. Treasuries with a notional amount of $280.0 million, a fair value in an asset position of $1.7 million and an expiration date of December 2018. As of December 31, 2017, the Company had entered into contracts to buy or long positions for U.S. Treasuries with a notional amount of $480.0 million, a fair value in an asset position of $628 thousand and an expiration date of March 2018. 

To-Be-Announced Securities

The Company purchased or sold TBAs during the nine months ended September 30, 2018 and the year ended December 31, 2017. The following is a summary of the Company's long and short TBA positions as of September 30, 2018 and December 31, 2017 reported in "Derivative assets, at fair value" and "Derivative liability, at fair value" in the Consolidated Balance Sheets (dollars in thousands):

	September 30, 2018						December 31, 2017
	Notional Amount			Fair Value			Notional Amount		Fair Value
Purchase contracts, asset	$	400,000		$	641		$	—	$	—
Sale contracts, asset	(200,000		)	47			—		—
TBA securities, asset	200,000			688			—		—
Purchase contracts, liability	—			—			125,000		(10		)
Sale contracts, liability	(200,000		)	(383		)	—		—
TBA securities, liability	(200,000		)	(383		)	125,000		(10		)
TBA securities, net	$	—		$	305		$	125,000	$	(10	)

The following tables present additional information about the Company’s contracts to purchase and sell TBAs for the nine months ended September 30, 2018 and the year ended December 31, 2017 (dollars in thousands):

	Notional Amount		Additions		Settlement, Termination, Expiration or Exercise			Notional Amount
	December 31, 2017							September 30, 2018
Purchase of TBAs	$	125,000	$	5,525,000	$	(5,250,000	)	$	400,000
Sale of TBAs	$	—	$	5,650,000	$	(5,250,000	)	$	400,000
	Notional Amount		Additions		Settlement, Termination, Expiration or Exercise			Notional Amount
	December 31, 2016							December 31, 2017
Purchase of TBAs	$	—	$	5,843,200	$	(5,718,200	)	$	125,000
Sale of TBAs	$	—	$	5,718,200	$	(5,718,200	)	$	—

Interest-Only Strips

The Company also invests in Interest-Only Strips. In determining the classification of its holdings of Interest-Only Strips, the Company evaluates the securities to determine if the nature of the cash flows has been altered from that of the underlying mortgage collateral. Generally, Interest-Only Strips for which the security represents a strip off of a mortgage pass through security will be considered a hybrid instrument classified as a MBS investment in the Consolidated Balance Sheets utilizing the fair value option. Alternatively, those Interest-Only Strips, for which the underlying mortgage collateral has been included into a structured security that alters the cash flows from the underlying mortgage collateral, are accounted for as derivatives at fair value with changes recognized in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations, along with any

40

interest received.  The carrying value of these Interest-Only Strips is included in "Agency mortgage-backed securities, at fair value" in the Consolidated Balance Sheets.

Credit Default Swaps

As of September 30, 2018, the Company had entered into credit default swaps with a notional amount of $64.7 million and a fair value in net liability position of $362 thousand. As of December 31, 2017, the Company had entered into credit default swaps with a notional amount of $14.8 million and a fair value in a liability position of $95 thousand. Under these instruments, the Company makes a monthly premium payment over the term of the contract in exchange for the counterparty making a payment to the Company for losses of the reference securities, upon the occurrence of a specified credit event.

Note 9 — Offsetting Assets and Liabilities

The following tables present information about certain assets and liabilities that are subject to master netting agreements (or similar agreements) and can potentially be offset in the Company’s Consolidated Balance Sheets at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Gross  Amounts		Gross  Amounts  Offset in the Consolidated Balance  Sheets		Net Amounts of Assets  presented in  the Consolidated Balance  Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
Description							Financial  Instruments(1)			Cash  Collateral (1)
Derivative Assets
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS	$	12,247	$	—	$	12,247	$	(10,369	)	$	—		$	1,878
Derivative asset, at fair value(2)	2,700		—		2,700		(575		)	(368		)	1,757
Total derivative assets	$	14,947	$	—	$	14,947	$	(10,944	)	$	(368	)	$	3,635
Derivative Liabilities and Repurchase Agreements
Derivative liability, at fair value(2)(3)	$	2,159	$	—	$	2,159	$	(575	)	$	(1,576	)	$	8
Repurchase Agreements(4)	3,469,319		—		3,469,319		(3,469,319		)	—			—
Total derivative liability	$	3,471,478	$	—	$	3,471,478	$	(3,469,894	)	$	(1,576	)	$	8

(1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral column of the tables above represents amounts pledged or received as collateral against derivative transactions.

(2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, foreign currency swaps and TBAs.

(3) Cash collateral pledged against the Company’s derivative counterparties was approximately $62.9 million as of September 30, 2018.

(4) The carrying value of investments pledged against the Company’s repurchase agreements was approximately $3.9 billion as of September 30, 2018.

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	December 31, 2017
	Gross  Amounts		Gross  Amounts  Offset in the Consolidated Balance  Sheets		Net Amounts of Assets  presented in  the Consolidated Balance  Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial  Instruments(1)			Cash  Collateral (1)
Derivative Assets
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS	$	16,176	$	—	$	16,176	$	(11,633	)	$	—		$	4,543
Derivative asset, at fair value(2)	728		—		728		(50		)	—			678
Total derivative assets	$	16,904	$	—	$	16,904	$	(11,683	)	$	—		$	5,221
Derivative Liabilities and Repurchase Agreements
Derivative liability, at fair value(2)(3)	$	4,346	$	—	$	4,346	$	(50	)	$	(4,270	)	$	26
Repurchase Agreements(4)	3,251,686		—		3,251,686		(3,251,686		)	—			—
Total derivative liability	$	3,256,032	$	—	$	3,256,032	$	(3,251,736	)	$	(4,270	)	$	26

(1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral Pledged column of the tables above represents amounts pledged as collateral against derivative transactions.

(2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, total return swaps and TBAs.

(3) Cash collateral pledged against the Company’s derivative counterparties was approximately $63.3 million as of December 31, 2017.

(4) The carrying value of investments pledged against the Company’s repurchase agreements was approximately $3.5 billion as of December 31, 2017.

Certain of the Company’s repurchase agreement and derivative transactions are governed by underlying agreements that generally provide for a right of set-off in the event of default or in the event of a bankruptcy of either party to the transaction.

Note 10 — Related Party Transactions

Management Agreement

In connection with the Company’s initial public offering ("IPO") in May 2012, the Company entered into a management agreement (the “Management Agreement”) with the Manager, which describes the services to be provided by the Manager and compensation for such services.  The Manager is responsible for managing the Company’s operations, including: (i) performing all of its day-to-day functions; (ii) determining investment criteria in conjunction with the Board of Directors; (iii) sourcing, analyzing and executing investments, asset sales and financings; (iv) performing asset management duties; and (v) performing financial and accounting management, subject to the direction and oversight of the Company’s Board of Directors. Pursuant to the terms of the Management Agreement, the Manager is paid a management fee equal to 1.50% per annum of the Company’s stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears. For purposes of calculating the management fee, “stockholders’ equity” means the sum of the net proceeds from any issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus retained earnings, calculated in accordance with GAAP, at the end of the most recently completed fiscal quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less any amount paid for repurchases of the Company’s shares of common stock, excluding any unrealized gains or losses on our investments and derivatives and other non-cash items (excluding OTTI ) that have impacted stockholders' equity as reported in the Company’s consolidated financial statements prepared in accordance with GAAP, regardless of whether such items are included in other comprehensive income or loss, or in net income, and excluding one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors. However, if the Company’s stockholders’ equity for any given quarter is negative based on the calculation described above, the Manager will not be entitled to receive any management fee for that quarter.

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In addition, the Company may be required to reimburse the Manager for certain expenses as described below, and shall reimburse the Manager for the compensation paid to the Company’s CFO, controller and their staff. Expense reimbursements to the Manager are made in cash on a regular basis. The Company’s reimbursement obligation is not subject to any dollar limitation. Because the Manager’s personnel perform certain legal, accounting, due diligence tasks and other services that outside professionals or outside consultants otherwise would perform, the Manager may be paid or reimbursed for the documented cost of performing such tasks, provided that such costs and reimbursements are in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.

The Management Agreement may be amended, supplemented or modified by agreement between the Company and the Manager. The Management Agreement expires on May 16, 2019.  It is automatically renewed for one-year terms on each May 15th unless previously terminated as described below. The Company’s independent directors review the Manager’s performance and any fees payable to the Manager annually and, the Management Agreement may be terminated annually upon the affirmative vote of at least two-thirds (2/3) of the Company’s independent directors, based upon: (i) the Manager’s unsatisfactory performance that is materially detrimental to the Company; or (ii) the Company’s determination that any fees payable to the Manager are not fair, subject to the Manager’s right to prevent such termination due to unfair fees by accepting a reduction of management fees agreed to by at least two-thirds (2/3) of the Company’s independent directors. The Company will provide the Manager 180 days prior notice of any such termination. Unless terminated for cause, the Company will pay the Manager a termination fee equal to three times the average annual management fee earned by the Manager during the prior 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination.

The Company may also terminate the Management Agreement at any time, without the payment of any termination fee, with 30 days prior written notice from the Company’s Board of Directors for cause, which will be determined by at least two-thirds (2/3) of the Company’s independent directors, which is defined as: (i) the Manager’s continued material breach of any provision of the Management Agreement (including the Manager’s failure to comply with the Company’s investment guidelines); (ii) the Manager’s fraud, misappropriation of funds, or embezzlement against the Company; (iii) the Manager’s gross negligence in the performance of its duties under the Management Agreement; (iv) the occurrence of certain events with respect to the bankruptcy or insolvency of the Manager, including an order for relief in an involuntary bankruptcy case or the Manager authorizing or filing a voluntary bankruptcy petition; (v) the Manager is convicted (including a plea of nolo contendere) of a felony; or (vi) the dissolution of the Manager.

In September 2018, the Company completed a secondary public offering in which it sold 6,500,000 share of its common stock for net proceeds of approximately $67.8 million after subtracting underwriting commissions and offering expenses. Refer to Note12- "Stockholders' Equity" for details on the secondary public offering Our Manager will not earn a management fee on the newly issued equity through March 31, 2019, to reduce any impact on earnings as the Company fully deploys the capital into its target assets.

For the three months ended September 30, 2018 and September 30, 2017, the Company incurred approximately $2.3 million and approximately $1.9 million in management fees, respectively. For the nine months ended September 30, 2018 and September 30, 2017, the Company incurred approximately $6.7 million and approximately $6.2 million in management fees, respectively.

In addition to the management fee, the Company is also responsible for reimbursing the Manager for certain expenses paid by the Manager on behalf of the Company as defined in the Management Agreement.  For the three months ended September 30, 2018 and September 30, 2017, the Company recorded expenses included in general and administrative expenses totaling approximately $205 thousand and approximately $202 thousand, respectively, related to reimbursable employee costs. For the nine months ended September 30, 2018 and September 30, 2017, the Company recorded expenses included in general and administrative expenses totaling approximately $1.3 million and approximately $1.1 million, respectively, related to reimbursable employee costs. Any such expenses incurred by the Manager and reimbursed by the Company, including the employee compensation expense, are typically included in the Company’s general and administrative expenses in the Consolidated Statements of Operations.  At September 30, 2018 and December 31, 2017, approximately $2.3 million and approximately $1.9 million, respectively, for management fees incurred but not yet paid was included in "Payable to affiliate" in the Consolidated Balance Sheets.  In addition, at September 30, 2018 and December 31, 2017, approximately $205 thousand and approximately $99 thousand, respectively, of reimbursable costs incurred but not yet paid was included in "Payable to affiliate" in the Consolidated Balance Sheets. 

Note 11 — Share-Based Payments

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In conjunction with the Company’s IPO and concurrent private placement, the Company’s Board of Directors approved the Western Asset Mortgage Capital Corporation Equity Plan (the “Equity Plan”) and the Western Asset Manager Equity Plan (the “Manager Equity Plan” and collectively the “Equity Incentive Plans”). The Equity Incentive Plans include provisions for grants of restricted common stock and other equity-based awards to the Manager, its employees and employees of its affiliates and to the Company’s directors, officers and employees. The Company can issue up to 3.0% of the total number of issued and outstanding shares of its common stock (on a fully diluted basis) at the time of each award (other than any shares previously issued or subject to awards made pursuant to one of the Company’s Equity Incentive Plans) under these Equity Incentive Plans. Upon the completion of the September 2018 secondary public offering, the number of shares of common stock available under the Equity Incentive Plans increased to 1,423,609. Approximately 753,205 shares have been issued under the Equity Plans with 670,404 shares available for issuance, as of September 30, 2018.

Under the Equity Plan, the Company made the following grants during the nine months ended September 30, 2018 and the year ended December 31, 2017:

On June 1, 2017, the Company granted a total of 15,536 shares (3,884 each) of restricted common stock under the Equity Plan to the Company’s four independent directors. These restricted shares vested in full on June 1, 2018, the first anniversary of the grant date. Each of the independent directors has elected to defer the shares granted to him under the Company’s Director Deferred Fee Plan (the “Director Deferred Fee Plan”). The Director Deferred Fee Plan permits eligible members of the Company's board of directors to defer certain stock awards made under its director compensation programs. The Director Deferred Fee Plan allows directors to defer issuance of their stock awards and therefore defer payment of any tax liability until the deferral is terminated, pursuant to the election form executed each year by each eligible director.

On June 7, 2018, the Company granted a total of 25,904 shares (6,476 each) of restricted common stock under the Equity Plan to the Company’s four independent directors. These restricted shares will vest in full on June 1, 2019, the first anniversary of the grant date. Each of the independent directors has elected to defer the shares granted to him under the Company’s Director Deferred Fee Plan (the “Director Deferred Fee Plan”). The Director Deferred Fee Plan permits eligible members of the Company's board of directors to defer certain stock awards made under its director compensation programs. The Director Deferred Fee Plan allows directors to defer issuance of their stock awards and therefore defer payment of any tax liability until the deferral is terminated, pursuant to the election form executed each year by each eligible director.

During the nine months ended September 30, 2018 and September 30, 2017, 84,203 and 152,630 restricted common shares vested, respectively, including shares whose issuance has been deferred under the Director Deferred Fee Plan. The Company recognized stock-based compensation expense of approximately $70 thousand and approximately $218 thousand for the three months ended September 30, 2018 and September 30, 2017, respectively. The Company recognized stock-based compensation expense of approximately $195 thousand and approximately $795 thousand for the nine months ended September 30, 2018 and September 30, 2017, respectively. In addition, the Company had unamortized compensation expense of $187 thousand for equity awards and $0 for liability awards and $66 thousand for equity awards and approximately $111 thousand for liability awards at September 30, 2018 and December 31, 2017, respectively.

All restricted common shares granted, other than those whose issuance has been deferred pursuant to the Director Deferred Fee Plan, possess all incidents of ownership, including the right to receive dividends and distributions currently, and the right to vote.  Dividend equivalent payments otherwise allocable to restricted common shares under the Company's Deferred Compensation Plan are deemed to purchase additional phantom shares of the Company’s common stock that are credited to each participant’s deferral account.  The award agreements include restrictions whereby the restricted shares cannot be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of prior to the lapse of restrictions under the respective award agreement. The restrictions lapse on the unvested restricted shares awarded when vested, subject to the grantee’s continuing to provide services to the Company as of the vesting date.  Unvested restricted shares and rights to dividends thereon are forfeited upon termination of the grantee.

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The following is a summary of restricted common stock vesting dates as of September 30, 2018 and December 31, 2017, including shares whose issuance has been deferred under the Director Deferred Fee Plan: 

	September 30, 2018	December 31, 2017
Vesting Date	Shares Vesting	Shares Vesting
March 2018	—	66,667
June 2018	—	16,488
June 2019	26,708	—
	26,708	83,155

The following table presents information with respect to the Company’s restricted stock for the nine months ended September 30, 2018, including shares whose issuance has been deferred under the Director Deferred Fee Plan:

	Shares of  Restricted Stock	Weighted Average  Grant Date Fair  Value (1)
Outstanding at beginning of period	725,449	$	17.00
Granted (2)	27,756	10.78
Cancelled/forfeited	—	—
Outstanding at end of period	753,205	$	16.77
Unvested at end of period	26,708	$	10.81

(1) The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date.

(2) Includes 1,852 shares of restricted stock attributed to dividends on restricted stock under the Director Deferred Fee Plan.

Note 12 — Stockholders’ Equity

Warrants

On May 9, 2012, the Company entered into agreements with certain institutional investors to sell 2,231,787 warrant units. Each warrant unit consists of one share of the Company’s common stock and a warrant to purchase 0.5 of a share of the Company’s common stock, subject to adjustment. As of September 30, 2018, the adjusted exercise price of the warrants was $15.87 per share and there were a total of 1,232,916 warrant shares purchasable. The warrants expire on May 15, 2019.

At-The-Market Program

In April 2017, the Company entered into an equity distribution agreement with JMP Securities LLC under which the Company may offer and sell up to $100.0 million shares of common stock in an At-The-Market equity offering. The Company has not sold any shares under this agreement.

Secondary Public Offering

In September 2018, the Company completed a secondary public offering in which it sold 6,500,000 of its common stock, including 303,422 shares of treasury stock, at a price of $10.85 per share, for net proceeds of approximately $67.8 million after subtracting underwriting commissions and offering expenses of approximately $2.7 million. The Company used the net proceeds from the offering to opportunistically invest in its target assets in accordance with its investment guidelines.

Stock Repurchase Program

On December 21, 2017, the Board of Directors of the Company reauthorized its repurchase program of up to 2,100,000 shares of its common stock through December 31, 2019. The previous reauthorization announced on February 25, 2016 of the Company's repurchase program of up to 2,050,000 shares of its common stock expired on December 31, 2017.  Purchases made pursuant to the program will be made in the open market, in privately negotiated transactions, or pursuant to any trading plan that

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may be adopted in accordance with Rules 10b5-1 and 10b-18 of the Securities and Exchange Act of 1934, as amended. The authorization does not obligate the Company to acquire any particular amount of common shares and the program may be suspended or discontinued at the Company’s discretion without prior notice. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors.  As of September 30, 2018, the Company has repurchased 303,422 shares of common stock accounted for as treasury stock pursuant to the authorization. In September 2018, the Company re-issued all 303,422 shares in treasury stock as part of its secondary public offering.

Dividends

The following table presents cash dividends declared and paid by the Company on its common stock:

Declaration Date	Record Date	Payment Date	Amount per Share		Tax Characterization
2018
September 17, 2018	September 27, 2018	October 26, 2018	$	0.31	Not yet determined
June 21, 2018	July 2, 2018	July 26, 2018	$	0.31	Not yet determined
March 22, 2018	April 2, 2018	April 26, 2018	$	0.31	Not yet determined
2017
December 21, 2017	January 2, 2018	January 26, 2018	$	0.31	Return of capital
September 21, 2017	October 2, 2017	October 26, 2017	$	0.31	Return of capital
June 20, 2017	June 30, 2017	July 26, 2017	$	0.31	Return of capital
March 23, 2017	April 3, 2017	April 26, 2017	$	0.31	Ordinary income

Note 13 — Net Income per Common Share

The table below presents basic and diluted net income per share of common stock using the two-class method for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars, other than shares and per share amounts, in thousands):

	For the three months ended September 30, 2018		For the three months ended September 30, 2017		Nine months ended September 30, 2018		Nine months ended September 30, 2017
Numerator:
Net income attributable to common stockholders and participating securities for basic and diluted earnings per share	$	20,882	$	22,767	$	44,064	$	63,693
Less:
Dividends and undistributed earnings allocated to participating securities	54		75		112		238
Net income allocable to common stockholders — basic and diluted	$	20,828	$	22,692	$	43,952	$	63,455
Denominator:
Weighted average common shares outstanding for basic earnings per share	42,060,077		41,853,134		41,802,302		41,824,318
Weighted average common shares outstanding for diluted earnings per share	42,060,077		41,853,134		41,802,302		41,824,318
Basic earnings per common share	$	0.50	$	0.54	$	1.05	$	1.52
Diluted earnings per common share	$	0.50	$	0.54	$	1.05	$	1.52

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For the three and nine months ended September 30, 2018 and September 30, 2017, the Company excluded the effects of the warrants and the convertible senior unsecured notes from the computation of diluted earnings per share since the average market value per share of the Company’s common stock was below the exercise price of the warrants and the convertible senior unsecured notes.

Note 14 — Income Taxes

As a REIT, the Company is not subject to federal income tax to the extent that it makes qualifying distributions to its stockholders and satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income and stock ownership tests.

Based on the Company’s analysis of any potential uncertain income tax positions, the Company concluded that it does not have any uncertain tax positions that meet the recognition or measurement criteria as of September 30, 2018.  The Company files U.S. federal and state income tax returns.  As of September 30, 2018, U.S. federal tax returns filed by the Company for 2016 and 2015 and state tax returns filed for 2016, 2015, 2014 and 2013 are open for examination pursuant to relevant statutes of limitation. In the event that the Company incurs income tax related interest and penalties, the Company’s policy is to classify them as a component of its provision for income taxes.

Income Tax Provision

Subject to the limitation under the REIT asset test rules, the Company is permitted to own up to 100% of the stock of one or more taxable REIT subsidiaries ("TRS"). Currently, the Company owns one TRS that is taxable as a corporation and is subject to federal, state and local income tax on its net income at the applicable corporate rates. The TRS, which was formed in Delaware on July 28, 2014, is a limited liability company and a wholly-owned subsidiary of the Company. During the three months ended September 30, 2018 and September 30, 2017, the Company recorded a federal and state tax provision of approximately $206 thousand and tax benefit of $1.2 million, respectively, which is recorded in "Income tax provision (benefit)" in the Consolidated Statements of Operations. During the nine months ended September 30, 2018 and September 30, 2017, the Company recorded a federal and state tax provision of approximately $555 thousand and $1.3 million, respectively, which is recorded in "Income tax provision (benefit)" in the Consolidated Statements of Operations.

Deferred Tax Asset

As of September 30, 2018 and December 31, 2017, the Company recorded a deferred tax asset of approximately $3.1 million and $6.1 million relating to capital loss carryforward and temporary differences as a result of the timing of income recognition of certain investments held in the TRS. The capital loss carryforwards may only be recognized to the extent of capital gains. There is uncertainty as to the TRS ability to recognize capital gains in the future. As a result, the Company has concluded it is more likely than not the deferred tax asset will not be realized and has recorded a valuation allowance of $3.1 million and $6.1 million.

In addition, the REIT generated net operating losses ("NOLs") during the year ended December 31, 2017, related to its interest rate swap terminations, and for its California return a portion of the NOL's is apportioned to the TRS. The TRS can carryback these NOLs to each of the two preceding years and receive a refund for taxes paid. The Company recorded a deferred state tax asset relating to the NOLs of $7.6 million and $8.8 million in the REIT and $1.4 million and $765 thousand in the TRS as of September 30, 2018 and December 31, 2017, respectively. As a result, the Company has concluded it is more likely than not the deferred tax asset relating to the NOLs will not be realized with the exception of the TRS carryback to 2015 and has recorded a combined valuation allowance of $8.5 million and $9.2 million as of September 30, 2018 and December 31, 2017, respectively. The Company also recorded a deferred federal tax liability of $85 thousand and $85 thousand as of September 30, 2018 and December 31, 2017, respectively, in anticipation of the receipt of the state tax refund as a result of the carryback of the California NOL.

Effective Tax Rate

The Company's effective tax rate differs from its combined federal and state income tax rate primarily due to its valuation allowance and the deduction of dividends distributions to be paid under Code Section 857(a).

Tax Cuts and Jobs Act

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On December 22, 2017, the President of the United States signed and enacted comprehensive tax legislation into law H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the corporate income tax rate from 35% to 21%. Shortly after the enactment of the Tax Act, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows a Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The ultimate impact of the Tax Act may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Act.

Note 15 — Contingencies

From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any material contingencies at September 30, 2018.

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ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING INFORMATION

The Company makes forward-looking statements herein and will make forward-looking statements in future filings with the Securities and Exchange Commission (the “SEC”), press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  For these statements, the Company claims the protections of the safe harbor for forward-looking statements contained in such sections.  Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control.  These forward-looking statements include information about possible or assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans and objectives.  When the Company uses the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, the Company intends to identify forward-looking statements.  Statements regarding the following subjects, among others, may be forward-looking: market trends in the Company’s industry, interest rates, real estate values, the debt securities markets, the U.S. housing and the U.S. and foreign commercial real estate markets or the general economy or the market for residential and/or commercial mortgage loans; the Company’s business and investment strategy; the Company’s projected operating results; actions and initiatives of the U.S. Government and changes to U.S. Government policies and the execution and impact of these actions, initiatives and policies; the state of the U.S. and to a lesser extent, international economy generally or in specific geographic regions; economic trends and economic recoveries; the Company’s ability to obtain and maintain financing arrangements, including under the Company's repurchase agreements, a form of secured financing, and securitizations; the current potential return dynamics available in residential mortgage-backed securities (“RMBS”), and commercial mortgage-backed securities (“CMBS” and collectively with RMBS, “MBS”); the level of government involvement in the U.S. mortgage market; the anticipated default rates on Non-Agency MBS (as defined herein), Residential and Commercial Whole-Loans and Residential Bridge Loans; the loss severity on Non-Agency MBS; the return of the Non-Agency RMBS, Non-Agency CMBS and asset-backed securities (“ABS”) securitization markets; the general volatility of the securities markets in which the Company participates; changes in the value of the Company’s assets; the Company’s expected portfolio of assets; the Company’s expected investment and underwriting process; interest rate mismatches between the Company’s target assets and any borrowings used to fund such assets; changes in interest rates and the market value of the Company’s target assets; changes in prepayment rates on the Company’s target assets; effects of hedging instruments on the Company’s target assets; rates of default or decreased recovery rates on the Company’s target assets; the degree to which the Company’s hedging strategies may or may not protect the Company from interest rate volatility; the impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; the Company’s ability to maintain the Company’s qualification as a real estate investment trust for U.S. federal income tax purposes; the Company’s ability to maintain its exemption from registration under the Investment Company Act of 1940, as amended (the “1940 Act”); the availability of opportunities to acquire Agency RMBS, Non-Agency RMBS, CMBS, Residential and Commercial Whole-Loans, Residential and Commercial Bridge Loans and other mortgage assets; the availability of qualified personnel; estimates relating to the Company’s ability to make distributions to its stockholders in the future; and the Company’s understanding of its competition.

The forward-looking statements are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it.  Forward-looking statements are not predictions of future events.  These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company.  Some of these factors, are described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 29, 2018. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that the Company files with the SEC, could cause its actual results to differ materially from those included in any forward-looking statements the Company makes.  All forward-looking statements speak only as of the date they are made.  New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect the Company.  Except as required by law, the Company is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Overview

Western Asset Mortgage Capital Corporation, a Delaware corporation, and its subsidiaries (the “Company” unless otherwise indicated or except where the context otherwise requires “we”, “us” or “our”) commenced operations in May 2012, focused on investing in, financing and managing a diversified portfolio of real estate related securities, whole-loans and other financial assets, which we collectively refer to as our target assets.  We are externally managed by Western Asset Management Company, LLC (our “Manager”) pursuant to the terms of a management agreement. We conduct our operations to qualify and be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes. Accordingly, we generally will not be subject to U.S. federal income taxes on our taxable income that we distribute currently to our stockholders as long as we maintain our intended qualification as a REIT. However, certain activities that we may perform may cause us to earn income which will not be qualifying income for REIT purposes. We have designated one subsidiary as a taxable REIT subsidiary, or TRS, to engage in such activities. We also intend to operate our business in a manner that permits us to maintain our exemption from registration under the Investment Company Act of 1940, as amended (the "1940 Act"). Our common stock is traded on the New York Stock Exchange, or the NYSE, under the symbol "WMC".

Our objective is to provide attractive risk adjusted returns to our stockholders primarily through an attractive dividend, supported with sustainable core earnings, as well as the potential for higher returns through capital appreciation. Our investment strategy is based on our Manager's perspective of which mix of our target assets it believes provides us with the best risk-reward opportunities at any given time.  We also deploy leverage as part of our investment strategy to increase potential returns. We primarily finance our investments through short-term repurchase agreements.

Factors Impacting Our Operating Results

Our business is affected by general U.S. residential and commercial real estate fundamentals and the overall U.S. and international economic environment. In particular, our strategy is influenced by the specific characteristics of these markets, including but not limited to interest rate levels and credit spreads.

Our operating results can be affected by a number of factors and primarily depend on, among other things, the size of our investment portfolio, our net interest income, changes in the market value of our investments, derivative instruments and to a lesser extent realized gains and losses on the sale of our investments and termination of our derivative instruments. Our overall performance is also impacted by the supply and demand for our target assets in the market, the terms and availability of financing for such assets, general economic conditions, the impact of U.S Government actions that affect the real estate and mortgage sectors, and the unanticipated credit events experienced by borrowers whose loans are included in our MBS, as well as our Residential Whole Loans, Residential Bridge Loan and Commercial Loan borrowers.

Our net interest income, which includes the amortization of purchase premiums and accretion of discounts, will vary primarily as a result of changes in interest rates, defaults and loss severity rates, borrowing costs, and prepayment speeds on our MBS and other Target Assets (as defined herein) investments.  Similarly, the overall value of our investment portfolio will be impacted by these factors as well as changes in the value of residential and commercial real estate and continuing regulatory changes.

See the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017, which is available on the SEC's website at www.sec.gov for additional factors that may impact our operating results.

Recent Market Conditions

Our Manager expects growth and inflation to improve from subdued levels, U.S. growth and inflation to be aided by fiscal stimulus, based in part on central banks signaling their path to normalization, and spread sectors to outperform in 2018 though margins are thin and emerging markets are expected to perform strongly. The first half of 2018 experienced volatility, with steadily increasing short-term interest rates. We saw wider credit spreads and spreads on Agency MBS widened. We were prepared for the move in interest rates by actively limiting our duration gap.  Our hedge portfolio helped to minimize the impact of the movement in interest rates on our book value and economic return.

In the third quarter 2018 interest continued to trend higher. The 10-year U.S. Treasury rate increased to 3.05% as of September 30, 2018, and the yield curve continued its flattening trend. Agency CMBS and credit spreads tightened during the

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second quarter . We earned a positive economic return for the third quarter of 3.1%, experiencing a modest increase in our book value of 0.3% as a result of the credit spread tightening in particular on our Agency CMBS portfolio.

As anticipated the Federal Reserve increased the federal funds rate by 25 basis points in September 2018, increasing the federal funds rate 75 basis points year to date as part of their continued progression towards a neutral monetary policy stance. The combination of higher interest rates coupled with higher costs associated with financing our credit sensitive investments, increased our average effective borrowing costs, excluding the consolidated VIEs, by 33 basis points, to 2.60% for the nine months ended September 30, 2018 from 2.27% as of December 31, 2017. Our average effective borrowing costs, includes the cost of our repurchase agreements and the net interest paid or received on our interest rate swap hedges.

With our current view that interest rates will continue to increase, we continue to operate with significant interest rate risk protection from our interest rate positions. This interest rate protection is intended to minimize the impact of the increase in long-term rates on our portfolio and mitigate interest rate risk to further rate increases. Our net "duration gap," which is a measure of the risk due to mismatches that can occur between the interest rate sensitivity of our assets and liabilities, inclusive of hedges, was negative .63 years as of September 30, 2018. The degree of interest rate protection and the duration gap will vary overtime given market conditions and our Manager's outlook.

We still believe the Agency RMBS sector is at risk for spread widening in the longer term. In response, During the quarter, we continued to reduce our Agency RMBS portfolio and redeploy the proceeds into credit sensitive investments such as Residential Whole Loans, Residential Bridge Loans and Non Agency CMBS.

Against this backdrop, the fundamentals in the U.S. housing market remain strong and spreads for most mortgages remained supported. Credit sensitive mortgage sectors have performed relatively well and are expected to continue to offer attractive returns.

Our Investment Strategy

Our Manager’s investment philosophy, which developed from a singular focus in fixed-income asset management over a variety of credit cycles and conditions, is to provide clients with a diversified, long-term value-oriented portfolio. We benefit from the breadth and depth of our Manager’s overall investment philosophy, which focuses on a macroeconomic analysis as well as an in-depth analysis of individual assets and their relative value. In making investment decisions on our behalf, our Manager seeks to identify assets across the broad mortgage universe with attractive risk adjusted returns, which incorporates its view on the outlook for the mortgage markets, including relative valuation, supply and demand trends, the level of interest rates, the shape of the yield curve, prepayment rates, financing and liquidity, commercial and residential real estate prices, delinquencies, default rates, recovery of various segments of the economy and vintage of collateral, subject to maintaining our REIT qualification and our exemption from registration under the 1940 Act.

Our Target Assets

Agency CMBS. — Fixed and floating rate CMBS, for which the principal and interest payments are guaranteed by a U.S. Government agency or U.S. Government-sponsored entity, but for which the underlying mortgage loans are secured by real property other than single family residences. These may include, but are not limited to Fannie Mae DUS (Delegated Underwriting and Servicing) MBS, Freddie Mac Multifamily Mortgage Participation Certificates, Ginnie Mae project loan pools, and/or CMOs structured from such collateral.

Agency RMBS. — Agency RMBS, which are RMBS for which the principal and interest payments are guaranteed by a U.S. Government agency, such as the Government National Mortgage Association (“GNMA” or “Ginnie Mae”), or a U.S. Government-sponsored entity ("GSE"), such as the Federal National Mortgage Association (“FNMA” or “Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”).  The Agency RMBS we acquire can be secured by fixed-rate mortgages, adjustable-rate mortgages or hybrid adjustable-rate mortgages. Fixed-rate mortgages have interest rates that are fixed for the term of the loan and do not adjust. The interest rates on adjustable-rate mortgages generally adjust annually (although some may adjust more frequently) to an increment over a specified interest rate index. Hybrid adjustable-rate mortgages have interest rates that are fixed for a specified period of time (typically three, five, seven or ten years) and, thereafter, adjust to an increment over a specified interest rate index. Adjustable-rate mortgages and hybrid adjustable-rate mortgages generally have

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periodic and lifetime constraints on the amount by which the loan interest rate can change on any predetermined interest rate reset date.

Non-Agency RMBS. — RMBS that are not guaranteed by a U.S. Government agency or U.S. Government-sponsored entity, with an emphasis on securities that when originally issued were rated in the highest rating category by one or more of the nationally recognized statistical rating organizations. The mortgage loan collateral for Non-Agency RMBS consists of residential mortgage loans that do not generally conform to underwriting guidelines issued by a U.S. Government agency or U.S. Government-sponsored entity due to certain factors, including mortgage balances in excess of Agency underwriting guidelines, borrower characteristics, loan characteristics and/or level of documentation, and therefore are not issued or guaranteed by a U.S. Government agency or U.S. Government-sponsored entity. The mortgage loan collateral may be classified as subprime, Alternative-A or prime depending on the borrower’s credit rating and the underlying level of documentation. Non-Agency RMBS collateral may also include reperforming loans, which are conventional mortgage loans that were current at the time of the securitization, but had been delinquent in the past. Non-Agency RMBS may be secured by fixed-rate mortgages, adjustable-rate mortgages or hybrid adjustable-rate mortgages.

Non-Agency CMBS. — Fixed and floating rate CMBS for which the principal and interest payments are not guaranteed by a U.S. Government agency or U.S. Government-sponsored entity.  We do not have an established minimum current rating requirement for such investments.

Non U.S. CMBS. — CMBS which is not guaranteed by a U.S. Government agency or U.S. Government-sponsored entity and which is secured by commercial real estate located outside of the U.S.  Although our Manager believes that these investments can provide attractive risk-reward opportunities and offer additional asset diversification, investing in international real estate has a number of additional risks, including but not limited to currency risk, political risk and the legal risk of investing in jurisdictions with varying laws and regulations and potential tax implications. 

GSE Risk Sharing Securities Issued by Fannie Mae and Freddie Mac. — From time to time we have and may in the future continue to invest in risk sharing securities issued by Fannie Mae and Freddie Mac.  Principal and interest payments on these securities are based on the performance of a specified pool of Agency residential mortgages. The payments due on these securities, however, are not secured by the referenced mortgages. The payments due are full faith and credit obligations of Fannie Mae or Freddie Mac respectively, but neither agency guarantees full payment of the underlying mortgages.  Investments in these securities generally are not qualifying assets for purposes of the 75% real estate asset test applicable to REITs and generally do not generate qualifying income for purposes of the 75% real estate income test applicable to REITs. As a result, we may be limited in our ability to invest in such assets.

TBAs. — We may utilize TBAs, in order to invest in Agency RMBS. Pursuant to these TBAs, we agree to purchase (or deliver), for future settlement, Agency RMBS with certain principal and interest terms and certain underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. Our ability to invest in Agency RMBS through TBAs may be limited by the 75% real estate income and asset tests applicable to REITs.

Mortgage pass-through certificates. — Mortgage pass-through certificates are securities representing interests in “pools” of mortgage loans secured by residential real property where payments of both interest and scheduled principal, plus pre-paid principal, on the underlying loan pools are made monthly to holders of the securities, in effect “passing through” monthly payments made by the individual borrowers on the mortgage loans that underlie the securities, net of fees paid to the issuer/guarantor of the securities and servicers of the underlying mortgages.

Interest-Only Strips or IOs. — This type of security entitles the holder only to payments of interest based on a notional principal balance. The yield to maturity of Interest-Only Strips is extremely sensitive to the rate of principal payments (particularly prepayments) on the underlying pool of mortgages. We invest in these types of securities primarily to take advantage of particularly attractive prepayment-related or structural opportunities in the MBS markets, as well as to help manage the duration of our overall portfolio.

Inverse Interest-Only Strips or IIOs. — This type of security has a coupon with an inverse relationship to its index and is subject to caps and floors. Inverse Interest-Only MBS entitles the holder to interest only payments based on a notional principal balance, which is typically equal to a fixed rate of interest on the notional principal balance less a floating rate of interest on the notional principal balance that adjusts according to an index subject to set minimum and maximum rates. The current yield of

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Inverse Interest-Only MBS will generally decrease when its related index rate increases and increase when its related index rate decreases.

Agency and Non-Agency CMBS IO and IIO Securities. — Interest-Only and Inverse Interest-Only securities for which the underlying collateral is commercial mortgages the principal and interest on which may or may not be guaranteed by a U.S Government agency or U.S. Government-sponsored entity.  Unlike single family residential mortgages in which the borrower, generally, can prepay at any time, commercial mortgages frequently limit the ability of the borrower to prepay, thereby providing a certain level of prepayment protection.  Common restrictions include yield maintenance and prepayment penalties, the proceeds of which are generally at least partially allocable to these securities, as well as, defeasance.

Principal-Only Strips or POs. — This type of security generally only entitles the holder to receive cash flows that are derived from principal repayments of an underlying loan pool, but in the case of Non-Agency Principal-Only Strips will also include cash flows from default recoveries and excess interest.  The yield to maturity of Principal-Only Strips is extremely sensitive to the rate of principal payments (particularly prepayments) on the underlying pool of mortgages. We invest in these types of securities primarily to take advantage of structural opportunities in the MBS markets.

Residential Whole-Loans. — Residential Whole-Loans are mortgages secured by single family residences held directly by us or through consolidated trusts with us holding the beneficial interest in the trusts. Our Residential Whole-Loans include conforming fixed rate mortgages and adjustable rate mortgages that do not qualify for the Consumer Finance Protection Bureau’s (or CFPB) safe harbor provision for “qualifying mortgages” ("Non QM" mortgages). Our Manager’s review, relating to Non QM mortgages, includes an analysis of the loan originator’s procedures and documentation for compliance with Ability to Repay requirements.  Our Residential Whole-Loans held in   We may in the future securitize the whole-loan interests, selling more senior interests in the pool of loans and retaining residual portions.  The characteristics of our Residential Whole-Loans may vary going forward.

Residential Bridge Loans. —Residential Bridge Loans are mortgages secured by non owner occupied single family and multi-family residences, typically short-term, held directly by us or through structured Non-Agency RMBS programs crafted specifically for us and other clients of our Manager.  These loans are held in a consolidated trust with us holding the beneficial interest in the trust. 

Commercial Whole-Loans. — Commercial Whole-Loans are generally loans ranging from, $20 million to $100.0 million, secured by commercial real estate typically short-term loans. The collateral types may include hospitality, senior care living facilities, multifamily, office retail and industrial properties. These loans may be held directly by us or through consolidated trusts with us holding the beneficial interest in the trust.

Commercial Mezzanine Loans. —Commercialmezzanine loans are generally structured to represent a senior position in the borrower’s equity in, and subordinate to a first mortgage loan, on a property. These loans are generally secured by pledges of ownership interests, in whole or in part, in entities that directly or indirectly own the real property. At times, mezzanine loans may be secured by additional collateral, including letters of credit, personal guarantees, or collateral unrelated to the property. Mezzanine loans may be structured to carry either fixed or floating interest rates as well as carry a right to participate in a percentage of gross revenues and a percentage of the increase in the fair market value of the property securing the loan. Mezzanine loans may also contain prepayment lockouts, penalties, minimum profit hurdles and other mechanisms to protect and enhance returns to the lender. Mezzanine loans usually have maturities that match the maturity of the related mortgage loan but may have shorter or longer terms.

Collateralized Mortgage Obligations or CMOs. — These are securities, which can be Agency or Non-Agency, that are structured from residential and/or commercial pass-through certificates, which receive monthly payments of principal and interest. CMOs divide the cash flows which come from the underlying mortgage pass-through certificates into different classes of securities that may have different maturities and different weighted average lives than the underlying pass-through certificates.

ABS. — Debt and/or equity tranches of securitizations backed by various asset classes including, but not limited to, aircrafts, automobiles, credit cards, equipment, franchises, recreational vehicles and student loans. Investments in ABS generally are not qualifying assets for purposes of the 75% real estate asset test applicable to REITs and generally do not generate qualifying income for purposes of the 75% real estate income test applicable to REITs. As a result, we may be limited in our ability to invest in such assets.

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Other investments. — In addition to MBS, our principal investment, and ABS from time to time, we may also make other investments in securities, which our Manager believes will assist us in meeting our investment objective and are consistent with our overall investment policies.  These investments will normally be limited by the REIT requirements that 75% our assets be real estate assets and that 75% of our income be generated from real estate, thereby limiting our ability to invest in such assets.

Our Investment Portfolio

Our investment portfolio composition at September 30, 2018.    

In November 2015, we acquired a $14.0 million Non-Agency CMBS security which resulted in the consolidation of a VIE and the initial recording of a $25.0 million securitized commercial loan and $11.0 million non-recourse securitized debt. In March 2018, we acquired a $67.8 million Non-Agency CMBS security which resulted in the consolidation of a VIE and the initial recording of a $1.3 billion securitized commercial loan and $1.3 billion non-recourse securitized debt. Refer to Note 6 - "Commercial Real Estate Investments" for details. The following table reflects the portfolio including the fair market value of the Non-Agency CMBS securities as of September 30, 2018 of $72.0 million and excludes the $1.2 billion of securitized commercial loans.

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Our Financing Strategy

 We deploy leverage to increase potential returns to our stockholders and to fund the acquisition of our target assets. While we are not required to maintain any particular leverage ratio, we expect to maintain a debt-to-equity ratio of three to ten times the amount of our stockholders’ equity, excluding securitized debt. To the extent the Agency MBS percentage of our portfolio decreases, our overall leverage is likely to decrease.  The amount of leverage we use for our portfolio depends upon a variety of factors, such as, general economic, political and financial market conditions, the anticipated liquidity and price volatility of our assets, the availability and cost of financing the assets, the credit worthiness of financing counterparties and the health of the U.S. residential and commercial mortgage markets. At September 30, 2018, our aggregate debt-to-equity ratio was approximately 6.7 to 1 when we exclude our securitized debt and 8.8 to 1 when we include our securitized debt. The debt-to-equity ratio is not a comprehensive statement of overall investment portfolio leverage which is affected by any leverage embedded in TBAs and derivative instruments.

Repurchase Agreements

We primarily finance our investments through repurchase agreements for which we pledge our assets. Our repurchase agreements have maturities generally ranging from one to six months, but in some cases longer. Repurchase agreements involve the transfer of the pledged collateral to a counterparty at an agreed upon price in exchange for such counterparty’s simultaneous agreement to return the same security back to the borrower at a future date (i.e., the maturity of the borrowing). Under our repurchase agreements, we retain beneficial ownership of the pledged collateral, while the counterparty maintains custody of such collateral.  At the maturity of a repurchase financing, unless the repurchase financing is renewed with the same counterparty, we are required to repay the loan, including any accrued interest, and concurrently reacquire custody of the pledged collateral or, with the consent of the counterparty, we may renew the repurchase financing at the then prevailing market interest rate and terms.  The amount borrowed under our repurchase agreements is a specified percentage of the asset’s applicable fair value, which is dependent on the collateral type.  Our repurchase agreement counterparties generally require collateral in excess of the loan amount, or haircuts. As of September 30, 2018, our haircuts range from a low of 3.0% to a high of 5.0% for Agency RMBS, exclusive of IOs and IIOs for which the haircuts are as high as 25.0% and Agency CMBS haircuts are 5.0%, exclusive of IOs and IIOs for which haircuts are as high as 15.0%. For Non-Agency RMBS haircuts range from a low of 15.0% to a high of 50.0% and for Non-Agency CMBS, haircuts range from a low of 15.0% to a high of 35.0%. Haircuts for Whole-Loans range from a low of 5.0% to a high of 45.0% and other securities range from a low of 25.0% to a high of 50.0%. 

A significant decrease in asset value, advance rate, or an increase in the haircut could result in us having to sell assets in order to meet additional margin calls by our repurchase agreement counterparties. Our inability to post adequate collateral for a margin call by the counterparty could result in a condition of default under our repurchase agreements. We expect to mitigate our

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risk to margin calls by deploying leverage at the portfolio level at amounts below our available financing under our repurchase agreements.

In order to reduce our exposure of risk associated with concentration to any one repurchase agreement counterparty, we seek to diversify our exposure by entering into repurchase agreements with multiple counterparties. At September 30, 2018, we had repurchase agreements with 28 counterparties and outstanding borrowings with 16 of such counterparties. Our total outstanding borrowings under our repurchase agreements was $3.5 billion, with a maximum net exposure to any single repurchase agreement counterparty of $88.6 million or 16.5% of equity.

Convertible Senior Unsecured Notes

In October 2017, we issued $115.0 million aggregate principal amount of 6.75% convertible senior unsecured notes, which included the underwriter’s option to purchase $15.0 million aggregate principal amount of the notes, for net proceeds to us of $111.1 million. The notes mature on October 1, 2022, unless earlier converted, redeemed or repurchased by the holders pursuant to their terms, and are not redeemable by us except during the final three months prior to maturity. We view this financing as an attractive source of longer-term capital, which we believe was more cost efficient than issuing straight equity. We have and will continue to deploy the proceeds from the offering of the notes to acquire our target assets.

Our Hedging Strategy

Our overall portfolio strategy is designed to generate attractive returns to our investors through various economic cycles. We believe our broad approach to investing in the real estate market, which considers all categories of real estate assets, allows us to invest in a diversified portfolio and help mitigate our portfolio from risks that arise from investing in a single or limited collateral type. In connection with our risk management activities, we enter into a variety of derivative and non-derivative instruments. Our primary objective for acquiring these derivatives and non-derivative instruments is to mitigate our exposure to future events that are outside our control. Our derivative instruments are designed to mitigate the effects market risk and cash flow volatility associated with interest rate risk, including associated prepayment risk. As part of our hedging strategy, we may enter into, but not limited to, interest rate swaps, including forward starting swaps, interest rate swaptions, U.S. Treasury options, future contracts, TBAs, total return swaps, credit default swaps and foreign current swaps and forwards.

Critical Accounting Policies

The consolidated financial statements include our accounts, those of our wholly-owned TRS and certain VIEs in which we are the primary beneficiary.  All intercompany amounts have been eliminated in consolidation.  In accordance with GAAP, our consolidated financial statements require the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties.  In accordance with SEC guidance, the following discussion addresses the accounting policies that we currently apply. Our most critical accounting policies will involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments upon which our consolidated financial statements have been based were reasonable at the time made and based upon information available to us at that time. For a review of recent accounting pronouncements that may impact our results of operations, see Note 2 of our “Notes to Consolidated Financial Statements (Unaudited)”.

There have been no significant changes to our critical accounting policies that are disclosed in our most recent Annual Report on Form 10-K for the year ended December 31, 2017, other than the critical accounting policies disclosed below.

Securitized Commercial Loans

Securitized commercial loans are comprised of commercial loans of consolidated variable interest entities which were sponsored by third parties. These loans are recorded in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs". We have chosen to make the fair value election pursuant to ASC 825. Accordingly, these loans are recorded at fair value with periodic changes in fair value being recorded in earnings as a component of "Unrealized gain (loss), net".

The securitized commercial loans are typically collateralized by commercial real estate. As a result, we regularly evaluate the extent and impact of any credit migration associated with the performance and or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. On a quarterly basis, we evaluate the

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collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, we do not record an allowance for loan loss as we have elected the fair value option.  However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed. Interest income accrual is resumed when the loan becomes contractually current and performance is demonstrated. A loan is written off when it is no longer realizable and/or legally discharged.

Commercial Loans

Investments in Commercial Loans, which are comprised of commercial mortgage loans and commercial mezzanine loans, are recorded in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs". We have chosen to make the fair value election pursuant to ASC 825 for our Commercial Loan portfolio. Accordingly, these loans are recorded at fair value with periodic changes in fair value being recorded in earnings as a component of "Unrealized gain (loss), net". All other costs incurred in connection with acquiring the Commercial Loans or committing to purchase these loans are charged to expense as incurred.

Our loans are typically collateralized by commercial real estate. As a result, we regularly evaluate the extent and impact of any credit migration associated with the performance and or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. On a quarterly basis, we evaluate the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, we do not record an allowance for loan loss as we have elected the fair value option.  However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed. Interest income accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. A loan is written off when it is no longer realizable and/or legally discharged.

Interest Income Recognition

Loan Portfolio

Interest income on our residential loan portfolio and commercial loan portfolio is recorded in accordance with ASC 835 using the effective interest method based on the contractual payment terms of the loan. Any premium amortization or discount accretion will be reflected as a component of "Interest income" in our Consolidated Statements of Operations.

2018 Activity

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Investment Activity

We continually evaluate our investment portfolio, focusing on expected future prepayment trends, supply of and demand, costs of financing, costs of hedging, expected future interest rate volatility and the overall shape of the U.S. Treasury and interest rate swap yield curves. Based on our evaluation and our long-term views of the Agency RMBS sector, we expect to gradually reduce our exposure to Agency MBS and deploy capital to acquire, Non-Agency CMBS, Residential Whole and Bridge Loans, Commercial Loans and to a lesser extent Non-Agency RMBS.

The following table presents our investing activity for the nine months ended September 30, 2018 (dollars in thousands):

	Balance at				Principal  Payments and Basis Recovery			Proceeds  from Sales			Realized Gain/(Loss)			Unrealized Gain/(loss)			Premium and discount amortization, net						Balance at
Investment Type	December 31, 2017		Purchases																	OTTI			September 30, 2018
Agency RMBS and Agency RMBS IOs	$	698,033	$	2,094	$	(56,960	)	$	(209,581	)	$	(4,512	)	$	(21,584	)	$	(1,540	)	$	(733	)	$	405,217
Non-Agency RMBS	99,554		55,022		(5,687		)	(51,958		)	3,114			(1,700		)	787			(269		)	98,863
Agency CMBS and Agency CMBS IOs	2,160,567		786,466		(5,579		)	(768,544		)	(30,657		)	(71,455		)	(266		)	(216		)	2,070,316
Non-Agency CMBS	278,604		100,231		(41,150		)	(80,554		)	(677		)	12,009			5,874			(7,490		)	266,847
Other securities(1)	122,065		9,686		(604		)	(35,469		)	3,470			(1,795		)	(4,825		)	—			92,528
Total MBS and other securities	3,358,823		953,499		(109,980		)	(1,146,106		)	(29,262		)	(84,525		)	30			(8,708		)	2,933,771
Residential Whole-Loans	237,423		502,228		(51,642		)	—			—			(2,714		)	(832		)	—			684,463
Residential Bridge Loans	106,673		359,775		(214,088		)	—			—			(1,247		)	(1,642		)	—			249,471
Commercial Loans	—		164,570		(20,638		)	—			—			(159		)	178			—			143,951
Securitized commercial loan	24,876		1,353,019		(196,007		)	—			—			11,152			(1,992		)	—			1,191,048
Total Investments	$	3,727,795	$	3,333,091	$	(592,355	)	$	(1,146,106	)	$	(29,262	)	$	(77,493	)	$	(4,258	)	$	(8,708	)	$	5,202,704

(1) Other securities include $64.7 million of GSE CRTs and $27.8 million of ABS at September 30, 2018.

We continue to see favorable risk-adjusted return opportunities in credit sensitive investments, particularly Residential Whole Loans, Residential Bridge Loans and Commercial Loans, including junior tranches of CMBS transactions. We intend to continue to deploy capital into credit sensitive investments. At September 30, 2018, we held $2.7 billion in credit sensitive investments, primarily consisting of 43.7% of securitized commercial loans (our risk is limited to only our direct ownership interest in the trust), 9.8% Non-Agency CMBS, 25.1% Residential Whole-Loans, 9.1% Residential Bridge Loans, 3.6% Non-Agency RMBS, 5.3% Commercial Loans and 2.4% GSE credit risk transfer. We work to mitigate the credit risk on our credit sensitive holdings by developing relationships with originators that adhere to our investment guidelines for our Residential Whole and Bridge Loans and for the other investments we perform a detailed credit analysis on the underlying collateral at the time of purchase.

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Portfolio Characteristics

Our Agency Portfolio

The following table summarizes our Agency portfolio by investment category as of September 30, 2018 (dollars in thousands): 

	Principal Balance		Amortized Cost		Fair Value		Net Weighted Average Coupon
Agency RMBS	$	389,756	$	402,889	$	385,008	3.6	%
Agency RMBS IOs and IIOs (1)	N/A		12,377		12,203		2.3	%
Agency RMBS IOs and IIOs accounted for as derivatives (1)	N/A		N/A		8,006		2.8	%
Total Agency RMBS	389,756		415,266		405,217		3.2	%
Agency CMBS	2,124,942		2,129,912		2,066,075		3.2	%
Agency CMBS IOs and IIOs accounted for as derivatives (1)	N/A		N/A		4,241		0.4	%
Total Agency CMBS	2,124,942		2,129,912		2,070,316		3.0	%
Total	$	2,514,698	$	2,545,178	$	2,475,533	3.0	%

(1) IOs and IIOs have no principal balances and bear interest based on a notional balance.  The notional balance is used solely to determine interest distributions on the interest-only class of securities.

Credit Sensitive Portfolio

The following table presents information by vintage⁽¹⁾ as it relates to our credit sensitive investment portfolio at September 30, 2018:

Credit Sensitive Securities	Pre 2006		2006		2007		2011		2012		2013		2014		2015		2016		2017		2018		Total
Non-Agency RMBS	0.3	%	0.8	%	0.3	%	—	%	—	%	—	%	—	%	—	%	—	%	1.0	%	0.6	%	3.0	%
Non-Agency RMBS IOs	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	0.3	%	0.3	%	0.6	%
Non-Agency CMBS	—	%	1.1	%	2.5	%	1.3	%	0.3	%	—	%	0.5	%	1.2	%	—	%	0.9	%	1.8	%	9.6	%
Other securities	0.3	%	—	%	—	%	—	%	—	%	—	%	0.3	%	0.4	%	1.4	%	0.7	%	0.4	%	3.5	%
Residential Whole-Loans	0.1	%	—	%	—	%	0.2	%	0.3	%	2.4	%	1.1	%	0.1	%	1.7	%	7.0	%	12.3	%	25.2	%
Residential Bridge Loans	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	0.3	%	2.6	%	6.2	%	9.1	%
Securitized commercial loans	—	%	—	%	—	%	—	%	—	%	—	%	—	%	0.9	%	—	%	—	%	42.8	%	43.7	%
Commercial Loans	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	5.3	%	5.3	%
Total	0.7	%	1.9	%	2.8	%	1.5	%	0.6	%	2.4	%	1.9	%	2.6	%	3.4	%	12.5	%	69.7	%	100	%

(1) Based on carrying amount of the investments.

Non-Agency RMBS

The following table presents the fair value and weighted average purchase price for each of our Non-agency RMBS categories, including IOs accounted for as derivatives, together with certain of their respective underlying loan collateral attributes and current performance metrics as of September 30, 2018 (fair value dollars in thousands):

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			Weighted Average
Category	Fair Value		Purchase Price		Life (Years)	Original LTV		Original FICO	60+ Day Delinquent		6-Month CPR
Prime	$	24,657	$	58.48	11.9	68.9	%	769	—	%	7.0	%
Alt-A	66,232		68.64		10.8	77.9	%	680	11.7	%	2.6	%
Subprime	7,974		58.55		17.3	77.4	%	598	17.4	%	4.3	%
Total	$	98,863	$	65.29	11.6	75.6	%	696	9.2	%	3.8	%

Non-Agency CMBS

The following table presents certain characteristics of our Non-Agency CMBS portfolio as of September 30, 2018 (dollars in thousands): 

		Principal				Weighted Average
Type	Vintage	Balance		Fair Value		Life (Years)	Original LTV
Conduit:
	2006-2009	$	119,616	$	99,159	6.3	71.3	%
	2010-2018	101,043		69,921		5.7	61.8	%
		220,659		169,080		6.1	67.4	%
Single Asset:
	2010-2018	101,596		97,767		5.0	65.7	%
Total		$	322,255	$	266,847	5.7	66.8	%

Residential Whole-Loans

The Residential Whole-Loans have low LTV's and are comprised of 1,034 non-qualifying adjustable rate mortgages, 902 conforming fixed rate mortgages and 13 investor fixed rate mortgages. The following table presents certain information about our Residential Whole-Loans investment portfolio at September 30, 2018 (dollars in thousands): 

				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Original FICO Score(1)	Expected Life (years)	Contractual Maturity (years)	Coupon Rate
3.01 – 4.00%	69	$	22,732	61.4	%	738	7.5	29.3	3.9	%
4.01– 5.00%	1,159	405,934		62.2	%	734	3.6	28.8	4.7	%
5.01 – 6.00%	708	238,961		63.2	%	709	2.8	28.0	5.4	%
6.01 – 7.00%	11	6,685		64.9	%	748	1.4	25.4	6.3	%
7.01 - 8.00%	1	357		70.0	%	777	1.9	29.3	7.2	%
8.01 - 9.00%	1	94		70.0	%	689	1.9	29.3	8.4	%
Total	1,949	$	674,763	62.6	%	727	3.4	28.5	4.9	%

(1) The original FICO score is not available for 240 loans with a principal balance of approximately $81.6 million at September 30, 2018. We have excluded those loans from the weighted average computation.

As of September 30, 2018, there was one Residential Whole-Loan in non-accrual status with a current unpaid principal balance of $806 thousand and a fair value of $787 thousand. This nonperforming loan represents approximately 0.1% of the total outstanding principal balance. No allowance and provision for credit losses was recorded for this loan as of and for the three and nine months ended September 30, 2018 since the we elected the fair value option. We stopped accruing interest income for this loan when it became contractually 90 days delinquent.

Residential Bridge Loans

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Our Residential Bridge Loans are comprised of short-term fixed rate mortgages secured by non-owner occupied single and multi-family residences with low LTVs, generally up to 85%. The following table presents certain information about our Residential Bridge Loans investment portfolio at September 30, 2018 (dollars in thousands): 

				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
6.01 – 7.00%	14	$	5,264	61.8	%	2.6	6.7	%
7.01 – 8.00%	127	57,820		72.9	%	6.5	7.7	%
8.01 – 9.00%	213	94,873		70.2	%	5.4	8.7	%
9.01 – 10.00%	189	59,927		72.3	%	5.5	9.7	%
10.01 – 11.00%	71	16,651		71.3	%	5.0	10.6	%
11.01 – 12.00%	37	9,121		63.5	%	6.1	11.4	%
12.01 – 13.00%	9	1,866		73.3	%	6.8	12.7	%
13.01 – 14.00%	1	88		65.0	%	7.0	14.0	%
17.01 – 18.00%	12	3,569		74.0	%	4.3	18.0	%
Total	673	$	249,179	71.1	%	5.6	9.1	%

As of September 30, 2018, there were 11 Residential Bridge Loans carried at amortized cost in non-accrual status with an unpaid principal balance of approximately $4.2 million and 4 Residential Bridge Loans carried at fair value in non-accrual status with an unpaid principal balance of approximately $727 thousand. These nonperforming Residential Bridge Loans represent approximately 2.0% of the total outstanding principal balance. We reviewed the estimated fair value of the collateral to determine if an allowance and provision of credit loss was required for loans carried at amortized costs. Based upon our evaluation, no allowance and provision for credit losses was recorded for loans carried at amortized cost as of and for the three and nine months ended September 30, 2018 since the fair value of the collateral balance less the cost to sell was in excess of the outstanding principal and interest balances. No allowance and provision for credit losses was recorded for loans carried at fair value as of and for the three and nine months ended September 30, 2018 since we elected the fair value option. We stopped accruing interest income for these loans when they became contractually 90 days delinquent.

Commercial Real Estate Investments

Securitized Commercial Loans

In November 2015, we acquired a $14.0 million variable interest in CMSC Trust, which is a VIE that we were required to consolidate. Please refer to Note 6 - "Commercial Real Estate Investments" for details. The CMSC Trust holds a $24.6 million mezzanine loan collateralized by interests in commercial real estate.  The mezzanine loan serves as collateral for the $24.6 million of securitized debt issued. Refer to Note 7 - "Financings" for details on the associated securitized debt.

In March 2018, we acquired a $67.8 million variable interest in RETL Trust, which is a VIE that we were required to consolidate. Please refer to Note 6 - "Commercial Real Estate Investments" for details. The RETL Trust holds a $1.15 billion commercial loan collateralized by first mortgages, deeds of trusts and interests in commercial real estate located throughout the United States and Puerto Rico.  The loan's stated maturity date is February 9, 2021 (subject to the borrower's option to extend the initial stated maturity date for two successive one-year terms) and bears an interest rate of one month LIBOR plus 3.15%. The commercial loan serves as collateral for the $1.15 billion of securitized debt issued. Refer to Note 7 - "Financings" for details on the associated securitized debt.

Commercial Loans

In March 2018, we acquired a $20.0 million mezzanine loan secured by a partnership interest in an entity that owns a hotel located in Boston, MA. The mezzanine loan has a maturity date of December 9, 2019 with three one-year extension options and bears an interest rate of one month LIBOR plus 6.5%.

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In June 2018, we acquired a $30.0 million interest-only commercial loan. The loan is secured by a hotel. The loan has a maturity date of June 9, 2020 with a one-year extension option and bears an interest rate of one month LIBOR plus 4.5%. On August 3, 2018 the loan was transfered into our Residential Whole Loan Trust RMI 2015 Trust.

Commercial Loan Trust

Revolving Small Balance Commercial Trust 2018-1

In March 2018, we formed the Revolving Small Balance Commercial Trust 2018-1 ("RSBC Trust") to acquire commercial real estate mortgage loans. In March 2018, RSBC Trust acquired a $20.6 million interest-only first lien commercial mortgage loan ("SBC-Loan 1") collateralized by three assisted care living facilities. The loan matures on March 6, 2019 and bears an interest rate of one month LIBOR plus 4.75%. In August 2018, SBC-Loan 1 was paid in full.

In July 2018, RSBC Trust acquired a $45.2 million interest-only commercial real estate mortgage loan ("SBC-Loan 2") secured by skilled nursing facilities. SBC-Loan 2 matures on July 6, 2020 with two extension options of one year each and bears an interest rate of one month LIBOR plus 4.25% subject to a LIBOR floor of 1.25%.

In September 2018, RSBC Trust acquired a $49.6 million interest-only commercial real estate mortgage loan ("SBC-Loan 3") secured by assisted care living facilities. SBC-Loan 3 matures on September 6, 2021 with a one extension option of one year and bears an interest rate of one month LIBOR plus 5.30% subject to a LIBOR floor of 1.90% and a LIBOR cap of 3.50%.

Geographic Concentration

The mortgages underlying our Non-Agency RMBS and Non-Agency CMBS are located in various states across the United States and other countries. The following table presents the five largest concentrations by location for the mortgages collateralizing our Non-Agency RMBS and Non-Agency CMBS as of September 30, 2018, based on fair value (dollars in thousands):

	Non-Agency RMBS					Non-Agency CMBS
	Concentration		Fair Value			Concentration		Fair Value
California	30.9	%	$	30,506	California	12.3	%	$	32,933
Florida	9.6	%	9,517		Missouri	7.6	%	20,165
New York	9.0	%	8,895		Illinois	6.9	%	18,532
Virginia	6.7	%	6,645		North Carolina	6.9	%	18,432
New Jersey	3.8	%	3,761		Florida	6.5	%	17,379

The following table presents the various states across the United States in which the collateral securing our Residential Whole-Loans and Residential Bridge Loans at September 30, 2018, based on principal balance, is located (dollars in thousands): 

	Residential Whole-Loans					Residential Bridge Loans
	State Concentration		Principal Balance			State Concentration		Principal Balance
California	68.8	%	$	463,638	California	48.2	%	$	119,784
New York	15.6	%	105,435		New York	9.5	%	23,791
Georgia	2.9	%	19,324		Florida	6.6	%	16,354
Washington	2.2	%	14,886		New Jersey	5.5	%	13,723
Massachusetts	1.3	%	8,504		Texas	4.8	%	11,964
Other	9.2	%	62,976		Other	25.4	%	63,563
Total	100.0	%	$	674,763	Total	100.0	%	$	249,179

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Financing Activity

Repurchase Agreements

At September 30, 2018, we had repurchase agreements with 28 counterparties and outstanding borrowings with 16 of such counterparties. The following table summarizes our 2018 financing activity under our repurchase agreements for the nine months ended September 30, 2018 (dollars in thousands):

	Balance at							Balance at
Collateral	December 31, 2017		Proceeds		Repayments			September 30, 2018
Agency RMBS	$	665,919	$	1,825,544	$	(2,097,977	)	$	393,486
Agency CMBS	2,035,222		7,781,144		(7,983,014		)	1,833,352
Non-Agency RMBS	46,530		350,813		(326,226		)	71,117
Non-Agency CMBS	154,325		738,113		(680,156		)	212,282
Residential Whole-Loans(1)	189,270		3,180,933		(2,785,025		)	585,178
Commercial loans	—		216,084		(128,517		)	87,567
Securitized commercial loan(1)	—		53,350		(45,751		)	7,599
Residential Bridge Loans(1)	100,183		1,039,545		(922,811		)	216,917
Other securities	60,237		283,592		(282,008		)	61,821
Borrowings under repurchase agreements	$	3,251,686	$	15,469,118	$	(15,251,485	)	$	3,469,319

(1) The borrowings and collateral pledged attributed to loans owned through trust certificates. The trust certificates are eliminated upon consolidation.

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At September 30, 2018, we had outstanding repurchase agreement borrowings with the following counterparties:

(dollars in thousands) Repurchase Agreement Counterparties	Amount Outstanding		Percent of Total Amount Outstanding		Company Investments Held as Collateral		Counterparty Rating(1)
Citigroup Global Markets Inc.	$	944,655	27.2	%	$	990,625	A+
JP Morgan Securities LLC	506,688		14.6	%	537,863		A+
Credit Suisse AG, Cayman Islands Branch	334,927		9.7	%	420,698		A
Nomura Securities International, Inc.	296,586		8.5	%	364,725		Unrated (2)
Mizuho Securities USA Inc.	268,691		7.7	%	290,634		A
UBS Securities LLC	242,417		7.0	%	254,568		A+
Merrill Lynch Pierce Fenner & Smith Inc.	198,881		5.7	%	202,682		A+
Royal Bank of Canada	186,473		5.4	%	200,924		AA-
Jefferies & Company, Inc.	162,723		4.7	%	171,409		BBB-
UBS AG, London Branch	149,337		4.3	%	214,756		A+
RBC (Barbados) Trading Bank Corporation	63,923		1.8	%	78,793		P-1
The Bank of Nova Scotia	37,535		1.1	%	37,942		A+
Credit Suisse Securities (USA) LLC	36,881		1.1	%	68,240		A
All other counterparties (3)	39,602		1.2	%	41,393
Total	$	3,469,319	100.0	%	$	3,875,252

(1) The counterparty ratings presented above are the long-term issuer credit ratings as rated at September 30, 2018 by S&P, except for RBC (Barbados) Trading Bank Corporation which is the short-term issuer credit rating by Moody’s at September 30, 2018.

(2) Nomura Holdings, Inc., the parent company of Nomura Securities International, Inc., is rated A- by S&P at September 30, 2018.

(3) Represents amount outstanding with threecounterparties, which each holds collateral valued less than 5% of our stockholders’ equity as security for our obligations under the applicable repurchase agreements as of September 30, 2018.

Securitized Debt

We acquired a variable interest in CMSC Trust and RETL Trust and were required to consolidate the CMBS VIEs. Refer to Note 7 - "Financings" for details. At September 30, 2018, the consolidated CMSC Trust's commercial mortgage pass-through certificate, which bears a fixed interest rate of 8.9% and mature on July 6, 2020, had an outstanding balance of $10.8 million and a fair value of $10.8 million.

The following table summarizes the consolidated RETL Trust's commercial mortgage pass-through certificates at September 30, 2018 which is classified in "Securitized debt" in the Consolidated Balance Sheets (dollars in thousands):

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Classes	Principal Balance		Coupon		Fair Value		Contractual Maturity
Class A	$	448,033	3.3	%	$	449,570	2/15/2021
Class B	136,120		3.9	%	136,800		2/15/2021
Class C	117,908		4.2	%	118,718		2/15/2021
Class D	104,228		4.9	%	105,141		2/15/2021
Class E	141,507		6.7	%	143,456		2/15/2021
Class F	137,060		8.2	%	138,948		2/15/2021
Class G	11,457		9.7	%	11,592		2/15/2021
Class X-CP(1)	N/A		2.6	%	1,420		3/11/2019
Class X-EXT(1)	N/A		—	%	2,606		2/15/2021
	$	1,096,313			$	1,108,251

(1) Class X-CP and Class X-EXT are interest-only classes with a notional balance of $104.2 million each.

The following table presents our average repurchase agreement borrowings, excluding unamortized debt issuance costs, by type of collateral pledged for the three and nine months ended September 30, 2018 (dollars in thousands):

Collateral	Three Months Ended September 30, 2018		Nine months ended September 30, 2018
Agency RMBS	$	401,678	$	523,040
Agency CMBS	1,683,433		1,914,550
Non-Agency RMBS	72,046		68,152
Non-Agency CMBS	241,529		221,660
Residential Whole-Loans	337,275		272,405
Commercial loans	37,795		17,656
Securitized commercial loans	7,611		5,250
Residential Bridge Loans	270,337		197,653
Other securities	63,590		70,991
Total	$	3,115,294	$	3,291,357
Maximum borrowings during the period(1)	$	3,469,319	$	3,573,043

(1) Amount represents the maximum borrowings at month-end during each of the respective periods.

Hedging Activity

In connection with our risk management activities, we enter into a variety of derivative and non-derivative instruments. Our primary objective for acquiring these derivatives and non-derivative instruments is to mitigate our exposure to future events that are outside our control. Our derivative instruments are designed to mitigate the effects market risk and cash flow volatility associated with interest rate risk, including associated prepayment risk. As part of our hedging strategy, we may enter into, but not limited to, interest rate swaps, including forward starting swaps, interest rate swaptions, U.S. Treasury options, Eurodollar, Volatility Index and U.S, Treasury futures, TBAs, total return swaps, credit default swaps and foreign current swaps and forwards. 

The following tables summarize the hedging activity during the nine months ended September 30, 2018 (dollars in thousands):

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	Notional Amount at				Settlements, Terminations or Expirations			Notional Amount at
Derivative Instrument	December 31, 2017		Acquisitions					September 30, 2018
Fixed pay interest swaps	$	3,252,200	$	1,721,400	$	(1,144,200	)	$	3,829,400
Variable pay interest rate swaps	—		531,700		(49,300		)	482,400
Options - long positions	320,000		742,000		(962,000		)	100,000
Options - short positions	320,000		632,300		(952,300		)	—
Futures contracts - long positions	—		372,300		(372,300		)	—
Futures contracts - short positions	480,000		1,642,700		(1,842,700		)	280,000
Credit default swaps	14,815		50,000		(68		)	64,747
TBA securities - long positions	125,000		5,525,000		(5,250,000		)	400,000
TBA securities - short positions	—		5,650,000		(5,250,000		)	400,000
Total derivative instruments	$	4,512,015	$	16,867,400	$	(15,822,868	)	$	5,556,547

	Fair Value at			Acquisitions			Settlements, Terminations or Expirations			Realized Gains / Losses			Mark-to-market			Fair Value at
Derivative Instrument	December 31, 2017															September 30, 2018
Fixed pay interest swaps	$	(4,191	)	$	18,521		$	(137,821	)	$	123,382		$	(1,301	)	$	(1,410	)
Variable pay interest rate swaps	—			(28,277		)	28,823			(154		)	(196		)	196
Options - long positions	100			825			—			(1,163		)	347			109
Options - short positions	(50		)	(298		)	3			645			(300		)	—
Futures contracts - long positions	—			—			1,477			(1,477		)	—			—
Futures contracts - short positions	628			—			(10,301		)	10,301			1,075			1,703
Credit default swaps	(95		)	174			—			—			(441		)	(362		)
TBA securities	(10		)	—			(126		)	126			315			305
Total derivative instruments	$	(3,618	)	$	(9,055	)	$	(117,945	)	$	131,660		$	(501	)	$	541

As of September 30, 2018, we had approximately $3.2 billion of fixed pay rate interest rate swaps, excluding approximately $599.3 million of forward starting fixed pay interest rate swap (forward starting date of 2.6 months), and $482 million of variable pay rate interest rate swap. The following tables provide additional information on our fixed pay interest rate swaps and variable pay interest rate swap (dollars in thousands):

	September 30, 2018
Fixed Pay Interest Rate Swap Remaining Term	Notional  Amount		Average  Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)	Forward Starting(1)
1 year or less	$	400,000	1.5	%	2.3	%	0.8	—	%
Greater than 1 year and less than 3 years	200,000		1.8	%	2.3	%	1.7	—	%
Greater than 3 years and less than 5 years	1,164,700		2.4	%	2.3	%	4.1	—	%
Greater than 5 years	2,064,700		2.7	%	2.3	%	10.2	29.0	%
Total	$	3,829,400	2.4	%	2.3	%	6.9	15.6	%

	September 30, 2018
Variable Pay Interest Rate Swap Remaining Term	Notional Amount		Average  Variable Pay Rate		Average Fixed Receive Rate		Average Maturity (Years)	Forward Starting (1)
Greater than 5 years	$	482,400	2.3	%	2.4	%	8.6	—	%
Total	$	482,400	2.3	%	2.4	%	8.6	—	%

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(1) Represents the percentage of notional that is forward starting.

Capital Markets Activity

The following is a summary of activity during the nine months ended September 30, 2018:

Pursuant to the repurchase plan that was reauthorized in December 2017, we acquired approximately 177,700 shares of our common stock with an average price, including commission, of $9.75 per share, totaling approximately $1.7 million;

In September 2018, we completed a secondary public offering in which we sold 6,500,000 shares of our common stock including 303,422 shares of treasury stock, at a price of $10.85 per share for net proceeds of approximately $67.8 million after subtracting underwriting commissions and offering expenses of approximately $2.7 million. Our Manager will not earn a management fee on the newly issued equity through March 31, 2019, to reduce any impact on earnings as we fully deploy the capital into our target assets; and

Our dividend remained stable at $0.31 for each of the ten quarters ending on September 30, 2018. For the quarter ended September 30, 2018, we generated a dividend yield of approximately 12.4% based on the stock closing price of $10.02 at September 28, 2018.

Book Value

The following chart reflects our book value per common share basic and diluted over five consecutive quarters:

Our book value per common share basic and diluted, net of our quarterly dividends was $11.13 at September 30, 2018, an increase of $0.03 or 0.3% when compared to our June 30, 2018 book value of $11.10. The increase in book value was mainly a result of spread tightening in our Agency CMBS portfolio.

Results of Operations

Comparison of the three months ended September 30, 2018 to the three months ended September 30, 2017.

General

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Our operating results mainly depend upon the difference between the yield on our investments, the cost of our borrowing, including our hedging activities, the composition and changes in market prices of our portfolio and our expenses. For the three months ended September 30, 2018, we generated net income of $20.9 million, or $0.50 per basic and diluted weighted common share, compared to net income of $22.8 million, or $0.54 per basic and diluted weighted common share, for the three months ended September 30, 2017. The decrease in net income was mainly attributable to the following: i) generally higher interest rates on our repurchase agreements in 2018, ii) higher costs associated with financing our credit-sensitive investments, which generally have higher interest rates, iii) an increase in our management fee resulting from realized gains and iv) an increase in investment related expenses as a result of a larger portfolio of Residential Whole-Loans, Bridge Loans and Commercial Loans . The decrease in net income was offset by lower OTTI. The key components of these changes are discussed in greater detail below.

Net Interest Income

The following tables set forth certain information regarding our net interest income on our investment portfolio for the three months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

Three Months Ended September 30, 2018	Average Amortized Cost of Assets		Total Interest Income		Yield on Average Assets
Investments
Agency RMBS	$	421,485	$	3,413	3.21	%
Agency CMBS	1,829,515		13,514		2.93	%
Non-Agency RMBS	96,668		1,603		6.58	%
Non-Agency CMBS	319,906		6,848		8.49	%
Residential Whole-Loans	407,055		4,743		4.62	%
Residential Bridge Loans	276,121		4,786		6.88	%
Commercial loans	97,179		2,131		8.70	%
Securitized commercial loans	1,217,805		15,409		5.02	%
Other securities	85,517		2,014		9.34	%
Total investments	$	4,751,251	$	54,461	4.55	%
	Average Carrying Value		Total Interest Expense		Average Cost of Funds(1)
Borrowings
Repurchase agreements	$	3,115,294	$	22,273	2.84	%
Convertible senior unsecured notes, net	109,621		2,269		8.21	%
Securitized debt	1,143,774		13,975		4.85	%
Total borrowings	$	4,368,689	$	38,517	3.50	%
Net interest income and net interest margin			$	15,944	1.33	%

(1) Average cost of funds does not include the interest expense related to our derivatives. In accordance with GAAP, such costs are included in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

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Three Months Ended September 30, 2017	Average Amortized Cost of Assets		Total Interest Income		Yield on Average Assets
Investments
Agency RMBS	$	854,526	$	5,891	2.74	%
Agency CMBS	1,478,355		11,181		3.00	%
Non-Agency RMBS	58,919		943		6.35	%
Non-Agency CMBS	293,959		6,381		8.61	%
Residential Whole-Loans	196,001		2,002		4.05	%
Residential Bridge Loans	61,953		1,331		8.52	%
Securitized commercial loan	24,974		575		9.13	%
Other securities	124,657		2,624		8.35	%
Total investments	$	3,093,344	$	30,928	3.97	%
	Average Carrying Value		Total Interest Expense		Average Cost of Funds(1)
Borrowings
Repurchase agreements	$	2,786,073	$	12,112	1.72	%
Securitized debt	10,989		251		9.06	%
Total borrowings	$	2,797,062	$	12,363	1.75	%
Net interest income and net interest margin			$	18,565	2.38	%

(1) Average cost of funds does not include the interest expense related to our derivatives. In accordance with GAAP, such costs are included in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

Interest Income

For the three months ended September 30, 2018 and September 30, 2017, we earned interest income on our investments of approximately $54.5 million and $30.9 million, respectively.  The increase in interest income for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017 was primarily the result of an overall larger investment portfolio. The $1.2 billion securitized commercial loan as a result of the consolidation of RETL securitized trust, in the first quarter of 2018, increased interest income by approximately $14.8 million. Interest income on our Agency CMBS, Residential Whole and Bridge Loans and Commercial Loans also increased by approximately $10.7 million, due to a larger investment portfolio, which was partially offset by reduction in interest income on Agency RMBS by approximately $2.5 million due to a smaller Agency RMBS portfolio.

Interest Expense

Interest expense increased from $12.4 million for the three months ended September 30, 2017 to $38.5 million for the three months ended September 30, 2018. The increase in our borrowing costs reflects: (i) increase in our average outstanding borrowings due to larger investment portfolio (our average outstanding borrowings on our repurchase agreement increased by $329.2 million to $3.1 billion for the three months ended September 30, 2018 from $2.8 billion for the three months ended September 30, 2017); (ii)  generally higher interest rates on our repurchase agreements in 2018 coupled with higher costs associated with financing our credit-sensitive investments, which generally have higher interest rates (our average cost of funds on our repurchase agreements increased from 1.72% for the three months ended September 30, 2017 to 2.84% for the three months ended September 30, 2018). We utilize interest rate swaps to mitigate our interest rate exposure. As of September 30, 2018, we have effectively hedged approximately 79.2% of our repurchase agreement debt by entering into interest rate swaps with a weighted average fixed rate of 2.3% for a weighted average term of 5.9 years (excludes forward starting swaps). However, since we do not apply hedge accounting the reduction in interest expense is reflected in "Gain (loss) on derivatives, net"; (iii) the issuance of $115.0 million aggregate principal amount of 6.75% convertible senior unsecured notes in October 2017; and the consolidation of the RETL securitized trust as of March 27, 2018, which added $1.1 billion of securitized debt to our balance sheet with a weighted average interest rate of 4.85%, increasing interest expense by approximately $13.7 million.

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Other income (loss), net

Realized gain (loss) on investments

Realized gain (loss) on investments represents the net gain (loss) on sales from our investment portfolio. Our Manager regularly reviews the characteristics of our portfolio and may make changes to our portfolio in order to adjust such portfolio characteristics in response to and/or anticipation of changing market conditions in an effort to achieve the appropriate risk reward ratio.  Accordingly, we expect to continue to redeploy our capital out of Agency MBS and into credit sensitive investments in order to adjust the overall characteristics of our portfolio.

The following table presents the sales and realized gains (losses) of our investments for each of the three months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	For the three months ended September 30, 2018										For the three months ended September 30, 2017
	Proceeds		Gross Gains		Gross Losses			Net Gain  (Loss)			Proceeds			Gross Gains			Gross Losses			Net Gain (Loss)
Agency RMBS (1)	$	—	$	—	$	—		$	—		$	(2,906	)	$	(3	)	$	51		$	48
Agency CMBS	641,677		—		(25,640		)	(25,640		)	—			—			—			—
Non-Agency CMBS	73,848		2,411		(2,712		)	(301		)	10,597			1,641			(278		)	1,363
Other securities	13,712		1,712		$	—		1,712			10,419			419			—			419
Total	$	729,237	$	4,123	$	(28,352	)	$	(24,229	)	$	18,110		$	2,057		$	(227	)	$	1,830

(1) Reflects a reclassification of proceeds from a sale recorded on the trade date to reflect subsequent Agency RMBS paydowns. Excludes Interest-Only Strips, accounted for as derivatives.

Other than temporary impairment

We evaluate securities for OTTI on at least a quarterly basis. The determination of whether a security is other-than-temporarily impaired involves judgments, estimates and assumptions based on subjective and objective factors. As a result, the timing and amount of an OTTI constitutes an accounting estimate that may change materially over time.

The following table presents the other-than-temporary impairments we recorded on our securities portfolio (dollars in thousands): 

	Three months ended September 30, 2018		Three months ended September 30, 2017
Agency RMBS(1)	$	320	$	4,760
Non-Agency RMBS	159		—
Non-Agency CMBS	2,054		2,344
Other securities	—		121
Total	$	2,533	$	7,225

(1) Normally, unrealized losses on Agency securities (excluding Agency IOs) with the explicit guarantee of principal and interest by the governmental sponsored entity are not credit losses but rather due to changes in interest rates and prepayment expectations. These securities would not be considered other than temporarily impaired provided we did not intend to sell the security. For the three months ended September 30, 2018 and 2017, $0 and $4.7 million of OTTI related to Agency RMBS securities we intended to sell.

Unrealized gain (loss), net

Our investments, and securitized debt, for which we have elected the fair value option are recorded at fair value with the periodic changes in fair value being recorded in earnings.  The change in unrealized gain (loss) is directly attributable to changes in market pricing on the underlying investments and securitized debt during the period. In the third quarter of 2018, the tighter

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spreads on our Agency CMBS and Non-Agency CMBS portfolio at the end of the quarter resulted in a significant in the value of our portfolio, which accounts for the majority of the increase in unrealized loss for the period.

The following table presents the net unrealized gains (losses) we recorded on our investments and securitized debt (dollars in thousands): 

	Three months ended September 30, 2018			Three months ended September 30, 2017
Agency RMBS	$	(4,344	)	$	5,806
Agency CMBS	16,103			(1,367		)
Non-Agency RMBS	(16		)	1,778
Non-Agency CMBS	5,113			45
Residential Whole-Loans	(1,473		)	(571		)
Residential Bridge Loans	(1,018		)	—
Commercial loans	(575		)	—
Securitized commercial loans	282			136
Other securities	(1,526		)	(518		)
Securitized debt	414			(60		)
Other liabilities	168			—
Total	$	13,128		$	5,249

Gain (loss) on derivatives, net

In order to mitigate interest rate risk resulting from our repurchase agreement borrowings, we enter into a variety of derivative and non-derivative instruments. Our primary objective for acquiring these derivatives and non-derivative instruments is to mitigate our exposure to future events that are outside our control.    

Effective January 2017, variation margin of CME cleared derivatives are treated as settlements of the derivative contract rather than cash collateral, accordingly variation margin is treated as a gain or loss of partial settlement of the underlying derivative contract and reported in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations. Also, included in "Gain (loss) on derivative instruments, net" in our Consolidated Statements of Operations are the net interest rate swap payments, since we do not apply hedge accounting, and currency payments (including accrued amounts) associated with these instruments.

In the third quarter of 2018, swap rates also increased which resulted in favorable realized gains on our fixed pay interest rate swap positions, which was partially offset by realized losses of $154 thousand on our $482.4 million notional of variable pay interest rate swaps.

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The following table presents the components of gain (loss) on derivatives for the three months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	Realized Gain (Loss), net
Description	Other Settlements / Expirations			Variation Margin Settlement		Return (Recovery) of Basis			Mark-to-Market			Contractual interest income (expense), net(1)			Total
Three months ended September 30, 2018
Interest rate swaps	$	95		$	25,250	$	772		$	(3,742	)	$	1,190		$	23,565
Agency and Non-Agency Interest-Only Strips— accounted for as derivatives	—			—		(996		)	(929		)	1,209			(716		)
Options	—			—		—			(253		)	—			(253		)
Futures contracts	4,232			—		—			(1,994		)	—			2,238
Credit default swaps	(83		)	—		—			(492		)	—			(575		)
TBAs	(8		)	—		—			374			—			366
Total	$	4,236		$	25,250	$	(224	)	$	(7,036	)	$	2,399		$	24,625
Three months ended September 30, 2017
Interest rate swaps	$	(38	)	$	9,564	$	92		$	(2,028	)	$	(1,764	)	$	5,826
Agency and Non-Agency Interest-Only Strips— accounted for as derivatives	—			—		(1,486		)	351			1,816			681
Options	(957		)	—		—			477			—			(480		)
Futures contracts	(77		)	—		—			—			—			(77		)
Foreign currency forwards	45			—		—			(15		)	—			30
Total return swaps	(52		)	—		—			329			95			372
TBAs	577			—		—			288			—			865
Total	$	(502	)	$	9,564	$	(1,394	)	$	(598	)	$	147		$	7,217

(1) Contractual interest income (expense), net on derivative instruments includes interest settlement paid or received.

Other, net

For the three months ended September 30, 2018 and September 30, 2017, "Other, net" was an expense of $2 thousand and income of $216 thousand, respectively. The balance is mainly comprised of miscellaneous net interest income (expense) on cash collateral for our repurchase agreements and derivatives.

Expenses

Management Fee Expense

We incurred management fee expense of approximately $2.3 million and $1.9 million for the three months ended September 30, 2018 and September 30, 2017, respectively.  Pursuant to the terms of the Management Agreement, our Manager is paid a management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears. In September 2018, we completed a secondary public offering, for net proceeds of approximately $67.8 million after subtracting underwriting commissions and offering expenses. Our Manager will not earn a management fee on the newly issued equity through March 31, 2019, to reduce any impact on earnings as we fully deploy the capital into our target assets. Therefore, the increasewas mainly attributable to the realized gains on our interest rate swaps increasing our stockholders' equity utilized to calculate our management fee.

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The management fees, expense reimbursements and the relationship between our Manager and us are discussed further in Note 10, “Related Party Transactions” to the financial statements contained in this Quarterly Report on Form 10-Q.

Other Operating Expenses

We incurred other operating expenses of approximately $1.6 million and $702 thousand for the three months ended September 30, 2018 and September 30, 2017, respectively. Other operating cost is comprised of derivative transaction costs, custody, and asset management/loan servicing fees. The increase was primarily a result of a larger portfolio of Residential Whole-Loans, Bridge Loans and Commercial Loans, which were acquired servicing released, thereby increasing the associated third party asset management/loan servicing fees.

General and Administrative Expenses

We incurred general and administrative expenses of approximately $2.0 million and $1.7 million for the three months ended September 30, 2018 and September 30, 2017, respectively. The following describes the key components of general and administrative expenses.

Compensation Expense

Compensation expense decreased from approximately $660 thousand for the three months ended September 30, 2017 to approximately $552 thousand for the three months ended September 30, 2018. The decrease was a result lower stock-based compensation from awards becoming fully vested in the first half of 2018. We did not issue any new stock-based awards to our Manager or executive officers in 2017 or 2018.

Professional Fees

Professional fees increased to approximately $1.1 million for the three months ended September 30, 2018 from approximately $781 thousand for the three months ended September 30, 2017.  The increase was a result of slightly higher professional fees incurred in connection with one-time transaction costs.

Other general and administrative expenses

Other general and administrative expenses was flat quarter over quarter.

Comparison of the nine months ended September 30, 2018 to the nine months ended September 30, 2017.

General

Our operating results mainly depend upon the difference between the yield on our investments, the cost of our borrowing, including our hedging activities, the composition and changes in market prices of our portfolio and our expenses. For the nine months ended September 30, 2018, we generated net income of $44.1 million, or $1.05 per basic and diluted weighted common share, compared to net income of $63.7 million, or $1.52 per basic and diluted weighted common share, for the nine months ended September 30, 2017. The decrease in net income was attributable to the following: i) spread widening resulting in a decline in value of mainly our Agency portfolio, ii) generally higher interest rates on our repurchase agreements in 2018, iii) higher costs associated with financing our credit-sensitive investments, which generally have higher interest rates, iii) an increase in our management fees resulting from realized gains, and iv) an increase in investment related expenses as a result of a larger portfolio of Residential Whole-Loans, Bridge Loans and Commercial Loans. The decrease in net income was offset by the gain on our derivative instruments and lower OTTI. The key components of these changes are discussed in greater detail below.

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Net Interest Income

The following tables set forth certain information regarding our net interest income on our investment portfolio for the nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

Nine months ended September 30, 2018	Average Amortized Cost of Assets		Total Interest Income		Yield on Average Assets
Investments
Agency RMBS	$	543,484	$	13,359	3.29	%
Agency CMBS	2,046,486		45,487		2.97	%
Non-Agency RMBS	100,895		4,931		6.53	%
Non-Agency CMBS	318,856		21,235		8.90	%
Residential Whole-Loans	337,261		11,488		4.55	%
Residential Bridge Loans	209,252		11,327		7.24	%
Commercial loans	50,275		3,175		8.44	%
Securitized commercial loans	884,936		33,555		5.07	%
Other securities	104,878		6,785		8.65	%
Total investments	$	4,596,323	$	151,342	4.40	%
	Average Carrying Value		Total Interest Expense		Average Cost of Funds(1)
Borrowings
Repurchase agreements	$	3,291,357	$	61,185	2.49	%
Convertible senior unsecured notes, net	109,291		6,788		8.30	%
Securitized debt	942,936		29,375		4.17	%
Total borrowings	$	4,343,584	$	97,348	3.00	%
Net interest income and net interest margin			$	53,994	1.57	%

(1) Average cost of funds does not include the interest expense related to our derivatives. In accordance with GAAP, such costs are included in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

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Nine months ended September 30, 2017	Average Amortized Cost of Assets		Total Interest Income		Yield on Average Assets
Investments
Agency RMBS	$	960,380	$	19,851	2.76	%
Agency CMBS	1,106,847		25,125		3.03	%
Non-Agency RMBS	91,105		4,785		7.02	%
Non-Agency CMBS	334,504		21,247		8.49	%
Residential Whole-Loans	206,957		6,336		4.09	%
Residential Bridge Loans	44,840		2,951		8.80	%
Securitized commercial loan	24,991		1,706		9.13	%
Other securities	118,534		7,412		8.36	%
Total investments	$	2,888,158	$	89,413	4.14	%
	Average Carrying Value		Total Interest Expense		Average Cost of Funds(1)
Borrowings
Repurchase agreements	$	2,544,244	$	30,762	1.62	%
Securitized debt	10,996		745		9.06	%
Total borrowings	$	2,555,240	$	31,507	1.65	%
Net interest income and net interest margin			$	57,906	2.68	%

(1) Average cost of funds does not include the interest expense related to our derivatives. In accordance with GAAP, such costs are included in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

Interest Income

For the nine months ended September 30, 2018 and September 30, 2017, we earned interest income on our investments of approximately $151.3 million and $89.4 million, respectively.  The increase in interest income for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017 was primarily the result of an overall larger investment portfolio. The $1.2 billion securitized commercial loan as a result of the consolidation of the RETL securitization, in the first quarter of 2018 increased interest income by approximately $31.9 million. Interest income on our Agency CMBS, Residential Whole and Bridge Loans and Commercial Loans also increased by approximately $37.1 million, due to a larger investment portfolio, which was partially offset by reduction in interest income of $6.5 million on Agency RMBS due to a significantly smaller Agency RMBS portfolio. The repositioning of our portfolio from Agency securities to a more credit sensitive portfolio increased the overall yield on our assets to 4.40% for the nine months ended September 30, 2018 compared to an overall portfolio yield of 4.14% for the nine months ended September 30, 2017.

Interest Expense

Interest expense increased from $31.5 million for the nine months ended September 30, 2017 to $97.3 million for the nine months ended September 30, 2018. The increase in our borrowing costs reflects: (i) increase in our average outstanding borrowings due to larger investment portfolio (our average outstanding borrowings on our repurchase agreement increased by $747.1 million to $3.3 billion for the nine months ended September 30, 2018 from $2.5 billion for the nine months ended September 30, 2017); (ii)  generally higher interest rates on our repurchase agreements in 2018 coupled with higher costs associated with financing our credit-sensitive investments, which generally have higher interest rates (our average cost of funds on our repurchase agreements increased from 1.62% for the nine months ended September 30, 2017 to 2.49% for the nine months ended September 30, 2018). We utilize interest rate swaps to mitigate our interest rate exposure. As of September 30, 2018, we have effectively hedged approximately 79.2% of our repurchase agreement debt by entering into interest rate swaps with a weighted average fixed rate of 2.3% for a weighted average term of 5.9 years (excludes forward starting swaps). However, since we do not apply hedge accounting the reduction in interest expense is reflected in "Gain (loss) on derivatives, net"; (iii) the issuance of $115.0 million aggregate principal amount of 6.75% convertible senior unsecured notes in October 2017; and the consolidation of the RETL

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securitized trust as of March 27, 2018, which added $1.1 billion of securitized debt to our balance sheet with a weighted average cost of 4.17% increasing interest expense by approximately $28.6 million.

Other income (loss), net

Realized gain (loss) on investments

Realized gain (loss) on investments represents the net gain (loss) on sales from our investment portfolio. Our Manager regularly reviews the characteristics of our portfolio and may make changes to our portfolio in order to adjust such portfolio characteristics in response to and/or anticipation of changing market conditions in an effort to achieve the appropriate risk reward ratio.  Accordingly, we expect to continue to redeploy our capital out of Agency MBS and into credit sensitive investments in order to adjust the overall characteristics of our portfolio.

The following table presents the sales and realized gains (losses) of our investments for each of the nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	For the nine months ended September 30, 2018										For the nine months ended September 30, 2017
	Proceeds		Gross Gains		Gross Losses			Net Gain  (Loss)			Proceeds		Gross Gains		Gross Losses			Net Gain (Loss)
Agency RMBS (1)	$	209,581	$	18	$	(4,531	)	$	(4,513	)	$	862,245	$	4,376	$	(7,314	)	$	(2,938	)
Agency CMBS	768,544		—		(30,656		)	(30,656		)	—		—		—			—
Non-Agency RMBS (1)	51,958		3,114		—			3,114			243,811		24,389		(2,242		)	22,147
Non-Agency CMBS	80,554		2,472		(3,148		)	(676		)	45,634		2,377		(1,351		)	1,026
Other securities	35,469		3,469		$	—		3,469			33,365		419		(54		)	365
Total	$	1,146,106	$	9,073	$	(38,335	)	$	(29,262	)	$	1,185,055	$	31,561	$	(10,961	)	$	20,600

(1) Excludes Interest-Only Strips, accounted for as derivatives.

Other than temporary impairment

We evaluate securities for OTTI on at least a quarterly basis. The determination of whether a security is other-than-temporarily impaired involves judgments, estimates and assumptions based on subjective and objective factors. As a result, the timing and amount of an OTTI constitutes an accounting estimate that may change materially over time.

The following table presents the other-than-temporary impairments we recorded on our securities portfolio (dollars in thousands): 

	Nine months ended September 30, 2018		Nine months ended September 30, 2017
Agency RMBS(1)	$	663	$	5,420
Non-Agency RMBS	269		—
Non-Agency CMBS	7,491		12,658
Other securities	—		1,823
Total	$	8,423	$	19,901

(1) Normally, unrealized losses on Agency securities (excluding Agency IOs) with explicit guarantee of principal and interest by the governmental sponsored entity are not credit losses but rather due to changes in interest rates and prepayment expectations. These securities would not be considered other than temporarily impaired provided we did not intend to sell the security. For the nine months ended September 30, 2018 and 2017, $0 and $4.7 million of OTTI related to Agency RMBS securities we intended to sell.

Unrealized gain (loss), net

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Our investments, and securitized debt, for which we have elected the fair value option are recorded at fair value with the periodic changes in fair value being recorded in earnings.  The change in unrealized gain (loss) is directly attributable to changes in market pricing on the underlying investments and securitized debt during the period. As interest rates trended higher in the first nine months of 2018, we experienced overall wider spreads, which resulted in a significant decrease in the value of our Agency MBS portfolio, which accounts for the majority of the increase in unrealized loss for the period.

The following table presents the net unrealized gains (losses) we recorded on our investments and securitized debt (dollars in thousands): 

	Nine months ended September 30, 2018			Nine months ended September 30, 2017
Agency RMBS	$	(20,998	)	$	12,203
Agency CMBS	(71,367		)	11,338
Non-Agency RMBS	(1,700		)	(11,415		)
Non-Agency CMBS	12,010			15,369
Residential Whole-Loans	(2,714		)	62
Residential Bridge Loans	(1,247		)	—
Commercial loans	(159		)	—
Securitized commercial loans	11,152			786
Other securities	(1,795		)	7,129
Securitized debt	(10,314		)	(346		)
Other liabilities	(394		)	—
Total	$	(87,526	)	$	35,126

Gain (loss) on derivatives, net

In order to mitigate interest rate risk resulting from our repurchase agreement borrowings, we enter into a variety of derivative and non-derivative instruments. Our primary objective for acquiring these derivatives and non-derivative instruments is to mitigate our exposure to future events that are outside our control.    

Effective January 2017, variation margin of CME cleared derivatives are treated as settlements of the derivative contract rather than cash collateral, accordingly variation margin is treated as a gain or loss of partial settlement of the underlying derivative contract and reported in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations. Also, included in "Gain (loss) on derivative instruments, net" in our Consolidated Statements of Operations are the net interest rate swap payments, since we do not apply hedge accounting, and currency payments (including accrued amounts) associated with these instruments.

For the nine months ended September 30, 2018, swap rates also increased which resulted in favorable realized gains on our fixed pay interest rate swap positions, which was partially offset by realized losses of $154 thousand on our $482.4 million notional of variable pay interest rate swaps.

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The following table presents the components of gain (loss) on derivatives for the nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	Realized Gain (Loss), net
Description	Other Settlements / Expirations			Variation Margin Settlement			Return (Recovery) of Basis			Mark-to-Market			Contractual interest income (expense), net(1)			Total
Nine months ended September 30, 2018
Interest rate swaps	$	114		$	123,114		$	1,064		$	(1,497	)	$	886		$	123,681
Agency and Non-Agency Interest-Only Strips— accounted for as derivatives	—			—			(2,970		)	(959		)	3,642			(287		)
Options	(518		)	—			—			47			—			(471		)
Futures contracts	8,824			—			—			1,075			—			9,899
Credit default swaps	(125		)	—			—			(441		)	—			(566		)
TBAs	126			—			—			315			—			441
Total	$	8,421		$	123,114		$	(1,906	)	$	(1,460	)	$	4,528		$	132,697
Nine months ended September 30, 2017
Interest rate swaps	$	(150,593	)	$	(7,966	)	$	378		$	156,102		$	(12,662	)	$	(14,741	)
Interest rate swaptions	(115		)	—			—			—			—			(115		)
Agency and Non-Agency Interest-Only Strips— accounted for as derivatives	526			—			(5,055		)	(783		)	6,229			917
Options	(892		)	—			—			(134		)	—			(1,026		)
Futures contracts	(9,230		)	—			—			2,416			—			(6,814		)
Foreign currency forwards	25			—			—			43			—			68
Total return swaps	(552		)	—			—			1,673			469			1,590
TBAs	3,148			—			—			938			—			4,086
Total	$	(157,683	)	$	(7,966	)	$	(4,677	)	$	160,255		$	(5,964	)	$	(16,035	)

(1) Contractual interest income (expense), net on derivative instruments includes interest settlement paid or received.

Other, net

For the nine months ended September 30, 2018 and September 30, 2017, "Other, net" was an expense of $100 thousand and income of $841 thousand, respectively. The balance is mainly comprised of miscellaneous net interest income (expense) on cash collateral for our repurchase agreements and derivatives.

Expenses

Management Fee Expense

We incurred management fee expense of approximately $6.7 million and $6.2 million for the nine months ended September 30, 2018 and September 30, 2017, respectively.  Pursuant to the terms of the Management Agreement, our Manager is paid a management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears. In September 2018, we completed a secondary public offering for net proceeds of approximately $67.8 million after subtracting underwriting commissions. Our Manager will not earn a management fee on the newly issued equity through March 31, 2019, to reduce any impact on earnings as we fully deploy the capital into our target assets.

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Therefore, the increase was mainly attributable to the realized gain on our interest rate swaps increasing our stockholders' equity utilized to calculate our management fee.

The management fees, expense reimbursements and the relationship between our Manager and us are discussed further in Note 10, “Related Party Transactions” to the financial statements contained in this Quarterly Report on Form 10-Q.

Other Operating Expenses

We incurred other operating expenses of approximately $4.1 million and $1.9 million for the nine months ended September 30, 2018 and September 30, 2017, respectively. Other operating cost is comprised of derivative transaction costs, custody, and asset management/loan servicing fees. The increase was primarily a result of a larger portfolio of Residential Whole-Loans, Bridge Loans and Commercial Loans, which were acquired servicing released, thereby increasing the associated third party asset management/loan servicing fees.

General and Administrative Expenses

We incurred general and administrative expenses of approximately $5.9 million and $5.6 million for the nine months ended September 30, 2018 and September 30, 2017, respectively. The following describes the key components of general and administrative expenses.

Compensation Expense

Compensation expense decreased from approximately $2.1 million for the nine months ended September 30, 2017 to approximately $1.6 million for the nine months ended September 30, 2018. The decrease was a result lower stock-based compensation from awards becoming fully vested in the first half of 2018. We did not issue any new stock-based awards to our Manager or executive officers in 2017 or the nine months ended September 30, 2018.

Professional Fees

Professional fees increased to approximately $3.2 million for the nine months ended September 30, 2018 from approximately $2.5 million for the nine months ended September 30, 2017.  The increase was a result of slightly higher professional fees incurred in connection with becoming Sarbanes Oxley 404(b) compliant and professional fees in connection with one-time transaction costs.

Other general and administrative expenses

Other general and administrative expenses was flat period over period for thenine months ended September 30, 2018compared to thenine months ended September 30, 2017.

Non-GAAP Financial Measures

We believe that our non-GAAP measures (described below), when considered with GAAP, provide supplemental information useful to investors in evaluating the results of our operations. Our presentations of such non-GAAP measures may not be comparable to similarly-titled measures of other companies, who may use different calculations. As a result, such non-GAAP measures should not be considered as substitutes for our GAAP net income, as measures of our financial performance or any measure of our liquidity under GAAP.

The following tables set forth certain information regarding our net investment income for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

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Three Months Ended September 30, 2018	Average Amortized Cost of Assets(1)			Total Interest Income(2)			Yield on Average Assets
Investments
Agency RMBS	$	429,117		$	3,581		3.31	%
Agency CMBS	1,834,628			13,559			2.93	%
Non-Agency RMBS	96,668			1,603			6.58	%
Non-Agency CMBS	319,906			6,848			8.49	%
Residential Whole-Loans	407,055			4,743			4.62	%
Residential Bridge Loans	276,121			4,786			6.88	%
Commercial loans	97,179			2,131			8.70	%
Securitized commercial loans	1,217,805			15,409			5.02	%
Other securities	85,517			2,014			9.34	%
Total investments	$	4,763,996		$	54,674		4.55	%
Adjustments:
Securitized commercial loans from consolidated VIEs	(1,217,805		)	(15,409		)	5.02	%
Investments in consolidated VIEs eliminated in consolidation	74,497			2,111			11.24	%
Adjusted total investments	$	3,620,688		$	41,376		4.53	%
	Average Carrying Value			Total Interest Expense(3)			Average Effective Cost of Funds
Borrowings
Repurchase agreements	$	3,115,294		$	22,273		2.84	%
Convertible senior unsecured notes, net	109,621			2,269			8.21	%
Securitized debt	1,143,774			13,975			4.85	%
Interest rate swaps	n/a			(1,962		)	(0.18	)%
Total borrowings	$	4,368,689		$	36,555		3.32	%
Adjustments:
Securitized debt from consolidated VIEs	$	(1,143,774	)	$	(13,975	)	4.85	%
Adjusted total borrowings	$	3,224,915		$	22,580		2.78	%
Adjusted net interest income and net interest margin				$	18,796		2.06	%

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Three Months Ended September 30, 2017	Average Amortized Cost of Assets(1)			Total Interest Income(2)			Yield on Average Assets
Investments
Agency RMBS	$	865,145		$	6,156		2.82	%
Agency CMBS	1,485,287			11,246			3.00	%
Non-Agency RMBS	58,919			943			6.35	%
Non-Agency CMBS	293,959			6,381			8.61	%
Residential Whole-Loans	196,001			2,002			4.05	%
Residential Bridge Loans	61,953			1,331			8.52	%
Securitized commercial loan	24,974			575			9.13	%
Other securities	124,657			2,624			8.35	%
Total return swaps	2,884			95			13.07	%
Total investments	$	3,113,779		$	31,353		4.00	%
Adjustments:
Securitized commercial loan from consolidated VIE	(24,974		)	(575		)	9.13	%
Investment in consolidated VIE eliminated in consolidation	13,986			319			9.05	%
Adjusted total investments	$	3,102,791		$	31,097		3.98	%
	Average Carrying Value			Total Interest Expense(3)			Average Effective Cost of Funds
Borrowings
Repurchase agreements	$	2,786,073		$	12,112		1.72	%
Securitized debt	10,989			251			9.06	%
Interest rate swaps	n/a			1,672			0.24	%
Total borrowings	$	2,797,062		$	14,035		1.99	%
Adjustments:
Securitized debt from consolidated VIE	$	(10,989	)	$	(251	)	9.06	%
Adjusted total borrowings	$	2,786,073		$	13,784		1.96	%
Adjusted net interest income and net interest margin				$	17,313		2.21	%

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Nine months ended September 30, 2018	Average Amortized Cost of Assets(1)			Total Interest Income(2)			Yield on Average Assets
Investments
Agency RMBS	$	552,354		$	13,871		3.36	%
Agency CMBS	2,052,401			45,647			2.97	%
Non-Agency RMBS	100,895			4,931			6.53	%
Non-Agency CMBS	318,856			21,235			8.90	%
Residential Whole-Loans	337,261			11,488			4.55	%
Residential Bridge Loans	209,252			11,327			7.24	%
Commercial loans	50,275			3,175			8.44	%
Securitized commercial loans	884,936			33,555			5.07	%
Other securities	104,878			6,785			8.65	%
Total investments	$	4,611,108		$	152,014		4.41	%
Adjustments:
Securitized commercial loans from consolidated VIEs	(884,936		)	(33,555		)	5.07	%
Investments in consolidated VIEs eliminated in consolidation	57,451			4,737			11.02	%
Adjusted total investments	$	3,783,623		$	123,196		4.35	%
	Average Carrying Value			Total Interest Expense(3)			Average Effective Cost of Funds
Borrowings
Repurchase agreements	$	3,291,357		$	61,185		2.49	%
Convertible senior unsecured notes, net	109,291			6,788			8.30	%
Securitized debt	942,936			29,375			4.17	%
Interest rate swaps	n/a			(1,950		)	(0.06	)%
Total borrowings	$	4,343,584		$	95,398		2.94	%
Adjustments:
Securitized debt from consolidated VIEs	$	(942,936	)	$	(29,375	)	4.17	%
Adjusted total borrowings	$	3,400,648		$	66,023		2.60	%
Adjusted net interest income and net interest margin				$	57,173		2.02	%

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Nine months ended September 30, 2017	Average Amortized Cost of Assets(1)			Total Interest Income(2)			Yield on Average Assets
Investments
Agency RMBS	$	974,051		$	20,801		2.86	%
Agency CMBS	1,115,406			25,310			3.03	%
Non-Agency RMBS	91,445			4,824			7.05	%
Non-Agency CMBS	334,504			21,247			8.49	%
Residential Whole-Loans	206,957			6,336			4.09	%
Residential Bridge Loans	44,840			2,951			8.80	%
Securitized commercial loan	24,991			1,706			9.13	%
Other securities	118,534			7,412			8.36	%
Total return swaps	4,718			469			—	%
Total investments	$	2,915,446		$	91,056		4.18	%
Adjustments:
Securitized commercial loan from consolidated VIE	(24,991		)	(1,706		)	9.13	%
Investment in consolidated VIE eliminated in consolidation	13,995			947			9.05	%
Adjusted total investments	$	2,904,450		$	90,297		4.16	%
	Average Carrying Value			Total Interest Expense(3)			Average Effective Cost of Funds
Borrowings
Repurchase agreements	$	2,544,244		$	30,762		1.62	%
Securitized debt	10,996			745			9.06	%
Interest rate swaps	n/a			12,284			0.64	%
Total borrowings	$	2,555,240		$	43,791		2.29	%
Adjustments:
Securitized debt from consolidated VIE	$	(10,996	)	$	(745	)	9.06	%
Adjusted total borrowings	$	2,544,244		$	43,046		2.26	%
Adjusted net interest income and net interest margin				$	47,251		2.18	%

(1) Includes Agency and Non-Agency Interest-Only Strips accounted for as derivatives.

(2) Refer to below table for components of interest income.

(3) Includes the net amount paid, including accrued amounts and premium amortization for MAC interest rate swaps during the periods included in gain/loss on derivative instruments for GAAP.

The following table reconciles total interest income to adjusted interest income, which includes interest income on Agency and Non-Agency Interest-Only Strips classified as derivatives (Non-GAAP financial measure) for the three and nine months ended September 30, 2018 and September 30, 2017:

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(dollars in thousands)	Three months ended September 30, 2018			Three months ended September 30, 2017			Nine months ended September 30, 2018			Nine months ended September 30, 2017
Coupon interest income:
Agency RMBS	$	4,551		$	8,886		$	17,471		$	30,513
Agency CMBS	13,812			11,071			45,753			24,408
Non-Agency RMBS	2,139			571			5,616			4,482
Non-Agency CMBS	5,379			4,242			15,362			14,675
Residential Whole-Loans	5,070			2,268			12,320			7,145
Residential Bridge Loans	5,685			1,450			12,969			3,179
Commercial loans	1,997			—			2,997			—
Securitized commercial loans	16,738			575			35,547			1,706
Other Securities	3,674			2,160			11,610			5,300
Subtotal coupon interest	59,045			31,223			159,645			91,408
Premium accretion, discount amortization and amortization of basis, net:
Agency RMBS	(1,138		)	(2,995		)	(4,112		)	(10,662		)
Agency CMBS	(298		)	110			(266		)	717
Non-Agency RMBS	(536		)	372			(685		)	303
Non-Agency CMBS	1,469			2,139			5,873			6,572
Residential Whole-Loans	(327		)	(266		)	(832		)	(809		)
Residential Bridge Loans	(899		)	(119		)	(1,642		)	(228		)
Commercial loans	134			—			178			—
Securitized commercial loans	(1,329		)	—			(1,992		)	—
Other Securities	(1,660		)	464			(4,825		)	2,112
Subtotal accretion and amortization	(4,584		)	(295		)	(8,303		)	(1,995		)
Interest income	$	54,461		$	30,928		$	151,342		$	89,413
Contractual interest income, net of amortization of basis on Agency and Non-Agency Interest-Only Strips, classified as derivatives(1):
Coupon interest income	$	1,209		$	1,816		$	3,642		$	6,229
Amortization of basis	(996		)	(1,486		)	(2,970		)	(5,055		)
Total return swaps	—			95			—			469
Subtotal	213			425			672			1,643
Total adjusted interest income	$	54,674		$	31,353		$	152,014		$	91,056

(1) Reported in "Gain (loss) on derivative instruments, net" in our Consolidated Statements of Operations.

Effective Cost of Funds includes the net interest component related to our interest rate swaps, as well as the impact of our foreign currency swaps and forwards. While we have not elected hedge accounting for these instruments, such derivative instruments are viewed by us as an economic hedge against increases in future market interest rates on our liabilities and changes in foreign currency exchange rates on our assets and liabilities and are characterized as hedges for purposes of satisfying the REIT requirements and therefore the Effective Cost of Funds reflects interest expense adjusted to include the realized gain/loss (i.e., the interest income/expense component) for all of our interest rate swaps and the impact of our foreign currency swaps and forwards.

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The following table reconciles the Effective Cost of Funds (Non-GAAP financial measure) with interest expense for the three and nine months ended September 30, 2018 and September 30, 2017:

	Three months ended September 30, 2018					Three months ended September 30, 2017					Nine months ended September 30, 2018					Nine months ended September 30, 2017
(dollars in thousands)	Reconciliation			Cost of Funds/ Effective Borrowing Costs		Reconciliation			Cost of Funds/ Effective Borrowing Costs		Reconciliation			Cost of Funds/ Effective Borrowing Costs		Reconciliation			Cost of Funds/ Effective Borrowing Costs
Interest expense	$	38,517		3.50	%	$	12,363		1.75	%	$	97,348		3.00	%	$	31,507		1.65	%
Adjustments:
Interest expense on Securitized debt from consolidated VIEs	(13,975		)	(4.85	)%	(251		)	(9.06	)%	(29,375		)	(4.17	)%	(745		)	(9.06	)%
Net interest (received) paid - interest rate swaps	(1,962		)	(0.18	)%	1,672			0.24	%	(1,950		)	(0.06	)%	12,284			0.64	%
Effective Borrowing Costs	$	22,580		2.78	%	$	13,784		1.96	%	$	66,023		2.60	%	$	43,046		2.26	%
Weighted average borrowings	$	3,224,915				$	2,786,073				$	3,400,648				$	2,544,244

Core Earnings

Core Earnings is a Non-GAAP financial measure that is used by us to approximate cash yield or income associated with our portfolio and is defined as GAAP net income (loss) as adjusted, excluding: (i) net realized gain (loss) on investments and termination of derivative contracts; (ii) net unrealized gain (loss) on investments; (iii) net unrealized gain (loss) resulting from mark-to-market adjustments on derivative contracts; (iv) other than temporary impairment; (v) provision for income taxes; (vi) non-cash stock-based compensation expense; (vii) non-cash amortization of the convertible senior unsecured notes discount; (viii) one-time charges such as acquisition costs and impairment on loans; and (ix) one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between us, our Manager and our independent directors and after approval by a majority of the our independent directors.

We utilize Core Earnings as a key metric to evaluate the effective yield of the portfolio. Core Earnings allows us to reflect the net investment income of our portfolio as adjusted to reflect the net interest rate swap interest expense.  Core Earnings allows us to isolate the interest expense associated with our interest rate swaps in order to monitor and project our borrowing costs and interest rate spread.

We believe that the Non-GAAP measure, when considered with GAAP, provides supplemental information useful to investors in evaluating the results of our operations. Our presentation of Core Earnings may not be comparable to similarly-titled measures of other companies, who may use different calculations.  As a result, Core Earnings should not be considered as a substitute for our GAAP net income, as a measure of our financial performance or any measure of our liquidity under GAAP.

The table below reconciles Net Income (Loss) to Core Earnings for the three and nine months ended September 30, 2018 and September 30, 2017:

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(dollars in thousands)	Three months ended September 30, 2018			Three months ended September 30, 2017			Nine months ended September 30, 2018			Nine months ended September 30, 2017
Net Income	$	20,882		$	22,767		$	44,064		$	63,693
Income tax provision (benefit)	206			(1,155		)	555			1,272
Net Income before income taxes	21,088			21,612			44,619			64,965
Adjustments:
Investments:
Unrealized (gain) loss on investments, securitized debt and other liabilities	(13,128		)	(5,249		)	87,526			(35,126		)
Other than temporary impairment	2,533			7,225			8,423			19,901
Realized (gain) loss on sale of investments	24,229			(1,830		)	29,262			(20,600		)
Realized (gain) loss on foreign currency transactions	—			(1		)	—			1
One-time transaction costs	310			—			514			—
Derivative Instruments:
Net realized (gain) loss on derivatives	(29,569		)	(9,062		)	(131,660		)	165,649
Net unrealized (gain) loss on derivatives	7,036			598			1,460			(160,255		)
Amortization of discount on convertible senior unsecured notes	137			—			412			—
Non-cash stock-based compensation expense	70			218			195			795
Total adjustments	(8,382		)	(8,101		)	(3,868		)	(29,635		)
Core Earnings	$	12,706		$	13,511		$	40,751		$	35,330

Alternatively, our Core Earnings can also be derived as presented in the table below by starting with Adjusted net interest income, which includes interest income on Interest-Only Strips accounted for as derivatives and other derivatives, and net interest expense incurred on interest rate swaps and foreign currency swaps and forwards (a Non-GAAP financial measure) subtracting Total expenses, adding Non-cash stock based compensation, adding one-time transaction costs, adding amortization of discount on convertible senior notes and adding interest income on cash balances and other income (loss), net:

(dollars in thousands)	Three months ended September 30, 2018			Three months ended September 30, 2017			Nine months ended September 30, 2018			Nine months ended September 30, 2017
Adjusted net interest income	$	18,119		$	17,318		$	56,616		$	47,265
Total expenses	(5,845		)	(4,240		)	(16,761		)	(13,572		)
Non-cash stock-based compensation	70			218			195			795
One-time transaction costs	310			—			514			—
Amortization of discount on convertible unsecured senior notes	137			—			412			—
Interest income on cash balances and other income (loss), net	(85		)	215			(225		)	842
Core Earnings	$	12,706		$	13,511		$	40,751		$	35,330

Liquidity and Capital Resources

General

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders, and other general business needs. 

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To maintain our REIT qualifications under the Internal Revenue Code, we must distribute annually at least 90% of our taxable income, excluding capital gains, such distributions requirements limit our ability to retain earnings and increase capital for operations. We believe that our significant capital resources and access to financing will provide us with financial flexibility at levels sufficient to meet current and anticipated capital requirements, including funding new investment opportunities, paying distributions to our stockholders and servicing our debt obligations.

Our liquidity and capital resources are managed on a daily basis to ensure that we have sufficient liquidity to absorb market events that could negatively impact collateral valuations and result in margin calls as well as to ensure that we have the flexibility to manage our investment portfolio to take advantage of market opportunities. As of September 30, 2018, our principal sources of cash consist of a secondary public stock offerings, borrowings under repurchase agreements, payments of principal and interest on our investment portfolio and cash generated from operations.

As part of our risk management process, our Manager closely monitors our liquidity position. This includes the development and evaluation of various alternative processes and procedures, which continue to be updated with regard to scenario testing for purposes of assessing our liquidity in the face of different economic and market developments.  We believe we have sufficient current liquidity and access to additional liquidity to meet financial obligations for at least the next 12 months.

Sources of Liquidity

Principal Sources of Cash

We held cash of approximately $12.8 million and $36.7 million at September 30, 2018 and September 30, 2017, respectively. Our primary sources of cash currently consist of repurchase agreement borrowings, investment income, principal repayments on investments and the proceeds from debt and equity offerings, to the extent available in the capital markets. In the future, we expect our primary sources of liquidity to consist of payments of principal and investment income, unused borrowing capacity under our financing sources and future issuances of equity and debt securities.

Repurchase Agreements

As of September 30, 2018, we had master repurchase agreements with 28 counterparties.  We had borrowings under repurchase agreements with 16 counterparties of approximately $3.5 billion at September 30, 2018.  The following tables present our repurchase agreement borrowings by type of collateral pledged, as of September 30, 2018 and September 30, 2017, and the respective effective cost of funds (Non-GAAP financial measure) for the three and nine months ended September 30, 2018 and September 30, 2017, respectively.  See “Non-GAAP Financial Measures” (dollars in thousands):

	September 30, 2018						Three months ended September 30, 2018				Nine months ended September 30, 2018
Collateral	Borrowings Outstanding		Value of Collateral Pledged (1)		Weighted Average Interest Rate end of period		Weighted Average Cost of Funds		Weighted Average Effective Cost of Funds  (Non-GAAP)(2)		Weighted Average Cost of Funds		Weighted Average Effective Cost of Funds (Non-GAAP)(2)		Weighted Average Haircut end of period
Agency RMBS, at fair value	$	393,486	$	403,339	2.39	%	2.25	%	2.25	%	1.96	%	1.96	%	4.65	%
Agency CMBS, at fair value	1,833,352		1,922,520		2.36	%	2.24	%	2.24	%	1.96	%	1.96	%	5.02	%
Non-Agency RMBS, at fair value	71,117		98,863		3.70	%	3.74	%	3.74	%	3.51	%	3.51	%	27.95	%
Non-Agency CMBS, at fair value	212,282		286,728		3.79	%	3.83	%	3.83	%	3.63	%	3.63	%	25.99	%
Residential Whole-Loans, at fair value(3)	585,178		684,463		3.65	%	3.90	%	3.90	%	4.08	%	4.08	%	13.90	%
Residential Bridge Loans(3)	216,917		249,471		4.37	%	4.39	%	4.39	%	4.49	%	4.49	%	20.00	%
Commercial loans, at fair value	87,567		123,677		4.33	%	4.65	%	4.65	%	4.66	%	4.66	%	35.00	%
Securitized commercial loan, at fair value(3)	7,599		13,800		3.99	%	3.96	%	3.96	%	3.90	%	3.90	%	45.00	%
Other securities, at fair value	61,821		92,391		3.86	%	4.02	%	4.02	%	3.70	%	3.70	%	32.95	%
Interest rate swaps	n/a		n/a		n/a		n/a		(0.25	)%	n/a		(0.08	)%	n/a
Total	$	3,469,319	$	3,875,252	2.90	%	2.84	%	2.59	%	2.49	%	2.41	%	10.35	%

(1) Excludes approximately $18.6 million of cash collateral posted.

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(2) The effective cost of funds for the period presented is calculated on an annualized basis and includes interest expense for the period and net periodic interest payments on interest rate swaps, net of premium amortization on MAC swaps, of approximately $2.0 million and $2.0 million received for the three and nine months ended September 30, 2018.  While interest rate swaps are not accounted for using hedge accounting, such instruments are viewed by us as an economic hedge against increases in interest rates on our liabilities and are treated as hedges for purposes of satisfying the REIT requirements.  See “Non-GAAP Financial Measures”.

(3) Repurchase agreement borrowings collateralized by Whole-Loans, Bridge Loans and securitized commercial loans owned through trust certificates.  The trust certificates are eliminated upon consolidation.

	September 30, 2017						Three months ended September 30, 2017				Nine months ended September 30, 2017
Collateral	Borrowings Outstanding		Fair Value of Collateral Pledged (1)		Weighted Average Interest Rate end of period		Weighted Average Cost of Funds		Weighted Average Effective Cost of Funds (Non-GAAP)(2)		Weighted Average Cost of Funds		Weighted Average Effective Cost of Funds (Non-GAAP)(2)		Weighted Average Haircut end of period
Agency RMBS	$	792,520	$	823,403	1.39	%	1.34	%	1.34	%	1.15	%	1.15	%	4.79	%
Agency CMBS	2,019,010		2,109,202		1.39	%	1.37	%	1.37	%	1.23	%	1.23	%	5.06	%
Non-Agency RMBS	48,443		64,348		2.85	%	2.84	%	2.84	%	2.69	%	2.69	%	23.29	%
Non-Agency CMBS	192,015		278,095		2.96	%	2.97	%	2.97	%	2.80	%	2.80	%	30.38	%
Residential Whole-Loans(3)	156,751		191,439		3.48	%	3.52	%	3.52	%	3.36	%	3.36	%	20.00	%
Residential Bridge Loans(3)	51,074		54,912		4.29	%	4.29	%	4.29	%	4.40	%	4.40	%	20.00	%
Securitized commercial loan(3)	6,809		13,973		3.09	%	3.20	%	3.20	%	3.28	%	3.28	%	50.00	%
Other securities	69,634		122,651		3.36	%	3.47	%	3.47	%	3.36	%	3.36	%	39.68	%
Interest rate swaps	n/a		n/a		n/a		n/a		0.24	%	n/a		0.64	%	n/a
Total	$	3,336,256	$	3,658,023	1.69	%	1.72	%	2.00	%	1.62	%	2.30	%	8.46	%

(1) Excludes approximately $25.0 million of cash collateral posted.

(2) The effective cost of funds for the period presented is calculated on an annualized basis and includes interest expense for the period and net periodic interest payments on interest rate swaps, net of premium amortization on MAC swaps, of approximately $1.7 million and $12.3 million for the three and nine months ended September 30, 2017, respectively.  While interest rate swaps are not accounted for using hedge accounting, such instruments are viewed by us as an economic hedge against increases in interest rates on our liabilities and are treated as hedges for purposes of satisfying the REIT requirements.  See “Non-GAAP Financial Measures”.

(3) Repurchase agreement borrowings collateralized by Whole-Loans, Bridge Loans and securitized commercial loan owned through trust certificates.  The trust certificates are eliminated upon consolidation.

We are also required to pledge cash or securities as collateral as part of a margin arrangement for our derivative contracts, calculated daily, subject either to the terms of individual agreements for bilateral agreements and the clearinghouse rules in the case of cleared swaps. The amount of margin that we are required to post will vary and generally reflects collateral posted with respect to swaps that are in an unrealized loss position to us and a percentage of the aggregate notional amount of swaps per counterparty as well as margin posted with our clearing broker, pursuant to clearinghouse rules and practices, for cleared swaps.  Conversely, if our bilateral swaps and swaptions are in an unrealized gain position, our counterparties are required to post collateral with us, under the same terms that we post collateral with them.  We may enter into a MAC interest rate swap in which we may receive or make a payment at the time of entering such interest rate swap to compensate for the out of the market nature of such interest rate swap.  Similar to all other interest rate swaps, these interest rate swaps are also subject to margin requirements.

Convertible Senior Unsecured Notes

In October 2017, we completed the issuance of $115.0 million aggregate principal amount of its 6.75% Convertible Senior Notes due October 1, 2022 (the “Convertible Notes”) in a public offering, which included $15.0 million aggregate principal amount sold by us to the underwriter on the same terms and conditions to cover over-allotments. The notes are unsecured, pay interest semiannually at a rate of 6.75% per annum and are convertible at the option of the holder into shares of our common stock. The notes will mature in October 2022, unless earlier converted or repurchased in accordance with their terms. We do not have the right to redeem the notes prior to maturity, but may be required to repurchase the notes from holders under certain circumstances. The notes have an initial conversion rate of 83.1947 shares of common stock per $1,000 principal amount of the notes (equivalent to an initial conversion price of $12.02 per share), subject to adjustment. The net proceeds from the offering were approximately $111.1 million after deducting underwriting discounts and offering expenses.      

At-The-Market Program

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In April 2017, we entered into an equity distribution agreement with JMP Securities LLC, or "JMP", under which we may offer and sell up to $100.0 million shares of common stock in an At-The-Market equity offering from time to time through JMP. As of September 30, 2018, we have not sold any shares under this agreement.

Secondary Public Offering

In September 2018, we completed a secondary public offer in which we sold 6,500,000 shares of our common stock, including all 303,422 shares in treasury stock, at a price of $10.85 per share, for net proceeds of approximately $67.8 million after subtracting underwriting commissions and offering expenses of approximately $2.7 million.

Cash Generated from Operations

For the nine months ended September 30, 2018, net cash from operating activities was approximately $141.4 million, this was primarily attributable to the net interest income we earned on our investments less operating expenses, general and administrative expenses and margin settlements of interest rate swaps. For the nine months ended September 30, 2017, net cash from operating activities was approximately $15.6 million, which was primarily attributable to net interest income we earned on our investments less operating expenses, general and administrative expenses. The change period over period was mainly attributable to the settlement of interest rate swaps.

Cash Provided by and Used in Investing Activities

For the nine months ended September 30, 2018, net cash used in investing activities was approximately $1.5 billion. This was primarily attributable to our investment acquisitions, including an investment from a consolidated CMBS VIE, which was partially offset by proceeds from sales and receipts of principal payments on our investments. For the nine months ended September 30, 2017, net cash used in investing activities was approximately $1.2 billion. This was primarily attributable to our investment acquisitions, which was partially offset by proceeds from sales and receipts of principal payments on our investments.

Cash Provided by and Used in Financing Activities

For the nine months ended September 30, 2018, net cash provided by financing activities was approximately $1.4 billion. This was primarily attributable to proceeds received from securitized debt related to a consolidated CMBS VIE and proceeds from a secondary public offer with net proceeds of approximately $67.8 million (includes the re-issuance of treasury stock for a net proceeds of $3.2 million) after subtracting underwriting commissions and offering expenses. For the nine months ended September 30, 2017, net cash provided by financing activities was approximately $1.1 billion.  This was primarily attributable to the net repurchase agreement borrowings.

Contractual Obligations and Commitments

Our contractual obligations as of September 30, 2018 are as follows (dollars in thousands):

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	Less than 1 year		1 to 3 years	3 to 5 years	More than 5 years	Total
Borrowings under repurchase agreements	$	3,469,319	—	—	—	$	3,469,319
Contractual interest on repurchase agreements	21,061		—	—	—	21,061
Convertible senior unsecured notes	—		—	115,000	—	115,000
Contractual interest on convertible senior unsecured notes	3,881		15,525	11,644	—	31,050
Securitized debt(2)	—		1,107,117	—	—	1,107,117
Contractual interest on securitized debt(3)	53,554		75,369	—	—	128,923
Investment related payables	169,499		—	—	—	169,499
Total: GAAP Basis - Excluding TBA - long positions	3,717,314		1,198,011	126,644	—	5,041,969
TBA - long positions	403,000		—	—	—	403,000
Total: Non-GAAP Basis	$	4,120,314	1,198,011	126,644	—	$	5,444,969

(1) The table above does not include amounts due under the Management Agreement (as defined herein) with our Manager, as those obligations do not have fixed and determinable payments.

(2) The securitized debt is non-recourse to us and can only be settled with the assets held in the securitization. Assumes entire outstanding principal balance at September 30, 2018 is paid at maturity.

(3) For variable rate debt, the one month LIBOR rate as of September 30, 2018 of 2.2% was used to calculate the contractual interest.

Repurchase Agreements

At September 30, 2018, we had entered into repurchase agreement borrowings of approximately $24.7 million, which settled by October 1, 2018, with a weighted average interest rate of 2.58%, a weighted average contractual maturity of 29 days and secured by collateral of approximately $26.4 million.

Securitized Debt

At September 30, 2018, we had securitized debt related to the consolidated VIEs, with a principal balance of $1.1 billion (and a fair value of $1.1 billion).  The securitized debt and related interest payments of the VIEs can only be settled with the securitized commercial loans that serve as collateral of the VIEs and is non-recourse to us.

Management Agreement

On May 9, 2012, we entered into a management agreement (the “Management Agreement”) with our Manager which describes the services to be provided by our Manager and compensation for such services. Our Manager is responsible for managing our operations, including: (i) performing all of our day-to-day functions; (ii) determining investment criteria in conjunction with our Board of Directors; (iii) sourcing, analyzing and executing investments, asset sales and financings; (iv) performing asset management duties; and (v) performing financial and accounting management, subject to the direction and oversight of our Board of Directors. Pursuant to the terms of the Management Agreement, our Manager is paid a management fee equal to 1.50% per annum of our stockholders’ equity, (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.

Off-Balance Sheet Arrangements

As of September 30, 2018, we held contracts to purchase (“long position”) and sell (“short position”) TBAs on a forward basis.  If a counterparty to one of the TBAs that we enter into defaults on its obligations, we may not receive payments or securities due under the TBA agreement, and thus, we may lose any unrealized gain associated with that TBA transaction.

We do not have any relationships with any entities or financial partnerships, such as entities often referred to as structured investment vehicles, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.

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Further, other than guaranteeing certain obligations of our wholly-owned taxable REIT subsidiary or TRS, we have not guaranteed any obligations of any entities or entered into any commitment to provide additional funding to any such entities.

See Note 12 “Stockholders' Equity - Warrants” to the financial statements contained in this Quarterly Report on Form 10-Q, for a description of our outstanding warrants.

Dividends

We intend to make regular quarterly dividend distributions to holders of our common stock.  U.S. federal income tax law generally requires that a REIT distribute annually, in accordance with the REIT regulations, at least 90% of its REIT taxable income for the taxable year, without regard to the deduction for dividends paid and excluding net capital gains as well as undistributed taxable income retained by a TRS.  To the extent that we distribute less than 100% of our net taxable income, in accordance with the REIT regulations, for any given year, we will pay tax on such amount at the regular corporate rates.  We intend to pay regular quarterly dividends to our stockholders based on our net taxable income, if and to the extent authorized by our Board of Directors.  Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our repurchase agreements and other debts payable.  If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

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ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk.

We seek to manage the risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market values while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns from our assets through ownership of our common stock. While we do not seek to avoid risk completely, our Manager seeks to actively manage risk for us, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.

Credit Risk

We are subject to varying degrees of credit risk in connection with our assets. Although we do not expect to encounter credit risk in our Agency RMBS, we are exposed to the risk of potential credit losses from general credit spread widening related to Non-Agency RMBS, CMBS and other portfolio investments in addition to unexpected increase in borrower defaults on these securities, as well as our Whole-Loans. Investment decisions are made following a bottom-up credit analysis and specific risk assumptions. As part of the risk management process, our Manager uses detailed proprietary models, applicable to evaluate, depending on the asset class, house price appreciation and depreciation by region, prepayment speeds and foreclosure/default frequency, cost and timing. If our Manager determines that the proposed investment can meet the appropriate risk and return criteria as well as complement our existing asset portfolio, the investment will undergo a more thorough analysis.

As of September 30, 2018, 13 of the counterparties that we had outstanding repurchase agreement borrowings held collateral which we posted as security for such borrowings in excess of 5% of our stockholders’ equity.  Prior to entering into a repurchase agreement with any particular institution, our Manager does a thorough review of such potential counterparty.  Such review, however, does not assure the creditworthiness of such counterparty nor that the financial wherewithal of the counterparty will not deteriorate in the future.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our assets and our related financing obligations. In general, we expect to finance the acquisition of our assets through financings in the form of repurchase agreements, warehouse facilities, securitizations, resecuritizations, bank credit facilities (including term loans and revolving facilities) and public and private equity and debt issuances in addition to transaction or asset specific funding arrangements. Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we may utilize derivative financial instruments to hedge the interest rate risk associated with our borrowings. These hedging activities may not be effective. We also may engage in a variety of interest rate management techniques that seek to mitigate changes in interest rates or other potential influences on the values of our assets.

Interest Rate Effect on Net Interest Income

Our operating results will depend in large part on differences between the income earned on our assets and our borrowing costs. The cost of our borrowings is generally based on prevailing market interest rates. During a period of rising interest rates, our borrowing costs generally will increase and the yields earned on our leveraged fixed-rate mortgage assets will remain static. Further, the cost of such financing could increase at a faster pace than the yields earned on our leveraged ARM and hybrid ARM assets. This could result in a decline in our net interest spread and net interest margin. The severity of any such decline would depend on our asset/liability composition at the time as well as the magnitude and duration of the interest rate increase. Further, an increase in short-term interest rates could also have a negative impact on the market value of our assets. If any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely affect our liquidity and results of operations.

Interest Rate Cap Risk

To the extent we invest in adjustable-rate RMBS, such securities are generally subject to interest rate caps, which potentially could cause such RMBS to acquire many of the characteristics of fixed-rate securities if interest rates were to rise above the cap levels. This issue is magnified to the extent we acquire ARM and hybrid ARM assets that are not based on mortgages which are fully indexed. In addition, ARM and hybrid ARM assets may be subject to periodic payment caps that result in some portion of

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the interest being deferred and added to the principal outstanding or a portion of the incremental interest rate increase being deferred. To the extent we invest in such ARM and/or hybrid ARM assets, we could potentially receive less cash income on such assets than we would need to pay the interest cost on our related borrowings. To mitigate interest rate mismatches, we may utilize the hedging strategies discussed above under “Interest Rate Risk.”

Interest Rate Effects on Fair value

Another component of interest rate risk is the effect that changes in interest rates will have on the market value of the assets that we acquire. We face the risk that the market value of our assets will increase or decrease at different rates than those of our liabilities, including our hedging instruments. See “Market Risk” below.

The impact of changing interest rates on fair value can change significantly when interest rates change materially. Therefore, the volatility in the fair value of our assets could increase significantly in the event interest rates change materially. In addition, other factors impact the fair value of our interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, changes in actual interest rates may have a material adverse effect on us.

Market Risk

Our MBS and other assets are reflected at their fair value with unrealized gains and losses included in earnings. The fair value of our investments fluctuates primarily due to changes in interest rates and other factors. Generally, in a rising interest rate environment, the fair value of these assets would be expected to decrease; conversely, in a decreasing interest rate environment, the fair value of these securities would be expected to increase.

The sensitivity analysis table presented below shows the estimated impact of an instantaneous parallel shift in the yield curve, up and down 50 and 100 basis points, on the market value of our interest rate-sensitive investments, including interest rate swaps, Interest-Only Strips, and net interest income at September 30, 2018, assuming a static portfolio of assets. When evaluating the impact of changes in interest rates, prepayment assumptions and principal reinvestment rates are adjusted based on our Manager’s expectations. The analysis presented utilizes our Manager’s assumptions, models and estimates, which are based on our Manager’s judgment and experience.

Change in Interest Rates	Percentage Change in Projected Net Interest Income		Percentage Change in Projected Portfolio Value
+1.00%	4.45	%	(0.06	)%
+0.50%	2.24	%	(0.02	)%
-0.50%	(2.64	)%	(0.01	)%
-1.00%	(5.55	)%	(0.11	)%

While the table above reflects the estimated immediate impact of interest rate increases and decreases on a static portfolio, we may rebalance our portfolio from time to time either to seek to take advantage of or reduce the impact of changes in interest rates. It is important to note that the impact of changing interest rates on market value and net interest income can change significantly when interest rates change beyond 100 basis points from current levels. Therefore, the volatility in the market value of our assets could increase significantly when interest rates change beyond amounts shown in the table above. In addition, other factors impact the market value of and net interest income from our interest rate-sensitive investments and derivative instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, interest income would likely differ from that shown above and such difference might be material and adverse to our stockholders.

Certain assumptions have been made in connection with the calculation of the information set forth in the table above and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes.  The base interest rate scenario assumes interest rates at September 30, 2018.  The analysis presented utilizes assumptions and estimates based on our Manager’s judgment and experience.  Furthermore, while we generally expect to retain such assets and the associated interest rate risk, future purchases and sales of assets could materially change our interest rate risk profile.

Prepayment Risk

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The value of our Agency and Non-Agency RMBS and our Residential Whole-Loans may be affected by prepayment rates on the underlying residential mortgage.  We acquire RMBS and Residential Whole-Loans and anticipate that the underlying residential mortgages will prepay at a projected rate generating an expected yield.  If we purchase assets at a premium to par value, when borrowers prepay their residential mortgage loans faster than expected, the corresponding prepayments may reduce the expected yield on our residential mortgage assets because we will have to amortize the related premium on an accelerated basis and, in the case of Agency RMBS, other than interest-only strips, and certain other investment grade rated securities, we are required to make a retrospective adjustment to historical amortization.  Conversely, if we purchase assets at a discount to par value, when borrowers prepay their residential mortgage loans slower than expected, such decrease may reduce the expected yield on such assets because we will not be able to accrete the related discount as quickly as originally anticipated and, in the case of Agency RMBS, other than interest-only strips, and certain other investment grade rated securities, we will be required to make a retrospective adjustment to historical amortization.

The value of our Agency and Non-Agency CMBS, as well as Commercial Whole-Loans, will also be affected by prepayment rates, however, commercial mortgages frequently limit the ability of the borrower to prepay, thereby providing a certain level of prepayment protection.  Common restrictions include yield maintenance and prepayment penalties, the proceeds of which are generally at least partially allocable to these securities, as well as defeasance.

Likewise, the value of our ABS and other structured securities will also be affected prepayment rates.  The collateral underlying such securities may, similar to most residential mortgages, allow the borrower to prepay at any time or, similar to commercial mortgages, limit the ability of the borrower to prepay by imposing lock-out provisions, prepayment penalties and/or make whole provisions.

Extension Risk

Most residential mortgage loans do not prohibit the partial or full prepayment of principal outstanding.  Accordingly, while the stated maturity of a residential mortgage loan may be 30 years, or in some cases even longer, historically the vast majority of residential mortgage loans are satisfied prior to their maturity date.  In periods of rising interest rates, borrowers have less incentive to refinance their existing mortgages and mortgage financing may not be as readily available.  This generally results in a slower rate of prepayments and a corresponding longer weighted average life for RMBS.  The increase, or extension, in weighted average life is commonly referred to as “Extension Risk” which can negatively impact our portfolio.  To the extent we receive smaller pre-payments of principal, we will have less capital to invest in new assets.  This is extremely detrimental in periods of rising interest rates as we will be unable to invest in new higher coupon investments and a larger portion of our portfolio will remain invested in lower coupon investments.  Further, our borrowing costs are generally short-term and, even if hedged, are likely to increase in a rising interest rate environment, thereby reducing our net interest margin.  Finally, to the extent we acquired securities at a discount to par, a portion of the overall return on such investments is based on the recovery of this discount.  Slower principal prepayments will result in a longer recovery period and a lower overall return on our investment.

Prepayment rates on Agency and Non-Agency CMBS, as well as Commercial Whole-Loans, are generally less volatile than residential mortgage assets as commercial mortgages usually limit the ability of the borrower to prepay the mortgage prior to maturity or a period shortly before maturity.  Accordingly, extension risk for Agency and Non-Agency CMBS and Commercial Whole-Loans is generally less than RMBS and Residential Whole-Loans as it presumed that other than defaults (i.e. involuntary prepayments), most commercial mortgages will remain outstanding for the contractual term of the mortgage.

Prepayment rates on ABS and our other structured securities will be determined by the underlying collateral.  The extension risk of such securities will generally be less than residential mortgages, but greater than commercial mortgages.

Real Estate Risk

Residential and commercial property values are subject to volatility and may be adversely affected by a number of factors, including, but not limited to: national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions (such as the supply of housing stock); changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to suffer losses.

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Counterparty Risk

The following discussion on counterparty risk reflects how these transactions are structured, rather than how they are presented for financial reporting purposes.

When we engage in repurchase transactions, we generally sell securities to lenders (i.e., repurchase agreement counterparties) and receive cash from the lenders. The lenders are obligated to resell the same securities back to us at the end of the term of the transaction. Because the cash we receive from the lender when we initially sell the securities to the lender is less than the value of those securities (this difference is the haircut), if the lender defaults on its obligation to resell the same securities back to us, we could incur a loss on the transaction up to the amount of the haircut (assuming there was no change in the value of the securities).

If a counterparty to a bi-lateral interest rate swap cannot perform under the terms of the interest rate swap, we may not receive payments due under that agreement, and thus, we may lose any unrealized gain associated with the interest rate swap. We may also risk the loss of any collateral we have pledged to secure our obligations under interest rate swap if the counterparty becomes insolvent or files for bankruptcy. In the case of a cleared swap, if our clearing broker were to default, become insolvent or file for bankruptcy, we may also risk the loss of any collateral we have posted to the clearing broker unless we were able to transfer or “port” our positions and held collateral to another clearing broker. In addition, the interest rate swap would no longer mitigate the impact of changes in interest rates as intended.  Most of our interest swaps are currently cleared through a central clearing house which reduces but does not eliminate the aforementioned risks.  Also see “Liquidity Risk” below.

As of September 30, 2018, we have entered into five master securities forward trading agreements, or MSFTAs, which may govern the trading of some or all TBA transactions.  Pursuant to the terms of these MSFTAs, we and our counterparties would be required to post margin to the other when the mark to market exposure of the TBA transactions executed under the agreement exceed certain thresholds.  We expect to continue to negotiate and enter into MSFTAs with additional TBA counterparties.  The margin provisions of the MSFTA help to mitigate, but do not eliminate, counterparty risk associated with TBA transactions.  If a counterparty to a TBA transaction cannot perform under the terms of the trade, we may not receive securities we have agreed to purchase or payment for securities we have agreed to sell, and thus, we may lose any unrealized gain associated with such transaction.

Prior to entering into a trading agreement or transaction with any particular institution where we take on counterparty risk, our Manager does a thorough review of such potential counterparty.  Such review, however, does not assure the creditworthiness of such counterparty nor that the financial wherewithal of the counterparty will not deteriorate in the future.

Funding Risk

We have financed a substantial majority of our assets with repurchase agreement financing. Over time, as market conditions change, in addition to these financings, we may use other forms of leverage. Changes in the regulatory environment, as well as, weakness in the financial markets, the residential mortgage markets, the commercial mortgage markets, the asset-backed securitization markets and the economy generally could adversely affect one or more of our potential lenders and could cause one or more of our potential lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.

Liquidity Risk

Our liquidity risk is principally associated with the financing of long-maturity assets with short-term borrowings in the form of repurchase agreements. Although the interest rate adjustments of these assets and liabilities fall within the guidelines established by our operating policies, maturities are not required to be, nor are they, matched.

Should the value of our assets pledged as collateral suddenly decrease, margin calls relating to our repurchase agreements could increase, causing an adverse change in our liquidity position. Our inability to post adequate collateral for a margin call by the counterparty could result in a condition of default under our repurchase agreements, thereby enabling the counterparty to liquidate the collateral pledged by us, which may have a material adverse consequence on our business and results of operations.

In an instance of severe volatility, or where the additional stress on liquidity resulting from volatility is sustained over an extended period of time, we could be required to sell securities, possibly even at a loss to generate sufficient liquidity to satisfy

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collateral and margin requirements which could have a material adverse effect on our financial position, results of operations and cash flows.

Additionally, if one or more of our repurchase agreement counterparties chose not to provide on-going funding, our ability to finance would decline or exist at possibly less advantageous terms. Further, if we are unable to renew, replace or expand repurchase financing with other sources of financing on substantially similar terms, it may have a material adverse effect on our business, financial position, results of operations and cash flows, due to the long term nature of our investments and relatively short-term maturities of our repurchase agreements. As such, there is no assurance that we will always be able to roll over our repurchase agreements.

The costs associated with our borrowings are generally based on prevailing market interest rates. During a period of rising interest rates, our borrowing costs generally will increase while the yields earned on our existing portfolio of leveraged fixed-rate MBS and other fixed rate assets will remain static. Further, certain of our floating rate assets may contain annual or lifetime interest rate caps as well as limit the frequency or timing of changes to the underlying interest rate index. This could result in a decline in our net interest spread and net interest margin. The severity of any such decline would depend on our asset/liability composition at the time, as well as the magnitude and duration of the interest rate increase. Further, an increase in short-term interest rates could also have a negative impact on the market value of our assets. If any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could have a material adverse effect on our liquidity and results of operations.

In addition, the assets that comprise our investment portfolio are not traded on a public exchange. A portion of these assets may be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. The illiquidity of our assets may make it difficult for us to sell such assets if the need or desire arises, including in response to changes in economic and other conditions.  Recent regulatory changes have imposed new capital requirements and other restrictions on banks and other market intermediaries’ ability and desire to hold assets on their balance sheets and otherwise make markets in fixed income securities and other assets resulting in reduced liquidity in many sectors of the market.  This regulatory trend is expected to continue.  As a result of these developments, it may become increasingly difficult for us to sell assets in the market, especially in credit oriented sectors such as Non-Agency RMBS and CMBS, ABS and Whole-Loans.

We enter into interest rate swaps to manage our interest rate risk. We are required to pledge cash or securities as collateral as part of a margin arrangement, calculated daily, in connection with the interest rate swaps. The amount of margin that we are required to post will vary and generally reflects collateral required to be posted with respect to interest rate swaps that are in an unrealized loss position to us and is generally based on a percentage of the aggregate notional amount of interest rate swaps per counterparty.  Margin calls could adversely affect our liquidity. Our inability to post adequate collateral for a margin call could result in a condition of default under our interest rate swap agreements, thereby resulting in liquidation of the collateral pledged by us, which may have a material adverse consequence on our business, financial position, results of operations and cash flows. Conversely, if our interest rate swaps are in an unrealized gain position, our counterparties to bilateral swaps are required to post collateral with us, under the same terms that we post collateral with them.  We generally enter into a MAC interest rate swap in which we receive or make a payment at the time of entering such interest rate swap to compensate for the out of the market nature of such interest rate swap.  Similar to all other interest rate swaps, MAC interest rate swaps are subject to the margin requirements previously described.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily directly correlate with inflation rates or changes in inflation rates. Our consolidated financial statements are prepared in accordance with GAAP and our distributions will be determined by our Board of Directors consistent with our obligation to distribute to our stockholders at least 90% of our net taxable income on an annual basis, in accordance with the REIT regulations, in order to maintain our REIT qualification.  In each case, our activities and consolidated balance sheets are measured with reference to historical cost and/or fair market value without considering inflation.

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Foreign Investment risk

We have invested in non U.S. CMBS transactions and, in the future, we may make other investments in non U.S. issuers and transactions. These investments present certain unique risks, including those resulting from future political, legal, and economic developments, which could include favorable or unfavorable changes in currency exchange rates, exchange control regulations (including currency blockage), expropriation, nationalization, or confiscatory taxation of assets, adverse changes in investment capital or exchange control regulations (which may include suspension of the ability to transfer currency from a country), political changes, diplomatic developments, difficulty in obtaining and enforcing judgments against non U.S. entities, the possible imposition of the applicable country’s governmental laws or restrictions, and the reduced availability of public information concerning issuers. In the event of a nationalization, expropriation, or other confiscation of assets, we could lose our entire investment in a security. Legal remedies available to investors in certain jurisdictions may be more limited than those available to investors in the United States. Issuers of non U.S. securities may not be subject to the same degree of regulation as U.S. issuers.

Furthermore, non U.S. issuers are not generally subject to uniform accounting, auditing, and financial reporting standards or other regulatory practices and requirements comparable to those applicable to U.S. issuers. There is generally less government supervision and regulation of non U.S. exchanges, brokers, and issuers than there is in the United States, and there is greater difficulty in taking appropriate legal action in non U.S. courts. There are also special tax considerations that apply to securities of non U.S. issuers and securities principally traded overseas.

To the extent that our investments are denominated in U.S. dollars, these investments are not affected directly by changes in currency exchange rates relative to the dollar and exchange control regulations. We are, however, subject to currency risk with respect to such investments to the extent that a decline in a non U.S. issuer’s or borrower’s own currency relative to the dollar may impair such issuer’s or borrower’s ability to make timely payments of principal and/or interest on a loan or other debt security. To the extent that our investments are in non-dollar denominated securities, the value of the investment and the net investment income available for distribution may be affected favorably or unfavorably by changes in currency exchange rates relative to the dollar and exchange control regulations.

Currency exchange rates can be volatile and affected by, among other factors, the general economics of a country, the actions of governments or central banks and the imposition of currency controls and speculation. In addition, a security may be denominated in a currency that is different from the currency where the issuer is domiciled.

Currency Risk

We have and may continue in the future to invest in assets which are denominated in a currency other than U.S dollars and may finance such investments with repurchase financing or other forms of financing which may also be denominated in a currency other than U.S. dollars.  To the extent we make such investments and/or enter into such financing arrangements, we may utilize foreign currency swaps, forwards or other derivative instruments to hedge our exposure to foreign currency risk.  Despite being economic hedges, we have elected not to treat such derivative instruments as hedges for accounting purposes and therefore the changes in the value of such instruments, including actual and accrued payments, will be included in our Consolidated Statements of Operations.  While such transactions are entered into in an effort to minimize our foreign currency risk, there can be no assurance that they will perform as expected.  If actual prepayments of the foreign denominated asset are faster, or slower, than expected, the hedge instrument is unlikely to fully protect us from changes in the valuation of such foreign currency.  Further, as with interest rate swaps, there is counterparty risk associated with the future creditworthiness of such counterparty.

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ITEM 4.  Controls and Procedures

Disclosure Controls and Procedures: Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that the required information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We have evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of September 30, 2018. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

No change occurred in our internal control over financial reporting (as defined in Rule13a-15(f) and Rule 15d-15(f) of the Exchange Act) during the three months ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.  Legal Proceedings

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business.  As of September 30, 2018, the Company was not involved in any legal proceedings.

ITEM 1A.  Risk Factors

There were no material changes during the period covered by this report to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on March 29, 2018.  Additional risks not presently known, or that we currently deem immaterial, also may have a material adverse effect on our business, financial condition and results of operations.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3.  Defaults Upon Senior Securities

None.

ITEM 4.  Mine Safety Disclosures

Not Applicable.

ITEM 5.  Other Information

None.

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ITEM 6.  Exhibits

The following exhibits are filed as part of this report.

Exhibit No.	Description
3.1*	Amended and restated certificate of incorporation of Western Asset Mortgage Capital Corporation, incorporated by reference to Exhibit 3.1 to Amendment No. 10 Form S-11 (Registration Statement No. 333-159962), filed May 8, 2012.
3.2*	Amendment to the amended and restated certificate of incorporation of Western Asset Mortgage Capital Corporation, dated June 3, 2016, incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K, filed March 7, 2017.
3.3*	Amended and restated bylaws of Western Asset Mortgage Capital Corporation, incorporated by reference to Exhibit 3.2 to Amendment No. 10 to Form S-11 (Registration Statement No. 333-159962), filed May 8, 2012
4.1*	Specimen Common Stock Certificate of Western Asset Mortgage Capital Corporation, incorporated by reference to Exhibit 4.1 to Amendment No. 10 to Form S-11 (Registration Statement No. 333-159962), filed May 8, 2012.
4.2*	Indenture, dated as of October 2, 2017, between Western Asset Mortgage Capital Corporation and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed on October 3, 2017.
4.3*	First Supplemental Indenture, dated as of October 2, 2017, between Western Asset Mortgage Capital Corporation and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, filed on October 3, 2017.
4.4*	Form of 6.75% Convertible Senior Notes due 2022 (attached as Exhibit A to the First Supplemental Indenture filed as Exhibit 4.3 hereto), incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K, filed on October 3, 2017.
10.1*	Amendment to the Management Agreement between Western Asset Mortgage Capital Corporation and Western Asset Management Company, dated August 3, 2016, incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed on August 5, 2016.
10.2*	Form of Warrant, incorporated by reference to Exhibit 10.2 to Amendment No. 9 to Form S-11 (Registration Statement No. 333-159962), filed April 30, 2012.
10.3*	Management Agreement, dated May 9, 2012, between Western Asset Mortgage Capital Corporation and Western Asset Management Company, incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q, filed August 14, 2012.
10.4*	Registration Rights Agreement, dated May 15, 2012, among Western Asset Mortgage Capital Corporation, Western Asset Management Company and certain individual holders named therein, incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q, filed August 14, 2012.
10.5*	Western Asset Mortgage Capital Corporation Equity Plan, incorporated by reference to Exhibit 10.5 to Amendment No. 9 to Form S-11 (Registration Statement No. 333-159962), filed April 30, 2012.
10.6*	Western Asset Mortgage Capital Corporation Manager Equity Plan, incorporated by reference to Exhibit 10.6 to Amendment No. 9 to Form S-11 (Registration Statement No. 333-159962), filed April 30, 2012.
10.7*	Form of Indemnification Agreement between Western Asset Mortgage Capital Corporation and a director, incorporated by reference to Exhibit 10.7 to Amendment No. 9 Form S-11 (Registration Statement No. 333-159962), filed April 30, 2012.
10.8*	Restricted Stock Award Agreement, dated May 15, 2012, for Western Asset Management Company, incorporated by reference to Exhibit 10.9 to the Quarterly Report on Form 10-Q, filed August 14, 2012.
10.9*	Form of Restricted Stock Award Agreement for independent directors, incorporated by reference to Exhibit 10.2 to the Form S-8 dated May 15, 2012 (File No. 1-35543).

100

10.10*	Equity Distribution Agreement, dated March 6, 2017, among Western Asset Mortgage Capital Corporation, Western Asset Management Company and JMP Securities LLC, incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K, filed March 9, 2017.
31.1	Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.
32.1	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

__________________________________

*Fully or partly previously filed.

101

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ JENNIFER W. MURPHY
Jennifer W. Murphy
President, Chief Executive Officer and Director (Principal Executive Officer)
November 7, 2018
By:	/s/ LISA MEYER
Lisa Meyer
Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)
November 7, 2018

102

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Jennifer W. Murphy, certify that:

1.           I have reviewed this report on Form 10-Q of Western Asset Mortgage Capital Corporation;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have):

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, if any, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 7, 2018

By:	/s/ JENNIFER W. MURPHY
	Name: Jennifer W. Murphy
	Title: President, Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Lisa Meyer, certify that:

1.           I have reviewed this report on Form 10-Q of Western Asset Mortgage Capital Corporation;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have):

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, if any, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 7, 2018

By:	/s/ LISA MEYER
	Name: Lisa Meyer
	Title: Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to

18 U.S. C. Section 1350

as adopted pursuant to

Section 906 of The Sarbanes-Oxley Act of 2002

The undersigned, the President and Chief Executive Officer of Western Asset Mortgage Capital Corporation (the “Company”), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 7, 2018	By:	/s/ JENNIFER W. MURPHY
		Name:	Jennifer W. Murphy
		Title:	President, Chief Executive Officer and Director

The undersigned, the Chief Financial Officer (principal financial officer and principal accounting officer) of Western Asset Mortgage Capital Corporation (the “Company”), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 7, 2018	By:	/s/ LISA MEYER
		Name:	Lisa Meyer
		Title:	Chief Financial Officer and Treasurer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 06, 2018
Document and Entity Information
Entity Registrant Name	Western Asset Mortgage Capital Corp
Entity Central Index Key	0001465885
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		48,116,379
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets - USD ($) $ in Thousands		Sep. 30, 2018	Dec. 31, 2017
Assets:
Cash and cash equivalents		$ 12,817	$ 48,024
Restricted cash		100,138	0
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)		684,463	237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)		249,471	106,673
Securitized commercial loans, at fair value		1,191,048	24,876
Commercial Loans, at fair value ($123,677 and $0 pledged as collateral, at fair value, respectively)		143,951	0
Investment related receivable ($34,559 and $0 pledged as collateral, respectively)		113,341	7,665
Interest receivable		21,869	13,603
Due from counterparties		81,513	86,930
Derivative assets, at fair value		2,700	728
Other assets		2,903	2,161
Total assets	[1]	5,537,985	3,886,906
Liabilities:
Repurchase agreements, net		3,469,319	3,251,686
Convertible senior unsecured notes, net		109,731	108,743
Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)		1,119,089	10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)		10,027	8,322
Investment related payables		169,499	17,217
Due to counterparties		1,068	1,490
Derivative liability, at fair value		2,159	4,346
Accounts payable and accrued expenses		3,513	3,118
Payable to affiliate		2,489	2,041
Dividend payable		14,916	12,960
Other liabilities		100,530	0
Total liabilities	[2]	5,002,340	3,420,868
Commitments and contingencies
Stockholders’ Equity:
Common stock: $0.01 par value, 500,000,000 shares authorized, 48,116,379 and 41,794,079 outstanding, respectively		481	419
Preferred stock, $0.01 par value, 100,000,000 shares authorized and no shares outstanding		0	0
Treasury stock, at cost, 0 and 125,722 shares held, respectively		0	(1,232)
Additional paid-in capital		833,840	768,763
Retained earnings (accumulated deficit)		(298,676)	(301,912)
Total Stockholders’ Equity		535,645	466,038
Total Liabilities and Stockholders’ Equity		5,537,985	3,886,906
Agency MBS
Assets:
Agency mortgage-backed securities, at fair value ($2,325,859 and $2,833,595 pledged as collateral, at fair value, respectively)		2,475,533	2,858,600
Non-Agency MBS
Assets:
Agency mortgage-backed securities, at fair value ($2,325,859 and $2,833,595 pledged as collateral, at fair value, respectively)		365,710	378,158
Other securities
Assets:
Agency mortgage-backed securities, at fair value ($2,325,859 and $2,833,595 pledged as collateral, at fair value, respectively)		$ 92,528	$ 122,065

[1] (1) Assets of consolidated VIEs included in the total assets above: Cash and cash equivalents——Restricted cash100,138—Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)684,463237,423Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)249,471106,673Securitized commercial loans, at fair value1,191,04824,876Commercial Loans, at fair value ($123,677 and $0 pledged as collateral, at fair value, respectively)123,677—Investment related receivable33,4307,665Interest receivable12,4183,358Other assets203—Total assets of consolidated VIEs2,394,848379,995Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)234,74764,526

[2] (2) Liabilities of consolidated VIEs included in the total liabilities above: Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)1,119,08910,945Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)2,48770Accounts payable and accrued expenses737189Other liabilities100,531—Total liabilities of consolidated VIEs1,222,84411,204Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)313,14310,945Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)89170

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands		Sep. 30, 2018	Dec. 31, 2017
Fair value of residential whole-loans pledged as collateral		$ 684,463	$ 237,423
Residential bridge loan, at fair value		234,747	64,526
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)		249,471	106,673
Commercial Loans, at fair value		123,677	0
Investment related receivable ($34,559 and $0 pledged as collateral, respectively)		34,559	0
Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)		1,119,089	10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)		$ 10,027	$ 8,322
Common stock, par value (in dollars per share)		$ 0.01	$ 0.01
Common stock, shares authorized (in shares)		500,000,000	500,000,000
Common stock, shares outstanding (in shares)		48,116,379	41,794,079
Preferred stock, par value (in dollars per share)		$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)		100,000,000	100,000,000
Preferred stock, shares outstanding (in shares)		0	0
Treasury stock, shares held (in shares)		0	125,722,000
Assets and liabilities of the consolidated VIEs
Restricted cash		$ 100,138	$ 0
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)		684,463	237,423
Residential Bridge Loan		249,471	106,673
Securitized commercial loans, at fair value		1,191,048	24,876
Investment related receivable ($34,559 and $0 pledged as collateral, respectively)		113,341	7,665
Interest receivable		21,869	13,603
Other assets		2,903	2,161
Total assets	[1]	5,537,985	3,886,906
Accounts payable and accrued expenses		3,513	3,118
Other liabilities		100,530	0
Total liabilities	[2]	5,002,340	3,420,868
VIE
Residential bridge loan, at fair value		234,747	64,526
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)		249,471	106,673
Commercial Loans, at fair value		123,677	0
Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)		1,119,089	10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)		2,487	70
Assets and liabilities of the consolidated VIEs
Restricted cash		100,138	0
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)		684,463	237,423
Securitized commercial loans, at fair value		1,191,048	24,876
Investment related receivable ($34,559 and $0 pledged as collateral, respectively)		33,430	7,665
Interest receivable		12,418	3,358
Other assets		203	0
Total assets		2,394,848	379,995
Securitized debt		1,119,089	10,945
Accounts payable and accrued expenses		737	189
Other liabilities		100,531	0
Total liabilities		1,222,844	11,204
Non-Agency MBS
Fair value of mortgage-backed securities and other securities pledged as collateral (in dollars)		351,032	266,189
Other securities
Fair value of mortgage-backed securities and other securities pledged as collateral (in dollars)		92,391	89,823
Agency MBS
Fair value of mortgage-backed securities and other securities pledged as collateral (in dollars)		2,325,859	2,833,595
Affiliated Entity
Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)		313,143	10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)		891	70
Affiliated Entity | VIE
Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)		313,143	10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)		$ 891	$ 70

[1] (1) Assets of consolidated VIEs included in the total assets above: Cash and cash equivalents——Restricted cash100,138—Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)684,463237,423Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)249,471106,673Securitized commercial loans, at fair value1,191,04824,876Commercial Loans, at fair value ($123,677 and $0 pledged as collateral, at fair value, respectively)123,677—Investment related receivable33,4307,665Interest receivable12,4183,358Other assets203—Total assets of consolidated VIEs2,394,848379,995Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)234,74764,526

[2] (2) Liabilities of consolidated VIEs included in the total liabilities above: Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)1,119,08910,945Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)2,48770Accounts payable and accrued expenses737189Other liabilities100,531—Total liabilities of consolidated VIEs1,222,84411,204Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)313,14310,945Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)89170

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net Interest Income
Interest income	$ 54,461	$ 30,928	$ 151,342	$ 89,413
Interest expense (includes $4,465, $251, $9,672 and $745 on securitized debt held by affiliates, respectively)	38,517	12,363	97,348	31,507
Net Interest Income	15,944	18,565	53,994	57,906
Other Income (Loss)
Realized gain (loss) on sale of investments, net	(24,229)	1,830	(29,262)	20,600
Other than temporary impairment	(2,533)	(7,225)	(8,423)	(19,901)
Unrealized gain (loss), net	13,128	5,249	(87,526)	35,126
Gain (loss) on derivative instruments, net	24,625	7,217	132,697	(16,035)
Other, net	(2)	216	(100)	841
Other Income (Loss)	10,989	7,287	7,386	20,631
Expenses
Management fee to affiliate	2,284	1,853	6,723	6,159
Other operating expenses	1,609	702	4,133	1,855
General and administrative expenses:
Compensation expense	552	660	1,634	2,064
Professional fees	1,065	781	3,178	2,501
Other general and administrative expenses	335	244	1,093	993
Total general and administrative expenses	1,952	1,685	5,905	5,558
Total Expenses	5,845	4,240	16,761	13,572
Income before income taxes	21,088	21,612	44,619	64,965
Income tax provision (benefit)	206	(1,155)	555	1,272
Net income	$ 20,882	$ 22,767	$ 44,064	$ 63,693
Net income (loss) per Common Share — Basic (in dollars per share)	$ 0.50	$ 0.54	$ 1.05	$ 1.52
Net income (loss) per Common Share — Diluted (in dollars per share)	$ 0.50	$ 0.54	$ 1.05	$ 1.52

XML

Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest expense (includes $4,465, $251, $9,672 and $745 on securitized debt held by affiliates, respectively)	$ 38,517	$ 12,363	$ 97,348	$ 31,507
Affiliated Entity
Interest expense (includes $4,465, $251, $9,672 and $745 on securitized debt held by affiliates, respectively)	$ 4,465	$ 251	$ 9,672	$ 745

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Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock Outstanding	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit)	Treasury Stock
Balance at Dec. 31, 2016	$ 430,482	$ 419	$ 765,042	$ (334,979)	$ 0
Balance (in shares) at Dec. 31, 2016		41,919,801
Increase (Decrease) in Stockholders' Equity
Vesting of restricted stock	981		981
Equity component of convertible senior unsecured notes	2,656		2,656
Treasury stock (shares)		(125,722)
Treasury stock	(1,232)				(1,232)
Net income (loss)	85,097			85,097
Dividends declared on common stock	(51,946)		84	(52,030)
Balance at Dec. 31, 2017	466,038	$ 419	768,763	(301,912)	$ (1,232)
Balance (in shares) at Dec. 31, 2017		41,794,079
Increase (Decrease) in Stockholders' Equity
Vesting of restricted stock	195		195
Net income (loss)	44,064			44,064
Dividends declared on common stock	(40,738)		90	(40,828)
Proceeds from public offerings of common stock (in shares)		6,196,578
Proceeds from public offerings of common stock	64,880	$ 62	64,818
Offering costs, public offerings of common stock	(239)		(239)
Treasury stock (in shares)		125,722			303,422
Treasury stock	1,445		213		$ 1,232
Balance at Sep. 30, 2018	$ 535,645	$ 481	$ 833,840	$ (298,676)	$ 0
Balance (in shares) at Sep. 30, 2018		48,116,379

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Cash flows from operating activities:
Net income (loss)	$ 20,882	$ 22,767	$ 44,064	$ 63,693	$ 85,097
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Premium amortization and (discount accretion), net			2,884	(2,658)
Interest income earned added to principal of securities			0	(46)
Amortization of deferred financing costs			576	0
Amortization of discount on convertible senior notes			412	0
Restricted stock amortization			195	795
Interest payments and basis recovered on MAC interest rate swaps			1,064	358
Premium on purchase of Residential Whole-Loans			(8,863)	(354)
Premium on purchase of Residential Bridge Loans			(3,191)	(425)
Premium on purchase of securitized commercial loans			(3,019)	0
Unrealized (gain) loss, net	(13,128)	(5,249)	87,526	(35,126)
Unrealized (gain) loss on derivative instruments, net			1,460	(156,098)
Other than temporary impairment	2,533	7,225	8,423	19,901
Realized (gain) loss on sale of securities, net	24,229	(1,830)	29,262	(20,600)
(Gain) loss on derivatives, net			(12,905)	156,655
Loss on foreign currency transactions, net			0	1
Changes in operating assets and liabilities:
(Increase) decrease in interest receivable			(8,266)	5,787
(Increase) decrease in other assets			(599)	(3,736)
Increase (decrease) in interest payable			1,705	(11,182)
Increase (decrease) in accounts payable and accrued expenses			221	(667)
Increase (decrease) in payable to affiliate			448	(664)
Net cash provided by operating activities			141,397	15,634
Cash flows from investing activities:
Purchase of securities			(846,680)	(2,473,379)
Proceeds from sale of securities			1,111,547	1,189,824
Principal repayments and basis recovered on securities			109,938	187,157
Purchase of Residential Whole-Loans			(493,365)	(35,323)
Principal repayments on Residential Whole-Loans			42,867	32,287
Purchase of Commercial Loans			(164,570)	0
Principal repayments on commercial loans			20,638	0
Purchase of securitized commercial loans			(1,350,000)	0
Principal repayments on securitized commercial loans			196,007	59
Purchase of Residential Bridge Loans			(356,584)	(73,565)
Principal repayments on Residential Bridge Loans			197,099	16,251
Payment of premium for option derivatives			(829)	(14,995)
Premium received from option derivatives			298	13,721
Premium received from credit default swaps			(174)	0
Net settlements of TBAs			136	3,135
Proceeds from (Payments on) termination of futures, net			8,823	(9,230)
Interest payments and basis recovered on MAC interest rate swaps			(1,064)	(358)
Due from counterparties			0	8,449
Payments on total return swaps, net			0	(552)
Premium for interest rate swaptions, net			0	(115)
Net cash used in investing activities			(1,525,913)	(1,156,634)
Cash flows from financing activities:
Proceeds from issuance of common stock			64,880	0
Payment of offering costs			(65)	0
Repurchase of common stock			(1,733)	0
Proceeds from sale of treasury stock			3,177	0
Proceeds from repurchase agreement borrowings			15,469,118	13,054,995
Repayments of repurchase agreement borrowings			(15,251,485)	(11,874,382)
Proceeds from securitized debt			1,285,219	0
Repayments of securitized debt			(186,015)	(26)
Proceeds from forward contracts			0	6,875
Repayments of forward contracts			0	(6,850)
Due from counterparties, net			5,417	(11,709)
Due to counterparties, net			(422)	1,580
Increase in other liabilities			100,138	0
Dividends paid on common stock			(38,782)	(38,985)
Net cash provided by financing activities			1,449,447	1,131,498
Effect of exchange rate changes on cash and cash equivalents			0	(1)
Net increase (decrease) in cash, cash equivalents and restricted cash			64,931	(9,503)
Cash, cash equivalents and restricted cash, beginning of period			48,024	46,172	46,172
Cash, cash equivalents and restricted cash, end of period	112,955	36,669	112,955	36,669	48,024
Supplemental disclosure of operating cash flow information:
Interest paid			96,030	30,010
Income taxes paid			1,635	4,966
Supplemental disclosure of non-cash financing/investing activities:
Underwriting and offering costs payable			174	0
Principal payments of securities, not settled			42	16
Securities sold, not settled			34,559	0
Securities purchased, not settled			(124,036)	(293,959)
Net unsettled TBAs			(10)	(2)
Dividends and distributions declared, not paid	14,916	12,995	14,916	12,995	$ 12,960
Principal payments of Residential Whole-Loans, not settled			11,061	4,580
Principal payments of Residential Bridge Loans, not settled			22,227	2,598
Derivative collateral offset against derivatives	$ 0	$ (157,913)	0	(157,913)
Other assets			$ 143	$ 0

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Organization

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

Western Asset Mortgage Capital Corporation, a Delaware corporation, and its subsidiaries (the “Company”), commenced operations in May 2012. The Company invests in, finances and manages a diversified portfolio of real estate related securities, whole-loans and other financial assets.  The Company’s portfolio is comprised of Agency CMBS, Agency RMBS (including TBAs), Non-Agency RMBS, Non-Agency CMBS, Residential Whole-Loans, Residential Bridge Loans and Commercial Loans. In addition, and to a significantly lesser extent, the Company has invested in other securities including certain Agency obligations that are not technically MBS as well as certain Non U.S. CMBS and in asset-backed securities (“ABS”) investments secured by a portfolio of private student loans.  The Company’s investment strategy is based on Western Asset Management Company LLC’s (the “Manager”) perspective of which mix of portfolio assets it believes provides the Company with the best risk-reward opportunities at any given time.  The Manager will vary the allocation among various asset classes subject to maintaining the Company’s qualification as a REIT and maintaining its exemption from the Investment Company Act of 1940, as amended (the “1940 Act”).  These restrictions limit the Company’s ability to invest in non-qualifying MBS, non-real estate assets and/or assets which are not secured by real estate.  Accordingly, the Company’s portfolio will continue to be principally invested in qualifying MBS, Whole-Loans and other real estate related assets.

The Company is externally managed by the Manager, an investment advisor registered with the Securities and Exchange Commission (“SEC”).  The Manager is a wholly-owned subsidiary of Legg Mason, Inc.  The Company operates and has elected to be taxed as a real estate investment trust or “REIT” commencing with its taxable year ended December 31, 2012.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited financial statements and related notes have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q.  Certain prior period amounts have been reclassified to conform to the current period’s presentation. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary have been made to state fairly the Company’s financial position, results of operations and cash flows. The results of operations for the period ended September 30, 2018, are not necessarily indicative of the results to be expected for the full year or any future period. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 29, 2018.

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary and variable interest entities (“VIEs”) in which it is considered the primary beneficiary.  All intercompany amounts between the Company and its subsidiary and consolidated VIEs have been eliminated in consolidation.

Variable Interest Entities

VIEs are defined as entities that by design either lack sufficient equity for the entity to finance its activities without additional subordinated financial support or are unable to direct the entity’s activities or are not exposed to the entity’s losses or entitled to its residual returns. The Company evaluates all of its interests in VIEs for consolidation. When the interests are determined to be variable interests, the Company assesses whether it is deemed the primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, it considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes: first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers is deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, it considers all of its economic interests. This assessment requires the Company to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

In instances where the Company and its related parties have variable interests in a VIE, the Company considers whether there is a single party in the related party group that meets both the power and losses or benefits criteria on its own as though no related party relationship existed.  If one party within the related party group meets both these criteria, such reporting entity is the primary beneficiary of the VIE and no further analysis is needed.  If no party within the related party group on its own meets both the power and losses or benefits criteria, but the related party group as a whole meets these two criteria, the determination of primary beneficiary within the related party group requires significant judgment. The analysis is based upon qualitative as well as quantitative factors, such as the relationship of the VIE to each of the members of the related-party group, as well as the significance of the VIE's activities to those members, with the objective of determining which party is most closely associated with the VIE. 

Ongoing assessments of whether an enterprise is the primary beneficiary of a VIE are required.

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.

Significant Accounting Policies

There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our

Annual Report on Form 10-K for the year ended December 31, 2017, other than the significant accounting policies disclosed below.

Restricted Cash

Restricted cash represents cash held by the trustee or servicer for mortgage escrows in connection with the Company's securitized loan and commercial loan investments held in two consolidated VIEs. These escrows consist of principal and interest escrows, capital improvement reserves, repair reserves, real estate tax and insurance reserves and tenant reserves. The corresponding liability is recorded in "Other liabilities" in the Consolidated Balance Sheets. The restricted cash is not available for general corporate use.

Securitized Commercial Loans

Securitized commercial loans are comprised of commercial loans of consolidated variable interest entities which were sponsored by third parties. These loans are recorded in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs". The Company has chosen to make the fair value election pursuant to ASC 825. Accordingly, these loans are recorded at fair value with periodic changes in fair value being recorded in earnings as a component of "Unrealized gain (loss), net".

The securitized commercial loans are typically collateralized by commercial real estate. As a result, the Company regularly evaluates the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. On a quarterly basis, the Company evaluates the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the Company does not record an allowance for loan loss as the Company has elected the fair value option.  However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed. Interest income accrual is resumed when the loan becomes contractually current and performance is demonstrated. A loan is written off when it is no longer realizable and/or legally discharged.

Commercial Loans

Investments in Commercial Loans, which are comprised of first lien commercial mortgage loans and commercial mezzanine loans, are recorded in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs". The Company has chosen to make the fair value election pursuant to ASC 825 for its Commercial Loan portfolio. Accordingly, these loans are recorded at fair value with periodic changes in fair value being recorded in earnings as a component of "Unrealized gain (loss), net". All other costs incurred in connection with acquiring the Commercial Loans or committing to purchase these loans are charged to expense as incurred.

The Company’s loans are typically collateralized by commercial real estate. As a result, the Company regularly evaluates the extent and impact of any credit migration associated with the performance and or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. On a quarterly basis, the Company evaluates the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the Company does not record an allowance for loan loss as the Company has elected the fair value option.  However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed. Interest income accrual is resumed when the loan becomes contractually current and performance is demonstrated. A loan is written off when it is no longer realizable and/or legally discharged.

Interest Income Recognition

Loan Portfolio

Interest income on the Company's residential loan portfolio and commercial loan portfolio is recorded using the effective interest method based on the contractual payment terms of the loan. Any premium amortization or discount accretion will be reflected as a component of "Interest income" in the Consolidated Statements of Operations.

Recently adopted accounting pronouncements

Description	Adoption Date	Effect on Financial Statements
In May 2014, the FASB issued ASU 2014-9, “Revenue from Contracts with Customers (Topic 606).” The guidance changes an entity’s recognition of revenue from contracts with customers.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In addition, the new guidance requires improved disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, the FASB issued implementation guidance which clarifies principal versus agent considerations in reporting revenue gross versus net (ASU 2016-8). In April 2016, the FASB issued implementation guidance which clarifies the identification of performance obligations (ASU 2016-10). In May 2016, the FASB issued amendments that affect only the narrow aspects of Topic 606 (ASU2016-12).	First quarter 2018.	The Company's revenue is mainly derived from interest income on our investments and to a lesser extent gains on sales of investments, which are not impacted by this standard. Therefore, the adoption of this standard did not have a material impact on the Company's consolidated financial statements.
In January 2016, the FASB issued ASU 2016-1, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The guidance improves certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. In February 2018, the FASB issued a separate Update for technical corrections and improvements related to the ASU 2016-01 to increase stakeholders' awareness of the amendments and to expedite the improvements (ASU 2018-3).	First quarter 2018.	The standard does not change the guidance for classifying and measuring investments in debt securities and loans as well nonrecourse liabilities of consolidated collateralized financing entities. Therefore, the adoption of this standard did not have a material impact on the Company's consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230)." The guidance is intended to reduce diversity in practice in how certain transactions are classified on the statement of cash flows.	First quarter 2018 and requires retrospective adoption.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In November 2016, the FASB issued ASU 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB's Emerging Issues Task Force." The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents as well as disclose information about the nature of the restrictions on its cash and cash equivalents.	First quarter 2018 and requires retrospective adoption.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In January 2017, the FASB issued ASU 2017-01 "Business Combinations (Topic 805): Clarifying the Definition of a Business." This ASU provides a more robust framework to use in determining when a set of assets and activities constitutes a business.	First quarter 2018. The guidance should be applied prospectively on or after the effective date.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In May 2017, the FASB issued ASU 2017-09 "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting." The amendments in this update provide guidance about which changes to the terms or conditions of a shared-based payment award require an entity to apply modification accounting in Topic 718.	First quarter 2018.	There are no changes to the terms and conditions of the Company's share-based compensation. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently issued accounting pronouncements

Description	Effective Date	Effect on Financial Statements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard significantly changes how an entity will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through the income statement. The standard will replace the current "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available for sale debt securities, entities will be required to record an allowance rather than reduce the carrying amount, as is currently done under the other than temporary impairment model. It also simplifies the accounting model for purchased credit impaired debt securities and loans.	First quarter 2020.	The Company is currently evaluating the impact the standard may have on its consolidated financial statements when adopted.
In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivative and Hedges (Topic 815): Part I - Accounting for Certain Financial Instruments with Down Round Features and Part II - Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatory Redeemable Noncontrolling Interest with a Scope Exception". Part I of this update changes the classification analysis of certain financial instruments (such as warrants and convertible instruments) with down round features. Down round features are features of certain equity-linked financial instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. Entities that present earnings per share are required to recognize the effect of the down round feature when it is triggered. The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting." The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-09, "Codification Improvements." The amendments in this update affect a wide variety of Topics in the Codification including derivatives and hedging, stock compensation-income taxes, distinguishing liabilities from equity, debt modification and extinguishment, reporting comprehensive income, business combinations-income taxes, financial services and Plan accounting.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this update modify the disclosure requirements on fair value measurements including the consideration of costs and benefits.	First quarter 2020.	The Company is evaluating the impact this standard may have on its consolidated financial statements.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The following tables present the Company’s financial instruments carried at fair value as of September 30, 2018 and December 31, 2017, based upon the valuation hierarchy (dollars in thousands):

	September 30, 2018
	Fair Value
	Level I		Level II		Level III		Total
Assets
Agency RMBS	$	—	$	385,008	$	—	$	385,008
Agency RMBS Interest-Only Strips	—		—		12,203		12,203
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		—		8,006		8,006
Agency CMBS	—		1,958,951		107,124		2,066,075
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		4,241		—		4,241
Subtotal Agency MBS	—		2,348,200		127,333		2,475,533
Non-Agency RMBS	—		26,076		57,274		83,350
Non-Agency RMBS Interest-Only Strips	—		—		15,513		15,513
Non-Agency CMBS	—		266,847		—		266,847
Subtotal Non-Agency MBS	—		292,923		72,787		365,710
Other securities	—		82,820		9,708		92,528
Total mortgage-backed securities and other securities	—		2,723,943		209,828		2,933,771
Residential Whole-Loans	—		—		684,463		684,463
Residential Bridge Loans	—		—		234,747		234,747
Securitized commercial loans	—		—		1,191,048		1,191,048
Commercial Loans	—		—		143,951		143,951
Derivative assets	1,812		888		—		2,700
Total Assets	$	1,812	$	2,724,831	$	2,464,037	$	5,190,680
Liabilities
Derivative liabilities	$	—	$	2,159	$	—	$	2,159
Securitized debt	—		1,116,483		2,606		1,119,089
Total Liabilities	$	—	$	1,118,642	$	2,606	$	1,121,248

	December 31, 2017
	Fair Value
	Level I		Level II		Level III		Total
Assets
Agency RMBS	$	—	$	672,177	$	—	$	672,177
Agency RMBS Interest-Only Strips	—		15,437		—		15,437
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		10,419		—		10,419
Agency CMBS	—		2,137,583		17,217		2,154,800
Agency CMBS Interest-Only Strips	—		10		—		10
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		5,757		—		5,757
Subtotal Agency MBS	—		2,841,383		17,217		2,858,600
Non-Agency RMBS	—		90,819		13		90,832
Non-Agency RMBS Interest-Only Strips	—		—		8,722		8,722
Non-Agency CMBS	—		278,604		—		278,604
Subtotal Non-Agency MBS	—		369,423		8,735		378,158
Other securities	—		112,826		9,239		122,065
Total mortgage-backed securities and other securities	—		3,323,632		35,191		3,358,823
Residential Whole-Loans	—		—		237,423		237,423
Residential Bridge Loans	—		—		64,526		64,526
Securitized commercial loan	—		—		24,876		24,876
Derivative assets	728		—		—		728
Total Assets	$	728	$	3,323,632	$	362,016	$	3,686,376
Liabilities
Derivative liabilities	$	50	$	4,296	$	—	$	4,346
Securitized debt	—		—		10,945		10,945
Total Liabilities	$	50	$	4,296	$	10,945	$	15,291

When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will use independent pricing services and if the independent pricing service cannot price a particular asset or liability, the Company will obtain third party broker quotes.  The Manager’s pricing group, which functions independently from its portfolio management personnel, reviews the third party broker quotes by comparing the broker quotes for reasonableness to alternate sources when available.  If independent pricing service, or third party broker quotes are not available, the Company determines the fair value of the securities using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and when applicable, estimates of prepayments and credit losses.

In instances when the Company is required to consolidate a VIE that is determined to be a qualifying collateralized financing entity ("CFE"), under GAAP, the Company will measure both the financial assets and financial liabilities of the VIE using the fair value of either the VIE’s financial assets or financial liabilities, whichever is more observable.

Mortgage-backed securities and other securities

In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. Agency RMBS, given the amount of available observable market data, are classified in Level II.  For Non-Agency RMBS, CMBS and other securities, to determine whether a security should be a Level II, the securities are grouped by security type and the Manager reviews the internal trade history, for the quarter, for each security type. If there is sufficient trade data above a predetermined threshold of a security type, the Manager determines it has sufficient observable market data and the security will be categorized as a Level II.

Values for the Company’s securities are based upon prices obtained from independent third party pricing services. The valuation methodology of the third party pricing services incorporates a commonly used market pricing method. Depending on the type of asset and the underlying collateral, the primary inputs to the model include yields for TBAs, Agency RMBS, the U.S. Treasury market and floating rate indices such as LIBOR, the Constant Maturity Treasury rate and the prime rate as a benchmark yield. In addition, the model may incorporate the current weighted average maturity and additional pool level information such as prepayment speeds, default frequencies and default severities, if applicable. When the third party pricing service cannot adequately price a particular security, the Company utilizes a broker’s quote which is reviewed for reasonableness by the Manager’s pricing group.

Residential Whole-Loans and Residential Bridge Loans

Values for the Company's Residential Whole-Loans and Bridge Loans are based upon prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a discounted cash flow valuation model that is calibrated to recent loan trade execution. Their valuation methodology incorporates commonly used market pricing methods, including loan to value ("LTV"), debt to income, maturity, interest rates, collateral location, and unpaid principal balance, prepayment penalties, FICO scores, lien position and times late. Due to the inherent uncertainty of such valuation, the fair values established for residential loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's loans are classified as Level III.

Commercial Loans

Values for the Company's Commercial Loans are based upon either prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a valuation model that is calibrated to recent loan trade execution or a broker quote. The third party pricing service uses a discounted cash flow valuation methodology that incorporates commonly used market pricing methods, including LTV, debt to income, maturity, interest rates, collateral location, and unpaid principal balance, prepayment penalties, lien position and times late. Due to the inherent uncertainty of such valuation, the fair values established for commercial loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's commercial loans are classified as a Level III.

Securitized commercial loans

Values for the Company’s securitized commercial loans are based on the CFE valuation methodology.  Since there is an extremely limited market for the securitized commercial loans, the Company determined the securitized debt is more actively traded and therefore was more observable.  Due to the inherent uncertainty of such valuation, the Company classifies its securitized commercial loans as Level III.

Securitized debt

In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. Since the securitized debt represents traded debt securities, the Manager's pricing team reviews the trade activity during the quarter for each security to determine the appropriate level within the fair value hierarchy. If there is sufficient trade data above a predetermined threshold, the Manager determines it has sufficient observable market data and the debt security will be categorized as a Level II. If there is not sufficient observable market data the debt security will be categorized as a Level III.

Derivatives

Values for the Company's derivatives are based upon prices from third party pricing services, whose pricing is subject to review by the Manager’s pricing committee. In valuing its over-the-counter interest rate derivatives, such as swaps and swaptions, its currency derivatives, such as swaps and forwards and credit derivatives such as total return swaps, the Company considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each derivative agreement, from the perspective of both the Company and its counterparties. No credit valuation adjustment was made in determining the fair value of interest rate and/or currency derivatives for the periods ended September 30, 2018 and December 31, 2017.

The Company performs quarterly reviews of the independent third party pricing data. These reviews may consist of a review of the daily change in the prices provided by the independent pricing vendor which exceed established tolerances or comparisons to executed transaction prices, utilizing the Manager’s pricing group.  The Manager’s pricing group, which functions independently from its portfolio management personnel, reviews the price differences or changes in price by comparing the vendor price to alternate sources including other independent pricing services or broker quotations.  If the price change or difference cannot be corroborated, the Manager’s pricing group consults with the portfolio management team for market color in reviewing such pricing data as warranted.  To the extent that the Manager has information, typically in the form of broker quotations that would indicate that a price received from the independent pricing service is outside of a tolerance range, the Manager generally challenges the independent pricing service price.

The following tables present additional information about the Company’s financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level III inputs to determine fair value:

	Three months ended September 30, 2018
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Residential Bridge Loans			Commercial Loans			Securitized  commercial  loans			Securitized debt
Beginning balance	$	75,043		$	16,307		$	8,955		$	335,149		$	236,359		$	70,717		$	1,309,195		$	2,870
Transfers into Level III from Level II	—			57,275			9,708			—			—			—			—			—
Transfers from Level III into Level II	(51,976		)	—			(8,697		)	—			—			—			—			—
Purchases	107,034			—			—			372,348			70,465			94,313			—			—
Principal repayments	(42		)	(14		)	(285		)	(21,258		)	(70,341		)	(20,638		)	(117,100		)	—
Total net gains / losses included in net income
Other than temporary impairment	(384		)	(142		)	—			—			—			—			—			—
Unrealized gains/(losses), net on assets(1)	(1,007		)	(95		)	(15		)	(1,469		)	(1,103		)	(575		)	282			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			—			—			(330		)
Premium and discount amortization, net	(1,335		)	(544		)	42			(307		)	(633		)	134			(1,329		)	66
Ending balance	$	127,333		$	72,787		$	9,708		$	684,463		$	234,747		$	143,951		$	1,191,048		$	2,606
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	(668	)	$	(94	)	$	—		$	(1,231	)	$	(844	)	$	(618	)	$	282		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	330

	Three months ended September 30, 2017
$ in thousands	Agency MBS		Non-Agency MBS			Other Securities			Residential  Whole-Loans			Securitized  commercial  loan			Securitized debt			Derivative liability
Beginning balance	$	—	$	14,326		$	22,405		$	203,540		$	24,875		$	10,945		$	329
Transfers into Level III from Level II	—		—			9,470			—			—			—			—
Transfers from Level III into Level II	—		—			(23,852		)	—			—			—			—
Purchases	2,009		—			—			—			—			—			—
Sales and settlements	—		—			—			—			—			—			(53		)
Principal repayments	—		(388		)	—			(11,264		)	(59		)	(26		)	—
Total net gains / losses included in net income						0
Realized (gains)/losses, net on liabilities	—		—			—			—			—			—			53
Other than temporary impairment	—		—			(121		)	—			—			—			—
Unrealized gains/(losses), net on assets(1)	—		291			1,094			(575		)	136			—			—
Unrealized (gains)/losses, net on liabilities(2)	—		—			—			—			—			60			(329		)
Premium and discount amortization, net	—		33			474			(262		)	—			—			—
Ending balance	$	2,009	$	14,262		$	9,470		$	191,439		$	24,952		$	10,979		$	—
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	—	$	291		$	—		$	(356	)	$	136		$	—		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—	$	—		$	—		$	—		$	—		$	(60	)	$	—

	Nine months ended September 30, 2018
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Residential Bridge Loans			Commercial Loans			Securitized  commercial  loans			Securitized debt
Beginning balance	$	17,217		$	8,735		$	9,239		$	237,423		$	64,526		$	—		$	24,876		$	10,945
Transfers into Level III from Level II	22,794			57,275			9,708			—			—			—			—			—
Transfers from Level III into Level II	(16,805		)	—			(8,697		)	—			—			—			—			(10,899		)
Purchases	109,002			8,602			—			486,354			221,619			144,035			1,353,019			—
Sales and settlements	—			—			—			—			—			—			—			12
Principal repayments	(53		)	(14		)	(604		)	(36,092		)	(49,503		)	—			(196,007		)	(44		)
Total net gains / losses included in net income
Other than temporary impairment	(590		)	(191		)	—			—			—			—			—			—
Unrealized gains/(losses), net on assets(1)	(1,447		)	(149		)	(68		)	(2,644		)	(1,217		)	(159		)	11,152			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			—			—			2,502
Premium and discount amortization, net	(2,785		)	(1,471		)	130			(578		)	(678		)	75			(1,992		)	90
Ending balance	$	127,333		$	72,787		$	9,708		$	684,463		$	234,747		$	143,951		$	1,191,048		$	2,606
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	(1,089	)	$	(148	)	$	—		$	(2,101	)	$	(832	)	$	(159	)	$	11,152		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	(2,504	)

	Nine months ended September 30, 2017
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Securitized  commercial  loan			Securitized debt			Derivative liability
Beginning balance	$	73,059		$	75,576		$	31,356		$	192,136		$	24,225		$	10,659		$	1,673
Transfers into Level III from Level II	—			15,610			9,470			—			—			—			—
Transfers from Level III into Level II	(73,715		)	(7,434		)	(33,080		)	—			—			—			—
Purchases	2,009			—			—			33,718			—			—			—
Sales and settlements	—			(60,132		)	—			—			—			—			(552		)
Principal repayments	—			(2,463		)	(172		)	(33,718		)	(59		)	(26		)	—
Total net gains / losses included in net income
Realized gains/(losses), net on assets	—			2,623			—			—			—			—			—
Realized (gains)/losses, net on liabilities	—			—			—			—			—			—			552
Other than temporary impairment	—			—			(1,823		)	—			—			—			—
Unrealized gains/(losses), net on assets(1)	636			(8,715		)	1,550			97			786			—			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			346			(1,673		)
Premium and discount amortization, net	20			(803		)	2,169			(794		)	—			—			—
Ending balance	$	2,009		$	14,262		$	9,470		$	191,439		$	24,952		$	10,979		$	—
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	—		$	684		$	72		$	347		$	786		$	—		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	(346	)	$	—

(1) Gains and losses are included in "Unrealized gain (loss), net" in the Consolidated Statements of Operations.

(2) Gains and losses on securitized debt and derivative liability are included in "Unrealized gain (loss), net" and "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations, respectively.

Transfers between hierarchy levels during operations for the three and nine months ended September 30, 2018 and September 30, 2017 were based on the availability of sufficient observable inputs. Movements from Level II to Level III was based on information received from a third party pricing service which, along with the back-testing of historical sales transactions performed by the Manager, which did not provide sufficient observable data to meet Level II versus Level III criteria, resulting in the movement from Level II to Level III. Movements form Level III to Level II was based on information received from a third party pricing service which, along with the back-testing of historical sales transactions performed by the Manager, which provided the sufficient observable data for the movement from Level III to Level II. The Company did not have transfers between either Level I and Level II or Level I and Level III for the three and nine months ended September 30, 2018 and September 30, 2017.

Other Fair Value Disclosures

Certain Residential Bridge Loans, repurchase agreement borrowings and convertible senior unsecured notes are not carried at fair value in the consolidated financial statements. The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value as of September 30, 2018 and December 31, 2017 in the consolidated financial statements (dollars in thousands):

	September 30, 2018				December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets
Residential Bridge Loans	$	14,724	$	14,479	$	42,147	$	42,881
Total	$	14,724	$	14,479	$	42,147	$	42,881
Liabilities
Borrowings under repurchase agreements	$	3,469,319	$	3,591,751	$	3,251,686	$	3,257,956
Convertible senior unsecured notes	109,731		115,385		108,743		114,819
Total	$	3,579,050	$	3,707,136	$	3,360,429	$	3,372,775

"Due from counterparties" and "Due to counterparties" in the Company’s Consolidated Balance Sheets are reflected at cost which approximates fair value.

Residential Bridge Loans

The fair values of the Residential Bridge Loans are based upon prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a valuation model that is calibrated to recent loan trade execution. Their valuation methodology uses a discounted cash flow model and incorporates commonly used market pricing methods, including LTV debt to income, maturity, interest rates, collateral location, and unpaid principal balance, prepayment penalties, FICO scores, lien position and times late. Due to the inherent uncertainty of such valuation, the fair values established for residential bridge loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's loans are classified as Level III.

Borrowings under repurchase agreements

The fair values of the borrowings under repurchase agreements are based on a net present value technique. This method discounts future estimated cash flows using rates the Company determined best estimates current market interest rates that would be offered for loans with similar characteristics and credit quality. The use of different market assumptions or estimation methodologies could have a material effect on the fair value amounts. This fair value measurement is based on observable inputs, and as such, are classified as Level II.

Convertible senior unsecured notes

The fair value of the convertible senior unsecured notes is based on quoted market prices. Accordingly, the Company's convertible senior unsecured notes are classified as Level I.

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Mortgage-Backed Securities and other securities

9 Months Ended

Sep. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Mortgage-Backed Securities and other securities

Mortgage-Backed Securities and other securities

The following tables present certain information about the Company’s investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Principal Balance		Unamortized Premium (Discount), net			Discount Designated as Credit Reserve and OTTI			Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Net Weighted Average Coupon
Agency RMBS	$	389,756	$	13,133		$	—		$	402,889	$	—	$	(17,881	)	$	385,008	3.6	%
Agency RMBS Interest-Only Strips (2)	N/A		N/A			N/A			12,377		724		(898		)	12,203		2.3	%	(1)
Agency RMBS Interest-Only Strips, accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			8,006		2.8	%	(1)
Subtotal Agency RMBS	389,756		13,133			—			415,266		724		(18,779		)	405,217		3.2	%
Agency CMBS	2,124,942		4,970			—			2,129,912		563		(64,400		)	2,066,075		3.2	%
Agency CMBS Interest-Only Strips accounted for as derivatives(1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			4,241		0.4	%	(1)
Subtotal Agency CMBS	2,124,942		4,970			—			2,129,912		563		(64,400		)	2,070,316		3.0	%
Total Agency MBS	2,514,698		18,103			—			2,545,178		1,287		(83,179		)	2,475,533		3.0	%
Non-Agency RMBS	113,606		5,568			(39,585		)	79,589		4,344		(583		)	83,350		4.4	%
Non-Agency RMBS Interest- Only Strips (1)	N/A		N/A			N/A			15,677		—		(164		)	15,513		0.5	%	(1)
Subtotal Non-Agency RMBS	113,606		5,568			(39,585		)	95,266		4,344		(747		)	98,863		1.0	%
Non-Agency CMBS	322,255		(29,014		)	(24,976		)	268,265		3,959		(5,377		)	266,847		5.9	%
Total Non-Agency MBS	435,861		(23,446		)	(64,561		)	363,531		8,303		(6,124		)	365,710		2.2	%
Other securities (3)	71,420		2,116			(9,891		)	82,349		10,247		(68		)	92,528		9.0	%
Total	$	3,021,979	$	(3,227	)	$	(74,452	)	$	2,991,058	$	19,837	$	(89,371	)	$	2,933,771	2.9	%

	December 31, 2017
	Principal Balance		Unamortized Premium (Discount), net			Discount  Designated as Credit Reserve and OTTI			Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Net Weighted Average Coupon
Agency RMBS	$	641,044	$	28,876		$	—		$	669,920	$	4,571	$	(2,314	)	$	672,177	3.9	%
Agency RMBS Interest-Only Strips (1)	N/A		N/A			N/A			14,750		878		(191		)	15,437		2.9	%	(1)
Agency RMBS Interest-Only Strips, accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			10,419		2.9	%	(1)
Subtotal Agency RMBS	641,044		28,876			—			684,670		5,449		(2,505		)	698,033		3.6	%
Agency CMBS	2,145,139		2,142			—			2,147,281		16,913		(9,394		)	2,154,800		2.9	%
Agency CMBS Interest-Only Strips(1)	N/A		N/A			N/A			—		10		—			10		3.2	%	(1)
Agency CMBS Interest-Only Strips accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			5,757		0.5	%	(1)
Subtotal Agency CMBS	2,145,139		2,142			—			2,147,281		16,923		(9,394		)	2,160,567		2.7	%
Total Agency MBS	2,786,183		31,018			—			2,831,951		22,372		(11,899		)	2,858,600		3.0	%
Non-Agency RMBS	119,748		5,263			(39,491		)	85,520		5,473		(161		)	90,832		3.8	%
Non-Agency RMBS Interest- Only Strips (1)	N/A		N/A			N/A			8,738		—		(16		)	8,722		0.9	%	(1)
Subtotal Non-Agency RMBS	119,748		5,263			(39,491		)	94,258		5,473		(177		)	99,554		1.8	%
Non-Agency CMBS	379,183		(59,129		)	(28,020		)	292,034		1,702		(15,132		)	278,604		4.8	%
Total Non-Agency MBS	498,931		(53,866		)	(67,511		)	386,292		7,175		(15,309		)	378,158		3.3	%
Other securities (3)	86,305		6,300			(5,404		)	110,091		12,161		(187		)	122,065		7.8	%
Total	$	3,371,419	$	(16,548	)	$	(72,915	)	$	3,328,334	$	41,708	$	(27,395	)	$	3,358,823	3.1	%

(1) IOs and IIOs have no principal balances and bear interest based on a notional balance.  The notional balance is used solely to determine interest distributions on interest-only class of securities.  At September 30, 2018, the notional balance for Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, Agency RMBS IOs and IIOs, accounted for as derivatives and Agency CMBS IOs and IIOs, accounted for as derivatives was $166.4 million, $822.0 million, $96.2 million and $173.9 million, respectively.  At December 31, 2017, the notional balance for Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, Agency RMBS IOs and IIOs, accounted for as derivatives, Agency CMBS IOs and IIOs, accounted for as derivatives and Agency CMBS IOs and IIOs was $165.5 million, $278.4 million, $122.0 million, $192.5 million and $3.3 million, respectively.

(2) Interest on these securities is reported as a component of "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

(3) Other securities include residual interests in asset-backed securities which have no principal balance and an amortized cost of approximately $18.7 million and $22.9 million, as of September 30, 2018 and December 31, 2017, respectively.

As of September 30, 2018 and December 31, 2017 the weighted average expected remaining term of the MBS and other securities investment portfolio was 9.0 years and 8.6 years, respectively.

The following tables present the changes in the components of the Company’s purchase discount and amortizable premium on its Non-Agency RMBS, Non-Agency CMBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	Three months ended September 30, 2018									Three months ended September 30, 2017
	Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)			Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)
Balance at beginning of period	$	(78,837	)	$	(68,677	)	$	21,723		$	(49,830	)	$	(76,778	)	$	15,186
Accretion of discount	—			1,314			—			—			2,588			—
Amortization of premium	—			—			(97		)	—			—			(87		)
Realized credit losses	3,305			—			—			25			—			—
Purchases	—			—			—			—			—			—
Sales	2,334			25,624			(400		)	187			1,931			(18		)
Net impairment losses recognized in earnings	(2,071		)	—			—			(2,345		)	—			—
Transfers/release of credit reserve(2)	817			8			(825		)	(866		)	953			(87		)
Balance at end of period	$	(74,452	)	$	(41,731	)	$	20,401		$	(52,829	)	$	(71,306	)	$	14,994

	Nine months ended September 30, 2018									Nine months ended September 30, 2017
	Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)			Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)
Balance at beginning of period	$	(72,915	)	$	(68,438	)	$	20,872		$	(130,484	)	$	(109,822	)	$	44,527
Accretion of discount	—			6,483			—			—			8,542			—
Amortization of premium	—			—			(461		)	—			—			(776		)
Realized credit losses	5,526			—			—			1,854			—			—
Purchases	(7,182		)	(6,473		)	435			(1,724		)	(668		)	1,522
Sales	5,673			29,352			(1,084		)	89,628			32,016			(31,060		)
Net impairment losses recognized in earnings	(7,570		)	—			—			(12,696		)	—			—
Transfers/release of credit reserve(2)	2,016			(2,655		)	639			593			(1,374		)	781
Balance at end of period	$	(74,452	)	$	(41,731	)	$	20,401		$	(52,829	)	$	(71,306	)	$	14,994

(1) Together with coupon interest, accretable purchase discount and amortizable premium is recognized as interest income over the life of the security.

(2) Subsequent reductions of a security’s non-accretable discount results in a corresponding reduction in its amortizable premium.

The following tables present the fair value and contractual maturities of the Company’s investment securities at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	< or equal to 10 years		> 10 years and < or equal to 20 years		> 20 years and < or equal to 30 years		> 30 years		Total
Agency RMBS	$	—	$	—	$	57,572	$	327,436	$	385,008
Agency RMBS Interest-Only Strips	3,937		2,436		5,830		—		12,203
Agency RMBS Interest-Only Strips, accounted for as derivatives	1,223		4,104		2,679		—		8,006
Agency CMBS	1,507,428		558,647		—		—		2,066,075
Agency CMBS Interest-Only Strips accounted for as derivatives	—		—		—		4,241		4,241
Subtotal Agency	1,512,588		565,187		66,081		331,677		2,475,533
Non-Agency RMBS	—		24,752		16,757		41,841		83,350
Non-Agency RMBS Interest- Only Strips	—		—		7,900		7,613		15,513
Non-Agency CMBS	28,752		80,180		104,617		53,298		266,847
Subtotal Non-Agency	28,752		104,932		129,274		102,752		365,710
Other securities	3,782		59,908		—		28,838		92,528
Total	$	1,545,122	$	730,027	$	195,355	$	463,267	$	2,933,771

	December 31, 2017
	< or equal to 10  years		> 10 years and < or  equal to 20 years		> 20 years and < or  equal to 30 years		> 30 years		Total
Agency RMBS	$	—	$	56,228	$	239,197	$	376,752	$	672,177
Agency RMBS Interest-Only Strips	3,920		4,591		6,926		—		15,437
Agency RMBS Interest-Only Strips, accounted for as derivatives	1,686		5,139		3,594		—		10,419
Agency CMBS	1,599,620		555,180		—		—		2,154,800
Agency CMBS Interest-Only Strips	10		—		—		—		10
Agency CMBS Interest-Only Strips accounted for as derivatives	—		—		—		5,757		5,757
Subtotal Agency	1,605,236		621,138		249,717		382,509		2,858,600
Non-Agency RMBS	13		51,092		4,184		35,543		90,832
Non-Agency RMBS Interest- Only Strips	—		—		—		8,722		8,722
Non-Agency CMBS	—		60,583		139,209		78,812		278,604
Subtotal Non-Agency	13		111,675		143,393		123,077		378,158
Other securities	—		99,062		—		23,003		122,065
Total	$	1,605,249	$	831,875	$	393,110	$	528,589	$	3,358,823

The following tables present the gross unrealized losses and estimated fair value of the Company’s MBS and other securities by length of time that such securities have been in a continuous unrealized loss position at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Less than 12 Months						12 Months or More						Total
	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities
Agency RMBS	$	115,378	$	(3,131	)	8	$	269,630	$	(14,750	)	2	$	385,008	$	(17,881	)	10
Agency RMBS Interest-Only Strips	3,588		(394		)	9	2,753		(504		)	6	6,341		(898		)	15
Agency CMBS	1,135,925		(32,175		)	76	516,838		(32,225		)	37	1,652,763		(64,400		)	113
Subtotal Agency	1,254,891		(35,700		)	93	789,221		(47,479		)	45	2,044,112		(83,179		)	138
Non-Agency RMBS	29,798		(583		)	5	—		—			—	29,798		(583		)	5
Non-Agency RMBS Interest-Only Strips	8,003		(164		)	2	—		—			—	8,003		(164		)	2
Non-Agency CMBS	70,410		(894		)	15	57,263		(4,483		)	12	127,673		(5,377		)	27
Subtotal Non-Agency	108,211		(1,641		)	22	57,263		(4,483		)	12	165,474		(6,124		)	34
Other securities	8,697		(68		)	1	—		—			—	8,697		(68		)	1
Total	$	1,371,799	$	(37,409	)	116	$	846,484	$	(51,962	)	57	$	2,218,283	$	(89,371	)	173

	December 31, 2017
	Less than 12 Months						12 Months or More						Total
	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities
Agency RMBS	$	330,259	$	(2,179	)	11	$	1,632	$	(135	)	5	$	331,891	$	(2,314	)	16
Agency RMBS Interest-Only Strips	3,095		(142		)	6	1,703		(49		)	3	4,798		(191		)	9
Agency CMBS	955,559		(9,394		)	57	—		—			—	955,559		(9,394		)	57
Subtotal Agency	1,288,913		(11,715		)	74	3,335		(184		)	8	1,292,248		(11,899		)	82
Non-Agency RMBS	28,508		(161		)	3	—		—			—	28,508		(161		)	3
Non-Agency RMBS Interest-Only Strips	8,722		(16		)	3	—		—			—	8,722		(16		)	3
Non-Agency CMBS	69,661		(1,753		)	15	119,729		(13,379		)	35	189,390		(15,132		)	50
Subtotal Non-Agency	106,891		(1,930		)	21	119,729		(13,379		)	35	226,620		(15,309		)	56
Other securities	23,800		(187		)	3	—		—			—	23,800		(187		)	3
Total	$	1,419,604	$	(13,832	)	98	$	123,064	$	(13,563	)	43	$	1,542,668	$	(27,395	)	141

The Company identified two securities with an unpaid principal balance of $4.1 million which it intended to sell that were in an unrealized loss position held at September 30, 2018, and as a result, the Company recognized an impairment charge of approximately $161 thousand on Non-Agency CMBS which is included in "Other than temporary impairment" in the Company's Consolidated Statements of Operations.

Generally, the Company records Other Than Temporary Impairment ("OTTI") when the credit quality of the underlying collateral deteriorates and or the scheduled payments are faster than previously projected.  The credit deterioration could be as a result of, but not limited to, increased projected realized losses, foreclosures, delinquencies and the likelihood of the borrower being able to make payments in the future.  Generally, a prepayment occurs when a loan has a higher interest rate relative to current interest rates and lenders are willing to extend credit at the lower current interest rate or the underlying collateral for the loan is sold or transferred. Refer to Note 2 "Summary of Significant Accounting Policies - Mortgage-Backed Securities and Other Securities."

The following table presents the OTTI the Company recorded on its securities portfolio (dollars in thousands):

	Three months ended September 30, 2018		Three months ended September 30, 2017		Nine months ended September 30, 2018		Nine months ended September 30, 2017
Agency RMBS (1)	$	320	$	4,760	$	663	$	5,420
Non-Agency RMBS	159		—		269		—
Non-Agency CMBS	2,054		2,344		7,491		12,658
Other securities	—		121		—		1,823
Total	$	2,533	$	7,225	$	8,423	$	19,901

(1) Normally, unrealized losses on Agency securities (excluding Agency IO's) with the explicit guarantee of principal and interest by the governmental sponsored entity are not credit losses but rather due to changes in interest rates and prepayment expectations. These securities would not be considered other than temporarily impaired provided the Company did not intend to sell the security. For the three and nine months ended September 30, 2018 and September 30, 2017, $0, $0, $4.7 million and $4.7 million, respectively, of OTTI related to Agency RMBS securities the Company intended to sell.

The following tables present components of interest income on the Company’s MBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017, respectively (dollars in thousands):

	For the three months ended September 30, 2018							For the three months ended September 30, 2017
	Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income		Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income
Agency RMBS	$	4,551	$	(1,138	)	$	3,413	$	8,886	$	(2,995	)	$	5,891
Agency CMBS	13,812		(298		)	13,514		11,071		110			11,181
Non-Agency RMBS	2,139		(536		)	1,603		571		372			943
Non-Agency CMBS	5,379		1,469			6,848		4,242		2,139			6,381
Other securities	3,674		(1,660		)	2,014		2,160		464			2,624
Total	$	29,555	$	(2,163	)	$	27,392	$	26,930	$	90		$	27,020

	Nine months ended September 30, 2018							Nine months ended September 30, 2017
	Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income		Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income
Agency RMBS	$	17,471	$	(4,112	)	$	13,359	$	30,513	$	(10,662	)	$	19,851
Agency CMBS	45,753		(266		)	45,487		24,408		717			25,125
Non-Agency RMBS	5,616		(685		)	4,931		4,482		303			4,785
Non-Agency CMBS	15,362		5,873			21,235		14,675		6,572			21,247
Other securities	11,610		(4,825		)	6,785		5,300		2,112			7,412
Total	$	95,812	$	(4,015	)	$	91,797	$	79,378	$	(958	)	$	78,420

The following tables present the sales and realized gain (loss) of the Company’s MBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017, respectively (dollars in thousands):

	For the three months ended September 30, 2018										For the three months ended September 30, 2017
	Proceeds		Gross Gains		Gross Losses			Net Gain  (Loss)			Proceeds			Gross Gains			Gross Losses			Net Gain (Loss)
Agency RMBS(1)	$	—	$	—	$	—		$	—		$	(2,906	)	$	(3	)	$	51		$	48
Agency CMBS	641,677		—		(25,640		)	(25,640		)	—			—			—			—
Non-Agency CMBS	73,848		2,411		(2,712		)	(301		)	10,597			1,641			(278		)	1,363
Other securities	13,712		1,712		—			1,712			10,419			419			—			419
Total	$	729,237	$	4,123	$	(28,352	)	$	(24,229	)	$	18,110		$	2,057		$	(227	)	$	1,830

(1) For the three months ended September 30, 2017 reflects a reclassification of proceeds from a sale on the trade date to reflect subsequent Agency RMBS paydowns.

	Nine months ended September 30, 2018										Nine months ended September 30, 2017
	Proceeds		Gross Gains		Gross Losses			Net Gain  (Loss)			Proceeds		Gross Gains		Gross Losses			Net Gain (Loss)
Agency RMBS(1)	$	209,581	$	18	$	(4,531	)	$	(4,513	)	$	862,245	$	4,376	$	(7,314	)	$	(2,938	)
Agency CMBS	768,544		—		(30,656		)	(30,656		)	—		—		—			—
Non-Agency RMBS(2)	51,958		3,114		—			3,114			243,811		24,389		(2,242		)	22,147
Non-Agency CMBS	80,554		2,472		(3,148		)	(676		)	45,634		2,377		(1,351		)	1,026
Other securities	35,469		3,469		—			3,469			33,365		419		(54		)	365
Total	$	1,146,106	$	9,073	$	(38,335	)	$	(29,262	)	$	1,185,055	$	31,561	$	(10,961	)	$	20,600

(1) For the nine months ended September 30, 2017, excludes proceeds for Agency RMBS Interest-Only Strips, accounted for as derivatives, of approximately $2.6 million and gross realized gains of $432 thousand, respectively.

(2) For the nine months ended September 30, 2017, excludes proceeds for Non-Agency RMBS Interest-Only Strips, accounted for as derivatives, of approximately $2.2 million, gross realized gains of $274 thousand and gross realized losses of $180 thousand, respectively.

Unconsolidated CMBS VIEs

The Company’s economic interests held in unconsolidated CMBS VIEs are limited in nature to those of a passive holder of CMBS issued by securitization trusts; the Company was not involved in the design or creation of the securitization trusts. The Company evaluates its CMBS holdings, for potential consolidation of the securitized trust, in which it owns the most subordinate tranche or a portion of the controlling class. As of September 30, 2018, the Company held seven variable interest in CMBS VIEs and had three variable interests in CMBS VIE's as of December 31, 2017, in which it either owned the most subordinate class or a portion of the controlling class. The Company determined it was not the primary beneficiary and accordingly, the CMBS VIEs were not consolidated in the Company’s consolidated financial statements. As of September 30, 2018 and December 31, 2017, the Company’s maximum exposure to loss from these variable interests did not exceed the carrying value of these investments of $116.1 million and $62.1 million. These investments are classified in "Non-Agency mortgage-backed securities, at fair value" in the Company’s Consolidated Balance Sheets. Further, as of September 30, 2018 and December 31, 2017, the Company did not guarantee any obligations of unconsolidated entities or enter into any commitment or intent to provide funding to any such entities.

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Residential Whole-Loans and Bridge Loans

9 Months Ended

Sep. 30, 2018

Variable Interest Entities

Residential Whole-Loans and Bridge Loans

Residential Whole-Loans and Bridge Loans

Residential Whole-Loan Trust

The consolidated financial statements include the consolidation of Revolving Mortgage Investment Trust 2015-1QR2 ("RMI 2015 Trust") since it met the definition of a VIE and the Company determined that it was the primary beneficiary of the trust because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust.  RMI 2015 Trust has issued a trust certificate that is wholly owned by the Company and represents the entire beneficial interest in pools of Non-QM Residential Whole-Loans and the Commercial Loan held by the trust. As of September 30, 2018, the Company financed the trust certificate with $334.9 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying Residential Whole-Loans owned by the trust in "Residential Whole-Loans, at fair value" and the Commercial Loan in "Commercial Loans, at fair value" in the Consolidated Balance Sheets and has eliminated the intercompany trust certificate in consolidation. Refer to Note 6 - "Commercial Loans" for details on the commercial real estate mortgage loan.

In August 2018, the Company formed Revolving Mortgage Investment Trust 2018-RCR ("RCR Trust") to acquire conforming Residential Whole-Loans. The Company determined that RCR Trust was a VIE and that the Company was the primary beneficiary of the trust because it was involved in the design of the trust of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $258.1 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying conforming mortgages owned by the trust in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

In September 2018, the Company formed Revolving Mortgage Investment Trust 2018-RNR ("RNR Trust") to acquire Non-QM Residential Whole-Loans. The Company determined that RNR Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $15.3 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying Non-QM Residential Whole-Loans in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

Residential Bridge Loan Trust

In February 2017, The Company formed Revolving Mortgage Investment Trust 2017-BRQ1 ("RMI 2017 Trust") and acquired the trust certificate, which represents the beneficial interest in pools of Residential Bridge Loans and certain Residential Whole-Loans held by the trust. Residential Bridge Loans are mortgage loans secured by residences, typically short-term. The Company determined that RMI Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $219.7 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies both the underlying Residential Bridge Loans carried at amortized cost and the Residential Bridge Loans that it elected the fair value option in "Residential Bridge Loans" and the Residential Whole-Loans in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

Consolidated Residential Whole-Loan and Residential Bridge Loan Trusts

The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.  The three consolidated Residential Whole-Loan trusts collectively hold 1,936 Residential Whole-Loans and one commercial loan and the consolidated Bridge Loan Trust holds 673 Residential Bridge Loans and 13 Residential Whole-Loans as of September 30, 2018. 

The following table presents a summary of the assets and liabilities of the consolidated residential whole-loan trusts, residential bridge loan trust included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)	$	684,463	$	237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)	249,471		106,673
Commercial loan, at fair value	29,831		—
Investment related receivable	33,430		7,665
Interest receivable	8,874		3,197
Other assets	203		—
Total assets	$	1,006,272	$	354,958
Accounts payable and accrued expenses	722		188
Other liabilities	393		—
Total liabilities	$	1,115	$	188

The Company’s risk with respect to its investment in each residential loan trust is limited to its direct ownership in the trust. The Residential Whole-Loans, Residential Bridge Loans and Commercial Loan held by the consolidated trusts are held solely to satisfy the liabilities of the trust, and creditors of the trust have no recourse to the general credit of the Company. The Company is not contractually required and has not provided any additional financial support to the trusts for the three and nine months ended September 30, 2018 and September 30, 2017. 

The following table presents the components of the carrying value of Residential Whole-Loans and Residential Bridge Loans as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	Residential Whole-Loans, at Fair Value						Residential Bridge Loans, at Fair Value(1)						Residential Bridge Loans, at Amortized Cost(1)
	September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017
Principal balance	$	674,763		$	232,270		$	234,445		$	63,802		$	14,734		$	42,066
Unamortized premium	10,592			2,021			1,426			293			28			122
Unamortized discount	(2,499		)	(1,190		)	(434		)	(128		)	(38		)	(41		)
Amortized cost	682,856			233,101			235,437			63,967			14,724			42,147
Gross unrealized gains	5,506			4,463			525			655			N/A			N/A
Gross unrealized losses	(3,899		)	(141		)	(1,215		)	(96		)	N/A			N/A
Fair value	$	684,463		$	237,423		$	234,747		$	64,526		N/A			N/A

(1) These loans are classified in "Residential Bridge Loans" in the Consolidated Balance Sheets.

Residential Whole-Loans

The Residential Whole-Loans have low LTV's and are comprised of 1,034 non-qualifying adjustable rate mortgages, 902 conforming fixed rate mortgages and 13 investor fixed rate mortgages.  The following tables present certain information about the Company’s Residential Whole-Loan investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

September 30, 2018
				Weighted Average
Current Coupon Rate	Number of Loans	Principal  Balance		Original LTV		Original  FICO Score(1)	Expected  Life (years)	Contractual  Maturity  (years)	Coupon  Rate
3.01 – 4.00%	69	$	22,732	61.4	%	738	7.5	29.3	3.9	%
4.01– 5.00%	1,159	405,934		62.2	%	734	3.6	28.8	4.7	%
5.01 – 6.00%	708	238,961		63.2	%	709	2.8	28.0	5.4	%
6.01 – 7.00%	11	6,685		64.9	%	748	1.4	25.4	6.3	%
7.01 - 8.00%	1	357		70.0	%	777	1.9	29.3	7.2	%
8.01 - 9.00%	1	94		70.0	%	689	1.9	29.3	8.4	%
Total	1,949	$	674,763	62.6	%	727	3.4	28.5	4.9	%

(1) The original FICO score is not available for 240 loans with a principal balance of approximately $81.6 million at September 30, 2018. The Company has excluded these loans from the weighted average computations.

December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal  Balance		Original LTV		Original  FICO Score(1)	Expected  Life (years)	Contractual  Maturity  (years)	Coupon  Rate
3.01 – 4.00%	142	$	55,593	55.5	%	751	1.7	29.1	3.9	%
4.01– 5.00%	338	125,860		56.9	%	725	1.4	26.5	4.5	%
5.01 – 6.00%	132	48,553		58.2	%	728	1.6	27.0	5.2	%
6.01 – 7.00%	4	2,264		71.1	%	758	1.3	20.5	6.3	%
Total	616	$	232,270	57.0	%	734	1.5	27.1	4.5	%

(1) The original FICO score is not available for 141 loans with a principal balance of approximately $56.5 million at December 31, 2017. The Company has excluded these loans from the weighted average computations.

The following table presents the various states across the United States in which the collateral securing the Company’s Residential Whole-Loans at September 30, 2018 and December 31, 2017, based on principal balance, is located (dollars in thousands):

September 30, 2018					December 31, 2017
State	State Concentration		Principal Balance		State	State Concentration		Principal Balance
California	68.8	%	$	463,638	California	62.2	%	$	144,321
New York	15.6	%	105,435		New York	24.4	%	56,631
Georgia	2.9	%	19,324		Georgia	4.3	%	10,061
Washington	2.2	%	14,886		Washington	4.0	%	9,244
Massachusetts	1.3	%	8,504		Massachusetts	3.9	%	9,114
Other	9.2	%	62,976		Other	1.2	%	2,899
Total	100.0	%	$	674,763	Total	100.0	%	$	232,270

Residential Bridge Loans

The Residential Bridge Loans are comprised of short-term non-owner occupied fixed rate loans secured by single or multi-unit residential properties, with LTVs generally not to exceed 85%. The following tables present certain information about the Company’s Residential Bridge Loan investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

September 30, 2018
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
6.01 – 7.00%	14	$	5,264	61.8	%	2.6	6.7	%
7.01 – 8.00%	127	57,820		72.9	%	6.5	7.7	%
8.01 – 9.00%	213	94,873		70.2	%	5.4	8.7	%
9.01 – 10.00%	189	59,927		72.3	%	5.5	9.7	%
10.01 – 11.00%	71	16,651		71.3	%	5.0	10.6	%
11.01 – 12.00%	37	9,121		63.5	%	6.1	11.4	%
12.01 – 13.00%	9	1,866		73.3	%	6.8	12.7	%
13.01 – 14.00%	1	88		65.0	%	7.0	14.0	%
17.01 – 18.00%	12	3,569		74.0	%	4.3	18.0	%
Total	673	$	249,179	71.1	%	5.6	9.1	%

December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
5.01 - 6.00%	9	$	4,016	64.5	%	10.8	5.9	%
6.01 - 7.00%	64	18,420		67.8	%	10.6	6.7	%
7.01 – 8.00%	98	25,608		66.4	%	9.5	7.6	%
8.01 – 9.00%	56	19,728		70.3	%	11.9	8.9	%
9.01 – 10.00%	67	25,001		73.3	%	6.8	9.7	%
10.01 – 11.00%	36	10,656		75.4	%	5.0	10.8	%
11.01 – 12.00%	2	919		89.8	%	8.2	11.4	%
17.01 – 18.00%	8	1,520		73.8	%	5.9	18.0	%
Total	340	$	105,868	70.1	%	9.0	8.6	%

The following table presents the U.S. states in which the collateral securing the Company’s Residential Bridge Loans at September 30, 2018 and December 31, 2017, based on principal balance, is located (dollars in thousands):

September 30, 2018					December 31, 2017
State	Concentration		Principal Balance		State	Concentration		Principal Balance
California	48.2	%	$	119,784	California	48.2	%	$	51,080
New York	9.5	%	23,791		Florida	13.4	%	14,199
Florida	6.6	%	16,354		Washington	6.3	%	6,645
New Jersey	5.5	%	13,723		New York	4.4	%	4,703
Texas	4.8	%	11,964		Texas	4.4	%	4,660
Other	25.4	%	63,563		Other	23.3	%	24,581
Total	100.0	%	$	249,179	Total	100.0	%	$	105,868

Non-performing Loans

Residential Whole-Loans

As of September 30, 2018, there was one Residential Whole-Loan in non-accrual status with a current unpaid principal balance of $806 thousand and a fair value of $787 thousand. This nonperforming loan represents approximately 0.1% of the total outstanding principal balance. No allowance and provision for credit losses was recorded for this loan as of and for the three and nine months ended September 30, 2018 since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

As of December 31, 2017, there was one Residential Whole-Loan in non-accrual status with a current unpaid principal balance of $579 thousand and a fair value of $570 thousand. This nonperforming loan represents approximately 0.2% of the total outstanding principal balance. No allowance for credit losses for this loan as of December 31, 2017 and no provision for credit losses for the three and nine months ended September 30, 2017 was recorded since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

Residential Bridge Loans

As of September 30, 2018, there were 11 Residential Bridge Loans carried at amortized cost in non-accrual status with an unpaid principal balance of approximately $4.2 million and 4 Residential Bridge Loans carried at fair value in non-accrual status with an unpaid principal balance of approximately $727 thousand. These nonperforming loans represent approximately 2.0% of the total outstanding principal balance. These loans are collateral dependent with a weighted average original LTV of 74%. No allowance and provision for credit losses was recorded for loans carried at amortized costs as of and for the three and nine months ended September 30, 2018 since the fair value of the collateral balance less the cost to sell was in excess of the outstanding principal and interest balances. No allowance and provision for credit losses was recorded for loans carried at fair value as of and for the three and nine months ended September 30, 2018 since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

As of December 31, 2017, there were 9 Residential Bridge Loans carried at amortized cost in non-accrual status with an unpaid principal balance of approximately $1.8 million. These nonperforming loans represent approximately 1.7% of the total outstanding principal balance. These loans are collateral dependent with a weighted average original LTV of 74%. No allowance for credit losses as of as December 31, 2017 and no provision for credit losses for the three and nine months ended September 30, 2017 was recorded since the fair value of the collateral balance less the cost to sell was in excess of the outstanding principal and interest balances.

Commercial Loans

Securitized Commercial Loans

Securitized commercial loans is comprised of commercial loans from consolidated third party sponsored CMBS VIE's. At September 30, 2018, the Company had variable interests in two CMBS VIEs, CMSC Trust 2015 - Longhouse MZ and RETL 2018- RVP, that it determined it was the primary beneficiary and was required to consolidate. The commercial loans that serve as collateral for the securitized debt issued by these VIE's can only be used to settle the securitized debt. Refer to Note 7 - "Financings" for details on the associated securitized debt. The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.

CMSC Trust 2015 - Longhouse MZ

In November 2015, the Company acquired a $14.0 million interest in the trust certificate issued by CMSC Trust 2015 - Longhouse MZ (“CMSC Trust”), with an outstanding balance of $13.8 million and a fair value of $13.8 million at September 30, 2018. The Company determined that CMSC Trust was a VIE and that the Company was the primary beneficiary because it was involved in certain aspects of the design of the trust, has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that the Company believes could potentially be significant to the trust. As the primary beneficiary, the Company was required to consolidate CMSC Trust and accordingly its $13.8 million investment in CMSC Trust was eliminated in consolidation. The CMSC Trust holds a $24.6 million mezzanine loan collateralized by interests in commercial real estate.  The mezzanine loan serves as collateral for the $24.6 million of trust certificates issued. Refer to Note 7 - "Financings" for details on the associated securitized debt.

RETL 2018-RVP

In March 2018, the Company acquired a $67.8 million interest in the trust certificate issued by RETL 2018-RVP (“RETL Trust”), which represents the 5% eligible horizontal residual interest under the Credit Risk Retention Rules of Section 15G of the Exchange Act. Under the credit risk retention rules, the Company must retain its investment for five years and is limited in its ability to finance and hedge its investment. The trust certificate's pass-through rate is one month LIBOR plus 9.5%. The outstanding balance and the fair value of the Company's interest in the trust were $58.0 million and $58.2 million, respectively, at September 30, 2018. The Company determined that RETL Trust was a VIE and that the Company was the primary beneficiary because the Manager was involved in certain aspects of the design of the trust and the Company together with other related party entities own more than 50% of the controlling class. The owner of 50% or more of the controlling class has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest from the trust that the Company believes could potentially be significant to the trust. As the primary beneficiary, the Company was required to consolidate RETL and accordingly its investment in RETL was eliminated in consolidation. The RETL Trust holds a commercial loan collateralized by first mortgages, deeds of trusts and interests in commercial real estate. The outstanding principal balance on this commercial loan is $1.15 billion as of September 30, 2018. The loan's stated maturity date is February 9, 2021 (subject to the borrower's option to extend the initial stated maturity date for two successive one-year terms) and bears an interest rate of one month LIBOR plus 3.15%. The commercial loan serves as collateral for the $1.15 billion of securitized debt issued. Refer to Note 7 - "Financings" for details on the associated securitized debt.

Commercial Loans

In March 2018, the Company acquired a $20.0 million interest-only mezzanine loan secured by a partnership interest in an entity that owns a hotel. The mezzanine loan has a maturity date of December 9, 2019 with three one-year extension options and bears an interest rate of one month LIBOR plus 6.5%.

In June 2018, the Company acquired a $30.0 million interest-only commercial loan. The loan is secured by a hotel. The loan has a maturity date of June 9, 2020 with a one-year extension option and bears an interest rate of one month LIBOR plus 4.5%. On August 3, 2018 the loan was transfered into our Residential Whole Loan Trust RMI 2015 Trust.

Commercial Loan Trust

Revolving Small Balance Commercial Trust 2018-1

In March 2018, the Company formed the Revolving Small Balance Commercial Trust 2018-1 ("RSBC Trust") to acquire commercial real estate mortgage loans. In March 2018, RSBC Trust acquired a $20.6 million interest-only first lien commercial mortgage loan ("SBC-Loan 1") collateralized by three assisted care living facilities. The loan matures on March 6, 2019 and bears an interest rate of one month LIBOR plus 4.75%. In August 2018, SBC-Loan 1 was paid in full.

In July 2018, RSBC Trust acquired a $45.2 million interest-only commercial real estate mortgage loan ("SBC-Loan 2") secured by skilled nursing facilities. SBC-Loan 2 matures on July 6, 2020 with two extension options of one year each and bears an interest rate of one month LIBOR plus 4.25% subject to a LIBOR floor of 1.25%.

In September 2018, RSBC Trust acquired a $49.6 million interest-only commercial real estate mortgage loan ("SBC-Loan 3") secured by assisted care living facilities. SBC-Loan 3 matures on September 6, 2021 with a one extension option of one year and bears an interest rate of one month LIBOR plus 5.30%, subject to a LIBOR floor of 1.90% and a LIBOR cap of 3.50%.

The Company determined that the wholly owned RSBC Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust and holds significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $61.6 million of repurchase agreement borrowings, which is a liability held outside the trust.

Consolidated Securitized Commercial Loan Trusts and Commercial Loan Trust

The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.  The three consolidated trusts, CMSC Trust, RETL Trust and RSBC Trust collectively hold four commercial loans as of September 30, 2018. 

The following table presents a summary of the assets and liabilities of the three consolidated trusts included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Restricted cash	$	100,138	$	—
Securitized commercial loans, at fair value	1,191,048		24,876
Commercial Loans, at fair value	93,846		—
Interest receivable	3,544		161
Total assets	$	1,388,576	$	25,037
Securitized debt, at fair value	$	1,119,089	$	10,945
Interest payable	2,487		70
Accounts payable and accrued expenses	15		1
Other liabilities	100,138		—
Total liabilities	$	1,221,729	$	11,016

The Company’s risk with respect to its investment in each commercial loan trust is limited to its direct ownership in the trust. The commercial loans held by the consolidated trusts are held solely to satisfy the liabilities of the trust, and creditors of the trust have no recourse to the general credit of the Company. The assets of a consolidated trust can only be used to satisfy the obligations of that trust. The Company is not contractually required and has not provided any additional financial support to the trusts for the three and nine months ended September 30, 2018 and September 30, 2017. 

The following table presents the components of the carrying value of the commercial real estate loans as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	CMSC Trust Securitized Commercial Loan, at Fair Value				RETL Trust Securitized Commercial Loan, at Fair Value				RSBC Trust Commercial Loans, at Fair Value					Commercial Loans, at Fair Value
	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018			December 31, 2017		September 30, 2018			December 31, 2017
Principal balance	$	24,556	$	24,846	$	1,154,283	$	—	$	94,787		$	—	$	50,000		$	—
Unamortized premium	—		—		1,027		—		—			—		—			—
Unamortized discount	—		—		—		—		(445		)	—		(232		)	—
Amortized cost	24,556		24,846		1,155,310		—		94,342			—		49,768			—
Gross unrealized gains	86		30		11,096		—		—			—		380			—
Gross unrealized losses	—		—		—		—		(496		)	—		(43		)	—
Fair value	$	24,642	$	24,876	$	1,166,406	$	—	$	93,846		$	—	$	50,105		$	—

XML

Commercial Loans

9 Months Ended

Sep. 30, 2018

Noncontrolling Interest [Abstract]

Commercial Loans

Residential Whole-Loans and Bridge Loans

Residential Whole-Loan Trust

The consolidated financial statements include the consolidation of Revolving Mortgage Investment Trust 2015-1QR2 ("RMI 2015 Trust") since it met the definition of a VIE and the Company determined that it was the primary beneficiary of the trust because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust.  RMI 2015 Trust has issued a trust certificate that is wholly owned by the Company and represents the entire beneficial interest in pools of Non-QM Residential Whole-Loans and the Commercial Loan held by the trust. As of September 30, 2018, the Company financed the trust certificate with $334.9 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying Residential Whole-Loans owned by the trust in "Residential Whole-Loans, at fair value" and the Commercial Loan in "Commercial Loans, at fair value" in the Consolidated Balance Sheets and has eliminated the intercompany trust certificate in consolidation. Refer to Note 6 - "Commercial Loans" for details on the commercial real estate mortgage loan.

In August 2018, the Company formed Revolving Mortgage Investment Trust 2018-RCR ("RCR Trust") to acquire conforming Residential Whole-Loans. The Company determined that RCR Trust was a VIE and that the Company was the primary beneficiary of the trust because it was involved in the design of the trust of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $258.1 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying conforming mortgages owned by the trust in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

In September 2018, the Company formed Revolving Mortgage Investment Trust 2018-RNR ("RNR Trust") to acquire Non-QM Residential Whole-Loans. The Company determined that RNR Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $15.3 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies the underlying Non-QM Residential Whole-Loans in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

Residential Bridge Loan Trust

In February 2017, The Company formed Revolving Mortgage Investment Trust 2017-BRQ1 ("RMI 2017 Trust") and acquired the trust certificate, which represents the beneficial interest in pools of Residential Bridge Loans and certain Residential Whole-Loans held by the trust. Residential Bridge Loans are mortgage loans secured by residences, typically short-term. The Company determined that RMI Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust, has oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $219.7 million of repurchase agreement borrowings, which is a liability held outside the trust. The Company classifies both the underlying Residential Bridge Loans carried at amortized cost and the Residential Bridge Loans that it elected the fair value option in "Residential Bridge Loans" and the Residential Whole-Loans in "Residential Whole-Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

Consolidated Residential Whole-Loan and Residential Bridge Loan Trusts

The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.  The three consolidated Residential Whole-Loan trusts collectively hold 1,936 Residential Whole-Loans and one commercial loan and the consolidated Bridge Loan Trust holds 673 Residential Bridge Loans and 13 Residential Whole-Loans as of September 30, 2018. 

The following table presents a summary of the assets and liabilities of the consolidated residential whole-loan trusts, residential bridge loan trust included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)	$	684,463	$	237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)	249,471		106,673
Commercial loan, at fair value	29,831		—
Investment related receivable	33,430		7,665
Interest receivable	8,874		3,197
Other assets	203		—
Total assets	$	1,006,272	$	354,958
Accounts payable and accrued expenses	722		188
Other liabilities	393		—
Total liabilities	$	1,115	$	188

The Company’s risk with respect to its investment in each residential loan trust is limited to its direct ownership in the trust. The Residential Whole-Loans, Residential Bridge Loans and Commercial Loan held by the consolidated trusts are held solely to satisfy the liabilities of the trust, and creditors of the trust have no recourse to the general credit of the Company. The Company is not contractually required and has not provided any additional financial support to the trusts for the three and nine months ended September 30, 2018 and September 30, 2017. 

The following table presents the components of the carrying value of Residential Whole-Loans and Residential Bridge Loans as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	Residential Whole-Loans, at Fair Value						Residential Bridge Loans, at Fair Value(1)						Residential Bridge Loans, at Amortized Cost(1)
	September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017
Principal balance	$	674,763		$	232,270		$	234,445		$	63,802		$	14,734		$	42,066
Unamortized premium	10,592			2,021			1,426			293			28			122
Unamortized discount	(2,499		)	(1,190		)	(434		)	(128		)	(38		)	(41		)
Amortized cost	682,856			233,101			235,437			63,967			14,724			42,147
Gross unrealized gains	5,506			4,463			525			655			N/A			N/A
Gross unrealized losses	(3,899		)	(141		)	(1,215		)	(96		)	N/A			N/A
Fair value	$	684,463		$	237,423		$	234,747		$	64,526		N/A			N/A

(1) These loans are classified in "Residential Bridge Loans" in the Consolidated Balance Sheets.

Residential Whole-Loans

The Residential Whole-Loans have low LTV's and are comprised of 1,034 non-qualifying adjustable rate mortgages, 902 conforming fixed rate mortgages and 13 investor fixed rate mortgages.  The following tables present certain information about the Company’s Residential Whole-Loan investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

September 30, 2018
				Weighted Average
Current Coupon Rate	Number of Loans	Principal  Balance		Original LTV		Original  FICO Score(1)	Expected  Life (years)	Contractual  Maturity  (years)	Coupon  Rate
3.01 – 4.00%	69	$	22,732	61.4	%	738	7.5	29.3	3.9	%
4.01– 5.00%	1,159	405,934		62.2	%	734	3.6	28.8	4.7	%
5.01 – 6.00%	708	238,961		63.2	%	709	2.8	28.0	5.4	%
6.01 – 7.00%	11	6,685		64.9	%	748	1.4	25.4	6.3	%
7.01 - 8.00%	1	357		70.0	%	777	1.9	29.3	7.2	%
8.01 - 9.00%	1	94		70.0	%	689	1.9	29.3	8.4	%
Total	1,949	$	674,763	62.6	%	727	3.4	28.5	4.9	%

(1) The original FICO score is not available for 240 loans with a principal balance of approximately $81.6 million at September 30, 2018. The Company has excluded these loans from the weighted average computations.

December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal  Balance		Original LTV		Original  FICO Score(1)	Expected  Life (years)	Contractual  Maturity  (years)	Coupon  Rate
3.01 – 4.00%	142	$	55,593	55.5	%	751	1.7	29.1	3.9	%
4.01– 5.00%	338	125,860		56.9	%	725	1.4	26.5	4.5	%
5.01 – 6.00%	132	48,553		58.2	%	728	1.6	27.0	5.2	%
6.01 – 7.00%	4	2,264		71.1	%	758	1.3	20.5	6.3	%
Total	616	$	232,270	57.0	%	734	1.5	27.1	4.5	%

(1) The original FICO score is not available for 141 loans with a principal balance of approximately $56.5 million at December 31, 2017. The Company has excluded these loans from the weighted average computations.

The following table presents the various states across the United States in which the collateral securing the Company’s Residential Whole-Loans at September 30, 2018 and December 31, 2017, based on principal balance, is located (dollars in thousands):

September 30, 2018					December 31, 2017
State	State Concentration		Principal Balance		State	State Concentration		Principal Balance
California	68.8	%	$	463,638	California	62.2	%	$	144,321
New York	15.6	%	105,435		New York	24.4	%	56,631
Georgia	2.9	%	19,324		Georgia	4.3	%	10,061
Washington	2.2	%	14,886		Washington	4.0	%	9,244
Massachusetts	1.3	%	8,504		Massachusetts	3.9	%	9,114
Other	9.2	%	62,976		Other	1.2	%	2,899
Total	100.0	%	$	674,763	Total	100.0	%	$	232,270

Residential Bridge Loans

The Residential Bridge Loans are comprised of short-term non-owner occupied fixed rate loans secured by single or multi-unit residential properties, with LTVs generally not to exceed 85%. The following tables present certain information about the Company’s Residential Bridge Loan investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

September 30, 2018
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
6.01 – 7.00%	14	$	5,264	61.8	%	2.6	6.7	%
7.01 – 8.00%	127	57,820		72.9	%	6.5	7.7	%
8.01 – 9.00%	213	94,873		70.2	%	5.4	8.7	%
9.01 – 10.00%	189	59,927		72.3	%	5.5	9.7	%
10.01 – 11.00%	71	16,651		71.3	%	5.0	10.6	%
11.01 – 12.00%	37	9,121		63.5	%	6.1	11.4	%
12.01 – 13.00%	9	1,866		73.3	%	6.8	12.7	%
13.01 – 14.00%	1	88		65.0	%	7.0	14.0	%
17.01 – 18.00%	12	3,569		74.0	%	4.3	18.0	%
Total	673	$	249,179	71.1	%	5.6	9.1	%

December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
5.01 - 6.00%	9	$	4,016	64.5	%	10.8	5.9	%
6.01 - 7.00%	64	18,420		67.8	%	10.6	6.7	%
7.01 – 8.00%	98	25,608		66.4	%	9.5	7.6	%
8.01 – 9.00%	56	19,728		70.3	%	11.9	8.9	%
9.01 – 10.00%	67	25,001		73.3	%	6.8	9.7	%
10.01 – 11.00%	36	10,656		75.4	%	5.0	10.8	%
11.01 – 12.00%	2	919		89.8	%	8.2	11.4	%
17.01 – 18.00%	8	1,520		73.8	%	5.9	18.0	%
Total	340	$	105,868	70.1	%	9.0	8.6	%

The following table presents the U.S. states in which the collateral securing the Company’s Residential Bridge Loans at September 30, 2018 and December 31, 2017, based on principal balance, is located (dollars in thousands):

September 30, 2018					December 31, 2017
State	Concentration		Principal Balance		State	Concentration		Principal Balance
California	48.2	%	$	119,784	California	48.2	%	$	51,080
New York	9.5	%	23,791		Florida	13.4	%	14,199
Florida	6.6	%	16,354		Washington	6.3	%	6,645
New Jersey	5.5	%	13,723		New York	4.4	%	4,703
Texas	4.8	%	11,964		Texas	4.4	%	4,660
Other	25.4	%	63,563		Other	23.3	%	24,581
Total	100.0	%	$	249,179	Total	100.0	%	$	105,868

Non-performing Loans

Residential Whole-Loans

As of September 30, 2018, there was one Residential Whole-Loan in non-accrual status with a current unpaid principal balance of $806 thousand and a fair value of $787 thousand. This nonperforming loan represents approximately 0.1% of the total outstanding principal balance. No allowance and provision for credit losses was recorded for this loan as of and for the three and nine months ended September 30, 2018 since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

As of December 31, 2017, there was one Residential Whole-Loan in non-accrual status with a current unpaid principal balance of $579 thousand and a fair value of $570 thousand. This nonperforming loan represents approximately 0.2% of the total outstanding principal balance. No allowance for credit losses for this loan as of December 31, 2017 and no provision for credit losses for the three and nine months ended September 30, 2017 was recorded since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

Residential Bridge Loans

As of September 30, 2018, there were 11 Residential Bridge Loans carried at amortized cost in non-accrual status with an unpaid principal balance of approximately $4.2 million and 4 Residential Bridge Loans carried at fair value in non-accrual status with an unpaid principal balance of approximately $727 thousand. These nonperforming loans represent approximately 2.0% of the total outstanding principal balance. These loans are collateral dependent with a weighted average original LTV of 74%. No allowance and provision for credit losses was recorded for loans carried at amortized costs as of and for the three and nine months ended September 30, 2018 since the fair value of the collateral balance less the cost to sell was in excess of the outstanding principal and interest balances. No allowance and provision for credit losses was recorded for loans carried at fair value as of and for the three and nine months ended September 30, 2018 since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

As of December 31, 2017, there were 9 Residential Bridge Loans carried at amortized cost in non-accrual status with an unpaid principal balance of approximately $1.8 million. These nonperforming loans represent approximately 1.7% of the total outstanding principal balance. These loans are collateral dependent with a weighted average original LTV of 74%. No allowance for credit losses as of as December 31, 2017 and no provision for credit losses for the three and nine months ended September 30, 2017 was recorded since the fair value of the collateral balance less the cost to sell was in excess of the outstanding principal and interest balances.

Commercial Loans

Securitized Commercial Loans

Securitized commercial loans is comprised of commercial loans from consolidated third party sponsored CMBS VIE's. At September 30, 2018, the Company had variable interests in two CMBS VIEs, CMSC Trust 2015 - Longhouse MZ and RETL 2018- RVP, that it determined it was the primary beneficiary and was required to consolidate. The commercial loans that serve as collateral for the securitized debt issued by these VIE's can only be used to settle the securitized debt. Refer to Note 7 - "Financings" for details on the associated securitized debt. The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.

CMSC Trust 2015 - Longhouse MZ

In November 2015, the Company acquired a $14.0 million interest in the trust certificate issued by CMSC Trust 2015 - Longhouse MZ (“CMSC Trust”), with an outstanding balance of $13.8 million and a fair value of $13.8 million at September 30, 2018. The Company determined that CMSC Trust was a VIE and that the Company was the primary beneficiary because it was involved in certain aspects of the design of the trust, has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that the Company believes could potentially be significant to the trust. As the primary beneficiary, the Company was required to consolidate CMSC Trust and accordingly its $13.8 million investment in CMSC Trust was eliminated in consolidation. The CMSC Trust holds a $24.6 million mezzanine loan collateralized by interests in commercial real estate.  The mezzanine loan serves as collateral for the $24.6 million of trust certificates issued. Refer to Note 7 - "Financings" for details on the associated securitized debt.

RETL 2018-RVP

In March 2018, the Company acquired a $67.8 million interest in the trust certificate issued by RETL 2018-RVP (“RETL Trust”), which represents the 5% eligible horizontal residual interest under the Credit Risk Retention Rules of Section 15G of the Exchange Act. Under the credit risk retention rules, the Company must retain its investment for five years and is limited in its ability to finance and hedge its investment. The trust certificate's pass-through rate is one month LIBOR plus 9.5%. The outstanding balance and the fair value of the Company's interest in the trust were $58.0 million and $58.2 million, respectively, at September 30, 2018. The Company determined that RETL Trust was a VIE and that the Company was the primary beneficiary because the Manager was involved in certain aspects of the design of the trust and the Company together with other related party entities own more than 50% of the controlling class. The owner of 50% or more of the controlling class has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest from the trust that the Company believes could potentially be significant to the trust. As the primary beneficiary, the Company was required to consolidate RETL and accordingly its investment in RETL was eliminated in consolidation. The RETL Trust holds a commercial loan collateralized by first mortgages, deeds of trusts and interests in commercial real estate. The outstanding principal balance on this commercial loan is $1.15 billion as of September 30, 2018. The loan's stated maturity date is February 9, 2021 (subject to the borrower's option to extend the initial stated maturity date for two successive one-year terms) and bears an interest rate of one month LIBOR plus 3.15%. The commercial loan serves as collateral for the $1.15 billion of securitized debt issued. Refer to Note 7 - "Financings" for details on the associated securitized debt.

Commercial Loans

In March 2018, the Company acquired a $20.0 million interest-only mezzanine loan secured by a partnership interest in an entity that owns a hotel. The mezzanine loan has a maturity date of December 9, 2019 with three one-year extension options and bears an interest rate of one month LIBOR plus 6.5%.

In June 2018, the Company acquired a $30.0 million interest-only commercial loan. The loan is secured by a hotel. The loan has a maturity date of June 9, 2020 with a one-year extension option and bears an interest rate of one month LIBOR plus 4.5%. On August 3, 2018 the loan was transfered into our Residential Whole Loan Trust RMI 2015 Trust.

Commercial Loan Trust

Revolving Small Balance Commercial Trust 2018-1

In March 2018, the Company formed the Revolving Small Balance Commercial Trust 2018-1 ("RSBC Trust") to acquire commercial real estate mortgage loans. In March 2018, RSBC Trust acquired a $20.6 million interest-only first lien commercial mortgage loan ("SBC-Loan 1") collateralized by three assisted care living facilities. The loan matures on March 6, 2019 and bears an interest rate of one month LIBOR plus 4.75%. In August 2018, SBC-Loan 1 was paid in full.

In July 2018, RSBC Trust acquired a $45.2 million interest-only commercial real estate mortgage loan ("SBC-Loan 2") secured by skilled nursing facilities. SBC-Loan 2 matures on July 6, 2020 with two extension options of one year each and bears an interest rate of one month LIBOR plus 4.25% subject to a LIBOR floor of 1.25%.

In September 2018, RSBC Trust acquired a $49.6 million interest-only commercial real estate mortgage loan ("SBC-Loan 3") secured by assisted care living facilities. SBC-Loan 3 matures on September 6, 2021 with a one extension option of one year and bears an interest rate of one month LIBOR plus 5.30%, subject to a LIBOR floor of 1.90% and a LIBOR cap of 3.50%.

The Company determined that the wholly owned RSBC Trust was a VIE and that the Company was the primary beneficiary because it was involved in the design of the trust and holds significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of September 30, 2018, the Company financed the trust certificate with $61.6 million of repurchase agreement borrowings, which is a liability held outside the trust.

Consolidated Securitized Commercial Loan Trusts and Commercial Loan Trust

The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment.  The three consolidated trusts, CMSC Trust, RETL Trust and RSBC Trust collectively hold four commercial loans as of September 30, 2018. 

The following table presents a summary of the assets and liabilities of the three consolidated trusts included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Restricted cash	$	100,138	$	—
Securitized commercial loans, at fair value	1,191,048		24,876
Commercial Loans, at fair value	93,846		—
Interest receivable	3,544		161
Total assets	$	1,388,576	$	25,037
Securitized debt, at fair value	$	1,119,089	$	10,945
Interest payable	2,487		70
Accounts payable and accrued expenses	15		1
Other liabilities	100,138		—
Total liabilities	$	1,221,729	$	11,016

The Company’s risk with respect to its investment in each commercial loan trust is limited to its direct ownership in the trust. The commercial loans held by the consolidated trusts are held solely to satisfy the liabilities of the trust, and creditors of the trust have no recourse to the general credit of the Company. The assets of a consolidated trust can only be used to satisfy the obligations of that trust. The Company is not contractually required and has not provided any additional financial support to the trusts for the three and nine months ended September 30, 2018 and September 30, 2017. 

The following table presents the components of the carrying value of the commercial real estate loans as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	CMSC Trust Securitized Commercial Loan, at Fair Value				RETL Trust Securitized Commercial Loan, at Fair Value				RSBC Trust Commercial Loans, at Fair Value					Commercial Loans, at Fair Value
	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018			December 31, 2017		September 30, 2018			December 31, 2017
Principal balance	$	24,556	$	24,846	$	1,154,283	$	—	$	94,787		$	—	$	50,000		$	—
Unamortized premium	—		—		1,027		—		—			—		—			—
Unamortized discount	—		—		—		—		(445		)	—		(232		)	—
Amortized cost	24,556		24,846		1,155,310		—		94,342			—		49,768			—
Gross unrealized gains	86		30		11,096		—		—			—		380			—
Gross unrealized losses	—		—		—		—		(496		)	—		(43		)	—
Fair value	$	24,642	$	24,876	$	1,166,406	$	—	$	93,846		$	—	$	50,105		$	—

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Financings

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Financings

Financings

Repurchase Agreements

The Company primarily finances its investment acquisitions with repurchase agreements. The repurchase agreements bear interest at a contractually agreed-upon rate and typically have terms ranging from one month to six months.  The Company’s repurchase agreement borrowings are accounted for as secured borrowings when the Company maintains effective control of the financed assets.  Under the repurchase agreements, the respective counterparties retain the right to determine the fair value of the underlying collateral. A reduction in the value of pledged assets requires the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements, and is referred to as a margin call.  The inability of the Company to post adequate collateral for a margin call by a counterparty, in a timeframe as short as the close of the same business day, could result in a condition of default under the Company’s repurchase agreements, thereby enabling the counterparty to liquidate the collateral pledged by the Company, which may have a material adverse effect on the Company’s financial position, results of operations and cash flows. 

     Certain of the repurchase agreements provide the counterparty with the right to terminate the agreement if the Company does not maintain certain equity and leverage metrics, the most restrictive of which include a limit on leverage based on the composition of the Company’s portfolio.  For all the repurchase agreements with outstanding borrowings, the Company was in compliance with the terms of such financial tests as of September 30, 2018.

As of September 30, 2018, the Company had master repurchase agreements with 28 counterparties.  As of September 30, 2018, the Company had borrowings under repurchase agreements with 16 counterparties. The following table summarizes certain characteristics of the Company’s repurchase agreements at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018					December 31, 2017
Securities Pledged	Repurchase Agreement Borrowings		Weighted Average Interest Rate on Borrowings Outstanding at  end of period		Weighted Average Remaining Maturity (days)	Repurchase Agreement Borrowings		Weighted Average Interest Rate on Borrowings Outstanding at end of period		Weighted Average Remaining Maturity (days)
Agency RMBS	$	393,486	2.39	%	60	$	665,919	1.62	%	61
Agency CMBS	1,833,352		2.36	%	62	2,035,222		1.53	%	53
Non-Agency RMBS	71,117		3.70	%	31	46,530		2.76	%	41
Non-Agency CMBS (1)	212,282		3.79	%	48	154,325		2.98	%	40
Residential Whole-Loans (2)	585,178		3.65	%	35	189,270		3.66	%	8
Residential Bridge Loans (2)	216,917		4.37	%	26	100,183		4.05	%	59
Commercial loans (2)	87,567		4.33	%	27	—		—	%	—
Securitized commercial loans (2)	7,599		3.99	%	12	—		—	%	—
Other securities	61,821		3.86	%	29	60,237		2.94	%	23
Borrowings under repurchase agreements	$	3,469,319	2.90	%	52	$	3,251,686	1.86	%	51

(1) Includes approximately $22.6 million of repurchase agreement borrowings related to securities sold in September 2018 that was paid off when the sale settled in October 2018.

(2) Repurchase agreement borrowings on loans owned are through trust certificates.  The trust certificates are eliminated upon consolidation.

      At September 30, 2018 and December 31, 2017, repurchase agreements collateralized by investments had the following remaining maturities:

(dollars in thousands)	September 30, 2018		December 31, 2017
Overnight	$	—	$	—
1 to 29 days	1,494,121		1,387,599
30 to 59 days	332,521		665,656
60 to 89 days	1,531,084		871,819
90 to 119 days	111,593		—
Greater than or equal to 120 days	—		326,612
Total	$	3,469,319	$	3,251,686

At September 30, 2018, the following table reflects amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty (dollars in thousands):

	September 30, 2018
Counterparty	Amount of  Collateral at Risk, at fair value		Weighted Average Remaining Maturity (days)	Percentage of  Stockholders’  Equity
Credit Suisse AG, Cayman Islands Branch	$	88,584	29	16.5	%
Nomura Securities International Inc.	72,697		29	13.6	%
UBS AG, London Branch	65,095		33	12.2	%
Citigroup Global Markets Inc.	56,038		80	10.5	%

Collateral for Borrowings under Repurchase Agreements

The following table summarizes the Company’s collateral positions, with respect to its borrowings under repurchase agreements at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018						December 31, 2017
	Assets Pledged		Accrued Interest		Assets Pledged and Accrued Interest		Assets Pledged		Accrued Interest		Assets Pledged and Accrued Interest
Assets pledged for borrowings under repurchase agreements:
Agency RMBS, at fair value	$	403,339	$	1,608	$	404,947	$	690,255	$	2,601	$	692,856
Agency CMBS, at fair value	1,922,520		5,391		1,927,911		2,143,340		5,454		2,148,794
Non-Agency RMBS, at fair value	98,863		718		99,581		58,127		160		58,287
Non-Agency CMBS, at fair value(3)	286,728		1,223		287,951		208,062		1,100		209,162
Residential Whole-Loans, at fair value (1)	684,463		4,778		689,241		237,423		1,754		239,177
Residential Bridge Loans (1)	249,471		3,975		253,446		106,673		1,443		108,116
Commercial Loans, at fair value (1)	123,677		789		124,466		—		—		—
Securitized commercial loans, at fair value (1)	13,800		85		13,885		—		—		—
Other securities, at fair value	92,391		179		92,570		89,823		105		89,928
Cash (2)	18,625		—		18,625		23,591		—		23,591
Total	$	3,893,877	$	18,746	$	3,912,623	$	3,557,294	$	12,617	$	3,569,911

(1) Loans owned through trust certificates are pledged as collateral. The trust certificates are eliminated upon consolidation.

(2) Cash posted as collateral is included in "Due from counterparties" in the Company’s Consolidated Balance Sheets.

(3) Assets pledge included $35 million of investment related receivable related to the unsettled sale of Non-Agency CMBS.

A reduction in the value of pledged assets typically results in the repurchase agreement counterparties initiating a margin call.  At September 30, 2018 and December 31, 2017, investments held by counterparties as security for repurchase agreements totaled approximately $3.9 billion and approximately $3.5 billion, respectively.  Cash collateral held by counterparties at September 30, 2018 and December 31, 2017 was approximately $18.6 million and approximately $23.6 million, respectively.  Cash posted by repurchase agreement counterparties at September 30, 2018 and December 31, 2017, was $700 thousand and approximately $1.5 million, respectively.  In addition, at September 30, 2018 and December 31, 2017, the Company held securities with a fair value of $168 thousand and $306 thousand, respectively, received as collateral from its repurchase agreement counterparties to satisfy margin requirements.  The Company has the ability to repledge collateral received from its repurchase counterparties.

Convertible Senior Unsecured Notes

In October 2017, the Company issued $115.0 million aggregate principal amount of 6.75% convertible senior unsecured notes, which included the underwriter’s option to purchase $15.0 million aggregate principal amount of the notes for net proceeds of $111.1 million. The notes mature on October 1, 2022, unless earlier converted, redeemed or repurchased by the holders pursuant to their terms, and are not redeemable by the Company except during the final three months prior to maturity.

The notes are convertible into, at the Company's election, cash, shares of the Company's common stock or a combination of both, subject to the satisfaction of certain conditions and during specified periods. The conversion rate is subject to adjustment upon the occurrence of certain specified events and the holders may require the Company to repurchase all or any portion of their notes for cash equal to 100% of the principal amount of the notes, plus accrued and unpaid interest, if the Company undergoes a fundamental change as specified in the agreement. The initial conversion rate was 83.1947 shares of common stock per $1,000 principal amount of notes and represented a conversion price of $12.02 per share of common stock.

Securitized Debt

CMSC Trust 2015 - Longhouse MZ

CMSC Trust issued $25.0 million in commercial pass-through certificates. The outstanding balance of the trust certificates was $24.6 million at September 30, 2018, with a fair value of $24.6 million. The trust certificates bear a fixed interest rate of 8.9% and mature on July 6, 2020. The Company owns $13.8 million of the trust certificates which was eliminated in consolidation and the remaining $10.8 million is held by related parties and is carried at a fair value of $10.8 million.

RETL 2018-RVP

The following table summarizes RETL Trust's commercial mortgage pass-through certificates at September 30, 2018 (dollars in thousands):

Classes	Principal Balance		Coupon	Fair Value		Contractual Maturity
Class A	$	448,033	3.3%	$	449,570	2/15/2021
Class B	136,120		3.9%	136,800		2/15/2021
Class C	117,908		4.2%	118,718		2/15/2021
Class D	104,228		4.9%	105,141		2/15/2021
Class E	141,507		6.7%	143,456		2/15/2021
Class F	137,060		8.2%	138,948		2/15/2021
Class G	11,457		9.7%	11,592		2/15/2021
Class HRR	57,971		11.7%	58,156		2/15/2021
Class X-CP(1)	N/A		2.6%	1,420		3/11/2019
Class X-EXT(1)	N/A		—%	2,606		2/15/2021
	$	1,154,284		$	1,166,407

(1) Class X-CP and Class X-EXT are interest-only classes with a notional balance of $104.2 million each.

The Company owns the HRR certificates which are eliminated in consolidation. Of the remaining outstanding principal balance of $1.1 billion, excluding the interest-only securities, of trust certificates, $298.5 million is owned by related parties and $797.9 million owned by third parties. The securitized debt of the RETL Trust can only be settled with the commercial loan that serves as collateral for the securitized debt and is non-recourse to the Company.

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Derivative Instruments

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company’s derivatives may include interest rate swaps, options, futures contracts, TBAs, Agency and Non-Agency Interest-Only Strips that are classified as derivatives, credit default swaps and total return swaps.

The following table summarizes the Company’s derivative instruments at September 30, 2018 and December 31, 2017 (dollars in thousands):

			September 30, 2018					December 31, 2017
Derivative Instrument	Accounting Designation	Consolidated Balance Sheets Location	Notional Amount		Fair Value			Notional Amount		Fair Value
Interest rate swaps, asset	Non-Hedge	Derivative assets, at fair value	$	572,400	$	200		$	—	$	—
Options, asset	Non-Hedge	Derivative assets, at fair value	100,000		109			320,000		100
Futures contracts, asset	Non-Hedge	Derivative assets, at fair value	280,000		1,703			480,000		628
TBA securities, asset	Non-Hedge	Derivative assets, at fair value	600,000		688			—		—
Total derivative instruments, assets					2,700					728
Interest rate swaps, liability	Non-Hedge	Derivative liability, at fair value	3,739,400		(1,414		)	3,252,200		(4,191		)
Options, liability	Non-Hedge	Derivative liability, at fair value	—		—			320,000		(50		)
Credit default swaps, liability	Non-Hedge	Derivative liability, at fair value	64,747		(362		)	14,815		(95		)
TBA securities, liability	Non-Hedge	Derivative liability, at fair value	200,000		(383		)	125,000		(10		)
Total derivative instruments, liabilities					(2,159		)			(4,346		)
Total derivative instruments, net					$	541				$	(3,618	)

The following tables summarize the effects of the Company’s derivative positions, including Interest-Only Strips characterized as derivatives and TBAs, which are reported in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	Realized Gain (Loss), net
Description	Other Settlements / Expirations			Variation Margin Settlement		Return (Recovery) of Basis			Mark-to-Market			Contractual interest income (expense), net(1)			Total
Three months ended September 30, 2018
Interest rate swaps	$	95		$	25,250	$	772		$	(3,742	)	$	1,190		$	23,565
Interest-Only Strips— accounted for as derivatives	—			—		(996		)	(929		)	1,209			(716		)
Options	—			—		—			(253		)	—			(253		)
Futures contracts	4,232			—		—			(1,994		)	—			2,238
Credit default swaps	(83		)	—		—			(492		)	—			(575		)
TBAs	(8		)	—		—			374			—			366
Total	$	4,236		$	25,250	$	(224	)	$	(7,036	)	$	2,399		$	24,625
Three months ended September 30, 2017
Interest rate swaps	$	(38	)	$	9,564	$	92		$	(2,028	)	$	(1,764	)	$	5,826
Interest-Only Strips— accounted for as derivatives	—			—		(1,486		)	351			1,816			681
Options	(957		)	—		—			477			—			(480		)
Futures contracts	(77		)	—		—			—			—			(77		)
Foreign currency forwards	45			—		—			(15		)	—			30
Total return swaps	(52		)	—		—			329			95			372
TBAs	577			—		—			288			—			865
Total	$	(502	)	$	9,564	$	(1,394	)	$	(598	)	$	147		$	7,217

	Realized Gain (Loss), net
Description	Other Settlements / Expirations			Variation Margin Settlement			Return (Recovery) of Basis			Mark-to-Market			Contractual interest income  (expense), net			Total
Nine months ended September 30, 2018
Interest rate swaps	$	114		$	123,114		$	1,064		$	(1,497	)	$	886		$	123,681
Interest-Only Strips— accounted for as derivatives	—			—			(2,970		)	(959		)	3,642			(287		)
Options	(518		)	—			—			47			—			(471		)
Futures contracts	8,824			—			—			1,075			—			9,899
Credit default swaps	(125		)	—			—			(441		)	—			(566		)
TBAs	126			—			—			315			—			441
Total	$	8,421		$	123,114		$	(1,906	)	$	(1,460	)	$	4,528		$	132,697
Nine months ended September 30, 2017
Interest rate swaps	$	(150,593	)	$	(7,966	)	$	378		$	156,102		$	(12,662	)	$	(14,741	)
Interest rate swaptions	(115		)	—			—			—			—			(115		)
Interest-Only Strips— accounted for as derivatives	526			—			(5,055		)	(783		)	6,229			917
Options	(892		)	—			—			(134		)	—			(1,026		)
Futures contracts	(9,230		)	—			—			2,416			—			(6,814		)
Foreign currency forwards	25			—			—			43			—			68
Total return swaps	(552		)	—			—			1,673			469			1,590
TBAs	3,148			—			—			938			—			4,086
Total	$	(157,683	)	$	(7,966	)	$	(4,677	)	$	160,255		$	(5,964	)	$	(16,035	)

At September 30, 2018 and December 31, 2017, the Company had cash pledged as collateral for derivatives which represents upfront cash collateral upon the Company entering into the derivative transaction and cash collateral for derivatives not cleared through the Chicago Mercantile Exchange ("CME"), of approximately $62.9 million and approximately $63.3 million, respectively, which is reported in "Due from counterparties" in the Consolidated Balance Sheets. The Company also held cash collateral against derivatives of $368 thousand and $0 at September 30, 2018 and December 31, 2017, respectively, which is reported in "Due to counterparties" in the Consolidated Balance Sheets.

Interest rate swaps and interest rate swaptions

The Company enters into interest rate swaps and interest rate swaptions to mitigate its exposure to higher short-term interest rates in connection with its repurchase agreements.  Interest rate swaps generally involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount.  Notwithstanding the foregoing, in order to manage its hedge position with regard to its liabilities, the Company on occasion will enter into interest rate swaps which involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. The Company also enters into forward starting swaps and interest rate swaptions to help mitigate the effects of changes in interest rates on a portion of its borrowings under repurchase agreements. Interest rate swaptions provide the Company the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future.  The Company generally enters into MAC (Market Agreed Coupon) interest rate swaps in which it may receive or make a payment at the time of entering such interest rate swap to compensate for the out of the market nature of such interest rate swap.  Similar to all other interest rate swaps, these interest rate swaps are also subject to margin requirements as previously described.

The Company has not elected to account for its interest rate swaps as “hedges” under GAAP, accordingly the change in fair value of the interest rate swaps not designated in hedging relationships are recorded together with periodic net interest settlement amounts in "Gain (loss) on derivatives instruments, net" in the Consolidated Statements of Operations.

Interest Rate Swaps

The following tables provide additional information on our fixed pay interest rate swaps and the variable pay interest rate swap as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
Fixed Pay Interest Rate Swap Remaining Term	Notional Amount		Average Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)	Forward Starting (1)
1 year or less	$	400,000	1.5	%	2.3	%	0.8	—	%
Greater than 1 year and less than 3 years	200,000		1.8	%	2.3	%	1.7	—	%
Greater than 3 years and less than 5 years	1,164,700		2.4	%	2.3	%	4.1	—	%
Greater than 5 years	2,064,700		2.7	%	2.3	%	10.2	29.0	%
Total	$	3,829,400	2.4	%	2.3	%	6.9	15.6	%

	September 30, 2018
Variable Pay Interest Rate Swap Remaining Term	Notional Amount		Average  Variable Pay Rate		Average Fixed Receive Rate		Average Maturity (Years)	Forward Starting (1)
Greater than 5 years	$	482,400	2.3	%	2.4	%	8.6	—	%
Total	$	482,400	2.3	%	2.4	%	8.6	—	%

	December 31, 2017
Fixed Pay Interest Rate Swap Remaining Term	Notional Amount		Average Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)	Forward Starting (1)
Greater than 1 year and less than 3 years	$	600,000	1.6	%	1.5	%	1.8	—	%
Greater than 3 years and less than 5 years	960,000		2.0	%	1.4	%	4.3	—	%
Greater than 5 years	1,692,200		2.5	%	1.4	%	10.5	90.2	%
Total	$	3,252,200	2.2	%	1.4	%	7.1	46.9	%

(1) Represents the percentage of notional that is forward starting.

The Company had no variable pay interest rate swap as of December 31, 2017.

As of September 30, 2018 and December 31, 2017, the Company has entered into fixed-pay forward starting interest rate swaps of approximately $599.3 million and $1.5 billion, respectively, which have weighted average forward starting dates of 2.6 months and 4.0 months, respectively.

Options

The Company may enter into options on U.S. Treasuries and Eurodollar instruments. As of September 30, 2018, the Company had long position options on U.S. Treasuries with a notional amount of $100.0 million and a fair value in an asset position of $109 thousand. As of December 31, 2017, the Company had long position options on U.S. Treasuries with a notional amount of $320.0 million and a fair value in an asset position of $100 thousand and short position options on U.S. Treasuries with a notional amount of $320.0 million and a fair value in a liability position of $50 thousand.

Futures Contracts

The Company may enter into Eurodollar, Volatility Index, and U.S. Treasury futures. As of September 30, 2018, the Company entered into contracts to sell or short positions for U.S. Treasuries with a notional amount of $280.0 million, a fair value in an asset position of $1.7 million and an expiration date of December 2018. As of December 31, 2017, the Company had entered into contracts to buy or long positions for U.S. Treasuries with a notional amount of $480.0 million, a fair value in an asset position of $628 thousand and an expiration date of March 2018. 

To-Be-Announced Securities

The Company purchased or sold TBAs during the nine months ended September 30, 2018 and the year ended December 31, 2017. The following is a summary of the Company's long and short TBA positions as of September 30, 2018 and December 31, 2017 reported in "Derivative assets, at fair value" and "Derivative liability, at fair value" in the Consolidated Balance Sheets (dollars in thousands):

	September 30, 2018						December 31, 2017
	Notional Amount			Fair Value			Notional Amount		Fair Value
Purchase contracts, asset	$	400,000		$	641		$	—	$	—
Sale contracts, asset	(200,000		)	47			—		—
TBA securities, asset	200,000			688			—		—
Purchase contracts, liability	—			—			125,000		(10		)
Sale contracts, liability	(200,000		)	(383		)	—		—
TBA securities, liability	(200,000		)	(383		)	125,000		(10		)
TBA securities, net	$	—		$	305		$	125,000	$	(10	)

The following tables present additional information about the Company’s contracts to purchase and sell TBAs for the nine months ended September 30, 2018 and the year ended December 31, 2017 (dollars in thousands):

	Notional Amount		Additions		Settlement, Termination, Expiration or Exercise			Notional Amount
	December 31, 2017							September 30, 2018
Purchase of TBAs	$	125,000	$	5,525,000	$	(5,250,000	)	$	400,000
Sale of TBAs	$	—	$	5,650,000	$	(5,250,000	)	$	400,000
	Notional Amount		Additions		Settlement, Termination, Expiration or Exercise			Notional Amount
	December 31, 2016							December 31, 2017
Purchase of TBAs	$	—	$	5,843,200	$	(5,718,200	)	$	125,000
Sale of TBAs	$	—	$	5,718,200	$	(5,718,200	)	$	—

Interest-Only Strips

The Company also invests in Interest-Only Strips. In determining the classification of its holdings of Interest-Only Strips, the Company evaluates the securities to determine if the nature of the cash flows has been altered from that of the underlying mortgage collateral. Generally, Interest-Only Strips for which the security represents a strip off of a mortgage pass through security will be considered a hybrid instrument classified as a MBS investment in the Consolidated Balance Sheets utilizing the fair value option. Alternatively, those Interest-Only Strips, for which the underlying mortgage collateral has been included into a structured security that alters the cash flows from the underlying mortgage collateral, are accounted for as derivatives at fair value with changes recognized in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations, along with any interest received.  The carrying value of these Interest-Only Strips is included in "Agency mortgage-backed securities, at fair value" in the Consolidated Balance Sheets.

Credit Default Swaps

As of September 30, 2018, the Company had entered into credit default swaps with a notional amount of $64.7 million and a fair value in net liability position of $362 thousand. As of December 31, 2017, the Company had entered into credit default swaps with a notional amount of $14.8 million and a fair value in a liability position of $95 thousand. Under these instruments, the Company makes a monthly premium payment over the term of the contract in exchange for the counterparty making a payment to the Company for losses of the reference securities, upon the occurrence of a specified credit event.

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Offsetting Assets and Liabilities

9 Months Ended

Sep. 30, 2018

Offsetting [Abstract]

Offsetting Assets and Liabilities

Offsetting Assets and Liabilities

The following tables present information about certain assets and liabilities that are subject to master netting agreements (or similar agreements) and can potentially be offset in the Company’s Consolidated Balance Sheets at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Gross  Amounts		Gross  Amounts  Offset in the Consolidated Balance  Sheets		Net Amounts of Assets  presented in  the Consolidated Balance  Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
Description							Financial  Instruments(1)			Cash  Collateral (1)
Derivative Assets
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS	$	12,247	$	—	$	12,247	$	(10,369	)	$	—		$	1,878
Derivative asset, at fair value(2)	2,700		—		2,700		(575		)	(368		)	1,757
Total derivative assets	$	14,947	$	—	$	14,947	$	(10,944	)	$	(368	)	$	3,635
Derivative Liabilities and Repurchase Agreements
Derivative liability, at fair value(2)(3)	$	2,159	$	—	$	2,159	$	(575	)	$	(1,576	)	$	8
Repurchase Agreements(4)	3,469,319		—		3,469,319		(3,469,319		)	—			—
Total derivative liability	$	3,471,478	$	—	$	3,471,478	$	(3,469,894	)	$	(1,576	)	$	8

(1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral column of the tables above represents amounts pledged or received as collateral against derivative transactions.

(2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, foreign currency swaps and TBAs.

(3) Cash collateral pledged against the Company’s derivative counterparties was approximately $62.9 million as of September 30, 2018.

(4) The carrying value of investments pledged against the Company’s repurchase agreements was approximately $3.9 billion as of September 30, 2018.

	December 31, 2017
	Gross  Amounts		Gross  Amounts  Offset in the Consolidated Balance  Sheets		Net Amounts of Assets  presented in  the Consolidated Balance  Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial  Instruments(1)			Cash  Collateral (1)
Derivative Assets
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS	$	16,176	$	—	$	16,176	$	(11,633	)	$	—		$	4,543
Derivative asset, at fair value(2)	728		—		728		(50		)	—			678
Total derivative assets	$	16,904	$	—	$	16,904	$	(11,683	)	$	—		$	5,221
Derivative Liabilities and Repurchase Agreements
Derivative liability, at fair value(2)(3)	$	4,346	$	—	$	4,346	$	(50	)	$	(4,270	)	$	26
Repurchase Agreements(4)	3,251,686		—		3,251,686		(3,251,686		)	—			—
Total derivative liability	$	3,256,032	$	—	$	3,256,032	$	(3,251,736	)	$	(4,270	)	$	26

(1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral Pledged column of the tables above represents amounts pledged as collateral against derivative transactions.

(2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, total return swaps and TBAs.

(3) Cash collateral pledged against the Company’s derivative counterparties was approximately $63.3 million as of December 31, 2017.

(4) The carrying value of investments pledged against the Company’s repurchase agreements was approximately $3.5 billion as of December 31, 2017.

Certain of the Company’s repurchase agreement and derivative transactions are governed by underlying agreements that generally provide for a right of set-off in the event of default or in the event of a bankruptcy of either party to the transaction.

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Related Party Transactions

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Management Agreement

In connection with the Company’s initial public offering ("IPO") in May 2012, the Company entered into a management agreement (the “Management Agreement”) with the Manager, which describes the services to be provided by the Manager and compensation for such services.  The Manager is responsible for managing the Company’s operations, including: (i) performing all of its day-to-day functions; (ii) determining investment criteria in conjunction with the Board of Directors; (iii) sourcing, analyzing and executing investments, asset sales and financings; (iv) performing asset management duties; and (v) performing financial and accounting management, subject to the direction and oversight of the Company’s Board of Directors. Pursuant to the terms of the Management Agreement, the Manager is paid a management fee equal to 1.50% per annum of the Company’s stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears. For purposes of calculating the management fee, “stockholders’ equity” means the sum of the net proceeds from any issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus retained earnings, calculated in accordance with GAAP, at the end of the most recently completed fiscal quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less any amount paid for repurchases of the Company’s shares of common stock, excluding any unrealized gains or losses on our investments and derivatives and other non-cash items (excluding OTTI ) that have impacted stockholders' equity as reported in the Company’s consolidated financial statements prepared in accordance with GAAP, regardless of whether such items are included in other comprehensive income or loss, or in net income, and excluding one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors. However, if the Company’s stockholders’ equity for any given quarter is negative based on the calculation described above, the Manager will not be entitled to receive any management fee for that quarter.

In addition, the Company may be required to reimburse the Manager for certain expenses as described below, and shall reimburse the Manager for the compensation paid to the Company’s CFO, controller and their staff. Expense reimbursements to the Manager are made in cash on a regular basis. The Company’s reimbursement obligation is not subject to any dollar limitation. Because the Manager’s personnel perform certain legal, accounting, due diligence tasks and other services that outside professionals or outside consultants otherwise would perform, the Manager may be paid or reimbursed for the documented cost of performing such tasks, provided that such costs and reimbursements are in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.

The Management Agreement may be amended, supplemented or modified by agreement between the Company and the Manager. The Management Agreement expires on May 16, 2019.  It is automatically renewed for one-year terms on each May 15th unless previously terminated as described below. The Company’s independent directors review the Manager’s performance and any fees payable to the Manager annually and, the Management Agreement may be terminated annually upon the affirmative vote of at least two-thirds (2/3) of the Company’s independent directors, based upon: (i) the Manager’s unsatisfactory performance that is materially detrimental to the Company; or (ii) the Company’s determination that any fees payable to the Manager are not fair, subject to the Manager’s right to prevent such termination due to unfair fees by accepting a reduction of management fees agreed to by at least two-thirds (2/3) of the Company’s independent directors. The Company will provide the Manager 180 days prior notice of any such termination. Unless terminated for cause, the Company will pay the Manager a termination fee equal to three times the average annual management fee earned by the Manager during the prior 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination.

The Company may also terminate the Management Agreement at any time, without the payment of any termination fee, with 30 days prior written notice from the Company’s Board of Directors for cause, which will be determined by at least two-thirds (2/3) of the Company’s independent directors, which is defined as: (i) the Manager’s continued material breach of any provision of the Management Agreement (including the Manager’s failure to comply with the Company’s investment guidelines); (ii) the Manager’s fraud, misappropriation of funds, or embezzlement against the Company; (iii) the Manager’s gross negligence in the performance of its duties under the Management Agreement; (iv) the occurrence of certain events with respect to the bankruptcy or insolvency of the Manager, including an order for relief in an involuntary bankruptcy case or the Manager authorizing or filing a voluntary bankruptcy petition; (v) the Manager is convicted (including a plea of nolo contendere) of a felony; or (vi) the dissolution of the Manager.

In September 2018, the Company completed a secondary public offering in which it sold 6,500,000 share of its common stock for net proceeds of approximately $67.8 million after subtracting underwriting commissions and offering expenses. Refer to Note12- "Stockholders' Equity" for details on the secondary public offering Our Manager will not earn a management fee on the newly issued equity through March 31, 2019, to reduce any impact on earnings as the Company fully deploys the capital into its target assets.

For the three months ended September 30, 2018 and September 30, 2017, the Company incurred approximately $2.3 million and approximately $1.9 million in management fees, respectively. For the nine months ended September 30, 2018 and September 30, 2017, the Company incurred approximately $6.7 million and approximately $6.2 million in management fees, respectively.

In addition to the management fee, the Company is also responsible for reimbursing the Manager for certain expenses paid by the Manager on behalf of the Company as defined in the Management Agreement.  For the three months ended September 30, 2018 and September 30, 2017, the Company recorded expenses included in general and administrative expenses totaling approximately $205 thousand and approximately $202 thousand, respectively, related to reimbursable employee costs. For the nine months ended September 30, 2018 and September 30, 2017, the Company recorded expenses included in general and administrative expenses totaling approximately $1.3 million and approximately $1.1 million, respectively, related to reimbursable employee costs. Any such expenses incurred by the Manager and reimbursed by the Company, including the employee compensation expense, are typically included in the Company’s general and administrative expenses in the Consolidated Statements of Operations.  At September 30, 2018 and December 31, 2017, approximately $2.3 million and approximately $1.9 million, respectively, for management fees incurred but not yet paid was included in "Payable to affiliate" in the Consolidated Balance Sheets.  In addition, at September 30, 2018 and December 31, 2017, approximately $205 thousand and approximately $99 thousand, respectively, of reimbursable costs incurred but not yet paid was included in "Payable to affiliate" in the Consolidated Balance Sheets.

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Share-Based Payments

9 Months Ended

Sep. 30, 2018

Share-based Compensation [Abstract]

Share-Based Payments

Share-Based Payments

In conjunction with the Company’s IPO and concurrent private placement, the Company’s Board of Directors approved the Western Asset Mortgage Capital Corporation Equity Plan (the “Equity Plan”) and the Western Asset Manager Equity Plan (the “Manager Equity Plan” and collectively the “Equity Incentive Plans”). The Equity Incentive Plans include provisions for grants of restricted common stock and other equity-based awards to the Manager, its employees and employees of its affiliates and to the Company’s directors, officers and employees. The Company can issue up to 3.0% of the total number of issued and outstanding shares of its common stock (on a fully diluted basis) at the time of each award (other than any shares previously issued or subject to awards made pursuant to one of the Company’s Equity Incentive Plans) under these Equity Incentive Plans. Upon the completion of the September 2018 secondary public offering, the number of shares of common stock available under the Equity Incentive Plans increased to 1,423,609. Approximately 753,205 shares have been issued under the Equity Plans with 670,404 shares available for issuance, as of September 30, 2018.

Under the Equity Plan, the Company made the following grants during the nine months ended September 30, 2018 and the year ended December 31, 2017:

On June 1, 2017, the Company granted a total of 15,536 shares (3,884 each) of restricted common stock under the Equity Plan to the Company’s four independent directors. These restricted shares vested in full on June 1, 2018, the first anniversary of the grant date. Each of the independent directors has elected to defer the shares granted to him under the Company’s Director Deferred Fee Plan (the “Director Deferred Fee Plan”). The Director Deferred Fee Plan permits eligible members of the Company's board of directors to defer certain stock awards made under its director compensation programs. The Director Deferred Fee Plan allows directors to defer issuance of their stock awards and therefore defer payment of any tax liability until the deferral is terminated, pursuant to the election form executed each year by each eligible director.

On June 7, 2018, the Company granted a total of 25,904 shares (6,476 each) of restricted common stock under the Equity Plan to the Company’s four independent directors. These restricted shares will vest in full on June 1, 2019, the first anniversary of the grant date. Each of the independent directors has elected to defer the shares granted to him under the Company’s Director Deferred Fee Plan (the “Director Deferred Fee Plan”). The Director Deferred Fee Plan permits eligible members of the Company's board of directors to defer certain stock awards made under its director compensation programs. The Director Deferred Fee Plan allows directors to defer issuance of their stock awards and therefore defer payment of any tax liability until the deferral is terminated, pursuant to the election form executed each year by each eligible director.

During the nine months ended September 30, 2018 and September 30, 2017, 84,203 and 152,630 restricted common shares vested, respectively, including shares whose issuance has been deferred under the Director Deferred Fee Plan. The Company recognized stock-based compensation expense of approximately $70 thousand and approximately $218 thousand for the three months ended September 30, 2018 and September 30, 2017, respectively. The Company recognized stock-based compensation expense of approximately $195 thousand and approximately $795 thousand for the nine months ended September 30, 2018 and September 30, 2017, respectively. In addition, the Company had unamortized compensation expense of $187 thousand for equity awards and $0 for liability awards and $66 thousand for equity awards and approximately $111 thousand for liability awards at September 30, 2018 and December 31, 2017, respectively.

All restricted common shares granted, other than those whose issuance has been deferred pursuant to the Director Deferred Fee Plan, possess all incidents of ownership, including the right to receive dividends and distributions currently, and the right to vote.  Dividend equivalent payments otherwise allocable to restricted common shares under the Company's Deferred Compensation Plan are deemed to purchase additional phantom shares of the Company’s common stock that are credited to each participant’s deferral account.  The award agreements include restrictions whereby the restricted shares cannot be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of prior to the lapse of restrictions under the respective award agreement. The restrictions lapse on the unvested restricted shares awarded when vested, subject to the grantee’s continuing to provide services to the Company as of the vesting date.  Unvested restricted shares and rights to dividends thereon are forfeited upon termination of the grantee.

The following is a summary of restricted common stock vesting dates as of September 30, 2018 and December 31, 2017, including shares whose issuance has been deferred under the Director Deferred Fee Plan: 

	September 30, 2018	December 31, 2017
Vesting Date	Shares Vesting	Shares Vesting
March 2018	—	66,667
June 2018	—	16,488
June 2019	26,708	—
	26,708	83,155

The following table presents information with respect to the Company’s restricted stock for the nine months ended September 30, 2018, including shares whose issuance has been deferred under the Director Deferred Fee Plan:

	Shares of  Restricted Stock	Weighted Average  Grant Date Fair  Value (1)
Outstanding at beginning of period	725,449	$	17.00
Granted (2)	27,756	10.78
Cancelled/forfeited	—	—
Outstanding at end of period	753,205	$	16.77
Unvested at end of period	26,708	$	10.81

(1) The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date.

(2) Includes 1,852 shares of restricted stock attributed to dividends on restricted stock under the Director Deferred Fee Plan.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2018

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

Warrants

On May 9, 2012, the Company entered into agreements with certain institutional investors to sell 2,231,787 warrant units. Each warrant unit consists of one share of the Company’s common stock and a warrant to purchase 0.5 of a share of the Company’s common stock, subject to adjustment. As of September 30, 2018, the adjusted exercise price of the warrants was $15.87 per share and there were a total of 1,232,916 warrant shares purchasable. The warrants expire on May 15, 2019.

At-The-Market Program

In April 2017, the Company entered into an equity distribution agreement with JMP Securities LLC under which the Company may offer and sell up to $100.0 million shares of common stock in an At-The-Market equity offering. The Company has not sold any shares under this agreement.

Secondary Public Offering

In September 2018, the Company completed a secondary public offering in which it sold 6,500,000 of its common stock, including 303,422 shares of treasury stock, at a price of $10.85 per share, for net proceeds of approximately $67.8 million after subtracting underwriting commissions and offering expenses of approximately $2.7 million. The Company used the net proceeds from the offering to opportunistically invest in its target assets in accordance with its investment guidelines.

Stock Repurchase Program

On December 21, 2017, the Board of Directors of the Company reauthorized its repurchase program of up to 2,100,000 shares of its common stock through December 31, 2019. The previous reauthorization announced on February 25, 2016 of the Company's repurchase program of up to 2,050,000 shares of its common stock expired on December 31, 2017.  Purchases made pursuant to the program will be made in the open market, in privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rules 10b5-1 and 10b-18 of the Securities and Exchange Act of 1934, as amended. The authorization does not obligate the Company to acquire any particular amount of common shares and the program may be suspended or discontinued at the Company’s discretion without prior notice. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors.  As of September 30, 2018, the Company has repurchased 303,422 shares of common stock accounted for as treasury stock pursuant to the authorization. In September 2018, the Company re-issued all 303,422 shares in treasury stock as part of its secondary public offering.

Dividends

The following table presents cash dividends declared and paid by the Company on its common stock:

Declaration Date	Record Date	Payment Date	Amount per Share		Tax Characterization
2018
September 17, 2018	September 27, 2018	October 26, 2018	$	0.31	Not yet determined
June 21, 2018	July 2, 2018	July 26, 2018	$	0.31	Not yet determined
March 22, 2018	April 2, 2018	April 26, 2018	$	0.31	Not yet determined
2017
December 21, 2017	January 2, 2018	January 26, 2018	$	0.31	Return of capital
September 21, 2017	October 2, 2017	October 26, 2017	$	0.31	Return of capital
June 20, 2017	June 30, 2017	July 26, 2017	$	0.31	Return of capital
March 23, 2017	April 3, 2017	April 26, 2017	$	0.31	Ordinary income

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Net Income per Common Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Net Income per Common Share

Net Income per Common Share

The table below presents basic and diluted net income per share of common stock using the two-class method for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars, other than shares and per share amounts, in thousands):

	For the three months ended September 30, 2018		For the three months ended September 30, 2017		Nine months ended September 30, 2018		Nine months ended September 30, 2017
Numerator:
Net income attributable to common stockholders and participating securities for basic and diluted earnings per share	$	20,882	$	22,767	$	44,064	$	63,693
Less:
Dividends and undistributed earnings allocated to participating securities	54		75		112		238
Net income allocable to common stockholders — basic and diluted	$	20,828	$	22,692	$	43,952	$	63,455
Denominator:
Weighted average common shares outstanding for basic earnings per share	42,060,077		41,853,134		41,802,302		41,824,318
Weighted average common shares outstanding for diluted earnings per share	42,060,077		41,853,134		41,802,302		41,824,318
Basic earnings per common share	$	0.50	$	0.54	$	1.05	$	1.52
Diluted earnings per common share	$	0.50	$	0.54	$	1.05	$	1.52

For the three and nine months ended September 30, 2018 and September 30, 2017, the Company excluded the effects of the warrants and the convertible senior unsecured notes from the computation of diluted earnings per share since the average market value per share of the Company’s common stock was below the exercise price of the warrants and the convertible senior unsecured notes.

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Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

As a REIT, the Company is not subject to federal income tax to the extent that it makes qualifying distributions to its stockholders and satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income and stock ownership tests.

Based on the Company’s analysis of any potential uncertain income tax positions, the Company concluded that it does not have any uncertain tax positions that meet the recognition or measurement criteria as of September 30, 2018.  The Company files U.S. federal and state income tax returns.  As of September 30, 2018, U.S. federal tax returns filed by the Company for 2016 and 2015 and state tax returns filed for 2016, 2015, 2014 and 2013 are open for examination pursuant to relevant statutes of limitation. In the event that the Company incurs income tax related interest and penalties, the Company’s policy is to classify them as a component of its provision for income taxes.

Income Tax Provision

Subject to the limitation under the REIT asset test rules, the Company is permitted to own up to 100% of the stock of one or more taxable REIT subsidiaries ("TRS"). Currently, the Company owns one TRS that is taxable as a corporation and is subject to federal, state and local income tax on its net income at the applicable corporate rates. The TRS, which was formed in Delaware on July 28, 2014, is a limited liability company and a wholly-owned subsidiary of the Company. During the three months ended September 30, 2018 and September 30, 2017, the Company recorded a federal and state tax provision of approximately $206 thousand and tax benefit of $1.2 million, respectively, which is recorded in "Income tax provision (benefit)" in the Consolidated Statements of Operations. During the nine months ended September 30, 2018 and September 30, 2017, the Company recorded a federal and state tax provision of approximately $555 thousand and $1.3 million, respectively, which is recorded in "Income tax provision (benefit)" in the Consolidated Statements of Operations.

Deferred Tax Asset

As of September 30, 2018 and December 31, 2017, the Company recorded a deferred tax asset of approximately $3.1 million and $6.1 million relating to capital loss carryforward and temporary differences as a result of the timing of income recognition of certain investments held in the TRS. The capital loss carryforwards may only be recognized to the extent of capital gains. There is uncertainty as to the TRS ability to recognize capital gains in the future. As a result, the Company has concluded it is more likely than not the deferred tax asset will not be realized and has recorded a valuation allowance of $3.1 million and $6.1 million.

In addition, the REIT generated net operating losses ("NOLs") during the year ended December 31, 2017, related to its interest rate swap terminations, and for its California return a portion of the NOL's is apportioned to the TRS. The TRS can carryback these NOLs to each of the two preceding years and receive a refund for taxes paid. The Company recorded a deferred state tax asset relating to the NOLs of $7.6 million and $8.8 million in the REIT and $1.4 million and $765 thousand in the TRS as of September 30, 2018 and December 31, 2017, respectively. As a result, the Company has concluded it is more likely than not the deferred tax asset relating to the NOLs will not be realized with the exception of the TRS carryback to 2015 and has recorded a combined valuation allowance of $8.5 million and $9.2 million as of September 30, 2018 and December 31, 2017, respectively. The Company also recorded a deferred federal tax liability of $85 thousand and $85 thousand as of September 30, 2018 and December 31, 2017, respectively, in anticipation of the receipt of the state tax refund as a result of the carryback of the California NOL.

Effective Tax Rate

The Company's effective tax rate differs from its combined federal and state income tax rate primarily due to its valuation allowance and the deduction of dividends distributions to be paid under Code Section 857(a).

Tax Cuts and Jobs Act

On December 22, 2017, the President of the United States signed and enacted comprehensive tax legislation into law H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the corporate income tax rate from 35% to 21%. Shortly after the enactment of the Tax Act, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows a Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The ultimate impact of the Tax Act may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Act.

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Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any material contingencies at September 30, 2018.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying unaudited financial statements and related notes have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q.  Certain prior period amounts have been reclassified to conform to the current period’s presentation. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary have been made to state fairly the Company’s financial position, results of operations and cash flows. The results of operations for the period ended September 30, 2018, are not necessarily indicative of the results to be expected for the full year or any future period. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 29, 2018.

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary and variable interest entities (“VIEs”) in which it is considered the primary beneficiary.  All intercompany amounts between the Company and its subsidiary and consolidated VIEs have been eliminated in consolidation.

Variable Interest Entities

Variable Interest Entities

VIEs are defined as entities that by design either lack sufficient equity for the entity to finance its activities without additional subordinated financial support or are unable to direct the entity’s activities or are not exposed to the entity’s losses or entitled to its residual returns. The Company evaluates all of its interests in VIEs for consolidation. When the interests are determined to be variable interests, the Company assesses whether it is deemed the primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, it considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes: first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers is deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, it considers all of its economic interests. This assessment requires the Company to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

In instances where the Company and its related parties have variable interests in a VIE, the Company considers whether there is a single party in the related party group that meets both the power and losses or benefits criteria on its own as though no related party relationship existed.  If one party within the related party group meets both these criteria, such reporting entity is the primary beneficiary of the VIE and no further analysis is needed.  If no party within the related party group on its own meets both the power and losses or benefits criteria, but the related party group as a whole meets these two criteria, the determination of primary beneficiary within the related party group requires significant judgment. The analysis is based upon qualitative as well as quantitative factors, such as the relationship of the VIE to each of the members of the related-party group, as well as the significance of the VIE's activities to those members, with the objective of determining which party is most closely associated with the VIE. 

Ongoing assessments of whether an enterprise is the primary beneficiary of a VIE are required.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.

Restricted Cash

Restricted Cash

Restricted cash represents cash held by the trustee or servicer for mortgage escrows in connection with the Company's securitized loan and commercial loan investments held in two consolidated VIEs. These escrows consist of principal and interest escrows, capital improvement reserves, repair reserves, real estate tax and insurance reserves and tenant reserves. The corresponding liability is recorded in "Other liabilities" in the Consolidated Balance Sheets. The restricted cash is not available for general corporate use.

Securitized / Unsecuritized Commercial Loans

Securitized Commercial Loans

Securitized commercial loans are comprised of commercial loans of consolidated variable interest entities which were sponsored by third parties. These loans are recorded in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs". The Company has chosen to make the fair value election pursuant to ASC 825. Accordingly, these loans are recorded at fair value with periodic changes in fair value being recorded in earnings as a component of "Unrealized gain (loss), net".

The securitized commercial loans are typically collateralized by commercial real estate. As a result, the Company regularly evaluates the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. On a quarterly basis, the Company evaluates the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the Company does not record an allowance for loan loss as the Company has elected the fair value option.  However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed. Interest income accrual is resumed when the loan becomes contractually current and performance is demonstrated. A loan is written off when it is no longer realizable and/or legally discharged.

Commercial Loans

Investments in Commercial Loans, which are comprised of first lien commercial mortgage loans and commercial mezzanine loans, are recorded in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs". The Company has chosen to make the fair value election pursuant to ASC 825 for its Commercial Loan portfolio. Accordingly, these loans are recorded at fair value with periodic changes in fair value being recorded in earnings as a component of "Unrealized gain (loss), net". All other costs incurred in connection with acquiring the Commercial Loans or committing to purchase these loans are charged to expense as incurred.

The Company’s loans are typically collateralized by commercial real estate. As a result, the Company regularly evaluates the extent and impact of any credit migration associated with the performance and or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. On a quarterly basis, the Company evaluates the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the Company does not record an allowance for loan loss as the Company has elected the fair value option.  However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed. Interest income accrual is resumed when the loan becomes contractually current and performance is demonstrated. A loan is written off when it is no longer realizable and/or legally discharged.

Interest Income Recognition

Interest Income Recognition

Loan Portfolio

Interest income on the Company's residential loan portfolio and commercial loan portfolio is recorded using the effective interest method based on the contractual payment terms of the loan. Any premium amortization or discount accretion will be reflected as a component of "Interest income" in the Consolidated Statements of Operations.

Recent accounting pronouncements

Recently adopted accounting pronouncements

Description	Adoption Date	Effect on Financial Statements
In May 2014, the FASB issued ASU 2014-9, “Revenue from Contracts with Customers (Topic 606).” The guidance changes an entity’s recognition of revenue from contracts with customers.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In addition, the new guidance requires improved disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, the FASB issued implementation guidance which clarifies principal versus agent considerations in reporting revenue gross versus net (ASU 2016-8). In April 2016, the FASB issued implementation guidance which clarifies the identification of performance obligations (ASU 2016-10). In May 2016, the FASB issued amendments that affect only the narrow aspects of Topic 606 (ASU2016-12).	First quarter 2018.	The Company's revenue is mainly derived from interest income on our investments and to a lesser extent gains on sales of investments, which are not impacted by this standard. Therefore, the adoption of this standard did not have a material impact on the Company's consolidated financial statements.
In January 2016, the FASB issued ASU 2016-1, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The guidance improves certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. In February 2018, the FASB issued a separate Update for technical corrections and improvements related to the ASU 2016-01 to increase stakeholders' awareness of the amendments and to expedite the improvements (ASU 2018-3).	First quarter 2018.	The standard does not change the guidance for classifying and measuring investments in debt securities and loans as well nonrecourse liabilities of consolidated collateralized financing entities. Therefore, the adoption of this standard did not have a material impact on the Company's consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230)." The guidance is intended to reduce diversity in practice in how certain transactions are classified on the statement of cash flows.	First quarter 2018 and requires retrospective adoption.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In November 2016, the FASB issued ASU 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB's Emerging Issues Task Force." The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents as well as disclose information about the nature of the restrictions on its cash and cash equivalents.	First quarter 2018 and requires retrospective adoption.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In January 2017, the FASB issued ASU 2017-01 "Business Combinations (Topic 805): Clarifying the Definition of a Business." This ASU provides a more robust framework to use in determining when a set of assets and activities constitutes a business.	First quarter 2018. The guidance should be applied prospectively on or after the effective date.	The adoption of this standard did not have a material impact on its Consolidated Statements of Cash Flows.
In May 2017, the FASB issued ASU 2017-09 "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting." The amendments in this update provide guidance about which changes to the terms or conditions of a shared-based payment award require an entity to apply modification accounting in Topic 718.	First quarter 2018.	There are no changes to the terms and conditions of the Company's share-based compensation. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently issued accounting pronouncements

Description	Effective Date	Effect on Financial Statements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard significantly changes how an entity will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through the income statement. The standard will replace the current "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available for sale debt securities, entities will be required to record an allowance rather than reduce the carrying amount, as is currently done under the other than temporary impairment model. It also simplifies the accounting model for purchased credit impaired debt securities and loans.	First quarter 2020.	The Company is currently evaluating the impact the standard may have on its consolidated financial statements when adopted.
In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivative and Hedges (Topic 815): Part I - Accounting for Certain Financial Instruments with Down Round Features and Part II - Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatory Redeemable Noncontrolling Interest with a Scope Exception". Part I of this update changes the classification analysis of certain financial instruments (such as warrants and convertible instruments) with down round features. Down round features are features of certain equity-linked financial instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. Entities that present earnings per share are required to recognize the effect of the down round feature when it is triggered. The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting." The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-09, "Codification Improvements." The amendments in this update affect a wide variety of Topics in the Codification including derivatives and hedging, stock compensation-income taxes, distinguishing liabilities from equity, debt modification and extinguishment, reporting comprehensive income, business combinations-income taxes, financial services and Plan accounting.	First quarter 2019.	The Company is evaluating the impact this standard may have on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this update modify the disclosure requirements on fair value measurements including the consideration of costs and benefits.	First quarter 2020.	The Company is evaluating the impact this standard may have on its consolidated financial statements.

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of the entity's financial instruments carried at fair value based upon the valuation hierarchy

The following tables present the Company’s financial instruments carried at fair value as of September 30, 2018 and December 31, 2017, based upon the valuation hierarchy (dollars in thousands):

	September 30, 2018
	Fair Value
	Level I		Level II		Level III		Total
Assets
Agency RMBS	$	—	$	385,008	$	—	$	385,008
Agency RMBS Interest-Only Strips	—		—		12,203		12,203
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		—		8,006		8,006
Agency CMBS	—		1,958,951		107,124		2,066,075
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		4,241		—		4,241
Subtotal Agency MBS	—		2,348,200		127,333		2,475,533
Non-Agency RMBS	—		26,076		57,274		83,350
Non-Agency RMBS Interest-Only Strips	—		—		15,513		15,513
Non-Agency CMBS	—		266,847		—		266,847
Subtotal Non-Agency MBS	—		292,923		72,787		365,710
Other securities	—		82,820		9,708		92,528
Total mortgage-backed securities and other securities	—		2,723,943		209,828		2,933,771
Residential Whole-Loans	—		—		684,463		684,463
Residential Bridge Loans	—		—		234,747		234,747
Securitized commercial loans	—		—		1,191,048		1,191,048
Commercial Loans	—		—		143,951		143,951
Derivative assets	1,812		888		—		2,700
Total Assets	$	1,812	$	2,724,831	$	2,464,037	$	5,190,680
Liabilities
Derivative liabilities	$	—	$	2,159	$	—	$	2,159
Securitized debt	—		1,116,483		2,606		1,119,089
Total Liabilities	$	—	$	1,118,642	$	2,606	$	1,121,248

	December 31, 2017
	Fair Value
	Level I		Level II		Level III		Total
Assets
Agency RMBS	$	—	$	672,177	$	—	$	672,177
Agency RMBS Interest-Only Strips	—		15,437		—		15,437
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		10,419		—		10,419
Agency CMBS	—		2,137,583		17,217		2,154,800
Agency CMBS Interest-Only Strips	—		10		—		10
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		5,757		—		5,757
Subtotal Agency MBS	—		2,841,383		17,217		2,858,600
Non-Agency RMBS	—		90,819		13		90,832
Non-Agency RMBS Interest-Only Strips	—		—		8,722		8,722
Non-Agency CMBS	—		278,604		—		278,604
Subtotal Non-Agency MBS	—		369,423		8,735		378,158
Other securities	—		112,826		9,239		122,065
Total mortgage-backed securities and other securities	—		3,323,632		35,191		3,358,823
Residential Whole-Loans	—		—		237,423		237,423
Residential Bridge Loans	—		—		64,526		64,526
Securitized commercial loan	—		—		24,876		24,876
Derivative assets	728		—		—		728
Total Assets	$	728	$	3,323,632	$	362,016	$	3,686,376
Liabilities
Derivative liabilities	$	50	$	4,296	$	—	$	4,346
Securitized debt	—		—		10,945		10,945
Total Liabilities	$	50	$	4,296	$	10,945	$	15,291

Schedule of additional information about the entity's financial instruments, which are measured at fair value on a recurring basis for which the entity has utilized Level III inputs to determine fair value

The following tables present additional information about the Company’s financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level III inputs to determine fair value:

	Three months ended September 30, 2018
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Residential Bridge Loans			Commercial Loans			Securitized  commercial  loans			Securitized debt
Beginning balance	$	75,043		$	16,307		$	8,955		$	335,149		$	236,359		$	70,717		$	1,309,195		$	2,870
Transfers into Level III from Level II	—			57,275			9,708			—			—			—			—			—
Transfers from Level III into Level II	(51,976		)	—			(8,697		)	—			—			—			—			—
Purchases	107,034			—			—			372,348			70,465			94,313			—			—
Principal repayments	(42		)	(14		)	(285		)	(21,258		)	(70,341		)	(20,638		)	(117,100		)	—
Total net gains / losses included in net income
Other than temporary impairment	(384		)	(142		)	—			—			—			—			—			—
Unrealized gains/(losses), net on assets(1)	(1,007		)	(95		)	(15		)	(1,469		)	(1,103		)	(575		)	282			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			—			—			(330		)
Premium and discount amortization, net	(1,335		)	(544		)	42			(307		)	(633		)	134			(1,329		)	66
Ending balance	$	127,333		$	72,787		$	9,708		$	684,463		$	234,747		$	143,951		$	1,191,048		$	2,606
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	(668	)	$	(94	)	$	—		$	(1,231	)	$	(844	)	$	(618	)	$	282		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	330

	Three months ended September 30, 2017
$ in thousands	Agency MBS		Non-Agency MBS			Other Securities			Residential  Whole-Loans			Securitized  commercial  loan			Securitized debt			Derivative liability
Beginning balance	$	—	$	14,326		$	22,405		$	203,540		$	24,875		$	10,945		$	329
Transfers into Level III from Level II	—		—			9,470			—			—			—			—
Transfers from Level III into Level II	—		—			(23,852		)	—			—			—			—
Purchases	2,009		—			—			—			—			—			—
Sales and settlements	—		—			—			—			—			—			(53		)
Principal repayments	—		(388		)	—			(11,264		)	(59		)	(26		)	—
Total net gains / losses included in net income						0
Realized (gains)/losses, net on liabilities	—		—			—			—			—			—			53
Other than temporary impairment	—		—			(121		)	—			—			—			—
Unrealized gains/(losses), net on assets(1)	—		291			1,094			(575		)	136			—			—
Unrealized (gains)/losses, net on liabilities(2)	—		—			—			—			—			60			(329		)
Premium and discount amortization, net	—		33			474			(262		)	—			—			—
Ending balance	$	2,009	$	14,262		$	9,470		$	191,439		$	24,952		$	10,979		$	—
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	—	$	291		$	—		$	(356	)	$	136		$	—		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—	$	—		$	—		$	—		$	—		$	(60	)	$	—

	Nine months ended September 30, 2018
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Residential Bridge Loans			Commercial Loans			Securitized  commercial  loans			Securitized debt
Beginning balance	$	17,217		$	8,735		$	9,239		$	237,423		$	64,526		$	—		$	24,876		$	10,945
Transfers into Level III from Level II	22,794			57,275			9,708			—			—			—			—			—
Transfers from Level III into Level II	(16,805		)	—			(8,697		)	—			—			—			—			(10,899		)
Purchases	109,002			8,602			—			486,354			221,619			144,035			1,353,019			—
Sales and settlements	—			—			—			—			—			—			—			12
Principal repayments	(53		)	(14		)	(604		)	(36,092		)	(49,503		)	—			(196,007		)	(44		)
Total net gains / losses included in net income
Other than temporary impairment	(590		)	(191		)	—			—			—			—			—			—
Unrealized gains/(losses), net on assets(1)	(1,447		)	(149		)	(68		)	(2,644		)	(1,217		)	(159		)	11,152			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			—			—			2,502
Premium and discount amortization, net	(2,785		)	(1,471		)	130			(578		)	(678		)	75			(1,992		)	90
Ending balance	$	127,333		$	72,787		$	9,708		$	684,463		$	234,747		$	143,951		$	1,191,048		$	2,606
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	(1,089	)	$	(148	)	$	—		$	(2,101	)	$	(832	)	$	(159	)	$	11,152		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	(2,504	)

	Nine months ended September 30, 2017
$ in thousands	Agency MBS			Non-Agency MBS			Other Securities			Residential  Whole-Loans			Securitized  commercial  loan			Securitized debt			Derivative liability
Beginning balance	$	73,059		$	75,576		$	31,356		$	192,136		$	24,225		$	10,659		$	1,673
Transfers into Level III from Level II	—			15,610			9,470			—			—			—			—
Transfers from Level III into Level II	(73,715		)	(7,434		)	(33,080		)	—			—			—			—
Purchases	2,009			—			—			33,718			—			—			—
Sales and settlements	—			(60,132		)	—			—			—			—			(552		)
Principal repayments	—			(2,463		)	(172		)	(33,718		)	(59		)	(26		)	—
Total net gains / losses included in net income
Realized gains/(losses), net on assets	—			2,623			—			—			—			—			—
Realized (gains)/losses, net on liabilities	—			—			—			—			—			—			552
Other than temporary impairment	—			—			(1,823		)	—			—			—			—
Unrealized gains/(losses), net on assets(1)	636			(8,715		)	1,550			97			786			—			—
Unrealized (gains)/losses, net on liabilities(2)	—			—			—			—			—			346			(1,673		)
Premium and discount amortization, net	20			(803		)	2,169			(794		)	—			—			—
Ending balance	$	2,009		$	14,262		$	9,470		$	191,439		$	24,952		$	10,979		$	—
Unrealized gains/(losses), net on assets held at the end of the period(1)	$	—		$	684		$	72		$	347		$	786		$	—		$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—		$	—		$	—		$	—		$	—		$	(346	)	$	—

(1) Gains and losses are included in "Unrealized gain (loss), net" in the Consolidated Statements of Operations.

(2) Gains and losses on securitized debt and derivative liability are included in "Unrealized gain (loss), net" and "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations, respectively.

Schedule of fair value, by balance sheet grouping

The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value as of September 30, 2018 and December 31, 2017 in the consolidated financial statements (dollars in thousands):

	September 30, 2018				December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets
Residential Bridge Loans	$	14,724	$	14,479	$	42,147	$	42,881
Total	$	14,724	$	14,479	$	42,147	$	42,881
Liabilities
Borrowings under repurchase agreements	$	3,469,319	$	3,591,751	$	3,251,686	$	3,257,956
Convertible senior unsecured notes	109,731		115,385		108,743		114,819
Total	$	3,579,050	$	3,707,136	$	3,360,429	$	3,372,775

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Mortgage-Backed Securities and other securities (Tables)

9 Months Ended

Sep. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Summary of certain information about the Company's investment portfolio

The following tables present certain information about the Company’s investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Principal Balance		Unamortized Premium (Discount), net			Discount Designated as Credit Reserve and OTTI			Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Net Weighted Average Coupon
Agency RMBS	$	389,756	$	13,133		$	—		$	402,889	$	—	$	(17,881	)	$	385,008	3.6	%
Agency RMBS Interest-Only Strips (2)	N/A		N/A			N/A			12,377		724		(898		)	12,203		2.3	%	(1)
Agency RMBS Interest-Only Strips, accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			8,006		2.8	%	(1)
Subtotal Agency RMBS	389,756		13,133			—			415,266		724		(18,779		)	405,217		3.2	%
Agency CMBS	2,124,942		4,970			—			2,129,912		563		(64,400		)	2,066,075		3.2	%
Agency CMBS Interest-Only Strips accounted for as derivatives(1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			4,241		0.4	%	(1)
Subtotal Agency CMBS	2,124,942		4,970			—			2,129,912		563		(64,400		)	2,070,316		3.0	%
Total Agency MBS	2,514,698		18,103			—			2,545,178		1,287		(83,179		)	2,475,533		3.0	%
Non-Agency RMBS	113,606		5,568			(39,585		)	79,589		4,344		(583		)	83,350		4.4	%
Non-Agency RMBS Interest- Only Strips (1)	N/A		N/A			N/A			15,677		—		(164		)	15,513		0.5	%	(1)
Subtotal Non-Agency RMBS	113,606		5,568			(39,585		)	95,266		4,344		(747		)	98,863		1.0	%
Non-Agency CMBS	322,255		(29,014		)	(24,976		)	268,265		3,959		(5,377		)	266,847		5.9	%
Total Non-Agency MBS	435,861		(23,446		)	(64,561		)	363,531		8,303		(6,124		)	365,710		2.2	%
Other securities (3)	71,420		2,116			(9,891		)	82,349		10,247		(68		)	92,528		9.0	%
Total	$	3,021,979	$	(3,227	)	$	(74,452	)	$	2,991,058	$	19,837	$	(89,371	)	$	2,933,771	2.9	%

	December 31, 2017
	Principal Balance		Unamortized Premium (Discount), net			Discount  Designated as Credit Reserve and OTTI			Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Net Weighted Average Coupon
Agency RMBS	$	641,044	$	28,876		$	—		$	669,920	$	4,571	$	(2,314	)	$	672,177	3.9	%
Agency RMBS Interest-Only Strips (1)	N/A		N/A			N/A			14,750		878		(191		)	15,437		2.9	%	(1)
Agency RMBS Interest-Only Strips, accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			10,419		2.9	%	(1)
Subtotal Agency RMBS	641,044		28,876			—			684,670		5,449		(2,505		)	698,033		3.6	%
Agency CMBS	2,145,139		2,142			—			2,147,281		16,913		(9,394		)	2,154,800		2.9	%
Agency CMBS Interest-Only Strips(1)	N/A		N/A			N/A			—		10		—			10		3.2	%	(1)
Agency CMBS Interest-Only Strips accounted for as derivatives (1) (2)	N/A		N/A			N/A			N/A		N/A		N/A			5,757		0.5	%	(1)
Subtotal Agency CMBS	2,145,139		2,142			—			2,147,281		16,923		(9,394		)	2,160,567		2.7	%
Total Agency MBS	2,786,183		31,018			—			2,831,951		22,372		(11,899		)	2,858,600		3.0	%
Non-Agency RMBS	119,748		5,263			(39,491		)	85,520		5,473		(161		)	90,832		3.8	%
Non-Agency RMBS Interest- Only Strips (1)	N/A		N/A			N/A			8,738		—		(16		)	8,722		0.9	%	(1)
Subtotal Non-Agency RMBS	119,748		5,263			(39,491		)	94,258		5,473		(177		)	99,554		1.8	%
Non-Agency CMBS	379,183		(59,129		)	(28,020		)	292,034		1,702		(15,132		)	278,604		4.8	%
Total Non-Agency MBS	498,931		(53,866		)	(67,511		)	386,292		7,175		(15,309		)	378,158		3.3	%
Other securities (3)	86,305		6,300			(5,404		)	110,091		12,161		(187		)	122,065		7.8	%
Total	$	3,371,419	$	(16,548	)	$	(72,915	)	$	3,328,334	$	41,708	$	(27,395	)	$	3,358,823	3.1	%

(1) IOs and IIOs have no principal balances and bear interest based on a notional balance.  The notional balance is used solely to determine interest distributions on interest-only class of securities.  At September 30, 2018, the notional balance for Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, Agency RMBS IOs and IIOs, accounted for as derivatives and Agency CMBS IOs and IIOs, accounted for as derivatives was $166.4 million, $822.0 million, $96.2 million and $173.9 million, respectively.  At December 31, 2017, the notional balance for Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, Agency RMBS IOs and IIOs, accounted for as derivatives, Agency CMBS IOs and IIOs, accounted for as derivatives and Agency CMBS IOs and IIOs was $165.5 million, $278.4 million, $122.0 million, $192.5 million and $3.3 million, respectively.

(2) Interest on these securities is reported as a component of "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

(3) Other securities include residual interests in asset-backed securities which have no principal balance and an amortized cost of approximately $18.7 million and $22.9 million, as of September 30, 2018 and December 31, 2017, respectively.

Schedule of changes in the components of purchase discount and amortizable premium on Non-Agency RMBS, Non-Agency CMBS and other securities

The following tables present the changes in the components of the Company’s purchase discount and amortizable premium on its Non-Agency RMBS, Non-Agency CMBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	Three months ended September 30, 2018									Three months ended September 30, 2017
	Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)			Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)
Balance at beginning of period	$	(78,837	)	$	(68,677	)	$	21,723		$	(49,830	)	$	(76,778	)	$	15,186
Accretion of discount	—			1,314			—			—			2,588			—
Amortization of premium	—			—			(97		)	—			—			(87		)
Realized credit losses	3,305			—			—			25			—			—
Purchases	—			—			—			—			—			—
Sales	2,334			25,624			(400		)	187			1,931			(18		)
Net impairment losses recognized in earnings	(2,071		)	—			—			(2,345		)	—			—
Transfers/release of credit reserve(2)	817			8			(825		)	(866		)	953			(87		)
Balance at end of period	$	(74,452	)	$	(41,731	)	$	20,401		$	(52,829	)	$	(71,306	)	$	14,994

	Nine months ended September 30, 2018									Nine months ended September 30, 2017
	Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)			Discount Designated as Credit Reserve and OTTI			Accretable  Discount(1)			Amortizable  Premium(1)
Balance at beginning of period	$	(72,915	)	$	(68,438	)	$	20,872		$	(130,484	)	$	(109,822	)	$	44,527
Accretion of discount	—			6,483			—			—			8,542			—
Amortization of premium	—			—			(461		)	—			—			(776		)
Realized credit losses	5,526			—			—			1,854			—			—
Purchases	(7,182		)	(6,473		)	435			(1,724		)	(668		)	1,522
Sales	5,673			29,352			(1,084		)	89,628			32,016			(31,060		)
Net impairment losses recognized in earnings	(7,570		)	—			—			(12,696		)	—			—
Transfers/release of credit reserve(2)	2,016			(2,655		)	639			593			(1,374		)	781
Balance at end of period	$	(74,452	)	$	(41,731	)	$	20,401		$	(52,829	)	$	(71,306	)	$	14,994

(1) Together with coupon interest, accretable purchase discount and amortizable premium is recognized as interest income over the life of the security.

(2) Subsequent reductions of a security’s non-accretable discount results in a corresponding reduction in its amortizable premium.

Schedule of the fair value and contractual maturities of the Company's investment securities

The following tables present the fair value and contractual maturities of the Company’s investment securities at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	< or equal to 10 years		> 10 years and < or equal to 20 years		> 20 years and < or equal to 30 years		> 30 years		Total
Agency RMBS	$	—	$	—	$	57,572	$	327,436	$	385,008
Agency RMBS Interest-Only Strips	3,937		2,436		5,830		—		12,203
Agency RMBS Interest-Only Strips, accounted for as derivatives	1,223		4,104		2,679		—		8,006
Agency CMBS	1,507,428		558,647		—		—		2,066,075
Agency CMBS Interest-Only Strips accounted for as derivatives	—		—		—		4,241		4,241
Subtotal Agency	1,512,588		565,187		66,081		331,677		2,475,533
Non-Agency RMBS	—		24,752		16,757		41,841		83,350
Non-Agency RMBS Interest- Only Strips	—		—		7,900		7,613		15,513
Non-Agency CMBS	28,752		80,180		104,617		53,298		266,847
Subtotal Non-Agency	28,752		104,932		129,274		102,752		365,710
Other securities	3,782		59,908		—		28,838		92,528
Total	$	1,545,122	$	730,027	$	195,355	$	463,267	$	2,933,771

	December 31, 2017
	< or equal to 10  years		> 10 years and < or  equal to 20 years		> 20 years and < or  equal to 30 years		> 30 years		Total
Agency RMBS	$	—	$	56,228	$	239,197	$	376,752	$	672,177
Agency RMBS Interest-Only Strips	3,920		4,591		6,926		—		15,437
Agency RMBS Interest-Only Strips, accounted for as derivatives	1,686		5,139		3,594		—		10,419
Agency CMBS	1,599,620		555,180		—		—		2,154,800
Agency CMBS Interest-Only Strips	10		—		—		—		10
Agency CMBS Interest-Only Strips accounted for as derivatives	—		—		—		5,757		5,757
Subtotal Agency	1,605,236		621,138		249,717		382,509		2,858,600
Non-Agency RMBS	13		51,092		4,184		35,543		90,832
Non-Agency RMBS Interest- Only Strips	—		—		—		8,722		8,722
Non-Agency CMBS	—		60,583		139,209		78,812		278,604
Subtotal Non-Agency	13		111,675		143,393		123,077		378,158
Other securities	—		99,062		—		23,003		122,065
Total	$	1,605,249	$	831,875	$	393,110	$	528,589	$	3,358,823

Schedule of gross unrealized losses and estimated fair value of the Company's MBS and other securities by length of time that such securities have been in a continuous unrealized loss position

The following tables present the gross unrealized losses and estimated fair value of the Company’s MBS and other securities by length of time that such securities have been in a continuous unrealized loss position at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Less than 12 Months						12 Months or More						Total
	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities
Agency RMBS	$	115,378	$	(3,131	)	8	$	269,630	$	(14,750	)	2	$	385,008	$	(17,881	)	10
Agency RMBS Interest-Only Strips	3,588		(394		)	9	2,753		(504		)	6	6,341		(898		)	15
Agency CMBS	1,135,925		(32,175		)	76	516,838		(32,225		)	37	1,652,763		(64,400		)	113
Subtotal Agency	1,254,891		(35,700		)	93	789,221		(47,479		)	45	2,044,112		(83,179		)	138
Non-Agency RMBS	29,798		(583		)	5	—		—			—	29,798		(583		)	5
Non-Agency RMBS Interest-Only Strips	8,003		(164		)	2	—		—			—	8,003		(164		)	2
Non-Agency CMBS	70,410		(894		)	15	57,263		(4,483		)	12	127,673		(5,377		)	27
Subtotal Non-Agency	108,211		(1,641		)	22	57,263		(4,483		)	12	165,474		(6,124		)	34
Other securities	8,697		(68		)	1	—		—			—	8,697		(68		)	1
Total	$	1,371,799	$	(37,409	)	116	$	846,484	$	(51,962	)	57	$	2,218,283	$	(89,371	)	173

	December 31, 2017
	Less than 12 Months						12 Months or More						Total
	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities	Fair Value		Unrealized Losses			Number  of Securities
Agency RMBS	$	330,259	$	(2,179	)	11	$	1,632	$	(135	)	5	$	331,891	$	(2,314	)	16
Agency RMBS Interest-Only Strips	3,095		(142		)	6	1,703		(49		)	3	4,798		(191		)	9
Agency CMBS	955,559		(9,394		)	57	—		—			—	955,559		(9,394		)	57
Subtotal Agency	1,288,913		(11,715		)	74	3,335		(184		)	8	1,292,248		(11,899		)	82
Non-Agency RMBS	28,508		(161		)	3	—		—			—	28,508		(161		)	3
Non-Agency RMBS Interest-Only Strips	8,722		(16		)	3	—		—			—	8,722		(16		)	3
Non-Agency CMBS	69,661		(1,753		)	15	119,729		(13,379		)	35	189,390		(15,132		)	50
Subtotal Non-Agency	106,891		(1,930		)	21	119,729		(13,379		)	35	226,620		(15,309		)	56
Other securities	23,800		(187		)	3	—		—			—	23,800		(187		)	3
Total	$	1,419,604	$	(13,832	)	98	$	123,064	$	(13,563	)	43	$	1,542,668	$	(27,395	)	141

Schedule of other-than-temporary impairments the Company recorded on its securities portfolio

The following table presents the OTTI the Company recorded on its securities portfolio (dollars in thousands):

	Three months ended September 30, 2018		Three months ended September 30, 2017		Nine months ended September 30, 2018		Nine months ended September 30, 2017
Agency RMBS (1)	$	320	$	4,760	$	663	$	5,420
Non-Agency RMBS	159		—		269		—
Non-Agency CMBS	2,054		2,344		7,491		12,658
Other securities	—		121		—		1,823
Total	$	2,533	$	7,225	$	8,423	$	19,901

(1) Normally, unrealized losses on Agency securities (excluding Agency IO's) with the explicit guarantee of principal and interest by the governmental sponsored entity are not credit losses but rather due to changes in interest rates and prepayment expectations. These securities would not be considered other than temporarily impaired provided the Company did not intend to sell the security. For the three and nine months ended September 30, 2018 and September 30, 2017, $0, $0, $4.7 million and $4.7 million, respectively, of OTTI related to Agency RMBS securities the Company intended to sell.

Summary of the components of interest income on the Company's MBS and other securities

The following tables present components of interest income on the Company’s MBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017, respectively (dollars in thousands):

	For the three months ended September 30, 2018							For the three months ended September 30, 2017
	Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income		Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income
Agency RMBS	$	4,551	$	(1,138	)	$	3,413	$	8,886	$	(2,995	)	$	5,891
Agency CMBS	13,812		(298		)	13,514		11,071		110			11,181
Non-Agency RMBS	2,139		(536		)	1,603		571		372			943
Non-Agency CMBS	5,379		1,469			6,848		4,242		2,139			6,381
Other securities	3,674		(1,660		)	2,014		2,160		464			2,624
Total	$	29,555	$	(2,163	)	$	27,392	$	26,930	$	90		$	27,020

	Nine months ended September 30, 2018							Nine months ended September 30, 2017
	Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income		Coupon Interest		Net (Premium Amortization/Amortization Basis) Discount Amortization			Interest Income
Agency RMBS	$	17,471	$	(4,112	)	$	13,359	$	30,513	$	(10,662	)	$	19,851
Agency CMBS	45,753		(266		)	45,487		24,408		717			25,125
Non-Agency RMBS	5,616		(685		)	4,931		4,482		303			4,785
Non-Agency CMBS	15,362		5,873			21,235		14,675		6,572			21,247
Other securities	11,610		(4,825		)	6,785		5,300		2,112			7,412
Total	$	95,812	$	(4,015	)	$	91,797	$	79,378	$	(958	)	$	78,420

Schedule of sales and realized gain (loss) of the Company's MBS and other securities

The following tables present the sales and realized gain (loss) of the Company’s MBS and other securities for the three and nine months ended September 30, 2018 and September 30, 2017, respectively (dollars in thousands):

	For the three months ended September 30, 2018										For the three months ended September 30, 2017
	Proceeds		Gross Gains		Gross Losses			Net Gain  (Loss)			Proceeds			Gross Gains			Gross Losses			Net Gain (Loss)
Agency RMBS(1)	$	—	$	—	$	—		$	—		$	(2,906	)	$	(3	)	$	51		$	48
Agency CMBS	641,677		—		(25,640		)	(25,640		)	—			—			—			—
Non-Agency CMBS	73,848		2,411		(2,712		)	(301		)	10,597			1,641			(278		)	1,363
Other securities	13,712		1,712		—			1,712			10,419			419			—			419
Total	$	729,237	$	4,123	$	(28,352	)	$	(24,229	)	$	18,110		$	2,057		$	(227	)	$	1,830

(1) For the three months ended September 30, 2017 reflects a reclassification of proceeds from a sale on the trade date to reflect subsequent Agency RMBS paydowns.

	Nine months ended September 30, 2018										Nine months ended September 30, 2017
	Proceeds		Gross Gains		Gross Losses			Net Gain  (Loss)			Proceeds		Gross Gains		Gross Losses			Net Gain (Loss)
Agency RMBS(1)	$	209,581	$	18	$	(4,531	)	$	(4,513	)	$	862,245	$	4,376	$	(7,314	)	$	(2,938	)
Agency CMBS	768,544		—		(30,656		)	(30,656		)	—		—		—			—
Non-Agency RMBS(2)	51,958		3,114		—			3,114			243,811		24,389		(2,242		)	22,147
Non-Agency CMBS	80,554		2,472		(3,148		)	(676		)	45,634		2,377		(1,351		)	1,026
Other securities	35,469		3,469		—			3,469			33,365		419		(54		)	365
Total	$	1,146,106	$	9,073	$	(38,335	)	$	(29,262	)	$	1,185,055	$	31,561	$	(10,961	)	$	20,600

(1) For the nine months ended September 30, 2017, excludes proceeds for Agency RMBS Interest-Only Strips, accounted for as derivatives, of approximately $2.6 million and gross realized gains of $432 thousand, respectively.

(2) For the nine months ended September 30, 2017, excludes proceeds for Non-Agency RMBS Interest-Only Strips, accounted for as derivatives, of approximately $2.2 million, gross realized gains of $274 thousand and gross realized losses of $180 thousand, respectively.

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Residential Whole-Loans and Bridge Loans - (Tables)

9 Months Ended

Sep. 30, 2018

Variable Interest Entities

Schedule of the assets and liabilities of the VIE included in the Consolidated Balance Sheets

The following table presents a summary of the assets and liabilities of the consolidated residential whole-loan trusts, residential bridge loan trust included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)	$	684,463	$	237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)	249,471		106,673
Commercial loan, at fair value	29,831		—
Investment related receivable	33,430		7,665
Interest receivable	8,874		3,197
Other assets	203		—
Total assets	$	1,006,272	$	354,958
Accounts payable and accrued expenses	722		188
Other liabilities	393		—
Total liabilities	$	1,115	$	188

The following table presents a summary of the assets and liabilities of the three consolidated trusts included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Restricted cash	$	100,138	$	—
Securitized commercial loans, at fair value	1,191,048		24,876
Commercial Loans, at fair value	93,846		—
Interest receivable	3,544		161
Total assets	$	1,388,576	$	25,037
Securitized debt, at fair value	$	1,119,089	$	10,945
Interest payable	2,487		70
Accounts payable and accrued expenses	15		1
Other liabilities	100,138		—
Total liabilities	$	1,221,729	$	11,016

Schedule of components of the carrying value of Residential Whole-Loans and securitized commercial loan

The following table presents the components of the carrying value of Residential Whole-Loans and Residential Bridge Loans as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	Residential Whole-Loans, at Fair Value						Residential Bridge Loans, at Fair Value(1)						Residential Bridge Loans, at Amortized Cost(1)
	September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017
Principal balance	$	674,763		$	232,270		$	234,445		$	63,802		$	14,734		$	42,066
Unamortized premium	10,592			2,021			1,426			293			28			122
Unamortized discount	(2,499		)	(1,190		)	(434		)	(128		)	(38		)	(41		)
Amortized cost	682,856			233,101			235,437			63,967			14,724			42,147
Gross unrealized gains	5,506			4,463			525			655			N/A			N/A
Gross unrealized losses	(3,899		)	(141		)	(1,215		)	(96		)	N/A			N/A
Fair value	$	684,463		$	237,423		$	234,747		$	64,526		N/A			N/A

(1) These loans are classified in "Residential Bridge Loans" in the Consolidated Balance Sheets.

Schedule of certain information about the Residential Whole-Loans investment portfolio

The Residential Whole-Loans have low LTV's and are comprised of 1,034 non-qualifying adjustable rate mortgages, 902 conforming fixed rate mortgages and 13 investor fixed rate mortgages.  The following tables present certain information about the Company’s Residential Whole-Loan investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

September 30, 2018
				Weighted Average
Current Coupon Rate	Number of Loans	Principal  Balance		Original LTV		Original  FICO Score(1)	Expected  Life (years)	Contractual  Maturity  (years)	Coupon  Rate
3.01 – 4.00%	69	$	22,732	61.4	%	738	7.5	29.3	3.9	%
4.01– 5.00%	1,159	405,934		62.2	%	734	3.6	28.8	4.7	%
5.01 – 6.00%	708	238,961		63.2	%	709	2.8	28.0	5.4	%
6.01 – 7.00%	11	6,685		64.9	%	748	1.4	25.4	6.3	%
7.01 - 8.00%	1	357		70.0	%	777	1.9	29.3	7.2	%
8.01 - 9.00%	1	94		70.0	%	689	1.9	29.3	8.4	%
Total	1,949	$	674,763	62.6	%	727	3.4	28.5	4.9	%

(1) The original FICO score is not available for 240 loans with a principal balance of approximately $81.6 million at September 30, 2018. The Company has excluded these loans from the weighted average computations.

December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal  Balance		Original LTV		Original  FICO Score(1)	Expected  Life (years)	Contractual  Maturity  (years)	Coupon  Rate
3.01 – 4.00%	142	$	55,593	55.5	%	751	1.7	29.1	3.9	%
4.01– 5.00%	338	125,860		56.9	%	725	1.4	26.5	4.5	%
5.01 – 6.00%	132	48,553		58.2	%	728	1.6	27.0	5.2	%
6.01 – 7.00%	4	2,264		71.1	%	758	1.3	20.5	6.3	%
Total	616	$	232,270	57.0	%	734	1.5	27.1	4.5	%

(1) The original FICO score is not available for 141 loans with a principal balance of approximately $56.5 million at December 31, 2017. The Company has excluded these loans from the weighted average computations.

Schedule of the U.S. states concentration and principal balance of collateral securing residential whole-loans

The following table presents the various states across the United States in which the collateral securing the Company’s Residential Whole-Loans at September 30, 2018 and December 31, 2017, based on principal balance, is located (dollars in thousands):

September 30, 2018					December 31, 2017
State	State Concentration		Principal Balance		State	State Concentration		Principal Balance
California	68.8	%	$	463,638	California	62.2	%	$	144,321
New York	15.6	%	105,435		New York	24.4	%	56,631
Georgia	2.9	%	19,324		Georgia	4.3	%	10,061
Washington	2.2	%	14,886		Washington	4.0	%	9,244
Massachusetts	1.3	%	8,504		Massachusetts	3.9	%	9,114
Other	9.2	%	62,976		Other	1.2	%	2,899
Total	100.0	%	$	674,763	Total	100.0	%	$	232,270

Schedule of residential bridge loans

The Residential Bridge Loans are comprised of short-term non-owner occupied fixed rate loans secured by single or multi-unit residential properties, with LTVs generally not to exceed 85%. The following tables present certain information about the Company’s Residential Bridge Loan investment portfolio at September 30, 2018 and December 31, 2017 (dollars in thousands):

September 30, 2018
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
6.01 – 7.00%	14	$	5,264	61.8	%	2.6	6.7	%
7.01 – 8.00%	127	57,820		72.9	%	6.5	7.7	%
8.01 – 9.00%	213	94,873		70.2	%	5.4	8.7	%
9.01 – 10.00%	189	59,927		72.3	%	5.5	9.7	%
10.01 – 11.00%	71	16,651		71.3	%	5.0	10.6	%
11.01 – 12.00%	37	9,121		63.5	%	6.1	11.4	%
12.01 – 13.00%	9	1,866		73.3	%	6.8	12.7	%
13.01 – 14.00%	1	88		65.0	%	7.0	14.0	%
17.01 – 18.00%	12	3,569		74.0	%	4.3	18.0	%
Total	673	$	249,179	71.1	%	5.6	9.1	%

December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
5.01 - 6.00%	9	$	4,016	64.5	%	10.8	5.9	%
6.01 - 7.00%	64	18,420		67.8	%	10.6	6.7	%
7.01 – 8.00%	98	25,608		66.4	%	9.5	7.6	%
8.01 – 9.00%	56	19,728		70.3	%	11.9	8.9	%
9.01 – 10.00%	67	25,001		73.3	%	6.8	9.7	%
10.01 – 11.00%	36	10,656		75.4	%	5.0	10.8	%
11.01 – 12.00%	2	919		89.8	%	8.2	11.4	%
17.01 – 18.00%	8	1,520		73.8	%	5.9	18.0	%
Total	340	$	105,868	70.1	%	9.0	8.6	%

Schedule of the U.S. states concentration and principal balance of collateral securing residential bridge-loans

The following table presents the U.S. states in which the collateral securing the Company’s Residential Bridge Loans at September 30, 2018 and December 31, 2017, based on principal balance, is located (dollars in thousands):

September 30, 2018					December 31, 2017
State	Concentration		Principal Balance		State	Concentration		Principal Balance
California	48.2	%	$	119,784	California	48.2	%	$	51,080
New York	9.5	%	23,791		Florida	13.4	%	14,199
Florida	6.6	%	16,354		Washington	6.3	%	6,645
New Jersey	5.5	%	13,723		New York	4.4	%	4,703
Texas	4.8	%	11,964		Texas	4.4	%	4,660
Other	25.4	%	63,563		Other	23.3	%	24,581
Total	100.0	%	$	249,179	Total	100.0	%	$	105,868

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Commercial Loans (Tables)

9 Months Ended

Sep. 30, 2018

Noncontrolling Interest [Abstract]

Schedule of the assets and liabilities of the VIE included in the Consolidated Balance Sheets

The following table presents a summary of the assets and liabilities of the consolidated residential whole-loan trusts, residential bridge loan trust included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)	$	684,463	$	237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)	249,471		106,673
Commercial loan, at fair value	29,831		—
Investment related receivable	33,430		7,665
Interest receivable	8,874		3,197
Other assets	203		—
Total assets	$	1,006,272	$	354,958
Accounts payable and accrued expenses	722		188
Other liabilities	393		—
Total liabilities	$	1,115	$	188

The following table presents a summary of the assets and liabilities of the three consolidated trusts included in the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018		December 31, 2017
Restricted cash	$	100,138	$	—
Securitized commercial loans, at fair value	1,191,048		24,876
Commercial Loans, at fair value	93,846		—
Interest receivable	3,544		161
Total assets	$	1,388,576	$	25,037
Securitized debt, at fair value	$	1,119,089	$	10,945
Interest payable	2,487		70
Accounts payable and accrued expenses	15		1
Other liabilities	100,138		—
Total liabilities	$	1,221,729	$	11,016

Schedule of Carrying Value of the Commercial Real Estate Loans

The following table presents the components of the carrying value of the commercial real estate loans as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	CMSC Trust Securitized Commercial Loan, at Fair Value				RETL Trust Securitized Commercial Loan, at Fair Value				RSBC Trust Commercial Loans, at Fair Value					Commercial Loans, at Fair Value
	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018			December 31, 2017		September 30, 2018			December 31, 2017
Principal balance	$	24,556	$	24,846	$	1,154,283	$	—	$	94,787		$	—	$	50,000		$	—
Unamortized premium	—		—		1,027		—		—			—		—			—
Unamortized discount	—		—		—		—		(445		)	—		(232		)	—
Amortized cost	24,556		24,846		1,155,310		—		94,342			—		49,768			—
Gross unrealized gains	86		30		11,096		—		—			—		380			—
Gross unrealized losses	—		—		—		—		(496		)	—		(43		)	—
Fair value	$	24,642	$	24,876	$	1,166,406	$	—	$	93,846		$	—	$	50,105		$	—

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Financings (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Summary of certain characteristics of the Company's repurchase agreements

The following table summarizes certain characteristics of the Company’s repurchase agreements at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018					December 31, 2017
Securities Pledged	Repurchase Agreement Borrowings		Weighted Average Interest Rate on Borrowings Outstanding at  end of period		Weighted Average Remaining Maturity (days)	Repurchase Agreement Borrowings		Weighted Average Interest Rate on Borrowings Outstanding at end of period		Weighted Average Remaining Maturity (days)
Agency RMBS	$	393,486	2.39	%	60	$	665,919	1.62	%	61
Agency CMBS	1,833,352		2.36	%	62	2,035,222		1.53	%	53
Non-Agency RMBS	71,117		3.70	%	31	46,530		2.76	%	41
Non-Agency CMBS (1)	212,282		3.79	%	48	154,325		2.98	%	40
Residential Whole-Loans (2)	585,178		3.65	%	35	189,270		3.66	%	8
Residential Bridge Loans (2)	216,917		4.37	%	26	100,183		4.05	%	59
Commercial loans (2)	87,567		4.33	%	27	—		—	%	—
Securitized commercial loans (2)	7,599		3.99	%	12	—		—	%	—
Other securities	61,821		3.86	%	29	60,237		2.94	%	23
Borrowings under repurchase agreements	$	3,469,319	2.90	%	52	$	3,251,686	1.86	%	51

(1) Includes approximately $22.6 million of repurchase agreement borrowings related to securities sold in September 2018 that was paid off when the sale settled in October 2018.

(2) Repurchase agreement borrowings on loans owned are through trust certificates.  The trust certificates are eliminated upon consolidation.

Schedule of repurchase agreements collateralized by investments

At September 30, 2018 and December 31, 2017, repurchase agreements collateralized by investments had the following remaining maturities:

(dollars in thousands)	September 30, 2018		December 31, 2017
Overnight	$	—	$	—
1 to 29 days	1,494,121		1,387,599
30 to 59 days	332,521		665,656
60 to 89 days	1,531,084		871,819
90 to 119 days	111,593		—
Greater than or equal to 120 days	—		326,612
Total	$	3,469,319	$	3,251,686

Schedule of amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty

At September 30, 2018, the following table reflects amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty (dollars in thousands):

	September 30, 2018
Counterparty	Amount of  Collateral at Risk, at fair value		Weighted Average Remaining Maturity (days)	Percentage of  Stockholders’  Equity
Credit Suisse AG, Cayman Islands Branch	$	88,584	29	16.5	%
Nomura Securities International Inc.	72,697		29	13.6	%
UBS AG, London Branch	65,095		33	12.2	%
Citigroup Global Markets Inc.	56,038		80	10.5	%

Summary of collateral positions, with respect to borrowings under repurchase agreements, securitized debt, derivatives and clearing margin account

The following table summarizes the Company’s collateral positions, with respect to its borrowings under repurchase agreements at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018						December 31, 2017
	Assets Pledged		Accrued Interest		Assets Pledged and Accrued Interest		Assets Pledged		Accrued Interest		Assets Pledged and Accrued Interest
Assets pledged for borrowings under repurchase agreements:
Agency RMBS, at fair value	$	403,339	$	1,608	$	404,947	$	690,255	$	2,601	$	692,856
Agency CMBS, at fair value	1,922,520		5,391		1,927,911		2,143,340		5,454		2,148,794
Non-Agency RMBS, at fair value	98,863		718		99,581		58,127		160		58,287
Non-Agency CMBS, at fair value(3)	286,728		1,223		287,951		208,062		1,100		209,162
Residential Whole-Loans, at fair value (1)	684,463		4,778		689,241		237,423		1,754		239,177
Residential Bridge Loans (1)	249,471		3,975		253,446		106,673		1,443		108,116
Commercial Loans, at fair value (1)	123,677		789		124,466		—		—		—
Securitized commercial loans, at fair value (1)	13,800		85		13,885		—		—		—
Other securities, at fair value	92,391		179		92,570		89,823		105		89,928
Cash (2)	18,625		—		18,625		23,591		—		23,591
Total	$	3,893,877	$	18,746	$	3,912,623	$	3,557,294	$	12,617	$	3,569,911

(1) Loans owned through trust certificates are pledged as collateral. The trust certificates are eliminated upon consolidation.

(2) Cash posted as collateral is included in "Due from counterparties" in the Company’s Consolidated Balance Sheets.

(3) Assets pledge included $35 million of investment related receivable related to the unsettled sale of Non-Agency CMBS.

Schedule of commercial mortgage pass-through certificates

The following table summarizes RETL Trust's commercial mortgage pass-through certificates at September 30, 2018 (dollars in thousands):

Classes	Principal Balance		Coupon	Fair Value		Contractual Maturity
Class A	$	448,033	3.3%	$	449,570	2/15/2021
Class B	136,120		3.9%	136,800		2/15/2021
Class C	117,908		4.2%	118,718		2/15/2021
Class D	104,228		4.9%	105,141		2/15/2021
Class E	141,507		6.7%	143,456		2/15/2021
Class F	137,060		8.2%	138,948		2/15/2021
Class G	11,457		9.7%	11,592		2/15/2021
Class HRR	57,971		11.7%	58,156		2/15/2021
Class X-CP(1)	N/A		2.6%	1,420		3/11/2019
Class X-EXT(1)	N/A		—%	2,606		2/15/2021
	$	1,154,284		$	1,166,407

(1) Class X-CP and Class X-EXT are interest-only classes with a notional balance of $104.2 million each.

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Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Derivative Instruments

Summary of the entity's derivative instruments

The following table summarizes the Company’s derivative instruments at September 30, 2018 and December 31, 2017 (dollars in thousands):

			September 30, 2018					December 31, 2017
Derivative Instrument	Accounting Designation	Consolidated Balance Sheets Location	Notional Amount		Fair Value			Notional Amount		Fair Value
Interest rate swaps, asset	Non-Hedge	Derivative assets, at fair value	$	572,400	$	200		$	—	$	—
Options, asset	Non-Hedge	Derivative assets, at fair value	100,000		109			320,000		100
Futures contracts, asset	Non-Hedge	Derivative assets, at fair value	280,000		1,703			480,000		628
TBA securities, asset	Non-Hedge	Derivative assets, at fair value	600,000		688			—		—
Total derivative instruments, assets					2,700					728
Interest rate swaps, liability	Non-Hedge	Derivative liability, at fair value	3,739,400		(1,414		)	3,252,200		(4,191		)
Options, liability	Non-Hedge	Derivative liability, at fair value	—		—			320,000		(50		)
Credit default swaps, liability	Non-Hedge	Derivative liability, at fair value	64,747		(362		)	14,815		(95		)
TBA securities, liability	Non-Hedge	Derivative liability, at fair value	200,000		(383		)	125,000		(10		)
Total derivative instruments, liabilities					(2,159		)			(4,346		)
Total derivative instruments, net					$	541				$	(3,618	)

Summary of the effect of entity's derivative instruments reported in Gain (loss) on derivative instruments, net on the Statements of Operations

The following tables summarize the effects of the Company’s derivative positions, including Interest-Only Strips characterized as derivatives and TBAs, which are reported in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars in thousands):

	Realized Gain (Loss), net
Description	Other Settlements / Expirations			Variation Margin Settlement		Return (Recovery) of Basis			Mark-to-Market			Contractual interest income (expense), net(1)			Total
Three months ended September 30, 2018
Interest rate swaps	$	95		$	25,250	$	772		$	(3,742	)	$	1,190		$	23,565
Interest-Only Strips— accounted for as derivatives	—			—		(996		)	(929		)	1,209			(716		)
Options	—			—		—			(253		)	—			(253		)
Futures contracts	4,232			—		—			(1,994		)	—			2,238
Credit default swaps	(83		)	—		—			(492		)	—			(575		)
TBAs	(8		)	—		—			374			—			366
Total	$	4,236		$	25,250	$	(224	)	$	(7,036	)	$	2,399		$	24,625
Three months ended September 30, 2017
Interest rate swaps	$	(38	)	$	9,564	$	92		$	(2,028	)	$	(1,764	)	$	5,826
Interest-Only Strips— accounted for as derivatives	—			—		(1,486		)	351			1,816			681
Options	(957		)	—		—			477			—			(480		)
Futures contracts	(77		)	—		—			—			—			(77		)
Foreign currency forwards	45			—		—			(15		)	—			30
Total return swaps	(52		)	—		—			329			95			372
TBAs	577			—		—			288			—			865
Total	$	(502	)	$	9,564	$	(1,394	)	$	(598	)	$	147		$	7,217

	Realized Gain (Loss), net
Description	Other Settlements / Expirations			Variation Margin Settlement			Return (Recovery) of Basis			Mark-to-Market			Contractual interest income  (expense), net			Total
Nine months ended September 30, 2018
Interest rate swaps	$	114		$	123,114		$	1,064		$	(1,497	)	$	886		$	123,681
Interest-Only Strips— accounted for as derivatives	—			—			(2,970		)	(959		)	3,642			(287		)
Options	(518		)	—			—			47			—			(471		)
Futures contracts	8,824			—			—			1,075			—			9,899
Credit default swaps	(125		)	—			—			(441		)	—			(566		)
TBAs	126			—			—			315			—			441
Total	$	8,421		$	123,114		$	(1,906	)	$	(1,460	)	$	4,528		$	132,697
Nine months ended September 30, 2017
Interest rate swaps	$	(150,593	)	$	(7,966	)	$	378		$	156,102		$	(12,662	)	$	(14,741	)
Interest rate swaptions	(115		)	—			—			—			—			(115		)
Interest-Only Strips— accounted for as derivatives	526			—			(5,055		)	(783		)	6,229			917
Options	(892		)	—			—			(134		)	—			(1,026		)
Futures contracts	(9,230		)	—			—			2,416			—			(6,814		)
Foreign currency forwards	25			—			—			43			—			68
Total return swaps	(552		)	—			—			1,673			469			1,590
TBAs	3,148			—			—			938			—			4,086
Total	$	(157,683	)	$	(7,966	)	$	(4,677	)	$	160,255		$	(5,964	)	$	(16,035	)

Schedule of to be announced securities

The following is a summary of the Company's long and short TBA positions as of September 30, 2018 and December 31, 2017 reported in "Derivative assets, at fair value" and "Derivative liability, at fair value" in the Consolidated Balance Sheets (dollars in thousands):

	September 30, 2018						December 31, 2017
	Notional Amount			Fair Value			Notional Amount		Fair Value
Purchase contracts, asset	$	400,000		$	641		$	—	$	—
Sale contracts, asset	(200,000		)	47			—		—
TBA securities, asset	200,000			688			—		—
Purchase contracts, liability	—			—			125,000		(10		)
Sale contracts, liability	(200,000		)	(383		)	—		—
TBA securities, liability	(200,000		)	(383		)	125,000		(10		)
TBA securities, net	$	—		$	305		$	125,000	$	(10	)

Schedule of additional information about the contracts to purchase and sell TBAs

The following tables present additional information about the Company’s contracts to purchase and sell TBAs for the nine months ended September 30, 2018 and the year ended December 31, 2017 (dollars in thousands):

	Notional Amount		Additions		Settlement, Termination, Expiration or Exercise			Notional Amount
	December 31, 2017							September 30, 2018
Purchase of TBAs	$	125,000	$	5,525,000	$	(5,250,000	)	$	400,000
Sale of TBAs	$	—	$	5,650,000	$	(5,250,000	)	$	400,000
	Notional Amount		Additions		Settlement, Termination, Expiration or Exercise			Notional Amount
	December 31, 2016							December 31, 2017
Purchase of TBAs	$	—	$	5,843,200	$	(5,718,200	)	$	125,000
Sale of TBAs	$	—	$	5,718,200	$	(5,718,200	)	$	—

Fixed Pay Rate | Interest rate swaps

Derivative Instruments

Summary of interest rate swaps or interest rate swaptions

	December 31, 2017
Fixed Pay Interest Rate Swap Remaining Term	Notional Amount		Average Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)	Forward Starting (1)
Greater than 1 year and less than 3 years	$	600,000	1.6	%	1.5	%	1.8	—	%
Greater than 3 years and less than 5 years	960,000		2.0	%	1.4	%	4.3	—	%
Greater than 5 years	1,692,200		2.5	%	1.4	%	10.5	90.2	%
Total	$	3,252,200	2.2	%	1.4	%	7.1	46.9	%

(1) Represents the percentage of notional that is forward starting.

The following tables provide additional information on our fixed pay interest rate swaps and the variable pay interest rate swap as of September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
Fixed Pay Interest Rate Swap Remaining Term	Notional Amount		Average Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)	Forward Starting (1)
1 year or less	$	400,000	1.5	%	2.3	%	0.8	—	%
Greater than 1 year and less than 3 years	200,000		1.8	%	2.3	%	1.7	—	%
Greater than 3 years and less than 5 years	1,164,700		2.4	%	2.3	%	4.1	—	%
Greater than 5 years	2,064,700		2.7	%	2.3	%	10.2	29.0	%
Total	$	3,829,400	2.4	%	2.3	%	6.9	15.6	%

Variable Pay Rate | Interest rate swaps

Derivative Instruments

Summary of interest rate swaps or interest rate swaptions

	September 30, 2018
Variable Pay Interest Rate Swap Remaining Term	Notional Amount		Average  Variable Pay Rate		Average Fixed Receive Rate		Average Maturity (Years)	Forward Starting (1)
Greater than 5 years	$	482,400	2.3	%	2.4	%	8.6	—	%
Total	$	482,400	2.3	%	2.4	%	8.6	—	%

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Offsetting Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2018

Offsetting [Abstract]

Schedule of gross and net information about the Company's assets subject to master netting arrangements

The following tables present information about certain assets and liabilities that are subject to master netting agreements (or similar agreements) and can potentially be offset in the Company’s Consolidated Balance Sheets at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Gross  Amounts		Gross  Amounts  Offset in the Consolidated Balance  Sheets		Net Amounts of Assets  presented in  the Consolidated Balance  Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
Description							Financial  Instruments(1)			Cash  Collateral (1)
Derivative Assets
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS	$	12,247	$	—	$	12,247	$	(10,369	)	$	—		$	1,878
Derivative asset, at fair value(2)	2,700		—		2,700		(575		)	(368		)	1,757
Total derivative assets	$	14,947	$	—	$	14,947	$	(10,944	)	$	(368	)	$	3,635
Derivative Liabilities and Repurchase Agreements
Derivative liability, at fair value(2)(3)	$	2,159	$	—	$	2,159	$	(575	)	$	(1,576	)	$	8
Repurchase Agreements(4)	3,469,319		—		3,469,319		(3,469,319		)	—			—
Total derivative liability	$	3,471,478	$	—	$	3,471,478	$	(3,469,894	)	$	(1,576	)	$	8

(1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral column of the tables above represents amounts pledged or received as collateral against derivative transactions.

(2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, foreign currency swaps and TBAs.

(3) Cash collateral pledged against the Company’s derivative counterparties was approximately $62.9 million as of September 30, 2018.

(4) The carrying value of investments pledged against the Company’s repurchase agreements was approximately $3.9 billion as of September 30, 2018.

	December 31, 2017
	Gross  Amounts		Gross  Amounts  Offset in the Consolidated Balance  Sheets		Net Amounts of Assets  presented in  the Consolidated Balance  Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial  Instruments(1)			Cash  Collateral (1)
Derivative Assets
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS	$	16,176	$	—	$	16,176	$	(11,633	)	$	—		$	4,543
Derivative asset, at fair value(2)	728		—		728		(50		)	—			678
Total derivative assets	$	16,904	$	—	$	16,904	$	(11,683	)	$	—		$	5,221
Derivative Liabilities and Repurchase Agreements
Derivative liability, at fair value(2)(3)	$	4,346	$	—	$	4,346	$	(50	)	$	(4,270	)	$	26
Repurchase Agreements(4)	3,251,686		—		3,251,686		(3,251,686		)	—			—
Total derivative liability	$	3,256,032	$	—	$	3,256,032	$	(3,251,736	)	$	(4,270	)	$	26

(1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral Pledged column of the tables above represents amounts pledged as collateral against derivative transactions.

(2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, total return swaps and TBAs.

(3) Cash collateral pledged against the Company’s derivative counterparties was approximately $63.3 million as of December 31, 2017.

(4) The carrying value of investments pledged against the Company’s repurchase agreements was approximately $3.5 billion as of December 31, 2017.

Schedule of gross and net information about the Company's liabilities subject to master netting arrangements

The following tables present information about certain assets and liabilities that are subject to master netting agreements (or similar agreements) and can potentially be offset in the Company’s Consolidated Balance Sheets at September 30, 2018 and December 31, 2017 (dollars in thousands):

	September 30, 2018
	Gross  Amounts		Gross  Amounts  Offset in the Consolidated Balance  Sheets		Net Amounts of Assets  presented in  the Consolidated Balance  Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
Description							Financial  Instruments(1)			Cash  Collateral (1)
Derivative Assets
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS	$	12,247	$	—	$	12,247	$	(10,369	)	$	—		$	1,878
Derivative asset, at fair value(2)	2,700		—		2,700		(575		)	(368		)	1,757
Total derivative assets	$	14,947	$	—	$	14,947	$	(10,944	)	$	(368	)	$	3,635
Derivative Liabilities and Repurchase Agreements
Derivative liability, at fair value(2)(3)	$	2,159	$	—	$	2,159	$	(575	)	$	(1,576	)	$	8
Repurchase Agreements(4)	3,469,319		—		3,469,319		(3,469,319		)	—			—
Total derivative liability	$	3,471,478	$	—	$	3,471,478	$	(3,469,894	)	$	(1,576	)	$	8

(1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral column of the tables above represents amounts pledged or received as collateral against derivative transactions.

(2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, foreign currency swaps and TBAs.

(3) Cash collateral pledged against the Company’s derivative counterparties was approximately $62.9 million as of September 30, 2018.

(4) The carrying value of investments pledged against the Company’s repurchase agreements was approximately $3.9 billion as of September 30, 2018.

	December 31, 2017
	Gross  Amounts		Gross  Amounts  Offset in the Consolidated Balance  Sheets		Net Amounts of Assets  presented in  the Consolidated Balance  Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial  Instruments(1)			Cash  Collateral (1)
Derivative Assets
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS	$	16,176	$	—	$	16,176	$	(11,633	)	$	—		$	4,543
Derivative asset, at fair value(2)	728		—		728		(50		)	—			678
Total derivative assets	$	16,904	$	—	$	16,904	$	(11,683	)	$	—		$	5,221
Derivative Liabilities and Repurchase Agreements
Derivative liability, at fair value(2)(3)	$	4,346	$	—	$	4,346	$	(50	)	$	(4,270	)	$	26
Repurchase Agreements(4)	3,251,686		—		3,251,686		(3,251,686		)	—			—
Total derivative liability	$	3,256,032	$	—	$	3,256,032	$	(3,251,736	)	$	(4,270	)	$	26

(1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral Pledged column of the tables above represents amounts pledged as collateral against derivative transactions.

(2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, total return swaps and TBAs.

(3) Cash collateral pledged against the Company’s derivative counterparties was approximately $63.3 million as of December 31, 2017.

(4) The carrying value of investments pledged against the Company’s repurchase agreements was approximately $3.5 billion as of December 31, 2017.

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Share-Based Payments (Tables)

9 Months Ended

Sep. 30, 2018

Share-based Compensation [Abstract]

Summary of restricted common stock vesting dates

The following is a summary of restricted common stock vesting dates as of September 30, 2018 and December 31, 2017, including shares whose issuance has been deferred under the Director Deferred Fee Plan: 

	September 30, 2018	December 31, 2017
Vesting Date	Shares Vesting	Shares Vesting
March 2018	—	66,667
June 2018	—	16,488
June 2019	26,708	—
	26,708	83,155

Schedule of restricted stock activity

The following table presents information with respect to the Company’s restricted stock for the nine months ended September 30, 2018, including shares whose issuance has been deferred under the Director Deferred Fee Plan:

	Shares of  Restricted Stock	Weighted Average  Grant Date Fair  Value (1)
Outstanding at beginning of period	725,449	$	17.00
Granted (2)	27,756	10.78
Cancelled/forfeited	—	—
Outstanding at end of period	753,205	$	16.77
Unvested at end of period	26,708	$	10.81

(1) The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date.

(2) Includes 1,852 shares of restricted stock attributed to dividends on restricted stock under the Director Deferred Fee Plan.

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2018

Stockholders' Equity Note [Abstract]

Schedule of cash dividends declared and paid on common stock

The following table presents cash dividends declared and paid by the Company on its common stock:

Declaration Date	Record Date	Payment Date	Amount per Share		Tax Characterization
2018
September 17, 2018	September 27, 2018	October 26, 2018	$	0.31	Not yet determined
June 21, 2018	July 2, 2018	July 26, 2018	$	0.31	Not yet determined
March 22, 2018	April 2, 2018	April 26, 2018	$	0.31	Not yet determined
2017
December 21, 2017	January 2, 2018	January 26, 2018	$	0.31	Return of capital
September 21, 2017	October 2, 2017	October 26, 2017	$	0.31	Return of capital
June 20, 2017	June 30, 2017	July 26, 2017	$	0.31	Return of capital
March 23, 2017	April 3, 2017	April 26, 2017	$	0.31	Ordinary income

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Net Income per Common Share (Tables)

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Schedule of basic and diluted net income (loss) per share of common stock

The table below presents basic and diluted net income per share of common stock using the two-class method for the three and nine months ended September 30, 2018 and September 30, 2017 (dollars, other than shares and per share amounts, in thousands):

	For the three months ended September 30, 2018		For the three months ended September 30, 2017		Nine months ended September 30, 2018		Nine months ended September 30, 2017
Numerator:
Net income attributable to common stockholders and participating securities for basic and diluted earnings per share	$	20,882	$	22,767	$	44,064	$	63,693
Less:
Dividends and undistributed earnings allocated to participating securities	54		75		112		238
Net income allocable to common stockholders — basic and diluted	$	20,828	$	22,692	$	43,952	$	63,455
Denominator:
Weighted average common shares outstanding for basic earnings per share	42,060,077		41,853,134		41,802,302		41,824,318
Weighted average common shares outstanding for diluted earnings per share	42,060,077		41,853,134		41,802,302		41,824,318
Basic earnings per common share	$	0.50	$	0.54	$	1.05	$	1.52
Diluted earnings per common share	$	0.50	$	0.54	$	1.05	$	1.52

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Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Assets
Derivative assets	$ 14,947		$ 14,947		$ 16,904
Liabilities
Derivative liabilities	2,159		2,159		4,346
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Other than temporary impairment	(2,533)	$ (7,225)	(8,423)	$ (19,901)
Premium and discount amortization, net			(2,884)	2,658
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Unrealized (gains)/losses, net on liabilities				(1,673)
Residential Whole-Loans
Assets
Fair value	684,463		684,463		237,423
Agency RMBS
Assets
Estimated Fair Value	385,008		385,008		672,177
Agency MBS
Assets
Estimated Fair Value	2,475,533		2,475,533		2,858,600
Agency RMBS Interest-Only Strips
Assets
Estimated Fair Value	12,203		12,203		15,437
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS
Assets
Estimated Fair Value	8,006		8,006		10,419
Agency CMBS
Assets
Estimated Fair Value	2,066,075		2,066,075		2,154,800
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Premium and discount amortization, net	(298)	110	(266)	717
Agency CMBS Interest-Only Strips
Assets
Estimated Fair Value					10
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS
Assets
Estimated Fair Value	4,241		4,241		5,757
Non-Agency MBS
Assets
Estimated Fair Value	365,710		365,710		378,158
Non-Agency RMBS
Assets
Estimated Fair Value	83,350		83,350		90,832
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Other than temporary impairment	(159)	0	(269)	0
Premium and discount amortization, net	(536)	372	(685)	303
Non-Agency RMBS Interest-Only Strips
Assets
Estimated Fair Value	15,513		15,513		8,722
Non-Agency CMBS
Assets
Estimated Fair Value	266,847		266,847		278,604
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Other than temporary impairment	(2,054)	(2,344)	(7,491)	(12,658)
Premium and discount amortization, net	1,469	2,139	5,873	6,572
Subtotal Non-Agency MBS
Assets
Estimated Fair Value	365,710		365,710		378,158
Other securities
Assets
Estimated Fair Value	92,528		92,528		122,065
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Other than temporary impairment	0	(121)	0	(1,823)
Premium and discount amortization, net	(1,660)	464	(4,825)	2,112
Level I
Assets
Derivative assets	1,812		1,812		728
Total Assets	1,812		1,812		728
Liabilities
Derivative liabilities	0		0		50
Securitized debt	0		0
Total Liabilities	0		0		50
Level II
Assets
Estimated Fair Value	2,723,943		2,723,943		3,323,632
Derivative assets	888		888		0
Total Assets	2,724,831		2,724,831		3,323,632
Liabilities
Derivative liabilities	2,159		2,159		4,296
Securitized debt	1,116,483		1,116,483
Total Liabilities	1,118,642		1,118,642		4,296
Level II | Agency RMBS
Assets
Estimated Fair Value	385,008		385,008		672,177
Level II | Agency MBS
Assets
Estimated Fair Value	2,348,200		2,348,200		2,841,383
Level II | Agency RMBS Interest-Only Strips
Assets
Estimated Fair Value	0		0		15,437
Level II | Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS
Assets
Estimated Fair Value	0		0		10,419
Level II | Agency CMBS
Assets
Estimated Fair Value	1,958,951		1,958,951		2,137,583
Level II | Agency CMBS Interest-Only Strips
Assets
Estimated Fair Value					10
Level II | Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS
Assets
Estimated Fair Value	4,241		4,241		5,757
Level II | Non-Agency RMBS
Assets
Estimated Fair Value	26,076		26,076		90,819
Level II | Non-Agency CMBS
Assets
Estimated Fair Value	266,847		266,847		278,604
Level II | Subtotal Non-Agency MBS
Assets
Estimated Fair Value	292,923		292,923		369,423
Level II | Other securities
Assets
Estimated Fair Value	82,820		82,820		112,826
Level III
Assets
Estimated Fair Value	209,828		209,828		35,191
Total Assets	2,464,037		2,464,037		362,016
Liabilities
Derivative liabilities	0		0		0
Securitized debt	2,606		2,606		10,945
Total Liabilities	2,606		2,606		10,945
Level III | Residential Whole-Loans
Assets
Fair value	684,463		684,463		237,423
Level III | Residential Bridge Loans
Assets
Fair value	234,747		234,747		64,526
Level III | Securitized commercial loans
Assets
Fair value	1,191,048		1,191,048		24,876
Level III | Commercial Loans
Assets
Fair value	143,951		143,951
Level III | Agency MBS
Assets
Estimated Fair Value	127,333		127,333		17,217
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance	75,043	0	17,217	73,059
Ending balance	127,333	2,009	127,333	2,009
Level III | Agency RMBS Interest-Only Strips
Assets
Estimated Fair Value	12,203		12,203
Level III | Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS
Assets
Estimated Fair Value	8,006		8,006
Level III | Agency CMBS
Assets
Estimated Fair Value	107,124		107,124		17,217
Level III | Non-Agency MBS
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance	16,307	14,326	8,735	75,576
Ending balance	72,787	14,262	72,787	14,262
Level III | Non-Agency RMBS
Assets
Estimated Fair Value	57,274		57,274		13
Level III | Non-Agency RMBS Interest-Only Strips
Assets
Estimated Fair Value	15,513		15,513		8,722
Level III | Non-Agency CMBS
Assets
Estimated Fair Value	0		0		0
Level III | Subtotal Non-Agency MBS
Assets
Estimated Fair Value	72,787		72,787		8,735
Level III | Other securities
Assets
Estimated Fair Value	9,708		9,708		9,239
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance	8,955	22,405	9,239	31,356
Ending balance	9,708	9,470	9,708	9,470
Fair Value, Measurements, Recurring | Level III | Securitized debt
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Transfers from Level III into Level II			(10,899)
Principal repayments		26	(44)	26
Premium and discount amortization, net	66		90
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance	2,870	10,945	10,945	10,659
Sales and settlements			12
Principal repayments		26	(44)	26
Unrealized (gains)/losses, net on liabilities	(330)	60	2,502	346
Ending balance	2,606	10,979	2,606	10,979
Unrealized gains/(losses) on securities	330	(60)	(2,504)	(346)
Fair Value, Measurements, Recurring | Level III | Derivative liability
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance		329		1,673
Sales and settlements		(53)		(552)
Realized (gains)/losses, net on liabilities		53		552
Unrealized (gains)/losses, net on liabilities		(329)
Ending balance		0		0
Unrealized gains/(losses) on securities		0		0
Fair Value, Measurements, Recurring | Level III | Residential Whole-Loans
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance	335,149	203,540	237,423	192,136
Purchases	372,348		486,354	33,718
Principal repayments	(21,258)	(11,264)	(36,092)	(33,718)
Unrealized gains/(losses), net on assets	(1,469)	(575)	(2,644)	97
Premium and discount amortization, net	(307)	(262)	(578)	(794)
Ending balance	684,463	191,439	684,463	191,439
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Principal repayments	(21,258)	(11,264)	(36,092)	(33,718)
Fair Value, Measurements, Recurring | Level III | Residential Bridge Loans
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance	236,359		64,526
Purchases	70,465		221,619
Principal repayments	(70,341)		(49,503)
Unrealized gains/(losses), net on assets	(1,103)		(1,217)
Premium and discount amortization, net	(633)		(678)
Ending balance	234,747		234,747
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Principal repayments	(70,341)		(49,503)
Fair Value, Measurements, Recurring | Level III | Securitized commercial loans
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance	1,309,195	24,875	24,876	24,225
Purchases			1,353,019
Principal repayments	(117,100)	59	(196,007)	59
Unrealized gains/(losses), net on assets	282	136	11,152	786
Premium and discount amortization, net	(1,329)		(1,992)
Ending balance	1,191,048	24,952	1,191,048	24,952
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Principal repayments	(117,100)	59	(196,007)	59
Fair Value, Measurements, Recurring | Level III | Commercial Loans
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Beginning balance	70,717		0
Purchases	94,313		144,035
Principal repayments	20,638
Unrealized gains/(losses), net on assets	(575)		(159)
Premium and discount amortization, net	134		75
Ending balance	143,951		143,951
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Principal repayments	20,638
Fair Value, Measurements, Recurring | Level III | Agency MBS
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Transfers into Level III from Level II			22,794
Transfers from Level III into Level II	(51,976)		(16,805)	(73,715)
Purchases	107,034	2,009	109,002	2,009
Principal repayments	(42)		(53)
Other than temporary impairment	(384)		(590)
Unrealized gains/(losses), net on assets	(1,007)	0	(1,447)	636
Premium and discount amortization, net	(1,335)	0	(2,785)	20
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Principal repayments	(42)		(53)
Fair Value, Measurements, Recurring | Level III | Non-Agency MBS
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Transfers into Level III from Level II	57,275		57,275	15,610
Transfers from Level III into Level II				(7,434)
Purchases			8,602
Sales and settlements				(60,132)
Principal repayments	(14)	(388)	14	(2,463)
Other than temporary impairment	(142)		(191)
Unrealized gains/(losses), net on assets	(95)	291	(149)	(8,715)
Premium and discount amortization, net	(544)	33	(1,471)	(803)
Realized gains/(losses), net on assets				2,623
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Principal repayments	(14)	(388)	14	(2,463)
Fair Value, Measurements, Recurring | Level III | Other securities
Investment assets measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Transfers into Level III from Level II	9,708	9,470	9,708	9,470
Transfers from Level III into Level II	(8,697)	(23,852)	8,697	(33,080)
Principal repayments	(285)		(604)	(172)
Other than temporary impairment		(121)		(1,823)
Unrealized gains/(losses), net on assets	(15)	1,094	(68)	1,550
Premium and discount amortization, net	42	474	130	2,169
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Principal repayments	(285)		(604)	(172)
Estimated Fair Value
Assets
Estimated Fair Value	2,933,771		2,933,771		3,358,823
Derivative assets	2,700		2,700		728
Total Assets	5,190,680		5,190,680		3,686,376
Liabilities
Derivative liabilities	2,159		2,159		4,346
Securitized debt	1,119,089		1,119,089		10,945
Total Liabilities	1,121,248		1,121,248		15,291
Estimated Fair Value | Residential Whole-Loans
Assets
Fair value	684,463		684,463		237,423
Estimated Fair Value | Residential Bridge Loans
Assets
Fair value	234,747		234,747		64,526
Estimated Fair Value | Securitized commercial loans
Assets
Fair value	1,191,048		1,191,048		24,876
Estimated Fair Value | Commercial Loans
Assets
Fair value	143,951		143,951
Estimated Fair Value | Agency RMBS
Assets
Estimated Fair Value	385,008		385,008		672,177
Estimated Fair Value | Agency MBS
Assets
Estimated Fair Value	2,475,533		2,475,533		2,858,600
Estimated Fair Value | Agency RMBS Interest-Only Strips
Assets
Estimated Fair Value	12,203		12,203		15,437
Estimated Fair Value | Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS
Assets
Estimated Fair Value	8,006		8,006		10,419
Estimated Fair Value | Agency CMBS
Assets
Estimated Fair Value	2,066,075		2,066,075		2,154,800
Estimated Fair Value | Agency CMBS Interest-Only Strips
Assets
Estimated Fair Value					10
Estimated Fair Value | Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS
Assets
Estimated Fair Value	4,241		4,241		5,757
Estimated Fair Value | Non-Agency RMBS
Assets
Estimated Fair Value	83,350		83,350		90,832
Estimated Fair Value | Non-Agency RMBS Interest-Only Strips
Assets
Estimated Fair Value	15,513		15,513		8,722
Estimated Fair Value | Non-Agency CMBS
Assets
Estimated Fair Value	266,847		266,847		278,604
Estimated Fair Value | Subtotal Non-Agency MBS
Assets
Estimated Fair Value	365,710		365,710		378,158
Estimated Fair Value | Other securities
Assets
Estimated Fair Value	92,528		92,528		$ 122,065
Assets | Fair Value, Measurements, Recurring | Level III | Residential Whole-Loans
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Unrealized gains/(losses) on securities	(1,231)	(356)	(2,101)	347
Assets | Fair Value, Measurements, Recurring | Level III | Residential Bridge Loans
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Unrealized gains/(losses) on securities	(844)		(832)
Assets | Fair Value, Measurements, Recurring | Level III | Securitized commercial loans
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Unrealized gains/(losses) on securities	282	136	11,152	786
Assets | Fair Value, Measurements, Recurring | Level III | Commercial Loans
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Unrealized gains/(losses) on securities	(618)		(159)
Assets | Fair Value, Measurements, Recurring | Level III | Agency MBS
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Unrealized gains/(losses) on securities	(668)	0	(1,089)	0
Assets | Fair Value, Measurements, Recurring | Level III | Non-Agency MBS
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Unrealized gains/(losses) on securities	(94)	291	(148)	684
Assets | Fair Value, Measurements, Recurring | Level III | Other securities
Investment liabilities measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value
Unrealized gains/(losses) on securities	$ 0	$ 0	$ 0	$ 72

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Fair Value of Financial Instruments Narrative (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Derivative credit risk valuation adjustment, derivative assets	$ 0	$ 0

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Fair Value of Financial Instruments Carrying Value and Estimated Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Residential Bridge Loans	$ 14,724	$ 42,147
Borrowings under repurchase agreements	3,469,319	3,251,686
Convertible senior unsecured notes	109,731	108,743
Total	3,579,050	3,360,429
Estimated Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Residential Bridge Loans	14,479	42,881
Borrowings under repurchase agreements	3,591,751	3,257,956
Convertible senior unsecured notes	115,385	114,819
Total	3,707,136	3,372,775
Residential Bridge Loans | Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Residential Bridge Loans	14,724	42,147
Residential Bridge Loans | Estimated Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Residential Bridge Loans	$ 14,479	$ 42,881

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Mortgage-Backed Securities and other securities (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Agency RMBS
Mortgage-Backed Securities and other securities
Principal Balance	$ 389,756,000	$ 641,044,000
Unamortized Premium (Discount), net	13,133,000	28,876,000
Amortized Cost	402,889,000	669,920,000
Unrealized Gain	0	4,571,000
Unrealized Loss	(17,881,000)	(2,314,000)
Estimated Fair Value	$ 385,008,000	$ 672,177,000
Net Weighted Average Coupon (as a percent)	3.60%	3.90%
Subtotal Agency RMBS
Mortgage-Backed Securities and other securities
Principal Balance	$ 389,756,000	$ 641,044,000
Unamortized Premium (Discount), net	13,133,000	28,876,000
Amortized Cost	415,266,000	684,670,000
Unrealized Gain	724,000	5,449,000
Unrealized Loss	(18,779,000)	(2,505,000)
Estimated Fair Value	$ 405,217,000	$ 698,033,000
Net Weighted Average Coupon (as a percent)	3.20%	3.60%
Agency RMBS Interest-Only Strips
Mortgage-Backed Securities and other securities
Amortized Cost	$ 12,377,000	$ 14,750,000
Unrealized Gain	724,000	878,000
Unrealized Loss	(898,000)	(191,000)
Estimated Fair Value	$ 12,203,000	$ 15,437,000
Net Weighted Average Coupon (as a percent)	2.30%	2.90%
Notional balance	$ 166,400,000	$ 165,500,000
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	$ 8,006,000	$ 10,419,000
Net Weighted Average Coupon (as a percent)	2.80%	2.90%
Notional balance	$ 96,200,000	$ 122,000,000
Subtotal Agency CMBS
Mortgage-Backed Securities and other securities
Principal Balance	2,124,942,000	2,145,139,000
Unamortized Premium (Discount), net	4,970,000	2,142,000
Amortized Cost	2,129,912,000	2,147,281,000
Unrealized Gain	563,000	16,923,000
Unrealized Loss	(64,400,000)	(9,394,000)
Estimated Fair Value	$ 2,070,316,000	$ 2,160,567,000
Net Weighted Average Coupon (as a percent)	3.00%	2.70%
Agency CMBS
Mortgage-Backed Securities and other securities
Principal Balance	$ 2,124,942,000	$ 2,145,139,000
Unamortized Premium (Discount), net	4,970,000	2,142,000
Amortized Cost	2,129,912,000	2,147,281,000
Unrealized Gain	563,000	16,913,000
Unrealized Loss	(64,400,000)	(9,394,000)
Estimated Fair Value	$ 2,066,075,000	$ 2,154,800,000
Net Weighted Average Coupon (as a percent)	3.20%	2.90%
Agency CMBS Interest-Only Strips
Mortgage-Backed Securities and other securities
Amortized Cost		$ 0
Unrealized Gain		10,000
Estimated Fair Value		$ 10,000
Net Weighted Average Coupon (as a percent)		3.20%
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	$ 4,241,000	$ 5,757,000
Net Weighted Average Coupon (as a percent)	0.40%	0.50%
Notional balance	$ 173,900,000
Agency MBS
Mortgage-Backed Securities and other securities
Principal Balance	2,514,698,000	$ 2,786,183,000
Unamortized Premium (Discount), net	18,103,000	31,018,000
Amortized Cost	2,545,178,000	2,831,951,000
Unrealized Gain	1,287,000	22,372,000
Unrealized Loss	(83,179,000)	(11,899,000)
Estimated Fair Value	$ 2,475,533,000	$ 2,858,600,000
Net Weighted Average Coupon (as a percent)	3.00%	3.00%
Subtotal Non-Agency MBS
Mortgage-Backed Securities and other securities
Principal Balance	$ 435,861,000	$ 498,931,000
Unamortized Premium (Discount), net	(23,446,000)	(53,866,000)
Discount Designated as Credit Reserve and OTTI	(64,561,000)	(67,511,000)
Amortized Cost	363,531,000	386,292,000
Unrealized Gain	8,303,000	7,175,000
Unrealized Loss	(6,124,000)	(15,309,000)
Estimated Fair Value	$ 365,710,000	$ 378,158,000
Net Weighted Average Coupon (as a percent)	2.20%	3.30%
Non-Agency RMBS
Mortgage-Backed Securities and other securities
Principal Balance	$ 113,606,000	$ 119,748,000
Unamortized Premium (Discount), net	5,568,000	5,263,000
Discount Designated as Credit Reserve and OTTI	(39,585,000)	(39,491,000)
Amortized Cost	79,589,000	85,520,000
Unrealized Gain	4,344,000	5,473,000
Unrealized Loss	(583,000)	(161,000)
Estimated Fair Value	$ 83,350,000	$ 90,832,000
Net Weighted Average Coupon (as a percent)	4.40%	3.80%
Non-Agency RMBS Interest-Only Strips
Mortgage-Backed Securities and other securities
Amortized Cost	$ 15,677,000	$ 8,738,000
Unrealized Gain	0	0
Unrealized Loss	(164,000)	(16,000)
Estimated Fair Value	$ 15,513,000	$ 8,722,000
Net Weighted Average Coupon (as a percent)	0.50%	0.90%
Notional balance	$ 822,000,000	$ 278,400,000
Subtotal Non-Agency RMBS
Mortgage-Backed Securities and other securities
Principal Balance	113,606,000	119,748,000
Unamortized Premium (Discount), net	5,568,000	5,263,000
Discount Designated as Credit Reserve and OTTI	(39,585,000)	(39,491,000)
Amortized Cost	95,266,000	94,258,000
Unrealized Gain	4,344,000	5,473,000
Unrealized Loss	(747,000)	(177,000)
Estimated Fair Value	$ 98,863,000	$ 99,554,000
Net Weighted Average Coupon (as a percent)	1.00%	1.80%
Non-Agency CMBS
Mortgage-Backed Securities and other securities
Principal Balance	$ 322,255,000	$ 379,183,000
Unamortized Premium (Discount), net	(29,014,000)	(59,129,000)
Discount Designated as Credit Reserve and OTTI	(24,976,000)	(28,020,000)
Amortized Cost	268,265,000	292,034,000
Unrealized Gain	3,959,000	1,702,000
Unrealized Loss	(5,377,000)	(15,132,000)
Estimated Fair Value	$ 266,847,000	$ 278,604,000
Net Weighted Average Coupon (as a percent)	5.90%	4.80%
Total
Mortgage-Backed Securities and other securities
Principal Balance	$ 3,021,979,000	$ 3,371,419,000
Unamortized Premium (Discount), net	(3,227,000)	(16,548,000)
Discount Designated as Credit Reserve and OTTI	(74,452,000)	(72,915,000)
Amortized Cost	2,991,058,000	3,328,334,000
Unrealized Gain	19,837,000	41,708,000
Unrealized Loss	(89,371,000)	(27,395,000)
Estimated Fair Value	$ 2,933,771,000	$ 3,358,823,000
Net Weighted Average Coupon (as a percent)	2.90%	3.10%
Weighted average expected remaining term to the expected maturity of investment portfolio	9 years	8 years 7 months 6 days
Other securities
Mortgage-Backed Securities and other securities
Principal Balance	$ 71,420,000	$ 86,305,000
Unamortized Premium (Discount), net	2,116,000	6,300,000
Discount Designated as Credit Reserve and OTTI	(9,891,000)	(5,404,000)
Amortized Cost	82,349,000	110,091,000
Unrealized Gain	10,247,000	12,161,000
Unrealized Loss	(68,000)	(187,000)
Estimated Fair Value	$ 92,528,000	$ 122,065,000
Net Weighted Average Coupon (as a percent)	9.00%	7.80%
Residual interests in asset-backed securities
Mortgage-Backed Securities and other securities
Principal Balance	$ 0	$ 0
Amortized Cost	$ 18,700,000	22,900,000
Agency interest only strips accounted for as derivatives
Mortgage-Backed Securities and other securities
Notional balance		192,500,000
CMBS Interest Only Strips
Mortgage-Backed Securities and other securities
Notional balance		$ 3,300,000

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Mortgage-Backed Securities and other securities- Purchase discount and premium (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Discount Designated as Credit Reserve and OTTI
Net impairment losses recognized in earnings	$ (2,533)	$ (7,225)	$ (8,423)	$ (19,901)
Non-Agency RMBS and Non-Agency CMBS and other securities
Discount Designated as Credit Reserve and OTTI
Balance at beginning of period	(78,837)	(49,830)	(72,915)	(130,484)
Realized credit losses	3,305	25	5,526	1,854
Purchases	0	0	(7,182)	(1,724)
Sales	2,334	187	5,673	89,628
Net impairment losses recognized in earnings	(2,071)	(2,345)	(7,570)	(12,696)
Transfers/release of credit reserve	817	(866)	2,016	593
Balance at end of period	(74,452)	(52,829)	(74,452)	(52,829)
Accretable Discount
Balance at beginning of period	(68,677)	(76,778)	(68,438)	(109,822)
Accretion of discount	1,314	2,588	6,483	8,542
Purchases	0	0	(6,473)	(668)
Sales	25,624	1,931	29,352	32,016
Transfers/release of credit reserve	8	953	(2,655)	(1,374)
Balance at end of period	(41,731)	(71,306)	(41,731)	(71,306)
Amortizable Premium
Balance at beginning of period	21,723	15,186	20,872	44,527
Amortization of premium	(97)	(87)	(461)	(776)
Purchases	0	0	(435)	(1,522)
Sales	(400)	(18)	(1,084)	(31,060)
Transfers/release of credit reserve	(825)	(87)	639	781
Balance at end of period	$ 20,401	$ 14,994	$ 20,401	$ 14,994

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Mortgage-Backed Securities and other securities- Type of security (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Agency RMBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	$ 385,008	$ 672,177
Agency RMBS | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	0	0
Agency RMBS | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	0	56,228
Agency RMBS | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	57,572	239,197
Agency RMBS | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	327,436	376,752
Total
Mortgage-Backed Securities and other securities
Estimated Fair Value	2,933,771	3,358,823
Total | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	1,545,122	1,605,249
Total | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	730,027	831,875
Total | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	195,355	393,110
Total | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	463,267	528,589
Agency MBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	2,475,533	2,858,600
Agency MBS | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	1,512,588	1,605,236
Agency MBS | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	565,187	621,138
Agency MBS | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	66,081	249,717
Agency MBS | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	331,677	382,509
Agency RMBS (1)
Mortgage-Backed Securities and other securities
Estimated Fair Value	405,217	698,033
Agency RMBS Interest-Only Strips
Mortgage-Backed Securities and other securities
Estimated Fair Value	12,203	15,437
Agency RMBS Interest-Only Strips | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	3,937	3,920
Agency RMBS Interest-Only Strips | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	2,436	4,591
Agency RMBS Interest-Only Strips | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	5,830	6,926
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	8,006	10,419
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	1,223	1,686
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	4,104	5,139
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	2,679	3,594
Agency CMBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	2,066,075	2,154,800
Agency CMBS | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	1,507,428	1,599,620
Agency CMBS | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	558,647	555,180
Agency CMBS | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	0
Agency CMBS | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	0
Agency CMBS Interest-Only Strips
Mortgage-Backed Securities and other securities
Estimated Fair Value		10
Agency CMBS Interest-Only Strips | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value		10
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	4,241	5,757
Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	4,241	5,757
Subtotal Non-Agency MBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	365,710	378,158
Subtotal Non-Agency MBS | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	28,752	13
Subtotal Non-Agency MBS | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	104,932	111,675
Subtotal Non-Agency MBS | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	129,274	143,393
Subtotal Non-Agency MBS | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	102,752	123,077
Non-Agency RMBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	83,350	90,832
Non-Agency RMBS | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	0	13
Non-Agency RMBS | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	24,752	51,092
Non-Agency RMBS | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	16,757	4,184
Non-Agency RMBS | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	41,841	35,543
Non-Agency RMBS Interest-Only Strips
Mortgage-Backed Securities and other securities
Estimated Fair Value	15,513	8,722
Non-Agency RMBS Interest-Only Strips | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	0	0
Non-Agency RMBS Interest-Only Strips | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	7,900	0
Non-Agency RMBS Interest-Only Strips | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	7,613	8,722
Non-Agency CMBS
Mortgage-Backed Securities and other securities
Estimated Fair Value	266,847	278,604
Non-Agency CMBS | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	28,752	0
Non-Agency CMBS | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	80,180	60,583
Non-Agency CMBS | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	104,617	139,209
Non-Agency CMBS | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	53,298	78,812
Other securities
Mortgage-Backed Securities and other securities
Estimated Fair Value	92,528	122,065
Other securities | Less than or equal to 10 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	3,782	0
Other securities | More than 10 years and less than or equal to 20 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	59,908	99,062
Other securities | More than 20 years and less than or equal to 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	0	0
Other securities | More than 30 years
Mortgage-Backed Securities and other securities
Estimated Fair Value	$ 28,838	$ 23,003

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Mortgage-Backed Securities and other securities- FV and unrealized loss (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) item security	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) item security	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($) item security
Fair Value
Fair value - Less than 12 months	$ 1,371,799		$ 1,371,799		$ 1,419,604
12 Months or More Fair Value	846,484		846,484		123,064
Total Fair Value	2,218,283		2,218,283		1,542,668
Unrealized Losses
Less than 12 Months Unrealized Losses	(37,409)		(37,409)		(13,832)
12 Months or More Unrealized Losses	(51,962)		(51,962)		(13,563)
Total Unrealized Losses	$ (89,371)		$ (89,371)		$ (27,395)
Number of Securities
Less than 12 Months Number of Securities | security	116		116		98
12 Months or More Number of Securities | security	57		57		43
Total Number of Securities | security	173		173		141
Other than temporary impairment	$ 2,533	$ 7,225	$ 8,423	$ 19,901
Agency RMBS
Fair Value
Fair value - Less than 12 months	115,378		115,378		$ 330,259
12 Months or More Fair Value	269,630		269,630		1,632
Total Fair Value	385,008		385,008		331,891
Unrealized Losses
Less than 12 Months Unrealized Losses	(3,131)		(3,131)		(2,179)
12 Months or More Unrealized Losses	(14,750)		(14,750)		(135)
Total Unrealized Losses	$ (17,881)		$ (17,881)		$ (2,314)
Number of Securities
Less than 12 Months Number of Securities | security	8		8		11
12 Months or More Number of Securities | security	2		2		5
Total Number of Securities | item	10		10		16
Agency RMBS (1)
Fair Value
Fair value - Less than 12 months	$ 1,254,891		$ 1,254,891		$ 1,288,913
12 Months or More Fair Value	789,221		789,221		3,335
Total Fair Value	2,044,112		2,044,112		1,292,248
Unrealized Losses
Less than 12 Months Unrealized Losses	(35,700)		(35,700)		(11,715)
12 Months or More Unrealized Losses	(47,479)		(47,479)		(184)
Total Unrealized Losses	$ (83,179)		$ (83,179)		$ (11,899)
Number of Securities
Less than 12 Months Number of Securities | security	93		93		74
12 Months or More Number of Securities | security	45		45		8
Total Number of Securities	138		138		82
Other than temporary impairment	$ 320	4,760	$ 663	5,420
Agency RMBS Interest-Only Strips
Fair Value
Fair value - Less than 12 months	3,588		3,588		$ 3,095
12 Months or More Fair Value	2,753		2,753		1,703
Total Fair Value	6,341		6,341		4,798
Unrealized Losses
Less than 12 Months Unrealized Losses	(394)		(394)		(142)
12 Months or More Unrealized Losses	(504)		(504)		(49)
Total Unrealized Losses	$ (898)		$ (898)		$ (191)
Number of Securities
Less than 12 Months Number of Securities | security	9		9		6
12 Months or More Number of Securities | security	6		6		3
Total Number of Securities	15		15		9
Agency CMBS
Fair Value
Fair value - Less than 12 months	$ 1,135,925		$ 1,135,925		$ 955,559
12 Months or More Fair Value	516,838		516,838		0
Total Fair Value	1,652,763		1,652,763		955,559
Unrealized Losses
Less than 12 Months Unrealized Losses	(32,175)		(32,175)		(9,394)
12 Months or More Unrealized Losses	(32,225)		(32,225)		0
Total Unrealized Losses	$ (64,400)		$ (64,400)		$ (9,394)
Number of Securities
Less than 12 Months Number of Securities | security	76		76		57
12 Months or More Number of Securities | security	37		37		0
Total Number of Securities	113		113		57
Subtotal Non-Agency MBS
Fair Value
Fair value - Less than 12 months	$ 108,211		$ 108,211		$ 106,891
12 Months or More Fair Value	57,263		57,263		119,729
Total Fair Value	165,474		165,474		226,620
Unrealized Losses
Less than 12 Months Unrealized Losses	(1,641)		(1,641)		(1,930)
12 Months or More Unrealized Losses	(4,483)		(4,483)		(13,379)
Total Unrealized Losses	$ (6,124)		$ (6,124)		$ (15,309)
Number of Securities
Less than 12 Months Number of Securities | security	22		22		21
12 Months or More Number of Securities | security	12		12		35
Total Number of Securities | security	34		34		56
Non-Agency RMBS
Fair Value
Fair value - Less than 12 months	$ 29,798		$ 29,798		$ 28,508
12 Months or More Fair Value	0		0		0
Total Fair Value	29,798		29,798		28,508
Unrealized Losses
Less than 12 Months Unrealized Losses	(583)		(583)		(161)
12 Months or More Unrealized Losses	0		0		0
Total Unrealized Losses	$ (583)		$ (583)		$ (161)
Number of Securities
Less than 12 Months Number of Securities	5		5		3
12 Months or More Number of Securities	0		0		0
Total Number of Securities	5		5		3
Other than temporary impairment	$ 159	0	$ 269	0
Non-Agency RMBS Interest-Only Strips
Fair Value
Fair value - Less than 12 months	8,003		8,003		$ 8,722
12 Months or More Fair Value	0		0		0
Total Fair Value	8,003		8,003		8,722
Unrealized Losses
Less than 12 Months Unrealized Losses	(164)		(164)		(16)
12 Months or More Unrealized Losses	0		0		0
Total Unrealized Losses	$ (164)		$ (164)		$ (16)
Number of Securities
Less than 12 Months Number of Securities | item	2		2		3
12 Months or More Number of Securities | item	0		0		0
Total Number of Securities | item	2		2		3
Non-Agency CMBS
Fair Value
Fair value - Less than 12 months	$ 70,410		$ 70,410		$ 69,661
12 Months or More Fair Value	57,263		57,263		119,729
Total Fair Value	127,673		127,673		189,390
Unrealized Losses
Less than 12 Months Unrealized Losses	(894)		(894)		(1,753)
12 Months or More Unrealized Losses	(4,483)		(4,483)		(13,379)
Total Unrealized Losses	$ (5,377)		$ (5,377)		$ (15,132)
Number of Securities
Less than 12 Months Number of Securities | security	15		15		15
12 Months or More Number of Securities | security	12		12		35
Total Number of Securities | security	27		27		50
Other than temporary impairment	$ 2,054	2,344	$ 7,491	12,658
Other securities
Fair Value
Fair value - Less than 12 months	8,697		8,697		$ 23,800
12 Months or More Fair Value	0		0		0
Total Fair Value	8,697		8,697		23,800
Unrealized Losses
Less than 12 Months Unrealized Losses	(68)		(68)		(187)
12 Months or More Unrealized Losses	0		0		0
Total Unrealized Losses	$ (68)		$ (68)		$ (187)
Number of Securities
Less than 12 Months Number of Securities	1		1		3
12 Months or More Number of Securities	0		0		0
Total Number of Securities	1		1		3
Other than temporary impairment	$ 0	$ 121	$ 0	$ 1,823
Unpaid Securities [Member]
Number of Securities
Less than 12 Months Number of Securities | security	2		2
Other than temporary impairment			$ 161
Available-for-sale securities, unpaid principal balance	$ 4,100		$ 4,100

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Mortgage-Backed Securities and other securities- Financing receivables (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Mortgage-Backed Securities and other securities
Other loss on securities	$ 2,533	$ 7,225	$ 8,423	$ 19,901
Components of interest income
Net (Premium Amortization/Amortization Basis) Discount Amortization			(2,884)	2,658
Interest Income	54,461	30,928	151,342	89,413
Total
Components of interest income
Coupon Interest	29,555	26,930	95,812	79,378
Net (Premium Amortization/Amortization Basis) Discount Amortization	(2,163)	90	(4,015)	(958)
Interest Income	27,392	27,020	91,797	78,420
Agency RMBS (1)
Mortgage-Backed Securities and other securities
Other loss on securities	320	4,760	663	5,420
Other than temporary impairment losses, investments, AFS securities	0	0	4,700	4,700
Components of interest income
Coupon Interest	4,551	8,886	17,471	30,513
Net (Premium Amortization/Amortization Basis) Discount Amortization	(1,138)	(2,995)	(4,112)	(10,662)
Interest Income	3,413	5,891	13,359	19,851
Agency CMBS
Components of interest income
Coupon Interest	13,812	11,071	45,753	24,408
Net (Premium Amortization/Amortization Basis) Discount Amortization	(298)	110	(266)	717
Interest Income	13,514	11,181	45,487	25,125
Non-Agency RMBS
Mortgage-Backed Securities and other securities
Other loss on securities	159	0	269	0
Components of interest income
Coupon Interest	2,139	571	5,616	4,482
Net (Premium Amortization/Amortization Basis) Discount Amortization	(536)	372	(685)	303
Interest Income	1,603	943	4,931	4,785
Non-Agency CMBS
Mortgage-Backed Securities and other securities
Other loss on securities	2,054	2,344	7,491	12,658
Components of interest income
Coupon Interest	5,379	4,242	15,362	14,675
Net (Premium Amortization/Amortization Basis) Discount Amortization	1,469	2,139	5,873	6,572
Interest Income	6,848	6,381	21,235	21,247
Other securities
Mortgage-Backed Securities and other securities
Other loss on securities	0	121	0	1,823
Components of interest income
Coupon Interest	3,674	2,160	11,610	5,300
Net (Premium Amortization/Amortization Basis) Discount Amortization	(1,660)	464	(4,825)	2,112
Interest Income	$ 2,014	$ 2,624	$ 6,785	$ 7,412

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Mortgage-Backed Securities and other securities- Gross gains and losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Total
Mortgage-Backed Securities and other securities
Proceeds	$ 729,237	$ 18,110	$ 1,146,106	$ 1,185,055
Gross Gains	4,123	2,057	9,073	31,561
Gross Losses	28,352	227	38,335	10,961
Net Gain (Loss)	(24,229)	1,830	(29,262)	20,600
Agency RMBS (1)
Mortgage-Backed Securities and other securities
Proceeds	0	(2,906)	209,581	862,245
Gross Gains	0	(3)	18	4,376
Gross Losses	0	(51)	4,531	7,314
Net Gain (Loss)	0	48	(4,513)	(2,938)
Agency RMBS (1) | Agency interest only strips accounted for as derivatives
Mortgage-Backed Securities and other securities
Proceeds				2,600
Gross Gains				432
Agency CMBS
Mortgage-Backed Securities and other securities
Proceeds	641,677	0	768,544	0
Gross Gains	0	0	0	0
Gross Losses	25,640	0	30,656	0
Net Gain (Loss)	(25,640)	0	(30,656)	0
Non-Agency RMBS
Mortgage-Backed Securities and other securities
Proceeds			51,958	243,811
Gross Gains			3,114	24,389
Gross Losses			0	2,242
Net Gain (Loss)			3,114	22,147
Non-Agency RMBS | Agency interest only strips accounted for as derivatives
Mortgage-Backed Securities and other securities
Proceeds				2,200
Gross Gains				274
Gross Losses				180
Non-Agency CMBS
Mortgage-Backed Securities and other securities
Proceeds	73,848	10,597	80,554	45,634
Gross Gains	2,411	1,641	2,472	2,377
Gross Losses	2,712	278	3,148	1,351
Net Gain (Loss)	(301)	1,363	(676)	1,026
Other securities
Mortgage-Backed Securities and other securities
Proceeds	13,712	10,419	35,469	33,365
Gross Gains	1,712	419	3,469	419
Gross Losses	0	0	0	54
Net Gain (Loss)	$ 1,712	$ 419	$ 3,469	$ 365

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Mortgage-Backed Securities and other securities Mortgage-Backed Securities and other securities - Unconsolidated CMBS VIEs (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Variable interest entity, not primary beneficiary, aggregated disclosure
Investment [Line Items]
Variable interest entity, reporting entity involvement, maximum loss exposure, amount	$ 116.1	$ 62.1

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Residential Whole-Loans and Bridge Loans (Details) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018 USD ($) loan	Dec. 31, 2017 USD ($) entity loan
Variable Interest Entity [Line Items]
Repurchase agreements, net | $	$ 3,469,319	$ 3,251,686
Variable interest entity, not primary beneficiary, aggregated disclosure
Variable Interest Entity [Line Items]
Variable interest entity, nonconsolidated, number of entity | entity		3
Residential Whole-Loans
Variable Interest Entity [Line Items]
Number of Loans	1,949	616
Residential Whole-Loans | Variable interest entity, primary beneficiary, aggregated disclosure
Variable Interest Entity [Line Items]
Number of Loans	13
Residential Whole-Loans | VIE
Variable Interest Entity [Line Items]
Repurchase agreements, net | $	$ 334,900
Number of Loans	1,936
Mortgage loans on real estate, number of loans, nonperforming	1
Mortgage loans on real estate, principal amount of delinquent loans | $	$ 806	$ 579
Mortgage loans on real estate, fair value amount of delinquent loans | $	$ 787	$ 570
Mortgage loans on real estate, number of loans, nonperforming, percentage	0.10%	0.20%
Residential Whole-Loans | RCR Trust
Variable Interest Entity [Line Items]
Repurchase agreements, net | $	$ 258,100
Residential Whole-Loans | RNR Trust
Variable Interest Entity [Line Items]
Repurchase agreements, net | $	$ 15,300
Commercial Loans | VIE
Variable Interest Entity [Line Items]
Number of Loans	1
Residential Bridge Loans | Variable interest entity, primary beneficiary, aggregated disclosure
Variable Interest Entity [Line Items]
Number of Loans	673
Residential Bridge Loans | VIE
Variable Interest Entity [Line Items]
Repurchase agreements, net | $	$ 219,700
Number of Loans	673	340
Mortgage loans on real estate, number of loans, nonperforming	11	9
Mortgage loans on real estate, principal amount of delinquent loans | $	$ 4,200	$ 1,800
Mortgage loans on real estate, number of loans, nonperforming, percentage	2.00%	1.70%
Mortgage loans on real estate weighted average loan to value, collateral dependent	74.00%	74.00%
Estimated Fair Value | Residential Bridge Loans | VIE
Variable Interest Entity [Line Items]
Mortgage loans on real estate, number of loans, nonperforming	4
Mortgage loans on real estate, principal amount of delinquent loans | $	$ 727
Non-Qualifying Adjustable Rate Mortgage Loan | Residential Whole-Loans
Variable Interest Entity [Line Items]
Number of Loans	1,034
Conforming Fixed Rate Mortgage Loan | Residential Whole-Loans
Variable Interest Entity [Line Items]
Number of Loans	902
Investor Fixed Rate Mortgage Loan | Residential Whole-Loans
Variable Interest Entity [Line Items]
Number of Loans	13

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Residential Whole-Loans and Bridge Loans - Summary of the assets and liabilities of the residential and commercial loan trusts (Details) - USD ($) $ in Thousands		Sep. 30, 2018	Dec. 31, 2017
Variable Interest Entity [Line Items]
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)		$ 684,463	$ 237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)		249,471	106,673
Commercial Loans, at fair value		123,677	0
Investment related receivable		113,341	7,665
Interest receivable		21,869	13,603
Other assets		2,903	2,161
Total assets	[1]	5,537,985	3,886,906
Accounts payable and accrued expenses		3,513	3,118
Other liabilities		100,530	0
Total liabilities	[2]	5,002,340	3,420,868
Residential bridge loan, at fair value		234,747	64,526
VIE
Variable Interest Entity [Line Items]
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)		684,463	237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)		249,471	106,673
Commercial Loans, at fair value		123,677	0
Investment related receivable		33,430	7,665
Interest receivable		12,418	3,358
Other assets		203	0
Total assets		2,394,848	379,995
Accounts payable and accrued expenses		737	189
Other liabilities		100,531	0
Total liabilities		1,222,844	11,204
Residential bridge loan, at fair value		234,747	64,526
Residential Whole-Loan And Residential Bridge Loan | VIE
Variable Interest Entity [Line Items]
Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)		684,463	237,423
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)		249,471	106,673
Commercial Loans, at fair value		29,831	0
Investment related receivable		33,430	7,665
Interest receivable		8,874	3,197
Other assets		203	0
Total assets		1,006,272	354,958
Accounts payable and accrued expenses		722	188
Other liabilities		393	0
Total liabilities		1,115	188
Residential Whole-Loans | VIE
Variable Interest Entity [Line Items]
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)		684,463	237,423
Residential Bridge Loans | VIE
Variable Interest Entity [Line Items]
Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)		249,471	106,673
Residential bridge loan, at fair value		$ 234,747	$ 64,526

[1] (1) Assets of consolidated VIEs included in the total assets above: Cash and cash equivalents——Restricted cash100,138—Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)684,463237,423Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)249,471106,673Securitized commercial loans, at fair value1,191,04824,876Commercial Loans, at fair value ($123,677 and $0 pledged as collateral, at fair value, respectively)123,677—Investment related receivable33,4307,665Interest receivable12,4183,358Other assets203—Total assets of consolidated VIEs2,394,848379,995Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)234,74764,526

[2] (2) Liabilities of consolidated VIEs included in the total liabilities above: Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)1,119,08910,945Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)2,48770Accounts payable and accrued expenses737189Other liabilities100,531—Total liabilities of consolidated VIEs1,222,84411,204Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)313,14310,945Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)89170

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Residential Whole-Loans and Bridge Loans - Components of the fair value of Residential Whole-Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Residential Whole-Loans
Variable Interest Entity [Line Items]
Principal Balance	$ 674,763	$ 232,270
Unamortized premium	10,592	2,021
Unamortized discount	(2,499)	(1,190)
Amortized cost	682,856	233,101
Gross unrealized gains	5,506	4,463
Gross unrealized losses	(3,899)	(141)
Fair value	684,463	237,423
Residential Bridge Loans, At Fair Value
Variable Interest Entity [Line Items]
Principal Balance	234,445	63,802
Unamortized premium	1,426	293
Unamortized discount	(434)	(128)
Amortized cost	235,437	63,967
Gross unrealized gains	525	655
Gross unrealized losses	(1,215)	(96)
Fair value	234,747	64,526
Residential Bridge Loans, At Amortized Cost
Variable Interest Entity [Line Items]
Principal Balance	14,734	42,066
Unamortized premium	28	122
Unamortized discount	(38)	(41)
Amortized cost	$ 14,724	$ 42,147

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Residential Whole-Loans and Bridge Loans - Investment Portfolio (Details) $ in Thousands	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2018 USD ($) loan	Sep. 30, 2018 USD ($) score loan	Dec. 31, 2017 USD ($) score loan
3.01 – 4.00%
Variable Interest Entity [Line Items]
Number of Loans		69	142
Principal Balance | $	$ 22,732	$ 22,732	$ 55,593
Original LTV		61.40%	55.50%
Original FICO Score | score		738	751
Expected Life (years)		7 years 6 months	1 year 8 months 12 days
Contractual Maturity (years)		29 years 3 months 18 days	29 years 1 month 6 days
Coupon Rate		3.90%	3.90%
4.01– 5.00%
Variable Interest Entity [Line Items]
Number of Loans		1,159	338
Principal Balance | $	405,934	$ 405,934	$ 125,860
Original LTV		62.20%	56.90%
Original FICO Score | score		734	725
Expected Life (years)		3 years 7 months 6 days	1 year 4 months 24 days
Contractual Maturity (years)		28 years 9 months 18 days	26 years 6 months
Coupon Rate		4.70%	4.50%
5.01 – 6.00%
Variable Interest Entity [Line Items]
Number of Loans		708	132
Principal Balance | $	238,961	$ 238,961	$ 48,553
Original LTV		63.20%	58.20%
Original FICO Score | score		709	728
Expected Life (years)		2 years 9 months 18 days	1 year 7 months 6 days
Contractual Maturity (years)		28 years	27 years
Coupon Rate		5.40%	5.20%
6.01 – 7.00%
Variable Interest Entity [Line Items]
Number of Loans		11	4
Principal Balance | $	6,685	$ 6,685	$ 2,264
Original LTV		64.90%	71.10%
Original FICO Score | score		748	758
Expected Life (years)		1 year 4 months 24 days	1 year 3 months 18 days
Contractual Maturity (years)		25 years 4 months 24 days	20 years 6 months
Coupon Rate		6.30%	6.30%
7.01 - 8.00%
Variable Interest Entity [Line Items]
Number of Loans		1
Principal Balance | $	357	$ 357
Original LTV		70.00%
Original FICO Score | score		777
Expected Life (years)		1 year 10 months 24 days
Contractual Maturity (years)		29 years 3 months 18 days
Coupon Rate		7.20%
8.01 - 9.00%
Variable Interest Entity [Line Items]
Number of Loans		1
Principal Balance | $	94	$ 94
Original LTV		70.00%
Original FICO Score | score		689
Expected Life (years)		1 year 10 months 24 days
Contractual Maturity (years)		29 years 3 months 18 days
Coupon Rate		8.40%
Residential Whole-Loans
Variable Interest Entity [Line Items]
Number of Loans		1,949	616
Principal Balance | $	674,763	$ 674,763	$ 232,270
Original LTV		62.60%	57.00%
Original FICO Score | score		727	734
Expected Life (years)		3 years 4 months 24 days	1 year 6 months
Contractual Maturity (years)		28 years 6 months	27 years 1 month 6 days
Coupon Rate		4.90%	4.50%
Residential portfolio segment with no FICO score
Variable Interest Entity [Line Items]
Number of Loans		240	141
Principal Balance | $	81,600	$ 81,600	$ 56,500
5.01 – 6.00%
Variable Interest Entity [Line Items]
Number of Loans			9
Principal Balance | $			$ 4,016
Original LTV			64.50%
Expected Life (years)			10 months 25 days
Coupon Rate			5.90%
6.01 – 7.00%
Variable Interest Entity [Line Items]
Number of Loans		14	64
Principal Balance | $	5,264	$ 5,264	$ 18,420
Original LTV		61.80%	67.80%
Expected Life (years)		2 months 17 days	10 months 19 days
Coupon Rate		6.70%	6.70%
7.01 – 8.00%
Variable Interest Entity [Line Items]
Number of Loans		127	98
Principal Balance | $	57,820	$ 57,820	$ 25,608
Original LTV		72.90%	66.40%
Expected Life (years)		6 months 15 days	9 months 16 days
Coupon Rate		7.70%	7.60%
8.01 – 9.00%
Variable Interest Entity [Line Items]
Number of Loans		213	56
Principal Balance | $	94,873	$ 94,873	$ 19,728
Original LTV		70.20%	70.30%
Expected Life (years)		5 months 13 days	11 months 28 days
Coupon Rate		8.70%	8.90%
9.01 – 10.00%
Variable Interest Entity [Line Items]
Number of Loans		189	67
Principal Balance | $	59,927	$ 59,927	$ 25,001
Original LTV		72.30%	73.30%
Expected Life (years)		5 months 16 days	6 months 25 days
Coupon Rate		9.70%	9.70%
10.01 – 11.00%
Variable Interest Entity [Line Items]
Number of Loans		71	36
Principal Balance | $	16,651	$ 16,651	$ 10,656
Original LTV		71.30%	75.40%
Expected Life (years)		5 months	5 months
Coupon Rate		10.60%	10.80%
11.01 – 12.00%
Variable Interest Entity [Line Items]
Number of Loans		37	2
Principal Balance | $	9,121	$ 9,121	$ 919
Original LTV		63.50%	89.80%
Expected Life (years)		6 months 4 days	8 months 7 days
Coupon Rate		11.40%	11.40%
12.01 – 13.00%
Variable Interest Entity [Line Items]
Number of Loans		9
Principal Balance | $	$ 1,866	$ 1,866
Original LTV		73.30%
Expected Life (years)		6 months 25 days
Coupon Rate		12.70%
13.01 – 14.00%
Variable Interest Entity [Line Items]
Number of Loans	1
Principal Balance | $	$ 88	$ 88
Original LTV	65.00%
Expected Life (years)		7 months
Coupon Rate	14.00%
17.01 – 18.00%
Variable Interest Entity [Line Items]
Number of Loans		12	8
Principal Balance | $	$ 3,569	$ 3,569	$ 1,520
Original LTV		74.00%	73.80%
Expected Life (years)		4 months 13 days	5 months 28 days
Coupon Rate		18.00%	18.00%
Residential Bridge Loans
Variable Interest Entity [Line Items]
Expected Life (years)		5 months 19 days	9 months
Minimum | 3.01 – 4.00%
Variable Interest Entity [Line Items]
Coupon Rate		3.01%	3.01%
Minimum | 4.01– 5.00%
Variable Interest Entity [Line Items]
Coupon Rate		4.01%	4.01%
Minimum | 5.01 – 6.00%
Variable Interest Entity [Line Items]
Coupon Rate		5.01%	5.01%
Minimum | 6.01 – 7.00%
Variable Interest Entity [Line Items]
Coupon Rate		6.01%	6.01%
Minimum | 7.01 - 8.00%
Variable Interest Entity [Line Items]
Coupon Rate		7.01%
Minimum | 8.01 - 9.00%
Variable Interest Entity [Line Items]
Coupon Rate		8.01%
Minimum | 5.01 – 6.00%
Variable Interest Entity [Line Items]
Coupon Rate		5.01%	5.01%
Minimum | 6.01 – 7.00%
Variable Interest Entity [Line Items]
Coupon Rate		6.01%	6.01%
Minimum | 7.01 – 8.00%
Variable Interest Entity [Line Items]
Coupon Rate		7.01%	7.01%
Minimum | 8.01 – 9.00%
Variable Interest Entity [Line Items]
Coupon Rate		8.01%	8.01%
Minimum | 9.01 – 10.00%
Variable Interest Entity [Line Items]
Coupon Rate		9.01%	9.01%
Minimum | 10.01 – 11.00%
Variable Interest Entity [Line Items]
Coupon Rate		10.01%	10.01%
Minimum | 11.01 – 12.00%
Variable Interest Entity [Line Items]
Coupon Rate		11.01%	11.01%
Minimum | 12.01 – 13.00%
Variable Interest Entity [Line Items]
Coupon Rate		12.01%
Minimum | 13.01 – 14.00%
Variable Interest Entity [Line Items]
Coupon Rate		13.01%
Minimum | 17.01 – 18.00%
Variable Interest Entity [Line Items]
Coupon Rate		17.01%	17.01%
Maximum | 3.01 – 4.00%
Variable Interest Entity [Line Items]
Coupon Rate		4.00%	4.00%
Maximum | 4.01– 5.00%
Variable Interest Entity [Line Items]
Coupon Rate		5.00%	5.00%
Maximum | 5.01 – 6.00%
Variable Interest Entity [Line Items]
Coupon Rate		6.00%	6.00%
Maximum | 6.01 – 7.00%
Variable Interest Entity [Line Items]
Coupon Rate		7.00%	7.00%
Maximum | 7.01 - 8.00%
Variable Interest Entity [Line Items]
Coupon Rate		8.00%
Maximum | 8.01 - 9.00%
Variable Interest Entity [Line Items]
Coupon Rate		9.00%
Maximum | 5.01 – 6.00%
Variable Interest Entity [Line Items]
Coupon Rate		6.00%	6.00%
Maximum | 6.01 – 7.00%
Variable Interest Entity [Line Items]
Coupon Rate		7.00%	7.00%
Maximum | 7.01 – 8.00%
Variable Interest Entity [Line Items]
Coupon Rate		8.00%	8.00%
Maximum | 8.01 – 9.00%
Variable Interest Entity [Line Items]
Coupon Rate		9.00%	9.00%
Maximum | 9.01 – 10.00%
Variable Interest Entity [Line Items]
Coupon Rate		10.00%	10.00%
Maximum | 10.01 – 11.00%
Variable Interest Entity [Line Items]
Coupon Rate		11.00%	11.00%
Maximum | 11.01 – 12.00%
Variable Interest Entity [Line Items]
Coupon Rate		12.00%	12.00%
Maximum | 12.01 – 13.00%
Variable Interest Entity [Line Items]
Coupon Rate		13.00%
Maximum | 13.01 – 14.00%
Variable Interest Entity [Line Items]
Coupon Rate		14.00%
Maximum | 17.01 – 18.00%
Variable Interest Entity [Line Items]
Coupon Rate		18.00%	18.00%
VIE | Residential Whole-Loans
Variable Interest Entity [Line Items]
Number of Loans		1,936
VIE | Residential Bridge Loans
Variable Interest Entity [Line Items]
Number of Loans		673	340
Principal Balance | $	$ 249,179	$ 249,179	$ 105,868
Original LTV		71.10%	70.10%
Coupon Rate		9.10%	8.60%

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Residential Whole-Loans and Bridge Loans - Collateral Securing (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Residential Whole-Loans
Variable Interest Entity [Line Items]
Principal Balance	$ 674,763	$ 232,270
Geographic Concentration Risk | Financing Receivables Total | Residential Whole-Loans
Variable Interest Entity [Line Items]
Concentration	100.00%	100.00%
Principal Balance	$ 674,763	$ 232,270
Geographic Concentration Risk | Financing Receivables Total | Residential Bridge Loans
Variable Interest Entity [Line Items]
Concentration	100.00%	100.00%
Principal Balance	$ 249,179	$ 105,868
California | Geographic Concentration Risk | Financing Receivables Total | Residential Whole-Loans
Variable Interest Entity [Line Items]
Concentration	68.80%	62.20%
Principal Balance	$ 463,638	$ 144,321
California | Geographic Concentration Risk | Financing Receivables Total | Residential Bridge Loans
Variable Interest Entity [Line Items]
Concentration	48.20%	48.20%
Principal Balance	$ 119,784	$ 51,080
New York | Geographic Concentration Risk | Financing Receivables Total | Residential Whole-Loans
Variable Interest Entity [Line Items]
Concentration	15.60%	24.40%
Principal Balance	$ 105,435	$ 56,631
New York | Geographic Concentration Risk | Financing Receivables Total | Residential Bridge Loans
Variable Interest Entity [Line Items]
Concentration	9.50%	4.40%
Principal Balance	$ 23,791	$ 4,703
Georgia | Geographic Concentration Risk | Financing Receivables Total | Residential Whole-Loans
Variable Interest Entity [Line Items]
Concentration	2.90%	4.30%
Principal Balance	$ 19,324	$ 10,061
Washington | Geographic Concentration Risk | Financing Receivables Total | Residential Whole-Loans
Variable Interest Entity [Line Items]
Concentration	2.20%	4.00%
Principal Balance	$ 14,886	$ 9,244
Washington | Geographic Concentration Risk | Financing Receivables Total | Residential Bridge Loans
Variable Interest Entity [Line Items]
Concentration		6.30%
Principal Balance		$ 6,645
New Jersey | Geographic Concentration Risk | Financing Receivables Total | Residential Bridge Loans
Variable Interest Entity [Line Items]
Concentration	5.50%
Principal Balance	$ 13,723
Massachusetts | Geographic Concentration Risk | Financing Receivables Total | Residential Whole-Loans
Variable Interest Entity [Line Items]
Concentration	1.30%	3.90%
Principal Balance	$ 8,504	$ 9,114
Other | Geographic Concentration Risk | Financing Receivables Total | Residential Whole-Loans
Variable Interest Entity [Line Items]
Concentration	9.20%	1.20%
Principal Balance	$ 62,976	$ 2,899
Other | Geographic Concentration Risk | Financing Receivables Total | Residential Bridge Loans
Variable Interest Entity [Line Items]
Concentration	25.40%	23.30%
Principal Balance	$ 63,563	$ 24,581
Florida | Geographic Concentration Risk | Financing Receivables Total | Residential Bridge Loans
Variable Interest Entity [Line Items]
Concentration	6.60%	13.40%
Principal Balance	$ 16,354	$ 14,199
Texas | Geographic Concentration Risk | Financing Receivables Total | Residential Bridge Loans
Variable Interest Entity [Line Items]
Concentration	4.80%	4.40%
Principal Balance	$ 11,964	$ 4,660

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Commercial Loans - Narrative (Details) $ in Thousands	1 Months Ended			3 Months Ended	9 Months Ended
	Jun. 30, 2018	Mar. 31, 2018 USD ($)	Nov. 30, 2015 USD ($)	Mar. 31, 2018 USD ($)	Sep. 30, 2018 USD ($) entity	Jul. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Variable Interest Entity [Line Items]
Variable interest entity, number of entity | entity					2
Securitized commercial loans, at fair value					$ 1,191,048		$ 24,876
Securitized debt, at fair value					1,119,089		10,945
Repurchased borrowings					$ 61,600
Number of commercial loans trusts | entity					3
Securitized commercial loans
Variable Interest Entity [Line Items]
Principal balance		$ 20,000		$ 20,000	$ 30,000
Commercial Loans
Variable Interest Entity [Line Items]
Number of commercial loans trusts | entity					4
RSBC Trust
Variable Interest Entity [Line Items]
Principal balance					$ 94,787		0
RSBC Trust | Securitized commercial loans
Variable Interest Entity [Line Items]
Principal balance					49,600
Securitized debt, at fair value		20,600		$ 20,600		$ 45,200
RETL Trust
Variable Interest Entity [Line Items]
Trust certificates issued					1,100,000
Principal balance					1,154,283		0
RETL Trust | Securitized commercial loans
Variable Interest Entity [Line Items]
Amount acquired, eliminated in consolidation		$ 67,800
Variable interest entity, carrying amount					58,000
Variable interest entity, fair value					58,200
CMSC Trust
Variable Interest Entity [Line Items]
Trust certificates issued					24,600
Principal balance					24,556		$ 24,846
CMSC Trust | Securitized commercial loans
Variable Interest Entity [Line Items]
Amount acquired, eliminated in consolidation			$ 14,000		13,800
Variable interest entity, carrying amount					13,800
Variable interest entity, fair value					13,800
Securitized debt, at fair value					10,800
RETL Trust
Variable Interest Entity [Line Items]
Trust certificates issued					1,150,000
CMSC Trust
Variable Interest Entity [Line Items]
Securitized commercial loans, at fair value					$ 24,600
London Interbank Offered Rate (LIBOR) | RSBC Trust
Variable Interest Entity [Line Items]
Loans receivable, basis spread on variable rate		4.25%
London Interbank Offered Rate (LIBOR) | RSBC Trust | Securitized commercial loans
Variable Interest Entity [Line Items]
Loans receivable, basis spread on variable rate					5.30%
Loans receivable, extension period					1 year
Debt instrument, basis spread on variable rate				4.75%
London Interbank Offered Rate (LIBOR) | Commercial Mezzanine Loan | Securitized commercial loans
Variable Interest Entity [Line Items]
Loans receivable, basis spread on variable rate	4.50%	6.50%
Loans receivable, extension period	1 year	1 year
London Interbank Offered Rate (LIBOR) | RETL Trust
Variable Interest Entity [Line Items]
Debt instrument, basis spread on variable rate		3.15%
London Interbank Offered Rate (LIBOR) Floor | RSBC Trust
Variable Interest Entity [Line Items]
Loans receivable, basis spread on variable rate		1.25%
London Interbank Offered Rate (LIBOR) Floor | RSBC Trust | Securitized commercial loans
Variable Interest Entity [Line Items]
Loans receivable, basis spread on variable rate					1.90%
London Interbank Offered Rate (LIBOR) Cap | RSBC Trust | Securitized commercial loans
Variable Interest Entity [Line Items]
Loans receivable, basis spread on variable rate					3.50%
Trust Certificate | London Interbank Offered Rate (LIBOR) | RETL Trust | Securitized commercial loans
Variable Interest Entity [Line Items]
Loans receivable, basis spread on variable rate		9.50%

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Commercial Loans - Consolidated commercial loan trusts included in the Consolidated Balance Sheets (Details) - USD ($) $ in Thousands		Sep. 30, 2018	Dec. 31, 2017
Noncontrolling Interest [Line Items]
Restricted cash		$ 100,138	$ 0
Securitized commercial loans, at fair value		1,191,048	24,876
Commercial Loans, at fair value		123,677	0
Interest receivable		21,869	13,603
Total assets	[1]	5,537,985	3,886,906
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)		10,027	8,322
Accounts payable and accrued expenses		3,513	3,118
Other liabilities		100,530	0
Total liabilities	[2]	5,002,340	3,420,868
VIE
Noncontrolling Interest [Line Items]
Restricted cash		100,138	0
Securitized commercial loans, at fair value		1,191,048	24,876
Commercial Loans, at fair value		123,677	0
Interest receivable		12,418	3,358
Total assets		2,394,848	379,995
Securitized debt		1,119,089	10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)		2,487	70
Accounts payable and accrued expenses		737	189
Other liabilities		100,531	0
Total liabilities		1,222,844	11,204
Securitized commercial loans | VIE
Noncontrolling Interest [Line Items]
Restricted cash		100,138	0
Securitized commercial loans, at fair value		1,191,048	24,876
Commercial Loans, at fair value		93,846	0
Interest receivable		3,544	161
Total assets		1,388,576	25,037
Securitized debt		1,119,089	10,945
Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)		2,487	70
Accounts payable and accrued expenses		15	1
Other liabilities		100,138	0
Total liabilities		$ 1,221,729	$ 11,016

[1] (1) Assets of consolidated VIEs included in the total assets above: Cash and cash equivalents——Restricted cash100,138—Residential Whole-Loans, at fair value ($684,463 and $237,423 pledged as collateral, at fair value, respectively)684,463237,423Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)249,471106,673Securitized commercial loans, at fair value1,191,04824,876Commercial Loans, at fair value ($123,677 and $0 pledged as collateral, at fair value, respectively)123,677—Investment related receivable33,4307,665Interest receivable12,4183,358Other assets203—Total assets of consolidated VIEs2,394,848379,995Residential Bridge Loans ($234,747 and $64,526 at fair value and $249,471 and $106,673 pledged as collateral, respectively)234,74764,526

[2] (2) Liabilities of consolidated VIEs included in the total liabilities above: Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)1,119,08910,945Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)2,48770Accounts payable and accrued expenses737189Other liabilities100,531—Total liabilities of consolidated VIEs1,222,84411,204Securitized debt, at fair value (includes $313,143 and $10,945 held by affiliates, respectively)313,14310,945Interest payable (includes $891 and $70 on securitized debt held by affiliates, respectively)89170

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Commercial Loans - Components of the carrying value of commercial real estate loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Commercial Mezzanine Loan
Variable Interest Entity [Line Items]
Principal balance	$ 50,000	$ 0
Unamortized premium	0	0
Unamortized discount	(232)	0
Amortized cost	49,768	0
Gross unrealized gains	380	0
Gross unrealized losses	(43)	0
Fair value	50,105	0
CMSC Trust
Variable Interest Entity [Line Items]
Principal balance	24,556	24,846
Unamortized premium	0	0
Unamortized discount	0	0
Amortized cost	24,556	24,846
Gross unrealized gains	86	30
Gross unrealized losses	0	0
Fair value	24,642	24,876
RETL Trust
Variable Interest Entity [Line Items]
Principal balance	1,154,283	0
Unamortized premium	1,027	0
Unamortized discount	0	0
Amortized cost	1,155,310	0
Gross unrealized gains	11,096	0
Gross unrealized losses	0	0
Fair value	1,166,406	0
RSBC Trust
Variable Interest Entity [Line Items]
Principal balance	94,787	0
Unamortized premium	0	0
Unamortized discount	(445)	0
Amortized cost	94,342	0
Gross unrealized gains	0	0
Gross unrealized losses	(496)	0
Fair value	$ 93,846	$ 0

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Financings Narrative (Details) $ in Thousands	1 Months Ended		9 Months Ended
	Mar. 31, 2018 USD ($)	Nov. 30, 2015 USD ($)	Sep. 30, 2018 USD ($) Counterparty	Dec. 31, 2017 USD ($)
Short-term Debt [Line Items]
Number of counterparties to master repurchase agreement | Counterparty			28
Number of counterparties from whom entity borrowed under repurchase agreement | Counterparty			16
MBS pledged for borrowings under repurchase agreements			$ 249,471	$ 106,673
Securities loaned, collateral, right to reclaim cash			18,600	23,600
Securities purchased under agreements to resell, collateral, obligation to return cash			700	1,500
Securities purchased under agreements to resell, fair value of collateral			168	306
Securitized debt, at fair value			1,119,089	10,945
Repurchase agreements
Short-term Debt [Line Items]
MBS pledged for borrowings under repurchase agreements			3,900,000	$ 3,500,000
RETL Trust
Short-term Debt [Line Items]
Trust certificates issued			1,100,000
RETL Trust | Affiliated entities
Short-term Debt [Line Items]
Trust certificates issued			298,500
RETL Trust | Third parties
Short-term Debt [Line Items]
Trust certificates issued			797,900
CMSC Trust
Short-term Debt [Line Items]
Commercial pass-through certificate, amount			25,000
Trust certificates issued			$ 24,600
Debt instrument interest rate, effective percentage			8.90%
Securitized commercial loans | RETL Trust
Short-term Debt [Line Items]
Amount acquired, eliminated in consolidation	$ 67,800
Securitized commercial loans | CMSC Trust
Short-term Debt [Line Items]
Amount acquired, eliminated in consolidation		$ 14,000	$ 13,800
Securitized debt, at fair value			10,800
Securitized debt | Securitized commercial loans | CMSC Trust
Short-term Debt [Line Items]
Securitized debt, at fair value			$ 10,800

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Financings - Borrowings under Repurchase Agreements (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 3,469,319	$ 3,251,686
Borrowings under repurchase agreements, net	$ 3,469,319	$ 3,251,686
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	2.90%	1.86%
Weighted Average Remaining Maturity (days)	52 days	51 days
Repurchase agreements | Agency RMBS (1)
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 393,486	$ 665,919
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	2.39%	1.62%
Weighted Average Remaining Maturity (days)	60 days	61 days
Repurchase agreements | Agency CMBS
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 1,833,352	$ 2,035,222
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	2.36%	1.53%
Weighted Average Remaining Maturity (days)	62 days	53 days
Securities loaned or sold under agreements to repurchase, fair value	$ 22,600
Repurchase agreements | Non-Agency RMBS
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 71,117	$ 46,530
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	3.70%	2.76%
Weighted Average Remaining Maturity (days)	31 days	41 days
Repurchase agreements | Non-Agency CMBS
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 212,282	$ 154,325
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	3.79%	2.98%
Weighted Average Remaining Maturity (days)	48 days	40 days
Repurchase agreements | Whole-Loans
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 585,178	$ 189,270
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	3.65%	3.66%
Weighted Average Remaining Maturity (days)	35 days	8 days
Repurchase agreements | Residential Bridge Loans
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 216,917	$ 100,183
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	4.37%	4.05%
Weighted Average Remaining Maturity (days)	26 days	59 days
Repurchase agreements | Commercial Loans
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 87,567
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	4.33%
Weighted Average Remaining Maturity (days)	27 days
Repurchase agreements | Securitized commercial loans
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 7,599
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	3.99%
Weighted Average Remaining Maturity (days)	12 days
Repurchase agreements | Other securities
Certain characteristics of the Company's repurchase agreements
Repurchase Agreement Borrowings	$ 61,821	$ 60,237
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent)	3.86%	2.94%
Weighted Average Remaining Maturity (days)	29 days	23 days
Carrying Value
Certain characteristics of the Company's repurchase agreements
Securities loaned or sold under agreements to repurchase, fair value	$ 3,469,319	$ 3,251,686

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Financings - Borrowings under Repurchase Agreements-Maturity dates (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Certain characteristics of the Company's repurchase agreements
Repurchase agreements, net	$ 3,469,319	$ 3,251,686
Overnight
Certain characteristics of the Company's repurchase agreements
Repurchase agreements, net	0	0
1 to 29 days
Certain characteristics of the Company's repurchase agreements
Repurchase agreements, net	1,494,121	1,387,599
30 to 59 days
Certain characteristics of the Company's repurchase agreements
Repurchase agreements, net	332,521	665,656
60 to 89 days
Certain characteristics of the Company's repurchase agreements
Repurchase agreements, net	1,531,084	871,819
90 to 119 days
Certain characteristics of the Company's repurchase agreements
Repurchase agreements, net	111,593	0
Greater than or equal to 120 days
Certain characteristics of the Company's repurchase agreements
Repurchase agreements, net	$ 0	$ 326,612

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Financings - Borrowings under Repurchase Agreements-Risk by Counterparty (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Credit Suisse AG, Cayman Islands Branch
Amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty
Amount of Collateral at Risk, at fair value	$ 88,584
Weighted Average Remaining Maturity (days)	29 days
Percentage of Stockholders’ Equity	16.50%
Nomura Securities International Inc.
Amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty
Amount of Collateral at Risk, at fair value	$ 72,697
Weighted Average Remaining Maturity (days)	29 days
Percentage of Stockholders’ Equity	13.60%
UBS AG, London Branch
Amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty
Amount of Collateral at Risk, at fair value	$ 65,095
Weighted Average Remaining Maturity (days)	33 days
Percentage of Stockholders’ Equity	12.20%
Citigroup Global Markets Inc.
Amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty
Amount of Collateral at Risk, at fair value	$ 56,038
Weighted Average Remaining Maturity (days)	80 days
Percentage of Stockholders’ Equity	10.50%

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Financings - Collateral Positions (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	$ 249,471	$ 106,673
Accrued Interest	18,746	12,617
Assets Pledged and Accrued Interest	3,912,623	3,569,911
Assets Pledged- Fair Value	3,893,877	3,557,294
Investment related receivable	113,341	7,665
Non-Agency CMBS
Financial Instruments Owned and Pledged as Collateral [Line Items]
Investment related receivable	35,000
Repurchase agreements
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	3,900,000	3,500,000
Repurchase agreements | Agency RMBS (1)
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	403,339	690,255
Accrued Interest	1,608	2,601
Assets Pledged and Accrued Interest	404,947	692,856
Repurchase agreements | Non-Agency RMBS
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	98,863	58,127
Accrued Interest	718	160
Assets Pledged and Accrued Interest	99,581	58,287
Repurchase agreements | Non-Agency CMBS
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	286,728	208,062
Accrued Interest	1,223	1,100
Assets Pledged and Accrued Interest	287,951	209,162
Repurchase agreements | Whole-Loans
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	684,463	237,423
Accrued Interest	4,778	1,754
Assets Pledged and Accrued Interest	689,241	239,177
Repurchase agreements | Residential Bridge Loans
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	249,471	106,673
Accrued Interest	3,975	1,443
Assets Pledged and Accrued Interest	253,446	108,116
Repurchase agreements | Commercial Loans
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	123,677	0
Accrued Interest	789	0
Assets Pledged and Accrued Interest	124,466	0
Repurchase agreements | Securitized commercial loans
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	13,800	0
Accrued Interest	85	0
Assets Pledged and Accrued Interest	13,885	0
Repurchase agreements | Other securities
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	92,391	89,823
Accrued Interest	179	105
Assets Pledged and Accrued Interest	92,570	89,928
Repurchase agreements | Cash
Financial Instruments Owned and Pledged as Collateral [Line Items]
Assets Pledged and Accrued Interest	18,625	23,591
Assets Pledged- Fair Value	18,625	23,591
VIE
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	249,471	106,673
Investment related receivable	33,430	7,665
VIE | Agency CMBS
Financial Instruments Owned and Pledged as Collateral [Line Items]
MBS pledged for borrowings under repurchase agreements	1,922,520	2,143,340
Accrued Interest	5,391	5,454
Assets Pledged and Accrued Interest	$ 1,927,911	$ 2,148,794

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Financings - Convertible Senior Unsecured Notes (Details) - 6.75% Convertible Senior Unsecured Notes - Convertible Debt	1 Months Ended
	Oct. 31, 2017 USD ($) $ / shares
Debt Conversion [Line Items]
Aggregate principal amount of 6.75% convertible senior unsecured notes	$ 115,000,000
Interest rate stated percentage	6.75%
Convertible notes, carrying amount of equity component	$ 15,000,000
Proceeds from issuance of long-term debt	$ 111,100,000
Convertible senior unsecured notes, earliest redemption period by company	3 months
Redemption price, percentage	100.00%
Convertible senior unsecured notes, conversion ratio	0.0831947
Convertible senior unsecured notes, conversion price (in dollars per share) | $ / shares	$ 12.02

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Financings - Commercial Mortgage Pass-Through Certificates (Details) - RETL Trust - Secured Debt $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Debt Instrument [Line Items]
Principal Balance	$ 1,154,284
Fair Value	1,166,407
Class A
Debt Instrument [Line Items]
Principal Balance	$ 448,033
Coupon	3.30%
Fair Value	$ 449,570
Class B
Debt Instrument [Line Items]
Principal Balance	$ 136,120
Coupon	3.90%
Fair Value	$ 136,800
Class C
Debt Instrument [Line Items]
Principal Balance	$ 117,908
Coupon	4.20%
Fair Value	$ 118,718
Class D
Debt Instrument [Line Items]
Principal Balance	$ 104,228
Coupon	4.90%
Fair Value	$ 105,141
Class E
Debt Instrument [Line Items]
Principal Balance	$ 141,507
Coupon	6.70%
Fair Value	$ 143,456
Class F
Debt Instrument [Line Items]
Principal Balance	$ 137,060
Coupon	8.20%
Fair Value	$ 138,948
Class G
Debt Instrument [Line Items]
Principal Balance	$ 11,457
Coupon	9.70%
Fair Value	$ 11,592
Class HRR
Debt Instrument [Line Items]
Principal Balance	$ 57,971
Coupon	11.70%
Fair Value	$ 58,156
Class X-CP
Debt Instrument [Line Items]
Coupon	2.60%
Fair Value	$ 1,420
Notional amount	$ 104,200
Class X-EXT
Debt Instrument [Line Items]
Coupon	0.00%
Fair Value	$ 2,606
Notional amount	$ 104,200

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Derivative Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Dec. 31, 2016
Estimated Fair Value
Fair value of derivative assets	$ 14,947	$ 16,904
Derivative liability, at fair value	(2,159)	(4,346)
Derivative instruments not accounted as hedges under GAAP
Estimated Fair Value
Fair value of derivative assets	2,700	728
Derivative liability, at fair value	(2,159)	(4,346)
Total derivative instruments	541	(3,618)
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP
Notional Amount
Notional amount, assets	572,400	0
Notional amount, liabilities	3,739,400	3,252,200
Estimated Fair Value
Fair value of derivative assets	200	0
Derivative liability, at fair value	(1,414)	(4,191)
U.S. Treasury option | Derivative instruments not accounted as hedges under GAAP
Notional Amount
Notional amount, assets		320,000
Notional amount, liabilities		320,000
Estimated Fair Value
Fair value of derivative assets		100
Derivative liability, at fair value		(50)
Futures contracts | Derivative instruments not accounted as hedges under GAAP
Notional Amount
Notional amount, assets	280,000	480,000
Estimated Fair Value
Fair value of derivative assets	1,703	628
TBAs | Derivative instruments not accounted as hedges under GAAP
Notional Amount
Notional amount, assets	600,000	0
Notional amount, liabilities	200,000	125,000
Estimated Fair Value
Fair value of derivative assets	688	0
Derivative liability, at fair value	(383)	(10)
Total derivative instruments	305	(10)
Forward starting interest rate swap
Estimated Fair Value
Notional Amount	599,300	1,500,000
Credit default swaps | Derivative instruments not accounted as hedges under GAAP
Notional Amount
Notional amount, liabilities	64,747	14,815
Estimated Fair Value
Derivative liability, at fair value	(362)	(95)
Notional Amount	64,700	14,800
Derivative assets, at fair value, net	(362)
Long | Us Treasury Futures
Estimated Fair Value
Fair value of derivative assets		628
Derivative liability, at fair value	(1,700)
Notional Amount		480,000
Long | U.S. Treasury option
Notional Amount
Notional amount, assets	100,000	320,000
Estimated Fair Value
Fair value of derivative assets	109	100
Long | TBAs | Derivative instruments not accounted as hedges under GAAP
Notional Amount
Notional amount, assets	400,000	0
Estimated Fair Value
Fair value of derivative assets	641	0
Derivative liability, at fair value	0	(10)
Notional Amount	400,000	125,000	$ 0
Short | Us Treasury Futures
Estimated Fair Value
Notional Amount	280,000
Short | U.S. Treasury option
Notional Amount
Notional amount, liabilities	0	320,000
Estimated Fair Value
Derivative liability, at fair value	0	(50)
Short | TBAs | Derivative instruments not accounted as hedges under GAAP
Notional Amount
Notional amount, assets	200,000	0
Estimated Fair Value
Fair value of derivative assets	47	0
Derivative liability, at fair value	(383)	0
Notional Amount	$ 400,000	$ 0	$ 0

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Derivative Instruments- Gain or loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations			$ 12,905	$ (156,655)
Return (Recovery) of Basis			(1,460)	156,098
Total	$ 24,625	$ 7,217	132,697	(16,035)
Collateral already posted, aggregate fair value	62,900		62,900		$ 63,300
Cash pledged as collateral	368		368		$ 0
Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations	4,236	(502)	8,421	(157,683)
Variation Margin Settlement	25,250	9,564	123,114	(7,966)
Return (Recovery) of Basis	(224)	(1,394)	(1,906)	(4,677)
Mark-to-Market	(7,036)	(598)	(1,460)	160,255
Contractual interest income (expense), net	2,399	147	4,528	(5,964)
Total	24,625	7,217	132,697	(16,035)
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations	95	(38)	114	(150,593)
Variation Margin Settlement	25,250	9,564	123,114	(7,966)
Return (Recovery) of Basis	772	92	1,064	378
Mark-to-Market	(3,742)	(2,028)	(1,497)	156,102
Contractual interest income (expense), net	1,190	(1,764)	886	(12,662)
Total	23,565	5,826	123,681	(14,741)
Interest rate swaption | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations				(115)
Return (Recovery) of Basis				0
Mark-to-Market				0
Contractual interest income (expense), net				0
Total				(115)
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations	0	0	0	526
Return (Recovery) of Basis	(996)	(1,486)	(2,970)	(5,055)
Mark-to-Market	(929)	351	(959)	(783)
Contractual interest income (expense), net	1,209	1,816	3,642	6,229
Total	(716)	681	(287)	917
Option | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations	0	(957)	(518)	(892)
Return (Recovery) of Basis	0	0	0	0
Mark-to-Market	(253)	477	47	(134)
Contractual interest income (expense), net	0	0	0	0
Total	(253)	(480)	(471)	(1,026)
Futures contracts | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations	4,232	(77)	8,824	(9,230)
Return (Recovery) of Basis	0	0	0	0
Mark-to-Market	(1,994)	0	1,075	2,416
Contractual interest income (expense), net	0	0	0	0
Total	2,238	(77)	9,899	(6,814)
Foreign currency forwards | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations		45		25
Return (Recovery) of Basis		0		0
Mark-to-Market		(15)		43
Contractual interest income (expense), net		0		0
Total		30		68
Total return swaps | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations		(52)		(552)
Return (Recovery) of Basis		0		0
Mark-to-Market		329		1,673
Contractual interest income (expense), net		95		469
Total		372		1,590
Credit default swaps | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations	(83)		(125)
Return (Recovery) of Basis	0		0
Mark-to-Market	(492)		(441)
Contractual interest income (expense), net	0		0
Total	(575)		(566)
TBAs | Derivative instruments not accounted as hedges under GAAP
Amounts recognized on the statements of operations related to the Company's derivatives
Other Settlements / Expirations	(8)	577	126	3,148
Variation Margin Settlement				0
Return (Recovery) of Basis	0	0	0	0
Mark-to-Market	374	288	315	938
Contractual interest income (expense), net	0	0	0	0
Total	$ 366	$ 865	$ 441	$ 4,086

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Derivative Instruments- Swaption terms (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Interest rate swaps and interest rate swaptions
Derivative assets	$ 14,947	$ 16,904
Derivative liability, at fair value	2,159	4,346
Derivative instruments not accounted as hedges under GAAP
Interest rate swaps and interest rate swaptions
Derivative assets	2,700	728
Derivative liability, at fair value	2,159	4,346
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP
Interest rate swaps and interest rate swaptions
Notional amount, assets	572,400	0
Derivative assets	200	0
Notional amount, liabilities	3,739,400	3,252,200
Derivative liability, at fair value	1,414	4,191
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate
Interest rate swaps and interest rate swaptions
Notional Amount	$ 3,829,400	$ 3,252,200
Average Fixed Pay Rate	2.40%	2.20%
Average Floating Receive Rate	2.30%	1.40%
Average Maturity (Years)	6 years 10 months 24 days	7 years 1 month 6 days
Forward Starting	15.60%	46.90%
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Variable Pay Rate
Interest rate swaps and interest rate swaptions
Notional Amount	$ 482,400
Average Fixed Pay Rate	2.30%
Average Floating Receive Rate	2.40%
Average Maturity (Years)	8 years 7 months 6 days
Forward Starting	0.00%
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | 1 year or less | Fixed Pay Rate
Interest rate swaps and interest rate swaptions
Notional Amount	$ 400,000
Average Fixed Pay Rate	1.50%
Average Floating Receive Rate	2.30%
Average Maturity (Years)	9 months 18 days
Forward Starting	0.00%
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 1 year and less than 3 years | Fixed Pay Rate
Interest rate swaps and interest rate swaptions
Notional Amount	$ 200,000	$ 600,000
Average Fixed Pay Rate	1.80%	1.60%
Average Floating Receive Rate	2.30%	1.50%
Average Maturity (Years)	1 year 8 months 12 days	1 year 9 months 18 days
Forward Starting	0.00%	0.00%
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 3 years and less than 5 years | Fixed Pay Rate
Interest rate swaps and interest rate swaptions
Notional Amount	$ 1,164,700	$ 960,000
Average Fixed Pay Rate	2.40%	2.00%
Average Floating Receive Rate	2.30%	1.40%
Average Maturity (Years)	4 years 1 month 6 days	4 years 3 months 18 days
Forward Starting	0.00%	0.00%
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 5 years | Fixed Pay Rate
Interest rate swaps and interest rate swaptions
Notional Amount	$ 2,064,700	$ 1,692,200
Average Fixed Pay Rate	2.70%	2.50%
Average Floating Receive Rate	2.30%	1.40%
Average Maturity (Years)	10 years 2 months 12 days	10 years 6 months
Forward Starting	29.00%	90.20%
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 5 years | Variable Pay Rate
Interest rate swaps and interest rate swaptions
Notional Amount	$ 482,400
Average Fixed Pay Rate	2.30%
Average Floating Receive Rate	2.40%
Average Maturity (Years)	8 years 7 months 6 days
Forward Starting	0.00%
Forward starting interest rate swap
Interest rate swaps and interest rate swaptions
Notional Amount	$ 599,300	$ 1,500,000
Derivative Instrument, Weighted Average Forward Starting Date	2 months 17 days	4 months
U.S. Treasury option | Derivative instruments not accounted as hedges under GAAP
Interest rate swaps and interest rate swaptions
Notional amount, assets		$ 320,000
Derivative assets		100
Notional amount, liabilities		320,000
Derivative liability, at fair value		50
Long | U.S. Treasury option
Interest rate swaps and interest rate swaptions
Notional amount, assets	$ 100,000	320,000
Derivative assets	109	100
Long | Us Treasury Futures
Interest rate swaps and interest rate swaptions
Notional Amount		480,000
Derivative assets		628
Derivative liability, at fair value	1,700
Short | U.S. Treasury option
Interest rate swaps and interest rate swaptions
Notional amount, liabilities	0	320,000
Derivative liability, at fair value	0	$ 50
Short | Us Treasury Futures
Interest rate swaps and interest rate swaptions
Notional Amount	$ 280,000

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Derivative Instruments- TBA securities (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Currency swaps and forwards
Derivative assets	$ 14,947	$ 16,904
Derivative liability, at fair value	(2,159)	(4,346)
Derivative instruments not accounted as hedges under GAAP
Currency swaps and forwards
Derivative assets	2,700	728
Derivative liability, at fair value	(2,159)	(4,346)
Fair Value	541	(3,618)
TBAs | Derivative instruments not accounted as hedges under GAAP
Currency swaps and forwards
Notional amount, assets	600,000	0
Derivative assets	688	0
Derivative Asset Notional Amount Net	200,000	0
Notional amount, liabilities	200,000	125,000
Derivative Liability Notional Amount Net	(200,000)	125,000
Derivative liability, at fair value	(383)	(10)
Notional Amount, net	0	125,000
Fair Value	305	(10)
TBAs | Derivative instruments not accounted as hedges under GAAP | Long
Currency swaps and forwards
Notional amount, assets	400,000	0
Derivative assets	641	0
Derivative Liability Notional Amount Net	0	125,000
Derivative liability, at fair value	0	(10)
Changes in notional amount
Notional amount at the beginning of the period	125,000	0
Additions	5,525,000	5,843,200
Settlement, Termination, Expiration or Exercise	(5,250,000)	(5,718,200)
Notional amount at the end of the period	400,000	125,000
TBAs | Derivative instruments not accounted as hedges under GAAP | Short
Currency swaps and forwards
Notional amount, assets	200,000	0
Derivative assets	47	0
Derivative Liability Notional Amount Net	(200,000)	0
Derivative liability, at fair value	(383)	0
Changes in notional amount
Notional amount at the beginning of the period	0	0
Additions	5,650,000	5,718,200
Settlement, Termination, Expiration or Exercise	(5,250,000)	(5,718,200)
Notional amount at the end of the period	$ 400,000	$ 0

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Offsetting Assets and Liabilities- Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Offsetting Assets [Line Items]
Derivative asset, gross amount	$ 14,947	$ 16,904
Derivative assets, at fair value	2,700	728
Fair value of derivative assets	14,947	16,904
Derivative asset, not offset	(10,944)	(11,683)
Derivative, collateral, obligation to return cash	(368)	0
Net Amount	3,635	5,221
Gross Amounts of Recognized Liabilities	2,159	4,346
Securities Sold under Agreements to Repurchase, Gross	3,469,319	3,251,686
Derivative Liability, Securities Sold under Agreements to Repurchase, Securities Loaned, Gross	3,471,478	3,256,032
Derivative liabilities	2,159	4,346
Securities Sold Under Agreements To Repurchase Before Amortization of Debt Issuance Costs	3,469,319	3,251,686
Derivative Liability, Securities Sold under Agreements to Repurchase, Securities Loaned	3,471,478	3,256,032
Gross Amounts Not Offset in the Balance Sheets
Financial Instruments	(575)	(50)
Securities Sold under Agreements to Repurchase, Collateral, Right to Reclaim Securities	(3,469,319)	(3,251,686)
Derivative Liability, Securities Sold under Agreements to Repurchase, Securities Loaned, Collateral, Right to Reclaim Securities	(3,469,894)	(3,251,736)
Cash Collateral Pledged	(1,576)	(4,270)
Derivative Liability, Fair Value, Amount Offset Against Collateral	8	26
Derivative Liability, Securities Sold under Agreements to Repurchase, Securities Loaned, Amount Offset Against Collateral	8	26
Cash collateral for derivatives	62,900	63,300
Fair value of investments pledged against repurchase agreements	3,900,000	3,500,000
Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS
Offsetting Assets [Line Items]
Derivative asset, gross amount	12,247	16,176
Fair value of derivative assets	12,247	16,176
Derivative asset, not offset	(10,369)	(11,633)
Net Amount	1,878	4,543
Derivative Instruments Excluding Interest Only Strips Accounted For As Derivatives And Linked Transactions
Offsetting Assets [Line Items]
Derivative asset, gross amount	2,700	728
Derivative assets, at fair value	2,700	728
Derivative asset, not offset	(575)	(50)
Derivative, collateral, obligation to return cash	(368)	0
Net Amount	$ 1,757	$ 678

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Related Party Transactions (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Related Party Transactions
Proceeds from issuance of common stock				$ 64,880	$ 0
Management fees		$ 2,284	$ 1,853	$ 6,723	6,159
Western Asset Management Company
Related Party Transactions
Management fees (as a percent)				1.50%
Renewal term of management agreement				1 year
Notice period to terminate the Management Agreement following initial term				180 days
Multiple of average annual management fees used to calculate termination fee of management agreement				300.00%
Prior period over which management fees were incurred used to calculate the termination fee under the Management Agreement				24 months
Notice period to terminate the Management Agreement for cause				30 days
Management fees		2,300	1,900	$ 6,700	6,200
Reimbursable employee costs		205	$ 202	1,300	$ 1,100
Management fees incurred but not yet paid	$ 2,300	2,300		2,300		$ 1,900
Reimbursable employee costs incurred but not yet paid	$ 205	$ 205		$ 205		$ 99
Western Asset Management Company | Minimum
Related Party Transactions
Proportion of affirmative votes by the entity's independent directors to terminate the Management Agreement (as a percent)				67.00%
Proportion of votes required by the entity's independent directors for acceptance of reduction in management fees (as a percent)				67.00%
Secondary Offering
Related Party Transactions
Sale of stock, number of shares issued in transaction	6,500,000			6,500,000
Proceeds from issuance of common stock	$ 67,800

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Share-Based Payments (Details) $ / shares in Units, $ in Thousands			3 Months Ended		9 Months Ended		50 Months Ended
	Jun. 07, 2018 director shares	Jun. 01, 2017 shares	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) shares	Jun. 30, 2016 shares	Dec. 31, 2017 USD ($) shares
Share-Based Payments
Shares authorized (as a percent)			3.00%		3.00%
Number of shares remained available for issuance (in shares)			670,404		670,404
Stock-based compensation expense recognized | $			$ 70	$ 218	$ 195	$ 795
Common Stock Outstanding
Share-Based Payments
Number of shares remained available for issuance (in shares)			1,423,609		1,423,609
Restricted common stock
Share-Based Payments
Vested (in shares)					84,203	152,630
Summary of restricted common stock vesting dates
Shares Vesting (in shares)			26,708		26,708			83,155
Shares of Restricted Stock
Outstanding, beginning of period (in shares)					725,449
Granted (in shares)					27,756
Cancelled/forfeited (in shares)					0
Outstanding, end of period (in shares)			753,205		753,205
Unvested at end of year (in shares)			26,708		26,708			83,155
Weighted Average Grant Date Fair Value
Outstanding at beginning of period (in dollars per share) | $ / shares					$ 17.00
Granted (in dollars per share) | $ / shares					10.78
Cancelled/forfeited (in dollars per share) | $ / shares					0.00
Outstanding at end of year (in dollars per share) | $ / shares			$ 16.77		16.77
Unvested at end of year (in dollars per share) | $ / shares			$ 10.81		$ 10.81
Restricted common stock | March 2018
Summary of restricted common stock vesting dates
Shares Vesting (in shares)			0		0			66,667
Shares of Restricted Stock
Unvested at end of year (in shares)			0		0			66,667
Restricted common stock | June 2018
Summary of restricted common stock vesting dates
Shares Vesting (in shares)			0		0			16,488
Shares of Restricted Stock
Unvested at end of year (in shares)			0		0			16,488
Restricted common stock | June 2019
Summary of restricted common stock vesting dates
Shares Vesting (in shares)			26,708		26,708			0
Shares of Restricted Stock
Unvested at end of year (in shares)			26,708		26,708			0
Restricted common stock | Director
Share-Based Payments
Awards granted to each of the entity's independent directors (in shares)	6,476	3,884
Number of independent directors to whom awards were granted | director	4
Shares of Restricted Stock
Granted (in shares)	25,904	15,536
Restricted common stock | Director Deferred Fee Plan
Shares of Restricted Stock
Granted (in shares)					1,852
Equity awards
Share-Based Payments
Unamortized compensation expense | $			$ 187		$ 187			$ 66
Shares of Restricted Stock
Granted (in shares)							753,205
Liability awards
Share-Based Payments
Unamortized compensation expense | $			$ 0		$ 0			$ 111

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Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands															1 Months Ended	9 Months Ended
	Oct. 26, 2018	Sep. 17, 2018	Jul. 26, 2018	Jun. 21, 2018	Apr. 26, 2018	Mar. 22, 2018	Jan. 26, 2018	Dec. 21, 2017	Oct. 26, 2017	Sep. 21, 2017	Jul. 26, 2017	Jun. 20, 2017	Apr. 26, 2017	Mar. 23, 2017	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Apr. 30, 2017	Feb. 25, 2016	May 09, 2012
Shareholders equity
Number of shares of common stock for each warrant unit																				1
Number of common shares that can be acquired upon exercise of each warrant unit																				0.5
Exercise price of outstanding warrants (in dollars per share)															$ 15.87	$ 15.87
Number of warrant shares purchasable (in shares)															1,232,916	1,232,916
Proceeds from issuance of common stock																$ 64,880	$ 0
Payments of stock issuance costs																$ 65	$ 0
Shares authorized to be repurchased (in shares)								2,100,000											2,050,000
Dividends, declared per share of common stock (in dollars per share)		$ 0.31		$ 0.31		$ 0.31		$ 0.31		$ 0.31		$ 0.31		$ 0.31
Dividends, cash paid per share of common stock (in dollars per share)			$ 0.31		$ 0.31		$ 0.31		$ 0.31		$ 0.31		$ 0.31
Treasury Stock
Shareholders equity
Treasury stock (in shares)																303,422
Common Stock Outstanding
Shareholders equity
Equity offering amount, maximum																		$ 100,000
Treasury stock (in shares)																125,722
Common Stock Outstanding
Shareholders equity
Stock repurchased during period (in shares)																303,422
Institutional investors
Shareholders equity
Number of warrant units authorized to be sold																				2,231,787
Subsequent Event
Shareholders equity
Dividends, cash paid per share of common stock (in dollars per share)	$ 0.31
Secondary Offering
Shareholders equity
Sale of stock, number of shares issued in transaction															6,500,000	6,500,000
Treasury stock (in shares)																303,422
Sale of stock, price per share (in dollars per share)															$ 10.85	$ 10.85
Proceeds from issuance of common stock															$ 67,800
Payments of stock issuance costs																$ 2,700

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Net Income per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Numerator:
Net income attributable to common stockholders and participating securities for basic and diluted earnings per share	$ 20,882	$ 22,767	$ 44,064	$ 63,693	$ 85,097
Less: Dividends and undistributed earnings allocated to participating securities	54	75	112	238
Net income allocable to common stockholders — basic and diluted	$ 20,828	$ 22,692	$ 43,952	$ 63,455
Denominator:
Weighted average common shares outstanding for basic earnings per share	42,060,077	41,853,134	41,802,302	41,824,318
Weighted average common shares outstanding for diluted earnings per share	42,060,077	41,853,134	41,802,302	41,824,318
Basic earnings per common share (in dollars per share)	$ 0.50	$ 0.54	$ 1.05	$ 1.52
Diluted earnings per common share (in dollars per share)	$ 0.50	$ 0.54	$ 1.05	$ 1.52

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Valuation Allowance [Line Items]
Current federal, state and local, tax expense (benefit)	$ 206	$ (1,200)	$ 555	$ 1,300
Deferred tax assets, gross	3,100		3,100		$ 6,100
Capital Loss Carryforward [Member]
Valuation Allowance [Line Items]
Valuation allowances balance	3,100		3,100		6,100
Operating Loss Carryforwards [Member]
Valuation Allowance [Line Items]
Valuation allowances balance	8,500		8,500		9,200
State Jurisdiction [Member]
Valuation Allowance [Line Items]
Deferred tax asset, net operating losses	7,600		7,600		8,800
State Jurisdiction [Member] | Taxable REIT Subsidiary [Member]
Valuation Allowance [Line Items]
Deferred tax asset, net operating losses	1,400		1,400		765
Domestic Tax Authority [Member]
Valuation Allowance [Line Items]
Deferred tax liabilities, net	$ 85		$ 85		$ 85