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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2020

The carrying values and estimated fair values of the Company’s financial instruments, which are both reported at fair value on a recurring basis (as indicated) or amortized cost/par, at December 31, 2020 and 2019 are as follows ($ in thousands):

December 31, 2020


									Weighted Average
	Outstanding Face Amount			Amortized Cost Basis/Purchase Price		Fair Value		Fair Value Method	Yield %		Remaining Maturity/Duration (years)
Assets:
CMBS(1)	$	1,015,520		$	1,015,282	$	1,003,301	Internal model, third-party inputs	1.56 %		2.01
CMBS interest-only(1)	1,498,181		(2)	21,567		22,213		Internal model, third-party inputs	3.53 %		2.19
GNMA interest-only(3)	75,350		(2)	868		1,001		Internal model, third-party inputs	5.06 %		3.59
Agency securities(1)	586			593		605		Internal model, third-party inputs	1.64 %		1.26
GNMA permanent securities(1)	30,254			30,340		31,199		Internal model, third-party inputs	3.49 %		1.98


Provision for current expected credit reserves	N/A			(20)		(20)		(5)	N/A		N/A
Mortgage loan receivables held for investment, net, at amortized cost:
Mortgage loan receivables held for investment, net, at amortized cost	2,365,204			2,354,059		2,328,441		Discounted Cash Flow(4)	6.67 %		1.07

Provision for current expected credit reserves	N/A			(41,507)		(41,507)		(5)	N/A		N/A
Mortgage loan receivables held for sale	30,478			30,518		32,082		Internal model, third-party inputs(6)	4.05 %		9.18
FHLB stock(7)	31,000			31,000		31,000		(7)	3.00 %		N/A
Nonhedge derivatives(1)(8)	65,600			N/A		299		Counterparty quotations	N/A		0.25

Liabilities:
Repurchase agreements - short-term	708,833			708,833		708,833		Discounted Cash Flow(9)	1.16 %		0.34
Repurchase agreements - long-term	112,004			112,004		112,004		Discounted Cash Flow(10)	9.47 %		2.21
Revolving credit facility	266,430			266,430		266,430		Discounted Cash Flow(9)	3.15 %		0.07
Mortgage loan financing	761,793			766,064		786,405		Discounted Cash Flow(10)	4.84	%	4.04
Secured financing facility	192,646			192,646		192,646		Discounted Cash Flow(9)	10.75 %		2.35
CLO debt	276,516			276,516		276,516		Discounted Cash Flow(10)	5.50 %		3.38

Borrowings from the FHLB	288,000			288,000		289,091		Discounted Cash Flow	1.12	%	2.76
Senior unsecured notes	1,612,299			1,599,371		1,607,930		Internal model, third-party inputs	4.90 %		3.89

(1)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.

(2)Represents notional outstanding balance of underlying collateral.

(3)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.

(4)Fair value for floating rate mortgage loan receivables, held for investment is estimated to approximate the outstanding face amount given the short interest rate reset risk (30 days) and no significant change in credit risk. Fair value for fixed rate mortgage loan receivables, held for investment is measured using a discounted cash flow model.

(5)Fair value is estimated to equal par value.

(6)Fair value for mortgage loan receivables, held for sale is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.

(7)Fair value of the FHLB stock approximates outstanding face amount as the Company’s captive insurance subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.

(8)The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

(9)Fair value for repurchase agreement liabilities - short term borrowings under the secured financing facility and borrowings under the revolving credit facility is estimated to approximate carrying amount primarily due to the short interest rate reset risk (30 days) of the financings and the high credit quality of the assets collateralizing these positions. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.

(10)For repurchase agreements - long term, mortgage loan financing, and CLO debt the carrying value approximates the fair value discounting the expected cash flows at current market rates. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.

December 31, 2019


									Weighted Average
	Outstanding Face Amount			Amortized Cost Basis		Fair Value		Fair Value Method	Yield %		Remaining Maturity/Duration (years)
Assets:
CMBS(1)	$	1,640,597		$	1,640,905	$	1,644,322	Internal model, third-party inputs	3.08	%	2.41
CMBS interest-only(1)	1,559,160		(2)	28,553		29,146		Internal model, third-party inputs	3.04	%	2.53
GNMA interest-only(3)	109,783		(2)	1,982		1,851		Internal model, third-party inputs	4.59	%	2.77
Agency securities(1)	629			640		637		Internal model, third-party inputs	1.73	%	1.83
GNMA permanent securities(1)	31,461			31,681		32,369		Internal model, third-party inputs	3.17	%	1.93

Equity securities(3)	N/A			12,848		12,980		Observable market prices	N/A		N/A
Mortgage loan receivables held for investment, net, at amortized cost:
Mortgage loan receivables held for investment, net, at amortized cost	3,277,596			3,257,036		3,273,219		Discounted Cash Flow(4)	6.94	%	1.43

Provision for loan losses	N/A			(20,500)		(20,500)		(5)	N/A		N/A
Mortgage loan receivables held for sale	122,748			122,325		124,989		Internal model, third-party inputs(6)	4.20	%	9.99
FHLB stock(7)	61,619			61,619		61,619		(7)	4.75	%	N/A
Nonhedge derivatives(1)(8)	340,200			N/A		693		Counterparty quotations	N/A		0.25

Liabilities:
Repurchase agreements - short-term	1,781,253			1,781,253		1,781,253		Discounted Cash Flow(9)	2.50	%	0.19
Repurchase agreements - long-term	34,681			34,681		34,681		Discounted Cash Flow(10)	2.81	%	1.41

Mortgage loan financing	807,854			812,606		838,766		Discounted Cash Flow(10)	4.91	%	5.65


Borrowings from the FHLB	1,073,500			1,073,500		1,080,354		Discounted Cash Flow	2.33	%	2.08
Senior unsecured notes	1,166,201			1,157,833		1,208,860		Internal model, third-party inputs	5.39	%	3.28

Nonhedge derivatives(1)(8)	69,571			N/A		—		Counterparty quotations	N/A		0.36

(1)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.

(2)Represents notional outstanding balance of underlying collateral.

(3)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.

(5)Fair value is estimated to equal par value.

(6)Fair value for mortgage loan receivables, held for sale is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.

(8)The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

(9)Fair value for repurchase agreement liabilities is estimated to approximate carrying amount primarily due to the short interest rate reset risk (30 days) of the financings and the high credit quality of the assets collateralizing these positions. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.

(10)For repurchase agreements - long term and mortgage loan financing, the carrying value approximates the fair value discounting the expected cash flows at current market rates. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.

Summary of financial assets and liabilities, both reported at fair value on a recurring basis or amortized cost/par

The following table summarizes the Company’s financial assets and liabilities, which are both reported at fair value on a recurring basis (as indicated) or amortized cost/par, at December 31, 2020 and 2019 ($ in thousands):

December 31, 2020


Financial Instruments Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
				Level 1		Level 2		Level 3		Total

Assets:
CMBS(1)	$	1,003,998		$	—	$	—	$	992,227	$	992,227
CMBS interest-only(1)	1,487,616		(2)	—		—		21,538		21,538
GNMA interest-only(3)	75,350		(2)	—		—		1,001		1,001
Agency securities(1)	586			—		—		605		605
GNMA permanent securities(1)	30,254			—		—		31,199		31,199


Nonhedge derivatives(4)	65,600			—		299		—		299
				$	—	$	299	$	1,046,570	$	1,046,869



Financial Instruments Not Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
				Level 1		Level 2		Level 3		Total

Assets:
Mortgage loan receivable held for investment, net, at amortized cost:
Mortgage loans held by consolidated subsidiaries	$	2,365,204		$	—	$	—	$	2,328,441	$	2,328,441

Provision for current expected credit losses	N/A			—		—		(41,507)		(41,507)
Mortgage loan receivable held for sale	30,478			—		—		32,082		32,082
CMBS(5)	11,523			—		—		11,074		11,074
CMBS interest-only(5)	10,566		(2)	—		—		675		675
Provision for current expected credit losses	N/A							(20)		(20)

FHLB stock	31,000			—		—		31,000		31,000
				$	—	$	—	$	2,361,745	$	2,361,745
Liabilities:
Repurchase agreements - short-term	708,833			$	—	$	—	$	708,833	$	708,833
Repurchase agreements - long-term	112,004			—		—		112,004		112,004
Revolving credit facility	266,430			—		—		266,430		266,430
Mortgage loan financing	761,793			—		—		786,405		786,405
Secured financing facility	192,646			—		—		192,646		192,646
CLO debt	276,516			—		—		276,516		276,516

Borrowings from the FHLB	288,000			—		—		289,091		289,091
Senior unsecured notes	1,612,299			—		—		1,607,930		1,607,930

				$	—	$	—	$	4,239,855	$	4,239,855

(1)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.

(2)Represents notional outstanding balance of underlying collateral.

(3)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.

(4)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings. The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

(5)Restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust, which are classified as held-to-maturity and reported at amortized cost.

December 31, 2019


Financial Instruments Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
				Level 1		Level 2		Level 3		Total

Assets:
CMBS(1)	$	1,628,476		$	—	$	—	$	1,632,714	$	1,632,714
CMBS interest-only(1)	1,548,061		(2)	—		—		28,342		28,342
GNMA interest-only(3)	109,783		(2)	—		—		1,851		1,851
Agency securities(1)	629			—		—		637		637
GNMA permanent securities(1)	31,461			—		—		32,369		32,369

Equity securities	N/A			12,980		—		—		12,980
Nonhedge derivatives(4)	340,200			—		693		—		693
				$	12,980	$	693	$	1,695,913	$	1,709,586
Liabilities:
Nonhedge derivatives(4)	$	69,571		$	—	$	—	$	—	$	—


Financial Instruments Not Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
				Level 1		Level 2		Level 3		Total

Assets:
Mortgage loan receivable held for investment, net, at amortized cost:
Mortgage loans held by consolidated subsidiaries	$	3,277,597		$	—	$	—	$	3,273,219	$	3,273,219

Provision for loan losses	N/A			—		—		(20,500)		(20,500)
Mortgage loan receivables held for sale	122,748			—		—		124,989		124,989
CMBS(5)	12,121			—		—		11,608		11,608
CMBS interest-only(5)	11,099		(2)	—		—		804		804
FHLB stock	61,619			—		—		61,619		61,619
				$	—	$	—	$	3,451,739	$	3,451,739
Liabilities:
Repurchase agreements - short-term	1,781,253			$	—	$	—	$	1,781,253	$	1,781,253
Repurchase agreements - long-term	34,681			—		—		34,681		34,681

Mortgage loan financing	807,854			—		—		838,766		838,766


Borrowings from the FHLB	1,073,500			—		—		1,080,354		1,080,354
Senior unsecured notes	1,166,201			—		—		1,208,860		1,208,860

				$	—	$	—	$	4,943,914	$	4,943,914

(1)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.

(2)Represents notional outstanding balance of underlying collateral.

(3)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.

Schedule of changes in Level 3 of financial instruments

The following table summarizes changes in Level 3 financial instruments reported at fair value on the consolidated statements of financial condition for the years ended December 31, 2020 and December 31, 2019 ($ in thousands):


	Year Ended December 31,
Level 3	2020		2019

Balance at January 1,	$	1,695,913	$	1,398,576
Transfer from level 2	—		—
Purchases	439,735		1,627,063
Sales	(917,372)		(850,513)
Paydowns/maturities	(135,343)		(491,790)
Amortization of premium/discount	(8,073)		(12,185)
Unrealized gain/(loss)	(14,896)		10,014
Realized gain/(loss) on sale(1)	(13,396)		14,748
Balance at December 31,	$	1,046,568	$	1,695,913

(1)Includes realized losses on securities recorded as other than temporary impairments.

Schedule of quantitative information

The following is quantitative information about significant unobservable inputs in our Level 3 measurements for those assets and liabilities measured at fair value on a recurring basis ($ in thousands):

December 31, 2020


Financial Instrument	Carrying Value			Valuation Technique	Unobservable Input	Minimum		Weighted Average		Maximum

CMBS(1)	$	992,226		Discounted cash flow	Yield (4)	—	%	2.09	%	23.85	%
					Duration (years)(5)	0		2.68		5.82
CMBS interest-only(1)	21,537		(2)	Discounted cash flow	Yield (4)	1	%	2.51	%	9.94	%
					Duration (years)(5)	0.12		2.23		3.15
					Prepayment speed (CPY)(5)	100.00		100.00		100.00
GNMA interest-only(3)	1,001		(2)	Discounted cash flow	Yield (4)	—	%	7.93	%	35.82	%
					Duration (years)(5)	0		2.80		6.79
					Prepayment speed (CPJ)(5)	5.00		17.78		35.00
Agency securities(1)	605			Discounted cash flow	Yield (4)	—	%	11.31	%	72	%
					Duration (years)(5)	0		1.23		1.44
GNMA permanent securities(1)	31,199			Discounted cash flow	Yield (4)	—	%	2.99	%	3.47	%
					Duration (years)(5)	1.57		9.74		14.57


Total	$	1,046,568

(1)CMBS, CMBS interest-only securities, Agency securities, GNMA construction securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.

(2)The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.

(3)Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.

Sensitivity of the Fair Value to Changes in the Unobservable Inputs

(4)Significant increase (decrease) in the unobservable input in isolation would result in significantly lower (higher) fair value measurement.

(5)Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (lower or higher) fair value measurement depending on the structural features of the security in question.

December 31, 2019


Financial Instrument	Carrying Value			Valuation Technique	Unobservable Input	Minimum		Weighted Average		Maximum

CMBS(1)	$	1,632,714		Discounted cash flow	Yield (3)	—	%	3.11	%	19.92	%
					Duration (years)(4)	0.00		1.63		6.87
CMBS interest-only(1)	28,342		(2)	Discounted cash flow	Yield (3)	1.57	%	3.93	%	7.62	%
					Duration (years)(4)	0.26		2.47		3.51
					Prepayment speed (CPY)(4)	100.00		97.24		100.00
GNMA interest-only(3)	1,851		(2)	Discounted cash flow	Yield (4)	(4.82)	%	15.13	%	44.5	%
					Duration (years)(5)	0.85		2.90		13.69
					Prepayment speed (CPJ)(5)	5.00		12.36		35.00
Agency securities(1)	637			Discounted cash flow	Yield (4)	—	%	1.7	%	2.16	%
					Duration (years)(5)	0.00		2.30		2.92
GNMA permanent securities(1)	32,369			Discounted cash flow	Yield (4)	56.56	%	166.79	%	410	%
					Duration (years)(5)	2.60		3.61		6.49


Total	$	1,695,913

(2)The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.

(3)Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.

Sensitivity of the Fair Value to Changes in the Unobservable Inputs

(4)Significant increase (decrease) in the unobservable input in isolation would result in significantly lower (higher) fair value measurement.