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Fair Value (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value

Summary of the carrying values and the estimated fair values of the Company's financial instruments

		September 30, 2014						December 31, 2013
					Estimated						Estimated
		Carrying Value			Fair Value			Carrying Value			Fair Value
Financial assets:
Loans and investments, net		$	1,526,641,987		$	1,535,535,289		$	1,523,699,653		$	1,550,248,793
Available-for-sale securities		2,529,104			2,529,104			37,315,652			37,315,652
Derivative financial instruments		3,020			3,020			6,402,336			6,402,336
Financial liabilities:
Credit facilities and repurchase agreements		$	71,306,110		$	71,124,471		$	159,125,023		$	158,735,570
Collateralized debt obligations		371,733,279			271,701,329			639,622,981			521,938,885
Collateralized loan obligations		545,750,000			547,220,625			264,500,000			266,436,250
Senior unsecured notes		97,860,025			95,902,825			—			—
Junior subordinated notes		159,695,009			102,264,289			159,291,427			101,240,185
Notes payable		1,300,000			1,292,461			2,500,000			2,487,287
Mortgage note payable - real estate owned and held-for-sale		48,813,906			46,554,314			53,751,004			52,943,305
Derivative financial instruments		16,334,580			16,334,580			24,794,051			24,794,051

Schedule of certain financial assets and financial liabilities measured at fair value on a recurring basis

								Fair Value Measurements
		Carrying			Fair			Using Fair Value Hierarchy
		Value			Value			Level 1			Level 2			Level 3
Financial assets:
Available-for-sale securities (1)		$	2,529,104		$	2,529,104		$	529,104		$	—		$	2,000,000
Derivative financial instruments		3,020			3,020			—			3,020			—
Financial liabilities:
Derivative financial instruments		$	16,334,580		$	16,334,580		$	—		$	16,334,580		$	—

(1) The Company’s equity securities were measured using Level 1 inputs and the Company’s CMBS investment was measured using Level 3 inputs.

Schedule of financial assets measured at fair value on a recurring basis using Level 3 inputs

		Available-for-sale			Derivative
		Securities			Financial Instruments
Balance as of December 31, 2013		$	36,580,786		$	6,396,853
Adjustments to fair value:
Paydowns (1)		(663,684		)	1,483,387
Net changes in fair value (2)		(100,000		)	511,012
Sales and settlements (3)		(33,817,102		)	(8,391,252		)
Balance as of September 30, 2014		$	2,000,000		$	—

(1) Includes an addition of $1.7 million to the derivative financial instruments as a result of a decrease in the amount financed under the respective repurchase agreement.

(2) Represents the net change in fair value recorded to other income during the nine months ended September 30, 2014.

(3) Represents the sale of RMBS investments and the settlement of forward contract derivatives for which the Company recorded a gain of $0.5 million and $0.1 million, respectively, to other income during the nine months ended September 30, 2014.

Schedule of certain financial and non-financial assets measured at fair value on a nonrecurring basis

The Company measures certain financial and non-financial assets at fair value on a nonrecurring basis.  The fair value of these financial assets was determined using the following inputs as of September 30, 2014:

		Net						Fair Value Measurements
		Carrying			Fair			Using Fair Value Hierarchy
		Value			Value			Level 1			Level 2			Level 3
Financial assets:
Impaired loans, net (1)		$	112,189,705		$	112,189,705		$	—		$	—		$	112,189,705

(1) The Company had an allowance for loan losses of $116.4 million relating to 12 loans with an aggregate carrying value, before loan loss reserves, of approximately $228.6 million at September 30, 2014.

Schedule of quantitative information about Level 3 Fair Value Measurements on a recurring and non-recurring basis

		September 30, 2014
					Valuation		Significant Unobservable		Range
		Fair Value			Technique(s)		Inputs		(Weighted Average)
Financial assets:
Impaired loans (1):
Multi-family		$	2,734,447		Direct capitalization analysis and discounted cash flows		Discount rate Capitalization rate Revenue growth rate		8.00% 6.50% to 8.00% (7.07%) 2.00%
Office		13,747,931			Discounted cash flows		Discount rate Capitalization rate Revenue growth rate		8.50% to 12.00% (9.71%) 7.00% to 10.00% (8.21%) 2.50% to 3.00% (2.97%)
Land		65,157,368			Discounted cash flows		Discount rate Capitalization rate Revenue growth rate		15.00% 7.25% 3.00%
Hotel		30,549,959			Discounted cash flows		Discount rate Capitalization rate Revenue growth rate		9.25% 7.25% 3.00%
CMBS		2,000,000			Discounted cash flows		Discount rate		14.16%

(1) Includes all impaired loans regardless of the period in which a loan loss provision was recorded.

Schedule of fair value of assets and liabilities

								Fair Value Measurements
		Carrying			Fair			Using Fair Value Hierarchy
		Value			Value			Level 1			Level 2			Level 3
Financial assets:
Loans and investments, net		$	1,526,641,987		$	1,535,535,289		$	—		$	—		$	1,535,535,289
Financial liabilities:
Credit facilities		$	71,306,110		$	71,124,471		$	—		$	—		$	71,124,471
Collateralized debt obligations		371,733,279			271,701,329			—			—			271,701,329
Collateralized loan obligation		545,750,000			547,220,625			—			—			547,220,625
Senior unsecured notes		97,860,025			95,902,825			95,902,825			—			—
Junior subordinated notes		159,695,009			102,264,289			—			—			102,264,289
Notes payable		1,300,000			1,292,461			—			—			1,292,461
Mortgage note payable — real estate owned and held-for-sale		48,813,906			46,554,314			—			—			46,554,314

X

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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