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Fair Value (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value

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

The following table summarizes the principal amounts, carrying values and the estimated fair values of our financial instruments (in thousands):

		September 30, 2018									December 31, 2017
		Principal /			Carrying			Estimated			Principal /			Carrying			Estimated
		Notional Amount			Value			Fair Value			Notional Amount			Value			Fair Value
Financial assets:
Loans and investments, net		$	3,170,117		$	3,097,689		$	3,154,139		$	2,652,538		$	2,579,127		$	2,652,520
Loans held-for-sale, net			492,966			500,281			507,698			292,249			297,443			302,883
Capitalized mortgage servicing rights, net			n/a			259,401			312,316			n/a			252,608			286,073
Securities held-to-maturity, net			70,518			50,520			52,312			40,566			27,837			28,439
Derivative financial instruments			155,202			926			926			77,984			684			684
Financial liabilities:
Credit and repurchase facilities		$	1,172,413		$	1,169,586		$	1,170,235		$	530,938		$	528,573		$	529,992
Collateralized loan obligations			1,609,524			1,592,089			1,616,293			1,436,274			1,418,422			1,436,871
Debt fund			70,000			68,099			70,135			70,000			68,084			70,000
Senior unsecured notes			125,000			122,358			124,375			97,860			95,280			99,582
Convertible senior unsecured notes, net			280,816			263,653			289,560			243,750			231,287			254,335
Junior subordinated notes			154,336			140,084			95,458			154,336			139,590			94,215
Related  party financing			—			—			—			50,000			50,000			49,682
Derivative financial instruments			413,694			3,406			3,406			291,421			1,306			1,306

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

The fair values of these financial assets and liabilities were determined using the following input levels as of September 30, 2018 (in thousands):

								Fair Value Measurements Using Fair
		Carrying						Value  Hierarchy
		Value			Fair Value			Level 1			Level 2			Level 3
Financial assets:
Derivative financial instruments		$	926		$	926		$	—		$	177		$	749
Financial liabilities:
Derivative financial instruments		$	3,406		$	3,406		$	—		$	3,406		$	—

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

The fair values of these financial and non-financial assets were determined using the following input levels as of September 30, 2018 (in thousands):

								Fair Value Measurements Using Fair
		Net Carrying						Value Hierarchy
		Value			Fair Value			Level 1			Level 2			Level 3
Financial assets:
Impaired loans, net (1)		$	70,909		$	70,909		$	—		$	—		$	70,909
Non-financial assets:
Long-lived assets (2)		$	14,563		$	14,563		$	—		$	—		$	14,563

(1) We had an allowance for loan losses of $61.0 million relating to five loans with an aggregate carrying value, before loan loss reserves, of $131.9 million at September 30, 2018.

(2) We recorded a $2.0 million impairment loss during the nine months ended September 30, 2018 on the office building we own. See Note 9 - Real Estate Owned for details.

Schedule of quantitative information about Level 3 fair value measurements

Quantitative information about Level 3 fair value measurements at September 30, 2018 were as follows ($ in thousands):

					Valuation
		Fair Value			Techniques		Significant Unobservable Inputs
Financial assets:
Impaired loans:
Land		$	70,135		Discounted cash flows		Discount rate		15.00	%
							Capitalization rate		7.25	%
							Revenue growth rate		3.00	%
Office			774		Discounted cash flows		Discount rate		10.53	%
							Capitalization rate		8.53	%
							Revenue growth rate		2.63	%
Derivative financial instruments:
Rate lock commitments			749		Discounted cash flows		W/A discount rate		10.15	%
Non-financial assets:
Long-lived assets:
Office Building		$	3,210		Broker quotes		N/A		N/A

Schedule of roll forward of Level 3 derivative instruments

A roll-forward of Level 3 derivative instruments were as follows (in thousands):

		Fair Value Measurements Using Significant Unobservable Inputs
		Three Months Ended September 30,						Nine Months Ended September 30,
		2018			2017				2018		2017
Derivative assets and liabilities, net
Balance at beginning of period		$	606		$	1,420		$	276		$	2,816
Settlements			(17,793)			(18,897)			(62,313)			(57,578)
Realized gains recorded in earnings			17,187			17,477			62,037			54,762
Unrealized gains recorded in earnings			749			420			749			420
Balance at end of period		$	749		$	420		$	749		$	420

Schedule of components of fair value and other relevant information

The components of fair value and other relevant information associated with our rate lock commitments, forward sales commitments and the estimated fair value of cash flows from servicing on loans held-for-sale were as follows (in thousands):

		Notional/			Fair Value of			Interest Rate			Total Fair Value
September 30, 2018		Principal Amount			Servicing Rights			Movement Effect			Adjustment
Rate lock commitments		$	37,965		$	749		$	(28)		$	721
Forward sale commitments			530,931			—			28			28
Loans held-for-sale, net (1)			492,966			8,459			—			8,459
Total					$	9,208		$	—		$	9,208

(1) Loans held-for-sale, net are recorded at the lower of cost or market on an aggregate basis and includes fair value adjustments related to estimated cash flows from MSRs.

Schedule of fair value of assets and liabilities

The fair value of these assets and liabilities was determined using the following input levels as of September 30, 2018 (in thousands):

								Fair Value Measurements Using Fair Value Hierarchy
		Carrying Value			Fair Value			Level 1			Level 2			Level 3
Financial assets:
Loans and investments, net		$	3,097,689		$	3,154,139		$	—		$	—		$	3,154,139
Loans held-for-sale, net			500,281			507,698			—			499,239			8,459
Capitalized mortgage servicing rights, net			259,401			312,316			—			—			312,316
Securities held-to-maturity, net			50,520			52,312			—			—			52,312
Financial liabilities:
Credit and repurchase facilities		$	1,169,586		$	1,170,235		$	—		$	492,603		$	677,632
Collateralized loan obligations			1,592,089			1,616,293			—			—			1,616,293
Debt fund			68,099			70,135			—			—			70,135
Senior unsecured notes			122,358			124,375			124,375			—			—
Convertible senior unsecured notes, net			263,653			289,560			—			289,560			—
Junior subordinated notes			140,084			95,458			—			—			95,458

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