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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2014

FAIR VALUE OF FINANCIAL INSTRUMENTS

Summary of fair value

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 March 31, 2014 and December 31, 2013 are as follows ($ in thousands):

March 31, 2014

													Weighted Average
		Outstanding			Amortized						Fair Value		Yield		Remaining
		Face Amount			Cost Basis			Fair Value			Method		%		Maturity/Duration (years)
Assets:
CMBS(1)		$	1,227,308		$	1,225,746		$	1,247,477		Broker quotations, pricing services		3.68	%	4.79
CMBS interest-only(1)		6,075,913		(7)	275,802			278,832			Broker quotations, pricing services		4.25	%	3.35
GNMA interest-only(1)		1,799,019		(7)	98,682			94,614			Broker quotations, pricing services		5.03	%	3.10
FHLMC interest-only(1)		218,834		(7)	7,541			7,563			Broker quotations, pricing services		5.32	%	2.03
GN construction securities(1)		16,321			16,808			16,305			Broker quotations, pricing services		3.46	%	6.67
GN permanent securities(1)		101,175			103,244			105,249			Broker quotations, pricing services		4.40	%	3.64
Mortgage loan receivable held for investment, at amortized cost		687,212			674,980			677,630			Discounted Cash Flow(3)		9.51	%	2.11
Mortgage loan receivable held for sale		162,554			162,107			168,356			Discounted Cash Flow(4)		5.46	%	7.43
FHLB stock(5)		50,400			50,400			50,400			(5)		3.50	%	N/A
Nonhedge derivatives(1)(6)		89,602			N/A			839			Counterparty quotations		N/A		2.23
Liabilities:
Repurchase agreements - short-term		246,713			246,713			246,713			Discounted Cash Flow(2)		1.24	%	0.08
Repurchase agreements - long-term		124,257			124,257			124,257			Discounted Cash Flow(2)		1.98	%	1.19
Long-term financing		324,689			331,937			320,196			Discounted Cash Flow(2)		4.88	%	8.59
Borrowings from the FHLB		933,000			933,000			907,286			Discounted Cash Flow(2)		0.61	%	1.69
Senior unsecured notes		325,000			325,000			340,844			Broker quotations, pricing services		7.38	%	3.50
Nonhedge derivatives(1)(6)		724,100			N/A			10,412			Counterparty quotations		N/A		3.17

(1) Measured at fair value on a recurring basis.

(2) 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.  For the borrowings from the FHLB, the carrying value approximates the fair value discounting the expected cash flows. For the long-term financing, the carrying value approximates the fair value discounting the expected cash flows.  If the collateral is determined to be impaired, the related financing would be revalued accordingly.  There are no impairments on any security positions.

(3) Fair value for 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.

(4) 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.

(5) The fair value of the FHLB stock approximates outstanding face amount as the Company’s wholly-owned subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.

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

(7) Represents notional outstanding balance of underlying collateral.

December 31, 2013

													Weighted Average
		Outstanding			Amortized						Fair Value		Yield		Remaining
		Face Amount			Cost Basis			Fair Value			Method		%		Maturity/Duration (years)
Assets:
CMBS(1)		$	1,160,741		$	1,156,230		$	1,164,936		Broker quotations, pricing services		4.08	%	4.88
CMBS interest-only(1)		5,702,862		(7)	259,061			258,058			Broker quotations, pricing services		4.19	%	3.38
GNMA interest-only(1)		1,848,270		(7)	103,136			99,877			Broker quotations, pricing services		5.32	%	2.12
FHLMC interest-only(1)		219,677		(7)	7,904			8,152			Broker quotations, pricing services		5.21	%	3.04
GN construction securities(1)		12,858			13,261			13,007			Broker quotations, pricing services		3.49	%	6.57
GN permanent securities(1)		108,310			110,724			113,216			Broker quotations, pricing services		4.64	%	3.27
Mortgage loan receivable held for investment, at amortized cost		549,574			539,078			541,578			Discounted Cash Flow(3)		9.76	%	2.14
Mortgage loan receivable held for sale		440,775			440,490			455,804			Discounted Cash Flow(4)		5.47	%	9.62
FHLB stock(5)		49,450			49,450			49,450			(5)		3.50	%	N/A
Nonhedge derivatives(1)(6)		808,700			N/A			8,244			Counterparty quotations		N/A		0.50
Liabilities:
Repurchase agreements - short-term		409,334			409,334			409,334			Discounted Cash Flow(2)		1.46	%	0.04
Repurchase agreements - long-term		200,501			200,501			200,501			Discounted Cash Flow(2)		2.13	%	1.49
Long-term financing		287,246			291,053			278,129			Discounted Cash Flow(2)		4.84	%	8.70
Borrowings from the FHLB		989,000			989,000			987,896			Discounted Cash Flow(2)		0.57	%	1.60
Senior unsecured notes		325,000			325,000			341,250			Broker quotations, pricing services		7.38	%	3.75
Nonhedge derivatives(1)(6)		154,500			N/A			7,031			Counterparty quotations		N/A		4.55

(1) Measured at fair value on a recurring basis.

(2) 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.  For the borrowings from the FHLB, the carrying value approximates the fair value discounting the expected cash flows.  If the collateral is determined to be impaired, the related financing would be revalued accordingly.  There are no impairments on any security positions.

(3) Fair value for 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).

(4) 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.

(5) The fair value of the FHLB stock approximates outstanding face amount as the Company’s wholly-owned subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.

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

(7) Represents notional outstanding balance of underlying collateral.

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 March 31, 2014 and December 31, 2013 ($ in thousands):

March 31, 2014

		Outstanding Face			Fair Value
		Amount			Level 1			Level 2			Level 3			Total
Assets:
CMBS(1)		$	1,227,308		$	—		$	1,247,477		$	—		$	1,247,477
CMBS interest-only(1)		6,075,913		(2)	—			278,832			—			278,832
GNMA interest-only(1)		1,799,019		(2)	—			94,614			—			94,614
FHLMC interest-only(1)		218,834		(2)	—			7,563			—			7,563
GN construction securities(1)		16,321			—			16,305			—			16,305
GN permanent securities(1)		101,175			—			105,249			—			105,249
Mortgage loan receivable held for investment		687,212			—			—			677,630			677,630
Mortgage loan receivable held for sale		162,554			—			—			168,356			168,356
FHLB stock		50,400			—			—			50,400			50,400
Nonhedge derivatives(1)		89,602			—			839			—			839
Liabilities:
Repurchase agreements - short-term		246,713			—			246,713			—			246,713
Repurchase agreements - long-term		124,257			—			124,257			—			124,257
Long-term financing		324,689			—			—			320,196			320,196
Borrowings from the FHLB		933,000			—			—			907,286			907,286
Senior unsecured notes		325,000			—			340,844			—			340,844
Nonhedge derivatives(1)		724,100			—			10,412			—			10,412

December 31, 2013

		Outstanding Face			Fair Value
		Amount			Level 1			Level 2			Level 3			Total
Assets:
CMBS(1)		$	1,160,741		$	—		$	1,164,936		$	—		$	1,164,936
CMBS interest-only(1)		5,702,862		(2)	—			258,058			—			258,058
GNMA interest-only(1)		1,848,270		(2)	—			99,877			—			99,877
FHLMC interest-only(1)		219,677		(2)	—			8,152			—			8,152
GN construction securities(1)		12,858			—			13,007			—			13,007
GN permanent securities(1)		108,310			—			113,216			—			113,216
Mortgage loan receivable held for investment		549,574			—			—			541,578			541,578
Mortgage loan receivable held for sale		440,775			—			—			455,804			455,804
FHLB stock		49,450			—			—			49,450			49,450
Nonhedge derivatives(1)		808,700			—			8,244			—			8,244
Liabilities:
Repurchase agreements - short-term		409,334			—			409,334			—			409,334
Repurchase agreements - long-term		—			—			—			—			—
Long-term financing		287,246			—			—			278,129			278,129
Borrowings from the FHLB		989,000			—			—			987,896			987,896
Senior unsecured notes		325,000			—			341,250			—			341,250
Nonhedge derivatives(1)		154,500			—			7,031			—			7,031

(1) Measured at fair value on a recurring basis.  The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

(2) Represents notional outstanding balance of underlying collateral.

X

- Definition

Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis or on an amortized cost basis.. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

+ References

No definition available.

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X

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Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

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