Distressed Residential Mortgage Loans

As of September 30, 2017 and December 31, 2016, the carrying value of the Company’s distressed residential mortgage loans, including distressed residential mortgage loans held in securitization trusts, amounts to approximately $369.7 million and $503.1 million, respectively.

The Company considers its purchase price for the distressed residential mortgage loans, including distressed residential mortgage loans held in securitization trusts, to be at fair value at the date of acquisition. The Company only establishes an allowance for loan losses subsequent to acquisition.

The following table presents information regarding the estimates of the contractually required payments, the cash flows expected to be collected, and the estimated fair value of the distressed residential mortgage loans acquired during the nine months ended September 30, 2017 and 2016, respectively (dollar amounts in thousands):



	September 30, 2017			September 30, 2016
Contractually required principal and interest	$	76,529		$	89,590
Non-accretable yield	(6,467		)	(7,516		)
Expected cash flows to be collected	70,062			82,074
Accretable yield	(58,767		)	(44,007		)
Fair value at the date of acquisition	$	11,295		$	38,067

The following table details activity in accretable yield for the distressed residential mortgage loans, including distressed residential mortgage loans held in securitization trusts, for the nine months ended September 30, 2017 and 2016, respectively (dollar amounts in thousands):



	September 30, 2017			September 30, 2016
Balance at beginning of period	$	530,511		$	579,009
Additions	91,356			54,917
Disposals	(263,475		)	(119,113		)
Accretion	(16,635		)	(25,166		)
Balance at end of period ⁽¹⁾	$	341,757		$	489,647

⁽¹⁾

Accretable yield is the excess of the distressed residential mortgage loans’ cash flows expected to be collected over the purchase price. The cash flows expected to be collected represents the Company’s estimate of the amount and timing of undiscounted principal and interest cash flows. Additions include accretable yield estimates for purchases made during the period and reclassification to accretable yield from nonaccretable yield. Disposals include distressed residential mortgage loan dispositions, which include refinancing, sale and foreclosure of the underlying collateral and resulting removal of the distressed residential mortgage loans from the accretable yield, and reclassifications from accretable to nonaccretable yield. The reclassifications between accretable and nonaccretable yield and the accretion of interest income is based on various estimates regarding loan performance and the value of the underlying real estate securing the loans. As the Company continues to update its estimates regarding the loans and the underlying collateral, the accretable yield may change. Therefore, the amount of accretable income recorded in each of the nine month periods ended September 30, 2017 and 2016 is not necessarily indicative of future results.

The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of our distressed residential mortgage loans, including distressed residential mortgage loans held in securitization trusts, as of September 30, 2017 and December 31, 2016, respectively, are as follows:



	September 30, 2017		December 31, 2016
Florida	10.6	%	12.2	%
North Carolina	8.2	%	7.7	%
Georgia	7.4	%	6.0	%
California	6.6	%	8.8	%
New York	5.5	%	5.4	%
Ohio	5.0	%	4.8	%

The Company's distressed residential mortgage loans held in securitization trusts with a carrying value of approximately $134.0 million and $195.3 million at September 30, 2017 and December 31, 2016, respectively, are pledged as collateral for certain of the Securitized Debt issued by the Company (see Note 10). In addition, distressed residential mortgage loans with a carrying value of approximately $206.3 million and $279.9 million at September 30, 2017 and December 31, 2016, respectively, are pledged as collateral for a Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch (see Note 14).