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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2018 and 2017, respectively, on the Company’s consolidated balance sheets (dollar amounts in thousands):

	Measured at Fair Value on a Recurring Basis at
	December 31, 2018																December 31, 2017
	Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Assets carried at fair value
Investment securities available for sale:
Agency RMBS	$	—			$	1,037,730			$	—			$	1,037,730			$	—			$	1,169,536			$	—			$	1,169,536
Non-Agency RMBS	—				214,037				—				214,037				—				102,125				—				102,125
CMBS	—				207,785				52,700				260,485				—				93,498				47,922				141,420
Multi-family loans held in securitization trusts	—				—				11,679,847				11,679,847				—				—				9,657,421				9,657,421
Distressed and other residential mortgage loans, at fair value	—				—				737,523				737,523				—				—				87,153				87,153
Derivative assets:
Interest rate swaps	—				10,263				—				10,263				—				10,101				—				10,101
Investments in unconsolidated entities	—				—				32,994				32,994				—				—				42,823				42,823
Total	$	—			$	1,469,815			$	12,503,064			$	13,972,879			$	—			$	1,375,260			$	9,835,319			$	11,210,579
Liabilities carried at fair value
Multi-family collateralized debt obligations	$	—			$	—			$	11,022,248			$	11,022,248			$	—			$	—			$	9,189,459			$	9,189,459
Total	$	—			$	—			$	11,022,248			$	11,022,248			$	—			$	—			$	9,189,459			$	9,189,459

The following table details changes in valuation for the Level 3 assets for the years ended December 31, 2018, 2017 and 2016, respectively (amounts in thousands):

Level 3 Assets:

	Years Ended December 31,
	2018				2017				2016
Balance at beginning of period	$	9,835,319			$	7,061,842			$	7,214,587
Total (losses)/gains (realized/unrealized)
Included in earnings (1)	(117,330		)		(17,841		)		(19,495		)
Included in other comprehensive income	798				602				224
Transfers in (2)	—				—				52,176
Transfers out (3)	(56		)		—				(56,756		)
Contributions	—				2,500				3,200
Paydowns/Distributions	(180,788		)		(176,037		)		(150,824		)
Sales	(18,173		)		(7,224		)		—
Purchases (4)	2,983,294				2,971,477				18,730
Balance at the end of period	$	12,503,064			$	9,835,319			$	7,061,842

⁽¹⁾  Amounts include interest income from multi-family loans held in securitization trusts, interest income from residential mortgage loans, realized gain on distressed residential mortgage loans, net gain on residential mortgage loans at fair value, unrealized gain on multi-family loans and debt held in securitization trusts, and other income.

⁽²⁾  Transfers into Level 3 include investments in unconsolidated entities held by RiverBanc and RBMI for which the Company accounts under the equity method of accounting with a fair value election. These transfers in are a result of the Company's acquisition of the outstanding membership interests in RiverBanc and RBMI that were not previously owned by the Company on May 16, 2016, which resulted in consolidation of these entities into the Company's financial statements (see Note 23).

⁽³⁾  Transfers out of Level 3 for the year ended December 31, 2016 represent the Company's previously held membership interests in RBMI and RBDHC that were accounted for under the equity method of accounting with a fair value election. These transfers out are a result of the Company's acquisition of the outstanding membership interests in RBMI and RBDHC that were not previously owned by the Company on May 16, 2016, which resulted in consolidation of these entities into the Company's financial statements (see Note 23).

⁽⁴⁾  In the years ended December 31, 2018 and 2017, the Company purchased POs, certain IOs and mezzanine multi-family CMBS securities issued from securitizations that it determined to consolidate and include in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $2.3 billion and $2.9 billion, for the years ended December 31, 2018 and 2017, respectively (see Notes 2 and 7).

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2018 and 2017, respectively, on the Company’s consolidated balance sheets (dollar amounts in thousands):

	Measured at Fair Value on a Recurring Basis at
	December 31, 2018																December 31, 2017
	Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Assets carried at fair value
Investment securities available for sale:
Agency RMBS	$	—			$	1,037,730			$	—			$	1,037,730			$	—			$	1,169,536			$	—			$	1,169,536
Non-Agency RMBS	—				214,037				—				214,037				—				102,125				—				102,125
CMBS	—				207,785				52,700				260,485				—				93,498				47,922				141,420
Multi-family loans held in securitization trusts	—				—				11,679,847				11,679,847				—				—				9,657,421				9,657,421
Distressed and other residential mortgage loans, at fair value	—				—				737,523				737,523				—				—				87,153				87,153
Derivative assets:
Interest rate swaps	—				10,263				—				10,263				—				10,101				—				10,101
Investments in unconsolidated entities	—				—				32,994				32,994				—				—				42,823				42,823
Total	$	—			$	1,469,815			$	12,503,064			$	13,972,879			$	—			$	1,375,260			$	9,835,319			$	11,210,579
Liabilities carried at fair value
Multi-family collateralized debt obligations	$	—			$	—			$	11,022,248			$	11,022,248			$	—			$	—			$	9,189,459			$	9,189,459
Total	$	—			$	—			$	11,022,248			$	11,022,248			$	—			$	—			$	9,189,459			$	9,189,459

The following table details changes in valuation for the Level 3 assets for the years ended December 31, 2018, 2017 and 2016, respectively (amounts in thousands):

Level 3 Assets:

	Years Ended December 31,
	2018				2017				2016
Balance at beginning of period	$	9,835,319			$	7,061,842			$	7,214,587
Total (losses)/gains (realized/unrealized)
Included in earnings (1)	(117,330		)		(17,841		)		(19,495		)
Included in other comprehensive income	798				602				224
Transfers in (2)	—				—				52,176
Transfers out (3)	(56		)		—				(56,756		)
Contributions	—				2,500				3,200
Paydowns/Distributions	(180,788		)		(176,037		)		(150,824		)
Sales	(18,173		)		(7,224		)		—
Purchases (4)	2,983,294				2,971,477				18,730
Balance at the end of period	$	12,503,064			$	9,835,319			$	7,061,842

⁽¹⁾  Amounts include interest income from multi-family loans held in securitization trusts, interest income from residential mortgage loans, realized gain on distressed residential mortgage loans, net gain on residential mortgage loans at fair value, unrealized gain on multi-family loans and debt held in securitization trusts, and other income.

⁽²⁾  Transfers into Level 3 include investments in unconsolidated entities held by RiverBanc and RBMI for which the Company accounts under the equity method of accounting with a fair value election. These transfers in are a result of the Company's acquisition of the outstanding membership interests in RiverBanc and RBMI that were not previously owned by the Company on May 16, 2016, which resulted in consolidation of these entities into the Company's financial statements (see Note 23).

⁽³⁾  Transfers out of Level 3 for the year ended December 31, 2016 represent the Company's previously held membership interests in RBMI and RBDHC that were accounted for under the equity method of accounting with a fair value election. These transfers out are a result of the Company's acquisition of the outstanding membership interests in RBMI and RBDHC that were not previously owned by the Company on May 16, 2016, which resulted in consolidation of these entities into the Company's financial statements (see Note 23).

⁽⁴⁾  In the years ended December 31, 2018 and 2017, the Company purchased POs, certain IOs and mezzanine multi-family CMBS securities issued from securitizations that it determined to consolidate and include in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $2.3 billion and $2.9 billion, for the years ended December 31, 2018 and 2017, respectively (see Notes 2 and 7).

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following table details changes in valuation for the Level 3 liabilities for the years ended December 31, 2018, 2017 and 2016, respectively (amounts in thousands):

Level 3 Liabilities:

	Years Ended December 31,
	2018				2017				2016
Balance at beginning of period	$	9,189,459			$	6,624,896			$	6,818,901
Total losses (realized/unrealized)
Included in earnings (1)	(211,738		)		(82,650		)		(57,687		)
Purchases (2)	2,182,330				2,784,377				—
Paydowns	(137,803		)		(137,164		)		(136,318		)
Balance at the end of period	$	11,022,248			$	9,189,459			$	6,624,896

⁽¹⁾  Amounts include interest expense on Multi-Family CDOs and unrealized gain on multi-family loans and debt held in securitization trusts.

⁽²⁾  During the years ended December 31, 2018 and 2017, the Company purchased POs, certain IOs and mezzanine multi-family CMBS securities issued from securitizations that it determined to consolidate and include in the Consolidated K-Series. As a result, the Company consolidated liabilities of these securitizations in the amount $2.2 billion and $2.8 billion, for the years ended December 31, 2018 and 2017, respectively (see Notes 2 and 7).

Fair Value, Measured on Recurring Basis, Gain (Loss) Included in Earnings

he following table details the changes in unrealized gains (losses) included in earnings for our Level 3 assets and liabilities for the years ended December 31, 2018, 2017 and 2016, respectively (dollar amounts in thousands):

	Years Ended December 31,
	2018				2017				2016
Change in unrealized (losses) gains – assets	$	(77,007	)		$	12,402			$	13,865
Change in unrealized gains (losses) – liabilities	122,696				8,851				(7,762		)
Net change in unrealized gains included in earnings for assets and liabilities	$	45,689			$	21,253			$	6,103

Fair Value Measurements, Nonrecurring

he following table presents assets measured at fair value on a non-recurring basis as of December 31, 2018 and 2017, respectively, on the Company's consolidated balance sheets (dollar amounts in thousands):

	Assets Measured at Fair Value on a Non-Recurring Basis at
	December 31, 2018																December 31, 2017
	Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Residential mortgage loans held in securitization trusts – impaired loans, net	$	—			$	—			$	5,921			$	5,921			$	—			$	—			$	10,317			$	10,317
Real estate owned held in residential securitization trusts	—				—				—				—				—				—				111				111

Fair Value, Gains (Losses) for Assets Measured on Nonrecurring Basis

he following table presents gains (losses) incurred for assets measured at fair value on a non-recurring basis for the years ended December 31, 2018, 2017 and 2016, respectively, on the Company’s consolidated statements of operations (dollar amounts in thousands):

	Years Ended December 31,
	2018				2017				2016
Residential mortgage loans held in securitization trusts – impaired loans, net	$	(165	)		$	(472	)		$	(482	)
Real estate owned held in residential securitization trusts	—				(6		)		(130		)

Carrying Value and Estimated Fair Value

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at December 31, 2018 and 2017, respectively (dollar amounts in thousands):

			December 31, 2018								December 31, 2017
	Fair Value Hierarchy Level		Carrying Value				Estimated Fair Value				Carrying Value				Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1		$	103,724			$	103,724			$	95,191			$	95,191
Investment securities available for sale	Level 2 or 3		1,512,252				1,512,252				1,413,081				1,413,081
Residential mortgage loans held in securitization trusts, net	Level 3		56,795				56,497				73,820				72,131
Distressed residential mortgage loans, at carrying value, net	Level 3		228,466				232,879				331,464				334,765
Distressed and other residential mortgage loans, at fair value	Level 3		737,523				737,523				87,153				87,153
Multi-family loans held in securitization trusts	Level 3		11,679,847				11,679,847				9,657,421				9,657,421
Derivative assets	Level 2		10,263				10,263				10,101				10,101
Mortgage loans held for sale, net (1)	Level 3		3,414				3,584				5,507				5,598
Mortgage loans held for investment (1)	Level 3		1,580				1,580				1,760				1,900
Preferred equity and mezzanine loan investments	Level 3		165,555				167,739				138,920				140,129
Investments in unconsolidated entities	Level 3		73,466				73,833				51,143				51,212
Financial Liabilities:
Financing arrangements, portfolio investments	Level 2		1,543,577				1,543,577				1,276,918				1,276,918
Financing arrangements, distressed and other residential mortgage loans	Level 2		587,928				587,928				149,063				149,063
Residential collateralized debt obligations	Level 3		53,040				50,031				70,308				66,865
Multi-family collateralized debt obligations	Level 3		11,022,248				11,022,248				9,189,459				9,189,459
Securitized debt	Level 3		42,335				45,030				81,537				87,891
Subordinated debentures	Level 3		45,000				44,897				45,000				45,002
Convertible notes	Level 2		130,762				135,689				128,749				140,060

⁽¹⁾  Included in receivables and other assets in the accompanying consolidated balance sheets.

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