UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ____________

Commission file number 001-32216

NEW YORK MORTGAGE TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)



Maryland	47-0934168
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

~~275 Madison~~90 Park Avenue, New York, New York 10016

(Address of Principal Executive Office) (Zip Code)

(212) 792-0107

(Registrant’s Telephone Number, Including Area Code)

275 Madison Avenue

New York, New York 10016

(Former Address)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer ☒	Accelerated Filer ☐	Non-Accelerated Filer ☐	Smaller Reporting Company ☐	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Table of Contents

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	NYMT	NASDAQ Stock Market
7.75% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share, $25.00 Liquidation Preference	NYMTP	NASDAQ Stock Market
7.875% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share, $25.00 Liquidation Preference	NYMTO	NASDAQ Stock Market
8.000% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share, $25.00 Liquidation Preference	NYMTN	NASDAQ Stock Market

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding on ~~November~~May 7, ~~2017~~2019 was ~~111,854,023.~~190,091,655.

Table of Contents

NEW YORK MORTGAGE TRUST, INC.

FORM 10-Q



PART I. Financial Information
	Item 1. Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2019 (Unaudited) and December 31, ~~2016~~2018	3
	Unaudited Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	5
	Unaudited Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2019 and 2018	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	78
	Unaudited Notes to the Condensed Consolidated Financial Statements	910
	Note 1. Organization	10
	Note 2. Summary of Significant Accounting Policies	11
	Note 3. Investment Securities Available For Sale	14
	Note 4. Distressed and Other Residential Mortgage Loans, At Fair Value	17
	Note 5. Distressed and Other Residential Mortgage Loans, Net	18
	Note 6. Consolidated K-Series	21
	Note 7. Investments in Unconsolidated Entities	23
	Note 8. Preferred Equity and Mezzanine Loan Investments	24
	Note 9. Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)	25
	Note 10. Real Estate Held for Sale in Consolidated VIEs	30
	Note 11. Derivative Instruments and Hedging Activities	31
	Note 12. Repurchase Agreements	33
	Note 13. Residential Collateralized Debt Obligations	35
	Note 14. Debt	36
	Note 15. Commitments and Contingencies	38
	Note 16. Fair Value of Financial Instruments	39
	Note 17. Stockholders' Equity	46
	Note 18. Earnings Per Share	49
	Note 19. Stock Based Compensation	50
	Note 20. Income Taxes	52
	Note 21. Subsequent Events	54
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	6355
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	9689
	Item 4. Controls and Procedures	~~101~~94
PART II. OTHER INFORMATION
	Item 1A. Risk Factors	~~101~~94
	Item ~~2. Unregistered Sales of Equity Securities and Use of Proceeds~~5. Other Information	~~101~~94
	Item 6. Exhibits	~~102~~95

SIGNATURES		~~105~~97

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except share data)


	September 30, 2017			December 31, 2016			March 31, 2019			December 31, 2018
	(unaudited)						(unaudited)
ASSETS
Investment securities, available for sale, at fair value (including $46,623 and $43,897 held in securitization trusts as of September 30, 2017 and December 31, 2016, respectively, and pledged securities of $493,632 and $690,592, as of September 30, 2017 and December 31, 2016, respectively)	$	674,161		$	818,976
Residential mortgage loans held in securitization trusts, net	79,875			95,144
Residential mortgage loans, at fair value	69,512			17,769
Distressed residential mortgage loans, net (including $133,972 and $195,347 held in securitization trusts as of September 30, 2017 and December 31, 2016, respectively)	369,651			503,094
Investment securities, available for sale, at fair value							$	1,583,965		$	1,512,252
Distressed and other residential mortgage loans, at fair value							875,566			737,523
Distressed and other residential mortgage loans, net							262,193			285,261
Investments in unconsolidated entities							92,364			73,466
Preferred equity and mezzanine loan investments							175,128			165,555
Multi-family loans held in securitization trusts, at fair value	8,399,334			6,939,844			14,328,336			11,679,847
Derivative assets	182,115			150,296			14,873			10,263
Receivable for securities sold	1,261			—
Cash and cash equivalents	101,904			83,554			65,359			103,724
Investment in unconsolidated entities	51,268			79,259
Mezzanine loan and preferred equity investments	122,578			100,150
Real estate held for sale in consolidated variable interest entities	64,097			—			—			29,704
Goodwill	25,222			25,222			25,222			25,222
Receivables and other assets	123,944			138,323			132,135			114,821
Total Assets ⁽¹⁾	$	10,264,922		$	8,951,631		$	17,555,141		$	14,737,638
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Financing arrangements, portfolio investments	$	608,304		$	773,142
Financing arrangements, residential mortgage loans	160,562			192,419
Repurchase agreements							$	2,273,005		$	2,131,505
Residential collateralized debt obligations	76,867			91,663			49,247			53,040
Multi-family collateralized debt obligations, at fair value	7,990,619			6,624,896			13,547,195			11,022,248
Securitized debt	98,371			158,867			—			42,335
Mortgages and notes payable in consolidated variable interest entities	57,342			1,588			3,986			31,227
Derivative liabilities	467			498
Payable for securities purchased	181,718			148,015
Accrued expenses and other liabilities	71,394			64,381			125,955			101,228
Subordinated debentures	45,000			45,000			45,000			45,000
Convertible notes	128,273			—			131,301			130,762
Total liabilities ⁽¹⁾	9,418,917			8,100,469			16,175,689			13,557,345
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value, 7.75% Series B cumulative redeemable, $25 liquidation preference per share, 6,000,000 shares authorized, 3,000,000 shares issued and outstanding	72,397			72,397			72,397			72,397
Preferred stock, $0.01 par value, 7.875% Series C cumulative redeemable, $25 liquidation preference per share, 4,140,000 shares authorized, 3,600,000 shares issued and outstanding	86,862			86,862
Common stock, $0.01 par value, 400,000,000 shares authorized, 111,854,023 and 111,474,521 shares issued and outstanding as of September 30, and December 31, 2016, respectively	1,119			1,115
Preferred stock, $0.01 par value, 7.875% Series C cumulative redeemable, $25 liquidation preference per share, 6,600,000 and 4,140,000 shares authorized at March 31, 2019 and December 31, 2018, respectively, 3,600,000 shares issued and outstanding							86,862			86,862
Preferred stock, $0.01 par value, 8.00% Series D Fixed-to-Floating Rate cumulative redeemable, $25 liquidation preference per share, 8,400,000 and 5,750,000 shares authorized at March 31, 2019 and December 31, 2018, respectively, 5,400,000 shares issued and outstanding							130,496			130,496
Common stock, $0.01 par value, 400,000,000 shares authorized, 187,831,455 and 155,589,528 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively							1,878			1,556
Additional paid-in capital	750,438			748,599			1,199,090			1,013,391
Accumulated other comprehensive income	9,203			1,639
Accumulated other comprehensive loss							(9,088		)	(22,135		)
Accumulated deficit	(77,966		)	(62,537		)	(102,530		)	(103,178		)
Company's stockholders' equity	842,053			848,075			1,379,105			1,179,389
Non-controlling interest in consolidated variable interest entities	3,952			3,087			347			904
Total equity	846,005			851,162			1,379,452			1,180,293
Total Liabilities and Stockholders' Equity	$	10,264,922		$	8,951,631		$	17,555,141		$	14,737,638

⁽¹⁾

Our condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company is the primary beneficiary of these VIEs. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, assets of consolidated VIEs totaled ~~$8,799,352~~$14,450,531 and ~~$7,330,872,~~$11,984,374, respectively, and the liabilities of consolidated VIEs totaled ~~$8,255,541~~$13,647,045 and ~~$6,902,536,~~$11,191,736, respectively. See Note 10 9for further discussion.

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(~~Amounts~~Dollar amounts in thousands, except per share data)

(unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2017			2016			2019			2018
INTEREST INCOME:
Investment securities and other	$	9,716		$	8,587		$	29,716		$	25,612
Investment securities and other interest earning assets													$	15,316		$	11,813
Distressed and other residential mortgage loans													15,891			7,541
Preferred equity and mezzanine loan investments													5,007			4,445
Multi-family loans held in securitization trusts	76,186			62,126			213,242			187,427			111,768			85,092
Residential mortgage loans	1,556			947			4,163			2,705
Distressed residential mortgage loans	3,924			7,865			16,627			25,173
Total interest income	91,382			79,525			263,748			240,917			147,982			108,891

INTEREST EXPENSE:
Investment securities and other	5,759			4,598			17,132			12,409
Convertible notes	2,630			—			7,220			—
Repurchase agreements and other interest bearing liabilities													20,386			9,651
Residential collateralized debt obligations													422			411
Multi-family collateralized debt obligations	67,030			55,359			187,835			167,783			96,797			74,478
Residential collateralized debt obligations	403			322			978			937
Securitized debt	1,651			3,209			5,937			8,436			742			1,330
Subordinated debentures	589			519			1,699			1,528			741			620
Convertible notes													2,691			2,649
Total interest expense	78,062			64,007			220,801			191,093			121,779			89,139

NET INTEREST INCOME	13,320			15,518			42,947			49,824			26,203			19,752

OTHER INCOME (LOSS):
Recovery of (provision for) loan losses	563			(26		)	452			661			1,065			(42		)
Realized gain on investment securities and related hedges, net	4,059			2,306			3,951			5,333
Realized gain on distressed residential mortgage loans at carrying value, net	6,689			6,416			21,024			11,990
Net gain on residential mortgage loans at fair value	717			—			717			—
Unrealized gain (loss) on investment securities and related hedges, net	1,192			1,563			1,687			(1,594		)
Realized gain (loss) on investment securities and related hedges, net													16,801			(3,423		)
Realized gain (loss) on distressed and other residential mortgage loans at carrying value, net													2,079			(773		)
Net gain (loss) on distressed and other residential mortgage loans at fair value													11,010			(166		)
Unrealized (loss) gain on investment securities and related hedges, net													(14,586		)	11,692
Unrealized gain on multi-family loans and debt held in securitization trusts, net	2,353			738			5,184			2,340			9,410			7,545
Income from operating real estate and real estate held for sale in consolidated variable interest entities	2,429			—			4,746			—
Loss on extinguishment of debt													(2,857		)	—
Income from real estate held for sale in consolidated variable interest entities													215			2,126
Other income	6,916			5,635			12,037			16,833			7,728			3,994
Total other income	24,918			16,632			49,798			35,563			30,865			20,953

GENERAL, ADMINISTRATIVE AND OPERATING EXPENSES:
General and administrative expenses													8,187			4,656
Base management and incentive fees	1,386			1,453			4,355			7,958			723			833
Expenses related to distressed residential mortgage loans	2,225			2,398			6,682			8,332
Expenses related to operating real estate and real estate held for sale in consolidated variable interest entities	3,143			—			7,558			—
Other general and administrative expenses	4,242			4,854			14,196			11,711
Expenses related to distressed and other residential mortgage loans													3,252			1,603
Expenses related to real estate held for sale in consolidated variable interest entities													482			1,606
Total general, administrative and operating expenses	10,996			8,705			32,791			28,001			12,644			8,698

INCOME FROM OPERATIONS BEFORE INCOME TAXES	27,242			23,445			59,954			57,386			44,424			32,007
Income tax expense	507			163			2,187			2,720
Income tax expense (benefit)													74			(79		)

NET INCOME	26,735			23,282			57,767			54,666			44,350			32,086
Net loss (income) attributable to non-controlling interest in consolidated variable interest entities	1,110			(14		)	3,597			(12		)
Net income attributable to non-controlling interest in consolidated variable interest entities													(211		)	(2,468		)
NET INCOME ATTRIBUTABLE TO COMPANY	27,845			23,268			61,364			54,654			44,139			29,618
Preferred stock dividends	(3,225		)	(3,225		)	(9,675		)	(9,675		)	(5,925		)	(5,925		)
NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	24,620		$	20,043		$	51,689		$	44,979		$	38,214		$	23,693

Basic earnings per common share	$	0.22		$	0.18		$	0.46		$	0.41		$	0.22		$	0.21
Diluted earnings per common share	$	0.21		$	0.18		$	0.45		$	0.41		$	0.21		$	0.20
Weighted average shares outstanding-basic	111,886			109,569			111,824			109,487			174,421			112,018
Weighted average shares outstanding-diluted	131,580			109,569			129,931			109,487			194,970			131,761

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollar amounts in thousands)

(unaudited)

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ 24,620
$ 20,043
$ 51,689
$ 44,979
OTHER COMPREHENSIVE INCOME
Increase in fair value of available for sale securities 4,560
1,469
11,946
13,045
Reclassification adjustment for net gain included in net income (3,538 ) —
(4,298 ) —
(Decrease) increase in in fair value of derivative instruments utilized for cash flow hedges (176 ) 521
(84 ) (607 )
OTHER COMPREHENSIVE INCOME 846
1,990
7,564
12,438
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ 25,466
$ 22,033
$ 59,253
$ 57,417



	For the Three Months Ended March 31,
	2019			2018
NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	38,214		$	23,693
OTHER COMPREHENSIVE INCOME (LOSS)
Increase (Decrease) in fair value of available for sale securities	26,712			(24,478		)
Reclassification adjustment for net gain included in net income	(13,665		)	—
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	13,047			(24,478		)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	51,261		$	(785	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollar amounts in thousands)

(unaudited)

Common
Stock

Preferred
Stock

Additional
Paid-In
Capital
Retained Earnings (Accumulated Deficit)
Accumulated
Other
Comprehensive
(Loss) Income
Total Company Stockholders' Equity Non-Controlling Interest in Consolidated Variable Interest Entities Total
Balance, December 31, 2016 $ 1,115
$ 159,259
$ 748,599
$ (62,537 ) $ 1,639
$ 848,075
$ 3,087
$ 851,162
Net income (loss) —
—
—
61,364
—
61,364
(3,597 ) 57,767
Common Stock issuance, net 4
—
1,839
—
—
1,843
—
1,843
Dividends declared on common stock —
—
—
(67,118 ) —
(67,118 ) —
(67,118 )
Dividends declared on preferred stock —
—
—
(9,675 ) —
(9,675 ) (9,675 )
Reclassification adjustment for net gain included in net income —
—
—
—
(4,298 ) (4,298 ) —
(4,298 )
Increase in fair value on available for sale securities —
—
—
—
11,946
11,946
—
11,946
Decrease in fair value of derivative instruments utilized for cash flow hedges —
—
—
—
(84 ) (84 ) —
(84 )
Increase in non-controlling interest related to initial consolidation of variable interest entities —
—
—
—
—
—
4,462
4,462
Balance, September 30, 2017 $ 1,119
$ 159,259
$ 750,438
$ (77,966 ) $ 9,203
$ 842,053
$ 3,952
$ 846,005



	Common Stock		Preferred Stock		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive (Loss) Income			Total Company Stockholders' Equity			Non-Controlling Interest in Consolidated VIE			Total
Balance, December 31, 2018	$	1,556	$	289,755	$	1,013,391	$	(103,178	)	$	(22,135	)	$	1,179,389		$	904		$	1,180,293
Net income	—		—		—		44,139			—			44,139			211			44,350
Common stock issuance, net	322		—		185,699		—			—			186,021			—			186,021
Preferred stock issuance, net	—		—		—		—			—			—			—			—
Dividends declared on common stock	—		—		—		(37,566		)	—			(37,566		)	—			(37,566		)
Dividends declared on preferred stock	—		—		—		(5,925		)	—			(5,925		)	—			(5,925		)
Reclassification adjustment for net gain included in net income	—		—		—		—			(13,665		)	(13,665		)	—			(13,665		)
Increase in fair value of available for sale securities	—		—		—		—			26,712			26,712			—			26,712
Decrease in non-controlling interest related to distributions from and de-consolidation of variable interest entities	—		—		—		—			—			—			(768		)	(768		)
Balance, March 31, 2019	$	1,878	$	289,755	$	1,199,090	$	(102,530	)	$	(9,088	)	$	1,379,105		$	347		$	1,379,452

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollar amounts in thousands)

(unaudited)



	Common Stock		Preferred Stock		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Company Stockholders' Equity			Non-Controlling Interest in Consolidated VIE			Total
Balance, December 31, 2017	$	1,119	$	289,755	$	751,155	$	(75,717	)	$	5,553		$	971,865		$	4,136		$	976,001
Net income	—		—		—		29,618			—			29,618			2,468			32,086
Common stock issuance, net	2		—		387		—			—			389			—			389
Preferred stock issuance, net	—		—		—		—			—			—			—			—
Dividends declared on common stock	—		—		—		(22,423		)	—			(22,423		)	—			(22,423		)
Dividends declared on preferred stock	—		—		—		(5,925		)	—			(5,925		)	—			(5,925		)
Decrease in fair value of available for sale securities	—		—		—		—			(24,478		)	(24,478		)	—			(24,478		)
Decrease in non-controlling interest related to distributions from and de-consolidation of variable interest entities	—		—		—		—			—			—			(4,863		)	(4,863		)
Balance, March 31, 2018	$	1,121	$	289,755	$	751,542	$	(74,447	)	$	(18,925	)	$	949,046		$	1,741		$	950,787

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

(unaudited)


	For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2019			2018
Cash Flows from Operating Activities:
Net income	$	57,767		$	54,666		$	44,350		$	32,086
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization	2,248			5,713
Realized gain on investment securities and related hedges, net	(3,951		)	(5,333		)
Net gain on distressed residential mortgage and residential mortgage loans	(21,741		)	(11,990		)
Unrealized (gain) loss on investment securities and related hedges, net	(1,687		)	1,594
Gain on remeasurement of existing membership interest in businesses acquired	—			(5,052		)
Gain on bargain purchase on businesses acquired	—			(65		)
Net accretion							(10,463		)	(5,729		)
Realized (gain) loss on investment securities and related hedges, net							(16,801		)	3,423
Net (gain) loss on distressed and other residential mortgage							(13,089		)	939
Unrealized loss (gain) on investment securities and related hedges, net							14,586			(11,692		)
Gain on sale of real estate held for sale in consolidated variable interest entities							(1,580		)	(2,328		)
Impairment of real estate under development in consolidated variable interest entities							936			—
Loss on extinguishment of debt							2,857			—
Unrealized gain on loans and debt held in multi-family securitization trusts	(5,184		)	(2,340		)	(9,410		)	(7,545		)
Net decrease in loans held for sale	24			432
Recovery of loan losses	(452		)	(661		)
Income from unconsolidated entity, mezzanine loan and preferred equity investments	(21,507		)	(16,934		)
Distributions of income from unconsolidated entity, mezzanine loan and preferred equity investments	17,348			12,085
(Recovery of) provision for loan losses							(1,065		)	42
Income from unconsolidated entity, preferred equity and mezzanine loan investments							(13,108		)	(6,090		)
Distributions of income from unconsolidated entity, preferred equity and mezzanine loan investments							7,010			3,926
Amortization of stock based compensation, net	1,268			514			993			387
Changes in operating assets and liabilities:
Receivables and other assets	(7,823		)	8,288			(15,499		)	125
Accrued expenses and other liabilities	9,875			3,687			18,476			(435		)
Net cash provided by operating activities	26,185			44,604			8,193			7,109

Cash Flows from Investing Activities:
Acquisition of businesses, net of cash and restricted cash acquired	—			(28,447		)
Cash received from initial consolidation of variable interest entities	112			—
Net proceeds from sale of real estate held for sale in consolidated variable interest entities							3,587			33,192
Proceeds from sales of investment securities	100,937			198,280			56,769			10,080
Purchases of investment securities	(129,923		)	(339,650		)	(136,265		)	(60,321		)
Redemption of FHLBI stock	—			5,423
Purchases of other assets	(23		)	(85		)	(600		)	(2		)
Capital expenditures on operating real estate and real estate held for sale in consolidated variable interest entities	(191		)	—
Funding of mezzanine loans, equity and preferred equity investments	(45,101		)	(40,860		)
Principal repayments received on mezzanine loans and preferred equity investments	18,947			464
Capital expenditures on real estate held for sale in consolidated variable interest entities							(128		)	(46		)
Funding of preferred equity, equity and mezzanine loan investments							(35,021		)	(18,210		)
Principal repayments received on preferred equity and mezzanine loan investments							12,316			3,871
Return of capital from unconsolidated entity investments	23,395			6,002			311			638
Net proceeds on other derivative instruments settled during the period	3,950			8,155
Principal repayments received on residential mortgage loans held in securitization trusts	14,190			19,607
Principal repayments and proceeds from sales and refinancing of distressed residential mortgage loans	179,108			100,217
Net payments made on other derivative instruments settled during the period							(19,197		)	—
Principal repayments and proceeds from sales and refinancing of distressed and other residential mortgage loans							50,296			12,335
Principal repayments received on multi-family loans held in securitization trusts	104,962			91,914			37,485			34,434
Principal paydowns on investment securities - available for sale	170,133			84,592			37,642			35,365
Proceeds from sale of real estate owned	5,656			1,525			650			943
Purchases of residential mortgage loans and distressed residential mortgage loans	(81,472		)	(52,130		)	(159,658		)	(15,966		)
Purchases of investments held in multi-family securitization trusts	(65,453		)	—			(101,570		)	—
Net cash provided by investing activities	299,227			55,007
Net cash (used in) provided by investing activities							(253,383		)	36,313

Cash Flows from Financing Activities:
(Payments made on) net proceeds from financing arrangements, including FHLBI advances and payments	(197,590		)	64,185
Proceeds from issuance of convertible notes, net	126,995			—
Proceeds from issuance of securitized debt	—			167,724
Net proceeds from repurchase agreements							141,153			10,215
Common stock issuance, net	574			385			185,027			—
Dividends paid on common stock	(71,501		)	(78,811		)	(31,118		)	(22,382		)
Dividends paid on preferred stock	(9,675		)	(9,675		)	(5,925		)	(5,985		)
Payments made on mortgages and notes payable in consolidated variable interest entities	(266		)	—			(36		)	(25,565		)
Proceeds from mortgages and notes payable in consolidated variable interest entities	4,425			—			—			505
Payments made on residential collateralized debt obligations	(14,856		)	(20,736		)	(3,808		)	(3,167		)
Payments made on multi-family collateralized debt obligations	(104,958		)	(91,901		)	(37,481		)	(34,437		)
Payments made on securitized debt	(62,098		)	(53,354		)
Redemption of preferred debt	—			(16,255		)
Net cash used in financing activities	(328,950		)	(38,438		)
Extinguishment of and payments made on securitized debt							(45,557		)	(11,753		)
Net cash provided by (used in) financing activities							202,255			(92,569		)

Net Decrease in Cash, Cash Equivalents and Restricted Cash							(42,935		)	(49,147		)
Cash, Cash Equivalents and Restricted Cash - Beginning of Period							109,145			115,450
Cash, Cash Equivalents and Restricted Cash - End of Period							$	66,210		$	66,303

The accompanying notes are an integral part of the condensed consolidated financial statements.

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NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Dollar amounts in thousands)

(unaudited)


Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash	(3,538		)	61,173
Cash, Cash Equivalents and Restricted Cash - Beginning of Period	139,530			82,742
Cash, Cash Equivalents and Restricted Cash - End of Period	$	135,992		$	143,915


Supplemental Disclosure:
Cash paid for interest	$	245,891		$	226,555	$	130,627	$	103,316
Cash paid for income taxes	$	2,153		$	2,172	$	7	$	642


Non-Cash Investment Activities:
Sales of investment securities not yet settled	$	1,261		$	—
Purchase of investment securities not yet settled	$	181,718		$	290,833
Consolidation of multi-family loans held in securitization trusts	$	1,537,526		$	—	$	2,426,210	$	—
Consolidation of multi-family collateralized debt obligations	$	1,472,073		$	—	$	2,324,639	$	—
Transfer from residential loans to real estate owned	$	6,221		$	5,844	$	1,841	$	1,992

Non-Cash Financing Activities:
Dividends declared on common stock to be paid in subsequent period	$	22,371		$	26,296	$	37,566	$	22,423
Dividends declared on preferred stock to be paid in subsequent period	$	3,225		$	3,225	$	5,925	$	5,925
Mortgages and notes payable assumed by purchaser of real estate held for sale in consolidated variable entities						$	27,260	$	—

Cash, Cash Equivalents and Restricted Cash Reconciliation:
Cash and cash equivalents						$	65,359	$	65,495
Restricted cash included in receivables and other assets						$	851	$	808
Total cash, cash equivalents, and restricted cash						$	66,210	$	66,303

The accompanying notes are an integral part of the condensed consolidated financial statements.

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NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2019

(unaudited)


1.	Organization

New York Mortgage Trust, Inc., together with its consolidated subsidiaries ("NYMT," "we," "our," or the “Company"), is a real estate investment trust, or REIT, in the business of acquiring, investing in, financing and managing mortgage-related and residential housing-related ~~assets and financial~~ assets. Our objective is to deliver long-term stable distributions to our stockholders over ~~diverse~~changing economic conditions through a combination of ~~income generated by~~ net interest margin and net realized capital gains from ~~our~~a diversified investment portfolio. Our portfolio includes ~~residential mortgage loans, including loans sourced from distressed markets and second mortgage loans,~~(i) structured multi-family property investments such as multi-family CMBS and preferred equity ~~and joint venture equity investments~~ in, and mezzanine loans to, owners of multi-family properties, ~~equity~~(ii) residential mortgage loans, including distressed residential mortgage loans, non-QM loans, second mortgages, and ~~debt securities issued by entities that invest in~~other residential ~~and commercial real estate,~~mortgage loans, (iii) non-Agency RMBS, (iv) Agency RMBS ~~consisting of fixed-rate, adjustable-rate~~ and hybrid adjustable-rate RMBS and Agency IOs consisting of interest only and inverse interest-only RMBS that represent the right to the interest component of the cash flow from a pool of mortgage loans and(v) certain other ~~investments in~~ mortgage-related and residential housing-related ~~assets and financial~~ assets.

The Company conducts its business through the parent company, New York Mortgage Trust, Inc., and several subsidiaries, including special purpose subsidiaries established for residential loan, distressed residential loan and CMBS securitization purposes, taxable REIT subsidiaries ("TRSs") and qualified REIT subsidiaries ("QRSs"). The Company consolidates all of its subsidiaries under generally accepted accounting principles in the United States of America (“GAAP”).

The Company is organized and conducts its operations to qualify as a REIT for U.S. federal income tax purposes. As such, the Company will generally not be subject to federal income ~~tax~~taxes on that portion of its income that is distributed to stockholders if it distributes at least 90% of its annual REIT taxable income to its stockholders by the due date of its federal income tax return and complies with various other requirements.

910

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2.Summary of Significant Accounting Policies

Definitions – The following defines certain of the commonly used terms in these financial statements:

“RMBS” refers to residential mortgage-backed securities comprised of adjustable-rate, hybrid adjustable-rate, fixed-rate, interest only and inverse interest only and principal only ~~mortgage-backed~~ securities;

“Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of mortgage loans issued or guaranteed by a ~~federally chartered corporation~~government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. government, such as the Government National Mortgage Association (“Ginnie Mae”);

“~~Non-Agency~~non-Agency RMBS” refers to RMBS ~~backed~~that are not guaranteed by ~~prime jumbo mortgage loans and re-performing and non-performing mortgage loans;~~any agency of the U.S. Government or any federally chartered corporation;

“IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the right to the interest component of the cash flow from a pool of mortgage loans;

"IO RMBS" refers to RMBS comprised of IOs;

“Agency IOs” refers to Agency RMBS comprised of IO RMBS;

“POs” refers to mortgage-backed securities that represent the right to the principal component of the cash flow from a pool of mortgage loans;

“Agency IOs” refers to an IO that represents the right to the interest component of the cash flows from a pool of residential mortgage loans issued or guaranteed by a GSE or an agency of the U.S. government;

“ARMs” refers to adjustable-rate residential mortgage loans;

“~~Prime~~prime ARM loans” and “residential securitized loans” each refer to prime credit quality residential ~~ARM loans~~ARMs held in our securitization trusts formed in 2005;

“Agency ARMs” refers to Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS;

"“Agency fixed-rate ~~RMBS"~~RMBS” refers to Agency RMBS comprised of fixed-rate RMBS;

“CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities, as well as PO, IO, or POmezzanine securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans;

“Multi-family CMBS” refers to CMBS backed by commercial mortgage loans on multi-family properties;

“CDOs” refers to collateralized debt obligations;

“non-QM loans” refers to residential mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the Consumer Financial Protection Bureau; and

~~“CLO”~~"second mortgages" refers to ~~collateralized loan obligations.~~liens on residential properties that are subordinate to more senior mortgages or loans.

Basis of Presentation – The accompanying condensed consolidated balance sheet as of December 31, ~~2016~~2018 has been derived from audited financial statements. The accompanying condensed consolidated balance sheet as of ~~September 30, 2017,~~March 31, 2019, the accompanying condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, the accompanying condensed consolidated statements of comprehensive income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, the accompanying condensed consolidated ~~statement~~statements of changes in stockholders’ equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and 2018 and the accompanying condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 are unaudited. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, as filed with the U.S. Securities and Exchange Commission (“SEC”). Accordingly, significant accounting policies and other disclosures have been omitted since such items are disclosed in Note 2 in the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2018. Provided below is a summary of additional accounting policies that are significant to or newly adopted by the Company for the three months ended March 31, 2019. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 are not necessarily indicative of the operating results for the full year.

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The accompanying condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management has made significant estimates in several areas, including fair valuation of its ~~CMBS investments,~~distressed and other residential mortgage loans, multi-family loans held in securitization trusts, ~~and~~ multi-family CDOs and CMBS held in securitization trusts, as well as income recognition on distressed residential mortgage loans purchased at a discount. Although the Company’s estimates contemplate current conditions and how it expects ~~them~~those conditions to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition.

Reclassifications – Certain prior period amounts have been reclassified in the condensed consolidated financial statements to conform to current period presentation.

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Principles of Consolidation and Variable Interest Entities – The accompanying condensed consolidated financial statements of the Company include the accounts of all its subsidiaries which are majority-owned, controlled by the Company or a variable interest entity ("VIE") where the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE when it is the primary beneficiary of such VIE, herein referred to as a "Consolidated VIE". As primary beneficiary, the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.

~~Business Combinations~~ ~~– The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition~~Adoption of ~~a business. The Company accounts for business combinations by applying the acquisition method in accordance with~~ Accounting Standards Codification ~~(“ASC”~~("ASC") ~~805,~~ ~~Business Combinations~~ ("Topic 842, Leases ("ASC ~~805"~~842"). Transaction costs related to acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed and non-controlling interests, if any, in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and non-controlling interests, if any, in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets and liabilities.

Contingent consideration is classified as a liability or equity, as applicable. Contingent consideration in connection with the acquisition of a business is measured at fair value on acquisition date, and unless classified as equity, is remeasured at fair value each reporting period thereafter until the consideration is settled, with changes in fair value included in net income.

~~Net cash paid to acquire a business is classified as investing activities on the accompanying condensed consolidated statements of cash flows.~~

On ~~May 16, 2016,~~January 1, 2019, the Company ~~acquired~~adopted ASC 842 using the ~~outstanding membership interests in RiverBanc LLC ("RiverBanc"), RB Multifamily Investors LLC ("RBMI"), and RB Development Holding Company, LLC ("RBDHC")~~modified retrospective transition method applied to all leases that were not ~~previously owned by the Company through the consummation~~completed as of ~~separate membership interest purchase agreements, thereby increasing the Company's ownership of each of these entities to 100% (see Note 23). These transactions were accounted~~January 1, 2019. Results for ~~by applying the acquisition method for business combinations~~reporting periods beginning on or after January 1, 2019 are presented under ASC ~~805.~~

~~On March 31, 2017,~~842, while prior period amounts are not adjusted and continue to be reported under the ~~Company determined that it became~~accounting standards in effect for the primary beneficiary of 200 RHC Hoover, LLC ("Riverchase Landing") and The Clusters, LLC ("The Clusters"), two variable interest entities that each own a multi-family apartment community and in which the Company holds preferred equity investments. Accordingly, on this date, the Company consolidated both Riverchase Landing and The Clusters into its condensed consolidated financial statements in accordance with ASC 810, ~~Consolidation~~ ~~("ASC 810"). These transactions were accounted for by applying the acquisition method for business combinations under ASC 805 (see Note 10~~).

~~Investment Securities Available for Sale~~ – The Company's investment securities, where the fair value option has not been elected and which are reported at fair value with unrealized gains and losses reported in Other Comprehensive Income (“OCI”), include Agency RMBS, non-Agency RMBS and CMBS. The Company hasprior period. We elected the fair value option for its Agency IOs, U.S. Treasury securities, and certain Agency ARMs and Agency fixed-rate RMBS within the Agency IO portfolio, which measures unrealized gains and losses through earnings in the accompanying condensed consolidated statements of operations. The fair value option was elected for these investment securities to better match the accounting for these investment securities with the related derivative instruments within the Agency IO portfolio, which are not designated as hedging instruments for accounting purposes.

The Company generally intends to hold its investment securities until maturity; however, from time to time, it may sell any of its securities as part of the overall management of its business. As a result, our investment securities are classified as available for sale securities. Realized gains and losses recorded on the sale of investment securities available for sale are based on the specific identification method and included in realized gain (loss) on investment securities and related hedges in the accompanying condensed consolidated statements of operations.

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Interest income on our investment securities available for sale is accrued based on the outstanding principal balance and their contractual terms. Purchase premiums or discounts on investment securities are amortized or accreted to interest income over the estimated life of the investment securities using the effective yield method. Adjustments to amortization are made for actual prepayment activity.

Interest income on certain of our credit sensitive securities, such as our CMBS that were purchased at a discount to par value, is recognized based on the security’s effective interest rate. The effective interest rate on these securities is based on management’s estimate of the projected cash flows from each security, which are estimated based on assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of credit losses. On at least a quarterly basis, management reviews and, if appropriate, adjusts its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on these securities.

A portion of the purchase discount on the Company’s first loss tranche PO multi-family CMBS is designated as non-accretable purchase discount or credit reserve, which partially mitigates the Company’s risk of loss on the mortgages collateralizing such multi-family CMBS, and is not expected to be accreted into interest income. The amount designated as a credit reserve may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit reserve is more favorable than forecasted, a portion of the amount designated as credit reserve may be accreted into interest income over time. Conversely, if the performance of a security with a credit reserve is less favorable than forecasted, the amount designated as credit reserve may be increased, or impairment charges and writedowns of such securities to a new cost basis could be required.

The Company accounts for debt securities that are of high credit quality (generally those rated AA or better by a Nationally Recognized Statistical Rating Organization, or NRSRO) at date of acquisition in accordance with ASC 320-10, ~~Investments - Debt and Equity Securities~~ ("ASC 320-10"). The Company accounts for debt securities that are not of high credit quality (i.e., those whose risk of loss is less than remote) or securities that can be contractually prepaid such that we would not recover our initial investment at the date of acquisition in accordance with ASC 325-40, ~~Investments - Beneficial Interests in Securitized Financial Assets~~ ("ASC 325-40"). The Company considers credit ratings, the underlying credit risk and other market factors in determining whether the debt securities are of high credit quality; however, securities rated lower than AA or an equivalent rating are not considered of high credit quality and are accounted for in accordance with ASC 325-40. If ratings are inconsistent among NRSROs, the Company uses the lower rating in determining whether the securities are of high credit quality.

The Company assesses its impaired securities on at least a quarterly basis and designates such impairments as either “temporary” or “other-than-temporary” by applying the guidance prescribed in ASC 320-10. When the fair value of an investment security is less than its amortized cost as of the reporting balance sheet date, the security is considered impaired. If the Company intends to sell an impaired security, or it is more likely than not that it will be required to sell the impaired security before its anticipated recovery, then it must recognize an other-than-temporary impairment through earnings equal to the entire difference between the investment’s amortized cost and its fair value as of the balance sheet date. If the Company does not expect to sell an other-than-temporarily impaired security, only the portion of the other-than-temporary impairment related to credit losses is recognized through earnings with the remainder recognized as a component of other comprehensive income (loss) on the accompanying condensed consolidated balance sheets. Impairments recognized through other comprehensive income (loss) do not impact earnings. Following the recognition of an other-than-temporary impairment through earnings, a new cost basis is established for the security, which may not be adjusted for subsequent recoveries in fair value through earnings. However, other-than-temporary impairments recognized through earnings may be accreted back to the amortized cost basis of the security on a prospective basis through interest income. The determination as to whether an other-than-temporary impairment exists and, if so, the amount considered other-than-temporarily impaired is subjective, as such determinations are based on both factual and subjective information available at the time of assessment as well the Company’s estimates of the future performance and cash flow projections. As a result, the timing and amount of other-than-temporary impairments constitute material estimates that are susceptible to significant change.

In determining the other-than temporary impairment related to credit losses for securities that are not of high credit quality, the Company compares the present value of the remaining cash flows expected to be collected at the prior reporting date or purchase date, whichever is most recent, against the present value of the cash flows expected to be collected at the current financial reporting date. The Company considers information available about the past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, prepayment rates, default rates, loss severities and delinquency rates.

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~~Residential Mortgage Loans Held in Securitization Trusts~~ – Residential mortgage loans held in securitization trusts are comprised of certain ARM loans transferred to Consolidated VIEs that have been securitized into sequentially rated classes of beneficial interests. The Company accounted for these securitization trusts as financings which are consolidated into the Company’s financial statements. Residential mortgage loans held in securitization trusts are carried at their unpaid principal balances, net of unamortized premium or discount, unamortized loan origination costs and allowance for loan losses. Interest income is accrued and recognized as revenue when earned according to the terms of the mortgage loans and when, in the opinion of management, it is collectible. The accrual of interest on loans is discontinued when, in management’s opinion, the interest is not collectible in the normal course of business, but in all cases when payment becomes greater than 90 days delinquent. Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.

We establish an allowance for loan losses based on management's judgment and estimate of credit losses inherent in our portfolio of residential mortgage loans held in securitization trusts. Estimation involves the consideration of various credit-related factors, including but not limited to, macro-economic conditions, current housing market conditions, loan-to-value ratios, delinquency status, historical credit loss severity rates, purchased mortgage insurance, the borrower's current economic condition and other factors deemed to warrant consideration. Additionally, we look at the balance of any delinquent loan and compare that to the current value of the collateralizing property. We utilize various home valuation methodologies including appraisals, broker pricing opinions, internet-based property data services to review comparable properties in the same area or consult with a broker in the property's area.

~~Residential Mortgage Loans, at fair value~~ – Certain of the Company’s acquired residential mortgage loans, including distressed residential mortgage loans and second lien mortgages, are presented at fair value on its condensed consolidated balance sheets as a result of a fair value election made at the time of acquisition pursuant to ASC 825. Changes in fair value are recorded in current period earnings in net gain on residential mortgage loans at fair value in the Company's condensed consolidated statements of operations.

Premiums and discounts associated with the purchase of residential mortgage loans, at fair value are amortized or accreted into interest income over the life of the related loan using the effective interest method. Any premium amortization or discount accretion is reflected as a component of interest income, residential mortgage loans in the Company's condensed consolidated statements of operations.

~~Acquired Distressed Residential Mortgage Loans~~ – Distressed residential mortgage loans are comprised of pools of fixed and adjustable rate residential mortgage loans acquired by the Company at a discount, with evidence of credit deterioration since their origination and where it is possible that the Company will not collect all contractually required principal payments. Distressed residential mortgage loans held in securitization trusts are distressed residential mortgage loans transferred to Consolidated VIEs that have been securitized into beneficial interests. The Company accounted for these securitization trusts as financings which are consolidated into the Company’s financial statements.

~~Acquired distressed residential mortgage loans that have evidence of deteriorated credit quality at acquisition are accounted~~practical expedients allowed for under ASC ~~310-30,~~ ~~Loans~~842 that exempt an entity from reassessing whether existing contracts contain leases, reassessing the lease classification of existing leases, and ~~Debt Securities Acquired with Deteriorated Credit Quality~~ ~~("ASC 310-30"). Management evaluates whether~~reassessing the initial direct costs for existing leases. As such, there ~~is evidence of credit quality deterioration~~was no cumulative impact on opening accumulated deficit as of January 1, 2019 of adopting ASC 842 under the ~~acquisition date using indicators such as past due or~~ modified ~~status, risk ratings, recent borrower credit scores and recent loan-to-value percentages. Acquired distressed residential mortgage loans are recorded at fair value at the date~~retrospective transition method. Operating lease right of acquisition, with no allowance for loan losses. Under ASC 310-30, the acquired loans may be accounted for individually or aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics. A pool is accounted for as a single asset with a single composite interest rate and an expectation of aggregate cash flows. Once a pool is assembled, it is treated as if it was one loan for purposes of applying the accounting guidance.

Under ASC 310-30, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield,” is accreted into interest income over the life of the loans in each pool or individually using a level yield methodology. Accordingly, our acquired distressed residential mortgage loans accounted for under ASC 310-30 are not subject to classification as nonaccrual classification in the same manner as our residential mortgage loans that were not distressed when acquired by us. Rather, interest income on acquired distressed residential mortgage loans relates to the accretable yield recognized at the pool level or on an individual loan basis, and not to contractual interest payments received at the loan level. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference,” includes estimates of both the impact of prepayments and expected credit losses over the life of the individual loan, or the pool (for loans grouped into a pool).

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Management monitors actual cash collections against its expectations, and revised cash flow estimates are prepared as necessary. A decrease in expected cash flows in subsequent periods may indicate that the loan pool or individual loan, as applicable, is impaired, thus requiring the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods initially reduces any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan pool. The adjustment of accretable yield due to an increase in expected cash flows is accounted for prospectively as a change in estimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodic accretion is adjusted accordingly over the remaining life of the loans in the pool or individual loan, as applicable. The impacts of (i) prepayments, (ii) changes in variable interest rates, and (iii) any other changes in the timing of expected cash flows are recognized prospectively as adjustments to interest income.

A distressed residential mortgage loan disposal, which may include a loan sale, receipt of payment in full from the borrower or foreclosure, results in removal of the loan from the loan pool at its allocated carrying amount. In the event of a sale of the loan and receipt of payment (in full or partial) from the borrower, a gain or loss on sale is recognized and reported based on the difference between the sales proceeds or payment from the borrower and the allocated carrying amount of the acquired distressed residential mortgage loan. In the case of a foreclosure, an individual loan is removed from the pool and a loss on sale is recognized if the carrying value exceeds the fair value of the collateral less costs to sell. A gain is not recognized if the fair value of collateral less costs to sell exceeds the carrying value.

The Company uses the specific allocation method for the removal of loans as the estimated cash flows and related carrying amount for each individual loan are known. In these cases, the remaining accretable yield is unaffected and any material change in remaining effective yield caused by the removal of the loan from the pool is addressed by the re-assessment of the estimate of cash flows for the pool prospectively.

Acquired distressed residential mortgage loans subject to modification are not removed from the pool even if those loans would otherwise be considered troubled debt restructurings because the pool, and not the individual loan, represents the unit of account.

For individual loans not accounted for in pools that are sold or satisfied by payment in full, a gain or loss on sale is recognized and reported based on the difference between the sales proceeds and the carrying amount of the acquired distressed residential mortgage loan. In the case of a foreclosure, a loss is recognized if the carrying value exceeds the fair value of the underlying collateral less costs to sell. A gain is not recognized if the fair value of the underlying collateral less costs to sell exceeds the carrying value.

~~Multi-Family Loans Held in Securitization Trusts~~ – Multi-family loans held in securitization trusts are comprised of multi-family mortgage loans held in Freddie Mac-sponsored multi-family K-Series securitizations (the “Consolidated K-Series”). Based on a number of factors, we determined that we were the primary beneficiary of each VIE within the Consolidated K-Series, met the criteria for consolidation and, accordingly, have consolidated these Freddie Mac-sponsored multi-family K-Series securitizations, including their assets, liabilities, income and expenses in our condensed consolidated financial statements. The Company has elected the fair value option on each of theuse assets and liabilities held within the Consolidated K-Series, which requires that changes in valuations be reflected in the Company's accompanying condensed consolidated statement of operations. The Company adopted Accounting Standards Update ("ASU") 2014-13 ~~Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity,~~ ~~effective January 1, 2016. As a result, the Company measures both the financial assets and financial~~operating lease liabilities of a qualifying collateralized financing entity ("CFE") using the fair value of either the CFE’s financial assets or financial liabilities, whichever is more observable. As the Company’s securitization trusts are considered qualifying CFEs, the Company determines the fair value of multi-family loans held in securitization trusts based on the fair value of its multi-family collateralized debt obligations and its retained interests from these securitizations (eliminated in consolidation in accordance with GAAP), as the fair value of these instruments is more observable.

Interest income is accrued and recognized as revenue when earned according to the terms of the multi-family loans and when, in the opinion of management, it is collectible. The accrual of interest on multi-family loans is discontinued when, in management’s opinion, the interest is not collectible in the normal course of business, but in all cases when payment becomes greater than 90 days delinquent. The multi-family loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.

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~~Mezzanine Loan and Preferred Equity Investments~~ – The Company invests in mezzanine loans and preferred equity of entities that have significant real estate assets. The mezzanine loan is secured by a pledge of the borrower’s equity ownership in the property. Unlike a mortgage, this loan does not represent a lien on the property. Therefore, it is always junior and subordinate to any first-lien as well as second liens, if applicable, on the property. These loans are senior to any preferred equity or common equity interests.

A preferred equity investment is an equity investment in the entity that owns the underlying property. Preferred equity is not secured by the underlying property, but holders have priority relative to common equity holders on cash flow distributions and proceeds from capital events. In addition, preferred equity holders may be able to enhance their position and protect their equity position with covenants that limit the entity’s activities and grant the holder the exclusive right to control the property after an event of default.

Mezzanine loans and preferred equity investments, where the risks and payment characteristics are equivalent to mezzanine loans, are accounted for as loans and are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances. The Company has evaluated its mezzanine loan and preferred equity investments for accounting treatment as loans versus equity investment utilizing the guidance provided by the ADC Arrangements Subsection of ASC 310, ~~Receivables~~.

For mezzanine loan and preferred equity investments where the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate, the Company accretes or amortizes any discounts or premiums and deferred fees and expenses over the life of the related asset utilizing the effective interest method or straight line-method, if the result is not materially different.

Management evaluates the collectibility of both interest and principal of each of these loans, if circumstances warrant, to determine whether they are impaired. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the estimated fair value of the loan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. Interest income is accrued and recognized as revenue when earned according to the terms of the loans and when, in the opinion of management, it is collectible. The accrual of interest on loans is discontinued when, in management’s opinion, the interest is not collectible in the normal course of business, but in all cases when payment becomes greater than 90 days delinquent. Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.

~~Mezzanine loans and preferred equity investments where the risks and payment characteristics are equivalent to an equity investment are accounted for using the equity method of accounting. See “Investment in Unconsolidated Entities.~~”

~~Mortgage Loans Held for Investment~~ – Mortgage loans held for investment are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances, and are included in receivables and other assets. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in interest income. A loan is considered to be impaired when it is probable that based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Based on the facts and circumstances of the individual loans being impaired, loan specific valuation allowances are established for the excess carrying value of the loan over either: (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price.

~~Investment inUnconsolidated Entities~~ – Non-controlling, unconsolidated ownership interests in an entity may be accounted for using the equity method or the cost method. In circumstances where the Company has a non-controlling interest but either owns a significant interest or is able to exert influence over the affairs of the enterprise, the Company utilizes the equity method of accounting. Under the equity method of accounting, the initial investment is increased each period for additional capital contributions and a proportionate share of the entity’s earnings or preferred return and decreased for cash distributions and a proportionate share of the entity’s losses. Management periodically reviews its investments for impairment based on projected cash flows from the entity over the holding period. When any impairment is identified, the investments are written down to recoverable amounts.

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The Company may elect the fair value option for an investment in an unconsolidated entity that is accounted for using the equity method. The Company elected the fair value option for certain investments in unconsolidated entities that own interests (directly or indirectly) in commercial and residential real estate assets because the Company determined that such presentation represents the underlying economics of the respective investment. The Company records the change in fair value of its investment in other income in the condensed consolidated statements of operations (s~~ee Note 8~~).

~~Operating Real Estate Held in Consolidated Variable Interest Entities, Net~~ – The Company records its initial investments in income-producing real estate at fair value at the acquisition date in accordance with ASC 805. The purchase price of acquired properties is apportioned to the tangible and identified intangible assets and liabilities acquired at their respective estimated fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective real estate, its own analysis of recently-acquired and existing comparable properties, property financial results, and other market data. The Company also considers information obtained about the real estate as a result of its due diligence, including marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired. The Company considers the value of acquired in-place leases and utilizes an amortization period that is the average remaining term of the acquired leases. The Company has reclassified its operating real estate held in consolidated variable interest entities to real estate held for sale in consolidated variable interest entities as of September 30, 2017.

~~Depreciation of Real Estate~~ – The Company depreciates on a straight-line basis the building component of its real estate over a 30-year estimated useful life, building and improvements over a 10-year to 30-year estimated useful life, and furniture, fixtures and equipment over a 5-year estimated useful life, all of which are judgmental determinations. Betterments and certain costs directly related to the improvement of real estate are capitalized. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred.

~~Real Estate Held for Sale in Consolidated Variable Interest Entities~~ ~~- The Company classifies its long-lived assets as held for sale in accordance with ASC 360,~~ ~~Property, Plant, and Equipment~~. When real estate assets are identified as held for sale, the Company discontinues depreciating (amortizing) the assets and estimates the fair value, net of selling costs, of such assets. Real estate held for sale in consolidated variable interest entities is recorded at the lower of the net carrying amount of the assets or the estimated net fair value. If the estimated net fair value of the real estate held for sale is less than the net carrying amount of the assets, an impairment charge is recorded in the condensed consolidated statements of operations with an allocation to non-controlling interests in the respective VIEs, if any.

The Company assesses the net fair value of real estate held for sale each reporting period the assets remain classified as held for sale. Subsequent changes, if any, in the net fair value of the real estate assets held for sale that require an adjustment to the carrying amount are recorded in the condensed consolidated statements of operations with an allocation to non-controlling interests in the respective VIEs, if any, unless the adjustment causes the carrying amount of the assets to exceed the net carrying amount upon initial classification as held for sale.

If circumstances arise that the Company previously considered unlikely and, as a result, the Company decides not to sell real estate assets previously classified as held for sale, the real estate assets are reclassified to another real estate classification. Real estate assets that are reclassified are measured at the lower of (a) their carrying amount before they were classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the assets remained in their previous classification, or (b) their fair value at the date of the subsequent decision not to sell.

~~Real Estate - Under Development~~ – The Company's expenditures which directly relate to the acquisition, development, construction and improvement of properties are capitalized, at cost. During the development period, which culminates once a property is substantially complete and ready for intended use, operating and carrying costs such as interest expense, real estate taxes, insurance and other direct costs are capitalized. Advertising and general administrative costs that do not relate to the development of a property are expensed as incurred. Real estate under development as of September 30, 2017 and December 31, 2016 of $21.9$10.3 million ~~and $17.5 million, respectively, is included in receivables and other assets on the condensed consolidated balance sheets.~~

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~~Real Estate - Impairment~~ – The Company periodically evaluates its long-lived assets for indicators of impairment. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal and environmental concerns, as well as the Company's ability to hold and its intent with regard to each asset. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment is warranted. If impairment indicators exist for long-lived assets to be held and used, and the expected future undiscounted cash flows are less than the carrying amount of the asset, then the Company will record an impairment loss for the difference between the fair value of the asset and its carrying amount. If the asset is to be disposed of, then an impairment loss is recognized for the difference between the estimated fair value of the asset, net of selling costs, and its carrying amount.

~~Cash and Cash Equivalents~~ – Cash and cash equivalents include cash on hand, amounts due from banks and overnight deposits. The Company maintains its cash and cash equivalents in highly rated financial institutions, and at times these balances exceed insurable amounts.

~~Goodwill~~ – Goodwill represents the excess of the fair value of consideration transferred in a business combination over the fair values of identifiable assets acquired, liabilities assumed and non-controlling interests, if any, in an acquired entity, net of fair value of any previously held interest in the acquired entity. Goodwill is not amortized but tested for impairment annually or more frequently if events or circumstances indicate that goodwill may be impaired. Goodwill of $25.2 million as of September 30, 2017 and December 31, 2016 relates to the Company's multi-family investment reporting unit.

Goodwill is evaluated for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist, by initially performing a qualitative screen and, if necessary, then comparing fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is less than the carrying value, an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value (in an amount not to exceed the total amount of goodwill allocated to the reporting unit) is recognized. The Company evaluated goodwill as of October 1, 2016 and no impairment was indicated.

~~Intangible Assets~~ ~~– Intangible assets consisting of acquired trade name, acquired technology, employment/non-compete agreements, and acquired in-place leases with useful lives ranging from 6 months to 10 years~~ are included in receivables and other assets onand accrued expenses and other liabilities in the condensed consolidated balance ~~sheets. Intangible assets with estimable useful lives are amortized~~sheets, respectively, as of March 31, 2019. The adoption of ASC 842 did not have a material effect on ~~a straight-line basis over their respective estimated useful lives and reviewed~~our results of operations for ~~impairment whenever events or changes in circumstances indicate that~~ the carrying value may not be recoverable. The useful lives of intangible assets are evaluated on an annual basis to determine whether events and circumstances warrant a revision to the remaining useful life. See "~~Operating Real Estate Held in Consolidated Variable Interest Entities, Net~~"~~for further discussion of acquired in-place lease intangible assets.~~three months ended March 31, 2019.

~~Receivables and Other Assets~~ – Receivables and other assets as of September 30, 2017 and December 31, 2016 include restricted cash held by third parties of $34.1 million and $56.0 million, respectively. Included in restricted cash is $8.9 million and $35.6 million held in our Agency IO portfolio to be used for trading purposes and $7.9 million and $6.1 million held by counterparties as collateral for hedging instruments as of September 30, 2017 and December 31, 2016, respectively. Interest receivable on multi-family loans held in securitization trusts is also included in the amounts of $28.1 million and $24.1 million as of September 30, 2017 and December 31, 2016, respectively.

~~Financing Arrangements, Portfolio Investments~~ – The Company finances the majority of its investment securities available for sale using repurchase agreements. Under a repurchase agreement, an asset is sold to a counterparty to be repurchased at a future date at a predetermined price, which represents the original sales price plus interest. The Company accounts for these repurchase agreements as financings and are carried at their contractual amounts, as specified in the respective agreements. Borrowings under repurchase agreements generally bear interest rates of a specified margin over one-month LIBOR.

~~Financing Arrangements, Residential Mortgage Loans~~ – The Company finances a portion of its residential mortgage loans, including its distressed residential mortgage loans, through a repurchase agreement expiring within 12 to 15 months. The borrowing under the repurchase agreement bears an interest rate of a specified margin over one-month LIBOR. The repurchase agreement is treated as a collateralized financing transaction and is carried at the contractual amounts, as specified in the respective agreement. Costs related to the establishment of the repurchase agreement which include underwriting, legal, accounting and other fees are reflected as deferred charges. Such costs are presented as a deduction from the corresponding debt liability on the Company’s accompanying condensed consolidated balance sheets in the amount of $0.4 million as of September 30, 2017 and $1.3 million as of December 31, 2016. These deferred charges are amortized as an adjustment to interest expense using the effective interest method, or straight line-method, if the result is not materially different.

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~~Residential Collateralized Debt Obligations (“Residential CDOs”)~~ – We use Residential CDOs to permanently finance our residential mortgage loans held in securitization trusts. For financial reporting purposes, the ARM loans held as collateral are recorded as assets of the Company and the Residential CDOs are recorded as the Company’s debt. The Company completed four securitizations in 2005 and 2006. The first three were accounted for as a permanent financing while the fourth was accounted for as a sale and accordingly, is not included in the Company’s accompanying condensed consolidated financial statements.

~~Multi-Family Collateralized Debt Obligations (“Multi-Family CDOs”)~~ – We consolidated the Consolidated K-Series including their debt, referred to as Multi-Family CDOs, in our condensed consolidated financial statements. The Multi-Family CDOs permanently finance the multi-family mortgage loans held in the Consolidated K-Series securitizations. For financial reporting purposes, the loans held as collateral are recorded as assets of the Company and the Multi-Family CDOs are recorded as the Company’s debt. We refer to both the Residential CDOs and Multi-Family CDOs as CDOs in this report.

~~Securitized Debt~~ – Securitized Debt represents third-party liabilities of Consolidated VIEs and excludes liabilities of the VIEs acquired by the Company that are eliminated on consolidation. The Company has entered into several financing transactions that resulted in the Company consolidating as VIEs the special purpose entities (the “SPEs”) that were created to facilitate the transactions and to which underlying assets in connection with the financing were transferred. The Company engaged in these transactions primarily to obtain permanent or longer term financing on a portion of its multi-family CMBS and acquired distressed residential mortgage loans.

Costs related to issuance of securitized debt which include underwriting, rating agency, legal, accounting and other fees are reflected as deferred charges. Such costs are presented as a deduction from the corresponding debt liability on the Company’s accompanying condensed consolidated balance sheets in the amount of $0.8 million and $1.4 million as of September 30, 2017 and December 31, 2016, respectively. These deferred charges are amortized as an adjustment to interest expense using the effective interest method, or straight line-method, if the result is not materially different.

~~Convertible Notes~~ – On January 23, 2017, the Company issued Convertible Notes to finance the acquisition of targeted assets and for general working capital purposes. The Company evaluated the conversion features of the Convertible Notes for embedded derivatives in accordance with ASC 815, ~~Derivatives and Hedging~~ ~~("ASC 815") and determined that the conversion features should not be bifurcated from the notes.~~

The Convertible Notes were issued at a 4% discount. Costs related to issuance of the Convertible Notes which include underwriting, legal, accounting and other fees are reflected as deferred charges. The discount and deferred charges are amortized as an adjustment to interest expense using the effective interest method. The discount and deferred issuance costs, net of amortization, are presented as a deduction from the corresponding debt liability on the Company's accompanying condensed consolidated balance sheets in the amount of $9.7 million as of September 30, 2017.

~~Derivative Financial Instruments~~ – In accordance with ASC 815, the Company records derivative financial instruments on its consolidated balance sheet as assets or liabilities at fair value. Changes in fair value are accounted for depending on the use of the derivative instruments and whether they qualify for hedge accounting treatment.

In connection with our investment in Agency IOs, the Company uses several types of derivative instruments such as interest rate swaps, futures, put and call options on futures and TBAs to hedge the interest rate risk, as well as spread risk associated with these investments. The Company also purchases, or sells short, To-Be-Announced securities (“TBAs”) through its Agency IO portfolio. TBAs are forward-settling purchases and sales of Agency RMBS where the underlying pools of mortgage loans are “To-Be-Announced.” Pursuant to these TBA transactions, we agree to purchase or sell, for future settlement, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. For TBA contracts that we have entered into, we have not asserted that physical settlement is probable, therefore we have not designated these forward commitments as hedging instruments. The use of TBAs, futures, options on futures and interest rate swaps in our Agency IO portfolio hedge the overall risk profile of investment securities in the portfolio. The derivative instruments in our Agency IO portfolio are not designated as hedging instruments, therefore realized and unrealized gains and losses associated with these derivative instruments are recognized through earnings and reported as part of the other income (loss) category in the Company's condensed consolidated statements of operations.

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The Company also uses interest rate swaps to hedge the variable cash flows associated with borrowings made under our financing arrangements and Residential CDOs. We typically pay a fixed rate and receive a floating rate based on one-month LIBOR, on the notional amount of the interest rate swaps. The floating rate we receive under our swap agreements has the effect of offsetting the repricing characteristics and cash flows of our financing arrangements. These interest rate swaps qualify as a cash flow hedge, where the effective portion of the gain or loss on the derivative instrument is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instruments in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during the period of change.

~~Termination of Hedging Relationships~~ – The Company employs risk management monitoring procedures to ensure that the designated hedging relationships are demonstrating, and are expected to continue to demonstrate, a high level of effectiveness. Hedge accounting is discontinued on a prospective basis if it is determined that the hedging relationship is no longer highly effective or expected to be highly effective in offsetting changes in fair value of the hedged item.

Additionally, the Company may elect to un-designate a hedge relationship during an interim period and re-designate upon the rebalancing of a hedge profile and the corresponding hedge relationship. When hedge accounting is discontinued, the Company continues to carry the derivative instruments at fair value with changes recorded in current earnings.

~~Manager Compensation~~ – We are a party to separate investment management agreements with Headlands Asset Management LLC (“Headlands”) and The Midway Group, LP (“Midway”), with Headlands providing investment management services with respect to our investments in certain distressed residential mortgage loans and Midway providing investment management services with respect to our investments in Agency IOs. These investment management agreements provide for the payment to our investment managers of a management fee, incentive fee and reimbursement of certain operating expenses, which are accrued and expensed during the period for which they are earned or incurred.

~~Other Comprehensive Income (Loss)~~ – The Company’s comprehensive income/(loss) attributable to the Company's common stockholders includes net income, the change in net unrealized gains/(losses) on its available for sale securities and its derivative hedging instruments, currently comprised of interest rate swaps, (to the extent that such changes are not recorded in earnings), adjusted by realized net gains/(losses) reclassified out of accumulated other comprehensive income/(loss) for available for sale securities, reduced by dividends declared on the Company’s preferred stock and increased for net loss attributable to non-controlling interest.

~~Employee Benefits Plans~~ – The Company sponsors a defined contribution plan (the “Plan”) for all eligible domestic employees. The Plan qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Company made no contributions to the Plan for the nine months ended September 30, 2017. The Company made $0.1 million in contributions to the Plan for the nine months ended September 30, 2016.

~~Stock Based Compensation~~ – The Company has awarded restricted stock to eligible employees and officers as part of their compensation. Compensation expense for equity based awards and stock issued for services are recognized over the vesting period of such awards and services based upon the fair value of the award at the grant date.

In May 2015, the Company granted certain Performance Share Awards (“PSAs”) which cliff vest after a three-year period, subject to the achievement of certain performance criteria based on a formula tied to the Company’s achievement of three-year total stockholder return (“TSR”) and the Company’s TSR relative to the TSR of certain peer companies. The feature in this award constitutes a “market condition” which impacts the amount of compensation expense recognized for these awards. The grant date fair values of PSAs were determined through Monte-Carlo simulation analysis.

~~Income Taxes~~ – The Company operates in such a manner so as to qualify as a REIT under the requirements of the Internal Revenue Code. Requirements for qualification as a REIT include various restrictions on ownership of the Company’s stock, requirements concerning distribution of taxable income and certain restrictions on the nature of assets and sources of income. A REIT must distribute at least 90% of its taxable income to its stockholders, of which 85% plus any undistributed amounts from the prior year must be distributed within the taxable year in order to avoid the imposition of an excise tax. Distribution of the remaining balance may extend until timely filing of the Company’s tax return in the subsequent taxable year. Qualifying distributions of taxable income are deductible by a REIT in computing taxable income.

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Certain activities of the Company are conducted through TRSs and therefore are subject to federal and various state and local income taxes. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

~~ASC 740,~~ ~~Income Taxes~~ ("ASC 740"), provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. In situations involving uncertain tax positions related to income tax matters, we do not recognize benefits unless it is more likely than not that they will be sustained. ASC 740 was applied to all open taxable years as of the effective date. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based on factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Company will recognize interest and penalties, if any, related to uncertain tax positions as income tax expense.

~~Earnings Per Share~~ – Basic earnings per share excludes dilution and is computed by dividing net income attributable to the Company's common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

~~Segment Reporting –~~ ~~ASC 280,~~ ~~Segment Reporting~~, is the authoritative guidance for the way public entities report information about operating segments in their annual financial statements. We are a REIT focused on the business of acquiring, investing in, financing and managing primarily mortgage-related and residential housing-related assets and financial assets, and currently operate in only one reportable segment.

Summary of Recent Accounting Pronouncements

~~Revenue Recognition (Topic 606)~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~ (“ASU 2014-09”). This guidance creates a new, principle-based revenue recognition framework that will affect nearly every revenue-generating entity. ASU 2014-09 also creates a new topic in the Codification, Topic 606 (“ASC 606”). In addition to superseding and replacing nearly all existing GAAP revenue recognition guidance, including industry-specific guidance, ASC 606 does the following: (1) establishes a new control-based revenue recognition model; (2) changes the basis for deciding when revenue is recognized over time or at a point in time; (3) provides new and more detailed guidance on specific aspects of revenue recognition; and (4) expands and improves disclosures about revenue. In August 2015, the FASB issued ASU 2015-14 that defers the effective date of ASU 2014-09 for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods therein. Early application is permitted for public business entities only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

ASC 606 applies to all contracts with customers with exceptions for financial instruments and other contractual rights or obligations that are within the scope of other ASC Topics. Exclusions from the scope of ASC 606 include investment securities available for sale (subject to ASC 320, ~~Investments - Debt and Equity Securities~~ ~~or ASC 325,~~ ~~Investments - Other); residential mortgage loans, distressed residential mortgage loans, multi-family loans, and mezzanine loan and preferred equity investments (subject to either ASC 310,~~ ~~Receivables~~ ~~or ASC 825,~~ ~~Financial Instruments); derivative assets and derivative liabilities (subject to ASC 815,~~ ~~Derivatives and Hedging); and investment in unconsolidated entities (subject to either ASC 323,~~ ~~Investments- Equity Method and Joint Ventures~~ ~~or ASC 825,~~ ~~Financial Instruments~~). The Company evaluated the applicability of this ASU with respect to its investment portfolio, considering the scope exceptions listed above, and has determined that the adoption of this ASU will not have a material impact on the Company's financial condition or results of operations as the majority of the Company's revenue is generated by financial instruments and other contractual rights and obligations that are not within the scope of ASC 606.

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Financial Instruments ~~—Credit~~— Credit Losses (Topic 326)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments ~~—Credit~~— Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendments are effective for ~~all~~public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption as of the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 is permitted. The Company is currently assessing the impact of this guidance as the ASU will have an effect on the Company's estimation of credit losses on distressed residential mortgage loans, residential mortgage loans held in securitization trusts, residential mortgage loans, and ~~mezzanine loans and~~ preferred equity and mezzanine loan investments that are accounted for as loans.

~~Statement~~

Table of ~~Cash Flows~~Contents

Fair Value Measurement (Topic ~~230)~~820)

In ~~November 2016,~~August 2018, the FASB issued ASU ~~2016-18,~~2018-13, ~~Statement of Cash Flows~~Fair Value Measurement (Topic ~~230)~~820): ~~Restricted Cash~~Disclosure Framework - Changes to Disclosure Requirements for Fair Value Measurement ("ASU

~~2016-18"~~ 2018-13"). These amendments ~~require that a statement~~add, modify, or remove disclosure requirements regarding the range and weighted average of ~~cash flows explain~~significant unobservable inputs used to develop Level 3 fair value measurements, narrative descriptions of measurement uncertainty, and the ~~change during the period in the total of cash,~~

cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents.valuation processes for Level 3 fair value measurements. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company adopted the ASU effective January 1, 2017 and included restricted cash of $34.1 million and $78.6 million as of September 30, 2017 and 2016, respectively, with cash and cash equivalents as shown on the condensed consolidated statements of cash flows.

~~Intangibles - Goodwill and Other (Topic 350)~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ ("ASU 2017-04"). The amendments simplify annual or interim goodwill impairment tests by eliminating a second step to compute the implied fair value of goodwill if the fair value of a reporting unit is less than its carrying amount. Instead, should the fair value of a reporting unit be less than its carrying amount, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value (in an amount not to exceed the total amount of goodwill allocated to that reporting unit). The amendments are effective for all entities for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted ~~for interim~~upon issuance of this update. An entity is permitted to early adopt any removed or ~~annual goodwill impairment tests performed on testing dates on or after January 1, 2017.~~modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company ~~adopted~~anticipates the ~~ASU~~implementation of this guidance as of the effective ~~January 1, 2017~~date will result in additional and ~~will apply the guidance~~modified disclosures with respect to ~~the performance of our annual impairment test of $25.2 million in goodwill for the year ended December 31, 2017.~~its Level 3 fair value measurements.

2113

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3.	Investment Securities Available For Sale

Investment securities available for sale consisted of the following as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollar amounts in thousands):


	September 30, 2017										December 31, 2016									March 31, 2019									December 31, 2018
	Amortized Cost		Unrealized					Fair Value			Amortized Cost		Unrealized					Fair Value		Amortized Cost		Unrealized					Fair Value		Amortized Cost			Unrealized					Fair Value
			Gains		Losses					Gains			Losses			Gains						Losses				Gains					Losses
Agency RMBS ⁽¹⁾
Agency ARMs
Freddie Mac	$	34,733	$	21	$	(351	)	$	34,403		$	39,138	$	24	$	(528	)	$	38,634	$	26,053	$	—	$	(981	)	$	25,072	$	26,338		$	—	$	(1,052	)	$	25,286
Fannie Mae	59,583		13		(545		)	59,051			69,031		71		(698		)	68,404		41,673		6		(1,196		)	40,483		43,984			8		(1,384		)	42,608
Ginnie Mae	5,022		—		(209		)	4,813			6,011		—		(204		)	5,807		3,440		—		(133		)	3,307		3,627			—		(127		)	3,500
Total Agency ARMs(1)	99,338		34		(1,105		)	98,267			114,180		95		(1,430		)	112,845		71,166		6		(2,310		)	68,862		73,949			8		(2,563		)	71,394
Agency Fixed Rate
Agency Fixed- Rate
Freddie Mac	21,556		—		(586		)	20,970			26,338		—		(644		)	25,694		85,182		—		(1,041		)	84,141		87,018			—		(2,526		)	84,492
Fannie Mae	267,169		—		(9,089		)	258,080			312,515		—		(10,035		)	302,480		889,070		273		(18,408		)	870,935		915,039			—		(33,195		)	881,844
Ginnie Mae	379		—		(5		)	374			457		—		(4		)	453		—		—		—			—		—			—		—			—
Total Agency Fixed Rate	289,104		—		(9,680		)	279,424			339,310		—		(10,683		)	328,627
Agency IOs ⁽¹⁾
Freddie Mac	9,423		25		(2,571		)	6,877			19,768		559		(3,363		)	16,964
Fannie Mae	13,752		50		(3,316		)	10,486			27,597		478		(4,777		)	23,298
Ginnie Mae	23,858		411		(4,291		)	19,978			49,788		1,223		(6,382		)	44,629
Total Agency IOs	47,033		486		(10,178		)	37,341			97,153		2,260		(14,522		)	84,891
Total Agency Fixed-Rate																				974,252		273		(19,449		)	955,076		1,002,057			—		(35,721		)	966,336

Total Agency RMBS	435,475		520		(20,963		)	415,032			550,643		2,355		(26,635		)	526,363		1,045,418		279		(21,759		)	1,023,938		1,076,006			8		(38,284		)	1,037,730
Non-Agency RMBS	131,253		1,789		(20		)	133,022			162,220		1,218		(154		)	163,284
U.S. Treasury securities ⁽¹⁾	2,920		4		—			2,924			2,920		—		(33		)	2,887
CMBS ⁽²⁾	105,020		18,163		—			123,183			113,955		12,876		(389		)	126,442
Non-Agency RMBS ⁽¹⁾																				310,763		3,738		(415		)	314,086		215,337			166		(1,466		)	214,037
CMBS ⁽¹⁾ ⁽²⁾																				236,873		9,068		—			245,941		243,046			17,815		(376		)	260,485
Total investment securities available for sale	$	674,668	$	20,476	$	(20,983	)	$	674,161		$	829,738	$	16,449	$	(27,211	)	$	818,976	$	1,593,054	$	13,085	$	(22,174	)	$	1,583,965	$	1,534,389		$	17,989	$	(40,126	)	$	1,512,252


⁽¹⁾	~~Included in investment securities available for sale are~~For the Company's Agency ~~IOs, Agency~~ARMs, non-Agency RMBS, and ~~U.S. Treasury~~CMBS securities ~~managed by Midway that~~with stated reset periods, the weighted average reset periods are ~~measured at fair value through earnings.~~twenty-nine months, eight months, and one month, respectively.


⁽²⁾	Included in CMBS is ~~$46.6 million and $43.9~~$52.7 million of investment securities available for sale held in securitization trusts as of ~~September 30, 2017 and~~ December 31, ~~2016, respectively.~~2018.

Realized Gain or Loss Activity

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019, the Company received total proceeds of approximately ~~$49.5~~$56.8 million ~~and $102.2 million on sales~~from the sale of investment securities available for sale, realizing a net gain of approximately ~~$3.0 million and $0.7 million, respectively.~~$16.8 million. During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2018, the Company received total proceeds of approximately ~~$9.6~~$10.1 million ~~and $112.0 million on sales~~from the sale of investment securities available for sale, realizing a net loss of approximately ~~$1.4 million and $2.4 million, respectively.~~$3.4 million.

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Weighted Average Life

Actual maturities of our available for sale securities are generally shorter than stated contractual maturities (with maturities up to 30 years), as they are affected by periodic payments and prepayments of principal on the underlying mortgages. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, based on management’s estimates using the three month historical constant prepayment rate (“CPR”), the weighted average life of the Company’s available for sale securities portfolio was approximately ~~3.3~~8.3 years and ~~4.3~~5.7 years, respectively.

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The following table sets forth the weighted average lives of our investment securities available for sale as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollar amounts in thousands):

Weighted Average Life September 30, 2017 December 31, 2016
0 to 5 years $ 508,612
$ 606,079
Over 5 to 10 years 152,559
177,765
10+ years 12,990
35,132
Total $ 674,161
$ 818,976

~~Portfolio Interest Reset Periods~~

The following tables set forth the stated reset periods of our investment securities available for sale and investment securities available for sale held in securitization trusts at September 30, 2017 and December 31, 2016 at carrying value (dollar amounts in thousands):

September 30, 2017 December 31, 2016
Less than 6
months 6 to 24
months More than
24 months Total Less than
6 months 6 to 24
months More than
24 months Total
Agency RMBS $ 36,940
$ 23,332
$ 354,760
$ 415,032
$ 53,043
$ 27,272
$ 446,048
$ 526,363
Non-Agency RMBS 6,205
—
126,817
133,022
50,080
—
113,204
163,284
U.S. Treasury securities —
—
2,924
2,924
—
—
2,887
2,887
CMBS 76,560
—
46,623
123,183
82,545
—
43,897
126,442
Total investment securities available for sale $ 119,705
$ 23,332
$ 531,124
$ 674,161
$ 185,668
$ 27,272
$ 606,036
$ 818,976



Weighted Average Life	March 31, 2019		December 31, 2018
0 to 5 years	$	549,663	$	456,947
Over 5 to 10 years	552,393		1,043,369
10+ years	481,909		11,936
Total	$	1,583,965	$	1,512,252

Unrealized Losses in ~~OCI~~Other Comprehensive Income

The following tables present the Company's investment securities available for sale in an unrealized loss position reported through ~~OCI,~~other comprehensive income, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollar amounts in thousands):


September 30, 2017	Less than 12 months					Greater than 12 months					Total
March 31, 2019																Less than 12 months					Greater than 12 months					Total
	Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses
Agency RMBS	$	91,170	$	(914	)	$	281,152	$	(9,866	)	$	372,322	$	(10,780	)	$	—	$	—		$	1,004,264	$	(21,759	)	$	1,004,264	$	(21,759	)
Non-Agency RMBS	—		—			212		(20		)	212		(20		)	51,269		(401		)	150		(14		)	51,419		(415		)
Total investment securities available for sale	$	91,170	$	(914	)	$	281,364	$	(9,886	)	$	372,534	$	(10,800	)	$	51,269	$	(401	)	$	1,004,414	$	(21,773	)	$	1,055,683	$	(22,174	)

At ~~September 30, 2017,~~March 31, 2019, the Company does not intend to sell any of its investments that were in an unrealized loss position, and it is “more likely than not” that the Company will not be required to sell these securities before recovery of their amortized cost basis, which may be at their maturity.

~~Table of Contents~~

Gross unrealized losses on the Company’s Agency RMBS were ~~$10.8~~$21.8 million at ~~September 30, 2017.~~March 31, 2019. Agency RMBS are issued by ~~Government Sponsored Entities (“GSEs”)~~GSEs and enjoy either the implicit or explicit backing of the full faith and credit of the U.S. Government. While the Company’s Agency RMBS are not rated by any rating agency, they are currently perceived by market participants to be of high credit quality, with risk of default limited to the unlikely event that the U.S. Government would not continue to support the GSEs. Given the credit quality inherent in Agency RMBS, the Company does not consider any of the current impairments on its Agency RMBS to be ~~credit-related.~~credit related. In assessing whether it is more likely than not that it will be required to sell any impaired security before its anticipated recovery, which may be at its maturity, the Company considers for each impaired security, the significance of each investment, the amount of impairment, the projected future performance of such impaired securities, as well as the Company’s current and anticipated leverage capacity and liquidity position. Based on these analyses, the Company determined that at ~~September 30, 2017~~March 31, 2019 any unrealized losses on its Agency RMBS were temporary.

Gross unrealized losses on the Company's non-Agency RMBS were $0.4 million at March 31, 2019, respectively. Credit risk associated with non-Agency RMBS is regularly assessed as new information regarding the underlying collateral becomes available and based on updated estimates of cash flows generated by the underlying collateral. Based upon the most recent evaluation, the Company does not consider these unrealized losses to be indicative of other-than-temporary impairment and does not believe that these unrealized losses are credit related, but are rather a reflection of current market yields and/or marketplace bid-ask spreads.

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December 31, 2016	Less than 12 months					Greater than 12 months					Total
December 31, 2018																Less than 12 months					Greater than 12 months					Total
	Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses
Agency RMBS	$	96,357	$	(1,290	)	$	328,474	$	(10,819	)	$	424,831	$	(12,109	)	$	310,783	$	(8,037	)	$	726,028	$	(30,247	)	$	1,036,811	$	(38,284	)
Non-Agency RMBS	—		—			596		(154		)	596		(154		)	187,395		(1,451		)	158		(15		)	187,553		(1,466		)
CMBS	16,523		(389		)	—		—			16,523		(389		)	75,292		(376		)	—		—			75,292		(376		)
Total investment securities available for sale	$	112,880	$	(1,679	)	$	329,070	$	(10,973	)	$	441,950	$	(12,652	)	$	573,470	$	(9,864	)	$	726,186	$	(30,262	)	$	1,299,656	$	(40,126	)

Other than Temporary Impairment

For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, the Company ~~recognized no~~did not recognize other-than-temporary impairment through earnings.


4.	~~Residential Mortgage Loans Held in Securitization Trusts (Net) and Real Estate Owned~~

~~Residential mortgage loans held in securitization trusts (net) consist of the following as of September 30, 2017 and December 31, 2016, respectively (dollar amounts in thousands):~~

September 30, 2017 December 31, 2016
Unpaid principal balance $ 83,068
$ 98,303
Deferred origination costs – net 532
623
Reserve for loan losses (3,725 ) (3,782 )
Total $ 79,875
$ 95,144

~~Allowance for Loan Losses -~~ The following table presents the activity in the Company's allowance for loan losses on residential mortgage loans held in securitization trusts for the nine months ended September 30, 2017 and 2016, respectively (dollar amounts in thousands):

Nine Months Ended September 30,
2017 2016
Balance at beginning of period $ 3,782
$ 3,399
Provisions for loan losses 306
557
Transfer to real estate owned (303 ) —
Charge-offs (60 ) (123 )
Balance at the end of period $ 3,725
$ 3,833

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On an ongoing basis, the Company evaluates the adequacy of its allowance for loan losses. The Company’s allowance for loan losses as of September 30, 2017 was $3.7 million, representing 448 basis points of the outstanding principal balance of residential loans held in securitization trusts, as compared to 385 basis points as of December 31, 2016. As part of the Company’s allowance for loan loss adequacy analysis, management will assess an overall level of allowances while also assessing credit losses inherent in each non-performing residential mortgage loan held in securitization trusts. These estimates involve the consideration of various credit related factors, including but not limited to, current housing market conditions, current loan to value ratios, delinquency status, the borrower’s current economic and credit status and other relevant factors.

~~Real Estate Owned –~~ The following table presents the activity in the Company’s real estate owned held in residential securitization trusts for the nine months ended September 30, 2017 and 2016, respectively (dollar amounts in thousands):

Nine Months Ended September 30,
2017 2016
Balance at beginning of period $ 150
$ 411
Write downs —
—
Transfer from/(to) mortgage loans held in securitization trusts 742
173
Disposal (150 ) (411 )
Balance at the end of period $ 742
$ 173

Real estate owned held in residential securitization trusts are included in receivables and other assets on the accompanying condensed consolidated balance sheets and write downs are included in recovery of loan losses in the accompanying condensed consolidated statements of operations for reporting purposes.

All of the Company’s mortgage loans and real estate owned held in residential securitization trusts are pledged as collateral for the Residential CDOs issued by the Company. The Company’s net investment in the residential securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between (i) the carrying amount of the mortgage loans, real estate owned and receivables held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding, was $4.6 million and $4.4 million as of September 30, 2017 and December 31, 2016, respectively.

~~Delinquency Status of Our Residential Mortgage Loans Held in Securitization Trusts~~

As of September 30, 2017, we had 24 delinquent loans with an aggregate principal amount outstanding of approximately $15.4 million categorized as Residential Mortgage Loans Held in Securitization trusts (net), of which $10.3 million, or 67%, are under some form of temporary modified payment plan. The table below shows delinquencies in our portfolio of residential mortgage loans held in securitization trusts, including REO through foreclosure, as of September 30, 2017 (dollar amounts in thousands):

~~September 30, 2017~~

Days Late
Number of
Delinquent
Loans

Total
Unpaid
Principal

% of Loan
Portfolio
30 - 60 — $ —
—
61 - 90 — $ —
—
90 + 24 $ 15,410
18.32 %
Real estate owned through foreclosure 2 $ 1,045
1.24 %

~~Table of Contents~~

As of December 31, 2016, we had 31 delinquent loans with an aggregate principal amount outstanding of approximately $18.7 million categorized as Residential Mortgage Loans Held in Securitization Trusts (net), of which $11.2 million, or 60%, are under some form of modified payment plan. The table below shows delinquencies in our portfolio of residential mortgage loans held in securitization trusts, including real estate owned through foreclosure (REO), as of December 31, 2016 (dollar amounts in thousands):

~~December 31, 2016~~

Days Late
Number of Delinquent
Loans

Total
Unpaid Principal

% of Loan
Portfolio
30 - 60 1 $ 247
0.25 %
61 - 90 — $ —
—
90 + 30 $ 18,416
18.68 %
Real estate owned through foreclosure 1 $ 268
0.27 %

The geographic concentrations of credit risk exceeding 5% of the total loan balances in our residential mortgage loans held in securitization trusts and real estate owned held in residential securitization trusts as of September 30, 2017 and December 31, 2016 are as follows:

September 30, 2017 December 31, 2016
New York 32.0 % 33.8 %
Massachusetts 19.9 % 19.9 %
New Jersey 11.1 % 10.8 %
Florida 10.0 % 8.9 %
Connecticut 8.1 % 7.4 %
Maryland 5.3 % 5.1 %


5.4.	Distressed and Other Residential Mortgage Loans, At Fair Value

Certain of the Company’s acquired residential mortgage loans, including distressed residential mortgage loans, non-QM loans and second ~~lien~~ mortgages, are presented at fair value on its condensed consolidated balance sheets as a result of a fair value election made at the time of acquisition. Subsequent changes in fair value are reported in current period earnings and presented in net gain (loss) on distressed and other residential mortgage loans at fair value on the Company’s condensed consolidated statements of operations.

The Company’s distressed and other residential mortgage loans at fair value consist of the following as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (dollar amounts in thousands):

Principal Premium/(Discount) Unrealized Gains/(Losses) Carrying Value
September 30, 2017 $ 73,546
$ (4,258 ) $ 224
$ 69,512
December 31, 2016 $ 17,540
$ 229
$ —
$ 17,769



	Principal		Premium/(Discount)			Unrealized Gains/(Losses)		Carrying Value
March 31, 2019	$	927,196	$	(63,569	)	$	11,939	$	875,566
December 31, 2018	788,372		(54,905		)	4,056		737,523

As of March 31, 2019, the Company is committed to purchase $0.3 million of second mortgages from originators.

The following table presents the components of net gain (loss) on distressed and other residential mortgage loans at fair value for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018, respectively (dollar amounts in thousands):

September 30, 2017 September 30, 2016
Net realized gain on payoff and sale of loans $ 493
$ —
Net unrealized gains $ 224
$ —

~~Table of Contents~~



	March 31, 2019		March 31, 2018
Net realized gain on payoff and sale of loans	$	3,127	$	40
Net unrealized gains (losses)	7,883		(206		)

The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of distressed and other residential mortgage loans at fair value as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively, are as follows:


	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
California	34.98	%	63.32	%	27.8	%	27.9	%
Florida	8.48	%	5.63	%	9.8	%	9.0	%
New Jersey	8.28	%	2.46	%
Texas					5.1	%	4.2	%
New York					5.0	%	5.1	%

The following table presents the fair value and aggregate unpaid principal balance of the Company's distressed and other residential mortgage loans at fair value greater than 90 days past due and in non-accrual status as of March 31, 2019 and December 31, 2018, respectively (dollar amounts in thousands):



	Fair Value		Unpaid Principal Balance
March 31, 2019	$	49,284	$	60,858
December 31, 2018	60,117		75,167

Distressed and other residential mortgage loans with a fair value of approximately $677.6 million and $626.2 million at March 31, 2019 and December 31, 2018, respectively, are pledged as collateral for master repurchase agreements (see Note 12).

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6.5.	Distressed and Other Residential Mortgage Loans, Net

Distressed Residential Mortgage Loans, Net

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the carrying value of the Company’s distressed residential mortgage loans ~~including distressed residential mortgage loans held in securitization trusts,~~accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30") amounts to approximately ~~$369.7~~$209.3 million and ~~$503.1~~$228.5 million, respectively.

The Company ~~considers its~~did not purchase ~~price~~loans accounted 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 acquiredunder ASC 310-30 during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016, respectively (dollar amounts in thousands):~~2018, respectively.

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~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively (dollar amounts in thousands):


	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Balance at beginning of period	$	530,511		$	579,009		$	195,559		$	303,949
Additions	91,356			54,917			587			1,694
Disposals	(263,475		)	(119,113		)	(15,080		)	(8,694		)
Accretion	(16,635		)	(25,166		)	(1,825		)	(5,354		)
Balance at end of period ⁽¹⁾	$	341,757		$	489,647		$	179,241		$	291,595

⁽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~~three month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 is not necessarily indicative of future results.

~~Table of Contents~~

The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of our distressed residential mortgage loans ~~including~~as of March 31, 2019 and December 31, 2018, respectively, are as follows:



	March 31, 2019		December 31, 2018
Florida	10.6	%	10.4	%
North Carolina	9.7	%	9.0	%
Georgia	5.9	%	7.2	%
New York	5.7	%	5.4	%
Virginia	5.6	%	5.3	%
South Carolina	5.6	%	5.6	%
Ohio	5.3	%	5.0	%
Texas	5.2	%	4.9	%
California	5.1	%	4.8	%

The Company had no distressed residential mortgage loans held in securitization trusts pledged as collateral for securitized debt as of ~~September 30, 2017 and December~~March 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 %

2019. The Company's distressed residential mortgage loans held in securitization trusts with a carrying value of approximately ~~$134.0 million and $195.3~~$88.1 million at ~~September 30, 2017 and~~ December 31, ~~2016, respectively, are~~2018 were pledged as collateral for certain of the Securitized Debt issued by the Company (see Note 109). In addition, distressed residential mortgage loans with a carrying value of approximately ~~$206.3~~$114.8 million and ~~$279.9~~$128.1 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively, are pledged as collateral for a ~~Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch~~master repurchase agreement (see Note 1412).

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Residential Mortgage Loans Held in Securitization Trusts, Net

Residential mortgage loans held in securitization trusts are comprised of certain ARMs transferred to Consolidated VIEs that have been securitized into sequentially rated classes of beneficial interests. Residential mortgage loans held in securitization trusts, net consist of the following as of March 31, 2019 and December 31, 2018, respectively (dollar amounts in thousands):



	March 31, 2019			December 31, 2018
Unpaid principal balance	$	56,140		$	60,171
Deferred origination costs – net	359			383
Reserve for loan losses	(3,630		)	(3,759		)
Total	$	52,869		$	56,795

Allowance for Loan Losses - The following table presents the activity in the Company's allowance for loan losses on residential mortgage loans held in securitization trusts for the three months ended March 31, 2019 and 2018, respectively (dollar amounts in thousands):



	Three Months Ended March 31,
	2019			2018
Balance at beginning of period	$	3,759		$	4,191
Provision for (recovery of) loan losses	38			(110		)
Transfer to real estate owned	(167		)	—
Charge-offs	—			—
Balance at the end of period	$	3,630		$	4,081

On an ongoing basis, the Company evaluates the adequacy of its allowance for loan losses. The Company’s allowance for loan losses as of March 31, 2019 was $3.6 million, representing 647 basis points of the outstanding principal balance of residential mortgage loans held in securitization trusts, as compared to 625 basis points as of December 31, 2018. As part of the Company’s allowance for loan loss adequacy analysis, management will assess an overall level of allowances while also assessing credit losses inherent in each non-performing residential mortgage loan held in securitization trusts. These estimates involve the consideration of various credit related factors, including, but not limited to, current housing market conditions, current loan to value ratios, delinquency status, the borrower’s current economic and credit status and other relevant factors.

All of the Company’s residential mortgage loans held in securitization trusts and real estate owned are pledged as collateral for the residential collateralized debt obligations (the "Residential CDOs") issued by the Company. The Company’s net investment in the residential securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between (i) the carrying amount of the mortgage loans, real estate owned and receivables held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding, was $4.8 million as of March 31, 2019 and December 31, 2018.

Delinquency Status of Our Residential Mortgage Loans Held in Securitization Trusts

As of March 31, 2019, we had 18 delinquent loans with an aggregate principal amount outstanding of approximately $10.5 million categorized as residential mortgage loans held in securitization trusts, net, of which $6.4 million, or 60%, are under some form of temporary modified payment plan. The table below shows delinquencies in our portfolio of residential mortgage loans held in securitization trusts as of March 31, 2019 (dollar amounts in thousands):

March 31, 2019



Days Late	Number of Delinquent Loans	Total Unpaid Principal		% of Loan Portfolio
90 +	18	$	10,530	18.65	%
Real estate owned through foreclosure	1	$	360	0.64	%

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As of December 31, 2018, we had 19 delinquent loans with an aggregate principal amount outstanding of approximately $10.9 million categorized as residential mortgage loans held in securitization trusts, net, of which $6.6 million, or 61%, are under some form of temporary modified payment plan. The table below shows delinquencies in our portfolio of residential mortgage loans held in securitization trusts as of December 31, 2018 (dollar amounts in thousands):

December 31, 2018



Days Late	Number of Delinquent Loans	Total Unpaid Principal		% of Loan Portfolio
90 +	19	$	10,926	18.16	%

The geographic concentrations of credit risk exceeding 5% of the total loan balances in our residential mortgage loans held in securitization trusts as of March 31, 2019 and December 31, 2018 are as follows:



	March 31, 2019		December 31, 2018
New York	33.9	%	33.9	%
Massachusetts	18.3	%	20.0	%
New Jersey	14.9	%	14.5	%
Florida	10.5	%	9.9	%
Maryland	5.4	%	5.3	%

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7.6.	Consolidated K-Series

The Company's investments in first loss POs, certain IOs and mezzanine securities issued by certain Freddie Mac-sponsored multi-family loan K-series securitizations that we consolidate in our financial statements in accordance with GAAP represent the "Consolidated K-Series." The Company has elected the fair value option on the assets and liabilities held within the Consolidated K-Series, which requires that changes in valuations in the assets and liabilities of the Consolidated K-Series be reflected in the Company's condensed consolidated statements of operations. Our investment in the Consolidated K-Series is limited to the multi-family CMBS comprised of first loss ~~tranche PO,~~POs and certain IOs and mezzanine securities issued by certain Freddie Mac-sponsored multi-family loan K-Series securitizations that we consolidate with an aggregate net carrying value of ~~$408.7~~$781.1 million and ~~$314.9~~$657.6 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (see Note 109). The Consolidated K-Series is comprised of ~~six~~eleven and ~~five~~nine Freddie Mac-sponsored multi-family loan K-Series securitizations as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively.

The condensed consolidated balance sheets of the Consolidated K-Series at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively, are as follows (dollar amounts in thousands):


Balance Sheets	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Assets
Multi-family loans held in securitization trusts	$	8,399,334	$	6,939,844	$	14,328,336	$	11,679,847
Receivables	28,103		24,098		47,186		41,850
Total Assets	$	8,427,437	$	6,963,942	$	14,375,522	$	11,721,697
Liabilities and Equity
Multi-family CDOs	$	7,990,619	$	6,624,896	$	13,547,195	$	11,022,248
Accrued expenses	27,783		24,003		46,154		41,102
Total Liabilities	8,018,402		6,648,899		13,593,349		11,063,350
Equity	409,035		315,043		782,173		658,347
Total Liabilities and Equity	$	8,427,437	$	6,963,942	$	14,375,522	$	11,721,697

The multi-family loans held in securitization trusts had an unpaid aggregate principal ~~balance~~balances of approximately ~~$8.1~~$13.8 billion and ~~$6.7~~$11.5 billion at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. The multi-family CDOs (the "Multi-Family CDOs") had anaggregate unpaid principal ~~balance~~balances of approximately ~~$8.1~~$13.8 billion and ~~$6.7~~$11.5 billion at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the current weighted average interest rate on these ~~multi-family~~Multi-Family CDOs was ~~4.07%~~4.02% and ~~3.97%~~3.96%, respectively.

~~Table of Contents~~

The Company does not have any claims to the assets or obligations for the liabilities of the Consolidated K-Series (other than those securities represented by our first loss POs, IOs and mezzanine ~~tranche~~ securities). We have elected the fair value option for the Consolidated K-Series. The net fair value of our investment in the Consolidated K-Series, which represents the difference between the carrying values of multi-family loans held in securitization trusts less the carrying value of ~~multi-family~~Multi-Family CDOs, approximates the fair value of our underlying ~~securities. The fair value of our underlying~~ securities ~~is determined using the same valuation methodology as our CMBS investments available for sale~~ (see Note 1816).

The condensed consolidated statements of operations of the Consolidated K-Series for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively, are as follows (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
Statements of Operations	2017		2016		2017		2016		2019		2018
Interest income	$	76,186	$	62,126	$	213,242	$	187,427	$	111,768	$	85,092
Interest expense	67,030		55,359		187,835		167,783		96,797		74,478
Net interest income	9,156		6,767		25,407		19,644		14,971		10,614
Unrealized gain on multi-family loans and debt held in securitization trusts, net	2,353		738		5,184		2,340		9,410		7,545
Net income	$	11,509	$	7,505	$	30,591	$	21,984	$	24,381	$	18,159

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The geographic concentrations of credit risk exceeding 5% of the total loan balances related to multi-family loans held in securitization trusts as of March 31, 2019 and our CMBS investments included in investment securities available for sale, held in securitization trusts, and multi-family loans held in securitization trusts as of ~~September 30, 2017 and~~ December 31, ~~2016, respectively,~~2018 are as follows:


	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
California	11.8	%	13.8	%	16.0	%	14.8	%
Texas	10.5	%	12.4	%	12.5	%	13.0	%
Maryland					6.0	%	5.0	%
New York	6.9	%	8.1	%	5.1	%	6.4	%
Maryland	4.5	%	5.3	%

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8.7.	~~Investment~~Investments in Unconsolidated Entities

The Company's investments in unconsolidated entities accounted for under the equity method consist of the following as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollar amounts in thousands):


	September 30, 2017			December 31, 2016			March 31, 2019			December 31, 2018
Investment Name	Ownership Interest	Carrying Amount		Ownership Interest	Carrying Amount		Ownership Interest	Carrying Amount		Ownership Interest	Carrying Amount
Autumnwood Investments LLC	—	$	2,020	—	$	2,092
200 RHC Hoover, LLC⁽¹⁾	—	—		63%	8,886
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively)	45%	8,222		45%	7,949		45%	$	9,217	45%	$	8,948
Somerset Deerfield Investor, LLC							45%	16,504		45%	16,266
RS SWD Owner, LLC, RS SWD Mitchell Owner, LLC, RS SWD IF Owner, LLC, RS SWD Mullis Owner, LLC, RS SWD JH Mullis Owner, LLC and RS SWD Saltzman Owner, LLC (collectively)							43%	4,752		43%	4,714
Audubon Mezzanine Holdings, L.L.C. (Series A)							57%	10,701		57%	10,544
EP 320 Growth Fund, L.L.C. (Series A) and Turnbury Park Apartments - BC, L.L.C. (Series A) (collectively)							46%	6,612		—	—
Walnut Creek Properties Holdings, L.L.C.							36%	8,003		—	—
Total - Equity Method		$	10,242		$	18,927		$	55,789		$	40,472


⁽¹⁾	On March 31, 2017, the Company reconsidered its evaluation of its variable interest in 200 RHC Hoover, LLC ("Riverchase Landing") and determined that it became the primary beneficiary of Riverchase Landing. Accordingly, on this date, the Company consolidated Riverchase Landing into its condensed consolidated financial statements (see~~Note 10).~~

The Company's investments in unconsolidated entities accounted for under the equity method using the fair value option consist of the following as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollar amounts in thousands):

September 30, 2017 December 31, 2016
Investment Name Ownership Interest Carrying Amount Ownership Interest Carrying Amount
Morrocroft Neighborhood Stabilization Fund II, LP 11% $ 11,206
11% $ 9,732
Evergreens JV Holdings, LLC 85% 4,120
85% 3,810
Bent Tree JV Holdings, LLC⁽¹⁾
— —
78% 9,890
Summerchase LR Partners LLC⁽¹⁾
— —
80% 4,410
Lake Mary Realty Partners, LLC⁽¹⁾
— —
80% 7,690
The Preserve at Port Royal Venture, LLC 77% 12,850
77% 12,280
WR Savannah Holdings, LLC 90% 12,850
90% 12,520
Total - Fair Value Option $ 41,026
$ 60,332


⁽¹⁾	~~The unconsolidated entity redeemed the Company's investment in the three months ended September 30, 2017.~~

~~Table of Contents~~



	March 31, 2019			December 31, 2018
Investment Name	Ownership Interest	Carrying Amount		Ownership Interest	Carrying Amount
Morrocroft Neighborhood Stabilization Fund II, LP	11%	$	11,185	11%	$	10,954
Evergreens JV Holdings, LLC	85%	11,340		85%	8,200
The Preserve at Port Royal Venture, LLC	77%	14,050		77%	13,840
Total - Fair Value Option		$	36,575		$	32,994

The following table presents income from investments in unconsolidated entities for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016~~March 31, 2018 (dollar amounts in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
Investment Name 2017 2016 2017 2016
Autumnwood Investments LLC $ 64
$ 71
$ 137
$ 213
200 RHC Hoover, LLC —
276
275
1,091
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively) 252
189
741
189
RiverBanc LLC ⁽¹⁾
—
—
—
125
Kiawah River View Investors LLC ("KRVI") ⁽¹⁾
—
—
—
1,250
RB Development Holding Company, LLC ⁽¹⁾
—
—
—
107
RB Multifamily Investors LLC ⁽¹⁾
—
—
—
2,262
Morrocroft Neighborhood Stabilization Fund II, LP 394
244
1,374
702
Evergreens JV Holdings, LLC 161
79
464
89
Bent Tree JV Holdings, LLC⁽²⁾
1,210
157
1,795
257
Summerchase LR Partners LLC⁽²⁾
194
190
556
200
Lake Mary Realty Partners, LLC ⁽²⁾
2,312
238
2,745
258
The Preserve at Port Royal Venture, LLC 440
392
1,266
492
WR Savannah Holdings, LLC 405
362
1,030
422

⁽¹⁾

As of May 16, 2016, RiverBanc LLC, RB Development Holding Company, LLC, and RB Multifamily Investors LLC became wholly-owned subsidiaries of the Company as a result of the Company's acquisition of the remaining ownership interests in those entities held by other unaffiliated entities (~~see Note 23). Also as of May 16, 2016, the Company consolidated KRVI into its condensed consolidated financial statements (see Note 10~~).


⁽²⁾	~~Includes income recognized from redemption of the Company's investment during the three and nine months ended September 30, 2017.~~


9.	~~Mezzanine Loan and Preferred Equity Investments~~

~~Mezzanine loan and preferred equity investments consist of the following as of September 30, 2017 and December 31, 2016 (dollar amounts in thousands):~~

September 30, 2017 December 31, 2016
Investment amount $ 124,172
$ 101,154
Deferred loan fees, net (1,594 ) (1,004 )
Total $ 122,578
$ 100,150

~~There were no delinquent mezzanine loan or preferred equity investments as of September 30, 2017 and December 31, 2016.~~



	Three Months Ended March 31,
Investment Name	2019		2018
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively)	$	275	$	253
Morrocroft Neighborhood Stabilization Fund II, LP	232		282
Evergreens JV Holdings, LLC	3,224		194
The Preserve at Port Royal Venture, LLC	438		483
WR Savannah Holdings, LLC	—		361
Somerset Deerfield Investor, LLC	478		—
RS SWD Owner, LLC, RS SWD Mitchell Owner, LLC, RS SWD IF Owner, LLC, RS SWD Mullis Owner, LLC, RS SWD JH Mullis Owner, LLC and RS SWD Saltzman Owner, LLC (collectively)	131		—
Audubon Mezzanine Holdings, L.L.C. (Series A)	297		—
EP 320 Growth Fund, L.L.C. (Series A) and Turnbury Park Apartments - BC, L.L.C. (Series A) (collectively)	165		—
Walnut Creek Properties Holdings, L.L.C.	98		—

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8.	Preferred Equity and Mezzanine Loan Investments

Preferred equity and mezzanine loan investments consist of the following as of March 31, 2019 and December 31, 2018 (dollar amounts in thousands):



	March 31, 2019			December 31, 2018
Investment amount	$	176,486		$	166,789
Deferred loan fees, net	(1,358		)	(1,234		)
Total	$	175,128		$	165,555

There were no delinquent preferred equity or mezzanine loan investments as of March 31, 2019 and December 31, 2018.

The geographic concentrations of credit risk exceeding 5% of the total preferred equity and mezzanine loan ~~and preferred equity~~ investment amounts as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 are as follows:


	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Georgia					14.6	%	15.3	%
Texas	27.5	%	43.3	%	11.9	%	16.6	%
New York	21.6	%	—
Alabama					11.1	%	8.6	%
Florida					10.8	%	11.3	%
Tennessee					10.2	%	6.8	%
South Carolina					9.1	%	9.5	%
Virginia	12.3	%	14.9	%	8.6	%	9.1	%
South Carolina	7.9	%	9.4	%
Kentucky	5.9	%	7.2	%

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~~10.~~9.	Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)

The Company uses SPEs to facilitate transactions that involve securitizing financial assets or re-securitizing previously securitized financial assets. The objective of such transactions may include obtaining non-recourse financing, obtaining liquidity or refinancing the underlying securitized financial assets on improved terms. Securitization involves transferring assets to an SPE to convert all or a portion of those assets into cash before they would have been realized in the normal course of business through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE and depending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excess assets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or other form of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement.

The Company has entered into ~~resecuritization and~~re-securitization or financing transactions which required the Company to analyze and determine whether the SPEs that were created to facilitate the transactions are VIEs in accordance with ASC 810,Consolidation, and if so, whether the Company is the primary beneficiary requiring consolidation. ~~The~~As of March 31, 2019, the Company evaluated its Residential CDOs and concluded that the entities created to facilitate each of the financing transactions are VIEs and that the Company is the primary beneficiary of these VIEs. Accordingly, the Company continues to consolidate the Residential CDOs as of March 31, 2019.

As of December 31, 2018, the Company evaluated the following ~~resecuritization or~~re-securitization and financing transactions: 1) its Residential CDOs; 2) its multi-family CMBS re-securitization transaction and 3) its distressed residential mortgage loan securitization transaction (each a “Financing VIE” and collectively, the “Financing VIEs”) and concluded that the entities created to facilitate each of the transactions ~~are~~were VIEs and that the Company iswas the primary beneficiary of these VIEs. Accordingly, the Company ~~continues to consolidate~~consolidated the Financing VIEs as of ~~September 30, 2017.~~December 31, 2018. On March 14, 2019, the Company exercised its right to an optional redemption of its multi-family CMBS re-securitization with an outstanding principal balance of $33.2 million resulting in a loss on extinguishment of debt of $2.9 million. Additionally, on March 25, 2019, the Company repaid outstanding notes from its April 2016 distressed residential mortgage loan securitization with an outstanding principal balance of $6.5 million. Due to the redemptions, the multi-family CMBS held by the re-securitization trust and residential mortgage loans held in securitization trust were returned to the Company.

The Company invests in multi-family CMBS consisting of ~~PO securities~~POs that represent the first loss ~~tranche~~position of the Freddie Mac-sponsored multi-family K-series securitizations from which they were issued, and certain IOs and mezzanine CMBS securities issued from ~~Freddie Mac-sponsored multi-family K-Series securitization trusts.~~the securitization. The Company has evaluated these CMBS investments ~~in Freddie Mac-sponsored K-Series securitization trusts~~ to determine whether they are VIEs and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that ~~the~~eleven and nine Freddie Mac-sponsored multi-family K-Series securitization trusts are VIEs as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. The Company also determined that it is the primary beneficiary of each VIE within the Consolidated K-Series and, accordingly, has consolidated its assets, liabilities, income and expenses in the accompanying condensed consolidated financial statements (see Notes 2 and 76). Of the ~~Company’s~~ multi-family CMBS investments owned by the Company that are included in the Consolidated K-Series, ~~five~~eleven and ~~four~~eight of these investments are not included as collateral to any Financing VIE as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively.

In analyzing whether the Company is the primary beneficiary of the Consolidated K-Series and the Financing VIEs, the Company considered its involvement in each of the VIEs, including the design and purpose of each VIE, and whether its involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the VIEs. In determining whether the Company would be considered the primary beneficiary, the following factors were assessed:

whether the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE; and

whether the Company has a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE.

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~~On May 16, 2016, the~~The Company ~~acquired the remaining outstanding membership interests in RBDHC, resulting in the Company's~~owns 100% ~~ownership~~ of ~~RBDHC.~~RB Development Holding Company, LLC ("RBDHC"). RBDHC owns 50% of ~~KRVI,~~Kiawah River View Investors LLC ("KRVI"), a limited liability company that owns developed land and residential homes under development in Kiawah Island, SC, for which RiverBanc LLC ("RiverBanc", a wholly-owned subsidiary of the Company) is the manager. The Company has evaluated KRVI to determine if it is a VIE and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that KRVI is a VIE for which RBDHC is the primary beneficiary as the Company, collectively through its wholly-owned subsidiaries, RiverBanc and RBDHC, has both the power to direct the activities that most significantly impact the economic performance of KRVI and has a right to receive benefits or absorb losses of KRVI that could be potentially significant to KRVI. Accordingly, the Company has consolidated KRVI in its condensed consolidated financial statements with a non-controlling interest for the third-party ownership of KRVI membership interests.

OnThe Company evaluates the home pricing and lot values of the real estate under development that is owned by KRVI, which is included in receivables and other assets on the Company's condensed consolidated balance sheets, on a quarterly basis. Based on the evaluation during the three months ended March 31, 2019, the Company determined that the real estate under development with a carrying amount of $20.9 million was no longer fully recoverable and was impaired. The Company recognized a $0.9 million impairment loss which is included in other income in the Company's condensed consolidated statements of operations for the three months ended March 31, 2019. For the three months ended March 31, 2019, $0.5 million of this impairment loss is included in net income attributable to non-controlling interest in consolidated variable interest entities on the accompanying condensed consolidated statements of operations, resulting in a net loss to the Company of $0.4 million. Fair value was determined based on the sales comparison approach which derives a value indication by comparing the subject property to similar properties that have been recently sold and assumes a purchaser will not pay more for a particular property than a similar substitute property. Real estate under development as of March 31, 2019 and December 31, 2018 of $20.0 million and $22.0 million, respectively, is included in receivables and other assets on the condensed consolidated balance sheets.

In March 2017, ~~(the "Changeover Date"),~~ the Company reconsidered its evaluation of its variable interests in 200 RHC Hoover, LLC ("Riverchase ~~Landing~~Landing") and The Clusters, LLC ("The Clusters"), two ~~variable interest entities~~VIEs that each ~~own~~owned a multi-family apartment community and in each inof which the Company ~~holds~~held a preferred equity investment. The Company determined that it gained the power to direct the activities, and became primary beneficiary, of Riverchase Landing and The Clusters ~~on the Changeover Date. Prior to the Changeover Date, the Company accounted for~~and consolidated them in its condensed consolidated financial statements. In March 2018, Riverchase Landing ~~as an investment~~completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. Also, in ~~an unconsolidated entity and for~~February 2019, The Clusters ~~as a~~completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Company ~~does~~de-consolidated Riverchase Landing and The Clusters as of the date of each property's sale. Prior to the properties' sale, the Company did not have any claims to the assets or obligations for the liabilities of Riverchase Landing and The Clusters.

On the Changeover Date, the Company consolidated Riverchase Landing and The Clusters into its condensed consolidated financial statements. These transactions were accounted for by applying the acquisition method for business combinations.

The estimated Changeover Date fair value of the consideration transferred totaled $12.5 million, which consisted of the estimated fair value of the Company's preferred equity investments in both Riverchase Landing and The Clusters. The Company determined the estimated fair value of its preferred equity investments in Riverchase Landing and The Clusters using assumptions for the timing and amount of expected future cash flows from the underlying multi-family apartment communities and a discount rate.

The following table summarizes the estimated fair values of the assets and liabilities of Riverchase Landing and The Clusters at the Changeover Date (dollar amounts in thousands). The estimated fair values shown below are provisional measurements that are based upon preliminary financial information provided by Riverchase Landing and The Clusters and are subject to change.

Cash $ 112
Operating real estate ⁽¹⁾
62,322
Lease intangibles ⁽¹⁾
5,340
Receivables and other assets 2,260
Total assets 70,034

Mortgages payable 51,570
Accrued expenses and other liabilities 1,519
Total liabilities 53,089

Non-controlling interest ⁽²⁾
4,462
Net assets consolidated $ 12,483


⁽¹⁾	~~Reclassified to real estate held for sale in consolidated variable interest entities on the condensed consolidated balance sheets (see Note 11~~).


⁽²⁾	Represents third party ownership of membership interests in Riverchase Landing and The Clusters. The fair value of the non-controlling interests in Riverchase Landing and The Clusters, both private companies, was estimated using assumptions for the timing and amount of expected future cash flows from the underlying multi-family apartment communities and a discount rate.

~~The Consolidated K-Series, the Financing VIEs, KRVI, Riverchase Landing and The Clusters are collectively referred to in this footnote as "Consolidated VIEs".~~

~~Table of Contents~~

~~The following tables present~~presents a summary of the assets and liabilities of ~~these~~the Residential CDOs, the Consolidated ~~VIEs~~K-Series, and KRVI of as of ~~September 30, 2017 and December~~March 31, ~~2016, respectively.~~2019. Intercompany balances have been eliminated for purposes of this presentation.

~~Assets~~



	Financing VIE		Other VIEs
	Residential Mortgage Loan Securitization		Multi-family CMBS		Other		Total
Cash and cash equivalents	$	—	$	—	$	712	$	712
Residential mortgage loans held in securitization trusts, net	52,869		—		—		52,869
Multi-family loans held in securitization trusts, at fair value	—		14,328,336		—		14,328,336
Receivables and other assets	1,203		47,186		20,225		68,614
Total assets	$	54,072	$	14,375,522	$	20,937	$	14,450,531

Residential collateralized debt obligations	$	49,247	$	—	$	—	$	49,247
Multi-family collateralized debt obligations, at fair value	—		13,547,195		—		13,547,195
Mortgages and notes payable in consolidated variable interest entities	—		—		3,986		3,986
Accrued expenses and other liabilities	24		46,154		439		46,617
Total liabilities	$	49,271	$	13,593,349	$	4,425	$	13,647,045

Table of Contents

The following table presents the Consolidated K-Series, the Financing VIEs, KRVI, and ~~Liabilities of Consolidated VIEs~~The Clusters as of ~~September 30, 2017 (dollar amounts in thousands):~~December 31, 2018.


	Financing VIEs						Other VIEs						Financing VIEs						Other VIEs
	Multi-family CMBS Re- securitization ⁽¹⁾		Distressed Residential Mortgage Loan Securitization ⁽²⁾		Residential Mortgage Loan Securitization		Multi- family CMBS ⁽³⁾		Other		Total		Multi-family CMBS Re- securitization ⁽¹⁾		Distressed Residential Mortgage Loan Securitization ⁽²⁾		Residential Mortgage Loan Securitization		Multi- family CMBS ⁽³⁾		Other		Total
Cash and cash equivalents	$	—	$	—	$	—	$	—	$	1,194	$	1,194	$	—	$	—	$	—	$	—	$	708	$	708
Investment securities available for sale, at fair value held in securitization trusts	46,623		—		—		—		—		46,623		52,700		—		—		—		—		52,700
Residential mortgage loans held in securitization trusts (net)	—		—		79,875		—		—		79,875
Distressed residential mortgage loans held in securitization trust (net)	—		133,972		—		—		—		133,972
Residential mortgage loans held in securitization trusts, net													—		—		56,795		—		—		56,795
Distressed residential mortgage loans held in securitization trusts, net													—		88,096		—		—		—		88,096
Multi-family loans held in securitization trusts, at fair value	1,174,341		—		—		7,224,993		—		8,399,334		1,107,071		—		—		10,572,776		—		11,679,847
Real estate held for sale in consolidated variable interest entities	—		—		—		—		64,097		64,097		—		—		—		—		29,704		29,704
Receivables and other assets	4,217		19,795		1,585		23,959		24,701		74,257		4,243		10,287		1,061		37,679		23,254		76,524
Total assets	$	1,225,181	$	153,767	$	81,460	$	7,248,952	$	89,992	$	8,799,352	$	1,164,014	$	98,383	$	57,856	$	10,610,455	$	53,666	$	11,984,374

Residential collateralized debt obligations	$	—	$	—	$	76,867	$	—	$	—	$	76,867	$	—	$	—	$	53,040	$	—	$	—	$	53,040
Multi-family collateralized debt obligations, at fair value	1,112,651		—		—		6,877,968		—		7,990,619		1,036,604		—		—		9,985,644		—		11,022,248
Securitized debt	28,946		69,425		—		—		—		98,371		30,121		12,214		—		—		—		42,335
Mortgages and notes payable in consolidated variable interest entities	—		—		—		—		57,342		57,342		—		—		—		—		31,227		31,227
Accrued expenses and other liabilities	4,200		1,766		22		23,733		2,621		32,342		4,228		444		26		37,022		1,166		42,886
Total liabilities	$	1,145,797	$	71,191	$	76,889	$	6,901,701	$	59,963	$	8,255,541	$	1,070,953	$	12,658	$	53,066	$	10,022,666	$	32,393	$	11,191,736

⁽¹⁾

The Company classified the multi-family CMBS issued by two securitizations included in the Consolidated K-Series ~~securitizations~~ and held by this Financing VIE as available for sale securities as the purpose is not to trade these securities. The Financing VIE consolidated one securitization included in the Consolidated K-Series ~~securitization~~ that issued certain of the multi-family CMBS owned by the Company, including its assets, liabilities, income and expenses, in its financial statements, as based on a number of factors, the Company determined that it was the primary beneficiary and has a controlling financial interest in this particular K-Series securitization (see Note 76).

⁽²⁾

The Company engaged in this transaction for the purpose of financing certain distressed residential mortgage loans acquired by the Company. The distressed residential mortgage loans serving as collateral for the financing are comprised of ~~performing,~~ re-performing and, to a lesser extent, non-performing ~~fixed~~ and ~~adjustable-rate, fully-amortizing, interest only and balloon, seasoned~~other delinquent mortgage loans secured by first liens on ~~one~~one- to ~~four~~four- family properties. Balances as of ~~September 30, 2017~~December 31, 2018 are related to a securitization transaction that closed in April 2016 that involved the issuance of $177.5 million of Class A Notes representing the beneficial ownership in a pool of performing and re-performing seasoned mortgage loans. The Company holds 5% of the Class A Notes issued as part of the securitization transaction, which were eliminated in consolidation.


⁽³⁾	~~Five~~Eight of the ~~Company’s Freddie Mac-sponsored multi-family K-Series securitizations included in the Consolidated K-Series were not held in a Financing VIE as of September 30, 2017.~~

~~Table of Contents~~

~~Assets and Liabilities of Consolidated VIEs as of December 31, 2016 (dollar amounts in thousands):~~

Financing VIEs Other VIEs

Multi-family
CMBS Re-
securitization ⁽¹⁾

Distressed
Residential
Mortgage
Loan
Securitization ⁽²⁾

Residential
Mortgage
Loan Securitization

Multi-
family
CMBS ⁽³⁾
Other Total
Cash and cash equivalents $ —
$ —
$ —
$ —
$ 186
$ 186
Investment securities available for sale, at fair value held in securitization trusts 43,897
—
—
—
—
43,897
Residential mortgage loans held in securitization trusts (net) —
—
95,144
—
—
95,144
Distressed residential mortgage loans held in securitization trust (net) —
195,347
—
—
—
195,347
Multi-family loans held in securitization trusts, at fair value 1,196,835
—
—
5,743,009
—
6,939,844
Receivables and other assets 4,420
13,610
912
19,753
17,759
56,454
Total assets $ 1,245,152
$ 208,957
$ 96,056
$ 5,762,762
$ 17,945
$ 7,330,872

Residential collateralized debt obligations $ —
$ —
$ 91,663
$ —
$ —
$ 91,663
Multi-family collateralized debt obligations, at fair value 1,137,002
—
—
5,487,894
—
6,624,896
Securitized debt 28,332
130,535
—
—
—
158,867
Mortgages and notes payable in consolidated variable interest entities —
—
—
—
1,588
1,588
Accrued expenses and other liabilities 4,400
1,336
20
19,753
13
25,522
Total liabilities $ 1,169,734
$ 131,871
$ 91,683
$ 5,507,647
$ 1,601
$ 6,902,536

⁽¹⁾

The Company classified the multi-family CMBS issued by two K-Series securitizations and held by this Financing VIE as available for sale securities as the purpose is not to trade these securities. The Financing VIE consolidated one K-Series securitization that issued certain of the multi-family CMBS owned by the Company, including its assets, liabilities, income and expenses, in its financial statements, as based on a number of factors, the Company determined that it was the primary beneficiary and has a controlling financial interest in this particular K-Series securitization (~~see Note 7~~).

⁽²⁾

The Company engaged in this transaction for the purpose of financing distressed residential mortgage loans acquired by the Company. The distressed residential mortgage loans serving as collateral for the financing are comprised of performing, re-performing and, to a lesser extent, non-performing, fixed and adjustable-rate, fully-amortizing, interest only and balloon, seasoned mortgage loans secured by first liens on one to four family properties. Balances as of December 31, 2016 are related to a securitization transaction that closed in April 2016 that involved the issuance of $177.5 million of Class A Notes representing the beneficial ownership in a pool of performing and re-performing seasoned mortgage loans. The Company holds 5% of the Class A Notes issued as part of the securitization transaction, which have been eliminated in consolidation.

⁽³⁾

~~Four of the Company’s Freddie Mac-sponsored multi-family K-Series~~ securitizations included in the Consolidated K-Series were not held in a Financing VIE as of December 31, 2016. In October 2016, the Company repaid $55.9 million of outstanding notes from its November 2013 collateralized recourse financing, which was comprised of securities issued from three separate Freddie Mac-sponsored multi-family K-Series securitizations. In connection with the repayment of the notes, the Company terminated and de-consolidated the Financing VIE that facilitated this financing transaction and securities serving as collateral on the notes were transferred back to the Company.2018.

3527

Table of Contents

As of March 31, 2019, the Company had no securitized debt outstanding. The following table summarizes the Company’s securitized debt collateralized by multi-family CMBS ~~and~~or distressed residential mortgage loans as of December 31, 2018 (dollar amounts in thousands):

Multi-family CMBS
Re-securitization ⁽¹⁾

Distressed
Residential Mortgage
Loan Securitizations
Principal Amount at September 30, 2017 $ 33,399
$ 70,374
Principal Amount at December 31, 2016 $ 33,553
$ 132,319
Carrying Value at September 30, 2017 ⁽²⁾
$ 28,946
$ 69,425
Carrying Value at December 31, 2016 ⁽²⁾
$ 28,332
$ 130,535
Pass-through rate of Notes issued 5.35% 4.00%



	Multi-family CMBS Re-securitization ⁽¹⁾			Distressed Residential Mortgage Loan Securitization
Principal Amount at December 31, 2018	$	33,177		$	12,381
Carrying Value at December 31, 2018 ⁽²⁾	$	30,121		$	12,214
Pass-through rate of notes issued	5.35		%	4.00		%

⁽¹⁾

The Company engaged in the re-securitization transaction primarily for the purpose of obtaining non-recourse financing on a portion of its multi-family CMBS portfolio. As a result of engaging in this transaction, the Company ~~remains~~remained economically exposed to the first loss position on the underlying multi-family CMBS transferred to the Consolidated VIE. The holders of the Note issued in this re-securitization transaction have no recourse to the general credit of the Company, but the Company does have the obligation, under certain circumstances, to repurchase assets upon the breach of certain representations and warranties. The Company will receive all remaining cash flow, if any, through its retained ownership.


⁽²⁾	~~Classified as~~Presented net of unamortized deferred costs of $0.2 million related to the issuance of the securitized debt, ~~in the liability section of the Company’s accompanying condensed consolidated balance sheets, net of debt issuance costs.~~which include underwriting, rating agency, legal, accounting and other fees.

The following table presents contractual maturity information about the Financing VIEs’ securitized debt as of ~~September 30, 2017 and~~ December 31, ~~2016, respectively~~2018 (dollar amounts in thousands):

Scheduled Maturity (principal amount)
September 30, 2017 December 31, 2016
Within 24 months $ 70,374
$ —
Over 24 months to 36 months —
132,319
Over 36 months 33,399
33,553
Total outstanding principal 103,773
165,872
Discount (4,567 ) (5,589 )
Debt Issuance Cost (835 ) (1,416 )
Carrying value $ 98,371
$ 158,867

~~There is no guarantee that the Company will receive any cash flows from these securitization trusts.~~



Scheduled Maturity (principal amount)	December 31, 2018
Within 24 months	$	12,381
Over 24 months to 36 months	—
Over 36 months	33,177
Total	45,558
Discount	(2,983		)
Debt issuance cost	(240		)
Carrying value	$	42,335

Residential Mortgage Loan Securitization Transaction

The Company has completed four residential mortgage loan securitizations (other than the distressed residential mortgage loan securitizations discussed above) since inception; the first three were accounted for as permanent financings and have been included in the Company’s accompanying condensed consolidated financial statements. The fourth was accounted for as a sale and, accordingly, is not included in the Company’s accompanying condensed consolidated financial statements.

3628

Table of Contents

Unconsolidated VIEs

As of March 31, 2019, the Company evaluated its mezzanine loan, preferred equity and other equity investments to determine whether they are VIEs and should be consolidated by the Company. Based on a number of factors, the Company determined that it does not have a controlling financial interest and is not the primary beneficiary of these VIEs. The following table presents the classification and carrying value of unconsolidated VIEs as of March 31, 2019 (dollar amounts in thousands):



	March 31, 2019
	Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
Preferred equity investments in multi-family properties	$	164,533	$	55,789	$	220,322
Mezzanine loans on multi-family properties	10,595		—		10,595
Equity investments in entities that invest in residential properties	—		11,185		11,185
Total assets	$	175,128	$	66,974	$	242,102

As of December 31, 2018, the Company ~~has~~ evaluated its multi-family CMBS investments in two Freddie Mac-sponsored multi-family loan K-Series securitizations ~~as of September 30, 2017 and December 31, 2016, respectively,~~ and its mezzanine loan, preferred equity and other equity investments to determine whether they are VIEs and should be consolidated by the Company. Based on a number of factors, the Company determined that, except for ~~Riverchase Landing and~~ The Clusters as of December 31, 2018, it does not have a controlling financial interest and is not the primary beneficiary of these VIEs. The following ~~tables present~~table presents the classification and carrying value of unconsolidated VIEs as of ~~September 30, 2017 and~~ December 31, ~~2016~~2018 (dollar amounts in thousands):

September 30, 2017

Investment
securities,
available for
sale, at fair
value
Receivables and other assets Mezzanine loan and preferred equity investments Investment in unconsolidated entities Total
Multi-family CMBS $ 46,623
$ 73
$ —
$ —
$ 46,696
Mezzanine loan on multi-family properties —
—
6,875
—
6,875
Preferred equity investment on multi-family properties —
—
115,703
10,242
125,945
Equity investment in entities that invest in multi-family properties —
—
—
24,056
24,056
Total assets $ 46,623
$ 73
$ 122,578
$ 34,298
$ 203,572

December 31, 2016

Investment
securities,
available for
sale, at fair
value
Receivables and other assets Mezzanine loan and preferred equity investments Investment in unconsolidated entities Total
Multi-family CMBS $ 43,897
$ 74
$ —
$ —
$ 43,971
Mezzanine loan on multi-family properties —
—
18,881
—
18,881
Preferred equity investment on multi-family properties —
—
81,269
18,928
100,197
Equity investment in entities that invest in multi-family properties —
—
—
22,252
22,252
Total assets $ 43,897
$ 74
$ 100,150
$ 41,180
$ 185,301



	December 31, 2018
	Investment securities, available for sale, at fair value, held in securitization trusts		Receivables and other assets		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
Multi-family CMBS	$	52,700	$	72	$	—	$	—	$	52,772
Preferred equity investments in multi-family properties	—		—		154,629		40,472		195,101
Mezzanine loans on multi-family properties	—		—		10,926		—		10,926
Equity investments in entities that invest in residential properties	—		—		—		10,954		10,954
Total assets	$	52,700	$	72	$	165,555	$	51,426	$	269,753

Our maximum loss exposure on the multi-family CMBS investments, mezzanine loan, preferred equity and other equity investments is approximately ~~$203.6~~$242.1 million and ~~$185.3~~$269.8 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. The Company’s maximum exposure does not exceed the carrying value of its investments.

3729

Table of Contents


~~11.~~10.	Real Estate Held for Sale in Consolidated VIEs

OnIn March ~~31,~~ 2017, the Company determined that it became the primary beneficiary of Riverchase Landing and The Clusters, two ~~variable interest entities~~VIEs that each ~~own~~owned a multi-family apartment community and in each of which the Company ~~holds~~held a preferred equity ~~investments.~~investment. Accordingly, ~~on this date,~~ the Company consolidated both Riverchase Landing and The Clusters into its condensed consolidated financial statements (see Note ~~10)~~9).

During the second quarter of 2017, Riverchase Landing determined to actively market its ~~multifamily~~multi-family apartment community for sale. ~~The Company anticipates completing a sale to a third party buyer in 2018.~~ Accordingly, the Company classified the real estate assets in Riverchase Landing as held for sale ~~as of~~ ~~September 30, 2017~~in ~~the accompanying condensed~~its consolidated balance sheets. The Company also ceased depreciation of the operating real estate assets and amortization of the related lease intangible asset in Riverchase Landing in the second quarter of 2017. In March 2018, Riverchase Landing completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. Riverchase Landing recognized a net gain on sale of approximately $2.3 million which is included in other income and is allocated to net income attributable to non-controlling interest in consolidated variable interest entities on the accompanying condensed consolidated statements of operations. The Company de-consolidated Riverchase Landing as of ~~June 5, 2017.~~the date of the sale.

During the third quarter of 2017, The Clusters determined to actively market its ~~multifamily~~multi-family apartment community for sale. ~~The Company anticipates completing a sale to a third party buyer in 2018.~~ Accordingly, the Company classified the real estate assets in The Clusters as held for sale as of ~~September 30, 2017~~December 31, 2018 in the accompanying condensed consolidated balance sheets. The Company also ceased depreciation of the operating real estate assets and amortization of the related lease intangible asset in The Clusters in the third quarter of 2017. In February 2019, The Clusters completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Clusters recognized a net gain on sale of approximately $1.6 million which is included in other income and is allocated to net income attributable to non-controlling interest in consolidated variable interest entities on the accompanying condensed consolidated statements of operations. The Company de-consolidated The Clusters as of ~~September 1, 2017.~~the date of the sale.

As of March 31, 2019, there is no real estate held for sale in consolidated variable interest entities. The following is a ~~provisional~~ summary of the real estate held for sale in ~~both Riverchase Landing and The Clusters~~consolidated variable interest entities as of ~~September 30, 2017~~December 31, 2018 (dollar amounts in thousands):


				December 31, 2018
Land	$	7,000		$	2,650
Building and improvements	53,435			26,032
Furniture, fixtures and equipment	2,078			974
Lease intangible	5,340			2,802
Real estate held for sale before accumulated depreciation and amortization	67,853			32,458
Accumulated depreciation⁽¹⁾	(647		)	(418		)
Accumulated amortization of lease intangible ⁽¹⁾	(3,109		)	(2,336		)
Real estate held for sale in consolidated variable interest entities	$	64,097		$	29,704


⁽¹⁾	~~Depreciation~~There were no depreciation and amortization expenses for the three months ended ~~September 30, 2017 totaled $0.2 million~~March 31, 2019 and ~~$0.9 million, respectively. Depreciation and amortization expenses for the nine months ended September 30, 2017 totaled $0.6 million and $3.1 million, respectively.~~March 31, 2018.

No gain or loss was recognized by the Company or allocated to non-controlling interests related to the initial classification of the real estate assets as held for ~~sale.~~sale during the year ended December 31, 2017.

Table of Contents


~~12.~~11.	Derivative Instruments and Hedging Activities

The Company enters into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, swaptions, futures and options on futures. The Company may also purchase or sell ~~short~~“To-Be-Announced,” or TBAs, purchase ~~put or call~~ options on U.S. Treasury futures or invest in other types of mortgage derivative securities. The Company's derivative instruments are currently comprised of interest rate swaps, which are designated as trading instruments.

Derivatives NotDesignated as Hedging Instruments

The following table presents the fair value of derivative instruments ~~that were not designated as hedging instruments~~ and their location in our condensed consolidated balance sheets at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (dollar amounts in thousands):

~~Table of Contents~~

Derivatives Not Designated
as Hedging Instruments Balance Sheet Location September 30, 2017 December 31, 2016
Eurodollar futures Derivative assets $ 289
$ 1,175
TBA securities Derivative assets 180,562
148,139
Interest rate swap futures Derivative assets 1,228
444
Swaptions Derivative assets 18
431
U.S. Treasury futures Derivative liabilities 193
107
Interest rate swaps ⁽¹⁾
Derivative liabilities 274
384



Type of Derivative Instrument	Balance Sheet Location	March 31, 2019		December 31, 2018
Interest rate swaps ⁽¹⁾	Derivative assets	$	14,873	$	10,263

⁽¹⁾

~~Includes~~All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in ~~our Agency IO portfolio. There was no netting~~fair value. As a result of amendments to rules governing certain central clearing activities, the exchange of variation margin is treated as a legal settlement of the exposure under the swap contract. Previously such payments were treated as cash collateral pledged against the exposure under the swap contract. Accordingly, the Company accounted for the receipt or payment of variation margin as a direct reduction to or increase of the carrying value of the interest rate ~~swaps~~swap asset or liability on the Company's condensed consolidated balance sheets. Includes $12.8 million of derivative liabilities netted against a variation margin of $27.7 million at ~~September 30, 2017~~March 31, 2019. Includes $1.8 million of derivative assets and variation margin of $8.5 million at December 31, ~~2016.~~2018.

The tables below summarize the activity of derivative instruments not designated as hedges for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively (dollar amounts in thousands):

Notional Amount For the Nine Months Ended September 30, 2017
Derivatives Not Designated
as Hedging Instruments
December 31, 2016 Additions
Settlement,
Expiration
or Exercise
September 30, 2017
TBA securities $ 149,000
$ 1,466,000
$ (1,440,000 ) $ 175,000
U.S. Treasury futures 17,100
123,900
(135,500 ) 5,500
Interest rate swap futures (151,700 ) 413,800
(349,000 ) (86,900 )
Eurodollar futures (2,575,000 ) 5,989,000
(5,054,000 ) (1,640,000 )
Options on U.S. Treasury futures —
5,000
(5,000 ) —
Swaptions 154,000
—
—
154,000
Interest rate swaps 15,000
—
—
15,000



	Notional Amount For the Three Months Ended March 31, 2019
Type of Derivative Instrument	December 31, 2018		Additions		Settlement, Expiration or Exercise		March 31, 2019
Interest rate swaps	$	495,500	$	—	$	—	$	495,500

Notional Amount For the Nine Months Ended September 30, 2016
Derivatives Not Designated
as Hedging Instruments
December 31, 2015 Additions
Settlement,
Expiration
or Exercise
September 30, 2016
TBA securities $ 222,000
$ 2,925,000
$ (2,866,000 ) $ 281,000
U.S. Treasury futures —
189,800
(146,400 ) 43,400
Interest rate swap futures (137,200 ) 718,700
(700,300 ) (118,800 )
Eurodollar futures (2,769,000 ) 4,134,000
(4,838,000 ) (3,473,000 )
Options on U.S. Treasury futures 28,000
91,000
(114,000 ) 5,000
Swaptions 159,000
—
(5,000 ) 154,000
Interest rate swaps 10,000
5,000
—
15,000



	Notional Amount For the Three Months Ended March 31, 2018
Type of Derivative Instrument	December 31, 2017		Additions		Settlement, Expiration or Exercise		March 31, 2018
Interest rate swaps	$	345,500	$	—	$	—	$	345,500

~~Table of Contents~~

The following ~~tables present~~table presents the components of realized and unrealized gains and losses related to our derivative instruments that were not designated as hedging instruments included in other income category in our condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 (dollar amounts in thousands):

Three Months Ended September 30,
2017 2016
Realized Gains (Losses) Unrealized Gains (Losses) Realized Gains (Losses) Unrealized Gains (Losses)
TBA securities $ 1,470
$ (265 ) $ 4,981
$ (2,547 )
Eurodollar futures ⁽¹⁾
62
39
(1,674 ) 3,877
Interest rate swaps —
36
—
65
Swaptions —
171
—
190
U.S. Treasury and interest rate swap futures and options (583 ) 505
462
(790 )
Total $ 949
$ 486
$ 3,769
$ 795

Nine Months Ended September 30,
2017 2016
Realized Gains (Losses) Unrealized Gains (Losses) Realized Gains (Losses) Unrealized Gains (Losses)
TBA securities $ 3,285
$ (1,080 ) $ 13,489
$ 883
Eurodollar futures ⁽¹⁾
849
(886 ) (3,180 ) 547
Interest rate swaps —
110
—
40
Swaptions —
239
—
212
U.S. Treasury and interest rate swap futures and options (999 ) 699
(2,534 ) (1,251 )
Total $ 3,135
$ (918 ) $ 7,775
$ 431



	Three Months Ended March 31,
	2019					2018
	Realized Gains (Losses)		Unrealized Gains (Losses)			Realized Gains (Losses)		Unrealized Gains (Losses)
Interest rate swaps	$	—	$	(14,586	)	$	—	$	8,969
Total	$	—	$	(14,586	)	$	—	$	8,969


⁽¹⁾	~~At September 30, 2017, the Eurodollar futures consist of 1,640 contracts with expiration dates ranging between December 2017 and June 2019.~~

~~The use~~

Table of TBAs exposes the Company to market value risk, as the market value of the securities that the Company is required to purchase pursuant to a TBA transaction may increase or decrease from the agreed-upon purchase price. At September 30, 2017 and December 31, 2016, our condensed consolidated balance sheets include TBA-related liabilities of $181.7 million and $148.0 million included in payable for securities purchased, respectively. Open TBA purchases and sales involving the same counterparty, same underlying deliverable and the same settlement date are reflected in our condensed consolidated financial statements on a net basis. There were no TBA sales netted against TBA purchases at September 30, 2017. There was $114.4 million netting of TBA sales against TBA purchases of $262.4 million at December 31, 2016.Contents

Derivatives Designated as Hedging Instruments

The Company’s interest rate swaps, except interest swaps included in its Agency IO portfolio, are used to hedge the variable cash flows associated with borrowings made under our financing arrangements, including FHLBI advances until January 2016 when we repaid them,As of March 31, 2019 and ~~are~~December 31, 2018, there were no derivative instruments designated as cash flow hedges. There were no costs incurred at the inception of the Company's interest rate swaps, under which the Company agrees to pay a fixed rate of interest and receive a variable interest rate based on one month LIBOR, on the notional amount of the interest rate swaps.

hedging instruments. The Company documents its risk-management policies, including objectives and strategies, as they relate to its hedging activities, and upon entering into hedging transactions, documents the relationship between the hedging instrument and the hedged liability contemporaneously. The Company assesses, both at inception of a hedge and on an ~~on-going~~ongoing basis, whether or not the hedge is “highly effective” when using the matched term basis.

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The Company discontinues hedge accounting on a prospective basis and recognizes changes in the fair value through earnings when: (i) it is determined that the derivative is no longer effective in offsetting cash flows of a hedged item (including forecasted transactions); (ii) it is no longer probable that the forecasted transaction will occur; or (iii) it is determined that designating the derivative as a hedge is no longer appropriate. The Company’s derivative instruments are carried on the Company’s balance sheets at fair value, as assets, if their fair value is positive, or as liabilities, if their fair value is negative. For the Company’s derivative instruments that are designated as “cash flow hedges,” changes in their fair value are recorded in accumulated other comprehensive income (loss), provided that the hedges are effective. A change in fair value for any ineffective amount of the Company’s derivative instruments would be recognized in earnings. ~~The Company has not recognized any change in the value of its existing derivative instruments designated as cash flow hedges through earnings as a result of ineffectiveness of any of its hedges.~~

The following table presents the fair value of derivative instruments designated as hedging instruments and their location in the Company’s condensed consolidated balance sheets at September 30, 2017 and December 31, 2016, respectively (dollar amounts in thousands):

Derivatives Designated
as Hedging Instruments
Balance Sheet Location
Total Notional Amount
September 30, 2017 December 31, 2016
Interest rate swaps Derivative asset $ 80,000
$ 18
$ —
Interest rate swaps Derivative asset 65,000
—
108
Interest rate swaps Derivative liabilities 150,000
—
6

~~The Company has netting arrangements by counterparty with respect to its interest rate swaps. There was no netting of interest rate swaps designated as hedging instruments at September 30, 2017.~~

The following table presents the impact of the Company’s derivative instruments on the Company’s accumulated other comprehensive income for the nine months ended September 30, 2017 and 2016, respectively (dollar amounts in thousands):

Nine Months Ended September 30,
Derivatives Designated as Hedging Instruments 2017 2016
Accumulated other comprehensive income for derivative instruments:
Balance at beginning of the period $ 102
$ 304
Unrealized loss on interest rate swaps (84 ) (607 )
Balance at end of the period $ 18
$ (303 )

The Company estimates that over the next 12 months, approximately none of the net unrealized gains on the interest rate swaps will be reclassified from accumulated other comprehensive income (loss) into earnings.

The following table details the impact of the Company’s interest rate swaps designated as hedging instruments included in interest expense for the three and nine months ended September 30, 2017 and 2016, respectively (dollar amounts in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Interest income-investment securities $ 176
$ —
$ 249
$ —
Interest expense-investment securities —
177
—
604
Outstanding Derivatives

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The following table presents information about our interest rate swaps ~~(includes interest rate swaps in our Agency IO portfolio)~~ whereby we receive floating rate payments in exchange for fixed rate payments as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (dollar amounts in thousands):

September 30, 2017 December 31, 2016
Swap Maturities

Notional
Amount

Weighted Average
Fixed Interest Rate
Weighted Average
Variable Interest Rate
Notional
Amount

Weighted Average
Fixed
Interest Rate
Weighted Average
Variable Interest Rate
2017 $ 80,000
0.71 % 1.23 % $ 215,000
0.83 % 0.74 %
2019 10,000
2.25 % 1.32 % 10,000
2.25 % 0.97 %
Total $ 90,000
0.88 % 1.24 % $ 225,000
0.90 % 0.75 %

The following table presents information about our interest rate swaps in our Agency IO portfolio whereby we receive fixed rate payments in exchange for floating rate payments as of September 30, 2017 and December 31, 2016, respectively (dollar amounts in thousands):


	September 30, 2017						December 31, 2016						March 31, 2019						December 31, 2018
Swap Maturities	Notional Amount		Weighted Average Fixed Interest Rate		Weighted Average Variable Interest Rate		Notional Amount		Weighted Average Fixed Interest Rate		Weighted Average Variable Interest Rate		Notional Amount		Weighted Average Fixed Interest Rate		Weighted Average Variable Interest Rate		Notional Amount		Weighted Average Fixed Interest Rate		Weighted Average Variable Interest Rate
2026	$	5,000	1.80	%	1.33	%	$	5,000	1.80	%	1.00	%
2024													$	98,000	2.18	%	2.78	%	$	98,000	2.18	%	2.45	%
2027													247,500		2.39	%	2.74	%	247,500		2.39	%	2.53	%
2028													150,000		3.23	%	2.74	%	150,000		3.23	%	2.53	%
Total	$	5,000	1.80	%	1.33	%	$	5,000	1.80	%	1.00	%	$	495,500	2.60	%	2.75	%	$	495,500	2.60	%	2.52	%

The use of derivatives exposes the Company to counterparty credit risks in the event of a default by a counterparty. If a counterparty defaults under the applicable derivative agreement, the Company may be unable to collect payments to which it is entitled under its derivative agreements and may have difficulty collecting the assets it pledged as collateral against such derivatives. The Company ~~currently~~ has in place with all counterparties bi-lateral margin agreements requiring a party to post collateral to the Company for any valuation deficit. This arrangement is intended to limit the Company’s exposure to losses in the event of a counterparty default.

~~The Company is required to pledge assets under a bi-lateral margin arrangement, including either cash or Agency RMBS, as collateral for its~~ Currently, all of the Company's interest rate swaps ~~futures contracts and TBAs, whose collateral requirements vary by counterparty and change over time based on~~outstanding are cleared through CME Group Inc. ("CME Clearing") which is the ~~market value, notional amount, and remaining term~~parent company of the agreement. In the event the Company is unable to meet a margin call under one of its agreements, thereby causing an event of default or triggering an early termination event under one of its agreements,Chicago Mercantile Exchange Inc. CME Clearing serves as the counterparty to ~~such agreement may have~~every cleared transaction, becoming the ~~option~~buyer to ~~terminate all~~each seller and the seller to each buyer, limiting the credit risk by guaranteeing the financial performance of such counterparty’s outstanding transactions with the Company. In addition, under this scenario, any close-out amount due to the counterparty upon termination of the counterparty’s transactions would be immediately payable by the Company pursuant to the applicable agreement. The Company believes it was in compliance with all margin requirements under its agreements as of September 30, 2017both parties and December 31, 2016. The Company had $7.9 million and $6.1 million of restricted cash related to margin posted for its agreements as of September 30, 2017 and December 31, 2016, respectively. The restricted cash held by third parties is included in receivables and other assets in the accompanying condensed consolidated balance sheets.

netting down exposures.

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~~13.~~12.	~~Financing Arrangements, Portfolio Investments~~Repurchase Agreements

Investment Securities, Available for Sale

The Company has entered into repurchase agreements with third party financial institutions to finance its investment securities portfolio. These ~~financing arrangements~~repurchase agreements are short-term borrowings that bear interest rates typically based on a spread to LIBOR, and are secured by the investment securities which they finance. At ~~September 30, 2017,~~March 31, 2019 and December 31, 2018, the Company had repurchase agreements secured by investment securities with an outstanding balance of ~~$608.3 million~~$1.7 billion and $1.5 billion, respectively, and a weighted average interest rate of ~~2.33%. At December 31, 2016, the Company had repurchase agreements with an outstanding balance of $773.1 million~~3.43% and ~~a weighted average interest rate of 1.92%.~~3.41%, respectively.

The following table presents detailed information about the Company’s borrowings under ~~financing arrangements~~repurchase agreements secured by investment securities and associated assets pledged as collateral at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollar amounts in thousands):

September 30, 2017 December 31, 2016

Outstanding
Financing
Arrangements

Fair Value of
Collateral
Pledged

Amortized
Cost
of Collateral
Pledged

Outstanding
Financing
Arrangements

Fair Value of
Collateral
Pledged

Amortized
Cost
of Collateral
Pledged
Agency ARMs $ 80,327
$ 85,117
$ 85,990
$ 102,088
$ 109,552
$ 110,903
Agency Fixed Rate 248,936
261,450
270,587
289,619
308,411
318,544
Agency IOs/U.S. Treasury Securities 26,048
36,702
47,913
60,862
82,153
93,819
Non Agency 48,773
64,917
63,792
113,749
150,944
149,969
CMBS ⁽¹⁾
204,220
283,669
221,440
206,824
294,083
216,092
Balance at end of the period $ 608,304
$ 731,855
$ 689,722
$ 773,142
$ 945,143
$ 889,327



	March 31, 2019						December 31, 2018
	Outstanding Repurchase Agreements		Fair Value of Collateral Pledged		Amortized Cost of Collateral Pledged		Outstanding Repurchase Agreements		Fair Value of Collateral Pledged		Amortized Cost of Collateral Pledged
Agency ARMs RMBS	$	64,706	$	68,220	$	70,513	$	67,648	$	70,747	$	73,290
Agency Fixed-rate RMBS	829,154		879,501		897,055		857,582		907,610		940,994
Non-Agency RMBS	136,782		185,881		182,905		88,730		117,958		118,414
CMBS ⁽¹⁾	623,797		821,144		659,444		529,617		687,876		539,788
Balance at end of the period	$	1,654,439	$	1,954,746	$	1,809,917	$	1,543,577	$	1,784,191	$	1,672,486


⁽¹⁾	Includes first loss ~~tranche~~ PO and mezzanine CMBS securities with a fair value amounting to ~~$237.8~~$602.8 million and ~~$254.6~~$543.0 million included in the Consolidated K-Series as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively.

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the average days to maturity for ~~financing arrangements~~repurchase agreements secured by investment securities were 1868 days and 1262 days, respectively. The Company’s accrued interest payable on outstanding ~~financing arrangements~~repurchase agreements secured by investment securities at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 amounts to ~~$0.5~~$5.3 million and ~~$1.1~~$3.9 million, respectively, and is included in accrued expenses and other liabilities on the Company’s condensed consolidated balance sheets.

The following table presents contractual maturity information about the Company’s outstanding ~~financing arrangements,~~repurchase agreements secured by investment securities at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollar amounts in thousands):


Contractual Maturity	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Within 30 days	$	608,304	$	729,134	$	531,548	$	732,051
Over 30 days to 90 days	—		44,008		989,271		677,906
Over 90 days	—		—		133,620		133,620
Total	$	608,304	$	773,142	$	1,654,439	$	1,543,577

As of ~~September 30, 2017,~~March 31, 2019, the outstanding balance under our ~~financing arrangements~~repurchase agreements secured by investment securities was funded at ana weighted average advance rate of ~~87.8%~~86.9% that implies an average haircut of ~~12.2%~~13.1%. As of ~~September 30, 2017,~~March 31, 2019, the weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS, ~~(excluding Agency IOs), Non-Agency~~non-agency RMBS, ~~CMBS~~ and ~~Agency IOs~~CMBS was approximately 4%5%, 25%, ~~20%~~ and ~~25%~~22%, respectively.

In the event we are unable to obtain sufficient short-term financing through existing ~~financings arrangements,~~repurchase agreements, or our lenders start to require additional collateral, we may have to liquidate our investment securities at a disadvantageous time, which could result in losses. Any losses resulting from the disposition of our investment securities in this manner could have a material adverse effect on our operating results and net profitability. At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Company had financing arrangements with ~~eight counterparties.~~thirteen and eleven counterparties, respectively. As of ~~September 30, 2017, we~~March 31, 2019, the Company had no ~~counterparties~~exposure where the amount at risk was in excess of 5% of the Company's stockholders’ equity. AtAs of December 31, ~~2016,~~2018 the Company's only exposure where the amount at risk was in excess of 5% ~~of the Company's stockholders' equity~~ was to ~~Deutsche Bank AG, London Branch~~Jefferies & Company, Inc. at ~~5.1%~~5.04%. ~~The amount at risk is defined as the fair value of securities pledged as collateral to the financing arrangement in excess of the financing arrangement liability.~~

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As of ~~September 30, 2017,~~March 31, 2019, our available liquid assets included unrestricted cash and cash equivalents ~~overnight deposits~~ and unencumbered securities that we believe may be posted as margin. The Company had ~~$101.9~~$65.4 million in cash and cash equivalents ~~$8.9 million in overnight deposits in our Agency IO portfolio included in restricted cash~~ and ~~$243.1~~$410.4 million in unencumbered investment securities to meet additional haircuts or market valuation requirements. The unencumbered securities that we believe may be posted as margin as of ~~September 30, 2017~~March 31, 2019 included ~~$35.1~~$76.2 million of Agency RMBS, ~~$139.9~~$205.9 million of CMBS and ~~$68.1~~$128.2 million of ~~Non-Agency~~non-Agency RMBS and other investment securities. The cash and unencumbered securities, which collectively represent ~~58.2%~~28.8% of our ~~financing arrangements,~~repurchase agreements secured by investment securities, are liquid and could be monetized to pay down or collateralize a liability immediately.

Distressed and Other Residential Mortgage Loans

The Company has master repurchase agreements with third party financial institutions to fund the purchase of distressed and other residential mortgage loans, including both first and second mortgages. The following table presents detailed information about the Company’s borrowings under these repurchase agreements and associated distressed and other residential mortgage loans pledged as collateral at March 31, 2019 and December 31, 2018 (dollar amounts in thousands):



	Maximum Aggregate Uncommitted Principal Amount		Outstanding Repurchase Agreements		Carrying Value of Loans Pledged ⁽¹⁾		Weighted Average Rate		Weighted Average Months to Maturity
March 31, 2019	$	1,100,000	$	619,605	$	792,380	4.58	%	7.68
December 31, 2018	$	950,000	$	589,148	$	754,352	4.67	%	9.24


~~14.~~ ⁽¹⁾	~~Financing Arrangements, Residential Mortgage Loans~~Includes distressed and other residential mortgage loans at fair value of $677.6 million and $626.2 million and distressed and other residential mortgage loans, net of $114.8 million and $128.1 million at March 31, 2019 and December 31, 2018, respectively.

The Company has a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch in an aggregate principal amount of $200.0 million and a maximum uncommitted principal amount of $50.0 million to fund its distressed residential mortgage loan portfolio, expiring on December 13, 2017. The outstanding balance on this master repurchase agreement as of September 30, 2017 and December 31, 2016 amounts to approximately $140.3 million and $193.8 million, respectively, bearing interest at one month LIBOR plus 2.50% (3.74% and 3.26% at September 30, 2017 and December 31, 2016, respectively). The Company expects to roll outstanding borrowings under this master repurchase agreement into a new repurchase agreement or other financing prior to or at maturity.

In November 2015, the Company entered into a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch in an aggregate principal amount of up to $100.0 million to fund the future purchase of residential mortgage loans, expiring on May 25, 2017. On May 24, 2017, the Company entered into an amended master repurchase agreement that reduced the committed principal amount to $25.0 million and expires on November 24, 2018. The outstanding balance on this master repurchase agreement as of September 30, 2017 amounts to approximately $20.7 million, bearing interest at one-month LIBOR plus 3.50% (4.74% at September 30, 2017). There was no outstanding balance on this master repurchase agreement as of December 31, 2016.

During the ~~term~~terms of the master repurchase agreements, proceeds from the ~~residential mortgage loans, including the Company's~~ distressed and other residential mortgage loans will be applied to pay any price differential and to reduce the aggregate repurchase price of the collateral. The financings under the master repurchase agreements are subject to margin calls to the extent the market value of the distressed and other residential mortgage loans falls below specified levels and repurchase may be accelerated upon an event of default under the master repurchase agreements. The master repurchase agreements contain various covenants, including among other things, the maintenance of certain amounts of ~~net worth,~~ liquidity, market capitalization, and ~~leverage ratios.~~total stockholders' equity. The Company is in compliance with such covenants as of ~~November~~May 7, ~~2017.~~2019. The Company expects to roll outstanding borrowings under these master repurchase agreements into new repurchase agreements or other financings prior to or at maturity.

Costs related to the establishment of the repurchase agreements which include underwriting, legal, accounting and other fees are reflected as deferred charges. Such costs are presented as a deduction from the corresponding debt liability on the Company’s accompanying condensed consolidated balance sheets in the amount of $1.0 million as of March 31, 2019 and $1.2 million as of December 31, 2018. These deferred charges are amortized as an adjustment to interest expense using the effective interest method, or straight line-method, if the result is not materially different.

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~~15.~~13.	Residential Collateralized Debt Obligations

The Company’s Residential CDOs, which are recorded as liabilities on the Company’s condensed consolidated balance sheets, are secured by ~~ARM loans~~ARMs pledged as collateral, which are recorded as assets of the Company. AsPledged assets of ~~September 30, 2017~~$52.9 million and $56.8 million are included in distressed and other residential mortgage loans, net in the Company's condensed consolidated balance sheets as of March 31, 2019 and December 31, ~~2016,~~2018, respectively. As of March 31, 2019 and December 31, 2018, the Company had Residential CDOs outstanding of $~~76.9~~49.2 million and ~~$91.7~~$53.0 million, respectively. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the current weighted average interest rate on these Residential CDOs was ~~1.85%~~3.10% and ~~1.37%~~3.12%, respectively. The Residential CDOs are collateralized by ARM loans with a principal balance of ~~$83.1~~$56.1 million and ~~$98.3~~$60.2 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. The Company retained the owner trust certificates, or residual interest, for three securitizations, and, as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, had a net investment in the residential securitization trusts of ~~$4.6 million and $4.4 million, respectively.~~$4.8 million.

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~~16.~~14.	Debt

Convertible Notes

On January 23, 2017, the Company ~~completed the issuance and sale to an underwriter,~~issued $138.0 million aggregate principal amount of its 6.25% Senior Convertible Notes due 2022 (the "Convertible Notes"), including $18.0 million aggregate principal amount of ~~the~~ Convertible Notes issued upon exercise of the underwriter's over-allotment option, in an underwritten public offering. The net proceeds to the Company from the sale of the Convertible Notes, after deducting the underwriter's discounts, commissions and offering expenses, were approximately $127.0 ~~million.~~million with the total cost to the Company of approximately 8.24%. Costs related to the issuance of the Convertible Notes which include underwriting, legal, accounting and other fees, are reflected as deferred charges. The underwriter's discount and deferred charges, net of amortization, are presented as a deduction from the corresponding debt liability on the Company's accompanying condensed consolidated balance sheets in the amount of $6.7 million and $7.2 million as of March 31, 2019 and December 31, 2018, respectively. The underwriter's discount and deferred charges are amortized as an adjustment to interest expense using the effective interest method.

The Convertible Notes were issued at 96% of the principal amount, bear interest at a rate equal to 6.25% per year, payable semi-annually in arrears on January 15 and July 15 of each year, and are expected to mature on January 15, 2022, unless earlier converted or repurchased. The Company does not have the right to redeem the Convertible Notes prior to maturity and no sinking fund is provided for the Convertible Notes. Holders of the Convertible Notes ~~will be~~are permitted to convert their Convertible Notes into shares of the Company's common stock at any time prior to the close of business on the business day immediately ~~proceeding~~preceding January 15, 2022. The conversion rate for the Convertible Notes, which is subject to adjustment upon the occurrence of certain specified events, initially equals 142.7144 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $7.01 per share of the Company’s common stock, based on a $1,000 principal amount of the Convertible Notes. The Convertible Notes are senior unsecured obligations of the Company that rank senior in right of payment to the Company's subordinated debentures and any of its other indebtedness that is expressly subordinated in right of payment to the Convertible Notes.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, none of the Convertible Notes were converted. As of ~~November~~May 7, ~~2017,~~2019, the Company has not been notified, and is not aware, of any event of default under the covenants for the Convertible Notes.

Subordinated Debentures

Subordinated debentures are trust preferred securities that are fully guaranteed by the Company with respect to distributions and amounts payable upon liquidation, redemption or repayment. The following table summarizes the key details of the Company’s subordinated debentures as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollar amounts in thousands):

NYM Preferred Trust I

NYM Preferred Trust II

NYM Preferred Trust I

NYM Preferred Trust II

Principal value of trust preferred securities

25,000

20,000

25,000

20,000

Interest Rate

Three month LIBOR plus 3.75%, resetting quarterly

Three month LIBOR plus 3.95%, resetting quarterly

Interest rate

Three month LIBOR plus 3.75%, resetting quarterly

Three month LIBOR plus 3.95%, resetting quarterly

Scheduled maturity

March 30, 2035

October 30, 2035

March 30, 2035

October 30, 2035

As of ~~November~~May 7, ~~2017,~~2019, the Company has not been notified, and is not aware, of any event of default under the covenants for the subordinated debentures.

Mortgages and Notes Payable in Consolidated VIEs

On In March ~~31,~~ 2017,, the Company determined that it became the primary beneficiary of Riverchase Landing and The Clusters, two variable interest entities that each own a multi-family apartment community and in which the Company holds preferred equity investments. Accordingly, on this date, the Company consolidated both Riverchase Landing and The Clusters into its condensed consolidated financial statements (see Note ~~10)~~9). ~~Both~~In March 2018, Riverchase ~~Landing's~~Landing completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Company de-consolidated Riverchase Landing as of the date of the sale. In February 2019, The Clusters completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Company de-consolidated The Clusters as of the date of the sale. The Clusters' real estate ~~investments are~~investment was subject to ~~mortgages~~a mortgage payable as of December 31, 2018, and the Company ~~has~~had no obligation for ~~these liabilities~~this liability as of ~~September 30, 2017.~~December 31, 2018.

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The Company also consolidates KRVI into its condensed consolidated financial statements (see Note 109). KRVI's real estate under development is subject to a note payable of ~~$6.0~~$4.0 million that has an unused commitment of ~~$2.4~~$4.4 million as of ~~September 30, 2017.~~March 31, 2019. The Company has not been notified, and is not aware, of any event of default under the covenants of KRVI's note payable as of ~~November~~May 7, ~~2017.~~2019.

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The mortgages and notes payable in the consolidated VIEs as of March 31, 2019 are described below (dollar amounts in thousands):

Assumption/Origination Date Mortgage Note Amount as of September 30, 2017 Maturity Date Interest Rate Net Deferred Finance Costs
Riverchase Landing
10/2/2015 ⁽¹⁾
$ 23,674
11/1/2022 3.88 % $ 194
The Clusters 6/30/2014 $ 27,917
7/6/2024 4.49 % $ 68
KRVI 12/16/2016 $ 6,013
12/16/2019 6.00 % $ —



	Assumption/Origination Date	Mortgage Note Amount as of March 31, 2019		Maturity Date	Interest Rate		Net Deferred Finance Costs
KRVI	12/16/2016	$	3,986	12/16/2019	7.00	%	$	—


⁽¹⁾	~~Origination date of 10/26/2012~~

As of ~~September 30, 2017,~~March 31, 2019, maturities for debt on the Company's condensed consolidated balance sheet are as follows (dollar amounts in thousands):


Fiscal Year	Total
2017	$	—
2018	—
Year Ending December 31,			Total
2019	6,013		$	3,986
2020	—		—
2021	—		—
2022	161,674		138,000
2023			—
Thereafter	72,917		45,000
	$	240,604	$	186,986

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~~17.~~15.	Commitments and Contingencies

Loans Sold to Third Parties – In the normal course of business, the Company is obligated to repurchase loans based on violations of representations and warranties in ~~the~~its loan sale agreements. The Company did not repurchase any loans during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2019.

Outstanding Litigation – The Company is at times subject to various legal proceedings arising in the ordinary course of business. As of ~~September 30, 2017,~~March 31, 2019, the Company does not believe that any of its current legal proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s operations, financial condition or cash flows.

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~~18.~~16.	Fair Value of Financial Instruments

The Company has established and documented processes for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, then fair value is based upon internally developed models that primarily use inputs that are market-based or independently-sourced market parameters, including interest rate yield curves.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy are defined as follows:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following describes the valuation methodologies used for the Company’s financial instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities Available for Sale – ~~Fair~~The Company determines the fair value ~~for~~of the investment securities in our portfolio, except the CMBS held in securitization trusts, ~~are valued~~ using a third-party pricing service or ~~are based on~~ quoted prices provided by dealers who make markets in similar financial instruments. Dealer valuations typically incorporate common market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlying characteristics of the particular security including coupon, periodic and life caps, collateral type, rate reset period and seasoning or age of the security. If quoted prices for a security are not reasonably available from a dealer, the security will be classified as a Level 3 security and, as a result, management will determine fair value by modeling the security based on its specific characteristics and available market information. Management reviews all prices used in determining fair value to ensure they represent current market conditions. This review includes surveying similar market transactions, comparisons to interest pricing models as well as offerings of like securities by dealers. The Company's investment securities, except the CMBS held in securitization trusts, are valued based upon readily observable market parameters and are classified as Level ~~1 or~~ 2 fair values.

The Company’s CMBS held in securitization trusts ~~are~~at December 31, 2018 were comprised of securities for which there ~~are~~were not substantially similar securities that ~~trade~~traded frequently. The Company ~~classifies~~classified these securities as Level 3 fair values. Fair value of the Company’s CMBS investments held in securitization trusts iswas based on an internal valuation model that ~~considers~~considered expected cash flows from the underlying loans and yields required by market participants. The significant unobservable inputs used in the measurement of these investments ~~are~~were projected losses of certain identified loans within the pool of loans and a discount rate. The discount rate used in determining fair value ~~incorporates~~incorporated default rate, loss severity and current market interest rates. The discount rate ~~ranges~~ranged from 4.5% to ~~10.6%.~~9.5% as of December 31, 2018. Significant increases or decreases in these inputs would ~~result~~have resulted in a significantly lower or higher fair value measurement.

Multi-Family Loans Held in Securitization Trusts – Multi-family loans held in securitization trusts are carried at fair value as a result of a fair value election and classified as Level 3 fair values. The Company determines the fair value of multi-family loans held in securitization trusts based on the fair value of its Multi-Family CDOs and its retained interests from these securitizations (eliminated in consolidation in accordance with GAAP), as the fair value of these instruments is more observable.

~~Table of Contents~~


c.	Derivative Instruments – The fair value of interest rate swaps ~~swaptions, options and TBAs~~ are based on dealer ~~quotes. The fair value~~quotes and are presented net of ~~future contracts are based on exchange-traded prices.~~variation margin payments pledged or received. The Company’s derivatives are classified as Level ~~1 or Level~~ 2 fair values.

Table of Contents

Multi-Family CDOs – Multi-Family CDOs are recorded at fair value and classified as Level 3 fair values. The fair value of Multi-Family CDOs is determined using a third party pricing service or are based on quoted prices provided by dealers who make markets in similar financial instruments. The dealers will consider contractual cash payments and yields expected by market participants. Dealers also incorporate common market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlying characteristics of the particular security including coupon, periodic and life caps, collateral type, rate reset period and seasoning or age of the security.

~~Investment~~Investments in Unconsolidated Entities – Fair value for investments in unconsolidated entities is determined based on a valuation model using assumptions for the timing and amount of expected future cash flow for income and realization events for the underlying assets in the unconsolidated entities and a discount rate. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 in the fair value hierarchy.

Residential Mortgage Loans -– Certain of the Company’s acquired distressed and other residential mortgage loans ~~including distressed residential mortgage loans and second lien mortgages,~~ are recorded at fair value and classified as Level 3 in the fair value hierarchy. The fair value for ~~first lien mortgages~~distressed and other residential mortgage loans is determined using ~~prices~~valuations obtained from a third party ~~pricing service.~~that specializes in providing valuations of residential mortgage loans. The ~~fair value~~valuation approach depends on whether the residential mortgage loan is based upon cash flow models that primarily use market-based inputs such as current interest and discount rates but also include unobservable market data inputs such as prepayment speeds, default rates and loss severities. The fair value for second lien residential loansconsidered performing, re-performing or non-performing at the date the valuation is ~~based upon an internal cash flow model that considers current interest rates, prepayment speeds, default rates, and loss severities.~~performed.

For performing and re-performing loans, estimates of fair value are derived using a discounted cash flow model, where estimates of cash flows are determined from scheduled payments for each loan, adjusted using forecast prepayment rates, default rates and rates for loss upon default. For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, expected liquidation costs and home price appreciation. The discount rate used in determining fair value for distressed and other residential mortgage loans ranges from 4.7% to 12.0%.

Any changes to the valuation methodology are reviewed by management to ensure the changes are appropriate. As markets and products develop and the pricing for certain products becomes more transparent, the Company continues to refine its valuation methodologies. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of each reporting date, which may include periods of market dislocation, during which time price transparency may be reduced. This condition could cause the Company’s financial instruments to be reclassified from Level 2 to Level 3 in future periods.

4840

Table of Contents

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively, on the Company’s condensed consolidated balance sheets (dollar amounts in thousands):


	Measured at Fair Value on a Recurring Basis at																Measured at Fair Value on a Recurring Basis at
	September 30, 2017								December 31, 2016								March 31, 2019								December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		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	$	—	$	415,032	$	—	$	415,032	$	—	$	526,363	$	—	$	526,363	$	—	$	1,023,938	$	—	$	1,023,938	$	—	$	1,037,730	$	—	$	1,037,730
Non-Agency RMBS	—		133,022		—		133,022		—		163,284		—		163,284		—		314,086		—		314,086		—		214,037		—		214,037
U.S. Treasury Securities	2,924		—		—		2,924		2,887		—		—		2,887
CMBS	—		76,560		46,623		123,183		—		82,545		43,897		126,442		—		245,941		—		245,941		—		207,785		52,700		260,485
Multi-family loans held in securitization trusts	—		—		8,399,334		8,399,334		—		—		6,939,844		6,939,844		—		—		14,328,336		14,328,336		—		—		11,679,847		11,679,847
Residential mortgage loans, at fair value	—		—		69,512		69,512		—		—		17,769		17,769
Distressed and other residential mortgage loans, at fair value																	—		—		875,566		875,566		—		—		737,523		737,523
Derivative assets:
TBA Securities	—		180,562		—		180,562		—		148,139		—		148,139
Interest rate swap futures	1,228		—		—		1,228		444		—		—		444
Interest rate swaps	—		18		—		18		—		108		—		108
Swaptions	—		18		—		18		—		431		—		431
Eurodollar futures	289		—		—		289		1,175		—		—		1,175
Investment in unconsolidated entities	—		—		41,026		41,026		—		—		60,332		60,332
Interest rate swaps ⁽¹⁾																	—		14,873		—		14,873		—		10,263		—		10,263
Investments in unconsolidated entities																	—		—		36,575		36,575		—		—		32,994		32,994
Total	$	4,441	$	805,212	$	8,556,495	$	9,366,148	$	4,506	$	920,870	$	7,061,842	$	7,987,218	$	—	$	1,598,838	$	15,240,477	$	16,839,315	$	—	$	1,469,815	$	12,503,064	$	13,972,879
Liabilities carried at fair value
Multi-family collateralized debt obligations	$	—	$	—	$	7,990,619	$	7,990,619	$	—	$	—	$	6,624,896	$	6,624,896	$	—	$	—	$	13,547,195	$	13,547,195	$	—	$	—	$	11,022,248	$	11,022,248
Derivative liabilities:
U.S. Treasury futures	193		—		—		193		107		—		—		107
Interest rate swaps	—		274		—		274		—		391		—		391
Total	$	193	$	274	$	7,990,619	$	7,991,086	$	107	$	391	$	6,624,896	$	6,625,394	$	—	$	—	$	13,547,195	$	13,547,195	$	—	$	—	$	11,022,248	$	11,022,248

⁽¹⁾

All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $12.8 million netted against a variation margin of $27.7 million at March 31, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.

Table of Contents

The following tables detail changes in valuation for the Level 3 assets for the three months ended March 31, 2019 and 2018, respectively (amounts in thousands):

Level 3 Assets:



	Three Months Ended March 31, 2019
	Multi-family loans held in securitization trusts			Distressed and other residential mortgage loans			Investments in unconsolidated entities			CMBS held in securitization trusts			Total
Balance at beginning of period	$	11,679,847		$	737,523		$	32,994		$	52,700		$	12,503,064
Total (losses)/gains (realized/unrealized)
Included in earnings	259,764			9,945			3,892			17,734			291,335
Included in other comprehensive income (loss)	—			—			—			(13,665		)	(13,665		)
Transfers in	—			—			—			—			—
Transfers out	—			(182		)	—			—			(182		)
Contributions	—			—			—			—			—
Paydowns/Distributions	(37,485		)	(24,930		)	(311		)	—			(62,726		)
Sales	—			(6,448		)	—			(56,769		)	(63,217		)
Purchases ⁽¹⁾	2,426,210			159,658			—			—			2,585,868
Balance at the end of period	$	14,328,336		$	875,566		$	36,575		$	—		$	15,240,477


⁽¹⁾	During the three months ended March 31, 2019, the Company purchased PO securities and certain IOs and mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $2.4 billion during the three months ended March 31, 2019 (see Notes 2 and 6).



	Three Months Ended March 31, 2018
	Multi-family loans held in securitization trusts			Distressed and other residential mortgage loans			Investments in unconsolidated entities			CMBS held in securitization trusts			Total
Balance at beginning of period	$	9,657,421		$	87,153		$	42,823		$	47,922		$	9,835,319
Total (losses)/gains (realized/unrealized)
Included in earnings	(184,678		)	(181		)	1,319			939			(182,601		)
Included in other comprehensive income (loss)	—			—			—			(4		)	(4		)
Transfers in	—			—			—			—			—
Transfers out	—			—			—			—			—
Contributions	—			—			—			—			—
Paydowns/Distributions	(34,434		)	(3,458		)	(638		)	—			(38,530		)
Sales	—			—			—			—			—
Purchases	—			15,966			—			—			15,966
Balance at the end of period	$	9,438,309		$	99,480		$	43,504		$	48,857		$	9,630,150

4942

Table of Contents

The following table details changes in valuation for the Level 3 ~~assets~~liabilities (Multi-family CDOs) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016, respectively (amounts in thousands):~~

~~Level 3 Assets:~~

Nine Months Ended September 30,
2017 2016
Balance at beginning of period $ 7,061,842
$ 7,214,587
Total gains/(losses) (realized/unrealized)
Included in earnings ⁽¹⁾
38,978
215,325
Included in other comprehensive income 208
178
Purchases 1,598,018
13,326
Transfers in⁽²⁾
—
52,176
Transfers out ⁽³⁾
—
(56,756 )
Contributions 1,300
2,000
Paydowns/Distributions (139,751 ) (93,129 )
Sales (4,100 ) —
Balance at the end of period $ 8,556,495
$ 7,340,018


⁽¹⁾	Amounts included in 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 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~~).

~~The following table details changes in valuation for the Level 3 liabilities for the nine months ended September 30, 2017 and 2016,~~2018, respectively (amounts in thousands):

Level 3 Liabilities:


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2019			2018
Balance at beginning of period	$	6,624,896		$	6,818,901		$	11,022,248		$	9,189,459
Total gains/(losses) (realized/unrealized)
Total losses (gains) (realized/unrealized)
Included in earnings ⁽¹⁾	(1,389		)	186,855			237,789			(201,558		)
Purchases(2)	1,472,073			—			2,324,639			—
Paydowns	(104,961		)	(91,901		)	(37,481		)	(34,434		)
Balance at the end of period	$	7,990,619		$	6,913,855		$	13,547,195		$	8,953,467


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

~~Table of Contents~~


⁽²⁾	During the three months ended March 31, 2019, the Company purchased PO securities and certain IOs and mezzanine 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 of $2.3 billion (see Notes 2 and 6).

The following table details the changes in unrealized gains (losses) included in earnings for the three months ended March 31, 2019 and 2018 for our Level 3 ~~multi-family loans~~assets and ~~debt~~liabilities held ~~in securitization trusts for the three~~as of March 31, 2019 and ~~nine months ended September 30, 2017 and 2016,~~2018, respectively (dollar amounts in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Change in unrealized (losses) gains – assets
$ (19,767 ) $ (17,722 ) $ 56,995
$ 237,934
Change in unrealized gains (losses) – liabilities 22,120
18,460
(51,811 ) (235,594 )
Net change in unrealized gains included in earnings for assets and liabilities $ 2,353
$ 738
$ 5,184
$ 2,340



	Three Months Ended March 31,
	2019			2018
Assets
Multi-family loans held in securitization trusts ⁽¹⁾	$	274,683		$	(172,546	)
Investments in unconsolidated entities ⁽²⁾	3,661			1,038
Distressed and other residential mortgage loans at fair value ⁽³⁾	9,337			(92		)

Liabilities
Multi-family debt held in securitization trusts ⁽¹⁾	(265,273		)	180,091


⁽¹⁾	Presented in unrealized gain on multi-family loans and debt held in securitization trusts, net on the Company's condensed consolidated statements of operations.


⁽²⁾	Presented in other income on the Company's condensed consolidated statements of operations.


⁽³⁾	Presented in net gain (loss) on distressed and other residential mortgage loans at fair value on the Company's condensed consolidated statements of operations.

The following table presents assets measured at fair value on a non-recurring basis as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively, on the Company's condensed consolidated balance sheets (dollar amounts in thousands):

Assets Measured at Fair Value on a Non-Recurring Basis at
September 30, 2017 December 31, 2016
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Residential mortgage loans held in securitization trusts – impaired loans (net) $ —
$ —
$ 7,201
$ 7,201
$ —
$ —
$ 9,050
$ 9,050
Real estate owned held in residential securitization trusts —
—
742
742
—
—
150
150



	Assets Measured at Fair Value on a Non-Recurring Basis at
	March 31, 2019								December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Residential mortgage loans held in securitization trusts – impaired loans, net	$	—	$	—	$	5,779	$	5,779	$	—	$	—	$	5,921	$	5,921

Table of Contents

The following table presents ~~losses (gains)~~gains (losses) incurred for assets measured at fair value on a non-recurring basis for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively, on the Company’s condensed consolidated statements of operations (dollar amounts in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Residential mortgage loans held in securitization trusts – impaired loans (net) $ (199 ) $ 102
$ 6
$ 534
Real estate owned held in residential securitization trusts 297
46
303
23



	Three Months Ended March 31,
	2019			2018
Residential mortgage loans held in securitization trusts – impaired loans, net	$	(38	)	$	110

Residential Mortgage Loans Held in Securitization Trusts – Impaired Loans, ~~(net)~~net – Impaired residential mortgage loans held in securitization trusts are recorded at amortized cost less specific loan loss reserves. Impaired loan value is based on management’s estimate of the net realizable value taking into consideration local market conditions of the property, updated appraisal values of the property and estimated expenses required to remediate the impaired loan.

~~Real Estate Owned Held in Residential Securitization Trusts –~~ Real estate owned held in the residential securitization trusts are recorded at net realizable value. Any subsequent adjustment will result in the reduction in carrying value with the corresponding amount charged to earnings. Net realizable value is based on an estimate of disposal taking into consideration local market conditions of the property, updated appraisal values of the property and estimated expenses required to sell the property.

~~Table of Contents~~

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (dollar amounts in thousands):

September 30, 2017 December 31, 2016

Fair Value
Hierarchy Level

Carrying
Value

Estimated
Fair Value

Carrying
Value

Estimated
Fair Value
Financial Assets:
Cash and cash equivalents Level 1 $ 101,904
$ 101,904
$ 83,554
$ 83,554
Investment securities available for sale ⁽¹⁾
Level 1, 2 or 3 674,161
674,161
818,976
818,976
Residential mortgage loans held in securitization trusts (net) Level 3 79,875
77,412
95,144
88,718
Distressed residential mortgage loans, at carrying value ⁽²⁾
Level 3 369,651
374,169
503,094
504,915
Residential mortgage loans, at fair value Level 3 69,512
69,512
17,769
17,769
Multi-family loans held in securitization trusts Level 3 8,399,334
8,399,334
6,939,844
6,939,844
Derivative assets Level 1 or 2 182,115
182,115
150,296
150,296
Mortgage loans held for sale (net) ⁽³⁾
Level 3 6,797
6,899
7,847
7,959
Mortgage loans held for investment ⁽³⁾
Level 3 1,760
1,900
19,529
19,641
Mezzanine loan and preferred equity investments ⁽⁴⁾
Level 3 122,578
124,436
100,150
101,408
Investment in unconsolidated entities ⁽⁵⁾
Level 3 51,268
51,342
79,259
79,390
Receivable for securities sold Level 1 1,261
1,261
—
—
Financial Liabilities:
Financing arrangements, portfolio investments Level 2 608,304
608,304
773,142
773,142
Financing arrangements, residential mortgage loans Level 2 160,562
160,562
192,419
192,419
Residential collateralized debt obligations Level 3 76,867
72,428
91,663
85,568
Multi-family collateralized debt obligations Level 3 7,990,619
7,990,619
6,624,896
6,624,896
Securitized debt Level 3 98,371
105,768
158,867
163,884
Derivative liabilities Level 1 or 2 467
467
498
498
Payable for securities purchased Level 1 181,718
181,718
148,015
148,015
Subordinated debentures Level 3 45,000
44,989
45,000
43,132
Convertible notes Level 2 128,273
138,697
—
—



		March 31, 2019				December 31, 2018
	Fair Value Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	65,359	$	65,359	$	103,724	$	103,724
Investment securities available for sale	Level 2 or 3	1,583,965		1,583,965		1,512,252		1,512,252
Distressed and other residential mortgage loans, at fair value	Level 3	875,566		875,566		737,523		737,523
Distressed and other residential mortgage loans, net	Level 3	262,193		264,476		285,261		289,376
Investments in unconsolidated entities	Level 3	92,364		92,961		73,466		73,833
Preferred equity and mezzanine loan investments	Level 3	175,128		177,602		165,555		167,739
Multi-family loans held in securitization trusts	Level 3	14,328,336		14,328,336		11,679,847		11,679,847
Derivative assets	Level 2	14,873		14,873		10,263		10,263
Mortgage loans held for sale, net ⁽¹⁾	Level 3	2,960		3,134		3,414		3,584
Mortgage loans held for investment ⁽¹⁾	Level 3	1,580		1,580		1,580		1,580
Financial Liabilities:
Repurchase agreements	Level 2	2,273,005		2,273,005		2,131,505		2,131,505
Residential collateralized debt obligations	Level 3	49,247		47,004		53,040		50,031
Multi-family collateralized debt obligations	Level 3	13,547,195		13,547,195		11,022,248		11,022,248
Securitized debt	Level 3	—		—		42,335		45,030
Subordinated debentures	Level 3	45,000		45,011		45,000		44,897
Convertible notes	Level 2	131,301		136,693		130,762		135,689


⁽¹⁾	~~Includes $46.6 million and $43.9 million of investment securities for sale held in securitization trusts as of September 30, 2017 and December 31, 2016, respectively.~~

⁽²⁾

Includes distressed residential mortgage loans held in securitization trusts with a carrying value amounting to approximately $134.0 million and $195.3 million at September 30, 2017 and December 31, 2016, respectively, and distressed residential mortgage loans with a carrying value amounting to approximately $235.7 million and $307.7 million at September 30, 2017 and December 31, 2016, respectively.


⁽³⁾	Included in receivables and other assets in the accompanying condensed consolidated balance sheets.


⁽⁴⁾ 44 Table of Contents	~~Includes mezzanine loan and preferred equity investments accounted for as loans (seeNote 9~~).


⁽⁵⁾	Includes investments in unconsolidated entities accounted for under the fair value option with a carrying value of $41.0 million and $60.3 million at September 30, 2017 and December 31, 2016, respectively (~~see Note 8)~~.

In addition to the methodology to determine the fair value of the Company’s financial assets and liabilities reported at fair value on a recurring basis and non-recurring basis, as previously described, the following methods and assumptions were used by the Company in arriving at the fair value of the Company’s other financial instruments in the table immediately above:


a.	Cash and cash equivalents – Estimated fair value approximates the carrying value of such assets.

~~Residential~~Distressed and other residential mortgage loans held in securitization trusts, ~~(net)~~net – Residential mortgage loans held in the securitization trusts are recorded at amortized ~~cost.~~cost, net of allowance for loan losses. Fair value is based on an internal valuation model that considers the aggregated characteristics of groups of loans such as, but not limited to, collateral type, index, interest rate, margin, length of fixed-rate period, life cap, periodic cap, underwriting standards, age and credit estimated using the estimated market prices for similar types of loans.

~~Table of Contents~~


c.	Distressed and other residential mortgage loans, ~~(net)~~net – Fair value is estimated using pricing models taking into consideration current interest rates, loan amount, payment status and property type, and forecasts of future interest rates, home prices and property values, prepayment speeds, default, loss severities, and actual purchases and sales of similar loans.


d.	~~Receivable for securities sold –~~ ~~Estimated fair value approximates the carrying value of such assets.~~

Mortgage loans held for sale, ~~(net)~~net – The fair value of mortgage loans held for sale, ~~(net)~~net are estimated by the Company based on the price that would be received if the loans were sold as whole loans taking into consideration the aggregated characteristics of the loans such as, but not limited to, collateral type, index, interest rate, margin, length of fixed interest rate period, life time cap, periodic cap, underwriting standards, age and credit.

f.e.

~~Mezzanine~~Preferred equity and mezzanine loan ~~and preferred equity~~ investments – Estimated fair value is determined by both market comparable pricing and discounted cash flows. The discounted cash flows are based on the underlying contractual cash flows and estimated changes in market yields. The fair value also reflects consideration of changes in credit risk since the origination or time of initial investment.


g.f.	~~Financing arrangements~~Repurchase agreements – The fair value of these ~~financing arrangements~~repurchase agreements approximates cost as they are short term in nature.


h.g.	Residential collateralized debt obligations – The fair value of these CDOs is based on discounted cash flows as well as market pricing on comparable obligations.


i.h.	Securitized debt – The fair value of securitized debt is based on discounted cash flows using management’s estimate for market yields.


j.	~~Payable for securities purchased –~~ ~~Estimated fair value approximates the carrying value of such liabilities.~~


k.i.	Subordinated debentures – The fair value of these subordinated debentures is based on discounted cash flows using management’s estimate for market yields.


l.j.	Convertible notes – The fair value is based on quoted prices provided by dealers who make markets in similar financial instruments.

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~~19.~~17.	Stockholders' Equity


(a)	Dividends on Preferred Stock

The Company had 200,000,000 authorized shares of preferred stock, par value $0.01 per share, with ~~6,600,000~~12,000,000 shares issued and outstanding as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.

~~On June 4, 2013,~~At December 31, 2018, the Company ~~issued 3,000,000~~had designated 6,000,000 shares of 7.75% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”), with a par value of $0.01 per share and a liquidation preference of $25 per share, in an underwritten public offering, for net proceeds of approximately $72.4 million, after deducting underwriting discounts and offering expenses. As of September 30, 2017 and December 31, 2016, there were 6,000,000 shares of Series B Preferred Stock authorized. The Series B Preferred Stock is entitled to receive a dividend at a rate of 7.75% per year on the $25 liquidation preference and is senior to the common stock with respect to dividends and distribution of assets upon liquidation, dissolution or winding up.

~~On April 22, 2015, the Company issued 3,600,000~~4,140,000 shares of 7.875% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”), ~~with a par value~~and 5,750,000 shares of ~~$0.01 per share~~8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”). On March 28, 2019, the Company classified and ~~a liquidation preference~~designated an additional 2,460,000 shares and 2,650,000 shares of ~~$25 per share, in an underwritten public offering, for net proceeds~~the Company's authorized but unissued preferred stock as Series C Preferred Stock and Series D Preferred Stock, respectively. At March 31, 2019, the Company had designated 6,000,000 shares, 6,600,000 shares and 8,400,000 shares of ~~approximately $86.9 million, after deducting underwriting discounts~~Series B Preferred Stock, Series C Preferred Stock, and ~~offering expenses. As~~Series D Preferred Stock, respectively (collectively, the "Preferred Stock"). The Company had 3,000,000 shares of ~~September 30, 2017 and December 31, 2016, there were 4,140,000~~Series B Preferred Stock, 3,600,000 shares of Series C Preferred Stock ~~authorized.~~and 5,400,000 shares of Series D Preferred Stock issued and outstanding as of March 31, 2019 and December 31, 2018.

Each of the Series B Preferred Stock and the Series C Preferred Stock are entitled to receive a dividend at a rate of 7.75% and 7.875%, respectively, per year on its $25 liquidation preference. The Series CD Preferred Stock is entitled to receive a dividend at a fixed rate from and including the issue date to, but excluding, October 15, 2027 of ~~7.875%~~8.00% per year on ~~the~~its $25 liquidation ~~preference and~~preference. Beginning October 15, 2027, the Series D Preferred Stock is entitled to receive a dividend at a floating rate equal to three-month LIBOR plus a spread of 5.695% per year on its $25 liquidation preference. Each series of the Preferred Stock is senior to the common stock with respect to ~~dividends and distribution of assets~~distributions upon liquidation, dissolution or winding up.

The ~~Series B Preferred Stock and Series C~~ Preferred Stock generally do not have any voting rights, subject to an exception in the event the Company fails to pay dividends on such stock for six or more quarterly periods (whether or not consecutive). Under such circumstances, holders of ~~the Series B Preferred Stock and Series C~~ Preferred Stock voting together as a single class with the holders of all other classes or series of our preferred stock upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the ~~Series B Preferred Stock and Series C~~ Preferred Stock will be entitled to vote to elect two additional directors to the Company’s Board of Directors (the “Board”) until all unpaid dividends have been paid or declared and set apart for payment. In addition, certain material and adverse changes to the terms of any series of the ~~Series B Preferred Stock and Series C~~ Preferred Stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of the series of Preferred Stock whose terms are being changed.

The Series B Preferred Stock, ~~and~~ Series C ~~Preferred Stock.~~

~~Neither the Series B~~ Preferred Stock, and Series CD Preferred Stock are not redeemable by the Company prior to June 4, 2018, ~~in the case of the Series B Preferred Stock, and~~ April 22, 2020, ~~in the case of the Series C Preferred Stock,~~and October 15, 2027, respectively, except under circumstances intended to preserve the Company’s qualification as a REIT and except upon the occurrence of a Change of Control (as defined in the Articles Supplementary designating the Series B Preferred Stock, Series C Preferred Stock, and Series CD Preferred Stock, respectively). On and after June 4, 2018, ~~and~~ April 22, 2020, and October 15, 2027, the Company may, at its option, redeem the Series B Preferred Stock, Series C Preferred Stock, and Series CD Preferred Stock, respectively, in whole or in part, at any time or from time to time, for cash at a redemption price equal to $25.00 per share, plus any accumulated and unpaid dividends.

In addition, upon the occurrence of a Change of Control, the Company may, at its option, redeem the ~~Series B Preferred Stock and Series C~~ Preferred Stock in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends.

~~Each of the Series B Preferred Stock and Series C~~The Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless repurchased or redeemed by the Company or converted into the Company’s common stock in connection with a Change of Control.

Upon the occurrence of a Change of Control, each holder of ~~Series B Preferred Stock and Series C~~ Preferred Stock will have the right (unless the Company has exercised its right to redeem the ~~Series B~~ Preferred ~~Stock or Series C Preferred Stock, respectively)~~Stock) to convert some or all of the ~~Series B Preferred Stock or Series C~~ Preferred Stock held by such holder into a number of shares of our common stock per share of ~~Series B Preferred Stock or Series C~~the applicable series of Preferred Stock determined by a formula, in each case, on the terms and subject to the conditions described in the applicable Articles Supplementary for such series.

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From the time of original issuance of ~~each of~~ the ~~Series B Preferred Stock and the Series C~~ Preferred Stock through ~~September 30, 2017,~~March 31, 2019, the Company has declared and paid all required quarterly dividends on such series of stock. The following table presents the relevant dates with respect to such quarterly cash dividends declared on the ~~Series B~~ Preferred Stock ~~and Series C Preferred Stock declared from~~commencing January 1, ~~2016~~2018 through ~~September 30, 2017 :~~

March 31, 2019:

Series B Preferred Stock Series C Preferred Stock
Declaration Date
Record
Date

Payment
Date

Cash
Dividend
Per Share

Declaration
Date

Record
Date

Payment
Date
Cash Dividend Per Share

September 14, 2017 October 1, 2017 October 15, 2017 $ 0.484375
September 14, 2017 October 1, 2017 October 15, 2017 $ 0.4921875
June 14, 2017 July 1, 2017 July 15, 2017 0.484375
June 14, 2017 July 1, 2017 July 15, 2017 0.4921875
March 16, 2017 April 1, 2017 April 15, 2017 0.484375
March 16, 2017 April 1, 2017 April 15, 2017 0.4921875
December 15, 2016 January 1, 2017 January 15, 2017 0.484375
December 15, 2016 January 1, 2017 January 15, 2017 0.4921875
September 15, 2016 October 1, 2016 October 15, 2016 0.484375
September 15, 2016 October 1, 2016 October 15, 2016 0.4921875
June 16, 2016 July 1, 2016 July 15, 2016 0.484375
June 16, 2016 July 1, 2016 July 15, 2016 0.4921875
March 18, 2016 April 1, 2016 April 15, 2016 0.484375
March 18, 2016 April 1, 2016 April 15, 2016 0.4921875



			Cash Dividend Per Share
Declaration Date	Record Date	Payment Date	Series B Preferred Stock		Series C Preferred Stock		Series D Preferred Stock
March 19, 2019	April 1, 2019	April 15, 2019	$	0.484375	$	0.4921875	$	0.50
December 4, 2018	January 1, 2019	January 15, 2019	0.484375		0.4921875		0.50
September 17, 2018	October 1, 2018	October 15, 2018	0.484375		0.4921875		0.50
June 18, 2018	July 1, 2018	July 15, 2018	0.484375		0.4921875		0.50
March 19, 2018	April 1, 2018	April 15, 2018	0.484375		0.4921875		0.50


(b)	Dividends on Common Stock

The following table presents cash dividends declared by the Company on its common stock with respect to each of the quarterly periods commencing January 1, ~~2016~~2018 and ended ~~September 30, 2017:~~March 31, 2019:

Period Declaration Date Record Date Payment Date Cash Dividend Per Share
Third Quarter 2017 September 14, 2017 September 25, 2017 October 25, 2017 $ 0.20
Second Quarter 2017 June 14, 2017 June 26, 2017 July 25, 2017 0.20
First Quarter 2017 March 16, 2017 March 27, 2017 April 25, 2017 0.20
Fourth Quarter 2016 December 15, 2016 December 27, 2016 January 26, 2017 0.24
Third Quarter 2016 September 15, 2016 September 26, 2016 October 28, 2016 0.24
Second Quarter 2016 June 16, 2016 June 27, 2016 July 25, 2016 0.24
First Quarter 2016 March 18, 2016 March 28, 2016 April 25, 2016 0.24



Period	Declaration Date	Record Date	Payment Date	Cash Dividend Per Share
First Quarter 2019	March 19, 2019	March 29, 2019	April 25, 2019	$	0.20
Fourth Quarter 2018	December 4, 2018	December 14, 2018	January 25, 2019	0.20
Third Quarter 2018	September 17, 2018	September 27, 2018	October 26, 2018	0.20
Second Quarter 2018	June 18, 2018	June 28, 2018	July 26, 2018	0.20
First Quarter 2018	March 19, 2018	March 29, 2018	April 26, 2018	0.20


(c)	Public Offering of Common Stock

~~There were no~~On January 11, 2019, the Company issued 14,490,000 shares of its common stock through an underwritten public ~~offerings~~offering, at a public offering price of $5.96 per share, resulting in total net proceeds to the Company of $83.8 million after deducting underwriting discounts and commissions and offering expenses.

On March 1, 2019, the Company issued 15,000,000 shares of its common stock ~~during~~through an underwritten public offering, at a public offering price of $6.00 per share. On March 15, 2019, the ~~three~~Company issued 2,250,000 shares of its common stock upon exercise of the underwriters' option to purchase up to an additional 2,250,000 shares of the Company's common stock. The offering resulted in the Company issuing a total of 17,250,000 shares of its common stock for total net proceeds to the Company of $101.2 million after deducting underwriting discounts and ~~nine months ended September 30, 2017.~~commissions and offering expenses.


(d)	Equity Distribution Agreements

On August 10, 2017, the Company entered into an equity distribution agreement (the ~~“Equity~~“Common Equity Distribution Agreement”) with Credit Suisse Securities (USA) LLC (“Credit Suisse”), as sales agent, pursuant to which the Company may offer and sell shares of its common stock, par value $0.01 per share, having a maximum aggregate sales price of up to $100.0 million, from time to time through Credit Suisse. On September 10, 2018, the Company entered into an amendment to the Common Equity Distribution Agreement that increased the maximum aggregate sales price to $177.1 million. The Company has no obligation to sell any of the shares of common stock issuable under the Common Equity Distribution Agreement and may at any time suspend solicitations and offers under the Common Equity Distribution Agreement.

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The Common Equity Distribution Agreement ~~replaces~~replaced the Company’s prior equity distribution agreements with JMP Securities LLC and Ladenburg Thalmann & Co. Inc. dated as of March 20, 2015 and August 25, 2016, respectively (the “Prior Equity Distribution Agreements”), pursuant to which up to $39.3 million of aggregate value of the Company's common stock and Series B Preferred Stock remained available for issuance immediately prior to termination. The Prior Equity Distribution Agreements were terminated effective on August 7, 2017.

There were no shares of common stock issued under the ~~Prior Equity Distribution Agreements and the~~Common Equity Distribution Agreement during the three months ended September 30, 2017 . During the nine months ended September 30, 2017, the Company issued 87,737 shares of its common stock under the Prior Equity Distribution Agreements, at an average sales price of $6.68 per share, resulting in total net proceeds to the Company of $0.6 million after deducting the placement fees. During the threeMarch 31, 2019 and ~~nine months ended September 30, 2016, the Company issued no shares under the Prior Equity Distribution Agreements.~~March 31, 2018. As of ~~September 30, 2017,~~March 31, 2019, approximately ~~$100.0~~$86.4 million of ~~securities~~common stock remains available for issuance under the Common Equity Distribution Agreement.

On March 29, 2019, the Company entered into an equity distribution agreement (the "Preferred Equity Distribution Agreement") with JonesTrading Institutional Services LLC, as sales agent, pursuant to which the Company may offer and sell shares of the Company's Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, having a maximum aggregate gross sales price of up to $50.0 million. The Company has no obligation to sell any of the shares of Preferred Stock issuable under the Preferred Equity Distribution Agreement and may at any time suspend solicitations and offers under the Preferred Equity Distribution Agreement. As of March 31, 2019, $50.0 million of Preferred Stock remains available for issuance under the Preferred Equity Distribution Agreement.

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~~20.~~18.	Earnings Per Share

The Company calculates basic earnings per common share by dividing net income attributable to the Company's common stockholders for the period by weighted-average shares of common stock outstanding for that period. Diluted earnings per common share takes into account the effect of dilutive instruments, such as convertible notes and performance ~~share awards,~~stock units, and the number of incremental shares that are to be added to the weighted-average number of shares outstanding.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019 and March 31, 2018, the Company's Convertible Notes were determined to be dilutive and were included in the calculation of diluted earnings per common share under the "if-converted" method. Under this method, the periodic interest expense (net of applicable taxes) for dilutive notes is added back to the numerator and the number of shares that the notes are entitled to (if converted, regardless of whether they are in or out of the money) are included in the denominator. ~~There were no dilutive instruments for~~During the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2019 and March 31, 2018, performance stock units ("PSUs") awarded under the Company's 2017 Equity Incentive Plan (the "2017 Plan," see Note 19) were also determined to be dilutive and were included in the calculation of diluted earnings per common share under the treasury stock method. Under this method, common equivalent shares are calculated assuming that target PSUs vest according to the PSU award agreements ("PSU Agreements") and unrecognized compensation cost is used to repurchase shares of the Company’s outstanding common stock at the average market price during the reported period.

The following table presents the computation of basic and diluted earnings per common share for the periods indicated (dollar and share amounts in thousands, except per share amounts):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2019			2018
Basic Earnings per Common Share
Net income attributable to Company	$	27,845		$	23,268		$	61,364		$	54,654		$	44,139		$	29,618
Less: Preferred stock dividends	(3,225		)	(3,225		)	(9,675		)	(9,675		)	(5,925		)	(5,925		)
Net income attributable to Company's common stockholders	$	24,620		$	20,043		$	51,689		$	44,979		$	38,214		$	23,693
Basic weighted average common shares outstanding	111,886			109,569			111,824			109,487			174,421			112,018
Basic Earnings per Common Share	$	0.22		$	0.18		$	0.46		$	0.41		$	0.22		$	0.21

Diluted Earnings per Common Share:
Net income attributable to Company	27,845			23,268			61,364			54,654			$	44,139		$	29,618
Less: Preferred stock dividends	(3,225		)	(3,225		)	(9,675		)	(9,675		)	(5,925		)	(5,925		)
Add back: Interest expense on convertible notes for the period, net of tax	2,428			—			6,982			—			2,626			2,634
Net income attributable to Company's common stockholders	$	27,048		$	20,043		$	58,671		$	44,979		$	40,840		$	26,327
Weighted average common shares outstanding	111,886			109,569			111,824			109,487			174,421			112,018
Net effect of assumed convertible notes conversion to common shares	19,694			—			18,107			—			19,694			19,694
Net effect of assumed PSUs vested													855			49
Diluted weighted average common shares outstanding	131,580			109,569			129,931			109,487			194,970			131,761
Diluted Earnings per Common Share	$	0.21		$	0.18		$	0.45		$	0.41		$	0.21		$	0.20

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~~21.~~19.	Stock Based Compensation

In May 2017, the Company’s stockholders approved the ~~Company’s~~ 2017 ~~Equity Incentive~~ Plan, ~~(the “2017 Plan”),~~ with such stockholder action resulting in the termination of the Company’s 2010 Stock Incentive Plan (the “2010 Plan”). The terms of the 2017 Plan are substantially the same as the 2010 Plan. However, any outstanding awards under the 2010 Plan will continue in accordance with the terms of the 2010 Plan and any award agreement executed in connection with such outstanding awards. At ~~September 30, 2017,~~March 31, 2019, there ~~are 94,043 common~~were 115,170 shares ~~reserved for issuance~~of non-vested restricted stock outstanding under the 2010 ~~Plan in connection with an outstanding performance share award.~~Plan.

Pursuant to the 2017 Plan, eligible employees, officers and directors of the Company are offered the opportunity to acquire the Company's common stock through the award of restricted stock and other equity awards under the 2017 Plan. The maximum number of shares that may be issued under the 2017 Plan is 5,570,000. Of the common stock authorized at March 31, 2019, 1,605,667 shares are available for issuance under the 2017 Plan. The Company’s non-employee directors have been issued ~~58,920~~131,975 shares under the 2017 Plan as of ~~September 30, 2017.~~March 31, 2019. The Company’s employees have been issued ~~6,258~~828,701 shares of restricted stock under the 2017 Plan as of ~~September 30, 2017.~~March 31, 2019. At ~~September 30, 2017,~~March 31, 2019, there were ~~6,258~~756,861 shares of non-vested restricted stock outstanding and 3,003,657 common shares reserved for issuance in connection with PSUs under the 2017 Plan.

Of the common stock authorized at December 31, ~~2016, 326,663~~2018, 3,865,174 shares were reserved for issuance under the ~~2010~~2017 Plan. ~~The Company’s non-employee directors have been issued 265,934 shares collectively under the 2010 and 2017 Plans as of September 30, 2017.~~ The Company's non-employee directors had been issued ~~207,014~~131,975 shares under the ~~2010 plan~~2017 Plan as of December 31, ~~2016.~~2018. The Company’s employees ~~have~~had been issued ~~895,201 and 562,280~~292,459 shares of restricted ~~shares collectively~~stock under the ~~2010 and~~ 2017 ~~Plans~~Plan as of ~~September 30, 2017 and~~ December 31, ~~2016, respectively.~~2018. At ~~September 30, 2017 and~~ December 31, ~~2016,~~2018, there were ~~422,928 and 319,058~~290,373 shares of non-vested restricted stock outstanding ~~collectively~~and 1,280,392 common shares reserved for issuance in connection with outstanding PSUs under the ~~2010 and~~ 2017 ~~Plans.~~Plan.


(a)	Restricted Common Stock Awards

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019 and March 31, 2018, the Company recognized non-cash compensation expense on its restricted common stock awards of ~~$0.8~~$0.5 million and ~~$1.5 million, respectively. During the three and nine months ended September 30, 2016, the Company recognized non-cash compensation expense on its restricted common stock awards of~~ $0.3 ~~million and $0.7~~ million, respectively. Dividends are paid on all restricted common stock issued, whether those shares have vested or not. In general, non-vested restricted stock is forfeited upon the recipient's termination of employment. There were no forfeitures ~~during~~of shares for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016.~~2018, respectively.

A summary of the activity of the Company's non-vested restricted stock collectively under the 2010 Plan and 2017 Plan for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively, is presented below:


	2017				2016				2019				2018
	Number of Non-vested Restricted Shares		Weighted Average Per Share Grant Date Fair Value ⁽¹⁾		Number of Non-vested Restricted Shares		Weighted Average Per Share Grant Date Fair Value ⁽¹⁾		Number of Non-vested Restricted Shares		Weighted Average Per Share Grant Date Fair Value ⁽¹⁾		Number of Non-vested Restricted Shares		Weighted Average Per Share Grant Date Fair Value ⁽¹⁾
Non-vested shares at January 1	319,058		$	6.40	280,457		$	7.63	507,536		$	5.91	422,928		$	6.36
Granted	332,921		6.54		160,453		5.11		536,242		6.30		206,597		5.57
Vested	(229,051	)	6.67		(121,852	)	7.54		(171,747	)	5.88		(164,645	)	6.72
Non-vested shares as of September 30	422,928		6.36		319,058		6.40
Weighted-average fair value of restricted stock granted during the period	332,921		$	6.54	160,453		$	5.11
Forfeited									—		—		—		—
Non-vested shares as of March 31									872,031		$	6.16	464,880		$	5.88
Restricted stock granted during the period									536,242		$	6.30	206,597		$	5.57


⁽¹⁾	The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date.

At ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, the Company had unrecognized compensation expense of ~~$1.9~~$4.8 million and ~~$1.5~~$2.4 million, respectively, related to the non-vested shares of restricted common stock under the 2010 Plan and 2017 ~~Plans.~~Plan, collectively. The unrecognized compensation expense at ~~September 30, 2017~~March 31, 2019 is expected to be recognized over a weighted average period of ~~2.1~~2.50 years. The total fair value of restricted shares vested during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 was approximately ~~$1.5~~$1.1 million and ~~$0.6~~$0.9 million, respectively. The requisite service period for restricted ~~shares~~stock awards at issuance is three ~~years.~~years and the restricted common stock vests ratably over a three year period.

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(b)	Performance ~~Share Awards~~Stock Units

~~In May 2015,~~During the three months ended March 31, 2019 and 2018, the Compensation Committee ofand the Board of Directors approved athe grant of PSUs. Each PSU represents an unfunded promise to receive one share of the Company's common stock once the performance ~~share award (“PSA”)~~condition has been satisfied. The awards were issued pursuant to and are consistent with the terms and conditions of the 2017 Plan.

The PSU awards are subject to performance-based vesting under the ~~2010~~2017 Plan ~~to the Company’s Chairman and Chief Executive Officer. At the time of grant, the target number of shares~~ pursuant to the PSA consisted of 89,629 shares of common stock. The PSA had a grant date fair value of approximately $0.4 million. The PSA award under which the number of underlying shares of Company common stock that can be earned will generally range from 0% to 200% of the target number of shares, with the target number of shares increased to reflect the value of the reinvestment of any dividends declared on Company common stock during the vesting period.PSU Agreements. Vesting of the ~~PSA~~PSUs will occur at the end of three years based on ~~three-year TSR, as follows:~~the following:


•	If three-year TSR performance relative to the Company's identified performance peer group (the "Relative TSR") is less than 30^th percentile, then 0% of the target PSUs will vest;


•	If three-year Relative TSR performance is equal to the 30^th percentile, then the Threshold % (as defined in the individual PSU Agreements) of the target PSUs will vest;


•	If three-year Relative TSR performance is equal to the 50^th percentile, then 100% of the target PSUs will vest; and


•	If three-year Relative TSR performance is greater than or equal to the 80^th percentile, then the Maximum % (as defined in the individual PSU Agreements) of the target PSUs will vest.

The percentage of target PSUs that vest for performance between the 30^th, 50^th, and 80^th percentiles will be calculated using linear interpolation.

~~If three-year TSR is less than 33%, then 0% of the PSA will vest;~~

~~If three-year TSR is greater than or equal to 33% and the TSR is not in the bottom quartile of an identified peer group, then 100% of the PSA will vest;~~

~~If three-year TSR is greater than or equal to 33% and the TSR is in the top quartile of an identified peer group, then 200% of the PSA will vest;~~

~~If three-year TSR is greater than or equal to 33% and the TSR is in the bottom quartile of an identified peer group, then 50% of the PSA will vest.~~

~~TSR is defined, with respect to~~Total shareholder return for the Company and each member of the ~~identified~~ peer group ~~as applicable, as~~will be determined by dividing (i) the sum of the cumulative amount of such entity’s dividends per share for the performance period and the arithmetic average ~~annual total shareholder return based on~~per share volume weighted average price (the “VWAP”) of such entity’s common stock ~~price appreciation/depreciation during the applicable measurement period or until the date of a change of control, whichever first occurs, plus the value on~~for the last ~~day~~thirty (30) consecutive trading days of the ~~applicable measurement~~performance period orminus the ~~date~~arithmetic average per share VWAP of ~~a change of control of~~such entity’s common ~~shares if all cash dividends declared on a common share during such period were reinvested in additional common shares.~~

~~Under~~stock for the ~~terms of the agreement pursuant to which the PSA was granted (the "PSA Agreement"), the PSA is subject~~last thirty (30) consecutive trading days immediately prior to the ~~terms and conditions~~performance period by (ii) the arithmetic average per share VWAP of such entity’s common stock for the 2010 Plan and in the event of any conflict between the terms of the 2010 Plan and the PSA Agreement, the terms of the 2010 Plan govern. The 2010 Plan provides that the Compensation Committee may determine that the amount payable when an award of performance shares is earned may be settled in cash, by the issuance of shares, or a combination thereof. The maximum number of shares which may be issued under the PSA is limited to 94,043 shares. In the event the PSA is earned at a level that would cause the Company to issue more than 94,043 shares, the dollar value of the PSA earned in excess of 94,043 shares will be paid in cash, subjectlast thirty (30) consecutive trading days immediately prior to the ~~terms of the 2010 Plan.~~performance period.

The grant date fair value of the ~~PSA~~PSUs was determined through a Monte-Carlo simulation of the Company’s common stock total shareholder return and the common stock total shareholder return of its identified performance peer companies to determine the Relative TSR of the Company’s common stock ~~relative to its peer companies~~ over a future period of three years. For the ~~PSA~~PSUs granted in ~~2015,~~2019 and 2018, the inputs used by the model to determine the fair value are (i) historical stock ~~return~~price volatilities of the Company and its identified performance peer companies over the most recent three year period and correlation between each company's stock and the identified performance peer group over the same time series and (ii) a risk free rate ~~based on~~for the ~~three year~~period interpolated from the U.S. Treasury ~~rate~~yield curve on grant ~~date, and (iii) historical pairwise stock return correlations between the Company and its peer companies over the most recent three year period.~~date.

~~Compensation expense related to~~A summary of the ~~PSA was $32.0 thousand and $95.1 thousand~~activity of the target PSU Awards under the 2017 Plan for the three ~~and nine~~ months ended ~~September 30, 2017.~~ March 31, 2019 and 2018, respectively, is presented below:



	2019			2018
	Number of Non-vested Target Shares	Weighted Average Per Share Grant Date Fair Value		Number of Non-vested Target Shares	Weighted Average Per Share Grant Date Fair Value
Non-vested target PSUs at January 1	842,792	$	4.20	—	$	—
Granted	1,137,525	4.00		588,535	4.04
Vested	—	—		—	—
Non-vested target PSUs as of March 31	1,980,317	$	4.08	588,535	$	4.04

As of ~~September 30, 2017,~~March 31, 2019 and 2018, there was ~~$0.1~~$6.5 million and $2.3 million of unrecognized compensation cost related to the non-vested portion of the ~~PSA.~~PSUs, respectively. Compensation expense related to the PSUs was $0.7 million and $37.2 thousand for the three months ended March 31, 2019 and 2018, respectively.


~~22.~~20.	Income Taxes

For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016,~~March 31, 2018, the Company qualified to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), for U.S. federal income tax purposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes at least 100% of its taxable income to stockholders and does not engage in prohibited transactions. Certain activities the Company performs may produce income that will not be qualifying income for REIT purposes. The Company has designated its TRSs to engage in these activities. The tables below reflect the taxes accrued at the TRS level and the tax attributes included in the consolidated financial statements.

The income tax provision for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016~~March 31, 2018 is comprised of the following components (dollar amounts in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Current income tax expense $ 541
$ 326
$ 2,280
$ 2,581
Deferred income tax (benefit) expense (34 ) (163 ) (93 ) 139
Total provision $ 507
$ 163
$ 2,187
$ 2,720



	Three Months Ended March 31,
	2019			2018
Current income tax (benefit) expense	$	(7	)	$	—
Deferred income tax expense (benefit)	81			(79		)
Total provision (benefit)	$	74		$	(79	)

Deferred Tax Assets and Liabilities

The major sources of temporary differences included in the deferred tax assets and their deferred tax effect as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 are as follows (dollar amounts in thousands):


	September 30, 2017			December 31, 2016			March 31, 2019			December 31, 2018
Deferred tax assets
Net operating loss carryforward	$	2,174		$	2,287		$	2,826		$	2,416
Net capital loss carryforward	—			1,123
Capital loss carryover							976			739
GAAP/Tax basis differences	3,556			3,059			4,056			3,903
Total deferred tax assets ⁽¹⁾	5,730			6,469			7,858			7,058
Deferred tax liabilities
Deferred tax liabilities	200			303			7			6
Total deferred tax liabilities ⁽²⁾	200			303			7			6
Valuation allowance ⁽¹⁾	(5,248		)	(5,978		)	(6,949		)	(6,069		)
Total net deferred tax asset	$	282		$	188		$	902		$	983


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


⁽²⁾	Included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

As of ~~September 30, 2017,~~March 31, 2019, the Company, through ~~wholly owned~~wholly-owned TRSs, had incurred net operating losses in the aggregate amount of approximately ~~$4.8~~$8.3 million. The Company’s carryforward net operating losses can be carried forward indefinitely until they are offset by future taxable income. Additionally, as of March 31, 2019, the Company, through one of its wholly-owned TRSs, had also incurred approximately $2.9 million in capital losses. The Company's carryforward capital losses will expire between ~~2033~~2023 and ~~2037~~2024 if they are not offset by future ~~taxable income.~~capital gains. At ~~September 30, 2017,~~March 31, 2019, the Company has recorded a valuation allowance against certain deferred tax assets as management does not believe that it is more likely than not that these deferred tax assets will be realized.

The Company files income tax returns with the U.S. federal government and various state and local jurisdictions. The Company's federal, state and city income tax returns are subject to examination by the Internal Revenue Service and related tax authorities generally for three years after they were filed. The Company has assessed its tax positions for all open years and concluded that there are no material uncertainties to be recognized.

In addition, based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.


~~23.~~	~~Business Combinations~~

On May 16, 2016 (the “Acquisition Date”), the Company acquired the outstanding common equity interests in RiverBanc, RBMI, and RBDHC (collectively, the “Acquirees”) that were not previously owned by the Company through the consummation of separate membership interest purchase agreements, thereby increasing the Company's ownership of each of these entities to 100%. The results of the Acquirees’ operations have been included in the condensed consolidated financial statements since the Acquisition Date. Prior to the Acquisition Date, the Company owned 20.0%, 67.19% and 62.5% of the outstanding common equity interests in RiverBanc, RBMI and RBDHC, respectively. RiverBanc is an investment management firm that was founded in 2010 and has sourced and managed direct and indirect investments in multi-family apartment properties on behalf of both public and private institutional investors, including the Company, RBMI and RBDHC. Prior to the completion of the RiverBanc acquisition, RiverBanc had served as an external manager of the Company pursuant to an investment management agreement, for which it received base management and incentive fees. In connection with the acquisition, the Company terminated its investment management agreement with RiverBanc on May 17, 2016. As of March 31, 2016, RiverBanc managed approximately $371.5 million of the Company’s capital. In acquiring a 100% ownership interest in RiverBanc, the Company has internalized the management of its multi-family investments. The Company has achieved certain synergies related to processes and personnel as a result of this internalization. Prior to the completion of the acquisitions described above, Donlon Family LLC beneficially owned 59.40%, 5.47% and 6.25% of the outstanding common equity interests in RiverBanc, RMI and RBDHC, respectively.

~~The estimated Acquisition Date fair value of the consideration transferred totaled $53.5 million, which consisted of the following (dollar amounts in thousands):~~

Cash ⁽¹⁾
$ 29,073
Contingent consideration 3,800
Fair value of previously held membership interests 20,608
Total consideration transferred $ 53,481


⁽¹⁾	~~Includes $16.3 million paid to Donlon Family LLC and reflects a post-closing working capital adjustment of $20 thousand delivered to the sellers of RiverBanc on July 15, 2016.~~

Prior to the Acquisition Date, the Company accounted for its previously held membership interests in the Acquirees as equity method investments, utilizing the fair value election for both RBMI and RBDHC. The Acquisition Date fair value of the Company's previously held membership interests in the Acquirees was $20.6 million and is included in the measurement of consideration transferred. In the year ended December 31, 2016, the Company recorded a net gain as a result of remeasuring its previously held membership interests in RiverBanc, RBMI, and RBDHC totaling $5.0 million. This net gain was included in other income on the Company's consolidated statements of operations for the year ended December 31, 2016.

The Company determined the estimated fair value of its previously held membership interests in RiverBanc using assumptions for the timing and amount of expected net future cash flow for the managed portfolio and a discount rate. The Company determined the estimated fair value of its previously held membership interests in RBMI and RBDHC using assumptions for the timing and amount of expected future cash flow for income and realization events for the underlying assets and a discount rate.

~~The contingent consideration includes two components:~~

A cash holdback in the amount of $3.0 million to be released to Donlon Family LLC upon the purchase of $3.0 million in Company common shares on the open market within 90 days of the Acquisition Date. This cash holdback was paid to Donlon Family LLC on June 10, 2016 upon satisfaction of the conditions to the release of this holdback.

A severance holdback in the amount of $0.8 million to fund the aggregate amount of all severance compensation and severance benefits to be paid or provided to current or former RiverBanc employees as a result of the acquisition. The severance holdback was settled in cash and paid to a separated employee on June 30, 2016 and the holdback amount in excess of actual severance costs was delivered to the sellers of RiverBanc on July 15, 2016.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed by the Company at the Acquisition Date (dollar amounts in thousands). The membership interest purchase agreement for the acquisition of RiverBanc included a post-closing working capital adjustment that was calculated at $20 thousand and settled with the sellers of RiverBanc on July 15, 2016. Additionally, the excess severance holdback amount described above was settled with the sellers of RiverBanc on July 15, 2016. The Company engaged a third party for valuations of certain intangible assets.

Cash $ 4,325
Investment in unconsolidated entities 52,176
Mezzanine loan and preferred equity investments 23,638
Real estate under development ⁽¹⁾
14,922
Receivables and other assets 911
Intangible assets ⁽¹⁾
3,490
Total identifiable assets acquired 99,462

Construction loan payable ⁽²⁾
8,499
Accrued expenses and other liabilities 2,864
Total liabilities assumed 11,363

Preferred equity ⁽³⁾
56,697

Net identifiable assets acquired 31,402

Goodwill ⁽⁴⁾
25,222
Gain on bargain purchase ⁽⁵⁾
(65 )
Non-controlling interest ⁽⁶⁾
(3,078 )
Net assets acquired $ 53,481


⁽¹⁾	~~Included in receivables and other assets on the condensed consolidated balance sheets.~~


⁽²⁾	~~Construction loan payable to the Company is eliminated on the condensed consolidated balance sheets.~~


⁽³⁾	Includes $40.4 million of preferred equity owned by the Company that is eliminated on the condensed consolidated balance sheets. Remaining $16.3 million of preferred equity owned by third parties was redeemed on June 10, 2016 and June 24, 2016.


⁽⁴⁾	~~Goodwill recognized in the acquisition of RiverBanc.~~


⁽⁵⁾	~~Gain on bargain purchase recognized in the acquisitions of RBMI and RBDHC in the year ended December 31, 2016.~~

⁽⁶⁾

~~Represents third-party ownership of KRVI membership interests (see Note 10~~). The Company consolidates its investment in KRVI. The third-party ownership in KRVI is represented in the condensed consolidated financial statements and the pro forma net income attributable to the Company's common stockholders as non-controlling interests. The fair value of the non-controlling interests in KRVI was estimated to be $3.1 million. The fair value of the non-controlling interests in KRVI, a private company, was estimated using assumptions for the timing and amount of expected future cash flow for income and realization events for the underlying real estate.

The $3.5 million of intangible assets relates to the RiverBanc acquisition and was recognized at estimated fair value on the Acquisition Date. Intangible assets include an acquired trade name, acquired technology, and employment/non-compete agreements with useful lives ranging from 1 to 10 years.

The $25.2 million of goodwill recognized is attributable primarily to expected synergies and economies of scale from combining with RiverBanc and the assembled workforce of RiverBanc. For the Company’s ongoing evaluation of goodwill for impairment in accordance with ASC 350, ~~Intangibles - Goodwill and Other~~, the Company’s multi-family investment portfolio (inclusive of RiverBanc) will be considered a reporting unit. As of December 31, 2016, there were changes in the recognized amounts of goodwill resulting from the acquisition of RiverBanc as a result of payment of the post-closing working capital adjustment of $20 thousand and adjustments to the estimated fair value of intangible assets in the amount of $0.4 million. The Company evaluated goodwill as of October 1, 2016 and no impairment was indicated.

The acquisition of both RBMI and RBDHC was negotiated directly with the sellers and the fair value of identifiable assets acquired and liabilities assumed exceed the fair value of the consideration transferred. Subsequently, the Company reassessed the identification and recognition of identifiable assets acquired and liabilities assumed, the Company’s previously held membership interests, and the consideration transferred and concluded that all items were recognized and that the valuation procedures and measurements were appropriate. Accordingly, the Company recorded a net gain on bargain purchase of $0.1 million that was included in other income on the Company’s consolidated statements of operations for the year ended December 31, 2016.

~~The amount of revenue of the Acquirees included in the Company’s consolidated statements of operations from the Acquisition Date to the period ended December 31, 2016 was $5.3 million.~~

The following represents the pro forma consolidated revenue and net income attributable to the Company's common stockholders as if the Acquirees had been included in the consolidated results of the Company for the nine months ended September 30, 2016 (dollar amounts in thousands):

For the Nine Months Ended September 30,
2016
Revenue $ 272,074
Net income attributable to Company's common stockholders $ 42,077

Basic pro forma earnings per share $ 0.38
Diluted pro forma earnings per share $ 0.38

These amounts have been calculated after applying the Company’s accounting policies and adjustments for consolidation and amortization that would have been charged assuming the estimated fair value adjustments to intangible assets had been applied on January 1, 2015. Material, nonrecurring pro forma adjustments directly attributable to the business combinations have been included in the pro forma consolidated revenue and net income attributable to the Company's common stockholders shown above as if the transaction occurred on January 1, 2015.


~~24.~~	~~Related Party Transactions~~

The Company terminated its management agreement with RiverBanc on May 17, 2016 as a result of the Company's acquisition of the remaining 80% membership interest in RiverBanc, which resulted in consolidation of RiverBanc into the Company's financial statements (~~see Note 23~~). Prior to May 16, 2016, RiverBanc sourced and managed direct and indirect investments in multi-family properties on behalf of the Company pursuant to a management agreement entered into on April 5, 2011 and amended on March 13, 2013. The amended and restated management agreement had an effective date of January 1, 2013 and had an initial term that expired on December 31, 2015 and was subject to annual automatic one-year renewals (subject to any notice of termination).

Prior to May 16, 2016, the Company owned a 20% membership interest in RiverBanc. For the nine months ended September 30, 2016, the Company recognized approximately $0.1 million in equity income related to its investment in RiverBanc.

~~For the nine months ended September 30, 2016, the Company expensed $1.8 million in fees to RiverBanc.~~

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~~25.~~21. Subsequent Events

~~On October 13, 2017,~~ In April 2019, the Company ~~closed on an underwritten public offering of 5,400,000~~issued 213,753 shares of ~~the Company's 8.00%~~its Series ~~D Fixed-to-Floating Rate Cumulative Redeemable~~B Preferred Stock ~~$0.01 par value~~and Series C Preferred Stock, collectively, under the Preferred Equity Distribution Agreement at an average sales price of $24.78 per share, ("Series D Preferred Stock"), including 400,000 shares of Series D Preferred Stock issued pursuant to the partial exercise of the underwriters' option to purchase up to 750,000 additional shares. Holders of Series D Preferred Stock will be entitled to receive cumulative cash dividends (i) from and including the original issue date to, but excluding, October 15, 2027 at a fixed rate equal to 8.00% per annum of the$25.00 per share liquidation preference (equivalent to $2.00 per annum per share) and (ii) from and including October 15, 2027 at a floating rate equal to three-month LIBOR plus a spread of 5.695% per annum of the $25.00 per share liquidation preference. The Series D Preferred Stock is not redeemable by the Company prior to October 15, 2027, except under circumstances where it is necessary to preserve the Company’s qualification as a REIT for U.S. federal income tax purposes and except in certain instances upon the occurrence of a change of control. The issuance and sale of the 5,400,000 shares of Series D Preferred Stock resultedresulting in total net proceeds to the Company of ~~approximately $130.4~~$5.2 million after ~~deduction~~deducting the placement fees. As of ~~underwriting discounts and commissions and estimated offering expenses.~~May 7, 2019, $44.7 million of Preferred Stock remains available for issuance under the Preferred Equity Distribution Agreement.

Also, in April 2019, the Company issued 2,260,200 shares of its common stock under the Common Equity Distribution Agreement at an average sales price of $6.12 per share, resulting in total net proceeds to the Company of $13.6 million after deducting the placement fees. As of May 7, 2019, $72.5 million of common stock remains available for issuance under the Common Equity Distribution Agreement.

On ~~October 27, 2017,~~May 3, 2019, we entered into a termination and transition agreement (the "Transition Agreement") with Headlands Asset Management LLC ("Headlands") that terminated the ~~Company purchased $36.7 million in first loss tranche PO~~Headlands Management Agreement effective as of May 3, 2019. Pursuant to the Transition Agreement, Headlands will provide us with certain transition services until June 30, 2019 and will receive certain ~~IO securities issued by a Freddie Mac-sponsored multi-family K-Series securitization collateralized by multi-family loans in~~fees during this transition period similar to the ~~amount of approximately $1.3 billion.~~fees Headlands was entitled to under the Headlands Management Agreement, but excluding incentive fees.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

When used in this Quarterly Report on Form 10-Q, in future filings with the ~~Securities and Exchange Commission, or~~ SEC or in press releases or other written or oral communications issued or made by us, statements which are not historical in nature, including those containing words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “would,” “could,” “goal,” “objective,” “will,” “may” or similar expressions, are intended to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act, and as such, may involve known and unknown risks, uncertainties and assumptions.

Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-looking statements: changes in interest rates and the market value of our ~~securities,~~assets, changes in credit spreads, the impact of ~~the~~a downgrade of the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac, ~~and~~or Ginnie Mae; market volatility; changes in ~~the~~ prepayment rates on the ~~mortgage~~ loans ~~underlying~~we own or that underlie our investment securities; increased rates of default and/or decreased recovery rates on our assets; ~~delays in identifying~~our ability to identify and ~~acquiring~~acquire our targeted assets; our ability to borrow to finance our ~~assets;~~assets and the terms thereof; changes in ~~government~~governmental laws, regulations or policies affecting our ~~business, including actions taken by the U.S. Federal Reserve and the U.S. Treasury and those relating to Fannie Mae, Freddie Mac or Ginnie Mae;~~business; our ability to maintain our qualification as a REIT for federal tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as ~~amended;~~amended (the "Investment Company Act"); and risks associated with investing in real estate assets, including changes in business conditions and the general economy. These and other risks, uncertainties and factors, including the risk factors described in Part I, Item 1A – “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2016 and~~2018, as updated by those risks described in our subsequent filings with the SEC under the Exchange Act, could cause our actual results to differ materially from those projected in any forward-looking statements we make. All forward-looking statements speak only as of the date on which they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Defined Terms

In this Quarterly Report on Form 10-Q we refer to New York Mortgage Trust, Inc., together with its consolidated subsidiaries, as “we,” “us,” “Company,” or “our,”unless we specifically state otherwise or the context indicates ~~otherwise. We~~otherwise, and refer to our wholly-owned taxable REIT subsidiaries as “TRSs” and our wholly-owned qualified REIT subsidiaries as “QRSs.”In addition, the following defines certain of the commonly used terms in this report: ~~“RMBS”~~

“Agency ARMs” refers to ~~residential mortgage-backed securities~~Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS;

"Agency fixed-rate" refers to Agency RMBS comprised of fixed-rate ~~interest only and inverse interest only, and principal only securities; “Agency~~RMBS;

“Agency IOs” refers to Agency RMBS comprised of IO RMBS;

“ARMs” refers to Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS; "Agency fixed-rate RMBS" refers to Agency RMBS comprised of fixed-rate RMBS; “non-Agency RMBS” refers to RMBS backed by prime jumbo residential mortgage loans and re-performing and non-performing loans; “IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the right to the interest component of the cash flow from a pool of mortgage loans; “Agency IOs” refers to IOs that represent the right to the interest components of the cash flow from a pool of residential mortgage loans issued or guaranteed by a GSE or an agency of the U.S. government; “POs” refers to mortgage-backed securities that represent the right to the principal component of the cash flow from a pool of mortgage loans; “ARMs” refers to adjustable-rate residential mortgage loans; ~~“prime ARM loans” and “residential securitized loans” each refer to prime credit quality residential ARM loans held in securitization trusts; “distressed residential loans”~~

“CDO” refers to pools of performing and re-performing, fixed-rate and adjustable-rate, fully amortizing, interest-only and balloon, seasoned mortgage loans secured by first liens on one- to four-family properties; “CMBS”collateralized debt obligation;

“CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities, as well as PO, IO or POmezzanine securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans; ~~“multi-family CMBS”~~

“Consolidated K-Series” refers to CMBS backed by commercial mortgage loans on multi-family properties; “CDOs” refers to collateralized debt obligations; “CLO” refers to collateralized loan obligation; “Consolidated K-Series” refers~~to, as of September 30, 2017 and December 31, 2016, six and five separate~~ Freddie Mac-sponsored multi-family loan K-Series securitizations, ~~respectively, that we have determined are Consolidated VIEs and~~ of which we, or one of our ~~special~~"special purpose entities, ~~(“SPEs”)~~" or "SPEs," own the first loss POPOs and certain IOs and mezzanine securities ~~certain IO securities or other classes of securities; “Variable Interest Entity”and“VIE” refers to an entity~~that we consolidate in ~~which equity investors do not have the characteristics of a controlling~~our financial ~~interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties; and “Consolidated~~statements in accordance with GAAP;

“Consolidated VIEs” refers to VIEs where the Company is the primary beneficiary, as it has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the ~~VIE.~~VIE;

“distressed residential mortgage loans” refers to pools of seasoned re-performing, non-performing and other delinquent mortgage loans secured by first liens on one- to four-family properties;

"excess mortgage servicing spread" refers to the difference between the contractual servicing fee with Fannie Mae, Freddie Mac or Ginnie Mae and the base servicing fee that is retained as compensation for servicing or subservicing the related mortgage loans pursuant to the applicable servicing contract;

"GAAP" refers to generally accepted accounting principles within the United States;

“IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the right to the interest component of the cash flow from a pool of mortgage loans;

"IO RMBS" refers to RMBS comprised of IOs;

“multi-family CMBS” refers to CMBS backed by commercial mortgage loans on multi-family properties;

“non-Agency RMBS” refers to RMBS that are not guaranteed by any agency of the U.S. Government or GSE;

“non-QM loans” refers to residential mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the Consumer Financial Protection Bureau;

“POs” refers to mortgage-backed securities that represent the right to the principal component of the cash flow from a pool of mortgage loans;

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“prime ARM loans” and “residential securitized loans” each refer to prime credit quality residential ARM loans held in our securitization trusts;

“RMBS” refers to residential mortgage-backed securities comprised of adjustable-rate, hybrid adjustable-rate, fixed-rate, interest only and inverse interest only, and principal only securities;

“second mortgages” refers to liens on residential properties that are subordinate to more senior mortgages or loans; and

“Variable Interest Entity” or “VIE” refers to an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.

General

We are a real estate investment trust ~~or REIT,~~("REIT") for U.S. federal income tax purposes, in the business of acquiring, investing in, financing and managing mortgage-related and ~~residential housing-related assets and financial~~residential-housing related assets. Our objective is to deliver long-term stable distributions to our stockholders over changing economic conditions through a combination of net interest margin and net realized capital gains from a diversified investment portfolio. Our investment portfolio includes credit sensitive assets and investments sourced from distressed markets ~~in recent years~~ that create the potential for capital gains, as well as more traditional types of mortgage-related investments that generate interest income.

Our investment portfolio includes ~~residential mortgage loans, including second mortgages and loans sourced from distressed markets, non-Agency RMBS,~~(i) structured multi-family property investments such as multi-family CMBS and preferred equity ~~and joint venture equity investments~~ in, and mezzanine loans to, owners of multi-family properties, ~~equity~~(ii) residential mortgage loans, including distressed residential mortgage loans, non-QM loans, second mortgages, and ~~debt securities issued by entities that invest in~~other residential mortgage loans, (iii) non-Agency RMBS, (iv) Agency RMBS and ~~commercial real estate~~(v) certain other mortgage-related and ~~Agency RMBS.~~residential housing-related assets. Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company under the Investment Company Act, we also may opportunistically acquire and manage various other types of mortgage-related and residential housing-related ~~and financial~~ assets that we believe will compensate us appropriately for the risks associated with them, including, without limitation, collateralized mortgage obligations, excess mortgage servicing spreads and securities issued by newly originated residential securitizations, including credit sensitive securities from these securitizations.

~~In recent years, we have transitioned~~We intend to maintain our focus on expanding our portfolio ~~to one focused increasingly on~~of single-family residential and multi-family credit assets, which we believe will benefit from improving credit metrics. Consistent with this approach to capital allocation, we acquired an additional ~~$317.3~~$432.8 million of single-family residential and multi-family credit assets during the ~~nine~~three months ended ~~September 30, 2017. The~~March 31, 2019. In periods where we have working capital in excess of our short-term liquidity needs, we may invest the excess in more liquid assets until such time as we are able to re-invest that capital in credit assets that meet our underwriting requirements. Our investment and capital allocation decisions ~~of our Company and our external managers~~ depend on prevailing market conditions, among other factors, and may change over time in response to opportunities available in different economic and capital market environments. Given current market conditions, we anticipate continuing our pursuit of credit assets, but may also deploy capital to non-credit assets, including, without limitation, Agency RMBS, that we believe will compensate us appropriately for the risks associated with them.

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We seek to achieve a balanced and diverse funding mix to finance our assets and operations. We currently rely primarily on a combination of short-term borrowings, such as repurchase agreements with terms typically of 30 days, longer term repurchase agreement borrowings with terms between one year and 1824 months and longer term ~~structured~~ financings, such as securitizations and convertible notes, with terms longer than one year.

~~We internally manage a significant portion~~In connection with our growth in recent years, we have taken steps each year since 2016 to internalize the investment management of our ~~portfolio,~~various investment portfolios. In August 2018, in order to expand our capabilities in self managing, sourcing and creating single-family distressed residential credit assets, we moved to internalize our last externally-managed business, our distressed residential loan strategy, by adding a team of professionals that increases our capabilities across many residential credit opportunities, including ~~Agency ARMs, Agency fixed-rate RMBS, non-Agency RMBS,~~distressed residential ~~securitized~~ loans, ~~second mortgage loans, multi-family CMBS~~ and preferred equity and joint venture equity investments in, and mezzanine loans to, owners of multi-family properties. In addition, as part of our investment strategy, we also utilize certain external investment managers to manage specific asset types that we target or own. Accordingly,providing Headlands Asset Management LLC ~~or Headlands, provides investment management services with respect to~~(“Headlands”), the external manager of our ~~investments in~~ distressed residential ~~mortgage loans,~~loan strategy, with notice that we intended to cause our management agreement with Headlands (the “Headlands Management Agreement”) to expire when its term ends on June 30, 2019. On May 3, 2019, we entered into a termination and ~~The Midway Group, L.P., or Midway, provides~~transition agreement with Headlands (the “Transition Agreement”) that terminated the Headlands Management Agreement effective as of May 3, 2019. Pursuant to the Transition Agreement, Headlands will provide us with certain transition services until June 30, 2019 and will receive certain fees during this transition period similar to the fees Headlands was entitled to under the Headlands Management Agreement, but excluding incentive fees. We believe that internalization of all our credit investing functions, including both multi-family and single-family residential credit investments, will strengthen our ability to identify and secure future investment ~~management services with respect to our investments in Agency IOs.~~opportunities.

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Key ~~Third~~First Quarter ~~2017~~2019 Developments

~~Residential Mortgage Loan~~Multi-Family Credit Portfolio Activity

~~During the third quarter of 2017, we sold pools of residential mortgage loans,~~We purchased multi-family CMBS securities totaling $136.5 million, including ~~distressed residential mortgage loans with a carrying value~~aggregate purchases of approximately ~~$57.9 million for aggregate proceeds of approximately $65.2 million, which resulted in a net realized gain, before income taxes, of approximately $7.3 million.~~

We acquired residential mortgage loans, including distressed residential mortgage loans and second lien mortgages, for an aggregate cost of approximately $43.6 million during the third quarter of 2017.

~~Multi-Family Activity~~

~~During the third quarter of 2017, we received proceeds of approximately $41.5 million on sales of CMBS investment securities available for sale realizing a gain of approximately $4.9 million.~~

~~We funded $34.6~~$101.6 million in first loss PO, IO and mezzanine securities issued by two Freddie Mac-sponsored multi-family loan ~~and~~K-Series securitizations. In addition, we funded $35.4 million in preferred equity investments in owners of multi-family properties during the ~~third~~first quarter of ~~2017.~~2019.

~~During~~The Company exercised its option to redeem the ~~third quarter~~notes issued by a multi-family CMBS re-securitization that it completed in 2012, with an outstanding principal balance of ~~2017, three investments~~$33.2 million resulting in ~~unconsolidated entities~~a loss on extinguishment of debt of $2.9 million. Due to the redemption, the multi-family CMBS held by the re-securitization trust were returned to the Company. Subsequent to redemption, a portion of the multi-family CMBS returned to the Company was sold ~~their underlying multi-family properties, for which we received~~at a realized gain of $16.8 million, with the Company receiving proceeds of ~~$25.7 million, realizing income of approximately $3.7~~$56.8 million.

~~We received $6.2 million in proceeds for the payoff of a mezzanine loan realizing income of $1.3 million during the third quarter of 2017.~~Residential Credit Portfolio Activity

We acquired an aggregate of $261.0 million of single-family residential credit assets, including distressed residential mortgage loans totaling $71.1 million, other residential mortgage loans totaling $88.5 million and non-Agency RMBS totaling $101.3 million.

~~Third~~On March 25, 2019, we repaid outstanding notes from our April 2016 distressed residential mortgage loan securitization, which had an outstanding principal balance of $6.5 million. As a result, $80.0 million of distressed residential mortgage loans held by the securitization were returned to the Company. The notes were issued in 2016 in an aggregate original principal amount of $177.5 million, including 5% of the notes retained by the Company.

We increased the capacity in our master repurchase agreements to fund the purchase of distressed and other residential mortgage loans by approximately $150.0 million.

Common Stock Issuance

We issued 31,740,000 shares of common stock through two underwritten public offerings in January 2019 and February 2019, at an average public offering price per share of $5.98, resulting in aggregate net proceeds to us of $184.9 million after deducting underwriting discounts, commissions and offering expenses.

Preferred Stock Equity Distribution Agreement

On March 29, 2019, we entered into an equity distribution agreement with JonesTrading Institutional Services LLC, as sales agent, pursuant to which we may offer and sell shares of the Company's Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock (each as defined below), having a maximum aggregate sales price of up to $50.0 million.

First Quarter ~~2017~~2019 Common Stock and Preferred Stock Dividends

On ~~September 14, 2017,~~March 19, 2019, our Board of Directors declared a regular quarterly cash dividend of $0.20 per share of common stock for the quarter ended ~~September 30, 2017.~~March 31, 2019. The dividend was paid on ~~October~~April 25, ~~2017~~2019 to our common stockholders of record as of ~~September 25, 2017.~~March 29, 2019.

On ~~September 14, 2017,~~March 19, 2019, in accordance with the terms of our 7.75% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred ~~Stock,~~Stock"), our Board of Directors declared a Series B Preferred Stock quarterly cash dividend of $0.484375 per share of Series B Preferred Stock. The dividend was paid on ~~October~~April 15, ~~2017~~2019 to holders of record of our Series B Preferred ~~stockholders of record~~Stock as of ~~October~~April 1, ~~2017.~~2019.

~~Also on September 14, 2017,~~On March 19, 2019, in accordance with the terms of our 7.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred ~~Stock,~~Stock"), our Board of Directors declared a Series C Preferred Stock quarterly cash dividend of $0.4921875 per share of Series C Preferred Stock. The dividend was paid on ~~October~~April 15, ~~2017~~2019 to holders of record of our Series C Preferred ~~stockholders of record~~Stock as of ~~October~~April 1, ~~2017.~~2019.

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~~Subsequent Events~~

~~On October 13, 2017,~~Also on March 19, 2019, in accordance with the ~~Company closed on an underwritten public offering~~terms of ~~5,400,000 shares of the Company's~~our 8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ~~$0.01 par value per share~~ ("Series D Preferred Stock"), ~~including 400,000 shares~~our Board of Directors declared a Series D Preferred Stock quarterly cash dividend of $0.50 per share of Series D Preferred ~~Stock issued pursuant~~Stock. The dividend was paid on April 15, 2019 to ~~the underwriters' exercise~~holders of ~~its option to purchase up to 750,000 additional shares. The issuance and sale~~record of ~~the 5,400,000 shares of~~our Series D Preferred Stock ~~resulted in total net proceeds to the Company~~ of ~~approximately $130.4 million after deduction~~record as of ~~underwriting discounts and commissions and estimated offering expenses.~~April 1, 2019.

On October 27, 2017, the Company purchased $36.7 million in first loss tranche PO and certain IO securities issued by a Freddie Mac-sponsored multi-family K-Series securitization collateralized by multi-family loans in the amount

Table of ~~approximately $1.3 billion.~~Contents

Current Market Conditions and Commentary

The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income, the market value of our assets, which is driven by numerous factors including the supply and demand for residential mortgage assets in the marketplace, the terms and availability of adequate financing, general economic and real estate conditions (both on a national and local level), the impact of government actions in the real estate and mortgage sector, and the credit performance of our credit sensitive residential mortgage assets. The market conditions discussed below significantly influence our investment strategy and results:

General. ~~The third~~Global equity markets, including emerging markets, rebounded and made gains during the first quarter of ~~2017 was marked~~2019 after a rough end to 2018 and despite a lengthy government shutdown, largely driven by ~~steady~~eased concerns over global ~~economic expansion~~trade restrictions. U.S. equities also rose during the first quarter of 2019, driven by market expectations that the Federal Reserve will not raise interest rates in the near term and ~~low volatility. Given~~ the ~~stable and healthy backdrop~~end of ~~data for~~ the ~~global economy, central bankers have indicated a desire to continue a gradual reduction in monetary policy stimulus.~~government shutdown. U.S. economic data released over the past quarter suggests that the U.S. economy has continued ~~its solid recovery from a lackluster first quarter,~~to expand, with U.S. gross domestic product (“GDP”) estimated to have grown by ~~3.0%~~3.2% (advance estimate) in the ~~third quarter of 2017, which was consistent with the strong showing of 3.1% growth posted for the second quarter of 2017. U.S. GDP grew just 1.2% during the~~ first quarter of ~~2017 and 1.8%~~2019, up from GDP growth of 2.2% (revised) for the ~~year~~quarter ended December 31, ~~2016.~~2018. U.S. GDP expansion in the quarter was largely driven by strong inventory and trade data, despite softer contributions from consumer spending and business investment.

The U.S. labor market continued to expand during the ~~third~~first quarter of ~~2017, although the levels of job growth in September were likely negatively impacted by regional disruptions related to multiple major hurricanes.~~2019. According to the U.S. Department of Labor, the U.S. unemployment rate ~~was 4.2%~~remained unchanged over the quarter, ending at 3.8% as of the end of ~~September 2017, while total~~March 2019. Total nonfarm payroll employment posted an average monthly increase of ~~91,000~~180,000 jobs during the three months ended ~~September 30, 2017~~March 31, 2019, as compared to an average monthly increase of ~~172,000~~223,000 jobs ~~for the twelve months ended September 30, 2017.~~in 2018.

Federal Reserve and Monetary ~~Policy.~~ Policy. In March 2019, in view of realized and expected labor market conditions, economic activity and inflation, the Federal Reserve ~~determined at its September 2017 meeting to leave~~maintained the target range for the federal funds rate ~~unchanged at 1.0%~~of 2.25% to ~~1.25%. At its meeting in September 2017,~~2.50% and indicated that it intends to remain patient as it determines future changes to the target range for the federal funds rate. The Federal Reserve also ~~announced that it will initiate~~opted not to increase the rate at its ~~balance sheet normalization program as described in June 2017. As part of this normalization program, effective in October 2017,~~January 2019 meeting, but had raised the ~~Federal Reserve will allow its holdings of maturing U.S. Treasury securities and Agency debt and RMBS to decline by up to $6 billion and $4 billion, respectively, on a monthly basis going forward.~~rate four times during 2018. The Federal Reserve ~~has~~ indicated ~~its expectations~~that in determining the size and timing of future adjustments to the target range for ~~additional rate hikes in~~ the ~~near future, with the central tendency from the Federal Reserve’s meeting in September 2017 projecting a~~ federal funds rate, ~~of between 1.1%~~it will assess “realized and ~~1.4% by the end of 2017~~expected economic conditions relative to its maximum employment objective and ~~1.9% and 2.4% by the end of 2018. While market reaction~~its symmetric 2 percent inflation objective.” Significant uncertainty with respect to ~~the Federal Reserve’s 2017 rate hikes has been largely uneventful, renewed uncertainty surrounding~~ the speed at which the Federal Reserve will tighten its monetary policy ~~could~~continues to persist and may result in ~~higher~~significant volatility in 2019 and future periods. Greater uncertainty frequently leads to wider asset spreads or lower prices and higher hedging costs.

Single-Family Homes and Residential Mortgage ~~Market.~~ Market. The residential real estate market displayed signs of ~~continued growth~~slowing during ~~2016 and the first half of 2017,~~2018, and initial data from the ~~third~~first quarter of ~~2017~~2019 suggests that trend continued. Data released by S&P Indices for its S&P/Case-Shiller Home Price Indices for ~~August 2017~~February 2019 showed that, on average, home prices increased ~~5.9%~~3.0% for the 20-City Composite over ~~August 2016.~~February 2018, down from 3.5% in the previous month. In addition, according to data provided by the U.S. Department of Commerce, privately-owned housing starts for single-family homes averaged a seasonally adjusted annual rate of ~~810,000 and 809,000~~849,000 during the ~~three and nine months ended September 30, 2017, respectively, as compared to an~~first quarter of 2019, which was 2.5% below the annual rate of ~~785,000~~871,000 for the year ended December 31, ~~2016. Continued improvement in~~2018. Declining single-family housing fundamentals ~~is generally expected to have a positive~~may adversely impact on the overall credit profile of our existing portfolio of ~~distressed~~single-family residential ~~loans.~~credit investments, but also may result in a more attractive new investment environment.

~~Multi-Family Housing.~~Multi-family Housing. Apartments and other residential rental properties ~~performed~~have continued to perform well, although the data has been more mixed in ~~2016 and have performed solidly to date in 2017.~~recent quarters. According to data provided by the U.S. Department of Commerce, starts on multi-family homes containing five units or more averaged a seasonally adjusted annual rate of ~~391,000 and 396,000~~331,000 during the ~~three~~first quarter of 2019 and ~~nine months ended September 30, 2017, respectively, as compared to 375,000~~366,000 for the year ended December 31, ~~2016. Moreover, even with the~~2018. While supply expansion remained strong in ~~recent years,~~2018 and during the first quarter of 2019, vacancy ~~trends in the~~concerns among multi-family ~~sector have improved.~~industry participants has ticked higher. According to the Multifamily Vacancy Index (“MVI”), which is produced by the National Association of Home Builders and surveys the multi-family housing industry’s perception of vacancies, the MVI was at 3845 for the fourth quarter of 2018, up from 42 for the second quarter of ~~2017, which is~~2018 and down from 47 for the ~~best score recorded by the index since the second~~third quarter of ~~2015.~~2018. Strength in the multi-family housing sector has contributed to valuation improvements for multi-family properties and, in turn, many of the structured multi-family ~~properties in which~~investments that we ~~have directly or indirectly invested in.~~own.

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Credit ~~Spreads.~~Spreads ~~Credit~~. Although credit spreads ~~tightened further~~widened sharply during the ~~third~~latter half of the fourth quarter of ~~2017 amid what appears to be~~2018, credit spreads generally tightened throughout 2018, and that trend continued during the first quarter of 2019. Specifically, credit spreads for residential and multi-family credit assets remained tight during the first quarter of 2019 and this had a ~~growing “risk-on” sentiment among investors.~~positive impact on the value of many of our credit sensitive assets. Tightening credit spreads generally increase the value of many of our credit sensitive assets while widening credit spreads generally decrease the value of these assets.

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Financing ~~Markets.~~ markets. During the ~~third~~first quarter of ~~2017, movement in~~2019, the ~~10-Year U.S. Treasury~~bond market experienced moderate volatility with the closing yield ~~was relatively flat, with~~of the 10-year U.S. Treasury ~~ranging from 2.06% to~~Note trading between 2.39% and 2.79% during the quarter, ~~and~~ closing the quarter at ~~2.33%~~2.41%. Overall interest rate volatility tends to increase the costs of hedging and may place downward pressure on some of our strategies. During the ~~third~~first quarter of ~~2017,~~2019, the Treasury curve ~~continued to flatten~~decreased with the spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield closing to 8614 basis points, down 7 basis points from ~~June 30, 2017.~~December 31, 2018. This spread is important as it is indicative of opportunities for investing in levered assets. Increases in interest rates raises the costs of many of our liabilities, while overall interest rate volatility generally increases the costs of hedging.

Developments at Fannie Mae and Freddie ~~Mac.~~ Mac. Payments on the Agency ~~ARMs~~fixed-rate and ~~fixed-rate~~ Agency ARMs RMBS in which we invest are guaranteed by Fannie Mae and Freddie Mac. In addition, although not guaranteed by Freddie Mac, all of our multi-family CMBS ~~have~~has been issued by securitization vehicles sponsored by Freddie ~~Mac and the Agency IOs we invest in are issued by Fannie Mae, Freddie Mac or Ginnie Mae.~~Mac. As broadly publicized, Fannie Mae and Freddie Mac are presently under federal conservatorship as the U.S. Government continues to evaluate the future of these entities and what role the U.S. Government should continue to play in the housing markets in the future. On March 27, 2019, President Trump signed a Presidential memorandum directing the Secretary of Treasury to develop a reform plan aimed at ending the conservatorship of Fannie Mae and Freddie Mac and improving regulatory oversight over them. Since being placed under federal conservatorship, there have been a number of proposals introduced, both from industry groups and by the U.S. Congress, relating to changing the role of the U.S. government in the mortgage market and reforming or eliminating Fannie Mae and Freddie Mac. It remains unclear how the U.S. Congress or the executive branch of the U.S. Government will move forward on such reform at this time and what impact, if any, this reform will have on mortgage REITs. See “Item 1A. Risk Factors-Risks Related to Regulatory Matters-The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae, Freddie Mac and Ginnie Mae and the U.S. Government, may materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders” in our Annual Report on Form 10-K for the year ended December 31, 2018.

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Significant Estimates and Critical Accounting Policies

~~A summary~~We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe are reasonable based on facts and circumstances existing at the time of reporting. We believe that the estimates, judgments and assumptions utilized in the preparation of our consolidated financial statements are prudent and reasonable. Although our estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income during the periods presented.

Accounting policies and estimates related to specific components of our consolidated financial statements are disclosed in the notes to our consolidated financial statements. A discussion of the critical accounting policies and the possible effects of changes in estimates on our consolidated financial statements is included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 and under “Note 2 – Summary of Significant Accounting Policies” to the consolidated financial statements included therein.

~~Revenue Recognition~~. Interest income on our investment securities available for sale is accrued based on the outstanding principal balance and their contractual terms. Purchase premiums or discounts on investment securities are amortized or accreted to interest income over the estimated life of the investment securities using the effective yield method. Adjustments to amortization are made for actual prepayment activity.

A portion of the purchase discount on the Company’s first loss tranche PO multi-family CMBS is designated as non-accretable purchase discount or credit reserve, which partially mitigates the Company’s risk of loss on the mortgages collateralizing such multi-family CMBS, and is not expected to be accreted into interest income. The amount designated as a credit reserve may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit reserve is more favorable than forecasted, a portion of the amount designated as credit reserve may be accreted into interest income over time. Conversely, if the performance of a security with a credit reserve is less favorable than forecasted, the amount designated as credit reserve may be increased, or impairment charges and write-downs of such securities to a new cost basis could be required.

~~With respect to interest rate swaps that have not been designated as hedges, any net payments under, or fluctuations in the fair value of, such swaps will be recognized in current earnings.~~

~~Fair Value.~~ The Company has established and documented processes for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, then fair value is based upon internally developed models that primarily use inputs that are market-based or independently-sourced market parameters, including interest rate yield curves. Such inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company’s interest-only CMBS, principal-only CMBS, multi-family loans held in securitization trusts and multi-family CDOs are considered to be the most significant of its fair value estimates.

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~~The Company’s valuation methodologies are described in “Note 18 – Fair Value of Financial Instruments” included in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~

~~Residential Mortgage Loans Held in Securitization Trusts – Impaired Loans (net)~~ –Impaired residential mortgage loans held in securitization trusts are recorded at amortized cost less specific loan loss reserves. Impaired loan value is based on management’s estimate of the net realizable value taking into consideration local market conditions of the distressed property, updated appraisal values of the property and estimated expenses required to remediate the impaired loan.

~~Variable Interest Entities~~ – A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE when it is the primary beneficiary of such VIE. As primary beneficiary, it has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.

~~Loan Consolidation Reporting Requirement for Certain Multi-Family K-Series Securitizations~~ –As of September 30, 2017 and December 31, 2016, we owned 100% of the first loss tranche of securities of the Consolidated K-Series (as defined in Note 2 to our condensed consolidated financial statements included in this report). The Consolidated K-Series collectively represents, as of September 30, 2017 and December 31, 2016, six and five separate Freddie Mac sponsored multi-family loan K-Series securitizations, respectively, of which we or one of our SPEs own the first loss PO securities, certain IO securities and mezzanine CMBS securities. We determined that the Consolidated K-Series were VIEs and that we are the primary beneficiary of the Consolidated K-Series. As a result, we are required to consolidate the Consolidated K-Series’ underlying multi-family loans including their liabilities, income and expenses in our condensed consolidated financial statements. We have elected the fair value option on the assets and liabilities held within the Consolidated K-Series, which requires that changes in valuations in the assets and liabilities of the Consolidated K-Series be reflected in our condensed consolidated statement of operations.

~~Fair Value Option~~ – The fair value option provides an election that allows companies to irrevocably elect fair value for financial assets and liabilities on an instrument-by-instrument basis at initial recognition. Changes in fair value for assets and liabilities for which the election is made will be recognized in earnings as they occur. The Company elected the fair value option for its Agency IO strategy, certain of its investments in unconsolidated entities, the Consolidated K-Series and certain acquired residential mortgage loans including both first and second lien mortgages.

~~Acquired Distressed Residential Mortgage Loans~~ ~~– Acquired distressed residential mortgage loans that have evidence of deteriorated credit quality at acquisition are accounted for under Accounting Standards Codification (“ASC”) 310-30,~~ ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~ ("ASC 310-30"). Management evaluates whether there is evidence of credit quality deterioration as of the acquisition date using indicators such as past due or modified status, risk ratings, recent borrower credit scores and recent loan-to-value percentages. Acquired distressed residential mortgage loans are recorded at fair value at the date of acquisition, with no allowance for loan losses. Under ASC 310-30, the acquired loans may be aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics. A pool is accounted for as a single asset with a single composite interest rate and an expectation of aggregate cash flows. Once a pool is assembled, it is treated as if it was one loan for purposes of applying the accounting guidance.

~~Table of Contents~~

Management monitors actual cash collections against its expectations, and revised cash flow expectations are prepared as necessary. A decrease in expected cash flows in subsequent periods may indicate that the loan pool or individual loan, as applicable, is impaired, thus requiring the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods initially reduces any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan pool. The adjustment of accretable yield due to an increase in expected cash flows is accounted for prospectively as a change in estimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodic accretion is adjusted accordingly over the remaining life of the loans in the pool or individual loan, as applicable. The impacts of (i) prepayments, (ii) changes in variable interest rates, and (iii) any other changes in the timing of expected cash flows are recognized prospectively as adjustments to interest income.

~~Business Combinations~~ - The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition of a business. The Company accounts for business combinations by applying the acquisition method in accordance with ASC 805, ~~Business Combinations~~. Transaction costs related to acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed and non-controlling interests, if any, in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and non-controlling interests, if any, in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets and liabilities.

~~Net cash paid to acquire a business is classified as investing activities on the accompanying condensed consolidated statements of cash flows.~~

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements and the possible effects on our consolidated financial statements is included in “Note 2 — Summary of Significant Accounting Policies” included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Capital Allocation

The following tables set forth our allocated capital by investment ~~type~~category at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (dollar amounts in thousands):

At ~~September 30, 2017:~~March 31, 2019:


	Agency RMBS⁽¹⁾			Agency IOs			Multi- Family ⁽²⁾			Distressed Residential ⁽³⁾			Other ⁽⁴⁾				Total			Agency RMBS ⁽¹⁾			Residential Credit ⁽²⁾			Multi- Family Credit ⁽³⁾			Other ⁽⁴⁾			Total
Carrying value	$	377,316		$	40,641		$	723,170		$	535,520		$	136,304			$	1,812,951		$	1,023,938		$	1,467,571		$	1,299,404		$	—		$	3,790,913
Liabilities:
Callable ⁽⁵⁾	(329,263		)	(26,048		)	(204,220		)	(188,817		)	(20,517		)		(768,865		)	(893,860		)	(755,348		)	(623,797		)	—			(2,273,005		)
Non-callable	—			—			(28,946		)	(69,425		)	(121,867		)		(220,238		)	—			(49,247		)	—			(45,000		)	(94,247		)
Convertible	—			—			—			—			(128,273		)	��	(128,273		)	—			—			—			(131,301		)	(131,301		)
Hedges (Net) ⁽⁶⁾	750			7,045			—			—			—				7,795			14,873			—			—			—			14,873
Cash ⁽⁷⁾	3,775			13,283			11,263			12,882			86,923				128,126
Cash and Restricted Cash ⁽⁷⁾																				10,239			28,770			20,491			6,710			66,210
Goodwill	—			—			—			—			25,222				25,222			—			—			—			25,222			25,222
Other	1,109			4,925			(5,385		)	12,501			(23,863		)		(10,713		)	2,473			32,214			(9,194		)	(44,706		)	(19,213		)
Net capital allocated	$	53,687		$	39,846		$	495,882		$	302,661		$	(46,071	)		$	846,005		$	157,663		$	723,960		$	686,904		$	(189,075	)	$	1,379,452
% of capital allocated	6.3		%	4.7		%	58.7		%	35.8		%	(5.5		)%		100		%


⁽¹⁾	Includes ~~both~~ Agency ~~ARMs~~fixed-rate RMBS and Agency ~~fixed-rate RMBS.~~ARMs.


⁽²⁾	Includes $875.6 million of distressed and other residential mortgage loans at fair value, $262.2 million of distressed and other residential mortgage loans at carrying value, $314.1 million of non-Agency RMBS and $11.2 million of investments in unconsolidated entities.


⁽³⁾	The Company, through its ownership of certain securities, has determined it is the primary beneficiary of the Consolidated K-Series and has consolidated the Consolidated K-Series into the Company’s condensed consolidated financial statements. A reconciliation to our financial statements as of ~~September 30, 2017~~March 31, 2019 follows:


Multi-family loans held in securitization trusts, at fair value	$	8,399,334		$	14,328,336
Multi-family CDOs, at fair value	(7,990,619		)	(13,547,195		)
Net carrying value	408,715			781,141
Investment securities available for sale, at fair value	123,183			245,941
Total CMBS, at fair value	531,898			1,027,082
Mezzanine loan, preferred equity investments and investments in unconsolidated entities	162,639
Preferred equity investments, mezzanine loans and investments in unconsolidated entities				256,307
Real estate under development	21,877			20,001
Real estate held for sale in consolidated variable interest entities	64,097
Mortgages and notes payable in consolidated variable interest entities	(57,342		)	(3,986		)
Financing arrangements, portfolio investments	(204,220		)
Securitized debt	(28,946		)
Repurchase agreements, investment securities				(623,797		)
Cash and other	5,879			11,297
Net Capital in Multi-Family	$	495,882		$	686,904


⁽³⁾	Includes $369.7 million of distressed residential loans, $28.0 million of distressed residential mortgage loans, at fair value and $133.0 million of non-Agency RMBS backed by re-performing and non-performing loans.

⁽⁴⁾

Other includes residential mortgage loans held in securitization trusts amounting to $79.9 million, residential mortgage loans, at fair value of $41.5 million, investments in unconsolidated entities amounting to $11.2 million and mortgage loans held for sale and mortgage loans held for investment totaling $3.5 million. Mortgage loans held for sale and mortgage loans held for investment are included in the Company’s accompanying condensed consolidated balance sheet in receivables and other assets. Non-callablenon-callable liabilities ~~consist~~consisting of $45.0 million in subordinated debentures and ~~$76.9~~$131.3 million ~~in residential collateralized debt obligations.~~of convertible notes.


⁽⁵⁾	Includes repurchase agreements.


⁽⁶⁾	Includes derivative ~~assets, derivative~~ liabilities ~~payable for securities purchased and restricted cash posted as~~of $12.8 million netted against a $27.7 million variation margin.


⁽⁷⁾	Includes $8.9 million held in overnight deposits in our Agency IO portfolio to be used for trading purposes and $12.9 million in deposits held in our distressed residential securitization trusts to be used to pay down outstanding debt. These deposits areRestricted cash included in the Company’s accompanying condensed consolidated balance sheets in receivables and other assets.

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At December 31, ~~2016:~~2018:


	Agency RMBS ⁽¹⁾			Agency IOs			Multi- Family ⁽²⁾			Distressed Residential Loans ⁽³⁾			Other ⁽⁴⁾			Total			Agency RMBS ⁽¹⁾			Residential Credit ⁽²⁾			Multi- Family Credit ⁽³⁾			Other ⁽⁴⁾			Total
Carrying value	$	441,472		$	87,778		$	628,522		$	671,272		$	127,359		$	1,956,403		$	1,037,730		$	1,252,770		$	1,166,628		$	—		$	3,457,128
Liabilities:
Callable⁽⁵⁾	(391,707		)	(60,862		)	(206,824		)	(306,168		)	—			(965,561		)	(925,230		)	(676,658		)	(529,617		)	—			(2,131,505		)
Non-callable	—			—			(28,332		)	(130,535		)	(136,663		)	(295,530		)	—			(65,253		)	(30,121		)	(45,000		)	(140,374		)
Convertible																			—			—			—			(130,762		)	(130,762		)
Hedges (Net)⁽⁶⁾	2,500			5,417			—			—			—			7,917			10,263			—			—			—			10,263
Cash⁽⁷⁾	4,415			39,673			3,687			9,898			75,725			133,398
Cash and Restricted Cash ⁽⁷⁾																			10,377			20,859			17,291			60,618			109,145
Goodwill	—			—			—			—			25,222			25,222			—			—			—			25,222			25,222
Other	3,166			4,874			(2,652		)	13,436			(29,511		)	(10,687		)	2,374			24,182			(4,929		)	(40,451		)	(18,824		)
Net capital allocated	$	59,846		$	76,880		$	394,401		$	257,903		$	62,132		$	851,162		$	135,514		$	555,900		$	619,252		$	(130,373	)	$	1,180,293
% of capital allocated	7.0		%	9.0		%	46.4		%	30.3		%	7.3		%	100		%


⁽¹⁾	Includes ~~both~~ Agency ~~ARMs~~fixed-rate RMBS and Agency ~~fixed-rate RMBS.~~ARMs.


⁽²⁾	Includes $737.5 million of distressed and other residential mortgage loans at fair value, $285.3 million of distressed and other residential mortgage loans at carrying value, $214.0 million of non-agency RMBS and $11.0 million of investments in unconsolidated entities.


⁽³⁾	The Company, through its ownership of certain securities, has determined it is the primary beneficiary of the Consolidated K-Series and has consolidated the Consolidated K-Series into the Company’s condensed consolidated financial statements. A reconciliation to our financial statements as of December 31, ~~2016~~2018 follows:


Multi-family loans held in securitization trusts, at fair value	$	6,939,844		$	11,679,847
Multi-family CDOs, at fair value	(6,624,896		)	(11,022,248		)
Net carrying value	314,948			657,599
Investment securities available for sale, at fair value held in securitization trusts	126,442
Investment securities available for sale, at fair value				260,485
Total CMBS, at fair value	441,390			918,084
Mezzanine loan, preferred equity investments and investment in unconsolidated entities	169,678
Preferred equity investments, mezzanine loans and investments in unconsolidated entities				228,067
Real estate under development	17,454			22,000
Real estate held for sale in consolidated variable interest entities				29,704
Mortgages and notes payable in consolidated variable interest entities	(1,588		)	(31,227		)
Financing arrangements, portfolio investments	(206,824		)
Repurchase agreements, investment securities				(529,617		)
Securitized debt	(28,332		)	(30,121		)
Other	2,623
Cash and other				12,362
Net Capital in Multi-family	$	394,401		$	619,252


⁽³⁾	~~Includes $503.1 million of distressed residential loans and $162.1 million of non-Agency RMBS backed by re-performing and non-performing loans.~~

⁽⁴⁾

Other includes residential mortgage loans held in securitization trusts amounting to $95.1 million, residential mortgage loans, at fair value of $17.8 million, investments in unconsolidated entities amounting to $9.7 million and mortgage loans held for sale and mortgage loans held for investment totaling $21.3 million. Mortgage loans held for sale and mortgage loans held for investment are included in the Company’s accompanying condensed consolidated balance sheet in receivables and other assets. Non-callablenon-callable liabilities ~~consist~~consisting of $45.0 million in subordinated debentures and ~~$91.7~~$130.8 million ~~in residential collateralized debt obligations.~~of convertible notes.


⁽⁵⁾	Includes repurchase agreements.


⁽⁶⁾	Includes derivative assets ~~derivative liabilities, payable for securities purchased~~of $1.8 million and ~~restricted cash posted as~~an $8.5 million variation margin.


⁽⁷⁾	Includes $35.6 million held in overnight deposits in our Agency IO portfolio to be used for trading purposes and $9.9 million in deposits held in our distressed residential securitization trusts to be used to pay down outstanding debt. These deposits areRestricted cash is included in the Company’s accompanying condensed consolidated balance ~~sheet~~sheets in receivables and other assets.

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Results of Operations

Comparison of the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2019 to the Three ~~and Nine~~ Months Ended ~~September 30, 2016~~March 31, 2018

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019, we reported net income attributable to the Company's common stockholders of ~~$24.6~~$38.2 million ~~and $51.7 million, respectively,~~ as compared to net income attributable to the Company's common stockholders of ~~$20.0 million and $45.0~~$23.7 million for the respective ~~periods~~period in ~~2016.~~2018. The main components of the change in net income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 as compared to the ~~respective periods~~same period in ~~2016~~2018 are detailed in the following table ~~(dollar amounts~~(amounts in thousands, except per share data):


	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended March 31,
	2017		2016		$ Change			2017		2016		$ Change			2019		2018			$ Change
Net interest income	$	13,320	$	15,518	$	(2,198	)	$	42,947	$	49,824	$	(6,877	)	$	26,203	$	19,752		$	6,451
Total other income	$	24,918	$	16,632	$	8,286		$	49,798	$	35,563	$	14,235		30,865		20,953			9,912
Total general, administrative and operating expenses	$	10,996	$	8,705	$	2,291		$	32,791	$	28,001	$	4,790		12,644		8,698			3,946
Income from operations before income taxes	$	27,242	$	23,445	$	3,797		$	59,954	$	57,386	$	2,568		44,424		32,007			12,417
Income tax expense	$	507	$	163	$	344		$	2,187	$	2,720	$	(533	)
Income tax expense (benefit)															74		(79		)	153
Net income attributable to Company	$	27,845	$	23,268	$	4,577		$	61,364	$	54,654	$	6,710		44,139		29,618			14,521
Preferred stock dividends	$	3,225	$	3,225	$	—		$	9,675	$	9,675	$	—		5,925		5,925			—
Net income attributable to Company's common stockholders	$	24,620	$	20,043	$	4,577		$	51,689	$	44,979	$	6,710		38,214		23,693			14,521
Basic earnings per common share	$	0.22	$	0.18	$	0.04		$	0.46	$	0.41	$	0.05		$	0.22	$	0.21		$	0.01
Diluted earnings per common share	$	0.21	$	0.18	$	0.03		$	0.45	$	0.41	$	0.04		$	0.21	$	0.20		$	0.01

Net Interest Income

The ~~decrease~~increase in net interest income of approximately ~~$2.2~~$6.5 million for the three months ended ~~September 30, 2017~~March 31, 2019 as compared to the corresponding period in ~~2016~~2018 was primarily driven by:

~~A decrease~~An increase in net interest income of approximately ~~$2.7~~$4.3 million in our ~~distressed residential~~multi-family credit portfolio primarily due to ~~a decrease~~an increase in ~~net~~average interest ~~income from our distressed residential mortgage~~earning assets to $927.2 million for the three months ended March 31, 2019 as compared to $612.4 million for the three months ended March 31, 2018. The increase in average interest earning assets is attributable to new multi-family preferred equity investments, mezzanine loans ~~of approximately $3.0 million, partially offset by an~~and CMBS purchased since March 31, 2018.

An increase in net interest income ~~on our non-Agency RMBS~~ of approximately ~~$0.3 million. Net interest income on~~$4.6 million in our ~~distressed~~ residential ~~mortgage loans decreased due to decreases in average interest earning assets and asset yields and an increase in financing costs. Net interest income on our non-Agency RMBS increased~~credit portfolio primarily due to an increase in ~~asset yields.~~average interest earnings assets to $1.3 billion for the three months ended March 31, 2019 as compared to $604.0 million for the three months ended March 31, 2018.

A decrease in net interest income of approximately ~~$0.4 million in our Agency IO portfolio primarily due to a decrease in average interest earning assets to $56.7 million in the 2017 period from $118.9 million during the 2016 period.~~

A decrease in net interest income of approximately $0.8 million in our Agency ARM and Agency fixed-rate RMBS portfolio due to a decrease in average interest earning assets in this portfolio and an increase in financing costs in the 2017 period compared to the corresponding period in 2016.

An increase in net interest income of approximately $4.0 million in our multi-family portfolio due to an increase in average interest earning assets to $536.5 million for the three months ended September 30, 2017 as compared to $341.6 million for the corresponding period in 2016, and a decrease in our average cost of funds in the 2017 period as compared to the same period in 2016. The increase in average interest earning assets can be primarily attributed to the acquisition of new multi-family CMBS and funding of preferred equity investments.

~~An increase in interest expense of $2.6 million related to the issuance in January 2017 of $138.0 million principal amount of Convertible Notes.~~

~~Table of Contents~~

~~The decrease in net interest income of approximately $6.9 million for the nine months ended September 30, 2017 as compared to the corresponding period in 2016 was primarily driven by:~~

~~A decrease in net interest income of approximately $2.0~~$2.4 million in our Agency RMBS portfolio ~~due to a decrease in average interest earning assets in this portfolio and an increase in financing costs.~~

~~A decrease in net interest income of approximately $4.8 million in our Agency IO portfolio~~ primarily ~~due to a decrease in average interest earning assets to $71.2 million in the 2017 period from $129.3 million during the 2016 period and an increase in average prepayment rates.~~

A decrease in net interest income of approximately $5.4 million in our distressed residential portfolio due to a decrease in net interest income on our distressed residential mortgage loans of approximately $8.0 million partially offset by an increase in net interest income on our non-Agency RMBS of approximately $2.6 million. Net interest income on our distressed residential mortgage loans decreased due to decreases in average interest earning assets and asset yields and an increase in financing costs. Net interest income on our non-Agency RMBS increased due to an increase in ~~average~~ interest ~~earning assets to $151.3 million in the 2017 period as compared to $66.2 million in the corresponding period in 2016.~~rates since March 31, 2018.

An increase in net interest income of approximately $11.7 million in our multi-family portfolio due to an increase in average interest earning assets to $507.9 million for the nine months ended September 30, 2017 as compared to $314.4 million in the corresponding period in 2016, and a decrease in our average cost of funds in the 2017 period as compared to the same period in 2016. Average interest earning assets in this portfolio increased due to new multi-family preferred equity investments made and CMBS purchased during the period.

~~An increase in interest expense of $7.2 million related to the issuance in January 2017 of $138.0 million principal amount in Convertible Notes.~~

Other Income

~~The increase in~~Total other income ~~of approximately $8.3~~increased by $9.9 million for the three months ended ~~September 30, 2017~~March 31, 2019 as compared to the corresponding period in ~~2016~~2018. The change was primarily driven by:

An increase in ~~other income of $1.3 million, primarily due to income recognized from redemption of the Company's investments in unconsolidated entities during the three months ended September 30, 2017.~~

~~A decrease in~~ net ~~unrealized~~realized gain ~~of $0.4 million primarily related to~~on investment securities and related hedges of $20.2 million primarily related to the sale of certain multi-family CMBS. This realized gain was partially offset by a $2.9 million loss on extinguishment of debt related to our redemption of securities issued by a multi-family CMBS re-securitization that was collateralized by certain of our multi-family CMBS, including the securities we sold in ~~our Agency IO portfolio.~~the first quarter of 2019.

An increase in net ~~realized~~ gain on distressed and other residential mortgage loans at fair value of ~~$1.8~~$11.2 million ~~for the three months ended September 30, 2017~~primarily due to an increase in ~~realized gains on CMBS, offset by decreases in net~~residential mortgage loans accounted for at fair value from purchases since March 31, 2018 and unrealized gains recognized during the current period.

Table of Contents

An increase in realized gain on ~~investment securities~~distressed and ~~related hedges in~~other residential mortgage loans at carrying value of $2.9 million primarily due to increased sale activity during the ~~Agency IO portfolio.~~three months ended March 31, 2019.

An increase in net unrealized gains on multi-family loans and debt held in securitization trusts of ~~$1.6~~$1.9 million for the three months ended ~~September 30, 2017~~March 31, 2019 as compared to the corresponding period in ~~2016,~~2018, primarily due to ~~the~~an increase in multi-family CMBS ~~investments~~ owned by us ~~as compared to the same period in the prior year. As~~and tightening of September 30, 2017, the net carrying value of our multi-family CMBS, which measures unrealized gains and losses through earnings, increased to approximately $408.7 million from $307.5 million as of September 30, 2016.

An increase in income from operating real estate and real estate held for sale in consolidated variable interest entities of $2.4 million related to the consolidation of Riverchase Landing and The Clusters, which required consolidation of the entities' income and expenses in our condensed consolidated financial statements in accordance with GAAP.

~~An increase in net gain on residential mortgage loans, at fair value of~~ ~~$0.7 million, which included $0.5 million of realized gains from sale and $0.2 million of net unrealized gain.~~

~~Table of Contents~~

~~The increase in other income of approximately $14.2 million for the nine months ended September 30, 2017~~credit spreads as compared to the corresponding period in ~~2016 was primarily driven by:~~the prior year.

An increase in ~~realized gains~~net unrealized loss on ~~distressed residential mortgage loans~~investment securities and related hedges of ~~$9.0~~$26.3 million primarily due to ~~higher gains from increased sales activity~~unrealized losses on our interest rate swaps accounted for as trading instruments during the ~~2017 period~~three months ended March 31, 2019.

An increase in other income of $3.7 million for the three months ended March 31, 2019 as compared to the corresponding period in ~~2016.~~

~~An increase in net~~2018, primarily due to unrealized gains on multi-family loans and debt held in securitization trusts of $2.8 million for the nine months ended September 30, 2017 as compared to the corresponding period in 2016, primarily due to the increase in multi-family CMBS investments owned by us as compared to the same period in the prior year.

~~A decrease in net unrealized loss of $3.3 million primarily related to investment securities and related hedges in~~ our ~~Agency IO portfolio.~~

A decrease in realized gain on investment securities and related hedges of $1.4 million primarily due to decreases in net gains recognized on investment securities and related hedges in the Agency IO portfolio partially offset by an increase in realized gains on CMBS.

An increase in income from operating real estate and real estate held for sale in consolidated variable interest entities of $4.7 million related to the consolidation of Riverchase Landing and The Clusters, which required consolidation of the entities' income and expenses in our condensed consolidated financial statements in accordance with GAAP.

A decrease in other income of $4.8 million, which is primarily due to gains recognized as a result of the Company's re-measurement of its previously held membership interests in RiverBanc, RBMI, and RBDHC in accordance with GAAP in 2016. No such income was recognized in 2017. This decrease was partially offset by income recognized from redemption of the Company's investments in unconsolidated entities ~~during~~and gain recognized related to early redemption of a preferred equity investment offset by losses on home sales and impairment loss recognized, both related to the ~~nine months ended September 30, 2017.~~

~~An increase~~real estate development property owned through the Company's 50% interest in ~~net gain~~an entity that owns and develops land and residential homes in Kiawah Island, SC. The Company's losses on ~~residential mortgage loans, at fair value~~home sales and impairment loss is partially offset by the non-controlling interest share of ~~$0.7 million, which included $0.5 million of realized gains from sale and $0.2 million of net unrealized gain.~~these losses.

Comparative Expenses (dollar amounts in thousands)


	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended March 31,
General, Administrative and Operating Expenses	2017		2016		$ Change			2017		2016		$ Change			2019		2018		$ Change
General and Administrative Expenses
Salaries, benefits and directors’ compensation	$	2,456	$	2,705	$	(249	)	$	8,211	$	6,765	$	1,446		$	5,671	$	2,556	$	3,115
Professional fees	756		1,024		(268		)	2,774		2,296		478			1,138		1,138		—
Base management and incentive fees	1,386		1,453		(67		)	4,355		7,958		(3,603		)	723		833		(110		)
Expenses on distressed residential mortgage loans	2,225		2,398		(173		)	6,682		8,332		(1,650		)
Expenses related to operating real estate and real estate held for sale in consolidated variable interest entities	3,143		—		3,143			7,558		—		7,558
Other	1,030		1,125		(95		)	3,211		2,650		561			1,378		962		416
Operating Expenses
Expenses related to distressed and other residential mortgage loans															3,252		1,603		1,649
Expenses related to real estate held for sale in consolidated variable interest entities															482		1,606		(1,124		)
Total	$	10,996	$	8,705	$	2,291		$	32,791	$	28,001	$	4,790		$	12,644	$	8,698	$	3,946

For the three months ended ~~September 30, 2017~~March 31, 2019 as compared to the corresponding period in ~~2016,~~2018, general, administrative and operating expenses increased by ~~$2.3~~$3.9 million. The increase was primarily driven by a $3.1 million increase in salaries, benefits and directors' compensation due to an increase in employee headcount as part of the internalization and expansion of our residential credit investment platform. The increase was also driven by a $1.6 million increase in expenses related to ~~operating real estate~~distressed and other residential mortgage loans as a result of increased purchase activity. The overall increase was partially offset by a $1.1 million reduction in expenses related to real estate held for sale in consolidated variable interest entities ~~due to~~as a result of the ~~consolidation~~de-consolidation of ~~Riverchase Landing and~~ The Clusters following its sale in ~~our condensed consolidated financial statements in accordance with GAAP.~~February 2019.

~~Table of Contents~~

For the nine months ended September 30, 2017 as compared to the same period in 2016, general, administrative and operating expenses increased by $4.8 million. Beginning in the second quarter of 2017, the Company recognized expenses related to operating real estate and real estate held for sale in consolidated variable interest entities in the amount of $7.6 million due to the consolidation of Riverchase Landing and The Clusters in our condensed consolidated financial statements in accordance with GAAP. Salaries, benefits and directors’ compensation was driven higher during the 2017 period as compared to the same period in the prior year primarily due to the impact of the increase in employee headcount resulting from the RiverBanc acquisition for the full nine-month period in 2017.

The decline in base management and incentive fees during the nine months ended September 30, 2017 as compared to the same period in 2016 was due in part to the termination of the RiverBanc management agreement on May 17, 2016, resulting in a decrease of $1.8 million in fees to RiverBanc. In addition, base management fees on our distressed loan strategy decreased by $2.6 million for the nine months ended September 30, 2017, due in part to a change in methodology for calculating base management fees from 1.5% of assets under management to 1.5% of invested capital beginning in the third quarter of 2016. For the nine months ended September 30, 2017, there was an increase in incentive fees earned amounting to $1.1 million as compared to the same period in 2016. The change in incentive fee earned is dependent on sale activity in our distressed residential loan strategy during the period.

The decrease in expenses related to distressed residential mortgage loans for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 can be attributed to a decrease in loan count as well as decreases in appraisal costs incurred during the 2017 periods as compared to the same periods in 2016.

Quarterly Comparative Portfolio Net Interest Margin

Our results of operations for our investment portfolio during a given period typically reflect, in large part, the net interest income earned on our investment portfolio of RMBS, CMBS, ~~(including CMBS held in securitization trusts),~~ residential securitized loans, distressed and other residential mortgage loans (including ~~distressed residential~~ loans ~~held in securitization trusts)~~accounted for at fair value and loans accounted for under ASC 310-30), loans held for investment, ~~mezzanine loans and~~ preferred equity investments and mezzanine loans, where the risks and payment characteristics are equivalent to and accounted for as loans, and loans held for sale (collectively, our “Interest Earning Assets”). The net interest spread is impacted by factors such as our cost of financing, the interest rate that our investments bear and our interest rate hedging strategies. Furthermore, the amount of premium or discount paid on purchased portfolio investments and the prepayment rates on portfolio investments will impact the net interest spread as such factors will be amortized over the expected term of such investments. Realized and unrealized gains and losses on TBAs, Eurodollar and Treasury futures and other derivatives associated with our Agency IO investments, which do not utilize hedge accounting for financial reporting purposes, are included in other income in our statement of operations, and therefore, not reflected in the data set forth below.

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The following ~~table sets~~tables set forth certain information about our portfolio by investment ~~type~~category and their related interest income, interest expense, weighted average yield on interest earning assets, average cost of funds and portfolio net interest margin for our interest earning assets (by investment ~~type)~~category) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively (dollar amounts in thousands):

Three Months Ended ~~September 30, 2017~~March 31, 2019


	Agency RMBS			Agency IOs			Multi- Family ⁽¹⁾ ⁽²⁾			Distressed Residential			Other			Total			Agency RMBS ⁽¹⁾			Residential Credit			Multi- Family Credit ⁽²⁾ ⁽³⁾			Other			Total
Interest Income	$	1,623		$	308		$	15,279		$	5,807		$	1,335		$	24,352		$	7,568		$	19,384		$	24,233		$	—		$	51,185
Interest Expense	(1,184		)	(170		)	(2,744		)	(3,091		)	(3,843		)	(11,032		)	(6,360		)	(8,832		)	(6,357		)	(3,433		)	(24,982		)
Net Interest Income	$	439		$	138		$	12,535		$	2,716		$	(2,508	)	$	13,320
Net Interest Income (Expense)																			$	1,208		$	10,552		$	17,876		$	(3,433	)	$	26,203

Average Interest Earning Assets ^{(2) (3)}	$	396,588		$	56,735		$	536,537		$	531,050		$	126,848		$	1,647,758
Average Interest Earning Assets ^{(3) (4)}																			$	1,053,529		$	1,312,263		$	927,201		$	—		$	3,292,993
Weighted Average Yield on Interest Earning Assets ⁽⁴⁾⁽⁵⁾	1.64		%	2.17		%	11.39		%	4.37		%	4.21		%	5.91		%	2.87		%	5.91		%	10.45		%	—			6.22		%
Average Cost of Funds ⁽⁵⁾⁽⁶⁾	(1.37		)%	(2.35		)%	(4.46		)%	(4.28		)%	(2.57		)%	(3.10		)%	(2.76		)%	(4.71		)%	(4.37		)%	—			(3.82		)%
Portfolio Net Interest Margin ⁽⁶⁾⁽⁷⁾	0.27		%	(0.18		)%	6.93		%	0.09		%	1.64		%	2.81		%	0.11		%	1.20		%	6.08		%	—			2.40		%

~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2018


	Agency RMBS			Agency IOs			Multi- Family ⁽¹⁾ ⁽²⁾			Distressed Residential			Other			Total			Agency RMBS ⁽¹⁾			Residential Credit			Multi- Family Credit ⁽²⁾ ⁽³⁾			Other			Total
Interest Income	$	5,246		$	1,303		$	42,918		$	22,765		$	3,681		$	75,913		$	7,971		$	8,949		$	17,493		$	—		$	34,413
Interest Expense	(3,388		)	(575		)	(7,614		)	(10,745		)	(10,644		)	(32,966		)	(4,407		)	(3,095		)	(3,890		)	(3,269		)	(14,661		)
Net Interest Income	$	1,858		$	728		$	35,304		$	12,020		$	(6,963	)	$	42,947
Net Interest Income (Expense)																			$	3,564		$	5,854		$	13,603		$	(3,269	)	$	19,752

Average Interest Earning Assets ^{(2) (3)}	$	418,867		$	71,156		$	507,891		$	604,907		$	123,644		$	1,726,465
Average Interest Earning Assets ^{(3) (4)}																			$	1,208,900		$	604,033		$	612,357		$	—		$	2,425,290
Weighted Average Yield on Interest Earning Assets ⁽⁴⁾⁽⁵⁾	1.67		%	2.44		%	11.27		%	5.02		%	3.97		%	5.86		%	2.64		%	5.93		%	11.43		%	—			5.68		%
Average Cost of Funds ⁽⁵⁾⁽⁶⁾	(1.25		)%	(2.00		)%	(4.42		)%	(4.05		)%	(2.51		)%	(2.98		)%	(1.82		)%	(4.06		)%	(4.51		)%	—			(2.82		)%
Portfolio Net Interest Margin ⁽⁶⁾⁽⁷⁾	0.42		%	0.44		%	6.85		%	0.97		%	1.46		%	2.88		%	0.82		%	1.87		%	6.92		%	—			2.86		%

~~Table of Contents~~

~~Three Months Ended September 30, 2016~~

Agency
RMBS
Agency IOs
Multi-
Family ⁽¹⁾ ⁽²⁾

Distressed
Residential
Other Total
Interest Income $ 1,904
$ 1,222
$ 10,719
$ 9,398
$ 923
$ 24,166
Interest Expense (652 ) (718 ) (2,179 ) (3,958 ) (1,141 ) (8,648 )
Net Interest Income $ 1,252
$ 504
$ 8,540
$ 5,440
$ (218 ) $ 15,518

Average Interest Earning Assets ^{(2) (3)}
$ 491,843
$ 118,945
$ 341,637
$ 686,122
$ 122,825
$ 1,761,372
Weighted Average Yield on Interest Earning Assets ⁽⁴⁾
1.55 % 4.11 % 12.55 % 5.48 % 3.01 % 5.49 %
Average Cost of Funds ⁽⁵⁾
(0.58 )% (3.98 )% (6.55 )% (3.45 )% (2.39 )% (2.67 )%
Portfolio Net Interest Margin ⁽⁶⁾
0.97 % 0.13 % 6.00 % 2.03 % 0.62 % 2.82 %

~~Nine Months Ended September 30, 2016~~

Agency
RMBS
Agency IOs
Multi-
Family ⁽¹⁾ ⁽²⁾

Distressed
Residential

Other Total
Interest Income $ 6,469
$ 7,569
$ 29,115
$ 27,366
$ 2,615
$ 73,134
Interest Expense (2,610 ) (2,023 ) (5,485 ) (9,964 ) (3,228 ) (23,310 )
Net Interest Income $ 3,859
$ 5,546
$ 23,630
$ 17,402
$ (613 ) $ 49,824

Average Interest Earning Assets ^{(2) (3)}
$ 543,731
$ 129,281
$ 314,406
$ 614,670
$ 124,869
$ 1,726,957
Weighted Average Yield on Interest Earning Assets ⁽⁴⁾
1.59 % 7.81 % 12.35 % 5.94 % 2.79 % 5.65 %
Average Cost of Funds ⁽⁵⁾
(0.75 )% (3.21 )% (6.84 )% (3.80 )% (2.07 )% (2.61 )%
Portfolio Net Interest Margin ⁽⁶⁾
0.84 % 4.60 % 5.51 % 2.14 % 0.72 % 3.04 %

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⁽¹⁾	Includes Agency fixed-rate RMBS, Agency ARMs and, solely with respect to the three months ended March 31, 2018, Agency IOs.

⁽²⁾

The Company, through its ownership of certain securities, has determined it is the primary beneficiary of the Consolidated K-Series and has consolidated the Consolidated K-Series into the Company’s condensed consolidated financial statements. ~~Average Interest Earning Assets for the periods indicated exclude all Consolidated K-Series assets other than those securities actually owned by the Company.~~ Interest income amounts represent interest income earned by securities that are actually owned by the Company. A reconciliation of our net interest income ingenerated by our multi-family ~~investments~~credit portfolio to our condensed consolidated financial statements for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively, is set forth below (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2019			2018
Interest income, multi-family loans held in securitization trusts	$	76,186	$	62,126	$	213,242	$	187,427	$	111,768		$	85,092
Interest income, investment securities, available for sale ^(a)	2,463		1,281		7,689		3,461		4,255			2,434
Interest income, mezzanine loan and preferred equity investments ^(a)	3,660		2,671		9,822		6,010
Interest expense, multi-family collateralized debt obligation	67,030		55,359		187,835		167,783
Interest income, preferred equity and mezzanine loan investments									5,007			4,445
Interest expense, multi-family collateralized debt obligations									(96,797		)	(74,478		)
Interest income, Multi-Family, net	15,279		10,719		42,918		29,115		24,233			17,493
Interest expense, investment securities, available for sale	2,036		609		5,504		821
Interest expense, repurchase agreements									(5,863		)	(3,171		)
Interest expense, securitized debt	708		1,570		2,110		4,664		(494		)	(719		)
Net interest income, Multi-Family	$	12,535	$	8,540	$	35,304	$	23,630	$	17,876		$	13,603


^(a)	Included in the Company’s accompanying condensed consolidated statements of operations in interest income, investment securities and ~~other.~~other interest earning assets.


⁽²⁾⁽³⁾	Average Interest Earning Assets for the ~~period excludes~~periods indicated exclude all Consolidated K-Series assets other than those securities ~~issued by the securitizations comprising the Consolidated K-Series that are~~ actually owned by the Company.


⁽³⁾⁽⁴⁾	Our Average Interest Earning Assets is calculated each quarter based on daily average amortized cost for the respective periods.


⁽⁴⁾⁽⁵⁾	Our Weighted Average Yield on Interest Earning Assets was calculated by dividing our annualized interest income by our Average Interest Earning Assets for the respective periods.

⁽⁵⁾⁽⁶⁾

Our Average Cost of Funds was calculated by dividing our annualized interest expense by our average interest bearing liabilities, excluding our subordinated debentures and ~~Convertible Notes,~~convertible notes, for the respective periods. InFor the three months ended ~~September 30, 2017,~~March 31, 2019, our subordinated debentures and ~~Convertible Notes~~convertible notes generated interest expense of approximately $0.7 million and $2.7 million, respectively. For the three months ended March 31, 2018, our subordinated debentures and convertible notes generated interest expense of approximately $0.6 million and $2.6 ~~million, respectively. In the nine months ended September 30, 2017, our subordinated debentures and Convertible Notes generated interest expense of approximately $1.7 million and $7.2~~ million, respectively. Our Average Cost of Funds includes interest expense on our interest rate ~~swaps and amortization of premium on our swaptions.~~swaps.


⁽⁶⁾⁽⁷⁾	Portfolio Net Interest Margin is the difference between our Weighted Average Yield on Interest Earning Assets and our Average Cost of Funds, excluding the ~~Weighted Average Cost~~weighted average cost of subordinated debentures and ~~Convertible Notes.~~convertible notes.

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Prepayment ~~Experience~~History

The following table sets forth the actual constant prepayment rates (“CPR”) for ~~selected asset classes,~~our Agency fixed-rate RMBS and Agency ARM portfolios, by quarter, for the ~~quarterly~~ periods indicated:

Quarter Ended Agency
ARMs Agency
Fixed-Rate RMBS Agency
IOs Residential
Securitizations Total Weighted
Average
September 30, 2017 9.4 % 12.8 % 17.4 % 18.2 % 14.9 %
June 30, 2017 16.5 % 9.6 % 17.5 % 16.8 % 14.7 %
March 31, 2017 8.3 % 10.6 % 15.9 % 5.1 % 12.6 %
December 31, 2016 21.7 % 12.3 % 19.4 % 11.1 % 16.9 %
September 30, 2016 20.7 % 10.0 % 18.2 % 15.9 % 16.1 %
June 30, 2016 17.6 % 10.2 % 15.6 % 17.8 % 14.6 %
March 31, 2016 13.5 % 7.9 % 14.7 % 14.8 % 12.7 %
December 31, 2015 16.9 % 8.5 % 14.6 % 31.2 % 14.7 %
September 30, 2015 18.6 % 10.5 % 18.0 % 8.9 % 15.1 %



Quarter Ended	Weighted Average		Agency Fixed-Rate RMBS		Agency ARMs
March 31, 2019	6.6	%	6.5	%	8.2	%
December 31, 2018	7.2	%	6.8	%	12.9	%
September 30, 2018	7.8	%	7.3	%	14.6	%
June 30, 2018	6.6	%	5.9	%	16.3	%
March 31, 2018	5.8	%	5.4	%	10.2	%
December 31, 2017	7.0	%	6.3	%	12.9	%
September 30, 2017	11.9	%	12.8	%	9.4	%
June 30, 2017	11.4	%	9.6	%	16.5	%
March 31, 2017	10.0	%	10.6	%	8.3	%

When prepayment expectations over the remaining life of assets increase, we have to amortize premiums over a shorter time period resulting in a reduced yield to maturity on our investment assets. Conversely, if prepayment expectations decrease, the premium would be amortized over a longer period resulting in a higher yield to maturity. ~~In addition, the market values and cash flows from our Agency IOs can be materially adversely affected during periods of elevated prepayments.~~ We monitor our prepayment experience on a monthly basis and adjust the amortization rate to reflect current market conditions.

Financial Condition

As of ~~September 30, 2017,~~March 31, 2019, we had approximately ~~$10.3~~$17.6 billion of total assets, as compared to approximately ~~$9.0~~$14.7 billion of total assets as of December 31, ~~2016.~~2018. A significant portion of our assets represents the assets comprising the Consolidated K-Series, which we consolidate in accordance with GAAP. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Consolidated K-Series assets amounted to approximately ~~$8.4~~$14.4 billion and ~~$7.0~~$11.7 billion, respectively. ~~See "Significant Estimates~~For a reconciliation of our actual interest in the Consolidated K-Series to our financial statements, see "Capital Allocation" and ~~Critical Accounting Policies—Loan Consolidation Reporting Requirement for Certain Multi-Family K-Series Securitizations" in this Quarterly Report on Form 10-Q.~~

The increase in total assets is primarily due to the consolidation of multi-family loans held in securitization trusts on our balance sheet for a Freddie Mac-sponsored multi-family loan securitization during the first quarter of 2017."Quarterly Comparative Portfolio Net Interest Margin" above.

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Balance Sheet Analysis

Investment Securities Available for Sale.

At ~~September 30, 2017,~~March 31, 2019, our securities portfolio includes Agency RMBS, including Agency fixed-rate and Agency ~~ARM pass-through certificates, Agency IOs,~~ARMs, CMBS and non-Agency RMBS, ~~and U.S. Treasury securities,~~ which are classified as investment securities available for sale. At ~~September 30, 2017,~~March 31, 2019, we had no investment securities in a single issuer or entity that had an aggregate book value in excess of 10% of our total assets. The ~~decrease~~increase in the carrying value of our investment securities available for sale as of ~~September 30, 2017~~March 31, 2019 as compared to December 31, ~~2016~~2018 is ~~primarily related~~due to purchases of multi-family CMBS and non-Agency RMBS during the period and increase in fair value of our investment securities partially offset by sales of ~~Agency RMBS, Non-Agency RMBS and~~multi-family CMBS during the period.

The following tables set forth the balances of our investment securities available for sale by vintage (i.e., by issue year) as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (dollar amounts in thousands):


	September 30, 2017				December 31, 2016				March 31, 2019				December 31, 2018
	Par Value		Carrying Value		Par Value		Carrying Value		Par Value		Carrying Value		Par Value		Carrying Value
Agency RMBS
ARMs
Prior to 2012	$	18,250	$	19,070	$	22,173	$	23,203	$	11,216	$	11,638	$	11,813	$	12,257
2012	76,250		79,197		86,449		89,642		56,495		57,224		58,547		59,137
Total ARMs	94,500		98,267		108,622		112,845		67,711		68,862		70,360		71,394
Fixed
Fixed Rate
Prior to 2012	641		659		1,011		1,042		319		322		357		358
2012	271,162		278,391		317,974		327,132		198,004		200,069		207,667		207,572
2015	341		374		411		453		2,367		2,408		2,386		2,392
Total Fixed	272,144		279,424		319,396		328,627
IO
Prior to 2013	178,051		26,329		321,237		49,617
2013	29,081		4,765		87,142		14,635
2014	20,920		2,435		51,716		5,634
2015	5,952		1,024		55,338		9,578
2016	34,185		2,788		75,770		5,427
Total IOs	268,189		37,341		591,203		84,891
2017									719,440		733,189		735,959		736,851
2018									18,701		19,088		19,132		19,163
Total Fixed Rate									938,831		955,076		965,501		966,336

Total Agency RMBS	634,833		415,032		1,019,221		526,363		1,006,542		1,023,938		1,035,861		1,037,730

U.S. Treasury securities
2016	3,000		2,924		3,000		2,887
Total U.S. Treasury Securities	3,000		2,924		3,000		2,887

Non-Agency RMBS
2006	232		212		1,659		1,229		164		150		173		156
2015	—		—		27,574		27,643
2016	48,008		48,210		133,647		134,412
2017	84,054		84,600		—		—		13,000		12,739		19,000		18,691
2018									205,419		207,677		196,919		195,190
2019									94,823		93,520		—		—
Total Non-Agency RMBS	132,294		133,022		162,880		163,284		313,406		314,086		216,092		214,037

CMBS
Prior to 2013 ⁽¹⁾	825,263		46,623		835,447		43,897		—		—		807,319		52,700
2013	—		—		5,912		5,733
2014	—		—		2,500		2,158
2015	—		—		16,880		14,364
2016	40,853		43,309		64,873		60,290		18,239		19,589		20,228		21,444
2017	34,027		33,251		—		—		49,921		49,718		50,243		48,840
2018									143,677		141,059		143,680		137,501
2019									35,431		35,575		—		—
Total CMBS	900,143		123,183		925,612		126,442		247,268		245,941		1,021,470		260,485

Total	$	1,670,270	$	674,161	$	2,110,713	$	818,976	$	1,567,216	$	1,583,965	$	2,273,423	$	1,512,252


⁽¹⁾	These amounts represent multi-family CMBS available for sale held in securitization trusts at ~~September 30, 2017 and~~ December 31, ~~2016, respectively.~~2018. These securities were sold during the three months ended March 31, 2019.

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Distressed and Other Residential Mortgage Loans, at Fair Value

Certain of the Company’s acquired residential mortgage loans, including distressed residential mortgage loans, non-QM loans and second mortgages, are presented at fair value on its condensed consolidated balance sheets as a result of a fair value election made at the time of acquisition pursuant to ASC 825, Financial Instruments. Subsequent changes in fair value are reported in current period earnings and presented in net gain (loss) on distressed and other residential mortgage loans at fair value on the Company’s condensed consolidated statements of operations.

The following table details our residential and other mortgage loans, at fair value at March 31, 2019 and December 31, 2018, respectively (dollar amounts in thousands):



	March 31, 2019					December 31, 2018
	Number of Loans	Unpaid Principal		Fair Value		Number of Loans	Unpaid Principal		Fair Value
Distressed Residential Mortgage Loans	3,712	$	679,295	$	633,496	3,352	$	627,092	$	576,816
Other Residential Mortgage Loans ⁽¹⁾	1,824	$	247,902	$	242,070	1,539	$	161,280	$	160,707


⁽¹⁾	Includes second mortgages with a fair value $64.8 million and $67.4 million at March 31, 2019 and December 31, 2018, respectively.

Characteristics of Our Distressed and Other Residential Mortgage Loans, at Fair Value:



Loan to Value at Purchase ⁽¹⁾	March 31, 2019		December 31, 2018
50.00% or less	18.1	%	18.5	%
50.01% - 60.00%	13.0	%	13.6	%
60.01% - 70.00%	15.3	%	14.5	%
70.01% - 80.00%	16.1	%	15.9	%
80.01% - 90.00%	15.6	%	15.4	%
90.01% - 100.00%	10.1	%	9.3	%
100.01% and over	11.8	%	12.8	%
Total	100.0	%	100.0	%


⁽¹⁾	For second mortgages, the Company calculates the combined loan to value.



FICO Scores at Purchase	March 31, 2019		December 31, 2018
550 or less	24.5	%	26.0	%
551 to 600	20.4	%	21.9	%
601 to 650	16.5	%	17.3	%
651 to 700	14.1	%	12.7	%
701 to 750	11.8	%	10.3	%
751 to 800	8.8	%	7.8	%
801 and over	3.9	%	4.0	%
Total	100.0	%	100.0	%

Table of Contents



Current Coupon	March 31, 2019		December 31, 2018
3.00% or less	6.5	%	8.6	%
3.01% - 4.00%	16.9	%	16.1	%
4.01% - 5.00%	35.2	%	35.2	%
5.01% – 6.00%	22.2	%	19.0	%
6.01% and over	19.2	%	21.1	%
Total	100.0	%	100.0	%



Delinquency Status	March 31, 2019		December 31, 2018
Current	79.6	%	71.8	%
31 – 60 days	10.0	%	6.4	%
61 – 90 days	3.8	%	12.3	%
90+ days	6.6	%	9.5	%
Total	100.0	%	100.0	%



Origination Year	March 31, 2019		December 31, 2018
2005 or earlier	22.5	%	23.8	%
2006	14.8	%	16.0	%
2007	25.6	%	27.4	%
2008 or later	37.1	%	32.8	%
Total	100.0	%	100.0	%

Table of Contents

Distressed and Other Residential Mortgage Loans, Net

Distressed Residential Mortgage Loans accounted for under ASC 310-30:

Certain of the distressed residential mortgage loans acquired by the Company at a discount, with evidence of credit deterioration since their origination and where it is probable that the Company will not collect all contractually required principal payments, are accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"). Management evaluates whether there is evidence of credit quality deterioration as of the acquisition date using indicators such as past due or modified status, risk ratings, recent borrower credit scores and recent loan-to-value percentages.

The following table details our portfolio of distressed residential mortgage loans at carrying value at March 31, 2019 and December 31, 2018, respectively (dollar amounts in thousands):



	Number of Loans	Unpaid Principal		Carrying Value
March 31, 2019	2,500	$	220,552	$	209,324
December 31, 2018	2,702	242,007		228,466

As of December 31, 2018, $88.1 million of distressed residential mortgage loans were held in a securitization trust and were pledged as collateral for certain of the securitized debt issued by the Company. The Company’s net investment in this securitization trust was the maximum amount of the Company’s investment that was at risk to loss and represented the difference between the carrying amount of the net assets and liabilities associated with the distressed residential mortgage loans held in securitization trusts. The Company had a net investment in these securitization trusts of $85.7 million as of December 31, 2018. In March 2019, the Company repaid the outstanding notes from this securitization and distressed residential mortgage loans with a carrying value of $80.0 million became unencumbered.

In addition, distressed residential mortgage loans with a carrying value of approximately $114.8 million and $128.1 million at March 31, 2019 and December 31, 2018, respectively, are pledged as collateral for a master repurchase agreement.

Characteristics of Distressed Residential Mortgage Loans accounted for under ASC 310-30:



Loan to Value at Purchase	March 31, 2019		December 31, 2018
50.00% or less	4.1	%	3.9	%
50.01% - 60.00%	5.1	%	4.8	%
60.01% - 70.00%	7.5	%	7.6	%
70.01% - 80.00%	12.6	%	12.4	%
80.01% - 90.00%	13.9	%	13.7	%
90.01% - 100.00%	15.4	%	15.0	%
100.01% and over	41.4	%	42.6	%
Total	100.0	%	100.0	%



FICO Scores at Purchase	March 31, 2019		December 31, 2018
550 or less	20.7	%	20.3	%
551 to 600	30.2	%	30.5	%
601 to 650	29.0	%	29.3	%
651 to 700	12.3	%	12.3	%
701 to 750	5.4	%	5.3	%
751 to 800	2.0	%	1.9	%
801 and over	0.4	%	0.4	%
Total	100.0	%	100.0	%

Table of Contents



Current Coupon	March 31, 2019		December 31, 2018
3.00% or less	7.4	%	7.9	%
3.01% - 4.00%	8.5	%	8.5	%
4.01% - 5.00%	20.6	%	21.2	%
5.01% – 6.00%	13.6	%	13.6	%
6.01% and over	49.9	%	48.8	%
Total	100.0	%	100.0	%



Delinquency Status	March 31, 2019		December 31, 2018
Current	74.9	%	65.7	%
31 – 60 days	4.7	%	10.6	%
61 – 90 days	2.4	%	4.5	%
90+ days	18.0	%	19.2	%
Total	100.0	%	100.0	%



Origination Year	March 31, 2019		December 31, 2018
2005 or earlier	29.8	%	29.2	%
2006	18.1	%	17.9	%
2007	31.4	%	32.1	%
2008 or later	20.7	%	20.8	%
Total	100.0	%	100.0	%

Residential Mortgage Loans Held in Securitization Trusts, Net

Included in our portfolio are prime ARM loans that we originated or purchased in bulk from third parties that met our investment criteria and portfolio requirements and that we subsequently securitized in 2005.

At ~~September 30, 2017,~~March 31, 2019, residential mortgage loans held in securitization trusts totaled approximately ~~$79.9~~$52.9 million. The Company’s net investment in the residential securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between the carrying amount of (i) the ARM loans, real estate owned and receivables held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding, was ~~$4.6~~$4.8 million. Of the residential mortgage loans held in ~~securitized~~securitization trusts, 100% are traditional ARMs or hybrid ARMs, ~~81.8%~~80.7% of which ~~are~~were ARM loans that ~~are~~were interest only at the time of origination. With respect to the hybrid ARMs included in these securitizations, interest rate reset periods were predominately five years or less and the interest-only period is typically nine years, which mitigates the “payment shock” at the time of interest rate reset. None of the residential mortgage loans held in securitization trusts are pay option-ARMs or ARMs with negative amortization. ~~At September 30, 2017,~~As of March 31, 2019, the interest only period for the interest only ARM loans included in these securitizations has ~~expired.~~ended.

The following table details our residential mortgage loans held in securitization trusts at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (dollar amounts in thousands):

Number of Loans
Unpaid
Principal
Carrying Value
September 30, 2017 252
$ 83,068
$ 79,875
December 31, 2016 287
$ 98,303
$ 95,144



	Number of Loans	Unpaid Principal		Carrying Value
March 31, 2019	188	$	56,140	$	52,869
December 31, 2018	196	$	60,171	$	56,795

Table of Contents

Characteristics of Our Residential Mortgage Loans Held in Securitization Trusts:

The following table sets forth the composition of our residential mortgage loans held in securitization trusts as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively (dollar amounts in thousands):


	September 30, 2017									December 31, 2016									March 31, 2019									December 31, 2018
	Average			High			Low			Average			High			Low			Average			High			Low			Average			High			Low
General Loan Characteristics:
Original Loan Balance	$	424		$	2,850		$	48		$	424		$	2,850		$	48		$	422		$	2,850		$	48		$	425		$	2,850		$	48
Current Coupon Rate	3.70		%	5.50		%	2.00		%	3.35		%	5.25		%	1.63		%	4.94		%	6.63		%	3.00		%	4.75		%	6.63		%	3.00		%
Gross Margin	2.37		%	4.13		%	1.13		%	2.36		%	4.13		%	1.13		%	2.37		%	4.13		%	1.13		%	2.36		%	4.13		%	1.13		%
Lifetime Cap	11.31		%	13.25		%	9.38		%	11.30		%	13.25		%	9.38		%	11.33		%	12.63		%	9.38		%	11.32		%	12.63		%	9.38		%
Original Term (Months)	360			360			360			360			360			360			360			360			360			360			360			360
Remaining Term (Months)	212			219			178			221			228			187			193			201			160			197			204			163
Average Months to Reset	5			11			1			5			11			1			6			11			1			5			11			1
Original FICO Score	726			818			603			724			818			593			193			201			160			725			818			603
Original LTV	70.44		%	95.00		%	16.28		%	69.80		%	95.00		%	13.94		%	70.50		%	95.00		%	16.28		%	70.54		%	95.00		%	16.28		%

~~Table of Contents~~

The following tables detail the activity for the residential mortgage loans held in securitization trusts (net) for the nine months ended September 30, 2017 and 2016, respectively (dollar amounts in thousands):

Principal Premium
Allowance for
Loan Losses

Net Carrying
Value
Balance, January 1, 2017 $ 98,303
$ 623
$ (3,782 ) $ 95,144
Principal repayments (14,190 ) —
—
(14,190 )
Provision for loan loss —
—
(306 ) (306 )
Transfer to real estate owned (1,045 ) —
303
(742 )
Charge-Offs —
—
60
60
Amortization of premium —
(91 ) —
(91 )
Balance, September 30, 2017 $ 83,068
$ 532
$ (3,725 ) $ 79,875

Principal Premium
Allowance for
Loan Losses
Net Carrying Value
Balance, January 1, 2016 $ 122,545
$ 775
$ (3,399 ) $ 119,921
Principal repayments (20,316 ) —
—
(20,316 )
Provision for loan loss —
—
(557 ) (557 )
Transfer to real estate owned (193 ) —
—
(193 )
Charge-Offs 574
—
123
697
Amortization of premium —
(126 ) —
(126 )
Balance, September 30, 2016 $ 102,610
$ 649
$ (3,833 ) $ 99,426

~~Residential Mortgage Loans, at Fair Value~~

Residential mortgage loans, at fair value, include both first lien distressed residential loans and second lien residential loans that are presented at fair value on the Company's condensed consolidated balance sheets. Subsequent changes in fair value are reported in current period earnings and presented in net gain on residential mortgage loans at fair value on the Company’s condensed consolidated statements of operations.

~~The following table details our residential mortgage loans at fair value at September 30, 2017 and December 31, 2016, respectively (dollar amounts in thousands):~~

Number of Loans
Unpaid
Principal

Fair Value ⁽¹⁾
September 30, 2017 775
$ 73,546
$ 69,512
December 31, 2016 259
17,540
17,769


⁽¹⁾	~~Residential mortgage loans at, at fair value includes second lien mortgages with a fair value of $41.5 million and $17.8 million at September 30, 2017 and December 31, 2016, respectively.~~

~~Table of Contents~~

~~Characteristics of Our Residential Mortgage Loans, at Fair Value:~~

Loan to Value at Purchase September 30, 2017 December 31, 2016
50.00% or less 58.4 % 100.0 %
50.01% - 60.00% 2.9 % —
60.01% - 70.00% 4.2 % —
70.01% - 80.00% 6.8 % —
80.01% - 90.00% 5.8 % —
90.01% - 100.00% 9.9 % —
100.01% and over 12.0 % —
Total 100.0 % 100.0 %

FICO Scores at Purchase September 30, 2017 December 31, 2016
550 or less 6.3 % —
551 to 600 7.0 % —
601 to 650 8.5 % —
651 to 700 13.2 % 2.5 %
701 to 750 39.0 % 63.3 %
751 to 800 23.0 % 32.3 %
801 and over 3.0 % 1.9 %
Total 100.0 % 100.0 %

Current Coupon September 30, 2017 December 31, 2016
3.00% or less 0.3 % —
3.01% - 4.00% 18.4 % —
4.01% - 5.00% 20.5 % —
5.01% – 6.00% 2.4 % 1.4 %
6.01% and over 58.4 % 98.6 %
Total 100.0 % 100.0 %

Delinquency Status September 30, 2017 December 31, 2016
Current 98.8 % 98.5 %
31 – 60 days —
0.6 %
61 – 90 days 0.6 % 0.6 %
90+ days 0.6 % 0.3 %
Total 100.0 % 100.0 %

Origination Year September 30, 2017 December 31, 2016
2005 or earlier 2.0 % —
2006 2.0 % —
2007 4.7 % —
2008 or later 91.3 % 100.0 %
Total 100.0 % 100.0 %

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~~Acquired Distressed Residential Mortgage Loans.~~ Distressed residential mortgage loans are comprised of pools of fixed and adjustable rate residential mortgage loans acquired by the Company at a discount, with evidence of credit deterioration since their origination and where it is probable that the Company will not collect all contractually required principal payments. Management evaluates whether there is evidence of credit quality deterioration as of the acquisition date using indicators such as past due or modified status, risk ratings, recent borrower credit scores and recent loan-to-value percentages. Distressed residential mortgage loans held in securitization trusts are distressed residential mortgage loans transferred to Consolidated VIEs that have been securitized into beneficial interests.

The following table details our portfolio of distressed residential mortgage loans, including those distressed residential mortgage loans held in securitization trusts, at September 30, 2017 and December 31, 2016, respectively (dollar amounts in thousands):

Number of
Loans
Unpaid Principal Carrying Value
September 30, 2017 4,163
$ 400,418
$ 369,651
December 31, 2016 5,275
$ 559,945
$ 503,094

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. The Company’s net investment in these securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between the carrying amount of the net assets and liabilities associated with the distressed residential mortgage loans held in securitization trusts, was $82.6 million and $77.1 million at September 30, 2017 and December 31, 2016, respectively.

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.

~~Characteristics of Our Distressed Residential Mortgage Loans, including Distressed Residential Mortgage Loans Held in Securitization Trusts~~:

Loan to Value at Purchase September 30, 2017 December 31, 2016
50.00% or less 4.3 % 4.1 %
50.01% - 60.00% 4.6 % 4.3 %
60.01% - 70.00% 7.2 % 6.8 %
70.01% - 80.00% 11.3 % 10.8 %
80.01% - 90.00% 13.1 % 12.7 %
90.01% - 100.00% 14.3 % 14.0 %
100.01% and over 45.2 % 47.3 %
Total 100.0 % 100.0 %

FICO Scores at Purchase September 30, 2017 December 31, 2016
550 or less 20.3 % 18.5 %
551 to 600 30.5 % 28.7 %
601 to 650 28.3 % 28.0 %
651 to 700 13.3 % 15.6 %
701 to 750 5.2 % 6.6 %
751 to 800 2.1 % 2.3 %
801 and over 0.3 % 0.3 %
Total 100.0 % 100.0 %

~~Table of Contents~~

Current Coupon September 30, 2017 December 31, 2016
3.00% or less 11.3 % 13.5 %
3.01% - 4.00% 10.9 % 11.8 %
4.01% - 5.00% 20.5 % 22.0 %
5.01% – 6.00% 12.3 % 11.8 %
6.01% and over 45.0 % 40.9 %
Total 100.0 % 100.0 %

Delinquency Status September 30, 2017 December 31, 2016
Current 73.7 % 69.7 %
31 – 60 days 3.5 % 11.6 %
61 – 90 days 4.5 % 4.2 %
90+ days 18.3 % 14.5 %
Total 100.0 % 100.0 %

Origination Year September 30, 2017 December 31, 2016
2005 or earlier 27.3 % 27.0 %
2006 17.5 % 18.1 %
2007 32.0 % 33.6 %
2008 or later 23.2 % 21.3 %
Total 100.0 % 100.0 %

~~Table of Contents~~

~~Consolidated K-Series.~~ As of September 30, 2017 and December 31, 2016, we owned 100% of the first loss securities of the Consolidated K-Series. As of September 30, 2017 and December 31, 2016, the Consolidated K-Series are comprised of multi-family mortgage loans held in six and five Freddie Mac-sponsored multi-family K-Series securitizations, respectively, of which we or one of our SPEs own the first loss securities and, in certain cases, IOs and mezzanine securities. We determined that the securitizations comprising the Consolidated K-Series were VIEs and that we are the primary beneficiary of these securitizations. Accordingly, we are required to consolidate the Consolidated K-Series’ underlying multi-family loans and related debt, income and expense in our condensed consolidated financial statements.

We have elected the fair value option on the assets and liabilities held within the Consolidated K-Series, which requires that changes in valuations in the assets and liabilities of the Consolidated K-Series be reflected in our condensed consolidated statements of operations. As of September 30, 2017 and December 31, 2016, the Consolidated K-Series was comprised of $8.4 billion and $6.9 billion, respectively, in multi-family loans held in securitization trusts and $8.0 billion and $6.6 billion, respectively, in multi-family CDOs, with a weighted average interest rate of 4.07% and 3.97%, respectively. The increases in multi-family loans held in securitization trusts and multi-family CDOs during the nine months ended September 30, 2017 were due to the consolidation of $1.5 billion in multi-family loans held in securitization trusts and $1.5 billion in multi-family CDOs following the purchase in March 2017 of $65.5 million in additional first loss tranche PO securities and certain IO and mezzanine CMBS securities. As a result of the consolidation of the Consolidated K-Series, our condensed consolidated statements of operations for the three and nine months ended September 30, 2017 included $76.2 million and $213.2 million in interest income, respectively, and $67.0 million and $187.8 million in interest expense, respectively. Also, we recognized a $2.4 million and a $5.2 million unrealized gain in the condensed consolidated statements of operations for the three and nine months ended September 30, 2017, respectively, as a result of the fair value accounting method election. As a result of the consolidation of the Consolidated K-Series, our condensed consolidated statements of operations for the three and nine months ended September 30, 2016 included $62.1 million and $187.4 million in interest income, respectively, and $55.4 million and $167.8 million in interest expense, respectively. Also, we recognized a $0.7 million and a $2.3 million unrealized gain in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016, respectively, as a result of the fair value accounting method election.

We do not have any claims to the assets (other than those securities represented by our first loss and mezzanine tranche securities) or obligations for the liabilities of the Consolidated K-Series. Our investment in the Consolidated K-Series is limited to the multi-family CMBS comprised of first loss tranche PO, and, in certain cases, IOs and mezzanine securities, issued by these K-Series securitizations with an aggregate net carrying value of $408.7 million and $314.9 million as of September 30, 2017 and December 31, 2016, respectively.

~~Multi-Family CMBS Loan Characteristics:~~

The following table details the loan characteristics of the loans that back the multi-family CMBS (including the Consolidated K-Series) in our portfolio as of September 30, 2017 and December 31, 2016, respectively (dollar amounts in thousands, except as noted):

September 30, 2017 December 31, 2016
Current balance of loans $ 10,211,047
$ 8,824,481
Number of loans 587
543
Weighted average original LTV 69.5 % 68.8 %
Weighted average underwritten debt service coverage ratio 1.44x
1.49x
Current average loan size $ 17,395
$ 16,251
Weighted average original loan term (in months) 120
120
Weighted average current remaining term (in months) 61
79
Weighted average loan rate 4.35 % 4.39 %
First mortgages 100 % 100 %
Geographic state concentration (greater than 5.0%):
  California 11.8 % 13.8 %
  Texas 10.5 % 12.4 %
  New York 6.9 % 8.1 %

~~Table of Contents~~

~~Investment~~Investments in Unconsolidated Entities. ~~Investment~~Investments in unconsolidated entities is comprised of ownership interests in entities that invest in multi-family or residential real estate and related assets. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, we had approximately ~~$51.3~~$92.4 million and ~~$79.3~~$73.5 million of investments in unconsolidated entities, respectively.

On March 31, 2017, the Company reconsidered its evaluation of its variable interest in 200 RHC Hoover, LLC ("Riverchase Landing"), a multi-family apartment community in which the Company holds a preferred equity investment, and determined that it became the primary beneficiary of Riverchase Landing. Accordingly, on this date, the Company consolidated Riverchase Landing into its condensed consolidated financial statements and decreased its investment in unconsolidated entities by approximately $9.0 million. ~~See~~ ~~Note 10~~ ~~to our condensed consolidated financial statements included in this report for more information on Riverchase Landing.~~

Preferred Equity and Mezzanine Loan ~~and Preferred Equity~~ Investments. The Company had preferred equity and mezzanine loan ~~and preferred equity~~ investments in the amount of ~~$122.6~~$175.1 million and ~~$100.2~~$165.6 million as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively.

On As of March 31, ~~2017, the Company reconsidered its evaluation of its variable interest in The Clusters, LLC ("The Clusters"), a multi-family apartment community in which the Company holds a~~2019, all preferred equity ~~investment,~~ and determined that it became the primary beneficiary of The Clusters. Accordingly, on this date, the Company consolidated The Clusters into its condensed consolidated financial statements, resulting in a decrease in preferred equity investments of approximately $3.5 million. ~~See~~ ~~Note 10~~ ~~to our condensed consolidated financial statements included in this report for more information on The Clusters.~~

~~As of September 30, 2017, all~~ mezzanine loan ~~and preferred equity~~ investments were paying in accordance with their contractual terms. During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019, there were no impairments with respect to our ~~mezzanine loans and~~ preferred equity and mezzanine loan investments.

The following tables summarize our ~~mezzanine loans and~~ preferred equity and mezzanine loan investments as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (dollars in thousands):


	September 30, 2017								March 31, 2019
	Count	Carrying Amount ⁽¹⁾		Investment Amount ⁽¹⁾		Weighted Average Interest or Preferred Return Rate ⁽²⁾		Weighted Average Remaining Life (Years)	Count	Carrying Amount ⁽¹⁾		Investment Amount ⁽¹⁾		Weighted Average Interest or Preferred Return Rate ⁽²⁾		Weighted Average Remaining Life (Years)
Preferred equity investments									27	$	164,533	$	165,847	11.55	%	7.1
Mezzanine loans	3	$	6,875	$	6,907	12.95	%	7.1	4	10,595		10,639		12.24	%	17.8
Preferred equity investments	17	115,703		117,265		12.08	%	6.5
Total	20	$	122,578	$	124,172	12.13	%	6.5	31	$	175,128	$	176,486	11.59	%	7.7


	December 31, 2016								December 31, 2018
	Count	Carrying Amount ⁽¹⁾		Investment Amount ⁽¹⁾		Weighted Average Interest or Preferred Return Rate ⁽²⁾		Weighted Average Remaining Life (Years)	Count	Carrying Amount ⁽¹⁾		Investment Amount ⁽¹⁾		Weighted Average Interest or Preferred Return Rate ⁽²⁾		Weighted Average Remaining Life (Years)
Preferred equity investments									24	$	154,629	$	155,819	11.59	%	7.2
Mezzanine loans	5	$	18,881	$	19,058	12.53	%	8.8	4	10,926		10,970		12.29	%	17.5
Preferred equity investments	14	81,269		82,096		12.10	%	7.4
Total	19	$	100,150	$	101,154	12.18	%	7.7	28	$	165,555	$	166,789	11.63	%	7.8


⁽¹⁾	The difference between the carrying amount and the investment amount consists of any unamortized premium or discount, deferred fees, or deferred expenses.


⁽²⁾	Based upon investment amount and contractual interest or preferred return rate.

Preferred Equity and Mezzanine Loan Investments Characteristics:



Combined Loan to Value at Investment	March 31, 2019		December 31, 2018
70.01% - 80.00%	13.2	%	10.4	%
80.01% - 90.00%	86.8	%	89.6	%
Total	100.0	%	100.0	%

~~Table~~Consolidated K-Series. As of ~~Contents~~

~~Real Estate Held for Sale in Consolidated VIEs.~~On March 31, ~~2017, the Company re-evaluated its variable interests in Riverchase Landing~~2019 and ~~The Clusters and, as a result~~December 31, 2018, we owned 100% of the ~~reconsideration, consolidated both Riverchase Landing~~first loss POs of the Consolidated K-Series. The Consolidated K-Series are comprised of multi-family mortgage loans held in eleven and ~~The Clusters into its~~nine Freddie Mac-sponsored multi-family loan K-Series securitizations as of March 31, 2019 and December 31, 2018, respectively, of which we, or one of our SPEs, own the first loss POs and, in certain cases, IOs and/or mezzanine securities issued by these securitizations. We determined that the securitizations comprising the Consolidated K-Series were VIEs and that we are the primary beneficiary of these securitizations. Accordingly, we are required to consolidate the Consolidated K-Series’ underlying multi-family loans and related debt, income and expense in our condensed consolidated financial statements. During the second quarter of 2017, Riverchase Landing determined to actively market its multi-family apartment community for sale, with anticipation of completing a sale to a third party buyer in 2018. During the third quarter of 2017, The Clusters determined to actively market its multi-family apartment community for sale, with anticipation of completing a sale to a third party buyer in 2018. As a result, the Company classified the real estate assets held by both Riverchase Landing and The Clusters in the amount of $64.1 million as real estate held for sale in consolidated variable interest entities as of September 30, 2017. No gain or loss was recognized by the Company or allocated to non-controlling interests related to the classification of the real estate assets to held for sale.

~~Financing Arrangements, Portfolio Investments~~. The Company finances its portfolio investments primarily through repurchase agreements with third party financial institutions. These financing arrangements are short-term borrowings that bear interest rates typically based on a spread to LIBOR, and are secured by the securities which they finance.

At September 30, 2017, the Company had repurchase agreements with an outstanding balance of $608.3 million and a weighted average interest rate of 2.33%. At December 31, 2016, the Company had repurchase agreements with an outstanding balance of $773.1 million and a weighted average interest rate of 1.92%.

As of September 30, 2017, we had no counterparties where the amount at risk was in excess of 5% of the Company's stockholders’ equity. The amount at risk is defined as the fair value of securities pledged as collateral to the financing agreement in excess of the financing agreement liability. At December 31, 2016, the Company's only exposure where the amount at risk was in excess of 5% of the Company's stockholder's equity was to Deutsche Bank AG, London Branch at 5.1%.

As of September 30, 2017 and December 31, 2016, the outstanding balance under our repurchase agreements was funded at an advance rate of 87.8% and 84.6% that implies an average "haircut" of 12.2% and 15.4%, respectively. The weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS (excluding Agency IOs), non-Agency RMBS, CMBS and Agency IOs was approximately 4%, 25%, 20% and 25%, respectively, at September 30, 2017.

The following table details the ending balance, quarterly average balance and maximum balance at any month-end during each quarter in 2017, 2016 and 2015 for outstanding financing arrangements on our portfolio investments, including Federal Home Loan Bank advances (dollar amounts in thousands):

Quarter Ended
Quarterly Average
Balance

End of Quarter
Balance

Maximum Balance
at any Month-End
September 30, 2017 $ 624,398
$ 608,304
$ 645,457
June 30, 2017 $ 688,853
$ 656,350
$ 719,222
March 31, 2017 $ 702,675
$ 702,309
$ 762,382

December 31, 2016 $ 742,594
$ 773,142
$ 773,142
September 30, 2016 $ 686,348
$ 671,774
$ 699,506
June 30, 2016 $ 615,930
$ 618,050
$ 642,536
March 31, 2016 $ 576,822
$ 589,919
$ 589,919

December 31, 2015 $ 574,847
$ 577,413
$ 578,136
September 30, 2015 $ 578,491
$ 586,075
$ 586,075
June 30, 2015 $ 513,254
$ 585,492
$ 585,492
March 31, 2015 $ 633,132
$ 619,741
$ 645,162

~~Financing Arrangements, Residential Mortgage Loans.~~ The Company has a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch, with a maximum aggregate committed principal amount of $200.0 million and a maximum uncommitted principal amount of $50.0 million to fund distressed residential mortgage loans, expiring on December 13, 2017. The outstanding balance on the master repurchase agreement, as of September 30, 2017 and December 31, 2016, amounts to approximately $140.3 million and $193.8 million, respectively, bearing interest at one-month LIBOR plus 2.50% (3.74% and 3.26% at September 30, 2017 and December 31, 2016, respectively). Distressed residential mortgage loans with a carrying value of approximately $206.3 million at September 30, 2017 are pledged as collateral for the borrowings under this master repurchase agreement. The Company expects to roll outstanding borrowings under this master repurchase agreement into a new repurchase agreement or other financing prior to or at maturity.

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~~On November 25, 2015,~~We have elected the ~~Company entered into a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch~~fair value option on the assets and liabilities held within the Consolidated K-Series, which requires that changes in ~~an aggregate principal amount~~valuations in the assets and liabilities of ~~up to $100.0 million to fund~~ the ~~purchase~~Consolidated K-Series be reflected in our condensed consolidated statements of residential mortgage loans, particularly second mortgage loans, expiring on May 25, 2017. On May 24, 2017, the Company entered into an amended master repurchase agreement that reduced the committed principal amount to $25.0 million. The amended master repurchase agreement expires on November 24, 2018. The outstanding balance on this master repurchase agreement as of September 30, 2017 amounts to approximately $20.7 million, bearing interest at one-month LIBOR plus 3.50% (4.74% at September 30, 2017). There was no outstanding balance on this master repurchase agreement as of December 31, 2016. Second lien mortgages with a carrying value of approximately $35.3 million at September 30, 2017 are pledged as collateral for the borrowings under this master repurchase agreement.

~~Residential Collateralized Debt Obligations~~.operations. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016, we had Residential CDOs~~2018, the Consolidated K-Series were comprised of ~~$76.9 million~~$14.3 billion and $91.7 million, respectively. As of September 30, 2017 and December 31, 2016, the weighted average interest rate of these Residential CDOs was 1.85% and 1.37%, respectively. The Residential CDOs are collateralized by ARM$11.7 billion, respectively, in multi-family loans with a principal balance of $83.1 million and $98.3 million at September 30, 2017 and December 31, 2016, respectively. The Company retained the owner trust certificates, or residual interest, for three securitizations, and, as of September 30, 2017 and December 31, 2016, had a net investmentheld in ~~the residential~~ securitization trusts ~~of $4.6 million~~ and ~~$4.4 million, respectively.~~

~~Securitized Debt~~. ~~As of September 30, 2017~~$13.5 billion and December 31, 2016, we had approximately $98.4 million and $158.9 million of securitized debt, respectively. As of September 30, 2017 and December 31, 2016, the weighted average interest rate for our securitized debt was 4.40% and 4.24%, respectively. The Company’s securitized debt is collateralized by$11.0 billion, respectively, in multi-family ~~CMBS and distressed residential mortgage loans. See~~ ~~Note 10~~ ~~to our condensed consolidated financial statements included in this report for more information on securitized debt.~~

~~Debt~~. ~~The Company's debt as of~~ ~~September 30, 2017~~ ~~included Convertible Notes, subordinated debentures and mortgages and notes payable in consolidated variable interest entities.~~

~~Convertible Notes~~

On January 23, 2017, the Company completed the issuance and sale to Nomura Securities International, Inc., as the underwriter, of $138.0 million aggregate principal amount of its 6.25% Senior Convertible Notes due 2022, including $18.0 million aggregate principal amount of the Convertible Notes issued upon exercise of Nomura's over-allotment option, in an underwritten public offering. The net proceeds to the Company from the sale of the Convertible Notes, after deducting the underwriter's discounts and commissions and estimated offering expenses, were approximately $127.0 million with the total cost to the Company of approximately 8.24%.

~~Subordinated Debentures~~

~~As of September 30, 2017, certain of our wholly owned subsidiaries had trust preferred securities outstanding of $45.0 million~~CDOs, with a weighted average interest rate of ~~5.14%.~~4.02% and 3.96%, respectively. The ~~securities are fully guaranteed by us~~increases in multi-family loans held in securitization trusts and multi-family CDOs during the three months ended March 31, 2019 were due to the consolidation of $2.4 billion in multi-family loans held in securitization trusts and $2.3 billion in multi-family CDOs in connection with ~~respect to distributions~~the purchase of $101.6 million in additional first loss POs and ~~amounts payable upon liquidation, redemption or repayment. These securities are classified as subordinated debentures in~~certain IOs and mezzanine CMBS securities. As a result of the ~~liability section~~consolidation of the Consolidated K-Series, our condensed consolidated ~~balance sheets.~~statements of operations for the three months ended March 31, 2019 and March 31, 2018 included interest income of $111.8 million and $85.1 million, respectively, and interest expense of $96.8 million and $74.5 million, respectively. Also, we recognized a $9.4 million and a $7.5 million unrealized gain in the condensed consolidated statements of operations for the three months ended March 31, 2019 and March 31, 2018, respectively, as a result of the fair value accounting method election.

~~Mortgages~~We do not have any claims to the assets (other than those securities represented by our first loss POs and ~~Notes Payable~~mezzanine securities) or obligations for the liabilities of the Consolidated K-Series. Our investment in the Consolidated ~~VIEs~~

~~On March 31, 2017,~~K-Series is limited to the ~~Company determined that it became the primary beneficiary~~multi-family CMBS comprised of ~~Riverchase Landing and The Clusters, two variable interest entities that each own a multi-family apartment community~~first loss PO, and, in ~~which the Company holds preferred equity investments. Accordingly, on this date, the Company consolidated Riverchase Landing~~certain cases, IOs and/or mezzanine securities, issued by these K-Series securitizations with an aggregate net carrying value of $781.1 million and The Clusters into its condensed consolidated financial statements. Both of Riverchase Landing's and The Clusters' real estate investments are subject to mortgages payable and the Company has no obligation for these liabilities as of September 30, 2017. See ~~Note 10~~ ~~to our condensed consolidated financial statements included in this report for more information on Riverchase Landing and The Clusters.~~

The Company also consolidates KRVI into its condensed consolidated financial statements. KRVI's real estate under development is subject to a note payable of $6.0 million that has an unused commitment of $2.4$657.6 million as of ~~September 30, 2017. See~~ ~~Note 10~~ ~~to our condensed consolidated financial statements included~~March 31, 2019 and December 31, 2018, respectively.

Multi-Family CMBS Loan Characteristics:

The following table details the loan characteristics of the loans that back multi-family loans held in ~~this report~~securitization trusts as of March 31, 2019 and the multi-family CMBS investment securities available for ~~more information on KRVI.~~sale, held in securitization trusts, and multi-family loans held in securitization trusts as of December 31, 2018 (dollar amounts in thousands, except as noted):



	March 31, 2019			December 31, 2018
Current balance of loans	$	13,795,518		$	13,593,818
Number of loans	713			773
Weighted average original LTV	68		%	68.8		%
Weighted average underwritten debt service coverage ratio	1.47x			1.45x
Current average loan size	$	19,349		$	19,364
Weighted average original loan term (in months)	125			123
Weighted average current remaining term (in months)	80			64
Weighted average loan rate	4.28		%	4.34		%
First mortgages	100		%	100		%
Geographic state concentration (greater than 5.0%):
California	16.0		%	14.8		%
Texas	12.5		%	13.0		%
Maryland	6.0		%	5.0		%
New York	5.1		%	6.4		%

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Derivative Assets and Liabilities. The Company enters into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, swaptions, futures, ~~put and call~~ options on futures and mortgage derivatives such as forward-settling purchases and sales of Agency RMBS where the underlying pools of mortgage loans are ~~“To-Be-Announced,”~~"To-Be-Announced," or TBAs.

~~In connection with our investment in Agency IOs, we utilize several types of~~Our current derivative instruments ~~such as~~are comprised of interest rate swaps, futures, put and call options on futures and TBAs to hedge the interest rate risk and spread risk. This hedging technique is dynamic in nature and requires frequent adjustments, which accordingly makes it very difficult to qualify for hedge accounting treatment. Hedge accounting treatment requires specific identification of a risk or group of risks and then requires that we designate a particular trade to that risk with no minimal ability to adjust over the life of the transaction. Because we and Midway are frequently adjusting these derivative instruments in response to current market conditions, we have determined to account for all the derivative instruments related to our Agency IO investments as derivatives not designated as hedging instruments. Realized and unrealized gains and losses associated with derivatives in our Agency IO portfolio are recognized through earnings in the condensed consolidated statements of operations.

swaps. We ~~also~~ use interest rate swaps ~~(separately from interest rate swaps in our Agency IO portfolio)~~ to hedge variable cash flows associated with ~~borrowings made under~~ our ~~financing arrangements and Residential CDOs.~~variable rate borrowings. We typically pay a fixed rate and receive a floating rate based on one or three month LIBOR, on the notional amount of the interest rate swaps. The floating rate we receive under our swap agreements has the effect of offsetting the repricing characteristics and cash flows of our financing arrangements. Historically, we have accounted for these interest rate swaps under the hedged accounting methodology with changes in value reflected in comprehensive earnings and not through the statement of operations. Beginning in the fourth quarter of 2017, the Company did not elect hedge accounting treatment and all changes in fair value are recognized in the statement of operations.

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Company had ~~$80.0 million and $215.0 million of notional amount of interest rate~~no outstanding swaps ~~outstanding~~ that qualify as cash flow hedges for financial reporting ~~purposes, respectively. The interest rate swaps had a net fair market asset value of $17.6 thousand and $0.1 million at September 30, 2017 and December 31, 2016, respectively.~~purposes. See Note 1211 to our condensed consolidated financial statements included in this Form 10-Q for more information on our derivative instruments and hedging activities.

Derivative financial instruments may contain credit risk to the extent that the institutional counterparties may be unable to meet the terms of the agreements. We minimize this risk by limiting our counterparties to major financial institutions with good credit ratings. In addition, we regularly monitor the potential risk of loss with any one party resulting from this type of credit risk. ~~Accordingly, we do not expect any material losses~~Currently, all of the Company's interest rate swaps outstanding are cleared through CME Group Inc. ("CME Clearing") which is the parent company of the Chicago Mercantile Exchange Inc. CME Clearing serves as the counterparty to every cleared transaction, becoming the buyer to each seller and the seller to each buyer, limiting the credit risk by guaranteeing the financial performance of both parties and netting down exposures.

Real Estate Held for Sale in Consolidated VIEs.In March 2017, the Company re-evaluated its variable interest in The Clusters and, as a result of ~~default~~that review, consolidated The Clusters into its condensed consolidated financial statements. During the third quarter of 2017, The Clusters determined to actively market its multi-family apartment community for sale and as a result, the Company classified the real estate assets held by ~~other parties, but we cannot guarantee that we will not experience counterparty failures~~The Clusters in the ~~future.~~amount of $29.7 million as real estate held for sale in consolidated variable interest entities as of December 31, 2018. In February 2019, The Clusters completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Company de-consolidated The Clusters as of the date of the sale.

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Repurchase Agreements

Investment Securities, Available for Sale

The Company finances its investment securities primarily through repurchase agreements with third party financial institutions. These repurchase agreements are short-term borrowings that bear interest rates typically based on a spread to LIBOR and are secured by the investment securities which they finance.

As of March 31, 2019, the Company had repurchase agreements secured by investment securities with an outstanding balance of $1.7 billion and a weighted average interest rate of 3.43%. At December 31, 2018, the Company had repurchase agreements secured by investment securities with an outstanding balance of $1.5 billion and a weighted average interest rate of 3.41%. Our repurchase agreements secured by investment securities have a weighted average days to maturity of 68 days.

As of March 31, 2019, the Company had no exposure where the amount at risk was in excess of 5% of the Company's stockholders’ equity. As of December 31, 2018, the Company's only exposure where the amount at risk was in excess of 5% of the Company's stockholders' equity was to Jefferies & Company, Inc. at 5.04%. The amount at risk is defined as the fair value of securities pledged as collateral to the repurchase agreement in excess of the repurchase agreement liability.

As of March 31, 2019, the outstanding balance under our repurchase agreements secured by investment securities was funded at an advance rate of 86.9% that implies a weighted average "haircut" of 13.1%. The weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS, non-Agency RMBS, and CMBS was approximately 5%, 25%, and 22%, respectively, at March 31, 2019. As of December 31, 2018, the outstanding balance under our repurchase agreements secured by investment securities was funded at a weighted average advance rate of 87.7% that implies an average "haircut" of 12.3%. The weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS, non-Agency RMBS, and CMBS was approximately 5%, 25%, and 23%, respectively, at December 31, 2018.

The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2019, 2018 and 2017 for our repurchase agreement borrowings (dollar amounts in thousands):



Quarter Ended	Quarterly Average Balance		End of Quarter Balance		Maximum Balance at any Month-End
March 31, 2019	$	1,604,421	$	1,654,439	$	1,654,439

December 31, 2018	$	1,372,459	$	1,543,577	$	1,543,577
September 30, 2018	$	1,144,080	$	1,130,659	$	1,163,683
June 30, 2018	$	1,230,648	$	1,179,961	$	1,279,121
March 31, 2018	$	1,287,939	$	1,287,314	$	1,297,949

December 31, 2017	$	1,224,771	$	1,276,918	$	1,276,918
September 30, 2017	$	624,398	$	608,304	$	645,457
June 30, 2017	$	688,853	$	656,350	$	719,222
March 31, 2017	$	702,675	$	702,309	$	762,382

Distressed and Other Residential Mortgage Loans

The Company has master repurchase agreements with third party financial institutions to fund the purchase of distressed and other residential mortgage loans, including both first and second mortgages. The following table presents detailed information about the Company’s borrowings under repurchase agreements and associated assets pledged as collateral at March 31, 2019 and December 31, 2018 (dollar amounts in thousands):

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	Maximum Aggregate Uncommitted Principal Amount		Outstanding Repurchase Agreements		Carrying Value of Loans Pledged		Weighted Average Rate		Weighted Average Months to Maturity
March 31, 2019	$	1,100,000	$	619,605	$	792,380	4.58	%	7.68
December 31, 2018	$	950,000	$	589,148	$	754,352	4.67	%	9.24

The Company expects to roll outstanding borrowings under these master repurchase agreements into new repurchase agreements or other financings prior to or at maturity.

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Residential Collateralized Debt Obligations. As of March 31, 2019 and December 31, 2018, we had Residential CDOs of $49.2 million and $53.0 million, respectively. As of March 31, 2019 and December 31, 2018, the weighted average interest rate of these Residential CDOs was 3.10% and 3.12%, respectively. The Residential CDOs are collateralized by ARMs with a principal balance of $56.1 million and $60.2 million at March 31, 2019 and December 31, 2018, respectively. The Company retained the owner trust certificates, or residual interest, for three securitizations, and, as of March 31, 2019 and December 31, 2018, had a net investment in the residential securitization trusts of $4.8 million.

Securitized Debt. On March 14, 2019, the Company exercised its option to redeem the notes issued by its multi-family CMBS re-securitization with an outstanding principal balance of $33.2 million. Additionally, on March 25, 2019, the Company repaid outstanding notes from its April 2016 distressed residential mortgage loan securitization with an outstanding principal balance of $6.5 million.

As of December 31, 2018, we had approximately $42.3 million of securitized debt. As of December 31, 2018, the weighted average interest rate for our securitized debt was 4.96%. The Company’s securitized debt was collateralized by multi-family CMBS and distressed residential mortgage loans. See Note 9 to our condensed consolidated financial statements included in this report for more information on securitized debt.

Debt. The Company's debt as of March 31, 2019 included Convertible Notes, subordinated debentures and mortgages and notes payable in consolidated variable interest entities.

Convertible Notes

On January 23, 2017, the Company issued $138.0 million aggregate principal amount of its 6.25% Senior Convertible Notes due 2022 (the "Convertible Notes") in an underwritten public offering. The net proceeds to the Company from the sale of the Convertible Notes, after deducting the underwriter's discounts, commissions and estimated offering expenses, were approximately $127.0 million with the total cost to the Company of approximately 8.24%.

Subordinated Debentures

As of March 31, 2019, certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of 6.50%. The securities are fully guaranteed by us with respect to distributions and amounts payable upon liquidation, redemption or repayment. These securities are classified as subordinated debentures in the liability section of our condensed consolidated balance sheets.

Mortgages and Notes Payable in Consolidated VIEs

In March 2017, the Company determined that it became the primary beneficiary of The Clusters, a VIE that owned a multi-family apartment community and in which the Company held a preferred equity investment. Accordingly, the Company consolidated The Clusters into its condensed consolidated financial statements. In February 2019, The Clusters completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Company de-consolidated The Clusters as of the date of the sale. See Note 9 to our condensed consolidated financial statements included in this report for more information on The Clusters.

The Company also consolidates Kiawah River View Investors LLC ("KRVI") into its condensed consolidated financial statements. KRVI's real estate under development is subject to a note payable of $4.0 million that has an unused commitment of $4.4 million as of March 31, 2019. See Note 9 to our condensed consolidated financial statements included in this report for more information on KRVI.

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Balance Sheet Analysis - Company's Stockholders’ Equity

The Company's ~~stockholders’~~stockholders' equity at ~~September 30, 2017~~March 31, 2019 was ~~$842.1 million~~$1.4 billion and included ~~$9.2~~$9.1 million of accumulated other comprehensive ~~income.~~loss. The accumulated other comprehensive ~~income~~loss at ~~September 30, 2017 primarily~~March 31, 2019 consisted of $1.8 million in unrealized gains related to non-Agency RMBS and $18.2 million in net unrealized gains related to our CMBS, partially offset by $10.8 million in unrealized losses related to our Agency RMBS. The Company's stockholders’ equity at December 31, 2016 was $848.1 million and included $1.6 million of accumulated other comprehensive income. The accumulated other comprehensive income at December 31, 2016 consisted of $12.0$21.5 million in unrealized losses related to our Agency RMBS, partially offset by ~~$1.0~~$9.1 million ~~in unrealized gains related to non-Agency RMBS, $12.5~~and $3.3 million in net unrealized gains related to our CMBS and ~~$0.1~~non-Agency RMBS, respectively. The Company's stockholders’ equity at December 31, 2018 was $1.2 billion and included $22.1 million of accumulated other comprehensive loss. The accumulated other comprehensive loss at December 31, 2018 consisted of $38.3 million in unrealized ~~derivative~~losses related to our Agency RMBS and $1.2 million in net unrealized losses related to our non-Agency RMBS, partially offset by $17.4 million in net unrealized gains related to ~~cash flow hedges.~~our CMBS.

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Analysis of Changes in Book Value

The following table analyzes the changes in book value of our common stock for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 (amounts in thousands, except per share):


	Three Months Ended September 30, 2017								Nine Months Ended September 30, 2017							Three Months Ended March 31, 2019
	Amount			Shares		Per Share⁽¹⁾			Amount			Shares	Per Share⁽¹⁾			Amount			Shares	Per Share⁽¹⁾
Beginning Balance	$	673,381		111,891		$	6.02		$	683,075		111,474	$	6.13		$	879,389		155,590	$	5.65
Common stock issuance, net ⁽²⁾	577			(37	)				1,843			380				186,021			32,241
Balance after share issuance activity	673,958			111,854		6.02			684,918			111,854	6.12			1,065,410			187,831	5.68
Dividends declared	(22,371		)			(0.20		)	(67,118		)		(0.60		)	(37,566		)		(0.20		)
Net change in accumulated other comprehensive income:
Hedges	(176		)			—			(84		)		—
Investment securities	1,022					0.01			7,648				0.07
Investment securities, available for sale ⁽³⁾																13,047				0.07
Net income attributable to Company's common stockholders	24,620					0.22			51,689				0.46			38,214				0.20
Ending Balance	$	677,053		111,854		$	6.05		$	677,053		111,854	$	6.05		$	1,079,105		187,831	$	5.75


⁽¹⁾	Outstanding shares used to calculate book value per share for the ~~ending balance is based on outstanding shares as of September 30, 2017 of 111,854,023.~~three months ended March 31, 2019 are 187,831,455.


⁽²⁾	Includes amortization of stock based compensation.


⁽³⁾	The increase relates to unrealized gains in our investment securities due to improved pricing from December 31, 2018.

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Liquidity and Capital Resources

General

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, comply with margin requirements, fund our operations, pay management and incentive fees, pay dividends to our stockholders and other general business needs. Our investments and assets, excluding the ~~principal only~~ multi-family CMBS POs we invest in, generate liquidity on an ongoing basis through principal and interest payments, prepayments, net earnings retained prior to payment of dividends and distributions from unconsolidated investments. Our ~~principal only~~ multi-family CMBS POs are backed by balloon non-recourse mortgage loans that provide for the payment of principal at maturity date, which is typically ~~seven~~ten to ~~ten~~fifteen years from the date the underlying mortgage loans are originated, and therefore do not directly contribute to monthly cash flows. In addition, the Company will, from time to time, sell on an opportunistic basis certain assets from its investment portfolio as part of its overall investment strategy and these sales are expected to provide additional liquidity.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, net cash and restricted cash decreased ~~by $3.5 million,~~primarily as a result of ~~$329.0~~$253.4 million used in ~~financing~~investing activities, which was partially offset by ~~$299.2~~$202.3 million provided by ~~investing~~financing activities and ~~$26.2~~$8.2 million ~~of cash~~ provided by operating activities.

Our financing activities primarily included ~~$197.6~~$185.0 million in proceeds from issuance of common stock and net ~~payments made on financing arrangements, $105.0~~proceeds from repurchase agreements of $141.2 million, partially offset by $37.5 million in payments made on multi-family CDOs, ~~$81.2~~$37.0 million in aggregate dividends paid on common stock ~~Series B Preferred Stock~~ and ~~Series C Preferred Stock, $14.9~~preferred stock, $45.6 million in extinguishment of and payments made on securitized debt, and $3.8 million in payments made on Residential CDOs, and $62.1 million in payments made on securitized debt, partially offset by $127.0 million in proceeds from the issuance of convertible debt and $4.4 million in proceeds from mortgages and notes payable in consolidated variable interest entities. CDOs.

Our investing activities primarily included ~~$179.1~~$159.7 million of purchases of residential mortgage loans and distressed residential mortgage loans, $136.3 million of purchases of investment securities, $101.6 million of purchases of investments held in multi-family securitization trusts, $35.0 million in the funding of preferred equity, equity and mezzanine loan investments, and $19.2 million in net payments made on other derivative instruments settled during the period, partially offset by $56.8 million in proceeds from sales of investment securities, $50.3 million in principal repayments and proceeds from sales and refinancing of distressed and other residential mortgage loans, ~~$100.9~~$37.6 million in ~~proceeds from sales of~~principal paydowns on investment securities ~~$105.0~~available for sale, $37.5 million in principal repayments received on multi-family loans held in securitization trusts, ~~$170.1 million in principal paydowns received on investment securities available for sale, $14.2~~$12.3 million in principal repayments received on ~~residential mortgage loans held in securitization trusts, $18.9 million in principal repayments received on mezzanine loans and~~ preferred equity ~~investments, $5.7 million in proceeds from sale of real estate owned, $23.4 million in return of capital from unconsolidated entity~~and mezzanine loan investments, and ~~$4.0~~$3.6 million in net proceeds ~~on other derivative instruments settled during the period, partially offset by $65.5 million~~from sales of real estate in purchases of investments held in multi-family securitization trusts, $129.9 million in purchases of investment securities, $81.5 million in purchases of residential mortgage loans and distressed residential mortgage loans, and $45.1 million in funding of mezzanine loans, equity and preferred equity investments.

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Consolidated VIEs.

We fund our investments and operations through a balanced and diverse funding mix, which includes proceeds from the issuance of common and preferred equity and debt securities, including convertible notes, short-term and longer-term repurchase agreement borrowings, CDOs, securitized debt and trust preferred ~~debentures and, until January 2016, we also used FHLBI advances.~~debentures. The type and terms of financing used by us depends on the asset being financed and the financing available at the time of the financing. In those cases where we utilize some form of structured financing, be it through CDOs, longer-term repurchase agreements or securitized debt, the cash flow produced by the assets that serve as collateral for these structured finance instruments may be restricted in terms of its use or applied to pay principal or interest on CDOs, repurchase agreements, notes or ~~notes~~other securities that are senior to our interests. At ~~September 30, 2017,~~March 31, 2019, we had cash and cash equivalents balances of ~~$101.9~~$65.4 million, which ~~increased~~decreased from ~~$83.6~~$103.7 million at December 31, ~~2016.~~2018. Based on our current investment portfolio, new investment initiatives, leverage ratio and available and future possible ~~borrowing~~financing arrangements, we believe our existing cash balances, funds available under our various financing arrangements and cash flows from operations will meet our liquidity requirements for at least the next 12 months.

Liquidity – Financing Arrangements

We rely primarily on short-term repurchase agreements to finance the more liquid assets in our investment ~~portfolio, such as Agency RMBS. In recent~~portfolio. Over the last several years, certain repurchase agreement lenders have elected to exit the repo lending market for various reasons, including new capital requirement regulations. However, as certain lenders have exited the space, other financing counterparties that had not participated in the repo lending market historically have ~~begun to step~~stepped in, ~~to replace many of~~offsetting, in part the lenders that have elected to exit.

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As of ~~September 30, 2017,~~March 31, 2019, we have outstanding short-term repurchase agreements, a form of collateralized short-term borrowing, with ~~eight~~thirteen different financial institutions. These agreements are secured by certain of our investment securities and bear interest rates that have historically moved in close relationship to LIBOR. Our borrowings under repurchase agreements are based on the fair value of our investment securities ~~portfolio.~~that serve as collateral under these agreements. Interest rate changes and increased prepayment activity can have a negative impact on the valuation of these securities, reducing the amount we can borrow under these agreements. Moreover, our repurchase agreements allow the counterparties to determine a new market value of the collateral to reflect current market conditions and because these lines of financing are not committed, the counterparty can call the loan at any time. Market value of the collateral represents the price of such collateral obtained from generally recognized sources or most recent closing bid quotation from such source plus accrued income. If a counterparty determines that the value of the collateral has decreased, the counterparty may initiate a margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing in cash, on minimal notice. Moreover, in the event an existing counterparty elected to not renew the outstanding balance at its maturity into a new repurchase agreement, we would be required to repay the outstanding balance with cash or proceeds received from a new counterparty or to surrender the securities that serve as collateral for the outstanding balance, or any combination thereof. If we are unable to secure financing from a new counterparty and had to surrender the collateral, we would expect to incur a loss. In addition, in the event one of our lenders under the repurchase agreement defaults on its obligation to “re-sell” or return to us the securities that are securing the borrowings at the end of the term of the repurchase agreement, we would incur a loss on the transaction equal to the amount of “haircut” associated with the short-term repurchase agreement, which we sometimes refer to as the “amount at risk.” As of ~~September 30, 2017,~~March 31, 2019, we had an aggregate amount at risk under our repurchase agreements ~~with eight counterparties~~ of approximately ~~$123.6~~$300.3 million, with no more than approximately ~~$40.8~~$63.0 million at risk with any single counterparty. At ~~September 30, 2017,~~March 31, 2019, the Company had short-term repurchase agreement borrowings of ~~$608.3 million~~$1.7 billion as compared to ~~$773.1 million~~$1.5 billion as of December 31, ~~2016.~~2018.

As of ~~September 30, 2017,~~March 31, 2019, our available liquid assets include unrestricted cash and cash equivalents ~~overnight deposits~~ and unencumbered securities we believe may be posted as margin. ~~The Company~~We had ~~$101.9~~$65.4 million in cash and cash equivalents ~~$8.9 million in overnight deposits in our Agency IO portfolio included in restricted cash~~ and ~~$243.1~~$410.4 million in unencumbered investment securities to meet additional haircuts or market valuation requirements. The unencumbered securities that we believe may be posted as margin as of ~~September 30, 2017~~March 31, 2019 included ~~$35.1~~$76.2 million of Agency RMBS, ~~$139.9~~$205.9 million of CMBS and ~~$68.1~~$128.2 million of non-Agency RMBS and other investment securities. We believe the cash and unencumbered securities, which collectively represent ~~58.2%~~28.8% of our financing arrangements, are liquid and could be monetized to pay down or collateralize a liability immediately.

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At ~~September 30, 2017,~~March 31, 2019, the Company also had ~~two~~three longer-term master repurchase agreements with ~~Deutsche Bank AG, Cayman Islands Branch. The outstanding balances under the first master repurchase agreement in an aggregate principal amount~~terms of up to ~~$200.0 million amounted to approximately $140.3 million~~one year with certain third party financial institutions. See "Management's Discussion and ~~$193.8 million at September 30, 2017~~Analysis of Financial Condition and ~~December 31, 2016, respectively. This agreement is collateralized by distressed residential mortgage loans with a carrying value~~Results of $206.3 million at September 30, 2017, expiring on December 13, 2017. The Company expects to roll outstanding borrowings under this master repurchase agreement into a new repurchase agreement or other financing prior to or at maturity. The outstanding balances under the second master repurchase agreement, with an aggregate principal amount of up to $25.0 million, amounted to approximately $20.7 million at September 30, 2017. We had no outstanding balance at December 31, 2016. This agreement is collateralized by second lien mortgages with a carrying value of $35.3 million at September 30, 2017, expiring on November 24, 2018.Operations—Balance Sheet Analysis - Repurchase Agreements" for further information.

At September 30, 2017, we also had other longer-term debt, including Residential CDOs outstanding of $76.9 million, multi-family CDOs outstanding of $8.0 billion (which represent obligations of the Consolidated K-Series), securitized debt of $98.4 million, subordinated debt of $45.0 million and convertible debt of $128.3 million. The CDOs are collateralized by residential and multi-family loans held in securitization trusts, respectively. The securitized debt as of September 30, 2017 represents the notes issued in (i) our May 2012 multi-family re-securitization transaction and (ii) our April 2016 distressed residential mortgage loan securitization transaction, which is described in ~~Note 10~~ ~~of our condensed consolidated financial statements in this Quarterly Report on Form 10-Q .~~

On January 23, 2017, the Company ~~completed the issuance of~~issued $138.0 million aggregate principal amount of Convertible Notes in a public offering. The Convertible Notes were issued at 96% of the principal amount, bear interest at a rate equal to 6.25% per year, payable semi-annually in arrears on January 15 and July 15 of each year, and are expected to mature on January 15, 2022, unless earlier converted or repurchased. The Company does not have the right to redeem the Convertible Notes prior to maturity and no sinking fund is provided for the Convertible Notes. Holders of the Convertible Notes are permitted to convert their Convertible Notes into shares of the Company's common stock at any time prior to the close of business on the business day immediately ~~proceeding~~preceding January 15, 2022. The conversion rate for the Convertible Notes, which is subject to adjustment upon the occurrence of certain specified events, initially equals 142.7144 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $7.01 per share of the Company’s common stock, based on a $1,000 principal amount of the Convertible Notes.

At March 31, 2019, we also had other longer-term debt, including Residential CDOs outstanding of $49.2 million, multi-family CDOs outstanding of $13.5 billion (which represent obligations of the Consolidated K-Series), and subordinated debt of $45.0 million. The CDOs are collateralized by residential and multi-family loans held in securitization trusts, respectively.

As of ~~September 30, 2017,~~March 31, 2019, our overall leverage ratio, which represents our total debt divided by our total stockholders' equity, was approximately ~~1.2~~1.8 to 1. Our overall leverage ratio does not ~~account for liabilities other than debt financings and does not~~ include ~~the mortgage debt of Riverchase Landing and The Clusters or~~ debt associated with the Multi-family CDOs or the Residential CDOs and other non-recourse debt, for which we have no obligation. As of ~~September 30, 2017,~~March 31, 2019, our leverage ratio on our short term financings or callable debt, which represents our repurchase agreement borrowings divided by our total stockholders' equity, was approximately ~~0.9~~1.6 to 1. We monitor all at risk or ~~short term~~short-term borrowings to ensure that we have adequate liquidity to satisfy margin calls and have the ability to respond to other market disruptions.

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Liquidity – Hedging and Other Factors

Certain of our hedging instruments may also impact our liquidity. We may use interest rate swaps, swaptions, TBAs ~~Eurodollar~~ or other futures contracts to hedge interest rate and ~~spread~~market value risk associated with our investments in Agency ~~RMBS, including Agency IOs.~~RMBS.

With respect to interest rate swaps, futures contracts and TBAs, initial margin deposits, which can be comprised of either cash or securities, will be made upon entering into these contracts. During the period these contracts are open, changes in the value of the contract are recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of these contracts at the end of each day’s trading. We may be required to satisfy variable margin payments periodically, depending upon whether unrealized gains or losses are incurred. In addition, because delivery of TBAs extend beyond the typical settlement dates for most non-derivative investments, these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, and thereby are more vulnerable to increasing amounts at risk with the applicable counterparties. The use of TBAs associated with our Agency IO investments creates significant short term payables (and/or receivables) amounting to $181.7 million at September 30, 2017, and is included in payable for securities purchased on our condensed consolidated balance sheets.

We also use interest rate swaps (separately from interest rate swaps in our Agency IO portfolio) to hedge variable cash flows associated with borrowings made under our financing arrangements and Residential CDOs.

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For additional information regarding the Company’s derivative instruments and hedging activities for the periods covered by this report, including the fair values and notional amounts of these instruments and realized and unrealized gains and losses relating to these instruments, please see Note 1211 to our condensed consolidated financial statements included in this report. Also, please see Item 3. Quantitative and Qualitative Disclosures about Market Risk, under the caption, “Fair Value Risk”, for a tabular presentation of the sensitivity of the fair value and net duration changes of the Company’s portfolio across various changes in interest rates, which takes into account the Company’s hedging activities.

Liquidity — Securities Offerings

In addition to the financing arrangements described above under the caption “Liquidity—Financing Arrangements,” we also rely on follow-on equity offerings of common and preferred ~~equity~~stock, and may utilize from time to time debt securities offerings, as a source of both short-term and long-term liquidity. We also may generate liquidity through the sale of shares of our common or stock or preferred stock in an “at the market” equity offering ~~program~~programs pursuant to an equity distribution ~~agreement (the "ATM Program"),~~agreements, as well as through the sale of shares of our common stock pursuant to our Dividend Reinvestment Plan ~~or DRIP.~~("DRIP"). Our DRIP provides for the issuance of up to $20,000,000 of shares of our common stock.

On ~~August 10, 2017,~~January 11, 2019, the Company issued 14,490,000 shares of its common stock through an underwritten public offering, at a public offering price of $5.96 per share, resulting in total net proceeds to the Company of $83.8 million after deducting underwriting discounts and commissions and offering expenses.

On March 1, 2019, the Company issued 15,000,000 shares of its common stock through an underwritten public offering, at a public offering price of $6.00 per share. On March 15, 2019, the Company issued 2,250,000 shares of its common stock upon exercise of the underwriters' option to purchase up to an additional 2,250,000 shares of the Company's common stock. The offering resulted in the Company issuing a total of 17,250,000 shares of its common stock for total net proceeds to the Company of $101.2 million after deducting underwriting discounts and commissions and offering expenses.

There were no shares of common stock issued under the equity distribution agreement relating to our common equity "at-the-market" offering program ("Common Equity Distribution Agreement") during the three months ended March 31, 2019 and March 31, 2018. As of March 31, 2019, approximately $86.4 million of common stock remains available for issuance under the Common Equity Distribution Agreement.

On March 29, 2019, the Company entered into ana preferred equity distribution agreement (the ~~“Equity~~"Preferred Equity Distribution ~~Agreement”) with Credit Suisse Securities (USA) LLC (“Credit Suisse”~~Agreement"), ~~as sales agent,~~ pursuant to which the Company may offer and sell shares of ~~its common stock, par value $0.01 per share,~~the Company's Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, having a maximum aggregate sales price of up to ~~$100.0 million, from time to time through Credit Suisse.~~$50.0 million. The Company has no obligation to sell any of the shares of ~~common~~preferred stock ~~issued~~issuable under the Preferred Equity Distribution Agreement and may at any time suspend solicitations and offers under the Preferred Equity Distribution Agreement.

~~The Equity Distribution Agreement replaces the Company’s prior equity distribution agreements with JMP Securities LLC and Ladenburg Thalmann & Co. Inc. dated as~~ As of March ~~20, 2015 and August 25, 2016, respectively (the “Prior Equity Distribution Agreements”), pursuant to which up to $39.3~~31, 2019, $50.0 million of ~~aggregate value of the Company's common~~preferred stock ~~and Series B Preferred Stock remained available for issuance immediately prior to termination. The Prior Equity Distribution Agreements were terminated effective on August 7, 2017.~~

There were no shares of common stock issued under the Prior Equity Distribution Agreements and the Equity Distribution Agreement during the three months ended September 30, 2017 . During the nine months ended September 30, 2017, the Company issued 87,737 shares of its common stock under the Prior Equity Distribution Agreements, at an average sales price of $6.68 per share, resulting in total net proceeds to the Company of $0.6 million after deducting the placement fees. During the three and nine months ended September 30, 2016, the Company issued no shares under the Prior Equity Distribution Agreements. As of September 30, 2017, approximately $100.0 million of securities remains available for issuance under the Preferred Equity Distribution ~~Agreement~~.

~~Management Agreements~~

We have investment management agreements with Midway and Headlands, pursuant to which we pay these managers a base management and incentive fee, if earned, quarterly in arrears. See "- Results of Operations - Comparison of the Three and Nine Months Ended September 30, 2017 to the Three and Nine Months Ended September 30, 2016 - Comparative Expenses" for more information regarding the base management and incentive fees incurred during the three and nine months ended September 30, 2017.Agreement.

Dividends

~~On September 14, 2017, we declared a Series B Preferred Stock cash dividend~~For information regarding the declaration and payment of ~~$0.484375 per share of Series B Preferred Stock~~dividends on our common and preferred stock for the ~~quarterly period that began on July15, 2017 and ended on October 14, 2017. The dividend was paid on October 15, 2017~~periods covered by this report, please see Note 17 to our ~~Series B Preferred stockholders of record as of October 1, 2017.~~

On September 14, 2017, we declared a Series C Preferred Stock cash dividend of $0.4921875 per share of Series C Preferred Stock for the quarterly period that began on July15, 2017 and ended on October 14, 2017. The dividend was paid on October 15, 2017 to our Series C Preferred stockholders of record as of October 1, 2017.

On September 14, 2017, we declared a 2017 third quarter cash dividend of $0.20 per common share. The dividend was paid on October 25, 2017 to common stockholders of record as of September 25, 2017. The dividend was paid out of our working capital.condensed consolidated financial statements included in this report.

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We expect to continue to pay quarterly cash dividends on our common stock during the near term. However, our Board of Directors will continue to evaluate our dividend policy each quarter and will make adjustments as necessary, based on a variety of factors, including, among other things, the need to maintain our REIT status, our financial condition, liquidity, earnings projections and business prospects. Our dividend policy does not constitute an obligation to pay dividends.

We intend to make distributions to our stockholders to comply with the various requirements to maintain our REIT status and to minimize or avoid corporate income tax and the nondeductible excise tax. However, differences in timing between the recognition of REIT taxable income and the actual receipt of cash could require us to sell assets or to borrow funds on a short-term basis to meet the REIT distribution requirements and to minimize or avoid corporate income tax and the nondeductible excise tax.

~~Exposure to European financial counterparties~~

We finance the acquisition of a significant portion of our mortgage-backed securities with repurchase agreements. In connection with these financing arrangements, we pledge our securities as collateral to secure the borrowings. The amount of collateral pledged will typically exceed the amount of the financing with the extent of over-collateralization from 5% of the amount borrowed (in the case of Agency ARM and Agency fixed-rate RMBS collateral) and up to 25% (in the case of our non-Agency RMBS and Agency IOs).

While our repurchase agreement financing results in us recording a liability to the counterparty in our consolidated balance sheet, we are exposed to the counterparty, if during the term of the repurchase agreement financing, a lender should default on its obligation and we are not able to recover our pledged assets. The amount of this exposure is the difference between the amount loaned to us plus interest due to the counterparty and the fair value of the collateral pledged by us to the lender (including accrued interest receivable on such collateral).

Several large European banks have experienced financial difficulty in recent years, some of whom have required a rescue or assistance from other large European banks or the European Central Bank. Some of these banks have U.S. banking subsidiaries which have provided repurchase agreement financing or interest rate swap agreements to us in connection with the acquisition of various investments, including mortgage-backed securities investments. We have outstanding repurchase agreement borrowings with Deutsche Bank AG, in the amount of $213.9 million at September 30, 2017, with a net exposure of $101.1 million. In addition, certain of our U.S. based counterparties may have significant exposure to the financial and economic dislocations in Europe which could impact their future lending activities or cause them to default under agreements with us. In the event one or more of these counterparties or their affiliates experience liquidity difficulties in the future, our liquidity could be materially adversely affected.

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Inflation

For the periods presented herein, inflation has been relatively low and we believe that inflation has not had a material effect on our results of operations. The impact of inflation is primarily reflected in the increased costs of our operations. VirtuallySubstantially all our assets and liabilities are financial in ~~nature.~~nature and are sensitive to interest rate and other related factors to a greater degree than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our consolidated financial statements and corresponding notes thereto have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering ~~the changes in the relative purchasing power of money over time due to~~ inflation. As a result, interest rates and other factors influence our performance far more than inflation. Inflation affects our operations primarily through its effect on interest rates, since interest rates typically increase during periods of high inflation and decrease during periods of low inflation. During periods of increasing interest rates, demand for mortgages and a borrower’s ability to qualify for mortgage financing in a purchase transaction may be adversely affected. During periods of decreasing interest rates, borrowers may prepay their mortgages, which in turn may adversely affect our yield and subsequently the value of our portfolio of mortgage assets.

Off-Balance Sheet Arrangements

We did not maintain any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

This section should be read in conjunction with “Item 1A. Risk Factors” in ~~this~~our Annual Report on Form 10-K and in our subsequent periodic reports filed with the SEC.

We seek to manage risks that we believe will impact our business including interest rates, liquidity, prepayments, credit quality and market value. When managing these risks we consider the impact on our assets, liabilities and derivative positions. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience. We seek to actively manage that risk, to generate risk-adjusted total returns that we believe compensate us appropriately for those risks and to maintain capital levels consistent with the risks we take.

The following analysis includes forward-looking statements that assume that certain market conditions occur. Actual results may differ materially from these projected results due to changes in our portfolio assets and borrowings mix and due to developments in the domestic and global financial and real estate markets. Developments in the financial markets include the likelihood of changing interest rates and the relationship of various interest rates and their impact on our portfolio yield, cost of funds and cash flows. The analytical methods that we use to assess and mitigate these market risks should not be considered projections of future events or operating performance.

Interest Rate Risk

Interest rates are sensitive to many factors, including governmental, monetary, tax policies, domestic and international economic conditions, and political or regulatory matters beyond our control. Changes in interest rates affect the value of the ~~financial~~ assets we manage and hold in our investment portfolio and the variable-rate borrowings we use to finance our portfolio. Changes in interest rates also affect the interest rate swaps and caps, Eurodollar and other futures, TBAs and other securities or instruments we may use to hedge our portfolio. As a result, our net interest income is particularly affected by changes in interest rates.

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For example, we hold RMBS, some of which may have fixed rates or interest rates that adjust on various dates that are not synchronized to the adjustment dates on our repurchase agreements. In general, the re-pricing of our repurchase agreements occurs more quickly than the re-pricing of our variable-interest rate assets. Thus, it is likely that our floating rate borrowings, such as our repurchase agreements, may react to interest rates before our RMBS because the weighted average next re-pricing dates on the related borrowings may have shorter time periods than that of the RMBS. In addition, the interest rates on our Agency ARMs backed by hybrid ARMs may be limited to a “periodic cap,” or an increase of typically 1% or 2% per adjustment period, while our borrowings do not have comparable limitations. Moreover, changes in interest rates can directly impact prepayment speeds, thereby affecting our net return on RMBS. During a declining interest rate environment, the prepayment of RMBS may accelerate (as borrowers may opt to refinance at a lower interest rate) causing the amount of liabilities that have been extended by the use of interest rate swaps to increase relative to the amount of RMBS, possibly resulting in a decline in our net return on RMBS, as replacement RMBS may have a lower yield than those being prepaid. Conversely, during an increasing interest rate environment, RMBS may prepay more slowly than expected, requiring us to finance a higher amount of RMBS than originally forecast and at a time when interest rates may be higher, resulting in a decline in our net return on RMBS. Accordingly, each of these scenarios can negatively impact our net interest income.

We seek to manage interest rate risk in our portfolio by utilizing interest rate swaps, swaptions, interest rate caps, ~~Eurodollar and other~~ futures, options on futures and U.S. Treasury securities with the goal of optimizing the earnings potential while seeking to maintain long term stable portfolio values. We continually monitor the duration of our mortgage assets and have a policy to hedge the financing of those assets such that the net duration of the assets, our borrowed funds related to such assets, and related hedging instruments, is less than one year. ~~In addition, we utilize TBAs to mitigate the risks on our long Agency RMBS positions associated with our investments in Agency IOs.~~

We utilize a model-based risk analysis system to assist in projecting portfolio performances over a scenario of different interest rates. The model incorporates shifts in interest rates, changes in prepayments and other factors impacting the valuations of our financial securities and ~~instruments, including mortgage-backed securities, repurchase agreements, interest rate swaps and interest rate caps, TBAs and Eurodollar futures.~~derivative hedging instruments.

Based on the results of the model, the instantaneous changes in interest rates specified below would have had the following effect on our net interest income for the next 12 months based on our assets and liabilities as of ~~September 30, 2017~~March 31, 2019 (dollar amounts in thousands):

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			Changes in Net Interest Income
Changes in Interest Rates	Changes in Net Interest Income
Changes in Interest Rates (basis points)		Changes in Net Interest Income
+200	$(6,151)	$(24,940)
+100	$(2,223)	$(12,836)
-100	$782	$13,645

Interest rate changes may also impact our net book value as our ~~financial~~ assets and related hedge derivatives are marked-to-market each quarter. Generally, as interest rates increase, the value of our mortgage assets ~~other than IOs,~~ decreases, and conversely, as interest rates decrease, the value of such investments will increase. The value of an IO will likely be negatively affected in a declining interest rate environment due to the risk of increasing prepayment rates because the IOs’ value is wholly contingent on the underlying mortgage loans having an outstanding balance. In general, we expect that, over time, decreases in the value of our portfolio attributable to interest rate changes will be offset, to the degree we are hedged, by increases in the value of our interest rate swaps or other financial instruments used for hedging purposes, and vice versa. However, the relationship between spreads on ~~securities~~our assets and spreads on our hedging instruments may vary from time to time, resulting in a net aggregate book value increase or decline. That said, unless there is a material impairment in value that would result in a payment not being received on a security or loan, changes in the book value of our portfolio will not directly affect our recurring earnings or our ability to make a distribution to our stockholders.

Liquidity Risk

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay dividends to our stockholders and other general business needs. The primary liquidity risk we face arises from financing long-maturity assets with shorter-term borrowings primarily in the form of repurchase agreement financings. We recognize the need to have funds available to operate our business. We manage and forecast our liquidity needs and sources daily to ensure that we have adequate liquidity at all times. We plan to meet liquidity through normal operations with the goal of avoiding unplanned sales of assets or emergency borrowing of funds.

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Our principal sources of liquidity are repurchase agreements, the CDOs we have issued to finance our loans held in securitization trusts, securitized debt, trust preferred securities, the principal and interest payments from our assets and cash proceeds from the issuance of equity or debt securities (as market and other conditions permit). We believe our existing cash balances and cash flows from operations will be sufficient for our liquidity requirements for at least the next 12 months.

We are subject to “margin call” risk under our repurchase agreements. In the event the value of our assets pledged as collateral suddenly decreases, margin calls relating to our repurchase agreements could increase, causing an adverse change in our liquidity position. Additionally, if one or more of our repurchase agreement counterparties chooses not to provide ongoing funding, we may be unable to replace the financing through other lenders on favorable terms or at all. As such, we provide no assurance that we will be able to roll over our repurchase agreements as they mature from time to time in the future. See Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in this Quarterly Report on Form 10-Q for further information about our liquidity and capital resource management.

Derivative financial instruments ~~used to hedge interest rate risk~~ are also subject to “margin call” risk. For example, under our interest rate swaps, typically we pay a fixed rate to the counterparties while they pay us a floating rate. If interest rates drop below the fixed rate we are paying on an interest rate swap, we may be required to post cash margin.

Prepayment Risk

When borrowers repay the principal on their residential mortgage loans before maturity or faster than their scheduled amortization, the effect is to shorten the period over which interest is earned, and therefore, reduce the yield for residential mortgage assets purchased at a premium to their then current balance, as with our portfolio of Agency RMBS. Conversely, residential mortgage assets purchased for less than their then current balance, such as our distressed residential mortgage loans, exhibit higher yields due to faster prepayments. Furthermore, actual prepayment speeds may differ from our modeled prepayment speed projections impacting the effectiveness of any hedges we have in place to mitigate financing and/or fair value risk. Generally, when market interest rates decline, borrowers have a tendency to refinance their mortgages, thereby increasing prepayments. The impact of increasing prepayment rates, whether as a result of declining interest rates, government intervention in the mortgage markets or otherwise, is particularly acute with respect to our Agency IOs. Because the value of an IO security is wholly contingent on the underlying mortgage loans having an outstanding principal balance, an unexpected increase in prepayment rates on the pool of mortgage loans underlying the IOs could significantly negatively impact the performance of our Agency IOs.

Our modeled prepayments will help determine the amount of hedging we use to off-set changes in interest rates. If actual prepayment rates are higher than modeled, the yield will be less than modeled in cases where we paid a premium for the particular residential mortgage asset. Conversely, when we have paid a premium, if actual prepayment rates experienced are slower than modeled, we would amortize the premium over a longer time period, resulting in a higher yield to maturity.

In an environment of increasing prepayment speeds, the timing difference between the actual cash receipt of principal paydowns and the announcement of the principal ~~paydown~~paydowns may result in additional margin requirements from our repurchase agreement counterparties.

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We mitigate prepayment risk by constantly evaluating our residential mortgage assets relative to prepayment speeds observed for assets with similar structures, quantities and characteristics. Furthermore, we stress-test the portfolio as to prepayment speeds and interest rate risk in order to further develop or make modifications to our hedge balances. Historically, we have not hedged 100% of our liability costs due to prepayment risk.

Credit Risk

Credit risk is the risk that we will not fully collect the principal we have invested in our credit sensitive assets, including distressed residential and other mortgage loans, non-Agency RMBS, multi-family CMBS, ~~mezzanine loans and~~ preferred equity and mezzanine loan and joint venture equity investments, due to borrower defaults. In selecting the credit sensitive assets in our portfolio, we seek to identify and invest in assets with characteristics that we believe offset or limit ~~the~~our exposure ofto borrower ~~defaults to the Company.~~defaults.

We seek to manage credit risk through our pre-acquisition or pre-funding due diligence process, and by factoring projected credit losses into the purchase price we pay or loan terms we negotiate for all of our credit sensitive assets. In general, we evaluate relative valuation, supply and demand trends, prepayment rates, delinquency and default rates, vintage of collateral and macroeconomic factors as part of this process. Nevertheless, these procedures do not guarantee unanticipated credit losses which would materially affect our operating results.

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With respect to the ~~$369.7~~$209.3 million of distressed residential mortgage loans at carrying value and $633.5 million of distressed residential mortgage loans at fair value owned by the Company ~~owned~~ at ~~September 30, 2017, the~~March 31, 2019, we purchased these mortgage loans ~~were purchased~~ at a discount to par reflecting their distressed state or perceived higher risk of default, which may include higher loan to value ratios and, in certain instances, delinquent loan payments.

As of March 31, 2019, we own $633.6 million of multi-family CMBS comprised solely of first loss POs that are backed by commercial mortgage loans on multi-family properties at a weighted average amortized purchase price of approximately 43.6% of current par. Prior to the acquisition of each of our ~~first loss~~multi-family CMBS ~~securities,~~POs, the Company completed an extensive review of the underlying loan collateral, including loan level cash flow re-underwriting, site inspections on selected properties, property specific cash flow and loss modeling, review of appraisals, property condition and environmental reports, and other credit risk ~~analyses.~~analysis. We continue to monitor credit quality on an ongoing basis using updated property level financial reports provided by borrowers and periodic site inspection of selected properties. We also reconcile on a monthly basis the actual bond distributions received against projected distributions to assure proper allocation of cash flow generated by the underlying loan pool.

As of September 30, 2017, we own $409.3 million of first loss CMBS comprised solely of first loss POs that are backed by commercial mortgage loans on multi-family properties at a weighted average amortized purchase price of approximately 41.6% of current par. Prior to the acquisition of each of our first loss CMBS securities, the Company completed an extensive review of the underlying loan collateral, including loan level cash flow re-underwriting, site inspections on selected properties, property specific cash flow and loss modeling, review of appraisals, property condition and environmental reports, and other credit risk analyses. We continue to monitor credit quality on an ongoing basis using updated property level financial reports provided by borrowers and periodic site inspection of selected properties. We also reconcile on a monthly basis the actual bond distributions received against projected distributions to assure proper allocation of cash flow generated by the underlying loan pool.

~~As of September 30, 2017,~~March 31, 2019, we own approximately ~~$186.5~~$267.5 million of preferred equity, mezzanine loan ~~preferred equity~~ and equity investments in owners of residential and multi-family properties. The performance and value of these investments depend upon the applicable operating partner’s or borrower’s ability to effectively operate the multi-family and residential properties, that serve as the underlying collateral, to produce cash flows adequate to pay distributions, interest or principal due to us. The Company monitors the performance and credit quality of the underlying assets that serve as collateral for its investments. In ~~the case~~connection with these types of ~~our~~investments by us in multi-family ~~investments,~~properties, the procedures for ongoing monitoring include financial statement analysis and regularly scheduled site inspections of portfolio properties to assess property physical condition, performance of on-site staff and competitive activity in the sub-market. We also formulate annual budgets and performance goals alongside our operating partners for use in measuring the ongoing investment performance and credit quality of our investments. Additionally, the Company's preferred equity and equity investments typically provide us with various rights and remedies to protect our investment. In March 2017, the Company exercised ~~its~~such rights and remedies with respect to Riverchase Landing and The Clusters and effectively assumed control of both entities. ~~The~~In March 2018, the Company ~~has an asset management team~~successfully resolved its investment in Riverchase Landing with the ~~experience~~sale of the entity's multi-family apartment community and ~~expertise necessary to efficiently manage Riverchase Landing and~~full redemption of the Company's preferred equity investment. In February 2019, the Company successfully resolved its investment in The Clusters ~~while working toward a successful resolution for each~~with the sale of the entity's multi-family apartment community and full redemption of the Company's preferred equity investment.

We are exposed ~~on the~~to credit risk in our investments in non-Agency RMBS ~~backed by re-performing or nonperforming loans~~ totaling ~~133.0~~$314.1 million as of September 30, 2017. Our non-Agency RMBS backed by re-performing or nonperforming loans were purchased primarily through new issue at prices at or around par and represent the senior tranches of the related securitizations.March 31, 2019. The non-Agency RMBS ~~backed by re-performing~~in our investment portfolio consist of either the senior, mezzanine or ~~nonperforming loans~~subordinate tranches in securitizations. The underlying collateral of these securitizations are ~~structured with significant~~predominantly residential credit assets, which may be exposed to various macroeconomic and asset-specific credit risks. These securities have varying levels of credit enhancement ~~(typically approximately 50%) and~~which provides some structural protection from losses within the subordinate tranches absorb all credit losses (until those tranches are extinguished) and typically receive no cash flow (interest or principal) until the senior tranche is paid off. Prior to purchase, we analyze the deal structure in order to assess the associated credit risk. Subsequent to purchase, the ongoing credit risk associated with the deal is evaluated by analyzing the extent to which actual credit losses occur that result in a reduction in the amount of subordination enjoyed by our bond. Based on the recent performanceportfolio. We undertake an in-depth assessment of the underlying collateral ~~underlying our non-Agency RMBS backed by re-performing or nonperforming loans~~ and ~~current subordination levels, we do not believe that we are currently exposed to significant risk~~securitization structure when investing in these assets, which may include modeling defaults, prepayments and loss across different scenarios.

Table of ~~credit loss on these investments.~~Contents

Fair Value Risk

Changes in interest rates also expose us to ~~fair~~market value (fair value) fluctuation on our assets, liabilities and hedges. While the fair value of the majority of our assets (when excluding all Consolidated K-Series assets other than the securities we actually own) that are measured on a recurring basis are determined using Level 2 fair values, we own certain assets, such as our ~~first loss PO~~multi-family CMBS ~~investments,~~POs and residential mortgage loans, for which fair values may not be readily available if there are no active trading markets for the instruments. In such cases, fair values would only be derived or estimated for these investments using various valuation techniques, such as computing the present value of estimated future cash flows using discount rates commensurate with the risks involved. However, the determination of estimated future cash flows is inherently subjective and imprecise. Minor changes in assumptions or estimation methodologies can have a material effect on these derived or estimated fair values. Our fair value estimates and assumptions are indicative of the interest rate environments as of ~~September 30, 2017~~March 31, 2019 and do not take into consideration the effects of subsequent interest rate fluctuations.

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We note that the fair values of our investments in derivative instruments will be sensitive to changes in market interest rates, interest rate spreads, credit spreads and other market factors. The value of these investments can vary and has varied materially from period to period.

The following describes the methods and assumptions we use in estimating fair values of our financial instruments:

Fair value estimates are made as of a specific point in time based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimate of future cash flows, future expected loss experience and other factors.

Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, the fair values used by us should not be compared to those of other companies.

The table below presents the sensitivity of the fair value and net duration changes of our portfolio as of ~~September 30, 2017,~~March 31, 2019, using a discounted cash flow simulation model assuming an instantaneous interest rate shift. Application of this method results in an estimation of the fair market value change of our assets, liabilities and hedging instruments per 100 basis point (“bp”) shift in interest rates.

The use of hedging instruments is a critical part of our interest rate risk management strategies, and the effects of these hedging instruments on the market value of the portfolio are reflected in the model's output. This analysis also takes into consideration the value of options embedded in our mortgage assets including constraints on the re-pricing of the interest rate of assets resulting from periodic and lifetime cap features, as well as prepayment options. Assets and liabilities that are not interest rate-sensitive such as cash, payment receivables, prepaid expenses, payables and accrued expenses are excluded.

Changes in assumptions including, but not limited to, volatility, mortgage and financing spreads, prepayment behavior, defaults, as well as the timing and level of interest rate changes will affect the results of the model. Therefore, actual results are likely to vary from modeled results.

					Fair Value Changes
Changes in Interest Rates	Changes in Fair Value	Net Duration	Changes in Fair Value	Net Duration
	(Amounts in thousands)
(basis points)			(dollar amounts in thousands)
+200	$(63,996)	3.4	$(171,572)	3.5
+100	$(33,642)	2.9	$(76,570)	3.1
Base		2.1		2.6
-100	$27,415	2.1	$58,453	2.1

It should be noted that the model is used as a tool to identify potential risk in a changing interest rate environment but does not include any changes in portfolio composition, financing strategies, market spreads or changes in overall market liquidity.

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Although market value sensitivity analysis is widely accepted in identifying interest rate risk, it does not take into consideration changes that may occur such as, but not limited to, changes in investment and financing strategies, changes in market spreads and changes in business volumes. Accordingly, we make extensive use of an earnings simulation model to further analyze our level of interest rate risk.

There are a number of key assumptions in our earnings simulation model. These key assumptions include changes in market conditions that affect interest rates, the pricing of our portfolio, the availability of investment assets and the availability and the cost of financing for portfolio assets. Other key assumptions made in using the simulation model include prepayment speeds and management's investment, financing and hedging strategies. The assumptions used represent our estimate of the likely effect of changes in interest rates and do not necessarily reflect actual results. The earnings simulation model takes into account periodic and lifetime caps embedded in our assets in determining the earnings at risk.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosures. An evaluation was performed under the supervision and with the participation of our management, including our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of ~~September 30, 2017.~~March 31, 2019. Based upon that evaluation, our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer~~principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September 30, 2017.~~March 31, 2019.

Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2017~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~

During the three months ended September 30, 2017, the Company repurchased 37,107 shares of common stock at an average price of $6.40 per share in connection with the satisfaction of employee tax withholding obligations upon the vesting of restricted stock awards.

The table below sets forth the information with respect to purchases made by or on the behalf of the Company or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act, as amended), of our common stock during the three months ended September 30, 2017.

Period Total # of Shares Purchased Average Price Paid Per Share Total # of Shares Purchased as Part of Publicly Announced Plan or Program Maximum # of Shares that May Yet be Purchased under Plans or Programs
July 1-31, 2017:
Employee Transaction
⁽¹⁾
—
—
N/A N/A
August 1-31, 2017:
Employee Transaction
⁽¹⁾
—
—
N/A N/A
September 1-30, 2017:
Employee Transaction
⁽¹⁾
37,107
$ 6.40
N/A N/A
Total Employee Transactions 37,107
$ 6.40
N/A N/A


⁽¹⁾	~~The Company's 2010 Plan provides that the value of the shares forfeited be based on the price of its common stock on the date the relevant shares vest.~~

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Item 6. Exhibits

EXHIBIT INDEX



Exhibit		Description

2.1		Membership ~~Interest~~ Purchase Agreement, by and among Donlon Family LLC, JMP Investment Holdings LLC, Hypotheca Capital, LLC, RiverBanc LLC and ~~New York Mortgage Trust, Inc.,~~the Company, dated May 3, 2016 (Incorporated by reference to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on May 5, 2016).

3.1		Articles of Amendment and Restatement of ~~New York Mortgage Trust, Inc.,~~the Company, as amended (Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 10, 2014).

3.2		Amended and Restated Bylaws of ~~New York Mortgage Trust, Inc., as amended (Incorporated by reference to Exhibit 3.2 to~~ the ~~Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 4, 2011).~~Company.

3.3		Articles Supplementary designating the Company’s 7.75% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) (Incorporated by reference to Exhibit 3.3 of the Company’s Registration Statement on Form 8-A as filed with the Securities and Exchange Commission on May 31, 2013).

3.4		Articles Supplementary classifying and designating 2,550,000 additional shares of the ~~Company’s~~ Series B Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 20, 2015).

3.5		Articles Supplementary classifying and designating the Company's 7.875% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) (Incorporated by reference to Exhibit 3.5 of the Company’s Registration Statement on Form 8-A as filed with the Securities and Exchange Commission on April 21, 2015).

3.6		Articles Supplementary classifying and designating the Company's 8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series D Preferred Stock”) (Incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 10, 2017).

3.7		Articles Supplementary classifying and designating 2,460,000 additional shares of the Series C Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2019).

3.8		Articles Supplementary classifying and designating 2,650,000 additional shares of the Series D Preferred Stock (Incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2019).

4.1		Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-11 as(Registration No. 333-111668) filed with the Securities and Exchange Commission ~~(Registration No. 333-111668), effective~~on June ~~23,~~18, 2004).

4.2		Form of Certificate representing the Series B Preferred Stock Certificate (Incorporated by reference to Exhibit 3.4 of the Company’s Registration Statement on Form 8-A as filed with the Securities and Exchange Commission on May 31, 2013).

4.3		Form of Certificate representing the Series C Preferred Stock (Incorporated by reference to Exhibit 3.6 of the Company’s Registration Statement on Form 8-A as filed with the Securities and Exchange Commission on April 21, 2015).

~~4.4(a)~~4.4		~~Junior Subordinated Indenture between The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, as trustee, dated September 1, 2005~~Form of Certificate representing the Series D Preferred Stock (Incorporated by reference to Exhibit ~~4.1~~3.7 to the Company’s ~~Current Report~~Registration Statement on Form ~~8-K as~~8-A filed with the Securities and Exchange Commission on ~~September 6, 2005)~~October 10, 2017).

~~4.4(b)~~		Amended and Restated Trust Agreement among The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, as Property Trustee, Chase Bank USA, National Association, as Delaware Trustee, and the Administrative Trustees named therein, dated as of September 1, 2005 (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 6, 2005).

~~4.4(c)~~		Parent Guarantee Agreement between New York Mortgage Trust, Inc. and JPMorgan Chase Bank, National Association, as guarantee trustee, dated September 1, 2005 (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on September 6, 2005).

~~102~~

~~Table of Contents~~



~~4.5(a)~~		Junior Subordinated Indenture between The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, as trustee, dated March 15, 2005 (Incorporated by reference to Exhibit 4.3(a) to the Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 9, 2012).

~~4.5(b)~~		Parent Guarantee Agreement between New York Mortgage Trust, Inc. and JPMorgan Chase Bank, National Association, as guarantee trustee, dated March 15, 2005 (Incorporated by reference to Exhibit 4.3(b) to the Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 9, 2012).

~~4.6~~4.5		Indenture, dated April 15, 2016, by and between NYMT Residential 2016-RP1, LLC and U.S. Bank National Association (Incorporated by reference to Exhibit 4.1 to the ~~Company's~~Company’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 19, ~~2016.)~~2016).

Table of Contents




~~4.7~~4.6		Indenture, dated January 23, 2017, between the Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).).

~~4.8~~4.7		First Supplemental Indenture, dated January 23, 2017, between the Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

~~4.9~~4.8		Form of 6.25% Senior Convertible ~~Notes~~Note Due 2022 of the Company (Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

		Certain instruments defining the rights of holders of long-term debt securities of the ~~Registrant~~Company and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The ~~Registrant~~Company hereby undertakes to furnish to the ~~SEC,~~Securities and Exchange Commission, upon request, copies of any such instruments.

10.1		The Company's Amended and Restated 2019 Annual Incentive Plan.

10.2		Form of 2019 Performance Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2019).

10.3		Equity Distribution Agreement, dated ~~August 10, 2017,~~March 29, 2019, by and between ~~New York Mortgage Trust, Inc.~~the Company and ~~Credit Suisse Securities (USA)~~JonesTrading Institutional Services LLC (Incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on ~~August 11, 2017).~~

~~10.2~~		Separation Agreement, dated September 18, 2017, between New York Mortgage Trust, Inc. and Kevin Donlon (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 19, 2017)March 29, 2019).



~~12.1~~		~~Statement re: Computation of Ratios.~~

31.1		Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 ~~Certification~~ of ~~Chief Executive Officer.~~the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 ~~Certification~~ of ~~Chief Financial Officer.~~the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 ~~Certification~~ of ~~Chief Executive Officer and Chief Financial Officer.~~the Sarbanes-Oxley Act of 2002. *

101.INS		XBRL Instance Document **

101.SCH		Taxonomy Extension Schema Document **

101.CAL		Taxonomy Extension Calculation Linkbase Document **

101.DEF XBRL		Taxonomy Extension Definition Linkbase Document **

101.LAB		Taxonomy Extension Label Linkbase Document **

101.PRE		Taxonomy Extension ~~Label~~Presentation Linkbase Document **

~~103~~

~~Table of Contents~~


*	Furnished herewith. Such certification shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016;~~2018; (ii) Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016;~~2018; (iii) Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016;~~2018; (iv) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the ~~nine~~three months ended ~~September 30, 2017;~~March 31, 2019; (v) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016;~~2018; and (vi) Notes to Condensed Consolidated Financial Statements.

~~104~~96

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the ~~registrant~~Registrant has duly caused this report to be signed on its behalf by the ~~undersigned~~undersigned. thereunto duly authorized.



		NEW YORK MORTGAGE TRUST, INC.

Date: ~~November~~	May 7, ~~2017~~2019	By:	/s/ Steven R. Mumma
				Steven R. Mumma
				Chairman of the Board and Chief Executive Officer
				(Principal Executive Officer)



Date: ~~November~~	May 7, ~~2017~~2019	By:	/s/ Kristine R. ~~Nario~~Nario-Eng
				Kristine R. ~~Nario~~Nario-Eng
				Chief Financial Officer
				(Principal Financial and Accounting Officer)

~~105~~

Table of Contents

EXHIBIT INDEX



Exhibit		Description

2.1		Membership ~~Interest~~ Purchase Agreement, by and among Donlon Family LLC, JMP Investment Holdings LLC, Hypotheca Capital, LLC, RiverBanc LLC and ~~New York Mortgage Trust, Inc.,~~the Company, dated May 3, 2016 (Incorporated by reference to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on May 5, 2016).

3.1		Articles of Amendment and Restatement of ~~New York Mortgage Trust, Inc.,~~the Company, as amended (Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 10, 2014).

3.2		Amended and Restated Bylaws of ~~New York Mortgage Trust, Inc., as amended (Incorporated by reference to Exhibit 3.2 to~~ the ~~Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 4, 2011).~~Company.

3.3		Articles Supplementary designating the Company’s 7.75% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) (Incorporated by reference to Exhibit 3.3 ofto the Company’s Registration Statement on Form 8-A as filed with the Securities and Exchange Commission on May 31, 2013).

3.4		Articles Supplementary classifying and designating 2,550,000 additional shares of the ~~Company’s~~ Series B Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 20, 2015).

3.5		Articles Supplementary classifying and designating the Company's 7.875% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) (Incorporated by reference to Exhibit 3.5 of the Company’s Registration Statement on Form 8-A as filed with the Securities and Exchange Commission on April 21, 2015).

3.6		Articles Supplementary classifying and designating the Company's 8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series D Preferred Stock”) (Incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 10, 2017).

3.7		Articles Supplementary classifying and designating 2,460,000 additional shares of the Series C Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2019).

3.8		Articles Supplementary classifying and designating 2,650,000 additional shares of the Series D Preferred Stock (Incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2019).

4.1		Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-11 as(Registration No. 333-111668) filed with the Securities and Exchange Commission ~~(Registration No. 333-111668), effective~~on June ~~23,~~18, 2004).

4.2		Form of Certificate representing the Series B Preferred Stock Certificate (Incorporated by reference to Exhibit 3.4 of the Company’s Registration Statement on Form 8-A as filed with the Securities and Exchange Commission on May 31, 2013).

4.3		Form of Certificate representing the Series C Preferred Stock (Incorporated by reference to Exhibit 3.6 of the Company’s Registration Statement on Form 8-A as filed with the Securities and Exchange Commission on April 21, 2015).

~~4.4(a)~~4.4		~~Junior Subordinated Indenture between The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, as trustee, dated September 1, 2005~~Form of Certificate representing the Series D Preferred Stock (Incorporated by reference to Exhibit ~~4.1~~3.7 to the Company’s ~~Current Report~~Registration Statement on Form ~~8-K as~~8-A filed with the Securities and Exchange Commission on ~~September 6, 2005)~~October 10, 2017).

~~4.4(b)~~		Amended and Restated Trust Agreement among The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, as Property Trustee, Chase Bank USA, National Association, as Delaware Trustee, and the Administrative Trustees named therein, dated as of September 1, 2005 (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 6, 2005).

~~4.4(c)~~		Parent Guarantee Agreement between New York Mortgage Trust, Inc. and JPMorgan Chase Bank, National Association, as guarantee trustee, dated September 1, 2005 (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on September 6, 2005).

~~4.5(a)~~		Junior Subordinated Indenture between The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, as trustee, dated March 15, 2005 (Incorporated by reference to Exhibit 4.3(a) to the Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 9, 2012).

~~106~~

~~Table of Contents~~



~~4.5(b)~~		Parent Guarantee Agreement between New York Mortgage Trust, Inc. and JPMorgan Chase Bank, National Association, as guarantee trustee, dated March 15, 2005 (Incorporated by reference to Exhibit 4.3(b) to the Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 9, 2012).

~~4.6~~4.5		Indenture, dated April 15, 2016, by and between NYMT Residential 2016-RP1, LLC and U.S. Bank National Association (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 19, ~~2016.)~~2016).

Table of Contents



~~4.7~~4.6		Indenture, dated January 23, 2017, between the Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

~~4.8~~4.7		First Supplemental Indenture, dated January 23, 2017, between the Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

~~4.9~~4.8		Form of 6.25% Senior Convertible ~~Notes~~Note Due 2022 of the Company (Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

		Certain instruments defining the rights of holders of long-term debt securities of the ~~Registrant~~Company and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The ~~Registrant~~Company hereby undertakes to furnish to the ~~SEC,~~Securities Exchange Commission, upon request, copies of any such instruments.


10.1		The Company's Amended and Restated 2019 Annual Incentive Plan.

10.2		Form of 2019 Performance Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2019).

10.3		Equity Distribution Agreement, dated ~~August 10, 2017,~~March 29, 2019, by and between ~~New York Mortgage Trust, Inc.~~the Company and ~~Credit Suisse Securities (USA)~~JonesTrading Institutional Services LLC (Incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on ~~August 11, 2017)~~March 29, 2019).

~~10.2~~		Separation Agreement, dated September 18, 2017, between New York Mortgage Trust, Inc. and Kevin Donlon (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 19, 2017).



~~12.1~~		~~Statement re: Computation of Ratios.~~

31.1		Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 ~~Certification~~ of ~~Chief Executive Officer.~~the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 ~~Certification~~ of ~~Chief Financial Officer.~~the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 ~~Certification~~ of ~~Chief Executive Officer and Chief Financial Officer.~~the Sarbanes-Oxley Act of 2002. *

101.INS		XBRL Instance Document **

101.SCH		Taxonomy Extension Schema Document **

101.CAL		Taxonomy Extension Calculation Linkbase Document **

101.DEF XBRL		Taxonomy Extension Definition Linkbase Document **

101.LAB		Taxonomy Extension Label Linkbase Document **

101.PRE		Taxonomy Extension ~~Label~~Presentation Linkbase Document **


*	Furnished herewith. Such certification shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016;~~2018; (ii) Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016;~~2018; (iii) Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018; (iv) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the ~~nine~~three months ended ~~September 30, 2017;~~March 31, 2019; (v) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016;~~2018; and (vi) Notes to Condensed Consolidated Financial Statements.

~~107~~99



	September 30, 2017								December 31, 2016
	Less than 6 months		6 to 24 months		More than 24 months		Total		Less than 6 months		6 to 24 months		More than 24 months		Total
Agency RMBS	$	36,940	$	23,332	$	354,760	$	415,032	$	53,043	$	27,272	$	446,048	$	526,363
Non-Agency RMBS	6,205		—		126,817		133,022		50,080		—		113,204		163,284
U.S. Treasury securities	—		—		2,924		2,924		—		—		2,887		2,887
CMBS	76,560		—		46,623		123,183		82,545		—		43,897		126,442
Total investment securities available for sale	$	119,705	$	23,332	$	531,124	$	674,161	$	185,668	$	27,272	$	606,036	$	818,976



	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



Cash	$	112
Operating real estate ⁽¹⁾	62,322
Lease intangibles ⁽¹⁾	5,340
Receivables and other assets	2,260
Total assets	70,034

Mortgages payable	51,570
Accrued expenses and other liabilities	1,519
Total liabilities	53,089

Non-controlling interest ⁽²⁾	4,462
Net assets consolidated	$	12,483



	Multi-family CMBS Re-securitization ⁽¹⁾		Distressed Residential Mortgage Loan Securitizations
Principal Amount at September 30, 2017	$	33,399	$	70,374
Principal Amount at December 31, 2016	$	33,553	$	132,319
Carrying Value at September 30, 2017 ⁽²⁾	$	28,946	$	69,425
Carrying Value at December 31, 2016 ⁽²⁾	$	28,332	$	130,535
Pass-through rate of Notes issued	5.35%		4.00%



	Notional Amount For the Nine Months Ended September 30, 2016
Derivatives Not Designated as Hedging Instruments	December 31, 2015			Additions		Settlement, Expiration or Exercise			September 30, 2016
TBA securities	$	222,000		$	2,925,000	$	(2,866,000	)	$	281,000
U.S. Treasury futures	—			189,800		(146,400		)	43,400
Interest rate swap futures	(137,200		)	718,700		(700,300		)	(118,800		)
Eurodollar futures	(2,769,000		)	4,134,000		(4,838,000		)	(3,473,000		)
Options on U.S. Treasury futures	28,000			91,000		(114,000		)	5,000
Swaptions	159,000			—		(5,000		)	154,000
Interest rate swaps	10,000			5,000		—			15,000



Derivatives Designated as Hedging Instruments	Balance Sheet Location	Total Notional Amount		September 30, 2017		December 31, 2016
Interest rate swaps	Derivative asset	$	80,000	$	18	$	—
Interest rate swaps	Derivative asset	65,000		—		108
Interest rate swaps	Derivative liabilities	150,000		—		6



	September 30, 2017						December 31, 2016
	Outstanding Financing Arrangements		Fair Value of Collateral Pledged		Amortized Cost of Collateral Pledged		Outstanding Financing Arrangements		Fair Value of Collateral Pledged		Amortized Cost of Collateral Pledged
Agency ARMs	$	80,327	$	85,117	$	85,990	$	102,088	$	109,552	$	110,903
Agency Fixed Rate	248,936		261,450		270,587		289,619		308,411		318,544
Agency IOs/U.S. Treasury Securities	26,048		36,702		47,913		60,862		82,153		93,819
Non Agency	48,773		64,917		63,792		113,749		150,944		149,969
CMBS ⁽¹⁾	204,220		283,669		221,440		206,824		294,083		216,092
Balance at end of the period	$	608,304	$	731,855	$	689,722	$	773,142	$	945,143	$	889,327



	Assumption/Origination Date	Mortgage Note Amount as of September 30, 2017		Maturity Date	Interest Rate		Net Deferred Finance Costs
Riverchase Landing	10/2/2015 ⁽¹⁾	$	23,674	11/1/2022	3.88	%	$	194
The Clusters	6/30/2014	$	27,917	7/6/2024	4.49	%	$	68
KRVI	12/16/2016	$	6,013	12/16/2019	6.00	%	$	—



Cash ⁽¹⁾	$	29,073
Contingent consideration	3,800
Fair value of previously held membership interests	20,608
Total consideration transferred	$	53,481



Cash	$	4,325
Investment in unconsolidated entities	52,176
Mezzanine loan and preferred equity investments	23,638
Real estate under development ⁽¹⁾	14,922
Receivables and other assets	911
Intangible assets ⁽¹⁾	3,490
Total identifiable assets acquired	99,462

Construction loan payable ⁽²⁾	8,499
Accrued expenses and other liabilities	2,864
Total liabilities assumed	11,363

Preferred equity ⁽³⁾	56,697

Net identifiable assets acquired	31,402

Goodwill ⁽⁴⁾	25,222
Gain on bargain purchase ⁽⁵⁾	(65		)
Non-controlling interest ⁽⁶⁾	(3,078		)
Net assets acquired	$	53,481



	For the Nine Months Ended September 30,
	2016
Revenue	$	272,074
Net income attributable to Company's common stockholders	$	42,077

Basic pro forma earnings per share	$	0.38
Diluted pro forma earnings per share	$	0.38



Quarter Ended	Agency ARMs		Agency Fixed-Rate RMBS		Agency IOs		Residential Securitizations		Total Weighted Average
September 30, 2017	9.4	%	12.8	%	17.4	%	18.2	%	14.9	%
June 30, 2017	16.5	%	9.6	%	17.5	%	16.8	%	14.7	%
March 31, 2017	8.3	%	10.6	%	15.9	%	5.1	%	12.6	%
December 31, 2016	21.7	%	12.3	%	19.4	%	11.1	%	16.9	%
September 30, 2016	20.7	%	10.0	%	18.2	%	15.9	%	16.1	%
June 30, 2016	17.6	%	10.2	%	15.6	%	17.8	%	14.6	%
March 31, 2016	13.5	%	7.9	%	14.7	%	14.8	%	12.7	%
December 31, 2015	16.9	%	8.5	%	14.6	%	31.2	%	14.7	%
September 30, 2015	18.6	%	10.5	%	18.0	%	8.9	%	15.1	%



	Principal			Premium			Allowance for Loan Losses			Net Carrying Value
Balance, January 1, 2017	$	98,303		$	623		$	(3,782	)	$	95,144
Principal repayments	(14,190		)	—			—			(14,190		)
Provision for loan loss	—			—			(306		)	(306		)
Transfer to real estate owned	(1,045		)	—			303			(742		)
Charge-Offs	—			—			60			60
Amortization of premium	—			(91		)	—			(91		)
Balance, September 30, 2017	$	83,068		$	532		$	(3,725	)	$	79,875



	Number of Loans	Unpaid Principal		Fair Value ⁽¹⁾
September 30, 2017	775	$	73,546	$	69,512
December 31, 2016	259	17,540		17,769



Period		Total # of Shares Purchased	Average Price Paid Per Share		Total # of Shares Purchased as Part of Publicly Announced Plan or Program	Maximum # of Shares that May Yet be Purchased under Plans or Programs
July 1-31, 2017:
Employee Transaction	⁽¹⁾	—	—		N/A	N/A
August 1-31, 2017:
Employee Transaction	⁽¹⁾	—	—		N/A	N/A
September 1-30, 2017:
Employee Transaction	⁽¹⁾	37,107	$	6.40	N/A	N/A
Total Employee Transactions		37,107	$	6.40	N/A	N/A