0001273685 us-gaap:PreferredStockMember nymt:PreferredEquityDistributionAgreementMember 2019-06-30

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~~June 30, ~~2018~~

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 York10016

(Address of Principal Executive Office) (Zip Code)

~~(212)~~ (212) 792-0107

(Registrant’s Telephone Number, Including Area Code)

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,	NYMTP	NASDAQ	Stock Market
par value $0.01 per share, $25.00 Liquidation Preference	NYMTP	NASDAQ	Stock Market
7.875% Series C Cumulative Redeemable Preferred Stock,	NYMTO	NASDAQ	Stock Market
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,	NYMTN	NASDAQ	Stock Market
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~~August 6, ~~2018~~2019 was ~~141,214,528.~~233,872,614.

Table of Contents

NEW YORK MORTGAGE TRUST, INC.

FORM 10-Q



PART I. Financial Information
	Item 1. Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 (Unaudited) and December 31, ~~2017~~2018	34
	Unaudited Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	45
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~	5
	~~Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30,~~ 2018	6
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018	7
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~	7
	~~Unaudited Notes to the Condensed Consolidated Financial Statements~~2018	9
	Unaudited Notes to the Condensed Consolidated Financial Statements	11
	Note 1. Organization	11
	Note 2. Summary of Significant Accounting Policies	12
	Note 3. Investment Securities Available For Sale	15
	Note 4. Distressed and Other Residential Mortgage Loans, At Fair Value	18
	Note 5. Distressed and Other Residential Mortgage Loans, Net	19
	Note 6. Consolidated K-Series	22
	Note 7. Investments in Unconsolidated Entities	24
	Note 8. Preferred Equity and Mezzanine Loan Investments	26
	Note 9. Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)	27
	Note 10. Real Estate Held for Sale in Consolidated VIEs	32
	Note 11. Derivative Instruments and Hedging Activities	33
	Note 12. Repurchase Agreements	36
	Note 13. Residential Collateralized Debt Obligations	38
	Note 14. Debt	39
	Note 15. Commitments and Contingencies	41
	Note 16. Fair Value of Financial Instruments	42
	Note 17. Stockholders' Equity	49
	Note 18. Earnings Per Share	52
	Note 19. Stock Based Compensation	53
	Note 20. Income Taxes	56
	Note 21. Subsequent Events	58
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	5859
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	9091
	Item 4. Controls and Procedures	9596
PART II. OTHER INFORMATION
	Item 1A. Risk Factors	95
	~~Item 6. Exhibits~~	96
	Item 6. Exhibits	97

SIGNATURES		99

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

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 BALANCE SHEETS

(Dollar amounts in thousands, except share data)


	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
	(unaudited)						(unaudited)
ASSETS
Investment securities, available for sale, at fair value (including pledged securities of $899,065 and $1,076,187, as of September 30, 2018 and December 31, 2017, respectively, and $51,751 and $47,922 held in securitization trusts as of September 30, 2018 and December 31, 2017, respectively)	$	1,287,188		$	1,413,081
Residential mortgage loans held in securitization trusts, net	60,459			73,820
Residential mortgage loans, at fair value	181,910			87,153
Distressed residential mortgage loans, net (including $96,493 and $121,791 held in securitization trusts as of September 30, 2018 and December 31, 2017, respectively)	260,837			331,464
Investment securities, available for sale, at fair value							$	1,743,869		$	1,512,252
Distressed and other residential mortgage loans, at fair value							1,061,954			737,523
Distressed and other residential mortgage loans, net							218,094			285,261
Investments in unconsolidated entities							166,148			73,466
Preferred equity and mezzanine loan investments							191,387			165,555
Multi-family loans held in securitization trusts, at fair value	10,070,834			9,657,421			14,573,925			11,679,847
Derivative assets	8,760			10,101			14,047			10,263
Cash and cash equivalents	57,471			95,191			134,993			103,724
Investment in unconsolidated entities	43,736			51,143
Preferred equity and mezzanine loan investments	198,277			138,920
Real estate held for sale in consolidated variable interest entities	29,558			64,202			—			29,704
Goodwill	25,222			25,222			25,222			25,222
Receivables and other assets	102,659			108,567			135,845			114,821
Total Assets ⁽¹⁾	$	12,326,911		$	12,056,285		$	18,265,484		$	14,737,638
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Financing arrangements, portfolio investments	$	1,130,659		$	1,276,918
Financing arrangements, residential mortgage loans	177,226			149,063
Repurchase agreements							$	2,604,356		$	2,131,505
Residential collateralized debt obligations	56,504			70,308			45,280			53,040
Multi-family collateralized debt obligations, at fair value	9,504,313			9,189,459			13,772,726			11,022,248
Convertible notes							131,839			130,762
Subordinated debentures							45,000			45,000
Mortgages and notes payable in consolidated variable interest entities							3,986			31,227
Securitized debt	53,597			81,537			—			42,335
Mortgages and notes payable in consolidated variable interest entities	32,486			57,124
Accrued expenses and other liabilities	88,186			82,126			134,615			101,228
Subordinated debentures	45,000			45,000
Convertible notes	130,251			128,749
Total liabilities ⁽¹⁾	11,218,222			11,080,284			16,737,802			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
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
Preferred stock, $0.01 par value, 8.00% Series D Fixed-to-Floating Rate cumulative redeemable, $25 liquidation preference per share, 5,750,000 shares authorized and 5,400,000 shares issued and outstanding	130,496			130,496
Common stock, $0.01 par value, 400,000,000 shares authorized, 141,214,528 and 111,909,909 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	1,412			1,119
Preferred stock, $0.01 par value, 7.75% Series B cumulative redeemable, $25 liquidation preference per share, 6,000,000 shares authorized, 3,101,683 and 3,000,000 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively							74,854			72,397
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 as of June 30, 2019 and December 31, 2018, respectively, 3,993,866 and 3,600,000 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively							96,486			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 as of June 30, 2019 and December 31, 2018, respectively, 5,565,738 and 5,400,000 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively							134,502			130,496
Common stock, $0.01 par value, 400,000,000 shares authorized, 210,872,614 and 155,589,528 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively							2,109			1,556
Additional paid-in capital	927,585			751,155			1,337,330			1,013,391
Accumulated other comprehensive (loss) income	(35,323		)	5,553
Accumulated other comprehensive income (loss)							11,004			(22,135		)
Accumulated deficit	(75,736		)	(75,717		)	(128,207		)	(103,178		)
Company's stockholders' equity	1,107,693			971,865			1,528,078			1,179,389
Non-controlling interest in consolidated variable interest entities	996			4,136			(396		)	904
Total equity	1,108,689			976,001			1,527,682			1,180,293
Total Liabilities and Stockholders' Equity	$	12,326,911		$	12,056,285		$	18,265,484		$	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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, assets of consolidated VIEs totaled ~~$10,381,126~~$14,691,481 and ~~$10,041,468,~~$11,984,374, respectively, and the liabilities of consolidated VIEs totaled ~~$9,680,332~~$13,870,064 and ~~$9,436,421,~~$11,191,736, respectively. See Note 109for 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

(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 June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
INTEREST INCOME:
Investment securities and other	$	17,021		$	9,716		$	50,269		$	29,716
Investment securities and other interest earning assets													$	15,355		$	12,128		$	30,671		$	23,940
Distressed and other residential mortgage loans													13,598			5,104			29,489			12,645
Preferred equity and mezzanine loan investments													5,148			4,862			10,155			9,308
Multi-family loans held in securitization trusts	86,458			76,186			257,179			213,242			133,157			85,629			244,925			170,721
Residential mortgage loans	2,844			1,556			7,415			4,163
Distressed residential mortgage loans	3,926			3,924			12,000			16,627
Total interest income	110,249			91,382			326,863			263,748			167,258			107,723			315,240			216,614

INTEREST EXPENSE:
Investment securities and other	10,548			5,759			30,673			17,132
Repurchase agreements and other interest bearing liabilities													22,823			10,477			43,209			20,127
Residential collateralized debt obligations													402			475			824			886
Multi-family collateralized debt obligations													114,914			74,686			211,711			149,165
Convertible notes	2,669			2,630			7,971			7,220			2,694			2,652			5,384			5,301
Multi-family collateralized debt obligations	75,145			67,030			224,310			187,835
Residential collateralized debt obligations	462			403			1,348			978
Subordinated debentures													734			690			1,474			1,310
Securitized debt	1,110			1,651			3,684			5,937			—			1,243			742			2,574
Subordinated debentures	712			589			2,023			1,699
Total interest expense	90,646			78,062			270,009			220,801			141,567			90,223			263,344			179,363

NET INTEREST INCOME	19,603			13,320			56,854			42,947			25,691			17,500			51,896			37,251

OTHER INCOME (LOSS):
Recovery of loan losses	840			563			1,235			452			1,296			437			2,362			395
Realized gain (loss) on investment securities and related hedges, net	299			4,059			(11,778		)	3,951
Realized gain on distressed residential mortgage loans at carrying value, net	1,806			6,689			3,054			21,024
Net gain on residential mortgage loans at fair value	643			717			573			717
Unrealized gain on investment securities and related hedges, net	2,275			1,192			26,574			1,687
Realized (loss) gain on investment securities and related hedges, net													—			(8,847		)	16,801			(12,270		)
Realized gain on distressed and other residential mortgage loans at carrying value, net													2,054			2,214			4,133			1,442
Net gain (loss) on distressed and other residential mortgage loans at fair value													12,271			97			23,281			(70		)
Unrealized (loss) gain on investment securities and related hedges, net													(15,007		)	12,606			(29,593		)	24,298
Unrealized gain on multi-family loans and debt held in securitization trusts, net	12,303			2,353			31,867			5,184			5,207			12,019			14,617			19,564
Income from operating real estate and real estate held for sale in consolidated variable interest entities	1,380			2,429			4,759			4,746
Loss on extinguishment of debt													—			—			(2,857		)	—
Income from real estate held for sale in consolidated variable interest entities													—			1,253			215			3,379
Other income	4,757			6,916			8,981			12,037			2,740			228			10,465			4,223
Total other income	24,303			24,918			65,265			49,798			8,561			20,007			39,424			40,961

GENERAL, ADMINISTRATIVE AND OPERATING EXPENSES:
General and administrative expenses	6,196			4,242			16,129			14,196			9,272			5,276			17,459			9,932
Base management and incentive fees	844			1,386			2,486			4,355			543			809			1,266			1,642
Expenses related to distressed residential mortgage loans	2,117			2,225			5,531			6,682
Expenses related to operating real estate and real estate held for sale in consolidated variable interest entities	755			3,143			3,234			7,558
Expenses related to distressed and other residential mortgage loans													2,579			1,811			5,831			3,414
Expenses related to real estate held for sale in consolidated variable interest entities													—			873			482			2,479
Total general, administrative and operating expenses	9,912			10,996			27,380			32,791			12,394			8,769			25,038			17,467

INCOME FROM OPERATIONS BEFORE INCOME TAXES	33,994			27,242			94,739			59,954			21,858			28,738			66,282			60,745
Income tax (benefit) expense	(454		)	507			(547		)	2,187
Income tax benefit													(134		)	(13		)	(60		)	(92		)

NET INCOME	34,448			26,735			95,286			57,767			21,992			28,751			66,342			60,837
Net (income) loss attributable to non-controlling interest in consolidated variable interest entities	(475		)	1,110			(2,001		)	3,597
Net loss (income) attributable to non-controlling interest in consolidated variable interest entities													743			943			532			(1,526		)
NET INCOME ATTRIBUTABLE TO COMPANY	33,973			27,845			93,285			61,364			22,735			29,694			66,874			59,311
Preferred stock dividends	(5,925		)	(3,225		)	(17,775		)	(9,675		)	(6,257		)	(5,925		)	(12,182		)	(11,850		)
NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	28,048		$	24,620		$	75,510		$	51,689		$	16,478		$	23,769		$	54,692		$	47,461

Basic earnings per common share	$	0.21		$	0.22		$	0.63		$	0.46		$	0.08		$	0.21		$	0.29		$	0.42
Diluted earnings per common share	$	0.20		$	0.21		$	0.60		$	0.45		$	0.08		$	0.20		$	0.29		$	0.40
Weighted average shares outstanding-basic	132,413			111,886			119,955			111,824			200,691			115,211			187,628			113,623
Weighted average shares outstanding-diluted	152,727			131,580			140,044			129,931			202,398			135,164			209,011			133,470

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,
2018 2017 2018 2017
NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ 28,048
$ 24,620
$ 75,510
$ 51,689
OTHER COMPREHENSIVE (LOSS) INCOME
(Decrease) increase in fair value of available for sale securities (9,874 ) 4,560
(40,876 ) 11,946
Reclassification adjustment for net gain included in net income —
(3,538 ) —
(4,298 )
Decrease in fair value of derivative instruments utilized for cash flow hedges —
(176 ) —
(84 )
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME (9,874 ) 846
(40,876 ) 7,564
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ 18,174
$ 25,466
$ 34,634
$ 59,253



	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019		2018			2019			2018
NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	16,478	$	23,769		$	54,692		$	47,461
OTHER COMPREHENSIVE INCOME (LOSS)
Increase (decrease) in fair value of available for sale securities	20,092		(6,525		)	46,804			(31,003		)
Reclassification adjustment for net gain included in net income	—		—			(13,665		)	—
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	20,092		(6,525		)	33,139			(31,003		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	36,570	$	17,244		$	87,831		$	16,458

~~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 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 —
—
—
93,285
—
93,285
2,001
95,286
Common stock issuance, net 293
—
176,430
—
—
176,723
—
176,723
Dividends declared on common stock —
—
—
(75,529 ) —
(75,529 ) —
(75,529 )
Dividends declared on preferred stock —
—
—
(17,775 ) —
(17,775 ) —
(17,775 )
Decrease in fair value of available for sale securities —
—
—
—
(40,876 ) (40,876 ) —
(40,876 )
Decrease in non-controlling interest related to distributions from and de-consolidation of variable interest entities —
—
—
—
—
—
(5,141 ) (5,141 )
Balance, September 30, 2018 $ 1,412
$ 289,755
$ 927,585
$ (75,736 ) $ (35,323 ) $ 1,107,693
$ 996
$ 1,108,689

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)



For the Three Months Ended
	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, March 31, 2019	$	1,878	$	289,755	$	1,199,090	$	(102,530	)	$	(9,088	)	$	1,379,105		$	347		$	1,379,452
Net income	—		—		—		22,735			—			22,735			(743		)	21,992
Common stock issuance, net	231		—		138,240		—			—			138,471			—			138,471
Preferred stock issuance, net	—		16,087		—		—			—			16,087			—			16,087
Dividends declared on common stock	—		—		—		(42,155		)	—			(42,155		)	—			(42,155		)
Dividends declared on preferred stock	—		—		—		(6,257		)	—			(6,257		)	—			(6,257		)
Increase in fair value of available for sale securities	—		—		—		—			20,092			20,092			—			20,092
Balance, June 30, 2019	$	2,109	$	305,842	$	1,337,330	$	(128,207	)	$	11,004		$	1,528,078		$	(396	)	$	1,527,682



Balance, March 31, 2018	$	1,121	$	289,755	$	751,542	$	(74,447	)	$	(18,925	)	$	949,046		$	1,741		$	950,787
Net income	—		—		—		29,694			—			29,694			(943		)	28,751
Common stock issuance, net	122		—		74,418		—			—			74,540			—			74,540
Dividends declared on common stock	—		—		—		(24,863		)	—			(24,863		)				(24,863		)
Dividends declared on preferred stock	—		—				(5,925		)	—			(5,925		)	—			(5,925		)
Decrease in fair value of available for sale securities	—		—		—		—			(6,525		)	(6,525		)	—			(6,525		)
Decrease in non-controlling interest related to distributions from and de-consolidation of variable interest entities	—		—		—		—			—			—			(564		)	(564		)
Balance, June 30, 2018	$	1,243	$	289,755	$	825,960	$	(75,541	)	$	(25,450	)	$	1,015,967		$	234		$	1,016,201

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 CHANGES IN STOCKHOLDERS' EQUITY

(Dollar amounts in thousands)

(unaudited)



For the Six Months Ended
	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	—		—		—		66,874			—			66,874			(532		)	66,342
Common stock issuance, net	553		—		323,939		—			—			324,492			—			324,492
Preferred stock issuance, net	—		16,087		—		—			—			16,087			—			16,087
Dividends declared on common stock	—		—		—		(79,721		)	—			(79,721		)	—			(79,721		)
Dividends declared on preferred stock	—		—		—		(12,182		)	—			(12,182		)	—			(12,182		)
Reclassification adjustment for net gain included in net income	—		—		—		—			(13,665		)	(13,665		)	—			(13,665		)
Increase in fair value of available for sale securities	—		—		—		—			46,804			46,804			—			46,804
Decrease in non-controlling interest related to distributions from and de-consolidation of variable interest entities	—		—		—		—			—			—			(768		)	(768		)
Balance, June 30, 2019	$	2,109	$	305,842	$	1,337,330	$	(128,207	)	$	11,004		$	1,528,078		$	(396	)	$	1,527,682



Balance, December 31, 2017	$	1,119	$	289,755	$	751,155	$	(75,717	)	$	5,553		$	971,865		$	4,136		$	976,001
Net income	—		—		—		59,311			—			59,311			1,526			60,837
Common stock issuance, net	124		—		74,805		—			—			74,929			—			74,929
Dividends declared on common stock	—		—		—		(47,285		)	—			(47,285		)	—			(47,285		)
Dividends declared on preferred stock	—		—		—		(11,850		)	—			(11,850		)	—			(11,850		)
Decrease in fair value of available for sale securities	—		—		—		—			(31,003		)	(31,003		)	—			(31,003		)
Decrease in non-controlling interest related to distributions from and de-consolidation of variable interest entities	—		—		—		—			—			—			(5,428		)	(5,428		)
Balance, June 30, 2018	$	1,243	$	289,755	$	825,960	$	(75,541	)	$	(25,450	)	$	1,015,967		$	234		$	1,016,201

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

(Dollar amounts in thousands)

(unaudited)


	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2018			2017			2019			2018
Cash Flows from Operating Activities:
Net income	$	95,286		$	57,767		$	66,342		$	60,837
Adjustments to reconcile net income to net cash provided by operating activities:
Net (accretion) amortization	(19,109		)	2,248
Realized loss (gain) on investment securities and related hedges, net	11,778			(3,951		)
Net gain on distressed residential mortgage and residential mortgage loans	(3,627		)	(21,741		)
Unrealized gain on investment securities and related hedges, net	(26,574		)	(1,687		)
Net accretion							(21,566		)	(11,588		)
Realized (gain) loss on investment securities and related hedges, net							(16,801		)	12,270
Net gain on distressed and other residential mortgage							(27,414		)	(1,372		)
Unrealized loss (gain) on investment securities and related hedges, net							29,593			(24,298		)
Gain on sale of real estate held for sale in consolidated variable interest entities	(2,328		)	—			(1,580		)	(2,328		)
Impairment of real estate under development in consolidated variable interest entities	2,091			—			1,660			2,091
Unrealized gain on loans and debt held in multi-family securitization trusts	(31,867		)	(5,184		)
Net decrease in loans held for sale	1,492			24
Loss on extinguishment of debt							2,857			—
Unrealized gain on loans and debt held in multi-family securitization trusts, net							(14,617		)	(19,564		)
Recovery of loan losses	(1,235		)	(452		)	(2,362		)	(395		)
Income from unconsolidated entity, preferred equity and mezzanine loan investments	(24,020		)	(21,507		)	(22,292		)	(13,526		)
Distributions of income from unconsolidated entity, preferred equity and mezzanine loan investments	15,957			17,348			12,706			8,340
Amortization of stock based compensation, net	1,906			1,268			2,792			1,211
Changes in operating assets and liabilities:
Receivables and other assets	(995		)	(7,823		)	(21,763		)	610
Accrued expenses and other liabilities	326			9,875			19,410			(1,403		)
Net cash provided by operating activities	19,081			26,185			6,965			10,885

Cash Flows from Investing Activities:
Cash received from initial consolidation of variable interest entities	—			112
Net proceeds from sale of real estate in consolidated variable interest entities	33,192			—
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	26,899			100,937			56,769			26,899
Purchases of investment securities	(140,241		)	(129,923		)	(321,134		)	(60,321		)
Purchases of other assets	(131		)	(23		)	(923		)	(35		)
Capital expenditures on operating real estate and real estate held for sale in consolidated variable interest entities	(311		)	(191		)
Capital expenditures on real estate held for sale in consolidated variable interest entities							(128		)	(255		)
Funding of preferred equity, equity and mezzanine loan investments	(65,668		)	(45,101		)	(130,004		)	(45,532		)
Principal repayments received on preferred equity and mezzanine loan investments	9,543			18,947			20,416			9,122
Return of capital from unconsolidated entity investments	11,871			23,395			639			1,246
Net proceeds from other derivative instruments settled during the period	17,719			3,950
Principal repayments received on residential mortgage loans held in securitization trusts	13,367			14,190
Principal repayments and proceeds from sales and refinancing of distressed residential mortgage loans	93,153			179,108
(Net payments made on) received from other derivative instruments settled during the period							(33,377		)	13,662
Principal repayments and proceeds from sales and refinancing of distressed and other residential mortgage loans							144,228			57,903
Principal repayments received on multi-family loans held in securitization trusts	101,953			104,962			106,363			67,880
Principal paydowns on investment securities - available for sale	193,070			170,133			84,418			120,508
Proceeds from sale of real estate owned	3,183			5,656			1,266			2,136
Purchases of residential mortgage loans and distressed residential mortgage loans	(118,679		)	(81,472		)	(380,454		)	(94,075		)
Purchases of investments held in multi-family securitization trusts	(37,686		)	(65,453		)	(101,570		)	—
Net cash provided by investing activities	141,234			299,227
Net cash (used in) provided by investing activities							(549,904		)	132,330

Cash Flows from Financing Activities:
Net payments made on financing arrangements	(118,596		)	(197,590		)
Proceeds from issuance of convertible notes	—			126,995
Net proceeds from (net payments made on) repurchase agreements							471,998			(54,120		)
Common stock issuance, net	174,995			574			321,655			73,831
Preferred stock issuance, net							16,101			—
Dividends paid on common stock	(69,668		)	(71,501		)	(68,684		)	(44,805		)
Dividends paid on preferred stock	(17,835		)	(9,675		)	(11,850		)	(11,910		)
Payments made on mortgages and notes payable in consolidated variable interest entities	(25,781		)	(266		)	(36		)	(25,673		)
Proceeds from mortgages and notes payable in consolidated variable interest entities	1,130			4,425			—			1,058
Payments made on residential collateralized debt obligations	(13,859		)	(14,856		)	(7,792		)	(8,142		)
Payments made on multi-family collateralized debt obligations	(101,958		)	(104,958		)	(106,091		)	(67,886		)
Payments made on securitized debt	(29,170		)	(62,098		)
Net cash used in financing activities	(200,742		)	(328,950		)
Extinguishment of and payments made on securitized debt							(45,557		)	(21,351		)
Net cash provided by (used in) financing activities							569,744			(158,998		)

Net Decrease in Cash, Cash Equivalents and Restricted Cash	(40,427		)	(3,538		)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash							26,805			(15,783		)
Cash, Cash Equivalents and Restricted Cash - Beginning of Period	106,195			139,530			109,145			106,195
Cash, Cash Equivalents and Restricted Cash - End of Period	$	65,768		$	135,992		$	135,950		$	90,412

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)




Supplemental Disclosure:
Cash paid for interest	$	294,817	$	204,174
Cash paid for income taxes	$	21	$	1,342

Non-Cash Investment Activities:
Sales of investment securities not yet settled	$	—	$	—
Purchase of investment securities not yet settled	$	3,132	$	—
Consolidation of multi-family loans held in securitization trusts	$	2,426,210	$	—
Consolidation of multi-family collateralized debt obligations	$	2,324,639	$	—
Transfer from residential loans to real estate owned	$	2,368	$	3,558

Non-Cash Financing Activities:
Dividends declared on common stock to be paid in subsequent period	$	42,155	$	24,863
Dividends declared on preferred stock to be paid in subsequent period	$	6,257	$	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	$	134,993	$	84,717
Restricted cash included in receivables and other assets	$	957	$	5,695
Total cash, cash equivalents, and restricted cash	$	135,950	$	90,412

Supplemental Disclosure:
Cash paid for interest $ 308,346
$ 245,891
Cash paid for income taxes $ 1,711
$ 2,153
Non-Cash Investment Activities:
Sales of investment securities not yet settled $ —
$ 1,261
Purchase of investment securities not yet settled $ —
$ 181,718
Consolidation of multi-family loans held in securitization trusts $ 805,163
$ 1,537,526
Consolidation of multi-family collateralized debt obligations $ 767,477
$ 1,472,073
Transfer from residential loans to real estate owned $ 5,805
$ 6,221

Non-Cash Financing Activities:
Dividends declared on common stock to be paid in subsequent period $ 28,243
$ 22,371
Dividends declared on preferred stock to be paid in subsequent period $ 5,925
$ 3,225

Cash, Cash Equivalents and Restricted Cash Reconciliation:
Cash and cash equivalents $ 57,471
$ 101,904
Restricted cash included in receivables and other assets $ 8,297
$ 34,088
Total cash, cash equivalents, and restricted cash $ 65,768
$ 135,992

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

810

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NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~June 30, ~~2018~~2019

(unaudited)


1.	Organization

New York Mortgage Trust, Inc., together with its consolidated subsidiaries ("(“NYMT,~~" "we," "our,"~~” “we,” “our,” or the ~~“Company"~~“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. 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 portfolio includes ~~without limitation, residential mortgage loans, including distressed residential 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, ~~and~~(iv) Agency RMBS ~~consisting of fixed-rate, adjustable-rate~~ and ~~hybrid adjustable-rate RMBS.~~(v) certain mortgage-, residential housing- and other credit-related 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"~~(“TRSs”) and qualified REIT subsidiaries ~~("QRSs"~~(“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 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.

911

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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 securities;

“Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of mortgage loans issued or guaranteed by a 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 RMBS” refers to RMBS ~~backed~~that are not guaranteed by ~~prime jumbo residential mortgage loans, including performing, re-performing and non-performing mortgage loans;~~

~~"IO RMBS" refers to RMBS comprised~~any agency of ~~IOs;~~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 Agency RMBS comprised of IO RMBS;~~

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

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

“Agency 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;

“ABS” refers to debt and/or equity tranches of securitizations backed by various asset classes including, but not limited to, automobiles, aircraft, credit cards, equipment, franchises, recreational vehicles and student loans;

“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, ~~2017~~2018 has been derived from audited financial statements. The accompanying condensed consolidated balance sheet as of ~~September~~June 30, ~~2018,~~2019, the accompanying condensed consolidated statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, the accompanying condensed consolidated statements of comprehensive income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, the accompanying condensed consolidated ~~statement~~statements of changes in stockholders’ equity for the ~~nine~~three and six months ended ~~September~~June 30, 2019 and 2018 and the accompanying condensed consolidated statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~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, ~~2017,~~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 and six months ended June 30, 2019. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~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.

~~Table of Contents~~

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 ~~March 31, 2017,~~January 1, 2019, the Company ~~determined~~adopted ASC 842 using the modified retrospective transition method applied to all leases that ~~it became the primary beneficiary~~were not completed as of 200 RHC Hoover, LLC ("Riverchase Landing") and The Clusters, LLC ("The Clusters"), two VIEs that each own a multi-family apartment community and in which the Company held preferred equity investments. Accordingly,January 1, 2019. Results for reporting periods beginning 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~~or after January 1, 2019 are presented under ASC ~~805 (see Note 10). In March 2018, Riverchase Landing completed~~842, while prior period amounts are not adjusted and continue to be reported under the ~~sale of its multi-family apartment community and redeemed~~accounting standards in effect for the ~~Company's preferred equity investment. The Company de-consolidated Riverchase Landing as of the date of the sale.~~

~~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 and certain Agency ARMs and Agency fixed-rate RMBS which were transferred from our 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. As of September 30, 2018, the Company fully exited its Agency IO strategy.

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.

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.

~~Table of Contents~~

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 yield. The effective yield 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 (or interest income) recognized on these securities.

A portion of the purchase discount on the Company’s first loss PO multi-family CMBS is designated as non-accretable purchase discount or credit reserve, which is intended to partially mitigate 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.

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”. 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, the Company recognizes 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.

The Company establishes 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, management looks at the balance of any delinquent loan and compares that to the current value of the collateralizing property. Management utilizes various home valuation methodologies including appraisals, broker pricing opinions, internet-based property data services to review comparable properties in the same area or consults 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 mortgage loans, 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. Changes in fair value are recorded in current period earnings in net gain (loss) 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.

Residential mortgage loans at fair value are considered past due when they are 30 days past their contractual due date, and are placed on nonaccrual status when delinquent for more than 90 days. Interest accrued but not yet collected at the time loans are placed on nonaccrual is reversed and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. Loans are restored to accrual status only when contractually current or the collection of future payments is reasonably assured.

~~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. 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~~retrospective transition method. Operating lease right of use assets of $9.8 million 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 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.

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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).

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 of which we, or one of our "special purpose entities" ("SPEs") own the first loss POs and certain IOs and mezzanine securities and that we consolidate (the “Consolidated K-Series”). Based on a number of factors, management determined that the Company was the primary beneficiary of each VIE within the Consolidated K-Series, met the criteria for consolidation and, accordingly, has consolidated these securitizations, including their assets, liabilities, income and expenses in our financial statements. The Company has elected the fair value option on each of the assets and liabilities held within the Consolidated K-Series, which requires that changes in valuations be reflected in the Company's accompanying consolidated statements of operations. In accordance with ASC 810, the Company measures both the financial assets and financialoperating lease liabilities of a qualifying consolidated 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 multi-family 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.

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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.

~~Preferred Equity and Mezzanine Loan Investments -~~ ~~The Company invests in preferred equity of and mezzanine loans to entities that have significant real estate assets.~~

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 are 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 in the entity that owns the property.

Preferred equity and mezzanine loan investments for which the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances. 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. The Company has evaluated its preferred equity and mezzanine loan investments for accounting treatment as loans versus equity investment utilizing the guidance provided by the ADC Arrangements Subsection of ASC 310, ~~Receivables~~.

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.

~~Preferred equity and mezzanine loan 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~~”.

~~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.

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 (~~see Note 8~~).

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~~Operating Real Estate Held in Consolidated Variable Interest Entities, Net~~ – The Company recorded 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 was 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 utilized 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 considered 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 considered the value of acquired in-place leases and utilized 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, 2018.

~~Real Estate~~ - ~~Depreciation~~ – 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 Sales~~ ~~– The Company accounts for its real estate sales in accordance with ASC 360-20,~~ ~~Property, Plant and Equipment - Real Estate Sales~~. When real estate is sold, the nature of the entire real estate component being sold is considered in relation to the entire transaction to determine whether the substance of the transaction is the sale of real estate. Profit is recognized on the date of the real estate sale provided that a) a sale is consummated, b) the buyer's initial and continuing investments are adequate to demonstrate commitment to pay for the property, c) the seller's receivable is not subject to future subordination, and d) the seller has transferred to the buyer the usual risks and rewards of ownership and does not have a substantial continuing involvement with the sold property. Sales value is calculated based off of the stated sales price plus any other proceeds that are additions to the sales price subtracting any discount needed to reduce a receivable to its present value and any services the seller commits to perform without compensation. See ~~Note 11~~ ~~for further discussion regarding sales of real estate by consolidated VIEs.~~

~~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, 2018 and December 31, 2017 of $22.2$10.1 million ~~and $22.9 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 real estate 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. The Company, through one of its consolidated VIEs, recorded a $2.1 million impairment loss on real estate under development during the nine months ended September 30, 2018 which is included in other income in the Company's condensed consolidated statements of operations. $1.0 million of this impairment loss is included in net income attributable to non-controlling interest in consolidated variable interest entities for the nine months ended September 30, 2018 on the accompanying condensed consolidated statements of operations, resulting in a net loss to the Company of $1.1 million. See ~~Note 10~~ ~~for further discussion regarding impairment.~~

~~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 of $25.2 million as of September 30, 2018 and December 31, 2017 relates to the Company's multi-family investment reporting unit.

Goodwill is not amortized but 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's annual evaluation of goodwill as of October 1, 2017 indicated no impairment. Additionally, there were no indicators of impairment during the nine months ended September 30, 2018.

~~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 on a straight-line basis over their respective estimated useful lives and reviewed 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.~~

~~Receivables and Other Assets~~ ~~– Receivables and other assets~~sheets, respectively, as of September 30, 2018 and December 31, 2017 include restricted cash held by third parties of $8.3 million and $11.0 million, respectively. Interest receivable on multi-family loans held in securitization trusts is also included in the amounts of $32.5 million and $33.6 million as of September 30, 2018 and December 31, 2017, 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 repurchase agreements are treated as collateralized financing transactions and carried at the contractual amounts, as specified in the respective agreements. Borrowings under repurchase agreements generally bear interest rates of a specified margin over LIBOR.

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~~Financing Arrangements, Residential Mortgage Loans~~ ~~– The Company finances a portion of its residential mortgage loans, including its distressed residential mortgage loans, through repurchase agreements (see Note 14~~). The borrowing under the repurchase agreements bear an interest rate of a specified margin over one-month LIBOR. The repurchase agreements are treated as collateralized financing transactions and carried at the contractual amounts, as specified in the respective agreements. 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 $0.2 million as of September 30, 2018 and $0.7 million as of December 31, 2017. 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.

~~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”)~~ – The Consolidated K-Series including their debt are 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 the Residential CDOs and Multi-Family CDOs collectively 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 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 $0.4 million and $0.7 million as of September 30, 2018 and December 31, 2017, 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 (the "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 $7.7 million and $9.3 million as of September 30, 2018 and December 31, 2017, respectively.

~~Derivative Financial Instruments~~ – In accordance with ASC 815, the Company records derivative financial instruments on its condensed consolidated balance sheets 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.

The Company uses interest rate swaps to hedge the variable cash flows associated with our 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. At the inception of an interest rate swap agreement, the Company determines whether the instrument will be part of a qualifying hedge accounting relationship or whether the Company will account for the contract as a trading instrument. The Company has elected to treat all current interest swaps as trading instruments due to volatility and difficulty in effectively matching cash flows. Changes in fair value for interest rate swaps designated as trading instruments are reported in the condensed consolidated statements of operations as unrealized gain (loss) on investment securities and related hedges.

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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. 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 increase of or reduction to the carrying value of the interest rate swap asset or liability on the Company's consolidated balance sheets.

~~Manager Compensation~~ – We are a party to an investment management agreement with Headlands Asset Management LLC (“Headlands”) pursuant to which Headlands provides investment management services with respect to our investments in certain distressed residential mortgage loans. From 2011 to December 2017, we were a party to an investment management agreement with the Midway Group, LP ("Midway"), pursuant to which Midway provided 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. On August 2, 2018, the Company provided Headlands with written notice that it will not renew its management agreement at the end of the current term, which is set to expire on June 30, 2019. The ~~Midway agreement was terminated effective December 31, 2017.~~

~~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)~~adoption of ASC 842 did not have a material effect on ~~its available for sale securities and its derivative hedging instruments, comprised~~our results of interest rate swaps until October 2017 (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/decreased for net loss/income 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 Planoperations for the ~~nine~~three and six months ended ~~September~~June 30, ~~2018 and 2017.~~2019.

~~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 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 shareholder 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.

During the nine months ended September 30, 2018, the Company granted Performance Stock Units ("PSUs") to the Chief Executive Officer, Chief Financial Officer and certain other employees. The awards were issued pursuant to and are consistent with the terms and conditions of the Company’s 2017 Equity Incentive Plan (the “2017 Plan”). The PSUs are subject to performance-based vesting under the 2017 Plan pursuant to a form of PSU award agreement (the "PSU Agreement"). Vesting of the PSUs will occur after a three-year period based on the Company's relative TSR percentile ranking as compared to an identified performance peer group. 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 PSUs 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.

~~Table of Contents~~

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 in our condensed consolidated statements of operations.

~~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 mortgage-related and residential housing-related 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 created a new, principle-based revenue recognition framework that affects nearly every revenue-generating entity. ASU 2014-09 also created 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.

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 preferred equity and mezzanine loan 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~~). In adopting the ASU effective January 1, 2018, the Company evaluated the applicability of this ASU with respect to its investment portfolio and, considering the scope exceptions listed above, the adoption of this ASU did not have a material impact on the Company's financial condition or results of operations.

~~Table of Contents~~

Financial Instruments — Credit Losses (Topic 326)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — 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.~~deterioration and available-for-sale debt securities, which will require the recognition of credit losses through a valuation allowance when fair value is less than amortized cost. 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 is permitted beginning in 2019.

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In May 2019, the FASB issued ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief ("ASU 2019-05"). The amendments allow an entity to make an irrevocable one-time election to measure financial assets accounted for under ASC 326-20, Financial Instruments—Credit Losses— Measured at Amortized Cost, using the fair value option upon adoption of ASU 2016-13. For the Company, the amendments are effective upon adoption of ASU 2016-13. The amendments in ASU 2019-05 should be applied on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance as of the ~~fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 is permitted.~~date that an entity adopted the amendments in ASU 2016-13. The Company is currently assessing the impact of this guidance in conjunction with ASU 2016-13 as the ~~ASU~~ASUs will ~~have an effect on~~affect the Company's ~~estimation of credit losses on~~accounting for distressed and other residential mortgage loans, ~~residential mortgage loans held in securitization trusts, residential mortgage loans,~~net and preferred equity and mezzanine loan investments that are accounted for as loans. It is the Company's intention to elect fair value option for impacted assets but the Company will continue to evaluate the new standards and any changes in our business or additional amendments to these standards could change our intention to elect fair value option.

Fair Value Measurement — (Topic 820)

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). These amendments add, modify, or remove disclosure requirements regarding the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, narrative descriptions of measurement uncertainty, and the 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, 2019. Early adoption is permitted upon issuance of this update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company anticipates the implementation of this guidance as of the effective date will result in additional and modified disclosures with respect to its Level 3 fair value measurements.

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3.	Investment Securities Available For Sale

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


	September 30, 2018										December 31, 2017									June 30, 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
Agency ARMs
Freddie Mac	$	27,479	$	—	$	(1,238	)	$	26,241		$	33,623	$	16	$	(852	)	$	32,787	$	24,618	$	—	$	(733	)	$	23,885	$	26,338		$	—	$	(1,052	)	$	25,286
Fannie Mae	46,456		9		(1,705		)	44,760			54,958		6		(1,236		)	53,728		36,379		20		(895		)	35,504		43,984			8		(1,384		)	42,608
Ginnie Mae	3,855		—		(136		)	3,719			4,750		—		(193		)	4,557		3,233		—		(103		)	3,130		3,627			—		(127		)	3,500
Total Agency ARMs(1)	77,790		9		(3,079		)	74,720			93,331		22		(2,281		)	91,072		64,230		20		(1,731		)	62,519		73,949			8		(2,563		)	71,394
Agency Fixed- Rate
Freddie Mac	89,023		—		(3,806		)	85,217			20,804		—		(736		)	20,068		82,165		650		(502		)	82,313		87,018			—		(2,526		)	84,492
Fannie Mae	942,868		—		(47,372		)	895,496			1,038,363		669		(12,174		)	1,026,858		856,313		1,080		(8,025		)	849,368		915,039			—		(33,195		)	881,844
Ginnie Mae	—		—		—			—			365		—		(6		)	359
Total Agency Fixed-Rate	1,031,891		—		(51,178		)	980,713			1,059,532		669		(12,916		)	1,047,285		938,478		1,730		(8,527		)	931,681		1,002,057			—		(35,721		)	966,336
Agency IOs
Freddie Mac	—		—		—			—			8,436		19		(2,756		)	5,699
Fannie Mae	—		—		—			—			11,310		22		(2,989		)	8,343
Ginnie Mae	—		—		—			—			21,621		230		(4,714		)	17,137
Total Agency IOs	—		—		—			—			41,367		271		(10,459		)	31,179

Total Agency RMBS	1,109,681		9		(54,257		)	1,055,433			1,194,230		962		(25,656		)	1,169,536		1,002,708		1,750		(10,258		)	994,200		1,076,006			8		(38,284		)	1,037,730
Non-Agency RMBS	98,301		58		(115		)	98,244			100,291		1,852		(18		)	102,125
CMBS ⁽¹⁾	114,529		18,982		—			133,511			123,203		18,217		—			141,420
Non-Agency RMBS ⁽¹⁾⁽²⁾																				428,443		4,719		(322		)	432,840		215,337			166		(1,466		)	214,037
CMBS ⁽¹⁾ ⁽³⁾																				276,947		15,300		(157		)	292,090		243,046			17,815		(376		)	260,485
ABS																				24,768		—		(29		)	24,739		—			—		—			—
Total investment securities available for sale	$	1,322,511	$	19,049	$	(54,372	)	$	1,287,188		$	1,417,724	$	21,031	$	(25,674	)	$	1,413,081	$	1,732,866	$	21,769	$	(10,766	)	$	1,743,869	$	1,534,389		$	17,989	$	(40,126	)	$	1,512,252


⁽¹⁾	For the Company's Agency ARMs, non-Agency RMBS, and CMBS securities with stated reset periods, the weighted average reset periods are 28 months, five months, and one month, respectively.


⁽²⁾	Includes $3.1 million in non-Agency RMBS purchased not yet settled, which are included in accrued expenses and other liabilities on the Company's condensed consolidated balance sheet.


⁽³⁾	Included in CMBS is ~~$51.8 million and $47.9~~$52.7 million of ~~investment securities available for sale~~first loss POs and certain IOs held in securitization trusts as of ~~September 30, 2018 and~~ December 31, ~~2017, respectively.~~2018.

Realized Gain or Loss Activity

The Company did not sell investment securities available for sale during the three months ended ~~September~~June 30, ~~2018.~~2019. During the ~~nine~~six months ended ~~September~~June 30, 2019, the Company received total proceeds of approximately $56.8 million from the sale of investment securities available for sale, realizing a net gain of approximately $16.8 million. During the three and six months ended June 30, 2018, the Company received total proceeds of approximately $16.8 million and $26.9 million, respectively, from the sale of investment securities available for sale, realizing a net loss of approximately ~~$12.3 million. During the three and nine months ended September 30, 2017, the Company received total proceeds of approximately $49.5~~$8.8 million and ~~$102.2 million, respectively, from the sale of investment securities available for sale, realizing a net gain of approximately $3.0 million and $0.7~~$12.3 million, respectively.

Weighted Average Life

Actual maturities of our available for sale securities are generally shorter than stated contractual maturities (with maturities up to 3040 years), as they are affected by periodic payments and prepayments of principal on the underlying mortgages. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~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 ~~5.7~~10.2 years and ~~7.1~~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~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollar amounts in thousands):



Weighted Average Life	June 30, 2019		December 31, 2018
0 to 5 years	$	670,546	$	456,947
Over 5 to 10 years	733,319		1,043,369
10+ years	340,004		11,936
Total	$	1,743,869	$	1,512,252

Weighted Average Life September 30, 2018 December 31, 2017
0 to 5 years $ 365,791
$ 426,061
Over 5 to 10 years 917,955
970,336
10+ years 3,442
16,684
Total $ 1,287,188
$ 1,413,081

~~Portfolio Interest Reset Periods~~

~~The following tables set forth the stated reset periods of our investment securities available for sale at September 30, 2018 and December 31, 2017 at carrying value (dollar amounts in thousands):~~

September 30, 2018 December 31, 2017
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 $ 6,770
$ 16,043
$ 1,032,620
$ 1,055,433
$ 26,876
$ 24,726
$ 1,117,934
$ 1,169,536
Non-Agency RMBS 50,000
13,845
34,399
98,244
84,461
—
17,664
102,125
CMBS —
—
133,511
133,511
70,791
—
70,629
141,420
Total investment securities available for sale $ 56,770
$ 29,888
$ 1,200,530
$ 1,287,188
$ 182,128
$ 24,726
$ 1,206,227
$ 1,413,081

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~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollar amounts in thousands):



June 30, 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
Agency RMBS	$	—	$	—		$	617,454	$	(10,258	)	$	617,454	$	(10,258	)
Non-Agency RMBS	36,903		(309		)	133		(13		)	37,036		(322		)
CMBS	31,310		(157		)	—		—			31,310		(157		)
ABS	24,739		(29		)	—		—			24,739		(29		)
Total investment securities available for sale	$	92,952	$	(495	)	$	617,587	$	(10,271	)	$	710,539	$	(10,766	)

September 30, 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
Agency RMBS $ 768,749
$ (34,876 ) $ 285,758
$ (19,381 ) $ 1,054,507
$ (54,257 )
Non-Agency RMBS 12,825
(107 ) 178
(8 ) 13,003
(115 )
Total investment securities available for sale $ 781,574
$ (34,983 ) $ 285,936
$ (19,389 ) $ 1,067,510
$ (54,372 )

At ~~September~~June 30, ~~2018,~~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.

Gross unrealized losses on the Company’s Agency RMBS were ~~$54.3~~$10.3 million at ~~September~~June 30, ~~2018.~~2019. Agency RMBS are issued by 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. 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~~June 30, ~~2018~~2019, any unrealized losses on its Agency RMBS were temporary.

Gross unrealized losses on the Company's non-Agency RMBS and CMBS were $0.3 million and $0.2 million at June 30, 2019, respectively. Credit risk associated with non-Agency RMBS and CMBS 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, 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
Agency RMBS	$	310,783	$	(8,037	)	$	726,028	$	(30,247	)	$	1,036,811	$	(38,284	)
Non-Agency RMBS	187,395		(1,451		)	158		(15		)	187,553		(1,466		)
CMBS	75,292		(376		)	—		—			75,292		(376		)
Total investment securities available for sale	$	573,470	$	(9,864	)	$	726,186	$	(30,262	)	$	1,299,656	$	(40,126	)

December 31, 2017 Less than 12 months Greater than 12 months Total

Carrying
Value

Gross
Unrealized
Losses

Carrying
Value

Gross
Unrealized
Losses

Carrying
Value

Gross
Unrealized
Losses
Agency RMBS $ 511,313
$ (1,807 ) $ 342,963
$ (13,390 ) $ 854,276
$ (15,197 )
Non-Agency RMBS —
—
193
(18 ) 193
(18 )
Total investment securities available for sale $ 511,313
$ (1,807 ) $ 343,156
$ (13,408 ) $ 854,469
$ (15,215 )

Other than Temporary Impairment

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

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4.	~~Residential Mortgage Loans Held in Securitization Trusts, Net~~Distressed and ~~Real Estate Owned~~

~~Residential mortgage loans held in securitization trusts, net consist of the following as of September 30, 2018 and December 31, 2017, respectively (dollar amounts in thousands):~~

September 30, 2018 December 31, 2017
Unpaid principal balance $ 63,717
$ 77,519
Deferred origination costs – net 405
492
Reserve for loan losses (3,663 ) (4,191 )
Total $ 60,459
$ 73,820

~~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, 2018 and 2017, respectively (dollar amounts in thousands):

Nine Months Ended September 30,
2018 2017
Balance at beginning of period $ 4,191
$ 3,782
(Recovery of) provision for loan losses (93 ) 306
Transfer to real estate owned —
(303 )
Charge-offs (435 ) (60 )
Balance at the end of period $ 3,663
$ 3,725

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, 2018 was $3.7 million, representing 575 basis points of the outstanding principal balance of residential loans held in securitization trusts, as compared to 541 basis points as of December 31, 2017. 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 Company had no real estate owned held in residential securitization trusts at September 30, 2018. The Company had real estate owned held in residential securitization trusts of $0.1 million at December 31, 2017. 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 (provision for) loan losses in the accompanying condensed consolidated statements of operations for reporting purposes.

~~Table of Contents~~

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 $5.0 million and $4.4 million as of September 30, 2018 and December 31, 2017, respectively.

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

As of September 30, 2018, we had 23 delinquent loans with an aggregate principal amount outstanding of approximately $11.9 million categorized as residential mortgage loans held in securitization trusts, net, of which $7.0 million, or 59%, 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 September 30, 2018 (dollar amounts in thousands):

~~September 30, 2018~~

Days Late
Number of
Delinquent
Loans

Total
Unpaid
Principal

% of Loan
Portfolio
30 - 60 1 $ 134
0.21 %
61 - 90 2 $ 335
0.53 %
90 + 20 $ 11,447
17.97 %

As of December 31, 2017, we had 26 delinquent loans with an aggregate principal amount outstanding of approximately $16.5 million categorized as residential mortgage loans held in securitization trusts, net, of which $10.2 million, or 62%, 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 December 31, 2017 (dollar amounts in thousands):

~~December 31, 2017~~

Days Late
Number of Delinquent
Loans

Total
Unpaid Principal

% of Loan
Portfolio
30 - 60 1 $ 203
0.26 %
61 - 90 1 $ 173
0.22 %
90 + 24 $ 16,147
20.80 %
Real estate owned through foreclosure 1 $ 118
0.15 %

The geographic concentrations of credit risk exceeding 5% of the total loan balances in our residential mortgage loans held in securitization trusts and REO held in residential securitization trusts as of September 30, 2018 and December 31, 2017 are as follows:

September 30, 2018 December 31, 2017
New York 34.3 % 31.8 %
Massachusetts 20.5 % 20.7 %
New Jersey 13.8 % 11.9 %
Florida 9.8 % 8.8 %
Maryland 5.1 % 5.2 %


5.	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. 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.

~~Table of Contents~~

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



	Principal		Premium/(Discount)			Unrealized Gains/(Losses)		Carrying Value
June 30, 2019	$	1,110,163	$	(70,026	)	$	21,817	$	1,061,954
December 31, 2018	788,372		(54,905		)	4,056		737,523

Principal Premium/(Discount) Unrealized Gains/(Losses) Carrying Value
September 30, 2018 $ 189,461
$ (6,588 ) $ (963 ) $ 181,910
December 31, 2017 92,105
(4,911 ) (41 ) 87,153

~~As of September 30, 2018, the Company is committed to purchase $0.8 million of second mortgage loans 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 and six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively (dollar amounts in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Net realized gain on payoff and sale of loans	$	2,394	$	330		$	5,519	$	369
Net unrealized gains (losses)	9,877		(233		)	17,762		(439		)

September 30, 2018 September 30, 2017
Net realized gain on payoff and sale of loans $ 1,496
$ 493
Net unrealized (losses) gains (923 ) 224

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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, are as follows:



	June 30, 2019		December 31, 2018
California	23.7	%	27.9	%
Florida	9.8	%	9.0	%
Texas	5.7	%	4.2	%
New York	5.6	%	5.1	%

September 30, 2018 December 31, 2017
California 26.7 % 35.9 %
Florida 13.7 % 6.6 %
New Jersey 5.5 % 7.7 %
New York 5.1 % 3.8 %

The following table presents the ~~difference between the~~ fair value and ~~the~~ 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 ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively (dollar amounts in thousands):



	Fair Value		Unpaid Principal Balance
June 30, 2019	$	58,628	$	73,120
December 31, 2018	60,117		75,167

Fair Value Unpaid Principal Balance Difference
September 30, 2018 $ 4,917
$ 5,442
$ (525 )
December 31, 2017 1,048
1,214
(166 )

~~Residential mortgage loans, including distressed~~Distressed and other residential mortgage loans ~~and second mortgages,~~ with a fair value of approximately ~~$110.9~~$806.6 million and ~~$44.2~~$626.2 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, are pledged as collateral for master repurchase agreements ~~with Deutsche Bank AG, Cayman Islands Branch~~ (see Note 1412).

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6.5.	Distressed and Other Residential Mortgage Loans, Net

Distressed Residential Mortgage Loans, Net

As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~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 ~~$260.8~~$169.3 million and ~~$331.5~~$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.

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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~~six months ended ~~September~~June 30, ~~2017 (dollar amounts in thousands):~~

September 30, 2017
Contractually required principal and interest $ 76,529
Nonaccretable yield (6,467 )
Expected cash flows to be collected 70,062
Accretable yield (58,767 )
Fair value at the date of acquisition $ 11,295

~~Distressed residential mortgage loans purchased during the nine months ended September 30,~~2019 and 2018, ~~are presented in the accompanying condensed consolidated balance sheets at fair value (see Note 5~~).respectively.

The following table details activity in accretable yield for the distressed residential mortgage loans, ~~including distressed residential mortgage loans held in securitization trusts,~~net for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively (dollar amounts in thousands):


	September 30, 2018			September 30, 2017			June 30, 2019			June 30, 2018
Balance at beginning of period	$	303,949		$	530,511		$	195,560		$	303,949
Additions	6,007			91,356			2,369			3,314
Disposals	(64,876		)	(263,475		)	(45,004		)	(37,665		)
Accretion	(11,999		)	(16,635		)	(2,370		)	(8,074		)
Balance at end of period ⁽¹⁾	$	233,081		$	341,757		$	150,555		$	261,524

⁽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~~six month periods ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 is not necessarily indicative of future results.

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The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of our distressed residential mortgage loans, ~~including~~net as of June 30, 2019 and December 31, 2018, respectively, are as follows:



	June 30, 2019		December 31, 2018
North Carolina	10.1	%	9.0	%
Florida	9.9	%	10.4	%
Georgia	7.0	%	7.2	%
South Carolina	5.6	%	5.6	%
Virginia	5.6	%	5.3	%
Texas	5.5	%	4.9	%
New York	5.4	%	5.4	%
Ohio	5.2	%	5.0	%

The Company had no distressed residential mortgage loans held in securitization trusts pledged as collateral for securitized debt as of ~~September~~June 30, ~~2018 and December 31, 2017, respectively, are as follows:~~

September 30, 2018 December 31, 2017
Florida 10.7 % 11.2 %
North Carolina 8.6 % 8.3 %
Georgia 6.6 % 5.8 %
California 5.7 % 6.9 %
New York 5.5 % 5.7 %
South Carolina 5.4 % 5.0 %
Ohio 5.2 % 5.1 %

2019. The Company's distressed residential mortgage loans held in securitization trusts with a carrying value of approximately ~~$96.5 million and $121.8~~$88.1 million at ~~September 30, 2018 and~~ December 31, ~~2017, 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 ~~$143.8~~$85.1 million and ~~$182.6~~$128.1 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, are pledged as collateral for a master repurchase agreement ~~with Deutsche Bank AG, Cayman Islands Branch~~ (see Note 1412).

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Residential Mortgage Loans Held in Securitization Trusts, Net

Residential mortgage loans held in securitization trusts, net 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 June 30, 2019 and December 31, 2018, respectively (dollar amounts in thousands):



	June 30, 2019			December 31, 2018
Unpaid principal balance	$	51,986		$	60,171
Deferred origination costs – net	334			383
Reserve for loan losses	(3,521		)	(3,759		)
Total	$	48,799		$	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, net for the six months ended June 30, 2019 and 2018, respectively (dollar amounts in thousands):



	Six Months Ended June 30,
	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	(109		)	(237		)
Balance at the end of period	$	3,521		$	3,844

On an ongoing basis, the Company evaluates the adequacy of its allowance for loan losses. The Company’s allowance for loan losses as of June 30, 2019 was $3.5 million, representing 677 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 June 30, 2019 and December 31, 2018.

Delinquency Status of Our Residential Mortgage Loans Held in Securitization Trusts

As of June 30, 2019, we had 19 delinquent loans with an aggregate principal amount outstanding of approximately $10.6 million categorized as residential mortgage loans held in securitization trusts, net, of which $6.5 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 June 30, 2019 (dollar amounts in thousands):

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June 30, 2019



Days Late	Number of Delinquent Loans	Total Unpaid Principal		% of Loan Portfolio
30-60	1	$	264	0.50	%
90 +	18	$	10,384	19.85	%
Real estate owned through foreclosure	1	$	360	0.69	%

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 June 30, 2019 and December 31, 2018 are as follows:



	June 30, 2019		December 31, 2018
New York	34.7	%	33.9	%
Massachusetts	17.6	%	20.0	%
New Jersey	15.1	%	14.5	%
Florida	11.2	%	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 the Company consolidates in its 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 POs, certain IOs and mezzanine securities issued by certain Freddie Mac K-Series securitizations~~that we own with an aggregate net carrying value of ~~$566.5~~$801.2 million and ~~$468.0~~$657.6 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively (see Note 109). The Consolidated K-Series is comprised of ~~eight~~eleven and ~~seven~~nine Freddie ~~Mac~~Mac-sponsored multi-family loan K-Series securitizations as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

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



Balance Sheets	June 30, 2019		December 31, 2018
Assets
Multi-family loans held in securitization trusts, at fair value	$	14,573,925	$	11,679,847
Receivables	48,958		41,850
Total Assets	$	14,622,883	$	11,721,697
Liabilities and Equity
Multi-family CDOs, at fair value	$	13,772,726	$	11,022,248
Accrued expenses	47,921		41,102
Total Liabilities	13,820,647		11,063,350
Equity	802,236		658,347
Total Liabilities and Equity	$	14,622,883	$	11,721,697

Balance Sheets September 30, 2018 December 31, 2017
Assets
Multi-family loans held in securitization trusts $ 10,070,834
$ 9,657,421
Receivables 32,533
33,562
Total Assets $ 10,103,367
$ 9,690,983
Liabilities and Equity
Multi-family CDOs $ 9,504,313
$ 9,189,459
Accrued expenses 31,966
33,136
Total Liabilities 9,536,279
9,222,595
Equity 567,088
468,388
Total Liabilities and Equity $ 10,103,367
$ 9,690,983

The multi-family loans held in securitization trusts had unpaid aggregate ~~unpaid~~ principal balances of approximately ~~$10.1~~$13.7 billion and ~~$9.4~~$11.5 billion at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The multi-family CDOs (the "Multi-Family CDOs") had aggregate unpaid principal balances of approximately ~~$10.1~~$13.7 billion and ~~$9.4~~$11.5 billion at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the current weighted average interest rate on these ~~multi-family~~Multi-Family CDOs was ~~4.06%~~4.14% and ~~3.92%~~3.96%, respectively.

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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~~the first loss POs, IOs and mezzanine ~~securities)~~securities owned by the Company). 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 (see Note 1816).

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



	Three Months Ended June 30,				Six Months Ended June 30,
Statements of Operations	2019		2018		2019		2018
Interest income	$	133,157	$	85,629	$	244,925	$	170,721
Interest expense	114,914		74,686		211,711		149,165
Net interest income	18,243		10,943		33,214		21,556
Unrealized gain on multi-family loans and debt held in securitization trusts, net	5,207		12,019		14,617		19,564
Net income	$	23,450	$	22,962	$	47,831	$	41,120

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Three Months Ended
September 30, Nine Months Ended
September 30,
Statements of Operations 2018 2017 2018 2017
Interest income $ 86,458
$ 76,186
$ 257,179
$ 213,242
Interest expense 75,145
67,030
224,310
187,835
Net interest income 11,313
9,156
32,869
25,407
Unrealized gain on multi-family loans and debt held in securitization trusts, net 12,303
2,353
31,867
5,184
Net income $ 23,616
$ 11,509
$ 64,736
$ 30,591

The geographic concentrations of credit risk exceeding 5% of the total loan balances related to multi-family loans held in securitization trusts as of June 30, 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, 2018 and~~ December 31, ~~2017, respectively,~~2018 are as follows:



	June 30, 2019		December 31, 2018
California	16.1	%	14.8	%
Texas	12.4	%	13.0	%
Maryland	5.8	%	5.0	%
New York	5.1	%	6.4	%
Florida	5.0	%	4.5	%

September 30, 2018 December 31, 2017
California 13.8 % 14.7 %
Texas 11.8 % 12.7 %
New York 6.1 % 6.5 %
Maryland 5.1 % 5.5 %

2923

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8.7.	~~Investment~~Investments in Unconsolidated Entities

The Company's investments in unconsolidated entities accounted for under the equity method are comprised of preferred equity ownership interests in entities that invest in multi-family properties where the risks and payment characteristics are equivalent to an equity investment and consist of the following as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollar amounts in thousands):



	June 30, 2019			December 31, 2018
Investment Name	Ownership Interest	Carrying Amount		Ownership Interest	Carrying Amount
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively)	45%	$	9,503	45%	$	8,948
Somerset Deerfield Investor, LLC	45%	16,796		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%	4,792		43%	4,714
Audubon Mezzanine Holdings, L.L.C. (Series A)	57%	10,795		57%	10,544
EP 320 Growth Fund, L.L.C. (Series A) and Turnbury Park Apartments - BC, L.L.C. (Series A) (collectively)	46%	6,687		—	—
Walnut Creek Properties Holdings, L.L.C.	36%	8,093		—	—
Towers Property Holdings, LLC	37%	10,885		—	—
Mansions Property Holdings, LLC	34%	10,489		—	—
Total - Equity Method		$	78,040		$	40,472

September 30, 2018
December 31, 2017
Investment Name Ownership Interest Carrying Amount Ownership Interest Carrying Amount
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively) 45% $ 8,675
45% $ 8,320
Total - Equity Method $ 8,675
$ 8,320

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~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollar amounts in thousands):



	June 30, 2019			December 31, 2018
Investment Name	Ownership Interest	Carrying Amount		Ownership Interest	Carrying Amount
Joint venture equity investments in multi-family properties
Evergreens JV Holdings, LLC	85%	$	12,500	85%	$	8,200
The Preserve at Port Royal Venture, LLC	77%	14,260		77%	13,840
Equity investments in entities that invest in residential properties and loans
Morrocroft Neighborhood Stabilization Fund II, LP	11%	11,348		11%	10,954
Headlands Asset Management Fund III (Cayman), LP (Headlands Flagship Opportunity Fund Series I)	49%	50,000		—	—
Total - Fair Value Option		$	88,108		$	32,994

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September 30, 2018 December 31, 2017
Investment Name Ownership Interest Carrying Amount Ownership Interest Carrying Amount
Morrocroft Neighborhood Stabilization Fund II, LP 11% $ 13,451
11% $ 12,623
Evergreens JV Holdings, LLC 85% 7,970
85% 4,220
The Preserve at Port Royal Venture, LLC 77% 13,640
77% 13,040
WR Savannah Holdings, LLC ⁽¹⁾
— —
90% 12,940
Total - Fair Value Option $ 35,061
$ 42,823


⁽¹⁾	~~The Company's equity investment was redeemed during the three months ended September 30, 2018.~~

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



	Three Months Ended June 30,				Six Months Ended June 30,
Investment Name	2019		2018		2019		2018
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively)	$	287	$	259	$	562	$	512
Somerset Deerfield Investor, LLC	492		—		970		—
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)	134		—		265		—
Audubon Mezzanine Holdings, L.L.C. (Series A)	304		—		601		—
EP 320 Growth Fund, L.L.C. (Series A) and Turnbury Park Apartments - BC, L.L.C. (Series A) (collectively)	188		—		353		—
Walnut Creek Properties Holdings, L.L.C.	231		—		328		—
Towers Property Holdings, LLC	10		—		10		—
Mansions Property Holdings, LLC	10		—		10		—
Evergreens JV Holdings, LLC	1,289		171		4,513		365
The Preserve at Port Royal Venture, LLC	409		419		847		902
WR Savannah Holdings, LLC	—		1,269		—		1,629
Morrocroft Neighborhood Stabilization Fund II, LP	163		398		395		680

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Three Months Ended September 30, Nine Months Ended September 30,
Investment Name 2018 2017 2018 2017
Autumnwood Investments LLC $ —
$ 64
$ —
$ 137
200 RHC Hoover, LLC —
—
—
275
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively) 265
252
777
741
Morrocroft Neighborhood Stabilization Fund II, LP 149
394
829
1,374
Evergreens JV Holdings, LLC 3,643
161
4,008
464
Bent Tree JV Holdings, LLC —
1,210
—
1,795
Summerchase LR Partners LLC —
194
—
556
Lake Mary Realty Partners, LLC —
2,312
—
2,745
The Preserve at Port Royal Venture, LLC 449
440
1,351
1,266
WR Savannah Holdings, LLC ⁽¹⁾
113
405
1,743
1,030


⁽¹⁾	~~Includes income recognized from redemption of the Company's investment during the three and nine months ended September 30, 2018.~~

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9.8.	Preferred Equity and Mezzanine Loan Investments

Preferred equity and mezzanine loan investments consist of the following as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollar amounts in thousands):



	June 30, 2019			December 31, 2018
Investment amount	$	192,814		$	166,789
Deferred loan fees, net	(1,427		)	(1,234		)
Total	$	191,387		$	165,555

September 30, 2018 December 31, 2017
Investment amount $ 200,047
$ 140,560
Deferred loan fees, net (1,770 ) (1,640 )
Total $ 198,277
$ 138,920

There were no delinquent preferred equity ~~and~~or mezzanine loan investments as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017. As of September 30, 2018, the Company is committed to fund an additional $1.7 million of preferred equity on an existing investment.~~2018.

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



	June 30, 2019		December 31, 2018
Texas	17.0	%	16.6	%
Tennessee	11.3	%	6.8	%
Georgia	10.8	%	15.3	%
Alabama	10.3	%	8.6	%
Florida	10.0	%	11.3	%
South Carolina	8.4	%	9.5	%
Virginia	7.9	%	9.1	%

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September 30, 2018 December 31, 2017
New York 22.1 % 24.1 %
Texas 13.8 % 24.3 %
Florida 12.1 % 3.9 %
Georgia 9.9 % 3.4 %
Virginia 7.6 % 10.8 %
Alabama 7.4 % 7.1 %
Tennessee 5.6 % —
South Carolina 5.1 % 7.0 %


~~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 June 30, 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 June 30, 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,~~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.

~~Table of Contents~~

The Company invests in multi-family CMBS consisting of ~~PO securities~~POs that represent the first loss 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 ~~eight~~eleven and ~~seven~~nine Freddie Mac-sponsored multi-family K-Series securitization trusts are VIEs as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~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, ~~seven~~eleven and ~~six~~eight of these investments are not included as collateral to any Financing VIE as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~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.

Table of Contents

The Company owns 100% of RB Development Holding Company, LLC ("RBDHC")~~, a wholly-owned subsidiary of the Company,~~. RBDHC owns 50% of 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,~~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.

~~The Company evaluates the home pricing and lot values of the real~~ Real estate under development ~~that is owned by~~in KRVI ~~which~~as of June 30, 2019 and December 31, 2018 of $16.7 million and $22.0 million, respectively, 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 quarter ended June 30, 2018, the Company determined that the real estate under development with a carrying amount of $22.4 million was no longer recoverable and was impaired. The Company recognized a $2.1 million impairment loss which is included in other income in the Company's condensed consolidated statements of operations for the nine months ended September 30, 2018. For the nine months ended September 30, 2018, $1.0 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 $1.1 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.sheets.

OnIn March ~~31,~~ 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 VIEs that each ~~own~~owned a multi-family apartment community and in each of which the Company 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 Riverchase Landing as an investment~~and consolidated them in ~~an unconsolidated entity and for The Clusters as a preferred equity investment.~~

~~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.

~~Table of Contents~~

~~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).~~

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 in 2017 (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.

In March 2018, Riverchase Landing completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. Also, 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 Riverchase Landing and The Clusters as of the date of ~~the~~each property's sale. Prior to ~~March 2018,~~the properties' sale, the Company did not have any claims to the assets or obligations for the liabilities of Riverchase ~~Landing. As of September 30, 2018, the Company does not have any claims to the assets or obligations for the liabilities of~~Landing and The Clusters.

~~The Consolidated K-Series, the Financing VIEs, KRVI, Riverchase Landing (as of December 31, 2017) and The Clusters are collectively referred to in this footnote as "Consolidated VIEs".~~

~~Table of Contents~~

The following ~~tables present~~table presents a summary of the assets and liabilities of ~~these~~the Residential CDOs, the Consolidated ~~VIEs~~K-Series, and KRVI of as of ~~September~~June 30, ~~2018 and December 31, 2017, respectively.~~2019. Intercompany balances have been eliminated for purposes of this presentation.

~~Assets~~



	Financing VIE		Other VIEs
	Residential Mortgage Loan Securitization		Consolidated K-Series		Other		Total
Cash and cash equivalents	$	—	$	—	$	1,513	$	1,513
Residential mortgage loans held in securitization trusts, net	48,799		—		—		48,799
Multi-family loans held in securitization trusts, at fair value	—		14,573,925		—		14,573,925
Receivables and other assets	1,302		48,958		16,984		67,244
Total assets	$	50,101	$	14,622,883	$	18,497	$	14,691,481

Residential collateralized debt obligations	$	45,280	$	—	$	—	$	45,280
Multi-family collateralized debt obligations, at fair value	—		13,772,726		—		13,772,726
Mortgages and notes payable in consolidated variable interest entities	—		—		3,986		3,986
Accrued expenses and other liabilities	40		47,921		111		48,072
Total liabilities	$	45,320	$	13,820,647	$	4,097	$	13,870,064

Table of Contents

The following table presents a summary of the assets and ~~Liabilities~~liabilities of the Financing VIEs, the Consolidated ~~VIEs~~K-Series, KRVI, and The Clusters as of ~~September 30, 2018 (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		Consolidated K-Series⁽³⁾		Other		Total
Cash and cash equivalents	$	—	$	—	$	—	$	—	$	781	$	781	$	—	$	—	$	—	$	—	$	708	$	708
Investment securities available for sale, at fair value held in securitization trusts	51,751		—		—		—		—		51,751		52,700		—		—		—		—		52,700
Residential mortgage loans held in securitization trusts, net	—		—		60,459		—		—		60,459		—		—		56,795		—		—		56,795
Distressed residential mortgage loans held in securitization trusts, net	—		96,493		—		—		—		96,493		—		88,096		—		—		—		88,096
Multi-family loans held in securitization trusts, at fair value	1,109,276		—		—		8,961,558		—		10,070,834		1,107,071		—		—		10,572,776		—		11,679,847
Real estate held for sale in consolidated variable interest entities	—		—		—		—		29,558		29,558		—		—		—		—		29,704		29,704
Receivables and other assets	4,131		14,320		1,021		28,474		23,304		71,250		4,243		10,287		1,061		37,679		23,254		76,524
Total assets	$	1,165,158	$	110,813	$	61,480	$	8,990,032	$	53,643	$	10,381,126	$	1,164,014	$	98,383	$	57,856	$	10,610,455	$	53,666	$	11,984,374

Residential collateralized debt obligations	$	—	$	—	$	56,504	$	—	$	—	$	56,504	$	—	$	—	$	53,040	$	—	$	—	$	53,040
Multi-family collateralized debt obligations, at fair value	1,040,174		—		—		8,464,139		—		9,504,313		1,036,604		—		—		9,985,644		—		11,022,248
Securitized debt	29,870		23,727		—		—		—		53,597		30,121		12,214		—		—		—		42,335
Mortgages and notes payable in consolidated variable interest entities	—		—		—		—		32,486		32,486		—		—		—		—		31,227		31,227
Accrued expenses and other liabilities	4,115		317		25		27,999		976		33,432		4,228		444		26		37,022		1,166		42,886
Total liabilities	$	1,074,159	$	24,044	$	56,529	$	8,492,138	$	33,462	$	9,680,332	$	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 ~~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- to four- family properties. Balances as of ~~September 30,~~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~~held 5% of the Class A Notes issued as part of the securitization transaction, which were eliminated in consolidation.


⁽³⁾	~~Seven~~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, 2018.~~

~~Table of Contents~~

~~Assets and Liabilities of Consolidated VIEs as of December 31, 2017 (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 $ —
$ —
$ —
$ —
$ 808
$ 808
Investment securities available for sale, at fair value held in securitization trusts 47,922
—
—
—
—
47,922
Residential mortgage loans held in securitization trusts, net —
—
73,820
—
—
73,820
Distressed residential mortgage loans held in securitization trusts, net —
121,791
—
—
—
121,791
Multi-family loans held in securitization trusts, at fair value 1,157,726
—
—
8,499,695
—
9,657,421
Real estate held for sale in consolidated variable interest entities —
—
—
—
64,202
64,202
Receivables and other assets 4,333
15,428
935
29,301
25,507
75,504
Total assets $ 1,209,981
$ 137,219
$ 74,755
$ 8,528,996
$ 90,517
$ 10,041,468

Residential collateralized debt obligations $ —
$ —
$ 70,308
$ —
$ —
$ 70,308
Multi-family collateralized debt obligations, at fair value 1,094,044
—
—
8,095,415
—
9,189,459
Securitized debt 29,164
52,373
—
—
—
81,537
Mortgages and notes payable in consolidated variable interest entities —
—
—
—
57,124
57,124
Accrued expenses and other liabilities 4,316
2,957
24
28,969
1,727
37,993
Total liabilities $ 1,127,524
$ 55,330
$ 70,332
$ 8,124,384
$ 58,851
$ 9,436,421

⁽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, 2017 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⁾	~~Six 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, ~~2017.~~2018.

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As of June 30, 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, 2018 $ 33,218
$ 24,051
Principal Amount at December 31, 2017 $ 33,350
$ 53,089
Carrying Value at September 30, 2018 ⁽²⁾
$ 29,870
$ 23,727
Carrying Value at December 31, 2017 ⁽²⁾
$ 29,164
$ 52,373
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.~~which included 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, 2018 and~~ December 31, ~~2017, respectively~~2018 (dollar amounts in thousands):



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

Scheduled Maturity (principal amount)
September 30, 2018 December 31, 2017
Within 24 months $ 24,051
$ 53,089
Over 24 months to 36 months —
—
Over 36 months 33,218
33,350
Total 57,269
86,439
Discount (3,312 ) (4,232 )
Debt issuance cost (360 ) (670 )
Carrying value $ 53,597
$ 81,537

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

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.

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Unconsolidated VIEs

~~The~~As of June 30, 2019, the Company ~~has~~evaluated its investment securities, mezzanine loan, preferred equity and other equity investments to determine whether they are VIEs and should be consolidated by the Company. As of December 31, 2018, the Company evaluated its multi-family CMBS investments in two Freddie Mac-sponsored multi-family loan K-Series securitizations and its mezzanine loan, preferred equity ~~mezzanine loan~~ and other equity investments ~~as of September 30, 2018 and December 31, 2017, respectively,~~ 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 The Clusters as of September 30, 2018 and both Riverchase Landing and The Clusters~~ as of December 31, ~~2017,~~2018, except for the Clusters, it does not have a controlling financial interest and is not the primary beneficiary of these VIEs. The following tables present the classification and carrying value of unconsolidated VIEs as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018, (dollar amounts in thousands):

September 30, 2018

Investment
securities,
available for
sale, at fair
value, held in securitization trusts
Receivables and other assets Preferred equity and mezzanine loan investments Investment in unconsolidated entities Total
Multi-family CMBS $ 51,751
$ 72
$ —
$ —
$ 51,823
Preferred equity investments in multi-family properties —
—
187,508
8,675
196,183
Mezzanine loan on multi-family properties —
—
10,769
—
10,769
Equity investments in entities that invest in residential properties —
—
—
13,451
13,451
Total assets $ 51,751
$ 72
$ 198,277
$ 22,126
$ 272,226



	June 30, 2019
	Investment securities, available for sale, at fair value		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
ABS	$	24,739	$	—	$	—	$	24,739
Preferred equity investments in multi-family properties	—		184,727		78,040		262,767
Mezzanine loans on multi-family properties	—		6,660		—		6,660
Equity investments in entities that invest in residential properties and loans	—		—		61,348		61,348
Total assets	$	24,739	$	191,387	$	139,388	$	355,514

December 31, 2017

Investment
securities,
available for
sale, at fair
value, held in securitization trusts
Receivables and other assets Preferred equity and mezzanine loan investments Investment in unconsolidated entities Total
Multi-family CMBS $ 47,922
$ 73
$ —
$ —
$ 47,995
Preferred equity investments in multi-family properties —
—
132,009
8,320
140,329
Mezzanine loan on multi-family properties —
—
6,911
—
6,911
Equity investments in entities that invest in multi-family and residential properties —
—
—
25,562
25,562
Total assets $ 47,922
$ 73
$ 138,920
$ 33,882
$ 220,797



	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,~~investment securities available for sale, at fair value, preferred equity and mezzanine loan investments, and ~~equity~~ investments in unconsolidated entities is approximately ~~$272.2 million and $220.8~~$355.5 million at ~~September~~June 30, ~~2018~~2019. Our maximum loss exposure on the investment securities available for sale, at fair value, held in securitization trusts, preferred equity and mezzanine loan investments, and investments in unconsolidated entities is approximately $269.8 million at December 31, ~~2017, respectively.~~2018. The Company’s maximum exposure does not exceed the carrying value of its investments.

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~~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 VIEs that each ~~own~~owned a multi-family apartment community and in each of which the Company 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 (seeNote ~~10)~~9).

During the second quarter of 2017, Riverchase Landing determined to actively market its multi-family apartment community for ~~sale. Accordingly, the Company classified the real estate assets in Riverchase Landing as held for~~ sale ~~as of December 31, 2017 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 Riverchase Landing as of June 5, 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~~in March 2018, recognizing 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~~In connection with the sale, the Company's preferred equity investment was redeemed, resulting in de-consolidation of Riverchase Landing as of the date of the sale.

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

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


	September 30, 2018			December 31, 2017			December 31, 2018
Land	$	2,650		$	7,000		$	2,650
Building and improvements	25,975			53,468			26,032
Furniture, fixtures and equipment	885			2,150			974
Lease intangible	2,802			5,340			2,802
Real estate held for sale before accumulated depreciation and amortization	32,312			67,958			32,458
Accumulated depreciation⁽¹⁾	(418		)	(647		)	(418		)
Accumulated amortization of lease intangible ⁽¹⁾	(2,336		)	(3,109		)	(2,336		)
Real estate held for sale in consolidated variable interest entities	$	29,558		$	64,202		$	29,704

⁽¹⁾

There were no depreciation and amortization expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018. Depreciation~~2019 and amortization expenses for the three months ended September 30, 2017 totaled $0.2 million 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.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.

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~~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 “To-Be-Announced,” or TBAs, purchase 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.

~~Table of Contents~~

Derivatives NotDesignated as Hedging Instruments

The following table presents the fair value of derivative instruments and their location in our condensed consolidated balance sheets at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively (dollar amounts in thousands):



Type of Derivative Instrument	Balance Sheet Location	June 30, 2019		December 31, 2018
Interest rate swaps ⁽¹⁾	Derivative assets	$	14,047	$	10,263

Type of Derivative Instrument Balance Sheet Location September 30, 2018 December 31, 2017
Interest rate swaps ⁽¹⁾
Derivative assets $ 8,760
$ 10,101

⁽¹⁾

~~Variation margin payable~~All of ~~$8.5 million and~~the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin ~~receivable~~for swaps based upon daily changes in fair value. As a result of ~~$9.3 million~~amendments to rules governing certain central clearing activities, the exchange of variation margin is ~~included~~treated as ~~an adjustment~~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 swap asset or liability on the Company's condensed consolidated balance sheets. Includes $27.8 million of derivative liabilities netted against a variation margin of $41.9 million at June 30, 2019. Includes $1.8 million of derivative assets and variation margin of $8.5 million at ~~September 30, 2018 and~~ December 31, ~~2017, respectively.~~2018.

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


	Notional Amount For the Nine Months Ended September 30, 2018								Notional Amount For the Six Months Ended June 30, 2019
Type of Derivative Instrument	December 31, 2017		Additions		Settlement, Expiration or Exercise		September 30, 2018		December 31, 2018		Additions		Settlement, Expiration or Exercise		June 30, 2019
Interest rate swaps	$	345,500	$	50,000	$	—	$	395,500	$	495,500	$	—	$	—	$	495,500



	Notional Amount For the Six Months Ended June 30, 2018
Type of Derivative Instrument	December 31, 2017		Additions		Settlement, Expiration or Exercise		June 30, 2018
Interest rate swaps	$	345,500	$	50,000	$	—	$	395,500

Notional Amount For the Nine Months Ended September 30, 2017
Type of Derivative Instrument December 31, 2016 Additions
Settlement,
Expiration
or Exercise
September 30, 2017
TBA securities ⁽¹⁾
$ 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


⁽¹⁾	~~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.~~

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The following 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~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (dollar amounts in thousands):



	Three Months Ended June 30,
	2019					2018
	Realized Gains (Losses)		Unrealized Gains (Losses)			Realized Gains (Losses)		Unrealized Gains (Losses)
Interest rate swaps	$	—	$	(15,007	)	$	—	$	5,135
Total	$	—	$	(15,007	)	$	—	$	5,135

	Six Months Ended June 30,
	2019					2018
	Realized Gains (Losses)		Unrealized Gains (Losses)			Realized Gains (Losses)		Unrealized Gains (Losses)
Interest rate swaps	$	—	$	(29,593	)	$	—	$	14,103
Total	$	—	$	(29,593	)	$	—	$	14,103

Three Months Ended September 30,
2018 2017
Realized Gains (Losses) Unrealized Gains (Losses) Realized Gains (Losses) Unrealized Gains (Losses)
TBA securities $ —
$ —
$ 1,470
$ (265 )
Eurodollar futures —
—
62
39
Interest rate swaps —
2,275
—
36
Swaptions —
—
—
171
U.S. Treasury and interest rate swap futures and options —
—
(583 ) 505
Total $ —
$ 2,275
$ 949
$ 486

Nine Months Ended September 30,
2018 2017
Realized Gains (Losses) Unrealized Gains (Losses) Realized Gains (Losses) Unrealized Gains (Losses)
TBA securities $ —
$ —
$ 3,285
$ (1,080 )
Eurodollar futures —
—
849
(886 )
Interest rate swaps —
16,379
—
110
Swaptions —
—
—
239
U.S. Treasury and interest rate swap futures and options —
—
(999 ) 699
Total $ —
$ 16,379
$ 3,135
$ (918 )

Derivatives Designated as Hedging Instruments

As of June 30, 2019 and December 31, 2018, there were no derivative instruments designated as 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 ongoing basis, whether or not the hedge is “highly effective” when using the matched term basis.

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.

Outstanding Derivatives

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



	June 30, 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
2024	$	98,000	2.18	%	2.59	%	$	98,000	2.18	%	2.45	%
2027	247,500		2.39	%	2.57	%	247,500		2.39	%	2.53	%
2028	150,000		3.23	%	2.57	%	150,000		3.23	%	2.53	%
Total	$	495,500	2.60	%	2.57	%	$	495,500	2.60	%	2.52	%

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September 30, 2018 December 31, 2017
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
2024 $ 98,000
2.18 % 2.34 % $ 98,000
2.18 % 1.36 %
2027 247,500
2.39 % 2.34 % 247,500
2.39 % 1.39 %
2028 50,000
3.13 % 2.31 % —
—
—
Total $ 395,500
2.43 % 2.34 % $ 345,500
2.33 % 1.38 %

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 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. 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.

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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~~June 30, 2019 and December 31, 2018, the Company had repurchase agreements secured by investment securities with an outstanding balance of ~~$1.1~~$1.8 billion and $1.5 billion, respectively, and a weighted average interest rate of ~~2.90%. At December 31, 2017, the Company had repurchase agreements with an outstanding balance of $1.3 billion~~3.28% and ~~a weighted average interest rate of 2.18%.~~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~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollar amounts in thousands):


	September 30, 2018						December 31, 2017						June 30, 2019						December 31, 2018
	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		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	$	49,689	$	51,750	$	53,699	$	86,349	$	90,343	$	92,586	$	58,802	$	62,295	$	64,004	$	67,648	$	70,747	$	73,290
Agency Fixed-rate RMBS	802,636		847,316		891,660		842,474		890,359		902,744		812,811		858,359		863,160		857,582		907,610		940,994
Non-Agency RMBS	—		—		—		38,160		51,841		50,693		172,108		234,583		232,657		88,730		117,958		118,414
CMBS ⁽¹⁾	278,334		405,623		282,492		309,935		421,156		322,092		800,094		1,001,725		769,395		529,617		687,876		539,788
Balance at end of the period	$	1,130,659	$	1,304,689	$	1,227,851	$	1,276,918	$	1,453,699	$	1,368,115	$	1,843,815	$	2,156,962	$	1,929,216	$	1,543,577	$	1,784,191	$	1,672,486


⁽¹⁾	Includes first loss PO, IO and mezzanine CMBS securities with a fair value amounting to ~~$405.6~~$755.3 million and ~~$377.5~~$543.0 million included in the Consolidated K-Series as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the average days to maturity for ~~financing arrangements~~repurchase agreements secured by investment securities were 29106 days and 4462 days, respectively. The Company’s accrued interest payable on outstanding ~~financing arrangements~~repurchase agreements secured by investment securities at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 amounts to ~~$5.2~~$4.2 million and ~~$2.5~~$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~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollar amounts in thousands):



Contractual Maturity	June 30, 2019		December 31, 2018
Within 30 days	$	240,210	$	732,051
Over 30 days to 90 days	1,188,847		677,906
Over 90 days	414,758		133,620
Total	$	1,843,815	$	1,543,577

Contractual Maturity September 30, 2018 December 31, 2017
Within 30 days $ 822,582
$ 1,081,911
Over 30 days to 90 days 308,077
95,007
Over 90 days —
100,000
Total $ 1,130,659
$ 1,276,918

As of ~~September~~June 30, ~~2018,~~2019, the outstanding balance under our ~~financing arrangements~~repurchase agreements secured by investment securities was funded at a weighted average advance rate of ~~90.3%~~86.1% that implies an average ~~haircut~~“haircut” of ~~9.7%~~13.9%. As of ~~September~~June 30, ~~2018,~~2019, the weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS, non-agency RMBS, and CMBS was approximately 5%, 26%, and ~~25%~~21%, 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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had financing arrangements with ~~ten counterparties.~~fourteen and eleven counterparties, respectively. As of ~~September~~June 30, ~~2018 and December 31, 2017,~~2019, the ~~Company's only~~Company had no exposure where the amount at risk was in excess of 5% of the Company's stockholders’ ~~equity was to Deutsche Bank AG, London Branch at 7.4% and 5.0%, respectively. The~~equity. As of December 31, 2018 the Company's only exposure where the amount at risk ~~is defined as the fair value of securities pledged as collateral to the financing arrangement~~was in excess of ~~the financing arrangement liability.~~5% was to Jefferies & Company, Inc. at 5.04%.

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As of ~~September~~June 30, ~~2018,~~2019, our available liquid assets included unrestricted cash and cash equivalents and unencumbered securities that we believe may be posted as margin. The Company had ~~$57.5~~$135.0 million in cash and cash equivalents and ~~$429.4~~$388.1 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~~June 30, ~~2018~~2019 included ~~$156.5~~$73.5 million of Agency RMBS, ~~$173.6~~$91.6 million of CMBS, ~~and $99.3~~$198.3 million of non-Agency RMBS and ~~other investment securities.~~$24.7 million of ABS. The cash and unencumbered securities, which collectively represent ~~43.1%~~28.4% 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 June 30, 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
June 30, 2019	$	950,000	$	761,361	$	891,664	4.43	%	7.01
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 $806.6 million and $626.2 million and distressed and other residential mortgage loans, net of $85.1 million and $128.1 million at June 30, 2019 and December 31, 2018, respectively.

The Company has a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch with a maximum aggregate committed principal amount of $100.0 million and a maximum uncommitted principal amount of $150.0 million to fund the purchase of residential mortgage loans, expiring on June 8, 2019. The outstanding balance on this master repurchase agreement as of September 30, 2018 and December 31, 2017 amounts to approximately $141.5 million and $123.6 million, respectively, bearing interest at one-month LIBOR plus 2.40% and 2.50%, respectively (4.62% and 4.05% at September 30, 2018 and December 31, 2017, 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.

The Company also has a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch with a maximum aggregate committed principal amount of $25.0 million and a maximum uncommitted principal amount of $25.0 million to fund the purchase of residential mortgage loans, particularly second mortgage loans, expiring on November 24, 2018. The outstanding balance on this master repurchase agreement as of September 30, 2018 and December 31, 2017 amounts to approximately $35.9 million and $26.1 million, respectively, bearing interest at one-month LIBOR plus 3.50% (5.72% and 5.05% at September 30, 2018 and December 31, 2017, 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.

During the 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~~August 6, ~~2018.~~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 $0.8 million as of June 30, 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~~$48.8 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 June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. As of June 30, 2019 and December 31, 2018, the Company had Residential CDOs outstanding of $~~56.5~~45.3 million and ~~$70.3~~$53.0 million, respectively. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the current weighted average interest rate on these Residential CDOs was ~~2.83%~~3.02% and ~~2.16%~~3.12%, respectively. The Residential CDOs are collateralized by ARM loans with a principal balance of ~~$63.7~~$52.0 million and ~~$77.5~~$60.2 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The Company retained the owner trust certificates, or residual interest, for three securitizations, and, as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, had a net investment in the residential securitization trusts of ~~$5.0 million and $4.4 million, respectively.~~$4.8 million.

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~~16.~~14.	Debt

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"), 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 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 $6.2 million and $7.2 million as of June 30, 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 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~~six months ended ~~September~~June 30, ~~2018,~~2019, none of the Convertible Notes were converted. As of ~~November~~August 6, ~~2018,~~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~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollar amounts in thousands):



	NYM Preferred Trust I		NYM Preferred Trust II
Principal value of trust preferred securities	$	25,000	$	20,000
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

NYM Preferred Trust I NYM Preferred Trust II
Principal value of trust preferred securities $ 25,000
$ 20,000
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

As of ~~November~~August 6, ~~2018,~~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

OnIn March ~~31,~~ 2017, the Company consolidated both Riverchase Landing and The Clusters into its condensed consolidated financial statements (seeNote ~~10)~~9). In March 2018, Riverchase 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 investment iswas subject to a mortgage payable as of December 31, 2018, and the Company ~~has~~had no obligation for this liability as of ~~September 30,~~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 ~~$5.1~~$4.0 million that has an unused commitment of ~~$3.3~~$4.4 million as of ~~September~~June 30, ~~2018.~~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~~August 6, ~~2018.~~2019.

~~Table of Contents~~

The mortgages and notes payable in the consolidated VIEs as of ~~September~~June 30, ~~2018~~2019 are described below (dollar amounts in thousands):



		Mortgage Note Amount as of
	Assumption/Origination Date	June 30, 2019		Maturity Date	Interest Rate		Net Deferred Finance Costs
KRVI	12/16/2016	$	3,986	12/16/2019	7.00	%	$	—

Assumption/Origination Date Mortgage Note Amount Maturity Date Interest Rate Net Deferred Finance Costs
The Clusters 6/30/2014 $ 27,445
7/6/2024 4.49 % $ 58
KRVI 12/16/2016 $ 5,098
12/16/2019 6.75 % $ —

As of ~~September~~June 30, ~~2018,~~2019, maturities for debt on the Company's condensed consolidated balance sheet are as follows (dollar amounts in thousands):



Year Ending December 31,	Total
2019	$	3,986
2020	—
2021	—
2022	138,000
2023	—
Thereafter	45,000
	$	186,986

Fiscal Year Total
2018 $ —
2019 5,098
2020 —
2021 —
2022 138,000
2023 —
Thereafter 72,445
$ 215,543

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~~17.~~15.	Commitments and Contingencies

~~Loans Sold~~Commitment to ~~Third Parties –~~ ~~In the normal course of business, the~~Purchase Securities - The Company ~~is obligated~~has committed to ~~repurchase loans based on violations of representations~~purchase a first loss PO and ~~warranties~~IOs to be issued by a Freddie Mac-sponsored multi-family loan K-series securitization in the ~~loan sale agreements. The Company did not repurchase any loans during the nine months ended September 30, 2018.~~amount of approximately $48.3 million.

Outstanding Litigation– The Company is at times subject to various legal proceedings arising in the ordinary course of business. As of ~~September~~June 30, ~~2018,~~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 2 fair values.

The Company’s CMBS held in securitization trusts ~~are~~at December 31, 2018 were comprised of ~~securities~~first loss POs and certain IOs 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 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.


c.	Derivative Instruments – The fair value of interest rate swaps are based on dealer quotes and are presented net of variation margin payments pledged or received. The Company’s derivatives are classified as Level 2 fair values.

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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 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 mortgage 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 4.0% 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.

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



	Measured at Fair Value on a Recurring Basis at
	June 30, 2019								December 31, 2018
	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	$	—	$	994,200	$	—	$	994,200	$	—	$	1,037,730	$	—	$	1,037,730
Non-Agency RMBS	—		432,840		—		432,840		—		214,037		—		214,037
CMBS	—		292,090		—		292,090		—		207,785		52,700		260,485
ABS	—		24,739		—		24,739		—		—		—		—
Multi-family loans held in securitization trusts	—		—		14,573,925		14,573,925		—		—		11,679,847		11,679,847
Distressed and other residential mortgage loans, at fair value	—		—		1,061,954		1,061,954		—		—		737,523		737,523
Derivative assets:
Interest rate swaps ⁽¹⁾	—		14,047		—		14,047		—		10,263		—		10,263
Investments in unconsolidated entities	—		—		88,108		88,108		—		—		32,994		32,994
Total	$	—	$	1,757,916	$	15,723,987	$	17,481,903	$	—	$	1,469,815	$	12,503,064	$	13,972,879
Liabilities carried at fair value
Multi-family collateralized debt obligations	$	—	$	—	$	13,772,726	$	13,772,726	$	—	$	—	$	11,022,248	$	11,022,248
Total	$	—	$	—	$	13,772,726	$	13,772,726	$	—	$	—	$	11,022,248	$	11,022,248

Measured at Fair Value on a Recurring Basis at
September 30, 2018 December 31, 2017
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets carried at fair value
Investment securities available for sale:
Agency RMBS $ —
$ 1,055,433
$ —
$ 1,055,433
$ —
$ 1,169,536
$ —
$ 1,169,536
Non-Agency RMBS —
98,244
—
98,244
—
102,125
—
102,125
CMBS —
81,760
51,751
133,511
—
93,498
47,922
141,420
Multi-family loans held in securitization trusts —
—
10,070,834
10,070,834
—
—
9,657,421
9,657,421
Residential mortgage loans, at fair value —
—
181,910
181,910
—
—
87,153
87,153
Derivative assets:

Interest rate swaps —
8,760
—
8,760
—
10,101
—
10,101
Investments in unconsolidated entities —
—
35,061
35,061
—
—
42,823
42,823
Total $ —
$ 1,244,197
$ 10,339,556
$ 11,583,753
$ —
$ 1,375,260
$ 9,835,319
$ 11,210,579
Liabilities carried at fair value
Multi-family collateralized debt obligations $ —
$ —
$ 9,504,313
$ 9,504,313
$ —
$ —
$ 9,189,459
$ 9,189,459
Total $ —
$ —
$ 9,504,313
$ 9,504,313
$ —
$ —
$ 9,189,459
$ 9,189,459

⁽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 $27.8 million netted against a variation margin of $41.9 million at June 30, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.

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The following ~~table details~~tables detail changes in valuation for the Level 3 assets for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively (amounts in thousands):

Level 3 Assets:


	Nine Months Ended September 30,						Six Months Ended June 30, 2019
	2018			2017			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	$	9,835,319		$	7,061,842		$	11,679,847		$	737,523		$	32,994		$	52,700		$	12,503,064
Total (losses)/gains (realized/unrealized)
Total gains/(losses) (realized/unrealized)
Included in earnings ⁽¹⁾	(280,300		)	38,978			574,231			25,359			5,753			17,734			623,077
Included in other comprehensive income	901			208
Included in other comprehensive income (loss)							—			—			—			(13,665		)	(13,665		)
Transfers in							—			—			—			—			—
Transfers out							—			(182		)	—			—			(182		)
Contributions	—			1,300			—			—			50,000			—			50,000
Paydowns/Distributions	(133,101		)	(139,751		)	(106,363		)	(61,275		)	(639		)	—			(168,277		)
Sales	(7,105		)	(4,100		)	—			(19,814		)	—			(56,769		)	(76,583		)
Purchases ⁽²⁾	923,842			1,598,018
Purchases ⁽¹⁾							2,426,210			380,343			—			—			2,806,553
Balance at the end of period	$	10,339,556		$	8,556,495		$	14,573,925		$	1,061,954		$	88,108		$	—		$	15,723,987


⁽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⁾

During the ~~nine~~six months ended ~~September~~June 30, ~~2018 and 2017,~~2019, the Company purchased first loss PO securities and certain IOs and mezzanine CMBS securities issued from ~~Freddie Mac-sponsored multi-family K-Series securitization trusts. The Company~~securitizations that it determined ~~that~~to consolidate and included in the ~~securitization trusts are VIEs and that the Company is the primary beneficiary of the VIEs.~~Consolidated K-Series. As a result, ~~during the nine months ended September 30, 2018 and 2017,~~ the Company consolidated assets of these ~~Freddie Mac sponsored multi-family K-Series securitization trusts~~securitizations in the ~~amounts~~amount of ~~$0.8~~$2.4 billion ~~and $1.5 billion, respectively~~during the six months ended June 30, 2019 (see Notes 2 and 76).



	Six Months Ended June 30, 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	(244,181		)	(475		)	3,575			1,915		(239,166		)
Included in other comprehensive income (loss)	—			—			—			297		297
Transfers in	—			—			—			—		—
Transfers out	—			—			—			—		—
Contributions	—			—			—			—		—
Paydowns/Distributions	(67,880		)	(9,371		)	(1,246		)	—		(78,497		)
Sales	—			(2,185		)	—			—		(2,185		)
Purchases	—			94,075			—			—		94,075
Balance at the end of period	$	9,345,360		$	169,197		$	45,152		$	50,134	$	9,609,843

Table of Contents

The following table details changes in valuation for the Level 3 liabilities (Multi-family CDOs) for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively (amounts in thousands):

Level 3 Liabilities:


	Nine Months Ended September 30,						Six Months Ended June 30,
	2018			2017			2019			2018
Balance at beginning of period	$	9,189,459		$	6,624,896		$	11,022,248		$	9,189,459
Total gains (realized/unrealized)
Total losses (gains) (realized/unrealized)
Included in earnings ⁽¹⁾	(350,674		)	(1,389		)	531,930			(282,738		)
Purchases ⁽²⁾	767,477			1,472,073			2,324,639			—
Paydowns	(101,949		)	(104,961		)	(106,091		)	(67,880		)
Balance at the end of period	$	9,504,313		$	7,990,619		$	13,772,726		$	8,838,841


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

⁽²⁾

During the ~~nine~~six months ended ~~September~~June 30, ~~2018 and 2017,~~2019, the Company purchased PO securities and certain IOs and mezzanine CMBS securities issued from ~~Freddie Mac-sponsored multi-family K-Series securitization trusts. The Company~~securitizations that it determined ~~that~~to consolidate and include in the ~~securitization trusts are VIEs and that the Company is the primary beneficiary of the VIEs.~~Consolidated K-Series. As a result, ~~during the nine months ended September 30, 2018 and 2017,~~ the Company consolidated liabilities of these ~~Freddie Mac sponsored multi-family K-Series securitization trusts~~securitizations in the ~~amounts~~amount of ~~$0.8~~$2.3 billion ~~and $1.5 billion, respectively~~ (see Notes 2 and 76).

~~Table of Contents~~

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Assets
Multi-family loans held in securitization trusts ⁽¹⁾	$	330,105		$	(47,200	)	$	604,788		$	(219,746	)
Investments in unconsolidated entities ⁽²⁾	1,698			1,858			5,359			2,896
Distressed and other residential mortgage loans, at fair value ⁽³⁾	10,329			(34		)	19,666			(126		)

Liabilities
Multi-family debt held in securitization trusts ⁽¹⁾	(324,898		)	59,219			(590,171		)	239,310

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Change in unrealized (losses) gains – assets
$ (33,153 ) $ (19,767 ) $ (252,899 ) $ 56,995
Change in unrealized gains (losses) – liabilities 45,456
22,120
284,766
(51,811 )
Net change in unrealized gains included in earnings for assets and liabilities $ 12,303
$ 2,353
$ 31,867
$ 5,184


⁽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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~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
	June 30, 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	—	—	$	5,590	$	5,590	—	—	$	5,921	$	5,921

Table of Contents

Assets Measured at Fair Value on a Non-Recurring Basis at
September 30, 2018 December 31, 2017
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Residential mortgage loans held in securitization trusts – impaired loans, net $ —
$ —
$ 6,336
$ 6,336
$ —
$ —
$ 10,317
$ 10,317
Real estate owned held in residential securitization trusts —
—
—
—
—
—
111
111

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



	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019			2018
Residential mortgage loans held in securitization trusts – impaired loans, net	—	—	$	(38	)	$	110

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Residential mortgage loans held in securitization trusts – impaired loans, net $ (17 ) $ 199
$ 93
$ (6 )
Real estate owned held in residential securitization trusts —
(297 ) —
(303 )

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 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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively (dollar amounts in thousands):



		June 30, 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	$	134,993	$	134,993	$	103,724	$	103,724
Investment securities available for sale	Level 2 or 3	1,743,869		1,743,869		1,512,252		1,512,252
Distressed and other residential mortgage loans, at fair value	Level 3	1,061,954		1,061,954		737,523		737,523
Distressed and other residential mortgage loans, net	Level 3	218,094		221,615		285,261		289,376
Investments in unconsolidated entities	Level 3	166,148		166,983		73,466		73,833
Preferred equity and mezzanine loan investments	Level 3	191,387		193,875		165,555		167,739
Multi-family loans held in securitization trusts	Level 3	14,573,925		14,573,925		11,679,847		11,679,847
Derivative assets	Level 2	14,047		14,047		10,263		10,263
Mortgage loans held for sale, net ⁽¹⁾	Level 3	2,460		2,621		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	2,604,356		2,604,356		2,131,505		2,131,505
Residential collateralized debt obligations	Level 3	45,280		43,468		53,040		50,031
Multi-family collateralized debt obligations	Level 3	13,772,726		13,772,726		11,022,248		11,022,248
Securitized debt	Level 3	—		—		42,335		45,030
Subordinated debentures	Level 3	45,000		45,044		45,000		44,897
Convertible notes	Level 2	131,839		138,773		130,762		135,689

September 30, 2018 December 31, 2017

Fair Value
Hierarchy Level

Carrying
Value

Estimated
Fair Value

Carrying
Value

Estimated
Fair Value
Financial Assets:
Cash and cash equivalents Level 1 $ 57,471
$ 57,471
$ 95,191
$ 95,191
Investment securities available for sale ⁽¹⁾
Level 2 or 3 1,287,188
1,287,188
1,413,081
1,413,081
Residential mortgage loans held in securitization trusts, net Level 3 60,459
60,228
73,820
72,131
Distressed residential mortgage loans, at carrying value, net ⁽²⁾
Level 3 260,837
263,935
331,464
334,765
Residential mortgage loans, at fair value ⁽³⁾
Level 3 181,910
181,910
87,153
87,153
Multi-family loans held in securitization trusts Level 3 10,070,834
10,070,834
9,657,421
9,657,421
Derivative assets Level 2 8,760
8,760
10,101
10,101
Mortgage loans held for sale, net ⁽⁴⁾
Level 3 3,284
3,622
5,507
5,598
Mortgage loans held for investment ⁽⁴⁾
Level 3 1,760
1,760
1,760
1,900
Preferred equity and mezzanine loan investments ⁽⁵⁾
Level 3 198,277
199,885
138,920
140,129
Investments in unconsolidated entities ⁽⁶⁾
Level 3 43,736
43,795
51,143
51,212
Financial Liabilities:
Financing arrangements, portfolio investments Level 2 1,130,659
1,130,659
1,276,918
1,276,918
Financing arrangements, residential mortgage loans Level 2 177,226
177,226
149,063
149,063
Residential collateralized debt obligations Level 3 56,504
54,228
70,308
66,865
Multi-family collateralized debt obligations Level 3 9,504,313
9,504,313
9,189,459
9,189,459
Securitized debt Level 3 53,597
57,236
81,537
87,891
Subordinated debentures Level 3 45,000
44,988
45,000
45,002
Convertible notes Level 2 130,251
137,923
128,749
140,060


⁽¹⁾	~~Includes $51.8 million and $47.9 million of investment securities for sale held in securitization trusts as of September 30, 2018 and December 31, 2017, respectively.~~

⁽²⁾

Includes distressed residential mortgage loans held in securitization trusts with a carrying value amounting to approximately $96.5 million and $121.8 million at September 30, 2018 and December 31, 2017, respectively, and distressed residential mortgage loans with a carrying value amounting to approximately $164.3 million and $209.7 million at September 30, 2018 and December 31, 2017, respectively.


⁽³⁾	Includes distressed residential mortgage loans with a carrying value amounting to $112.5 million and $36.9 million at September 30, 2018 and December 31, 2017, respectively, and second mortgages with a carrying value amounting to $69.4 million and $50.2 million at September 30, 2018 and December 31, 2017, respectively.


⁽⁴⁾	Included in receivables and other assets in the accompanying condensed consolidated balance sheets.


⁽⁵⁾	~~Includes preferred equity and mezzanine loan investments accounted for as loans (seeNote 9~~).


⁽⁶⁾	Includes investments in unconsolidated entities accounted for under the fair value option with a carrying value of $35.1 million and $42.8 million at September 30, 2018 and December 31, 2017, respectively (~~see Note 8)~~.

Table of Contents

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 – Residential mortgage loans held in the securitization trusts are recorded at amortized 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 – 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.

Mortgage loans held for sale, net – The fair value of mortgage loans held for sale, 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.


e.	Preferred equity and mezzanine loan 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.


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


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.


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


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


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

5148

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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 12,661,287 and 12,000,000 shares issued and outstanding as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017.~~2018, respectively.

~~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, 2018 and December 31, 2017, 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 of $0.01 per share~~ and a liquidation preference of $25 per share, in an underwritten public offering, for net proceeds of approximately $86.9 million, after deducting underwriting discounts and offering expenses. As of September 30, 2018 and December 31, 2017, there were 4,140,000 shares of Series C Preferred Stock authorized. The Series C Preferred Stock is entitled to receive a dividend at a rate of 7.875% 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 October 13, 2017, the Company issued 5,400,000~~5,750,000 shares of 8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”)~~, with a par value~~. On March 28, 2019, the Company classified and designated an additional 2,460,000 shares and 2,650,000 shares of ~~$0.01 per share~~the Company's authorized but unissued preferred stock as Series C Preferred Stock and ~~a liquidation preference~~Series D Preferred Stock, respectively. At June 30, 2019, the Company had designated 6,000,000 shares, 6,600,000 shares and 8,400,000 shares of ~~$25 per share, in an underwritten public offering, for net proceeds~~Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, respectively (collectively, the "Preferred Stock"). The Company had 3,101,683 shares of ~~approximately $130.5 million, after deducting underwriting discounts~~Series B Preferred Stock, 3,993,866 shares of Series C Preferred Stock and ~~offering expenses. As of September 30, 2018 and December 31, 2017, there were 5,750,000~~5,565,738 shares of Series D Preferred Stock ~~authorized.~~issued and outstanding as of June 30, 2019. The Company had 3,000,000 shares of Series B Preferred Stock, 3,600,000 shares of Series C Preferred Stock and 5,400,000 shares of Series D Preferred Stock issued and outstanding as of 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 D 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 8.00% per year on ~~the~~its $25 liquidation 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 ~~the~~its $25 liquidation preference. ~~The Series D~~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, Series C Preferred Stock, and Series D~~ 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, Series C Preferred Stock, and Series D~~ 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, Series C Preferred Stock, and Series D~~ 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, Series C Preferred Stock, and Series D~~ Preferred Stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of ~~Series B~~the series of Preferred Stock ~~Series C Preferred Stock, or Series D Preferred Stock.~~whose terms are being changed.

The Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock are not redeemable by the Company prior to June 4, 2018, April 22, 2020, 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 D Preferred Stock, respectively). On and after June 4, 2018, 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 D 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, Series C Preferred Stock, and Series D~~ 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, Series C Preferred Stock, and Series D~~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.

~~Table of Contents~~

Upon the occurrence of a Change of Control, each holder of ~~Series B Preferred Stock, Series C Preferred Stock, and Series D~~ Preferred Stock will have the right (unless the Company has exercised its right to redeem the ~~Series B~~ Preferred ~~Stock, Series C Preferred Stock, or Series D Preferred Stock, respectively)~~Stock) to convert some or all of the ~~Series B Preferred Stock, Series C Preferred Stock, or Series D~~ Preferred Stock held by such holder into a number of shares of our common stock per share of ~~Series B Preferred Stock, Series C Preferred Stock or Series D~~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 the ~~Series B Preferred Stock, Series C Preferred Stock, and Series D~~ Preferred Stock through ~~September~~June 30, ~~2018,~~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 commencing January 1, ~~2017~~2018 through ~~September~~June 30, ~~2018 and on the Series D Preferred Stock from its time of original issuance through September 30, 2018:~~2019:



			Cash Dividend Per Share
Declaration Date	Record Date	Payment Date	Series B Preferred Stock		Series C Preferred Stock		Series D Preferred Stock
June 14, 2019	July 1, 2019	July 15, 2019	$	0.484375	$	0.4921875	$	0.50
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

Cash Dividend Per Share
Declaration Date Record Date Payment Date Series B Preferred Stock Series C Preferred Stock Series D Preferred Stock
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

December 7, 2017 January 1, 2018 January 15, 2018 0.484375
0.4921875
0.51111
⁽¹⁾
September 14, 2017 October 1, 2017 October 15, 2017 0.484375
0.4921875
—
June 14, 2017 July 1, 2017 July 15, 2017 0.484375
0.4921875
—
March 16, 2017 April 1, 2017 April 15, 2017 0.484375
0.4921875
—


⁽¹⁾	~~Cash dividend for the partial quarterly period that began on October 13, 2017 and ended on January 14, 2018.~~


(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, ~~2017~~2018 and ended ~~September~~June 30, ~~2018:~~2019:



Period	Declaration Date	Record Date	Payment Date	Cash Dividend Per Share
Second Quarter 2019	June 14, 2019	June 24, 2019	July 25, 2019	$	0.20
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

Period Declaration Date Record Date Payment Date Cash Dividend Per Share
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
Fourth Quarter 2017 December 7, 2017 December 18, 2017 January 25, 2018 0.20
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


(c)	Public Offering of Common Stock

~~On August 14, 2018,~~The following table details the ~~Company issued 14,375,000 shares~~Company's public offering of ~~its~~ common stock ~~through an underwritten public offering, at a public offering price of $6.16 per share, resulting~~during the six months ended June 30, 2019 (dollar amounts in ~~total net proceeds to the Company of $86.0 million after deducting underwriting discounts and commissions and offering expenses.~~thousands):



Share Issue Month	Shares Issued	Net Proceeds ⁽¹⁾
January 2019	14,490,000	$	83,772
March 2019	17,250,000	101,160
May 2019	20,700,000	123,102


⁽¹⁾	Proceeds are net of underwriting discounts and commissions and offering expenses

~~Table of Contents~~


(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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During the three and six months ended ~~September~~June 30, ~~2018,~~2019, the Company issued ~~2,443,487~~2,260,200 shares of ~~its~~ common stock under the Common Equity Distribution Agreement, at an average sales price of ~~$6.31~~$6.12 per share, resulting in total net proceeds to the Company of ~~$15.2 million after deducting the placement fees.~~$13.6 million. During the ~~nine~~three and six months ended ~~September~~June 30, 2018, the Company issued ~~14,588,631~~12,145,144 shares of ~~its~~ common stock under the Common Equity Distribution Agreement, at an average sales price of ~~$6.19~~$6.17 per share, resulting in total net proceeds to the Company of ~~$89.0 million after deducting the placement fees.~~$73.8 million. As of ~~September~~June 30, ~~2018,~~2019, approximately ~~$86.4~~$72.5 million of 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, from time to time through the sales agent. 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.

During the three and six months ended June 30, 2019, the Company issued 661,287 shares of Preferred Stock under the Preferred Equity Distribution Agreement, at an average sales price of $24.72 per share, resulting in total net proceeds to the Company of $16.1 million. As of June 30, 2019, approximately $33.7 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~~June 30, ~~2018 and September 30, 2017,~~2019, the Company's Convertible Notes were determined to be ~~dilutive~~anti-dilutive and were not 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. During the six months ended June 30, 2019, the Company's Convertible Notes were determined to be dilutive and were included in the calculation of diluted earnings per common share. During the three and ~~nine~~six months ended ~~September~~June 30, 2018, ~~PSUs~~the Company's Convertible Notes were determined to be dilutive and were included in the calculation of diluted earnings per common share.

During the three and six months ended June 30, 2019 and 2018, performance stock units ("PSUs") awarded under the Company's ~~2018 Long-Term~~2017 Equity Incentive ~~Program ("2018 Long-Term EIP") (~~Plan (as amended, the "2017 Plan," see Note 2119) 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 ~~Agreements~~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.

~~Table of Contents~~

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 June 30,						Six Months Ended June 30,
	2019			2018			2019			2018 ⁽¹⁾
Basic Earnings per Common Share
Net income attributable to Company	$	22,735		$	29,694		$	66,874		$	59,311
Less: Preferred stock dividends	(6,257		)	(5,925		)	(12,182		)	(11,850		)
Net income attributable to Company's common stockholders	$	16,478		$	23,769		$	54,692		$	47,461
Basic weighted average common shares outstanding	200,691			115,211			187,628			113,623
Basic Earnings per Common Share	$	0.08		$	0.21		$	0.29		$	0.42

Diluted Earnings per Common Share:
Net income attributable to Company	$	22,735		$	29,694		$	66,874		$	59,311
Less: Preferred stock dividends	(6,257		)	(5,925		)	(12,182		)	(11,850		)
Add back: Interest expense on convertible notes for the period, net of tax	—			2,633			5,307			5,267
Net income attributable to Company's common stockholders	$	16,478		$	26,402		$	59,999		$	52,728
Weighted average common shares outstanding	200,691			115,211			187,628			113,623
Net effect of assumed convertible notes conversion to common shares	—			19,695			19,695			19,695
Net effect of assumed PSUs vested	1,707			258			1,688			152
Diluted weighted average common shares outstanding	202,398			135,164			209,011			133,470
Diluted Earnings per Common Share	$	0.08		$	0.20		$	0.29		$	0.40

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Three Months Ended September 30, Nine Months Ended September 30,
2018
2017 ⁽¹⁾
2018
2017 ⁽¹⁾
Basic Earnings per Common Share
Net income attributable to Company $ 33,973
$ 27,845
$ 93,285
$ 61,364
Less: Preferred stock dividends (5,925 ) (3,225 ) (17,775 ) (9,675 )
Net income attributable to Company's common stockholders $ 28,048
$ 24,620
$ 75,510
$ 51,689
Basic weighted average common shares outstanding 132,413
111,886
119,955
111,824
Basic Earnings per Common Share $ 0.21
$ 0.22
$ 0.63
$ 0.46

Diluted Earnings per Common Share:
Net income attributable to Company $ 33,973
$ 27,845
$ 93,285
$ 61,364
Less: Preferred stock dividends (5,925 ) (3,225 ) (17,775 ) (9,675 )
Add back: Interest expense on convertible notes for the period, net of tax 2,570
2,428
7,838
6,982
Net income attributable to Company's common stockholders $ 30,618
$ 27,048
$ 83,348
$ 58,671
Weighted average common shares outstanding 132,413
111,886
119,955
111,824
Net effect of assumed PSUs vested 620
—
395
—
Net effect of assumed convertible notes conversion to common shares 19,694
19,694
19,694
18,107
Diluted weighted average common shares outstanding 152,727
131,580
140,044
129,931
Diluted Earnings per Common Share $ 0.20
$ 0.21
$ 0.60
$ 0.45


⁽¹⁾	~~There were no dilutive PSU awards during the three and nine months ended September 30, 2017.~~


~~21.~~19.	Stock Based Compensation

In May 2017, the Company’s stockholders approved the 2017 Plan, with such stockholder action resulting in the termination of the Company’s 2010 Stock Incentive Plan (the “2010 Plan”). In June 2019, the Company's stockholders approved an amendment to the 2017 Plan to increase the shares reserved under the 2017 Plan by 7,600,000 shares of common stock. 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~~June 30, ~~2018,~~2019, there were ~~217,163~~81,837 shares of non-vested restricted stock outstanding under the 2010 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.~~13,170,000. Of the common stock authorized at ~~September~~June 30, ~~2018, 3,865,174~~2019, 9,051,591 shares ~~are~~remain available for issuance under the 2017 Plan. The Company’s non-employee directors have been issued ~~131,975~~228,750 shares under the 2017 Plan as of ~~September~~June 30, ~~2018.~~2019. The Company’s employees have been issued ~~292,459~~828,701 shares of restricted stock under the 2017 Plan as of ~~September~~June 30, 2019. At June 30, 2019, there were 756,861 shares of non-vested restricted stock outstanding and 3,060,958 common shares reserved for issuance in connection with PSUs under the 2017 Plan.

Of the common stock authorized at December 31, 2018, 3,865,174 shares were reserved for issuance under the 2017 Plan. The Company's non-employee directors had been issued 131,975 shares under the 2017 Plan as of December 31, 2018. The Company’s employees had been issued 292,459 shares of restricted stock under the 2017 Plan as of December 31, 2018. At ~~September 30,~~December 31, 2018, there were 290,373 shares of non-vested restricted stock outstanding and 1,280,392 common shares reserved for issuance in connection with outstanding PSUs under the 2017 Plan.


(a)	Restricted Common Stock Awards

During the three and ~~nine~~six months ended ~~September~~June 30, 2019, the Company recognized non-cash compensation expense on its restricted common stock awards of $0.6 million and $1.1 million, respectively. During the three and six months ended June 30, 2018, the Company recognized non-cash compensation expense on its restricted common stock awards of $0.3 million and $1.0 million, respectively. During the three and nine months ended September 30, 2017, the Company recognized non-cash compensation expense on its restricted common stock awards of $0.8 million and $1.5$0.6 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 of shares for the three and six months ended June 30, 2019. There were forfeitures of 5,120 shares for the three and six months ended June 30, 2018.

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


	2018				2017				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	422,928		$	6.36	319,058		$	6.40	507,536		$	5.91	422,928		$	6.36
Granted	289,792		5.63		332,921		6.54		536,242		6.30		206,597		5.57
Vested	(200,064	)	6.55		(229,051	)	6.67		(205,080	)	5.85		(200,064	)	6.55
Forfeited	(5,120	)	6.25		—		—		—		—		(5,120	)	6.25
Non-vested shares as of September 30	507,536		5.91		422,928		6.36
Weighted-average of restricted stock granted during the period	289,792		$	5.63	332,921		$	6.54
Non-vested shares as of June 30									838,698		$	6.18	424,341		$	5.90
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.

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At ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, the Company had unrecognized compensation expense of ~~$2.3~~$4.2 million and ~~$1.9~~$2.1 million, respectively, related to the non-vested shares of restricted common stock under the 2010 Plan and 2017 ~~Plan.~~Plan, collectively. The unrecognized compensation expense at ~~September~~June 30, ~~2018~~2019 is expected to be recognized over a weighted average period of ~~2.1~~2.3 years. The total fair value of restricted shares vested during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 was approximately ~~$1.1~~$1.3 million and ~~$1.5~~$1.1 million, respectively. The requisite service period for restricted ~~shares~~stock awards at issuance is three ~~years.~~years and the restricted common stock either vests ratably over a three year period or at the end of the requisite service period.


(b)	Performance ~~Share Awards~~

In May 2015, the Compensation Committee of the Board of Directors approved a PSA under the 2010 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 grant date fair value of the PSA 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 peer companies to determine the total shareholder return of the Company’s common stock relative to its peer companies over a future period of three years. For the PSA granted in 2015, the inputs used by the model to determine the fair value were (i) historical stock return volatilities of the Company and its peer companies over the most recent three year period, (ii) a risk free rate based on the three year U.S. Treasury rate on grant date, and (iii) historical pairwise stock return correlations between the Company and its peer companies over the most recent three year period.

Under the terms of the agreement pursuant to which the PSA was granted, vesting of the PSA would occur at the end of three years based on three-year total shareholder return in April 2018. At the end of the three-year performance period in April 2018, no shares were issued under the PSA award.


~~(c)~~	~~Performance~~ Stock Units

During the ~~nine~~three and six months ended ~~September~~June 30, 2019 and 2018, the Compensation Committee and the Board of Directors approved the grant of ~~PSUs~~PSUs. Each PSU represents an unfunded promise to receive one share of the ~~Chief Executive Officer, Chief Financial Officer and certain other employees as part of our 2018 Long-Term EIP.~~Company's common stock once the performance 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 2017 Plan pursuant to the PSU Agreements. ~~At the time of grant, the target number of shares pursuant to the PSU awards totaled 842,792 shares of common stock. The PSU awards had a grant date fair value of approximately $3.5 million.~~ Vesting of the PSUs will occur at the end of three years based on the following:


•	If three-year TSR performance relative to the Company's identified performance peer group (the "Relative TSR") is less than the 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.

Total shareholder return for the Company and each member of the peer group 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 per share volume weighted average price (the “VWAP”) of such entity’s common stock for the last thirty (30) consecutive trading days of the performance period minus the arithmetic average per share VWAP of such entity’s common stock for the last thirty (30) consecutive trading days immediately prior to the performance period by (ii) the arithmetic average per share VWAP of such entity’s common stock for the last thirty (30) consecutive trading days immediately prior to the performance period. ~~Each PSU represents an unfunded promise to receive one share of the Company's common stock once the performance condition has been satisfied.~~

The grant date fair value of the 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 over a future period of three years. For the PSUs granted in 2019 and 2018, the inputs used by the model to determine the fair value are (i) historical stock 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 for the period interpolated from the U.S. Treasury yield curve on grant date.

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~~Compensation expense related to~~A summary of the ~~PSUs was $0.3 million and $0.6 million~~activity of the target PSU Awards under the 2017 Plan for the ~~three and nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~respectively.~~ 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	1,175,726	4.01		653,365	4.08
Vested	—	—		—	—
Non-vested target PSUs as of June 30	2,018,518	$	4.09	653,365	$	4.08

As of ~~September~~June 30, 2019 and 2018, there was ~~$3.0~~$5.9 million and $2.4 million of unrecognized compensation cost related to the non-vested portion of the ~~PSUs.~~PSUs, respectively. Compensation expense related to the PSUs was $0.7 million and $1.4 million for the three and six months ended June 30, 2019, respectively. Compensation expense related to the PSUs was $0.2 million for the three and six months ended June 30, 2018.

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~~22.~~20.	Income Taxes

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~September 30, 2017,~~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~~six months ended ~~September~~June 30, 2019 and 2018, ~~and September 30, 2017~~respectively, is comprised of the following components (dollar amounts in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Current income tax expense	$	15		$	7		$	8		$	7
Deferred income tax benefit	(149		)	(20		)	(68		)	(99		)
Total benefit	$	(134	)	$	(13	)	$	(60	)	$	(92	)

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Current income tax (benefit) expense $ (94 ) $ 541
$ (87 ) $ 2,280
Deferred income tax benefit (360 ) (34 ) (460 ) (93 )
Total provision $ (454 ) $ 507
$ (547 ) $ 2,187

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~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are as follows (dollar amounts in thousands):


	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Deferred tax assets
Net operating loss carryforward	$	3,019		$	295		$	3,213		$	2,416
Capital loss carryover							1,173			739
GAAP/Tax basis differences	3,379			2,237			4,073			3,903
Total deferred tax assets ⁽¹⁾	6,398			2,532			8,459			7,058
Deferred tax liabilities
Deferred tax liabilities	9			144			5			6
Total deferred tax liabilities ⁽²⁾	9			144			5			6
Valuation allowance ⁽¹⁾	(5,723		)	(2,182		)	(7,403		)	(6,069		)
Total net deferred tax asset	$	666		$	206		$	1,051		$	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~~June 30, ~~2018,~~2019, the Company, through ~~wholly owned~~wholly-owned TRSs, had incurred net operating losses in the aggregate amount of approximately ~~$8.9~~$9.4 million. The Company’s carryforward net operating losses can be carried forward indefinitely until they are offset by future taxable income. Additionally, as of June 30, 2019, the Company, through one of its wholly-owned TRSs, had also incurred approximately $3.4 million in capital losses. The Company's carryforward capital losses will expire between 2023 and 2024 if they are not offset by future capital gains. At ~~September~~June 30, ~~2018,~~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.

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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.

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21.	Subsequent Events

On ~~December~~July 22, ~~2017, H.R.1, informally known as~~2019, the ~~Tax Cuts and Jobs Act (the “TCJA”) was signed into law. The TCJA makes major changes~~Company issued 23,000,000 shares of its common stock through an underwritten public offering at a public offering price of $6.11 per share, resulting in total net proceeds to the ~~Internal Revenue Code, including several provisions~~Company of ~~the Internal Revenue Code that may affect the taxation of real estate investment trusts~~$137.5 million after deducting underwriting discounts and holders of their securities. The most significant of these changes, among other things, include lowering U.S. corporate income tax rates, net operating loss utilization rules, limitation on the deduction of business interest,commissions and ~~income recognition rules.~~estimated offering expenses.

We have recognized the tax effects of the TCJA in the three and nine months ended September 30, 2018 and the year ended December 31, 2017 through the measurement of deferred tax assets at the reduced corporate tax rate. We will continue to analyze and monitor the application of TCJA to our business and continue to assess our provision for income taxes as future guidance is issued.

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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 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 a downgrade of the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac, 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; our ability to identify and acquire our targeted assets; our ability to borrow to finance our assets and the terms thereof; changes in ~~government~~governmental laws, regulations or policies affecting our 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;~~Act of 1940, as 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, ~~2017 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, 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:

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

"Agency fixed-rate" refers to Agency RMBS comprised of fixed-rate RMBS;

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

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

“~~CLO”~~CDO” refers to collateralized ~~loan~~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;

“Consolidated K-Series” refers to Freddie Mac-sponsored multi-family loan K-Series securitizations, of which we, or one of our ~~"special~~“special purpose entities,"” or ~~"SPEs,"~~“SPEs,” own the first loss POs and certain IOs and mezzanine ~~securities;~~securities that we consolidate in our financial 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;

“distressed residential mortgage loans” refers to pools of ~~performing~~seasoned re-performing, non-performing and ~~re-performing, fixed-rate and adjustable-rate, fully amortizing, interest-only and balloon, seasoned~~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;

~~“CDO” refers to collateralized debt obligation;~~

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

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

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

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

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

“Variable Interest ~~Entity,”~~Entity” or ~~“VIE,”~~“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. 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 ~~certain~~ credit sensitive assets and investments sourced from distressed markets 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 (i) structured multi-family property investments such as multi-family CMBS and preferred equity in, and mezzanine loans to, owners of multi-family properties, (ii) ~~distressed residential assets such as~~ residential mortgage loans, ~~sourced from~~including distressed ~~markets~~residential mortgage loans, non-QM loans, second mortgages, and other residential mortgage loans, (iii) non-Agency RMBS, ~~(iii) second mortgages,~~ (iv) Agency RMBS and (v) certain mortgage-, residential housing- and other ~~mortgage-related and residential housing-related~~credit-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, ~~of 1940, as amended (the “Investment Company Act”),~~ we also may opportunistically acquire and manage various other types of mortgage-related and residential housing-related assets that we believe will compensate us appropriately for the risks associated with them, including, without limitation, ~~non-QM loans,~~ collateralized mortgage obligations, excess mortgage servicing spreads and securities issued by newly originated ~~residential~~ securitizations, including credit sensitive securities from these securitizations.

We intend to maintain our focus on expanding our portfolio 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,~~During the six months ended June 30, 2019, we acquired an additional ~~$301.2~~$937.1 million of single-family residential, multi-family and ~~multi-family~~other credit ~~assets during the nine months ended September 30, 2018.~~assets. In periods where we have working capital in excess of our short-term liquidity needs, we may invest the excess in more liquid assets ~~such as Agency RMBS,~~ 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 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.

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 financings, such as securitizations and convertible notes, with terms longer than one year.

We internally manage the assets in our investment portfolio, with the exception of certain distressed residential loans that are managed by Headlands Asset Management LLC ("Headlands") pursuant to a management agreement. As part of our investment strategy, we may, from time to time, utilize one or more external investment managers to manage specific asset types that we target or own.

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Key ~~Third~~Second Quarter ~~2018~~2019 Developments

Multi-Family Credit Portfolio Activity

We purchased multi-family CMBS securities totaling $45.6 million. In addition, we funded $45.5 million in preferred equity investments in owners of multi-family properties during the second quarter of 2019.

Residential Credit Portfolio Activity

We acquired an aggregate of $338.4 million of single-family residential credit assets, including distressed residential mortgage loans totaling $148.0 million, other residential mortgage loans totaling $72.8 million and non-Agency RMBS totaling $117.6 million.

We also funded $50.0 million in other residential-related equity investments during the second quarter of 2019.

Common Stock Issuance

We issued ~~14,375,000~~20,700,000 shares of common stock through an underwritten public offering in May 2019, at a public offering price per share of ~~$6.16,~~$6.08, resulting in ~~total~~ net proceeds to ~~the Company~~us of ~~$86.0~~$123.1 million after deducting underwriting discounts, ~~and~~ commissions and offering expenses. We also issued and sold ~~2,443,487~~2,260,200 shares of common stock during the quarter ended ~~September~~June 30, ~~2018~~2019 under our at-the-market common equity offering program, resulting in net proceeds to us of $13.6 million, after deducting placement fees.

Preferred Stock Issuance

We issued and sold 661,287 shares of preferred stock during the quarter ended June 30, 2019 under our at-the-market preferred equity offering program, resulting in net proceeds to the Company of ~~$15.2~~$16.1 million, after deducting placement fees.

~~Residential Mortgage Loan Activity~~

~~We acquired residential mortgage loans, including distressed residential mortgage loans and second mortgages, for an aggregate purchase cost of approximately $24.6 million.~~

~~We sold residential mortgage loans, including distressed residential mortgage loans, for aggregate proceeds of approximately $30.1 million during the quarter ended September 30, 2018.~~

~~Purchases of CMBS and Non-Agency RMBS~~

We purchased CMBS securities, including first loss PO, IO, and mezzanine securities issued by a Freddie Mac-sponsored multi-family loan K-Series securitization, for a gross purchase cost of approximately ~~$40.9 million~~ ~~and non-Agency RMBS for a gross purchase cost of approximately~~ ~~$76.7 million~~.

~~Third~~Second Quarter ~~2018~~2019 Common Stock and Preferred Stock Dividends

On ~~September 17, 2018,~~June 14, 2019, our Board of Directors declared a regular quarterly cash dividend of $0.20 per share of common stock for the quarter ended ~~September~~June 30, ~~2018.~~2019. The dividend was paid on ~~October 26, 2018~~July 25, 2019 to our common stockholders of record as of ~~September 27, 2018.~~June 24, 2019.

On ~~September 17, 2018,~~June 14, 2019, in accordance with the terms of our 7.75% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred 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~~July 15, ~~2018~~2019 to holders of record of our Series B Preferred Stock as of ~~October~~July 1, ~~2018.~~2019.

~~Also on September 17, 2018,~~On June 14, 2019, in accordance with the terms of our 7.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred 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~~July 15, ~~2018~~2019 to holders of record of our Series C Preferred Stock as of ~~October~~July 1, ~~2018.~~2019.

Also on ~~September 17, 2018,~~June 14, 2019, in accordance with the terms of our 8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ("Series D Preferred Stock"), our Board of Directors declared a Series D Preferred Stock quarterly cash dividend of $0.50 per share of Series D Preferred Stock. The dividend was paid on ~~October~~July 15, ~~2018~~2019 to holders of record of our Series D Preferred Stock of record as of ~~October~~July 1, ~~2018.~~2019.

Subsequent Development

On July 22, 2019, the Company issued 23,000,000 shares of its common stock through an underwritten public offering at a public offering price of $6.11 per share, resulting in total net proceeds to the Company of $137.5 million after deducting underwriting discounts and commissions and estimated offering expenses.

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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 assets. The market conditions discussed below significantly influence our investment strategy and results:

General. Global and U.S. equity markets ~~performed well~~made gains during the ~~third~~second quarter of ~~2018,~~2019, despite volatility largely driven by ~~robust~~investor uncertainty regarding global trade restrictions, while economic ~~growth and earnings data. However,~~data remains mixed. The rise in U.S. equities was driven by market expectations that the ~~latter part of the quarter was marked by the reemergence of market volatility, which we expect to persist until after midterm congressional elections~~Federal Reserve will lower interest rates in the ~~U.S. Employment figures~~near term and ~~industrial activity indicators remained strong despite investors’ continued concerns regarding U.S. interest rate increases and global~~indications of progress in trade ~~restrictions. However, emerging markets declined again this quarter, largely as a result of the strength of the U.S. dollar.~~tensions. U.S. economic data released over the past quarter suggests that the U.S. economy has continued to expand, with U.S. gross domestic product (“GDP”) estimated to have grown by ~~3.5%~~2.1% (advance estimate) in the ~~third~~second quarter of ~~2018,~~2019, down ~~slightly~~ from GDP growth of ~~4.2% (revised)~~3.1% for ~~the second quarter of 2018. GDP grew 2.2% during~~ the first quarter of ~~2018~~2019 and ~~2.3%~~2.2% for the ~~year~~quarter ended December 31, ~~2017.~~2018. While GDP growth and the labor market data remain solid, consumer and business confidence indices have weakened and recent survey data has indicated that business activity is slowing.

The U.S. labor market continued to expand during the ~~third~~second quarter of ~~2018.~~2019. According to the U.S. Department of Labor, the U.S. unemployment rate decreased slightly over the quarter, ending at 3.7% as of the end of ~~September 2018.~~June 2019. Total nonfarm payroll employment posted an average monthly increase of ~~164,000~~171,000 and 172,000 jobs during the three and six months ended ~~September~~June 30, ~~2018~~2019, respectively, as compared to an average monthly increase of ~~201,000~~223,000 jobs in 2018. Although the pace of the labor market expansion has slowed some in 2019, average hourly earnings for all employees of private nonfarm payrolls have increased by 3.1% over the ~~twelve months ended September 30, 2018.~~prior 12 months.

Federal Reserve and Monetary ~~Policy.~~ ~~In September 2018,~~Policy. On July 31, 2019, in ~~view~~light of ~~realized~~the implications of global economic developments and ~~expected labor market conditions, economic activity and inflation,~~subdued inflationary pressures, the Federal Reserve ~~again raised~~lowered the target range for the federal funds rate by 25 basis points ~~from~~to 2.00% to 2.25%, the first rate cut in over a decade. The Federal Reserve indicated that it will continue to monitor data and ~~indicated its expectations for further gradual increases.~~will act as appropriate to sustain the expansion. The Federal Reserve indicated that in determining the size and timing of future adjustments to the target range for the federal funds rate, it will ~~continue~~assess “realized and expected economic conditions relative to ~~aim to support strong labor market conditions~~its maximum employment objective and ~~medium-term~~its symmetric 2 percent inflation ~~of 2%. The increase in September marks the third such increase in the target range for the fed funds rate in 2018.~~objective.” Significant uncertainty with respect to the ~~speed~~timing at which the Federal Reserve will ~~tighten its monetary policy~~adjust the target range for the federal funds rate continues to persist and may result in significant volatility in ~~2018~~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 continued to ~~improve during 2017 and~~display signs of slowing in the ~~first half of 2018, and initial data from the third~~second quarter of ~~2018 suggests that trend continued.~~2019. Data released by S&P Indices for its S&P/Case-Shiller Home Price Indices for ~~August 2018~~May 2019 showed that, on average, home prices increased ~~5.5%~~2.4% for the 20-City Composite over ~~August 2017.~~May 2018, down from 2.5% 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 ~~approximately 870,000~~842,000 and ~~885,000~~853,000 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively, as compared to an annual rate of ~~849,000~~871,000 for the year ended December 31, ~~2017. 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 well in 2017 and~~ have continued to perform ~~solidly to date in 2018.~~well. 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 ~~approximately 338,000~~406,000 and ~~367,000~~373,000 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively, ~~as compared to 345,000~~and 366,000 for the year ended December 31, ~~2017. However, the~~2018. While supply expansion ~~in recent years~~ has ~~led to some concern from~~remained strong, vacancy concerns among multi-family industry participants ~~that such expansion will lead to higher vacancy rates.~~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 48 for the first quarter of 2019, up from 45 for the ~~second~~fourth quarter of 2018 ~~which is slightly higher than index scores over~~and 47 for the ~~prior two~~third quarter of 2018 and representing the highest level it has reached in several years. 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 ~~credit assets~~investments that we own.

Credit ~~Spreads.~~ ~~Although~~Spreads. Credit spreads have generally tightened during the first half of 2019. Specifically, credit spreads for ~~some corporate bonds widened towards the end of the third quarter, credit spreads for~~many residential and multi-family credit assets ~~continued to tighten~~remained tight during the ~~third~~second quarter ~~of 2018~~2019 and this had a positive impact on the value of many of our credit sensitive ~~assets while also resulting in a more challenging current return environment for new investment.~~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~~second quarter of ~~2018, movement in~~2019, the ~~ten-year U.S. Treasury yield was relatively flat,~~bond market experienced moderate volatility with the closing yield of the ~~ten-year~~10-year U.S. Treasury Note trading between ~~2.82%~~2.00% and ~~3.10%~~2.60% during the quarter, closing the quarter at ~~3.05%~~2.00%. Overall interest rate volatility tends to increase the costs of hedging and may place downward pressure on some of our strategies. During the ~~third~~second quarter of ~~2018,~~2019, the Treasury curve ~~continued to flatten~~increased with the spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield ~~closing to 24~~at 25 basis points, ~~down 9~~up 11 basis points from ~~June 29, 2018.~~March 31, 2019. 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.

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Developments at Fannie Mae and Freddie Mac. Payments on the Agency fixed-rate and 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 has been issued by securitization vehicles sponsored by Freddie 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, ~~2017.~~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, ~~2017~~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.

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 yield. The effective yield 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 (or interest income) recognized on these securities.

~~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. 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.

~~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.~~

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~~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~~ – We own 100% of the first loss PO securities of the Consolidated K-Series. The Consolidated K-Series represent Freddie Mac-sponsored multi-family K-Series securitizations, respectively, of which we, or one of our special purpose entities, or 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 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 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 mortgage loans.

~~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 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.

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.

~~Table of Contents~~

~~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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively (dollar amounts in thousands):

At ~~September~~June 30, ~~2018:~~2019:


	Agency RMBS⁽¹⁾			Multi- Family ⁽²⁾			Distressed Residential ⁽³⁾			Other ⁽⁴⁾			Total			Agency RMBS			Residential Credit ⁽¹⁾			Multi- Family Credit ⁽²⁾			Other			Total
Carrying value	$	1,055,433		$	947,851		$	474,717		$	145,228		$	2,623,229		$	994,200		$	1,778,276		$	1,402,217		$	24,739		$	4,199,432
Liabilities:
Callable ⁽⁵⁾⁽³⁾	(852,325		)	(278,334		)	(141,396		)	(35,830		)	(1,307,885		)	(871,613		)	(932,649		)	(800,094		)	—			(2,604,356		)
Non-callable	—			(29,870		)	(23,727		)	(101,504		)	(155,101		)	—			(45,280		)	—			(45,000		)	(90,280		)
Convertible	—			—			—			(130,251		)	(130,251		)	—			—			—			(131,839		)	(131,839		)
Hedges (Net) ⁽⁶⁾⁽⁴⁾	8,760			—			—			—			8,760			14,047			—			—			—			14,047
Cash ⁽⁷⁾	10,554			1,992			7,478			45,744			65,768
Cash and Restricted Cash ⁽⁵⁾																9,942			64,741			21,117			40,150			135,950
Goodwill	—			—			—			25,222			25,222			—			—			—			25,222			25,222
Other	2,123			(8,816		)	18,783			(33,143		)	(21,053		)	3,738			35,511			(7,965		)	(51,778		)	(20,494		)
Net capital allocated	$	224,545		$	632,823		$	335,855		$	(84,534	)	$	1,108,689		$	150,314		$	900,599		$	615,275		$	(138,506	)	$	1,527,682
% of capital allocated	20.2		%	57.1		%	30.3		%	(7.6		)%	100.0		%


⁽¹⁾	Includes ~~Agency fixed-rate~~$1.1 billion of distressed and other residential mortgage loans at fair value, $218.1 million of distressed and other residential mortgage loans at carrying value, $432.8 million of non-Agency RMBS and ~~Agency ARMs.~~$61.3 million of investments in unconsolidated entities.


⁽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. A reconciliation to our financial statements as of ~~September~~June 30, ~~2018~~2019 follows:


Multi-family loans held in securitization trusts, at fair value	$	10,070,834		$	14,573,925
Multi-family CDOs, at fair value	(9,504,313		)	(13,772,726		)
Net carrying value	566,521			801,199
Investment securities available for sale, at fair value	133,511			292,090
Total CMBS, at fair value	700,032			1,093,289
Preferred equity investments, mezzanine loans and investments in unconsolidated entities	228,562			296,187
Real estate under development	22,185			16,727
Real estate held for sale in consolidated variable interest entities	29,558
Mortgages and notes payable in consolidated variable interest entities	(32,486		)	(3,986		)
Financing arrangements, portfolio investments	(278,334		)
Securitized debt	(29,870		)
Repurchase agreements, investment securities				(800,094		)
Cash and other	(6,824		)	13,152
Net Capital in Multi-Family	$	632,823
Net Capital in Multi-Family Credit				$	615,275


⁽³⁾	Includes $260.8 million of distressed residential mortgage loans, $112.5 million of distressed residential mortgage loans, at fair value and $98.2 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 $60.5 million, residential second mortgage loans, at fair value of $69.4 million, investments in unconsolidated entities amounting to $13.5 million and mortgage loans held for sale and mortgage loans held for investment totaling $2.0 million. Mortgage loans held for sale and mortgage loans held for investment are included in the Company’s accompanying condensed consolidated balance sheets in receivables and other assets. Other non-callable liabilities consist of $45.0 million in subordinated debentures and $56.5 million in residential CDOs.


⁽⁵⁾	Includes repurchase agreements.


⁽⁶⁾⁽⁴⁾	Includes derivative ~~assets and~~liabilities of $27.8 million netted against a $41.9 million variation margin.


⁽⁷⁾⁽⁵⁾	~~Includes $7.5 million in deposits held in our distressed residential securitization trusts to be used to pay down outstanding debt. These deposits are~~Restricted cash is included in the Company’s accompanying condensed consolidated balance sheets in receivables and other assets.

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At December 31, ~~2017:~~2018:


	Agency RMBS ⁽¹⁾			Multi- Family ⁽²⁾			Distressed Residential ⁽³⁾			Other ⁽⁴⁾			Total			Agency RMBS			Residential Credit ⁽¹⁾			Multi- Family Credit ⁽²⁾			Other			Total
Carrying value	$	1,169,535		$	816,805		$	474,128		$	140,325		$	2,600,793		$	1,037,730		$	1,252,770		$	1,166,628		$	—		$	3,457,128
Liabilities:
Callable⁽⁵⁾	(928,823		)	(309,935		)	(161,277		)	(25,946		)	(1,425,981		)
Callable ⁽³⁾																(925,230		)	(676,658		)	(529,617		)	—			(2,131,505		)
Non-callable	—			(29,164		)	(52,373		)	(115,308		)	(196,845		)	—			(65,253		)	(30,121		)	(45,000		)	(140,374		)
Convertible	—			—			—			(128,749		)	(128,749		)	—			—			—			(130,762		)	(130,762		)
Hedges (Net)⁽⁶⁾⁽⁴⁾	10,763			—			—			—			10,763			10,263			—			—			—			10,263
Cash⁽⁷⁾	12,365			2,145			9,615			81,407			105,532
Cash and Restricted Cash ⁽⁵⁾																10,377			20,859			17,291			60,618			109,145
Goodwill	—			—			—			25,222			25,222			—			—			—			25,222			25,222
Other	961			(4,651		)	15,673			(26,717		)	(14,734		)	2,374			24,182			(4,929		)	(40,451		)	(18,824		)
Net capital allocated	$	264,801		$	475,200		$	285,766		$	(49,766	)	$	976,001		$	135,514		$	555,900		$	619,252		$	(130,373	)	$	1,180,293
% of capital allocated	27.1		%	48.7		%	29.3		%	(5.1		)%	100.0		%


⁽¹⁾	Includes ~~Agency fixed-rate~~$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 ~~Agency ARMs~~ and ~~Agency IOs.~~$11.0 million of investments in unconsolidated entities.


⁽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. A reconciliation to our financial statements as of December 31, ~~2017~~2018 follows:


Multi-family loans held in securitization trusts, at fair value	$	9,657,421		$	11,679,847
Multi-family CDOs, at fair value	(9,189,459		)	(11,022,248		)
Net carrying value	467,962			657,599
Investment securities available for sale, at fair value	141,420			260,485
Total CMBS, at fair value	609,382			918,084
Preferred equity investments, mezzanine loans and investment in unconsolidated entities	177,440
Preferred equity investments, mezzanine loans and investments in unconsolidated entities				228,067
Real estate under development	22,904			22,000
Real estate held for sale in consolidated variable interest entities	64,202			29,704
Mortgages and notes payable in consolidated variable interest entities	(57,124		)	(31,227		)
Financing arrangements, portfolio investments	(309,935		)
Repurchase agreements, investment securities				(529,617		)
Securitized debt	(29,164		)	(30,121		)
Cash and other	(2,505		)	12,362
Net Capital in Multi-family	$	475,200
Net Capital in Multi-Family Credit				$	619,252


⁽³⁾	Includes $331.5 million of distressed residential mortgage loans, $36.9 million of distressed residential mortgage loans, at fair value and $101.9 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 $73.8 million, residential second mortgage loans, at fair value of $50.2 million, investments in unconsolidated entities amounting to $12.6 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 sheets in receivables and other assets. Other non-callable liabilities consist of $45.0 million in subordinated debentures and $70.3 million in residential CDOs.


⁽⁵⁾	Includes repurchase agreements.


⁽⁶⁾⁽⁴⁾	Includes derivative assets ~~derivative liabilities, payable for securities purchased~~of $1.8 million and an $8.5 million variation margin.


⁽⁷⁾⁽⁵⁾	Includes $0.5 million held in overnight deposits related to our Agency IO investments and $9.6 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 sheets in receivables and other assets.

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Results of Operations

Comparison of the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 to the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we reported net income attributable to the Company's common stockholders of ~~$28.0~~$16.5 million and ~~$75.5~~$54.7 million, respectively, as compared to net income attributable to the Company's common stockholders of ~~$24.6~~$23.8 million and ~~$51.7~~$47.5 million for the respective periods in ~~2017.~~2018. The main components of the change in net income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the same periods in ~~2017~~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 June 30,									Six Months Ended June 30,
	2018			2017		$ Change			2018			2017		$ Change			2019			2018			$ Change			2019			2018			$ Change
Net interest income	$	19,603		$	13,320	$	6,283		$	56,854		$	42,947	$	13,907		$	25,691		$	17,500		$	8,191		$	51,896		$	37,251		$	14,645
Total other income	$	24,303		$	24,918	$	(615	)	$	65,265		$	49,798	$	15,467		$	8,561		$	20,007		$	(11,446	)	$	39,424		$	40,961		$	(1,537	)
Total general, administrative and operating expenses	$	9,912		$	10,996	$	(1,084	)	$	27,380		$	32,791	$	(5,411	)	$	12,394		$	8,769		$	3,625		$	25,038		$	17,467		$	7,571
Income from operations before income taxes	$	33,994		$	27,242	$	6,752		$	94,739		$	59,954	$	34,785		$	21,858		$	28,738		$	(6,880	)	$	66,282		$	60,745		$	5,537
Income tax (benefit) expense	$	(454	)	$	507	$	(961	)	$	(547	)	$	2,187	$	(2,734	)
Income tax benefit																	$	(134	)	$	(13	)	$	(121	)	$	(60	)	$	(92	)	$	32
Net income attributable to Company	$	33,973		$	27,845	$	6,128		$	93,285		$	61,364	$	31,921		$	22,735		$	29,694		$	(6,959	)	$	66,874		$	59,311		$	7,563
Preferred stock dividends	$	5,925		$	3,225	$	2,700		$	17,775		$	9,675	$	8,100		$	6,257		$	5,925		$	332		$	12,182		$	11,850		$	332
Net income attributable to Company's common stockholders	$	28,048		$	24,620	$	3,428		$	75,510		$	51,689	$	23,821		$	16,478		$	23,769		$	(7,291	)	$	54,692		$	47,461		$	7,231
Basic earnings per common share	$	0.21		$	0.22	$	(0.01	)	$	0.63		$	0.46	$	0.17		$	0.08		$	0.21		$	(0.13	)	$	0.29		$	0.42		$	(0.13	)
Diluted earnings per common share	$	0.20		$	0.21	$	(0.01	)	$	0.60		$	0.45	$	0.15		$	0.08		$	0.20		$	(0.12	)	$	0.29		$	0.40		$	(0.11	)

Net Interest Income

The ~~increase~~increases in net interest income for the three and six months ended June 30, 2019 as compared to the corresponding periods in 2018 were primarily driven by increases in average interest earning assets in our multi-family credit and residential credit portfolios resulting from purchase activity since June 30, 2018. These increases were partially offset by decreases in net interest income in our Agency RMBS portfolio due to reductions in average interest earning assets caused primarily by paydowns and the impact of ~~approximately $6.3~~our exit from our Agency IO portfolio in 2018 and increased prepayment rates and higher funding costs as compared to the corresponding periods in 2018.

See "Quarterly Comparative Portfolio Net Interest Margin" below for more information related to net interest income for the three and six months ended June 30, 2019 and 2018.

Other Income

Total other income decreased by $11.4 million for the three months ended ~~September~~June 30, ~~2018~~2019 as compared to the corresponding period in ~~2017~~2018. The change was primarily driven by:

An increase in net interest income of approximately $3.1 million in our multi-family portfolio primarily due to an increase in average interest earning assets to $681.0 million for the three months ended September 30, 2018 as compared to $536.5 million for the three months ended September 30, 2017. The increase in average interest earning assets is attributable to new multi-family preferred equity and mezzanine loan investments and CMBS purchased since September 30, 2017.

An increase in net interest income of approximately $2.0 million in our Agency RMBS portfolio primarily due to an increase in average interest earning assets to $1.1 billion for the three months ended September 30, 2018 as compared to $453.3 million for the three months ended September 30, 2017.

An increase in net interest income of approximately $1.2 million in our distressed residential portfolio primarily due to an increase in asset yield and a decrease in average interest bearing liabilities during the period as compared to the prior year period.

~~The increase in net interest income of approximately $13.9 million for the nine months ended September 30, 2018 as compared to the corresponding period in 2017 was primarily driven by:~~

An increase in net interest income of approximately $8.1 million in our multi-family portfolio primarily due to an increase in average interest earning assets to $647.4 million for the nine months ended September 30, 2018 as compared to $507.9 million for the nine months ended September 30, 2017. The increase in average interest earning assets is attributable to new multi-family preferred equity and mezzanine loan investments and CMBS purchased since September 30, 2017.

An increase in net interest income of approximately $6.8 million in our Agency RMBS portfolio primarily due to an increase in average interest earning assets to $1.2 billion for the nine months ended September 30, 2018 as compared to $490.0 million for the nine months ended September 30, 2017.

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A decrease in net interest income of approximately $0.5 million in our distressed residential portfolio primarily due to a decrease in average interest earning assets to $459.3 million for the nine months ended September 30, 2018 as compared to $604.9 million for the nine months ended September 30, 2017, partially offset by a decrease in average interest bearing liabilities during the period as compared to the prior year period.

~~Other Income~~

~~The decrease in other income of approximately $0.6 million for the three months ended September 30, 2018 as compared to the corresponding period in 2017 was primarily driven by:~~

A decrease in net realized ~~gain~~loss on investment securities and related hedges of ~~$3.8~~$8.8 million ~~during the period as compared~~primarily related to the ~~prior year period primarily due to decreased investment security sales, particularly CMBS.~~liquidation of the Agency IO portfolio in 2018.

~~A decrease~~

An increase in ~~realized~~net gain on distressed and other residential mortgage loans at fair value of ~~$4.9 million as compared to the corresponding period in 2017.~~

A decrease in income from operating real estate and real estate held for sale in consolidated variable interest entities of $1.1 million related to the de-consolidation of Riverchase Landing due to its sale in March 2018.

~~A decrease in other income of $2.2~~$12.2 million primarily due to ~~less income~~an increase in residential mortgage loans accounted for at fair value from purchases since June 30, 2018 and unrealized gains recognized ~~from the Company's investments in unconsolidated entities. The Company had fewer redemptions~~ during the current ~~period as compared to the corresponding period in 2017.~~period.

~~An increase~~

A decrease in net unrealized gains on multi-family loans and debt held in securitization trusts of ~~$10.0~~$6.8 million for the three months ended ~~September~~June 30, ~~2018~~2019 as compared to the corresponding period in ~~2017,~~2018, primarily due to ~~an increase~~a deceleration in ~~multi-family CMBS owned by us~~tightening of credit spreads as compared to the corresponding period in the prior year ~~and tightening of credit spreads.~~offset by an increase in multi-family CMBS owned by us.

An increase in net unrealized ~~gains~~loss on investment securities and related hedges of ~~$1.1~~$27.6 million ~~for the three months ended September 30, 2018 as compared to the prior year period~~ primarily due to unrealized ~~gains~~losses on our interest rate swaps accounted for as trading instruments ~~and~~during the three months

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ended June 30, 2019. In addition, during the three months ended June 30, 2018, the Company reversed unrealized losses related to the liquidation of the Agency IO ~~portfolio prior to third quarter of 2018.~~portfolio.

~~The~~An increase in other income of ~~approximately $15.5~~$2.5 million for the ~~nine~~three months ended ~~September~~June 30, ~~2018~~2019 as compared to the corresponding period in ~~2017~~2018, primarily due to an increase in preferred equity investments accounted for as equity and unrealized gains on our investments in unconsolidated entities.

Total other income decreased by $1.5 million for the six months ended June 30, 2019 as compared to the corresponding period in 2018. The change was primarily driven by:

An increase in net realized gain on investment securities and related hedges of $29.1 million primarily related to the sale of certain multi-family CMBS, where the Company recognized a realized gain of $16.8 million in the first quarter of 2019. Also, in 2018, the Company recognized $12.4 million in realized losses related to the liquidation of the Agency IO portfolio.

An increase in net gain on distressed and other residential mortgage loans at fair value of $23.4 million primarily due to an increase in residential mortgage loans accounted for at fair value from purchases since June 30, 2018 and unrealized gains recognized during the current period.

An increase in realized gain on distressed and other residential mortgage loans at carrying value of $2.7 million primarily due to increased sale activity during the six months ended June 30, 2019.

A decrease in net unrealized gains on multi-family loans and debt held in securitization trusts of ~~$26.7~~$4.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the corresponding period in ~~2017,~~2018, primarily due to ~~the increase~~a deceleration in ~~multi-family CMBS owned by us~~tightening of credit spreads as compared to the corresponding period in ~~2017 and tightening of credit spreads.~~the prior year.

An increase in net unrealized ~~gains~~loss on investment securities and related hedges of ~~$24.9~~$53.9 million ~~for the nine months ended September 30, 2018 as compared to the prior period~~ primarily due to unrealized ~~gains~~losses on our interest rate swaps accounted for as trading instruments ~~and reversal of~~during the six months ended June 30, 2019. In addition, during the six months ended June 30, 2018, the Company reversed unrealized losses ondue to the liquidation of the Agency IO ~~securities sold during the period.~~portfolio.

An increase in ~~net realized loss on investment securities and related hedges~~other income of ~~$15.7~~$6.2 million ~~primarily related to~~for the ~~liquidation of our Agency IO portfolio.~~

~~A decrease in realized gains on distressed residential mortgage loans of $18.0 million~~six months ended June 30, 2019 as compared to the corresponding period in ~~2017.~~

~~A decrease in other income of $3.1 million~~2018, primarily due to an increase in preferred equity investments accounted for as equity and an increase in realized gains on redemption of preferred equity investments.

Comparative Expenses(dollar amounts in thousands)



	Three Months Ended June 30,							Six Months Ended June 30,
General, Administrative and Operating Expenses	2019		2018		$ Change			2019		2018		$ Change
General and Administrative Expenses
Salaries, benefits and directors’ compensation	$	6,492	$	3,173	$	3,319		$	12,163	$	5,729	$	6,434
Professional fees	1,142		1,068		74			2,280		2,206		74
Base management and incentive fees	543		809		(266		)	1,266		1,642		(376		)
Other	1,638		1,035		603			3,016		1,997		1,019
Operating Expenses
Expenses related to distressed and other residential mortgage loans	2,579		1,811		768			5,831		3,414		2,417
Expenses related to real estate held for sale in consolidated variable interest entities	—		873		(873		)	482		2,479		(1,997		)
Total	$	12,394	$	8,769	$	3,625		$	25,038	$	17,467	$	7,571

For the ~~impairment loss recognized on the real estate development property owned through the Company's 50% interest in an entity that owns~~three and develops land and residential homes in Kiawah Island, SC. The Company's $2.1 million impairment loss is partially offset by a $1.0 million non-controlling interest share of the loss. In addition, the company recognized less income from the Company's investments in unconsolidated entities due to fewer redemptions during the periodsix months ended June 30, 2019 as compared to the corresponding ~~period~~periods in ~~2017.~~

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~~Comparative Expenses(dollar amounts in thousands)~~

Three Months Ended September 30, Nine Months Ended September 30,
General, Administrative and Operating Expenses 2018 2017 $ Change 2018 2017 $ Change
General and Administrative Expenses
Salaries, benefits and directors’ compensation $ 4,219
$ 2,456
$ 1,763
$ 9,948
$ 8,211
$ 1,737
Professional fees 958
756
202
3,164
2,774
390
Base management and incentive fees 844
1,386
(542 ) 2,486
4,355
(1,869 )
Other 1,019
1,030
(11 ) 3,017
3,211
(194 )
Operating Expenses
Expenses related to distressed residential mortgage loans 2,117
2,225
(108 ) 5,531
6,682
(1,151 )
Expenses related to operating real estate and real estate held for sale in consolidated variable interest entities 755
3,143
(2,388 ) 3,234
7,558
(4,324 )
Total $ 9,912
$ 10,996
$ (1,084 ) $ 27,380
$ 32,791
$ (5,411 )

~~For the three months ended September 30,~~ 2018, ~~as compared to the corresponding period in 2017,~~ general and administrative expenses increased by $3.7 million and ~~operating expenses decreased by $1.1 million. The decrease was~~$7.2 million, respectively, primarily driven by a $2.4 million reduction in expenses related to operating real estate and real estate held for sale in consolidated variable interest entities as a result of the de-consolidation of Riverchase Landing due to its sale in March 2018. The decrease was also driven by a $0.5 million reduction in base management and incentive fees due to a decrease in externally managed distressed residential mortgage loans and termination of an external management agreement related to our Agency IO investments. The decrease was offset by a $1.8 million increase in salaries, benefits and directors' compensation due to an increase in employee headcount as part of the internalization and expansion of our ~~single family~~ residential credit ~~strategy.~~investment platform.

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For the ~~nine~~three and six months ended ~~September~~June 30, ~~2018~~2019 as compared to the corresponding ~~period~~periods in ~~2017, general, administrative and operating expenses decreased by $5.4 million. The decrease was partially driven by a $4.3 million reduction in~~2018, expenses related to ~~operating real estate and~~ real estate held for sale in consolidated variable interest entities decreased by $0.9 million and $2.0 million, respectively, as a result of ~~cessation~~the de-consolidation of ~~depreciation and amortization expense on~~the variable interest entities after the sales of the real estate held ~~for sale in Consolidated VIEs subsequent~~by these entities.

For the three and six months ended June 30, 2019 as compared to the ~~second quarter of 2017 and the de-consolidation of Riverchase Landing due to its sale~~corresponding periods in March 2018. The decrease was also driven by a $1.9 million reduction in base management and incentive fees due to a decrease in sales activity related to our distressed residential mortgage loans and termination of an external management agreement related to our Agency IO investments. The decrease was offset by a $1.7 million increase in salaries, benefits and directors' compensation due to an increase in employee headcount as part of the internalization of our single family residential credit strategy.

~~The decrease in~~2018, expenses related to distressed and other residential mortgage loans ~~for the nine months ended September 30, 2018~~increased by $0.8 million and $2.4 million, respectively, as ~~compared to the same period~~a result of increased purchase activity in ~~2017 can be attributed to a decrease in loan count as well as decreases in appraisal costs incurred during the 2018 period as compared to the same period in 2017.~~2019.

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 mortgage~~ loans ~~held in securitization trusts),~~accounted for at fair value and loans ~~held~~accounted for ~~investment, second mortgages,~~under ASC 310-10 and ASC 310-30), 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 RMBS 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 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~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively (dollar amounts in thousands):

Three Months Ended ~~September~~June 30, ~~2018~~2019


	Agency RMBS⁽¹⁾			Multi- Family ⁽²⁾ ⁽³⁾			Distressed Residential			Other			Total			Agency RMBS ⁽¹⁾			Residential Credit			Multi- Family Credit ⁽²⁾ ⁽³⁾			Other			Total
Interest Income	$	7,479		$	19,668		$	6,058		$	1,899		$	35,104		$	6,758		$	18,725		$	26,834		$	29		$	52,346
Interest Expense	(4,860		)	(4,047		)	(2,182		)	(4,412		)	(15,501		)	(5,887		)	(10,092		)	(7,246		)	(3,430		)	(26,655		)
Net Interest Income (Expense)	$	2,619		$	15,621		$	3,876		$	(2,513	)	$	19,603		$	871		$	8,633		$	19,588		$	(3,401	)	$	25,691

Average Interest Earning Assets ^{(3) (4)}	$	1,121,180		$	681,040		$	456,240		$	140,960		$	2,399,420		$	1,017,409		$	1,506,973		$	1,018,847		$	1,098		$	3,544,327
Weighted Average Yield on Interest Earning Assets ⁽⁵⁾	2.67		%	11.55		%	5.31		%	5.39		%	5.85		%	2.66		%	4.97		%	10.54		%	10.44		%	5.91		%
Average Cost of Funds ⁽⁶⁾	(2.22		)%	(5.04		)%	(4.96		)%	(4.19		)%	(3.30		)%	(2.62		)%	(4.54		)%	(4.20		)%	—			(3.75		)%
Portfolio Net Interest Margin ⁽⁷⁾	0.45		%	6.51		%	0.35		%	1.20		%	2.55		%	0.04		%	0.43		%	6.34		%	10.44		%	2.16		%

~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019


	Agency RMBS⁽¹⁾			Multi- Family ⁽²⁾ ⁽³⁾			Distressed Residential			Other			Total			Agency RMBS ⁽¹⁾			Residential Credit			Multi- Family Credit ⁽²⁾ ⁽³⁾			Other			Total
Interest Income	$	23,301		$	55,440		$	18,478		$	5,334		$	102,553		$	14,326		$	38,107		$	51,067		$	29		$	103,529
Interest Expense	(13,911		)	(12,027		)	(6,937		)	(12,824		)	(45,699		)	(12,246		)	(18,925		)	(13,603		)	(6,859		)	(51,633		)
Net Interest Income (Expense)	$	9,390		$	43,413		$	11,541		$	(7,490	)	$	56,854		$	2,080		$	19,182		$	37,464		$	(6,830	)	$	51,896

Average Interest Earning Assets ^{(3) (4)}	$	1,165,786		$	647,400		$	459,313		$	139,894		$	2,412,393		$	1,035,469		1,409,618			$	972,774		$	549		$	3,418,410
Weighted Average Yield on Interest Earning Assets ⁽⁵⁾	2.66		%	11.42		%	5.36		%	5.08		%	5.67		%	2.77		%	5.41		%	10.50		%	10.44		%	6.06		%
Average Cost of Funds ⁽⁶⁾	(2.01		)%	(4.72		)%	(4.73		)%	(3.80		)%	(3.06		)%	(2.69		)%	(4.62		)%	(4.28		)%	—			(3.79		)%
Portfolio Net Interest Margin ⁽⁷⁾	0.65		%	6.70		%	0.63		%	1.28		%	2.61		%	0.08		%	0.79		%	6.22		%	10.44		%	2.27		%

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Three Months Ended June 30, 2018



	Agency RMBS ⁽¹⁾			Residential Credit			Multi- Family Credit ⁽²⁾ ⁽³⁾			Other			Total
Interest Income	$	7,851		$	6,906		$	18,280		$	—		$	33,037
Interest Expense	(4,644		)	(3,461		)	(4,090		)	(3,342		)	(15,537		)
Net Interest Income (Expense)	$	3,207		$	3,445		$	14,190		$	(3,342	)	$	17,500

Average Interest Earning Assets ^{(3) (4)}	$	1,167,278		$	596,382		$	639,637		$	—		$	2,403,297
Weighted Average Yield on Interest Earning Assets ⁽⁵⁾	2.69		%	4.63		%	11.43		%	—			5.50		%
Average Cost of Funds ⁽⁶⁾	(2.02		)%	(4.58		)%	(4.69		)%	—			(3.11		)%
Portfolio Net Interest Margin ⁽⁷⁾	0.67		%	0.05		%	6.74		%	—			2.39		%

Six Months Ended June 30, 2018



	Agency RMBS ⁽¹⁾			Residential Credit			Multi- Family Credit ⁽²⁾ ⁽³⁾			Other			Total
Interest Income	$	15,822		$	15,856		$	35,771		$	—		$	67,449
Interest Expense	(9,051		)	(6,557		)	(7,979		)	(6,611		)	(30,198		)
Net Interest Income (Expense)	$	6,771		$	9,299		$	27,792		$	(6,611	)	$	37,251

Average Interest Earning Assets ^{(3) (4)}	$	1,188,089		$	600,208		$	630,579		$	—		$	2,418,876
Weighted Average Yield on Interest Earning Assets ⁽⁵⁾	2.66		%	5.28		%	11.35		%	—			5.58		%
Average Cost of Funds ⁽⁶⁾	(1.92		)%	(4.32		)%	(4.60		)%	—			(2.96		)%
Portfolio Net Interest Margin ⁽⁷⁾	0.74		%	0.96		%	6.75		%	—			2.62		%

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~~Three Months Ended September 30, 2017~~

Agency
RMBS⁽¹⁾

Multi-
Family ⁽²⁾ ⁽³⁾

Distressed
Residential
Other Total
Interest Income $ 1,931
$ 15,279
$ 5,807
$ 1,335
$ 24,352
Interest Expense (1,354 ) (2,744 ) (3,091 ) (3,843 ) (11,032 )
Net Interest Income (Expense) $ 577
$ 12,535
$ 2,716
$ (2,508 ) $ 13,320

Average Interest Earning Assets ^{(3) (4)}
$ 453,323
$ 536,537
$ 531,050
$ 126,848
$ 1,647,758
Weighted Average Yield on Interest Earning Assets ⁽⁵⁾
1.70 % 11.39 % 4.37 % 4.21 % 5.91 %
Average Cost of Funds ⁽⁶⁾
(1.44 )% (4.46 )% (4.28 )% (2.57 )% (3.10 )%
Portfolio Net Interest Margin ⁽⁷⁾
0.26 % 6.93 % 0.09 % 1.64 % 2.81 %

~~Nine Months Ended September 30, 2017~~

Agency
RMBS⁽¹⁾

Multi-
Family ⁽²⁾ ⁽³⁾

Distressed
Residential
Other Total
Interest Income $ 6,549
$ 42,918
$ 22,765
$ 3,681
$ 75,913
Interest Expense (3,963 ) (7,614 ) (10,745 ) (10,644 ) (32,966 )
Net Interest Income (Expense) $ 2,586
$ 35,304
$ 12,020
$ (6,963 ) $ 42,947

Average Interest Earning Assets ^{(3) (4)}
$ 490,023
$ 507,891
$ 604,907
$ 123,644
$ 1,726,465
Weighted Average Yield on Interest Earning Assets ⁽⁵⁾
1.78 % 11.27 % 5.02 % 3.97 % 5.86 %
Average Cost of Funds ⁽⁶⁾
(1.32 )% (4.42 )% (4.05 )% (2.51 )% (2.98 )%
Portfolio Net Interest Margin ⁽⁷⁾
0.46 % 6.85 % 0.97 % 1.46 % 2.88 %

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⁽¹⁾	Includes Agency fixed-rate RMBS, Agency ARMs and, solely with respect to the three and six months ended June 30, 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. 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~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, is set forth below (dollar amounts in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Interest income, multi-family loans held in securitization trusts $ 86,458
$ 76,186
$ 257,179
$ 213,242
Interest income, investment securities, available for sale ^(a)
2,481
2,463
7,389
7,689
Interest income, preferred equity investments and mezzanine loans ^(a)
5,874
3,660
15,182
9,822
Interest expense, multi-family collateralized debt obligation (75,145 ) (67,030 ) (224,310 ) (187,835 )
Interest income, Multi-Family, net 19,668
15,279
55,440
42,918
Interest expense, investment securities, available for sale (3,317 ) (2,036 ) (9,853 ) (5,504 )
Interest expense, securitized debt (730 ) (708 ) (2,174 ) (2,110 )
Net interest income, Multi-Family $ 15,621
$ 12,535
$ 43,413
$ 35,304



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Interest income, multi-family loans held in securitization trusts	$	133,157		$	85,629		$	244,925		$	170,721
Interest income, investment securities, available for sale ^(a)	3,443			2,475			7,698			4,907
Interest income, preferred equity and mezzanine loan investments	5,148			4,862			10,155			9,308
Interest expense, multi-family collateralized debt obligations	(114,914		)	(74,686		)	(211,711		)	(149,165		)
Interest income, Multi-Family Credit, net	26,834			18,280			51,067			35,771
Interest expense, repurchase agreements	(7,246		)	(3,366		)	(13,109		)	(6,536		)
Interest expense, securitized debt	—			(724		)	(494		)	(1,443		)
Net interest income, Multi-Family Credit	$	19,588		$	14,190		$	37,464		$	27,792


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


⁽³⁾	Average Interest Earning Assets for the periods indicated exclude all Consolidated K-Series assets other than those securities actually owned by the Company.


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


⁽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.

⁽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, for the respective periods. InFor the three months ended ~~September~~June 30, 2019, our subordinated debentures and convertible notes generated interest expense of approximately $0.7 million and $2.7 million, respectively. For the six months ended June 30, 2019, our subordinated debentures and convertible notes generated interest expense of approximately $1.5 million and $5.4 million, respectively. For the three months ended June 30, 2018, our subordinated debentures and convertible notes generated interest expense of approximately $0.7 million and $2.7 million, respectively. InFor the ~~nine~~six months ended ~~September~~June 30, 2018, our subordinated debentures and convertible notes generated interest expense of approximately ~~$2.0~~$1.3 million and $8.0 million, respectively. In the three months ended September 30, 2017, 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$5.3 million, respectively. Our Average Cost of Funds includes interest expense on our interest rate ~~swaps and amortization of premium on our swaptions.~~swaps.


⁽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.

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Prepayment 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 Fixed-Rate RMBS		Agency ARMs		Agency IOs		Residential Securitizations		Weighted Average		Agency Fixed-Rate RMBS		Agency ARMs
June 30, 2019									10.3	%	9.6	%	20.0	%
March 31, 2019									6.6	%	6.5	%	8.2	%
December 31, 2018									7.2	%	6.8	%	12.9	%
September 30, 2018	7.3	%	14.6	%	—		23.1	%	7.8	%	7.3	%	14.6	%
June 30, 2018	5.9	%	16.3	%	13.2	%	20.1	%	6.6	%	5.9	%	16.3	%
March 31, 2018	5.4	%	10.2	%	10.2	%	10.8	%	5.8	%	5.4	%	10.2	%
December 31, 2017	6.3	%	12.9	%	17.8	%	22.1	%	7.0	%	6.3	%	12.9	%
September 30, 2017	12.8	%	9.4	%	17.4	%	18.2	%	11.9	%	12.8	%	9.4	%
June 30, 2017	9.6	%	16.5	%	17.5	%	16.8	%	11.4	%	9.6	%	16.5	%
March 31, 2017	10.6	%	8.3	%	15.9	%	5.1	%
December 31, 2016	12.3	%	21.7	%	19.4	%	11.1	%
September 30, 2016	10.0	%	20.7	%	18.2	%	15.9	%

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. ~~During the second quarter of 2018, the Company completely exited its Agency IO strategy.~~ We monitor our prepayment experience on a monthly basis and adjust the amortization rate to reflect current market conditions.

Financial Condition

As of ~~September~~June 30, ~~2018,~~2019, we had approximately ~~$12.3~~$18.3 billion of total assets, as compared to approximately ~~$12.1~~$14.7 billion of total assets as of December 31, ~~2017.~~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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Consolidated K-Series assets amounted to approximately ~~$10.1~~$14.6 billion and ~~$9.7~~$11.7 billion, respectively. ~~See "Significant Estimates and Critical Accounting Policies—Loan Consolidation Reporting Requirement for Certain Multi-Family K-Series Securitizations" in this Quarterly Report on Form 10-Q.~~ For a reconciliation of our actual interest in the Consolidated K-Series to our financial statements, see "Capital Allocation" and "Quarterly Comparative Portfolio Net Interest Margin" above.

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Balance Sheet Analysis

Investment Securities Available for Sale.

At ~~September~~June 30, ~~2018,~~2019, our securities portfolio includes Agency RMBS, including Agency fixed-rate and Agency ARMs, CMBS, ~~and~~ non-Agency RMBS and ABS, which are classified as investment securities available for sale. At ~~September~~June 30, ~~2018,~~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~~June 30, ~~2018~~2019 as compared to December 31, ~~2017~~2018 is primarily ~~related~~due to purchases of multi-family CMBS, non-Agency RMBS and ABS during the period and an increase in fair value of our investment securities partially offset by sales of ~~Agency IOs, principal payments and unrealized losses.~~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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively (dollar amounts in thousands):


	September 30, 2018				December 31, 2017				June 30, 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	$	12,648	$	13,110	$	16,290	$	16,899	$	10,149	$	10,570	$	11,813	$	12,257
2012	61,362		61,610		72,498		74,173		50,962		51,949		58,547		59,137
Total ARMs	74,010		74,720		88,788		91,072		61,111		62,519		70,360		71,394
Fixed Rate
Fixed-Rate
Prior to 2012	395		395		597		609		260		266		357		358
2012	217,664		214,886		257,978		262,792		187,715		191,732		207,667		207,572
2015	2,406		2,374		2,786		2,886		2,349		2,426		2,386		2,392
2017	753,897		743,545		757,387		780,998		696,024		718,592		735,959		736,851
2018	19,769		19,513		—		—		18,115		18,665		19,132		19,163
Total Fixed Rate	994,131		980,713		1,018,748		1,047,285
IO
Prior to 2013	—		—		152,994		21,405
2013	—		—		27,484		4,361
2014	—		—		19,371		1,944
2015	—		—		5,636		956
2016	—		—		31,480		2,513
Total IOs	—		—		236,965		31,179
Total Fixed-Rate									904,463		931,681		965,501		966,336

Total Agency RMBS	1,068,141		1,055,433		1,344,501		1,169,536		965,574		994,200		1,035,861		1,037,730

Non-Agency RMBS
2006	186		178		211		192		146		133		173		156
2016	2,499		2,512		16,978		17,118
2017	19,000		18,829		84,054		84,815		13,000		12,968		19,000		18,691
2018	76,917		76,725		—		—		511,971		219,202		196,919		195,190
2019									572,275		200,537		—		—
Total Non-Agency RMBS	98,602		98,244		101,243		102,125		1,097,392		432,840		216,092		214,037

CMBS
Prior to 2013 ⁽¹⁾	811,020		51,751		821,746		47,922		—		—		807,319		52,700
2016	23,559		25,471		36,108		38,270		14,474		15,471		20,228		21,444
2017	53,490		53,025		55,977		55,228		48,563		49,130		50,243		48,840
2018	4,000		3,264		—		—		143,118		145,073		143,680		137,501
2019									81,509		82,416		—		—
Total CMBS	892,069		133,511		913,831		141,420		287,664		292,090		1,021,470		260,485

ABS
2019									65		24,739		—		—
Total ABS									65		24,739		—		—

Total	$	2,058,812	$	1,287,188	$	2,359,575	$	1,413,081	$	2,350,695	$	1,743,869	$	2,273,423	$	1,512,252


⁽¹⁾	These amounts represent ~~multi-family CMBS available for sale~~first loss POs and certain IOs held in securitization trusts at ~~September 30, 2018 and~~ December 31, ~~2017, respectively.~~2018. These securities were sold in March 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 June 30, 2019 and December 31, 2018, respectively (dollar amounts in thousands):



	June 30, 2019					December 31, 2018
	Number of Loans	Unpaid Principal		Fair Value		Number of Loans	Unpaid Principal		Fair Value
Distressed Residential Mortgage Loans	4,670	$	800,634	$	758,765	3,352	$	627,092	$	576,816
Other Residential Mortgage Loans ⁽¹⁾	1,972	$	309,529	$	303,189	1,539	$	161,280	$	160,707


⁽¹⁾	Includes second mortgages with a fair value $58.9 million and $67.4 million at June 30, 2019 and December 31, 2018, respectively.

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



Loan to Value at Purchase ⁽¹⁾	June 30, 2019		December 31, 2018
50.00% or less	17.8	%	18.5	%
50.01% - 60.00%	13.0	%	13.6	%
60.01% - 70.00%	16.5	%	14.5	%
70.01% - 80.00%	17.6	%	15.9	%
80.01% - 90.00%	16.0	%	15.4	%
90.01% - 100.00%	9.7	%	9.3	%
100.01% and over	9.4	%	12.8	%
Total	100.0	%	100.0	%


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



FICO Scores at Purchase	June 30, 2019		December 31, 2018
550 or less	23.2	%	26.0	%
551 to 600	21.2	%	21.9	%
601 to 650	16.8	%	17.3	%
651 to 700	14.2	%	12.7	%
701 to 750	11.2	%	10.3	%
751 to 800	8.9	%	7.8	%
801 and over	4.5	%	4.0	%
Total	100.0	%	100.0	%

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Current Coupon	June 30, 2019		December 31, 2018
3.00% or less	5.7	%	8.6	%
3.01% - 4.00%	17.9	%	16.1	%
4.01% - 5.00%	36.6	%	35.2	%
5.01% – 6.00%	22.3	%	19.0	%
6.01% and over	17.5	%	21.1	%
Total	100.0	%	100.0	%



Delinquency Status	June 30, 2019		December 31, 2018
Current	83.2	%	71.8	%
31 – 60 days	7.9	%	6.4	%
61 – 90 days	2.3	%	12.3	%
90+ days	6.6	%	9.5	%
Total	100.0	%	100.0	%



Origination Year	June 30, 2019		December 31, 2018
2005 or earlier	21.7	%	23.8	%
2006	14.9	%	16.0	%
2007	25.1	%	27.4	%
2008 or later	38.3	%	32.8	%
Total	100.0	%	100.0	%

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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 June 30, 2019 and December 31, 2018, respectively (dollar amounts in thousands):



	Number of Loans	Unpaid Principal		Carrying Value
June 30, 2019	2,125	$	178,323	$	169,295
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.

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



Loan to Value at Purchase	June 30, 2019		December 31, 2018
50.00% or less	4.6	%	3.9	%
50.01% - 60.00%	4.9	%	4.8	%
60.01% - 70.00%	6.8	%	7.6	%
70.01% - 80.00%	14.1	%	12.4	%
80.01% - 90.00%	14.4	%	13.7	%
90.01% - 100.00%	16.0	%	15.0	%
100.01% and over	39.2	%	42.6	%
Total	100.0	%	100.0	%



FICO Scores at Purchase	June 30, 2019		December 31, 2018
550 or less	21.8	%	20.3	%
551 to 600	31.1	%	30.5	%
601 to 650	29.8	%	29.3	%
651 to 700	11.3	%	12.3	%
701 to 750	4.2	%	5.3	%
751 to 800	1.6	%	1.9	%
801 and over	0.2	%	0.4	%
Total	100.0	%	100.0	%

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Current Coupon	June 30, 2019		December 31, 2018
3.00% or less	6.4	%	7.9	%
3.01% - 4.00%	6.6	%	8.5	%
4.01% - 5.00%	21.9	%	21.2	%
5.01% – 6.00%	13.2	%	13.6	%
6.01% and over	51.9	%	48.8	%
Total	100.0	%	100.0	%



Delinquency Status	June 30, 2019		December 31, 2018
Current	67.8	%	65.7	%
31 – 60 days	8.8	%	10.6	%
61 – 90 days	3.1	%	4.5	%
90+ days	20.3	%	19.2	%
Total	100.0	%	100.0	%



Origination Year	June 30, 2019		December 31, 2018
2005 or earlier	30.5	%	29.2	%
2006	17.6	%	17.9	%
2007	30.7	%	32.1	%
2008 or later	21.2	%	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~~June 30, ~~2018,~~2019, residential mortgage loans held in securitization trusts totaled approximately ~~$60.5~~$48.8 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~~was $4.8 million, which 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 $5.0 million.~~outstanding. Of the residential mortgage loans held in securitization trusts, 100% are traditional ARMs or hybrid ARMs, ~~81.2%~~81.4% 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. As of ~~September~~June 30, ~~2018,~~2019, the interest only period for the interest only ARM loans included in these securitizations has ended.

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

Number of Loans
Unpaid
Principal
Carrying Value
September 30, 2018 207
$ 63,717
$ 60,459
December 31, 2017 240
$ 77,519
$ 73,820



	Number of Loans	Unpaid Principal		Carrying Value
June 30, 2019	177	$	51,986	$	48,799
December 31, 2018	196	60,171		56,795

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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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively (dollar amounts in thousands):


	September 30, 2018									December 31, 2017									June 30, 2019									December 31, 2018
	Average			High			Low			Average			High			Low			Average			High			Low			Average			High			Low
General Loan Characteristics:
Original Loan Balance	$	422		$	2,850		$	48		$	423		$	2,850		$	48		$	422		$	2,850		$	48		$	425		$	2,850		$	48
Current Coupon Rate	4.58		%	6.13		%	3.00		%	3.79		%	5.63		%	2.38		%	5.00		%	6.88		%	3.00		%	4.75		%	6.63		%	3.00		%
Gross Margin	2.36		%	4.13		%	1.13		%	2.37		%	4.13		%	1.13		%	2.36		%	4.13		%	1.13		%	2.36		%	4.13		%	1.13		%
Lifetime Cap	11.33		%	12.63		%	9.38		%	11.32		%	13.25		%	9.38		%	11.32		%	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)	200			207			166			209			216			175			190			198			157			197			204			163
Average Months to Reset	5			11			1			5			11			1			5			11			1			5			11			1
Original FICO Score	725			818			603			725			818			603			727			818			603			725			818			603
Original LTV	70.54		%	95.00		%	16.28		%	70.17		%	95.00		%	16.28		%	70.59		%	95.00		%	16.28		%	70.54		%	95.00		%	16.28		%

~~Table of Contents~~

~~Residential Mortgage Loans, at Fair Value~~

Residential mortgage loans, at fair value, include both first lien distressed residential loans and second mortgages 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 (loss) 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, 2018 and December 31, 2017, respectively (dollar amounts in thousands):~~

Distressed Residential Loans Residential Second Mortgages
Number of Loans Unpaid
Principal Fair Value Number of Loans Unpaid
Principal Fair Value
September 30, 2018 614
$ 120,886
$ 112,550
1,142
$ 68,575
$ 69,360
December 31, 2017 201
$ 42,789
$ 36,914
766
$ 49,316
$ 50,239

Distressed residential mortgage loans and second mortgages with a fair value of approximately $110.9 million and $44.2 million at September 30, 2018 and December 31, 2017, respectively, are pledged as collateral for master repurchase agreements with Deutsche Bank AG, Cayman Islands Branch.

~~Characteristics of Our Residential Second Mortgages, at Fair Value:~~

Combined Loan to Value at Purchase September 30, 2018 December 31, 2017
50.00% or less 2.9 % 2.4 %
50.01% - 60.00% 3.8 % 4.1 %
60.01% - 70.00% 7.6 % 8.0 %
70.01% - 80.00% 24.6 % 21.5 %
80.01% - 90.00% 58.8 % 62.1 %
90.01% - 100.00% 2.3 % 1.9 %
Total 100.0 % 100.0 %

FICO Scores at Purchase September 30, 2018 December 31, 2017
651 to 700 14.8 % 10.6 %
701 to 750 56.6 % 58.4 %
751 to 800 26.4 % 28.6 %
801 and over 2.2 % 2.4 %
Total 100.0 % 100.0 %

Current Coupon September 30, 2018 December 31, 2017
5.01% – 6.00% 0.6 % 0.7 %
6.01% and over 99.4 % 99.3 %
Total 100.0 % 100.0 %

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Delinquency Status September 30, 2018 December 31, 2017
Current 99.3 % 99.5 %
31 – 60 days —
0.3 %
61 – 90 days 0.3 % 0.1 %
90+ days 0.4 % 0.1 %
Total 100.0 % 100.0 %

Origination Year September 30, 2018 December 31, 2017
2015 1.3 % 1.1 %
2016 15.6 % 26.3 %
2017 46.7 % 72.6 %
2018 36.4 % —
Total 100.0 % 100.0 %

~~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 at carrying value, including those distressed residential mortgage loans held in securitization trusts, at September 30, 2018 and December 31, 2017, respectively (dollar amounts in thousands):

Number of
Loans
Unpaid Principal Carrying Value
September 30, 2018 3,127
$ 277,137
$ 260,837
December 31, 2017 3,729
$ 355,998
$ 331,464

The Company’s distressed residential mortgage loans held in securitization trusts with a carrying value of approximately $96.5 million and $121.8 million at September 30, 2018 and December 31, 2017, 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 $86.8 million and $81.9 million at September 30, 2018 and December 31, 2017, respectively.

In addition, distressed residential mortgage loans with a carrying value of approximately $143.8 million and $182.6 million at September 30, 2018 and December 31, 2017, respectively, are pledged as collateral for a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch.

~~Table of Contents~~

Characteristics of our Acquired Distressed Residential Mortgage Loans, including Distressed Residential Mortgage Loans Held in Securitization Trusts and Distressed Residential Mortgage Loans, at Fair Value:

Loan to Value at Purchase September 30, 2018 December 31, 2017
50.00% or less 5.5 % 4.7 %
50.01% - 60.00% 5.8 % 5.1 %
60.01% - 70.00% 9.1 % 7.8 %
70.01% - 80.00% 14.2 % 12.4 %
80.01% - 90.00% 14.9 % 14.1 %
90.01% - 100.00% 15.7 % 15.7 %
100.01% and over 34.8 % 40.2 %
Total 100.0 % 100.0 %

FICO Scores at Purchase September 30, 2018 December 31, 2017
550 or less 18.1 % 19.9 %
551 to 600 27.6 % 29.2 %
601 to 650 28.3 % 27.8 %
651 to 700 15.2 % 13.4 %
701 to 750 6.6 % 6.2 %
751 to 800 3.7 % 3.0 %
801 and over 0.5 % 0.5 %
Total 100.0 % 100.0 %

Current Coupon September 30, 2018 December 31, 2017
3.00% or less 9.5 % 9.7 %
3.01% - 4.00% 16.0 % 13.9 %
4.01% - 5.00% 26.0 % 23.0 %
5.01% – 6.00% 13.3 % 11.9 %
6.01% and over 35.2 % 41.5 %
Total 100.0 % 100.0 %

Delinquency Status September 30, 2018 December 31, 2017
Current 77.3 % 65.2 %
31 – 60 days 2.1 % 11.5 %
61 – 90 days 4.3 % 5.1 %
90+ days 16.3 % 18.2 %
Total 100.0 % 100.0 %

Origination Year September 30, 2018 December 31, 2017
2005 or earlier 27.0 % 26.0 %
2006 17.4 % 16.5 %
2007 27.8 % 30.6 %
2008 or later 27.8 % 26.9 %
Total 100.0 % 100.0 %

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~~Consolidated K-Series.~~Investments in Unconsolidated Entities. 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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had approximately $166.1 million and $73.5 million of investments in unconsolidated entities, respectively.

Preferred Equity and Mezzanine Loan Investments. The Company had preferred equity and mezzanine loan investments in the amount of $191.4 million and $165.6 million as of June 30, 2019 and December 31, 2018, respectively. As of June 30, 2019, all preferred equity and mezzanine loan investments were paying in accordance with their contractual terms. During the three and six months ended June 30, 2019, there were no impairments with respect to our preferred equity and mezzanine loan investments.

The following tables summarize our preferred equity and mezzanine loan investments as of June 30, 2019 and December 31, 2018 (dollars in thousands):



	June 30, 2019
	Count	Carrying Amount ⁽¹⁾		Investment Amount ⁽¹⁾		Weighted Average Interest or Preferred Return Rate ⁽²⁾		Weighted Average Remaining Life (Years)
Preferred equity investments	31	$	184,727	$	186,139	11.48	%	7.2
Mezzanine loans	3	6,660		6,675		12.08	%	24.5
Total	34	$	191,387	$	192,814	11.50	%	7.8



	December 31, 2018
	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	4	10,926		10,970		12.29	%	17.5
Total	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	June 30, 2019		December 31, 2018
70.01% - 80.00%	9.7	%	10.4	%
80.01% - 90.00%	90.3	%	89.6	%
Total	100.0	%	100.0	%

Consolidated K-Series. As of June 30, 2019 and December 31, 2018, we owned 100% of the first loss ~~securities~~POs of the Consolidated K-Series. The Consolidated K-Series are comprised of multi-family mortgage loans held in ~~eight~~eleven and ~~seven~~nine Freddie Mac-sponsored multi-family loan K-Series securitizations as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, of which we, or one of our SPEs, own the first loss ~~securities~~POs and, in certain cases, IOs and/or mezzanine ~~securities.~~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.

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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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Consolidated K-Series were comprised of ~~$10.1~~$14.6 billion and ~~$9.7~~$11.7 billion, respectively, in multi-family loans held in securitization trusts and ~~$9.5~~$13.8 billion and ~~$9.2~~$11.0 billion, respectively, in multi-family CDOs, with a weighted average interest rate of ~~4.06%~~4.14% and ~~3.92%~~3.96%, respectively. The increases in multi-family loans held in securitization trusts and multi-family CDOs during the six months ended June 30, 2019 were primarily 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 the purchase of $101.6 million in additional first loss POs and certain IOs 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~~six months ended ~~September~~June 30, ~~2018~~2019 included interest income of ~~$86.5~~$133.2 million and ~~$257.2~~$244.9 million, respectively, and interest expense of ~~$75.1~~$114.9 million and ~~$224.3~~$211.7 million, respectively. Also, we recognized a ~~$12.3~~$5.2 million and a ~~$31.9~~$14.6 million unrealized gain in the condensed consolidated statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, 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~~six months ended ~~September~~June 30, ~~2017~~2018 included interest income of ~~$76.2~~$85.6 million and ~~$213.2~~$170.7 million, respectively, and interest expense of ~~$67.0~~$74.7 million and ~~$187.8~~$149.2 million, respectively. Also, we recognized a ~~$2.4~~$12.0 million and a ~~$5.2~~$19.6 million unrealized gain in the condensed consolidated statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, 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 POs, IOs and mezzanine 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 PO, and, in certain cases, IOs and/or mezzanine securities, issued by these K-Series securitizations with an aggregate net carrying value of ~~$566.5~~$801.2 million and ~~$468.0~~$657.6 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

Multi-Family CMBS Loan Characteristics:

The following table details the loan characteristics of the loans that back multi-family loans held in securitization trusts as of June 30, 2019 and the multi-family CMBS ~~(including the Consolidated K-Series)~~investment securities available for sale, held in ~~our portfolio~~securitization trusts, and multi-family loans held in securitization trusts as of ~~September 30, 2018 and~~ December 31, ~~2017, respectively~~2018 (dollar amounts in thousands, except as noted):


	September 30, 2018			December 31, 2017				June 30, 2019			December 31, 2018
Current balance of loans	$	12,153,291		$	11,479,393		Current balance of loans	$	13,726,641		$	13,593,818
Number of loans	702			662			Number of loans	710			773
Weighted average original LTV	69.3		%	69.5		%	Weighted average original LTV	68		%	68.8		%
Weighted average underwritten debt service coverage ratio	1.44x			1.44x			Weighted average underwritten debt service coverage ratio	1.48			1.45x
Current average loan size	$	17,312		$	17,340		Current average loan size	$	19,333		$	19,364
Weighted average original loan term (in months)	123			120			Weighted average original loan term (in months)	125			123
Weighted average current remaining term (in months)	62			64			Weighted average current remaining term (in months)	77			64
Weighted average loan rate	4.33		%	4.32		%	Weighted average loan rate	4.28		%	4.34		%
First mortgages	100		%	100		%	First mortgages	100		%	100		%
Geographic state concentration (greater than 5.0%):							Geographic state concentration (greater than 5.0%):
California	13.8		%	14.7		%
Texas	11.8		%	12.7		%
New York	6.1		%	6.5		%
Maryland	5.1		%	5.5		%
							California	16.1		%	14.8		%
							Texas	12.4		%	13.0		%
							Maryland	5.8		%	5.0		%
							New York	5.1		%	6.4		%
							Florida	5.0		%	4.5		%

8081

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~~Investment in Unconsolidated Entities.~~ Investment 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, 2018 and December 31, 2017, we had approximately $43.7 million and $51.1 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 held 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. ~~In March 2018, Riverchase Landing completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. See~~ ~~Note 10~~ ~~to our condensed consolidated financial statements included in this report for more information on Riverchase Landing.~~

~~Preferred Equity and Mezzanine Loan Investments.~~ ~~The Company had preferred equity and mezzanine loan investments in the amount of $198.3 million and $138.9 million as of September 30, 2018 and December 31, 2017, respectively.~~

On 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 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, 2018, all preferred equity and mezzanine loan investments were paying in accordance with their contractual terms. During the three and nine months ended September 30, 2018, there were no impairments with respect to our preferred equity and mezzanine loan investments. As of September 30, 2018, the Company is committed to fund an additional $1.7 million of preferred equity on an existing investment.

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

September 30, 2018
Count
Carrying Amount ⁽¹⁾

Investment Amount ⁽¹⁾

Weighted Average Interest or Preferred Return Rate ⁽²⁾
Weighted Average Remaining Life (Years)
Preferred equity investments 24
$ 187,508
$ 189,233
11.92 % 6.2
Mezzanine loans 4
10,769
10,814
12.30 % 17.6
Total 28
$ 198,277
$ 200,047
11.94 % 6.8

December 31, 2017
Count
Carrying Amount ⁽¹⁾

Investment Amount ⁽¹⁾

Weighted Average Interest or Preferred Return Rate ⁽²⁾
Weighted Average Remaining Life (Years)
Preferred equity investments 20
$ 132,009
$ 133,618
12.02 % 6.6
Mezzanine loans 3
6,911
6,942
12.95 % 6.8
Total 23
$ 138,920
$ 140,560
12.07 % 6.6


⁽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.~~

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~~Preferred Equity and Mezzanine Loan Investments Characteristics~~

Combined Loan to Value at Investment September 30, 2018 December 31, 2017
70.01% - 80.00% 3.9 % 5.4 %
80.01% - 90.00% 96.1 % 94.6 %
Total 100.0 % 100.0 %

~~Real Estate Held for Sale in Consolidated VIEs.~~On March 31, 2017, the Company re-evaluated its variable interests in Riverchase Landing and The Clusters and, as a result of the reconsideration, consolidated Riverchase Landing and The Clusters into its condensed consolidated financial statements.

During the second quarter of 2017, Riverchase Landing determined to actively market its multi-family apartment community for sale. Accordingly, the Company classified the real estate assets held by Riverchase Landing in the amount of $34.9 million as held for sale as of December 31, 2017 in the accompanying condensed consolidated balance sheets. In March 2018, Riverchase 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.

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 The Clusters in the amount of $29.6 million and $29.3 million as real estate held for sale in consolidated variable interest entities as of September 30, 2018 and December 31, 2017, respectively.

~~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.

As of September 30, 2018, the Company had repurchase agreements with an outstanding balance of $1.1 billion and a weighted average interest rate of 2.90%. At December 31, 2017, the Company had repurchase agreements with an outstanding balance of $1.3 billion and a weighted average interest rate of 2.18%. Our repurchase agreements have a weighted average days to maturity of 29 days.

At September 30, 2018 and December 31, 2017, 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 at 7.4% and 5.0%, respectively. 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.

As of September 30, 2018, the outstanding balance under our repurchase agreements was funded at an advance rate of 90.3% that implies an average haircut of 9.7%. As of December 31, 2017, the outstanding balance under our repurchase agreements was funded at an advance rate of 90.0% that implies an average haircut of 10.0%. The weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS and CMBS was approximately 5% and 25%, respectively, at September 30, 2018.

~~Table of Contents~~

The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2018, 2017 and 2016 for our repurchase agreement borrowings (dollar amounts in thousands):

Quarter Ended
Quarterly Average
Balance

End of Quarter
Balance

Maximum Balance
at any Month-End
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

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

~~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 $100.0 million and a maximum uncommitted principal amount of $150.0 million to fund the purchase of residential mortgage loans, expiring on June 8, 2019. The outstanding balance on this master repurchase agreement as of September 30, 2018 and December 31, 2017 amounts to approximately $141.5 million and $123.6 million, respectively, bearing interest at one-month LIBOR plus 2.40% and 2.50%, respectively (4.62% and 4.05% at September 30, 2018 and December 31, 2017, respectively). Residential mortgage loans with a carrying value of approximately $194.9 million at September 30, 2018 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.

On November 25, 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 purchase 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 and extends the maturity date to November 24, 2018. The outstanding balance on this master repurchase agreement as of September 30, 2018 and December 31, 2017 amounts to approximately $35.9 million and $26.1 million, respectively, with the amount in excess of $25.0 million being uncommitted, bearing interest at one-month LIBOR plus 3.50% (5.72% and 5.05% at September 30, 2018 and December 31, 2017, respectively). Second mortgages with a carrying value of approximately $59.9 million at September 30, 2018 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.

~~Residential Collateralized Debt Obligations~~. As of September 30, 2018 and December 31, 2017, we had Residential CDOs of $56.5 million and $70.3 million, respectively. As of September 30, 2018 and December 31, 2017, the weighted average interest rate of these Residential CDOs was 2.83% and 2.16%, respectively. The Residential CDOs are collateralized by ARM loans with a principal balance of $63.7 million and $77.5 million at September 30, 2018 and December 31, 2017, respectively. The Company retained the owner trust certificates, or residual interest, for three securitizations, and, had a net investment in the residential securitization trusts of $5.0 million and $4.4 million at September 30, 2018 and December 31, 2017, respectively.

~~Securitized Debt~~. As of September 30, 2018 and December 31, 2017, we had approximately $53.6 million and $81.5 million of securitized debt, respectively. As of September 30, 2018 and December 31, 2017, the weighted average interest rate for our securitized debt was 4.75% and 4.48%, respectively. The Company’s securitized debt is collateralized by 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, 2018~~ ~~included Convertible Notes, subordinated debentures and mortgages and notes payable in consolidated variable interest entities.~~

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~~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 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, 2018, certain of our wholly owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of 6.18%. 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~~

On March 31, 2017, the Company determined that it became the primary beneficiary of Riverchase Landing and The Clusters, two VIEs that each own a multi-family apartment community and in which the Company held preferred equity investments. Accordingly, on this date, the Company consolidated both Riverchase Landing and The Clusters into its condensed consolidated financial statements. Both of Riverchase Landing's and The Clusters' real estate investments were subject to a mortgage payable as of December 31, 2017. In March 2018, Riverchase 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. The Clusters' real estate investment remains subject to a mortgage payable of $27.4 million and the Company has no obligation for this liability as of September 30, 2018. 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 $5.1 million that has an unused commitment of $3.3 million as of September 30, 2018. See ~~Note 10~~ ~~to our condensed consolidated financial statements included in this report for more information on KRVI.~~

~~Table of Contents~~

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, ~~interest rate caps,~~ futures, 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," or TBAs.

Our current derivative instruments are ~~currently~~ comprised of interest rate swaps. We use interest rate swaps to hedge variable cash flows associated with our 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~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had no outstanding swaps that qualify as cash flow hedges for financial reporting purposes. See Note 12 11 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. 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.

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 June 30, 2019, the Company had repurchase agreements secured by investment securities with an outstanding balance of $1.8 billion and a weighted average interest rate of 3.28%. 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 106 days.

As of June 30, 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 June 30, 2019, the outstanding balance under our repurchase agreements secured by investment securities was funded at a weighted average advance rate of 86.1% that implies a weighted average "haircut" of 13.9%. The weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS, non-Agency RMBS, and CMBS was approximately 5%, 26%, and 21%, respectively, at June 30, 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.

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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 secured by investment securities (dollar amounts in thousands):



Quarter Ended	Quarterly Average Balance		End of Quarter Balance		Maximum Balance at any Month-End
June 30, 2019	$	1,749,293	$	1,843,815	$	1,843,815
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 June 30, 2019 and December 31, 2018 (dollar amounts in thousands):



	Maximum Aggregate Uncommitted Principal Amount		Outstanding Repurchase Agreements		Carrying Value of Loans Pledged		Weighted Average Rate		Weighted Average Months to Maturity
June 30, 2019	$	950,000	$	761,361	$	891,664	4.43	%	7.01
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 June 30, 2019 and December 31, 2018, we had Residential CDOs of $45.3 million and $53.0 million, respectively. As of June 30, 2019 and December 31, 2018, the weighted average interest rate of these Residential CDOs was 3.02% and 3.12%, respectively. The Residential CDOs are collateralized by ARMs with a principal balance of $52.0 million and $60.2 million at June 30, 2019 and December 31, 2018, respectively. The Company retained the owner trust certificates, or residual interest, for three securitizations that issued Residential CDOs, and, as of June 30, 2019 and December 31, 2018, had a net investment in these 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, the Company had approximately $42.3 million of securitized debt. As of December 31, 2018, the weighted average interest rate for the Company's 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 June 30, 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 offering expenses, were approximately $127.0 million with the total cost to the Company of approximately 8.24%.

Subordinated Debentures

As of June 30, 2019, certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of 6.43%. 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 June 30, 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' equity at ~~September~~June 30, ~~2018~~2019 was ~~$1.1~~$1.5 billion and included $35.3 million of accumulated other comprehensive loss. The accumulated other comprehensive loss at September 30, 2018 consisted of $54.2 million in unrealized losses related to our Agency RMBS and $0.1 million in net unrealized losses related to non-Agency RMBS, partially offset by $19.0 million in net unrealized gains related to our CMBS. The Company's stockholders’ equity at December 31, 2017 was $971.9 million and included $5.6$11.0 million of accumulated other comprehensive income. The accumulated other comprehensive income at ~~December 31, 2017~~June 30, 2019 consisted of ~~$18.2~~$15.1 million in net unrealized gains related to our CMBS and ~~$1.8~~$4.4 million in net unrealized gains related to our non-Agency RMBS, partially offset by ~~$14.5~~$8.5 million in net unrealized losses related to our Agency RMBS. 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 losses related to our Agency ~~RMBS.~~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 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~~six months ended ~~September~~June 30, ~~2018~~2019 (amounts in thousands, except per share):


	Three Months Ended September 30, 2018							Nine Months Ended September 30, 2018							Three Months Ended June 30, 2019							Six Months Ended June 30, 2019
	Amount			Shares	Per Share⁽¹⁾			Amount			Shares	Per Share⁽¹⁾			Amount			Shares	Per Share⁽¹⁾			Amount			Shares	Per Share⁽¹⁾
Beginning Balance	$	715,967		124,313	$	5.76		$	671,865		111,910	$	6.00		$	1,079,105		187,831	$	5.75		$	879,389		155,590	$	5.65
Common stock issuance, net ⁽²⁾	101,795			16,902				176,723			29,305				138,471			23,042				324,492			55,283
Preferred stock issuance, net															16,087							16,087
Preferred stock liquidation preference															(16,532		)					(16,532		)
Balance after share issuance activity	817,762			141,215	5.79			848,588			141,215	6.01			1,217,131			210,873	5.77			1,203,436			210,873	5.71
Dividends declared	(28,243		)		(0.20		)	(75,529		)		(0.53		)	(42,155		)		(0.20		)	(79,721		)		(0.38		)
Net change in accumulated other comprehensive income:
Investment securities ⁽³⁾	(9,874		)		(0.07		)	(40,876		)		(0.29		)
Investment securities, available for sale ⁽³⁾															20,092				0.10			33,139				0.16
Net income attributable to Company's common stockholders	28,048				0.20			75,510				0.53			16,478				0.08			54,692				0.26
Ending Balance	$	807,693		141,215	$	5.72		$	807,693		141,215	$	5.72		$	1,211,546		210,873	$	5.75		$	1,211,546		210,873	$	5.75


⁽¹⁾	Outstanding shares used to calculate book value per share for the ~~ending balance is based on outstanding shares as of September~~three and six months ended June 30, ~~2018 of 141,214,528.~~2019 are 210,872,614.


⁽²⁾	Includes amortization of stock based compensation.


⁽³⁾	The ~~decline of $9.9 million and $40.9 million related~~increases relate to unrealized gains in our investment securities ~~for the three and nine months ended September 30, 2018, respectively, is primarily~~ due to ~~a decline in the value of the Agency RMBS portfolio.~~improved pricing.

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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 first loss 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 first loss POs are backed by balloon non-recourse mortgage loans that provide for the payment of principal at maturity date, which is typically ten to 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~~six months ended ~~September~~June 30, ~~2018,~~2019, net cash and restricted cash ~~decreased~~increased primarily as a result of ~~$200.7 million used in financing activities, partially offset by $141.2~~$569.7 million provided by ~~investing~~financing activities and ~~$19.1~~$7.0 million provided by operating activities, which was partially offset by $549.9 million used in investing activities.

Our financing activities primarily included ~~$102.0~~net proceeds from repurchase agreements of $472.0 million and $337.8 million in net proceeds from issuance of common and preferred stock, partially offset by $106.1 million in payments made on multi-family CDOs, ~~net payments made on financing arrangements of $118.6 million, $87.5~~$80.5 million in aggregate dividends paid on common stock and preferred stock, ~~$29.2~~$45.6 million in extinguishment of and payments made on securitized debt, ~~$25.8 million in payments made on mortgages~~ and ~~notes payable in Consolidated VIEs, and $13.9~~$7.8 million in payments made on Residential ~~CDOs, partially offset by $175.0 million in proceeds from the issuance of common stock and $1.1 million in advances on mortgages and notes payable in Consolidated VIEs.~~CDOs.

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Our investing activities primarily included ~~$193.1~~$380.5 million of purchases of residential mortgage loans and distressed residential mortgage loans, $321.1 million of purchases of investment securities, $130.0 million in funding of preferred equity investments, equity and mezzanine loan investments, $101.6 million of purchases of investments held in multi-family securitization trusts, and $33.4 million in net payments made on other derivative instruments settled during the period, partially offset by $144.2 million in principal ~~paydowns on investment securities available for sale, $102.0~~repayments and proceeds from sales and refinancing of distressed and other residential mortgage loans, $106.4 million in principal repayments received on multi-family loans held in securitization trusts, ~~$93.2~~$84.4 million in principal ~~repayments and proceeds from sales and refinancings of distressed residential mortgage loans, $33.2 million in net proceeds from sales of real estate in Consolidated VIEs, $26.9~~paydowns on investment securities available for sale, $56.8 million in proceeds from sales of investment securities, $17.7 million in net proceeds from other derivative instruments settled during the period, $13.4 million in principal repayments received on residential mortgage loans held in securitization trusts, $11.9 million of return of capital from unconsolidated entities, $9.5$20.4 million in principal repayments received on preferred equity and mezzanine loan investments, and ~~$3.2~~$3.6 million in net proceeds from ~~sale~~sales of real estate ~~owned, partially offset by $140.2 million of purchases of investment securities, $118.7 million of purchases of residential mortgage loans and distressed residential mortgage loans, $65.7 million~~ in ~~the funding of preferred equity, equity and mezzanine loan investments and $37.7 million of purchases of investments held in multi-family securitization trusts.~~Consolidated VIEs.

We fund our investments and operations through a balanced and diverse funding mix, which includes proceeds from the issuance of common ~~stock~~ and preferred equity and debt securities, including convertible notes, short-term and longer-term repurchase agreement borrowings, CDOs, securitized debt and trust preferred 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~~June 30, ~~2018,~~2019, we had cash and cash equivalents balances of ~~$57.5~~$135.0 million, which ~~decreased~~increased from ~~$95.2~~$103.7 million at December 31, ~~2017.~~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 stepped in, offsetting, in part the lenders that have elected to exit.

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As of ~~September~~June 30, ~~2018,~~2019, we have outstanding short-term repurchase agreements, a form of collateralized short-term borrowing, with ~~ten~~fourteen 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~~June 30, ~~2018,~~2019, we had an aggregate amount at risk under our repurchase agreements of approximately ~~$174.0~~$313.1 million, with no more than approximately ~~$81.6~~$67.4 million at risk with any single counterparty. ~~The~~At June 30, 2019, the Company had short-term repurchase agreement borrowings of ~~$1.1~~$1.8 billion ~~and $1.3~~as compared to $1.5 billion ~~at September 30, 2018 and~~as of December 31, ~~2017, respectively.~~2018.

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As of ~~September~~June 30, ~~2018,~~2019, our available liquid assets include unrestricted cash and cash equivalents and unencumbered securities we believe may be posted as margin. We had ~~$57.5~~$135.0 million in cash and cash equivalents and ~~$429.4~~$388.1 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~~June 30, ~~2018~~2019 included ~~$156.5~~$73.5 million of Agency RMBS, ~~$173.6~~$91.6 million of CMBS, ~~and $99.3~~$198.3 million of non-Agency RMBS and ~~other investment securities.~~$24.7 million of ABS. We believe the cash and unencumbered securities, which collectively represent ~~43.1%~~28.4% of our financing arrangements, are liquid and could be monetized to pay down or collateralize a liability immediately.

At ~~September~~June 30, ~~2018,~~2019, the Company also had ~~two~~longer-term master repurchase agreements with ~~Deutsche Bank AG, Cayman Islands Branch. The outstanding balances under the first master repurchase agreement~~terms of up to one year with ~~a maximum committed principal amount~~certain third party financial institutions that are secured by certain of $100.0 million and a maximum uncommitted principal amount of $150.0 million amounted to approximately $141.5 million and $123.6 million at September 30, 2018 and December 31, 2017, respectively. This agreement is collateralized byour residential mortgage ~~loans with a carrying value~~loans. See "Management's Discussion and Analysis of ~~$194.9 million at September 30, 2018~~Financial Condition and ~~expires on June 8, 2019. The outstanding balances under the second master repurchase agreement with a maximum aggregate committed principal amount~~Results of $25.0 million and a maximum uncommitted principal amount of $25.0 million amounted to approximately $35.9 million and $26.1 million at September 30, 2018 and December 31, 2017, respectively. This agreement is collateralized by second mortgages with a carrying value of $59.9 million at September 30, 2018, and expires on November 24, 2018. The Company expects to roll outstanding borrowings under these master repurchase agreements into new repurchase agreements or other financing prior to or at maturity.Operations—Balance Sheet Analysis - Repurchase Agreements" for further information.

At September 30, 2018, we also had other longer-term debt, including Residential CDOs outstanding of $56.5 million, multi-family CDOs outstanding of $9.5 billion (which represent obligations of the Consolidated K-Series), subordinated debt of $45.0 million and securitized debt of $53.6 million. The CDOs are collateralized by residential and multi-family loans held in securitization trusts, respectively. The securitized debt as of September 30, 2018 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 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 June 30, 2019, we also had other longer-term debt, including Residential CDOs outstanding of $45.3 million, multi-family CDOs outstanding of $13.8 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~~June 30, ~~2018,~~2019, our overall leverage ratio, which represents our total debt divided by our total stockholders' equity, was approximately ~~1.4~~1.8 to 1. Our overall leverage ratio does not include ~~the mortgage debt of The Clusters or~~ debt associated with the Multi-family CDOs, or the Residential CDOs or other non-recourse debt, for which we have no obligation. As of ~~September~~June 30, ~~2018,~~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 ~~1.2~~1.7 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 or other futures contracts to hedge interest rate and market value risk associated with our investments in Agency 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.

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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 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”~~“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 14, 2018,~~For information regarding secondary equity offerings of our common stock for the periods covered by this report, please see Note 17 to our condensed consolidated financial statements included in this report.

During the three and six months ended June 30, 2019, there were 2,260,200 shares of common stock issued under the equity distribution agreement relating to our common equity "at-the-market" offering program ("Common Equity Distribution Agreement"). As of June 30, 2019, approximately $72.5 million of common stock remains available for issuance under the Common Equity Distribution Agreement.

During the three and six months ended June 30, 2019, the Company issued ~~14,375,000~~661,287 shares of ~~its common~~preferred stock ~~through~~under the equity distribution agreement relating to our preferred equity "at-the-market" offering program ("Preferred Equity Distribution Agreement"), at an ~~underwritten public offering, at a public offering~~average sales price of ~~$6.16~~$24.72 per share, resulting in total net proceeds to the Company of ~~$86.0 million after deducting underwriting discounts and commissions and offering expenses.~~

On September 10, 2018, the Company entered into an amendment to its equity distribution agreement (as amended, the “Equity Distribution Agreement”) with Credit Suisse Securities (USA) LLC (“Credit Suisse”), as sales agent, to increase the amount available for issuance under the Equity Distribution Agreement by $77.1$16.1 million. Pursuant to the Equity Distribution Agreement, we may offer and sell shares of our common stock, par value $0.01 per share, having a maximum aggregate sales price of up to $177.1 million, from time to time through Credit Suisse. The Company has no obligation to sell any of the shares of common stock issuable under the Equity Distribution Agreement and may at any time suspend solicitations and offers under the Equity Distribution Agreement.

During the three months ended September 30, 2018, the Company issued 2,443,487 shares of its common stock under the Equity Distribution Agreement, at an average sales price of $6.31 per share, resulting in total net proceeds to the Company of $15.2 million after deducting the placement fees. During the nine months ended September 30, 2018, the Company issued 14,588,631 shares of its common stock under the Equity Distribution Agreement, at an average sales price of $6.19 per share, resulting in total net proceeds to the Company of $89.0 million after deducting the placement fees. As of ~~September~~June 30, ~~2018,~~2019, approximately ~~$86.4~~$33.7 million of ~~common~~preferred stock remains available for issuance under the Preferred Equity Distribution ~~Agreement~~.Agreement.

~~Management Agreements~~

We have an investment management agreement with Headlands, pursuant to which we pay Headlands a base management and incentive fee, if earned, quarterly in arrears. On August 2, 2018, the Company notified Headlands that it will allow its management agreement with the manager to expire on June 30, 2019.

Dividends

For information regarding the declaration and payment of dividends on our common and preferred stock for the periods covered by this report, please see Note 1917 to our condensed consolidated financial statements included in this report.

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.

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Inflation

Substantially all our assets and liabilities are financial in ~~nature. As~~nature and are sensitive to interest rate and other related factors to a ~~result, changes~~greater degree than inflation. Changes in interest rates ~~and other factors impact our performance far more than does inflation.~~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 inflation.

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 our Annual Report on Form 10-K ~~“Item 1A. Risk Factors” in Part II of our Quarterly Reports on Form 10-Q~~ 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 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.

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.

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We seek to manage interest rate risk in our portfolio by utilizing interest rate swaps, swaptions, interest rate caps, 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.

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 derivative hedging instruments.

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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~~June 30, ~~2018~~2019 (dollar amounts in thousands):

			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	$(19,233)	$(29,992)
+100	$(9,605)	$(15,792)
-100	$8,436	$14,114

Interest rate changes may also impact our net book value as our assets and related hedge derivatives are marked-to-market each quarter. Generally, as interest rates increase, the value of our mortgage assets decreases, and conversely, as interest rates decrease, the value of such investments will increase. 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 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.

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 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.

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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.

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.

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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.

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, ABS, multi-family CMBS, 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 our exposure to borrower 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.

With respect to the ~~$260.8~~$169.3 million of distressed residential mortgage loans at carrying value and ~~$112.5~~$758.8 million of distressed residential mortgage loans at fair value owned by the Company at ~~September~~June 30, ~~2018,~~2019, we purchased the majority of these mortgage loans at a discount to par reflecting their distressed state or perceived higher risk of ~~default,~~default. In connection with our loan acquisitions, we or a third party due diligence firm perform an independent review of the mortgage file to assess the state of mortgage loan files, the servicing of the mortgage loan, compliance with existing guidelines, as well as our ability to enforce the contractual rights in the mortgage. We also obtain certain representations and warranties from each seller with respect to the mortgage loans, as well as the enforceability of the lien on the mortgaged property. A seller who breaches these representations and warranties may be obligated to repurchase the loan from us. In addition, as part of our process, we focus on selecting a servicer with the appropriate expertise to mitigate losses and maximize our overall return on these residential mortgage loans. This involves, among other things, performing due diligence on the servicer prior to their engagement, assigning the appropriate servicer on each loan based on certain characteristics and monitoring each servicer's performance on an ongoing basis.

We are exposed to credit risk in our investments in non-Agency RMBS totaling $432.8 million as of June 30, 2019. The non-Agency RMBS in our investment portfolio consist of either the senior, mezzanine or subordinate tranches in securitizations. The underlying collateral of these securitizations are predominantly residential credit assets, which may be exposed to various macroeconomic and asset-specific credit risks. These securities have varying levels of credit enhancement which provides some structural protection from losses within the portfolio. We undertake an in-depth assessment of the underlying collateral and securitization structure when investing in these assets, which may include ~~higher loan to value ratios~~modeling defaults, prepayments and ~~in certain instances, delinquent loan payments.~~loss across different scenarios.

As of ~~September~~June 30, ~~2018,~~2019, we own ~~$541.7~~$651.9 million of ~~first loss~~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 ~~43.8%~~45.1% 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.

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As of ~~September~~June 30, ~~2018,~~2019, we own approximately ~~$245.5~~$307.5 million of preferred equity, mezzanine loan 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 connection with these types of investments by us in multi-family 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. In March 2018, the Company successfully resolved its investment in Riverchase Landing with the sale of the entity's multi-family apartment community and full redemption of the Company's preferred equity investment. ~~Additionally,~~In February 2019, the Company ~~believes it has an asset management team~~successfully resolved its investment in The Clusters with the ~~experience and expertise necessary to efficiently manage The Clusters while working toward a successful resolution for this investment.~~

We are exposed to credit risk in our investments in non-Agency RMBS totaling $98.2 million as of September 30, 2018. The non-Agency RMBS in our investment portfolio may consist of either the senior, mezzanine or subordinate tranches in securitizations. The underlying collateral of these securitizations are predominantly residential credit assets, which may be exposed to various macroeconomic and asset-specific credit risks. These securities have varying levels of credit enhancement which provides some structural protection from losses within the portfolio. We undertake an in-depth assessmentsale of the ~~underlying collateral~~entity's multi-family apartment community and ~~securitization structure when investing in these assets, which may include modeling defaults, prepayments and loss across different scenarios.~~full redemption of the Company's preferred equity investment.

Fair Value Risk

Changes in interest rates also expose us to market value (fair value) fluctuation on our assets, liabilities and hedges. While ~~the fair value of the majority~~a significant amount 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 principal only~~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~~June 30, ~~2018~~2019 and do not take into consideration the effects of subsequent interest rate fluctuations.

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~~June 30, ~~2018,~~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.

~~Table of Contents~~

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.

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					Fair Value Changes
Changes in Interest Rates	Changes in Fair Value	Net Duration	Changes in Fair Value	Net Duration
(basis points)	(dollar amounts in thousands)		(dollar amounts in thousands)
+200	$(119,580)	3.0	$(222,972)	3.7
+100	$(54,924)	2.6	$(71,996)	3.3
Base		1.6		3.0
-100	$22,971	0.7	$71,891	2.8

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.

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.

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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 principal executive officer and 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~~June 30, ~~2018.~~2019. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2018.~~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~~June 30, ~~2018~~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, ~~2017.~~2018.

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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~~the Company (Incorporated by reference to Exhibit ~~3.2~~4.2 to the Company’s ~~Annual Report~~Registration Statement on Form ~~10-K as~~S-8 filed with the Securities and Exchange Commission on ~~March 4, 2011)~~July 1, 2019).

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		Form of Certificate representing the Series D Preferred Stock (Incorporated by reference to Exhibit 3.7 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 10, 2017).

~~4.5(a)~~		Junior Subordinated Indenture between The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, as trustee, dated September 1, 2005 (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 September 6, 2005).

~~4.5(b)~~		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).

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~~4.6(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).

~~4.6(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).

~~4.7~~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).

~~4.8~~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).).

~~4.9~~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).

~~4.10~~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		Amendment No. 1 to ~~Equity Distribution Agreement, dated September 10, 2018, between~~the New York Mortgage Trust, Inc. ~~and Credit Suisse Securities (USA) LLC~~2017 Equity Incentive Plan (Incorporated by reference to Exhibit ~~1.1~~10.2 to the ~~Company’s~~Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on ~~September 10, 2018)~~June 28, 2019).

~~Table of Contents~~



~~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 of 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 of the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of 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~~June 30, ~~2018~~2019 and December 31, ~~2017;~~2018; (ii) Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017;~~2018; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017;~~2018; (iv) Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity for the ~~nine~~three and six months ended ~~September~~June 30, 2019 and 2018; (v) Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017;~~2018; and (vi) Notes to Condensed Consolidated Financial Statements.

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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~~	August 6, ~~2018~~2019	By:	/s/ Steven R. Mumma
				Steven R. Mumma
				Chairman of the Board and Chief Executive Officer
				(Principal Executive Officer)





Date: ~~November~~	August 6, ~~2018~~2019	By:	/s/ Kristine R. Nario-Eng
				Kristine R. Nario-Eng
				Chief Financial Officer
				(Principal Financial and Accounting Officer)

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~~the Company (Incorporated by reference to Exhibit ~~3.2~~4.2 to the Company’s ~~Annual Report~~Registration Statement on Form ~~10-K as~~S-8 filed with the Securities and Exchange Commission on ~~March 4, 2011)~~July 1, 2019).

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		Form of Certificate representing the Series D Preferred Stock (Incorporated by reference to Exhibit 3.7 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 10, 2017).

~~4.5(a)~~		Junior Subordinated Indenture between The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, as trustee, dated September 1, 2005 (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 September 6, 2005).

~~4.5(b)~~		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).

~~4.6(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).

~~100~~

~~Table of Contents~~




~~4.6(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).

~~4.7~~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).

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~~4.8~~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).

~~4.9~~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).

~~4.10~~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		Amendment No. 1 to ~~Equity Distribution Agreement, dated September 10, 2018, between~~the New York Mortgage Trust, Inc. ~~and Credit Suisse Securities (USA) LLC~~2017 Equity Incentive Plan (Incorporated by reference to Exhibit ~~1.1~~10.2 to the ~~Company’s~~Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on ~~September 10, 2018)~~June 28, 2019).



~~12.1~~31.1		~~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 of 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 of the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of 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 **

~~101~~

~~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~~June 30, ~~2018~~2019 and December 31, ~~2017;~~2018; (ii) Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017;~~2018; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~;2018; (iv) Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity for the ~~nine~~three and six months ended ~~September~~June 30, 2019 and 2018; (v) Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017;~~2018; and (vi) Notes to Condensed Consolidated Financial Statements.

~~102~~101





Supplemental Disclosure:
Cash paid for interest	$	308,346	$	245,891
Cash paid for income taxes	$	1,711	$	2,153
Non-Cash Investment Activities:
Sales of investment securities not yet settled	$	—	$	1,261
Purchase of investment securities not yet settled	$	—	$	181,718
Consolidation of multi-family loans held in securitization trusts	$	805,163	$	1,537,526
Consolidation of multi-family collateralized debt obligations	$	767,477	$	1,472,073
Transfer from residential loans to real estate owned	$	5,805	$	6,221

Non-Cash Financing Activities:
Dividends declared on common stock to be paid in subsequent period	$	28,243	$	22,371
Dividends declared on preferred stock to be paid in subsequent period	$	5,925	$	3,225

Cash, Cash Equivalents and Restricted Cash Reconciliation:
Cash and cash equivalents	$	57,471	$	101,904
Restricted cash included in receivables and other assets	$	8,297	$	34,088
Total cash, cash equivalents, and restricted cash	$	65,768	$	135,992



	September 30, 2018								December 31, 2017
	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	$	6,770	$	16,043	$	1,032,620	$	1,055,433	$	26,876	$	24,726	$	1,117,934	$	1,169,536
Non-Agency RMBS	50,000		13,845		34,399		98,244		84,461		—		17,664		102,125
CMBS	—		—		133,511		133,511		70,791		—		70,629		141,420
Total investment securities available for sale	$	56,770	$	29,888	$	1,200,530	$	1,287,188	$	182,128	$	24,726	$	1,206,227	$	1,413,081



	Fair Value		Unpaid Principal Balance		Difference
September 30, 2018	$	4,917	$	5,442	$	(525	)
December 31, 2017	1,048		1,214		(166		)



	September 30, 2017
Contractually required principal and interest	$	76,529
Nonaccretable yield	(6,467		)
Expected cash flows to be collected	70,062
Accretable yield	(58,767		)
Fair value at the date of acquisition	$	11,295



	Three Months Ended September 30,				Nine Months Ended September 30,
Investment Name	2018		2017		2018		2017
Autumnwood Investments LLC	$	—	$	64	$	—	$	137
200 RHC Hoover, LLC	—		—		—		275
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively)	265		252		777		741
Morrocroft Neighborhood Stabilization Fund II, LP	149		394		829		1,374
Evergreens JV Holdings, LLC	3,643		161		4,008		464
Bent Tree JV Holdings, LLC	—		1,210		—		1,795
Summerchase LR Partners LLC	—		194		—		556
Lake Mary Realty Partners, LLC	—		2,312		—		2,745
The Preserve at Port Royal Venture, LLC	449		440		1,351		1,266
WR Savannah Holdings, LLC ⁽¹⁾	113		405		1,743		1,030



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, 2018	$	33,218	$	24,051
Principal Amount at December 31, 2017	$	33,350	$	53,089
Carrying Value at September 30, 2018 ⁽²⁾	$	29,870	$	23,727
Carrying Value at December 31, 2017 ⁽²⁾	$	29,164	$	52,373
Pass-through rate of Notes issued	5.35%		4.00%



	Assumption/Origination Date	Mortgage Note Amount		Maturity Date	Interest Rate		Net Deferred Finance Costs
The Clusters	6/30/2014	$	27,445	7/6/2024	4.49	%	$	58
KRVI	12/16/2016	$	5,098	12/16/2019	6.75	%	$	—



Fiscal Year	Total
2018	$	—
2019	5,098
2020	—
2021	—
2022	138,000
2023	—
Thereafter	72,445
	$	215,543



	Distressed Residential Loans					Residential Second Mortgages
	Number of Loans	Unpaid Principal		Fair Value		Number of Loans	Unpaid Principal		Fair Value
September 30, 2018	614	$	120,886	$	112,550	1,142	$	68,575	$	69,360
December 31, 2017	201	$	42,789	$	36,914	766	$	49,316	$	50,239



Combined Loan to Value at Purchase	September 30, 2018		December 31, 2017
50.00% or less	2.9	%	2.4	%
50.01% - 60.00%	3.8	%	4.1	%
60.01% - 70.00%	7.6	%	8.0	%
70.01% - 80.00%	24.6	%	21.5	%
80.01% - 90.00%	58.8	%	62.1	%
90.01% - 100.00%	2.3	%	1.9	%
Total	100.0	%	100.0	%