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Derivatives | 9 Months Ended
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Sep. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | DERIVATIVES The Company utilizes a variety of derivative instruments to economically hedge a portion of its exposure to market risks, primarily interest rate risk. The principal instruments used to hedge these risks are interest rate swaps and Eurodollar futures. The objective of the Company's risk management strategy is to protect the Company's earnings from rising interest rates and to mitigate declines in book value resulting from fluctuations in the fair value of the Company's assets from changing interest rates. The Company seeks to limit its exposure to changes in interest rates but does not seek to eliminate this risk. Effective June 30, 2013, the Company voluntarily discontinued hedge accounting for interest rate swaps which had previously been accounted for as cash flow hedges under GAAP. The Company discontinued hedge accounting for its interest rate swap agreements in order to gain greater flexibility in managing the maturities of its repurchase agreement borrowings. In addition, the Company began purchasing Eurodollar futures during the third quarter of 2013. Please refer to Note 1 for additional information related to the Company's accounting policy for its derivative instruments. The table below summarizes information about the Company’s derivative instruments on its consolidated balance sheet as of the dates indicated:
|  |  |  |  |  | September 30, 2013
Type of Derivative Instrument |  | Accounting Designation |  | Balance Sheet Location: |  | Fair Value |  | Aggregate Notional Amount
Interest rate swaps |  | Non-hedging |  | Derivative assets |  | $ | 12,908 |  |  | $ | 425,000 |
Interest rate swaps |  | Non-hedging |  |  |  | $ | (20,837 | ) |  | $ | 1,267,000 |
Eurodollar futures |  | Non-hedging |  |  |  | — |  |  | 20,250,000 |
|  |  |  | Derivative liabilities |  | $ | (20,837 | ) |  | $ | 21,517,000 |
|  |  |  |  |  | December 31, 2012
Type of Derivative Instrument |  | Accounting Designation |  | Balance Sheet Location: |  | Fair Value |  | Aggregate Notional Amount
Interest rate swaps |  | Hedging |  |  |  | $ | (39,813 | ) |  | $ | 1,435,000 |
Interest rate swaps |  | Non-hedging |  |  |  | (2,724 | ) |  | 27,000 |
|  |  |  | Derivative liabilities |  | $ | (42,537 | ) |  | $ | 1,462,000 |
(1) Margin requirements from fluctuations in fair value of the Company's Eurodollar futures are settled daily with counterparties. Information related to the volume of activity for our interest rate derivative instruments subsequent to December 31, 2012 is as follows:
(amounts in thousands) | Interest Rate Swaps |  | Eurodollar Futures
Notional amount as of December 31, 2012: | $ | 1,462,000 |  |  | $ | — |
Additions: | 380,000 |  |  | 22,100,000 |
Settlements, terminations, or expirations: | (150,000 | ) |  | (1,850,000 | )
Notional amount as of September 30, 2013:(1) | $ | 1,692,000 |  |  | $ | 20,250,000 |
(1) | The Eurodollar futures notional amount as of September 30, 2013 represents the total notional of the 3-month contracts with expiration dates from 2013 to 2020. The maximum notional outstanding for any 3-month period does not exceed $1,275,000.
The following table summarizes the contractual maturities remaining for the Company’s outstanding interest rate swap agreements as of September 30, 2013:
Remaining Maturity |  | Notional Amount: Trading |  | Weighted-Average Fixed Rate Swapped
0-12 months |  | $ | 435,000 |  |  | 1.26 | %
13-24 months |  | 130,000 |  |  | 2.06 | %
25-36 months |  | 260,000 |  |  | 1.96 | %
37-48 months |  | 212,000 |  |  | 0.01 | %
49-60 months |  | 15,000 |  |  | 2.17 | %
61-72 months |  | 385,000 |  |  | 1.58 | %
73-84 months |  | 25,000 |  |  | 1.61 | %
109-127 months |  | 230,000 |  |  | 2.27 | %
|  | $ | 1,692,000 |  |  | 1.64 | %
As of September 30, 2013, three of these agreements with a total notional balance of $150,000 and a weighted average pay-fixed rate of 2.17% are 10-year forward-starting swaps which will not be effective until 2014. The tables below summarize the effect of the Company's interest rate derivatives reported in "(loss) gain on derivative instruments, net" on the Company's consolidated statements of income for the periods indicated:
|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | September 30,
Type of Derivative Instrument |  | 2013 |  | 2012 |  | 2013 |  | 2012
Interest rate swaps |  | $ | (6,225 | ) |  | $ | (333 | ) |  | $ | 5,111 |  |  | $ | (907 | )
Eurodollar futures |  | (17,794 | ) |  | — |  |  | (17,794 | ) |  | — |
Loss on derivative instruments, net |  | $ | (24,019 | ) |  | $ | (333 | ) |  | $ | (12,683 | ) |  | $ | (907 | )
Please refer to Note 10 for important information regarding derivative instruments the Company has terminated subsequent to September 30, 2013. As a result of discontinuing hedge accounting, the net unrealized loss remaining in AOCI as of September 30, 2013 of $11,975 related to the interest rate swap agreements previously designated as cash flow hedges will be recognized into the Company's consolidated statement of income as a portion of "interest expense" over the remaining contractual life of the agreements. The Company reclassified $2,583 from AOCI to its consolidated statement of income for the three months ended September 30, 2013. All forecasted transactions associated with interest rate swap agreements previously designated as cash flow hedges are expected to occur. No amounts have been reclassified to net income (loss) in any period in connection with forecasted transactions that are no longer considered probable of occurring. The Company estimates the net amount of existing net unrealized loss on discontinued cash flow hedges expected to be reclassified to earnings within the next 12 months is $7,911. All of the Company's derivative instruments contain various covenants related to the Company’s credit risk. Specifically, if the Company defaults on any of its indebtedness, including those circumstances whereby repayment of the indebtedness has not yet been accelerated by the lender, or is declared in default of any of its covenants with any counterparty, then the Company could also be declared in default of its derivative obligations. Additionally, the agreements outstanding with its derivative counterparties allow those counterparties to require settlement of its outstanding derivative transactions if the Company fails to earn GAAP net income greater than one dollar as measured on a rolling two quarter basis. These interest rate agreements also contain provisions whereby, if the Company fails to maintain a minimum net amount of shareholders’ equity, then the Company may be declared in default on its derivative obligatio

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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