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v3.20.2

Derivatives (Tables) | 6 Months Ended
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Jun. 30, 2020
Derivative [Line Items] |
Derivative Instruments, Gain (Loss) | The table below provides detail of the Company’s “loss on derivative instruments, net” by type of derivative for the periods indicated:
|  | Three Months |  |  |  | Six Months Ended |  |
|  | June 30, |  |  |  | June 30, |  |
Type of Derivative Instrument |  | 2020 |  | 2019 |  | 2020 |  | 2019
Interest rate swaps |  | $ | (1,672) |  |  | $ | (124,213) |  |  | $ | (183,852) |  |  | $ | (195,978) |
Interest rate swaptions |  | — |  |  | — |  |  | (573) |  |  | — |
Futures |  | (10,928) |  |  | (102) |  |  | (19,377) |  |  | (211) |
Options on U.S. Treasury futures |  | (6,680) |  |  | — |  |  | (17,406) |  |  | — |
TBA securities - long positions |  | 8,688 |  |  | 6,780 |  |  | 27,119 |  |  | 16,956 |
TBA securities - short positions |  | 2,029 |  |  | — |  |  | (10,041) |  |  | — |
Loss on derivative instruments, net |  | $ | (8,563) |  |  | $ | (117,535) |  |  | $ | (204,130) |  |  | $ | (179,233) |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The table below summarizes information about the fair value by type of derivative instrument on the Company’s consolidated balance sheets as of the dates indicated:
Type of Derivative Instrument |  | Balance Sheet Location |  | Purpose |  | June 30, 2020 |  | December 31, 2019
Options on U.S. Treasury futures |  | Derivative assets |  | Economic hedging |  | $ | 3,168 |  |  | $ | 2,883 |
Interest rate swaptions |  | Derivative assets |  | Economic hedging |  | — |  |  | 573 |
TBA securities - long positions |  | Derivative assets |  | Investing |  | 4,758 |  |  | 834 |
Total derivatives assets |  |  |  |  |  | $ | 7,926 |  |  | $ | 4,290 |
U.S. Treasury futures |  | Derivative liabilities |  | Economic hedging |  | $ | (4,208) |  |  | $ | — |
TBA securities - short positions |  | Derivative liabilities |  | Economic hedging |  | — |  |  | (974) |
Total derivatives liabilities |  |  |  |  |  | $ | (4,208) |  |  | $ | (974) |
Schedule of Derivative Instruments | Interest Rate Swaps The Company has interest rate swap agreements outstanding with various counterparties that are centrally cleared through the CME. As explained in Note 1, the exchange of variation margin for CME cleared interest rate swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Because the Company accounts for this daily exchange of variation margin for its CME cleared interest rate swaps as an increase or decrease to the carrying value of the related derivative asset or liability, the fair value of the interest rate swaps nets to $0 on the Company’s consolidated balance sheet. The Company had net settlement amounts of $(2,866) and $(9,265) in variation margin for its interest rate swaps as of June 30, 2020 and December 31, 2019, respectively. The following tables present information about the Company’s interest rate swaps as of the dates indicated:
|  | June 30, 2020 |  |  |  |  |  | December 31, 2019 |  |  |  |
|  |  |  | Weighted-Average |  |  |  |  |  | Weighted-Average |  |
Years to Maturity: |  | Notional Amount |  | Pay Rate |  | Life Remaining (in Years) |  | Notional Amount |  | Pay Rate |  | Life Remaining (in Years)
< 3 years |  | $ | 50,000 |  |  | 1.35 | % |  | 0.3 |  | $ | 2,860,000 |  |  | 1.58 | % |  | 1.5
>3 and < 6 years |  | — |  |  | — | % |  | — |  |  | 700,000 |  |  | 1.43 | % |  | 4.7
>6 and < 10 years |  | 425,000 |  |  | 0.69 | % |  | 9.9 |  | 545,000 |  |  | 1.78 | % |  | 9.4
>10 years |  | — |  |  | — | % |  | — |  |  | 120,000 |  |  | 2.84 | % |  | 27.7
Total |  | $ | 475,000 |  |  | 0.76 | % |  | 9.0 |  | $ | 4,225,000 |  |  | 1.62 | % |  | 3.8
U.S. Treasury Futures and Options The following table presents information about the Company’s U.S. Treasury futures and options outstanding as of the dates indicated:
| Cost Basis |  | Fair Value |  | Notional Amount
As of June 30, 2020: |  |  |  |  |
Options on U.S. Treasury futures (1) | $ | 20,622 |  |  | $ | 3,168 |  |  | $ | 1,425,000 |
U.S. Treasury futures - short positions | n/a |  | (4,208) |  |  | 1,225,000 |
As of December 31, 2019: |  |  |  |  |
Options on U.S. Treasury futures (2) | $ | 4,359 |  |  | $ | 2,883 |  |  | $ | 1,350,000 |
Pay-fixed interest rate swaptions (2) | 6,180 |  |  | 573 |  |  | 750,000 |
(1) All futures and options outstanding as of June 30, 2020 will expire in September of 2020. (2) All options outstanding as of December 31, 2019 expired during the first quarter of 2020. TBA Securities The following table summarizes information about the Company's TBA securities as of the dates indicated:
| June 30, 2020 |  |  |  | December 31, 2019 |  |
| Long Positions |  | Short Positions |  | Long Positions |  | Short Positions
Implied market value (1) | $ | 1,290,078 |  |  | $ | — |  |  | $ | 442,161 |  |  | $ | (520,117) |
Implied cost basis (2) | 1,285,320 |  |  | — |  |  | 441,327 |  |  | (519,143) |
Net carrying value (3) | $ | 4,758 |  |  | $ | — |  |  | $ | 834 |  |  | $ | (974) |
(1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the date indicated. (2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the date indicated. (3) Net carrying value is the amount included on the consolidated balance sheets within “derivative assets (liabilities)” and represents the difference between the implied market value and the implied cost basis of the TBA security as of the date indicated.
Schedule of Notional Amounts of Outstanding Derivative Positions | The tables below summarize changes in the Company’s derivative instruments for the period indicated:
Type of Derivative Instrument |  | Notional Amount as of December 31, 2019 |  | Additions |  | Settlements, Terminations, or Pair-Offs |  | Notional Amount as of June 30, 2020
Interest rate swaps |  | $ | 4,225,000 |  |  | $ | 2,915,000 |  |  | $ | (6,665,000) |  |  | $ | 475,000 |
Interest rate swaptions |  | 750,000 |  |  | — |  |  | (750,000) |  |  | — |
U.S. Treasury futures - short positions |  | — |  |  | 2,212,600 |  |  | (3,437,600) |  |  | (1,225,000) |
Options on U.S. Treasury futures |  | 1,350,000 |  |  | 3,425,000 |  |  | (3,350,000) |  |  | 1,425,000 |
TBA - long positions |  | 435,000 |  |  | 5,311,000 |  |  | (4,496,000) |  |  | 1,250,000 |
TBA - short positions |  | 500,000 |  |  | 3,017,000 |  |  | (3,517,000) |  |  | — |
Offsetting Assets |
| Offsetting of Assets |  |  |  |  |  |  |  |  |  |
| Gross Amount of Recognized Assets |  | Gross Amount Offset in the Balance Sheet |  | Net Amount of Assets Presented in the Balance Sheet |  | Gross Amount Not Offset in the Balance Sheet (1) |  |  |  | Net Amount
|  |  |  |  |  |  | Financial Instruments Received as Collateral |  | Cash Received as Collateral |  |
June 30, 2020 |  |  |  |  |  |  |  |  |  |  |
Options on U.S. Treasury futures | $ | 3,168 |  |  | — |  |  | $ | 3,168 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,168 |
TBA - long positions | 4,758 |  |  | — |  |  | 4,758 |  |  | — |  |  | — |  |  | 4,758 |
Derivative assets | $ | 7,926 |  |  | $ | — |  |  | $ | 7,926 |  |  | $ | — |  |  | $ | — |  |  | $ | 7,926 |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |
Interest rate swaptions | $ | 573 |  |  | $ | — |  |  | $ | 573 |  |  | $ | — |  |  | $ | — |  |  | $ | 573 |
Options on U.S. Treasury futures | 2,883 |  |  | — |  |  | 2,883 |  |  | — |  |  | — |  |  | 2,883 |
TBA - long positions | 834 |  |  | — |  |  | 834 |  |  | (380) |  |  | — |  |  | 454 |
Derivative assets | $ | 4,290 |  |  | $ | — |  |  | $ | 4,290 |  |  | $ | (380) |  |  | $ | — |  |  | $ | 3,910 |
Offsetting Liabilities |
| Offsetting of Liabilities |  |  |  |  |  |  |  |  |  |
| Gross Amount of Recognized Liabilities |  | Gross Amount Offset in the Balance Sheet |  | Net Amount of Liabilities Presented in the Balance Sheet |  | Gross Amount Not Offset in the Balance Sheet (1) |  |  |  | Net Amount
|  |  |  |  |  |  | Financial Instruments Posted as Collateral |  | Cash Posted as Collateral |  |
June 30, 2020 |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury futures | $ | (4,208) |  |  | — |  |  | $ | (4,208) |  |  | $ | — |  |  | $ | 4,208 |  |  | $ | — |
TBA - short positions | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Derivative liabilities | $ | (4,208) |  |  | $ | — |  |  | $ | (4,208) |  |  | $ | — |  |  | $ | 4,208 |  |  | $ | — |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |
TBA - short positions | $ | (974) |  |  | — |  |  | $ | (974) |  |  | $ | 380 |  |  | — |  |  | $ | (594) |
Derivative liabilities | $ | (974) |  |  | $ | — |  |  | $ | (974) |  |  | $ | 380 |  |  | $ | — |  |  | $ | (594) |
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total cash posted as collateral, which is recorded as "restricted cash," and the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically.

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