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Derivative Instruments (Notes)
 9 Months Ended
Sep. 30, 2013
Derivative Instruments [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
Financial Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. Specifically, the Company’s primary source of debt financing is repurchase agreements and the Company enters into financial derivative and other instruments to manage exposure to variable cash flows on portions of its borrowings under those repurchase agreements. Since the interest rates on repurchase agreements typically change with market interest rates such as LIBOR, the Company is exposed to constantly changing interest rates, which accordingly affects cash flows associated with these rates on its borrowings. To mitigate the effect of changes in these interest rates and their related cash flows, the Company may enter into a variety of derivative contracts, including interest rate swaps, Eurodollar and U.S. Treasury futures, interest rate swaptions, and TBAs.
The following table details fair value of the Company's holdings of financial derivatives as of September 30, 2013:
 
 
Fair Value
 
 
(In thousands)
Financial derivatives-assets at fair value:
 
 
TBA securities purchase contracts
 
$
104

Fixed payer interest rate swaps
 
23,077

Total financial derivatives-assets at fair value:
 
$
23,181

Financial derivatives-liabilities at fair value:
 
 
TBA securities sale contracts
 
$
(5,572
)
Fixed payer interest rate swaps
 
(1,409
)
Fixed payer swaptions
 
(86
)
Total financial derivatives-liabilities at fair value:
 
$
(7,067
)
Total
 
$
16,114

The Company did not have any financial derivatives outstanding as of December 31, 2012.
Interest Rate Swaps
An interest rate swap involves the receipt of variable rate payments from a counterparty in exchange for the Company making fixed rate payments over the life of the interest rate swap without exchange of the underlying notional amount. The following table details the Company's interest rate swaps as of September 30, 2013:
 
 
 
 
 
 
Weighted Average
Maturity
 
Notional Amount
 
Fair Value
 
Pay Rate
 
Receive Rate
 
Years to Maturity
 
 
(In thousands)
 
 
 
 
 
 
2016
 
$
38,000

 
$
(204
)
 
0.89
%
 
0.26
%
 
2.88
2017
 
109,000

 
(696
)
 
1.20

 
0.26

 
3.82
2018
 
90,000

 
1,773

 
0.88

 
0.27

 
4.60
2020
 
235,900

 
6,054

 
1.57

 
0.26

 
6.65
2023
 
213,000

 
9,279

 
2.14

 
0.26

 
9.65
2043
 
70,000

 
5,462

 
3.20

 
0.26

 
29.68
Total
 
$
755,900

 
$
21,668

 
1.71
%
 
0.26
%
 
8.79

Interest Rate Swaptions
As of September 30, 2013, the Company's outstanding fixed payer swaption contract had a notional value of $22 million and a remaining term to expiration of approximately 12 months. The underlying swap has a fixed pay rate of 3.31%, a receive rate of 3-month LIBOR and a term of 10 years.

TBAs
As of September 30, 2013, the Company had outstanding contracts to purchase ("long positions") and sell ("short positions") TBA securities as follows (shown in thousands):
TBA Securities
 
Notional Amount (1)
 
Cost Basis (2)
 
Market Value (3)
 
Net Carrying Value (4)
Purchase contracts:
 
 
 
 
 
 
 
 
Assets
 
$
3,350

 
$
3,169

 
$
3,273

 
$
104

Sale contracts:
 
 
 
 
 
 
 
 
Liabilities
 
(438,579
)
 
(449,060
)
 
(454,632
)
 
(5,572
)
Total TBA securities, net
 
$
(435,229
)
 
$
(445,891
)
 
$
(451,359
)
 
$
(5,468
)
(1)
Notional amount represents the principal balance of the underlying Agency RMBS.
(2)
Cost basis represents the forward price to be paid for the underlying Agency RMBS.
(3)
Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of September 30, 2013.
(4)
Net carrying value represents the difference between the market value of the TBA contract as of September 30, 2013 and the cost basis and is reported in Financial derivatives-assets at fair value and Financial derivatives-liabilities at fair value on the Consolidated Balance Sheet.
The Company primarily uses TBAs to hedge interest rate risk, but from time to time it also holds net long positions in certain TBA securities as a means of acquiring exposure to Agency RMBS.
Gains and losses on the Company's financial derivatives for the three and nine month periods ended September 30, 2013 are summarized in the tables below (shown in thousands):
 
 
Three Month Period Ended September 30, 2013
Derivative Type
 
Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps
 
Net Realized Gains (Losses) Other Than Periodic Settlements of Interest Rate Swaps
 
Net Realized Gains (Losses) on Financial Derivatives
 
Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps
 
Change in Net Unrealized Gains (Losses) Other Than on Accrued Periodic Settlements of Interest Rate Swaps
 
Change in Net Unrealized Gains (Losses) on Financial Derivatives
Fixed payer interest rate swaps
 
$
49

 
$
2,451

 
$
2,500

 
$
(3,109
)
 
$
(1,420
)
 
$
(4,529
)
Fixed payer swaptions
 
 
 
—

 
—

 
 
 
(86
)
 
(86
)
TBAs
 
 
 
1,773

 
1,773

 
 
 
(7,557
)
 
(7,557
)
Total
 
$
49

 
$
4,224

 
$
4,273

 
$
(3,109
)
 
$
(9,063
)
 
$
(12,172
)

 
 
Nine Month Period Ended September 30, 2013
Derivative Type
 
Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps
 
Net Realized Gains (Losses) Other Than Periodic Settlements of Interest Rate Swaps
 
Net Realized Gains (Losses) on Financial Derivatives
 
Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps
 
Change in Net Unrealized Gains (Losses) Other Than on Accrued Periodic Settlements of Interest Rate Swaps
 
Change in Net Unrealized Gains (Losses) on Financial Derivatives
Fixed payer interest rate swaps
 
$
(20
)
 
$
2,631

 
$
2,611

 
$
(4,151
)
 
$
25,819

 
$
21,668

Fixed payer swaptions
 
 
 
—

 
—

 
 
 
(86
)
 
(86
)
TBAs
 
 
 
10,039

 
10,039

 
 
 
(5,468
)
 
(5,468
)
Total
 
$
(20
)
 
$
12,670

 
$
12,650

 
$
(4,151
)
 
$
20,265

 
$
16,114