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Derivative Instruments
 3 Months Ended
Mar. 31, 2016
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 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, swaptions, and TBAs. Additionally, from time to time, the Company may use short positions in U.S. Treasury securities to mitigate its interest rate risk.
The following table details the fair value of the Company's holdings of financial derivatives as of March 31, 2016 and December 31, 2015:
 
 
March 31, 2016
 
December 31, 2015
 
 
(In thousands)
Financial derivatives–assets, at fair value:
 
 
 
 
TBA securities purchase contracts
 
$
365

 
$
115

TBA securities sale contracts
 
—

 
302

Fixed payer interest rate swaps
 
4

 
891

Fixed receiver interest rate swaps
 
1,265

 
857

Futures
 
1

 
18

Total financial derivatives–assets, at fair value
 
1,635

 
2,183

Financial derivatives–liabilities, at fair value:
 
 
 
 
TBA securities purchase contracts
 
—

 
(49
)
TBA securities sale contracts
 
(1,157
)
 
(315
)
Fixed payer interest rate swaps
 
(17,122
)
 
(4,361
)
Futures
 
(5
)
 
—

Total financial derivatives–liabilities, at fair value
 
(18,284
)
 
(4,725
)
Total
 
$
(16,649
)
 
$
(2,542
)

Interest Rate Swaps
The following tables provide information about the Company's fixed payer interest rate swaps as of March 31, 2016 and December 31, 2015:
March 31, 2016:
 
 
 
 
 
 
Weighted Average
Maturity
 
Notional Amount
 
Fair Value
 
Pay Rate
 
Receive Rate
 
Remaining Years to Maturity
 
 
(In thousands)
 
 
 
 
 
 
2016
 
$
48,000

 
$
(79
)
 
0.80
%
 
0.62
%
 
0.52
2017
 
74,750

 
(546
)
 
1.21

 
0.63

 
1.34
2018
 
71,529

 
(559
)
 
1.11

 
0.62

 
2.03
2020
 
107,461

 
(2,371
)
 
1.50

 
0.62

 
4.08
2021
 
10,400

 
1

 
1.15

 
0.62

 
4.87
2022
 
19,444

 
(587
)
 
1.76

 
0.62

 
6.26
2023
 
131,400

 
(7,080
)
 
2.10

 
0.63

 
7.14
2024
 
9,200

 
(428
)
 
1.99

 
0.61

 
8.01
2025
 
34,022

 
(1,503
)
 
2.05

 
0.62

 
8.86
2043
 
19,047

 
(3,966
)
 
3.02

 
0.62

 
27.14
Total
 
$
525,253

 
$
(17,118
)
 
1.59
%
 
0.62
%
 
5.16

December 31, 2015:
 
 
 
 
 
 
Weighted Average
Maturity
 
Notional Amount
 
Fair Value
 
Pay Rate
 
Receive Rate
 
Remaining Years to Maturity
 
 
(In thousands)
 
 
 
 
 
 
2016
 
$
48,000

 
$
(83
)
 
0.80
%
 
0.39
%
 
0.77
2017
 
74,750

 
(445
)
 
1.21

 
0.41

 
1.59
2018
 
71,529

 
80

 
1.11

 
0.34

 
2.28
2020
 
119,893

 
220

 
1.51

 
0.33

 
4.36
2022
 
19,444

 
86

 
1.76

 
0.34

 
6.51
2023
 
131,400

 
(1,367
)
 
2.10

 
0.38

 
7.39
2024
 
9,200

 
11

 
1.99

 
0.32

 
8.26
2025
 
58,560

 
(5
)
 
2.06

 
0.33

 
9.32
2043
 
21,067

 
(1,967
)
 
3.03

 
0.36

 
27.39
Total
 
$
553,843

 
$
(3,470
)
 
1.63
%
 
0.36
%
 
5.67

The following tables provide information about the Company's fixed receiver interest rate swaps as of March 31, 2016 and December 31, 2015.
March 31, 2016:
 
 
 
 
 
 
Weighted Average
Maturity
 
Notional Amount
 
Fair Value
 
Pay Rate
 
Receive Rate
 
Remaining Years to Maturity
 
 
(In thousands)
 
 
 
 
 
 
2025
 
$
9,700

 
$
1,255

 
0.62
%
 
3.00
%
 
9.30
2026
 
3,000

 
10

 
0.63
%
 
1.68
%
 
10.01
Total
 
$
12,700

 
$
1,265

 
0.62
%
 
2.69
%
 
9.46
December 31, 2015:
 
 
 
 
 
 
Weighted Average
Maturity
 
Notional Amount
 
Fair Value
 
Pay Rate
 
Receive Rate
 
Remaining Years to Maturity
 
 
(In thousands)
 
 
 
 
 
 
2025
 
$
9,700

 
$
857

 
0.32
%
 
3.00
%
 
9.55
Total
 
$
9,700

 
$
857

 
0.32
%
 
3.00
%
 
9.55

Futures
The following table provides information about the Company's short positions in Eurodollar futures as of March 31, 2016 and December 31, 2015.
March 31, 2016:
Maturity
 
Notional Amount
 
Fair Value
 
Remaining Months to Expiration
($ in thousands)
 
 
 
 
 
 
2016
 
$
(9,000
)
 
$
1

 
5.66
2017
 
(9,000
)
 
(5
)
 
14.76
Total
 
$
(18,000
)
 
$
(4
)
 
10.21
December 31, 2015:
Maturity
 
Notional Amount
 
Fair Value
 
Remaining Months to Expiration
($ in thousands)
 
 
 
 
 
 
2016
 
$
(12,000
)
 
$
10

 
7.13
2017
 
(9,000
)
 
8

 
17.79
Total
 
$
(21,000
)
 
$
18

 
11.70

TBAs
The Company transacts in the forward settling TBA market. Pursuant to these TBA transactions, the Company agrees to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. TBAs are liquid and have quoted market prices and represent the most actively traded class of MBS. The Company primarily uses TBAs to mitigate interest rate risk, typically in the form of short positions. However, from time to time the Company also invests in TBAs as a means of acquiring additional exposure to Agency RMBS, or for speculative purposes, including holding long positions. Overall, the Company typically holds a net short position.
The Company does not generally take delivery of TBAs; rather, it settles the associated receivable and payable with its trading counterparties on a net basis. Transactions with the same counterparty for the same TBA that result in a reduction of the position are treated as extinguished.
As of March 31, 2016 and December 31, 2015, the Company had outstanding contracts to purchase ("long positions") and sell ("short positions") TBA securities as follows:
 
 
March 31, 2016
 
December 31, 2015
TBA Securities
 
Notional Amount(1)
 
Cost
Basis(2)
 
Market Value(3)
 
Net Carrying Value(4)
 
Notional Amount (1)
 
Cost
Basis(2)
 
Market Value(3)
 
Net Carrying Value(4)
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase contracts:
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
Assets
 
$
76,904

 
$
79,928

 
$
80,293

 
$
365

 
$
60,291

 
$
61,638

 
$
61,753

 
$
115

Liabilities
 
—

 
—

 
—

 
—

 
23,418

 
24,208

 
24,159

 
(49
)
 
 
76,904


79,928


80,293


365


83,709


85,846


85,912


66

Sale contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
—

 
—

 
—

 
—

 
(170,800
)
 
(181,476
)
 
(181,174
)
 
302

Liabilities
 
(311,246
)
 
(332,743
)
 
(333,900
)
 
(1,157
)
 
(252,746
)
 
(268,973
)
 
(269,288
)
 
(315
)
 
 
(311,246
)

(332,743
)

(333,900
)

(1,157
)

(423,546
)

(450,449
)

(450,462
)

(13
)
Total TBA securities, net
 
$
(234,342
)
 
$
(252,815
)
 
$
(253,607
)
 
$
(792
)
 
$
(339,837
)
 
$
(364,603
)
 
$
(364,550
)
 
$
53

(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 period end.
(4)
Net carrying value represents the difference between the market value of the TBA contract as of period end 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 tables below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the three month period ended March 31, 2016 and the year ended December 31, 2015:
Derivative Type
 
Three Month
Period Ended
March 31, 2016
 
Year Ended
December 31, 2015
 
 
(In thousands)
Interest rate swaps
 
$
545,110

 
$
525,037

TBAs
 
430,152

 
606,665

Interest rate swaptions
 
—

 
5,223

Futures
 
20,250

 
5,308


Gains and losses on the Company's financial derivatives for the three month periods ended March 31, 2016 and 2015 are summarized in the tables below:
 
 
Three Month Period Ended March 31, 2016
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
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(672
)
 
$
(1,226
)
 
$
(1,898
)
 
$
(726
)
 
$
(12,543
)
 
$
(13,269
)
TBAs
 
 
 
(2,099
)
 
(2,099
)
 
 
 
(844
)
 
(844
)
Futures
 
 
 
1

 
1

 
 
 
(22
)
 
(22
)
Total
 
$
(672
)
 
$
(3,324
)
 
$
(3,996
)
 
$
(726
)
 
$
(13,409
)
 
$
(14,135
)

 
 
Three Month Period Ended March 31, 2015
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
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(707
)
 
$
(3,441
)
 
$
(4,148
)
 
$
(851
)
 
$
(6,383
)
 
$
(7,234
)
Swaptions
 
 
 
—

 
—

 
 
 
237

 
237

TBAs
 
 
 
(4,595
)
 
(4,595
)
 
 
 
(97
)
 
(97
)
Total
 
$
(707
)
 
$
(8,036
)
 
$
(8,743
)
 
$
(851
)
 
$
(6,243
)
 
$
(7,094
)

As of March 31, 2016, the Company also held short positions in U.S. Treasury securities, with a principal amount of $68.8 million and a fair value of $69.6 million. As of December 31, 2015, the Company also held short positions in U.S. Treasury securities, with a principal amount of $79.6 million and a fair value of $78.4 million. Such securities are included on the Company's Consolidated Balance Sheet under the caption U.S. Treasury securities sold short, at fair value.