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Derivative Instruments | 9 Months Ended
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Sep. 30, 2018
Derivative Instrument Detail [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 the Company's 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, futures, 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 September 30, 2018 and December 31, 2017:
|  | September 30, 2018 |  | December 31, 2017
|  | (In thousands)
Financial derivatives–assets, at fair value: |  |  |  |
TBA securities purchase contracts |  | $ | 33 |  |  | $ | 26 |
TBA securities sale contracts |  | 1,414 |  |  | 376 |
Fixed payer interest rate swaps |  | 18,189 |  |  | 7,475 |
Fixed receiver interest rate swaps |  | — |  |  | 563 |
Swaptions |  | — |  |  | 181 |
Futures |  | 3,413 |  |  | 171 |
Total financial derivatives–assets, at fair value |  | 23,049 |  |  | 8,792 |
Financial derivatives–liabilities, at fair value: |  |  |  |
TBA securities purchase contracts |  | (295 | ) |  | (266 | )
TBA securities sale contracts |  | (25 | ) |  | (469 | )
Fixed payer interest rate swaps |  | (13 | ) |  | (1,128 | )
Total financial derivatives–liabilities, at fair value |  | (333 | ) |  | (1,863 | )
Total, net |  | $ | 22,716 |  |  | $ | 6,929 |
Interest Rate Swaps The following tables provide information about the Company's fixed payer interest rate swaps as of September 30, 2018 and December 31, 2017: September 30, 2018:
|  |  |  |  |  | Weighted Average
Maturity |  | Notional Amount |  | Fair Value |  | Pay Rate |  | Receive Rate |  | Remaining Years to Maturity
|  | (In thousands) |  |  |  |  |  |
2020 |  | $ | 86,000 |  |  | $ | 1,529 |  |  | 1.60 | % |  | 2.33 | % |  | 1.57
2021 |  | 133,400 |  |  | 3,332 |  |  | 1.89 |  |  | 2.34 |  |  | 2.66
2022 |  | 68,480 |  |  | 2,245 |  |  | 2.00 |  |  | 2.34 |  |  | 3.68
2023 |  | 23,600 |  |  | 1,193 |  |  | 1.88 |  |  | 2.34 |  |  | 4.61
2024 |  | 8,900 |  |  | 454 |  |  | 1.99 |  |  | 2.34 |  |  | 5.51
2025 |  | 47,722 |  |  | 1,398 |  |  | 2.57 |  |  | 2.33 |  |  | 6.42
2026 |  | 40,885 |  |  | 4,189 |  |  | 1.63 |  |  | 2.34 |  |  | 7.96
2027 |  | 30,000 |  |  | 1,659 |  |  | 2.29 |  |  | 2.35 |  |  | 8.59
2028 |  | 126,063 |  |  | 1,949 |  |  | 2.92 |  |  | 2.33 |  |  | 9.82
2043 |  | 12,380 |  |  | 228 |  |  | 2.99 |  |  | 2.33 |  |  | 24.63
Total |  | $ | 577,430 |  |  | $ | 18,176 |  |  | 2.17 | % |  | 2.33 | % |  | 5.77
December 31, 2017:
|  |  |  |  |  | Weighted Average
Maturity |  | Notional Amount |  | Fair Value |  | Pay Rate |  | Receive Rate |  | Remaining Years to Maturity
|  | (In thousands) |  |  |  |  |  |
2018 |  | $ | 65,990 |  |  | $ | 187 |  |  | 0.97 | % |  | 1.38 | % |  | 0.43
2019 |  | 19,540 |  |  | 165 |  |  | 1.41 |  |  | 1.60 |  |  | 1.51
2020 |  | 131,900 |  |  | 1,514 |  |  | 1.60 |  |  | 1.41 |  |  | 2.39
2021 |  | 131,400 |  |  | 1,194 |  |  | 1.88 |  |  | 1.40 |  |  | 3.41
2022 |  | 79,044 |  |  | 736 |  |  | 1.97 |  |  | 1.39 |  |  | 4.48
2023 |  | 54,200 |  |  | 873 |  |  | 1.93 |  |  | 1.37 |  |  | 5.47
2024 |  | 8,900 |  |  | 142 |  |  | 1.99 |  |  | 1.34 |  |  | 6.26
2025 |  | 15,322 |  |  | 196 |  |  | 2.04 |  |  | 1.37 |  |  | 7.13
2026 |  | 40,885 |  |  | 2,230 |  |  | 1.63 |  |  | 1.36 |  |  | 8.71
2027 |  | 48,010 |  |  | 235 |  |  | 2.30 |  |  | 1.40 |  |  | 9.38
2043 |  | 12,380 |  |  | (1,125 | ) |  | 2.99 |  |  | 1.41 |  |  | 25.38
Total |  | $ | 607,571 |  |  | $ | 6,347 |  |  | 1.77 | % |  | 1.40 | % |  | 4.54
The following table provides information about the Company's fixed receiver interest rate swaps as of December 31, 2017. The Company did not hold any fixed receiver interest rate swaps as of September 30, 2018. December 31, 2017:
|  |  |  |  |  | Weighted Average
Maturity |  | Notional Amount |  | Fair Value |  | Pay Rate |  | Receive Rate |  | Remaining Years to Maturity
|  | (In thousands) |  |  |  |  |  |
2025 |  | $ | 9,700 |  |  | $ | 563 |  |  | 1.36 | % |  | 3.00 | % |  | 7.54
Total |  | $ | 9,700 |  |  | $ | 563 |  |  | 1.36 | % |  | 3.00 | % |  | 7.54
Interest Rate Swaptions The following tables provide information about the Company's swaptions as of December 31, 2017. The Company did not hold any swaptions as of September 30, 2018. December 31, 2017:
Option |  | Underlying Swap
Type |  | Fair Value |  | Months to Expiration |  | Notional Amount |  | Term (Years) |  | Fixed Rate
($ in thousands) |  |  |  |  |  |  |  |  |  |
Fixed Payer |  | $ | 181 |  |  | 7.0 |  | $ | 10,000 |  |  | 10 |  | 2.40%
Futures The following tables provide information about the Company's short positions in futures as of September 30, 2018 and December 31, 2017. September 30, 2018:
Description |  | Notional Amount |  | Fair Value |  | Remaining Months to Expiration
($ in thousands) |  |  |  |  |  |
U.S. Treasury Futures |  | $ | (246,700 | ) |  | $ | 3,413 |  |  | 2.92
December 31, 2017:
Description |  | Notional Amount |  | Fair Value |  | Remaining Months to Expiration
($ in thousands) |  |  |  |  |  |
U.S. Treasury Futures |  | $ | (25,800 | ) |  | $ | 171 |  |  | 2.63
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 generally liquid, 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 September 30, 2018 and December 31, 2017, the Company had outstanding contracts to purchase ("long positions") and sell ("short positions") TBA securities as follows:
|  | September 30, 2018 |  | December 31, 2017
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 |  | $ | 16,800 |  |  | $ | 16,503 |  |  | $ | 16,536 |  |  | $ | 33 |  |  | $ | 37,355 |  |  | $ | 38,065 |  |  | $ | 38,091 |  |  | $ | 26 |
Liabilities |  | 111,229 |  |  | 113,076 |  |  | 112,781 |  |  | (295 | ) |  | 75,789 |  |  | 79,570 |  |  | 79,304 |  |  | (266 | )
|  | 128,029 |  |  | 129,579 |  |  | 129,317 |  |  | (262 | ) |  | 113,144 |  |  | 117,635 |  |  | 117,395 |  |  | (240 | )
Sale contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  | (343,137 | ) |  | (344,620 | ) |  | (343,206 | ) |  | 1,414 |  |  | (358,279 | ) |  | (372,219 | ) |  | (371,843 | ) |  | 376 |
Liabilities |  | (9,811 | ) |  | (9,856 | ) |  | (9,881 | ) |  | (25 | ) |  | (328,576 | ) |  | (341,134 | ) |  | (341,603 | ) |  | (469 | )
|  | (352,948 | ) |  | (354,476 | ) |  | (353,087 | ) |  | 1,389 |  |  | (686,855 | ) |  | (713,353 | ) |  | (713,446 | ) |  | (93 | )
Total TBA securities, net |  | $ | (224,919 | ) |  | $ | (224,897 | ) |  | $ | (223,770 | ) |  | $ | 1,127 |  |  | $ | (573,711 | ) |  | $ | (595,718 | ) |  | $ | (596,051 | ) |  | $ | (333 | )
(1) | Notional amount represents the principal balance of the underlying Agency RMBS.
(2) | Cost basis represents the forward price to be paid (received) 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 table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the nine-month period ended September 30, 2018 and the year ended December 31, 2017:
Derivative Type |  | Nine-Month Period Ended September 30, 2018 |  | Year Ended December 31, 2017
|  | (In thousands)
Interest rate swaps |  | $ | 596,159 |  |  | $ | 549,907 |
TBAs |  | 624,974 |  |  | 796,813 |
Futures |  | 231,870 |  |  | 30,092 |
Swaptions |  | 7,000 |  |  | 4,615 |
Gains and losses on the Company's financial derivatives for the three- and nine-month periods ended September 30, 2018 and 2017 are summarized in the tables below:
|  | Three-Month Period Ended September 30, 2018
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 |  | $ | 1,281 |  |  | $ | 2,096 |  |  | $ | 3,377 |  |  | $ | (893 | ) |  | $ | 2,383 |  |  | $ | 1,490 |
Swaptions |  |  |  | (249 | ) |  | (249 | ) |  |  |  | (221 | ) |  | (221 | )
TBAs |  |  |  | (692 | ) |  | (692 | ) |  |  |  | 2,100 |  |  | 2,100 |
Futures |  |  |  | 1,622 |  |  | 1,622 |  |  |  |  | 1,237 |  |  | 1,237 |
Total |  | $ | 1,281 |  |  | $ | 2,777 |  |  | $ | 4,058 |  |  | $ | (893 | ) |  | $ | 5,499 |  |  | $ | 4,606 |
|  | Three-Month Period Ended September 30, 2017
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 |  | $ | 957 |  |  | $ | (76 | ) |  | $ | 881 |  |  | $ | (1,657 | ) |  | $ | 808 |  |  | $ | (849 | )
Swaptions |  |  |  | — |  |  | — |  |  |  |  | (37 | ) |  | (37 | )
TBAs |  |  |  | (3,475 | ) |  | (3,475 | ) |  |  |  | (179 | ) |  | (179 | )
Futures |  |  |  | (387 | ) |  | (387 | ) |  |  |  | 376 |  |  | 376 |
Total |  | $ | 957 |  |  | $ | (3,938 | ) |  | $ | (2,981 | ) |  | $ | (1,657 | ) |  | $ | 968 |  |  | $ | (689 | )
|  | Nine-Month Period Ended September 30, 2018
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 |  | $ | 1,072 |  |  | $ | 5,065 |  |  | $ | 6,137 |  |  | $ | (932 | ) |  | $ | 12,167 |  |  | $ | 11,235 |
Swaptions |  |  |  | (249 | ) |  | (249 | ) |  |  |  | 68 |  |  | 68 |
TBAs |  |  |  | 10,151 |  |  | 10,151 |  |  |  |  | 1,460 |  |  | 1,460 |
Futures |  |  |  | 272 |  |  | 272 |  |  |  |  | 3,242 |  |  | 3,242 |
Total |  | $ | 1,072 |  |  | $ | 15,239 |  |  | $ | 16,311 |  |  | $ | (932 | ) |  | $ | 16,937 |  |  | $ | 16,005 |
|  | Nine-Month Period Ended September 30, 2017
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 |  | $ | 7 |  |  | $ | (71 | ) |  | $ | (64 | ) |  | $ | (1,801 | ) |  | $ | (870 | ) |  | $ | (2,671 | )
Swaptions |  |  |  | — |  |  | — |  |  |  |  | (37 | ) |  | (37 | )
TBAs |  |  |  | (9,363 | ) |  | (9,363 | ) |  |  |  | 936 |  |  | 936 |
Futures |  |  |  | (1,028 | ) |  | (1,028 | ) |  |  |  | 470 |  |  | 470 |
Total |  | $ | 7 |  |  | $ | (10,462 | ) |  | $ | (10,455 | ) |  | $ | (1,801 | ) |  | $ | 499 |  |  | $ | (1,302 | )
From time to time, the Company uses short positions in U.S. Treasury positions as a component of its interest rate hedging portfolio. As of September 30, 2018, the Company held short positions in U.S. Treasury securities, with a principal amount of $26.8 million and a fair value of $26.4 million. As of December 31, 2017, the Company held short positions in U.S. Treasury securities, with a principal amount of $82.5 million and a fair value of $81.3 million. Such securities are included on the Company's Consolidated Balance Sheet under the caption U.S. Treasury securities sold short, at fair value.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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