DERIVATIVE INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2016

Summarizes Fair Value Information about Derivative Assets Liabilities

The table below summarizes fair value information about our derivative assets and liabilities as of March 31, 2016 and December 31, 2015:

Derivatives Instruments	Balance Sheet Location	March 31, 2016		December 31, 2015
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	93,312	$	19,642
TBA derivatives	Other derivatives, at fair value		76,732		9,622
Futures contracts	Other derivatives, at fair value		717		12,444
		$	170,761	$	41,708
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value	$	2,782,961	$	1,677,571
TBA derivatives	Other derivatives, at fair value		-		17,185
Futures contracts	Other derivatives, at fair value		69,171		32,778
		$	2,852,132	$	1,727,534

Offsetting of Derivative Assets and Liabilities

The following tables present information about derivative assets and liabilities that are subject to such provisions and can potentially be offset on our Consolidated Statements of Financial Condition as of March 31, 2016 and December 31, 2015, respectively.

March 31, 2016			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	93,312	$	(93,312	)	$	-		$	-
TBA derivatives, at fair value		76,732		-			-			76,732
Futures contracts, at fair value		717		(110	)		-			607
Liabilities:
Interest rate swaps, at fair value	$	2,782,961	$	(93,312	)	$	(1,617,530	)	$	1,072,119
TBA derivatives, at fair value		-		-			-			-
Futures contracts, at fair value		69,171		(110	)		(69,061	)		-
December 31, 2015			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	19,642	$	(18,040	)	$	-		$	1,602
TBA derivatives, at fair value		9,622		(7,367	)		-			2,255
Futures contracts, at fair value		12,443		(10,868	)		-			1,575
Liabilities:
Interest rate swaps, at fair value	$	1,677,571	$	(18,040	)	$	(913,576	)	$	745,955
TBA derivatives, at fair value		17,185		(7,367	)		-			9,818
Futures contracts, at fair value		32,778		(10,868	)		(21,910	)		-

Schedule of Derivative Instruments in Statement of Operations and Comprehensive Income Loss

The effect of interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss) is as follows:

	Location on Consolidated Statements of Comprehensive Income (Loss)
	Realized Gains (Losses) on Interest Rate Swaps(1)			Realized Gains (Losses) on Termination of Interest Rate Swaps			Unrealized Gains (Losses) on Interest Rate Swaps
	(dollars in thousands)
Quarters Ended:
March 31, 2016	$	(147,475	)	$	-		$	(1,031,720	)
March 31, 2015	$	(158,239	)	$	(226,462	)	$	(466,202	)

^{(1) Interest expense related to the Company's interest rate swaps is recorded in Realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss).}

Effect of Other Derivative Contracts on the Consolidated Statements of Operations and Comprehensive Income (Loss)

The effect of other derivative contracts on the Company's Consolidated Statements of Comprehensive Income (Loss) is as follows:

Quarter Ended March 31, 2016
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	219,993		$	84,295		$	304,288
Net interest rate swaptions	$	-		$	-		$	-
Futures	$	(130,994	)	$	(48,120	)	$	(179,114	)
							$	125,174
Quarter Ended March 31, 2015
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	(55,644	)	$	117,188		$	61,544
Net interest rate swaptions	$	(21,891	)	$	17,083		$	(4,808	)
Futures	$	(5,506	)	$	(58,126	)	$	(63,632	)
							$	(6,896	)

^{(1) Includes options on TBA contracts.}

Interest Rate Swaps

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company's interest rate swaps at March 31, 2016 and December 31, 2015:

March 31, 2016
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate(2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	4,290,419		1.79	%		0.47	%		1.87
3 - 6 years		11,925,000		1.87	%		0.73	%		4.22
6 - 10 years		10,227,550		2.49	%		0.76	%		7.88
Greater than 10 years		3,434,400		3.54	%		0.59	%		18.64
Total / Weighted Average	$	29,877,369		2.26	%		0.69	%		6.76
December 31, 2015
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate(2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	3,240,436		1.85	%		0.36	%		1.80
3 - 6 years		11,675,000		1.82	%		0.55	%		4.25
6 - 10 years		11,635,250		2.44	%		0.57	%		7.92
Greater than 10 years		3,634,400		3.70	%		0.43	%		19.37
Total / Weighted Average	$	30,185,086		2.26	%		0.53	%		7.02

(1) There were no forward starting pay fixed swaps as of March 31, 2016. Notional amount includes $500.0 million in forward starting pay fixed swaps as of December 31, 2015.

(2) Excludes forward starting swaps.

(3) There were no forward starting pay fixed swaps as of March 31, 2016. Weighted average fixed rate on forward starting pay fixed swaps was 1.44% as of December 31, 2015.

Future

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company's futures derivatives as of March 31, 2016 and December 31, 2015:

	March 31, 2016
	Notional - Long Positions		Notional - Short Positions			Weighted Average Years to Maturity
	(dollars in thousands)
2-year swap equivalent Eurodollar contracts	$	-	$	(4,375,000	)		2.00
U.S. Treasury futures - 5 year		-		(1,847,200	)		4.42
U.S. Treasury futures - 10 year and greater		-		(655,600	)		6.75
Total	$	-	$	(6,877,800	)		3.10
	December 31, 2015
	Notional - Long Positions		Notional - Short Positions			Weighted Average Years to Maturity
	(dollars in thousands)
2-year swap equivalent Eurodollar contracts	$	-	$	(7,000,000	)		2.00
U.S. Treasury futures - 5 year		-		(1,847,200	)		4.42
U.S. Treasury futures - 10 year and greater		-		(655,600	)		6.92
Total	$	-	$	(9,502,800	)		2.81

TBA Derivatives

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company's TBA derivatives as of March 31, 2016 and December 31, 2015:

March 31, 2016
Purchase and sale contracts for derivative TBAs	Notional		Implied Cost Basis		Implied Market Value		Net Carrying Value
(dollars in thousands)
Purchase contracts	$	14,273,000	$	14,847,792	$	14,924,524	$	76,732
December 31, 2015
Purchase and sale contracts for derivative TBAs	Notional		Implied Cost Basis		Implied Market Value		Net Carrying Value
(dollars in thousands)
Purchase contracts	$	13,761,000	$	14,177,338	$	14,169,775	$	(7,563	)