DERIVATIVE INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Summarizes Fair Value Information about Derivative Assets Liabilities

The table below summarizes fair value information about our derivative assets and liabilities as of June 30, 2016 and December 31, 2015:

Derivatives Instruments	Balance Sheet Location	June 30, 2016		December 31, 2015
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	146,285	$	19,642
TBA derivatives	Other derivatives, at fair value		137,490		9,622
Futures contracts	Other derivatives, at fair value		-		12,444
		$	283,775	$	41,708
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value	$	3,208,986	$	1,677,571
TBA derivatives	Other derivatives, at fair value		-		17,185
Futures contracts	Other derivatives, at fair value		154,017		32,778
		$	3,363,003	$	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 June 30, 2016 and December 31, 2015, respectively.

June 30, 2016				Amounts Eligible for Offset
	Gross Amounts			Financial Instruments				Cash Collateral				Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value		$	146,285		$	(146,285	)		$	-			$	-
TBA derivatives, at fair value			137,490			-				-				137,490
Futures contracts, at fair value			-			-				-				-
Liabilities:
Interest rate swaps, at fair value		$	3,208,986		$	(146,285	)		$	(1,878,983	)		$	1,183,718
TBA derivatives, at fair value			-			-				-				-
Futures contracts, at fair value			154,017			-				(154,017	)			-
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:
June 30, 2016		$	(130,762	)		$	(60,064	)		$	(373,220	)
June 30, 2015		$	(144,465	)		$	-			$	700,792
Six Months Ended:
June 30, 2016		$	(278,237	)		$	(60,064	)		$	(1,404,940	)
June 30, 2015		$	(302,704	)		$	(226,462	)		$	234,590

(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 June 30, 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)		$	98,371			$	60,758			$	159,129
Net interest rate swaptions			-				-				-
Futures			8,314				(85,563	)			(77,249	)
										$	81,880
Quarter Ended June 30, 2015
Derivative Instruments	Realized Gain (Loss)				Unrealized Gain (Loss)				Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Quarter Ended June 30, 2015
Net TBA derivatives (1)		$	(50,801	)		$	(106,974	)		$	(157,775	)
Net interest rate swaptions			(7,600	)			7,033				(567	)
Futures			(9,230	)			53,351				44,121
										$	(114,221	)

Six Months Ended June 30, 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)		$	318,363			$	145,052			$	463,415
Net interest rate swaptions			-				-				-
Futures			(122,680	)			(133,683	)			(256,363	)
										$	207,052
Six Months Ended June 30, 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)		$	(106,445	)		$	10,213			$	(96,232	)
Net interest rate swaptions			(29,491	)			24,116				(5,375	)
Futures			(14,737	)			(4,775	)			(19,512	)
										$	(121,119	)

(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 June 30, 2016 and December 31, 2015:

June 30, 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		$	1,152,401		1.63	%		0.53	%		2.61
3 - 6 years			12,025,000		1.88	%		0.74	%		4.00
6 - 10 years			9,570,550		2.43	%		0.81	%		7.73
Greater than 10 years			3,434,400		3.70	%		0.55	%		18.87
Total / Weighted Average		$	26,182,351		2.28	%		0.74	%		7.04
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)	Notional amount includes $200.0 million in forward starting receive fixed swaps and $500.0 million in forward starting pay fixed swaps as of June 30, 2016 and December 31, 2015, respectively.
(2)	Excludes forward starting swaps.
(3)	Weighted average fixed rate on forward starting receive fixed swaps was 1.38% as of June 30, 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 June 30, 2016 and December 31, 2015:

	June 30, 2016
	Notional - Long Positions			Notional - Short Positions				Weighted Average Years to Maturity
	(dollars in thousands)
2-year swap equivalent Eurodollar contracts		$	-		$	(6,200,000	)		2.00
U.S. Treasury futures - 5 year			-			(1,447,200	)		4.42
U.S. Treasury futures - 10 year and greater			-			(655,600	)		6.88
Total		$	-		$	(8,302,800	)		2.81
	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 June 30, 2016 and December 31, 2015:

June 30, 2016
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts		$	12,739,000		$	13,246,011		$	13,383,501		$	137,490
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	)