Derivative Financial Intruments and Hedging Activities

3 Months Ended

Mar. 31, 2012

Derivative Financial Intruments and Hedging Activities [Abstract]

Derivative Financial Intruments and Hedging Activities

4. Derivative Financial Instruments and Hedging Activities:

In the normal course of its operations, the Company is a party to financial instruments that are accounted for as derivative financial instruments in accordance with ASC 815. These instruments may include interest rate swaps, Eurodollar and U.S. Treasury futures contracts, put options and certain commitments to purchase and sell MBS.

During the three months ended March 31, 2012, the Company entered into various financial contracts to hedge certain MBS and related borrowings and other long-term debt. These financial contracts are not designated as hedges under ASC 815. The changes in fair value on these derivatives are recorded to net investment gain or loss in the statement of comprehensive income. For the three months ended March 31, 2012 and 2011, the Company recorded net losses of $385 and $2,547, respectively, on these derivatives. The Company held the following derivative instruments as of the dates indicated:

	March 31, 2012					December 31, 2011
	Notional Amount		Fair Value			Notional Amount		Fair Value
No hedge designation
Eurodollar futures(1)	$	12,307,000	$	(63,510	)	$	12,157,000	$	(62,556	)
10-year U.S. Treasury note futures		-		-			39,700		(468	)
Commitment to purchase MBS(2)		75,000		86			75,000		504
Commitment to sell MBS(3)		75,000		150			-		-
Stock sales option(4)		-		(19	)		-		-

 ____________________

(1) The $12,307,000 total notional amount of Eurodollar futures contracts as of March 31, 2012 represents the accumulation of Eurodollar futures contracts that mature on a quarterly basis between 2012 and 2017 and have a lifetime weighted-average rate of 3.41% as compared to a lifetime weighted-average market rate of 1.35%. As of March 31, 2012, the Company maintained $69,337 as a deposit and margin against the open Eurodollar futures contracts.

(2) The $75,000 total notional amount of commitment to purchase MBS as of March 31, 2012 represents forward commitments to purchase fixed-rate MBS securities with settlement dates in April 2012.

(3) The $75,000 total notional amount of commitment to sell MBS as of March 31, 2012 represents forward commitments to sell fixed-rate MBS securities with settlement dates in April 2012.

(4) Represents the over-allotment option granted to the underwriters in the Company's March 2012 public offering of Class A common stock to purchase up to an additional 263,250 shares at a public offering price of $23.90 per share less the $0.875 per share dividend declared on March 16, 2012 pursuant to the Underwriting Agreement dated March 22, 2012.