Financial Derivatives

6 Months Ended

Jun. 30, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Derivatives

Financial Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages certain risks associated with its investments and borrowings, including interest rate, credit, liquidity, and foreign exchange rate risk primarily by managing the amount, sources, and duration of its investments and borrowings, and through the use of derivative financial instruments. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of its known or expected cash receipts and its known or expected cash payments principally related to its investments and borrowings. Subject to maintaining its qualification as a REIT, the Company may also use derivative financial instruments for speculative purposes.

The following table details the fair value of the Company's holdings of financial derivatives as of June 30, 2025 and December 31, 2024:

	June 30, 2025		December 31, 2024
(In thousands)
Financial derivatives–assets, at fair value:
TBA securities purchase contracts	$	857	$	—
TBA securities sale contracts	—		2,381
Fixed payer interest rate swaps	75,262		160,875
Fixed receiver interest rate swaps	72,863		14,575
Credit default swaps on asset-backed indices	2,252		1,825
Credit default swaps on corporate bonds	—		83
Credit default swaps on corporate bond indices	4,231		—
Options	4,320		3,427
Futures	799		900
Forwards	—		320
Warrants	—		9
Total financial derivatives–assets, at fair value	160,584		184,395
Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts	—		(2,417)
TBA securities sale contracts	(2,311)		—
Fixed payer interest rate swaps	(32,813)		(2,900)
Fixed receiver interest rate swaps	(5,139)		(32,139)
Credit default swaps on asset-backed securities	(3)		(3)
Credit default swaps on corporate bonds	(188)		(225)
Credit default swaps on corporate bond indices	(38,511)		(33,207)
Futures	(2,578)		(130)
Forwards	(269)		(3)
Total financial derivatives–liabilities, at fair value	(81,812)		(71,024)
Total	$	78,772	$	113,371

Interest Rate Swaps

The following tables provide information about the Company's fixed payer interest rate swaps as of June 30, 2025 and December 31, 2024:

June 30, 2025:

					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2025	$	296,101	$	543	4.12	%	4.45	%	0.45
2026	411,809		1,376		3.85		4.45		1.16
2027	2,779,153		(4,886)		3.71		4.45		1.83
2028	544,477		5,660		3.28		4.45		3.01
2029	502,481		2,458		3.41		4.45		4.19
2030	485,567		(938)		3.53		4.45		4.97
2031	157,766		18,962		1.51		4.45		5.96
2032	178,272		9,507		2.80		4.45		7.06
2033	240,259		7,302		3.20		4.45		7.73
2034	259,142		8,300		3.36		4.45		9.21
2035	472,744		(9,625)		3.94		4.45		9.78
2036	1,102		259		1.19		4.45		10.64
2037	45,000		5,014		2.81		4.45		12.16
2038	32,500		(455)		4.01		4.41		13.17
2039	11,322		49		3.85		4.45		14.19
2040	99,900		(1,495)		4.02		4.45		14.78
2045	12,500		(188)		4.07		4.45		19.81
2050	500		247		0.98		4.33		25.32
2053	2,780		301		3.32		4.45		28.50
2054	3,874		78		3.81		4.45		29.50
2055	17,219		(20)		3.92		4.45		29.78
Total	$	6,554,468	$	42,449	3.57	%	4.45	%	4.05

December 31, 2024:

					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2025	$	549,561	$	3,947	3.78	%	4.49	%	0.67
2026	626,768		2,688		4.02		4.47		1.72
2027	332,013		10,541		3.13		4.48		2.50
2028	526,877		16,461		3.26		4.47		3.52
2029	966,432		24,394		3.52		4.48		4.77
2030	247,580		9,050		3.44		4.21		5.57
2031	169,293		25,912		1.69		4.49		6.44
2032	181,867		16,640		2.80		4.49		7.56
2033	240,259		18,222		3.20		4.49		8.23
2034	391,137		21,655		3.43		4.48		9.74
2035	500		146		0.78		4.33		10.81
2036	1,102		325		1.19		4.49		11.13
2037	45,000		6,085		2.81		4.49		12.66
2038	32,500		460		4.01		4.46		13.67
2039	14,252		556		3.79		4.47		14.81
2040	500		188		0.90		4.33		15.81
2050	500		241		0.98		4.33		25.82
2053	2,780		300		3.32		4.49		28.99
2054	5,474		164		3.77		4.49		29.94
Total	$	4,334,395	$	157,975	3.43	%	4.47	%	4.59

The following tables provide information about the Company's fixed receiver interest rate swaps as of June 30, 2025 and December 31, 2024:

June 30, 2025:

					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2025	$	11,100	$	15	4.42	%	4.68	%	0.22
2026	561,535		2,189		4.45		4.56		0.79
2027	1,104,369		4,405		4.45		3.80		1.86
2028	388,660		9,688		4.45		4.27		3.21
2029	596,002		20,089		4.45		4.35		3.81
2030	725,758		14,815		4.45		3.92		4.85
2031	5,485		(169)		4.45		3.14		6.22
2033	174,464		6,427		4.45		4.15		8.37
2034	170,633		1,420		4.41		3.84		9.05
2035	687,339		11,489		4.45		3.89		9.79
2038	33,258		(1,208)		4.45		3.54		13.48
2039	8,259		(187)		4.45		3.67		13.64
2040	28,460		458		4.45		4.03		14.88
2050	500		(257)		4.45		0.90		25.32
2053	12,160		(1,307)		4.45		3.33		28.49
2054	7,004		(361)		4.45		3.65		29.37
2055	14,220		218		4.45		4.00		29.80
Total	$	4,529,206	$	67,724	4.45	%	4.05	%	4.70

December 31, 2024:

					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2025	$	137,818	$	(235)	4.49	%	4.89	%	0.21
2026	658,463		1,040		4.47		4.54		1.38
2027	59,110		(794)		4.49		3.84		2.42
2028	391,266		2,499		4.49		4.27		3.71
2029	1,188,667		(8,483)		4.48		3.97		4.57
2030	148,025		223		4.39		4.14		5.70
2031	47,985		(1,628)		4.49		3.68		6.16
2033	193,949		48		4.49		4.08		8.87
2034	193,363		(5,174)		4.47		3.81		9.57
2035	500		(150)		4.49		0.74		10.81
2038	34,792		(2,148)		4.49		3.54		13.98
2039	8,539		(460)		4.47		3.71		14.39
2040	500		(194)		4.49		0.84		15.81
2050	500		(251)		4.49		0.90		25.82
2053	13,154		(1,409)		4.49		3.33		28.99
2054	7,704		(448)		4.46		3.62		29.85
Total	$	3,084,335	$	(17,564)	4.48	%	4.16	%	4.51

Credit Default Swaps

The following table provides information about the Company's credit default swaps as of June 30, 2025 and December 31, 2024:

	June 30, 2025					December 31, 2024
Type(1)	Notional		Fair Value		Weighted Average Remaining Term (Years)	Notional		Fair Value		Weighted Average Remaining Term (Years)
($ in thousands)
Asset:
Long:
Credit default swaps on asset-backed indices	$	199	$	11	12.50	$	209	$	11	12.99
Credit default swaps on corporate bonds	—		—		—	2,000		83		0.97
Credit default swaps on corporate bond indices	73,371		4,231		2.46	—		—		—
Short:
Credit default swaps on asset-backed indices	(28,464)		2,241		33.47	(31,427)		1,814		34.60
Liability:
Short:
Credit default swaps on asset-backed securities	(47)		(3)		10.24	(46)		(3)		10.74
Credit default swaps on corporate bonds	(13,000)		(188)		1.97	(13,000)		(225)		2.47
Credit default swaps on corporate bond indices	(1,066,343)		(38,511)		4.79	(900,305)		(33,207)		4.97
	$	(1,034,284)	$	(32,219)	5.71	$	(942,569)	$	(31,527)	5.91

(1)Long notional represents contracts where the Company has written protection and short notional represents contracts where the Company has purchased protection.

Futures

The following table provides information about the Company's long and short positions in futures as of June 30, 2025 and December 31, 2024:

	June 30, 2025					December 31, 2024
Description	Notional Amount		Fair Value		Remaining Months to Expiration	Notional Amount		Fair Value		Remaining Months to Expiration
	(In thousands)					(In thousands)
Assets:
Long Contracts:
U.S. Treasury futures	$	48,900	$	799	2.70	$	—	$	—	—
Short Contracts:
U.S. Treasury futures	—		—		—	(107,000)		900		2.82
Liabilities:
Long Contracts:
U.S. Treasury futures	—		—		—	1,900		(130)		2.63
Short Contracts:
U.S. Treasury futures	(205,500)		(2,578)		2.80	—		—		—
Total, net	$	(156,600)	$	(1,779)	2.78	$	(105,100)	$	770	2.81

Warrants

The following table provides information about the Company's warrants contracts to purchase shares as of June 30, 2025 and December 31, 2024:

	June 30, 2025				December 31, 2024
Description	Number of Shares Underlying Warrant	Fair Value		Remaining Years to Expiration	Number of Shares Underlying Warrant	Fair Value		Remaining Years to Expiration
	(In thousands)				(In thousands)
Warrants	102	$	—	n/a	102	$	9	n/a

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 uses TBAs to mitigate interest rate risk, usually by taking short positions. The Company also invests in TBAs as a means of acquiring additional exposure to Agency RMBS, or for investment purposes, including holding long positions. The Company does not usually 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 June 30, 2025 and December 31, 2024, the Company had outstanding TBA purchase and sale contracts as follows:

	June 30, 2025								December 31, 2024
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	$	73,114	$	68,158	$	69,015	$	857	$	—	$	—	$	—	$	—
Liabilities	—		—		—		—		151,156		140,826		138,409		(2,417)
	73,114		68,158		69,015		857		151,156		140,826		138,409		(2,417)
Sale contracts:
Assets	—		—		—		—		(164,256)		(156,001)		(153,620)		2,381
Liabilities	(216,421)		(206,505)		(208,816)		(2,311)		—		—		—		—
	(216,421)		(206,505)		(208,816)		(2,311)		(164,256)		(156,001)		(153,620)		2,381
Total TBA securities, net	$	(143,307)	$	(138,347)	$	(139,801)	$	(1,454)	$	(13,100)	$	(15,175)	$	(15,211)	$	(36)

(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 Condensed Consolidated Balance Sheet.

Gains and losses on the Company's derivative contracts for the three- and six- month periods ended June 30, 2025 and 2024 are summarized in the tables below:

		Three-Month Period Ended June 30, 2025
Derivative Type	Primary  Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives 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) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	Interest Rate	$	6,721	$	(1,321)	$	5,400	$	2,267	$	(12,939)	$	(10,672)
Credit default swaps on asset-backed indices	Credit			(159)		(159)				466		466
Credit default swaps on corporate bond indices	Credit			(5,429)		(5,429)				(9,424)		(9,424)
Credit default swaps on corporate bonds	Credit			67		67				(72)		(72)
TBAs	Interest Rate			(286)		(286)				(804)		(804)
Futures	Interest Rate			903		903				(747)		(747)
Forwards	Currency			(1,015)		(1,015)				(364)		(364)
Warrants	Credit			—		—				—		—
Options	Credit			—		—				(3,991)		(3,991)
Total		$	6,721	$	(7,240)	$	(519)	$	2,267	$	(27,875)	$	(25,608)

		Three-Month Period Ended June 30, 2024
Derivative Type	Primary  Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives 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) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	Interest Rate	$	10,751	$	(12,875)	$	(2,124)	$	(479)	$	9,854	$	9,375
Credit default swaps on asset-backed indices	Credit			(232)		(232)				189		189
Credit default swaps on corporate bond indices	Credit			(1,683)		(1,683)				1,833		1,833
Credit default swaps on corporate bonds	Credit			(8)		(8)				(19)		(19)
Total return swaps	Equity Market/Credit			17		17				(3)		(3)
TBAs	Interest Rate			3,113		3,113				477		477
Futures	Interest Rate			6,909		6,909				(3,810)		(3,810)
Forwards	Currency			322		322				(140)		(140)
Warrants	Credit			—		—				—		—
Total		$	10,751	$	(4,438)	$	6,313	$	(479)	$	8,381	$	7,902

		Six-Month Period Ended June 30, 2025
Derivative Type	Primary  Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives 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) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	Interest Rate	$	17,539	$	837	$	18,376	$	180	$	(38,537)	$	(38,357)
Credit default swaps on asset-backed indices	Credit			42		42				352		352
Credit default swaps on corporate bond indices	Credit			(5,561)		(5,561)				(6,241)		(6,241)
Credit default swaps on corporate bonds	Credit			59		59				(86)		(86)
TBAs	Interest Rate			(214)		(214)				(1,418)		(1,418)
Futures	Interest Rate			(139)		(139)				(2,548)		(2,548)
Forwards	Currency			(1,441)		(1,441)				(586)		(586)
Warrants	Credit			—		—				(8)		(8)
Options	Credit			—		—				(3,832)		(3,832)
Total		$	17,539	$	(6,417)	$	11,122	$	180	$	(52,904)	$	(52,724)

		Six-Month Period Ended June 30, 2024
Derivative Type	Primary  Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives 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) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	Interest Rate	$	26,189	$	(21,528)	$	4,661	$	(4,906)	$	33,745	$	28,839
Credit default swaps on asset-backed indices	Credit			(432)		(432)				(1,182)		(1,182)
Credit default swaps on corporate bond indices	Credit			(6,250)		(6,250)				3,509		3,509
Credit default swaps on corporate bonds	Credit			(15)		(15)				42		42
Total return swaps	Equity Market/Credit			37		37				(3)		(3)
TBAs	Interest Rate			3,929		3,929				4,426		4,426
Futures	Interest Rate			7,344		7,344				3,107		3,107
Forwards	Currency			432		432				255		255
Warrants	Credit			86		86				(726)		(726)
Total		$	26,189	$	(16,398)	$	9,791	$	(4,906)	$	43,173	$	38,267

The table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the six-month period ended June 30, 2025 and the year ended December 31, 2024:

Derivative Type	Six-Month Period Ended June 30, 2025		Year Ended December 31, 2024
	(In thousands)
Interest rate swaps	$	9,602,475	$	6,264,082
Credit default swaps	1,095,296		816,986
TBAs	368,468		443,821
Futures	180,757		292,562
Forwards	21,213		23,575
Options	4,817		605
Warrants	102		125
Total return swaps	—		705

From time to time the Company enters into credit derivative contracts for which the Company sells credit protection ("written credit derivatives"). As of June 30, 2025 and December 31, 2024, all of the Company's open written credit derivatives were credit default swaps on either mortgage/asset-backed indices (ABX and CMBX indices) or corporate bond indices (CDX), collectively referred to as credit indices, or on individual corporate bonds, for which the Company receives periodic payments at fixed rates from credit protection buyers, and is obligated to make payments to the credit protection buyer upon the occurrence of a "credit event" with respect to underlying reference assets.

Written credit derivatives held by the Company at June 30, 2025 and December 31, 2024 are summarized below:

Credit Derivatives	June 30, 2025		December 31, 2024
(In thousands)
Fair Value of Written Credit Derivatives, Net	$	4,242	$	94
Notional Value of Written Credit Derivatives(1)	73,570		2,209

(1)The notional value is the maximum amount that a seller of credit protection would be obligated to pay, and a buyer of credit protection would receive, upon occurrence of a "credit event." Movements in the value of credit default swap transactions may require the Company or the counterparty to post or receive collateral. Amounts due or owed under credit derivative contracts with an International Swaps and Derivatives Association ("ISDA") counterparty may be offset against amounts due or owed on other credit derivative contracts with the same ISDA counterparty. As a result, the notional value of written credit derivatives involving a particular underlying reference asset or index has been reduced (but not below zero) by the notional value of any contracts where the Company has purchased credit protection on the same reference asset or index with the same ISDA counterparty.

A credit default swap on a credit index or a corporate bond typically terminates at the stated maturity date in the case of corporate indices or bonds, or, in the case of ABX and CMBX indices, the date that all of the reference assets underlying the index are paid off in full, retired, or otherwise cease to exist. Implied credit spreads may be used to determine the market value of such contracts and are reflective of the cost of buying/selling credit protection. Higher spreads would indicate a greater likelihood that a seller will be obligated to perform (i.e., make protection payments) under the contract. In situations where the credit quality of the underlying reference assets has deteriorated, the percentage of notional values that would be paid up front to enter into a new such contract ("points up front") is frequently used as an indication of credit risk. Credit protection sellers entering the market in such situations would expect to be paid points up front corresponding to the approximate fair value of the contract. As of June 30, 2025, the implied credit spreads on the Company's outstanding written credit derivative ranged from 157 to 318 basis points as compared to 79 basis points as of December 31, 2024. Total net up-front payments (paid) or received relating to written credit derivatives outstanding as of June 30, 2025 and December 31, 2024 was $3.1 million and $0.3 million, respectively.