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Derivatives
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Note 8 - Derivatives

We enter into derivative transactions to manage our interest rate risk and agency mortgage rate exposures. We have agreements with our derivative counterparties that provide for the posting of collateral based on the fair values of our derivatives. Through this margin process, either we or our counterparties may be required to pledge cash or securities as collateral. Collateral requirements vary by counterparty and change over time based on the fair value, notional amount and remaining term of the contracts. Certain contracts provide for cross collateralization and cross default with repurchase agreements and other contracts with the same counterparty.

Interest rate swap contracts are designed to lock in funding costs for repurchase agreements associated with our assets in such a way to help assure the realization of net interest margins. Such transactions are based on assumptions about prepayments which, if not realized, will cause transaction results to differ from expectations. Interest rate swaptions generally provide us the option to enter into an interest rate swap agreement at a certain point of time in the future with a predetermined notional amount, stated term and stated rate of interest in the fixed leg and interest rate index on the floating leg. Basis swap contracts allow us to exchange one floating interest rate basis for another, thereby allowing us to diversify our floating rate basis exposures.
 
TBA Agency Securities are forward contracts for the purchase (“long position”) or sale (“short position”) of Agency Securities at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency Securities delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association, are not known at the time of the transaction. We may enter into TBA Agency Securities as a means of hedging against short-term changes in interest rates. We may also enter into TBA Agency Securities as a means of acquiring or disposing of Agency Securities and we may from time to time utilize TBA dollar roll transactions to finance Agency Security purchases. We estimate the fair value of TBA Agency Securities based on similar methods used to value our Agency Securities.

We have netting arrangements in place with all derivative counterparties pursuant to standard documentation developed by the International Swap and Derivatives Association. We are also required to post or hold cash collateral based upon the net underlying market value of our open positions with the counterparty.

The following tables present information about the potential effects of netting our derivatives if we were to offset the assets and liabilities on the accompanying consolidated balance sheets. We currently present these financial instruments at their gross amounts and they are included in derivatives, at fair value on the accompanying consolidated balance sheets at December 31, 2019 and December 31, 2018.

 
 
 
 
Gross Amounts Not Offset
 
 
Assets
 
Gross Amounts(1)
 
Financial
Instruments
 
Cash Collateral
 
Total Net
December 31, 2019
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
$
23,659

 
$
(70,290
)
 
$
83,066

 
$
36,435

TBA Agency Securities
 
1,092

 
(1,092
)
 
—

 
—

Totals
 
$
24,751

 
$
(71,382
)
 
$
83,066

 
$
36,435

 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
$
107,677

 
$
(24,505
)
 
$
(82,838
)
 
$
334

TBA Agency Securities
 
4,236

 
—

 
(2,593
)
 
1,643

Totals
 
$
111,913

 
$
(24,505
)
 
$
(85,431
)
 
$
1,977

(1)
See Note 5, “Fair Value of Financial Instruments” for additional discussion.

 
 
 
 
Gross Amounts Not Offset
 
 
Liabilities
 
Gross Amounts(1)
 
Financial
Instruments
 
Cash Collateral
 
Total Net
December 31, 2019
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
$
(70,290
)
 
$
70,290

 
$
—

 
$
—

TBA Agency Securities
 
(1,684
)
 
1,092

 
377

 
(215
)
Totals
 
$
(71,974
)
 
$
71,382

 
$
377

 
$
(215
)
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
$
(24,505
)
 
$
24,505

 
$
—

 
$
—

Totals
 
$
(24,505
)
 
$
24,505

 
$
—

 
$
—

 
(1)
See Note 5, “Fair Value of Financial Instruments” for additional discussion.
The following table represents the location and information regarding our derivatives which are included in Other Income (Loss) in the accompanying consolidated statements of operations for the years ended December 31, 2019, December 31, 2018 and December 31, 2017.

 
 
 
 
Income (Loss) Recognized
 
 
 
 
For the Years Ended
Derivatives
 
Location on consolidated statements of operations
 
December 31, 2019
 
December 31, 2018
 
December 31, 2017
Interest rate swap contracts:
 
 
 
 
 
 
 
 
Realized gain (loss)
 
Realized loss on derivatives
 
$
(237,725
)
 
2,655

 
990

Interest income
 
Realized loss on derivatives
 
187,899

 
124,714

 
50,464

Interest expense
 
Realized loss on derivatives
 
(162,529
)
 
(124,241
)
 
(83,797
)
Changes in fair value
 
Unrealized gain (loss) on derivatives
 
(132,303
)
 
43,755

 
39,388

 
 
 
 
$
(344,658
)
 
46,883

 
$
7,045

TBA Agency Securities:
 
 
 
 
 
 
 
 
Realized gain (loss)
 
Realized loss on derivatives
 
(1,641
)
 
(50,625
)
 
9,668

Changes in fair value
 
Unrealized gain (loss) on derivatives
 
(3,824
)
 
5,561

 
(116
)
 
 
 
 
$
(5,465
)
 
(45,064
)
 
9,552

Totals
 
$
(350,123
)
 
1,819

 
16,597



    The following tables present information about our derivatives at December 31, 2019 and December 31, 2018.
Interest Rate Swaps (1)
 
Notional Amount
 
Weighted Average Remaining Term (Months)
 
Weighted Average Rate
December 31, 2019
 
 
 
 
 
 
< 3 years
 
$
2,750,000

 
19
 
1.66
%
≥ 3 years and < 5 years 
 
2,850,000

 
47
 
1.84
%
≥ 5 years and < 7 years
 
1,200,000

 
83
 
1.86
%
≥ 7 years and < 10 years
 
1,175,000

 
118
 
1.54
%
Total or Weighted Average (2)
 
$
7,975,000

 
53
 
1.74
%
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
< 3 years
 
$
2,225,000

 
20
 
1.67
%
≥ 3 years and < 5 years
 
1,725,000

 
54
 
1.95
%
≥ 5 years and < 7 years
 
925,000

 
69
 
2.06
%
≥ 7 years and < 10 years
 
2,475,000

 
104
 
2.25
%
Total or Weighted Average
 
$
7,350,000

 
62
 
1.98
%

(1)
Pay Fixed/Receive Variable
(2)
Of this amount, $1,025,000 notional are LIBOR based swaps, the last of which matures in 2023; $375,000 notional are SOFR based swaps, the last of which matures in 2024; and $6,575,000 notional are Fed Funds based swaps, the last of which matures in 2029

TBA Agency Securities
 
Notional Amount
 
Cost Basis
 
Fair Value
December 31, 2019
 
 
 
 
 
 
15 Year Long
 
 
 
 
 
 
3.0%
 
$
500,000

 
$
511,055

 
$
511,885

30 Year Long
 
 
 
 
 
 
2.5%
 
500,000

 
494,813

 
494,395

Total (1)
 
$
1,000,000

 
$
1,005,868

 
$
1,006,280

 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
30 Year Long
 
 
 
 
 
 
4.5%
 
$
500,000

 
$
514,270

 
$
517,123

5.0%
 
400,000

 
414,914

 
416,297

Total
 
$
900,000

 
$
929,184

 
$
933,420


(1)
$1,000,000 notional are forward settling.