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Derivatives
 6 Months Ended
Jun. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Note 7 - 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 ISDA. We are also required to post or hold cash collateral based upon the net underlying market value of our open positions with the counterparty. A decline in the value of the open positions with the counterparty could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels. We manage this risk by maintaining an adequate balance of available cash and unpledged securities. An event of default or termination event under the standard ISDA would give our counterparty the option to terminate all repurchase transactions existing with us and require any amount due to be payable immediately. In addition, certain of our ISDAs contain a restriction that prohibits our leverage from exceeding twelve times our stockholders’ equity as well as termination events in the case of significant reductions in equity capital.
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 June 30, 2022 and December 31, 2021.
Gross Amounts Not Offset
Assets
Gross Amounts(1)
Financial
Instruments		Cash CollateralTotal Net
June 30, 2022
Interest rate swap contracts$765,923 $— $(698,422)$67,501 
Futures contracts2,160 — 9,065 11,225 
TBA Agency Securities4,368 (3,772)7,159 7,755 
Totals$772,451 $(3,772)$(682,198)$86,481 
December 31, 2021
Interest rate swap contracts$187,661 $(7,185)$(161,529)$18,947 
TBA Agency Securities11,412 (3,715)4,036 11,733 
Totals$199,073 $(10,900)$(157,493)$30,680 
(1)See Note 4 - Fair Value of Financial Instruments for additional discussion.
 Gross Amounts Not Offset  
Liabilities
Gross Amounts(1)
Financial
Instruments		Cash CollateralTotal Net
June 30, 2022
TBA Agency Securities(3,772)3,772 — — 
Totals$(3,772)$3,772 $— $— 
December 31, 2021
Interest rate swap contracts$(7,185)$7,185 $— $— 
TBA Agency Securities(3,715)3,715 — — 
Totals$(10,900)$10,900 $— $— 
(1)See Note 4 - 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 and comprehensive income (loss) for the three and six months ended June 30, 2022 and June 30, 2021.
Income (Loss) Recognized
For the Three Months Ended June 30,For the Six Months Ended June 30,
DerivativesLocation on consolidated statements of operations and comprehensive income (loss)2022202120222021
Interest rate swap contracts:
Interest incomeGain (loss) on derivatives, net11,913 884 $13,632 $1,756 
Interest expenseGain (loss) on derivatives, net(10,376)(8,734)(18,361)(13,182)
Changes in fair valueGain (loss) on derivatives, net220,485 (131,815)570,584 54,145 
$222,022 $(139,665)$565,855 $42,719 
Futures contracts:
Realized gainGain (loss) on derivatives, net(9)— (9)— 
Changes in fair valueGain (loss) on derivatives, net2,160 — 2,160 — 
$2,151 $— $2,151 $— 
TBA Agency Securities:
Realized gainGain (loss) on derivatives, net(15,732)4,201 (111,531)(19,583)
Changes in fair valueGain (loss) on derivatives, net(2,169)39,071 (5,569)(909)
$(17,901)$43,272 $(117,100)$(20,492)
Totals$206,272 $(96,393)$450,906 $22,227 
The following tables present information about our derivatives at June 30, 2022 and December 31, 2021.
Interest Rate Swap Contracts (1)
Notional AmountWeighted Average Remaining Term (Months)Weighted Average Rate
June 30, 2022
< 3 years
$1,066,000 160.10 %
≥ 3 years and < 5 years
1,342,000 550.59 %
≥ 5 years and < 7 years
100,000 811.04 %
≥ 7 years
4,402,000 1020.95 %
Total or Weighted Average (2)
$6,910,000 790.75 %
December 31, 2021
< 3 years
$1,593,000 150.08 %
≥ 3 years and < 5 years
708,000 570.24 %
≥ 5 years and < 7 years
707,000 640.88 %
≥ 7 years
4,202,000 1070.87 %
Total or Weighted Average (3)
$7,210,000 770.63 %
(1)Pay Fixed/Receive Variable.
(2)Of this amount, $6,007,000 notional are Fed Funds based swaps, the last of which matures in 2032 and $903,000 notional are SOFR based swaps, the last of which matures in 2032. Includes $550,000 notional of forward settling swap contracts that settle by September 23, 2022.
(3)Of this amount, $1,203,000 notional are SOFR based swaps, the last of which matures in 2023; and $6,007,000 notional are Fed Funds based swaps, the last of which matures in 2032.
TBA Agency SecuritiesNotional AmountCost BasisFair Value
June 30, 2022
30 Year Long
4.5%
375,000 377,955 376,919 
5.0%
300,000 304,742 306,433 
Total (1)
$675,000 $682,697 $683,352 
December 31, 2021
15 Year Long
1.5%
$1,000,000 $999,840 $1,003,125 
2.0%
1,700,0001,733,6521,738,695
30 Year Long
2.0%
300,000 300,789 299,227 
2.5%
1,200,000 1,224,820 1,223,510 
3.0%
300,000 309,734 310,503 
Total (1)
$4,500,000 $4,568,835 $4,575,060 
(1)$1,225,000 and $400,000 notional were forward settling at June 30, 2022 and December 31, 2021, respectively.