XML 43 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Derivative Instruments (Tables)
 12 Months Ended
Dec. 31, 2017
Derivative instruments  
Schedule of interest rate swaps, interest rate swaptions, currency swaps and forwards, futures contracts and TBA derivative instruments, options and linked transactions
The following table summarizes the Company's derivative instruments at December 31, 2017 and December 31, 2016 (dollars in thousands):
 
 
 
 
 
December 31, 2017
 
December 31, 2016
Derivative Instrument
Designation
 
Balance Sheet Location
 
Notional
Amount
 
Fair
Value(1)
 
Accrued
Interest
Payable
(receivable)
 
Notional
Amount
 
Fair
Value(1)
 
Accrued
Interest
Payable
(receivable)
Interest rate swaps, asset
Non-Hedge
 
Derivative assets, at fair value
 
$
—

 
$
—

 
$
—

 
$
2,298,300

 
$
20,466

 
$
1,145

Options, asset
Non-Hedge
 
Derivative assets, at fair value
 
320,000

 
100

 
—

 
—

 
—

 
—

Futures contracts, asset
Non-Hedge
 
Derivative assets, at fair value
 
480,000

 
628

 
—

 
56,900

 
71

 
—

Foreign currency forward contracts, asset
Non-Hedge
 
Derivative assets, at fair value
 
—

 
—

 
—

 
784

 
34

 
—

Total derivative instruments, assets
 
 
 
 
 

 
728

 
—

 
 

 
20,571

 
1,145

Interest rate swaps, liability
Non-Hedge
 
Derivative liability, at fair value
 
3,252,200

 
(4,191
)
 
—

 
5,046,300

 
(177,929
)
 
3,054

Options, liability
Non-Hedge
 
Derivative liability, at fair value
 
320,000

 
(50
)
 
—

 
—

 
—

 
—

Total return swap, liability
Non-Hedge
 
Derivative liability, at fair value
 
—

 
—

 
—

 
47,059

 
(1,673
)
 
(94
)
Futures contracts, liability
Non-Hedge
 
Derivative liability, at fair value
 
—

 
—

 
—

 
176,300

 
(2,487
)
 
—

Foreign currency forward contracts, liability
Non-Hedge
 
Derivative liability, at fair value
 
—

 
—

 
—

 
1,532

 
(69
)
 
—

Credit default swaps, liability
Non-Hedge
 
Derivative liability, at fair value
 
14,815

 
(95
)
 
—

 
—

 
—

 
—

TBA securities, liability
Non-Hedge
 
Derivative liability, at fair value
 
125,000

 
(10
)
 
—

 
—

 
—

 
—

Total derivative instruments, liabilities
 
 
 
 
 

 
(4,346
)
 
—

 
 

 
(182,158
)
 
2,960

Total derivative instruments, net
 
 
 
 
 

 
$
(3,618
)
 
$
—

 
 
 
$
(161,587
)
 
$
4,105

 
(1) Fair value excludes accrued interest
Summary of the effect of interest rate swaps, swaptions, foreign currency swaps, foreign currency forwards, options, futures contracts, Agency and Non-Agency Interest-Only Strips as derivatives and TBAs reported in Gain (loss) on derivative instruments, net on the Statements of Operations
The following tables summarize the effect of the Company's derivative positions, including Interest-Only Strips characterized as derivatives and TBAs, which are reported in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 (dollars in thousands):

 
Realized Gain (Loss), net
 
 
 
 
 
 
 
 
Period End
Other Settlements / Expirations
 
Variation Margin Settlement
 
Return
(Recovery) of
Basis
 
Mark-to-market
adjustments
 
Contractual interest
income (expense),
net(1)
 
Total
Year ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
$
(150,607
)
 
$
20,258

 
$
524

 
$
148,947

 
$
(14,606
)
 
$
4,516

Interest rate swaptions
(115
)
 
—

 
—

 
—

 
—

 
(115
)
Interest-Only Strips—accounted for as derivatives
526

 
—

 
(5,995
)
 
(902
)
 
7,438

 
1,067

Options
(1,453
)
 
—

 
—

 
(300
)
 
—

 
(1,753
)
Futures contracts
(9,130
)
 
—

 
—

 
3,044

 
—

 
(6,086
)
Foreign currency forwards
32

 
—

 
—

 
35

 
—

 
67

Total return swap
(552
)
 
—

 
—

 
1,673

 
469

 
1,590

Credit default swaps
(11
)
 
—

 
—

 
(22
)
 
—

 
(33
)
TBAs
4,049

 
—

 
—

 
(10
)
 
—

 
4,039

Total
$
(157,261
)
 
$
20,258

 
$
(5,471
)
 
$
152,465

 
$
(6,699
)
 
$
3,292

 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
$
(33,999
)
 
$
—

 
$
672

 
$
11,013

 
$
(27,903
)
 
$
(50,217
)
Interest rate swaptions
(1,035
)
 
—

 
—

 
1,631

 
—

 
596

Interest-Only Strips—accounted for as derivatives
1,317

 
—

 
(11,438
)
 
(4,726
)
 
14,148

 
(699
)
Options
4,756

 
—

 
—

 
—

 
—

 
4,756

Futures contracts
23,609

 
—

 
—

 
(1,781
)
 
—

 
21,828

Foreign currency forwards
(66
)
 
—

 
—

 
(56
)
 
—

 
(122
)
Foreign currency swaps
6,771

 
—

 
—

 
(7,168
)
 
283

 
(114
)
Total return swap
38

 
—

 
—

 
(1,673
)
 
1,121

 
(514
)
TBAs
6,126

 
—

 
—

 
(2,375
)
 
—

 
3,751

Total
$
7,517

 
$
—

 
$
(10,766
)
 
$
(5,135
)
 
$
(12,351
)
 
$
(20,735
)
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
$
23,680

 
$
—

 
$
1,250

 
$
(68,843
)
 
$
(20,366
)
 
$
(64,279
)
Interest rate swaptions
(5,242
)
 
—

 
—

 
(1,486
)
 
—

 
(6,728
)
Interest-Only Strips—accounted for as derivatives
595

 
—

 
(17,265
)
 
(4,283
)
 
21,872

 
919

Options
(711
)
 
—

 
—

 
—

 
—

 
(711
)
Futures contracts
(527
)
 
—

 
—

 
105

 
—

 
(422
)
Foreign currency forwards
(901
)
 
—

 
—

 
323

 
—

 
(578
)
Foreign currency swaps
—

 
—

 
—

 
3,311

 
795

 
4,106

TBAs
1,524

 
—

 
—

 
(2,726
)
 
—

 
(1,202
)
Total
$
18,418

 
$
—

 
$
(16,015
)
 
$
(73,599
)
 
$
2,301

 
$
(68,895
)
 

(1)
Contractual interest income (expense), net on derivative instruments includes interest settlement paid or received.
Summary of long and short TBA positions reported in Derivative assets, at fair value on the Balance Sheets
The following is a summary of the Company's long and short TBA positions reported, as of December 31, 2017, reported in "Derivative assets, at fair value" and "Derivative liability, at fair value" in the Consolidated Balance Sheets (dollars in thousands):
 
 
December 31, 2017
 
 
Notional
Amount
 
Fair
Value
Purchase contracts, liability
 
$
125,000

 
$
(10
)
TBA securities, liability
 
125,000

 
(10
)
TBA securities, net
 
$
125,000

 
$
(10
)
Schedule of additional information about the contracts to purchase and sell TBAs
The following table presents additional information about the Company's contracts to purchase and sell TBAs for the year ended December 31, 2017 (dollars in thousands):
 
Notional Amount
 
 
 
Settlement, Termination,
 
Notional Amount
 
December 31, 2016
 
Additions
 
 Expiration or Exercise
 
December 31, 2017
Purchase of TBAs
$
—

 
$
5,843,200

 
$
(5,718,200
)
 
$
125,000

Sale of TBAs
$
—

 
$
5,718,200

 
$
(5,718,200
)
 
$
—
Foreign currency forwards  
Derivative instruments  
Summary of foreign currency forwards or foreign currency swaps
The following is a summary of the Company's foreign currency forwards at December 31, 2016 (dollars and euros in thousands):
 
 
December 31, 2016
Derivative Type
 
Notional
Amount
 
Notional
(USD Equivalent)
 
Maturity
 
Fair Value
Buy USD/Sell EUR currency forward
 
€
710

 
$
784

 
January 2017
 
$
34

Currency forwards, assets
 
€
710

 
$
784

 
n/a
 
$
34

Buy EUR/Sell USD currency forward
 
€
673

 
$
735

 
February 2017
 
$
(23
)
Buy EUR/Sell USD currency forward
 
€
710

 
$
797

 
January 2017
 
$
(46
)
Currency forwards, liabilities
 
€
1,383

 
$
1,532

 
n/a
 
$
(69
)
Total currency forwards
 
€
2,093

 
$
2,316

 
n/a
 
$
(35
)
Fixed Pay Rate | Interest rate swaps  
Derivative instruments  
Summary of interest rate swaps or interest rate swaptions
The following tables summarize the average fixed pay rate, average floating receive rate and average maturity for the Company's interest rate swaps as of December 31, 2017 and December 31, 2016 (dollars in thousands):
 
December 31, 2017
Remaining Interest Rate Swap Term
Notional
Amount
 
Average Fixed Pay
Rate
 
Average Floating Receive
Rate
 
Average
Maturity (Years)
 
Forward Starting (1)
Greater than 1 year and less than 3 years
$
600,000

 
1.6
%
 
1.5
%
 
1.8
 
—
%
Greater than 3 years and less than 5 years
960,000

 
2.0
%
 
1.4
%
 
4.3
 
—
%
Greater than 5 years
1,692,200

 
2.5
%
 
1.4
%
 
10.5
 
90.2
%
Total
$
3,252,200

 
2.2
%
 
1.4
%
 
7.1
 
46.9
%
 
(1) Represents the percentage of notional that is forward starting

 
December 31, 2016
Remaining Interest Rate Swap Term
Notional
Amount
 
Average Fixed Pay
Rate
 
Average Floating Receive
Rate
 
Average
Maturity
(Years)
 
Forward
Starting(1)
1 year or less
$
105,900

 
0.8
%
 
0.8
%
 
0.8
 
—
%
Greater than 1 year and less than 3 years
993,000

 
1.2
%
 
0.9
%
 
1.4
 
88.1
%
Greater than 3 years and less than 5 years
1,861,700

 
1.9
%
 
0.9
%
 
3.9
 
36.5
%
Greater than 5 years
1,701,600

 
3.1
%
 
0.9
%
 
10.5
 
6.5
%
Total
$
4,662,200

 
2.1
%
 
0.9
%
 
5.7
 
35.7
%
    
 
(1) Represents the percentage of notional that is forward starting
The following table summarizes the average variable pay rate, average fixed pay receive rate and average maturity for the Company's interest rate swaps as of December 31, 2016 (dollars in thousands):
 
December 31, 2016
Remaining Interest Rate interest rate swap Term
Notional
Amount
 
Fair Value—Asset
(Liability), net
 
Average Variable Pay
Rate
 
Average Fixed Received
Rate
 
Average
Maturity
(Years)
 
Forward
Starting
Greater than 3 years and less than 5 years
$
1,811,400

 
$
(24,112
)
 
0.9
%
 
1.4
%
 
3.7
 
—
%
Greater than 5 years
871,000

 
(18,749
)
 
0.9
%
 
2.2
%
 
12.3
 
—

Total
$
2,682,400

 
$
(42,861
)
 
0.9
%
 
1.7
%
 
6.5
 
—
%