DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2021

Derivative Financial Instruments [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The table below summarizes fair value information about our derivative and other hedging instruments assets and liabilities as of

March 31, 2021 and December 31, 2020.

(in thousands)

Derivative and Other Hedging Instruments

Balance Sheet Location

March 31, 2021

December 31, 2020

Assets

Interest rate swaps

Derivative assets, at fair value

$

25,254

$

7

Payer swaptions (long positions)

Derivative assets, at fair value

58,643

17,433

Interest rate floors

Derivative assets, at fair value

2,399

-

TBA securities

Derivative assets, at fair value

9,456

3,559

Total derivative assets, at fair value

$

95,752

$

20,999

Liabilities

Interest rate swaps

Derivative liabilities, at fair value

$

-

$

24,711

Payer swaptions (short positions)

Derivative liabilities, at fair value

35,057

7,730

TBA securities

Derivative liabilities, at fair value

-

786

Total derivative liabilities, at fair value

$

35,057

$

33,227

Margin Balances Posted to (from) Counterparties

Futures contracts

Restricted cash

$

585

$

489

TBA securities

Restricted cash

1,781

284

TBA securities

Other liabilities

(7,407)

(2,520)

Interest rate swaption contracts

Other liabilities

(13,962)

(3,563)

Interest rate swap contracts

Restricted cash

12,214

19,761

Total margin balances on derivative contracts

$

(6,789)

$

14,451

Schedule of Eurodollar and T-Note futures positions

Eurodollar, Fed Funds and T-Note futures are cash settled futures contracts on an interest rate, with gains and losses credited or

charged to the Company’s cash accounts on a daily basis. A minimum balance, or “margin”, is required to be maintained in the account on

a daily basis. The tables below present information related to the Company’s Eurodollar and T-Note futures positions at March 31, 2021

and December 31, 2020.

($ in thousands)

March 31, 2021

Average

Weighted

Weighted

Contract

Average

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Rate

Equity

(1)

Eurodollar Futures Contracts (Short Positions)

2021

$

50,000

1.01%

0.21%

$

(301)

Treasury Note Futures Contracts (Short Position)

(2)

June 2021 5-year T-Note futures

(Jun 2021 - Jun 2026 Hedge Period)

$

69,000

0.88%

1.17%

$

1,036

($ in thousands)

December 31, 2020

Average

Weighted

Weighted

Contract

Average

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Rate

Equity

(1)

Eurodollar Futures Contracts (Short Positions)

2021

$

50,000

1.03%

0.18%

$

(424)

Treasury Note Futures Contracts (Short Position)

(2)

March 2021 5 year T-Note futures

(Mar 2021 - Mar 2026 Hedge Period)

$

69,000

0.72%

0.67%

$

(186)

Open equity represents the cumulative gains (losses) recorded on open futures positions from inception.

(2)

T-Note futures contracts were valued at a price of $

123.40

 at March 31, 2021 and $

126.16

 at December 31, 2020. The contract values of the

short positions were $

85.1

 million and $

87.1

 million at March 31, 2021 and December 31, 2020, respectively.

Schedule of Interest Rate Swap Agreements [Table Text Block]

Under our interest rate swap agreements, we typically pay a fixed rate and receive a floating rate based on LIBOR ("payer swaps").

The floating rate we receive under our swap agreements has the effect of offsetting the repricing characteristics of our repurchase

agreements and cash flows on such liabilities. We are typically required to post collateral on our interest rate swap agreements. The table

below presents information related to the Company’s interest rate swap positions at March 31, 2021 and December 31, 2020.

($ in thousands)

Average

Net

Fixed

Average

Estimated

Average

Notional

Pay

Receive

Fair

Maturity

Amount

Rate

Rate

Value

(Years)

March 31, 2021

Expiration > 3 to ≤ 5 years

$

955,000

0.64%

0.21%

$

15,286

4.8

Expiration > 5 years

400,000

1.16%

0.18%

9,968

8.1

$

1,355,000

0.79%

0.20%

$

25,254

5.7

December 31, 2020

Expiration > 3 to ≤ 5 years

$

620,000

1.29%

0.22%

$

(23,760)

3.6

Expiration > 5 years

200,000

0.67%

0.23%

(944)

6.4

$

820,000

1.14%

0.23%

$

(24,704)

4.3

Schedule Of Interest Rate Swaption Agreements [Table Text Block]

The table below presents information related to the Company’s interest rate swaption positions at March 31, 2021 and

($ in thousands)

Option

Underlying Swap

Weighted

Average

Weighted

Average

Average

Adjustabl

e

Average

Fair

Months to

Notional

Fixed

Rate

Term

Expiration

Cost

Value

Expiration

Amount

Rate

(LIBOR)

(Years)

March 31, 2021

Payer Swaptions - long

>1 year ≤ 2 years

$

25,390

$

58,643

22.1

$

1,027,200

2.20%

3 Month

15.0

Payer Swaptions - short

≤ 1 year

$

(10,720)

$

(35,057)

10.1

$

(782,850)

2.20%

3 Month

15.0

December 31, 2020

Payer Swaptions - long

≤ 1 year

$

3,450

$

5

2.5

$

500,000

0.95%

3 Month

4.0

>1 year ≤ 2 years

13,410

17,428

17.4

675,000

1.49%

3 Month

12.8

$

16,860

$

17,433

11.0

$

1,175,000

1.26%

3 Month

9.0

Payer Swaptions - short

≤ 1 year

$

(4,660)

$

(7,730)

5.4

$

(507,700)

1.49%

3 Month

12.8

Schedule of To Be Announced Securities [TableTextBlock]

The following table summarizes our contracts to purchase and sell TBA securities as of March 31, 2021 and December 31, 2020

($ in thousands)

Notional

Net

Amount

Cost

Market

Carrying

Long (Short)

(1)

Basis

(2)

Value

(3)

Value

(4)

March 31, 2021

30-Year TBA securities:

2.5%

$

(250,000)

$

(257,188)

$

(256,270)

$

918

3.0%

(1,062,000)

(1,114,345)

(1,105,807)

8,538

Total

$

(1,312,000)

$

(1,371,533)

$

(1,362,077)

$

9,456

December 31, 2020

30-Year TBA securities:

2.0%

$

465,000

$

479,531

$

483,090

$

3,559

3.0%

(328,000)

(342,896)

(343,682)

(786)

Total

$

137,000

$

136,635

$

139,408

$

2,773

Notional amount represents the par value (or 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 TBA securities (or of the underlying Agency RMBS) as of period-end.

(4)

Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported

in derivative assets (liabilities) at fair value in our balance sheets.

Schedule of Interest Rate Floors [Table Text Block]

The table below presents information related to the Company’s interest rate floor positions at March 31, 2021.

($ in thousands)

Net

Strike

Estimated

Notional

Swap

Curve

Fair

Expiration

Amount

Cost

Rate

Spread

Value

February 3, 2023

$

70,000

$

511

0.76%

30Y5Y

$

1,435

February 3, 2023

80,000

504

1.10%

10Y2Y

964

$

150,000

$

1,015

0.94%

2,399

Schedule of the effect of the Company's deriviative financial instruments on the consolidated statement of operations

Gain (Loss) From Derivative and Other Hedging Instruments, Net

The table below presents the effect of the Company’s derivative and other hedging instruments on the statements of

operations for the three months ended March 31, 2021 and 2020.

(in thousands)

Three Months Ended March 31,

2021

2020

Eurodollar futures contracts (short positions)

$

12

$

(8,217)

T-Note futures contracts (short position)

2,476

(4,339)

Interest rate swaps

27,123

(60,623)

Payer swaptions (short positions)

(26,167)

-

Payer swaptions (long positions)

40,070

(2,589)

Interest rate floors

1,384

-

TBA securities (short positions)

9,133

(7,090)

TBA securities (long positions)

(8,559)

-

Total

$

45,472

$

(82,858)