DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2022

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 the Company’s derivative and other hedging instruments assets and

liabilities as of September 30, 2022 and December 31, 2021.

(in thousands)

Derivative and Other Hedging Instruments

Balance Sheet Location

September 30, 2022

December 31, 2021

Assets

Interest rate swaps

Derivative assets, at fair value

$

169,630

$

29,293

Payer swaptions (long positions)

Derivative assets, at fair value

91,195

21,493

Interest rate caps

Derivative assets, at fair value

1,188

-

TBA securities

Derivative assets, at fair value

305

-

Total derivative assets, at fair value

$

262,318

$

50,786

Liabilities

Interest rate swaps

Derivative liabilities, at fair value

$

-

$

2,862

Payer swaptions (short positions)

Derivative liabilities, at fair value

52,315

4,423

TBA securities

Derivative liabilities, at fair value

698

304

Total derivative liabilities, at fair value

$

53,013

$

7,589

Margin Balances Posted to (from) Counterparties

Futures contracts

Restricted cash

$

16,056

$

8,035

TBA securities

Restricted cash

1,336

-

TBA securities

Other liabilities

(11,422)

(856)

Interest rate swaption contracts

Other liabilities

(27,149)

(6,350)

Total margin balances on derivative contracts

$

(21,179)

$

829

Schedule of Eurodollar and T-Note futures positions

The tables below present information related to the Company’s T-Note futures positions at September 30, 2022 and

December 31, 2021.

($ in thousands)

September 30, 2022

Average

Weighted

Weighted

Contract

Average

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Rate

Equity

(1)

Treasury Note Futures Contracts (Short Positions)

(2)

December 2022 5-year T-Note futures

(Dec 2022 - Dec 2027 Hedge Period)

$

750,500

3.54%

4.32%

$

29,141

December 2022 10-year Ultra futures

(Dec 2022 - Dec 2032 Hedge Period)

$

174,500

3.03%

3.77%

$

13,141

($ in thousands)

December 31, 2021

Average

Weighted

Weighted

Contract

Average

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Rate

Equity

(1)

Treasury Note Futures Contracts (Short Position)

(2)

March 2022 5-year T-Note futures

(Mar 2022 - Mar 2027 Hedge Period)

$

369,000

1.56%

1.62%

$

1,013

March 2022 10-year Ultra futures

(Mar 2022 - Mar 2032 Hedge Period)

$

220,000

1.22%

1.09%

$

(3,861)

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

(2)

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

107.51

 at September 30, 2022 and $

120.98

 at December 31, 2021. The contract

values of the short positions were $

806.8

 million and $

446.4

 million at September 30, 2022 and December 31, 2021, respectively. 10-Year Ultra

futures contracts were valued at a price of $

118.48

 at September 30, 2022 and $

146.44

 at December 31, 2021. The contract value of the short

position was $

206.8

 million and $

322.2

 million at September 30, 2022 and December 31, 2021, respectively

Schedule of Interest Rate Swap Agreements [Table Text Block]

Under its interest rate swap agreements, the Company typically pays a fixed rate and receive a floating rate based on an index

("payer swaps"). The floating rate the Company receives under its swap agreements has the effect of offsetting the repricing

characteristics of our repurchase agreements and cash flows on such liabilities. The Company is typically required to post collateral on its

interest rate swap agreements. The table below presents information related to the Company’s interest rate swap positions at September

30, 2022 and December 31, 2021.

($ in thousands)

Average

Net

Fixed

Average

Estimated

Average

Notional

Pay

Receive

Fair

Maturity

Amount

Rate

Rate

Value

(Years)

September 30, 2022

Expiration > 3 to ≤ 5 years

$

500,000

0.84%

3.46%

$

60,776

4.0

Expiration > 5 years

900,000

1.70%

2.56%

108,854

6.8

$

1,400,000

1.39%

2.88%

$

169,630

5.8

December 31, 2021

Expiration > 3 to ≤ 5 years

$

955,000

0.64%

0.16%

$

21,788

4.0

Expiration > 5 years

400,000

1.16%

0.21%

4,643

7.3

$

1,355,000

0.79%

0.18%

$

26,431

5.0

Schedule Of Interest Rate Swaption Agreements [Table Text Block]

The table below presents information related to the Company’s interest rate swaption positions at September 30, 2022 and

($ in thousands)

Option

Underlying Swap

Weighted

Average

Weighted

Average

Average

Adjustable

Average

Fair

Months to

Notional

Fixed

Rate

Term

Expiration

Cost

Value

Expiration

Amount

Rate

(LIBOR)

(Years)

September 30, 2022

Payer Swaptions - long

≤ 1 year

$

35,230

$

83,470

10.6

$

1,303,600

2.95%

3 Month

10.0

>10 years

7,267

7,725

238.9

80,000

2.07%

3 Month

10.0

$

42,497

$

91,195

23.8

$

1,383,600

2.90%

3 Month

10.0

Payer Swaptions - short

≤ 1 year

$

(17,500)

$

52,315

4.7

$

(958,300)

2.95%

3 Month

10.0

December 31, 2021

Payer Swaptions - long

≤ 1 year

$

4,000

$

1,575

3.2

$

400,000

1.66%

3 Month

5.0

>1 year ≤ 2 years

32,690

19,918

18.4

1,258,500

2.46%

3 Month

14.1

$

36,690

$

21,493

14.7

$

1,658,500

2.27%

3 Month

11.9

Payer Swaptions - short

≤ 1 year

$

(16,185)

$

(4,423)

5.3

$

(1,331,500)

2.29%

3 Month

11.4

Schedule of To Be Announced Securities [TableTextBlock]

The following table summarizes the Company’s contracts to purchase and sell TBA securities as of September 30, 2022 and

December 31, 2021.

($ in thousands)

Notional

Net

Amount

Cost

Market

Carrying

Long (Short)

(1)

Basis

(2)

Value

(3)

Value

(4)

September 30, 2022

30-Year TBA securities:

2.0%

$

(175,000)

$

(141,329)

$

(141,723)

$

(394)

3.0%

(300,000)

(261,047)

(261,047)

-

Total

$

(475,000)

$

(402,376)

$

(402,770)

$

(394)

December 31, 2021

30-Year TBA securities:

3.0%

$

(575,000)

$

(595,630)

$

(595,934)

$

(304)

Total

$

(575,000)

$

(595,630)

$

(595,934)

$

(304)

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 the balance sheets.

Schedule of Interest Rate Caps [Table Text Block]

The table below presents information related to the Company’s interest rate cap positions at September 30, 2022.

($ in thousands)

Net

Strike

Estimated

Notional

Swap

Curve

Fair

Expiration

Amount

Cost

Rate

Spread

Value

February 8, 2024

$

200,000

$

1,450

0.09%

2Y10Y

$

1,188

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

(in thousands)

Nine Months Ended September 30,

Three Months Ended September 30,

2022

2021

2022

2021

T-Note futures contracts (short position)

$

207,681

$

866

$

84,713

$

581

Eurodollar futures contracts (short positions)

-

(14)

-

(7)

Interest rate swaps

172,069

12,446

65,966

3,000

Payer swaptions (short positions)

(80,183)

3,507

(35,239)

2,295

Payer swaptions (long positions)

150,445

5,477

59,131

1,767

Interest rate caps

988

-

(499)

-

Interest rate floors

-

1,345

-

45

TBA securities (short positions)

14,194

864

10,642

(2,306)

TBA securities (long positions)

1,200

(8,559)

106

-

Total

$

466,394

$

15,932

$

184,820

$

5,375