Derivatives (Tables)

6 Months Ended

Jun. 30, 2018

Derivative [Line Items]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The table below summarizes information about the fair value by type of derivative instrument on the Company’s consolidated balance sheets as of the dates indicated:  

Type of Derivative Instrument	Balance Sheet Location	Purpose	June 30, 2018		December 31, 2017
Interest rate swaps	Derivative assets	Economic hedging	$	985	$	791
Eurodollar futures	Derivative assets	Economic hedging	967		666
TBA securities	Derivative assets	Trading	2,034		1,483
Options on U.S. Treasury futures	Derivative assets	Trading	3,656		—
			$	7,642	$	2,940
TBA securities	Derivative liabilities	Economic hedging	$	—	$	(269	)

Schedule of Derivative Instruments

The following tables present information about the Company’s interest rate swaps as of the dates indicated:

	June 30, 2018
			Weighted-Average:
Years to Maturity:	Net Notional Amount (1)		Pay Rate (2)		Life Remaining (in Years)	Fair Value (3)
< 3 years	$	1,220,000	1.63	%	1.3	$	985
>3 and < 6 years	1,310,000		2.01	%	4.2	—
>6 and < 10 years	1,100,000		2.56	%	8.0	—
>10 years	220,000		2.81	%	22.4	—
Total	$	3,850,000	2.07	%	5.2	$	985
	December 31, 2017
			Weighted-Average:
Years to Maturity:	Net Notional Amount (1)		Pay Rate (2)		Life Remaining (in Years)	Fair Value (3)
< 3 years	$	3,320,000	1.35	%	0.7	$	791
>3 and < 6 years	1,210,000		2.00	%	4.6	—
>6 and < 10 years	1,025,000		2.49	%	8.0	—
>10 years	120,000		2.75	%	17.3	—
Total	$	5,675,000	1.71	%	3.1	$	791

(1) The net notional amounts included in the tables above represent pay-fixed interest rate swaps, net of receive-fixed interest rate swaps and include $1,575,000 and $2,525,000 of pay-fixed forward starting interest rate swaps as of June 30, 2018 and December 31, 2017, respectively.

(2) Excluding forward starting pay-fixed interest rate swaps, the weighted average pay rate was 1.85% and 1.36% as of June 30, 2018 and December 31, 2017, respectively.

(3) The majority of the Company’s interest rate swap agreements are centrally cleared through the CME. Please refer to Note 1 for information regarding the exchange of variation margin being legally considered as settlement of the derivative as opposed to a pledge of collateral.

The following table summarizes information about the Company's TBA securities as of the dates indicated:

	June 30, 2018
TBA Securities:	Notional Amount (1)		Implied Cost Basis (2)			Implied Market Value (3)			Net Carrying Value (4)
Dollar roll positions	$	765,000	$	782,408		$	784,442		$	2,034
Economic hedges	$	—	$	—		$	—		$	—
	December 31, 2017
	Notional Amount (1)		Implied Cost Basis (2)			Implied Market Value (3)			Net Carrying Value (4)
Dollar roll positions	$	795,000	$	829,425		$	830,908		$	1,483
Economic hedges	$	150,000	$	(153,797	)	$	(154,066	)	$	(269	)

(1) Notional amount represents the par value (or principal balance) of the underlying Agency MBS as if settled as of the end of the period.

(2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as if settled as of end of the period.

(3) Implied market value represents the estimated fair value of the underlying Agency MBS as if settled as of the end of the period.

(4) Net carrying value is the amount included on the consolidated balance sheets within “derivative assets (liabilities)” and represents the difference between the implied market value and the implied cost basis of the TBA security as of the end of the period.

Schedule of Notional Amounts of Outstanding Derivative Positions

The tables below summarize changes in the Company’s derivative instruments for the periods indicated:

Type of Derivative Instrument	Notional Amount as of December 31, 2017		Additions		Settlements, Terminations, or Pair-Offs			Notional Amount as of June 30, 2018
Receive-fixed interest rate swaps	$	100,000	$	—	$	—		$	100,000
Pay-fixed interest rate swaps	5,775,000		575,000		(2,400,000		)	3,950,000
Eurodollar futures (1)	1,950,000		—		(1,300,000		)	650,000
TBA dollar roll positions	795,000		4,580,000		(4,610,000		)	765,000
TBA economic hedges	150,000		—		(150,000		)	—
Options on U.S. Treasury futures	—		300,000		—			300,000

Derivative Instruments, Gain (Loss)

The table below provides detail of the Company’s “gain (loss) on derivative instruments, net” by type of derivative for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Type of Derivative Instrument	2018			2017			2018			2017
Receive-fixed interest rate swaps	$	(376	)	$	979		$	(1,505	)	$	845
Pay-fixed interest rate swaps	20,947			(18,498		)	70,319			(18,189		)
Eurodollar futures	170			—			2,075			—
TBA dollar roll positions	(965		)	1,717			(13,052		)	1,717
TBA economic hedges	—			—			293			—
Options on U.S. Treasury futures	891			—			891			—
Gain (loss) on derivative instruments, net	$	20,667		$	(15,802	)	$	59,021		$	(15,627	)

Offsetting Assets

	Offsetting of Assets
	Gross Amount of Recognized Assets		Gross Amount Offset in the Balance Sheet		Net Amount of Assets Presented in the Balance Sheet		Gross Amount Not Offset in the Balance Sheet (1)						Net Amount
							Financial Instruments Received as Collateral			Cash Received as Collateral
June 30, 2018
Interest rate swaps	$	985	$	—	$	985	$	—		$	—		$	985
Eurodollar Futures	967		—		967		—			(967		)	—
TBA securities	2,034		—		2,034		—			(266		)	1,768
Options on U.S. Treasury futures	3,656		—		3,656		—			(3,656		)	—
Derivative assets	$	7,642	$	—	$	7,642	$	—		$	(4,889	)	$	2,753
December 31, 2017
Interest rate swaps	$	791	$	—	$	791	$	—		$	—		$	791
Eurodollar Futures	666		—		666		—			(666		)	—
TBA securities	1,483		—		1,483		(180		)	—			1,303
Options on U.S. Treasury futures	—		—		—		—			—			—
Derivative assets	$	2,940	$	—	$	2,940	$	(180	)	$	(666	)	$	2,094

Offsetting Liabilities

	Offsetting of Liabilities
	Gross Amount of Recognized Liabilities		Gross Amount Offset in the Balance Sheet		Net Amount of Liabilities Presented in the Balance Sheet		Gross Amount Not Offset in the Balance Sheet (1)					Net Amount
							Financial Instruments Posted as Collateral			Cash Posted as Collateral
June 30, 2018
Interest rate swaps	$	—	$	—	$	—	$	—		$	—	$	—
TBA securities	—		—		—		—			—		—
Derivative liabilities	$	—	$	—	$	—	$	—		$	—	$	—
December 31, 2017
Interest rate swaps	$	—	$	—	$	—	$	—		$	—	$	—
TBA securities	269		—		269		(180		)	—		89
Derivative liabilities	$	269	$	—	$	269	$	(180	)	$	—	$	89

(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented.