Derivatives (Tables)

9 Months Ended

Sep. 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	September 30, 2018			December 31, 2017
Interest rate swaps	Derivative assets	Economic hedging	$	694		$	791
Eurodollar futures	Derivative assets	Economic hedging	—			666
TBA securities	Derivative assets	Trading	871			1,483
Call Options on U.S. Treasury futures	Derivative assets	Trading	328			—
Put Options on U.S. Treasury futures	Derivative assets	Trading	719			—
			$	2,612		$	2,940
TBA securities	Derivative liabilities	Trading	$	(2,039	)	$	—
TBA securities	Derivative liabilities	Economic hedging	—			(269		)
			$	(2,039	)	$	(269	)

Schedule of Derivative Instruments

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

	September 30, 2018
			Weighted-Average:
Years to Maturity:	Net Notional Amount (1)		Pay Rate (2)		Life Remaining (in Years)	Fair Value (3)
< 3 years	$	1,520,000	2.01	%	1.4	$	694
>3 and < 6 years	1,290,000		2.10	%	4.1	—
>6 and < 10 years	1,150,000		2.61	%	7.9	—
>10 years	220,000		2.81	%	22.2	—
Total	$	4,180,000	2.24	%	5.1	$	694
	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 any receive-fixed interest rate swaps, and include $1,525,000 and $2,655,000 of pay-fixed forward starting interest rate swaps as of September 30, 2018 and December 31, 2017, respectively.

(2) Excluding forward starting pay-fixed interest rate swaps, the weighted average pay rate was 1.66% and 1.36% as of September 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:

	September 30, 2018
TBA Securities:	Notional Amount (1)		Implied Cost Basis (2)			Implied Market Value (3)			Net Carrying Value (4)
Dollar roll positions	$	761,000	$	780,865		$	779,697		$	(1,168	)
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 September 30, 2018
Receive-fixed interest rate swaps	$	100,000	$	—	$	(100,000	)	$	—
Pay-fixed interest rate swaps	5,775,000		955,000		(2,550,000		)	4,180,000
Eurodollar futures (1)	1,950,000		—		(1,950,000		)	—
TBA dollar roll positions	795,000		7,857,000		(7,891,000		)	761,000
TBA economic hedges	150,000		—		(150,000		)	—
Call Options on U.S. Treasury futures	—		100,000		—			100,000
Put Options on U.S. Treasury futures	—		400,000		(300,000		)	100,000

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						Nine Months Ended
	September 30,						September 30,
Type of Derivative Instrument	2018			2017			2018			2017
Receive-fixed interest rate swaps	$	(153	)	$	(99	)	$	(1,658	)	$	746
Pay-fixed interest rate swaps	25,172			(611		)	95,491			(18,799		)
Eurodollar futures	(189		)	—			1,886			—
TBA dollar roll positions	(5,204		)	6,703			(18,256		)	8,419
TBA economic hedges	—			—			293			—
Call Options on U.S. Treasury futures	148			—			148			—
Put Options on U.S. Treasury futures	(275		)	—			616			—
Gain (loss) on derivative instruments, net	$	19,499		$	5,993		$	78,520		$	(9,634	)

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
September 30, 2018
Interest rate swaps	$	694	$	—	$	694	$	—		$	—		$	694
Eurodollar Futures	—		—		—		—			—			—
TBA securities	871		—		871		(346		)	(123		)	402
Options on U.S. Treasury futures	1,047		—		1,047		(1,047		)	—			—
Derivative assets	$	2,612	$	—	$	2,612	$	(1,393	)	$	(123	)	$	1,096
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
September 30, 2018
Interest rate swaps	$	—	$	—	$	—	$	—		$	—		$	—
TBA securities	2,039		—		2,039		(346		)	(873		)	820
Derivative liabilities	$	2,039	$	—	$	2,039	$	(346	)	$	(873	)	$	820
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.