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Derivatives (Tables)

12 Months Ended

Dec. 31, 2019

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	December 31, 2019		December 31, 2018
Interest rate swaps ⁽¹⁾	Derivative assets	Economic hedging	$	—	$	324
Interest rate swaptions	Derivative assets	Economic hedging	573		—
Options on U.S. Treasury futures	Derivative assets	Economic hedging	2,883		—
TBA securities - long positions	Derivative assets	Investing	834		6,239
			$	4,290	$	6,563

TBA securities - short positions	Derivative liabilities	Economic hedging	$	(974)	$	—
U.S. Treasury futures	Derivative liabilities	Economic hedging	—		(1,218)
			$	(974)	$	(1,218)

(1) Amounts shown as of December 31, 2019 and December 31, 2018 are net of $(9,265) paid and $8,424 received, respectively, in variation margin which is recorded on the Company’s consolidated balance sheets within “restricted cash.” As of December 31, 2019, all 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 amount shown as of December 31, 2018 is the unsettled fair value of the instruments subject to bilateral agreements and not centrally cleared through the CME as of that date.

Derivative Instruments, Gain (Loss)

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


	Year Ended
	December 31,
Type of Derivative Instrument	2019		2018		2017
Interest rate swaps	$	(202,450)	$	10,363	$	(2,632)
Interest rate swaptions	(5,607)		—		—
Eurodollar futures	2,359		1,887		821
U.S. Treasury futures	(109)		(4,609)		—
Options on U.S. Treasury futures	(1,422)		(658)		—
TBA securities - long positions	20,020		(10,737)		5,757
TBA securities - short positions	260		293		(902)
(Loss) gain on derivative instruments, net	$	(186,949)	$	(3,461)	$	3,044

Schedule of Derivative Instruments

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


	December 31, 2019
			Weighted-Average
Years to Maturity:	Notional Amount		Pay Rate		Life Remaining (in Years)
< 3 years	$	2,860,000	1.58	%	1.5
>3 and < 6 years	700,000		1.43	%	4.7
>6 and < 10 years	545,000		1.78	%	9.4
>10 years	120,000		2.84	%	27.7
Total	$	4,225,000	1.62	%	3.8

	December 31, 2018
			Weighted-Average
Years to Maturity:	Notional Amount		Pay Rate		Life Remaining (in Years)
< 3 years	$	1,560,000	1.96	%	1.4
>3 and < 6 years	1,230,000		2.23	%	4.4
>6 and < 10 years	1,505,000		2.80	%	8.3
>10 years	220,000		2.81	%	21.9
Total	$	4,515,000	2.35	%	5.5

Options

The following table presents information about the Company’s options outstanding as of December 31, 2019:⁽¹⁾


	December 31, 2019
	Option									Underlying Instrument
	Cost Basis		Fair Value		Maturity Date	Notional Amount		Rate ⁽²⁾		Term in Years
Pay-fixed interest rate swaptions	$	6,180	$	573	January 16, 2020	$	750,000	2.07	%	10.0
Options on U.S. Treasury futures	4,359		2,883		Febuary 21, 2020	1,350,000		n/a		10.0
Total	$	10,539	$	3,456		$	2,100,000

(1) The Company did not have any options as of December 31, 2018.

(2) Weighted average based on notional amount of the underlying instrument.

TBA Securities

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


	December 31, 2019						December 31, 2018
	Long Positions		Short Positions		Long Positions		Short Positions
Implied market value ⁽¹⁾	$	442,161	$	(520,117)	$	888,469	$	—
Implied cost basis ⁽²⁾	441,327		(519,143)		882,230		—
Net carrying value ⁽³⁾	$	834	$	(974)	$	6,239	$	—

(1) Implied market value represents the estimated fair value of the underlying Agency MBS as if settled as of the date indicated.

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

(3) 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 date indicated.

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, 2018		Additions		Settlements, Terminations, or Pair-Offs		Notional Amount as of December 31, 2019
Interest rate swaps	$	4,515,000	$	6,560,000	$	(6,850,000)	$	4,225,000
Interest rate swaptions	—		1,500,000		(750,000)		750,000
Eurodollar futures	—		9,000,000		(9,000,000)		—
U.S. Treasury futures	50,000		—		(50,000)		—
Options on U.S. Treasury futures	—		1,350,000		—		1,350,000
TBA long positions	860,000		7,615,000		(8,040,000)		435,000
TBA short positions	—		1,800,000		(2,300,000)		(500,000)

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
December 31, 2019

Interest rate swaptions	$	573	$	—	$	573	$	—	$	—	$	573
Options on U.S. Treasury future	2,883		—		2,883		—		—		2,883
TBA securities-long positions	834		—		834		(380)		—		454
Derivative assets	$	4,290	$	—	$	4,290	$	(380)	$	—	$	3,910
December 31, 2018
Interest rate swaps	$	324	$	—	$	324	$	—	$	—	$	324
TBA securities-long positions	6,239		—		6,239		—		(1,719)		4,520
Derivative assets	$	6,563	$	—	$	6,563	$	—	$	(1,719)	$	4,844

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
December 31, 2019
TBA securities-short positions	(974)		—		(974)		380		—		(594)
Derivative liabilities	$	(974)	$	—	$	(974)	$	380	$	—	$	(594)

December 31, 2018
U.S. Treasury futures	(1,218)		—		(1,218)		—		1,218		—
Derivative liabilities	$	(1,218)	$	—	$	(1,218)	$	—	$	1,218	$	—

(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 derivative 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. Please refer to the consolidated balance sheets for the total cash posted as collateral, which is recorded as "restricted cash", and the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically.

- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

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