MARYLAND | 22-3479661 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
Class
Common Stock, $.01 par value
|
Outstanding at May 6, 2013
947,368,897
|
PAGE | |||
Part I. FINANCIAL INFORMATION
|
|||
Item 1. Financial Statements:
|
|||
Part II. OTHER INFORMATION
|
|||
ASSETS
|
March 31, 2013
(Unaudited)
|
December 31, 2012(1)
|
||||||
Cash and cash equivalents
|
$ | 1,862,550 | $ | 615,789 | ||||
Reverse repurchase agreements
|
4,933,465 | 1,811,095 | ||||||
Investments, at fair value:
|
||||||||
U.S. Treasury Securities (including pledged assets of $1,645,930 and $752,076, respectively)
|
1,645,930 | 752,076 | ||||||
Securities borrowed
|
2,688,485 | 2,160,942 | ||||||
Agency mortgage-backed securities (including pledged assets of $98,719,355 and $107,466,084, respectively)
|
108,256,671 | 123,963,207 | ||||||
Agency debentures (including pledged assets of $2,707,919 and $981,727, respectively)
|
3,970,279 | 3,009,568 | ||||||
Investments in affiliates
|
267,547 | 234,120 | ||||||
Corporate debt, held for investment
|
66,539 | 63,944 | ||||||
Receivable for investments sold
|
1,292,478 | 290,722 | ||||||
Accrued interest and dividends receivable
|
388,665 | 419,259 | ||||||
Receivable for advisory and service fees (including from affiliates of $9,244 and $14,077, respectively)
|
12,817 | 17,730 | ||||||
Intangible for customer relationships (net of accumulated amortization of $6,037 and $5,779, respectively)
|
6,731 | 6,989 | ||||||
Goodwill
|
55,417 | 55,417 | ||||||
Other derivative contracts, at fair value
|
- | 9,830 | ||||||
Other assets
|
54,282 | 41,607 | ||||||
Total Assets
|
$ | 125,501,856 | $ | 133,452,295 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Liabilities:
|
||||||||
U.S. Treasury Securities sold, not yet purchased, at fair value
|
$ | 611,167 | $ | 495,437 | ||||
Repurchase agreements
|
100,322,942 | 102,785,697 | ||||||
Securities loaned, at fair value
|
2,330,060 | 1,808,315 | ||||||
Payable for investments purchased
|
3,203,461 | 8,256,957 | ||||||
Payable for share buyback program
|
- | 141,149 | ||||||
Convertible Senior Notes
|
824,902 | 825,541 | ||||||
Accrued interest payable
|
175,749 | 186,896 | ||||||
Dividends payable
|
426,173 | 432,154 | ||||||
Interest rate swaps, at fair value
|
2,259,173 | 2,584,907 | ||||||
Accounts payable and other liabilities
|
37,048 | 10,798 | ||||||
Other derivative contracts, at fair value
|
4,812 | - | ||||||
Total Liabilities
|
110,195,487 | 117,527,851 | ||||||
Stockholders’ Equity:
|
||||||||
7.875% Series A Cumulative Redeemable Preferred Stock: 7,412,500 authorized, issued and outstanding
|
177,088 | 177,088 | ||||||
7.625% Series C Cumulative Redeemable Preferred Stock: 12,650,000 authorized, 12,000,000 issued and outstanding
|
290,514 | 290,514 | ||||||
7.50% Series D Cumulative Redeemable Preferred Stock: 18,400,000 authorized, issued and outstanding, respectively
|
445,457 | 445,457 | ||||||
Common stock, par value $0.01 per share, 1,956,937,500 authorized, 947,293,099 and 947,213,204, issued and outstanding, respectively
|
9,473 | 9,472 | ||||||
Additional paid-in capital
|
14,746,579 | 14,740,774 | ||||||
Accumulated other comprehensive income (loss)
|
2,003,248 | 3,053,242 | ||||||
Accumulated deficit
|
(2,365,990 | ) | (2,792,103 | ) | ||||
Total Stockholders’ Equity
|
15,306,369 | 15,924,444 | ||||||
Total Liabilities and Stockholders’ Equity
|
$ | 125,501,856 | $ | 133,452,295 | ||||
(1) Derived from the audited consolidated financial statements at December 31, 2012.
See notes to consolidated financial statements.
|
For the Quarter Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Interest income:
|
||||||||
Investments
|
$ | 728,609 | $ | 850,959 | ||||
U.S. Treasury Securities
|
5,996 | 1,418 | ||||||
Securities loaned
|
2,612 | 2,518 | ||||||
Total interest income
|
737,217 | 854,895 | ||||||
Interest expense:
|
||||||||
Repurchase agreements
|
157,064 | 113,914 | ||||||
Convertible Senior Notes
|
15,813 | 14,727 | ||||||
U.S. Treasury Securities sold, not yet purchased
|
2,788 | 2,644 | ||||||
Securities borrowed
|
1,925 | 2,060 | ||||||
Total interest expense
|
177,590 | 133,345 | ||||||
Net interest income
|
559,627 | 721,550 | ||||||
Other income (loss):
|
||||||||
Investment advisory and other fee income
|
13,540 | 20,766 | ||||||
Net gains (losses) on disposal of investments
|
182,843 | 80,299 | ||||||
Dividend income from affiliates
|
6,431 | 7,521 | ||||||
Net gains (losses) on trading assets
|
1,549 | 5,256 | ||||||
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities
|
80,127 | 30,877 | ||||||
Subtotal
|
284,490 | 144,719 | ||||||
Realized gains (losses) on interest rate swaps(1)
|
(225,476 | ) | (219,340 | ) | ||||
Realized gains (losses) on termination of interest rate swaps
|
(16,378 | ) | (2,385 | ) | ||||
Unrealized gains (losses) on interest rate swaps
|
325,734 | 341,639 | ||||||
Subtotal
|
83,880 | 119,914 | ||||||
Total other income (loss)
|
368,370 | 264,633 | ||||||
Expenses:
|
||||||||
Compensation expense
|
38,443 | 59,014 | ||||||
Other general and administrative expenses
|
13,469 | 8,901 | ||||||
Total expenses
|
51,912 | 67,915 | ||||||
Income (loss) before income taxes
|
876,085 | 918,268 | ||||||
Income taxes
|
(5,807 | ) | (16,462 | ) | ||||
Net income (loss)
|
870,278 | 901,806 | ||||||
Dividends on preferred stock
|
17,992 | 3,938 | ||||||
Net income (loss) available (related) to common shareholders
|
$ | 852,286 | $ | 897,868 | ||||
Net income (loss) per share available (related) to common shareholders:
|
||||||||
Basic
|
$ | 0.90 | $ | 0.92 | ||||
Diluted
|
$ | 0.87 | $ | 0.89 | ||||
Weighted average number of common shares outstanding:
|
||||||||
Basic
|
947,249,901 | 971,727,701 | ||||||
Diluted
|
994,815,169 | 1,010,588,609 | ||||||
Dividends Declared Per Share of Common Stock
|
$ | 0.45 | $ | 0.55 | ||||
Net income (loss)
|
$ | 870,278 | $ | 901,806 | ||||
Other comprehensive income (loss):
|
||||||||
Unrealized gains (losses) on available-for-sale securities
|
(867,151 | ) | (162,259 | ) | ||||
Reclassification adjustment for net (gains) losses included in net income (loss)
|
(182,843 | ) | (80,299 | ) | ||||
Other comprehensive income (loss)
|
(1,049,994 | ) | (242,558 | ) | ||||
Comprehensive income (loss)
|
$ | (179,716 | ) | $ | 659,248 |
(1) |
Interest expense related to the Company’s interest rate swaps is recorded in Realized gains (losses) on interest rate swaps on the Consolidated Statements of Operations and Comprehensive Income (Loss).
|
|
See notes to consolidated financial statements. |
7.875% Series
A Cumulative
Redeemable
Preferred
Stock
|
7.625% Series
C Cumulative
Redeemable
Preferred
Stock
|
7.50% Series
D Cumulative
Redeemable
Preferred
Stock
|
Common
Stock
Par Value
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Accumulated
Deficit
|
Total
|
|||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2011
|
$ | 177,088 | - | - | $ | 9,702 | $ | 15,068,870 | $ | 3,008,988 | $ | (2,504,006 | ) | $ | 15,760,642 | |||||||||||||||||
Net income (loss)
|
- | - | - | - | - | - | 901,806 | 901,806 | ||||||||||||||||||||||||
Unrealized gains (losses) on available-for-sale securities
|
- | - | - | - | - | (162,259 | ) | - | (162,259 | ) | ||||||||||||||||||||||
Reclassification adjustment for net (gains) losses included in net income (loss)
|
- | - | - | - | - | (80,299 | ) | - | (80,299 | ) | ||||||||||||||||||||||
Exercise of stock options
|
- | - | - | 1 | 1,841 | - | - | 1,842 | ||||||||||||||||||||||||
Stock option expense and long-term compensation expense
|
- | - | - | - | 1,849 | - | - | 1,849 | ||||||||||||||||||||||||
Conversion of Series B cumulative preferred stock
|
- | - | - | 40 | 32,232 | - | - | 32,272 | ||||||||||||||||||||||||
Contingent beneficial conversion feature on 4% Convertible Senior Notes
|
- | - | - | - | 23,321 | - | - | 23,321 | ||||||||||||||||||||||||
Offering expenses
|
- | - | - | - | (231 | ) | - | - | (231 | ) | ||||||||||||||||||||||
Preferred Series A dividends declared $0.492 per share
|
- | - | - | - | - | - | (3,648 | ) | (3,648 | ) | ||||||||||||||||||||||
Preferred Series B dividends declared $0.375 per share
|
- | - | - | - | - | - | (289 | ) | (289 | ) | ||||||||||||||||||||||
Common dividends declared, $0.55 per share
|
- | - | - | - | - | - | (534,401 | ) | (534,401 | ) | ||||||||||||||||||||||
BALANCE, MARCH 31, 2012
|
$ | 177,088 | - | - | $ | 9,743 | $ | 15,127,882 | $ | 2,766,430 | $ | (2,140,538 | ) | $ | 15,940,605 | |||||||||||||||||
BALANCE, DECEMBER 31, 2012
|
$ | 177,088 | $ | 290,514 | $ | 445,457 | $ | 9,472 | $ | 14,740,774 | $ | 3,053,242 | $ | (2,792,103 | ) | $ | 15,924,444 | |||||||||||||||
Net income (loss)
|
- | - | - | - | - | - | 870,278 | 870,278 | ||||||||||||||||||||||||
Unrealized gains (losses) on available-for-sale securities
|
- | - | - | - | - | (867,151 | ) | - | (867,151 | ) | ||||||||||||||||||||||
Reclassification adjustment for net (gains) losses included in net income (loss)
|
- | - | - | - | - | (182,843 | ) | - | (182,843 | ) | ||||||||||||||||||||||
Exercise of stock options
|
- | - | - | - | 265 | - | - | 265 | ||||||||||||||||||||||||
Stock option expense and long-term compensation expense
|
- | - | - | - | 817 | - | - | 817 | ||||||||||||||||||||||||
Net proceeds from direct purchase and dividend reinvestment
|
- | - | - | 1 | 760 | - | - | 761 | ||||||||||||||||||||||||
Contingent beneficial conversion feature on 4% Convertible Senior Notes
|
- | - | - | - | 3,963 | - | - | 3,963 | ||||||||||||||||||||||||
Preferred Series A dividends declared $0.492 per share
|
- | - | - | - | - | - | (3,648 | ) | (3,648 | ) | ||||||||||||||||||||||
Preferred Series C dividends declared $0.477 per share
|
- | - | - | - | - | - | (5,719 | ) | (5,719 | ) | ||||||||||||||||||||||
Preferred Series D dividends declared $0.469 per share
|
- | - | - | - | - | - | (8,625 | ) | (8,625 | ) | ||||||||||||||||||||||
Common dividends declared, $0.45 per share
|
- | - | - | - | - | - | (426,173 | ) | (426,173 | ) | ||||||||||||||||||||||
BALANCE, MARCH 31, 2013
|
$ | 177,088 | $ | 290,514 | $ | 445,457 | $ | 9,473 | $ | 14,746,579 | $ | 2,003,248 | $ | (2,365,990 | ) | $ | 15,306,369 |
For the Quarters Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$ | 870,278 | $ | 901,806 | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||
Amortization of Investment premiums and discounts, net
|
421,057 | 280,336 | ||||||
Amortization of intangibles
|
323 | 591 | ||||||
Amortization of deferred expenses
|
2,038 | 900 | ||||||
Amortization of contingent beneficial conversion feature on convertible senior notes
|
3,324 | 7,828 | ||||||
Net (gains) losses on sales of Agency mortgage-backed securities and debentures
|
(182,843 | ) | (80,299 | ) | ||||
Stock option and long-term compensation expense
|
817 | 1,849 | ||||||
Unrealized (gains) losses on interest rate swaps
|
(325,734 | ) | (341,639 | ) | ||||
Net unrealized (gains) losses on interest-only Agency mortgage-backed securities
|
(80,127 | ) | (30,877 | ) | ||||
Net (gains) losses on trading assets
|
14,829 | (2,871 | ) | |||||
Proceeds from repurchase agreements from RCap
|
237,569,485 | 127,052,942 | ||||||
Payments on repurchase agreements from RCap
|
(238,600,415 | ) | (122,741,955 | ) | ||||
Proceeds from reverse repurchase agreements to RCap
|
104,959,663 | 54,896,766 | ||||||
Payments on reverse repurchase agreements to RCap
|
(108,104,936 | ) | (56,577,802 | ) | ||||
Proceeds from reverse repurchase agreements to Shannon
|
376,198 | 93,892 | ||||||
Payments on reverse repurchase agreements to Shannon
|
(353,295 | ) | (92,591 | ) | ||||
Proceeds from securities borrowed
|
53,799,157 | 6,683,283 | ||||||
Payments on securities borrowed
|
(54,326,700 | ) | (6,877,004 | ) | ||||
Proceeds from securities loaned
|
110,725,140 | 32,002,954 | ||||||
Payments on securities loaned
|
(110,203,395 | ) | (31,931,006 | ) | ||||
Proceeds from U.S. Treasury Securities
|
21,683,636 | 15,808,494 | ||||||
Payments on U.S. Treasury Securities
|
(22,157,117 | ) | (14,086,314 | ) | ||||
Net payments on derivatives
|
(1,490 | ) | 849 | |||||
Net change in:
|
||||||||
Other assets
|
(14,779 | ) | (5,918 | ) | ||||
Accrued interest and dividend receivable
|
22,616 | (10,568 | ) | |||||
Advisory and service fees receivable
|
4,913 | (58 | ) | |||||
Accrued interest payable
|
(11,147 | ) | (9,857 | ) | ||||
Accounts payable and other liabilities
|
26,250 | 50,704 | ||||||
Net cash provided by (used in) operating activities
|
(3,882,254 | ) | 4,994,435 | |||||
Cash flows from investing activities:
|
||||||||
Payments on purchases of Agency mortgage-backed securities and debentures
|
(17,699,472 | ) | (20,099,149 | ) | ||||
Proceeds from sales of Agency mortgage-backed securities and debentures
|
15,484,409 | 4,770,341 | ||||||
Principal payments on Agency mortgage-backed securities
|
8,514,074 | 7,376,488 | ||||||
Proceeds from Agency debentures called
|
847,205 | 151,640 | ||||||
Payments on purchases of corporate debt
|
(3,483 | ) | - | |||||
Principal payments on corporate debt
|
911 | 1,335 | ||||||
Net gains (losses) on other derivative securities
|
7,465 | - | ||||||
Earn out payment
|
- | (13,387 | ) | |||||
Net cash provided by (used in) investing activities
|
7,151,109 | (7,812,732 | ) | |||||
Cash flows from financing activities:
|
||||||||
Proceeds from repurchase agreements
|
101,631,583 | 82,930,109 | ||||||
Principal payments on repurchase agreements
|
(103,063,408 | ) | (79,618,116 | ) | ||||
Proceeds from exercise of stock options
|
265 | 1,842 | ||||||
Net proceeds from direct purchases and dividend reinvestments
|
761 | - | ||||||
Net (payments) proceeds from follow-on offerings
|
- | (231 | ) | |||||
Net payment on share repurchase
|
(141,149 | ) | - | |||||
Dividends paid
|
(450,146 | ) | (556,744 | ) | ||||
Net cash provided by (used in) financing activities
|
(2,022,094 | ) | 2,756,860 | |||||
Net (decrease) increase in cash and cash equivalents
|
1,246,761 | (61,437 | ) | |||||
Cash and cash equivalents, beginning of period
|
615,789 | 994,198 | ||||||
Cash and cash equivalents, end of period
|
$ | 1,862,550 | $ | 932,761 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Interest received
|
$ | 1,188,202 | $ | 1,125,003 | ||||
Dividends received
|
$ | 7,097 | $ | 8,283 | ||||
Statement continued on following page.
|
Statement continued from previous page.
|
||||||||
Fees received
|
$ | 18,453 | $ | 20,708 | ||||
Interest paid (excluding interest paid on interest rate swaps)
|
$ | 184,426 | $ | 134,099 | ||||
Net interest paid on interest rate swaps
|
$ | 226,463 | $ | 220,615 | ||||
Taxes paid
|
$ | 2,382 | $ | 21,401 | ||||
Noncash investing activities:
|
||||||||
Receivable for Investments sold
|
$ | 1,292,478 | $ | 454,278 | ||||
Payable for Investments purchased
|
$ | 3,203,461 | $ | 5,708,412 | ||||
Net change in unrealized loss on available-for-sale securities and interest rate swaps, net of reclassification adjustment
|
$ | (1,049,994 | ) | $ | (242,558 | ) | ||
Noncash financing activities:
|
||||||||
Dividends declared, not yet paid
|
$ | 426,173 | $ | 534,401 | ||||
Conversion of Series B cumulative preferred stock
|
- | $ | 32,232 | |||||
Contingent beneficial conversion feature on Convertible Senior Notes
|
$ | 3,963 | $ | 23,321 |
1.
|
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
|
March 31, 2013
|
Freddie Mac
|
Fannie Mae
|
Ginnie Mae
|
Total Mortgage-
Backed Securities
|
||||||||||||
(dollars in thousands)
|
||||||||||||||||
Agency mortgage-backed securities, par value
|
$ | 39,115,499 | $ | 61,622,413 | $ | 239,955 | $ | 100,977,867 | ||||||||
Unamortized discount
|
(12,573 | ) | (13,692 | ) | (388 | ) | (26,653 | ) | ||||||||
Unamortized premium
|
1,959,152 | 3,398,430 | 36,257 | 5,393,839 | ||||||||||||
Amortized cost
|
41,062,078 | 65,007,151 | 275,824 | 106,345,053 | ||||||||||||
Gross unrealized gains
|
818,602 | 1,516,324 | 15,965 | 2,350,891 | ||||||||||||
Gross unrealized losses
|
(166,212 | ) | (271,927 | ) | (1,134 | ) | (439,273 | ) | ||||||||
Estimated fair value
|
$ | 41,714,468 | $ | 66,251,548 | $ | 290,655 | $ | 108,256,671 |
Amortized Cost
|
Gross Unrealized
Gain
|
Gross Unrealized
Loss
|
Estimated Fair
Value
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Adjustable rate
|
$ | 4,938,813 | $ | 223,387 | $ | (2,401 | ) | $ | 5,159,799 | |||||||
Fixed rate
|
101,406,240 | 2,127,504 | (436,872 | ) | 103,096,872 | |||||||||||
Total
|
$ | 106,345,053 | $ | 2,350,891 | $ | (439,273 | ) | $ | 108,256,671 |
December 31, 2012
|
Freddie Mac
|
Fannie Mae
|
Ginnie Mae
|
Total Mortgage-
Backed Securities
|
||||||||||||
(dollars in thousands)
|
||||||||||||||||
Agency mortgage-backed securities, par value
|
$ | 44,296,234 | $ | 70,649,782 | $ | 273,988 | $ | 115,220,004 | ||||||||
Unamortized discount
|
(9,515 | ) | (12,315 | ) | (389 | ) | (22,219 | ) | ||||||||
Unamortized premium
|
2,121,478 | 3,695,381 | 39,348 | 5,856,207 | ||||||||||||
Amortized cost
|
46,408,197 | 74,332,848 | 312,947 | 121,053,992 | ||||||||||||
Gross unrealized gains
|
1,166,299 | 1,913,334 | 17,583 | 3,097,216 | ||||||||||||
Gross unrealized losses
|
(36,890 | ) | (146,533 | ) | (4,578 | ) | (188,001 | ) | ||||||||
Estimated fair value
|
$ | 47,537,606 | $ | 76,099,649 | $ | 325,952 | $ | 123,963,207 |
Amortized Cost
|
Gross Unrealized
Gain
|
Gross Unrealized
Loss
|
Estimated Fair
Value
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Adjustable rate
|
$ | 5,786,718 | $ | 259,013 | $ | (4,613 | ) | $ | 6,041,118 | |||||||
Fixed rate
|
115,267,274 | 2,838,203 | (183,388 | ) | 117,922,089 | |||||||||||
Total
|
$ | 121,053,992 | $ | 3,097,216 | $ | (188,001 | ) | $ | 123,963,207 |
March 31, 2013
|
December 31, 2012
|
|||||||||||||||
Weighted-Average Life
|
Fair Value
|
Amortized Cost
|
Fair Value |
Amortized Cost
|
||||||||||||
(dollars in thousands)
|
||||||||||||||||
Less than one year
|
$ | 655,460 | $ | 652,987 | $ | 1,264,094 | $ | 1,250,405 | ||||||||
Greater than one year through five years
|
98,984,676 | 97,021,498 | 119,288,168 | 116,510,310 | ||||||||||||
Greater than five years through ten years
|
8,487,896 | 8,543,055 | 3,104,073 | 2,992,054 | ||||||||||||
Greater than 10 years
|
128,639 | 127,513 | 306,872 | 301,223 | ||||||||||||
Total
|
$ | 108,256,671 | $ | 106,345,053 | $ | 123,963,207 | $ | 121,053,992 |
Unrealized Loss Position For:
(dollars in thousands)
|
||||||||||||||||||||||||||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||||||||||||||
Estimated
Fair Value
|
Unrealized
Losses
|
Number of
Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number of
Securities
|
Estimated
Fair Value
|
Unrealized
Losses
|
Number
of
Securities
|
||||||||||||||||||||||||||||
March 31, 2013
|
$ | 39,235,229 | $ | (364,700 | ) | 376 | $ | 120,653 | $ | (74,573 | ) | 31 | $ | 39,355,882 | $ | (439,273 | ) | 407 | ||||||||||||||||||
December 31, 2012
|
$ | 11,220,514 | $ | (82,721 | ) | 187 | $ | 147,775 | $ | (105,280 | ) | 39 | $ | 11,368,289 | $ | (188,001 | ) | 226 |
Level 1
|
Level 2
|
Level 3
|
||||||||||
At March 31, 2013
|
(dollars in thousands)
|
|||||||||||
Assets:
|
||||||||||||
U.S. Treasury Securities
|
$ | 1,645,930 | $ | - | - | |||||||
Agency mortgage-backed securities
|
- | 108,256,671 | - | |||||||||
Agency debentures
|
- | 3,970,279 | - | |||||||||
Investment in affiliates
|
267,547 | - | - | |||||||||
Liabilities:
|
||||||||||||
U.S. Treasury Securities sold, not yet purchased
|
611,167 | - | - | |||||||||
Interest rate swaps
|
- | 2,259,173 | - | |||||||||
Other derivative contracts
|
4,812 | - | - | |||||||||
Level 1
|
Level 2
|
Level 3
|
||||||||||
At December 31, 2012
|
(dollars in thousands)
|
|||||||||||
Assets:
|
||||||||||||
U.S. Treasury Securities
|
$ | 752,076 | $ | - | - | |||||||
Agency mortgage-backed securities
|
- | 123,963,207 | - | |||||||||
Agency debentures
|
- | 3,009,568 | - | |||||||||
Investment in affiliates
|
234,120 | - | - | |||||||||
Other derivative contracts
|
7,955 | 1,875 | - | |||||||||
Liabilities:
|
||||||||||||
U.S. Treasury Securities sold, not yet purchased
|
495,437 | - | - | |||||||||
Interest rate swaps
|
- | 2,584,907 | - |
March 31, 2013
|
December 31, 2012
|
||||||||||||||||||
Level in
Fair Value
Hierarchy
|
Carrying
Value
|
Fair Value
|
Carrying
Value
|
Fair Value
|
|||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||
Financial assets:
|
|||||||||||||||||||
Cash and cash equivalents(1)
|
1 | $ | 1,862,550 | $ | 1,862,550 | $ | 615,789 | $ | 615,789 | ||||||||||
Reverse repurchase agreements(1)
|
1 | 4,933,465 | 4,933,465 | 1,811,095 | 1,811,095 | ||||||||||||||
U.S. Treasury Securities(2)
|
1 | 1,645,930 | 1,645,930 | 752,076 | 752,076 | ||||||||||||||
Securities borrowed(2)
|
2 | 2,688,485 | 2,688,485 | 2,160,942 | 2,160,942 | ||||||||||||||
Agency mortgage-backed securities
|
2 | 108,256,671 | 108,256,671 | 123,963,207 | 123,963,207 | ||||||||||||||
Agency debentures
|
2 | 3,970,279 | 3,970,279 | 3,009,568 | 3,009,568 | ||||||||||||||
Investment in affiliates(2)
|
1 | 267,547 | 267,547 | 234,120 | 234,120 | ||||||||||||||
Corporate debt(3)
|
2 | 66,539 | 67,130 | 63,944 | 64,271 | ||||||||||||||
Other derivatives(2)
|
1,2 | - | - | 9,830 | 9,830 | ||||||||||||||
Financial liabilities:
|
|||||||||||||||||||
U.S. Treasury Securities sold, not yet purchased(2)
|
1 | $ | 611,167 | $ | 611,167 | $ | 495,437 | $ | 495,437 | ||||||||||
Repurchase agreements(1)(4)
|
1,2 | 100,322,942 | 100,828,852 | 102,785,697 | 103,332,832 | ||||||||||||||
Securities loaned(2)
|
2 | 2,330,060 | 2,330,060 | 1,808,315 | 1,808,315 | ||||||||||||||
Convertible Senior Notes(2)
|
1 | 824,902 | 909,255 | 825,541 | 899,192 | ||||||||||||||
Interest rate swaps
|
2 | 2,259,173 | 2,259,173 | 2,584,907 | 2,584,907 | ||||||||||||||
Other derivatives(2)
|
1,2 | 4,812 | 4,812 | - | - | ||||||||||||||
(1)
|
Carrying value approximates fair value due to the short-term maturities of these items.
|
(2)
|
Fair value is determined using end of day quoted prices in active markets.
|
(3)
|
The carrying value of the corporate debt is based on amortized cost. Estimates of fair value of corporate debt require the use of significant judgments and inputs including, but not limited to, the enterprise value of the borrower (i.e., an estimate of the total fair value of the borrower's debt and equity), the nature and realizable value of any collateral, the borrower’s ability to make payments when due and its earnings history. Management also considers factors that affect the macro and local economic markets in which the borrower operates.
|
(4)
|
The fair value of repurchase agreements with maturities greater than one year are valued as pay fixed versus receive floating interest rate swaps.
|
March 31, 2013
|
December 31, 2012
|
|||||||||||||||
Repurchase
Agreements
|
Weighted Average
Rate
|
Repurchase
Agreements
|
Weighted Average
Rate
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
1 day
|
$ | 6,664,087 | 0.32 | % | $ | - | - | |||||||||
2 to 29 days
|
26,451,593 | 0.46 | % | 33,191,448 | 0.50 | % | ||||||||||
30 to 59 days
|
13,129,666 | 0.44 | % | 28,383,851 | 0.45 | % | ||||||||||
60 to 89 days
|
8,705,572 | 0.36 | % | 8,602,680 | 0.42 | % | ||||||||||
90 to 119 days
|
11,103,023 | 0.47 | % | 4,804,671 | 0.57 | % | ||||||||||
Over 120 days
|
34,269,001 | 0.91 | % | 27,803,047 | 1.03 | % | ||||||||||
Total
|
$ | 100,322,942 | 0.59 | % | $ | 102,785,697 | 0.63 | % |
March 31, 2013
|
December 31, 2012
|
|||||||||||||||
Reverse
Repurchase
Agreements
|
Repurchase
Agreements
|
Reverse
Repurchase
Agreements
|
Repurchase
Agreements
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Gross Amounts
|
$ | 7,041,379 | $ | 102,430,856 | $ | 3,650,053 | $ | 104,624,655 | ||||||||
Amounts Offset
|
(2,107,914 | ) | (2,107,914 | ) | (1,838,958 | ) | (1,838,958 | ) | ||||||||
Netted Amounts
|
$ | 4,933,465 | $ | 100,322,942 | $ | 1,811,095 | $ | 102,785,697 |
March 31, 2013
|
||||||||||||||||
Interest Rate Swaps - Asset
|
Interest Rate Swaps - Liability
|
|||||||||||||||
Notional
|
Unrealized
Gains
|
Notional
|
Unrealized
Losses
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Gross Amounts
|
$ | 1,910,000 | $ | 46,612 | $ | 46,312,800 | $ | 2,305,785 | ||||||||
Amounts Offset
|
(1,910,000 | ) | (46,612 | ) | 1,910,000 | (46,612 | ) | |||||||||
Netted Amounts
|
- | - | $ | 48,222,800 | $ | 2,259,173 | ||||||||||
December 31, 2012
|
||||||||||||||||
Interest Rate Swaps - Asset
|
Interest Rate Swaps - Liability
|
|||||||||||||||
Notional
|
Unrealized
Gains
|
Notional
|
Unrealized
Losses
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Gross Amounts
|
$ | 1,100,000 | $ | 26,020 | $ | 45,811,800 | $ | 2,610,927 | ||||||||
Amounts Offset
|
(1,100,000 | ) | (26,020 | ) | 1,100,000 | (26,020 | ) | |||||||||
Netted Amounts
|
- | - | $ | 46,911,800 | $ | 2,584,907 |
Location on Consolidated Statements of Operations and Comprehensive Income (Loss)
|
||||||||||||
Realized Gains
(Losses) on
Interest Rate Swaps(1)
|
Realized Gains (Losses)
on Termination of
Interest Rate Swaps
|
Unrealized Gains
(Losses) on Interest
Rate Swaps
|
||||||||||
(dollars in thousands)
|
||||||||||||
For the Quarter Ended March 31, 2013
|
$ | (225,476 | ) | $ | (16,378 | ) | $ | 325,734 | ||||
For the Quarter Ended March 31, 2012
|
$ | (219,340 | ) | $ | (2,385 | ) | $ | 341,639 |
For the Quarter Ended
|
||||||||
March 31, 2013
|
March 31, 2012
|
|||||||
Net income (loss)
|
$ | 870,278 | $ | 901,806 | ||||
Less: Preferred stock dividends
|
17,992 | 3,938 | ||||||
Net income (loss) available to common shareholders, prior to
adjustment for dilutive potential common shares, if necessary
|
852,286 | 897,868 | ||||||
Add: Interest on Convertible Senior Notes, if dilutive
|
10,450 | 6,000 | ||||||
Net income (loss) available to common shareholders, as adjusted
|
$ | 862,736 | $ | 903,868 | ||||
Weighted average shares of common stock outstanding-basic
|
947,250 | 971,728 | ||||||
Add: Effect of dilutive stock options and Convertible Senior Notes, if dilutive
|
47,565 | 38,861 | ||||||
Weighted average shares of common stock outstanding-diluted
|
994,815 | 1,010,589 |
|
For the Quarter Ended
|
|||||||||||||||
March 31, 2013
|
March 31, 2012
|
|||||||||||||||
Number of
Shares
|
Weighted
Average
Exercise Price
|
Number of
Shares
|
Weighted
Average
Exercise Price
|
|||||||||||||
Options outstanding at the beginning of period
|
5,618,686 | $ | 15.74 | 6,216,805 | $ | 15.57 | ||||||||||
Granted
|
- | - | - | - | ||||||||||||
Exercised
|
(20,000 | ) | 13.25 | (126,394 | ) | 14.57 | ||||||||||
Forfeited
|
(943,975 | ) | 16.57 | - | - | |||||||||||
Expired
|
- | - | - | - | ||||||||||||
Options outstanding at the end of period
|
4,654,711 | $ | 15.58 | 6,090,411 | $ | 15.59 | ||||||||||
Options exercisable at the end of the period
|
4,049,149 | $ | 15.93 | 4,325,299 | $ | 16.22 |
Year Ending December
|
Lease Commitment
|
Sublease Income
|
Net Amount
|
|||||||||||
(dollars in thousands)
|
||||||||||||||
2013 (remaining)
|
$2,203 | $15 | $2,188 | |||||||||||
2014
|
2,509 | - | 2,509 | |||||||||||
2015
|
159 | - | 159 | |||||||||||
2016
|
26 | - | 26 | |||||||||||
Later years
|
- | - | - | |||||||||||
$4,897 | $15 | $4,882 |
Average
Interest-
Earning
Assets(1)
|
Total
Interest
Income
|
Yield on
Average
Interest-
Earning
Assets
|
Average
Interest-
Bearing
Liabilities
|
Economic
Interest
Expense (2)
|
Cost of Funds
on Average
Interest-
Bearing
Liabilities
|
Economic
Net
Interest
Income(3)
|
Net Interest
Rate
Spread
|
|||||||||||||||||||||||||
(ratios for the quarters have been annualized, dollars in thousands)
|
||||||||||||||||||||||||||||||||
Quarter Ended March 31, 2013
|
$ | 124,414,754 | $ | 737,217 | 2.37 | % | $ | 110,722,615 | $ | 403,066 | 1.46 | % | $ | 334,151 | 0.91 | % | ||||||||||||||||
Year Ended December 31, 2012
|
$ | 116,356,100 | $ | 3,259,145 | 2.80 | % | $ | 103,362,717 | $ | 1,560,941 | 1.51 | % | $ | 1,698,204 | 1.29 | % | ||||||||||||||||
Quarter Ended December 31, 2012
|
$ | 123,378,860 | $ | 756,661 | 2.45 | % | $ | 110,257,173 | $ | 413,646 | 1.50 | % | $ | 343,015 | 0.95 | % | ||||||||||||||||
Quarter Ended September 30, 2012
|
$ | 119,880,120 | $ | 761,265 | 2.54 | % | $ | 106,973,056 | $ | 406,165 | 1.52 | % | $ | 355,100 | 1.02 | % | ||||||||||||||||
Quarter Ended June 30, 2012
|
$ | 116,458,864 | $ | 886,324 | 3.04 | % | $ | 103,668,465 | $ | 388,445 | 1.50 | % | $ | 497,879 | 1.54 | % | ||||||||||||||||
Quarter Ended March 31, 2012
|
$ | 105,706,554 | $ | 854,895 | 3.23 | % | $ | 92,552,175 | $ | 352,685 | 1.52 | % | $ | 502,210 | 1.71 | % | ||||||||||||||||
(1)
|
Does not reflect unrealized gains/ (losses) or premium/ (discount).
|
(2)
|
Economic interest expense includes interest expense on interest rate swaps.
|
(3)
|
Economic net interest income includes interest expense on interest rate swaps.
|
Quarter Ended
|
CPR
|
March 31, 2013
|
18%
|
December 31, 2012
|
19%
|
September 30, 2012
|
20%
|
June 30, 2012
|
19%
|
March 31, 2012
|
19%
|
GAAP
Interest
Expense
|
Add: Realized
Losses on
Interest Rate
Swaps
|
Economic
Interest
Expense
|
GAAP Net
Interest
Income
|
Less: Realized
Losses on
Interest Rate
Swaps
|
Economic Net
Interest
Income
|
|||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
For the Quarter Ended March 31, 2013
|
$ | 177,590 | $ | 225,476 | $ | 403,066 | $ | 559,627 | $ | 225,476 | $ | 334,151 | ||||||||||||
For the Year Ended December 31, 2012
|
$ | 667,172 | $ | 893,769 | $ | 1,560,941 | $ | 2,591,973 | $ | 893,769 | $ | 1,698,204 | ||||||||||||
For the Quarter Ended December 31, 2012
|
$ | 185,491 | $ | 228,155 | $ | 413,646 | $ | 571,170 | $ | 228,155 | $ | 343,015 | ||||||||||||
For the Quarter Ended September 30, 2012
|
$ | 181,893 | $ | 224,272 | $ | 406,165 | $ | 579,372 | $ | 224,272 | $ | 355,100 | ||||||||||||
For the Quarter Ended June 30, 2012
|
$ | 166,443 | $ | 222,002 | $ | 388,445 | $ | 719,881 | $ | 222,002 | $ | 497,879 | ||||||||||||
For the Quarter Ended March 31, 2012
|
$ | 133,345 | $ | 219,340 | $ | 352,685 | $ | 721,550 | $ | 219,340 | $ | 502,210 |
Country
|
Number of
Counterparties
|
Repurchase
Agreement Financing
|
Interest Rate Swaps at
Fair Value
|
Exposure(1)
|
Exposure as a
Percentage of
Total Assets
|
|||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
France
|
4 | $ | 4,775,443 | $ | (161,669 | ) | $ | 276,545 | 0.22 | % | ||||||||||
Germany
|
1 | 2,726,602 | (299,010 | ) | 175,997 | 0.14 | % | |||||||||||||
Netherlands
|
2 | 4,754,675 | (23,762 | ) | 299,414 | 0.24 | % | |||||||||||||
Scotland
|
1 | 1,244,381 | - | 76,836 | 0.06 | % | ||||||||||||||
Switzerland
|
2 | 4,598,962 | (343,400 | ) | 351,954 | 0.28 | % | |||||||||||||
England
|
2 | 12,713,538 | (113,197 | ) | 611,734 | 0.49 | % | |||||||||||||
Total
|
12 | $ | 30,813,601 | $ | (941,038 | ) | $ | 1,792,480 | 1.43 | % |
(1)
|
Represents the amount of cash and/or securities pledged as collateral to each counterparty less the aggregate of repurchase agreement financing and unrealized loss on interest rate swaps for each counterparty.
|
For the Quarters Ended March 31,
|
||||||||
2013
|
2012
|
|||||||
Interest income:
|
||||||||
Investments
|
$ | 728,609 | $ | 850,959 | ||||
U.S. Treasury Securities
|
5,996 | 1,418 | ||||||
Securities loaned
|
2,612 | 2,518 | ||||||
Total interest income
|
737,217 | 854,895 | ||||||
Interest expense:
|
||||||||
Repurchase agreements
|
157,064 | 113,914 | ||||||
Convertible Senior Notes
|
15,813 | 14,727 | ||||||
U.S. Treasury Securities sold, not yet purchased
|
2,788 | 2,644 | ||||||
Securities borrowed
|
1,925 | 2,060 | ||||||
Total interest expense
|
177,590 | 133,345 | ||||||
Net interest income
|
559,627 | 721,550 | ||||||
Other income (loss):
|
||||||||
Investment advisory and other fee income
|
13,540 | 20,766 | ||||||
Net gains (losses) on disposal of investments
|
182,843 | 80,299 | ||||||
Dividend income from affiliates
|
6,431 | 7,521 | ||||||
Net gains (losses) on trading assets
|
1,549 | 5,256 | ||||||
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities
|
80,127 | 30,877 | ||||||
Subtotal
|
284,490 | 144,719 | ||||||
Realized gains (losses) on interest rate swaps(1)
|
(225,476 | ) | (219,340 | ) | ||||
Realized gains (losses) on termination of interest rate swaps
|
(16,378 | ) | (2,385 | ) | ||||
Unrealized gains (losses) on interest rate swaps
|
325,734 | 341,639 | ||||||
Subtotal
|
83,880 | 119,914 | ||||||
Total other income (loss)
|
368,370 | 264,633 | ||||||
Expenses:
|
||||||||
Compensation expense
|
38,443 | 59,014 | ||||||
Other general and administrative expenses
|
13,469 | 8,901 | ||||||
Total expenses
|
51,912 | 67,915 | ||||||
Income (loss) before income taxes
|
876,085 | 918,268 | ||||||
Income taxes
|
(5,807 | ) | (16,462 | ) | ||||
Net income (loss)
|
870,278 | 901,806 | ||||||
Dividends on preferred stock
|
17,992 | 3,938 | ||||||
Net income (loss) available (related) to common shareholders
|
$ | 852,286 | $ | 897,868 | ||||
Net income (loss) per share available (related) to common shareholders:
|
||||||||
Basic
|
$ | 0.90 | $ | 0.92 | ||||
Diluted
|
$ | 0.87 | $ | 0.89 | ||||
Weighted average number of common shares outstanding:
|
||||||||
Basic
|
947,249,901 | 971,727,701 | ||||||
Diluted
|
994,815,169 | 1,010,588,609 | ||||||
Average total assets
|
$ | 129,477,076 | $ | 114,955,771 | ||||
Average equity
|
$ | 15,615,407 | $ | 15,866,760 | ||||
Return on average total assets
|
2.69 | % | 3.14 | % | ||||
Return on average equity
|
22.29 | % | 22.73 | % |
(1) |
Interest expense related to the Company’s interest rate swaps is recorded in realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income.
|
Average
Interest-
Bearing
Liabilities
|
Interest-
Bearing
Liabilities at
Period End
|
Economic
Interest
Expense(1)
|
Cost of
Funds on
Average
Interest-
Bearing
Liabilities
|
Average
One-
Month
LIBOR
|
Average
Six-
Month
LIBOR
|
Average
One-
Month
LIBOR
Relative
to
Average
Six-
Month
LIBOR
|
Cost of
Funds on
Average
Interest-
Bearing
Liabilities
Relative
to
Average
One-
Month
LIBOR
|
Cost of
Funds on
Average
Interest-
Bearing
Liabilities
Relative
to
Average
Six-
Month
LIBOR
|
||||||||||||||||||||||||||||
For the Quarter Ended
March 31, 2013
|
$ | 110,722,615 | $ | 104,089,071 | $ | 403,066 | 1.46 | % | 0.20 | % | 0.47 | % | (0.27 | %) | 1.26 | % | 0.99 | % | ||||||||||||||||||
For the Year Ended
December 31, 2012
|
$ | 103,362,717 | $ | 105,914,990 | $ | 1,560,941 | 1.51 | % | 0.24 | % | 0.69 | % | (0.45 | %) | 1.27 | % | 0.82 | % | ||||||||||||||||||
For the Quarter Ended
December 31, 2012
|
$ | 110,257,173 | $ | 105,914,990 | $ | 413,646 | 1.50 | % | 0.21 | % | 0.54 | % | (0.33 | %) | 1.29 | % | 0.96 | % | ||||||||||||||||||
For the Quarter Ended
September 30, 2012
|
$ | 106,973,056 | $ | 104,700,613 | $ | 406,165 | 1.52 | % | 0.24 | % | 0.71 | % | (0.47 | %) | 1.28 | % | 0.81 | % | ||||||||||||||||||
For the Quarter Ended
June 30, 2012
|
$ | 103,668,465 | $ | 101,004,741 | $ | 388,445 | 1.50 | % | 0.24 | % | 0.73 | % | (0.49 | %) | 1.26 | % | 0.77 | % | ||||||||||||||||||
For the Quarter Ended
March 31, 2012
|
$ | 92,552,175 | $ | 95,700,039 | $ | 352,685 | 1.52 | % | 0.26 | % | 0.76 | % | (0.50 | %) | 1.26 | % | 0.76 | % |
(1)
|
Economic interest expense includes interest expense on interest rate swaps.
|
Average
Interest
Earning
Assets
|
Total
Interest
Income
|
Yield on
Average
Interest
Earning
Assets
|
Average Interest-
Bearing
Liabilities
|
Economic
Interest
Expense(1)
|
Cost of
Funds on
Average
Interest-
Bearing
Liabilities
|
Economic Net
Interest
Income (1)
|
Net
Interest
Rate
Spread
|
|||||||||||||||||||||||||
For the Quarter Ended
March 31, 2013
|
$ | 124,414,754 | $ | 737,217 | 2.37 | % | $ | 110,722,615 | $ | 403,066 | 1.46 | % | $ | 334,151 | 0.91 | % | ||||||||||||||||
For the Year Ended
December 31, 2012
|
$ | 116,356,100 | $ | 3,259,145 | 2.80 | % | $ | 103,362,717 | $ | 1,560,941 | 1.51 | % | $ | 1,698,204 | 1.29 | % | ||||||||||||||||
For the Quarter Ended
December 31, 2012
|
$ | 123,378,860 | $ | 756,661 | 2.45 | % | $ | 110,257,173 | $ | 413,646 | 1.50 | % | $ | 343,015 | 0.95 | % | ||||||||||||||||
For the Quarter Ended
September 30, 2012
|
$ | 119,880,120 | $ | 761,265 | 2.54 | % | $ | 106,973,056 | $ | 406,165 | 1.52 | % | $ | 355,100 | 1.02 | % | ||||||||||||||||
For the Quarter Ended
June 30, 2012
|
$ | 116,458,864 | $ | 886,324 | 3.04 | % | $ | 103,668,465 | $ | 388,445 | 1.50 | % | $ | 497,879 | 1.54 | % | ||||||||||||||||
For the Quarter Ended
March 31, 2012
|
$ | 105,706,554 | $ | 854,895 | 3.23 | % | $ | 92,552,175 | $ | 352,685 | 1.52 | % | $ | 502,210 | 1.71 | % |
(1)
|
Economic interest expense and economic net interest income include interest expense on interest rate swaps.
|
Total G&A Expenses
|
Total G&A
Expenses/Average Assets
|
Total G&A
Expenses/Average Equity
|
||||||||
For the Quarter Ended March 31, 2013
|
$ | 51,912 | 0.16% | 1.33% | ||||||
For the Year Ended December 31, 2012
|
$ | 235,559 | 0.19% | 1.45% | ||||||
For the Quarter Ended December 31, 2012
|
$ | 40,084 | 0.12% | 0.97% | ||||||
For the Quarter Ended September 30, 2012
|
$ | 63,004 | 0.19% | 1.51% | ||||||
For the Quarter Ended June 30, 2012
|
$ | 64,556 | 0.21% | 1.60% | ||||||
For the Quarter Ended March 31, 2012
|
$ | 67,915 | 0.24% | 1.71% |
Economic
Net
Interest
Income/
Average
Equity(1)
|
Net
Investment
Advisory and
Service
Fees/Average
Equity
|
Realized and
Unrealized
Gains and
Losses/
Average
Equity
|
Dividend
Income
from
Available-
For-Sale
Equity
Securities/
Average
Equity
|
G&A
Expenses/
Average
Equity
|
Income
Taxes/
Average
Equity
|
Return
on
Average
Equity
|
||||||||||||||||||||||
For the Quarter Ended
March 31, 2013
|
8.56 | % | 0.35 | % | 14.70 | % | 0.16 | % | (1.33 | %) | (0.15 | %) | 22.29 | % | ||||||||||||||
For the Year Ended
December 31, 2012
|
10.48 | % | 0.51 | % | 1.22 | % | 0.17 | % | (1.45 | %) | (0.22 | %) | 10.71 | % | ||||||||||||||
For the Quarter Ended
December 31, 2012
|
8.31 | % | 0.46 | % | 8.85 | % | 0.17 | % | (0.97 | %) | 0.15 | % | 16.97 | % | ||||||||||||||
For the Quarter Ended
September 30, 2012
|
8.51 | % | 0.50 | % | (1.95 | %) | 0.17 | % | (1.51 | %) | (0.33 | %) | 5.39 | % | ||||||||||||||
For the Quarter Ended
June 30, 2012
|
12.37 | % | 0.54 | % | (13.44 | %) | 0.16 | % | (1.60 | %) | (0.29 | %) | (2.26 | %) | ||||||||||||||
For the Quarter Ended
March 31, 2012
|
12.66 | % | 0.52 | % | 11.49 | % | 0.19 | % | (1.71 | %) | (0.42 | %) | 22.73 | % |
Principal
Amount
|
Net
Premium
|
Amortized
Cost
|
Amortized
Cost/Principal
Amount
|
Carrying
Value
|
Carrying
Value/
Principal
Amount
|
Weighted
Average
Yield
|
||||||||||||||||||||||
At March 31, 2013
|
$ | 105,018,772 | $ | 5,361,216 | $ | 110,379,988 | 105.11 | % | $ | 112,293,489 | 106.93 | % | 2.72 | % | ||||||||||||||
At December 31, 2012
|
$ | 118,291,085 | $ | 5,828,840 | $ | 124,119,925 | 104.93 | % | $ | 127,036,719 | 107.39 | % | 2.75 | % | ||||||||||||||
At September 30, 2012
|
$ | 123,176,544 | $ | 5,448,108 | $ | 128,624,652 | 104.42 | % | $ | 132,598,180 | 107.65 | % | 2.79 | % | ||||||||||||||
At June 30, 2012
|
$ | 111,975,194 | $ | 4,463,950 | $ | 116,439,144 | 103.99 | % | $ | 119,811,793 | 107.00 | % | 3.17 | % | ||||||||||||||
At March 31, 2012
|
$ | 105,296,991 | $ | 3,815,555 | $ | 109,112,546 | 103.62 | % | $ | 111,841,645 | 106.22 | % | 3.21 | % |
Principal Amount
|
Weighted
Average
Coupon
Rate
|
Weighted
Average Term
to Next
Adjustment
|
Weighted
Average
Lifetime Cap
|
Weighted
Average
Asset
Yield
|
Principal Amount at
Period End as % of
Total Investment
Securities
|
|||||||||||||||||
At March 31, 2013
|
$ | 8,527,853 | 3.19 | % |
35 months
|
7.56 | % | 2.60 | % | 8.12 | % | |||||||||||
At December 31, 2012
|
$ | 8,363,385 | 3.29 | % |
35 months
|
8.21 | % | 2.59 | % | 7.07 | % | |||||||||||
At September 30, 2012
|
$ | 9,285,709 | 3.28 | % |
39 months
|
8.39 | % | 2.59 | % | 7.54 | % | |||||||||||
At June 30, 2012
|
$ | 8,648,932 | 3.67 | % |
38 months
|
9.42 | % | 2.80 | % | 7.72 | % | |||||||||||
At March 31, 2012
|
$ | 9,104,082 | 3.72 | % |
38 months
|
8.80 | % | 2.78 | % | 8.65 | % |
Principal
Amount
|
Weighted Average
Coupon Rate
|
Weighted Average
Asset Yield
|
Principal Amount at Period
End as % of Total
Investment Securities
|
|||||||||||||
At March 31, 2013
|
$ | 96,490,919 | 3.96 | % | 2.73 | % | 91.88 | % | ||||||||
At December 31, 2012
|
$ | 109,927,700 | 4.04 | % | 2.76 | % | 92.93 | % | ||||||||
At September 30, 2012
|
$ | 113,890,835 | 4.17 | % | 2.80 | % | 92.46 | % | ||||||||
At June 30, 2012
|
$ | 103,326,262 | 4.52 | % | 3.20 | % | 92.28 | % | ||||||||
At March 31, 2012
|
$ | 96,192,909 | 4.63 | % | 3.25 | % | 91.35 | % |
One-Month
LIBOR
|
Six-
Month
LIBOR
|
Twelve
Month
LIBOR
|
12-Month
Moving
Average
|
11th
District
Cost of
Funds
|
1-Year
Treasury
Index
|
Other
Indices(1)
|
||||||||||||||||||||||
Weighted Average Term to Next Adjustment
|
1 mo.
|
3 mo.
|
37 mo.
|
3 mo.
|
2 mo.
|
23 mo.
|
44 mo.
|
|||||||||||||||||||||
Weighted Average Annual Period Cap
|
0.17 | % | 1.59 | % | 2.00 | % | 0.00 | % | 0.14 | % | 1.98 | % | 0.00 | % | ||||||||||||||
Weighted Average Lifetime Cap at March 31, 2013
|
6.14 | % | 10.35 | % | 9.94 | % | 9.44 | % | 10.72 | % | 10.82 | % | 4.53 | % | ||||||||||||||
Investment Principal Value as Percentage of
Investment Securities at March 31, 2013
|
0.09 | % | 0.34 | % | 3.53 | % | 0.23 | % | 0.21 | % | 0.22 | % | 3.50 | % |
(1)
|
Combination of indices that account for less than 0.05% of total or adjust over time, without a reset index.
|
One-
Month
LIBOR
|
Six-
Month
LIBOR
|
Twelve
Month
LIBOR
|
12-Month
Moving
Average
|
11th
District
Cost of
Funds
|
1-Year
Treasury
Index
|
Other
Indices(1)
|
||||||||||||||||||||||
Weighted Average Term to Next Adjustment
|
1 mo.
|
5 mo.
|
42 mo.
|
3 mo.
|
3 mo.
|
23 mo.
|
40 mo.
|
|||||||||||||||||||||
Weighted Average Annual Period Cap
|
0.82 | % | 1.70 | % | 2.00 | % | 0.00 | % | 0.17 | % | 1.89 | % | 0.00 | % | ||||||||||||||
Weighted Average Lifetime Cap at December 31, 2012
|
6.10 | % | 11.15 | % | 9.85 | % | 9.44 | % | 10.71 | % | 11.34 | % | 4.82 | % | ||||||||||||||
Investment Principal Value as Percentage of
Investment Securities at December 31, 2012
|
0.10 | % | 0.30 | % | 3.71 | % | 0.21 | % | 0.20 | % | 0.25 | % | 2.30 | % |
(1)
|
Combination of indices that account for less than 0.05% of total or adjust over time, without a reset index.
|
Within One
Year
|
One to Three
Years
|
Three to Five
Years
|
More than
Five Years
|
Total
|
||||||||||||||||
Repurchase agreements
|
$ | 88,916,575 | $ | 4,611,367 | $ | 6,695,000 | $ | 100,000 | $ | 100,322,942 | ||||||||||
Interest expense on repurchase agreements, based on rates at March 31, 2013
|
305,145 | 361,485 | 127,122 | 3,082 | 796,834 | |||||||||||||||
Convertible Senior Notes
|
- | 857,541 | - | - | 857,541 | |||||||||||||||
Interest Expense on Convertible Senior Notes
|
41,802 | 45,951 | - | - | 87,753 | |||||||||||||||
Long-term operating lease obligations
|
2,677 | 2,205 | - | - | 4,882 | |||||||||||||||
Employment contracts
|
40,397 | - | - | - | 40,397 | |||||||||||||||
Total
|
$ | 89,306,596 | $ | 5,878,549 | $ | 6,822,122 | $ | 103,082 | $ | 102,110,349 |
March 31, 2013
|
December 31, 2012
|
September 30, 2012
|
June 30, 2012
|
March 31, 2012
|
||||||||||||||||
Unrealized gain
|
$ | 2,334,373 | $ | 3,092,778 | $ | 4,110,450 | $ | 3,497,635 | $ | 2,892,493 | ||||||||||
Unrealized loss
|
(331,125 | ) | (39,536 | ) | (40,843 | ) | (84,315 | ) | (126,063 | ) | ||||||||||
Net Unrealized gain
|
$ | 2,003,248 | $ | 3,053,242 | $ | 4,069,607 | $ | 3,413,320 | $ | 2,766,430 |
Maturity of Interest Rate Swaps
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||
Maturity
|
Current
Notional
|
Weighted Average
Pay Rate
|
Weighted
Average
Receive Rate
|
Weighted Average
Years to Maturity
|
||||||||||||
0 - 3 years
|
$ | 21,729,950 | 2.08 | % | 0.22 | % | 2.14 | |||||||||
3 - 6 years
|
16,047,600 | 1.60 | % | 0.24 | % | 3.96 | ||||||||||
6 - 10 years
|
6,450,000 | 2.47 | % | 0.25 | % | 7.58 | ||||||||||
Greater than 10 years
|
3,995,250 | 3.39 | % | 0.23 | % | 19.27 | ||||||||||
Total / Weighted Average
|
$ | 48,222,800 | 2.08 | % | 0.23 | % | 4.89 |
●
|
Limit the initial margin and premiums required to establish its commodity interest positions to no more than five percent of the fair market value of the mortgage real estate investment trust’s total assets;
|
●
|
Limit the net income derived annually from its commodity interest positions that are not qualifying hedging transactions to less than five percent of the mortgage real estate investment trust’s gross income;
|
●
|
Ensure that interests in the mortgage real estate investment trust are not marketed to the public as or in a commodity pool or otherwise as or in a vehicle for trading in the commodity futures, commodity options, or swaps markets; and
|
●
|
Either:
|
o
|
identify itself as a “mortgage REIT” in Item G of its last U.S. income tax return on Form 1120-REIT; or
|
o
|
if it has not yet filed its first U.S. income tax return on Form 1120-REIT, it must disclosee to its shareholders that it intends to identify itself as a “mortgage REIT” in its first U.S. income tax return on Form 1120-REIT.
|
Change in Interest Rate
|
Projected Percentage Change in
Economic Net Interest Income(1)
|
Projected Percentage Change in
Portfolio Value, with Effect of
Interest Rate Swaps
|
-75 Basis Points
|
(8.40%)
|
0.62%
|
-50 Basis Points
|
(8.81%)
|
0.34%
|
-25 Basis Points
|
(7.04%)
|
0.14%
|
Base Interest Rate
|
-
|
-
|
+25 Basis Points
|
11.66%
|
(0.22%)
|
+50 Basis Points
|
16.91%
|
(0.57%)
|
+75 Basis Points
|
20.79%
|
(1.06%)
|
(1)
|
Economic net interest income includes interest expense on interest rate swaps.
|
Within 3
Months
|
4 to 12 Months
|
More than 1 Year
to 3 Years
|
3 Years and
Over
|
Total
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||
Rate Sensitive Assets:
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 1,862,550 | $ | - | $ | - | $ | - | $ | 1,862,550 | ||||||||||
Reverse repurchase agreements
|
4,933,465 | - | - | - | 4,933,465 | |||||||||||||||
U.S. Treasury Securities
|
- | - | - | 1,645,930 | 1,645,930 | |||||||||||||||
Securities borrowed
|
2,688,485 | - | - | - | 2,688,485 | |||||||||||||||
Agency Mortgage-backed securities (principal)
|
758,081 | 1,907,593 | 536,272 | 97,775,921 | 100,977,867 | |||||||||||||||
Agency debentures (principal)
|
- | - | 50,000 | 3,923,923 | 3,973,923 | |||||||||||||||
Corporate debt
|
41,260 | 25,722 | - | - | 66,982 | |||||||||||||||
Total Rate Sensitive Assets
|
10,283,841 | 1,933,315 | 586,272 | 103,345,774 | 116,149,202 | |||||||||||||||
Rate Sensitive Liabilities:
|
||||||||||||||||||||
U.S. Treasury Securities sold, not yet purchased
|
- | - | - | 611,167 | 611,167 | |||||||||||||||
Repurchase agreements, with the effect of interest rate swaps
|
18,181,701 | 25,036,704 | 24,301,877 | 32,802,660 | 100,322,942 | |||||||||||||||
Securities loaned
|
2,330,060 | - | - | - | 2,330,060 | |||||||||||||||
Convertible Senior Notes (principal)
|
- | - | 857,541 | - | 857,541 | |||||||||||||||
Total Rate Sensitive Liabilities
|
20,511,761 | 25,036,704 | 25,159,418 | 33,413,827 | 104,121,710 | |||||||||||||||
Interest rate sensitivity gap
|
$ | (10,227,920 | ) | $ | (23,103,389 | ) | $ | (24,573,146 | ) | $ | 69,931,947 | $ | 12,027,492 | |||||||
Cumulative interest rate sensitivity gap
|
$ | (10,227,920 | ) | $ | (33,331,309 | ) | $ | (57,904,455 | ) | $ | 12,027,492 | |||||||||
Cumulative interest rate sensitivity gap as a percentage of total rate-sensitive assets
|
(9 | %) | (29 | %) | (50 | %) | 10 | % |
Exhibit
Number
|
Exhibit Description
|
|
3.1
|
Articles of Amendment and Restatement of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-11 (Registration No. 333-32913) filed with the Securities and Exchange Commission on August 5, 1997).
|
|
3.2
|
Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-3 (Registration Statement 333-74618) filed with the Securities and Exchange Commission on June 12, 2002).
|
|
3.3
|
Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K (filed with the Securities and Exchange Commission on August 3, 2006).
|
|
3.4
|
Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.4 of the Registrant's Quarterly Report on Form 10-Q (filed with the Securities and Exchange Commission on May 7, 2008).
|
|
3.5
|
Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K (filed with the Securities and Exchange Commission on June 23, 2011).
|
|
3.6
|
Form of Articles Supplementary designating the Registrant’s 7.875% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form 8-A filed April 1, 2004).
|
|
3.7
|
Articles Supplementary of the Registrant’s designating an additional 2,750,000 shares of the Company’s 7.875% Series A Cumulative Redeemable Preferred Stock, as filed with the State Department of Assessments and Taxation of Maryland on October 15, 2004 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 4, 2004).
|
3.8
|
Articles Supplementary designating the Registrant’s 6% Series B Cumulative Convertible Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed April 10, 2006).
|
|
3.9
|
Articles Supplementary designating the Registrant’s 7.625% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed May 16, 2012).
|
|
3.10
|
Articles Supplementary designating the Registrant’s 7.50% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed September 13, 2012).
|
|
3.11
|
Amended and Restated Bylaws of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22, 2011).
|
|
4.1
|
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-11 (Registration No. 333-32913) filed with the Securities and Exchange Commission on September 17, 1997).
|
|
4.2
|
Specimen Preferred Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-3 (Registration No. 333-74618) filed with the Securities and Exchange Commission on December 5, 2001).
|
|
4.3
|
Specimen Series A Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant's Registration Statement on Form 8-A filed with the Securities and Exchange Commission on April 1, 2004).
|
|
4.4
|
Specimen Series B Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 10, 2006).
|
|
4.5
|
Specimen Series C Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 16, 2012).
|
|
4.6
|
Specimen Series D Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on September 13, 2012).
|
|
4.7
|
Indenture, dated as of February 12, 2010, between the Registrant and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 12, 2010).
|
|
4.8
|
Supplemental Indenture, dated as of February 12, 2010, between the Registrant and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 12, 2010).
|
|
4.9
|
Form of 4.00% Convertible Senior Note due 2015 (included in Exhibit 4.6).
|
|
4.10
|
Second Supplemental Indenture, dated as of May 14, 2012, between the Registrant and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 14, 2012).
|
|
4.11
|
Form of 5.00% Convertible Senior Note due 2015 (included in Exhibit 4.10).
|
|
31.1
|
Certification of Wellington J. Denahan, Chairman and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Kathryn Fagan, Chief Financial Officer and Treasurer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Wellington J. Denahan, Chairman and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of Kathryn Fagan, Chief Financial Officer and Treasurer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Exhibit 101.INS XBRL
|
Instance Document*
|
|
Exhibit 101.SCH XBRL
|
Taxonomy Extension Schema Document*
|
|
Exhibit 101.CAL XBRL
|
Taxonomy Extension Calculation Linkbase Document*
|
|
Exhibit 101.DEF XBRL
|
Additional Taxonomy Extension Definition Linkbase Document Created*
|
|
Exhibit 101.LAB XBRL
|
Taxonomy Extension Label Linkbase Document*
|
|
Exhibit 101.PRE XBRL
|
Taxonomy Extension Presentation Linkbase Document*
|
ANNALY CAPITAL MANAGEMENT, INC. | ||
Dated: | May 7, 2013 | By: /s/ Wellington J. Denahan |
Wellington J. Denahan | ||
(Chief Executive Officer, and authorized officer of registrant) | ||
Dated: | May 7, 2013 | By: /s/ Kathryn Fagan |
Kathryn Fagan | ||
(Chief Financial Officer and Treasurer and | ||
principal financial and chief accounting officer) |
1.
|
I have reviewed this quarterly report on Form 10-Q of Annaly Capital Management, Inc.;
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Wellington J. Denahan | ||
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Annaly Capital Management, Inc.;
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Kathryn Fagan | ||
Chief Financial Officer and Treasurer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
/s/ Wellington J. Denahan | ||
Wellington J. Denahan | ||
Chairman and Chief Executive Officer | ||
May 7, 2013
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
/s/ Kathryn Fagan | ||
Kathryn Fagan | ||
Chief Financial Officer and Treasurer | ||
May 7, 2013
|
Goodwill - Narrative (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Mar. 31, 2012
|
Mar. 31, 2013
|
Dec. 31, 2012
|
Dec. 31, 2012
Merganser
|
||||
Goodwill [Line Items] | |||||||
Goodwill | $ 55,417 | $ 55,417 | [1] | ||||
Earn out payment | $ 13,387 | $ 13,387 | |||||
|
Income Taxes - Narrative (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Income Taxes: | ||
Income tax expense for income and the portion of earnings retained based on 162(m) limitations | $ 3.9 | $ 14.7 |
Years federal and state tax returns remain open for examination | 2009, 2010 and 2011 | |
Real Estate Investment Trust
|
||
Income Taxes: | ||
Income tax expense for income and the portion of earnings retained based on 162(m) limitations | $ 1.9 | $ 1.8 |
Lease Commitments And Contingencies - Narrative (Detail) (USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Lease Commitments and Contingencies: | ||
Aggregate future net minimum lease payments | $ 4,882,000 | |
Lease expense | $ 632,000 | $ 621,000 |
Derivative Instruments - Effect of Interest Rate Swaps on Consolidated Statements of Comprehensive Income Loss (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|||||||
Effect of Derivatives on Statement of Operations and Comprehensive Income: | ||||||||
Realized gains (losses) on interest rate swaps | $ (225,476) | [1],[2] | $ (219,340) | [1],[2] | ||||
Gain (loss) on termination of interest rate swaps | (16,378) | (2,385) | ||||||
Unrealized gains (losses) on interest rate swaps | $ 325,734 | $ 341,639 | ||||||
|
Organization and Significant Accounting Policies - Narrative (Detail) (USD $)
In Millions, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Schedule Of Significant Accounting Policies [Line Items] | ||
Cash and securities deposited with clearing organizations | $ 377.8 | $ 424.6 |
Interest Rate Swap
|
||
Schedule Of Significant Accounting Policies [Line Items] | ||
Cash on margin with counterparty to interest rate swaps | $ 87.9 | $ 102.9 |
Interest Rate Risk - Narrative (Detail) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Interest Rate Risk: | ||
Derivative instruments, notional amount | $ 48,222,800 | $ 46,911,800 |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Basis of Accounting |
Basis of Accounting
The
accompanying consolidated financial statements and related notes of
the Company have been prepared in accordance with accounting
principles generally accepted in the United States
("U.S. GAAP").
|
Principles of Consolidation |
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, FIDAC, FIDAC FSI, FIDAC Europe, Merganser, RCap, Shannon,
Charlesfort, the Fund and CXS Acquisition. All
intercompany balances and transactions have been eliminated in
consolidation. Cash flows from RCap are reported as operating
activities in the Consolidated Statements of Cash
Flows.
|
Cash and Cash Equivalents |
Cash and Cash Equivalents - Cash and cash equivalents
include cash on hand and cash held in money market funds on an
overnight basis. RCap is a member of various clearing
organizations with which it maintains cash required for the conduct
of its day-to-day clearance activities. Cash and securities
deposited with clearing organizations are carried at cost, which
approximates fair value, which was $377.8 million and $424.6
million at March 31, 2013 and December 31, 2012, respectively. The
Company also maintains collateral in the form of cash on margin
with a counterparty to its interest rate swaps of $87.9 million and
$102.9 million at March 31, 2013 and December 31, 2012,
respectively. |
Reverse Repurchase Agreements |
Reverse Repurchase Agreements - RCap enters into reverse
repurchase agreements as part of the Company’s matched book
trading activity. Reverse repurchase agreements are recorded on
trade date at the contract amount and are collateralized by
mortgage-backed or other securities. Margin calls are made by the
Company as necessary based on the daily valuation of the underlying
collateral as compared to the contract price. The Company generates
income from the spread between what is earned on the reverse
repurchase agreements and what is paid on the matched repurchase
agreements. The Company’s policy is to obtain possession of
collateral with a market value in excess of the principal amount
loaned under reverse repurchase agreements. To ensure that the
market value of the underlying collateral remains sufficient,
collateral is valued daily, and the Company will require
counterparties to deposit additional collateral, when
necessary. All reverse repurchase activities are
transacted under master repurchase agreements that give the Company
the right, in the event of default, to liquidate collateral held
and to offset receivables and payables with the same
counterparty. |
Securities borrowed and loaned transactions |
Securities borrowed and loaned transactions – RCap
records securities borrowed and loaned transactions as
collateralized financings. Securities borrowed
transactions require RCap to provide the counterparty with
collateral in the form of cash, or other securities. RCap receives
collateral in the form of cash or other securities for securities
loaned transactions in an amount generally in excess of the fair
value of the securities loaned. RCap monitors the fair value
of the securities borrowed and loaned on a daily basis, with
additional collateral obtained or refunded as necessary.
Securities borrowed and securities loaned transactions are recorded
at contract value. For these transactions, the rebates
accrued by the Company are recorded as interest income or
expense. |
U.S. Treasury Securities |
U.S. Treasury Securities – RCap trades in U.S.
Treasury securities for its proprietary portfolio, which consists
of long and short positions on U.S Treasury notes and bonds. U.S.
Treasury securities are classified as trading investments and are
recorded on the trade date at cost. Changes in fair value are
reflected in the Company’s Consolidated Statement of
Operations and Comprehensive Income (Loss). Generally
the Company does not hold the U.S. Treasury notes and bonds to
maturity and realizes gains and losses from trading those
positions. Interest income or expense on U.S. Treasury notes and
bonds is accrued based on the outstanding principal amount of those
investments and their stated terms. |
Agency Mortgage-Backed Securities and Agency Debentures |
Agency Mortgage-Backed Securities and Agency Debentures
– The Company invests primarily in mortgage pass-through
certificates, collateralized mortgage obligations and other
mortgage-backed securities representing interests in or obligations
backed by pools of mortgage loans, and certificates guaranteed by
Ginnie Mae, Freddie Mac or Fannie Mae (collectively, “Agency
mortgage-backed securities”). The Company also
invests in Agency debentures issued by Federal Home Loan Bank
(“FHLB”), Freddie Mac, and Fannie Mae. |
Investment Securities |
Investment Securities – Agency mortgage-backed
securities, Agency debentures, and corporate debt are referred to
herein as “Investment Securities.” Although
the Company generally intends to hold most of its Investment
Securities until maturity, it may, from time to time, sell any of
its Investment Securities as part of its overall management of its
portfolio. Investment Securities classified as
available-for-sale are reported at fair values estimated by
management that are compared to independent sources for
reasonableness, with unrealized gains and losses reported as a
component of stockholders’ equity. Investment Securities
transactions are recorded on the trade date. Realized
gains and losses on sales of Investment Securities are determined
using the average cost method. The Company’s investments in
corporate debt are designated as held for investment, and are
carried at their principal balance outstanding plus any premiums or
discounts less allowances for loan losses. No allowance for loan
losses was deemed necessary as of March 31, 2013 and December 31,
2012.
On
April 1, 2011, the Company elected the fair value option for Agency
interest-only mortgage-backed securities acquired on or after such
date. Interest-only
securities and inverse interest-only securities are collectively
referred to as “interest-only securities.” These
Agency interest-only mortgage-backed securities represent the
Company’s right to receive a specified proportion of the
contractual interest flows of specific Agency mortgage-backed
securities. Agency interest-only mortgage-backed securities
acquired on or after April 1, 2011 are measured at fair value
through earnings in the Company’s Consolidated Statements of
Comprehensive Income. The interest-only securities are
included in Agency mortgage-backed securities at fair value on the
accompanying Consolidated Statements of Financial
Condition.
Interest
income from coupon payments is accrued based on the outstanding
principal amount of the Investment Securities and their contractual
terms. Premiums and discounts associated with the
purchase of the Investment Securities are amortized into interest
income over the projected lives of the securities using the
interest method. The Company’s policy for
estimating prepayment speeds for calculating the effective yield is
to evaluate historical performance, consensus prepayment speeds,
and current market conditions. Adjustments are made for
actual prepayment activity.
|
Equity Securities |
Equity Securities – The Company invests in equity
securities that are classified as available-for-sale or
trading. Equity securities classified as
available-for-sale are reported at fair value, based on market
quotes, with unrealized gains and losses reported as a component of
stockholders’ equity. Equity securities classified as trading
are reported at fair value, based on market quotes, with unrealized
gains and losses reported in the Consolidated Statements of
Operations and Comprehensive Income (Loss). Dividends
are recorded in earnings based on the declaration
date. |
Other-Than-Temporary Impairment |
Other-Than-Temporary Impairment – Management evaluates
available-for-sale securities for other-than-temporary impairment
at least quarterly, and more frequently when economic or market
concerns warrant such evaluation. The Company determines
if it (1) has the intent to sell the securities, (2) is more likely
than not that it will be required to sell the securities before
recovery, or (3) does not expect to recover the entire amortized
cost basis of the securities. Further, the security is
analyzed for credit loss (the difference between the present value
of cash flows expected to be collected and the amortized cost
basis). The credit loss, if any, will then be recognized
in the Consolidated Statements of Operations and Comprehensive
Income (Loss), while the balance of losses related to other factors
will be recognized as a component of stockholders’
equity. There was no other-than-temporary impairment for
the quarters ended March 31, 2013 and 2012. |
Derivative Instruments |
Derivative Instruments –
The Company accounts for interest rate swaps at fair value as
either assets or liabilities on the Consolidated Statements of
Financial Condition. Changes in the fair value of
interest rate swaps are recognized in earnings. The
Company uses interest rate swaps to manage its exposure to changing
interest rates on its repurchase agreements. Net payments on
interest rate swaps are included in the Consolidated Statements of
Cash Flows as a component of operating activities.
The
Company elected to net, by counterparty, the fair value of interest
rate swap contracts. These contracts contain legally
enforceable provisions that allow for netting or setting off swap
receivables and payables with each counterparty and, therefore, the
fair value of those swap contracts are netted by counterparty.
The credit support annex provisions of the Company’s
interest rate swap contracts allow the parties to mitigate their
credit risk by requiring the party which is out of the money to
post collateral. As the Company elects to net by counterparty the
fair value of interest rate swap contracts, it also nets by
counterparty any collateral exchanged as part of the interest rate
swap contracts. Substantially all collateral is non-cash
collateral under these contracts. In addition, the
Company’s agreements with certain of its counterparties with
whom it has both interest rate swap contracts and master repurchase
agreements contain legally enforceable provisions that allow for
netting or setting off on an aggregate basis all receivables,
payables and collateral postings required under both the interest
rate swap contract and the master repurchase agreement with respect
to each such counterparty.
The
Company may from time to time also use a variety of derivative
instruments to economically hedge some of its exposure to market
risks, including interest rate and prepayment risk. Any such
hedging transactions could take a variety of forms, including the
use of derivative instruments such as interest rate swap
agreements, interest rate swaptions or forward contracts. The
Company may also purchase or sell To-Be-Announced
(“TBA”) securities, purchase or write put or call
options on TBA securities or invest in other types of mortgage
derivative securities.
RCap enters primarily into U.S. Treasury, Eurodollar, federal
funds, U.S. equity index and currency futures and options
contracts. RCap maintains a margin account which is settled daily
with futures and options commission merchants. Changes in the
unrealized gains or losses on the futures and options contracts as
well as any foreign exchange gains and losses are reflected in the
Company’s Consolidated Statements of Operations and
Comprehensive Income (Loss). Unrealized gains (losses) are
excluded from net income (loss) in arriving at cash flows from
operating activities in the Consolidated Statements of Cash
Flows.
|
Credit Risk |
Credit Risk – The Company has limited its exposure to
credit losses on its portfolio of Agency mortgage-backed securities
by only purchasing securities issued by Freddie Mac, Fannie Mae or
Ginnie Mae and Agency debentures issued by the FHLB, Freddie Mac
and Fannie Mae. The payment of principal and interest on
the Freddie Mac and Fannie Mae Agency mortgage-backed securities
are guaranteed by those respective agencies, and the payment of
principal and interest on Ginnie Mae Agency mortgage-backed
securities are backed by the full faith and credit of the U.S.
government. Principal and interest on Agency debentures
are guaranteed by the agency issuing the
debenture. Substantially all of the Company’s
Investment Securities have an actual or implied “AAA”
rating. The Company faces credit risk on the portions of
its portfolio which are not Agency mortgage-backed securities and
Agency debentures. The Company will have credit risk on
commercial loans and securities. |
Market Risk |
Market Risk - Weakness in the mortgage market may adversely
affect the performance and market value of the Company’s
investments. This could negatively impact the
Company’s net book value. Furthermore, if many of the
Company’s lenders are unwilling or unable to provide
additional financing, the Company could be forced to sell
its Investment Securities at an inopportune time when
prices are depressed. The Company does not anticipate having
difficulty converting its assets to cash or extending financing
terms due to the fact that its Agency mortgage-backed securities
and Agency debentures have an actual or implied “AAA”
rating and principal payment is guaranteed by Freddie Mac, Fannie
Mae, or Ginnie Mae. |
Counterparty Credit Risk |
Counterparty Credit Risk – The Company is exposed to
risk of loss if an issuer or a counterparty fails to perform its
obligations under contractual terms.
The
Company has established policies and procedures for mitigating
credit risk, including reviewing and establishing limits for credit
exposure, limiting transactions with specific counterparties,
maintaining qualifying collateral and continually assessing the
creditworthiness of counterparties.
|
Repurchase Agreements |
Repurchase Agreements - The Company finances the acquisition
of a significant portion of its Agency mortgage-backed securities
with repurchase agreements. The Company examines each of the
specified criteria in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) 860, Transfers and
Servicing, at the inception of each transaction and has
determined that each of the financings meet the specified criteria
in this guidance. None of the Company’s repurchase agreements
are accounted for as components of linked transactions. As a
result, the Company separately accounts for the financial assets
and related repurchase financings in the accompanying consolidated
financial statements.
Reverse
repurchase agreements and repurchase agreements with the same
counterparty and the same maturity are presented net in the
Consolidated Statements of Financial Condition when the terms of
the agreements permit netting. The Company reports cash flows on
repurchase agreements as financing activities in the Consolidated
Statements of Cash Flows. The Company reports cash flows on
repurchase agreements entered into by RCap and Shannon as operating
activities in the Consolidated Statements of Cash
Flows.
|
Convertible Senior Notes |
Convertible Senior Notes
– The
Company records the 4% Convertible Senior Notes and 5% Convertible
Senior Notes (collectively, the “Convertible Senior
Notes”) at their contractual amounts, adjusted by the effects
of a beneficial conversion feature and a contingent beneficial
conversion feature (collectively, the “Conversion
Features”). This Conversion Features’
intrinsic value is included in “Additional paid-in
capital” on the Company’s Consolidated Statements of
Financial Condition and reduces the recorded liability amount
associated with the Convertible Senior Notes.
The
Convertible Senior Notes have a conversion price adjustment feature
that is evaluated at the time of the conversion price
adjustment. A contingent beneficial conversion feature
may be recognized as a result of adjustments to the conversion
price for dividends declared. The Company determined the
intrinsic value of a contingent beneficial conversion feature on
its 4% Convertible Senior Notes.
|
Income Taxes |
Income Taxes - The Company has elected to be taxed as a REIT
and intends to comply with the provisions of the Code, with respect
thereto. Accordingly, the Company will not be subjected
to federal income tax to the extent of its distributions to
shareholders and as long as certain asset, income and stock
ownership tests are met. The Company and its direct and
indirect subsidiaries, FIDAC, Merganser and RCap, have made
separate joint elections to treat these subsidiaries as taxable
REIT subsidiaries. As such, each of the taxable REIT
subsidiaries are taxable as a domestic C corporation and subject to
federal, state and local income taxes based upon their
taxable income. FIDAC
Europe was located in Europe and was not required to pay United
States income taxes. FIDAC Europe was sold by the
Company in December 2012.
The
provisions of FASB ASC 740, Income Taxes, clarify
the accounting for uncertainty in income taxes recognized in
financial statements and prescribe a recognition threshold and
measurement attribute for tax positions taken or expected to be
taken on a tax return. ASC 740 also requires that interest and
penalties related to unrecognized tax benefits be recognized in the
financial statements. The Company does not have any unrecognized
tax benefits that would affect its financial
position. Thus, no accruals for penalties and interest
were necessary as of March 31, 2013.
|
Goodwill and Intangible Assets |
Goodwill and Intangible Assets - The Company’s
acquisitions of FIDAC and Merganser and FIDAC Europe’s
acquisition of certain assets were accounted for using the
acquisition method. Under the acquisition method, net
assets and results of operations of acquired companies are included
in the consolidated financial statements from the date of
acquisition. The costs of FIDAC and Merganser were allocated to the
assets acquired, including identifiable intangible assets and the
liabilities assumed based on their estimated fair values at the
date of acquisition. The excess of purchase price over the fair
value of the net assets acquired was recognized as
goodwill. In addition, FIDAC Europe acquired a customer
relationship after its formation. Goodwill and intangible assets
are periodically (but not less frequently than annually) reviewed
for potential impairment. Intangible assets with an
estimated useful life are amortized over the expected
life. During
the quarters ended March 31, 2013 and 2012, there were no
impairment losses recognized related to goodwill and intangible
assets. |
Stock Based Compensation |
Stock Based Compensation - The Company is required to
measure and recognize in the consolidated financial statements the
compensation cost relating to share-based payment transactions. The
Company recognizes compensation expense on a straight-line basis
over the requisite service period for the entire
award. |
Use of Estimates |
Use of Estimates - The preparation of the consolidated
financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. All assets classified as trading
or available-for-sale and interest rate swaps are reported at their
estimated fair value, based on market prices. The
Company’s policy is to obtain fair values from one or more
independent sources to compare to internal prices for
reasonableness. Actual results could differ from those
estimates. |
Balance Sheet (ASC 210) |
Balance Sheet (ASC 210)
On
December 23, 2011, FASB released ASU 2011-11 Balance Sheet: Disclosures
about Offsetting Assets and Liabilities. Under
this update, the Company will be required to disclose both gross
information and net information about both instruments and
transactions eligible for offset in the statement of financial
position and transactions subject to an agreement similar to a
master netting arrangement. The scope would include
derivatives, sale and repurchase agreements and reverse sale and
repurchase agreements and securities borrowing and securities
lending arrangements. This disclosure is intended
to enable financial statement users to understand the effect of
such arrangements on the Company’s financial
position. In January 2013, FASB released ASU 2013-01
Balance Sheet:
Clarifying the Scope of Disclosures about Offsetting Assets and
Liabilities, which served solely to clarify the scope of
financial instruments included in ASU 2011-11 as there was concern
about diversity in practice. The objective of these
updates is to support further convergence of US GAAP and IFRS
requirements. The updates are effective for annual
reporting periods beginning on or after January 1, 2013 and did not
have a significant impact on the consolidated financial
statements.
|
Comprehensive Income (ASC 220) |
Comprehensive Income (ASC 220)
On
December 23, 2011, the FASB issued ASU 2011-12, Comprehensive Income:
Deferral of Effective Date for Amendments to the Presentation of
Reclassifications of Items Out of Accumulated Other Comprehensive
Income In ASU No. 2011-05, which defers those changes in ASU
2011-05 that relate to the presentation of reclassification
adjustments out of accumulated OCI. This was done to
allow the FASB time to re-deliberate the presentation on the face
of the financial statements the effects of reclassifications out of
accumulated OCI on the components of net income and
OCI. No other requirements under ASU 2011-05 are
affected by ASU 2011-12. FASB tentatively decided not to
require presentation of reclassification adjustments out of
accumulated other comprehensive income on the face of the financial
statements and to propose new disclosures instead.
In
February 2013, the FASB issued ASU 2013-02 Comprehensive Income:
Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income. This update addresses the
disclosure issue left open at the deferral under ASU
2011-12. This update requires the provision of
information about the amounts reclassified out of accumulated OCI
by component. In addition, it requires presentation, either on the
face of the statement where net income is presented or in the
notes, significant amounts reclassified out of accumulated OCI by
the respective line items of net income but only if the amount
reclassified is required under U.S. GAAP to be reclassified to net
income in its entirety in the same reporting period. For other
amounts that are not required under U.S. GAAP to be reclassified in
their entirety to net income, a cross-reference must be provided to
other disclosures required under U.S. GAAP that provide additional
detail about those amounts. This update is effective for
reporting periods beginning after December 15,
2012. Adoption of ASU 2013-02 did not have a significant
impact on the consolidated financial statements.
|
Financial Services - Investment Companies (ASC 946) |
Financial Services – Investment Companies (ASC
946)
In
October 2011, the FASB issued a proposed ASU 2011-20, Financial Services-Investment
Companies: Amendments to the Scope, Measurement, and Disclosure
Requirements, which would amend the criteria in ASC 946 for
determining whether an entity qualifies as an investment
company. As proposed, this ASU would affect the
measurement, presentation and disclosure requirements for
Investment Companies, as defined, amend the investment company
definition in ASC 946, and remove the current exemption for Real
Estate Investment Trusts from this topic. If promulgated
in its current form, this proposal may result in a material
modification to the presentation of the Company’s
consolidated financial statements.
On
December 12, 2012, the FASB agreed that the accounting for real
estate investments should be considered in a second phase of the
Investment Companies project and that all REITs should be exempted
from conclusions reached in phase I of the project. The
FASB has not yet agreed on the scope of phase II of the
project.
The
Company is monitoring developments related to this proposal and is
evaluating the effects it would have on the Company’s
consolidated financial statements.
|
Net Income Per Common Share (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Net Income Per Common Share: | ||
Net income (loss) | $ 870,278 | $ 901,806 |
Less: Preferred stock dividends | 17,992 | 3,938 |
Net income (loss) available to common shareholders, prior to adjustment for dilutive potential common shares, if necessary | 852,286 | 897,868 |
Add: Interest on Convertible Senior Notes, if dilutive | 10,450 | 6,000 |
Net income (loss) available to common shareholders, as adjusted | $ 862,736 | $ 903,868 |
Weighted average shares of common stock outstanding-basic | 947,249,901 | 971,727,701 |
Add: Effect of dilutive stock options and Convertible Senior Notes, if dilutive | 47,565,000 | 38,861,000 |
Weighted average shares of common stock outstanding-diluted | 994,815,169 | 1,010,588,609 |
Repurchase Agreements - Narrative (Detail) (USD $)
|
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2013
|
Dec. 31, 2012
|
||||
Repurchase Agreements: | |||||
Repurchase agreements - outstanding | $ 100,322,942,000 | $ 102,785,697,000 | [1] | ||
Repurchase agreements - weighted average borrowing rates | 1.49% | 1.53% | |||
Repurchase agreements - weighted average remaining maturities (in days) | 198 days | 191 days | |||
Repurchase agreements - collateral held, fair value | 103,100,000,000 | 109,200,000,000 | |||
Repurchase agreements - accrued interest | $ 328,200,000 | $ 363,800,000 | |||
|
Agency Mortgage-Backed Securities - Narrative (Detail) (USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Mortgage-Backed Securities Sold: | ||
Mortgage-Backed securities sold, carrying value | $ 16,300,000,000 | $ 5,100,000,000 |
Mortgage-Backed securities sold, realized gain | 182,800,000 | 80,300,000 |
Interest-only securities
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||
Mortgage-Backed Securities Sold: | ||
Unrealized losses gains net | 64,500,000 | |
Unrealized losses | 86,500,000 | |
Unrealized gains | 21,900,000 | |
Amortized cost | $ 807,100,000 |
Derivative Instruments - Narrative (Detail) (USD $)
In Billions, unless otherwise specified |
Mar. 31, 2013
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Dec. 31, 2012
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Derivative Instruments: | ||
Interest rate swaps - weighted average pay rate, percentage | 2.08% | 2.21% |
Interest rate swaps - weighted average receive rate, percentage | 0.23% | 0.24% |
Derivative instruments with credit-risk-related, net liability position, aggregate fair value | $ 2.3 |
AGENCY MORTGAGE-BACKED SECURITIES
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AGENCY MORTGAGE-BACKED SECURITIES |
2. AGENCY
MORTGAGE-BACKED SECURITIES
The
following tables present the Company’s available-for-sale
Agency mortgage-backed securities portfolio as of March 31, 2013
and December 31, 2012 which were carried at their fair
value:
Actual
maturities of Agency mortgage-backed securities are generally
shorter than stated contractual maturities because actual
maturities of Agency mortgage-backed securities are affected by the
contractual lives of the underlying mortgages, periodic payments
and prepayments of principal. The following table
summarizes the Company’s Agency mortgage-backed securities as
of March 31, 2013 and December 31, 2012, according to their
estimated weighted-average life classifications:
The
weighted-average lives of the Agency mortgage-backed securities at
March 31, 2013 and December 31, 2012 in the table above are based
upon data provided through subscription-based financial information
services, assuming constant principal prepayment rates to the reset
date of each security. The prepayment model considers
current yield, forward yield, steepness of the yield curve, current
mortgage rates, mortgage rate of the outstanding loans, loan age,
margin, volatility, and other factors. The actual
weighted average lives of the Agency mortgage-backed securities
could be longer or shorter than estimated.
The
following table presents the gross unrealized losses and estimated
fair value of the Company’s Agency mortgage-backed securities
by length of time that such securities have been in a continuous
unrealized loss position at March 31, 2013 and December 31,
2012.
The
decline in value of these securities is solely due to market
conditions and not the quality of the
assets. Substantially all of the Agency mortgage-backed
securities are “AAA” rated or carry an implied
“AAA” rating. The investments are not
considered to be other-than-temporarily impaired because the
Company currently has the ability and intent to hold the
investments to maturity or for a period of time sufficient for a
forecasted market price recovery up to or beyond the cost of the
investments, and it is not more likely than not that the Company
will be required to sell the investments before recovery of the
amortized cost bases, which may be maturity. Also, the
Company is guaranteed payment of the principal amount of the
securities by the respective issuing government
agency.
During
the quarter ended March 31, 2013, the Company sold $16.3 billion of
Agency mortgage-backed securities, resulting in a net realized gain
of $182.8 million. During the quarter ended March 31,
2012, the Company sold $5.1 billion of Agency mortgage-backed
securities, resulting in a net realized gain of $80.3 million.
Average cost is used as the basis on which the realized gain or
loss on sale is determined.
Agency
interest-only mortgage-backed securities represent the right to
receive a specified portion of the contractual interest flows of
the underlying unamortized principal balance of specific Agency
mortgage-backed securities. As of March 31, 2013, Agency
interest-only mortgage-backed securities had net unrealized losses
of $64.5 million (consisting of net unrealized losses of $86.5
million included in accumulated deficit and net unrealized gains of
$21.9 million included in other comprehensive income) and an
amortized cost of $807.1 million.
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