DERIVATIVE INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2013

Summarizes Fair Value Information about Derivative Assets Liabilities

The table below summarizes fair value information about our derivative assets and liabilities as of December 31, 2013 and 2012:

Derivatives Instruments	Balance Sheet Location	December 31, 2013		December 31, 2012
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	559,044		$	-
Interest rate swaptions	Other derivative contracts, at fair value		110,361			-
TBA derivatives	Other derivative contracts, at fair value		20,693			1,875
MBS options	Other derivative contracts, at fair value		12,184			-
U.S. Treasury futures	Other derivative contracts, at fair value		3,487			7,955
		$	705,769		$	9,830
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value	$	1,141,828		$	2,584,907
Interest rate swaptions	Other derivative contracts, at fair value		24,662			-
TBA derivatives	Other derivative contracts, at fair value		13,779			-
MBS options	Other derivative contracts, at fair value		16,638			-
U.S. Treasury futures	Other derivative contracts, at fair value		439			-
		$	1,197,346		$	2,584,907

Offsetting of Derivative Assets and Liabilities

The following tables present information about our derivative assets and liabilities that are subject to such provisions and can potentially be offset on our Consolidated Statements of Financial Condition as of December 31, 2013 and 2012, respectively.

December 31, 2013	Gross Amounts		Amounts Eligible for Offset			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	559,044	$	(408,553	)	$	150,491
Interest rate swaptions, at fair value		110,361		(24,662	)		85,699
TBA derivatives, at fair value		20,693		(9,775	)		10,918
MBS options, at fair value		12,184		(3,292	)		8,892
U.S. Treasury futures, at fair value		3,487		(439	)		3,048
Liabilities:
Interest rate swaps, at fair value	$	1,141,828	$	(408,553	)	$	733,275
Interest rate swaptions, at fair value		24,662		(24,662	)		-
TBA derivatives, at fair value		13,779		(9,775	)		4,004
MBS options, at fair value		16,638		(3,292	)		13,346
U.S. Treasury futures, at fair value		439		(439	)		-
December 31, 2012	Gross Amounts		Amounts Eligible for Offset			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	26,020	$	(26,020	)	$	-
TBA derivatives, at fair value		1,875		-			1,875
U.S. Treasury futures, at fair value		7,955		-			7,955
Liabilities:
Interest rate swaps, at fair value	$	2,610,927	$	(26,020	)	$	2,584,907

Schedule of Derivative Instruments in Statement of Operations and Comprehensive Income Loss

The effect of interest rate swaps on the Consolidated Statements of Operations and Comprehensive Income (Loss) is as follows:

	Location on Consolidated Statements of Operations and Comprehensive Income (Loss)
	Realized Gains (Losses) on Interest Rate Swaps			Realized Gains (Losses) on Termination of Interest Rate Swaps			Unrealized Gains (Losses) on Interest Rate Swaps
	(dollars in thousands)
For the Years Ended:
December 31, 2013	$	(908,294	)	$	(101,862	)	$	2,002,200
December 31, 2012	$	(893,769	)	$	(2,385	)	$	(32,219	)
December 31, 2011	$	(882,395	)	$	-		$	(1,815,107	)

Effect of Other Derivative Contracts on the Consolidated Statements of Operations and Comprehensive Income (Loss)

Year Ended December 31, 2013
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	33,728		$	6,630		$	40,358
Net interest rate swaptions	$	(2,697	)	$	(15,467	)	$	(18,164	)
U.S. Treasury futures	$	(38,514	)	$	(2,851	)	$	(41,365	)
							$	(19,171	)

(1) Includes options on TBA securities

Interest Rate Swaps

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s interest rate swaps at December 31, 2013:

Maturity	Current Notional		Weighted Average Pay Rate			Weighted Average Receive Rate			Weighted Average Years to Maturity
(dollars in thousands)
0 - 3 years	$	24,286,000		1.83	%		0.18	%		1.98
3 - 6 years		8,865,410		2.02	%		0.19	%		4.19
6 - 10 years		15,785,500		2.37	%		0.23	%		7.66
Greater than 10 years		3,490,000		3.62	%		0.20	%		19.93
Total / Weighted Average	$	52,426,910		2.14	%		0.20	%		5.26

Interest Rate Swaption

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s interest rate swaptions at December 31, 2013:

	Current Underlying Notional		Weighted Average Underlying Pay Rate			Weighted Average Underlying Receive Rate			Weighted Average Underlying Years to Maturity		Weighted Average Months to Expiration
	(dollars in thousands)
Long	$	5,150,000		3.07	%		3M LIBO	R		10.10		4.26
Short	$	1,000,000		3M LIBO	R		2.83	%		5.96		23.71

TBA Derivatives

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s TBA derivatives as of December 31, 2013:

December 31, 2013
(dollars in thousands)
Purchase and sale contracts for derivative TBAs	Notional			Cost Basis			Market Value			Net Carrying Value
Purchase contracts	$	2,625,000		$	2,733,682		$	2,722,324		$	(11,357	)
Sale contracts		(3,875,000	)		(3,923,213	)		(3,904,941	)		18,271
Net TBA derivatives	$	(1,250,000	)	$	(1,189,531	)	$	(1,182,617	)	$	6,914