DERIVATIVE INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2014

Summarizes Fair Value Information about Derivative Assets Liabilities

The table below summarizes fair value information about our derivative assets and liabilities as of March 31, 2014 and December 31, 2013:

Derivatives Instruments	Balance Sheet Location	March 31, 2014		December 31, 2013
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	340,890	$	559,044
Interest rate swaptions	Other derivative contracts, at fair value		36,965		110,361
TBA derivatives	Other derivative contracts, at fair value		3,140		20,693
MBS options	Other derivative contracts, at fair value		-		12,184
U.S. Treasury futures	Other derivative contracts, at fair value		-		3,487
		$	380,995	$	705,769
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value	$	1,272,616		1,141,828
Interest rate swaptions	Other derivative contracts, at fair value		-		24,662
TBA derivatives	Other derivative contracts, at fair value		6,045		13,779
MBS options	Other derivative contracts, at fair value		-		16,638
U.S. Treasury futures	Other derivative contracts, at fair value		-		439
		$	1,278,661	$	1,197,346

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 March 31, 2014 and December 31, 2013, respectively.

March 31, 2014	Gross Amounts		Amounts Eligible for Offset			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	340,890	$	(311,264	)	$	29,626
Interest rate swaptions, at fair value		36,965		-			36,965
TBA derivatives, at fair value		3,140		(1,304	)		1,836
Liabilities:
Interest rate swaps, at fair value		1,272,616		(311,264	)		961,352
Interest rate swaptions, at fair value		-		-			-
TBA derivatives, at fair value		6,045		(1,304	)		4,741
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	)		-

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

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

	Location on Consolidated Statements of 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, 2014	$	(260,435	)	$	(6,842	)	$	(348,942	)
March 31, 2013	$	(225,476	)	$	(16,378	)	$	325,734

(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 (Loss).

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

The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:

Three Months Ended March 31, 2014
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)	$	(37,837	)	$	(11,410	)	$	(49,247	)
Net interest rate swaptions	$	(40,943	)	$	(52,917	)	$	(93,860	)
U.S. Treasury futures	$	(5,669	)	$	(3,048	)	$	(8,717	)
							$	(151,824	)

(1) Includes options on TBA securities.

Three Months Ended March 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	$	9,340	$	(1,875	)	$	7,465
Net interest rate swaptions	$	-	$	-		$	-
U.S. Treasury futures	$	12,702	$	(12,458)		$	244
						$	7,709

Interest Rate Swaps

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s interest rate swaps at March 31, 2014 and December 31, 2013:

March 31, 2014
Maturity	Current Notional		Weighted Average Pay Rate			Weighted Average Receive Rate			Weighted Average Years to Maturity
(dollars in thousands)
0 - 3 years	$	24,516,550		1.78	%		0.17	%		1.84
3 - 6 years		8,723,500		2.07	%		0.19	%		4.60
6 - 10 years		17,179,700		2.49	%		0.23	%		7.83
Greater than 10 years		6,290,000		3.66	%		0.18	%		21.09
Total / Weighted Average	$	56,709,750		2.16	%		0.19	%		5.31
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 March 31, 2014 and December 31, 2013:

March 31, 2014	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	$	4,100,000		3.14%	3M LIBOR		10.04		4.70
Short	$	-		-	-		-		-
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 LIBOR		10.10		4.26
Short	$	1,000,000	3M LIBOR		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 March 31, 2014 and December 31, 2013:

March 31, 2014
Purchase and sale contracts for derivative TBAs	Notional			Cost Basis			Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	1,500,000		$	1,569,331		$	1,568,184		$	(1,147	)
Sale contracts		(2,125,000	)		(2,127,773	)		(2,129,531	)		(1,758	)
Net TBA derivatives	$	(625,000	)	$	(558,442	)	$	(561,347	)	$	(2,905	)

December 31, 2013
Purchase and sale contracts for derivative TBAs	Notional			Cost Basis			Market Value			Net Carrying Value
(dollars in thousands)
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