DERIVATIVE INSTRUMENTS (Tables)

12 Months Ended

Dec. 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 December 31, 2014 and 2013:

Derivatives Instruments	Balance Sheet Location	December 31, 2014		December 31, 2013
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	75,225	$	559,044
Interest rate swaptions	Other derivative contracts, at fair value		5,382		110,361
TBA derivatives	Other derivative contracts, at fair value		-		20,693
MBS options	Other derivative contracts, at fair value		-		12,184
Futures contracts	Other derivative contracts, at fair value		117		3,487
		$	80,724	$	705,769
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value		1,608,286		1,141,828
Interest rate swaptions	Other derivative contracts, at fair value		-		24,662
TBA derivatives	Other derivative contracts, at fair value		4,258		13,779
MBS options	Other derivative contracts, at fair value		-		16,638
Futures contracts	Other derivative contracts, at fair value		3,769		439
		$	1,616,313	$	1,197,346

Offsetting of Derivative Assets and Liabilities

The following tables present information about 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, 2014 and 2013, respectively.

December 31, 2014			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	75,225	$	(66,180	)	$	-		$	9,045
Interest rate swaptions, at fair value		5,382		-			-			5,382
TBA derivatives, at fair value		-		-			-			-
MBS options, at fair value		-		-			-			-
Futures contracts, at fair value		117		(117	)		-			-
Liabilities:
Interest rate swaps, at fair value	$	1,608,286	$	(66,180	)	$	(869,302	)	$	672,804
Interest rate swaptions, at fair value		-		-			-			-
TBA derivatives, at fair value		4,258		-			-			4,258
MBS options, at fair value		-		-			-			-
Futures contracts, at fair value		3,769		(117	)		-			3,652
			Amounts Eligible for Offset
December 31, 2013	Gross Amounts		Financial Instruments			Cash Collateral			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
Futures contracts, 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
Futures contracts, 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 Years Ended:
December 31, 2014	$	(825,360	)	$	(779,333	)	$	(948,755	)
December 31, 2013	$	(908,294	)	$	(101,862	)	$	2,002,200
December 31, 2012	$	(893,769	)	$	(2,385	)	$	(32,219	)
(1) Interest expense related to interest rate swaps is recorded in realized gains (losses) on interest rate swaps on the Consolidated Statements of Operations and 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:

Years Ended December 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)	$	(60,091	)	$	(12,763	)	$	(72,854	)
Net interest rate swaptions	$	(121,345	)	$	(20,167	)	$	(141,512	)
U.S. Treasury futures	$	(30,056	)	$	(6,701	)	$	(36,757	)
							$	(251,123	)
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 Swaption

Summary of Certain Characteristics of Derivatives

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

December 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	$	1,750,000	2.88%	3M LIBOR		9.17		3.59
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

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, 2014 and 2013:

December 31, 2014
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate (2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	2,502,505		1.63	%		0.17	%		2.64
3 - 6 years		11,138,000		2.06	%		0.22	%		5.18
6 - 10 years		13,069,200		2.67	%		0.23	%		8.57
Greater than 10 years		4,751,800		3.58	%		0.20	%		19.53
Total / Weighted Average	$	31,461,505		2.49	%		0.22	%		8.38

(1) Notional amount includes $500.0 million in forward starting pay fixed swaps.

(2) Excludes forward starting swaps.

(3) Weighted average fixed rate on forward starting pay fixed swaps was 3.25%.

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

TBA Derivatives

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s TBA derivatives at December 31, 2014 and 2013:

December 31, 2014
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	-		$	-		$	-		$	-
Sale contracts		(375,000	)		(375,430	)		(379,688	)		(4,258	)
Net TBA derivatives	$	(375,000	)	$	(375,430	)	$	(379,688	)	$	(4,258	)
December 31, 2013
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied 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