Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of derivative instruments and balance sheet location

The following table presents the fair value of the Company’s derivative instruments and their balance sheet location at June 30, 2014 and December 31, 2013:

			June 30, 2014		June 30, 2014			December 31, 2013
Derivative Instrument	Designation	Balance Sheet Location	Notional Amount		Fair Value
(In Thousands)
Linked Transactions	Non-Hedging	Assets	N/A		$	106,859		$	28,181
Non-cleared legacy Swaps (1)	Hedging	Assets	$	450,000	$	2,755		$	4,925
Cleared Swaps (2)	Hedging	Assets	$	—	$	—		$	8,075
Non-cleared legacy Swaps (1)	Hedging	Liabilities	$	927,214	$	(12,856	)	$	(24,437	)
Cleared Swaps (2)	Hedging	Liabilities	$	2,550,000	$	(44,570	)	$	(3,780	)

(1)  Non-cleared legacy Swaps include Swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house.

(2) Cleared Swaps include Swaps executed bilaterally with a counterparty in the over-the-counter market but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties.

Schedule of information about the Non-Agency MBS and repurchase agreements underlying the Linked Transactions

The following tables present certain information about the Non-Agency MBS and repurchase agreements underlying the Company’s Linked Transactions at June 30, 2014 and December 31, 2013:

Linked Transactions at June 30, 2014

Linked Repurchase Agreements					Linked MBS
	Balance		Weighted Average Interest Rate		Non-Agency MBS	Fair Value		Amortized Cost		Par/Current Face		Weighted Average Coupon Rate
Maturity or Repricing
(Dollars in Thousands)					(Dollars in Thousands)
Within 30 days	$	183,790	1.76	%	Total	$	494,047	$	486,220	$	499,034	3.55	%
>30 days to 90 days	203,739		1.54
Total	$	387,529	1.64	%

Linked Transactions at December 31, 2013

Linked Repurchase Agreements					Linked MBS
	Balance		Weighted Average Interest Rate		Non-Agency MBS	Fair Value		Amortized Cost		Par/Current Face		Weighted Average Coupon Rate
Maturity or Repricing
(Dollars in Thousands)					(Dollars in Thousands)
Within 30 days	$	93,835	1.76	%	Total	$	130,790	$	126,497	$	134,430	3.96	%
>30 days to 90 days	8,902		1.44
Total	$	102,737	1.73	%

Schedule of information about the components of the unrealized net gains/(losses) and net interest income from Linked Transactions

The following table presents certain information about the components of the unrealized net gains/(losses) and net interest income from Linked Transactions included in the Company’s consolidated statements of operations for the three and six months ended June 30, 2014 and 2013:

Components of Unrealized Net Gains and Net Interest Income from Linked Transactions	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands)	2014			2013			2014			2013
Interest income attributable to MBS underlying Linked Transactions	$	2,925		$	654		$	4,966		$	1,322
Interest expense attributable to linked repurchase agreement borrowings underlying Linked Transactions	(921		)	(137		)	(1,472		)	(277		)
Change in fair value of Linked Transactions included in earnings	1,772			(812		)	3,533			196
Unrealized net gains/(losses) and net interest income from Linked Transactions	$	3,776		$	(295	)	$	7,027		$	1,241

Schedule of assets pledged as collateral against derivative contracts

The following table presents the assets pledged as collateral against the Company’s Swap contracts at June 30, 2014 and December 31, 2013:

(In Thousands)	June 30, 2014		December 31, 2013
Agency MBS, at fair value	$	75,061	$	73,859
Restricted cash	52,630		37,520
Total assets pledged against Swaps	$	127,691	$	111,379

Schedule of information about Swap activity

The following table presents certain information with respect to the Company’s Swap activity during the three and six months ended June 30, 2014:

(Dollars in Thousands)	Three Months Ended   June 30, 2014			Six Months Ended   June 30, 2014
New Swaps:
Aggregate notional amount	$	200,000		$	400,000
Weighted average fixed-pay rate	1.96		%	1.95		%
Initial maturity date	5 years to 7 years			5 years to 7 years
Number of new Swaps	Two			Four
Swaps amortized/expired:
Aggregate notional amount	$	476,147		$	517,998
Weighted average fixed-pay rate	1.80		%	1.97		%

Schedule of information about swaps

The following table presents information about the Company’s Swaps at June 30, 2014 and December 31, 2013:

	June 30, 2014						December 31, 2013
	Notional Amount		Weighted Average Fixed-Pay Interest Rate		Weighted Average Variable Interest Rate (2)		Notional Amount		Weighted Average Fixed-Pay Interest Rate		Weighted Average Variable Interest Rate (2)
Maturity (1)
(Dollars in Thousands)
Within 30 days	$	6,978	4.07	%	0.20	%	$	17,635	3.90	%	0.21	%
Over 30 days to 3 months	39,344		2.63		0.16		24,216		3.93		0.21
Over 3 months to 6 months	120,722		3.36		0.17		476,147		1.80		0.17
Over 6 months to 12 months	710,170		1.96		0.16		167,043		3.22		0.18
Over 12 months to 24 months	50,000		2.13		0.15		710,171		1.97		0.17
Over 24 months to 36 months	450,000		0.56		0.15		150,000		1.03		0.17
Over 36 months to 48 months	50,000		1.45		0.15		350,000		0.58		0.17
Over 48 months to 60 months	700,000		1.56		0.15		550,000		1.49		0.17
Over 60 months to 72 months	200,000		2.05		0.15		—		—		—
Over 72 months to 84 months	1,500,000		2.24		0.15		1,500,000		2.22		0.17
Over 84 months (3)	100,000		2.75		0.16		100,000		2.75		0.17
Total Swaps	$	3,927,214	1.91	%	0.15	%	$	4,045,212	1.91	%	0.17	%

(1)  Each maturity category reflects contractual amortization and/or maturity of notional amounts.

(2)  Reflects the benchmark variable rate due from the counterparty at the date presented, which rate adjusts monthly or quarterly based on one-month or three-month LIBOR, respectively.

(3) Reflects one Swap with a maturity date of July 2023.

Schedule of interest expense and the weighted average interest rate paid and received on swaps

The following table presents the net impact of the Company’s derivative hedging instruments on its interest expense and the weighted average interest rate paid and received for such Swaps for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended   June 30,						Six Months Ended   June 30,
(Dollars in Thousands)	2014			2013			2014			2013
Interest expense attributable to Swaps	$	18,075		$	12,027		$	35,638		$	24,996
Weighted average Swap rate paid	1.92		%	2.12		%	1.92		%	2.22		%
Weighted average Swap rate received	0.15		%	0.20		%	0.16		%	0.20		%

Schedule of impact of hedging instruments on AOCI

The following table presents the impact of the Company’s derivative hedging instruments on its AOCI for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended   June 30,						Six Months Ended   June 30,
(In Thousands)	2014			2013			2014			2013
AOCI from derivative hedging instruments:
Balance at beginning of period	$	(27,037	)	$	(50,515	)	$	(15,217	)	$	(62,831	)
Unrealized (loss)/gain on Swaps, net	(27,634		)	18,548			(39,901		)	30,864
Reclassification of unrealized loss on de-designated Swaps	—			—			447			—
Balance at end of period	$	(54,671	)	$	(31,967	)	$	(54,671	)	$	(31,967	)