Stockholders’ Equity

(a) Preferred Stock

Redemption of 8.50% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”)

On May 16, 2013 (the “Redemption Date”), the Company redeemed all 3,840,000 outstanding shares of its Series A Preferred Stock at an aggregate redemption price of approximately $97.0 million, or $25.27153 per share, including all accrued and unpaid dividends to the Redemption Date. The redemption value of the Series A Preferred Stock exceeded its carrying value by $3.9 million, which represents the original offering costs for the Series A Preferred Stock. This amount was included in the determination of net income available to common stock and participating securities from the Redemption Date through the year ended December 31, 2013. In addition, as part of the redemption price on its Series A Preferred Stock, the Company paid a dividend of $0.27153 per share, which reflected accrued and unpaid dividends for the period from April 1, 2013, through and including the Redemption Date.

Issuance of 7.50% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”)

On April 15, 2013, the Company amended its charter through the filing of articles supplementary to its charter to reclassify 8,050,000 shares of the Company’s authorized but unissued common stock as shares of the Company’s Series B Preferred Stock. On April 15, 2013, the Company completed the issuance of 8.0 million shares of its Series B Preferred Stock, with a par value of $0.01 per share and a liquidation preference $25.00 per share, plus accrued and unpaid dividends, in an underwritten public offering. The aggregate net proceeds to the Company from the offering of the Series B Preferred Stock were approximately $193.3 million, after deducting the underwriting discount and related offering expenses. The Company used a portion of such net proceeds to redeem all of its outstanding Series A Preferred Stock (as discussed above), and used the remaining net proceeds of the offering for general corporate purposes, including, without limitation, to acquire additional MBS consistent with its investment policy, and for working capital, which included, among other things, the repayment of its repurchase agreements.

The Company’s Series B Preferred Stock, which is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not authorized or declared) exclusively at the Company’s option commencing on April 15, 2018 (subject to the Company’s right under limited circumstances to redeem the Series B Preferred Stock prior to that date in order to preserve its qualification as a REIT and upon certain specified change in control transactions in which the Company’s common stock and the acquiring or surviving entity common securities would not be listed on the New York Stock Exchange (the “NYSE”), the NYSE MKT or NASDAQ, or any successor exchanges), is entitled to receive a dividend at a rate of 7.50% per year on the $25.00 liquidation preference before the Company’s common stock is paid any dividends and is senior to the Company’s common stock with respect to distributions upon liquidation, dissolution or winding up.

Dividends on the Series B Preferred Stock are payable quarterly in arrears on or about March 31, June 30, September 30 and December 31 of each year. On May 20, 2013, the Company declared the first dividend payable on the Series B Preferred Stock, which was paid on July 1, 2013 to preferred stockholders of record as of June 3, 2013. The amount of such dividend payable was $0.39583 per share, and was paid in respect of the partial period commencing on April 15, 2013, the date of original issue of the Series B Preferred Stock, and ending on, and including, June 30, 2013.

The Series B Preferred Stock generally does not have any voting rights, subject to an exception in the event the Company fails to pay dividends on such stock for six or more quarterly periods (whether or not consecutive). Under such circumstances, the Series B Preferred Stock will be entitled to vote to elect two additional directors to the Company’s Board of Directors (the “Board”), until all unpaid dividends have been paid or declared and set apart for payment. In addition, certain material and adverse changes to the terms of the Series B Preferred Stock cannot be made without the affirmative vote of holders of at least 66 2/3% of the outstanding shares of Series B Preferred Stock.

The following table presents cash dividends declared by the Company on its Series B Preferred Stock from January 1, 2014 through September 30, 2014:



Declaration Date	Record Date	Payment Date	Dividend Per Share
August 25, 2014	September 8, 2014	September 30, 2014	$	0.46875
May 19, 2014	June 10, 2014	June 30, 2014	0.46875
February 14, 2014	February 28, 2014	March 31, 2014	0.46875

(b) Dividends on Common Stock

The following table presents cash dividends declared by the Company on its common stock from January 1, 2014 through September 30, 2014:



Declaration Date (1)	Record Date	Payment Date	Dividend Per Share
September 17, 2014	September 29, 2014	October 31, 2014	$	0.20	(1)
June 13, 2014	June 27, 2014	July 31, 2014	0.20
March 10, 2014	March 28, 2014	April 30, 2014	0.20

(1) At September 30, 2014, the Company had accrued dividends and DERs payable of $74.1 million related to the common stock dividend declared on September 17, 2014.

On August 8, 2013, the Company filed a shelf registration statement on Form S-3 with the SEC under the Securities Act of 1933, as amended (the “1933 Act”), for the purpose of registering additional common stock for sale through its DRSPP. Pursuant to Rule 462(e) of the 1933 Act, this shelf registration statement became effective automatically upon filing with the SEC and, when combined with the unused portion of the Company’s previous DRSPP shelf registration statements, registered an aggregate of 15 million shares of common stock. The Company’s DRSPP is designed to provide existing stockholders and new investors with a convenient and economical way to purchase shares of common stock through the automatic reinvestment of dividends and/or optional cash investments. At September 30, 2014, 8.1 million shares of common stock remained available for issuance pursuant to the DRSPP shelf registration statement.

During the three and nine months ended September 30, 2014, the Company issued 1,185,728 and 3,421,859 shares of common stock through the DRSPP, raising net proceeds of approximately $9.5 million and $26.4 million, respectively. From the inception of the DRSPP in September 2003 through September 30, 2014, the Company issued 29,461,623 shares pursuant to the DRSPP, raising net proceeds of $247.8 million.

(d) Stock Repurchase Program

As previously disclosed, in August 2005, the Company’s Board authorized a stock repurchase program (the “Repurchase Program”), to repurchase up to 4.0 million shares of its outstanding common stock under the Repurchase Program. The Board reaffirmed such authorization in May 2010. In December 2013, the Board increased the number of shares authorized for repurchase to an aggregate of 10.0 million. Such authorization does not have an expiration date and, at present, there is no intention to modify or otherwise rescind such authorization. Subject to applicable securities laws, repurchases of common stock under the Repurchase Program are made at times and in amounts as the Company deems appropriate, (including, in our discretion, through the use of one or more plans adopted under Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”)) using available cash resources. Shares of common stock repurchased by the Company under the Repurchase Program are cancelled and, until reissued by the Company, are deemed to be authorized but unissued shares of the Company’s common stock. The Repurchase Program may be suspended or discontinued by the Company at any time and without prior notice. The Company did not repurchase any shares of its common stock during the nine months ended September 30, 2014. At September 30, 2014, 6,616,355 shares remained authorized for repurchase under the Repurchase Program.

(e) Accumulated Other Comprehensive Income/(Loss)

The following table presents changes in the balances of each component of the Company’s AOCI for the three and nine months ended September 30, 2014:



	Three Months Ended September 30, 2014									Nine Months Ended September 30, 2014
(In Thousands)	Net Unrealized Gain/(Loss) on Available-for-Sale MBS			Net Unrealized Gain/(Loss) on Swaps			Total AOCI			Net Unrealized Gain/(Loss) on Available-for-Sale MBS			Net Unrealized Gain/(Loss) on Swaps			Total AOCI
Balance at the beginning of the period	$	905,704		$	(54,671	)	$	851,033		$	752,912		$	(15,217	)	$	737,695
OCI before reclassifications	(43,410		)	23,500			(19,910		)	116,973			(16,401		)	100,572
Amounts reclassified from AOCI (1)	(13,589		)	—			(13,589		)	(21,180		)	447			(20,733		)
Net OCI during the period (2)	(56,999		)	23,500			(33,499		)	95,793			(15,954		)	79,839
Balance at end of period	$	848,705		$	(31,171	)	$	817,534		$	848,705		$	(31,171	)	$	817,534

The following table presents changes in the balances of each component of the Company’s AOCI for the three and nine months ended September 30, 2013:



	Three Months Ended September 30, 2013									Nine Months Ended September 30, 2013
(In Thousands)	Net Unrealized Gain/(Loss) on Available-for-Sale MBS			Net Unrealized Gain/(Loss) on Swaps			Total AOCI			Net Unrealized Gain/(Loss) on Available-for-Sale MBS			Net Unrealized Gain/(Loss) on Swaps			Total AOCI
Balance at the beginning of the period	$	700,871		$	(31,967	)	$	668,904		$	824,808		$	(62,831	)	$	761,977
OCI before reclassifications	31,850			(19,934		)	11,916			(89,847		)	10,930			(78,917		)
Amounts reclassified from AOCI (1)	(15,158		)	—			(15,158		)	(17,398		)	—			(17,398		)
Net OCI during the period (2)	16,692			(19,934		)	(3,242		)	(107,245		)	10,930			(96,315		)
Balance at end of period	$	717,563		$	(51,901	)	$	665,662		$	717,563		$	(51,901	)	$	665,662

(1) See separate table below for details about these reclassifications.

(2) For further information regarding changes in OCI, see the Company’s consolidated statement of comprehensive income/(loss).

The following table presents information about the significant amounts reclassified out of the Company’s AOCI for the three and nine months ended September 30, 2014:



	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
Details about AOCI Components	Amounts Reclassified from AOCI						Affected Line Item in the Statement Where Net Income is Presented
(In Thousands)
Available-for-sale MBS:
Realized gain on sale of securities	$	(13,589	)	$	(21,180	)	Gain on sales of MBS and U.S. Treasury securities, net
Swaps designated as cash flow hedges:
De-designated Swaps	$	—		$	447		Other, net
Total reclassifications for period	$	(13,589	)	$	(20,733	)

The following table presents information about the significant amounts reclassified out of the Company’s AOCI for the three and nine months ended September 30, 2013:



	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
Details about AOCI Components	Amounts Reclassified from AOCI			Amounts Reclassified from AOCI			Affected Line Item in the Statement Where Net Income is Presented
(In Thousands)
Available-for-sale MBS:
Realized gain on sale of securities	$	(15,158	)	$	(17,398	)	Gain on sales of MBS and U.S. Treasury securities, net
Total reclassifications for period	$	(15,158	)	$	(17,398	)

At September 30, 2014 and December 31, 2013, the Company had OTTI recognized in AOCI of $618,000 and $609,000, respectively.