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 filed of articles supplementary amending 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 the same date, 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 the 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 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. The Series B Preferred Stock 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.

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, 2015 through June 30, 2015:



Declaration Date	Record Date	Payment Date	Dividend Per Share
May 18, 2015	June 2, 2015	June 30, 2015	$	0.46875
February 13, 2015	February 27, 2015	March 31, 2015	0.46875

(b) Dividends on Common Stock

The following table presents cash dividends declared by the Company on its common stock from January 1, 2015 through June 30, 2015:



Declaration Date (1)	Record Date	Payment Date	Dividend Per Share
June 15, 2015	June 29, 2015	July 31, 2015	$	0.20	(1)
March 13, 2015	March 27, 2015	April 30, 2015	$	0.20

(1) At June 30, 2015, the Company had accrued dividends and dividend equivalents payable of $74.6 million related to the common stock dividend declared on June 15, 2015.

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 June 30, 2015, 6.9 million shares of common stock remained available for issuance pursuant to the DRSPP shelf registration statement.

During the three and six months ended June 30, 2015, the Company issued 39,875 and 79,659 shares of common stock through the DRSPP, raising net proceeds of approximately $310,000 and $623,000, respectively. From the inception of the DRSPP in September 2003 through June 30, 2015, the Company issued 27,173,208 shares pursuant to the DRSPP, raising net proceeds of $229.7 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. The Board reaffirmed such authorization in May 2010. In December 2013, the Board increased the number of shares authorized under the Repurchase Program 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 six months ended June 30, 2015. At June 30, 2015, 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 six months ended June 30, 2015:



	Three Months Ended June 30, 2015									Six Months Ended June 30, 2015
(In Thousands)	Net Unrealized Gain/(Loss) on AFS Securities			Net Unrealized Gain/(Loss) on Swaps			Total AOCI			Net Unrealized Gain/(Loss) on AFS Securities			Net Unrealized Gain/(Loss) on Swaps			Total AOCI
Balance at beginning of period	$	850,257		$	(91,429	)	$	758,828		$	813,515		$	(59,062	)	$	754,453
OCI before reclassifications	(82,945		)	26,858			(56,087		)	(43,767		)	(5,509		)	(49,276		)
Amounts reclassified from AOCI (1)	(8,161		)	—			(8,161		)	(15,134		)	—			(15,134		)
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing	—			—			—			4,537			—			4,537
Net OCI during the period (2)	(91,106		)	26,858			(64,248		)	(54,364		)	(5,509		)	(59,873		)
Balance at end of period	$	759,151		$	(64,571	)	$	694,580		$	759,151		$	(64,571	)	$	694,580

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



	Three Months Ended June 30, 2014									Six Months Ended June 30, 2014
(In Thousands)	Net Unrealized Gain/(Loss) on AFS Securities			Net Unrealized Gain/(Loss) on Swaps			Total AOCI			Net Unrealized Gain/(Loss) on AFS Securities			Net Unrealized Gain/(Loss) on Swaps			Total AOCI
Balance at beginning of period	$	819,222		$	(27,037	)	$	792,185		$	752,912		$	(15,217	)	$	737,695
OCI before reclassifications	93,230			(27,634		)	65,596			162,491			(39,901		)	122,590
Amounts reclassified from AOCI (1)	(6,748		)	—			(6,748		)	(9,699		)	447			(9,252		)
Net OCI during the period (2)	86,482			(27,634		)	58,848			152,792			(39,454		)	113,338
Balance at end of period	$	905,704		$	(54,671	)	$	851,033		$	905,704		$	(54,671	)	$	851,033

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

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

The following table presents information about the significant amounts reclassified out of the Company’s AOCI for the three and six months ended June 30, 2015:



	Three Months Ended June 30, 2015			Six Months Ended June 30, 2015
Details about AOCI Components	Amounts Reclassified from AOCI						Affected Line Item in the Statement Where Net Income Is Presented
(In Thousands)
AFS Securities:
Realized gain on sale of securities	$	(7,863	)	$	(14,429	)	Gain on sales of MBS
OTTI recognized in earnings	(298		)	(705		)	Net impairment losses recognized in earnings
Total AFS Securities	$	(8,161	)	$	(15,134	)
Total reclassifications for period	$	(8,161	)	$	(15,134	)

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



	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
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)
AFS Securities:
Realized gain on sale of securities	$	(6,748	)	$	(9,699	)	Gain on sales of MBS
Swaps designated as cash flow hedges:
De-designated Swaps	$	—		$	447		Other, net
Total reclassifications for period	$	(6,748	)	$	(9,252	)

At June 30, 2015 and December 31, 2014, the Company had unrealized losses recorded in AOCI of $554,000 and $629,000, respectively on securities for which OTTI had been recognized in earnings in prior periods.