Derivatives (Tables)

9 Months Ended

Sep. 30, 2012

Derivatives

Schedule of fair value of derivative instruments and their balance sheet location

Derivative Instrument		Balance Sheet	September 30,			December 31,
(In Thousands)	Designation	Location	2012			2011
Swaps, at fair value ($0 notional at September 30, 2012)	Hedging	Assets	$	—		$	26
Linked Transactions, at fair value	Non-Hedging	Assets	$	12,767		$	55,801
Swaps, at fair value ($2.761 billion notional at September 30, 2012)	Hedging	Liabilities	$	(78,169	)	$	(114,220	)

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

Linked Transactions at September 30, 2012
Linked Repurchase Agreements					Linked MBS
			Weighted									Weighted
			Average									Average
Maturity or Repricing			Interest		Non-Agency MBS			Amortized		Par/Current		Coupon
(Dollars in Thousands)	Balance		Rate		(Dollars in Thousands)	Fair Value		Cost		Face		Rate
Within 30 days	$	36,423	1.61	%	Rated AA	$	14,544	$	13,728	$	14,120	5.00	%
Total	$	36,423	1.61	%	Rated A	3,137		2,641		3,486		0.79
					Rated BBB	8,210		7,340		9,022		2.61
					Rated BB	7,257		6,855		7,639		2.74
					Rated D	15,910		15,094		20,423		5.81
					Total	$	49,058	$	45,658	$	54,690	4.32	%

Linked Transactions at December 31, 2011
Linked Repurchase Agreements					Linked MBS
			Weighted									Weighted
			Average									Average
Maturity or Repricing			Interest		Non-Agency MBS			Amortized		Par/Current		Coupon
(Dollars in Thousands)	Balance		Rate		(Dollars in Thousands)	Fair Value		Cost		Face		Rate
Within 30 days	$	141,719	1.89	%	Rated AAA	$	29,057	$	29,917	$	30,675	3.31	%
>30 days to 90 days	29,178		1.81		Rated AA	17,427		16,858		17,297		5.00
Total	$	170,897	1.88	%	Rated BBB	41,825		42,419		49,781		2.81
					Rated CCC	20,782		20,988		26,680		4.42
					Rated CC	43,644		47,060		61,470		6.00
					Rated C	32,870		36,934		45,857		5.20
					Unrated	40,364		43,419		57,776		5.54
					Total	$	225,969	$	237,595	$	289,536	4.74	%

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

Components of Unrealized Net Gains and Net Interest	Three Months Ended						Nine Months Ended
Income from Linked Transactions	September 30,						September 30,
(In Thousands)	2012			2011			2012			2011
Interest income attributable to MBS underlying Linked Transactions	$	812		$	4,631		$	4,386		$	21,475
Interest expense attributable to linked repurchase agreement borrowings underlying Linked Transactions	(168		)	(864		)	(965		)	(3,938		)
Change in fair value of Linked Transactions included in earnings	2,533			(3,034		)	8,023			(7,567		)
Unrealized net gains and net interest income from Linked Transactions	$	3,177		$	733		$	11,444		$	9,970

Schedule of assets pledged as collateral against derivative contracts

(In Thousands)	September 30, 2012		December 31, 2011
Agency MBS, at fair value	$	84,150	$	117,687
Restricted cash	7,013		15,502
Total assets pledged against derivative contracts	$	91,163	$	133,189

Schedule of information about swaps

	September 30, 2012						December 31, 2011
			Weighted						Weighted
			Average		Weighted				Average		Weighted
Maturity (1)	Notional		Fixed-Pay		Average Variable		Notional		Fixed-Pay		Average Variable
(Dollars in Thousands)	Amount		Interest Rate		Interest Rate (2)		Amount		Interest Rate		Interest Rate (2)
Within 30 days	$	129,533	4.56	%	0.24	%	$	34,056	4.05	%	0.37	%
Over 30 days to 3 months	211,618		4.35		0.41		120,001		4.43		0.38
Over 3 months to 6 months	56,013		3.92		0.34		275,351		2.54		0.33
Over 6 months to 12 months	884,287		2.66		0.23		528,894		4.42		0.39
Over 12 months to 24 months	598,372		2.16		0.24		974,352		2.78		0.30
Over 24 months to 36 months	830,892		2.17		0.23		685,042		2.28		0.31
Over 36 months to 48 months	50,000		2.13		0.22		710,170		1.96		0.29
Over 48 months to 60 months	—		—		—		50,000		2.13		0.29
Total Swaps	$	2,760,715	2.64	%	0.25	%	$	3,377,866	2.80	%	0.32	%

(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.

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in Thousands)	2012			2011			2012			2011
Interest expense attributable to Swaps	$	18,138		$	24,322		$	58,275		$	73,091
Weighted average Swap rate paid	2.72		%	2.88		%	2.74		%	3.24		%
Weighted average Swap rate received	0.27		%	0.21		%	0.29		%	0.24		%

Schedule of impact of hedging instruments on accumulated other comprehensive income/(loss)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In Thousands)	2012			2011			2012			2011
Accumulated other comprehensive loss from derivative hedging instruments:
Balance at beginning of period	$	(89,823	)	$	(124,404	)	$	(114,194	)	$	(139,142	)
Unrealized gain/(loss) on Swaps, net	11,654			(10,028		)	36,025			4,483
Unrealized loss on Swaptions	—			(227		)	—			—
Balance at end of period	$	(78,169	)	$	(134,659	)	$	(78,169	)	$	(134,659	)