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Financial Derivatives (Tables)

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table details the fair value of the Company's holdings of financial derivatives as of June 30, 2022 and December 31, 2021:


	June 30, 2022		December 31, 2021
(In thousands)
Financial derivatives–assets, at fair value:
TBA securities purchase contracts	$	220	$	522
TBA securities sale contracts	2,949		707
Fixed payer interest rate swaps	72,740		11,871
Fixed receiver interest rate swaps	14		2,122
Credit default swaps on asset-backed securities	202		303
Credit default swaps on asset-backed indices	2,089		1,751
Credit default swaps on corporate bonds	201		—
Credit default swaps on corporate bond indices	1,405		156
Options	—		278
Futures	316		478
Forwards	244		—
Warrants	803		706
Total financial derivatives–assets, at fair value	81,183		18,894
Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts	(91)		(135)
TBA securities sale contracts	(2,687)		(774)
Fixed payer interest rate swaps	(1,911)		(6,567)
Fixed receiver interest rate swaps	(15,285)		(2,531)
Credit default swaps on asset-backed indices	(34)		(39)
Credit default swaps on corporate bonds	(338)		(99)
Credit default swaps on corporate bond indices	—		(1,870)
Futures	(96)		(75)
Forwards	—		(208)
Total financial derivatives–liabilities, at fair value	(20,442)		(12,298)
Total	$	60,741	$	6,596

Schedule of Interest Rate Derivatives [Table Text Block]

The following tables provide information about the Company's fixed payer interest rate swaps as of June 30, 2022 and December 31, 2021:

June 30, 2022:


					Weighted Average
	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2023	$	664,398	$	14,248	0.64	%	1.68	%	0.88
2024	719,357		19,436		1.34		1.50		1.71
2025	241,193		3,424		2.29		1.50		2.82
2026	100		8		0.79		1.24		4.08
2027	333,450		990		2.67		1.50		4.92
2028	109,534		9,655		1.37		1.32		5.98
2029	54,428		1,657		2.45		1.59		6.82
2030	68,300		2,154		2.30		1.51		7.89
2031	161,009		15,538		1.71		1.59		8.96
2032	79,027		2,564		2.34		1.50		9.80
2035	500		112		0.78		1.58		13.32
2036	1,100		201		1.45		1.46		13.64
2040	500		136		0.90		1.58		18.32
2049	5,796		10		2.89		0.96		26.53
2050	500		161		0.98		1.58		28.33
2052	5,000		535		2.07		1.50		29.77
Total	$	2,444,192	$	70,829	1.54	%	1.55	%	3.38

December 31, 2021:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2022	$	64,100	$	(282)	0.99	%	0.18	%	0.18
2023	771,110		1,488		0.58		0.19		1.52
2024	314,762		3,685		0.43		0.16		2.23
2025	14,993		426		0.49		0.16		3.81
2026	30,625		481		0.89		0.15		4.48
2027	14,732		448		0.80		0.19		5.60
2028	149,524		470		1.33		0.17		6.55
2029	19,152		(801)		1.98		0.16		7.55
2030	9,585		291		1.09		0.18		8.23
2031	122,509		535		1.45		0.17		9.47
2035	500		38		0.78		0.08		13.81
2036	1,100		25		1.45		0.16		14.13
2040	500		45		0.90		0.08		18.82
2049	5,796		(1,599)		2.89		0.13		27.02
2050	500		54		0.98		0.08		28.82
Total	$	1,519,488	$	5,304	0.75	%	0.18	%	3.11

The following tables provide information about the Company's fixed receiver interest rate swaps as of June 30, 2022 and December 31, 2021:

June 30, 2022:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2023	$	41,407	$	(107)	2.10	%	2.00	%	0.72
2024	786,141		(11,287)		1.36		2.03		1.75
2026	215,852		(3,371)		1.49		2.26		3.76
2027	12,900		(42)		1.50		2.63		4.86
2032	8,355		(40)		1.50		2.68		9.88
2035	500		(115)		1.50		0.74		13.32
2040	500		(140)		1.50		0.84		18.32
2050	500		(169)		1.50		0.90		28.33
Total	$	1,066,155	$	(15,271)	1.42	%	2.09	%	2.25

December 31, 2021:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2022	$	53,974	$	475	0.17	%	1.85	%	0.16
2023	241,407		(265)		0.15		0.73		1.69
2024	37,142		556		0.13		1.59		2.78
2026	105,040		(907)		0.18		1.10		4.72
2031	35,678		(114)		0.15		1.48		9.76
2035	500		(41)		0.05		0.74		13.81
2040	500		(50)		0.08		0.84		18.82
2050	500		(63)		0.08		0.90		28.82
Total	$	474,741	$	(409)	0.15	%	1.06	%	2.94

Schedule of Credit Default Swaps [Table Text Block]

The following table provides information about the Company's credit default swaps as of June 30, 2022 and December 31, 2021:


	As of
	June 30, 2022					December 31, 2021
Type(1)	Notional		Fair Value		Weighted Average Remaining Term (Years)	Notional		Fair Value		Weighted Average Remaining Term (Years)
($ in thousands)
Asset:
Long:
Credit default swaps on asset-backed indices	$	270	$	4	15.50	$	484	$	7	24.32
Credit default swaps on corporate bond indices	1,996		13		1.47	2,168		156		1.97
Short:
Credit default swaps on asset-backed securities	(916)		202		13.21	(910)		303		13.71
Credit default swaps on asset-backed indices	(16,285)		2,085		41.54	(13,947)		1,744		42.43
Credit default swaps on corporate bonds	(6,000)		201		4.98	—		—		—
Credit default swaps on corporate bond indices	(50,561)		1,392		4.70	—		—		—
Liability:
Long:
Credit default swaps on asset-backed indices	249		(34)		34.70	89		(39)		27.41
Short:
Credit default swaps on asset-backed indices	(1)		—		27.51	(491)		—		24.42
Credit default swaps on corporate bonds	(16,400)		(338)		4.56	(3,400)		(99)		3.47
Credit default swaps on corporate bond indices	—		—		—	(21,183)		(1,870)		4.75
	$	(87,648)	$	3,525	11.58	$	(37,190)	$	202	19.10

(1)Long notional represents contracts where the Company has written protection and short notional represents contracts where the Company has purchased protection.

Schedule of Futures Contracts [Table Text Block]

The following table provides information about the Company's long and short positions in futures as of June 30, 2022 and December 31, 2021:


	As of
	June 30, 2022					December 31, 2021
Description	Notional Amount		Fair Value		Remaining Months to Expiration	Notional Amount		Fair Value		Remaining Months to Expiration
	(In thousands)					(In thousands)
Assets:
Short Contracts:
U.S. Treasury futures	$	(50,100)	$	316	3.06	$	(170,000)	$	478	3.00
Liabilities:
Long Contracts:
U.S. Treasury futures	1,900		(96)		2.77	1,900		(36)		2.70
Short Contracts:
U.S. Treasury futures	—		—		—	(51,400)		(39)		2.70
Total, net	$	(48,200)	$	220	3.08	$	(219,500)	$	403	2.93

Schedule of Derivative Warrant Contracts [Table Text Block]

Warrants

The following table provides information about the Company's warrants contracts to purchase shares as of June 30, 2022 and December 31, 2021:


	June 30, 2022				December 31, 2021
Description	Number of Shares Underlying Warrant(1)	Fair Value		Remaining Years to Expiration	Number of Shares Underlying Warrant	Fair Value		Remaining Years to Expiration
	(In thousands)				(In thousands)
Warrants	3,559	$	803	1.17	1,521	$	706	2.17

(1)Excludes number of shares underlying warrant to purchase additional equity interest in a loan originator in which the Company currently holds an equity interest. The Company has the right to purchase 10% of the loan originator at the time of purchase for a pre-determined price. As of June 30, 2022, the fair value of the estimated fair value of such warrants was insignificant. Such warrants were not held at December 31, 2021.

Schedule of TBA securities [Table Text Block]

As of June 30, 2022 and December 31, 2021, the Company had outstanding TBA purchase and sale contracts as follows:


	June 30, 2022								December 31, 2021
TBA Securities	Notional Amount(1)		Cost Basis(2)		Market Value(3)		Net Carrying Value(4)		Notional Amount(1)		Cost Basis(2)		Market Value(3)		Net Carrying Value(4)
(In thousands)
Purchase contracts:
Assets	$	30,500	$	30,142	$	30,362	$	220	$	196,723	$	196,119	$	196,641	$	522
Liabilities	20,777		20,349		20,258		(91)		76,500		76,468		76,333		(135)
	51,277		50,491		50,620		129		273,223		272,587		272,974		387
Sale contracts:
Assets	(371,904)		(343,316)		(340,367)		2,949		(416,168)		(439,438)		(438,731)		707
Liabilities	(240,433)		(227,187)		(229,874)		(2,687)		(497,214)		(512,675)		(513,449)		(774)
	(612,337)		(570,503)		(570,241)		262		(913,382)		(952,113)		(952,180)		(67)
Total TBA securities, net	$	(561,060)	$	(520,012)	$	(519,621)	$	391	$	(640,159)	$	(679,526)	$	(679,206)	$	320

(1)Notional amount represents the principal balance of the underlying Agency RMBS.

(2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.

(3)Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of period end.

(4)Net carrying value represents the difference between the market value of the TBA contract as of period end and the cost basis, and is reported in Financial derivatives-assets, at fair value and Financial derivatives-liabilities, at fair value on the Consolidated Balance Sheet.

Schedule of Gains and Losses on Derivative Contracts

Gains and losses on the Company's derivative contracts for the three- and six-month periods ended June 30, 2022 and 2021 are summarized in the tables below:


		Three-Month Period Ended June 30, 2022
Derivative Type	Primary Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(1)		Change in Net Unrealized Gains (Losses) on Financial Derivatives(1)
(In thousands)
Interest rate swaps	Interest Rate	$	(499)	$	12,221	$	11,722	$	836	$	5,983	$	6,819
Credit default swaps on asset-backed securities	Credit			(6)		(6)				(102)		(102)
Credit default swaps on asset-backed indices	Credit			(351)		(351)				1,297		1,297
Credit default swaps on corporate bond indices	Credit			414		414				3,351		3,351
Credit default swaps on corporate bonds	Credit			(10)		(10)				92		92
Options	Credit			147		147				178		178
TBAs	Interest Rate			26,003		26,003				(3,754)		(3,754)
Futures	Interest Rate			8,390		8,390				(5,442)		(5,442)
Forwards	Currency			470		470				315		315
Warrants	Equity Market/Credit			—		—				(254)		(254)
Total		$	(499)	$	47,278	$	46,779	$	836	$	1,664	$	2,500

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(16) thousand for the three-month period ended June 30, 2022, which is included on the Consolidated Statement of Operations in Other, net.


		Three-Month Period Ended June 30, 2021
Derivative Type	Primary Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps(1)		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(2)		Change in Net Unrealized Gains (Losses) on Financial Derivatives(1)
(In thousands)
Interest rate swaps	Interest Rate	$	77	$	(300)	$	(223)	$	(709)	$	(4,221)	$	(4,930)
Credit default swaps on asset-backed securities	Credit			16		16				(18)		(18)
Credit default swaps on asset-backed indices	Credit			129		129				(221)		(221)
Credit default swaps on corporate bond indices	Credit			836		836				(1,418)		(1,418)
Credit default swaps on corporate bonds	Credit			153		153				(219)		(219)
Total return swaps	Credit			(860)		(860)				801		801
TBAs	Interest Rate			(358)		(358)				2,365		2,365
Options	Credit			—		—				(62)		(62)
Futures	Interest Rate			896		896				(2,037)		(2,037)
Forwards	Currency			(164)		(164)				98		98
Warrants	Equity Market/Credit			—		—				(39)		(39)
Total		$	77	$	348	$	425	$	(709)	$	(4,971)	$	(5,680)

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $3 thousand for the three-month period ended June 30, 2021, which is included on the Condensed Consolidated Statement of Operations in Other, net.


		Six-Month Period Ended June 30, 2022
Derivative Type	Primary Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(1)		Change in Net Unrealized Gains (Losses) on Financial Derivatives(1)
(In thousands)
Interest rate swaps	Interest Rate	$	(2,201)	$	10,072	$	7,871	$	1,397	$	40,035	$	41,432
Credit default swaps on asset-backed securities	Credit			(11)		(11)				(102)		(102)
Credit default swaps on asset-backed indices	Credit			(336)		(336)				1,704		1,704
Credit default swaps on corporate bond indices	Credit			237		237				3,657		3,657
Credit default swaps on corporate bonds	Credit			(18)		(18)				108		108
Options	Credit			147		147				148		148
TBAs	Interest Rate			46,791		46,791				71		71
Futures	Interest Rate			15,049		15,049				(182)		(182)
Forwards	Currency			797		797				451		451
Warrants	Equity Market/Credit			(413)		(413)				512		512
Total		$	(2,201)	$	72,315	$	70,114	$	1,397	$	46,402	$	47,799

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(24) thousand for the six-month period ended June 30, 2022, which is included on the Consolidated Statement of Operations in Other, net.


		Six-Month Period Ended June 30, 2021
Derivative Type	Primary Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps(1)		Net Realized Gains (Losses) on Financial Derivatives(1)		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(2)		Change in Net Unrealized Gains (Losses) on Financial Derivatives(2)
(In thousands)
Interest rate swaps	Interest Rate	$	(739)	$	147	$	(592)	$	(299)	$	3,454	$	3,155
Credit default swaps on asset-backed securities	Credit			42		42				(44)		(44)
Credit default swaps on asset-backed indices	Credit			1,199		1,199				(1,178)		(1,178)
Credit default swaps on corporate bond indices	Credit			(88)		(88)				(890)		(890)
Credit default swaps on corporate bonds	Credit			81		81				(153)		(153)
Total return swaps	Credit			(1,202)		(1,202)				940		940
Options	Credit			—		—				(62)		(62)
TBAs	Interest Rate			4,961		4,961				1,661		1,661
Futures	Interest Rate			1,913		1,913				878		878
Forwards	Currency			(76)		(76)				725		725
Warrants	Equity Market/Credit			—		—				(34)		(34)
Total		$	(739)	$	6,977	$	6,238	$	(299)	$	5,297	$	4,998

(1)Includes realized gain/(loss) on transactions involving foreign-currency-denominated financial derivatives in the amount of $18 thousand for the six-month period ended June 30, 2021, which is included on the Consolidated Statement of Operations in Other, net.

(2)Includes foreign currency remeasurement on financial derivatives in the amount of $(30) thousand for the six-month period ended June 30, 2021, which is included on the Consolidated Statement of Operations in Other, net.

Derivative activity, volume

The table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the six-month period ended June 30, 2022 and the year ended December 31, 2021:


Derivative Type	Six-Month Period Ended June 30, 2022		Year Ended December 31, 2021
(In thousands)
Interest rate swaps	$	2,660,695	$	1,343,094
TBAs	827,022		1,105,311
Futures	190,400		193,600
Credit default swaps	60,999		110,084
Forwards	15,201		21,188
Options	25,714		13,846
Total return swaps	—		2,593
Warrants	3,289		1,948

Schedule of Credit Derivatives

Written credit derivatives held by the Company at June 30, 2022 and December 31, 2021 are summarized below:


Credit Derivatives	June 30, 2022		December 31, 2021
(In thousands)
Fair Value of Written Credit Derivatives, Net	$	(17)	$	124
Notional Value of Written Credit Derivatives (1)	2,515		2,741

(1)The notional value is the maximum amount that a seller of credit protection would be obligated to pay, and a buyer of credit protection would receive, upon occurrence of a "credit event." Movements in the value of credit default swap transactions may require the Company or the counterparty to post or receive collateral. Amounts due or owed under credit derivative contracts with an International Swaps and Derivatives Association, or "ISDA," counterparty may be offset against amounts due or owed on other credit derivative contracts with the same ISDA counterparty. As a result, the notional value of written credit derivatives involving a particular underlying reference asset or index has been reduced (but not below zero) by the notional value of any contracts where the Company has purchased credit protection on the same reference asset or index with the same ISDA counterparty.

Schedule of options contracts

The following table provides information about the Company's options contracts as of December 31, 2021. The Company did not hold any options contracts as of June 30, 2022.

December 31, 2021:


Option				Underlying Swap
Type	Fair Value		Months to Expiration	Notional Amount		Term (Years)	Fixed Rate
($ in thousands)
Put options on credit default swaps on corporate bond indices (1)	$	278	5.5	$	30,000	5.00	5.00	%

(1)Represents the option on the part of the Company to enter into a credit default swap on a corporate bond index whereby the Company would pay a fixed rate and receive credit protection payments.