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Financial Derivatives (Tables)

9 Months Ended

Sep. 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 September 30, 2022 and December 31, 2021:


	September 30, 2022		December 31, 2021
(In thousands)
Financial derivatives–assets, at fair value:
TBA securities purchase contracts	$	60	$	522
TBA securities sale contracts	29,056		707
Fixed payer interest rate swaps	125,823		11,871
Fixed receiver interest rate swaps	—		2,122
Credit default swaps on asset-backed securities	77		303
Credit default swaps on asset-backed indices	2,250		1,751
Credit default swaps on corporate bonds	95		—
Credit default swaps on corporate bond indices	930		156
Options	—		278
Futures	828		478
Forwards	261		—
Warrants	663		706
Total financial derivatives–assets, at fair value	160,043		18,894
Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts	(789)		(135)
TBA securities sale contracts	(9)		(774)
Fixed payer interest rate swaps	—		(6,567)
Fixed receiver interest rate swaps	(49,041)		(2,531)
Credit default swaps on asset-backed indices	(32)		(39)
Credit default swaps on corporate bonds	(251)		(99)
Credit default swaps on corporate bond indices	(17)		(1,870)
Total return swaps	(37)		—
Futures	(242)		(75)
Forwards	—		(208)
Total financial derivatives–liabilities, at fair value	(50,418)		(12,298)
Total	$	109,625	$	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 September 30, 2022 and December 31, 2021:

September 30, 2022:


					Weighted Average
	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2023	$	664,398	$	16,329	0.64	%	3.17	%	0.63
2024	591,150		14,447		2.51		3.01		1.67
2025	265,793		10,762		2.36		2.98		2.59
2026	100		12		0.79		2.81		3.83
2027	363,450		16,834		2.69		2.98		4.68
2028	114,119		15,076		1.44		2.83		5.74
2029	54,428		4,815		2.45		3.11		6.57
2030	68,300		6,063		2.30		3.00		7.64
2031	161,009		24,901		1.71		3.07		8.71
2032	139,027		10,745		2.58		2.98		9.71
2035	500		143		0.78		3.08		13.06
2036	1,100		274		1.45		2.96		13.39
2037	35,000		3,564		2.61		2.98		14.87
2040	500		168		0.90		3.08		18.07
2049	5,796		562		2.89		2.29		26.28
2050	500		194		0.98		3.08		28.07
2052	5,000		934		2.07		2.98		29.52
Total	$	2,470,170	$	125,823	1.91	%	3.04	%	3.62

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 September 30, 2022 and December 31, 2021:

September 30, 2022:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2023	$	41,407	$	(439)	3.57	%	2.00	%	0.47
2024	820,157		(23,353)		2.91		2.36		1.65
2025	112,000		(3,940)		2.98		2.70		2.82
2026	215,852		(11,072)		2.97		2.26		3.51
2027	120,050		(4,968)		2.98		2.83		4.80
2032	59,155		(4,752)		2.98		2.58		9.84
2035	500		(145)		2.98		0.74		13.06
2040	500		(172)		2.98		0.84		18.07
2050	500		(200)		2.98		0.90		28.07
Total	$	1,370,121	$	(49,041)	2.95	%	2.41	%	2.65

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 September 30, 2022 and December 31, 2021:


	As of
	September 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	$	259	$	3	15.25	$	484	$	7	24.32
Credit default swaps on corporate bond indices	1,867		10		1.22	2,168		156		1.97
Short:
Credit default swaps on asset-backed securities	(220)		77		12.86	(910)		303		13.71
Credit default swaps on asset-backed indices	(56,345)		2,247		36.18	(13,947)		1,744		42.43
Credit default swaps on corporate bonds	(6,000)		95		4.72	—		—		—
Credit default swaps on corporate bond indices	(134,382)		920		5.01	—		—		—
Liability:
Long:
Credit default swaps on asset-backed indices	65		(32)		26.73	89		(39)		27.41
Short:
Credit default swaps on asset-backed indices	—		—		30.09	(491)		—		24.42
Credit default swaps on corporate bonds	(16,400)		(251)		4.31	(3,400)		(99)		3.47
Credit default swaps on corporate bond indices	(37,500)		(17)		4.72	(21,183)		(1,870)		4.75
	$	(248,656)	$	3,052	11.99	$	(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 September 30, 2022 and December 31, 2021:


	As of
	September 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)	$	828	3.03	$	(170,000)	$	478	3.00
Liabilities:
Long Contracts:
U.S. Treasury futures	1,900		(242)		2.70	1,900		(36)		2.70
Short Contracts:
U.S. Treasury futures	—		—		—	(51,400)		(39)		2.70
Total, net	$	(48,200)	$	586	3.04	$	(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 September 30, 2022 and December 31, 2021:


	September 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	3,524	$	663	0.89	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 September 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 September 30, 2022 and December 31, 2021, the Company had outstanding TBA purchase and sale contracts as follows:


	September 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	$	15,000	$	15,089	$	15,149	$	60	$	196,723	$	196,119	$	196,641	$	522
Liabilities	42,507		39,363		38,574		(789)		76,500		76,468		76,333		(135)
	57,507		54,452		53,723		(729)		273,223		272,587		272,974		387
Sale contracts:
Assets	(737,295)		(698,855)		(669,799)		29,056		(416,168)		(439,438)		(438,731)		707
Liabilities	(4,303)		(4,181)		(4,190)		(9)		(497,214)		(512,675)		(513,449)		(774)
	(741,598)		(703,036)		(673,989)		29,047		(913,382)		(952,113)		(952,180)		(67)
Total TBA securities, net	$	(684,091)	$	(648,584)	$	(620,266)	$	28,318	$	(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 nine-month periods ended September 30, 2022 and 2021 are summarized in the tables below:


		Three-Month Period Ended September 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	$	2,841	$	5,442	$	8,283	$	361	$	22,845	$	23,206
Credit default swaps on asset-backed securities	Credit			(844)		(844)				717		717
Credit default swaps on asset-backed indices	Credit			375		375				(514)		(514)
Credit default swaps on corporate bond indices	Credit			811		811				(1,281)		(1,281)
Credit default swaps on corporate bonds	Credit			(57)		(57)				(18)		(18)
Total return swaps	Credit			—		—				(37)		(37)
Options	Credit			—		—				—		—
TBAs	Interest Rate			9,085		9,085				27,926		27,926
Futures	Interest Rate			445		445				365		365
Forwards	Currency			897		897				17		17
Warrants	Equity Market/Credit			—		—				(140)		(140)
Total		$	2,841	$	16,154	$	18,995	$	361	$	49,880	$	50,241

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(18) thousand for the three-month period ended September 30, 2022, which is included on the Condensed Consolidated Statement of Operations in Other, net.


		Three-Month Period Ended September 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		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	$	(1,069)	$	(243)	$	(1,312)	$	252	$	2,790	$	3,042
Credit default swaps on asset-backed securities	Credit			(4)		(4)				—		—
Credit default swaps on asset-backed indices	Credit			(136)		(136)				69		69
Credit default swaps on corporate bond indices	Credit			(264)		(264)				244		244
Credit default swaps on corporate bonds	Credit			184		184				(192)		(192)
Total return swaps	Credit			(41)		(41)				(465)		(465)
TBAs	Interest Rate			(425)		(425)				(2,381)		(2,381)
Options	Credit			—		—				(148)		(148)
Futures	Interest Rate			(271)		(271)				843		843
Forwards	Currency			487		487				(85)		(85)
Warrants	Equity Market/Credit			—		—				221		221
Total		$	(1,069)	$	(713)	$	(1,782)	$	252	$	896	$	1,148

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(7) thousand for the three-month period ended September 30, 2021, which is included on the Condensed Consolidated Statement of Operations in Other, net.


		Nine-Month Period Ended September 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	$	640	$	15,514	$	16,154	$	1,759	$	62,879	$	64,638
Credit default swaps on asset-backed securities	Credit			(854)		(854)				615		615
Credit default swaps on asset-backed indices	Credit			40		40				1,190		1,190
Credit default swaps on corporate bond indices	Credit			1,048		1,048				2,376		2,376
Credit default swaps on corporate bonds	Credit			(76)		(76)				89		89
Total return swaps	Credit			—		—				(37)		(37)
Options	Credit			147		147				148		148
TBAs	Interest Rate			55,876		55,876				27,997		27,997
Futures	Interest Rate			15,493		15,493				183		183
Forwards	Currency			1,693		1,693				468		468
Warrants	Equity Market/Credit			(413)		(413)				372		372
Total		$	640	$	88,468	$	89,108	$	1,759	$	96,280	$	98,039

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(43) thousand for the nine-month period ended September 30, 2022, which is included on the Condensed Consolidated Statement of Operations in Other, net.


		Nine-Month Period Ended September 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	$	(1,808)	$	(96)	$	(1,904)	$	(47)	$	6,244	$	6,197
Credit default swaps on asset-backed securities	Credit			39		39				(44)		(44)
Credit default swaps on asset-backed indices	Credit			1,062		1,062				(1,109)		(1,109)
Credit default swaps on corporate bond indices	Credit			(351)		(351)				(647)		(647)
Credit default swaps on corporate bonds	Credit			265		265				(346)		(346)
Total return swaps	Credit			(1,243)		(1,243)				476		476
Options	Credit			—		—				(210)		(210)
TBAs	Interest Rate			4,536		4,536				(720)		(720)
Futures	Interest Rate			1,641		1,641				1,721		1,721
Forwards	Currency			411		411				640		640
Warrants	Equity Market/Credit			—		—				187		187
Total		$	(1,808)	$	6,264	$	4,456	$	(47)	$	6,192	$	6,145

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

(2)Includes foreign currency remeasurement on financial derivatives in the amount of $(38) thousand for the nine-month period ended September 30, 2021, which is included on the Condensed 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 nine-month period ended September 30, 2022 and the year ended December 31, 2021:


Derivative Type	Nine-Month Period Ended September 30, 2022		Year Ended December 31, 2021
(In thousands)
Interest rate swaps	$	2,994,551	$	1,343,094
TBAs	788,951		1,105,311
Futures	148,880		193,600
Credit default swaps	94,392		110,084
Forwards	14,289		21,188
Options	18,000		13,846
Total return swaps	299		2,593
Warrants	3,365		1,948

Schedule of Credit Derivatives

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


Credit Derivatives	September 30, 2022		December 31, 2021
(In thousands)
Fair Value of Written Credit Derivatives, Net	$	(19)	$	124
Notional Value of Written Credit Derivatives (1)	2,191		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 September 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.