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Financial Derivatives (Tables)

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table details the fair value of the Company's holdings of financial derivatives as of March 31, 2024 and December 31, 2023:


	March 31, 2024		December 31, 2023
(In thousands)
Financial derivatives–assets, at fair value:
TBA securities purchase contracts	$	13	$	2,182
TBA securities sale contracts	866		—
Fixed payer interest rate swaps	126,002		101,881
Fixed receiver interest rate swaps	9,113		27,358
Credit default swaps on asset-backed securities	8		8
Credit default swaps on asset-backed indices	1,948		3,318
Credit default swaps on corporate bonds	107		25
Credit default swaps on corporate bond indices	11,830		7,259
Total return swaps	6		6
Futures	61		245
Forwards	336		12
Warrants	53		1,702
Total financial derivatives–assets, at fair value	150,343		143,996
Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts	(189)		—
TBA securities sale contracts	(380)		(5,820)
Fixed payer interest rate swaps	(3,360)		(17,944)
Fixed receiver interest rate swaps	(13,293)		(13,801)
Credit default swaps on asset-backed indices	(32)		(32)
Credit default swaps on corporate bonds	(246)		(225)
Credit default swaps on corporate bond indices	(22,037)		(15,894)
Futures	(888)		(7,990)
Forwards	—		(70)
Total financial derivatives–liabilities, at fair value	(40,425)		(61,776)
Total	$	109,918	$	82,220

Schedule of Interest Rate Derivatives [Table Text Block]

The following tables provide information about the Company's fixed payer interest rate swaps as of March 31, 2024 and December 31, 2023:

March 31, 2024:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2024	$	482,811	$	6,294	3.97	%	5.35	%	0.53
2025	414,561		8,473		3.69		5.33		1.41
2026	189,287		2,219		4.13		5.33		2.41
2027	228,250		13,283		2.91		5.34		3.15
2028	582,656		15,885		3.51		5.34		4.30
2029	220,788		7,247		3.36		5.33		4.87
2030	199,817		5,477		3.60		5.34		6.32
2031	157,766		25,740		1.51		5.34		7.21
2032	181,867		14,883		2.80		5.34		8.31
2033	465,285		16,540		3.42		5.34		9.20
2034	89,710		429		3.80		5.33		9.89
2035	500		150		0.78		5.33		11.56
2036	1,102		281		1.19		5.34		11.88
2037	45,000		5,498		2.81		5.34		13.41
2038	32,500		(373)		4.01		5.33		14.42
2039	12,292		114		3.77		5.33		14.85
2040	500		186		0.90		5.33		16.57
2050	500		232		0.98		5.33		26.57
2053	1,600		91		3.32		5.33		29.75
2054	400		(7)		3.72		5.33		29.92
Total	$	3,307,192	$	122,642	3.44	%	5.34	%	4.85

December 31, 2023:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2024	$	629,547	$	9,097	3.18	%	5.41	%	0.61
2025	412,701		6,304		3.69		5.06		1.66
2026	189,287		(573)		4.13		5.39		2.66
2027	174,841		8,970		4.04		5.04		3.35
2028	650,990		7,516		3.48		5.38		4.54
2029	53,011		4,378		2.19		5.38		5.32
2030	150,817		1,122		3.50		5.39		6.59
2031	157,766		24,131		1.51		5.38		7.46
2032	181,867		11,069		2.80		5.38		8.56
2033	437,619		6,960		3.40		5.38		9.42
2035	500		132		0.78		5.33		11.81
2036	1,102		280		1.19		5.38		12.13
2037	45,000		3,780		2.81		5.38		13.66
2038	32,500		(1,727)		4.01		5.39		14.67
2040	500		165		0.90		5.33		16.82
2049	5,729		845		2.63		5.38		25.02
2050	500		207		0.98		5.33		26.82
2052	5,000		1,281		2.07		5.38		28.27
Total	$	3,129,277	$	83,937	3.34	%	5.33	%	4.68

The following tables provide information about the Company's fixed receiver interest rate swaps as of March 31, 2024 and December 31, 2023:

March 31, 2024:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2024	$	52,236	$	(699)	5.43	%	3.56	%	0.59
2025	143,183		(360)		5.34		4.87		0.98
2026	503,256		(580)		5.33		4.56		1.98
2027	121,157		(1,665)		5.33		3.88		2.98
2028	517,220		4,069		5.33		4.31		4.35
2029	372,044		(1,180)		5.33		3.95		4.91
2030	116,000		(267)		5.34		3.94		6.42
2031	35,000		(659)		5.33		3.64		6.79
2033	225,931		843		5.33		3.94		9.64
2034	69,930		(640)		5.33		3.74		9.90
2035	500		(154)		5.34		0.74		11.56
2038	36,300		(1,362)		5.33		3.54		14.73
2039	13,177		(306)		5.33		3.65		14.83
2040	500		(192)		5.34		0.84		16.57
2050	500		(242)		5.34		0.90		26.57
2053	13,795		(786)		5.33		3.33		29.74
Total	$	2,220,729	$	(4,180)	5.33	%	4.19	%	4.78

December 31, 2023:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2024	$	427,234	$	(578)	5.40	%	5.17	%	0.24
2025	143,183		67		5.38		4.87		1.23
2026	461,658		(8,399)		5.39		3.58		2.28
2027	36,591		30		5.39		3.68		3.90
2028	464,799		13,357		5.39		4.33		4.64
2030	67,000		1,737		5.39		3.97		6.77
2033	198,265		7,701		5.39		3.96		9.88
2035	500		(137)		5.38		0.74		11.81
2038	36,300		131		5.39		3.54		14.98
2040	500		(173)		5.38		0.84		16.82
2050	500		(220)		5.38		0.90		26.82
2053	22,800		41		5.39		3.33		29.99
Total	$	1,859,330	$	13,557	5.39	%	4.28	%	3.93

Schedule of Credit Default Swaps [Table Text Block]

The following table provides information about the Company's credit default swaps as of March 31, 2024 and December 31, 2023:


	As of
	March 31, 2024					December 31, 2023
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	$	226	$	12	13.75	$	230	$	12	13.99
Credit default swaps on corporate bonds	2,000		107		1.72	2,000		25		1.97
Credit default swaps on corporate bond indices	284,000		11,830		4.46	149,000		7,259		4.47
Short:
Credit default swaps on asset-backed securities	(45)		8		11.49	(45)		8		11.74
Credit default swaps on asset-backed indices	(42,003)		1,936		34.88	(42,101)		3,306		35.11
Liability:
Long:
Credit default swaps on asset-backed indices	60		(32)		24.97	60		(32)		25.22
Short:
Credit default swaps on corporate bonds	(13,000)		(246)		3.22	(13,000)		(225)		3.47
Credit default swaps on corporate bond indices	(674,269)		(22,037)		4.90	(537,299)		(15,894)		4.84
	$	(443,031)	$	(8,422)	7.98	$	(441,155)	$	(5,541)	7.81

(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 March 31, 2024 and December 31, 2023:


	As of
	March 31, 2024					December 31, 2023
Description	Notional Amount		Fair Value		Remaining Months to Expiration	Notional Amount		Fair Value		Remaining Months to Expiration
	(In thousands)					(In thousands)
Assets:
Long Contracts:
U.S. Treasury futures	$	1,900	$	49	5.67	$	1,900	$	245	2.63
Short Contracts:
U.S. Treasury futures	(49,800)		12		6.00	—		—		—
Liabilities:
Short Contracts:
U.S. Treasury futures	(274,300)		(888)		5.67	(313,100)		(7,990)		2.21
Total, net	$	(322,200)	$	(827)	5.72	$	(311,200)	$	(7,745)	2.21

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 March 31, 2024 and December 31, 2023:

March 31, 2024

December 31, 2023

Description

Number of Shares Underlying Warrant

Fair Value

Remaining Years to Expiration

Number of Shares Underlying Warrant

Fair Value

Remaining Years to Expiration

(In thousands)

Warrants

102

n/a

202

1,702

5.66

Schedule of TBA securities [Table Text Block]

As of March 31, 2024 and December 31, 2023, the Company had outstanding TBA purchase and sale contracts as follows:


	March 31, 2024								December 31, 2023
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	$	15,930	$	15,950	$	15,963	$	13	$	375,154	$	362,129	$	364,311	$	2,182
Liabilities	83,817		82,060		81,871		(189)		—		—		—		—
	99,747		98,010		97,834		(176)		375,154		362,129		364,311		2,182
Sale contracts:
Assets	(239,478)		(226,440)		(225,574)		866		—		—		—		—
Liabilities	(90,153)		(79,371)		(79,751)		(380)		(433,098)		(392,730)		(398,550)		(5,820)
	(329,631)		(305,811)		(305,325)		486		(433,098)		(392,730)		(398,550)		(5,820)
Total TBA securities, net	$	(229,884)	$	(207,801)	$	(207,491)	$	310	$	(57,944)	$	(30,601)	$	(34,239)	$	(3,638)

(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 Condensed Consolidated Balance Sheet.

Schedule of Gains and Losses on Derivative Contracts

Gains and losses on the Company's derivative contracts for the three-month periods ended March 31, 2024 and 2023 are summarized in the tables below:


		Three-Month Period Ended March 31, 2024
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		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	Interest Rate	$	15,438	$	(8,653)	$	6,785	$	(4,427)	$	23,890	$	19,463

Credit default swaps on asset-backed indices	Credit			(200)		(200)				(1,370)		(1,370)
Credit default swaps on corporate bond indices	Credit			(4,567)		(4,567)				1,676		1,676
Credit default swaps on corporate bonds	Credit			(7)		(7)				62		62
Total return swaps	Equity Market/Credit			20		20				(1)		(1)
TBAs	Interest Rate			817		817				3,948		3,948
Futures	Interest Rate			434		434				6,918		6,918
Forwards	Currency			110		110				395		395
Warrants	Credit			86		86				(726)		(726)
Total		$	15,438	$	(11,960)	$	3,478	$	(4,427)	$	34,792	$	30,365


		Three-Month Period Ended March 31, 2023
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	$	5,791	$	(31,075)	$	(25,284)	$	3,452	$	13,173	$	16,625
Credit default swaps on asset-backed securities	Credit			1		1				—		—
Credit default swaps on asset-backed indices	Credit			(275)		(275)				2,158		2,158
Credit default swaps on corporate bond indices	Credit			(1,348)		(1,348)				207		207
Credit default swaps on corporate bonds	Credit			(41)		(41)				(19)		(19)
TBAs	Interest Rate			4,292		4,292				(10,077)		(10,077)
Futures	Interest Rate			(2,933)		(2,933)				(5,664)		(5,664)
Forwards	Currency			141		141				(382)		(382)
Warrants	Equity Market/Credit			—		—				(80)		(80)
Total		$	5,791	$	(31,238)	$	(25,447)	$	3,452	$	(684)	$	2,768

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $5 thousand for the three-month period ended March 31, 2023, 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 three-month period ended March 31, 2024 and the year ended December 31, 2023:


Derivative Type	Three-Month Period Ended March 31, 2024		Year Ended December 31, 2023
(In thousands)
Interest rate swaps	$	5,369,996	$	4,309,089
Credit default swaps	811,654		497,857
TBAs	538,338		603,206
Futures	319,250		246,669
Forwards	23,200		15,567
Total return swaps	1,388		875
Warrants	177		1,926

Schedule of Credit Derivatives

Written credit derivatives held by the Company at March 31, 2024 and December 31, 2023 are summarized below:


Credit Derivatives	March 31, 2024		December 31, 2023
(In thousands)
Fair Value of Written Credit Derivatives, Net	$	11,917	$	7,264
Notional Value of Written Credit Derivatives(1)	286,286		151,290

(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.