Stockholders' Equity

Preferred Stock

Pursuant to our amended and restated certificate of incorporation, we are authorized to designate and issue up to 10.0 million shares of preferred stock in one or more classes or series. Our Board of Directors has designated 6.9 million shares as 8.000% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") and 8,050 shares as 7.750% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock"). As of December 31, 2014 we had 3.1 million shares of authorized but unissued shares of preferred stock. Our Board of Directors may designate additional series of authorized preferred stock ranking junior to or in parity with the Series A or Series B Preferred Stock or designate additional shares of the Series A or Series B Preferred Stock and authorize the issuance of such shares.

In April 2012, we completed a public offering in which 6.9 million shares of our Series A Preferred Stock were sold to the underwriters at a price of $24.2125 per share. Upon completion of the offering we received proceeds, net of offering expenses, of approximately $167 million. Our Series A Preferred Stock has no stated maturity and is not subject to any sinking fund or mandatory redemption. Under certain circumstances upon a change of control, our Series A Preferred Stock is convertible to shares of our common stock. Holders of Series A Preferred Stock have no voting rights, except under limited conditions, and holders are entitled to receive cumulative cash dividends at a rate of 8.000% per annum of the $25.00 per share liquidation preference before holders of our common stock are entitled to receive any dividends. Shares of our Series A Preferred Stock are redeemable at $25.00 per share plus accumulated and unpaid dividends (whether or not declared) exclusively at our option commencing on April 5, 2017, or earlier under certain circumstances intended to preserve our qualification as a REIT for federal income tax purposes. Dividends are payable quarterly in arrears on the 15th day of each January, April, July and October. As of December 31, 2014, we had declared all required quarterly dividends on our Series A Preferred Stock.

In May 2014, we completed a public offering in which 7.0 million depositary shares were sold to the underwriters at a price of $24.2125 per depositary share for proceeds, net of offering expenses, of approximately $169 million. Each depositary share represents a 1/1,000th interest in a share of our Series B Preferred Stock. Our Series B Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and ranks on parity with our Series A Preferred Stock. Under certain circumstances upon a change of control, our Series B Preferred Stock is convertible to shares of our common stock. Holders of depositary shares have no voting rights, except under limited conditions, and are entitled to receive cumulative cash dividends at a rate of 7.750% per annum of the $25.00 per depositary share liquidation preference before holders of our common stock are entitled to receive any dividends. Dividends are payable quarterly in arrears on the 15th day of each January, April, July and October. Depositary shares are redeemable at $25.00 per depositary share plus accumulated and unpaid dividends (whether or not declared) exclusively at our option commencing on May 8, 2019 or earlier under certain circumstances intended to preserve our qualification as a REIT for federal income tax purposes. As of December 31, 2014, we had declared all required quarterly dividends on the Series B Preferred Stock underlying our depositary shares.

Common Stock Repurchase Program

In October 2012, our Board of Directors adopted a program that provided for stock repurchases of up to $500 million of our outstanding shares of common stock through December 31, 2013. In September 2013, our Board of Directors increased the authorized amount to $1 billion of our outstanding shares of common stock and extended its authorization through December 31, 2014. In January 2014, our Board of Directors increased the authorized amount by an additional $1 billion of our outstanding shares of common stock through December 31, 2014. In October 2014, our Board of Directors extended its authorization through December 31, 2015. Shares of our common stock may be purchased in the open market, including through block purchases, or through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The timing, manner, price and amount of any repurchases will be determined at our discretion and the program may be suspended, terminated or modified at any time for any reason. We intend to only consider repurchasing shares of our common stock when the purchase price is less than our estimate of our current net asset value per common share. Generally, when we repurchase our common stock at a discount to our net asset value, the net asset value of our remaining shares of common stock outstanding increases. In addition, we do not intend to repurchase any shares from directors, officers or other affiliates. The program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases.

During fiscal year 2014, we repurchased approximately 3.4 million shares of our common stock at an average repurchase price of $22.10 per share, including expenses, totaling $74 million. During fiscal year 2013, we repurchased approximately 40.3 million shares of our common stock at an average repurchase price of $21.25 per share, including expenses, totaling $856 million. During fiscal year 2012, we repurchased 2.7 million shares of our common stock at an average repurchase price of $29.00 per share, including expenses, totaling $77 million. As of December 31, 2014, the total remaining amount authorized for repurchases of our common stock was $992 million.

Follow-On Equity Offerings

During fiscal years 2013 and 2012, we completed follow-on public offerings of shares of our common stock summarized in the table below (in millions, except per share amounts). During fiscal year 2014, we did not complete any follow-on public offerings of shares of our common stock.



Public Offering	Price Received Per Share ¹	Shares	Net Proceeds ²
Fiscal year 2013
March 2013	$31.34	57.5	$	1,803
Total fiscal year 2013		57.5	$	1,803

Fiscal year 2012
March 2012	$29.00	71.2	$	2,063
July 2012	$33.70	36.8	1,240
Total fiscal year 2012		108.0	$	3,303

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1.	Price received per share is gross of underwriters' discount, if applicable, and other offering costs.


2.	Net proceeds are net of the underwriters' discount, if applicable, and other offering costs.

At-the-Market Offering Program

We have entered into sales agreements with sales agents to publicly offer and sell shares of our common stock in privately negotiated and/or at-the-market transactions from time to time. The table below summarizes sales our common stock under such sales agreements during fiscal year 2012 (in millions, except per share amounts):



At-the-Market Offering	Price Received Per Share		Shares	Net Proceeds
Fiscal year 2012	$	31.41	9.5	$	298

During fiscal years 2014 and 2013, there were no shares issued under this program. As of December 31, 2014, 16.7 million shares remain available for issuance under this program.

Dividend Reinvestment and Direct Stock Purchase Plan

We sponsor a dividend reinvestment and direct stock purchase plan through which stockholders may purchase additional shares of our common stock by reinvesting some or all of the cash dividends received on shares of our common stock. Stockholders may also make optional cash purchases of shares of our common stock subject to certain limitations detailed in the plan prospectus. During fiscal years 2014, 2013 and 2012, there were no shares issued under the plan. As of December 31, 2014, 21.7 million shares remain available for issuance under the plan.

Accumulated Other Comprehensive Income (Loss)

The following tables summarize changes to accumulated OCI for fiscal years 2014, 2013 and 2012 (in millions):



Accumulated Other Comprehensive Income (Loss)	Net Unrealized Gain (Loss) on Available-for-Sale MBS			Net Unrealized Gain (Loss) on Swaps			Total Accumulated OCI Balance
Twelve Months Ended December 31, 2014
Balance as of December 31, 2013	$	(1,087	)	$	(296	)	$	(1,383	)
OCI before reclassifications	1,708			—			1,708
Amounts reclassified from accumulated OCI	(51		)	156			105
Balance as of December 31, 2014	$	570		$	(140	)	$	430

Twelve Months Ended December 31, 2013
Balance as of December 31, 2012	$	2,040		$	(485	)	$	1,555
OCI before reclassifications	(4,535		)	—			(4,535		)
Amounts reclassified from accumulated OCI	1,408			189			1,597
Balance as of December 31, 2013	$	(1,087	)	$	(296	)	$	(1,383	)

Twelve Months Ended December 31, 2012
Balance as of December 31, 2011	$	1,001		$	(690	)	$	311
OCI before reclassifications	2,235			—			2,235
Amounts reclassified from accumulated OCI	(1,196		)	205			(991		)
Balance as of December 31, 2012	$	2,040		$	(485	)	$	1,555

The following tables summarize reclassifications out of accumulated OCI for fiscal years 2014, 2013 and 2012 (in millions):



	Fiscal Year								Line Item in the Consolidated Statements of Comprehensive Income Where Net Income is Presented
Amounts Reclassified from Accumulated OCI	2014			2013		2012
(Gain) loss amounts reclassified from accumulated OCI for available-for-sale MBS	$	(51	)	$	1,408	$	(1,196	)	Gain (loss) on sale of agency securities, net
Periodic interest costs of interest rate swaps previously designated as hedges under GAAP, net	156			189		205			Interest expense
Total reclassifications	$	105		$	1,597	$	(991	)

Long-term Incentive Plan

We sponsor an equity incentive plan to provide for the issuance of equity-based awards, including stock options, restricted stock, restricted stock units and unrestricted stock awards to our independent directors.

During fiscal year 2014, we granted restricted stock unit ("RSU") awards under the plan totaling of $375,000, or $75,000 to each independent director. The awards represent the right to receive an equivalent number of shares of common stock as measured by the closing price of our common stock on the grant date, plus any equivalent RSUs for dividends declared on our common stock, and vest over a 13 month period, subject to the terms and conditions of the plan. As of December 31, 2014, we had unvested RSU common stock equivalents totaling 18,060 shares, or 3,612 shares for each independent director, based on a closing share price of $22.36 on the grant date and including accrued dividend equivalent RSUs.

During fiscal years 2013 and 2012, we granted restricted common stock awards under the plan. The restricted stock awards had a grant date fair value equal to the closing price of our common stock on such date and vest annually over three years. During fiscal year 2013, we granted 15,000 shares of restricted common stock, or 3,000 shares to each independent director, with a weighted average grant date fair value of $31.20 per share. During fiscal year 2012, we granted 12,000 shares of restricted common stock, or 3,000 shares to each independent director, with a grant date fair value of $29.48 per share. As of December 31, 2014, we had 14,000 shares of unvested restricted common stock outstanding under the plan.

During fiscal years 2014, 2013 and 2012, a total of 13,000, 9,500 and 7,000 shares of restricted common stock vested under the plan, respectively. The total fair value of restricted stock awards that vested during fiscal years 2014, 2013 and 2012 was approximately $286,000, $290,000 and $222,000, respectively, based upon the fair market value of our common stock on the vesting date.

During fiscal years 2014, 2013 and 2012, we recognized approximately $540,000, $383,000 and $282,000 of compensation expense under the plan, respectively. As of December 31, 2014, we had unrecognized compensation costs related to awards granted under the plan of approximately $317,000. As of December 31, 2014, approximately 29,000 shares of common stock remained available for future issuance under the plan, net of unissued shares reserved for unvested RSU awards and dividend equivalent RSUs outstanding as of December 31, 2014.