Derivatives and Hedging Activities (Tables)
|
3 Months Ended |
Mar. 31, 2017 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
|
Outstanding Interest Rate Swaptions and Derivative Instrument Information |
The following table summarizes changes in the notional amount of our derivative instruments during 2017: | | | | | | | | | | | | | $ in thousands | Notional Amount as of January 1, 2017 | | Additions | | Settlement, Termination, Expiration or Exercise | | Notional Amount as of March 31, 2017 | Interest Rate Swaps | 6,500,000 |
| | 1,150,000 |
| | — |
| | 7,650,000 |
| Currency Forward Contracts | 62,308 |
| | 69,269 |
| | (65,576 | ) | | 66,001 |
| Credit Derivatives | 569,966 |
| | — |
| | (3,007 | ) | | 566,959 |
| Total | 7,132,274 |
| | 1,219,269 |
| | (68,583 | ) | | 8,282,960 |
|
|
Interest Rate Derivatives Outstanding Designated as Cash Flow Hedges |
As of March 31, 2017, we had the following interest rate swaps outstanding: | | | | | | | | | | | $ in thousands Counterparty | | Notional | | Maturity Date | | Fixed Interest Rate in Contract | ING Capital Markets LLC | | 350,000 |
| | 2/24/2018 | | 0.95 | % | UBS AG | | 500,000 |
| | 5/24/2018 | | 1.10 | % | ING Capital Markets LLC | | 400,000 |
| | 6/5/2018 | | 0.87 | % | CME Central Clearing | | 300,000 |
| | 2/5/2021 | | 2.50 | % | CME Central Clearing | | 300,000 |
| | 2/5/2021 | | 2.69 | % | Wells Fargo Bank, N.A. | | 200,000 |
| | 3/15/2021 | | 3.14 | % | CME Central Clearing | | 500,000 |
| | 5/24/2021 | | 2.25 | % | Citibank, N.A. | | 200,000 |
| | 5/25/2021 | | 2.83 | % | CME Central Clearing | | 500,000 |
| | 6/24/2021 | | 2.44 | % | HSBC Bank USA, National Association | | 550,000 |
| | 2/24/2022 | | 2.45 | % | CME Central Clearing | | 1,000,000 |
| | 6/9/2022 | | 2.21 | % | The Royal Bank of Scotland Plc | | 500,000 |
| | 8/15/2023 | | 1.98 | % | CME Central Clearing | | 600,000 |
| | 8/24/2023 | | 2.88 | % | HSBC Bank USA, National Association | | 500,000 |
| | 12/15/2023 | | 2.20 | % | CME Central Clearing | | 450,000 |
| | 1/12/2024 | | 2.10 | % | CME Central Clearing | | 450,000 |
| | 1/25/2024 | | 2.15 | % | CME Central Clearing | | 100,000 |
| | 4/2/2025 | | 2.04 | % | CME Central Clearing | (1 | ) | 250,000 |
| | 5/24/2028 | | 2.78 | % | Total | | 7,650,000 |
| | | | 2.16 | % |
| | (1) | Forward start date of 5/24/2018 |
|
Disclosure of Credit Derivatives |
At March 31, 2017 and December 31, 2016, terms of the GSE CRT embedded derivatives are: | | | | | | | $ in thousand | March 31, 2017 | | December 31, 2016 | Fair value amount | 31,243 |
| | 17,095 |
| Notional amount | 566,959 |
| | 569,966 |
| Maximum potential amount of future undiscounted payments | 566,959 |
| | 569,966 |
|
|
Fair Value of Derivative Financial Instruments and Classification on Balance Sheet |
The table below presents the fair value of our derivative financial instruments, as well as their classification on the condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016. $ in thousands | | | | | | | | | | | | | | | | Derivative Assets | | Derivative Liabilities | | | As of March 31, 2017 | | As of December 31, 2016 | | | | As of March 31, 2017 | | As of December 31, 2016 | Balance Sheet | | Fair Value | | Fair Value | | Balance Sheet | | Fair Value | | Fair Value | Interest Rate Swaps Asset | | 5,387 |
| | 3,085 |
| | Interest Rate Swaps Liability | | 45,404 |
| | 133,833 |
| Currency Forward Contracts | | 412 |
| | 101 |
| | Currency Forward Contracts | | 219 |
| | 395 |
|
|
Effect of Derivative Financial Instruments on Statement of Operations |
The tables below present the effect of our credit derivatives on the condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016. | | | | | | | | | | | | | | $ in thousands | | Three months ended March 31, 2017 | Derivative not designated as hedging instrument | | Realized gain (loss), net | | GSE CRT embedded derivative coupon interest | | Unrealized gain (loss), net | | Realized and unrealized credit derivative income (loss), net | GSE CRT Embedded Derivatives | | — |
| | 5,807 |
| | 14,148 |
| | 19,955 |
|
| | | | | | | | | | | | | | $ in thousands | | Three months ended March 31, 2016 | Derivative not designated as hedging instrument | | Realized gain (loss), net | | GSE CRT embedded derivative coupon interest | | Unrealized gain (loss), net | | Realized and unrealized credit derivative income (loss), net | GSE CRT Embedded Derivatives | | (920 | ) | | 6,314 |
| | 3,016 |
| | 8,410 |
|
The following table summarizes the effect of interest rate swaps, interest rate swaptions and currency forward contracts reported in gain (loss) on derivative instruments, net on the condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016:
| | | | | | | | | | | | | | $ in thousands | | Three months ended March 31, 2017 | Derivative not designated as hedging instrument | | Realized gain (loss) on derivative instruments, net | | Contractual net interest expense | | Unrealized gain (loss), net | | Gain (loss) on derivative instruments, net | Interest Rate Swaps | | 15,994 |
| | (22,894 | ) | | 12,950 |
| | 6,050 |
| Currency Forward Contracts | | (1,076 | ) | | — |
| | 488 |
| | (588 | ) | Total | | 14,918 |
| | (22,894 | ) | | 13,438 |
| | 5,462 |
|
| | | | | | | | | | | | | | $ in thousands | | Three months ended March 31, 2016 | Derivative not designated as hedging instrument | | Realized gain (loss) on derivative instruments, net | | Contractual net interest expense | | Unrealized gain (loss), net | | Gain (loss) on derivative instruments, net | Interest Rate Swaps | | (43,895 | ) | | (29,091 | ) | | (166,671 | ) | | (239,657 | ) | Interest Rate Swaptions | | (1,485 | ) | | — |
| | 1,485 |
| | — |
| Currency Forward Contracts | | 2,395 |
| | — |
| | (1,281 | ) | | 1,114 |
| Total | | (42,985 | ) | | (29,091 | ) | | (166,467 | ) | | (238,543 | ) |
|