Other assets and liabilities

The following table details certain information on the Company's "Other assets" and "Other liabilities" line items on its consolidated balance sheet as of December 31, 2018 and December 31, 2017 (in thousands):



	December 31, 2018		December 31, 2017
Other assets
Interest receivable	$	12,762	$	12,607
Receivable under reverse repurchase agreements	11,461		24,671
Derivative assets, at fair value	1,729		2,127
Other assets	6,948		2,490
Due from broker	603		850
Total Other assets	$	33,503	$	42,745

Other liabilities
Obligation to return securities borrowed under reverse repurchase agreements, at fair value	$	11,378	$	24,379
Payable on unsettled trades	—		2,419
Interest payable	12,196		5,226
Derivative liabilities, at fair value	317		450
Due to affiliates	4,023		4,258
Accrued expenses (1)	7,859		790
Taxes payable	1,673		1,545
Due to broker	7,734		1,692
Total Other liabilities	$	45,180	$	40,759


(1)	The increase in accrued expenses from December 31, 2017 to December 31, 2018 pertains to increases in transaction related expenses payable and deal related performance fees payable, as well as increases in annual Single-family rental property taxes payable, a majority of which were advanced at settlement.

Derivative assets and liabilities

The Company’s derivatives may include interest rate swaps ("swaps"), TBAs, swaption contracts, Eurodollar Futures and U.S. Treasury Futures, (the latter two, collectively, "Futures"). Derivatives have not been designated as hedging instruments. The Company uses these derivatives and may also utilize other instruments to manage interest rate risk, including long and short positions in U.S. Treasury securities.

The Company may exchange cash "variation margin" with the counterparties to its derivative instruments on a daily basis based upon changes in the fair value of such derivative instruments as measured by the Chicago Mercantile Exchange ("CME") and the London Clearing House ("LCH"), the central clearinghouses ("CCPs") through which those derivatives are cleared. In addition, the CCPs require market participants to deposit and maintain an "initial margin" amount which is determined by the CCPs and is generally intended to be set at a level sufficient to protect the CCPs from the maximum estimated single-day price movement in that market participant’s contracts.

Receivables recognized for the right to reclaim cash initial margin posted in respect of derivative instruments are included in the "Restricted cash" line item in the consolidated balance sheets. Prior to the first quarter of 2017, the daily exchange of variation margin associated with centrally cleared derivative instruments was considered a pledge of collateral. For these prior periods, receivables recognized for the right to reclaim cash variation margin posted in respect of derivative instruments are included in the "Restricted cash" line item in the consolidated balance sheets.

Beginning in the first quarter of 2017, as a result of an amendment to the CCPs' rule book which governs their central clearing activities, the daily exchange of variation margin associated with a CCP instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. Accordingly, beginning in 2017, the Company accounts for the daily receipt or payment of variation margin associated with its centrally cleared derivative instruments as a direct reduction to the carrying value of the derivative asset or liability, respectively. Beginning in 2017, the carrying amount of centrally cleared derivative instruments reflected in the Company’s consolidated balance sheets approximates the unsettled fair value of such instruments. As variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments represents the change in fair value that occurred on the last day of the reporting period. Non-exchange traded derivatives were not affected by these legal interpretations and continue to be reported at fair value including accrued interest.

The following table presents the fair value of the Company's derivatives and other instruments and their balance sheet location at December 31, 2018 and December 31, 2017 (in thousands).



Derivatives and Other Instruments	Designation	Balance Sheet Location	December 31, 2018			December 31, 2017
Interest rate swaps (1)	Non-Hedge	Other assets	$	1,406		$	1,428
Interest rate swaps (1)	Non-Hedge	Other liabilities	(317		)	(450		)
Swaptions	Non-Hedge	Other assets	323			362
TBAs	Non-Hedge	Other assets	—			227
Short positions on U.S. Treasury Futures (2)	Non-Hedge	Other assets	—			110
Short positions on U.S. Treasuries	Non-Hedge	Other liabilities (3)	(11,378		)	(24,379		)


(1)	As of December 31, 2018, the Company applied a reduction in fair value of $26.0 million and $18.1 million to its interest rate swap assets and liabilities, respectively, related to variation margin. As of December 31, 2017, the Company applied a reduction in fair value of $19.5 million and $0.6 million to its interest rate swap assets and liabilities, respectively, related to variation margin


(2)	As of December 31, 2018, the Company applied a reduction in fair value of $0.1 million and $1.0 million to its U.S. Treasury Futures assets and Eurodollar Future liabilities, respectively, related to variation margin. As of December 31, 2017, the Company did not apply a fair value reduction to its U.S. Treasury Futures and Eurodollar Futures assets and liabilities related to variation margin.


(3)	Short positions on U.S. Treasuries relate to securities borrowed to cover short sales of U.S. Treasury securities. The change in fair value of the borrowed securities is recorded in the "Unrealized gain/(loss) on derivatives and other instruments, net" line item in the Company's consolidated statement of operations.

The following table summarizes information related to derivatives and other instruments (in thousands):



Non-hedge derivatives and other instruments held long/(short):	December 31, 2018			December 31, 2017
Notional amount of Pay Fix/Receive Float Interest Rate Swap Agreements	$	1,963,500		$	2,227,000
Notional amount of Swaptions	260,000			270,000
Net notional amount of TBAs	—			100,000
Notional amount of short positions on U.S. Treasury Futures (1)	—			(52,500		)
Notional amount of long positions on U.S. Treasury Futures (1)	30,000			—
Notional amount of short positions on Eurodollar Futures (2)	(500,000		)	—
Notional amount of short positions on U.S. Treasuries	(11,250		)	(24,668		)


(1)	Each U.S. Treasury Future contract embodies $100,000 of notional value.


(2)	Each Eurodollar Future contract embodies $1,000,000 of notional value.

The following table summarizes gains/(losses) related to derivatives and other instruments (in thousands):



Non-hedge derivatives and other instruments gain/(loss):	Statement of Operations Location	Year Ended December 31, 2018			Year Ended December 31, 2017			Year Ended December 31, 2016
Interest rate swaps	Unrealized gain/(loss) on derivative and other instruments, net	$	(11,171	)	$	20,547		$	5,009
Interest rate swaps	Net realized gain/(loss)	21,338			(9,959		)	(10,939		)
Swaptions, at fair value	Unrealized gain/(loss) on derivative and other instruments, net	(1,083		)	(596		)	—
Swaptions, at fair value	Net realized gain/(loss)	(790		)	—			—
Eurodollar Futures	Unrealized gain/(loss) on derivative and other instruments, net	(1,001		)	—			—
Eurodollar Futures	Net realized gain/(loss)	—			1,372			1,059
U.S. Treasury Futures	Unrealized gain/(loss) on derivative and other instruments, net	36			748			(639		)
U.S. Treasury Futures	Net realized gain/(loss)	607			(4,050		)	1,558
TBAs (1)	Unrealized gain/(loss) on derivative and other instruments, net	(227		)	650			(282		)
TBAs	Net realized gain/(loss)	(233		)	1,669			2,771
U.S. Treasuries	Unrealized gain/(loss) on derivative and other instruments, net	(176		)	(1,631		)	4,314
U.S. Treasuries	Net realized gain/(loss)	177			1,742			3,522

(1)

For the year ended December 31, 2018, gains and losses from purchases and sales of TBAs consisted of $1.6 million of net TBA dollar roll net interest income and net losses of $2.1 million due to price changes. For the year ended December 31, 2017, gains and losses from purchases and sales of TBAs consisted of $3.1 million of net TBA dollar roll net interest income and net losses of $0.8 million due to price changes. For the year ended December 31, 2016, gains and losses from purchases and sales of TBAs consisted of $0.3 million of net TBA dollar roll net interest income and net gains of $2.2 million due to price changes.

The following table presents both gross information and net information about derivative and other instruments eligible for offset in the consolidated balance sheets as of December 31, 2018 (in thousands):



							Gross Amounts Not Offset in the Consolidated Balance Sheets
Description (1)	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets (Liabilities) Presented in the Consolidated Balance Sheets		Financial Instruments (Posted)/Received		Cash Collateral (Posted)/Received			Net Amount
Receivable Under Reverse Repurchase Agreements	$	11,461	$	—	$	11,461	$	11,378	$	—		$	83

Derivative Assets (2)
Interest Rate Swaps	$	2,608	$	—	$	2,608	$	—	$	1,465		$	1,143
Interest Rate Swaptions	322		—		322		—		(600		)	922
Total Derivative Assets	$	2,930	$	—	$	2,930	$	—	$	865		$	2,065

Derivative Liabilities (3)
Interest Rate Swaps	$	1,635	$	—	$	1,635	$	—	$	1,465		$	170
Total Derivative Liabilities	$	1,635	$	—	$	1,635	$	—	$	1,465		$	170


(1)	The Company applied a reduction of fair value of $26.0 million and $18.1 million to its interest rate swap assets and liabilities, respectively, and a reduction of fair value of $0.1 million and $1.0 million to its U.S. Treasury Futures assets and Eurodollar Future liabilities, respectively, related to variation margin.


(2)	Included in Other assets on the consolidated balance sheet is $2.9 million less accrued interest of $(1.2) million for a total of $1.7 million.


(3)	Included in Other liabilities on the consolidated balance sheet is $1.6 million less accrued interest of $(1.9) million for a total of $(0.3) million.

The following table presents both gross information and net information about derivative instruments eligible for offset in the consolidated balance sheets as of December 31, 2017 (in thousands):



									Gross Amounts Not Offset in the Consolidated Balance Sheets
Description (1)	Gross Amounts of Recognized Assets (Liabilities)			Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets (Liabilities) Presented in the Consolidated Balance Sheets			Financial Instruments (Posted)/Received		Cash Collateral (Posted)/Received			Net Amount
Receivable Under Reverse Repurchase Agreements	$	24,671		$	—	$	24,671		$	24,379	$	—		$	292

Derivative Assets (2)
Interest Rate Swaps	$	4,544		$	—	$	4,544		$	—	$	1,666		$	2,878
Interest Rate Swaptions	362			—		362			—		—			362
TBAs	227			—		227			—		—			227
U.S. Treasury Futures - Short	110			—		110			—		—			110
Total Derivative Assets	$	5,243		$	—	$	5,243		$	—	$	1,666		$	3,577

Derivative Liabilities (3)
Interest Rate Swaps	$	(6	)	$	—	$	(6	)	$	—	$	(6	)	$	—
Total Derivative Liabilities	$	(6	)	$	—	$	(6	)	$	—	$	(6	)	$	—


(1)	The Company applied a reduction of fair value of $19.5 million and $0.6 million to its interest rate swap assets and liabilities, respectively, related to variation margin.


(2)	Included in Other assets on the consolidated balance sheet is $5.2 million less accrued interest of $(3.1) million for a total of $2.1 million.


(3)	Included in Other liabilities on the consolidated balance sheet is $(6) thousand plus accrued interest of $(444) thousand for a total of $(450) thousand.

The Company must post cash or securities as collateral on its derivative instruments when their fair value declines. This typically occurs when prevailing market rates change adversely, with the severity of the change also dependent on the term of the derivatives involved. The posting of collateral is generally bilateral, meaning that if the fair value of the Company’s derivatives increases, its counterparty will post collateral to it. As of December 31, 2018, the Company pledged real estate securities with a fair value of $7.2 million and cash of $29.3 million as collateral against certain derivatives. Of the $29.3 million of cash pledged as collateral against certain derivatives, $7.1 million represents amounts related to variation margin. The Company’s counterparties posted cash of $1.5 million as collateral for certain derivatives. On December 31, 2017, the Company pledged real estate securities with a fair value of $7.5 million and cash of $25.4 million as collateral against certain derivatives. The Company’s counterparties posted cash of $1.7 million to it as collateral for certain derivatives.

Interest rate swaps

To help mitigate exposure to increases in interest rates, the Company uses currently-paying and may use forward-starting, one- or three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. This arrangement hedges our exposure to higher interest rates because the variable-rate payments received on the swap agreements largely offset additional interest accruing on the related borrowings due to the higher interest rate, leaving the fixed-rate payments to be paid on the swap agreements as the Company’s effective borrowing rate, subject to certain adjustments including changes in spreads between variable rates on the swap agreements and actual borrowing rates.

As of December 31, 2018, the Company’s interest rate swap positions consist of pay-fixed interest rate swaps. The following table presents information about the Company’s interest rate swaps as of December 31, 2018 (in thousands):



Maturity	Notional Amount		Weighted Average Pay-Fixed Rate		Weighted Average Receive-Variable Rate		Weighted Average Years to Maturity
2020	$	105,000	1.54	%	2.56	%	1.20
2021	58,500		3.00	%	2.63	%	2.76
2022	478,000		1.87	%	2.72	%	3.58
2023	403,000		3.05	%	2.64	%	4.65
2024	230,000		2.06	%	2.63	%	5.50
2025	125,000		2.87	%	2.70	%	6.38
2026	75,000		2.12	%	2.66	%	7.89
2027	264,000		2.35	%	2.66	%	8.68
2028	225,000		2.96	%	2.69	%	9.37
Total/Wtd Avg	$	1,963,500	2.41	%	2.67	%	5.57

As of December 31, 2017, the Company’s interest rate swap positions consist of pay-fixed interest rate swaps. The following table presents information about the Company’s interest rate swaps as of December 31, 2017 (in thousands):



Maturity	Notional Amount		Weighted Average Pay-Fixed Rate		Weighted Average Receive-Variable Rate		Weighted Average Years to Maturity
2019	$	170,000	1.36	%	1.43	%	1.88
2020	835,000		1.77	%	1.52	%	2.54
2022	653,000		1.90	%	1.51	%	4.59
2024	230,000		2.06	%	1.47	%	6.50
2026	75,000		2.12	%	1.44	%	8.89
2027	264,000		2.35	%	1.50	%	9.69
Total/Wtd Avg	$	2,227,000	1.89	%	1.50	%	4.56

TBAs

As discussed in Note 2, the Company has entered into TBAs.

The following table presents information about the Company’s TBAs for the years ended December 31, 2018, December 31, 2017, and December 31, 2016 (in thousands):



For the Year Ended December 31, 2018
	Beginning Notional Amount		Buys or Covers		Sales or Shorts			Ending Net Notional Amount		Net Fair Value as of Year End		Net Receivable/(Payable) from/to Broker		Derivative Asset		Derivative Liability
TBAs - Long	$	100,000	$	1,761,000	$	(1,861,000	)	$	—	$	—	$	—	$	—	$	—
TBAs - Short	$	—	$	1,071,000	$	(1,071,000	)	$	—	$	—	$	—	$	—	$	—



For the Year Ended December 31, 2017
	Beginning Notional Amount			Buys or Covers		Sales or Shorts			Ending Net Notional Amount		Net Fair Value as of Year End		Net Receivable/(Payable) from/to Broker			Derivative Asset		Derivative Liability
TBAs - Long	$	50,000		$	2,231,000	$	(2,181,000	)	$	100,000	$	102,711	$	(102,484	)	$	227	$	—
TBAs - Short	$	(75,000	)	$	75,000	$	—		$	—	$	—	$	—		$	—	$	—



For the Year Ended December 31, 2016
	Beginning Notional Amount		Buys or Covers		Sales or Shorts			Ending Net Notional Amount			Net Fair Value as of Year End			Net Receivable/(Payable) from/to Broker			Derivative Asset		Derivative Liability
TBAs - Long	$	75,000	$	429,000	$	(454,000	)	$	50,000		$	51,250		$	(51,428	)	$	—	$	(178	)
TBAs - Short	$	—	$	705,000	$	(780,000	)	$	(75,000	)	$	(74,590	)	$	74,344		$	—	$	(246	)