☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Maryland
|
75-2027937
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
8401 North Central Expressway, Suite 800, Dallas, TX
|
75225-4404
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer☑
|
Accelerated filer☐
|
Non-accelerated filer☐
|
Smaller reporting company☐
|
Common Stock ($0.01 par value)
|
95,988,971 as of November 4, 2016 |
Page
|
||
ITEM 1.
|
Financial Statements (unaudited)
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
ITEM 2.
|
21
|
|
ITEM 3.
|
47
|
|
ITEM 4.
|
47
|
|
PART II. ¾ OTHER INFORMATION
|
||
ITEM 6.
|
48
|
|
50
|
September 30, 2016
|
December 31, 2015
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Residential mortgage investments ($13.09 and $13.54 billion pledged at September 30, 2016 and December 31, 2015, respectively)
|
$
|
13,582,323
|
$
|
14,154,737
|
||||
Cash collateral receivable from interest rate swap counterparties
|
73,191
|
50,193
|
||||||
Interest rate swap agreements at fair value
|
2,501
|
7,720
|
||||||
Cash and cash equivalents
|
83,697
|
54,185
|
||||||
Receivables and other assets
|
164,102
|
179,531
|
||||||
$
|
13,905,814
|
$
|
14,446,366
|
|||||
Liabilities
|
||||||||
Secured borrowings
|
$
|
12,431,839
|
$
|
12,958,394
|
||||
Interest rate swap agreements at fair value
|
46,954
|
26,061
|
||||||
Unsecured borrowings
|
98,065
|
97,986
|
||||||
Common stock dividend payable
|
22,687
|
25,979
|
||||||
Accounts payable and accrued expenses
|
36,159
|
39,622
|
||||||
12,635,704
|
13,148,042
|
|||||||
Stockholders’ equity
|
||||||||
Preferred stock - $0.10 par value; 100,000 shares authorized: 7.50% Cumulative Redeemable Preferred Stock, Series E, 8,204 and 8,156 shares issued and outstanding ($205,107 and $203,902 aggregate liquidation preferences) at September 30, 2016 and December 31, 2015, respectively
|
198,331
|
197,172
|
||||||
Common stock - $0.01 par value; 250,000 shares authorized: 95,989 and 95,825 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
|
960
|
958
|
||||||
Paid-in capital
|
1,296,550
|
1,310,563
|
||||||
Accumulated deficit
|
(346,464
|
)
|
(346,464
|
)
|
||||
Accumulated other comprehensive income
|
120,733
|
136,095
|
||||||
1,270,110
|
1,298,324
|
|||||||
$
|
13,905,814
|
$
|
14,446,366
|
Quarter Ended
September 30
|
Nine Months Ended
September 30
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Interest income:
|
||||||||||||||||
Residential mortgage investments
|
$
|
49,845
|
$
|
49,485
|
$
|
162,654
|
$
|
158,471
|
||||||||
Other
|
174
|
88
|
494
|
281
|
||||||||||||
50,019
|
49,573
|
163,148
|
158,752
|
|||||||||||||
Interest expense:
|
||||||||||||||||
Secured borrowings
|
(26,636
|
)
|
(22,272
|
)
|
(80,232
|
)
|
(61,584
|
)
|
||||||||
Unsecured borrowings
|
(1,970
|
)
|
(2,122
|
)
|
(5,923
|
)
|
(6,367
|
)
|
||||||||
(28,606
|
)
|
(24,394
|
)
|
(86,155
|
)
|
(67,951
|
)
|
|||||||||
21,413
|
25,179
|
76,993
|
90,801
|
|||||||||||||
Other revenue (expense):
|
||||||||||||||||
Compensation-related expense
|
(1,299
|
)
|
(3,064
|
)
|
(6,565
|
)
|
(7,573
|
)
|
||||||||
Separation of service charge
|
(2,740
|
)
|
–
|
(2,740
|
)
|
–
|
||||||||||
Other general and administrative expense
|
(1,239
|
)
|
(1,309
|
)
|
(3,565
|
)
|
(3,628
|
)
|
||||||||
Miscellaneous other revenue
|
305
|
261
|
1,300
|
368
|
||||||||||||
(4,973
|
)
|
(4,112
|
)
|
(11,570
|
)
|
(10,833
|
)
|
|||||||||
Net income
|
$
|
16,440
|
$
|
21,067
|
$
|
65,423
|
$
|
79,968
|
||||||||
Net income available to common stockholders:
|
||||||||||||||||
Net income
|
$
|
16,440
|
$
|
21,067
|
$
|
65,423
|
$
|
79,968
|
||||||||
Less preferred stock dividends
|
(3,846
|
)
|
(3,809
|
)
|
(11,515
|
)
|
(11,339
|
)
|
||||||||
$
|
12,594
|
$
|
17,258
|
$
|
53,908
|
$
|
68,629
|
|||||||||
Net income per common share:
|
||||||||||||||||
Basic and diluted
|
$
|
0.13
|
$
|
0.18
|
$
|
0.56
|
$
|
0.72
|
||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
95,678
|
95,530
|
95,647
|
95,500
|
||||||||||||
Diluted
|
95,866
|
95,721
|
95,799
|
95,695
|
||||||||||||
Cash dividends declared per share:
|
||||||||||||||||
Common
|
$
|
0.23
|
$
|
0.26
|
$
|
0.72
|
$
|
0.88
|
||||||||
Series E preferred
|
0.47
|
0.47
|
1.41
|
1.41
|
Quarter Ended
September 30
|
Nine Months Ended
September 30
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net income
|
$
|
16,440
|
$
|
21,067
|
$
|
65,423
|
$
|
79,968
|
||||||||
Other comprehensive income (loss)
|
||||||||||||||||
Amounts related to available-for-sale securities:
|
||||||||||||||||
Change in net unrealized gains
|
(19,155
|
)
|
(11,130
|
)
|
10,245
|
(23,770
|
)
|
|||||||||
Amounts related to cash flow hedges:
|
||||||||||||||||
Change in net unrealized losses
|
12,558
|
(21,235
|
)
|
(41,714
|
)
|
(36,226
|
)
|
|||||||||
Reclassification adjustment for amounts included in net income
|
4,927
|
7,183
|
16,107
|
20,494
|
||||||||||||
(1,670
|
)
|
(25,182
|
)
|
(15,362
|
)
|
(39,502
|
)
|
|||||||||
Comprehensive income (loss)
|
$
|
14,770
|
$
|
(4,115
|
)
|
$
|
50,061
|
$
|
40,466
|
Nine Months Ended September 30
|
||||||||
2016
|
2015
|
|||||||
Operating activities:
|
||||||||
Net income
|
$
|
65,423
|
$
|
79,968
|
||||
Noncash items:
|
||||||||
Amortization of investment premiums
|
95,139
|
92,458
|
||||||
Amortization of equity-based awards
|
1,241
|
1,708
|
||||||
Other depreciation and amortization
|
97
|
100
|
||||||
Change in measureable hedge ineffectiveness related to interest rate swap agreements designated as cash flow hedges
|
506
|
130
|
||||||
Net change in receivables, other assets, accounts payable and accrued expenses
|
(953
|
)
|
6,389
|
|||||
Net cash provided by operating activities
|
161,453
|
180,753
|
||||||
Investing activities:
|
||||||||
Purchases of residential mortgage investments
|
(2,319,819
|
)
|
(2,757,199
|
)
|
||||
Interest receivable acquired with the purchase of residential mortgage investments
|
(3,139
|
)
|
(4,202
|
)
|
||||
Principal collections on residential mortgage investments, including changes in mortgage securities principal remittance receivable
|
2,773,344
|
2,577,985
|
||||||
Decrease (increase) in lending counterparty investments
|
50,000
|
(46,002
|
)
|
|||||
Net cash provided by (used in) investing activities
|
500,386
|
(229,418
|
)
|
|||||
Financing activities:
|
||||||||
Proceeds from repurchase arrangements and similar borrowings
|
94,430,910
|
84,927,006
|
||||||
Principal payments on repurchase arrangements and similar borrowings
|
(92,332,463
|
)
|
(87,281,325
|
)
|
||||
Proceeds from other secured borrowings
|
1,175,000
|
2,450,000
|
||||||
Principal payments on other secured borrowings
|
(3,800,000
|
)
|
(150,000
|
)
|
||||
Increase in cash collateral receivable from interest rate swap counterparties
|
(22,998
|
)
|
(12,729
|
)
|
||||
Proceeds from issuance of preferred shares
|
1,167
|
12,679
|
||||||
Other capital stock transactions
|
(57
|
)
|
(429
|
)
|
||||
Dividends paid
|
(83,886
|
)
|
(103,561
|
)
|
||||
Net cash used in financing activities
|
(632,327
|
)
|
(158,359
|
)
|
||||
Net change in cash and cash equivalents
|
29,512
|
(207,024
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
54,185
|
307,526
|
||||||
Cash and cash equivalents at end of period
|
$
|
83,697
|
$
|
100,502
|
Quarter Ended
September 30
|
Nine Months Ended
September 30
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Basic net income per common share
|
||||||||||||||||
Numerator for basic net income per common share:
|
||||||||||||||||
Net income
|
$
|
16,440
|
$
|
21,067
|
$
|
65,423
|
$
|
79,968
|
||||||||
Preferred stock dividends
|
(3,846
|
)
|
(3,809
|
)
|
(11,515
|
)
|
(11,339
|
)
|
||||||||
Earnings participation of unvested equity awards
|
(40
|
)
|
(28
|
)
|
(123
|
)
|
(95
|
)
|
||||||||
$
|
12,554
|
$
|
17,230
|
$
|
53,785
|
$
|
68,534
|
|||||||||
Denominator for basic net income per common share:
|
||||||||||||||||
Average number of shares of common stock outstanding
|
95,978
|
95,814
|
95,946
|
95,814
|
||||||||||||
Average unvested stock awards outstanding
|
(300
|
)
|
(284
|
)
|
(299
|
)
|
(314
|
)
|
||||||||
95,678
|
95,530
|
95,647
|
95,500
|
|||||||||||||
$
|
0.13
|
$
|
0.18
|
$
|
0.56
|
$
|
0.72
|
|||||||||
Diluted net income per common share
|
||||||||||||||||
Numerator for diluted net income per common share:
|
||||||||||||||||
Numerator for basic net income per common share
|
$
|
12,554
|
$
|
17,230
|
$
|
53,785
|
$
|
68,534
|
||||||||
Denominator for diluted net income per common share:
|
||||||||||||||||
Denominator for basic net income per common share
|
95,678
|
95,530
|
95,647
|
95,500
|
||||||||||||
Net effect of dilutive equity awards
|
188
|
191
|
152
|
195
|
||||||||||||
95,866
|
95,721
|
95,799
|
95,695
|
|||||||||||||
$
|
0.13
|
$
|
0.18
|
$
|
0.56
|
$
|
0.72
|
Unpaid
Principal
Balance
|
Investment
Premiums
|
Amortized
Cost Basis
|
Carrying
Amount (a)
|
Net
WAC (b)
|
Average
Yield (b)
|
|||||||||||||||||||
September 30, 2016
|
||||||||||||||||||||||||
Agency Securities:
|
||||||||||||||||||||||||
Fannie Mae/Freddie Mac:
|
||||||||||||||||||||||||
Fixed-rate
|
$
|
416
|
$
|
1
|
$
|
417
|
$
|
417
|
6.68
|
%
|
6.50
|
%
|
||||||||||||
ARMs
|
10,030,859
|
319,319
|
10,350,178
|
10,506,371
|
2.69
|
1.56
|
||||||||||||||||||
Ginnie Mae ARMs
|
2,964,263
|
98,330
|
3,062,593
|
3,071,174
|
2.55
|
1.16
|
||||||||||||||||||
12,995,538
|
417,650
|
13,413,188
|
13,577,962
|
2.66
|
1.46
|
|||||||||||||||||||
Residential mortgage loans:
|
||||||||||||||||||||||||
Fixed-rate
|
761
|
–
|
761
|
761
|
6.73
|
4.09
|
||||||||||||||||||
ARMs
|
1,904
|
9
|
1,913
|
1,913
|
3.80
|
2.97
|
||||||||||||||||||
2,665
|
9
|
2,674
|
2,674
|
4.63
|
3.29
|
|||||||||||||||||||
Collateral for structured financings
|
1,659
|
28
|
1,687
|
1,687
|
8.16
|
7.59
|
||||||||||||||||||
$
|
12,999,862
|
$
|
417,687
|
$
|
13,417,549
|
$
|
13,582,323
|
2.66
|
1.46
|
|||||||||||||||
December 31, 2015
|
||||||||||||||||||||||||
Agency Securities:
|
||||||||||||||||||||||||
Fannie Mae/Freddie Mac:
|
||||||||||||||||||||||||
Fixed-rate
|
$
|
796
|
$
|
2
|
$
|
798
|
$
|
799
|
6.61
|
%
|
6.17
|
%
|
||||||||||||
ARMs
|
10,014,401
|
317,545
|
10,331,946
|
10,487,785
|
2.55
|
1.68
|
||||||||||||||||||
Ginnie Mae ARMs
|
3,542,541
|
119,225
|
3,661,766
|
3,660,455
|
2.61
|
1.49
|
||||||||||||||||||
13,557,738
|
436,772
|
13,994,510
|
14,149,039
|
2.57
|
1.63
|
|||||||||||||||||||
Residential mortgage loans:
|
||||||||||||||||||||||||
Fixed-rate
|
1,155
|
1
|
1,156
|
1,156
|
6.76
|
5.02
|
||||||||||||||||||
ARMs
|
2,650
|
11
|
2,661
|
2,661
|
3.73
|
3.15
|
||||||||||||||||||
3,805
|
12
|
3,817
|
3,817
|
4.65
|
3.71
|
|||||||||||||||||||
Collateral for structured financings
|
1,850
|
31
|
1,881
|
1,881
|
8.12
|
7.82
|
||||||||||||||||||
$
|
13,563,393
|
$
|
436,815
|
$
|
14,000,208
|
$
|
14,154,737
|
2.57
|
1.63
|
(a) |
Includes unrealized gains and losses for residential mortgage investments classified as available-for-sale.
|
(b) |
Net WAC, or weighted average coupon, is the weighted average interest rate of the mortgage loans underlying the indicated investments net of servicing and other fees as of the indicated balance sheet date. Net WAC is expressed as a percentage calculated on an annualized basis on the unpaid principal balances of the mortgage loans underlying these investments. Average yield is presented for the quarter then ended, and is based on the cash component of interest income expressed as a percentage calculated on an annualized basis on average amortized cost basis (the “cash yield”) less the effects of amortizing investment premiums. Investment premium amortization is determined using the interest method and incorporates actual and anticipated future mortgage prepayments.
|
Collateral Type
|
Collateral
Carrying
Amount
|
Accrued
Interest
Receivable
|
Borrowings
Outstanding
|
Average
Borrowing
Rates
|
||||||||||||
September 30, 2016
|
||||||||||||||||
Borrowings under repurchase arrangements with maturities of 30 days or less:
|
||||||||||||||||
Agency Securities
|
$
|
11,302,826
|
$
|
24,045
|
$
|
10,741,746
|
0.71
|
%
|
||||||||
Borrowings under repurchase arrangements with maturities greater than 30 days:
|
||||||||||||||||
Agency Securities (31 to 90 days)
|
1,365,926
|
2,881
|
1,299,305
|
0.72
|
||||||||||||
Agency Securities (greater than 90 days)
|
160,250
|
1,003
|
139,101
|
0.92
|
||||||||||||
Similar borrowings:
|
||||||||||||||||
Collateral for structured financings
|
1,687
|
–
|
1,687
|
8.16
|
||||||||||||
12,830,689
|
27,929
|
12,181,839
|
||||||||||||||
FHLB advances
|
259,367
|
1,039
|
250,000
|
0.71
|
||||||||||||
$
|
13,090,056
|
$
|
28,968
|
$
|
12,431,839
|
0.72
|
||||||||||
Quarter-end borrowing rates adjusted for effects of related derivative financial instruments (Derivatives) held as cash flow hedges
|
0.86
|
|||||||||||||||
December 31, 2015
|
||||||||||||||||
Borrowings under repurchase arrangements with maturities of 30 days or less:
|
||||||||||||||||
Agency Securities
|
$
|
9,080,363
|
$
|
18,504
|
$
|
8,585,336
|
0.67
|
%
|
||||||||
Borrowings under repurchase arrangements with maturities greater than 30 days:
|
||||||||||||||||
Agency Securities (31 to 90 days)
|
423,710
|
861
|
346,177
|
0.63
|
||||||||||||
Agency Securities (greater than 90 days)
|
1,073,254
|
2,519
|
1,150,000
|
0.75
|
||||||||||||
Similar borrowings:
|
||||||||||||||||
Collateral for structured financings
|
1,881
|
–
|
1,881
|
8.12
|
||||||||||||
10,579,208
|
21,884
|
10,083,394
|
||||||||||||||
FHLB advances
|
2,956,908
|
11,422
|
2,875,000
|
0.43
|
||||||||||||
$
|
13,536,116
|
$
|
33,306
|
$
|
12,958,394
|
0.62
|
||||||||||
Year-end borrowing rates adjusted for effects of related Derivatives held as cash flow hedges
|
0.85
|
Quarter Ended
|
||||||||||||||||
September 30, 2016
|
December 31, 2015 | |||||||||||||||
Average
Borrowings
|
Average
Rate
|
Average
Borrowings
|
Average
Rate
|
|||||||||||||
Average borrowings and rates adjusted for the effects of related Derivatives held as cash flow hedges for the indicated periods
|
$
|
12,731,035
|
0.84
|
%
|
$
|
13,160,703
|
0.73
|
%
|
Period of
Contract Expiration
|
Notional
Amount
|
Average Fixed-Rate
Payment Requirement
|
||||||
Fourth quarter 2016 (expired October 1, 2016)
|
$
|
800,000
|
0.66
|
%
|
||||
First quarter 2017
|
1,000,000
|
0.72
|
||||||
Second quarter 2017
|
900,000
|
0.74
|
||||||
Third quarter 2017
|
400,000
|
0.74
|
||||||
Fourth quarter 2017
|
1,500,000
|
0.79
|
||||||
First quarter 2018
|
1,700,000
|
0.76
|
||||||
Second quarter 2018
|
600,000
|
0.79
|
||||||
Third quarter 2018
|
400,000
|
0.88
|
||||||
Second quarter 2019
|
450,000
|
0.77
|
||||||
Third quarter 2019
|
100,000
|
0.68
|
||||||
$
|
7,850,000
|
Balance Sheet
|
September 30
|
December 31
|
|||||||
Location
|
2016
|
2015
|
|||||||
Balance sheet-related
|
|||||||||
Swap agreements in a gain position (an asset) related to Secured borrowings
|
(a)
|
$
|
2,501
|
$
|
7,720
|
||||
Swap agreements in a loss position (a liability) related to:
|
|||||||||
Secured borrowings
|
(a)
|
(5,981
|
)
|
(1,051
|
)
|
||||
Unsecured borrowings
|
(a)
|
(40,973
|
)
|
(25,010
|
)
|
||||
Related net interest payable
|
(b)
|
(11,727
|
)
|
(10,942
|
)
|
||||
$
|
(56,180
|
)
|
$
|
(29,283
|
)
|
(a) |
The fair value of Derivatives with unrealized gains are aggregated and recorded as an asset on the face of the Balance Sheets separately from the fair value of Derivatives with unrealized losses that are recorded as a liability. The amount of net unrealized losses scheduled to be recognized in the Statements of Income over the next twelve months primarily in the form of fixed-rate swap payments in excess of current market rates totaled $8.8 million at September 30, 2016.
|
(b) |
Included in “Accounts payable and accrued expenses” on the face of the Balance Sheets.
|
Location of
Gain or
(Loss)
|
||||||||||||||||||||
Recognized
in
|
Quarter Ended
September 30
|
Nine Months Ended
September 30
|
||||||||||||||||||
Net Income
|
2016
|
2015
|
2016
|
2015
|
||||||||||||||||
Income statement-related
|
||||||||||||||||||||
Components of effect on interest expense:
|
||||||||||||||||||||
Amount of loss reclassified from Accumulated other comprehensive income related to the effective portion of active positions
|
$
|
(4,927
|
)
|
$
|
(7,183
|
)
|
$
|
(16,107
|
)
|
$
|
(20,494
|
)
|
||||||||
Amount of gain (loss) recognized (ineffective portion)
|
(323
|
)
|
(336
|
)
|
(1,210
|
)
|
(642
|
)
|
||||||||||||
Increase in interest expense and decrease in Net income as a result of the use of Derivatives
|
*
|
$
|
(5,250
|
)
|
$
|
(7,519
|
)
|
$
|
(17,317
|
)
|
$
|
(21,136
|
)
|
|||||||
Other comprehensive income-related
|
||||||||||||||||||||
Amount of gain (loss) recognized in Other comprehensive income (loss) (effective portion)
|
$
|
12,558
|
$
|
(21,235
|
)
|
$
|
(41,714
|
)
|
$
|
(36,226
|
)
|
* |
Included in “Interest expense: Secured borrowings” on the face of the Statements of Income.
|
Offsetting of Derivative Assets
|
||||||||||||||||||||||||
Gross
|
Net Amounts
|
Gross Amounts Not Offset
|
||||||||||||||||||||||
Gross
|
Amounts
|
of Assets
|
in the Balance Sheet (a)
|
|||||||||||||||||||||
Amounts of
Recognized |
Offset in
the Balance |
Presented in
the Balance |
Financial
|
Cash
Collateral |
Net
|
|||||||||||||||||||
Assets
|
Sheet
|
Sheet
|
Instruments
|
Received
|
Amount
|
|||||||||||||||||||
September 30, 2016
|
||||||||||||||||||||||||
Counterparty 4
|
$
|
1,126
|
$
|
1,375
|
$
|
2,501
|
$
|
(2,501
|
)
|
$
|
–
|
$
|
–
|
|||||||||||
December 31, 2015
|
||||||||||||||||||||||||
Counterparty 2
|
$
|
–
|
$
|
23
|
$
|
23
|
$
|
(23
|
)
|
$
|
–
|
$
|
–
|
|||||||||||
Counterparty 4
|
4,758
|
2,939
|
7,697
|
(7,697
|
)
|
–
|
–
|
|||||||||||||||||
$
|
4,758
|
$
|
2,962
|
$
|
7,720
|
$
|
(7,720
|
)
|
$
|
–
|
$
|
–
|
Offsetting of Financial Liabilities and Derivative Liabilities
|
||||||||||||||||||||||||
Gross
|
Net Amounts
|
Gross Amounts Not Offset
|
||||||||||||||||||||||
Gross
|
Amounts
|
of Liabilities
|
in the Balance Sheet (c)
|
|||||||||||||||||||||
Amounts of
Recognized |
Offset in
the Balance |
Presented in
the Balance |
Financial
|
Cash
Collateral |
Net
|
|||||||||||||||||||
Liabilities (b)
|
Sheet
|
Sheet (a)
|
Instruments
|
Pledged
|
Amount
|
|||||||||||||||||||
September 30, 2016
|
||||||||||||||||||||||||
Derivatives by counterparty:
|
||||||||||||||||||||||||
Counterparty 1
|
$
|
42,029
|
$
|
–
|
$
|
42,029
|
$
|
–
|
$
|
(42,029
|
)
|
$
|
–
|
|||||||||||
Counterparty 4
|
15,277
|
1,375
|
16,652
|
(2,501
|
)
|
(14,151
|
)
|
–
|
||||||||||||||||
57,306
|
1,375
|
58,681
|
(2,501
|
)
|
(56,180
|
)
|
–
|
|||||||||||||||||
Borrowings under repurchase arrangements
|
12,186,583
|
–
|
12,186,583
|
(12,186,583
|
)
|
–
|
–
|
|||||||||||||||||
$
|
12,243,889
|
$
|
1,375
|
$
|
12,245,264
|
$
|
(12,189,084
|
)
|
$
|
(56,180
|
)
|
$
|
–
|
|||||||||||
December 31, 2015
|
||||||||||||||||||||||||
Derivatives by counterparty:
|
||||||||||||||||||||||||
Counterparty 1
|
$
|
26,311
|
$
|
–
|
$
|
26,311
|
$
|
–
|
$
|
(26,311
|
)
|
$
|
–
|
|||||||||||
Counterparty 2
|
776
|
23
|
799
|
(23
|
)
|
(776
|
)
|
–
|
||||||||||||||||
Counterparty 4
|
6,954
|
2,939
|
9,893
|
(7,697
|
)
|
(2,196
|
)
|
–
|
||||||||||||||||
34,041
|
2,962
|
37,003
|
(7,720
|
)
|
(29,283
|
)
|
–
|
|||||||||||||||||
Borrowings under repurchase arrangements
|
10,090,846
|
–
|
10,090,846
|
(10,090,846
|
)
|
–
|
–
|
|||||||||||||||||
$
|
10,124,887
|
$
|
2,962
|
$
|
10,127,849
|
$
|
(10,098,566
|
)
|
$
|
(29,283
|
)
|
$
|
–
|
(a) |
Amounts presented are limited to recognized liabilities and cash collateral received associated with the indicated counterparty sufficient to reduce the related Net Amount to zero in accordance with ASU No. 2011-11, as amended by ASU No. 2013-01.
|
(b) |
Amounts include accrued interest of $11.7 million and $10.9 million on interest rate swap agreements and $6.4 million and $9.3 million on borrowings under repurchase arrangements, included in “Accounts payable and accrued expenses” on the face of the Balance Sheets as of September 30, 2016 and December 31, 2015, respectively.
|
(c) |
Amounts presented are limited to recognized assets and collateral pledged associated with the indicated counterparty sufficient to reduce the related Net Amount to zero in accordance with ASU No. 2011-11, as amended by ASU No. 2013-01.
|
Gains and Losses
on Cash Flow
Hedges
|
Unrealized Gains
and Losses on
Available-for-Sale
Securities
|
Total
|
||||||||||
Balance at June 30, 2016
|
$
|
(61,526
|
)
|
$
|
183,929
|
$
|
122,403
|
|||||
Activity for the quarter ended September 30, 2016:
|
||||||||||||
Other comprehensive income (loss) before reclassifications
|
12,558
|
(19,155
|
)
|
(6,597
|
)
|
|||||||
Amounts reclassified from accumulated other comprehensive income
|
4,927
|
–
|
4,927
|
|||||||||
Other comprehensive income (loss)
|
17,485
|
(19,155
|
)
|
(1,670
|
)
|
|||||||
Balance at September 30, 2016
|
$
|
(44,041
|
)
|
$
|
164,774
|
$
|
120,733
|
|||||
Balance at December 31, 2015
|
$
|
(18,434
|
)
|
$
|
154,529
|
$
|
136,095
|
|||||
Activity for the nine months ended September 30, 2016:
|
||||||||||||
Other comprehensive income (loss) before reclassifications
|
(41,714
|
)
|
10,245
|
(31,469
|
)
|
|||||||
Amounts reclassified from accumulated other comprehensive income
|
16,107
|
–
|
16,107
|
|||||||||
Other comprehensive income (loss)
|
(25,607
|
)
|
10,245
|
(15,362
|
)
|
|||||||
Balance at September 30, 2016
|
$
|
(44,041
|
)
|
$
|
164,774
|
$
|
120,733
|
September 30, 2016
|
December 31, 2015
|
||||||||||||||||
Borrowings
Outstanding
|
Average
Rate
|
Borrowings
Outstanding
|
Average
Rate
|
||||||||||||||
Junior subordinated notes maturing in:
|
|||||||||||||||||
October 2035
|
($35,000 face amount) |
$
|
34,267
|
7.92
|
%
|
$
|
34,234
|
7.91
|
%
|
||||||||
December 2035
|
($40,000 face amount) |
39,272
|
7.68
|
39,244
|
7.68
|
||||||||||||
September 2036
|
($25,000 face amount) |
24,526
|
7.72
|
24,508
|
8.96
|
||||||||||||
$
|
98,065
|
7.77
|
$
|
97,986
|
8.08
|
September 30, 2016
|
December 31, 2015
|
|||||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
Financial assets:
|
||||||||||||||||
Residential mortgage loans
|
$
|
2,674
|
$
|
2,700
|
$
|
3,817
|
$
|
3,900
|
||||||||
Lending counterparty investments
|
15,002
|
15,002
|
65,002
|
65,002
|
||||||||||||
Portfolio-related interest rate swap agreements
|
2,501
|
2,501
|
7,720
|
7,720
|
||||||||||||
Financial liabilities:
|
||||||||||||||||
Secured borrowings with initial terms of greater than 120 days
|
839,101
|
839,300
|
3,246,177
|
3,245,000
|
||||||||||||
Unsecured borrowings
|
98,065
|
59,100
|
97,986
|
77,200
|
||||||||||||
Interest rate swap agreements:
|
||||||||||||||||
Portfolio-related
|
5,981
|
5,981
|
1,051
|
1,051
|
||||||||||||
Unsecured borrowings-related
|
40,973
|
40,973
|
25,010
|
25,010
|
Amortized
|
Gross Unrealized
|
|||||||||||||||
Cost Basis
|
Gains
|
Losses
|
Fair Value
|
|||||||||||||
September 30, 2016
|
||||||||||||||||
Agency Securities classified as available-for-sale:
|
||||||||||||||||
Fannie Mae/Freddie Mac
|
$
|
10,350,186
|
$
|
157,460
|
$
|
1,267
|
$
|
10,506,379
|
||||||||
Ginnie Mae
|
3,062,593
|
14,795
|
6,214
|
3,071,174
|
||||||||||||
Residential mortgage securities classified as held-to-maturity
|
2,096
|
25
|
–
|
2,121
|
||||||||||||
December 31, 2015
|
||||||||||||||||
Agency Securities classified as available-for-sale:
|
||||||||||||||||
Fannie Mae/Freddie Mac
|
10,331,965
|
166,794
|
10,954
|
10,487,805
|
||||||||||||
Ginnie Mae
|
3,661,766
|
11,705
|
13,016
|
3,660,455
|
||||||||||||
Residential mortgage securities classified as held-to-maturity
|
2,660
|
44
|
–
|
2,704
|
September 30, 2016
|
December 31, 2015
|
|||||||||||||||
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||
Securities in an unrealized loss position:
|
||||||||||||||||
One year or greater
|
$
|
813,179
|
$
|
4,923
|
$
|
597,652
|
$
|
4,259
|
||||||||
Less than one year
|
1,114,807
|
2,558
|
4,468,844
|
19,711
|
||||||||||||
$
|
1,927,986
|
$
|
7,481
|
$
|
5,066,496
|
$
|
23,970
|
Number of
Shares
|
Weighted Average
Grant Date
Fair Value
|
|||||||
Unvested stock awards outstanding at December 31, 2015
|
288,861
|
$
|
11.98
|
|||||
Grants
|
170,490
|
8.97
|
||||||
Vestings
|
(153,784
|
)
|
12.00
|
|||||
Unvested stock awards outstanding at September 30, 2016
|
305,567
|
10.29
|
Quarter Ended
September 30, 2016
|
Nine Months Ended
September 30, 2016
|
|||||||||||||||
Book value per common share, beginning of period
|
$
|
11.21
|
$
|
11.42
|
||||||||||||
Change in unrealized gains and losses on mortgage securities classified as available-for-sale
|
(0.20
|
)
|
0.11
|
|||||||||||||
Change in unrealized gains and losses on interest rate swap agreements designated as cash flow hedges of:
|
||||||||||||||||
Secured borrowings
|
0.19
|
(0.10
|
)
|
|||||||||||||
Unsecured borrowings
|
–
|
(0.17
|
)
|
|||||||||||||
(0.01
|
)
|
(0.1
|
)%
|
(0.16
|
)
|
(1.4
|
)%
|
|||||||||
Capital transactions:
|
||||||||||||||||
Dividend distributions in excess of earnings
|
(0.10
|
)
|
(0.9
|
)%
|
(0.16
|
)
|
(1.4
|
)%
|
||||||||
Book value per common share, end of period
|
$
|
11.10
|
$
|
11.10
|
||||||||||||
Decrease in book value per common share during the indicated periods
|
$
|
(0.11
|
)
|
(1.0
|
)%
|
$
|
(0.32
|
)
|
(2.8
|
)%
|
Quarter Ended
September 30, 2016
|
Nine Months Ended
September 30, 2016
|
|||||||
Residential mortgage investments, beginning of period
|
$
|
13,901,543
|
$
|
14,154,737
|
||||
Portfolio acquisitions (principal amount) at average lifetime purchased yields of 2.10% and 2.23%, respectively
|
779,620
|
2,243,808
|
||||||
Investment premiums on acquisitions*
|
27,462
|
76,011
|
||||||
Portfolio runoff (principal amount)
|
(1,071,071
|
)
|
(2,807,339
|
)
|
||||
Investment premium amortization
|
(36,076
|
)
|
(95,139
|
)
|
||||
(Decrease) Increase in net unrealized gains on securities classified as available-for-sale
|
(19,155
|
)
|
10,245
|
|||||
Residential mortgage investments, end of period
|
$
|
13,582,323
|
$
|
13,582,323
|
||||
Decrease in residential mortgage investments during the indicated periods
|
$
|
(319,220
|
)
|
$
|
(572,414
|
)
|
* |
Residential mortgage investments typically are acquired at a premium to the securities’ unpaid principal balances. Investment premiums are recognized in earnings as portfolio yield adjustments using the interest method over the estimated lives of the related investments. As such, the level of mortgage prepayments impacts how quickly investment premiums are amortized.
|
ARM Type
|
Amortized
Cost Basis (a)
|
Net
WAC (b)
|
Fully
Indexed
WAC (b)
|
Average
Net
Margins (b)
|
Average
Periodic
Caps (b)
|
Average
Lifetime
Caps (b)
|
Months
To
Roll
|
||||||||||||||||||||
Current-reset ARMs:
|
|||||||||||||||||||||||||||
Fannie Mae Agency Securities
|
$
|
4,132,930
|
2.64
|
%
|
2.98
|
%
|
1.70
|
%
|
3.18
|
%
|
9.57
|
%
|
5.9
|
||||||||||||||
Freddie Mac Agency Securities
|
1,683,157
|
2.74
|
3.16
|
1.82
|
2.67
|
9.61
|
6.9
|
||||||||||||||||||||
Ginnie Mae Agency Securities
|
1,813,753
|
2.30
|
2.12
|
1.51
|
1.06
|
8.30
|
6.3
|
||||||||||||||||||||
Residential mortgage loans
|
1,913
|
3.80
|
2.91
|
2.08
|
1.63
|
11.04
|
4.9
|
||||||||||||||||||||
(57% of total)
|
7,631,753
|
2.58
|
2.82
|
1.68
|
2.57
|
9.27
|
6.2
|
||||||||||||||||||||
Longer-to-reset ARMs:
|
|||||||||||||||||||||||||||
Fannie Mae Agency Securities
|
2,528,932
|
2.72
|
3.18
|
1.62
|
3.33
|
7.73
|
41.8
|
||||||||||||||||||||
Freddie Mac Agency Securities
|
2,005,159
|
2.73
|
3.21
|
1.66
|
2.80
|
7.80
|
43.0
|
||||||||||||||||||||
Ginnie Mae Agency Securities
|
1,248,840
|
2.92
|
2.10
|
1.51
|
1.04
|
7.96
|
41.3
|
||||||||||||||||||||
(43% of total)
|
5,782,931
|
2.76
|
2.95
|
1.61
|
2.65
|
7.80
|
42.1
|
||||||||||||||||||||
$
|
13,414,684
|
2.66
|
2.88
|
1.65
|
2.60
|
8.64
|
21.7
|
||||||||||||||||||||
Gross WAC (rate paid by borrowers) (c)
|
3.26
|
(a) |
Amortized cost basis represents the Company’s investment (unpaid principal balance plus unamortized investment premiums) before unrealized gains and losses. At September 30, 2016, the ratio of amortized cost basis to unpaid principal balance for the Company’s ARM holdings was 103.21. This table excludes $3 million in fixed-rate agency-guaranteed mortgage pass-through securities, residential mortgage loans and private residential mortgage pass-through securities held as collateral for structured financings.
|
(b) |
Net WAC, or weighted average coupon, is the weighted average interest rate of the mortgage loans underlying the indicated investments, net of servicing and other fees as of the indicated date. Net WAC is expressed as a percentage calculated on an annualized basis on the unpaid principal balances of the mortgage loans underlying these investments. As such, it is similar to the cash yield on the portfolio which is calculated using amortized cost basis. Fully indexed WAC represents the weighted average coupon upon one or more resets using interest rate indexes and net margins as of the indicated date. Average net margins represent the weighted average levels over the underlying indexes that the portfolio can adjust to upon reset, usually subject to initial, periodic and/or lifetime caps on the amount of such adjustments during any single interest rate adjustment period and over the contractual term of the underlying loans. ARM securities with initial fixed-rate periods of five years or longer typically have either 200 or 500 basis point initial caps with 200 basis point periodic caps. Additionally, certain ARM securities held by the Company are subject only to lifetime caps or are not subject to a cap. For presentation purposes, average periodic caps in the table above reflect initial caps until after an ARM security has reached its initial reset date and lifetime caps, less the current net WAC, for ARM securities subject only to lifetime caps. At quarter-end, 71% of current-reset ARMs were subject to periodic caps averaging 1.74%; 20% were subject to initial caps averaging 3.55%; 8% were subject to lifetime caps averaging 7.39%; and 1% were not subject to a cap. All longer-to-reset ARM securities at September 30, 2016 were subject to initial caps.
|
(c) |
Gross WAC is the weighted average interest rate of the mortgage loans underlying the indicated investments, including servicing and other fees paid by borrowers, as of the indicated balance sheet date.
|
· |
current portfolio leverage levels,
|
· |
changes in market value of assets pledged and interest rate swap agreements held for hedging purposes as determined by lending and swap counterparties,
|
· |
mortgage prepayment levels,
|
· |
collateral requirements of lending and swap counterparties, and
|
· |
general conditions in the commercial banking and mortgage finance industries.
|
Investments (a)
|
Secured
Borrowings
|
Capital
Employed
|
Potential
Liquidity (b)
|
Portfolio
Leverage
|
|||||||||||||||
Balances as of September 30, 2016:
|
|||||||||||||||||||
Residential mortgage investments
|
$
|
13,582,323
|
$
|
12,431,839
|
$
|
1,150,484
|
$
|
530,789
|
|||||||||||
Cash collateral receivable from swap counterparties, net (c)
|
28,738
|
–
|
|||||||||||||||||
Other assets, net of other liabilities
|
188,953
|
83,697
|
|||||||||||||||||
$
|
1,368,175
|
$
|
614,486
|
9.09:1
|
|||||||||||||||
Balances as of December 31, 2015
|
$
|
14,154,737
|
$
|
12,958,394
|
$
|
1,396,310
|
$
|
702,881
|
9.28:1
|
(a) |
Investments are stated at balance sheet carrying amounts, which generally reflect estimated fair value as of the indicated dates.
|
(b) |
Potential liquidity is based on maximum amounts of borrowings available under existing uncommitted financing arrangements considering management’s estimate of the fair value of residential mortgage investments held as of the indicated dates adjusted for other sources of liquidity such as cash and cash equivalents.
|
(c) |
Cash collateral receivable from swap counterparties is presented net of cash collateral payable to swap counterparties, if applicable, and the fair value of interest rate swap positions as of the indicated date.
|
2016
|
2015
|
2014
|
||||||||||||||||||||||||||||||
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
|||||||||||||||||||||||||
Total financing spreads: (a)
|
||||||||||||||||||||||||||||||||
Yields on all interest-earning assets
|
1.45
|
%
|
1.53
|
%
|
1.69
|
%
|
1.62
|
%
|
1.40
|
%
|
1.42
|
%
|
1.66
|
%
|
1.61
|
%
|
||||||||||||||||
Borrowing rates on all interest-paying liabilities
|
0.89
|
0.89
|
0.87
|
0.79
|
0.74
|
0.68
|
0.65
|
0.63
|
||||||||||||||||||||||||
Total financing spreads
|
0.56
|
0.64
|
0.82
|
0.83
|
0.66
|
0.74
|
1.01
|
0.98
|
||||||||||||||||||||||||
Financing spreads on residential mortgage investments, a non- GAAP financial measure:
|
||||||||||||||||||||||||||||||||
Cash yields on residential mortgage investments (b)
|
2.52
|
2.50
|
2.47
|
2.44
|
%
|
2.42
|
%
|
2.41
|
%
|
2.42
|
%
|
2.43
|
%
|
|||||||||||||||||||
Investment premium amortization (b)
|
(1.06
|
)
|
(0.96
|
)
|
(0.75
|
)
|
(0.81
|
)
|
(0.99
|
)
|
(0.95
|
)
|
(0.72
|
)
|
(0.77
|
)
|
||||||||||||||||
Yields on residential mortgage investments
|
1.46
|
1.54
|
1.72
|
1.63
|
1.43
|
1.46
|
1.70
|
1.66
|
||||||||||||||||||||||||
Unhedged secured borrowing rates (c)
|
0.69
|
0.67
|
0.65
|
0.48
|
0.45
|
0.41
|
0.38
|
0.36
|
||||||||||||||||||||||||
Hedged secured borrowing rates (c)
|
0.93
|
0.96
|
0.93
|
0.87
|
0.84
|
0.77
|
0.75
|
0.72
|
||||||||||||||||||||||||
Secured borrowing rates
|
0.84
|
0.84
|
0.82
|
0.73
|
0.69
|
0.62
|
0.59
|
0.56
|
||||||||||||||||||||||||
Financing spreads on residential mortgage investments
|
0.62
|
0.70
|
0.90
|
0.90
|
0.74
|
0.84
|
1.11
|
1.10
|
||||||||||||||||||||||||
Constant prepayment rate (“CPR”)
|
25.80
|
23.19
|
18.23
|
19.62
|
23.21
|
21.98
|
16.66
|
17.58
|
(a) |
All interest-earning assets include residential mortgage investments, overnight investments and cash collateral receivable from interest rate swap counterparties. All interest-paying liabilities include unsecured borrowings and cash collateral payable to interest rate swap counterparties.
|
(b) |
Cash yields are based on the cash component of interest income. Investment premium amortization is determined using the interest method which incorporates actual and anticipated future mortgage prepayments. Both are expressed as a percentage calculated on average amortized cost basis for the indicated periods.
|
(c) |
Unhedged borrowing rates represent average rates on secured borrowings, before consideration of related currently-paying interest rate swap agreements. Hedged borrowing rates represent the average fixed-rate payments made on currently-paying interest rate swap agreements held for portfolio hedging purposes adjusted for differences between LIBOR-based variable-rate payments received on these swaps and unhedged borrowing rates, as well as the effects of any hedge ineffectiveness. Average fixed-rate swap payments were 0.75%, 0.73% and 0.69% for the third, second and first quarters of 2016, respectively, while the variable-rate payment adjustments equated to 0.18%, 0.23% and 0.24% on average currently-paying swap notional amounts outstanding for the same periods, respectively. During 2015 fixed-rate swap payments averaged 0.57% while variable-rate payment adjustments averaged 0.24% on average notional amounts outstanding.
|
2016
|
2015
|
2014
|
||||||||||||||||||||||||||||||
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
|||||||||||||||||||||||||
Total financing spreads
|
0.56
|
%
|
0.64
|
%
|
0.82
|
%
|
0.83
|
%
|
0.66
|
%
|
0.74
|
%
|
1.01
|
%
|
0.98
|
%
|
||||||||||||||||
Impact of yields on other interest-earning assets*
|
0.01
|
0.01
|
0.03
|
0.01
|
0.03
|
0.04
|
0.04
|
0.05
|
||||||||||||||||||||||||
Impact of borrowing rates on other interest-paying liabilities*
|
0.05
|
0.05
|
0.05
|
0.06
|
0.05
|
0.06
|
0.06
|
0.07
|
||||||||||||||||||||||||
Financing spreads on residential mortgage investments
|
0.62
|
0.70
|
0.90
|
0.90
|
0.74
|
0.84
|
1.11
|
1.10
|
Nine Months
Ended
September 30
|
||||||||
2016
|
2015
|
|||||||
Total financing spreads
|
0.67
|
%
|
0.80
|
%
|
||||
Impact of yields on other interest-earning assets*
|
0.01
|
0.03
|
||||||
Impact of borrowing rates on other interest-paying liabilities*
|
0.06
|
0.06
|
||||||
Financing spreads on residential mortgage investments
|
0.74
|
0.89
|
* |
Other interest-earning assets consist of overnight investments and cash collateral receivable from interest rate swap counterparties. Other interest-paying liabilities consist of unsecured borrowings (at average borrowing rates of 8.04% and 8.06% for the quarter and nine months ended September 30, 2016, respectively) and cash collateral payable to interest rate swap counterparties.
|
Quarter Ended
September 30
|
Nine Months Ended
September 30
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Income statement data: (in thousands, except per share data)
|
||||||||||||||||
Interest income on residential mortgage investments (before investment premium amortization)
|
$
|
85,921
|
$
|
83,808
|
$
|
257,793
|
$
|
250,929
|
||||||||
Investment premium amortization
|
(36,076
|
)
|
(34,323
|
)
|
(95,139
|
)
|
(92,458
|
)
|
||||||||
Related interest expense
|
(26,636
|
)
|
(22,272
|
)
|
(80,232
|
)
|
(61,584
|
)
|
||||||||
23,209
|
27,213
|
82,422
|
96,887
|
|||||||||||||
Other interest income (expense)
|
(1,796
|
)
|
(2,034
|
)
|
(5,429
|
)
|
(6,086
|
)
|
||||||||
21,413
|
25,179
|
76,993
|
90,801
|
|||||||||||||
Other revenue (expense):
|
||||||||||||||||
Compensation-related expense
|
(1,299
|
)
|
(3,064
|
)
|
(6,565
|
)
|
(7,573
|
)
|
||||||||
Separation of service charge
|
(2,740
|
)
|
–
|
(2,740
|
)
|
–
|
||||||||||
Other general and administrative expense
|
(1,239
|
)
|
(1,309
|
)
|
(3,565
|
)
|
(3,628
|
)
|
||||||||
Miscellaneous other revenue
|
305
|
261
|
1,300
|
368
|
||||||||||||
(4,973
|
)
|
(4,112
|
)
|
(11,570
|
)
|
(10,833
|
)
|
|||||||||
Net income
|
$
|
16,440
|
$
|
21,067
|
$
|
65,423
|
$
|
79,968
|
||||||||
Net income per diluted common share
|
$
|
0.13
|
$
|
0.18
|
$
|
0.56
|
$
|
0.72
|
||||||||
Average diluted shares outstanding
|
95,866
|
95,721
|
95,799
|
95,695
|
||||||||||||
Key operating statistics: (dollars in millions)
|
||||||||||||||||
Average yields:
|
||||||||||||||||
Residential mortgage investments:
|
||||||||||||||||
Cash yields
|
2.52
|
%
|
2.42
|
%
|
2.49
|
%
|
2.41
|
%
|
||||||||
Investment premium amortization
|
(1.06
|
)
|
(0.99
|
)
|
(0.92
|
)
|
(0.89
|
)
|
||||||||
Adjusted yields
|
1.46
|
1.43
|
1.57
|
1.52
|
||||||||||||
Other interest-earning assets
|
0.38
|
0.14
|
0.29
|
0.12
|
||||||||||||
Total average yields
|
1.45
|
1.40
|
1.56
|
1.49
|
||||||||||||
Average borrowing rates:
|
||||||||||||||||
Secured borrowings:
|
||||||||||||||||
Unhedged borrowing rates
|
0.69
|
0.45
|
0.67
|
0.41
|
||||||||||||
Hedged borrowing rates
|
0.93
|
0.84
|
0.94
|
0.79
|
||||||||||||
Adjusted portfolio-related borrowing rates
|
0.84
|
0.69
|
0.83
|
0.63
|
||||||||||||
Unsecured borrowings
|
8.04
|
8.49
|
8.06
|
8.49
|
||||||||||||
Total average borrowing rates
|
0.89
|
0.74
|
0.89
|
0.69
|
||||||||||||
Average total financing spreads
|
0.56
|
0.66
|
0.67
|
0.80
|
||||||||||||
Average financing spreads on residential mortgage investments, a non-GAAP financial measure*
|
0.62
|
0.74
|
0.74
|
0.89
|
||||||||||||
Average net yield on total interest-earning assets
|
0.62
|
0.71
|
0.74
|
0.85
|
||||||||||||
Average CPR
|
25.80
|
23.21
|
22.41
|
20.62
|
||||||||||||
Average balance information:
|
||||||||||||||||
Residential mortgage investments (cost basis)
|
$
|
13,629
|
$
|
13,885
|
$
|
13,771
|
$
|
13,858
|
||||||||
Other interest-earning assets
|
182
|
255
|
187
|
309
|
||||||||||||
Secured borrowings
|
12,731
|
13,010
|
12,879
|
13,009
|
||||||||||||
Currently-paying swap agreements (notional amounts)
|
7,602
|
7,794
|
7,535
|
7,529
|
||||||||||||
Unsecured borrowings (included in long-term investment capital)
|
98
|
98
|
98
|
98
|
||||||||||||
Long-term investment capital (“LTIC”)
|
1,380
|
1,475
|
1,389
|
1,492
|
||||||||||||
Operating costs as a percentage of average LTIC
|
0.73
|
%
|
1.18
|
%
|
0.97
|
%
|
1.00
|
%
|
||||||||
Return on average LTIC
|
6.10
|
6.24
|
7.13
|
7.73
|
||||||||||||
Return on average common equity capital
|
4.62
|
5.80
|
6.59
|
7.64
|
* |
Financing spreads on residential mortgage investments is a non-GAAP financial measure based solely on yields on Capstead’s residential mortgage investments, net of secured borrowing rates, adjusted for currently-paying interest rate swap agreements held for hedging purposes. This measure differs from total financing spreads, an all-inclusive GAAP measure that includes yields on all interest-earning assets, as well as rates paid on all interest-bearing liabilities, principally unsecured borrowings. See page 29 for a reconciliation of these financial measures and the Company’s rationale for using this non-GAAP financial measure.
|
Federal
Funds
Rate
|
10-year U.S.
Treasury
Rate
|
Down
0.50%
|
Up
0.50%
|
Up
1.00%
|
||||||||||||||||
Projected 12-month percentage change in net interest margins: *
|
||||||||||||||||||||
September 30, 2016
|
0.25-0.50
|
%
|
1.60
|
%
|
(10.5
|
)%
|
1.9
|
%
|
(0.8
|
)%
|
||||||||||
December 31, 2015
|
0.25-0.50
|
2.27
|
(9.2
|
)
|
(0.1
|
)
|
(5.3
|
)
|
||||||||||||
Projected percentage change in portfolio and related derivative values: *
|
||||||||||||||||||||
September 30, 2016
|
0.25-0.50
|
1.60
|
–
|
(0.2
|
)
|
(0.5
|
)
|
|||||||||||||
December 31, 2015
|
0.25-0.50
|
2.27
|
0.1
|
(0.3
|
)
|
(0.5
|
)
|
* |
Sensitivity of net interest margins as well as portfolio and related derivative values to changes in interest rates is determined relative to the actual rates at the applicable date. Note that the projected 12-month net interest margin change is predicated on acquisitions of similar assets sufficient to replace runoff. There can be no assurance that suitable investments will be available for purchase at attractive prices, if investments made will behave in the same fashion as assets currently held or if management will choose to replace runoff with such assets.
|
• |
the Company would be taxed as a regular domestic corporation, which, among other things, means that the Company would be unable to deduct dividends paid to its stockholders in computing taxable income and would be subject to federal income tax on its taxable income at regular corporate rates;
|
• |
any resulting tax liability could be substantial and would reduce the cash available for distribution to stockholders;
|
• |
the Company would not be required to make income distributions; and
|
• |
unless Capstead were entitled to relief under applicable statutory provisions, the Company would be disqualified from treatment as a REIT for the subsequent four taxable years and, as a result, the Company’s cash available for distribution to stockholders would be reduced during these years.
|
• |
will be required to pay tax on any undistributed REIT taxable income,
|
• |
may be subject to the “alternative minimum tax” on any tax preference items, and
|
• |
may operate taxable REIT subsidiaries subject to tax on any taxable income earned.
|
• |
Repurchase rights – Repurchase rights granted to Capstead’s board in its charter limit related investors, including, among other things, any voting group, from owning common stock if the concentration owned would jeopardize the Company's REIT status.
|
• |
Classification of preferred stock – Capstead’s charter authorizes the board to issue preferred stock and establish the preferences and rights of any class of preferred stock issued. These actions can be taken without soliciting stockholder approval and could have the effect of delaying or preventing someone from taking control of the Company.
|
• |
Statutory provisions – Capstead is subject to provisions of Maryland statutory law that restrict business combinations with interested stockholders and restrict voting rights of certain shares acquired in control share acquisitions. The board has not taken any action to exempt the Company from these provisions.
|
• |
Redemption rights – The Series E preferred stock is redeemable by the Company, in whole or in part, at any time on or after May 13, 2018, or pursuant to a Special Optional Redemption Right upon the occurrence of a Change of Control, as both terms are defined in the Series E Articles Supplementary, at a cash redemption price of $25.00 plus all accrued and unpaid dividends to, but not including, the date of redemption, which may be less than the prevailing market price for shares of the Series E preferred stock.
|
• |
Limited conversion rights – Holders of shares of the Series E preferred stock may convert into shares of common stock only upon the occurrence of a Change of Control, and only if the Company does not exercise its Special Optional Redemption Right. Even if this were to occur, it may not be economically advantageous to convert based on then-existing conversion ratios and trading levels of the common stock.
|
• |
Subordination – The Series E preferred stock is subordinate to all of the Company’s existing and future debt. None of the provisions relating to the Series E preferred stock limit the Company’s ability to incur future debt. Future debt may include restrictions on the Company’s ability to pay dividends on, redeem, or pay the liquidation preference on shares of the Series E preferred stock.
|
• |
Dilution through issuance of additional shares of preferred stock – The Company’s charter currently authorizes the issuance of up to 100 million shares of preferred stock in one or more series. The issuance of additional preferred stock on parity with or senior to the Series E preferred stock would dilute the interests of Series E preferred stockholders, and could affect the Company’s ability to pay dividends on, redeem, or pay the liquidation preference on, the Series E preferred stock. None of the provisions relating to the Series E preferred stock limit the Company’s ability to issue additional preferred stock on parity with Series E preferred stock.
|
• |
Limited voting rights – Voting rights as a holder of Series E preferred stock are limited. The Company’s common stock is currently the only class of stock carrying full voting rights. Voting rights for holders of shares of Series E preferred stock exist primarily with respect to (i) adverse changes in the terms of the Series E preferred stock, (ii) the creation of additional classes or series of preferred stock that are senior to the Series E preferred stock, and (iii) the non-payment of six quarterly Series E dividends (whether or not consecutive).
|
•
|
Amortization of investment premiums on residential mortgage investments – Investment premiums on residential mortgage investments are recognized in earnings as adjustments to interest income by the interest method over the estimated lives of the related assets. The single largest determinant in amortizing investment premiums is actual portfolio runoff (scheduled and unscheduled principal paydowns) for a given accounting period. This is because the investment premium associated with actual runoff is amortized when the runoff occurs pursuant to the interest method. Amortization is also affected by estimates and judgments related to future levels of mortgage prepayments used in determining additional amortization that may be necessary to achieve the required effective yield over the estimated life of the related investment.
|
• |
Fair value and impairment accounting for residential mortgage investments – Nearly all of Capstead’s residential mortgage investments are held in the form of mortgage securities that are classified as available-for-sale and recorded at fair value on the balance sheet with unrealized gains and losses recorded in Stockholders’ equity as a component of Accumulated other comprehensive income. As such, these unrealized gains and losses enter into the calculation of book value per common share, a key financial metric used by investors in evaluating the Company. Fair values fluctuate with current and projected changes in interest rates, prepayment expectations and other factors such as market liquidity conditions and the perceived credit quality of Agency Securities. Judgment is required to interpret market data and develop estimated fair values, particularly in circumstances of deteriorating credit quality and market liquidity. See NOTE 10 to the consolidated financial statements (included under Item 1 of this report) for discussion of how Capstead values its residential mortgage investments.
|
• |
Accounting for derivative financial instruments – Capstead uses derivatives for risk management purposes. Derivatives are recorded as assets or liabilities and carried at fair value and consequently, changes in value of these instruments enter into the calculation of book value per common share. Fair values fluctuate with current and projected changes in interest rates and other factors such as the Company’s and its counterparties’ nonperformance risk. Judgment is required to develop estimated fair values.
|
•
|
changes in general economic conditions;
|
•
|
fluctuations in interest rates and levels of mortgage prepayments;
|
•
|
the effectiveness of risk management strategies;
|
•
|
the impact of differing levels of leverage employed;
|
•
|
liquidity of secondary markets and credit markets;
|
•
|
the availability of financing at reasonable levels and terms to support investing on a leveraged basis;
|
•
|
the availability of new investment capital;
|
• |
the availability of suitable qualifying investments from both an investment return and regulatory perspective;
|
• |
changes in market conditions as a result of Federal Reserve monetary policy or federal government fiscal challenges;
|
• |
deterioration in credit quality and ratings of existing or future issuances of Fannie Mae, Freddie Mac or Ginnie Mae securities;
|
• |
changes in legislation or regulation affecting Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Home Loan Bank system and similar federal government agencies and related guarantees;
|
• |
changes in legislation or regulation affecting exemptions for mortgage REITs from regulation under the Investment Company Act of 1940;
|
• |
other changes in legislation or regulation affecting the mortgage and banking industries; and
|
•
|
increases in costs and other general competitive factors.
|
Exhibit Number
|
DESCRIPTION
|
3.1
|
Charter, including Articles of Incorporation, Articles Supplementary for each series of preferred shares no longer outstanding and all other amendments to such Articles of Incorporation.(1)
|
3.2
|
Articles Supplementary classifying and designating the Registrant’s 7.50% Series E Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, par value $0.10 per share.(2)
|
3.3
|
Amended and Restated Bylaws.(3)
|
4.1
|
Specimen of Common Stock Certificate.(4)
|
4.2
|
Specimen of stock certificate evidencing the 7.50% Series E Cumulative Redeemable Preferred Stock of the Registrant, liquidation preference $25.00 per share, par value $0.10 per share.(2)
|
4.3
|
Junior Subordinated Indenture dated September 26, 2005.(5)
|
4.4
|
Indenture dated December 15, 2005.(5)
|
4.5
|
Indenture dated September 11, 2006.(5)
|
10.01
|
Amended and Restated Deferred Compensation Plan.(5)
|
10.02
|
Amended and Restated 2014 Flexible Incentive Plan.(6)
|
10.03
|
Amendment No. 1 to the Amended and Restated 2014 Flexible Incentive Plan.(7)
|
10.04
|
Second Amended and Restated Incentive Bonus Plan.(8)
|
10.05
|
Form of nonqualified stock option and stock award agreements for non-employee directors.(5)
|
10.06
|
Form of stock award agreements for employees with performance conditions.(9)
|
10.07
|
Form of stock award agreements for employees with performance conditions and deferral of dividends.(10)
|
10.08
|
2013 Annual Incentive Plan (short-term).(11)
|
10.09
|
2014 Annual Incentive Compensation Program (short-term).(3)
|
10.10
|
2014 Long-Term Award Criteria, as corrected.(3)
|
10.11
|
Form of performance unit agreement.(12)
|
10.12
|
2016 Annual Incentive Compensation Program.(13)
|
10.13
|
Form of restricted stock agreement for employees. (13)
|
10.14
|
2016 Long-Term Performance Unit Award Criteria. (13)
|
10.15
|
Form of performance unit agreement for employees. (13)
|
10.16
|
Sales agreement, dated January 23, 2015, by and between the Company and its continuous offering program sales manager.(14)
|
10.17
|
Severance agreement, dated May 3, 2016, by and between the Company and Roy S. Kim. (15)
|
10.18
|
Consulting Agreement, dated July 14, 2016, by and between the Company and Andrew F. Jacobs. (16)
|
Computation of ratio of net income to fixed charges and ratio of net income to combined fixed charges and preferred stock dividends.*
|
|
Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002*
|
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
|
Exhibit Number
|
DESCRIPTION
|
101.INS
|
XBRL Instance Document*
|
101.SCH
|
XBRL Taxonomy Extension Schema*
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase*
|
101.DEF
|
XBRL Additional Taxonomy Extension Definition Linkbase*
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase*
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase*
|
(1)
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K/A (No. 001-08896) for the year ended December 31, 2012.
|
(2)
|
Incorporated by reference to the Registrant’s Registration of Certain Classes of Securities on Form 8-A (No. 001-08896) dated May 13, 2013.
|
(3)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on February 3, 2014, for the event dated January 29, 2014.
|
(4)
|
Incorporated by reference to the Registrant’s Registration Statement on Form S-3 (No. 333-63358) dated June 19, 2001.
|
(5)
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K (No. 001-08896) for the year ended December 31, 2011.
|
(6)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on May 30, 2014, for the event dated May 28, 2014.
|
(7)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on February 20, 2015, for the event dated February 20, 2015.
|
(8)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on May 5, 2011, for the event dated May 4, 2011.
|
(9)
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K (No. 001-08896) for the year ended December 31, 2008.
|
(10)
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K (No. 001-08896) for the year ended December 31, 2010.
|
(11)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on October 23, 2013 for the event
dated October 21, 2013.
|
(12)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on January 6, 2015, for the event dated January 2, 2015.
|
(13)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on February 4, 2016, for the event dated February 1, 2016.
|
(14)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on January 29, 2015, for the event dated January 23, 2015.
|
(15)
|
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (No. 001-08896) for the quarter ended March 31, 2016.
|
(16)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K (No. 001-08896), filed on July 15, 2016, for the event dated July 14, 2016.
|
* | Filed herewith |
** | Furnished herewith |
CAPSTEAD MORTGAGE CORPORATION
Registrant
|
||
Date: November 4, 2016
|
By:
|
/s/ PHILLIP A. REINSCH
|
Phillip A. Reinsch
|
||
President and Chief Executive Officer,
|
||
Chief Financial Officer and Secretary
|
Nine Months
Ended
|
Year Ended December 31
|
|||||||||||||||||||||||
September 30,
2016
|
2015
|
2014
|
2013
|
2012
|
2011
|
|||||||||||||||||||
Fixed charges
|
$
|
86,155
|
$
|
93,975
|
$
|
73,643
|
$
|
75,104
|
$
|
77,848
|
$
|
66,080
|
||||||||||||
Fixed charges
|
$
|
86,155
|
$
|
93,975
|
$
|
73,643
|
$
|
75,104
|
$
|
77,848
|
$
|
66,080
|
||||||||||||
Net income
|
65,423
|
108,325
|
140,820
|
126,487
|
163,626
|
160,204
|
||||||||||||||||||
$
|
151,578
|
$
|
202,300
|
$
|
214,463
|
$
|
201,591
|
$
|
241,474
|
$
|
226,284
|
|||||||||||||
Ratio of net income to fixed charges
|
1.76:1
|
2.15:1
|
2.91:1
|
2.68:1
|
3.10:1
|
3.42:1
|
Nine Months
Ended
|
Year Ended December 31
|
|||||||||||||||||||||||
September 30,
2016
|
2015
|
2014
|
2013
|
2012
|
2011
|
|||||||||||||||||||
Fixed charges
|
$
|
86,155
|
$
|
93,975
|
$
|
73,643
|
$
|
75,104
|
$
|
77,848
|
$
|
66,080
|
||||||||||||
Preferred stock items:
|
||||||||||||||||||||||||
Redemption preference premiums*
|
–
|
–
|
–
|
19,924
|
–
|
–
|
||||||||||||||||||
Dividends
|
11,515
|
15,160
|
13,781
|
17,536
|
21,021
|
20,369
|
||||||||||||||||||
Combined fixed charges and preferred stock items
|
$
|
97,670
|
$
|
109,135
|
$
|
87,424
|
$
|
112,564
|
$
|
98,869
|
$
|
86,449
|
||||||||||||
Fixed charges
|
$
|
86,155
|
$
|
93,975
|
$
|
73,643
|
$
|
75,104
|
$
|
77,848
|
$
|
66,080
|
||||||||||||
Net income
|
65,423
|
108,325
|
140,820
|
126,487
|
163,626
|
160,204
|
||||||||||||||||||
$
|
151,578
|
$
|
202,300
|
$
|
214,463
|
$
|
201,591
|
$
|
241,474
|
$
|
226,284
|
|||||||||||||
Ratio of net income to combined fixed charges and preferred stock dividends
|
1.55:1
|
1.85:1
|
2.45:1
|
1.79:1
|
2.44:1
|
2.62:1
|
* |
Capstead’s Series A and B preferred shares were redeemed in June 2013. The ratio of net income to combined fixed charges and preferred stock dividends excluding the redemption preference premiums was 2.18:1 for the year ended December 31, 2013.
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Capstead Mortgage Corporation;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 4, 2016
|
By:
|
/s/ PHILLIP A. REINSCH
|
Phillip A. Reinsch
|
||
President and Chief Executive Officer,
|
||
Chief Financial Officer and Secretary
|
1. |
The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2016, (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 4, 2016
|
By:
|
/s/ PHILLIP A. REINSCH
|
Phillip A. Reinsch
|
||
President and Chief Executive Officer,
|
||
Chief Financial Officer and Secretary
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 04, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CAPSTEAD MORTGAGE CORP | |
Entity Central Index Key | 0000766701 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 95,988,971 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 |
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Assets | ||
Residential mortgage investments pledged | $ 13,090,000 | $ 13,540,000 |
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized (in shares) | 100,000 | 100,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 250,000 | 250,000 |
Common stock, shares issued (in shares) | 95,989 | 95,825 |
Common stock, shares outstanding (in shares) | 95,989 | 95,825 |
Cumulative Redeemable Preferred Stock, Series E [Member] | ||
Stockholders' equity | ||
Preferred stock, shares issued (in shares) | 8,204 | 8,156 |
Preferred stock, shares outstanding (in shares) | 8,204 | 8,156 |
Preferred stock, dividend rate | 7.50% | 7.50% |
Preferred stock, aggregate liquidation preference | $ 205,107 | $ 203,902 |
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Interest income: | ||||
Residential mortgage investments | $ 49,845 | $ 49,485 | $ 162,654 | $ 158,471 |
Other | 174 | 88 | 494 | 281 |
Interest income | 50,019 | 49,573 | 163,148 | 158,752 |
Interest expense: | ||||
Secured borrowings | (26,636) | (22,272) | (80,232) | (61,584) |
Unsecured borrowings | (1,970) | (2,122) | (5,923) | (6,367) |
Interest expense | (28,606) | (24,394) | (86,155) | (67,951) |
Net interest income (expense) | 21,413 | 25,179 | 76,993 | 90,801 |
Other revenue (expense): | ||||
Compensation-related expense | (1,299) | (3,064) | (6,565) | (7,573) |
Separation of service charge | (2,740) | 0 | (2,740) | 0 |
Other general and administrative expense | (1,239) | (1,309) | (3,565) | (3,628) |
Miscellaneous other revenue | 305 | 261 | 1,300 | 368 |
Operating expenses | (4,973) | (4,112) | (11,570) | (10,833) |
Net income | 16,440 | 21,067 | 65,423 | 79,968 |
Net income available to common stockholders: | ||||
Net income | 16,440 | 21,067 | 65,423 | 79,968 |
Less preferred stock dividends | (3,846) | (3,809) | (11,515) | (11,339) |
Net income available to common stockholders | $ 12,594 | $ 17,258 | $ 53,908 | $ 68,629 |
Net income per common share: | ||||
Basic and diluted (in dollars per share) | $ 0.13 | $ 0.18 | $ 0.56 | $ 0.72 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 95,678 | 95,530 | 95,647 | 95,500 |
Diluted (in shares) | 95,866 | 95,721 | 95,799 | 95,695 |
Cash dividends declared per share: | ||||
Common (in dollars per share) | $ 0.23 | $ 0.26 | $ 0.72 | $ 0.88 |
Series E Preferred [Member] | ||||
Cash dividends declared per share: | ||||
Series E preferred (in dollars per share) | $ 0.47 | $ 0.47 | $ 1.41 | $ 1.41 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) [Abstract] | ||||
Net income | $ 16,440 | $ 21,067 | $ 65,423 | $ 79,968 |
Amounts related to available-for-sale securities: | ||||
Change in net unrealized gains | (19,155) | (11,130) | 10,245 | (23,770) |
Amounts related to cash flow hedges: | ||||
Change in net unrealized losses | 12,558 | (21,235) | (41,714) | (36,226) |
Reclassification adjustment for amounts included in net income | 4,927 | 7,183 | 16,107 | 20,494 |
Other comprehensive income (loss) | (1,670) | (25,182) | (15,362) | (39,502) |
Comprehensive income (loss) | $ 14,770 | $ (4,115) | $ 50,061 | $ 40,466 |
BUSINESS |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
BUSINESS [Abstract] | |
BUSINESS | NOTE 1 ¾ BUSINESS Capstead Mortgage Corporation operates as a self-managed real estate investment trust for federal income tax purposes (a “REIT”) and is based in Dallas, Texas. Unless the context otherwise indicates, Capstead Mortgage Corporation, together with its subsidiaries, is referred to as “Capstead” or the “Company.” Capstead earns income from investing in a leveraged portfolio of residential mortgage pass-through securities consisting almost exclusively of adjustable-rate mortgage (“ARM”) securities issued and guaranteed by government-sponsored enterprises, either Fannie Mae, Freddie Mac, or by an agency of the federal government, Ginnie Mae. Residential mortgage pass-through securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae are referred to as “Agency Securities” and are considered to have limited, if any, credit risk. |
BASIS OF PRESENTATION |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
BASIS OF PRESENTATION [Abstract] | |
BASIS OF PRESENTATION | NOTE 2 ¾ BASIS OF PRESENTATION Interim Financial Reporting The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2016. For further information refer to the audited consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. Recent Accounting Pronouncements In November 2014 the Financial Accounting Standards Board issued ASU 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity (“ASU 2014-16”). ASU 2014-16 provides guidance in evaluating whether the nature of the host contract is more debt-like or equity-like when determining whether derivative financial instruments embedded in the hybrid financial instrument, such as call rights and conversion features, should be bifurcated and accounted for separately. The Company adopted ASU 2014-16 on January 1, 2016. The provisions of this ASU had no effect on the Company’s results of operations, financial condition, or cash flows. |
SEPARATION OF SERVICE CHARGE |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
SEPARATION OF SERVICE CHARGE [Abstract] | |
SEPARATION OF SERVICE CHARGE | NOTE 3 ¾ SEPARATION OF SERVICE CHARGE Effective July 14, 2016, Mr. Andrew F. Jacobs resigned as a director of Capstead and from his positions as President and Chief Executive Officer (“CEO”). Pursuant to an agreement entered into with Mr. Jacobs, he is entitled to payments aggregating $2.3 million in addition to continuing to participate in the Company’s short- and long-term incentive compensation and employee benefit programs through year-end. Currently estimated costs associated with Mr. Jacobs’ resignation, net of equity award cost accrual reversals, are recorded in Separation of service charge for the quarter ended September 30, 2016. Currently estimated amounts payable to Mr. Jacobs totaling $2.8 million are included in Accounts payable and accrued expenses. |
NET INCOME PER COMMON SHARE |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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NET INCOME PER COMMON SHARE [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME PER COMMON SHARE | NOTE 4 ¾ NET INCOME PER COMMON SHARE Basic net income per common share is computed by dividing net income, after deducting dividends paid or accrued on preferred stock and allocating earnings to equity awards deemed to be participating securities pursuant to the two-class method, by the average number of shares of common stock outstanding, calculated excluding unvested stock awards. Participating securities include unvested equity awards that contain non-forfeitable rights to dividends prior to vesting. Diluted net income per common share is computed by dividing the numerator used to compute basic net income per common share by the denominator used to compute basic net income per common share, further adjusted for the dilutive effect, if any, of equity awards and shares of preferred stock when and if convertible into shares of common stock. Shares of the Company’s 7.50% Series E Cumulative Redeemable Preferred Stock are contingently convertible into shares of common stock only upon the occurrence of a change in control and therefore are not considered dilutive securities absent such an occurrence. Any unvested equity awards that are deemed participating securities are included in the calculation of diluted net income per common share, if dilutive, under either the two-class method or the treasury stock method, depending upon which method produces the more dilutive result. Components of the computation of basic and diluted net income per common share were as follows for the indicated periods (dollars in thousands, except per share amounts):
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RESIDENTIAL MORTGAGE INVESTMENTS |
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RESIDENTIAL MORTGAGE INVESTMENTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESIDENTIAL MORTGAGE INVESTMENTS | NOTE 5 ¾ RESIDENTIAL MORTGAGE INVESTMENTS Residential mortgage investments classified by collateral type and interest rate characteristics as of the indicated dates were as follows (dollars in thousands):
Agency Securities are considered to have limited, if any, credit risk because the timely payment of principal and interest is guaranteed by Fannie Mae and Freddie Mac, which are federally chartered corporations, or Ginnie Mae, which is an agency of the federal government. Residential mortgage loans held by Capstead were originated prior to 1995 when the Company operated a mortgage conduit and the related credit risk is borne by the Company. Collateral for structured financings consists of private residential mortgage securities that are backed by loans obtained through this mortgage conduit and are pledged to secure repayment of related structured financings. Credit risk for these securities is borne by the related bondholders. The maturity of Residential mortgage investments is directly affected by prepayments of principal on the underlying mortgage loans. Consequently, actual maturities will be significantly shorter than the portfolio’s weighted average contractual maturity of 288 months. Fixed-rate investments consist of residential mortgage loans and Agency Securities backed by residential mortgage loans with fixed rates of interest. Adjustable-rate investments generally are ARM Agency Securities backed by residential mortgage loans that have coupon interest rates that adjust at least annually to more current interest rates or begin doing so after an initial fixed-rate period. After the initial fixed-rate period, if applicable, mortgage loans underlying ARM securities typically either (i) adjust annually based on specified margins over the one-year London interbank offered rate (“LIBOR”) or the one-year Constant Maturity U.S. Treasury Note Rate (“CMT”), (ii) adjust semiannually based on specified margins over six-month LIBOR, or (iii) adjust monthly based on specified margins over indices such as one-month LIBOR, the Eleventh District Federal Reserve Bank Cost of Funds Index, or over a rolling twelve month average of the one-year CMT index, usually subject to periodic and lifetime limits, or caps, on the amount of such adjustments during any single interest rate adjustment period and over the contractual term of the underlying loans. Capstead classifies its ARM investments based on average number of months until coupon reset (“months to roll”). Months to roll is an indicator of asset duration which is a measure of market price sensitivity to interest rate movements. A shorter duration generally indicates less interest rate risk. Current-reset ARM investments have months to roll of less than 18 months while longer-to-reset ARM investments have months to roll of 18 months or greater. As of September 30, 2016, the average months to roll for the Company’s $7.63 billion (amortized cost basis) in current-reset ARM investments was 6.2 months while the average months to roll for the Company’s $5.78 billion (amortized cost basis) in longer-to-reset ARM investments was 42.1 months. |
SECURED BORROWINGS |
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SECURED BORROWINGS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SECURED BORROWINGS | NOTE 6 ¾ SECURED BORROWINGS Capstead pledges its Residential mortgage investments as collateral for secured borrowings primarily in the form of repurchase arrangements with commercial banks and other financial institutions. In August 2015 the Company began supplementing its borrowings under repurchase arrangements with advances from the Federal Home Loan Bank (“FHLB”) of Cincinnati (collectively referred to as “counterparties” or “lending counterparties”). Repurchase arrangements entered into by the Company involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date and are accounted for as financings. The Company maintains the beneficial interest in the specific securities pledged during the term of each repurchase arrangement and receives the related principal and interest payments. FHLB advances differ from repurchase arrangements in that Capstead pledges collateral to the bank to secure each such advance rather than transferring ownership of the pledged collateral to the bank and simultaneously agreeing to repurchase the transferred assets at a future date. On January 12, 2016 the FHLB system regulator finalized rules originally proposed in 2014 that generally preclude captive insurers from remaining members beyond February 19, 2017 with transition rules that require outstanding advances to be repaid upon maturity or by that date. In response to this action, the Company has reduced outstanding FHLB advances to $250 million as of September 30, 2016 and anticipates migrating remaining balances away from the FHLB in November 2016. FHLB stock held by the Company in connection with advance activity was reduced by $20.0 million and $50.0 million during the quarter and nine months ended September 30, 2016, respectively, with the remaining $10.0 million held at September 30, 2016 expected to be redeemed by December 31, 2016. The terms and conditions of secured borrowings are negotiated on a transaction-by-transaction basis when each such borrowing is initiated or renewed. The amount borrowed is generally equal to the fair value of the securities pledged, as determined by the lending counterparty, less an agreed-upon discount, referred to as a “haircut.” Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings. Interest may be paid monthly or at the termination of a borrowing at which time the Company may enter into a new borrowing at prevailing haircuts and rates with the same lending counterparty or repay that counterparty and negotiate financing with a different lending counterparty. None of the Company’s lending counterparties are obligated to renew or otherwise enter into new borrowings at the conclusion of existing borrowings. In response to declines in fair value of pledged securities due to changes in market conditions or the publishing of monthly security pay-down factors, lending counterparties typically require the Company to post additional securities as collateral, pay down borrowings or fund cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements. These actions are referred to as margin calls. Conversely, in response to increases in fair value of pledged securities, the Company routinely margin calls its lending counterparties in order to have previously pledged collateral returned. Secured borrowings (and related pledged collateral, including accrued interest receivable), classified by collateral type and remaining maturities, and related weighted average borrowing rates as of the indicated dates were as follows (dollars in thousands):
Average secured borrowings outstanding during the indicated periods differed from respective ending balances primarily due to changes in portfolio levels and differences in the timing of portfolio acquisitions relative to portfolio runoff as illustrated below (dollars in thousands):
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USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT |
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USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT | NOTE 7 ¾ USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT In addition to entering into longer-maturity secured borrowings when available at attractive rates and terms, Capstead attempts to mitigate exposure to higher interest rates by entering into currently-paying and forward-starting, one-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. These Derivatives are designated as cash flow hedges of the variability of the underlying benchmark interest rate of current and forecasted 30- to 90-day secured borrowings. This hedge relationship establishes a relatively stable fixed rate on related borrowings because the variable-rate payments received on the swap agreements offset a significant portion of the interest accruing on the designated borrowings, leaving the fixed-rate swap payments as the Company’s effective borrowing rate, subject to certain adjustments. These adjustments include differences between variable-rate payments received on the swap agreements and related unhedged borrowing rates as well as the effects of measured hedge ineffectiveness. Additionally, changes in fair value of these Derivatives tend to partially offset opposing changes in fair value of the Company’s residential mortgage investments that can occur in response to changes in market interest rates. During the quarter and nine months ended September 30, 2016 Capstead entered into swap agreements with notional amounts of $500 million and $2.95 billion requiring fixed-rate interest payments averaging 0.84% and 0.76% for two and three-year periods commencing on various dates between January and September 2016. Also during the quarter and nine months ended September 30, 2016, $700 million and $3.50 billion notional amount of swaps requiring fixed-rate interest payments averaging 0.56% and 0.51% matured. At September 30, 2016, the Company’s portfolio financing-related swap positions had the following characteristics (dollars in thousands):
In 2010 the Company entered into forward-starting, three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements with notional amounts totaling $100 million and average fixed rates of 4.09% with 20-year payment terms coinciding with the floating-rate terms of the Company’s Unsecured borrowings. These Derivatives are designated as cash flow hedges of the variability of the underlying benchmark interest rate associated with the floating-rate terms of these long-term borrowings. Interest rate swap agreements are measured at fair value on a recurring basis primarily using Level Two Inputs in accordance with ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). In determining fair value estimates for these Derivatives, Capstead utilizes the standard methodology of netting the discounted future fixed cash payments and the discounted future variable cash receipts which are based on expected future interest rates derived from observable market interest rate curves. The related net interest payable at the balance sheet date is recorded separately. The Company also incorporates both its own nonperformance risk and its counterparties’ nonperformance risk in determining fair value. In considering the effect of nonperformance risk, the Company considered the impact of netting and credit enhancements, such as collateral postings and guarantees, and has concluded that counterparty risk is not significant to the overall valuation. The following tables include fair value and other related disclosures regarding all Derivatives held as of and for the indicated periods (in thousands):
Capstead’s swap agreements and borrowings under repurchase arrangements are subject to master netting arrangements in the event of default on, or termination of, any one contract. See NOTE 6 for more information on the Company’s use of secured borrowings. The following tables provide disclosures concerning offsetting of financial liabilities and Derivatives as of the indicated dates (in thousands):
Changes in Accumulated other comprehensive income by component for the quarter and nine months ended September 30, 2016 were as follows (in thousands):
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UNSECURED BORROWINGS |
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UNSECURED BORROWINGS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UNSECURED BORROWINGS | NOTE 8 ¾ UNSECURED BORROWINGS Unsecured borrowings consist of 30-year junior subordinated notes issued in 2005 and 2006 and maturing in 2035 and 2036, for a total face amount of $100 million. The notes are currently redeemable, in whole or in part, without penalty, at the Company’s option. In 2015 the Company retrospectively adopted ASU 2015-03, which requires debt issuance costs to be recorded as direct deductions from the carrying amounts of the related liabilities, consistent with debt discounts. Note balances net of debt issuance costs, and related weighted average interest rates as of the indicated dates (calculated including issuance cost amortization and adjusted for effects of related Derivatives held as cash flow hedges) as of September 30, 2016 and December 31, 2015 were as follows (dollars in thousands):
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CAPITAL TRANSACTIONS |
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CAPITAL TRANSACTIONS [Abstract] | |
CAPITAL TRANSACTIONS | NOTE 9 ¾ CAPITAL TRANSACTIONS During the nine months ended September 30, 2016, Capstead issued an additional 48,000 shares of its 7.50% Series E Cumulative Redeemable Preferred Stock through an at-the-market continuous offering program at an average price of $24.05, net of underwriting fees and other costs, for net proceeds of $1.2 million. While no shares were issued under this program during the quarter ended September 30, 2016, a modest amount of shares were issued subsequent to quarter-end through November 4, 2016. |
DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS |
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DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS | NOTE 10 ¾ DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS This note provides fair value-related disclosures as of the indicated balance sheet dates for Capstead’s financial assets and liabilities, most of which are influenced by changes in, and market expectations for changes in, interest rates and market liquidity conditions, as well as other factors beyond the control of management. With the exception of the fair value of lending counterparty investments, all fair values were determined using Level 2 Inputs in accordance with ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). Lending counterparty investments are nonmarketable securities classified as assets for which Level 3 Inputs are used to determine fair value. These assets are considered strategic investments that are carried at cost and periodically valued and evaluated for impairment. No impairment charges have been recorded relative to these investments and the Company’s cost basis is deemed to approximate fair value. Residential mortgage investments, nearly all of which are mortgage securities classified as available-for-sale, are measured at fair value on a recurring basis. In determining fair value estimates the Company considers recent trading activity for similar investments and pricing levels indicated by lenders in connection with designating collateral for secured borrowings, provided such pricing levels are considered indicative of actual market clearing transactions. In determining fair value estimates for Secured borrowings with initial terms of greater than 120 days, the Company considers pricing levels indicated by lenders for entering into new transactions using similar pledged collateral with terms equal to the remaining terms of the these borrowings. The Company currently bases fair value for Unsecured borrowings on discounted cash flows using Company estimates for market yields. Prior to these borrowings’ initial redemption dates, the Company considered then current pricing for financial instruments with similar characteristics in determining fair value estimates. Excluded from these disclosures are financial instruments for which cost basis is deemed to approximate fair value due primarily to the short duration of these instruments, which are valued using primarily Level 1 measurements, including Cash and cash equivalents, Cash collateral receivable from, or payable to, interest rate swap counterparties, receivables, payables and secured borrowings with initial terms of 120 days or less. See NOTE 7 for information relative to the valuation of interest rate swap agreements. Fair value-related disclosures for financial instruments other than debt securities were as follows as of the indicated dates (in thousands):
Fair value-related disclosures for debt securities were as follows as of the indicated dates (in thousands):
Capstead’s investment strategy involves managing a leveraged portfolio of relatively short-duration ARM Agency Securities and management expects these securities will be held until payoff absent a major shift in strategy or a severe contraction in the Company’s ability to obtain financing to support its portfolio. Declines in fair value caused by increases in interest rates are typically modest for investments in short-duration ARM Agency Securities compared to investments in longer-duration ARM or fixed-rate assets. These declines are generally recoverable in a relatively short period of time as coupon interest rates on the underlying mortgage loans reset to rates more reflective of the then-current interest rate environment. From a credit risk perspective, federal government support for Fannie Mae and Freddie Mac helps ensure that fluctuations in value due to credit risk associated with these securities will be limited. Given that (a) any existing unrealized losses on mortgage securities held by the Company are not attributable to credit risk and declines in fair value of ARM securities due to changes in interest rates are generally recoverable in a relatively short period of time, (b) the Company typically holds its investments to maturity, and (c) it is more likely than not that the Company will not be required to sell any of its investments given the resiliency of the financing market for Agency Securities, none of these investments were considered other-than-temporarily impaired at September 30, 2016. |
COMPENSATION PROGRAMS |
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COMPENSATION PROGRAMS | NOTE 11 ¾ COMPENSATION PROGRAMS The compensation committee of Capstead’s board of directors (the “Committee”) is responsible for establishing, implementing, and monitoring the Company’s compensation programs and practices. Incentive compensation programs adopted by the Committee for key executives are largely nondiscretionary, formulaic and target-based utilizing multiple pre-established performance goals (referred to as “metrics”) and defined threshold, target and maximum award amounts determined by reference to established percentages of base salaries. Prior to granting awards, the Committee reviews the Company’s programs, implementing any desired changes in performance metrics and the composition of mortgage REIT industry peer groups used for relative performance metric measurement purposes, as well as establishing each executive’s targeted award opportunity. Equity-based awards and other long-term incentive awards are made pursuant to the Company’s Amended and Restated 2014 Flexible Incentive Plan, approved by stockholders in May 2014. At September 30, 2016, this plan had 3,688,541 shares of common stock remaining available for future issuances. Short-term Incentive Compensation Programs Under the provisions of Capstead’s annual incentive compensation program, each participating executive has an overall target award opportunity equal to 125% of base salary. Awards are earned based on (a) relative and absolute economic return (change in book value per share of common stock plus common stock dividends divided by beginning book value per share), (b) relative operating cost efficiency (operating expenses divided by Unsecured borrowings and Stockholders’ equity), and (c) attainment of individual goals and objectives. Each performance metric is assigned a weighting and performance relative to each metric is calculated separately. No awards can be earned for performance below defined threshold return levels and awards are capped for performance above defined maximum return levels. Included in Accounts payable and accrued expenses at September 30, 2016 are annual incentive compensation accruals for participating executives (other than the Company’s former CEO), together with discretionary accruals for all other employees, totaling $1.1 million. Recognized in Compensation-related expense are $292,000 and $1.1 million related to annual incentive compensation for all employees excluding the former CEO for the quarter and nine months ended September 30, 2016, respectively. An additional $655,000 was recognized in Compensation-related expense during the quarter ended March 31, 2016 related to the March 2016 finalization of 2015 program results. The Committee administers an additional performance-based short-term incentive compensation program for key executives that provides for quarterly cash payments equal to per share dividends declared on Capstead’s common stock multiplied by a notional amount of non-vesting shares of common stock (“Dividend Equivalent Rights” or “DERs”). DERs only represent the right to receive the same cash distributions that the Company’s common stockholders are entitled to receive during the term of the grants, subject to certain conditions, including continuous service. Included in Accounts payable and accrued expenses and recognized in Compensation-related expense are third quarter 2016 DERs distribution amounts totaling $100,000 that were paid in October 2016 to executives other than the former CEO. For the nine months ended September 30, 2016, $420,000 was recognized in Compensation-related expense related to the DERs program. In February 2016 the Committee modified the relative weightings of the various metrics in the annual incentive compensation program for 2016 primarily to place more emphasis on absolute economic return at adjusted threshold, target and maximum return levels, while decreasing other relative weightings. Additionally, maximum payout percentage opportunities related to achieving or exceeding individual goals and objectives were increased and the term of outstanding DERs was extended to December 31, 2016. Long-term Equity-based Awards – Performance-based RSUs Capstead’s performance-based long-term incentive compensation program for key executives provides for the grant of performance-based RSUs that are convertible into shares of common stock following three-year performance periods, contingent upon whether, and to what extent, defined performance levels established for certain relative and absolute return performance metrics are met or exceeded. The relative return metrics measure the Company’s performance on the basis of relative economic return and relative total stockholder return (change in stock price plus reinvested dividends). The absolute economic return metric measures performance against defined return levels. For conversion purposes, each performance metric is assigned a weighting and the Company’s performance relative to each metric is calculated separately. The actual number of shares of common stock the units can convert into for each of the metrics, if any, can range from one-half of a share per unit if that metric’s threshold level of performance is met, to two shares per unit if the related maximum level of performance is met or exceeded, adjusted for the weighting assigned to the metric. If a metric’s threshold performance level is not met, no shares are issuable under that metric. Dividends accrue from the date of grant and will be paid in cash when the units convert into shares of common stock based on the number of shares ultimately issued, if any. Pursuant to this program, in February 2016, January 2015 and December 2013 the Committee granted 269,354, 247,512 and 242,505 RSUs with three-year performance periods ending December 31, 2018, 2017 and 2016, respectively. Initial grant date fair values developed for compensation cost purposes of $8.03, $8.83 and $12.45 were assigned to the units of each grant, respectively. Due to lowered expectations for attainment of certain performance metrics, the three-year cost estimate associated with the December 2013 grant has been reduced three times since issuance (in June 2016, December 2015 and December 2014), ultimately to $3.81 per unit. With the April 2015 resignation of a participating executive, 37,199 and 36,467 RSUs issued in 2015 and 2013, respectively, were forfeited. With the July 2016 resignation of the former CEO, 99,527 and 93,058 RSUs issued in 2016 and 2015, respectively, are expected to be forfeited by year-end. Recognized in Compensation-related expense are $237,000 and $786,000 related to outstanding RSUs for the quarter and nine months ended September 30, 2016, respectively. Included in Common stock dividends payable at September 30, 2016 are estimated dividends payable pertaining to these awards of $308,000. Long-term Equity-based Awards – Stock Awards Under a performance-based stock award program last utilized in 2012, the Committee granted common stock awards to all employees with staggered three-year vesting periods. These awards vest if annualized returns in excess of established return levels are generated during three-year measurement periods, with certain deferred vesting provisions that extend to include the seventh calendar year after the year of grant. Program grants for 118,784 shares with an average grant date fair value of $12.17 vested in January 2016 pertaining to the measurement period ending December 31, 2015. The last shares granted under this program totaling 62,137 shares with a grant date fair value of $11.67 are scheduled to vest in February 2017, assuming performance criteria and service conditions are met. In February 2016 the Committee granted service-based stock awards for 67,337 shares of common stock with a grant date fair value of $9.32 per share to key executives that are scheduled to vest in February 2019 assuming service conditions are met. With the July 2016 resignation of the former CEO, stock awards for 24,881 shares are expected to be forfeited by year-end. In January 2016 and December of 2014 and 2013, respectively, the Committee granted service-based stock awards for 61,272, 37,237 and 35,703 shares of common stock with grant date fair values of $7.87, $12.47 and $12.34 per share to employees not awarded RSUs. These awards vest in January of 2019, 2018 and 2017, respectively, assuming service conditions are met. As a component of the Company’s director compensation program, directors are granted common stock awards annually upon election or re-election to the board of directors that vest approximately one year from issuance. In July 2016, director common stock awards for a total of 35,000 shares granted in July 2015 with a grant date fair value of $11.41 per share vested and new awards, for a total of 41,881 shares, with a grant date fair value of $10.03 per share were granted that will vest on July 15, 2017. Performance-based and service-based stock award activity for the nine months ended September 30, 2016 is summarized below:
During the quarter and nine months ended September 30, 2016, the Company recognized in Compensation-related expense $189,000 and $630,000, respectively, related to amortization of the grant date fair value of employee stock awards. The amounts amortized for these periods assumed that any applicable performance metrics would continue to be met for related initial measurement periods. Included in Common Stock dividends payable at September 30, 2016 are estimated dividends payable pertaining to these awards of $332,000. In addition, the Company recognized in Other general and administrative expense $104,000 and $304,000 related to amortization of the grant date fair value of director stock awards during the quarter and nine months ended September 30, 2016, respectively. Unrecognized compensation expense for unvested stock awards for all employees and directors other than the former CEO totaled $1.3 million as of September 30, 2016, to be expensed over a weighted average period of 1.3 years (assumes minimal employee and director attrition and any applicable performance metrics would continue to be met for related initial measurement periods). Service-based stock awards issued to directors and to employees not awarded RSUs receive dividends on a current basis without risk of forfeiture if the related awards do not vest. Outstanding performance-based stock awards and stock awards issued to key executives defer the payment of dividends accruing between the grant dates and the end of related performance or service periods. If these awards do not vest, the related accrued dividends will be forfeited. Long-term Equity-based Awards – Option Awards At September 30, 2016 option awards for 40,000 shares of common stock were outstanding with a weighted average strike price of $11.86. These awards are currently exercisable, have no aggregate intrinsic value and have a weighted average remaining contractual term of 1.7 years. No option award activity occurred during the quarter and nine months ended September 30, 2016. All outstanding option awards were granted prior to 2010, have ten-year contractual terms and were issued with strike prices equal to the closing market price of Capstead’s common stock on the dates of grant. The fair value of these awards was estimated at that time using a Black-Scholes option pricing model and was expensed over the related vesting periods. Other Benefit Programs Capstead sponsors a qualified defined contribution retirement plan for all employees and a nonqualified deferred compensation plan for certain of its executives. In general the Company matches up to 50% of a participant’s voluntary contribution up to a maximum of 6% of a participant’s base salary and annual incentive compensation payments. The Company also makes discretionary contributions of up to another 3% of such compensation regardless of participation in the plans. Company contributions are subject to certain vesting requirements that have been met by nearly all of Capstead’s current employees. During the quarter and nine months ended September 30, 2016, the Company recognized in Compensation-related expense $33,000 and $220,000 related to contributions to these plans, respectively. |
BASIS OF PRESENTATION (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
BASIS OF PRESENTATION [Abstract] | |
Interim Financial Reporting | Interim Financial Reporting The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2016. For further information refer to the audited consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In November 2014 the Financial Accounting Standards Board issued ASU 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity (“ASU 2014-16”). ASU 2014-16 provides guidance in evaluating whether the nature of the host contract is more debt-like or equity-like when determining whether derivative financial instruments embedded in the hybrid financial instrument, such as call rights and conversion features, should be bifurcated and accounted for separately. The Company adopted ASU 2014-16 on January 1, 2016. The provisions of this ASU had no effect on the Company’s results of operations, financial condition, or cash flows. |
NET INCOME PER COMMON SHARE (Tables) |
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NET INCOME PER COMMON SHARE [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Computation of Basic and Diluted Net Income per Common Share | Components of the computation of basic and diluted net income per common share were as follows for the indicated periods (dollars in thousands, except per share amounts):
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RESIDENTIAL MORTGAGE INVESTMENTS (Tables) |
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESIDENTIAL MORTGAGE INVESTMENTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Residential Mortgage Investments | Residential mortgage investments classified by collateral type and interest rate characteristics as of the indicated dates were as follows (dollars in thousands):
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SECURED BORROWINGS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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SECURED BORROWINGS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Secured Borrowings | Secured borrowings (and related pledged collateral, including accrued interest receivable), classified by collateral type and remaining maturities, and related weighted average borrowing rates as of the indicated dates were as follows (dollars in thousands):
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Schedule of Average Borrowings Outstanding | Average secured borrowings outstanding during the indicated periods differed from respective ending balances primarily due to changes in portfolio levels and differences in the timing of portfolio acquisitions relative to portfolio runoff as illustrated below (dollars in thousands):
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USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT (Tables) |
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USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Swap Agreements Expiration Period and Characteristics | At September 30, 2016, the Company’s portfolio financing-related swap positions had the following characteristics (dollars in thousands):
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Impact of Derivative Instruments on Statements of Financial Performance and Financial Position | The following tables include fair value and other related disclosures regarding all Derivatives held as of and for the indicated periods (in thousands):
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Schedule of Offsetting Disclosures for Asset Derivatives Held and Repurchase Arrangements and Similar Borrowings Outstanding | The following tables provide disclosures concerning offsetting of financial liabilities and Derivatives as of the indicated dates (in thousands):
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Schedule of Offsetting Disclosures for Liability Derivatives Held and Repurchase Arrangements and Similar Borrowings Outstanding |
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Changes in Accumulated Other Comprehensive Income | Changes in Accumulated other comprehensive income by component for the quarter and nine months ended September 30, 2016 were as follows (in thousands):
|
UNSECURED BORROWINGS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UNSECURED BORROWINGS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Subordinated Note Balances and Related Weighted Average Interest Rates | Note balances net of debt issuance costs, and related weighted average interest rates as of the indicated dates (calculated including issuance cost amortization and adjusted for effects of related Derivatives held as cash flow hedges) as of September 30, 2016 and December 31, 2015 were as follows (dollars in thousands):
|
DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments Other than Debt Securities | Fair value-related disclosures for financial instruments other than debt securities were as follows as of the indicated dates (in thousands):
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||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value and Related Disclosures for Debt Securities | Fair value-related disclosures for debt securities were as follows as of the indicated dates (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities in Unrealized Loss Position |
|
COMPENSATION PROGRAMS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
COMPENSATION PROGRAMS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Performance and Service-Based Stock Award Activity | Performance-based and service-based stock award activity for the nine months ended September 30, 2016 is summarized below:
|
SEPARATION OF SERVICE CHARGE (Details) - Former President and Chief Executive Officer [Member] $ in Millions |
Sep. 30, 2016
USD ($)
|
---|---|
Related Party Transaction [Line Items] | |
Aggregate payment of incentive compensation and employee benefit | $ 2.3 |
Estimated amount payable | $ 2.8 |
RESIDENTIAL MORTGAGE INVESTMENTS, Schedule of Residential Mortgage Investments (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 12,999,862 | $ 13,563,393 | |||||
Investment Premiums | 417,687 | 436,815 | |||||
Amortized Cost Basis | 13,417,549 | 14,000,208 | |||||
Carrying Amount | [1] | $ 13,582,323 | $ 14,154,737 | ||||
Net WAC | [2] | 2.66% | 2.57% | ||||
Average Yield | [2] | 1.46% | 1.63% | ||||
Agency Securities [Member] | |||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 12,995,538 | $ 13,557,738 | |||||
Investment Premiums | 417,650 | 436,772 | |||||
Amortized Cost Basis | 13,413,188 | 13,994,510 | |||||
Carrying Amount | [1] | $ 13,577,962 | $ 14,149,039 | ||||
Net WAC | [2] | 2.66% | 2.57% | ||||
Average Yield | [2] | 1.46% | 1.63% | ||||
Fannie Mae/Freddie Mac [Member] | Fixed-Rate [Member] | |||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 416 | $ 796 | |||||
Investment Premiums | 1 | 2 | |||||
Amortized Cost Basis | 417 | 798 | |||||
Carrying Amount | [1] | $ 417 | $ 799 | ||||
Net WAC | [2] | 6.68% | 6.61% | ||||
Average Yield | [2] | 6.50% | 6.17% | ||||
Fannie Mae/Freddie Mac [Member] | ARMs [Member] | |||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 10,030,859 | $ 10,014,401 | |||||
Investment Premiums | 319,319 | 317,545 | |||||
Amortized Cost Basis | 10,350,178 | 10,331,946 | |||||
Carrying Amount | [1] | $ 10,506,371 | $ 10,487,785 | ||||
Net WAC | [2] | 2.69% | 2.55% | ||||
Average Yield | [2] | 1.56% | 1.68% | ||||
Ginnie Mae [Member] | ARMs [Member] | |||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 2,964,263 | $ 3,542,541 | |||||
Investment Premiums | 98,330 | 119,225 | |||||
Amortized Cost Basis | 3,062,593 | 3,661,766 | |||||
Carrying Amount | [1] | $ 3,071,174 | $ 3,660,455 | ||||
Net WAC | [2] | 2.55% | 2.61% | ||||
Average Yield | [2] | 1.16% | 1.49% | ||||
Residential Mortgage Loans [Member] | |||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 2,665 | $ 3,805 | |||||
Investment Premiums | 9 | 12 | |||||
Amortized Cost Basis | 2,674 | 3,817 | |||||
Carrying Amount | [1] | $ 2,674 | $ 3,817 | ||||
Net WAC | [2] | 4.63% | 4.65% | ||||
Average Yield | [2] | 3.29% | 3.71% | ||||
Residential Mortgage Loans [Member] | Fixed-Rate [Member] | |||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 761 | $ 1,155 | |||||
Investment Premiums | 0 | 1 | |||||
Amortized Cost Basis | 761 | 1,156 | |||||
Carrying Amount | [1] | $ 761 | $ 1,156 | ||||
Net WAC | [2] | 6.73% | 6.76% | ||||
Average Yield | [2] | 4.09% | 5.02% | ||||
Residential Mortgage Loans [Member] | ARMs [Member] | |||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 1,904 | $ 2,650 | |||||
Investment Premiums | 9 | 11 | |||||
Amortized Cost Basis | 1,913 | 2,661 | |||||
Carrying Amount | [1] | $ 1,913 | $ 2,661 | ||||
Net WAC | [2] | 3.80% | 3.73% | ||||
Average Yield | [2] | 2.97% | 3.15% | ||||
Collateral for Structured Financings [Member] | |||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||
Unpaid Principal Balance | $ 1,659 | $ 1,850 | |||||
Investment Premiums | 28 | 31 | |||||
Amortized Cost Basis | 1,687 | 1,881 | |||||
Carrying Amount | [1] | $ 1,687 | $ 1,881 | ||||
Net WAC | [2] | 8.16% | 8.12% | ||||
Average Yield | [2] | 7.59% | 7.82% | ||||
|
RESIDENTIAL MORTGAGE INVESTMENTS (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Financing Receivable, Recorded Investment [Line Items] | |
Mortgage securities weighted average contractual maturity | 288 months |
Available for sale ARM securities, current-reset | $ 7,630 |
Available for sale ARM securities, longer-to-reset | $ 5,780 |
Current-Reset ARMs [Member] | |
Financing Receivable, Recorded Investment [Line Items] | |
Agency securities average months to roll | 6 months 6 days |
Current-Reset ARMs [Member] | Maximum [Member] | |
Financing Receivable, Recorded Investment [Line Items] | |
Agency securities months to roll | 18 months |
Longer-To-Reset ARMs [Member] | |
Financing Receivable, Recorded Investment [Line Items] | |
Agency securities average months to roll | 42 months 3 days |
Longer-To-Reset ARMs [Member] | Minimum [Member] | |
Financing Receivable, Recorded Investment [Line Items] | |
Agency securities months to roll | 18 months |
USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT, Offsetting Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
|||
---|---|---|---|---|---|
Offsetting of derivative assets [Abstract] | |||||
Gross Amounts of Recognized Assets | $ 2,501 | $ 7,720 | |||
Net Amounts of Assets Presented in the Balance Sheet | 56,180 | 29,283 | |||
Cash Collateral Received | (73,191) | (50,193) | |||
Offsetting Derivatives Assets [Member] | |||||
Offsetting of derivative assets [Abstract] | |||||
Gross Amounts of Recognized Assets | 1,126 | 4,758 | |||
Gross Amounts Offset in the Balance Sheet | 1,375 | 2,962 | |||
Net Amounts of Assets Presented in the Balance Sheet | 2,501 | 7,720 | |||
Financial Instruments | [1] | (2,501) | (7,720) | ||
Cash Collateral Received | [1] | 0 | 0 | ||
Net Amount | 0 | 0 | |||
Offsetting Derivatives Assets [Member] | Counterparty 2 [Member] | |||||
Offsetting of derivative assets [Abstract] | |||||
Gross Amounts of Recognized Assets | 0 | ||||
Gross Amounts Offset in the Balance Sheet | 23 | ||||
Net Amounts of Assets Presented in the Balance Sheet | 23 | ||||
Financial Instruments | [1] | (23) | |||
Cash Collateral Received | [1] | 0 | |||
Net Amount | 0 | ||||
Offsetting Derivatives Assets [Member] | Counterparty 4 [Member] | |||||
Offsetting of derivative assets [Abstract] | |||||
Gross Amounts of Recognized Assets | 1,126 | 4,758 | |||
Gross Amounts Offset in the Balance Sheet | 1,375 | 2,939 | |||
Net Amounts of Assets Presented in the Balance Sheet | 2,501 | 7,697 | |||
Financial Instruments | [1] | (2,501) | (7,697) | ||
Cash Collateral Received | [1] | 0 | 0 | ||
Net Amount | $ 0 | $ 0 | |||
|
USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT, Offsetting Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
|||||||
---|---|---|---|---|---|---|---|---|---|
Offsetting of financial liabilities and derivative liabilities [Abstract] | |||||||||
Gross Amounts of Recognized Liabilities | $ 46,954 | $ 26,061 | |||||||
Offsetting Financial Liabilities and Derivative Liabilities [Member] | |||||||||
Offsetting of financial liabilities and derivative liabilities [Abstract] | |||||||||
Gross Amounts of Recognized Liabilities | [1] | 12,243,889 | 10,124,887 | ||||||
Gross Amounts Offset in the Balance Sheet | 1,375 | 2,962 | |||||||
Net Amounts of Liabilities Presented in the Balance Sheet | [2] | 12,245,264 | 10,127,849 | ||||||
Financial Instruments | [3] | (12,189,084) | (10,098,566) | ||||||
Cash Collateral Pledged | [3] | (56,180) | (29,283) | ||||||
Net Amount | 0 | 0 | |||||||
Offsetting Financial Liabilities and Derivative Liabilities [Member] | Counterparty 1 [Member] | |||||||||
Offsetting of financial liabilities and derivative liabilities [Abstract] | |||||||||
Gross Amounts of Recognized Liabilities | [1] | 42,029 | 26,311 | ||||||
Gross Amounts Offset in the Balance Sheet | 0 | 0 | |||||||
Net Amounts of Liabilities Presented in the Balance Sheet | [2] | 42,029 | 26,311 | ||||||
Financial Instruments | [3] | 0 | 0 | ||||||
Cash Collateral Pledged | [3] | (42,029) | (26,311) | ||||||
Net Amount | 0 | 0 | |||||||
Offsetting Financial Liabilities and Derivative Liabilities [Member] | Counterparty 2 [Member] | |||||||||
Offsetting of financial liabilities and derivative liabilities [Abstract] | |||||||||
Gross Amounts of Recognized Liabilities | [1] | 776 | |||||||
Gross Amounts Offset in the Balance Sheet | 23 | ||||||||
Net Amounts of Liabilities Presented in the Balance Sheet | [2] | 799 | |||||||
Financial Instruments | [3] | (23) | |||||||
Cash Collateral Pledged | [3] | (776) | |||||||
Net Amount | 0 | ||||||||
Offsetting Financial Liabilities and Derivative Liabilities [Member] | Counterparty 4 [Member] | |||||||||
Offsetting of financial liabilities and derivative liabilities [Abstract] | |||||||||
Gross Amounts of Recognized Liabilities | [1] | 15,277 | 6,954 | ||||||
Gross Amounts Offset in the Balance Sheet | 1,375 | 2,939 | |||||||
Net Amounts of Liabilities Presented in the Balance Sheet | [2] | 16,652 | 9,893 | ||||||
Financial Instruments | [3] | (2,501) | (7,697) | ||||||
Cash Collateral Pledged | [3] | (14,151) | (2,196) | ||||||
Net Amount | 0 | 0 | |||||||
Offsetting Financial Liabilities and Derivative Liabilities [Member] | Derivative Counterparties [Member] | |||||||||
Offsetting of financial liabilities and derivative liabilities [Abstract] | |||||||||
Gross Amounts of Recognized Liabilities | [1] | 57,306 | 34,041 | ||||||
Gross Amounts Offset in the Balance Sheet | 1,375 | 2,962 | |||||||
Net Amounts of Liabilities Presented in the Balance Sheet | [2] | 58,681 | 37,003 | ||||||
Financial Instruments | [3] | (2,501) | (7,720) | ||||||
Cash Collateral Pledged | [3] | (56,180) | (29,283) | ||||||
Net Amount | 0 | 0 | |||||||
Borrowings under Repurchase Arrangements [Member] | Offsetting Financial Liabilities and Derivative Liabilities [Member] | |||||||||
Offsetting of financial liabilities and derivative liabilities [Abstract] | |||||||||
Gross Amounts of Recognized Liabilities | [1] | 12,186,583 | 10,090,846 | ||||||
Gross Amounts Offset in the Balance Sheet | 0 | 0 | |||||||
Net Amounts of Liabilities Presented in the Balance Sheet | [2] | 12,186,583 | 10,090,846 | ||||||
Financial Instruments | [3] | (12,186,583) | (10,090,846) | ||||||
Cash Collateral Pledged | [3] | 0 | 0 | ||||||
Net Amount | $ 0 | $ 0 | |||||||
|
USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT, Changes in AOCI (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | $ 1,298,324 | |||
Other comprehensive income (loss) before reclassifications | $ (6,597) | (31,469) | ||
Amounts reclassified from accumulated other comprehensive income | 4,927 | 16,107 | ||
Other comprehensive income (loss) | (1,670) | $ (25,182) | (15,362) | $ (39,502) |
Ending Balance | 1,270,110 | 1,270,110 | ||
Accumulated Other Comprehensive Income [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | 122,403 | 136,095 | ||
Ending Balance | 120,733 | 120,733 | ||
Gains and Losses on Cash Flow Hedges [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | (61,526) | (18,434) | ||
Other comprehensive income (loss) before reclassifications | 12,558 | (41,714) | ||
Amounts reclassified from accumulated other comprehensive income | 4,927 | 16,107 | ||
Other comprehensive income (loss) | 17,485 | (25,607) | ||
Ending Balance | (44,041) | (44,041) | ||
Unrealized Gains and Losses on Available-for-sale Securities [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | 183,929 | 154,529 | ||
Other comprehensive income (loss) before reclassifications | (19,155) | 10,245 | ||
Amounts reclassified from accumulated other comprehensive income | 0 | 0 | ||
Other comprehensive income (loss) | (19,155) | 10,245 | ||
Ending Balance | $ 164,774 | $ 164,774 |
UNSECURED BORROWINGS (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Debt Instrument [Line Items] | ||
Junior subordinated notes maturity term | 30 years | |
Face amount of junior subordinated notes | $ 100,000 | |
Borrowings Outstanding | $ 98,065 | $ 97,986 |
Effective interest rate | 7.77% | 8.08% |
October 2035 [Member] | ||
Debt Instrument [Line Items] | ||
Face amount of junior subordinated notes | $ 35,000 | |
Junior subordinated notes, maturity period | Oct. 31, 2035 | |
Borrowings Outstanding | $ 34,267 | $ 34,234 |
Effective interest rate | 7.92% | 7.91% |
December 2035 [Member] | ||
Debt Instrument [Line Items] | ||
Face amount of junior subordinated notes | $ 40,000 | |
Junior subordinated notes, maturity period | Dec. 31, 2035 | |
Borrowings Outstanding | $ 39,272 | $ 39,244 |
Effective interest rate | 7.68% | 7.68% |
September 2036 [Member] | ||
Debt Instrument [Line Items] | ||
Face amount of junior subordinated notes | $ 25,000 | |
Junior subordinated notes, maturity period | Sep. 30, 2036 | |
Borrowings Outstanding | $ 24,526 | $ 24,508 |
Effective interest rate | 7.72% | 8.96% |
CAPITAL TRANSACTIONS (Details) - Cumulative Redeemable Preferred Stock, Series E [Member] - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended |
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Class of Stock [Line Items] | |||
Additional shares issued (in shares) | 0 | 48,000 | |
Preferred stock, dividend rate | 7.50% | 7.50% | |
Average cost per share (in dollars per share) | $ 24.05 | ||
Proceeds from issuance of redeemable preferred stock | $ 1.2 |
DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS, Balance Sheet Location (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Financial assets [Abstract] | ||
Residential mortgage loans | $ 13,582,323 | $ 14,154,737 |
Maximum [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Repurchase arrangements, initial term | 120 days | |
Carrying Amount [Member] | ||
Financial assets [Abstract] | ||
Residential mortgage loans | $ 2,674 | 3,817 |
Lending counterparty investments | 15,002 | 65,002 |
Financial liabilities [Abstract] | ||
Secured borrowings with initial terms of greater than 120 days | 839,101 | 3,246,177 |
Unsecured borrowings | 98,065 | 97,986 |
Carrying Amount [Member] | Interest Rate Swap Agreements [Member] | Portfolio-Related [Member] | ||
Financial assets [Abstract] | ||
Portfolio-related interest rate swap agreements | 2,501 | 7,720 |
Financial liabilities [Abstract] | ||
Interest rate swap agreements | 5,981 | 1,051 |
Carrying Amount [Member] | Interest Rate Swap Agreements [Member] | Unsecured Borrowings-Related [Member] | ||
Financial liabilities [Abstract] | ||
Interest rate swap agreements | 40,973 | 25,010 |
Fair Value [Member] | ||
Financial assets [Abstract] | ||
Residential mortgage loans | 2,700 | 3,900 |
Lending counterparty investments | 15,002 | 65,002 |
Financial liabilities [Abstract] | ||
Secured borrowings with initial terms of greater than 120 days | 839,300 | 3,245,000 |
Unsecured borrowings | 59,100 | 77,200 |
Fair Value [Member] | Interest Rate Swap Agreements [Member] | Portfolio-Related [Member] | ||
Financial assets [Abstract] | ||
Portfolio-related interest rate swap agreements | 2,501 | 7,720 |
Financial liabilities [Abstract] | ||
Interest rate swap agreements | 5,981 | 1,051 |
Fair Value [Member] | Interest Rate Swap Agreements [Member] | Unsecured Borrowings-Related [Member] | ||
Financial liabilities [Abstract] | ||
Interest rate swap agreements | $ 40,973 | $ 25,010 |
DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS, Fair Value and Related Disclosures for Debt Securities (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Agency Securities Classified as Available-for-sale [Member] | Fannie Mae/Freddie Mac [Member] | ||
Available-for-sale securities disclosure Items [Abstract] | ||
Available-for-sale securities, Amortized Cost Basis | $ 10,350,186 | $ 10,331,965 |
Available-for-sale securities, Gross Unrealized Gains | 157,460 | 166,794 |
Available-for-sale securities, Gross Unrealized Losses | 1,267 | 10,954 |
Available-for-sale securities, Fair Value | 10,506,379 | 10,487,805 |
Agency Securities Classified as Available-for-sale [Member] | Ginnie Mae [Member] | ||
Available-for-sale securities disclosure Items [Abstract] | ||
Available-for-sale securities, Amortized Cost Basis | 3,062,593 | 3,661,766 |
Available-for-sale securities, Gross Unrealized Gains | 14,795 | 11,705 |
Available-for-sale securities, Gross Unrealized Losses | 6,214 | 13,016 |
Available-for-sale securities, Fair Value | 3,071,174 | 3,660,455 |
Residential Mortgage Securities Classified as Held-to-Maturity [Member] | ||
Held-to-maturity securities disclosure [Abstract] | ||
Held-to-maturities, Amortized Cost Basis | 2,096 | 2,660 |
Held-to-maturities, Gross Unrealized Gains | 25 | 44 |
Held-to-maturities, Gross Unrealized Losses | 0 | 0 |
Held-to-maturities, Fair Value | $ 2,121 | $ 2,704 |
DISCLOSURES REGARDING FAIR VALUES OF FINANCIAL INSTRUMENTS, Securities in Unrealized Loss Position (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Securities in an unrealized loss position, fair value [Abstract] | ||
One year or greater | $ 813,179 | $ 597,652 |
Less than one year | 1,114,807 | 4,468,844 |
Fair Value, Total | 1,927,986 | 5,066,496 |
Securities in an unrealized loss position, aggregate loss [Abstract] | ||
One year or greater | 4,923 | 4,259 |
Less than one year | 2,558 | 19,711 |
Unrealized Losses, Total | $ 7,481 | $ 23,970 |
COMPENSATION PROGRAMS, Other Compensation Programs (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2016 |
Mar. 31, 2016 |
Sep. 30, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Short-term incentive compensation program accruals | $ 1,100,000 | $ 1,100,000 | |
Annual incentive compensation expense | 292,000 | $ 655,000 | 1,100,000 |
Dividend Equivalent Rights Payable | $ 100,000 | 100,000 | |
DER expense for the period | $ 420,000 | ||
Targeted award opportunity on base salary | 125.00% | ||
Long-Term Equity-Based Awards [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Common shares available for future issuances (in shares) | 3,688,541 | 3,688,541 | |
Share awards vesting period | 3 years |
COMPENSATION PROGRAMS, Schedule of Restricted Stock Awards (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2016 |
Feb. 29, 2016 |
Jan. 31, 2016 |
Jul. 31, 2015 |
Jan. 31, 2015 |
Sep. 30, 2016 |
Sep. 30, 2016 |
Dec. 31, 2014 |
Dec. 31, 2013 |
Dec. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Grant date fair value per share (in dollars per share) | $ 10.03 | $ 11.41 | $ 8.97 | |||||||
Total original grants (in shares) | 41,881 | 35,000 | 170,490 | |||||||
Equity instruments other than options, nonvested, number of shares [Roll Forward] | ||||||||||
Unvested stock awards outstanding at beginning of period (in shares) | 288,861 | |||||||||
Grants (in shares) | 41,881 | 35,000 | 170,490 | |||||||
Vestings (in shares) | (153,784) | |||||||||
Unvested stock awards outstanding at end of period (in shares) | 305,567 | 305,567 | ||||||||
Equity instruments other than options, nonvested, weighted average grant date fair value [Abstract] | ||||||||||
Unvested stock awards outstanding at beginning of period (in dollars per share) | $ 11.98 | |||||||||
Grants (in dollars per share) | $ 10.03 | $ 11.41 | 8.97 | |||||||
Vestings (in dollars per share) | 12.00 | |||||||||
Unvested stock awards outstanding at end of period (in dollars per share) | $ 10.29 | $ 10.29 | ||||||||
Common stock dividend payable | $ 22,687,000 | $ 22,687,000 | $ 25,979,000 | |||||||
Performance-based RSUs [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share awards performance period | 3 years | |||||||||
Grant date fair value per share (in dollars per share) | $ 8.03 | $ 8.83 | $ 3.81 | $ 12.45 | ||||||
Total original grants (in shares) | 269,354 | 247,512 | 242,505 | |||||||
Equity instruments other than options, nonvested, number of shares [Roll Forward] | ||||||||||
Grants (in shares) | 269,354 | 247,512 | 242,505 | |||||||
Equity instruments other than options, nonvested, weighted average grant date fair value [Abstract] | ||||||||||
Grants (in dollars per share) | $ 8.03 | $ 8.83 | $ 3.81 | $ 12.45 | ||||||
Long term incentive compensation expense | 237,000 | $ 786,000 | ||||||||
Common stock dividend payable | 308,000 | $ 308,000 | ||||||||
Performance-based RSUs [Member] | Minimum [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Number of shares to be issued in conversion per unit (in shares) | 1.5 | |||||||||
Performance-based RSUs [Member] | Maximum [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Number of shares to be issued in conversion per unit (in shares) | 2 | |||||||||
Performance-based RSUs [Member] | December 2013 [Member] | ||||||||||
Equity instruments other than options, nonvested, number of shares [Roll Forward] | ||||||||||
Forfeitures (in shares) | (36,467) | |||||||||
Performance-based RSUs [Member] | December 2015 [Member] | ||||||||||
Equity instruments other than options, nonvested, number of shares [Roll Forward] | ||||||||||
Forfeitures (in shares) | (37,199) | |||||||||
Equity instruments other than options, nonvested, weighted average grant date fair value [Abstract] | ||||||||||
Share expected to be forfeited (in shares) | (93,058) | |||||||||
Performance-based RSUs [Member] | December 2016 [Member] | ||||||||||
Equity instruments other than options, nonvested, weighted average grant date fair value [Abstract] | ||||||||||
Share expected to be forfeited (in shares) | (99,527) | |||||||||
Service-Based Stock Awards [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Grant date fair value per share (in dollars per share) | $ 9.32 | $ 7.87 | $ 12.47 | $ 12.34 | ||||||
Total original grants (in shares) | 67,337 | 61,272 | 37,237 | 35,703 | ||||||
Equity instruments other than options, nonvested, number of shares [Roll Forward] | ||||||||||
Grants (in shares) | 67,337 | 61,272 | 37,237 | 35,703 | ||||||
Equity instruments other than options, nonvested, weighted average grant date fair value [Abstract] | ||||||||||
Grants (in dollars per share) | $ 9.32 | $ 7.87 | $ 12.47 | $ 12.34 | ||||||
Share expected to be forfeited (in shares) | (24,881) | |||||||||
Stock Awards Activity [Member] | ||||||||||
Equity instruments other than options, nonvested, weighted average grant date fair value [Abstract] | ||||||||||
Long term incentive compensation expense | 189,000 | $ 630,000 | ||||||||
Other general and administrative expense | 104,000 | 304,000 | ||||||||
Total of unrecognized compensation expense for unvested stock award | 1,300,000 | $ 1,300,000 | ||||||||
Compensation cost not yet recognized, period for recognition | 1 year 3 months 18 days | |||||||||
Common stock dividend payable | $ 332,000 | $ 332,000 | ||||||||
Stock Awards Activity [Member] | February 2017 [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Grant date fair value per share (in dollars per share) | $ 11.67 | |||||||||
Total original grants (in shares) | 62,137 | |||||||||
Equity instruments other than options, nonvested, number of shares [Roll Forward] | ||||||||||
Grants (in shares) | 62,137 | |||||||||
Equity instruments other than options, nonvested, weighted average grant date fair value [Abstract] | ||||||||||
Grants (in dollars per share) | $ 11.67 | |||||||||
Stock Awards Activity [Member] | January 2016 [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Grant date fair value per share (in dollars per share) | $ 12.17 | |||||||||
Total original grants (in shares) | 118,784 | |||||||||
Equity instruments other than options, nonvested, number of shares [Roll Forward] | ||||||||||
Grants (in shares) | 118,784 | |||||||||
Equity instruments other than options, nonvested, weighted average grant date fair value [Abstract] | ||||||||||
Grants (in dollars per share) | $ 12.17 |
COMPENSATION PROGRAMS, Schedule of Stock Option Award Activity (Details) - Stock Option [Member] |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Exercisable option awards outstanding (in shares) | shares | 40,000 |
Weighted average strike price (in dollars per share) | $ / shares | $ 11.86 |
Exercisable, weighted average remaining contractual term | 1 year 8 months 12 days |
Exercisable, intrinsic value | $ | $ 0 |
Share awards contractual term | 10 years |
COMPENSATION PROGRAMS, Defined Contribution Plans (Details) - USD ($) |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2016 |
|
Defined Contribution Plan Disclosure [Abstract] | ||
Defined contribution plan, voluntary contribution based on compensation | 50.00% | |
Defined contribution plan, employer matching contribution | 3.00% | |
Defined contribution plan, cost recognized | $ 33,000 | $ 220,000 |
Maximum [Member] | ||
Defined Contribution Plan Disclosure [Abstract] | ||
Defined contribution plan, annual contributions per employee | 6.00% |
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