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USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT (Tables)
 3 Months Ended
Mar. 31, 2018
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Schedule of Swap Agreements Expiration Period and Characteristics

At March 31, 2018, the Company’s portfolio financing-related swap positions had the following characteristics (dollars in thousands):

 

Period of

Contract Expiration

 

Notional

Amount

 

 

Average Fixed-Rate

Payment Requirement

 

Second quarter 2018

 

$

600,000

 

 

 

0.79

%

Third quarter 2018

 

 

400,000

 

 

 

0.88

 

Fourth quarter 2018

 

 

800,000

 

 

 

1.15

 

First quarter 2019

 

 

950,000

 

 

 

1.58

 

Second quarter 2019

 

 

1,650,000

 

 

 

1.33

 

Third quarter 2019

 

 

550,000

 

 

 

1.40

 

Fourth quarter 2019

 

 

700,000

 

 

 

1.72

 

First quarter 2020

 

 

600,000

 

 

 

2.07

 

Second quarter 2020

 

 

100,000

 

 

 

2.56

 

Third quarter 2020

 

 

200,000

 

 

 

1.64

 

Fourth quarter 2020

 

 

200,000

 

 

 

2.04

 

First quarter 2021

 

 

100,000

 

 

 

2.67

 

 

 

$

6,850,000

 

 

 

 

 

 
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):

 

 

 

Balance Sheet

 

March 31

 

 

December 31

 

 

 

Location

 

2018

 

 

2017

 

Balance sheet-related

 

 

 

 

 

 

 

 

 

 

Swap agreements in a gain position (an asset) related to

   secured borrowings

 

(a)

 

$

387

 

 

$

–

 

Swap agreements in a loss position (a liability) related to

 

 

 

 

 

 

 

 

 

 

   unsecured borrowings

 

(a)

 

 

(18,265

)

 

 

(23,772

)

Related net interest payable

 

(b)

 

 

(954

)

 

 

(484

)

 

 

 

 

$

(18,832

)

 

$

(24,256

)

 

(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 unrealized gains, net of unrealized losses, scheduled to be recognized in the Statements of Income over the next twelve months primarily in the form of current market rates in excess of fixed-rate swap payments totaled $42.1 million at March 31, 2018.

(b)

Included in “Accounts payable and accrued expenses” on the face of the Balance Sheets.

 

Location of

Gain or (Loss)

Recognized in

 

Quarter Ended March 31

 

 

Net Income

 

 

2018

 

 

 

2017

 

Income statement-related

 

 

 

 

 

 

 

 

 

Components of Secured borrowings-related effects

   on interest expense:

 

 

 

 

 

 

 

 

 

Amount of gain (loss) reclassified from

   Accumulated other comprehensive income

 

 

$

5,247

 

 

$

(888

)

Amount of loss recognized in income

 

 

–

 

 

 

(393

)

 

(a)

 

 

5,247

 

 

 

(1,281

)

Component of Unsecured borrowings-related

   effects on interest expense:

 

 

 

 

 

 

 

 

 

Amount of loss reclassified from Accumulated

   other comprehensive income

(b)

 

 

(603

)

 

 

(773

)

Decrease (increase) in interest expense and increase

    (decrease) in Net income as a result of the use

    of Derivatives

 

 

$

4,644

 

 

$

(2,054

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive income-related

 

 

 

 

 

 

 

 

 

Amount of gain recognized in Other

   comprehensive income

 

 

$

30,933

 

 

$

8,096

 

 

 

(a)

Included in “Interest expense:  Secured borrowings” on the face of the Statements of Income.

 

(b)

Included in “Interest expense:  Unsecured borrowings” on the face of the Statements of Income.

 
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):

 

 

 

Offsetting of Derivative Assets

 

 

 

 

 

 

 

Gross

 

 

Net Amounts

 

 

Gross Amounts Not Offset

 

 

 

 

 

 

 

Gross

 

 

Amounts

 

 

of Assets

 

 

in the Balance Sheet (b)

 

 

 

 

 

 

 

Amounts of

 

 

Offset in

 

 

Presented in

 

 

 

 

 

 

Cash

 

 

 

 

 

 

 

Recognized

 

 

the Balance

 

 

the Balance

 

 

Financial

 

 

Collateral

 

 

Net

 

 

 

Assets (a)

 

 

Sheet (a)

 

 

Sheet

 

 

Instruments

 

 

Received

 

 

Amount

 

March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty 4

 

$

49,821

 

 

$

(49,434

)

 

$

387

 

 

$

–

 

 

$

–

 

 

$

387

 

December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty 4

 

$

30,676

 

 

$

(30,676

)

 

$

–

 

 

$

–

 

 

$

–

 

 

$

–

 

 

(a)

Included in gross amounts of recognized assets at March 31, 2018 is the fair value of exchange-traded swap agreements, calculated including accrued interest.  Included in gross amounts offset in the balance sheet are variation margin amounts associated with these swaps at March 31, 2018.

(b)

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.

 
Schedule of Offsetting Disclosures for Liability Derivatives Held and Repurchase Arrangements and Similar Borrowings Outstanding

 

 

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

 

 

Offset in

 

 

Presented in

 

 

 

 

 

 

Cash

 

 

 

 

 

 

 

Recognized

 

 

the Balance

 

 

the Balance

 

 

Financial

 

 

Collateral

 

 

Net

 

 

 

Liabilities (a)

 

 

Sheet (a)

 

 

Sheet (b)

 

 

Instruments

 

 

Pledged

 

 

Amount

 

March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives by

   counterparty:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty 1

 

$

19,219

 

 

$

–

 

 

$

19,219

 

 

$

–

 

 

$

(19,219

)

 

$

–

 

Counterparty 4

 

 

316

 

 

 

(316

)

 

–

 

 

–

 

 

–

 

 

–

 

 

 

 

19,535

 

 

 

(316

)

 

 

19,219

 

 

–

 

 

 

(19,219

)

 

–

 

Borrowings under

   repurchase

   arrangements (d)

 

 

11,953,111

 

 

–

 

 

 

11,953,111

 

 

 

(11,953,111

)

 

–

 

 

–

 

 

 

$

11,972,646

 

 

$

(316

)

 

$

11,972,330

 

 

$

(11,953,111

)

 

$

(19,219

)

 

$

–

 

December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives by

   counterparty:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty 1

 

$

24,256

 

 

$

–

 

 

$

24,256

 

 

$

–

 

 

$

(24,256

)

 

$

–

 

Counterparty 4

 

 

3,701

 

 

 

(3,701

)

 

 

–

 

 

 

–

 

 

–

 

 

–

 

 

 

 

27,957

 

 

 

(3,701

)

 

 

24,256

 

 

 

–

 

 

 

(24,256

)

 

–

 

Borrowings under

   repurchase

   arrangements (d)

 

 

12,337,299

 

 

–

 

 

 

12,337,299

 

 

 

(12,337,299

)

 

–

 

 

–

 

 

 

$

12,365,256

 

 

$

(3,701

)

 

$

12,361,555

 

 

$

(12,337,299

)

 

$

(24,256

)

 

$

–

 

 

(a)

Included in gross amounts of recognized liabilities at March 31, 2018 is the fair value of non-exchange traded swap agreements (Counterparty 1) and exchange-traded swap agreements (Counterparty 4), calculated including accrued interest.  Included in gross amounts offset in the balance sheet are variation margin amounts associated with exchange-traded swap agreements at March 31, 2018.

(b)

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.

(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.

(d)

Amounts include accrued interest payable of $9.5 million and $7.7 million on borrowings under repurchase arrangements as of March 31, 2018 and December 31, 2017, respectively.
Changes in Accumulated Other Comprehensive Income

Changes in Accumulated other comprehensive income by component for the quarter ended March 31, 2018 were as follows (in thousands):

 

 

Unrealized

Gains and Losses

on Cash Flow

Hedges

 

 

Unrealized Gains

and Losses on

Available-for-Sale

Securities

 

 

Total

 

Balance at December 31, 2017

 

$

16,874

 

 

$

45,244

 

 

$

62,118

 

Activity for the quarter ended March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) before

   reclassifications

 

 

30,933

 

 

 

(44,053

)

 

 

(13,120

)

Amounts reclassified from accumulated

   other comprehensive income

 

 

(4,644

)

 

–

 

 

 

(4,644

)

Other comprehensive income (loss)

 

 

26,289

 

 

 

(44,053

)

 

 

(17,764

)

Balance at March 31, 2018

 

$

43,163

 

 

$

1,191

 

 

$

44,354