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USE OF DERIVATIVES, OFFSETTING DISCLOSURES AND CHANGES IN OTHER COMPREHENSIVE INCOME BY COMPONENT (Tables)
 9 Months Ended
Sep. 30, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Schedule of Swap Agreements Expiration Period and Characteristics At September 30, 2020 the Company’s swap positions related to secured borrowings had the following characteristics (dollars in thousands):

 

Period of

Contract Expiration

 

Notional

Amount

 

 

Average Fixed-Rate

Payment Requirement

 

Third quarter 2021

 

$

1,900,000

 

 

 

1.15

%

First quarter 2022

 

 

400,000

 

 

 

1.37

 

Second quarter 2022

 

 

400,000

 

 

 

0.02

 

Third quarter 2022

 

 

1,200,000

 

 

 

0.01

 

Third quarter 2023

 

 

100,000

 

 

 

0.03

 

 

 

$

4,000,000

 

 

 

 

 
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

 

September 30

 

 

December 31

 

 

 

Location

 

2020

 

 

2019

 

Balance sheet-related

 

 

 

 

 

 

 

 

 

 

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

   secured borrowings

 

(a)

 

$

–

 

 

$

733

 

Eurodollar futures contracts in a gain position

 

(a)

 

–

 

 

 

738

 

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

 

 

 

 

 

 

 

 

 

 

unsecured borrowings

 

(a)

 

 

(46,529

)

 

 

(29,156

)

Related net interest payable

 

(b)

 

 

(1,100

)

 

 

(437

)

 

 

 

 

$

(47,629

)

 

$

(28,122

)

(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.

(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

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Income statement-related

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Components of Secured borrowings-related effects

   on interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of gain reclassified from

   Accumulated other comprehensive

   income (loss)

 

 

$

–

 

 

$

–

 

 

$

–

 

 

$

7,891

 

Amortization of unrealized gain, net

   of unrealized losses on de-designated

   Derivatives

 

 

 

(18

)

 

 

3,120

 

 

 

(37

)

 

$

12,854

 

 

(a)

 

 

(18

)

 

 

3,120

 

 

 

(37

)

 

 

20,745

 

Component of Unsecured borrowings-related

   effects on interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of loss reclassified from Accumulated

   other comprehensive income (loss)

(b)

 

 

(934

)

 

 

(418

)

 

 

(2,333

)

 

 

(1,121

)

(Increase) decrease in interest expense as a result

   of the use of Derivatives

 

 

$

(952

)

 

$

2,702

 

 

$

(2,370

)

 

$

19,624

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized and unrealized gain (loss) on non-designated

   Derivatives (net) related to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements

 

 

$

1,510

 

 

$

(10,262

)

 

$

(158,378

)

 

$

(106,761

)

Eurodollar futures

 

 

–

 

 

 

1,041

 

 

 

(2,799

)

 

 

1,041

 

 

(c)

 

$

1,510

 

 

$

(9,221

)

 

$

(161,177

)

 

$

(105,720

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income-related

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of gain (loss) recognized in Other

   comprehensive income

 

 

$

2,113

 

 

$

(7,648

)

 

$

(19,705

)

 

$

(22,945

)

 

(a)

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

(b)

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

(c)

Included in “Loss on derivative instruments (net)” on the face of the Consolidated Statement of Operations.

 
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

 

September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty 4

 

$

1,107

 

 

$

(1,107

)

 

$

–

 

 

$

–

 

 

$

–

 

 

$

–

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty 4

 

$

6,517

 

 

$

(5,046

)

 

$

1,471

 

 

$

–

 

 

$

–

 

 

$

1,471

 

 

(a)

Included in gross amounts of recognized assets at September 30, 2020 are 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 exchange-traded swaps at September 30, 2020.

(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

 

September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives by

   counterparty:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty 1

 

$

47,629

 

 

$

–

 

 

$

47,629

 

 

$

–

 

 

$

(47,629

)

 

$

–

 

Counterparty 4

 

 

29,655

 

 

 

(29,655

)

 

–

 

 

–

 

 

–

 

 

–

 

 

 

 

77,284

 

 

 

(29,655

)

 

 

47,629

 

 

–

 

 

 

(47,629

)

 

–

 

Borrowings under

   repurchase

   arrangements (d)

 

 

7,645,701

 

 

–

 

 

 

7,645,701

 

 

 

(7,645,701

)

 

–

 

 

–

 

 

 

$

7,722,985

 

 

$

(29,655

)

 

$

7,693,330

 

 

$

(7,645,701

)

 

$

(47,629

)

 

$

–

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives by

   counterparty:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty 1

 

$

29,593

 

 

$

–

 

 

$

29,593

 

 

$

–

 

 

$

(29,593

)

 

$

–

 

Counterparty 4

 

 

21,601

 

 

 

(21,601

)

 

 

–

 

 

 

–

 

 

–

 

 

–

 

 

 

 

51,194

 

 

 

(21,601

)

 

 

29,593

 

 

 

–

 

 

 

(29,593

)

 

–

 

Borrowings under

   repurchase

   arrangements (d)

 

 

10,286,011

 

 

–

 

 

 

10,286,011

 

 

 

(10,286,011

)

 

–

 

 

–

 

 

 

$

10,337,205

 

 

$

(21,601

)

 

$

10,315,604

 

 

$

(10,286,011

)

 

$

(29,593

)

 

$

–

 

 

(a)

Included in gross amounts of recognized liabilities at September 30, 2020 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 September 30, 2020.

(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 $1.7 million and $11.5 million on borrowings under repurchase arrangements as of September 30, 2020 and December 31, 2019, respectively.
Changes in Accumulated Other Comprehensive Income Changes in Accumulated other comprehensive income  by component for the quarter and nine months ended September 30, 2020 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 June 30, 2020

 

$

(52,268

)

 

$

111,020

 

 

$

58,752

 

Activity for the quarter ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before

   reclassifications

 

 

2,113

 

 

 

(12,563

)

 

 

(10,450

)

Amounts reclassified from accumulated

   other comprehensive income (loss)

 

 

952

 

 

–

 

 

 

952

 

Other comprehensive loss (income)

 

 

3,065

 

 

 

(12,563

)

 

 

(9,498

)

Balance at September 30, 2020

 

$

(49,203

)

 

$

98,457

 

 

$

49,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

$

(31,868

)

 

$

45,267

 

 

$

13,399

 

Activity for the nine months ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss before

   reclassifications

 

 

(19,705

)

 

 

(13,674

)

 

 

(33,379

)

Amounts reclassified from accumulated other

   comprehensive income

 

 

2,370

 

 

 

66,864

 

 

 

69,234

 

Other comprehensive loss

 

 

(17,335

)

 

 

53,190

 

 

 

35,855

 

Balance at September 30, 2020

 

$

(49,203

)

 

$

98,457

 

 

$

49,254