Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Oct. 30, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'MFA FINANCIAL, INC. | ' |
Entity Central Index Key | '0001055160 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 369,079,139 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | ||
In Thousands, unless otherwise specified | ||||
Mortgage-backed securities (“MBSâ€): | ' | ' | ||
Mortgage-backed securities | $10,937,502 | $11,371,358 | ||
Securities obtained and pledged as collateral, at fair value | 442,370 | 383,743 | ||
Cash and cash equivalents | 423,891 | 565,370 | ||
Restricted cash | 43,751 | 37,520 | ||
Interest receivable | 32,499 | 35,828 | ||
Derivative instruments: | ' | ' | ||
MBS linked transactions, net (“Linked Transactionsâ€), at fair value | 190,681 | 28,181 | ||
Interest rate swap agreements (“Swapsâ€), at fair value | 4,322 | 13,000 | ||
Goodwill | 7,189 | 7,189 | ||
Prepaid and other assets (See Notes 2(d) and 15) | 160,572 | 29,719 | ||
Total Assets | 12,242,777 | 12,471,908 | ||
Liabilities: | ' | ' | ||
Repurchase agreements | 8,125,723 | [1] | 8,339,297 | [1] |
Securitized debt | 156,276 | [2] | 366,205 | [2] |
Obligation to return securities obtained as collateral, at fair value | 442,370 | 383,743 | ||
8% Senior Notes due 2042 (“Senior Notesâ€) | 100,000 | 100,000 | ||
Accrued interest payable | 12,172 | 14,726 | ||
Swaps, at fair value | 35,493 | [3] | 28,217 | [3] |
Dividends and dividend equivalents rights (“DERsâ€) payable | 74,126 | 73,643 | ||
Accrued expenses and other liabilities | 42,873 | 23,826 | ||
Total Liabilities | 8,989,033 | 9,329,657 | ||
Commitments and contingencies | ' | ' | ||
Stockholders’ Equity: | ' | ' | ||
Preferred stock, $.01 par value; 7.50% Series B cumulative redeemable; 8,050 shares authorized; 8,000 shares issued and outstanding ($200,000 aggregate liquidation preference) | 80 | 80 | ||
Common stock, $.01 par value; 886,950 shares authorized; 368,721 and 365,125 shares issued and outstanding, respectively | 3,687 | 3,651 | ||
Additional paid-in capital, in excess of par | 3,002,549 | 2,972,369 | ||
Accumulated deficit | -570,106 | -571,544 | ||
Accumulated other comprehensive income | 817,534 | 737,695 | ||
Total Stockholders’ Equity | 3,253,744 | 3,142,251 | ||
Total Liabilities and Stockholders’ Equity | 12,242,777 | 12,471,908 | ||
Agency Mortgage Backed Securities | ' | ' | ||
Mortgage-backed securities (“MBSâ€): | ' | ' | ||
Mortgage-backed securities | 6,174,176 | 6,519,221 | ||
Non-Agency Mortgage Backed Securities | ' | ' | ||
Mortgage-backed securities (“MBSâ€): | ' | ' | ||
Mortgage-backed securities | 4,763,326 | 4,852,137 | ||
Interest receivable | 17,127 | 18,917 | ||
Non-Agency Mortgage Backed Securities | Non-Agency MBS | ' | ' | ||
Mortgage-backed securities (“MBSâ€): | ' | ' | ||
Mortgage-backed securities | 3,311,062 | 2,569,766 | ||
Non-Agency Mortgage Backed Securities | Non-Agency MBS Transferred to Consolidated VIEs | ' | ' | ||
Mortgage-backed securities (“MBSâ€): | ' | ' | ||
Mortgage-backed securities | $1,452,264 | [4] | $2,282,371 | [4] |
[1] | The fair value of securities pledged against the Company’s repurchase agreements was $9.595 billion and $10.116 billion at September 30, 2014 and December 31, 2013, respectively. | |||
[2] | Securitized Debt represents third-party liabilities of consolidated VIEs and excludes liabilities of the VIEs acquired by the Company that eliminate on consolidation. The third-party beneficial interest holders in the VIEs have no recourse to the general credit of the Company. (See Notes 10 and 15 for further discussion.) | |||
[3] | The fair value of securities pledged against the Company’s Swaps was $67.4 million and $73.9 million at September 30, 2014 and December 31, 2013, respectively. | |||
[4] | Non-Agency MBS transferred to consolidated VIEs represent assets of the consolidated VIEs that can be used only to settle the obligations of each respective VIE. |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | 9 Months Ended | 12 Months Ended |
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 | Dec. 31, 2013 |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, dividend rate (as a percent) | 7.50% | 7.50% |
Preferred stock, shares authorized | 8,050,000 | 8,050,000 |
Preferred stock, shares issued | 8,000,000 | 8,000,000 |
Preferred stock, shares outstanding | 8,000,000 | 8,000,000 |
Preferred stock, aggregate liquidation preference (in dollars) | $200,000 | $200,000 |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, shares authorized | 886,950,000 | 886,950,000 |
Common stock, shares issued | 368,721,000 | 365,125,000 |
Common stock, shares outstanding | 368,721,000 | 365,125,000 |
Agency Mortgage Backed Securities | ' | ' |
Mortgage backed securities, at fair value, pledged as collateral | 5,765,633 | 6,142,306 |
Non-Agency Mortgage Backed Securities | ' | ' |
Mortgage backed securities, at fair value, pledged as collateral | $2,178,412 | $1,778,067 |
Senior Notes | ' | ' |
Stated interest rate (percent) | 8.00% | 8.00% |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | ||||
Interest Income: | ' | ' | ' | ' | ||||
Cash and cash equivalent investments | $20 | $21 | $63 | $93 | ||||
Interest Income | 110,960 | 118,482 | 350,776 | 361,891 | ||||
Interest Expense: | ' | ' | ' | ' | ||||
Repurchase agreements | 35,935 | 37,113 | 109,354 | 105,185 | ||||
Securitized debt | 1,415 | 2,830 | 5,471 | 9,381 | ||||
Senior Notes | 2,008 | 2,007 | 6,023 | 6,020 | ||||
Interest Expense | 39,358 | 41,950 | 120,848 | 120,586 | ||||
Net Interest Income | 71,602 | 76,532 | 229,928 | 241,305 | ||||
Other Income, net: | ' | ' | ' | ' | ||||
Unrealized net gains and net interest income from Linked Transactions | 2,559 | 544 | 9,586 | 1,785 | ||||
Unrealized losses on TBA short positions | 0 | -8,724 | 0 | -8,724 | ||||
Gain on sales of MBS and U.S. Treasury securities, net | 13,880 | 13,680 | 25,303 | 19,678 | ||||
Other, net | 1,251 | 55 | 1,543 | 165 | ||||
Other Income, net | 17,690 | 5,555 | 36,432 | 12,904 | ||||
Operating and Other Expense: | ' | ' | ' | ' | ||||
Compensation and benefits | 5,970 | 5,294 | 18,378 | 15,851 | ||||
Other general and administrative expense | 3,831 | 3,434 | 11,461 | 10,175 | ||||
Excise tax and interest | 0 | 0 | 1,175 | 2,000 | ||||
Impairment of resecuritization related costs | 0 | 2,031 | 0 | 2,031 | ||||
Other investment related operating expenses | 609 | 0 | 1,550 | 0 | ||||
Operating and Other Expense | 10,410 | 10,759 | 32,564 | 30,057 | ||||
Net Income | 78,882 | 71,328 | 233,796 | 224,152 | ||||
Less Preferred Stock Dividends | 3,750 | 3,750 | 11,250 | 10,000 | ||||
Less Issuance Costs of Redeemed Preferred Stock | 0 | [1] | 0 | [1] | 0 | [1] | 3,947 | [1] |
Net Income Available to Common Stock and Participating Securities | 75,132 | 67,578 | 222,546 | 210,205 | ||||
Earnings per Common Share - Basic and Diluted (in dollars per share) | $0.20 | $0.19 | $0.60 | $0.58 | ||||
Dividends Declared per Share of Common Stock (in dollars per share) | $0.20 | $0.50 | [2] | $0.60 | $1.44 | [2],[3] | ||
Agency Mortgage Backed Securities | ' | ' | ' | ' | ||||
Interest Income: | ' | ' | ' | ' | ||||
Mortgage backed securities | 33,066 | 36,158 | 110,004 | 116,982 | ||||
Non-Agency Mortgage Backed Securities | ' | ' | ' | ' | ||||
Interest Income: | ' | ' | ' | ' | ||||
Mortgage backed securities | 77,874 | 82,303 | 240,709 | 244,816 | ||||
Non-Agency Mortgage Backed Securities | Non-Agency MBS | ' | ' | ' | ' | ||||
Interest Income: | ' | ' | ' | ' | ||||
Mortgage backed securities | 48,571 | 43,131 | 135,199 | 128,175 | ||||
Non-Agency Mortgage Backed Securities | Non-Agency MBS Transferred to Consolidated VIEs | ' | ' | ' | ' | ||||
Interest Income: | ' | ' | ' | ' | ||||
Mortgage backed securities | $29,303 | $39,172 | $105,510 | $116,641 | ||||
[1] | Issuance costs of redeemed preferred stock represent the original offering costs related to the Series A Preferred Stock, which was redeemed on May 16, 2013. (See Note 11) | |||||||
[2] | Includes a special dividend of $0.28 per share declared on August 1, 2013. | |||||||
[3] | Includes a special dividend of $0.50 per share declared on March 4, 2013. |
CONSOLIDATED_STATEMENTS_OF_OPE1
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Parenthetical) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | |
Dividend Declared August 1 2013 [Member] | ' | ' |
Dividends Declared per Share of Common Stock, special dividend (in dollars per share) | $0.28 | $0.28 |
Dividend Declared March 4 2013 [Member] | ' | ' |
Dividends Declared per Share of Common Stock, special dividend (in dollars per share) | ' | $0.50 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | ||||
Net income | $78,882 | $71,328 | $233,796 | $224,152 | ||||
Other Comprehensive (Loss)/Income: | ' | ' | ' | ' | ||||
Reclassification adjustment for MBS sales included in net income | -13,589 | -15,158 | -21,180 | -17,398 | ||||
Unrealized gain/(loss) on derivative hedging instruments, net | 23,500 | -19,934 | -16,401 | 10,930 | ||||
Reclassification of unrealized loss on de-designated derivative hedging instruments | 0 | 0 | 447 | 0 | ||||
Other Comprehensive (Loss)/Income | -33,499 | -3,242 | 79,839 | -96,315 | ||||
Comprehensive income before preferred stock dividends and issuance costs of redeemed preferred stock | 45,383 | 68,086 | 313,635 | 127,837 | ||||
Dividends declared on preferred stock | -3,750 | -3,750 | -11,250 | -10,000 | ||||
Issuance costs of redeemed preferred stock | 0 | [1] | 0 | [1] | 0 | [1] | -3,947 | [1] |
Comprehensive Income Available to Common Stock and Participating Securities | 41,633 | 64,336 | 302,385 | 113,890 | ||||
Agency Mortgage Backed Securities | ' | ' | ' | ' | ||||
Other Comprehensive (Loss)/Income: | ' | ' | ' | ' | ||||
Unrealized (loss)/gain on MBS, net | -14,937 | 15,469 | 46,000 | -152,302 | ||||
Non-Agency Mortgage Backed Securities | ' | ' | ' | ' | ||||
Other Comprehensive (Loss)/Income: | ' | ' | ' | ' | ||||
Unrealized (loss)/gain on MBS, net | ($28,473) | $16,381 | $70,973 | $62,455 | ||||
[1] | Issuance costs of redeemed preferred stock represent the original offering costs related to the Series A Preferred Stock, which was redeemed on May 16, 2013. (See Note 11) |
CONSOLIDATED_STATEMENT_OF_CHAN
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (USD $) | Total | Preferred Stock | Common Stock, Par Value $.01 | Additional Paid-in Capital, in excess of Par | Accumulated Deficit | Accumulated Other Comprehensive Income | ||
In Thousands, except Share data, unless otherwise specified | Series B 7.50% Cumulative Redeemable - Liquidation Preference $25.00 per Share | |||||||
Balance at Dec. 31, 2013 | $3,142,251 | $80 | $3,651 | $2,972,369 | ($571,544) | $737,695 | ||
Balance (in shares) at Dec. 31, 2013 | ' | 8,000,000 | 365,125,000 | ' | ' | ' | ||
Increase (Decrease) in Stockholders' Equity | ' | ' | ' | ' | ' | ' | ||
Issuance of stock | [1] | ' | ' | 36 | 26,335 | ' | ' | |
Issuance of stock (in shares) | [1] | ' | ' | 3,690,000 | ' | ' | ' | |
Equity-based compensation expense | ' | ' | ' | 4,357 | ' | ' | ||
Accrued dividends attributable to stock-based awards | ' | ' | ' | -164 | ' | ' | ||
Repurchase of shares of common stock | [1] | ' | ' | 0 | -348 | ' | ' | |
Repurchase of shares of common stock (in shares) | 0 | ' | -94,000 | [1] | ' | ' | ' | |
Net income | 233,796 | ' | ' | ' | 233,796 | ' | ||
Dividends declared on common stock | ' | ' | ' | ' | -220,724 | ' | ||
Dividends declared on preferred stock | -11,250 | ' | ' | ' | -11,250 | ' | ||
Dividends attributable to DERs | ' | ' | ' | ' | -384 | ' | ||
Change in unrealized gains on MBS, net | 95,793 | ' | ' | ' | ' | 95,793 | ||
Change in unrealized losses on derivative hedging instruments, net | ' | ' | ' | ' | ' | -15,954 | ||
Balance at Sep. 30, 2014 | $3,253,744 | $80 | $3,687 | $3,002,549 | ($570,106) | $817,534 | ||
Balance (in shares) at Sep. 30, 2014 | ' | 8,000,000 | 368,721,000 | ' | ' | ' | ||
[1] | For the nine months ended September 30, 2014, includes approximately $721,000 (94,073 shares) surrendered for tax purposes related to equity-based compensation awards. |
CONSOLIDATED_STATEMENT_OF_CHAN1
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (Parenthetical) (USD $) | 9 Months Ended |
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 |
Amount surrendered for tax purposes, equity-based compensation awards | $721 |
Shares for tax withholding, equity-based compensation awards | 94,073 |
Preferred Stock, dividend rate (as a percent) | 7.50% |
Common Stock, Par Value (in dollars per share) | $0.01 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Cash Flows From Operating Activities: | ' | ' |
Net income | $233,796 | $224,152 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Gain on sales of MBS and U.S. Treasury securities | -25,303 | -19,678 |
Accretion of purchase discounts on MBS and other investments | -68,871 | -48,322 |
Amortization of purchase premiums on MBS | 25,986 | 47,198 |
Depreciation and amortization on fixed assets and other assets | 936 | 3,133 |
Equity-based compensation expense | 4,357 | 2,946 |
Unrealized (losses)/gains on derivative instruments | -2,542 | 8,318 |
Decrease in interest receivable | 3,318 | 6,193 |
Increase in prepaid and other assets | -19,824 | -5,146 |
(Decrease)/increase in accrued expenses and other liabilities, and excise tax and interest | -6,434 | 10,837 |
Increase/(decrease) in accrued interest payable on financial instruments | 32,080 | -2,503 |
Net cash provided by operating activities | 177,499 | 227,128 |
Cash Flows From Investing Activities: | ' | ' |
Principal payments on MBS and other investments | 1,470,390 | 2,231,495 |
Proceeds from sale of MBS and U.S. Treasury securities | 103,625 | 493,613 |
Purchases of MBS and other investments | -1,068,713 | -1,532,982 |
Additions to leasehold improvements, furniture and fixtures | -383 | -272 |
Net cash provided by investing activities | 504,919 | 1,191,854 |
Cash Flows From Financing Activities: | ' | ' |
Principal payments on repurchase agreements | -62,567,398 | -60,312,234 |
Proceeds from borrowings under repurchase agreements | 62,353,824 | 60,127,933 |
Proceeds from issuance of securitized debt | 0 | 76,485 |
Principal payments on securitized debt | -208,702 | -303,608 |
Payments made on obligation to return securities obtained as collateral | 0 | -200,050 |
Maturity of obligation to return securities obtained as collateral | 0 | -275,402 |
Cash disbursements on financial instruments underlying Linked Transactions | -2,738,961 | -254,155 |
Cash received from financial instruments underlying Linked Transactions | 2,583,744 | 243,325 |
Payments made for margin calls on repurchase agreements and Swaps | -111,800 | -61,402 |
Proceeds from reverse margin calls on repurchase agreements and Swaps | 70,900 | 2,000 |
Proceeds from issuances of common stock | 26,371 | 67,409 |
Payments made for redemption of Series A Preferred Stock | 0 | -96,000 |
Proceeds from issuance of Series B Preferred Stock | 0 | 200,000 |
Payments made for preferred stock offering costs | 0 | -6,684 |
Payments made to repurchase common stock | 0 | -27 |
Dividends paid on preferred stock | -11,250 | -10,000 |
Dividends paid on common stock and DERs | -220,625 | -514,013 |
Net cash used in financing activities | -823,897 | -1,316,423 |
Net (decrease)/increase in cash and cash equivalents | -141,479 | 102,559 |
Cash and cash equivalents at beginning of period | 565,370 | 401,293 |
Cash and cash equivalents at end of period | 423,891 | 503,852 |
Non-cash Investing and Financing Activities: | ' | ' |
MBS recorded upon de-linking of Linked Transactions | 36,258 | 0 |
Net increase in securities obtained as collateral/obligation to return securities obtained as collateral | 63,691 | 221,578 |
Dividends and DERs declared and unpaid | $74,126 | $81,171 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Organization | ' |
Organization | |
MFA Financial, Inc. (the “Company”) was incorporated in Maryland on July 24, 1997 and began operations on April 10, 1998. The Company has elected to be treated as a real estate investment trust (“REIT”) for federal income tax purposes. In order to maintain its qualification as a REIT, the Company must comply with a number of requirements under federal tax law, including that it must distribute at least 90% of its annual REIT taxable income to its stockholders. (See Notes 2(n) and 11) |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Summary of Significant Accounting Policies | ' |
Summary of Significant Accounting Policies | |
(a) Basis of Presentation and Consolidation | |
The interim unaudited consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted according to these SEC rules and regulations. Management believes that the disclosures included in these interim financial statements are adequate to make the information presented not misleading. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2014 and results of operations for all periods presented have been made. The results of operations for the nine months ended September 30, 2014 should not be construed as indicative of the results to be expected for the full year. | |
The accompanying consolidated financial statements of the Company have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although the Company’s estimates contemplate current conditions and how it expects them to change in the future, it is reasonably possible that actual conditions could be worse than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition. Management has made significant estimates in several areas, including other-than-temporary impairment (“OTTI”) on Agency and Non-Agency MBS (Note 3), valuation of Agency and Non-Agency MBS (Notes 3 and 14), derivative instruments (Notes 5 and 14) and income recognition on certain Non-Agency MBS purchased at a discount (Note 3). In addition, estimates are used in the determination of taxable income used in the assessment of REIT compliance and contingent liabilities for related taxes, penalties and interest (Note 2(n)). Actual results could differ from those estimates. | |
The consolidated financial statements of the Company include the accounts of all subsidiaries; significant intercompany accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(b) Agency and Non-Agency MBS (including Non-Agency MBS transferred to a consolidated VIE) | |
The Company has investments in residential MBS that are issued or guaranteed as to principal and/or interest by a federally chartered corporation, such as Fannie Mae or Freddie Mac, or any agency of the U.S. Government, such as Ginnie Mae (collectively, “Agency MBS”), and residential MBS that are not guaranteed by any U.S. Government agency or any federally chartered corporation (“Non-Agency MBS”), as described in Note 3. | |
Designation | |
The Company generally intends to hold its MBS until maturity; however, from time to time, it may sell any of its securities as part of the overall management of its business. As a result, all of the Company’s MBS are designated as “available-for-sale” and, accordingly, are carried at their fair value with unrealized gains and losses excluded from earnings (except when an OTTI is recognized, as discussed below) and reported in accumulated other comprehensive income/(loss) (“AOCI”), a component of stockholders’ equity. | |
Upon the sale of an investment security, any unrealized gain or loss is reclassified out of AOCI to earnings as a realized gain or loss using the specific identification method. | |
Revenue Recognition, Premium Amortization and Discount Accretion | |
Interest income on securities is accrued based on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency MBS and Non-Agency MBS assessed as high credit quality at the time of purchase are amortized into interest income over the life of such securities using the effective yield method. Adjustments to premium amortization are made for actual prepayment activity. | |
Interest income on the Non-Agency MBS that were purchased at a discount to par value and/or are considered to be of less than high credit quality is recognized based on the security’s effective interest rate which is the security’s internal rate of return (“IRR”). The IRR is determined using management’s estimate of the projected cash flows for each security, which are based on the Company’s observation of current information and events and include assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of credit losses. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the IRR/interest income recognized on these securities or in the recognition of OTTIs. (See Note 3) | |
Based on the projected cash flows from the Company’s Non-Agency MBS purchased at a discount to par value, a portion of the purchase discount may be designated as non-accretable purchase discount (“Credit Reserve”), which effectively mitigates the Company’s risk of loss on the mortgages collateralizing such MBS and is not expected to be accreted into interest income. The amount designated as Credit Reserve may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a Credit Reserve is more favorable than forecasted, a portion of the amount designated as Credit Reserve may be reallocated to accretable discount and recognized into interest income over time. Conversely, if the performance of a security with a Credit Reserve is less favorable than forecasted, the amount designated as Credit Reserve may be increased, or impairment charges and write-downs of such securities to a new cost basis could result. | |
Determination of MBS Fair Value | |
In determining the fair value of the Company’s MBS, management considers a number of observable market data points, including prices obtained from pricing services, brokers and repurchase agreement counterparties, dialogue with market participants, as well as management’s observations of market activity. (See Note 14) | |
Impairments/OTTI | |
When the fair value of an investment security is less than its amortized cost at the balance sheet date, the security is considered impaired. The Company assesses its impaired securities on at least a quarterly basis and designates such impairments as either “temporary” or “other-than-temporary.” If the Company intends to sell an impaired security, or it is more likely than not that it will be required to sell the impaired security before its anticipated recovery, then the Company must recognize an OTTI through charges to earnings equal to the entire difference between the investment’s amortized cost and its fair value at the balance sheet date. If the Company does not expect to sell an other-than-temporarily impaired security, only the portion of the OTTI related to credit losses is recognized through charges to earnings with the remainder recognized through AOCI on the consolidated balance sheets. Impairments recognized through other comprehensive income/(loss) (“OCI”) do not impact earnings. Following the recognition of an OTTI through earnings, a new cost basis is established for the security and may not be adjusted for subsequent recoveries in fair value through earnings. However, OTTIs recognized through charges to earnings may be accreted back to the amortized cost basis of the security on a prospective basis through interest income. The determination as to whether an OTTI exists and, if so, the amount of credit impairment recognized in earnings is subjective, as such determinations are based on factual information available at the time of assessment as well as the Company’s estimates of the future performance and cash flow projections. As a result, the timing and amount of OTTIs constitute material estimates that are susceptible to significant change. (See Note 3) | |
Non-Agency MBS that are assessed to be of less than high credit quality and on which impairments are recognized have experienced, or are expected to experience, credit-related adverse cash flow changes. The Company’s estimate of cash flows for its Non-Agency MBS is based on its review of the underlying mortgage loans securing the MBS. The Company considers information available about the past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, prepayment rates, default rates, loss severities, delinquency rates, percentage of non-performing loans, Fair Isaac Corporation (“FICO”) scores at loan origination, year of origination, loan-to-value ratios (“LTVs”), geographic concentrations, as well as reports by credit rating agencies, such as Moody’s Investors Services, Inc. (“Moody’s”), Standard & Poor’s Corporation (“S&P”), or Fitch, Inc. (collectively, “Rating Agencies”), general market assessments, and dialogue with market participants. As a result, significant judgment is used in the Company’s analysis to determine the expected cash flows for its Non-Agency MBS. In determining the OTTI related to credit losses for securities that were purchased at significant discounts to par and/or are considered to be of less than high credit quality, the Company compares the present value of the remaining cash flows expected to be collected at the purchase date (or last date previously revised) against the present value of the cash flows expected to be collected at the current financial reporting date. The discount rate used to calculate the present value of expected future cash flows is the current yield used for income recognition purposes. Impairment assessment for Non-Agency MBS that were purchased at prices close to par and are considered to be of high credit quality involves comparing the present value of the remaining cash flows expected to be collected against the amortized cost of the security at the assessment date. The discount rate used to calculate the present value of the expected future cash flows is based on the instrument’s IRR. | |
Balance Sheet Presentation | |
The Company’s MBS pledged as collateral against repurchase agreements and Swaps are included in MBS on the consolidated balance sheets with the fair value of the MBS pledged disclosed parenthetically. Purchases and sales of securities are recorded on the trade date. However, if on the purchase settlement date, a repurchase agreement is used to finance the purchase of an MBS with the same counterparty and such transactions are determined to be linked, then the MBS and linked repurchase borrowing will be reported on the same settlement date as Linked Transactions. (See Notes 2(o) and 5) | |
(c) Securities Obtained and Pledged as Collateral/Obligation to Return Securities Obtained as Collateral | |
The Company has obtained securities as collateral under collateralized financing arrangements in connection with its financing strategy for Non-Agency MBS. Securities obtained as collateral in connection with these transactions are recorded on the Company’s consolidated balance sheets as an asset along with a liability representing the obligation to return the collateral obtained, at fair value. While beneficial ownership of securities obtained remains with the counterparty, the Company has the right to sell the collateral obtained or to pledge it as part of a subsequent collateralized financing transaction. (See Note 2(j) for Repurchase Agreements and Reverse Repurchase Agreements) | |
(d) Residential Whole Loans | |
Residential whole loans included in the Company’s consolidated balance sheets are comprised of pools of fixed and adjustable rate residential mortgage loans acquired through a consolidated trust. The Company has elected to account for these loans as credit impaired as they were acquired at discounted prices that reflect, in part, the credit history of the borrower. In addition, many of the borrowers have previously experienced payment delinquencies and the amount owed on the mortgage loan may exceed the value of the property pledged as collateral. Consequently, the Company has assessed that these loans have a higher likelihood of default than newly originated mortgage loans with LTVs of 80% or less to credit worthy borrowers. The Company believes that amounts paid to acquire residential whole loans represent fair market value at the date of acquisition. Residential whole loans are initially recorded at fair value with no allowance for loan losses. Subsequent to acquisition, the recorded amount reflects the original investment amount, plus accretion of interest income, less principal and interest cash flows received and principal amounts forgiven or otherwise charged off as they are considered not recoverable. Residential whole loans are presented in Prepaid and other assets in the Company's consolidated balance sheets at carrying value, which reflects the recorded amount net of any allowance for loan losses established subsequent to acquisition. | |
The Company may aggregate into pools loans acquired in the same fiscal quarter that are assessed as having similar risk characteristics. For each pool established, or on an individual loans basis for loans not aggregated into pools, the Company estimates at acquisition and periodically on at least a quarterly basis, the principal and interest cash flows expected to be collected. The difference between the cash flows expected to be collected and the carrying amount of the loans is referred to as the “accretable yield”. This amount is accreted as interest income over the life of the loans using an effective interest rate (level yield) methodology. Interest income recorded each period reflects the amount of accretable yield recognized and not the coupon interest payments received on the underlying loans. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference,” includes estimates of both the impact of prepayments and expected credit losses over the life of the underlying loans. | |
A decrease in expected cash flows in subsequent periods may indicate impairment at the pool and/or individual loan level thus requiring the establishment of an allowance for loan losses by a charge to the provision for loan losses. The allowance for loan losses represents the present value of cash flows expected at acquisition that are no longer expected to be received at the relevant measurement date. An increase in expected cash flows in subsequent periods initially reduces any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield. The adjustment of accretable yield due to an increase in expected cash flows is accounted for prospectively as a change in estimate and results in reclassification from nonaccretable difference to accretable yield. (See Note 15) | |
(e) Cash and Cash Equivalents | |
Cash and cash equivalents include cash on deposit with financial institutions and investments in money market funds and U. S. Treasury Bills, all of which have original maturities of three months or less. Cash and cash equivalents may also include cash pledged as collateral to the Company by its repurchase agreement and/or Swap counterparties as a result of reverse margin calls (i.e., margin calls made by the Company). The Company did not hold any cash pledged by its counterparties at September 30, 2014 or December 31, 2013. The Company’s investments in overnight money market funds, which are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency were $314.9 million and $534.4 million at September 30, 2014 and December 31, 2013, respectively. (See Notes 7 and 14) | |
(f) Restricted Cash | |
Restricted cash represents the Company’s cash held by its counterparties as collateral against the Company’s Swaps and/or repurchase agreements. Restricted cash, which earns interest, is not available to the Company for general corporate purposes, but may be applied against amounts due to counterparties to the Company’s repurchase agreements and/or Swaps, or returned to the Company when the collateral requirements are exceeded or at the maturity of the Swap or repurchase agreement. The Company had aggregate restricted cash held as collateral against its Swaps and repurchase agreements of $43.8 million at September 30, 2014 and $37.5 million held as collateral against its Swaps at December 31, 2013. (See Notes 5, 6, 7 and 14) | |
(g) Goodwill | |
At September 30, 2014 and December 31, 2013, the Company had goodwill of $7.2 million, which represents the unamortized portion of the excess of the fair value of its common stock issued over the fair value of net assets acquired in connection with its formation in 1998. Goodwill is tested for impairment at least annually, or more frequently under certain circumstances, at the entity level. Through September 30, 2014, the Company had not recognized any impairment against its goodwill. | |
(h) Depreciation | |
Leasehold Improvements and Other Depreciable Assets | |
Depreciation is computed on the straight-line method over the estimated useful life of the related assets or, in the case of leasehold improvements, over the shorter of the useful life or the lease term. Furniture, fixtures, computers and related hardware have estimated useful lives ranging from five to eight years at the time of purchase. | |
(i) Resecuritization and Senior Notes Related Costs | |
Resecuritization related costs are costs associated with the issuance of beneficial interests by consolidated VIEs and incurred by the Company in connection with various resecuritization transactions completed by the Company. Senior Notes related costs are costs incurred by the Company in connection with the issuance of its Senior Notes in April, 2012. These costs may include underwriting, rating agency, legal, accounting and other fees. Such costs, which reflect deferred charges, are included on the Company’s consolidated balance sheets in Prepaid and other assets. These deferred charges are amortized as an adjustment to interest expense using the effective interest method, based upon the actual repayments of the associated beneficial interests issued to third parties and over the stated legal maturity of the Senior Notes. The Company periodically reviews the recoverability of these deferred costs and in the event an impairment charge is required, such amount shall be included within Operating and other expense on the Company’s consolidated statement of operations. | |
(j) Repurchase Agreements and Reverse Repurchase Agreements | |
The Company finances the acquisition of a significant portion of its MBS with repurchase agreements. Under repurchase agreements, the Company sells securities to a lender and agrees to repurchase the same securities in the future for a price that is higher than the original sale price. The difference between the sale price that the Company receives and the repurchase price that the Company pays represents interest paid to the lender. Although legally structured as sale and repurchase transactions, the Company accounts for repurchase agreements as secured borrowings, with the exception of certain repurchase agreements accounted for as components of Linked Transactions. (See Note 2(o) below.) Under its repurchase agreements, the Company pledges its securities as collateral to secure the borrowing, which is equal in value to a specified percentage of the fair value of the pledged collateral, while the Company retains beneficial ownership of the pledged collateral. At the maturity of a repurchase financing, unless the repurchase financing is renewed with the same counterparty, the Company is required to repay the loan including any accrued interest and concurrently receives back its pledged collateral from the lender. With the consent of the lender, the Company may renew a repurchase financing at the then prevailing financing terms. Margin calls, whereby a lender requires that the Company pledge additional securities or cash as collateral to secure borrowings under its repurchase financing with such lender, are routinely experienced by the Company when the value of the MBS pledged as collateral declines as a result of principal amortization and prepayments or due to changes in market interest rates, spreads or other market conditions. The Company also may make margin calls on counterparties when collateral values increase. | |
The Company’s repurchase financings typically have terms ranging from one month to six months at inception, but may also have longer or shorter terms. Should a counterparty decide not to renew a repurchase financing at maturity, the Company must either refinance elsewhere or be in a position to satisfy the obligation. If, during the term of a repurchase financing, a lender should default on its obligation, the Company might experience difficulty recovering its pledged assets which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged by the Company to such lender, including accrued interest receivable or such collateral. (See Notes 2(o), 5, 6, 7 and 14) | |
In addition to the repurchase agreement financing arrangements discussed above, as part of its financing strategy for Non-Agency MBS, the Company has entered into contemporaneous repurchase and reverse repurchase agreements with a single counterparty. Under a typical reverse repurchase agreement, the Company buys securities from a borrower for cash and agrees to sell the same securities in the future for a price that is higher than the original purchase price. The difference between the purchase price the Company originally paid and the sale price represents interest received from the borrower. In contrast, the contemporaneous repurchase and reverse repurchase transactions effectively resulted in the Company pledging Non-Agency MBS as collateral to the counterparty in connection with the repurchase agreement financing and obtaining U.S. Treasury securities as collateral from the same counterparty in connection with the reverse repurchase agreement. No net cash was exchanged between the Company and counterparty at the inception of the transactions. Securities obtained and pledged as collateral are recorded as an asset on the Company’s consolidated balance sheets. Interest income is recorded on the reverse repurchase agreement and interest expense is recorded on the repurchase agreement on an accrual basis. Both the Company and the counterparty have the right to make daily margin calls based on changes in the value of the collateral obtained and/or pledged. The Company’s liability to the counterparty in connection with this financing arrangement is recorded on the Company’s consolidated balance sheets and disclosed as “Obligation to return securities obtained as collateral.” (See Note 2(c)) | |
(k) Equity-Based Compensation | |
Compensation expense for equity based awards is recognized ratably over the vesting period of such awards, based upon the fair value of such awards at the grant date. With respect to awards granted in 2009 and prior years, the Company has applied a zero forfeiture rate for these awards, as they were granted to a limited number of employees, and historical forfeitures have been minimal. Forfeitures, or an indication that forfeitures are expected to occur, may result in a revised forfeiture rate and would be accounted for prospectively as a change in estimate. | |
During 2010, the Company granted certain restricted stock units (“RSUs”) that vest after either two or four years of service and provided that certain criteria are met, which are based on a formula that includes changes in the Company’s closing stock price over a two- or four-year period and dividends declared on the Company’s common stock during those periods. From 2011 through 2013, the Company granted certain RSUs that vest annually over a one or three-year period, provided that certain criteria are met, which are based on a formula that includes changes in the Company’s closing stock price over the annual vesting period and dividends declared on the Company’s common stock during those periods. During 2014, the Company made grants of RSUs certain of which generally cliff vest after a three-year period and certain of which generally cliff vest after a three-year period subject to the achievement of a market-based condition that is based on a formula tied to the Company’s achievement of average total stockholder return during the three-year period. Such criteria constitute a “market condition” which impacts the amount of compensation expense recognized for these awards. Specifically, the uncertainty regarding whether the market condition will be achieved is reflected in the grant date fair valuation of the RSUs, which in addition to estimates regarding the amount of RSUs expected to be forfeited during the associated service period, determines the amount of compensation expense that is recognized. Compensation expense is not reversed should the market condition not be achieved, while differences in actual forfeiture experience relative to estimated forfeitures will result in adjustments to the timing and amount of compensation expense recognized. | |
The Company has awarded DERs that may be attached to or awarded separately from other equity based awards. Compensation expense for separately awarded DERs is based on the grant date fair value of such awards and is recognized over the vesting period. Payments pursuant to these DERs are charged to stockholders’ equity. Payments pursuant to DERs that are attached to equity based awards are charged to stockholders’ equity to the extent that the attached equity awards are expected to vest. Compensation expense is recognized for payments made for DERs to the extent that the attached equity awards do not or are not expected to vest and grantees are not required to return payments of dividends or DERs to the Company. (See Notes 2(l) and 13) | |
(l) Earnings per Common Share (“EPS”) | |
Basic EPS is computed using the two-class method, which includes the weighted-average number of shares of common stock outstanding during the period and other securities that participate in dividends, such as the Company’s unvested restricted stock and RSUs that have non-forfeitable rights to dividends and DERs attached to/associated with RSUs and vested stock options to arrive at total common equivalent shares. In applying the two-class method, earnings are allocated to both shares of common stock and securities that participate in dividends based on their respective weighted-average shares outstanding for the period. For the diluted EPS calculation, common equivalent shares are further adjusted for the effect of dilutive unexercised stock options and RSUs outstanding that are unvested and have dividends that are subject to forfeiture using the treasury stock method. Under the treasury stock method, common equivalent shares are calculated assuming that all dilutive common stock equivalents are exercised and the proceeds, along with future compensation expenses associated with such instruments, are used to repurchase shares of the Company’s outstanding common stock at the average market price during the reported period. (See Note 12) | |
(m) Comprehensive Income/(Loss) | |
The Company’s comprehensive income/(loss) available to common stock and participating securities includes net income, the change in net unrealized gains/(losses) on its MBS and derivative hedging instruments, (to the extent that such changes are not recorded in earnings), adjusted by realized net gains/(losses) reclassified out of AOCI for MBS and de-designated derivative hedging instruments and is reduced by dividends declared on the Company’s preferred stock and issuance costs of redeemed preferred stock. | |
(n) U.S. Federal Income Taxes | |
The Company has elected to be taxed as a REIT under the provisions of the Internal Revenue Code of 1986, as amended, (the “Code”) and the corresponding provisions of state law. The Company expects to operate in a manner that will enable it to satisfy the various requirements to maintain its status as a REIT. In order to maintain its status a REIT, the Company must, among other things, distribute at least 90% of its REIT taxable income (excluding net long-term capital gains) to stockholders in the timeframe permitted by the Code. As long as the Company maintains its status as a REIT, the Company will not be subject to regular Federal income tax to the extent that it distributes 100% of its REIT taxable income (including net long-term capital gains) to its stockholders within the permitted timeframe. Should this not occur, the Company would be subject to federal taxes at prevailing corporate tax rates on the difference between its REIT taxable income and the amounts deemed to be distributed for that tax year. As the Company’s objective is to distribute 100% of its REIT taxable income to its stockholders within the permitted timeframe, no provision for current or deferred income taxes has been made in the accompanying consolidated financial statements. Should the Company incur a liability for corporate income tax, such amounts would be recorded as REIT income tax expense on the Company’s consolidated statements of operations. Furthermore, if the Company fails to distribute during each calendar year, or by the end of January following the calendar year in the case of distributions with declaration and record dates falling in the last three months of the calendar year, at least the sum of (i) 85% its REIT ordinary income for such year; (ii) 95% of its REIT capital gain income for such year and; (iii) any undistributed taxable income from prior periods, the Company will be subject to a 4% nondeductible excise tax on the excess of such required distribution over the amounts actually distributed. To the extent that the Company incurs interest, penalties or related excise taxes in connection with its tax obligations, including as a result of its assessment of uncertain tax positions, such amounts shall be included within Operating and other expense on the Company’s consolidated statements of operations. | |
Based on its analysis of any potential uncertain tax positions, the Company concluded that it does not have any material uncertain tax positions that meet the relevant recognition or measurement criteria as of September 30, 2014, December 31, 2013, or September 30, 2013. The Company filed its 2013 tax return prior to September 15, 2014. The Company’s tax returns for tax years 2009 through 2013 are open to examination. | |
(o) Derivative Financial Instruments | |
The Company uses a variety of derivative instruments to economically hedge a portion of its exposure to market risks, including interest rate risk, prepayment risk and extension risk. The objective of the Company’s risk management strategy is to reduce fluctuations in net book value over a range of interest rate scenarios. In particular, the Company attempts to mitigate the risk of the cost of its variable rate liabilities increasing during a period of rising interest rates. The Company’s derivative instruments are primarily comprised of Swaps, the majority of which are designated as cash flow hedges against the interest rate risk associated with its borrowings. During 2013, the Company also entered into forward contracts for the sale of Agency MBS securities on a generic pool, or to-be-announced basis (“TBA short positions”) and Linked Transactions. TBA short positions and Linked Transactions are not designated as hedging instruments. | |
Linked Transactions | |
It is presumed that the initial transfer of a financial asset (i.e., the purchase of an MBS by the Company) and contemporaneous repurchase financing of such MBS with the same counterparty are considered part of the same arrangement, or a “linked transaction,” unless certain criteria are met. The two components of a linked transaction (MBS purchase and repurchase financing) are not reported separately but are evaluated on a combined basis and reported as a forward (derivative) contract and are presented as “Linked Transactions” on the Company’s consolidated balance sheets. Changes in the fair value of the assets and liabilities underlying Linked Transactions and associated interest income and expense are reported as “unrealized net gains/(losses) and net interest income from Linked Transactions” on the Company’s consolidated statements of operations and are not included in OCI. However, if certain criteria are met, the initial transfer (i.e., the purchase of a security by the Company) and repurchase financing will not be treated as a Linked Transaction and will be evaluated and reported separately, as an MBS purchase and repurchase financing. When or if a transaction is no longer considered to be linked, the MBS and repurchase financing will be reported on a gross basis. In this case, the fair value of the MBS at the time the transactions are no longer considered linked will become the cost basis of the MBS, and the income recognition yield for such MBS will be calculated prospectively using this new cost basis. (See Notes 5 and 14) | |
Swaps | |
The Company documents its risk-management policies, including objectives and strategies, as they relate to its hedging activities and the relationship between the hedging instrument and the hedged liability for all Swaps designated as hedging transactions. The Company assesses, both at inception of a hedge and on a quarterly basis thereafter, whether or not the hedge is “highly effective.” | |
Swaps are carried on the Company’s balance sheets at fair value, as assets, if their fair value is positive, or as liabilities, if their fair value is negative. Changes in the fair value of the Company’s Swaps designated in hedging transactions are recorded in OCI provided that the hedge remains effective. Changes in fair value for any ineffective amount of a Swap are recognized in earnings. The Company has not recognized any change in the value of its existing Swaps designated as hedges through earnings as a result of hedge ineffectiveness. | |
The Company discontinues hedge accounting on a prospective basis and recognizes changes in the fair value through earnings when: (i) it is determined that the derivative is no longer effective in offsetting cash flows of a hedged item (including forecasted transactions); (ii) it is no longer probable that the forecasted transaction will occur; or (iii) it is determined that designating the derivative as a hedge is no longer appropriate. | |
Although permitted under certain circumstances, the Company does not offset cash collateral receivables or payables against its net derivative positions. (See Notes 5, 7 and 14) | |
TBA Short Positions | |
During 2013, the Company entered into TBA short positions as a means of managing interest rate risk and MBS basis risk associated with its investment and financing activities. A TBA short position is a forward contract for the sale of Agency MBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency MBS that could be delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association (“SIFMA”), are not known at the time of the transaction. | |
The Company accounts for TBA short positions as derivative instruments since it cannot assert that it is probable at inception and throughout the term of the TBA contract that it will physically deliver the agency security upon settlement of the contract. The Company presents TBA short positions as either derivative assets or liabilities, at fair value on its consolidated balance sheets. Gains and losses associated with TBA short positions are reported in Other income on the Company’s consolidated statements of operations. | |
The Company did not have any TBA short positions at September 30, 2014 and December 31, 2013. | |
(p) Fair Value Measurements and the Fair Value Option for Financial Assets and Financial Liabilities | |
The Company’s presentation of fair value for its financial assets and liabilities is determined within a framework that stipulates that the fair value of a financial asset or liability is an exchange price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. This definition of fair value focuses on exit price and prioritizes the use of market-based inputs over entity-specific inputs when determining fair value. In addition, the framework for measuring fair value establishes a three-level hierarchy for fair value measurements based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. (See Note 14) | |
Although permitted under GAAP to measure many financial instruments and certain other items at fair value, the Company has not elected the fair value option for any of its assets or liabilities. If the fair value option is elected, unrealized gains and losses on such items for which fair value is elected would be recognized in earnings at each subsequent reporting date. A decision to elect the fair value option for an eligible financial instrument, which may be made on an instrument by instrument basis, is irrevocable. | |
(q) Variable Interest Entities and Other Consolidated Special Purpose Entities | |
An entity is referred to as a VIE if it meets at least one of the following criteria: (i) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support of other parties; or (ii) as a group, the holders of the equity investment at risk lack (a) the power to direct the activities of an entity that most significantly impact the entity’s economic performance; (b) the obligation to absorb the expected losses; or (c) the right to receive the expected residual returns; or (iii) have disproportional voting rights and the entity’s activities are conducted on behalf of the investor that has disproportionally few voting rights. | |
The Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE. | |
The Company has entered into resecuritization transactions which result in the Company consolidating the VIEs that were created to facilitate the transactions and to which the underlying assets in connection with the resecuritizations were transferred. In determining the accounting treatment to be applied to these resecuritization transactions, the Company evaluated whether the entities used to facilitate these transactions were VIEs and, if so, whether they should be consolidated. Based on its evaluation, the Company concluded that the VIEs should be consolidated. If the Company had determined that consolidation was not required, it would have then assessed whether the transfer of the underlying assets would qualify as a sale or should be accounted for as secured financings under GAAP. | |
Prior to the completion of its initial resecuritization transaction in October 2010, the Company had not transferred assets to VIEs or Qualifying Special Purpose Entities (“QSPEs”) and other than acquiring MBS issued by such entities, had no other involvement with VIEs or QSPEs. (See Note 15) | |
The Company also includes in its consolidated balance sheets certain financial assets and liabilities that are acquired/issued by trusts and/or other special purpose entities that have been evaluated as being required to be consolidated by the Company under the applicable accounting guidance. | |
(r) Offering Costs Related to Issuance and Redemption of Preferred Stock | |
Offering costs related to issuance of preferred stock are recorded as a reduction in Additional paid-in capital, a component of stockholders’ equity, at the time such preferred stock is issued. On redemption of preferred stock, any excess of the fair value of the consideration transferred to the holders of the preferred stock over the carrying amount of the preferred stock in the Company’s consolidated balance sheets is included in the determination of Net Income Available to Common Stock and Participating Securities in the calculation of EPS. (See Notes 11 and 12) | |
(s) New Accounting Standards and Interpretations | |
Accounting Standards Adopted in 2014 | |
Financial Services - Investment Companies | |
In June 2013, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-08, Financial Services - Investment Companies: Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”). In general, the amendments of this ASU: (i) revise the definition of an investment company; (ii) require an investment company to measure non-controlling ownership interests in other investment companies at fair value rather than using the equity method of accounting; and (iii) require information to be disclosed concerning the status of the entity and any financial support provided, or contractually required to be provided, by the investment company to its investees. The Company’s adoption of ASU 2013-08 beginning on January 1, 2014 did not have a material impact on the Company’s consolidated financial statements as the FASB has decided to retain the current U.S. GAAP scope exception from investment company accounting and financial reporting for real estate investment trusts. |
MBS
MBS | 9 Months Ended | ||||||||||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | ||||||||||||||||||||||||||||||||||||
MBS | ' | ||||||||||||||||||||||||||||||||||||
MBS | |||||||||||||||||||||||||||||||||||||
The Company’s MBS are comprised of Agency MBS and Non-Agency MBS which include MBS issued prior to 2008 (“Legacy Non-Agency MBS”) and MBS backed by re-performing/non-performing loans (“RPL/NPL MBS”). These MBS are secured by: (i) hybrid mortgages (“Hybrids”), which have interest rates that are fixed for a specified period of time and, thereafter, generally adjust annually to an increment over a specified interest rate index; (ii) adjustable-rate mortgages (“ARMs”); (iii) mortgages that have interest rates that reset more frequently (collectively, “ARM-MBS”); and (iv) 15 year and longer-term fixed rate mortgages. MBS do not have a single maturity date, and further, the mortgage loans underlying ARM-MBS do not all reset at the same time. | |||||||||||||||||||||||||||||||||||||
The Company pledges a significant portion of its MBS as collateral against its borrowings under repurchase agreements and Swaps. Non-Agency MBS that are accounted for as components of Linked Transactions are not reflected in the tables set forth in this note, as they are accounted for as derivatives. (See Notes 5 and 7) | |||||||||||||||||||||||||||||||||||||
Agency MBS: Agency MBS are guaranteed as to principal and/or interest by a federally chartered corporation, such as Fannie Mae or Freddie Mac, or an agency of the U.S. Government, such as Ginnie Mae. The payment of principal and/or interest on Ginnie Mae MBS is explicitly backed by the full faith and credit of the U.S. Government. Since the third quarter of 2008, Fannie Mae and Freddie Mac have been under the conservatorship of the Federal Housing Finance Agency, which significantly strengthened the backing for these government-sponsored entities. | |||||||||||||||||||||||||||||||||||||
Non-Agency MBS (including Non-Agency MBS transferred to consolidated VIEs): The Company’s Non-Agency MBS are secured by pools of residential mortgages, which are not guaranteed by an agency of the U.S. Government or any federally chartered corporation. Credit risk associated with Non-Agency MBS is regularly assessed as new information regarding the underlying collateral becomes available and based on updated estimates of cash flows generated by the underlying collateral. | |||||||||||||||||||||||||||||||||||||
The following tables present certain information about the Company’s MBS at September 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||||||||||||||||||
Principal/ | Purchase Premiums | Accretable | Discount | Amortized | Fair Value | Gross | Gross | Net | |||||||||||||||||||||||||||||
Current Face | Purchase Discounts | Designated | Cost (2) | Unrealized Gains | Unrealized Losses | Unrealized Gain/(Loss) | |||||||||||||||||||||||||||||||
as Credit | |||||||||||||||||||||||||||||||||||||
(In Thousands) | Reserve and OTTI (1) | ||||||||||||||||||||||||||||||||||||
Agency MBS: | |||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 4,825,285 | $ | 183,663 | $ | (73 | ) | $ | — | $ | 5,008,875 | $ | 5,079,098 | $ | 102,619 | $ | (32,396 | ) | $ | 70,223 | |||||||||||||||||
Freddie Mac | 1,050,873 | 40,421 | — | — | 1,093,168 | 1,083,010 | 11,130 | (21,288 | ) | (10,158 | ) | ||||||||||||||||||||||||||
Ginnie Mae | 11,559 | 199 | — | — | 11,758 | 12,068 | 310 | — | 310 | ||||||||||||||||||||||||||||
Total Agency MBS | 5,887,717 | 224,283 | (73 | ) | — | 6,113,801 | 6,174,176 | 114,059 | (53,684 | ) | 60,375 | ||||||||||||||||||||||||||
Non-Agency MBS: | |||||||||||||||||||||||||||||||||||||
Expected to Recover Par (3)(4) | 315,003 | 624 | (31,304 | ) | — | 284,323 | 311,950 | 29,035 | (1,408 | ) | 27,627 | ||||||||||||||||||||||||||
Expected to Recover | 5,014,820 | — | (395,047 | ) | (929,100 | ) | 3,690,673 | 4,451,376 | 762,425 | (1,722 | ) | 760,703 | |||||||||||||||||||||||||
Less Than Par (3)(5) | |||||||||||||||||||||||||||||||||||||
Total Non-Agency MBS | 5,329,823 | 624 | (426,351 | ) | (929,100 | ) | 3,974,996 | 4,763,326 | 791,460 | (3,130 | ) | 788,330 | |||||||||||||||||||||||||
Total MBS | $ | 11,217,540 | $ | 224,907 | $ | (426,424 | ) | $ | (929,100 | ) | $ | 10,088,797 | $ | 10,937,502 | $ | 905,519 | $ | (56,814 | ) | $ | 848,705 | ||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||||||||||||||
Principal/ | Purchase Premiums | Accretable | Discount | Amortized | Fair Value | Gross | Gross | Net | |||||||||||||||||||||||||||||
Current Face | Purchase Discounts | Designated | Cost (2) | Unrealized Gains | Unrealized Losses | Unrealized Gain/(Loss) | |||||||||||||||||||||||||||||||
as Credit | |||||||||||||||||||||||||||||||||||||
(In Thousands) | Reserve and OTTI (1) | ||||||||||||||||||||||||||||||||||||
Agency MBS: | |||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 5,092,410 | $ | 181,710 | $ | (87 | ) | $ | — | $ | 5,274,033 | $ | 5,315,363 | $ | 96,516 | $ | (55,186 | ) | $ | 41,330 | |||||||||||||||||
Freddie Mac | 1,171,841 | 44,967 | — | — | 1,217,927 | 1,190,670 | 9,842 | (37,099 | ) | (27,257 | ) | ||||||||||||||||||||||||||
Ginnie Mae | 12,668 | 218 | — | — | 12,886 | 13,188 | 302 | — | 302 | ||||||||||||||||||||||||||||
Total Agency MBS | 6,276,919 | 226,895 | (87 | ) | — | 6,504,846 | 6,519,221 | 106,660 | (92,285 | ) | 14,375 | ||||||||||||||||||||||||||
Non-Agency MBS: | |||||||||||||||||||||||||||||||||||||
Expected to Recover Par (3)(4) | 234,187 | 638 | (24,450 | ) | — | 210,375 | 230,738 | 21,720 | (1,357 | ) | 20,363 | ||||||||||||||||||||||||||
Expected to Recover | 5,381,851 | — | (435,589 | ) | (1,043,037 | ) | 3,903,225 | 4,621,399 | 720,566 | (2,392 | ) | 718,174 | |||||||||||||||||||||||||
Less Than Par (3)(5) | |||||||||||||||||||||||||||||||||||||
Total Non-Agency MBS | 5,616,038 | 638 | (460,039 | ) | (1,043,037 | ) | 4,113,600 | 4,852,137 | 742,286 | (3,749 | ) | 738,537 | |||||||||||||||||||||||||
Total MBS | $ | 11,892,957 | $ | 227,533 | $ | (460,126 | ) | $ | (1,043,037 | ) | $ | 10,618,446 | $ | 11,371,358 | $ | 848,946 | $ | (96,034 | ) | $ | 752,912 | ||||||||||||||||
-1 | Discount designated as Credit Reserve and amounts related to OTTI are generally not expected to be accreted into interest income. Amounts disclosed at September 30, 2014 reflect Credit Reserve of $897.7 million and OTTI of $31.4 million. Amounts disclosed at December 31, 2013 reflect Credit Reserve of $998.5 million and OTTI of $44.5 million. | ||||||||||||||||||||||||||||||||||||
-2 | Includes principal payments receivable of $1.9 million and $1.1 million at September 30, 2014 and December 31, 2013, respectively, which are not included in the Principal/Current Face. | ||||||||||||||||||||||||||||||||||||
-3 | Based on management’s current estimates of future principal cash flows expected to be received. | ||||||||||||||||||||||||||||||||||||
-4 | Includes RPL/NPL MBS which had a $26.5 million Principal/Current face, $26.7 million amortized cost and $26.6 million fair value at September 30, 2014. At December 31, 2013, RPL/NPL MBS had a $3.9 million Principal/Current face, amortized cost and fair value. | ||||||||||||||||||||||||||||||||||||
-5 | At September 30, 2014 and December 31, 2013, the Company expected to recover approximately 83% and 81%, respectively, of the then-current face amount of Non-Agency MBS. | ||||||||||||||||||||||||||||||||||||
Unrealized Losses on MBS and Impairments | |||||||||||||||||||||||||||||||||||||
The following table presents information about the Company’s MBS that were in an unrealized loss position at September 30, 2014: | |||||||||||||||||||||||||||||||||||||
Unrealized Loss Position For: | |||||||||||||||||||||||||||||||||||||
Less than 12 Months | 12 Months or more | Total | |||||||||||||||||||||||||||||||||||
Fair Value | Unrealized Losses | Number of Securities | Fair Value | Unrealized Losses | Number of Securities | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
(Dollars in Thousands) | |||||||||||||||||||||||||||||||||||||
Agency MBS: | |||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 451,536 | $ | 1,639 | 46 | $ | 1,316,459 | $ | 30,757 | 143 | $ | 1,767,995 | $ | 32,396 | |||||||||||||||||||||||
Freddie Mac | 28,903 | 184 | 3 | 702,935 | 21,104 | 103 | 731,838 | 21,288 | |||||||||||||||||||||||||||||
Total Agency MBS | 480,439 | 1,823 | 49 | 2,019,394 | 51,861 | 246 | 2,499,833 | 53,684 | |||||||||||||||||||||||||||||
Non-Agency MBS: | |||||||||||||||||||||||||||||||||||||
Expected to Recover Par (1) | 29,826 | 333 | 3 | 22,309 | 1,075 | 8 | 52,135 | 1,408 | |||||||||||||||||||||||||||||
Expected to Recover Less Than Par (1) | 66,674 | 654 | 9 | 20,041 | 1,068 | 7 | 86,715 | 1,722 | |||||||||||||||||||||||||||||
Total Non-Agency MBS | 96,500 | 987 | 12 | 42,350 | 2,143 | 15 | 138,850 | 3,130 | |||||||||||||||||||||||||||||
Total MBS | $ | 576,939 | $ | 2,810 | 61 | $ | 2,061,744 | $ | 54,004 | 261 | $ | 2,638,683 | $ | 56,814 | |||||||||||||||||||||||
(1) Based on management’s current estimates of future principal cash flows expected to be received. | |||||||||||||||||||||||||||||||||||||
At September 30, 2014, the Company did not intend to sell any of its MBS that were in an unrealized loss position, and it is “more likely than not” that the Company will not be required to sell these MBS before recovery of their amortized cost basis, which may be at their maturity. With respect to Non-Agency MBS held by consolidated VIEs, the ability of any entity to cause the sale by the VIE prior to the maturity of these Non-Agency MBS is either specifically precluded, or is limited to specified events of default, none of which has occurred to date. | |||||||||||||||||||||||||||||||||||||
Gross unrealized losses on the Company’s Agency MBS were $53.7 million at September 30, 2014. Agency MBS are issued by Government Sponsored Entities (“GSEs”) that enjoy either the implicit or explicit backing of the full faith and credit of the U.S. Government. While the Company’s Agency MBS are not rated by any rating agency, they are currently perceived by market participants to be of high credit quality, with risk of default limited to the unlikely event that the U.S. Government would not continue to support the GSEs. In addition, the GSEs are currently profitable on a stand-alone basis with such profits being remitted to the U.S. Treasury. Given the credit quality inherent in Agency MBS, the Company does not consider any of the current impairments on its Agency MBS to be credit related. In assessing whether it is more likely than not that it will be required to sell any impaired security before its anticipated recovery, which may be at its maturity, the Company considers for each impaired security, the significance of each investment, the amount of impairment, the projected future performance of such impaired securities, as well as the Company’s current and anticipated leverage capacity and liquidity position. Based on these analyses, the Company determined that at September 30, 2014 any unrealized losses on its Agency MBS were temporary. | |||||||||||||||||||||||||||||||||||||
Unrealized losses on the Company’s Non-Agency MBS (including Non-Agency MBS transferred to consolidated VIEs) were $3.1 million at September 30, 2014. Based upon the most recent evaluation, the Company does not consider these unrealized losses to be indicative of OTTI and does not believe that these unrealized losses are credit related, but are rather due to non-credit related factors. The Company has reviewed its Non-Agency MBS that are in an unrealized loss position to identify those securities with losses that are other-than-temporary based on an assessment of changes in expected cash flows for such MBS, which considers recent bond performance and expected future performance of the underlying collateral. | |||||||||||||||||||||||||||||||||||||
The Company did not recognize any credit-related OTTI losses through earnings related to its MBS during the three and nine months ended September 30, 2014 and 2013. | |||||||||||||||||||||||||||||||||||||
Non-Agency MBS on which OTTI is recognized have experienced, or are expected to experience, credit-related adverse cash flow changes. The Company’s estimate of cash flows for its Non-Agency MBS is based on its review of the underlying mortgage loans securing these MBS. The Company considers information available about the structure of the securitization, including structural credit enhancement, if any, and the past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, prepayment rates, default rates, loss severities, delinquency rates, percentage of non-performing loans, FICO scores at loan origination, year of origination, loan-to-value ratios, geographic concentrations, as well as Rating Agency reports, general market assessments, and dialogue with market participants. Changes in the Company’s evaluation of each of these factors impacts the cash flows expected to be collected at the OTTI assessment date. For Non-Agency MBS purchased at a discount to par that were assessed for OTTI during the quarter, such cash flow estimates indicated that the amount of expected losses decreased compared to the previous OTTI assessment date. These positive cash flow changes are primarily driven by recent improvements in loan-to-value ratios due to loan amortization and home price appreciation, which, in turn, positively impacts the Company’s estimates of default rates and loss severities for the underlying collateral. In addition, voluntary prepayments (i.e. loans that prepay in full with no loss) have generally trended higher for these MBS which also positively impacts the Company’s estimate of expected loss. Overall, the combination of higher voluntary prepayments and lower loan-to-value ratios supports the Company’s assessment that such MBS are not other-than-temporarily impaired. Significant judgment is used in both the Company’s analysis of the expected cash flows for its Non-Agency MBS and any determination of the credit component of OTTI. | |||||||||||||||||||||||||||||||||||||
The following table presents a roll-forward of the credit loss component of OTTI on the Company’s Non-Agency MBS for which a non-credit component of OTTI was previously recognized in OCI. Changes in the credit loss component of OTTI are presented based upon whether the current period is the first time OTTI was recorded on a security or a subsequent OTTI charge was recorded. | |||||||||||||||||||||||||||||||||||||
(In Thousands) | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
September 30, 2014 | September 30, 2014 | ||||||||||||||||||||||||||||||||||||
Credit loss component of OTTI at beginning of period | $ | 36,115 | $ | 36,115 | |||||||||||||||||||||||||||||||||
Additions for credit related OTTI not previously recognized | — | — | |||||||||||||||||||||||||||||||||||
Subsequent additional credit related OTTI recorded | — | — | |||||||||||||||||||||||||||||||||||
Credit loss component of OTTI at end of period | $ | 36,115 | $ | 36,115 | |||||||||||||||||||||||||||||||||
Purchase Discounts on Non-Agency MBS | |||||||||||||||||||||||||||||||||||||
The following tables present the changes in the components of the Company’s purchase discount on its Non-Agency MBS between purchase discount designated as Credit Reserve and OTTI and accretable purchase discount for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||||||||
September 30, 2014 | September 30, 2013 | ||||||||||||||||||||||||||||||||||||
Discount | Accretable | Discount | Accretable Discount (1)(2) | ||||||||||||||||||||||||||||||||||
Designated as | Discount (1)(2) | Designated as | |||||||||||||||||||||||||||||||||||
(In Thousands) | Credit Reserve and OTTI (1) | Credit Reserve and OTTI (1) | |||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | (986,842 | ) | $ | (436,111 | ) | $ | (1,264,971 | ) | $ | (396,581 | ) | |||||||||||||||||||||||||
Accretion of discount | — | 25,504 | — | 19,556 | |||||||||||||||||||||||||||||||||
Realized credit losses | 20,733 | — | 48,642 | — | |||||||||||||||||||||||||||||||||
Purchases | (4,200 | ) | 272 | (851 | ) | 879 | |||||||||||||||||||||||||||||||
Sales | 21,024 | 4,169 | 27,178 | 4,248 | |||||||||||||||||||||||||||||||||
Transfers/release of credit reserve | 20,185 | (20,185 | ) | 71,010 | (71,010 | ) | |||||||||||||||||||||||||||||||
Balance at end of period | $ | (929,100 | ) | $ | (426,351 | ) | $ | (1,118,992 | ) | $ | (442,908 | ) | |||||||||||||||||||||||||
Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||
September 30, 2014 | September 30, 2013 | ||||||||||||||||||||||||||||||||||||
Discount | Accretable | Discount | Accretable Discount (2)(3) | ||||||||||||||||||||||||||||||||||
Designated as | Discount (2)(3) | Designated as | |||||||||||||||||||||||||||||||||||
(In Thousands) | Credit Reserve and OTTI (3) | Credit Reserve and OTTI (3) | |||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | (1,043,037 | ) | $ | (460,039 | ) | $ | (1,380,506 | ) | $ | (371,626 | ) | |||||||||||||||||||||||||
Accretion of discount | — | 78,701 | — | 48,305 | |||||||||||||||||||||||||||||||||
Realized credit losses | 69,129 | — | 137,324 | — | |||||||||||||||||||||||||||||||||
Purchases | (70,535 | ) | 25,314 | (74,238 | ) | 30,533 | |||||||||||||||||||||||||||||||
Sales | 34,780 | 10,236 | 38,150 | 10,158 | |||||||||||||||||||||||||||||||||
Transfers/release of credit reserve | 80,563 | (80,563 | ) | 160,278 | (160,278 | ) | |||||||||||||||||||||||||||||||
Balance at end of period | $ | (929,100 | ) | $ | (426,351 | ) | $ | (1,118,992 | ) | $ | (442,908 | ) | |||||||||||||||||||||||||
-1 | The Company reallocated $333,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions during the three months ended September 30, 2014. The Company did not reallocate any purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the three months ended September 30, 2013. | ||||||||||||||||||||||||||||||||||||
-2 | Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security. | ||||||||||||||||||||||||||||||||||||
-3 | During the nine months ended September 30, 2014, the Company reallocated $218,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions. In addition, the Company reallocated $129,000 of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the nine months ended September 30, 2013. | ||||||||||||||||||||||||||||||||||||
Impact of MBS on AOCI | |||||||||||||||||||||||||||||||||||||
The following table presents the impact of the Company’s MBS on its AOCI for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||
AOCI from MBS: | |||||||||||||||||||||||||||||||||||||
Unrealized gain on MBS at beginning of period | $ | 905,704 | $ | 700,871 | $ | 752,912 | $ | 824,808 | |||||||||||||||||||||||||||||
Unrealized (loss)/gain on Agency MBS, net | (14,937 | ) | 15,469 | 46,000 | (152,302 | ) | |||||||||||||||||||||||||||||||
Unrealized (loss)/gain on Non-Agency MBS, net | (28,473 | ) | 16,381 | 70,973 | 62,455 | ||||||||||||||||||||||||||||||||
Reclassification adjustment for MBS sales included in net income | (13,589 | ) | (15,158 | ) | (21,180 | ) | (17,398 | ) | |||||||||||||||||||||||||||||
Change in AOCI from MBS | (56,999 | ) | 16,692 | $ | 95,793 | $ | (107,245 | ) | |||||||||||||||||||||||||||||
Balance at end of period | $ | 848,705 | $ | 717,563 | $ | 848,705 | $ | 717,563 | |||||||||||||||||||||||||||||
Sales of MBS | |||||||||||||||||||||||||||||||||||||
During the three and nine months ended September 30, 2014, the Company sold certain Non-Agency MBS for $61.6 million and $103.6 million, realizing gross gains of $13.9 million and $25.3 million, respectively. During the three and nine months ended September 30, 2013, the Company sold certain Non-Agency MBS for $102.2 million and $118.2 million, realizing gross gains of $13.7 million and $19.7 million, respectively. The Company has no continuing involvement with any of the sold MBS. | |||||||||||||||||||||||||||||||||||||
MBS Interest Income | |||||||||||||||||||||||||||||||||||||
The following table presents the components of interest income on the Company’s Agency MBS for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||
Coupon interest | $ | 46,529 | $ | 51,997 | $ | 145,864 | $ | 163,986 | |||||||||||||||||||||||||||||
Effective yield adjustment (1) | (13,463 | ) | (15,839 | ) | (35,860 | ) | (47,004 | ) | |||||||||||||||||||||||||||||
Agency MBS interest income | $ | 33,066 | $ | 36,158 | $ | 110,004 | $ | 116,982 | |||||||||||||||||||||||||||||
(1) Includes amortization of premium paid net of accretion of purchase discount. For Agency MBS, interest income is recorded at an effective yield, which reflects net premium amortization based on actual prepayment activity. | |||||||||||||||||||||||||||||||||||||
The following table presents components of interest income for the Company’s Non-Agency MBS (including MBS transferred to consolidated VIEs) for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||
Coupon interest | $ | 52,396 | $ | 62,802 | $ | 162,148 | $ | 196,688 | |||||||||||||||||||||||||||||
Effective yield adjustment (1) | 25,478 | 19,501 | 78,561 | 48,128 | |||||||||||||||||||||||||||||||||
Non-Agency MBS interest income | $ | 77,874 | $ | 82,303 | $ | 240,709 | $ | 244,816 | |||||||||||||||||||||||||||||
(1) The effective yield adjustment is the difference between the net income calculated using the net yield, which is based on management’s estimates of future cash flows for Non-Agency MBS, less the current coupon yield. |
Interest_Receivable
Interest Receivable | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Receivables [Abstract] | ' | ||||||||
Interest Receivable | ' | ||||||||
Interest Receivable | |||||||||
The following table presents the Company’s interest receivable by investment category at September 30, 2014 and December 31, 2013: | |||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
(In Thousands) | |||||||||
MBS interest receivable: | |||||||||
Fannie Mae | $ | 12,599 | $ | 13,760 | |||||
Freddie Mac | 2,728 | 3,110 | |||||||
Ginnie Mae | 18 | 19 | |||||||
Non-Agency MBS | 17,127 | 18,917 | |||||||
Total MBS interest receivable | 32,472 | 35,806 | |||||||
Money market and other investments | 27 | 22 | |||||||
Total interest receivable | $ | 32,499 | $ | 35,828 | |||||
Derivative_Instruments
Derivative Instruments | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | |||||||||||||||||||||||||
Derivative Instruments | ' | |||||||||||||||||||||||||
Derivative Instruments | ||||||||||||||||||||||||||
The Company’s derivative instruments are primarily comprised of Swaps, the majority of which are designated as cash flow hedges against the interest rate risk associated with its borrowings. The Company has also entered into Linked Transactions, which are not designated as hedging instruments. The following table presents the fair value of the Company’s derivative instruments and their balance sheet location at September 30, 2014 and December 31, 2013: | ||||||||||||||||||||||||||
September 30, | September 30, | December 31, | ||||||||||||||||||||||||
2014 | 2014 | 2013 | ||||||||||||||||||||||||
Derivative Instrument | Designation | Balance Sheet Location | Notional Amount | Fair Value | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||
Linked Transactions | Non-Hedging | Assets | N/A | $ | 190,681 | $ | 28,181 | |||||||||||||||||||
Non-cleared legacy Swaps (1) | Hedging | Assets | $ | 450,000 | $ | 4,322 | $ | 4,925 | ||||||||||||||||||
Cleared Swaps (2) | Hedging | Assets | $ | — | $ | — | $ | 8,075 | ||||||||||||||||||
Non-cleared legacy Swaps (1) | Hedging | Liabilities | $ | 880,892 | $ | (8,187 | ) | $ | (24,437 | ) | ||||||||||||||||
Cleared Swaps (2) | Hedging | Liabilities | $ | 2,550,000 | $ | (27,306 | ) | $ | (3,780 | ) | ||||||||||||||||
(1) Non-cleared legacy Swaps include Swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. | ||||||||||||||||||||||||||
(2) Cleared Swaps include Swaps executed bilaterally with a counterparty in the over-the-counter market but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties. | ||||||||||||||||||||||||||
Linked Transactions | ||||||||||||||||||||||||||
The Company’s Linked Transactions are evaluated on a combined basis, reported as forward (derivative) instruments and presented as assets on the Company’s consolidated balance sheets at fair value. The fair value of Linked Transactions reflect the value of the underlying Non-Agency MBS, linked repurchase agreement borrowings and accrued interest receivable/payable on such instruments. The Company’s Linked Transactions are not designated as hedging instruments and, as a result, the change in the fair value and net interest income from Linked Transactions is reported in other income on the Company’s consolidated statements of operations. | ||||||||||||||||||||||||||
The following tables present certain information about the Legacy Non-Agency MBS and RPL/NPL MBS and repurchase agreements underlying the Company’s Linked Transactions at September 30, 2014 and December 31, 2013: | ||||||||||||||||||||||||||
Linked Transactions at September 30, 2014 | ||||||||||||||||||||||||||
Linked Repurchase Agreements | Linked MBS | |||||||||||||||||||||||||
Balance | Weighted Average Interest Rate | Fair Value | Amortized Cost | Par/Current Face | Weighted Average Coupon Rate | |||||||||||||||||||||
Maturity or Repricing | ||||||||||||||||||||||||||
(Dollars in Thousands) | (Dollars in Thousands) | |||||||||||||||||||||||||
Within 30 days | $ | 786,207 | 1.48 | % | Legacy Non-Agency MBS | $ | 65,656 | $ | 60,588 | $ | 71,982 | 4.38 | % | |||||||||||||
>30 days to 90 days | 5,600 | 1.35 | RPL/NPL MBS | 916,652 | 915,839 | 917,332 | 3.36 | % | ||||||||||||||||||
Total | $ | 791,807 | 1.48 | % | Total | $ | 982,308 | $ | 976,427 | $ | 989,314 | 3.44 | % | |||||||||||||
Linked Transactions at December 31, 2013 | ||||||||||||||||||||||||||
Linked Repurchase Agreements | Linked MBS | |||||||||||||||||||||||||
Balance | Weighted Average Interest Rate | Fair Value | Amortized Cost | Par/Current Face | Weighted Average Coupon Rate | |||||||||||||||||||||
Maturity or Repricing | ||||||||||||||||||||||||||
(Dollars in Thousands) | (Dollars in Thousands) | |||||||||||||||||||||||||
Within 30 days | $ | 93,835 | 1.76 | % | Legacy Non-Agency MBS | $ | 39,280 | $ | 35,028 | $ | 42,199 | 3.92 | % | |||||||||||||
>30 days to 90 days | 8,902 | 1.44 | RPL/NPL MBS | 91,510 | 91,469 | 92,231 | 3.97 | % | ||||||||||||||||||
Total | $ | 102,737 | 1.73 | % | Total | $ | 130,790 | $ | 126,497 | $ | 134,430 | 3.96 | % | |||||||||||||
At September 30, 2014, Linked Transactions also included approximately $709,000 of associated accrued interest receivable and $529,000 of accrued interest payable. At December 31, 2013, Linked Transactions also included approximately $210,000 of associated accrued interest receivable and $82,000 of accrued interest payable. | ||||||||||||||||||||||||||
The following table presents certain information about the components of the unrealized net gains and net interest income from Linked Transactions included in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013: | ||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Interest income attributable to MBS underlying Linked Transactions | $ | 6,625 | $ | 1,109 | $ | 11,591 | $ | 2,431 | ||||||||||||||||||
Interest expense attributable to linked repurchase agreement borrowings underlying Linked Transactions | (2,246 | ) | (275 | ) | (3,719 | ) | (552 | ) | ||||||||||||||||||
Change in fair value of Linked Transactions included in earnings | (1,820 | ) | (290 | ) | 1,714 | (94 | ) | |||||||||||||||||||
Unrealized net gains and net interest income from Linked Transactions | $ | 2,559 | $ | 544 | $ | 9,586 | $ | 1,785 | ||||||||||||||||||
Swaps | ||||||||||||||||||||||||||
Consistent with market practice, the Company has agreements with its Swap counterparties that provide for the posting of collateral based on the fair values of its derivative contracts. Through this margining process, either the Company or its derivative counterparty may be required to pledge cash or securities as collateral. In addition, Swaps novated to and cleared by a central clearing house are subject to initial margin requirements. Certain derivative contracts provide for cross collateralization with repurchase agreements with the same counterparty. | ||||||||||||||||||||||||||
A number of the Company’s Swap contracts include financial covenants, which, if breached, could cause an event of default or early termination event to occur under such agreements. Such financial covenants include minimum net worth requirements and maximum debt-to-equity ratios. If the Company were to cause an event of default or trigger an early termination event pursuant to one of its Swap contracts, the counterparty to such agreement may have the option to terminate all of its outstanding Swap contracts with the Company and, if applicable, any close-out amount due to the counterparty upon termination of the Swap contracts would be immediately payable by the Company. The Company was in compliance with all of its financial covenants through September 30, 2014. At September 30, 2014, the aggregate fair value of assets needed to immediately settle Swap contracts that were in a liability position to the Company, if so required, was approximately $37.7 million, including accrued interest payable of approximately $2.2 million. | ||||||||||||||||||||||||||
The following table presents the assets pledged as collateral against the Company’s Swap contracts at September 30, 2014 and December 31, 2013: | ||||||||||||||||||||||||||
(In Thousands) | 30-Sep-14 | 31-Dec-13 | ||||||||||||||||||||||||
Agency MBS, at fair value | $ | 67,431 | $ | 73,859 | ||||||||||||||||||||||
Restricted cash | 35,351 | 37,520 | ||||||||||||||||||||||||
Total assets pledged against Swaps | $ | 102,782 | $ | 111,379 | ||||||||||||||||||||||
The use of derivative hedging instruments exposes the Company to counterparty credit risk. In the event of a default by a derivative counterparty, the Company may not receive payments to which it is entitled under its derivative agreements, and may have difficulty recovering its assets pledged as collateral against such agreements. If, during the term of a derivative contract, a counterparty should file for bankruptcy, the Company may experience difficulty recovering its assets pledged as collateral which could result in the Company having an unsecured claim against such counterparty’s assets for the difference between the fair value of the derivative and the fair value of the collateral pledged to such counterparty. | ||||||||||||||||||||||||||
The Company’s derivative hedging instruments, or a portion thereof, could become ineffective in the future if the associated repurchase agreements that such derivatives hedge fail to exist or fail to have terms that match those of the derivatives that hedge such borrowings. | ||||||||||||||||||||||||||
The Company’s Swaps designated as hedging transactions have the effect of modifying the repricing characteristics of the Company’s repurchase agreements and cash flows for such liabilities. To date, no cost has been incurred at the inception of a Swap (except for certain transaction fees related to entering in to Swaps cleared though a central clearing house), pursuant to which the Company agrees to pay a fixed rate of interest and receive a variable interest rate, generally based on one-month or three-month London Interbank Offered Rate (“LIBOR”), on the notional amount of the Swap. The Company did not recognize any change in the value of its existing Swaps designated as hedges through earnings as a result of hedge ineffectiveness during the three and nine months ended September 30, 2014 and 2013. | ||||||||||||||||||||||||||
At September 30, 2014, the Company had Swaps designated in hedging relationships with an aggregate notional amount of $3.881 billion, which had net unrealized losses of $31.2 million, and extended 49 months on average with a maximum term of approximately 107 months. | ||||||||||||||||||||||||||
The following table presents certain information with respect to the Company’s Swap activity during the three and nine months ended September 30, 2014: | ||||||||||||||||||||||||||
(Dollars in Thousands) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2014 | September 30, 2014 | |||||||||||||||||||||||||
New Swaps: | ||||||||||||||||||||||||||
Aggregate notional amount | $ | — | $ | 400,000 | ||||||||||||||||||||||
Weighted average fixed-pay rate | — | % | 1.95 | % | ||||||||||||||||||||||
Initial maturity date | N/A | 5 years to 7 years | ||||||||||||||||||||||||
Number of new Swaps | — | Four | ||||||||||||||||||||||||
Swaps amortized/expired: | ||||||||||||||||||||||||||
Aggregate notional amount | $ | 46,322 | $ | 564,320 | ||||||||||||||||||||||
Weighted average fixed-pay rate | 2.84 | % | 2.05 | % | ||||||||||||||||||||||
The following table presents information about the Company’s Swaps at September 30, 2014 and December 31, 2013: | ||||||||||||||||||||||||||
30-Sep-14 | December 31, 2013 | |||||||||||||||||||||||||
Notional Amount | Weighted Average Fixed-Pay | Weighted Average Variable | Notional Amount | Weighted Average Fixed-Pay | Weighted Average Variable | |||||||||||||||||||||
Interest Rate | Interest Rate (2) | Interest Rate | Interest Rate (2) | |||||||||||||||||||||||
Maturity (1) | ||||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||
Within 30 days | $ | 56,861 | 4.67 | % | 0.17 | % | $ | 17,635 | 3.9 | % | 0.21 | % | ||||||||||||||
Over 30 days to 3 months | 63,860 | 2.19 | 0.17 | 24,216 | 3.93 | 0.21 | ||||||||||||||||||||
Over 3 months to 6 months | 410,171 | 1.9 | 0.16 | 476,147 | 1.8 | 0.17 | ||||||||||||||||||||
Over 6 months to 12 months | 300,000 | 2.06 | 0.16 | 167,043 | 3.22 | 0.18 | ||||||||||||||||||||
Over 12 months to 24 months | 50,000 | 2.13 | 0.15 | 710,171 | 1.97 | 0.17 | ||||||||||||||||||||
Over 24 months to 36 months | 450,000 | 0.56 | 0.16 | 150,000 | 1.03 | 0.17 | ||||||||||||||||||||
Over 36 months to 48 months | 550,000 | 1.49 | 0.15 | 350,000 | 0.58 | 0.17 | ||||||||||||||||||||
Over 48 months to 60 months | 200,000 | 1.71 | 0.15 | 550,000 | 1.49 | 0.17 | ||||||||||||||||||||
Over 60 months to 72 months | 1,500,000 | 2.22 | 0.15 | — | — | — | ||||||||||||||||||||
Over 72 months to 84 months | 200,000 | 2.2 | 0.15 | 1,500,000 | 2.22 | 0.17 | ||||||||||||||||||||
Over 84 months (3) | 100,000 | 2.75 | 0.15 | 100,000 | 2.75 | 0.17 | ||||||||||||||||||||
Total Swaps | $ | 3,880,892 | 1.9 | % | 0.16 | % | $ | 4,045,212 | 1.91 | % | 0.17 | % | ||||||||||||||
(1) Each maturity category reflects contractual amortization and/or maturity of notional amounts. | ||||||||||||||||||||||||||
(2) Reflects the benchmark variable rate due from the counterparty at the date presented, which rate adjusts monthly or quarterly based on one-month or three-month LIBOR, respectively. | ||||||||||||||||||||||||||
(3) Reflects one Swap with a maturity date of July 2023. | ||||||||||||||||||||||||||
The following table presents the net impact of the Company’s derivative hedging instruments on its interest expense and the weighted average interest rate paid and received for such Swaps for the three and nine months ended September 30, 2014 and 2013: | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||
(Dollars in Thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Interest expense attributable to Swaps | $ | 17,491 | $ | 15,888 | $ | 53,129 | $ | 40,884 | ||||||||||||||||||
Weighted average Swap rate paid | 1.91 | % | 2.07 | % | 1.92 | % | 2.15 | % | ||||||||||||||||||
Weighted average Swap rate received | 0.16 | % | 0.2 | % | 0.16 | % | 0.2 | % | ||||||||||||||||||
TBA Short Positions | ||||||||||||||||||||||||||
During 2013, the Company entered into TBA short positions as a means of managing interest rate risk and MBS basis risk associated with its investment and financing activities. A TBA short position is a forward contract for the sale of Agency MBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency MBS that could be delivered into the contract upon the settlement date, published each month by SIFMA, are not known at the time of the transaction. | ||||||||||||||||||||||||||
The Company accounts for TBA short positions as derivative instruments since it cannot assert that it is probable at inception and throughout the term of the TBA contract that it will physically deliver the agency security upon settlement of the contract. The Company presents TBA short positions as either derivative assets or liabilities, at fair value on its consolidated balance sheets. Gains and losses associated with TBA short positions are reported in Other income on the Company’s consolidated statements of operations. During the three and nine months ended September 30, 2013, the Company recognized an unrealized loss of $8.7 million on TBA short positions. The Company did not have any TBA short positions at September 30, 2014 and December 31, 2013. | ||||||||||||||||||||||||||
Impact of Derivative Hedging Instruments on AOCI | ||||||||||||||||||||||||||
The following table presents the impact of the Company’s derivative hedging instruments on its AOCI for the three and nine months ended September 30, 2014 and 2013: | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
AOCI from derivative hedging instruments: | ||||||||||||||||||||||||||
Balance at beginning of period | $ | (54,671 | ) | $ | (31,967 | ) | $ | (15,217 | ) | $ | (62,831 | ) | ||||||||||||||
Unrealized gain/(loss) on Swaps, net | 23,500 | (19,934 | ) | (16,401 | ) | 10,930 | ||||||||||||||||||||
Reclassification of unrealized loss on de-designated Swaps | — | — | 447 | — | ||||||||||||||||||||||
Balance at end of period | $ | (31,171 | ) | $ | (51,901 | ) | $ | (31,171 | ) | $ | (51,901 | ) | ||||||||||||||
Counterparty Credit Risk from Use of Swaps | ||||||||||||||||||||||||||
By using Swaps, the Company is exposed to counterparty credit risk if counterparties to the derivative contracts do not perform as expected. If a counterparty fails to perform, the Company’s counterparty credit risk is equal to the amount reported as a derivative asset on its consolidated balance sheets to the extent that amount exceeds collateral obtained from the counterparty or, if in a net liability position, the extent to which collateral posted exceeds the liability to the counterparty. The amounts reported as a derivative asset/(liability) are derivative contracts in a gain/(loss) position, and to the extent subject to master netting arrangements, net of derivatives in a loss/(gain) position with the same counterparty and collateral received/(pledged). The Company attempts to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, executing master netting arrangements and obtaining collateral, where appropriate. Counterparty credit risk related to the Company’s Swaps is considered in determining fair value of such derivatives and its assessment of hedge effectiveness. |
Repurchase_Agreements
Repurchase Agreements | 9 Months Ended | ||||||||||||||
Sep. 30, 2014 | |||||||||||||||
Disclosure of Repurchase Agreements [Abstract] | ' | ||||||||||||||
Repurchase Agreements | ' | ||||||||||||||
Repurchase Agreements | |||||||||||||||
The Company’s repurchase agreements are collateralized by the Company’s MBS and U.S. Treasury securities (obtained as part of a reverse repurchase agreement) and cash, and bear interest that is generally LIBOR-based. (See Note 7) At September 30, 2014, the Company’s borrowings under repurchase agreements had a weighted average remaining term-to-interest rate reset of 26 days and an effective repricing period of 21 months, including the impact of related Swaps. At December 31, 2013, the Company’s borrowings under repurchase agreements had a weighted average remaining term-to-interest rate reset of 25 days and an effective repricing period of 24 months, including the impact of related Swaps. | |||||||||||||||
The following table presents information with respect to the Company’s borrowings under repurchase agreements and associated assets pledged as collateral at September 30, 2014 and December 31, 2013: | |||||||||||||||
(Dollars in Thousands) | September 30, | December 31, | |||||||||||||
2014 | 2013 | ||||||||||||||
Repurchase agreement borrowings secured by Agency MBS | $ | 5,417,797 | $ | 5,750,053 | |||||||||||
Fair Value of Agency MBS pledged as collateral under repurchase agreements | $ | 5,698,202 | $ | 6,068,447 | |||||||||||
Weighted average haircut on Agency MBS (1) | 4.7 | % | 4.89 | % | |||||||||||
Repurchase agreement borrowings secured by Non-Agency MBS (2) | $ | 2,263,910 | $ | 2,206,586 | |||||||||||
Fair Value of Non-Agency MBS pledged as collateral under repurchase agreements (2)(3) | $ | 3,454,698 | $ | 3,663,523 | |||||||||||
Weighted average haircut on Non-Agency MBS (1) | 28.48 | % | 32.48 | % | |||||||||||
Repurchase agreements secured by U.S. Treasuries | $ | 444,016 | $ | 382,658 | |||||||||||
Fair value of U.S. Treasuries pledged as collateral under repurchase agreements | $ | 442,370 | $ | 383,743 | |||||||||||
Weighted average haircut on U.S. Treasuries (1) | 1.41 | % | 1.65 | % | |||||||||||
-1 | Haircut represents the percentage amount by which the collateral value is contractually required to exceed the loan amount on the Company’s repurchase agreements borrowings. | ||||||||||||||
-2 | Does not reflect Non-Agency MBS and repurchase agreement borrowings that are components of Linked Transactions. | ||||||||||||||
-3 | Includes $1.276 billion and $1.885 billion of Non-Agency MBS acquired from consolidated VIEs at September 30, 2014, and December 31, 2013, respectively, that are eliminated from the Company’s consolidated balance sheets. | ||||||||||||||
The following table presents repricing information about the Company’s borrowings under repurchase agreements, which does not reflect the impact of associated derivative hedging instruments, at September 30, 2014 and December 31, 2013: | |||||||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||||||
Balance (1) | Weighted Average Interest Rate | Balance (1) | Weighted Average Interest Rate | ||||||||||||
Time Until Interest Rate Reset | |||||||||||||||
(Dollars in Thousands) | |||||||||||||||
Within 30 days | $ | 6,619,916 | 0.65 | % | $ | 7,064,598 | 0.68 | % | |||||||
Over 30 days to 3 months | 1,367,544 | 0.82 | 1,274,699 | 1.31 | |||||||||||
Over 3 months to 12 months | 138,263 | 1.65 | — | — | |||||||||||
Total | $ | 8,125,723 | 0.7 | % | $ | 8,339,297 | 0.77 | % | |||||||
(1) At September 30, 2014 and December 31, 2013, the Company had repurchase agreements of $791.8 million and $102.7 million, respectively, that were linked to Non-Agency MBS purchases and accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 5) | |||||||||||||||
The following table presents contractual maturity information about the Company’s borrowings under repurchase agreements at September 30, 2014 and does not reflect the impact of derivative contracts that hedge such repurchase agreements: | |||||||||||||||
30-Sep-14 | |||||||||||||||
Contractual Maturity | Balance (1) | Weighted Average Interest Rate | |||||||||||||
(Dollars in Thousands) | |||||||||||||||
Overnight | $ | — | — | % | |||||||||||
Within 30 days | 6,069,537 | 0.55 | |||||||||||||
Over 30 days to 90 days | 1,221,035 | 0.69 | |||||||||||||
Over 90 days to 12 months | 835,151 | 1.84 | |||||||||||||
Total | $ | 8,125,723 | 0.7 | % | |||||||||||
-1 | At September 30, 2014, the Company had repurchase agreements of $791.8 million that were linked to Non-Agency MBS purchases and were accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 5) | ||||||||||||||
The Company had repurchase agreements with 26 counterparties at both September 30, 2014 and December 31, 2013. The following table presents information with respect to any counterparty for repurchase agreements and/or Linked Transactions for which the Company had greater than 5% of stockholders’ equity at risk in the aggregate at September 30, 2014: | |||||||||||||||
Counterparty | Amount | Weighted | Percent of | ||||||||||||
Rating (1) | at Risk (2) | Average Months | Stockholders’ Equity | ||||||||||||
to Maturity for | |||||||||||||||
Counterparty | Repurchase Agreements | ||||||||||||||
(Dollars in Thousands) | |||||||||||||||
Alpine Securitization Corporation/Credit Suisse (3) | A-1/P-1/F1 | $ | 509,523 | 0 | 15.7 | % | |||||||||
Wells Fargo (4) | A+/A2/AA- | 339,149 | 5 | 10.4 | |||||||||||
RBS | BBB+/Baa2/A | 295,142 | 2 | 9.1 | |||||||||||
UBS (5) | A/A2/A | 236,453 | 16 | 7.3 | |||||||||||
RBC (6) | AA-/Aa3/AA | 179,387 | 5 | 5.5 | |||||||||||
-1 | As rated at September 30, 2014 by S&P, Moody’s and Fitch, Inc., respectively. The counterparty rating presented is the lowest published for these entities. | ||||||||||||||
-2 | The amount at risk reflects the difference between (a) the amount loaned to the Company through repurchase agreements and repurchase agreements underlying Linked Transactions, including interest payable, and (b) the cash and the fair value of the securities pledged by the Company as collateral and MBS underlying Linked Transactions, including accrued interest receivable on such securities. | ||||||||||||||
-3 | Includes $353.8 million at risk with Alpine Securitization Corporation and $155.7 million at risk with Credit Suisse Securities (USA) LLC. Alpine Securitization Corporation is a special purpose funding vehicle that is a consolidated affiliate of Credit Suisse Group. Counterparty rating shown is the asset backed short term rating for Alpine Securitization Corporation. | ||||||||||||||
-4 | Includes $199.3 million at risk with Wells Fargo Bank, NA and $139.9 million at risk with Wells Fargo Securities LLC. | ||||||||||||||
-5 | Includes Non-Agency MBS pledged as collateral with contemporaneous repurchase and reverse repurchase agreements. | ||||||||||||||
-6 | Includes $167.4 million at risk with Royal Bank of Canada and $12.0 million at risk with RBC Capital Markets LLC. |
Collateral_Positions
Collateral Positions | 9 Months Ended | ||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||
Collateral Positions | ' | ||||||||||||||||||||||||||||
Collateral Positions | ' | ||||||||||||||||||||||||||||
Collateral Positions | |||||||||||||||||||||||||||||
The Company pledges securities or cash as collateral to its counterparties pursuant to its borrowings under repurchase agreements and its derivative contracts that are in an unrealized loss position, and it receives securities or cash as collateral pursuant to financing provided under reverse repurchase agreements and certain of its derivative contracts in an unrealized gain position. The Company exchanges collateral with its counterparties based on changes in the fair value, notional amount and term of the associated repurchase and reverse repurchase agreements and derivative contracts, as applicable. Through this margining process, either the Company or its counterparty may be required to pledge cash or securities as collateral. In addition, Swaps novated to and cleared by a central clearing house are subject to initial margin requirements. When the Company’s pledged collateral exceeds the required margin, the Company may initiate a reverse margin call, at which time the counterparty may either return the excess collateral, or provide collateral to the Company in the form of cash or high-quality securities. | |||||||||||||||||||||||||||||
The following table summarizes the fair value of the Company’s collateral positions, which includes collateral pledged and collateral held, with respect to its borrowings under repurchase agreements, reverse repurchase agreements and derivative hedging instruments at September 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||||||||||||||||||||
(In Thousands) | Assets Pledged | Collateral Held | Assets Pledged | Collateral Held | |||||||||||||||||||||||||
Derivative Hedging Instruments: | |||||||||||||||||||||||||||||
Agency MBS | $ | 67,431 | $ | — | $ | 73,859 | $ | — | |||||||||||||||||||||
Cash (1) | 35,351 | — | 37,520 | — | |||||||||||||||||||||||||
102,782 | — | 111,379 | — | ||||||||||||||||||||||||||
Repurchase Agreement Borrowings: | |||||||||||||||||||||||||||||
Agency MBS | $ | 5,698,202 | $ | — | $ | 6,068,447 | $ | — | |||||||||||||||||||||
Non-Agency MBS (2)(3) | 3,454,698 | — | 3,663,523 | — | |||||||||||||||||||||||||
U.S. Treasury securities | 442,370 | — | 383,743 | — | |||||||||||||||||||||||||
Cash (1) | 8,400 | — | — | — | |||||||||||||||||||||||||
9,603,670 | — | 10,115,713 | — | ||||||||||||||||||||||||||
Reverse Repurchase Agreements: | |||||||||||||||||||||||||||||
U.S. Treasury securities | $ | — | $ | 442,370 | $ | — | $ | 383,743 | |||||||||||||||||||||
— | 442,370 | — | 383,743 | ||||||||||||||||||||||||||
Total | $ | 9,706,452 | $ | 442,370 | $ | 10,227,092 | $ | 383,743 | |||||||||||||||||||||
(1) Cash pledged as collateral is reported as “restricted cash” on the Company’s consolidated balance sheets. | |||||||||||||||||||||||||||||
(2) Includes $1.276 billion and $1.885 billion of Non-Agency MBS acquired in connection with resecuritization transactions from consolidated VIEs at September 30, 2014 and December 31, 2013, respectively, that are eliminated from the Company’s consolidated balance sheets. | |||||||||||||||||||||||||||||
(3) In addition, $736.8 million and $738.3 million of Non-Agency MBS are pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty at September 30, 2014 and December 31, 2013, respectively. | |||||||||||||||||||||||||||||
The following table presents detailed information about the Company’s assets pledged as collateral pursuant to its borrowings under repurchase agreements and derivative hedging instruments at September 30, 2014: | |||||||||||||||||||||||||||||
Assets Pledged Under Repurchase | Assets Pledged Against Derivative | Total Fair | |||||||||||||||||||||||||||
Agreements | Hedging Instruments | Value of Assets Pledged and Accrued Interest | |||||||||||||||||||||||||||
(In Thousands) | Fair Value/ | Amortized | Accrued | Fair Value/ | Amortized | Accrued | |||||||||||||||||||||||
Carrying | Cost | Interest on | Carrying | Cost | Interest on | ||||||||||||||||||||||||
Value | Pledged | Value | Pledged | ||||||||||||||||||||||||||
MBS | MBS | ||||||||||||||||||||||||||||
U.S. Treasuries | $ | 442,370 | $ | 442,370 | $ | — | $ | — | $ | — | $ | — | $ | 442,370 | |||||||||||||||
Fannie Mae | $ | 4,744,666 | $ | 4,682,097 | $ | 11,763 | $ | 6,205 | $ | 5,965 | $ | 13 | $ | 4,762,647 | |||||||||||||||
Freddie Mac | 953,536 | 963,082 | 2,382 | 54,959 | 55,898 | 129 | 1,011,006 | ||||||||||||||||||||||
Ginnie Mae | — | — | — | 6,267 | 6,144 | 9 | 6,276 | ||||||||||||||||||||||
Agency MBS | $ | 5,698,202 | $ | 5,645,179 | $ | 14,145 | $ | 67,431 | $ | 68,007 | $ | 151 | $ | 5,779,929 | |||||||||||||||
Non-Agency MBS (1)(2) | $ | 3,454,698 | $ | 2,632,613 | $ | 12,424 | $ | — | $ | — | $ | — | $ | 3,467,122 | |||||||||||||||
Total | $ | 9,595,270 | $ | 8,720,162 | $ | 26,569 | $ | 67,431 | $ | 68,007 | $ | 151 | $ | 9,689,421 | |||||||||||||||
(1) Includes $1.276 billion of Non-Agency MBS acquired in connection with resecuritization transactions from consolidated VIEs at September 30, 2014, that are eliminated from the Company’s consolidated balance sheets. | |||||||||||||||||||||||||||||
(2) In addition, $736.8 million of Non-Agency MBS are pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty at September 30, 2014. |
Offsetting_Assets_and_Liabilit
Offsetting Assets and Liabilities | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||
Offsetting [Abstract] | ' | ||||||||||||||||||||||||
Offsetting Assets and Liabilities | ' | ||||||||||||||||||||||||
Offsetting Assets and Liabilities | |||||||||||||||||||||||||
The following tables present information about certain assets and liabilities that are subject to master netting arrangements (or similar agreements) and can potentially be offset on the Company’s consolidated balance sheets at September 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||||||||||||||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets Presented in the Consolidated Balance Sheets | Gross Amounts Not Offset in | Net Amount | |||||||||||||||||||||
the Consolidated Balance Sheets | |||||||||||||||||||||||||
(In Thousands) | Financial | Cash | |||||||||||||||||||||||
Instruments | Collateral | ||||||||||||||||||||||||
Received | |||||||||||||||||||||||||
30-Sep-14 | |||||||||||||||||||||||||
Swaps, at fair value | $ | 4,322 | $ | — | $ | 4,322 | $ | (4,322 | ) | $ | — | $ | — | ||||||||||||
Total | $ | 4,322 | $ | — | $ | 4,322 | $ | (4,322 | ) | $ | — | $ | — | ||||||||||||
31-Dec-13 | |||||||||||||||||||||||||
Swaps, at fair value | $ | 13,000 | $ | — | $ | 13,000 | $ | (13,000 | ) | $ | — | $ | — | ||||||||||||
Total | $ | 13,000 | $ | — | $ | 13,000 | $ | (13,000 | ) | $ | — | $ | — | ||||||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||||||||||||||||||
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | Gross Amounts Not Offset in the | Net Amount | |||||||||||||||||||||
Consolidated Balance Sheets | |||||||||||||||||||||||||
(In Thousands) | Financial | Cash | |||||||||||||||||||||||
Instruments (1) | Collateral | ||||||||||||||||||||||||
Pledged (1) | |||||||||||||||||||||||||
30-Sep-14 | |||||||||||||||||||||||||
Swaps, at fair value (2) | $ | 35,493 | $ | — | $ | 35,493 | $ | (142 | ) | $ | (35,351 | ) | $ | — | |||||||||||
Repurchase agreements (3) | 8,125,723 | — | 8,125,723 | (8,117,323 | ) | (8,400 | ) | — | |||||||||||||||||
Total | $ | 8,161,216 | $ | — | $ | 8,161,216 | $ | (8,117,465 | ) | $ | (43,751 | ) | $ | — | |||||||||||
31-Dec-13 | |||||||||||||||||||||||||
Swaps, at fair value (2) | $ | 28,217 | $ | — | $ | 28,217 | $ | — | $ | (28,217 | ) | $ | — | ||||||||||||
Repurchase agreements (3) | 8,339,297 | — | 8,339,297 | (8,339,297 | ) | — | — | ||||||||||||||||||
Total | $ | 8,367,514 | $ | — | $ | 8,367,514 | $ | (8,339,297 | ) | $ | (28,217 | ) | $ | — | |||||||||||
(1) Amounts disclosed in the Financial Instruments column of the table above represents collateral pledged that is available to be offset against liability balances associated with repurchase agreement and derivative transactions. Amounts disclosed in the Cash Collateral Pledged column of the table above represents amounts pledged as collateral against derivative transactions and repurchase agreements, and excludes excess collateral of $9.3 million at December 31, 2013. | |||||||||||||||||||||||||
(2) The fair value of securities pledged against the Company’s Swaps was $67.4 million and $73.9 million at September 30, 2014 and December 31, 2013, respectively. | |||||||||||||||||||||||||
(3) The fair value of securities pledged against the Company’s repurchase agreements was $9.595 billion and $10.116 billion at September 30, 2014 and December 31, 2013, respectively. | |||||||||||||||||||||||||
Nature of Setoff Rights | |||||||||||||||||||||||||
In the Company’s consolidated balance sheets, all balances associated with the repurchase agreement and derivatives transactions are presented on a gross basis. | |||||||||||||||||||||||||
Certain of the Company’s repurchase agreement and derivative transactions are governed by underlying agreements that generally provide for a right of setoff in the event of default or in the event of a bankruptcy of either party to the transaction. For one repurchase agreement counterparty, the underlying agreements provide for an unconditional right of setoff. |
Senior_Notes
Senior Notes | 9 Months Ended |
Sep. 30, 2014 | |
Debt Disclosure [Abstract] | ' |
Senior Notes | ' |
Senior Notes | |
On April 11, 2012 the Company issued $100.0 million in aggregate principal amount of its Senior Notes in an underwritten public offering. The total net proceeds to the Company from the offering of the Senior Notes were approximately $96.6 million, after deducting offering expenses and the underwriting discount. The Senior Notes bear interest at a fixed rate of 8.00% per year, paid quarterly in arrears on January 15, April 15, July 15 and October 15 of each year and will mature on April 15, 2042. The Company may redeem the Senior Notes, in whole or in part, at any time on or after April 15, 2017 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to, but not excluding, the redemption date. | |
The Senior Notes are the Company’s senior unsecured obligations and are subordinate to all of the Company’s secured indebtedness, which includes the Company’s repurchase agreements, obligation to return securities obtained as collateral, and other financing arrangements, to the extent of the value of the collateral securing such indebtedness. |
Commitments_and_Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies | ' |
Commitments and Contingencies | |
(a) Lease Commitments | |
The Company pays monthly rent pursuant to two operating leases. The lease term for the Company’s headquarters in New York, New York extends through May 31, 2020. The lease provides for aggregate cash payments ranging over time from approximately $2.4 million to $2.5 million per year, paid on a monthly basis, exclusive of escalation charges. In addition, as part of this lease agreement, the Company has provided the landlord a $785,000 irrevocable standby letter of credit fully collateralized by cash. The letter of credit may be drawn upon by the landlord in the event that the Company defaults under certain terms of the lease. In addition, the Company has a lease through December 31, 2016 for its off-site back-up facility located in Rockville Centre, New York, which provides for, among other things, cash payments ranging over time from $28,000 to $30,000 per year, paid on a monthly basis. | |
(b) Representations and Warranties in Connection with Resecuritization Transactions | |
In connection with the resecuritization transactions engaged in by the Company (See Note 15 for further discussion), the Company has the obligation under certain circumstances to repurchase assets from its VIEs upon breach of certain representations and warranties. |
Stockholders_Equity
Stockholders' Equity | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ' | ||||||||||||||||||||||||
Stockholders' Equity | ' | ||||||||||||||||||||||||
Stockholders’ Equity | |||||||||||||||||||||||||
(a) Preferred Stock | |||||||||||||||||||||||||
Redemption of 8.50% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) | |||||||||||||||||||||||||
On May 16, 2013 (the “Redemption Date”), the Company redeemed all 3,840,000 outstanding shares of its Series A Preferred Stock at an aggregate redemption price of approximately $97.0 million, or $25.27153 per share, including all accrued and unpaid dividends to the Redemption Date. The redemption value of the Series A Preferred Stock exceeded its carrying value by $3.9 million, which represents the original offering costs for the Series A Preferred Stock. This amount was included in the determination of net income available to common stock and participating securities from the Redemption Date through the year ended December 31, 2013. In addition, as part of the redemption price on its Series A Preferred Stock, the Company paid a dividend of $0.27153 per share, which reflected accrued and unpaid dividends for the period from April 1, 2013, through and including the Redemption Date. | |||||||||||||||||||||||||
Issuance of 7.50% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”) | |||||||||||||||||||||||||
On April 15, 2013, the Company amended its charter through the filing of articles supplementary to its charter to reclassify 8,050,000 shares of the Company’s authorized but unissued common stock as shares of the Company’s Series B Preferred Stock. On April 15, 2013, the Company completed the issuance of 8.0 million shares of its Series B Preferred Stock, with a par value of $0.01 per share and a liquidation preference $25.00 per share, plus accrued and unpaid dividends, in an underwritten public offering. The aggregate net proceeds to the Company from the offering of the Series B Preferred Stock were approximately $193.3 million, after deducting the underwriting discount and related offering expenses. The Company used a portion of such net proceeds to redeem all of its outstanding Series A Preferred Stock (as discussed above), and used the remaining net proceeds of the offering for general corporate purposes, including, without limitation, to acquire additional MBS consistent with its investment policy, and for working capital, which included, among other things, the repayment of its repurchase agreements. | |||||||||||||||||||||||||
The Company’s Series B Preferred Stock, which is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not authorized or declared) exclusively at the Company’s option commencing on April 15, 2018 (subject to the Company’s right under limited circumstances to redeem the Series B Preferred Stock prior to that date in order to preserve its qualification as a REIT and upon certain specified change in control transactions in which the Company’s common stock and the acquiring or surviving entity common securities would not be listed on the New York Stock Exchange (the “NYSE”), the NYSE MKT or NASDAQ, or any successor exchanges), is entitled to receive a dividend at a rate of 7.50% per year on the $25.00 liquidation preference before the Company’s common stock is paid any dividends and is senior to the Company’s common stock with respect to distributions upon liquidation, dissolution or winding up. | |||||||||||||||||||||||||
Dividends on the Series B Preferred Stock are payable quarterly in arrears on or about March 31, June 30, September 30 and December 31 of each year. On May 20, 2013, the Company declared the first dividend payable on the Series B Preferred Stock, which was paid on July 1, 2013 to preferred stockholders of record as of June 3, 2013. The amount of such dividend payable was $0.39583 per share, and was paid in respect of the partial period commencing on April 15, 2013, the date of original issue of the Series B Preferred Stock, and ending on, and including, June 30, 2013. | |||||||||||||||||||||||||
The Series B Preferred Stock generally does not have any voting rights, subject to an exception in the event the Company fails to pay dividends on such stock for six or more quarterly periods (whether or not consecutive). Under such circumstances, the Series B Preferred Stock will be entitled to vote to elect two additional directors to the Company’s Board of Directors (the “Board”), until all unpaid dividends have been paid or declared and set apart for payment. In addition, certain material and adverse changes to the terms of the Series B Preferred Stock cannot be made without the affirmative vote of holders of at least 66 2/3% of the outstanding shares of Series B Preferred Stock. | |||||||||||||||||||||||||
The following table presents cash dividends declared by the Company on its Series B Preferred Stock from January 1, 2014 through September 30, 2014: | |||||||||||||||||||||||||
Declaration Date | Record Date | Payment Date | Dividend Per Share | ||||||||||||||||||||||
25-Aug-14 | 8-Sep-14 | 30-Sep-14 | $ | 0.46875 | |||||||||||||||||||||
19-May-14 | 10-Jun-14 | 30-Jun-14 | 0.46875 | ||||||||||||||||||||||
14-Feb-14 | 28-Feb-14 | 31-Mar-14 | 0.46875 | ||||||||||||||||||||||
(b) Dividends on Common Stock | |||||||||||||||||||||||||
The following table presents cash dividends declared by the Company on its common stock from January 1, 2014 through September 30, 2014: | |||||||||||||||||||||||||
Declaration Date (1) | Record Date | Payment Date | Dividend Per Share | ||||||||||||||||||||||
17-Sep-14 | 29-Sep-14 | 31-Oct-14 | $ | 0.2 | -1 | ||||||||||||||||||||
13-Jun-14 | 27-Jun-14 | 31-Jul-14 | 0.2 | ||||||||||||||||||||||
10-Mar-14 | 28-Mar-14 | 30-Apr-14 | 0.2 | ||||||||||||||||||||||
(1) At September 30, 2014, the Company had accrued dividends and DERs payable of $74.1 million related to the common stock dividend declared on September 17, 2014. | |||||||||||||||||||||||||
(c) Discount Waiver, Direct Stock Purchase and Dividend Reinvestment Plan (“DRSPP”) | |||||||||||||||||||||||||
On August 8, 2013, the Company filed a shelf registration statement on Form S-3 with the SEC under the Securities Act of 1933, as amended (the “1933 Act”), for the purpose of registering additional common stock for sale through its DRSPP. Pursuant to Rule 462(e) of the 1933 Act, this shelf registration statement became effective automatically upon filing with the SEC and, when combined with the unused portion of the Company’s previous DRSPP shelf registration statements, registered an aggregate of 15 million shares of common stock. The Company’s DRSPP is designed to provide existing stockholders and new investors with a convenient and economical way to purchase shares of common stock through the automatic reinvestment of dividends and/or optional cash investments. At September 30, 2014, 8.1 million shares of common stock remained available for issuance pursuant to the DRSPP shelf registration statement. | |||||||||||||||||||||||||
During the three and nine months ended September 30, 2014, the Company issued 1,185,728 and 3,421,859 shares of common stock through the DRSPP, raising net proceeds of approximately $9.5 million and $26.4 million, respectively. From the inception of the DRSPP in September 2003 through September 30, 2014, the Company issued 29,461,623 shares pursuant to the DRSPP, raising net proceeds of $247.8 million. | |||||||||||||||||||||||||
(d) Stock Repurchase Program | |||||||||||||||||||||||||
As previously disclosed, in August 2005, the Company’s Board authorized a stock repurchase program (the “Repurchase Program”), to repurchase up to 4.0 million shares of its outstanding common stock under the Repurchase Program. The Board reaffirmed such authorization in May 2010. In December 2013, the Board increased the number of shares authorized for repurchase to an aggregate of 10.0 million. Such authorization does not have an expiration date and, at present, there is no intention to modify or otherwise rescind such authorization. Subject to applicable securities laws, repurchases of common stock under the Repurchase Program are made at times and in amounts as the Company deems appropriate, (including, in our discretion, through the use of one or more plans adopted under Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”)) using available cash resources. Shares of common stock repurchased by the Company under the Repurchase Program are cancelled and, until reissued by the Company, are deemed to be authorized but unissued shares of the Company’s common stock. The Repurchase Program may be suspended or discontinued by the Company at any time and without prior notice. The Company did not repurchase any shares of its common stock during the nine months ended September 30, 2014. At September 30, 2014, 6,616,355 shares remained authorized for repurchase under the Repurchase Program. | |||||||||||||||||||||||||
(e) Accumulated Other Comprehensive Income/(Loss) | |||||||||||||||||||||||||
The following table presents changes in the balances of each component of the Company’s AOCI for the three and nine months ended September 30, 2014: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2014 | September 30, 2014 | ||||||||||||||||||||||||
(In Thousands) | Net Unrealized | Net | Total AOCI | Net | Net | Total AOCI | |||||||||||||||||||
Gain/(Loss) on | Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Available-for-Sale MBS | Gain/(Loss) | Gain/(Loss) on | Gain/(Loss) | ||||||||||||||||||||||
on Swaps | Available-for-Sale MBS | on Swaps | |||||||||||||||||||||||
Balance at the beginning of the period | $ | 905,704 | $ | (54,671 | ) | $ | 851,033 | $ | 752,912 | $ | (15,217 | ) | $ | 737,695 | |||||||||||
OCI before reclassifications | (43,410 | ) | 23,500 | (19,910 | ) | 116,973 | (16,401 | ) | 100,572 | ||||||||||||||||
Amounts reclassified from AOCI (1) | (13,589 | ) | — | (13,589 | ) | (21,180 | ) | 447 | (20,733 | ) | |||||||||||||||
Net OCI during the period (2) | (56,999 | ) | 23,500 | (33,499 | ) | 95,793 | (15,954 | ) | 79,839 | ||||||||||||||||
Balance at end of period | $ | 848,705 | $ | (31,171 | ) | $ | 817,534 | $ | 848,705 | $ | (31,171 | ) | $ | 817,534 | |||||||||||
The following table presents changes in the balances of each component of the Company’s AOCI for the three and nine months ended September 30, 2013: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2013 | September 30, 2013 | ||||||||||||||||||||||||
(In Thousands) | Net Unrealized | Net | Total AOCI | Net Unrealized | Net | Total AOCI | |||||||||||||||||||
Gain/(Loss) on | Unrealized | Gain/(Loss) on | Unrealized | ||||||||||||||||||||||
Available-for-Sale MBS | Gain/(Loss) | Available-for-Sale MBS | Gain/(Loss) | ||||||||||||||||||||||
on Swaps | on Swaps | ||||||||||||||||||||||||
Balance at the beginning of the period | $ | 700,871 | $ | (31,967 | ) | $ | 668,904 | $ | 824,808 | $ | (62,831 | ) | $ | 761,977 | |||||||||||
OCI before reclassifications | 31,850 | (19,934 | ) | 11,916 | (89,847 | ) | 10,930 | (78,917 | ) | ||||||||||||||||
Amounts reclassified from AOCI (1) | (15,158 | ) | — | (15,158 | ) | (17,398 | ) | — | (17,398 | ) | |||||||||||||||
Net OCI during the period (2) | 16,692 | (19,934 | ) | (3,242 | ) | (107,245 | ) | 10,930 | (96,315 | ) | |||||||||||||||
Balance at end of period | $ | 717,563 | $ | (51,901 | ) | $ | 665,662 | $ | 717,563 | $ | (51,901 | ) | $ | 665,662 | |||||||||||
(1) See separate table below for details about these reclassifications. | |||||||||||||||||||||||||
(2) For further information regarding changes in OCI, see the Company’s consolidated statement of comprehensive income/(loss). | |||||||||||||||||||||||||
The following table presents information about the significant amounts reclassified out of the Company’s AOCI for the three and nine months ended September 30, 2014: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2014 | September 30, 2014 | ||||||||||||||||||||||||
Details about AOCI Components | Amounts Reclassified from AOCI | Affected Line Item in the Statement | |||||||||||||||||||||||
Where Net Income is Presented | |||||||||||||||||||||||||
(In Thousands) | |||||||||||||||||||||||||
Available-for-sale MBS: | |||||||||||||||||||||||||
Realized gain on sale of securities | $ | (13,589 | ) | $ | (21,180 | ) | Gain on sales of MBS and U.S. Treasury securities, net | ||||||||||||||||||
Swaps designated as cash flow hedges: | |||||||||||||||||||||||||
De-designated Swaps | $ | — | $ | 447 | Other, net | ||||||||||||||||||||
Total reclassifications for period | $ | (13,589 | ) | $ | (20,733 | ) | |||||||||||||||||||
The following table presents information about the significant amounts reclassified out of the Company’s AOCI for the three and nine months ended September 30, 2013: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2013 | September 30, 2013 | ||||||||||||||||||||||||
Details about AOCI Components | Amounts | Amounts | Affected Line Item in the Statement | ||||||||||||||||||||||
Reclassified from AOCI | Reclassified from AOCI | Where Net Income is Presented | |||||||||||||||||||||||
(In Thousands) | |||||||||||||||||||||||||
Available-for-sale MBS: | |||||||||||||||||||||||||
Realized gain on sale of securities | $ | (15,158 | ) | $ | (17,398 | ) | Gain on sales of MBS and U.S. Treasury securities, net | ||||||||||||||||||
Total reclassifications for period | $ | (15,158 | ) | $ | (17,398 | ) | |||||||||||||||||||
At September 30, 2014 and December 31, 2013, the Company had OTTI recognized in AOCI of $618,000 and $609,000, respectively. |
EPS_Calculation
EPS Calculation | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||||||
EPS Calculation | ' | ||||||||||||||||
EPS Calculation | |||||||||||||||||
The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted EPS for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(In Thousands, Except Per Share Amounts) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator: | |||||||||||||||||
Net income | $ | 78,882 | $ | 71,328 | $ | 233,796 | $ | 224,152 | |||||||||
Dividends declared on preferred stock | (3,750 | ) | (3,750 | ) | (11,250 | ) | (10,000 | ) | |||||||||
Dividends, DERs and undistributed earnings allocated to participating securities | (281 | ) | (230 | ) | (842 | ) | (880 | ) | |||||||||
Issuance costs of redeemed preferred stock (1) | — | — | — | (3,947 | ) | ||||||||||||
Net income to common stockholders - basic and diluted | $ | 74,851 | $ | 67,348 | $ | 221,704 | $ | 209,325 | |||||||||
Denominator: | |||||||||||||||||
Weighted average common shares for basic and diluted earnings per share (2) | 369,690 | 363,918 | 368,430 | 361,181 | |||||||||||||
Basic and diluted earnings per share | $ | 0.2 | $ | 0.19 | $ | 0.6 | $ | 0.58 | |||||||||
-1 | Issuance costs of redeemed preferred stock represent the original offering costs related to the Series A Preferred Stock, which was redeemed on May 16, 2013. (See Note 11) | ||||||||||||||||
-2 | At September 30, 2014, the Company had an aggregate of 1.6 million equity instruments outstanding that were not included in the calculation of diluted EPS for the three and nine months ended September 30, 2014, as their inclusion would have been anti-dilutive. These equity instruments were comprised of approximately 358,000 shares of restricted common stock with a weighted average grant date fair value of $7.47 and approximately 1.2 million RSUs with a weighted average grant date fair value of $6.83. These equity instruments may have a dilutive impact on future EPS. |
Equity_Compensation_Employment
Equity Compensation, Employment Agreements and Other Benefit Plans | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Compensation Related Costs [Abstract] | ' | ||||||||||||||||
Equity Compensation, Employment Agreements and Other Benefit Plans | ' | ||||||||||||||||
Equity Compensation, Employment Agreements and Other Benefit Plans | |||||||||||||||||
(a) 2010 Equity Compensation Plan | |||||||||||||||||
In accordance with the terms of the Company’s Amended and Restated 2010 Equity Compensation Plan (the “2010 Plan”), directors, officers and employees of the Company and any of its subsidiaries and other persons expected to provide significant services for the Company and any of its subsidiaries are eligible to receive grants of stock options (“Options”), restricted stock, RSUs, DERs and other stock-based awards under the 2010 Plan. | |||||||||||||||||
Subject to certain exceptions, stock-based awards relating to a maximum of 13.5 million shares of common stock may be granted under the 2010 Plan; forfeitures and/or awards that expire unexercised do not count towards such limit. At September 30, 2014, approximately 9.2 million shares of common stock remained available for grant in connection with stock-based awards under the 2010 Plan. A participant may generally not receive stock-based awards in excess of 1,500,000 shares of common stock in any one year and no award may be granted to any person who, assuming exercise of all Options and payment of all awards held by such person, would own or be deemed to own more than 9.8% of the outstanding shares of the Company’s common stock. Unless previously terminated by the Board, awards may be granted under the 2010 Plan until May 20, 2020. | |||||||||||||||||
DERs | |||||||||||||||||
A DER is a right to receive a distribution equal to the dividend distributions that would be paid on a share of the Company’s common stock. DERs may be granted separately or together with other awards and are paid in cash or other consideration at such times and in accordance with such rules, as the Compensation Committee of the Board (the “Compensation Committee”) shall determine at its discretion. Payments made on the Company’s existing DERs are charged to stockholders’ equity when the common stock dividends are declared to the extent that such DERs are expected to vest. The Company made DER payments of approximately $195,000 and $645,000 during the three months ended September 30, 2014 and 2013, and approximately $557,000 and $1.9 million during the nine months ended September 30, 2014 and 2013, respectively. DER payments for the three and nine months ended September 30, 2013 reflect special cash dividends paid of $0.28 and $0.78 per share, respectively. At September 30, 2014, the Company had 1,220,724 DERs outstanding, all of which were awarded in connection with, or attached to, RSUs. A 0% forfeiture rate was assumed with respect to DERs outstanding at September 30, 2014. The DERs were scheduled to elapse over a weighted average period of 1.9 years. | |||||||||||||||||
Options | |||||||||||||||||
Pursuant to Section 422(b) of the Code, in order for Options granted under the 2010 Plan and vesting in any one calendar year to qualify as an incentive stock option (“ISO”) for tax purposes, the market value of the common stock to be received upon exercise of such Options as determined on the date of grant shall not exceed $100,000 during such calendar year. The exercise price of an ISO may not be lower than 100% (110% in the case of an ISO granted to a 10% stockholder) of the fair market value of the Company’s common stock on the date of grant. The exercise price for any other type of Option issued under the 2010 Plan may not be less than the fair market value on the date of grant. Each Option is exercisable after the period or periods specified in the award agreement, which will generally not exceed ten years from the date of grant. | |||||||||||||||||
The Company did not grant any stock options during the nine months ended September 30, 2014 and 2013. There were no stock options exercised during the nine months ended September 30, 2014 and 20,000 stock options exercised during the nine months ended September 30, 2013. During the three and nine months ended September 30, 2014, 5,000 stock options expired which had an exercise price of $8.40. No stock options were cancelled or expired during the nine months ended September 30, 2013. At September 30, 2014, the Company had no stock options outstanding. | |||||||||||||||||
Restricted Stock | |||||||||||||||||
The Company awarded 32,658 and 95,718 shares of restricted common stock during the three and nine months ended September 30, 2014 and awarded zero and 28,743 shares of restricted common stock during the three and nine months ended September 30, 2013. At September 30, 2014 and December 31, 2013, the Company had unrecognized compensation expense of $2.2 million and $3.3 million, respectively, related to the unvested shares of restricted common stock. The Company had accrued dividends payable of approximately $354,000 and $413,000 on unvested shares of restricted stock at September 30, 2014 and December 31, 2013, respectively. The unrecognized compensation expense at September 30, 2014 is expected to be recognized over a weighted average period of 2.2 years. | |||||||||||||||||
Restricted Stock Units and Associated DERs | |||||||||||||||||
Under the terms of the 2010 Plan, RSUs are instruments that provide the holder with the right to receive, subject to the satisfaction of conditions set by the Compensation Committee at the time of grant, a payment of a specified value, which may be a share of the Company’s common stock, the fair market value of a share of the Company’s common stock, or such fair market value to the extent in excess of an established base value, on the applicable settlement date. Although the 2010 Plan permits the Company to issue RSUs that can settle in cash, all of the Company’s outstanding RSUs as of September 30, 2014 are designated to be settled in shares of the Company’s common stock. The Company granted 3,334 and 630,815 RSUs during the three and nine months ended September 30, 2014, respectively and granted 72,500 and 112,824 RSUs during the three and nine months ended September 30, 2013, respectively. In addition, an aggregate of 97,164 previously awarded RSUs were forfeited by the holders’ thereof during the nine months ended September 30, 2014 in connection with the negotiation of such holders’ respective new employment agreements. All RSUs outstanding at September 30, 2014 had DERs attached or issued as separate associated instruments in connection with RSUs. At September 30, 2014 and December 31, 2013, the Company had unrecognized compensation expense of $3.4 million and $1.6 million, respectively, related to RSUs and DERs. The unrecognized compensation expense at September 30, 2014 is expected to be recognized over a weighted average period of 2.1 years. A 0% forfeiture rate was assumed with respect to unvested RSUs at September 30, 2014. | |||||||||||||||||
Expense Recognized for Equity-Based Compensation Instruments | |||||||||||||||||
The following table presents the Company’s expenses related to its equity-based compensation instruments for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Restricted shares of common stock | $ | 643 | $ | 404 | $ | 1,892 | $ | 1,539 | |||||||||
RSUs | 591 | 314 | 2,354 | -1 | 1,263 | ||||||||||||
DERs | 37 | 42 | 111 | 144 | |||||||||||||
Total | $ | 1,271 | $ | 760 | $ | 4,357 | $ | 2,946 | |||||||||
(1) RSU expense for the nine months ended September 30, 2014 includes approximately $500,000 for a one-time grant to the Company’s chief executive officer. | |||||||||||||||||
(b) Employment Agreements | |||||||||||||||||
At September 30, 2014, the Company had employment agreements with five of its officers, with varying terms that provide for, among other things, base salary, bonus and change-in-control payments upon the occurrence of certain triggering events. | |||||||||||||||||
(c) Deferred Compensation Plans | |||||||||||||||||
The Company administers deferred compensation plans for its senior officers and non-employee directors (collectively, the “Deferred Plans”), pursuant to which participants may elect to defer up to 100% of certain cash compensation. The Deferred Plans are designed to align participants’ interests with those of the Company’s stockholders. | |||||||||||||||||
Amounts deferred under the Deferred Plans are considered to be converted into “stock units” of the Company. Stock units do not represent stock of the Company, but rather are a liability of the Company that changes in value as would equivalent shares of the Company’s common stock. Deferred compensation liabilities are settled in cash at the termination of the deferral period, based on the value of the stock units at that time. The Deferred Plans are non-qualified plans under the Employee Retirement Income Security Act of 1974 and, as such, are not funded. Prior to the time that the deferred accounts are settled, participants are unsecured creditors of the Company. | |||||||||||||||||
The Company’s liability for stock units in the Deferred Plans is based on the market price of the Company’s common stock at the measurement date. The following table presents the Company’s expenses related to its Deferred Plans for its non-employee directors and senior officers for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Non-employee directors | $ | (11 | ) | $ | (30 | ) | $ | 52 | $ | 22 | |||||||
Total | $ | (11 | ) | $ | (30 | ) | $ | 52 | $ | 22 | |||||||
The following table presents the aggregate amount of income deferred by participants of the Deferred Plans through September 30, 2014 and December 31, 2013 that had not been distributed and the Company’s associated liability for such deferrals at September 30, 2014 and December 31, 2013: | |||||||||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||||||||
Undistributed Income Deferred (1) | Liability Under Deferred Plans | Undistributed Income Deferred (1) | Liability Under Deferred Plans | ||||||||||||||
(In Thousands) | |||||||||||||||||
Non-employee directors | $ | 263 | $ | 367 | $ | 270 | $ | 382 | |||||||||
Total | $ | 263 | $ | 367 | $ | 270 | $ | 382 | |||||||||
(1) Represents the cumulative amounts that were deferred by participants through September 30, 2014 and December 31, 2013, which had not been distributed through such date. | |||||||||||||||||
(d) Savings Plan | |||||||||||||||||
The Company sponsors a tax-qualified employee savings plan (the “Savings Plan”), in accordance with Section 401(k) of the Code. Subject to certain restrictions, all of the Company’s employees are eligible to make tax deferred contributions to the Savings Plan subject to limitations under applicable law. Participant’s accounts are self-directed and the Company bears the costs of administering the Savings Plan. The Company matches 100% of the first 3% of eligible compensation deferred by employees and 50% of the next 2%, subject to a maximum as provided by the Code. The Company has elected to operate the Savings Plan under the applicable safe harbor provisions of the Code, whereby among other things, the Company must make contributions for all participating employees and all matches contributed by the Company immediately vest 100%. For the three months ended September 30, 2014 and 2013, the Company recognized expenses for matching contributions of $65,000 and $62,000, respectively, and $195,000 and $187,000 for the nine months ended September 30, 2014 and 2013, respectively. |
Fair_Value_of_Financial_Instru
Fair Value of Financial Instruments | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Fair Value of Financial Instruments | ' | ||||||||||||||||
Fair Value of Financial Instruments | |||||||||||||||||
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy are defined as follows: | |||||||||||||||||
Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |||||||||||||||||
Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |||||||||||||||||
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. | |||||||||||||||||
The following describes the valuation methodologies used for the Company’s financial instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy. | |||||||||||||||||
Securities Obtained and Pledged as Collateral/Obligation to Return Securities Obtained as Collateral | |||||||||||||||||
The fair value of U.S. Treasury securities obtained as collateral and the associated obligation to return securities obtained as collateral are based upon prices obtained from a third-party pricing service, which are indicative of market activity. Securities obtained as collateral are classified as Level 1 in the fair value hierarchy. | |||||||||||||||||
Agency MBS and Non-Agency MBS | |||||||||||||||||
The Company determines the fair value of its Agency MBS, based upon prices obtained from third-party pricing services, which are indicative of market activity and repurchase agreement counterparties. | |||||||||||||||||
For Agency MBS, the valuation methodology of the Company’s third-party pricing services incorporate commonly used market pricing methods, trading activity observed in the marketplace and other data inputs. The methodology also considers the underlying characteristics of each security, which are also observable inputs, including: collateral vintage; coupon; maturity date; loan age; reset date; collateral type; periodic and life cap; geography; and prepayment speeds. Management analyzes pricing data received from third-party pricing services and compares it to other indications of fair value including data received from repurchase agreement counterparties and its own observations of trading activity observed in the marketplace. | |||||||||||||||||
In determining the fair value of its Non-Agency MBS and securitized debt, management considers a number of observable market data points, including prices obtained from pricing services and brokers as well as dialogue with market participants. In valuing Non-Agency MBS, the Company understands that pricing services use observable inputs that include, in addition to trading activity observed in the marketplace, loan delinquency data, credit enhancement levels and vintage, which are taken into account to assign pricing factors such as spread and prepayment assumptions. For tranches of Legacy Non-Agency MBS that are cross-collateralized, performance of all collateral groups involved in the tranche are considered. The Company collects and considers current market intelligence on all major markets, including benchmark security evaluations and bid-lists throughout the day from various sources, when available. | |||||||||||||||||
The Company’s MBS are valued using various market data points as described above, which management considers directly or indirectly observable parameters. Accordingly, the Company’s MBS are classified as Level 2 in the fair value hierarchy. | |||||||||||||||||
Derivative Instruments | |||||||||||||||||
Linked Transactions | |||||||||||||||||
The Non-Agency MBS underlying the Company’s Linked Transactions are valued using similar techniques to those used for the Company’s other Non-Agency MBS. The value of the underlying MBS is then netted against the carrying amount (which approximates fair value) of the repurchase agreement borrowing at the valuation date. The fair value of Linked Transactions also includes accrued interest receivable on the MBS and accrued interest payable on the underlying repurchase agreement borrowings. The Company’s Linked Transactions are classified as Level 2 in the fair value hierarchy. | |||||||||||||||||
Swaps | |||||||||||||||||
The Company determines the fair value of non-centrally cleared Swaps considering valuations obtained from a third-party pricing service. For Swaps that are cleared by a central clearing house valuations provided by the clearing house are used. All valuations obtained are tested with internally developed models that apply readily observable market parameters. The Company considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each derivative agreement, from the perspective of both the Company and its counterparties. All of the Company’s Swaps are subject either to bilateral collateral arrangements, or for cleared Swaps, to the clearing house’s margin requirements. Consequently, no credit valuation adjustment was made in determining the fair value of such instruments. Swaps are classified as Level 2 in the fair value hierarchy. | |||||||||||||||||
The following table presents the Company’s financial instruments carried at fair value on a recurring basis as of September 30, 2014, on the consolidated balance sheet by the valuation hierarchy, as previously described: | |||||||||||||||||
Fair Value at September 30, 2014 | |||||||||||||||||
(In Thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | |||||||||||||||||
Agency MBS | $ | — | $ | 6,174,176 | $ | — | $ | 6,174,176 | |||||||||
Non-Agency MBS, including MBS transferred to | — | 4,763,326 | — | 4,763,326 | |||||||||||||
consolidated VIEs | |||||||||||||||||
Securities obtained and pledged as collateral | 442,370 | — | — | 442,370 | |||||||||||||
Linked Transactions | — | 190,681 | — | 190,681 | |||||||||||||
Swaps | — | 4,322 | — | 4,322 | |||||||||||||
Total assets carried at fair value | $ | 442,370 | $ | 11,132,505 | $ | — | $ | 11,574,875 | |||||||||
Liabilities: | |||||||||||||||||
Swaps | $ | — | $ | 35,493 | $ | — | $ | 35,493 | |||||||||
Obligation to return securities obtained as collateral | 442,370 | — | — | 442,370 | |||||||||||||
Total liabilities carried at fair value | $ | 442,370 | $ | 35,493 | $ | — | $ | 477,863 | |||||||||
Changes to the valuation methodologies used with respect to the Company’s financial instruments are reviewed by management to ensure any such changes result in appropriate exit price valuations. The Company will refine its valuation methodologies as markets and products develop and pricing methodologies evolve. The methods described above may produce fair value estimates that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with those used by market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced. The Company reviews the classification of its financial instruments within the fair value hierarchy on a quarterly basis, and management may conclude that its financial instruments should be reclassified to a different level in the future. | |||||||||||||||||
The following table presents the carrying values and estimated fair values of the Company’s financial instruments at fair value, at September 30, 2014 and December 31, 2013: | |||||||||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||||||||
Carrying | Estimated Fair Value | Carrying | Estimated Fair Value | ||||||||||||||
(In Thousands) | Value | Value | |||||||||||||||
Financial Assets: | |||||||||||||||||
Agency MBS | $ | 6,174,176 | $ | 6,174,176 | $ | 6,519,221 | $ | 6,519,221 | |||||||||
Non-Agency MBS, including MBS transferred to | 4,763,326 | 4,763,326 | 4,852,137 | 4,852,137 | |||||||||||||
consolidated VIEs | |||||||||||||||||
Securities obtained and pledged as collateral | 442,370 | 442,370 | 383,743 | 383,743 | |||||||||||||
Cash and cash equivalents | 423,891 | 423,891 | 565,370 | 565,370 | |||||||||||||
Restricted cash | 43,751 | 43,751 | 37,520 | 37,520 | |||||||||||||
Linked Transactions | 190,681 | 190,681 | 28,181 | 28,181 | |||||||||||||
Swaps | 4,322 | 4,322 | 13,000 | 13,000 | |||||||||||||
Residential whole loans | 112,924 | 114,357 | — | — | |||||||||||||
Financial Liabilities: | |||||||||||||||||
Repurchase agreements | 8,125,723 | 8,124,355 | 8,339,297 | 8,339,071 | |||||||||||||
Securitized debt | 156,276 | 157,264 | 366,205 | 366,767 | |||||||||||||
Obligation to return securities obtained as collateral | 442,370 | 442,370 | 383,743 | 383,743 | |||||||||||||
Senior Notes | 100,000 | 105,000 | 100,000 | 98,000 | |||||||||||||
Swaps | 35,493 | 35,493 | 28,217 | 28,217 | |||||||||||||
In addition to the methodologies used to determine the fair value of the Company’s financial assets and liabilities reported at fair value on a recurring basis, as previously described, the following methods and assumptions were used by the Company in arriving at the fair value of the Company’s other financial instruments presented in the above table: | |||||||||||||||||
Cash and Cash Equivalents and Restricted Cash: Cash and cash equivalents and restricted cash are comprised of cash held in overnight money market investments, demand deposit accounts and U.S. Treasury Bills. At September 30, 2014 and December 31, 2013, the Company’s money market funds were invested in securities issued by the U.S. Government, or its agencies, instrumentalities, and sponsored entities, and repurchase agreements involving the securities described above. Given the overnight term and assessed credit risk, the Company’s investments in money market funds are determined to have a fair value equal to their carrying value. The Company’s investments in U.S. Treasury Bills have a carrying value which approximates fair value given the short-term to maturity of these instruments. | |||||||||||||||||
Repurchase Agreements: The fair value of repurchase agreements reflects the present value of the contractual cash flows discounted at market interest rates at the valuation date for repurchase agreements with a term equivalent to the remaining term to interest rate repricing, which may be at maturity. Such interest rates are estimated based on LIBOR rates observed in the market. The Company’s repurchase agreements are classified as Level 2 in the fair value hierarchy. | |||||||||||||||||
Securitized Debt: In determining the fair value of securitized debt, management considers a number of observable market data points, including prices obtained from pricing services and brokers as well as dialogue with market participants. Accordingly, the Company’s securitized debt is classified as Level 2 in the fair value hierarchy. | |||||||||||||||||
Senior Notes: The fair value of Senior Notes is determined using the end of day market price quoted on the NYSE at the reporting date. The Company’s Senior Notes are classified as Level 1 in the fair value hierarchy. | |||||||||||||||||
Residential Whole Loans: The fair value of residential whole loans is estimated taking into consideration current interest rates, loan amount, payment status and property type, and forecasts of future interest rates, home prices and property values, prepayment speeds, default, loss severities, and actual purchases and sales of similar loans. The Company’s residential whole loans are classified as Level 3 in the fair value hierarchy. |
Use_of_Special_Purpose_Entitie
Use of Special Purpose Entities and Variable Interest Entities | 9 Months Ended | ||||||||||||
Sep. 30, 2014 | |||||||||||||
Use of Special Purpose Entities and Variable Interest Entities | ' | ||||||||||||
Use of Special Purpose Entities and Variable Interest Entities | ' | ||||||||||||
Use of Special Purpose Entities and Variable Interest Entities | |||||||||||||
A Special Purpose Entity (“SPE”) is an entity designed to fulfill a specific limited need of the company that organized it. SPEs are often used to facilitate transactions that involve securitizing financial assets or resecuritizing previously securitized financial assets. The objective of such transactions may include obtaining non-recourse financing, obtaining liquidity or refinancing the underlying securitized financial assets on improved terms. Securitization involves transferring assets to a SPE to convert all or a portion of those assets into cash before they would have been realized in the normal course of business, through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE and depending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excess assets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or other form of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement. | |||||||||||||
Resecuritization transactions | |||||||||||||
Since October 2010, the Company has entered into several resecuritization transactions that resulted in the Company consolidating as VIEs the SPEs that were created to facilitate the transactions and to which the underlying assets in connection with the resecuritizations were transferred. See Note 2(q) for a discussion of the accounting policies applied to the consolidation of VIEs and transfers of financial assets in connection with resecuritization transactions. | |||||||||||||
The following table summarizes the key details of the resecuritization transactions the Company is involved in as of September 30, 2014: | |||||||||||||
(Dollars in Thousands) | February 2012 | February 2011 | October 2010 | ||||||||||
Name of Trust (Consolidated as a VIE) | WFMLT Series | CSMC Series | DMSI | ||||||||||
2012-RR1 | 2011-1R | 2010-RS2 | |||||||||||
Principal value of Non-Agency MBS sold | $ | 433,347 | $ | 1,319,969 | $ | 985,228 | |||||||
Face amount of Bonds issued by the VIE and purchased by 3rd party investors (1) | $ | 186,691 | $ | 488,389 | $ | 373,577 | |||||||
Outstanding amount of Senior Bonds at September 30, 2014 | $ | 67,035 | $ | 21,631 | $ | 67,610 | |||||||
Pass-through rate for Senior Bonds issued | 2.85 | % | One-month LIBOR plus 100 basis points | Weighted Average Coupon Rate | |||||||||
Face amount of Senior Support Certificates received by the Company (2) | $ | 220,216 | $ | 779,679 | $ | 484,630 | |||||||
Cash received | $ | 186,691 | $ | 488,389 | $ | 375,621 | |||||||
Notional amount acquired of non-rated, interest only senior certificates (1) | $ | 186,691 | $ | 488,389 | $ | — | |||||||
Unamortized deferred costs | $ | 577 | $ | 202 | $ | 97 | |||||||
(1) Amount disclosed reflects principal balance on the DMSI 2010-RS A1, A2 and A3 bonds. The DMSI 2010-RS2 A2 and A3 bond was sold to third party investors during 2013. The principal balance for the DMSI 2010-RS2 A1 Bond and associated interest only Senior certificate was paid off during the three months ended June 30, 2013. | |||||||||||||
(2) Provides credit support for the sequential Senior Non-Agency MBS sold to third-party investors in resecuritization transactions (“Senior Bonds”). | |||||||||||||
The Company engaged in these transactions primarily for the purpose of obtaining non-recourse financing on a portion of its Non-Agency MBS portfolio, as well as refinancing a portion of its Non-Agency MBS portfolio on improved terms. As a result of engaging in these transactions, the risks facing the Company are largely unchanged as the Company remains economically exposed to the first loss position on the underlying MBS transferred to the VIEs. | |||||||||||||
The activities that can be performed by an entity created to facilitate a resecuritization transaction are predominantly specified in the entity’s formation documents. Those documents do not permit the entity, any beneficial interest holder in the entity, or any other party associated with the entity to cause the entity to sell or replace the assets held by the entity, or limit such ability to specific events of default. | |||||||||||||
The Company concluded that the entities created to facilitate these resecuritization transactions are VIEs. The Company then completed an analysis of whether each VIE created to facilitate the resecuritization transaction should be consolidated by the Company, based on consideration of its involvement in each VIE, including the design and purpose of the SPE, and whether its involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of each VIE. In determining whether the Company would be considered the primary beneficiary, the following factors were assessed: | |||||||||||||
• | Whether the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE; and | ||||||||||||
• | Whether the Company has a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. | ||||||||||||
Based on its evaluation of the factors discussed above, including its involvement in the purpose and design of the entity, the Company determined that it was required to consolidate each VIE created to facilitate these transactions. | |||||||||||||
As of September 30, 2014 and December 31, 2013, the aggregate fair value of the Non-Agency MBS that were resecuritized as described above was $1.452 billion and $2.282 billion, respectively. These assets are included in the Company’s consolidated balance sheets and disclosed as “Non-Agency MBS transferred to consolidated VIEs”. As of September 30, 2014 and December 31, 2013, the aggregate outstanding balance of Senior Bonds issued by consolidated VIEs was $156.3 million and $366.2 million, respectively. These Senior Bonds are included in the Company’s consolidated balance sheets and disclosed as “Securitized debt”. The holders of the Senior Bonds have no recourse to the general credit of the Company, but the Company does have the obligation, under certain circumstances to repurchase assets from the VIE upon the breach of certain representations and warranties in relation to the Non-Agency MBS sold to the VIE. In the absence of such a breach, the Company has no obligation to provide any other explicit or implicit support to any VIE. | |||||||||||||
During the quarter ended September 30, 2014 and subsequent to the outstanding balance of Senior Bonds issued by the CSMC Series 2011-7R Trust (the “Trust”) being repaid, this resecuritization financing structure was terminated. The termination was effected through an exchange of the remaining beneficial interests previously issued by the Trust and held by the Company for the underlying securities that were previously transferred to and held by the Trust at the date of termination. Following the exchange, the beneficial interests were cancelled by the trustee and the Trust was terminated. The exchange and termination of this financing structure did not result in any gain or loss to the Company. As a result of the termination, the underlying securities originally transferred as part of this resecuritization are reported as Non-Agency MBS in the Company’s consolidated balance sheets at September 30, 2014 and interest income from the underlying securities from the date of termination through September 30, 2014 is reported as Interest income from Non-Agency MBS in the Company’s consolidated statements of operations. | |||||||||||||
Prior to the completion of the Company’s first resecuritization transaction in October 2010, the Company had not transferred assets to VIEs or QSPEs and other than acquiring MBS issued by such entities, had no other involvement with VIEs or QSPEs. | |||||||||||||
Residential Whole Loans | |||||||||||||
Included in Prepaid and other assets in the consolidated balance sheets as of September 30, 2014 is approximately $112.9 million in residential whole loans arising from the Company’s 100% equity interest in certificates issued by a trust established to acquire the loans. Based on its evaluation of its 100% interest in the trust and other factors, the Company has determined that the trust is required to be consolidated for financial reporting purposes. During the three and nine months ended September 30, 2014, approximately $1.2 million and $1.8 million, respectively, of income was recognized from residential whole loans and is included in Other income, net on the Company’s consolidated statements of operations. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Basis of Presentation and Consolidation | ' |
Basis of Presentation and Consolidation | |
The interim unaudited consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted according to these SEC rules and regulations. Management believes that the disclosures included in these interim financial statements are adequate to make the information presented not misleading. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2014 and results of operations for all periods presented have been made. The results of operations for the nine months ended September 30, 2014 should not be construed as indicative of the results to be expected for the full year. | |
The accompanying consolidated financial statements of the Company have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although the Company’s estimates contemplate current conditions and how it expects them to change in the future, it is reasonably possible that actual conditions could be worse than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition. Management has made significant estimates in several areas, including other-than-temporary impairment (“OTTI”) on Agency and Non-Agency MBS (Note 3), valuation of Agency and Non-Agency MBS (Notes 3 and 14), derivative instruments (Notes 5 and 14) and income recognition on certain Non-Agency MBS purchased at a discount (Note 3). In addition, estimates are used in the determination of taxable income used in the assessment of REIT compliance and contingent liabilities for related taxes, penalties and interest (Note 2(n)). Actual results could differ from those estimates. | |
The consolidated financial statements of the Company include the accounts of all subsidiaries; significant intercompany accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. | |
Agency and Non-Agency MBS (including Non-Agency MBS transferred to a consolidated VIE) | ' |
Agency and Non-Agency MBS (including Non-Agency MBS transferred to a consolidated VIE) | |
The Company has investments in residential MBS that are issued or guaranteed as to principal and/or interest by a federally chartered corporation, such as Fannie Mae or Freddie Mac, or any agency of the U.S. Government, such as Ginnie Mae (collectively, “Agency MBS”), and residential MBS that are not guaranteed by any U.S. Government agency or any federally chartered corporation (“Non-Agency MBS”), as described in Note 3. | |
Designation | |
The Company generally intends to hold its MBS until maturity; however, from time to time, it may sell any of its securities as part of the overall management of its business. As a result, all of the Company’s MBS are designated as “available-for-sale” and, accordingly, are carried at their fair value with unrealized gains and losses excluded from earnings (except when an OTTI is recognized, as discussed below) and reported in accumulated other comprehensive income/(loss) (“AOCI”), a component of stockholders’ equity. | |
Upon the sale of an investment security, any unrealized gain or loss is reclassified out of AOCI to earnings as a realized gain or loss using the specific identification method. | |
Revenue Recognition, Premium Amortization and Discount Accretion | |
Interest income on securities is accrued based on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency MBS and Non-Agency MBS assessed as high credit quality at the time of purchase are amortized into interest income over the life of such securities using the effective yield method. Adjustments to premium amortization are made for actual prepayment activity. | |
Interest income on the Non-Agency MBS that were purchased at a discount to par value and/or are considered to be of less than high credit quality is recognized based on the security’s effective interest rate which is the security’s internal rate of return (“IRR”). The IRR is determined using management’s estimate of the projected cash flows for each security, which are based on the Company’s observation of current information and events and include assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of credit losses. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the IRR/interest income recognized on these securities or in the recognition of OTTIs. (See Note 3) | |
Based on the projected cash flows from the Company’s Non-Agency MBS purchased at a discount to par value, a portion of the purchase discount may be designated as non-accretable purchase discount (“Credit Reserve”), which effectively mitigates the Company’s risk of loss on the mortgages collateralizing such MBS and is not expected to be accreted into interest income. The amount designated as Credit Reserve may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a Credit Reserve is more favorable than forecasted, a portion of the amount designated as Credit Reserve may be reallocated to accretable discount and recognized into interest income over time. Conversely, if the performance of a security with a Credit Reserve is less favorable than forecasted, the amount designated as Credit Reserve may be increased, or impairment charges and write-downs of such securities to a new cost basis could result. | |
Determination of MBS Fair Value | |
In determining the fair value of the Company’s MBS, management considers a number of observable market data points, including prices obtained from pricing services, brokers and repurchase agreement counterparties, dialogue with market participants, as well as management’s observations of market activity. (See Note 14) | |
Impairments/OTTI | |
When the fair value of an investment security is less than its amortized cost at the balance sheet date, the security is considered impaired. The Company assesses its impaired securities on at least a quarterly basis and designates such impairments as either “temporary” or “other-than-temporary.” If the Company intends to sell an impaired security, or it is more likely than not that it will be required to sell the impaired security before its anticipated recovery, then the Company must recognize an OTTI through charges to earnings equal to the entire difference between the investment’s amortized cost and its fair value at the balance sheet date. If the Company does not expect to sell an other-than-temporarily impaired security, only the portion of the OTTI related to credit losses is recognized through charges to earnings with the remainder recognized through AOCI on the consolidated balance sheets. Impairments recognized through other comprehensive income/(loss) (“OCI”) do not impact earnings. Following the recognition of an OTTI through earnings, a new cost basis is established for the security and may not be adjusted for subsequent recoveries in fair value through earnings. However, OTTIs recognized through charges to earnings may be accreted back to the amortized cost basis of the security on a prospective basis through interest income. The determination as to whether an OTTI exists and, if so, the amount of credit impairment recognized in earnings is subjective, as such determinations are based on factual information available at the time of assessment as well as the Company’s estimates of the future performance and cash flow projections. As a result, the timing and amount of OTTIs constitute material estimates that are susceptible to significant change. (See Note 3) | |
Non-Agency MBS that are assessed to be of less than high credit quality and on which impairments are recognized have experienced, or are expected to experience, credit-related adverse cash flow changes. The Company’s estimate of cash flows for its Non-Agency MBS is based on its review of the underlying mortgage loans securing the MBS. The Company considers information available about the past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, prepayment rates, default rates, loss severities, delinquency rates, percentage of non-performing loans, Fair Isaac Corporation (“FICO”) scores at loan origination, year of origination, loan-to-value ratios (“LTVs”), geographic concentrations, as well as reports by credit rating agencies, such as Moody’s Investors Services, Inc. (“Moody’s”), Standard & Poor’s Corporation (“S&P”), or Fitch, Inc. (collectively, “Rating Agencies”), general market assessments, and dialogue with market participants. As a result, significant judgment is used in the Company’s analysis to determine the expected cash flows for its Non-Agency MBS. In determining the OTTI related to credit losses for securities that were purchased at significant discounts to par and/or are considered to be of less than high credit quality, the Company compares the present value of the remaining cash flows expected to be collected at the purchase date (or last date previously revised) against the present value of the cash flows expected to be collected at the current financial reporting date. The discount rate used to calculate the present value of expected future cash flows is the current yield used for income recognition purposes. Impairment assessment for Non-Agency MBS that were purchased at prices close to par and are considered to be of high credit quality involves comparing the present value of the remaining cash flows expected to be collected against the amortized cost of the security at the assessment date. The discount rate used to calculate the present value of the expected future cash flows is based on the instrument’s IRR. | |
Balance Sheet Presentation | |
The Company’s MBS pledged as collateral against repurchase agreements and Swaps are included in MBS on the consolidated balance sheets with the fair value of the MBS pledged disclosed parenthetically. Purchases and sales of securities are recorded on the trade date. However, if on the purchase settlement date, a repurchase agreement is used to finance the purchase of an MBS with the same counterparty and such transactions are determined to be linked, then the MBS and linked repurchase borrowing will be reported on the same settlement date as Linked Transactions. (See Notes 2(o) and 5) | |
Securities Obtained and Pledged as Collateral/Obligation to Return Securities Obtained as Collateral | ' |
Securities Obtained and Pledged as Collateral/Obligation to Return Securities Obtained as Collateral | |
The Company has obtained securities as collateral under collateralized financing arrangements in connection with its financing strategy for Non-Agency MBS. Securities obtained as collateral in connection with these transactions are recorded on the Company’s consolidated balance sheets as an asset along with a liability representing the obligation to return the collateral obtained, at fair value. While beneficial ownership of securities obtained remains with the counterparty, the Company has the right to sell the collateral obtained or to pledge it as part of a subsequent collateralized financing transaction. (See Note 2(j) for Repurchase Agreements and Reverse Repurchase Agreements) | |
Residential Whole Loans | ' |
Residential Whole Loans | |
Residential whole loans included in the Company’s consolidated balance sheets are comprised of pools of fixed and adjustable rate residential mortgage loans acquired through a consolidated trust. The Company has elected to account for these loans as credit impaired as they were acquired at discounted prices that reflect, in part, the credit history of the borrower. In addition, many of the borrowers have previously experienced payment delinquencies and the amount owed on the mortgage loan may exceed the value of the property pledged as collateral. Consequently, the Company has assessed that these loans have a higher likelihood of default than newly originated mortgage loans with LTVs of 80% or less to credit worthy borrowers. The Company believes that amounts paid to acquire residential whole loans represent fair market value at the date of acquisition. Residential whole loans are initially recorded at fair value with no allowance for loan losses. Subsequent to acquisition, the recorded amount reflects the original investment amount, plus accretion of interest income, less principal and interest cash flows received and principal amounts forgiven or otherwise charged off as they are considered not recoverable. Residential whole loans are presented in Prepaid and other assets in the Company's consolidated balance sheets at carrying value, which reflects the recorded amount net of any allowance for loan losses established subsequent to acquisition. | |
The Company may aggregate into pools loans acquired in the same fiscal quarter that are assessed as having similar risk characteristics. For each pool established, or on an individual loans basis for loans not aggregated into pools, the Company estimates at acquisition and periodically on at least a quarterly basis, the principal and interest cash flows expected to be collected. The difference between the cash flows expected to be collected and the carrying amount of the loans is referred to as the “accretable yield”. This amount is accreted as interest income over the life of the loans using an effective interest rate (level yield) methodology. Interest income recorded each period reflects the amount of accretable yield recognized and not the coupon interest payments received on the underlying loans. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference,” includes estimates of both the impact of prepayments and expected credit losses over the life of the underlying loans. | |
A decrease in expected cash flows in subsequent periods may indicate impairment at the pool and/or individual loan level thus requiring the establishment of an allowance for loan losses by a charge to the provision for loan losses. The allowance for loan losses represents the present value of cash flows expected at acquisition that are no longer expected to be received at the relevant measurement date. An increase in expected cash flows in subsequent periods initially reduces any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield. The adjustment of accretable yield due to an increase in expected cash flows is accounted for prospectively as a change in estimate and results in reclassification from nonaccretable difference to accretable yield. (See Note 15) | |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents | |
Cash and cash equivalents include cash on deposit with financial institutions and investments in money market funds and U. S. Treasury Bills, all of which have original maturities of three months or less. Cash and cash equivalents may also include cash pledged as collateral to the Company by its repurchase agreement and/or Swap counterparties as a result of reverse margin calls (i.e., margin calls made by the Company). The Company did not hold any cash pledged by its counterparties at September 30, 2014 or December 31, 2013. The Company’s investments in overnight money market funds, which are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency were $314.9 million and $534.4 million at September 30, 2014 and December 31, 2013, respectively. (See Notes 7 and 14) | |
Restricted Cash | ' |
Restricted Cash | |
Restricted cash represents the Company’s cash held by its counterparties as collateral against the Company’s Swaps and/or repurchase agreements. Restricted cash, which earns interest, is not available to the Company for general corporate purposes, but may be applied against amounts due to counterparties to the Company’s repurchase agreements and/or Swaps, or returned to the Company when the collateral requirements are exceeded or at the maturity of the Swap or repurchase agreement. The Company had aggregate restricted cash held as collateral against its Swaps and repurchase agreements of $43.8 million at September 30, 2014 and $37.5 million held as collateral against its Swaps at December 31, 2013. (See Notes 5, 6, 7 and 14) | |
Goodwill | ' |
Goodwill | |
At September 30, 2014 and December 31, 2013, the Company had goodwill of $7.2 million, which represents the unamortized portion of the excess of the fair value of its common stock issued over the fair value of net assets acquired in connection with its formation in 1998. Goodwill is tested for impairment at least annually, or more frequently under certain circumstances, at the entity level. Through September 30, 2014, the Company had not recognized any impairment against its goodwill. | |
Depreciation | ' |
Depreciation | |
Leasehold Improvements and Other Depreciable Assets | |
Depreciation is computed on the straight-line method over the estimated useful life of the related assets or, in the case of leasehold improvements, over the shorter of the useful life or the lease term. Furniture, fixtures, computers and related hardware have estimated useful lives ranging from five to eight years at the time of purchase. | |
Resecuritization and Senior Notes Related Costs | ' |
Resecuritization and Senior Notes Related Costs | |
Resecuritization related costs are costs associated with the issuance of beneficial interests by consolidated VIEs and incurred by the Company in connection with various resecuritization transactions completed by the Company. Senior Notes related costs are costs incurred by the Company in connection with the issuance of its Senior Notes in April, 2012. These costs may include underwriting, rating agency, legal, accounting and other fees. Such costs, which reflect deferred charges, are included on the Company’s consolidated balance sheets in Prepaid and other assets. These deferred charges are amortized as an adjustment to interest expense using the effective interest method, based upon the actual repayments of the associated beneficial interests issued to third parties and over the stated legal maturity of the Senior Notes. The Company periodically reviews the recoverability of these deferred costs and in the event an impairment charge is required, such amount shall be included within Operating and other expense on the Company’s consolidated statement of operations. | |
Repurchase Agreements and Reverse Repurchase Agreements | ' |
Repurchase Agreements and Reverse Repurchase Agreements | |
The Company finances the acquisition of a significant portion of its MBS with repurchase agreements. Under repurchase agreements, the Company sells securities to a lender and agrees to repurchase the same securities in the future for a price that is higher than the original sale price. The difference between the sale price that the Company receives and the repurchase price that the Company pays represents interest paid to the lender. Although legally structured as sale and repurchase transactions, the Company accounts for repurchase agreements as secured borrowings, with the exception of certain repurchase agreements accounted for as components of Linked Transactions. (See Note 2(o) below.) Under its repurchase agreements, the Company pledges its securities as collateral to secure the borrowing, which is equal in value to a specified percentage of the fair value of the pledged collateral, while the Company retains beneficial ownership of the pledged collateral. At the maturity of a repurchase financing, unless the repurchase financing is renewed with the same counterparty, the Company is required to repay the loan including any accrued interest and concurrently receives back its pledged collateral from the lender. With the consent of the lender, the Company may renew a repurchase financing at the then prevailing financing terms. Margin calls, whereby a lender requires that the Company pledge additional securities or cash as collateral to secure borrowings under its repurchase financing with such lender, are routinely experienced by the Company when the value of the MBS pledged as collateral declines as a result of principal amortization and prepayments or due to changes in market interest rates, spreads or other market conditions. The Company also may make margin calls on counterparties when collateral values increase. | |
The Company’s repurchase financings typically have terms ranging from one month to six months at inception, but may also have longer or shorter terms. Should a counterparty decide not to renew a repurchase financing at maturity, the Company must either refinance elsewhere or be in a position to satisfy the obligation. If, during the term of a repurchase financing, a lender should default on its obligation, the Company might experience difficulty recovering its pledged assets which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged by the Company to such lender, including accrued interest receivable or such collateral. (See Notes 2(o), 5, 6, 7 and 14) | |
In addition to the repurchase agreement financing arrangements discussed above, as part of its financing strategy for Non-Agency MBS, the Company has entered into contemporaneous repurchase and reverse repurchase agreements with a single counterparty. Under a typical reverse repurchase agreement, the Company buys securities from a borrower for cash and agrees to sell the same securities in the future for a price that is higher than the original purchase price. The difference between the purchase price the Company originally paid and the sale price represents interest received from the borrower. In contrast, the contemporaneous repurchase and reverse repurchase transactions effectively resulted in the Company pledging Non-Agency MBS as collateral to the counterparty in connection with the repurchase agreement financing and obtaining U.S. Treasury securities as collateral from the same counterparty in connection with the reverse repurchase agreement. No net cash was exchanged between the Company and counterparty at the inception of the transactions. Securities obtained and pledged as collateral are recorded as an asset on the Company’s consolidated balance sheets. Interest income is recorded on the reverse repurchase agreement and interest expense is recorded on the repurchase agreement on an accrual basis. Both the Company and the counterparty have the right to make daily margin calls based on changes in the value of the collateral obtained and/or pledged. The Company’s liability to the counterparty in connection with this financing arrangement is recorded on the Company’s consolidated balance sheets and disclosed as “Obligation to return securities obtained as collateral.” (See Note 2(c)) | |
Equity-Based Compensation | ' |
Equity-Based Compensation | |
Compensation expense for equity based awards is recognized ratably over the vesting period of such awards, based upon the fair value of such awards at the grant date. With respect to awards granted in 2009 and prior years, the Company has applied a zero forfeiture rate for these awards, as they were granted to a limited number of employees, and historical forfeitures have been minimal. Forfeitures, or an indication that forfeitures are expected to occur, may result in a revised forfeiture rate and would be accounted for prospectively as a change in estimate. | |
During 2010, the Company granted certain restricted stock units (“RSUs”) that vest after either two or four years of service and provided that certain criteria are met, which are based on a formula that includes changes in the Company’s closing stock price over a two- or four-year period and dividends declared on the Company’s common stock during those periods. From 2011 through 2013, the Company granted certain RSUs that vest annually over a one or three-year period, provided that certain criteria are met, which are based on a formula that includes changes in the Company’s closing stock price over the annual vesting period and dividends declared on the Company’s common stock during those periods. During 2014, the Company made grants of RSUs certain of which generally cliff vest after a three-year period and certain of which generally cliff vest after a three-year period subject to the achievement of a market-based condition that is based on a formula tied to the Company’s achievement of average total stockholder return during the three-year period. Such criteria constitute a “market condition” which impacts the amount of compensation expense recognized for these awards. Specifically, the uncertainty regarding whether the market condition will be achieved is reflected in the grant date fair valuation of the RSUs, which in addition to estimates regarding the amount of RSUs expected to be forfeited during the associated service period, determines the amount of compensation expense that is recognized. Compensation expense is not reversed should the market condition not be achieved, while differences in actual forfeiture experience relative to estimated forfeitures will result in adjustments to the timing and amount of compensation expense recognized. | |
The Company has awarded DERs that may be attached to or awarded separately from other equity based awards. Compensation expense for separately awarded DERs is based on the grant date fair value of such awards and is recognized over the vesting period. Payments pursuant to these DERs are charged to stockholders’ equity. Payments pursuant to DERs that are attached to equity based awards are charged to stockholders’ equity to the extent that the attached equity awards are expected to vest. Compensation expense is recognized for payments made for DERs to the extent that the attached equity awards do not or are not expected to vest and grantees are not required to return payments of dividends or DERs to the Company. (See Notes 2(l) and 13) | |
Earnings per Common Share ("EPS") | ' |
Earnings per Common Share (“EPS”) | |
Basic EPS is computed using the two-class method, which includes the weighted-average number of shares of common stock outstanding during the period and other securities that participate in dividends, such as the Company’s unvested restricted stock and RSUs that have non-forfeitable rights to dividends and DERs attached to/associated with RSUs and vested stock options to arrive at total common equivalent shares. In applying the two-class method, earnings are allocated to both shares of common stock and securities that participate in dividends based on their respective weighted-average shares outstanding for the period. For the diluted EPS calculation, common equivalent shares are further adjusted for the effect of dilutive unexercised stock options and RSUs outstanding that are unvested and have dividends that are subject to forfeiture using the treasury stock method. Under the treasury stock method, common equivalent shares are calculated assuming that all dilutive common stock equivalents are exercised and the proceeds, along with future compensation expenses associated with such instruments, are used to repurchase shares of the Company’s outstanding common stock at the average market price during the reported period. (See Note 12) | |
Comprehensive Income/(Loss) | ' |
Comprehensive Income/(Loss) | |
The Company’s comprehensive income/(loss) available to common stock and participating securities includes net income, the change in net unrealized gains/(losses) on its MBS and derivative hedging instruments, (to the extent that such changes are not recorded in earnings), adjusted by realized net gains/(losses) reclassified out of AOCI for MBS and de-designated derivative hedging instruments and is reduced by dividends declared on the Company’s preferred stock and issuance costs of redeemed preferred stock. | |
U.S. Federal Income Taxes | ' |
U.S. Federal Income Taxes | |
The Company has elected to be taxed as a REIT under the provisions of the Internal Revenue Code of 1986, as amended, (the “Code”) and the corresponding provisions of state law. The Company expects to operate in a manner that will enable it to satisfy the various requirements to maintain its status as a REIT. In order to maintain its status a REIT, the Company must, among other things, distribute at least 90% of its REIT taxable income (excluding net long-term capital gains) to stockholders in the timeframe permitted by the Code. As long as the Company maintains its status as a REIT, the Company will not be subject to regular Federal income tax to the extent that it distributes 100% of its REIT taxable income (including net long-term capital gains) to its stockholders within the permitted timeframe. Should this not occur, the Company would be subject to federal taxes at prevailing corporate tax rates on the difference between its REIT taxable income and the amounts deemed to be distributed for that tax year. As the Company’s objective is to distribute 100% of its REIT taxable income to its stockholders within the permitted timeframe, no provision for current or deferred income taxes has been made in the accompanying consolidated financial statements. Should the Company incur a liability for corporate income tax, such amounts would be recorded as REIT income tax expense on the Company’s consolidated statements of operations. Furthermore, if the Company fails to distribute during each calendar year, or by the end of January following the calendar year in the case of distributions with declaration and record dates falling in the last three months of the calendar year, at least the sum of (i) 85% its REIT ordinary income for such year; (ii) 95% of its REIT capital gain income for such year and; (iii) any undistributed taxable income from prior periods, the Company will be subject to a 4% nondeductible excise tax on the excess of such required distribution over the amounts actually distributed. To the extent that the Company incurs interest, penalties or related excise taxes in connection with its tax obligations, including as a result of its assessment of uncertain tax positions, such amounts shall be included within Operating and other expense on the Company’s consolidated statements of operations. | |
Based on its analysis of any potential uncertain tax positions, the Company concluded that it does not have any material uncertain tax positions that meet the relevant recognition or measurement criteria as of September 30, 2014, December 31, 2013, or September 30, 2013. The Company filed its 2013 tax return prior to September 15, 2014. The Company’s tax returns for tax years 2009 through 2013 are open to examination. | |
Derivative Financial Instruments | ' |
Derivative Financial Instruments | |
The Company uses a variety of derivative instruments to economically hedge a portion of its exposure to market risks, including interest rate risk, prepayment risk and extension risk. The objective of the Company’s risk management strategy is to reduce fluctuations in net book value over a range of interest rate scenarios. In particular, the Company attempts to mitigate the risk of the cost of its variable rate liabilities increasing during a period of rising interest rates. The Company’s derivative instruments are primarily comprised of Swaps, the majority of which are designated as cash flow hedges against the interest rate risk associated with its borrowings. During 2013, the Company also entered into forward contracts for the sale of Agency MBS securities on a generic pool, or to-be-announced basis (“TBA short positions”) and Linked Transactions. TBA short positions and Linked Transactions are not designated as hedging instruments. | |
Linked Transactions | |
It is presumed that the initial transfer of a financial asset (i.e., the purchase of an MBS by the Company) and contemporaneous repurchase financing of such MBS with the same counterparty are considered part of the same arrangement, or a “linked transaction,” unless certain criteria are met. The two components of a linked transaction (MBS purchase and repurchase financing) are not reported separately but are evaluated on a combined basis and reported as a forward (derivative) contract and are presented as “Linked Transactions” on the Company’s consolidated balance sheets. Changes in the fair value of the assets and liabilities underlying Linked Transactions and associated interest income and expense are reported as “unrealized net gains/(losses) and net interest income from Linked Transactions” on the Company’s consolidated statements of operations and are not included in OCI. However, if certain criteria are met, the initial transfer (i.e., the purchase of a security by the Company) and repurchase financing will not be treated as a Linked Transaction and will be evaluated and reported separately, as an MBS purchase and repurchase financing. When or if a transaction is no longer considered to be linked, the MBS and repurchase financing will be reported on a gross basis. In this case, the fair value of the MBS at the time the transactions are no longer considered linked will become the cost basis of the MBS, and the income recognition yield for such MBS will be calculated prospectively using this new cost basis. (See Notes 5 and 14) | |
Swaps | |
The Company documents its risk-management policies, including objectives and strategies, as they relate to its hedging activities and the relationship between the hedging instrument and the hedged liability for all Swaps designated as hedging transactions. The Company assesses, both at inception of a hedge and on a quarterly basis thereafter, whether or not the hedge is “highly effective.” | |
Swaps are carried on the Company’s balance sheets at fair value, as assets, if their fair value is positive, or as liabilities, if their fair value is negative. Changes in the fair value of the Company’s Swaps designated in hedging transactions are recorded in OCI provided that the hedge remains effective. Changes in fair value for any ineffective amount of a Swap are recognized in earnings. The Company has not recognized any change in the value of its existing Swaps designated as hedges through earnings as a result of hedge ineffectiveness. | |
The Company discontinues hedge accounting on a prospective basis and recognizes changes in the fair value through earnings when: (i) it is determined that the derivative is no longer effective in offsetting cash flows of a hedged item (including forecasted transactions); (ii) it is no longer probable that the forecasted transaction will occur; or (iii) it is determined that designating the derivative as a hedge is no longer appropriate. | |
Although permitted under certain circumstances, the Company does not offset cash collateral receivables or payables against its net derivative positions. (See Notes 5, 7 and 14) | |
TBA Short Positions | |
During 2013, the Company entered into TBA short positions as a means of managing interest rate risk and MBS basis risk associated with its investment and financing activities. A TBA short position is a forward contract for the sale of Agency MBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency MBS that could be delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association (“SIFMA”), are not known at the time of the transaction. | |
The Company accounts for TBA short positions as derivative instruments since it cannot assert that it is probable at inception and throughout the term of the TBA contract that it will physically deliver the agency security upon settlement of the contract. The Company presents TBA short positions as either derivative assets or liabilities, at fair value on its consolidated balance sheets. Gains and losses associated with TBA short positions are reported in Other income on the Company’s consolidated statements of operations. | |
The Company did not have any TBA short positions at September 30, 2014 and December 31, 2013. | |
Fair Value Measurements and the Fair Value Option for Financial Assets and Financial Liabilities | ' |
Fair Value Measurements and the Fair Value Option for Financial Assets and Financial Liabilities | |
The Company’s presentation of fair value for its financial assets and liabilities is determined within a framework that stipulates that the fair value of a financial asset or liability is an exchange price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. This definition of fair value focuses on exit price and prioritizes the use of market-based inputs over entity-specific inputs when determining fair value. In addition, the framework for measuring fair value establishes a three-level hierarchy for fair value measurements based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. (See Note 14) | |
Although permitted under GAAP to measure many financial instruments and certain other items at fair value, the Company has not elected the fair value option for any of its assets or liabilities. If the fair value option is elected, unrealized gains and losses on such items for which fair value is elected would be recognized in earnings at each subsequent reporting date. A decision to elect the fair value option for an eligible financial instrument, which may be made on an instrument by instrument basis, is irrevocable. | |
Variable Interest Entities and Other Consolidated Special Purpose Entities | ' |
Variable Interest Entities and Other Consolidated Special Purpose Entities | |
An entity is referred to as a VIE if it meets at least one of the following criteria: (i) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support of other parties; or (ii) as a group, the holders of the equity investment at risk lack (a) the power to direct the activities of an entity that most significantly impact the entity’s economic performance; (b) the obligation to absorb the expected losses; or (c) the right to receive the expected residual returns; or (iii) have disproportional voting rights and the entity’s activities are conducted on behalf of the investor that has disproportionally few voting rights. | |
The Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE. | |
The Company has entered into resecuritization transactions which result in the Company consolidating the VIEs that were created to facilitate the transactions and to which the underlying assets in connection with the resecuritizations were transferred. In determining the accounting treatment to be applied to these resecuritization transactions, the Company evaluated whether the entities used to facilitate these transactions were VIEs and, if so, whether they should be consolidated. Based on its evaluation, the Company concluded that the VIEs should be consolidated. If the Company had determined that consolidation was not required, it would have then assessed whether the transfer of the underlying assets would qualify as a sale or should be accounted for as secured financings under GAAP. | |
Prior to the completion of its initial resecuritization transaction in October 2010, the Company had not transferred assets to VIEs or Qualifying Special Purpose Entities (“QSPEs”) and other than acquiring MBS issued by such entities, had no other involvement with VIEs or QSPEs. (See Note 15) | |
The Company also includes in its consolidated balance sheets certain financial assets and liabilities that are acquired/issued by trusts and/or other special purpose entities that have been evaluated as being required to be consolidated by the Company under the applicable accounting guidance. | |
Offering Costs Related to Issuance and Redemption of Preferred Stock | ' |
Offering Costs Related to Issuance and Redemption of Preferred Stock | |
Offering costs related to issuance of preferred stock are recorded as a reduction in Additional paid-in capital, a component of stockholders’ equity, at the time such preferred stock is issued. On redemption of preferred stock, any excess of the fair value of the consideration transferred to the holders of the preferred stock over the carrying amount of the preferred stock in the Company’s consolidated balance sheets is included in the determination of Net Income Available to Common Stock and Participating Securities in the calculation of EPS. (See Notes 11 and 12) | |
New Accounting Standards and Interpretations | ' |
New Accounting Standards and Interpretations | |
Accounting Standards Adopted in 2014 | |
Financial Services - Investment Companies | |
In June 2013, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-08, Financial Services - Investment Companies: Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”). In general, the amendments of this ASU: (i) revise the definition of an investment company; (ii) require an investment company to measure non-controlling ownership interests in other investment companies at fair value rather than using the equity method of accounting; and (iii) require information to be disclosed concerning the status of the entity and any financial support provided, or contractually required to be provided, by the investment company to its investees. The Company’s adoption of ASU 2013-08 beginning on January 1, 2014 did not have a material impact on the Company’s consolidated financial statements as the FASB has decided to retain the current U.S. GAAP scope exception from investment company accounting and financial reporting for real estate investment trusts. |
MBS_Tables
MBS (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | ||||||||||||||||||||||||||||||||||||
Schedule of information about MBS | ' | ||||||||||||||||||||||||||||||||||||
The following tables present certain information about the Company’s MBS at September 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||||||||||||||||||
Principal/ | Purchase Premiums | Accretable | Discount | Amortized | Fair Value | Gross | Gross | Net | |||||||||||||||||||||||||||||
Current Face | Purchase Discounts | Designated | Cost (2) | Unrealized Gains | Unrealized Losses | Unrealized Gain/(Loss) | |||||||||||||||||||||||||||||||
as Credit | |||||||||||||||||||||||||||||||||||||
(In Thousands) | Reserve and OTTI (1) | ||||||||||||||||||||||||||||||||||||
Agency MBS: | |||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 4,825,285 | $ | 183,663 | $ | (73 | ) | $ | — | $ | 5,008,875 | $ | 5,079,098 | $ | 102,619 | $ | (32,396 | ) | $ | 70,223 | |||||||||||||||||
Freddie Mac | 1,050,873 | 40,421 | — | — | 1,093,168 | 1,083,010 | 11,130 | (21,288 | ) | (10,158 | ) | ||||||||||||||||||||||||||
Ginnie Mae | 11,559 | 199 | — | — | 11,758 | 12,068 | 310 | — | 310 | ||||||||||||||||||||||||||||
Total Agency MBS | 5,887,717 | 224,283 | (73 | ) | — | 6,113,801 | 6,174,176 | 114,059 | (53,684 | ) | 60,375 | ||||||||||||||||||||||||||
Non-Agency MBS: | |||||||||||||||||||||||||||||||||||||
Expected to Recover Par (3)(4) | 315,003 | 624 | (31,304 | ) | — | 284,323 | 311,950 | 29,035 | (1,408 | ) | 27,627 | ||||||||||||||||||||||||||
Expected to Recover | 5,014,820 | — | (395,047 | ) | (929,100 | ) | 3,690,673 | 4,451,376 | 762,425 | (1,722 | ) | 760,703 | |||||||||||||||||||||||||
Less Than Par (3)(5) | |||||||||||||||||||||||||||||||||||||
Total Non-Agency MBS | 5,329,823 | 624 | (426,351 | ) | (929,100 | ) | 3,974,996 | 4,763,326 | 791,460 | (3,130 | ) | 788,330 | |||||||||||||||||||||||||
Total MBS | $ | 11,217,540 | $ | 224,907 | $ | (426,424 | ) | $ | (929,100 | ) | $ | 10,088,797 | $ | 10,937,502 | $ | 905,519 | $ | (56,814 | ) | $ | 848,705 | ||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||||||||||||||
Principal/ | Purchase Premiums | Accretable | Discount | Amortized | Fair Value | Gross | Gross | Net | |||||||||||||||||||||||||||||
Current Face | Purchase Discounts | Designated | Cost (2) | Unrealized Gains | Unrealized Losses | Unrealized Gain/(Loss) | |||||||||||||||||||||||||||||||
as Credit | |||||||||||||||||||||||||||||||||||||
(In Thousands) | Reserve and OTTI (1) | ||||||||||||||||||||||||||||||||||||
Agency MBS: | |||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 5,092,410 | $ | 181,710 | $ | (87 | ) | $ | — | $ | 5,274,033 | $ | 5,315,363 | $ | 96,516 | $ | (55,186 | ) | $ | 41,330 | |||||||||||||||||
Freddie Mac | 1,171,841 | 44,967 | — | — | 1,217,927 | 1,190,670 | 9,842 | (37,099 | ) | (27,257 | ) | ||||||||||||||||||||||||||
Ginnie Mae | 12,668 | 218 | — | — | 12,886 | 13,188 | 302 | — | 302 | ||||||||||||||||||||||||||||
Total Agency MBS | 6,276,919 | 226,895 | (87 | ) | — | 6,504,846 | 6,519,221 | 106,660 | (92,285 | ) | 14,375 | ||||||||||||||||||||||||||
Non-Agency MBS: | |||||||||||||||||||||||||||||||||||||
Expected to Recover Par (3)(4) | 234,187 | 638 | (24,450 | ) | — | 210,375 | 230,738 | 21,720 | (1,357 | ) | 20,363 | ||||||||||||||||||||||||||
Expected to Recover | 5,381,851 | — | (435,589 | ) | (1,043,037 | ) | 3,903,225 | 4,621,399 | 720,566 | (2,392 | ) | 718,174 | |||||||||||||||||||||||||
Less Than Par (3)(5) | |||||||||||||||||||||||||||||||||||||
Total Non-Agency MBS | 5,616,038 | 638 | (460,039 | ) | (1,043,037 | ) | 4,113,600 | 4,852,137 | 742,286 | (3,749 | ) | 738,537 | |||||||||||||||||||||||||
Total MBS | $ | 11,892,957 | $ | 227,533 | $ | (460,126 | ) | $ | (1,043,037 | ) | $ | 10,618,446 | $ | 11,371,358 | $ | 848,946 | $ | (96,034 | ) | $ | 752,912 | ||||||||||||||||
-1 | Discount designated as Credit Reserve and amounts related to OTTI are generally not expected to be accreted into interest income. Amounts disclosed at September 30, 2014 reflect Credit Reserve of $897.7 million and OTTI of $31.4 million. Amounts disclosed at December 31, 2013 reflect Credit Reserve of $998.5 million and OTTI of $44.5 million. | ||||||||||||||||||||||||||||||||||||
-2 | Includes principal payments receivable of $1.9 million and $1.1 million at September 30, 2014 and December 31, 2013, respectively, which are not included in the Principal/Current Face. | ||||||||||||||||||||||||||||||||||||
-3 | Based on management’s current estimates of future principal cash flows expected to be received. | ||||||||||||||||||||||||||||||||||||
-4 | Includes RPL/NPL MBS which had a $26.5 million Principal/Current face, $26.7 million amortized cost and $26.6 million fair value at September 30, 2014. At December 31, 2013, RPL/NPL MBS had a $3.9 million Principal/Current face, amortized cost and fair value. | ||||||||||||||||||||||||||||||||||||
-5 | At September 30, 2014 and December 31, 2013, the Company expected to recover approximately 83% and 81%, respectively, of the then-current face amount of Non-Agency MBS. | ||||||||||||||||||||||||||||||||||||
Schedule of information about MBS that were in an unrealized loss position | ' | ||||||||||||||||||||||||||||||||||||
The following table presents information about the Company’s MBS that were in an unrealized loss position at September 30, 2014: | |||||||||||||||||||||||||||||||||||||
Unrealized Loss Position For: | |||||||||||||||||||||||||||||||||||||
Less than 12 Months | 12 Months or more | Total | |||||||||||||||||||||||||||||||||||
Fair Value | Unrealized Losses | Number of Securities | Fair Value | Unrealized Losses | Number of Securities | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
(Dollars in Thousands) | |||||||||||||||||||||||||||||||||||||
Agency MBS: | |||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 451,536 | $ | 1,639 | 46 | $ | 1,316,459 | $ | 30,757 | 143 | $ | 1,767,995 | $ | 32,396 | |||||||||||||||||||||||
Freddie Mac | 28,903 | 184 | 3 | 702,935 | 21,104 | 103 | 731,838 | 21,288 | |||||||||||||||||||||||||||||
Total Agency MBS | 480,439 | 1,823 | 49 | 2,019,394 | 51,861 | 246 | 2,499,833 | 53,684 | |||||||||||||||||||||||||||||
Non-Agency MBS: | |||||||||||||||||||||||||||||||||||||
Expected to Recover Par (1) | 29,826 | 333 | 3 | 22,309 | 1,075 | 8 | 52,135 | 1,408 | |||||||||||||||||||||||||||||
Expected to Recover Less Than Par (1) | 66,674 | 654 | 9 | 20,041 | 1,068 | 7 | 86,715 | 1,722 | |||||||||||||||||||||||||||||
Total Non-Agency MBS | 96,500 | 987 | 12 | 42,350 | 2,143 | 15 | 138,850 | 3,130 | |||||||||||||||||||||||||||||
Total MBS | $ | 576,939 | $ | 2,810 | 61 | $ | 2,061,744 | $ | 54,004 | 261 | $ | 2,638,683 | $ | 56,814 | |||||||||||||||||||||||
(1) Based on management’s current estimates of future principal cash flows expected to be received. | |||||||||||||||||||||||||||||||||||||
Schedule of changes in credit loss component of OTTI | ' | ||||||||||||||||||||||||||||||||||||
The following table presents a roll-forward of the credit loss component of OTTI on the Company’s Non-Agency MBS for which a non-credit component of OTTI was previously recognized in OCI. Changes in the credit loss component of OTTI are presented based upon whether the current period is the first time OTTI was recorded on a security or a subsequent OTTI charge was recorded. | |||||||||||||||||||||||||||||||||||||
(In Thousands) | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
September 30, 2014 | September 30, 2014 | ||||||||||||||||||||||||||||||||||||
Credit loss component of OTTI at beginning of period | $ | 36,115 | $ | 36,115 | |||||||||||||||||||||||||||||||||
Additions for credit related OTTI not previously recognized | — | — | |||||||||||||||||||||||||||||||||||
Subsequent additional credit related OTTI recorded | — | — | |||||||||||||||||||||||||||||||||||
Credit loss component of OTTI at end of period | $ | 36,115 | $ | 36,115 | |||||||||||||||||||||||||||||||||
Schedule of changes in the components of the purchase discount on Non-Agency MBS | ' | ||||||||||||||||||||||||||||||||||||
The following tables present the changes in the components of the Company’s purchase discount on its Non-Agency MBS between purchase discount designated as Credit Reserve and OTTI and accretable purchase discount for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||||||||
September 30, 2014 | September 30, 2013 | ||||||||||||||||||||||||||||||||||||
Discount | Accretable | Discount | Accretable Discount (1)(2) | ||||||||||||||||||||||||||||||||||
Designated as | Discount (1)(2) | Designated as | |||||||||||||||||||||||||||||||||||
(In Thousands) | Credit Reserve and OTTI (1) | Credit Reserve and OTTI (1) | |||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | (986,842 | ) | $ | (436,111 | ) | $ | (1,264,971 | ) | $ | (396,581 | ) | |||||||||||||||||||||||||
Accretion of discount | — | 25,504 | — | 19,556 | |||||||||||||||||||||||||||||||||
Realized credit losses | 20,733 | — | 48,642 | — | |||||||||||||||||||||||||||||||||
Purchases | (4,200 | ) | 272 | (851 | ) | 879 | |||||||||||||||||||||||||||||||
Sales | 21,024 | 4,169 | 27,178 | 4,248 | |||||||||||||||||||||||||||||||||
Transfers/release of credit reserve | 20,185 | (20,185 | ) | 71,010 | (71,010 | ) | |||||||||||||||||||||||||||||||
Balance at end of period | $ | (929,100 | ) | $ | (426,351 | ) | $ | (1,118,992 | ) | $ | (442,908 | ) | |||||||||||||||||||||||||
Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||
September 30, 2014 | September 30, 2013 | ||||||||||||||||||||||||||||||||||||
Discount | Accretable | Discount | Accretable Discount (2)(3) | ||||||||||||||||||||||||||||||||||
Designated as | Discount (2)(3) | Designated as | |||||||||||||||||||||||||||||||||||
(In Thousands) | Credit Reserve and OTTI (3) | Credit Reserve and OTTI (3) | |||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | (1,043,037 | ) | $ | (460,039 | ) | $ | (1,380,506 | ) | $ | (371,626 | ) | |||||||||||||||||||||||||
Accretion of discount | — | 78,701 | — | 48,305 | |||||||||||||||||||||||||||||||||
Realized credit losses | 69,129 | — | 137,324 | — | |||||||||||||||||||||||||||||||||
Purchases | (70,535 | ) | 25,314 | (74,238 | ) | 30,533 | |||||||||||||||||||||||||||||||
Sales | 34,780 | 10,236 | 38,150 | 10,158 | |||||||||||||||||||||||||||||||||
Transfers/release of credit reserve | 80,563 | (80,563 | ) | 160,278 | (160,278 | ) | |||||||||||||||||||||||||||||||
Balance at end of period | $ | (929,100 | ) | $ | (426,351 | ) | $ | (1,118,992 | ) | $ | (442,908 | ) | |||||||||||||||||||||||||
-1 | The Company reallocated $333,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions during the three months ended September 30, 2014. The Company did not reallocate any purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the three months ended September 30, 2013. | ||||||||||||||||||||||||||||||||||||
-2 | Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security. | ||||||||||||||||||||||||||||||||||||
-3 | During the nine months ended September 30, 2014, the Company reallocated $218,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions. In addition, the Company reallocated $129,000 of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the nine months ended September 30, 2013. | ||||||||||||||||||||||||||||||||||||
Schedule of impact of MBS on AOCI | ' | ||||||||||||||||||||||||||||||||||||
The following table presents the impact of the Company’s MBS on its AOCI for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||
AOCI from MBS: | |||||||||||||||||||||||||||||||||||||
Unrealized gain on MBS at beginning of period | $ | 905,704 | $ | 700,871 | $ | 752,912 | $ | 824,808 | |||||||||||||||||||||||||||||
Unrealized (loss)/gain on Agency MBS, net | (14,937 | ) | 15,469 | 46,000 | (152,302 | ) | |||||||||||||||||||||||||||||||
Unrealized (loss)/gain on Non-Agency MBS, net | (28,473 | ) | 16,381 | 70,973 | 62,455 | ||||||||||||||||||||||||||||||||
Reclassification adjustment for MBS sales included in net income | (13,589 | ) | (15,158 | ) | (21,180 | ) | (17,398 | ) | |||||||||||||||||||||||||||||
Change in AOCI from MBS | (56,999 | ) | 16,692 | $ | 95,793 | $ | (107,245 | ) | |||||||||||||||||||||||||||||
Balance at end of period | $ | 848,705 | $ | 717,563 | $ | 848,705 | $ | 717,563 | |||||||||||||||||||||||||||||
Schedule of components of interest income on the entity's Agency MBS | ' | ||||||||||||||||||||||||||||||||||||
The following table presents the components of interest income on the Company’s Agency MBS for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||
Coupon interest | $ | 46,529 | $ | 51,997 | $ | 145,864 | $ | 163,986 | |||||||||||||||||||||||||||||
Effective yield adjustment (1) | (13,463 | ) | (15,839 | ) | (35,860 | ) | (47,004 | ) | |||||||||||||||||||||||||||||
Agency MBS interest income | $ | 33,066 | $ | 36,158 | $ | 110,004 | $ | 116,982 | |||||||||||||||||||||||||||||
(1) Includes amortization of premium paid net of accretion of purchase discount. For Agency MBS, interest income is recorded at an effective yield, which reflects net premium amortization based on actual prepayment activity. | |||||||||||||||||||||||||||||||||||||
Schedule of components of interest income on the entity's Non-Agency MBS | ' | ||||||||||||||||||||||||||||||||||||
The following table presents components of interest income for the Company’s Non-Agency MBS (including MBS transferred to consolidated VIEs) for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||
Coupon interest | $ | 52,396 | $ | 62,802 | $ | 162,148 | $ | 196,688 | |||||||||||||||||||||||||||||
Effective yield adjustment (1) | 25,478 | 19,501 | 78,561 | 48,128 | |||||||||||||||||||||||||||||||||
Non-Agency MBS interest income | $ | 77,874 | $ | 82,303 | $ | 240,709 | $ | 244,816 | |||||||||||||||||||||||||||||
(1) The effective yield adjustment is the difference between the net income calculated using the net yield, which is based on management’s estimates of future cash flows for Non-Agency MBS, less the current coupon yield. |
Interest_Receivable_Tables
Interest Receivable (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Receivables [Abstract] | ' | ||||||||
Schedule of company's interest receivable by investment category | ' | ||||||||
The following table presents the Company’s interest receivable by investment category at September 30, 2014 and December 31, 2013: | |||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
(In Thousands) | |||||||||
MBS interest receivable: | |||||||||
Fannie Mae | $ | 12,599 | $ | 13,760 | |||||
Freddie Mac | 2,728 | 3,110 | |||||||
Ginnie Mae | 18 | 19 | |||||||
Non-Agency MBS | 17,127 | 18,917 | |||||||
Total MBS interest receivable | 32,472 | 35,806 | |||||||
Money market and other investments | 27 | 22 | |||||||
Total interest receivable | $ | 32,499 | $ | 35,828 | |||||
Derivative_Instruments_Tables
Derivative Instruments (Tables) | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | |||||||||||||||||||||||||
Schedule of derivative instruments and balance sheet location | ' | |||||||||||||||||||||||||
The following table presents the fair value of the Company’s derivative instruments and their balance sheet location at September 30, 2014 and December 31, 2013: | ||||||||||||||||||||||||||
September 30, | September 30, | December 31, | ||||||||||||||||||||||||
2014 | 2014 | 2013 | ||||||||||||||||||||||||
Derivative Instrument | Designation | Balance Sheet Location | Notional Amount | Fair Value | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||
Linked Transactions | Non-Hedging | Assets | N/A | $ | 190,681 | $ | 28,181 | |||||||||||||||||||
Non-cleared legacy Swaps (1) | Hedging | Assets | $ | 450,000 | $ | 4,322 | $ | 4,925 | ||||||||||||||||||
Cleared Swaps (2) | Hedging | Assets | $ | — | $ | — | $ | 8,075 | ||||||||||||||||||
Non-cleared legacy Swaps (1) | Hedging | Liabilities | $ | 880,892 | $ | (8,187 | ) | $ | (24,437 | ) | ||||||||||||||||
Cleared Swaps (2) | Hedging | Liabilities | $ | 2,550,000 | $ | (27,306 | ) | $ | (3,780 | ) | ||||||||||||||||
(1) Non-cleared legacy Swaps include Swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. | ||||||||||||||||||||||||||
(2) Cleared Swaps include Swaps executed bilaterally with a counterparty in the over-the-counter market but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties. | ||||||||||||||||||||||||||
Schedule of information about the Non-Agency MBS and repurchase agreements underlying the Linked Transactions | ' | |||||||||||||||||||||||||
The following tables present certain information about the Legacy Non-Agency MBS and RPL/NPL MBS and repurchase agreements underlying the Company’s Linked Transactions at September 30, 2014 and December 31, 2013: | ||||||||||||||||||||||||||
Linked Transactions at September 30, 2014 | ||||||||||||||||||||||||||
Linked Repurchase Agreements | Linked MBS | |||||||||||||||||||||||||
Balance | Weighted Average Interest Rate | Fair Value | Amortized Cost | Par/Current Face | Weighted Average Coupon Rate | |||||||||||||||||||||
Maturity or Repricing | ||||||||||||||||||||||||||
(Dollars in Thousands) | (Dollars in Thousands) | |||||||||||||||||||||||||
Within 30 days | $ | 786,207 | 1.48 | % | Legacy Non-Agency MBS | $ | 65,656 | $ | 60,588 | $ | 71,982 | 4.38 | % | |||||||||||||
>30 days to 90 days | 5,600 | 1.35 | RPL/NPL MBS | 916,652 | 915,839 | 917,332 | 3.36 | % | ||||||||||||||||||
Total | $ | 791,807 | 1.48 | % | Total | $ | 982,308 | $ | 976,427 | $ | 989,314 | 3.44 | % | |||||||||||||
Linked Transactions at December 31, 2013 | ||||||||||||||||||||||||||
Linked Repurchase Agreements | Linked MBS | |||||||||||||||||||||||||
Balance | Weighted Average Interest Rate | Fair Value | Amortized Cost | Par/Current Face | Weighted Average Coupon Rate | |||||||||||||||||||||
Maturity or Repricing | ||||||||||||||||||||||||||
(Dollars in Thousands) | (Dollars in Thousands) | |||||||||||||||||||||||||
Within 30 days | $ | 93,835 | 1.76 | % | Legacy Non-Agency MBS | $ | 39,280 | $ | 35,028 | $ | 42,199 | 3.92 | % | |||||||||||||
>30 days to 90 days | 8,902 | 1.44 | RPL/NPL MBS | 91,510 | 91,469 | 92,231 | 3.97 | % | ||||||||||||||||||
Total | $ | 102,737 | 1.73 | % | Total | $ | 130,790 | $ | 126,497 | $ | 134,430 | 3.96 | % | |||||||||||||
Schedule of information about the components of the unrealized net gains/(losses) and net interest income from Linked Transactions | ' | |||||||||||||||||||||||||
The following table presents certain information about the components of the unrealized net gains and net interest income from Linked Transactions included in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013: | ||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Interest income attributable to MBS underlying Linked Transactions | $ | 6,625 | $ | 1,109 | $ | 11,591 | $ | 2,431 | ||||||||||||||||||
Interest expense attributable to linked repurchase agreement borrowings underlying Linked Transactions | (2,246 | ) | (275 | ) | (3,719 | ) | (552 | ) | ||||||||||||||||||
Change in fair value of Linked Transactions included in earnings | (1,820 | ) | (290 | ) | 1,714 | (94 | ) | |||||||||||||||||||
Unrealized net gains and net interest income from Linked Transactions | $ | 2,559 | $ | 544 | $ | 9,586 | $ | 1,785 | ||||||||||||||||||
Schedule of assets pledged as collateral against derivative contracts | ' | |||||||||||||||||||||||||
The following table presents the assets pledged as collateral against the Company’s Swap contracts at September 30, 2014 and December 31, 2013: | ||||||||||||||||||||||||||
(In Thousands) | 30-Sep-14 | 31-Dec-13 | ||||||||||||||||||||||||
Agency MBS, at fair value | $ | 67,431 | $ | 73,859 | ||||||||||||||||||||||
Restricted cash | 35,351 | 37,520 | ||||||||||||||||||||||||
Total assets pledged against Swaps | $ | 102,782 | $ | 111,379 | ||||||||||||||||||||||
Schedule of information about Swap activity | ' | |||||||||||||||||||||||||
The following table presents certain information with respect to the Company’s Swap activity during the three and nine months ended September 30, 2014: | ||||||||||||||||||||||||||
(Dollars in Thousands) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2014 | September 30, 2014 | |||||||||||||||||||||||||
New Swaps: | ||||||||||||||||||||||||||
Aggregate notional amount | $ | — | $ | 400,000 | ||||||||||||||||||||||
Weighted average fixed-pay rate | — | % | 1.95 | % | ||||||||||||||||||||||
Initial maturity date | N/A | 5 years to 7 years | ||||||||||||||||||||||||
Number of new Swaps | — | Four | ||||||||||||||||||||||||
Swaps amortized/expired: | ||||||||||||||||||||||||||
Aggregate notional amount | $ | 46,322 | $ | 564,320 | ||||||||||||||||||||||
Weighted average fixed-pay rate | 2.84 | % | 2.05 | % | ||||||||||||||||||||||
Schedule of information about swaps | ' | |||||||||||||||||||||||||
The following table presents information about the Company’s Swaps at September 30, 2014 and December 31, 2013: | ||||||||||||||||||||||||||
30-Sep-14 | December 31, 2013 | |||||||||||||||||||||||||
Notional Amount | Weighted Average Fixed-Pay | Weighted Average Variable | Notional Amount | Weighted Average Fixed-Pay | Weighted Average Variable | |||||||||||||||||||||
Interest Rate | Interest Rate (2) | Interest Rate | Interest Rate (2) | |||||||||||||||||||||||
Maturity (1) | ||||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||
Within 30 days | $ | 56,861 | 4.67 | % | 0.17 | % | $ | 17,635 | 3.9 | % | 0.21 | % | ||||||||||||||
Over 30 days to 3 months | 63,860 | 2.19 | 0.17 | 24,216 | 3.93 | 0.21 | ||||||||||||||||||||
Over 3 months to 6 months | 410,171 | 1.9 | 0.16 | 476,147 | 1.8 | 0.17 | ||||||||||||||||||||
Over 6 months to 12 months | 300,000 | 2.06 | 0.16 | 167,043 | 3.22 | 0.18 | ||||||||||||||||||||
Over 12 months to 24 months | 50,000 | 2.13 | 0.15 | 710,171 | 1.97 | 0.17 | ||||||||||||||||||||
Over 24 months to 36 months | 450,000 | 0.56 | 0.16 | 150,000 | 1.03 | 0.17 | ||||||||||||||||||||
Over 36 months to 48 months | 550,000 | 1.49 | 0.15 | 350,000 | 0.58 | 0.17 | ||||||||||||||||||||
Over 48 months to 60 months | 200,000 | 1.71 | 0.15 | 550,000 | 1.49 | 0.17 | ||||||||||||||||||||
Over 60 months to 72 months | 1,500,000 | 2.22 | 0.15 | — | — | — | ||||||||||||||||||||
Over 72 months to 84 months | 200,000 | 2.2 | 0.15 | 1,500,000 | 2.22 | 0.17 | ||||||||||||||||||||
Over 84 months (3) | 100,000 | 2.75 | 0.15 | 100,000 | 2.75 | 0.17 | ||||||||||||||||||||
Total Swaps | $ | 3,880,892 | 1.9 | % | 0.16 | % | $ | 4,045,212 | 1.91 | % | 0.17 | % | ||||||||||||||
(1) Each maturity category reflects contractual amortization and/or maturity of notional amounts. | ||||||||||||||||||||||||||
(2) Reflects the benchmark variable rate due from the counterparty at the date presented, which rate adjusts monthly or quarterly based on one-month or three-month LIBOR, respectively. | ||||||||||||||||||||||||||
(3) Reflects one Swap with a maturity date of July 2023. | ||||||||||||||||||||||||||
Schedule of interest expense and the weighted average interest rate paid and received on swaps | ' | |||||||||||||||||||||||||
The following table presents the net impact of the Company’s derivative hedging instruments on its interest expense and the weighted average interest rate paid and received for such Swaps for the three and nine months ended September 30, 2014 and 2013: | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||
(Dollars in Thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Interest expense attributable to Swaps | $ | 17,491 | $ | 15,888 | $ | 53,129 | $ | 40,884 | ||||||||||||||||||
Weighted average Swap rate paid | 1.91 | % | 2.07 | % | 1.92 | % | 2.15 | % | ||||||||||||||||||
Weighted average Swap rate received | 0.16 | % | 0.2 | % | 0.16 | % | 0.2 | % | ||||||||||||||||||
Schedule of impact of hedging instruments on AOCI | ' | |||||||||||||||||||||||||
The following table presents the impact of the Company’s derivative hedging instruments on its AOCI for the three and nine months ended September 30, 2014 and 2013: | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
AOCI from derivative hedging instruments: | ||||||||||||||||||||||||||
Balance at beginning of period | $ | (54,671 | ) | $ | (31,967 | ) | $ | (15,217 | ) | $ | (62,831 | ) | ||||||||||||||
Unrealized gain/(loss) on Swaps, net | 23,500 | (19,934 | ) | (16,401 | ) | 10,930 | ||||||||||||||||||||
Reclassification of unrealized loss on de-designated Swaps | — | — | 447 | — | ||||||||||||||||||||||
Balance at end of period | $ | (31,171 | ) | $ | (51,901 | ) | $ | (31,171 | ) | $ | (51,901 | ) |
Repurchase_Agreements_Tables
Repurchase Agreements (Tables) | 9 Months Ended | ||||||||||||||
Sep. 30, 2014 | |||||||||||||||
Disclosure of Repurchase Agreements [Abstract] | ' | ||||||||||||||
Schedule of Company's borrowings under repurchase agreements and associated assets pledged as collateral | ' | ||||||||||||||
The following table presents information with respect to the Company’s borrowings under repurchase agreements and associated assets pledged as collateral at September 30, 2014 and December 31, 2013: | |||||||||||||||
(Dollars in Thousands) | September 30, | December 31, | |||||||||||||
2014 | 2013 | ||||||||||||||
Repurchase agreement borrowings secured by Agency MBS | $ | 5,417,797 | $ | 5,750,053 | |||||||||||
Fair Value of Agency MBS pledged as collateral under repurchase agreements | $ | 5,698,202 | $ | 6,068,447 | |||||||||||
Weighted average haircut on Agency MBS (1) | 4.7 | % | 4.89 | % | |||||||||||
Repurchase agreement borrowings secured by Non-Agency MBS (2) | $ | 2,263,910 | $ | 2,206,586 | |||||||||||
Fair Value of Non-Agency MBS pledged as collateral under repurchase agreements (2)(3) | $ | 3,454,698 | $ | 3,663,523 | |||||||||||
Weighted average haircut on Non-Agency MBS (1) | 28.48 | % | 32.48 | % | |||||||||||
Repurchase agreements secured by U.S. Treasuries | $ | 444,016 | $ | 382,658 | |||||||||||
Fair value of U.S. Treasuries pledged as collateral under repurchase agreements | $ | 442,370 | $ | 383,743 | |||||||||||
Weighted average haircut on U.S. Treasuries (1) | 1.41 | % | 1.65 | % | |||||||||||
-1 | Haircut represents the percentage amount by which the collateral value is contractually required to exceed the loan amount on the Company’s repurchase agreements borrowings. | ||||||||||||||
-2 | Does not reflect Non-Agency MBS and repurchase agreement borrowings that are components of Linked Transactions. | ||||||||||||||
-3 | Includes $1.276 billion and $1.885 billion of Non-Agency MBS acquired from consolidated VIEs at September 30, 2014, and December 31, 2013, respectively, that are eliminated from the Company’s consolidated balance sheets. | ||||||||||||||
Schedule of repricing information about borrowings under repurchase agreements | ' | ||||||||||||||
The following table presents repricing information about the Company’s borrowings under repurchase agreements, which does not reflect the impact of associated derivative hedging instruments, at September 30, 2014 and December 31, 2013: | |||||||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||||||
Balance (1) | Weighted Average Interest Rate | Balance (1) | Weighted Average Interest Rate | ||||||||||||
Time Until Interest Rate Reset | |||||||||||||||
(Dollars in Thousands) | |||||||||||||||
Within 30 days | $ | 6,619,916 | 0.65 | % | $ | 7,064,598 | 0.68 | % | |||||||
Over 30 days to 3 months | 1,367,544 | 0.82 | 1,274,699 | 1.31 | |||||||||||
Over 3 months to 12 months | 138,263 | 1.65 | — | — | |||||||||||
Total | $ | 8,125,723 | 0.7 | % | $ | 8,339,297 | 0.77 | % | |||||||
(1) At September 30, 2014 and December 31, 2013, the Company had repurchase agreements of $791.8 million and $102.7 million, respectively, that were linked to Non-Agency MBS purchases and accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 5) | |||||||||||||||
Schedule of contractual maturity information about repurchase agreements | ' | ||||||||||||||
The following table presents contractual maturity information about the Company’s borrowings under repurchase agreements at September 30, 2014 and does not reflect the impact of derivative contracts that hedge such repurchase agreements: | |||||||||||||||
30-Sep-14 | |||||||||||||||
Contractual Maturity | Balance (1) | Weighted Average Interest Rate | |||||||||||||
(Dollars in Thousands) | |||||||||||||||
Overnight | $ | — | — | % | |||||||||||
Within 30 days | 6,069,537 | 0.55 | |||||||||||||
Over 30 days to 90 days | 1,221,035 | 0.69 | |||||||||||||
Over 90 days to 12 months | 835,151 | 1.84 | |||||||||||||
Total | $ | 8,125,723 | 0.7 | % | |||||||||||
-1 | At September 30, 2014, the Company had repurchase agreements of $791.8 million that were linked to Non-Agency MBS purchases and were accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 5) | ||||||||||||||
Schedule of information about counterparty for repurchase agreements and/or Linked Transactions for which the entity had greater than 5% of stockholders' equity at risk | ' | ||||||||||||||
The following table presents information with respect to any counterparty for repurchase agreements and/or Linked Transactions for which the Company had greater than 5% of stockholders’ equity at risk in the aggregate at September 30, 2014: | |||||||||||||||
Counterparty | Amount | Weighted | Percent of | ||||||||||||
Rating (1) | at Risk (2) | Average Months | Stockholders’ Equity | ||||||||||||
to Maturity for | |||||||||||||||
Counterparty | Repurchase Agreements | ||||||||||||||
(Dollars in Thousands) | |||||||||||||||
Alpine Securitization Corporation/Credit Suisse (3) | A-1/P-1/F1 | $ | 509,523 | 0 | 15.7 | % | |||||||||
Wells Fargo (4) | A+/A2/AA- | 339,149 | 5 | 10.4 | |||||||||||
RBS | BBB+/Baa2/A | 295,142 | 2 | 9.1 | |||||||||||
UBS (5) | A/A2/A | 236,453 | 16 | 7.3 | |||||||||||
RBC (6) | AA-/Aa3/AA | 179,387 | 5 | 5.5 | |||||||||||
-1 | As rated at September 30, 2014 by S&P, Moody’s and Fitch, Inc., respectively. The counterparty rating presented is the lowest published for these entities. | ||||||||||||||
-2 | The amount at risk reflects the difference between (a) the amount loaned to the Company through repurchase agreements and repurchase agreements underlying Linked Transactions, including interest payable, and (b) the cash and the fair value of the securities pledged by the Company as collateral and MBS underlying Linked Transactions, including accrued interest receivable on such securities. | ||||||||||||||
-3 | Includes $353.8 million at risk with Alpine Securitization Corporation and $155.7 million at risk with Credit Suisse Securities (USA) LLC. Alpine Securitization Corporation is a special purpose funding vehicle that is a consolidated affiliate of Credit Suisse Group. Counterparty rating shown is the asset backed short term rating for Alpine Securitization Corporation. | ||||||||||||||
-4 | Includes $199.3 million at risk with Wells Fargo Bank, NA and $139.9 million at risk with Wells Fargo Securities LLC. | ||||||||||||||
-5 | Includes Non-Agency MBS pledged as collateral with contemporaneous repurchase and reverse repurchase agreements. | ||||||||||||||
-6 | Includes $167.4 million at risk with Royal Bank of Canada and $12.0 million at risk with RBC Capital Markets LLC. |
Collateral_Positions_Tables
Collateral Positions (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||
Collateral Positions | ' | ||||||||||||||||||||||||||||
Schedule of fair value of collateral pledged and collateral held | ' | ||||||||||||||||||||||||||||
The following table summarizes the fair value of the Company’s collateral positions, which includes collateral pledged and collateral held, with respect to its borrowings under repurchase agreements, reverse repurchase agreements and derivative hedging instruments at September 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||||||||||||||||||||
(In Thousands) | Assets Pledged | Collateral Held | Assets Pledged | Collateral Held | |||||||||||||||||||||||||
Derivative Hedging Instruments: | |||||||||||||||||||||||||||||
Agency MBS | $ | 67,431 | $ | — | $ | 73,859 | $ | — | |||||||||||||||||||||
Cash (1) | 35,351 | — | 37,520 | — | |||||||||||||||||||||||||
102,782 | — | 111,379 | — | ||||||||||||||||||||||||||
Repurchase Agreement Borrowings: | |||||||||||||||||||||||||||||
Agency MBS | $ | 5,698,202 | $ | — | $ | 6,068,447 | $ | — | |||||||||||||||||||||
Non-Agency MBS (2)(3) | 3,454,698 | — | 3,663,523 | — | |||||||||||||||||||||||||
U.S. Treasury securities | 442,370 | — | 383,743 | — | |||||||||||||||||||||||||
Cash (1) | 8,400 | — | — | — | |||||||||||||||||||||||||
9,603,670 | — | 10,115,713 | — | ||||||||||||||||||||||||||
Reverse Repurchase Agreements: | |||||||||||||||||||||||||||||
U.S. Treasury securities | $ | — | $ | 442,370 | $ | — | $ | 383,743 | |||||||||||||||||||||
— | 442,370 | — | 383,743 | ||||||||||||||||||||||||||
Total | $ | 9,706,452 | $ | 442,370 | $ | 10,227,092 | $ | 383,743 | |||||||||||||||||||||
(1) Cash pledged as collateral is reported as “restricted cash” on the Company’s consolidated balance sheets. | |||||||||||||||||||||||||||||
(2) Includes $1.276 billion and $1.885 billion of Non-Agency MBS acquired in connection with resecuritization transactions from consolidated VIEs at September 30, 2014 and December 31, 2013, respectively, that are eliminated from the Company’s consolidated balance sheets. | |||||||||||||||||||||||||||||
(3) In addition, $736.8 million and $738.3 million of Non-Agency MBS are pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty at September 30, 2014 and December 31, 2013, respectively. | |||||||||||||||||||||||||||||
Schedule of additional information about assets Pledged as collateral pursuant to borrowings under repurchase agreements and Derivative Hedging Contracts | ' | ||||||||||||||||||||||||||||
The following table presents detailed information about the Company’s assets pledged as collateral pursuant to its borrowings under repurchase agreements and derivative hedging instruments at September 30, 2014: | |||||||||||||||||||||||||||||
Assets Pledged Under Repurchase | Assets Pledged Against Derivative | Total Fair | |||||||||||||||||||||||||||
Agreements | Hedging Instruments | Value of Assets Pledged and Accrued Interest | |||||||||||||||||||||||||||
(In Thousands) | Fair Value/ | Amortized | Accrued | Fair Value/ | Amortized | Accrued | |||||||||||||||||||||||
Carrying | Cost | Interest on | Carrying | Cost | Interest on | ||||||||||||||||||||||||
Value | Pledged | Value | Pledged | ||||||||||||||||||||||||||
MBS | MBS | ||||||||||||||||||||||||||||
U.S. Treasuries | $ | 442,370 | $ | 442,370 | $ | — | $ | — | $ | — | $ | — | $ | 442,370 | |||||||||||||||
Fannie Mae | $ | 4,744,666 | $ | 4,682,097 | $ | 11,763 | $ | 6,205 | $ | 5,965 | $ | 13 | $ | 4,762,647 | |||||||||||||||
Freddie Mac | 953,536 | 963,082 | 2,382 | 54,959 | 55,898 | 129 | 1,011,006 | ||||||||||||||||||||||
Ginnie Mae | — | — | — | 6,267 | 6,144 | 9 | 6,276 | ||||||||||||||||||||||
Agency MBS | $ | 5,698,202 | $ | 5,645,179 | $ | 14,145 | $ | 67,431 | $ | 68,007 | $ | 151 | $ | 5,779,929 | |||||||||||||||
Non-Agency MBS (1)(2) | $ | 3,454,698 | $ | 2,632,613 | $ | 12,424 | $ | — | $ | — | $ | — | $ | 3,467,122 | |||||||||||||||
Total | $ | 9,595,270 | $ | 8,720,162 | $ | 26,569 | $ | 67,431 | $ | 68,007 | $ | 151 | $ | 9,689,421 | |||||||||||||||
(1) Includes $1.276 billion of Non-Agency MBS acquired in connection with resecuritization transactions from consolidated VIEs at September 30, 2014, that are eliminated from the Company’s consolidated balance sheets. | |||||||||||||||||||||||||||||
(2) In addition, $736.8 million of Non-Agency MBS are pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty at September 30, 2014. |
Offsetting_Assets_and_Liabilit1
Offsetting Assets and Liabilities (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||
Offsetting [Abstract] | ' | ||||||||||||||||||||||||
Schedule of information about certain assets that are subject to master netting arrangements (or similar agreements) | ' | ||||||||||||||||||||||||
The following tables present information about certain assets and liabilities that are subject to master netting arrangements (or similar agreements) and can potentially be offset on the Company’s consolidated balance sheets at September 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||||||||||||||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets Presented in the Consolidated Balance Sheets | Gross Amounts Not Offset in | Net Amount | |||||||||||||||||||||
the Consolidated Balance Sheets | |||||||||||||||||||||||||
(In Thousands) | Financial | Cash | |||||||||||||||||||||||
Instruments | Collateral | ||||||||||||||||||||||||
Received | |||||||||||||||||||||||||
30-Sep-14 | |||||||||||||||||||||||||
Swaps, at fair value | $ | 4,322 | $ | — | $ | 4,322 | $ | (4,322 | ) | $ | — | $ | — | ||||||||||||
Total | $ | 4,322 | $ | — | $ | 4,322 | $ | (4,322 | ) | $ | — | $ | — | ||||||||||||
31-Dec-13 | |||||||||||||||||||||||||
Swaps, at fair value | $ | 13,000 | $ | — | $ | 13,000 | $ | (13,000 | ) | $ | — | $ | — | ||||||||||||
Total | $ | 13,000 | $ | — | $ | 13,000 | $ | (13,000 | ) | $ | — | $ | — | ||||||||||||
Schedule of information about certain liabilities that are subject to master netting arrangements (or similar agreements) | ' | ||||||||||||||||||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||||||||||||||||||
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | Gross Amounts Not Offset in the | Net Amount | |||||||||||||||||||||
Consolidated Balance Sheets | |||||||||||||||||||||||||
(In Thousands) | Financial | Cash | |||||||||||||||||||||||
Instruments (1) | Collateral | ||||||||||||||||||||||||
Pledged (1) | |||||||||||||||||||||||||
30-Sep-14 | |||||||||||||||||||||||||
Swaps, at fair value (2) | $ | 35,493 | $ | — | $ | 35,493 | $ | (142 | ) | $ | (35,351 | ) | $ | — | |||||||||||
Repurchase agreements (3) | 8,125,723 | — | 8,125,723 | (8,117,323 | ) | (8,400 | ) | — | |||||||||||||||||
Total | $ | 8,161,216 | $ | — | $ | 8,161,216 | $ | (8,117,465 | ) | $ | (43,751 | ) | $ | — | |||||||||||
31-Dec-13 | |||||||||||||||||||||||||
Swaps, at fair value (2) | $ | 28,217 | $ | — | $ | 28,217 | $ | — | $ | (28,217 | ) | $ | — | ||||||||||||
Repurchase agreements (3) | 8,339,297 | — | 8,339,297 | (8,339,297 | ) | — | — | ||||||||||||||||||
Total | $ | 8,367,514 | $ | — | $ | 8,367,514 | $ | (8,339,297 | ) | $ | (28,217 | ) | $ | — | |||||||||||
(1) Amounts disclosed in the Financial Instruments column of the table above represents collateral pledged that is available to be offset against liability balances associated with repurchase agreement and derivative transactions. Amounts disclosed in the Cash Collateral Pledged column of the table above represents amounts pledged as collateral against derivative transactions and repurchase agreements, and excludes excess collateral of $9.3 million at December 31, 2013. | |||||||||||||||||||||||||
(2) The fair value of securities pledged against the Company’s Swaps was $67.4 million and $73.9 million at September 30, 2014 and December 31, 2013, respectively. | |||||||||||||||||||||||||
(3) The fair value of securities pledged against the Company’s repurchase agreements was $9.595 billion and $10.116 billion at September 30, 2014 and December 31, 2013, respectively. |
Stockholders_Equity_Tables
Stockholders' Equity (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ' | ||||||||||||||||||||||||
Schedule of preferred stock dividend declaration and payment | ' | ||||||||||||||||||||||||
The following table presents cash dividends declared by the Company on its Series B Preferred Stock from January 1, 2014 through September 30, 2014: | |||||||||||||||||||||||||
Declaration Date | Record Date | Payment Date | Dividend Per Share | ||||||||||||||||||||||
25-Aug-14 | 8-Sep-14 | 30-Sep-14 | $ | 0.46875 | |||||||||||||||||||||
19-May-14 | 10-Jun-14 | 30-Jun-14 | 0.46875 | ||||||||||||||||||||||
14-Feb-14 | 28-Feb-14 | 31-Mar-14 | 0.46875 | ||||||||||||||||||||||
Schedule of cash dividends declared on common stock | ' | ||||||||||||||||||||||||
The following table presents cash dividends declared by the Company on its common stock from January 1, 2014 through September 30, 2014: | |||||||||||||||||||||||||
Declaration Date (1) | Record Date | Payment Date | Dividend Per Share | ||||||||||||||||||||||
17-Sep-14 | 29-Sep-14 | 31-Oct-14 | $ | 0.2 | -1 | ||||||||||||||||||||
13-Jun-14 | 27-Jun-14 | 31-Jul-14 | 0.2 | ||||||||||||||||||||||
10-Mar-14 | 28-Mar-14 | 30-Apr-14 | 0.2 | ||||||||||||||||||||||
(1) At September 30, 2014, the Company had accrued dividends and DERs payable of $74.1 million related to the common stock dividend declared on September 17, 2014. | |||||||||||||||||||||||||
Schedule of changes in balances of each component of the entity's AOCI | ' | ||||||||||||||||||||||||
The following table presents changes in the balances of each component of the Company’s AOCI for the three and nine months ended September 30, 2014: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2014 | September 30, 2014 | ||||||||||||||||||||||||
(In Thousands) | Net Unrealized | Net | Total AOCI | Net | Net | Total AOCI | |||||||||||||||||||
Gain/(Loss) on | Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Available-for-Sale MBS | Gain/(Loss) | Gain/(Loss) on | Gain/(Loss) | ||||||||||||||||||||||
on Swaps | Available-for-Sale MBS | on Swaps | |||||||||||||||||||||||
Balance at the beginning of the period | $ | 905,704 | $ | (54,671 | ) | $ | 851,033 | $ | 752,912 | $ | (15,217 | ) | $ | 737,695 | |||||||||||
OCI before reclassifications | (43,410 | ) | 23,500 | (19,910 | ) | 116,973 | (16,401 | ) | 100,572 | ||||||||||||||||
Amounts reclassified from AOCI (1) | (13,589 | ) | — | (13,589 | ) | (21,180 | ) | 447 | (20,733 | ) | |||||||||||||||
Net OCI during the period (2) | (56,999 | ) | 23,500 | (33,499 | ) | 95,793 | (15,954 | ) | 79,839 | ||||||||||||||||
Balance at end of period | $ | 848,705 | $ | (31,171 | ) | $ | 817,534 | $ | 848,705 | $ | (31,171 | ) | $ | 817,534 | |||||||||||
The following table presents changes in the balances of each component of the Company’s AOCI for the three and nine months ended September 30, 2013: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2013 | September 30, 2013 | ||||||||||||||||||||||||
(In Thousands) | Net Unrealized | Net | Total AOCI | Net Unrealized | Net | Total AOCI | |||||||||||||||||||
Gain/(Loss) on | Unrealized | Gain/(Loss) on | Unrealized | ||||||||||||||||||||||
Available-for-Sale MBS | Gain/(Loss) | Available-for-Sale MBS | Gain/(Loss) | ||||||||||||||||||||||
on Swaps | on Swaps | ||||||||||||||||||||||||
Balance at the beginning of the period | $ | 700,871 | $ | (31,967 | ) | $ | 668,904 | $ | 824,808 | $ | (62,831 | ) | $ | 761,977 | |||||||||||
OCI before reclassifications | 31,850 | (19,934 | ) | 11,916 | (89,847 | ) | 10,930 | (78,917 | ) | ||||||||||||||||
Amounts reclassified from AOCI (1) | (15,158 | ) | — | (15,158 | ) | (17,398 | ) | — | (17,398 | ) | |||||||||||||||
Net OCI during the period (2) | 16,692 | (19,934 | ) | (3,242 | ) | (107,245 | ) | 10,930 | (96,315 | ) | |||||||||||||||
Balance at end of period | $ | 717,563 | $ | (51,901 | ) | $ | 665,662 | $ | 717,563 | $ | (51,901 | ) | $ | 665,662 | |||||||||||
(1) See separate table below for details about these reclassifications. | |||||||||||||||||||||||||
(2) For further information regarding changes in OCI, see the Company’s consolidated statement of comprehensive income/(loss). | |||||||||||||||||||||||||
Information about the significant amounts reclassified out of the entity's AOCI | ' | ||||||||||||||||||||||||
The following table presents information about the significant amounts reclassified out of the Company’s AOCI for the three and nine months ended September 30, 2014: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2014 | September 30, 2014 | ||||||||||||||||||||||||
Details about AOCI Components | Amounts Reclassified from AOCI | Affected Line Item in the Statement | |||||||||||||||||||||||
Where Net Income is Presented | |||||||||||||||||||||||||
(In Thousands) | |||||||||||||||||||||||||
Available-for-sale MBS: | |||||||||||||||||||||||||
Realized gain on sale of securities | $ | (13,589 | ) | $ | (21,180 | ) | Gain on sales of MBS and U.S. Treasury securities, net | ||||||||||||||||||
Swaps designated as cash flow hedges: | |||||||||||||||||||||||||
De-designated Swaps | $ | — | $ | 447 | Other, net | ||||||||||||||||||||
Total reclassifications for period | $ | (13,589 | ) | $ | (20,733 | ) | |||||||||||||||||||
The following table presents information about the significant amounts reclassified out of the Company’s AOCI for the three and nine months ended September 30, 2013: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, 2013 | September 30, 2013 | ||||||||||||||||||||||||
Details about AOCI Components | Amounts | Amounts | Affected Line Item in the Statement | ||||||||||||||||||||||
Reclassified from AOCI | Reclassified from AOCI | Where Net Income is Presented | |||||||||||||||||||||||
(In Thousands) | |||||||||||||||||||||||||
Available-for-sale MBS: | |||||||||||||||||||||||||
Realized gain on sale of securities | $ | (15,158 | ) | $ | (17,398 | ) | Gain on sales of MBS and U.S. Treasury securities, net | ||||||||||||||||||
Total reclassifications for period | $ | (15,158 | ) | $ | (17,398 | ) |
EPS_Calculation_Tables
EPS Calculation (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||||||
Schedule of reconciliation of the earnings and shares used in calculating basic and diluted EPS | ' | ||||||||||||||||
The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted EPS for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(In Thousands, Except Per Share Amounts) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator: | |||||||||||||||||
Net income | $ | 78,882 | $ | 71,328 | $ | 233,796 | $ | 224,152 | |||||||||
Dividends declared on preferred stock | (3,750 | ) | (3,750 | ) | (11,250 | ) | (10,000 | ) | |||||||||
Dividends, DERs and undistributed earnings allocated to participating securities | (281 | ) | (230 | ) | (842 | ) | (880 | ) | |||||||||
Issuance costs of redeemed preferred stock (1) | — | — | — | (3,947 | ) | ||||||||||||
Net income to common stockholders - basic and diluted | $ | 74,851 | $ | 67,348 | $ | 221,704 | $ | 209,325 | |||||||||
Denominator: | |||||||||||||||||
Weighted average common shares for basic and diluted earnings per share (2) | 369,690 | 363,918 | 368,430 | 361,181 | |||||||||||||
Basic and diluted earnings per share | $ | 0.2 | $ | 0.19 | $ | 0.6 | $ | 0.58 | |||||||||
-1 | Issuance costs of redeemed preferred stock represent the original offering costs related to the Series A Preferred Stock, which was redeemed on May 16, 2013. (See Note 11) | ||||||||||||||||
-2 | At September 30, 2014, the Company had an aggregate of 1.6 million equity instruments outstanding that were not included in the calculation of diluted EPS for the three and nine months ended September 30, 2014, as their inclusion would have been anti-dilutive. These equity instruments were comprised of approximately 358,000 shares of restricted common stock with a weighted average grant date fair value of $7.47 and approximately 1.2 million RSUs with a weighted average grant date fair value of $6.83. These equity instruments may have a dilutive impact on future EPS. |
Equity_Compensation_Employment1
Equity Compensation, Employment Agreements and Other Benefit Plans (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Compensation Related Costs [Abstract] | ' | ||||||||||||||||
Schedule of expenses related to equity-based compensation | ' | ||||||||||||||||
The following table presents the Company’s expenses related to its equity-based compensation instruments for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Restricted shares of common stock | $ | 643 | $ | 404 | $ | 1,892 | $ | 1,539 | |||||||||
RSUs | 591 | 314 | 2,354 | -1 | 1,263 | ||||||||||||
DERs | 37 | 42 | 111 | 144 | |||||||||||||
Total | $ | 1,271 | $ | 760 | $ | 4,357 | $ | 2,946 | |||||||||
(1) RSU expense for the nine months ended September 30, 2014 includes approximately $500,000 for a one-time grant to the Company’s chief executive officer. | |||||||||||||||||
Schedule of expenses related to deferred compensation plans | ' | ||||||||||||||||
The following table presents the Company’s expenses related to its Deferred Plans for its non-employee directors and senior officers for the three and nine months ended September 30, 2014 and 2013: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(In Thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Non-employee directors | $ | (11 | ) | $ | (30 | ) | $ | 52 | $ | 22 | |||||||
Total | $ | (11 | ) | $ | (30 | ) | $ | 52 | $ | 22 | |||||||
Schedule of aggregate income deferred by participants and associated liability under deferred compensation plans | ' | ||||||||||||||||
The following table presents the aggregate amount of income deferred by participants of the Deferred Plans through September 30, 2014 and December 31, 2013 that had not been distributed and the Company’s associated liability for such deferrals at September 30, 2014 and December 31, 2013: | |||||||||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||||||||
Undistributed Income Deferred (1) | Liability Under Deferred Plans | Undistributed Income Deferred (1) | Liability Under Deferred Plans | ||||||||||||||
(In Thousands) | |||||||||||||||||
Non-employee directors | $ | 263 | $ | 367 | $ | 270 | $ | 382 | |||||||||
Total | $ | 263 | $ | 367 | $ | 270 | $ | 382 | |||||||||
(1) Represents the cumulative amounts that were deferred by participants through September 30, 2014 and December 31, 2013, which had not been distributed through such date. |
Fair_Value_of_Financial_Instru1
Fair Value of Financial Instruments (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Schedule of financial instruments carried at fair value by valuation hierarchy | ' | ||||||||||||||||
The following table presents the Company’s financial instruments carried at fair value on a recurring basis as of September 30, 2014, on the consolidated balance sheet by the valuation hierarchy, as previously described: | |||||||||||||||||
Fair Value at September 30, 2014 | |||||||||||||||||
(In Thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | |||||||||||||||||
Agency MBS | $ | — | $ | 6,174,176 | $ | — | $ | 6,174,176 | |||||||||
Non-Agency MBS, including MBS transferred to | — | 4,763,326 | — | 4,763,326 | |||||||||||||
consolidated VIEs | |||||||||||||||||
Securities obtained and pledged as collateral | 442,370 | — | — | 442,370 | |||||||||||||
Linked Transactions | — | 190,681 | — | 190,681 | |||||||||||||
Swaps | — | 4,322 | — | 4,322 | |||||||||||||
Total assets carried at fair value | $ | 442,370 | $ | 11,132,505 | $ | — | $ | 11,574,875 | |||||||||
Liabilities: | |||||||||||||||||
Swaps | $ | — | $ | 35,493 | $ | — | $ | 35,493 | |||||||||
Obligation to return securities obtained as collateral | 442,370 | — | — | 442,370 | |||||||||||||
Total liabilities carried at fair value | $ | 442,370 | $ | 35,493 | $ | — | $ | 477,863 | |||||||||
Schedule of carrying value and fair value of financial instruments | ' | ||||||||||||||||
The following table presents the carrying values and estimated fair values of the Company’s financial instruments at fair value, at September 30, 2014 and December 31, 2013: | |||||||||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||||||||
Carrying | Estimated Fair Value | Carrying | Estimated Fair Value | ||||||||||||||
(In Thousands) | Value | Value | |||||||||||||||
Financial Assets: | |||||||||||||||||
Agency MBS | $ | 6,174,176 | $ | 6,174,176 | $ | 6,519,221 | $ | 6,519,221 | |||||||||
Non-Agency MBS, including MBS transferred to | 4,763,326 | 4,763,326 | 4,852,137 | 4,852,137 | |||||||||||||
consolidated VIEs | |||||||||||||||||
Securities obtained and pledged as collateral | 442,370 | 442,370 | 383,743 | 383,743 | |||||||||||||
Cash and cash equivalents | 423,891 | 423,891 | 565,370 | 565,370 | |||||||||||||
Restricted cash | 43,751 | 43,751 | 37,520 | 37,520 | |||||||||||||
Linked Transactions | 190,681 | 190,681 | 28,181 | 28,181 | |||||||||||||
Swaps | 4,322 | 4,322 | 13,000 | 13,000 | |||||||||||||
Residential whole loans | 112,924 | 114,357 | — | — | |||||||||||||
Financial Liabilities: | |||||||||||||||||
Repurchase agreements | 8,125,723 | 8,124,355 | 8,339,297 | 8,339,071 | |||||||||||||
Securitized debt | 156,276 | 157,264 | 366,205 | 366,767 | |||||||||||||
Obligation to return securities obtained as collateral | 442,370 | 442,370 | 383,743 | 383,743 | |||||||||||||
Senior Notes | 100,000 | 105,000 | 100,000 | 98,000 | |||||||||||||
Swaps | 35,493 | 35,493 | 28,217 | 28,217 | |||||||||||||
Use_of_Special_Purpose_Entitie1
Use of Special Purpose Entities and Variable Interest Entities (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2014 | |||||||||||||
Use of Special Purpose Entities and Variable Interest Entities | ' | ||||||||||||
Summary of key details related to resecuritization transactions | ' | ||||||||||||
The following table summarizes the key details of the resecuritization transactions the Company is involved in as of September 30, 2014: | |||||||||||||
(Dollars in Thousands) | February 2012 | February 2011 | October 2010 | ||||||||||
Name of Trust (Consolidated as a VIE) | WFMLT Series | CSMC Series | DMSI | ||||||||||
2012-RR1 | 2011-1R | 2010-RS2 | |||||||||||
Principal value of Non-Agency MBS sold | $ | 433,347 | $ | 1,319,969 | $ | 985,228 | |||||||
Face amount of Bonds issued by the VIE and purchased by 3rd party investors (1) | $ | 186,691 | $ | 488,389 | $ | 373,577 | |||||||
Outstanding amount of Senior Bonds at September 30, 2014 | $ | 67,035 | $ | 21,631 | $ | 67,610 | |||||||
Pass-through rate for Senior Bonds issued | 2.85 | % | One-month LIBOR plus 100 basis points | Weighted Average Coupon Rate | |||||||||
Face amount of Senior Support Certificates received by the Company (2) | $ | 220,216 | $ | 779,679 | $ | 484,630 | |||||||
Cash received | $ | 186,691 | $ | 488,389 | $ | 375,621 | |||||||
Notional amount acquired of non-rated, interest only senior certificates (1) | $ | 186,691 | $ | 488,389 | $ | — | |||||||
Unamortized deferred costs | $ | 577 | $ | 202 | $ | 97 | |||||||
(1) Amount disclosed reflects principal balance on the DMSI 2010-RS A1, A2 and A3 bonds. The DMSI 2010-RS2 A2 and A3 bond was sold to third party investors during 2013. The principal balance for the DMSI 2010-RS2 A1 Bond and associated interest only Senior certificate was paid off during the three months ended June 30, 2013. | |||||||||||||
(2) Provides credit support for the sequential Senior Non-Agency MBS sold to third-party investors in resecuritization transactions (“Senior Bonds”). |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Cash and Cash Equivalents [Line Items] | ' | ' |
Restricted cash | $43,751,000 | $37,520,000 |
Overnight money market funds | ' | ' |
Cash and Cash Equivalents [Line Items] | ' | ' |
Cash equivalents | $314,900,000 | $534,400,000 |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details 1) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Accounting Policies [Abstract] | ' | ' |
Goodwill | $7,189 | $7,189 |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Details 2) (Furniture, fixtures, computers and related hardwares) | 9 Months Ended |
Sep. 30, 2014 | |
Low end of range | ' |
Estimated useful life of long-lived assets | ' |
Estimated useful life | '5 years |
High end of range | ' |
Estimated useful life of long-lived assets | ' |
Estimated useful life | '8 years |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Details 3) | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Repurchase financing period, low end of range | '1 month |
Repurchase financing period, high end of range | '6 months |
Summary_of_Significant_Account6
Summary of Significant Accounting Policies (Details 4) | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | |
Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | ||
Minimum | Minimum | Minimum | Minimum | Maximum | Maximum | Maximum | Maximum | |||
Share based compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Forfeiture rate assumption for equity based awards granted in 2009 and prior years (as a percent) | 0.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Vesting period of restricted share units (RSUs) | ' | '3 years | '1 year | '1 year | '1 year | '2 years | '3 years | '3 years | '3 years | '4 years |
Period for measuring market condition of award | ' | '3 years | ' | ' | ' | '2 years | ' | ' | ' | '4 years |
Summary_of_Significant_Account7
Summary of Significant Accounting Policies (Details 5) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Annual REIT taxable income intended to be distributed to stockholders (as a percent) | 100.00% |
REIT income tax expense | $0 |
Summary_of_Significant_Account8
Summary of Significant Accounting Policies (Details 6) | 9 Months Ended |
Sep. 30, 2014 | |
Component | |
Accounting Policies [Abstract] | ' |
Number of components in a linked transaction | 2 |
MBS_Details
MBS (Details) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Dec. 31, 2013 | |||
Information about MBS | ' | ' | ||
Minimum term of fixed rate mortgages underlying MBS | '15 years | ' | ||
Principal/ Current Face | $11,217,540,000 | $11,892,957,000 | ||
Purchase Premiums | 224,907,000 | 227,533,000 | ||
Accretable Purchase Discounts | -426,424,000 | -460,126,000 | ||
Discount Designated as Credit Reserve and OTTI | -929,100,000 | [1] | -1,043,037,000 | [1] |
Amortized Cost | 10,088,797,000 | [2] | 10,618,446,000 | [2] |
Fair Value | 10,937,502,000 | 11,371,358,000 | ||
Gross Unrealized Gains | 905,519,000 | 848,946,000 | ||
Gross Unrealized Losses | -56,814,000 | -96,034,000 | ||
Net Unrealized Gain/(Loss) | 848,705,000 | 752,912,000 | ||
Principal payments receivable | 1,900,000 | 1,100,000 | ||
Agency Mortgage Backed Securities | ' | ' | ||
Information about MBS | ' | ' | ||
Principal/ Current Face | 5,887,717,000 | 6,276,919,000 | ||
Purchase Premiums | 224,283,000 | 226,895,000 | ||
Accretable Purchase Discounts | -73,000 | -87,000 | ||
Discount Designated as Credit Reserve and OTTI | 0 | [1] | 0 | [1] |
Amortized Cost | 6,113,801,000 | [2] | 6,504,846,000 | [2] |
Fair Value | 6,174,176,000 | 6,519,221,000 | ||
Gross Unrealized Gains | 114,059,000 | 106,660,000 | ||
Gross Unrealized Losses | -53,684,000 | -92,285,000 | ||
Net Unrealized Gain/(Loss) | 60,375,000 | 14,375,000 | ||
Agency Mortgage Backed Securities | Fannie Mae | ' | ' | ||
Information about MBS | ' | ' | ||
Principal/ Current Face | 4,825,285,000 | 5,092,410,000 | ||
Purchase Premiums | 183,663,000 | 181,710,000 | ||
Accretable Purchase Discounts | -73,000 | -87,000 | ||
Discount Designated as Credit Reserve and OTTI | 0 | [1] | 0 | [1] |
Amortized Cost | 5,008,875,000 | [2] | 5,274,033,000 | [2] |
Fair Value | 5,079,098,000 | 5,315,363,000 | ||
Gross Unrealized Gains | 102,619,000 | 96,516,000 | ||
Gross Unrealized Losses | -32,396,000 | -55,186,000 | ||
Net Unrealized Gain/(Loss) | 70,223,000 | 41,330,000 | ||
Agency Mortgage Backed Securities | Freddie Mac | ' | ' | ||
Information about MBS | ' | ' | ||
Principal/ Current Face | 1,050,873,000 | 1,171,841,000 | ||
Purchase Premiums | 40,421,000 | 44,967,000 | ||
Accretable Purchase Discounts | 0 | 0 | ||
Discount Designated as Credit Reserve and OTTI | 0 | [1] | 0 | [1] |
Amortized Cost | 1,093,168,000 | [2] | 1,217,927,000 | [2] |
Fair Value | 1,083,010,000 | 1,190,670,000 | ||
Gross Unrealized Gains | 11,130,000 | 9,842,000 | ||
Gross Unrealized Losses | -21,288,000 | -37,099,000 | ||
Net Unrealized Gain/(Loss) | -10,158,000 | -27,257,000 | ||
Agency Mortgage Backed Securities | Ginnie Mae | ' | ' | ||
Information about MBS | ' | ' | ||
Principal/ Current Face | 11,559,000 | 12,668,000 | ||
Purchase Premiums | 199,000 | 218,000 | ||
Accretable Purchase Discounts | 0 | 0 | ||
Discount Designated as Credit Reserve and OTTI | 0 | [1] | 0 | [1] |
Amortized Cost | 11,758,000 | [2] | 12,886,000 | [2] |
Fair Value | 12,068,000 | 13,188,000 | ||
Gross Unrealized Gains | 310,000 | 302,000 | ||
Gross Unrealized Losses | 0 | 0 | ||
Net Unrealized Gain/(Loss) | 310,000 | 302,000 | ||
Non-Agency Mortgage Backed Securities | ' | ' | ||
Information about MBS | ' | ' | ||
Principal/ Current Face | 5,329,823,000 | 5,616,038,000 | ||
Purchase Premiums | 624,000 | 638,000 | ||
Accretable Purchase Discounts | -426,351,000 | -460,039,000 | ||
Discount Designated as Credit Reserve and OTTI | -929,100,000 | [1] | -1,043,037,000 | [1] |
Amortized Cost | 3,974,996,000 | [2] | 4,113,600,000 | [2] |
Fair Value | 4,763,326,000 | 4,852,137,000 | ||
Gross Unrealized Gains | 791,460,000 | 742,286,000 | ||
Gross Unrealized Losses | -3,130,000 | -3,749,000 | ||
Net Unrealized Gain/(Loss) | 788,330,000 | 738,537,000 | ||
Credit Reserve | 897,700,000 | 998,500,000 | ||
OTTI | 31,400,000 | 44,500,000 | ||
Non-Agency Mortgage Backed Securities | Non-Agency MBS Expected to Recover Par | ' | ' | ||
Information about MBS | ' | ' | ||
Principal/ Current Face | 315,003,000 | [3],[4] | 234,187,000 | [3],[4] |
Purchase Premiums | 624,000 | [3],[4] | 638,000 | [3],[4] |
Accretable Purchase Discounts | -31,304,000 | [3],[4] | -24,450,000 | [3],[4] |
Discount Designated as Credit Reserve and OTTI | 0 | [1],[3],[4] | 0 | [1],[3],[4] |
Amortized Cost | 284,323,000 | [2],[3],[4] | 210,375,000 | [2],[3],[4] |
Fair Value | 311,950,000 | [3],[4] | 230,738,000 | [3],[4] |
Gross Unrealized Gains | 29,035,000 | [3],[4] | 21,720,000 | [3],[4] |
Gross Unrealized Losses | -1,408,000 | [3],[4] | -1,357,000 | [3],[4] |
Net Unrealized Gain/(Loss) | 27,627,000 | [3],[4] | 20,363,000 | [3],[4] |
Non-Agency Mortgage Backed Securities | Non-Agency MBS Expected to Recover Less Than Par | ' | ' | ||
Information about MBS | ' | ' | ||
Principal/ Current Face | 5,014,820,000 | [3],[5] | 5,381,851,000 | [3],[5] |
Purchase Premiums | 0 | [3],[5] | 0 | [3],[5] |
Accretable Purchase Discounts | -395,047,000 | [3],[5] | -435,589,000 | [3],[5] |
Discount Designated as Credit Reserve and OTTI | -929,100,000 | [1],[3],[5] | -1,043,037,000 | [1],[3],[5] |
Amortized Cost | 3,690,673,000 | [2],[3],[5] | 3,903,225,000 | [2],[3],[5] |
Fair Value | 4,451,376,000 | [3],[5] | 4,621,399,000 | [3],[5] |
Gross Unrealized Gains | 762,425,000 | [3],[5] | 720,566,000 | [3],[5] |
Gross Unrealized Losses | -1,722,000 | [3],[5] | -2,392,000 | [3],[5] |
Net Unrealized Gain/(Loss) | 760,703,000 | [3],[5] | 718,174,000 | [3],[5] |
Percentage of current face amount of Non-Agency MBS to be recovered | 83.00% | 81.00% | ||
RPL/NPL MBS | ' | ' | ||
Information about MBS | ' | ' | ||
Principal/ Current Face | 26,500,000 | 3,900,000 | ||
Amortized Cost | 26,700,000 | 3,900,000 | ||
Fair Value | $26,600,000 | $3,900,000 | ||
[1] | Discount designated as Credit Reserve and amounts related to OTTI are generally not expected to be accreted into interest income. Amounts disclosed at September 30, 2014 reflect Credit Reserve of $897.7 million and OTTI of $31.4 million. Amounts disclosed at December 31, 2013 reflect Credit Reserve of $998.5 million and OTTI of $44.5 million. | |||
[2] | Includes principal payments receivable of $1.9 million and $1.1 million at September 30, 2014 and December 31, 2013, respectively, which are not included in the Principal/Current Face. | |||
[3] | Based on management’s current estimates of future principal cash flows expected to be received. | |||
[4] | Includes RPL/NPL MBS which had a $26.5 million Principal/Current face, $26.7 million amortized cost and $26.6 million fair value at September 30, 2014. At December 31, 2013, RPL/NPL MBS had a $3.9 million Principal/Current face, amortized cost and fair value. | |||
[5] | At September 30, 2014 and December 31, 2013, the Company expected to recover approximately 83% and 81%, respectively, of the then-current face amount of Non-Agency MBS. |
MBS_Details_2
MBS (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | ||||||
Security | Security | |||||||||
Fair Value | ' | ' | ' | ' | ' | |||||
Less than 12 months | $576,939,000 | ' | $576,939,000 | ' | ' | |||||
12 months or more | 2,061,744,000 | ' | 2,061,744,000 | ' | ' | |||||
Total | 2,638,683,000 | ' | 2,638,683,000 | ' | ' | |||||
Unrealized Losses | ' | ' | ' | ' | ' | |||||
Less than 12 months | ' | ' | 2,810,000 | ' | ' | |||||
12 months or more | ' | ' | 54,004,000 | ' | ' | |||||
Total | ' | ' | 56,814,000 | ' | ' | |||||
Number of Securities | ' | ' | ' | ' | ' | |||||
Less than 12 months (in security) | 61 | ' | 61 | ' | ' | |||||
12 months or more (in security) | 261 | ' | 261 | ' | ' | |||||
Unrealized loss on securities | ' | ' | 56,814,000 | ' | 96,034,000 | |||||
Roll-forward of the credit loss component of OTTI | ' | ' | ' | ' | ' | |||||
Credit loss component of OTTI at beginning of period | 36,115,000 | ' | 36,115,000 | ' | ' | |||||
Additions for credit related OTTI not previously recognized | 0 | ' | 0 | ' | ' | |||||
Subsequent additional credit related OTTI recorded | 0 | ' | 0 | ' | ' | |||||
Credit loss component of OTTI at end of period | 36,115,000 | ' | 36,115,000 | ' | 36,115,000 | |||||
AOCI from MBS: | ' | ' | ' | ' | ' | |||||
Unrealized gain on MBS at beginning of period | 905,704,000 | 700,871,000 | 752,912,000 | 824,808,000 | 824,808,000 | |||||
Reclassification adjustment for MBS sales included in net income | -13,589,000 | -15,158,000 | -21,180,000 | -17,398,000 | ' | |||||
Change in AOCI from MBS | -56,999,000 | 16,692,000 | 95,793,000 | -107,245,000 | ' | |||||
Balance at end of period | 848,705,000 | 717,563,000 | 848,705,000 | 717,563,000 | 752,912,000 | |||||
Agency Mortgage Backed Securities | ' | ' | ' | ' | ' | |||||
Fair Value | ' | ' | ' | ' | ' | |||||
Less than 12 months | 480,439,000 | ' | 480,439,000 | ' | ' | |||||
12 months or more | 2,019,394,000 | ' | 2,019,394,000 | ' | ' | |||||
Total | 2,499,833,000 | ' | 2,499,833,000 | ' | ' | |||||
Unrealized Losses | ' | ' | ' | ' | ' | |||||
Less than 12 months | ' | ' | 1,823,000 | ' | ' | |||||
12 months or more | ' | ' | 51,861,000 | ' | ' | |||||
Total | ' | ' | 53,684,000 | ' | ' | |||||
Number of Securities | ' | ' | ' | ' | ' | |||||
Less than 12 months (in security) | 49 | ' | 49 | ' | ' | |||||
12 months or more (in security) | 246 | ' | 246 | ' | ' | |||||
Unrealized loss on securities | ' | ' | 53,684,000 | ' | 92,285,000 | |||||
AOCI from MBS: | ' | ' | ' | ' | ' | |||||
Unrealized (loss)/gain on mortgage backed securities | -14,937,000 | 15,469,000 | 46,000,000 | -152,302,000 | ' | |||||
MBS Interest Income | ' | ' | ' | ' | ' | |||||
Coupon interest | 46,529,000 | 51,997,000 | 145,864,000 | 163,986,000 | ' | |||||
Effective yield adjustment | -13,463,000 | [1] | -15,839,000 | [1] | -35,860,000 | [1] | -47,004,000 | [1] | ' | |
Agency MBS interest income | 33,066,000 | 36,158,000 | 110,004,000 | 116,982,000 | ' | |||||
Agency Mortgage Backed Securities | Fannie Mae | ' | ' | ' | ' | ' | |||||
Fair Value | ' | ' | ' | ' | ' | |||||
Less than 12 months | 451,536,000 | ' | 451,536,000 | ' | ' | |||||
12 months or more | 1,316,459,000 | ' | 1,316,459,000 | ' | ' | |||||
Total | 1,767,995,000 | ' | 1,767,995,000 | ' | ' | |||||
Unrealized Losses | ' | ' | ' | ' | ' | |||||
Less than 12 months | ' | ' | 1,639,000 | ' | ' | |||||
12 months or more | ' | ' | 30,757,000 | ' | ' | |||||
Total | ' | ' | 32,396,000 | ' | ' | |||||
Number of Securities | ' | ' | ' | ' | ' | |||||
Less than 12 months (in security) | 46 | ' | 46 | ' | ' | |||||
12 months or more (in security) | 143 | ' | 143 | ' | ' | |||||
Unrealized loss on securities | ' | ' | 32,396,000 | ' | 55,186,000 | |||||
Agency Mortgage Backed Securities | Freddie Mac | ' | ' | ' | ' | ' | |||||
Fair Value | ' | ' | ' | ' | ' | |||||
Less than 12 months | 28,903,000 | ' | 28,903,000 | ' | ' | |||||
12 months or more | 702,935,000 | ' | 702,935,000 | ' | ' | |||||
Total | 731,838,000 | ' | 731,838,000 | ' | ' | |||||
Unrealized Losses | ' | ' | ' | ' | ' | |||||
Less than 12 months | ' | ' | 184,000 | ' | ' | |||||
12 months or more | ' | ' | 21,104,000 | ' | ' | |||||
Total | ' | ' | 21,288,000 | ' | ' | |||||
Number of Securities | ' | ' | ' | ' | ' | |||||
Less than 12 months (in security) | 3 | ' | 3 | ' | ' | |||||
12 months or more (in security) | 103 | ' | 103 | ' | ' | |||||
Unrealized loss on securities | ' | ' | 21,288,000 | ' | 37,099,000 | |||||
Non-Agency Mortgage Backed Securities | ' | ' | ' | ' | ' | |||||
Fair Value | ' | ' | ' | ' | ' | |||||
Less than 12 months | 96,500,000 | ' | 96,500,000 | ' | ' | |||||
12 months or more | 42,350,000 | ' | 42,350,000 | ' | ' | |||||
Total | 138,850,000 | ' | 138,850,000 | ' | ' | |||||
Unrealized Losses | ' | ' | ' | ' | ' | |||||
Less than 12 months | ' | ' | 987,000 | ' | ' | |||||
12 months or more | ' | ' | 2,143,000 | ' | ' | |||||
Total | ' | ' | 3,130,000 | ' | ' | |||||
Number of Securities | ' | ' | ' | ' | ' | |||||
Less than 12 months (in security) | 12 | ' | 12 | ' | ' | |||||
12 months or more (in security) | 15 | ' | 15 | ' | ' | |||||
Unrealized loss on securities | ' | ' | 3,130,000 | ' | 3,749,000 | |||||
Changes in the components of the purchase discount on Non-Agency MBS | ' | ' | ' | ' | ' | |||||
MBS linked transactions purchase discount designated as accretable purchase discount reallocated to credit reserve | 333,000 | ' | 218,000 | ' | ' | |||||
MBS linked transactions purchase discount designated as credit reserve reallocated to accretable purchase discount | ' | 0 | ' | 129,000 | ' | |||||
AOCI from MBS: | ' | ' | ' | ' | ' | |||||
Unrealized (loss)/gain on mortgage backed securities | -28,473,000 | 16,381,000 | 70,973,000 | 62,455,000 | ' | |||||
Sales of MBS | ' | ' | ' | ' | ' | |||||
Proceeds from Sale of Mortgage Backed Securities (MBS) categorized as Available-for-sale | 61,600,000 | 102,200,000 | 103,600,000 | 118,200,000 | ' | |||||
Gain (Loss) on Sales of Mortgage Backed Securities (MBS) | 13,900,000 | 13,700,000 | 25,300,000 | 19,700,000 | ' | |||||
MBS Interest Income | ' | ' | ' | ' | ' | |||||
Coupon interest | 52,396,000 | 62,802,000 | 162,148,000 | 196,688,000 | ' | |||||
Effective yield adjustment | 25,478,000 | [2] | 19,501,000 | [2] | 78,561,000 | [2] | 48,128,000 | [2] | ' | |
Agency MBS interest income | 77,874,000 | 82,303,000 | 240,709,000 | 244,816,000 | ' | |||||
Non-Agency Mortgage Backed Securities | Discount Designated as Credit Reserve and OTTI | ' | ' | ' | ' | ' | |||||
Changes in the components of the purchase discount on Non-Agency MBS | ' | ' | ' | ' | ' | |||||
Balance at beginning of period | -986,842,000 | [3] | -1,264,971,000 | [3] | -1,043,037,000 | [4] | -1,380,506,000 | [4] | -1,380,506,000 | [4] |
Accretion of discount | 0 | [3] | 0 | [3] | 0 | [4] | 0 | [4] | ' | |
Realized credit losses | 20,733,000 | [3] | 48,642,000 | [3] | 69,129,000 | [4] | 137,324,000 | [4] | ' | |
Purchases | -4,200,000 | [3] | -851,000 | [3] | -70,535,000 | [4] | -74,238,000 | [4] | ' | |
Sales | 21,024,000 | [3] | 27,178,000 | [3] | 34,780,000 | [4] | 38,150,000 | [4] | ' | |
Transfers/release of credit reserve | 20,185,000 | [3] | 71,010,000 | [3] | 80,563,000 | [4] | 160,278,000 | [4] | ' | |
Balance at end of period | -929,100,000 | [3],[4] | -1,118,992,000 | [3],[4] | -929,100,000 | [3],[4] | -1,118,992,000 | [3],[4] | ' | |
Non-Agency Mortgage Backed Securities | Accretable Discount | ' | ' | ' | ' | ' | |||||
Changes in the components of the purchase discount on Non-Agency MBS | ' | ' | ' | ' | ' | |||||
Balance at beginning of period | -436,111,000 | [3],[5] | -396,581,000 | [3],[5] | -460,039,000 | [4],[5] | -371,626,000 | [4],[5] | -371,626,000 | [4],[5] |
Accretion of discount | 25,504,000 | [3],[5] | 19,556,000 | [3],[5] | 78,701,000 | [4],[5] | 48,305,000 | [4],[5] | ' | |
Realized credit losses | 0 | [3],[5] | 0 | [3],[5] | 0 | [4],[5] | 0 | [4],[5] | ' | |
Purchases | 272,000 | [3],[5] | 879,000 | [3],[5] | 25,314,000 | [4],[5] | 30,533,000 | [4],[5] | ' | |
Sales | 4,169,000 | [3],[5] | 4,248,000 | [3],[5] | 10,236,000 | [4],[5] | 10,158,000 | [4],[5] | ' | |
Transfers/release of credit reserve | -20,185,000 | [3],[5] | -71,010,000 | [3],[5] | -80,563,000 | [4],[5] | -160,278,000 | [4],[5] | ' | |
Balance at end of period | -426,351,000 | [3],[4],[5] | -442,908,000 | [3],[4],[5] | -426,351,000 | [3],[4],[5] | -442,908,000 | [3],[4],[5] | ' | |
Non-Agency Mortgage Backed Securities | Non-Agency MBS Expected to Recover Par | ' | ' | ' | ' | ' | |||||
Fair Value | ' | ' | ' | ' | ' | |||||
Less than 12 months | 29,826,000 | [6] | ' | 29,826,000 | [6] | ' | ' | |||
12 months or more | 22,309,000 | [6] | ' | 22,309,000 | [6] | ' | ' | |||
Total | 52,135,000 | [6] | ' | 52,135,000 | [6] | ' | ' | |||
Unrealized Losses | ' | ' | ' | ' | ' | |||||
Less than 12 months | ' | ' | 333,000 | [6] | ' | ' | ||||
12 months or more | ' | ' | 1,075,000 | [6] | ' | ' | ||||
Total | ' | ' | 1,408,000 | [6] | ' | ' | ||||
Number of Securities | ' | ' | ' | ' | ' | |||||
Less than 12 months (in security) | 3 | [6] | ' | 3 | [6] | ' | ' | |||
12 months or more (in security) | 8 | [6] | ' | 8 | [6] | ' | ' | |||
Unrealized loss on securities | ' | ' | 1,408,000 | [6],[7] | ' | 1,357,000 | [6],[7] | |||
Non-Agency Mortgage Backed Securities | Non-Agency MBS Expected to Recover Less Than Par | ' | ' | ' | ' | ' | |||||
Fair Value | ' | ' | ' | ' | ' | |||||
Less than 12 months | 66,674,000 | [6] | ' | 66,674,000 | [6] | ' | ' | |||
12 months or more | 20,041,000 | [6] | ' | 20,041,000 | [6] | ' | ' | |||
Total | 86,715,000 | [6] | ' | 86,715,000 | [6] | ' | ' | |||
Unrealized Losses | ' | ' | ' | ' | ' | |||||
Less than 12 months | ' | ' | 654,000 | [6] | ' | ' | ||||
12 months or more | ' | ' | 1,068,000 | [6] | ' | ' | ||||
Total | ' | ' | 1,722,000 | [6] | ' | ' | ||||
Number of Securities | ' | ' | ' | ' | ' | |||||
Less than 12 months (in security) | 9 | [6] | ' | 9 | [6] | ' | ' | |||
12 months or more (in security) | 7 | [6] | ' | 7 | [6] | ' | ' | |||
Unrealized loss on securities | ' | ' | $1,722,000 | [6],[8] | ' | $2,392,000 | [6],[8] | |||
[1] | Includes amortization of premium paid net of accretion of purchase discount. For Agency MBS, interest income is recorded at an effective yield, which reflects net premium amortization based on actual prepayment activity. | |||||||||
[2] | The effective yield adjustment is the difference between the net income calculated using the net yield, which is based on management’s estimates of future cash flows for Non-Agency MBS, less the current coupon yield. | |||||||||
[3] | The Company reallocated $333,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions during the three months ended September 30, 2014. The Company did not reallocate any purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the three months ended September 30, 2013. | |||||||||
[4] | During the nine months ended September 30, 2014, the Company reallocated $218,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions. In addition, the Company reallocated $129,000 of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the nine months ended September 30, 2013. | |||||||||
[5] | Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security. | |||||||||
[6] | Based on management’s current estimates of future principal cash flows expected to be received. | |||||||||
[7] | Includes RPL/NPL MBS which had a $26.5 million Principal/Current face, $26.7 million amortized cost and $26.6 million fair value at September 30, 2014. At December 31, 2013, RPL/NPL MBS had a $3.9 million Principal/Current face, amortized cost and fair value. | |||||||||
[8] | At September 30, 2014 and December 31, 2013, the Company expected to recover approximately 83% and 81%, respectively, of the then-current face amount of Non-Agency MBS. |
Interest_Receivable_Details
Interest Receivable (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Interest receivable by investment category | ' | ' |
Total interest receivable | $32,499 | $35,828 |
Total MBS | ' | ' |
Interest receivable by investment category | ' | ' |
Total interest receivable | 32,472 | 35,806 |
Fannie Mae | ' | ' |
Interest receivable by investment category | ' | ' |
Total interest receivable | 12,599 | 13,760 |
Freddie Mac | ' | ' |
Interest receivable by investment category | ' | ' |
Total interest receivable | 2,728 | 3,110 |
Ginnie Mae | ' | ' |
Interest receivable by investment category | ' | ' |
Total interest receivable | 18 | 19 |
Non-Agency Mortgage Backed Securities | ' | ' |
Interest receivable by investment category | ' | ' |
Total interest receivable | 17,127 | 18,917 |
Money market and other investments | ' | ' |
Interest receivable by investment category | ' | ' |
Total interest receivable | $27 | $22 |
Derivative_Instruments_Details
Derivative Instruments (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | ||
In Thousands, unless otherwise specified | ||||
Derivative Instruments | ' | ' | ||
Derivative assets, fair value | $4,322 | $13,000 | ||
Derivative liabilities, at fair value | -35,493 | [1] | -28,217 | [1] |
Linked Transactions | Non-Hedging | Assets | ' | ' | ||
Derivative Instruments | ' | ' | ||
Linked Transactions, at fair value | 190,681 | 28,181 | ||
Swaps | Hedging | Assets | Non-cleared legacy Swaps | ' | ' | ||
Derivative Instruments | ' | ' | ||
Derivative assets, fair value | 4,322 | [2] | 4,925 | [2] |
Notional amount of derivative assets | 450,000 | [2] | ' | |
Swaps | Hedging | Assets | Cleared Swaps | ' | ' | ||
Derivative Instruments | ' | ' | ||
Derivative assets, fair value | 0 | [3] | 8,075 | [3] |
Notional amount of derivative assets | 0 | [3] | ' | |
Swaps | Hedging | Liabilities | Non-cleared legacy Swaps | ' | ' | ||
Derivative Instruments | ' | ' | ||
Derivative liabilities, at fair value | -8,187 | [2] | -24,437 | [2] |
Notional amount of derivative liabilities | 880,892 | [2] | ' | |
Swaps | Hedging | Liabilities | Cleared Swaps | ' | ' | ||
Derivative Instruments | ' | ' | ||
Derivative liabilities, at fair value | -27,306 | [3] | -3,780 | [3] |
Notional amount of derivative liabilities | $2,550,000 | [3] | ' | |
[1] | The fair value of securities pledged against the Company’s Swaps was $67.4 million and $73.9 million at September 30, 2014 and December 31, 2013, respectively. | |||
[2] | Non-cleared legacy Swaps include Swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. | |||
[3] | Cleared Swaps include Swaps executed bilaterally with a counterparty in the over-the-counter market but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties. |
Derivative_Instruments_Details1
Derivative Instruments (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
Components of unrealized net gains and net interest income from Linked Transactions | ' | ' | ' | ' | ' |
Change in fair value of Linked Transactions included in earnings | ' | ' | $2,542 | ($8,318) | ' |
Linked Transactions | ' | ' | ' | ' | ' |
Linked Repurchase Agreements | ' | ' | ' | ' | ' |
Balance | 791,807 | ' | 791,807 | ' | 102,737 |
Weighted Average Interest Rate (as a percent) | 1.48% | ' | 1.48% | ' | 1.73% |
Linked MBS | ' | ' | ' | ' | ' |
Fair Value | 982,308 | ' | 982,308 | ' | 130,790 |
Amortized Cost | 976,427 | ' | 976,427 | ' | 126,497 |
Par/Current Face | 989,314 | ' | 989,314 | ' | 134,430 |
Weighted Average Coupon Rate (as a percent) | ' | ' | 3.44% | ' | 3.96% |
Accrued Interest Receivable, Mortgage Back Securities | 709 | ' | 709 | ' | 210 |
Accrued Interest Payable, Mortgage Back Securities | 529 | ' | 529 | ' | 82 |
Components of unrealized net gains and net interest income from Linked Transactions | ' | ' | ' | ' | ' |
Interest income attributable to MBS underlying Linked Transactions | 6,625 | 1,109 | 11,591 | 2,431 | ' |
Interest expense attributable to linked repurchase agreement borrowings underlying Linked Transactions | -2,246 | -275 | -3,719 | -552 | ' |
Change in fair value of Linked Transactions included in earnings | -1,820 | -290 | 1,714 | -94 | ' |
Unrealized net gains and net interest income from Linked Transactions | 2,559 | 544 | 9,586 | 1,785 | ' |
Linked Transactions | Within 30 days | ' | ' | ' | ' | ' |
Linked Repurchase Agreements | ' | ' | ' | ' | ' |
Balance | 786,207 | ' | 786,207 | ' | 93,835 |
Weighted Average Interest Rate (as a percent) | 1.48% | ' | 1.48% | ' | 1.76% |
Linked Transactions | Over 30 days to 90 days | ' | ' | ' | ' | ' |
Linked Repurchase Agreements | ' | ' | ' | ' | ' |
Balance | 5,600 | ' | 5,600 | ' | 8,902 |
Weighted Average Interest Rate (as a percent) | 1.35% | ' | 1.35% | ' | 1.44% |
Legacy Non-Agency MBS | ' | ' | ' | ' | ' |
Components of unrealized net gains and net interest income from Linked Transactions | ' | ' | ' | ' | ' |
Interest income attributable to MBS underlying Linked Transactions | 77,874 | 82,303 | 240,709 | 244,816 | ' |
Legacy Non-Agency MBS | Linked Transactions | ' | ' | ' | ' | ' |
Linked MBS | ' | ' | ' | ' | ' |
Fair Value | 65,656 | ' | 65,656 | ' | 39,280 |
Amortized Cost | 60,588 | ' | 60,588 | ' | 35,028 |
Par/Current Face | 71,982 | ' | 71,982 | ' | 42,199 |
Weighted Average Coupon Rate (as a percent) | ' | ' | 4.38% | ' | 3.92% |
RPL/NPL MBS | Linked Transactions | ' | ' | ' | ' | ' |
Linked MBS | ' | ' | ' | ' | ' |
Fair Value | 916,652 | ' | 916,652 | ' | 91,510 |
Amortized Cost | 915,839 | ' | 915,839 | ' | 91,469 |
Par/Current Face | $917,332 | ' | $917,332 | ' | $92,231 |
Weighted Average Coupon Rate (as a percent) | ' | ' | 3.36% | ' | 3.97% |
Derivative_Instruments_Details2
Derivative Instruments (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | ||||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Assets pledged | $9,706,452,000 | ' | $9,706,452,000 | ' | $10,227,092,000 | |||
Restricted cash | 43,751,000 | ' | 43,751,000 | ' | 37,520,000 | |||
Net unrealized gains (losses) | -31,171,000 | -51,901,000 | -31,171,000 | -51,901,000 | ' | |||
Interest expense attributable to Swaps | 39,358,000 | 41,950,000 | 120,848,000 | 120,586,000 | ' | |||
TBA short positions, at fair value | ' | 8,700,000 | ' | 8,700,000 | ' | |||
AOCI from derivative hedging instruments: | ' | ' | ' | ' | ' | |||
Balance at beginning of period | -54,671,000 | -31,967,000 | -15,217,000 | -62,831,000 | ' | |||
Unrealized gain/(loss) on Swaps, net | 23,500,000 | -19,934,000 | -16,401,000 | 10,930,000 | ' | |||
Reclassification of unrealized loss on de-designated Swaps | 0 | 0 | 447,000 | 0 | ' | |||
Balance at end of period | -31,171,000 | -51,901,000 | -31,171,000 | -51,901,000 | ' | |||
Interest Rate Contract | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate fair value of assets needed to immediately settle | 37,700,000 | ' | 37,700,000 | ' | ' | |||
Associated accrued interest payable | 2,200,000 | ' | 2,200,000 | ' | ' | |||
Assets pledged | 102,782,000 | ' | 102,782,000 | ' | 111,379,000 | |||
Swaps | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Interest rate, description | ' | ' | 'one-month or three-month London Interbank Offered Rate (LIBOR) | ' | ' | |||
Aggregate notional amount of derivatives | 3,880,892,000 | [1] | ' | 3,880,892,000 | [1] | ' | 4,045,212,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 1.90% | [1] | ' | 1.90% | [1] | ' | 1.91% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.16% | [1],[2] | ' | 0.16% | [1],[2] | ' | 0.17% | [1],[2] |
Interest expense attributable to Swaps | 17,491,000 | 15,888,000 | 53,129,000 | 40,884,000 | ' | |||
Weighted average Swap rate paid (as a percent) | 1.91% | 2.07% | 1.92% | 2.15% | ' | |||
Weighted average Swap rate received (as a percent) | 0.16% | 0.20% | 0.16% | 0.20% | ' | |||
Swaps | Minimum | LIBOR | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Derivative, variable interest rate, term | ' | ' | '1 month | ' | ' | |||
Swaps | Maximum | LIBOR | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Derivative, variable interest rate, term | ' | ' | '3 months | ' | ' | |||
Swaps | Within 30 days | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 56,861,000 | [1] | ' | 56,861,000 | [1] | ' | 17,635,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 4.67% | [1] | ' | 4.67% | [1] | ' | 3.90% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.17% | [1],[2] | ' | 0.17% | [1],[2] | ' | 0.21% | [1],[2] |
Swaps | Over 30 days to 3 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 63,860,000 | [1] | ' | 63,860,000 | [1] | ' | 24,216,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 2.19% | [1] | ' | 2.19% | [1] | ' | 3.93% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.17% | [1],[2] | ' | 0.17% | [1],[2] | ' | 0.21% | [1],[2] |
Swaps | Over 3 months to 6 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 410,171,000 | [1] | ' | 410,171,000 | [1] | ' | 476,147,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 1.90% | [1] | ' | 1.90% | [1] | ' | 1.80% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.16% | [1],[2] | ' | 0.16% | [1],[2] | ' | 0.17% | [1],[2] |
Swaps | Over 6 months to 12 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 300,000,000 | [1] | ' | 300,000,000 | [1] | ' | 167,043,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 2.06% | [1] | ' | 2.06% | [1] | ' | 3.22% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.16% | [1],[2] | ' | 0.16% | [1],[2] | ' | 0.18% | [1],[2] |
Swaps | Over 12 months to 24 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 50,000,000 | [1] | ' | 50,000,000 | [1] | ' | 710,171,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 2.13% | [1] | ' | 2.13% | [1] | ' | 1.97% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.15% | [1],[2] | ' | 0.15% | [1],[2] | ' | 0.17% | [1],[2] |
Swaps | Over 24 months to 36 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 450,000,000 | [1] | ' | 450,000,000 | [1] | ' | 150,000,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 0.56% | [1] | ' | 0.56% | [1] | ' | 1.03% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.16% | [1],[2] | ' | 0.16% | [1],[2] | ' | 0.17% | [1],[2] |
Swaps | Over 36 months to 48 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 550,000,000 | [1] | ' | 550,000,000 | [1] | ' | 350,000,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 1.49% | [1] | ' | 1.49% | [1] | ' | 0.58% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.15% | [1],[2] | ' | 0.15% | [1],[2] | ' | 0.17% | [1],[2] |
Swaps | Over 48 months to 60 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 200,000,000 | [1] | ' | 200,000,000 | [1] | ' | 550,000,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 1.71% | [1] | ' | 1.71% | [1] | ' | 1.49% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.15% | [1],[2] | ' | 0.15% | [1],[2] | ' | 0.17% | [1],[2] |
Swaps | Over 60 months to 72 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 1,500,000,000 | [1] | ' | 1,500,000,000 | [1] | ' | 0 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 2.22% | [1] | ' | 2.22% | [1] | ' | 0.00% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.15% | [1],[2] | ' | 0.15% | [1],[2] | ' | 0.00% | [1],[2] |
Swaps | Over 72 months to 84 months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 200,000,000 | [1] | ' | 200,000,000 | [1] | ' | 1,500,000,000 | [1] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 2.20% | [1] | ' | 2.20% | [1] | ' | 2.22% | [1] |
Weighted Average Variable Interest Rate (as a percent) | 0.15% | [1],[2] | ' | 0.15% | [1],[2] | ' | 0.17% | [1],[2] |
Swaps | Over 84 Months | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 100,000,000 | [1],[3] | ' | 100,000,000 | [1],[3] | ' | 100,000,000 | [1],[3] |
Weighted Average Fixed-Pay Interest Rate (as a percent) | 2.75% | [1],[3] | ' | 2.75% | [1],[3] | ' | 2.75% | [1],[3] |
Weighted Average Variable Interest Rate (as a percent) | 0.15% | [1],[2],[3] | ' | 0.15% | [1],[2],[3] | ' | 0.17% | [1],[2],[3] |
Agency MBS, at fair value | Interest Rate Contract | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Assets pledged | 67,431,000 | ' | 67,431,000 | ' | 73,859,000 | |||
Restricted cash | Interest Rate Contract | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Restricted cash | 35,351,000 | ' | 35,351,000 | ' | 37,520,000 | |||
New Swaps | Swaps | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount | 0 | ' | 400,000,000 | ' | ' | |||
Number of new Swaps | 0 | ' | 4 | ' | ' | |||
New Swaps | Swaps | Minimum | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Initial maturity date | ' | ' | '5 years | ' | ' | |||
New Swaps | Swaps | Maximum | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Initial maturity date | ' | ' | '7 years | ' | ' | |||
Swaps amortized expired | Swaps | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount | 46,322,000 | ' | 564,320,000 | ' | ' | |||
Hedging | Swaps | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Aggregate notional amount of derivatives | 3,881,000,000 | [1] | ' | 3,881,000,000 | [1] | ' | ' | |
Net unrealized gains (losses) | -31,200,000 | ' | -31,200,000 | ' | ' | |||
Average maturity term of swaps | ' | ' | '49 months | ' | ' | |||
Maximum maturity term of swaps | ' | ' | '107 months | ' | ' | |||
AOCI from derivative hedging instruments: | ' | ' | ' | ' | ' | |||
Balance at end of period | ($31,200,000) | ' | ($31,200,000) | ' | ' | |||
QTD | New Swaps | Swaps | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Weighted Average Fixed-Pay Interest Rate (as a percent) | 0.00% | ' | 0.00% | ' | ' | |||
QTD | Swaps amortized expired | Swaps | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Weighted Average Fixed-Pay Interest Rate (as a percent) | 2.84% | ' | 2.84% | ' | ' | |||
YTD | New Swaps | Swaps | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Weighted Average Fixed-Pay Interest Rate (as a percent) | 1.95% | ' | 1.95% | ' | ' | |||
YTD | Swaps amortized expired | Swaps | ' | ' | ' | ' | ' | |||
Derivative Instruments | ' | ' | ' | ' | ' | |||
Weighted Average Fixed-Pay Interest Rate (as a percent) | 2.05% | ' | 2.05% | ' | ' | |||
[1] | Each maturity category reflects contractual amortization and/or maturity of notional amounts. | |||||||
[2] | Reflects the benchmark variable rate due from the counterparty at the date presented, which rate adjusts monthly or quarterly based on one-month or three-month LIBOR, respectively. | |||||||
[3] | Reflects one Swap with a maturity date of July 2023. |
Repurchase_Agreements_Details
Repurchase Agreements (Details) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Dec. 31, 2013 | |||
Repurchase Agreements | ' | ' | ||
Balance of repurchase agreements | $8,125,723,000 | [1] | $8,339,297,000 | [1] |
Securities Sold under Agreements to Repurchase | ' | ' | ||
Repurchase Agreements | ' | ' | ||
Weighted average remaining term-to-interest rate reset of borrowings under repurchase agreements | '26 days | '25 days | ||
Effective repricing period | '21 months | '24 months | ||
Balance of repurchase agreements | 8,125,723,000 | [2],[3] | 8,339,297,000 | [2] |
Agency Mortgage Backed Securities | Securities Sold under Agreements to Repurchase | ' | ' | ||
Repurchase Agreements | ' | ' | ||
Balance of repurchase agreements | 5,417,797,000 | 5,750,053,000 | ||
Fair Value of securities pledged as collateral under repurchase agreements | 5,698,202,000 | 6,068,447,000 | ||
Weighted average haircut (as a percent) | 4.70% | [4] | 4.89% | [4] |
Non-Agency Mortgage Backed Securities | Securities Sold under Agreements to Repurchase | ' | ' | ||
Repurchase Agreements | ' | ' | ||
Balance of repurchase agreements | 2,263,910,000 | [5] | 2,206,586,000 | [5] |
Fair Value of securities pledged as collateral under repurchase agreements | 3,454,698,000 | [5],[6] | 3,663,523,000 | [5],[6] |
Weighted average haircut (as a percent) | 28.48% | [4] | 32.48% | [4] |
Non-Agency MBS acquired from consolidated VIEs | 1,276,000,000 | 1,885,000,000 | ||
U.S. Treasuries | Securities Sold under Agreements to Repurchase | ' | ' | ||
Repurchase Agreements | ' | ' | ||
Balance of repurchase agreements | 444,016,000 | 382,658,000 | ||
Fair Value of securities pledged as collateral under repurchase agreements | $442,370,000 | $383,743,000 | ||
Weighted average haircut (as a percent) | 1.41% | [4] | 1.65% | [4] |
[1] | The fair value of securities pledged against the Company’s repurchase agreements was $9.595 billion and $10.116 billion at September 30, 2014 and December 31, 2013, respectively. | |||
[2] | At September 30, 2014 and December 31, 2013, the Company had repurchase agreements of $791.8 million and $102.7 million, respectively, that were linked to Non-Agency MBS purchases and accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 5) | |||
[3] | At September 30, 2014, the Company had repurchase agreements of $791.8 million that were linked to Non-Agency MBS purchases and were accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 5) | |||
[4] | Haircut represents the percentage amount by which the collateral value is contractually required to exceed the loan amount on the Company’s repurchase agreements borrowings. | |||
[5] | Does not reflect Non-Agency MBS and repurchase agreement borrowings that are components of Linked Transactions. | |||
[6] | Includes $1.276 billion and $1.885 billion of Non-Agency MBS acquired from consolidated VIEs at September 30, 2014, and December 31, 2013, respectively, that are eliminated from the Company’s consolidated balance sheets. |
Repurchase_Agreements_Details_
Repurchase Agreements (Details 2) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | ||
In Thousands, unless otherwise specified | counterparty | counterparty | ||
Information about MBS | ' | ' | ||
Repurchase agreements | $8,125,723 | [1] | $8,339,297 | [1] |
Number of counterparties | 26 | 26 | ||
Threshold percent of stockholders' equity at risk with single counterparty to repurchase agreements or Linked Transactions | 5.00% | ' | ||
Repurchase Agreement Borrowings | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 8,125,723 | [2],[3] | 8,339,297 | [2] |
Weighted Average Interest Rate (as a percent) | 0.70% | 0.77% | ||
Repurchase Agreement Borrowings | Overnight | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 0 | [3] | ' | |
Weighted Average Interest Rate (as a percent) | 0.00% | ' | ||
Repurchase Agreement Borrowings | Within 30 days | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 6,069,537 | [3] | ' | |
Weighted Average Interest Rate (as a percent) | 0.55% | ' | ||
Repurchase Agreement Borrowings | Over 30 days to 90 days | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 1,221,035 | [3] | ' | |
Weighted Average Interest Rate (as a percent) | 0.69% | ' | ||
Repurchase Agreement Borrowings | Over 90 days to 12 months | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 835,151 | [3] | ' | |
Weighted Average Interest Rate (as a percent) | 1.84% | ' | ||
Repurchase Agreement Borrowings | Non-Agency Mortgage Backed Securities | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 2,263,910 | [4] | 2,206,586 | [4] |
Repurchase Agreement Borrowings | Within 30 days | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 6,619,916 | [2] | 7,064,598 | [2] |
Weighted Average Interest Rate (as a percent) | 0.65% | 0.68% | ||
Repurchase Agreement Borrowings | Over 30 days to 3 months | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 1,367,544 | [2] | 1,274,699 | [2] |
Weighted Average Interest Rate (as a percent) | 0.82% | 1.31% | ||
Repurchase Agreement Borrowings | Over 3 months to 12 months | ' | ' | ||
Information about MBS | ' | ' | ||
Repurchase agreements | 138,263 | [2] | 0 | [2] |
Weighted Average Interest Rate (as a percent) | 1.65% | 0.00% | ||
Linked Transactions | Non-Agency Mortgage Backed Securities | ' | ' | ||
Information about MBS | ' | ' | ||
Linked repurchase agreements | $791,800 | $102,700 | ||
[1] | The fair value of securities pledged against the Company’s repurchase agreements was $9.595 billion and $10.116 billion at September 30, 2014 and December 31, 2013, respectively. | |||
[2] | At September 30, 2014 and December 31, 2013, the Company had repurchase agreements of $791.8 million and $102.7 million, respectively, that were linked to Non-Agency MBS purchases and accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 5) | |||
[3] | At September 30, 2014, the Company had repurchase agreements of $791.8 million that were linked to Non-Agency MBS purchases and were accounted for as Linked Transactions, and as such, the linked repurchase agreements are not included in the above table. (See Note 5) | |||
[4] | Does not reflect Non-Agency MBS and repurchase agreement borrowings that are components of Linked Transactions. |
Repurchase_Agreements_Details_1
Repurchase Agreements (Details 3) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | |
Alpine Securitization Corporation/Credit Suisse | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | $509,523 | [1],[2] |
Weighted Average Months to Maturity for Repurchase Agreements | '0 months | [1] |
Percent of Stockholders’ Equity | 15.70% | [1] |
Alpine Securitization Corporation | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 353,800 | |
Credit Suisse Securities USA LLC | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 155,700 | |
Wells Fargo | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 339,149 | [2],[3] |
Weighted Average Months to Maturity for Repurchase Agreements | '5 months | [3] |
Percent of Stockholders’ Equity | 10.40% | [3] |
Wells Fargo Bank | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 199,300 | |
Wells Fargo Securities LLC | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 139,900 | |
RBS | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 295,142 | [2] |
Weighted Average Months to Maturity for Repurchase Agreements | '2 months | |
Percent of Stockholders’ Equity | 9.10% | |
UBS | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 236,453 | [2],[4] |
Weighted Average Months to Maturity for Repurchase Agreements | '16 months | [4] |
Percent of Stockholders’ Equity | 7.30% | [4] |
RBC | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 179,387 | [2],[5] |
Weighted Average Months to Maturity for Repurchase Agreements | '5 months | [5] |
Percent of Stockholders’ Equity | 5.50% | [5] |
Royal Bank of Canada | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | 167,400 | |
RBC Capital Markets LLC | ' | |
Repurchase agreements counterparty risk | ' | |
Amount at Risk | $12,000 | |
[1] | Includes $353.8 million at risk with Alpine Securitization Corporation and $155.7 million at risk with Credit Suisse Securities (USA) LLC. Alpine Securitization Corporation is a special purpose funding vehicle that is a consolidated affiliate of Credit Suisse Group. Counterparty rating shown is the asset backed short term rating for Alpine Securitization Corporation. | |
[2] | The amount at risk reflects the difference between (a)Â the amount loaned to the Company through repurchase agreements and repurchase agreements underlying Linked Transactions, including interest payable, and (b)Â the cash and the fair value of the securities pledged by the Company as collateral and MBS underlying Linked Transactions, including accrued interest receivable on such securities. | |
[3] | Includes $199.3 million at risk with Wells Fargo Bank, NA and $139.9 million at risk with Wells Fargo Securities LLC. | |
[4] | Includes Non-Agency MBS pledged as collateral with contemporaneous repurchase and reverse repurchase agreements. | |
[5] | Includes $167.4 million at risk with Royal Bank of Canada and $12.0 million at risk with RBC Capital Markets LLC. |
Collateral_Positions_Details
Collateral Positions (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | ||
Collateral Positions | ' | ' | ||
Assets Pledged | $9,706,452,000 | $10,227,092,000 | ||
Collateral Held | 442,370,000 | 383,743,000 | ||
Derivative contracts | ' | ' | ||
Collateral Positions | ' | ' | ||
Assets Pledged | 102,782,000 | 111,379,000 | ||
Derivative contracts | Agency Mortgage Backed Securities | ' | ' | ||
Collateral Positions | ' | ' | ||
Assets Pledged | 67,431,000 | 73,859,000 | ||
Derivative contracts | Cash | ' | ' | ||
Collateral Positions | ' | ' | ||
Assets Pledged | 35,351,000 | [1] | 37,520,000 | [1] |
Repurchase Agreement Borrowings | ' | ' | ||
Collateral Positions | ' | ' | ||
Assets Pledged | 9,603,670,000 | 10,115,713,000 | ||
Repurchase Agreement Borrowings | Agency Mortgage Backed Securities | ' | ' | ||
Collateral Positions | ' | ' | ||
Assets Pledged | 5,698,202,000 | 6,068,447,000 | ||
Repurchase Agreement Borrowings | Cash | ' | ' | ||
Collateral Positions | ' | ' | ||
Assets Pledged | 8,400,000 | [1] | 0 | [1] |
Repurchase Agreement Borrowings | Non-Agency Mortgage Backed Securities | ' | ' | ||
Collateral Positions | ' | ' | ||
Assets Pledged | 3,454,698,000 | [2],[3] | 3,663,523,000 | [2],[3] |
Non-Agency MBS acquired from consolidated VIEs | 1,276,000,000 | 1,885,000,000 | ||
Non-Agency MBS pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty | 736,800,000 | 738,300,000 | ||
Repurchase Agreement Borrowings | U.S. Treasury securities | ' | ' | ||
Collateral Positions | ' | ' | ||
Assets Pledged | 442,370,000 | 383,743,000 | ||
Reverse Repurchase Agreements: | ' | ' | ||
Collateral Positions | ' | ' | ||
Collateral Held | 442,370,000 | 383,743,000 | ||
Reverse Repurchase Agreements: | U.S. Treasury securities | ' | ' | ||
Collateral Positions | ' | ' | ||
Collateral Held | $442,370,000 | $383,743,000 | ||
[1] | Cash pledged as collateral is reported as “restricted cash†on the Company’s consolidated balance sheets. | |||
[2] | In addition, $736.8 million and $738.3 million of Non-Agency MBS are pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty at September 30, 2014 and December 31, 2013, respectively. | |||
[3] | Includes $1.276 billion and $1.885 billion of Non-Agency MBS acquired in connection with resecuritization transactions from consolidated VIEs at September 30, 2014 and December 31, 2013, respectively, that are eliminated from the Company’s consolidated balance sheets. |
Collateral_Positions_Details_2
Collateral Positions (Details 2) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | |
Collateral Positions | ' | ' | |
Total Fair Value of Assets Pledged and Accrued Interest | $9,689,421,000 | ' | |
Non-Agency Mortgage Backed Securities | ' | ' | |
Collateral Positions | ' | ' | |
Total Fair Value of Assets Pledged and Accrued Interest | 3,467,122,000 | [1],[2] | ' |
U.S. Treasury securities | ' | ' | |
Collateral Positions | ' | ' | |
Total Fair Value of Assets Pledged and Accrued Interest | 442,370,000 | ' | |
Agency Mortgage Backed Securities | ' | ' | |
Collateral Positions | ' | ' | |
Total Fair Value of Assets Pledged and Accrued Interest | 5,779,929,000 | ' | |
Agency Mortgage Backed Securities | Fannie Mae | ' | ' | |
Collateral Positions | ' | ' | |
Total Fair Value of Assets Pledged and Accrued Interest | 4,762,647,000 | ' | |
Agency Mortgage Backed Securities | Freddie Mac | ' | ' | |
Collateral Positions | ' | ' | |
Total Fair Value of Assets Pledged and Accrued Interest | 1,011,006,000 | ' | |
Agency Mortgage Backed Securities | Ginnie Mae | ' | ' | |
Collateral Positions | ' | ' | |
Total Fair Value of Assets Pledged and Accrued Interest | 6,276,000 | ' | |
Securities Sold under Agreements to Repurchase | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 9,595,270,000 | ' | |
Amortized Cost | 8,720,162,000 | ' | |
Accrued Interest on Pledged MBS | 26,569,000 | ' | |
Securities Sold under Agreements to Repurchase | Non-Agency Mortgage Backed Securities | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 3,454,698,000 | [1],[2] | ' |
Amortized Cost | 2,632,613,000 | [1],[2] | ' |
Accrued Interest on Pledged MBS | 12,424,000 | [1],[2] | ' |
Non-Agency MBS acquired from consolidated VIEs in connection with resecuritization transactions | 1,276,000,000 | 1,885,000,000 | |
Non-Agency MBS pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty | 736,800,000 | 738,300,000 | |
Securities Sold under Agreements to Repurchase | U.S. Treasury securities | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 442,370,000 | ' | |
Amortized Cost | 442,370,000 | ' | |
Accrued Interest on Pledged MBS | 0 | ' | |
Securities Sold under Agreements to Repurchase | Agency Mortgage Backed Securities | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 5,698,202,000 | ' | |
Amortized Cost | 5,645,179,000 | ' | |
Accrued Interest on Pledged MBS | 14,145,000 | ' | |
Securities Sold under Agreements to Repurchase | Agency Mortgage Backed Securities | Fannie Mae | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 4,744,666,000 | ' | |
Amortized Cost | 4,682,097,000 | ' | |
Accrued Interest on Pledged MBS | 11,763,000 | ' | |
Securities Sold under Agreements to Repurchase | Agency Mortgage Backed Securities | Freddie Mac | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 953,536,000 | ' | |
Amortized Cost | 963,082,000 | ' | |
Accrued Interest on Pledged MBS | 2,382,000 | ' | |
Securities Sold under Agreements to Repurchase | Agency Mortgage Backed Securities | Ginnie Mae | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 0 | ' | |
Amortized Cost | 0 | ' | |
Accrued Interest on Pledged MBS | 0 | ' | |
Derivative contracts | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 67,431,000 | ' | |
Amortized Cost | 68,007,000 | ' | |
Accrued Interest on Pledged MBS | 151,000 | ' | |
Derivative contracts | Non-Agency Mortgage Backed Securities | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 0 | [1],[2] | ' |
Amortized Cost | 0 | [1],[2] | ' |
Accrued Interest on Pledged MBS | 0 | [1],[2] | ' |
Derivative contracts | U.S. Treasury securities | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 0 | ' | |
Amortized Cost | 0 | ' | |
Accrued Interest on Pledged MBS | 0 | ' | |
Derivative contracts | Agency Mortgage Backed Securities | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 67,431,000 | ' | |
Amortized Cost | 68,007,000 | ' | |
Accrued Interest on Pledged MBS | 151,000 | ' | |
Derivative contracts | Agency Mortgage Backed Securities | Fannie Mae | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 6,205,000 | ' | |
Amortized Cost | 5,965,000 | ' | |
Accrued Interest on Pledged MBS | 13,000 | ' | |
Derivative contracts | Agency Mortgage Backed Securities | Freddie Mac | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 54,959,000 | ' | |
Amortized Cost | 55,898,000 | ' | |
Accrued Interest on Pledged MBS | 129,000 | ' | |
Derivative contracts | Agency Mortgage Backed Securities | Ginnie Mae | ' | ' | |
Collateral Positions | ' | ' | |
Fair Value/ Carrying Value | 6,267,000 | ' | |
Amortized Cost | 6,144,000 | ' | |
Accrued Interest on Pledged MBS | $9,000 | ' | |
[1] | Includes $1.276 billion of Non-Agency MBS acquired in connection with resecuritization transactions from consolidated VIEs at September 30, 2014, that are eliminated from the Company’s consolidated balance sheets. | ||
[2] | In addition, $736.8 million of Non-Agency MBS are pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty at September 30, 2014 |
Offsetting_Assets_and_Liabilit2
Offsetting Assets and Liabilities (Details) (USD $) | 9 Months Ended | |||
Sep. 30, 2014 | Dec. 31, 2013 | |||
counterparty | ||||
Swaps, at fair value | ' | ' | ||
Gross Amounts of Recognized Assets | $4,322,000 | $13,000,000 | ||
Gross Amounts Offset in the Consolidated Balance Sheets | 0 | 0 | ||
Net Amounts of Assets Presented in the Consolidated Balance Sheets | 4,322,000 | 13,000,000 | ||
Derivative Fair Value of Derivative Asset Gross Amounts Not Offset [Abstract] | ' | ' | ||
Financial Instruments | -4,322,000 | -13,000,000 | ||
Cash Collateral Received | 0 | 0 | ||
Net Amount | 0 | 0 | ||
Swaps, at fair value | ' | ' | ||
Gross Amounts of Recognized Liabilities | 35,493,000 | [1] | 28,217,000 | [1] |
Gross Amounts Offset in the Consolidated Balance Sheets | 0 | [1] | 0 | [1] |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 35,493,000 | [1] | 28,217,000 | [1] |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' | ||
Financial Instruments | -142,000 | [1],[2] | 0 | [1],[2] |
Cash Collateral Pledged | -35,351,000 | [1],[2] | -28,217,000 | [1],[2] |
Net Amount | 0 | [1] | 0 | [1] |
Repurchase agreements | ' | ' | ||
Gross Amounts of Recognized Liabilities | 8,125,723,000 | [3] | 8,339,297,000 | [3] |
Gross Amounts Offset in the Consolidated Balance Sheets | 0 | [3] | 0 | [3] |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 8,125,723,000 | [3] | 8,339,297,000 | [3] |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' | ||
Financial Instruments | -8,117,323,000 | [2],[3] | -8,339,297,000 | [2],[3] |
Cash Collateral Pledged | -8,400,000 | [2],[3] | 0 | [2],[3] |
Net Amount | 0 | [3] | 0 | [3] |
Total | ' | ' | ||
Gross Amounts of Recognized Liabilities | 8,161,216,000 | 8,367,514,000 | ||
Gross Amounts Offset in the Consolidated Balance Sheets | 0 | 0 | ||
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 8,161,216,000 | 8,367,514,000 | ||
Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' | ||
Financial Instruments | -8,117,465,000 | [2] | -8,339,297,000 | [2] |
Cash Collateral Pledged | -43,751,000 | [2] | -28,217,000 | [2] |
Net Amount | 0 | 0 | ||
Additional disclosures | ' | ' | ||
Excess collateral | ' | 9,300,000 | ||
Fair value of securities pledged against the swaps | 67,400,000 | 73,900,000 | ||
Fair value of securities pledged against the repurchase agreements | $9,595,000,000 | $10,116,000,000 | ||
Number of repurchase agreement counterparties with unconditional right of setoff | 1 | ' | ||
[1] | The fair value of securities pledged against the Company’s Swaps was $67.4 million and $73.9 million at September 30, 2014 and December 31, 2013, respectively. | |||
[2] | Amounts disclosed in the Financial Instruments column of the table above represents collateral pledged that is available to be offset against liability balances associated with repurchase agreement and derivative transactions. Amounts disclosed in the Cash Collateral Pledged column of the table above represents amounts pledged as collateral against derivative transactions and repurchase agreements, and excludes excess collateral of $9.3 million at December 31, 2013. | |||
[3] | The fair value of securities pledged against the Company’s repurchase agreements was $9.595 billion and $10.116 billion at September 30, 2014 and December 31, 2013, respectively. |
Senior_Notes_Details
Senior Notes (Details) (Senior Unsecured Notes, USD $) | 0 Months Ended | 9 Months Ended | |
Apr. 11, 2012 | Sep. 30, 2014 | Dec. 31, 2013 | |
Senior Unsecured Notes | ' | ' | ' |
Senior Notes | ' | ' | ' |
Aggregate principal amount | $100,000,000 | ' | ' |
Proceed from senior notes net of offering expenses and underwriting discount | $96,600,000 | ' | ' |
Interest rate (as a percent) | ' | 8.00% | 8.00% |
Redemption price as percentage of principal amount | ' | 100.00% | ' |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
lease | |
Lease Commitments | ' |
Number of operating leases | 2 |
Corporate headquarters | ' |
Lease Commitments | ' |
Irrevocable standby letter of credit provided to landlord | 785,000 |
Corporate headquarters | Low end of range | ' |
Lease Commitments | ' |
Aggregate annual cash payments | 2,400,000 |
Corporate headquarters | High end of range | ' |
Lease Commitments | ' |
Aggregate annual cash payments | 2,500,000 |
Off-site back-up facility | Low end of range | ' |
Lease Commitments | ' |
Aggregate annual cash payments | 28,000 |
Off-site back-up facility | High end of range | ' |
Lease Commitments | ' |
Aggregate annual cash payments | 30,000 |
Stockholders_Equity_Details
Stockholders' Equity (Details) (USD $) | 0 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 133 Months Ended | 0 Months Ended | 9 Months Ended | 0 Months Ended | 9 Months Ended | ||||||||||||||
Sep. 17, 2014 | Jun. 13, 2014 | Mar. 10, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Aug. 31, 2005 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Aug. 08, 2013 | 16-May-13 | Sep. 30, 2014 | 16-May-13 | Aug. 25, 2014 | 19-May-14 | Feb. 14, 2014 | Jul. 01, 2013 | Apr. 15, 2013 | Sep. 30, 2014 | ||||
DRSPP | DRSPP | DRSPP | DRSPP | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | |||||||||||||
Series A | Series A | Series A | Series B | Series B | Series B | Series B | Series B | Series B | |||||||||||||||||
director | |||||||||||||||||||||||||
quarter | |||||||||||||||||||||||||
Stockholders' Equity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Preferred stock, dividend rate (as a percent) | ' | ' | ' | ' | ' | 7.50% | ' | 7.50% | ' | ' | ' | ' | ' | ' | 8.50% | ' | ' | ' | ' | ' | 7.50% | 7.50% | |||
Preferred stock redeemed (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,840,000 | ' | ' | ' | ' | ' | ' | ' | ' | |||
Payments to redeem preferred stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $97,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | |||
Preferred stock, redemption price (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $25.27 | ' | ' | ' | ' | $25 | ' | |||
Preferred stock, redemption value in excess of carrying value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,900,000 | ' | ' | ' | ' | ' | ' | |||
Preferred stock, cash dividends (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.27 | ' | ' | ' | ' | ' | $0.40 | ' | ' | |||
Shares of common stock reclassified to preferred stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 8,050,000 | ' | |||
Preferred stock, shares issued | ' | ' | ' | 8,000,000 | ' | 8,000,000 | ' | 8,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 8,000,000 | ' | |||
Preferred stock, par value (in dollars per share) | ' | ' | ' | $0.01 | ' | $0.01 | ' | $0.01 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.01 | ' | |||
Preferred stock, liquidation preference (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $25 | $25 | |||
Proceeds from issuance of preferred stock | ' | ' | ' | ' | ' | 0 | 200,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 193,300,000 | ' | |||
Minimum number of quarters for which failure to pay dividends on the preferred stock will give rise to voting rights | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6 | ' | |||
Number of additional directors that can be elected by preferred stock holders | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | |||
Minimum percentage of preferred shareholders required for approval | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 66.67% | ' | |||
Dividend Declared Per Share, preferred stock (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.47 | $0.47 | $0.47 | ' | ' | ' | |||
Common stock, cash dividends declared (in dollars per share) | $0.20 | [1] | $0.20 | $0.20 | $0.20 | $0.50 | [2] | $0.60 | $1.44 | [2],[3] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock, accrued dividends and DERs payable | ' | ' | ' | 74,100,000 | ' | 74,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Aggregate number of shares of common stock registered for sale under the plan | ' | ' | ' | 886,950,000 | ' | 886,950,000 | ' | 886,950,000 | ' | ' | ' | ' | 15,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Shares of common stock authorized and available for issuance | ' | ' | ' | ' | ' | ' | ' | ' | ' | 8,100,000 | 8,100,000 | 8,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Stock Issued During Period, Shares, Dividend Reinvestment Plan | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,185,728 | 3,421,859 | 29,461,623 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Stock Issued During Period, Value, Dividend Reinvestment Plan | ' | ' | ' | ' | ' | ' | ' | ' | ' | $9,500,000 | $26,400,000 | $247,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Number of shares authorized to be repurchased under the Repurchase Program | ' | ' | ' | ' | ' | ' | ' | 10,000,000 | 4,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Repurchase of common stock, shares | ' | ' | ' | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Number of Remaining shares authorized to be repurchased under the Repurchase Program (in shares) | ' | ' | ' | 6,616,355 | ' | 6,616,355 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
[1] | At September 30, 2014, the Company had accrued dividends and DERs payable of $74.1 million related to the common stock dividend declared on September 17, 2014. | ||||||||||||||||||||||||
[2] | Includes a special dividend of $0.28 per share declared on August 1, 2013. | ||||||||||||||||||||||||
[3] | Includes a special dividend of $0.50 per share declared on March 4, 2013. |
Stockholders_Equity_Details_2
Stockholders' Equity (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | ||||
Components of accumulated other comprehensive income/(loss) | ' | ' | ' | ' | ||||
Balance at the beginning of the period | ' | ' | $737,695 | ' | ||||
Net OCI during the period | -33,499 | -3,242 | 79,839 | -96,315 | ||||
Balance at end of period | 817,534 | ' | 817,534 | ' | ||||
Net Unrealized Gain/(Loss) on Available-for-Sale MBS | ' | ' | ' | ' | ||||
Components of accumulated other comprehensive income/(loss) | ' | ' | ' | ' | ||||
Balance at the beginning of the period | 905,704 | 700,871 | 752,912 | 824,808 | ||||
OCI before reclassifications | -43,410 | 31,850 | 116,973 | -89,847 | ||||
Amounts reclassified from AOCI | -13,589 | [1] | -15,158 | [1] | -21,180 | [1] | -17,398 | [1] |
Net OCI during the period | -56,999 | [2] | 16,692 | [2] | 95,793 | [2] | -107,245 | [2] |
Balance at end of period | 848,705 | 717,563 | 848,705 | 717,563 | ||||
Net Unrealized Gain/(Loss) on Swaps | ' | ' | ' | ' | ||||
Components of accumulated other comprehensive income/(loss) | ' | ' | ' | ' | ||||
Balance at the beginning of the period | -54,671 | -31,967 | -15,217 | -62,831 | ||||
OCI before reclassifications | 23,500 | -19,934 | -16,401 | 10,930 | ||||
Amounts reclassified from AOCI | 0 | [1] | 0 | [1] | 447 | [1] | 0 | [1] |
Net OCI during the period | 23,500 | [2] | -19,934 | [2] | -15,954 | [2] | 10,930 | [2] |
Balance at end of period | -31,171 | -51,901 | -31,171 | -51,901 | ||||
Total AOCI | ' | ' | ' | ' | ||||
Components of accumulated other comprehensive income/(loss) | ' | ' | ' | ' | ||||
Balance at the beginning of the period | 851,033 | 668,904 | 737,695 | 761,977 | ||||
OCI before reclassifications | -19,910 | 11,916 | 100,572 | -78,917 | ||||
Amounts reclassified from AOCI | -13,589 | [1] | -15,158 | [1] | -20,733 | [1] | -17,398 | [1] |
Net OCI during the period | -33,499 | [2] | -3,242 | [2] | 79,839 | [2] | -96,315 | [2] |
Balance at end of period | $817,534 | $665,662 | $817,534 | $665,662 | ||||
[1] | See separate table below for details about these reclassifications. | |||||||
[2] | For further information regarding changes in OCI, see the Company’s consolidated statement of comprehensive income/(loss). |
Stockholders_Equity_Details_3
Stockholders' Equity (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | |||||||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | ||||
Amounts Reclassified from AOCI | ' | ' | ' | ' | ' | ||||
Realized gain on sale of securities | ($13,589) | ($15,158) | ($21,180) | ($17,398) | ' | ||||
De-designated Swaps | 0 | 0 | 447 | 0 | ' | ||||
Accumulated Other Comprehensive Income/(Loss) | ' | ' | ' | ' | ' | ||||
Other-than-temporary impairments recognized in accumulated other comprehensive income/(loss) | 618 | ' | 618 | ' | 609 | ||||
Available-for-sale MBS | ' | ' | ' | ' | ' | ||||
Amounts Reclassified from AOCI | ' | ' | ' | ' | ' | ||||
Total reclassifications for period | -13,589 | [1] | -15,158 | [1] | -21,180 | [1] | -17,398 | [1] | ' |
Swaps Designated as Cash Flow Hedges | ' | ' | ' | ' | ' | ||||
Amounts Reclassified from AOCI | ' | ' | ' | ' | ' | ||||
Total reclassifications for period | 0 | [1] | 0 | [1] | 447 | [1] | 0 | [1] | ' |
Amounts Reclassified from AOCI | ' | ' | ' | ' | ' | ||||
Amounts Reclassified from AOCI | ' | ' | ' | ' | ' | ||||
Total reclassifications for period | -13,589 | ' | -20,733 | ' | ' | ||||
Amounts Reclassified from AOCI | Available-for-sale MBS | ' | ' | ' | ' | ' | ||||
Amounts Reclassified from AOCI | ' | ' | ' | ' | ' | ||||
Realized gain on sale of securities | -13,589 | -15,158 | -21,180 | -17,398 | ' | ||||
Total reclassifications for period | ' | -15,158 | ' | -17,398 | ' | ||||
Amounts Reclassified from AOCI | Swaps Designated as Cash Flow Hedges | ' | ' | ' | ' | ' | ||||
Amounts Reclassified from AOCI | ' | ' | ' | ' | ' | ||||
De-designated Swaps | $0 | ' | $447 | ' | ' | ||||
[1] | See separate table below for details about these reclassifications. |
EPS_Calculation_Details
EPS Calculation (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | ||||
Numerator: | ' | ' | ' | ' | ||||
Net income | $78,882 | $71,328 | $233,796 | $224,152 | ||||
Dividends declared on preferred stock | -3,750 | -3,750 | -11,250 | -10,000 | ||||
Dividends, DERs and undistributed earnings allocated to participating securities | -281 | -230 | -842 | -880 | ||||
Issuance costs of redeemed preferred stock | 0 | [1] | 0 | [1] | 0 | [1] | -3,947 | [1] |
Net income to common stockholders - basic and diluted | $74,851 | $67,348 | $221,704 | $209,325 | ||||
Denominator: | ' | ' | ' | ' | ||||
Weighted average common shares for basic and diluted earnings per share | 369,690 | [2] | 363,918 | [2] | 368,430 | [2] | 361,181 | [2] |
Basic and diluted earnings per share (in dollars per share) | $0.20 | $0.19 | $0.60 | $0.58 | ||||
Anti-dilutive securities excluded from diluted earnings per share calculations (in shares) | 1,600 | ' | 1,600 | ' | ||||
Restricted common stock | ' | ' | ' | ' | ||||
Denominator: | ' | ' | ' | ' | ||||
Anti-dilutive securities excluded from diluted earnings per share calculations (in shares) | 358 | ' | 358 | ' | ||||
Weighted average grant date fair value (in dollars per share) | $7.47 | ' | $7.47 | ' | ||||
Restricted Stock Units | ' | ' | ' | ' | ||||
Denominator: | ' | ' | ' | ' | ||||
Anti-dilutive securities excluded from diluted earnings per share calculations (in shares) | 1,200 | ' | 1,200 | ' | ||||
Weighted average grant date fair value (in dollars per share) | $6.83 | ' | $6.83 | ' | ||||
[1] | Issuance costs of redeemed preferred stock represent the original offering costs related to the Series A Preferred Stock, which was redeemed on May 16, 2013. (See Note 11) | |||||||
[2] | At September 30, 2014, the Company had an aggregate of 1.6 million equity instruments outstanding that were not included in the calculation of diluted EPS for the three and nine months ended September 30, 2014, as their inclusion would have been anti-dilutive. These equity instruments were comprised of approximately 358,000 shares of restricted common stock with a weighted average grant date fair value of $7.47 and approximately 1.2 million RSUs with a weighted average grant date fair value of $6.83. These equity instruments may have a dilutive impact on future EPS. |
Equity_Compensation_Employment2
Equity Compensation, Employment Agreements and Other Benefit Plans (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | ||
Share based compensation | ' | ' | ' | ' | ' | |
Maximum shares authorized for grant | 13,500,000 | ' | 13,500,000 | ' | ' | |
Shares available for grant | 9,200,000 | ' | 9,200,000 | ' | ' | |
Accrued dividends payable | $74,126,000 | $81,171,000 | $74,126,000 | $81,171,000 | $73,643,000 | |
Expense recognized for equity-based compensation instruments | 1,271,000 | 760,000 | 4,357,000 | 2,946,000 | ' | |
DERs | ' | ' | ' | ' | ' | |
Share based compensation | ' | ' | ' | ' | ' | |
Payments attributable to DERs | 195,000 | 645,000 | 557,000 | 1,900,000 | ' | |
Dividends declared per share of common stock, special dividend (in dollars per share) | ' | $0.28 | ' | $0.78 | ' | |
Share-based awards outstanding (in shares) | 1,220,724 | ' | 1,220,724 | ' | ' | |
Average forfeiture rate on DERs outstanding | ' | ' | 0.00% | ' | ' | |
Weighted average period over which DERs are scheduled to elapse | ' | ' | '1 year 10 months 24 days | ' | ' | |
Expense recognized for equity-based compensation instruments | 37,000 | 42,000 | 111,000 | 144,000 | ' | |
Stock options | ' | ' | ' | ' | ' | |
Share based compensation | ' | ' | ' | ' | ' | |
Period to determine market value of the common stock to qualify as an incentive stock option for tax purposes | ' | ' | '1 year | ' | ' | |
Maximum grant date market value of the common stock to be received upon exercise of options in one calendar year | ' | ' | 100,000 | ' | ' | |
Exercise price of an ISO relative to fair market value on the grant date, minimum (as a percent) | ' | ' | 100.00% | ' | ' | |
Exercise price of an ISO granted to a 10% stockholder relative to fair market value on the grant date, minimum (as a percent) | ' | ' | 110.00% | ' | ' | |
Percentage of stockholders to whom 110% of ISO is granted | ' | ' | 10.00% | ' | ' | |
Maximum period for exercise of stock options | ' | ' | '10 years | ' | ' | |
Stock options exercised (in shares) | ' | ' | 0 | 20,000 | ' | |
Stock options cancelled (in shares) | 5,000 | 0 | 5,000 | 0 | ' | |
Exercise price of Options expired in period (in dollars per share) | $8.40 | ' | $8.40 | ' | ' | |
Stock options, outstanding (in shares) | 0 | ' | 0 | ' | ' | |
Restricted common stock | ' | ' | ' | ' | ' | |
Share based compensation | ' | ' | ' | ' | ' | |
Granted (in shares) | 32,658 | 0 | 95,718 | 28,743 | ' | |
Unrecognized compensation cost | 2,200,000 | ' | 2,200,000 | ' | 3,300,000 | |
Accrued dividends payable | 354,000 | ' | 354,000 | ' | 413,000 | |
Period for recognizing unrecognized compensation cost | ' | ' | '2 years 2 months 19 days | ' | ' | |
Expense recognized for equity-based compensation instruments | 643,000 | 404,000 | 1,892,000 | 1,539,000 | ' | |
Restricted Stock Units | ' | ' | ' | ' | ' | |
Share based compensation | ' | ' | ' | ' | ' | |
Granted (in shares) | 3,334 | 72,500 | 630,815 | 112,824 | ' | |
Unrecognized compensation cost | 3,400,000 | ' | 3,400,000 | ' | 1,600,000 | |
Period for recognizing unrecognized compensation cost | ' | ' | '2 years 24 days | ' | ' | |
Forfeitures (in shares) | ' | ' | 97,164 | ' | ' | |
Weighted average forfeiture rate of unvested RSUs (as a percent) | ' | ' | 0.00% | ' | ' | |
Expense recognized for equity-based compensation instruments | 591,000 | 314,000 | 2,354,000 | [1] | 1,263,000 | ' |
Restricted Stock Units | Chief Executive Officer | ' | ' | ' | ' | ' | |
Share based compensation | ' | ' | ' | ' | ' | |
Expense recognized for equity-based compensation instruments | ' | ' | $500,000 | ' | ' | |
2010 Equity Compensation Plan | ' | ' | ' | ' | ' | |
Share based compensation | ' | ' | ' | ' | ' | |
Maximum number of common shares that can be granted to participant in any one year | ' | ' | 1,500,000 | ' | ' | |
Period during which a participant can be awarded the maximum number of shares allowable under the Plan | ' | ' | '1 year | ' | ' | |
Maximum percentage of common shares that can be owned or deemed to be owned by a participant | ' | ' | 9.80% | ' | ' | |
[1] | RSU expense for the nine months ended September 30, 2014 includes approximately $500,000 for a one-time grant to the Company’s chief executive officer. |
Equity_Compensation_Employment3
Equity Compensation, Employment Agreements and Other Benefit Plans (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |||
Deferred Compensation Activity | ' | ' | ' | ' | ' | |||
Number of officers having employment agreements with the company | 5 | ' | 5 | ' | ' | |||
Deferred Compensation Plans | ' | ' | ' | ' | ' | |||
Deferred Compensation Activity | ' | ' | ' | ' | ' | |||
Deferrable compensation by the employee, maximum (as a percent) | ' | ' | 100.00% | ' | ' | |||
Expenses related to deferred plans | ($11) | ($30) | $52 | $22 | ' | |||
Undistributed income deferred | 263 | [1] | ' | 263 | [1] | ' | 270 | [1] |
Liability Under Deferred Plans | 367 | ' | 367 | ' | 382 | |||
Deferred Compensation Plans | Non-employee directors | ' | ' | ' | ' | ' | |||
Deferred Compensation Activity | ' | ' | ' | ' | ' | |||
Expenses related to deferred plans | -11 | -30 | 52 | 22 | ' | |||
Undistributed income deferred | 263 | [1] | ' | 263 | [1] | ' | 270 | [1] |
Liability Under Deferred Plans | 367 | ' | 367 | ' | 382 | |||
Savings Plan | ' | ' | ' | ' | ' | |||
Deferred Compensation Activity | ' | ' | ' | ' | ' | |||
Employer contribution percentage on first 3 percent of eligible compensation deferred by employees | ' | ' | 100.00% | ' | ' | |||
Percentage of eligible compensation deferred by employees qualifying for 100 percent matching contribution | ' | ' | 3.00% | ' | ' | |||
Employer contribution percentage on next 2 percent of eligible compensation deferred by employees | ' | ' | 50.00% | ' | ' | |||
Percentage of eligible compensation deferred by employees qualifying for 50 percent matching contribution | ' | ' | 2.00% | ' | ' | |||
Percentage of employer matching contributions that vest immediately | ' | ' | 100.00% | ' | ' | |||
Expenses for matching contributions | $65 | $62 | $195 | $187 | ' | |||
[1] | Represents the cumulative amounts that were deferred by participants through September 30, 2014 and December 31, 2013, which had not been distributed through such date. |
Fair_Value_of_Financial_Instru2
Fair Value of Financial Instruments (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | ||
Assets: | ' | ' | ||
Available-for-sale Securities | $10,937,502,000 | $11,371,358,000 | ||
Securities obtained and pledged as collateral | 442,370,000 | 383,743,000 | ||
Linked Transactions | 190,681,000 | 28,181,000 | ||
Swaps | 4,322,000 | 13,000,000 | ||
Liabilities: | ' | ' | ||
Swaps | 35,493,000 | [1] | 28,217,000 | [1] |
Obligation to return securities obtained as collateral | 442,370,000 | 383,743,000 | ||
Level 2 | ' | ' | ||
Components of financial instruments carried at fair value | ' | ' | ||
Credit valuation adjustment to derivative liabilities | 0 | ' | ||
Credit valuation adjustment to derivative assets | 0 | ' | ||
Recurring basis | Level 1 | ' | ' | ||
Assets: | ' | ' | ||
Securities obtained and pledged as collateral | 442,370,000 | ' | ||
Linked Transactions | 0 | ' | ||
Swaps | 0 | ' | ||
Total assets carried at fair value | 442,370,000 | ' | ||
Liabilities: | ' | ' | ||
Swaps | 0 | ' | ||
Obligation to return securities obtained as collateral | 442,370,000 | ' | ||
Total liabilities carried at fair value | 442,370,000 | ' | ||
Recurring basis | Level 2 | ' | ' | ||
Assets: | ' | ' | ||
Securities obtained and pledged as collateral | 0 | ' | ||
Linked Transactions | 190,681,000 | ' | ||
Swaps | 4,322,000 | ' | ||
Total assets carried at fair value | 11,132,505,000 | ' | ||
Liabilities: | ' | ' | ||
Swaps | 35,493,000 | ' | ||
Obligation to return securities obtained as collateral | 0 | ' | ||
Total liabilities carried at fair value | 35,493,000 | ' | ||
Recurring basis | Level 3 | ' | ' | ||
Assets: | ' | ' | ||
Securities obtained and pledged as collateral | 0 | ' | ||
Linked Transactions | 0 | ' | ||
Swaps | 0 | ' | ||
Total assets carried at fair value | 0 | ' | ||
Liabilities: | ' | ' | ||
Swaps | 0 | ' | ||
Obligation to return securities obtained as collateral | 0 | ' | ||
Total liabilities carried at fair value | 0 | ' | ||
Recurring basis | Estimated Fair Value | ' | ' | ||
Assets: | ' | ' | ||
Securities obtained and pledged as collateral | 442,370,000 | ' | ||
Linked Transactions | 190,681,000 | ' | ||
Swaps | 4,322,000 | ' | ||
Total assets carried at fair value | 11,574,875,000 | ' | ||
Liabilities: | ' | ' | ||
Swaps | 35,493,000 | ' | ||
Obligation to return securities obtained as collateral | 442,370,000 | ' | ||
Total liabilities carried at fair value | 477,863,000 | ' | ||
Agency Mortgage Backed Securities | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 6,174,176,000 | 6,519,221,000 | ||
Agency Mortgage Backed Securities | Recurring basis | Level 1 | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 0 | ' | ||
Agency Mortgage Backed Securities | Recurring basis | Level 2 | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 6,174,176,000 | ' | ||
Agency Mortgage Backed Securities | Recurring basis | Level 3 | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 0 | ' | ||
Agency Mortgage Backed Securities | Recurring basis | Estimated Fair Value | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 6,174,176,000 | ' | ||
Non-Agency Mortgage Backed Securities | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 4,763,326,000 | 4,852,137,000 | ||
Non-Agency Mortgage Backed Securities | Recurring basis | Level 1 | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 0 | ' | ||
Non-Agency Mortgage Backed Securities | Recurring basis | Level 2 | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 4,763,326,000 | ' | ||
Non-Agency Mortgage Backed Securities | Recurring basis | Level 3 | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | 0 | ' | ||
Non-Agency Mortgage Backed Securities | Recurring basis | Estimated Fair Value | ' | ' | ||
Assets: | ' | ' | ||
Available-for-sale Securities | $4,763,326,000 | ' | ||
[1] | The fair value of securities pledged against the Company’s Swaps was $67.4 million and $73.9 million at September 30, 2014 and December 31, 2013, respectively. |
Fair_Value_of_Financial_Instru3
Fair Value of Financial Instruments (Details 2) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | ||
In Thousands, unless otherwise specified | ||||
Financial Assets: | ' | ' | ||
Available-for-sale Securities | $10,937,502 | $11,371,358 | ||
Securities obtained and pledged as collateral | 442,370 | 383,743 | ||
Restricted cash | 43,751 | 37,520 | ||
Linked Transactions | 190,681 | 28,181 | ||
Swaps | 4,322 | 13,000 | ||
Financial Liabilities: | ' | ' | ||
Repurchase agreements | 8,125,723 | [1] | 8,339,297 | [1] |
Securitized debt | 156,276 | [2] | 366,205 | [2] |
Obligation to return securities obtained as collateral | 442,370 | 383,743 | ||
Senior Notes | 100,000 | 100,000 | ||
Swaps | 35,493 | [3] | 28,217 | [3] |
Carrying Value | ' | ' | ||
Financial Assets: | ' | ' | ||
Securities obtained and pledged as collateral | 442,370 | 383,743 | ||
Cash and cash equivalents | 423,891 | 565,370 | ||
Restricted cash | 43,751 | 37,520 | ||
Linked Transactions | 190,681 | 28,181 | ||
Swaps | 4,322 | 13,000 | ||
Residential whole loans | 112,924 | 0 | ||
Financial Liabilities: | ' | ' | ||
Repurchase agreements | 8,125,723 | 8,339,297 | ||
Securitized debt | 156,276 | 366,205 | ||
Obligation to return securities obtained as collateral | 442,370 | 383,743 | ||
Senior Notes | 100,000 | 100,000 | ||
Swaps | 35,493 | 28,217 | ||
Estimated Fair Value | ' | ' | ||
Financial Assets: | ' | ' | ||
Securities obtained and pledged as collateral | 442,370 | 383,743 | ||
Cash and cash equivalents | 423,891 | 565,370 | ||
Restricted cash | 43,751 | 37,520 | ||
Linked Transactions | 190,681 | 28,181 | ||
Swaps | 4,322 | 13,000 | ||
Residential whole loans | 114,357 | 0 | ||
Financial Liabilities: | ' | ' | ||
Repurchase agreements | 8,124,355 | 8,339,071 | ||
Securitized debt | 157,264 | 366,767 | ||
Obligation to return securities obtained as collateral | 442,370 | 383,743 | ||
Senior Notes | 105,000 | 98,000 | ||
Swaps | 35,493 | 28,217 | ||
Agency Mortgage Backed Securities | ' | ' | ||
Financial Assets: | ' | ' | ||
Available-for-sale Securities | 6,174,176 | 6,519,221 | ||
Agency Mortgage Backed Securities | Carrying Value | ' | ' | ||
Financial Assets: | ' | ' | ||
Available-for-sale Securities | 6,174,176 | 6,519,221 | ||
Agency Mortgage Backed Securities | Estimated Fair Value | ' | ' | ||
Financial Assets: | ' | ' | ||
Available-for-sale Securities | 6,174,176 | 6,519,221 | ||
Non-Agency Mortgage Backed Securities | ' | ' | ||
Financial Assets: | ' | ' | ||
Available-for-sale Securities | 4,763,326 | 4,852,137 | ||
Non-Agency Mortgage Backed Securities | Carrying Value | ' | ' | ||
Financial Assets: | ' | ' | ||
Available-for-sale Securities | 4,763,326 | 4,852,137 | ||
Non-Agency Mortgage Backed Securities | Estimated Fair Value | ' | ' | ||
Financial Assets: | ' | ' | ||
Available-for-sale Securities | $4,763,326 | $4,852,137 | ||
[1] | The fair value of securities pledged against the Company’s repurchase agreements was $9.595 billion and $10.116 billion at September 30, 2014 and December 31, 2013, respectively. | |||
[2] | Securitized Debt represents third-party liabilities of consolidated VIEs and excludes liabilities of the VIEs acquired by the Company that eliminate on consolidation. The third-party beneficial interest holders in the VIEs have no recourse to the general credit of the Company. (See Notes 10 and 15 for further discussion.) | |||
[3] | The fair value of securities pledged against the Company’s Swaps was $67.4 million and $73.9 million at September 30, 2014 and December 31, 2013, respectively. |
Use_of_Special_Purpose_Entitie2
Use of Special Purpose Entities and Variable Interest Entities (Details) (USD $) | 3 Months Ended | 9 Months Ended | 1 Months Ended | 1 Months Ended | 1 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | Feb. 29, 2012 | Sep. 30, 2014 | Feb. 29, 2012 | Feb. 28, 2011 | Sep. 30, 2014 | Feb. 28, 2011 | Oct. 31, 2010 | Sep. 30, 2014 | Oct. 31, 2010 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | ||||||||||||
Prepaid and other assets | WFMLT Series 2012-RR1 | WFMLT Series 2012-RR1 | WFMLT Series 2012-RR1 | CSMC Series 2011-1R | CSMC Series 2011-1R | CSMC Series 2011-1R | Deutsche Mortgage Securities, Inc. Real Estate Mortgage Investment Conduit Trust, Series 2010-RS2 | Deutsche Mortgage Securities, Inc. Real Estate Mortgage Investment Conduit Trust, Series 2010-RS2 | Deutsche Mortgage Securities, Inc. Real Estate Mortgage Investment Conduit Trust, Series 2010-RS2 | Trust, ownership in residential whole loans | Non-Agency Mortgage Backed Securities | Non-Agency Mortgage Backed Securities | Non-Agency Mortgage Backed Securities | Non-Agency Mortgage Backed Securities | ||||||||||||||||
Senior-support certificates | Senior-support certificates | Senior-support certificates | Variable Interest Entity, Primary Beneficiary | Variable Interest Entity, Primary Beneficiary | ||||||||||||||||||||||||||
Special purpose entities and variable interest entities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||||||||
Principal value of Non-Agency MBS sold | ' | ' | ' | ' | ' | $433,347,000 | ' | ' | $1,319,969,000 | ' | ' | $985,228,000 | ' | ' | ' | ' | ' | ' | ' | |||||||||||
Face amount of Bonds issued by the VIE and purchased by 3rd party investors | ' | ' | ' | ' | ' | 186,691,000 | [1] | ' | ' | 488,389,000 | [1] | ' | ' | 373,577,000 | [1] | ' | ' | ' | ' | ' | ' | ' | ||||||||
Outstanding amount of Senior Bonds | 156,276,000 | [2] | 156,276,000 | [2] | ' | 366,205,000 | [2] | ' | ' | 67,035,000 | ' | ' | 21,631,000 | ' | ' | 67,610,000 | ' | ' | ' | ' | ' | ' | ||||||||
Pass-through rate for Senior Bonds issued | ' | ' | ' | ' | ' | 2.85% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||||||||
Pass-through rate for Senior Bonds issued | ' | ' | ' | ' | ' | ' | ' | ' | 'One-month LIBOR | ' | ' | 'Weighted Average Coupon Rate | ' | ' | ' | ' | ' | ' | ' | |||||||||||
Interest rate added to base rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 1.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||||||||
Face amount of Senior Support Certificates received by the Company | ' | ' | ' | ' | ' | ' | ' | 220,216,000 | [3] | ' | ' | 779,679,000 | [3] | ' | ' | 484,630,000 | [3] | ' | ' | ' | ' | ' | ||||||||
Cash received | ' | 0 | 76,485,000 | ' | ' | 186,691,000 | ' | ' | 488,389,000 | ' | ' | 375,621,000 | ' | ' | ' | ' | ' | ' | ' | |||||||||||
Notional amount acquired of non-rated, interest only senior certificates | ' | ' | ' | ' | ' | 186,691,000 | [1] | ' | ' | 488,389,000 | [1] | ' | ' | 0 | [1] | ' | ' | ' | ' | ' | ' | ' | ||||||||
Unamortized deferred costs | ' | ' | ' | ' | ' | 577,000 | ' | ' | 202,000 | ' | ' | 97,000 | ' | ' | ' | ' | ' | ' | ' | |||||||||||
Available-for-sale Securities | 10,937,502,000 | 10,937,502,000 | ' | 11,371,358,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4,763,326,000 | 4,852,137,000 | 1,452,264,000 | [4] | 2,282,371,000 | [4] | |||||||||
Residential whole loans | ' | ' | ' | ' | 112,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||||||||
Ownership percentage by parent | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' | |||||||||||
Other Income | $1,200,000 | $1,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||||||||
[1] | Amount disclosed reflects principal balance on the DMSI 2010-RS A1, A2 and A3 bonds. The DMSI 2010-RS2 A2 and A3 bond was sold to third party investors during 2013. The principal balance for the DMSI 2010-RS2 A1 Bond and associated interest only Senior certificate was paid off during the three months ended June 30, 2013. | |||||||||||||||||||||||||||||
[2] | Securitized Debt represents third-party liabilities of consolidated VIEs and excludes liabilities of the VIEs acquired by the Company that eliminate on consolidation. The third-party beneficial interest holders in the VIEs have no recourse to the general credit of the Company. (See Notes 10 and 15 for further discussion.) | |||||||||||||||||||||||||||||
[3] | Provides credit support for the sequential Senior Non-Agency MBS sold to third-party investors in resecuritization transactions (“Senior Bondsâ€). | |||||||||||||||||||||||||||||
[4] | Non-Agency MBS transferred to consolidated VIEs represent assets of the consolidated VIEs that can be used only to settle the obligations of each respective VIE. |