Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 31, 2017 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | Arlington Asset Investment Corp. | |
Entity Central Index Key | 1,209,028 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Trading Symbol | AI | |
Common Class A | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 25,950,468 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
ASSETS | ||
Cash and cash equivalents | $ 73,308 | $ 54,794 |
Interest receivable | 12,785 | 11,646 |
Mortgage-backed securities, at fair value | 4,182,603 | 3,912,641 |
Derivative assets, at fair value | 7,965 | 74,889 |
Deferred tax assets, net | 24,162 | 48,829 |
Deposits, net | 65,339 | 11,149 |
Other assets | 2,729 | 3,003 |
Total assets | 4,368,891 | 4,116,951 |
Liabilities: | ||
Repurchase agreements | 3,913,699 | 3,649,102 |
Interest payable | 3,020 | 3,434 |
Accrued compensation and benefits | 2,958 | 5,406 |
Dividend payable | 15,548 | 15,739 |
Derivative liabilities, at fair value | 4,038 | 9,554 |
Other liabilities | 1,233 | 1,247 |
Long-term unsecured debt | 73,768 | 73,656 |
Total liabilities | 4,014,264 | 3,758,138 |
Commitments and contingencies | ||
Stockholders’ Equity: | ||
Preferred stock, $0.01 par value, 25,000,000 shares authorized, 156,310 and -0- shares issued and outstanding, respectively (liquidation preference of $3,908 and $-0-, respectively) | 3,500 | |
Additional paid-in capital | 1,944,847 | 1,910,284 |
Accumulated deficit | (1,593,980) | (1,551,707) |
Total stockholders’ equity | 354,627 | 358,813 |
Total liabilities and stockholders’ equity | 4,368,891 | 4,116,951 |
Private-Label MBS | ||
ASSETS | ||
Mortgage-backed securities, at fair value | 74 | 1,266 |
Agency MBS | ||
ASSETS | ||
Mortgage-backed securities, at fair value | 4,182,529 | 3,911,375 |
Liabilities: | ||
Repurchase agreements | 3,913,699 | 3,649,102 |
Common Class A | ||
Stockholders’ Equity: | ||
Common stock | 260 | 236 |
Common Class B | ||
Stockholders’ Equity: | ||
Common stock | $ 0 | $ 0 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 25,000,000 | 25,000,000 |
Preferred stock, issued (in shares) | 156,310 | 0 |
Preferred stock, outstanding (in shares) | 156,310 | 0 |
Preferred stock, liquidation preference | $ 3,908 | $ 0 |
Common Class A | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 |
Common stock, shares issued (in shares) | 25,950,468 | 23,607,111 |
Common stock, shares outstanding (in shares) | 25,950,468 | 23,607,111 |
Common Class B | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 0 | 20,256 |
Common stock, shares outstanding (in shares) | 0 | 20,256 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Interest income | ||||
Other | $ 21 | $ 135 | $ 41 | $ 260 |
Total interest income | 31,461 | 26,351 | 61,804 | 55,105 |
Interest expense | ||||
Total interest expense | 12,528 | 6,703 | 22,594 | 13,396 |
Net interest income | 18,933 | 19,648 | 39,210 | 41,709 |
Investment loss, net | ||||
Realized loss on sale of available-for-sale investments, net | (593) | (593) | ||
Other-than-temporary impairment charges | (1,638) | (1,737) | ||
Gain on trading investments, net | 15,855 | 27,665 | 11,636 | 78,615 |
Loss from derivative instruments, net | (31,678) | (34,381) | (29,373) | (135,141) |
Other, net | (147) | 5 | 19 | |
Total investment loss, net | (15,970) | (8,947) | (17,732) | (58,837) |
General and administrative expenses | ||||
Compensation and benefits | 2,804 | 2,756 | 6,249 | 5,320 |
Other general and administrative expenses | 1,350 | 4,916 | 2,830 | 6,687 |
Total general and administrative expenses | 4,154 | 7,672 | 9,079 | 12,007 |
(Loss) income before income taxes | (1,191) | 3,029 | 12,399 | (29,135) |
Income tax provision (benefit) | 16,737 | (9,865) | 25,073 | (10,411) |
Net (loss) income | (17,928) | 12,894 | (12,674) | (18,724) |
Dividend on preferred stock | (35) | (35) | ||
Net (loss) income (attributable) available to common stock | $ (17,963) | $ 12,894 | $ (12,709) | $ (18,724) |
Basic (loss) earnings per common share | $ (0.74) | $ 0.56 | $ (0.53) | $ (0.81) |
Diluted (loss) earnings per common share | $ (0.74) | $ 0.56 | $ (0.53) | $ (0.81) |
Weighted-average common shares outstanding (in thousands) | ||||
Basic | 24,319 | 23,003 | 23,987 | 22,998 |
Diluted | 24,319 | 23,070 | 23,987 | 22,998 |
Other comprehensive (loss) income, net of taxes | ||||
Unrealized losses on available-for-sale securities (net of taxes of $-0-, $(641), $-0- and $(3,805), respectively) | $ (1,006) | $ (5,976) | ||
Reclassification | ||||
Included in investment loss, net, related to sales of available-for-sale securities (net of taxes of $-0-, $(144), $-0-, and $(144), respectively) | (226) | (226) | ||
Included in investment loss, net, related to other-than- temporary impairment charges on available-for-sale securities (net of taxes of $-0-, $637, $-0- and $676, respectively) | 1,001 | 1,061 | ||
Comprehensive (loss) income | $ (17,928) | 12,663 | $ (12,674) | (23,865) |
Unsecured Debt | ||||
Interest expense | ||||
Long-term debt | 1,214 | 1,194 | 2,421 | 2,387 |
Secured Debt | ||||
Interest expense | ||||
Short-term debt | 11,314 | 5,509 | 20,173 | 11,009 |
Agency MBS | ||||
Interest income | ||||
Mortgage-backed securities | 31,397 | 23,408 | 61,683 | 49,063 |
Private-Label MBS | ||||
Interest income | ||||
Mortgage-backed securities | 43 | 2,808 | 80 | 5,782 |
Investment loss, net | ||||
Gain on trading investments, net | $ 43 | $ (237) | $ 57 | $ 89 |
CONSOLIDATED STATEMENTS OF COM5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Statement Of Income And Comprehensive Income [Abstract] | ||||
Unrealized losses for the period on available-for-sale securities, taxes | $ 0 | $ (641) | $ 0 | $ (3,805) |
Included in investment loss, net, related to sales of available-for-sale securities, taxes | 0 | (144) | 0 | (144) |
Included in investment loss, net, related to other-than-temporary impairment charges on available-for-sale securities, taxes | $ 0 | $ 637 | $ 0 | $ 676 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) - USD ($) $ in Thousands | Total | Series B Preferred Stock | Common Class A | Preferred StockSeries B Preferred Stock | Common StockCommon Class A | Common StockCommon Class B | Additional Paid-in Capital | Additional Paid-in CapitalCommon Class A | Accumulated Other Comprehensive Income | Accumulated Deficit |
Balances at Dec. 31, 2015 | $ 459,428 | $ 229 | $ 1 | $ 1,898,085 | $ 12,371 | $ (1,451,258) | ||||
Balances (in shares) at Dec. 31, 2015 | 22,874,819 | 102,216 | ||||||||
Net loss | (41,347) | (41,347) | ||||||||
Conversion of Class B common stock to Class A common stock | $ 1 | $ (1) | ||||||||
Conversion of Class B common stock to Class A common stock (in shares) | 81,960 | (81,960) | ||||||||
Issuance of stock | $ 9,675 | $ 6 | $ 9,669 | |||||||
Issuance of stock (in shares) | 595,342 | |||||||||
Issuance of Class A common stock under stock-based compensation plans (in shares) | 73,457 | |||||||||
Repurchase of Class A common stock under stock-based compensation plans | (269) | (269) | ||||||||
Repurchase of Class A common stock under stock-based compensation plans (in shares) | (18,467) | |||||||||
Stock-based compensation | 2,974 | 2,974 | ||||||||
Income tax provision from stock-based compensation | (175) | (175) | ||||||||
Other comprehensive loss | (12,371) | $ (12,371) | ||||||||
Dividends declared | (59,102) | (59,102) | ||||||||
Balances at Dec. 31, 2016 | 358,813 | $ 236 | 1,910,284 | (1,551,707) | ||||||
Balances (in shares) at Dec. 31, 2016 | 23,607,111 | 20,256 | ||||||||
Balances at Mar. 31, 2017 | 349,878 | |||||||||
Balances at Dec. 31, 2016 | 358,813 | $ 236 | 1,910,284 | (1,551,707) | ||||||
Balances (in shares) at Dec. 31, 2016 | 23,607,111 | 20,256 | ||||||||
Net loss | (12,674) | (12,674) | ||||||||
Conversion of Class B common stock to Class A common stock (in shares) | 20,256 | (20,256) | ||||||||
Issuance of stock | $ 3,500 | $ 33,346 | $ 3,500 | $ 24 | $ 33,322 | |||||
Issuance of stock (in shares) | 156,310 | 2,332,289 | ||||||||
Repurchase of Class A common stock under stock-based compensation plans | (134) | (134) | ||||||||
Repurchase of Class A common stock under stock-based compensation plans (in shares) | (9,188) | |||||||||
Stock-based compensation | 1,375 | 1,375 | ||||||||
Dividends declared | (29,599) | (29,599) | ||||||||
Balances at Jun. 30, 2017 | 354,627 | $ 3,500 | $ 260 | 1,944,847 | (1,593,980) | |||||
Balances (in shares) at Jun. 30, 2017 | 156,310 | 25,950,468 | ||||||||
Balances at Mar. 31, 2017 | 349,878 | |||||||||
Net loss | (17,928) | |||||||||
Balances at Jun. 30, 2017 | $ 354,627 | $ 3,500 | $ 260 | $ 1,944,847 | $ (1,593,980) | |||||
Balances (in shares) at Jun. 30, 2017 | 156,310 | 25,950,468 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (12,674) | $ (18,724) |
Adjustments to reconcile net loss to net cash provided by operating activities | ||
Investment loss, net | 17,732 | 58,837 |
Net premium amortization on mortgage-backed securities | 15,938 | 11,671 |
Deferred tax provision (benefit) | 24,667 | (11,020) |
Other | 1,245 | 1,111 |
Changes in operating assets | ||
Interest receivable | (1,139) | 1,504 |
Other assets | 146 | 2,124 |
Changes in operating liabilities | ||
Interest payable and other liabilities | (419) | 481 |
Accrued compensation and benefits | (2,448) | (2,375) |
Net cash provided by operating activities | 43,048 | 43,609 |
Cash flows from investing activities: | ||
Proceeds from sales of private-label mortgage-backed securities | 1,268 | 38,290 |
Proceeds from sales of agency mortgage-backed securities | 996,304 | 1,451,374 |
Receipt of principal payments on private-label mortgage-backed securities | 10 | 404 |
Receipt of principal payments on agency mortgage-backed securities | 229,271 | 211,614 |
Payments for derivatives and deposits, net | (22,053) | (150,698) |
Other | 129 | 15,732 |
Net cash (used in) provided by investing activities | (296,187) | 272,228 |
Cash flows from financing activities: | ||
Proceeds from repurchase agreements, net | 264,597 | 481,797 |
Repayments of Federal Home Loan Bank advances | (786,900) | |
Proceeds from issuance of common stock | 33,346 | |
Proceeds from issuance of preferred stock | 3,500 | |
Excess tax benefits associated with stock-based awards | 86 | |
Dividends paid | (29,790) | (28,894) |
Net cash provided by (used in) financing activities | 271,653 | (333,911) |
Net increase (decrease) in cash and cash equivalents | 18,514 | (18,074) |
Cash and cash equivalents, beginning of period | 54,794 | 36,987 |
Cash and cash equivalents, end of period | 73,308 | 18,913 |
Supplemental cash flow information: | ||
Cash payments for interest | 22,896 | 14,355 |
Private-Label MBS | ||
Cash flows from investing activities: | ||
Purchases of mortgage-backed securities | (5,357) | |
Agency MBS | ||
Cash flows from investing activities: | ||
Purchases of mortgage-backed securities | $ (1,501,116) | $ (1,289,131) |
Organization and Nature of Oper
Organization and Nature of Operations | 6 Months Ended |
Jun. 30, 2017 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization and Basis of Presentation | Note 1. Organization and Basis of Presentation Arlington Asset Investment Corp. (“Arlington Asset”) and its consolidated subsidiaries (unless the context otherwise provides, collectively, the “Company”) is an investment firm that acquires and holds residential mortgage-related assets, primarily comprised of residential mortgage-backed securities (“MBS”). The Company’s investments in residential MBS include (i) residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a government-sponsored enterprise (“GSE”) such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), which are collectively referred to as “agency MBS,” and (ii) residential MBS issued by private institutions for which the principal and interest payments are not guaranteed by a GSE, which are referred to as “private-label MBS” or “non-agency MBS.” The unaudited interim consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The Company’s unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The Company’s consolidated financial statements include the accounts of Arlington Asset and all other entities in which the Company has a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Although the Company bases these estimates and assumptions on historical experience and all other reasonably available information that the Company believes to be relevant under the circumstances, such estimates frequently require management to exercise significant subjective judgment about matters that are inherently uncertain. Actual results may differ from these estimates. Certain amounts in the consolidated financial statements and notes for prior periods have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on the previously reported net income, other comprehensive income, total assets or total liabilities. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Cash Equivalents Cash equivalents include demand deposits with banks, money market accounts and highly liquid investments with original maturities of three months or less. As of June 30, 2017 and December 31, 2016, approximately 99% of the Company’s cash equivalents were invested in money market funds that invest primarily in U.S. Treasuries and other securities backed by the U.S. government. Investment Security Purchases and Sales Purchases and sales of investment securities are recorded on the settlement date of the transfer unless the trade qualifies as a “regular-way” trade and the associated commitment qualifies for an exemption from the accounting guidance applicable to derivative instruments. A regular-way trade is an investment security purchase or sale transaction that is expected to settle within the period of time following the trade date that is prevalent or traditional for that specific type of security. Any amounts payable or receivable for unsettled security trades are recorded as “sold securities receivable” or “purchased securities payable” in the consolidated balance sheets. Interest Income Recognition for Investments in Agency MBS The Company recognizes interest income for its investments in agency MBS by applying the “interest method” permitted by GAAP, whereby purchase premiums and discounts are amortized and accreted, respectively, as an adjustment to contractual interest income accrued at each security’s stated coupon rate. The interest method is applied at the individual security level based upon each security’s effective interest rate. The Company calculates each security’s effective interest rate at the time of purchase by solving for the discount rate that equates the present value of that security's remaining contractual cash flows (assuming no principal prepayments) to its purchase price. Because each security’s effective interest rate does not reflect an estimate of future prepayments, the Company refers to this manner of applying the interest method as the “contractual effective interest method.” When applying the contractual effective interest method to its investments in agency MBS, as principal prepayments occur, a proportional amount of the unamortized premium or discount is recognized in interest income such that the effective interest rate on the remaining security balance is unaffected. Interest Income Recognition for Investments in Private-Label MBS The Company’s investments in private-label MBS were generally acquired at significant discounts to their par values due in large part to an expectation that the Company will be unable to collect all of the contractual cash flows of the securities. Investments in private-label MBS acquired prior to 2015 were classified as available-for-sale, all of which had been sold as of December 31, 2016. The Company has elected to classify its investments in private-label MBS acquired in 2015 or later as trading securities. Interest income from investments in private-label MBS is recognized using a prospective level-yield methodology which is based upon each security’s effective interest rate. The amount of periodic interest income recognized is determined by applying the security’s effective interest rate to its amortized cost basis or reference amount. At the time of acquisition, the security’s effective interest rate is calculated by solving for the single discount rate that equates the present value of the Company’s best estimate of the amount and timing of the cash flows expected to be collected from the security to its purchase price. To prepare its best estimate of cash flows expected to be collected, the Company develops a number of assumptions about the future performance of the pool of mortgage loans that serve as collateral for its investment, including assumptions about the timing and amount of prepayments and credit losses. In each subsequent quarterly reporting period, the amount and timing of cash flows expected to be collected from the security are re-estimated based upon current information and events. The following table provides a description of how periodic changes in the estimate of cash flows expected to be collected affect interest income recognition prospectively for investments in private-label MBS that are classified as available-for-sale and trading securities, respectively: Effect on Interest Income Recognition for Investments in Private-Label MBS Classified as: Scenario: Available-for-Sale Trading A positive change in cash flows occurs. Actual cash flows exceed prior estimates and/or a positive change occurs in the estimate of expected remaining cash flows. If the positive change in cash flows is deemed significant, a revised effective interest rate is calculated and applied prospectively such that the positive change is recognized as incremental interest income over the remaining life of the security. This revised effective interest rate is also used in subsequent periods to determine if any declines in the fair value of that security are other-than-temporary. A revised effective interest rate is calculated and applied prospectively such that the positive change in cash flows is recognized as incremental interest income over the remaining life of the security. An adverse change in cash flows occurs. Actual cash flows fall short of prior estimates and/or an adverse change occurs in the estimate of expected remaining cash flows. The security’s effective interest rate is unaffected. If an adverse change in cash flows occurs for a security that is impaired (that is, its fair value is less than its amortized cost basis), the impairment is considered other-than-temporary due to the occurrence of a credit loss. If a credit loss occurs, the Company writes-down the amortized cost basis of the security to an amount equal to the present value of cash flows expected to be collected, discounted at the security’s existing effective interest rate, and recognizes a corresponding other-than-temporary impairment charge in earnings as a component of “investment gain (loss), net.” The amount of periodic interest income recognized over the remaining life of the security will be reduced accordingly. Specifically, if an adverse change in cash flows occurs for a security that is impaired (that is, its fair value is less than its reference amount), the reference amount to which the security’s existing effective interest rate will be prospectively applied will be reduced to the present value of cash flows expected to be collected, discounted at the security’s existing effective interest rate. If an adverse change in cash flows occurs for a security that is not impaired, the security’s effective interest rate will be reduced accordingly and applied on a prospective basis. Other Comprehensive Income Comprehensive income includes net income as currently reported by the Company on the consolidated statements of comprehensive income adjusted for other comprehensive income. Other comprehensive income for the Company represents periodic unrealized holding gains and losses related to the Company’s investments in MBS classified as available-for-sale. Accumulated unrealized holding gains and losses for available-for-sale MBS are reclassified into net income as a component of “investment gain (loss), net” upon (i) sale or realization, or (ii) the occurrence of an other-than-temporary impairment. As of December 31, 2016 all of the Company’s investments in MBS are classified as trading securities. Accordingly, all unrealized gains and losses related to the Company’s investments in MBS during 2017 have been recognized in net income. Other Significant Accounting Policies Certain of the Company’s other significant accounting policies are summarized in the following notes: Investments in agency MBS, subsequent measurement Note 3 Investments in private-label MBS, subsequent measurement Note 4 Borrowings Note 5 To-be-announced agency MBS transactions, including “dollar rolls” Note 6 Derivative instruments Note 6 Balance sheet offsetting Note 7 Fair value measurements Note 8 Refer to the Company’s 2016 Annual Report on Form 10-K for a complete inventory and summary of the Company’s significant accounting policies. Recent Accounting Pronouncements The following table provides a brief description of recently issued accounting pronouncements and their actual or expected effect on the Company’s consolidated financial statements: Standard Description Date of Adoption Effect on the Consolidated Financial Statements Recently Adopted Accounting Guidance ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting (Topic 323) This amendment eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. January 1, 2017 The adoption of ASU No. 2016-07 did not impact the Company’s consolidated financial statements. ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718) This amendment was issued with the objective of simplifying several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. January 1, 2017 The adoption of ASU No. 2016-07 did not have a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Guidance Not Yet Adopted ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date This amendment defers the effective date of ASU No. 2014-09 for all entities by one year. ASU No. 2014-09 requires entities to recognize revenue to depict the transfer of promised goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue recognition with respect to financial instruments is not within the scope of ASU No. 2014-09. January 1, 2018 The Company does not expect that the adoption of ASU No. 2015-14 will have a material impact on its consolidated financial statements. ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10) This amendment makes targeted changes to certain aspects of guidance applicable to financial assets and financial liabilities. The amendment primarily affects accounting for certain equity investments, financial liabilities measured under the fair value option, and certain financial instrument presentation and disclosure requirements. Accounting for investments in debt securities and financial liabilities not measured under the fair value option is largely unaffected by this amendment. January 1, 2018 ASU No. 2016-01 requires entities to measure investments in equity securities at fair value, unless fair value measurement is impractical, with changes in fair value recognized in current period earnings. Upon the adoption of ASU No. 2016-01, the Company will recognize the difference between the fair value of its investments in equity securities currently carried at their historical cost (net of impairments) and the securities’ fair values in net income. As of June 30, 2017, the Company’s investments in equity securities measured at cost have a balance sheet carrying value of $1,257 and an estimated fair value of $5,556. ASU No. 2016-02, Leases (Topic 842) This amendment replaces the existing lease accounting model with a revised model. The primary change effectuated by the revised lease accounting model is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. January 1, 2019 The Company is currently evaluating the impact of this amendment on its consolidated financial statements. ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 606) The amendments in this update require financial assets measured at amortized cost as well as available-for-sale debt securities to be measured for impairment on the basis of the net amount expected to be collected. Credit losses are to be recognized through an allowance for credit losses, which differs from the direct write-down of the amortized cost basis currently required for other-than-temporary impairments of investments in debt securities. This update also makes substantial changes to the manner in which interest income is to be recognized for financial assets acquired with a more-than-insignificant amount of credit deterioration since origination. This update will not affect the accounting for investments in debt securities that are classified as trading securities. January 1, 2019 As of June 30, 2017, all of the Company’s investments in debt securities are classified as trading securities. Accordingly, the Company does not expect ASU No. 2016-13 to have a material impact on its consolidated financial statements. ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230) This amendment was issued to reduce diversity in practice with respect to eight various statement of cash flow reporting issues for which existing GAAP is either unclear or does not provide specific guidance. January 1, 2018 The Company does not expect that the adoption of ASU No. 2016-15 will have a material impact on the classification of cash inflows or outflows within its consolidated statement of cash flows. ASU No. 2017-08, Premium Amortization of Purchased Callable Debt Securities (Subtopic 310-20) This amendment requires purchase premiums for investments in debt securities that are noncontingently callable by the issuer (at a fixed price and preset date) to be amortized to the earliest call date. Previously, purchase premiums for such investments were permitted to be amortized to the instrument’s maturity date. January 1, 2020 Investments in prepayable financial assets, such as residential MBS, for which the embedded call options are not held by the issuer are not within the scope of ASU No. 2017-08. Accordingly, the Company does not expect the adoption of ASU No. 2017-08 to have a material effect on its consolidated financial statements. |
Investments in Agency MBS
Investments in Agency MBS | 6 Months Ended |
Jun. 30, 2017 | |
Agency MBS | |
Investments in MBS | Note 3. Investments in Agency MBS The Company’s investments in agency MBS are reported in the accompanying consolidated balance sheets at fair value. As of June 30, 2017 and December 31, 2016, the Company had $4,182,529 and $3,911,375, respectively, of fair value in agency MBS classified as trading securities. As of June 30, 2017 all of the Company’s investments in agency MBS represent undivided (or “pass-through”) beneficial interests in specified pools of fixed-rate mortgage loans. As of December 31, 2016, the Company’s portfolio of investments in agency MBS also included investments in inverse interest-only agency MBS with an aggregate fair value of $1,923. The Company’s investments in inverse interest-only agency MBS represented beneficial interests in a portion of the interest cash flows of an underlying pool of pass-through agency MBS collateralized by adjustable-rate mortgage loans. All periodic changes in the fair value of trading agency MBS that are not attributed to interest income are recognized as a component of “investment gain (loss), net” in the accompanying consolidated statements of comprehensive income. The following table provides additional information about the gains and losses recognized as a component of “investment gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in agency MBS classified as trading securities: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net gains recognized in earnings for: Agency MBS still held at period end $ 13,474 $ 27,639 $ 11,191 $ 65,180 Agency MBS sold during the period 2,343 284 397 13,562 Total $ 15,817 $ 27,923 $ 11,588 $ 78,742 The Company also invests in and finances fixed-rate agency MBS on a generic pool basis through sequential series of to-be-announced security transactions commonly referred to as “dollar rolls.” Dollar rolls are accounted for as a sequential series of derivative instruments. Refer to “Note 6. Derivative Instruments” for further information about dollar rolls. |
Investments in Private-Label MB
Investments in Private-Label MBS | 6 Months Ended |
Jun. 30, 2017 | |
Private-Label MBS | |
Investments in MBS | Note 4. Investments in Private-Label MBS The Company’s investments in private-label MBS are reported in the accompanying consolidated balance sheets at fair value. Investments in private-label MBS acquired prior to 2015 were classified as available-for-sale, all of which had been sold as of December 31, 2016. The Company has elected to classify its investments in private-label MBS acquired in 2015 or later as trading securities. As of June 30, 2017 and December 31, 2016, the Company held investments in private-label MBS with a fair value of $74 and $1,266, respectively, all of which were classified as trading securities. Available-for-Sale Private-Label MBS Periodic changes in the fair value of the Company’s available-for-sale private-label MBS that are not attributed to interest income or other-than-temporary impairments represent unrealized holding gains and losses. Unrealized holding gains and losses are accumulated in other comprehensive income until the securities are sold. As of June 30, 2017 and December 31, 2016, the Company had no available-for-sale private-label MBS. Upon the sale of available-for-sale private-label MBS, any gains or losses accumulated in other comprehensive income are recognized in earnings as a component of “investment gain (loss), net.” The Company uses the specific identification method to determine the realized gain or loss that is recognized in earnings upon the sale of an available-for-sale private-label MBS. The following table presents the results of sales of available-for-sale private-label MBS for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Proceeds from sales $ — $ 28,410 $ — $ 28,410 Gross realized gains — 26 — 26 Gross realized losses — 619 — 619 Accretable Yield The excess of the Company’s estimate of undiscounted future cash flows expected to be collected over the security’s amortized cost basis represents that security’s accretable yield. The accretable yield is expected to be recognized as interest income over the remaining life of the security on a level-yield basis. The difference between undiscounted future contractual cash flows and undiscounted future expected cash flows represents the non-accretable difference. Based on actual payments received and/or changes in the estimate of future cash flows expected to be collected, the accretable yield and the non-accretable difference can change over time. Actual cash collections that exceed prior estimates and/or positive changes in the Company’s periodic estimate of expected future cash flows result in a reclassification of non-accretable difference to accretable yield. Conversely, actual cash collections that fall short of prior estimates and/or adverse changes in the Company’s periodic estimate of expected future cash flows result in a reclassification of accretable yield to non-accretable difference. The following table presents the changes in the accretable yield solely for available-for-sale private-label MBS for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Beginning balance $ — $ 66,998 $ — $ 85,052 Accretion — (2,448 ) — (5,021 ) Reclassifications, net — 89 — (11,877 ) Eliminations in consolidation — — — (3,515 ) Sales — (16,440 ) — (16,440 ) Ending balance $ — $ 48,199 $ — $ 48,199 Other-than-Temporary Impairments The Company evaluates available-for-sale MBS for other-than-temporary impairment on a quarterly basis. When the fair value of an available-for-sale security is less than its amortized cost at the quarterly reporting date, the security is considered impaired. Impairments determined to be other-than-temporary are recognized as a direct write-down to the security’s amortized cost basis with a corresponding charge recognized in earnings as a component of “investment gain (loss), net.” An impairment is considered other-than-temporary when (i) the Company intends to sell the impaired security, (ii) the Company more-likely-than not will be required to sell the impaired security prior to the recovery of its amortized cost basis, or (iii) a credit loss exists. A credit loss exists when the present value of the Company’s estimate of the cash flows expected to be collected from the security, discounted at the security’s existing effective interest rate, is less than the security’s amortized cost basis. If the Company intends to sell an impaired security or it more-likely-than-not will be required to sell an impaired security before recovery of its amortized cost basis, the Company writes-down the amortized cost basis of the security to an amount equal to the security’s fair value and recognizes a corresponding other-than-temporary impairment charge in earnings as a component of “investment gain (loss), net.” If a credit loss exists for an impaired security that the Company does not intend to sell nor will it likely be required to sell prior to recovery, the Company writes-down the amortized cost basis of the security to an amount equal to the present value of cash flows expected to be collected, discounted at the security’s existing effective interest rate, and recognizes a corresponding other-than-temporary impairment charge in earnings as a component of “investment gain (loss), net.” For the three and six months ended June 30, 2016, the Company recorded credit related other-than-temporary impairment charges of $1,638 and $1,737 as a component of “investment gain (loss), net” on the consolidated statements of comprehensive income on certain available-for-sale private-label MBS. The Company recorded no other-than-temporary impairment charges on available-for-sale private-label MBS during the three and six months ended June 30, 2017. The following table presents a summary of cumulative credit related other-than-temporary impairment charges recognized on the available-for-sale private-label MBS held as of the dates indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Cumulative credit related other-than-temporary impairments, beginning balance $ — $ 14,116 $ — $ 14,017 Additions for: Securities for which other-than-temporary impairments have not previously occurred — 1,638 — 1,737 Securities with previously recognized other-than- temporary impairments — — — — Reductions for sold or matured securities — — — — Cumulative credit related other-than-temporary impairments, ending balance $ — $ 15,754 $ — $ 15,754 Trading Private-Label MBS Periodic changes in the fair value of investments in trading private-label MBS that are not attributable to interest income are recognized as a component of “investment gain (loss), net” in the Company’s consolidated statements of comprehensive income. The following table provides additional information about the net gains and losses recognized as a component of “investment gain (loss), net” for the periods indicated with respect to investments in private-label MBS classified as trading securities: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net gains (losses) recognized in earnings for: Private-label MBS still held at period end $ (5 ) $ (21 ) $ (9 ) $ (216 ) Private-label MBS sold during the period 43 (237 ) 57 89 Total $ 38 $ (258 ) $ 48 $ (127 ) |
Borrowings
Borrowings | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Borrowings | Note 5. Borrowings Repurchase Agreements The Company finances the purchase of MBS through repurchase agreements, which are accounted for as collateralized borrowing arrangements. In a repurchase transaction, the Company sells MBS to a counterparty under a master repurchase agreement in exchange for cash and concurrently agrees to repurchase the same security at a future date in an amount equal to the cash initially exchanged plus an agreed-upon amount of interest. MBS sold under agreements to repurchase remain on the Company’s consolidated balance sheets because the Company maintains effective control over such securities throughout the duration of the arrangement. Throughout the contractual term of a repurchase agreement, the Company recognizes a “repurchase agreement” liability on its consolidated balance sheets to reflect the obligation to repay to the counterparty the proceeds received upon the initial transfer of the MBS. The difference between the proceeds received by the Company upon the initial transfer of the MBS and the contractually agreed-upon repurchase price is recognized as interest expense over the term of the repurchase arrangement on a level-yield basis. Amounts borrowed pursuant to repurchase agreements are equal in value to a specified percentage of the fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral throughout the term of the repurchase agreement. The counterparty to the repurchase agreements may require that the Company pledge additional securities or cash as additional collateral to secure borrowings when the value of the collateral declines. As of June 30, 2017 and December 31, 2016, the Company had no amount at risk with a single repurchase agreement counterparty or lender greater than 10% of equity. The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated: June 30, 2017 December 31, 2016 Pledged with agency MBS: Repurchase agreements outstanding $ 3,913,699 $ 3,649,102 Agency MBS collateral, at fair value 4,102,321 3,851,269 Net amount (1) 188,622 202,167 Weighted-average rate 1.33 % 0.96 % Weighted-average term to maturity 12.8 days 19.3 days (1) Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance. The following table provides information regarding the Company’s outstanding repurchase agreement borrowings during the three and six months ended June 30, 2017 and 2016: June 30, 2017 June 30, 2016 Weighted-average outstanding balance during the three months ended $ 4,125,631 $ 3,293,662 Weighted-average rate during the three months ended 1.08 % 0.66 % Weighted-average outstanding balance during the six months ended $ 4,025,321 $ 3,258,029 Weighted-average rate during the six months ended 1.00 % 0.66 % Long-Term Unsecured Debt As of June 30, 2017 and December 31, 2016, the Company had $73,768 and $73,656, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $1,532 and $1,644, respectively. The Company’s long-term debentures consisted of the following as of the dates indicated: June 30, 2017 December 31, 2016 Senior Notes Due 2025 Senior Notes Due 2023 Trust Preferred Debt Senior Notes Due 2025 Senior Notes Due 2023 Trust Preferred Debt Outstanding Principal $ 35,300 $ 25,000 $ 15,000 $ 35,300 $ 25,000 $ 15,000 Annual Interest Rate 6.75 % 6.625 % LIBOR+ 2.25 - 3.00 % 6.75 % 6.625 % LIBOR+ 2.25 - 3.00 % Interest Payment Frequency Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Weighted-Average Interest Rate 6.75 % 6.625 % 3.91 % 6.75 % 6.625 % 3.63 % Maturity March 15, 2025 May 1, 2023 2033 - 2035 March 15, 2025 May 1, 2023 2033 - 2035 Early Redemption Date March 15, 2018 May 1, 2016 2008 - 2010 March 15, 2018 May 1, 2016 2008 - 2010 The Senior Notes due 2023 and the Senior Notes due 2025 are publicly traded on the New York Stock Exchange under the ticker symbols “AIW” and “AIC,” respectively. The Senior Notes due 2023 and Senior Notes due 2025 may be redeemed in whole or in part at any time and from time to time at the Company’s option on or after May 1, 2016 and March 15, 2018, respectively, at a redemption price equal to the principal amount plus accrued and unpaid interest. The indenture governing these Senior Notes contains certain covenants, including limitations on the Company’s ability to merge or consolidate with other entities or sell or otherwise dispose of all or substantially all of the Company’s assets. |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Note 6. Derivative Instruments In the normal course of its operations, the Company is a party to financial instruments that are accounted for as derivative instruments. Derivative instruments are recorded at fair value as either “derivative assets” or “derivative liabilities” in the consolidated balance sheets, with all periodic changes in fair value reflected as a component of “investment gain (loss), net” in the consolidated statements of comprehensive income. Cash receipts or payments related to derivative instruments are classified as investing activities within the consolidated statements of cash flows. Types and Uses of Derivative Instruments Interest Rate Derivatives Most of the Company’s derivative instruments are interest rate derivatives that are intended to economically hedge changes, attributable to changes in benchmark interest rates, in certain MBS fair values and future interest cash flows on the Company’s short-term financing arrangements. Interest rate derivatives include centrally cleared interest rate swaps as well as exchange-traded instruments, such as Eurodollar futures, interest rate swap futures, U.S. Treasury note futures, and options on futures. While the Company uses its interest rate derivatives to economically hedge a portion of its interest rate risk, it has not designated such contracts as hedging instruments for financial reporting purposes. The Company exchanges cash “variation margin” with the counterparties to its interest rate derivative instruments at least on a daily basis based upon daily changes in fair value as measured by the Chicago Mercantile Exchange (“CME”), the central clearinghouse through which those derivatives are cleared. In addition, the CME requires market participants to deposit and maintain an “initial margin” amount which is determined by the CME and is generally intended to be set at a level sufficient to protect the CME from the maximum estimated single-day price movement in that market participant’s contracts. Receivables recognized for the right to reclaim cash initial margin posted in respect of interest rate derivative instruments are included in the line item “deposits, net” in the accompanying consolidated balance sheets. Prior to January 1, 2017, the daily exchange of variation margin associated with centrally cleared derivative instruments was considered a pledge of collateral. For these prior periods, receivables recognized for the right to reclaim cash variation margin posted in respect of interest rate derivative instruments are included in the line item “deposits, net” in the accompanying consolidated balance sheets. The Company elected to offset any payables recognized for the obligation to return cash variation margin received from an interest rate derivative instrument counterparty against receivables recognized for the right to reclaim cash initial margin posted by the Company to that same counterparty. Beginning on January 1, 2017, as a result of a CME amendment to their rule book which governs their central clearing activities, the daily exchange of variation margin associated with a centrally cleared derivative instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. Accordingly, beginning in 2017, the Company accounts for the daily receipt or payment of variation margin associated with its centrally cleared interest rate swaps as a direct reduction to the carrying value of the interest rate swap derivative asset or liability, respectively. Beginning in 2017, the carrying amount of centrally cleared interest rate swaps reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments; because variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments represents the change in fair value that occurred on the last day of the reporting period. To-Be-Announced Agency MBS Transactions, Including “Dollar Rolls” In addition to interest rate derivatives that are used for interest rate risk management, the Company is a party to derivative instruments that economically serve as investments, such as forward contracts to purchase fixed-rate “pass-through” agency MBS on a non-specified pool basis, which are known as to-be-announced (“TBA”) contracts. A TBA contract is a forward contract for the purchase or sale of a fixed-rate agency MBS at a predetermined price, face amount, issuer, coupon, and stated maturity for settlement on an agreed upon future date. The specific agency MBS that will be delivered to satisfy the TBA trade is not known at the inception of the trade. The Company accounts for TBA contracts as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA contract that its settlement will result in physical delivery of the underlying agency MBS, or the individual TBA contract will not settle in the shortest time period possible. The Company’s agency MBS investment portfolio includes net purchase (or “net long”) positions in TBA securities, which are primarily the result of executing sequential series of “dollar roll” transactions. The Company executes dollar roll transactions as a means of investing in and financing non-specified fixed-rate agency MBS. Such transactions involve effectively delaying (or “rolling”) the settlement of a forward purchase of a TBA agency MBS by entering into an offsetting sale prior to the settlement date, net settling the “paired-off” positions in cash, and contemporaneously entering another forward purchase of a TBA agency MBS of the same characteristics for a later settlement date. TBA securities purchased for a forward settlement month are generally priced at a discount relative to TBA securities sold for settlement in the current month. This discount, often referred to as the dollar roll “price drop,” reflects compensation for the net interest income (interest income less financing costs) that is foregone as a result of relinquishing beneficial ownership of the MBS for the duration of the dollar roll (also known as “dollar roll income”). By executing a sequential series of dollar roll transactions, the Company is able to create the economic experience of investing in an agency MBS, financed with a repurchase agreement, over a period of time. Forward purchases and sales of TBA securities are accounted for as derivative instruments in the Company’s financial statements. Accordingly, dollar roll income is recognized as a component of “investment gain (loss), net” along with all other periodic changes in the fair value of TBA commitments. In addition to transacting in net long positions in TBA securities for investment purposes, the Company may also, from time to time, transact in net sale (or “net short”) positions in TBA securities for the purpose of economically hedging a portion of the sensitivity of the fair value of the Company’s investments in agency MBS to changes in interest rates. Receivables recognized for the right to reclaim cash collateral posted by the Company in respect of TBA transactions is included in the line item “deposits, net” in the accompanying consolidated balance sheets. Liabilities recognized for the obligation to return cash collateral received by the Company in respect of TBA transactions is included in the line item “other liabilities” in the accompanying consolidated balance sheets. In addition to TBA transactions, the Company may, from time to time, enter into commitments to purchase or sell specified agency MBS that do not qualify as regular-way security trades. Such commitments are also accounted for as derivative instruments. Derivative Instrument Population and Fair Value The following table presents the fair value of the Company’s derivative instruments as of the dates indicated: June 30, 2017 December 31, 2016 Assets Liabilities Assets Liabilities Interest rate swaps $ 6,907 $ — $ 63,315 $ (1,949 ) 10-year U.S. Treasury note futures 984 — — — Options on 10-year U.S. Treasury note futures 27 — 4,289 (3,906 ) TBA commitments 47 (4,038 ) 7,285 (3,699 ) Total $ 7,965 $ (4,038 ) $ 74,889 $ (9,554 ) Interest Rate Swaps The Company’s interest rate swap agreements represent agreements to make semiannual interest payments based upon a fixed interest rate and receive quarterly variable interest payments based upon the prevailing three-month LIBOR on the date of reset. The following table presents information about the Company’s interest rate swap agreements that were in effect as of June 30, 2017: Weighted-average: Notional Amount Fixed Pay Rate Variable Receive Rate Net Receive (Pay) Rate Remaining Life (Years) Fair Value Years to maturity: Less than 3 years $ 975,000 1.18 % 1.24 % 0.06 % 1.7 $ 352 3 to less than 7 years 500,000 1.91 % 1.21 % (0.70 )% 4.0 644 7 to 10 years 2,000,000 2.01 % 1.23 % (0.78 )% 8.9 5,721 Total / weighted-average $ 3,475,000 1.76 % 1.23 % (0.53 )% 6.2 $ 6,717 The following table presents information about the Company’s forward-starting interest rate swap agreements that had yet to take effect as of June 30, 2017: Weighted-average: Notional Amount Fixed Pay Rate Term After Effective Date (Years) Fair Value Effective in September / October 2017 $ 375,000 1.13 % 2.0 $ 190 The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2016: Weighted-average: Notional Amount Fixed Pay Rate Variable Receive Rate Net (Pay) Rate Remaining Life (Years) Fair Value Years to maturity: Less than 3 years $ 1,375,000 1.10 % 0.97 % (0.13 )% 1.7 $ 6,470 3 to less than 7 years 350,000 1.84 % 1.00 % (0.84 )% 3.7 (769 ) 7 to 10 years 1,600,000 1.93 % 0.96 % (0.97 )% 9.2 50,511 Total / weighted-average $ 3,325,000 1.58 % 0.97 % (0.61 )% 5.5 $ 56,212 The following table presents information about the Company’s forward-starting interest rate swap agreements that had yet to take effect as of December 31, 2016: Weighted-average: Notional Amount Fixed Pay Rate Term After Effective Date (Years) Fair Value Effective in September / October 2017 $ 375,000 1.13 % 2.0 $ 5,154 10-year U.S. Treasury Note Futures The Company’s 10-year U.S. Treasury note futures held as of June 30, 2017, are short positions with an aggregate notional amount of $350,000 that mature in September 2017. Upon the maturity date of these futures contracts, the Company has the option to either net settle each contract in cash in an amount equal to the difference between the then-current fair value of the underlying 10-year U.S. Treasury note and the contractual sale price inherent to the futures contract, or to physically settle the contract by delivering the underlying 10-year U.S. Treasury note. Options on 10-year U.S. Treasury Note Futures The Company purchases and sells exchange-traded options on 10-year U.S. Treasury note futures contracts with the objective of economically hedging a portion of the sensitivity of its investments in agency MBS to significant changes in interest rates. The Company may purchase put options which provide the Company with the right to sell 10-year U.S. Treasury note futures to a counterparty, and the Company may also write call options that provide a counterparty with the option to buy 10-year U.S. Treasury note futures from the Company. In order to limit its exposure on its interest rate derivative instruments from a significant decline in long-term interest rates, the Company may also purchase contracts that provide the Company with the option to buy, or call, 10-year U.S. Treasury note futures from a counterparty. The options may be exercised at any time prior to their expiry, and if exercised, may be net settled in cash or through physical receipt or delivery of the underlying futures contracts. Information about the Company’s outstanding options on 10-year U.S. Treasury note futures contracts as of June 30, 2017 is as follows: Notional Amount Weighted-average Strike Price Implied Strike Rate (1) Net Fair Value Purchased call options: July 2017 expiration $ 700,000 129.9 1.81 % $ 27 (1) The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract. Information about the Company’s outstanding options on 10-year U.S. Treasury note futures contracts as of December 31, 2016 is as follows: Notional Amount Weighted-average Strike Price Implied Strike Rate (1) Net Fair Value Purchased put options: January 2017 expiration $ 950,000 120.8 2.87 % $ 539 February 2017 expiration 700,000 122.6 2.64 % 3,281 Total / weighted average for purchased put options $ 1,650,000 121.6 2.77 % $ 3,820 Sold call options: January 2017 expiration $ (100,000 ) 126.0 2.25 % $ (141 ) February 2017 expiration (900,000 ) 126.0 2.24 % (3,765 ) Total / weighted average for sold call options $ (1,000,000 ) 126.0 2.24 % $ (3,906 ) Purchased call options: January 2017 expiration $ 1,000,000 127.1 2.12 % $ 469 $ 383 (1) The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract. TBA Commitments The following tables present information about the Company’s TBA commitments as of the dates indicated: June 30, 2017 Notional Amount: Net Purchase (Sale) Commitment Contractual Forward Price Market Price Fair Value Dollar roll positions: 3.5% coupon purchase commitments $ 435,000 $ 448,641 $ 446,826 $ (1,815 ) 4.0% coupon purchase commitments 700,000 738,535 736,312 (2,223 ) 4.0% coupon sale commitments (25,000 ) (26,344 ) (26,297 ) 47 Total TBA commitments, net $ 1,110,000 $ 1,160,832 $ 1,156,841 $ (3,991 ) December 31, 2016 Notional Amount: Net Purchase (Sale) Commitment Contractual Forward Price Market Price Fair Value Dollar roll positions: 3.0% coupon purchase commitments $ 725,000 $ 718,887 $ 720,027 $ 1,140 3.5% coupon purchase commitments 25,000 25,586 25,613 27 3.5% coupon sale commitments (25,000 ) (25,602 ) (25,613 ) (11 ) Total dollar roll positions, net 725,000 718,871 720,027 1,156 TBA commitments serving as economic hedges: 3.5% coupon purchase commitments 600,000 608,601 614,719 6,118 3.5% coupon sale commitments (600,000 ) (611,031 ) (614,719 ) (3,688 ) Total economic hedges, net — (2,430 ) — 2,430 Total TBA commitments, net $ 725,000 $ 716,441 $ 720,027 $ 3,586 Derivative Instrument Gains and Losses The following tables provide information about the derivative gains and losses recognized within the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Interest rate derivatives: Interest rate swaps: Net interest expense (1) $ (5,293 ) $ (4,376 ) $ (10,702 ) $ (8,373 ) Unrealized losses, net (26,991 ) (35,840 ) (18,824 ) (80,945 ) Gains realized upon early termination 65 — 696 — Total interest rate swap losses, net (32,219 ) (40,216 ) (28,830 ) (89,318 ) U.S. Treasury note futures, net (2,176 ) (2,208 ) (2,041 ) (63,285 ) Options on U.S. Treasury note futures, net (1,736 ) (4,374 ) (6,153 ) (6,249 ) Other, net — — — (25 ) Total interest rate derivative losses, net (36,131 ) (46,798 ) (37,024 ) (158,877 ) TBA and specified agency MBS commitments: TBA dollar roll income (2) 4,298 3,719 7,696 7,514 Other gains (losses) on agency MBS commitments, net 155 8,698 (45 ) 16,222 Total gains on agency MBS commitments, net 4,453 12,417 7,651 23,736 Total derivative losses, net $ (31,678 ) $ (34,381 ) $ (29,373 ) $ (135,141 ) (1) Represents the periodic net interest settlement incurred during the period (often referred to as “net interest carry”). Beginning in 2017, also includes “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively, associated with centrally cleared interest rate swap agreements. (2) Represents the price discount of forward-settling TBA purchases relative to a contemporaneously executed “spot” TBA sale, which economically equates to net interest income that is earned ratably over the period beginning on the settlement date of the sale and ending on the settlement date of the forward-settling purchase. Derivative Instrument Activity The following tables summarize the volume of activity, in terms of notional amount, related to derivative instruments for the periods indicated: For the Three Months Ended June 30, 2017 Beginning of Period Additions Scheduled Settlements Early Terminations End of Period Interest rate swaps $ 3,600,000 $ 375,000 $ — $ (125,000 ) $ 3,850,000 10-year U.S. Treasury note futures — 608,000 (258,000 ) — 350,000 Purchased put options on 10-year U.S. Treasury note futures 700,000 100,000 (800,000 ) — — Sold call options on 10-year U.S. Treasury note futures 350,000 300,000 (650,000 ) — — Purchased call options on 10-year U.S. Treasury note futures 350,000 1,500,000 (1,150,000 ) — 700,000 Commitments to purchase (sell) MBS, net 450,000 2,865,000 (2,205,000 ) — 1,110,000 For the Three Months Ended June 30, 2016 Beginning of Period Additions Scheduled Settlements Early Terminations End of Period Interest rate swaps $ 1,750,000 $ 500,000 $ — $ — $ 2,250,000 10-year U.S. Treasury note futures 375,000 502,500 (415,000 ) (462,500 ) — Purchased put options on 10-year U.S. Treasury note futures 2,000,000 4,000,000 (4,000,000 ) — 2,000,000 Commitments to purchase (sell) MBS, net 690,000 2,050,441 (1,865,000 ) — 875,441 For the Six Months Ended June 30, 2017 Beginning of Period Additions Scheduled Settlements Early Terminations End of Period Interest rate swaps $ 3,700,000 $ 775,000 $ — $ (625,000 ) $ 3,850,000 10-year U.S. Treasury note futures — 845,100 (495,100 ) — 350,000 Purchased put options on 10-year U.S. Treasury note futures 1,650,000 2,540,000 (4,190,000 ) — — Sold call options on 10-year U.S. Treasury note futures 1,000,000 2,450,000 (3,450,000 ) — — Purchased call options on 10-year U.S. Treasury note futures 1,000,000 2,400,000 (2,700,000 ) — 700,000 Commitments to purchase (sell) MBS, net 725,000 4,315,000 (3,930,000 ) — 1,110,000 For the Six Months Ended June 30, 2016 Beginning of Period Additions Scheduled Settlements Early Terminations End of Period Interest rate swaps $ 1,500,000 $ 750,000 $ — $ — $ 2,250,000 10-year U.S. Treasury note futures 1,335,000 1,371,000 (2,118,500 ) (587,500 ) — Put options on 10-year U.S. Treasury note futures, net — 6,000,000 (4,000,000 ) — 2,000,000 Put options on Eurodollar futures 4,000,000 — (4,000,000 ) — — Commitments to purchase (sell) MBS, net 375,000 3,550,441 (3,050,000 ) — 875,441 Cash Collateral Posted and Received for Derivative Instruments The following table presents information about the cash collateral posted and received by the Company in respect of its derivative instruments, which is included in the line item “deposits, net” in the accompanying consolidated balance sheets, for the dates indicated: June 30, 2017 December 31, 2016 Cash collateral posted for: Interest rate swaps (cash initial margin) $ 58,992 $ 65,728 U.S. Treasury note futures and options on U.S. Treasury note futures (cash initial margin) 4,550 5,314 TBA commitments 1,797 1,474 Total cash collateral posted 65,339 72,516 Cash collateral received for interest rate swaps (1) — (61,367 ) Total cash collateral posted, net $ 65,339 $ 11,149 (1) Beginning in 2017, the Company accounts for the daily receipt or payment of cash variation margin associated with centrally cleared interest rate swaps as a legal settlement of the derivative instrument itself, as opposed to a pledge of collateral. |
Offsetting of Financial Assets
Offsetting of Financial Assets and Liabilities | 6 Months Ended |
Jun. 30, 2017 | |
Offsetting [Abstract] | |
Offsetting of Financial Assets and Liabilities | Note 7. Offsetting of Financial Assets and Liabilities The agreements that govern certain of the Company’s derivative instruments and collateralized short-term financing arrangements provide for a right of setoff in the event of default or bankruptcy with respect to either party to such transactions. The Company presents derivative assets and liabilities as well as collateralized short-term financing arrangements on a gross basis. Receivables recognized for the right to reclaim cash initial margin posted in respect of interest rate derivative instruments are included in the line item “deposits, net” in the accompanying consolidated balance sheets. Prior to January 1, 2017, the daily exchange of variation margin associated with centrally cleared derivative instruments was considered a pledge of collateral. For these prior periods, receivables recognized for the right to reclaim cash variation margin posted in respect of interest rate derivative instruments are included in the line item “deposits, net” in the accompanying consolidated balance sheets. The Company elected to offset any payables recognized for the obligation to return cash variation margin received from an interest rate derivative instrument counterparty against receivables recognized for the right to reclaim cash initial margin posted by the Company to that same counterparty. Beginning on January 1, 2017, as a result of a CME amendment to their rule book which governs their central clearing activities, the daily exchange of variation margin associated with a centrally cleared derivative instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. Accordingly, beginning in 2017, the Company accounts for the daily receipt or payment of variation margin associated with its centrally cleared interest rate swaps as a direct reduction to the carrying value of the interest rate swap derivative asset or liability, respectively. Beginning in 2017, the carrying amount of centrally cleared interest rate swaps reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments; because variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments represents the change in fair value that occurred on the last day of the reporting period. The following tables present information, as of the dates indicated, about the Company’s derivative instruments, short-term borrowing arrangements, and associated collateral, including those subject to master netting (or similar) arrangements: As of June 30, 2017 Gross Amount Recognized Amount Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets Gross Amount Not Offset in the Consolidated Balance Sheets Net Amount Financial Instruments (1) Cash Collateral (2) Assets: Derivative instruments: Options on U.S. Treasury note futures $ 27 $ — $ 27 $ — $ — $ 27 U.S. Treasury note futures 984 — 984 — (984 ) — Interest rate swaps 6,907 — 6,907 — (6,907 ) — TBA commitments 47 — 47 — — 47 Total derivative instruments 7,965 — 7,965 — (7,891 ) 74 Total assets $ 7,965 $ — $ 7,965 $ — $ (7,891 ) $ 74 Liabilities: TBA commitments $ 4,038 $ — $ 4,038 $ — $ (1,797 ) $ 2,241 Repurchase agreements 3,913,699 — 3,913,699 (3,913,699 ) — — Total liabilities $ 3,917,737 $ — $ 3,917,737 $ (3,913,699 ) $ (1,797 ) $ 2,241 As of December 31, 2016 Gross Amount Recognized Amount Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets Gross Amount Not Offset in the Consolidated Balance Sheets Net Amount Financial Instruments (1) Cash Collateral (2) Assets: Derivative instruments: Options on U.S. Treasury note futures $ 4,289 $ — $ 4,289 $ (3,906 ) $ — $ 383 Interest rate swaps 63,315 — 63,315 (1,949 ) (61,366 ) — TBA commitments 7,285 — 7,285 — — 7,285 Total derivative instruments 74,889 — 74,889 (5,855 ) (61,366 ) 7,668 Deposits, net 72,516 (61,367 ) 11,149 — — 11,149 Total assets $ 147,405 $ (61,367 ) $ 86,038 $ (5,855 ) $ (61,366 ) $ 18,817 Liabilities: Derivative instruments: Options on U.S. Treasury note futures $ 3,906 $ — $ 3,906 $ (3,906 ) $ — $ — Interest rate swaps 1,949 — 1,949 (1,949 ) — — TBA commitments 3,699 — 3,699 — (1,474 ) 2,225 Total derivative instruments 9,554 — 9,554 (5,855 ) (1,474 ) 2,225 Deposits, net 61,367 (61,367 ) — — — — Repurchase agreements 3,649,102 — 3,649,102 (3,649,102 ) — — Total liabilities $ 3,720,023 $ (61,367 ) $ 3,658,656 $ (3,654,957 ) $ (1,474 ) $ 2,225 (1) Does not include the fair value amount of financial instrument collateral pledged in respect of repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets. (2) Does not include the amount of cash collateral pledged in respect of derivative instruments that exceeds the associated derivative liability presented in the consolidated balance sheets. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 8. Fair Value Measurements Fair Value of Financial Instruments The accounting principles related to fair value measurements define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company at the measurement date; Level 2 Inputs - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and Level 3 Inputs - Unobservable inputs for the asset or liability, including significant judgments made by the Company about the assumptions that a market participant would use. The Company measures the fair value of the following assets and liabilities: Mortgage-backed securities Agency MBS - The Company’s investments in agency MBS are classified within Level 2 of the fair value hierarchy. Inputs to fair value measurements of the Company’s investments in agency MBS include price estimates obtained from third-party pricing services. In determining fair value, third-party pricing services use a market approach. The inputs used in the fair value measurements performed by the third-party pricing services are based upon readily observable transactions for securities with similar characteristics (such as issuer/guarantor, coupon rate, stated maturity, and collateral pool characteristics) occurring on the measurement date. The Company makes inquiries of the third party pricing sources to understand the significant inputs and assumptions used to determine prices. The Company reviews the various third-party fair value estimates and performs procedures to validate their reasonableness, including comparison to recent trading activity for similar securities and an overall review for consistency with market conditions observed as of the measurement date. Private-label MBS - The Company’s investments in private-label MBS are classified within Level 3 of the fair value hierarchy as private-label MBS trade infrequently and, therefore, the measurement of their fair value requires the use of significant unobservable inputs. In determining fair value, the Company primarily uses an income approach as well as market approaches. The Company utilizes present value techniques based on the estimated future cash flows of the instrument taking into consideration various assumptions derived by management based on their observations of assumptions used by market participants. These assumptions are corroborated by evidence such as historical collateral performance data, evaluation of historical collateral performance data for other securities with comparable or similar risk characteristics, and observed completed or pending transactions in similar instruments, when available. The significant inputs to the Company’s valuation process include collateral default, loss severity, prepayment, and discount rates (i.e., the rate of return demanded by market participants as of the measurement date). In general, significant increases (decreases) in default, loss severity, or discount rate assumptions, in isolation, would result in a significantly lower (higher) fair value measurement. However, significant increases (decreases) in prepayment rate assumptions, in isolation, may result in a significantly higher (lower) fair value measurement depending upon the instrument’s specific characteristics and the overall payment structure of the issuing securitization vehicle. It is difficult to generalize the interrelationships between these significant inputs as the actual results could differ considerably on an individual security basis. Therefore, each significant input is closely analyzed to ascertain its reasonableness for the Company’s purposes of fair value measurement. Measuring fair value is inherently subjective given the volatile and sometimes illiquid markets for these private-label MBS and requires management to make a number of judgments about the assumptions that a market participant would use, including assumptions about the timing and amount of future cash flows as well as the rate of return required by market participants. The assumptions the Company applies are specific to each security. Although the Company relies on its internal calculations to estimate the fair value of these private-label MBS, the Company considers indications of value from actual sales of similar private-label MBS to assist in the valuation process and to calibrate the Company’s models. Derivative instruments Exchange-traded derivative instruments - Exchange-traded derivative instruments, which include Eurodollar futures, U.S. Treasury note futures, interest rate swap futures, and options on futures, are classified within Level 1 of the fair value hierarchy as they are measured using quoted prices for identical instruments in liquid markets. Centrally cleared interest rate swaps - Centrally cleared interest rate swaps are classified within Level 2 of the fair value hierarchy. The fair values of centrally cleared interest rate swaps are measured using the daily valuations reported by the clearinghouse through which the instrument was cleared. In performing its end-of-day valuations, the clearinghouse constructs forward interest rate curves (for example, three-month LIBOR forward rates) from its specific observations of that day’s trading activity. The clearinghouse uses the applicable forward interest rate curve to develop a market-based forecast of future remaining contractually required cash flows for each interest rate swap. Each market-based cash flow forecast is then discounted using the overnight index swap rate curve (sourced from the Federal Reserve Bank of New York) to determine a net present value amount which represents the instrument’s fair value. The Company reviews the valuations reported by the clearinghouse on an ongoing basis and performs procedures using readily available market data to independently verify their reasonableness. Forward-settling purchases and sales of TBA securities – Forward-settling purchases and sales of TBA securities are classified within Level 2 of the fair value hierarchy. The fair value of each forward-settling TBA contract is measured using broker or dealer quotations, which are based upon readily observable transaction prices occurring on the measurement date for forward-settling contracts to buy or sell TBA securities with the same guarantor, contractual maturity, and coupon rate for delivery on the same forward settlement date as the contract under measurement. Other Long-term unsecured debt - As of June 30, 2017 and December 31, 2016, the carrying value of the Company’s long-term debt was $73,768 and $73,656, respectively, net of unamortized debt issuance costs, and consists of Senior Notes and trust preferred debt issued by the Company. The Company’s estimate of the fair value of long-term debt is $70,742 and $66,489 as of June 30, 2017 and December 31, 2016, respectively. The Company’s Senior Notes, which are publicly traded on the New York Stock Exchange, are classified within Level 1 of the fair value hierarchy. Trust preferred debt is classified within Level 2 of the fair value hierarchy as the fair value is estimated based on the quoted prices of the Company’s publicly traded Senior Notes. Investments in equity securities of non-public companies and investment funds - As of June 30, 2017 and December 31, 2016, the Company had investments in equity securities and investment funds with a carrying amount of $1,801 and $1,918, respectively, which are included in the line item “other assets” in the accompanying consolidated balance sheets. As of June 30, 2017 and December 31, 2016, $544 and $533, respectively, of these investments represent securities for which the Company elected the “fair value option” at the time that the securities were initially recognized on the Company’s consolidated balance sheets; the Company measures the fair value of these securities on a recurring basis, recognizing the periodic change in fair value in earnings. The remaining $1,257 and $1,385 in investments in equity securities of non-public companies and investment funds as of June 30, 2017 and December 31, 2016, respectively, were measured at cost, net of impairments. The Company’s estimate of the fair value of investments in equity securities and investment funds is $6,100 and $6,034 as of June 30, 2017 and December 31, 2016, respectively. Investments in equity securities and investment funds are classified within Level 3 of the fair value hierarchy. The fair values of the Company’s investments in equity securities and investment funds are not readily determinable. Accordingly, for its investments in equity securities, the Company estimates fair value by estimating the enterprise value of the investee and then waterfalls the enterprise value over the investee’s securities in the order of their preference relative to one another. To estimate the enterprise value of the investee, the Company uses traditional valuation methodologies, including the consideration of recent investments in, or tender offers for, the equity securities of the investee. For its investments in investment funds, the Company estimates fair value based upon the investee’s net asset value per share. Financial assets and liabilities for which carrying value approximates fair value - Cash and cash equivalents, deposits, receivables, repurchase agreements, payables, and other assets and liabilities are reflected in the consolidated balance sheets at their cost, which, due to the short-term nature of these instruments and their limited inherent credit risk, approximates fair value. Fair Value Hierarchy Financial Instruments Measured at Fair Value on a Recurring Basis The following tables set forth financial instruments measured at fair value by level within the fair value hierarchy as of June 30, 2017 and December 31, 2016. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. June 30, 2017 Total Level 1 Level 2 Level 3 MBS Trading: Agency MBS $ 4,182,529 $ — $ 4,182,529 $ — Private-label MBS 74 — — 74 Total MBS 4,182,603 — 4,182,529 74 Derivative assets 7,965 1,011 6,954 — Derivative liabilities (4,038 ) — (4,038 ) — Other assets 544 — — 544 Total $ 4,187,074 $ 1,011 $ 4,185,445 $ 618 December 31, 2016 Total Level 1 Level 2 Level 3 MBS Trading: Agency MBS $ 3,911,375 $ — $ 3,911,375 $ — Private-label MBS 1,266 — — 1,266 Total MBS 3,912,641 — 3,911,375 1,266 Derivative assets 74,889 4,289 70,600 — Derivative liabilities (9,554 ) (3,906 ) (5,648 ) — Other assets 533 — — 533 Total $ 3,978,509 $ 383 $ 3,976,327 $ 1,799 There were no transfers of financial instruments into or out of Levels 1, 2 or 3 during the three and six months ended June 30, 2017 or the year ended December 31, 2016. Level 3 Financial Assets and Liabilities The following table provides information about the significant unobservable inputs used to measure the fair value of the Company’s private-label MBS as of the dates indicated: June 30, 2017 December 31, 2016 Weighted- average (1) Range Weighted- average (1) Range Discount rate — — 6.50 % 6.50 - 6.50 % Default rate — — 2.25 % 2.25 - 2.25 % Loss severity rate — — 45.00 % 45.00 - 45.00 % Total prepayment rate (including defaults) — — 10.25 % 10.25 - 10.25 % (1) The table below sets forth an attribution of the change in the fair value of the Company’s Level 3 investments that are measured at fair value on a recurring basis for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Beginning balance $ 1,976 $ 129,336 $ 1,799 $ 130,553 Total net gains (losses) Included in investment gain (loss), net (101 ) (2,488 ) 61 (2,456 ) Included in other comprehensive income — (379 ) — (8,415 ) Purchases — — — 5,357 Sales (1,268 ) (38,290 ) (1,268 ) (38,290 ) Payments, net (32 ) (1,801 ) (54 ) (3,345 ) Accretion of discount 43 2,808 80 5,782 Ending balance $ 618 $ 89,186 $ 618 $ 89,186 Net unrealized gains (losses) included in earnings for the period for Level 3 assets still held at the reporting date $ (145 ) $ (1,658 ) $ 3 $ (1,952 ) |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 9. Income Taxes Arlington Asset is subject to taxation as a corporation under Subchapter C of the Internal Revenue Code of 1986, as amended (the “Code”). As of June 30, 2017, the Company had estimated net operating loss (“NOL”) carry-forwards of $75,423 that can be used to offset future taxable ordinary income. The Company’s NOL carry-forwards begin to expire in 2027. As of June 30, 2017, the Company had estimated net capital loss (“NCL”) carry-forwards of $324,385 that can be used to offset future net capital gains. The scheduled expirations of the Company’s NCL carry-forwards are $136,840 in 2019, $102,927 in 2020, $71,131 in 2021 and $13,487 in 2022. The Company is subject to federal alternative minimum tax (“AMT”) and state and local taxes on its taxable income and gains that are not offset by its NOL and NCL carry-forwards. As of June 30, 2017, the Company had estimated AMT credit carry-forwards of $8,838 that can be used to offset future taxable ordinary income. The AMT credit carry-forwards do not expire. Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities reflect the impact of temporary differences between the carrying amount of assets and liabilities pursuant to the application of GAAP and their respective tax bases and are stated at tax rates expected to be in effect when the taxes are actually paid or recovered. Deferred tax assets are also recognized for NOL carry-forwards, NCL carry-forwards and any tax credit carry-forwards. A valuation allowance is provided against the deferred tax asset if, based upon the Company’s evaluation, it is more-likely-than-not that some or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is incorporated into the determination of whether a valuation allowance for deferred tax assets is appropriate. Items considered in the valuation allowance determination include expectations of future earnings of the appropriate tax character, recent historical financial results, tax planning strategies, the length of statutory carry-forward periods and the expected timing of the reversal of temporary differences. As of June 30, 2017, the Company determined that it should record a full valuation allowance against its deferred tax assets that are capital in nature, which consists of its NCL carry-forwards and temporary GAAP to tax differences that are expected to result in capital losses in future periods. As of June 30, 2017, the Company determined that it should not record any valuation allowance against its deferred tax assets that are ordinary in nature, which consists of its NOL carry-forwards, tax credit carry-forwards and temporary GAAP to tax differences that are expected to result in deductions from ordinary income in future periods. For the three and six months ended June 30, 2017, the Company recorded an increase to its valuation allowance of $16,829 and $19,958, respectively. The increase in the valuation allowance primarily represents the incremental allowance required to fully reserve its deferred tax assets stemming from temporary GAAP to tax differences that are expected to be capital losses in future periods (at current valuations). Deferred tax assets and liabilities consisted of the following as of the dates indicated: June 30, 2017 December 31, 2016 Ordinary deferred tax assets: NOL carry-forward $ 29,340 $ 37,238 AMT credit carry-forward 8,838 8,427 Deferred net loss on designated derivatives 1,195 1,386 Stock-based compensation 2,404 2,426 Other, net 208 208 Total ordinary deferred tax assets 41,985 49,685 Ordinary deferred tax liabilities: Net unrealized gain on designated derivatives (17,823 ) (25,145 ) Ordinary deferred tax assets, net 24,162 24,540 Capital deferred tax assets: NCL carry-forward 126,186 120,939 Net unrealized loss on investments 34,675 44,253 Valuation allowance (160,861 ) (140,903 ) Total capital deferred tax assets, net — 24,289 Total deferred tax assets, net $ 24,162 $ 48,829 The Company is subject to examination by the U.S. Internal Revenue Service (“IRS”) and state and local taxing jurisdictions where the Company has significant business operations. As of June 30, 2017, there are no on-going examinations. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | Note 10. Earnings (Loss) Per Share Basic earnings per share includes no dilution and is computed by dividing net income or loss applicable to common stock by the weighted-average number of common shares outstanding for the respective period. Diluted earnings per share includes the impact of dilutive securities such as unvested shares of restricted stock and performance share units. The following tables present the computations of basic and diluted earnings (loss) per share for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, (Shares in thousands) 2017 2016 2017 2016 Basic weighted-average common shares outstanding 24,319 23,003 23,987 22,998 Performance share units and unvested restricted stock — 67 — — Diluted weighted-average common shares outstanding 24,319 23,070 23,987 22,998 Net (loss) income attributable to common stock $ (17,963 ) $ 12,894 $ (12,709 ) $ (18,724 ) Basic (loss) earnings per common share $ (0.74 ) $ 0.56 $ (0.53 ) $ (0.81 ) Diluted (loss) earnings per common share $ (0.74 ) $ 0.56 $ (0.53 ) $ (0.81 ) The diluted loss per share for the three and six months ended June 30, 2017 and the six months ended June 30, 2016 did not include the antidilutive effect of 233,418, 239,248 and 56,463 shares of unvested shares of performance share units and restricted stock, respectively. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | Note 11. Stockholders’ Equity Common Stock The Company has authorized share capital of 450,000,000 shares of Class A common stock, par value $0.01 per share, and 100,000,000 shares of Class B common stock, par value $0.01 per share. Holders of the Class A and Class B common stock are entitled to one vote and three votes per share, respectively, on all matters voted upon by the shareholders. Shares of Class B common stock are convertible into shares of Class A common stock on a one-for-one basis at the option of the Company in certain circumstances including either (i) upon sale or other transfer, or (ii) at the time the holder of such shares of Class B common stock ceases to be employed by the Company. During the six months ended June 30, 2017 and during the year ended December 31, 2016, holders of the Company's Class B common stock converted an aggregate of 20,256 and 81,960 shares of Class B common stock into 20,256 and 81,960 shares of Class A common stock, respectively. As of June 30, 2017, all remaining shares of Class B common stock had been exchanged for shares of the Company’s Class A common stock. Preferred Stock The Company has authorized share capital of 2,000,000 shares of 7.00% Series B Cumulative Perpetual Redeemable Preferred Stock (the “Series B Preferred Stock”), par value of $.01 per share, and 23,000,000 shares of undesignated preferred stock. The Company’s Board of Directors has the authority, without further action by the shareholders, to issue additional preferred stock in one or more series and to fix the terms and rights of the preferred stock. In May 2017, the Company completed a public offering in which 135,000 shares of its Series B Preferred Stock were issued to the public at a public offering price of $24.00 per share for proceeds net of underwriting discounts and commissions and expenses of $3,018. The Series B Preferred Stock is publicly traded on the New York Stock Exchange under the ticker symbol “AI PrB.” The Series B Preferred Stock has no stated maturity, is not subject to any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by the Company. Holders of Series B Preferred Stock have no voting rights, except under limited conditions, and are entitled to receive a cumulative cash dividend at a rate of 7.00% per annum of their $25.00 per share liquidation preference before holders of common stock are entitled to receive any dividends. Shares of Series B Preferred Stock are redeemable at $25.00 per share, plus accumulated and unpaid dividends (whether or not authorized or declared) exclusively at our option commencing on May 12, 2022 or earlier upon the occurrence of a change in control. Dividends are payable quarterly in arrears on the 30th day of each December, March, June and September. As of June 30, 2017, we had declared and paid all required quarterly dividends on our Series B Preferred Stock. Dividends Pursuant to the Company’s variable dividend policy for its common stock, the Board of Directors evaluates common stock dividends on a quarterly basis and, in its sole discretion, approves the payment of dividends. The Company’s common stock dividend payments, if any, may vary significantly from quarter to quarter. The Board of Directors has approved and the Company has declared and paid the following dividends on its common stock to date in 2017: Quarter Ended Dividend Amount Declaration Date Record Date Pay Date June 30 $ 0.550 June 16 June 30 July 31 March 31 0.625 March 14 March 31 April 28 The Board of Directors approved and the Company declared and paid the following dividends for 2016: Quarter Ended Dividend Amount Declaration Date Record Date Pay Date December 31 $ 0.625 December 16 December 30 January 31, 2017 September 30 0.625 September 15 September 30 October 31 June 30 0.625 June 17 June 30 July 29 March 31 0.625 March 15 March 31 April 29 Equity Distribution Agreements On May 24, 2013, the Company entered into separate equity distribution agreements (the “Prior Equity Distribution Agreements”) with each of RBC Capital Markets, LLC, JMP Securities LLC, Ladenburg Thalmann & Co. Inc. and MLV & Co. LLC (the “Prior Equity Sales Agents”), pursuant to which the Company may offer and sell, from time to time, up to 1,750,000 shares of the Company’s Class A common stock. Pursuant to the Prior Equity Distribution Agreements, shares of the Company’s common stock may be offered and sold through the Prior Equity Sales Agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from the Company, in privately negotiated transactions. During the three months ended March 31, 2017, the Company issued 800 shares of Class A common stock at a weighted average public offering price of $15.16 per share for proceeds net of underwriting discounts and commissions and expenses of $12 under the Prior Equity Distribution Agreements. On February 23, 2017, the Company terminated the Prior Equity Distribution Agreements. On February 22, 2017, the Company entered into new separate equity distribution agreements (the “New Equity Distribution Agreements”) with each of JMP Securities LLC, FBR Capital Markets & Co., JonesTrading Institutional Services LLC and Ladenburg Thalmann & Co. Inc. (the “New Equity Sales Agents”), pursuant to which the Company may offer and sell, from time to time, up to 6,000,000 shares of the Company’s Class A common stock. Pursuant to the New Equity Distribution Agreements, shares of the Company’s common stock may be offered and sold through the New Equity Sales Agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from the Company, in privately negotiated transactions. During the three months ended June 30, 2017, the Company issued 2,331,489 shares of Class A common stock at a weighted average public offering price of $14.51 per share for proceeds net of underwriting discounts and commissions and expenses of $33,334 under the New Equity Distribution Agreements. As of June 30, 2017, the Company had 3,668,511 shares of Class A common stock available for sale under the New Equity Distribution Agreements. On May 16, 2017, the Company entered into an equity distribution agreement (the “Series B Preferred Equity Distribution Agreement”) with JonesTrading Institutional Services LLC (the “Series B Preferred Equity Agent”), pursuant to which the Company may offer and sell, from time to time, up to 1,865,000 shares of the Company’s Series B Preferred Stock. Pursuant to the Series B Preferred Equity Distribution Agreement, shares of the Company’s Series B Preferred stock may be offered and sold through the Series B Preferred Equity Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from the Company, in privately negotiated transactions. During the three months ended June 30, 2017, the Company issued 21,310 shares of Series B Preferred stock at a weighted average public offering price of $24.41 per share for proceeds net of underwriting discounts and commissions and expenses of $482 under the Series B Preferred Equity Distribution Agreement. As of June 30, 2017, the Company had 1,843,690 shares of Series B Preferred stock available for sale under the Series B Preferred Equity Distribution Agreement. Share Repurchase Program The Company’s Board of Directors authorized a share repurchase program pursuant to which the Company may repurchase up to 2,000,000 shares of Class A common stock (the “Repurchase Program”). Repurchases under the Repurchase Program may be made from time to time on the open market and in private transactions at management’s discretion in accordance with applicable federal securities laws. The timing of repurchases and the exact number of shares of Class A common stock to be repurchased will depend upon market conditions and other factors. The Repurchase Program is funded using the Company’s cash on hand and cash generated from operations. The Repurchase Program has no expiration date and may be suspended or terminated at any time without prior notice. As of June 30, 2017, there remain available for repurchase 1,951,305 shares of Class A common stock under the Repurchase Program. Shareholder Rights Agreement The Board of Directors adopted and the Company’s shareholders approved a shareholder rights agreement (“Rights Plan”). Under the terms of the Rights Plan, in general, if a person or group acquires or commences a tender or exchange offer for beneficial ownership of 4.9% or more of the outstanding shares of our Class A common stock upon a determination by our Board of Directors (an “Acquiring Person”), all of our other Class A and Class B common shareholders will have the right to purchase securities from us at a discount to such securities’ fair market value, thus causing substantial dilution to the Acquiring Person. The Board of Directors adopted the Rights Plan in an effort to protect against a possible limitation on the Company’s ability to use its NOL carry-forwards, NCL carry-forwards, and built-in losses under Sections 382 and 383 of the Code. The Company’s ability to use its NOLs, NCLs and built-in losses would be limited if it experienced an “ownership change” under Section 382 of the Code. In general, an “ownership change” would occur if there is a cumulative change in the ownership of the Company’s common stock of more than 50% by one or more “5% shareholders” during a three-year period. The Rights Plan was adopted to dissuade any person or group from acquiring 4.9% or more of the Company’s outstanding Class A common stock, each, an Acquiring Person, without the approval of the Board of Directors and triggering an “ownership change” as defined by Section 382. The Rights Plan and any outstanding rights will expire at the earliest of (i) June 4, 2019, (ii) the time at which the rights are redeemed or exchanged pursuant to the Rights Plan, (iii) the repeal of Section 382 and 383 of the Code or any successor statute if the Board of Directors determines that the Rights Plan is no longer necessary for the preservation of the applicable tax benefits, and (iv) the beginning of a taxable year to which the Board of Directors determines that no applicable tax benefits may be carried forward. |
Revisions to Previously Reporte
Revisions to Previously Reported Financial Statements | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Changes And Error Corrections [Abstract] | |
Revisions to Previously Reported Financial Statements | Note 12. Revisions to Previously Reported Financial Statements During the second quarter of 2017, the Company concluded that the previously reported deferred tax assets, net, and accumulated deficit were incorrect for the three months ended March 31, 2017 and for the five fiscal years ended December 31, 2016 with a corresponding effect on the previously reported income tax benefit and net income for the fiscal year ended December 31, 2012. Although the impact of this change was not material to the consolidated financial statements for the five fiscal years ended December 31, 2016 and for the three months ended March 31, 2017, the Company has revised its previously reported consolidated financial statements for those periods to reflect the cumulative impact of the errors. The following tables set forth the affected line items within the Company’s previously reported consolidated financial statements for the periods indicated: As of March 31, 2017 As Previously Reported Adjustment As Revised Consolidated Balance Sheets: Deferred tax assets, net $ 65,149 $ (24,603 ) $ 40,546 Total assets 4,720,492 (24,603 ) 4,695,889 Accumulated deficit (1,536,949 ) (24,603 ) (1,561,552 ) Total stockholders' equity 374,481 (24,603 ) 349,878 Total liabilities and stockholders' equity 4,720,492 (24,603 ) 4,695,889 As of December 31, 2016 As Previously Reported Adjustment As Revised Consolidated Balance Sheets: Deferred tax assets, net $ 73,432 $ (24,603 ) $ 48,829 Total assets 4,141,554 (24,603 ) 4,116,951 Accumulated deficit (1,527,104 ) (24,603 ) (1,551,707 ) Total stockholders' equity 383,416 (24,603 ) 358,813 Total liabilities and stockholders' equity 4,141,554 (24,603 ) 4,116,951 As of December 31, 2015 As Previously Reported Adjustment As Revised Consolidated Balance Sheets: Deferred tax assets, net $ 97,530 $ (24,603 ) $ 72,927 Total assets 4,202,939 (24,603 ) 4,178,336 Accumulated deficit (1,426,655 ) (24,603 ) (1,451,258 ) Total stockholders' equity 484,031 (24,603 ) 459,428 Total liabilities and stockholders' equity 4,202,939 (24,603 ) 4,178,336 |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Cash Equivalents | Cash Equivalents Cash equivalents include demand deposits with banks, money market accounts and highly liquid investments with original maturities of three months or less. As of June 30, 2017 and December 31, 2016, approximately 99% of the Company’s cash equivalents were invested in money market funds that invest primarily in U.S. Treasuries and other securities backed by the U.S. government. |
Investment Security Purchases and Sales | Investment Security Purchases and Sales Purchases and sales of investment securities are recorded on the settlement date of the transfer unless the trade qualifies as a “regular-way” trade and the associated commitment qualifies for an exemption from the accounting guidance applicable to derivative instruments. A regular-way trade is an investment security purchase or sale transaction that is expected to settle within the period of time following the trade date that is prevalent or traditional for that specific type of security. Any amounts payable or receivable for unsettled security trades are recorded as “sold securities receivable” or “purchased securities payable” in the consolidated balance sheets. |
Interest Income Recognition for Investments in Agency MBS | Interest Income Recognition for Investments in Agency MBS The Company recognizes interest income for its investments in agency MBS by applying the “interest method” permitted by GAAP, whereby purchase premiums and discounts are amortized and accreted, respectively, as an adjustment to contractual interest income accrued at each security’s stated coupon rate. The interest method is applied at the individual security level based upon each security’s effective interest rate. The Company calculates each security’s effective interest rate at the time of purchase by solving for the discount rate that equates the present value of that security's remaining contractual cash flows (assuming no principal prepayments) to its purchase price. Because each security’s effective interest rate does not reflect an estimate of future prepayments, the Company refers to this manner of applying the interest method as the “contractual effective interest method.” When applying the contractual effective interest method to its investments in agency MBS, as principal prepayments occur, a proportional amount of the unamortized premium or discount is recognized in interest income such that the effective interest rate on the remaining security balance is unaffected. |
Interest Income Recognition for Investments in Private-Label MBS | Interest Income Recognition for Investments in Private-Label MBS The Company’s investments in private-label MBS were generally acquired at significant discounts to their par values due in large part to an expectation that the Company will be unable to collect all of the contractual cash flows of the securities. Investments in private-label MBS acquired prior to 2015 were classified as available-for-sale, all of which had been sold as of December 31, 2016. The Company has elected to classify its investments in private-label MBS acquired in 2015 or later as trading securities. Interest income from investments in private-label MBS is recognized using a prospective level-yield methodology which is based upon each security’s effective interest rate. The amount of periodic interest income recognized is determined by applying the security’s effective interest rate to its amortized cost basis or reference amount. At the time of acquisition, the security’s effective interest rate is calculated by solving for the single discount rate that equates the present value of the Company’s best estimate of the amount and timing of the cash flows expected to be collected from the security to its purchase price. To prepare its best estimate of cash flows expected to be collected, the Company develops a number of assumptions about the future performance of the pool of mortgage loans that serve as collateral for its investment, including assumptions about the timing and amount of prepayments and credit losses. In each subsequent quarterly reporting period, the amount and timing of cash flows expected to be collected from the security are re-estimated based upon current information and events. The following table provides a description of how periodic changes in the estimate of cash flows expected to be collected affect interest income recognition prospectively for investments in private-label MBS that are classified as available-for-sale and trading securities, respectively: Effect on Interest Income Recognition for Investments in Private-Label MBS Classified as: Scenario: Available-for-Sale Trading A positive change in cash flows occurs. Actual cash flows exceed prior estimates and/or a positive change occurs in the estimate of expected remaining cash flows. If the positive change in cash flows is deemed significant, a revised effective interest rate is calculated and applied prospectively such that the positive change is recognized as incremental interest income over the remaining life of the security. This revised effective interest rate is also used in subsequent periods to determine if any declines in the fair value of that security are other-than-temporary. A revised effective interest rate is calculated and applied prospectively such that the positive change in cash flows is recognized as incremental interest income over the remaining life of the security. An adverse change in cash flows occurs. Actual cash flows fall short of prior estimates and/or an adverse change occurs in the estimate of expected remaining cash flows. The security’s effective interest rate is unaffected. If an adverse change in cash flows occurs for a security that is impaired (that is, its fair value is less than its amortized cost basis), the impairment is considered other-than-temporary due to the occurrence of a credit loss. If a credit loss occurs, the Company writes-down the amortized cost basis of the security to an amount equal to the present value of cash flows expected to be collected, discounted at the security’s existing effective interest rate, and recognizes a corresponding other-than-temporary impairment charge in earnings as a component of “investment gain (loss), net.” The amount of periodic interest income recognized over the remaining life of the security will be reduced accordingly. Specifically, if an adverse change in cash flows occurs for a security that is impaired (that is, its fair value is less than its reference amount), the reference amount to which the security’s existing effective interest rate will be prospectively applied will be reduced to the present value of cash flows expected to be collected, discounted at the security’s existing effective interest rate. If an adverse change in cash flows occurs for a security that is not impaired, the security’s effective interest rate will be reduced accordingly and applied on a prospective basis. |
Other Comprehensive Income | Other Comprehensive Income Comprehensive income includes net income as currently reported by the Company on the consolidated statements of comprehensive income adjusted for other comprehensive income. Other comprehensive income for the Company represents periodic unrealized holding gains and losses related to the Company’s investments in MBS classified as available-for-sale. Accumulated unrealized holding gains and losses for available-for-sale MBS are reclassified into net income as a component of “investment gain (loss), net” upon (i) sale or realization, or (ii) the occurrence of an other-than-temporary impairment. As of December 31, 2016 all of the Company’s investments in MBS are classified as trading securities. Accordingly, all unrealized gains and losses related to the Company’s investments in MBS during 2017 have been recognized in net income. |
Other Significant Accounting Policies | Other Significant Accounting Policies Certain of the Company’s other significant accounting policies are summarized in the following notes: Investments in agency MBS, subsequent measurement Note 3 Investments in private-label MBS, subsequent measurement Note 4 Borrowings Note 5 To-be-announced agency MBS transactions, including “dollar rolls” Note 6 Derivative instruments Note 6 Balance sheet offsetting Note 7 Fair value measurements Note 8 Refer to the Company’s 2016 Annual Report on Form 10-K for a complete inventory and summary of the Company’s significant accounting policies. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The following table provides a brief description of recently issued accounting pronouncements and their actual or expected effect on the Company’s consolidated financial statements: Standard Description Date of Adoption Effect on the Consolidated Financial Statements Recently Adopted Accounting Guidance ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting (Topic 323) This amendment eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. January 1, 2017 The adoption of ASU No. 2016-07 did not impact the Company’s consolidated financial statements. ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718) This amendment was issued with the objective of simplifying several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. January 1, 2017 The adoption of ASU No. 2016-07 did not have a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Guidance Not Yet Adopted ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date This amendment defers the effective date of ASU No. 2014-09 for all entities by one year. ASU No. 2014-09 requires entities to recognize revenue to depict the transfer of promised goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue recognition with respect to financial instruments is not within the scope of ASU No. 2014-09. January 1, 2018 The Company does not expect that the adoption of ASU No. 2015-14 will have a material impact on its consolidated financial statements. ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10) This amendment makes targeted changes to certain aspects of guidance applicable to financial assets and financial liabilities. The amendment primarily affects accounting for certain equity investments, financial liabilities measured under the fair value option, and certain financial instrument presentation and disclosure requirements. Accounting for investments in debt securities and financial liabilities not measured under the fair value option is largely unaffected by this amendment. January 1, 2018 ASU No. 2016-01 requires entities to measure investments in equity securities at fair value, unless fair value measurement is impractical, with changes in fair value recognized in current period earnings. Upon the adoption of ASU No. 2016-01, the Company will recognize the difference between the fair value of its investments in equity securities currently carried at their historical cost (net of impairments) and the securities’ fair values in net income. As of June 30, 2017, the Company’s investments in equity securities measured at cost have a balance sheet carrying value of $1,257 and an estimated fair value of $5,556. ASU No. 2016-02, Leases (Topic 842) This amendment replaces the existing lease accounting model with a revised model. The primary change effectuated by the revised lease accounting model is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. January 1, 2019 The Company is currently evaluating the impact of this amendment on its consolidated financial statements. ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 606) The amendments in this update require financial assets measured at amortized cost as well as available-for-sale debt securities to be measured for impairment on the basis of the net amount expected to be collected. Credit losses are to be recognized through an allowance for credit losses, which differs from the direct write-down of the amortized cost basis currently required for other-than-temporary impairments of investments in debt securities. This update also makes substantial changes to the manner in which interest income is to be recognized for financial assets acquired with a more-than-insignificant amount of credit deterioration since origination. This update will not affect the accounting for investments in debt securities that are classified as trading securities. January 1, 2019 As of June 30, 2017, all of the Company’s investments in debt securities are classified as trading securities. Accordingly, the Company does not expect ASU No. 2016-13 to have a material impact on its consolidated financial statements. ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230) This amendment was issued to reduce diversity in practice with respect to eight various statement of cash flow reporting issues for which existing GAAP is either unclear or does not provide specific guidance. January 1, 2018 The Company does not expect that the adoption of ASU No. 2016-15 will have a material impact on the classification of cash inflows or outflows within its consolidated statement of cash flows. ASU No. 2017-08, Premium Amortization of Purchased Callable Debt Securities (Subtopic 310-20) This amendment requires purchase premiums for investments in debt securities that are noncontingently callable by the issuer (at a fixed price and preset date) to be amortized to the earliest call date. Previously, purchase premiums for such investments were permitted to be amortized to the instrument’s maturity date. January 1, 2020 Investments in prepayable financial assets, such as residential MBS, for which the embedded call options are not held by the issuer are not within the scope of ASU No. 2017-08. Accordingly, the Company does not expect the adoption of ASU No. 2017-08 to have a material effect on its consolidated financial statements. |
Repurchase Agreements | The Company finances the purchase of MBS through repurchase agreements, which are accounted for as collateralized borrowing arrangements. In a repurchase transaction, the Company sells MBS to a counterparty under a master repurchase agreement in exchange for cash and concurrently agrees to repurchase the same security at a future date in an amount equal to the cash initially exchanged plus an agreed-upon amount of interest. MBS sold under agreements to repurchase remain on the Company’s consolidated balance sheets because the Company maintains effective control over such securities throughout the duration of the arrangement. Throughout the contractual term of a repurchase agreement, the Company recognizes a “repurchase agreement” liability on its consolidated balance sheets to reflect the obligation to repay to the counterparty the proceeds received upon the initial transfer of the MBS. The difference between the proceeds received by the Company upon the initial transfer of the MBS and the contractually agreed-upon repurchase price is recognized as interest expense over the term of the repurchase arrangement on a level-yield basis. |
Derivative Instruments | In the normal course of its operations, the Company is a party to financial instruments that are accounted for as derivative instruments. Derivative instruments are recorded at fair value as either “derivative assets” or “derivative liabilities” in the consolidated balance sheets, with all periodic changes in fair value reflected as a component of “investment gain (loss), net” in the consolidated statements of comprehensive income. Cash receipts or payments related to derivative instruments are classified as investing activities within the consolidated statements of cash flows. In addition to interest rate derivatives that are used for interest rate risk management, the Company is a party to derivative instruments that economically serve as investments, such as forward contracts to purchase fixed-rate “pass-through” agency MBS on a non-specified pool basis, which are known as to-be-announced (“TBA”) contracts. A TBA contract is a forward contract for the purchase or sale of a fixed-rate agency MBS at a predetermined price, face amount, issuer, coupon, and stated maturity for settlement on an agreed upon future date. The specific agency MBS that will be delivered to satisfy the TBA trade is not known at the inception of the trade. The Company accounts for TBA contracts as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA contract that its settlement will result in physical delivery of the underlying agency MBS, or the individual TBA contract will not settle in the shortest time period possible. |
Derivatives, Offsetting of Financial Assets and Liabilities | The agreements that govern certain of the Company’s derivative instruments and collateralized short-term financing arrangements provide for a right of setoff in the event of default or bankruptcy with respect to either party to such transactions. The Company presents derivative assets and liabilities as well as collateralized short-term financing arrangements on a gross basis. Receivables recognized for the right to reclaim cash initial margin posted in respect of interest rate derivative instruments are included in the line item “deposits, net” in the accompanying consolidated balance sheets. Prior to January 1, 2017, the daily exchange of variation margin associated with centrally cleared derivative instruments was considered a pledge of collateral. For these prior periods, receivables recognized for the right to reclaim cash variation margin posted in respect of interest rate derivative instruments are included in the line item “deposits, net” in the accompanying consolidated balance sheets. The Company elected to offset any payables recognized for the obligation to return cash variation margin received from an interest rate derivative instrument counterparty against receivables recognized for the right to reclaim cash initial margin posted by the Company to that same counterparty. Beginning on January 1, 2017, as a result of a CME amendment to their rule book which governs their central clearing activities, the daily exchange of variation margin associated with a centrally cleared derivative instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. Accordingly, beginning in 2017, the Company accounts for the daily receipt or payment of variation margin associated with its centrally cleared interest rate swaps as a direct reduction to the carrying value of the interest rate swap derivative asset or liability, respectively. Beginning in 2017, the carrying amount of centrally cleared interest rate swaps reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments; because variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments represents the change in fair value that occurred on the last day of the reporting period. |
Fair Value of Financial Instruments | The accounting principles related to fair value measurements define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company at the measurement date; Level 2 Inputs - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and Level 3 Inputs - Unobservable inputs for the asset or liability, including significant judgments made by the Company about the assumptions that a market participant would use. The Company measures the fair value of the following assets and liabilities: |
Agency MBS | |
Investment Security Purchases and Sales | The Company’s investments in agency MBS are reported in the accompanying consolidated balance sheets at fair value. As of June 30, 2017 and December 31, 2016, the Company had $4,182,529 and $3,911,375, respectively, of fair value in agency MBS classified as trading securities. |
Private-Label MBS | |
Investment Security Purchases and Sales | The Company’s investments in private-label MBS are reported in the accompanying consolidated balance sheets at fair value. Investments in private-label MBS acquired prior to 2015 were classified as available-for-sale, all of which had been sold as of December 31, 2016. The Company has elected to classify its investments in private-label MBS acquired in 2015 or later as trading securities. The Company evaluates available-for-sale MBS for other-than-temporary impairment on a quarterly basis. When the fair value of an available-for-sale security is less than its amortized cost at the quarterly reporting date, the security is considered impaired. Impairments determined to be other-than-temporary are recognized as a direct write-down to the security’s amortized cost basis with a corresponding charge recognized in earnings as a component of “investment gain (loss), net.” An impairment is considered other-than-temporary when (i) the Company intends to sell the impaired security, (ii) the Company more-likely-than not will be required to sell the impaired security prior to the recovery of its amortized cost basis, or (iii) a credit loss exists. A credit loss exists when the present value of the Company’s estimate of the cash flows expected to be collected from the security, discounted at the security’s existing effective interest rate, is less than the security’s amortized cost basis. If the Company intends to sell an impaired security or it more-likely-than-not will be required to sell an impaired security before recovery of its amortized cost basis, the Company writes-down the amortized cost basis of the security to an amount equal to the security’s fair value and recognizes a corresponding other-than-temporary impairment charge in earnings as a component of “investment gain (loss), net.” If a credit loss exists for an impaired security that the Company does not intend to sell nor will it likely be required to sell prior to recovery, the Company writes-down the amortized cost basis of the security to an amount equal to the present value of cash flows expected to be collected, discounted at the security’s existing effective interest rate, and recognizes a corresponding other-than-temporary impairment charge in earnings as a component of “investment gain (loss), net.” |
Investments in Agency MBS (Tabl
Investments in Agency MBS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Agency MBS | |
Additional Information Realized Gain Loss on Investments | The following table provides additional information about the gains and losses recognized as a component of “investment gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in agency MBS classified as trading securities: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net gains recognized in earnings for: Agency MBS still held at period end $ 13,474 $ 27,639 $ 11,191 $ 65,180 Agency MBS sold during the period 2,343 284 397 13,562 Total $ 15,817 $ 27,923 $ 11,588 $ 78,742 |
Investments in Private-Label 22
Investments in Private-Label MBS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Realized Gain (Loss) on Investments | The following table presents the results of sales of available-for-sale private-label MBS for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Proceeds from sales $ — $ 28,410 $ — $ 28,410 Gross realized gains — 26 — 26 Gross realized losses — 619 — 619 |
Other than Temporary Impairment, Credit Losses Recognized in Earnings | The following table presents a summary of cumulative credit related other-than-temporary impairment charges recognized on the available-for-sale private-label MBS held as of the dates indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Cumulative credit related other-than-temporary impairments, beginning balance $ — $ 14,116 $ — $ 14,017 Additions for: Securities for which other-than-temporary impairments have not previously occurred — 1,638 — 1,737 Securities with previously recognized other-than- temporary impairments — — — — Reductions for sold or matured securities — — — — Cumulative credit related other-than-temporary impairments, ending balance $ — $ 15,754 $ — $ 15,754 |
Private-Label MBS | |
Additional Information Realized Gain Loss on Investments | The following table provides additional information about the net gains and losses recognized as a component of “investment gain (loss), net” for the periods indicated with respect to investments in private-label MBS classified as trading securities: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net gains (losses) recognized in earnings for: Private-label MBS still held at period end $ (5 ) $ (21 ) $ (9 ) $ (216 ) Private-label MBS sold during the period 43 (237 ) 57 89 Total $ 38 $ (258 ) $ 48 $ (127 ) |
Private-Label MBS | Available-for-sale Securities | |
Private Label MBS Available for Sale Accretable Yield | The following table presents the changes in the accretable yield solely for available-for-sale private-label MBS for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Beginning balance $ — $ 66,998 $ — $ 85,052 Accretion — (2,448 ) — (5,021 ) Reclassifications, net — 89 — (11,877 ) Eliminations in consolidation — — — (3,515 ) Sales — (16,440 ) — (16,440 ) Ending balance $ — $ 48,199 $ — $ 48,199 |
Borrowings (Tables)
Borrowings (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Repurchase Agreements | As of June 30, 2017 and December 31, 2016, the Company had no amount at risk with a single repurchase agreement counterparty or lender greater than 10% of equity. The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated: June 30, 2017 December 31, 2016 Pledged with agency MBS: Repurchase agreements outstanding $ 3,913,699 $ 3,649,102 Agency MBS collateral, at fair value 4,102,321 3,851,269 Net amount (1) 188,622 202,167 Weighted-average rate 1.33 % 0.96 % Weighted-average term to maturity 12.8 days 19.3 days (1) Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance. The following table provides information regarding the Company’s outstanding repurchase agreement borrowings during the three and six months ended June 30, 2017 and 2016: June 30, 2017 June 30, 2016 Weighted-average outstanding balance during the three months ended $ 4,125,631 $ 3,293,662 Weighted-average rate during the three months ended 1.08 % 0.66 % Weighted-average outstanding balance during the six months ended $ 4,025,321 $ 3,258,029 Weighted-average rate during the six months ended 1.00 % 0.66 % |
Schedule of Long-term Unsecured Debt Instruments | As of June 30, 2017 and December 31, 2016, the Company had $73,768 and $73,656, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $1,532 and $1,644, respectively. The Company’s long-term debentures consisted of the following as of the dates indicated: June 30, 2017 December 31, 2016 Senior Notes Due 2025 Senior Notes Due 2023 Trust Preferred Debt Senior Notes Due 2025 Senior Notes Due 2023 Trust Preferred Debt Outstanding Principal $ 35,300 $ 25,000 $ 15,000 $ 35,300 $ 25,000 $ 15,000 Annual Interest Rate 6.75 % 6.625 % LIBOR+ 2.25 - 3.00 % 6.75 % 6.625 % LIBOR+ 2.25 - 3.00 % Interest Payment Frequency Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Weighted-Average Interest Rate 6.75 % 6.625 % 3.91 % 6.75 % 6.625 % 3.63 % Maturity March 15, 2025 May 1, 2023 2033 - 2035 March 15, 2025 May 1, 2023 2033 - 2035 Early Redemption Date March 15, 2018 May 1, 2016 2008 - 2010 March 15, 2018 May 1, 2016 2008 - 2010 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Schedule of Derivative Instruments | The following table presents the fair value of the Company’s derivative instruments as of the dates indicated: June 30, 2017 December 31, 2016 Assets Liabilities Assets Liabilities Interest rate swaps $ 6,907 $ — $ 63,315 $ (1,949 ) 10-year U.S. Treasury note futures 984 — — — Options on 10-year U.S. Treasury note futures 27 — 4,289 (3,906 ) TBA commitments 47 (4,038 ) 7,285 (3,699 ) Total $ 7,965 $ (4,038 ) $ 74,889 $ (9,554 ) |
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location | The following tables provide information about the derivative gains and losses recognized within the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Interest rate derivatives: Interest rate swaps: Net interest expense (1) $ (5,293 ) $ (4,376 ) $ (10,702 ) $ (8,373 ) Unrealized losses, net (26,991 ) (35,840 ) (18,824 ) (80,945 ) Gains realized upon early termination 65 — 696 — Total interest rate swap losses, net (32,219 ) (40,216 ) (28,830 ) (89,318 ) U.S. Treasury note futures, net (2,176 ) (2,208 ) (2,041 ) (63,285 ) Options on U.S. Treasury note futures, net (1,736 ) (4,374 ) (6,153 ) (6,249 ) Other, net — — — (25 ) Total interest rate derivative losses, net (36,131 ) (46,798 ) (37,024 ) (158,877 ) TBA and specified agency MBS commitments: TBA dollar roll income (2) 4,298 3,719 7,696 7,514 Other gains (losses) on agency MBS commitments, net 155 8,698 (45 ) 16,222 Total gains on agency MBS commitments, net 4,453 12,417 7,651 23,736 Total derivative losses, net $ (31,678 ) $ (34,381 ) $ (29,373 ) $ (135,141 ) (1) Represents the periodic net interest settlement incurred during the period (often referred to as “net interest carry”). Beginning in 2017, also includes “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively, associated with centrally cleared interest rate swap agreements. (2) Represents the price discount of forward-settling TBA purchases relative to a contemporaneously executed “spot” TBA sale, which economically equates to net interest income that is earned ratably over the period beginning on the settlement date of the sale and ending on the settlement date of the forward-settling purchase. |
Derivative Instrument Volume of Activity | The following tables summarize the volume of activity, in terms of notional amount, related to derivative instruments for the periods indicated: For the Three Months Ended June 30, 2017 Beginning of Period Additions Scheduled Settlements Early Terminations End of Period Interest rate swaps $ 3,600,000 $ 375,000 $ — $ (125,000 ) $ 3,850,000 10-year U.S. Treasury note futures — 608,000 (258,000 ) — 350,000 Purchased put options on 10-year U.S. Treasury note futures 700,000 100,000 (800,000 ) — — Sold call options on 10-year U.S. Treasury note futures 350,000 300,000 (650,000 ) — — Purchased call options on 10-year U.S. Treasury note futures 350,000 1,500,000 (1,150,000 ) — 700,000 Commitments to purchase (sell) MBS, net 450,000 2,865,000 (2,205,000 ) — 1,110,000 For the Three Months Ended June 30, 2016 Beginning of Period Additions Scheduled Settlements Early Terminations End of Period Interest rate swaps $ 1,750,000 $ 500,000 $ — $ — $ 2,250,000 10-year U.S. Treasury note futures 375,000 502,500 (415,000 ) (462,500 ) — Purchased put options on 10-year U.S. Treasury note futures 2,000,000 4,000,000 (4,000,000 ) — 2,000,000 Commitments to purchase (sell) MBS, net 690,000 2,050,441 (1,865,000 ) — 875,441 For the Six Months Ended June 30, 2017 Beginning of Period Additions Scheduled Settlements Early Terminations End of Period Interest rate swaps $ 3,700,000 $ 775,000 $ — $ (625,000 ) $ 3,850,000 10-year U.S. Treasury note futures — 845,100 (495,100 ) — 350,000 Purchased put options on 10-year U.S. Treasury note futures 1,650,000 2,540,000 (4,190,000 ) — — Sold call options on 10-year U.S. Treasury note futures 1,000,000 2,450,000 (3,450,000 ) — — Purchased call options on 10-year U.S. Treasury note futures 1,000,000 2,400,000 (2,700,000 ) — 700,000 Commitments to purchase (sell) MBS, net 725,000 4,315,000 (3,930,000 ) — 1,110,000 For the Six Months Ended June 30, 2016 Beginning of Period Additions Scheduled Settlements Early Terminations End of Period Interest rate swaps $ 1,500,000 $ 750,000 $ — $ — $ 2,250,000 10-year U.S. Treasury note futures 1,335,000 1,371,000 (2,118,500 ) (587,500 ) — Put options on 10-year U.S. Treasury note futures, net — 6,000,000 (4,000,000 ) — 2,000,000 Put options on Eurodollar futures 4,000,000 — (4,000,000 ) — — Commitments to purchase (sell) MBS, net 375,000 3,550,441 (3,050,000 ) — 875,441 |
Derivative Instrument Cash Collateral | The following table presents information about the cash collateral posted and received by the Company in respect of its derivative instruments, which is included in the line item “deposits, net” in the accompanying consolidated balance sheets, for the dates indicated: June 30, 2017 December 31, 2016 Cash collateral posted for: Interest rate swaps (cash initial margin) $ 58,992 $ 65,728 U.S. Treasury note futures and options on U.S. Treasury note futures (cash initial margin) 4,550 5,314 TBA commitments 1,797 1,474 Total cash collateral posted 65,339 72,516 Cash collateral received for interest rate swaps (1) — (61,367 ) Total cash collateral posted, net $ 65,339 $ 11,149 (1) Beginning in 2017, the Company accounts for the daily receipt or payment of cash variation margin associated with centrally cleared interest rate swaps as a legal settlement of the derivative instrument itself, as opposed to a pledge of collateral. |
Put and Call Options on 10-year U.S. Treasury Note Futures | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Schedule of Derivative Instruments | Information about the Company’s outstanding options on 10-year U.S. Treasury note futures contracts as of June 30, 2017 is as follows: Notional Amount Weighted-average Strike Price Implied Strike Rate (1) Net Fair Value Purchased call options: July 2017 expiration $ 700,000 129.9 1.81 % $ 27 (1) The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract. Information about the Company’s outstanding options on 10-year U.S. Treasury note futures contracts as of December 31, 2016 is as follows: Notional Amount Weighted-average Strike Price Implied Strike Rate (1) Net Fair Value Purchased put options: January 2017 expiration $ 950,000 120.8 2.87 % $ 539 February 2017 expiration 700,000 122.6 2.64 % 3,281 Total / weighted average for purchased put options $ 1,650,000 121.6 2.77 % $ 3,820 Sold call options: January 2017 expiration $ (100,000 ) 126.0 2.25 % $ (141 ) February 2017 expiration (900,000 ) 126.0 2.24 % (3,765 ) Total / weighted average for sold call options $ (1,000,000 ) 126.0 2.24 % $ (3,906 ) Purchased call options: January 2017 expiration $ 1,000,000 127.1 2.12 % $ 469 $ 383 (1) The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract. |
TBA Commitments | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Schedule of Derivative Instruments | The following tables present information about the Company’s TBA commitments as of the dates indicated: June 30, 2017 Notional Amount: Net Purchase (Sale) Commitment Contractual Forward Price Market Price Fair Value Dollar roll positions: 3.5% coupon purchase commitments $ 435,000 $ 448,641 $ 446,826 $ (1,815 ) 4.0% coupon purchase commitments 700,000 738,535 736,312 (2,223 ) 4.0% coupon sale commitments (25,000 ) (26,344 ) (26,297 ) 47 Total TBA commitments, net $ 1,110,000 $ 1,160,832 $ 1,156,841 $ (3,991 ) December 31, 2016 Notional Amount: Net Purchase (Sale) Commitment Contractual Forward Price Market Price Fair Value Dollar roll positions: 3.0% coupon purchase commitments $ 725,000 $ 718,887 $ 720,027 $ 1,140 3.5% coupon purchase commitments 25,000 25,586 25,613 27 3.5% coupon sale commitments (25,000 ) (25,602 ) (25,613 ) (11 ) Total dollar roll positions, net 725,000 718,871 720,027 1,156 TBA commitments serving as economic hedges: 3.5% coupon purchase commitments 600,000 608,601 614,719 6,118 3.5% coupon sale commitments (600,000 ) (611,031 ) (614,719 ) (3,688 ) Total economic hedges, net — (2,430 ) — 2,430 Total TBA commitments, net $ 725,000 $ 716,441 $ 720,027 $ 3,586 |
Interest Rate Swap | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Schedule of Derivative Instruments | The following table presents information about the Company’s interest rate swap agreements that were in effect as of June 30, 2017: Weighted-average: Notional Amount Fixed Pay Rate Variable Receive Rate Net Receive (Pay) Rate Remaining Life (Years) Fair Value Years to maturity: Less than 3 years $ 975,000 1.18 % 1.24 % 0.06 % 1.7 $ 352 3 to less than 7 years 500,000 1.91 % 1.21 % (0.70 )% 4.0 644 7 to 10 years 2,000,000 2.01 % 1.23 % (0.78 )% 8.9 5,721 Total / weighted-average $ 3,475,000 1.76 % 1.23 % (0.53 )% 6.2 $ 6,717 The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2016: Weighted-average: Notional Amount Fixed Pay Rate Variable Receive Rate Net (Pay) Rate Remaining Life (Years) Fair Value Years to maturity: Less than 3 years $ 1,375,000 1.10 % 0.97 % (0.13 )% 1.7 $ 6,470 3 to less than 7 years 350,000 1.84 % 1.00 % (0.84 )% 3.7 (769 ) 7 to 10 years 1,600,000 1.93 % 0.96 % (0.97 )% 9.2 50,511 Total / weighted-average $ 3,325,000 1.58 % 0.97 % (0.61 )% 5.5 $ 56,212 |
Forward-Starting Interest Rate Swap | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Schedule of Derivative Instruments | The following table presents information about the Company’s forward-starting interest rate swap agreements that had yet to take effect as of June 30, 2017: Weighted-average: Notional Amount Fixed Pay Rate Term After Effective Date (Years) Fair Value Effective in September / October 2017 $ 375,000 1.13 % 2.0 $ 190 The following table presents information about the Company’s forward-starting interest rate swap agreements that had yet to take effect as of December 31, 2016: Weighted-average: Notional Amount Fixed Pay Rate Term After Effective Date (Years) Fair Value Effective in September / October 2017 $ 375,000 1.13 % 2.0 $ 5,154 |
Offsetting of Financial Asset25
Offsetting of Financial Assets and Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Offsetting [Abstract] | |
Offsetting of Financial Assets and Liabilities | The following tables present information, as of the dates indicated, about the Company’s derivative instruments, short-term borrowing arrangements, and associated collateral, including those subject to master netting (or similar) arrangements: As of June 30, 2017 Gross Amount Recognized Amount Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets Gross Amount Not Offset in the Consolidated Balance Sheets Net Amount Financial Instruments (1) Cash Collateral (2) Assets: Derivative instruments: Options on U.S. Treasury note futures $ 27 $ — $ 27 $ — $ — $ 27 U.S. Treasury note futures 984 — 984 — (984 ) — Interest rate swaps 6,907 — 6,907 — (6,907 ) — TBA commitments 47 — 47 — — 47 Total derivative instruments 7,965 — 7,965 — (7,891 ) 74 Total assets $ 7,965 $ — $ 7,965 $ — $ (7,891 ) $ 74 Liabilities: TBA commitments $ 4,038 $ — $ 4,038 $ — $ (1,797 ) $ 2,241 Repurchase agreements 3,913,699 — 3,913,699 (3,913,699 ) — — Total liabilities $ 3,917,737 $ — $ 3,917,737 $ (3,913,699 ) $ (1,797 ) $ 2,241 As of December 31, 2016 Gross Amount Recognized Amount Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets Gross Amount Not Offset in the Consolidated Balance Sheets Net Amount Financial Instruments (1) Cash Collateral (2) Assets: Derivative instruments: Options on U.S. Treasury note futures $ 4,289 $ — $ 4,289 $ (3,906 ) $ — $ 383 Interest rate swaps 63,315 — 63,315 (1,949 ) (61,366 ) — TBA commitments 7,285 — 7,285 — — 7,285 Total derivative instruments 74,889 — 74,889 (5,855 ) (61,366 ) 7,668 Deposits, net 72,516 (61,367 ) 11,149 — — 11,149 Total assets $ 147,405 $ (61,367 ) $ 86,038 $ (5,855 ) $ (61,366 ) $ 18,817 Liabilities: Derivative instruments: Options on U.S. Treasury note futures $ 3,906 $ — $ 3,906 $ (3,906 ) $ — $ — Interest rate swaps 1,949 — 1,949 (1,949 ) — — TBA commitments 3,699 — 3,699 — (1,474 ) 2,225 Total derivative instruments 9,554 — 9,554 (5,855 ) (1,474 ) 2,225 Deposits, net 61,367 (61,367 ) — — — — Repurchase agreements 3,649,102 — 3,649,102 (3,649,102 ) — — Total liabilities $ 3,720,023 $ (61,367 ) $ 3,658,656 $ (3,654,957 ) $ (1,474 ) $ 2,225 (1) Does not include the fair value amount of financial instrument collateral pledged in respect of repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets. (2) Does not include the amount of cash collateral pledged in respect of derivative instruments that exceeds the associated derivative liability presented in the consolidated balance sheets. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements, Recurring and Nonrecurring | The following tables set forth financial instruments measured at fair value by level within the fair value hierarchy as of June 30, 2017 and December 31, 2016. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. June 30, 2017 Total Level 1 Level 2 Level 3 MBS Trading: Agency MBS $ 4,182,529 $ — $ 4,182,529 $ — Private-label MBS 74 — — 74 Total MBS 4,182,603 — 4,182,529 74 Derivative assets 7,965 1,011 6,954 — Derivative liabilities (4,038 ) — (4,038 ) — Other assets 544 — — 544 Total $ 4,187,074 $ 1,011 $ 4,185,445 $ 618 December 31, 2016 Total Level 1 Level 2 Level 3 MBS Trading: Agency MBS $ 3,911,375 $ — $ 3,911,375 $ — Private-label MBS 1,266 — — 1,266 Total MBS 3,912,641 — 3,911,375 1,266 Derivative assets 74,889 4,289 70,600 — Derivative liabilities (9,554 ) (3,906 ) (5,648 ) — Other assets 533 — — 533 Total $ 3,978,509 $ 383 $ 3,976,327 $ 1,799 |
Fair Value Inputs, Assets, Quantitative Information | The following table provides information about the significant unobservable inputs used to measure the fair value of the Company’s private-label MBS as of the dates indicated: June 30, 2017 December 31, 2016 Weighted- average (1) Range Weighted- average (1) Range Discount rate — — 6.50 % 6.50 - 6.50 % Default rate — — 2.25 % 2.25 - 2.25 % Loss severity rate — — 45.00 % 45.00 - 45.00 % Total prepayment rate (including defaults) — — 10.25 % 10.25 - 10.25 % (1) |
Fair Value, Measured on Recurring Basis | The table below sets forth an attribution of the change in the fair value of the Company’s Level 3 investments that are measured at fair value on a recurring basis for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Beginning balance $ 1,976 $ 129,336 $ 1,799 $ 130,553 Total net gains (losses) Included in investment gain (loss), net (101 ) (2,488 ) 61 (2,456 ) Included in other comprehensive income — (379 ) — (8,415 ) Purchases — — — 5,357 Sales (1,268 ) (38,290 ) (1,268 ) (38,290 ) Payments, net (32 ) (1,801 ) (54 ) (3,345 ) Accretion of discount 43 2,808 80 5,782 Ending balance $ 618 $ 89,186 $ 618 $ 89,186 Net unrealized gains (losses) included in earnings for the period for Level 3 assets still held at the reporting date $ (145 ) $ (1,658 ) $ 3 $ (1,952 ) |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets and Liabilities | Deferred tax assets and liabilities consisted of the following as of the dates indicated: June 30, 2017 December 31, 2016 Ordinary deferred tax assets: NOL carry-forward $ 29,340 $ 37,238 AMT credit carry-forward 8,838 8,427 Deferred net loss on designated derivatives 1,195 1,386 Stock-based compensation 2,404 2,426 Other, net 208 208 Total ordinary deferred tax assets 41,985 49,685 Ordinary deferred tax liabilities: Net unrealized gain on designated derivatives (17,823 ) (25,145 ) Ordinary deferred tax assets, net 24,162 24,540 Capital deferred tax assets: NCL carry-forward 126,186 120,939 Net unrealized loss on investments 34,675 44,253 Valuation allowance (160,861 ) (140,903 ) Total capital deferred tax assets, net — 24,289 Total deferred tax assets, net $ 24,162 $ 48,829 |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Computations of Basic and Diluted Earnings (Loss) Per Share | The following tables present the computations of basic and diluted earnings (loss) per share for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, (Shares in thousands) 2017 2016 2017 2016 Basic weighted-average common shares outstanding 24,319 23,003 23,987 22,998 Performance share units and unvested restricted stock — 67 — — Diluted weighted-average common shares outstanding 24,319 23,070 23,987 22,998 Net (loss) income attributable to common stock $ (17,963 ) $ 12,894 $ (12,709 ) $ (18,724 ) Basic (loss) earnings per common share $ (0.74 ) $ 0.56 $ (0.53 ) $ (0.81 ) Diluted (loss) earnings per common share $ (0.74 ) $ 0.56 $ (0.53 ) $ (0.81 ) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Equity [Abstract] | |
Schedule of Dividends Payable | The Board of Directors has approved and the Company has declared and paid the following dividends on its common stock to date in 2017: Quarter Ended Dividend Amount Declaration Date Record Date Pay Date June 30 $ 0.550 June 16 June 30 July 31 March 31 0.625 March 14 March 31 April 28 The Board of Directors approved and the Company declared and paid the following dividends for 2016: Quarter Ended Dividend Amount Declaration Date Record Date Pay Date December 31 $ 0.625 December 16 December 30 January 31, 2017 September 30 0.625 September 15 September 30 October 31 June 30 0.625 June 17 June 30 July 29 March 31 0.625 March 15 March 31 April 29 |
Revisions to Previously Repor30
Revisions to Previously Reported Financial Statements (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Changes And Error Corrections [Abstract] | |
Schedule of Affected Line Items within Previously Reported Consolidated Financial Statements | The following tables set forth the affected line items within the Company’s previously reported consolidated financial statements for the periods indicated: As of March 31, 2017 As Previously Reported Adjustment As Revised Consolidated Balance Sheets: Deferred tax assets, net $ 65,149 $ (24,603 ) $ 40,546 Total assets 4,720,492 (24,603 ) 4,695,889 Accumulated deficit (1,536,949 ) (24,603 ) (1,561,552 ) Total stockholders' equity 374,481 (24,603 ) 349,878 Total liabilities and stockholders' equity 4,720,492 (24,603 ) 4,695,889 As of December 31, 2016 As Previously Reported Adjustment As Revised Consolidated Balance Sheets: Deferred tax assets, net $ 73,432 $ (24,603 ) $ 48,829 Total assets 4,141,554 (24,603 ) 4,116,951 Accumulated deficit (1,527,104 ) (24,603 ) (1,551,707 ) Total stockholders' equity 383,416 (24,603 ) 358,813 Total liabilities and stockholders' equity 4,141,554 (24,603 ) 4,116,951 As of December 31, 2015 As Previously Reported Adjustment As Revised Consolidated Balance Sheets: Deferred tax assets, net $ 97,530 $ (24,603 ) $ 72,927 Total assets 4,202,939 (24,603 ) 4,178,336 Accumulated deficit (1,426,655 ) (24,603 ) (1,451,258 ) Total stockholders' equity 484,031 (24,603 ) 459,428 Total liabilities and stockholders' equity 4,202,939 (24,603 ) 4,178,336 |
Summary of Significant Accoun31
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Summary Of Significant Accounting Policies [Line Items] | ||
Cash Equivalents Percentage Held in Us Government Backed Securities | 99.00% | 99.00% |
ASU No. 2016-01 | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Investments in equity securities at cost method, carrying value | $ 1,257 | |
Investments in equity securities at cost method, estimated fair value | $ 5,556 |
Investments in Agency MBS - Add
Investments in Agency MBS - Additional Information (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Fair Value of MBS | $ 4,182,603 | $ 3,912,641 |
Agency MBS | ||
Fair Value of MBS | 4,182,529 | 3,911,375 |
Trading securities | $ 4,182,529 | 3,911,375 |
Interest-only agency MBS | ||
Trading securities | $ 1,923 |
Investments in Agency MBS - A33
Investments in Agency MBS - Additional Information About Gains and Losses Recognized with Respect to Investments in MBS classified as trading securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Net gains recognized in earnings for: | ||||
Gain on trading investments, net | $ 15,855 | $ 27,665 | $ 11,636 | $ 78,615 |
Agency MBS | ||||
Net gains recognized in earnings for: | ||||
MBS still held at period end | 13,474 | 27,639 | 11,191 | 65,180 |
Gain on trading investments, net | 2,343 | 284 | 397 | 13,562 |
Total | $ 15,817 | $ 27,923 | $ 11,588 | $ 78,742 |
Investments in Private-Label 34
Investments in Private-Label MBS - Additional Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Fair Value of MBS | $ 4,182,603,000 | $ 4,182,603,000 | $ 3,912,641,000 | ||
Private-Label MBS | |||||
Fair Value of MBS | 74,000 | 74,000 | 1,266,000 | ||
Available-for-sale | 0 | 0 | $ 0 | ||
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities | $ 0 | $ 1,638,000 | $ 0 | $ 1,737,000 |
Investments in Private-Label 35
Investments in Private-Label MBS - Results of Sales of Available-for-sale MBS (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2016 | Jun. 30, 2016 | |
Investments Debt And Equity Securities [Abstract] | ||
Proceeds from sales | $ 28,410 | $ 28,410 |
Gross realized gains | 26 | 26 |
Gross realized losses | $ 619 | $ 619 |
Investments in Private-Label 36
Investments in Private-Label MBS - Changes in Accretable Yield Solely for Available-for-sale MBS (Details) - Available-for-sale Securities - Private-Label MBS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | ||||
Beginning balance | $ 0 | $ 66,998 | $ 0 | $ 85,052 |
Accretion | 0 | (2,448) | 0 | (5,021) |
Reclassifications, net | 0 | 89 | 0 | (11,877) |
Eliminations in consolidation | 0 | (16,440) | 0 | (16,440) |
Ending balance | 0 | 48,199 | 0 | 48,199 |
Consolidation, Eliminations | ||||
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | ||||
Eliminations in consolidation | $ 0 | $ 0 | $ 0 | $ (3,515) |
Investments in Private-Label 37
Investments in Private-Label MBS - Cumulative Credit Related Other than Temporary Impairment Charges Recognized on Available-for-sale MBS (Details) - Available-for-sale Securities - Private-Label MBS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Schedule of Available-for-sale Securities [Line Items] | |||
Cumulative credit related other-than-temporary impairments, beginning balance | $ 14,116 | $ 0 | $ 14,017 |
Additions for: | |||
Securities for which other-than-temporary impairments have not previously occurred | 1,638 | 0 | 1,737 |
Securities with previously recognized other-than-temporary impairments | 0 | 0 | |
Reductions | |||
Reductions for sold or matured securities | 0 | 0 | |
Cumulative credit related other-than-temporary impairments, ending balance | $ 15,754 | $ 0 | $ 15,754 |
Investments in Private-Label 38
Investments in Private-Label MBS - Additional Information Realized Gain Loss on Investments (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Net gains recognized in earnings for: | ||||
MBS sold during the period | $ 15,855 | $ 27,665 | $ 11,636 | $ 78,615 |
Private-Label MBS | ||||
Net gains recognized in earnings for: | ||||
MBS still held at period end | (5) | (21) | (9) | (216) |
MBS sold during the period | 43 | (237) | 57 | 89 |
Total | $ 38 | $ (258) | $ 48 | $ (127) |
Borrowings - Outstanding Repurc
Borrowings - Outstanding Repurchase Agreement Borrowings (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | ||
Repurchase Agreement Counterparty [Line Items] | |||
Repurchase agreements outstanding | $ 3,913,699 | $ 3,649,102 | |
Pledged with agency-backed MBS | |||
Repurchase Agreement Counterparty [Line Items] | |||
Repurchase agreements outstanding | 3,913,699 | 3,649,102 | |
MBS collateral, at fair value | 4,102,321 | 3,851,269 | |
Net amount | [1] | $ 188,622 | $ 202,167 |
Weighted-average rate | 1.33% | 0.96% | |
Weighted-average term to maturity (in days) | 13 days | 20 days | |
[1] | Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance. |
Borrowings - Information Regard
Borrowings - Information Regarding Outstanding Repurchase Agreement Borrowings During the Period (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Debt Disclosure [Abstract] | ||||
Weighted-average outstanding balance | $ 4,125,631 | $ 3,293,662 | $ 4,025,321 | $ 3,258,029 |
Weighted-average rate | 1.08% | 0.66% | 1.00% | 0.66% |
Borrowings - Additional Informa
Borrowings - Additional Information (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
Long-term unsecured debt | $ 73,768 | $ 73,656 |
Net of unamortized debt issuance costs | $ 1,532 | $ 1,644 |
Borrowings - Long-term Unsecure
Borrowings - Long-term Unsecured Debt Instruments (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Senior Notes Due 2025 | ||
Debt Instrument [Line Items] | ||
Outstanding Principal | $ 35,300 | $ 35,300 |
Annual Interest Rate | 6.75% | 6.75% |
Interest Payment Frequency | Quarterly | Quarterly |
Weighted-Average Interest Rate | 6.75% | 6.75% |
Maturity | Mar. 15, 2025 | Mar. 15, 2025 |
Early Redemption Date | Mar. 15, 2018 | Mar. 15, 2018 |
Senior Notes Due 2023 | ||
Debt Instrument [Line Items] | ||
Outstanding Principal | $ 25,000 | $ 25,000 |
Annual Interest Rate | 6.625% | 6.625% |
Interest Payment Frequency | Quarterly | Quarterly |
Weighted-Average Interest Rate | 6.625% | 6.625% |
Maturity | May 1, 2023 | May 1, 2023 |
Early Redemption Date | May 1, 2016 | May 1, 2016 |
Trust Preferred Debt | ||
Debt Instrument [Line Items] | ||
Outstanding Principal | $ 15,000 | $ 15,000 |
Interest Payment Frequency | Quarterly | Quarterly |
Weighted-Average Interest Rate | 3.91% | 3.63% |
Annual Interest Rate | LIBOR+ 2.25 - 3.00 % | LIBOR+ 2.25 - 3.00 % |
Trust Preferred Debt | Minimum | ||
Debt Instrument [Line Items] | ||
Maturity | 2,033 | 2,033 |
Early Redemption Date | 2,008 | 2,008 |
Trust Preferred Debt | Maximum | ||
Debt Instrument [Line Items] | ||
Maturity | 2,035 | 2,035 |
Early Redemption Date | 2,010 | 2,010 |
Derivative Instruments - Fair V
Derivative Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Derivative Assets | $ 7,965 | $ 74,889 |
Derivative Liabilities | (4,038) | (9,554) |
Interest Rate Swap and Forward Starting Interest Rate Swap | ||
Derivative Assets | 6,907 | 63,315 |
Derivative Liabilities | 0 | (1,949) |
10-year U.S. Treasury Note Futures | ||
Derivative Assets | 984 | 0 |
Derivative Liabilities | 0 | 0 |
Options on 10-year U.S. Treasury Note Futures | ||
Derivative Assets | 27 | 4,289 |
Derivative Liabilities | 0 | (3,906) |
TBA Commitments | ||
Derivative Assets | 47 | 7,285 |
Derivative Liabilities | $ (4,038) | $ (3,699) |
Derivative Instruments - Intere
Derivative Instruments - Interest Rate Swap Agreements (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Fair Value, Asset | $ 7,965,000 | $ 74,889,000 |
Fair Value, Liability | (4,038,000) | (9,554,000) |
Interest Rate Swap | ||
Notional Amount | $ 3,475,000,000 | $ 3,325,000,000 |
Weighted-average: Fixed Pay Rate | 1.76% | 1.58% |
Weighted-average: Variable Receive Rate | 1.23% | 0.97% |
Weighted-average: Net Receive (Pay) Rate | (0.53%) | (0.61%) |
Weighted-average: Remaining Life (in years) | 6 years 2 months 12 days | 5 years 6 months |
Fair Value, Asset | $ 6,717,000 | $ 56,212,000 |
Interest Rate Swap | Less Than Three Year Maturity | ||
Notional Amount | $ 975,000,000 | $ 1,375,000,000 |
Weighted-average: Fixed Pay Rate | 1.18% | 1.10% |
Weighted-average: Variable Receive Rate | 1.24% | 0.97% |
Weighted-average: Net Receive (Pay) Rate | 0.06% | (0.13%) |
Weighted-average: Remaining Life (in years) | 1 year 8 months 12 days | 1 year 8 months 12 days |
Fair Value, Asset | $ 352,000 | $ 6,470,000 |
Interest Rate Swap | Three To Less Than Seven Years Maturity | ||
Notional Amount | $ 500,000,000 | $ 350,000,000 |
Weighted-average: Fixed Pay Rate | 1.91% | 1.84% |
Weighted-average: Variable Receive Rate | 1.21% | 1.00% |
Weighted-average: Net Receive (Pay) Rate | (0.70%) | (0.84%) |
Weighted-average: Remaining Life (in years) | 4 years | 3 years 8 months 12 days |
Fair Value, Asset | $ 644,000 | |
Fair Value, Liability | $ (769,000) | |
Interest Rate Swap | Seven To Ten Year Maturity | ||
Notional Amount | $ 2,000,000,000 | $ 1,600,000,000 |
Weighted-average: Fixed Pay Rate | 2.01% | 1.93% |
Weighted-average: Variable Receive Rate | 1.23% | 0.96% |
Weighted-average: Net Receive (Pay) Rate | (0.78%) | (0.97%) |
Weighted-average: Remaining Life (in years) | 8 years 10 months 25 days | 9 years 2 months 12 days |
Fair Value, Asset | $ 5,721,000 | $ 50,511,000 |
Forward-Starting Interest Rate Swap | Effective In September / October 2017 | ||
Notional Amount | $ 375,000,000 | $ 375,000,000 |
Weighted-average: Fixed Pay Rate | 1.13% | 1.13% |
Weighted-average: Remaining Life (in years) | 2 years | 2 years |
Fair Value, Asset | $ 190,000 | $ 5,154,000 |
Derivative Instruments - Additi
Derivative Instruments - Additional Information (Details) - 10-year U.S. Treasury Note Futures - USD ($) | 6 Months Ended | |||||
Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | |
Derivative [Line Items] | ||||||
Notional Amount | $ 350,000,000 | $ 0 | $ 0 | $ 0 | $ 375,000,000 | $ 1,335,000,000 |
Maturity date | 2017-09 |
Derivative Instruments - Inform
Derivative Instruments - Information of Outstanding Options (Details) - 10-year U.S. Treasury Note Futures - USD ($) | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | |
Derivative [Line Items] | |||||||
Notional Amount | $ 350,000,000 | $ 0 | $ 0 | $ 0 | $ 375,000,000 | $ 1,335,000,000 | |
Put Option | Long | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 1,650,000,000 | ||||||
Weighted-average Strike Price | $ 121.6 | ||||||
Implied Strike Rate | [1] | 2.77% | |||||
Net Fair Value | $ 3,820,000 | ||||||
Call Options | Long | |||||||
Derivative [Line Items] | |||||||
Net Fair Value | 383,000 | ||||||
Call Options | Short | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 1,000,000,000 | ||||||
Weighted-average Strike Price | $ 126 | ||||||
Implied Strike Rate | [1] | 2.24% | |||||
Net Fair Value | $ (3,906,000) | ||||||
July 2017 Expiration | Purchased Call Options | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 700,000,000 | ||||||
Weighted-average Strike Price | $ 129.9 | ||||||
Implied Strike Rate | [1] | 1.81% | |||||
Net Fair Value | $ 27,000 | ||||||
January 2017 Expiration | Put Option | Long | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 950,000,000 | ||||||
Weighted-average Strike Price | $ 120.8 | ||||||
Implied Strike Rate | [1] | 2.87% | |||||
Net Fair Value | $ 539,000 | ||||||
January 2017 Expiration | Call Options | Long | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 1,000,000,000 | ||||||
Weighted-average Strike Price | $ 127.1 | ||||||
Implied Strike Rate | [1] | 2.12% | |||||
Net Fair Value | $ 469,000 | ||||||
January 2017 Expiration | Call Options | Short | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 100,000,000 | ||||||
Weighted-average Strike Price | $ 126 | ||||||
Implied Strike Rate | [1] | 2.25% | |||||
Net Fair Value | $ (141,000) | ||||||
February 2017 Expiration | Put Option | Long | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 700,000,000 | ||||||
Weighted-average Strike Price | $ 122.6 | ||||||
Implied Strike Rate | [1] | 2.64% | |||||
Net Fair Value | $ 3,281,000 | ||||||
February 2017 Expiration | Call Options | Short | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 900,000,000 | ||||||
Weighted-average Strike Price | $ 126 | ||||||
Implied Strike Rate | [1] | 2.24% | |||||
Net Fair Value | $ (3,765,000) | ||||||
[1] | The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract. |
Derivative Instruments - Info47
Derivative Instruments - Information of Outstanding Options (Parenthetical) (Details) - 10-year U.S. Treasury Note Futures | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Derivative [Line Items] | ||
Options maturity period | 2017-09 | |
July 2017 Expiration | Call Options | Long | ||
Derivative [Line Items] | ||
Options maturity period | 2017-07 | |
January 2017 Expiration | Call Options | Long | ||
Derivative [Line Items] | ||
Options maturity period | 2017-01 | |
January 2017 Expiration | Call Options | Short | ||
Derivative [Line Items] | ||
Options maturity period | 2017-01 | |
January 2017 Expiration | Put Option | Long | ||
Derivative [Line Items] | ||
Options maturity period | 2017-01 | |
February 2017 Expiration | Call Options | Short | ||
Derivative [Line Items] | ||
Options maturity period | 2017-02 | |
February 2017 Expiration | Put Option | Long | ||
Derivative [Line Items] | ||
Options maturity period | 2017-02 |
Derivative Instruments - TBA Co
Derivative Instruments - TBA Commitments (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Fair Value | $ 7,965,000 | $ 74,889,000 |
Fair Value, Liability | (4,038,000) | (9,554,000) |
TBA Commitments | ||
Notional Amount: Net Purchase Commitment | 1,110,000,000 | 725,000,000 |
Contractual Forward Price | 1,160,832,000 | 716,441,000 |
Market Price | 1,156,841,000 | 720,027,000 |
Fair Value | 47,000 | 7,285,000 |
Fair Value, Liability | (4,038,000) | (3,699,000) |
Fair Value | (3,991,000) | 3,586,000 |
TBA Commitments | Dollar Roll Positions Three Point Five Percent Coupon Purchase (Sale) Commitments, Purchase | ||
Notional Amount: Net Purchase Commitment | 435,000,000 | 25,000,000 |
Contractual Forward Price | 448,641,000 | 25,586,000 |
Market Price | 446,826,000 | 25,613,000 |
Fair Value | 27,000 | |
Fair Value, Liability | (1,815,000) | |
TBA Commitments | Dollar Roll Positions Four Point Zero Percent Coupon Purchase Commitments | ||
Notional Amount: Net Purchase Commitment | 700,000,000 | |
Contractual Forward Price | 738,535,000 | |
Market Price | 736,312,000 | |
Fair Value, Liability | (2,223,000) | |
Fair Value | 0 | |
TBA Commitments | Dollar Roll Positions Four Point Zero Percent Coupon Purchase (Sale) Commitments, Sale | ||
Notional Amount: Net Purchase Commitment | 25,000,000 | |
Contractual Forward Price | (26,344,000) | |
Market Price | (26,297,000) | |
Fair Value | $ 47,000 | |
TBA Commitments | Dollar Roll Positions Three Percent Coupon Purchase (Sale) Commitments | ||
Notional Amount: Net Purchase Commitment | 725,000,000 | |
Contractual Forward Price | 718,887,000 | |
Market Price | 720,027,000 | |
Fair Value | 1,140,000 | |
TBA Commitments | Dollar Roll Positions Three Point Five Percent Coupon Purchase (Sale) Commitments, Sale | ||
Notional Amount: Net Purchase Commitment | 25,000,000 | |
Contractual Forward Price | (25,602,000) | |
Market Price | (25,613,000) | |
Fair Value, Liability | (11,000) | |
TBA Commitments | Dollar Roll Positions | ||
Notional Amount: Net Purchase Commitment | 725,000,000 | |
Contractual Forward Price | 718,871,000 | |
Market Price | 720,027,000 | |
Fair Value | 1,156,000 | |
TBA Commitments | Economic Hedges Three Point Five Percent Coupon Purchase (Sale) Commitments, Purchase | ||
Notional Amount: Net Purchase Commitment | 600,000,000 | |
Contractual Forward Price | 608,601,000 | |
Market Price | 614,719,000 | |
Fair Value | 6,118,000 | |
TBA Commitments | Economic Hedges Three Point Five Percent Coupon Purchase (Sale) Commitments, Sale | ||
Notional Amount: Net Purchase Commitment | 600,000,000 | |
Contractual Forward Price | (611,031,000) | |
Market Price | (614,719,000) | |
Fair Value, Liability | (3,688,000) | |
TBA Commitments | Economic Hedges | ||
Notional Amount: Net Purchase Commitment | 0 | |
Contractual Forward Price | (2,430,000) | |
Fair Value | $ 2,430,000 |
Derivative Instruments - Deriva
Derivative Instruments - Derivative Gains and Losses Recognized Within the Periods (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Interest rate derivatives | $ (36,131) | $ (46,798) | $ (37,024) | $ (158,877) | |
Total derivative losses, net | (31,678) | (34,381) | (29,373) | (135,141) | |
Interest Rate Swap Losses, Net | |||||
Interest rate derivatives | (32,219) | (40,216) | (28,830) | (89,318) | |
Interest Rate Swaps Net Interest Expense | |||||
Interest rate derivatives | [1] | (5,293) | (4,376) | (10,702) | (8,373) |
Interest Rate Swaps Unrealized Losses | |||||
Interest rate derivatives | (26,991) | (35,840) | (18,824) | (80,945) | |
Interest Rate Swaps Losses Realized Upon Early Termination | |||||
Interest rate derivatives | 65 | 0 | 696 | 0 | |
Options on US Treasury Note Futures | |||||
Interest rate derivatives | (1,736) | (4,374) | (6,153) | (6,249) | |
Other, Net | |||||
Interest rate derivatives | 0 | 0 | 0 | (25) | |
TBA and Specified Agency MBS Commitments | |||||
Gains (losses) on agency commitments | 4,453 | 12,417 | 7,651 | 23,736 | |
TBA Dollar Roll Income | |||||
Gains (losses) on agency commitments | [2] | 4,298 | 3,719 | 7,696 | 7,514 |
Other Gains (Losses) on Agency MBS Commitments | |||||
Gains (losses) on agency commitments | 155 | 8,698 | (45) | 16,222 | |
U.S. Treasury Note Futures | |||||
Interest rate derivatives | $ (2,176) | $ (2,208) | $ (2,041) | $ (63,285) | |
[1] | Represents the periodic net interest settlement incurred during the period (often referred to as “net interest carry”). Beginning in 2017, also includes “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively, associated with centrally cleared interest rate swap agreements. | ||||
[2] | Represents the price discount of forward-settling TBA purchases relative to a contemporaneously executed “spot” TBA sale, which economically equates to net interest income that is earned ratably over the period beginning on the settlement date of the sale and ending on the settlement date of the forward-settling purchase. |
Derivative Instruments - Volume
Derivative Instruments - Volume of Activity, in terms of Notional Amount, Related to Derivative Instruments (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Interest Rate Swap and Forward Starting Interest Rate Swap | ||||
Derivative [Line Items] | ||||
Beginning of Period | $ 3,600,000,000 | $ 1,750,000,000 | $ 3,700,000,000 | $ 1,500,000,000 |
Additions | 375,000,000 | 500,000,000 | 775,000,000 | 750,000,000 |
Scheduled Settlements | 0 | 0 | 0 | 0 |
Early Terminations | (125,000,000) | 0 | (625,000,000) | 0 |
End of Period | 3,850,000,000 | 2,250,000,000 | 3,850,000,000 | 2,250,000,000 |
10-year U.S. Treasury Note Futures | ||||
Derivative [Line Items] | ||||
Beginning of Period | 0 | 375,000,000 | 0 | 1,335,000,000 |
Additions | 608,000,000 | 502,500,000 | 845,100,000 | 1,371,000,000 |
Scheduled Settlements | (258,000,000) | (415,000,000) | (495,100,000) | (2,118,500,000) |
Early Terminations | 0 | (462,500,000) | 0 | (587,500,000) |
End of Period | 350,000,000 | 0 | 350,000,000 | 0 |
Purchased Put Options on 10-Year U.S. Treasury Note Futures | ||||
Derivative [Line Items] | ||||
Beginning of Period | 700,000,000 | 2,000,000,000 | 1,650,000,000 | |
Additions | 100,000,000 | 4,000,000,000 | 2,540,000,000 | |
Scheduled Settlements | (800,000,000) | (4,000,000,000) | (4,190,000,000) | |
Early Terminations | 0 | 0 | 0 | |
End of Period | 0 | 2,000,000,000 | 0 | 2,000,000,000 |
Sold Call Options on Ten Year U.S. Treasury Note Futures | ||||
Derivative [Line Items] | ||||
Beginning of Period | 350,000,000 | 1,000,000,000 | ||
Additions | 300,000,000 | 2,450,000,000 | ||
Scheduled Settlements | (650,000,000) | (3,450,000,000) | ||
Early Terminations | 0 | 0 | ||
End of Period | 0 | 0 | ||
Purchased Call Options on Ten Year U.S. Treasury Note Futures | ||||
Derivative [Line Items] | ||||
Beginning of Period | 350,000,000 | 1,000,000,000 | ||
Additions | 1,500,000,000 | 2,400,000,000 | ||
Scheduled Settlements | (1,150,000,000) | (2,700,000,000) | ||
Early Terminations | 0 | 0 | ||
End of Period | 700,000,000 | 700,000,000 | ||
Put Options on 10-year U.S. Treasury Note Futures | ||||
Derivative [Line Items] | ||||
Beginning of Period | 0 | |||
Additions | 6,000,000,000 | |||
Scheduled Settlements | (4,000,000,000) | |||
Early Terminations | 0 | |||
End of Period | 2,000,000,000 | 2,000,000,000 | ||
Put Options on Eurodollar Futures | ||||
Derivative [Line Items] | ||||
Beginning of Period | 4,000,000,000 | |||
Additions | 0 | |||
Scheduled Settlements | (4,000,000,000) | |||
Early Terminations | 0 | |||
End of Period | 0 | 0 | ||
Commitments To Purchase (sell) MBS | ||||
Derivative [Line Items] | ||||
Beginning of Period | 450,000,000 | 690,000,000 | 725,000,000 | 375,000,000 |
Additions | 2,865,000,000 | 2,050,441,000 | 4,315,000,000 | 3,550,441,000 |
Scheduled Settlements | (2,205,000,000) | (1,865,000,000) | (3,930,000,000) | (3,050,000,000) |
Early Terminations | 0 | 0 | 0 | 0 |
End of Period | $ 1,110,000,000 | $ 875,441,000 | $ 1,110,000,000 | $ 875,441,000 |
Derivative Instruments - Cash C
Derivative Instruments - Cash Collateral Posted and Received in Respect of Derivative Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | |
Cash collateral posted | $ 65,339 | $ 72,516 | |
Cash collateral received for interest rate swaps | [1] | (61,367) | |
Total cash collateral posted, net | 65,339 | 11,149 | |
Interest Rate Swap | |||
Cash collateral posted | 58,992 | 65,728 | |
U.S. Treasury Note Futures and Options on U.S. Treasury Note Futures | |||
Cash collateral posted | 4,550 | 5,314 | |
TBA Commitments | |||
Cash collateral posted | $ 1,797 | $ 1,474 | |
[1] | Beginning in 2017, the Company accounts for the daily receipt or payment of cash variation margin associated with centrally cleared interest rate swaps as a legal settlement of the derivative instrument itself, as opposed to a pledge of collateral. |
Offsetting of Financial Asset52
Offsetting of Financial Assets and Liabilities - Derivative Instruments and Short-term Borrowing Arrangements, including those Subject to Master Netting or Similar Arrangements (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | |
Derivative instruments: | |||
Derivative Asset, Gross Amount Recognized | $ 7,965 | $ 74,889 | |
Derivative Asset, Amount Offset | 0 | 0 | |
Derivative Asset, Net Amount | 7,965 | 74,889 | |
Derivative Asset, Financial Instruments | [1] | 0 | (5,855) |
Derivative Asset, Cash Collateral | [2] | (7,891) | (61,366) |
Derivative Asset, Net amount Total | 74 | 7,668 | |
Derivative instruments: | |||
Derivative Liabilities, Gross Amount Recognized | 9,554 | ||
Derivative Liabilities, Amount Offset | 0 | ||
Derivative Liabilities, Net Amount | 4,038 | 9,554 | |
Derivative Liabilities, Financial Instruments | [1] | (5,855) | |
Derivative Liabilities, Cash Collateral | [2] | (1,474) | |
Derivative Liabilities, Net amount Total | 2,225 | ||
Derivative Financial Instruments, Liabilities | |||
Derivative instruments: | |||
Derivative Liabilities, Gross Amount Recognized | 3,917,737 | 3,720,023 | |
Derivative Liabilities, Amount Offset | 0 | (61,367) | |
Derivative Liabilities, Net Amount | 3,917,737 | 3,658,656 | |
Derivative Liabilities, Financial Instruments | [1] | (3,913,699) | (3,654,957) |
Derivative Liabilities, Cash Collateral | [2] | (1,797) | (1,474) |
Derivative Liabilities, Net amount Total | 2,241 | 2,225 | |
Derivative Financial Instruments, Assets | |||
Derivative instruments: | |||
Derivative Asset, Gross Amount Recognized | 7,965 | 147,405 | |
Derivative Asset, Amount Offset | 0 | (61,367) | |
Derivative Asset, Net Amount | 7,965 | 86,038 | |
Derivative Asset, Financial Instruments | [1] | 0 | (5,855) |
Derivative Asset, Cash Collateral | [2] | (7,891) | (61,366) |
Derivative Asset, Net amount Total | 74 | 18,817 | |
U.S. Treasury Note Futures | |||
Derivative instruments: | |||
Derivative Asset, Gross Amount Recognized | 984 | ||
Derivative Asset, Amount Offset | 0 | ||
Derivative Asset, Net Amount | 984 | ||
Derivative Asset, Financial Instruments | [1] | 0 | |
Derivative Asset, Cash Collateral | [2] | (984) | |
Derivative Asset, Net amount Total | 0 | ||
U.S. Treasury Note Futures | Option | |||
Derivative instruments: | |||
Derivative Asset, Gross Amount Recognized | 27 | 4,289 | |
Derivative Asset, Amount Offset | 0 | 0 | |
Derivative Asset, Net Amount | 27 | 4,289 | |
Derivative Asset, Financial Instruments | [1] | 0 | (3,906) |
Derivative Asset, Cash Collateral | [2] | 0 | 0 |
Derivative Asset, Net amount Total | 27 | 383 | |
Derivative instruments: | |||
Derivative Liabilities, Gross Amount Recognized | 3,906 | ||
Derivative Liabilities, Amount Offset | 0 | ||
Derivative Liabilities, Net Amount | 3,906 | ||
Derivative Liabilities, Financial Instruments | [1] | (3,906) | |
Derivative Liabilities, Cash Collateral | [2] | 0 | |
Derivative Liabilities, Net amount Total | 0 | ||
Repurchase Agreements | |||
Derivative instruments: | |||
Derivative Liabilities, Gross Amount Recognized | 3,913,699 | 3,649,102 | |
Derivative Liabilities, Amount Offset | 0 | 0 | |
Derivative Liabilities, Net Amount | 3,913,699 | 3,649,102 | |
Derivative Liabilities, Financial Instruments | [1] | (3,913,699) | (3,649,102) |
Derivative Liabilities, Cash Collateral | [2] | 0 | 0 |
Derivative Liabilities, Net amount Total | 0 | 0 | |
Deposits, net | |||
Derivative instruments: | |||
Derivative Asset, Gross Amount Recognized | 72,516 | ||
Derivative Asset, Amount Offset | (61,367) | ||
Derivative Asset, Net Amount | 11,149 | ||
Derivative Asset, Financial Instruments | [1] | 0 | |
Derivative Asset, Cash Collateral | [2] | 0 | |
Derivative Asset, Net amount Total | 11,149 | ||
Derivative instruments: | |||
Derivative Liabilities, Gross Amount Recognized | 61,367 | ||
Derivative Liabilities, Amount Offset | (61,367) | ||
Derivative Liabilities, Net Amount | 0 | ||
Derivative Liabilities, Financial Instruments | [1] | 0 | |
Derivative Liabilities, Cash Collateral | [2] | 0 | |
Derivative Liabilities, Net amount Total | 0 | ||
10-year Interest Rate Swap Futures | |||
Derivative instruments: | |||
Derivative Asset, Gross Amount Recognized | 6,907 | 63,315 | |
Derivative Asset, Amount Offset | 0 | 0 | |
Derivative Asset, Net Amount | 6,907 | 63,315 | |
Derivative Asset, Financial Instruments | [1] | 0 | (1,949) |
Derivative Asset, Cash Collateral | [2] | (6,907) | (61,366) |
Derivative Asset, Net amount Total | 0 | 0 | |
Derivative instruments: | |||
Derivative Liabilities, Gross Amount Recognized | 1,949 | ||
Derivative Liabilities, Amount Offset | 0 | ||
Derivative Liabilities, Net Amount | 1,949 | ||
Derivative Liabilities, Financial Instruments | [1] | (1,949) | |
Derivative Liabilities, Cash Collateral | [2] | 0 | |
Derivative Liabilities, Net amount Total | 0 | ||
TBA Commitments | |||
Derivative instruments: | |||
Derivative Asset, Gross Amount Recognized | 47 | 7,285 | |
Derivative Asset, Amount Offset | 0 | 0 | |
Derivative Asset, Net Amount | 47 | 7,285 | |
Derivative Asset, Financial Instruments | [1] | 0 | 0 |
Derivative Asset, Cash Collateral | [2] | 0 | 0 |
Derivative Asset, Net amount Total | 47 | 7,285 | |
Derivative instruments: | |||
Derivative Liabilities, Gross Amount Recognized | 4,038 | 3,699 | |
Derivative Liabilities, Amount Offset | 0 | 0 | |
Derivative Liabilities, Net Amount | 4,038 | 3,699 | |
Derivative Liabilities, Financial Instruments | [1] | 0 | 0 |
Derivative Liabilities, Cash Collateral | [2] | (1,797) | (1,474) |
Derivative Liabilities, Net amount Total | $ 2,241 | $ 2,225 | |
[1] | Does not include the fair value amount of financial instrument collateral pledged in respect of repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets. | ||
[2] | Does not include the amount of cash collateral pledged in respect of derivative instruments that exceeds the associated derivative liability presented in the consolidated balance sheets. |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Long-term unsecured debt, carrying value | $ 73,768 | $ 73,656 |
Long-term Debt, Fair Value | 70,742 | 66,489 |
Investments in equity securities and investment funds, fair value of other assets | 544 | 533 |
Private Equity Funds | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Investments in equity securities and investment funds, at carrying amount | 1,801 | 1,918 |
Investments in equity securities and investment funds, fair value of other assets | 544 | 533 |
Investments in equity securities and investment funds, at cost | 1,257 | 1,385 |
Investments in equity securities and investment funds, fair value | $ 6,100 | $ 6,034 |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Instruments Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
MBS | ||
Fair Value of MBS | $ 4,182,603 | $ 3,912,641 |
Derivative assets, at fair value | 7,965 | 74,889 |
Derivative Liabilities | (4,038) | (9,554) |
Other assets | 544 | 533 |
Total | 4,187,074 | 3,978,509 |
Agency MBS | ||
MBS | ||
Trading securities | 4,182,529 | 3,911,375 |
Fair Value of MBS | 4,182,529 | 3,911,375 |
Private-Label MBS | ||
MBS | ||
Trading securities | 74 | 1,266 |
Fair Value of MBS | 74 | 1,266 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1 | ||
MBS | ||
Fair Value of MBS | 0 | 0 |
Derivative assets, at fair value | 1,011 | 4,289 |
Derivative Liabilities | 0 | (3,906) |
Other assets | 0 | 0 |
Total | 1,011 | 383 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | ||
MBS | ||
Fair Value of MBS | 4,182,529 | 3,911,375 |
Derivative assets, at fair value | 6,954 | 70,600 |
Derivative Liabilities | (4,038) | (5,648) |
Other assets | 0 | 0 |
Total | 4,185,445 | 3,976,327 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | ||
MBS | ||
Fair Value of MBS | 74 | 1,266 |
Derivative assets, at fair value | 0 | 0 |
Derivative Liabilities | 0 | 0 |
Other assets | 544 | 533 |
Total | 618 | 1,799 |
Fair Value, Measurements, Recurring | Agency MBS | Fair Value, Inputs, Level 1 | ||
MBS | ||
Trading securities | 0 | 0 |
Fair Value, Measurements, Recurring | Agency MBS | Fair Value, Inputs, Level 2 | ||
MBS | ||
Trading securities | 4,182,529 | 3,911,375 |
Fair Value, Measurements, Recurring | Agency MBS | Fair Value, Inputs, Level 3 | ||
MBS | ||
Trading securities | 0 | 0 |
Fair Value, Measurements, Recurring | Private-Label MBS | Fair Value, Inputs, Level 1 | ||
MBS | ||
Trading securities | 0 | 0 |
Fair Value, Measurements, Recurring | Private-Label MBS | Fair Value, Inputs, Level 2 | ||
MBS | ||
Trading securities | 0 | 0 |
Fair Value, Measurements, Recurring | Private-Label MBS | Fair Value, Inputs, Level 3 | ||
MBS | ||
Trading securities | $ 74 | $ 1,266 |
Fair Value Measurements - Signi
Fair Value Measurements - Significant Unobservable Inputs Used to Measure Fair value on Private-Label Mortgage-Backed Securities (Details) - Pledged with private-label MBS | 12 Months Ended | |
Dec. 31, 2016 | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 6.50% | [1] |
Default rate | 2.25% | [1] |
Loss severity rate | 45.00% | [1] |
Total prepayment rate (including defaults) | 10.25% | [1] |
Maximum | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 6.50% | |
Default rate | 2.25% | |
Loss severity rate | 45.00% | |
Total prepayment rate (including defaults) | 10.25% | |
Minimum | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 6.50% | |
Default rate | 2.25% | |
Loss severity rate | 45.00% | |
Total prepayment rate (including defaults) | 10.25% | |
[1] | Based on face value. |
Fair Value Measurements - Chang
Fair Value Measurements - Change in Fair Value of Level 3 Investments that are Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | ||||
Beginning balance | $ 1,976 | $ 129,336 | $ 1,799 | $ 130,553 |
Total net gains (losses) Included in investment (loss) gain, net | (101) | (2,488) | 61 | (2,456) |
Total net gains (losses) Included in other comprehensive income | (379) | (8,415) | ||
Purchases | 5,357 | |||
Sales | (1,268) | (38,290) | (1,268) | (38,290) |
Payments, net | (32) | (1,801) | (54) | (3,345) |
Accretion of discount | 43 | 2,808 | 80 | 5,782 |
Ending balance | 618 | 89,186 | 618 | 89,186 |
Net unrealized gains (losses) included in earnings for the period for Level 3 assets still held at the reporting date | $ (145) | $ (1,658) | $ 3 | $ (1,952) |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2016 | |
Income Tax Disclosure [Line Items] | |||||||
Operating Loss Carryforwards | $ 75,423 | $ 75,423 | |||||
Operating Loss Carryforwards Expiration Period | 2,027 | ||||||
AMT credit carry-forwards | 8,838 | $ 8,838 | $ 8,427 | ||||
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount | 16,829 | 19,958 | |||||
Capital Loss Carryforward [Member] | |||||||
Income Tax Disclosure [Line Items] | |||||||
Tax Credit Carryforward, Amount | $ 324,385 | $ 324,385 | |||||
Scenario, Forecast [Member] | |||||||
Income Tax Disclosure [Line Items] | |||||||
Capital Loss Carryforward Expiration | $ 13,487 | $ 71,131 | $ 102,927 | $ 136,840 |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Ordinary deferred tax assets: | ||||
NOL carry-forward | $ 29,340 | $ 37,238 | ||
AMT credit carry-forward | 8,838 | 8,427 | ||
Deferred net loss on designated derivatives | 1,195 | 1,386 | ||
Stock-based compensation | 2,404 | 2,426 | ||
Other, net | 208 | 208 | ||
Total ordinary deferred tax assets | 41,985 | 49,685 | ||
Ordinary deferred tax liabilities: | ||||
Net unrealized gain on designated derivatives | (17,823) | (25,145) | ||
Ordinary deferred tax assets, net | 24,162 | 24,540 | ||
Capital deferred tax assets: | ||||
NCL carry-forward | 126,186 | 120,939 | ||
Net unrealized loss on investments | 34,675 | 44,253 | ||
Valuation allowance | (160,861) | (140,903) | ||
Total capital deferred tax assets, net | 24,289 | |||
Total deferred tax assets, net | $ 24,162 | $ 40,546 | $ 48,829 | $ 72,927 |
Earnings (Loss) Per Share - Com
Earnings (Loss) Per Share - Computations of Basic and Diluted Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Earnings Per Share [Abstract] | ||||
Basic weighted-average common shares outstanding | 24,319 | 23,003 | 23,987 | 22,998 |
Performance share units and unvested restricted stock | 67 | |||
Diluted weighted-average common shares outstanding | 24,319 | 23,070 | 23,987 | 22,998 |
Net (loss) income attributable to common stock | $ (17,963) | $ 12,894 | $ (12,709) | $ (18,724) |
Basic (loss) earnings per common share | $ (0.74) | $ 0.56 | $ (0.53) | $ (0.81) |
Diluted (loss) earnings per common share | $ (0.74) | $ 0.56 | $ (0.53) | $ (0.81) |
Earnings (Loss) Per Share - Add
Earnings (Loss) Per Share - Additional Information (Details) - shares | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | |
Performance Shares and Restricted Stock | |||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 233,418 | 239,248 | 56,463 |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
May 31, 2017USD ($)$ / sharesshares | Jun. 30, 2017USD ($)$ / sharesshares | Mar. 31, 2017USD ($)$ / sharesshares | Jun. 30, 2017$ / sharesshares | Dec. 31, 2016$ / sharesshares | May 16, 2017shares | Feb. 22, 2017shares | May 24, 2013shares | |
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Preferred stock, shares authorized (in shares) | 25,000,000 | 25,000,000 | 25,000,000 | |||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||
Prior Equity Distribution Agreements | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Agreement termination date | Feb. 23, 2017 | |||||||
Common Class A | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 | 450,000,000 | |||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||
Common Stock Voting Rights Per Share Owned | 1 | 1 | ||||||
Stock Repurchase Program, Number of Shares Authorized to be Repurchased | 2,000,000 | 2,000,000 | ||||||
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased | 1,951,305 | 1,951,305 | ||||||
Common Class A | Common Stock | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Conversion of Class B common stock to Class A common stock (in shares) | 20,256 | 81,960 | ||||||
Issuance of stock (in shares) | 2,332,289 | 595,342 | ||||||
Common Class A | Common Stock | Maximum | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Number of Shares Offer and Sell | 6,000,000 | 1,750,000 | ||||||
Common Class A | Common Stock | Prior Equity Distribution Agreements | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Issuance of stock (in shares) | 800 | |||||||
Weighted Average Public Offering Price Per Share | $ / shares | $ 15.16 | |||||||
Net Proceeds Underwriting Discounts and Commissions and Expenses | $ | $ 12 | |||||||
Common Class A | Common Stock | New Equity Distribution Agreements | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Issuance of stock (in shares) | 2,331,489 | |||||||
Number of Shares Offer and Sell | 3,668,511 | 3,668,511 | ||||||
Weighted Average Public Offering Price Per Share | $ / shares | $ 14.51 | $ 14.51 | ||||||
Net Proceeds Underwriting Discounts and Commissions and Expenses | $ | $ 33,334 | |||||||
Common Class B | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 | 100,000,000 | |||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||
Common Stock Voting Rights Per Share Owned | 3 | 3 | ||||||
Common Class B | Common Stock | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Conversion of Class B common stock to Class A common stock (in shares) | (20,256) | (81,960) | ||||||
7.00 % Series B Cumulative Perpetual Redeemable Preferred Stock | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 | ||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||
Undesignated Preferred Stock | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Preferred stock, shares authorized (in shares) | 23,000,000 | 23,000,000 | ||||||
Series B Preferred Stock | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Public Offering Price Per Share | $ / shares | $ 24 | |||||||
Net proceeds underwriting discounts and commissions and expenses | $ | $ 3,018 | |||||||
Preferred stock, dividend rate percentage | 7.00% | |||||||
Preferred stock voting rights per share owned | 0 | 0 | ||||||
Preferred stock, liquidation preference per share | $ / shares | $ 25 | $ 25 | ||||||
Preferred stock, redeemable price per share | $ / shares | $ 25 | $ 25 | ||||||
Preferred stock, redemption date | May 12, 2022 | |||||||
Preferred stock, dividend payment terms | Dividends are payable quarterly in arrears on the 30th day of each December, March, June and September. | |||||||
Series B Preferred Stock | Public Offering | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Issuance of stock (in shares) | 135,000 | |||||||
Series B Preferred Stock | Preferred Stock | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Issuance of stock (in shares) | 156,310 | |||||||
Series B Preferred Stock | Preferred Stock | Maximum | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Number of Shares Offer and Sell | 1,865,000 | |||||||
Series B Preferred Stock | Preferred Stock | Series B Preferred Equity Distribution Agreement | ||||||||
Share based Compensation Arrangement by Share based Payment Award [Line Items] | ||||||||
Issuance of stock (in shares) | 21,310 | |||||||
Weighted Average Public Offering Price Per Share | $ / shares | $ 24.41 | $ 24.41 | ||||||
Net Proceeds Underwriting Discounts and Commissions and Expenses | $ | $ 482 | |||||||
Number of Shares Offer and Sell | 1,843,690 | 1,843,690 |
Stockholders' Equity - Dividend
Stockholders' Equity - Dividends Declared and Paid (Details) - $ / shares | 3 Months Ended | |||||
Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | |
Equity [Abstract] | ||||||
Dividend Amount (in dollars per share) | $ 0.550 | $ 0.625 | $ 0.625 | $ 0.625 | $ 0.625 | $ 0.625 |
Declaration Date | Jun. 16, 2017 | Mar. 14, 2017 | Dec. 16, 2016 | Sep. 15, 2016 | Jun. 17, 2016 | Mar. 15, 2016 |
Record Date | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 30, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 |
Pay Date | Jul. 31, 2017 | Apr. 28, 2017 | Jan. 31, 2017 | Oct. 31, 2016 | Jul. 29, 2016 | Apr. 29, 2016 |
Revisions to Previously Repor63
Revisions to Previously Reported Financial Statements - Schedule of Affected Line Items within Previously Reported Consolidated Financial Statements (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Consolidated Balance Sheets: | ||||
Deferred tax assets, net | $ 24,162 | $ 40,546 | $ 48,829 | $ 72,927 |
Total assets | 4,368,891 | 4,695,889 | 4,116,951 | 4,178,336 |
Accumulated deficit | (1,593,980) | (1,561,552) | (1,551,707) | (1,451,258) |
Total stockholders' equity | 354,627 | 349,878 | 358,813 | 459,428 |
Total liabilities and stockholders' equity | $ 4,368,891 | 4,695,889 | 4,116,951 | 4,178,336 |
As Previously Reported | ||||
Consolidated Balance Sheets: | ||||
Deferred tax assets, net | 65,149 | 73,432 | 97,530 | |
Total assets | 4,720,492 | 4,141,554 | 4,202,939 | |
Accumulated deficit | (1,536,949) | (1,527,104) | (1,426,655) | |
Total stockholders' equity | 374,481 | 383,416 | 484,031 | |
Total liabilities and stockholders' equity | 4,720,492 | 4,141,554 | 4,202,939 | |
Adjustment | ||||
Consolidated Balance Sheets: | ||||
Deferred tax assets, net | (24,603) | (24,603) | (24,603) | |
Total assets | (24,603) | (24,603) | (24,603) | |
Accumulated deficit | (24,603) | (24,603) | (24,603) | |
Total stockholders' equity | (24,603) | (24,603) | (24,603) | |
Total liabilities and stockholders' equity | $ (24,603) | $ (24,603) | $ (24,603) |