Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 03, 2016 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | HTS | |
Entity Registrant Name | HATTERAS FINANCIAL CORP | |
Entity Central Index Key | 1,419,521 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 94,529,206 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | |
Assets | |||
Mortgage-backed securities, at fair value (including pledged assets of $11,540,366 and $13,932,415) | $ 12,045,571 | $ 14,302,230 | |
Agency CRT securities, at fair value | 111,021 | 109,387 | |
Mortgage loans held for investment, at fair value (including pledged assets of $47,176 and $50,143) | 152,197 | 116,857 | |
Mortgage loans held for investment in securitization trusts, at fair value | 209,418 | 226,908 | |
Mortgage loans held for sale, at fair value (including pledged assets of $25,919 and $17,542) | 25,919 | 17,542 | |
Mortgage servicing rights, at fair value | 316,176 | 269,926 | |
Cash and cash equivalents (including pledged cash of $469,690 and $376,081) | 705,920 | 816,715 | |
Unsettled purchased mortgage-backed securities, at fair value | 5,536 | 12,582 | |
Receivable for securities sold | 274,127 | ||
Accrued interest receivable | 38,826 | 45,008 | |
Principal payments receivable | 91,476 | 108,201 | |
Other investments | 51,464 | 51,930 | |
Derivative assets, at fair value | 20,207 | 2,914 | |
Other assets | 46,647 | 57,326 | |
Total assets | [1] | 14,094,505 | 16,137,526 |
Borrowings: | |||
Repurchase agreements | 11,419,354 | 13,443,883 | |
Warehouse lines of credit | 63,615 | 60,096 | |
Federal Home Loan Bank advances | 14,132 | ||
Collateralized borrowings in securitization trusts, at fair value | 60,550 | 57,611 | |
Total borrowings | 11,543,519 | 13,575,722 | |
Payable for unsettled securities | 5,483 | 12,582 | |
Accrued interest payable | 3,052 | 4,938 | |
Derivative liabilities, at fair value | 419,282 | 325,233 | |
Dividends payable | 47,166 | 47,824 | |
Other liabilities | 30,632 | 27,870 | |
Total liabilities | [1] | 12,049,134 | 13,994,169 |
Shareholders’ equity: | |||
7.625% Series A Cumulative Redeemable Preferred stock, $.001 par value, 25,000,000 shares authorized, 11,500,000 shares issued and outstanding ($287,500 aggregate liquidation preference) | 278,252 | 278,252 | |
Common stock, $.001 par value, 200,000,000 shares authorized, 94,529,206 and 95,773,767 shares issued and outstanding | 95 | 96 | |
Additional paid-in capital | 2,424,741 | 2,438,223 | |
Accumulated deficit | (791,055) | (671,872) | |
Accumulated other comprehensive income | 133,338 | 98,658 | |
Total shareholders’ equity | 2,045,371 | 2,143,357 | |
Total liabilities and shareholders’ equity | $ 14,094,505 | $ 16,137,526 | |
[1] | The consolidated balance sheet as of March 31, 2016 and December 31, 2015, respectively, include $216,224 and $228,240 of assets of a consolidated collateralized financing entity (“CFE”) that can only be used to settle obligations of the CFE as well as liabilities of $60,712 and $57,784 of the CFE for which creditors do not have recourse to Hatteras Financial Corp. |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Statement Of Financial Position [Abstract] | ||
Mortgage-backed securities, pledged assets | $ 11,540,366 | $ 13,932,415 |
Mortgage loans held for investment, pledged assets | 47,176 | 50,143 |
Pledged cash | 469,690 | 376,081 |
Mortgage loans held for sale, pledged assets | $ 25,919 | $ 17,542 |
Series A preferred stock dividend rate per year | 7.625% | 7.625% |
7.625% Series A Cumulative Redeemable Preferred stock, par value | $ 0.001 | $ 0.001 |
7.625% Series A Cumulative Redeemable Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
7.625% Series A Cumulative Redeemable Preferred stock, shares issued | 11,500,000 | 11,500,000 |
7.625% Series A Cumulative Redeemable Preferred stock, shares outstanding | 11,500,000 | 11,500,000 |
7.625% Series A Cumulative Redeemable Preferred stock, aggregate Liquidation Preference | $ 287,500 | $ 287,500 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 94,529,206 | 95,773,767 |
Common stock, shares outstanding | 94,529,206 | 95,773,767 |
Asset of collateralized financing entity | $ 216,224 | $ 228,240 |
Liabilities of collateralized financing entity | $ 60,712 | $ 57,784 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Interest income: | ||
Securities | $ 67,705 | $ 86,362 |
Mortgage loans | 1,149 | 467 |
Mortgage loans in securitization trusts | 1,819 | |
Short-term cash investments | 464 | 288 |
Total interest income | 71,137 | 87,117 |
Interest expense: | ||
Repurchase agreements | 22,088 | 27,314 |
Warehouse lines | 252 | |
Collateralized borrowings in securitization trusts | 406 | |
Total interest expense | 22,746 | 27,314 |
Net interest margin | 48,391 | 59,803 |
Other income (loss): | ||
Servicing income | 18,882 | |
Management fee income | 1,400 | |
Net realized gain on sale of securities | 4,287 | 16,453 |
Net gain on mortgage loans | 2,607 | 244 |
Net loss on mortgage servicing rights | (38,111) | |
Net loss on derivative instruments | (92,494) | (102,785) |
Net miscellaneous gains and losses | 1,315 | |
Total other loss | (102,114) | (86,088) |
Expenses: | ||
Management fee | 3,982 | 4,095 |
Share-based compensation | 1,293 | 1,045 |
Servicing expenses | 2,665 | |
General and administrative | 9,430 | 3,110 |
Securitization deal costs | 72 | |
Total expenses | 17,442 | 8,250 |
Net loss | (71,165) | (34,535) |
Dividends on preferred stock | 5,480 | 5,481 |
Net loss available to common shareholders | $ (76,645) | $ (40,016) |
Loss per share - common stock, basic | $ (0.81) | $ (0.41) |
Loss per share - common stock, diluted | (0.81) | (0.41) |
Dividends per share of common stock | $ 0.45 | $ 0.50 |
Weighted average common shares outstanding, basic | 94,850,791 | 96,783,199 |
Weighted average common shares outstanding, diluted | 94,850,791 | 96,783,199 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net loss | $ (71,165) | $ (34,535) |
Other comprehensive income (loss): | ||
Net unrealized gains on securities available for sale | 31,887 | 74,546 |
Net unrealized gains on derivative instruments | 2,793 | 14,167 |
Other comprehensive income | 34,680 | 88,713 |
Comprehensive income (loss) | (36,485) | 54,178 |
Dividends on preferred stock | 5,480 | 5,481 |
Comprehensive income (loss) available to common shareholders | $ (41,965) | $ 48,697 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders' Equity - 3 months ended Mar. 31, 2016 - USD ($) $ in Thousands | Total | 7.625% Series A Cumulative Redeemable Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income |
Balance at Dec. 31, 2015 | $ 2,143,357 | $ 278,252 | $ 96 | $ 2,438,223 | $ (671,872) | $ 98,658 |
Repurchase of common stock | (14,776) | (1) | (14,775) | |||
Share-based compensation expense | 1,293 | 1,293 | ||||
Dividends declared on preferred stock | (5,480) | (5,480) | ||||
Dividends declared on common stock | (42,538) | (42,538) | ||||
Net loss | (71,165) | (71,165) | ||||
Other comprehensive income | 34,680 | 34,680 | ||||
Balance at Mar. 31, 2016 | $ 2,045,371 | $ 278,252 | $ 95 | $ 2,424,741 | $ (791,055) | $ 133,338 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Operating activities | ||
Net loss | $ (71,165) | $ (34,535) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Net amortization of premium related to mortgage-backed securities | 18,943 | 27,116 |
Reclassification of deferred swap net loss | 1,376 | 13,438 |
Share-based compensation expense | 1,293 | 1,045 |
Net realized gain on sale of securities | (4,287) | (16,453) |
Net unrealized loss on MSR | 38,111 | |
Net unrealized gain on mortgage loans | (2,007) | (244) |
Purchase of mortgage loans held for sale | (112,617) | |
Sale of mortgage loans held for sale | 104,962 | |
Net loss on derivative instruments | 92,494 | 102,785 |
Other | (1,895) | 29 |
Changes in operating assets and liabilities: | ||
Decrease in accrued interest receivable | 6,182 | 2,654 |
(Increase) decrease in other assets | 11,241 | (669) |
Decrease in accrued interest payable | (1,886) | (3,956) |
Increase in other liabilities | 3,843 | 8,976 |
Net cash provided by operating activities | 84,588 | 100,186 |
Investing activities | ||
Purchases of securities | (217,728) | (783,566) |
Principal repayments on securities | 693,381 | 877,143 |
Sales of securities | 1,540,791 | 628,123 |
Purchases of mortgage loans held for investment | (40,855) | (95,769) |
Principal repayments on mortgage loans held for investment | 24,870 | 4,172 |
Purchases of mortgage servicing rights | (84,361) | |
Net payments on derivative instruments | (15,402) | (25,050) |
Net cash provided by investing activities | 1,900,696 | 605,053 |
Financing activities | ||
Repurchase of common stock | (14,776) | |
Cash dividends paid | (48,676) | (53,868) |
Proceeds from borrowings | 37,257,993 | 42,920,560 |
Principal repayments on borrowings | (39,293,135) | (43,571,853) |
Proceeds from collateralized trust borrowing | 6,240 | |
Repayments on collateralized trust borrowing | (3,725) | |
Net cash used in financing activities | (2,096,079) | (705,161) |
Net increase (decrease) in cash and cash equivalents | (110,795) | 78 |
Cash and cash equivalents, beginning of period | 816,715 | 627,595 |
Cash and cash equivalents, end of period | 705,920 | 627,673 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 28,667 | 39,226 |
Supplemental schedule of non-cash investing and financing activities | ||
Obligation to brokers for unsettled purchases of securities | 5,483 | 103,995 |
Receivable for securities sold | 274,127 | 13,423 |
Dividends accrued not yet paid | 47,166 | |
Redeemable Preferred Stock | ||
Supplemental schedule of non-cash investing and financing activities | ||
Dividends accrued not yet paid | 4,628 | 4,628 |
Common Stock | ||
Supplemental schedule of non-cash investing and financing activities | ||
Dividends accrued not yet paid | $ 42,538 | $ 48,396 |
Organization and Business Descr
Organization and Business Description | 3 Months Ended |
Mar. 31, 2016 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization and Business Description | 1. Organization and Business Description Hatteras Financial Corp. (the “Company”) was incorporated in Maryland on September 19, 2007. The Company invests in single-family residential mortgage assets, such as mortgage-backed securities (“MBS”), and other financial assets. To date, the Company has primarily invested in MBS issued or guaranteed by a U.S. Government agency, such as Ginnie Mae, or by a U.S. Government-sponsored entity, such as Fannie Mae and Freddie Mac (“agency securities”). The Company is externally managed and advised by its manager, Atlantic Capital Advisors LLC (“ACA”). The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). As a result, the Company does not pay federal income taxes on taxable income distributed to shareholders if certain REIT qualification tests are met. It is the Company’s policy to distribute 100% of its taxable income, after application of available tax attributes, within the time limits prescribed by the Code, which may extend into the subsequent taxable year. However, the Company may conduct certain activities that cause it to earn income which will not be qualifying income for REIT purposes. The Company has designated certain of its subsidiaries as taxable REIT subsidiaries (“TRSs”) as defined in the Code to engage in such activities, and the Company may in the future form additional TRSs. See Note 15 for information regarding the planned merger of the Company with Annaly Capital Management, Inc., a Maryland corporation (“Annaly”), which is expected to close by the end of the third quarter of 2016. The closing is subject to various conditions and regulatory approvals, including two-thirds of the outstanding shares of the Company’s common stock being validly tendered into the exchange offer, and therefore, the Company cannot provide any assurance that the merger will close in a timely manner or at all. On August 31, 2015, the Company closed on its acquisition of the voting interests of Pingora Asset Management, LLC (“PAM”) and Pingora Loan Servicing, LLC (“PLS,” and together, “Pingora”), a specialized asset manager focused on investing in new-production performing mortgage servicing rights (“MSR”) and master-servicing residential mortgage loans sourced primarily from direct, ongoing relationships with loan originators. PAM is a registered investment advisor and PLS is an approved servicer with Fannie Mae, Freddie Mac and Ginnie Mae that is managed by PAM. The acquisition provides the Company with MSR portfolio management and master-servicing oversight capabilities to the Company, accelerating the Company’s entry into investing in MSR. In addition to being an income-producing investment, the Company expects that MSR will serve as a natural hedge against the impact of changes in interest rates on the fair value of the Company’s interest-earning portfolio. The Company acquired 100% of the voting interests of Pingora for cash consideration of approximately $23.5 million. In conjunction with the transaction, the Company also issued approximately $4.4 million of equity interests to Pingora management, a significant portion of which is subject to future vesting. The Company has accounted for the transaction as a business combination in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combination |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2016. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates affecting the accompanying consolidated financial statements include the valuation of investments and derivative instruments. Certain prior period amounts have been reclassified to conform to the current period classification. Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries. The Company also considers the provisions of FASB ASC Topic 810, Consolidation, The Company consolidates a securitization trust, also known as a collateralized financing entity (“CFE”) that purchased individual whole mortgage loans from one of the Company’s subsidiaries and issued MBS that are backed by the loans. PLS, which meets the definition of a business pursuant to GAAP, has also been determined to be a VIE . The Company is required to reassess the consolidation of VIEs quarterly, and changes in facts and circumstances may change the Company’s determination. This could result in a material impact to the Company’s consolidated financial statements during subsequent reporting periods. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The carrying amounts of cash equivalents approximate their fair value. Cash and cash equivalents includes cash pledged to derivative counterparties, which is held in margin accounts at various counterparties as collateral related to interest rate swaps, Eurodollar Futures Contracts (“Futures Contracts”) and forward commitments to purchase to-be-announced (“TBA”) securities. Financial Instruments The Company considers its cash and cash equivalents, MBS and agency credit risk transfer (“CRT”) securities (settled and unsettled), mortgage loans, forward purchase commitments, debt security held-to-maturity, receivable for securities sold, accrued interest receivable, principal payments receivable, payable for unsettled securities, derivative instruments, borrowings and accrued interest payable to meet the definition of financial instruments. The carrying amount of cash and cash equivalents, receivable for securities sold, accrued interest receivable and payable for unsettled securities approximate their fair value due to the short maturities of these instruments and would be valued using Level 1 inputs. The carrying amount of repurchase agreements is deemed to approximate fair value given their short-term duration and would be valued using Level 2 inputs. See Note 5 for discussion of the fair value of MBS and agency CRT securities. See Note 6 for discussion of the fair value of mortgage loans. See Note 8 for discussion of the fair value of the held-to-maturity debt security. See Note 10 for discussion of the fair value of derivative instruments, including forward purchase commitments. The Company limits its exposure to credit losses on its portfolio of securities by purchasing predominantly agency securities. In addition, the Company’s portfolio is diversified to avoid undue exposure to loan originator, geographic and other types of concentration. The Company manages the risk of prepayments of the underlying mortgages by creating a diversified portfolio with a variety of expected prepayment characteristics. See Note 5 for additional information on MBS. The Company is engaged in various trading and brokerage activities including repurchase agreements, dollar roll transactions, interest rate swap agreements, interest rate swaptions and Futures Contracts in which counterparties primarily include broker-dealers, banks, and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk of loss. The risk of default depends on the creditworthiness of the counterparty and/or issuer of the instrument. It is the Company’s policy to review, as necessary, the credit standing for each counterparty and retain collateral when appropriate. See Note 9 for additional information on repurchase agreements and Note 10 for additional information on dollar roll transactions, interest rate swap agreements, interest rate swaptions and Futures Contracts. Mortgage-Backed Securities and Agency CRT Securities The Company invests primarily in MBS representing interests in or obligations backed by pools of single-family residential mortgage loans. GAAP requires the Company to classify its investments as either trading, available-for-sale or held-to-maturity securities. Management determines the appropriate classifications of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company currently classifies all of its MBS as available-for-sale. All assets that are classified as available-for-sale are carried at fair value and unrealized gains and losses are included in other comprehensive income (loss). Agency CRT securities are credit risk transfer securities issued by government sponsored entities, which are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors. The Company has elected to account for agency CRT securities under the fair value option, which simplifies accounting for these particular securities due to the potential for embedded derivatives therein. The estimated fair values of MBS and agency CRT securities are determined by management utilizing valuations obtained from independent sources. Security purchase and sale transactions are recorded on the trade date. Gains or losses realized from the sale of securities are included in income and are determined using the specific identification method. Forward purchase commitments to acquire “when issued” or TBA securities are recorded at fair value in accordance with FASB ASC Topic 815, Derivatives and Hedging The Company assesses its available-for-sale securities for other-than-temporary impairment on at least a quarterly basis. When the fair value of an investment is less than its amortized cost at the balance sheet date the impairment is designated as either “temporary” or “other-than-temporary.” In deciding on whether or not a security is other-than-temporarily impaired, the Company uses a two-step evaluation process. First, the Company determines whether it has made any decision to sell a security that is in an unrealized loss position, or, if not, the Company determines whether it is more likely than not that the Company will be required to sell the security prior to recovering its amortized cost basis. If the answer to either of these questions is “yes” then the security is considered other-than-temporarily impaired. Mortgage Loans Held for Investment The Company does not originate any loans, but purchases individual prime jumbo adjustable-rate whole mortgage loans with the intention of holding them as investments. In order to finance its investment in the loans, the Company may securitize the loans into MBS not issued or guaranteed by a U.S. Government agency or U.S. Government-sponsored entity. The Company would then purchase the majority of the MBS that the securitization trusts would issue, and would expect to consolidate the trusts pursuant to GAAP. The Company completed such a securitization transaction during 2015. The Company has elected to account for these loans under the fair value option, pursuant to FASB ASC Topic 825, Financial Instruments Mortgage Loans Held for Investment in Securitization Trusts As discussed under “Principles of Consolidation,” the Company consolidates a CFE that securitized individual prime jumbo adjustable-rate whole mortgage loans it had purchased from a subsidiary of the Company. These securitized mortgage loans are legally isolated from the Company, are beyond the reach of the Company’s creditors, and may only be used to settle obligations of the CFE. The Company has elected to account for the assets and liabilities of the CFE under the fair value option, pursuant to ASC 825. As a result, mortgage loans held for investment in securitization trusts are carried at fair value. See “Interest Income” below for discussion of the recognition of the interest income on mortgage loans. Paydowns on these mortgage loans are classified as investing cash flows in the consolidated statements of cash flows. See Note 3 for further information regarding the CFE. Mortgage Loans Held for Sale The Company purchases certain individual whole loans with the intention of selling them to Ginnie Mae for inclusion in securitizations. The Company has elected to account for these loans under the fair value option, pursuant to ASC 825, because it better reflects the short-term nature of the Company’s holdings in these loans. As a result of electing the fair value option, the mortgage loans are carried at fair value with changes therein reflected in consolidated net income (loss). Changes in fair value are reported in “Net gain (loss) on mortgage loans” in the consolidated statements of income. Cash flows related to mortgage loans held for sale are classified as operating cash flows in the consolidated statements of cash flows. Mortgage Servicing Rights The Company purchases MSR with the intention of holding them as investments. The Company and its subsidiaries do not originate or directly service mortgage loans. Rather, it utilizes duly licensed subservicers to perform substantially all servicing functions for the loans underlying the MSR. The Company has elected to account for its investments in MSR at fair value pursuant to FASB ASC Topic 860, Transfers and Servicing Derivative Instruments The Company manages economic risks, including interest rate, liquidity and credit risks, primarily by managing the amount, sources, cost and duration of its debt funding. The objectives of the Company’s risk management strategy are 1) to attempt to mitigate the risk of the cost of its variable rate liabilities increasing during a period of rising interest rates, and 2) to reduce fluctuations in net book value over a range of interest rate scenarios. The principal instruments that the Company uses to achieve these objectives are interest rate swaps and Eurodollar Futures Contracts (“Futures Contracts”). The Company uses Futures Contracts to approximate the economic hedging results achieved with interest rate swaps. The Company does not enter into any of these transactions for speculative purposes. The Company accounts for derivative instruments in accordance with ASC 815, which requires an entity to recognize all derivatives as either assets or liabilities and to measure those instruments at fair value. The accounting for changes in the fair value of derivative instruments depends on whether the instruments are designated and qualify as part of a hedging relationship pursuant to ASC 815. Changes in fair value related to derivatives not in hedge designated relationships are recorded in “Gain (loss) on derivative instruments, net” in the Company’s consolidated statements of income, whereas changes in fair value related to derivatives in hedge designated relationships are initially recorded in other comprehensive income (loss) and later reclassified to income at the time that the hedged transactions affect earnings. Any portion of the changes in fair value due to hedge ineffectiveness is immediately recognized in the income statement. Derivative instruments in a gain position are reported as derivative assets and derivative instruments in a loss position are reported as derivative liabilities in the Company’s consolidated balance sheets. In the Company’s consolidated statements of cash flows, cash receipts and payments related to derivative instruments are classified according to the underlying nature or purpose of the derivative transaction, generally in the operating section if the derivatives are designated as accounting hedges and in the investing section otherwise. The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments in an asset position fail to perform their obligations under the contracts. The Company attempts to minimize this risk by limiting its counterparties to major financial institutions with acceptable credit ratings, monitoring positions with individual counterparties and adjusting posted collateral as required. The Company may also enter into forward purchase commitments as a means of investing in and financing agency securities via TBA dollar roll transactions. TBA dollar roll transactions involve moving the settlement of a TBA contract out to a later date by entering into an offsetting short position (referred to as a "pair off"), net settling the paired-off positions for cash, and simultaneously purchasing a similar TBA contract for a later settlement date. The agency securities purchased at the later settlement date are typically priced at a discount to securities for settlement in the current month. This difference is referred to as the “price drop.” The price drop represents compensation to the Company for foregoing net interest margin (interest income less repurchase agreement financing cost) and is referred to as “dollar roll income,” which the Company classifies in “Gain (loss) on derivative instruments, net.” Realized and unrealized gains and losses related to TBA dollar roll transactions are also recognized in “Gain (loss) on derivative instruments, net.” TBA dollar roll transactions represent off-balance sheet financing. Repurchase Agreements The Company finances the acquisition of its MBS through the use of repurchase agreements. Under these repurchase agreements, the Company sells securities to a lender and agrees to repurchase the same securities in the future for a price that is higher than the original sales price. The difference between the sale price that the Company receives and the repurchase price that the Company pays represents interest paid to the lender. Although structured as a sale and repurchase obligation, a repurchase agreement operates as a financing under which the Company pledges its securities as collateral to secure a loan which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. The Company records repurchase agreements on the consolidated balance sheets at the amount of cash received (or contract value), with accrued interest recorded separately. The Company retains beneficial ownership of the pledged collateral. At the maturity of a repurchase agreement, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender or, with the consent of the lender, the Company may renew such agreement at the then-prevailing financing rate. These repurchase agreements may require the Company to pledge additional assets to the lender in the event the estimated fair value of the existing pledged collateral declines. Warehouse Lines of Credit Warehouse lines of credit include borrowings under mortgage loan warehouse facilities with various counterparties that expire within one year. These borrowings are collateralized by mortgage loans. If the value of the underlying collateral (as determined by the counterparty) securing these borrowings decreases, the Company may be subject to margin calls during the period the borrowing is outstanding. To satisfy these margin calls, the Company may have to pledge additional collateral or repay portions of the borrowings. Federal Home Loan Bank Advances During the third quarter of 2015, a wholly-owned subsidiary of the Company became a member of the Federal Home Loan Bank of Atlanta (the “FHLB”). The FHLB offers a variety of products and services, including short-term and long-term secured advances. FHLB advances are carried at their contractual amounts. Based on the current status of recent rulemaking by the Federal Housing Finance Agency (“FHFA”), the Company will need to surrender its membership in the FHLB in 2016. Collateralized Borrowings in Securitization Trusts, at Fair Value As discussed under “Principles of Consolidation,” the Company consolidates a CFE that securitized individual prime jumbo adjustable-rate whole mortgage loans it had purchased from a subsidiary of the Company. Investors in the collateralized borrowings issued by the CFE have recourse against the assets within the CFE, but have no recourse against the Company itself. The Company has elected to account for the assets and liabilities of the CFE under the fair value option, pursuant to ASC 825. As a result, collateralized borrowings in securitization trusts are carried at fair value. The debt certificates issued by the CFE are tradeable MBS, and the fair value of the debt is determined by management by obtaining valuations from independent sources, consistent with how the Company values its investment portfolio. Paydowns on this debt are classified as financing cash flows in the consolidated statements of cash flows. See Note 3 for further information regarding the CFE. Offsetting of Assets and Liabilities The Company’s derivative agreements and repurchase agreements generally contain provisions that allow for netting or the offsetting of receivables and payables with each counterparty. The Company reports amounts in its consolidated balance sheets on a gross basis without regard for such rights of offset or master netting arrangements. Interest Income Interest income on MBS and agency CRT securities is earned and recognized based on the outstanding principal amount of the investment securities and their contractual terms. Premiums and discounts associated with the purchase of MBS are amortized or accreted into interest income over the actual lives of the securities using the effective interest method. Interest income on agency CRT securities, which are accounted for under the fair-value option, is recognized based on their stated coupon rates. The Company recognizes interest income on mortgage loans held for investment and mortgage loans held for investment in securitization trusts based on their stated coupon rates. If a loan becomes 90 days past due, it is considered non-performing and is placed in non-accrual status. Accrual of interest income ceases and any existing interest receivables are reversed. Any cash received while a loan is in non-accrual status is first applied to unpaid principal and then to unpaid interest. In general, non-performing loans are only restored to accrual status when no principal or interest remains due and unpaid. Income Taxes The Company has elected to be taxed as a REIT under the Code. The Company will generally not be subject to federal income tax to the extent that it distributes 100% of its taxable income, after application of available tax attributes, within the time limits prescribed by the Code and as long as it satisfies the ongoing REIT requirements including meeting certain asset, income and stock ownership tests. The Company has made an election to treat certain of its subsidiaries as TRSs. These TRSs are taxable as domestic C corporations and are subject to federal, state and local income taxes based upon their taxable income. Share-Based Compensation Share-based compensation is accounted for under the guidance included in FASB ASC Topic 718, Stock Compensation Earnings Per Common Share (EPS) Basic EPS is computed by dividing net income less preferred stock dividends to arrive at net income available to holders of common stock by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed using the two class method, as described in FASB ASC Topic 260, Earnings Per Share Other Comprehensive Income Other comprehensive income refers to revenue, expenses, gains, and losses that are recorded directly as an adjustment to shareholders’ equity. Other comprehensive income for the Company generally arises from unrealized gains or losses generated from changes in market values of the securities held as available-for-sale and derivative instruments that have been designated as accounting hedges. Recent Accounting Pronouncements In January 2016, the FASB issued ASU 2016-1, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities |
Collateralized Financing Entity
Collateralized Financing Entity | 3 Months Ended |
Mar. 31, 2016 | |
Collateralized Financings [Abstract] | |
Collateralized Financing Entity | 3. Collateralized Financing Entity As discussed under “Principles of Consolidation” above, the Company consolidates a CFE that purchased individual whole mortgage loans from one of the Company’s subsidiaries and issued MBS that are backed by the loans. The Company purchased most of the MBS issued by the CFE. The Company has elected the fair value option for the financial assets and liabilities of the CFE in order to avoid an accounting mismatch and more accurately present the economics of the securitization. The underlying loans are classified as “Mortgage loans held for investment in securitization trusts, at fair value” and the portion of the related debt that is not eliminated in consolidation is classified as “Collateralized borrowings in securitization trusts, at fair value” in the consolidated balance sheets. The securitized mortgage loans are legally isolated from the Company, are beyond the reach of the Company’s creditors, and may only be used to settle obligations of the CFE. Similarly, investors in the collateralized borrowings issued by the CFE have recourse against the assets within the CFE, but have no recourse against the Company itself. The Company is not contractually required to provide and has not provided any form of financial support to the CFE. The following table presents the carrying amounts and classifications of the CFE’s assets and liabilities as reflected in the Company’s consolidated balance sheets, prior to certain consolidation adjustments: March 31, 2016 December 31, 2015 Mortgage loans held-for-investment in securitization trusts $ 208,047 $ 225,285 Accrued interest receivable and other assets 8,176 2,955 Total assets $ 216,223 $ 228,240 Collateralized borrowings in securitization trusts $ 60,550 $ 57,611 Accrued interest payable 125 133 Other liabilities 37 40 Total liabilities $ 60,712 $ 57,784 The following table presents the statement of income of the CFE as reflected in the Company’s consolidated statements of income: Three Months Ended March 31, 2016 Interest income $ 1,819 Interest expense (406 ) Net interest margin 1,413 Gain on mortgage loans 1,201 Loss on collateralized borrowings (358 ) Operating expenses (26 ) Net income $ 2,230 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 4. Fair Value Measurements The Company’s valuation techniques for financial instruments are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. FASB Topic 820, Fair Value Measurements Level 1 Inputs – Quoted prices for identical instruments in active markets. Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 Inputs – Instruments with primarily unobservable value drivers. The Company’s Futures Contracts were valued using Level 1 inputs. The Company’s MBS, mortgage loans held for sale and derivatives other than Futures Contracts were valued using Level 2 inputs. Mortgage loans held for investment along with related purchase commitments and MSR were valued using Level 3 inputs. See Notes 5, 6, 7 and 10, respectively, for a discussion of the valuation of MBS, mortgage loans, MSR and derivatives. The carrying values and fair values of assets and liabilities that are required to be reported or disclosed at fair value as of March 31, 2016 and December 31, 2015 were as follows. March 31, 2016 December 31, 2015 Carrying Value Fair Value Carrying Value Fair Value Assets MBS $ 12,045,571 $ 12,045,571 $ 14,302,230 $ 14,302,230 Agency CRT securities 111,021 111,021 109,387 109,387 Mortgage loans held for investment 152,197 152,197 116,857 116,857 Mortgage loans held for investment in securitization trusts 209,418 209,418 226,908 226,908 Mortgage loans held for sale 25,919 25,919 17,542 17,542 MSR 316,176 316,176 269,926 269,926 Cash and cash equivalents 705,920 705,920 816,715 816,715 Unsettled purchased MBS 5,536 5,536 12,582 12,582 Receivable for securities sold 274,127 274,127 - - Accrued interest receivable 38,826 38,826 45,008 45,008 Principal payments receivable 91,476 91,476 108,201 108,201 Debt security, held-to-maturity (1) 15,000 14,477 15,000 14,871 Short-term investments (1) 30,447 30,447 30,327 30,327 Interest rate swaps and swaptions (2) 6 6 2,031 2,031 Futures Contracts asset (2) - - 693 693 Forward purchase commitments (2) 20,201 20,201 190 190 Liabilities Repurchase agreements $ 11,419,354 11,419,354 $ 13,443,883 $ 13,443,883 Warehouse lines of credit 63,615 63,615 60,096 60,096 FHLB advances - - 14,132 14,132 Collateralized borrowings in securitization trusts 60,550 60,550 57,611 57,611 Payable for unsettled securities 5,483 5,483 12,582 12,582 Accrued interest payable 3,052 3,052 4,938 4,938 Interest rate swap liability (3) 11,440 11,440 6,802 6,802 Futures Contracts liability (3) 407,842 407,842 286,058 286,058 Forward purchase commitments (3) - - 32,373 32,373 (1) ncluded in other investments on the consolidated balance sheets. (2) ncluded in derivative assets on the consolidated balance sheets. (3) ncluded in derivative liabilities on the consolidated balance sheets. |
Mortgage-Backed Securities and
Mortgage-Backed Securities and Agency CRT securities | 3 Months Ended |
Mar. 31, 2016 | |
Available-for-sale MBS | |
Mortgage-Backed Securities | 5. Mortgage-Backed Securities and Agency CRT securities All of the Company’s securities, other than its agency CRT securities, are classified as available-for-sale and are reported at their estimated fair value. The agency CRT securities are accounted for under the fair value option as discussed in Note 2. The MBS market is primarily an over-the-counter market. As such, there are no standard, public market quotations for individual MBS. The Company estimates the fair value of its securities based on a market approach by obtaining values for its securities from third-party pricing services. The third-party pricing services gather trade data and use pricing models that incorporate such factors as coupons, primary mortgage rates, prepayment speeds, spread to the U.S. Treasury and interest rate swap curves, periodic and life caps and other similar factors. The third party pricing services also receive data from traders at broker-dealers that participate in the active markets for these securities and directly observe numerous trades of securities similar to the securities owned by the Company. The Company regularly reviews the prices obtained and the methods used to derive those prices. As part of this evaluation, the Company considers security-specific factors such as coupon, prepayment experience, fixed/adjustable rate, annual and life caps, coupon index, time to next reset and issuing agency, among other factors to ensure that estimated fair values are appropriate. The Company’s analysis of pricing information obtained also includes comparing the data received to other available information, such as other independent pricing services, repurchase agreement pricing, discounted cash flow analysis, matrix pricing, option adjusted spread models and other fundamental analysis of observable market factors. In addition to agency securities, the Company at times invests in MBS not issued or guaranteed by a U.S. Government agency or a U.S. Government-sponsored entity (“non-agency” securities). The following table presents the composition of the Company’s MBS and agency CRT securities portfolio at March 31, 2016. Amortized Cost Gross Unrealized Loss Gross Unrealized Gain Estimated Fair Value Agency MBS Fannie Mae Certificates ARMs $ 6,680,662 $ (4,469 ) $ 94,897 $ 6,771,090 Fixed-Rate - - - - Total Fannie Mae 6,680,662 (4,469 ) 94,897 6,771,090 Freddie Mac Certificates ARMs 5,234,739 (7,041 ) 46,783 5,274,481 Fixed-Rate - - - - Total Freddie Mac 5,234,739 (7,041 ) 46,783 5,274,481 Total Agency MBS $ 11,915,401 $ (11,510 ) $ 141,680 $ 12,045,571 Agency CRT Securities $ 111,217 $ (659 ) $ 463 $ 111,021 The following table presents the composition of the Company’s MBS and agency CRT securities portfolio at December 31, 2015. Amortized Cost Gross Unrealized Loss Gross Unrealized Gain Estimated Fair Value Agency MBS Fannie Mae Certificates ARMs $ 7,392,021 $ (14,465 ) $ 102,247 $ 7,479,803 Fixed-Rate 1,005,458 (8,148 ) - 997,310 Total Fannie Mae 8,397,479 (22,613 ) 102,247 8,477,113 Freddie Mac Certificates ARMs 5,806,425 (22,551 ) 41,243 5,825,117 Fixed-Rate - - - - Total Freddie Mac 5,806,425 (22,551 ) 41,243 5,825,117 Total Agency MBS $ 14,203,904 $ (45,164 ) $ 143,490 $ 14,302,230 Agency CRT Securities $ 111,217 $ (1,830 ) $ - $ 109,387 The components of the combined carrying value the Company’s MBS and agency CRT securities at March 31, 2016 and December 31, 2015 are presented below: March 31, December 31, 2016 2015 Principal balance $ 11,717,636 $ 13,935,533 Unamortized premium 311,245 381,851 Unamortized discount (2,263 ) (2,263 ) Gross unrealized gains 142,143 143,490 Gross unrealized losses (12,169 ) (46,994 ) Carrying value/estimated fair value $ 12,156,592 $ 14,411,617 The following table presents components of interest income on the Company’s MBS and agency CRT securities for the three months ended March 31, 2016 and 2015. Three Months Ended March 31 2016 2015 Coupon interest $ 86,648 $ 113,478 Net premium amortization (18,943 ) (27,116 ) Interest income $ 67,705 $ 86,362 Gross gains and losses from sales of available-for-sale MBS and agency CRT securities for the three months ended March 31, 2016 and 2015 were as follows: Three Months Ended March 31 2016 2015 Gross gains $ 5,894 $ 16,510 Gross losses (1,607 ) (57 ) Net gain (loss) $ 4,287 $ 16,453 The Company monitors the performance and market value of its available-for-sale MBS portfolio on an ongoing basis, and on a quarterly basis reviews its MBS for impairment. At March 31, 2016 and December 31, 2015, the Company had the following MBS in a loss position as presented in the following two tables: As of March 31, 2016 Less than 12 Months Greater than 12 Months Total Fair Market Unrealized Fair Market Unrealized Fair Market Unrealized Value Loss Value Loss Value Loss Fannie Mae Certificates ARMs 775,829 $ (2,022 ) $ 503,197 $ (2,447 ) $ 1,279,026 $ (4,469 ) Fixed-Rate - - - - - - Freddie Mac Certificates ARMs 620,483 (1,830 ) 889,689 (5,211 ) 1,510,172 (7,041 ) Fixed-Rate - - - - - - Total temporarily impaired securities $ 1,396,312 $ (3,852 ) $ 1,392,886 $ (7,658 ) $ 2,789,198 $ (11,510 ) Number of securities in an unrealized loss position 84 57 141 As of December 31, 2015 Less than 12 Months Greater than 12 Months Total Fair Market Unrealized Fair Market Unrealized Fair Market Unrealized Value Loss Value Loss Value Loss Fannie Mae Certificates ARMs 1,712,043 $ (7,922 ) $ 511,884 $ (6,542 ) $ 2,223,927 $ (14,464 ) Fixed-Rate 997,310 (8,148 ) - - 997,310 (8,148 ) Freddie Mac Certificates ARMs 1,814,773 (9,246 ) 861,198 (13,306 ) 2,675,971 (22,552 ) Fixed-Rate - - - - - - Total temporarily impaired securities $ 4,524,126 $ (25,316 ) $ 1,373,082 $ (19,848 ) $ 5,897,208 $ (45,164 ) Number of securities in an unrealized loss position 223 52 275 The Company did not make the decision to sell the above MBS as of March 31, 2016 and December 31, 2015, nor was it deemed more likely than not the Company would be required to sell these securities before recovery of their amortized cost basis. The unrealized losses on the above securities are the result of market interest rates and are not considered to be credit related. No impairment losses were recognized during the periods presented herein. The contractual maturity of the Company’s MBS ranges from 15 to 30 years. Because of prepayments on the underlying mortgage loans, the actual weighted-average life is expected to be significantly less than the stated maturity. |
Mortgage Loans
Mortgage Loans | 3 Months Ended |
Mar. 31, 2016 | |
Mortgage Loans | |
Mortgage-Backed Securities | 6. Mortgage Loans The Company classifies its mortgage loans held for investment and mortgage loans held for investment in securitization trusts as Level 3 in the fair value hierarchy. Prices for these instruments are obtained from third party pricing providers which use significant unobservable inputs in their valuations. These valuations are prepared on an instrument-by-instrument basis and primarily use discounted cash flow models that include unobservable market data inputs including prepayment speeds, delinquency levels, and credit losses. Model valuations are then compared to external indicators such as market price quotations from market makers for similar instruments and recent transactions in the same or similar instruments. These valuations may also be discounted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the third-party pricing provider in the absence of market information. The valuation of these mortgage loans requires significant judgment by the third-party pricing provider and management. Assumptions used by the third-party pricing provider due to lack of observable inputs may significantly impact the resulting fair value and therefore the Company’s financial statements. Management reviews the valuations received from the third-party pricing provider. As part of this review, prices are compared against other pricing along with internal valuation expertise to ensure assumptions and pricing is reasonable. Mortgage Loans Held for Investment, at Fair Value The Company purchases individual jumbo whole mortgage loans with the intention of securitizing them. These loans are considered held for investment because the Company expects to consolidate the securitization trusts and are accounted for under the fair value option. See Note 2 for further discussion. As of March 31, 2016, the unpaid principal balance and the fair value of the Company’s mortgage loans held for investment were $148,691 and $152,197, respectively. As of December 31, 2015, the unpaid principal balance and the fair value of the Company’s mortgage loans held for investment were $114,997 and $116,857, respectively. The following table provides the geographic distribution of mortgage loans held for investment at March 31, 2016 and December 31, 2015, based on the unpaid principal balance. March 31, 2016 December 31, 2015 California 66 % 68 % Washington 7 % 6 % Texas 5 % 5 % Illinois 3 % 3 % All other 19 % 18 % Total 100 % 100 % The following table provides additional data on the Company’s mortgage loan portfolio at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Portfolio Portfolio Portfolio Range Weighted Average Portfolio Range Weighted Average Unpaid principal balance $110 to $1,980 $ 778 $116 to $1,987 $ 804 Interest rate 2.63% to 4.00% 3.50% 2.63% to 4.00% 3.48% Maturity 11/2044 to 4/2046 11/2045 11/2044 to 2/2046 10/2045 FICO score at loan origination 700 to 811 762 701 to 811 763 Loan-to-value ratio at loan origination 20% to 80% 71% 20% to 80% 71% No loans were 90 days or more past due and none were on nonaccrual status at March 31, 2016 or December 31, 2015. The following table presents the rollforward of mortgage loans held for investment for the periods presented. Three Months Ended March 31 2016 2015 Fair value, beginning of period $ 116,857 $ 31,460 Purchased 40,855 95,769 Repaid (6,428 ) (4,172 ) Change in fair value 913 244 Fair value, end of period $ 152,197 $ 123,301 None of the change in the fair value of the mortgage loans was attributable to changes in credit risk. The portion of the change in fair value included in the Company’s consolidated statements of income that were attributable to mortgage loan held for investment that were held at March 31, 2016 and December 31, 2015 was $1,034 and $261, respectively. The following table provides information about the significant unobservable inputs used in the Level 3 valuation of the Company’s mortgage loans held for investment at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Weighted- Weighted- Unobservable Input Range Average Range Average Discount rate 2.8% - 3.1% 3.0 % 3.0% - 3.5% 3.3 % Conditional refinance rate 14.6% - 21.5% 17.4 % 13.6% - 21.7% 16.4 % Default rate 0% - 1.9% 0.4 % 0% - 2.1% 0.7 % Loss severity 10.0% - 21.4% 13.3 % 10.5% - 22.2% 14.9 % A significant increase or decrease in any of the above unobservable inputs, in isolation, would likely result in a significantly lower or higher fair value measurement. Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value As discussed in Notes 2 and 3, the Company consolidates a CFE that owns whole mortgage loans it purchased from a subsidiary of the Company. These securitized mortgage loans are legally isolated from the Company, are beyond the reach of the Company’s creditors, and may only be used to settle obligations of the CFE. These loans are carried at fair value as a result of a fair value option election. As of March 31, 2016, the unpaid principal balance and the fair value of the Company’s mortgage loans held for investment in securitization trusts was $204,766 and $209,418, respectively. As of December 31, 2015, the unpaid principal balance and the fair value of the Company’s mortgage loans held for investment in securitization trusts was $223,205 and $226,908, respectively. The following table provides the geographic distribution of mortgage loans held for investment in securitization trusts at March 31, 2016 and December 31, 2015 based on the unpaid principal balance. March 31, 2016 December 31, 2015 California 49 % 49 % Texas 11 % 10 % Illinois 7 % 6 % Washington 5 % 5 % All other 28 % 30 % Total 100 % 100 % The following table provides additional data on mortgage loans held for investment in in securitization trusts at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Portfolio Portfolio Portfolio Range Weighted Average Portfolio Range Weighted Average Unpaid principal balance $220 to $1,926 $ 731 $291 to $1,933 $ 742 Interest rate 2.50% to 4.13% 3.38% 2.50% to 4.13% 3.38% Maturity 6/2044 to 11/2045 3/2045 6/2044 to 11/2045 3/2045 FICO score at loan origination 700 to 813 769 700 to 815 769 Loan-to-value ratio at loan origination 24% to 80% 69% 24% to 80% 69% No loans were 90 days or more past due and none were on nonaccrual status at March 31, 2016 or December 31, 2015. The following table presents the rollforward of mortgage loans held for investment in securitization trusts for the period presented. Three Months Ended March 31 2016 2015 Fair value, beginning of period $ 226,908 $ - Purchased - - Repaid (18,439 ) - Change in fair value 949 - Fair value, end of period $ 209,418 $ - None of the change in the fair value of these mortgage loans was attributable to changes in credit risk. The portion of the change in fair value included in the Company’s consolidated statements of income that were attributable to mortgage loan held for investment in securitization trusts that were held at March 31, 2016 and December 31, 2015 was $1,238 and $0, respectively, adjusted for the effects of the transfer of these loans into the CFE. The following table provides information about the significant unobservable inputs used in the Level 3 valuation of the Company’s mortgage loans held for investment in securitization trusts at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Weighted- Weighted- Unobservable Input Range Average Range Average Discount rate 2.7% - 3.2% 3.0 % 2.2% - 3.6% 3.3 % Conditional refinance rate 13.9% - 22.3% 17.2 % 0.0% - 21.3% 16.4 % Default rate 0% - 1.8% 0.4 % 0.0% - 2.0% 0.5 % Loss severity 10.0% - 22.8% 13.4 % 0.0% - 22.9% 14.4 % A significant increase or decrease in any of the above unobservable inputs, in isolation, would likely result in a significantly lower or higher fair value measurement. Mortgage Loans Held for Sale, at Fair Value The Company purchases individual whole mortgage loans with the intention of selling them to Ginnie Mae for inclusion in securitizations. As of March 31, 2016, the unpaid principal balance and the fair value of the Company’s mortgage loans held for sale were $25,676 and $25,919, respectively. As of December 31, 2015, the unpaid principal balance and the fair value of the Company’s mortgage loans held for sale were $16,629 and $17,542, respectively. The Company did not invest in mortgage loans held for sale prior to the acquisition of Pingora on August 31, 2015. The Company classifies its mortgage loans held for sale as Level 2 in the fair value hierarchy. Prices for these instruments are obtained from third-party pricing providers and other applicable market data. If observable market prices are not available or insufficient to determine fair value due principally to illiquidity in the marketplace, then fair value is based upon cash flow models that are primarily based on observable market-based inputs but may also include unobservable market data inputs, including prepayment speeds, delinquency levels, and credit losses. No unobservable inputs were significant to the valuation of these loans as of March 31, 2016 or December 31, 2015. |
Mortgage Servicing Rights
Mortgage Servicing Rights | 3 Months Ended |
Mar. 31, 2016 | |
Mortgage Servicing Rights | |
Mortgage-Backed Securities | 7. Mortgage Servicing Rights In connection with its acquisition of Pingora, as discussed in Note 1, the Company entered agreements with PLS to begin investing in MSR during the third quarter of 2015. As discussed in Note 2, MSR are carried at fair value. The following table presents the rollforward of MSR for the three months ended March 31, 2016. Three Months Ended March 31 2016 2015 Fair value, beginning of period $ 269,926 $ - Purchases 84,361 - Change in fair value due to: Changes in valuation inputs or assumptions (30,999 ) - Other changes, including realization of cash flows (7,112 ) - Fair value, end of period $ 316,176 $ - The Company classifies its MSR as Level 3 in the fair value hierarchy. Prices for these instruments are obtained from internal models and third-party pricing providers, both of which use significant unobservable inputs in their valuations. These valuations are prepared on an instrument-by-instrument basis and primarily use discounted cash flow models that include unobservable market data inputs including prepayment rates, delinquency levels, and discount rates. Model valuations are then compared to external indicators such as market price quotations from market makers for similar instruments and recent transactions in the same or similar instruments. These valuations may also be discounted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the third-party pricing provider in the absence of market information. The valuation of MSR requires significant judgment by management and the third-party pricing provider. Assumptions used for which there is a lack of observable inputs may significantly impact the resulting fair value and therefore the Company’s financial statements. Management reviews the valuations received from the third-party pricing provider and uses them as a point of comparison to its internally modeled values. As part of this review, prices are compared against other pricing indicators to ensure assumptions and pricing are reasonable. The following table provides information about the significant unobservable inputs used in the Level 3 valuation of the Company’s MSR at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Weighted- Weighted- Unobservable Input Range Average Range Average Discount rate 10%-15% 10.4 % 10%-15% 10.4 % Prepayment rate 4.6%-29.6% 11.9 % 5.6%-30.7% 11.9 % Delinquency rate 0.3%-13.4% 1.6 % 0%-6.03% 1.4 % Annual cost to service $77-$112 $ 87 $80-$101 $ 88 The Company’s mortgage servicing income consisted of the following for the three months ended March 31, 2016: Three Months Ended March 31 2016 2015 Servicing income $ 18,474 $ - Ancillary income 408 - Servicing income $ 18,882 $ - A decline in interest rates could lead to higher-than-expected prepayments of mortgages underlying the Company’s MSR, which would result in a decline in the value of the MSR. The Company’s investment in MBS mitigates the impact of such a decline on the Company’s total portfolio as a decline in interest rates generally leads to an increase in the value of the Company’s MBS. |
Other Investments
Other Investments | 3 Months Ended |
Mar. 31, 2016 | |
Schedule Of Investments [Abstract] | |
Other Investments | 8. Other Investments Other investments consisted of the following items as of March 31, 2016 and December 31, 2015: March 31, 2016 December 31, 2015 Short-term investments $ 30,447 $ 30,327 Debt security, held-to-maturity 15,000 15,000 Equity investments 6,017 6,603 Total other investments $ 51,464 $ 51,930 The Company owns both a $15,000 debt security and a $6,000 equity investment in a non-public repurchase lending counterparty. The debt security matures on March 24, 2019. The Company has designated this debt security as a held-to-maturity investment, and as such it is carried at its cost basis. The debt security pays interest quarterly at the rate of 4.0% above the three-month London Interbank Offered Rate (“LIBOR”). The Company estimates the fair value of this debt security to be approximately $14,477 and $14,871 at March 31, 2016 and December 31, 2015, respectively, which was determined by calculating the present value of the projected future cash flows using a discount rate from a similar issuer and security (which represent Level 2 inputs). The Company accounts for the equity investment in the non-public repurchase lending counterparty under the cost method and concluded there have been no identified events or circumstance that would have a significant adverse effect on the fair value of the investment since the purchase date. As a member of the FHLB, the Company also has an equity investment of $17 in FHLB. The amount of investment required is partially dependent on the level of advances taken. This investment is accounted for under the cost method, because the stock can only be sold at its par value, and only to the FHLB. |
Borrowings
Borrowings | 3 Months Ended |
Mar. 31, 2016 | |
Banking And Thrift [Abstract] | |
Borrowings | 9 . Borrowings Repurchase Agreements The Company uses repurchase agreements to finance purchases of securities. These repurchase agreements are collateralized by the Company’s securities and typically bear interest at rates that are closely related to LIBOR. At March 31, 2016 and December 31, 2015, the Company had repurchase indebtedness outstanding with 26 and 25 counterparties with a weighted average remaining contractual maturity of 0.8 and 0.9 months, respectively. The following table presents contractual maturity information regarding the Company’s repurchase agreements: March 31, 2016 December 31, 2015 Weighted Average Weighted Average Balance Contractual Rate Balance Contractual Rate Within 30 days $ 10,669,354 0.66 % $ 12,693,883 0.64 % 30 days to 3 months 500,000 0.90 % - 0.00 % 3 months to 36 months 250,000 0.79 % 750,000 0.75 % $ 11,419,354 0.67 % $ 13,443,883 0.65 % The fair value of securities and accrued interest the Company had pledged under repurchase agreements at March 31, 2016 and December 31, 2015 was $11,676,938 and $14,072,647, respectively. Warehouse Lines of Credit Beginning in 2015, the Company has access to warehouse lines of credit with three financial institutions to finance purchases of whole mortgage loans. Borrowings under these facilities are charged interest at a specified margin over the one-month LIBOR interest rate. At March 31, 2016, the Company has outstanding borrowings with two counterparties totaling $63,615 with maturity dates between June 2016 and December 2016. The Company has pledged mortgage loans with a fair value of $67,685 as collateral pursuant to these lines of credit. The borrowing limit under these lines of credit is $300 million. As of December 31, 2015, the Company had outstanding borrowings of $60,096 under these lines of credit. Federal Home Loan Bank Advances As discussed in Note 2, during 2015, a subsidiary of the Company became a member of the FHLB. As of March 31, 2016 and December 31, 2015, the Company had advances outstanding of $0 and $14,132, respectively. The advances as of December 31, 2015 were secured by the pledge of agency MBS with a fair value of $15,714. The Company’s aggregate borrowing capacity with the FHLB is $1 billion. Unused capacity may be adjusted at the sole discretion of the FHLB. The ability to borrow from the FHLB is subject to the Company’s continued creditworthiness, pledging of sufficient eligible collateral to secure advances, and compliance with certain covenants. Each advance requires approval by the FHLB and is secured by collateral in accordance with the FHLB’s credit and collateral guidelines, which the FHLB may revise from time to time. Based on the current status of recent FHFA rulemaking, the Company will need to surrender its membership in the FHLB in 2016. Collateralized Borrowing in Securitization Trusts As discussed in Notes 2 and 3, the Company consolidates a CFE that has issued MBS backed by mortgage loans. The portion of the CFE’s collateralized borrowings that is not eliminated in consolidation is carried at fair value as a result of a fair value option election. Investors in the collateralized borrowings issued by the CFE have recourse against the assets within the CFE, but have no recourse against the Company itself. As of March 31, 2016, the collateralized borrowings has an outstanding principal amount of $60,567 and a weighted-average interest rate of 2.75%. As of December 31, 2015, the collateralized borrowings has an outstanding principal amount of $58,052 and a weighted-average interest rate of 2.75%. The final scheduled distribution date thereof is November 2045. The actual maturity of the collateralized borrowing is based on the principal repayments of the underlying mortgage loans. As a result, the actual maturity of the borrowing may be substantially sooner than the final scheduled distribution date. |
Derivatives and Other Hedging I
Derivatives and Other Hedging Instruments | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivatives and Other Hedging Instruments | 10 . Derivatives and Other Hedging Instruments In connection with the Company’s risk management strategy, the Company hedges a portion of its interest rate risk by entering into derivative contracts. The Company may enter into agreements for interest rate swaps, interest rate swaptions, interest rate cap or floor contracts and futures or forward contracts. The Company’s risk management strategy attempts to manage the overall risk of the portfolio, reduce fluctuations in book value and generate additional income distributable to shareholders. For additional information regarding the Company’s derivative instruments and its overall risk management strategy, please refer to the discussion of derivative instruments in Note 2. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate swaptions are based on the fair value of the underlying interest rate swaps that the Company has the option to enter, and are based on inputs from the counterparty and pricing models. The fair value of Futures Contracts is based on quoted prices from the exchange on which they trade. The fair value of MBS forward purchase commitments was determined using the same methodology as MBS as described in Note 5. The fair value of forward purchase commitments for whole loans was determined using the same methodologies as mortgage loans as described in Note 6. The Company applies fallout assumptions to the third-party pricing of forward purchase commitments regarding loans that the counterparties may not successfully issue. The table below presents the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of March 31, 2016 and December 31, 2015, respectively. Derivative Instruments Balance Sheet Location March 31, 2016 December 31, 2015 Interest rate swaps and swaptions Derivative assets $ 6 $ 2,031 Futures Contracts Derivative assets - 693 Forward purchase commitments - MBS Derivative assets 20,150 165 Forward purchase commitments - mortgage loans Derivative assets 51 25 $ 20,207 $ 2,914 Interest rate swaps Derivative liabilities $ 11,440 $ 6,802 Futures Contracts Derivative liabilities 407,842 286,058 Forward purchase commitments - MBS Derivative liabilities - 32,373 $ 419,282 $ 325,233 Interest Rate Swaps and Swaptions The Company finances its activities primarily through repurchase agreements, which are generally settled on a short-term basis, usually from one to three months. At each settlement date, the Company refinances each repurchase agreement at the market interest rate at that time. Since the Company is exposed to interest rates on its borrowings that change on a short-term basis, it enters into hedging agreements to mitigate the effect of these changes. Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The effect of these hedges is to synthetically lockup interest rates on a portion of the Company’s repurchase agreements for the terms of the interest rate swaps. Although the Company’s objective is to hedge the risk associated with changing repurchase agreement rates, the Company’s interest rate swaps are benchmark interest rate swaps which perform with reference to LIBOR. Therefore, the Company remains at risk to the variability of the spread between repurchase agreement rates and LIBOR interest rates. Changes in the fair value of the Company’s interest rate swaps are recorded in “Net gain (loss) on derivative instruments” in the consolidated statements of income. Monthly net cash settlements under the interest rate swaps are also recorded in “Net gain (loss) on derivative instruments.” The volume of activity for the Company’s interest rate swap instruments is shown in the table below. Notional Value Three Months Ended March 31 2016 2015 Beginning of period $ 4,600,000 $ 8,300,000 Expirations and terminations (600,000 ) (1,000,000 ) End of period $ 4,000,000 $ 7,300,000 Information regarding the Company’s interest rate swaps as of March 31, 2016 and December 31, 2015 follows. March 31, 2016 December 31, 2015 Wtd. Avg. Wtd. Avg. Remaining Wtd. Avg. Remaining Wtd. Avg. Notional Term Fixed Interest Notional Term Fixed Interest Maturity Amount in Months Rate Amount in Months Rate 12 months or less $ 2,400,000 6 0.95% $ 2,400,000 6 0.92% Over 12 months to 24 months 1,600,000 17 0.87% 1,800,000 17 0.89% Over 24 months to 36 months - - - 400,000 26 0.96% Total $ 4,000,000 11 0.92% $ 4,600,000 12 0.91% A swaption is a derivative instrument that gives the holder the option to enter into a pay-fixed interest rate swap in the future, if it so desires. As of March 31, 2016, the Company had four interest rate swaptions outstanding, which were entered into during 2015: Options Underlying Swaps Swaptions Original Cost Fair Value Wtd. Avg. Months to Expiration Notional Wtd. Avg. Fixed Pay Rate Receive Rate Wtd. Avg. Term (Years) Fixed payer $ 6,813 $ 6 4 $ 2,000,000 3.35% 3 month LIBOR 6 As of December 31, 2015, the Company had six interest rate swaptions outstanding: Options Underlying Swaps Swaptions Original Cost Fair Value Wtd. Avg. Months to Expiration Notional Wtd. Avg. Fixed Pay Rate Receive Rate Wtd. Avg. Term (Years) Fixed payer $ 10,813 $ 727 6 $ 3,065,000 3.23% 3 month LIBOR 6 During the first quarter of 2015, the Company terminated swaptions held as of December 31, 2014 and received proceeds of $2,049. Eurodollar Futures Contracts The Company uses Futures Contracts to 1) synthetically replicate an interest rate swap, or 2) offset the changes in value of its forward purchases of certain MBS and mortgage loans. The following table presents the composition of the Company’s Futures Contracts as of March 31, 2016 and December 31, 2015, respectively. Fair Value March 31, 2016 December 31, 2015 Futures Contracts designed to replicate swaps $ (407,408 ) $ (285,711 ) Futures Contracts designed to hedge value changes in forward purchases (434 ) 346 Total fair value of Futures Contracts $ (407,842 ) $ (285,365 ) The volume of activity for the Company’s Futures Contracts is shown in the table below. Number of Contracts Three Months Ended March 31 2016 2015 Beginning of period 108,824 130,074 New positions opened 1,773 20,518 Early settlements (5,427 ) (13,268 ) Settlements at maturity (9,712 ) (8,611 ) End of period 95,458 128,713 Each Futures Contract embodies $1 million of notional value and corresponds to a Eurodollar contract for a specific three month timeframe. The effective dates of the Eurodollar contracts underlying the Company’s Futures Contracts range from 2016 through 2021. The Company has not designated its Futures Contracts as hedges for accounting purposes. As a result, realized and unrealized changes in fair value thereon are recognized in net income in the period in which the changes occur. See “Financial Statement Presentation” below for quantification of gains and losses on Futures Contracts for the three months To Be Announced Securities Purchases and Mortgage Loan Commitments The Company purchases certain of its investment securities in the forward market. The Company purchases ARM TBA contracts and fixed-rate TBA contracts from dealers. ARM TBA contracts are not a frequently-traded security and are generally used to acquire MBS for the portfolio. Fixed-rate TBA contracts are a highly liquid security, and may be physically settled, net settled or traded as an investment. The Company also has commitments with various mortgage origination companies to purchase their production as it becomes securitized. Forward purchases do not qualify for trade date accounting and are considered derivatives for financial statement purposes, as described in Note 2. The net fair value of the forward commitment is reported on the balance sheet as an asset or liability. Whether the unrealized gain (or loss) is recognized in net income or other comprehensive income depends on whether or not the commitment has been designated as an accounting hedge, as discussed in Note 2. Forward purchase commitments on ARMs are designated as all-in-one cash flow hedges and the related unrealized gain or loss is recorded in other comprehensive income. Unrealized gains and losses on forward purchase commitments on mortgage loans and fixed-rate TBA dollar roll securities are recorded in net income. The following table summarizes the Company’s forward purchase commitments as of March 31, 2016. Face / UPB Cost Fair Market Value Net Asset (Liability) ARMs - originators $ 173,605 $ 177,117 $ 178,699 $ 1,582 Fixed-rate TBA dollar roll securities 3,617,000 3,739,204 3,757,772 18,568 Whole mortgage loans 14,010 14,003 14,054 51 Total purchase commitments $ 3,804,615 $ 3,930,324 $ 3,950,525 $ 20,201 The following table summarizes the Company’s forward purchase commitments as of December 31, 2015. Face / UPB Cost Fair Market Value Net Asset (Liability) ARMs - originators $ 145,246 $ 147,749 $ 147,914 $ 165 Fixed-rate TBA dollar roll securities 2,655,000 2,736,748 2,704,375 (32,373 ) Whole mortgage loans 26,523 26,700 26,725 25 Total purchase commitments $ 2,826,769 $ 2,911,197 $ 2,879,014 $ (32,183 ) Financial Statement Presentation The Company does not use either offsetting or netting to present any of its derivative assets or liabilities. The following table shows the gross amounts associated with the Company’s derivative financial instruments and the impact if netting were used as of March 31, 2016. Assets/(Liabilities) Cash Collateral Posted (Held) Net Asset/(Liability) Interest rate swaps $ - $ - $ - Interest rate swaptions 6 (25 ) (19 ) Futures contracts - - - Forward purchase commitments 20,201 - 20,201 Interest rate swaps $ (11,440 ) $ 16,518 $ 5,078 Futures contracts (407,842 ) 447,624 39,782 Forward purchase commitments - 5,148 5,148 The following table shows the gross amounts associated with the Company’s derivative financial instruments and the impact if netting were used as of December 31, 2015. Assets/(Liabilities) Cash Collateral Posted (Held) Net Asset/(Liability) Interest rate swaps 1,304 - 1,304 Interest rate swaptions 727 (1,106 ) (379 ) Futures contracts 693 - 693 Forward purchase commitments 190 - 190 Interest rate swaps (6,802 ) 14,626 7,824 Futures contracts (286,058 ) 335,084 49,026 Forward purchase commitments (32,373 ) 25,687 (6,686 ) The following table shows the components of “Loss on derivative instruments, net” for the three months ended March 31, 2016 and 2015. Three Months Ended March 31 2016 2015 Interest rate swaps – net realized and unrealized gains $ (5,942 ) $ 1,116 Interest rate swaptions – net realized and unrealized losses (721 ) (3,027 ) Interest rate swaps – monthly net settlements (5,411 ) (21,423 ) Futures Contracts – fair value adjustments (122,477 ) (94,016 ) Futures Contracts – losses from maturities (18,630 ) (7,493 ) Futures Contracts – other realized losses (9,884 ) (22,374 ) Mortgage loan purchase commitments - fair value adjustments (20 ) 331 TBA dollar roll income 17,602 23,155 TBA dollar rolls – net realized and unrealized gains (losses) 52,989 20,946 Net gain (loss) on derivative instruments $ (92,494 ) $ (102,785 ) See Note 2 for discussion of TBA dollar roll transactions and TBA dollar roll income. The table below presents the effect of the interest rate swaps that were previously designated as cash flow hedges on the Company’s AOCI for the three months ended March 31, 2016 and 2015. Three Months Ended March 31 2016 2015 Beginning balance $ 673 $ (30,042 ) Reclassification of net losses to the income statement 1,376 13,438 Ending balance $ 2,049 $ (16,604 ) During the next 12 months, the Company estimates that $109 of net deferred gains will be reclassified out of AOCI as a decrease to interest expense. Credit-risk-related Contingent Features The Company has agreements with its interest rate swap and swaption counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company has agreements with certain of its derivative counterparties that contain a provision where if the Company’s GAAP shareholders’ equity declines by a specified percentage over a specified time period, or if the Company fails to maintain a minimum shareholders’ equity threshold, then the Company could be declared in default on its derivative obligations. The Company also has agreements with several of those counterparties that contain provisions regarding maximum leverage ratios. At March 31, 2016, the Company was in compliance with these requirements. As of March 31, 2016, the fair value of derivatives in a net liability position related to these agreements was $11,440. The Company has collateral posting requirements with each of its counterparties and all interest rate swap agreements were fully collateralized as of March 31, 2016. |
Capital Stock
Capital Stock | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Capital Stock | 11. Capital Stock On June 18, 2013, the Company’s board of directors authorized a stock repurchase program (the “Repurchase Program”) to acquire up to 10,000,000 shares of the Company’s common stock. For the three months ended March 31, 2016, the Company repurchased 1,273,625 shares of common stock under the Repurchase Program in at-the-market transactions at a total cost of $14,776. The Company did not repurchase any shares during the three months ended March 31, 2015. As of March 31, 2016, there are 4,697,645 shares of repurchase capacity available under the Repurchase Program. |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per Share | 12 . Earnings per Share The following table details the Company’s calculation of earnings per share for the three months ended March 31, 2016 and 2015. Three Months Ended March 31 2016 2015 Basic earnings (loss) per share: Net income (loss) $ (71,165 ) $ (34,535 ) Less preferred stock dividends (5,480 ) (5,481 ) Net income (loss) available to common shareholders $ (76,645 ) $ (40,016 ) Weighted average shares 94,850,791 96,783,199 Basic earnings (loss) per share $ (0.81 ) $ (0.41 ) Diluted earnings (loss) per share: Net income (loss) $ (71,165 ) $ (34,535 ) Less preferred stock dividends for antidilutive shares (5,480 ) (5,481 ) Net income (loss) available to common shareholders $ (76,645 ) $ (40,016 ) Weighted average shares 94,850,791 96,783,199 Potential dilutive shares from exercise of stock options - - Diluted weighted average shares 94,850,791 96,783,199 Diluted earnings (loss) per share $ (0.81 ) $ (0.41 ) There were no potentially dilutive shares for any of the periods presented. |
Transactions with Related Parti
Transactions with Related Parties | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Transactions with Related Parties | 13. Transactions with Related Parties Management Fees The Company is externally managed by ACA pursuant to a management agreement (the “Management Agreement”). All of the Company’s executive officers are also employees of ACA. ACA manages the Company’s day-to-day operations, subject to the direction and oversight of the Company’s board of directors which includes six independent directors. The Management Agreement expires on February 23, 2017 and is thereafter automatically renewed for an additional one-year term unless terminated under certain circumstances. ACA must be provided 180 days prior notice of any such termination and will be paid a termination fee equal to four times the average annual management fee earned by ACA during the two year period immediately preceding termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. See Note 15 for information regarding a subsequent related to the Management Agreement. Under the terms of the Management Agreement, the Company reimburses ACA for certain operating expenses of the Company that are borne by ACA. ACA is entitled to receive a management fee payable monthly in arrears in an amount equal to 1/12th of an amount determined as follows: · for the Company’s equity up to $250 million, 1.50% (per annum) of equity; plus · for the Company’s equity in excess of $250 million and up to $500 million, 1.10% (per annum) of equity; plus · for the Company’s equity in excess of $500 million and up to $750 million, 0.80% (per annum) of equity; plus · for the Company’s equity in excess of $750 million, 0.50% (per annum) of equity. For purposes of calculating the management fee, equity is defined as the value, computed in accordance with GAAP, of shareholders’ equity, adjusted to exclude the effects of unrealized gains or losses. The following table presents amounts incurred for management fee, reimbursable expenses and share-based compensation expense related to the restricted common shares granted to management. Three Months Ended March 31 2016 2015 Management fee $ 3,982 $ 4,095 Reimbursable expenses 1,343 1,293 Total $ 5,325 $ 5,388 Share-based compensation $ 1,293 $ 1,045 None of the reimbursement payments were specifically attributable to the compensation of the Company’s executive officers. Reimbursable expenses above includes rent paid by ACA for the Company’s office space. As of October 2014, the Company’s office space is rented from a real estate partnership in which some of the Company’s executive officers have a financial interest, at an annual rate of approximately $300. At March 31, 2016 and December 31, 2015, the Company owed ACA $3,806 and $3,063, respectively, for the management fee and reimbursable expenses, which is included in other liabilities. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income | 1 4 . Accumulated Other Comprehensive Income The Company records unrealized gains and losses on its MBS and its forward purchase commitments securities as described in Note 5 and Note 10. The Company ceased hedge accounting for its interest rate swaps effective September 30, 2013. Beginning October 1, 2013, changes in the fair value of interest rate swaps are recorded directly to net income. The cumulative net unrealized gains and losses on interest rate swaps in AOCI as of September 30, 2013 are being amortized to net income as the hedged forecasted transactions occur. The following table rolls forward the components of AOCI, including reclassification adjustments, for the three months ended March 31, 2016. Unrealized gain/(loss) on available for sale MBS Unrealized gain/(loss) on unsettled MBS Unrealized gain/(loss) on other investments Unrealized gain/(loss) on derivative instruments Total Accumulated other comprehensive income (loss) at January 1, 2016 $ 98,368 $ (1 ) $ (547 ) $ 838 $ 98,658 Other comprehensive income (loss) before reclassification 36,025 54 94 1,582 37,755 Balance Sheet Reclassification: Amount reclassified to MBS available for sale - 1 - (165 ) (164 ) Income Statement Reclassification: Amounts reclassified to net gain on the sale of MBS (4,287 ) - - - (4,287 ) Amounts reclassified to interest expense - - - 1,376 1,376 Net current period other comprehensive income (loss) 31,738 55 94 2,793 34,680 Accumulated other comprehensive income (loss) at March 31, 2016 $ 130,106 $ 54 $ (453 ) $ 3,631 $ 133,338 The following table rolls forward the components of AOCI, including reclassification adjustments, for the three months ended March 31, 2015. Unrealized gain/(loss) on available for sale MBS Unrealized gain/(loss) on unsettled MBS Unrealized gain/(loss) on other investments Unrealized gain/(loss) on derivative instruments Total Accumulated other comprehensive income (loss) at January 1, 2015 $ 232,240 $ 42 $ (595 ) $ (25,922 ) $ 205,765 Other comprehensive income before reclassification 90,119 794 129 4,848 95,890 Balance Sheet Reclassification: Amount reclassified to MBS available for sale - (42 ) - (4,120 ) (4,162 ) Income Statement Reclassification: Amounts reclassified to net gain on the sale of MBS (16,453 ) - - - (16,453 ) Amounts reclassified to interest expense - - - 13,438 13,438 Net current period other comprehensive income 73,666 752 129 14,166 88,713 Accumulated other comprehensive income (loss) at March 31, 2015 $ 305,906 $ 794 $ (466 ) $ (11,756 ) $ 294,478 |
Subsequent Event
Subsequent Event | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Event | 1 5 . Subsequent Event Merger Agreement On April 10, 2016, the Company, Annaly and Ridgeback Merger Sub Corporation, a Maryland corporation and a wholly owned subsidiary of Annaly (“Purchaser”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, and upon the terms and conditions thereof, Purchaser will commence an exchange offer (the “Offer”) to purchase all of the Company’s issued and outstanding shares of the Company’s common stock. In the Offer, holders of the Company’s common stock will have the option to elect from among three forms of consideration for each share (subject to proration as described below): · $5.55 in cash and 0.9894 shares of Annaly common stock (the “Mixed Consideration Option”); · $15.85 in cash (the “Cash Consideration Option”); or · 1.5226 shares of Annaly common stock (the “Stock Consideration Option”). Holders of the Company’s common stock who do not make a valid election will receive the Mixed Consideration Option for their shares. Holders who elect to receive the Cash Consideration Option or Stock Consideration Option will be subject to proration to ensure that approximately 65% of the aggregate consideration paid to holders of the Company’s common stock in the Offer will be paid in the form of Annaly common stock and approximately 35% of the aggregate consideration paid to holders of the Company’s common stock in the Offer will be paid in cash. It is a condition to the closing of the Offer that one share more than two-thirds of the outstanding shares of the Company’s common stock, when added to any shares of the Company’s common stock owned by Annaly and Purchaser, are validly tendered and not validly withdrawn. In addition to the minimum tender condition, completion of the Offer is subject to the satisfaction or waiver of a number of other customary closing conditions as set forth in the Merger Agreement, including the effectiveness of a registration statement on Form S-4 registering the shares of Annaly common stock to be issued in connection with the Offer and the Merger (as defined below) and the receipt of certain regulatory approvals. Immediately following the closing of the Offer, subject to the terms and conditions set forth in the Merger Agreement, the Company will be merged with and into Purchaser (the “Merger”), with Purchaser surviving the Merger. The Merger Agreement contemplates that, if the Offer is completed, the Merger will be effected pursuant to Section 3-106.1 of the Maryland General Corporation Law, which permits completion of the Merger without a vote of the holders of the Company’s common stock upon the acquisition by Purchaser of at least two-thirds of shares of the Company’s common stock that are then issued and outstanding. In the Merger, holders of the Company’s common stock will be entitled to the same election options as described above for the Offer and subject to the same proration rules. Each share of the Company’s 7.625% Series A Cumulative Redeemable Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), that is outstanding as of immediately prior to the Merger will be converted into one share of a newly-designated series of Annaly preferred stock, par value $0.01 per share, which Annaly expects will be classified and designated as 7.625% Series E Cumulative Redeemable Preferred Stock, and which will have rights, preferences, privileges and voting powers substantially the same as a Series A Preferred Stock immediately prior to the Merger. In general, each award of restricted shares of the Company’s common stock outstanding at the effective time of the Merger will vest and be cancelled in exchange for the right of the holder thereof to receive the Mixed Consideration Option in respect of each share subject to such award, less applicable tax withholding, except that certain awards of restricted shares of the Company’s common stock shall instead be converted at the effective time of the Merger into restricted stock awards with respect to Annaly common stock on the terms set forth in the Merger Agreement. Prior to closing the transactions contemplated by the Merger Agreement, each of the Company and Annaly will declare a prorated dividend to their respective shareholders with a record and payment date on the last business day prior to the completion of the Offer. Each of the dividends will be prorated based on the number of days that elapsed since the record date for the most recent quarterly dividend paid to the Company and Annaly shareholders, respectively, and the amount of such prior quarterly dividend, as applicable. The Merger Agreement also contains customary representations, warranties and covenants, including, among others, covenants by the Company to conduct its business in all material respects in the ordinary course of business consistent with past practice, subject to certain exceptions, during the period between the execution of the Merger Agreement and the consummation of the Merger. The Company’s board of directors has unanimously agreed, based on the unanimous recommendation of the special committee of the board of directors (composed entirely of independent directors), to recommend that holders of the Company’s common stock tender their shares into the Offer, and has agreed not to solicit alternative transactions, subject to customary exceptions. The Merger Agreement contains certain termination rights by the Company and Annaly. If the Merger Agreement is terminated under specified circumstances, including with respect to a change of the recommendation of the Company’s board of directors, the Company will pay Annaly a termination fee equal to $44,949. Management Agreement Amendment In connection with the execution of the Merger Agreement, the Company and ACA entered into an amendment (the “Management Agreement Amendment”) to the Management Agreement. The Management Agreement Amendment provides that upon the completion of the transactions contemplated by the Merger Agreement, the Management Agreement will terminate, and as a result of such termination, the Company will pay to ACA a termination fee of $45,411. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Use of Estimates | Basis of Presentation and Use of Estimates The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2016. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates affecting the accompanying consolidated financial statements include the valuation of investments and derivative instruments. Certain prior period amounts have been reclassified to conform to the current period classification. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries. The Company also considers the provisions of FASB ASC Topic 810, Consolidation, The Company consolidates a securitization trust, also known as a collateralized financing entity (“CFE”) that purchased individual whole mortgage loans from one of the Company’s subsidiaries and issued MBS that are backed by the loans. PLS, which meets the definition of a business pursuant to GAAP, has also been determined to be a VIE . The Company is required to reassess the consolidation of VIEs quarterly, and changes in facts and circumstances may change the Company’s determination. This could result in a material impact to the Company’s consolidated financial statements during subsequent reporting periods. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The carrying amounts of cash equivalents approximate their fair value. Cash and cash equivalents includes cash pledged to derivative counterparties, which is held in margin accounts at various counterparties as collateral related to interest rate swaps, Eurodollar Futures Contracts (“Futures Contracts”) and forward commitments to purchase to-be-announced (“TBA”) securities. |
Financial Instruments | Financial Instruments The Company considers its cash and cash equivalents, MBS and agency credit risk transfer (“CRT”) securities (settled and unsettled), mortgage loans, forward purchase commitments, debt security held-to-maturity, receivable for securities sold, accrued interest receivable, principal payments receivable, payable for unsettled securities, derivative instruments, borrowings and accrued interest payable to meet the definition of financial instruments. The carrying amount of cash and cash equivalents, receivable for securities sold, accrued interest receivable and payable for unsettled securities approximate their fair value due to the short maturities of these instruments and would be valued using Level 1 inputs. The carrying amount of repurchase agreements is deemed to approximate fair value given their short-term duration and would be valued using Level 2 inputs. See Note 5 for discussion of the fair value of MBS and agency CRT securities. See Note 6 for discussion of the fair value of mortgage loans. See Note 8 for discussion of the fair value of the held-to-maturity debt security. See Note 10 for discussion of the fair value of derivative instruments, including forward purchase commitments. The Company limits its exposure to credit losses on its portfolio of securities by purchasing predominantly agency securities. In addition, the Company’s portfolio is diversified to avoid undue exposure to loan originator, geographic and other types of concentration. The Company manages the risk of prepayments of the underlying mortgages by creating a diversified portfolio with a variety of expected prepayment characteristics. See Note 5 for additional information on MBS. The Company is engaged in various trading and brokerage activities including repurchase agreements, dollar roll transactions, interest rate swap agreements, interest rate swaptions and Futures Contracts in which counterparties primarily include broker-dealers, banks, and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk of loss. The risk of default depends on the creditworthiness of the counterparty and/or issuer of the instrument. It is the Company’s policy to review, as necessary, the credit standing for each counterparty and retain collateral when appropriate. See Note 9 for additional information on repurchase agreements and Note 10 for additional information on dollar roll transactions, interest rate swap agreements, interest rate swaptions and Futures Contracts. |
Mortgage-Backed Securities and Agency CRT Securities | Mortgage-Backed Securities and Agency CRT Securities The Company invests primarily in MBS representing interests in or obligations backed by pools of single-family residential mortgage loans. GAAP requires the Company to classify its investments as either trading, available-for-sale or held-to-maturity securities. Management determines the appropriate classifications of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company currently classifies all of its MBS as available-for-sale. All assets that are classified as available-for-sale are carried at fair value and unrealized gains and losses are included in other comprehensive income (loss). Agency CRT securities are credit risk transfer securities issued by government sponsored entities, which are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors. The Company has elected to account for agency CRT securities under the fair value option, which simplifies accounting for these particular securities due to the potential for embedded derivatives therein. The estimated fair values of MBS and agency CRT securities are determined by management utilizing valuations obtained from independent sources. Security purchase and sale transactions are recorded on the trade date. Gains or losses realized from the sale of securities are included in income and are determined using the specific identification method. Forward purchase commitments to acquire “when issued” or TBA securities are recorded at fair value in accordance with FASB ASC Topic 815, Derivatives and Hedging The Company assesses its available-for-sale securities for other-than-temporary impairment on at least a quarterly basis. When the fair value of an investment is less than its amortized cost at the balance sheet date the impairment is designated as either “temporary” or “other-than-temporary.” In deciding on whether or not a security is other-than-temporarily impaired, the Company uses a two-step evaluation process. First, the Company determines whether it has made any decision to sell a security that is in an unrealized loss position, or, if not, the Company determines whether it is more likely than not that the Company will be required to sell the security prior to recovering its amortized cost basis. If the answer to either of these questions is “yes” then the security is considered other-than-temporarily impaired. |
Mortgage Loans Held for Investment | Mortgage Loans Held for Investment The Company does not originate any loans, but purchases individual prime jumbo adjustable-rate whole mortgage loans with the intention of holding them as investments. In order to finance its investment in the loans, the Company may securitize the loans into MBS not issued or guaranteed by a U.S. Government agency or U.S. Government-sponsored entity. The Company would then purchase the majority of the MBS that the securitization trusts would issue, and would expect to consolidate the trusts pursuant to GAAP. The Company completed such a securitization transaction during 2015. The Company has elected to account for these loans under the fair value option, pursuant to FASB ASC Topic 825, Financial Instruments |
Mortgage Loans Held for Investment in Securitization Trusts | Mortgage Loans Held for Investment in Securitization Trusts As discussed under “Principles of Consolidation,” the Company consolidates a CFE that securitized individual prime jumbo adjustable-rate whole mortgage loans it had purchased from a subsidiary of the Company. These securitized mortgage loans are legally isolated from the Company, are beyond the reach of the Company’s creditors, and may only be used to settle obligations of the CFE. The Company has elected to account for the assets and liabilities of the CFE under the fair value option, pursuant to ASC 825. As a result, mortgage loans held for investment in securitization trusts are carried at fair value. See “Interest Income” below for discussion of the recognition of the interest income on mortgage loans. Paydowns on these mortgage loans are classified as investing cash flows in the consolidated statements of cash flows. See Note 3 for further information regarding the CFE. |
Mortgage Loans Held for Sale | Mortgage Loans Held for Sale The Company purchases certain individual whole loans with the intention of selling them to Ginnie Mae for inclusion in securitizations. The Company has elected to account for these loans under the fair value option, pursuant to ASC 825, because it better reflects the short-term nature of the Company’s holdings in these loans. As a result of electing the fair value option, the mortgage loans are carried at fair value with changes therein reflected in consolidated net income (loss). Changes in fair value are reported in “Net gain (loss) on mortgage loans” in the consolidated statements of income. Cash flows related to mortgage loans held for sale are classified as operating cash flows in the consolidated statements of cash flows. |
Mortgage Servicing Rights | Mortgage Servicing Rights The Company purchases MSR with the intention of holding them as investments. The Company and its subsidiaries do not originate or directly service mortgage loans. Rather, it utilizes duly licensed subservicers to perform substantially all servicing functions for the loans underlying the MSR. The Company has elected to account for its investments in MSR at fair value pursuant to FASB ASC Topic 860, Transfers and Servicing |
Derivative Instruments | Derivative Instruments The Company manages economic risks, including interest rate, liquidity and credit risks, primarily by managing the amount, sources, cost and duration of its debt funding. The objectives of the Company’s risk management strategy are 1) to attempt to mitigate the risk of the cost of its variable rate liabilities increasing during a period of rising interest rates, and 2) to reduce fluctuations in net book value over a range of interest rate scenarios. The principal instruments that the Company uses to achieve these objectives are interest rate swaps and Eurodollar Futures Contracts (“Futures Contracts”). The Company uses Futures Contracts to approximate the economic hedging results achieved with interest rate swaps. The Company does not enter into any of these transactions for speculative purposes. The Company accounts for derivative instruments in accordance with ASC 815, which requires an entity to recognize all derivatives as either assets or liabilities and to measure those instruments at fair value. The accounting for changes in the fair value of derivative instruments depends on whether the instruments are designated and qualify as part of a hedging relationship pursuant to ASC 815. Changes in fair value related to derivatives not in hedge designated relationships are recorded in “Gain (loss) on derivative instruments, net” in the Company’s consolidated statements of income, whereas changes in fair value related to derivatives in hedge designated relationships are initially recorded in other comprehensive income (loss) and later reclassified to income at the time that the hedged transactions affect earnings. Any portion of the changes in fair value due to hedge ineffectiveness is immediately recognized in the income statement. Derivative instruments in a gain position are reported as derivative assets and derivative instruments in a loss position are reported as derivative liabilities in the Company’s consolidated balance sheets. In the Company’s consolidated statements of cash flows, cash receipts and payments related to derivative instruments are classified according to the underlying nature or purpose of the derivative transaction, generally in the operating section if the derivatives are designated as accounting hedges and in the investing section otherwise. The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments in an asset position fail to perform their obligations under the contracts. The Company attempts to minimize this risk by limiting its counterparties to major financial institutions with acceptable credit ratings, monitoring positions with individual counterparties and adjusting posted collateral as required. The Company may also enter into forward purchase commitments as a means of investing in and financing agency securities via TBA dollar roll transactions. TBA dollar roll transactions involve moving the settlement of a TBA contract out to a later date by entering into an offsetting short position (referred to as a "pair off"), net settling the paired-off positions for cash, and simultaneously purchasing a similar TBA contract for a later settlement date. The agency securities purchased at the later settlement date are typically priced at a discount to securities for settlement in the current month. This difference is referred to as the “price drop.” The price drop represents compensation to the Company for foregoing net interest margin (interest income less repurchase agreement financing cost) and is referred to as “dollar roll income,” which the Company classifies in “Gain (loss) on derivative instruments, net.” Realized and unrealized gains and losses related to TBA dollar roll transactions are also recognized in “Gain (loss) on derivative instruments, net.” TBA dollar roll transactions represent off-balance sheet financing. |
Repurchase Agreements | Repurchase Agreements The Company finances the acquisition of its MBS through the use of repurchase agreements. Under these repurchase agreements, the Company sells securities to a lender and agrees to repurchase the same securities in the future for a price that is higher than the original sales price. The difference between the sale price that the Company receives and the repurchase price that the Company pays represents interest paid to the lender. Although structured as a sale and repurchase obligation, a repurchase agreement operates as a financing under which the Company pledges its securities as collateral to secure a loan which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. The Company records repurchase agreements on the consolidated balance sheets at the amount of cash received (or contract value), with accrued interest recorded separately. The Company retains beneficial ownership of the pledged collateral. At the maturity of a repurchase agreement, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender or, with the consent of the lender, the Company may renew such agreement at the then-prevailing financing rate. These repurchase agreements may require the Company to pledge additional assets to the lender in the event the estimated fair value of the existing pledged collateral declines. |
Warehouse Line Of Credit | Warehouse Lines of Credit Warehouse lines of credit include borrowings under mortgage loan warehouse facilities with various counterparties that expire within one year. These borrowings are collateralized by mortgage loans. If the value of the underlying collateral (as determined by the counterparty) securing these borrowings decreases, the Company may be subject to margin calls during the period the borrowing is outstanding. To satisfy these margin calls, the Company may have to pledge additional collateral or repay portions of the borrowings. |
Federal Home Loan Bank Advances | Federal Home Loan Bank Advances During the third quarter of 2015, a wholly-owned subsidiary of the Company became a member of the Federal Home Loan Bank of Atlanta (the “FHLB”). The FHLB offers a variety of products and services, including short-term and long-term secured advances. FHLB advances are carried at their contractual amounts. Based on the current status of recent rulemaking by the Federal Housing Finance Agency (“FHFA”), the Company will need to surrender its membership in the FHLB in 2016. |
Collateralized Borrowings in Securitization Trusts, at Fair Value | Collateralized Borrowings in Securitization Trusts, at Fair Value As discussed under “Principles of Consolidation,” the Company consolidates a CFE that securitized individual prime jumbo adjustable-rate whole mortgage loans it had purchased from a subsidiary of the Company. Investors in the collateralized borrowings issued by the CFE have recourse against the assets within the CFE, but have no recourse against the Company itself. The Company has elected to account for the assets and liabilities of the CFE under the fair value option, pursuant to ASC 825. As a result, collateralized borrowings in securitization trusts are carried at fair value. The debt certificates issued by the CFE are tradeable MBS, and the fair value of the debt is determined by management by obtaining valuations from independent sources, consistent with how the Company values its investment portfolio. Paydowns on this debt are classified as financing cash flows in the consolidated statements of cash flows. See Note 3 for further information regarding the CFE. |
Offsetting of Assets and Liabilities | Offsetting of Assets and Liabilities The Company’s derivative agreements and repurchase agreements generally contain provisions that allow for netting or the offsetting of receivables and payables with each counterparty. The Company reports amounts in its consolidated balance sheets on a gross basis without regard for such rights of offset or master netting arrangements. |
Interest Income | Interest Income Interest income on MBS and agency CRT securities is earned and recognized based on the outstanding principal amount of the investment securities and their contractual terms. Premiums and discounts associated with the purchase of MBS are amortized or accreted into interest income over the actual lives of the securities using the effective interest method. Interest income on agency CRT securities, which are accounted for under the fair-value option, is recognized based on their stated coupon rates. The Company recognizes interest income on mortgage loans held for investment and mortgage loans held for investment in securitization trusts based on their stated coupon rates. If a loan becomes 90 days past due, it is considered non-performing and is placed in non-accrual status. Accrual of interest income ceases and any existing interest receivables are reversed. Any cash received while a loan is in non-accrual status is first applied to unpaid principal and then to unpaid interest. In general, non-performing loans are only restored to accrual status when no principal or interest remains due and unpaid. |
Income Taxes | Income Taxes The Company has elected to be taxed as a REIT under the Code. The Company will generally not be subject to federal income tax to the extent that it distributes 100% of its taxable income, after application of available tax attributes, within the time limits prescribed by the Code and as long as it satisfies the ongoing REIT requirements including meeting certain asset, income and stock ownership tests. The Company has made an election to treat certain of its subsidiaries as TRSs. These TRSs are taxable as domestic C corporations and are subject to federal, state and local income taxes based upon their taxable income. |
Share-Based Compensation | Share-Based Compensation Share-based compensation is accounted for under the guidance included in FASB ASC Topic 718, Stock Compensation |
Earnings Per Common Share (EPS) | Earnings Per Common Share (EPS) Basic EPS is computed by dividing net income less preferred stock dividends to arrive at net income available to holders of common stock by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed using the two class method, as described in FASB ASC Topic 260, Earnings Per Share |
Other Comprehensive Income | Other Comprehensive Income Other comprehensive income refers to revenue, expenses, gains, and losses that are recorded directly as an adjustment to shareholders’ equity. Other comprehensive income for the Company generally arises from unrealized gains or losses generated from changes in market values of the securities held as available-for-sale and derivative instruments that have been designated as accounting hedges. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2016, the FASB issued ASU 2016-1, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities |
Collateralized Financing Enti24
Collateralized Financing Entity (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Collateralized Financings [Abstract] | |
Schedule of Carrying Amounts and Classifications of the CEF's Assets And Liabilities | The following table presents the carrying amounts and classifications of the CFE’s assets and liabilities as reflected in the Company’s consolidated balance sheets, prior to certain consolidation adjustments: March 31, 2016 December 31, 2015 Mortgage loans held-for-investment in securitization trusts $ 208,047 $ 225,285 Accrued interest receivable and other assets 8,176 2,955 Total assets $ 216,223 $ 228,240 Collateralized borrowings in securitization trusts $ 60,550 $ 57,611 Accrued interest payable 125 133 Other liabilities 37 40 Total liabilities $ 60,712 $ 57,784 |
Components of Statement of Income of the CFE | The following table presents the statement of income of the CFE as reflected in the Company’s consolidated statements of income: Three Months Ended March 31, 2016 Interest income $ 1,819 Interest expense (406 ) Net interest margin 1,413 Gain on mortgage loans 1,201 Loss on collateralized borrowings (358 ) Operating expenses (26 ) Net income $ 2,230 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Carrying Values and Fair Values of Assets and Liabilities | The carrying values and fair values of assets and liabilities that are required to be reported or disclosed at fair value as of March 31, 2016 and December 31, 2015 were as follows. March 31, 2016 December 31, 2015 Carrying Value Fair Value Carrying Value Fair Value Assets MBS $ 12,045,571 $ 12,045,571 $ 14,302,230 $ 14,302,230 Agency CRT securities 111,021 111,021 109,387 109,387 Mortgage loans held for investment 152,197 152,197 116,857 116,857 Mortgage loans held for investment in securitization trusts 209,418 209,418 226,908 226,908 Mortgage loans held for sale 25,919 25,919 17,542 17,542 MSR 316,176 316,176 269,926 269,926 Cash and cash equivalents 705,920 705,920 816,715 816,715 Unsettled purchased MBS 5,536 5,536 12,582 12,582 Receivable for securities sold 274,127 274,127 - - Accrued interest receivable 38,826 38,826 45,008 45,008 Principal payments receivable 91,476 91,476 108,201 108,201 Debt security, held-to-maturity (1) 15,000 14,477 15,000 14,871 Short-term investments (1) 30,447 30,447 30,327 30,327 Interest rate swaps and swaptions (2) 6 6 2,031 2,031 Futures Contracts asset (2) - - 693 693 Forward purchase commitments (2) 20,201 20,201 190 190 Liabilities Repurchase agreements $ 11,419,354 11,419,354 $ 13,443,883 $ 13,443,883 Warehouse lines of credit 63,615 63,615 60,096 60,096 FHLB advances - - 14,132 14,132 Collateralized borrowings in securitization trusts 60,550 60,550 57,611 57,611 Payable for unsettled securities 5,483 5,483 12,582 12,582 Accrued interest payable 3,052 3,052 4,938 4,938 Interest rate swap liability (3) 11,440 11,440 6,802 6,802 Futures Contracts liability (3) 407,842 407,842 286,058 286,058 Forward purchase commitments (3) - - 32,373 32,373 (1) ncluded in other investments on the consolidated balance sheets. (2) ncluded in derivative assets on the consolidated balance sheets. (3) ncluded in derivative liabilities on the consolidated balance sheets. |
Mortgage-Backed Securities an26
Mortgage-Backed Securities and Agency CRT securities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Investments Debt And Equity Securities [Abstract] | |
Schedule of Agency Securities Invests at Times in MBS not Issued or Guaranteed by U.S. Government Agency or U.S. Government Sponsored Entity | The following table presents the composition of the Company’s MBS and agency CRT securities portfolio at March 31, 2016. Amortized Cost Gross Unrealized Loss Gross Unrealized Gain Estimated Fair Value Agency MBS Fannie Mae Certificates ARMs $ 6,680,662 $ (4,469 ) $ 94,897 $ 6,771,090 Fixed-Rate - - - - Total Fannie Mae 6,680,662 (4,469 ) 94,897 6,771,090 Freddie Mac Certificates ARMs 5,234,739 (7,041 ) 46,783 5,274,481 Fixed-Rate - - - - Total Freddie Mac 5,234,739 (7,041 ) 46,783 5,274,481 Total Agency MBS $ 11,915,401 $ (11,510 ) $ 141,680 $ 12,045,571 Agency CRT Securities $ 111,217 $ (659 ) $ 463 $ 111,021 The following table presents the composition of the Company’s MBS and agency CRT securities portfolio at December 31, 2015. Amortized Cost Gross Unrealized Loss Gross Unrealized Gain Estimated Fair Value Agency MBS Fannie Mae Certificates ARMs $ 7,392,021 $ (14,465 ) $ 102,247 $ 7,479,803 Fixed-Rate 1,005,458 (8,148 ) - 997,310 Total Fannie Mae 8,397,479 (22,613 ) 102,247 8,477,113 Freddie Mac Certificates ARMs 5,806,425 (22,551 ) 41,243 5,825,117 Fixed-Rate - - - - Total Freddie Mac 5,806,425 (22,551 ) 41,243 5,825,117 Total Agency MBS $ 14,203,904 $ (45,164 ) $ 143,490 $ 14,302,230 Agency CRT Securities $ 111,217 $ (1,830 ) $ - $ 109,387 |
Components of Combined Carrying Value of the Company's MBS and Agency CRT Securities | The components of the combined carrying value the Company’s MBS and agency CRT securities at March 31, 2016 and December 31, 2015 are presented below: March 31, December 31, 2016 2015 Principal balance $ 11,717,636 $ 13,935,533 Unamortized premium 311,245 381,851 Unamortized discount (2,263 ) (2,263 ) Gross unrealized gains 142,143 143,490 Gross unrealized losses (12,169 ) (46,994 ) Carrying value/estimated fair value $ 12,156,592 $ 14,411,617 |
Schedule of Interest Income on MBS and Agency CRT Securities | The following table presents components of interest income on the Company’s MBS and agency CRT securities for the three months ended March 31, 2016 and 2015. Three Months Ended March 31 2016 2015 Coupon interest $ 86,648 $ 113,478 Net premium amortization (18,943 ) (27,116 ) Interest income $ 67,705 $ 86,362 |
Gross Gains and Losses from MBS Sales | Gross gains and losses from sales of available-for-sale MBS and agency CRT securities for the three months ended March 31, 2016 and 2015 were as follows: Three Months Ended March 31 2016 2015 Gross gains $ 5,894 $ 16,510 Gross losses (1,607 ) (57 ) Net gain (loss) $ 4,287 $ 16,453 |
Schedule of MBS in Unrealized Loss Position | The Company monitors the performance and market value of its available-for-sale MBS portfolio on an ongoing basis, and on a quarterly basis reviews its MBS for impairment. At March 31, 2016 and December 31, 2015, the Company had the following MBS in a loss position as presented in the following two tables: As of March 31, 2016 Less than 12 Months Greater than 12 Months Total Fair Market Unrealized Fair Market Unrealized Fair Market Unrealized Value Loss Value Loss Value Loss Fannie Mae Certificates ARMs 775,829 $ (2,022 ) $ 503,197 $ (2,447 ) $ 1,279,026 $ (4,469 ) Fixed-Rate - - - - - - Freddie Mac Certificates ARMs 620,483 (1,830 ) 889,689 (5,211 ) 1,510,172 (7,041 ) Fixed-Rate - - - - - - Total temporarily impaired securities $ 1,396,312 $ (3,852 ) $ 1,392,886 $ (7,658 ) $ 2,789,198 $ (11,510 ) Number of securities in an unrealized loss position 84 57 141 As of December 31, 2015 Less than 12 Months Greater than 12 Months Total Fair Market Unrealized Fair Market Unrealized Fair Market Unrealized Value Loss Value Loss Value Loss Fannie Mae Certificates ARMs 1,712,043 $ (7,922 ) $ 511,884 $ (6,542 ) $ 2,223,927 $ (14,464 ) Fixed-Rate 997,310 (8,148 ) - - 997,310 (8,148 ) Freddie Mac Certificates ARMs 1,814,773 (9,246 ) 861,198 (13,306 ) 2,675,971 (22,552 ) Fixed-Rate - - - - - - Total temporarily impaired securities $ 4,524,126 $ (25,316 ) $ 1,373,082 $ (19,848 ) $ 5,897,208 $ (45,164 ) Number of securities in an unrealized loss position 223 52 275 |
Mortgage Loans (Tables)
Mortgage Loans (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Geographic Distribution of Mortgage Loans Held for Investment | The following table provides the geographic distribution of mortgage loans held for investment at March 31, 2016 and December 31, 2015, based on the unpaid principal balance. March 31, 2016 December 31, 2015 California 66 % 68 % Washington 7 % 6 % Texas 5 % 5 % Illinois 3 % 3 % All other 19 % 18 % Total 100 % 100 % |
Components for Mortgage Loan Held for Investment Portfolio | The following table provides additional data on the Company’s mortgage loan portfolio at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Portfolio Portfolio Portfolio Range Weighted Average Portfolio Range Weighted Average Unpaid principal balance $110 to $1,980 $ 778 $116 to $1,987 $ 804 Interest rate 2.63% to 4.00% 3.50% 2.63% to 4.00% 3.48% Maturity 11/2044 to 4/2046 11/2045 11/2044 to 2/2046 10/2045 FICO score at loan origination 700 to 811 762 701 to 811 763 Loan-to-value ratio at loan origination 20% to 80% 71% 20% to 80% 71% |
Rollforward of Mortgage Loans Held for Investment | The following table presents the rollforward of mortgage loans held for investment for the periods presented. Three Months Ended March 31 2016 2015 Fair value, beginning of period $ 116,857 $ 31,460 Purchased 40,855 95,769 Repaid (6,428 ) (4,172 ) Change in fair value 913 244 Fair value, end of period $ 152,197 $ 123,301 |
Schedule of Unobservable Inputs Used in Level 3 Valuation of Mortgage Loans Held for Investment | The following table provides information about the significant unobservable inputs used in the Level 3 valuation of the Company’s mortgage loans held for investment at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Weighted- Weighted- Unobservable Input Range Average Range Average Discount rate 2.8% - 3.1% 3.0 % 3.0% - 3.5% 3.3 % Conditional refinance rate 14.6% - 21.5% 17.4 % 13.6% - 21.7% 16.4 % Default rate 0% - 1.9% 0.4 % 0% - 2.1% 0.7 % Loss severity 10.0% - 21.4% 13.3 % 10.5% - 22.2% 14.9 % |
Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | |
Geographic Distribution of Mortgage Loans Held for Investment | The following table provides the geographic distribution of mortgage loans held for investment in securitization trusts at March 31, 2016 and December 31, 2015 based on the unpaid principal balance. March 31, 2016 December 31, 2015 California 49 % 49 % Texas 11 % 10 % Illinois 7 % 6 % Washington 5 % 5 % All other 28 % 30 % Total 100 % 100 % |
Components for Mortgage Loan Held for Investment Portfolio | The following table provides additional data on mortgage loans held for investment in in securitization trusts at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Portfolio Portfolio Portfolio Range Weighted Average Portfolio Range Weighted Average Unpaid principal balance $220 to $1,926 $ 731 $291 to $1,933 $ 742 Interest rate 2.50% to 4.13% 3.38% 2.50% to 4.13% 3.38% Maturity 6/2044 to 11/2045 3/2045 6/2044 to 11/2045 3/2045 FICO score at loan origination 700 to 813 769 700 to 815 769 Loan-to-value ratio at loan origination 24% to 80% 69% 24% to 80% 69% |
Rollforward of Mortgage Loans Held for Investment | The following table presents the rollforward of mortgage loans held for investment in securitization trusts for the period presented. Three Months Ended March 31 2016 2015 Fair value, beginning of period $ 226,908 $ - Purchased - - Repaid (18,439 ) - Change in fair value 949 - Fair value, end of period $ 209,418 $ - |
Schedule of Unobservable Inputs Used in Level 3 Valuation of Mortgage Loans Held for Investment | The following table provides information about the significant unobservable inputs used in the Level 3 valuation of the Company’s mortgage loans held for investment in securitization trusts at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Weighted- Weighted- Unobservable Input Range Average Range Average Discount rate 2.7% - 3.2% 3.0 % 2.2% - 3.6% 3.3 % Conditional refinance rate 13.9% - 22.3% 17.2 % 0.0% - 21.3% 16.4 % Default rate 0% - 1.8% 0.4 % 0.0% - 2.0% 0.5 % Loss severity 10.0% - 22.8% 13.4 % 0.0% - 22.9% 14.4 % |
Mortgage Servicing Rights (Tabl
Mortgage Servicing Rights (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Rollforward of Mortgage Loans Held for Investment | The following table presents the rollforward of mortgage loans held for investment for the periods presented. Three Months Ended March 31 2016 2015 Fair value, beginning of period $ 116,857 $ 31,460 Purchased 40,855 95,769 Repaid (6,428 ) (4,172 ) Change in fair value 913 244 Fair value, end of period $ 152,197 $ 123,301 |
Schedule of Unobservable Inputs Used in Level 3 Valuation of Mortgage Loans Held for Investment | The following table provides information about the significant unobservable inputs used in the Level 3 valuation of the Company’s mortgage loans held for investment at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Weighted- Weighted- Unobservable Input Range Average Range Average Discount rate 2.8% - 3.1% 3.0 % 3.0% - 3.5% 3.3 % Conditional refinance rate 14.6% - 21.5% 17.4 % 13.6% - 21.7% 16.4 % Default rate 0% - 1.9% 0.4 % 0% - 2.1% 0.7 % Loss severity 10.0% - 21.4% 13.3 % 10.5% - 22.2% 14.9 % |
Schedule of Mortgage Servicing Income and Mortgage Servicing Expenses | The Company’s mortgage servicing income consisted of the following for the three months ended March 31, 2016: Three Months Ended March 31 2016 2015 Servicing income $ 18,474 $ - Ancillary income 408 - Servicing income $ 18,882 $ - |
Mortgage Servicing Rights | |
Rollforward of Mortgage Loans Held for Investment | The following table presents the rollforward of MSR for the three months ended March 31, 2016. Three Months Ended March 31 2016 2015 Fair value, beginning of period $ 269,926 $ - Purchases 84,361 - Change in fair value due to: Changes in valuation inputs or assumptions (30,999 ) - Other changes, including realization of cash flows (7,112 ) - Fair value, end of period $ 316,176 $ - |
Schedule of Unobservable Inputs Used in Level 3 Valuation of Mortgage Loans Held for Investment | The following table provides information about the significant unobservable inputs used in the Level 3 valuation of the Company’s MSR at March 31, 2016 and December 31, 2015. March 31, 2016 December 31, 2015 Weighted- Weighted- Unobservable Input Range Average Range Average Discount rate 10%-15% 10.4 % 10%-15% 10.4 % Prepayment rate 4.6%-29.6% 11.9 % 5.6%-30.7% 11.9 % Delinquency rate 0.3%-13.4% 1.6 % 0%-6.03% 1.4 % Annual cost to service $77-$112 $ 87 $80-$101 $ 88 |
Other Investments (Tables)
Other Investments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Schedule Of Investments [Abstract] | |
Summary of Other Investments | Other investments consisted of the following items as of March 31, 2016 and December 31, 2015: March 31, 2016 December 31, 2015 Short-term investments $ 30,447 $ 30,327 Debt security, held-to-maturity 15,000 15,000 Equity investments 6,017 6,603 Total other investments $ 51,464 $ 51,930 |
Borrowings (Tables)
Borrowings (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Banking And Thrift [Abstract] | |
Contractual Maturity Information Regarding Repurchase Agreements | The following table presents contractual maturity information regarding the Company’s repurchase agreements: March 31, 2016 December 31, 2015 Weighted Average Weighted Average Balance Contractual Rate Balance Contractual Rate Within 30 days $ 10,669,354 0.66 % $ 12,693,883 0.64 % 30 days to 3 months 500,000 0.90 % - 0.00 % 3 months to 36 months 250,000 0.79 % 750,000 0.75 % $ 11,419,354 0.67 % $ 13,443,883 0.65 % |
Derivatives and Other Hedging31
Derivatives and Other Hedging Instruments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Schedule of Location of Derivatives Instruments on Consolidated Balance Sheet | The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate swaptions are based on the fair value of the underlying interest rate swaps that the Company has the option to enter, and are based on inputs from the counterparty and pricing models. The fair value of Futures Contracts is based on quoted prices from the exchange on which they trade. The fair value of MBS forward purchase commitments was determined using the same methodology as MBS as described in Note 5. The fair value of forward purchase commitments for whole loans was determined using the same methodologies as mortgage loans as described in Note 6. The Company applies fallout assumptions to the third-party pricing of forward purchase commitments regarding loans that the counterparties may not successfully issue. The table below presents the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of March 31, 2016 and December 31, 2015, respectively. Derivative Instruments Balance Sheet Location March 31, 2016 December 31, 2015 Interest rate swaps and swaptions Derivative assets $ 6 $ 2,031 Futures Contracts Derivative assets - 693 Forward purchase commitments - MBS Derivative assets 20,150 165 Forward purchase commitments - mortgage loans Derivative assets 51 25 $ 20,207 $ 2,914 Interest rate swaps Derivative liabilities $ 11,440 $ 6,802 Futures Contracts Derivative liabilities 407,842 286,058 Forward purchase commitments - MBS Derivative liabilities - 32,373 $ 419,282 $ 325,233 |
Volume of Activity for the Company's Interest Rate Derivative Instruments | The volume of activity for the Company’s interest rate swap instruments is shown in the table below. Notional Value Three Months Ended March 31 2016 2015 Beginning of period $ 4,600,000 $ 8,300,000 Expirations and terminations (600,000 ) (1,000,000 ) End of period $ 4,000,000 $ 7,300,000 |
Schedule of Outstanding Interest Rate Swaptions | A swaption is a derivative instrument that gives the holder the option to enter into a pay-fixed interest rate swap in the future, if it so desires. As of March 31, 2016, the Company had four interest rate swaptions outstanding, which were entered into during 2015: Options Underlying Swaps Swaptions Original Cost Fair Value Wtd. Avg. Months to Expiration Notional Wtd. Avg. Fixed Pay Rate Receive Rate Wtd. Avg. Term (Years) Fixed payer $ 6,813 $ 6 4 $ 2,000,000 3.35% 3 month LIBOR 6 As of December 31, 2015, the Company had six interest rate swaptions outstanding: Options Underlying Swaps Swaptions Original Cost Fair Value Wtd. Avg. Months to Expiration Notional Wtd. Avg. Fixed Pay Rate Receive Rate Wtd. Avg. Term (Years) Fixed payer $ 10,813 $ 727 6 $ 3,065,000 3.23% 3 month LIBOR 6 |
Schedule of Composition of Futures Contracts | The Company uses Futures Contracts to 1) synthetically replicate an interest rate swap, or 2) offset the changes in value of its forward purchases of certain MBS and mortgage loans. The following table presents the composition of the Company’s Futures Contracts as of March 31, 2016 and December 31, 2015, respectively. Fair Value March 31, 2016 December 31, 2015 Futures Contracts designed to replicate swaps $ (407,408 ) $ (285,711 ) Futures Contracts designed to hedge value changes in forward purchases (434 ) 346 Total fair value of Futures Contracts $ (407,842 ) $ (285,365 ) |
Schedule of ARM Securities Forward Purchase Commitments with Brokers | The following table summarizes the Company’s forward purchase commitments as of March 31, 2016. Face / UPB Cost Fair Market Value Net Asset (Liability) ARMs - originators $ 173,605 $ 177,117 $ 178,699 $ 1,582 Fixed-rate TBA dollar roll securities 3,617,000 3,739,204 3,757,772 18,568 Whole mortgage loans 14,010 14,003 14,054 51 Total purchase commitments $ 3,804,615 $ 3,930,324 $ 3,950,525 $ 20,201 The following table summarizes the Company’s forward purchase commitments as of December 31, 2015. Face / UPB Cost Fair Market Value Net Asset (Liability) ARMs - originators $ 145,246 $ 147,749 $ 147,914 $ 165 Fixed-rate TBA dollar roll securities 2,655,000 2,736,748 2,704,375 (32,373 ) Whole mortgage loans 26,523 26,700 26,725 25 Total purchase commitments $ 2,826,769 $ 2,911,197 $ 2,879,014 $ (32,183 ) |
Gross Amounts Associated with Derivative Financial Instruments | The Company does not use either offsetting or netting to present any of its derivative assets or liabilities. The following table shows the gross amounts associated with the Company’s derivative financial instruments and the impact if netting were used as of March 31, 2016. Assets/(Liabilities) Cash Collateral Posted (Held) Net Asset/(Liability) Interest rate swaps $ - $ - $ - Interest rate swaptions 6 (25 ) (19 ) Futures contracts - - - Forward purchase commitments 20,201 - 20,201 Interest rate swaps $ (11,440 ) $ 16,518 $ 5,078 Futures contracts (407,842 ) 447,624 39,782 Forward purchase commitments - 5,148 5,148 The following table shows the gross amounts associated with the Company’s derivative financial instruments and the impact if netting were used as of December 31, 2015. Assets/(Liabilities) Cash Collateral Posted (Held) Net Asset/(Liability) Interest rate swaps 1,304 - 1,304 Interest rate swaptions 727 (1,106 ) (379 ) Futures contracts 693 - 693 Forward purchase commitments 190 - 190 Interest rate swaps (6,802 ) 14,626 7,824 Futures contracts (286,058 ) 335,084 49,026 Forward purchase commitments (32,373 ) 25,687 (6,686 ) |
Schedule of Derivative Instruments Loss, Net | The following table shows the components of “Loss on derivative instruments, net” for the three months ended March 31, 2016 and 2015. Three Months Ended March 31 2016 2015 Interest rate swaps – net realized and unrealized gains $ (5,942 ) $ 1,116 Interest rate swaptions – net realized and unrealized losses (721 ) (3,027 ) Interest rate swaps – monthly net settlements (5,411 ) (21,423 ) Futures Contracts – fair value adjustments (122,477 ) (94,016 ) Futures Contracts – losses from maturities (18,630 ) (7,493 ) Futures Contracts – other realized losses (9,884 ) (22,374 ) Mortgage loan purchase commitments - fair value adjustments (20 ) 331 TBA dollar roll income 17,602 23,155 TBA dollar rolls – net realized and unrealized gains (losses) 52,989 20,946 Net gain (loss) on derivative instruments $ (92,494 ) $ (102,785 ) |
Interest Rate Swap | |
Schedule of Derivative Instruments Forecasted Transactions | Information regarding the Company’s interest rate swaps as of March 31, 2016 and December 31, 2015 follows. March 31, 2016 December 31, 2015 Wtd. Avg. Wtd. Avg. Remaining Wtd. Avg. Remaining Wtd. Avg. Notional Term Fixed Interest Notional Term Fixed Interest Maturity Amount in Months Rate Amount in Months Rate 12 months or less $ 2,400,000 6 0.95% $ 2,400,000 6 0.92% Over 12 months to 24 months 1,600,000 17 0.87% 1,800,000 17 0.89% Over 24 months to 36 months - - - 400,000 26 0.96% Total $ 4,000,000 11 0.92% $ 4,600,000 12 0.91% |
Schedule of Derivative Instruments Loss, Net | The table below presents the effect of the interest rate swaps that were previously designated as cash flow hedges on the Company’s AOCI for the three months ended March 31, 2016 and 2015. Three Months Ended March 31 2016 2015 Beginning balance $ 673 $ (30,042 ) Reclassification of net losses to the income statement 1,376 13,438 Ending balance $ 2,049 $ (16,604 ) |
Eurodollar Futures Contracts | |
Schedule of Derivative Instruments Forecasted Transactions | The volume of activity for the Company’s Futures Contracts is shown in the table below. Number of Contracts Three Months Ended March 31 2016 2015 Beginning of period 108,824 130,074 New positions opened 1,773 20,518 Early settlements (5,427 ) (13,268 ) Settlements at maturity (9,712 ) (8,611 ) End of period 95,458 128,713 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | The following table details the Company’s calculation of earnings per share for the three months ended March 31, 2016 and 2015. Three Months Ended March 31 2016 2015 Basic earnings (loss) per share: Net income (loss) $ (71,165 ) $ (34,535 ) Less preferred stock dividends (5,480 ) (5,481 ) Net income (loss) available to common shareholders $ (76,645 ) $ (40,016 ) Weighted average shares 94,850,791 96,783,199 Basic earnings (loss) per share $ (0.81 ) $ (0.41 ) Diluted earnings (loss) per share: Net income (loss) $ (71,165 ) $ (34,535 ) Less preferred stock dividends for antidilutive shares (5,480 ) (5,481 ) Net income (loss) available to common shareholders $ (76,645 ) $ (40,016 ) Weighted average shares 94,850,791 96,783,199 Potential dilutive shares from exercise of stock options - - Diluted weighted average shares 94,850,791 96,783,199 Diluted earnings (loss) per share $ (0.81 ) $ (0.41 ) |
Transactions with Related Par33
Transactions with Related Parties (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Amounts Incurred for Management Fee and Reimbursable Expenses | For purposes of calculating the management fee, equity is defined as the value, computed in accordance with GAAP, of shareholders’ equity, adjusted to exclude the effects of unrealized gains or losses. The following table presents amounts incurred for management fee, reimbursable expenses and share-based compensation expense related to the restricted common shares granted to management. Three Months Ended March 31 2016 2015 Management fee $ 3,982 $ 4,095 Reimbursable expenses 1,343 1,293 Total $ 5,325 $ 5,388 Share-based compensation $ 1,293 $ 1,045 |
Accumulated Other Comprehensi34
Accumulated Other Comprehensive Income (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Components of Accumulated Other Comprehensive Income | The Company records unrealized gains and losses on its MBS and its forward purchase commitments securities as described in Note 5 and Note 10. The Company ceased hedge accounting for its interest rate swaps effective September 30, 2013. Beginning October 1, 2013, changes in the fair value of interest rate swaps are recorded directly to net income. The cumulative net unrealized gains and losses on interest rate swaps in AOCI as of September 30, 2013 are being amortized to net income as the hedged forecasted transactions occur. The following table rolls forward the components of AOCI, including reclassification adjustments, for the three months ended March 31, 2016. Unrealized gain/(loss) on available for sale MBS Unrealized gain/(loss) on unsettled MBS Unrealized gain/(loss) on other investments Unrealized gain/(loss) on derivative instruments Total Accumulated other comprehensive income (loss) at January 1, 2016 $ 98,368 $ (1 ) $ (547 ) $ 838 $ 98,658 Other comprehensive income (loss) before reclassification 36,025 54 94 1,582 37,755 Balance Sheet Reclassification: Amount reclassified to MBS available for sale - 1 - (165 ) (164 ) Income Statement Reclassification: Amounts reclassified to net gain on the sale of MBS (4,287 ) - - - (4,287 ) Amounts reclassified to interest expense - - - 1,376 1,376 Net current period other comprehensive income (loss) 31,738 55 94 2,793 34,680 Accumulated other comprehensive income (loss) at March 31, 2016 $ 130,106 $ 54 $ (453 ) $ 3,631 $ 133,338 The following table rolls forward the components of AOCI, including reclassification adjustments, for the three months ended March 31, 2015. Unrealized gain/(loss) on available for sale MBS Unrealized gain/(loss) on unsettled MBS Unrealized gain/(loss) on other investments Unrealized gain/(loss) on derivative instruments Total Accumulated other comprehensive income (loss) at January 1, 2015 $ 232,240 $ 42 $ (595 ) $ (25,922 ) $ 205,765 Other comprehensive income before reclassification 90,119 794 129 4,848 95,890 Balance Sheet Reclassification: Amount reclassified to MBS available for sale - (42 ) - (4,120 ) (4,162 ) Income Statement Reclassification: Amounts reclassified to net gain on the sale of MBS (16,453 ) - - - (16,453 ) Amounts reclassified to interest expense - - - 13,438 13,438 Net current period other comprehensive income 73,666 752 129 14,166 88,713 Accumulated other comprehensive income (loss) at March 31, 2015 $ 305,906 $ 794 $ (466 ) $ (11,756 ) $ 294,478 |
Organization and Business Des35
Organization and Business Description - Additional Information (Details) - USD ($) $ in Thousands | Aug. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | Apr. 10, 2016 |
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Distributions from taxable income | 100.00% | |||
Business acquisition expected completion description | Planned merger of the Company with Annaly Capital Management, Inc., a Maryland corporation (“Annaly”), which is expected to close by the end of the third quarter of 2016. The closing is subject to various conditions and regulatory approvals, including two-thirds of the outstanding shares of the Company’s common stock being validly tendered into the exchange offer, and therefore, the Company cannot provide any assurance that the merger will close in a timely manner or at all. | |||
Effective date of acquisition | Aug. 31, 2015 | |||
Percentage of voting interest | 100.00% | |||
Purchase consideration, cash | $ 23,500 | |||
Purchase consideration, equity interest | $ 4,400 | |||
Net loss | $ 71,165 | $ 34,535 | ||
Pingora Asset Management, LLC | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Acquired operations generated other income | 21,800 | |||
Net loss | $ 8,200 | |||
Subsequent Event | Annaly Capital Management Inc | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Percentage of outstanding shares of common stock | 0.6667% |
Summary of Significant Accoun36
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Accounting Policies [Abstract] | ||
Ownership percentage on variable interest | 100.00% | |
Distributions from taxable income | 100.00% | |
Share-based compensation expense | $ 1,293 | $ 1,045 |
Schedule of Carrying Amounts an
Schedule of Carrying Amounts and Classifications of CFE's Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | |
Collateralized Securities Transactions [Line Items] | |||
Mortgage loans held for investment in securitization trusts, at fair value | $ 209,418 | $ 226,908 | |
Total assets | [1] | 14,094,505 | 16,137,526 |
Collateralized borrowings in securitization trusts | 60,550 | 57,611 | |
Accrued interest payable | 3,052 | 4,938 | |
Other liabilities | 30,632 | 27,870 | |
Total liabilities | [1] | 12,049,134 | 13,994,169 |
CFE | |||
Collateralized Securities Transactions [Line Items] | |||
Mortgage loans held for investment in securitization trusts, at fair value | 208,047 | 225,285 | |
Accrued interest receivable and other assets | 8,176 | 2,955 | |
Total assets | 216,223 | 228,240 | |
Collateralized borrowings in securitization trusts | 60,550 | 57,611 | |
Accrued interest payable | 125 | 133 | |
Other liabilities | 37 | 40 | |
Total liabilities | $ 60,712 | $ 57,784 | |
[1] | The consolidated balance sheet as of March 31, 2016 and December 31, 2015, respectively, include $216,224 and $228,240 of assets of a consolidated collateralized financing entity (“CFE”) that can only be used to settle obligations of the CFE as well as liabilities of $60,712 and $57,784 of the CFE for which creditors do not have recourse to Hatteras Financial Corp. |
Components of Statement of Inco
Components of Statement of Income of the CFE (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Collateralized Securities Transactions [Line Items] | ||
Interest expense | $ (22,746) | $ (27,314) |
Net interest margin | 48,391 | 59,803 |
Gain on mortgage loans | 2,007 | 244 |
Net loss | (71,165) | $ (34,535) |
CFE | ||
Collateralized Securities Transactions [Line Items] | ||
Interest income | 1,819 | |
Interest expense | (406) | |
Net interest margin | 1,413 | |
Gain on mortgage loans | 1,201 | |
Loss on collateralized borrowings | (358) | |
Operating expenses | (26) | |
Net loss | $ 2,230 |
Carrying Values and Fair Values
Carrying Values and Fair Values of Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | |
Fair Value Disclosures [Abstract] | |||||
MBS, Carrying Value | $ 12,045,571 | $ 14,302,230 | |||
Agency CRT securities, Carrying Value | 111,021 | 109,387 | |||
Mortgage loans held for investment, Carrying Value | 152,197 | 116,857 | |||
Mortgage loans held for investment in securitization trusts, Carrying Value | 209,418 | 226,908 | |||
Mortgage loans held for sale, Carrying Value | 25,919 | 17,542 | |||
MSR, Carrying Value | 316,176 | 269,926 | |||
Cash and cash equivalents, Carrying Value | 705,920 | 816,715 | $ 627,673 | $ 627,595 | |
Unsettled purchased MBS, Carrying Value | 5,536 | 12,582 | |||
Receivable for securities sold, Carrying Value | 274,127 | ||||
Accrued interest receivable, Carrying Value | 38,826 | 45,008 | |||
Principal payments receivable, Carrying Value | 91,476 | 108,201 | |||
Debt security, held-to-maturity, Carrying Value | [1] | 15,000 | 15,000 | ||
Short-term investments, Carrying Value | [1] | 30,447 | 30,327 | ||
Interest rate swaps and swaptions, Carrying Value | [2] | 6 | 2,031 | ||
Futures Contracts asset, Carrying Value | [2] | 693 | |||
Forward purchase commitments, Carrying Value | [2] | 20,201 | 190 | ||
Repurchase agreements, Carrying Value | 11,419,354 | 13,443,883 | |||
Warehouse lines of credit, Carrying Value | 63,615 | 60,096 | |||
FHLB advances, Carrying Value | 14,132 | ||||
Collateralized borrowings in securitization trusts, Carrying Value | 60,550 | 57,611 | |||
Payable for unsettled securities, Carrying Value | 5,483 | 12,582 | |||
Accrued interest payable, Carrying Value | 3,052 | 4,938 | |||
Interest rate swap liability, Carrying Value | [3] | 11,440 | 6,802 | ||
Futures Contracts liability, Carrying Value | [3] | 407,842 | 286,058 | ||
Forward purchase commitments, Carrying Value | [3] | 32,373 | |||
MBS, Fair Value | 12,045,571 | 14,302,230 | |||
Agency CRT securities, at fair value | 111,021 | 109,387 | |||
Mortgage loans held for investment, Fair Value | 152,197 | 116,857 | |||
Mortgage loans held for investment in securitization trusts, at fair value | 209,418 | 226,908 | |||
Mortgage loans held for sale, Fair Value | 25,919 | 17,542 | |||
MSR, Fair Value | 316,176 | 269,926 | |||
Cash and cash equivalents, Fair Value | 705,920 | 816,715 | |||
Unsettled purchased MBS, Fair Value | 5,536 | 12,582 | |||
Receivable for securities sold, Fair Value | 274,127 | ||||
Accrued interest receivable, Fair Value | 38,826 | 45,008 | |||
Principal payments receivable, Fair Value | 91,476 | 108,201 | |||
Debt security, held-to-maturity, Fair Value | [1] | 14,477 | 14,871 | ||
Short-term investments, Fair Value | [1] | 30,447 | 30,327 | ||
Interest rate swaps and swaptions, Fair Value | [2] | 6 | 2,031 | ||
Futures Contracts asset, Fair Value | [2] | 693 | |||
Forward purchase commitments, Fair Value | [2] | 20,201 | 190 | ||
Repurchase agreements, Fair Value | 11,419,354 | 13,443,883 | |||
Warehouse lines of credit | 63,615 | 60,096 | |||
FHLB advances, Fair Value | 14,132 | ||||
Collateralized borrowings in securitization trusts | 60,550 | 57,611 | |||
Payable for unsettled securities, Fair Value | 5,483 | 12,582 | |||
Accrued interest payable, Fair Value | 3,052 | 4,938 | |||
Interest rate swap liability, Fair Value | [3] | 11,440 | 6,802 | ||
Futures Contracts liability, Fair Value | [3] | $ 407,842 | 286,058 | ||
Forward purchase commitments, Fair Value | [3] | $ 32,373 | |||
[1] | Included in other investments on the consolidated balance sheets. | ||||
[2] | Included in derivative assets on the consolidated balance sheets. | ||||
[3] | Included in derivative liabilities on the consolidated balance sheets. |
Schedule of Agency Securities I
Schedule of Agency Securities Invests at Times in MBS not Issued or Guaranteed by U.S. Government Agency or U.S. Government Sponsored Entity (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Schedule Of Available For Sale Securities [Line Items] | ||
Gross Unrealized Loss | $ (12,169) | $ (46,994) |
Gross Unrealized Gain | 142,143 | 143,490 |
Estimated Fair Value | 12,045,571 | 14,302,230 |
Agency MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized Cost | 11,915,401 | 14,203,904 |
Gross Unrealized Loss | (11,510) | (45,164) |
Gross Unrealized Gain | 141,680 | 143,490 |
Estimated Fair Value | 12,045,571 | 14,302,230 |
Fannie Mae Certificates | Agency MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized Cost | 6,680,662 | 8,397,479 |
Gross Unrealized Loss | (4,469) | (22,613) |
Gross Unrealized Gain | 94,897 | 102,247 |
Estimated Fair Value | 6,771,090 | 8,477,113 |
Fannie Mae Certificates | Adjustable Rate Residential Mortgage | Agency MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized Cost | 6,680,662 | 7,392,021 |
Gross Unrealized Loss | (4,469) | (14,465) |
Gross Unrealized Gain | 94,897 | 102,247 |
Estimated Fair Value | 6,771,090 | 7,479,803 |
Fannie Mae Certificates | Fixed-Rate | Agency MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized Cost | 1,005,458 | |
Gross Unrealized Loss | (8,148) | |
Estimated Fair Value | 997,310 | |
Freddie Mac Certificates | Agency MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized Cost | 5,234,739 | 5,806,425 |
Gross Unrealized Loss | (7,041) | (22,551) |
Gross Unrealized Gain | 46,783 | 41,243 |
Estimated Fair Value | 5,274,481 | 5,825,117 |
Freddie Mac Certificates | Adjustable Rate Residential Mortgage | Agency MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized Cost | 5,234,739 | 5,806,425 |
Gross Unrealized Loss | (7,041) | (22,551) |
Gross Unrealized Gain | 46,783 | 41,243 |
Estimated Fair Value | 5,274,481 | 5,825,117 |
Agency CRT | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized Cost | 111,217 | 111,217 |
Gross Unrealized Loss | (659) | (1,830) |
Gross Unrealized Gain | 463 | |
Estimated Fair Value | $ 111,021 | $ 109,387 |
Components of Combined Carrying
Components of Combined Carrying Value of the Company's MBS and Agency CRT Securities (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Investments Debt And Equity Securities [Abstract] | ||
Principal balance | $ 11,717,636 | $ 13,935,533 |
Unamortized premium | 311,245 | 381,851 |
Unamortized discount | (2,263) | (2,263) |
Gross unrealized gains | 142,143 | 143,490 |
Gross unrealized losses | (12,169) | (46,994) |
Carrying value/estimated fair value | $ 12,156,592 | $ 14,411,617 |
Schedule of Interest Income on
Schedule of Interest Income on MBS and Agency CRT Securities (Details) - MSB - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | ||
Coupon interest | $ 86,648 | $ 113,478 |
Net premium amortization | (18,943) | (27,116) |
Interest income | $ 67,705 | $ 86,362 |
Gross Gains and Losses from Inv
Gross Gains and Losses from Investment Sales (Details) - MSB - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Schedule Of Gain Loss On Investments Including Marketable Securities And Investments Held At Cost Income Statement Reported Amounts Summary [Line Items] | ||
Gross gains | $ 5,894 | $ 16,510 |
Gross losses | (1,607) | (57) |
Net gain (loss) | $ 4,287 | $ 16,453 |
Schedule of MBS in Unrealized L
Schedule of MBS in Unrealized Loss Position (Details) $ in Thousands | Mar. 31, 2016USD ($)Security | Dec. 31, 2015USD ($)Security |
Schedule Of Available For Sale Securities [Line Items] | ||
Fair Market Value - Less than 12 months | $ 1,396,312 | $ 4,524,126 |
Unrealized Loss - Less than 12 months | (3,852) | (25,316) |
Fair Market Value - Greater than 12 Months | 1,392,886 | 1,373,082 |
Unrealized Loss - Greater than 12 Months | (7,658) | (19,848) |
Total - Fair Market Value | 2,789,198 | 5,897,208 |
Total - Unrealized Loss | $ (11,510) | $ (45,164) |
Number of securities in an unrealized loss position, Less than 12 Months | Security | 84 | 223 |
Number of securities in an unrealized loss position, Greater than 12 Months | Security | 57 | 52 |
Number of securities in an unrealized loss position, Total | Security | 141 | 275 |
Fannie Mae Certificates | Adjustable Rate Residential Mortgage | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Fair Market Value - Less than 12 months | $ 775,829 | $ 1,712,043 |
Unrealized Loss - Less than 12 months | (2,022) | (7,922) |
Fair Market Value - Greater than 12 Months | 503,197 | 511,884 |
Unrealized Loss - Greater than 12 Months | (2,447) | (6,542) |
Total - Fair Market Value | 1,279,026 | 2,223,927 |
Total - Unrealized Loss | (4,469) | (14,464) |
Fannie Mae Certificates | Fixed-Rate | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Fair Market Value - Less than 12 months | 997,310 | |
Unrealized Loss - Less than 12 months | (8,148) | |
Total - Fair Market Value | 997,310 | |
Total - Unrealized Loss | (8,148) | |
Freddie Mac Certificates | Adjustable Rate Residential Mortgage | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Fair Market Value - Less than 12 months | 620,483 | 1,814,773 |
Unrealized Loss - Less than 12 months | (1,830) | (9,246) |
Fair Market Value - Greater than 12 Months | 889,689 | 861,198 |
Unrealized Loss - Greater than 12 Months | (5,211) | (13,306) |
Total - Fair Market Value | 1,510,172 | 2,675,971 |
Total - Unrealized Loss | $ (7,041) | $ (22,552) |
Mortgage-Backed Securities an45
Mortgage-Backed Securities and Agency CRT securities - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Minimum | |
Schedule Of Available For Sale Securities [Line Items] | |
Contractual maturity of Company's agency securities, in years | 15 years |
Maximum | |
Schedule Of Available For Sale Securities [Line Items] | |
Contractual maturity of Company's agency securities, in years | 30 years |
Agency Securities | |
Schedule Of Available For Sale Securities [Line Items] | |
Impairment loss on mortgage-backed securities | $ 0 |
Mortgage Loans - Additional Inf
Mortgage Loans - Additional Information (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Schedule Of Available For Sale Securities [Line Items] | ||
Fair value | $ 152,197,000 | $ 116,857,000 |
Past due on mortgage loan | 0 | 0 |
Nonaccrual status on mortgage loan | 0 | 0 |
Mortgage loans held for investment | 1,034,000 | 261,000 |
Unpaid principal | 25,676,000 | 16,629,000 |
Mortgage loans held for sale | 25,919,000 | 17,542,000 |
Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | 204,766,000 | 223,205,000 |
Fair value | 209,418,000 | 226,908,000 |
Past due on mortgage loan | 0 | 0 |
Nonaccrual status on mortgage loan | 0 | 0 |
Mortgage loans held for investment | 1,238,000 | 0 |
Mortgage Held for Investment, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | $ 148,691,000 | $ 114,997,000 |
Geographic Distribution of Mort
Geographic Distribution of Mortgage Loans Held for Investment (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 100.00% | 100.00% |
Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 100.00% | 100.00% |
California | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 66.00% | 68.00% |
California | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 49.00% | 49.00% |
Washington | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 7.00% | 6.00% |
Washington | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 5.00% | 5.00% |
Texas | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 5.00% | 5.00% |
Texas | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 11.00% | 10.00% |
Illinois | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 3.00% | 3.00% |
Illinois | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 7.00% | 6.00% |
All Other | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 19.00% | 18.00% |
All Other | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Mortgage loans held | 28.00% | 30.00% |
Components for Mortgage Loan He
Components for Mortgage Loan Held for Investment Portfolio (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016USD ($)Point | Dec. 31, 2015USD ($)Point | |
Schedule Of Available For Sale Securities [Line Items] | ||
Maturity | 2045-11 | |
Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | $ 204,766,000 | $ 223,205,000 |
Minimum | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | $ 110,000 | $ 116,000 |
Interest rate | 2.63% | 2.63% |
Maturity | 2044-11 | 2044-11 |
FICO score at loan origination | Point | 700 | 701 |
Loan-to-value ratio at loan origination | 20.00% | 20.00% |
Minimum | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | $ 220,000 | $ 291,000 |
Interest rate | 2.50% | 2.50% |
Maturity | 2044-06 | 2044-06 |
FICO score at loan origination | Point | 700 | 700 |
Loan-to-value ratio at loan origination | 24.00% | 24.00% |
Maximum | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | $ 1,980,000 | $ 1,987,000 |
Interest rate | 4.00% | 4.00% |
Maturity | 2046-04 | 2046-02 |
FICO score at loan origination | Point | 811 | 811 |
Loan-to-value ratio at loan origination | 80.00% | 80.00% |
Maximum | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | $ 1,926,000 | $ 1,933,000 |
Interest rate | 4.13% | 4.13% |
Maturity | 2045-11 | 2045-11 |
FICO score at loan origination | Point | 813 | 815 |
Loan-to-value ratio at loan origination | 80.00% | 80.00% |
Weighted Average | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | $ 778,000 | $ 804,000 |
Interest rate | 3.50% | 3.48% |
Maturity | 2045-11 | 2045-10 |
FICO score at loan origination | Point | 762 | 763 |
Loan-to-value ratio at loan origination | 71.00% | 71.00% |
Weighted Average | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Unpaid principal balance | $ 731,000 | $ 742,000 |
Interest rate | 3.38% | 3.38% |
Maturity | 2045-03 | 2045-03 |
FICO score at loan origination | Point | 769 | 769 |
Loan-to-value ratio at loan origination | 69.00% | 69.00% |
Rollforward of Mortgage Loans H
Rollforward of Mortgage Loans Held for Investment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Investments Classified By Contractual Maturity Date [Line Items] | ||
Fair value, beginning of period | $ 116,857 | $ 31,460 |
Purchased | 40,855 | 95,769 |
Repaid | (6,428) | (4,172) |
Change in fair value | 913 | 244 |
Fair value, end of period | 152,197 | $ 123,301 |
Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Investments Classified By Contractual Maturity Date [Line Items] | ||
Fair value, beginning of period | 226,908 | |
Repaid | (18,439) | |
Change in fair value | 949 | |
Fair value, end of period | $ 209,418 |
Schedule of Unobservable Inputs
Schedule of Unobservable Inputs Used in Level 3 Valuation of Mortgage Loans Held for Investment (Details) - Level 3 | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Minimum | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 2.70% | 2.20% |
Conditional refinance rate | 13.90% | 0.00% |
Default rate | 0.00% | 0.00% |
Loss severity | 10.00% | 0.00% |
Maximum | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 3.20% | 3.60% |
Conditional refinance rate | 22.30% | 21.30% |
Default rate | 1.80% | 2.00% |
Loss severity | 22.80% | 22.90% |
Weighted Average | Mortgage Loans Held for Investment in Securitization Trusts, at Fair Value | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 3.00% | 3.30% |
Conditional refinance rate | 17.20% | 16.40% |
Default rate | 0.40% | 0.50% |
Loss severity | 13.40% | 14.40% |
Mortgage Held for Investment, at Fair Value | Minimum | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 2.80% | 3.00% |
Conditional refinance rate | 14.60% | 13.60% |
Default rate | 0.00% | 0.00% |
Loss severity | 10.00% | 10.50% |
Mortgage Held for Investment, at Fair Value | Maximum | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 3.10% | 3.50% |
Conditional refinance rate | 21.50% | 21.70% |
Default rate | 1.90% | 2.10% |
Loss severity | 21.40% | 22.20% |
Mortgage Held for Investment, at Fair Value | Weighted Average | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 3.00% | 3.30% |
Conditional refinance rate | 17.40% | 16.40% |
Default rate | 0.40% | 0.70% |
Loss severity | 13.30% | 14.90% |
Rollforward of Mortgage Servici
Rollforward of Mortgage Servicing Rights (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Schedule Of Available For Sale Securities [Line Items] | |
Fair value, beginning of period | $ 269,926 |
Change in fair value due to: | |
Fair value, end of period | 316,176 |
Mortgage Servicing Rights | |
Schedule Of Available For Sale Securities [Line Items] | |
Fair value, beginning of period | 269,926 |
Purchases | 84,361 |
Change in fair value due to: | |
Changes in valuation inputs or assumptions | (30,999) |
Other changes, including realization of cash flows | (7,112) |
Fair value, end of period | $ 316,176 |
Schedule of Unobservable Inpu52
Schedule of Unobservable Inputs Used in Level 3 Valuation of Mortgage Servicing Rights (Details) - Mortgage Servicing Rights - Level 3 - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Minimum | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 10.00% | 10.00% |
Prepayment rate | 4.60% | 5.60% |
Delinquency rate | 0.30% | 0.00% |
Annual cost to service | $ 77,000 | $ 80,000 |
Maximum | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 15.00% | 15.00% |
Prepayment rate | 29.60% | 30.70% |
Delinquency rate | 13.40% | 6.03% |
Annual cost to service | $ 112,000 | $ 101,000 |
Weighted Average | ||
Fair Value Inputs Assets Quantitative Information [Line Items] | ||
Discount rate | 10.40% | 10.40% |
Prepayment rate | 11.90% | 11.90% |
Delinquency rate | 1.60% | 1.40% |
Annual cost to service | $ 87,000 | $ 88,000 |
Schedule of Mortgage Servicing
Schedule of Mortgage Servicing Income and Mortgage Servicing Expenses (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Investments Debt And Equity Securities [Abstract] | |
Servicing income | $ 18,474 |
Ancillary income | 408 |
Servicing income | $ 18,882 |
Summary of Other Investments (D
Summary of Other Investments (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | |
Schedule Of Investments [Abstract] | |||
Short-term investments | [1] | $ 30,447 | $ 30,327 |
Debt security, held-to-maturity | [1] | 15,000 | 15,000 |
Equity investments | 6,017 | 6,603 | |
Total other investments | $ 51,464 | $ 51,930 | |
[1] | Included in other investments on the consolidated balance sheets. |
Other Investments - Additional
Other Investments - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Dec. 31, 2015 | ||
Schedule Of Held To Maturity Securities [Line Items] | |||
Debt security, held-to-maturity | [1] | $ 15,000 | $ 15,000 |
Available for sale securities equity securities | $ 6,017 | 6,603 | |
Maturity date | Mar. 24, 2019 | ||
Debt security bears interest at the rate | The debt security pays interest quarterly at the rate of 4.0% above the three-month London Interbank Offered Rate (“LIBOR”). | ||
Debt security, held-to-maturity, fair value | [1] | $ 14,477 | $ 14,871 |
London Interbank Offered Rate (LIBOR) | |||
Schedule Of Held To Maturity Securities [Line Items] | |||
Debt security, variable rate basis added to LIBOR to determine interest rate | 4.00% | ||
Federal Home Loan Bank of Atlanta (FHLB) | |||
Schedule Of Held To Maturity Securities [Line Items] | |||
Available for sale securities equity securities | $ 17 | ||
Available for Sale Equity Security Investment in Counterparty | |||
Schedule Of Held To Maturity Securities [Line Items] | |||
Available for sale securities equity securities | $ 6,000 | ||
[1] | Included in other investments on the consolidated balance sheets. |
Borrowings - Additional Informa
Borrowings - Additional Information (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016USD ($)PersonInstitution | Dec. 31, 2015USD ($)Person | |
Banking And Thrift [Abstract] | ||
Number of counterparties in repurchase agreements | Person | 26 | 25 |
Weighted average contractual maturity of the repurchase agreements outstanding | 24 days | 27 days |
Fair value of assets pledged as collateral under repurchase agreements | $ 11,676,938,000 | $ 14,072,647,000 |
Number of financial institutions | Institution | 3 | |
Number of outstanding borrowings from counterparties | Person | 2 | |
Warehouse lines of credit | $ 63,615,000 | 60,096,000 |
Warehouse lines of credit earliest maturity date | 2016-06 | |
Warehouse lines of credit last maturity date | 2016-12 | |
Fair value of securities pledged as collateral under lines of credit facilities | $ 67,685,000 | |
Warehouse lines of credit, Maximum borrowing capacity | 300,000,000 | |
FHLB advances outstanding | 0 | 14,132,000 |
Fair value of assets pledged as collateral under FHLB | 15,714,000 | |
FHLB advances maximum borrowing capacity | 1,000,000,000 | |
Outstanding principal amount | $ 60,567,000 | $ 58,052,000 |
Collateralized borrowings weighted-average interest rate | 2.75% | 2.75% |
Scheduled distribution date | 2045-11 |
Contractual Maturity Informatio
Contractual Maturity Information Regarding Repurchase Agreements (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements, Carrying Value | $ 11,419,354 | $ 13,443,883 |
Weighted Average Contractual Rate | 0.67% | 0.65% |
Within 30 days | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements, Carrying Value | $ 10,669,354 | $ 12,693,883 |
Weighted Average Contractual Rate | 0.66% | 0.64% |
30 days to 3 months | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements, Carrying Value | $ 500,000 | |
Weighted Average Contractual Rate | 0.90% | 0.00% |
3 months to 36 months | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements, Carrying Value | $ 250,000 | $ 750,000 |
Weighted Average Contractual Rate | 0.79% | 0.75% |
Schedule of Location of Derivat
Schedule of Location of Derivatives on Balance Sheet (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Derivatives Fair Value [Line Items] | ||
Derivative assets | $ 20,207 | $ 2,914 |
Derivative liabilities | 419,282 | 325,233 |
Interest Rate Swaps and Swaptions | Derivative Assets | ||
Derivatives Fair Value [Line Items] | ||
Derivative assets | 6 | 2,031 |
Interest Rate Swap | ||
Derivatives Fair Value [Line Items] | ||
Derivative assets | 1,304 | |
Interest Rate Swap | Derivative Liabilities | ||
Derivatives Fair Value [Line Items] | ||
Derivative liabilities | 11,440 | 6,802 |
Futures Contracts | ||
Derivatives Fair Value [Line Items] | ||
Derivative assets | 693 | |
Futures Contracts | Derivative Assets | ||
Derivatives Fair Value [Line Items] | ||
Derivative assets | 693 | |
Futures Contracts | Derivative Liabilities | ||
Derivatives Fair Value [Line Items] | ||
Derivative liabilities | 407,842 | 286,058 |
Forward Purchase Commitments - MBS | Derivative Assets | ||
Derivatives Fair Value [Line Items] | ||
Derivative assets | 20,150 | 165 |
Forward Purchase Commitments - MBS | Derivative Liabilities | ||
Derivatives Fair Value [Line Items] | ||
Derivative liabilities | 32,373 | |
Forward Purchase Commitments - Mortgage Loans | Derivative Assets | ||
Derivatives Fair Value [Line Items] | ||
Derivative assets | $ 51 | $ 25 |
Volume of Activity for Interest
Volume of Activity for Interest Rate Derivative Instruments (Details) - Interest Rate Swap - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Derivative [Line Items] | ||
Notional Value, Beginning of period | $ 4,600,000,000 | $ 8,300,000,000 |
Expirations and terminations | (600,000,000) | (1,000,000,000) |
Notional Value, End of period | $ 4,000,000,000 | $ 7,300,000,000 |
Hedging Exposure Future Cash Fl
Hedging Exposure Future Cash Flows with Interest Rate Swaps For Forecasted Transactions (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2016 | Dec. 31, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | |
Derivative Instruments Gain Loss [Line Items] | ||||
Weighted Average Remaining Term in Months | 11 months | 12 months | ||
Weighted Average Fixed Interest Rate | 0.92% | 0.91% | ||
Interest Rate Swap | ||||
Derivative Instruments Gain Loss [Line Items] | ||||
Notional Amount | $ 4,000,000,000 | $ 4,600,000,000 | $ 7,300,000,000 | $ 8,300,000,000 |
12 Months or Less | ||||
Derivative Instruments Gain Loss [Line Items] | ||||
Maturity - lower remaining maturity range | 0 months | 0 months | ||
Maturity - higher remaining maturity range | 12 months | 12 months | ||
Weighted Average Remaining Term in Months | 6 months | 6 months | ||
Weighted Average Fixed Interest Rate | 0.95% | 0.92% | ||
12 Months or Less | Interest Rate Swap | ||||
Derivative Instruments Gain Loss [Line Items] | ||||
Notional Amount | $ 2,400,000,000 | $ 2,400,000,000 | ||
Over 12 Months to 24 Months | ||||
Derivative Instruments Gain Loss [Line Items] | ||||
Maturity - lower remaining maturity range | 12 months | 12 months | ||
Maturity - higher remaining maturity range | 24 months | 24 months | ||
Weighted Average Remaining Term in Months | 17 months | 17 months | ||
Weighted Average Fixed Interest Rate | 0.87% | 0.89% | ||
Over 12 Months to 24 Months | Interest Rate Swap | ||||
Derivative Instruments Gain Loss [Line Items] | ||||
Notional Amount | $ 1,600,000,000 | $ 1,800,000,000 | ||
Over 24 Months to 36 Months | ||||
Derivative Instruments Gain Loss [Line Items] | ||||
Maturity - lower remaining maturity range | 24 months | 24 months | ||
Maturity - higher remaining maturity range | 36 months | 36 months | ||
Weighted Average Remaining Term in Months | 0 months | 26 months | ||
Weighted Average Fixed Interest Rate | 0.96% | |||
Over 24 Months to 36 Months | Interest Rate Swap | ||||
Derivative Instruments Gain Loss [Line Items] | ||||
Notional Amount | $ 400,000,000 |
Derivatives and other Hedging61
Derivatives and other Hedging Instruments - Additional Information (Details) | 3 Months Ended | |||
Mar. 31, 2016USD ($)Contract | Mar. 31, 2015USD ($)Contract | Dec. 31, 2015Contract | Dec. 31, 2014Contract | |
Derivative [Line Items] | ||||
Estimated amount related to derivatives reclassified to interest expense during the next 12 months | $ 109,000 | |||
Interest Rate Swaptions | ||||
Derivative [Line Items] | ||||
Number of derivative instruments outstanding | Contract | 4 | 6 | ||
Proceeds from swaptions termination | $ 2,049,000 | |||
Eurodollar Future | ||||
Derivative [Line Items] | ||||
Number of derivative instruments outstanding | Contract | 95,458 | 128,713 | 108,824 | 130,074 |
Derivative term of contract | 3 months | |||
Notional Amount | $ 1,000,000 | |||
Fair value of derivatives in net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to agreements | $ 11,440,000 | |||
Eurodollar Future | Minimum | ||||
Derivative [Line Items] | ||||
Futures contracts range | 2,016 | |||
Eurodollar Future | Maximum | ||||
Derivative [Line Items] | ||||
Futures contracts range | 2,021 |
Schedule of Outstanding Interes
Schedule of Outstanding Interest Rate Swaptions (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Derivative [Line Items] | ||
Weighted Average Months to Expiration | 11 months | 12 months |
Options | ||
Derivative [Line Items] | ||
Original Cost | $ 6,813,000 | $ 10,813,000 |
Fair Value | $ 6,000 | $ 727,000 |
Weighted Average Months to Expiration | 4 months | 6 months |
Underlying Swaps | ||
Derivative [Line Items] | ||
Notional Amount | $ 2,000,000,000 | $ 3,065,000,000 |
Weighted Average Fixed Pay Rate | 3.35% | 3.23% |
Weighted Average Term (Years) | 6 years | 6 years |
Schedule of Composition of Futu
Schedule of Composition of Futures Contracts (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Derivative [Line Items] | ||
Total fair value of Futures Contracts | $ (407,842) | $ (285,365) |
Futures Contracts Designed to Replicate Swaps | ||
Derivative [Line Items] | ||
Total fair value of Futures Contracts | (407,408) | (285,711) |
Futures Contracts Designed to Hedge Value Changes in Forward Purchases | ||
Derivative [Line Items] | ||
Total fair value of Futures Contracts | $ (434) | $ 346 |
Schedule of Volume of Activity
Schedule of Volume of Activity Futures Contracts (Details) - Eurodollar Future - Contract | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Derivatives Fair Value [Line Items] | ||
Number of contracts, Beginning of period | 108,824 | 130,074 |
New positions opened | 1,773 | 20,518 |
Early settlements | (5,427) | (13,268) |
Settlements at maturity | (9,712) | (8,611) |
Number of contracts, End of period | 95,458 | 128,713 |
Schedule of ARM Securities Forw
Schedule of ARM Securities Forward Purchase Commitments (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Derivative [Line Items] | ||
Forward purchase agreements - Face/UPB | $ 3,804,615 | $ 2,826,769 |
Forward purchase agreements - Cost | 3,930,324 | 2,911,197 |
Forward purchase agreements - Fair Value | 3,950,525 | 2,879,014 |
Forward purchase agreements - Net Asset (Liability) | 20,201 | (32,183) |
ARMs - Originators | ||
Derivative [Line Items] | ||
Forward purchase agreements - Face/UPB | 173,605 | 145,246 |
Forward purchase agreements - Cost | 177,117 | 147,749 |
Forward purchase agreements - Fair Value | 178,699 | 147,914 |
Forward purchase agreements - Net Asset (Liability) | 1,582 | 165 |
Fixed-rate TBA Dollar Roll Securities | ||
Derivative [Line Items] | ||
Forward purchase agreements - Face/UPB | 3,617,000 | 2,655,000 |
Forward purchase agreements - Cost | 3,739,204 | 2,736,748 |
Forward purchase agreements - Fair Value | 3,757,772 | 2,704,375 |
Forward purchase agreements - Net Asset (Liability) | 18,568 | (32,373) |
Whole Mortgage Loans | ||
Derivative [Line Items] | ||
Forward purchase agreements - Face/UPB | 14,010 | 26,523 |
Forward purchase agreements - Cost | 14,003 | 26,700 |
Forward purchase agreements - Fair Value | 14,054 | 26,725 |
Forward purchase agreements - Net Asset (Liability) | $ 51 | $ 25 |
Gross Amounts Associated with D
Gross Amounts Associated with Derivative Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Derivative [Line Items] | ||
Derivative assets, at fair value | $ 20,207 | $ 2,914 |
Derivative liabilities, at fair value | (419,282) | (325,233) |
Interest Rate Swap | ||
Derivative [Line Items] | ||
Derivative assets, at fair value | 1,304 | |
Net Asset | 1,304 | |
Interest Rate Swaptions | ||
Derivative [Line Items] | ||
Derivative assets, at fair value | 6 | 727 |
Cash Collateral Posted (Held) | (25) | (1,106) |
Net Asset | (19) | (379) |
Futures Contracts | ||
Derivative [Line Items] | ||
Derivative assets, at fair value | 693 | |
Net Asset | 693 | |
Forward Purchase Commitments | ||
Derivative [Line Items] | ||
Derivative assets, at fair value | 20,201 | 190 |
Net Asset | 20,201 | 190 |
Second Interest Rate Swap | ||
Derivative [Line Items] | ||
Derivative liabilities, at fair value | (11,440) | (6,802) |
Cash Collateral Posted (Held) | 16,518 | 14,626 |
Net Liability | 5,078 | 7,824 |
Second Futures Contracts | ||
Derivative [Line Items] | ||
Derivative liabilities, at fair value | (407,842) | (286,058) |
Cash Collateral Posted (Held) | 447,624 | 335,084 |
Net Liability | 39,782 | 49,026 |
Second Forward Purchase Commitments | ||
Derivative [Line Items] | ||
Derivative liabilities, at fair value | (32,373) | |
Cash Collateral Posted (Held) | 5,148 | 25,687 |
Net Liability | $ 5,148 | $ (6,686) |
The Components of Loss on Deriv
The Components of Loss on Derivative Instruments Net (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | $ (92,494) | $ (102,785) |
Interest Rate Swaps – Net Realized and Unrealized Gains | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | (5,942) | 1,116 |
Interest Rate Swaptions | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | (721) | (3,027) |
Interest Rate Swap | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | (5,411) | (21,423) |
Futures Contracts - fair value adjustments | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | (122,477) | (94,016) |
Futures Contracts - Other Realized Losses | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | (9,884) | (22,374) |
Mortgage Loan Purchase Commitments - Fair Value Adjustments | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | (20) | 331 |
TBA Dollar Roll | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | 17,602 | 23,155 |
TBA Dollar Rolls – Net Realized And Unrealized Gains (Losses) | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | 52,989 | 20,946 |
Futures Contracts - Losses From Maturities | ||
Derivative Instruments Gain Loss [Line Items] | ||
Net gain (loss) on derivative instruments | $ (18,630) | $ (7,493) |
Schedule of Interest Rate Swap
Schedule of Interest Rate Swap Agreements on Accumulated Other Comprehensive Income (Details) - Interest Rate Swap - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Derivative Instruments And Hedging Activities Disclosures [Line Items] | ||
Beginning balance | $ 673 | $ (30,042) |
Reclassification of net losses to the income statement | 1,376 | 13,438 |
Ending balance | $ 2,049 | $ (16,604) |
Capital Stock - Additional Info
Capital Stock - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Jun. 18, 2013 | |
Equity [Abstract] | |||
Common stock share authorized to repurchase | 4,697,645 | ||
Common stock shares authorized to repurchase | 10,000,000 | ||
Stock repurchased during period, shares | 1,273,625 | 0 | |
Stock repurchased during period, value | $ 14,776 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Basic earnings (loss) per share: | ||
Net loss | $ (71,165) | $ (34,535) |
Dividends declared on preferred stock | (5,480) | (5,481) |
Net loss available to common shareholders | $ (76,645) | $ (40,016) |
Weighted average shares | 94,850,791 | 96,783,199 |
Basic earnings (loss) per share | $ (0.81) | $ (0.41) |
Diluted earnings (loss) per share: | ||
Net loss | $ (71,165) | $ (34,535) |
Dividends declared on preferred stock | (5,480) | (5,481) |
Net income (loss) available to common shareholders | $ (76,645) | $ (40,016) |
Weighted average shares | 94,850,791 | 96,783,199 |
Diluted weighted average shares | 94,850,791 | 96,783,199 |
Diluted earnings (loss) per share | $ (0.81) | $ (0.41) |
Transactions with Related Par71
Transactions with Related Parties - Additional Information (Details) | 1 Months Ended | 3 Months Ended | |
Oct. 31, 2014USD ($) | Mar. 31, 2016USD ($)Director | Dec. 31, 2015USD ($) | |
ACA | |||
Related Party Transaction [Line Items] | |||
Percentage of management fees payable | 8.33% | ||
Management Fees | |||
Related Party Transaction [Line Items] | |||
Number of independent directors | Director | 6 | ||
Management agreement initial expiration date | Feb. 23, 2017 | ||
Management agreement additional term of expiration | 1 year | ||
Prior notice for uncertain termination (in days) | 180 days | ||
Proportion of average annual management fee description | ACA must be provided 180 days prior notice of any such termination and will be paid a termination fee equal to four times the average annual management fee earned by ACA during the two year period immediately preceding termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. | ||
Period of annual management fees earned (in years) | 2 years | ||
Management fee payable | $ 3,806,000 | $ 3,063,000 | |
Financial interest at an annual rate | $ 300,000 | ||
Management Fees | Company's Equity Up To $250 Million | |||
Related Party Transaction [Line Items] | |||
Management fee payable | $ 250,000,000 | ||
Management fee bases per annum | 1.50% | ||
Management Fees | Company's Equity In Excess Of $250 Million And Up To $500 Million | |||
Related Party Transaction [Line Items] | |||
Management fee payable | $ 500,000,000 | ||
Management fee bases per annum | 1.10% | ||
Management fee payable, minimum | $ 250,000,000 | ||
Management Fees | Company's Equity In Excess Of $500 Million And Up To $750 Million | |||
Related Party Transaction [Line Items] | |||
Management fee payable | $ 750,000,000 | ||
Management fee bases per annum | 0.80% | ||
Management fee payable, minimum | $ 500,000,000 | ||
Management Fees | Company's Equity In Excess Of $750 Million | |||
Related Party Transaction [Line Items] | |||
Management fee bases per annum | 0.50% | ||
Management fee payable, minimum | $ 750,000,000 |
Amounts Incurred for Management
Amounts Incurred for Management Fee and Reimbursable Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Related Party Transaction [Line Items] | ||
Management fee | $ 3,982 | $ 4,095 |
Share-based compensation | 1,293 | 1,045 |
Management Fees | ||
Related Party Transaction [Line Items] | ||
Management fee | 3,982 | 4,095 |
Reimbursable expenses | 1,343 | 1,293 |
Total | 5,325 | 5,388 |
Share-based compensation | $ 1,293 | $ 1,045 |
Accumulated Other Comprehensi73
Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance accumulated other comprehensive income (loss) | $ 98,658 | $ 205,765 |
Other comprehensive income (loss) before reclassification | 37,755 | 95,890 |
Amount reclassified to MBS available for sale | (164) | (4,162) |
Amounts reclassified to net gain/loss on the sale of MBS | (4,287) | (16,453) |
Amounts reclassified to interest expense | 1,376 | 13,438 |
Net current period other comprehensive income (loss), unrealized gain/(loss) on derivative instruments | 2,793 | 14,167 |
Other comprehensive income | 34,680 | 88,713 |
Ending balance, total accumulated other comprehensive income (loss) | 133,338 | 294,478 |
Derivative Instruments | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | 838 | (25,922) |
Other comprehensive income (loss) before reclassification | 1,582 | 4,848 |
Amount reclassified to MBS available for sale | (165) | (4,120) |
Amounts reclassified to interest expense | 1,376 | 13,438 |
Net current period other comprehensive income (loss), unrealized gain/(loss) on derivative instruments | 2,793 | 14,166 |
Ending balance | 3,631 | (11,756) |
Other Investments | Unrealized Gain (Loss) on Investments | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance, accumulated other comprehensive income (loss), unrealized gain/(loss) on investments | (547) | (595) |
Other comprehensive income (loss) before reclassification, unrealized gain/(loss) on derivative instruments | 94 | 129 |
Net current period other comprehensive income (loss), unrealized gain/(loss) on investments | 94 | 129 |
Ending balance, accumulated other comprehensive income (loss), unrealized gain/(loss) on investments | (453) | (466) |
Unsettled MBS | Unrealized Gain (Loss) on Investments | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance, accumulated other comprehensive income (loss), unrealized gain/(loss) on investments | (1) | 42 |
Other comprehensive income (loss) before reclassification, unrealized gain/(loss) on derivative instruments | 54 | 794 |
Amount reclassified to MBS available for sale | 1 | (42) |
Net current period other comprehensive income (loss), unrealized gain/(loss) on investments | 55 | 752 |
Ending balance, accumulated other comprehensive income (loss), unrealized gain/(loss) on investments | 54 | 794 |
MSB | Unrealized Gain (Loss) on Investments | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance, accumulated other comprehensive income (loss), unrealized gain/(loss) on investments | 98,368 | 232,240 |
Other comprehensive income (loss) before reclassification, unrealized gain/(loss) on derivative instruments | 36,025 | 90,119 |
Amounts reclassified to net gain/loss on the sale of MBS | (4,287) | (16,453) |
Net current period other comprehensive income (loss), unrealized gain/(loss) on investments | 31,738 | 73,666 |
Ending balance, accumulated other comprehensive income (loss), unrealized gain/(loss) on investments | $ 130,106 | $ 305,906 |
Subsequent Event - Additional I
Subsequent Event - Additional Information (Details) $ / shares in Units, $ in Thousands | Apr. 10, 2016USD ($)$ / sharesshares | Mar. 31, 2016$ / shares | Dec. 31, 2015$ / shares |
Subsequent Event [Line Items] | |||
Preferred stock dividend rate per year | 7.625% | 7.625% | |
Preferred stock, par value | $ 0.001 | $ 0.001 | |
7.625% Series A Cumulative Redeemable Preferred Stock | |||
Subsequent Event [Line Items] | |||
Preferred stock dividend rate per year | 7.625% | ||
Preferred stock, par value | $ 0.001 | ||
Subsequent Event | ACA | |||
Subsequent Event [Line Items] | |||
Termination fee | $ | $ 45,411 | ||
Subsequent Event | Annaly Capital Management Inc | |||
Subsequent Event [Line Items] | |||
Business acquisition, agreement date | Apr. 10, 2016 | ||
Percentage of aggregate consideration payable to holders of company's common stock in the form of common stock | 65.00% | ||
Percentage of aggregate consideration payable to holders of company's common stock in the form of cash | 35.00% | ||
Percentage of outstanding shares of common stock | 0.6667% | ||
Termination fee | $ | $ 44,949 | ||
Subsequent Event | Annaly Capital Management Inc | Cumulative Redeemable Series E Preferred Stock | |||
Subsequent Event [Line Items] | |||
Preferred stock dividend rate per year | 7.625% | ||
Preferred stock, par value | $ 0.01 | ||
Each share converted to newly-designated series of Annaly Preferred stock | shares | 1 | ||
Subsequent Event | Annaly Capital Management Inc | Mixed Consideration Option | |||
Subsequent Event [Line Items] | |||
Business acquisition, per share | $ 5.55 | ||
Common stock shares issuable for each share | 0.9894 | ||
Subsequent Event | Annaly Capital Management Inc | Cash Consideration Option | |||
Subsequent Event [Line Items] | |||
Business acquisition, per share | $ 15.85 | ||
Subsequent Event | Annaly Capital Management Inc | Stock Consideration Option | |||
Subsequent Event [Line Items] | |||
Common stock shares issuable for each share | 1.5226 |