Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 04, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | Western Asset Mortgage Capital Corp | |
Entity Central Index Key | 1,465,885 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 41,919,801 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Assets: | ||
Cash and cash equivalents | $ 22,440 | $ 24,711 |
Mortgage-backed securities and other securities, at fair value ($2,587,846 and $2,777,717 pledged as collateral, at fair value, respectively) | 2,593,418 | 2,851,127 |
Residential Whole-Loans, at fair value ($201,267 and $218,538 pledged as collateral, at fair value, respectively) | 201,267 | 218,538 |
Securitized commercial loan, at fair value | 23,675 | 25,000 |
Receivable under reverse repurchase agreements | 9,307 | |
Investment related receivable | 21,509 | 572 |
Accrued interest receivable | 24,494 | 22,621 |
Due from counterparties | 280,471 | 249,563 |
Derivative assets, at fair value | 100,161 | 21,915 |
Other assets | 173 | 382 |
Total Assets | 3,276,915 | 3,414,429 |
Liabilities: | ||
Borrowings under repurchase agreements, net | 2,403,129 | 2,585,667 |
Securitized debt, at fair value | 10,417 | 11,000 |
Accrued interest payable | 20,340 | 20,431 |
Investment related payables | 18,044 | 66,146 |
Due to counterparties | 21,608 | 9,950 |
Derivative liability, at fair value | 322,387 | 180,177 |
Accounts payable and accrued expenses | 1,971 | 2,078 |
Payable to related party | 3,103 | 3,019 |
Dividend payable | 18,864 | 24,313 |
Total Liabilities | $ 2,819,863 | $ 2,902,781 |
Commitments and contingencies | ||
Stockholders' Equity: | ||
Common stock, $0.01 par value, 500,000,000 shares authorized, 41,919,801 shares issued and outstanding, respectively | $ 419 | $ 419 |
Preferred stock, $0.01 par value, 100,000,000 shares authorized and no shares outstanding | ||
Additional paid-in capital | $ 763,869 | $ 763,283 |
Retained earnings (accumulated deficit) | (307,236) | (252,054) |
Total Stockholders' Equity | 457,052 | 511,648 |
Total Liabilities and Stockholders' Equity | $ 3,276,915 | $ 3,414,429 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Fair value of mortgage-backed securities and other securities pledged as collateral (in dollars) | $ 2,587,846 | $ 2,777,717 |
Fair value of residential whole-loans pledged as collateral | $ 201,267 | $ 218,538 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 41,919,801 | 41,919,801 |
Common stock, shares outstanding | 41,919,801 | 41,919,801 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Assets and liabilities of the consolidated VIEs | ||
Residential Whole-Loans, at fair value ($201,267 and $218,538 pledged as collateral, at fair value, respectively) | $ 201,267 | $ 218,538 |
Securitized commercial loan, at fair value | 23,675 | 25,000 |
Investment related receivable | 21,509 | 572 |
Accrued interest receivable | 24,494 | 22,621 |
Total Assets | 3,276,915 | 3,414,429 |
Securitized debt, at fair value | 10,417 | 11,000 |
Accrued interest payable | 20,340 | 20,431 |
Accounts payable and accrued expenses | 1,971 | 2,078 |
Total Liabilities | 2,819,863 | 2,902,781 |
VIE | ||
Fair value of residential whole-loans pledged as collateral | 201,267 | 218,538 |
Assets and liabilities of the consolidated VIEs | ||
Residential Whole-Loans, at fair value ($201,267 and $218,538 pledged as collateral, at fair value, respectively) | 201,267 | 218,538 |
Securitized commercial loan, at fair value | 23,675 | 25,000 |
Investment related receivable | 3,200 | |
Accrued interest receivable | 1,737 | 1,836 |
Total Assets | 229,879 | 245,374 |
Securitized debt, at fair value | 10,417 | 11,000 |
Accrued interest payable | 85 | 85 |
Accounts payable and accrued expenses | 2 | 2 |
Total Liabilities | $ 10,504 | $ 11,087 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Net Interest Income: | ||
Interest income | $ 29,618 | $ 40,806 |
Interest expense | 7,979 | 6,402 |
Net Interest Income | 21,639 | 34,404 |
Other Income (Loss): | ||
Realized gain (loss) on sale of investments, net | (6,055) | 7,468 |
Other than temporary impairment | (10,797) | (4,651) |
Unrealized gain (loss), net | 10,769 | 28,410 |
Gain (loss) on derivative instruments, net | (45,170) | (48,302) |
Other, net | (332) | 2,384 |
Other Income (Loss), net | (51,585) | (14,691) |
Operating Expenses: | ||
General and administrative (includes $572 and $679 non-cash stock based compensation, respectively) | 3,605 | 2,874 |
Management fee - related party | 2,753 | 2,693 |
Total Operating Expenses | 6,358 | 5,567 |
Net income (loss) available to Common Stock and participating securities | $ (36,304) | $ 14,146 |
Net income (loss) per Common Share - Basic (in dollars per share) | $ (0.88) | $ 0.34 |
Net income (loss) per Common Share - Diluted (in dollars per share) | (0.88) | 0.34 |
Dividends Declared per Share of Common Stock (in dollars per share) | $ 0.45 | $ 0.67 |
Consolidated Statements of Ope5
Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Consolidated Statements of Operations | ||
Non-cash stock based compensation | $ 572 | $ 679 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - 3 months ended Mar. 31, 2016 - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Retained Earnings (Accumulated) Deficit | Total |
Balance at Dec. 31, 2015 | $ 419 | $ 763,283 | $ (252,054) | $ 511,648 |
Balance (in shares) at Dec. 31, 2015 | 41,919,801 | 41,919,801 | ||
Increase (Decrease) in Stockholders' Equity | ||||
Vesting of restricted stock | 572 | $ 572 | ||
Net income (loss) | (36,304) | (36,304) | ||
Dividends declared on common stock | 14 | (18,878) | (18,864) | |
Balance at Mar. 31, 2016 | $ 419 | $ 763,869 | $ (307,236) | $ 457,052 |
Balance (in shares) at Mar. 31, 2016 | 41,919,801 | 41,919,801 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (36,304) | $ 14,146 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Premium amortization and (discount accretion) on investments, net | 895 | 2,582 |
Interest income earned added to principal of securities | (94) | |
Amortization of deferred financing costs | 134 | |
Restricted stock amortization expense | 572 | 679 |
Premium amortization for MAC interest rate swaps | (164) | (371) |
(Interest received) Interest payments and basis recovered on MAC interest rate swaps | (159) | 246 |
Premium on purchase of Residential Whole-Loans | (230) | |
Unrealized gain, net | (10,769) | (28,410) |
Mark-to-market adjustments on derivative instruments | 64,555 | 56,037 |
Other than temporary impairment | 10,797 | 4,651 |
Realized (gain) loss on sale of securities, net | 6,055 | (7,468) |
Realized (gain) loss on sale of Interest-Only Strips accounted for as derivatives, net | (300) | 2 |
Realized gain on sale of TBAs, net | (7,739) | (7,448) |
Realized (gain) loss on sale of swaptions, net | 712 | (713) |
Realized gain on futures | (14,316) | |
Realized (gain) loss on forward contracts | 28 | (646) |
Realized gain on options | (4,756) | |
Realized gain on foreign currency swaps | (3,942) | |
Realized gain on total return swaps | (8) | |
(Gain) loss on foreign currency transactions, net | 575 | (2,396) |
Changes in operating assets and liabilities: | ||
Increase in accrued interest receivable | (1,873) | (4,533) |
Decrease in other assets | 209 | 155 |
Decrease in accrued interest payable | (91) | (1,247) |
Increase (decrease) in accounts payable and accrued expenses | (107) | 841 |
Increase in payable to related party | 84 | 178 |
Net cash provided by operating activities | 3,994 | 26,055 |
Cash flows from investing activities: | ||
Purchase of securities | (1,059,720) | (334,429) |
Proceeds from sale of securities | 1,166,621 | 536,869 |
Principal payments and basis recovered on securities | 75,531 | 100,436 |
Purchase of Residential Whole-Loans | (10,230) | |
Principal payments on Residential Whole-Loans | 14,021 | 20 |
Purchase of Commercial Whole-Loans | (8,750) | |
Payment of premium for option derivatives | (17,951) | |
Premium received from option derivatives | 22,707 | |
Net settlements of TBAs | 7,624 | 9,629 |
Payment on termination of futures | 14,316 | |
Proceeds from sale of interest rate swaptions | 2,075 | 17,768 |
Premium for MAC interest rate swaps | 465 | |
(Interest received) Interest payments and basis recovered on MAC interest rate swaps | 159 | (32) |
Due from counterparties | (9,719) | |
Payment on termination of foreign currency swaps | 3,942 | |
Payments on total return swaps | 8 | |
Payments made on reverse repurchase agreements | (9,307) | (65,674) |
Premium for interest rate swaptions, net | (19,215) | |
Net cash provided by investing activities | 210,772 | 226,392 |
Cash flows from financing activities: | ||
Proceeds from repurchase agreement borrowings | 3,775,760 | 5,074,942 |
Repayments of repurchase agreement borrowings | (3,959,010) | (5,331,410) |
Proceeds from forward contracts | 30,876 | 71,417 |
Repayments of forward contracts | (30,904) | (70,771) |
Interest payments and basis recovered on MAC interest rate swaps containing an other-than-insignificant financing element | (214) | |
Due from counterparties, net | 21,189 | 51,435 |
Due to counterparties, net | 11,658 | 62,373 |
Dividends paid on common stock | (24,313) | (29,204) |
Net cash used in financing activities | (217,122) | (274,302) |
Effect of exchange rate changes on cash and cash equivalents | 85 | 115 |
Net decrease in cash and cash equivalents | (2,271) | (21,740) |
Cash and cash equivalents beginning of period | 24,711 | 47,222 |
Cash and cash equivalents end of period | 22,440 | 25,482 |
Supplemental disclosure of operating cash flow information: | ||
Interest paid | 7,626 | 6,560 |
Supplemental disclosure of non-cash financing/investing activities: | ||
Principal payments of securities, not settled | 290 | |
Securities sold, not settled | (151) | |
Net unsettled TBAs | 115 | 4 |
Principal payments of Residential Whole-Loans, not settled | 3,200 | |
Dividends and distributions declared, not paid | $ 18,864 | $ 28,086 |
Organization
Organization | 3 Months Ended |
Mar. 31, 2016 | |
Organization | |
Organization | Note 1 — Organization Western Asset Mortgage Capital Corporation and subsidiaries (the “Company”) is a Delaware corporation commencing operations in May 2012 focusing on investing in, financing and managing a diversified portfolio of real estate related securities, whole-loans and other financial assets. The Company’s portfolio is comprised of Agency RMBS (including TBAs as defined herein), Non-Agency RMBS, Agency and Non-Agency CMBS and Whole-Loans. In addition, and to a significantly lesser extent, the Company has invested in other securities including certain Agency obligations that are not technically MBS as well as certain Non U.S. CMBS and in asset-backed securities (“ABS”) investments secured by a portfolio of private student loans. The Company’s investment strategy is based on Western Asset Management Company’s (the “Manager”) perspective of which mix of portfolio assets it believes provides the Company with the best risk-reward opportunities at any given time. The Manager will vary the allocation among various asset classes subject to maintaining the Company’s qualification as a REIT and maintaining its exemption from the Investment Company Act of 1940 (the “1940 Act”). These restrictions limit the Company’s ability to invest in non-qualifying MBS, non-real estate assets and/or assets which are not secured by real estate. Accordingly, the Company’s portfolio will continue to be principally invested in qualifying MBS and other real estate related assets. T he Company is externally managed by the Manager, an investment advisor registered with the Securities and Exchange Commission (“SEC”). The Manager is a wholly-owned subsidiary of Legg Mason, Inc. The Company operates and has elected to be taxed as a real estate investment trust or “REIT” commencing with its taxable year ended December 31, 2012. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 2 — Summary of Significant Accounting Policies Basis of Presentation and Consolidation The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 periods. Actual results could differ from those estimates. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. The Company also consolidated two variable interest entities (“VIE”) where it was primary beneficiary. Refer to Note 5 - “Variable Interest Entities” for additional information regarding the impact of consolidation of theses VIE’s. All intercompany amounts between the Company and its subsidiary and consolidated VIE’s have been eliminated in consolidation. Variable Interest Entities VIEs are defined as entities that by design either lack sufficient equity for the entity to finance its activities without additional subordinated financial support or are unable to direct the entity’s activities or are not exposed to the entity’s losses or entitled to its residual returns. The Company evaluates all of its interests in VIEs for consolidation. When the interests are determined to be variable interests, the Company assesses whether it is deemed the primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, it considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers is deemed to have the power to direct the activities of a VIE. To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, it considers all of its economic interests. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company. In instances when a VIE is owned by both the Company and related parties, the Company considers whether there is a single party in the related party group that meets both the power and losses or benefits criteria on its own as though no related party relationship existed. If one party within the related party group meets both these criteria, such reporting entity is the primary beneficiary of the VIE and no further analysis is needed. If no party within the related party group on its own meets both the power and losses or benefits criteria, but the related party group does as a whole meets these two criteria, the determination of primary beneficiary within the related party group is based upon an analysis of the facts and circumstances with the objective of determining which party is most closely associated with the VIE. Determining the primary beneficiary within the related party group requires significant judgement. In instances when the Company is required to consolidate a VIE that is determined to be a qualifying collateralized financing entity, under GAAP, the Company will measure both the financial assets and financial liabilities of the VIE using the fair value of either the VIE’s financial assets or financial liabilities, whichever is more observable. Ongoing assessments of whether an enterprise is the primary beneficiary of a VIE are required. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary have been made to present fairly the Company’s financial position, results of operations and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q. These consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission (“SEC”) on March 11, 2016. The results of operations for the period ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year or any future period. The Company currently operates as one business segment. Cash and Cash Equivalents The Company considers all highly-liquid short term investments with original maturities of 90 days or less when purchased to be cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company places its cash and cash equivalents with what it believes to be high credit quality institutions. At times such investments may be in excess of the Federal Deposit Insurance Corporation insurance limit. Fair Value Election The Company has elected the fair value option for all of its investments and its securitized debt, which permits the Company to measure these financial instruments at fair value with the change in fair value included as a component of earnings. In the Manager’s view, this election more appropriately reflects the results of the Company’s operations for a particular reporting period, as financial asset fair value changes are presented in a manner consistent with the presentation and timing of the fair value changes of economic hedging instruments. Mortgage-Backed Securities and Other Securities The Company’s purchases and sales of mortgage-backed securities and other securities are recorded on the trade date, which results in an investment related payable (receivable) for MBS and other securities purchased (sold) for which settlement has not taken place as of the balance sheet date. In addition, the Company’s TBAs (as defined herein) which have matured but have not settled as of the balance sheet date result in an investment related payable (receivable). The Company’s MBS and other securities are pledged as collateral against borrowings under repurchase agreements. The Company’s MBS and other securities are included in Mortgage-backed securities and other securities at fair value and Investment related receivables in the Consolidated Balance Sheets, with the fair value of such MBS and other securities pledged disclosed parenthetically. Residential and Commercial Loans The Company records its purchases of residential and commercial loans on settlement date as the amount paid to the seller plus any fees paid or less any fees received. All other costs incurred in connection with acquiring residential and commercial loans or committing to purchase residential and commercial loans are charged to expense as incurred. The Company amortizes or accretes any premium or discount over the life of the related loan utilizing the effective interest method, based on the contractual payment terms of the loan. On at least a quarterly basis, the Company evaluates the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the Company does not record an allowance for loan loss as the Company has elected the fair value option. However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. A loan is written off when it is no longer realizable and/or legally discharged. Valuation of financial instruments The Company discloses the fair value of its financial instruments according to a fair value hierarchy (Levels I, II, and III, as defined below). In accordance with GAAP, the Company is required to provide enhanced disclosures regarding instruments in the Level III category (which require significant management judgment), including a separate reconciliation of the beginning and ending balances for each major category of assets and liabilities. GAAP establishes a framework for measuring fair value and expands financial statement disclosure requirements for fair value measurements. GAAP further specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows: Level I — Quoted prices in active markets for identical assets or liabilities. Level II — Quoted prices for similar assets and liabilities 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 III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable, for example, when there is little or no market activity for an investment at the end of the period, unobservable inputs may be used. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Transfers between levels are determined by the Company at the end of the reporting period. When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will use independent pricing services and if the independent pricing service cannot price a particular asset or liability, the Company will obtain third party broker quotes. The Manager’s pricing group, which functions independently from its portfolio management personnel, corroborates the third party broker quote by comparing the broker price to alternate sources or using internal valuation techniques. If independent pricing service, or third party broker quotes are not available, the Company determines the fair value of the securities using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and when applicable, estimates of prepayment and credit losses. Fair value under GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company is forced to sell assets in a short period to meet liquidity needs, the prices it receives can be substantially less than their recorded fair values. The Company performs quarterly reviews of the independent third party pricing data which may consist of a review of the daily change in the prices provided by the independent pricing vendor that exceed established tolerances or comparisons to executed transaction prices, utilizing its Manager’s pricing group. The Manager’s pricing group corroborates the price differences or changes in price by comparing the vendor price to alternate sources including other independent pricing services or broker quotations. If the price change or difference cannot be corroborated, the Manager’s pricing group consults with the portfolio management team for market color in reviewing such pricing data as warranted. To the extent that the Manager has information, typically in the form of broker quotations that would indicate that a price received from the independent pricing service is outside of a tolerance range, the Manager generally challenges the independent pricing service price. Interest income recognition and Impairment Agency MBS, Non-Agency MBS and other securities, excluding Interest-Only Strips, rated AA and higher at the time of purchase Interest income on mortgage-backed and other securities is accrued based on the respective outstanding principal balances and corresponding contractual terms. Premiums and discounts associated with Agency MBS, Non-Agency MBS and other securities, excluding Interest-Only Strips, rated AA and higher at the time of purchase, are amortized into interest income over the estimated life of such securities using the effective yield method. Adjustments to premium and discount amortization are made for actual prepayment activity. The Company estimates prepayments at least quarterly for its securities and, as a result, if prepayments increase (or are expected to increase), the Company will accelerate the rate of amortization on premiums or discounts and make a retrospective adjustment to historical amortization. Alternatively, if prepayments decrease (or are expected to decrease), the Company will reduce the rate of amortization on the premiums or discounts and make a retrospective adjustment to historical amortization. The Company assesses its Agency MBS, Non-Agency MBS and other securities, excluding Interest-Only Strips, rated AA and higher at the time of purchase, for other-than-temporary impairment (“OTTI”) on at least a quarterly basis. The determination of whether a security is other —than —temporarily impaired involves judgement and assumptions based on subjective and objective factors. When the fair value of an investment is less than its amortized cost at the balance sheet date, during a reporting period, the security is considered impaired and 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 considers several factors, including the nature of the investment, communications (if any) from the trustee of securitization regarding the credit quality of the security, the severity and duration of the impairment and the cause of the impairment. When a security is impaired an OTTI is considered to have occurred if there is an adverse change in the expected cash flows (principal or interest) to be received and the fair value of the security is less than its carrying amount and either the Company intends to sell the security or it is more likely than not the Company will be required to sell the security before recovery of its amortized cost. In determining whether an adverse change in cash flows occurred, the present value of the remaining cash flows, as estimated at the initial transaction date (or the last date previously revised), is compared to the present value of the expected cash flows at the current reporting date. The estimated cash flows reflect those a “market participant” would use and are discounted at a rate equal to the current yield used to accrete interest income. The OTTI is recorded in the Company’s Consolidated Statement of Operations. The determination as to whether OTTI exists is subjective given that such determination is based on information available at the time of assessment as well as the Company’s estimates of the future performance and cash flow projections on the security. As a result, the timing and amount of an OTTI constitutes an accounting estimate that may change materially over time. Finally, certain of the Company’s MBS and other securities that are in an unrealized loss position at the end of the reporting period are not considered other-than-temporarily impaired because the Company has the ability and intent to hold the securities to maturity or for a period of time sufficient for a price recovery up to or above the amortized cost of the investment and the Company is not required to sell the security for regulatory or other reasons. Non-Agency MBS and other securities that are rated below AA at the time of purchase and Interest-Only Strips that are not classified as derivatives Interest income on Non-Agency MBS and other securities that are rated below AA at the time of purchase and Interest-Only Strips that are not classified as derivatives are recognized based on the effective yield method. The effective yield on these securities is based on the projected cash flows from each security, which is estimated based on the Company’s observation of the then current information and events, where applicable, and will include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Where appropriate, the Company may include in its cash flow projections the U.S Department of Justice’s settlements with the major residential mortgage originators, regarding certain lending practices. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the underlying collateral, periodic payments of scheduled principal, and prepayments of principal. Therefore, actual maturities of the securities will generally be shorter than stated contractual maturities. Based on the projected cash flow of such securities purchased at a discount to par value, the Company may designate a portion of such purchase discount as credit protection against future credit losses and, therefore, not accrete such amount into interest income. The amount designated as credit discount may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively. In addition, an OTTI is deemed to have occurred when there is an adverse change in the expected cash flows (principal or interest) to be received and the fair value of the security is less than its carrying amount. In determining whether an adverse change in cash flows occurred, the present value of the remaining cash flows, as estimated at the initial transaction date (or the last date previously revised), is compared to the present value of the expected cash flows at the current reporting date. The estimated cash flows reflect those a “market participant” would use and are discounted at a rate equal to the current yield used to accrete interest income. The OTTI is recorded in the Company’s Consolidated Statements of Operations as Other than temporary impairment. Securities denominated in a foreign currency contain additional risk in that the amortized cost basis for those securities may not be recovered due to declines in currency exchange rates. The Company considers the length of time that the security’s fair value has declined due to the decline in foreign exchange rates, when assessing other-than temporary impairment. The determination as to whether OTTI exists is subjective given that such determination is based on information available at the time of assessment as well as the Company’s estimates of the future performance and cash flow projections on the security. As a result, the timing and amount of an OTTI constitutes an accounting estimate that may change materially over time. Finally, certain of the Company’s MBS and other securities that are in an unrealized loss position at the end of the reporting period are not be considered other-than-temporarily impaired because the Company has the ability and intent to hold the securities to maturity or for a period of time sufficient for a price recovery up to or above the amortized cost of the investment and the Company is not required to sell the security for regulatory or other reasons. Sales of Investments Sales of investments are driven by the Company’s portfolio management process. The Company seeks to mitigate risks including those associated with prepayments and will opportunistically rotate the portfolio into securities and/or other assets the Company’s Manager believes have more favorable attributes. Strategies may also be employed to manage net capital gains, which need to be distributed for tax purposes. Realized gains or losses on sales of investments, including Agency Interest-Only Strips not characterized as derivatives, are included in the net Realized gain (loss) on sale of investments, net in the Consolidated Statements of Operations, and are recorded at the time of disposition. Realized gains losses on Interest-Only Strips which are characterized as derivatives are included in Gain (loss) on derivative instruments, net line item in the Consolidated Statements of Operations. The cost of positions sold is calculated using the specific identification method. Investments in an unrealized loss position at the end of each reporting period are evaluated by the Company’s Manager to determine whether the Company has the intent to sell such investments. To the extent the Company has no intent as of the end of such reporting period to sell such investments and it is more likely than not that the Company will not be required to sell the investment before recovery of its amortized cost basis, such unrealized loss is included in Unrealized gain (loss), net in the Consolidated Statements of Operations. Otherwise, when the Company has determined its intent to sell such securities, the unrealized loss is characterized as a realized loss and included in Other than temporary impairment in the Consolidated Statements of Operations. The Company has no intent to sell any of its investments in an unrealized loss position at March 31, 2016. Foreign currency transactions The Company has and expects to continue to enter into transactions denominated in foreign currency from time to time. At the date the transaction is recognized, the asset and/or liability will be measured and recorded using the exchange rate in effect at the date of the transaction. At each balance sheet date, such foreign currency assets and liabilities are re-measured using the exchange rate in effect at the date of the balance sheet, resulting in unrealized foreign currency gains or losses. Unrealized foreign currency gains or losses on MBS and other assets are recorded in Unrealized gain (loss), net in the Consolidated Statement of Operations. In addition, the Company evaluates whether an other-than-temporary impairment is deemed to have occurred on MBS and other assets denominated in a foreign currency. Cash flows from MBS and other assets denominated in foreign currencies are received in a foreign currency, and as a result, the Company may incur a loss due to changes in foreign exchange rates even when all contractual cash flows are received. These adjustments are reflected in the Consolidated Statements of Operations as Other than temporary impairment. Unrealized and realized foreign currency gains or losses on borrowings under repurchase agreements are recorded in Other, net in the Consolidated Statement of Operations. Interest income from investments denominated in a foreign currency and interest expense on borrowings denominated in a foreign currency are recorded at the average rate of exchange during the period. Due from counterparties/Due to counterparties Due from counterparties represents cash posted by the Company with its counterparties as collateral for the Company’s interest rate and/or currency derivative financial instruments, repurchase agreements, and TBAs. Due to counterparties represents cash posted with the Company by its counterparties as collateral under the Company’s interest rate and/or currency derivative financial instruments, repurchase agreements, and TBAs. Included in the due from counterparties and/or due to counterparties are daily variation margin settlement amounts with counterparties which are based on the price movement of the Company’s futures contracts. In addition, as provided below, Due to counterparties may include non-cash collateral in which the Company has the obligation to return and which the Company has either sold or pledged. To the extent the Company receives collateral other than cash from its counterparties such assets are not included in the Company’s Consolidated Balance Sheets. Notwithstanding the foregoing, if the Company either rehypothecates such assets or pledges the assets as collateral pursuant to a repurchase agreement, the cash received and the corresponding liability are reflected in the Consolidated Balance Sheets. Derivatives and hedging activities Subject to maintaining its qualification as a REIT for U.S. federal income tax purposes, the Company utilizes derivative financial instruments, including interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, TBAs and Agency and Non-Agency Interest-Only Strips to hedge the interest rate and currency risk associated with its portfolio and related borrowings. Derivatives, subject to REIT requirements, are used for hedging purposes rather than speculation. The Company has also entered into a total return swap, which transfer the total return of a referenced security to the Company. The Company determines the fair value of its derivative positions and obtains quotations from third parties, including the Chicago Mercantile Exchange or CME, to facilitate the process of determining such fair values. If the Company’s hedging activities do not achieve the desired results, reported earnings may be adversely affected. GAAP requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative. The fair value adjustment will affect either other comprehensive income in stockholders’ equity until the hedged item is recognized in earnings or net income depending on whether the derivative instrument is designated and qualifies as a for hedge for accounting purposes and if so, the nature of the hedging activity. The Company elected not to apply hedge accounting for its derivative instruments. Accordingly, the Company records the change in fair value, of its derivative instruments, which includes net interest rate swap payments/receipts (including accrued amounts) and net currency payments (including accrued amounts) related to interest rate swaps and currency swaps, respectively in Gain (loss) on derivative instruments, net in its Consolidated Statements of Operations. In the Company’s Consolidated Statements of Cash Flows, premiums received or paid on termination of its interest rate swaps, excluding interest rate swaps containing an other-than-insignificant financing element and the unamortized premium of market agreed coupon (“MAC”) interest rate swaps, are included in cash flows from operating activities. Notwithstanding the foregoing, proceeds and payments on settlement of swaptions, mortgage put options, futures contracts and TBAs are included in cash flows from investing activities. Proceeds and payments on settlement of forward contracts are reflected in cash flows from financing activities in the Company’s Consolidated Statement of Cash Flows. While payments made at the time of entering MAC interest rate swaps are included in cash flows from investing activities, payments received by the Company upon entering MAC interest rate swaps are included in either cash flows from investing activities or cash flows financing activities, depending on whether or not the derivative instrument includes an other-than-insignificant financing element. For MAC interest rate swaps containing an other-than-insignificant financing element, all cash flows over the life of the derivative are treated as cash flows from financing activities. Return and recovery of basis activity for MAC interest rate swaps is included in cash flows from investing activities for swaps not containing an other-than-insignificant financing element in the Company’s Consolidated Statement of Cash Flows. For Agency and Non-Agency Interest-Only Strips accounted for as derivatives, the purchase, sale and recovery of basis activity is included with MBS and other securities under cash flows from investing activities in the Company’s Consolidated Statement of Cash Flows. The Company evaluates the terms and conditions of its holdings of Agency and Non-Agency Interest-Only Strips, interest rate swaptions, currency forwards, futures contracts, total return swaps and TBAs to determine if these instruments have the characteristics of an investment or should be considered a derivative under GAAP. In determining the classification of its holdings of Interest-Only Strips, the Company evaluates the securities to determine if the nature of the cash flows has been altered from that of the underlying mortgage collateral. Generally, Interest-Only Strips for which the security represents a strip off of a mortgage pass through security will be considered a hybrid instrument classified as a MBS investment in the Consolidated Balance Sheets utilizing the fair value option. Alternatively, those Interest-Only Strips, for which the underlying mortgage collateral has been included into a structured security that alters the cash flows from the underlying mortgage collateral, are accounted for as derivatives at fair value. Accordingly, Agency and Non-Agency Interest-Only Strips, interest rate swaptions, currency forwards, futures contracts, total return swaps and TBAs having the characteristics of derivatives are accounted for at fair value with such changes recognized in Gain (loss) on derivative instruments, net in its Consolidated Statements of Operations, along with any interest earned or paid (including accrued amounts). The carrying value of the Agency and Non-Agency Interest-Only Strips, accounted for as derivatives, is included in Mortgage-backed securities in the Consolidated Balance Sheets. The carrying value of interest rate swaptions, currency forwards, futures contracts, total return swaps and TBAs is included in Derivative assets or Derivative liabilities in the Consolidated Balance Sheets. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. An embedded derivative is separated from the host contact and accounted for separately when all of the guidance criteria are met. Hybrid instruments that are remeasured at fair value through earnings, including the fair value option are not bifurcated. Derivative instruments, including derivative instruments accounted for as liabilities, are recorded at fair value and are re-valued at each reporting date, with changes in the fair value together with interest earned or paid (including accrued amounts) reported in the Gain (loss) on derivative instruments, net in the Consolidated Statements of Operations. Repurchase agreements and Reverse Repurchase agreements Mortgage-backed securities and other securities sold un |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | Note 3 — Fair Value of Financial Instruments The following tables present the Company’s financial instruments carried at fair value as of March 31, 2016 and December 31, 2015 , based upon the valuation hierarchy (dollars in thousands) : March 31, 2016 Fair Value Level I Level II Level III Total Assets Agency RMBS: 20-Year mortgage $ — $ $ — $ 30-Year mortgage — — Agency RMBS Interest-Only Strips — — Agency and Non-Agency Interest-Only Strips accounted for as derivatives, included in MBS — Non-Agency RMBS — Agency and Non-Agency CMBS — Other securities — Subtotal — Residential Whole-Loans — — Securitized commercial loan — — Subtotal — — Derivative assets — — Total $ — $ $ $ Liabilities Derivative liabilities $ $ $ $ Securitized debt — — Total $ $ $ $ December 31, 2015 Fair Value Level I Level II Level III Total Assets Agency RMBS: 20-Year mortgage $ — $ $ — $ 30-Year mortgage — — Agency RMBS Interest-Only Strips — — Agency and Non-Agency Interest-Only Strips accounted for as derivatives, included in MBS — Non-Agency RMBS — Agency and Non-Agency CMBS — Other securities — Subtotal — Residential Whole-Loans — — Securitized commercial loan — — Subtotal — — Derivative assets — Total $ $ $ $ Liabilities Derivative liabilities $ $ $ — $ Securitized debt — — Total $ $ $ $ When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will use independent pricing services and if the independent pricing service cannot price a particular asset or liability, the Company will obtain third party broker quotes. The Manager’s pricing group, which functions independently from its portfolio management personnel, corroborates the third party broker quote by comparing the broker price to alternate sources or using internal valuation techniques. If independent pricing service, or third party broker quotes are not available, the Company determines the fair value of the securities using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and when applicable, estimates of prepayments and credit losses. Mortgage-backed securities and other securities In determining the proper fair value hierarchy or level, all securities are initially classified in Level III. The Company further determined, given the amount of available observable market data, Agency RMBS should be classified in Level II. For Non-Agency RMBS, CMBS and other securities, to determine whether a security should be a Level II, the securities are grouped by security type and the Manager reviews the internal trade history, for the quarter, for each security type. If there is sufficient trade data above a predetermined threshold of a security type, the Managers determines it has sufficient observable market data and the security will be categorized as a Level II. Values for the Company’s securities are based upon prices obtained from independent third party pricing services. The valuation methodology of the third party pricing services incorporates a commonly used market pricing method. Depending on the type of asset and the underlying collateral, the primary inputs to the model include yields for TBAs, Agency RMBS, the U.S. Treasury market and floating rate indices such as LIBOR, the Constant Maturity Treasury rate and the prime rate as a benchmark yield. In addition, the model may incorporate the current weighted average maturity and additional pool level information such as prepayment speeds, default frequencies and default severities, if applicable. When the third party pricing service cannot adequately price a particular security, the Company utilizes a broker’s quote which is validated by the Manager’s pricing group. Residential and Commercial Loans Values for the Company’s residential and commercial loans are based upon prices obtained from an independent third party pricing service that specializes in residential and commercial loans, utilizing a trade based valuation model. Their valuation methodology incorporates commonly used market pricing methods, including loan to value (“LTV”), debt to income, maturity, interest rates, collateral location, and unpaid principal balance, prepayment penalties, FICO scores, lien position and times late. Due to the inherent uncertainty of such valuation, the fair values established for residential and commercial loans held by the Company may differ from the fair values that would have been established if a ready market existed for these loans. Accordingly, the Company’s loans are classified as Level III in the fair value hierarchy. Securitized commercial loan and securitized debt Values for the Company’s securitized commercial loan and securitized debt is based on the fair value that is more observable. Since there is an extremely limited market for the securitized commercial loan, the Company determined the fair value of the securitized debt was more observable. The fair value of the securitized debt was based upon a third party broker quote, which is validated by the Manager’s pricing group. Due to the inherent uncertainty of such valuation the Company classifies its securitized commercial loan and securitized debt as Level III. Derivatives Values for the Company derivatives are based upon prices from third party pricing services, whose pricing is subject to review by the Manager’s pricing committee. In valuing its over-the-counter interest rate derivatives, such as swaps and swaptions, its currency derivatives, such as swaps and forwards and credit derivatives such as total return swaps, the Company considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each derivative agreement, from the perspective of both the Company and its counterparties. The majority of the Company’s interest rate swaps are cleared through a central clearing house and subject to the clearing house margin requirements. The Company’s agreements with its derivative counterparties also contain netting provisions; however the Company has elected to report its interest rate swaps and swaptions and currency swaps and forwards on a gross basis. No credit valuation adjustment was made in determining the fair value of interest rate and/or currency derivatives for the periods ended March 31, 2016 and December 31, 2015. The Company performs quarterly reviews of the independent third party pricing data. These reviews may consist of a review of the daily change in the prices provided by the independent pricing vendor which exceed established tolerances or comparisons to executed transaction prices, utilizing the Manager’s pricing group. The Manager’s pricing group, which functions independently from its portfolio management personnel, corroborates the price differences or changes in price by comparing the vendor price to alternate sources including other independent pricing services or broker quotations. If the price change or difference cannot be corroborated, the Manager’s pricing group consults with the portfolio management team for market color in reviewing such pricing data as warranted. To the extent that the Manager has information, typically in the form of broker quotations that would indicate that a price received from the independent pricing service is outside of a tolerance range, the Manager generally challenges the independent pricing service price. The following tables present additional information about the Company’s financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level III inputs to determine fair value: Three months ended March 31, 2016 $ in thousands Mortgage-backed securities and other securities Residential Whole-Loans Securitized commercial loan Beginning balance $ $ $ Transfers into Level III from Level II — — — Transfers from Level III into Level II ) — — Purchases — — Sales and settlements ) — — Principal repayments ) ) — Total net gains / (losses) included in net income Realized gains/(losses), net ) — — Other than temporary impairment ) — — Unrealized gains/(losses), net(1) ) Premium and discount amortization, net ) ) — Ending balance $ $ $ (1) For Mortgage-backed securities and other securities, Residential Whole-Loans and Securitized commercial loans classified as Level III at March 31, 2016, the Company recorded gross unrealized gains of approximately $17.1 million, $790 thousand and $0 and gross unrealized losses of approximately $2.6 million, $24 thousand and $1.3 million, respectively. These gains and losses are included in Unrealized gain (loss), net on the Consolidated Statements of Operations. Three months ended March 31, 2016 $ in thousands Derivative Liability Securitized debt Beginning balance $ — $ Transfers into Level III from Level II — — Transfers from Level III into Level II — — Purchases — — Sales and settlements — — Principal repayments — — Total net gains / (losses) included in net income Realized gains/(losses), net — — Other than temporary impairment — — Unrealized (gains)/losses, net(1) ) Premium and discount amortization, net — — Ending balance $ $ (1) For Derivative liability and Securitized debt classified as Level III at March 31, 2016, the Company recorded gross unrealized gains of $0 and approximately $583 thousand and gross unrealized losses of approximately $866 thousand and $0, respectively. These gains and losses are included in Gain (loss) on derivative instruments, net and Unrealized gain (loss), net in the Consolidated Statements of Operations, respectively. Three months ended March 31, 2015 $ in thousands Mortgage-backed securities and other securities Residential Whole-Loans Commercial Whole-Loan Linked Transactions Beginning balance $ $ $ — $ Fair value of securities previously accounted for as linked transactions(1) — — — Fair value of financial instruments previously accounted for as linked transactions(1) — — — ) Transfers into Level III from Level II — — — Transfers from Level III into Level II — — — — Purchases — Sales and settlements ) — — — Principal repayments ) ) — — Total net gains / (losses) included in net income Realized gains/(losses), net — — — Other than temporary impairment ) — — — Unrealized gains/(losses), net(2) — Premium and discount amortization, net ) ) — — Ending balance $ $ $ $ — (1) Resulting from the implementation of guidance issued by the Financial Accounting Standards Board which eliminated the requirement to account for certain financial instruments as linked transactions. (2) For Mortgage-backed securities and other securities, Residential Whole-Loans and Commercial Whole-Loan classified as Level III at March 31, 2015, the Company recorded gross unrealized gains of approximately $6.9 million, $246 thousand and $150 thousand and gross unrealized losses of approximately $6.7 million, $0 and $0, respectively. These gains and losses are included in Unrealized gain (loss), net in the Consolidated Statements of Operations. Transfers between hierarchy levels for the three months ended March 31, 2016 and March 31, 2015 were based on the availability of sufficient observable inputs to meet Level II versus Level III criteria. The leveling of these assets was based on information received from a third party pricing service which, along with the back-testing of historical sales transactions performed by the Manager provided the sufficient observable data for the movement from Level III to Level II. The Company did not have transfers between Level I and Level II for the three months ended March 31, 2016 and March 31, 2015. Other Fair Value Disclosures Due from counterparties and Due to counterparties on the Company’s Consolidated Balance Sheets are reflected at cost which approximates fair value. The fair value of the repurchase agreements is based on an expected present value technique. This method discounts future estimated cash flows using rates the Company determined best estimate current market interest rates that would be offered for loans with similar characteristics and credit quality. The use of different market assumptions or estimation methodologies could have a material effect on the fair value amounts. At March 31, 2016, the Company’s borrowings under repurchase agreements had a fair value of approximately $2.406 billion and a carrying value of approximately $2.403 billion. At March 31, 2016, the Company’s receivable under reverse repurchase agreements had a fair value of approximately $9.3 million and a carrying value of approximately $9.3 million. Inputs used to arrive at the fair value of the repurchase agreement borrowings and receivables under reverse repurchase agreements are generally observable, and therefore, they would be considered a Level II fair value measurement. |
Mortgage-Backed Securities and
Mortgage-Backed Securities and other securities | 3 Months Ended |
Mar. 31, 2016 | |
Mortgage-Backed Securities and other securities. | |
Mortgage-Backed Securities and other securities | Note 4 — Mortgage-Backed Securities and other securities The following tables present certain information about the Company’s investment portfolio at March 31, 2016 and December 31, 2015 (dollars in thousands). March 31, 2016 Principal Balance Unamortized Premium (Discount), net Discount Designated as Credit Reserve and OTTI Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Net Weighted Average Coupon (1) Agency RMBS: 20-Year mortgage $ $ $ — $ $ $ ) $ % 30-Year mortgage — ) % Agency RMBS Interest-Only Strips (2) N/A N/A N/A ) %(2) Agency and Non-Agency Interest-Only Strips, accounted for as derivatives (2) (3) N/A N/A N/A N/A N/A N/A %(2) Non-Agency RMBS ) ) ) % Non-Agency RMBS Interest- Only Strips (2) N/A N/A N/A ) %(2) Agency and Non-Agency CMBS ) ) ) % Agency CMBS Interest-Only Strips (2) N/A N/A N/A — %(2) Other securities (4) ) ) ) % Total $ $ ) $ ) $ $ $ ) $ % December 31, 2015 Principal Balance Unamortized Premium (Discount), net Discount Designated as Credit Reserve and OTTI Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Net Weighted Average Coupon (1) Agency RMBS: 20-Year mortgage $ $ $ — $ $ $ ) $ % 30-Year mortgage — ) % Agency RMBS Interest-Only Strips (2) N/A N/A N/A ) %(2) Agency and Non-Agency Interest-Only Strips, accounted for as derivatives (2) (3) N/A N/A N/A N/A N/A N/A %(2) Non-Agency RMBS ) ) ) % Non-Agency RMBS Interest- Only Strips (2) N/A N/A N/A — %(2) Agency and Non-Agency CMBS ) ) ) % Agency CMBS Interest-Only Strips (2) N/A N/A N/A — %(2) Other securities (4) ) ) % Total $ $ $ ) $ $ $ ) $ % (1) Net weighted average coupon as of March 31, 2016 and December 31, 2015 is presented, net of servicing and other fees. (2) Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, Agency and Non-Agency IOs and IIOs, accounted for as derivatives, and Agency and Non-Agency CMBS IOs and IIOs have no principal balances and bear interest based on a notional balance. The notional balance is used solely to determine interest distributions on interest-only class of securities. At March 31, 2016, the notional balance for Agency RMBS IOs and IIOs, Non-Agency IOs and IIOs, Agency and Non-Agency IOs and IIOs, accounted for as derivatives, and CMBS IOs and IIOs was $337.4 million, $309.0 million, $602.9 million and $42.6 million, respectively. At December 31, 2015, the notional balance for Agency RMBS IOs and IIOs, Non-Agency IOs and IIOs, Agency and Non-Agency IOs and IIOs, accounted for as derivatives, and CMBS IOs and IIOs was $593.4 million, $321.0 million, $655.6 million and $43.2 million, respectively. (3) Interest on these securities is reported as a component of Gain (loss) on derivative instruments, net in the Consolidated Statements of Operations. (4) Other securities include residual interests in asset-backed securities which have no principal balance and an amortized cost of approximately $22.0 million and $22.8 million, as of March 31, 2016 and December 31, 2015, respectively. As of March 31, 2016 and December 31, 2015 the weighted average expected remaining term to the expected maturity of the MBS and other securities investment portfolio was 6.6 years and 7.1 years, respectively. The following tables present the changes in the components of the Company’s purchase discount and amortizable premium on its Non-Agency RMBS, Non-Agency CMBS and other securities for the three months ended March 31, 2016 and March 31, 2015 (dollars in thousands): Three months ended March 31, 2016 Discount Designated as Credit Reserve and OTTI Accretable Discount(1) Amortizable Premium(1) Balance at beginning of period $ ) $ ) $ Accretion of discount — — Amortization of premium — — ) Realized credit losses — — Purchases — ) — Sales ) Net impairment losses recognized in earnings ) — — Transfers/release of credit reserve(2) ) ) Balance at end of period $ ) $ ) $ (1) Together with coupon interest, accretable purchase discount and amortizable premium is recognized as interest income over the life of the security. (2) Subsequent reductions of a security’s non-accretable discount results in a corresponding reduction in its amortizable premium. Three months ended March 31, 2015 Discount Designated as Credit Reserve and OTTI Accretable Discount(1) Amortizable Premium(1) Balance at beginning of period $ ) $ ) $ Securities previously accounted for as linked transactions(2) ) ) Accretion of discount — — Amortization of premium — — ) Realized credit losses — — Purchases ) ) Sales ) Net impairment losses recognized in earnings ) — — Transfers/release of credit reserve(3) ) Balance at end of period $ ) $ ) $ (1) Together with coupon interest, accretable purchase discount and amortizable premium is recognized as interest income over the life of the security. (2) Resulting from the implementation of guidance issued by the Financial Accounting Standards Board which eliminated the requirement to account for certain financial instruments as linked transactions. (3) Subsequent reductions of a security’s non-accretable discount results in a corresponding reduction in its amortizable premium. The following tables present the fair value and contractual maturities of the Company’s investment securities at March 31, 2016 and December 31, 2015 (dollars in thousands) : March 31, 2016 < or equal to 10 years > 10 years and < or equal to 20 years > 20 years and < or equal to 30 years > 30 years Total Agency RMBS: 20-Year mortgage $ — $ $ — $ — $ 30-Year mortgage — — — Agency RMBS Interest-Only Strips — — Agency and Non-Agency Interest-Only Strips, accounted for as derivatives Non-Agency RMBS Non-Agency RMBS Interest- Only Strips — — Agency and Non-Agency CMBS Agency CMBS Interest-Only Strips — — — Other securities Total $ $ $ $ $ December 31, 2015 < or equal to 10 years > 10 years and < or equal to 20 years > 20 years and < or equal to 30 years > 30 years Total Agency RMBS: 20-Year mortgage $ — $ $ — $ — $ 30-Year mortgage — — — Agency RMBS Interest-Only Strips — — Agency and Non-Agency Interest-Only Strips, accounted for as derivatives Non-Agency RMBS Non-Agency RMBS Interest- Only Strips — — Agency and Non-Agency CMBS Agency CMBS Interest-Only Strips — — — Other securities Total $ $ $ $ $ The following tables present the gross unrealized losses and estimated fair value of the Company’s MBS and other securities by length of time that such securities have been in a continuous unrealized loss position at March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Less than 12 Months 12 Months or More Total Number Number Number Unrealized of Unrealized of Unrealized of Fair Value Losses Securities Fair Value Losses Securities Fair Value Losses Securities Agency RMBS: 20-Year mortgage $ $ ) $ $ ) $ $ ) 30-Year mortgage ) ) ) Agency RMBS Interest-Only Strips ) — — — ) Non-Agency RMBS ) ) ) Non-Agency RMBS Interest-Only Strips ) — — — ) Agency and Non-Agency CMBS ) ) ) Other securities ) — — — ) Total $ $ ) $ $ ) $ $ ) December 31, 2015 Less than 12 Months 12 Months or More Total Number Number Number Unrealized of Unrealized of Unrealized of Fair Value Losses Securities Fair Value Losses Securities Fair Value Losses Securities Agency RMBS: 20-Year mortgage $ $ ) $ $ ) $ $ ) 30-Year mortgage ) ) ) Agency RMBS Interest-Only Strips ) — — — ) Non-Agency RMBS ) ) ) Agency and Non-Agency CMBS ) ) ) Other securities ) ) ) Total $ $ ) $ $ ) $ $ ) At March 31, 2016, the Company did not intend to sell any of its MBS and other securities that were in an unrealized loss position, and it is “more likely than not” that the Company will not be required to sell these MBS and other securities before recovery of their amortized cost basis, which may be at their maturity. The Company assesses its Agency MBS, Non-Agency MBS and other securities, excluding Interest-Only Strips, rated AA and higher at the time of purchase 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 of the reporting period for which impairment is assessed, 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 considers several factors, including the nature of the investment, communications (if any) from the securitization trustee regarding the credit quality of the security, the severity and duration of the impairment, the cause of the impairment, and the Company’s intent not to sell the security and that it is more likely than not that the Company will not be required to sell the security until recovery of its amortized cost. In addition, an other-than-temporary impairment is deemed to have occurred when there is an adverse change in the expected cash flows (principal or interest) to be received and the fair value of the security is less than its carrying amount. In determining whether an adverse change in cash flows occurred, the present value of the remaining cash flows, as estimated at the initial transaction date (or the last date previously revised), is compared to the present value of the expected cash flows at the current reporting date. The estimated cash flows reflect those a “market participant” would use and are discounted at a rate equal to the current yield used to accrete interest income. These adjustments are reflected in the Company’s Consolidated Statement of Operations as Other than temporary impairment. For Non-Agency MBS and other securities rated below AA at the time of purchase and Agency and Non-Agency Interest-Only Strips, excluding Interest-Only Strips classified as derivatives, an other-than-temporary impairment is deemed to have occurred when there is an adverse change in the expected cash flows (principal or interest) to be received and the fair value of the beneficial interest is less than its carrying amount. Other than for “plain-vanilla” variable rate Non-Agency MBS, the Company does not bifurcate the loss between credit loss and loss attributed to change in interest rates, therefore, the entire loss is recorded as other-than-temporary. These adjustments are reflected in the Company’s Consolidated Statement of Operations as Other than temporary impairment. In determining whether an adverse change in cash flows occurred, the present value of the remaining cash flows, as estimated at the initial transaction date (or the last date previously revised), is compared to the present value of the expected cash flows at the current reporting date. The estimated cash flows reflect those a “market participant” would use and are discounted at a rate equal to the current yield used to accrete interest income. If an other-than-temporary impairment is recognized as a result of this analysis, the yield is maintained at the current accretion rate. The last revised estimated cash flows are then used for future impairment analysis purposes. The Company’s prepayment speed estimate was the primary assumption used to determine other-than temporary-impairments for Interest-Only Strips, excluding Agency and Non-Agency Interest-Only Strips accounted for as derivatives, for the three months ended March 31, 2016, and March 31, 2015. With respect to the Company’s security portfolio, OTTI is generally recorded when the credit quality of the underlying collateral deteriorates and or the schedule payments are faster than previously projected. The credit deterioration could be as a result of, but not limited to, increased projected realized losses, foreclosures, delinquencies and the likelihood of the borrower being able to make payments in the future. Generally, a prepayment occurs when a loan has a higher interest rate relative to current interest rates and lenders are willing to extend credit at the lower current interest rate of the underlying collateral for the loan is sold or transferred. OTTI is reported in the Company’s Consolidated Statement of Operations. The following table presents the OTTI the Company recorded on its securities portfolio (dollars in thousands): For the three months ended March 31, 2016 For the three months ended March 31, 2015 Agency RMBS $ $ Non-Agency RMBS Non-Agency CMBS Other securities Total $ $ The Company has made investments in certain Non-Agency RMBS inverse floaters. These securities’ coupon rates have an inverse relationship to a benchmark rate. When the benchmark interest rate increases the coupon payment rate will decrease because the benchmark interest rate is deducted from the coupon payment. The Company has generally purchased these securities at a premium. Accelerated prepayments on these securities could result in an economic loss, as the Company would not recover the upfront premium. The premiums are amortized into income using the effective interest rate method. As of March 31, 2016 and March 31, 2015, the Company held $81.4 million and $90.0 million, respectively, in Non-Agency RMBS inverse floaters. The following tables present components of interest income on the Company’s MBS and other securities (dollars in thousands): For the three months ended March 31, 2016 Coupon Net (Premium Amortization/ Amortization Basis) Discount Interest Interest Amortization Income Agency RMBS $ $ ) $ Non-Agency RMBS ) Agency and Non-Agency CMBS Other securities Total(1) $ $ ) $ (1) Interest income in the Consolidated Statements of Operations includes coupon interest, net premium/discount amortization and interest income of approximately $2.5 million, $(597) thousand and $1.9 million on Residential Whole-Loans, respectively and coupon interest, net premium amortization and interest income of $569 thousand, $0 and $569 thousand on a securitized commercial loan, respectively. For the three months ended March 31, 2015 Coupon Net (Premium Amortization/ Amortization Basis) Discount Interest Interest Amortization Income Agency RMBS $ $ ) $ Non-Agency RMBS ) Agency and Non-Agency CMBS Other securities Total(1) $ $ ) $ (1) Interest income in the Consolidated Statements of Operations includes coupon interest, net premium amortization and interest income of $117 thousand, $(46) thousand and $71 thousand on Residential Whole-Loans, respectively and coupon interest, net premium amortization and interest income of $74 thousand, $0 and $74 thousand on Commercial Whole-Loans. The following tables present the sales and realized gain (loss) of the Company’s MBS and other securities (dollars in thousands): For the three months ended March 31, 2016 Proceeds Gross Gains Gross Losses Net Gain (Loss) Agency RMBS (1) $ $ $ ) $ Non-Agency RMBS ) ) Agency and Non-Agency CMBS — ) ) Other securities ) ) Total $ $ $ ) $ ) (1) Excludes proceeds for Agency Interest-Only Strips, accounted for as derivatives, of approximately $4.2 million, gross realized gains of $300 thousand and gross realized losses of $0 . For the three months ended March 31, 2015 Proceeds Gross Gains Gross Losses Net Gain (Loss) Agency RMBS (1) $ $ $ ) $ ) Non-Agency RMBS ) Agency and Non-Agency CMBS — Total $ $ $ ) $ (1) Excludes gross realized gains of $(2) thousand for Agency Interest-Only Strips, accounted for as derivatives, as a result of the settlement of prior year sales in January 2015. |
Variable Interest Entities
Variable Interest Entities | 3 Months Ended |
Mar. 31, 2016 | |
Variable Interest Entities | |
Variable Interest Entities | Note 5 — Variable Interest Entities Residential Whole-Loan Trusts The consolidated financial statements also include the consolidation of certain trusts that each meet the definition of a VIE related to the acquisition of Residential Whole-Loans in which the Company has determined itself to be the primary beneficiary of each such trust. The Company determined that it was the primary beneficiary of the two residential Whole-Loan trusts, which were merged into one trust during the first quarter of 2016, because it was involved in certain aspects of the design of each trust, has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses and the right to receive benefits from the trust that could potentially be significant to the trust. The trust has issued a trust certificate to the Company, which represents the beneficial interest in pools of Residential Whole-Loans held by such trust. As of March 31, 2016, the Company financed the trust certificates with $164.0 million of repurchase borrowings, which is a liability held outside the trusts. The Company classifies the underlying Residential Whole-Loans owned by the trusts in Residential Whole-Loans at fair value in the Consolidated Balance Sheets and has eliminated the intercompany trust certificates in consolidation. Commercial Loan Trust In November 2015, the Company acquired $14.0 million interest in the trust certificate issued by CMSC Trust 2015 — Longhouse MZ (“CMSC Trust”), with a fair value of $13.3 million at March 31, 2016, which is financed with $6.8 million of repurchase borrowings. The Company determined that CMSC Trust was a VIE and itself the primary beneficiary b ecause it was involved in certain aspects of the design of the trust, has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses and the right to receive benefits from the trust that could potentially be significant to the trust. The CMSC Trust holds a $25.0 million mezzanine loan collateralized by interests in commercial real estate. The mezzanine loan serves as collateral for the $25.0 million of trust certificates issued. As of March 31, 2016, the Company classified the mezzanine loan at fair value in Securitized commercial loan in the Consolidated Balance Sheets. The $25.0 million of trust certificates, of which $14.0 million was eliminated in consolidation and the remaining $11.0 million held by an affiliate is carried at a fair value of $10.4 million and classified as Securitized debt in the Consolidated Balance Sheets. The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment. The consolidated two trusts hold 499 performing Residential Whole-Loans and 1 performing commercial loan . The following table presents a summary of the assets and liabilities of the residential and commercial loan trusts included in the Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 (dollars in thousands). March 31, 2016 December 31, 2015 Residential Whole-Loans, at fair value $ $ Securitized commercial loan, at fair value Investment related receivable — Accrued interest receivable Total assets $ $ Securitized debt $ $ Accrued interest payable Accounts payable and accrued expenses Total liabilities $ $ The Company’s risk with respect to its investment in each trust is limited to its direct ownership in the trust. The Residential Whole-Loans and securitized commercial loan held by the consolidated trusts are held solely to satisfy the liabilities of the trust, and creditors of the trust have no recourse to the general credit of the Company for the trust certificates issued by the trusts. The assets of a consolidated trust can only be used to satisfy the obligations of that trust. The Company is not contractually required and has not provided any additional financial support to the trusts for the three months ended March 31, 2016 and March 31, 2015. The Company did not deconsolidate any trusts during the three months ended March 31, 2016 and March 31, 2015. The following table presents the components of the carrying value of Residential Whole-Loans and securitized commercial loan as of March 31, 2016 and December 31, 2015 (dollars in thousands): Residential Whole-Loans Securitized Commercial Loan March 31, 2016 December 31, 2015 March 31, 2016 December 31, 2015 Principal balance $ $ $ $ Unamortized premium — — Unamortized discount ) ) — — Gross unrealized gains — — Gross unrealized losses — — ) — Fair value $ $ $ $ The Residential Whole-Loans are comprised of non-qualifying, mostly adjustable rate mortgages with low loan to values (or “LTV”). The following tables present certain information about the Company’s Residential Whole-Loans investment portfolio at March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Weighted Average Current Coupon Rate Number of Loans Principal Balance Original LTV Original FICO Score(1) Expected Life (years) Contractual Maturity (years) Coupon Rate 3.01– 4.00% 26 $ % % 4.01– 5.00% 181 % % 5.01 – 6.00% 285 % % 6.01 – 7.00% 7 % % Total 499 $ % % (1) The original FICO score is not available for 135 loans with a principal balance of approximately $56.8 million at March 31, 2016. The Company has excluded those loans from the weighted average computation. December 31, 2015 Weighted Average Current Coupon Rate Number of Loans Principal Balance Original LTV Original FICO Score(1) Expected Life (years) Contractual Maturity (years) Coupon Rate 3.01– 4.00% 2 $ % % 4.01– 5.00% 211 % % 5.01 – 6.00% 302 % % 6.01 – 7.00% 9 % % Total 524 $ % % (2) The original FICO score is not available for 139 loans with a principal balance of approximately $58.7 million at December 31, 2015. The Company has excluded those loans from the weighted average computation. The following tables present the U.S. states in which the collateral securing the Company’s Residential Whole-Loans at March 31, 2016 and December 31, 2015, based on principal balance, is located (dollars in thousands): March 31, 2016 State Concentration Principal Balance California % $ Washington Massachusetts New York Georgia Other Total % $ December 31, 2015 State Concentration Principal Balance California % $ Washington Massachusetts New York Georgia Other Total % $ As of March 31, 2016, the aggregate fair value of the securitized debt issued by the consolidated VIE was $10.4 million which is classified as Securitized debt, at fair value on the Company’s Consolidated Balance sheets. The cost of financing the securitized debt is approximately 8.9%. Unconsolidated VIEs As of March 31, 2016 and December 31, 2015, the Company had three investments in VIEs where it was not the primary beneficiary, and accordingly, the VIEs were not consolidated in the Company’s consolidated financial statements. As of March 31, 2016 and December 31, 2015, the Company’s maximum exposure to loss from these investments did not exceed the sum of the $56.9 million and $58.2 million carrying value of the investments, respectively, which are classified in Mortgage-backed securities and other securities, at fair value on the Company’s Consolidated Balance sheets. |
Borrowings under Repurchase Agr
Borrowings under Repurchase Agreements | 3 Months Ended |
Mar. 31, 2016 | |
Borrowings under Repurchase Agreements | |
Borrowings under Repurchase Agreements | Note 6 — Borrowings under Repurchase Agreements As of March 31, 2016, the Company had master repurchase agreements with 27 counterparties. As of March 31, 2016, the Company had borrowings under repurchase agreements with 20 counterparties. The following tables summarize certain characteristics of the Company’s repurchase agreements at March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Securities Pledged Repurchase Agreement Borrowings Weighted Average Interest Rate on Borrowings Outstanding at end of period Weighted Average Remaining Maturity (days) Agency RMBS $ % Non-Agency RMBS % Agency and Non-Agency CMBS % Whole-Loans and securitized commercial loan(1) % Other securities % Borrowings under repurchase agreements, net $ % (1) Repurchase agreement borrowings on Whole-Loans and securitized commercial loan owned through trust certificates. The trust certificates are eliminated upon consolidation. December 31, 2015 Securities Pledged Repurchase Agreement Borrowings Weighted Average Interest Rate on Borrowings Outstanding at end of period Weighted Average Remaining Maturity (days) Agency RMBS $ % Non-Agency RMBS % Agency and Non-Agency CMBS % Whole-Loans and securitized commercial loan(1) % Other securities % Borrowings under repurchase agreements % Less unamortized debt issuance cost N/A N/A Borrowings under repurchase agreements, net $ % (1) Repurchase agreement borrowings on Whole-Loans and securitized commercial loan owned through trust certificates. The trust certificates are eliminated upon consolidation. For the three months ended March 31, 2016 and December 31, 2015 , the Company had average borrowings under its repurchase agreements of approximately $2.4 billion and $2.8 billion, respectively, had a maximum month-end balance during the periods of approximately $2.4 billion and $3.0 billion, respectively. The Company had accrued interest payable at March 31, 2016 and December 31, 2015 of approximately $3.2 million and $3.0 million, respectively. In addition, at March 31, 2016, the Company had not entered into any repurchase agreement borrowings which settled subsequent to March 31, 2016. The repurchase agreements bear interest at a contractually agreed-upon rate and typically have terms ranging from one month to three months. The Company’s repurchase agreement borrowings are accounted for as secured borrowings when the Company maintains effective control of the financed assets. Under the repurchase agreements, the respective counterparties retain the right to determine the fair value of the underlying collateral. A reduction in the value of pledged assets requires the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements, and is referred to as a margin call. The inability of the Company to post adequate collateral for a margin call by a counterparty, in a timeframe as short as the close of the same business day, could result in a condition of default under the Company’s repurchase agreements, thereby enabling the counterparty to liquidate the collateral pledged by the Company, which may have a material adverse effect on the Company’s financial position, results of operations and cash flows. During 2015, the Company also rehypothecated pledged U.S. Treasury securities it received from its repurchase agreement and interest rate swap counterparties as incremental collateral in order to increase the Company’s cash position. The maximum amount of repurchase borrowings for the rehypothecated U.S. Treasury securities was $0 and $530 thousand during the three months ended March 31, 2016 and March 31, 2015, respectively. At March 31, 2016 and March 31, 2015, the Company did not have any rehypothecated U.S. Treasury securities. Volatility in the mortgage markets may create additional stress on the overall liquidity of the Company due to the long-term nature of its assets and the short-term nature of its liabilities. In an instance of severe volatility, or where the additional stress on liquidity resulting from volatility is sustained over an extended period of time, the Company could be required to sell assets, possibly even at a loss, to generate sufficient liquidity to satisfy collateral and margin requirements which could have a material adverse effect on the Company’s financial position, results of operations and cash flows. The majority of the Company’s repurchase agreement counterparties are either U.S. financial institutions or the U.S. broker-dealer subsidiaries of foreign financial institutions. Further, if the Company is unable to renew, replace or expand repurchase financing with other sources of financing on substantially similar terms it may have a material adverse effect on the Company’s financial position, results of operations and cash flow, due to the long term nature of the Company’s investments and relatively short-term maturities of the Company’s repurchase agreements. Certain of the repurchase agreements provide the counterparty with the right to terminate the agreement if the Company does not maintain certain equity and leverage metrics, the most restrictive of which include a limit on leverage based on the composition of the Company’s portfolio. The Company was in compliance with the terms of such financial tests as of March 31, 2016. At March 31, 2016 and December 31, 2015, repurchase agreements collateralized by investments had the following remaining maturities: (dollars in thousands) March 31, 2016 December 31, 2015(1) Overnight $ — $ — 1 to 29 days 30 to 59 days 60 to 89 days 90 to 119 days — Greater than or equal to 120 days — Total $ $ (1) Excludes unamortized debt issuance costs of $134 thousand. At March 31, 2016, the following table reflects amounts of collateral at risk under its repurchase agreements greater than 10% of the Company’s equity with any counterparty (dollars in thousands): March 31, 2016 Counterparty Amount of Collateral at Risk, at fair value Weighted Average Remaining Maturity (days) Percentage of Stockholders’ Equity Credit Suisse Securities (USA) LLC $ % RBC (Barbados) Trading Bank Corporation |
Collateral Positions
Collateral Positions | 3 Months Ended |
Mar. 31, 2016 | |
Collateral Positions | |
Collateral Positions | Note 7 — Collateral Positions The following tables summarize the Company’s collateral positions, with respect to its borrowings under repurchase agreements, securitized debt, derivatives and clearing margin account at March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Assets Pledged- Fair Value Accrued Interest Fair Value of Assets Pledged and Accrued Interest Assets pledged for borrowings under repurchase agreements: Agency RMBS $ $ $ Non-Agency RMBS Agency and Non-Agency CMBS Whole-Loans and securitized commercial loan(1) Other securities Cash (2) — Securitized commercial loan pledged for securitized debt Cash collateral for derivatives (2): — Total $ $ $ (1) Whole-Loans and securitized commercial loan owned through trust certificates are pledged as collateral. The trust certificates are eliminated upon consolidation. (2) Cash posted as collateral is included in Due from counterparties on the Company’s Consolidated Balance Sheets. December 31, 2015 Assets Pledged- Fair Value Accrued Interest Fair Value of Assets Pledged and Accrued Interest Assets pledged for borrowings under repurchase agreements: Agency RMBS $ $ $ Non-Agency RMBS Agency and Non-Agency CMBS Whole-Loans and securitized commercial loan(1) Other securities Cash (2) — Securitized commercial loan pledged for securitized debt Cash collateral for derivatives (2): — Total $ $ $ (1) Whole-Loans and securitized commercial loan owned through trust certificates are pledged as collateral. The trust certificates are eliminated upon consolidation. (2) Cash posted as collateral is included in Due from counterparties on the Company’s Consolidated Balance Sheets. A reduction in the value of pledged assets typically results in the repurchase agreement counterparties, derivative counterparties and clearing margin counterparty initiating a daily margin call. At March 31, 2016 and December 31, 2015, investments held by counterparties as security for repurchase agreements totaled approximately $2.8 billion and approximately $3.0 billion, respectively. Cash collateral held by counterparties at March 31, 2016 and December 31, 2015 was approximately $280.5 million and approximately $249.6 million, respectively. Cash posted by counterparties at March 31, 2016 and December 31, 2015, was approximately $12.7 million and approximately $10.0 million, respectively. In addition, at March 31, 2016 and December 31, 2015, the Company held securities with a fair value of approximately $577 thousand and $0, respectively, received as collateral from its repurchase agreement counterparties to satisfy margin requirements. The Company has the ability to repledge collateral received from its repurchase counterparties. The Company has an obligation to return Agency RMBS pledged under reverse repurchase agreements accounted for as securities borrowing transaction which were subsequently sold by the Company with a fair value of $10.1 million as of March 31, 2016. The borrowed securities were collateral for payments made by the Company of $9.3 million, which are presented as a receivable under reverse repurchase agreements in the Consolidated Balance Sheets. The reverse repurchase agreements have a weighted average maturity of 18 days and a weighted average interest rate of 0.57%. The Company did not have any obligation to return securities received under reverse repurchase agreements as collateral at December 31, 2015. |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments | |
Derivative Instruments | Note 8 — Derivative Instruments The Company’s derivatives currently include interest rate swaps, interest rate swaptions, futures contracts, TBAs, currency swaps and forwards, Agency and Non-Agency Interest-Only Strips that are classified as derivatives, and total return swaps. Interest rate swaps and interest rate swaptions The Company is exposed to certain risks arising from both its business operations and economic conditions. Specifically, the Company’s primary source of debt funding is repurchase agreements and the Company enters into derivative financial instruments to manage exposure to variable cash flows on portions of its borrowings under those repurchase agreements . Since the interest rates on repurchase agreements typically change with market interest rates such as LIBOR, the Company is exposed to constantly changing interest rates, which accordingly affects cash flows associated with these rates on its borrowings. To mitigate the effect of changes in these interest rates, the Company enters into interest rate swap agreements, which help to mitigate the volatility in the interest rate exposures and their related cash flows. Interest rate swaps generally involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. Notwithstanding the foregoing, in order to manage its hedge position with regard to its liabilities, the Company on occasion will enter into interest rate swaps which involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the interest rate swap without exchange of the underlying notional amount. The Company also enters into forward starting swaps and interest rate swaptions to help mitigate the effects of changes in interest rates on a portion of its borrowings under repurchase agreements. Interest rate swaptions provide the Company the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future. On occasion the Company may enter into a MAC interest rate swap in which it may receive or make a payment at the time of entering such interest rate swap to compensate for the out of the market nature of such interest rate swap. Similar to all other interest rate swaps, these interest rate swaps are also subject to margin requirements as previously described. While the Company has not elected to account for its interest rate swap derivative instruments as “hedges” under GAAP, it does not use interest rate swaps and swaptions for speculative purposes, but rather uses such instruments to manage interest rate risk and views them as economic hedges. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings together with periodic net interest settlement amounts. Currency Swaps and Forwards The Company has invested in and, in the future, may invest in additional securities which are denominated in a currency or currencies other than U.S. dollars. Similarly, it has and may in the future, finance such assets in a currency or currencies other than U.S. dollars. In order to mitigate the impact to the Company, the Company may enter into derivative financial instruments, including foreign currency swaps and foreign currency forwards, to manage fluctuations in the valuation between U.S. dollars and such foreign currencies. Foreign currency swaps involve the payment of a foreign currency at fixed interest rate on a fixed notional amount and the receipt of U.S. dollars at a fixed interest rate on a fixed notional amount. Foreign currency forwards provide for the payment of a fixed amount of a foreign currency in exchange for a fixed amount of U.S. dollars at a date certain in the future. The carrying value of foreign currency swaps and forwards is included in Derivative assets (liabilities), at fair value in the Consolidated Balance Sheets with changes in valuation included in Gain (loss) on derivative instruments, net in the Consolidated Statement of Operations. Interest-Only Strips The Company also invests in Interest-Only Strips. In determining the classification of its holdings of Interest-Only Strips, the Company evaluates the securities to determine if the nature of the cash flows has been altered from that of the underlying mortgage collateral. Generally, Interest-Only Strips for which the security represents a strip off of a mortgage pass through security will be considered a hybrid instrument classified as a MBS investment in the Consolidated Balance Sheets utilizing the fair value option. Alternatively, those Interest-Only Strips, for which the underlying mortgage collateral has been included into a structured security that alters the cash flows from the underlying mortgage collateral, are accounted for as derivatives at fair value with changes recognized in Gain (loss) on derivative instruments, net in the Consolidated Statements of Operations, along with any interest received. The carrying value of these Interest-Only Strips is included in Mortgage-backed securities and other securities, at fair value in the Consolidated Balance Sheets. To-Be-Announced Securities The Company has also purchased or sold TBAs. As of March 31, 2016 and December 31, 2015, the Company had contracts to purchase (“long position”) and sell (“short position”) TBAs on a forward basis. Futures Contracts The Company also enters into Eurodollar, Volatility Index and U.S. Treasury futures. As of March 31, 2016, the Company had entered into contracts to buy (“long position”) U.S. Treasuries with a notional amount of $343.1 million, a fair value in a liability position of $1.8 million and an expiration date of June 2016. As of December 31, 2015, the Company had entered into contracts to buy (“long position”) U.S. Treasuries with a notional amount of $480.8 million, a fair value in a liability position of $635 thousand and an expiration date of March 2016. Total Return Swap In 2016, the Company has entered into a total return swap and in the future may continue to enter into these types of credit derivatives. This swap transfers the total return of the referenced asset, including interim cash flows and capital appreciation or depreciation from a specified price to the Company. The total return swap has a referenced asset which is a security collateralized by residential loans with a notional of €51.0 million. The Company receives interest from the referenced asset equal to EURIBOR plus 2.75% and is required to pay the counterparty EURIBOR plus 0.50% through June 23, 2019, with the spread decreasing to 0.25% through December 2019, with the spread further decreasing to 0% through the maturity date of the referenced asset in December 2020. The Company was required to post $9.7 million in cash collateral which is recorded in Due from counterparties in the Consolidated Balance Sheets. The following tables summarize the Company’s derivative instruments at March 31, 2016 and December 31, 2015 (dollars in thousands) : March 31, 2016 Derivative Instrument Accounting Designation Consolidated Balance Sheets Location Notional Amount Fair Value, excluding accrued interest Accrued Interest Payable (receivable) Interest rate swaps, assets Non-Hedge Derivative assets, at fair value $ $ $ ) Interest rate swaptions, assets Non-Hedge Derivative assets, at fair value — — Foreign currency swaps, asset Non-Hedge Derivative assets, at fair value ) Foreign currency forward contracts, asset Non-Hedge Derivative assets, at fair value — TBA securities, assets Non-Hedge Derivative assets, at fair value — Total derivative instruments, assets ) Interest rate swaps, liability Non-Hedge Derivative liability, at fair value ) Futures contract, liability Non-Hedge Derivative liability, at fair value ) — Total return swaps - liability Non-Hedge Derivative liability, at fair value ) ) Foreign currency forward contracts, liability Non-Hedge Derivative liability, at fair value ) — TBA securities, liabilities Non-Hedge Derivative liability, at fair value ) — Total derivative instruments, liabilities ) Total derivative instruments $ ) $ December 31, 2015 Derivative Instrument Accounting Designation Consolidated Balance Sheets Location Notional Amount Fair Value, excluding accrued interest Accrued Interest Payable (receivable) Interest rate swaps, assets Non-Hedge Derivative assets, at fair value $ $ $ Interest rate swaptions, assets Non-Hedge Derivative assets, at fair value — Futures contract, asset Non-Hedge Derivative assets, at fair value — Foreign currency swaps, asset Non-Hedge Derivative assets, at fair value ) Foreign currency forward contracts, asset Non-Hedge Derivative assets, at fair value — TBA securities, assets Non-Hedge Derivative assets, at fair value — Total derivative instruments, assets Interest rate swaps, liability Non-Hedge Derivative liability, at fair value ) Futures contract, liability Non-Hedge Derivative liability, at fair value ) — Foreign currency forward contracts, liability Non-Hedge Derivative liability, at fair value ) — TBA securities, liabilities Non-Hedge Derivative liability, at fair value ) — Total derivative instruments, liabilities ) Total derivative instruments $ ) $ Interest Rate Swaps The following tables summarize the average fixed pay rate and average maturity for the Company’s interest rate swaps as of March 31, 2016 and December 31, 2015 (excludes interest rate swaptions) (dollars in thousands): March 31, 2016 Remaining Interest Rate Swap Term Notional Amount Fair Value – Asset (Liability), net Average Fixed Pay Rate Average Maturity (Years) Forward Starting Greater than 1 year and less than 3 years $ $ ) % % Greater than 3 years and less than 5 years ) Greater than 5 years ) Total $ $ ) % % December 31, 2015 Remaining Interest Rate Swap Term Notional Amount Fair Value – Asset (Liability), net Average Fixed Pay Rate Average Maturity (Years) Forward Starting 1 year or less $ $ % — % Greater than 1 year and less than 3 years ) — Greater than 3 years and less than 5 years ) — Greater than 5 years ) Total $ $ ) % % The Company has entered into swaps to effectively fix the interest rate (for the life of the swap); net of variable-rate payment swaps, of approximately $282.8 million of borrowings under its repurchase agreements, excluding forward starting swaps of approximately $1.7 billion. The following tables summarize the average variable pay-rate and average maturity for the Company’s interest rate swaps as of March 31, 2016 and December 31, 2015 (excludes interest rate swaptions) (dollars in thousands): March 31, 2016 Remaining Interest Rate interest rate swap Term Notional Amount Fair Value – Asset (Liability), net Average Variable Pay Rate Average Maturity (Years) Forward Starting Greater than 3 years and less than 5 years $ $ % — % Greater than 5 years — Total $ $ % — % December 31, 2015 Remaining Interest Rate interest rate swap Term Notional Amount Fair Value – Asset (Liability), net Average Variable Pay Rate Average Maturity (Years) Forward Starting Greater than 3 years and less than 5 years $ $ ) % — % Greater than 5 years ) — Total $ $ ) % — % The Company’s agreements with certain of its bilateral interest rate swap counterparties may be terminated at the option of the counterparty, and settled at fair value, if the Company does not maintain certain equity and leverage metrics. The most restrictive of which contain provisions which become more restrictive based upon portfolio composition. Through March 31, 2016, the Company was in compliance with the terms of such financial tests. Interest Rate Swaptions The following tables present information about the Company’s interest rate swaptions as of March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Option Underlying Swap Fixed-Pay Rate for Underlying Swap Fair Value Weighted Average Months Until Option Expiration Notional Amount Weighted Average Swap Term (Years) 2.26 – 2.50% $ — $ $ — $ December 31, 2015 Option Underlying Swap Fixed-Pay Rate for Underlying Swap Fair Value Weighted Average Months Until Option Expiration Notional Amount Weighted Average Swap Term (Years) 1.76 – 2.00% $ $ 2.01 – 2.25% 2.26 – 2.50% $ $ December 31, 2015 Option Underlying Swap Variable-Pay Rate for Underlying Swap Fair Value Weighted Average Months Until Option Expiration Notional Amount Weighted Average Swap Term (Years) 1.26 – 1.50% $ $ $ $ Derivative Collateral The Company has minimum collateral posting thresholds with certain of its derivative counterparties, including with its clearing broker for cleared swaps, for which it typically pledges cash. During 2015, the Company rehypothecated some of the U.S. Treasury securities it received as incremental collateral on its repurchase borrowings, swaps and swaptions, effectively entering into repurchase agreements with such securities, in order to increase its cash position. The maximum amount of repurchase borrowings for the rehypothecated U.S. Treasury securities was $0 and $530 thousand during the three months ended March 31, 2016 and March 31, 2015, respectively. At March 31, 2016, no U.S. Treasury securities were rehypothecated. As of March 31, 2016 and December 31, 2015, the Company had cash pledged as collateral for derivatives of approximately $260.9 million and approximately $211.3 million, respectively, which is reported in the Consolidated Balance Sheets as Due from counterparties. The Company held cash of approximately $3.8 million and approximately $9.4 million as collateral against derivatives at March 31, 2016 and December 31, 2015, respectively, which is reported in the Consolidated Balance Sheets as Due to counterparties. As of March 31, 2016, the Company has swaps with two counterparties that are based in England and Switzerland, with fair values an asset position of approximately $2.7 million and with fair values in a liability position of approximately $2.4 million and notional balances of $11.6 million and $123.9 million, respectively. As of December 31, 2015, the Company has swaps with two counterparties that are based in England and Switzerland, with fair values in an asset position of approximately $7.6 million and with fair values in a liability position of approximately $183 thousand and notional balances of $25.2 million and $123.9 million, respectively. Included in the $260.9 million and $211.3 million pledged by the Company is cash pledged to the counterparty based in Switzerland of $3.3 million and $1.4 million at March 31, 2016 and December 31, 2015, respectively. Included in the $3.8 million and $9.4 million received by the Company is cash posted as collateral by the counterparty based in England of approximately $2.8 million and $7.4 million at March 31, 2016 and December 31, 2015, respectively. Foreign Currency Forwards and Swaps The following is a summary of the Company’s foreign currency forwards at March 31, 2016 and December 31, 2015 (dollars and euros in thousands) : March 31, 2016 Derivative Type Notional Amount Notional (USD Equivalent) Maturity Fair Value Buy EUR/Sell USD currency forward € $ April 2016 $ Currency forwards, assets € $ n/a $ Buy USD/Sell EUR currency forward € $ April 2016 $ ) Currency forwards, liabilities € $ n/a $ ) Total currency forwards € $ n/a $ ) December 31, 2015 Derivative Type Notional Amount Notional (USD Equivalent) Maturity Fair Value Buy USD/Sell EUR currency forward € January 2016 $ Currency forwards, assets € $ n/a $ Buy EUR/Sell USD currency forward € $ January 2016 $ ) Currency forwards, liabilities € $ n/a $ ) Total currency forwards € $ n/a $ The following is a summary of the Company’s foreign currency swaps with a fair value of $2.6 million and $7.2 million at March 31, 2016 and December 31, 2015, respectively (dollars and euros in thousands) : March 31, 2016 Date entered Maturity Fixed Rate Denomination Notional Amount Payer June 2014 July 2024 % EUR Receiver June 2014 July 2024 % USD December 31, 2015 Date entered Maturity Fixed Rate Denomination Notional Amount Payer June 2014 July 2024 % EUR Receiver June 2014 July 2024 % USD To- Be- Announced Securities The following table presents additional information about the Company’s contracts to purchase and sell TBAs for the three months ended March 31, 2016 (dollars in thousands): Notional Amount as of December 31, 2015 Additions Settlement, Termination, Expiration or Exercise Notional Amount as of March 31, 2016 Purchase of TBAs $ $ $ ) $ Sale of TBAs $ $ $ ) $ Gain (loss) on derivative instruments The below tables summarize the effects of the Company’s derivative instruments, including Agency and Non-Agency Interest-Only Strips characterized as derivatives and TBAs, reported in Gain (loss) on derivative instruments, net in the Consolidated Statements of Operations for the three months ended March 31, 2016 and March 31, 2015 (dollars in thousands): Three months ended March 31, 2016 Description Realized Gain (Loss), net Contractual interest income (expense), net(1) Return (Recovery) of Basis Mark-to- market adjustments Total Interest rate swaps $ ) $ ) $ $ ) $ ) Interest rate swaptions ) — — Agency and Non-Agency Interest-Only Strips–accounted for as derivatives ) ) ) Options — — — Futures contracts — — ) Foreign currency forwards ) — — ) ) Foreign currency swaps — ) ) Total return swaps — ) ) TBAs — — ) Total $ $ ) $ ) $ ) $ ) Three months ended March 31, 2015 Description Realized Gain (Loss), net Contractual interest income (expense), net(1) Return (Recovery) of Basis Mark-to- market adjustments Total Interest rate swaps $ ) $ ) $ $ ) $ ) Interest rate swaptions — — ) ) Agency and Non-Agency Interest-Only Strips–accounted for as derivatives ) ) ) ) Futures contracts — — — ) ) Foreign currency forwards — — ) ) Foreign currency swaps — — TBAs — — ) Total $ $ $ ) $ ) $ ) (1) Contractual interest income (expense), net on derivative instruments includes interest settlement paid or received. |
Offsetting Assets and Liabiliti
Offsetting Assets and Liabilities | 3 Months Ended |
Mar. 31, 2016 | |
Offsetting Assets and Liabilities | |
Offsetting Assets and Liabilities | Note 9 — Offsetting Assets and Liabilities The following tables present information about certain assets and liabilities that are subject to master netting agreements (or similar agreements) and can potentially be offset on the Company’s Consolidated Balance Sheets at March 31, 2016 and December 31, 2015: Offsetting of Derivative Assets and Reverse Repurchase Agreements As of March 31, 2016 Gross Gross Amounts Offset in the Net Amounts of Assets presented in the Gross Amounts Not Offset in the Consolidated Balance Sheets $s in thousands Description Amounts of Recognized Assets Consolidated Balance Sheets Consolidated Balance Sheets Financial Instruments (1) Cash Collateral Received Net Amount Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS $ $ — $ $ ) $ — $ Derivative asset, at fair value(2) — ) ) Receivable under reverse repurchase agreements — ) — — Total $ $ — $ $ ) $ ) $ Offsetting of Derivative Liabilities and Repurchase Agreements As of March 31, 2016 Gross Gross Amounts Offset in the Net Amounts of Liabilities presented in the Gross Amounts Not Offset in the Consolidated Balance Sheets $s in thousands Description Amounts of Recognized Liabilities Consolidated Balance Sheets Consolidated Balance Sheets Financial Instruments (1) Cash Collateral Pledged(1) Net Amount Derivative liability, at fair value(2)(3) $ $ — $ $ ) $ ) $ Repurchase Agreements(4) — ) — — $ $ — $ $ ) $ ) $ (1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral Pledged column of the tables above represents amounts pledged as collateral against derivative transactions. (2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, foreign currency swaps, total return swaps and TBAs. (3) Cash collateral pledged against the Company’s derivative counterparties was approximately $260.9 million as of March 31, 2016. (4) The fair value of investments pledged against the Company’s repurchase agreements was approximately $2.8 billion as of March 31, 2016. Offsetting of Derivative Assets As of December 31, 2015 Gross Gross Amounts Offset in the Net Amounts of Assets presented in the Gross Amounts Not Offset in the Consolidated Balance Sheets $s in thousands Description Amounts of Recognized Assets Consolidated Balance Sheets Consolidated Balance Sheets Financial Instruments (1) Cash Collateral Received Net Amount Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS $ $ — $ $ ) $ — $ Derivative asset, at fair value(2) — ) ) Total $ $ — $ $ ) $ ) $ Offsetting of Derivative Liabilities and Repurchase Agreements As of December 31, 2015 Gross Gross Amounts Offset in the Net Amounts of Liabilities presented in the Gross Amounts Not Offset in the Consolidated Balance Sheets $s in thousands Description Amounts of Recognized Liabilities Consolidated Balance Sheets Consolidated Balance Sheets Financial Instruments (1) Cash Collateral Pledged(1) Net Amount Derivative liability, at fair value(2)(3) $ $ — $ $ ) $ ) $ Repurchase Agreements(4) — ) — — $ $ — $ $ ) $ ) $ (1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral Pledged column of the tables above represents amounts pledged as collateral against derivative transactions. (2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, foreign currency swaps and TBAs. (3) Cash collateral pledged against the Company’s derivative counterparties was approximately $211.3 million as of December 31, 2015. (4) The fair value of investments pledged against the Company’s repurchase agreements was approximately $3.0 billion as of December 31, 2015. Certain of the Company’s repurchase agreement and derivative transactions are governed by underlying agreements that generally provide for a right of setoff in the event of default or in the event of a bankruptcy of either party to the transaction. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions | |
Related Party Transactions | Note 10 — Related Party Transactions Management Agreement In connection with the Company’s IPO in May 2012, the Company entered into a management agreement (the “Management Agreement”) with the Manager, which describes the services to be provided by the Manager and compensation for such services. The Manager is responsible for managing the Company’s operations, including: (i) performing all of its day-to-day functions; (ii) determining investment criteria in conjunction with the Board of Directors; (iii) sourcing, analyzing and executing investments, asset sales and financings; (iv) performing asset management duties; and (v) performing financial and accounting management, subject to the direction and oversight of the Company’s Board of Directors. Pursuant to the terms of the Management Agreement, the Manager is paid a management fee equal to 1.50% per annum of the Company’s stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears. For purposes of calculating the management fee, “stockholders’ equity” means the sum of the net proceeds from any issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus retained earnings, calculated in accordance with GAAP, at the end of the most recently completed fiscal quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less any amount paid for repurchases of the Company’s shares of common stock, excluding any unrealized gains, losses or other non-cash items, including OTTI charges; unrealized gain (loss), net; and the non-cash portion of gain (loss) on derivative instruments, that have impacted stockholder’s equity as reported in the Company’s consolidated financial statements prepared in accordance with GAAP, regardless of whether such items are included in other comprehensive income or loss, or in net income, and excluding one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors. However, if the Company’s stockholders’ equity for any given quarter is negative based on the calculation described above, the Manager will not be entitled to receive any management fee for that quarter. In addition, the Company may be required to reimburse the Manager for certain expenses as described below, and shall reimburse the Manager for the compensation paid to the Company’s CFO and controller. Expense reimbursements to the Manager are made in cash on a regular basis. The Company’s reimbursement obligation is not subject to any dollar limitation. Because the Manager’s personnel perform certain legal, accounting, due diligence tasks and other services that outside professionals or outside consultants otherwise would perform, the Manager may be paid or reimbursed for the documented cost of performing such tasks, provided that such costs and reimbursements are in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis. The Management Agreement may be amended, supplemented or modified by agreement between the Company and the Manager. The Management Agreement expires on May 16, 2017. It is automatically renewed for one-year terms on each May 15th unless previously terminated as described below. The Company’s independent directors review the Manager’s performance and any fees payable to the Manager annually and, the Management Agreement may be terminated annually upon the affirmative vote of at least two-thirds (2/3) of the Company’s independent directors, based upon: (i) the Manager’s unsatisfactory performance that is materially detrimental to the Company; or (ii) the Company’s determination that any fees payable to the Manager are not fair, subject to the Manager’s right to prevent such termination due to unfair fees by accepting a reduction of management fees agreed to by at least two-thirds (2/3) of the Company’s independent directors. The Company will provide the Manager 180 days prior notice of any such termination. Unless terminated for cause, the Company will pay the Manager a termination fee equal to three times the average annual management fee earned by the Manager during the prior 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. The Company may also terminate the Management Agreement at any time, without the payment of any termination fee, with 30 days prior written notice from the Company’s Board of Directors for cause, which will be determined by at least two-thirds (2/3) of the Company’s independent directors, which is defined as: (i) the Manager’s continued material breach of any provision of the Management Agreement (including the Manager’s failure to comply with the Company’s investment guidelines); (ii) the Manager’s fraud, misappropriation of funds, or embezzlement against the Company; (iii) the Manager’s gross negligence in the performance of its duties under the Management Agreement; (iv) the occurrence of certain events with respect to the bankruptcy or insolvency of the Manager, including an order for relief in an involuntary bankruptcy case or the Manager authorizing or filing a voluntary bankruptcy petition; (v) the Manager is convicted (including a plea of nolo contendere) of a felony; or (vi) the dissolution of the Manager. For the three months ended March 31, 2016 and March 31, 2015, the Company incurred approximately $2.8 million and approximately $2.7 million in management fees, respectively. In addition to the management fee, the Company is also responsible for reimbursing the Manager for certain expenses paid by the Manager on behalf of the Company as defined in the Management Agreement. For the three months ended March 31, 2016 and March 31, 2015, the Company recorded expenses included in general and administrative expense totaling approximately $72 thousand and approximately $137 thousand, respectively, related to reimbursable employee costs. Any such expenses incurred by the Manager and reimbursed by the Company, including the employee compensation expense, are typically included in the Company’s general and administrative expense on its Consolidated Statements of Operations, or may be reflected in the Consolidated Balance Sheets and associated Consolidated Statement of Changes in Stockholders’ Equity, based on the nature of the item. At March 31, 2016 and December 31, 2015, approximately $2.8 million and approximately $2.7 million, respectively for management fees incurred but not yet paid was included in Payable to related party in the Consolidated Balance Sheets. In addition, at March 31, 2016 and December 31, 2015, approximately $349 thousand and approximately $277 thousand, respectively of reimbursable costs incurred but not yet paid was included in Payable to related party in the Consolidated Balance Sheets. Securitized debt At March 31, 2016, the Company had securitized debt related to the consolidated VIEs, with a balance of $11.0 million (and a fair value of $10.4 million) which was held by an affiliate. The securitized debt of the VIEs can only be settled with the commercial loans that serve as collateral of the VIE and has non-recourse to the Company. |
Share-Based Payments
Share-Based Payments | 3 Months Ended |
Mar. 31, 2016 | |
Share-Based Payments | |
Share-Based Payments | Note 11 — Share-Based Payments In conjunction with the Company’s IPO and concurrent private placement, the Company’s Board of Directors approved the Western Asset Mortgage Capital Corporation Equity Plan (the “Equity Plan”) and the Western Asset Manager Equity Plan (the “Manager Equity Plan” and collectively the “Equity Incentive Plans”). The Equity Incentive Plans include provisions for grants of restricted common stock and other equity-based awards to the Manager, its employees and employees of its affiliates and to the Company’s directors, officers and employees. The Company can issue up to 3.0% of the total number of issued and outstanding shares of its common stock (on a fully diluted basis) at the time of each award (other than any shares previously issued or subject to awards made pursuant to one of the Company’s Equity Incentive Plans) under these Equity Incentive Plans. At May 15, 2012, there were 308,335 shares of common stock initially reserved for issuance under the Equity Incentive Plans. Upon the completion of the October 3, 2012 follow-on common stock offering, the stock portion of the Company’s dividend declared December 19, 2013, and the April 9, 2014 follow-on offering (which includes the partial exercise of the greenshoe on May 7, 2014) and private placement of common stock, the number of shares of common stock available for issuance under the Equity Incentive Plans increased to 1,237,711, inclusive of 664,838 shares of restricted stock granted and 24,276 shares of restricted stock issued as a result of the stock portion of the dividend declared on December 19, 2013 and restricted stock attributed to dividends on restricted stock under the Director Deferred Fee Plan. As of March 31, 2016, 548,597 shares remained available for issuance under the Equity Incentive Plans. The Company made the following grants under the Equity Plan for the three months ended March 31, 2016 and the year ended December 31, 2015: On March 1, 2015, the Company granted 200,000 shares of restricted common stock to the Manager under the Manager Equity Plan. One-third of the shares vested on March 1, 2016, one-third will vest on March 1, 2017 and the remaining one-third will vest on March 1, 2018. On June 4, 2015, the Company granted a total of 10,500 (2,625 each) of restricted common stock under the Equity Plan to the Company’s four independent directors. These restricted shares will vest in full on June 4, 2016, the first anniversary of the grant date. Each of the independent directors has elected to defer the shares granted to him under the Company’s Director Deferred Fee Plan (the “Director Deferred Fee Plan”). The Director Deferred Fee Plan permits eligible members of the Company’s board of directors to defer certain stock awards made under its director compensation programs. The Director Deferred Fee Plan allows directors to defer issuance of their stock awards and therefore defer payment of any tax liability until the deferral is terminated, pursuant to the election form executed each year by each eligible director. On December 8, 2015 the Company’s chief financial officer passed away and the board of directors approved the accelerated vesting of 13,980 shares of restricted common stock. During the three months ended March 31, 2016 and March 31, 2015, 188,184 and 134,263 restricted common shares vested, respectively, including shares whose issuance has been deferred under the Director Deferred Fee Plan. The Company recognized stock-based compensation expense of approximately $572 thousand and approximately $679 thousand for the three months ended March 31, 2016 and March 31, 2015, respectively. In addition, the Company had unamortized compensation expense of $27 thousand for equity awards and approximately $1.9 million for liability awards and $67 thousand for equity awards and approximately $2.4 million for liability awards at March 31, 2016 and December 31, 2015, respectively. All restricted common shares granted, other than those whose issuance has been deferred pursuant to the Director Deferred Fee Plan, possess all incidents of ownership, including the right to receive dividends and distributions currently, and the right to vote. Dividend equivalent payments otherwise allocable to restricted common shares under the Deferred Compensation Plan are deemed to purchase additional phantom shares of the Company’s common stock that are credited to each participant’s deferral account. The award agreements include restrictions whereby the restricted shares cannot be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of prior to the lapse of restrictions under the respective award agreement. The restrictions lapse on the unvested restricted shares awarded when vested, subject to the grantee’s continuing to provide services to the Company as of the vesting date. Unvested restricted shares and rights to dividends thereon are forfeited upon termination of the grantee. The following is a summary of restricted common stock vesting dates as of March 31, 2016 and December 31, 2015, including shares whose issuance has been deferred under the Director Deferred Fee Plan: March 31, 2016 December 31, 2015 Vesting Date Shares Vesting Shares Vesting March 2016 — June 2016 March 2017 March 2018 The following table presents information with respect to the Company’s restricted stock for the three months ended March 31, 2016 including shares whose issuance has been deferred under the Director Deferred Fee Plan: Shares of Restricted Stock Weighted Average Grant Date Fair Value (1) Outstanding at beginning of period $ Granted (2) Cancelled/forfeited — — Outstanding at end of period $ Unvested at end of period $ (1) The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date. (2) Included in Granted are restricted stock attributed to dividends on restricted stock under the Director Deferred Fee Plan of 720 shares. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2016 | |
Stockholders' Equity | |
Stockholders' Equity | Note 12 — Stockholders’ Equity Warrants On May 9, 2012, the Company entered into agreements with certain institutional investors to sell 2,231,787 warrant units. Each warrant unit consists of one share of the Company’s common stock and a warrant to purchase 0.5 of a share of the Company’s common stock, subject to adjustment. As of March 31, 2016, the adjusted exercise price of the warrants was $16.70 and there were a total of 1,232,916 warrant shares purchasable. The warrants expire on May 15, 2019. Share Repurchase Program On February 25, 2016, the Board of Directors of the Company reauthorized its repurchase program of up to 2,050,000 shares of its common stock through December 31, 2017. The original authorization expired on December 31, 2015. Purchases made pursuant to the program will be made in the open market, in privately negotiated transactions , or pursuant to any trading plan that may be adopted in accordance with Rules 10b5-1 and 10b-18 of the Securities and Exchange Commission. The authorization does not obligate the Company to acquire any particular amount of common shares and the program may be suspended or discontinued at the Company’s discretion without prior notice. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The Company has not repurchased any shares of common stock pursuant to the authorization as of March 31, 2016. Dividends The following table presents cash dividends declared and paid by the Company on its common stock : Declaration Date Record Date Payment Date Amount per Share Tax Characterization 2016 March 24, 2016 April 4, 2016 April 26, 2016 $ Not yet determined 2015 December 17, 2015 December 28, 2015 January 26, 2016 $ Ordinary income September 24, 2015 October 5, 2015 October 27, 2015 $ Ordinary income June 18, 2015 June 29, 2015 July 28, 2015 $ Ordinary income March 26, 2015 April 6, 2015 April 28, 2015 $ Ordinary income 2014 December 18, 2014 December 29, 2014 January 27, 2015 $ Ordinary income September 23, 2014 October 3, 2014 October 28, 2014 $ Ordinary income June 19, 2014 June 30, 2014 July 29, 2014 $ Ordinary income March 20, 2014 March 31, 2014 April 29, 2014 $ Ordinary income 2013 April 1, 2013 April 12, 2013 April 30, 2013 $ Ordinary income June 20, 2013 July 1, 2013 July 29, 2013 $ Ordinary income September 19, 2013 September 30, 2013 October 29, 2013 $ Ordinary income December 19, 2013 December 30, 2013 January 28, 2014 $ (1) Ordinary income (1) Consisting of cash and stock. For stockholders who elected to receive the entire $2.35 per share dividend in stock, each stockholder received 0.1590 shares in newly issued common stock for each common share that they held as of the dividend record date. For stockholders who elected to receive the dividend in cash, or did not make an election, each stockholder received $0.9159 per share in cash and 0.0970 shares in newly issued common stock for each common share that they held as of the dividend record date. |
Net Income (Loss) per Common Sh
Net Income (Loss) per Common Share | 3 Months Ended |
Mar. 31, 2016 | |
Net Income (Loss) per Common Share | |
Net Income (Loss) per Common Share | Note 13 — Net Income (Loss) per Common Share The table below presents basic and diluted net income (loss) per share of common stock using the two-class method for the three months ended March 31, 2016 and March 31, 2015 (dollars, other than shares and per share amounts, in thousands): For the three months ended March 31, 2016 For the three months ended March 31, 2015 Numerator : Net income (loss) attributable to common stockholders and participating securities for basic and diluted earnings per share $ ) $ Less: Dividends and undistributed earnings allocated to participating securities Net income (loss) allocable to common stockholders — basic and diluted $ ) $ Denominator : Weighted average common shares outstanding for basic earnings per share Weighted average diluted shares outstanding (warrants) — — Weighted average common shares outstanding for diluted earnings per share Basic earnings per common share $ ) $ Diluted earnings per common share $ ) $ For the three months ended March 31, 2016 and March 31, 2015, the Company excluded the effects of the warrants from the computation of diluted earnings per share since the average market value per share of the Company’s common stock was below the exercise price of the warrants. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Taxes | |
Income Taxes | Note 14 — Income Taxes As a REIT, the Company is not subject to federal income tax to the extent that it makes qualifying distributions to its stockholders and satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income and stock ownership tests. Based on the Company’s analysis of any potential uncertain income tax positions, the Company concluded that it does not have any uncertain tax positions that meet the recognition or measurement criteria as of March 31, 2016. The Company files U.S. federal and state income tax returns. As of March 31, 2016, tax returns filed by the Company for 2014, 2013 and 2012 are open for examination pursuant to relevant statutes of limitation. In the event that the Company incurs income tax related interest and penalties, the Company’s policy is to classify them as a component of its provision for income taxes. Subject to the limitation under the REIT asset test rules, the Company is permitted to own up to 100% of the stock of one or more TRS. Currently, the Company owns one TRS that is taxable as a corporation and is subject to federal, state and local income tax on its net income at the applicable corporate rates. The TRS, which was formed in Delaware on July 28, 2014, is a limited liability company and a wholly-owned subsidiary of the Company. As of March 31, 2016, the cumulative taxable loss of the TRS was de-minimis. As there can be no certainty that the TRS will have taxable income in the future, no tax benefit was included in these consolidated financial statements. |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Contingencies | |
Contingencies | Note 15 — Contingencies From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any material contingencies at March 31, 2016. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 periods. Actual results could differ from those estimates. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. The Company also consolidated two variable interest entities (“VIE”) where it was primary beneficiary. Refer to Note 5 - “Variable Interest Entities” for additional information regarding the impact of consolidation of theses VIE’s. All intercompany amounts between the Company and its subsidiary and consolidated VIE’s have been eliminated in consolidation. Variable Interest Entities VIEs are defined as entities that by design either lack sufficient equity for the entity to finance its activities without additional subordinated financial support or are unable to direct the entity’s activities or are not exposed to the entity’s losses or entitled to its residual returns. The Company evaluates all of its interests in VIEs for consolidation. When the interests are determined to be variable interests, the Company assesses whether it is deemed the primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, it considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers is deemed to have the power to direct the activities of a VIE. To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, it considers all of its economic interests. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company. In instances when a VIE is owned by both the Company and related parties, the Company considers whether there is a single party in the related party group that meets both the power and losses or benefits criteria on its own as though no related party relationship existed. If one party within the related party group meets both these criteria, such reporting entity is the primary beneficiary of the VIE and no further analysis is needed. If no party within the related party group on its own meets both the power and losses or benefits criteria, but the related party group does as a whole meets these two criteria, the determination of primary beneficiary within the related party group is based upon an analysis of the facts and circumstances with the objective of determining which party is most closely associated with the VIE. Determining the primary beneficiary within the related party group requires significant judgement. In instances when the Company is required to consolidate a VIE that is determined to be a qualifying collateralized financing entity, under GAAP, the Company will measure both the financial assets and financial liabilities of the VIE using the fair value of either the VIE’s financial assets or financial liabilities, whichever is more observable. Ongoing assessments of whether an enterprise is the primary beneficiary of a VIE are required. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary have been made to present fairly the Company’s financial position, results of operations and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q. These consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission (“SEC”) on March 11, 2016. The results of operations for the period ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year or any future period. The Company currently operates as one business segment. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly-liquid short term investments with original maturities of 90 days or less when purchased to be cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company places its cash and cash equivalents with what it believes to be high credit quality institutions. At times such investments may be in excess of the Federal Deposit Insurance Corporation insurance limit. |
Fair Value Election | Fair Value Election The Company has elected the fair value option for all of its investments and its securitized debt, which permits the Company to measure these financial instruments at fair value with the change in fair value included as a component of earnings. In the Manager’s view, this election more appropriately reflects the results of the Company’s operations for a particular reporting period, as financial asset fair value changes are presented in a manner consistent with the presentation and timing of the fair value changes of economic hedging instruments. |
Mortgage-Backed Securities and Other Securities | Mortgage-Backed Securities and Other Securities The Company’s purchases and sales of mortgage-backed securities and other securities are recorded on the trade date, which results in an investment related payable (receivable) for MBS and other securities purchased (sold) for which settlement has not taken place as of the balance sheet date. In addition, the Company’s TBAs (as defined herein) which have matured but have not settled as of the balance sheet date result in an investment related payable (receivable). The Company’s MBS and other securities are pledged as collateral against borrowings under repurchase agreements. The Company’s MBS and other securities are included in Mortgage-backed securities and other securities at fair value and Investment related receivables in the Consolidated Balance Sheets, with the fair value of such MBS and other securities pledged disclosed parenthetically. |
Residential and Commercial Loans | Residential and Commercial Loans The Company records its purchases of residential and commercial loans on settlement date as the amount paid to the seller plus any fees paid or less any fees received. All other costs incurred in connection with acquiring residential and commercial loans or committing to purchase residential and commercial loans are charged to expense as incurred. The Company amortizes or accretes any premium or discount over the life of the related loan utilizing the effective interest method, based on the contractual payment terms of the loan. On at least a quarterly basis, the Company evaluates the collectability of both interest and principal of each loan, if circumstances warrant, to determine whether such loan is impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the Company does not record an allowance for loan loss as the Company has elected the fair value option. However, income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. A loan is written off when it is no longer realizable and/or legally discharged. |
Valuation of financial instruments | Valuation of financial instruments The Company discloses the fair value of its financial instruments according to a fair value hierarchy (Levels I, II, and III, as defined below). In accordance with GAAP, the Company is required to provide enhanced disclosures regarding instruments in the Level III category (which require significant management judgment), including a separate reconciliation of the beginning and ending balances for each major category of assets and liabilities. GAAP establishes a framework for measuring fair value and expands financial statement disclosure requirements for fair value measurements. GAAP further specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows: Level I — Quoted prices in active markets for identical assets or liabilities. Level II — Quoted prices for similar assets and liabilities 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 III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable, for example, when there is little or no market activity for an investment at the end of the period, unobservable inputs may be used. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Transfers between levels are determined by the Company at the end of the reporting period. When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will use independent pricing services and if the independent pricing service cannot price a particular asset or liability, the Company will obtain third party broker quotes. The Manager’s pricing group, which functions independently from its portfolio management personnel, corroborates the third party broker quote by comparing the broker price to alternate sources or using internal valuation techniques. If independent pricing service, or third party broker quotes are not available, the Company determines the fair value of the securities using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and when applicable, estimates of prepayment and credit losses. Fair value under GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company is forced to sell assets in a short period to meet liquidity needs, the prices it receives can be substantially less than their recorded fair values. The Company performs quarterly reviews of the independent third party pricing data which may consist of a review of the daily change in the prices provided by the independent pricing vendor that exceed established tolerances or comparisons to executed transaction prices, utilizing its Manager’s pricing group. The Manager’s pricing group corroborates the price differences or changes in price by comparing the vendor price to alternate sources including other independent pricing services or broker quotations. If the price change or difference cannot be corroborated, the Manager’s pricing group consults with the portfolio management team for market color in reviewing such pricing data as warranted. To the extent that the Manager has information, typically in the form of broker quotations that would indicate that a price received from the independent pricing service is outside of a tolerance range, the Manager generally challenges the independent pricing service price. |
Interest income recognition and Impairment | Interest income recognition and Impairment Agency MBS, Non-Agency MBS and other securities, excluding Interest-Only Strips, rated AA and higher at the time of purchase Interest income on mortgage-backed and other securities is accrued based on the respective outstanding principal balances and corresponding contractual terms. Premiums and discounts associated with Agency MBS, Non-Agency MBS and other securities, excluding Interest-Only Strips, rated AA and higher at the time of purchase, are amortized into interest income over the estimated life of such securities using the effective yield method. Adjustments to premium and discount amortization are made for actual prepayment activity. The Company estimates prepayments at least quarterly for its securities and, as a result, if prepayments increase (or are expected to increase), the Company will accelerate the rate of amortization on premiums or discounts and make a retrospective adjustment to historical amortization. Alternatively, if prepayments decrease (or are expected to decrease), the Company will reduce the rate of amortization on the premiums or discounts and make a retrospective adjustment to historical amortization. The Company assesses its Agency MBS, Non-Agency MBS and other securities, excluding Interest-Only Strips, rated AA and higher at the time of purchase, for other-than-temporary impairment (“OTTI”) on at least a quarterly basis. The determination of whether a security is other —than —temporarily impaired involves judgement and assumptions based on subjective and objective factors. When the fair value of an investment is less than its amortized cost at the balance sheet date, during a reporting period, the security is considered impaired and 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 considers several factors, including the nature of the investment, communications (if any) from the trustee of securitization regarding the credit quality of the security, the severity and duration of the impairment and the cause of the impairment. When a security is impaired an OTTI is considered to have occurred if there is an adverse change in the expected cash flows (principal or interest) to be received and the fair value of the security is less than its carrying amount and either the Company intends to sell the security or it is more likely than not the Company will be required to sell the security before recovery of its amortized cost. In determining whether an adverse change in cash flows occurred, the present value of the remaining cash flows, as estimated at the initial transaction date (or the last date previously revised), is compared to the present value of the expected cash flows at the current reporting date. The estimated cash flows reflect those a “market participant” would use and are discounted at a rate equal to the current yield used to accrete interest income. The OTTI is recorded in the Company’s Consolidated Statement of Operations. The determination as to whether OTTI exists is subjective given that such determination is based on information available at the time of assessment as well as the Company’s estimates of the future performance and cash flow projections on the security. As a result, the timing and amount of an OTTI constitutes an accounting estimate that may change materially over time. Finally, certain of the Company’s MBS and other securities that are in an unrealized loss position at the end of the reporting period are not considered other-than-temporarily impaired because the Company has the ability and intent to hold the securities to maturity or for a period of time sufficient for a price recovery up to or above the amortized cost of the investment and the Company is not required to sell the security for regulatory or other reasons. Non-Agency MBS and other securities that are rated below AA at the time of purchase and Interest-Only Strips that are not classified as derivatives Interest income on Non-Agency MBS and other securities that are rated below AA at the time of purchase and Interest-Only Strips that are not classified as derivatives are recognized based on the effective yield method. The effective yield on these securities is based on the projected cash flows from each security, which is estimated based on the Company’s observation of the then current information and events, where applicable, and will include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Where appropriate, the Company may include in its cash flow projections the U.S Department of Justice’s settlements with the major residential mortgage originators, regarding certain lending practices. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the underlying collateral, periodic payments of scheduled principal, and prepayments of principal. Therefore, actual maturities of the securities will generally be shorter than stated contractual maturities. Based on the projected cash flow of such securities purchased at a discount to par value, the Company may designate a portion of such purchase discount as credit protection against future credit losses and, therefore, not accrete such amount into interest income. The amount designated as credit discount may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively. In addition, an OTTI is deemed to have occurred when there is an adverse change in the expected cash flows (principal or interest) to be received and the fair value of the security is less than its carrying amount. In determining whether an adverse change in cash flows occurred, the present value of the remaining cash flows, as estimated at the initial transaction date (or the last date previously revised), is compared to the present value of the expected cash flows at the current reporting date. The estimated cash flows reflect those a “market participant” would use and are discounted at a rate equal to the current yield used to accrete interest income. The OTTI is recorded in the Company’s Consolidated Statements of Operations as Other than temporary impairment. Securities denominated in a foreign currency contain additional risk in that the amortized cost basis for those securities may not be recovered due to declines in currency exchange rates. The Company considers the length of time that the security’s fair value has declined due to the decline in foreign exchange rates, when assessing other-than temporary impairment. The determination as to whether OTTI exists is subjective given that such determination is based on information available at the time of assessment as well as the Company’s estimates of the future performance and cash flow projections on the security. As a result, the timing and amount of an OTTI constitutes an accounting estimate that may change materially over time. Finally, certain of the Company’s MBS and other securities that are in an unrealized loss position at the end of the reporting period are not be considered other-than-temporarily impaired because the Company has the ability and intent to hold the securities to maturity or for a period of time sufficient for a price recovery up to or above the amortized cost of the investment and the Company is not required to sell the security for regulatory or other reasons. |
Sales of Investments | Sales of Investments Sales of investments are driven by the Company’s portfolio management process. The Company seeks to mitigate risks including those associated with prepayments and will opportunistically rotate the portfolio into securities and/or other assets the Company’s Manager believes have more favorable attributes. Strategies may also be employed to manage net capital gains, which need to be distributed for tax purposes. Realized gains or losses on sales of investments, including Agency Interest-Only Strips not characterized as derivatives, are included in the net Realized gain (loss) on sale of investments, net in the Consolidated Statements of Operations, and are recorded at the time of disposition. Realized gains losses on Interest-Only Strips which are characterized as derivatives are included in Gain (loss) on derivative instruments, net line item in the Consolidated Statements of Operations. The cost of positions sold is calculated using the specific identification method. Investments in an unrealized loss position at the end of each reporting period are evaluated by the Company’s Manager to determine whether the Company has the intent to sell such investments. To the extent the Company has no intent as of the end of such reporting period to sell such investments and it is more likely than not that the Company will not be required to sell the investment before recovery of its amortized cost basis, such unrealized loss is included in Unrealized gain (loss), net in the Consolidated Statements of Operations. Otherwise, when the Company has determined its intent to sell such securities, the unrealized loss is characterized as a realized loss and included in Other than temporary impairment in the Consolidated Statements of Operations. The Company has no intent to sell any of its investments in an unrealized loss position at March 31, 2016. |
Foreign currency transactions | Foreign currency transactions The Company has and expects to continue to enter into transactions denominated in foreign currency from time to time. At the date the transaction is recognized, the asset and/or liability will be measured and recorded using the exchange rate in effect at the date of the transaction. At each balance sheet date, such foreign currency assets and liabilities are re-measured using the exchange rate in effect at the date of the balance sheet, resulting in unrealized foreign currency gains or losses. Unrealized foreign currency gains or losses on MBS and other assets are recorded in Unrealized gain (loss), net in the Consolidated Statement of Operations. In addition, the Company evaluates whether an other-than-temporary impairment is deemed to have occurred on MBS and other assets denominated in a foreign currency. Cash flows from MBS and other assets denominated in foreign currencies are received in a foreign currency, and as a result, the Company may incur a loss due to changes in foreign exchange rates even when all contractual cash flows are received. These adjustments are reflected in the Consolidated Statements of Operations as Other than temporary impairment. Unrealized and realized foreign currency gains or losses on borrowings under repurchase agreements are recorded in Other, net in the Consolidated Statement of Operations. Interest income from investments denominated in a foreign currency and interest expense on borrowings denominated in a foreign currency are recorded at the average rate of exchange during the period. |
Due from counterparties/Due to counterparties | Due from counterparties/Due to counterparties Due from counterparties represents cash posted by the Company with its counterparties as collateral for the Company’s interest rate and/or currency derivative financial instruments, repurchase agreements, and TBAs. Due to counterparties represents cash posted with the Company by its counterparties as collateral under the Company’s interest rate and/or currency derivative financial instruments, repurchase agreements, and TBAs. Included in the due from counterparties and/or due to counterparties are daily variation margin settlement amounts with counterparties which are based on the price movement of the Company’s futures contracts. In addition, as provided below, Due to counterparties may include non-cash collateral in which the Company has the obligation to return and which the Company has either sold or pledged. To the extent the Company receives collateral other than cash from its counterparties such assets are not included in the Company’s Consolidated Balance Sheets. Notwithstanding the foregoing, if the Company either rehypothecates such assets or pledges the assets as collateral pursuant to a repurchase agreement, the cash received and the corresponding liability are reflected in the Consolidated Balance Sheets. |
Derivatives and hedging activities | Derivatives and hedging activities Subject to maintaining its qualification as a REIT for U.S. federal income tax purposes, the Company utilizes derivative financial instruments, including interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, TBAs and Agency and Non-Agency Interest-Only Strips to hedge the interest rate and currency risk associated with its portfolio and related borrowings. Derivatives, subject to REIT requirements, are used for hedging purposes rather than speculation. The Company has also entered into a total return swap, which transfer the total return of a referenced security to the Company. The Company determines the fair value of its derivative positions and obtains quotations from third parties, including the Chicago Mercantile Exchange or CME, to facilitate the process of determining such fair values. If the Company’s hedging activities do not achieve the desired results, reported earnings may be adversely affected. GAAP requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative. The fair value adjustment will affect either other comprehensive income in stockholders’ equity until the hedged item is recognized in earnings or net income depending on whether the derivative instrument is designated and qualifies as a for hedge for accounting purposes and if so, the nature of the hedging activity. The Company elected not to apply hedge accounting for its derivative instruments. Accordingly, the Company records the change in fair value, of its derivative instruments, which includes net interest rate swap payments/receipts (including accrued amounts) and net currency payments (including accrued amounts) related to interest rate swaps and currency swaps, respectively in Gain (loss) on derivative instruments, net in its Consolidated Statements of Operations. In the Company’s Consolidated Statements of Cash Flows, premiums received or paid on termination of its interest rate swaps, excluding interest rate swaps containing an other-than-insignificant financing element and the unamortized premium of market agreed coupon (“MAC”) interest rate swaps, are included in cash flows from operating activities. Notwithstanding the foregoing, proceeds and payments on settlement of swaptions, mortgage put options, futures contracts and TBAs are included in cash flows from investing activities. Proceeds and payments on settlement of forward contracts are reflected in cash flows from financing activities in the Company’s Consolidated Statement of Cash Flows. While payments made at the time of entering MAC interest rate swaps are included in cash flows from investing activities, payments received by the Company upon entering MAC interest rate swaps are included in either cash flows from investing activities or cash flows financing activities, depending on whether or not the derivative instrument includes an other-than-insignificant financing element. For MAC interest rate swaps containing an other-than-insignificant financing element, all cash flows over the life of the derivative are treated as cash flows from financing activities. Return and recovery of basis activity for MAC interest rate swaps is included in cash flows from investing activities for swaps not containing an other-than-insignificant financing element in the Company’s Consolidated Statement of Cash Flows. For Agency and Non-Agency Interest-Only Strips accounted for as derivatives, the purchase, sale and recovery of basis activity is included with MBS and other securities under cash flows from investing activities in the Company’s Consolidated Statement of Cash Flows. The Company evaluates the terms and conditions of its holdings of Agency and Non-Agency Interest-Only Strips, interest rate swaptions, currency forwards, futures contracts, total return swaps and TBAs to determine if these instruments have the characteristics of an investment or should be considered a derivative under GAAP. In determining the classification of its holdings of Interest-Only Strips, the Company evaluates the securities to determine if the nature of the cash flows has been altered from that of the underlying mortgage collateral. Generally, Interest-Only Strips for which the security represents a strip off of a mortgage pass through security will be considered a hybrid instrument classified as a MBS investment in the Consolidated Balance Sheets utilizing the fair value option. Alternatively, those Interest-Only Strips, for which the underlying mortgage collateral has been included into a structured security that alters the cash flows from the underlying mortgage collateral, are accounted for as derivatives at fair value. Accordingly, Agency and Non-Agency Interest-Only Strips, interest rate swaptions, currency forwards, futures contracts, total return swaps and TBAs having the characteristics of derivatives are accounted for at fair value with such changes recognized in Gain (loss) on derivative instruments, net in its Consolidated Statements of Operations, along with any interest earned or paid (including accrued amounts). The carrying value of the Agency and Non-Agency Interest-Only Strips, accounted for as derivatives, is included in Mortgage-backed securities in the Consolidated Balance Sheets. The carrying value of interest rate swaptions, currency forwards, futures contracts, total return swaps and TBAs is included in Derivative assets or Derivative liabilities in the Consolidated Balance Sheets. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. An embedded derivative is separated from the host contact and accounted for separately when all of the guidance criteria are met. Hybrid instruments that are remeasured at fair value through earnings, including the fair value option are not bifurcated. Derivative instruments, including derivative instruments accounted for as liabilities, are recorded at fair value and are re-valued at each reporting date, with changes in the fair value together with interest earned or paid (including accrued amounts) reported in the Gain (loss) on derivative instruments, net in the Consolidated Statements of Operations. |
Repurchase agreements and Reverse Repurchase agreements | Repurchase agreements and Reverse Repurchase agreements Mortgage-backed securities and other securities sold under repurchase agreements are treated as collateralized financing transactions, unless they meet sales treatment. Securities financed through a repurchase agreement remain on the Company’s Consolidated Balance Sheets as assets and cash received from the lender is recorded in the Company’s Consolidated Balance Sheets as a liability. Interest payable in accordance with repurchase agreements is recorded as accrued interest payable in the Consolidated Balance Sheets. Interest paid (including accrued amounts) in accordance with repurchase agreements was recorded as interest expense. The Company reflects all proceeds from repurchase agreement borrowings and repayment of repurchase agreement borrowings, including transactions pertaining to collateral received with respect to certain swap transactions, on a gross basis in the Consolidated Statements of Cash Flows. The Company may borrow securities under reverse repurchase agreements to deliver a security owned and sold by the Company but pledged to a different counterparty under a separate repurchase agreement when in the Manager’s view terminating the outstanding repurchase agreement is not in the Company’s interest. Cash paid to the borrower is recorded in the Company’s Consolidated Balance Sheets as an asset. Interest receivable in accordance with reverse repurchase agreements is recorded as accrued interest receivable in the Consolidated Balance Sheets. The Company reflects all proceeds on reverse repurchase agreement and repayment of reverse repurchase agreement, on a net basis in the Consolidated Statements of Cash Flows. Upon sale of a pledged security, the Company recognizes an obligation to return the borrowed security in the Consolidated Balance Sheet in Due to Counterparty. The Company establishes haircuts to ensure the market value of the underlying asset remains sufficient to protect the Company in the event of default by the counterparty. Realized gains and losses associated with the sale of the security are recognized in Realized gain (loss) on sale of investments, net in the Consolidated Statement of Cash Flows. |
Securitized debt | Securitized debt Securitized debt was issued at par by a consolidated securitization trust. The Company elected the fair value option for the debt and as a result all changes in fair value are reflected in Unrealized gain (loss), net in the Consolidated Statement of Operations. |
Share-based compensation | Share-based compensation The Company accounts for share-based compensation to its independent directors, to any employee, to its Manager and to employees of its Manager and its affiliates using the fair value based methodology prescribed by GAAP. Compensation cost related to restricted common stock issued to the Company’s independent directors including any such restricted stock which is subject to a deferred compensation program, and any employee of the Company is measured at its fair value at the grant date, and amortized into expense over the service period on a straight-line basis. Compensation cost related to restricted common stock issued to the Manager and to employees of the Manager, including officers of the Company who are employees of the Manager and its affiliates is initially measured at fair value at the grant date, and amortized into expense over the vesting period on a straight-line basis and re-measured on subsequent dates to the extent the awards are unvested. |
Warrants | Warrants For the Company’s warrants, the Company uses a variation of the adjusted Black-Scholes option valuation model to record the financial instruments at their relative fair values at issuance. The warrants issued with the Company’s common stock in the private placement to certain accredited institutional investors on May 15, 2012, were evaluated by the Company and were recorded at their relative fair value as a component of equity at the date of issuance. |
Income taxes | Income taxes The Company operates and has elected to be taxed as a REIT commencing with its taxable year ended December 31, 2012. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that the Company makes qualifying distributions to stockholders, and provided that the Company satisfies, on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which the Company lost its REIT qualification. Accordingly, the failure to qualify as a REIT could have a material adverse impact on the Company’s results of operations and amounts available for distribution to stockholders. The dividends paid deduction for qualifying dividends paid to stockholders is computed using the Company’s taxable income as opposed to net income reported in the consolidated financial statements. Taxable income, generally, will differ from net income reported in the consolidated financial statements because the determination of taxable income is based on tax regulations and not GAAP. The Company has elected to treat a wholly-owned subsidiary as a domestic Taxable REIT Subsidiary (“TRS”) and in the future may create and elect other subsidiaries as either a domestic or foreign TRS. In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A domestic TRS is subject to U.S. federal, state and local corporate income taxes, and its value may not exceed 25% of the value of the Company. While a TRS may generate net income, a TRS can declare dividends to the Company, which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at the TRS level, no distribution is required and it can increase book equity of the consolidated entity. The Company evaluates uncertain tax positions, if any, and classifies interest and penalties, if any, related to unrecognized tax benefits, if any, as a component of the provision for income taxes. In addition, the Company evaluates the performance of the TRS each period to determine the need for a provision for income taxes. |
Offering costs | Offering costs Offering costs borne by the Company in connection with common stock offerings and private placements are reflected as a reduction of additional paid-in-capital. |
Earnings per share | Earnings per share GAAP requires use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating securities as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity. The Company’s participating securities are not allocated a share of the net loss, as the participating securities do not have a contractual obligation to share in the net losses of the Company. The remaining earnings are allocated to common stockholders and participating securities, to the extent that each security shares in earnings, as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding common shares and all potential common shares assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential common shares. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) The Company has none of the components of comprehensive income (loss) and therefore comprehensive income (loss) is not presented. |
Accounting standards applicable to emerging growth companies | Accounting standards applicable to emerging growth companies The JOBS Act contains provisions that relax certain requirements for “emerging growth companies”, which includes the Company. For as long as the Company is an emerging growth company, which may be up to five full fiscal years, unlike other public companies, the Company will not be required to: (i) comply with any new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies under Section 102(b)(1) of the JOBS Act; (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of the Company’s system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act; (iii) comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. The Company currently takes advantage of some of these exemptions. The Company’s qualification for remaining an emerging growth company under the five full fiscal years expires on December 31, 2017. However, the Company will no longer qualify for such exemption if its gross revenues for any year equals or exceeds $1.0 billion, the Company issues more than $1.0 billion in non-convertible debt during the three previous years, or if the Company is deemed to be a large accelerated filer. |
Recent accounting pronouncements | Recent accounting pronouncements Accounting Standards Adopted in 2016 In January 2015, the FASB issued guidance to simplify income statement presentation by eliminating the concept of extraordinary items. U.S. GAAP currently requires that a company separately classify, disclose and present extraordinary events and transactions. The guidance eliminates the concept of extraordinary items from U.S. GAAP. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is of an unusual nature and occurs infrequently. This separate, net-of-tax presentation (and corresponding earnings per share impact) will no longer be allowed. The existing requirement to separately present items that are of an unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained. The new guidance also requires similar separate presentation of items that are both unusual and infrequent. The standard is effective for periods beginning after December 15, 2015. The effective date is the same for both public companies and all other entities. The 2016 adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements. In February 2015, the FASB issued guidance to simplify and reduce the number of consolidation models through the elimination of an indefinite deferral for certain entities and by placing more emphasis on risk of loss when determining a controlling financial interest. The guidance affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The standard is effective for a public company for fiscal years, and for interim periods within fiscal years beginning after December 15, 2015. The 2016 adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements. In April 2015, the FASB issued guidance to amend the presentation of debt issuance cost related to a recognized debt liability. Under the new guidance, the debt issuance costs were presented in the balance sheet as a direct deduction from the carrying amount of the recognized debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected under the new guidance. The standard is effective for a public company for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The guidance should be applied on a retrospective basis. The Company’s December 31, 2015 balance sheet was adjusted to reflect the effects of applying the new guidance on a retrospective basis and resulted in a $134 thousand reduction in Borrowings under repurchase agreements and a corresponding reduction in Other assets. Upon adoption, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability). The 2016 adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements. Accounting Standards to be Adopted in Future Periods In May 2014, the Financial Accounting Standards Board issued guidance that changes an entity’s recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new guidance requires improved disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In applying the new guidance, an entity may use either a retrospective approach to each prior reporting period or a retrospective approach with the cumulative effect recognized at the date of initial application. For a public company, the standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is not permitted for a public entity. The new guidance is not expected to have a material impact on the Company’s consolidated financial statements. In August 2014, the Financial Accounting Standards Board issued guidance that will require an entity’s management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. According to the new guidance, substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued. The term “probable” is used consistently with its current use in U.S. GAAP for loss contingencies. Disclosures will be required if conditions give rise to substantial doubt about the entity’s ability to continue as a going concern, including whether management’s plans that are intended to mitigate those conditions will alleviate the substantial doubt when implemented. The guidance is effective for annual periods ending after December 15, 2016. The effective date is the same for both public companies and all other entities. Early application is permitted. The Company’s first assessment under the new guidance will be completed for the year ending December 31, 2016. In January 2016, the FASB issued guidance to improve certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard is effective for a public company for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Early adoption by public companies for fiscal years or interim periods that have not yet been issued or, by all other entities, that have not yet been made available for issuance of this guidance are permitted as of the beginning of the fiscal year of adoption, under certain restrictions. The Company should apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The guidance related to equity securities without readily determinable fair values should be applied prospectively to equity investments that exist at the date of adoption. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements when adopted. In March 2016, the Financial Accounting Standards Board issued guidance that changes the accounting for certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. For a public company, the standard is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted in any interim or annual period. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements when adopted. |
Fair Value of Financial Instr24
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value of Financial Instruments | |
Schedule of the entity's financial instruments carried at fair value based upon the valuation hierarchy | The following tables present the Company’s financial instruments carried at fair value as of March 31, 2016 and December 31, 2015 , based upon the valuation hierarchy (dollars in thousands) : March 31, 2016 Fair Value Level I Level II Level III Total Assets Agency RMBS: 20-Year mortgage $ — $ $ — $ 30-Year mortgage — — Agency RMBS Interest-Only Strips — — Agency and Non-Agency Interest-Only Strips accounted for as derivatives, included in MBS — Non-Agency RMBS — Agency and Non-Agency CMBS — Other securities — Subtotal — Residential Whole-Loans — — Securitized commercial loan — — Subtotal — — Derivative assets — — Total $ — $ $ $ Liabilities Derivative liabilities $ $ $ $ Securitized debt — — Total $ $ $ $ December 31, 2015 Fair Value Level I Level II Level III Total Assets Agency RMBS: 20-Year mortgage $ — $ $ — $ 30-Year mortgage — — Agency RMBS Interest-Only Strips — — Agency and Non-Agency Interest-Only Strips accounted for as derivatives, included in MBS — Non-Agency RMBS — Agency and Non-Agency CMBS — Other securities — Subtotal — Residential Whole-Loans — — Securitized commercial loan — — Subtotal — — Derivative assets — Total $ $ $ $ Liabilities Derivative liabilities $ $ $ — $ Securitized debt — — Total $ $ $ $ |
Schedule of additional information about the entity's financial instruments, which are measured at fair value on a recurring basis for which the entity has utilized Level III inputs to determine fair value | Three months ended March 31, 2016 $ in thousands Mortgage-backed securities and other securities Residential Whole-Loans Securitized commercial loan Beginning balance $ $ $ Transfers into Level III from Level II — — — Transfers from Level III into Level II ) — — Purchases — — Sales and settlements ) — — Principal repayments ) ) — Total net gains / (losses) included in net income Realized gains/(losses), net ) — — Other than temporary impairment ) — — Unrealized gains/(losses), net(1) ) Premium and discount amortization, net ) ) — Ending balance $ $ $ (1) For Mortgage-backed securities and other securities, Residential Whole-Loans and Securitized commercial loans classified as Level III at March 31, 2016, the Company recorded gross unrealized gains of approximately $17.1 million, $790 thousand and $0 and gross unrealized losses of approximately $2.6 million, $24 thousand and $1.3 million, respectively. These gains and losses are included in Unrealized gain (loss), net on the Consolidated Statements of Operations. Three months ended March 31, 2016 $ in thousands Derivative Liability Securitized debt Beginning balance $ — $ Transfers into Level III from Level II — — Transfers from Level III into Level II — — Purchases — — Sales and settlements — — Principal repayments — — Total net gains / (losses) included in net income Realized gains/(losses), net — — Other than temporary impairment — — Unrealized (gains)/losses, net(1) ) Premium and discount amortization, net — — Ending balance $ $ (1) For Derivative liability and Securitized debt classified as Level III at March 31, 2016, the Company recorded gross unrealized gains of $0 and approximately $583 thousand and gross unrealized losses of approximately $866 thousand and $0, respectively. These gains and losses are included in Gain (loss) on derivative instruments, net and Unrealized gain (loss), net in the Consolidated Statements of Operations, respectively. Three months ended March 31, 2015 $ in thousands Mortgage-backed securities and other securities Residential Whole-Loans Commercial Whole-Loan Linked Transactions Beginning balance $ $ $ — $ Fair value of securities previously accounted for as linked transactions(1) — — — Fair value of financial instruments previously accounted for as linked transactions(1) — — — ) Transfers into Level III from Level II — — — Transfers from Level III into Level II — — — — Purchases — Sales and settlements ) — — — Principal repayments ) ) — — Total net gains / (losses) included in net income Realized gains/(losses), net — — — Other than temporary impairment ) — — — Unrealized gains/(losses), net(2) — Premium and discount amortization, net ) ) — — Ending balance $ $ $ $ — (1) Resulting from the implementation of guidance issued by the Financial Accounting Standards Board which eliminated the requirement to account for certain financial instruments as linked transactions. (2) For Mortgage-backed securities and other securities, Residential Whole-Loans and Commercial Whole-Loan classified as Level III at March 31, 2015, the Company recorded gross unrealized gains of approximately $6.9 million, $246 thousand and $150 thousand and gross unrealized losses of approximately $6.7 million, $0 and $0, respectively. These gains and losses are included in Unrealized gain (loss), net in the Consolidated Statements of Operations. |
Mortgage-Backed Securities an25
Mortgage-Backed Securities and other securities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Mortgage-Backed Securities and other securities. | |
Summary of certain information about the Company's investment portfolio | The following tables present certain information about the Company’s investment portfolio at March 31, 2016 and December 31, 2015 (dollars in thousands). March 31, 2016 Principal Balance Unamortized Premium (Discount), net Discount Designated as Credit Reserve and OTTI Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Net Weighted Average Coupon (1) Agency RMBS: 20-Year mortgage $ $ $ — $ $ $ ) $ % 30-Year mortgage — ) % Agency RMBS Interest-Only Strips (2) N/A N/A N/A ) %(2) Agency and Non-Agency Interest-Only Strips, accounted for as derivatives (2) (3) N/A N/A N/A N/A N/A N/A %(2) Non-Agency RMBS ) ) ) % Non-Agency RMBS Interest- Only Strips (2) N/A N/A N/A ) %(2) Agency and Non-Agency CMBS ) ) ) % Agency CMBS Interest-Only Strips (2) N/A N/A N/A — %(2) Other securities (4) ) ) ) % Total $ $ ) $ ) $ $ $ ) $ % December 31, 2015 Principal Balance Unamortized Premium (Discount), net Discount Designated as Credit Reserve and OTTI Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Net Weighted Average Coupon (1) Agency RMBS: 20-Year mortgage $ $ $ — $ $ $ ) $ % 30-Year mortgage — ) % Agency RMBS Interest-Only Strips (2) N/A N/A N/A ) %(2) Agency and Non-Agency Interest-Only Strips, accounted for as derivatives (2) (3) N/A N/A N/A N/A N/A N/A %(2) Non-Agency RMBS ) ) ) % Non-Agency RMBS Interest- Only Strips (2) N/A N/A N/A — %(2) Agency and Non-Agency CMBS ) ) ) % Agency CMBS Interest-Only Strips (2) N/A N/A N/A — %(2) Other securities (4) ) ) % Total $ $ $ ) $ $ $ ) $ % (1) Net weighted average coupon as of March 31, 2016 and December 31, 2015 is presented, net of servicing and other fees. (2) Agency RMBS IOs and IIOs, Non-Agency RMBS IOs and IIOs, Agency and Non-Agency IOs and IIOs, accounted for as derivatives, and Agency and Non-Agency CMBS IOs and IIOs have no principal balances and bear interest based on a notional balance. The notional balance is used solely to determine interest distributions on interest-only class of securities. At March 31, 2016, the notional balance for Agency RMBS IOs and IIOs, Non-Agency IOs and IIOs, Agency and Non-Agency IOs and IIOs, accounted for as derivatives, and CMBS IOs and IIOs was $337.4 million, $309.0 million, $602.9 million and $42.6 million, respectively. At December 31, 2015, the notional balance for Agency RMBS IOs and IIOs, Non-Agency IOs and IIOs, Agency and Non-Agency IOs and IIOs, accounted for as derivatives, and CMBS IOs and IIOs was $593.4 million, $321.0 million, $655.6 million and $43.2 million, respectively. (3) Interest on these securities is reported as a component of Gain (loss) on derivative instruments, net in the Consolidated Statements of Operations. (4) Other securities include residual interests in asset-backed securities which have no principal balance and an amortized cost of approximately $22.0 million and $22.8 million, as of March 31, 2016 and December 31, 2015, respectively. |
Schedule of changes in the components of purchase discount and amortizable premium on Non-Agency RMBS, Non-Agency CMBS and other securities | The following tables present the changes in the components of the Company’s purchase discount and amortizable premium on its Non-Agency RMBS, Non-Agency CMBS and other securities for the three months ended March 31, 2016 and March 31, 2015 (dollars in thousands): Three months ended March 31, 2016 Discount Designated as Credit Reserve and OTTI Accretable Discount(1) Amortizable Premium(1) Balance at beginning of period $ ) $ ) $ Accretion of discount — — Amortization of premium — — ) Realized credit losses — — Purchases — ) — Sales ) Net impairment losses recognized in earnings ) — — Transfers/release of credit reserve(2) ) ) Balance at end of period $ ) $ ) $ (1) Together with coupon interest, accretable purchase discount and amortizable premium is recognized as interest income over the life of the security. (2) Subsequent reductions of a security’s non-accretable discount results in a corresponding reduction in its amortizable premium. Three months ended March 31, 2015 Discount Designated as Credit Reserve and OTTI Accretable Discount(1) Amortizable Premium(1) Balance at beginning of period $ ) $ ) $ Securities previously accounted for as linked transactions(2) ) ) Accretion of discount — — Amortization of premium — — ) Realized credit losses — — Purchases ) ) Sales ) Net impairment losses recognized in earnings ) — — Transfers/release of credit reserve(3) ) Balance at end of period $ ) $ ) $ (1) Together with coupon interest, accretable purchase discount and amortizable premium is recognized as interest income over the life of the security. (2) Resulting from the implementation of guidance issued by the Financial Accounting Standards Board which eliminated the requirement to account for certain financial instruments as linked transactions. (3) Subsequent reductions of a security’s non-accretable discount results in a corresponding reduction in its amortizable premium. |
Schedule of the fair value and contractual maturities of the Company's investment securities | The following tables present the fair value and contractual maturities of the Company’s investment securities at March 31, 2016 and December 31, 2015 (dollars in thousands) : March 31, 2016 < or equal to 10 years > 10 years and < or equal to 20 years > 20 years and < or equal to 30 years > 30 years Total Agency RMBS: 20-Year mortgage $ — $ $ — $ — $ 30-Year mortgage — — — Agency RMBS Interest-Only Strips — — Agency and Non-Agency Interest-Only Strips, accounted for as derivatives Non-Agency RMBS Non-Agency RMBS Interest- Only Strips — — Agency and Non-Agency CMBS Agency CMBS Interest-Only Strips — — — Other securities Total $ $ $ $ $ December 31, 2015 < or equal to 10 years > 10 years and < or equal to 20 years > 20 years and < or equal to 30 years > 30 years Total Agency RMBS: 20-Year mortgage $ — $ $ — $ — $ 30-Year mortgage — — — Agency RMBS Interest-Only Strips — — Agency and Non-Agency Interest-Only Strips, accounted for as derivatives Non-Agency RMBS Non-Agency RMBS Interest- Only Strips — — Agency and Non-Agency CMBS Agency CMBS Interest-Only Strips — — — Other securities Total $ $ $ $ $ |
Schedule of gross unrealized losses and estimated fair value of the Company's MBS and other securities by length of time that such securities have been in a continuous unrealized loss position | The following tables present the gross unrealized losses and estimated fair value of the Company’s MBS and other securities by length of time that such securities have been in a continuous unrealized loss position at March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Less than 12 Months 12 Months or More Total Number Number Number Unrealized of Unrealized of Unrealized of Fair Value Losses Securities Fair Value Losses Securities Fair Value Losses Securities Agency RMBS: 20-Year mortgage $ $ ) $ $ ) $ $ ) 30-Year mortgage ) ) ) Agency RMBS Interest-Only Strips ) — — — ) Non-Agency RMBS ) ) ) Non-Agency RMBS Interest-Only Strips ) — — — ) Agency and Non-Agency CMBS ) ) ) Other securities ) — — — ) Total $ $ ) $ $ ) $ $ ) December 31, 2015 Less than 12 Months 12 Months or More Total Number Number Number Unrealized of Unrealized of Unrealized of Fair Value Losses Securities Fair Value Losses Securities Fair Value Losses Securities Agency RMBS: 20-Year mortgage $ $ ) $ $ ) $ $ ) 30-Year mortgage ) ) ) Agency RMBS Interest-Only Strips ) — — — ) Non-Agency RMBS ) ) ) Agency and Non-Agency CMBS ) ) ) Other securities ) ) ) Total $ $ ) $ $ ) $ $ ) |
Schedule of other-than-temporary impairments the Company recorded on its securities portfolio | The following table presents the OTTI the Company recorded on its securities portfolio (dollars in thousands): For the three months ended March 31, 2016 For the three months ended March 31, 2015 Agency RMBS $ $ Non-Agency RMBS Non-Agency CMBS Other securities Total $ $ |
Summary of the components of interest income on the Company's MBS and other securities | The following tables present components of interest income on the Company’s MBS and other securities (dollars in thousands): For the three months ended March 31, 2016 Coupon Net (Premium Amortization/ Amortization Basis) Discount Interest Interest Amortization Income Agency RMBS $ $ ) $ Non-Agency RMBS ) Agency and Non-Agency CMBS Other securities Total(1) $ $ ) $ (1) Interest income in the Consolidated Statements of Operations includes coupon interest, net premium/discount amortization and interest income of approximately $2.5 million, $(597) thousand and $1.9 million on Residential Whole-Loans, respectively and coupon interest, net premium amortization and interest income of $569 thousand, $0 and $569 thousand on a securitized commercial loan, respectively. For the three months ended March 31, 2015 Coupon Net (Premium Amortization/ Amortization Basis) Discount Interest Interest Amortization Income Agency RMBS $ $ ) $ Non-Agency RMBS ) Agency and Non-Agency CMBS Other securities Total(1) $ $ ) $ (1) Interest income in the Consolidated Statements of Operations includes coupon interest, net premium amortization and interest income of $117 thousand, $(46) thousand and $71 thousand on Residential Whole-Loans, respectively and coupon interest, net premium amortization and interest income of $74 thousand, $0 and $74 thousand on Commercial Whole-Loans. |
Schedule of sales and realized gain (loss) of the Company's MBS and other securities | The following tables present the sales and realized gain (loss) of the Company’s MBS and other securities (dollars in thousands): For the three months ended March 31, 2016 Proceeds Gross Gains Gross Losses Net Gain (Loss) Agency RMBS (1) $ $ $ ) $ Non-Agency RMBS ) ) Agency and Non-Agency CMBS — ) ) Other securities ) ) Total $ $ $ ) $ ) (1) Excludes proceeds for Agency Interest-Only Strips, accounted for as derivatives, of approximately $4.2 million, gross realized gains of $300 thousand and gross realized losses of $0 . For the three months ended March 31, 2015 Proceeds Gross Gains Gross Losses Net Gain (Loss) Agency RMBS (1) $ $ $ ) $ ) Non-Agency RMBS ) Agency and Non-Agency CMBS — Total $ $ $ ) $ (1) Excludes gross realized gains of $(2) thousand for Agency Interest-Only Strips, accounted for as derivatives, as a result of the settlement of prior year sales in January 2015. |
Variable Interest Entities (Tab
Variable Interest Entities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Variable Interest Entities | |
Schedule of the assets and liabilities of the VIE included in the Consolidated Balance Sheets | The following table presents a summary of the assets and liabilities of the residential and commercial loan trusts included in the Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 (dollars in thousands). March 31, 2016 December 31, 2015 Residential Whole-Loans, at fair value $ $ Securitized commercial loan, at fair value Investment related receivable — Accrued interest receivable Total assets $ $ Securitized debt $ $ Accrued interest payable Accounts payable and accrued expenses Total liabilities $ $ |
Schedule of components of the carrying value of Residential Whole-Loans and securitized commercial loan | The following table presents the components of the carrying value of Residential Whole-Loans and securitized commercial loan as of March 31, 2016 and December 31, 2015 (dollars in thousands): Residential Whole-Loans Securitized Commercial Loan March 31, 2016 December 31, 2015 March 31, 2016 December 31, 2015 Principal balance $ $ $ $ Unamortized premium — — Unamortized discount ) ) — — Gross unrealized gains — — Gross unrealized losses — — ) — Fair value $ $ $ $ |
Schedule of certain information about the Residential Whole-Loans investment portfolio | The following tables present certain information about the Company’s Residential Whole-Loans investment portfolio at March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Weighted Average Current Coupon Rate Number of Loans Principal Balance Original LTV Original FICO Score(1) Expected Life (years) Contractual Maturity (years) Coupon Rate 3.01– 4.00% 26 $ % % 4.01– 5.00% 181 % % 5.01 – 6.00% 285 % % 6.01 – 7.00% 7 % % Total 499 $ % % (1) The original FICO score is not available for 135 loans with a principal balance of approximately $56.8 million at March 31, 2016. The Company has excluded those loans from the weighted average computation. December 31, 2015 Weighted Average Current Coupon Rate Number of Loans Principal Balance Original LTV Original FICO Score(1) Expected Life (years) Contractual Maturity (years) Coupon Rate 3.01– 4.00% 2 $ % % 4.01– 5.00% 211 % % 5.01 – 6.00% 302 % % 6.01 – 7.00% 9 % % Total 524 $ % % (2) The original FICO score is not available for 139 loans with a principal balance of approximately $58.7 million at December 31, 2015. The Company has excluded those loans from the weighted average computation. |
Schedule of the U.S. states concentration and principal balance of collateral securing residential whole-loans | The following tables present the U.S. states in which the collateral securing the Company’s Residential Whole-Loans at March 31, 2016 and December 31, 2015, based on principal balance, is located (dollars in thousands): March 31, 2016 State Concentration Principal Balance California % $ Washington Massachusetts New York Georgia Other Total % $ December 31, 2015 State Concentration Principal Balance California % $ Washington Massachusetts New York Georgia Other Total % $ |
Borrowings under Repurchase A27
Borrowings under Repurchase Agreements (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Borrowings under Repurchase Agreements | |
Summary of certain characteristics of the Company's repurchase agreements | The following tables summarize certain characteristics of the Company’s repurchase agreements at March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Securities Pledged Repurchase Agreement Borrowings Weighted Average Interest Rate on Borrowings Outstanding at end of period Weighted Average Remaining Maturity (days) Agency RMBS $ % Non-Agency RMBS % Agency and Non-Agency CMBS % Whole-Loans and securitized commercial loan(1) % Other securities % Borrowings under repurchase agreements, net $ % (1) Repurchase agreement borrowings on Whole-Loans and securitized commercial loan owned through trust certificates. The trust certificates are eliminated upon consolidation. December 31, 2015 Securities Pledged Repurchase Agreement Borrowings Weighted Average Interest Rate on Borrowings Outstanding at end of period Weighted Average Remaining Maturity (days) Agency RMBS $ % Non-Agency RMBS % Agency and Non-Agency CMBS % Whole-Loans and securitized commercial loan(1) % Other securities % Borrowings under repurchase agreements % Less unamortized debt issuance cost N/A N/A Borrowings under repurchase agreements, net $ % (1) Repurchase agreement borrowings on Whole-Loans and securitized commercial loan owned through trust certificates. The trust certificates are eliminated upon consolidation. |
Schedule of repurchase agreements collateralized by investments | (dollars in thousands) March 31, 2016 December 31, 2015(1) Overnight $ — $ — 1 to 29 days 30 to 59 days 60 to 89 days 90 to 119 days — Greater than or equal to 120 days — Total $ $ (1) Excludes unamortized debt issuance costs of $134 thousand. |
Schedule of amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty | At March 31, 2016, the following table reflects amounts of collateral at risk under its repurchase agreements greater than 10% of the Company’s equity with any counterparty (dollars in thousands): March 31, 2016 Counterparty Amount of Collateral at Risk, at fair value Weighted Average Remaining Maturity (days) Percentage of Stockholders’ Equity Credit Suisse Securities (USA) LLC $ % RBC (Barbados) Trading Bank Corporation |
Collateral Positions (Tables)
Collateral Positions (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Collateral Positions | |
Summary of collateral positions, with respect to borrowings under repurchase agreements, securitized debt, derivatives and clearing margin account | The following tables summarize the Company’s collateral positions, with respect to its borrowings under repurchase agreements, securitized debt, derivatives and clearing margin account at March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Assets Pledged- Fair Value Accrued Interest Fair Value of Assets Pledged and Accrued Interest Assets pledged for borrowings under repurchase agreements: Agency RMBS $ $ $ Non-Agency RMBS Agency and Non-Agency CMBS Whole-Loans and securitized commercial loan(1) Other securities Cash (2) — Securitized commercial loan pledged for securitized debt Cash collateral for derivatives (2): — Total $ $ $ (1) Whole-Loans and securitized commercial loan owned through trust certificates are pledged as collateral. The trust certificates are eliminated upon consolidation. (2) Cash posted as collateral is included in Due from counterparties on the Company’s Consolidated Balance Sheets. December 31, 2015 Assets Pledged- Fair Value Accrued Interest Fair Value of Assets Pledged and Accrued Interest Assets pledged for borrowings under repurchase agreements: Agency RMBS $ $ $ Non-Agency RMBS Agency and Non-Agency CMBS Whole-Loans and securitized commercial loan(1) Other securities Cash (2) — Securitized commercial loan pledged for securitized debt Cash collateral for derivatives (2): — Total $ $ $ (1) Whole-Loans and securitized commercial loan owned through trust certificates are pledged as collateral. The trust certificates are eliminated upon consolidation. (2) Cash posted as collateral is included in Due from counterparties on the Company’s Consolidated Balance Sheets. |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments | |
Summary of the entity's derivative instruments | The following tables summarize the Company’s derivative instruments at March 31, 2016 and December 31, 2015 (dollars in thousands) : March 31, 2016 Derivative Instrument Accounting Designation Consolidated Balance Sheets Location Notional Amount Fair Value, excluding accrued interest Accrued Interest Payable (receivable) Interest rate swaps, assets Non-Hedge Derivative assets, at fair value $ $ $ ) Interest rate swaptions, assets Non-Hedge Derivative assets, at fair value — — Foreign currency swaps, asset Non-Hedge Derivative assets, at fair value ) Foreign currency forward contracts, asset Non-Hedge Derivative assets, at fair value — TBA securities, assets Non-Hedge Derivative assets, at fair value — Total derivative instruments, assets ) Interest rate swaps, liability Non-Hedge Derivative liability, at fair value ) Futures contract, liability Non-Hedge Derivative liability, at fair value ) — Total return swaps - liability Non-Hedge Derivative liability, at fair value ) ) Foreign currency forward contracts, liability Non-Hedge Derivative liability, at fair value ) — TBA securities, liabilities Non-Hedge Derivative liability, at fair value ) — Total derivative instruments, liabilities ) Total derivative instruments $ ) $ December 31, 2015 Derivative Instrument Accounting Designation Consolidated Balance Sheets Location Notional Amount Fair Value, excluding accrued interest Accrued Interest Payable (receivable) Interest rate swaps, assets Non-Hedge Derivative assets, at fair value $ $ $ Interest rate swaptions, assets Non-Hedge Derivative assets, at fair value — Futures contract, asset Non-Hedge Derivative assets, at fair value — Foreign currency swaps, asset Non-Hedge Derivative assets, at fair value ) Foreign currency forward contracts, asset Non-Hedge Derivative assets, at fair value — TBA securities, assets Non-Hedge Derivative assets, at fair value — Total derivative instruments, assets Interest rate swaps, liability Non-Hedge Derivative liability, at fair value ) Futures contract, liability Non-Hedge Derivative liability, at fair value ) — Foreign currency forward contracts, liability Non-Hedge Derivative liability, at fair value ) — TBA securities, liabilities Non-Hedge Derivative liability, at fair value ) — Total derivative instruments, liabilities ) Total derivative instruments $ ) $ |
Schedule of additional information about the contracts to purchase and sell TBAs | The following table presents additional information about the Company’s contracts to purchase and sell TBAs for the three months ended March 31, 2016 (dollars in thousands): Notional Amount as of December 31, 2015 Additions Settlement, Termination, Expiration or Exercise Notional Amount as of March 31, 2016 Purchase of TBAs $ $ $ ) $ Sale of TBAs $ $ $ ) $ |
Summary of the effect of entity's derivative instruments reported in Gain (loss) on derivative instruments, net on the Statements of Operations | The below tables summarize the effects of the Company’s derivative instruments, including Agency and Non-Agency Interest-Only Strips characterized as derivatives and TBAs, reported in Gain (loss) on derivative instruments, net in the Consolidated Statements of Operations for the three months ended March 31, 2016 and March 31, 2015 (dollars in thousands): Three months ended March 31, 2016 Description Realized Gain (Loss), net Contractual interest income (expense), net(1) Return (Recovery) of Basis Mark-to- market adjustments Total Interest rate swaps $ ) $ ) $ $ ) $ ) Interest rate swaptions ) — — Agency and Non-Agency Interest-Only Strips–accounted for as derivatives ) ) ) Options — — — Futures contracts — — ) Foreign currency forwards ) — — ) ) Foreign currency swaps — ) ) Total return swaps — ) ) TBAs — — ) Total $ $ ) $ ) $ ) $ ) Three months ended March 31, 2015 Description Realized Gain (Loss), net Contractual interest income (expense), net(1) Return (Recovery) of Basis Mark-to- market adjustments Total Interest rate swaps $ ) $ ) $ $ ) $ ) Interest rate swaptions — — ) ) Agency and Non-Agency Interest-Only Strips–accounted for as derivatives ) ) ) ) Futures contracts — — — ) ) Foreign currency forwards — — ) ) Foreign currency swaps — — TBAs — — ) Total $ $ $ ) $ ) $ ) (1) Contractual interest income (expense), net on derivative instruments includes interest settlement paid or received. |
Interest rate swaption | |
Derivative Instruments | |
Summary of interest rate swaps or interest rate swaptions | The following tables present information about the Company’s interest rate swaptions as of March 31, 2016 and December 31, 2015 (dollars in thousands): March 31, 2016 Option Underlying Swap Fixed-Pay Rate for Underlying Swap Fair Value Weighted Average Months Until Option Expiration Notional Amount Weighted Average Swap Term (Years) 2.26 – 2.50% $ — $ $ — $ December 31, 2015 Option Underlying Swap Fixed-Pay Rate for Underlying Swap Fair Value Weighted Average Months Until Option Expiration Notional Amount Weighted Average Swap Term (Years) 1.76 – 2.00% $ $ 2.01 – 2.25% 2.26 – 2.50% $ $ December 31, 2015 Option Underlying Swap Variable-Pay Rate for Underlying Swap Fair Value Weighted Average Months Until Option Expiration Notional Amount Weighted Average Swap Term (Years) 1.26 – 1.50% $ $ $ $ |
Foreign currency forwards | |
Derivative Instruments | |
Summary of foreign currency forwards or foreign currency swaps | The following is a summary of the Company’s foreign currency forwards at March 31, 2016 and December 31, 2015 (dollars and euros in thousands) : March 31, 2016 Derivative Type Notional Amount Notional (USD Equivalent) Maturity Fair Value Buy EUR/Sell USD currency forward € $ April 2016 $ Currency forwards, assets € $ n/a $ Buy USD/Sell EUR currency forward € $ April 2016 $ ) Currency forwards, liabilities € $ n/a $ ) Total currency forwards € $ n/a $ ) December 31, 2015 Derivative Type Notional Amount Notional (USD Equivalent) Maturity Fair Value Buy USD/Sell EUR currency forward € January 2016 $ Currency forwards, assets € $ n/a $ Buy EUR/Sell USD currency forward € $ January 2016 $ ) Currency forwards, liabilities € $ n/a $ ) Total currency forwards € $ n/a $ |
Foreign currency swaps | |
Derivative Instruments | |
Summary of foreign currency forwards or foreign currency swaps | The following is a summary of the Company’s foreign currency swaps with a fair value of $2.6 million and $7.2 million at March 31, 2016 and December 31, 2015, respectively (dollars and euros in thousands) : March 31, 2016 Date entered Maturity Fixed Rate Denomination Notional Amount Payer June 2014 July 2024 % EUR Receiver June 2014 July 2024 % USD December 31, 2015 Date entered Maturity Fixed Rate Denomination Notional Amount Payer June 2014 July 2024 % EUR Receiver June 2014 July 2024 % USD |
Fixed Pay Rate | Interest rate swaps | |
Derivative Instruments | |
Summary of interest rate swaps or interest rate swaptions | The following tables summarize the average fixed pay rate and average maturity for the Company’s interest rate swaps as of March 31, 2016 and December 31, 2015 (excludes interest rate swaptions) (dollars in thousands): March 31, 2016 Remaining Interest Rate Swap Term Notional Amount Fair Value – Asset (Liability), net Average Fixed Pay Rate Average Maturity (Years) Forward Starting Greater than 1 year and less than 3 years $ $ ) % % Greater than 3 years and less than 5 years ) Greater than 5 years ) Total $ $ ) % % December 31, 2015 Remaining Interest Rate Swap Term Notional Amount Fair Value – Asset (Liability), net Average Fixed Pay Rate Average Maturity (Years) Forward Starting 1 year or less $ $ % — % Greater than 1 year and less than 3 years ) — Greater than 3 years and less than 5 years ) — Greater than 5 years ) Total $ $ ) % % |
Variable Pay Rate | Interest rate swaps | |
Derivative Instruments | |
Summary of interest rate swaps or interest rate swaptions | The following tables summarize the average variable pay-rate and average maturity for the Company’s interest rate swaps as of March 31, 2016 and December 31, 2015 (excludes interest rate swaptions) (dollars in thousands): March 31, 2016 Remaining Interest Rate interest rate swap Term Notional Amount Fair Value – Asset (Liability), net Average Variable Pay Rate Average Maturity (Years) Forward Starting Greater than 3 years and less than 5 years $ $ % — % Greater than 5 years — Total $ $ % — % December 31, 2015 Remaining Interest Rate interest rate swap Term Notional Amount Fair Value – Asset (Liability), net Average Variable Pay Rate Average Maturity (Years) Forward Starting Greater than 3 years and less than 5 years $ $ ) % — % Greater than 5 years ) — Total $ $ ) % — % |
Offsetting Assets and Liabili30
Offsetting Assets and Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Offsetting Assets and Liabilities | |
Schedule of gross and net information about the Company's assets subject to master netting arrangements | Offsetting of Derivative Assets and Reverse Repurchase Agreements As of March 31, 2016 Gross Gross Amounts Offset in the Net Amounts of Assets presented in the Gross Amounts Not Offset in the Consolidated Balance Sheets $s in thousands Description Amounts of Recognized Assets Consolidated Balance Sheets Consolidated Balance Sheets Financial Instruments (1) Cash Collateral Received Net Amount Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS $ $ — $ $ ) $ — $ Derivative asset, at fair value(2) — ) ) Receivable under reverse repurchase agreements — ) — — Total $ $ — $ $ ) $ ) $ (1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral Pledged column of the tables above represents amounts pledged as collateral against derivative transactions. (2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, foreign currency swaps, total return swaps and TBAs. (3) Cash collateral pledged against the Company’s derivative counterparties was approximately $260.9 million as of March 31, 2016. (4) The fair value of investments pledged against the Company’s repurchase agreements was approximately $2.8 billion as of March 31, 2016. Offsetting of Derivative Assets As of December 31, 2015 Gross Gross Amounts Offset in the Net Amounts of Assets presented in the Gross Amounts Not Offset in the Consolidated Balance Sheets $s in thousands Description Amounts of Recognized Assets Consolidated Balance Sheets Consolidated Balance Sheets Financial Instruments (1) Cash Collateral Received Net Amount Agency and Non-Agency Interest-Only Strips, accounted for as derivatives included in MBS $ $ — $ $ ) $ — $ Derivative asset, at fair value(2) — ) ) Total $ $ — $ $ ) $ ) $ |
Schedule of gross and net information about the Company's liabilities subject to master netting arrangements | Offsetting of Derivative Liabilities and Repurchase Agreements As of March 31, 2016 Gross Gross Amounts Offset in the Net Amounts of Liabilities presented in the Gross Amounts Not Offset in the Consolidated Balance Sheets $s in thousands Description Amounts of Recognized Liabilities Consolidated Balance Sheets Consolidated Balance Sheets Financial Instruments (1) Cash Collateral Pledged(1) Net Amount Derivative liability, at fair value(2)(3) $ $ — $ $ ) $ ) $ Repurchase Agreements(4) — ) — — $ $ — $ $ ) $ ) $ Offsetting of Derivative Liabilities and Repurchase Agreements As of December 31, 2015 Gross Gross Amounts Offset in the Net Amounts of Liabilities presented in the Gross Amounts Not Offset in the Consolidated Balance Sheets $s in thousands Description Amounts of Recognized Liabilities Consolidated Balance Sheets Consolidated Balance Sheets Financial Instruments (1) Cash Collateral Pledged(1) Net Amount Derivative liability, at fair value(2)(3) $ $ — $ $ ) $ ) $ Repurchase Agreements(4) — ) — — $ $ — $ $ ) $ ) $ (1) Amounts disclosed in the Financial Instruments column of the tables above represent securities, Whole-Loans and securitized commercial loan collateral pledged and derivative assets that are available to be offset against liability balances associated with repurchase agreement and derivative liabilities. Amounts disclosed in the Cash Collateral Pledged column of the tables above represents amounts pledged as collateral against derivative transactions. (2) Derivative asset, at fair value and Derivative liability, at fair value includes interest rate swaps, interest rate swaptions, mortgage put options, currency forwards, futures contracts, foreign currency swaps and TBAs. (3) Cash collateral pledged against the Company’s derivative counterparties was approximately $211.3 million as of December 31, 2015. (4) The fair value of investments pledged against the Company’s repurchase agreements was approximately $3.0 billion as of December 31, 2015. |
Share-Based Payments (Tables)
Share-Based Payments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Share-Based Payments | |
Summary of restricted common stock vesting dates | March 31, 2016 December 31, 2015 Vesting Date Shares Vesting Shares Vesting March 2016 — June 2016 March 2017 March 2018 |
Schedule of restricted stock activity | The following table presents information with respect to the Company’s restricted stock for the three months ended March 31, 2016 including shares whose issuance has been deferred under the Director Deferred Fee Plan: Shares of Restricted Stock Weighted Average Grant Date Fair Value (1) Outstanding at beginning of period $ Granted (2) Cancelled/forfeited — — Outstanding at end of period $ Unvested at end of period $ (1) The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date. (2) Included in Granted are restricted stock attributed to dividends on restricted stock under the Director Deferred Fee Plan of 720 shares. |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Stockholders' Equity | |
Schedule of cash dividends declared and paid on common stock | Declaration Date Record Date Payment Date Amount per Share Tax Characterization 2016 March 24, 2016 April 4, 2016 April 26, 2016 $ Not yet determined 2015 December 17, 2015 December 28, 2015 January 26, 2016 $ Ordinary income September 24, 2015 October 5, 2015 October 27, 2015 $ Ordinary income June 18, 2015 June 29, 2015 July 28, 2015 $ Ordinary income March 26, 2015 April 6, 2015 April 28, 2015 $ Ordinary income 2014 December 18, 2014 December 29, 2014 January 27, 2015 $ Ordinary income September 23, 2014 October 3, 2014 October 28, 2014 $ Ordinary income June 19, 2014 June 30, 2014 July 29, 2014 $ Ordinary income March 20, 2014 March 31, 2014 April 29, 2014 $ Ordinary income 2013 April 1, 2013 April 12, 2013 April 30, 2013 $ Ordinary income June 20, 2013 July 1, 2013 July 29, 2013 $ Ordinary income September 19, 2013 September 30, 2013 October 29, 2013 $ Ordinary income December 19, 2013 December 30, 2013 January 28, 2014 $ (1) Ordinary income (1) Consisting of cash and stock. For stockholders who elected to receive the entire $2.35 per share dividend in stock, each stockholder received 0.1590 shares in newly issued common stock for each common share that they held as of the dividend record date. For stockholders who elected to receive the dividend in cash, or did not make an election, each stockholder received $0.9159 per share in cash and 0.0970 shares in newly issued common stock for each common share that they held as of the dividend record date. |
Net Income (Loss) per Common 33
Net Income (Loss) per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Net Income (Loss) per Common Share | |
Schedule of basic and diluted net income (loss) per share of common stock | The table below presents basic and diluted net income (loss) per share of common stock using the two-class method for the three months ended March 31, 2016 and March 31, 2015 (dollars, other than shares and per share amounts, in thousands): For the three months ended March 31, 2016 For the three months ended March 31, 2015 Numerator : Net income (loss) attributable to common stockholders and participating securities for basic and diluted earnings per share $ ) $ Less: Dividends and undistributed earnings allocated to participating securities Net income (loss) allocable to common stockholders — basic and diluted $ ) $ Denominator : Weighted average common shares outstanding for basic earnings per share Weighted average diluted shares outstanding (warrants) — — Weighted average common shares outstanding for diluted earnings per share Basic earnings per common share $ ) $ Diluted earnings per common share $ ) $ |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016USD ($)entitysegment | Dec. 31, 2015USD ($) | |
Summary of Significant Accounting Policies | ||
Number of VIEs, as primary beneficiary | entity | 2 | |
Number of business segments | segment | 1 | |
Emerging growth company revenue qualification lower limit | $ 1,000,000 | |
Emerging growth company qualification debt limit | $ 1,000,000 | |
Emerging growth company debt limit exclusion period | 3 years | |
Change in Accounting Estimate [Line Items] | ||
Borrowings under repurchase agreements, net | $ 2,403,129 | $ 2,585,667 |
Other assets | $ 173 | 382 |
Income taxes | ||
Maximum value of TRS expressed as a percentage of the value of the entity | 25.00% | |
Number of years the entity will be precluded from qualifying as a REIT | 4 years | |
Accounting Standards Update 2015-03 | Adjustments | ||
Change in Accounting Estimate [Line Items] | ||
Borrowings under repurchase agreements, net | (134) | |
Other assets | $ (134) |
Fair Value of Financial Instr35
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Assets | |||
Estimated fair value | $ 2,593,418 | $ 2,851,127 | |
Derivative assets | 100,161 | 21,915 | |
Liabilities | |||
Fair value of liability | 322,387 | 180,177 | |
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Other than temporary impairment | (10,797) | $ (4,651) | |
Premium and discount amortization, net | (895) | (2,582) | |
Credit valuation adjustment- interest rate and/or currency derivative assets | 0 | 0 | |
Credit valuation adjustment- interest rate and/or currency derivative liabilities | 0 | 0 | |
Securitized debt | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Beginning balance | 11,000 | ||
Unrealized gains/(losses), net | 583 | ||
Ending balance | 10,417 | ||
Derivative liabilities | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Unrealized gains/(losses), net | (866) | ||
Ending balance | 866 | ||
Residential Whole-Loans | |||
Assets | |||
Loans | 201,267 | 218,538 | |
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Premium and discount amortization, net | (597) | (46) | |
Securitized commercial loan | |||
Assets | |||
Loans | 23,675 | 25,000 | |
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Premium and discount amortization, net | 0 | ||
Agency RMBS | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Other than temporary impairment | (727) | (1,122) | |
Premium and discount amortization, net | (8,505) | (15,407) | |
20 Year Mortgage | |||
Assets | |||
Estimated fair value | 592,573 | 687,272 | |
30 Year Mortgage | |||
Assets | |||
Estimated fair value | 1,008,436 | 926,459 | |
Agency RMBS Interest-Only Strips | |||
Assets | |||
Estimated fair value | 32,671 | 71,954 | |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | |||
Assets | |||
Estimated fair value | 48,995 | 59,987 | |
Non-Agency RMBS | |||
Assets | |||
Estimated fair value | 354,299 | 445,449 | |
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Other than temporary impairment | (4,917) | (2,667) | |
Premium and discount amortization, net | (1,836) | (2,427) | |
Agency and Non-Agency CMBS | |||
Assets | |||
Estimated fair value | 422,252 | 475,605 | |
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Premium and discount amortization, net | 1,359 | 575 | |
Non-Agency CMBS | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Other than temporary impairment | (2,785) | (599) | |
Other securities | |||
Assets | |||
Estimated fair value | 47,999 | 101,099 | |
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Other than temporary impairment | (2,368) | (263) | |
Premium and discount amortization, net | 798 | 431 | |
Mortgage-backed securities and other securities | |||
Assets | |||
Estimated fair value | 2,593,418 | 2,851,127 | |
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Premium and discount amortization, net | (8,184) | (16,828) | |
Level I | |||
Assets | |||
Derivative assets | 63 | ||
Total | 63 | ||
Liabilities | |||
Fair value of liability | 1,794 | 698 | |
Total | 1,794 | 698 | |
Level II | |||
Assets | |||
Estimated fair value | 2,360,412 | 2,384,791 | |
Derivative assets | 100,161 | 21,852 | |
Total | 2,460,573 | 2,406,643 | |
Liabilities | |||
Fair value of liability | 319,727 | 179,479 | |
Total | 319,727 | 179,479 | |
Level II | 20 Year Mortgage | |||
Assets | |||
Estimated fair value | 592,573 | 687,272 | |
Level II | 30 Year Mortgage | |||
Assets | |||
Estimated fair value | 1,008,436 | 926,459 | |
Level II | Agency RMBS Interest-Only Strips | |||
Assets | |||
Estimated fair value | 32,671 | 71,954 | |
Level II | Agency and Non-Agency Interest-Only Strips accounted for as derivatives | |||
Assets | |||
Estimated fair value | 45,013 | 56,431 | |
Level II | Non-Agency RMBS | |||
Assets | |||
Estimated fair value | 272,282 | 278,885 | |
Level II | Agency and Non-Agency CMBS | |||
Assets | |||
Estimated fair value | 391,822 | 334,687 | |
Level II | Other securities | |||
Assets | |||
Estimated fair value | 17,615 | 29,103 | |
Level III | |||
Assets | |||
Estimated fair value | 233,006 | 466,336 | |
Loans | 224,942 | 243,538 | |
Total | 457,948 | 709,874 | |
Liabilities | |||
Securitized debt | 10,417 | 11,000 | |
Fair value of liability | 866 | ||
Total | 11,283 | 11,000 | |
Level III | Residential Whole-Loans | |||
Assets | |||
Loans | 201,267 | 218,538 | |
Level III | Securitized commercial loan | |||
Assets | |||
Loans | 23,675 | 25,000 | |
Level III | Agency and Non-Agency Interest-Only Strips accounted for as derivatives | |||
Assets | |||
Estimated fair value | 3,982 | 3,556 | |
Level III | Non-Agency RMBS | |||
Assets | |||
Estimated fair value | 166,558 | 247,753 | |
Level III | Agency and Non-Agency CMBS | |||
Assets | |||
Estimated fair value | 32,082 | 143,031 | |
Level III | Other securities | |||
Assets | |||
Estimated fair value | 30,384 | 71,996 | |
Level III | Recurring basis | Linked Transactions | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Beginning balance | 20,627 | ||
Level III | Recurring basis | Securitized debt | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Gross unrealized gains | 583 | ||
Gross unrealized losses | 0 | ||
Level III | Recurring basis | Derivative liabilities | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Gross unrealized gains | 0 | ||
Gross unrealized losses | 866 | ||
Level III | Recurring basis | Residential Whole-Loans | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Beginning balance | 218,538 | 7,220 | |
Purchases | 10,460 | ||
Principal repayments | (17,221) | (20) | |
Unrealized gains/(losses), net | 547 | 246 | |
Premium and discount amortization, net | (597) | (46) | |
Ending balance | 201,267 | 17,860 | |
Gross unrealized gains | 790 | 246 | |
Gross unrealized losses | 24 | 0 | |
Level III | Recurring basis | Securitized commercial loan | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Beginning balance | 25,000 | ||
Purchases | 8,750 | ||
Unrealized gains/(losses), net | (1,325) | 150 | |
Ending balance | 23,675 | 8,900 | |
Gross unrealized gains | 0 | 150 | |
Gross unrealized losses | 1,300 | 0 | |
Level III | Recurring basis | Mortgage-backed securities and other securities | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Beginning balance | 466,336 | 291,407 | |
Transfers into Level III from Level II | 5,357 | ||
Transfers from Level III into Level II | (158,566) | ||
Purchases | 94 | 101,710 | |
Sales and settlements | (68,910) | (49,724) | |
Principal repayments | (4,021) | (2,345) | |
Realized gains/(losses), net | (6,191) | 4,470 | |
Other than temporary impairment | (4,063) | (1,194) | |
Unrealized gains/(losses), net | 10,719 | 130 | |
Premium and discount amortization, net | (2,392) | (3,414) | |
Ending balance | 233,006 | 398,881 | |
Gross unrealized gains | 17,100 | 6,900 | |
Gross unrealized losses | 2,600 | 6,700 | |
Estimated Fair Value | |||
Assets | |||
Estimated fair value | 2,593,418 | 2,851,127 | |
Loans | 224,942 | 243,538 | |
Derivative assets | 100,161 | 21,915 | |
Total | 2,918,521 | 3,116,580 | |
Liabilities | |||
Securitized debt | 10,417 | 11,000 | |
Fair value of liability | 322,387 | 180,177 | |
Total | 332,804 | 191,177 | |
Estimated Fair Value | Residential Whole-Loans | |||
Assets | |||
Loans | 201,267 | 218,538 | |
Estimated Fair Value | Securitized commercial loan | |||
Assets | |||
Loans | 23,675 | 25,000 | |
Estimated Fair Value | 20 Year Mortgage | |||
Assets | |||
Estimated fair value | 592,573 | 687,272 | |
Estimated Fair Value | 30 Year Mortgage | |||
Assets | |||
Estimated fair value | 1,008,436 | 926,459 | |
Estimated Fair Value | Agency RMBS Interest-Only Strips | |||
Assets | |||
Estimated fair value | 32,671 | 71,954 | |
Estimated Fair Value | Agency and Non-Agency Interest-Only Strips accounted for as derivatives | |||
Assets | |||
Estimated fair value | 48,995 | 59,987 | |
Estimated Fair Value | Non-Agency RMBS | |||
Assets | |||
Estimated fair value | 438,840 | 526,638 | |
Estimated Fair Value | Agency and Non-Agency CMBS | |||
Assets | |||
Estimated fair value | 423,904 | 477,718 | |
Estimated Fair Value | Other securities | |||
Assets | |||
Estimated fair value | $ 47,999 | $ 101,099 | |
Adjustments | Level III | Recurring basis | Linked Transactions | Accounting Standards Update 2014-11 | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Ending balance | (20,627) | ||
Adjustments | Level III | Recurring basis | Mortgage-backed securities and other securities | Accounting Standards Update 2014-11 | |||
Investments measured at fair value on recurring basis for which the entity has utilized Level III inputs to determine fair value | |||
Ending balance | $ 52,484 |
Fair Value of Financial Instr36
Fair Value of Financial Instruments (Details 2) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Financial Liabilities: | ||
Repurchase agreements | $ 2,403,129 | $ 2,585,667 |
Estimated Fair Value | ||
Financial Liabilities: | ||
Repurchase agreements | 2,406,000 | |
Receivable under reverse repurchase agreements | 9,300 | |
Carrying Value | ||
Financial Liabilities: | ||
Repurchase agreements | 2,403,000 | |
Receivable under reverse repurchase agreements | $ 9,300 |
Mortgage-Backed Securities an37
Mortgage-Backed Securities and other securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Mortgage-Backed Securities and other securities | ||
Estimated Fair Value | $ 2,593,418 | $ 2,851,127 |
Mortgage-backed securities and other securities | ||
Mortgage-Backed Securities and other securities | ||
Principal Balance | 2,529,709 | 2,759,429 |
Unamortized Premium (Discount), net | (1,725) | 17,189 |
Discount Designated as Credit Reserve and OTTI | (118,090) | (152,750) |
Amortized Cost | 2,529,177 | 2,786,859 |
Unrealized Gain | 64,777 | 51,542 |
Unrealized Loss | (49,531) | (47,261) |
Estimated Fair Value | $ 2,593,418 | $ 2,851,127 |
Net Weighted Average Coupon (as a percent) | 4.00% | 3.90% |
Weighted average expected remaining term to the expected maturity of investment portfolio | 6 years 7 months 6 days | 7 years 1 month 6 days |
20 Year Mortgage | ||
Mortgage-Backed Securities and other securities | ||
Maturity period | 20 years | 20 years |
Principal Balance | $ 551,238 | $ 645,313 |
Unamortized Premium (Discount), net | 29,886 | 35,216 |
Amortized Cost | 581,124 | 680,529 |
Unrealized Gain | 11,678 | 8,562 |
Unrealized Loss | (229) | (1,819) |
Estimated Fair Value | $ 592,573 | $ 687,272 |
Net Weighted Average Coupon (as a percent) | 3.90% | 3.90% |
30 Year Mortgage | ||
Mortgage-Backed Securities and other securities | ||
Maturity period | 30 years | 30 years |
Principal Balance | $ 927,137 | $ 856,014 |
Unamortized Premium (Discount), net | 68,878 | 71,342 |
Amortized Cost | 996,015 | 927,356 |
Unrealized Gain | 14,901 | 10,827 |
Unrealized Loss | (2,480) | (11,724) |
Estimated Fair Value | $ 1,008,436 | $ 926,459 |
Net Weighted Average Coupon (as a percent) | 4.10% | 4.20% |
Agency RMBS Interest-Only Strips | ||
Mortgage-Backed Securities and other securities | ||
Amortized Cost | $ 32,264 | $ 71,632 |
Unrealized Gain | 1,314 | 2,499 |
Unrealized Loss | (907) | (2,177) |
Estimated Fair Value | $ 32,671 | $ 71,954 |
Net Weighted Average Coupon (as a percent) | 2.80% | 3.10% |
Notional balance | $ 337,400 | $ 593,400 |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | ||
Mortgage-Backed Securities and other securities | ||
Estimated Fair Value | $ 48,995 | $ 59,987 |
Net Weighted Average Coupon (as a percent) | 2.40% | 2.50% |
Notional balance | $ 602,900 | $ 655,600 |
Non-Agency RMBS | ||
Mortgage-Backed Securities and other securities | ||
Principal Balance | 482,117 | 601,233 |
Unamortized Premium (Discount), net | (26,376) | (16,669) |
Discount Designated as Credit Reserve and OTTI | (106,562) | (141,014) |
Amortized Cost | 349,179 | 443,550 |
Unrealized Gain | 12,659 | 9,345 |
Unrealized Loss | (7,539) | (7,446) |
Estimated Fair Value | $ 354,299 | $ 445,449 |
Net Weighted Average Coupon (as a percent) | 3.80% | 3.70% |
Non-Agency RMBS Interest-Only Strips | ||
Mortgage-Backed Securities and other securities | ||
Amortized Cost | $ 63,580 | $ 66,600 |
Unrealized Gain | 21,175 | 14,589 |
Unrealized Loss | (214) | |
Estimated Fair Value | $ 84,541 | $ 81,189 |
Net Weighted Average Coupon (as a percent) | 5.90% | 5.90% |
Notional balance | $ 309,000 | $ 321,000 |
Agency and Non-Agency CMBS | ||
Mortgage-Backed Securities and other securities | ||
Principal Balance | 538,320 | 575,351 |
Unamortized Premium (Discount), net | (73,237) | (73,835) |
Discount Designated as Credit Reserve and OTTI | (9,585) | (9,017) |
Amortized Cost | 455,498 | 492,499 |
Unrealized Gain | 2,607 | 4,289 |
Unrealized Loss | (35,853) | (21,183) |
Estimated Fair Value | $ 422,252 | $ 475,605 |
Net Weighted Average Coupon (as a percent) | 5.00% | 5.00% |
CMBS Interest Only Strips | ||
Mortgage-Backed Securities and other securities | ||
Notional balance | $ 42,600 | $ 43,200 |
Agency CMBS Interest-Only Strips | ||
Mortgage-Backed Securities and other securities | ||
Amortized Cost | 1,486 | 1,915 |
Unrealized Gain | 166 | 198 |
Estimated Fair Value | $ 1,652 | $ 2,113 |
Net Weighted Average Coupon (as a percent) | 4.60% | 4.70% |
Other securities | ||
Mortgage-Backed Securities and other securities | ||
Principal Balance | $ 30,897 | $ 81,518 |
Unamortized Premium (Discount), net | (876) | 1,135 |
Discount Designated as Credit Reserve and OTTI | (1,943) | (2,719) |
Amortized Cost | 50,031 | 102,778 |
Unrealized Gain | 277 | 1,233 |
Unrealized Loss | (2,309) | (2,912) |
Estimated Fair Value | $ 47,999 | $ 101,099 |
Net Weighted Average Coupon (as a percent) | 6.40% | 4.80% |
Residual interests in asset-backed securities | ||
Mortgage-Backed Securities and other securities | ||
Principal Balance | $ 0 | $ 0 |
Amortized Cost | $ 22,000 | $ 22,800 |
Mortgage-Backed Securities an38
Mortgage-Backed Securities and other securities (Details 2) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Discount Designated as Credit Reserve and OTTI | ||
Net impairment losses recognized in earnings | $ (10,797) | $ (4,651) |
Non-Agency RMBS and Non-Agency CMBS and other securities | ||
Discount Designated as Credit Reserve and OTTI | ||
Balance at beginning of period | (152,750) | (182,007) |
Securities previously accounted for as linked transactions | (2,320) | |
Realized credit losses | 3,666 | 2,668 |
Purchases | (30,587) | |
Sales | 28,154 | 53,815 |
Net impairment losses recognized in earnings | (8,445) | (3,529) |
Transfers/release of credit reserve | 11,285 | (1,932) |
Balance at end of period | (118,090) | (163,892) |
Accretable Discount | ||
Balance at beginning of period | (145,532) | (105,804) |
Securities previously accounted for as linked transactions | (1,393) | |
Accretion of discount | 4,737 | 5,154 |
Purchases | (2,265) | (48,298) |
Sales | 7,831 | 36,852 |
Transfers/release of credit reserve | (8,667) | 1,687 |
Balance at end of period | (143,896) | (111,802) |
Amortizable Premium | ||
Balance at beginning of period | 56,163 | 82,228 |
Securities previously accounted for as linked transactions | 4,587 | |
Amortization of premium | (1,702) | (2,728) |
Purchases | 2,057 | |
Sales | (8,436) | (9,946) |
Transfers/release of credit reserve | (2,618) | 245 |
Balance at end of period | $ 43,407 | $ 76,443 |
Mortgage-Backed Securities an39
Mortgage-Backed Securities and other securities (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Mortgage-Backed Securities and other securities | ||
Estimated fair value | $ 2,593,418 | $ 2,851,127 |
Mortgage-backed securities and other securities | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 2,593,418 | 2,851,127 |
Mortgage-backed securities and other securities | Less than or equal to 10 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 60,360 | 97,753 |
Mortgage-backed securities and other securities | More than 10 years and less than or equal to 20 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 730,200 | 863,362 |
Mortgage-backed securities and other securities | More than 20 years and less than or equal to 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 1,289,931 | 1,279,484 |
Mortgage-backed securities and other securities | More than 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 512,927 | 610,528 |
20 Year Mortgage | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | $ 592,573 | $ 687,272 |
Maturity period | 20 years | 20 years |
20 Year Mortgage | More than 10 years and less than or equal to 20 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | $ 592,573 | $ 687,272 |
30 Year Mortgage | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | $ 1,008,436 | $ 926,459 |
Maturity period | 30 years | 30 years |
30 Year Mortgage | More than 20 years and less than or equal to 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | $ 1,008,436 | $ 926,459 |
Agency RMBS Interest-Only Strips | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 32,671 | 71,954 |
Agency RMBS Interest-Only Strips | More than 10 years and less than or equal to 20 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 22,651 | 40,900 |
Agency RMBS Interest-Only Strips | More than 20 years and less than or equal to 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 10,020 | 31,054 |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 48,995 | 59,987 |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | Less than or equal to 10 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 1,075 | 1,310 |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | More than 10 years and less than or equal to 20 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 9,010 | 10,081 |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | More than 20 years and less than or equal to 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 26,454 | 35,219 |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | More than 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 12,456 | 13,377 |
Non-Agency RMBS | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 354,299 | 445,449 |
Non-Agency RMBS | Less than or equal to 10 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 14 | 15 |
Non-Agency RMBS | More than 10 years and less than or equal to 20 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 67,868 | 86,172 |
Non-Agency RMBS | More than 20 years and less than or equal to 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 66,757 | 59,502 |
Non-Agency RMBS | More than 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 219,660 | 299,760 |
Non-Agency RMBS Interest-Only Strips | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 84,541 | 81,189 |
Non-Agency RMBS Interest-Only Strips | More than 20 years and less than or equal to 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 22,604 | 20,639 |
Non-Agency RMBS Interest-Only Strips | More than 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 61,937 | 60,550 |
Agency and Non-Agency CMBS | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 422,252 | 475,605 |
Agency and Non-Agency CMBS | Less than or equal to 10 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 46,083 | 65,213 |
Agency and Non-Agency CMBS | More than 10 years and less than or equal to 20 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 28,788 | 27,849 |
Agency and Non-Agency CMBS | More than 20 years and less than or equal to 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 149,581 | 167,355 |
Agency and Non-Agency CMBS | More than 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 197,800 | 215,188 |
Agency CMBS Interest-Only Strips | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 1,652 | 2,113 |
Agency CMBS Interest-Only Strips | Less than or equal to 10 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 1,652 | 2,113 |
Other securities | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 47,999 | 101,099 |
Other securities | Less than or equal to 10 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 11,536 | 29,102 |
Other securities | More than 10 years and less than or equal to 20 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 9,310 | 11,088 |
Other securities | More than 20 years and less than or equal to 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | 6,079 | 39,256 |
Other securities | More than 30 years | ||
Mortgage-Backed Securities and other securities | ||
Estimated fair value | $ 21,074 | $ 21,653 |
Mortgage-Backed Securities an40
Mortgage-Backed Securities and other securities (Details 4) $ in Thousands | Mar. 31, 2016USD ($)item | Dec. 31, 2015USD ($)item |
Fair Value | ||
Fair value - Less than 12 months | $ 754,400 | $ 814,776 |
12 Months or More Fair Value | 356,808 | 432,931 |
Total Fair Value | 1,111,208 | 1,247,707 |
Unrealized Losses | ||
Less than 12 Months Unrealized Losses | (40,903) | (33,293) |
12 Months or More Unrealized Losses | (8,628) | (13,968) |
Total Unrealized Losses | $ (49,531) | $ (47,261) |
Number of Securities | ||
Less than 12 Months Number of Securities | item | 133 | 166 |
12 Months or More Number of Securities | item | 73 | 78 |
Total Number of Securities | item | 206 | 244 |
20 Year Mortgage | ||
Fair Value | ||
Fair value - Less than 12 months | $ 50,288 | $ 113,919 |
12 Months or More Fair Value | 46,978 | 44,470 |
Total Fair Value | 97,266 | 158,389 |
Unrealized Losses | ||
Less than 12 Months Unrealized Losses | (100) | (1,229) |
12 Months or More Unrealized Losses | (129) | (590) |
Total Unrealized Losses | $ (229) | $ (1,819) |
Number of Securities | ||
Less than 12 Months Number of Securities | item | 2 | 35 |
12 Months or More Number of Securities | item | 13 | 10 |
Total Number of Securities | item | 15 | 45 |
30 Year Mortgage | ||
Fair Value | ||
Fair value - Less than 12 months | $ 156,253 | $ 68,890 |
12 Months or More Fair Value | 247,475 | 329,716 |
Total Fair Value | 403,728 | 398,606 |
Unrealized Losses | ||
Less than 12 Months Unrealized Losses | (33) | (1,325) |
12 Months or More Unrealized Losses | (2,447) | (10,399) |
Total Unrealized Losses | $ (2,480) | $ (11,724) |
Number of Securities | ||
Less than 12 Months Number of Securities | item | 16 | 17 |
12 Months or More Number of Securities | item | 45 | 55 |
Total Number of Securities | item | 61 | 72 |
Agency RMBS Interest-Only Strips | ||
Fair Value | ||
Fair value - Less than 12 months | $ 21,658 | $ 39,091 |
Total Fair Value | 21,658 | 39,091 |
Unrealized Losses | ||
Less than 12 Months Unrealized Losses | (908) | (2,177) |
Total Unrealized Losses | $ (908) | $ (2,177) |
Number of Securities | ||
Less than 12 Months Number of Securities | item | 13 | 18 |
Total Number of Securities | item | 13 | 18 |
Non-Agency RMBS | ||
Fair Value | ||
Fair value - Less than 12 months | $ 170,213 | $ 234,897 |
12 Months or More Fair Value | 16,500 | 19,656 |
Total Fair Value | 186,713 | 254,553 |
Unrealized Losses | ||
Less than 12 Months Unrealized Losses | (6,959) | (6,928) |
12 Months or More Unrealized Losses | (579) | (519) |
Total Unrealized Losses | $ (7,538) | $ (7,447) |
Number of Securities | ||
Less than 12 Months Number of Securities | item | 34 | 36 |
12 Months or More Number of Securities | item | 4 | 5 |
Total Number of Securities | item | 38 | 41 |
Non-Agency RMBS Interest-Only Strips | ||
Fair Value | ||
Fair value - Less than 12 months | $ 3,755 | |
Total Fair Value | 3,755 | |
Unrealized Losses | ||
Less than 12 Months Unrealized Losses | (214) | |
Total Unrealized Losses | $ (214) | |
Number of Securities | ||
Less than 12 Months Number of Securities | item | 1 | |
Total Number of Securities | item | 1 | |
Agency and Non-Agency CMBS | ||
Fair Value | ||
Fair value - Less than 12 months | $ 318,025 | $ 298,369 |
12 Months or More Fair Value | 45,855 | 27,755 |
Total Fair Value | 363,880 | 326,124 |
Unrealized Losses | ||
Less than 12 Months Unrealized Losses | (30,380) | (19,888) |
12 Months or More Unrealized Losses | (5,473) | (1,294) |
Total Unrealized Losses | $ (35,853) | $ (21,182) |
Number of Securities | ||
Less than 12 Months Number of Securities | item | 63 | 55 |
12 Months or More Number of Securities | item | 11 | 7 |
Total Number of Securities | item | 74 | 62 |
Other securities | ||
Fair Value | ||
Fair value - Less than 12 months | $ 34,208 | $ 59,610 |
12 Months or More Fair Value | 11,334 | |
Total Fair Value | 34,208 | 70,944 |
Unrealized Losses | ||
Less than 12 Months Unrealized Losses | (2,309) | (1,746) |
12 Months or More Unrealized Losses | (1,166) | |
Total Unrealized Losses | $ (2,309) | $ (2,912) |
Number of Securities | ||
Less than 12 Months Number of Securities | item | 4 | 5 |
12 Months or More Number of Securities | item | 1 | |
Total Number of Securities | item | 4 | 6 |
Mortgage-Backed Securities an41
Mortgage-Backed Securities and other securities (Details 5) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Mortgage-Backed Securities and other securities | |||
Other loss on securities | $ 10,797 | $ 4,651 | |
Estimated fair value | 2,593,418 | $ 2,851,127 | |
Components of interest income | |||
Net (Premium Amortization/Amortization Basis) Discount Amortization | (895) | (2,582) | |
Interest Income | 29,618 | 40,806 | |
Residential Whole-Loans | |||
Components of interest income | |||
Coupon Interest | 2,500 | 117 | |
Net (Premium Amortization/Amortization Basis) Discount Amortization | (597) | (46) | |
Interest Income | 1,900 | 71 | |
Commercial Whole-Loans | |||
Components of interest income | |||
Coupon Interest | 74 | ||
Net (Premium Amortization/Amortization Basis) Discount Amortization | 0 | ||
Interest Income | 74 | ||
Securitized commercial loan | |||
Components of interest income | |||
Coupon Interest | 569 | ||
Net (Premium Amortization/Amortization Basis) Discount Amortization | 0 | ||
Interest Income | 569 | ||
Mortgage-backed securities and other securities | |||
Mortgage-Backed Securities and other securities | |||
Estimated fair value | 2,593,418 | 2,851,127 | |
Components of interest income | |||
Coupon Interest | 35,367 | 57,489 | |
Net (Premium Amortization/Amortization Basis) Discount Amortization | (8,184) | (16,828) | |
Interest Income | 27,183 | 40,661 | |
Agency RMBS | |||
Mortgage-Backed Securities and other securities | |||
Other loss on securities | 727 | 1,122 | |
Components of interest income | |||
Coupon Interest | 17,323 | 37,451 | |
Net (Premium Amortization/Amortization Basis) Discount Amortization | (8,505) | (15,407) | |
Interest Income | 8,818 | 22,044 | |
Non-Agency RMBS | |||
Mortgage-Backed Securities and other securities | |||
Other loss on securities | 4,917 | 2,667 | |
Estimated fair value | 354,299 | 445,449 | |
Components of interest income | |||
Coupon Interest | 9,778 | 11,869 | |
Net (Premium Amortization/Amortization Basis) Discount Amortization | (1,836) | (2,427) | |
Interest Income | 7,942 | 9,442 | |
Non-Agency RMBS inverse floaters | |||
Mortgage-Backed Securities and other securities | |||
Estimated fair value | 81,400 | 90,000 | |
Agency and Non-Agency CMBS | |||
Mortgage-Backed Securities and other securities | |||
Estimated fair value | 422,252 | 475,605 | |
Components of interest income | |||
Coupon Interest | 7,572 | 6,902 | |
Net (Premium Amortization/Amortization Basis) Discount Amortization | 1,359 | 575 | |
Interest Income | 8,931 | 7,477 | |
Non-Agency CMBS | |||
Mortgage-Backed Securities and other securities | |||
Other loss on securities | 2,785 | 599 | |
Other securities | |||
Mortgage-Backed Securities and other securities | |||
Other loss on securities | 2,368 | 263 | |
Estimated fair value | 47,999 | $ 101,099 | |
Components of interest income | |||
Coupon Interest | 694 | 1,267 | |
Net (Premium Amortization/Amortization Basis) Discount Amortization | 798 | 431 | |
Interest Income | $ 1,492 | $ 1,698 |
Mortgage-Backed Securities an42
Mortgage-Backed Securities and other securities (Details 6) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Mortgage-Backed Securities and other securities | ||
Net Gain (Loss) | $ (6,055) | $ 7,468 |
Mortgage-backed securities and other securities | ||
Mortgage-Backed Securities and other securities | ||
Proceeds | 1,162,542 | 536,869 |
Gross Gains | 8,287 | 10,539 |
Gross Losses | (14,342) | (3,071) |
Net Gain (Loss) | (6,055) | 7,468 |
Agency RMBS | ||
Mortgage-Backed Securities and other securities | ||
Proceeds | 310,480 | 301,732 |
Gross Gains | 5,250 | 290 |
Gross Losses | (5,151) | (2,897) |
Net Gain (Loss) | 99 | (2,607) |
Agency RMBS | Agency interest only strips accounted for as derivatives | ||
Mortgage-Backed Securities and other securities | ||
Proceeds | 4,200 | |
Gross Gains | 300 | (2) |
Gross Losses | 0 | |
Non-Agency RMBS | ||
Mortgage-Backed Securities and other securities | ||
Proceeds | 82,801 | 207,594 |
Gross Gains | 1,219 | 9,761 |
Gross Losses | (4,244) | (174) |
Net Gain (Loss) | (3,025) | 9,587 |
Agency and Non-Agency CMBS | ||
Mortgage-Backed Securities and other securities | ||
Proceeds | 19,035 | 27,543 |
Gross Gains | 488 | |
Gross Losses | (2,838) | |
Net Gain (Loss) | (2,838) | $ 488 |
Other securities | ||
Mortgage-Backed Securities and other securities | ||
Proceeds | 750,226 | |
Gross Gains | 1,818 | |
Gross Losses | (2,109) | |
Net Gain (Loss) | $ (291) |
Variable Interest Entities (Det
Variable Interest Entities (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended |
Nov. 30, 2015USD ($) | Mar. 31, 2016USD ($)entityloanitem | Dec. 31, 2015USD ($)entityloanitem | |
Variable Interest Entities | |||
Number of VIEs, as primary beneficiary | entity | 2 | ||
Repurchase agreements | $ 2,403,129 | $ 2,585,667 | |
Residential Whole-Loans, at fair value | 201,267 | 218,538 | |
Securitized commercial loan, at fair value | 23,675 | 25,000 | |
Investment related receivable | 21,509 | 572 | |
Accrued interest receivable | 24,494 | 22,621 | |
Total assets | 3,276,915 | 3,414,429 | |
Securitized debt | 10,417 | 11,000 | |
Accrued interest payable | 20,340 | 20,431 | |
Accounts payable and accrued expenses | 1,971 | 2,078 | |
Total Liabilities | $ 2,819,863 | $ 2,902,781 | |
Residential Whole-Loans | |||
Variable Interest Entities | |||
Number of VIEs, as primary beneficiary | entity | 1 | 2 | |
Principal balance | $ 195,425 | $ 212,647 | |
Unamortized premium | 1,860 | 2,410 | |
Unamortized discount | (206) | (161) | |
Gross unrealized gains | 4,188 | 3,642 | |
Fair value | $ 201,267 | $ 218,538 | |
Number of Loans | loan | 499 | 524 | |
Original LTV | 56.00% | 55.90% | |
Original FICO Score | item | 724 | 725 | |
Expected Life (years) | 1 year 4 months 24 days | 1 year 6 months | |
Contractual Maturity (years) | 27 years 4 months 24 days | 27 years 7 months 6 days | |
Coupon rate | 4.80% | 4.90% | |
Residential Whole-Loans | State Concentration | Principal balance | |||
Variable Interest Entities | |||
Principal balance | $ 195,425 | $ 212,647 | |
State Concentration | 100.00% | 100.00% | |
Residential Whole-Loans | California | State Concentration | Principal balance | |||
Variable Interest Entities | |||
Principal balance | $ 163,725 | $ 176,611 | |
State Concentration | 83.80% | 83.10% | |
Residential Whole-Loans | Washington | State Concentration | Principal balance | |||
Variable Interest Entities | |||
Principal balance | $ 12,269 | $ 14,442 | |
State Concentration | 6.20% | 6.80% | |
Residential Whole-Loans | Massachusetts | State Concentration | Principal balance | |||
Variable Interest Entities | |||
Principal balance | $ 11,168 | $ 12,000 | |
State Concentration | 5.70% | 5.60% | |
Residential Whole-Loans | New York | State Concentration | Principal balance | |||
Variable Interest Entities | |||
Principal balance | $ 5,007 | $ 5,399 | |
State Concentration | 2.60% | 2.50% | |
Residential Whole-Loans | Georgia | State Concentration | Principal balance | |||
Variable Interest Entities | |||
Principal balance | $ 1,624 | $ 1,813 | |
State Concentration | 0.80% | 0.90% | |
Residential Whole-Loans | Other | State Concentration | Principal balance | |||
Variable Interest Entities | |||
Principal balance | $ 1,632 | $ 2,382 | |
State Concentration | 0.90% | 1.10% | |
3.01- 4.00% | |||
Variable Interest Entities | |||
Principal balance | $ 6,662 | $ 698 | |
Current Coupon Rate, low end | 3.01% | 3.01% | |
Current Coupon Rate, high end | 4.00% | 4.00% | |
Number of Loans | loan | 26 | 2 | |
Original LTV | 56.00% | 35.70% | |
Original FICO Score | item | 764 | 766 | |
Expected Life (years) | 1 year 4 months 24 days | 1 year 10 months 24 days | |
Contractual Maturity (years) | 27 years 1 month 6 days | 29 years 4 months 24 days | |
Coupon rate | 4.00% | 3.90% | |
4.01- 5.00% | |||
Variable Interest Entities | |||
Principal balance | $ 68,806 | $ 79,696 | |
Current Coupon Rate, low end | 4.01% | 4.01% | |
Current Coupon Rate, high end | 5.00% | 5.00% | |
Number of Loans | loan | 181 | 211 | |
Original LTV | 57.00% | 56.60% | |
Original FICO Score | item | 725 | 728 | |
Expected Life (years) | 1 year 3 months 18 days | 1 year 4 months 24 days | |
Contractual Maturity (years) | 27 years 2 months 12 days | 27 years 6 months | |
Coupon rate | 4.50% | 4.50% | |
5.01- 6.00% | |||
Variable Interest Entities | |||
Principal balance | $ 116,469 | $ 128,204 | |
Current Coupon Rate, low end | 5.01% | 5.01% | |
Current Coupon Rate, high end | 6.00% | 6.00% | |
Number of Loans | loan | 285 | 302 | |
Original LTV | 54.90% | 55.10% | |
Original FICO Score | item | 721 | 723 | |
Expected Life (years) | 1 year 6 months | 1 year 7 months 6 days | |
Contractual Maturity (years) | 27 years 7 months 6 days | 27 years 10 months 24 days | |
Coupon rate | 5.10% | 5.10% | |
6.01- 7.00% | |||
Variable Interest Entities | |||
Principal balance | $ 3,488 | $ 4,049 | |
Current Coupon Rate, low end | 6.01% | 6.01% | |
Current Coupon Rate, high end | 7.00% | 7.00% | |
Number of Loans | loan | 7 | 9 | |
Original LTV | 70.40% | 71.00% | |
Original FICO Score | item | 731 | 723 | |
Expected Life (years) | 1 year 3 months 18 days | 1 year 4 months 24 days | |
Contractual Maturity (years) | 22 years 4 months 24 days | 23 years 4 months 24 days | |
Coupon rate | 6.40% | 6.40% | |
Residential Whole- Loans with no FICO score available | |||
Variable Interest Entities | |||
Principal balance | $ 56,800 | $ 58,700 | |
Number of Loans | loan | 135 | 139 | |
Securitized commercial loan | |||
Variable Interest Entities | |||
Principal balance | $ 25,000 | $ 25,000 | |
Gross unrealized losses | (1,325) | ||
Fair value | 23,675 | 25,000 | |
VIE | |||
Variable Interest Entities | |||
Residential Whole-Loans, at fair value | 201,267 | 218,538 | |
Securitized commercial loan, at fair value | 23,675 | 25,000 | |
Investment related receivable | 3,200 | ||
Accrued interest receivable | 1,737 | 1,836 | |
Total assets | 229,879 | 245,374 | |
Securitized debt | 10,417 | 11,000 | |
Accrued interest payable | 85 | 85 | |
Accounts payable and accrued expenses | 2 | 2 | |
Total Liabilities | $ 10,504 | 11,087 | |
VIE | Residential Whole-Loans | |||
Variable Interest Entities | |||
Number of Loans | loan | 499 | ||
VIE | Securitized commercial loan | |||
Variable Interest Entities | |||
Number of Loans | loan | 1 | ||
CMSC Trust | |||
Variable Interest Entities | |||
Trust certificates issued | $ 25,000 | ||
Securitized commercial loan, at fair value | 25,000 | ||
VIE | |||
Variable Interest Entities | |||
Securitized debt | $ 10,400 | ||
Cost of financing the securitized debt | 8.90% | ||
VIE | Residential Whole-Loans | |||
Variable Interest Entities | |||
Repurchase agreements | $ 164,000 | ||
CMSC Trust | Securitized commercial loan | |||
Variable Interest Entities | |||
Repurchase agreements | $ 6,800 | ||
Amount acquired, eliminated in consolidation | $ 14,000 | ||
Fair value of variable interest entity | 13,300 | ||
Securitized commercial loan, at fair value | 10,400 | ||
Securitized debt | 11,000 | ||
Unconsolidated VIEs | |||
Variable Interest Entities | |||
Maximum exposure to loss and carrying value of the investments | $ 56,900 | $ 58,200 | |
Number of VIEs- not as primary beneficiary | entity | 3 | 3 |
Borrowings under Repurchase A44
Borrowings under Repurchase Agreements (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016USD ($)item | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) | |
Borrowings Under Repurchase Agreements | |||
Number of counterparties to master repurchase agreement | item | 27 | ||
Number of counterparties from whom the Company had borrowings | item | 20 | ||
Certain characteristics of the Company's repurchase agreements | |||
Repurchase Agreement Borrowings | $ 2,585,801 | ||
Unamortized Debt Issuance Expense | 134 | ||
Borrowings under repurchase agreements, net | $ 2,403,129 | $ 2,585,667 | |
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent) | 1.25% | 1.17% | |
Weighted Average Remaining Maturity (days) | 36 days | 38 days | |
Accrued interest payable | $ 20,340 | $ 20,431 | |
VIE | |||
Certain characteristics of the Company's repurchase agreements | |||
Accrued interest payable | 85 | 85 | |
Repurchase agreements | |||
Certain characteristics of the Company's repurchase agreements | |||
Average borrowings under repurchase agreements | 2,400,000 | 2,800,000 | |
Maximum balance | 2,400,000 | 3,000,000 | |
Accrued interest payable | 3,200 | 3,000 | |
Repurchase agreements | Agency RMBS | |||
Certain characteristics of the Company's repurchase agreements | |||
Repurchase Agreement Borrowings | $ 1,601,713 | ||
Borrowings under repurchase agreements, net | $ 1,591,880 | ||
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent) | 0.75% | 0.66% | |
Weighted Average Remaining Maturity (days) | 38 days | 41 days | |
Repurchase agreements | Non-Agency RMBS | |||
Certain characteristics of the Company's repurchase agreements | |||
Repurchase Agreement Borrowings | $ 380,177 | ||
Borrowings under repurchase agreements, net | $ 295,369 | ||
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent) | 2.21% | 1.91% | |
Weighted Average Remaining Maturity (days) | 52 days | 44 days | |
Repurchase agreements | Agency and Non-Agency CMBS | |||
Certain characteristics of the Company's repurchase agreements | |||
Repurchase Agreement Borrowings | $ 356,369 | ||
Borrowings under repurchase agreements, net | $ 318,146 | ||
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent) | 2.12% | 1.84% | |
Weighted Average Remaining Maturity (days) | 34 days | 35 days | |
Repurchase agreements | Whole-Loans and securitized commercial loan | |||
Certain characteristics of the Company's repurchase agreements | |||
Repurchase Agreement Borrowings | $ 180,892 | ||
Borrowings under repurchase agreements, net | $ 170,788 | ||
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent) | 2.46% | 2.38% | |
Weighted Average Remaining Maturity (days) | 8 days | 26 days | |
Repurchase agreements | Other securities | |||
Certain characteristics of the Company's repurchase agreements | |||
Repurchase Agreement Borrowings | $ 66,650 | ||
Borrowings under repurchase agreements, net | $ 26,946 | ||
Weighted Average Interest Rate on Borrowings Outstanding at end of period (as a percent) | 2.68% | 2.33% | |
Weighted Average Remaining Maturity (days) | 11 days | 60 days | |
Repurchase agreements | Rehypothecated securities | |||
Certain characteristics of the Company's repurchase agreements | |||
Maximum balance | $ 0 | $ 530 | |
Repurchase agreements | Minimum | |||
Certain characteristics of the Company's repurchase agreements | |||
Term of repurchase agreements | 1 month | ||
Repurchase agreements | Maximum | |||
Certain characteristics of the Company's repurchase agreements | |||
Term of repurchase agreements | 3 months |
Borrowings under Repurchase A45
Borrowings under Repurchase Agreements (Details 2) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Certain characteristics of the Company's repurchase agreements | ||
Total | $ 2,403,129 | $ 2,585,667 |
Total | 2,585,801 | |
Unamortized Debt Issuance Cost | 134 | |
1 to 29 days | ||
Certain characteristics of the Company's repurchase agreements | ||
Total | 1,238,642 | |
Total | 1,335,119 | |
30 to 59 days | ||
Certain characteristics of the Company's repurchase agreements | ||
Total | 501,051 | |
Total | 362,940 | |
60 to 89 days | ||
Certain characteristics of the Company's repurchase agreements | ||
Total | 648,589 | |
Total | 847,781 | |
90 to 119 days | ||
Certain characteristics of the Company's repurchase agreements | ||
Total | $ 14,847 | |
Greater than or equal to 120 days | ||
Certain characteristics of the Company's repurchase agreements | ||
Total | $ 39,961 |
Borrowings under Repurchase A46
Borrowings under Repurchase Agreements (Details 3) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Credit Suisse Securities (USA) LLC | |
Amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty | |
Amount Collateral at Risk, at fair value | $ 100,635 |
Weighted Average Remaining Maturity | 9 days |
Percentage of Stockholders' Equity (as a percent) | 22.00% |
RBC (Barbados) Trading Bank Corporation | |
Amounts of collateral at risk under its repurchase agreements greater than 10% of the Company's equity with any counterparty | |
Amount Collateral at Risk, at fair value | $ 100,608 |
Weighted Average Remaining Maturity | 43 days |
Percentage of Stockholders' Equity (as a percent) | 22.00% |
Collateral Positions (Details)
Collateral Positions (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Collateral Positions | ||
Assets Pledged- Fair Value | $ 3,093,259 | $ 3,270,818 |
Cash collateral for derivatives | 260,900 | 211,300 |
Accrued interest | 11,914 | 13,815 |
Fair Value of Assets Pledged and Accrued Interest | 3,105,173 | 3,284,633 |
Cash collateral held by counterparties | 280,471 | 249,563 |
Collateral posted by counterparties | 21,608 | 9,950 |
Securities received as collateral | 577 | $ 0 |
Receivable under reverse repurchase agreements | $ 9,307 | |
Weighted average maturity period | 36 days | 38 days |
Weighted average interest rate | 1.25% | 1.17% |
Repurchase agreements | ||
Collateral Positions | ||
MBS pledged for borrowings under repurchase agreements | $ 2,800,000 | $ 3,000,000 |
Reverse repurchase agreements | ||
Collateral Positions | ||
Receivable under reverse repurchase agreements | $ 9,300 | |
Weighted Average Remaining Maturity | 18 days | |
Weighted average interest rate | 0.57% | |
Agency RMBS | Repurchase agreements | ||
Collateral Positions | ||
MBS pledged for borrowings under repurchase agreements | $ 1,663,353 | 1,658,865 |
Accrued interest | 6,549 | 7,366 |
Fair Value of Assets Pledged and Accrued Interest | $ 1,669,902 | $ 1,666,231 |
Weighted average maturity period | 38 days | 41 days |
Weighted average interest rate | 0.75% | 0.66% |
Agency RMBS | Reverse repurchase agreements | ||
Collateral Positions | ||
MBS pledged for borrowings under repurchase agreements | $ 10,100 | |
Non-Agency RMBS | Repurchase agreements | ||
Collateral Positions | ||
MBS pledged for borrowings under repurchase agreements | 442,742 | $ 530,110 |
Accrued interest | 782 | 1,053 |
Fair Value of Assets Pledged and Accrued Interest | $ 443,524 | $ 531,163 |
Weighted average maturity period | 52 days | 44 days |
Weighted average interest rate | 2.21% | 1.91% |
Agency and Non-Agency CMBS | Repurchase agreements | ||
Collateral Positions | ||
MBS pledged for borrowings under repurchase agreements | $ 433,752 | $ 487,643 |
Accrued interest | 2,821 | 3,291 |
Fair Value of Assets Pledged and Accrued Interest | $ 436,573 | $ 490,934 |
Weighted average maturity period | 34 days | 35 days |
Weighted average interest rate | 2.12% | 1.84% |
Whole-Loans and securitized commercial loan | Repurchase agreements | ||
Collateral Positions | ||
MBS pledged for borrowings under repurchase agreements | $ 214,525 | $ 232,538 |
Accrued interest | 1,634 | 1,750 |
Fair Value of Assets Pledged and Accrued Interest | $ 216,159 | $ 234,288 |
Weighted average maturity period | 8 days | 26 days |
Weighted average interest rate | 2.46% | 2.38% |
Other securities | Repurchase agreements | ||
Collateral Positions | ||
MBS pledged for borrowings under repurchase agreements | $ 47,999 | $ 101,099 |
Accrued interest | 43 | 270 |
Fair Value of Assets Pledged and Accrued Interest | $ 48,042 | $ 101,369 |
Weighted average maturity period | 11 days | 60 days |
Weighted average interest rate | 2.68% | 2.33% |
Cash | Derivative | ||
Collateral Positions | ||
Cash collateral for derivatives | $ 260,931 | $ 211,263 |
Fair Value of Assets Pledged and Accrued Interest | 260,931 | 211,263 |
Cash | Repurchase agreements | ||
Collateral Positions | ||
Assets Pledged- Fair Value | 19,540 | 38,300 |
Fair Value of Assets Pledged and Accrued Interest | 19,540 | 38,300 |
Securitized commercial loan pledged for securitized debt | Repurchase agreements | ||
Collateral Positions | ||
MBS pledged for borrowings under repurchase agreements | 10,417 | 11,000 |
Accrued interest | 85 | 85 |
Fair Value of Assets Pledged and Accrued Interest | $ 10,502 | $ 11,085 |
Derivative Instruments (Details
Derivative Instruments (Details) $ in Thousands, € in Millions | 3 Months Ended | ||
Mar. 31, 2016EUR (€) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Estimated Fair Value | |||
Estimated Fair value, assets | $ 100,161 | $ 21,915 | |
Estimated Fair value, liabilities | (322,387) | (180,177) | |
Accrued Interest Payable | |||
Total derivative instruments | 20,340 | 20,431 | |
Derivative instruments not accounted as hedges under GAAP | |||
Estimated Fair Value | |||
Estimated Fair value, assets | 100,161 | 21,915 | |
Estimated Fair value, liabilities | (322,387) | (180,177) | |
Total derivative instruments | 222,226 | 158,262 | |
Accrued Interest Payable | |||
Accrued Interest, assets | (12,029) | 889 | |
Accrued Interest, liabilities | 16,617 | 7,875 | |
Total derivative instruments | 4,588 | 8,764 | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | |||
Notional Amount | |||
Notional Amount, assets | 4,011,800 | 2,808,700 | |
Notional Amount, liabilities | 5,333,800 | 5,631,800 | |
Estimated Fair Value | |||
Estimated Fair value, assets | 95,426 | 9,635 | |
Estimated Fair value, liabilities | (318,645) | (178,305) | |
Accrued Interest Payable | |||
Accrued Interest, assets | (11,946) | 1,287 | |
Accrued Interest, liabilities | 16,725 | 7,875 | |
Interest rate swaption | Derivative instruments not accounted as hedges under GAAP | |||
Notional Amount | |||
Notional Amount, assets | 105,000 | 1,105,000 | |
Estimated Fair Value | |||
Estimated Fair value, assets | 1,479 | ||
Futures contracts | Derivative instruments not accounted as hedges under GAAP | |||
Notional Amount | |||
Notional Amount, assets | 201,600 | ||
Notional Amount, liabilities | 343,100 | 279,200 | |
Estimated Fair Value | |||
Estimated Fair value, assets | 63 | ||
Estimated Fair value, liabilities | (1,794) | (698) | |
Total return swaps | |||
Notional Amount | |||
Notional Amount, assets | € | € 51 | ||
Accrued Interest Payable | |||
Cash collateral | 9,700 | ||
Total return swaps | Derivative instruments not accounted as hedges under GAAP | |||
Notional Amount | |||
Notional Amount, liabilities | 55,764 | ||
Estimated Fair Value | |||
Estimated Fair value, liabilities | (866) | ||
Accrued Interest Payable | |||
Accrued Interest, liabilities | $ (108) | ||
Total return swaps | EURIBOR | |||
Accrued Interest Payable | |||
Variable rate spread (as a percent) | 2.75% | 2.75% | |
Variable rate spread for payment to counterparty (as a percent) | 0.50% | ||
Total return swaps | Through December 2019 | EURIBOR | |||
Accrued Interest Payable | |||
Variable rate spread for payment to counterparty (as a percent) | 0.25% | ||
Total return swaps | In December 2020 | EURIBOR | |||
Accrued Interest Payable | |||
Variable rate spread for payment to counterparty (as a percent) | 0.00% | ||
Foreign currency swaps | Derivative instruments not accounted as hedges under GAAP | |||
Notional Amount | |||
Notional Amount, assets | $ 11,560 | 25,160 | |
Estimated Fair Value | |||
Estimated Fair value, assets | 2,599 | 7,168 | |
Total derivative instruments | (2,600) | (7,200) | |
Accrued Interest Payable | |||
Accrued Interest, assets | (83) | (398) | |
Foreign currency forwards | Derivative instruments not accounted as hedges under GAAP | |||
Notional Amount | |||
Notional Amount, assets | 1,622 | 5,825 | |
Notional Amount, liabilities | 5,538 | 7,671 | |
Estimated Fair Value | |||
Estimated Fair value, assets | 77 | 302 | |
Estimated Fair value, liabilities | (256) | (281) | |
TBAs | Derivative instruments not accounted as hedges under GAAP | |||
Notional Amount | |||
Notional Amount, assets | 900,000 | 1,650,000 | |
Notional Amount, liabilities | 450,000 | 825,000 | |
Estimated Fair Value | |||
Estimated Fair value, assets | 2,059 | 3,268 | |
Estimated Fair value, liabilities | $ (826) | $ (893) |
Derivative Instruments (Detai49
Derivative Instruments (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2013 | |
Interest rate swaps and interest rate swaptions | |||
Fair value of assets | $ 100,161 | $ 21,915 | |
Fair value of liability | 322,387 | 180,177 | |
Derivative instruments not accounted as hedges under GAAP | |||
Interest rate swaps and interest rate swaptions | |||
Fair Value - Asset (Liability), net | (222,226) | (158,262) | |
Fair value of assets | 100,161 | 21,915 | |
Fair value of liability | 322,387 | 180,177 | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | |||
Interest rate swaps and interest rate swaptions | |||
Fair value of assets | 95,426 | 9,635 | |
Fair value of liability | 318,645 | 178,305 | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | 5,646,700 | 6,167,600 | |
Fair Value - Asset (Liability), net | $ (314,905) | $ (155,736) | |
Average Fixed Pay Rate (as a percent) | 2.10% | 1.90% | |
Average Maturity | 6 years 6 months | 5 years 4 months 24 days | |
Forward Starting (as a percent) | 29.50% | 11.50% | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Variable Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 3,698,900 | $ 2,272,900 | |
Fair Value - Asset (Liability), net | $ 91,686 | $ (12,934) | |
Average Variable Pay Rate | 0.60% | 0.40% | |
Average Maturity | 7 years 2 months 12 days | 8 years 2 months 12 days | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | 1 Year or Less | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 1,286,000 | ||
Fair Value - Asset (Liability), net | $ 163 | ||
Average Fixed Pay Rate (as a percent) | 0.60% | ||
Average Maturity | 7 months 6 days | ||
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 1 Year and less than 3 years | Minimum | |||
Interest rate swaps and interest rate swaptions | |||
Remaining Interest Rate interest rate swap Term | 1 year | 1 year | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 1 Year and less than 3 years | Maximum | |||
Interest rate swaps and interest rate swaptions | |||
Remaining Interest Rate interest rate swap Term | 3 years | 3 years | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 1 Year and less than 3 years | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 980,900 | $ 1,131,800 | |
Fair Value - Asset (Liability), net | $ (1,287) | $ (1,450) | |
Average Fixed Pay Rate (as a percent) | 1.10% | 1.10% | |
Average Maturity | 2 years | 1 year 4 months 24 days | |
Forward Starting (as a percent) | 89.20% | ||
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 3 years and less than 5 years [Member] | Minimum | |||
Interest rate swaps and interest rate swaptions | |||
Remaining Interest Rate interest rate swap Term | 3 years | 3 years | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 3 years and less than 5 years [Member] | Maximum | |||
Interest rate swaps and interest rate swaptions | |||
Remaining Interest Rate interest rate swap Term | 5 years | 5 years | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 3 years and less than 5 years [Member] | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 2,011,200 | $ 1,345,200 | |
Fair Value - Asset (Liability), net | $ (57,781) | $ (22,705) | |
Average Fixed Pay Rate (as a percent) | 1.90% | 2.10% | |
Average Maturity | 4 years 7 months 6 days | 4 years 7 months 6 days | |
Forward Starting (as a percent) | 33.80% | ||
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 3 years and less than 5 years [Member] | Variable Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 1,998,600 | $ 1,170,700 | |
Fair Value - Asset (Liability), net | $ 25,321 | $ (8,902) | |
Average Variable Pay Rate | 0.60% | 0.40% | |
Average Maturity | 4 years 6 months | 4 years 6 months | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 5 years | Minimum | |||
Interest rate swaps and interest rate swaptions | |||
Remaining Interest Rate interest rate swap Term | 5 years | 5 years | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 5 years | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 2,654,600 | $ 2,404,600 | |
Fair Value - Asset (Liability), net | $ (255,837) | $ (131,744) | |
Average Fixed Pay Rate (as a percent) | 2.60% | 2.80% | |
Average Maturity | 9 years 7 months 6 days | 10 years 2 months 12 days | |
Forward Starting (as a percent) | 4.10% | 29.50% | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | Greater than 5 years | Variable Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 1,700,300 | $ 1,102,200 | |
Fair Value - Asset (Liability), net | $ 66,365 | $ (4,032) | |
Average Variable Pay Rate | 0.60% | 0.40% | |
Average Maturity | 10 years 6 months | 12 years 3 months 18 days | |
Interest rate swaps excluding forward starting swaps | Variable Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 282,800 | ||
Forward starting interest rate swaps | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | 1,700,000 | ||
Interest rate swaption | Derivative instruments not accounted as hedges under GAAP | |||
Interest rate swaps and interest rate swaptions | |||
Fair value of assets | $ 1,479 | ||
Interest rate swaption | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 105,000 | $ 605,000 | |
Average Maturity | 2 months 24 days | 2 months 21 days | |
Fair value of assets | $ 1,020 | ||
Weighted average swap terms | 1 year | 4 years 3 months 18 days | |
Interest rate swaption | Derivative instruments not accounted as hedges under GAAP | Variable Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 500,000 | ||
Average Maturity | 2 months 3 days | ||
Fair value of assets | $ 459 | ||
Weighted average swap terms | 5 years | ||
Interest Rate Swaption 1.26-1.50% | Derivative instruments not accounted as hedges under GAAP | Variable Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 500,000 | ||
Average Maturity | 2 months 3 days | ||
Fair value of assets | $ 459 | ||
Weighted average swap terms | 5 years | ||
Interest Rate Swaption 1.26-1.50% | Derivative instruments not accounted as hedges under GAAP | Variable Pay Rate | Minimum | |||
Interest rate swaps and interest rate swaptions | |||
Fixed-pay/receive rate for underlying swap | 1.26% | ||
Interest Rate Swaption 1.26-1.50% | Derivative instruments not accounted as hedges under GAAP | Variable Pay Rate | Maximum | |||
Interest rate swaps and interest rate swaptions | |||
Fixed-pay/receive rate for underlying swap | 1.50% | ||
Interest Rate Swaption 1.76-2.00% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 400,000 | ||
Average Maturity | 2 months 3 days | ||
Fair value of assets | $ 890 | ||
Weighted average swap terms | 5 years | ||
Interest Rate Swaption 1.76-2.00% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | Minimum | |||
Interest rate swaps and interest rate swaptions | |||
Fixed-pay/receive rate for underlying swap | 1.76% | 1.76% | |
Interest Rate Swaption 1.76-2.00% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | Maximum | |||
Interest rate swaps and interest rate swaptions | |||
Fixed-pay/receive rate for underlying swap | 2.00% | ||
Interest Rate Swaption 2.01-2.25% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 100,000 | ||
Average Maturity | 2 months 3 days | ||
Fair value of assets | $ 129 | ||
Weighted average swap terms | 5 years | ||
Interest Rate Swaption 2.01-2.25% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | Minimum | |||
Interest rate swaps and interest rate swaptions | |||
Fixed-pay/receive rate for underlying swap | 2.01% | 2.01% | |
Interest Rate Swaption 2.01-2.25% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | Maximum | |||
Interest rate swaps and interest rate swaptions | |||
Fixed-pay/receive rate for underlying swap | 2.25% | ||
Interest Rate Swaption 2.26-2.50% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | |||
Interest rate swaps and interest rate swaptions | |||
Notional Amount | $ 105,000 | $ 105,000 | |
Average Maturity | 2 months 24 days | 5 months 24 days | |
Fair value of assets | $ 1 | ||
Weighted average swap terms | 1 year | 1 year | |
Interest Rate Swaption 2.26-2.50% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | Minimum | |||
Interest rate swaps and interest rate swaptions | |||
Fixed-pay/receive rate for underlying swap | 2.26% | 2.26% | |
Interest Rate Swaption 2.26-2.50% | Derivative instruments not accounted as hedges under GAAP | Fixed Pay Rate | Maximum | |||
Interest rate swaps and interest rate swaptions | |||
Fixed-pay/receive rate for underlying swap | 2.50% | 2.50% |
Derivative Instruments (Detai50
Derivative Instruments (Details 3) € in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||
Mar. 31, 2016USD ($)Counterparty | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($)Counterparty | Mar. 31, 2016EUR (€) | Mar. 31, 2016USD ($) | Dec. 31, 2015EUR (€) | Dec. 31, 2015USD ($) | |
Derivative [Line Items] | |||||||
Cash collateral for derivatives | $ 260,900 | $ 211,300 | |||||
Cash collateral provided | 3,800 | 9,400 | |||||
Fair value of assets | 100,161 | 21,915 | |||||
Fair value of liability | (322,387) | (180,177) | |||||
Number of counterparties | Counterparty | 2 | ||||||
Cash pledged as collateral to the Company by counterparties | 2,909 | 8,647 | |||||
Counterparty Based in Switzerland | |||||||
Derivative [Line Items] | |||||||
Notional Amount | 123,900 | 123,900 | |||||
Fair value of liability | 2,400 | 183 | |||||
Counterparty Based in England | |||||||
Derivative [Line Items] | |||||||
Notional Amount | 11,600 | 25,200 | |||||
Fair value of assets | 2,700 | 7,600 | |||||
Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Fair Value | (222,226) | (158,262) | |||||
Fair value of assets | 100,161 | 21,915 | |||||
Fair value of liability | (322,387) | (180,177) | |||||
Rehypothecated securities | |||||||
Derivative [Line Items] | |||||||
Notional Amount | 0 | ||||||
Repurchase agreements | |||||||
Derivative [Line Items] | |||||||
Maximum balance | $ 2,400,000 | $ 3,000,000 | |||||
Repurchase agreements | Rehypothecated securities | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 530 | 0 | |||||
Maximum balance | $ 0 | $ 530 | |||||
Interest rate swaps | Counterparty Based in England and Switzerland | |||||||
Derivative [Line Items] | |||||||
Number of counterparties | Counterparty | 2 | ||||||
Interest rate swaps | Counterparty Based in Switzerland | |||||||
Derivative [Line Items] | |||||||
Cash collateral for derivatives | 3,300 | 1,400 | |||||
Interest rate swaps | Counterparty Based in England | |||||||
Derivative [Line Items] | |||||||
Cash collateral for derivatives | 2,800 | 7,400 | |||||
Cash pledged as collateral to the Company by counterparties | 3,800 | 9,400 | |||||
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount, assets | 4,011,800 | 2,808,700 | |||||
Fair value of assets | 95,426 | 9,635 | |||||
Notional Amount, liabilities | 5,333,800 | 5,631,800 | |||||
Fair value of liability | (318,645) | (178,305) | |||||
Foreign currency forwards | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount, assets | 1,622 | 5,825 | |||||
Fair value of assets | 77 | 302 | |||||
Notional Amount, liabilities | 5,538 | 7,671 | |||||
Fair value of liability | (256) | (281) | |||||
Foreign currency swaps | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Fair Value | 2,600 | 7,200 | |||||
Notional Amount, assets | 11,560 | 25,160 | |||||
Fair value of assets | 2,599 | 7,168 | |||||
TBAs | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount, assets | 900,000 | 1,650,000 | |||||
Fair value of assets | 2,059 | 3,268 | |||||
Notional Amount, liabilities | 450,000 | 825,000 | |||||
Fair value of liability | (826) | (893) | |||||
TBAs | Derivative instruments not accounted as hedges under GAAP | Long | |||||||
Derivative [Line Items] | |||||||
Notional Amount | 900,000 | 1,650,000 | |||||
TBAs | Derivative instruments not accounted as hedges under GAAP | Short | |||||||
Derivative [Line Items] | |||||||
Notional Amount | 450,000 | 825,000 | |||||
Euro Member Countries, Euro | Foreign currency forwards | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount, Net | € 6,573 | 7,160 | € 11,883 | 13,496 | |||
Fair Value | (179) | 21 | |||||
Notional Amount, assets | 1,490 | 1,622 | 5,083 | 5,825 | |||
Fair value of assets | 77 | 302 | |||||
Notional Amount, liabilities | 5,083 | 5,538 | 6,800 | 7,671 | |||
Fair value of liability | (256) | (281) | |||||
Euro Member Countries, Euro | Buy Usd And Sell Eur Currency Forward One | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount, assets | 1,490 | 1,622 | |||||
Fair value of assets | 77 | ||||||
Euro Member Countries, Euro | Buy Usd And Sell Eur Currency Forward Four | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount, liabilities | € 5,083 | 5,538 | |||||
Fair value of liability | (256) | ||||||
Euro Member Countries, Euro | Buy Usd And Sell Eur Currency Forward Five | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount, assets | 5,083 | 5,825 | |||||
Fair value of assets | 302 | ||||||
Euro Member Countries, Euro | Buy Eur And Sell Usd Currency Forward Four | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount, liabilities | € 6,800 | 7,671 | |||||
Fair value of liability | (281) | ||||||
Euro Member Countries, Euro | Foreign currency swaps | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 8,500 | $ 18,500 | |||||
Fixed rate | 7.25% | 7.25% | 7.25% | 7.25% | |||
United States of America, Dollars | Foreign currency swaps | Derivative instruments not accounted as hedges under GAAP | |||||||
Derivative [Line Items] | |||||||
Notional Amount | $ 11,560 | $ 25,160 | |||||
Fixed rate | 9.005% | 9.005% | 9.005% | 9.005% |
Derivative Instruments (Detai51
Derivative Instruments (Details 4) - TBAs - Derivative instruments not accounted as hedges under GAAP $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Long | |
Changes in notional amount | |
Notional Amount at the beginning of the period | $ 1,650,000 |
Additions | 2,550,000 |
Settlement, Termination, Expiration or Exercise | (3,300,000) |
Notional Amount at the end of the period | 900,000 |
Short | |
Changes in notional amount | |
Notional Amount at the beginning of the period | 825,000 |
Additions | 2,925,000 |
Settlement, Termination, Expiration or Exercise | (3,300,000) |
Notional Amount at the end of the period | $ 450,000 |
Derivative Instruments (Detai52
Derivative Instruments (Details 5) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of assets | $ 100,161 | $ 21,915 | |
Fair value of liability | 322,387 | 180,177 | |
Mark-to-market adjustments | (64,555) | $ (56,037) | |
Total | (45,170) | (48,302) | |
Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of assets | 100,161 | 21,915 | |
Fair value of liability | 322,387 | 180,177 | |
Realized Gain (Loss), net | 26,716 | 7,756 | |
Contractual interest income (expense), net | (4,115) | 4,086 | |
Basis Recovery | (3,216) | (4,107) | |
Mark-to-market adjustments | (64,555) | (56,037) | |
Total | (45,170) | (48,302) | |
Interest rate swaps | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of assets | 95,426 | 9,635 | |
Fair value of liability | 318,645 | 178,305 | |
Realized Gain (Loss), net | (3,605) | (1,049) | |
Contractual interest income (expense), net | (8,595) | (1,784) | |
Basis Recovery | 167 | 371 | |
Mark-to-market adjustments | (54,248) | (53,205) | |
Total | (66,281) | (55,667) | |
Interest rate swaption | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of assets | 1,479 | ||
Realized Gain (Loss), net | (712) | 713 | |
Mark-to-market adjustments | 1,309 | (873) | |
Total | 597 | (160) | |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Realized Gain (Loss), net | 300 | (2) | |
Contractual interest income (expense), net | 4,146 | 5,654 | |
Basis Recovery | (3,383) | (4,478) | |
Mark-to-market adjustments | (3,679) | (2,395) | |
Total | (2,616) | (1,221) | |
Option | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Realized Gain (Loss), net | 4,756 | ||
Total | 4,756 | ||
Futures contracts | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of assets | 63 | ||
Fair value of liability | 1,794 | 698 | |
Realized Gain (Loss), net | 14,316 | ||
Mark-to-market adjustments | (1,159) | ||
Total | 13,157 | ||
Eurodollar futures | Long | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Notional Amount | 343,100 | ||
Eurodollar futures | Short | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of liability | 1,800 | ||
Eurodollar futures | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Mark-to-market adjustments | (74) | ||
Total | (74) | ||
US Treasury futures | Long | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Notional Amount | 480,800 | ||
Fair value of liability | 635 | ||
Foreign currency forwards | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of assets | 77 | 302 | |
Fair value of liability | 256 | 281 | |
Realized Gain (Loss), net | (28) | 646 | |
Mark-to-market adjustments | (200) | (1,195) | |
Total | (228) | (549) | |
Foreign currency swaps | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of assets | 2,599 | 7,168 | |
Realized Gain (Loss), net | 3,942 | ||
Contractual interest income (expense), net | 113 | 216 | |
Mark-to-market adjustments | (4,569) | 4,356 | |
Total | (514) | 4,572 | |
Total return swaps | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of liability | 866 | ||
Realized Gain (Loss), net | 8 | ||
Contractual interest income (expense), net | 221 | ||
Mark-to-market adjustments | (866) | ||
Total | (637) | ||
TBAs | Derivative instruments not accounted as hedges under GAAP | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Fair value of assets | 2,059 | 3,268 | |
Fair value of liability | 826 | 893 | |
Realized Gain (Loss), net | 7,739 | 7,448 | |
Mark-to-market adjustments | (1,143) | (2,651) | |
Total | 6,596 | $ 4,797 | |
TBAs | Derivative instruments not accounted as hedges under GAAP | Long | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Notional Amount | 900,000 | 1,650,000 | |
TBAs | Derivative instruments not accounted as hedges under GAAP | Short | |||
Amounts recognized on the statements of operations related to the Company's derivatives | |||
Notional Amount | $ 450,000 | $ 825,000 |
Offsetting Assets and Liabili53
Offsetting Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Offsetting of Derivative Assets and Reverse Repurchase Agreements | ||
Gross Amounts of Recognized Assets | $ 158,463 | $ 81,902 |
Net Amounts of Assets presented in the Consolidated Balance Sheets | 158,463 | 81,902 |
Gross Amounts Not Offset in the Consolidated Balance Sheets | ||
Financial Instruments | (150,012) | (65,549) |
Cash Collateral Received | (2,909) | (8,647) |
Net Amount | 5,542 | 7,706 |
Agency and Non-Agency Interest-Only Strips accounted for as derivatives | ||
Offsetting of Derivative Assets and Reverse Repurchase Agreements | ||
Gross Amounts of Recognized Assets | 48,995 | 59,987 |
Net Amounts of Assets presented in the Consolidated Balance Sheets | 48,995 | 59,987 |
Gross Amounts Not Offset in the Consolidated Balance Sheets | ||
Financial Instruments | (44,375) | (55,372) |
Net Amount | 4,620 | 4,615 |
Derivative asset | ||
Offsetting of Derivative Assets and Reverse Repurchase Agreements | ||
Gross Amounts of Recognized Assets | 100,161 | 21,915 |
Net Amounts of Assets presented in the Consolidated Balance Sheets | 100,161 | 21,915 |
Gross Amounts Not Offset in the Consolidated Balance Sheets | ||
Financial Instruments | (96,330) | (10,177) |
Cash Collateral Received | (2,909) | (8,647) |
Net Amount | 922 | $ 3,091 |
Reverse repurchase agreements | ||
Offsetting of Derivative Assets and Reverse Repurchase Agreements | ||
Gross Amounts of Recognized Assets | 9,307 | |
Net Amounts of Assets presented in the Consolidated Balance Sheets | 9,307 | |
Gross Amounts Not Offset in the Consolidated Balance Sheets | ||
Financial Instruments | $ (9,307) |
Offsetting Assets and Liabili54
Offsetting Assets and Liabilities (Details 2) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Offsetting Assets and Liabilities | ||
Gross Amounts of Recognized Liabilities | $ 322,387 | $ 180,177 |
Net Amounts of Liabilities Presented in the Balance Sheets | 322,387 | 180,177 |
Gross Amounts Not Offset in the Balance Sheets | ||
Financial Instruments | (96,330) | (10,177) |
Cash Collateral Pledged | (225,877) | (169,887) |
Net Amount | 180 | 113 |
Repurchase agreement | ||
Gross Amounts of Recognized Liabilities | 2,403,129 | 2,585,801 |
Borrowings under repurchase agreements, net | 2,403,129 | 2,585,667 |
Borrowings under repurchase agreements, net | 2,585,801 | |
Gross Amounts Not Offset in the Balance Sheets | ||
Financial Instruments | (2,403,129) | (2,585,801) |
Total | ||
Gross Amounts of Recognized Liabilities | 2,725,516 | 2,765,978 |
Net Amounts of Liabilities presented in the Balance Sheet | 2,725,516 | 2,765,978 |
Gross Amounts Not Offset in the Balance Sheet | ||
Financial Instruments | (2,499,459) | (2,595,978) |
Cash Collateral Pledged | (225,877) | (169,887) |
Net Amount | 180 | 113 |
Cash collateral pledged against Swaps | 260,900 | 211,300 |
Fair value of investments pledged against repurchase agreements | $ 2,800,000 | $ 3,000,000 |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016USD ($)item | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) | |
Related Party Transactions | |||
Management fees | $ 2,753 | $ 2,693 | |
Securitized debt | $ 10,417 | $ 11,000 | |
Western Asset Management Company | |||
Related Party Transactions | |||
Management fees (as a percent) | 1.50% | ||
Renewal term of management agreement | 1 year | ||
Notice period to terminate the Management Agreement following initial term | 180 days | ||
Multiple of average annual management fees used to calculate termination fee | item | 3 | ||
Prior period over which management fees were incurred used to calculate the termination fee under the Management Agreement | 24 months | ||
Notice period to terminate the Management Agreement for cause | 30 days | ||
Management fees | $ 2,800 | 2,700 | |
Reimbursable employee costs | 72 | $ 137 | |
Management fees incurred but not yet paid | 2,800 | 2,700 | |
Reimbursable employee costs incurred but not yet paid | $ 349 | $ 277 | |
Western Asset Management Company | Minimum | |||
Related Party Transactions | |||
Proportion of affirmative votes by the entity's independent directors to terminate the Management Agreement (as a percent) | 67.00% | ||
Proportion of votes required by the entity's independent directors for acceptance of reduction in management fees (as a percent) | 67.00% | ||
Securitized debt | VIE | |||
Related Party Transactions | |||
Securitized debt | $ 11,000 | ||
Securitized debt, Fair value | $ 10,400 |
Share-Based Payments (Details)
Share-Based Payments (Details) $ / shares in Units, $ in Thousands | Mar. 01, 2016 | Dec. 08, 2015shares | Jun. 04, 2015directorshares | Mar. 01, 2015shares | Dec. 19, 2013shares | Mar. 31, 2016USD ($)$ / sharesshares | Mar. 31, 2015USD ($)shares | Mar. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2015USD ($)shares | May. 15, 2012shares |
Share-Based Payments | ||||||||||
Shares authorized (as a percent) | 3.00% | 3.00% | ||||||||
Shares reserved for issuance under the Equity plan (in shares) | 1,237,711 | 1,237,711 | 308,335 | |||||||
Number of shares remained available for issuance (in shares) | 548,597 | 548,597 | ||||||||
Stock-based compensation expense recognized | $ | $ 572 | $ 679 | ||||||||
Restricted common stock | ||||||||||
Share-Based Payments | ||||||||||
Number of shares with accelerated vesting | 13,980 | |||||||||
Vested (in shares) | 188,184 | 134,263 | ||||||||
Summary of restricted common stock vesting dates | ||||||||||
Shares Vesting (in shares) | 212,249 | 212,249 | 399,713 | |||||||
Shares of Restricted Stock | ||||||||||
Outstanding at beginning of period (in shares) | 688,394 | |||||||||
Granted (in shares) | 720 | 664,838 | ||||||||
Outstanding at end of year (in shares) | 689,114 | 689,114 | ||||||||
Unvested at end of year (in shares) | 212,249 | 212,249 | 399,713 | |||||||
Weighted Average Grant Date Fair Value | ||||||||||
Outstanding at beginning of period (in dollars per share) | $ / shares | $ 17.39 | |||||||||
Granted (in dollars per share) | $ / shares | 9.31 | |||||||||
Outstanding at end of year (in dollars per share) | $ / shares | 17.38 | $ 17.38 | ||||||||
Unvested at end of year (in dollars per share) | $ / shares | $ 15.38 | $ 15.38 | ||||||||
Restricted common stock | Director Deferred Fee Plan | ||||||||||
Share-Based Payments | ||||||||||
Stock dividends granted (in shares) | 24,276 | |||||||||
Shares of Restricted Stock | ||||||||||
Granted (in shares) | 720 | |||||||||
Restricted common stock | March 2016 | ||||||||||
Summary of restricted common stock vesting dates | ||||||||||
Shares Vesting (in shares) | 188,184 | |||||||||
Shares of Restricted Stock | ||||||||||
Unvested at end of year (in shares) | 188,184 | |||||||||
Restricted common stock | June 2016 | ||||||||||
Summary of restricted common stock vesting dates | ||||||||||
Shares Vesting (in shares) | 12,248 | 12,248 | 11,528 | |||||||
Shares of Restricted Stock | ||||||||||
Unvested at end of year (in shares) | 12,248 | 12,248 | 11,528 | |||||||
Restricted common stock | March 2017 | ||||||||||
Summary of restricted common stock vesting dates | ||||||||||
Shares Vesting (in shares) | 133,334 | 133,334 | 133,334 | |||||||
Shares of Restricted Stock | ||||||||||
Unvested at end of year (in shares) | 133,334 | 133,334 | 133,334 | |||||||
Restricted common stock | March 2018 | ||||||||||
Summary of restricted common stock vesting dates | ||||||||||
Shares Vesting (in shares) | 66,667 | 66,667 | 66,667 | |||||||
Shares of Restricted Stock | ||||||||||
Unvested at end of year (in shares) | 66,667 | 66,667 | 66,667 | |||||||
Restricted common stock | Director | ||||||||||
Share-Based Payments | ||||||||||
Awards granted to each of the entity's independent directors (in shares) | 2,625 | |||||||||
Number of independent directors to whom awards were granted | director | 4 | |||||||||
Shares of Restricted Stock | ||||||||||
Granted (in shares) | 10,500 | |||||||||
Restricted common stock | Western Asset Management Company | ||||||||||
Share-Based Payments | ||||||||||
Awards vested or to be vested (as a percent) | 33.00% | |||||||||
Shares of Restricted Stock | ||||||||||
Granted (in shares) | 200,000 | |||||||||
Restricted common stock | Western Asset Management Company | March 2017 | ||||||||||
Share-Based Payments | ||||||||||
Awards vested or to be vested (as a percent) | 33.00% | |||||||||
Restricted common stock | Western Asset Management Company | March 2018 | ||||||||||
Share-Based Payments | ||||||||||
Awards vested or to be vested (as a percent) | 33.00% | |||||||||
Equity awards | ||||||||||
Share-Based Payments | ||||||||||
Unamortized compensation expense | $ | $ 27 | $ 27 | $ 67 | |||||||
Liability awards | ||||||||||
Share-Based Payments | ||||||||||
Unamortized compensation expense | $ | $ 1,900 | $ 1,900 | $ 2,400 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - $ / shares | Apr. 26, 2016 | Mar. 24, 2016 | Jan. 26, 2016 | Dec. 17, 2015 | Oct. 27, 2015 | Sep. 24, 2015 | Jul. 28, 2015 | Jun. 18, 2015 | Apr. 28, 2015 | Mar. 26, 2015 | Jan. 27, 2015 | Dec. 18, 2014 | Oct. 28, 2014 | Sep. 23, 2014 | Jul. 29, 2014 | Jun. 19, 2014 | Apr. 29, 2014 | Mar. 20, 2014 | Jan. 28, 2014 | Dec. 19, 2013 | Oct. 29, 2013 | Sep. 19, 2013 | Jul. 29, 2013 | Jun. 20, 2013 | Apr. 30, 2013 | Apr. 01, 2013 | Mar. 31, 2016 | Mar. 31, 2015 | Feb. 25, 2016 | May. 09, 2012 |
Shareholders equity | ||||||||||||||||||||||||||||||
Number of shares of common stock for each warrant unit | 1 | |||||||||||||||||||||||||||||
Number of common shares that can be acquired upon exercise of each warrant unit | 0.5 | |||||||||||||||||||||||||||||
Exercise price of outstanding warrants (in dollars per share) | $ 16.70 | |||||||||||||||||||||||||||||
Number of warrant shares purchasable (in shares) | 1,232,916 | |||||||||||||||||||||||||||||
Shares authorized to be repurchased | 2,050,000 | |||||||||||||||||||||||||||||
Dividends declared per Share of Common Stock (in dollars per share) | $ 0.45 | $ 0.58 | $ 0.60 | $ 0.64 | $ 0.67 | $ 0.70 | $ 0.70 | $ 0.67 | $ 0.67 | $ 2.35 | $ 0.90 | $ 0.90 | $ 0.95 | $ 0.45 | $ 0.67 | |||||||||||||||
Dividends paid per Share of Common Stock (in dollars per share) | $ 0.45 | $ 0.58 | $ 0.60 | $ 0.64 | $ 0.67 | $ 0.70 | $ 0.70 | $ 0.67 | $ 0.67 | $ 2.35 | $ 0.90 | $ 0.90 | $ 0.95 | |||||||||||||||||
Shares received as dividend by shareholder under option of dividend to be paid in stock | 0.1590 | |||||||||||||||||||||||||||||
Cash received per share as dividend by shareholder under option of dividend to be paid in cash | $ 0.9159 | |||||||||||||||||||||||||||||
Shares received as dividend by shareholder under option of dividend to be paid in cash | 0.0970 | |||||||||||||||||||||||||||||
Institutional investors | ||||||||||||||||||||||||||||||
Shareholders equity | ||||||||||||||||||||||||||||||
Number of warrant units authorized to be sold | 2,231,787 |
Net Income (Loss) per Common 58
Net Income (Loss) per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Numerator: | ||
Net income (loss) attributable to common stockholders and participating securities for basic and diluted earnings per share | $ (36,304) | $ 14,146 |
Less: Dividends and undistributed earnings allocated to participating securities | 159 | 259 |
Net income (loss) allocable to common stockholders - basic and diluted | $ (36,463) | $ 13,887 |
Denominator: | ||
Weighted average common shares outstanding for basic earnings per share | 41,595,723 | 41,417,932 |
Weighted average common shares outstanding for diluted earnings per share | 41,595,723 | 41,417,932 |
Basic earnings per common share (in dollars per share) | $ (0.88) | $ 0.34 |
Diluted earnings per common share (in dollars per share) | $ (0.88) | $ 0.34 |
Income Taxes (Details)
Income Taxes (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($)subsidiary | |
Income Taxes | |
Maximum ownership percentage permitted in TRS | 100.00% |
Number of TRS owned | subsidiary | 1 |
Income tax benefit | $ | $ 0 |