Derivative Instruments (Tables)
|
12 Months Ended |
Dec. 31, 2021 |
|---|
| Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] |
|
| Schedule of Derivative Instruments |
The following table presents the fair value of the Company’s derivative instruments as of the dates indicated:
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
Interest rate swaps |
|
$ |
— |
|
|
$ |
(107 |
) |
|
$ |
— |
|
|
$ |
(147 |
) |
|
10-year U.S. Treasury note futures |
|
|
16 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Options on U.S. Treasury note futures |
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
TBA commitments |
|
|
230 |
|
|
|
(121 |
) |
|
|
258 |
|
|
|
(74 |
) |
|
Total |
|
$ |
250 |
|
|
$ |
(228 |
) |
|
$ |
258 |
|
|
$ |
(221 |
) |
|
| Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location |
The following table provides information about the derivative gains and losses recognized within the periods indicated:
|
|
|
For the Year Ended December 31, |
|
|
|
|
2021 |
|
|
2020 |
|
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
Interest rate swaps: |
|
|
|
|
|
|
|
|
|
Net interest (expense) income (1) |
|
$ |
(2,929 |
) |
|
$ |
501 |
|
|
Unrealized gains, net |
|
|
3,129 |
|
|
|
15,236 |
|
|
Gains (losses) realized upon early termination, net |
|
|
1,960 |
|
|
|
(118,893 |
) |
|
Total interest rate swap gains (losses), net |
|
|
2,160 |
|
|
|
(103,156 |
) |
|
U.S. Treasury note futures, net |
|
|
3,215 |
|
|
|
(3,071 |
) |
|
Options on U.S. Treasury note futures, net |
|
|
14 |
|
|
|
— |
|
|
Total interest rate derivatives gains (losses), net |
|
|
5,389 |
|
|
|
(106,227 |
) |
|
TBA commitments: |
|
|
|
|
|
|
|
|
|
TBA dollar roll income (2) |
|
|
4,143 |
|
|
|
1,750 |
|
|
Other (losses) gains on TBA commitments, net |
|
|
(11,586 |
) |
|
|
4,230 |
|
|
Total (losses) gains on TBA commitments, net |
|
|
(7,443 |
) |
|
|
5,980 |
|
|
Other derivatives |
|
|
— |
|
|
|
(1,040 |
) |
|
Total derivative losses, net |
|
$ |
(2,054 |
) |
|
$ |
(101,287 |
) |
|
(1) |
Represents the periodic net interest settlement incurred during the period (often referred to as “net interest carry”). Also includes “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively, associated with centrally cleared interest rate swap agreements. |
|
(2) |
Represents the price discount of forward-settling TBA purchases relative to a contemporaneously executed “spot” TBA sale, which economically equates to net interest income that is earned ratably over the period beginning on the settlement date of the sale and ending on the settlement date of the forward-settling purchase. |
|
| Derivative Instrument Volume of Activity |
The following tables summarize the volume of activity, in terms of notional amount, related to derivative instruments for the periods indicated:
|
|
|
For the Year Ended December 31, 2021 |
|
|
|
|
Beginning of
Period |
|
|
Additions |
|
|
Scheduled
Settlements |
|
|
Early
Terminations |
|
|
End of Period |
|
|
Interest rate swaps |
|
$ |
275,000 |
|
|
$ |
750,000 |
|
|
$ |
— |
|
|
$ |
(875,000 |
) |
|
$ |
150,000 |
|
|
2-year U.S. Treasury note futures |
|
|
— |
|
|
|
50,000 |
|
|
|
(50,000 |
) |
|
|
— |
|
|
|
— |
|
|
10-year U.S. Treasury note futures |
|
|
— |
|
|
|
590,100 |
|
|
|
(365,000 |
) |
|
|
(200,100 |
) |
|
|
25,000 |
|
|
Purchased call options on 10-year Treasury note futures |
|
|
— |
|
|
|
165,200 |
|
|
|
(65,200 |
) |
|
|
(75,000 |
) |
|
|
25,000 |
|
|
TBA purchase (sale) commitments, net |
|
|
— |
|
|
|
2,965,000 |
|
|
|
(2,965,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
For the Year Ended December 31, 2020 |
|
|
|
|
Beginning of
Period |
|
|
Additions |
|
|
Scheduled
Settlements |
|
|
Early
Terminations |
|
|
End of Period |
|
|
Interest rate swaps |
|
$ |
2,985,000 |
|
|
$ |
275,000 |
|
|
$ |
(100,000 |
) |
|
$ |
(2,885,000 |
) |
|
$ |
275,000 |
|
|
2-year U.S. Treasury note futures |
|
|
— |
|
|
|
1,150,000 |
|
|
|
— |
|
|
|
(1,150,000 |
) |
|
|
— |
|
|
10-year U.S. Treasury note futures |
|
|
— |
|
|
|
765,000 |
|
|
|
— |
|
|
|
(765,000 |
) |
|
|
— |
|
|
Put options on S&P 500 ETF |
|
|
— |
|
|
|
1,850 |
|
|
|
(1,850 |
) |
|
|
— |
|
|
|
— |
|
|
TBA purchase (sale) commitments, net |
|
|
— |
|
|
|
1,075,000 |
|
|
|
(1,075,000 |
) |
|
|
— |
|
|
|
— |
|
|
| Derivative Instruments and Other Financial Instrument Cash Collateral |
The following table presents information about the cash collateral posted by the Company in respect of its derivative and other financial instruments, which is included in the line item “deposits” in the accompanying consolidated balance sheets, for the dates indicated:
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Cash collateral posted for: |
|
|
|
|
|
|
|
|
|
Interest rate swaps (cash initial margin) |
|
$ |
4,174 |
|
|
$ |
6,306 |
|
|
U.S. Treasury note futures (cash initial margin) |
|
|
375 |
|
|
|
— |
|
|
Total cash collateral posted, net |
|
$ |
4,549 |
|
|
$ |
6,306 |
|
|
| Options on 10-Year U.S. Treasury Note Futures |
|
| Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] |
|
| Schedule of Derivative Instruments |
Information about the Company’s outstanding options on 10-year U.S. Treasury note futures contracts as of December 31, 2021 is as follows:
|
|
|
Notional Amount
Long/(Short) |
|
|
Weighted-average
Strike Price |
|
|
Implied Strike
Rate (1) |
|
|
Net Fair Value |
|
|
Purchased call options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2022 expiration |
|
$ |
25,000 |
|
|
|
134.5 |
|
|
1.00% |
|
|
$ |
4 |
|
|
(1) |
The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract. |
|
| TBA Commitments |
|
| Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] |
|
| Schedule of Derivative Instruments |
The following tables present information about the Company’s TBA commitments as of the date indicated:
|
|
|
December 31, 2021 |
|
|
|
|
Notional Amount:
Net Purchase (Sale)
Commitment |
|
|
Contractual
Forward Price |
|
|
Market Price |
|
|
Fair Value |
|
|
2.5% 30-year MBS purchase commitments |
|
$ |
225,000 |
|
|
$ |
229,043 |
|
|
$ |
229,148 |
|
|
$ |
105 |
|
|
2.5% 30-year MBS sale commitments |
|
|
(225,000 |
) |
|
|
(229,152 |
) |
|
|
(229,148 |
) |
|
|
4 |
|
|
Total TBA commitments, net |
|
$ |
— |
|
|
$ |
(109 |
) |
|
$ |
— |
|
|
$ |
109 |
|
|
|
|
December 31, 2020 |
|
|
|
|
Notional Amount:
Net Purchase (Sale)
Commitment |
|
|
Contractual
Forward Price |
|
|
Market Price |
|
|
Fair Value |
|
|
1.5% 30-year MBS purchase commitments |
|
$ |
50,000 |
|
|
$ |
50,281 |
|
|
$ |
50,539 |
|
|
$ |
258 |
|
|
1.5% 30-year MBS sale commitments |
|
|
(50,000 |
) |
|
|
(50,465 |
) |
|
|
(50,539 |
) |
|
|
(74 |
) |
|
Total TBA commitments, net |
|
$ |
— |
|
|
$ |
(184 |
) |
|
$ |
— |
|
|
$ |
184 |
|
|
| Interest Rate Swap |
|
| Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] |
|
| Schedule of Derivative Instruments |
The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2021:
|
|
|
|
|
|
|
Weighted-average: |
|
|
|
|
|
|
|
|
Notional Amount |
|
|
Fixed
Pay Rate |
|
|
Variable
Receive Rate |
|
|
Net Receive
(Pay) Rate |
|
|
Remaining
Life (Years) |
|
|
Fair Value |
|
|
Years to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 3 years |
|
$ |
50,000 |
|
|
0.71% |
|
|
0.13% |
|
|
(0.58)% |
|
|
|
1.8 |
|
|
$ |
(5 |
) |
|
3 to less than 10 years |
|
|
100,000 |
|
|
0.90% |
|
|
0.13% |
|
|
(0.77)% |
|
|
|
6.6 |
|
|
|
(102 |
) |
|
Total / weighted-average |
|
$ |
150,000 |
|
|
0.84% |
|
|
0.13% |
|
|
(0.71)% |
|
|
|
5.0 |
|
|
$ |
(107 |
) |
The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2020:
|
|
|
|
|
|
|
Weighted-average: |
|
|
|
|
|
|
|
|
Notional Amount |
|
|
Fixed
Pay Rate |
|
|
Variable
Receive Rate |
|
|
Net Receive (Pay) Rate |
|
|
Remaining
Life (Years) |
|
|
Fair Value |
|
|
Years to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 3 years |
|
$ |
200,000 |
|
|
0.10% |
|
|
0.06% |
|
|
(0.04)% |
|
|
|
2.9 |
|
|
$ |
(40 |
) |
|
3 to less than 10 years |
|
|
75,000 |
|
|
0.74% |
|
|
0.22% |
|
|
(0.52)% |
|
|
|
9.5 |
|
|
|
(107 |
) |
|
Total / weighted-average |
|
$ |
275,000 |
|
|
0.28% |
|
|
0.10% |
|
|
(0.18)% |
|
|
|
4.7 |
|
|
$ |
(147 |
) |
|