Document and Entity Information
Document and Entity Information Document and Entity Information - $ / shares | 6 Months Ended | |
Jun. 30, 2020 | Jul. 31, 2020 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2020 | |
Entity File Number | 1-9819 | |
Entity Registrant Name | DYNEX CAPITAL, INC. | |
Entity Central Index Key | 0000826675 | |
Entity Incorporation, State or Country Code | VA | |
Entity Tax Identification Number | 52-1549373 | |
Entity Address, Address Line One | 4991 Lake Brook Drive, Suite 100 | |
Entity Address, Address Line Two | 4991 Lake Brook Drive, Suite 100 | |
Entity Address, City or Town | Glen Allen, | |
Entity Address, State or Province | VA | |
Entity Address, Postal Zip Code | 23060-9245 | |
City Area Code | (804) | |
Local Phone Number | 217-5800 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 23,140,617 | |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Common Stock, par value $.01 per share | |
Trading Symbol | DX | |
Security Exchange Name | NYSE | |
Series B Preferred Stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | 7.625% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share | |
Trading Symbol | DXPRB | |
Security Exchange Name | NYSE | |
Series C Preferred Stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | 6.900% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share | |
Trading Symbol | DXPRC | |
Security Exchange Name | NYSE |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Assets [Abstract] | ||
Cash and cash equivalents | $ 147,243 | $ 62,582 |
Restricted cash | 59,150 | 71,648 |
Receivables from Brokers-Dealers and Clearing Organizations | 156,047 | 0 |
Mortgage-backed securities (including pledged of $5,024,625 and $3,511,604, respectively) | 3,496,925 | 5,188,163 |
Other Investments and Securities, at Cost | 9,405 | |
Derivative assets | 7,926 | 4,290 |
Accrued interest receivable | 16,620 | 26,209 |
Other assets, net | 6,351 | 8,307 |
Total assets | 3,897,628 | 5,370,604 |
Liabilities: | ||
Repurchase agreements | 3,314,991 | 4,752,348 |
Payable for unsettled securities | 0 | 6,180 |
Non-Recourse Debt | 1,282 | 2,733 |
Derivative liabilities | 4,208 | 974 |
Accrued interest payable | 907 | 15,585 |
Accrued dividends payable | 5,735 | 6,280 |
Other liabilities | 3,036 | 3,516 |
Total liabilities | 3,330,159 | 4,787,616 |
Stockholders' Equity Attributable to Parent [Abstract] | ||
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized; 7,248,330 and 6,788,330 shares issued and outstanding, respectively ($181,208 and $169,708 aggregate liquidation preference, respectively) | 174,709 | 162,807 |
Common stock, par value $0.01 per share, 90,000,000 shares authorized; 23,140,617 and 22,945,993 shares issued and outstanding, respectively | 231 | 229 |
Additional paid-in capital | 858,451 | 858,347 |
Accumulated other comprehensive income | 81,731 | 173,806 |
Accumulated deficit | (547,653) | (612,201) |
Total shareholders’ equity | 567,469 | 582,988 |
Total liabilities and shareholders’ equity | 3,897,628 | 5,370,604 |
Mortgage Loans on Real Estate, Commercial and Consumer, Net | $ 7,366 | $ 8,857 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Interest income | $ 19,853,000 | $ 43,748,000 | $ 59,676,000 | $ 83,706,000 |
Interest expense | 4,850,000 | 30,813,000 | 26,952,000 | 57,089,000 |
Net interest income | 15,003,000 | 12,935,000 | 32,724,000 | 26,617,000 |
Loss on derivative instruments, net | 8,563,000 | 117,535,000 | 204,130,000 | 179,233,000 |
Gain (loss) on sale of investments, net | 193,099,000 | (10,360,000) | 277,882,000 | (10,360,000) |
Fair value adjustments, net | 332,000 | (16,000) | (40,000) | (29,000) |
Other operating (expense) income, net | (222,000) | 256,000 | (645,000) | 25,000 |
General and administrative expenses: | ||||
Compensation and benefits | (2,736,000) | (1,747,000) | (4,898,000) | (3,645,000) |
Other general and administrative | (2,075,000) | (2,518,000) | (4,534,000) | (4,574,000) |
Net income (loss) | 194,838,000 | (118,985,000) | 96,359,000 | (171,199,000) |
Preferred stock dividends | (3,253,000) | (3,206,000) | (7,094,000) | (6,265,000) |
Net income (loss) to common shareholders | 191,585,000 | (122,191,000) | 85,351,000 | (177,464,000) |
Other comprehensive income: | ||||
Unrealized gain on available-for-sale investments, net | 28,052,000 | 100,767,000 | 185,807,000 | 187,399,000 |
Reclassification adjustment for (gain) loss on sale of investments, net | (193,099,000) | 10,360,000 | (277,882,000) | 10,360,000 |
Reclassification adjustment for de-designated cash flow hedges | 0 | 0 | 0 | (165,000) |
Total other comprehensive (loss) income | (165,047,000) | 111,127,000 | (92,075,000) | 197,594,000 |
Comprehensive income (loss) to common shareholders | $ 26,538,000 | $ (11,064,000) | $ (6,724,000) | $ 20,130,000 |
Net income (loss) per common share-basic and diluted | $ 8.31 | $ (4.98) | $ 3.71 | $ (7.49) |
Weighted average common shares-basic and diluted | 23,057 | 24,541 | 23,010 | 23,681 |
Preferred Stock Redemption Premium | $ 0 | $ 0 | $ 3,914,000 | $ 0 |
Accumulated Deficit | ||||
General and administrative expenses: | ||||
Net income (loss) | $ (118,985,000) |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity Statement - USD ($) $ in Thousands | Total | Preferred Stock | Preferred Stock Including Additional Paid in Capital | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit |
Balance, Preferred shares outstanding at Dec. 31, 2018 | 5,954,594 | ||||||
Balance, Common shares outstanding at Dec. 31, 2018 | 20,939,073 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock issuance, shares | 213,468 | 3,109,047 | |||||
Restricted stock granted, net of amortization | 50,821 | ||||||
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation | 16,231 | ||||||
Balance, Preferred shares outstanding at Mar. 31, 2019 | 6,168,062 | ||||||
Balance, Common shares outstanding at Mar. 31, 2019 | 24,082,710 | ||||||
Balance at Dec. 31, 2018 | $ 527,153 | $ 142,883 | $ 209 | $ 818,861 | $ (35,779) | $ (399,021) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock issuance, value | 58,887 | 5,015 | 31 | 53,841 | |||
Restricted stock granted, net of amortization | 298 | 1 | 297 | ||||
Adjustments for tax withholding on share-based compensation | (296) | 0 | (296) | ||||
Stock issuance costs | (212) | (212) | |||||
Net (loss) income | (52,214) | (52,214) | |||||
Dividends on preferred stock | (3,059) | (3,059) | |||||
Dividends on common stock | (12,350) | (12,350) | |||||
Other Comprehensive Income (Loss), Net of Tax | 86,467 | 86,467 | |||||
Balance at Mar. 31, 2019 | 604,674 | 147,898 | $ 241 | 872,491 | 50,688 | (466,644) | |
Balance, Preferred shares outstanding at Dec. 31, 2018 | 5,954,594 | ||||||
Balance, Common shares outstanding at Dec. 31, 2018 | 20,939,073 | ||||||
Balance, Preferred shares outstanding at Jun. 30, 2019 | 6,514,130 | ||||||
Balance, Common shares outstanding at Jun. 30, 2019 | 24,646,964 | ||||||
Balance at Dec. 31, 2018 | 527,153 | 142,883 | $ 209 | 818,861 | (35,779) | (399,021) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net (loss) income | (171,199) | ||||||
Other Comprehensive Income (Loss), Net of Tax | 197,594 | ||||||
Balance at Jun. 30, 2019 | 598,638 | 156,071 | $ 246 | 882,633 | 161,815 | (602,127) | |
Balance, Preferred shares outstanding at Mar. 31, 2019 | 6,168,062 | ||||||
Balance, Common shares outstanding at Mar. 31, 2019 | 24,082,710 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock issuance, shares | 346,068 | 547,071 | |||||
Restricted stock granted, net of amortization | 17,183 | ||||||
Balance, Preferred shares outstanding at Jun. 30, 2019 | 6,514,130 | ||||||
Balance, Common shares outstanding at Jun. 30, 2019 | 24,646,964 | ||||||
Balance at Mar. 31, 2019 | 604,674 | 147,898 | $ 241 | 872,491 | 50,688 | (466,644) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock issuance, value | 18,052 | 8,173 | 5 | 9,874 | |||
Restricted stock granted, net of amortization | 296 | 0 | 296 | ||||
Stock issuance costs | (28) | (28) | |||||
Net (loss) income | (118,985) | (118,985) | |||||
Dividends on preferred stock | (3,206) | (3,206) | |||||
Dividends on common stock | (13,292) | (13,292) | |||||
Other Comprehensive Income (Loss), Net of Tax | 111,127 | 111,127 | |||||
Balance at Jun. 30, 2019 | $ 598,638 | 156,071 | $ 246 | 882,633 | 161,815 | (602,127) | |
Balance, Preferred shares outstanding at Dec. 31, 2019 | 6,788,330 | 6,788,330 | |||||
Balance, Common shares outstanding at Dec. 31, 2019 | 22,945,993 | 22,945,993 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock issuance, shares | 4,460,000 | ||||||
Stock Redeemed or Called During Period, Shares | 4,000,000 | ||||||
Restricted stock granted, net of amortization | 67,511 | ||||||
Stock Repurchased During Period, Shares | (18,782) | ||||||
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation | (12,744) | ||||||
Balance, Preferred shares outstanding at Mar. 31, 2020 | 7,248,330 | ||||||
Balance, Common shares outstanding at Mar. 31, 2020 | 22,981,978 | ||||||
Balance at Dec. 31, 2019 | $ 582,988 | 162,807 | $ 229 | 858,347 | 173,806 | (612,201) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock issuance, value | 107,988 | 107,988 | |||||
Stock Redeemed or Called During Period, Value | 100,000 | 96,086 | 3,914 | ||||
Restricted stock granted, net of amortization | 307 | 1 | 306 | ||||
Stock Repurchased During Period, Value | (206) | 0 | (206) | ||||
Adjustments for tax withholding on share-based compensation | (235) | 0 | (235) | ||||
Stock issuance costs | (9) | (9) | |||||
Net (loss) income | (98,479) | 98,479 | |||||
Dividends on preferred stock | (3,841) | (3,841) | |||||
Dividends on common stock | (10,330) | (10,330) | |||||
Other Comprehensive Income (Loss), Net of Tax | 72,972 | 72,972 | |||||
Balance at Mar. 31, 2020 | $ 550,607 | 174,709 | $ 230 | 858,203 | 246,778 | (729,313) | |
Balance, Preferred shares outstanding at Dec. 31, 2019 | 6,788,330 | 6,788,330 | |||||
Balance, Common shares outstanding at Dec. 31, 2019 | 22,945,993 | 22,945,993 | |||||
Balance, Preferred shares outstanding at Jun. 30, 2020 | 7,248,330 | 7,248,330 | |||||
Balance, Common shares outstanding at Jun. 30, 2020 | 23,140,617 | 23,140,617 | |||||
Balance at Dec. 31, 2019 | $ 582,988 | 162,807 | $ 229 | 858,347 | 173,806 | (612,201) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net (loss) income | 96,359 | ||||||
Other Comprehensive Income (Loss), Net of Tax | (92,075) | ||||||
Balance at Jun. 30, 2020 | $ 567,469 | 174,709 | $ 231 | 858,451 | 81,731 | (547,653) | |
Balance, Preferred shares outstanding at Mar. 31, 2020 | 7,248,330 | ||||||
Balance, Common shares outstanding at Mar. 31, 2020 | 22,981,978 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Restricted stock granted, net of amortization | 172,782 | ||||||
Stock Repurchased During Period, Shares | (14,143) | ||||||
Balance, Preferred shares outstanding at Jun. 30, 2020 | 7,248,330 | 7,248,330 | |||||
Balance, Common shares outstanding at Jun. 30, 2020 | 23,140,617 | 23,140,617 | |||||
Balance at Mar. 31, 2020 | $ 550,607 | 174,709 | $ 230 | 858,203 | 246,778 | (729,313) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Restricted stock granted, net of amortization | 423 | 1 | 422 | ||||
Stock Repurchased During Period, Value | (166) | (166) | |||||
Stock issuance costs | (8) | (8) | |||||
Net (loss) income | 194,838 | ||||||
Dividends on preferred stock | (3,253) | (3,253) | |||||
Dividends on common stock | (9,925) | (9,925) | |||||
Other Comprehensive Income (Loss), Net of Tax | (165,047) | (165,047) | |||||
Balance at Jun. 30, 2020 | $ 567,469 | $ 174,709 | $ 231 | $ 858,451 | $ 81,731 | $ (547,653) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Operating activities: | ||
Net loss (income) | $ 96,359,000 | $ (171,199,000) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | ||
Decrease (increase) in accrued interest receivable | 9,589,000 | (4,273,000) |
(Decrease) increase in accrued interest payable | (14,678,000) | 5,599,000 |
Loss on derivative instruments, net | 204,130,000 | 179,233,000 |
(Gain) loss on sale of investments, net | (277,882,000) | 10,360,000 |
Fair value adjustments, net | 40,000 | 29,000 |
Amortization of investment premiums, net | 63,789,000 | 63,239,000 |
Other amortization and depreciation, net | 959,000 | 707,000 |
Stock-based compensation expense | 731,000 | 593,000 |
Change in other assets and liabilities, net | 432,000 | 642,000 |
Net cash and cash equivalents provided by operating activities | 83,469,000 | 84,930,000 |
Investing activities: | ||
Purchase of investments | (2,818,863,000) | (2,100,712,000) |
Principal payments received on investments | 249,766,000 | 195,061,000 |
Proceeds from sales of investments | 4,226,321,000 | 432,552,000 |
Principal payments received on mortgage loans held for investment | 1,519,000 | 1,199,000 |
Net payments on derivatives, including terminations | (210,712,000) | (174,023,000) |
Other investing activities | 0 | (1,348,000) |
Net cash and cash equivalents provided by (used in) investing activities | 1,448,031,000 | (1,647,271,000) |
Financing activities: | ||
Borrowings under repurchase agreements | 23,686,649,000 | 60,627,601,000 |
Repayments of repurchase agreement borrowings | (25,124,006,000) | (59,080,133,000) |
Principal payments on non-recourse collateralized financing | (1,467,000) | (386,000) |
Proceeds from issuance of preferred stock | 107,988,000 | 13,188,000 |
Proceeds from issuance of common stock | 0 | 63,751,000 |
Payments for Repurchase of Redeemable Preferred Stock | 100,000,000 | 0 |
Cash paid for stock issuance costs | 0 | (185,000) |
Payments for Repurchase of Common Stock | 372,000 | 0 |
Payments related to tax withholding for stock-based compensation | (235,000) | (296,000) |
Dividends paid | (27,894,000) | (38,553,000) |
Net cash and cash equivalents (used in) provided by financing activities | (1,459,337,000) | 1,584,987,000 |
Net increase in cash, cash equivalents, and restricted cash | 72,163,000 | 22,646,000 |
Cash, cash equivalents, and restricted cash at beginning of period | 134,230,000 | 88,704,000 |
Cash, cash equivalents, and restricted cash at end of period | 206,393,000 | 111,350,000 |
Supplemental Disclosure of Cash Activity: | ||
Cash paid for interest | $ 41,613,000 | $ 51,650,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Pledged MBS of $3,268,796 and $5,024,625, respectively | $ 3,391,112 | $ 5,024,625 |
Preferred Stock, Shares Authorized | 50,000,000 | |
Preferred Stock, Shares Outstanding | 7,248,330 | 6,788,330 |
Preferred Stock, Shares Issued | 7,248,330 | 6,788,330 |
Preferred Stock, Liquidation Preference, Value | $ 181,208 | $ 169,708 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | |
Common Stock, Shares Authorized | 90,000,000 | |
Common Stock, Shares, Issued | 23,140,617 | 22,945,993 |
Common Stock, Shares, Outstanding | 23,140,617 | 22,945,993 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | |
Mortgage Loans on Real Estate, Commercial and Consumer, Net | $ 7,366 | $ 8,857 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Organization and Summary of Significant Accounting Policies | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Dynex Capital, Inc. (“Company”) was incorporated in the Commonwealth of Virginia on December 18, 1987 and commenced operations in February 1988. The Company is an internally managed mortgage real estate investment trust, or mortgage REIT, which primarily earns income from investing on a leveraged basis in debt securities, the majority of which are specified pools of Agency mortgage-backed securities (“MBS”) consisting of commercial MBS (“CMBS”), residential MBS (“RMBS”), and CMBS interest-only (“IO”) securities and non-Agency MBS, which consist mainly of CMBS IO. Agency MBS have a guaranty of principal payment by a U.S. government-sponsored entity (“GSE”) such as Fannie Mae and Freddie Mac which are in conservatorship and are currently supported by a senior preferred stock purchase agreement from U.S. Treasury. Non-Agency MBS are issued by non-governmental enterprises and do not have a guaranty of principal payment. The Company also invests in other types of mortgage-related securities, such as to-be-announced securities (“TBAs” or “TBA securities”). Impact of COVID-19 As a result of the economic, health and market turmoil brought about by the coronavirus (“COVID-19”) pandemic, fixed income and equity markets experienced severe disruption during mid-March of 2020. The disruption resulted in a substantial rally in interest rates and a decline in fair value of securities in which the Company invests, which led to significant demands on liquidity from margin calls from derivative and repurchase agreement counterparties. The Agency MBS market largely stabilized in late March after the Federal Reserve announced that it would purchase Agency RMBS and CMBS as well as U.S. Treasuries in the amounts needed to support smooth market functioning. In addition, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide economic relief to individuals, businesses, state and local governments, and the health care system. The Company has not sought assistance under the CARES Act for its business or operations. Economic relief under the CARES Act includes mortgage loan forbearance and modification programs to qualifying borrowers who may have difficulty making their loan payments and individual states have adopted similar policies addressing loan payments, rent payments, foreclosures and evictions. The Company is not able to predict the impact these policies may have on its investments at this time. The impact of forbearance on the Company’s MBS could range from immaterial to significant depending on actual losses incurred on underlying loans as well as future public policy choices, and actions by the GSEs, their regulator the Federal Housing Finance Authority ("FHFA"), the Federal Reserve, and federal and state governments. There can be no assurance as to how these and other actions by the U.S. government will affect the efficiency, liquidity and stability of the financial and mortgage markets. To the extent the financial or mortgage markets do not respond favorably to any of these actions, or such actions do not function as intended, our business, results of operations and financial condition may be materially adversely affected. While market conditions have improved since the first quarter of 2020 as a result of actions by the Federal Reserve and the passage of economic stimulus packages such as the CARES Act, economic activity has not returned to pre-pandemic levels and a resurgence in cases of COVID-19 threatens further recovery. The Company continues to monitor servicers’ reporting of delinquencies on loans underlying its investments as an increase in defaults could lead to loss of premiums should servicers become unable to advance or losses become severe enough to impact the senior tranches of the securitizations in which the Company is invested. Basis of Presentation The accompanying unaudited consolidated financial statements of the Company and its subsidiaries (together, “Dynex” or, as appropriate, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all significant adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the consolidated financial statements have been included; however, uncertainty over the continuing impact that COVID-19 will have on the global economy and on the Company’s business makes any estimates and assumptions as of June 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for any other interim periods or for the entire year ending December 31, 2020. The unaudited consolidated financial statements included herein should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) filed with the SEC. All references to common shares, per common share amounts, and restricted stock have been adjusted to reflect the effect of the Company’s 1-for-3 reverse stock split effected on June 20, 2019 for all periods presented. Consolidation and Variable Interest Entities The consolidated financial statements include the accounts of the Company and the accounts of its majority owned subsidiaries and variable interest entities (“VIE”) for which it is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation. The Company consolidates a VIE if the Company is determined to be the VIE’s primary beneficiary, which is defined as the party that has both: (i) the power to control the activities that most significantly impact the VIE’s financial performance and (ii) the right to receive benefits or absorb losses that could potentially be significant to the VIE. The Company reconsiders its evaluation of whether to consolidate a VIE on an ongoing basis, based on changes in the facts and circumstances pertaining to the VIE. The Company consolidates a securitization trust, which has residential mortgage loans included in “mortgage loans held for investment” on its consolidated balance sheet, of which a portion is pledged as collateral for one remaining bond recorded as “non-recourse collateralized financing” on its consolidated balance sheet. The Company owns the subordinate class in the trust and has been deemed the primary beneficiary. Though the Company invests in Agency and non-Agency MBS which are generally considered to be interests in VIEs, the Company does not consolidate these entities because it does not meet the criteria necessary to be deemed a primary beneficiary. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. The most significant estimates used by management include, but are not limited to, amortization of premiums and discounts and fair value measurements of its investments. These items are discussed further below within this note to the consolidated financial statements. Income Taxes The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986 and the corresponding provisions of state law. To qualify as a REIT, the Company must meet certain tests including investing in primarily real estate-related assets and the required distribution of at least 90% of its annual REIT taxable income to shareholders after consideration of its net operating loss (“NOL”) carryforward and not including taxable income retained in its taxable subsidiaries. As a REIT, the Company generally will not be subject to federal income tax on the amount of its income or capital gains that is distributed as dividends to shareholders. The Company assesses its tax positions for all open tax years and determines whether the Company has any material unrecognized liabilities and records these liabilities, if any, to the extent they are deemed more likely than not to have been incurred. Net Income (Loss) Per Common Share The Company calculates basic net income per common share by dividing net income to common shareholders for the period by weighted-average shares of common stock outstanding for that period. The Company did not have any potentially dilutive securities outstanding during the three and six months ended June 30, 2020 or June 30, 2019. Holders of unvested shares of the Company’s issued and outstanding restricted common stock are eligible to receive non-forfeitable dividends. As such, these unvested shares are considered participating securities and therefore are included in the computation of basic net income per common share using the two-class method. Upon vesting, restrictions on transfer expire on each share of restricted stock, and each such share of restricted stock represents one unrestricted share of common stock. Because the Company’s 7.625% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) and its 6.900% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) (collectively, the “Preferred Stock”) are redeemable at the Company’s option for cash only and may convert into shares of common stock only upon a change of control of the Company (and subject to other circumstances) as described in Article IIIB and Article IIIC of the Company’s Articles of Amendment to the Restated Articles of Incorporation (the “Restated Articles of Incorporation, as amended”), the effect of those shares and their related dividends is excluded from the calculation of diluted net income per common share. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less as well as unrestricted demand deposits at highly rated financial institutions. The Company’s cash balances fluctuate throughout the year and may exceed Federal Deposit Insurance Company insured limits from time to time. Although the Company bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result. Restricted Cash Restricted cash consists of cash the Company has pledged to cover initial and variation margin with its financing and certain derivative counterparties. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company's consolidated balance sheet as of June 30, 2020 that sum to the total of the same such amounts shown on the Company’s consolidated statement of cash flows for the six months ended June 30, 2020: June 30, 2020 Cash and cash equivalents $ 147,243 Restricted cash 59,150 Total cash, cash equivalents, and restricted cash shown on consolidated statement of cash flows $ 206,393 Mortgage-Backed Securities The Company’s MBS are designated as available-for-sale (“AFS”) and are recorded at fair value on the Company’s consolidated balance sheet. Changes in unrealized gain (loss) on the Company’s MBS are reported in other comprehensive income (“OCI”) until the investment is sold or matures. Although the Company generally intends to hold its AFS securities until maturity, it may sell any of these securities as part of the overall management of its business. Upon the sale of an AFS security, any unrealized gain or loss is reclassified out of accumulated other comprehensive income (“AOCI”) into net income as a realized “gain (loss) on sale of investments, net” using the specific identification method. The fair value of the Company’s MBS pledged as collateral against repurchase agreements is disclosed parenthetically on the Company’s consolidated balance sheets. Interest Income, Premium Amortization, and Discount Accretion. Interest income on MBS is accrued based on the outstanding principal balance (or notional balance in the case of interest-only, or “IO” securities) and their contractual terms. Premiums or discounts associated with the purchase of Agency MBS as well as any non-Agency MBS rated ‘AA’ and higher are amortized or accreted into interest income over the projected life of such securities using the effective yield method, and adjustments to premium amortization and discount accretion are made for actual cash payments. The Company’s projections of future cash payments are based on input and analysis received from external sources and internal models and include assumptions about the amount and timing of loan prepayment rates, fluctuations in interest rates, credit losses, and other factors. On at least a quarterly basis, the Company reviews and makes any necessary adjustments to its cash flow projections and updates the yield recognized on these assets. The Company does not currently hold any non-Agency MBS that were purchased at a discount with credit ratings of less than ‘AA’ or not rated by any of the nationally recognized credit rating agencies at the time of purchase. Determination of MBS Fair Value. The Company estimates the fair value of the majority of its MBS based upon prices obtained from third-party pricing services and broker quotes. The remainder of the Company’s MBS are valued by discounting the estimated future cash flows derived from cash flow models that utilize information such as the security’s coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, estimated future interest rates, expected losses, and credit enhancements as well as certain other relevant information. Please refer to Note 5 for further discussion of MBS fair value measurements. Allowance for Credit Losses. The Company recently adopted Accounting Standards Codification Topic 326, Financial Instruments - Credit Losses . On at least a quarterly basis, the Company evaluates any MBS with a fair value less than its amortized cost for credit losses. If the difference between the present value of cash flows expected to be collected on the MBS is less than its amortized cost, the difference is recorded as an allowance for credit loss through net income up to and not exceeding the amount that the amortized cost exceeds current fair value. Subsequent changes in credit loss estimates are recognized in earnings in the period in which they occur. Because the majority of the Company’s investments are higher credit quality and most are guaranteed by a GSE, the Company is not likely to have an allowance for credit losses recorded on its consolidated balance sheet. Repurchase Agreements The Company’s repurchase agreements, which are used to finance its purchases of MBS, are accounted for as secured borrowings under which the Company pledges its securities as collateral to secure a loan, which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral. At the maturity of a repurchase agreement, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender or, with the consent of the lender, the Company may renew the agreement at the then prevailing financing rate. A repurchase agreement lender may require the Company to pledge additional collateral in the event of a decline in the fair value of the collateral pledged. Repurchase agreement financing is recourse to the Company and the assets pledged. Most of the Company’s repurchase agreements are based on the September 1996 version of the Bond Market Association Master Repurchase Agreement, which generally provides that the lender, as buyer, is responsible for obtaining collateral valuations from a generally recognized source agreed to by both the Company and the lender, or, in an instance when such source is not available, the value determination is made by the lender. Derivative Instruments The Company’s derivative instruments include interest rate swaps, futures, options, and forward contracts for the purchase or sale of Agency RMBS on a non-specified pool basis, commonly referred to as to-be-announced (“TBA”) securities. Derivative instruments are reported at their fair value on the Company’s consolidated balance sheet as derivative assets if in a gain position or as derivative liabilities if in a loss position, at the end of the period reported. All periodic interest benefits/costs and changes in fair value of derivative instruments, including gains and losses realized upon termination, maturity, or settlement are recorded in “gain (loss) on derivative instruments, net” on the Company’s consolidated statement of comprehensive income (loss). Cash receipts and payments related to derivative instruments are classified in the investing activities section of the consolidated statements of cash flows in accordance with the underlying nature or purpose of the derivative transactions. Generally, the Company enters into pay-fixed interest rate swaps, which 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. From time to time the Company may also enter into receive-fixed interest rate swaps that 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’s interest rate swap agreements are centrally cleared through the Chicago Mercantile Exchange (“CME”). The Company’s CME cleared swaps require that the Company post initial margin as collateral, and in addition, variation margin is exchanged, typically in cash, for changes in the fair value of the CME cleared swaps. The exchange of variation margin for CME cleared swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily exchange of variation margin associated with its CME cleared interest rate swaps as a direct increase or decrease to the carrying value of the related derivative asset or liability. The Company may also enter into long and short positions in U.S. Treasury futures contracts. U.S. Treasury futures are valued based on exchange pricing with daily margin settlements. The Company realizes gains or losses on these contracts upon expiration at an amount equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract. Unlike interest rate swaps, the Company does not treat the daily margin exchanges for its U.S. Treasury futures as legal settlement of the instrument. The Company currently holds put options on U.S. Treasury futures which provide the Company the right, but not an obligation, to buy U.S. Treasury futures at a predetermined notional amount and stated term in the future. Put options on U.S. Treasury futures are valued based on exchange pricing without daily exchanges of margin amounts. The Company records the premium paid for the option contract as a derivative asset on its consolidated balance sheet and adjusts the balance for changes in fair value through “gain (loss) on derivative instruments” until the option is exercised or the contract expires. The Company may also purchase options for interest rate swaps (“interest rate swaptions”) which are accounted for similarly. A TBA security is a forward contract (“TBA contract”) for the purchase (“long position”) or sale (“short position”) of a non-specified Agency MBS at a predetermined price with certain principal and interest terms and certain types of collateral, but the particular Agency securities to be delivered are not identified until shortly before the settlement date. The Company accounts for long and short positions in TBAs as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS or that the individual TBA transaction will not settle in the shortest time period possible. Please refer to Note 4 for additional information regarding the Company’s derivative instruments as well as Note 5 for information on how the fair value of these instruments are calculated. Share-Based Compensation Pursuant to the Company’s 2020 Stock and Incentive Plan (the “2020 Plan”), the Company may grant share-based compensation to eligible employees, non-employee directors or consultants or advisors to the Company, including restricted stock awards, stock options, stock appreciation rights, performance units, restricted stock units, and performance cash awards. The Company’s restricted stock currently issued and outstanding may be settled only in shares of its common stock, and therefore are treated as equity awards with their fair value measured at the grant date and recognized as compensation cost over the requisite service period with a corresponding credit to shareholders’ equity. The requisite service period is the period during which a participant is required to provide service in exchange for an award, which is equivalent to the vesting period specified in the terms of the time-based restricted stock award. None of the Company’s restricted stock awards have performance-based conditions. The Company does not currently have any share-based compensation issued or outstanding other than restricted stock issued to its employees, officers, and directors. Contingencies In the normal course of business, there may be various lawsuits, claims, and other contingencies pending against the Company. On a quarterly basis, the Company evaluates whether to establish provisions for estimated losses from those matters. The Company recognizes a liability for a contingent loss when: (a) the underlying causal event has occurred prior to the balance sheet date; (b) it is probable that a loss has been incurred; and (c) there is a reasonable basis for estimating that loss. A liability is not recognized for a contingent loss when it is only possible or remotely possible that a loss has been incurred, however, possible contingent losses shall be disclosed. If the contingent loss (or an additional loss in excess of any accrual) is at least a reasonable possibility and material, then the Company discloses a reasonable estimate of the possible loss or range of loss, if such reasonable estimate can be made. If the Company cannot make a reasonable estimate of the possible material loss, or range of loss, then that fact is disclosed. As previously disclosed in the 2019 Form 10-K, the receiver (the “Receiver”) for one of the plaintiffs awarded damages in a judgment (the "DCI Judgment") against Dynex Commercial, Inc. ("DCI"), a subsidiary of a former affiliate of the Company, filed a separate claim in May 2018 against the Company seeking payment of the damages awarded in connection with the DCI Judgment, alleging that the Company breached a litigation cost sharing agreement, as amended (the "Agreement"), that was initially entered into by the Company and DCI in December 2000. On November 21, 2019, the U.S. District Court, Northern District of Texas ("Northern District Court") granted in part and denied in part summary judgment on the Receiver’s claim and the Company’s claim for offset and recoupment. The Northern District Court found that the Company breached the Agreement and therefore must pay damages to the Receiver. The Northern District Court simultaneously granted the Company’s motion for summary judgment finding that DCI also breached the Agreement and that the Company can recover amounts due to it from DCI under the Agreement. The Receiver subsequently filed a claim for damages with the Northern District Court of approximately $12,600, while the Company filed claims for damages ranging from $13,300 to $30,600, including interest. The Receiver filed objections (the "Objections") with the Northern District Court to, among other things, the Company recovering amounts incurred prior to entry into the Agreement and amounts incurred under the Agreement after January 31, 2006, including interest, which is the date that DCI’s corporate existence ceased under Virginia law. The Company has disputed, among other things, that the Receiver's Objections are not supportable under Virginia law and has further refined its damages claim to range from $13,300 based on simple interest to $17,800 based on a combination of simple and compound interest, which the Company believes is supportable under Virginia law. There have been no material developments in this matter during the three months ended June 30, 2020. After consultation with litigation counsel, the Company believes, based upon information currently available and its evaluation of Virginia law, that the likelihood of loss is not probable, and given the range of potential claims for damages by the Company to offset the Receiver's claims, the amount of possible loss cannot be reasonably estimated, and therefore, no contingent liability has been recorded. Recently Issued and Adopted Accounting Pronouncements The Company reviews all Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) on at least a quarterly basis to evaluate applicability and significance of any impact on its financial condition and results of operations. There were no accounting pronouncements issued during the six months ended June 30, 2020 that are expected to have a material impact on the Company’s financial condition or results of operations. As of January 1, 2020, the Company elected the fair value option for its mortgage loans held for investment pursuant to the provisions of ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326) Targeted Transition Relief, which was issued in May of 2019. Management chose to elect the fair value option for its mortgage loans because the majority of the Company’s investments are represented on its consolidated balance sheet at fair value. The election of the fair value option resulted in a cumulative adjustment of $(548) to retained earnings on its consolidated balance sheet as of January 1, 2020. The Company does not expect its election of the fair value option for its mortgage loans to have a material impact on its future consolidated financial statements. In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives, and other contracts, related to the expected market transition from LIBOR, and certain other floating rate benchmark indices to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. The guidance in ASU 2020-04 is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur. The Company does not believe this ASU will have a material impact on its consolidated financial statements. |
Impact of COVID-19 | Impact of COVID-19 As a result of the economic, health and market turmoil brought about by the coronavirus (“COVID-19”) pandemic, fixed income and equity markets experienced severe disruption during mid-March of 2020. The disruption resulted in a substantial rally in interest rates and a decline in fair value of securities in which the Company invests, which led to significant demands on liquidity from margin calls from derivative and repurchase agreement counterparties. The Agency MBS market largely stabilized in late March after the Federal Reserve announced that it would purchase Agency RMBS and CMBS as well as U.S. Treasuries in the amounts needed to support smooth market functioning. In addition, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide economic relief to individuals, businesses, state and local governments, and the health care system. The Company has not sought assistance under the CARES Act for its business or operations. Economic relief under the CARES Act includes mortgage loan forbearance and modification programs to qualifying borrowers who may have difficulty making their loan payments and individual states have adopted similar policies addressing loan payments, rent payments, foreclosures and evictions. The Company is not able to predict the impact these policies may have on its investments at this time. The impact of forbearance on the Company’s MBS could range from immaterial to significant depending on actual losses incurred on underlying loans as well as future public policy choices, and actions by the GSEs, their regulator the Federal Housing Finance Authority ("FHFA"), the Federal Reserve, and federal and state governments. There can be no assurance as to how these and other actions by the U.S. government will affect the efficiency, liquidity and stability of the financial and mortgage markets. To the extent the financial or mortgage markets do not respond favorably to any of these actions, or such actions do not function as intended, our business, results of operations and financial condition may be materially adversely affected. While market conditions have improved since the first quarter of 2020 as a result of actions by the Federal Reserve and the passage of economic stimulus packages such as the CARES Act, economic activity has not returned to pre-pandemic levels and a resurgence in cases of COVID-19 threatens further recovery. The Company continues to monitor servicers’ reporting of delinquencies on loans underlying its investments as an increase in defaults could lead to loss of premiums should servicers become unable to advance or losses become severe enough to impact the senior tranches of the securitizations in which the Company is invested. |
Commitment and Contingencies
Commitment and Contingencies | 6 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies Disclosure | As previously disclosed in the 2019 Form 10-K, the receiver (the “Receiver”) for one of the plaintiffs awarded damages in a judgment (the "DCI Judgment") against Dynex Commercial, Inc. ("DCI"), a subsidiary of a former affiliate of the Company, filed a separate claim in May 2018 against the Company seeking payment of the damages awarded in connection with the DCI Judgment, alleging that the Company breached a litigation cost sharing agreement, as amended (the "Agreement"), that was initially entered into by the Company and DCI in December 2000. On November 21, 2019, the U.S. District Court, Northern District of Texas ("Northern District Court") granted in part and denied in part summary judgment on the Receiver’s claim and the Company’s claim for offset and recoupment. The Northern District Court found that the Company breached the Agreement and therefore must pay damages to the Receiver. The Northern District Court simultaneously granted the Company’s motion for summary judgment finding that DCI also breached the Agreement and that the Company can recover amounts due to it from DCI under the Agreement. The Receiver subsequently filed a claim for damages with the Northern District Court of approximately $12,600, while the Company filed claims for damages ranging from $13,300 to $30,600, including interest. The Receiver filed objections (the "Objections") with the Northern District Court to, among other things, the Company recovering amounts incurred prior to entry into the Agreement and amounts incurred under the Agreement after January 31, 2006, including interest, which is the date that DCI’s corporate existence ceased under Virginia law. The Company has disputed, among other things, that the Receiver's Objections are not supportable under Virginia law and has further refined its damages claim to range from $13,300 based on simple interest to $17,800 based on a combination of simple and compound interest, which the Company believes is supportable under Virginia law. There have been no material developments in this matter during the three months ended June 30, 2020. After consultation with litigation counsel, the Company believes, based upon information currently available and its evaluation of Virginia law, that the likelihood of loss is not probable, and given the range of potential claims for damages by the Company to offset the Receiver's claims, the amount of possible loss cannot be reasonably estimated, and therefore, no contingent liability has been recorded. |
Investments in Debt Securities
Investments in Debt Securities Investment in Debt Securities (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Mortgage-Backed Securities | MORTGAGE-BACKED SECURITIES The majority of the Company’s MBS are pledged as collateral for the Company’s repurchase agreements. The following tables present the Company’s MBS by investment type (including securities pending settlement) as of the dates indicated: June 30, 2020 Par Net Premium (Discount) Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Agency RMBS $ 2,248,752 $ 67,589 $ 2,316,341 $ 40,465 $ — $ 2,356,806 Agency CMBS 655,935 6,518 662,453 39,507 (1) 701,959 CMBS IO (1) — 435,271 435,271 5,731 (4,332) 436,670 Non-Agency other 1,732 (600) 1,132 403 (45) 1,490 Total MBS: $ 2,906,419 $ 508,778 $ 3,415,197 $ 86,106 $ (4,378) $ 3,496,925 (1) The notional balance for Agency CMBS IO and non-Agency CMBS IO was $13,007,113 and $9,577,721 respectively, as of June 30, 2020. December 31, 2019 Par Net Premium (Discount) Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Agency RMBS $ 2,563,684 $ 55,770 $ 2,619,454 $ 69,082 $ (462) $ 2,688,074 Agency CMBS 1,890,186 15,414 1,905,600 93,763 (6) 1,999,357 CMBS IO (1) — 488,145 488,145 11,760 (863) 499,042 Non-Agency other 1,938 (780) 1,158 552 (20) 1,690 Total MBS: $ 4,455,808 $ 558,549 $ 5,014,357 $ 175,157 $ (1,351) $ 5,188,163 (1) The notional balance for the Agency CMBS IO and non-Agency CMBS IO was $13,404,824 and $9,799,629, respectively, as of December 31, 2019. Actual maturities of MBS are affected by the contractual lives of the underlying mortgage collateral, periodic payments of principal, prepayments of principal, and the payment priority structure of the security; therefore, actual maturities are generally shorter than the securities' stated contractual maturities. The following table presents information regarding the "gain on sale of investments, net" on the Company’s consolidated statements of comprehensive income (loss) for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Proceeds Received Realized Gain (Loss) Proceeds Received Realized Gain (Loss) Proceeds Received Realized Gain (Loss) Proceeds Received Realized Gain (Loss) Agency RMBS $ 371,106 $ 11,729 $ 205,493 $ (3,953) $ 2,188,456 $ 75,823 $ 205,493 $ (3,953) Agency CMBS 2,020,228 181,370 213,198 (6,493) 2,193,912 202,059 213,198 (6,493) Agency CMBS IO — — 13,861 86 — — 13,861 86 $ 2,391,334 $ 193,099 $ 432,552 $ (10,360) $ 4,382,368 $ 277,882 $ 432,552 $ (10,360) Included in the table above are securities sold with an amortized cost of $152,363 which were unsettled as of June 30, 2020 and were pledged as collateral for repurchase agreement borrowings of $144,910. The sale proceeds of $156,047 to be received for the unsettled portion are recorded as “receivable for securities sold” on the Company’s consolidated balance sheet as of June 30, 2020. The following table presents certain information for the AFS securities in an unrealized loss position as of the dates indicated: June 30, 2020 December 31, 2019 Fair Value Gross Unrealized Losses # of Securities Fair Value Gross Unrealized Losses # of Securities Continuous unrealized loss position for less than 12 months: Agency MBS $ 87,603 $ (2,304) 26 $ 215,792 $ (1,139) 27 Non-Agency MBS 98,246 (1,926) 47 13,607 (146) 7 Continuous unrealized loss position for 12 months or longer: Agency MBS $ 1,225 $ (128) 3 $ 75,745 $ (35) 2 Non-Agency MBS 107 (20) 4 1,099 (31) 5 The unrealized losses on the Company’s MBS are not credit related, therefore the Company’s allowance for credit losses was $0 as of June 30, 2020. The unrealized losses are a result of declines in market prices driven by significant spread widening. The principal related to Agency MBS is guaranteed by the government-sponsored entities Fannie Mae and Freddie Mac. Although the unrealized losses are not credit related, the Company assesses its ability and intent to hold any MBS with an unrealized loss until the recovery in its value in accordance with GAAP. This assessment is based on the amount of the unrealized loss and significance of the related investment as well as the Company’s leverage and liquidity position. In addition, for its non-Agency MBS the Company reviews the credit ratings, the credit characteristics of the mortgage loans collateralizing these securities, and the estimated future cash flows including projected collateral losses. |
Repurchase Agreements (Notes)
Repurchase Agreements (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
Disclosure of Repurchase Agreements [Abstract] | |
Repurchase agreements | REPURCHASE AGREEMENTS The Company’s repurchase agreements outstanding as of June 30, 2020 and December 31, 2019 are summarized in the following tables: June 30, 2020 December 31, 2019 Collateral Type Balance (1) Weighted Fair Value of Balance Weighted Fair Value of Agency RMBS $ 2,308,446 0.27 % $ 2,427,267 $ 2,594,645 1.96 % $ 2,647,638 Agency CMBS 654,001 0.28 % 695,578 1,735,848 1.98 % 1,901,452 Agency CMBS IO 225,191 1.12 % 265,342 255,912 2.30 % 282,522 Non-Agency CMBS IO 127,353 1.40 % 155,288 165,943 2.67 % 193,013 Total repurchase agreements $ 3,314,991 0.38 % $ 3,543,475 $ 4,752,348 2.01 % $ 5,024,625 The amounts for fair value of collateral pledged in the table above as of June 30, 2020 include securities sold but not settled, which are recorded as “receivable for securities sold” on the consolidated balance sheet and for which the Company had $144,910 of repurchase agreement borrowings outstanding as of June 30, 2020. The Company also had $0 and $6,180 payable to counterparties as of June 30, 2020 and December 31, 2019, respectively, for purchases pending settlement as of those respective dates. The following table provides information on the remaining term to maturity and original term to maturity for the Company’s repurchase agreements as of the dates indicated: June 30, 2020 December 31, 2019 Remaining Term to Maturity Balance Weighted WAVG Original Term to Maturity Balance Weighted WAVG Original Term to Maturity Less than 30 days $ 1,875,520 0.40 % 26 $ 2,078,185 2.12 % 34 30 to 90 days 1,439,471 0.35 % 32 2,674,163 1.93 % 52 Total $ 3,314,991 0.38 % 29 $ 4,752,348 2.01 % 45 As of June 30, 2020, the Company had repurchase agreement amounts outstanding with 19 of its 37 available repurchase agreement counterparties. The Company had $645,231 outstanding and $46,872, or approximately 8%, of equity at risk with JP Morgan Chase at a weighted average borrowing rate of 0.39%. The Company did not have more than 10% of its equity at risk with any of its other counterparties as of June 30, 2020. The Company has a committed repurchase facility with Wells Fargo that has an aggregate maximum borrowing capacity of $250,000, of which it had $137,301 outstanding at a weighted average borrowing rate of 1.04% as of June 30, 2020. The facility is available to the Company until its maturity date of June 11, 2021. The Company’s counterparties, as set forth in the master repurchase agreement with the counterparty, require the Company to comply with various customary operating and financial covenants, including, but not limited to, minimum net worth and earnings, maximum declines in net worth in a given period, and maximum leverage requirements as well as maintaining the Company’s REIT status. In addition, some of the agreements contain cross default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders. To the extent that the Company fails to comply with the covenants contained in these financing agreements or is otherwise found to be in default under the terms of such agreements, the counterparty has the right to accelerate amounts due under the master repurchase agreement. The Company believes it was in full compliance with all covenants in master repurchase agreements under which there were amounts outstanding as of June 30, 2020. The Company's repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its repurchase agreements to these arrangements on a gross basis. The following tables present information regarding the Company's repurchase agreements as if the Company had presented them on a net basis as of June 30, 2020 and December 31, 2019: Gross Amount of Recognized Liabilities Gross Amount Offset in the Balance Sheet Net Amount of Liabilities Presented in the Balance Sheet Gross Amount Not Offset in the Balance Sheet (1) Net Amount Financial Instruments Posted as Collateral Cash Posted as Collateral June 30, 2020 Repurchase agreements $ 3,314,991 $ — $ 3,314,991 $ (3,314,991) $ — $ — December 31, 2019 Repurchase agreements $ 4,752,348 $ — $ 4,752,348 $ (4,752,348) $ — $ — (1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the repurchase agreement liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please see Note 4 |
Derivatives (Notes)
Derivatives (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | DERIVATIVES Types and Uses of Derivatives Instruments Interest Rate Derivatives. Prior to the end of the first quarter of 2020, the Company primarily used interest rate swaps as economic hedges to mitigate declines in book value and to protect some portion of the Company's earnings from rising interest rates; however, the Company substantially reduced its notional balance of interest rate swaps late in the first quarter of 2020 due to the significant reduction of its MBS portfolio. In addition, counterparties began expanding initial margin requirements for interest rate swaps. The Company added short positions in U.S. Treasury futures and increased its holdings of put options on U.S. Treasury futures as these derivative instruments are viewed by management as more liquid and having more favorable margin requirements versus interest rate swaps. TBA Transactions. The Company purchases TBA securities as a means of investing in non-specified fixed-rate Agency RMBS and may also periodically sell TBA securities as a means of economically hedging its book value exposure to Agency RMBS as well as earnings exposure from rising financing costs. The Company holds long and short positions in TBA securities by executing a series of transactions, commonly referred to as “dollar roll” transactions, which effectively delay the settlement of a forward purchase (or sale) of a non-specified Agency RMBS by entering into an offsetting TBA position, net settling the paired-off positions in cash, and simultaneously entering into an identical TBA long (or short) position with a later settlement date. TBA securities purchased (or sold) for a forward settlement date are generally priced at a discount relative to TBA securities settling in the current month. This discount, often referred to as “drop income” represents the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. The Company accounts for all TBAs (whether net long or net short positions, or collectively “TBA dollar roll positions”) as derivative instruments because it cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS, or that the individual TBA transaction will not settle in the shortest period possible. Loss on Derivative Instruments, Net The table below provides detail of the Company’s “loss on derivative instruments, net” by type of derivative for the periods indicated: Three Months Six Months Ended June 30, June 30, Type of Derivative Instrument 2020 2019 2020 2019 Interest rate swaps $ (1,672) $ (124,213) $ (183,852) $ (195,978) Interest rate swaptions — — (573) — Futures (10,928) (102) (19,377) (211) Options on U.S. Treasury futures (6,680) — (17,406) — TBA securities - long positions 8,688 6,780 27,119 16,956 TBA securities - short positions 2,029 — (10,041) — Loss on derivative instruments, net $ (8,563) $ (117,535) $ (204,130) $ (179,233) The table below summarizes information about the fair value by type of derivative instrument on the Company’s consolidated balance sheets as of the dates indicated: Type of Derivative Instrument Balance Sheet Location Purpose June 30, 2020 December 31, 2019 Options on U.S. Treasury futures Derivative assets Economic hedging $ 3,168 $ 2,883 Interest rate swaptions Derivative assets Economic hedging — 573 TBA securities - long positions Derivative assets Investing 4,758 834 Total derivatives assets $ 7,926 $ 4,290 U.S. Treasury futures Derivative liabilities Economic hedging $ (4,208) $ — TBA securities - short positions Derivative liabilities Economic hedging — (974) Total derivatives liabilities $ (4,208) $ (974) Interest Rate Swaps The Company has interest rate swap agreements outstanding with various counterparties that are centrally cleared through the CME. As explained in Note 1 , the exchange of variation margin for CME cleared interest rate swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Because the Company accounts for this daily exchange of variation margin for its CME cleared interest rate swaps as an increase or decrease to the carrying value of the related derivative asset or liability, the fair value of the interest rate swaps nets to $0 on the Company’s consolidated balance sheet. The Company had net settlement amounts of $(2,866) and $(9,265) in variation margin for its interest rate swaps as of June 30, 2020 and December 31, 2019, respectively. The following tables present information about the Company’s interest rate swaps as of the dates indicated: June 30, 2020 December 31, 2019 Weighted-Average Weighted-Average Years to Maturity: Notional Amount Pay Rate Life Remaining (in Years) Notional Amount Pay Rate Life Remaining (in Years) < 3 years $ 50,000 1.35 % 0.3 $ 2,860,000 1.58 % 1.5 >3 and < 6 years — — % — 700,000 1.43 % 4.7 >6 and < 10 years 425,000 0.69 % 9.9 545,000 1.78 % 9.4 >10 years — — % — 120,000 2.84 % 27.7 Total $ 475,000 0.76 % 9.0 $ 4,225,000 1.62 % 3.8 U.S. Treasury Futures and Options The following table presents information about the Company’s U.S. Treasury futures and options outstanding as of the dates indicated: Cost Basis Fair Value Notional Amount As of June 30, 2020: Options on U.S. Treasury futures (1) $ 20,622 $ 3,168 $ 1,425,000 U.S. Treasury futures - short positions n/a (4,208) 1,225,000 As of December 31, 2019: Options on U.S. Treasury futures (2) $ 4,359 $ 2,883 $ 1,350,000 Pay-fixed interest rate swaptions (2) 6,180 573 750,000 (1) All futures and options outstanding as of June 30, 2020 will expire in September of 2020. (2) All options outstanding as of December 31, 2019 expired during the first quarter of 2020. TBA Securities The following table summarizes information about the Company's TBA securities as of the dates indicated: June 30, 2020 December 31, 2019 Long Positions Short Positions Long Positions Short Positions Implied market value (1) $ 1,290,078 $ — $ 442,161 $ (520,117) Implied cost basis (2) 1,285,320 — 441,327 (519,143) Net carrying value (3) $ 4,758 $ — $ 834 $ (974) (1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the date indicated. (2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the date indicated. (3) Net carrying value is the amount included on the consolidated balance sheets within “derivative assets (liabilities)” and represents the difference between the implied market value and the implied cost basis of the TBA security as of the date indicated. Volume of Activity The tables below summarize changes in the Company’s derivative instruments for the period indicated: Type of Derivative Instrument Notional Amount as of December 31, 2019 Additions Settlements, Notional Amount as of June 30, 2020 Interest rate swaps $ 4,225,000 $ 2,915,000 $ (6,665,000) $ 475,000 Interest rate swaptions 750,000 — (750,000) — U.S. Treasury futures - short positions — 2,212,600 (3,437,600) (1,225,000) Options on U.S. Treasury futures 1,350,000 3,425,000 (3,350,000) 1,425,000 TBA - long positions 435,000 5,311,000 (4,496,000) 1,250,000 TBA - short positions 500,000 3,017,000 (3,517,000) — Offsetting The Company's derivatives are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its derivative assets and liabilities subject to these arrangements on a gross basis. The following tables present information regarding those derivative assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2020 and December 31, 2019: Offsetting of Assets Gross Amount of Recognized Assets Gross Amount Offset in the Balance Sheet Net Amount of Assets Presented in the Balance Sheet Gross Amount Not Offset in the Balance Sheet (1) Net Amount Financial Instruments Received as Collateral Cash Received as Collateral June 30, 2020 Options on U.S. Treasury futures $ 3,168 — $ 3,168 $ — $ — $ 3,168 TBA - long positions 4,758 — 4,758 — — 4,758 Derivative assets $ 7,926 $ — $ 7,926 $ — $ — $ 7,926 December 31, 2019 Interest rate swaptions $ 573 $ — $ 573 $ — $ — $ 573 Options on U.S. Treasury futures 2,883 — 2,883 — — 2,883 TBA - long positions 834 — 834 (380) — 454 Derivative assets $ 4,290 $ — $ 4,290 $ (380) $ — $ 3,910 Offsetting of Liabilities Gross Amount of Recognized Liabilities Gross Amount Offset in the Balance Sheet Net Amount of Liabilities Presented in the Balance Sheet Gross Amount Not Offset in the Balance Sheet (1) Net Amount Financial Instruments Posted as Collateral Cash Posted as Collateral June 30, 2020 U.S. Treasury futures $ (4,208) — $ (4,208) $ — $ 4,208 $ — TBA - short positions — — — — — — Derivative liabilities $ (4,208) $ — $ (4,208) $ — $ 4,208 $ — December 31, 2019 TBA - short positions $ (974) — $ (974) $ 380 — $ (594) Derivative liabilities $ (974) $ — $ (974) $ 380 $ — $ (594) (1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total cash posted as collateral, which is recorded as "restricted cash," and the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically. Please see Note 3 for information related to the Company’s repurchase agreements, which are also subject to underlying agreements with master netting or similar arrangements. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on the assumptions market participants would use when pricing an asset or liability and also considers all aspects of nonperformance risk, including the entity’s own credit standing, when measuring fair value of a liability. ASC Topic 820 established a valuation hierarchy of three levels as follows: • Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date. • Level 2 – Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs either directly observable or indirectly observable through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. • Level 3 – Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best estimate of how market participants would price the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. The following table presents the Company’s financial instruments that are measured at fair value on the Company’s consolidated balance sheet by their valuation hierarchy levels as of the dates indicated: June 30, 2020 December 31, 2019 Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3 Assets carried at fair value: MBS $ 3,496,925 $ — $ 3,495,435 $ 1,490 $ 5,188,163 $ — $ 5,186,473 $ 1,690 Mortgage loans held for investment 7,366 — — 7,366 — — — — Derivative assets: Options on U.S. Treasury futures 3,168 3,168 — — 2,883 2,883 — — Interest rate swaptions — — — — 573 — 573 — TBA securities-long positions 4,758 — 4,758 — 834 — 834 — Total assets carried at fair value $ 3,512,217 $ 3,168 $ 3,500,193 $ 8,856 $ 5,192,453 $ 2,883 $ 5,187,880 $ 1,690 Liabilities carried at fair value: TBA-short positions $ — $ — $ — $ — $ 974 $ — $ 974 $ — U.S. Treasury futures 4,208 4,208 — — — — — — Total liabilities carried at fair value $ 4,208 $ 4,208 $ — $ — $ 974 $ — $ 974 $ — The fair value measurements for the Company's MBS are considered Level 2 when there are substantially similar securities actively trading or for which there has been recent trading activity in their respective markets. The Company determines the fair value of its Level 2 securities based on prices received from the Company's primary pricing service as well as other pricing services and brokers. The Company evaluates the third-party prices it receives to assess their reasonableness. Although the Company does not adjust third-party prices, they may be excluded from use in the determination of a security's fair value if they are significantly different from other observable market data. In valuing a security, the primary pricing service uses either a market approach, which uses observable prices and other relevant information that is generated by market transactions of identical or similar securities, or an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount. The Company also reviews the assumptions and inputs utilized in the valuation techniques of its primary pricing service. Examples of these observable inputs and assumptions include market interest rates, credit spreads, and projected prepayment speeds, among other things. The Company owns MBS and mortgage loans that are considered Level 3 assets because there has been no recent trading activity of similar instruments upon which their fair value can be measured. The fair value for these Level 3 assets is measured by discounting the estimated future cash flows derived from cash flow models using significant inputs which are determined by the Company when market observable inputs are not available. Information utilized in those pricing models include the security’s credit rating, coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, estimated future interest rates, expected credit losses, and credit enhancement as well as certain other relevant information. The Company used a constant prepayment rate assumption of 10%, default rate of 2%, loss severity of 20%, and a discount rate of 7.0% in measuring the fair value of its Level 3 assets as of June 30, 2020. Significant changes in any of these inputs in isolation may result in a significantly different fair value measurement. Level 3 assets are generally most sensitive to the default rate and severity assumptions. The activity of the Company’s Level 3 assets during the three and six months ended June 30, 2020 is presented in the following table: Three Months Ended Six Months Ended June 30, 2020 June 30, 2020 Other Non-Agency MBS Mortgage Loans Other Non-Agency MBS Mortgage Loans Balance as of beginning of period $ 1,562 $ 7,922 $ 1,690 $ 9,405 Change in fair value (1) (57) 359 (174) (501) Principal payments (101) (904) (206) (1,519) Accretion (amortization) 86 (11) 180 (19) Balance as of end of period $ 1,490 $ 7,366 $ 1,490 $ 7,366 (1) Change in fair value for other non-Agency MBS is recorded as unrealized gain (loss) in “other comprehensive income”. Change in fair value for mortgage loans is recorded as unrealized gain (loss) in “fair value adjustments, net“ and the amount shown for the six months ended June 30, 2020 is net of cumulative adjustment of $(548) made to the amortized cost as of December 31, 2019 as a result of the Company’s election of the fair value option for its mortgage loans effective January 1, 2020. The fair value of interest rate swaps is measured using the income approach with the primary input being the forward interest rate swap curve, which is considered an observable input, and thus their fair values are considered Level 2 measurements. All of the Company’s interest rate swap agreements are centrally cleared through the CME. Please refer to Note 1 for information regarding the exchange of variation margin being legally considered as settlement of the derivative as opposed to a pledge of collateral. U.S. Treasury futures and options on U.S. Treasury futures are valued based on closing exchange prices on these contracts and are classified accordingly as Level 1 measurements. Unlike its interest rate swaps, the Company does not treat the exchange of variation margin for its U.S. Treasury futures as legal settlement of the instrument. The fair value of interest rate swaptions is based on the fair value of the underlying interest rate swap and time remaining until its expiration. The fair value of TBA securities is estimated using methods similar those used to fair value the Company’s Level 2 MBS. |
Shareholders' Equity and Share-
Shareholders' Equity and Share-Based Compensation (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Shareholders' Equity and Share-based Compensation | SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION Preferred Stock. The Company's articles of incorporation authorize the issuance of up to 50,000,000 shares of preferred stock, par value $0.01 per share. The Company’s Board of Directors has designated 6,600,000 shares for issuance as 6.900% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and sold 4,460,000 of such shares during the first quarter of 2020 through a public offering for which it received proceeds of $107,988, net of $3,512 in broker commissions and other expenses. The Company used the proceeds to redeem all 2,300,000 outstanding shares of its 8.50% Series A Preferred Stock at an aggregate redemption price of approximately $25.35 per share, which included accumulated and unpaid dividends declared as of the redemption date March 14, 2020. The Company also used the proceeds to partially redeem 1,700,000 shares of its 7.625% Series B Preferred Stock at an aggregate redemption price of approximately $25.32 per share, which included accumulated and unpaid dividends declared as of the redemption date March 16, 2020. The excess of the $25.00 liquidation price per share over the carrying value of the preferred stock redeemed resulted in a charge of $(3,914) to net income to common shareholders for the six months ended June 30, 2020. The Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption, and will remain outstanding indefinitely unless redeemed or otherwise repurchased or converted into common stock pursuant to the terms of the Preferred Stock. The Company had 2,788,330 shares of its Series B Preferred Stock remaining as of June 30, 2020, which may be redeemed at any time and from time to time at the Company's option at a cash redemption price of $25.00 per share plus any accumulated and unpaid dividends. Except under certain limited circumstances described in Article IIIC of the Company’s Restated Articles of Incorporation, as amended, the Company may not redeem the Series C Preferred Stock prior to April 15, 2025. On or after that date, the Series C Preferred Stock may be redeemed at any time and from time to time at the Company's option at a cash redemption price of $25.00 per share plus any accumulated and unpaid dividends. Because the Preferred Stock is redeemable only at the option of the issuer, it is classified as equity on the Company’s consolidated balance sheet. The Series B Preferred Stock pays a cumulative cash dividend equivalent to 7.625% of the $25.00 liquidation preference per share each year. The Series C Preferred stock pays a cumulative cash dividend equivalent to 6.900% of the $25.00 liquidation preference per share each year until April 15, 2025 upon which date and thereafter, the Company will pay cumulative cash dividends at a percentage of the $25.00 liquidation value per share equal to an annual floating rate of three-month LIBOR plus a spread of 5.461%. The Company paid its regular quarterly dividend of $0.4765625 per share of Series B Preferred Stock and $0.43125 per share of Series C Preferred Stock on July 15, 2020 to shareholders of record as of July 1, 2020. Common Stock. The following table summarizes information regarding monthly dividend declarations on the Company’s common stock during the six months ended June 30, 2020: Six Months Ended June 30, 2020 Declaration Date Amount Declared Record Date Payment Date January 13, 2020 $ 0.15 January 24, 2020 February 3, 2020 February 14, 2020 0.15 February 24, 2020 March 2, 2020 March 10, 2020 0.15 March 23, 2020 April 1, 2020 April 8, 2020 0.15 April 22, 2020 May 1, 2020 May 12, 2020 0.15 May 22, 2020 June 1, 2020 June 10. 2020 0.13 June 22, 2020 July 1, 2020 Stock and Incentive Plans. The Company’s Board adopted the 2020 Stock and Incentive Plan, which was approved by the Company’s shareholders on June 9, 2020. The 2020 Plan, which replaced the Company’s 2018 Stock and Incentive Plan (the “2018 Plan”), reserves for issuance up to 2,300,000 common shares for eligible employees, non-employee directors, consultants, and advisors to the Company to be granted in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance cash awards. Awards previously granted under the 2018 Plan or any other prior equity plan will remain outstanding and valid in accordance with their terms, but no new awards will be granted under the 2018 Plan or any other prior equity plan. Total stock-based compensation expense recognized by the Company for the three and six months ended June 30, 2020 was $424 and $731, respectively, compared to $296 and $593 for the three and six months ended June 30, 2019, respectively. The following table presents a rollforward of the restricted stock activity for the periods indicated: Six Months Ended June 30, 2020 2019 Shares Weighted Average Grant Date Fair Value Per Share Shares Weighted Average Grant Date Fair Value Per Share Restricted stock outstanding as of beginning of period 119,213 $ 18.56 113,904 $ 19.19 Restricted stock granted 240,293 13.88 67,997 18.09 Restricted stock vested (65,749) 18.61 (62,688) 19.20 Restricted stock outstanding as of end of period 293,757 $ 14.72 119,213 $ 18.56 As of June 30, 2020, the grant date fair value of the Company’s remaining nonvested restricted stock is $3,863 which will be amortized into compensation expense over a weighted average period of 2.4 years. |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Organization [Text Block] | OrganizationDynex Capital, Inc. (“Company”) was incorporated in the Commonwealth of Virginia on December 18, 1987 and commenced operations in February 1988. The Company is an internally managed mortgage real estate investment trust, or mortgage REIT, which primarily earns income from investing on a leveraged basis in debt securities, the majority of which are specified pools of Agency mortgage-backed securities (“MBS”) consisting of commercial MBS (“CMBS”), residential MBS (“RMBS”), and CMBS interest-only (“IO”) securities and non-Agency MBS, which consist mainly of CMBS IO. Agency MBS have a guaranty of principal payment by a U.S. government-sponsored entity (“GSE”) such as Fannie Mae and Freddie Mac which are in conservatorship and are currently supported by a senior preferred stock purchase agreement from U.S. Treasury. Non-Agency MBS are issued by non-governmental enterprises and do not have a guaranty of principal payment. The Company also invests in other types of mortgage-related securities, such as to-be-announced securities (“TBAs” or “TBA securities”). |
Basis of Presentation [Policy Text Block] | Basis of Presentation The accompanying unaudited consolidated financial statements of the Company and its subsidiaries (together, “Dynex” or, as appropriate, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all significant adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the consolidated financial statements have been included; however, uncertainty over the continuing impact that COVID-19 will have on the global economy and on the Company’s business makes any estimates and assumptions as of June 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for any other interim periods or for the entire year ending December 31, 2020. The unaudited consolidated financial statements included herein should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) filed with the SEC. All references to common shares, per common share amounts, and restricted stock have been adjusted to reflect the effect of the Company’s 1-for-3 reverse stock split effected on June 20, 2019 for all periods presented. |
Consolidation [Policy Text Block] | Consolidation and Variable Interest Entities The consolidated financial statements include the accounts of the Company and the accounts of its majority owned subsidiaries and variable interest entities (“VIE”) for which it is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation. The Company consolidates a VIE if the Company is determined to be the VIE’s primary beneficiary, which is defined as the party that has both: (i) the power to control the activities that most significantly impact the VIE’s financial performance and (ii) the right to receive benefits or absorb losses that could potentially be significant to the VIE. The Company reconsiders its evaluation of whether to consolidate a VIE on an ongoing basis, based on changes in the facts and circumstances pertaining to the VIE. The Company consolidates a securitization trust, which has residential mortgage loans included in “mortgage loans held for investment” on its consolidated balance sheet, of which a portion is pledged as collateral for one remaining bond recorded as “non-recourse collateralized financing” on its consolidated balance sheet. The Company owns the subordinate class in the trust and has been deemed the primary beneficiary. |
Use of Estimates [Policy Text Block] | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. The most significant estimates used by management include, but are not limited to, amortization of premiums and discounts and fair value measurements of its investments. These items are discussed further below within this note to the consolidated financial statements. |
Income Taxes [Policy Text Block] | Income Taxes The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986 and the corresponding provisions of state law. To qualify as a REIT, the Company must meet certain tests including investing in primarily real estate-related assets and the required distribution of at least 90% of its annual REIT taxable income to shareholders after consideration of its net operating loss (“NOL”) carryforward and not including taxable income retained in its taxable subsidiaries. As a REIT, the Company generally will not be subject to federal income tax on the amount of its income or capital gains that is distributed as dividends to shareholders. The Company assesses its tax positions for all open tax years and determines whether the Company has any material unrecognized liabilities and records these liabilities, if any, to the extent they are deemed more likely than not to have been incurred. |
Earnings Per Share, Policy | Net Income (Loss) Per Common Share The Company calculates basic net income per common share by dividing net income to common shareholders for the period by weighted-average shares of common stock outstanding for that period. The Company did not have any potentially dilutive securities outstanding during the three and six months ended June 30, 2020 or June 30, 2019. Holders of unvested shares of the Company’s issued and outstanding restricted common stock are eligible to receive non-forfeitable dividends. As such, these unvested shares are considered participating securities and therefore are included in the computation of basic net income per common share using the two-class method. Upon vesting, restrictions on transfer expire on each share of restricted stock, and each such share of restricted stock represents one unrestricted share of common stock. Because the Company’s 7.625% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) and its 6.900% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) (collectively, the “Preferred Stock”) are redeemable at the Company’s option for cash only and may convert into shares of common stock only upon a change of control of the Company (and subject to other circumstances) as described in Article IIIB and Article IIIC of the Company’s Articles of Amendment to the Restated Articles of Incorporation (the “Restated Articles of Incorporation, as amended”), the effect of those shares and their related dividends is excluded from the calculation of diluted net income per common share. |
Cash and Cash Equivalents [Policy Text Block] | Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less as well as unrestricted demand deposits at highly rated financial institutions. The Company’s cash balances fluctuate throughout the year and may exceed Federal Deposit Insurance Company insured limits from time to time. Although the Company bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result. |
Restricted Cash [Policy Text Block] | Restricted Cash Restricted cash consists of cash the Company has pledged to cover initial and variation margin with its financing and certain derivative counterparties. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company's consolidated balance sheet as of June 30, 2020 that sum to the total of the same such amounts shown on the Company’s consolidated statement of cash flows for the six months ended June 30, 2020: June 30, 2020 Cash and cash equivalents $ 147,243 Restricted cash 59,150 Total cash, cash equivalents, and restricted cash shown on consolidated statement of cash flows $ 206,393 |
Investment in Debt Securities, Policy | Mortgage-Backed Securities The Company’s MBS are designated as available-for-sale (“AFS”) and are recorded at fair value on the Company’s consolidated balance sheet. Changes in unrealized gain (loss) on the Company’s MBS are reported in other comprehensive income (“OCI”) until the investment is sold or matures. Although the Company generally intends to hold its AFS securities until maturity, it may sell any of these securities as part of the overall management of its business. Upon the sale of an AFS security, any unrealized gain or loss is reclassified out of accumulated other comprehensive income (“AOCI”) into net income as a realized “gain (loss) on sale of investments, net” using the specific identification method. The fair value of the Company’s MBS pledged as collateral against repurchase agreements is disclosed parenthetically on the Company’s consolidated balance sheets. Interest Income, Premium Amortization, and Discount Accretion. Interest income on MBS is accrued based on the outstanding principal balance (or notional balance in the case of interest-only, or “IO” securities) and their contractual terms. Premiums or discounts associated with the purchase of Agency MBS as well as any non-Agency MBS rated ‘AA’ and higher are amortized or accreted into interest income over the projected life of such securities using the effective yield method, and adjustments to premium amortization and discount accretion are made for actual cash payments. The Company’s projections of future cash payments are based on input and analysis received from external sources and internal models and include assumptions about the amount and timing of loan prepayment rates, fluctuations in interest rates, credit losses, and other factors. On at least a quarterly basis, the Company reviews and makes any necessary adjustments to its cash flow projections and updates the yield recognized on these assets. The Company does not currently hold any non-Agency MBS that were purchased at a discount with credit ratings of less than ‘AA’ or not rated by any of the nationally recognized credit rating agencies at the time of purchase. Determination of MBS Fair Value. The Company estimates the fair value of the majority of its MBS based upon prices obtained from third-party pricing services and broker quotes. The remainder of the Company’s MBS are valued by discounting the estimated future cash flows derived from cash flow models that utilize information such as the security’s coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, estimated future interest rates, expected losses, and credit enhancements as well as certain other relevant information. Please refer to Note 5 for further discussion of MBS fair value measurements. Allowance for Credit Losses. The Company recently adopted Accounting Standards Codification Topic 326, Financial Instruments - Credit Losses . On at least a quarterly basis, the Company evaluates any MBS with a fair value less than its amortized cost for credit losses. If the difference between the present value of cash flows expected to be collected on the MBS is less than its amortized cost, the difference is recorded as an allowance for credit loss through net income up to and not exceeding the amount that the amortized cost exceeds current fair value. Subsequent changes in credit loss estimates are recognized in earnings in the period in which they occur. Because the majority of the Company’s investments are higher credit quality and most are guaranteed by a GSE, the Company is not likely to have an allowance for credit losses recorded on its consolidated balance sheet. |
Repurchase Agreements [Policy Text Block] | Repurchase Agreements The Company’s repurchase agreements, which are used to finance its purchases of MBS, are accounted for as secured borrowings under which the Company pledges its securities as collateral to secure a loan, which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral. At the maturity of a repurchase agreement, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender or, with the consent of the lender, the Company may renew the agreement at the then prevailing financing rate. A repurchase agreement lender may require the Company to pledge additional collateral in the event of a decline in the fair value of the collateral pledged. Repurchase agreement financing is recourse to the Company and the assets pledged. Most of the Company’s repurchase agreements are based on the September 1996 version of the Bond Market Association Master Repurchase Agreement, which generally provides that the lender, as buyer, is responsible for obtaining collateral valuations from a generally recognized source agreed to by both the Company and the lender, or, in an instance when such source is not available, the value determination is made by the lender. |
Derivative Instruments [Policy Text Block] | Derivative Instruments The Company’s derivative instruments include interest rate swaps, futures, options, and forward contracts for the purchase or sale of Agency RMBS on a non-specified pool basis, commonly referred to as to-be-announced (“TBA”) securities. Derivative instruments are reported at their fair value on the Company’s consolidated balance sheet as derivative assets if in a gain position or as derivative liabilities if in a loss position, at the end of the period reported. All periodic interest benefits/costs and changes in fair value of derivative instruments, including gains and losses realized upon termination, maturity, or settlement are recorded in “gain (loss) on derivative instruments, net” on the Company’s consolidated statement of comprehensive income (loss). Cash receipts and payments related to derivative instruments are classified in the investing activities section of the consolidated statements of cash flows in accordance with the underlying nature or purpose of the derivative transactions. Generally, the Company enters into pay-fixed interest rate swaps, which 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. From time to time the Company may also enter into receive-fixed interest rate swaps that 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’s interest rate swap agreements are centrally cleared through the Chicago Mercantile Exchange (“CME”). The Company’s CME cleared swaps require that the Company post initial margin as collateral, and in addition, variation margin is exchanged, typically in cash, for changes in the fair value of the CME cleared swaps. The exchange of variation margin for CME cleared swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily exchange of variation margin associated with its CME cleared interest rate swaps as a direct increase or decrease to the carrying value of the related derivative asset or liability. The Company may also enter into long and short positions in U.S. Treasury futures contracts. U.S. Treasury futures are valued based on exchange pricing with daily margin settlements. The Company realizes gains or losses on these contracts upon expiration at an amount equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract. Unlike interest rate swaps, the Company does not treat the daily margin exchanges for its U.S. Treasury futures as legal settlement of the instrument. The Company currently holds put options on U.S. Treasury futures which provide the Company the right, but not an obligation, to buy U.S. Treasury futures at a predetermined notional amount and stated term in the future. Put options on U.S. Treasury futures are valued based on exchange pricing without daily exchanges of margin amounts. The Company records the premium paid for the option contract as a derivative asset on its consolidated balance sheet and adjusts the balance for changes in fair value through “gain (loss) on derivative instruments” until the option is exercised or the contract expires. The Company may also purchase options for interest rate swaps (“interest rate swaptions”) which are accounted for similarly. A TBA security is a forward contract (“TBA contract”) for the purchase (“long position”) or sale (“short position”) of a non-specified Agency MBS at a predetermined price with certain principal and interest terms and certain types of collateral, but the particular Agency securities to be delivered are not identified until shortly before the settlement date. The Company accounts for long and short positions in TBAs as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS or that the individual TBA transaction will not settle in the shortest time period possible. Please refer to Note 4 for additional information regarding the Company’s derivative instruments as well as Note 5 for information on how the fair value of these instruments are calculated. |
Share-based Compensation [Policy Text Block] | Share-Based CompensationPursuant to the Company’s 2020 Stock and Incentive Plan (the “2020 Plan”), the Company may grant share-based compensation to eligible employees, non-employee directors or consultants or advisors to the Company, including restricted stock awards, stock options, stock appreciation rights, performance units, restricted stock units, and performance cash awards. The Company’s restricted stock currently issued and outstanding may be settled only in shares of its common stock, and therefore are treated as equity awards with their fair value measured at the grant date and recognized as compensation cost over the requisite service period with a corresponding credit to shareholders’ equity. The requisite service period is the period during which a participant is required to provide service in exchange for an award, which is equivalent to the vesting period specified in the terms of the time-based restricted stock award. None of the Company’s restricted stock awards have performance-based conditions. The Company does not currently have any share-based compensation issued or outstanding other than restricted stock issued to its employees, officers, and directors. |
Contingencies [Policy Text Block] | ContingenciesIn the normal course of business, there may be various lawsuits, claims, and other contingencies pending against the Company. On a quarterly basis, the Company evaluates whether to establish provisions for estimated losses from those matters. The Company recognizes a liability for a contingent loss when: (a) the underlying causal event has occurred prior to the balance sheet date; (b) it is probable that a loss has been incurred; and (c) there is a reasonable basis for estimating that loss. A liability is not recognized for a contingent loss when it is only possible or remotely possible that a loss has been incurred, however, possible contingent losses shall be disclosed. If the contingent loss (or an additional loss in excess of any accrual) is at least a reasonable possibility and material, then the Company discloses a reasonable estimate of the possible loss or range of loss, if such reasonable estimate can be made. If the Company cannot make a reasonable estimate of the possible material loss, or range of loss, then that fact is disclosed. |
Recent Accounting Pronouncements [Text Block] | Recently Issued and Adopted Accounting Pronouncements The Company reviews all Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) on at least a quarterly basis to evaluate applicability and significance of any impact on its financial condition and results of operations. There were no accounting pronouncements issued during the six months ended June 30, 2020 that are expected to have a material impact on the Company’s financial condition or results of operations. As of January 1, 2020, the Company elected the fair value option for its mortgage loans held for investment pursuant to the provisions of ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326) Targeted Transition Relief, which was issued in May of 2019. Management chose to elect the fair value option for its mortgage loans because the majority of the Company’s investments are represented on its consolidated balance sheet at fair value. The election of the fair value option resulted in a cumulative adjustment of $(548) to retained earnings on its consolidated balance sheet as of January 1, 2020. The Company does not expect its election of the fair value option for its mortgage loans to have a material impact on its future consolidated financial statements. In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives, and other contracts, related to the expected market transition from LIBOR, and certain other floating rate benchmark indices to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. The guidance in ASU 2020-04 is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur. The Company does not believe this ASU will have a material impact on its consolidated financial statements. |
Investments in Debt Securitie_2
Investments in Debt Securities Investments in Debt Securities (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Debt Securities, Available-for-sale [Table Text Block] | The following tables present the Company’s MBS by investment type (including securities pending settlement) as of the dates indicated: June 30, 2020 Par Net Premium (Discount) Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Agency RMBS $ 2,248,752 $ 67,589 $ 2,316,341 $ 40,465 $ — $ 2,356,806 Agency CMBS 655,935 6,518 662,453 39,507 (1) 701,959 CMBS IO (1) — 435,271 435,271 5,731 (4,332) 436,670 Non-Agency other 1,732 (600) 1,132 403 (45) 1,490 Total MBS: $ 2,906,419 $ 508,778 $ 3,415,197 $ 86,106 $ (4,378) $ 3,496,925 (1) The notional balance for Agency CMBS IO and non-Agency CMBS IO was $13,007,113 and $9,577,721 respectively, as of June 30, 2020. December 31, 2019 Par Net Premium (Discount) Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Agency RMBS $ 2,563,684 $ 55,770 $ 2,619,454 $ 69,082 $ (462) $ 2,688,074 Agency CMBS 1,890,186 15,414 1,905,600 93,763 (6) 1,999,357 CMBS IO (1) — 488,145 488,145 11,760 (863) 499,042 Non-Agency other 1,938 (780) 1,158 552 (20) 1,690 Total MBS: $ 4,455,808 $ 558,549 $ 5,014,357 $ 175,157 $ (1,351) $ 5,188,163 |
Schedule of Realized Gain (Loss) [Table Text Block] | The following table presents information regarding the "gain on sale of investments, net" on the Company’s consolidated statements of comprehensive income (loss) for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Proceeds Received Realized Gain (Loss) Proceeds Received Realized Gain (Loss) Proceeds Received Realized Gain (Loss) Proceeds Received Realized Gain (Loss) Agency RMBS $ 371,106 $ 11,729 $ 205,493 $ (3,953) $ 2,188,456 $ 75,823 $ 205,493 $ (3,953) Agency CMBS 2,020,228 181,370 213,198 (6,493) 2,193,912 202,059 213,198 (6,493) Agency CMBS IO — — 13,861 86 — — 13,861 86 $ 2,391,334 $ 193,099 $ 432,552 $ (10,360) $ 4,382,368 $ 277,882 $ 432,552 $ (10,360) |
Debt Securities, Available-for-sale, Unrealized Loss Position, Fair Value [Table Text Block] | The following table presents certain information for the AFS securities in an unrealized loss position as of the dates indicated: June 30, 2020 December 31, 2019 Fair Value Gross Unrealized Losses # of Securities Fair Value Gross Unrealized Losses # of Securities Continuous unrealized loss position for less than 12 months: Agency MBS $ 87,603 $ (2,304) 26 $ 215,792 $ (1,139) 27 Non-Agency MBS 98,246 (1,926) 47 13,607 (146) 7 Continuous unrealized loss position for 12 months or longer: Agency MBS $ 1,225 $ (128) 3 $ 75,745 $ (35) 2 Non-Agency MBS 107 (20) 4 1,099 (31) 5 |
Repurchase Agreements (Tables)
Repurchase Agreements (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Disclosure of Repurchase Agreements [Abstract] | |
Schedule of Underlying Assets of Repurchase Agreements when Amount of Repurchase Agreements Exceeds 10 Percent of Assets [Table Text Block] | The Company’s repurchase agreements outstanding as of June 30, 2020 and December 31, 2019 are summarized in the following tables: June 30, 2020 December 31, 2019 Collateral Type Balance (1) Weighted Fair Value of Balance Weighted Fair Value of Agency RMBS $ 2,308,446 0.27 % $ 2,427,267 $ 2,594,645 1.96 % $ 2,647,638 Agency CMBS 654,001 0.28 % 695,578 1,735,848 1.98 % 1,901,452 Agency CMBS IO 225,191 1.12 % 265,342 255,912 2.30 % 282,522 Non-Agency CMBS IO 127,353 1.40 % 155,288 165,943 2.67 % 193,013 Total repurchase agreements $ 3,314,991 0.38 % $ 3,543,475 $ 4,752,348 2.01 % $ 5,024,625 |
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Table Text Block] | The following table provides information on the remaining term to maturity and original term to maturity for the Company’s repurchase agreements as of the dates indicated: June 30, 2020 December 31, 2019 Remaining Term to Maturity Balance Weighted WAVG Original Term to Maturity Balance Weighted WAVG Original Term to Maturity Less than 30 days $ 1,875,520 0.40 % 26 $ 2,078,185 2.12 % 34 30 to 90 days 1,439,471 0.35 % 32 2,674,163 1.93 % 52 Total $ 3,314,991 0.38 % 29 $ 4,752,348 2.01 % 45 |
Derivatives (Tables)
Derivatives (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Derivative [Line Items] | |
Derivative Instruments, Gain (Loss) | The table below provides detail of the Company’s “loss on derivative instruments, net” by type of derivative for the periods indicated: Three Months Six Months Ended June 30, June 30, Type of Derivative Instrument 2020 2019 2020 2019 Interest rate swaps $ (1,672) $ (124,213) $ (183,852) $ (195,978) Interest rate swaptions — — (573) — Futures (10,928) (102) (19,377) (211) Options on U.S. Treasury futures (6,680) — (17,406) — TBA securities - long positions 8,688 6,780 27,119 16,956 TBA securities - short positions 2,029 — (10,041) — Loss on derivative instruments, net $ (8,563) $ (117,535) $ (204,130) $ (179,233) |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The table below summarizes information about the fair value by type of derivative instrument on the Company’s consolidated balance sheets as of the dates indicated: Type of Derivative Instrument Balance Sheet Location Purpose June 30, 2020 December 31, 2019 Options on U.S. Treasury futures Derivative assets Economic hedging $ 3,168 $ 2,883 Interest rate swaptions Derivative assets Economic hedging — 573 TBA securities - long positions Derivative assets Investing 4,758 834 Total derivatives assets $ 7,926 $ 4,290 U.S. Treasury futures Derivative liabilities Economic hedging $ (4,208) $ — TBA securities - short positions Derivative liabilities Economic hedging — (974) Total derivatives liabilities $ (4,208) $ (974) |
Schedule of Derivative Instruments | Interest Rate Swaps The Company has interest rate swap agreements outstanding with various counterparties that are centrally cleared through the CME. As explained in Note 1 , the exchange of variation margin for CME cleared interest rate swaps is legally considered to be the settlement of the derivative itself as opposed to a pledge of collateral. Because the Company accounts for this daily exchange of variation margin for its CME cleared interest rate swaps as an increase or decrease to the carrying value of the related derivative asset or liability, the fair value of the interest rate swaps nets to $0 on the Company’s consolidated balance sheet. The Company had net settlement amounts of $(2,866) and $(9,265) in variation margin for its interest rate swaps as of June 30, 2020 and December 31, 2019, respectively. The following tables present information about the Company’s interest rate swaps as of the dates indicated: June 30, 2020 December 31, 2019 Weighted-Average Weighted-Average Years to Maturity: Notional Amount Pay Rate Life Remaining (in Years) Notional Amount Pay Rate Life Remaining (in Years) < 3 years $ 50,000 1.35 % 0.3 $ 2,860,000 1.58 % 1.5 >3 and < 6 years — — % — 700,000 1.43 % 4.7 >6 and < 10 years 425,000 0.69 % 9.9 545,000 1.78 % 9.4 >10 years — — % — 120,000 2.84 % 27.7 Total $ 475,000 0.76 % 9.0 $ 4,225,000 1.62 % 3.8 U.S. Treasury Futures and Options The following table presents information about the Company’s U.S. Treasury futures and options outstanding as of the dates indicated: Cost Basis Fair Value Notional Amount As of June 30, 2020: Options on U.S. Treasury futures (1) $ 20,622 $ 3,168 $ 1,425,000 U.S. Treasury futures - short positions n/a (4,208) 1,225,000 As of December 31, 2019: Options on U.S. Treasury futures (2) $ 4,359 $ 2,883 $ 1,350,000 Pay-fixed interest rate swaptions (2) 6,180 573 750,000 (1) All futures and options outstanding as of June 30, 2020 will expire in September of 2020. (2) All options outstanding as of December 31, 2019 expired during the first quarter of 2020. TBA Securities The following table summarizes information about the Company's TBA securities as of the dates indicated: June 30, 2020 December 31, 2019 Long Positions Short Positions Long Positions Short Positions Implied market value (1) $ 1,290,078 $ — $ 442,161 $ (520,117) Implied cost basis (2) 1,285,320 — 441,327 (519,143) Net carrying value (3) $ 4,758 $ — $ 834 $ (974) (1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the date indicated. (2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the date indicated. (3) Net carrying value is the amount included on the consolidated balance sheets within “derivative assets (liabilities)” and represents the difference between the implied market value and the implied cost basis of the TBA security as of the date indicated. |
Schedule of Notional Amounts of Outstanding Derivative Positions | The tables below summarize changes in the Company’s derivative instruments for the period indicated: Type of Derivative Instrument Notional Amount as of December 31, 2019 Additions Settlements, Notional Amount as of June 30, 2020 Interest rate swaps $ 4,225,000 $ 2,915,000 $ (6,665,000) $ 475,000 Interest rate swaptions 750,000 — (750,000) — U.S. Treasury futures - short positions — 2,212,600 (3,437,600) (1,225,000) Options on U.S. Treasury futures 1,350,000 3,425,000 (3,350,000) 1,425,000 TBA - long positions 435,000 5,311,000 (4,496,000) 1,250,000 TBA - short positions 500,000 3,017,000 (3,517,000) — |
Offsetting Assets | Offsetting of Assets Gross Amount of Recognized Assets Gross Amount Offset in the Balance Sheet Net Amount of Assets Presented in the Balance Sheet Gross Amount Not Offset in the Balance Sheet (1) Net Amount Financial Instruments Received as Collateral Cash Received as Collateral June 30, 2020 Options on U.S. Treasury futures $ 3,168 — $ 3,168 $ — $ — $ 3,168 TBA - long positions 4,758 — 4,758 — — 4,758 Derivative assets $ 7,926 $ — $ 7,926 $ — $ — $ 7,926 December 31, 2019 Interest rate swaptions $ 573 $ — $ 573 $ — $ — $ 573 Options on U.S. Treasury futures 2,883 — 2,883 — — 2,883 TBA - long positions 834 — 834 (380) — 454 Derivative assets $ 4,290 $ — $ 4,290 $ (380) $ — $ 3,910 |
Offsetting Liabilities | Offsetting of Liabilities Gross Amount of Recognized Liabilities Gross Amount Offset in the Balance Sheet Net Amount of Liabilities Presented in the Balance Sheet Gross Amount Not Offset in the Balance Sheet (1) Net Amount Financial Instruments Posted as Collateral Cash Posted as Collateral June 30, 2020 U.S. Treasury futures $ (4,208) — $ (4,208) $ — $ 4,208 $ — TBA - short positions — — — — — — Derivative liabilities $ (4,208) $ — $ (4,208) $ — $ 4,208 $ — December 31, 2019 TBA - short positions $ (974) — $ (974) $ 380 — $ (594) Derivative liabilities $ (974) $ — $ (974) $ 380 $ — $ (594) (1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total cash posted as collateral, which is recorded as "restricted cash," and the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically. |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Disclosures | FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on the assumptions market participants would use when pricing an asset or liability and also considers all aspects of nonperformance risk, including the entity’s own credit standing, when measuring fair value of a liability. ASC Topic 820 established a valuation hierarchy of three levels as follows: • Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date. • Level 2 – Inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs either directly observable or indirectly observable through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. • Level 3 – Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best estimate of how market participants would price the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. The following table presents the Company’s financial instruments that are measured at fair value on the Company’s consolidated balance sheet by their valuation hierarchy levels as of the dates indicated: June 30, 2020 December 31, 2019 Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3 Assets carried at fair value: MBS $ 3,496,925 $ — $ 3,495,435 $ 1,490 $ 5,188,163 $ — $ 5,186,473 $ 1,690 Mortgage loans held for investment 7,366 — — 7,366 — — — — Derivative assets: Options on U.S. Treasury futures 3,168 3,168 — — 2,883 2,883 — — Interest rate swaptions — — — — 573 — 573 — TBA securities-long positions 4,758 — 4,758 — 834 — 834 — Total assets carried at fair value $ 3,512,217 $ 3,168 $ 3,500,193 $ 8,856 $ 5,192,453 $ 2,883 $ 5,187,880 $ 1,690 Liabilities carried at fair value: TBA-short positions $ — $ — $ — $ — $ 974 $ — $ 974 $ — U.S. Treasury futures 4,208 4,208 — — — — — — Total liabilities carried at fair value $ 4,208 $ 4,208 $ — $ — $ 974 $ — $ 974 $ — The fair value measurements for the Company's MBS are considered Level 2 when there are substantially similar securities actively trading or for which there has been recent trading activity in their respective markets. The Company determines the fair value of its Level 2 securities based on prices received from the Company's primary pricing service as well as other pricing services and brokers. The Company evaluates the third-party prices it receives to assess their reasonableness. Although the Company does not adjust third-party prices, they may be excluded from use in the determination of a security's fair value if they are significantly different from other observable market data. In valuing a security, the primary pricing service uses either a market approach, which uses observable prices and other relevant information that is generated by market transactions of identical or similar securities, or an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount. The Company also reviews the assumptions and inputs utilized in the valuation techniques of its primary pricing service. Examples of these observable inputs and assumptions include market interest rates, credit spreads, and projected prepayment speeds, among other things. The Company owns MBS and mortgage loans that are considered Level 3 assets because there has been no recent trading activity of similar instruments upon which their fair value can be measured. The fair value for these Level 3 assets is measured by discounting the estimated future cash flows derived from cash flow models using significant inputs which are determined by the Company when market observable inputs are not available. Information utilized in those pricing models include the security’s credit rating, coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, estimated future interest rates, expected credit losses, and credit enhancement as well as certain other relevant information. The Company used a constant prepayment rate assumption of 10%, default rate of 2%, loss severity of 20%, and a discount rate of 7.0% in measuring the fair value of its Level 3 assets as of June 30, 2020. Significant changes in any of these inputs in isolation may result in a significantly different fair value measurement. Level 3 assets are generally most sensitive to the default rate and severity assumptions. The activity of the Company’s Level 3 assets during the three and six months ended June 30, 2020 is presented in the following table: Three Months Ended Six Months Ended June 30, 2020 June 30, 2020 Other Non-Agency MBS Mortgage Loans Other Non-Agency MBS Mortgage Loans Balance as of beginning of period $ 1,562 $ 7,922 $ 1,690 $ 9,405 Change in fair value (1) (57) 359 (174) (501) Principal payments (101) (904) (206) (1,519) Accretion (amortization) 86 (11) 180 (19) Balance as of end of period $ 1,490 $ 7,366 $ 1,490 $ 7,366 (1) Change in fair value for other non-Agency MBS is recorded as unrealized gain (loss) in “other comprehensive income”. Change in fair value for mortgage loans is recorded as unrealized gain (loss) in “fair value adjustments, net“ and the amount shown for the six months ended June 30, 2020 is net of cumulative adjustment of $(548) made to the amortized cost as of December 31, 2019 as a result of the Company’s election of the fair value option for its mortgage loans effective January 1, 2020. The fair value of interest rate swaps is measured using the income approach with the primary input being the forward interest rate swap curve, which is considered an observable input, and thus their fair values are considered Level 2 measurements. All of the Company’s interest rate swap agreements are centrally cleared through the CME. Please refer to Note 1 for information regarding the exchange of variation margin being legally considered as settlement of the derivative as opposed to a pledge of collateral. U.S. Treasury futures and options on U.S. Treasury futures are valued based on closing exchange prices on these contracts and are classified accordingly as Level 1 measurements. Unlike its interest rate swaps, the Company does not treat the exchange of variation margin for its U.S. Treasury futures as legal settlement of the instrument. The fair value of interest rate swaptions is based on the fair value of the underlying interest rate swap and time remaining until its expiration. The fair value of TBA securities is estimated using methods similar those used to fair value the Company’s Level 2 MBS. |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table presents the Company’s financial instruments that are measured at fair value on the Company’s consolidated balance sheet by their valuation hierarchy levels as of the dates indicated: June 30, 2020 December 31, 2019 Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3 Assets carried at fair value: MBS $ 3,496,925 $ — $ 3,495,435 $ 1,490 $ 5,188,163 $ — $ 5,186,473 $ 1,690 Mortgage loans held for investment 7,366 — — 7,366 — — — — Derivative assets: Options on U.S. Treasury futures 3,168 3,168 — — 2,883 2,883 — — Interest rate swaptions — — — — 573 — 573 — TBA securities-long positions 4,758 — 4,758 — 834 — 834 — Total assets carried at fair value $ 3,512,217 $ 3,168 $ 3,500,193 $ 8,856 $ 5,192,453 $ 2,883 $ 5,187,880 $ 1,690 Liabilities carried at fair value: TBA-short positions $ — $ — $ — $ — $ 974 $ — $ 974 $ — U.S. Treasury futures 4,208 4,208 — — — — — — Total liabilities carried at fair value $ 4,208 $ 4,208 $ — $ — $ 974 $ — $ 974 $ — |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | The activity of the Company’s Level 3 assets during the three and six months ended June 30, 2020 is presented in the following table: Three Months Ended Six Months Ended June 30, 2020 June 30, 2020 Other Non-Agency MBS Mortgage Loans Other Non-Agency MBS Mortgage Loans Balance as of beginning of period $ 1,562 $ 7,922 $ 1,690 $ 9,405 Change in fair value (1) (57) 359 (174) (501) Principal payments (101) (904) (206) (1,519) Accretion (amortization) 86 (11) 180 (19) Balance as of end of period $ 1,490 $ 7,366 $ 1,490 $ 7,366 |
Shareholders' Equity and Shar_2
Shareholders' Equity and Share-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Dividends Declared | Common Stock. The following table summarizes information regarding monthly dividend declarations on the Company’s common stock during the six months ended June 30, 2020: Six Months Ended June 30, 2020 Declaration Date Amount Declared Record Date Payment Date January 13, 2020 $ 0.15 January 24, 2020 February 3, 2020 February 14, 2020 0.15 February 24, 2020 March 2, 2020 March 10, 2020 0.15 March 23, 2020 April 1, 2020 April 8, 2020 0.15 April 22, 2020 May 1, 2020 May 12, 2020 0.15 May 22, 2020 June 1, 2020 June 10. 2020 0.13 June 22, 2020 July 1, 2020 |
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | The following table presents a rollforward of the restricted stock activity for the periods indicated: Six Months Ended June 30, 2020 2019 Shares Weighted Average Grant Date Fair Value Per Share Shares Weighted Average Grant Date Fair Value Per Share Restricted stock outstanding as of beginning of period 119,213 $ 18.56 113,904 $ 19.19 Restricted stock granted 240,293 13.88 67,997 18.09 Restricted stock vested (65,749) 18.61 (62,688) 19.20 Restricted stock outstanding as of end of period 293,757 $ 14.72 119,213 $ 18.56 |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 147,243 | $ 62,582 | ||
Restricted cash | 59,150 | 71,648 | ||
Total cash, cash equivalents, and restricted cash shown on consolidated statement of cash flows | $ 206,393 | $ 134,230 | $ 111,350 | $ 88,704 |
Commitment and Contingencies (D
Commitment and Contingencies (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Loss Contingency, Damages Sought, Value | $ 12,600 |
Loss Contingency, Inestimable Loss | After consultation with litigation counsel, the Company believes, based upon information currently available and its evaluation of Virginia law, that the likelihood of loss is not probable, and given the range of potential claims for damages by the Company to offset the Receiver's claims, the amount of possible loss cannot be reasonably estimated, and therefore, no contingent liability has been recorded. |
Investments in Debt Securitie_3
Investments in Debt Securities Investments in Debt Securities (Details) | 3 Months Ended | 6 Months Ended | ||||||
Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Dec. 31, 2019USD ($) | ||||
Investments [Line Items] | ||||||||
Par value of available for sale debt security | $ 2,906,419,000 | $ 2,906,419,000 | $ 4,455,808,000 | |||||
Investments, Unamortized Premium (Discount) | 508,778,000 | 508,778,000 | 558,549,000 | |||||
Debt Securities, Available-for-sale, Amortized Cost | 3,415,197,000 | 3,415,197,000 | 5,014,357,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 86,106,000 | 86,106,000 | 175,157,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | (4,378,000) | (4,378,000) | (1,351,000) | |||||
Debt Securities, Available-for-sale | 3,496,925,000 | 3,496,925,000 | 5,188,163,000 | |||||
Proceeds from Sale of Available-for-sale Securities | 2,391,334,000 | $ 432,552,000 | 4,382,368,000 | $ 432,552,000 | ||||
Debt Securities, Available-for-sale, Realized Gain (Loss) | 193,099,000 | (10,360,000) | 277,882,000 | (10,360,000) | ||||
Receivables from Brokers-Dealers and Clearing Organizations | 156,047,000 | 156,047,000 | 0 | |||||
Securities sold, unsettled, at amortized cost | 152,363,000 | 152,363,000 | ||||||
Debt Securities, Available-for-sale, Allowance for Credit Loss | 0 | 0 | ||||||
Agency MBS | ||||||||
Investments [Line Items] | ||||||||
Notional balance for interest only securities | 13,007,113,000 | 13,007,113,000 | 13,404,824,000 | |||||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | 87,603,000 | 87,603,000 | 215,792,000 | |||||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | $ 2,304,000 | $ 2,304,000 | $ 1,139,000 | |||||
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | 26 | 26 | 27 | |||||
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value | $ 1,225,000 | $ 1,225,000 | $ 75,745,000 | |||||
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss | $ 128,000 | $ 128,000 | $ 35,000 | |||||
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | 3 | 3 | 2 | |||||
Interest-Only-Strip | ||||||||
Investments [Line Items] | ||||||||
Par value of available for sale debt security | $ 0 | [1] | $ 0 | [1] | $ 0 | [2] | ||
Investments, Unamortized Premium (Discount) | 435,271,000 | 435,271,000 | 488,145,000 | |||||
Debt Securities, Available-for-sale, Amortized Cost | 435,271,000 | 435,271,000 | 488,145,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 5,731,000 | 5,731,000 | 11,760,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | (4,332,000) | (4,332,000) | (863,000) | |||||
Debt Securities, Available-for-sale | 436,670,000 | 436,670,000 | 499,042,000 | |||||
Non-Agency MBS | ||||||||
Investments [Line Items] | ||||||||
Par value of available for sale debt security | 1,732,000 | 1,732,000 | 1,938,000 | |||||
Investments, Unamortized Premium (Discount) | (600,000) | (600,000) | (780,000) | |||||
Notional balance for interest only securities | 9,577,721,000 | 9,577,721,000 | 9,799,629,000 | |||||
Debt Securities, Available-for-sale, Amortized Cost | 1,132,000 | 1,132,000 | 1,158,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 403,000 | 403,000 | 552,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | (45,000) | (45,000) | (20,000) | |||||
Debt Securities, Available-for-sale | 1,490,000 | 1,490,000 | 1,690,000 | |||||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | 98,246,000 | 98,246,000 | 13,607,000 | |||||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | $ 1,926,000 | $ 1,926,000 | $ 146,000 | |||||
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | 47 | 47 | 7 | |||||
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value | $ 107,000 | $ 107,000 | $ 1,099,000 | |||||
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss | $ 20,000 | $ 20,000 | $ 31,000 | |||||
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | 4 | 4 | 5 | |||||
Agency | Commercial Mortgage Backed Securities | ||||||||
Investments [Line Items] | ||||||||
Par value of available for sale debt security | $ 655,935,000 | $ 655,935,000 | $ 1,890,186,000 | |||||
Investments, Unamortized Premium (Discount) | 6,518,000 | 6,518,000 | 15,414,000 | |||||
Debt Securities, Available-for-sale, Amortized Cost | 662,453,000 | 662,453,000 | 1,905,600,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 39,507,000 | 39,507,000 | 93,763,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | (1,000) | (1,000) | (6,000) | |||||
Debt Securities, Available-for-sale | 701,959,000 | 701,959,000 | 1,999,357,000 | |||||
Proceeds from Sale of Available-for-sale Securities | 2,020,228,000 | 213,198,000 | 2,193,912,000 | 213,198,000 | ||||
Debt Securities, Available-for-sale, Realized Loss | 181,370,000 | (6,493,000) | 202,059,000 | (6,493,000) | ||||
Agency | Residential Mortgage Backed Securities | ||||||||
Investments [Line Items] | ||||||||
Par value of available for sale debt security | 2,248,752,000 | 2,248,752,000 | 2,563,684,000 | |||||
Investments, Unamortized Premium (Discount) | 67,589,000 | 67,589,000 | 55,770,000 | |||||
Debt Securities, Available-for-sale, Amortized Cost | 2,316,341,000 | 2,316,341,000 | 2,619,454,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 40,465,000 | 40,465,000 | 69,082,000 | |||||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | 0 | 0 | (462,000) | |||||
Debt Securities, Available-for-sale | 2,356,806,000 | 2,356,806,000 | $ 2,688,074,000 | |||||
Proceeds from Sale of Available-for-sale Securities | 371,106,000 | 205,493,000 | 2,188,456,000 | 205,493,000 | ||||
Debt Securities, Available-for-sale, Realized Gain | $ 11,729,000 | $ 75,823,000 | ||||||
Debt Securities, Available-for-sale, Realized Loss | (3,953,000) | (3,953,000) | ||||||
Agency | Interest-Only-Strip | ||||||||
Investments [Line Items] | ||||||||
Proceeds from Sale of Available-for-sale Securities | 13,861,000 | 13,861,000 | ||||||
Debt Securities, Available-for-sale, Realized Loss | $ 86,000 | $ 86,000 | ||||||
[1] | The notional balance for Agency CMBS IO and non-Agency CMBS IO was $13,007,113 and $9,577,721 respectively, as of June 30, 2020. | |||||||
[2] | The notional balance for the Agency CMBS IO and non-Agency CMBS IO was $13,404,824 and $9,799,629, respectively, as of December 31, 2019. |
Repurchase Agreements (Details)
Repurchase Agreements (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items] | ||
Assets Sold under Agreements to Repurchase, Repurchase Liability | $ 3,314,991 | $ 4,752,348 |
Weighted Average Rate | 0.38% | 2.01% |
Fair Value of Collateral Pledged | $ 3,543,475 | $ 5,024,625 |
Payable for unsettled securities | 0 | 6,180 |
Borrowings against securities sold, unsettled | 144,910 | |
Agency | Commercial Mortgage Backed Securities | ||
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items] | ||
Assets Sold under Agreements to Repurchase, Repurchase Liability | $ 654,001 | $ 1,735,848 |
Weighted Average Rate | 0.28% | 1.98% |
Fair Value of Collateral Pledged | $ 695,578 | $ 1,901,452 |
Agency | Residential Mortgage Backed Securities | ||
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items] | ||
Assets Sold under Agreements to Repurchase, Repurchase Liability | $ 2,308,446 | $ 2,594,645 |
Weighted Average Rate | 0.27% | 1.96% |
Fair Value of Collateral Pledged | $ 2,427,267 | $ 2,647,638 |
Agency | Interest-Only-Strip | ||
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items] | ||
Assets Sold under Agreements to Repurchase, Repurchase Liability | $ 225,191 | $ 255,912 |
Weighted Average Rate | 1.12% | 2.30% |
Fair Value of Collateral Pledged | $ 265,342 | $ 282,522 |
Non-Agency | Interest-Only-Strip | ||
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items] | ||
Assets Sold under Agreements to Repurchase, Repurchase Liability | $ 127,353 | $ 165,943 |
Weighted Average Rate | 1.40% | 2.67% |
Fair Value of Collateral Pledged | $ 155,288 | $ 193,013 |
Repurchase Agreements Remaining
Repurchase Agreements Remaining Term to Maturity (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items] | ||
Assets Sold under Agreements to Repurchase, Repurchase Liability | $ 3,314,991 | $ 4,752,348 |
Assets Sold under Agreements to Repurchase, Interest Rate | 0.38% | 2.01% |
WAVG Original Term to Maturity | 29 | 45 |
Less than 30 days | ||
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items] | ||
Assets Sold under Agreements to Repurchase, Repurchase Liability | $ 1,875,520 | $ 2,078,185 |
Assets Sold under Agreements to Repurchase, Interest Rate | 0.40% | 2.12% |
WAVG Original Term to Maturity | 26 | 34 |
30 to 90 days | ||
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items] | ||
Assets Sold under Agreements to Repurchase, Repurchase Liability | $ 1,439,471 | $ 2,674,163 |
Assets Sold under Agreements to Repurchase, Interest Rate | 0.35% | 1.93% |
WAVG Original Term to Maturity | 32 | 52 |
Repurchase Agreements Counterpa
Repurchase Agreements Counterparty Information (Details) $ in Thousands | Jun. 30, 2020USD ($)Agreements |
Repurchase Agreement Counterparty [Line Items] | |
Repurchase Agreement Counterparty, Amount at Risk | $ 46,872 |
Long-term Line of Credit | 137,301 |
Line of Credit Facility, Maximum Borrowing Capacity | $ 250,000 |
Line of Credit Facility, Interest Rate at Period End | 1.04% |
Number of Counterparties with Borrowings Outstanding | Agreements | 19 |
Available Repurchase Agreement Counterparties | Agreements | 37 |
JP Morgan | |
Repurchase Agreement Counterparty [Line Items] | |
Borrowings outstanding with counterparty | $ 645,231 |
WAVG interest rate for amount outstanding with named counterparty | 0.39% |
Repurchase Agreements Offsettin
Repurchase Agreements Offsetting (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | |
Offsetting Liabilities [Line Items] | |||
Gross Amount of Recognized Liabilities | $ 4,752,348 | ||
Gross Amount Offset in the Balance Sheet | $ 0 | 0 | |
Net Amount of Liabilities Presented in the Balance Sheet | 3,314,991 | 4,752,348 | |
Securities Sold under Agreements to Repurchase, Collateral, Right to Reclaim Securities | [1] | (3,314,991) | (4,752,348) |
Securities Sold under Agreements to Repurchase, Collateral, Right to Reclaim Cash | 0 | 0 | |
Securities Sold under Agreements to Repurchase, Amount Offset Against Collateral | $ 0 | $ 0 | |
[1] | Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the repurchase agreement liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. |
Derivatives (Details)
Derivatives (Details) - USD ($) | Dec. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | ||||
Derivative [Line Items] | |||||||||
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net | $ (8,563,000) | $ (117,535,000) | $ (204,130,000) | $ (179,233,000) | |||||
Derivative assets, fair value | $ 4,290,000 | 7,926,000 | 7,926,000 | ||||||
Derivative liabilities, fair value | (974,000) | (4,208,000) | (4,208,000) | ||||||
Derivative Asset, Fair Value, Gross Asset | 4,290,000 | 7,926,000 | 7,926,000 | ||||||
Derivative Liability, Fair Value, Gross Liability | 974,000 | 4,208,000 | 4,208,000 | ||||||
Variation margin | 9,265,000 | 2,866,000 | 2,866,000 | ||||||
Derivative Liability, Notional Amount | [1] | 1,225,000,000 | 1,225,000,000 | ||||||
Interest rate swaps | |||||||||
Derivative [Line Items] | |||||||||
Derivative Instruments Not Designated as Hedging Instruments, Loss | (1,672,000) | (124,213,000) | (183,852,000) | (195,978,000) | |||||
Interest rate swaption | |||||||||
Derivative [Line Items] | |||||||||
Derivative Instruments Not Designated as Hedging Instruments, Loss | 0 | 0 | (573,000) | 0 | |||||
Derivative Asset, Fair Value, Gross Asset | 573,000 | ||||||||
U.S. Treasury futures | |||||||||
Derivative [Line Items] | |||||||||
Derivative Instruments Not Designated as Hedging Instruments, Loss | (10,928,000) | (102,000) | (19,377,000) | (211,000) | |||||
Derivative Liability, Fair Value, Gross Liability | (4,208,000) | (4,208,000) | |||||||
Options on U.S. Treasury futures | |||||||||
Derivative [Line Items] | |||||||||
Derivative Instruments Not Designated as Hedging Instruments, Loss | (6,680,000) | 0 | (17,406,000) | 0 | |||||
Derivative Asset, Fair Value, Gross Asset | 2,883,000 | 3,168,000 | [1] | 3,168,000 | [1] | ||||
Long position | TBA securities | |||||||||
Derivative [Line Items] | |||||||||
Derivative Instruments Not Designated as Hedging Instruments, Gain | 8,688,000 | 6,780,000 | 27,119,000 | 16,956,000 | |||||
Derivative Asset, Fair Value, Gross Asset | 834,000 | 4,758,000 | 4,758,000 | ||||||
Short position | TBA securities | |||||||||
Derivative [Line Items] | |||||||||
Derivative Instruments Not Designated as Hedging Instruments, Gain | 2,029,000 | $ 0 | |||||||
Derivative Instruments Not Designated as Hedging Instruments, Loss | $ 0 | (10,041,000) | |||||||
Derivative Liability, Fair Value, Gross Liability | $ 974,000 | $ 0 | $ 0 | ||||||
Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaps | |||||||||
Derivative [Line Items] | |||||||||
Derivative, Average Fixed Interest Rate | 1.62% | 0.76% | 0.76% | ||||||
Derivative, Average Remaining Maturity | 3 years 9 months 18 days | 9 years | |||||||
Derivative Asset, Notional Amount | $ 4,225,000,000 | $ 475,000,000 | $ 475,000,000 | ||||||
Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaption | |||||||||
Derivative [Line Items] | |||||||||
Derivative assets, fair value | 573,000 | 0 | 0 | ||||||
Derivative instrument, cost basis | [2] | 6,180,000 | |||||||
Derivative Asset, Fair Value, Gross Asset | [2] | 573,000 | |||||||
Derivative Asset, Notional Amount | 750,000,000 | [2] | 0 | 0 | |||||
Not Designated as Hedging Instrument, Economic Hedge | U.S. Treasury futures | |||||||||
Derivative [Line Items] | |||||||||
Derivative liabilities, fair value | 0 | (4,208,000) | [1] | (4,208,000) | [1] | ||||
Derivative Liability, Notional Amount | 0 | 1,225,000,000 | 1,225,000,000 | ||||||
Not Designated as Hedging Instrument, Economic Hedge | Options on U.S. Treasury futures | |||||||||
Derivative [Line Items] | |||||||||
Derivative assets, fair value | 2,883,000 | 3,168,000 | 3,168,000 | ||||||
Derivative instrument, cost basis | 4,359,000 | [2] | 20,622,000 | [1] | 20,622,000 | [1] | |||
Derivative Asset, Fair Value, Gross Asset | [2] | 2,883,000 | |||||||
Derivative Asset, Notional Amount | 1,350,000,000 | [2] | 1,425,000,000 | [1] | 1,425,000,000 | [1] | |||
Not Designated as Hedging Instrument, Economic Hedge | Short position | TBA securities | |||||||||
Derivative [Line Items] | |||||||||
Derivative liabilities, fair value | (974,000) | 0 | 0 | ||||||
Derivative Liability, Notional Amount | 500,000,000 | 0 | 0 | ||||||
Not Designated as Hedging Instrument, Trading | Long position | TBA securities | |||||||||
Derivative [Line Items] | |||||||||
Derivative assets, fair value | 834,000 | 4,758,000 | 4,758,000 | ||||||
Derivative Asset, Notional Amount | $ 435,000,000 | $ 1,250,000,000 | $ 1,250,000,000 | ||||||
Maturity in three years or less | Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaps | |||||||||
Derivative [Line Items] | |||||||||
Derivative, Average Fixed Interest Rate | 1.58% | 1.35% | 1.35% | ||||||
Derivative, Average Remaining Maturity | 1 year 6 months | 3 months 18 days | |||||||
Derivative Asset, Notional Amount | $ 2,860,000,000 | $ 50,000,000 | $ 50,000,000 | ||||||
Maturity between 3 and 6 years | Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaps | |||||||||
Derivative [Line Items] | |||||||||
Derivative, Average Fixed Interest Rate | 1.43% | ||||||||
Derivative, Average Remaining Maturity | 4 years 8 months 12 days | ||||||||
Derivative Asset, Notional Amount | $ 700,000,000 | ||||||||
Maturity between 6 and 10 years | Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaps | |||||||||
Derivative [Line Items] | |||||||||
Derivative, Average Fixed Interest Rate | 1.78% | 0.69% | 0.69% | ||||||
Derivative, Average Remaining Maturity | 9 years 4 months 24 days | 9 years 10 months 24 days | |||||||
Derivative Asset, Notional Amount | $ 545,000,000 | $ 425,000,000 | $ 425,000,000 | ||||||
Maturity greater than 10 years [Member] | Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaps | |||||||||
Derivative [Line Items] | |||||||||
Derivative, Average Fixed Interest Rate | 2.84% | ||||||||
Derivative, Average Remaining Maturity | 27 years 8 months 12 days | ||||||||
Derivative Asset, Notional Amount | $ 120,000,000 | ||||||||
[1] | All futures and options outstanding as of June 30, 2020 will expire in September of 2020 | ||||||||
[2] | All options outstanding as of December 31, 2019 expired during the first quarter of 2020. |
Derivatives TBA securities (Det
Derivatives TBA securities (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | |
Derivative [Line Items] | |||
Derivative Instruments Not Designated as Hedging Instruments, Asset, at Fair Value | $ 7,926 | $ 4,290 | |
Long position | Not Designated as Hedging Instrument, Trading | TBA securities | |||
Derivative [Line Items] | |||
Derivative Instruments Not Designated as Hedging Instruments, Asset, at Fair Value | 4,758 | 834 | |
Cost Basis,TBA | [1] | (1,285,320) | (441,327) |
Market value, TBA | [2] | (1,290,078) | (442,161) |
Net carrying value, TBA | [3] | (4,758) | (834) |
Short position | Not Designated as Hedging Instrument, Economic Hedge | TBA securities | |||
Derivative [Line Items] | |||
Cost Basis,TBA | [1] | 0 | (519,143) |
Market value, TBA | [2] | 0 | (520,117) |
Net carrying value, TBA | [3] | $ 0 | $ 974 |
[1] | Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the date indicated. | ||
[2] | Implied market value represents the estimated fair value of the underlying Agency MBS as of the date indicated | ||
[3] | Net carrying value is the amount included on the consolidated balance sheets within “derivative assets (liabilities)” and represents the difference between the implied market value and the implied cost basis of the TBA security as of the date indicated. |
Derivatives Volume of Activity
Derivatives Volume of Activity (Details) | 6 Months Ended | |
Jun. 30, 2020USD ($) | ||
Derivative [Line Items] | ||
Derivative Liability, Notional Amount | $ 1,225,000,000 | [1] |
Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaps | ||
Derivative [Line Items] | ||
Derivative Asset, Notional Amount | 4,225,000,000 | |
Notional Amount of Derivative Instruments Added | 2,915,000,000 | |
Notional Amount of Derivative Instruments Maturing, Settled, Terminated, or Paired-Off | (6,665,000,000) | |
Derivative Asset, Notional Amount | 475,000,000 | |
Not Designated as Hedging Instrument, Economic Hedge | Interest rate swaption | ||
Derivative [Line Items] | ||
Derivative Asset, Notional Amount | 750,000,000 | [2] |
Notional Amount of Derivative Instruments Added | 0 | |
Notional Amount of Derivative Instruments Maturing, Settled, Terminated, or Paired-Off | (750,000,000) | |
Derivative Asset, Notional Amount | 0 | |
Not Designated as Hedging Instrument, Economic Hedge | U.S. Treasury futures | ||
Derivative [Line Items] | ||
Derivative Liability, Notional Amount | 0 | |
Notional Amount of Derivative Instruments Added | 2,212,600,000 | |
Notional Amount of Derivative Instruments Maturing, Settled, Terminated, or Paired-Off | (3,437,600,000) | |
Derivative Liability, Notional Amount | 1,225,000,000 | |
Not Designated as Hedging Instrument, Economic Hedge | Options on U.S. Treasury futures | ||
Derivative [Line Items] | ||
Derivative Asset, Notional Amount | 1,350,000,000 | [2] |
Notional Amount of Derivative Instruments Added | 3,425,000,000 | |
Notional Amount of Derivative Instruments Maturing, Settled, Terminated, or Paired-Off | (3,350,000,000) | |
Derivative Asset, Notional Amount | 1,425,000,000 | [1] |
Not Designated as Hedging Instrument, Economic Hedge | TBA securities | Short position | ||
Derivative [Line Items] | ||
Derivative Liability, Notional Amount | 500,000,000 | |
Notional Amount of Derivative Instruments Added | 3,017,000,000 | |
Notional Amount of Derivative Instruments Maturing, Settled, Terminated, or Paired-Off | (3,517,000,000) | |
Derivative Liability, Notional Amount | 0 | |
Not Designated as Hedging Instrument, Trading | TBA securities | Long position | ||
Derivative [Line Items] | ||
Derivative Asset, Notional Amount | 435,000,000 | |
Notional Amount of Derivative Instruments Added | 5,311,000,000 | |
Notional Amount of Derivative Instruments Maturing, Settled, Terminated, or Paired-Off | (4,496,000,000) | |
Derivative Asset, Notional Amount | $ 1,250,000,000 | |
[1] | All futures and options outstanding as of June 30, 2020 will expire in September of 2020 | |
[2] | All options outstanding as of December 31, 2019 expired during the first quarter of 2020. |
Derivatives Offsetting Assets (
Derivatives Offsetting Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | ||
Offsetting Assets [Line Items] | ||||
Derivative Asset, Fair Value, Gross Asset | $ 7,926 | $ 4,290 | ||
Derivative Asset, Fair Value, Amount Not Offset Against Collateral | 7,926 | 4,290 | ||
Derivative, Collateral, Obligation to Return Securities | 0 | (380) | [1] | |
Derivative, Collateral, Obligation to Return Cash | 0 | 0 | ||
Derivative Asset, Fair Value, Amount Offset Against Collateral | 7,926 | 3,910 | ||
Interest rate swaption | ||||
Offsetting Assets [Line Items] | ||||
Derivative Asset, Fair Value, Gross Asset | 573 | |||
Derivative Asset, Fair Value, Amount Not Offset Against Collateral | 573 | |||
Derivative, Collateral, Obligation to Return Securities | 0 | |||
Derivative, Collateral, Obligation to Return Cash | 0 | |||
Derivative Asset, Fair Value, Amount Offset Against Collateral | 573 | |||
Options on U.S. Treasury futures | ||||
Offsetting Assets [Line Items] | ||||
Derivative Asset, Fair Value, Gross Asset | 3,168 | [2] | 2,883 | |
Derivative Asset, Fair Value, Amount Not Offset Against Collateral | 3,168 | 2,883 | ||
Derivative, Collateral, Obligation to Return Securities | 0 | 0 | ||
Derivative, Collateral, Obligation to Return Cash | 0 | 0 | ||
Derivative Asset, Fair Value, Amount Offset Against Collateral | 3,168 | 2,883 | ||
Long position | TBA securities | ||||
Offsetting Assets [Line Items] | ||||
Derivative Asset, Fair Value, Gross Asset | 4,758 | 834 | ||
Derivative Asset, Fair Value, Amount Not Offset Against Collateral | 4,758 | 834 | ||
Derivative, Collateral, Obligation to Return Securities | 0 | (380) | [1] | |
Derivative, Collateral, Obligation to Return Cash | 0 | 0 | ||
Derivative Asset, Fair Value, Amount Offset Against Collateral | $ 4,758 | $ 454 | ||
[1] | Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total cash posted as collateral, which is recorded as "restricted cash," and the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically | |||
[2] | All futures and options outstanding as of June 30, 2020 will expire in September of 2020 |
Derivatives Offsetting Liabilit
Derivatives Offsetting Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | |||
Offsetting Liabilities [Line Items] | |||||
Derivative Liability, Fair Value, Gross Liability | $ (4,208) | $ (974) | |||
Derivative Liability, Fair Value, Amount Not Offset Against Collateral | (4,208) | (974) | |||
Derivative, Collateral, Right to Reclaim Securities | 0 | 380 | [1] | ||
Derivative, Collateral, Right to Reclaim Cash | 4,208 | [1] | 0 | ||
Derivative Liability, Fair Value, Amount Offset Against Collateral | 0 | (594) | |||
U.S. Treasury futures | |||||
Offsetting Liabilities [Line Items] | |||||
Derivative Liability, Fair Value, Gross Liability | 4,208 | ||||
Derivative Liability, Fair Value, Amount Not Offset Against Collateral | 4,208 | ||||
Derivative, Collateral, Right to Reclaim Securities | 0 | ||||
Derivative, Collateral, Right to Reclaim Cash | [1] | 4,208 | |||
Derivative Liability, Fair Value, Amount Offset Against Collateral | 0 | ||||
Short position | TBA securities | |||||
Offsetting Liabilities [Line Items] | |||||
Derivative Liability, Fair Value, Gross Liability | 0 | (974) | |||
Derivative Liability, Fair Value, Amount Not Offset Against Collateral | 0 | (974) | |||
Derivative, Collateral, Right to Reclaim Securities | 0 | 380 | [1] | ||
Derivative, Collateral, Right to Reclaim Cash | 0 | 0 | |||
Derivative Liability, Fair Value, Amount Offset Against Collateral | $ 0 | $ (594) | |||
[1] | Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total cash posted as collateral, which is recorded as "restricted cash," and the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | $ 7,926 | $ 4,290 |
Derivative liabilities | 4,208 | 974 |
Fair Value, Measurements, Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 3,496,925 | 5,188,163 |
Assets, Fair Value Disclosure | 3,512,217 | 5,192,453 |
Financial Liabilities Fair Value Disclosure | 4,208 | 974 |
Loans Receivable, Fair Value Disclosure | 7,366 | 0 |
Fair Value, Measurements, Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 0 | 0 |
Assets, Fair Value Disclosure | 3,168 | 2,883 |
Financial Liabilities Fair Value Disclosure | 4,208 | 0 |
Loans Receivable, Fair Value Disclosure | 0 | 0 |
Fair Value, Measurements, Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 3,495,435 | 5,186,473 |
Assets, Fair Value Disclosure | 3,500,193 | 5,187,880 |
Financial Liabilities Fair Value Disclosure | 0 | 974 |
Loans Receivable, Fair Value Disclosure | 0 | 0 |
Fair Value, Measurements, Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 1,490 | 1,690 |
Assets, Fair Value Disclosure | 8,856 | 1,690 |
Financial Liabilities Fair Value Disclosure | 0 | 0 |
Loans Receivable, Fair Value Disclosure | 7,366 | 0 |
Fair Value, Measurements, Recurring | Options on U.S. Treasury futures | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 3,168 | 2,883 |
Fair Value, Measurements, Recurring | Options on U.S. Treasury futures | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 3,168 | 2,883 |
Fair Value, Measurements, Recurring | Options on U.S. Treasury futures | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 0 | 0 |
Fair Value, Measurements, Recurring | Options on U.S. Treasury futures | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 0 | 0 |
Fair Value, Measurements, Recurring | Interest rate swaption | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 573 | |
Fair Value, Measurements, Recurring | Interest rate swaption | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 0 | |
Fair Value, Measurements, Recurring | Interest rate swaption | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 573 | |
Fair Value, Measurements, Recurring | Interest rate swaption | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 0 | |
Fair Value, Measurements, Recurring | TBA securities | Short position | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | 974 | |
Fair Value, Measurements, Recurring | TBA securities | Long position | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 4,758 | 834 |
Fair Value, Measurements, Recurring | TBA securities | Level 1 | Short position | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | 0 | |
Fair Value, Measurements, Recurring | TBA securities | Level 1 | Long position | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 0 | 0 |
Fair Value, Measurements, Recurring | TBA securities | Level 2 | Short position | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | 974 | |
Fair Value, Measurements, Recurring | TBA securities | Level 2 | Long position | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 4,758 | 834 |
Fair Value, Measurements, Recurring | TBA securities | Level 3 | Short position | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | 0 | |
Fair Value, Measurements, Recurring | TBA securities | Level 3 | Long position | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative asset | 0 | 0 |
Fair Value, Measurements, Recurring | Futures | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | 4,208 | 0 |
Fair Value, Measurements, Recurring | Futures | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | 4,208 | 0 |
Fair Value, Measurements, Recurring | Futures | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | 0 | 0 |
Fair Value, Measurements, Recurring | Futures | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | $ 0 | $ 0 |
Fair Value of Financial Instr_4
Fair Value of Financial Instruments Level 3 (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2020 | ||
Non-Agency MBS | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Balance at the beginning of the period | $ 1,562 | $ 1,690 | |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Gain (Loss) Included in Other Comprehensive Income (Loss) | [1] | (57) | (174) |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | (101) | (206) | |
Balance at the end of the period | 1,490 | 1,490 | |
Loans Receivable | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Balance at the beginning of the period | 7,922 | 9,405 | |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Gain (Loss) Included in Earnings | [1] | (359) | 501 |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | (904) | (1,519) | |
Balance at the end of the period | 7,366 | 7,366 | |
Interest Income | Non-Agency MBS | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Accretion (amortization) | 86 | 180 | |
Interest Income | Loans Receivable | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Accretion (amortization) | $ (11) | $ (19) | |
[1] | Change in fair value for other non-Agency MBS is recorded as unrealized gain (loss) in “other comprehensive income”. Change in fair value for mortgage loans is recorded as unrealized gain (loss) in “fair value adjustments, net“ and the amount shown for the six months ended June 30, 2020 is net of cumulative adjustment of $(548) made to the amortized cost as of December 31, 2019 as a result of the Company’s election of the fair value option for its mortgage loans effective January 1, 2020. |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 01, 2020 | Jun. 22, 2020 | Jun. 10, 2020 | Jun. 01, 2020 | May 22, 2020 | May 12, 2020 | May 01, 2020 | Apr. 22, 2020 | Apr. 08, 2020 | Apr. 01, 2020 | Mar. 23, 2020 | Mar. 16, 2020 | Mar. 14, 2020 | Mar. 10, 2020 | Mar. 02, 2020 | Feb. 24, 2020 | Feb. 14, 2020 | Feb. 03, 2020 | Jan. 24, 2020 | Jan. 13, 2020 | Jun. 30, 2020 | May 31, 2020 | Apr. 30, 2020 | Mar. 31, 2020 | Feb. 29, 2020 | Jan. 31, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019 |
Class of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 | 50,000,000 | |||||||||||||||||||||||||||||
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | $ 0.01 | |||||||||||||||||||||||||||||
Stock issuance, value | $ 107,988 | $ 18,052 | $ 58,887 | |||||||||||||||||||||||||||||
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs | $ 8 | $ 9 | $ 28 | $ 212 | ||||||||||||||||||||||||||||
Preferred Stock, Shares Outstanding | 7,248,330 | 7,248,330 | 7,248,330 | 6,788,330 | ||||||||||||||||||||||||||||
Redemption Premium | $ 3,914 | |||||||||||||||||||||||||||||||
Preferred Stock, Shares Issued | 7,248,330 | 7,248,330 | 7,248,330 | 6,788,330 | ||||||||||||||||||||||||||||
Dividends Payable, Date Declared, Month and Year | Jun. 10, 2020 | May 12, 2020 | Apr. 8, 2020 | Mar. 10, 2020 | Feb. 14, 2020 | Jan. 13, 2020 | ||||||||||||||||||||||||||
Common Stock, Dividends, Per Share, Declared | $ 0.13 | $ 0.15 | $ 0.15 | $ 0.15 | $ 0.15 | $ 0.15 | ||||||||||||||||||||||||||
Series A Preferred Stock | ||||||||||||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Preferred Stock, Dividend Rate, Percentage | 8.50% | |||||||||||||||||||||||||||||||
Preferred Stock, Shares Outstanding | 2,300,000 | |||||||||||||||||||||||||||||||
Preferred Stock, Redemption Price Per Share | $ 25.35 | |||||||||||||||||||||||||||||||
Preferred Stock, Liquidation Preference Per Share | $ 25 | |||||||||||||||||||||||||||||||
Series B Preferred Stock | ||||||||||||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Preferred Stock, Dividend Rate, Percentage | 7.625% | |||||||||||||||||||||||||||||||
Preferred Stock, Shares Outstanding | 1,700,000 | |||||||||||||||||||||||||||||||
Preferred Stock, Redemption Price Per Share | $ 25.32 | |||||||||||||||||||||||||||||||
Preferred Stock, Shares Issued | 2,788,330 | 2,788,330 | 2,788,330 | |||||||||||||||||||||||||||||
Preferred Stock, Liquidation Preference Per Share | $ 25 | $ 25 | $ 25 | $ 25 | ||||||||||||||||||||||||||||
Preferred Stock, Dividend Payment Terms | The Series B Preferred Stock pays a cumulative cash dividend equivalent to 7.625% of the $25.00 liquidation preference per share each year. | |||||||||||||||||||||||||||||||
Preferred Stock, Dividends Per Share, Declared | $ 0.4765625 | |||||||||||||||||||||||||||||||
Series C Preferred Stock | ||||||||||||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Preferred Stock, Shares Authorized | 6,600,000 | 6,600,000 | 6,600,000 | |||||||||||||||||||||||||||||
Stock issuance, shares | 4,460,000 | |||||||||||||||||||||||||||||||
Stock issuance, value | $ 107,988 | |||||||||||||||||||||||||||||||
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs | $ 3,512 | |||||||||||||||||||||||||||||||
Preferred Stock, Dividend Rate, Percentage | 6.90% | |||||||||||||||||||||||||||||||
Preferred Stock, Liquidation Preference Per Share | $ 25 | $ 25 | $ 25 | |||||||||||||||||||||||||||||
Preferred Stock, Dividend Payment Terms | The Series C Preferred stock pays a cumulative cash dividend equivalent to 6.900% of the $25.00 liquidation preference per share each year until April 15, 2025 upon which date and thereafter, the Company will pay cumulative cash dividends at a percentage of the $25.00 liquidation value per share equal to an annual floating rate of three-month LIBOR plus a spread of 5.461%. | |||||||||||||||||||||||||||||||
Preferred Stock, Dividends Per Share, Declared | $ 0.43125 | |||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Dividends Payable, Date of Record | Jun. 22, 2020 | May 22, 2020 | Apr. 22, 2020 | Mar. 23, 2020 | Feb. 24, 2020 | Jan. 24, 2020 | ||||||||||||||||||||||||||
Dividends Payable, Date to be Paid | Jul. 1, 2020 | Jun. 1, 2020 | May 1, 2020 | Apr. 1, 2020 | Mar. 2, 2020 | Feb. 3, 2020 |
Shareholders' Equity and Shar_3
Shareholders' Equity and Share-Based Compensation Share-based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based incentive plan, number of shares authorized for issuance | 2,300,000 | 2,300,000 | ||
Stock-based compensation expense | $ 424 | $ 296 | $ 731 | $ 593 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Rollforward] | ||||
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 2 years 4 months 24 days | |||
Restricted Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Rollforward] | ||||
Restricted stock outstanding as of beginning of period | 119,213 | 113,904 | ||
Restricted stock granted | 240,293 | 67,997 | ||
Restricted stock vested | (65,749) | (62,688) | ||
Restricted stock outstanding as of end of period | 293,757 | 119,213 | 293,757 | 119,213 |
Restricted stock as of beginning of period of period, nonvested, weighted average grant date fair value per share | $ 18.56 | $ 19.19 | ||
Restricted stock granted, weighted average grant date fair value per share | 13.88 | 18.09 | ||
Restricted stock vested, weighted average grant date fair value per share | 18.61 | 19.20 | ||
Restricted stock as of end of period, nonvested, weighted average grant date fair value per share | $ 14.72 | $ 18.56 | $ 14.72 | $ 18.56 |
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount | $ 3,863 | $ 3,863 |
Uncategorized Items - dx-202006
Label | Element | Value |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 548,000 |
Accumulated Distributions in Excess of Net Income [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 548,000 |