TWO Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Repurchase Agreements

Repurchase Agreements

3 Months Ended

Mar. 31, 2019

Disclosure of Repurchase Agreements [Abstract]

As of March 31, 2019 and December 31, 2018, the Company had outstanding $19.7 billion and $23.1 billion, respectively, of repurchase agreements. Excluding the effect of the Company’s interest rate swaps and caps, the repurchase agreements had a weighted average borrowing rate of 2.85% and 2.68% and weighted average remaining maturities of 75 and 66 days as of March 31, 2019 and December 31, 2018, respectively.

At March 31, 2019 and December 31, 2018, the repurchase agreement balances were as follows:



(in thousands)	March 31, 2019		December 31, 2018
Short-term	$	19,429,691	$	22,833,476
Long-term	300,000		300,000
Total	$	19,729,691	$	23,133,476

At March 31, 2019 and December 31, 2018, the repurchase agreements had the following characteristics and remaining maturities:



	March 31, 2019
	Collateral Type
(in thousands)	Agency RMBS			Non-Agency Securities			Agency Derivatives			Mortgage Servicing Rights			Total Amount Outstanding
Within 30 days	$	3,900,686		$	931,231		$	20,575		$	—		$	4,852,492
30 to 59 days	3,577,461			407,568			11,858			—			3,996,887
60 to 89 days	4,462,064			352,105			—			—			4,814,169
90 to 119 days	2,405,034			385,637			—			—			2,790,671
120 to 364 days	2,857,714			103,884			13,874			—			2,975,472
One year and over	—			—			—			300,000			300,000
Total	$	17,202,959		$	2,180,425		$	46,307		$	300,000		$	19,729,691
Weighted average borrowing rate	2.71		%	3.74		%	3.51		%	4.25		%	2.85		%



	December 31, 2018
	Collateral Type
(in thousands)	Agency RMBS			Non-Agency Securities			Agency Derivatives			Mortgage Servicing Rights			Total Amount Outstanding
Within 30 days	$	6,712,021		$	770,287		$	6,561		$	—		$	7,488,869
30 to 59 days	4,557,688			496,466			23,444			—			5,077,598
60 to 89 days	5,410,967			242,473			1,621			—			5,655,061
90 to 119 days	1,209,395			722,399			7,065			—			1,938,859
120 to 364 days	2,201,325			463,939			7,825			—			2,673,089
One year and over	—			—			—			300,000			300,000
Total	$	20,091,396		$	2,695,564		$	46,516		$	300,000		$	23,133,476
Weighted average borrowing rate	2.52		%	3.65		%	3.34		%	4.51		%	2.68		%

The following table summarizes assets at carrying values that are pledged or restricted as collateral for the future payment obligations of repurchase agreements and derivative instruments:



(in thousands)	March 31, 2019		December 31, 2018
Available-for-sale securities, at fair value	$	20,925,201	$	24,240,507
Mortgage servicing rights, at fair value	756,573		685,683
Restricted cash	66,296		416,696
Due from counterparties	35,619		110,695
Derivative assets, at fair value	71,696		70,191
U.S. Treasuries ⁽¹⁾	4,260		6,457
Total	$	21,859,645	$	25,530,229

____________________


(1)	U.S. Treasuries received as collateral and re-pledged.

Although the transactions under repurchase agreements represent committed borrowings until maturity, the respective lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or fund margin calls.

The following table summarizes certain characteristics of the Company’s repurchase agreements and counterparty concentration at March 31, 2019 and December 31, 2018:



	March 31, 2019							December 31, 2018
(dollars in thousands)	Amount Outstanding		Net Counterparty Exposure ⁽¹⁾		Percent of Equity		Weighted Average Days to Maturity	Amount Outstanding		Net Counterparty Exposure ⁽¹⁾		Percent of Equity		Weighted Average Days to Maturity
Royal Bank of Canada	$	2,657,910	$	304,256	6	%	59	$	2,504,438	$	342,739	8	%	94
All other counterparties⁽²⁾	17,071,781		1,407,909		29	%	77	20,629,038		1,679,335		39	%	63
Total	$	19,729,691	$	1,712,165				$	23,133,476	$	2,022,074

____________________

(1)

Represents the net carrying value of the assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest. Payables due to broker counterparties for unsettled securities purchases of $2.1 billion are not included in the March 31, 2019 amounts presented above. The Company did not have any such payables at December 31, 2018.


(2)	Represents amounts outstanding with 29 and 29 counterparties at March 31, 2019 and December 31, 2018, respectively.

The Company does not anticipate any defaults by its repurchase agreement counterparties. There can be no assurance, however, that any such default or defaults will not occur.