TWO Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Repurchase Agreements (Notes)

Repurchase Agreements (Notes)

12 Months Ended

Dec. 31, 2014

Disclosure of Repurchase Agreements [Abstract]

As of December 31, 2014, the Company had outstanding $12.9 billion of repurchase agreements, including repurchase agreements funding the Company’s U.S. Treasuries of $2.0 billion. Excluding the debt associated with the Company’s U.S. Treasuries and the effect of the Company’s interest rate swaps, the repurchase agreements had a weighted average borrowing rate of 0.72% and weighted average remaining maturities of 64 days as of December 31, 2014. As of December 31, 2013, the Company had outstanding $12.3 billion of repurchase agreements, including repurchase agreements funding the Company’s U.S. Treasuries of $997.5 million. Excluding the debt associated with the Company’s U.S. Treasuries and the effect of the Company’s interest rate swaps, the repurchase agreements had a weighted average borrowing rate of 0.75% and weighted average remaining maturities of 72 days as of December 31, 2013. As of December 31, 2014 and December 31, 2013, the debt associated with the Company’s U.S. Treasuries had a weighted average borrowing rate of 0.23% and 0.03%, respectively.

At December 31, 2014 and December 31, 2013, the repurchase agreement balances were as follows:



(in thousands)	December 31, 2014		December 31, 2013
Short-term	$	12,839,242	$	12,050,450
Long-term	93,221		200,000
Total	$	12,932,463	$	12,250,450

At December 31, 2014 and December 31, 2013, the repurchase agreements had the following characteristics:



(dollars in thousands)	December 31, 2014				December 31, 2013
Collateral Type	Amount Outstanding		Weighted Average Borrowing Rate		Amount Outstanding		Weighted Average Borrowing Rate
U.S. Treasuries	$	1,996,250	0.23	%	$	997,500	0.03	%
Agency RMBS	8,458,572		0.42	%	9,109,510		0.46	%
Non-Agency RMBS ⁽¹⁾	2,324,395		1.79	%	1,829,709		2.01	%
Agency derivatives	138,133		0.99	%	166,438		1.05	%
Mortgage loans held-for-sale	15,113		3.03	%	147,293		2.85	%
Total	$	12,932,463	0.64	%	$	12,250,450	0.69	%

____________________


(1)	Includes repurchase agreements collateralized by retained interests from the Company’s on-balance sheet securitizations, which are eliminated in consolidation in accordance with U.S. GAAP.

At December 31, 2014 and December 31, 2013, the repurchase agreements had the following remaining maturities:



(in thousands)	December 31, 2014			December 31, 2013
Within 30 days	$	3,979,317		$	3,831,917
30 to 59 days	4,595,425			2,013,733
60 to 89 days	903,286			2,225,967
90 to 119 days	434,550			1,386,371
120 to 364 days	1,929,164			1,594,962
Open maturity ⁽¹⁾	997,500			997,500
One year and over	93,221		⁽²⁾	200,000
Total	$	12,932,463		$	12,250,450

____________________


(1)	Includes repurchase agreements collateralized by U.S. Treasuries with an open maturity period (i.e., rolling 1-day maturity) renewable at the discretion of either party to the agreements.


(2)	One year and over includes repurchase agreements with a maturity date of June 25, 2016.

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



(in thousands)	December 31, 2014		December 31, 2013
Available-for-sale securities, at fair value	$	11,874,783	$	12,295,302
Trading securities, at fair value	1,997,656		1,000,180
Mortgage loans held-for-sale	19,123		200,839
Net economic interests in consolidated securitization trusts ⁽¹⁾	363,564		—
Cash and cash equivalents	14,117		15,000
Restricted cash	112,435		201,194
Due from counterparties	32,495		21,579
Derivative assets, at fair value	185,067		216,365
Total	$	14,599,240	$	13,950,459

____________________


(1)	Includes the retained interests from the Company’s on-balance sheet securitizations, which are eliminated in consolidation in accordance with U.S. GAAP.

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 December 31, 2014 and December 31, 2013:



	December 31, 2014							December 31, 2013
(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	$	1,373,549	$	401,194	10	%	83.8	$	980,464	$	264,746	7	%	88.2
Barclays Capital Inc.	1,346,085		365,879		9	%	50.5	1,453,396		302,744		8	%	74.6
All other counterparties^{(2) (3)}	9,215,329		907,066		22	%	57.7	8,819,090		1,107,340		29	%	71.2
Total	$	11,934,963	$	1,674,139				$	11,252,950	$	1,674,830

____________________


(1)	Represents the net carrying value of the securities and mortgage loans held-for-sale 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.


(2)	Excludes $997.5 million and $997.5 million of repurchase agreements collateralized by U.S. Treasuries with a rolling 1-day maturity as of December 31, 2014 and December 31, 2013, respectively.


(3)	Represents amounts outstanding to 23 and 18 counterparties at December 31, 2014 and December 31, 2013, respectively.

The Company does not anticipate any defaults by its repurchase agreement counterparties.