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

Annual report pursuant to Section 13 and 15(d)

Repurchase Agreements

Repurchase Agreements

12 Months Ended

Dec. 31, 2017

Disclosure of Repurchase Agreements [Abstract]

As of December 31, 2017 and December 31, 2016, the Company had outstanding $19.5 billion and $8.9 billion, respectively, of repurchase agreements. Excluding the effect of the Company’s interest rate swaps, the repurchase agreements had a weighted average borrowing rate of 1.69% and 1.22% and weighted average remaining maturities of 83 and 57 days as of December 31, 2017 and December 31, 2016, respectively.

At December 31, 2017 and December 31, 2016, the repurchase agreement balances were as follows:



(in thousands)	December 31, 2017		December 31, 2016
Short-term	$	19,338,707	$	8,865,184
Long-term	112,500		—
Total	$	19,451,207	$	8,865,184

At December 31, 2017 and December 31, 2016, the repurchase agreements had the following characteristics and remaining maturities:



	December 31, 2017
	Collateral Type
(in thousands)	Agency RMBS			Non-Agency Securities			Agency Derivatives			Mortgage Servicing Rights			Total Amount Outstanding
Within 30 days	$	3,634,541		$	613,500		$	21,423		$	—		$	4,269,464
30 to 59 days	3,522,256			261,835			47,020			—			3,831,111
60 to 89 days	3,165,834			290,628			2,478			—			3,458,940
90 to 119 days	2,119,490			332,614			322			—			2,452,426
120 to 364 days	4,883,432			443,334			—			—			5,326,766
One year and over	—			—			—			112,500			112,500
Total	$	17,325,553		$	1,941,911		$	71,243		$	112,500		$	19,451,207
Weighted average borrowing rate	1.53		%	2.98		%	2.15		%	3.78		%	1.69		%



	December 31, 2016
	Collateral Type
(in thousands)	Agency RMBS			Non-Agency Securities ⁽¹⁾			Agency Derivatives			Mortgage Servicing Rights			Total Amount Outstanding
Within 30 days	$	2,511,773		$	688,667		$	30,672		$	—		$	3,231,112
30 to 59 days	1,786,664			326,471			68,257			—			2,181,392
60 to 89 days	1,035,806			89,281			3,307			—			1,128,394
90 to 119 days	1,192,127			251,929			—			—			1,444,056
120 to 364 days	810,552			69,678			—			—			880,230
One year and over	—			—			—			—			—
Total	$	7,336,922		$	1,426,026		$	102,236		$	—		$	8,865,184
Weighted average borrowing rate	0.94		%	2.60		%	1.69		%	—		%	1.22		%

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

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, 2017		December 31, 2016
Available-for-sale securities, at fair value	$	19,780,175	$	9,528,163
Mortgage servicing rights, at fair value	424,740		—
Net economic interests in consolidated securitization trusts	—		211,095		⁽¹⁾
Cash and cash equivalents	15,000		15,000
Restricted cash	417,018		162,759
Due from counterparties	773,422		48,690
Derivative assets, at fair value	90,895		126,341
Total	$	21,501,250	$	10,092,048

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(1)	Includes the retained interests from the Company’s previous on-balance sheet securitizations, which were 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, 2017 and December 31, 2016:



	December 31, 2017							December 31, 2016
(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
Barclays Capital Inc.	$	1,958,741	$	275,128	8	%	93	$	292,086	$	164,315	5	%	26
All other counterparties⁽²⁾	17,492,466		1,467,995		41	%	82	8,573,098		1,058,367		31	%	58
Total	$	19,451,207	$	1,743,123				$	8,865,184	$	1,222,682

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(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 are not included in the amounts presented above. The Company did not have any such payables at December 31, 2017 or December 31, 2016.


(2)	Represents amounts outstanding with 26 and 22 counterparties at December 31, 2017 and December 31, 2016, 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.