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, 2011

The Company had outstanding $6.7 billion of repurchase agreements, including repurchase agreements funding the Company's U.S. Treasuries of $1.0 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 0.78% and weighted average remaining maturities of 73 days as of December 31, 2011. The Company had outstanding $1.2 billion of repurchase agreements with a weighted average borrowing rate of 0.74% excluding the debt associated with the Company's U.S. Treasuries and the effect of the Company's interest rate swaps, and weighted average remaining maturities of 90 days as of December 31, 2010. As of December 31, 2011 and December 31, 2010, the debt associated with the Company's U.S. Treasuries had a weighted borrowing rate of 0.12% and 0.28%, respectively.

At December 31, 2011 and December 31, 2010, the repurchase agreement balances were as follows:



(in thousands)	December 31, 2011		December 31, 2010
Short-term	$	6,610,148	$	1,169,803
Long-term	50,000		—
Total	$	6,660,148	$	1,169,803

At December 31, 2011 and December 31, 2010, the repurchase agreements had the following characteristics:



(dollars in thousands)	December 31, 2011				December 31, 2010
Collateral Type	Amount Outstanding		Weighted Average Borrowing Rate		Amount Outstanding		Weighted Average Borrowing Rate
U.S. Treasuries	$	1,001,250	0.12	%	$	198,750	0.28	%
Agency RMBS	4,804,533		0.50	%	745,861		0.37	%
Non-Agency RMBS	731,014		2.61	%	201,976		2.05	%
Agency derivatives	118,032		0.97	%	23,216		1.07	%
Mortgage loans held-for-sale	5,319		3.20	%	—		—	%
Total	$	6,660,148	0.68	%	$	1,169,803	0.66	%

As of December 31, 2011, the Company's amounts outstanding under repurchase agreements includes $130.0 million of borrowings under the 364-day repurchase facility with Wells Fargo Bank National Association, or Wells Fargo. As of December 31, 2011, the facility provided an aggregate maximum borrowing capacity of $150.0 million and it is set to mature on July 25, 2012. The facility is collateralized by non-Agency RMBS and its weighted average borrowing rate as of December 31, 2011 was 2.07%. As of December 31, 2010, the Company's amounts outstanding under repurchase agreements included $70.8 million of borrowings under the 364-day repurchase facility with Wells Fargo. As of December 31, 2010, the facility provided an aggregate maximum borrowing capacity of $75.0 million. The facility was collateralized by non-Agency RMBS and its weighted average borrowing rate as of December 31, 2010 was 1.98%. The facility also subjected the Company to maintain certain financial covenants under the guaranty agreement with Wells Fargo. As of December 31, 2011 and December 31, 2010, the Company was in compliance with these covenants.

As of December 31, 2011, the Company's amounts outstanding under repurchase agreements included $5.3 million of borrowings under the 364-day repurchase facility with Barclays Bank PLC, or Barclays. The facility provides an aggregate maximum borrowing capacity of $100.0 million and it is set to mature on May 16, 2012, unless extended pursuant to its terms. The facility is collateralized by eligible residential mortgage loans and its weighted average borrowing rate as of December 31, 2011 was 3.20%. The facility also subjects the Company to maintain certain financial covenants under the guaranty agreement with Barclays. As of December 31, 2011, the Company is in compliance with these covenants. This facility did not exist at December 31, 2010.

At December 31, 2011 and December 31, 2010, the repurchase agreements had the following remaining maturities:



(in thousands)	December 31, 2011		December 31, 2010
Within 30 days	$	1,967,009	$	197,286
30 to 59 days	1,263,060		211,556
60 to 89 days	1,096,410		117,621
90 to 119 days	359,171		152,433
120 to 364 days ⁽¹⁾	923,248		292,157
Open maturity ⁽²⁾	1,001,250		198,750
One year and over ⁽³⁾	50,000		—
Total	$	6,660,148	$	1,169,803

____________________


(1)	120 to 364 days includes the amounts outstanding under the Wells Fargo 364-day borrowing facility and the Barclays 364-day borrowing facility.


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


(3)	One year and over includes repurchase agreements with a maturity date of December 23, 2013.

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



(in thousands)	December 31, 2011		December 31, 2010
Available-for-sale securities, at fair value	$	6,160,229	$	1,090,598
Trading securities, at fair value	1,003,301		199,523
Mortgage loans held-for-sale	5,782		—
Cash and cash equivalents	15,000		14,467
Restricted cash	94,803		11,634
Due from counterparties	32,201		10,508
Derivative assets, at fair value	145,779		30,534
Total	$	7,457,095	$	1,357,264

Although the repurchase agreements are 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, 2011 and December 31, 2010:



	December 31, 2011							December 31, 2010
(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
JP Morgan Chase	$	2,251,879	$	186,997	15	%	70.0	$	289,321	$	8,687	2	%	44.7
Barclays Capital Inc.	242,608		84,391		7	%	56.7	168,291		45,060		12	%	53.0
All other counterparties ⁽²⁾	4,165,661		529,055		42	%	74.9	712,191		123,439		32	%	104.3
Total	$	6,660,148	$	800,443				$	1,169,803	$	177,186

____________________

(1)

Represents the net carrying value of the securities 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. At December 31, 2011 and December 31, 2010, the Company had $45.6 million and $231.7 million, respectively, in payables due to broker counterparties for unsettled security purchases. The payables are not included in the amounts presented above.


(2)	Represents amounts outstanding to 18 and 8 counterparties at December 31, 2011 and December 31, 2010, respectively.

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

- Definition

The entire disclosure for repurchase agreements (also known as repos), resale agreements (also known as reverse repurchase agreements or reverse repos), securities borrowed transactions, and securities loaned transactions.

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