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

Quarterly report pursuant to Section 13 or 15(d)

Repurchase Agreements (Notes)

Repurchase Agreements (Notes)

3 Months Ended

Mar. 31, 2014

The Company had outstanding $12.0 billion of repurchase agreements, including repurchase agreements funding the Company’s U.S. Treasuries of $996.3 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 0.69% and weighted average remaining maturities of 84 days as of March 31, 2014. The Company had outstanding $12.3 billion of repurchase agreements with a weighted average borrowing rate of 0.75%, 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 72 days as of December 31, 2013. As of March 31, 2014 and December 31, 2013, the debt associated with the Company’s U.S. Treasuries had a weighted average borrowing rate of 0.09% and 0.03%, respectively.

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



(in thousands)	March 31, 2014		December 31, 2013
Short-term	$	11,821,177	$	12,050,450
Long-term	200,000		200,000
Total	$	12,021,177	$	12,250,450

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



(dollars in thousands)	March 31, 2014				December 31, 2013
Collateral Type	Amount Outstanding		Weighted Average Borrowing Rate		Amount Outstanding		Weighted Average Borrowing Rate
U.S. Treasuries	$	996,250	0.09	%	$	997,500	0.03	%
Agency RMBS	8,968,708		0.41	%	9,109,510		0.46	%
Non-Agency RMBS ⁽¹⁾	1,802,594		1.96	%	1,829,709		2.01	%
Agency derivatives	157,397		1.04	%	166,438		1.05	%
Mortgage loans held-for-sale	96,228		2.55	%	147,293		2.85	%
Total	$	12,021,177	0.64	%	$	12,250,450	0.69	%

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



(in thousands)	March 31, 2014		December 31, 2013
Within 30 days	$	2,747,454	$	3,831,917
30 to 59 days	2,955,290		2,013,733
60 to 89 days	857,235		2,225,967
90 to 119 days	2,362,631		1,386,371
120 to 364 days	1,902,317		1,594,962
Open maturity ⁽¹⁾	996,250		997,500
One year and over ⁽²⁾	200,000		200,000
Total	$	12,021,177	$	12,250,450

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(1)	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.


(2)	One year and over includes repurchase agreements with maturity dates ranging from June 26, 2015 to June 27, 2017.

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)	March 31, 2014		December 31, 2013
Available-for-sale securities, at fair value	$	12,116,464	$	12,295,302
Trading securities, at fair value	1,000,312		1,000,180
Mortgage loans held-for-sale, at fair value	116,463		200,839
Net economic interests in consolidated securitization trusts ⁽¹⁾	38,384		—
Cash and cash equivalents	15,000		15,000
Restricted cash	87,713		201,194
Due from counterparties	32,579		21,579
Derivative assets, at fair value	208,524		216,365
Total	$	13,615,439	$	13,950,459

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(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 March 31, 2014 and December 31, 2013:



	March 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
Barclays Capital Inc.	$	1,423,953	$	297,203	8	%	75.8	$	1,453,396	$	302,744	8	%	74.6
All other counterparties^{(2) (3)}	9,600,974		1,290,831		33	%	85.5	9,799,554		1,372,086		36	%	71.9
Total	$	11,024,927	$	1,588,034				$	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. Payables due to broker counterparties for unsettled securities purchases are not included in the amounts presented above. However, at March 31, 2014 and December 31, 2013, the Company did not have any such payables.


(2)	Excludes $996.3 million and $997.5 million of repurchase agreements collateralized by U.S. Treasuries with a rolling 1-day maturity as of March 31, 2014 and December 31, 2013, respectively.


(3)	Represents amounts outstanding with 21 and 19 counterparties at March 31, 2014 and December 31, 2013, respectively.

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