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)

9 Months Ended

Sep. 30, 2014

Disclosure of Repurchase Agreements [Abstract]

As of September 30, 2014, the Company had outstanding $12.3 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 0.70% and weighted average remaining maturities of 100 days as of September 30, 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 September 30, 2014 and December 31, 2013, the debt associated with the Company’s U.S. Treasuries had a weighted average borrowing rate of (0.97)% and 0.03%, respectively.

At September 30, 2014 and December 31, 2013, the repurchase agreement balances were as follows:



(in thousands)	September 30, 2014		December 31, 2013
Short-term	$	12,181,658	$	12,050,450
Long-term	93,220		200,000
Total	$	12,274,878	$	12,250,450

At September 30, 2014 and December 31, 2013, the repurchase agreements had the following characteristics:



(dollars in thousands)	September 30, 2014				December 31, 2013
Collateral Type	Amount Outstanding		Weighted Average Borrowing Rate		Amount Outstanding		Weighted Average Borrowing Rate
U.S. Treasuries	$	1,986,250	(0.97	)%	$	997,500	0.03	%
Agency RMBS	8,142,314		0.41	%	9,109,510		0.46	%
Non-Agency RMBS ⁽¹⁾	1,987,034		1.86	%	1,829,709		2.01	%
Agency derivatives	142,079		1.00	%	166,438		1.05	%
Mortgage loans held-for-sale	17,201		3.11	%	147,293		2.85	%
Total	$	12,274,878	0.43	%	$	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 September 30, 2014 and December 31, 2013, the repurchase agreements had the following remaining maturities:



(in thousands)	September 30, 2014			December 31, 2013
Within 30 days	$	2,906,285		$	3,831,917
30 to 59 days	2,860,071			2,013,733
60 to 89 days	—			2,225,967
90 to 119 days	2,289,504			1,386,371
120 to 364 days	3,132,048			1,594,962
Open maturity ⁽¹⁾	993,750			997,500
One year and over	93,220		⁽²⁾	200,000
Total	$	12,274,878		$	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 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)	September 30, 2014		December 31, 2013
Available-for-sale securities, at fair value	$	11,185,800	$	12,295,302
Trading securities, at fair value	1,993,124		1,000,180
Mortgage loans held-for-sale, at fair value	20,710		200,839
Net economic interests in consolidated securitization trusts ⁽¹⁾	301,549		—
Cash and cash equivalents	15,000		15,000
Restricted cash	93,295		201,194
Due from counterparties	23,070		21,579
Derivative assets, at fair value	184,924		216,365
Total	$	13,817,472	$	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 September 30, 2014 and December 31, 2013:



	September 30, 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	$	1,280,084	$	393,951	10	%	93.1	$	980,464	$	264,745	7	%	88.2
Barclays Capital Inc.	1,119,776		270,340		7	%	78.9	1,453,396		302,744		8	%	74.6
All other counterparties^{(2) (3)}	8,881,268		885,887		22	%	85.0	8,819,090		1,107,341		29	%	71.2
Total	$	11,281,128	$	1,550,178				$	11,252,950	$	1,674,830

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(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. At September 30, 2014, the Company had $31.1 million in payables due to broker counterparties for unsettled securities purchases. The payables are not included in the amounts presented above. At December 31, 2013, the Company did not have any payables due to broker counterparties for unsettled securities purchases..


(2)	Excludes $993.8 million and $997.5 million of repurchase agreements collateralized by U.S. Treasuries with a rolling 1-day maturity as of September 30, 2014 and December 31, 2013, respectively.


(3)	Represents amounts outstanding with 23 and 18 counterparties at September 30, 2014 and December 31, 2013, respectively.

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