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

Quarterly report pursuant to Section 13 or 15(d)

Repurchase Agreements

Repurchase Agreements

9 Months Ended

Sep. 30, 2018

Disclosure of Repurchase Agreements [Abstract]

As of September 30, 2018 and December 31, 2017, the Company had outstanding $23.8 billion and $19.5 billion, respectively, of repurchase agreements. Excluding the effect of the Company’s interest rate swaps and caps, the repurchase agreements had a weighted average borrowing rate of 2.45% and 1.69% and weighted average remaining maturities of 92 and 83 days as of September 30, 2018 and December 31, 2017, respectively.

At September 30, 2018 and December 31, 2017, the repurchase agreement balances were as follows:



(in thousands)	September 30, 2018		December 31, 2017
Short-term	$	23,606,631	$	19,338,707
Long-term	200,000		112,500
Total	$	23,806,631	$	19,451,207

At September 30, 2018 and December 31, 2017, the repurchase agreements had the following characteristics and remaining maturities:



	September 30, 2018
	Collateral Type
(in thousands)	Agency RMBS			Non-Agency Securities			Agency Derivatives			Mortgage Servicing Rights			Total Amount Outstanding
Within 30 days	$	6,408,843		$	485,289		$	16,494		$	—		$	6,910,626
30 to 59 days	1,956,414			494,990			13,884			—			2,465,288
60 to 89 days	5,041			—			—			—			5,041
90 to 119 days	5,034,622			501,372			—			—			5,535,994
120 to 364 days	8,099,969			568,631			21,082			—			8,689,682
One year and over	—			—			—			200,000			200,000
Total	$	21,504,889		$	2,050,282		$	51,460		$	200,000		$	23,806,631
Weighted average borrowing rate	2.32		%	3.59		%	3.20		%	4.37		%	2.45		%



	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		%

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, 2018		December 31, 2017
Available-for-sale securities, at fair value	$	23,636,891	$	19,780,175
Mortgage servicing rights, at fair value	733,206		424,740
Cash and cash equivalents	—		15,000
Restricted cash	558,088		417,018
Due from counterparties	1,219,860		773,422
Derivative assets, at fair value	66,980		90,895
Total	$	26,215,025	$	21,501,250

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, 2018 and December 31, 2017:



	September 30, 2018							December 31, 2017
(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	$	1,898,455	$	316,471	7	%	146	$	1,261,956	$	223,347	6	%	75
All other counterparties⁽²⁾	21,908,176		1,590,085		34	%	87	18,189,251		1,519,776		43	%	84
Total	$	23,806,631	$	1,906,556				$	19,451,207	$	1,743,123

____________________

(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 of $421.1 million are not included in the September 30, 2018 amounts presented above. The Company did not have any such payables at December 31, 2017.


(2)	Represents amounts outstanding with 34 and 26 counterparties at September 30, 2018 and December 31, 2017, 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.