NOTE 7. SHORT-TERM DEBT

We have entered into repurchase agreements and a warehouse line of credit with large financial institutions. The repurchase agreements that we use to finance most of our MBS are short-term borrowings that are secured by the market value of our MBS and bear fixed interest rates that have historically been based upon LIBOR. Warehouse lines of credit are short-term borrowings (generally less than 1 year) that are used to finance the residential mortgage loans that are held-for-securitization.

Repurchase Agreements

At March 31, 2019 and December 31, 2018, the repurchase agreements had the following balances, weighted average interest rates, and remaining weighted average maturities:

March 31, 2019


	Agency MBS				Non-Agency MBS				Total MBS
			Weighted				Weighted					Weighted
			Average				Average					Average
			Interest				Interest					Interest
	Balance		Rate		Balance		Rate		Balance			Rate
		(in thousands)				(in thousands)				(in thousands)
Overnight	$	15,000	2.50	%	$	—	—	%	$	15,000		2.50	%
Less than 30 days		1,800,000	2.69			545,634	3.60			2,345,634		2.91
30 days to 90 days		1,400,000	2.66			—	—			1,400,000		2.66
Over 90 days		—	—			—	—			—		—
Demand		—	—			—	—			—		—
	$	3,215,000	2.68	%	$	545,634	3.60	%	$	3,760,634		2.81	%
Weighted average maturity		33 days				18 days				31 days
Weighted average interest rate after adjusting for interest rate swaps										2.32	%
Weighted average maturity after adjusting for interest rate swaps										1,222 days
MBS pledged as collateral under the repurchase agreements and interest rate swaps	$	3,421,455			$	700,391			$	4,121,846

December 31, 2018


	Agency MBS				Non-Agency MBS				Total MBS
			Weighted				Weighted					Weighted
			Average				Average					Average
			Interest				Interest					Interest
	Balance		Rate		Balance		Rate		Balance			Rate
		(in thousands)				(in thousands)				(in thousands)
Overnight	$	—	—	%	$	—	—	%	$	—		—	%
Less than 30 days		1,510,000	2.46			576,627	3.55			2,086,627		2.76
30 days to 90 days		1,725,000	2.57			—	—			1,725,000		2.57
Over 90 days		—	—			—	—			—		—
Demand		—	—			—	—			—		—
	$	3,235,000	2.52	%	$	576,627	3.55	%	$	3,811,627		2.67	%
Weighted average maturity		35 days				13 days				32 days
Weighted average interest rate after adjusting for interest rate swaps										2.23	%
Weighted average maturity after adjusting for interest rate swaps										1,217 days
MBS pledged as collateral under the repurchase agreements and interest rate swaps	$	3,433,252			$	726,428			$	4,159,680

Warehouse Line of Credit

On December 28, 2018, the Company had secured a warehouse line of credit of $100 million. On March 7, 2019, this credit line was increased to $300 million. At March 31, 2019, the total amount of the credit line was $300 million and the amount outstanding was $15.4 million. The interest rate on this credit line is LIBOR + 2.25%, which was approximately 4.75% for the three months ended March 31, 2019. Additionally, we pay, on a quarterly basis, a facility fee of 25 basis points on the amount of the credit line, which is included in “Interest expense on warehouse line of credit” on our consolidated statements of operations.

Master Netting Arrangement

In our consolidated balance sheets, all balances associated with repurchase agreements and other borrowings and derivative transactions are presented on a gross basis. Master netting arrangements are agreements between counterparties that govern rights of set-off in the event of default by or bankruptcy of either party to the transactions.

The following tables present information about certain assets and liabilities that are subject to master netting arrangements (or similar agreements) only in the event of default on a contract at March 31, 2019 and December 31, 2018 (see Notes 1, 9, and 15 for more information on the Company’s interest rate swaps and other derivative instruments):

March 31, 2019


					Net Amounts of
					Assets		Gross Amounts Not Offset
	Gross Amounts				or Liabilities		in the Balance Sheets(1)
	of Recognized		Gross Amounts		Presented in				Cash
	Assets or		Offset in the		the Balance		Financial		Collateral		Net
	Liabilities		Balance Sheets		Sheets		Instruments		Received		Amounts
		(in thousands)
Derivative assets at fair value(2)	$	27,396	$	—	$	27,396	$	(27,396)	$	5,238	$	(22,158)
Total	$	27,396	$	—	$	27,396	$	(27,396)	$	5,238	$	(22,158)
Repurchase agreements(3)	$	3,760,634	$	—	$	3,760,634	$	(3,760,634)	$	—	$	—
Warehouse line of credit(4)		15,442		—		15,442		(15,442)		—		—
Derivative liabilities at fair value(2)		36,261		—		36,261		(36,261)		—		—
Total	$	3,812,337	$	—	$	3,812,337	$	(3,812,337)	$	—	$	—

(1)

Amounts presented are limited to collateral pledged sufficient to reduce the related net amount to zero in accordance with ASU No. 2011‑11, as amended by ASU No. 2013‑01.

(2)

At March 31, 2019, we had not pledged any Agency MBS as collateral on our interest rate swaps derivatives. We paid approximately $75.5 million in cash margin calls on our derivatives, which is reflected on our consolidated balance sheets as “Restricted cash,” and we received cash from counterparties of approximately $5.2 million, which is reflected as a liability on our consolidated balance sheets as “derivative counterparty margin.” Our interest rate swaps derivatives were approximately $23.0 million in derivative assets and approximately $36.3 million in derivative liabilities at March 31, 2019.

(3)

At March 31, 2019, we had pledged approximately $3.42 billion in Agency MBS and approximately $700.4 million in Non-Agency MBS as collateral on our repurchase agreements.

(4)

At March 31, 2019, we had pledged approximately $17.2 million in residential mortgage loans on the warehouse line of credit.

December 31, 2018


					Net Amounts of
					Assets		Gross Amounts Not Offset
	Gross Amounts				or Liabilities		in the Balance Sheets(1)
	of Recognized		Gross Amounts		Presented in				Cash
	Assets or		Offset in the		the Balance		Financial		Collateral		Net
	Liabilities		Balance Sheets		Sheets		Instruments		Received		Amounts
	(in thousands)
Derivative assets at fair value(2)	$	46,207	$	—	$	46,207	$	(46,207)	$	—	$	—
Total	$	46,207	$	—	$	46,207	$	(46,207)	$	—	$	—
Repurchase agreements(3)	$	3,811,627	$	—	$	3,811,627	$	(3,811,627)	$	—	$	—
Derivative liabilities at fair value(2)		15,901		—		15,901		(15,901)		—		—
Total	$	3,827,528	$	—	$	3,827,528	$	(3,827,528)	$	—	$	—

(1)

Amounts presented are limited to collateral pledged sufficient to reduce the related net amount to zero in accordance with ASU No. 2011‑11, as amended by ASU No. 2013‑01.

(2)

At December 31, 2018, we had paid approximately $30.3 million on swap and TBA Agency MBS margin calls (included in “restricted cash). Our swap derivatives were approximately $40.2 million in derivative assets and approximately $15.9 million in derivative liabilities at December 31, 2018.

(3)

At December 31, 2018, we had pledged $3.43 billion in Agency MBS and approximately $726.4 million in Non-Agency MBS as collateral on our repurchase agreements.