Borrowings

The Company has entered into repurchase agreements and issued exchangeable senior notes to finance the majority of its portfolio of investments. The following table summarizes certain characteristics of the Company’s borrowings at December 31, 2013 and 2012:



$ in thousands	December 31, 2013				December 31, 2012
	Amount Outstanding	Weighted Average Interest Rate		Weighted Average Remaining Maturity (Days)	Amount Outstanding	Weighted Average Interest Rate		Weighted Average Remaining Maturity (Days)
Agency RMBS	10,281,154	0.38	%	19	11,713,565	0.48	%	16
Non-Agency RMBS	3,088,064	1.54	%	33	2,450,960	1.75	%	23
CMBS	2,082,457	1.39	%	23	1,555,935	1.51	%	18
Exchangeable Senior Notes	400,000	5.00	%	1,535	—	—	%	0
Total	15,851,675	0.86	%	60	15,720,460	0.78	%	17

Repurchase Agreements

The repurchase agreements bear interest at a contractually agreed rate. The repurchase obligations mature and typically reinvest every thirty days to one year. Repurchase agreements are being accounted for as secured borrowings since the Company maintains effective control of the financed assets. Under the repurchase agreements, 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. In addition, the repurchase agreements are subject to certain financial covenants. The Company was in compliance with these covenants at December 31, 2013.

The following tables summarize certain characteristics of the Company’s repurchase agreements at December 31, 2013 and 2012:



December 31, 2013 $ in thousands Repurchase Agreement Counterparties	Amount Outstanding	Percent of Total Amount Outstanding		Company MBS Held as Collateral
Credit Suisse Securities (USA) LLC	1,809,896	11.8	%	2,203,883	₍₁	₎
South Street Securities LLC	1,236,812	8.0	%	1,286,384
Banc of America Securities LLC	1,043,689	6.8	%	1,146,151
Citigroup Global Markets Inc.	1,027,210	6.6	%	1,164,162
JP Morgan Securities Inc.	875,201	5.7	%	1,001,116
Wells Fargo Securities, LLC	857,824	5.6	%	996,151
Pierpont Securities LLC	791,572	5.1	%	824,184
HSBC Securities (USA) Inc.	787,462	5.1	%	809,230
RBS Securities Inc.	720,457	4.7	%	854,978
Royal Bank of Canada	710,705	4.6	%	850,870
Morgan Stanley & Co. Incorporated	691,599	4.5	%	758,761
ING Financial Market LLC	676,644	4.4	%	718,086
Mitsubishi UFJ Securities (USA), Inc.	625,703	4.0	%	656,046
Nomura Securities International, Inc.	578,265	3.7	%	608,193
Industrial and Commercial Bank of China Financial Services LLC	493,906	3.2	%	518,775
BNP Paribas Securities Corp.	471,372	3.1	%	499,106
Scotia Capital	443,534	2.9	%	461,066
Deutsche Bank Securities Inc.	423,405	2.7	%	468,939
Goldman, Sachs & Co.	404,094	2.6	%	423,598
KGS-Alpha Capital Markets, L.P.	202,677	1.3	%	214,033
Barclays Capital Inc.	156,904	1.0	%	165,605
TD Securities	155,099	1.0	%	163,512
Daiwa Capital Markets America Inc.	112,309	0.7	%	117,551
Cantor Fitzgerald & Co.	68,261	0.4	%	71,910
Mizuho Securities USA Inc.	53,962	0.3	%	62,423
Guggenheim Liquidity Services, LLC	33,113	0.2	%	34,664
Total	15,451,675	100.0	%	17,079,377

(1) Includes $133.8 million of MBS held as collateral which are eliminated in consolidation.



December 31, 2012 $ in thousands Repurchase Agreement Counterparties	Amount Outstanding	Percent of Total Amount Outstanding		Company MBS Held as Collateral
Credit Suisse Securities (USA) LLC	1,600,331	10.2	%	1,919,676
Morgan Stanley & Co. Incorporated	1,275,616	8.1	%	1,397,846
Nomura Securities International, Inc.	1,240,231	7.9	%	1,350,901
Mitsubishi UFJ Securities (USA), Inc.	941,671	6.0	%	990,057
Wells Fargo Securities, LLC	941,556	6.0	%	1,079,194
HSBC Securities (USA) Inc.	883,726	5.6	%	918,551
South Street Securities LLC	819,524	5.2	%	871,963
CitiGroup Global Markets Inc.	780,020	5.0	%	882,517
Banc of America Securities LLC	728,609	4.6	%	838,216
Scotia Capital	708,750	4.5	%	744,692
Industrial and Commercial Bank of China Financial Services LLC	634,928	4.0	%	690,783
Deutsche Bank Securities Inc.	587,919	3.7	%	666,472
ING Financial Market LLC	573,116	3.6	%	622,944
JP Morgan Securities Inc.	561,426	3.6	%	697,602
Royal Bank of Canada	560,828	3.6	%	641,079
BNP Paribas Securities Corp.	488,375	3.1	%	516,770
Goldman, Sachs & Co.	468,806	3.0	%	509,660
Daiwa Capital Markets America Inc.	456,098	2.9	%	479,354
Pierpont Securities LLC	437,095	2.8	%	463,466
Barclays Capital Inc.	350,688	2.3	%	372,708
RBS Securities Inc.	348,741	2.2	%	427,183
Mizuho Securities USA Inc.	101,962	0.6	%	122,836
Cantor Fitzgerald & Co.	80,466	0.5	%	86,961
KGS-Alpha Capital Markets, L.P.	79,052	0.5	%	86,241
Guggenheim Liquidity Services, LLC	43,245	0.3	%	45,437
TD Securities	27,681	0.2	%	33,129
Total	15,720,460	100.0	%	17,456,238

Company MBS held by counterparties as security for repurchase agreements was $17.1 billion and $17.5 billion at December 31, 2013 and 2012, respectively. This represents a collateral ratio (Company MBS Held as Collateral/Amount Outstanding) of 111% and 111% for 2013 and 2012, respectively.

No cash collateral was held by the counterparties at December 31, 2013 and 2012.

Asset-Backed Securities

During 2013, the Company purchased controlling interests in five securitization trusts which it determined to be VIEs. The securitization trusts securitized residential mortgage loans with an aggregate principal balance of $1.8 billion, and issued $1.8 billion aggregate principal amount of ABS, of which $1.4 billion were sold to unaffiliated third parties and the balance was purchased by the Company. The Company subsequently issued $260.0 million of the original principal balance to a third party. As a result, the ABS issued by the securitization trusts is recorded as a non-recourse liability in the Company’s consolidated balance sheets. During 2013, ABS held by unaffiliated third parties was paid down by $41.7 million.

The carrying value of the ABS is based on its amortized cost, which is equal to the remaining principal balance net of unamortized premiums or discounts. The following table provides summary information of the carrying value of the ABS, along with other relevant information, at December 31, 2013.



	ABS		Residential loans
$ in thousands	Outstanding		Held as Collateral
Principal balance	1,633,688		1,783,983
Interest-only securities	11,137		—
Unamortized premium	9,906		27,163
Unamortized discount	(10,990	)	—
Loan loss reserve	—		(884	)
Carrying value	1,643,741		1,810,262
Range of weighted average interest rates	2.8% - 3.5%
Number of series	5

The following table presents the estimated principal repayment schedule of the VIE’s ABS at December 31, 2013, based on estimated cash flows of the residential mortgage loans, as adjusted for projected prepayments and losses on such loans.



$ in thousands
Estimated principal repayment	December 31, 2013
Within one year	168,505
One to three years	293,382
Three to five years	241,119
Greater than or equal to five years	930,682
Total	1,633,688

The maturity of the VIEs' ABS is dependent upon cash flows received from the underlying residential mortgage loans. The estimated principal repayments may differ from actual amounts to the extent prepayments and/or loan losses vary. Refer to Note 5 “Residential Loans Held-for-Investment” for a more detailed discussion of the residential loans collateralizing the VIEs' ABS.

Exchangeable Senior Notes

In the first quarter of 2013, a wholly-owned subsidiary of the Company issued $400.0 million in aggregate principal amount of Exchangeable Senior Notes (the “Notes”) due 2018. The total net proceeds to the Company after deducting financing expenses was $387.7 million.

The terms of the Notes are governed by an indenture (the “Indenture”) by and among the wholly-owned subsidiary, as issuer, the Company, as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Notes bear interest at 5.00% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning September 15, 2013. The Notes may be exchanged for shares of the Company’s common stock at the applicable exchange rate at any time prior to the close of business on the second scheduled trading day prior to the maturity date. The initial exchange rate for each $1,000 aggregate principal amount of the Notes is 42.0893 shares of the Company’s common stock, equivalent to an exchange price of approximately $23.76 per share, and the maximum exchange rate is 48.4027 shares of the Company's common stock, equivalent to an exchange price of approximately $20.66 per share. The initial and maximum exchange rates of the Notes are subject to adjustment in certain events. The Notes have not been registered under the Securities Act of 1933, as amended. Pursuant to the registration rights agreement between the Company and the initial purchasers of the Notes, the Company filed a prospectus supplement in August 2013 registering for resale 605,034 shares of common stock issuable upon exchange of the Notes. The Company may be required to register additional shares of common stock issuable upon exchange of the Notes from time to time at the request of holders as required by the registration rights agreement. Accrued interest payable on the Notes was approximately $5.9 million as of December 31, 2013.