NOTE 5. REPURCHASE AGREEMENTS

We have entered into repurchase agreements with large financial institutions to finance most of our Agency MBS. The repurchase agreements 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.

At September 30, 2014 and December 31, 2013, the repurchase agreements had the following balances (dollar amounts in thousands), weighted average interest rates and remaining weighted average maturities:

	September 30, 2014						December 31, 2013
	Balance			Weighted Average Interest Rate			Balance			Weighted Average Interest Rate

Overnight	$	-			-	%	$	-			-	%
Less than 30 days		2,705,000			0.32			3,105,000			0.39
30 days to 90 days		3,795,000			0.32			4,475,000			0.39
Over 90 days to less than 1 year		50,000			0.33			-			-
1 year to 2 years		-			-			-			-
Demand		-			-			-			-
	$	6,550,000			0.32	%	$	7,580,000			0.39	%
Weighted average maturity	38 days						38 days
Weighted average interest rate after adjusting for interest rate swaps		1.08	%					1.50	%
Weighted average maturity after adjusting for interest rate swaps	845 days						1,010 days
Agency MBS pledged as collateral under the repurchase agreements and swap agreements	$	6,912,185					$	8,060,567

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. See Notes 1, 7 and 13 for more information on the Company’s interest rate swaps (both items that were hedges and also for discontinued hedges) and other derivative instruments.

					Net Amounts of
					Assets		Gross Amounts Not Offset
	Gross Amounts				or Liabilities		in the Balance Sheets⁽¹⁾
	of Recognized		Gross Amounts		Presented in					Cash
September 30, 2014	Assets or		Offset in the		the Balance		Financial			Collateral		Net
(in thousands)	Liabilities		Balance Sheets		Sheets		Instruments			Received		Amounts

Derivative assets at fair value	$	662,095	$	-	$	662,095	$	(662,095	)	$	-	$	-
Total	$	662,095	$	-	$	662,095	$	(662,095	)	$	-	$	-

Repurchase Agreements⁽³⁾	$	6,550,000	$	-	$	6,550,000	$	(6,550,000	)	$	-	$	-
Derivative liabilities at fair value⁽²⁾		671,288	-			671,288		(671,288	)	-		-
Total	$	7,221,288	$	-	$	7,221,288	$	(7,221,288	)	$	-	$	-	\

					Net Amounts of
					Assets		Gross Amounts Not Offset
	Gross Amounts				or Liabilities		in the Balance Sheets⁽¹⁾
	of Recognized		Gross Amounts		Presented in					Cash
December 31, 2013	Assets or		Offset in the		the Balance		Financial			Collateral		Net
(in thousands)	Liabilities		Balance Sheets		Sheets		Instruments			Received		Amounts

Derivative assets at fair value⁽²⁾	$	22,551	$	-	$	22,551	$	(22,551	)	$	-	$	-
Total	$	22,551	$	-	$	22,551	$	(22,551	)	$	-	$	-

Repurchase Agreements⁽³⁾	$	7,580,000	$	-	$	7,580,000	$	(7,580,000	)	$	-	$	-
Derivative liabilities at fair value⁽²⁾		55,914	-			55,914		(55,914	)	-		-
Total	$	7,635,914	$	-	$	7,635,914	$	(7,635,914	)	$	-	$	-

(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 September 30, 2014, we had pledged approximately $26.1 million in Agency MBS as collateral and paid another approximately $7.2 million on swap margin calls on our swap derivatives. At December 31, 2013, we had pledged approximately $84.2 million in Agency MBS as collateral and paid another approximately $7.1 million on swap margin calls on our swap derivatives.

(3)	At September 30, 2014, we had pledged approximately $6.89 billion in Agency MBS as collateral on our repurchase agreements. At December 31, 2013, we had pledged approximately $7.98 billion in Agency MBS as collateral on our repurchase agreements.