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| 8-K - 8-K SECOND QUARTER 2017 INVESTOR PRESENTATION - TWO HARBORS INVESTMENT CORP. | a8-kq2x2017investorpresent.htm |
Second Quarter 2017 Investor Presentation
Safe Harbor Statement
FORWARD-LOOKING STATEMENTS
This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act
of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as
predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,”
“could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-
looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things,
those described in our Annual Report on Form 10-K for the year ended December 31, 2016, and any subsequent Quarterly Reports on Form 10-Q, under the caption
“Risk Factors.” Factors that could cause actual results to differ include, but are not limited to: the state of credit markets and general economic conditions; changes in
interest rates and the market value of our assets; changes in prepayment rates of mortgages underlying our target assets; the rates of default or decreased recovery
on the mortgages underlying our target assets; the occurrence, extent and timing of credit losses within our portfolio; the concentration of credit risks we are exposed
to; declines in home prices; our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio; the availability and cost of our target assets;
the availability and cost of financing; changes in the competitive landscape within our industry; our ability to effectively execute and to realize the benefits of strategic
transactions and initiatives we have pursued or may in the future pursue; our ability to manage various operational risks and costs associated with our business;
interruptions in or impairments to our communications and information technology systems; our ability to acquire mortgage servicing rights (MSR) and successfully
operate our seller-servicer subsidiary and oversee our subservicers; the impact of any deficiencies in the servicing or foreclosure practices of third parties and related
delays in the foreclosure process; the state of commercial real estate markets; our anticipated distribution of Granite Point shares to the holders of our common stock;
our exposure to legal and regulatory claims; legislative and regulatory actions affecting our business; the impact of new or modified government mortgage refinance or
principal reduction programs; our ability to maintain our REIT qualification; and limitations imposed on our business due to our REIT status and our exempt status
under the Investment Company Act of 1940.
Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Two Harbors does not undertake or
accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events,
conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Two Harbors’ most
recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Two Harbors or matters
attributable to Two Harbors or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.
This presentation may include industry and market data obtained through research, surveys, and studies conducted by third parties and industry publications. We
have not independently verified any such market and industry data from third-party sources. This presentation is provided for discussion purposes only and may not be
relied upon as legal or investment advice, nor is it intended to be inclusive of all the risks and uncertainties that should be considered. This presentation does not
constitute an offer to purchase or sell any securities, nor shall it be construed to be indicative of the terms of an offer that the parties or their respective affiliates
would accept.
Readers are advised that the financial information in this presentation is based on company data available at the time of this presentation and, in certain
circumstances, may not have been audited by the company’s independent auditors.
2
Two Harbors Investment Corp. Overview (1)
LEADING HYBRID MORTGAGE REAL ESTATE INVESTMENT TRUST
3
1) Except as otherwise indicated in this presentation, reported data is as of or for the period ended June 30, 2017.
2) Includes Agency and non-Agency RMBS, inverse-interest only securities (Agency Derivatives), MSR, net economic interest in securitization trusts, residential mortgage loans held-for-sale and commercial real estate assets, which consists of
the consolidated financial results of Granite Point and its subsidiaries, which assets include senior, mezzanine and B-note commercial real estate debt and related instruments.
3) Two Harbors’ total stockholder return calculated for the period October 29, 2009 through June 30, 2017. Total stockholder return is defined as stock price appreciation including dividends. Source: Bloomberg.
•$3.5 billion market cap
•$19.5 billion portfolio(2)
•Incorporated in 2009
MARKET PRESENCE
•Rates: Agency RMBS and mortgage servicing
rights (MSR)
•Credit: mortgage credit assets
INVESTMENT STRATEGIES
•Low leverage
•Strong repo counterparties
•Diversified capital structure through convertible
debt and preferred stock
FINANCING & LIQUIDITY
•Sophisticated approach to hedging
•Low exposure to rates and prepayment speeds
•Superior asset selection
RISK MANAGEMENT
•Total stockholder return since inception of 192%(3)
•Top performer during times of volatility
LEADING PERFORMANCE
LEADING HYBRID MREIT
VALUE APPROACH TO
PORTFOLIO MANAGEMENT
DIVERSIFIED FINANCING
PROFILE AND STRONG
BALANCE SHEET
HIGH QUALITY RETURNS
WITH LESS VOLATILITY
OUTPERFORMED PEER
GROUP
Strategic Overview
4
…through attractive investment opportunities in target assets…
…and a sophisticated approach to risk management
POSITIONED TO DELIVER STRONG RETURNS AND PROTECT BOOK VALUE
THROUGH A VARIETY OF RATE ENVIRONMENTS
Committed to maximizing stockholder returns…
8.5%
TWO Co. A Co. B Co. C Co. D
Co. E Co. F Co. G Co. H
Book Value Stability
5
• Since inception, book value has grown by 8.5%; peer
median over same time period is (23.0%)(1)
1) Book value growth measured from December 31, 2009 through June 30, 2017. Companies A-H represent comparable mortgage REIT peers.
2) Book value volatility since inception is measured from December 31, 2009 or the company’s inception, whichever is later, through June 30, 2017, 5-years is measured from June 30, 2012 through June 30, 2017, and 3-years is measured
from June 30, 2014 to June 30, 2017. Book value volatility calculated by dividing the standard deviation of book values in the measured period by the average book value from the measured period. Agency mREITs include NLY, AGNC, CYS
and CMO. Hybrid mREITs include ANH, ARR, CIM, MFA, IVR, MTGE, NYMT, MITT and WMC.
MAINTAIN AND GROW BOOK VALUE WITH DAMPENED VOLATILIT Y
BOOK VALUE VOLATILITY(2) BOOK VALUE GROWTH
• Significantly less book value volatility than Agency and
hybrid mREIT peers
Agency mREIT
Average
Hybrid mREIT
Average TWO
Book value
volatility since
inception 12.9% 12.2% 7.6%
Book value
volatility 5 years 13.2% 11.9% 5.8%
Book value
volatility 3 years 8.1% 7.6% 5.7%
(65.0%)
-20.0%
10.0%
40.0%
70.0%
100.0%
130.0%
160.0%
190.0%
10/29/2009 10/29/2010 10/29/2011 10/29/2012 10/29/2013 10/29/2014 10/29/2015 10/29/2016
TWO BBG REIT MTG Index
Delivering Results
6
1) Two Harbors’ total stockholder return is calculated for the period October 29, 2009 through June 30, 2017. Total stockholder return is defined as stock price appreciation including dividends. Source: Bloomberg.
2) Bloomberg REIT Mortgage Index total stockholder return for the period October 29, 2009 through June 30, 2017. The Bloomberg REIT Mortgage Index tracks publicly traded REITs whose principal business consists of originating, servicing or
investing in residential mortgage interests. The index uses a modified market capitalization weighted methodology, and components are reviewed quarterly for eligibility. Source: Bloomberg.
• Outperformed peer group by over 65% since inception
• Delivered total stockholder return of 192% during that time(1)
― Bloomberg REIT Mortgage Index total stockholder return of 125% over the same period of time(2)
• Maintained comparable dividend yield with lower leverage and less interest rate exposure than peer average
192%
125%
(2) (1)
6/30/2017
…LESS INTEREST RATE R ISK (3 ) . . .
Attractive Returns With Lower Risk
7
AT T R AC T I VE & C O M PA R A BLE D I V I D E ND Y I E L D (1 ) …WITH LOWER LEVERAGE (2 ) . . .
SUPERIOR ASSET SELECTION AND RISK MANAGEMENT DRIVE RETURNS WITH LESS RISK
TWO Peer Average TWO Peer Average
TWO Peer Average
…AND LESS P R E PAY M E NT E X P O S U R E (4 )
TWO Peer Average
Note: Two Harbors and peer financial data for Dividend Yield, Leverage, Prepayment Risk and Interest Rate Exposure on this slide is based on available financial information as of June 30 2017 as filed with the SEC. Peers include AGNC, ANH, ARR, CMO, CYS, IVR, MFA , NLY and HTS
(financial information for HTS is included in peer financial data only for the periods ending prior to the second quarter of 2016).
(1) Represents average of annualized yields on all quarterly cash dividends per respective fiscal year. Annualized yields for each quarter are calculated by dividing annualized quarterly dividends by closing share price as of respective quarter-ends. Peer dividend data based on peer
company press releases. Historical dividends may not be indicative of future dividend distributions. Our company ultimately distributes dividends based on its taxable income per share of common stock.
(2) Represents average of debt-to-equity ratios for all reportable quarters per respective fiscal year. Debt-to-equity is defined as total borrowings to fund RMBS, residential mortgage loans held-for-sale, commercial real estate assets, MSR and Agency Derivatives divided by total equity.
(3) Represents average of estimated change in equity value for theoretical +100bps parallel shift in interest rates for all reportable quarters per respective fiscal year. Change in equity market capitalization is adjusted for leverage.
(4) Represents average of the constant prepayment rate (CPR) on Agency RMBS, including Agency Derivatives, for all reportable quarters per respective fiscal year.
7.6%
9.3%
8.7%
6.8%
11.2%
13.5%
14.8%
13.3%
0.0%
5.0%
10.0%
15.0%
20.0%
2014 2015 2016 2017 2014 2015 2016 2017
10.3%
11.3% 11.0%
10.5%
11.9%
13.0%
11.8%
10.1%
0.0%
6.0%
12.0%
18.0%
2014 2015 2016 2017 2014 2015 2016 2017
3.0x 3.0x
3.8x
4.7x
6.4x 6.6x
6.2x
5.8x
0.0x
2.0x
4.0x
6.0x
8.0x
2014 2015 2016 2017 2014 2015 2016 2017
-1.0%
-3.2% -3.0%
-4.2%
-8.2%
-6.7% -7.0%
-9.5%
-12.0%
-7.0%
-2.0%
3.0%
2014 2015 2016 2017 2014 2015 2016 2017
HISTORICAL CAPITAL ALLOCATION PORTFOLIO COMPOSITION(1)
Portfolio Composition
8
$19.5 BILLION PORTFOLIO AS OF JUNE 30, 2017
(1) For additional detail on the portfolio, see Appendix slides 12-17.
(2) Commercial consists of the consolidated financial results of Granite Point and its subsidiaries, which assets include senior, mezzanine and B-note commercial real estate debt and related
instruments.
(3) MSR includes Ginnie Mae buyout residential mortgage loans.
(4) Assets in “Rates” include Agency RMBS, Agency Derivatives, MSR and Ginnie Mae buyout residential mortgage loans.
(5) Assets in “Credit” include non-Agency MBS, net economic interests in securitization trusts, prime jumbo residential mortgage loans and credit sensitive residential mortgage loans.
Rates(3)
$10,766
Commercial(2)
$1.8b
June 30,
2016
March 31,
2017
June 30,
2017
Rates(4) 56 % 58 % 54 %
Credit(5) 31 % 27 % 28 %
Commercial(2) 13 % 15 % 18 %
OPPORTUNISTIC CAPITAL ALLOCATION
Agency
$14.3b
MSR(3)
$0.9b
Non-Agency
$2.3b
Rates(4) $15.2b Credit(5) $2.5b Commercial(2) $1.8b
Conduit
$0.2b
If Granite Point shares had been
distributed on June 30, 2017,
capital allocation to the Rates
and Credit strategies would have
been 65% and 35%, respectively.
Rates Update
9
PORTFOLIO SUMMARY
DELIVERING RESULTS THROUGH VARIETY OF RATE ENVIRONMENTS
• Pairing MSR with Agency RMBS results in a portfolio that has higher return potential with lower mortgage
spread risk and lower overall leverage
– Mitigates impact to book value in spread widening scenario
• Utilize combination of hedging tools to maintain low interest rate exposure
• Agency RMBS holdings of $14.3 billion
– 83% of Agency pools have some form of prepayment protection(1)
• MSR portfolio of approximately $900 million in fair market value
– Added $18.9 billion UPB on new issue, high quality MSR in Q2-2017
o $13.1 billion UPB from two bulk MSR purchases
o $5.8 billion UPB from flow-sale arrangements
– Expect near-term flow MSR volume of approximately $2.0 billion UPB per month
(1) Includes securities with implicit or explicit protection including lower loan balances (securities collateralized by loans less than or equal to $175K of initial principal balance), higher LTVs
(securities collateralized by loans with greater than or equal to 80% LTV), certain geographic concentrations and lower FICO scores.
Credit Update
10
• Home prices continue to improve; CoreLogic Home Price Index up 6.7% on a rolling 12-month basis(1)
– Supported by affordability, low housing supply and strong demand
• Believe future performance will continue to be strong, driven by increasing prepayments, lower
delinquencies, defaults and severities
(1) Source: CoreLogic Home Price Index rolling 12-month change as of June 2017.
(2) Weighted average market price utilized current face for weighting purposes. Please see slide 16 in the Appendix for more information on our non-Agency RMBS portfolio.
RESIDENTIAL CREDIT TAILWINDS
• Non-Agency RMBS holdings of $2.3 billion, $2.0 billion of which are legacy non-Agency RMBS
• Released $13.9 million in credit reserves against portfolio in Q2-2017 due to strong continued
performance; released $38.2 million in credit reserves over the previous 12 months
• Average market price of ~$78 allows ability to capture upside opportunity(2)
PORTFOLIO SUMMARY
Appendix
Rates: Agency RMBS Metrics
12
AGENCY PORTFOLIO YIELDS AND METRICS
AGENCY RMBS CPR(1)
(1) Agency weighted average 3-month Constant Prepayment Rate (CPR) includes IIOs (or Agency Derivatives).
(2) Weighted average cost basis includes RMBS principal and interest securities only. Average purchase price utilized carrying value for weighting purposes.
Portfolio Yield
Realized Q1-
2017
At March 31,
2017
Realized Q2-
2017
At June 30,
2017
Agency yield 3.1 % 3.1 % 3.1 % 3.0 %
Repo and FHLB costs 1.0 % 1.1 % 1.2 % 1.3 %
Swap costs 0.3 % 0.2 % 0.2 % — %
Net interest spread 1.8 % 1.8 % 1.7 % 1.7 %
Portfolio Metrics Q1-2017 Q2-2017
Weighted average 3-month CPR(1) 5.6 % 8.0 %
Weighted average cost basis(2) $105.9 $106.6
AGENCY PORTFOLIO COMPOSITION
30-Year Fixed 4-4.5%
60.7%
30-Year Fixed 3-3.5%
31.4%
30-Year Fixed
5% & above
3.8%
IO & Inverse IO
2.3%
Hybrid ARMs and
Other
1.8%
Rates: Agency RMBS
13
As of June 30, 2017 Par Value ($M) Market Value ($M)
% Prepay
Protected(1)
Amortized Cost
Basis ($M)
Weighted Average
Coupon
Weighted Average
Age (Months)
30-Year fixed
3.0-3.5% $4,343 $4,477 74.8 % $4,538 3.5 % 10
4.0-4.5% 8,097 8,674 92.9 % 8,670 4.2 % 21
≥ 5.0% 491 548 84.2 % 531 5.5 % 86
12,931 13,699 86.6 % 13,739 4.0 % 20
Hybrid ARMs 25 27 — % 26 4.8 % 159
Other 232 231 0.7 % 225 4.7 % 146
IOs and IIOs 3,685 323 (2) — % 334 3.2 % 100
Total $16,873 $14,280 83.1 % $14,324
(1) Includes securities with implicit or explicit protection including lower loan balances (securities collateralized by loans less than or equal to $175K of initial principal balance), higher LTVs
(securities collateralized by loans with greater than or equal to 80% LTV), certain geographic concentrations and lower FICO scores.
(2) Represents market value of $215.2 million of IOs and $108.3 million of Agency Derivatives.
Rates: Mortgage Servicing Rights(1)
14
As of March 31, 2017 As of June 30, 2017
Fair value ($M) $747.6 $898.0
Unpaid principal balance ($M) $68,128.0 $84,814.2
Weighted average coupon 3.9 % 3.9 %
Original FICO score(2) 755 754
Original LTV 73 % 73 %
60+ day delinquencies 0.2 % 0.2 %
Net servicing spread 25.3 basis points 25.4 basis points
Vintage:
Pre-2009 0.4 % 0.4 %
2009-2012 20.9 % 16.8 %
Post 2012 78.7 % 82.8 %
Percent of MSR portfolio:
Conventional 99.9 % 100.0 %
Government 0.1 % — %
(1) Excludes residential mortgage loans held-for-investment in securitization trusts for which the company is the named servicing administrator.
(2) FICO represents a mortgage industry accepted credit score of a borrower.
Credit: Non-Agency MBS Metrics
15
NON-AGENCY PORTFOLIO COMPOSITION NON-AGENCY PORTFOLIO YIELDS AND METRICS
(1) Weighted average cost basis includes MBS principal and interest securities only. Average purchase price utilized carrying value for weighting purposes. If current face were utilized for weighting
purposes, total non-Agency MBS excluding the company’s non-Agency interest-only portfolio would have been $58.04 at June 30, 2017.
Portfolio Yield
Realized Q1-
2017
At March 31,
2017
Realized Q2-
2017
At June 30,
2017
Non-Agency yield 9.0 % 9.0 % 8.4 % 8.2 %
Repo and FHLB costs 2.8 % 2.8 % 2.9 % 2.9 %
Swap costs 0.1 % 0.1 % 0.1 % — %
Net interest spread 6.1 % 6.1 % 5.4 % 5.3 %
NON-AGENCY MBS CPR
Non-Agency: Loan Type March 31, 2017 June 30, 2017
Sub-prime 74 % 73 %
Option-ARM 8 % 10 %
Prime 2 % 2 %
Alt-A 8 % 7 %
Other 8 % 8 %
Portfolio Metrics Q1-2017 Q2-2017
Weighted average 3-month CPR 6.7 % 6.2 %
Weighted average cost basis(1) $59.5 $60.5
Credit: Non-Agency MBS
16
As of June 30, 2017 Senior Bonds Mezzanine Bonds Total P&I
Portfolio characteristics:
Carrying value ($M) $1,418.4 $832.2 $2,250.6
% of non-Agency portfolio 63.0 % 37.0 % 100.0 %
Average purchase price(1) $57.23 $66.12 $60.52
Average coupon 2.9 % 2.2 % 2.6 %
Weighted average market price(2) $77.97 $77.01 $77.61
Collateral attributes:
Average loan age (months) 130 140 132
Average loan size ($K) $362 $352 $359
Average original Loan-to-Value 70.5 % 69.6 % 70.2 %
Average original FICO(3) 634 603 624
Current performance:
60+ day delinquencies 22.5 % 20.1 % 21.7 %
Average credit enhancement(4) 9.2 % 16.8 % 11.6 %
3-Month CPR(5) 5.4 % 7.7 % 6.2 %
(1) Average purchase price utilized carrying value for weighting purposes. If current face were utilized for weighting purposes, the average purchase price for senior, mezzanine and total non-Agency MBS,
excluding our non-Agency interest-only portfolio, would have been $54.52, $63.98 and $58.04, respectively.
(2) Weighted average market price utilized current face for weighting purposes.
(3) FICO represents a mortgage industry accepted credit score of a borrower.
(4) Average credit enhancement remaining on our non-Agency MBS portfolio, which is the average amount of protection available to absorb future credit losses due to defaults on the underlying collateral.
(5) 3-Month CPR is reflective of the prepayment speed on the underlying securitization; however, it does not necessarily indicate the proceeds received on our investment tranche. Proceeds received for
each security are dependent on the position of the individual security within the structure of each deal.
Granite Point’s Commercial Real Estate Portfolio(1)
(1) Due to the company’s controlling ownership interest in Granite Point, the company consolidates Granite Point on its financial statements and reflects noncontrolling interest for the portion of equity and comprehensive income not
attributable to the company.
(2) Cash coupon does not include origination or exit fees. Weighted average cash coupon excludes fixed rate loans.
(3) Yield includes net origination fees and exit fees, but does not include future fundings, and is expressed as a monthly equivalent yield. Weighted average yield excludes fixed rate loans.
(4) Initial LTV considers the original appraisal at the time of origination.
(5) Stabilized LTV considers the "as stabilized" value (as determined in conformance with USPAP) of the underlying property or properties, as set forth in the original appraisal. "As stabilized" value may be based on certain assumptions, such
as future construction completion, projected re-tenanting, payment of tenant improvement or leasing commissions allowances or free or abated rent periods, or increased tenant occupancies.
17
$ in millions Type
Origination
Date
Principal
Balance Book Value Cash Coupon(2) Yield(3)
Original Term
(Years) State Property Type Initial LTV(4)
Stabilized
LTV(5)
Asset 1 Senior 12/15 $120.0 $120.0 L + 4.20% L + 4.43% 4 LA Mixed-Use 65.5 % 60.0 %
Asset 2 Senior 09/15 105.0 105.0 L + 3.42% L + 3.79% 3 CA Retail 70.9 % 66.9 %
Asset 3 Senior 07/16 97.8 96.7 L + 4.45% L + 4.99% 4 Various Office 62.8 % 61.5 %
Asset 4 Senior 04/16 82.0 81.5 L + 4.75% L + 5.44% 3 NY Industrial 75.9 % 55.4 %
Asset 5 Senior 11/15 78.0 78.0 L + 4.20% L + 4.67% 3 NY Office 66.4 % 68.7 %
Asset 6 Senior 10/16 75.6 74.9 L + 4.37% L + 4.83% 4 NC Office 72.4 % 68.1 %
Asset 7 Senior 05/17 68.0 67.0 L + 4.10% L + 4.82% 4 MA Office 71.3 % 71.5 %
Asset 8 Senior 12/16 62.3 60.7 L + 4.11% L + 4.87% 4 FL Office 73.3 % 63.2 %
Asset 9 Senior 06/16 51.3 51.0 L + 4.49% L + 4.93% 4 HI Retail 76.2 % 57.4 %
Asset 10 Senior 01/17 51.5 50.9 L + 4.75% L + 5.24% 4 SC Office 67.6 % 67.1 %
Asset 11 Senior 12/15 46.7 46.7 L + 4.65% L + 4.87% 4 PA Office 74.5 % 67.5 %
Asset 12 Mezzanine 03/15 45.9 45.9 L + 6.75% L + 7.61% 5 Various Hotel 70.3 % 63.5 %
Asset 13 Senior 06/17 45.0 44.4 L + 4.50% L + 5.24% 3 CA Hotel 54.7 % 48.6 %
Asset 14 Senior 12/15 43.5 43.5 L + 4.05% L + 4.25% 3 TX Multifamily 82.3 % 76.8 %
Asset 15 Mezzanine 11/15 43.5 43.5 L + 7.25% L + 8.06% 3 Various Office 77.6 % 77.5 %
Assets 16-40 Various Various 780.0 773.2 L + 4.90% L + 5.56% 4 Various Various 69.6 % 63.1 %
Total/Weighted Average $ 1,796.2 $ 1,782.7 L + 4.67% L + 5.24% 4 69.9 % 63.8 %
Financing
18
(1) Weighted average of 2.9 years to maturity.
(2) Includes FHLB advances of $2.4 billion with original maturities of 20 years.
(3) Excludes FHLB membership and activity stock totaling $134.8 million.
(4) Revolving credit facilities over-collateralized due to operational considerations.
$ in millions
Outstanding Borrowings and Maturities(1)
Repurchase
Agreements FHLB Advances
Revolving Credit
Facilities Convertible Notes
Total Outstanding
Borrowings Percent (%)
Within 30 days $ 3,418.6 $ — $ — $ — $ 3,418.6 20.2 %
30 to 59 days 3,267.0 — — — 3,267.0 19.4 %
60 to 89 days 2,250.9 — 20.0 — 2,270.9 13.4 %
90 to 119 days 2,354.5 — — — 2,354.5 13.9 %
120 to 364 days 1,478.4 — 20.0 — 1,498.4 8.9 %
One to three years 547.4 815.0 — — 1,362.4 8.1 %
Three to five years — — — 282.3 282.3 1.7 %
Ten years and over(2) — 2,423.7 — — 2,423.7 14.4 %
$ 13,316.8 $ 3,238.7 $ 40.0 $ 282.3 $ 16,877.9 100.0 %
Collateral Pledged for Borrowings(3)
Repurchase
Agreements FHLB Advances
Revolving Credit
Facilities(4) Convertible Notes
Total Collateral
Pledged Percent (%)
Available-for-sale securities, at fair value $ 13,639.1 $ 2,749.7 $ — n/a $ 16,388.8 88.6 %
Derivative assets, at fair value 108.2 — — n/a 108.2 0.6 %
Commercial real estate assets 883.0 720.3 — n/a 1,603.3 8.7 %
Mortgage servicing rights, at fair value — — 166.0 n/a 166.0 0.9 %
Net economic interests in consolidated securitization
trusts 219.4 2.0 — n/a 221.4 1.2 %
$ 14,849.7 $ 3,472.0 $ 166.0 n/a $ 18,487.7 100.0 %
Maturities Notional Amounts ($B)(1) Average Fixed Pay Rate(2) Average Receive Rate(2)
Average Maturity
Years(2)
Payers
2017 $1.5 0.771 % 1.220 % 0.3
2018 4.3 1.155 % 1.223 % 1.0
2019 0.4 1.283 % 1.165 % 1.9
2020 1.2 1.463 % 1.209 % 3.3
2021 and after 4.5 1.699 % 1.235 % 5.6
$11.9 1.322 % 1.224 % 2.7
Maturities Notional Amounts ($B) Average Pay Rate
Average Fixed Receive
Rate
Average Maturity
(Years)
Receivers
2020 0.2 1.171 % 1.642 % 3.1
2021 and after 2.7 1.193 % 2.190 % 6.4
$2.9 1.192 % 2.152 % 6.2
Interest Rate Swaps
19
(1) Notional amount includes $778.0 million in forward starting interest rate swaps as of June 30, 2017.
(2) Weighted averages exclude forward starting interest rate swaps. As of June 30, 2017, the weighted average fixed pay rate on interest rate swaps starting in 2017 was 2.4%.
Interest Rate Swaptions
20
Option Underlying Swap
Swaption Expiration
Cost
($M)
Fair Value
($M)
Average
Months to
Expiration
Notional
Amount ($M)
Average Pay
Rate
Average
Receive
Rate
Average
Term (Years)
Purchase Contracts:
Payer <6 Months $43.7 $7.7 2.9 $5,025 2.35 % 3M LIBOR 6.2
Total Payer $43.7 $7.7 2.9 $5,025 2.35 % 3M LIBOR 6.2
Receiver <6 Months $2.7 $2.1 3.2 $2,000 3M LIBOR 1.78 % 8.5
Receiver >6 Months — 5.9 10.8 250 3M LIBOR 2.35 % 10.0
Total Receiver $2.7 $8.0 7.6 $2,250 3M LIBOR 1.84 % 8.7
Sale Contracts:
Payer <6 Months ($35.5 ) ($0.9 ) 3.2 ($2,300 ) 2.92 % 3M LIBOR 8.7
Total Payer ($35.5 ) ($0.9 ) 3.2 ($2,300 ) 2.92 % 3M LIBOR 8.7
Receiver <6 Months ($9.7 ) ($6.2 ) 2.4 ($3,000 ) 3M LIBOR 2.02 % 10.0
Receiver >6 Months (1.4 ) (6.5 ) 10.8 (625 ) 3M LIBOR 1.95 % 10.0
Total Receiver ($11.1 ) ($12.7 ) 4.9 ($3,625 ) 3M LIBOR 2.00 % 10.0
