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ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
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26-2749336
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1555 Peachtree Street, N.E., Suite 1800
Atlanta, Georgia
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30309
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value $0.01 per share
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New York Stock Exchange
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7.75% Series A Cumulative Redeemable Preferred Stock
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New York Stock Exchange
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7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock
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New York Stock Exchange
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7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock
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New York Stock Exchange
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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o
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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•
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our business and investment strategy;
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•
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our investment portfolio;
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•
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our projected operating results;
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•
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general volatility of financial markets and effects of governmental responses, including actions and initiatives of the U.S. governmental agencies and changes to U.S. government policies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), mortgage loan modification programs, actions and initiatives of foreign governmental agencies and central banks, monetary policy actions of the Federal Reserve, including actions relating to its agency mortgage-backed securities portfolio and the continuation of re-investment of principal payments, and our ability to respond to and comply with such actions, initiatives and changes;
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•
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the availability of financing sources, including our ability to obtain additional financing arrangements and the terms of such arrangements;
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•
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financing and advance rates for our target assets;
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•
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changes to our expected leverage;
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•
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our expected investments;
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•
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our expected book value per diluted common share;
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•
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interest rate mismatches between our target assets and our borrowings used to fund such investments;
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•
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the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;
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•
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our ability to maintain sufficient liquidity to meet any margin calls;
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•
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changes in the credit rating of the U.S. government;
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•
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changes in interest rates and interest rate spreads and the market value of our target assets;
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•
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changes in prepayment rates on our target assets;
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•
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the impact of any deficiencies in foreclosure practices of third parties and related uncertainty in the timing of collateral disposition;
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•
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our reliance on third parties in connection with services related to our target assets;
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•
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disruption of our information technology systems;
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•
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effects of hedging instruments on our target assets;
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•
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rates of default or decreased recovery rates on our target assets;
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•
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modifications to whole loans or loans underlying securities;
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•
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the degree to which our hedging strategies may or may not protect us from interest rate and foreign currency exchange rate volatility;
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•
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the degree to which derivative contracts expose us to contingent liabilities;
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•
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counterparty defaults;
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•
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compliance with financial covenants in our financing arrangements;
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1
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•
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changes in governmental regulations, zoning, insurance, eminent domain and tax laws and rates, and similar matters and our ability to respond to such changes;
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•
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our ability to maintain our qualification as a real estate investment trust for U.S. federal income tax purposes;
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•
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our ability to maintain our exception from the definition of “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”);
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•
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availability of investment opportunities in mortgage-related, real estate-related and other securities;
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•
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availability of U.S. Government Agency guarantees with regard to payments of principal and interest on securities;
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•
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the market price and trading volume of our capital stock;
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•
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availability of qualified personnel of our Manager;
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•
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the relationship with our Manager;
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•
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estimates relating to taxable income and our ability to continue to pay dividends to our stockholders in the future;
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•
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estimates relating to fair value of our target assets and loan loss reserves;
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•
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our understanding of our competition;
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•
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changes to generally accepted accounting principles in the United States of America (“U.S. GAAP”);
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•
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the adequacy of our disclosure controls and procedures and internal controls over financial reporting; and
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•
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market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy.
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2
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•
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Residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S. government agency such as the Government National Mortgage Association (“Ginnie Mae”) or a federally chartered corporation such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (collectively “Agency RMBS”);
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•
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Commercial mortgage-backed securities (“CMBS”) that are guaranteed by a U.S. government agency such as Ginnie Mae or a federally chartered corporation such as Fannie Mae or Freddie Mac (collectively “Agency CMBS”);
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•
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RMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency RMBS”);
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•
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CMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency CMBS”);
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•
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Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises (“GSE CRT”);
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•
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Residential and commercial mortgage loans; and
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•
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Other real estate-related financing arrangements.
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3
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4
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5
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6
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7
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8
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•
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no investment shall be made that would cause us to fail to qualify as a REIT for federal income tax purposes;
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•
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no investment shall be made that would cause us to be regulated as an investment company under the 1940 Act;
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•
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our assets will be invested within our target assets; and
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•
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until appropriate investments can be identified, our Manager may pay off short-term debt, or invest the proceeds of any offering in interest-bearing, short-term investments, including funds that are consistent with maintaining our REIT qualification.
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9
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10
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11
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12
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•
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If long-term rates increased significantly, the market value of our fixed rate investments in our target assets would decline, and the duration and weighted average life of the investments may increase. We could realize a loss if the securities were sold. Further, declines in market value may reduce our book value per diluted common share and ultimately reduce earnings or result in losses to us.
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•
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An increase in short-term interest rates would increase the amount of interest owed on the repurchase agreements we enter into to finance the purchase of our investments.
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•
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If short-term interest rates rise disproportionately relative to longer-term interest rates (a flattening of the yield curve), our borrowing costs may increase more rapidly than the interest income earned on our assets. Because we expect our investments, on average, generally will bear interest based on longer-term rates than our borrowings, a flattening of the yield curve would tend to decrease our net income. Additionally, to the extent cash flows from investments that return scheduled and unscheduled principal are reinvested, the spread between the yields on the new investments and available borrowing rates may decline, which would likely decrease our net income.
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•
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If short-term interest rates exceed longer-term interest rates (a yield curve inversion), our borrowing costs may exceed our interest income and we could incur operating losses.
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•
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If interest rates fall, we may recognize losses on our derivative financial instruments that are not offset by gains on our assets, which may adversely affect our liquidity and financial position.
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13
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14
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15
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16
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•
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We may purchase RMBS that have a higher interest rate than the market interest rate at the time. In exchange for this higher interest rate, we may pay a premium over the par value to acquire the security. In accordance with U.S. GAAP, we may amortize this premium over the estimated term of the RMBS. If the RMBS is prepaid in whole or in part prior to its maturity date, however, we may be required to expense the premium that was prepaid at the time of the prepayment.
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•
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A substantial portion of our adjustable-rate RMBS may bear interest rates that are lower than their fully indexed rates, which are equivalent to the applicable index rate plus a margin. If an adjustable-rate RMBS is prepaid prior to or soon after the time of adjustment to a fully-indexed rate, we will have held that RMBS while it was least profitable and lost the opportunity to receive interest at the fully indexed rate over the remainder of its expected life.
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•
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If we are unable to acquire new RMBS at similar yields to the prepaid RMBS, our financial condition, results of operations and cash flow would suffer. Prepayment rates generally increase when interest rates fall and decrease when interest rates rise, but changes in prepayment rates are difficult to predict. Prepayment rates also may be affected by conditions in the housing and financial markets, general economic conditions and the relative interest rates on FRMs and ARMs.
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17
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18
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•
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interest rate and/or currency hedging can be expensive, particularly during periods of rising and volatile markets;
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•
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available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought;
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•
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the duration of the hedges may not match the duration of the liabilities;
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19
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•
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the amount of income that a REIT may earn from hedging transactions (other than hedging transactions that satisfy certain requirements of the Internal Revenue Code or that are done through a taxable REIT subsidiary (“TRS”)) to offset interest rate losses is limited by U.S. federal tax provisions governing REITs;
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•
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the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and
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20
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21
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22
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23
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24
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25
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26
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27
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28
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29
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30
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31
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32
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33
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34
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Index
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12/31/2013
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12/31/2014
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12/31/2015
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12/31/2016
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12/31/2017
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12/31/2018
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Invesco Mortgage Capital Inc.
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100.00
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118.52
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106.94
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141.31
|
190.17
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172.05
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S&P 500
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100.00
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113.69
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115.26
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129.05
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157.22
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150.33
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FTSE NAREIT Mortgage REITs
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100.00
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117.88
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107.42
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131.96
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158.08
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154.09
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|
35
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|
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36
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|
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As of December 31,
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$ in thousands
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2018
|
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2017
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2016
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2015
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|
2014
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|||||
Mortgage-backed and credit risk transfer securities, at fair value
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17,396,642
|
|
|
18,190,754
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|
|
14,981,331
|
|
|
16,065,935
|
|
|
17,248,895
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Residential loans, held-for-investment
(1)
|
—
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|
|
—
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|
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—
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—
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|
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3,365,003
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Commercial loans, held-for-investment
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31,582
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|
|
191,808
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|
|
273,355
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|
|
209,062
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|
|
145,756
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Total assets
(1)
|
17,813,505
|
|
|
18,657,256
|
|
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15,706,238
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|
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16,767,309
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|
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21,218,097
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Repurchase agreements
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13,602,484
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|
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14,080,801
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|
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11,160,669
|
|
|
12,126,048
|
|
|
13,622,677
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Secured loans
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1,650,000
|
|
|
1,650,000
|
|
|
1,650,000
|
|
|
1,650,000
|
|
|
1,250,000
|
|
Asset-backed securities
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,924,787
|
|
Exchangeable senior notes
|
—
|
|
|
143,231
|
|
|
397,041
|
|
|
394,573
|
|
|
392,113
|
|
Total stockholders’ equity
|
2,286,697
|
|
|
2,630,491
|
|
|
2,241,560
|
|
|
2,241,035
|
|
|
2,610,315
|
|
Non-controlling interest
|
—
|
|
|
26,387
|
|
|
28,624
|
|
|
25,873
|
|
|
28,535
|
|
Total equity
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2,286,697
|
|
|
2,656,878
|
|
|
2,270,184
|
|
|
2,266,908
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|
|
2,638,850
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(1)
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As of December 31, 2014, our consolidated balance sheet included assets and liabilities of consolidated variable interest entities (“VIEs”). We deconsolidated these VIEs in 2015.
As of December 31, 2014, total assets of the consolidated VIEs were
$3,380,597
, and total liabilities of the consolidated VIEs were
$2,938,512
.
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|
37
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|
|
For the Years ended December 31,
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$ in thousands, except share amounts
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2018
|
|
2017
|
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2016
|
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2015
|
|
2014
|
|||||
Interest income
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643,016
|
|
|
545,055
|
|
|
478,682
|
|
|
650,132
|
|
|
687,080
|
|
Interest expense
|
338,868
|
|
|
196,591
|
|
|
157,354
|
|
|
277,973
|
|
|
281,895
|
|
Net interest income
|
304,148
|
|
|
348,464
|
|
|
321,328
|
|
|
372,159
|
|
|
405,185
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|
(Reduction in) provision for loan losses
|
—
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|
|
—
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|
|
—
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|
|
(213
|
)
|
|
(142
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)
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Net interest income after provision for loan losses
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304,148
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|
|
348,464
|
|
|
321,328
|
|
|
372,372
|
|
|
405,327
|
|
Other income (loss)
|
(326,892
|
)
|
|
49,339
|
|
|
(21,824
|
)
|
|
(203,697
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)
|
|
(570,001
|
)
|
Total expenses
|
47,792
|
|
|
44,746
|
|
|
41,806
|
|
|
54,620
|
|
|
52,866
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|
Net income (loss)
|
(70,536
|
)
|
|
353,057
|
|
|
257,698
|
|
|
114,055
|
|
|
(217,540
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)
|
Net income (loss) attributable to non-controlling interest
|
254
|
|
|
4,450
|
|
|
3,287
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|
|
1,344
|
|
|
(2,482
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)
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Net income (loss) attributable to Invesco Mortgage Capital Inc.
|
(70,790
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)
|
|
348,607
|
|
|
254,411
|
|
|
112,711
|
|
|
(215,058
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)
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Dividends to preferred stockholders
|
44,426
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|
|
28,080
|
|
|
22,864
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|
|
22,864
|
|
|
17,378
|
|
Net income (loss) attributable to common stockholders
|
(115,216
|
)
|
|
320,527
|
|
|
231,547
|
|
|
89,847
|
|
|
(232,436
|
)
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Earnings per share:
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|||||
Basic
|
(1.03
|
)
|
|
2.87
|
|
|
2.07
|
|
|
0.74
|
|
|
(1.89
|
)
|
Diluted
|
(1.03
|
)
|
|
2.75
|
|
|
1.98
|
|
|
0.74
|
|
|
(1.89
|
)
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
|
|
|
|
|||||
Basic
|
111,637,035
|
|
|
111,610,393
|
|
|
111,973,404
|
|
|
121,377,585
|
|
|
123,104,934
|
|
Diluted
|
111,637,035
|
|
|
123,040,827
|
|
|
130,254,003
|
|
|
122,843,838
|
|
|
124,529,934
|
|
•
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Residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S. government agency such as the Government National Mortgage Association ("Ginnie Mae") or a federally chartered corporation such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (collectively "Agency RMBS");
|
•
|
Commercial mortgage-backed securities (“CMBS”) that are guaranteed by a U.S. government agency such as Ginnie Mae or a federally chartered corporation such as Fannie Mae or Freddie Mac”) (collectively “Agency CMBS”);
|
•
|
RMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation ("non-Agency RMBS");
|
•
|
CMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency CMBS”);
|
|
38
|
|
•
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Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises ("GSE CRT");
|
•
|
Residential and commercial mortgage loans; and
|
•
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Other real estate-related financing arrangements.
|
•
|
a dividend of
$0.42
per share of common stock payable on
January 28, 2019
to stockholders of record as of the close of business on
December 26, 2018
;
|
•
|
a dividend of
$0.4844
per share of Series A Preferred Stock payable on
January 25, 2019
to stockholders of record as of the close of business on
January 1, 2019
;
|
|
39
|
|
|
40
|
|
|
As of December 31,
|
||||
|
2018
|
|
2017
|
||
Agency RMBS and Agency CMBS
|
49
|
%
|
|
45
|
%
|
Commercial Credit
(1)
|
33
|
%
|
|
35
|
%
|
Residential Credit
(2)
|
18
|
%
|
|
20
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
(1)
|
Non-Agency CMBS, commercial loans and investments in unconsolidated ventures (that are included in Other Assets on our consolidated balance sheet) are considered commercial credit.
|
(2)
|
Non-Agency RMBS, GSE CRT and a loan participation interest (that is included in Other Assets on our consolidated balance sheet) are considered residential credit.
|
$ in thousands
|
As of December 31,
|
||||||||||
|
2018
|
|
Percent of Total
|
|
2017
|
|
Percent of Total
|
||||
Agency RMBS:
|
|
|
|
|
|
|
|
||||
30 year fixed-rate, at fair value
|
9,772,769
|
|
|
55.9
|
%
|
|
7,640,540
|
|
|
41.6
|
%
|
15 year fixed-rate, at fair value
|
424,254
|
|
|
2.4
|
%
|
|
2,974,782
|
|
|
16.2
|
%
|
Hybrid ARM, at fair value
|
554,201
|
|
|
3.2
|
%
|
|
1,719,385
|
|
|
9.3
|
%
|
ARM, at fair value
|
105,747
|
|
|
0.6
|
%
|
|
241,200
|
|
|
1.3
|
%
|
Agency CMO, at fair value
|
267,691
|
|
|
1.5
|
%
|
|
273,943
|
|
|
1.5
|
%
|
Agency CMBS, at fair value
|
1,002,510
|
|
|
5.7
|
%
|
|
—
|
|
|
—
|
%
|
Non-Agency CMBS, at fair value
|
3,286,459
|
|
|
18.8
|
%
|
|
3,216,417
|
|
|
17.5
|
%
|
Non-Agency RMBS, at fair value
|
1,163,682
|
|
|
6.6
|
%
|
|
1,257,608
|
|
|
6.8
|
%
|
GSE CRT, at fair value
|
819,329
|
|
|
4.7
|
%
|
|
866,879
|
|
|
4.7
|
%
|
Loan participation interest, at fair value
|
54,981
|
|
|
0.3
|
%
|
|
—
|
|
|
—
|
%
|
Commercial loans, at amortized cost
|
31,582
|
|
|
0.2
|
%
|
|
191,808
|
|
|
1.0
|
%
|
Investments in unconsolidated ventures
|
24,012
|
|
|
0.1
|
%
|
|
25,972
|
|
|
0.1
|
%
|
Total Investment portfolio
|
17,507,217
|
|
|
100.0
|
%
|
|
18,408,534
|
|
|
100.0
|
%
|
|
41
|
|
|
42
|
|
|
|
2003-2007
|
|
|
2008-2010
|
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
Total
|
|||||||||
Prime
|
|
19.3
|
%
|
|
2.3
|
%
|
|
—
|
%
|
|
—
|
%
|
|
12.9
|
%
|
|
10.3
|
%
|
|
2.4
|
%
|
|
0.3
|
%
|
|
—
|
%
|
|
15.6
|
%
|
|
63.1
|
%
|
Alt-A
|
|
27.6
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
27.6
|
%
|
Re-REMIC
(1)
|
|
0.6
|
%
|
|
4.4
|
%
|
|
1.9
|
%
|
|
1.5
|
%
|
|
0.8
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
9.2
|
%
|
Subprime/reperforming
|
|
0.1
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
0.1
|
%
|
Total Non-Agency
|
|
47.6
|
%
|
|
6.7
|
%
|
|
1.9
|
%
|
|
1.5
|
%
|
|
13.7
|
%
|
|
10.3
|
%
|
|
2.4
|
%
|
|
0.3
|
%
|
|
—
|
%
|
|
15.6
|
%
|
|
100.0
|
%
|
GSE CRT
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
30.9
|
%
|
|
35.5
|
%
|
|
6.4
|
%
|
|
22.4
|
%
|
|
3.6
|
%
|
|
1.2
|
%
|
|
100.0
|
%
|
Non-Agency CMBS
|
|
—
|
%
|
|
2.8
|
%
|
|
17.6
|
%
|
|
11.5
|
%
|
|
12.6
|
%
|
|
33.2
|
%
|
|
7.6
|
%
|
|
2.2
|
%
|
|
8.3
|
%
|
|
4.2
|
%
|
|
100.0
|
%
|
(1)
|
For Re-REMICs, the table reflects the year in which the resecuritizations were issued. The vintage distribution of the securities that collateralize our Re-REMIC investments is
4.4%
for 2005,
2.5%
for 2006 and
93.1%
for 2007.
|
|
Percentage of Re-REMIC
Holdings at Fair Value
|
||||
Re-REMIC Subordination
(1)
|
December 31, 2018
|
|
December 31, 2017
|
||
0% - 10%
|
49.8
|
%
|
|
34.5
|
%
|
10% - 20%
|
3.4
|
%
|
|
3.7
|
%
|
20% - 30%
|
16.9
|
%
|
|
12.3
|
%
|
30% - 40%
|
14.9
|
%
|
|
18.4
|
%
|
40% - 50%
|
1.8
|
%
|
|
9.6
|
%
|
50% - 60%
|
12.5
|
%
|
|
19.7
|
%
|
60% - 70%
|
0.7
|
%
|
|
1.8
|
%
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Subordination refers to the credit enhancement provided to the Re-REMIC tranche held by us by any junior Re-REMIC tranche or tranches in a resecuritization. This figure reflects the percentage of the balance of the underlying securities represented by any junior tranche or tranches at the time of resecuritization. Generally, principal losses on the underlying securities in excess of the subordination amount would result in principal losses on the Re-REMIC tranche held by us. As of
December 31, 2018
,
70.1%
of our Re-REMIC holdings are not senior tranches.
|
Non-Agency RMBS
State
|
|
Percentage
|
|
GSE CRT
State
|
|
Percentage
|
|
Non-Agency CMBS
State
|
|
Percentage
|
|||
California
|
|
44.6
|
%
|
|
California
|
|
19.1
|
%
|
|
California
|
|
14.8
|
%
|
New York
|
|
8.7
|
%
|
|
Texas
|
|
6.0
|
%
|
|
New York
|
|
14.6
|
%
|
Florida
|
|
6.6
|
%
|
|
New York
|
|
4.6
|
%
|
|
Texas
|
|
9.3
|
%
|
New Jersey
|
|
3.9
|
%
|
|
Virginia
|
|
4.3
|
%
|
|
Florida
|
|
6.4
|
%
|
Massachusetts
|
|
3.2
|
%
|
|
Florida
|
|
4.3
|
%
|
|
Illinois
|
|
4.4
|
%
|
Virginia
|
|
2.9
|
%
|
|
Illinois
|
|
3.9
|
%
|
|
Pennsylvania
|
|
4.0
|
%
|
Maryland
|
|
2.7
|
%
|
|
Massachusetts
|
|
3.4
|
%
|
|
New Jersey
|
|
3.5
|
%
|
Colorado
|
|
2.5
|
%
|
|
New Jersey
|
|
3.3
|
%
|
|
Ohio
|
|
3.1
|
%
|
Washington
|
|
2.5
|
%
|
|
Washington
|
|
3.3
|
%
|
|
Michigan
|
|
3.0
|
%
|
Illinois
|
|
2.4
|
%
|
|
Pennsylvania
|
|
3.2
|
%
|
|
Virginia
|
|
2.9
|
%
|
Other
|
|
20.0
|
%
|
|
Other
|
|
44.6
|
%
|
|
Other
|
|
34.0
|
%
|
Total
|
|
100.0
|
%
|
|
|
|
100.0
|
%
|
|
Total
|
|
100.0
|
%
|
|
43
|
|
$ in thousands
|
Collateralized borrowings under repurchase agreements and secured loans
|
|||||||
Quarter Ended
|
Quarter-end balance
|
|
Average quarterly balance
|
|
Maximum balance outstanding
|
|||
March 31, 2017
|
13,939,899
|
|
|
13,901,254
|
|
|
14,086,600
|
|
June 30, 2017
|
13,768,948
|
|
|
13,716,749
|
|
|
13,768,948
|
|
September 30, 2017
|
15,738,838
|
|
|
15,010,514
|
|
|
15,738,838
|
|
December 31, 2017
|
15,730,801
|
|
|
15,762,094
|
|
|
15,815,972
|
|
March 31, 2018
|
15,561,137
|
|
|
15,536,093
|
|
|
15,561,137
|
|
June 30, 2018
|
15,352,321
|
|
|
15,275,972
|
|
|
15,352,321
|
|
September 30, 2018
|
16,028,518
|
|
|
15,973,428
|
|
|
16,078,388
|
|
December 31, 2018
|
15,252,484
|
|
|
15,836,597
|
|
|
16,144,062
|
|
•
|
available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;
|
•
|
the duration of the hedges may not match the duration of the related liabilities;
|
•
|
our counterparty in the hedging transaction may default on its obligation to pay;
|
|
44
|
|
•
|
the credit quality of our counterparty on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and
|
•
|
the value of derivatives used for hedging may be adjusted from time-to-time in accordance with accounting rules to reflect changes in fair value.
|
|
Years Ended December 31,
|
|||||||
In thousands except per share amounts
|
2018
|
|
2017
|
|
2016
|
|||
Numerator (adjusted equity):
|
|
|
|
|
|
|||
Total equity
|
2,286,697
|
|
|
2,656,878
|
|
|
2,270,184
|
|
Less: Liquidation preference of Series A Preferred Stock
|
(140,000
|
)
|
|
(140,000
|
)
|
|
(140,000
|
)
|
Less: Liquidation preference of Series B Preferred Stock
|
(155,000
|
)
|
|
(155,000
|
)
|
|
(155,000
|
)
|
Less: Liquidation preference of Series C Preferred Stock
|
(287,500
|
)
|
|
(287,500
|
)
|
|
—
|
|
Total adjusted equity
|
1,704,197
|
|
|
2,074,378
|
|
|
1,975,184
|
|
|
|
|
|
|
|
|||
Denominator (number of shares - diluted):
|
|
|
|
|
|
|||
Common stock outstanding
|
111,585
|
|
|
111,624
|
|
|
111,595
|
|
Non-controlling interest OP units
|
—
|
|
|
1,425
|
|
|
1,425
|
|
Number of shares - diluted
|
111,585
|
|
|
113,049
|
|
|
113,020
|
|
|
|
|
|
|
|
|||
Book value per diluted common share
|
15.27
|
|
|
18.35
|
|
|
17.48
|
|
|
45
|
|
|
46
|
|
|
47
|
|
|
48
|
|
|
Years Ended December 31,
|
|||||||
In thousands except share amounts
|
2018
|
|
2017
|
|
2016
|
|||
Interest Income
|
|
|
|
|
|
|||
Mortgage-backed and credit risk transfer securities
|
631,478
|
|
|
521,547
|
|
|
456,444
|
|
Commercial and other loans
|
11,538
|
|
|
23,508
|
|
|
22,238
|
|
Total interest income
|
643,016
|
|
|
545,055
|
|
|
478,682
|
|
Interest Expense
|
|
|
|
|
|
|||
Repurchase agreements
|
301,794
|
|
|
163,881
|
|
|
124,000
|
|
Secured loans
|
35,453
|
|
|
19,370
|
|
|
10,887
|
|
Exchangeable senior notes
|
1,621
|
|
|
13,340
|
|
|
22,467
|
|
Total interest expense
|
338,868
|
|
|
196,591
|
|
|
157,354
|
|
Net interest income
|
304,148
|
|
|
348,464
|
|
|
321,328
|
|
Other income (loss)
|
|
|
|
|
|
|||
Gain (loss) on investments, net
|
(327,700
|
)
|
|
(19,704
|
)
|
|
(17,542
|
)
|
Equity in earnings (losses) of unconsolidated ventures
|
3,402
|
|
|
(1,327
|
)
|
|
2,392
|
|
Gain (loss) on derivative instruments, net
|
(5,277
|
)
|
|
18,155
|
|
|
(62,815
|
)
|
Realized and unrealized credit derivative income (loss), net
|
(151
|
)
|
|
51,648
|
|
|
61,143
|
|
Net loss on extinguishment of debt, net
|
(26
|
)
|
|
(6,814
|
)
|
|
—
|
|
Other investment income (loss), net
|
2,860
|
|
|
7,381
|
|
|
(5,002
|
)
|
Total other income (loss)
|
(326,892
|
)
|
|
49,339
|
|
|
(21,824
|
)
|
Expenses
|
|
|
|
|
|
|||
Management fee — related party
|
40,722
|
|
|
37,556
|
|
|
34,541
|
|
General and administrative
|
7,070
|
|
|
7,190
|
|
|
7,265
|
|
Total expenses
|
47,792
|
|
|
44,746
|
|
|
41,806
|
|
Net income (loss)
|
(70,536
|
)
|
|
353,057
|
|
|
257,698
|
|
Net income (loss) attributable to non-controlling interest
|
254
|
|
|
4,450
|
|
|
3,287
|
|
Net income (loss) attributable to Invesco Mortgage Capital Inc.
|
(70,790
|
)
|
|
348,607
|
|
|
254,411
|
|
Dividends to preferred stockholders
|
44,426
|
|
|
28,080
|
|
|
22,864
|
|
Net income (loss) attributable to common stockholders
|
(115,216
|
)
|
|
320,527
|
|
|
231,547
|
|
Earnings per share:
|
|
|
|
|
|
|||
Net income (loss) attributable to common stockholders
|
|
|
|
|
|
|||
Basic
|
(1.03
|
)
|
|
2.87
|
|
|
2.07
|
|
Diluted
|
(1.03
|
)
|
|
2.75
|
|
|
1.98
|
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
|||
Basic
|
111,637,035
|
|
|
111,610,393
|
|
|
111,973,404
|
|
Diluted
|
111,637,035
|
|
|
123,040,827
|
|
|
130,254,003
|
|
|
49
|
|
|
As of and for the Years Ended
|
|||||||
|
December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Average Earning Asset Balances
(1)
:
|
|
|
|
|
|
|||
Agency RMBS:
|
|
|
|
|
|
|||
15 year fixed-rate, at amortized cost
|
1,911,511
|
|
|
3,297,267
|
|
|
2,722,301
|
|
30 year fixed-rate, at amortized cost
|
8,867,942
|
|
|
5,874,757
|
|
|
3,646,480
|
|
ARM, at amortized cost
|
188,517
|
|
|
267,265
|
|
|
353,937
|
|
Hybrid ARM, at amortized cost
|
1,342,560
|
|
|
1,969,767
|
|
|
2,800,812
|
|
Agency-CMO, at amortized cost
|
258,457
|
|
|
302,060
|
|
|
375,888
|
|
Agency CMBS, at amortized cost
|
339,816
|
|
|
—
|
|
|
—
|
|
Non-Agency CMBS, at amortized cost
|
3,226,174
|
|
|
2,818,244
|
|
|
2,582,003
|
|
Non-Agency RMBS, at amortized cost
|
1,055,682
|
|
|
1,441,527
|
|
|
2,167,679
|
|
GSE CRT, at amortized cost
|
767,220
|
|
|
784,203
|
|
|
650,189
|
|
U.S. Treasury securities, at amortized cost
|
—
|
|
|
—
|
|
|
45,375
|
|
Commercial loans, at amortized cost
|
110,461
|
|
|
270,314
|
|
|
265,708
|
|
Loan participation interest
|
20,503
|
|
|
—
|
|
|
—
|
|
Average earning assets
|
18,088,843
|
|
|
17,025,404
|
|
|
15,610,372
|
|
|
|
|
|
|
|
|||
Average Earning Asset Yields
(2)
:
|
|
|
|
|
|
|||
Agency RMBS:
|
|
|
|
|
|
|||
15 year fixed-rate
|
2.23
|
%
|
|
1.98
|
%
|
|
1.98
|
%
|
30 year fixed-rate
|
3.09
|
%
|
|
2.79
|
%
|
|
2.72
|
%
|
ARM
|
2.44
|
%
|
|
2.32
|
%
|
|
2.28
|
%
|
Hybrid ARM
|
2.40
|
%
|
|
2.26
|
%
|
|
2.12
|
%
|
Agency-CMO
|
3.01
|
%
|
|
1.54
|
%
|
|
2.47
|
%
|
Agency CMBS
|
3.30
|
%
|
|
—
|
%
|
|
—
|
%
|
Non-Agency CMBS
|
4.91
|
%
|
|
4.50
|
%
|
|
4.30
|
%
|
Non-Agency RMBS
|
7.11
|
%
|
|
6.22
|
%
|
|
4.97
|
%
|
GSE CRT
(3)
|
3.40
|
%
|
|
2.58
|
%
|
|
0.98
|
%
|
U.S. Treasury securities
|
—
|
%
|
|
—
|
%
|
|
1.15
|
%
|
Commercial loans
|
9.54
|
%
|
|
8.70
|
%
|
|
8.35
|
%
|
Loan participation interest
|
6.10
|
%
|
|
—
|
%
|
|
—
|
%
|
Average earning asset yields
|
3.55
|
%
|
|
3.20
|
%
|
|
3.07
|
%
|
(1)
|
Average amounts for each period are based on weighted month-end balances.
|
(2)
|
Average earning asset yields for the period are calculated by dividing interest income, including amortization of premiums and discounts, by the average balance of the amortized cost of the investments. All yields are annualized.
|
(3)
|
GSE CRT average earning asset yield excludes coupon interest associated with embedded derivatives on securities not accounted for under the fair value option that is recorded as realized and unrealized credit derivative income (loss), net under U.S. GAAP.
|
|
50
|
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Interest Income
|
|
|
|
|
|
|||
MBS and GSE CRT - coupon interest
|
689,240
|
|
|
616,697
|
|
|
574,692
|
|
MBS and GSE CRT - net premium amortization
|
(57,762
|
)
|
|
(95,150
|
)
|
|
(118,248
|
)
|
MBS and GSE CRT - interest income
|
631,478
|
|
|
521,547
|
|
|
456,444
|
|
Commercial and other loans
|
11,538
|
|
|
23,508
|
|
|
22,238
|
|
Total interest income
|
643,016
|
|
|
545,055
|
|
|
478,682
|
|
|
51
|
|
|
Three Months Ended
|
||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
||||
15 year Agency RMBS
|
8.8
|
|
|
10.9
|
|
|
10.6
|
|
|
9.2
|
|
30 year Agency RMBS
|
6.2
|
|
|
7.4
|
|
|
8.2
|
|
|
7.1
|
|
Agency/ Hybrid ARM RMBS
|
13.8
|
|
|
16.6
|
|
|
15.7
|
|
|
14.4
|
|
Non-Agency RMBS
|
9.1
|
|
|
10.5
|
|
|
12.0
|
|
|
11.6
|
|
GSE CRT
|
8.7
|
|
|
10.9
|
|
|
9.8
|
|
|
9.5
|
|
Weighted average CPR
|
7.3
|
|
|
8.9
|
|
|
10.2
|
|
|
9.2
|
|
|
Three Months Ended
|
|||||||||
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
|||
15 year Agency RMBS
|
9.3
|
|
|
10.2
|
|
|
9.5
|
|
|
8.1
|
30 year Agency RMBS
|
7.9
|
|
|
9.3
|
|
|
9.2
|
|
|
10.8
|
Agency/ Hybrid ARM RMBS
|
14.9
|
|
|
18.6
|
|
|
16.3
|
|
|
15.7
|
Non-Agency RMBS
|
11.8
|
|
|
15.3
|
|
|
12.6
|
|
|
13.3
|
GSE CRT
|
11.8
|
|
|
12.4
|
|
|
9.7
|
|
|
13.1
|
Weighted average CPR
|
9.9
|
|
|
12.2
|
|
|
11.2
|
|
|
11.7
|
|
Three Months Ended
|
||||||||||
|
December 31, 2016
|
|
September 30, 2016
|
|
June 30, 2016
|
|
March 31, 2016
|
||||
15 year Agency RMBS
|
8.9
|
|
|
9.5
|
|
|
10.4
|
|
|
10.2
|
|
30 year Agency RMBS
|
17.6
|
|
|
16.2
|
|
|
13.7
|
|
|
10.8
|
|
Agency/ Hybrid ARM RMBS
|
20.5
|
|
|
21.7
|
|
|
18.4
|
|
|
12.5
|
|
Non-Agency RMBS
|
17.9
|
|
|
16.5
|
|
|
15.2
|
|
|
11.1
|
|
GSE CRT
|
21.0
|
|
|
17.9
|
|
|
14.0
|
|
|
9.2
|
|
Weighted average CPR
|
16.3
|
|
|
16.1
|
|
|
14.9
|
|
|
11.2
|
|
|
52
|
|
|
For the Years Ended
|
|||||||
|
December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Interest Expense
|
|
|
|
|
|
|||
Interest expense on repurchase agreement borrowings
|
327,633
|
|
|
189,425
|
|
|
118,846
|
|
Amortization of net deferred (gain) loss on de-designated interest rate swaps
|
(25,839
|
)
|
|
(25,544
|
)
|
|
5,154
|
|
Repurchase agreements interest expense
|
301,794
|
|
|
163,881
|
|
|
124,000
|
|
Secured loans
|
35,453
|
|
|
19,370
|
|
|
10,887
|
|
Exchangeable senior notes
|
1,621
|
|
|
13,340
|
|
|
22,467
|
|
Total interest expense
|
338,868
|
|
|
196,591
|
|
|
157,354
|
|
|
53
|
|
|
54
|
|
(1)
|
Average amounts for each period are based on weighted month-end balances.
|
(2)
|
Agency RMBS and non-Agency CMBS average borrowings and average cost of funds include borrowings under repurchase agreements and secured loans.
|
(3)
|
Amount represents the maximum borrowings at month-end during each of the respective periods.
|
(4)
|
Average cost of funds is calculated by dividing annualized interest expense excluding amortization of net deferred gain (loss) on de-designated interest rate swaps by our average borrowings.
|
(5)
|
For a reconciliation of cost of funds to effective cost of funds, see "Non-GAAP Financial Measures".
|
|
55
|
|
|
For the Years Ended
|
|||||||
|
December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Interest Income
|
|
|
|
|
|
|||
Mortgage-backed and credit risk transfer securities
|
631,478
|
|
|
521,547
|
|
|
456,444
|
|
Commercial and other loans
|
11,538
|
|
|
23,508
|
|
|
22,238
|
|
Total interest income
|
643,016
|
|
|
545,055
|
|
|
478,682
|
|
Interest Expense
|
|
|
|
|
|
|||
Interest expense on repurchase agreement borrowings
|
327,633
|
|
|
189,425
|
|
|
118,846
|
|
Amortization of net deferred (gain) loss on de-designated interest rate swaps
|
(25,839
|
)
|
|
(25,544
|
)
|
|
5,154
|
|
Repurchase agreements interest expense
|
301,794
|
|
|
163,881
|
|
|
124,000
|
|
Secured loans
|
35,453
|
|
|
19,370
|
|
|
10,887
|
|
Exchangeable senior notes
|
1,621
|
|
|
13,340
|
|
|
22,467
|
|
Total interest expense
|
338,868
|
|
|
196,591
|
|
|
157,354
|
|
Net interest income
|
304,148
|
|
|
348,464
|
|
|
321,328
|
|
Net interest rate margin
|
1.39
|
%
|
|
1.87
|
%
|
|
1.92
|
%
|
|
56
|
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Realized gains and losses on sale of investments
|
(218,136
|
)
|
|
(1,665
|
)
|
|
(7,439
|
)
|
Other-than-temporary impairment losses
|
(7,846
|
)
|
|
(11,962
|
)
|
|
(8,909
|
)
|
Net unrealized gains and losses on MBS accounted for under the fair value option
|
(95,327
|
)
|
|
(21,368
|
)
|
|
(5,791
|
)
|
Net unrealized gains and losses on GSE CRT accounted for under the fair value option
|
(6,370
|
)
|
|
15,269
|
|
|
4,598
|
|
Net unrealized gains and losses on trading securities
|
(21
|
)
|
|
22
|
|
|
(1
|
)
|
Total
|
(327,700
|
)
|
|
(19,704
|
)
|
|
(17,542
|
)
|
|
57
|
|
$ in thousands
|
Year ended December 31, 2018
|
||||||||||
Derivative
not designated as
hedging instrument
|
Realized gain (loss) on derivative instruments, net
|
|
Contractual net
interest expense
|
|
Unrealized
gain (loss), net
|
|
Gain (loss) on derivative instruments, net
|
||||
Interest Rate Swaps
|
81,417
|
|
|
(20,015
|
)
|
|
24,358
|
|
|
85,760
|
|
Futures Contracts
|
(86,318
|
)
|
|
—
|
|
|
(7,836
|
)
|
|
(94,154
|
)
|
Currency Forward Contracts
|
2,088
|
|
|
—
|
|
|
1,046
|
|
|
3,134
|
|
TBAs
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
Total
|
(2,830
|
)
|
|
(20,015
|
)
|
|
17,568
|
|
|
(5,277
|
)
|
$ in thousands
|
Year ended December 31, 2017
|
||||||||||
Derivative
not designated as
hedging instrument
|
Realized gain (loss) on derivative instruments, net
|
|
Contractual net
interest expense |
|
Unrealized
gain (loss), net
|
|
Gain (loss) on derivative instruments, net
|
||||
Interest Rate Swaps
|
72,894
|
|
|
(77,076
|
)
|
|
28,316
|
|
|
24,134
|
|
Currency Forward Contracts
|
(5,056
|
)
|
|
—
|
|
|
(923
|
)
|
|
(5,979
|
)
|
Total
|
67,838
|
|
|
(77,076
|
)
|
|
27,393
|
|
|
18,155
|
|
$ in thousands
|
Year ended December 31, 2016
|
||||||||||
Derivative
not designated as hedging instrument |
Realized gain (loss) on derivative instruments, net
|
|
Contractual net
interest expense |
|
Unrealized
gain (loss), net
|
|
Gain (loss) on derivative instruments, net
|
||||
Interest Rate Swaps
|
(69,090
|
)
|
|
(104,804
|
)
|
|
100,503
|
|
|
(73,391
|
)
|
Interest Rate Swaptions
|
(1,485
|
)
|
|
—
|
|
|
1,485
|
|
|
—
|
|
Currency Forward Contracts
|
12,632
|
|
|
—
|
|
|
(2,056
|
)
|
|
10,576
|
|
Total
|
(57,943
|
)
|
|
(104,804
|
)
|
|
99,932
|
|
|
(62,815
|
)
|
|
58
|
|
(1)
|
Excludes
$500.0 million
of notional amount for an interest rate swap with a forward start date of
5/24/2018
.
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
GSE CRT embedded derivative coupon interest
|
22,478
|
|
|
23,343
|
|
|
24,343
|
|
Gain (loss) on settlement of GSE CRT embedded derivatives
|
—
|
|
|
—
|
|
|
(6,017
|
)
|
Change in fair value of GSE CRT embedded derivatives
|
(22,629
|
)
|
|
28,305
|
|
|
42,817
|
|
Total
|
(151
|
)
|
|
51,648
|
|
|
61,143
|
|
|
59
|
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Dividend income
|
3,790
|
|
|
3,247
|
|
|
3,185
|
|
Gain (loss) on foreign currency transactions, net
|
(930
|
)
|
|
4,134
|
|
|
(8,187
|
)
|
Total
|
2,860
|
|
|
7,381
|
|
|
(5,002
|
)
|
|
60
|
|
•
|
core earnings (and by calculation, core earnings per common share),
|
•
|
effective interest income (and by calculation, effective yield),
|
•
|
effective interest expense (and by calculation, effective cost of funds),
|
•
|
effective net interest income (and by calculation, effective interest rate margin), and
|
•
|
repurchase agreement debt-to-equity ratio.
|
•
|
net income (loss) attributable to common stockholders (and by calculation, basic earnings (loss) per common share),
|
•
|
total interest income (and by calculation, earning asset yield),
|
•
|
total interest expense (and by calculation, cost of funds),
|
•
|
net interest income (and by calculation, net interest rate margin), and
|
•
|
debt-to-equity ratio.
|
|
61
|
|
|
Years Ended December 31,
|
|||||||
$ in thousands, except per share data
|
2018
|
|
2017
|
|
2016
|
|||
Net income (loss) attributable to common stockholders
|
(115,216
|
)
|
|
320,527
|
|
|
231,547
|
|
Adjustments:
|
|
|
|
|
|
|||
(Gain) loss on investments, net
|
327,700
|
|
|
19,704
|
|
|
17,542
|
|
Realized (gain) loss on derivative instruments, net
(1)
|
2,830
|
|
|
(67,838
|
)
|
|
57,943
|
|
Unrealized (gain) loss on derivative instruments, net
(1)
|
(17,568
|
)
|
|
(27,393
|
)
|
|
(99,932
|
)
|
Realized and unrealized (gain) loss on GSE CRT embedded derivatives, net
(2)
|
22,629
|
|
|
(28,305
|
)
|
|
(36,800
|
)
|
(Gain) loss on foreign currency transactions, net
(3)
|
930
|
|
|
(4,134
|
)
|
|
8,187
|
|
Amortization of net deferred (gain) loss on de-designated interest rate swaps
(4)
|
(25,839
|
)
|
|
(25,544
|
)
|
|
5,154
|
|
Net loss on extinguishment of debt
|
26
|
|
|
6,814
|
|
|
—
|
|
Subtotal
|
310,708
|
|
|
(126,696
|
)
|
|
(47,906
|
)
|
Cumulative adjustments attributable to non-controlling interest
|
(2,536
|
)
|
|
1,597
|
|
|
653
|
|
Preferred stock dividend declared but not accumulated
(5)
|
—
|
|
|
(2,870
|
)
|
|
—
|
|
Core earnings attributable to common stockholders
|
192,956
|
|
|
192,558
|
|
|
184,294
|
|
Basic earnings (loss) per common share
|
(1.03
|
)
|
|
2.87
|
|
|
2.07
|
|
Core earnings per share attributable to common stockholders
(6)
|
1.73
|
|
|
1.73
|
|
|
1.65
|
|
(1)
|
U.S. GAAP gain (loss) on derivative instruments, net on the consolidated statements of operations includes the following components:
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Realized gain (loss) on derivative instruments, net
|
(2,830
|
)
|
|
67,838
|
|
|
(57,943
|
)
|
Unrealized gain (loss) on derivative instruments, net
|
17,568
|
|
|
27,393
|
|
|
99,932
|
|
Contractual net interest expense
|
(20,015
|
)
|
|
(77,076
|
)
|
|
(104,804
|
)
|
Gain (loss) on derivative instruments, net
|
(5,277
|
)
|
|
18,155
|
|
|
(62,815
|
)
|
|
62
|
|
(2)
|
U.S. GAAP realized and unrealized credit derivative income (loss), net on the consolidated statements of operations includes the following components:
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Realized and unrealized gain (loss) on GSE CRT embedded derivatives, net
|
(22,629
|
)
|
|
28,305
|
|
|
36,800
|
|
GSE CRT embedded derivative coupon interest
|
22,478
|
|
|
23,343
|
|
|
24,343
|
|
Realized and unrealized credit derivative income (loss), net
|
(151
|
)
|
|
51,648
|
|
|
61,143
|
|
(3)
|
U.S. GAAP other investment income (loss), net on the consolidated statements of operations includes the following components:
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Dividend income
|
3,790
|
|
|
3,247
|
|
|
3,185
|
|
Gain (loss) on foreign currency transactions, net
|
(930
|
)
|
|
4,134
|
|
|
(8,187
|
)
|
Other investment income (loss), net
|
2,860
|
|
|
7,381
|
|
|
(5,002
|
)
|
(4)
|
U.S. GAAP repurchase agreements interest expense on the consolidated statements of operations includes the following components:
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Interest expense on repurchase agreements outstanding
|
327,633
|
|
|
189,425
|
|
|
118,846
|
|
Amortization of net deferred (gain) loss on de-designated interest rate swaps
|
(25,839
|
)
|
|
(25,544
|
)
|
|
5,154
|
|
Repurchase agreements interest expense
|
301,794
|
|
|
163,881
|
|
|
124,000
|
|
(5)
|
Cumulative dividends are charged to retained earnings when declared or earned under U.S. GAAP. Prior to 2017, we declared quarterly dividends on Series B Preferred Stock prior to dividends accumulating. As of September 14, 2017, we declared cumulative dividends on Series B Preferred Stock from the date of issuance through December 27, 2017. In December 2017, the Company deferred declaring its next dividend on Series B Preferred Stock to February 2018. Due to the change in declaration date, we recorded $9.1 million in Series B Preferred Stock dividends for the year ended December 31, 2017 compared to $12.0 million for the year ended December 31, 2016. We reduced core earnings for the quarter ended December 31, 2017 for the cumulative impact of deferring the declaration date to February 2018 because we consider all dividends accumulated during a quarter a current component of our capital costs regardless of the dividend declaration date.
|
(6)
|
Core earnings per share attributable to common stockholders is equal to core earnings divided by the basic weighted average number of common shares outstanding.
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Effective net interest income
(1)
|
280,772
|
|
|
269,187
|
|
|
246,021
|
|
Dividend income
|
3,790
|
|
|
3,247
|
|
|
3,185
|
|
Equity in earnings (losses) of unconsolidated ventures
|
3,402
|
|
|
(1,327
|
)
|
|
2,392
|
|
Total expenses
|
(47,792
|
)
|
|
(44,746
|
)
|
|
(41,806
|
)
|
Total core earnings
|
240,172
|
|
|
226,361
|
|
|
209,792
|
|
Dividends to preferred stockholders
|
(44,426
|
)
|
|
(28,080
|
)
|
|
(22,864
|
)
|
Preferred stock dividend declared but not accumulated
|
—
|
|
|
(2,870
|
)
|
|
—
|
|
Core earnings attributable to non-controlling interest
|
(2,790
|
)
|
|
(2,853
|
)
|
|
(2,634
|
)
|
Core earnings attributable to common stockholders
|
192,956
|
|
|
192,558
|
|
|
184,294
|
|
(1)
|
See below for a reconciliation of net interest income to effective net interest income, a non-GAAP measure.
|
|
63
|
|
|
64
|
|
|
Years Ended December 31,
|
||||||||||||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
||||||||||||
$ in thousands
|
Reconciliation
|
|
Yield/Effective Yield
|
|
Reconciliation
|
|
Yield/Effective Yield
|
|
Reconciliation
|
|
Yield/Effective Yield
|
||||||
Total interest income
|
643,016
|
|
|
3.55
|
%
|
|
545,055
|
|
|
3.20
|
%
|
|
478,682
|
|
|
3.07
|
%
|
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
|
22,478
|
|
|
0.13
|
%
|
|
23,343
|
|
|
0.14
|
%
|
|
24,343
|
|
|
0.15
|
%
|
Effective interest income
|
665,494
|
|
|
3.68
|
%
|
|
568,398
|
|
|
3.34
|
%
|
|
503,025
|
|
|
3.22
|
%
|
|
65
|
|
|
Years Ended December 31,
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||||||||
$ in thousands
|
Reconciliation
|
|
Cost of Funds / Effective Cost of Funds
|
|
Reconciliation
|
|
Cost of Funds / Effective Cost of Funds
|
|
Reconciliation
|
|
Cost of Funds / Effective Cost of Funds
|
||||||
Total interest expense
|
338,868
|
|
|
2.16
|
%
|
|
196,591
|
|
|
1.33
|
%
|
|
157,354
|
|
|
1.15
|
%
|
Add (Less): Amortization of net deferred gain (loss) on de-designated interest rate swaps
|
25,839
|
|
|
0.16
|
%
|
|
25,544
|
|
|
0.17
|
%
|
|
(5,154
|
)
|
|
(0.04
|
)%
|
Add: Contractual net interest expense on interest rate swaps recorded as gain (loss) on derivative instruments, net
|
20,015
|
|
|
0.13
|
%
|
|
77,076
|
|
|
0.52
|
%
|
|
104,804
|
|
|
0.76
|
%
|
Effective interest expense
|
384,722
|
|
|
2.45
|
%
|
|
299,211
|
|
|
2.02
|
%
|
|
257,004
|
|
|
1.87
|
%
|
|
Years Ended December 31,
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||||||||
$ in thousands
|
Reconciliation
|
|
Net Interest Rate Margin / Effective Interest Rate Margin
|
|
Reconciliation
|
|
Net Interest Rate Margin / Effective Interest Rate Margin
|
|
Reconciliation
|
|
Net Interest Rate Margin / Effective Interest Rate Margin
|
||||||
Net interest income
|
304,148
|
|
|
1.39
|
%
|
|
348,464
|
|
|
1.87
|
%
|
|
321,328
|
|
|
1.92
|
%
|
Add (Less): Amortization of net deferred (gain) loss on de-designated interest rate swaps
|
(25,839
|
)
|
|
(0.16
|
)%
|
|
(25,544
|
)
|
|
(0.17
|
)%
|
|
5,154
|
|
|
0.04
|
%
|
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
|
22,478
|
|
|
0.13
|
%
|
|
23,343
|
|
|
0.14
|
%
|
|
24,343
|
|
|
0.15
|
%
|
Less: Contractual net interest expense on interest rate swaps recorded as gain (loss) on derivative instruments, net
|
(20,015
|
)
|
|
(0.13
|
)%
|
|
(77,076
|
)
|
|
(0.52
|
)%
|
|
(104,804
|
)
|
|
(0.76
|
)%
|
Effective net interest income
|
280,772
|
|
|
1.23
|
%
|
|
269,187
|
|
|
1.32
|
%
|
|
246,021
|
|
|
1.35
|
%
|
|
66
|
|
$ in thousands
|
Agency RMBS and CMBS
|
Commercial Credit
(1)
|
Residential Credit
(2)
|
Total
|
||||
Investments
|
12,127,173
|
|
3,318,041
|
|
1,983,010
|
|
17,428,224
|
|
Cash and cash equivalents
(3)
|
68,689
|
|
45,632
|
|
21,296
|
|
135,617
|
|
Derivative assets, at fair value
(4)
|
15,089
|
|
—
|
|
—
|
|
15,089
|
|
Other assets
|
88,517
|
|
84,326
|
|
61,732
|
|
234,575
|
|
Total assets
|
12,299,468
|
|
3,447,999
|
|
2,066,038
|
|
17,813,505
|
|
|
|
|
|
|
||||
Repurchase agreements
|
10,339,802
|
|
1,616,473
|
|
1,646,209
|
|
13,602,484
|
|
Secured loans
(5)
|
600,856
|
|
1,049,144
|
|
—
|
|
1,650,000
|
|
Derivative liabilities, at fair value
(4)
|
23,219
|
|
171
|
|
—
|
|
23,390
|
|
Other liabilities
|
212,057
|
|
25,819
|
|
13,058
|
|
250,934
|
|
Total liabilities
|
11,175,934
|
|
2,691,607
|
|
1,659,267
|
|
15,526,808
|
|
|
|
|
|
|
||||
Total equity (allocated)
|
1,123,534
|
|
756,392
|
|
406,771
|
|
2,286,697
|
|
Adjustments to calculate repurchase agreement debt-to-equity ratio:
|
|
|
|
|
||||
Net equity in unsecured assets
(6)
|
—
|
|
(55,594
|
)
|
—
|
|
(55,594
|
)
|
Collateral pledged against secured loans
|
(702,952
|
)
|
(1,227,412
|
)
|
—
|
|
(1,930,364
|
)
|
Secured loans
|
600,856
|
|
1,049,144
|
|
—
|
|
1,650,000
|
|
Equity related to repurchase agreement debt
|
1,021,438
|
|
522,530
|
|
406,771
|
|
1,950,739
|
|
Debt-to-equity ratio
(7)
|
9.7
|
|
3.5
|
|
4.0
|
|
6.7
|
|
Repurchase agreement debt-to-equity ratio
(8)
|
10.1
|
|
3.1
|
|
4.0
|
|
7.0
|
|
(1)
|
Investments in non-Agency CMBS, commercial loans and investments in unconsolidated joint ventures are included in commercial credit.
|
(2)
|
Investments in non-Agency RMBS, GSE CRT and a loan participation interest are included in residential credit.
|
(3)
|
Cash and cash equivalents is allocated based on a percentage of equity for each asset class.
|
(4)
|
Derivative assets and liabilities are allocated based on the hedging strategy for each asset class.
|
(5)
|
Secured loans are allocated based on amount of collateral pledged.
|
(6)
|
Net equity in unsecured assets includes commercial loans and investments in unconsolidated joint ventures.
|
(7)
|
Debt-to-equity ratio is calculated as the ratio of total debt (sum of repurchase agreements and secured loans) to total equity.
|
|
67
|
|
(8)
|
Repurchase agreement debt-to-equity ratio is calculated as the ratio of repurchase agreements to equity related to repurchase agreement debt.
|
$ in thousands
|
Agency RMBS
|
Commercial Credit
(1)
|
Residential Credit
(2)
|
Exchangeable Senior Notes and Other
|
Total
|
|||||
Investments
|
12,849,851
|
|
3,434,196
|
|
2,124,487
|
|
—
|
|
18,408,534
|
|
Cash and cash equivalents
(3)
|
39,630
|
|
30,449
|
|
17,682
|
|
—
|
|
87,761
|
|
Restricted cash
|
—
|
|
620
|
|
—
|
|
—
|
|
620
|
|
Derivative assets, at fair value
(4)
|
6,896
|
|
—
|
|
—
|
|
—
|
|
6,896
|
|
Other assets
|
77,893
|
|
64,904
|
|
6,669
|
|
3,979
|
|
153,445
|
|
Total assets
|
12,974,270
|
|
3,530,169
|
|
2,148,838
|
|
3,979
|
|
18,657,256
|
|
|
|
|
|
|
|
|||||
Repurchase agreements
|
11,111,755
|
|
1,396,330
|
|
1,572,716
|
|
—
|
|
14,080,801
|
|
Secured loans
(5)
|
533,463
|
|
1,116,537
|
|
—
|
|
—
|
|
1,650,000
|
|
Exchangeable senior notes
|
—
|
|
—
|
|
—
|
|
143,231
|
|
143,231
|
|
Derivative liabilities, at fair value
(4)
|
31,548
|
|
1,217
|
|
—
|
|
—
|
|
32,765
|
|
Other liabilities
|
51,840
|
|
24,742
|
|
14,888
|
|
2,111
|
|
93,581
|
|
Total liabilities
|
11,728,606
|
|
2,538,826
|
|
1,587,604
|
|
145,342
|
|
16,000,378
|
|
|
|
|
|
|
|
|||||
Total equity (allocated)
|
1,245,664
|
|
991,343
|
|
561,234
|
|
(141,363
|
)
|
2,656,878
|
|
Adjustments to calculate repurchase agreement debt-to-equity ratio:
|
|
|
|
|
|
|||||
Net equity in unsecured assets and exchangeable senior notes
(6)
|
—
|
|
(217,780
|
)
|
—
|
|
141,363
|
|
(76,417
|
)
|
Collateral pledged against secured loans
|
(623,181
|
)
|
(1,304,315
|
)
|
—
|
|
—
|
|
(1,927,496
|
)
|
Secured loans
|
533,463
|
|
1,116,537
|
|
—
|
|
—
|
|
1,650,000
|
|
Equity related to repurchase agreement debt
|
1,155,946
|
|
585,785
|
|
561,234
|
|
—
|
|
2,302,965
|
|
Debt-to-equity ratio
(7)
|
9.3
|
|
2.5
|
|
2.8
|
|
NA
|
|
6.0
|
|
Repurchase agreement debt-to-equity ratio
(8)
|
9.6
|
|
2.4
|
|
2.8
|
|
NA
|
|
6.1
|
|
(1)
|
Investments in non-Agency CMBS, commercial loans and investments in unconsolidated joint ventures are included in commercial credit.
|
(2)
|
Investments in non-Agency RMBS and GSE CRT are included in residential credit.
|
(3)
|
Cash and cash equivalents is allocated based on a percentage of equity for each asset class.
|
(4)
|
Derivative assets and liabilities are allocated based on the hedging strategy for each asset class.
|
(5)
|
Secured loans are allocated based on amount of collateral pledged.
|
(6)
|
Net equity in unsecured assets and exchangeable senior notes includes commercial loans, investments in unconsolidated joint ventures and exchangeable senior notes and other.
|
(7)
|
Debt-to-equity ratio is calculated as the ratio of total debt (sum of repurchase agreements, secured loans and exchangeable senior notes) to total equity.
|
(8)
|
Repurchase agreement debt-to-equity ratio is calculated as the ratio of repurchase agreements to equity related to repurchase agreement debt.
|
|
68
|
|
|
69
|
|
|
70
|
|
(1)
|
Excluded from total contractual obligations are the amounts due to our Manager under our management agreement, as those obligations do not have fixed and determinable payments.
|
|
71
|
|
|
Year Ended December 31,
|
|||||
|
2018
|
|||||
|
Restricted Stock Units
|
|
Weighted Average Grant Date Fair Value
(1)
|
|||
Unvested at the beginning of the year
|
19,827
|
|
|
$
|
14.35
|
|
Shares granted during the year
|
7,055
|
|
|
15.37
|
|
|
Shares forfeited during the year
|
(3,967
|
)
|
|
14.56
|
|
|
Shares vested during the year
|
(11,864
|
)
|
|
14.71
|
|
|
Unvested at the end of the year
|
11,051
|
|
|
$
|
14.55
|
|
(1)
|
The grant date fair value of restricted stock awards is based on the closing market price of our common stock at the grant date.
|
|
72
|
|
|
73
|
|
|
74
|
|
Change in Interest Rates
|
Percentage Change
in Projected
Net Interest Income
|
|
Percentage Change
in Projected
Portfolio Value
|
||
+1.00%
|
(4.47
|
)%
|
|
(0.97
|
)%
|
+0.50%
|
(0.70
|
)%
|
|
(0.37
|
)%
|
-0.50%
|
(1.08
|
)%
|
|
(0.05
|
)%
|
-1.00%
|
(4.49
|
)%
|
|
(0.51
|
)%
|
•
|
monitoring and adjusting, if necessary, the reset index and interest rate related to our target assets and our financings;
|
|
75
|
|
•
|
attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;
|
•
|
using hedging instruments, primarily interest rate swap agreements but also financial futures, options, interest rate cap agreements, floors and forward sales to adjust the interest rate sensitivity of our target assets and our borrowings; and
|
•
|
actively managing, on an aggregate basis, the interest rate indices, interest rate adjustment periods, and gross reset margins of our target assets and the interest rate indices and adjustment periods of our financings.
|
|
76
|
|
|
77
|
|
Exhibit
No.
|
|
Description
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
3.3
|
|
|
|
|
|
3.4
|
|
|
|
|
|
3.5
|
|
|
|
|
|
4.1
|
|
|
|
|
|
4.2
|
|
|
|
|
|
4.3
|
|
|
|
|
|
4.4
|
|
|
|
|
|
4.5
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
|
|
|
|
|
78
|
|
|
79
|
|
|
Page
|
|
80
|
|
|
81
|
|
|
82
|
|
|
As of
|
||||
|
December 31, 2018
|
|
December 31, 2017
|
||
In thousands except share amounts
|
|
||||
ASSETS
|
|
|
|
||
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $17,082,825 and $17,560,811, respectively)
|
17,396,642
|
|
|
18,190,754
|
|
Commercial loans, held-for-investment
|
31,582
|
|
|
191,808
|
|
Cash and cash equivalents
|
135,617
|
|
|
88,381
|
|
Restricted cash
|
—
|
|
|
620
|
|
Due from counterparties
|
13,500
|
|
|
—
|
|
Investment related receivable
|
66,598
|
|
|
73,217
|
|
Derivative assets, at fair value
|
15,089
|
|
|
6,896
|
|
Other assets
|
154,477
|
|
|
105,580
|
|
Total assets
|
17,813,505
|
|
|
18,657,256
|
|
LIABILITIES AND EQUITY
|
|
|
|
||
Liabilities:
|
|
|
|
||
Repurchase agreements
|
13,602,484
|
|
|
14,080,801
|
|
Secured loans
|
1,650,000
|
|
|
1,650,000
|
|
Exchangeable senior notes, net
|
—
|
|
|
143,231
|
|
Derivative liabilities, at fair value
|
23,390
|
|
|
32,765
|
|
Dividends and distributions payable
|
49,578
|
|
|
50,193
|
|
Investment related payable
|
132,096
|
|
|
5,191
|
|
Accrued interest payable
|
37,620
|
|
|
17,845
|
|
Collateral held payable
|
18,083
|
|
|
7,327
|
|
Accounts payable and accrued expenses
|
1,694
|
|
|
2,200
|
|
Due to affiliate
|
11,863
|
|
|
10,825
|
|
Total liabilities
|
15,526,808
|
|
|
16,000,378
|
|
Commitments and contingencies (See Note 16)
|
|
|
|
||
Equity:
|
|
|
|
||
Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized:
|
|
|
|
||
7.75% Series A Cumulative Redeemable Preferred Stock: 5,600,000 shares issued and outstanding ($140,000 aggregate liquidation preference)
|
135,356
|
|
|
135,356
|
|
7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock: 6,200,000 shares issued and outstanding ($155,000 aggregate liquidation preference)
|
149,860
|
|
|
149,860
|
|
7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock: 11,500,000 shares issued and outstanding ($287,500 aggregate liquidation preference)
|
278,108
|
|
|
278,108
|
|
Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 111,584,996 and 111,624,159 shares issued and outstanding, respectively
|
1,115
|
|
|
1,116
|
|
Additional paid in capital
|
2,383,532
|
|
|
2,384,356
|
|
Accumulated other comprehensive income
|
220,813
|
|
|
261,029
|
|
Retained earnings (distributions in excess of earnings)
|
(882,087
|
)
|
|
(579,334
|
)
|
Total stockholders’ equity
|
2,286,697
|
|
|
2,630,491
|
|
Non-controlling interest
|
—
|
|
|
26,387
|
|
Total equity
|
2,286,697
|
|
|
2,656,878
|
|
Total liabilities and equity
|
17,813,505
|
|
|
18,657,256
|
|
|
83
|
|
|
Years Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
In thousands except share amounts
|
|
|
||||||
Interest Income
|
|
|
|
|
|
|||
Mortgage-backed and credit risk transfer securities
|
631,478
|
|
|
521,547
|
|
|
456,444
|
|
Commercial and other loans
|
11,538
|
|
|
23,508
|
|
|
22,238
|
|
Total interest income
|
643,016
|
|
|
545,055
|
|
|
478,682
|
|
Interest Expense
|
|
|
|
|
|
|||
Repurchase agreements
|
301,794
|
|
|
163,881
|
|
|
124,000
|
|
Secured loans
|
35,453
|
|
|
19,370
|
|
|
10,887
|
|
Exchangeable senior notes
|
1,621
|
|
|
13,340
|
|
|
22,467
|
|
Total interest expense
|
338,868
|
|
|
196,591
|
|
|
157,354
|
|
Net interest income
|
304,148
|
|
|
348,464
|
|
|
321,328
|
|
Other income (loss)
|
|
|
|
|
|
|||
Gain (loss) on investments, net
|
(327,700
|
)
|
|
(19,704
|
)
|
|
(17,542
|
)
|
Equity in earnings (losses) of unconsolidated ventures
|
3,402
|
|
|
(1,327
|
)
|
|
2,392
|
|
Gain (loss) on derivative instruments, net
|
(5,277
|
)
|
|
18,155
|
|
|
(62,815
|
)
|
Realized and unrealized credit derivative income (loss), net
|
(151
|
)
|
|
51,648
|
|
|
61,143
|
|
Net loss on extinguishment of debt
|
(26
|
)
|
|
(6,814
|
)
|
|
—
|
|
Other investment income (loss), net
|
2,860
|
|
|
7,381
|
|
|
(5,002
|
)
|
Total other income (loss)
|
(326,892
|
)
|
|
49,339
|
|
|
(21,824
|
)
|
Expenses
|
|
|
|
|
|
|||
Management fee — related party
|
40,722
|
|
|
37,556
|
|
|
34,541
|
|
General and administrative
|
7,070
|
|
|
7,190
|
|
|
7,265
|
|
Total expenses
|
47,792
|
|
|
44,746
|
|
|
41,806
|
|
Net income (loss)
|
(70,536
|
)
|
|
353,057
|
|
|
257,698
|
|
Net income (loss) attributable to non-controlling interest
|
254
|
|
|
4,450
|
|
|
3,287
|
|
Net income (loss) attributable to Invesco Mortgage Capital Inc.
|
(70,790
|
)
|
|
348,607
|
|
|
254,411
|
|
Dividends to preferred stockholders
|
44,426
|
|
|
28,080
|
|
|
22,864
|
|
Net income (loss) attributable to common stockholders
|
(115,216
|
)
|
|
320,527
|
|
|
231,547
|
|
Earnings per share:
|
|
|
|
|
|
|||
Net income (loss) attributable to common stockholders
|
|
|
|
|
|
|||
Basic
|
(1.03
|
)
|
|
2.87
|
|
|
2.07
|
|
Diluted
|
(1.03
|
)
|
|
2.75
|
|
|
1.98
|
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
|||
Basic
|
111,637,035
|
|
|
111,610,393
|
|
|
111,973,404
|
|
Diluted
|
111,637,035
|
|
|
123,040,827
|
|
|
130,254,003
|
|
|
84
|
|
|
Years Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
In thousands
|
|
|
||||||
Net income (loss)
|
(70,536
|
)
|
|
353,057
|
|
|
257,698
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|||
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net
|
(210,424
|
)
|
|
(9,885
|
)
|
|
(37,632
|
)
|
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net
|
193,162
|
|
|
1,508
|
|
|
6,134
|
|
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense
|
(25,839
|
)
|
|
(25,544
|
)
|
|
5,154
|
|
Currency translation adjustments on investment in unconsolidated venture
|
(447
|
)
|
|
863
|
|
|
128
|
|
Total other comprehensive income (loss)
|
(43,548
|
)
|
|
(33,058
|
)
|
|
(26,216
|
)
|
Comprehensive income (loss)
|
(114,084
|
)
|
|
319,999
|
|
|
231,482
|
|
Less: Comprehensive (income) loss attributable to non-controlling interest
|
979
|
|
|
(4,032
|
)
|
|
(2,939
|
)
|
Less: Dividends to preferred stockholders
|
(44,426
|
)
|
|
(28,080
|
)
|
|
(22,864
|
)
|
Comprehensive income (loss) attributable to common stockholders
|
(157,531
|
)
|
|
287,887
|
|
|
205,679
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Common Stockholders
|
|
|
|
|
|
|
||||||||||||||||||||||
In thousands except share amounts
|
Series A
Preferred Stock
|
|
Series B
Preferred Stock
|
|
Series C
Preferred Stock
|
|
Common Stock
|
|
Additional
Paid in
Capital
|
|
Accumulated
Other
Comprehensive
Income (loss)
|
|
Retained earnings (Distributions
in excess
of earnings)
|
|
Total
Stockholders’
Equity
|
|
Non-
Controlling
Interest
|
|
Total
Equity
|
||||||||||||||||||||||
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||||||||||
Balance at December 31, 2015
|
5,600,000
|
|
|
135,356
|
|
|
6,200,000
|
|
|
149,860
|
|
|
—
|
|
|
—
|
|
|
113,619,471
|
|
|
1,136
|
|
|
2,407,372
|
|
|
318,624
|
|
|
(771,313
|
)
|
|
2,241,035
|
|
|
25,873
|
|
|
2,266,908
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
254,411
|
|
|
254,411
|
|
|
3,287
|
|
|
257,698
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,868
|
)
|
|
—
|
|
|
(25,868
|
)
|
|
(348
|
)
|
|
(26,216
|
)
|
Proceeds from issuance of common stock, net of offering costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,201
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
35
|
|
Repurchase of shares of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,063,451
|
)
|
|
(20
|
)
|
|
(24,980
|
)
|
|
—
|
|
|
—
|
|
|
(25,000
|
)
|
|
—
|
|
|
(25,000
|
)
|
Stock awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35,374
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(178,537
|
)
|
|
(178,537
|
)
|
|
—
|
|
|
(178,537
|
)
|
Common unit dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,280
|
)
|
|
(2,280
|
)
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,864
|
)
|
|
(22,864
|
)
|
|
—
|
|
|
(22,864
|
)
|
Amortization of equity-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
434
|
|
|
—
|
|
|
—
|
|
|
434
|
|
|
6
|
|
|
440
|
|
Rebalancing of ownership percentage of non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,998
|
)
|
|
912
|
|
|
—
|
|
|
(2,086
|
)
|
|
2,086
|
|
|
—
|
|
Balance at December 31, 2016
|
5,600,000
|
|
|
135,356
|
|
|
6,200,000
|
|
|
149,860
|
|
|
—
|
|
|
—
|
|
|
111,594,595
|
|
|
1,116
|
|
|
2,379,863
|
|
|
293,668
|
|
|
(718,303
|
)
|
|
2,241,560
|
|
|
28,624
|
|
|
2,270,184
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
348,607
|
|
|
348,607
|
|
|
4,450
|
|
|
353,057
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,640
|
)
|
|
—
|
|
|
(32,640
|
)
|
|
(418
|
)
|
|
(33,058
|
)
|
Proceeds from issuance of preferred stock, net of offering costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,500,000
|
|
|
278,108
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
278,108
|
|
|
—
|
|
|
278,108
|
|
Stock awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,564
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(181,931
|
)
|
|
(181,931
|
)
|
|
—
|
|
|
(181,931
|
)
|
Common unit dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
(2,323
|
)
|
|
(2,323
|
)
|
||
Preferred stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,707
|
)
|
|
(27,707
|
)
|
|
—
|
|
|
(27,707
|
)
|
Amortization of equity-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
541
|
|
|
—
|
|
|
—
|
|
|
541
|
|
|
7
|
|
|
548
|
|
Rebalancing of ownership percentage of non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,952
|
|
|
1
|
|
|
—
|
|
|
3,953
|
|
|
(3,953
|
)
|
|
—
|
|
Balance at December 31, 2017
|
5,600,000
|
|
|
135,356
|
|
|
6,200,000
|
|
|
149,860
|
|
|
11,500,000
|
|
|
278,108
|
|
|
111,624,159
|
|
|
1,116
|
|
|
2,384,356
|
|
|
261,029
|
|
|
(579,334
|
)
|
|
2,630,491
|
|
|
26,387
|
|
|
2,656,878
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(70,790
|
)
|
|
(70,790
|
)
|
|
254
|
|
|
(70,536
|
)
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42,315
|
)
|
|
—
|
|
|
(42,315
|
)
|
|
(1,233
|
)
|
|
(43,548
|
)
|
Repurchase of shares of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75,100
|
)
|
|
(1
|
)
|
|
(1,143
|
)
|
|
—
|
|
|
—
|
|
|
(1,144
|
)
|
|
—
|
|
|
(1,144
|
)
|
Stock awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35,937
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(187,537
|
)
|
|
(187,537
|
)
|
|
—
|
|
|
(187,537
|
)
|
Common unit dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,796
|
)
|
|
(1,796
|
)
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44,426
|
)
|
|
(44,426
|
)
|
|
—
|
|
|
(44,426
|
)
|
Amortization of equity-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
561
|
|
|
—
|
|
|
—
|
|
|
561
|
|
|
9
|
|
|
570
|
|
Purchase of OP units from non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(798
|
)
|
|
2,100
|
|
|
—
|
|
|
1,302
|
|
|
(23,066
|
)
|
|
(21,764
|
)
|
Rebalancing of ownership percentage of non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
556
|
|
|
(1
|
)
|
|
—
|
|
|
555
|
|
|
(555
|
)
|
|
—
|
|
Balance at December 31, 2018
|
5,600,000
|
|
|
135,356
|
|
|
6,200,000
|
|
|
149,860
|
|
|
11,500,000
|
|
|
278,108
|
|
|
111,584,996
|
|
|
1,115
|
|
|
2,383,532
|
|
|
220,813
|
|
|
(882,087
|
)
|
|
2,286,697
|
|
|
—
|
|
|
2,286,697
|
|
|
86
|
|
In thousands
|
Years Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Cash Flows from Operating Activities
|
|
|
|
|
|
|||
Net income (loss)
|
(70,536
|
)
|
|
353,057
|
|
|
257,698
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|||
Amortization of mortgage-backed and credit risk transfer securities premiums and (discounts), net
|
42,608
|
|
|
67,152
|
|
|
84,330
|
|
Realized and unrealized (gain) loss on derivative instruments, net
|
(14,738
|
)
|
|
(95,231
|
)
|
|
(41,988
|
)
|
Realized and unrealized (gain) loss on credit derivatives, net
|
22,629
|
|
|
(28,305
|
)
|
|
(36,800
|
)
|
(Gain) loss on investments, net
|
327,700
|
|
|
19,704
|
|
|
17,542
|
|
Loss from investments in unconsolidated ventures in excess of distributions received
|
392
|
|
|
1,972
|
|
|
(2,392
|
)
|
Other amortization
|
(25,184
|
)
|
|
(23,888
|
)
|
|
7,759
|
|
Net loss on extinguishment of debt
|
26
|
|
|
6,814
|
|
|
—
|
|
(Gain) loss on foreign currency transactions, net
|
1,038
|
|
|
(4,103
|
)
|
|
8,260
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|||
(Increase) decrease in operating assets
|
(155
|
)
|
|
(7,774
|
)
|
|
3,966
|
|
Increase (decrease) in operating liabilities
|
20,484
|
|
|
1,203
|
|
|
(2,578
|
)
|
Net cash provided by operating activities
|
304,264
|
|
|
290,601
|
|
|
295,797
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|||
Purchase of mortgage-backed and credit risk transfer securities
|
(6,217,723
|
)
|
|
(6,277,918
|
)
|
|
(2,660,925
|
)
|
Purchase of U.S. Treasury Securities
|
—
|
|
|
—
|
|
|
(403,105
|
)
|
Proceeds from sale of U.S. Treasury securities
|
—
|
|
|
—
|
|
|
524,478
|
|
(Contributions to) distributions from investments in unconsolidated ventures, net
|
1,121
|
|
|
6,220
|
|
|
7,632
|
|
Change in other assets
|
(51,017
|
)
|
|
(3,457
|
)
|
|
623
|
|
Principal payments from mortgage-backed and credit risk transfer securities
|
1,986,930
|
|
|
2,401,951
|
|
|
2,614,613
|
|
Proceeds from sale of mortgage-backed and credit risk transfer securities
|
4,749,807
|
|
|
625,540
|
|
|
1,034,295
|
|
Payments on sale of credit derivatives
|
—
|
|
|
—
|
|
|
(6,017
|
)
|
Settlement (termination) of futures, forwards, swaps, swaptions and TBAs, net
|
(2,830
|
)
|
|
67,838
|
|
|
(59,658
|
)
|
Net change in due from counterparties and collateral held payable
|
(3,994
|
)
|
|
5,627
|
|
|
—
|
|
Principal payments from commercial loans held-for-investment
|
160,934
|
|
|
90,713
|
|
|
15,000
|
|
Origination and advances of commercial loans, net of origination fees
|
(1,677
|
)
|
|
(4,799
|
)
|
|
(87,202
|
)
|
Net cash provided by (used in) investing activities
|
621,551
|
|
|
(3,088,285
|
)
|
|
979,734
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|||
Proceeds from issuance of common stock
|
—
|
|
|
—
|
|
|
35
|
|
Repurchase of common stock
|
(1,144
|
)
|
|
—
|
|
|
(25,000
|
)
|
Proceeds from issuance of preferred stock
|
—
|
|
|
278,226
|
|
|
—
|
|
Due from counterparties - secured loans
|
—
|
|
|
—
|
|
|
29,445
|
|
Proceeds from repurchase agreements
|
136,573,821
|
|
|
146,886,038
|
|
|
127,056,247
|
|
Principal repayments of repurchase agreements
|
(137,052,138
|
)
|
|
(143,964,490
|
)
|
|
(128,023,042
|
)
|
Proceeds from secured loans
|
—
|
|
|
—
|
|
|
125,000
|
|
Principal repayments of secured loans
|
—
|
|
|
—
|
|
|
(125,000
|
)
|
Extinguishment of exchangeable senior notes
|
(143,433
|
)
|
|
(262,069
|
)
|
|
—
|
|
Payments of deferred costs
|
(167
|
)
|
|
(116
|
)
|
|
(136
|
)
|
Purchase of Operating Partnership units from non-controlling interest
|
(21,764
|
)
|
|
—
|
|
|
—
|
|
Payments of dividends and distributions
|
(234,374
|
)
|
|
(212,692
|
)
|
|
(204,491
|
)
|
Net cash (used in) provided by financing activities
|
(879,199
|
)
|
|
2,724,897
|
|
|
(1,166,942
|
)
|
Net change in cash, cash equivalents and restricted cash
|
46,616
|
|
|
(72,787
|
)
|
|
108,589
|
|
Cash, cash equivalents, and restricted cash beginning of period
|
89,001
|
|
|
161,788
|
|
|
53,199
|
|
Cash, cash equivalents, and restricted cash end of period
|
135,617
|
|
|
89,001
|
|
|
161,788
|
|
Supplement Disclosure of Cash Flow Information
|
|
|
|
|
|
|||
Interest paid
|
344,422
|
|
|
220,299
|
|
|
146,840
|
|
Non-cash Investing and Financing Activities Information
|
|
|
|
|
|
|||
Net change in unrealized gain (loss) on mortgage-backed and credit risk transfer securities
|
(17,262
|
)
|
|
(8,377
|
)
|
|
(31,498
|
)
|
Dividends and distributions declared not paid
|
49,578
|
|
|
50,193
|
|
|
50,924
|
|
Net change in investment related payable (receivable)
|
(135,086
|
)
|
|
(25,948
|
)
|
|
115,304
|
|
Net change in repurchase agreements, not settled
|
—
|
|
|
(1,416
|
)
|
|
(1,416
|
)
|
Change in due from counterparties and collateral held payable
|
—
|
|
|
—
|
|
|
(5,886
|
)
|
|
87
|
|
•
|
Residential mortgage-backed securities ("RMBS") that are guaranteed by a U.S. government agency such as the Government National Mortgage Association (“Ginnie Mae”), or a federally chartered corporation such as the Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac") (collectively "Agency RMBS");
|
•
|
Commercial mortgage-backed securities (“CMBS”) that are guaranteed by a U.S. government agency such as or a federally chartered corporation such as Freddie Mac or Freddie Mac (collectively "Agency CMBS");
|
•
|
RMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency RMBS”);
|
•
|
CMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency CMBS”);
|
•
|
Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises ("GSE CRT");
|
•
|
Residential and commercial mortgage loans; and
|
•
|
Other real estate-related financing agreements.
|
|
88
|
|
|
89
|
|
|
90
|
|
•
|
Loan-to-value ratios;
|
•
|
The most recent financial information available for each loan and associated properties, including net operating income, debt service coverage ratios, occupancy rates, rent rolls, as well as any other factors we consider relevant, including, but not limited to, specific loan trigger events that would indicate an adverse change in expected cash flows or payment delinquency;
|
•
|
Economic trends, both macroeconomic as well as those directly affecting the properties associated with the loans, and the supply and demand trends in the market in which the subject property is located; and
|
•
|
The loan sponsor or borrowing entity’s ability to ensure that properties associated with the loan are managed and operated sufficiently.
|
|
91
|
|
|
92
|
|
|
93
|
|
|
94
|
|
$ in thousands
|
Carrying
Amount
|
|
Company's Maximum Risk of Loss
|
||
Non-Agency CMBS
|
3,286,459
|
|
|
3,286,459
|
|
Non-Agency RMBS
|
1,163,682
|
|
|
1,163,682
|
|
Investments in unconsolidated ventures
|
24,012
|
|
|
24,012
|
|
Total
|
4,474,153
|
|
|
4,474,153
|
|
|
95
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|||||||
$ in thousands
|
Principal/ Notional
Balance |
|
Unamortized
Premium
(Discount)
|
|
Amortized
Cost
|
|
Unrealized
Gain/
(Loss), net
|
|
Fair
Value
|
|
Period-
end Weighted Average Yield (1) |
||||||
Agency RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
15 year fixed-rate
|
417,233
|
|
|
5,077
|
|
|
422,310
|
|
|
1,944
|
|
|
424,254
|
|
|
3.27
|
%
|
30 year fixed-rate
|
9,599,301
|
|
|
298,693
|
|
|
9,897,994
|
|
|
(125,225
|
)
|
|
9,772,769
|
|
|
3.55
|
%
|
ARM*
|
105,453
|
|
|
350
|
|
|
105,803
|
|
|
(56
|
)
|
|
105,747
|
|
|
2.74
|
%
|
Hybrid ARM*
|
548,133
|
|
|
13,425
|
|
|
561,558
|
|
|
(7,357
|
)
|
|
554,201
|
|
|
2.80
|
%
|
Total Agency RMBS pass-through
|
10,670,120
|
|
|
317,545
|
|
|
10,987,665
|
|
|
(130,694
|
)
|
|
10,856,971
|
|
|
3.49
|
%
|
Agency-CMO
(2)
|
907,862
|
|
|
(631,180
|
)
|
|
276,682
|
|
|
(8,991
|
)
|
|
267,691
|
|
|
3.61
|
%
|
Agency CMBS
|
973,122
|
|
|
15,058
|
|
|
988,180
|
|
|
14,330
|
|
|
1,002,510
|
|
|
3.54
|
%
|
Non-Agency CMBS
(3)
|
4,024,715
|
|
|
(727,307
|
)
|
|
3,297,408
|
|
|
(10,949
|
)
|
|
3,286,459
|
|
|
5.05
|
%
|
Non-Agency RMBS
(4)(5)(6)
|
2,800,335
|
|
|
(1,748,223
|
)
|
|
1,052,112
|
|
|
111,570
|
|
|
1,163,682
|
|
|
7.24
|
%
|
GSE CRT
(7)
|
738,529
|
|
|
21,259
|
|
|
759,788
|
|
|
59,541
|
|
|
819,329
|
|
|
3.10
|
%
|
Total
|
20,114,683
|
|
|
(2,752,848
|
)
|
|
17,361,835
|
|
|
34,807
|
|
|
17,396,642
|
|
|
4.00
|
%
|
(1)
|
Period-end weighted average yield is based on amortized cost as of
December 31, 2018
and incorporates future prepayment and loss assumptions.
|
(2)
|
Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent
73.6%
of principal/notional balance,
13.5%
of amortized cost and
12.4%
of fair value.
|
(3)
|
Non-Agency CMBS includes interest-only securities which represent of
15.0%
principal/notional balance,
0.4%
of amortized cost and
0.5%
of fair value.
|
(4)
|
Non-Agency RMBS held by us is
43.5%
variable rate,
50.7%
fixed rate and
5.8%
floating rate based on fair value.
|
(5)
|
Of the total discount in non-Agency RMBS,
$145.6 million
is non-accretable calculated using the principal/notional balance and based on estimated future cash flows of the securities.
|
(6)
|
Non-Agency RMBS includes interest-only securities ("non-Agency IO") which represent
55.4%
of principal/notional balance,
2.3%
of amortized cost and
2.4%
of fair value.
|
(7)
|
GSE CRT weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option that is recorded as realized and unrealized credit derivative income (loss), net.
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||||
$ in thousands
|
Principal/ Notional
Balance
|
|
Unamortized
Premium
(Discount)
|
|
Amortized
Cost
|
|
Unrealized
Gain/
(Loss), net
|
|
Fair Value
|
|
Period-
end
Weighted
Average
Yield
(1)
|
||||||
Agency RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
15 year fixed-rate
|
2,917,307
|
|
|
119,120
|
|
|
3,036,427
|
|
|
(61,645
|
)
|
|
2,974,782
|
|
|
2.17
|
%
|
30 year fixed-rate
|
7,354,211
|
|
|
295,977
|
|
|
7,650,188
|
|
|
(9,648
|
)
|
|
7,640,540
|
|
|
3.09
|
%
|
ARM*
|
238,486
|
|
|
1,609
|
|
|
240,095
|
|
|
1,105
|
|
|
241,200
|
|
|
2.60
|
%
|
Hybrid ARM
|
1,696,148
|
|
|
26,066
|
|
|
1,722,214
|
|
|
(2,829
|
)
|
|
1,719,385
|
|
|
2.54
|
%
|
Total Agency RMBS pass-through
|
12,206,152
|
|
|
442,772
|
|
|
12,648,924
|
|
|
(73,017
|
)
|
|
12,575,907
|
|
|
2.79
|
%
|
Agency-CMO
(2)
|
1,226,539
|
|
|
(942,290
|
)
|
|
284,249
|
|
|
(10,306
|
)
|
|
273,943
|
|
|
2.91
|
%
|
Non-Agency CMBS
(3)
|
3,879,775
|
|
|
(704,097
|
)
|
|
3,175,678
|
|
|
40,739
|
|
|
3,216,417
|
|
|
4.92
|
%
|
Non-Agency RMBS
(4)(5)(6)
|
2,785,704
|
|
|
(1,661,683
|
)
|
|
1,124,021
|
|
|
133,587
|
|
|
1,257,608
|
|
|
7.19
|
%
|
GSE CRT
(7)
|
757,183
|
|
|
24,306
|
|
|
781,489
|
|
|
85,390
|
|
|
866,879
|
|
|
2.45
|
%
|
Total
|
20,855,353
|
|
|
(2,840,992
|
)
|
|
18,014,361
|
|
|
176,393
|
|
|
18,190,754
|
|
|
3.42
|
%
|
(1)
|
Period-end weighted average yield based on amortized cost as of
December 31, 2017
and incorporates future prepayment and loss assumptions.
|
(2)
|
Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent
81.8%
of principal/notional balance,
20.9%
of amortized cost and
18.7%
of fair value.
|
|
96
|
|
(3)
|
Non-Agency CMBS includes interest-only securities which represent
15.8%
of principal/notional balance,
0.5%
of amortized cost and
0.6%
of fair value.
|
(4)
|
Non-Agency RMBS held by us is
52.2%
variable rate,
37.8%
fixed rate and
10.0%
floating rate based on fair value.
|
(5)
|
Of the total discount in non-Agency RMBS,
$195.3 million
is non-accretable calculated using the principal/notional balance and based on estimated future cash flows of the securities.
|
(6)
|
Non-Agency RMBS includes interest-only securities ("non-Agency IO") which represent
51.5%
of principal/notional balance,
2.0%
of amortized cost and
1.8%
of fair value.
|
(7)
|
GSE CRT weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option that is recorded as realized and unrealized credit derivative income (loss), net.
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||
$ in thousands
|
Available-for-sale Securities
|
|
Securities under Fair Value Option
|
|
Total
Fair Value
|
|
Available-for-sale Securities
|
|
Securities under Fair Value Option
|
|
Total
Fair Value |
||||||
Agency RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
15 year fixed-rate
|
204,347
|
|
|
219,907
|
|
|
424,254
|
|
|
2,842,440
|
|
|
132,342
|
|
|
2,974,782
|
|
30 year fixed-rate
|
1,093,070
|
|
|
8,679,699
|
|
|
9,772,769
|
|
|
2,467,871
|
|
|
5,172,669
|
|
|
7,640,540
|
|
ARM
|
105,747
|
|
|
—
|
|
|
105,747
|
|
|
241,200
|
|
|
—
|
|
|
241,200
|
|
Hybrid ARM
|
521,199
|
|
|
33,002
|
|
|
554,201
|
|
|
1,719,385
|
|
|
—
|
|
|
1,719,385
|
|
Total Agency RMBS pass-through
|
1,924,363
|
|
|
8,932,608
|
|
|
10,856,971
|
|
|
7,270,896
|
|
|
5,305,011
|
|
|
12,575,907
|
|
Agency-CMO
|
168,385
|
|
|
99,306
|
|
|
267,691
|
|
|
203,351
|
|
|
70,592
|
|
|
273,943
|
|
Agency CMBS
|
—
|
|
|
1,002,510
|
|
|
1,002,510
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-Agency CMBS
|
2,153,403
|
|
|
1,133,056
|
|
|
3,286,459
|
|
|
2,376,413
|
|
|
840,004
|
|
|
3,216,417
|
|
Non-Agency RMBS
|
961,445
|
|
|
202,237
|
|
|
1,163,682
|
|
|
1,236,178
|
|
|
21,430
|
|
|
1,257,608
|
|
GSE CRT
|
586,231
|
|
|
233,098
|
|
|
819,329
|
|
|
635,537
|
|
|
231,342
|
|
|
866,879
|
|
Total
|
5,793,827
|
|
|
11,602,815
|
|
|
17,396,642
|
|
|
11,722,375
|
|
|
6,468,379
|
|
|
18,190,754
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||
$ in thousands
|
MBS and GSE CRT Securities
|
|
Interest-Only Securities
|
|
Total
|
|
MBS and GSE CRT Securities
|
|
Interest-Only Securities
|
|
Total
|
||||||
Principal/ notional balance
|
17,442,367
|
|
|
2,672,316
|
|
|
20,114,683
|
|
|
17,974,390
|
|
|
2,880,963
|
|
|
20,855,353
|
|
Unamortized premium
|
395,907
|
|
|
—
|
|
|
395,907
|
|
|
521,626
|
|
|
—
|
|
|
521,626
|
|
Unamortized discount
|
(549,988
|
)
|
|
(2,598,767
|
)
|
|
(3,148,755
|
)
|
|
(577,344
|
)
|
|
(2,785,274
|
)
|
|
(3,362,618
|
)
|
Gross unrealized gains
(1)
|
238,579
|
|
|
7,448
|
|
|
246,027
|
|
|
336,543
|
|
|
5,113
|
|
|
341,656
|
|
Gross unrealized losses
(1)
|
(204,664
|
)
|
|
(6,556
|
)
|
|
(211,220
|
)
|
|
(155,146
|
)
|
|
(10,117
|
)
|
|
(165,263
|
)
|
Fair value
|
17,322,201
|
|
|
74,441
|
|
|
17,396,642
|
|
|
18,100,069
|
|
|
90,685
|
|
|
18,190,754
|
|
(1)
|
Gross unrealized gains and losses includes gains (losses) recognized in net income for securities accounted for as derivatives or under the fair value option as well as gains (losses) for available-for-sale securities which are recognized as adjustments to other comprehensive income. Realization occurs upon sale or settlement of such securities. Further detail on the components of our total gains (losses) on investments, net for the years ended
December 31, 2018
and
2017
is provided below within this Note 4.
|
|
97
|
|
$ in thousands
|
December 31, 2018
|
|
December 31, 2017
|
||
Less than one year
|
110,020
|
|
|
135,559
|
|
Greater than one year and less than five years
|
3,508,100
|
|
|
7,934,836
|
|
Greater than or equal to five years
|
13,778,522
|
|
|
10,120,359
|
|
Total
|
17,396,642
|
|
|
18,190,754
|
|
December 31, 2018
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
|||||||||||||||||||||
$ in thousands
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|||||||||
Agency RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
15 year fixed-rate
|
86,241
|
|
|
(814
|
)
|
|
50
|
|
|
16,660
|
|
|
(189
|
)
|
|
22
|
|
|
102,901
|
|
|
(1,003
|
)
|
|
72
|
|
30 year fixed-rate
|
3,966,347
|
|
|
(49,182
|
)
|
|
158
|
|
|
2,846,090
|
|
|
(94,716
|
)
|
|
95
|
|
|
6,812,437
|
|
|
(143,898
|
)
|
|
253
|
|
ARM
|
2,632
|
|
|
(28
|
)
|
|
1
|
|
|
49,954
|
|
|
(785
|
)
|
|
10
|
|
|
52,586
|
|
|
(813
|
)
|
|
11
|
|
Hybrid ARM
|
6,758
|
|
|
(59
|
)
|
|
2
|
|
|
453,463
|
|
|
(8,390
|
)
|
|
71
|
|
|
460,221
|
|
|
(8,449
|
)
|
|
73
|
|
Total Agency RMBS pass-through
(1)
|
4,061,978
|
|
|
(50,083
|
)
|
|
211
|
|
|
3,366,167
|
|
|
(104,080
|
)
|
|
198
|
|
|
7,428,145
|
|
|
(154,163
|
)
|
|
409
|
|
Agency-CMO
(2)
|
152,962
|
|
|
(6,315
|
)
|
|
34
|
|
|
101,705
|
|
|
(5,100
|
)
|
|
19
|
|
|
254,667
|
|
|
(11,415
|
)
|
|
53
|
|
Non-Agency CMBS
(3)
|
1,214,691
|
|
|
(17,778
|
)
|
|
94
|
|
|
659,298
|
|
|
(25,381
|
)
|
|
52
|
|
|
1,873,989
|
|
|
(43,159
|
)
|
|
146
|
|
Non-Agency RMBS
(4)
|
87,850
|
|
|
(1,152
|
)
|
|
19
|
|
|
89,265
|
|
|
(1,138
|
)
|
|
16
|
|
|
177,115
|
|
|
(2,290
|
)
|
|
35
|
|
GSE CRT
(5)
|
9,639
|
|
|
(193
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,639
|
|
|
(193
|
)
|
|
1
|
|
Total
|
5,527,120
|
|
|
(75,521
|
)
|
|
359
|
|
|
4,216,435
|
|
|
(135,699
|
)
|
|
285
|
|
|
9,743,555
|
|
|
(211,220
|
)
|
|
644
|
|
(1)
|
Amounts disclosed includes Agency RMBS with a fair value of $
6.1 billion
for which the fair value option has been elected. Such securities have unrealized losses of $
130.2 million
.
|
(2)
|
Amounts disclosed includes Agency IO and Agency-CMO with fair value of
$21.8 million
and
$66.0 million
, respectively, for which the fair value option has been elected. These Agency IO and Agency-CMO securities have unrealized losses of
$6.3 million
and
$845,000
, respectively.
|
(3)
|
Amounts disclosed includes non-Agency CMBS with a fair value of
$831.3 million
for which the fair value option has been elected. Such securities have unrealized losses of
$26.3 million
.
|
(4)
|
Amounts disclosed includes non-Agency RMBS and non-Agency IO with a fair value of
$6.2 million
and
$3.7 million
, respectively for which the fair value option has been elected. Such securities have unrealized losses of
$79,000
and
$269,000
, respectively.
|
(5)
|
Amounts disclosed includes GSE CRT with a fair value of
$9.6 million
for which fair value option has been elected. Such securities have unrealized losses of
$193,000
.
|
|
98
|
|
December 31, 2017
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
|||||||||||||||||||||
$ in thousands
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|||||||||
Agency RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
15 year fixed-rate
|
111,020
|
|
|
(321
|
)
|
|
26
|
|
|
2,406,021
|
|
|
(67,285
|
)
|
|
133
|
|
|
2,517,041
|
|
|
(67,606
|
)
|
|
159
|
|
30 year fixed-rate
|
3,677,576
|
|
|
(20,730
|
)
|
|
107
|
|
|
963,547
|
|
|
(27,158
|
)
|
|
56
|
|
|
4,641,123
|
|
|
(47,888
|
)
|
|
163
|
|
ARM
|
101,173
|
|
|
(902
|
)
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
101,173
|
|
|
(902
|
)
|
|
12
|
|
Hybrid ARM
|
614,321
|
|
|
(4,189
|
)
|
|
73
|
|
|
517,642
|
|
|
(8,091
|
)
|
|
47
|
|
|
1,131,963
|
|
|
(12,280
|
)
|
|
120
|
|
Total Agency RMBS pass-through
(1)
|
4,504,090
|
|
|
(26,142
|
)
|
|
218
|
|
|
3,887,210
|
|
|
(102,534
|
)
|
|
236
|
|
|
8,391,300
|
|
|
(128,676
|
)
|
|
454
|
|
Agency-CMO
(2)
|
75,299
|
|
|
(10,433
|
)
|
|
44
|
|
|
81,988
|
|
|
(2,309
|
)
|
|
5
|
|
|
157,287
|
|
|
(12,742
|
)
|
|
49
|
|
Non-Agency CMBS
(3)
|
892,553
|
|
|
(17,612
|
)
|
|
81
|
|
|
135,139
|
|
|
(3,792
|
)
|
|
12
|
|
|
1,027,692
|
|
|
(21,404
|
)
|
|
93
|
|
Non-Agency RMBS
(4)
|
84,439
|
|
|
(709
|
)
|
|
15
|
|
|
96,263
|
|
|
(1,732
|
)
|
|
11
|
|
|
180,702
|
|
|
(2,441
|
)
|
|
26
|
|
Total
|
5,556,381
|
|
|
(54,896
|
)
|
|
358
|
|
|
4,200,600
|
|
|
(110,367
|
)
|
|
264
|
|
|
9,756,981
|
|
|
(165,263
|
)
|
|
622
|
|
(1)
|
Amounts disclosed includes Agency RMBS with a fair value of $
3.4 billion
for which the fair value option has been elected. Such securities have unrealized losses of $
22.8 million
.
|
(2)
|
Fair value includes unrealized losses on Agency IO of
$10.1 million
and and unrealized losses on CMO of
$2.7 million
.
|
(3)
|
Amounts disclosed include non-Agency CMBS with a fair value of
$596.0 million
for which the fair value option has been elected. Such securities have unrealized losses of
$8.9 million
.
|
(4)
|
Amounts disclosed include non-Agency IO with a fair value of
$530,000
for which the fair value option has been elected. Such securities have unrealized losses of $
39,000
.
|
|
Years Ended December 31,
|
||||
$ in thousands
|
2018
|
|
2017
|
||
RMBS interest-only securities
|
7,761
|
|
|
11,208
|
|
Non-Agency RMBS
(1)
|
85
|
|
|
754
|
|
Total
|
7,846
|
|
|
11,962
|
|
(1)
|
Amounts disclosed relate to credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income.
|
|
99
|
|
|
Years Ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Gross realized gains on sale of investments
|
774
|
|
|
2,208
|
|
|
14,196
|
|
Gross realized losses on sale of investments
|
(218,910
|
)
|
|
(3,873
|
)
|
|
(21,635
|
)
|
Other-than-temporary impairment losses
|
(7,846
|
)
|
|
(11,962
|
)
|
|
(8,909
|
)
|
Net unrealized gains and losses on MBS accounted for under the fair value option
|
(95,327
|
)
|
|
(21,368
|
)
|
|
(5,791
|
)
|
Net unrealized gains and losses on GSE CRT accounted for under the fair value option
|
(6,370
|
)
|
|
15,269
|
|
|
4,598
|
|
Net unrealized gains and losses on trading securities
|
(21
|
)
|
|
22
|
|
|
(1
|
)
|
Total gain (loss) on investments, net
|
(327,700
|
)
|
|
(19,704
|
)
|
|
(17,542
|
)
|
|
100
|
|
$ in thousands
|
Number of
loans
|
|
Principal
Balance
|
|
Unamortized (fees)/
costs, net
|
|
Carrying
value
|
|
Weighted Average
Coupon
|
|
Weighted Average Years to Maturity
(1)
|
|||||
Mezzanine loans
|
2
|
|
|
31,582
|
|
|
—
|
|
|
31,582
|
|
|
10.69
|
%
|
|
1.7
|
$ in thousands
|
Number of
loans
|
|
Principal
Balance
|
|
Unamortized (fees)/
costs, net
|
|
Carrying
value
|
|
Weighted Average
Coupon |
|
Weighted Average Years to Maturity
(1)
|
|||||
Mezzanine loans
|
8
|
|
|
191,894
|
|
|
(86
|
)
|
|
191,808
|
|
|
8.52
|
%
|
|
1.2
|
(1)
|
Weighted average years to maturity is based on the contractual maturity date. Certain loans may contain either an option to prepay or an option to extend beyond their contractual maturity dates as specified in the respective loan agreements.
|
$ in thousands
|
December 31, 2018
|
|
December 31, 2017
|
||
FHLBI stock
|
74,250
|
|
|
74,250
|
|
Loan participation interest
|
54,981
|
|
|
—
|
|
Investments in unconsolidated ventures
|
24,012
|
|
|
25,972
|
|
Investment in exchange-traded fund
|
—
|
|
|
3,979
|
|
Prepaid expenses and other assets
|
1,234
|
|
|
1,379
|
|
Total
|
154,477
|
|
|
105,580
|
|
|
101
|
|
|
102
|
|
$ in thousands
|
December 31, 2018
|
||||||
|
Amount
Outstanding
|
|
Period-end Weighted
Average
Interest
Rate
|
|
Weighted
Average
Remaining
Maturity
(Days)
|
||
Repurchase Agreements:
|
|
|
|
|
|
||
Agency RMBS
|
9,529,352
|
|
|
2.56
|
%
|
|
36
|
Agency CMBS
|
810,450
|
|
|
2.53
|
%
|
|
31
|
Non-Agency CMBS
|
1,616,473
|
|
|
3.56
|
%
|
|
19
|
Non-Agency RMBS
|
923,959
|
|
|
3.60
|
%
|
|
26
|
GSE CRT
|
681,014
|
|
|
3.48
|
%
|
|
21
|
Loan Participation Interest
|
41,236
|
|
|
4.09
|
%
|
|
605
|
Total Repurchase Agreements
|
13,602,484
|
|
|
2.80
|
%
|
|
34
|
Secured Loans
|
1,650,000
|
|
|
2.68
|
%
|
|
1952
|
Total Borrowings
|
15,252,484
|
|
|
2.79
|
%
|
|
242
|
$ in thousands
|
December 31, 2017
|
||||||
|
Amount
Outstanding |
|
Period-end Weighted
Average Interest Rate |
|
Weighted
Average Remaining Maturity (Days) |
||
Repurchase Agreements:
|
|
|
|
|
|
||
Agency RMBS
|
11,111,755
|
|
|
1.58
|
%
|
|
25
|
Non-Agency CMBS
|
1,396,330
|
|
|
2.61
|
%
|
|
9
|
Non-Agency RMBS
|
915,225
|
|
|
2.77
|
%
|
|
31
|
GSE CRT
|
657,491
|
|
|
2.78
|
%
|
|
24
|
Total Repurchase Agreements
|
14,080,801
|
|
|
1.82
|
%
|
|
25
|
Secured Loans
|
1,650,000
|
|
|
1.52
|
%
|
|
2317
|
Exchangeable Senior Notes
(1)
|
143,410
|
|
|
5.00
|
%
|
|
74
|
Total Borrowings
|
15,874,211
|
|
|
1.82
|
%
|
|
263
|
(1)
|
Exchangeable senior notes were reported net of unamortized debt issuance costs of
$179,000
as of December 31, 2017 in our consolidated balance sheet.
|
|
103
|
|
December 31, 2018
|
|
|
|
|
|
|||
$ in thousands
|
Amount Outstanding
|
|
Percent of Total Amount Outstanding
|
|
MBS and GSE CRT Pledged as Collateral
(1)
|
|||
Repurchase Agreement Counterparties:
|
|
|
|
|
|
|||
ING Financial Markets
|
1,429,396
|
|
|
9.4
|
%
|
|
1,520,769
|
|
Mirae Asset Securities
|
1,425,052
|
|
|
9.3
|
%
|
|
1,511,005
|
|
HSBC
|
1,380,761
|
|
|
9.1
|
%
|
|
1,459,458
|
|
RBC
|
1,137,424
|
|
|
7.5
|
%
|
|
1,350,770
|
|
E D & F Man Capital Markets
|
1,102,474
|
|
|
7.2
|
%
|
|
1,170,665
|
|
Industrial and Commercial Bank of China
|
819,664
|
|
|
5.4
|
%
|
|
867,409
|
|
Citigroup
|
722,580
|
|
|
4.7
|
%
|
|
843,019
|
|
Federal Home Loan Mortgage Corp
|
580,277
|
|
|
3.8
|
%
|
|
622,607
|
|
Wells Fargo
|
528,165
|
|
|
3.5
|
%
|
|
612,132
|
|
MUFG Securities
|
511,725
|
|
|
3.4
|
%
|
|
568,563
|
|
Societe Generale
|
428,749
|
|
|
2.8
|
%
|
|
541,319
|
|
South Street Securities
|
409,698
|
|
|
2.7
|
%
|
|
432,208
|
|
Amherst Pierpont Securities
|
399,389
|
|
|
2.6
|
%
|
|
422,819
|
|
JP Morgan
|
383,560
|
|
|
2.5
|
%
|
|
454,570
|
|
Goldman Sachs
|
304,787
|
|
|
2.0
|
%
|
|
386,400
|
|
Mizuho Securities
|
252,528
|
|
|
1.7
|
%
|
|
270,910
|
|
Guggenheim Liquidity Services
|
204,548
|
|
|
1.3
|
%
|
|
216,047
|
|
All other repurchase agreement counterparties
(2)
|
1,581,707
|
|
|
10.3
|
%
|
|
1,796,858
|
|
Total Repurchase Agreement Counterparties
|
13,602,484
|
|
|
89.2
|
%
|
|
15,047,528
|
|
Secured Loans Counterparty:
|
|
|
|
|
|
|||
FHLBI
|
1,650,000
|
|
|
10.8
|
%
|
|
1,930,364
|
|
Total
|
15,252,484
|
|
|
100.0
|
%
|
|
16,977,892
|
|
(1)
|
Amounted pledged as collateral is measured at fair value as described in Note 2 - "Summary of Significant Accounting Policies."
|
(2)
|
Represents amounts outstanding with
twelve
counterparties.
|
|
104
|
|
December 31, 2017
|
|
|
|
|
|
|||
$ in thousands
|
Amount Outstanding
|
|
Percent of Total Amount Outstanding
|
|
MBS and GSE CRT Pledged as Collateral
(1)
|
|||
Repurchase Agreement Counterparties:
|
|
|
|
|
|
|||
HSBC
|
1,745,684
|
|
|
11.2
|
%
|
|
1,839,411
|
|
ING Financial Markets
|
1,482,603
|
|
|
9.4
|
%
|
|
1,571,061
|
|
Royal Bank of Canada
|
1,144,856
|
|
|
7.3
|
%
|
|
1,375,285
|
|
Industrial and Commercial Bank of China
|
1,038,844
|
|
|
6.6
|
%
|
|
1,102,543
|
|
E D & F Man Capital Markets
|
1,028,437
|
|
|
6.5
|
%
|
|
1,085,429
|
|
Mirae Asset Securities
|
958,756
|
|
|
6.1
|
%
|
|
1,018,664
|
|
MUFG Securities
|
865,201
|
|
|
5.5
|
%
|
|
936,071
|
|
Citigroup
|
724,094
|
|
|
4.6
|
%
|
|
841,977
|
|
Amherst Pierpont Securities
|
722,080
|
|
|
4.6
|
%
|
|
764,713
|
|
KGS-Alpha Capital Markets
|
461,098
|
|
|
2.9
|
%
|
|
491,313
|
|
JP Morgan
|
451,941
|
|
|
2.9
|
%
|
|
523,590
|
|
Societe Generale
|
386,737
|
|
|
2.5
|
%
|
|
495,093
|
|
BNP Paribas Securities
|
348,340
|
|
|
2.2
|
%
|
|
388,091
|
|
South Street Securities
|
332,623
|
|
|
2.1
|
%
|
|
354,689
|
|
Goldman Sachs
|
324,152
|
|
|
2.1
|
%
|
|
419,713
|
|
Mizuho Securities
|
310,835
|
|
|
2.0
|
%
|
|
330,555
|
|
Guggenheim Liquidity Services
|
306,081
|
|
|
1.9
|
%
|
|
322,452
|
|
Bank of Nova Scotia
|
289,705
|
|
|
1.8
|
%
|
|
301,715
|
|
Natixis Securities
|
275,764
|
|
|
1.8
|
%
|
|
302,291
|
|
All other repurchase agreement counterparties
(2)
|
882,970
|
|
|
5.5
|
%
|
|
1,058,759
|
|
Total Repurchase Agreement Counterparties
|
14,080,801
|
|
|
89.5
|
%
|
|
15,523,415
|
|
Secured Loans Counterparty:
|
|
|
|
|
|
|||
FHLBI
|
1,650,000
|
|
|
10.5
|
%
|
|
1,927,496
|
|
Total
|
15,730,801
|
|
|
100.0
|
%
|
|
17,450,911
|
|
(1)
|
Amount pledged as collateral is measured at fair value as described in Note 2 - "Summary of Significant Accounting Policies."
|
(2)
|
Represents amount outstanding with
seven
counterparties.
|
|
105
|
|
|
106
|
|
$ in thousands
|
As of
|
||||
Collateral Pledged
|
December 31, 2018
|
|
December 31, 2017
|
||
Repurchase Agreements:
|
|
|
|
||
Agency RMBS
|
10,158,404
|
|
|
11,788,765
|
|
Agency CMBS
|
870,702
|
|
|
—
|
|
Non-Agency CMBS
|
2,016,202
|
|
|
1,737,831
|
|
Non-Agency RMBS
|
1,127,911
|
|
|
1,143,373
|
|
GSE CRT
|
819,328
|
|
|
853,446
|
|
Loan participation interest
|
54,981
|
|
|
—
|
|
Total repurchase agreements collateral pledged
|
15,047,528
|
|
|
15,523,415
|
|
Secured Loans:
|
|
|
|
||
Agency RMBS
|
702,952
|
|
|
623,181
|
|
Non-Agency CMBS
|
1,227,412
|
|
|
1,304,315
|
|
Total secured loans collateral pledged
|
1,930,364
|
|
|
1,927,496
|
|
Interest Rate Swaps, Futures Contracts and Currency Forward Contracts:
|
|
|
|
||
Agency RMBS
|
159,914
|
|
|
109,900
|
|
Cash
|
13,500
|
|
|
620
|
|
Total interest rate swaps, futures contracts and currency forward contracts collateral pledged
|
173,414
|
|
|
110,520
|
|
Total:
|
|
|
|
||
Mortgage-backed and GSE CRT securities
|
17,082,825
|
|
|
17,560,811
|
|
Loan participation interest
|
54,981
|
|
|
—
|
|
Cash
|
13,500
|
|
|
620
|
|
Total collateral pledged
|
17,151,306
|
|
|
17,561,431
|
|
Collateral Held
|
December 31, 2018
|
|
December 31, 2017
|
||
Interest Rate Swaps:
|
|
|
|
||
Cash
|
18,083
|
|
|
7,327
|
|
Non-cash collateral
|
—
|
|
|
—
|
|
Total collateral held
|
18,083
|
|
|
7,327
|
|
|
107
|
|
|
108
|
|
$ in thousands
|
Notional Amount as of December 31, 2017
|
|
Additions
|
|
Settlement,
Termination, Expiration or Exercise |
|
Notional Amount as
of December 31, 2018 |
||||
Interest Rate Swaps
(1)
|
8,620,000
|
|
|
5,200,000
|
|
|
(1,450,000
|
)
|
|
12,370,000
|
|
Futures Contracts
|
—
|
|
|
5,069,300
|
|
|
(3,379,400
|
)
|
|
1,689,900
|
|
Currency Forward Contracts
|
76,859
|
|
|
208,727
|
|
|
(262,437
|
)
|
|
23,149
|
|
Credit Derivatives
|
553,493
|
|
|
—
|
|
|
(26,581
|
)
|
|
526,912
|
|
TBA Purchase Contracts
|
—
|
|
|
283,100
|
|
|
(283,100
|
)
|
|
—
|
|
TBA Sale Contracts
|
—
|
|
|
(283,100
|
)
|
|
283,100
|
|
|
—
|
|
Total
|
9,250,352
|
|
|
10,478,027
|
|
|
(5,118,418
|
)
|
|
14,609,961
|
|
|
109
|
|
$ in thousands
Counterparty
|
|
Index
|
|
Notional
|
|
Maturity Date
|
|
Fixed Interest
Rate
in Contract
|
||
CME Central Clearing
|
|
1-month LIBOR
|
|
1,500,000
|
|
|
11/19/2019
|
|
2.70
|
%
|
LCH Central Clearing
|
|
1-month LIBOR
|
|
400,000
|
|
|
7/30/2020
|
|
2.69
|
%
|
CME Central Clearing
|
|
1-month LIBOR
|
|
200,000
|
|
|
9/20/2020
|
|
2.79
|
%
|
CME Central Clearing
|
|
1-month LIBOR
|
|
400,000
|
|
|
9/28/2020
|
|
2.72
|
%
|
CME Central Clearing
|
|
1-month LIBOR
|
|
500,000
|
|
|
10/25/2020
|
|
2.90
|
%
|
CME Central Clearing
|
|
1-month LIBOR
|
|
300,000
|
|
|
2/5/2021
|
|
2.69
|
%
|
CME Central Clearing
|
|
1-month LIBOR
|
|
300,000
|
|
|
2/5/2021
|
|
2.50
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
500,000
|
|
|
5/24/2021
|
|
2.25
|
%
|
Citibank, N.A.
|
|
1-month LIBOR
|
|
200,000
|
|
|
5/25/2021
|
|
2.83
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
500,000
|
|
|
6/24/2021
|
|
2.44
|
%
|
CME Central Clearing
|
|
1-month LIBOR
|
|
500,000
|
|
|
12/21/2021
|
|
2.60
|
%
|
HSBC Bank USA, National Association
|
|
1-month LIBOR
|
|
550,000
|
|
|
2/24/2022
|
|
2.45
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
1,000,000
|
|
|
6/9/2022
|
|
2.21
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
1,000,000
|
|
|
8/14/2022
|
|
1.87
|
%
|
The Royal Bank of Scotland Plc
|
|
1-month LIBOR
|
|
500,000
|
|
|
8/15/2023
|
|
1.98
|
%
|
CME Central Clearing
|
|
1-month LIBOR
|
|
600,000
|
|
|
8/24/2023
|
|
2.88
|
%
|
HSBC Bank USA, National Association
|
|
1-month LIBOR
|
|
500,000
|
|
|
12/15/2023
|
|
2.20
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
450,000
|
|
|
1/12/2024
|
|
2.10
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
450,000
|
|
|
1/25/2024
|
|
2.15
|
%
|
LCH Central Clearing
|
|
3-month LIBOR
|
|
1,000,000
|
|
|
2/6/2025
|
|
2.77
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
100,000
|
|
|
4/2/2025
|
|
2.04
|
%
|
LCH Central Clearing
|
|
3-month LIBOR
|
|
220,000
|
|
|
8/31/2027
|
|
2.12
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
250,000
|
|
|
5/24/2028
|
|
2.78
|
%
|
CME Central Clearing
|
|
3-month LIBOR
|
|
250,000
|
|
|
5/24/2028
|
|
2.39
|
%
|
LCH Central Clearing
|
|
1-month LIBOR
|
|
200,000
|
|
|
7/3/2028
|
|
2.78
|
%
|
Total
|
|
|
|
12,370,000
|
|
|
|
|
2.46
|
%
|
|
110
|
|
$ in thousands
|
December 31, 2018
|
|
December 31, 2017
|
||
Fair value amount
|
22,771
|
|
|
45,400
|
|
Notional amount
|
526,912
|
|
|
553,493
|
|
Maximum potential amount of future undiscounted payments
|
526,912
|
|
|
553,493
|
|
$ in thousands
|
Year ended December 31, 2018
|
||||||||||
Derivative
not designated as
hedging instrument
|
Realized gain (loss), net
|
|
GSE CRT embedded derivative coupon interest
|
|
Unrealized
gain (loss), net
|
|
Realized and unrealized credit derivative income (loss), net
|
||||
GSE CRT Embedded Derivatives
|
—
|
|
|
22,478
|
|
|
(22,629
|
)
|
|
(151
|
)
|
|
111
|
|
$ in thousands
|
Year ended December 31, 2017
|
||||||||||
Derivative
not designated as
hedging instrument
|
Realized gain (loss), net
|
|
GSE CRT embedded derivative coupon interest
|
|
Unrealized
gain (loss), net
|
|
Realized and unrealized credit derivative income (loss), net
|
||||
GSE CRT Embedded Derivatives
|
—
|
|
|
23,343
|
|
|
28,305
|
|
|
51,648
|
|
$ in thousands
|
Year ended December 31, 2016
|
||||||||||
Derivative
not designated as
hedging instrument
|
Realized gain (loss), net
|
|
GSE CRT embedded derivative coupon interest
|
|
Unrealized
gain (loss), net
|
|
Realized and unrealized credit derivative income (loss), net
|
||||
GSE CRT Embedded Derivatives
|
(6,017
|
)
|
|
24,343
|
|
|
42,817
|
|
|
61,143
|
|
$ in thousands
|
Year ended December 31, 2018
|
||||||||||
Derivative
not designated as
hedging instrument
|
Realized gain (loss) on derivative instruments, net
|
|
Contractual net
interest expense
|
|
Unrealized
gain (loss), net
|
|
Gain (loss) on derivative instruments, net
|
||||
Interest Rate Swaps
|
81,417
|
|
|
(20,015
|
)
|
|
24,358
|
|
|
85,760
|
|
Future Contracts
|
(86,318
|
)
|
|
—
|
|
|
(7,836
|
)
|
|
(94,154
|
)
|
Currency Forward Contracts
|
2,088
|
|
|
—
|
|
|
1,046
|
|
|
3,134
|
|
TBAs
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
Total
|
(2,830
|
)
|
|
(20,015
|
)
|
|
17,568
|
|
|
(5,277
|
)
|
$ in thousands
|
Year ended December 31, 2017
|
||||||||||
Derivative
not designated as
hedging instrument
|
Realized gain (loss) on derivative instruments, net
|
|
Contractual net
interest expense
|
|
Unrealized
gain (loss), net
|
|
Gain (loss) on derivative instruments, net
|
||||
Interest Rate Swaps
|
72,894
|
|
|
(77,076
|
)
|
|
28,316
|
|
|
24,134
|
|
Currency Forward Contracts
|
(5,056
|
)
|
|
—
|
|
|
(923
|
)
|
|
(5,979
|
)
|
Total
|
67,838
|
|
|
(77,076
|
)
|
|
27,393
|
|
|
18,155
|
|
$ in thousands
|
Year ended December 31, 2016
|
||||||||||
Derivative
not designated as hedging instrument |
Realized gain (loss) on derivative instruments, net
|
|
Contractual net
interest expense
|
|
Unrealized
gain (loss), net
|
|
Gain (loss) on derivative instruments, net
|
||||
Interest Rate Swaps
|
(69,090
|
)
|
|
(104,804
|
)
|
|
100,503
|
|
|
(73,391
|
)
|
Interest Rate Swaptions
|
(1,485
|
)
|
|
—
|
|
|
1,485
|
|
|
—
|
|
Currency Forward Contracts
|
12,632
|
|
|
—
|
|
|
(2,056
|
)
|
|
10,576
|
|
Total
|
(57,943
|
)
|
|
(104,804
|
)
|
|
99,932
|
|
|
(62,815
|
)
|
|
112
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Balance Sheets
|
|
|
||||||||
$ in thousands
Description
|
Gross
Amounts of
Recognized
Assets
|
|
Gross
Amounts
Offset in the
Consolidated
Balance
Sheets
|
|
Net Amounts
of Assets
presented
in the
Consolidated
Balance Sheets
|
|
Financial
Instruments
|
|
Cash
Collateral
Received
|
|
Net Amount
|
||||||
Derivatives
(1)(3)
|
15,089
|
|
|
—
|
|
|
15,089
|
|
|
(433
|
)
|
|
(14,656
|
)
|
|
—
|
|
|
113
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Balance Sheets
|
|
|
||||||||
$ in thousands
Description
|
Gross
Amounts of
Recognized
Liabilities
|
|
Gross
Amounts
Offset in the
Consolidated
Balance
Sheets
|
|
Net Amounts
of Liabilities
presented
in the
Consolidated
Balance Sheets
|
|
Financial
Instruments
(2)
|
|
Cash Collateral
Pledged
|
|
Net Amount
|
||||||
Derivatives
(3)
|
10,239
|
|
|
—
|
|
|
10,239
|
|
|
(2,058
|
)
|
|
(7,836
|
)
|
|
345
|
|
Repurchase Agreements
(4)
|
13,602,484
|
|
|
—
|
|
|
13,602,484
|
|
|
(13,602,484
|
)
|
|
—
|
|
|
—
|
|
Secured Loans
(5)
|
1,650,000
|
|
|
—
|
|
|
1,650,000
|
|
|
(1,650,000
|
)
|
|
—
|
|
|
—
|
|
Total
|
15,262,723
|
|
|
—
|
|
|
15,262,723
|
|
|
(15,254,542
|
)
|
|
(7,836
|
)
|
|
345
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Balance Sheets
|
|
|
||||||||
$ in thousands
Description
|
Gross
Amounts of
Recognized
Assets
|
|
Gross
Amounts
Offset in the
Consolidated
Balance
Sheets
|
|
Net Amounts
of Assets
presented
in the
Consolidated
Balance Sheets
|
|
Financial
Instruments
|
|
Cash
Collateral
Received
|
|
Net Amount
|
||||||
Derivatives
(1)(3)
|
6,896
|
|
|
—
|
|
|
6,896
|
|
|
—
|
|
|
(6,896
|
)
|
|
—
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Balance Sheets
|
|
|
||||||||
$ in thousands
Description
|
Gross
Amounts of
Recognized
Liabilities
|
|
Gross
Amounts
Offset in the
Consolidated
Balance
Sheets
|
|
Net Amounts
of Liabilities
presented
in the
Consolidated
Balance Sheets
|
|
Financial
Instruments
(2)
|
|
Cash
Collateral
Pledged
|
|
Net Amount
|
||||||
Derivatives
(3)
|
22,445
|
|
|
—
|
|
|
22,445
|
|
|
(21,169
|
)
|
|
(620
|
)
|
|
656
|
|
Repurchase Agreements
(4)
|
14,080,801
|
|
|
—
|
|
|
14,080,801
|
|
|
(14,080,801
|
)
|
|
—
|
|
|
—
|
|
Secured Loans
(5)
|
1,650,000
|
|
|
—
|
|
|
1,650,000
|
|
|
(1,650,000
|
)
|
|
—
|
|
|
—
|
|
|
15,753,246
|
|
|
—
|
|
|
15,753,246
|
|
|
(15,751,970
|
)
|
|
(620
|
)
|
|
656
|
|
(1)
|
Amounts represent derivatives in an asset position that could potentially be offset against derivatives in a liability position at
December 31, 2018
and
December 31, 2017
, subject to a netting arrangement.
|
(2)
|
Amounts represent collateral pledged that is available to be offset against liability balances associated with repurchase agreements, secured loans and derivatives.
|
(3)
|
The fair value of securities pledged against our derivatives was
$159.9 million
at
December 31, 2018
(
December 31, 2017
:
$109.9 million
), of which
$158.3 million
(
December 31, 2017
:
$86.2 million
) relates to initial margin pledged on centrally cleared interest rate swaps and futures. Centrally cleared interest rate swaps are excluded from the tables above. Cash collateral received on our derivatives was
$18.1 million
and
$7.3 million
at
December 31, 2018
and
December 31, 2017
, respectively. Cash collateral pledged by us on our derivatives was
$13.5 million
and
$620,000
at
December 31, 2018
and
December 31, 2017
, respectively. Cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps and therefore excluded from the tables above at
December 31, 2018
.
|
(4)
|
The fair value of securities pledged against our borrowing under repurchase agreements was
$15.0 billion
and
$15.5 billion
at
December 31, 2018
and
December 31, 2017
, respectively.
|
(5)
|
The fair value of securities pledged against IAS Services LLC's borrowing under secured loans was
$1.9 billion
and
$1.9 billion
at
December 31, 2018
and
December 31, 2017
, respectively.
|
|
114
|
|
•
|
Level 1 Inputs
– Quoted prices for identical instruments in active markets.
|
•
|
Level 2 Inputs
– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
|
•
|
Level 3 Inputs
– Instruments with primarily unobservable value drivers.
|
|
December 31, 2018
|
|
|
|||||||||||
|
Fair Value Measurements Using:
|
|
|
|||||||||||
$ in thousands
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
NAV as a practical expedient
(3)
|
|
Total at
Fair Value
|
|||||
Assets:
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage-backed and credit risk transfer securities
(1) (2)
|
—
|
|
|
17,373,871
|
|
|
22,771
|
|
|
—
|
|
|
17,396,642
|
|
Derivative assets
|
—
|
|
|
15,089
|
|
|
—
|
|
|
—
|
|
|
15,089
|
|
Other assets
(4)
|
—
|
|
|
—
|
|
|
54,981
|
|
|
24,012
|
|
|
78,993
|
|
Total assets
|
—
|
|
|
17,388,960
|
|
|
77,752
|
|
|
24,012
|
|
|
17,490,724
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|||||
Derivative liabilities
|
7,836
|
|
|
15,554
|
|
|
—
|
|
|
—
|
|
|
23,390
|
|
Total liabilities
|
7,836
|
|
|
15,554
|
|
|
—
|
|
|
—
|
|
|
23,390
|
|
|
December 31, 2017
|
|
|
|||||||||||
|
Fair Value Measurements Using:
|
|
|
|||||||||||
$ in thousands
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
NAV as a practical expedient
(3)
|
|
Total at
Fair Value
|
|||||
Assets:
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage-backed and credit risk transfer securities
(1) (2)
|
—
|
|
|
18,145,354
|
|
|
45,400
|
|
|
—
|
|
|
18,190,754
|
|
Derivative assets
|
—
|
|
|
6,896
|
|
|
—
|
|
|
—
|
|
|
6,896
|
|
Other assets
(5)
|
3,979
|
|
|
—
|
|
|
—
|
|
|
25,972
|
|
|
29,951
|
|
Total assets
|
3,979
|
|
|
18,152,250
|
|
|
45,400
|
|
|
25,972
|
|
|
18,227,601
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|||||
Derivative liabilities
|
—
|
|
|
32,765
|
|
|
—
|
|
|
—
|
|
|
32,765
|
|
Total liabilities
|
—
|
|
|
32,765
|
|
|
—
|
|
|
—
|
|
|
32,765
|
|
(1)
|
For more detail about the fair value of our MBS and GSE CRTs, refer to Note 4 - "Mortgage-Backed and Credit Risk Transfer Securities."
|
(2)
|
Our GSE CRTs purchased prior to August 24, 2015 are accounted for as hybrid financial instruments with an embedded derivative. The hybrid instruments consist of debt host contracts classified as Level 2 and embedded derivatives classified as Level 3. As of
December 31, 2018
, the net embedded derivative asset position of
$22.8 million
includes
$28.8 million
of embedded derivatives in an asset position and
$6.0 million
of embedded derivatives in a liability position. As of
December 31, 2017
, the net embedded derivative asset position of
$45.4 million
includes
$46.5 million
of embedded derivatives in an asset position and
$1.1 million
of embedded derivatives in a liability position.
|
(3)
|
Investments in unconsolidated ventures are valued using the net asset value ("NAV") as a practical expedient and are not subject to redemption, although investors may sell or transfer their interest at the approval of the general partner of the underlying funds. As of
December 31, 2018
and
December 31, 2017
, the weighted average remaining term of investments in unconsolidated ventures is
2.6
years and
1.9
years, respectively.
|
(4)
|
Includes
$55.0 million
of a loan participation interest as of December 31, 2018. The loan participation interest is transferable and bears interest at a variable rate based on LIBOR plus a spread and resets daily. There was no evidence that the interest rate spread on the loan participation interest did not approximate market comparables as of December 31, 2018. As a result, the cost of the loan participation interest approximates its fair value.
|
(5)
|
Includes
$4.0 million
of an investment in an exchange-traded fund as of
December 31, 2017
.
|
|
115
|
|
|
Years Ended
|
||||
$ in thousands
|
December 31, 2018
|
|
December 31, 2017
|
||
Beginning balance
|
45,400
|
|
|
17,095
|
|
Unrealized gains/(losses), net
(1)
|
(22,629
|
)
|
|
28,305
|
|
Ending balance
|
22,771
|
|
|
45,400
|
|
(1)
|
Included in realized and unrealized credit derivative income (loss), net in the consolidated statements of operations are
$22.6 million
in net unrealized losses and
$28.3 million
in net unrealized gains attributable to assets still held as of
December 31, 2018
and
December 31, 2017
, respectively.
|
|
Year Ended
|
|
$ in thousands
|
December 31, 2018
|
|
Beginning balance
|
—
|
|
Purchases
|
54,981
|
|
Ending balance
|
54,981
|
|
|
Fair Value at
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
December 31, 2018
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range
|
|
Weighted Average
|
|
GSE CRT Embedded Derivatives
|
22,771
|
|
|
Market Comparables, Vendor Pricing
|
|
Weighted average life
|
|
2.9 - 5.9 years
|
|
4.3 years
|
|
Fair Value at
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
December 31, 2017
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range
|
|
Weighted Average
|
|
GSE CRT Embedded Derivatives
|
45,400
|
|
|
Market Comparables, Vendor Pricing
|
|
Weighted average life
|
|
2.6 - 6.8 years
|
|
4.8 years
|
|
116
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||
$ in thousands
|
Carrying
Value
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Estimated
Fair Value
|
||||
Financial Assets:
|
|
|
|
|
|
|
|
||||
Commercial loans, held-for-investment
|
31,582
|
|
|
31,826
|
|
|
191,808
|
|
|
191,930
|
|
Other assets
|
74,250
|
|
|
74,250
|
|
|
74,250
|
|
|
74,250
|
|
Total
|
105,832
|
|
|
106,076
|
|
|
266,058
|
|
|
266,180
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
||||
Repurchase agreements
|
13,602,484
|
|
|
13,602,050
|
|
|
14,080,801
|
|
|
14,080,460
|
|
Secured loans
|
1,650,000
|
|
|
1,650,000
|
|
|
1,650,000
|
|
|
1,650,000
|
|
Exchangeable senior notes
|
—
|
|
|
—
|
|
|
143,231
|
|
|
143,948
|
|
Total
|
15,252,484
|
|
|
15,252,050
|
|
|
15,874,032
|
|
|
15,874,408
|
|
•
|
The estimated fair value of commercial loans held-for-investment is a Level 3 fair value measurement. Subsequent to the origination or purchase, commercial loan investments are valued on monthly basis by an independent third party valuation agent using a discounted cash flow technique.
|
•
|
The estimated fair value of FHLBI stock, included in "Other assets," is a Level 3 fair value measurement. FHLBI stock may only be sold back to the FHLBI at its discretion at par. As a result, the cost of the FHLBI stock approximates its fair value.
|
•
|
The estimated fair value of repurchase agreements is a Level 3 fair value measurement based on an expected present value technique. This method discounts future estimated cash flows using rates we determined best reflect current market interest rates that would be offered for repurchase agreements with similar characteristics and credit quality.
|
•
|
The estimated fair value of secured loans is a Level 3 fair value measurement. The secured loans have floating rates based on an index plus a spread and the spread is typically consistent with those demanded in the market. Accordingly, the interest rates on these secured loans are at market, and thus the carrying amount approximates fair value.
|
•
|
The estimated fair value of exchangeable senior notes is a Level 2 fair value measurement based on a valuation obtained from a third-party pricing service.
|
|
117
|
|
|
Years ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Incurred costs, prepaid or expensed
|
6,483
|
|
|
5,997
|
|
|
6,986
|
|
Incurred costs, charged against equity as a cost of raising capital
|
230
|
|
|
299
|
|
|
—
|
|
Incurred costs, capitalized to other assets
|
—
|
|
|
—
|
|
|
50
|
|
Total incurred costs, originally paid by our Manager
|
6,713
|
|
|
6,296
|
|
|
7,036
|
|
|
118
|
|
|
119
|
|
|
Year Ended December 31,
|
|||||
|
2018
|
|||||
|
Restricted Stock Units
|
|
Weighted Average Grant Date Fair Value
(1)
|
|||
Unvested at the beginning of the year
|
19,827
|
|
|
$
|
14.35
|
|
Shares granted during the year
|
7,055
|
|
|
15.37
|
|
|
Shares forfeited during the year
|
(3,967
|
)
|
|
14.56
|
|
|
Shares vested during the year
|
(11,864
|
)
|
|
14.71
|
|
|
Unvested at the end of the year
|
11,051
|
|
|
$
|
14.55
|
|
(1)
|
The grant date fair value of restricted stock unit awards is based on the closing market price of our common stock at the grant date.
|
|
December 31, 2018
|
||||||||||
$ in thousands
|
Equity method investments
|
|
Available-for-sale securities
|
|
Derivatives and hedging
|
|
Total
|
||||
Total other comprehensive income (loss), net:
|
|
|
|
|
|
|
|
||||
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net
|
—
|
|
|
(210,424
|
)
|
|
—
|
|
|
(210,424
|
)
|
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net
|
—
|
|
|
193,162
|
|
|
—
|
|
|
193,162
|
|
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense
|
—
|
|
|
—
|
|
|
(25,839
|
)
|
|
(25,839
|
)
|
Currency translation adjustments on investment in unconsolidated venture
|
(447
|
)
|
|
—
|
|
|
—
|
|
|
(447
|
)
|
Total other comprehensive income (loss), net
|
(447
|
)
|
|
(17,262
|
)
|
|
(25,839
|
)
|
|
(43,548
|
)
|
|
|
|
|
|
|
|
|
||||
AOCI balance at beginning of period
|
947
|
|
|
136,188
|
|
|
123,894
|
|
|
261,029
|
|
Other comprehensive income/(loss), net
|
(447
|
)
|
|
(17,262
|
)
|
|
(25,839
|
)
|
|
(43,548
|
)
|
Other comprehensive income/(loss) attributable to non-controlling interest
|
6
|
|
|
927
|
|
|
300
|
|
|
1,233
|
|
Rebalancing of ownership percentage of non-controlling interest
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Purchase of OP units from non-controlling interest
|
7
|
|
|
812
|
|
|
1,281
|
|
|
2,100
|
|
AOCI balance at end of period
|
513
|
|
|
120,664
|
|
|
99,636
|
|
|
220,813
|
|
|
120
|
|
|
December 31, 2017
|
||||||||||
$ in thousands
|
Equity method investments
|
|
Available-for-sale securities
|
|
Derivatives and hedging
|
|
Total
|
||||
Total other comprehensive income (loss), net:
|
|
|
|
|
|
|
|
||||
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net
|
—
|
|
|
(9,885
|
)
|
|
—
|
|
|
(9,885
|
)
|
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net
|
—
|
|
|
1,508
|
|
|
—
|
|
|
1,508
|
|
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense
|
—
|
|
|
—
|
|
|
(25,544
|
)
|
|
(25,544
|
)
|
Currency translation adjustments on investment in unconsolidated venture
|
863
|
|
|
—
|
|
|
—
|
|
|
863
|
|
Total other comprehensive income (loss), net
|
863
|
|
|
(8,377
|
)
|
|
(25,544
|
)
|
|
(33,058
|
)
|
|
|
|
|
|
|
|
|
||||
AOCI balance at beginning of period
|
95
|
|
|
144,458
|
|
|
149,115
|
|
|
293,668
|
|
Other comprehensive income/(loss), net
|
863
|
|
|
(8,377
|
)
|
|
(25,544
|
)
|
|
(33,058
|
)
|
Other comprehensive income/(loss) attributable to non-controlling interest
|
(11
|
)
|
|
106
|
|
|
323
|
|
|
418
|
|
Rebalancing of ownership percentage of non-controlling interest
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
AOCI balance at end of period
|
947
|
|
|
136,188
|
|
|
123,894
|
|
|
261,029
|
|
|
121
|
|
Common Stock
|
Dividends Declared Per Share
|
||||
|
Amount
|
|
Date of Payment
|
||
2018
|
|
|
|
||
December 14, 2018
|
$
|
0.42
|
|
|
January 28, 2019
|
September 14, 2018
|
$
|
0.42
|
|
|
October 26, 2018
|
June 15, 2018
|
$
|
0.42
|
|
|
July 26, 2018
|
March 15, 2018
|
$
|
0.42
|
|
|
April 26, 2018
|
2017
|
|
|
|
||
December 14, 2017
|
$
|
0.42
|
|
|
January 26, 2018
|
September 14, 2017
|
$
|
0.41
|
|
|
October 26, 2017
|
June 15, 2017
|
$
|
0.40
|
|
|
July 26, 2017
|
March 15, 2017
|
$
|
0.40
|
|
|
April 26, 2017
|
|
122
|
|
|
|
|
Tax Characterization of Dividends
|
||||||||
Fiscal Tax Year
|
Dividends Declared
|
|
Ordinary Dividends
|
|
Capital Gain Distribution
|
|
Carry Forward
|
||||
Series A Preferred Stock Dividends
|
|
|
|
|
|
|
|
||||
Fiscal tax year 2018
(1)
|
1.937600
|
|
|
1.937600
|
|
|
—
|
|
|
—
|
|
Fiscal tax year 2017
(2)
|
1.937600
|
|
|
1.937600
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
||||
Series B Preferred Stock Dividends
|
|
|
|
|
|
|
|
||||
Fiscal tax year 2018
|
1.937600
|
|
|
1.937600
|
|
|
—
|
|
|
—
|
|
Fiscal tax year 2017
|
1.937600
|
|
|
1.937600
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
||||
Series C Preferred Stock Dividends
|
|
|
|
|
|
|
|
||||
Fiscal tax year 2018
|
1.875000
|
|
|
1.875000
|
|
|
—
|
|
|
—
|
|
Fiscal tax year 2017
|
0.682290
|
|
|
0.682290
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
||||
Common Stock Dividends
|
|
|
|
|
|
|
|
||||
Fiscal tax year 2018
|
1.680000
|
|
|
1.378178
|
|
|
—
|
|
|
0.301822
|
|
Fiscal tax year 2017
|
1.630000
|
|
|
1.480040
|
|
|
—
|
|
|
0.149960
|
|
(1)
|
Excludes preferred stock dividend of
$0.4844
per share declared on December 14, 2018 that has a record date of January 1, 2019. This dividend is a 2019 dividend for federal income tax purposes.
|
(2)
|
Excludes preferred stock dividend of
$0.4844
per share declared on December 14, 2017 that has a record date of January 1, 2018. This dividend is a 2018 dividend for federal income tax purposes.
|
|
123
|
|
$ and share amounts in thousands
|
Years Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Numerator (Income)
|
|
|
|
|
|
|||
Basic Earnings:
|
|
|
|
|
|
|||
Net income (loss) available to common stockholders
|
(115,216
|
)
|
|
320,527
|
|
|
231,547
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|||
Income allocated to exchangeable senior notes
|
—
|
|
|
13,340
|
|
|
22,467
|
|
Income (loss) allocated to non-controlling interest
|
—
|
|
|
4,450
|
|
|
3,287
|
|
Dilutive net income (loss) available to stockholders
|
(115,216
|
)
|
|
338,317
|
|
|
257,301
|
|
Denominator (Weighted Average Shares)
|
|
|
|
|
|
|||
Basic Earnings:
|
|
|
|
|
|
|||
Shares available to common stockholders
|
111,637
|
|
|
111,610
|
|
|
111,973
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|||
Restricted stock awards
|
—
|
|
|
20
|
|
|
20
|
|
Non-controlling interest OP Units
|
—
|
|
|
1,425
|
|
|
1,425
|
|
Exchangeable senior notes
|
—
|
|
|
9,986
|
|
|
16,836
|
|
Dilutive Shares
|
111,637
|
|
|
123,041
|
|
|
130,254
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|||
Net income (loss) attributable to common stockholders
|
|
|
|
|
|
|||
Basic
|
(1.03
|
)
|
|
2.87
|
|
|
2.07
|
|
Diluted
|
(1.03
|
)
|
|
2.75
|
|
|
1.98
|
|
|
124
|
|
|
Years ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Net income (loss) attributable to Invesco Mortgage Capital Inc.
|
(70,790
|
)
|
|
348,607
|
|
|
254,411
|
|
Transfers from non-controlling interest:
|
|
|
|
|
|
|||
Decrease in additional paid-in capital due to purchase of OP units
|
(798
|
)
|
|
—
|
|
|
—
|
|
Net transfers from non-controlling interest
|
(798
|
)
|
|
—
|
|
|
—
|
|
Change from net income (loss) attributable to Invesco Mortgage Capital Inc. common stockholders and transfers (to) from non-controlling interest
|
(71,588
|
)
|
|
348,607
|
|
|
254,411
|
|
|
Years ended December 31,
|
|||||||
$ in thousands
|
2018
|
|
2017
|
|
2016
|
|||
Net income (loss) allocated
|
254
|
|
|
4,450
|
|
|
3,287
|
|
Distributions paid
|
2,394
|
|
|
2,294
|
|
|
2,280
|
|
|
125
|
|
$ in thousands except share amounts
|
Q4 18
|
|
Q3 18
|
|
Q2 18
|
|
Q1 18
|
|
Q4 17
|
|
Q3 17
|
|
Q2 17
|
|
Q1 17
|
||||||||
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Mortgage-backed and credit risk transfer securities
|
174,511
|
|
|
160,416
|
|
|
147,548
|
|
|
149,003
|
|
|
147,509
|
|
|
134,138
|
|
|
121,027
|
|
|
118,873
|
|
Commercial and other loans
|
1,593
|
|
|
1,672
|
|
|
4,051
|
|
|
4,222
|
|
|
5,472
|
|
|
6,251
|
|
|
6,021
|
|
|
5,764
|
|
Total interest income
|
176,104
|
|
|
162,088
|
|
|
151,599
|
|
|
153,225
|
|
|
152,981
|
|
|
140,389
|
|
|
127,048
|
|
|
124,637
|
|
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Repurchase agreements
|
91,057
|
|
|
81,763
|
|
|
69,389
|
|
|
59,585
|
|
|
51,955
|
|
|
45,907
|
|
|
36,072
|
|
|
29,947
|
|
Secured loans
|
10,565
|
|
|
9,490
|
|
|
8,471
|
|
|
6,927
|
|
|
5,878
|
|
|
5,544
|
|
|
4,535
|
|
|
3,413
|
|
Exchangeable senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
1,621
|
|
|
2,104
|
|
|
2,724
|
|
|
3,504
|
|
|
5,008
|
|
Total interest expense
|
101,622
|
|
|
91,253
|
|
|
77,860
|
|
|
68,133
|
|
|
59,937
|
|
|
54,175
|
|
|
44,111
|
|
|
38,368
|
|
Net interest income
|
74,482
|
|
|
70,835
|
|
|
73,739
|
|
|
85,092
|
|
|
93,044
|
|
|
86,214
|
|
|
82,937
|
|
|
86,269
|
|
Other income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) on investments, net
|
76,957
|
|
|
(207,910
|
)
|
|
(36,377
|
)
|
|
(160,370
|
)
|
|
(17,153
|
)
|
|
(11,873
|
)
|
|
11,175
|
|
|
(1,853
|
)
|
Equity in earnings of unconsolidated ventures
|
624
|
|
|
1,084
|
|
|
798
|
|
|
896
|
|
|
(47
|
)
|
|
408
|
|
|
(154
|
)
|
|
(1,534
|
)
|
Gain (loss) on derivative instruments, net
|
(293,485
|
)
|
|
87,672
|
|
|
67,169
|
|
|
133,367
|
|
|
64,251
|
|
|
1,955
|
|
|
(53,513
|
)
|
|
5,462
|
|
Realized and unrealized credit derivative income (loss), net
|
(9,026
|
)
|
|
4,975
|
|
|
735
|
|
|
3,165
|
|
|
13,220
|
|
|
(2,930
|
)
|
|
21,403
|
|
|
19,955
|
|
Net loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
(233
|
)
|
|
(1,344
|
)
|
|
(526
|
)
|
|
(4,711
|
)
|
Other investment income (loss), net
|
850
|
|
|
1,068
|
|
|
(2,160
|
)
|
|
3,102
|
|
|
1,206
|
|
|
2,313
|
|
|
2,533
|
|
|
1,329
|
|
Total other income (loss)
|
(224,080
|
)
|
|
(113,111
|
)
|
|
30,165
|
|
|
(19,866
|
)
|
|
61,244
|
|
|
(11,471
|
)
|
|
(19,082
|
)
|
|
18,648
|
|
Expenses
|
12,410
|
|
|
11,778
|
|
|
11,627
|
|
|
11,977
|
|
|
11,972
|
|
|
11,254
|
|
|
10,635
|
|
|
10,885
|
|
Net income (loss)
|
(162,008
|
)
|
|
(54,054
|
)
|
|
92,277
|
|
|
53,249
|
|
|
142,316
|
|
|
63,489
|
|
|
53,220
|
|
|
94,032
|
|
Net income (loss) attributable to non-controlling interest
|
(899
|
)
|
|
(681
|
)
|
|
1,163
|
|
|
671
|
|
|
1,794
|
|
|
800
|
|
|
670
|
|
|
1,186
|
|
Net income (loss) attributable to Invesco Mortgage Capital Inc.
|
(161,109
|
)
|
|
(53,373
|
)
|
|
91,114
|
|
|
52,578
|
|
|
140,522
|
|
|
62,689
|
|
|
52,550
|
|
|
92,846
|
|
Dividends to preferred stockholders
|
11,106
|
|
|
11,107
|
|
|
11,106
|
|
|
11,107
|
|
|
3,086
|
|
|
13,562
|
|
|
5,716
|
|
|
5,716
|
|
Net income (loss) attributable to common stockholders
|
(172,215
|
)
|
|
(64,480
|
)
|
|
80,008
|
|
|
41,471
|
|
|
137,436
|
|
|
49,127
|
|
|
46,834
|
|
|
87,130
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
(1.54
|
)
|
|
(0.58
|
)
|
|
0.72
|
|
|
0.37
|
|
|
1.23
|
|
|
0.44
|
|
|
0.42
|
|
|
0.78
|
|
Diluted
|
(1.54
|
)
|
|
(0.58
|
)
|
|
0.72
|
|
|
0.37
|
|
|
1.18
|
|
|
0.43
|
|
|
0.41
|
|
|
0.73
|
|
|
126
|
|
|
127
|
|
|
|
Invesco Mortgage Capital Inc.
|
|
|
|
|
By:
|
/s/ John M. Anzalone
|
|
|
John M. Anzalone
Chief Executive Officer
|
|
Date:
|
February 20, 2019
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
By:
|
/s/ John M. Anzalone
|
|
Chief Executive Officer
|
|
February 20, 2019
|
|
John M. Anzalone
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
|
By:
|
/s/ R. Lee Phegley, Jr.
|
|
Chief Financial Officer
|
|
February 20, 2019
|
|
R. Lee Phegley, Jr.
|
|
(principal financial officer)
|
|
|
|
|
|
|
|
|
By:
|
/s/ Roseann M. Perlis
|
|
Chief Accounting Officer
|
|
February 20, 2019
|
|
Roseann M. Perlis
|
|
(principal accounting officer)
|
|
|
|
|
|
|
|
|
By:
|
/s/ John S. Day
|
|
Director
|
|
February 20, 2019
|
|
John S. Day
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Carolyn B. Handlon
|
|
Director
|
|
February 20, 2019
|
|
Carolyn B. Handlon
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Edward J. Hardin
|
|
Director
|
|
February 20, 2019
|
|
Edward J. Hardin
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ James R. Lientz, Jr.
|
|
Director
|
|
February 20, 2019
|
|
James R. Lientz, Jr.
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Dennis P. Lockhart
|
|
Director
|
|
February 20, 2019
|
|
Dennis P. Lockhart
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Gregory G. McGreevey
|
|
Director
|
|
February 20, 2019
|
|
Gregory G. McGreevey
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Colin D. Meadows
|
|
Director
|
|
February 20, 2019
|
|
Colin D. Meadows
|
|
|
|
|
|
128
|
|
Name
|
Jurisdiction
|
IAS Operating Partnership LP
|
Delaware
|
IAS Asset I LLC
|
Delaware
|
IMRF Holdings LLC
|
Delaware
|
IMRF TRSCO Inc.
|
Delaware
|
IAS Services LLC
|
Michigan
|
IVR Irish Mezzanine LLC
|
Delaware
|
IVR Limited Partner LLC
|
Delaware
|
/s/ PricewaterhouseCoopers LLP
|
|
Atlanta, Georgia
|
February 20, 2019
|
1.
|
I have reviewed this Annual Report on Form 10-K of Invesco Mortgage Capital Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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February 20, 2019
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/s/ John M. Anzalone
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John M. Anzalone
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Chief Executive Officer
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1.
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I have reviewed this Annual Report on Form 10-K of Invesco Mortgage Capital Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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February 20, 2019
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/s/ R. Lee Phegley, Jr.
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R. Lee Phegley, Jr.
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Chief Financial Officer
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1.
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the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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February 20, 2019
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/s/ John M. Anzalone
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John M. Anzalone
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Chief Executive Officer
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1.
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the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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February 20, 2019
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/s/ R. Lee Phegley, Jr.
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R. Lee Phegley, Jr.
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Chief Financial Officer
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•
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holders who receive our common stock through the exercise of employee stock options or otherwise as compensation;
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•
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persons holding our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment;
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•
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persons subject to the alternative minimum tax provisions of the Internal Revenue Code;
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•
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persons holding their interest through a partnership or similar pass-through entity;
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•
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persons holding a 10% or more (by vote or value) beneficial interest in us; and, except to the extent discussed below;
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•
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tax-exempt organizations; and
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•
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non-U.S. stockholders (as defined below).
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•
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We will be taxed at regular corporate rates on any undistributed income, including undistributed net capital gains.
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•
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If we have net income from prohibited transactions, which are, in general, sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, such income will be subject to a 100% tax. See “- Prohibited Transactions” and “- Foreclosure Property” below.
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•
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If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or from certain leasehold terminations as “foreclosure property,” we may thereby avoid the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), but the net income from the sale or operation of the property that is not otherwise qualifying income for purposes of the 75% gross income test described below would be subject to corporate income tax at the highest applicable rate (21% for taxable years beginning after December 31, 2017).
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•
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If we fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because other requirements are met, we will be subject to a 100% tax on an amount equal to (1) the greater of (A) the amount by which we fail the 75% gross income test or (B) the amount by which we fail the 95% gross income test, as the case may be, multiplied by (2) a fraction intended to reflect our profitability.
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•
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If we fail to satisfy any of the REIT asset tests, as described below, other than a failure of the 5% or 10% asset tests that do not exceed a statutory de minimis amount as described more fully below, but our failure is due to reasonable cause and not due to willful neglect and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to the greater of $50,000 or the product of the highest corporate tax rate (21% for taxable years beginning after December 31, 2017) and the amount of net income generated by the nonqualifying assets during the period in which we failed to satisfy the asset tests.
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•
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If we fail to satisfy any provision of the Internal Revenue Code that would result in our failure to qualify as a REIT (other than a gross income or asset test requirement) and the violation is due to reasonable cause, we may retain our REIT qualification but we will be required to pay a penalty of $50,000 for each such failure.
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•
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If we fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for such year, (2) 95% of our REIT capital gain net income for such year and (3) any undistributed taxable income from prior periods (or the required distribution), we will be subject to a 4% excise tax on the excess of the required distribution over the sum of (A) the amounts actually distributed (taking into account excess distributions from prior years), plus (B) retained amounts on which income tax is paid at the corporate level.
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•
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We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules relating to the composition of our stockholders, as described below in “- Requirements for Qualification as a REIT.”
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•
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A 100% tax may be imposed on some items of income and expense that are directly or constructively paid between us and any TRSs we may own if and to the extent that the IRS successfully adjusts the reported amounts of these items.
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•
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If we acquire appreciated assets from a corporation that is not a REIT in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the non-REIT corporation, we will be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during the 5-year period following their acquisition from the non-REIT corporation. The results described in this paragraph apply only if the non-REIT corporation will not elect, in lieu of this treatment, to be subject to an immediate tax when the asset is acquired by us.
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•
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We will generally be subject to tax on the portion of any excess inclusion income derived from an investment in residual interests in real estate mortgage investment conduits or REMICs to the extent our stock is held by specified tax-exempt organizations not subject to tax on unrelated business taxable income. Similar rules will apply if we own an equity interest in a taxable mortgage pool through a subsidiary REIT of our operating
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•
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We may elect to retain and pay income tax on our net long-term capital gain. In that case, a stockholder would include its proportionate share of our undistributed long-term capital gain (to the extent we make a timely designation of such gain to the stockholder) in its income, would be deemed to have paid the tax that we paid on such gain, and would be allowed a credit for its proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase the stockholder’s basis in our common stock.
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•
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We may have interests in entities, including TRSs, that are subchapter C corporations, the earnings of which could be subject to U.S. federal corporate income tax.
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(1)
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that is managed by one or more trustees or directors;
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(2)
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the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest;
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(3)
|
that would be taxable as a domestic corporation but for the special Internal Revenue Code provisions applicable to REITs;
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(4)
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that is neither a financial institution nor an insurance company subject to specific provisions of the Internal Revenue Code;
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(5)
|
the beneficial ownership of which is held by 100 or more persons during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months;
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(6)
|
in which, during the last half of each taxable year, not more than 50% in value of the outstanding stock is owned, directly or indirectly, by five or fewer “individuals” (as defined in the Internal Revenue Code to include specified entities);
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(7)
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which meets other tests described below, including with respect to the nature of its income and assets and the amount of its distributions; and
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(8)
|
that makes an election to be a REIT for the current taxable year or has made such an election for a previous taxable year that has not been terminated or revoked.
|
(a)
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the sum of:
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•
|
90% of our “REIT taxable income” (computed without regard to our deduction for dividends paid and our net capital gains); and
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•
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90% of the net income (after tax), if any, from foreclosure property (as described below); minus
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(b)
|
the sum of specified items of non-cash income that exceeds a percentage of our income.
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•
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substantially all of its assets consist of debt obligations or interests in debt obligations;
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•
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more than 50% of those debt obligations are real estate mortgages or interests in real estate mortgages as of specified testing dates;
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•
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the entity has issued debt obligations (liabilities) that have two or more maturities; and
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•
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the payments required to be made by the entity on its debt obligations (liabilities) “bear a relationship” to the payments to be received by the entity on the debt obligations that it holds as assets.
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•
|
cannot be offset by any net operating losses otherwise available to the stockholder;
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•
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is subject to tax as unrelated business taxable income in the hands of most types of stockholders that are otherwise generally exempt from federal income tax; and
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•
|
results in the application of U.S. federal income tax withholding at the maximum rate (30%), without reduction for any otherwise applicable income tax treaty or other exemption, to the extent allocable to most types of foreign stockholders.
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•
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a citizen or resident of the U.S.;
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•
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a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S. or of a political subdivision thereof (including the District of Columbia);
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•
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an estate whose income is subject to U.S. federal income taxation regardless of its source; or
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•
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any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person.
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•
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In the case of a publicly traded REIT, a person holding less than 5% of a publicly traded class of stock at all times during the testing period is treated as a U.S. person unless the REIT has actual knowledge that such person is not a U.S. person. Our stock is publicly traded.
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•
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In the case of REIT stock held by a publicly traded REIT or certain publicly global traded or open-ended regulated investment companies (RICs), the REIT or RIC will be treated as a U.S. person if the REIT or RIC is domestically controlled and will be treated as a non-U.S. person otherwise.
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•
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In the case of REIT stock held by a REIT or RIC not described in the previous rule, the REIT or RIC is treated as a U.S. person or a non-U.S. person on a look-through basis.
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