10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________ 

FORM 10-Q

_______________________________________________

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34385

(Exact Name of Registrant as Specified in Its Charter)

_______________________________________________

Maryland	26-2749336
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1555 Peachtree Street, N.E., Suite 1800 Atlanta, Georgia	30309
(Address of Principal Executive Offices)	(Zip Code)

(404) 892-0896

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 

Large Accelerated filer	ý		Accelerated filer	o
Non-Accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o
			Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No  ý

As of August 3, 2017, there were 111,609,901 outstanding shares of common stock of Invesco Mortgage Capital Inc.

INVESCO MORTGAGE CAPITAL INC.

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	1
	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016	2
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016	3
	Unaudited Condensed Consolidated Statement of Equity for the six months ended June 30, 2017	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	67
Item 4.	Controls and Procedures	70
PART II OTHER INFORMATION		71
Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	71
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	73

PART I

ITEM 1. FINANCIAL STATEMENTS

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of
$ in thousands except share amounts	June 30, 2017		December 31, 2016
ASSETS
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $15,367,150 and $14,422,198, respectively)	16,083,284		14,981,331
Commercial loans, held-for-investment	278,866		273,355
Cash and cash equivalents	64,069		161,788
Due from counterparties	1,246		86,450
Investment related receivable	83,181		43,886
Accrued interest receivable	49,852		46,945
Derivative assets, at fair value	11,005		3,186
Other assets	102,428		109,297
Total assets	16,673,931		15,706,238
LIABILITIES AND EQUITY
Liabilities:
Repurchase agreements	12,118,948		11,160,669
Secured loans	1,650,000		1,650,000
Exchangeable senior notes, net	217,804		397,041
Derivative liabilities, at fair value	44,147		134,228
Dividends and distributions payable	50,930		50,924
Investment related payable	202,051		9,232
Accrued interest payable	14,987		21,066
Collateral held payable	3,471		1,700
Accounts payable and accrued expenses	1,790		1,534
Due to affiliate	9,709		9,660
Total liabilities	14,313,837		13,436,054
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
Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 111,609,901 and 111,594,595 shares issued and outstanding, respectively	1,116		1,116
Additional paid in capital	2,380,243		2,379,863
Accumulated other comprehensive income	337,391		293,668
Retained earnings (distributions in excess of earnings)	(673,625	)	(718,303	)
Total stockholders’ equity	2,330,341		2,241,560
Non-controlling interest	29,753		28,624
Total equity	2,360,094		2,270,184
Total liabilities and equity	16,673,931		15,706,238

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands, except share amounts	2017		2016		2017		2016
Interest Income
Mortgage-backed and credit risk transfer securities	121,027		112,860		239,900		235,106
Commercial loans	6,021		5,947		11,785		10,840
Total interest income	127,048		118,807		251,685		245,946
Interest Expense
Repurchase agreements	36,072		31,260		66,019		73,060
Secured loans	4,535		2,688		7,948		5,403
Exchangeable senior notes	3,504		5,614		8,512		11,227
Total interest expense	44,111		39,562		82,479		89,690
Net interest income	82,937		79,245		169,206		156,256
Other Income (loss)
Gain (loss) on investments, net	11,175		1,414		9,322		13,015
Equity in earnings (losses) of unconsolidated ventures	(154	)	202		(1,688	)	1,263
Gain (loss) on derivative instruments, net	(53,513	)	(90,363	)	(48,051	)	(328,906	)
Realized and unrealized credit derivative income (loss), net	21,403		17,228		41,358		25,638
Net loss on extinguishment of debt	(526	)	—		(5,237	)	—
Other investment income (loss), net	2,533		(2,745	)	3,862		(3,063	)
Total other income (loss)	(19,082	)	(74,264	)	(434	)	(292,053	)
Expenses
Management fee – related party	9,027		9,061		17,828		18,573
General and administrative	1,608		1,896		3,692		3,933
Total expenses	10,635		10,957		21,520		22,506
Net income (loss)	53,220		(5,976	)	147,252		(158,303	)
Net income (loss) attributable to non-controlling interest	670		(75	)	1,856		(1,958	)
Net income (loss) attributable to Invesco Mortgage Capital Inc.	52,550		(5,901	)	145,396		(156,345	)
Dividends to preferred stockholders	5,716		5,716		11,432		11,432
Net income (loss) attributable to common stockholders	46,834		(11,617	)	133,964		(167,777	)
Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic	0.42		(0.10	)	1.20		(1.49	)
Diluted	0.41		(0.10	)	1.15		(1.49	)
Dividends declared per common share	0.40		0.40		0.80		0.80

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Net income (loss)	53,220		(5,976	)	147,252		(158,303	)
Other comprehensive income (loss):
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	39,633		117,116		55,922		238,576
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	651		(1,037	)	1,501		(11,581	)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	(6,369	)	3,238		(12,667	)	16,162
Currency translation adjustments on investment in unconsolidated venture	139		274		(476	)	225
Total other comprehensive income (loss)	34,054		119,591		44,280		243,382
Comprehensive income (loss)	87,274		113,615		191,532		85,079
Less: Comprehensive (income) loss attributable to non-controlling interest	(1,099	)	(1,435	)	(2,414	)	(1,094	)
Less: Dividends to preferred stockholders	(5,716	)	(5,716	)	(11,432	)	(11,432	)
Comprehensive income (loss) attributable to common stockholders	80,459		106,464		177,686		72,553

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

For the six months ended June 30, 2017

(Unaudited)

					Attributable to Common Stockholders
								Additional Paid in Capital	Accumulated Other Comprehensive Income	Retained Earnings (Distributions in excess of earnings)		Total Stockholders’ Equity		Non- Controlling Interest
	Series A Preferred Stock		Series B Preferred Stock
$ in thousands except  share amounts						Common Stock										Total Equity
	Shares	Amount	Shares	Amount		Shares	Amount
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	—	—	—	—		—	—	—	—	145,396		145,396		1,856		147,252
Other comprehensive income	—	—	—	—		—	—	—	43,722	—		43,722		558		44,280
Stock awards	—	—	—	—		15,306	—	—	—	—		—		—		—
Common stock dividends	—	—	—	—		—	—	—	—	(89,286	)	(89,286	)	—		(89,286	)
Common unit dividends	—	—	—	—		—	—	—	—	—		—		(1,140	)	(1,140	)
Preferred stock dividends	—	—	—	—		—	—	—	—	(11,432	)	(11,432	)	—		(11,432	)
Amortization of equity-based compensation	—	—	—	—		—	—	233	—	—		233		3		236
Rebalancing of ownership percentage of non-controlling interest	—	—	—	—		—	—	147	1	—		148		(148	)	—
Balance at June 30, 2017	5,600,000	135,356	6,200,000	149,860		111,609,901	1,116	2,380,243	337,391	(673,625	)	2,330,341		29,753		2,360,094

The accompanying notes are an integral part of this condensed consolidated financial statement.

4

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
$ in thousands	2017		2016
Cash Flows from Operating Activities
Net income (loss)	147,252		(158,303	)
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	53,436		53,664
Amortization of commercial loan origination fees	(164	)	(139	)
Unrealized (gain) loss on derivative instruments, net	(20,120	)	211,261
Unrealized (gain) loss on credit derivatives, net	(29,707	)	(19,229	)
(Gain) loss on investments, net	(9,322	)	(13,015	)
Realized (gain) loss on derivative instruments, net	25,311		63,569
Realized (gain) loss on credit derivatives, net	—		6,017
Equity in (earnings) losses of unconsolidated ventures	1,688		(1,263	)
Amortization of equity-based compensation	263		265
Amortization of deferred securitization and financing costs	912		1,227
Amortization of net deferred losses on de-designated interest rate swaps	(12,667	)	16,162
Net loss on extinguishment of debt	5,237		—
(Gain) loss on foreign currency transactions, net	(2,229	)	4,741
Changes in operating assets and liabilities:
(Increase) decrease in operating assets	(2,497	)	1,893
Decrease in operating liabilities	(3,016	)	(5,039	)
Net cash provided by operating activities	154,377		161,811
Cash Flows from Investing Activities
Purchase of mortgage-backed and credit risk transfer securities	(2,533,663	)	(1,061,651	)
Purchase of U.S. Treasury securities	—		(152,256	)
Proceeds from sale of U.S. Treasury securities	—		122,736
(Contributions to) distributions from investments in unconsolidated ventures, net	7,826		6,863
Purchase of exchange-traded fund	(3,508	)	—
Sale of exchange-traded fund	51		—
Change in other assets	—		1,125
Principal payments from mortgage-backed and credit risk transfer securities	1,065,577		1,131,028
Proceeds from sale of mortgage-backed and credit risk transfer securities	572,616		659,959
Payments on sale of credit derivatives	—		(6,017	)
Proceeds from/ (payments for) settlement or termination of forwards, swaps and swaptions, net	(25,311	)	(62,083	)
Principal payments from commercial loans held-for-investment	—		15,000
Origination and advances of commercial loans, net of origination fees	(3,170	)	(83,005	)
Net cash provided by (used in) investing activities	(919,582	)	571,699
Cash Flows from Financing Activities
Proceeds from issuance of common stock	—		35
Repurchase of common stock	—		(25,000	)
Due from counterparties	(1,246	)	(158,132	)
Change in collateral held payable	1,771		660
Proceeds from repurchase agreements	63,154,822		61,581,699
Principal repayments of repurchase agreements	(62,200,623	)	(61,939,100	)
Proceeds from secured loans	—		125,000
Principal repayments of secured loans	—		(125,000	)
Extinguishment of exchangeable senior notes	(185,386	)	—
Payments of deferred costs	—		(136	)
Payments of dividends and distributions	(101,852	)	(102,651	)
Net cash provided by (used in) financing activities	667,486		(642,625	)
Net change in cash and cash equivalents	(97,719	)	90,885
Cash and cash equivalents, beginning of period	161,788		53,199
Cash and cash equivalents, end of period	64,069		144,084
Supplement Disclosure of Cash Flow Information
Interest paid	97,003		74,037
Non-cash Investing and Financing Activities Information
Net change in unrealized gain (loss) on mortgage-backed and credit risk transfer securities	57,423		226,995
Dividends and distributions declared not paid	50,930		50,919
Net change in investment related payable (receivable)	(163,489	)	206,034
Net change in repurchase agreements, not settled	4,081		—
Change in due from counterparties	86,450		1,126

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Organization and Business Operations

Invesco Mortgage Capital Inc. (the "Company", "we") is a Maryland corporation primarily focused on investing in, financing and managing residential and commercial mortgage-backed securities and mortgage loans. We are externally managed and advised by Invesco Advisers, Inc. (our "Manager"), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd. ("Invesco"), a leading independent global investment management firm. We conduct our business through IAS Operating Partnership LP (the "Operating Partnership"), as its sole general partner. As of June 30, 2017, we owned 98.7% of the Operating Partnership, and a wholly-owned subsidiary of Invesco owned the remaining 1.3%. We have one operating segment.

We primarily invest in:

• Residential mortgage-backed securities ("RMBS") that are guaranteed by a U.S. government agency such as the Government National Mortgage Association, or a federally chartered corporation such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively "Agency RMBS");

• RMBS that are not guaranteed by a U.S. government agency ("non-Agency RMBS");

• Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises ("GSE CRT");

• Commercial mortgage-backed securities ("CMBS");

• Residential and commercial mortgage loans; and

• Other real estate-related financing agreements.

We elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986 commencing with our taxable year ended December 31, 2009. To maintain our REIT qualification, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits exclusion from the "Investment Company" definition under the Investment Company Act of 1940.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Certain disclosures included in our Annual Report on Form 10-K are not required to be included on an interim basis in our quarterly reports on Form 10-Q. We have condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016.

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Company and our controlled subsidiaries. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of our financial condition and results of operations for the periods presented.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Examples of estimates include, but are not limited to, estimates of the fair values of financial instruments, interest income on mortgage-backed and credit risk transfer securities, allowance for loan losses and other-than-temporary impairment charges. Actual results may differ from those estimates.

Significant Accounting Policies

There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements

In January 2016, the FASB issued guidance to improve certain aspects of classification and measurement of financial instruments, including significant revisions in accounting related to the classification and measurement of investments in equity securities and presentation of certain fair value changes for financial liabilities when the fair value option is elected. The

6

guidance also amends certain disclosure requirements associated with the fair value of financial instruments. We are required to adopt the new guidance in the first quarter of 2018. Early adoption is permitted. We have determined that this new accounting standard will not have an impact on our financial condition or results of operations but will simplify financial statement disclosures.

In June 2016, the FASB issued an amendment to the guidance on reporting credit losses for assets measured at amortized cost and available-for-sale securities. We are required to adopt the new guidance in the first quarter of 2020. Early adoption is permitted. We are currently evaluating the potential impacts of the new guidance on our consolidated financial statements, as well as available transition methods.

In August 2016, the FASB issued new guidance that is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Additionally, in November 2016, the FASB issued new guidance on classification and presentation of changes in restricted cash on the statement of cash flows. We are required to adopt the new accounting standards in the first quarter of 2018 using a retrospective transition method for each period presented. Early adoption is permitted. We are currently evaluating the potential impacts of the new guidance on our consolidated financial statements.

Note 3 - Variable Interest Entities ("VIEs")

Our maximum risk of loss in VIEs in which we are not the primary beneficiary at June 30, 2017 is presented in the table below.

$ in thousands	Carrying Amount	Company's Maximum Risk of Loss
CMBS	2,777,516	2,777,516
Non-Agency RMBS	1,575,840	1,575,840
Investments in unconsolidated ventures	23,311	23,311
Total	4,376,667	4,376,667

Refer to Note 4 - "Mortgage-Backed and Credit Risk Transfer Securities" and Note 6 - "Other Assets" for additional details regarding these investments.

7

Note 4 – Mortgage-Backed and Credit Risk Transfer Securities

The following tables summarize our mortgage-backed securities ("MBS") and GSE CRT portfolio by asset type as of June 30, 2017 and December 31, 2016.

June 30, 2017
$ in thousands	Principal/ Notional Balance	Unamortized Premium (Discount)		Amortized Cost	Unrealized Gain/ (Loss), net		Fair Value	Net Weighted Average Coupon (1)		Period- end Weighted Average Yield (2)		Quarterly Weighted Average Yield (3)
Agency RMBS:
15 year fixed-rate	3,187,931	134,856		3,322,787	(46,007	)	3,276,780	3.09	%	2.19	%	1.97	%
30 year fixed-rate	4,816,054	232,385		5,048,439	20,677		5,069,116	3.95	%	3.10	%	2.83	%
ARM*	269,123	1,988		271,111	3,463		274,574	2.68	%	2.58	%	2.27	%
Hybrid ARM	1,891,257	30,099		1,921,356	12,659		1,934,015	2.71	%	2.54	%	2.29	%
Total Agency pass-through(4)	10,164,365	399,328		10,563,693	(9,208	)	10,554,485	3.42	%	2.69	%	2.44	%
Agency-CMO(5)	1,429,977	(1,129,678	)	300,299	(2,033	)	298,266	2.04	%	2.87	%	0.34	%
Non-Agency RMBS(6)(7)(8)	3,247,516	(1,793,760	)	1,453,756	122,084		1,575,840	2.18	%	5.80	%	5.90	%
GSE CRT(9)(10)	769,217	25,537		794,754	82,423		877,177	3.06	%	2.40	%	2.62	%
CMBS(11)(12)	3,317,888	(612,386	)	2,705,502	72,014		2,777,516	3.90	%	4.62	%	4.45	%
Total	18,928,963	(3,110,959	)	15,818,004	265,280		16,083,284	3.17	%	3.30	%	3.07	%

* Adjustable-rate mortgage ("ARM")

(1) Net weighted average coupon as of June 30, 2017 is presented net of servicing and other fees.

(2) Period-end weighted average yield is based on amortized cost as of June 30, 2017 and incorporates future prepayment and loss assumptions.

(3) Quarterly weighted average portfolio yield for the period was 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.

(4) We have elected the fair value option for Agency RMBS purchased on or after September 1, 2016 which represent 23.7% of principal/notional balance, 23.5% of amortized cost and 23.5% of fair value.

(5) Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent 84.3% of principal/notional balance, 24.1% of amortized cost and 23.9% of fair value.

(6) Non-Agency RMBS held by us is 43.8% fixed rate, 48.0% variable rate, and 8.2% floating rate based on fair value.

(7) Of the total discount in non-Agency RMBS, $258.2 million is non-accretable based on estimated future cash flows of the securities.

(8) Non-Agency RMBS includes interest-only securities which represent 47.7% of principal/notional balance, 1.8% of amortized cost and 1.5% of fair value.

(9) We have elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 26.1% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.

(10) GSE CRT weighted average coupon and 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.

(11) CMBS includes interest-only securities which represent 18.5% of principal/notional balance, 0.7% of amortized cost and 0.7% of fair value.

(12) We have elected the fair value option for CMBS purchased on or after September 1, 2016 which represent 10.6% of principal/notional balance, 11.3% of amortized cost and 11.0% of fair value.

8

December 31, 2016
$ in thousands	Principal/Notional Balance	Unamortized Premium (Discount)		Amortized Cost	Unrealized Gain/ (Loss), net		Fair Value	Net Weighted Average Coupon (1)		Period- end Weighted Average Yield (2)		Quarterly Weighted Average Yield (3)
Agency RMBS:
15 year fixed-rate	3,460,625	151,526		3,612,151	(54,223	)	3,557,928	3.11	%	2.19	%	1.99	%
30 year fixed-rate	2,780,806	185,521		2,966,327	15,390		2,981,717	4.37	%	2.61	%	2.57	%
ARM	301,900	2,520		304,420	3,453		307,873	2.69	%	2.59	%	2.16	%
Hybrid ARM	2,423,152	42,360		2,465,512	8,789		2,474,301	2.70	%	2.52	%	2.02	%
Total Agency pass-through(4)	8,966,483	381,927		9,348,410	(26,591	)	9,321,819	3.37	%	2.42	%	2.20	%
Agency-CMO(5)	1,712,120	(1,368,916	)	343,204	837		344,041	2.16	%	3.08	%	2.07	%
Non-Agency RMBS(6)(7)(8)	3,838,314	(1,934,269	)	1,904,045	91,506		1,995,551	2.21	%	5.22	%	5.22	%
GSE CRT(9)(10)	707,899	24,320		732,219	35,981		768,200	2.38	%	1.51	%	1.24	%
CMBS(11)(12)	3,050,747	(559,857	)	2,490,890	60,830		2,551,720	3.80	%	4.21	%	4.17	%
Total	18,275,563	(3,456,795	)	14,818,768	162,563		14,981,331	3.05	%	3.05	%	2.87	%

(1) Net weighted average coupon as of December 31, 2016 is presented net of servicing and other fees.

(2) Period-end weighted average yield is based on amortized cost as of December 31, 2016 and incorporates future prepayment and loss assumptions.

(3) Quarterly weighted average portfolio yield for the period was 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.

(4) We have elected the fair value option for Agency RMBS purchased on or after September 1, 2016 which represent 4.3% of principal/notional balance, 4.3% of amortized cost and 4.2% of fair value.

(5) Agency collateralized mortgage obligation ("Agency CMO") includes interest-only securities ("Agency IO"), which represent 85.5% of principal (notional) balance, 26.8%of amortized cost and 21.7% of fair value.

(6) Non-Agency RMBS held by us is 45.5% variable rate, 47.2% fixed rate, and 7.3% floating rate based on fair value.

(7) Of the total discount in non-Agency RMBS, $252.5 million is non-accretable based on estimated future cash flows of the securities.

(8) Non-Agency RMBS includes interest-only securities, which represent 43.5% of principal/notional balance, 1.5% of amortized cost and 1.3% of fair value.

(9) We have elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 19.2% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.

(10) GSE CRT weighted average coupon and 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.

(11) CMBS includes interest-only securities which represent 20.3% of principal/notional balance, 0.8% of amortized cost and 0.9% of fair value.

(12) We have elected the fair value option for CMBS purchased on or after September 1, 2016 which represent 0.4% of principal/notional balance, 0.6% of amortized cost and 0.5% of fair value.

The following table summarizes our non-Agency RMBS portfolio by asset type based on fair value as of June 30, 2017 and December 31, 2016.

$ in thousands	June 30, 2017	% of Non-Agency		December 31, 2016	% of Non-Agency
Prime	699,638	44.4	%	889,658	44.6	%
Alt-A	421,492	26.7	%	447,213	22.4	%
Re-REMIC	237,766	15.1	%	364,301	18.2	%
Subprime/reperforming	216,944	13.8	%	294,379	14.8	%
Total Non-Agency	1,575,840	100.0	%	1,995,551	100.0	%

9

The following table summarizes the credit enhancement provided to our re-securitization of real estate mortgage investment conduit ("Re-REMIC") holdings as of June 30, 2017 and December 31, 2016.

	Percentage of Re-REMIC Holdings at Fair Value
Re-REMIC Subordination(1)	June 30, 2017		December 31, 2016
0% - 10%	26.3	%	17.6	%
10% - 20%	3.9	%	7.4	%
20% - 30%	9.9	%	13.5	%
30% - 40%	19.4	%	15.7	%
40% - 50%	18.4	%	27.0	%
50% - 60%	20.3	%	16.1	%
60% - 70%	1.8	%	2.7	%
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. 48.3% of our Re-REMIC holdings are not senior tranches.

The components of the carrying value of our MBS and GSE CRT portfolio at June 30, 2017 and December 31, 2016 are presented below.

$ in thousands	June 30, 2017		December 31, 2016
Principal balance	18,928,963		18,275,563
Unamortized premium	484,242		476,314
Unamortized discount	(3,595,201	)	(3,933,109	)
Gross unrealized gains	379,923		302,099
Gross unrealized losses	(114,643	)	(139,536	)
Fair value	16,083,284		14,981,331

The following table summarizes our MBS and GSE CRT portfolio according to estimated weighted average life classifications as of June 30, 2017 and December 31, 2016. 

$ in thousands	June 30, 2017	December 31, 2016
Less than one year	117,913	121,076
Greater than one year and less than five years	8,306,399	6,719,923
Greater than or equal to five years	7,658,972	8,140,332
Total	16,083,284	14,981,331

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The following tables present the estimated fair value and gross unrealized losses of our MBS and GSE CRTs by length of time that such securities have been in a continuous unrealized loss position at June 30, 2017 and December 31, 2016.

June 30, 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	2,534,116	(54,361	)	129	111,912	(2,469	)	19	2,646,028	(56,830	)	148
30 year fixed-rate	1,351,307	(16,221	)	59	507,832	(16,337	)	27	1,859,139	(32,558	)	86
ARM	82,986	(89	)	9	—	—		—	82,986	(89	)	9
Hybrid ARM	799,528	(4,824	)	73	7,048	(105	)	4	806,576	(4,929	)	77
Total Agency pass-through(1)	4,767,937	(75,495	)	270	626,792	(18,911	)	50	5,394,729	(94,406	)	320
Agency-CMO(2)	124,257	(5,340	)	26	21,443	(1,012	)	4	145,700	(6,352	)	30
Non-Agency RMBS	113,298	(2,385	)	23	166,184	(2,403	)	24	279,482	(4,788	)	47
CMBS(3)	487,895	(8,767	)	42	19,970	(330	)	5	507,865	(9,097	)	47
Total	5,493,387	(91,987	)	361	834,389	(22,656	)	83	6,327,776	(114,643	)	444

(1) Amounts disclosed include Agency RMBS with a fair value of $801.6 million for which the fair value option has been elected. Such securities have unrealized losses of $6.5 million.

(2) Fair value includes unrealized losses on Agency IO of $3.9 million and unrealized losses on CMO of $2.4 million.

(3) Amounts disclosed includes CMBS with a fair value of $168.0 million for which the fair value option has been elected. Such securities have unrealized losses of $2.3 million.

December 31, 2016

	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	2,781,777	(66,506	)	127	65,964	(1,556	)	17	2,847,741	(68,062	)	144
30 year fixed-rate	747,719	(15,409	)	45	547,763	(18,004	)	27	1,295,482	(33,413	)	72
ARM	120,540	(326	)	9	1,091	(7	)	1	121,631	(333	)	10
Hybrid ARM	1,356,687	(9,922	)	99	252	(4	)	2	1,356,939	(9,926	)	101
Total Agency pass-through(1)	5,006,723	(92,163	)	280	615,070	(19,571	)	47	5,621,793	(111,734	)	327
Agency-CMO(2)	163,114	(3,812	)	28	22,792	(952	)	3	185,906	(4,764	)	31
Non-Agency RMBS	287,647	(7,861	)	42	497,863	(6,671	)	36	785,510	(14,532	)	78
GSE CRT(3)	—	—		—	35,935	(969	)	3	35,935	(969	)	3
CMBS(4)	401,016	(6,733	)	36	47,219	(804	)	6	448,235	(7,537	)	42
Total	5,858,500	(110,569	)	386	1,218,879	(28,967	)	95	7,077,379	(139,536	)	481

(1) Amounts disclosed include Agency RMBS with a fair value of $149.7 million for which the fair value option has been elected. Such securities have unrealized losses of $4.0 million.

(2) Fair value includes unrealized losses on Agency IO of $3.0 million unrealized losses and unrealized losses on CMO of $1.7 million.

(3) Fair value includes unrealized losses on both the debt host contract and the embedded derivative.

(4) Amounts disclosed includes CMBS with a fair value of $13.9 million for which the fair value option has been elected. Such securities have unrealized losses of $613,000.

Gross unrealized losses on our Agency RMBS and CMO were $94.4 million and $2.4 million, respectively, at June 30, 2017. Due to the inherent credit quality of Agency RMBS and CMO, we determined that at June 30, 2017, any unrealized losses on our Agency RMBS and CMO portfolio are not other than temporary.

Gross unrealized losses on our Agency IO, non-Agency RMBS, GSE CRT and CMBS were $17.8 million at June 30, 2017. We did not consider these unrealized losses to be credit related, but rather due to non-credit related factors such as

11

interest rate spreads, prepayment speeds, and market fluctuations. These investment securities are included in our assessment for other-than-temporary impairment on a quarterly basis.

We assess our investment securities for other-than-temporary impairment on a quarterly basis. When the fair value of an investment is less than its amortized cost at the balance sheet date of the reporting period for which impairment is assessed, the impairment is designated as either "temporary" or "other-than-temporary." This analysis includes a determination of estimated future cash flows through an evaluation of the characteristics of the underlying loans and the structural features of the investment. Underlying loan characteristics reviewed include, but are not limited to, delinquency status, loan-to-value ratios, borrower credit scores, occupancy status and geographic concentration.

The following table represents the other-than-temporary impairment losses ("OTTI") included in earnings for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended   June 30,		Six Months Ended   June 30,
$ in thousands	2017	2016	2017	2016
RMBS interest-only securities	3,585	1,472	3,876	7,155
Non-Agency RMBS (1)	513	53	754	53
Total	4,098	1,525	4,630	7,208

(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.

As we have previously elected the fair value option for RMBS interest-only securities, the OTTI was recorded as a reclassification from an unrealized to a realized loss within gain (loss) on investments, net on the condensed consolidated statements of operations. As of June 30, 2017, we did not intend to sell the securities and determined that it was not more likely than not that we will be required to sell the securities.

The following table summarizes the changes in accumulated other comprehensive income (loss) related to our GSE CRT debt host contracts and available-for-sale MBS for the three and six months ended June 30, 2017 and 2016.  We reclassify unrealized gains and losses from other comprehensive income to gain (loss) on investments, net when we sell our investments.

The table excludes MBS and GSE CRT that are accounted for under the fair value option. As of June 30, 2017, $3.1 billion or 19.3% of our MBS and GSE CRT are accounted for under the fair value option.

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Accumulated other comprehensive income (loss) from MBS and GSE CRT securities:
Unrealized gain (loss) on MBS and GSE CRT at beginning of period	163,440	288,715		146,301	177,799
Unrealized gain (loss) on MBS and GSE CRT	39,633	117,116		55,922	238,576
Reclassification of unrealized (gain) loss on sale of MBS and GSE CRT to gain (loss) on investments, net	651	(1,037	)	1,501	(11,581	)
Balance at the end of period	203,724	404,794		203,724	404,794

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The following table summarizes the components of our total gain (loss) on investments, net for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Gross realized gains on sale of investments	1,311		1,037		2,215		14,052
Gross realized losses on sale of investments	(1,962	)	—		(3,873	)	(2,471	)
Other-than-temporary impairment losses	(4,098	)	(1,525	)	(4,630	)	(7,208	)
Net unrealized gains and losses on MBS accounted for under the fair value option	7,715		1,266		4,113		7,942
Net unrealized gains and losses on GSE CRT accounted for under the fair value option	8,195		173		11,474		237
Net unrealized gains and losses on trading securities	14		463		23		463
Total gain (loss) on investments, net	11,175		1,414		9,322		13,015

The following table presents components of interest income recognized on our MBS and GSE CRT portfolio for the three and six months ended June 30, 2017 and 2016. GSE CRT interest income 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.

For the three months ended June 30, 2017

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	91,979	(27,775	)	64,204
Non-Agency	18,131	3,734		21,865
GSE CRT	5,556	(347	)	5,209
CMBS	31,506	(1,852	)	29,654
Other	95	—		95
Total	147,267	(26,240	)	121,027

For the three months ended June 30, 2016

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	84,440	(28,277	)	56,163
Non-Agency	24,127	2,292		26,419
GSE CRT	2,136	(775	)	1,361
CMBS	31,476	(2,839	)	28,637
Other	297	(17	)	280
Total	142,476	(29,616	)	112,860

For the six months ended June 30, 2017

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	183,210	(56,353	)	126,857
Non-Agency	38,745	8,121		46,866
GSE CRT	10,043	(718	)	9,325
CMBS	61,182	(4,486	)	56,696
Other	156	—		156
Total	293,336	(53,436	)	239,900

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For the six months ended June 30, 2016

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	170,211	(52,462	)	117,749
Non-Agency	49,976	6,136		56,112
GSE CRT	4,333	(1,542	)	2,791
CMBS	63,740	(5,779	)	57,961
Other	510	(17	)	493
Total	288,770	(53,664	)	235,106

Note 5 – Commercial Loans Held-for-Investment

The following table summarizes commercial loans held-for-investment as of June 30, 2017 and December 31, 2016 that we purchased or originated.

June 30, 2017

$ in thousands	Number of loans	Principal Balance	Unamortized (fees)/ costs, net		Carrying value	Weighted Average Coupon		Weighted Average Years to Maturity (1)
Mezzanine loans	10	279,121	(255	)	278,866	8.50	%	1.4
Total	10	279,121	(255	)	278,866	8.50	%	1.4

December 31, 2016

$ in thousands	Number of loans	Principal Balance	Unamortized (fees)/ costs, net		Carrying value	Weighted Average Coupon		Weighted Average Years to Maturity (1)
Mezzanine loans	10	273,666	(311	)	273,355	8.14	%	1.6
Total	10	273,666	(311	)	273,355	8.14	%	1.6

(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.

These loans were not impaired, and no allowance for loan loss has been recorded as of June 30, 2017 and December 31, 2016 based on our analysis of credit quality factors as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

Note 6 – Other Assets

The following table summarizes our other assets as of June 30, 2017 and December 31, 2016.

$ in thousands	June 30, 2017	December 31, 2016
FHLBI stock	74,250	74,250
Investments in unconsolidated ventures	23,311	33,301
Investment in exchange-traded fund	3,979	500
Prepaid expenses and other assets	888	1,246
Total	102,428	109,297

IAS Services LLC, our wholly-owned subsidiary, is required to purchase and hold FHLBI stock as a condition of membership in the Federal Home Loan Bank of Indianapolis ("FHLBI"). The stock is recorded at cost.

We have invested in unconsolidated ventures that are managed by an affiliate of our Manager. The unconsolidated ventures invest in our target assets. Refer to Note 16 - "Commitments and Contingencies" for additional details regarding our commitments to these unconsolidated ventures.

We have invested in an exchange-traded fund that is managed by an affiliate of our Manager. The exchange-traded fund invests in our target assets.

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Note 7 – Borrowings

We finance the majority of our investment portfolio through repurchase agreements, secured loans and exchangeable senior notes. The following table summarizes certain characteristics of our borrowings at June 30, 2017 and December 31, 2016. Refer to Note 8 - "Collateral Positions" for collateral pledged under our repurchase agreements and secured loans.

$ in thousands	June 30, 2017
				Weighted
		Weighted		Average
		Average		Remaining
	Amount	Interest		Maturity
	Outstanding	Rate		(days)
Repurchase Agreements:
Agency RMBS	9,227,679	1.29	%	20
Non-Agency RMBS	1,130,943	2.50	%	29
GSE CRT	661,432	2.58	%	7
CMBS	1,098,894	2.33	%	16
Total Repurchase Agreements	12,118,948	1.56	%	21
Secured Loans	1,650,000	1.23	%	2,501
Exchangeable Senior Notes (1)	218,755	5.00	%	258
Total Borrowings	13,987,703	1.58	%	317

$ in thousands	December 31, 2016
				Weighted
		Weighted		Average
		Average		Remaining
	Amount	Interest		Maturity
	Outstanding	Rate		(days)
Repurchase Agreements:
Agency RMBS	8,148,220	0.93	%	32
Non-Agency RMBS	1,519,859	2.06	%	28
GSE CRT	547,872	2.25	%	16
CMBS	944,718	1.86	%	16
Total Repurchase Agreements	11,160,669	1.23	%	30
Secured Loans	1,650,000	0.74	%	2,682
Exchangeable Senior Notes (1)	400,000	5.00	%	439
Total Borrowings	13,210,669	1.28	%	373

(1) The carrying value of exchangeable senior notes is $217.8 million and $397.0 million as of June 30, 2017 and December 31, 2016, respectively. The carrying value is net of unamortized debt issuance costs of $1.0 million and $3.0 million as of June 30, 2017 and December 31, 2016, respectively.

The following table shows the aggregate amount of maturities of our outstanding borrowings:

$ in thousands	As of June 30,
2018	12,337,703
2019	—
2020	300,000
2021	100,000
2022	—
Thereafter	1,250,000
Total	13,987,703

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The following tables summarize certain characteristics of our repurchase agreements and secured loans at June 30, 2017 and December 31, 2016.

June 30, 2017
$ in thousands	Amount Outstanding	Percent of Total Amount Outstanding		MBS and GSE CRT Pledged as Collateral (1)
Repurchase Agreement Counterparties:
HSBC Securities (USA) Inc.	1,315,644	9.5	%	1,383,316
ING Financial Market LLC	1,270,181	9.2	%	1,336,963
Pierpont Securities LLC	1,125,511	8.2	%	1,181,071
Royal Bank of Canada	1,073,515	7.8	%	1,258,618
Mitsubishi UFJ Securities (USA), Inc.	653,956	4.7	%	691,437
E D & F Man Capital Markets Inc.	621,813	4.5	%	653,306
Scotia Capital	605,826	4.4	%	630,441
Citigroup Global Markets Inc.	552,926	4.0	%	656,821
Industrial and Commercial Bank of China Financial Services LLC	524,907	3.8	%	550,286
South Street Securities LLC	485,749	3.5	%	514,435
KGS-Alpha Capital Markets, L.P.	481,965	3.5	%	506,387
Goldman, Sachs & Co.	467,361	3.4	%	586,400
JP Morgan Securities Inc.	411,296	3.0	%	476,473
Societe Generale	395,937	2.9	%	509,082
Guggenheim Liquidity Services, LLC	329,375	2.4	%	346,416
Mizuho Securities USA Inc.	329,168	2.4	%	347,282
Natixis, New York Branch	302,566	2.2	%	327,418
BNP Paribas Securities Corp.	283,528	2.1	%	326,548
Daiwa Capital Markets America Inc.	218,702	1.6	%	230,239
All other counterparties(2)	669,022	4.9	%	857,358
Total Repurchase Agreement Counterparties	12,118,948	88.0	%	13,370,297
Secured Loans Counterparty:
FHLBI	1,650,000	12.0	%	1,941,665
Total	13,768,948	100.0	%	15,311,962

(1) Amount pledged as collateral is measured at fair value as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

(2) Represents amounts outstanding with seven counterparties.

16

December 31, 2016
$ in thousands	Amount Outstanding	Percent of Total Amount Outstanding		MBS and GSE CRT Pledged as Collateral (1)
Repurchase Agreement Counterparties:
HSBC Securities (USA) Inc.	1,401,966	11.2	%	1,468,793
ING Financial Market LLC	1,142,200	8.9	%	1,216,492
Royal Bank of Canada	1,098,631	8.6	%	1,293,336
Industrial and Commercial Bank of China Financial Services LLC	707,616	5.5	%	748,503
Mitsubishi UFJ Securities (USA), Inc.	703,382	5.5	%	740,404
Pierpont Securities LLC	681,853	5.3	%	717,663
South Street Securities LLC	675,660	5.3	%	713,330
Goldman, Sachs & Co.	486,430	3.8	%	623,400
Scotia Capital	479,105	3.7	%	500,578
JP Morgan Securities Inc.	477,947	3.7	%	554,494
KGS-Alpha Capital Markets, L.P.	441,541	3.4	%	475,858
Citigroup Global Markets Inc.	427,185	3.3	%	534,875
E D & F Man Capital Markets Inc.	405,615	3.2	%	430,896
Guggenheim Liquidity Services, LLC	356,149	2.8	%	377,030
Natixis, New York Branch	336,202	2.6	%	362,432
Societe Generale	325,393	2.5	%	427,200
BNP Paribas Securities Corp.	307,641	2.4	%	346,484
All other counterparties(2)	706,153	5.4	%	912,536
Total Repurchase Agreement Counterparties:	11,160,669	87.1	%	12,444,304
Secured Loans Counterparty:
FHLBI	1,650,000	12.9	%	1,931,582
Total	12,810,669	100.0	%	14,375,886

(1) Amount pledged as collateral is measured at fair value as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

(2) Represents amounts outstanding with seven counterparties.

Repurchase Agreements

Repurchase agreements bear interest at a contractually agreed upon rate and have maturities ranging from one month to twelve months. Repurchase agreements are accounted for as secured borrowings since we maintain effective control of the financed assets. Repurchase agreements are subject to certain financial covenants. We were in compliance with these covenants at June 30, 2017.

Our repurchase agreement collateral ratio (MBS and GSE CRTs pledged as collateral/Amount Outstanding) was 110% as of June 30, 2017 (December 31, 2016: 112%).

Secured Loans

Our wholly-owned captive insurance subsidiary, IAS Services LLC is a member of the FHLBI. As a member of the FHLBI, IAS Services LLC has borrowed funds from the FHLBI in the form of secured loans.

As of June 30, 2017, IAS Services LLC, had $1.65 billion in outstanding secured loans from the FHLBI. These secured loans have floating rates that are based on the three-month FHLB swap rate plus a spread. For the six months ended June 30, 2017, IAS Services LLC had weighted average borrowings of $1.65 billion with a weighted average borrowing rate of 0.96% and a weighted average maturity of 6.9 years.

The Federal Housing Finance Agency’s ("FHFA") final rule governing Federal Home Loan Bank membership (the "FHFA Rule") was effective on February 19, 2016. The FHFA Rule, among other provisions, excludes captive insurance

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companies from membership eligibility. The FHFA Rule permits existing captive insurance companies, such as IAS Services LLC, to remain members until February 2021. New advances or renewals that mature after February 2021 are prohibited. As permitted by the FHFA Rule, the FHLBI has indicated it will honor the contractual maturity dates of existing advances to IAS Services LLC that were made prior to February 19, 2016 and extend beyond February 2021. We do not expect there to be any impact to our existing FHLBI borrowings under the FHFA rule. The ability to borrow from the FHLBI is subject to our continued creditworthiness, pledging of sufficient eligible collateral to secure advances, and compliance with certain agreements with FHLBI and FHFA rules.

As discussed in Note 6 - "Other Assets," IAS Services LLC is required to purchase and hold a certain amount of FHLBI stock, which is based, in part, upon the outstanding principal balance of secured loans from the FHLBI.

Exchangeable Senior Notes

In 2013, our wholly-owned subsidiary, IAS Operating Partnership LP, issued $400.0 million in aggregate principal amount of Exchangeable Senior Notes (the "Notes") due March 15, 2018. The Notes may be exchanged for shares of our common stock at the applicable exchange rate at any time prior to the close of business on March 13, 2018. The Notes are reported on our consolidated balance sheets net of unamortized debt issuance costs. Debt issuance costs are amortized as an adjustment to interest expense using the effective interest method over the stated legal maturity of the Notes.

In June and March 2017, we retired $31.2 million and $150.0 million of Notes for a repurchase price of $31.6 million and $153.8 million, respectively. During the three months ended June 30, 2017, we realized a $526,000 net loss on extinguishment of debt including $136,000 of unamortized debt issuance costs associated with the retired debt. During the six months ended June 30, 2017, we realized a $5.2 million net loss on extinguishment of debt including $1.0 million of unamortized debt issuance costs associated with the retired debt.

Accrued interest payable on the Notes was approximately $3.2 million as of June 30, 2017 (December 31, 2016: $5.9 million).

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Note 8 - Collateral Positions

The following table summarizes the fair value of collateral that we have pledged and held under our repurchase agreements, secured loans, interest rate swaps and currency forward contracts as of June 30, 2017 and December 31, 2016. Refer to Note 2 - "Summary of Significant Accounting Policies - Fair Value Measurements" of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for a description of how we determine fair value. RMBS, CMBS and GSE CRT collateral pledged is included in mortgage-backed and credit risk transfer securities on our consolidated balance sheets. Cash collateral pledged on bilateral swaps and currency forward contracts is classified as due from counterparties on our consolidated balance sheets.

Cash collateral held on bilateral swaps that is not restricted for use is included in cash and cash equivalents on our consolidated balance sheets and the liability to return the collateral is included in collateral held payable. Non-cash collateral held is only recognized if the counterparty defaults or if we sell the pledged collateral. As of June 30, 2017 and December 31, 2016, we did not recognize any non-cash collateral held.

Collateral Pledged	June 30, 2017	December 31, 2016
Repurchase Agreements:
Agency RMBS	9,711,706	8,654,233
Non-Agency RMBS	1,424,646	1,887,550
GSE CRT	874,493	734,212
CMBS	1,359,452	1,168,309
Total repurchase agreements collateral pledged	13,370,297	12,444,304
Secured Loans:
Agency RMBS	596,514	585,504
CMBS	1,345,151	1,346,078
Total secured loans collateral pledged	1,941,665	1,931,582
Interest Rate Swaps and Currency Forward Contracts:
Agency RMBS	55,188	46,312
Cash	1,246	86,450
Total interest rate swaps and currency forward contracts collateral pledged (1)	56,434	132,762
Total:
Mortgage-backed and GSE CRT securities	15,367,150	14,422,198
Cash	1,246	86,450
Total collateral pledged	15,368,396	14,508,648
Collateral Held	June 30, 2017	December 31, 2016
Interest Rate Swaps:
Cash	3,471	1,700
Non-cash collateral	—	536
Total collateral held	3,471	2,236

(1) Cash collateral pledged on our currency forward contracts was $980,000 as of June 30, 2017. We did not pledge any collateral on our currency forward contracts as of December 31, 2016.

Repurchase Agreements

Collateral pledged with our repurchase agreement counterparties is segregated in our books and records. The repurchase agreement counterparties have the right to resell and repledge the collateral posted but have the obligation to return the pledged collateral, or substantially the same collateral if agreed to by us, upon maturity of the repurchase agreement. Under the repurchase agreements, the respective lender retains the contractual right to mark the underlying collateral to fair value as determined by a pricing service agreed to by the respective lender and us. We would be required to provide additional collateral or fund margin calls if the value of pledged assets declined. We intend to maintain a level of liquidity that will enable us to meet margin calls.

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Secured Loans

The ability to borrow from the FHLBI is subject to our continued creditworthiness, pledging of sufficient eligible collateral to secure advances, and compliance with certain agreements with FHLBI and FHFA rules. Collateral pledged with the FHLBI is held in trust for the benefit of the FHLBI and is not commingled with our other assets. The FHLBI does not have the right to resell or repledge collateral posted unless an event of default occurs. The FHLBI retains the right to mark the underlying collateral for FHLBI advances to fair value as determined by the FHLBI in its sole discretion. IAS Services LLC would be required to provide additional collateral or fund margin calls if the value of pledged assets declines.

Interest Rate Swaps

Collateral pledged with our interest rate swap counterparties is segregated in our books and records. We have two types of interest rate swap agreements: bilateral interest rate swaps that are governed by an International Swaps and Derivatives Association ("ISDA") agreement and interest rate swaps that are centrally cleared by the Chicago Mercantile Exchange ("CME") through a Futures Commission Merchant. Interest rate swaps that are governed by an ISDA agreement provide for bilateral collateral pledging based on the counterparties' market value. The counterparties have the right to repledge the collateral posted, but have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the interest rate swaps change.

We are required to pledge initial margin and daily variation margin for our interest rate swaps that are centrally cleared by CME. CME determines the fair value of our centrally cleared swaps, including daily variation margin. Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate swaps as settlement rather than collateral. As a result of this rule change, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps.

Currency Forward Contracts

Collateral pledged with our currency forward counterparty is segregated in our books and records. Eligible collateral to be pledged can be in the form of cash or securities. Our currency forward contract provides for bilateral collateral pledging based on the counterparties' market value. The counterparties have the right to repledge the collateral posted, but have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the currency forward contracts change.

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Note 9 – Derivatives and Hedging Activities

The following table summarizes changes in the notional amount of our derivative instruments during 2017:

$ in thousands	Notional Amount as of January 1, 2017	Additions	Settlement, Termination, Expiration or Exercise		Notional Amount as of June 30, 2017
Interest Rate Swaps	6,500,000	1,400,000	—		7,900,000
Currency Forward Contracts	62,308	137,860	(131,575	)	68,593
Credit Derivatives	569,966	—	(5,729	)	564,237
Total	7,132,274	1,537,860	(137,304	)	8,532,830

Interest Rate Swaps

Our repurchase agreements are usually settled on a short-term basis ranging from one to twelve months. At each settlement date, we typically refinance each repurchase agreement at the market interest rate at that time. In addition, our secured loans have floating interest rates. As such, we are exposed to changing interest rates. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposures to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Effective December 31, 2013, we voluntarily discontinued cash flow hedge accounting for our interest rate swaps to gain greater flexibility in managing interest rate exposures. Amounts recorded in accumulated other comprehensive income ("AOCI") before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the condensed consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements. We reclassified $6.4 million as a decrease (June 30, 2016: $3.2 million as an increase) and $12.7 million as a decrease (June 30, 2016: $16.2 million as an increase) to interest expense for the three and six months ended June 30, 2017, respectively. During the next 12 months, we estimate that $26.3 million will be reclassified as a decrease to interest expense, repurchase agreements. As of June 30, 2017, $136.6 million (December 31, 2016: $149.1 million) of unrealized gain/(loss) on discontinued cash flow hedges, net is still included in accumulated other comprehensive income.

As of June 30, 2017, we had the following interest rate swaps outstanding:

$ in thousands Counterparty			Notional	Maturity Date	Fixed Interest Rate in Contract
ING Capital Markets LLC			350,000	2/24/2018	0.95	%
UBS AG			500,000	5/24/2018	1.10	%
ING Capital Markets LLC			400,000	6/5/2018	0.87	%
CME Central Clearing			300,000	2/5/2021	2.50	%
CME Central Clearing			300,000	2/5/2021	2.69	%
Wells Fargo Bank, N.A.			200,000	3/15/2021	3.14	%
CME Central Clearing			500,000	5/24/2021	2.25	%
Citibank, N.A.			200,000	5/25/2021	2.83	%
CME Central Clearing			500,000	6/24/2021	2.44	%
HSBC Bank USA, National Association			550,000	2/24/2022	2.45	%
CME Central Clearing			1,000,000	6/9/2022	2.21	%
The Royal Bank of Scotland Plc			500,000	8/15/2023	1.98	%
CME Central Clearing			600,000	8/24/2023	2.88	%
HSBC Bank USA, National Association			500,000	12/15/2023	2.20	%
CME Central Clearing			450,000	1/12/2024	2.10	%
CME Central Clearing			450,000	1/25/2024	2.15	%
CME Central Clearing			100,000	4/2/2025	2.04	%
CME Central Clearing	(1	)	250,000	5/24/2028	2.78	%
CME Central Clearing	(1	)	250,000	5/24/2028	2.39	%
Total			7,900,000		2.17	%

(1) Forward start date of 5/24/2018

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Refer to Note 8 - "Collateral Positions" for further information regarding our collateral pledged to and received from our interest rate swap counterparties.

Interest Rate Swaptions

We have purchased interest rate swaptions to help mitigate the potential impact of increases or decreases in interest rates on the performance of a portion of our investment portfolio (referred to as "convexity risk"). The interest rate swaptions provide us the option to enter into interest rate swap agreements for a predetermined notional amount, stated term and pay and receive interest rates in the future. The premium paid for interest rate swaptions is reported as a derivative asset in our condensed consolidated balance sheets. The premium is valued at an amount equal to the fair value of the swaption that would have the effect of closing the position adjusted for nonperformance risk, if any. The difference between the premium and the fair value of the swaption is reported in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations. If an interest rate swaption expires unexercised, the loss on the interest rate swaption would be equal to the premium paid. If we sell or exercise an interest rate swaption, the realized gain or loss on the interest rate swaption would be equal to the difference between the cash or the fair value of the underlying interest rate swap received and the premium paid.

As of June 30, 2017 and December 31, 2016, we have no outstanding interest rate swaptions.

Currency Forward Contracts

We use currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies. Realized and unrealized gains and losses associated with the purchases or sales of currency forward contracts are recognized in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations. As of June 30, 2017, we have $49.6 million (December 31, 2016: $49.0 million) of notional amount of forward contracts denominated in Pound Sterling and $19.0 million (December 31, 2016: $13.3 million) of notional amount of forward contracts denominated in Euro.

Credit Derivatives

Our GSE CRTs purchased prior to August 24, 2015 are accounted for as hybrid financial instruments consisting of a debt host contract and an embedded credit derivative. Embedded derivatives associated with GSE CRTs are recorded within mortgage-backed and credit risk transfer securities, at fair value, on the consolidated balance sheets. At June 30, 2017 and December 31, 2016, terms of the GSE CRT embedded derivatives are:

$ in thousand	June 30, 2017	December 31, 2016
Fair value amount	46,802	17,095
Notional amount	564,237	569,966
Maximum potential amount of future undiscounted payments	564,237	569,966

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Tabular Disclosure of the Effect of Derivative Instruments on the Balance Sheet

The table below presents the fair value of our derivative financial instruments, as well as their classification on the condensed consolidated balance sheets as of June 30, 2017 and December 31, 2016.

$ in thousands

Derivative Assets			Derivative Liabilities
	As of June 30, 2017	As of December 31, 2016		As of June 30, 2017	As of December 31, 2016
Balance Sheet	Fair Value	Fair Value	Balance Sheet	Fair Value	Fair Value
Interest Rate Swaps Asset	11,005	3,085	Interest Rate Swaps Liability	43,047	133,833
Currency Forward Contracts	—	101	Currency Forward Contracts	1,100	395

Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate swaps as settlement rather than collateral. As a result of this rule change, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps.

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement

The tables below present the effect of our credit derivatives on the condensed consolidated statements of operations for the three and six months ended June 30, 2017 and 2016.

$ in thousands	Three months ended June 30, 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	—	5,844	15,559	21,403

$ in thousands	Three months ended June 30, 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	(5,097	)	6,112	16,213	17,228

$ in thousands	Six months ended June 30, 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	—	11,651	29,707	41,358

$ in thousands	Six months ended June 30, 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	)	12,426	19,229	25,638

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The following table summarizes the effect of interest rate swaps, interest rate swaptions and currency forward contracts reported in gain (loss) on derivative instruments, net on the condensed consolidated statements of operations for the three and six months ended June 30, 2017 and 2016:

$ in thousands	Three months ended June 30, 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	(38,512	)	(19,966	)	7,975		(50,503	)
Currency Forward Contracts	(1,717	)	—		(1,293	)	(3,010	)
Total	(40,229	)	(19,966	)	6,682		(53,513	)

$ in thousands	Three months ended June 30, 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	(20,105	)	(24,985	)	(49,711	)	(94,801	)
Currency Forward Contracts	(479	)	—		4,917		4,438
Total	(20,584	)	(24,985	)	(44,794	)	(90,363	)

$ in thousands	Six months ended June 30, 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	(22,518	)	(42,860	)	20,925		(44,453	)
Currency Forward Contracts	(2,793	)	—		(805	)	(3,598	)
Total	(25,311	)	(42,860	)	20,120		(48,051	)

$ in thousands	Six months ended June 30, 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	(64,000	)	(54,076	)	(216,382	)	(334,458	)
Interest Rate Swaptions	(1,485	)	—		1,485		—
Currency Forward Contracts	1,916		—		3,636		5,552
Total	(63,569	)	(54,076	)	(211,261	)	(328,906	)

Credit-risk-related Contingent Features

We have agreements with each of our bilateral derivative counterparties. Some of those agreements contain a provision whereby if we default on any of our indebtedness, including default whereby repayment of the indebtedness has not been accelerated by the lender, we could be declared in default on our derivative obligations.

At June 30, 2017, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for non-performance risk related to bilateral interest rate swap agreements, was $40.0 million. We have minimum collateral posting thresholds with certain of our derivative counterparties and have pledged collateral of $55.2 million of Agency RMBS as of June 30, 2017. If we had breached any of these provisions at June 30, 2017, we could have been required to settle our obligations under these agreements at their termination value.

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We also have an agreement with a clearing counterparty for our interest rate swaps that includes cross default provisions. The fair value of our centrally cleared interest rate derivative contracts was a net asset as of June 30, 2017.

We were in compliance with all of the financial provisions of these counterparty agreements as of June 30, 2017.

Note 10 – Offsetting Assets and Liabilities

Certain of our repurchase agreements and derivative transactions are governed by underlying agreements that generally provide for a right of setoff under master netting arrangements (or similar agreements) in the event of default or in the event of bankruptcy of either party to the transactions. Assets and liabilities subject to such arrangements are presented on a gross basis in the condensed consolidated balance sheets.

The following tables present information about the assets and liabilities that are subject to master netting agreements (or similar agreements) and can potentially be offset on our condensed consolidated balance sheets at June 30, 2017 and December 31, 2016. Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate swaps as settlement rather than collateral. As a result of this rule change, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps. Our derivative asset of $7.3 million at June 30, 2017 related to centrally cleared interest rate swaps is not included in the table below as a result of this change.

Offsetting of Derivative Assets

As of June 30, 2017

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	Financial Instruments	Cash Collateral Received		Net Amount
Derivatives (1) (4)	3,706	—	3,706	—	(3,445	)	261
Total	3,706	—	3,706	—	(3,445	)	261

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Offsetting of Derivative Liabilities, Repurchase Agreements and Secured Loans

As of June 30, 2017

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	Financial Instruments (2)		Cash Collateral Pledged		Net Amount
Derivatives (4)	44,147	—	44,147	(43,047	)	(980	)	120
Repurchase Agreements (3)	12,118,948	—	12,118,948	(12,118,948	)	—		—
Secured Loans (5)	1,650,000	—	1,650,000	(1,650,000	)	—		—
Total	13,813,095	—	13,813,095	(13,811,995	)	(980	)	120

Offsetting of Derivative Assets

As of December 31, 2016

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	Financial Instruments		Cash Collateral Received		Net Amount
Derivatives (1) (4)	3,186	—	3,186	(1,640	)	(1,546	)	—
Total	3,186	—	3,186	(1,640	)	(1,546	)	—

Offsetting of Derivative Liabilities and Repurchase Agreements

As of December 31, 2016

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	Financial Instruments (2)		Cash Collateral Pledged		Net Amount
Derivatives (4)	134,228	—	134,228	(45,738	)	(85,787	)	2,703
Repurchase Agreements (3)	11,160,669	—	11,160,669	(11,160,669	)	—		—
Secured Loans (5)	1,650,000	—	1,650,000	(1,650,000	)	—		—
Total	12,944,897	—	12,944,897	(12,856,407	)	(85,787	)	2,703

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(1) Amounts represent derivatives in an asset position which could potentially be offset against derivatives in a liability position at June 30, 2017 and December 31, 2016, 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 borrowing under repurchase agreements was $13.4 billion and $12.4 billion at June 30, 2017 and December 31, 2016, respectively.

(4) Cash collateral received on our derivatives was $3.5 million and $1.7 million at June 30, 2017 and December 31, 2016, respectively. We did not receive any non-cash collateral on our derivatives at June 30, 2017. Non-cash collateral received on our derivatives was $536,000 at December 31, 2016. Cash collateral pledged by us on our derivatives was $86.5 million at December 31, 2016. As a result of the CME rule change effective January 3, 2017, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps and therefore excluded from the table above at June 30, 2017.

(5) The fair value of securities pledged against IAS Services LLC's borrowing under secured loans was $1.9 billion at June 30, 2017 and December 31, 2016, respectively.

Note 11 – Fair Value of Financial Instruments

A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The three levels are defined as follows:

• 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.

The following tables present our assets and liabilities measured at fair value on a recurring basis.

	June 30, 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)	—	16,036,482	46,802	—	16,083,284
Derivative assets	—	11,005	—	—	11,005
Other assets(4)	3,979	—	—	23,311	27,290
Total assets	3,979	16,047,487	46,802	23,311	16,121,579
Liabilities:
Derivative liabilities	—	44,147	—	—	44,147
Total liabilities	—	44,147	—	—	44,147

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	December 31, 2016
	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)	—	14,964,236	17,095	—	14,981,331
Derivative assets	—	3,186	—	—	3,186
Other assets(4)	500	—	—	33,301	33,801
Total assets	500	14,967,422	17,095	33,301	15,018,318
Liabilities:
Derivative liabilities	—	134,228	—	—	134,228
Total liabilities	—	134,228	—	—	134,228

(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 financial instruments consist of debt host contracts classified as Level 2 and embedded derivatives classified as Level 3. As of June 30, 2017, the net embedded derivative asset position of $46.8 million includes $47.7 million of embedded derivatives in an asset position and $900,000 of embedded derivatives in a liability position. As of December 31, 2016, the net embedded derivative asset position of $17.1 million includes $21.0 million of embedded derivatives in an asset position and $3.9 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 June 30, 2017 and December 31, 2016, the weighted average remaining term of investments in unconsolidated ventures is 1.8 and 1.3 years, respectively.

(4) Includes $4.0 million and $0.5 million of investment in an exchange-traded fund as of June 30, 2017 and December 31, 2016, respectively.

The following table shows a reconciliation of the beginning and ending fair value measurements of our GSE CRT embedded derivatives, which we have valued utilizing Level 3 inputs:

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Beginning balance	31,243	(22,706	)	17,095	(25,722	)
Sales and settlements	—	5,097		—	6,017
Total net gains / (losses) included in net income:	—	—			—
Realized gains/(losses), net	—	(5,097	)	—	(6,017	)
Unrealized gains/(losses), net(1)	15,559	16,213		29,707	19,229
Ending balance	46,802	(6,493	)	46,802	(6,493	)

(1) Included in realized and unrealized credit derivative income (loss), net in the condensed consolidated statements of operations for the three months ended June 30, 2017 and 2016, are $15.6 million and $11.1 million in net unrealized gains attributable to assets still held as of June 30, 2017 and June 30, 2016, respectively. Included in realized and unrealized credit derivative income (loss), net in the condensed consolidated statements of operations for the six months ended June 30, 2017 and 2016, are $29.7 million and $12.6 million in net unrealized gains attributable to assets still held as of June 30, 2017 and June 30, 2016, respectively. We did not reverse any unrealized gains or losses on securities sold in the three and six months ended June 30, 2017. During the three and six months ended June 30, 2016, we reversed unrealized losses on securities sold during the period of $5.1 million and $6.0 million, respectively.

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The following table summarizes significant unobservable inputs used in the fair value measurement of our GSE CRT embedded derivatives:

	Fair Value at	Valuation	Unobservable		Weighted
$ in thousands	June 30, 2017	Technique	Input	Range	Average
GSE CRT Embedded Derivatives	46,802	Market Comparables, Vendor Pricing	Weighted average life	3.7 - 7.5 years	5.7 years

	Fair Value at	Valuation	Unobservable		Weighted
$ in thousands	December 31, 2016	Technique	Input	Range	Average
GSE CRT Embedded Derivatives	17,095	Market Comparables, Vendor Pricing	Weighted average life	2.5 - 7.7 years	5.3 years

These significant unobservable inputs change according to market conditions and security performance. We estimate the weighted average life of GSE CRTs in order to identify GSE corporate debt with a similar maturity. We obtain our weighted average life estimates from a third party provider. Although weighted average life is a significant input, changes in weighted average life may not have an explicit directional impact on the fair value measurement.

The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the condensed consolidated balance sheets at June 30, 2017 and December 31, 2016:

	June 30, 2017		December 31, 2016
$ in thousands	Carrying Value	Estimated Fair Value	Carrying Value	Estimated Fair Value
Financial Assets
Commercial loans, held-for-investment	278,866	280,257	273,355	275,319
Other assets	74,250	74,250	74,250	74,250
Total	353,116	354,507	347,605	349,569
Financial Liabilities
Repurchase agreements	12,118,948	12,118,722	11,160,669	11,161,034
Secured loans	1,650,000	1,650,000	1,650,000	1,650,000
Exchangeable senior notes	217,804	220,943	397,041	400,000
Total	13,986,752	13,989,665	13,207,710	13,211,034

The following describes our methods for estimating the fair value for financial instruments.

• 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 a 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 cost. 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.

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Note 12 – Related Party Transactions

Under the terms of our management agreement, our Manager and its affiliates provide us with our management team, including our officers and appropriate support personnel. Each of our officers is an employee of our Manager or one of its affiliates. We do not have any employees. Our Manager is not obligated to dedicate any of its employees exclusively to us, nor is our Manager obligated to dedicate any specific portion of time to our business. During the three and six months ended June 30, 2017, we reimbursed our Manager $202,000 (June 30, 2016: $182,000) and $387,000 (June 30, 2016: $341,000), respectively, for costs of support personnel that are fully dedicated to our business.

We have invested $24.3 million as of June 30, 2017 (December 31, 2016: $149.9 million) in money market or mutual funds managed by affiliates of our Manager. The investments are reported as cash and cash equivalents on our condensed consolidated balance sheets.

We also pay our Manager a portion of the origination and commitment fees received from borrowers in connection with purchasing and originating commercial real estate loans. For the three and six months ended June 30, 2017, we did not pay our Manager any costs related to such transactions. For the three and six months ended June 30, 2016, we paid our Manager $189,000 and $692,000, respectively, related to such transactions.

Management Fee Expense

We pay our Manager a management fee equal to 1.50% of our stockholders’ equity per annum. The fee is calculated and payable quarterly in arrears. For purposes of calculating the management fee, stockholders’ equity is equal to the sum of the net proceeds from all issuances of equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus retained earnings at the end of the most recently completed calendar quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less any amount paid to repurchase common stock since inception. Stockholder's equity excludes (i) any unrealized gains, losses or other items that do not affect realized net income (regardless of whether such items are included in other comprehensive income or loss, or in net income); (ii) cumulative net realized losses that are not attributable to permanently impaired investments and that relate to the investments for which market movement is accounted for in other comprehensive income; provided, however, that such adjustment shall not exceed cumulative unrealized net gains in other comprehensive income; (iii) one-time events pursuant to changes in U.S. GAAP; and (iv) certain non-cash items after discussions between our Manager and our independent directors and approval by a majority of our independent directors.

We do not pay any management fees on our investments in unconsolidated ventures that are managed by an affiliate of our Manager.

Expense Reimbursement

We are required to reimburse our Manager for our operating expenses incurred on our behalf, including directors and officers insurance, accounting services, auditing and tax services, filing fees, and miscellaneous general and administrative costs. Our reimbursement obligation is not subject to any dollar limitation. We incurred costs of $1.2 million and $1.4 million originally paid for by our Manager for the three months ended June 30, 2017and 2016, respectively. We incurred costs of $2.8 million and $3.2 million originally paid for by our Manager for the six months ended June 30, 2017 and 2016, respectively.

Termination Fee

If we terminate our management agreement, we owe our Manager a termination fee equal to three times the sum of our average annual management fee during the 24-month period before termination, calculated as of the end of the most recently completed fiscal quarter.

Note 13 – Stockholders’ Equity

Preferred Stock

Holders of our Series A Preferred Stock are entitled to receive dividends at an annual rate of 7.75% of the liquidation preference of $25.00 per share or $1.9375 per share per annum. The dividends are cumulative and payable quarterly in arrears.

Holders of our Series B Preferred Stock are entitled to receive dividends at an annual rate of 7.75% of the liquidation preference of $25.00 per share or $1.9375 per share per annum until December 27, 2024. After December 27, 2024, holders are entitled to receive dividends at a floating rate equal to three-month LIBOR plus a spread of 5.18% of the $25.00 liquidation preference per annum. Dividends are cumulative and payable quarterly in arrears.

We may elect to redeem shares of preferred stock at our option after July 26, 2017 (with respect to the Series A Preferred Stock) and after December 27, 2024 (with respect to the Series B Preferred Stock) for $25.00 per share, plus any accumulated

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and unpaid dividends through the date of the redemption. These shares are not redeemable, convertible into or exchangeable for any other property or any other securities of the Company prior to those times, except under circumstances intended to preserve our qualification as a REIT or upon the occurrence of a change in control.

Accumulated Other Comprehensive Income

The following tables present the components of accumulated other comprehensive income. The tables exclude MBS and GSE CRTs that are accounted for under the fair value option.

	Three Months Ended June 30, 2017
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		39,633		—		39,633
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		651		—		651
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(6,369	)	(6,369	)
Currency translation adjustments on investment in unconsolidated venture	139		—		—		139
Other comprehensive income/(loss), net	139		40,284		(6,369	)	34,054
Balance at beginning of period	(512	)	161,381		142,896		303,765
Other comprehensive income/(loss), net	139		40,284		(6,369	)	34,054
Other comprehensive income/(loss) attributable to non-controlling interest	(2	)	(508	)	81		(429	)
Rebalancing of ownership percentage of non-controlling interest	—		1		—		1
Balance at end of period	(375	)	201,158		136,608		337,391

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	Three Months Ended June 30, 2016
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		117,116		—		117,116
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		(1,037	)	—		(1,037	)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		3,238		3,238
Currency translation adjustments on investment in unconsolidated venture	274		—		—		274
Other comprehensive income/(loss), net	274		116,079		3,238		119,591
Balance at beginning of period	(79	)	279,916		161,036		440,873
Other comprehensive income/(loss), net	274		116,079		3,238		119,591
Other comprehensive income/(loss) attributable to non-controlling interest	(5	)	(1,464	)	(41	)	(1,510	)
Balance at end of period	190		394,531		164,233		558,954

	Six Months Ended June 30, 2017
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		55,922		—		55,922
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		1,501		—		1,501
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(12,667	)	(12,667	)
Currency translation adjustments on investment in unconsolidated venture	(476	)	—		—		(476	)
Other comprehensive income/(loss), net	(476	)	57,423		(12,667	)	44,280
Balance at beginning of period	95		144,458		149,115		293,668
Other comprehensive income/(loss), net	(476	)	57,423		(12,667	)	44,280
Other comprehensive income/(loss) attributable to non-controlling interest	6		(724	)	160		(558	)
Rebalancing of ownership percentage of non-controlling interest	—		1		—		1
Balance at end of period	(375	)	201,158		136,608		337,391

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	Six Months Ended June 30, 2016
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		238,576		—		238,576
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		(11,581	)	—		(11,581	)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		16,162		16,162
Currency translation adjustments on investment in unconsolidated venture	225		—		—		225
Other comprehensive income/(loss), net	225		226,995		16,162		243,382
Balance at beginning of period	(32	)	170,383		148,273		318,624
Other comprehensive income/(loss), net	225		226,995		16,162		243,382
Other comprehensive income/(loss) attributable to non-controlling interest	(3	)	(2,847	)	(202	)	(3,052	)
Balance at end of period	190		394,531		164,233		558,954

Effective December 31, 2013, we voluntarily discontinued cash flow hedge accounting for our interest rate swaps to gain greater flexibility in managing interest rate exposures. Amounts recorded in AOCI before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the condensed consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

Securities Convertible into Shares of Common Stock

The non-controlling interest holder of the Operating Partnership units, a wholly-owned Invesco subsidiary, has the right to cause the Operating Partnership to redeem their operating partnership units ("OP Units") for cash equal to the market value of an equivalent number of shares of common stock, or at our option, we may purchase their OP Units by issuing one share of common stock for each OP Unit redeemed. We also have an equity incentive plan which allows us to grant securities convertible into our common stock to our independent directors and employees of our Manager and its affiliates.

Share Repurchase Program

During the three and six months ended June 30, 2017 and three months ended June 30, 2016, we did not repurchase any shares of our common stock. During the six months ended June 30, 2016, we repurchased and concurrently retired 2,063,451 shares of our common stock at a weighted average repurchase price of $12.12 per share for a net cost of $25.0 million, including acquisition expenses. As of June 30, 2017, we have authority to purchase 18,239,082 additional shares of our common stock under our share repurchase program. The share repurchase program has no stated expiration date.

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Share-Based Compensation

We established the 2009 Equity Incentive Plan for grants of common stock and other equity based awards to our independent directors and officers and employees of our Manager and its affiliates (the "Incentive Plan"). Under the Incentive Plan, a total of 1,000,000 shares of common stock are authorized for issuance. Unless terminated earlier, the Incentive Plan will terminate in 2019, but will continue to govern the unexpired awards. As of June 30, 2017, 806,778 shares of common stock remain available for future issuance under the Incentive Plan.

We recognized compensation expense of approximately $112,000 (June 30, 2016: $85,000) and approximately $197,000 (June 30, 2016: $170,000) related to our independent directors for the three and six months ended June 30, 2017, respectively. During the three months ended June 30, 2017 and 2016, we issued 5,292 shares and 6,160 shares of common stock, respectively, pursuant to the Incentive Plan to our independent directors. During the six months ended June 30, 2017 and 2016, we issued 10,748 shares and 13,908 shares of common stock, respectively, pursuant to the Incentive Plan to our independent directors. The fair market value of the shares granted was determined by the closing stock market price on the date of the grant. The grants vested immediately.

We recognized compensation expense of approximately $35,000 (June 30, 2016: $63,000) and $66,000 (June 30, 2016: $95,000) for the three and six months ended June 30, 2017, respectively,related to restricted stock units awarded to employees of our Manager and its affiliates which is reimbursed by our Manager under the management agreement. At June 30, 2017 there was approximately $288,000 of total unrecognized compensation cost related to restricted stock unit awards that is expected to be recognized over a period of up to 45 months, with a weighted-average remaining vesting period of 20 months.

The following table summarizes the activity related to restricted stock units awarded to employees of our Manager and its affiliates for the three and six months ended June 30, 2017.

	Three Months Ended June 30,			Six Months Ended June 30,
	2017			2017
	Restricted Stock Units	Weighted Average Grant Date Fair Value (1)		Restricted Stock Units		Weighted Average Grant Date Fair Value (1)
Unvested at the beginning of the period	19,827	$	14.35	18,807		$	14.37
Shares granted during the period	—	—		8,115		15.55
Shares vested during the period	—	—		(7,095	)	15.78
Unvested at the end of the period	19,827	$	14.35	19,827		$	14.35

(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.

Dividends

On June 15, 2017, we declared the following dividends:

• a dividend of $0.40 per share of common stock to be paid on July 26, 2017 to stockholders of record as of the close of business on June 27, 2017;

• a dividend of $0.4844 per share of Series A Preferred Stock to be paid on July 25, 2017 to stockholders of record as of the close of business on July 1, 2017; and

• a dividend of $0.4844 per share of Series B Preferred Stock to be paid on September 27, 2017 to stockholders of record as of the close of business on September 5, 2017.

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Note 14 – Earnings per Common Share

Earnings per share for the three and six months ended June 30, 2017 and 2016 is computed as follows:

	Three Months Ended   June 30,			Six Months Ended   June 30,
In thousands except per share amounts	2017	2016		2017	2016
Numerator (Income)
Basic Earnings:
Net income (loss) available to common stockholders	46,834	(11,617	)	133,964	(167,777	)
Effect of dilutive securities:
Income allocated to exchangeable senior notes	3,504	—		8,512	—
Income (loss) allocated to non-controlling interest	670	(75	)	1,856	(1,958	)
Dilutive net income (loss) available to stockholders	51,008	(11,692	)	144,332	(169,735	)
Denominator (Weighted Average Shares)
Basic Earnings:
Shares available to common stockholders	111,608	111,581		111,603	112,362
Effect of dilutive securities:
Restricted stock awards	20	—		20	—
OP units	1,425	1,425		1,425	1,425
Exchangeable senior notes	10,507	—		12,782	—
Dilutive Shares	123,560	113,006		125,830	113,787
Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic	0.42	(0.10	)	1.20	(1.49	)
Diluted	0.41	(0.10	)	1.15	(1.49	)

The following potential common shares were excluded from diluted earnings per share for the three and six months ended June 30, 2016 as the effect would be anti-dilutive: 16,835,720 for the exchangeable senior notes and 46,001 and 44,172 for restricted stock awards.

Note 15 – Non-controlling Interest - Operating Partnership

Non-controlling interest represents the aggregate ownership interest of a wholly-owned Invesco subsidiary in our Operating Partnership. The ownership percentage is determined by dividing the number of OP Units held by the Unit Holders by the total number of dilutive shares of common stock. The issuance or repurchase of common stock ("Share" or "Shares") or OP Units changes the percentage ownership of both the Unit Holders and the common stockholders. Since an OP unit is generally redeemable for cash or Shares at our option, it is deemed to be a Share equivalent. Therefore, such transactions are treated as capital transactions and result in a reallocation between stockholders’ equity and non-controlling interest in the accompanying condensed consolidated balance sheets. As of June 30, 2017 and December 31, 2016, non-controlling interest related to the outstanding 1,425,000 OP Units represented a 1.3% interest in the Operating Partnership.

Income allocated to the non-controlling interest is based on the Unit Holders' ownership percentage of the Operating Partnership. The following table presents the net income (loss) allocated and distributions paid to the Operating Partnership non-controlling interest for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Net income (loss) allocated	670	(75	)	1,856	(1,958	)
Distributions paid	570	570		1,140	1,140

As of June 30, 2017 and December 31, 2016, distributions payable to the non-controlling interest were approximately $570,000.

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Note 16 – Commitments and Contingencies

Commitments and Contingencies

Commitments and contingencies may arise in the ordinary course of business. Our material off-balance sheet commitments as of June 30, 2017 are discussed below.

As discussed in Note 6 - "Other Assets", we have invested in unconsolidated ventures that are sponsored by an affiliate of our Manager. The unconsolidated ventures are structured as partnerships, and we invest in the partnerships as a limited partner. The entities are structured such that capital commitments are to be drawn down over the life of the partnership as investment opportunities are identified. As of June 30, 2017 and December 31, 2016, our undrawn capital and purchase commitments were $12.6 million and $15.5 million, respectively.

As discussed in Note 5 - "Commercial Loans Held-for-Investment", we purchase and originate commercial loans. As of June 30, 2017 and December 31, 2016, we have unfunded commitments on commercial loans held-for-investment of $6.4 million and $9.7 million, respectively.

We have entered into agreements with financial institutions to guarantee certain obligations of our subsidiaries. We would be required to perform under these guarantees in the event of certain defaults. We have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.

Note 17 – Subsequent Events

We have reviewed subsequent events occurring through the date that these condensed consolidated financial statements were issued, and determined that no subsequent events occurred that would require accrual or additional disclosure.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In this quarterly report on Form 10-Q, or this “Report,” we refer to Invesco Mortgage Capital Inc. and its consolidated subsidiaries as “we,” “us,” “our Company,” or “our,” unless we specifically state otherwise or the context indicates otherwise. We refer to our external manager, Invesco Advisers, Inc., as our “Manager,” and we refer to the indirect parent company of our Manager, Invesco Ltd. together with its consolidated subsidiaries (which does not include us), as “Invesco.”

The following discussion should be read in conjunction with our condensed consolidated financial statements and the accompanying notes to our condensed consolidated financial statements, which are included in Item 1 of this Report, as well as the information contained in our most recent Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

Forward-Looking Statements

We make forward-looking statements in this Report and other filings we make with the SEC within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, investment strategies, financial condition, liquidity, results of operations, plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” and any other statement that necessarily depends on future events, we intend to identify forward-looking statements. Factors that could cause actual results to differ from those expressed in our forward-looking statements include, but are not limited to:

• our business and investment strategy;

• our investment portfolio;

• our projected operating results;

• 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;

• the availability of financing sources, including our ability to obtain additional financing arrangements and the terms of such arrangements;

• financing and advance rates for our target assets;

• changes to our expected leverage;

• our expected investments;

• our expected book value per share of common stock;

• interest rate mismatches between our target assets and our borrowings used to fund such investments;

• the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;

• our ability to maintain sufficient liquidity to meet any margin calls;

• changes in the credit rating of the U.S. government;

• changes in interest rates and interest rate spreads and the market value of our target assets;

• changes in prepayment rates on our target assets;

• the impact of any deficiencies in foreclosure practices of third parties and related uncertainty in the timing of collateral disposition;

• our reliance on third parties in connection with services related to our target assets;

• effects of hedging instruments on our target assets;

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• rates of default or decreased recovery rates on our target assets;

• modifications to whole loans or loans underlying securities;

• the degree to which our hedging strategies may or may not protect us from interest rate volatility;

• the degree to which derivative contracts expose us to contingent liabilities;

• counterparty defaults;

• compliance with financial covenants in our financing arrangements;

• changes in governmental regulations, zoning, insurance, eminent domain and tax law and rates, and similar matters and our ability to respond to such changes;

• our ability to maintain our qualification as a real estate investment trust for U.S. federal income tax purposes;

• our ability to maintain our exception from the definition of “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”);

• availability of investment opportunities in mortgage-related, real estate-related and other securities;

• availability of U.S. Government Agency guarantees with regard to payments of principal and interest on securities;

• the market price and trading volume of our capital stock;

• availability of qualified personnel of our Manager;

• the relationship with our Manager;

• estimates relating to taxable income and our ability to continue to make distributions to our stockholders in the future;

• estimates relating to fair value of our target assets and loan loss reserves;

• our understanding of our competition;

• changes to generally accepted accounting principles in the United States of America (“U.S. GAAP”);

• the adequacy of our disclosure controls and procedures and internal controls over financial reporting; and

• market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion should be read in conjunction with our condensed consolidated financial statements and the accompanying notes to our condensed consolidated financial statements, which are included in this Report.

Overview

We are a Maryland corporation primarily focused on investing in, financing and managing residential and commercial mortgage-backed securities ("MBS") and mortgage loans. We are externally managed and advised by Invesco Advisers, Inc., our Manager, a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd., a leading independent global investment management firm. Our objective is to provide attractive risk-adjusted returns to our investors, primarily through dividends and secondarily through capital appreciation. To achieve this objective, we primarily invest in the following:

• Residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S. government agency such as the Government National Mortgage Association or a federally chartered corporation such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively "Agency RMBS");

• RMBS that are not guaranteed by a U.S. government agency ("non-Agency RMBS");

• Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises ("GSE CRT");

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• Commercial mortgage-backed securities (“CMBS”); 

• Residential and commercial mortgage loans; and

• Other real estate-related financing arrangements.

We elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986, as amended (“Code”), commencing with our taxable year ended December 31, 2009. To maintain our REIT qualification, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits our exclusion from the definition of “Investment Company” under the 1940 Act.

Capital Activities

On June 15, 2017, we declared the following dividends:

• a dividend of $0.40 per share of common stock to be paid on July 26, 2017 to stockholders of record as of the close of business on June 27, 2017;

• a dividend of $0.4844 per share of Series A Preferred Stock to be paid on July 25, 2017 to stockholders of record as of the close of business on July 1, 2017; and

• a dividend of $0.4844 per share of Series B Preferred Stock to be paid on September 27, 2017 to stockholders of record as of the close of business on September 5, 2017.

During the six months ended June 30, 2017, we did not repurchase any shares of our common stock.

Factors Impacting Our Operating Results

Our operating results can be affected by a number of factors and primarily depend on the level of our net interest income and the market value of our assets. Our net interest income, which includes the amortization of purchase premiums and accretion of purchase discounts, varies primarily as a result of changes in market interest rates and prepayment speeds, as measured by the constant prepayment rate (“CPR”) on our target assets. Interest rates and prepayment speeds vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. The market value of our assets can be impacted by credit spread premiums (yield advantage over U.S. Treasury notes) and the supply of, and demand for, target assets in which we invest.

Market Conditions

Macroeconomic factors that affect our business include credit spread premiums, market interest rates, governmental policy initiatives, residential and commercial real estate prices, credit availability, consumer personal income, corporate earnings, employment conditions, financial conditions and inflation.

Financial market volatility fell once again during the second quarter of 2017, with equity markets rallying and credit spreads being generally tighter, despite the fact that it is uncertain that health care reform, tax reform and meaningful regulatory reform are on the immediate horizon. U.S. equity markets ended the quarter higher, with the total returns on the S&P 500 (+3.1%), the Dow Jones Industrial Average (+4.0%) and the NASDAQ (+4.2%) all posting gains since the beginning of the quarter. Equity volatility was lower, as evidenced by the 9.6% decrease in the Chicago Board Options Exchange SPX Volatility Index. Energy prices fell during the quarter. The CRB Commodity Price index was down 6.0%, and WTI Crude Oil was down 10.9%. Lower equity price and interest rate volatility were supportive of credit spreads, which were generally tighter during the quarter. The Federal Reserve’s Open Market Committee voted to continue on the path to rate normalization in June by raising the federal funds target rate by 25 basis points, but this outcome was anticipated by the market and had little impact on asset prices. As we enter the third quarter of 2017, investor concerns are largely the same as three months ago. These include increased geopolitical tensions in the Middle East and on the Korean peninsula, the ongoing Brexit negotiations, as well as concerns about the ability of the U.S. administration to enact meaningful tax and regulatory reform.

The consensus of economists’ forecast for growth in U.S. domestic economic activity stands at 2.2% for 2017. In contrast, the Federal Reserve Bank of Atlanta’s GDPNow forecast for 2017 GDP growth increased to 2.7%. The consensus for the 2017 core personal consumption expenditures deflator is 1.4%, down 0.4% in the quarter, and now further away from the 2% target communicated by the U.S. Federal Reserve. Monthly increases in payroll employment averaged 194,000 jobs per month for the second quarter of 2017, up from the average of 177,000 over the course of the first quarter. Sentiment indicators,including the University of Michigan Consumer Sentiment Index and the Institute for Supply Management Manufacturing PMI were mixed during the quarter, although both remain close to their recent highs. This continues to be in sharp contrast to most of the economic indicators (retail sales, employment, wage growth) that have been generally lower. This divergence in sentiment versus actual data is one of the largest uncertainties facing investors for the balance of 2017.

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U.S. interest rates were mixed over the quarter, with shorter maturity Treasury rates increasing along with the federal funds rate and longer term Treasury rates decreasing modestly. During the second quarter, the yield on the 2 year Treasury note was 13 basis points higher, ending at 1.38%, while the yield on the 10 year Treasury note decreased by 9 basis points, ending the quarter at 2.30%. Three month LIBOR increased 15 basis points to 1.30%, due to the 25 basis point increase in the federal funds rate. Swap spreads were tighter during the quarter, with the 2 year, 5 year and 10 year swap spreads ending the quarter 13, 6 and 2 basis points tighter, respectively. Agency RMBS performance was mixed, with spreads on 30 year fixed rate Agency RMBS delivering a slightly positive excess return versus Treasury notes, while Hybrid ARMs and 15 year fixed rate Agency RMBS underperformed slightly. Prepayment speeds picked up during the quarter due to the impact of slightly lower long term interest rates and seasonal factors. Credit spreads were generally tighter across the securitized space, and once again GSE Credit Risk Transfer bonds outperformed. During the quarter, nonrated CRT bonds from 2014 and 2015 were 75 and 46 basis points tighter, respectively. CMBS bonds rated single-A issued in 2012 and 2013 were 9 basis points tighter and 10 basis points wider, respectively.

In addition, the regulatory landscape for our repurchase agreement counterparties continues to evolve following the adoption of new capital rules that generally affect the manner in which banks lend. Regulators are also focused on liquidity requirements that will likely impact how banks fund themselves. While we are not directly subject to compliance with the implementation of rules regarding financial institutions, the effect of these regulations and others could affect the terms on which we finance our assets in the future.

Investment Activities

The table below shows the allocation of our equity as of June 30, 2017, December 31, 2016 and June 30, 2016:

	As of
$ in thousands	June 30, 2017		December 31, 2016		June 30, 2016
Agency RMBS	41	%	41	%	40	%
Commercial Credit (1)	33	%	32	%	35	%
Residential Credit (2)	26	%	27	%	25	%
Total	100	%	100	%	100	%

(1) CMBS, Commercial loans and Investments in unconsolidated ventures (which are included in Other Assets), are considered commercial credit.

(2) Non-Agency RMBS and GSE CRT are considered residential credit.

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The table below shows the breakdown of our investment portfolio as of June 30, 2017, December 31, 2016 and June 30, 2016:

	As of
$ in thousands	June 30, 2017	December 31, 2016	June 30, 2016
Agency RMBS:
30 year fixed-rate, at fair value	5,069,116	2,981,717	3,826,433
15 year fixed-rate, at fair value	3,276,780	3,557,928	2,563,350
Hybrid ARM, at fair value	1,934,015	2,474,301	2,879,988
ARM, at fair value	274,574	307,873	364,334
Agency CMO, at fair value	298,266	344,041	395,265
Non-Agency RMBS, at fair value	1,575,840	1,995,551	2,248,974
GSE CRT, at fair value	877,177	768,200	613,241
CMBS, at fair value	2,777,516	2,551,720	2,733,442
U.S. Treasury securities, at fair value	—	—	152,701
Commercial loans, at amortized cost	278,866	273,355	272,502
Investments in unconsolidated ventures	23,311	33,301	33,037
Total Investment portfolio	16,385,461	15,287,987	16,083,267

During the six months ended June 30, 2017, we purchased $2.4 billion of 30 year fixed-rate Agency RMBS. We funded our purchases through a modest increase in leverage and reinvestment of cash flows from principal repayments and sales of securities. We increased our holdings of 30 year fixed-rate Agency RMBS and CMBS as the return on equity profile for these securities remained attractive. As of June 30, 2017 our holdings of 30 year fixed-rate Agency RMBS represent approximately 31% of our total investment portfolio versus 20% of our total investment portfolio as of December 31, 2016 and 24% as of June 30, 2016.

We continue to hold 15 year fixed-rate Agency RMBS that have relatively low interest rate risk, which reduces our book value volatility. Additionally, we hold Hybrid ARM Agency RMBS and ARM Agency RMBS that we believe have lower durations and better cash flow certainty relative to current coupon 30 year fixed-rate Agency RMBS. Further, we own Agency collateralized mortgage obligations ("CMOs"), some of which are interest-only securities.

Our portfolio of investments that have credit exposure include non-Agency RMBS, GSE CRTs, CMBS and commercial real estate loans. Rather than relying on the rating agencies, we utilize proprietary models as well as third party applications to quantify and monitor the credit risk associated with our portfolio holdings. Our analysis generally begins at the underlying asset level, where we gather detailed information on loan, borrower, and property characteristics that inform our expectations for future performance. In addition to base case cash flow projections, we perform a range of scenario stresses to gauge the sensitivity of returns to potential deviations in underlying asset behavior. We perform this detailed credit analysis at the time of initial purchase and regularly throughout the holding period of each investment.

With respect to our non-Agency RMBS portfolio, we primarily invest in securities collateralized by prime and Alt-A loans. In addition, we have invested in re-securitizations of real estate mortgage investment conduit ("Re-REMIC") RMBS and securitizations of reperforming mortgage loans that we believe provide attractive risk adjusted returns. We also invest in GSE CRTs, which have the added benefit of paying a floating rate coupon, reducing our need to hedge interest rate risk. Our GSE CRT holdings are concentrated in 2013 and 2014 vintages, where reference loans have significant embedded home price appreciation. We modestly increased our allocation to GSE CRT during the six months ended June 30, 2017 based on the sector's limited duration profile, positive underlying fundamentals and attractive relative value.

Our CMBS portfolio generally consists of assets originated during and after 2010. These assets continue to benefit from rating agency upgrades, property price appreciation and limited supply.

As of June 30, 2017, our commercial real estate loan portfolio includes ten mezzanine loans that we either purchased or originated. Our commercial real estate loan portfolio represents approximately 2% of our total investment portfolio and has a weighted average maturity of 1.4 years. For further details on our commercial loan portfolio, see Note 5 - "Commercial Loans Held-for-Investment" of our condensed consolidated financial statements. We evaluate the collectibility of our commercial loans held-for investment using the factors described in Note 2 - "Summary of Significant Accounting Policies" of our

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consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016. We determined that no provision for loan losses for our commercial loans was required as of June 30, 2017.

Portfolio Characteristics

The table below illustrates the vintage distribution of our non-Agency RMBS, GSE CRT and CMBS portfolio as of June 30, 2017 as a percentage of the fair value:

	2003		2004		2005		2006		2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		Total
Prime	0.5	%	1.7	%	5.0	%	4.4	%	9.3	%	2.4	%	—	%	—	%	—	%	—	%	10.0	%	9.0	%	1.8	%	0.3	%	—	%	44.4	%
Alt-A	—	%	0.8	%	8.6	%	7.7	%	9.6	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	26.7	%
Re-REMIC(1)	—	%	—	%	—	%	—	%	0.6	%	—	%	0.6	%	5.0	%	5.4	%	2.5	%	1.0	%	—	%	—	%	—	%	—	%	15.1	%
Subprime/reperforming	—	%	—	%	—	%	—	%	0.3	%	—	%	—	%	—	%	—	%	—	%	3.3	%	7.8	%	2.4	%	—	%	—	%	13.8	%
Total Non-Agency	0.5	%	2.5	%	13.6	%	12.1	%	19.8	%	2.4	%	0.6	%	5.0	%	5.4	%	2.5	%	14.3	%	16.8	%	4.2	%	0.3	%	—	%	100.0	%
GSE CRT	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	31.2	%	36.2	%	8.1	%	21.1	%	3.4	%	100.0	%
CMBS	—	%	—	%	—	%	—	%	—	%	—	%	—	%	4.4	%	22.5	%	14.2	%	16.5	%	34.5	%	5.2	%	0.5	%	2.2	%	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 9.0% for 2005, 13.2% for 2006, and 77.8% for 2007.

The tables below represent the geographic concentration of the underlying collateral for our non-Agency RMBS, GSE CRT and CMBS portfolio as of June 30, 2017:

Non-Agency RMBS State	Percentage		GSE CRT State	Percentage		CMBS State	Percentage
California	41.4	%	California	19.0	%	California	14.8	%
New York	8.4	%	Texas	6.1	%	New York	13.7	%
Florida	6.6	%	New York	4.4	%	Texas	10.0	%
New Jersey	3.6	%	Florida	4.3	%	Florida	6.2	%
Virginia	3.6	%	Virginia	4.3	%	Pennsylvania	4.5	%
Maryland	3.3	%	Illinois	3.8	%	Illinois	4.2	%
Illinois	2.9	%	Washington	3.4	%	New Jersey	3.6	%
Massachusetts	2.8	%	Massachusetts	3.4	%	Ohio	3.1	%
Washington	2.2	%	New Jersey	3.2	%	Virginia	2.8	%
Arizona	2.0	%	Colorado	3.2	%	Michigan	2.7	%
Other	23.2	%	Other	44.9	%	Other	34.4	%
Total	100.0	%	Total	100.0	%	Total	100.0	%

Financing and Other Liabilities

We enter into repurchase agreements to finance the majority of our target assets. These agreements are secured by our Agency RMBS, non-Agency RMBS, GSE CRTs and CMBS. In addition, these agreements are generally settled on a short-term basis, usually from one to twelve months, and bear interest at rates that have historically moved in close relationship to LIBOR. At each settlement date, we refinance each repurchase agreement at the market interest rate at that time. As of June 30, 2017, we had entered into repurchase agreements totaling $12.1 billion (December 31, 2016: $11.2 billion).

Our wholly-owned captive insurance subsidiary, IAS Services, is a member of the FHLBI. As a member of the FHLBI, IAS Services has borrowed funds from the FHLBI in the form of secured loans. As of June 30, 2017, IAS Services had $1.65 billion in outstanding secured loans. For the six months ended June 30, 2017, IAS Services had weighted average borrowings of $1.65 billion with a weighted average borrowing rate of 0.96% and a weighted average maturity of 6.9 years.

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The following table presents the amount of collateralized borrowings outstanding under repurchase agreements and secured loans as of the end of each quarter, the average amount outstanding during the quarter and the maximum balance outstanding during the quarter:

$ in thousands	Collateralized borrowings under repurchase agreements and secured loans
Quarter Ended	Quarter-end balance	Average quarterly balance	Maximum balance of any quarter-end
March 31, 2016	12,837,159	13,137,569	13,501,433
June 30, 2016	13,418,647	13,075,770	13,418,647
September 30, 2016	13,710,502	13,826,469	13,984,960
December 31, 2016	12,810,669	13,215,697	13,626,829
March 31, 2017	13,939,899	13,901,254	14,086,600
June 30, 2017	13,768,948	13,716,749	13,768,948

In 2013, our wholly-owned subsidiary, IAS Operating Partnership LP, issued $400.0 million in aggregate principal amount of Exchangeable Senior Notes (the "Notes") due March 15, 2018. In June and March 2017, we retired $31.2 million and $150.0 million of Notes for a repurchase price of $31.6 million and $153.8 million, respectively. During the three months ended June 30, 2017, we realized a $526,000 net loss on extinguishment of debt including $136,000 of unamortized debt issuance costs associated with the retired debt. During the six months ended June 30, 2017, we realized a $5.2 million net loss on extinguishment of debt including $1.0 million of unamortized debt issuance costs associated with the retired debt. We partially retired our Notes in anticipation of the upcoming scheduled maturity of our Notes in March 2018.

We have also committed to invest up to $122.0 million in unconsolidated ventures that are sponsored by an affiliate of our Manager. As of June 30, 2017, $109.5 million of our commitment to these unconsolidated ventures has been called. We are committed to fund $12.6 million in additional capital to fund future investments and cover future expenses should they occur.

We record a liability for mortgage-backed and credit risk transfer securities purchased, for which settlement has not taken place, as an investment related payable. As of June 30, 2017 and December 31, 2016, we had investment related payables of $202.1 million, and $9.2 million, respectively. Our liability balance fluctuates based on our volume of unsettled trades.

We record a receivable for mortgage-backed and credit risk transfer securities sold for which settlement has not taken place as an investment related receivable. As of June 30, 2017 and December 31, 2016, we had investment related receivables of $83.2 million and $43.9 million, respectively. Our receivable balance fluctuates based on our volume of unsettled trades.

Hedging Instruments.

As of June 30, 2017, we have entered into interest rate swap agreements designed to mitigate the effects of increases in interest rates under a portion of our borrowings. These swap agreements provide for fixed interest rates indexed off of one-month or three-month LIBOR and effectively fix the floating interest rates on $7.9 billion (December 31, 2016: $6.5 billion) of borrowings. During the six months ended June 30, 2017, we moderately increased our leverage to fund the purchase of MBS and GSE CRT securities and entered into swaps with a notional amount of $1.4 billion to hedge the interest rates on the associated repurchase agreement debt. We have two types of interest rate swap arrangements: bilateral interest rate swaps and centrally cleared interest rate swaps. We are required to pledge collateral on our interest rate swaps. Effective January 3, 2017, the Chicago Mercantile Exchange amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate swaps as settlement rather than collateral. As a result of this rule change, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps. Due in part to this rule change, the fair value of our derivative liabilities decreased from $134.2 million as of December 31, 2016 to $44.1 million as of June 30, 2017 and our derivative assets increased from $3.2 million as of December 31, 2016 to $11.0 million as of June 30, 2017.

As of June 30, 2017 and December 31, 2016, we have no outstanding interest rate swaptions. During the six months endedJune 30, 2016, interest rate swaptions expired unexercised with a notional amount of approximately $300.0 million, and we realized a loss of $1.5 million on these contracts. We have historically purchased interest rate swaptions to reduce the impact that interest rate volatility has on our portfolio. The change in the notional amount of swaptions held was due to our views on the potential for change in volatility.

As of June 30, 2017, we held $68.6 million (December 31, 2016: $62.3 million) in notional amount of currency forward contracts. During the six months ended June 30, 2017, we settled currency forward contracts of $131.6 million (June 30, 2016: $154.9 million) in notional amount and realized a net loss of $2.8 million (June 30, 2016: $1.9 million net gain). As of June 30, 2017, we have $49.6 million (December 31, 2016: $49.0 million) of notional amount of forward contracts denominated in Pound Sterling and $19.0 million (December 31, 2016: $13.3 million) of notional amount of forward contracts denominated in

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Euro. We use currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies.

Book Value per Share

We calculate book value per share as follows:

	As of
In thousands except per share amounts	June 30, 2017		December 31, 2016
Numerator (adjusted equity):
Total equity	2,360,094		2,270,184
Less: Liquidation preference of Series A Preferred Stock	(140,000	)	(140,000	)
Less: Liquidation preference of Series B Preferred Stock	(155,000	)	(155,000	)
Total adjusted equity	2,065,094		1,975,184
Denominator (number of shares - diluted):
Common stock outstanding	111,610		111,595
OP units	1,425		1,425
Number of shares - diluted	113,035		113,020
Book value per diluted common share	18.27		17.48

Our book value per diluted common share rose 4.5% as of June 30, 2017 compared to December 31, 2016 primarily due to broad spread tightening resulting in higher valuations of our mortgage-backed and credit risk transfer securities portfolio. Refer to Item 3. "Quantitative and Qualitative Disclosures About Market Risk" for interest rate risk and its impact on fair value.

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Critical Accounting Policies

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. All of these estimates reflect our best judgment about current, and for some estimates, future economic and market conditions and their effects based on information available as of the date of these financial statements. If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in valuation of our investment portfolio, future impairments of our MBS and GSE CRTs, change in our interest income recognition, allowance for loan losses, and a change in our tax liability among other effects.

There have been no significant changes to our critical accounting policies that are disclosed in our most recent Form 10-K for the year ended December 31, 2016.

Expected Impact of New Authoritative Guidance on Future Financial Information

In January 2016, the FASB issued guidance to improve certain aspects of classification and measurement of financial instruments, including significant revisions in accounting related to the classification and measurement of investments in equity securities and presentation of certain fair value changes for financial liabilities when the fair value option is elected. The guidance also amends certain disclosure requirements associated with the fair value of financial instruments. We are required to adopt the new guidance in the first quarter of 2018. Early adoption is permitted. We have determined that this new accounting standard will not have an impact on our financial condition or results of operations but will simplify financial statement disclosures.

In June 2016, the FASB issued an amendment to the guidance on reporting credit losses for assets measured at amortized cost and available-for-sale securities. We are required to adopt the new guidance in the first quarter of 2020. Early adoption is permitted. We are currently evaluating the potential impacts of the new guidance on our consolidated financial statements, as well as available transition methods.

In August 2016, the FASB issued new guidance that is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Additionally, in November 2016, the FASB issued new guidance on classification and presentation of changes in restricted cash on the statement of cash flows. We are required to adopt the new accounting standards in the first quarter of 2018 using a retrospective transition method for each period presented. Early adoption is permitted. We are currently evaluating the potential impacts of the new guidance on our consolidated financial statements.

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Results of Operations

The table below presents certain information from our condensed consolidated statements of operations for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands, except share data	2017		2016		2017		2016
Interest Income
Mortgage-backed and credit risk transfer securities	121,027		112,860		239,900		235,106
Commercial loans	6,021		5,947		11,785		10,840
Total interest income	127,048		118,807		251,685		245,946
Interest Expense
Repurchase agreements	36,072		31,260		66,019		73,060
Secured loans	4,535		2,688		7,948		5,403
Exchangeable senior notes	3,504		5,614		8,512		11,227
Total interest expense	44,111		39,562		82,479		89,690
Net interest income	82,937		79,245		169,206		156,256
Other Income (loss)
Gain (loss) on investments, net	11,175		1,414		9,322		13,015
Equity in earnings (losses) of unconsolidated ventures	(154	)	202		(1,688	)	1,263
Gain (loss) on derivative instruments, net	(53,513	)	(90,363	)	(48,051	)	(328,906	)
Realized and unrealized credit derivative income (loss), net	21,403		17,228		41,358		25,638
Net loss on extinguishment of debt	(526	)	—		(5,237	)	—
Other investment income (loss), net	2,533		(2,745	)	3,862		(3,063	)
Total other income (loss)	(19,082	)	(74,264	)	(434	)	(292,053	)
Expenses
Management fee – related party	9,027		9,061		17,828		18,573
General and administrative	1,608		1,896		3,692		3,933
Total expenses	10,635		10,957		21,520		22,506
Net income (loss)	53,220		(5,976	)	147,252		(158,303	)
Net income (loss) attributable to non-controlling interest	670		(75	)	1,856		(1,958	)
Net income (loss) attributable to Invesco Mortgage Capital Inc.	52,550		(5,901	)	145,396		(156,345	)
Dividends to preferred stockholders	5,716		5,716		11,432		11,432
Net income (loss) attributable to common stockholders	46,834		(11,617	)	133,964		(167,777	)
Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic	0.42		(0.10	)	1.20		(1.49	)
Diluted	0.41		(0.10	)	1.15		(1.49	)
Dividends declared per common share	0.40		0.40		0.80		0.80
Weighted average number of shares of common stock:
Basic	111,607,924		111,580,727		111,603,218		112,361,565
Diluted	123,560,625		113,005,727		125,830,020		113,786,565

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Interest Income and Average Earning Asset Yields

The table below presents information related to our average earning assets and earning asset yields for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Average Balances(1):
Agency RMBS:
15 year fixed-rate, at amortized cost	3,374,039		2,245,998		3,444,975		1,903,463
30 year fixed-rate, at amortized cost	4,852,769		3,797,400		4,657,799		3,871,527
ARM, at amortized cost	276,272		362,067		283,502		386,408
Hybrid ARM, at amortized cost	1,996,026		2,883,494		2,143,014		2,990,071
Agency - CMO, at amortized cost	309,113		384,949		318,728		394,696
Non-Agency RMBS, at amortized cost	1,483,354		2,231,510		1,637,336		2,326,974
GSE CRT, at amortized cost	796,050		635,953		780,954		656,061
CMBS, at amortized cost	2,663,808		2,623,578		2,620,014		2,649,398
U.S. Treasury securities, at amortized cost	—		23,682		—		11,842
Commercial loans, at amortized cost	278,052		275,631		276,524		258,961
Average earning assets	16,029,483		15,464,262		16,162,846		15,449,401
Average Earning Asset Yields (2):
Agency RMBS:
15 year fixed-rate	1.97	%	1.87	%	2.00	%	2.08	%
30 year fixed-rate	2.83	%	2.74	%	2.74	%	2.86	%
ARM	2.27	%	2.30	%	2.29	%	2.36	%
Hybrid ARM	2.29	%	2.10	%	2.29	%	2.19	%
Agency - CMO	0.34	%	2.55	%	0.46	%	2.68	%
Non-Agency RMBS	5.90	%	4.74	%	5.72	%	4.82	%
GSE CRT (3)	2.62	%	0.86	%	2.39	%	0.85	%
CMBS	4.45	%	4.37	%	4.33	%	4.38	%
U.S. Treasury securities	—	%	1.05	%	—	%	1.05	%
Commercial loans	8.69	%	8.44	%	8.59	%	8.28	%
Average earning asset yields	3.17	%	3.07	%	3.11	%	3.18	%

(1) Average amounts for each period are based on weighted month-end balances.

(2) Average earning asset yields for the period was 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.

Our primary source of income is interest earned on our investment portfolio. We had average earning assets of approximately $16.0 billion for the three months ended June 30, 2017 (June 30, 2016: $15.5 billion). We had average earning assets of approximately $16.2 billion for the six months ended June 30, 2017 (June 30, 2016: $15.4 billion). Average earning assets increased for the three and six months ended June 30, 2017 primarily because we increased our holdings of 30 year fixed-rate Agency RMBS and CMBS as the return on equity profile for these securities remained attractive.

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We earned interest income of $127.0 million (June 30, 2016: $118.8 million) and $251.7 million (June 30, 2016: $245.9 million) for the three and six months ended June 30, 2017, respectively. Our interest income includes coupon interest and net premium amortization/discount accretion on MBS and GSE CRTs as well as interest income on commercial loans as shown in the table below.

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Interest Income
MBS and GSE CRT - coupon interest	147,267		142,476		293,336		288,770
MBS and GSE CRT - net (premium amortization)/discount accretion	(26,240	)	(29,616	)	(53,436	)	(53,664	)
MBS and GSE CRT - interest income	121,027		112,860		239,900		235,106
Commercial loans	6,021		5,947		11,785		10,840
Total interest income	127,048		118,807		251,685		245,946

Interest income increased $8.2 million or 7% and $5.7 million or 2% during the three and six months ended June 30, 2017 compared to 2016, respectively, primarily due to higher average earning assets. Lower net premium amortization also contributed to higher interest income during the three months ended June 30, 2017.

Our average earning asset yields increased during the three months ended June 30, 2017 compared to 2016 primarily due to slower prepayment speeds in the three months ended June 30, 2017. Our average earning asset yields decreased during the six months ended June 30, 2017 compared to 2016 primarily due to our shift in portfolio composition to Agency RMBS. While average yields on our fixed rate Agency RMBS securities declined in the six months ended June 30, 2017 compared to 2016, the average yield on our non-Agency RMBS earning assets increased primarily due to higher index interest rates.  As of June 30, 2017, approximately 56% of our non-Agency RMBS are variable or floating rate securities.

Prepayment Speeds

Our RMBS and GSE CRT portfolio is subject to inherent prepayment risk primarily driven by changes in interest rates, which impacts the amount of premium and discount on the purchase of these securities that is recognized into interest income. Expected future prepayment speeds on our RMBS and GSE CRT portfolio are estimated on a quarterly basis. Generally, in an environment of falling interest rates, prepayment speeds will increase as homeowners are more likely to prepay their existing mortgage and refinance into a lower borrowing rate. If the actual prepayment speed during the period is faster than estimated, the amortization on securities purchased at a premium to par value will be accelerated, resulting in lower interest income recognized. Conversely, for securities purchased at a discount to par value, interest income will be reduced in periods where prepayment speeds were slower than expected. The table below provides the three month constant prepayment rate for our RMBS and GSE CRTs as of June 30, 2017, March 31, 2017, June 30, 2016 and March 31, 2016.

	As of
	June 30, 2017	March 31, 2017	June 30, 2016	March 31, 2016
15 year fixed-rate Agency RMBS	9.5	8.1	10.4	10.2
30 year fixed-rate Agency RMBS	9.2	10.8	13.7	10.8
ARM/ Hybrid ARM Agency RMBS	16.3	15.7	18.4	12.5
Non-Agency RMBS	12.6	13.3	15.2	11.1
GSE CRT	9.7	13.1	14.0	9.2
Weighted average CPR	11.2	11.7	14.9	11.2

We recognized $26.2 million and $29.6 million of net premium amortization during the three months ended June 30, 2017 and 2016, respectively, on our RMBS and GSE CRT portfolio. Net premium amortization decreased over the same period in 2016 due to slower prepayment speeds in the three months ended June 30, 2017.

We recognized $53.4 million and $53.7 million of net premium amortization during the six months ended June 30, 2017 and 2016, respectively, on our RMBS and GSE CRT portfolio. Net premium amortization was relatively constant in the six months ended June 30, 2017 over the same period in 2016 despite slower prepayment speeds due to higher average Agency RMBS assets in the six months ended June 30, 2017.

Our interest income is subject to interest rate risk. Refer to Item 3. "Quantitative and Qualitative Disclosures about Market Risk" for more information relating to interest rate risk and its impact on our operating results.

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Interest Expense and the Cost of Funds

The table below presents the components of interest expense for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017		2016	2017		2016
Interest Expense
Interest expense on repurchase agreement borrowings	42,441		28,022	78,686		56,898
Amortization of net deferred (gain) loss on de-designated interest rate swaps	(6,369	)	3,238	(12,667	)	16,162
Repurchase agreements interest expense	36,072		31,260	66,019		73,060
Secured loans	4,535		2,688	7,948		5,403
Exchangeable senior notes	3,504		5,614	8,512		11,227
Total interest expense	44,111		39,562	82,479		89,690

We enter into repurchase agreements to finance the majority of our target assets. These agreements are secured by our Agency RMBS, non-Agency RMBS, GSE CRTs and CMBS. In addition, these agreements are generally settled on a short-term basis, usually from one to twelve months, and bear interest at rates that have historically moved in close relationship to LIBOR. At each settlement date, we typically refinance each repurchase agreement at the market interest rate at that time.

Our repurchase agreement interest expense includes amortization of deferred gains and losses on de-designated interest rate swaps as summarized in the table above. Amortization of net deferred gains on de-designated interest rate swaps decreased our total interest expense by $6.4 million and $12.7 million, respectively, during the three and six months ended June 30, 2017 whereas amortization of net deferred losses on de-designated interest rate swaps increased our total interest expense by $3.2 million and $16.2 million, respectively, during the three and six months ended June 30, 2016. Amounts recorded in AOCI before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the condensed consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements. During the next twelve months, we estimate that $26.3 million of net deferred gains on de-designated interest rate swaps will be reclassified from other comprehensive income and recorded as a decrease to interest expense.

During the three and six months ended June 30, 2017, interest expense for our secured loans increased compared to the same periods in 2016 primarily due to higher borrowing rates as a result of the December 2016, March 2017 and June 2017 increases in the federal funds interest rate. For the six months ended June 30, 2017, IAS Services LLC had a weighted average borrowing rate of 0.96% as compared to 0.65% for the six months ended June 30, 2016.

During the three and six months ended June 30, 2017, interest expense on our senior exchangeable notes decreased compared to the same periods in 2016 due to retirement of $150.0 million of Notes in March 2017 and $31.2 million of Notes in June 2017. Our remaining Notes mature in March 2018.

Our total interest expense during the three months ended June 30, 2017 increased $4.5 million from the same period in 2016 primarily due to a $14.4 million increase in interest expense on repurchase agreements borrowings due to higher borrowing rates and average borrowings in the 2017 period. The increase was partially offset by a $9.6 million decrease caused by the amortization of net deferred (gain) loss on de-designated interest rate swaps.

Our total interest expense during the six months ended June 30, 2017 decreased $7.2 million from the same period in 2016 primarily due to a $28.8 million decrease caused by the amortization of net deferred (gain) loss on de-designated interest rate swaps discussed above that was partially offset by a $21.8 million increase in interest expense on repurchase agreements borrowings due to higher borrowing rates as well as higher average borrowings in the 2017 period.

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The table below presents information related to our borrowings and cost of funds for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Average Borrowings(1):
Agency RMBS (2)	9,665,651		8,584,572		9,691,612		8,565,425
Non-Agency RMBS	1,155,529		1,805,286		1,283,001		1,878,927
GSE CRT	655,715		473,270		628,122		462,259
CMBS (2)	2,239,854		2,162,450		2,205,758		2,174,962
U.S. Treasury securities	—		50,192		—		25,096
Exchangeable senior notes	238,530		395,596		292,009		395,289
Total average borrowings	13,955,279		13,471,366		14,100,502		13,501,958
Maximum borrowings during the period (3)	13,986,752		13,814,447		14,484,038		13,896,215
Average Cost of Funds (4):
Agency RMBS (2)	1.10	%	0.65	%	0.99	%	0.65	%
Non-Agency RMBS	2.47	%	1.85	%	2.32	%	1.82	%
GSE CRT	2.51	%	2.08	%	2.39	%	2.13	%
CMBS (2)	1.63	%	1.11	%	1.49	%	1.13	%
U.S. Treasury securities	—	%	0.14	%	—	%	0.19	%
Exchangeable senior notes	5.88	%	5.68	%	5.83	%	5.68	%
Cost of funds	1.26	%	1.17	%	1.17	%	1.33	%
Effective cost of funds (non-GAAP measure) (5)	2.01	%	1.81	%	1.96	%	1.89	%

(1) Average amounts for each period are based on weighted month-end balances.

(2) Agency RMBS and 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"

Total average borrowings increased in the three and six months ended June 30, 2017 versus 2016 primarily because we entered into repurchase agreements to finance our increased holdings of 30 year fixed-rate Agency RMBS.

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Net Interest Income

The table below presents the components of net interest income for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017		2016	2017		2016
Interest Income
Mortgage-backed and credit risk transfer securities	121,027		112,860	239,900		235,106
Commercial loans	6,021		5,947	11,785		10,840
Total interest income	127,048		118,807	251,685		245,946
Interest Expense
Interest expense on repurchase agreement borrowings	42,441		28,022	78,686		56,898
Amortization of net deferred (gain) loss on de-designated interest rate swaps	(6,369	)	3,238	(12,667	)	16,162
Repurchase agreements interest expense	36,072		31,260	66,019		73,060
Secured loans	4,535		2,688	7,948		5,403
Exchangeable senior notes	3,504		5,614	8,512		11,227
Total interest expense	44,111		39,562	82,479		89,690
Net interest income	82,937		79,245	169,206		156,256

Our net interest income, which equals interest income less interest expense, totaled $82.9 million (June 30, 2016: $79.2 million) and $169.2 million (June 30, 2016: $156.3 million) for the three and six months ended June 30, 2017, respectively. Our net interest rate margin, which equals the yield on our average assets for the period less the average cost of funds for the period, was 1.91% (June 30, 2016: 1.90%) and 1.94% (June 30, 2016: 1.85%) for the three and six months ended June 30, 2017, respectively. The increase in net interest income and net interest rate margin for the three months ended June 30, 2017 compared to 2016 was primarily driven by interest income on higher average earning assets that exceeded the increase in interest expense driven by higher average borrowings and borrowing rates. The increase in net interest income and net interest rate margin for the six months ended June 30, 2017 was primarily driven by interest income on higher average earning assets and lower interest expense. Amortization of net deferred gains on de-designated interest rate swaps decreased our total interest expense by $12.7 million during the six months ended June 30, 2017 whereas amortization of net deferred losses on de-designated interest rate swaps increased our total interest expense by $16.2 million, during the six months ended June 30, 2016.

Gain (Loss) on Investments, net

The table below summarizes the components of gain (loss) on investments, net for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Realized gains and losses on sale of investments	(651	)	1,037		(1,658	)	11,581
Other-than-temporary impairment losses	(4,098	)	(1,525	)	(4,630	)	(7,208	)
Net unrealized gains and losses on MBS accounted for under the fair value option	7,715		1,266		4,113		7,942
Net unrealized gains and losses on GSE CRT accounted for under the fair value option	8,195		173		11,474		237
Net unrealized gains and losses on trading securities	14		463		23		463
Total gain (loss) on investments, net	11,175		1,414		9,322		13,015

As part of our investment process, our mortgage-backed and credit risk transfer securities are continuously reviewed to determine if they continue to meet our risk and return targets. This process involves looking at changing market assumptions and the impact those assumptions will have on the individual securities.

We assess our investment securities for other-than-temporary impairment on a quarterly basis. When the fair value of an investment is less than its amortized cost at the balance sheet date of the reporting period for which impairment is assessed, the

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impairment is designated as either "temporary" or "other-than-temporary." For additional information regarding our assessment analysis of other-than temporary impairment on our investment securities, refer to Note 4 – “Mortgage-Backed and Credit Risk Transfer Securities” of our condensed consolidated financial statements.

We have elected the fair value option for all of our MBS purchased on or after September 1, 2016 and all of our GSE CRTs purchased on or after August 24, 2015. Prior to September 1, 2016, we had also elected the fair value option for our RMBS IOs. Under the fair value option, changes in fair value are recognized in income in the condensed consolidated statements of operations. As of June 30, 2017, $3.1 billion or 19.3% of our MBS and GSE CRT are accounted for under the fair value option.

Equity in Earnings (Losses) of Unconsolidated Ventures

For the three months ended June 30, 2017, we recorded equity in losses of unconsolidated ventures of $154,000 (June 30, 2016: equity in earnings of $202,000). For the six months ended June 30, 2017, we recorded equity in losses of unconsolidated ventures of $1.7 million (June 30, 2016: equity in earnings of $1.3 million). Our unconsolidated ventures recorded losses during the three and six months ended June 30, 2017 primarily due to higher unrealized losses on portfolio investments as compared to the same periods in 2016.

Gain (Loss) on Derivative Instruments, net

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements on our floating rate repurchase agreements and secured loans. To accomplish these objectives, we primarily use interest rate derivative instruments, including interest rate swaps, interest rate swaptions, U.S. Treasury futures contracts and TBAs as part of our interest rate risk management strategy.

We also use currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies.

The tables below summarize our realized and unrealized gain (loss) on derivative instruments, net for the following periods:

$ in thousands	Three months ended June 30, 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	(38,512	)	(19,966	)	7,975		(50,503	)
Currency Forward Contracts	(1,717	)	—		(1,293	)	(3,010	)
Total	(40,229	)	(19,966	)	6,682		(53,513	)

$ in thousands	Three months ended June 30, 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	(20,105	)	(24,985	)	(49,711	)	(94,801	)
Currency Forward Contracts	(479	)	—		4,917		4,438
Total	(20,584	)	(24,985	)	(44,794	)	(90,363	)

$ in thousands	Six Months Ended June 30, 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	(22,518	)	(42,860	)	20,925		(44,453	)
Currency Forward Contracts	(2,793	)	—		(805	)	(3,598	)
Total	(25,311	)	(42,860	)	20,120		(48,051	)

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$ in thousands	Six Months Ended June 30, 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	(64,000	)	(54,076	)	(216,382	)	(334,458	)
Interest Rate Swaptions	(1,485	)	—		1,485		—
Currency Forward Contracts	1,916		—		3,636		5,552
Total	(63,569	)	(54,076	)	(211,261	)	(328,906	)

As of June 30, 2017 and December 31, 2016, we held the following interest rate swaps whereby we receive interest at a one-month and three-month LIBOR rate:

$ in thousands	As of June 30, 2017						As of December 31, 2016
Derivative instrument	Notional Amounts (1)	Average Fixed Pay Rate		Average Receive Rate		Average Maturity (Years)	Notional Amounts	Average Fixed Pay Rate		Average Receive Rate		Average Maturity (Years)
Interest Rate Swaps	7,400,000	2.14	%	1.18	%	4.44	6,500,000	2.14	%	0.79	%	4.64

(1) Excludes $500.0 million of notional amount for an interest rate swap with a forward start date of 5/24/2018.

During the six months ended June 30, 2017, we entered into swaps with a notional amount of $1.4 billion.

During the six months ended June 30, 2016, we sold assets to facilitate stock repurchases. We terminated swaps with a notional amount of $4.8 billion and realized losses of $64.0 million. The terminated swaps were predominantly maturing in 2016 and offered little protection from rising rates. Our overall interest rate risk did not change materially as a result of the swap terminations. As a result of swap terminations in 2016, our contractual net interest expense for the three months ended June 30, 2017 decreased to $20.0 million (three months ended June 30, 2016: $25.0 million) and six months ended June 30, 2017 decreased to $42.9 million (six months ended June 30, 2016: $54.1 million).

Realized and Unrealized Credit Derivative Income (Loss), net

The table below summarizes the components of realized and unrealized credit derivative income (loss), net for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended June 30,			Six Months Ended June 30,
$ in thousands	2017	2016		2017	2016
GSE CRT embedded derivative coupon interest	5,844	6,112		11,651	12,426
Gain (loss) on settlement of GSE CRT embedded derivatives	—	(5,097	)	—	(6,017	)
Change in fair value of GSE CRT embedded derivatives	15,559	16,213		29,707	19,229
Total	21,403	17,228		41,358	25,638

In the three months ended June 30, 2017, we recorded a $4.2 million increase in realized and unrealized credit derivative income (loss), net compared to the same period in 2016. We sold GSE CRT securities in the three months ended June 30, 2016 and realized losses of $5.1 million.

In the six months ended June 30, 2017, we recorded an $15.7 million increase in realized and unrealized credit derivative income (loss), net compared to the same period in 2016. In addition, we sold GSE CRT securities in the six months ended June 30, 2016and realized losses of$6.0 million. The increase in realized and unrealized credit derivative income (loss), net in the six months ended June 30, 2017 versus 2016 was driven by a change in the value of our GSE CRT holdings primarily resulting from credit spread tightening.

Net Loss on Extinguishment of Debt

In June and March 2017, we retired $31.2 million and $150.0 million of Notes for a repurchase price of $31.6 million and $153.8 million, respectively. During the three months ended June 30, 2017, we realized a $526,000 net loss on extinguishment of debt including $136,000 of unamortized debt issuance costs associated with the retired debt. During the six months ended

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June 30, 2017, we realized a $5.2 million net loss on extinguishment of debt including $1.0 million of unamortized debt issuance costs associated with the retired debt.

Other Investment Income (Loss), net

Other investment income (loss), net primarily consists of quarterly dividends from FHLBI stock and an investment in an exchange-traded fund and foreign exchange rate gains and losses related to a commercial loan investment denominated in a foreign currency. The table below summarizes the components of other investment income (loss), net for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended June 30,			Six Months Ended June 30,
$ in thousands	2017	2016		2017	2016
Dividend income	802	797		1,618	1,604
Gain (loss) on foreign currency transactions, net	1,731	(3,542	)	2,244	(4,667	)
Total	2,533	(2,745	)	3,862	(3,063	)

We incurred foreign exchange gains (losses) on the revaluation of a commercial loan investment (notional amount of £34.5 million) for the three and six months ended June 30, 2017 and 2016 due to the fluctuation in the Pound Sterling/ U.S. Dollar foreign exchange rate. We enter into currency forward contracts as an economic hedge against our foreign currency exposure. Changes in the fair value of our currency forward contracts are recognized in gain (loss) derivative instruments, net in the condensed consolidated statements of operations.

Expenses

For the three months ended June 30, 2017, we incurred management fees of $9.0 million (June 30, 2016: $9.1 million) and $17.8 million (June 30, 2016: $18.6 million) for the six months ended June 30, 2017, which are payable to our Manager under our management agreement. Management fees decreased for the six months ended June 30, 2017 compared to the same period in 2016 primarily due to the repurchase of 2,063,451 shares of common stock in the first quarter of 2016. Refer to Note 12 – "Related Party Transactions" of our condensed consolidated financial statements for a discussion of our relationship with our Manager and a description of how our fees are calculated.

For the three months ended June 30, 2017, our general and administrative expenses not covered under our management agreement amounted to $1.6 million (June 30, 2016: $1.9 million) and $3.7 million (June 30, 2016: $3.9 million) for the six months ended June 30, 2017. General and administrative expenses not covered under our management agreement primarily consist of directors and officers insurance, legal costs, accounting, auditing and tax services, filing fees, and miscellaneous general and administrative costs. General and administrative costs were lower for the three and six months ended June 30, 2017 versus 2016 due to costs associated with repositioning our hedging portfolio and purchasing new commercial loan investments in the 2016 period.

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Net Income (Loss) after Preferred Dividends, and Net Income (Loss) attributable to Common Stockholders

For the three months ended June 30, 2017, our net income after preferred dividendswas $47.5 million (June 30, 2016: $11.7 million net loss). In addition, for the three months ended June 30, 2017, our net income attributable to common stockholders was $46.8 million (June 30, 2016: $11.6 million net loss) or $0.42 basic and $0.41 diluted net income per average share available to common stockholders (June 30, 2016: $0.10 basic and diluted net loss per average share available to common stockholders). The change in net income (loss) after preferred dividends and net income (loss) attributable to common stockholders was primarily due to (i) net losses on derivative instruments of $53.5 million in the 2017 period versus net losses on derivative instruments of $90.4 million in the 2016 period and (ii) net gains on investments of $11.2 million in the 2017 period versus net gains of $1.4 million in the 2016 period. For further information on the changes in net losses on derivative instruments and net gains on investments in the 2017 period versus 2016 period, see preceding discussion under "Gain (Loss) on Investments, net" and "Gain (Loss) on Derivative Instruments, net."

For the six months ended June 30, 2017, our net income after preferred dividendswas $135.8 million (June 30, 2016: $169.7 million net loss). In addition, for the six months ended June 30, 2017 our net income attributable to common stockholders was $134.0 million (June 30, 2016: $167.8 million net loss) or $1.20 basic and $1.15 diluted net income per average share available to common stockholders (June 30, 2016: $1.49 basic and diluted net loss per average share available to common stockholders). The change in net income (loss) after preferred dividends and net income (loss) attributable to common stockholders was primarily due to (i) net losses on derivative instruments of $48.1 million in the 2017 period versus net losses on derivative instruments of $328.9 million in the 2016 period and (ii) net credit derivative income of $41.4 million in the 2017 period versus net credit derivative income of $25.6 million in the 2016 period. For further information on the changes in net losses on derivative instruments and net credit derivative income in the 2017 period versus 2016 period, see preceding discussion under "Gain (Loss) on Derivative Instruments, net" and "Realized and Unrealized Credit Derivative Income (Loss), net."

Non-GAAP Financial Measures

We use the following non-GAAP financial measures to analyze the Company's operating results and believe these financial measures are useful to investors in assessing our performance as further discussed below:

• 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. 

The most directly comparable U.S. GAAP measures are:

• 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. 

The non-GAAP financial measures used by management should be analyzed in conjunction with U.S. GAAP financial measures and should not be considered substitutes for U.S. GAAP financial measures In addition, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of our peer companies.

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Core Earnings

We calculate core earnings as U.S. GAAP net income (loss) attributable to common stockholders adjusted for (gain) loss on investments, net; realized (gain) loss on derivative instruments, net; unrealized (gain) loss on derivative instruments, net; realized and unrealized (gain) loss on GSE CRT embedded derivatives, net; (gain) loss on foreign currency transactions, net; amortization of net deferred (gain) loss on de-designated interest rate swaps; net loss on extinguishment of debt; and cumulative adjustments attributable to non-controlling interest. We may add additional reconciling items to our core earnings calculation in the future if appropriate.

We believe the presentation of core earnings provides a consistent measure of operating performance by excluding the impact of gains and losses described above from operating results. We exclude the impact of gains and losses because gains and losses are not accounted for consistently under U.S. GAAP. Under U.S. GAAP, certain gains and losses are reflected in net income whereas other gains and losses are reflected in other comprehensive income. For example, the majority of our mortgage-backed securities are classified as available-for-sale securities, and we record changes in the valuation of these securities in other comprehensive income on our condensed consolidated balance sheet. We elected the fair value option for our mortgage-backed securities purchased on or after September 1, 2016, and changes in the valuation of these securities are recorded in other income (loss) in our condensed consolidated statement of operations. In addition, certain gains and losses represent one-time events.

We believe that providing transparency into core earnings enables our investors to consistently measure, evaluate and compare our operating performance to that of our peers over multiple reporting periods. However, we caution that core earnings should not be considered as an alternative to net income (determined in accordance with U.S. GAAP), or as an indication of our cash flow from operating activities (determined in accordance with U.S. GAAP), a measure of our liquidity, or as an indication of amounts available to fund our cash needs, including our ability to make cash distributions.

The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to core earnings for the following periods:

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands, except per share data	2017		2016		2017		2016
Net income (loss) attributable to common stockholders	46,834		(11,617	)	133,964		(167,777	)
Adjustments:
(Gain) loss on investments, net	(11,175	)	(1,414	)	(9,322	)	(13,015	)
Realized (gain) loss on derivative instruments, net (1)	40,229		20,584		25,311		63,569
Unrealized (gain) loss on derivative instruments, net (1)	(6,682	)	44,794		(20,120	)	211,261
Realized and unrealized (gain) loss on GSE CRT embedded derivatives, net (2)	(15,559	)	(11,116	)	(29,707	)	(13,212	)
(Gain) loss on foreign currency transactions, net (3)	(1,731	)	3,542		(2,244	)	4,667
Amortization of net deferred (gain) loss on de-designated interest rate swaps(4)	(6,369	)	3,238		(12,667	)	16,162
Net loss on extinguishment of debt	526		—		5,237		—
Subtotal	(761	)	59,628		(43,512	)	269,432
Cumulative adjustments attributable to non-controlling interest	10		(752	)	549		(3,349	)
Core earnings attributable to common stockholders	46,083		47,259		91,001		98,306
Basic income (loss) per common share	0.42		(0.10	)	1.20		(1.49	)
Core earnings per share attributable to common stockholders(5)	0.41		0.42		0.82		0.87

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(1) U.S. GAAP gain (loss) on derivative instruments, net on the condensed consolidated statements of operations includes the following components:

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Realized gain (loss) on derivative instruments, net	(40,229	)	(20,584	)	(25,311	)	(63,569	)
Unrealized gain (loss) on derivative instruments, net	6,682		(44,794	)	20,120		(211,261	)
Contractual net interest expense	(19,966	)	(24,985	)	(42,860	)	(54,076	)
Gain (loss) on derivative instruments, net	(53,513	)	(90,363	)	(48,051	)	(328,906	)

(2) U.S. GAAP realized and unrealized credit derivative income (loss), net on the condensed consolidated statements of operations includes the following components:

	Three Months Ended   June 30,		Six Months Ended   June 30,
$ in thousands	2017	2016	2017	2016
Realized and unrealized gain (loss) on GSE CRT embedded derivatives, net	15,559	11,116	29,707	13,212
GSE CRT embedded derivative coupon interest	5,844	6,112	11,651	12,426
Realized and unrealized credit derivative income (loss), net	21,403	17,228	41,358	25,638

(3) U.S. GAAP other investment income (loss) net on the condensed consolidated statements of operations includes the following components:

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Dividend income	802	797		1,618	1,604
Gain (loss) on foreign currency transactions, net	1,731	(3,542	)	2,244	(4,667	)
Other investment income (loss), net	2,533	(2,745	)	3,862	(3,063	)

(4) U.S. GAAP repurchase agreements interest expense on the condensed consolidated statements of operations includes the following components:

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017		2016	2017		2016
Interest expense on repurchase agreements borrowings	42,441		28,022	78,686		56,898
Amortization of net deferred (gain) loss on de-designated interest rate swaps	(6,369	)	3,238	(12,667	)	16,162
Repurchase agreements interest expense	36,072		31,260	66,019		73,060

(5) Core earnings per share attributable to common stockholders is equal to core earnings divided by the basic weighted average number of common shares outstanding.

Core earnings for the three months ended June 30, 2017 decreased $1.2 million from the same period in 2016 primarily due to a $1.2 million decline in effective net interest income.

Core earnings for the six months ended June 30, 2017 decreased $7.3 million from the same period in 2016 primarily due to a $5.4 million decline in effective net interest income. In addition, we recorded equity in losses of unconsolidated ventures of $1.7 million for the six months ended June 30, 2017 compared to equity in earnings of $1.3 million for the same period in 2016.

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Effective Interest Income / Effective Yield/ Effective Interest Expense / Effective Cost of Funds / Effective Net Interest Income / Effective Interest Rate Margin

We calculate effective interest income (and by calculation, effective yield) as U.S. GAAP total interest income adjusted for GSE CRT embedded derivative coupon interest that is recorded as realized and unrealized credit derivative income (loss), net. We include our GSE CRT embedded derivative coupon interest in effective interest income because GSE CRT coupon interest is not accounted for consistently under U.S. GAAP. We account for GSE CRTs purchased prior to August 24, 2015 as hybrid financial instruments, but we have elected the fair value option for GSE CRTs purchased on or after August 24, 2015. Under U.S. GAAP, coupon interest on GSE CRTs accounted for using the fair value option is recorded as interest income, whereas coupon interest on GSE CRTs accounted for as hybrid financial instruments is recorded as realized and unrealized credit derivative income (loss). We add back GSE CRT embedded derivative coupon interest to our total interest income because we consider GSE CRT embedded derivative coupon interest a current component of our total interest income irrespective of whether we elected the fair value option for the GSE CRT or accounted for the GSE CRT as a hybrid financial instrument.

We calculate effective interest expense (and by calculation, effective cost of funds) as U.S. GAAP total interest expense adjusted for contractual net interest expense on our interest rate swaps that is recorded as gain (loss) on derivative instruments, net and the amortization of net deferred gains (losses) on de-designated interest rate swaps that is recorded as repurchase agreements interest expense. We view our interest rate swaps as an economic hedge against increases in future market interest rates on our floating rate borrowings. We add back the net payments we make on our interest rate swap agreements to our total U.S. GAAP interest expense because we use interest rate swaps to add stability to interest expense. We exclude the amortization of net deferred gains (losses) on de-designated interest rate swaps from our calculation of effective interest expense because we do not consider the amortization a current component of our borrowing costs.

We calculate effective net interest income (and by calculation, effective interest rate margin) as U.S. GAAP net interest income adjusted for net interest expense on our interest rate swaps that is recorded as gain (loss) on derivative instruments, amortization of net deferred gains (losses) on de-designated interest rate swaps that is recorded as repurchase agreements interest expense and GSE CRT embedded derivative coupon interest that is recorded as realized and unrealized credit derivative income (loss), net.

We believe the presentation of effective interest income, effective yield, effective interest expense, effective cost of funds, effective net interest income and effective interest rate margin measures, when considered together with U.S. GAAP financial measures, provide information that is useful to investors in understanding our borrowing costs and operating performance.

The following table reconciles total interest income to effective interest income and yield to effective yield for the following periods:

	Three Months Ended June 30,
	2017			2016
$ in thousands	Reconciliation	Yield/Effective Yield		Reconciliation	Yield/Effective Yield
Total interest income	127,048	3.17	%	118,807	3.07	%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net	5,844	0.15	%	6,112	0.16	%
Effective interest income	132,892	3.32	%	124,919	3.23	%

	Six Months Ended June 30,
	2017			2016
$ in thousands	Reconciliation	Yield/Effective Yield		Reconciliation	Yield/Effective Yield
Total interest income	251,685	3.11	%	245,946	3.18	%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net	11,651	0.15	%	12,426	0.16	%
Effective interest income	263,336	3.26	%	258,372	3.34	%

Our effective interest income increased in the three and six months ended June 30, 2017 versus the 2016 periods primarily due to higher average earning assets.

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The increase in effective yield for the three months ended June 30, 2017 versus the 2016 period was primarily due to higher average earning asset yields driven by slower prepayment speeds in the three months ended June 30, 2017. The decrease in effective yield for the six months ended June 30, 2017 versus the 2016 period was primarily driven by our shift in portfolio composition to Agency RMBS.

The following table reconciles total interest expense to effective interest expense and cost of funds to effective cost of funds for the following periods.

	Three Months Ended June 30,
	2017			2016
$ in thousands	Reconciliation	Cost of Funds / Effective Cost of Funds		Reconciliation		Cost of Funds / Effective Cost of Funds
Total interest expense	44,111	1.26	%	39,562		1.17	%
Add (Less): Amortization of net deferred gain (loss) on de-designated interest rate swaps	6,369	0.18	%	(3,238	)	(0.1	)%
Add: Contractual net interest expense on interest rate swaps recorded as gain (loss) on derivative instruments, net	19,966	0.57	%	24,985		0.74	%
Effective interest expense	70,446	2.01	%	61,309		1.81	%

	Six Months Ended June 30,
	2017			2016
$ in thousands	Reconciliation	Cost of Funds / Effective Cost of Funds		Reconciliation		Cost of Funds / Effective Cost of Funds
Total interest expense	82,479	1.17	%	89,690		1.33	%
Less: Amortization of net deferred swap losses on de-designation	12,667	0.18	%	(16,162	)	(0.24	)%
Add: Net interest paid - interest rate swaps	42,860	0.61	%	54,076		0.80	%
Effective interest expense	138,006	1.96	%	127,604		1.89	%

Our effective interest expense and effective cost of funds increased during the three and six months ended June 30, 2017 compared to the same periods in 2016 primarily due to increased borrowings and higher interest rates as a result of the December 2016, March 2017 and June 2017 increases in the federal funds interest rate.

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The following table reconciles net interest income to effective net interest income and net interest rate margin to effective interest rate margin for the following periods.

	Three Months Ended June 30,
	2017				2016
$ in thousands	Reconciliation		Net Interest Rate Margin / Effective Interest Rate Margin		Reconciliation		Net Interest Rate Margin / Effective Interest Rate Margin
Net interest income	82,937		1.91	%	79,245		1.90	%
Add (Less): Amortization of net deferred (gain) loss on de-designated interest rate swaps	(6,369	)	(0.18	)%	3,238		0.10	%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net	5,844		0.15	%	6,112		0.16	%
Less: Contractual net interest expense on interest rate swaps recorded as gain (loss) on derivative instruments, net	(19,966	)	(0.57	)%	(24,985	)	(0.74	)%
Effective net interest income	62,446		1.31	%	63,610		1.42	%

	Six Months Ended June 30,
	2017				2016
$ in thousands	Reconciliation		Net Interest Rate Margin / Effective Interest Rate Margin		Reconciliation		Net Interest Rate Margin / Effective Interest Rate Margin
Net interest income	169,206		1.94	%	156,256		1.85	%
Add: Amortization of net deferred swap losses on de-designation	(12,667	)	(0.18	)%	16,162		0.24	%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net	11,651		0.15	%	12,426		0.16	%
Less: Net interest paid - interest rate swaps	(42,860	)	(0.61	)%	(54,076	)	(0.80	)%
Effective net interest income	125,330		1.30	%	130,768		1.45	%

Effective net interest income and effective interest rate margin for the three months ended June 30, 2017 decreased from the same period in 2016 due to increased borrowings and higher effective cost of funds. Effective net interest income and effective interest rate margin for the six months ended June 30, 2017 decreased from the same period in 2016 primarily due to lower asset yields, increased borrowings and higher cost of funds.

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Repurchase Agreement Debt-to-Equity Ratio

The tables below show the allocation of our equity to our target assets, our debt-to-equity ratio, and our repurchase agreement debt-to-equity ratio as of June 30, 2017 and December 31, 2016. Our debt-to-equity ratio is calculated in accordance with U.S. GAAP and is the ratio of total debt (sum of repurchase agreements, secured loans and exchangeable senior notes) to total equity. We present a repurchase agreement debt-to-equity ratio, a non-GAAP financial measure of leverage, because the mortgage REIT industry primarily uses repurchase agreements, which typically mature within one year, to finance investments. We believe that presenting our repurchase agreement debt-to-equity ratio, when considered together with our U.S. GAAP financial measure of debt-to-equity ratio, provides information that is useful to investors in understanding our refinancing risks, and gives investors a comparable statistic to those other mortgage REITs who almost exclusively borrow using short-term repurchase agreements that are subject to refinancing risk.

June 30, 2017

$ in thousands	Agency RMBS		Residential Credit (1)	Commercial Credit (2)		Exchangeable Senior Notes and Other		Total
Investments	10,852,753		2,453,015	3,079,693		—		16,385,461
Cash and cash equivalents (3)	29,985		18,653	15,431		—		64,069
Derivative assets, at fair value (4)	11,005		—	—		—		11,005
Other assets	132,267		6,950	70,200		3,979		213,396
Total assets	11,026,010		2,478,618	3,165,324		3,979		16,673,931
Repurchase agreements	9,227,679		1,792,375	1,098,894		—		12,118,948
Secured loans (5)	506,909		—	1,143,091		—		1,650,000
Exchangeable senior notes, net	—		—	—		217,804		217,804
Derivative liabilities, at fair value	43,047		—	1,100		—		44,147
Other liabilities	195,806		20,960	62,951		3,221		282,938
Total liabilities	9,973,441		1,813,335	2,306,036		221,025		14,313,837
Total equity (allocated)	1,052,569		665,283	859,288		(217,046	)	2,360,094
Adjustments to calculate repurchase agreement debt-to-equity ratio:
Net equity in unsecured assets and exchangeable senior notes (6)	—		—	(302,177	)	217,046		(85,131	)
Collateral pledged against secured loans	(596,514	)	—	(1,345,151	)	—		(1,941,665	)
Secured loans	506,909		—	1,143,091		—		1,650,000
Equity related to repurchase agreement debt	962,964		665,283	355,051		—		1,983,298
Debt-to-equity ratio (7)	9.2		2.7	2.6		NA		5.9
Repurchase agreement debt-to-equity ratio (8)	9.6		2.7	3.1		NA		6.1

(1) Investments in non-Agency RMBS and GSE CRT are included in residential credit.

(2) Investments in CMBS, commercial loans and investments in unconsolidated joint ventures are included in commercial credit.

(3) Cash and cash equivalents are allocated based on a percentage of equity for Agency RMBS, residential credit and commercial credit.

(4) Derivative assets are allocated based on the hedging strategy for each 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, 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.

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December 31, 2016

$ in thousands	Agency RMBS		Residential Credit (1)	Commercial Credit (2)		Exchangeable Senior Notes and Other		Total
Investments	9,665,860		2,763,751	2,858,376		—		15,287,987
Cash and cash equivalents (3)	76,067		49,582	36,139		—		161,788
Derivative assets, at fair value (4)	3,085		—	101		—		3,186
Other assets	179,931		9,381	63,465		500		253,277
Total assets	9,924,943		2,822,714	2,958,081		500		15,706,238
Repurchase agreements	8,148,220		2,067,731	944,718		—		11,160,669
Secured loans (5)	500,150		—	1,149,850		—		1,650,000
Exchangeable senior notes	—		—	—		397,041		397,041
Derivative liabilities, at fair value	133,832		—	396		—		134,228
Other liabilities	52,047		21,389	14,791		5,889		94,116
Total liabilities	8,834,249		2,089,120	2,109,755		402,930		13,436,054
Total equity (allocated)	1,090,694		733,594	848,326		(402,430	)	2,270,184
Adjustments to calculate repurchase agreement debt-to-equity ratio:
Net equity in unsecured assets and exchangeable senior notes (6)	—		—	(306,656	)	402,430		95,774
Collateral pledged against secured loans	(585,504	)	—	(1,346,078	)	—		(1,931,582	)
Secured loans	500,150		—	1,149,850		—		1,650,000
Equity related to repurchase agreement debt	1,005,340		733,594	345,442		—		2,084,376
Debt-to-equity ratio (7)	7.9		2.8	2.5		NA		5.8
Repurchase agreement debt-to-equity ratio (8)	8.1		2.8	2.7		NA		5.4

(1) Investments in non-Agency RMBS and GSE CRT are included in residential credit.

(2) Investments in CMBS, commercial loans and investments in unconsolidated joint ventures are included in commercial credit.

(3) Cash and cash equivalents are allocated based on a percentage of equity for Agency RMBS, residential credit and commercial credit.

(4) Derivative assets are allocated based on the hedging strategy for each 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, 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.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, repayment of borrowings and other general business needs. Our primary sources of funds for liquidity consist of the net proceeds from our common and preferred equity offerings, net cash provided by operating activities, proceeds from repurchase agreements and other financing arrangements and future issuances of equity and/or debt securities.

We currently believe that we have sufficient liquidity and capital resources available for the acquisition of additional investments, repayments on borrowings, margin requirements and the payment of cash dividends as required for continued qualification as a REIT. We generally maintain liquidity to pay down borrowings under repurchase arrangements to reduce borrowing costs and otherwise efficiently manage our long-term investment capital. Because the level of these borrowings can be adjusted on a daily basis, the level of cash and cash equivalents carried on our condensed consolidated balance sheets is significantly less important than our potential liquidity available under borrowing arrangements. However, there can be no assurance that we will maintain sufficient levels of liquidity to meet any margin calls.

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We held cash and cash equivalents of $64.1 million at June 30, 2017 (June 30, 2016: $144.1 million). Our cash and cash equivalents decreased due to normal fluctuations in cash balances related to the timing of principal and interest payments, repayments of debt, and asset purchases and sales. Our operating activities provided net cash of approximately $154.4 million for the six months ended June 30, 2017 (June 30, 2016: $161.8 million).

Our investing activities used net cash of $919.6 million in the six months ended June 30, 2017 compared to net cash provided from investing activities of $571.7 million in the six months ended June 30, 2016. We invested $2.5 billion in mortgage-backed and credit risk transfer securities during the six months ended June 30, 2017 compared to investments of $1.1 billion in mortgage-backed and credit risk transfer securities, $152.3 million in U.S. Treasury securities and $83.0 million in commercial loans in the six months ended June 30, 2016. We generated $1.1 billion from principal payments of mortgage-backed and credit risk transfer securities and $572.6 million from the sales of mortgage-backed and credit risk transfer securities during the six months ended June 30, 2017 compared to $1.1 billion from principal payments of mortgage-backed and credit risk transfer securities and $660.0 million from the sales of mortgage-backed and credit risk transfer securities in the six months ended June 30, 2016. We also used proceeds from sales and principal repayments to fund termination payments on derivative contracts of $25.3 million during the six months ended June 30, 2017 compared to $62.1 million in the six months ended June 30, 2016.

Our financing activities provided net cash of $667.5 million for the six months ended June 30, 2017 compared to net cash used of $642.6 million in the six months ended June 30, 2016. Our primary source of cash flows from financing activities during the six months ended June 30, 2017 was from net proceeds from repurchase agreements of $954.2 million (June 30, 2016: net repayments of $357.4 million). We primarily used cash of $185.4 million to extinguish a portion of our senior exchangeable notes maturing in March 2018 and to pay dividends of $101.9 million (June 30, 2016: $102.7 million) We also used cash to repurchase 2,063,451 shares of common stock for $25.0 million during the six months ended June 30, 2016.

As of June 30, 2017, our wholly-owned subsidiary, IAS Services, had $1.65 billion in outstanding secured loans from the FHLBI. As of June 30, 2017, the FHLBI advances were collateralized by CMBS and Agency RMBS with a fair value of $1.3 billion and $596.5 million, respectively.

As of June 30, 2017, the average margin requirement (weighted by borrowing amount), or the percentage amount by which the collateral value must exceed the loan amount (also refer to as the "haircut") under our repurchase agreements was 4.9% for Agency RMBS, 21.4% for non-Agency RMBS, 24.5% for GSE CRT and 19.2% for CMBS. Across our repurchase agreement facilities, the haircuts range from a low of 3% to a high of 20% for Agency RMBS, a low of 10% to a high of 50% for non-Agency RMBS, a low of 20% to a high of 27.5% for GSE CRT, a low of 15% to a high of 30% for CMBS. Declines in the value of our securities portfolio can trigger margin calls by our lenders under our repurchase agreements. An event of default or termination event would give some of our counterparties the option to terminate all repurchase transactions existing with us and require any amount due by us to the counterparties to be payable immediately.

Our total debt-to-equity ratio, which includes longer term financing, was 5.9x as of June 30, 2017 (December 31, 2016: 5.8x). We moderately increased our debt-to-equity ratio over the last six months to finance purchases of mortgage-backed securities and to retire $181.2 million of our exchangeable senior notes.

In December 2011, our board of directors approved a common stock share repurchase program. Shares of our common stock may be purchased in the open market, including through block purchases, or through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended. The timing, manner, price and amount of any repurchases will be determined at our discretion and the program may be suspended, terminated or modified at any time for any reason.  The program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases.

During the six months ended June 30, 2017, we did not repurchase any shares of our common stock (six months ended June 30, 2016: $25.0 million of repurchases). As of June 30, 2017, we had authority to purchase 18,239,082 additional shares of common stock under our share repurchase program with no expiration date.

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Effects of Margin Requirements, Leverage and Credit Spreads

Our securities have values that fluctuate according to market conditions and, as discussed above, the market value of our securities will decrease as prevailing interest rates or credit spreads increase. When the value of the securities pledged to secure a repurchase loan or a secured loan decreases to the point where the positive difference between the collateral value and the loan amount is less than the haircut, our lenders may issue a margin call, which means that the lender will require us to pay the margin call in cash or pledge additional collateral to meet that margin call. Under our repurchase facilities and secured loans, our lenders have full discretion to determine the value of the securities we pledge to them. Most of our lenders will value securities based on recent trades in the market. Lenders also issue margin calls as the published current principal balance factors change on the pool of mortgages underlying the securities pledged as collateral when scheduled and unscheduled paydowns are announced monthly.

We experience margin calls and increased collateral requirements in the ordinary course of our business. In seeking to effectively manage the margin requirements established by our lenders, we maintain a position of cash and unpledged securities. We refer to this position as our liquidity. The level of liquidity we have available to meet margin calls is directly affected by our leverage levels, our haircuts and the price changes on our securities. If interest rates increase as a result of a yield curve shift or for another reason or if credit spreads widen, then the prices of our collateral (and our unpledged assets that constitute our liquidity) will decline, we will experience margin calls, and we will use our liquidity to meet the margin calls. There can be no assurance that we will maintain sufficient levels of liquidity to meet any margin calls or increased collateral requirements. If our haircuts increase, our liquidity will proportionately decrease. In addition, if we increase our borrowings, our liquidity will decrease by the amount of additional haircut on the increased level of indebtedness.

We intend to maintain a level of liquidity in relation to our assets that enables us to meet reasonably anticipated margin calls and increased collateral requirements but that also allows us to be substantially invested in securities. We may misjudge the appropriate amount of our liquidity by maintaining excessive liquidity, which would lower our investment returns, or by maintaining insufficient liquidity, which would force us to liquidate assets into unfavorable market conditions and harm our results of operations and financial condition.

We are subject to financial covenants in connection with our lending, derivatives and other agreements we enter into in the normal course of our business. We intend to continue to operate in a manner which complies with all of our financial covenants. Our lending and derivative agreements provide that we may be declared in default of our obligations if our leverage ratio exceeds certain thresholds and we fail to maintain stockholders’ equity or market value above certain thresholds over specified time periods.

Forward-Looking Statements Regarding Liquidity

Based upon our current portfolio, leverage rate and available borrowing arrangements, we believe that cash flow from operations and available borrowing capacity will be sufficient to enable us to meet anticipated short-term (one year or less) liquidity requirements to fund our investment activities, pay fees under our management agreement, fund our distributions to stockholders and for other general corporate expenses.

Our ability to meet our long-term (greater than one year) liquidity and capital resource requirements will be subject to obtaining additional debt financing. We may increase our capital resources by obtaining long-term credit facilities or through public or private offerings of equity or debt securities, possibly including classes of preferred stock, common stock, and senior or subordinated notes. Such financing will depend on market conditions for capital raises and our ability to invest such offering proceeds. If we are unable to renew, replace or expand our sources of financing on substantially similar terms, it may have an adverse effect on our business and results of operations.

Contractual Obligations

We have entered into an agreement with our Manager pursuant to which our Manager is entitled to receive a management fee and the reimbursement of certain expenses. The management fee is calculated and payable quarterly in arrears in an amount equal to 1.50% of our stockholders’ equity, per annum. Refer to Note 12 - "Related Party Transactions" of our condensed consolidated financial statements for a description of adjustments made to our stockholders' equity for purposes of calculating our management fee. Our Manager uses the proceeds from its management fee in part to pay compensation to its officers and personnel who, notwithstanding that certain of those individuals are also our officers, receive no cash compensation directly from us. We are required to reimburse our Manager for operating expenses related to us incurred by our Manager, including certain salary expenses and other expenses relating to legal, accounting, due diligence and other services. Our reimbursement obligation is not subject to any dollar limitation. Refer to Note 12 – "Related Party Transactions" of our condensed consolidated financial statements for details of our reimbursements to our Manager.

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As of June 30, 2017, we had the following contractual obligations:

	Payments Due by Period
$ in thousands	Total	Less than 1 year	1-3 years	3-5 years	After 5 years
Repurchase agreements	12,118,948	12,118,948	—	—	—
Secured loans	1,650,000	—	300,000	100,000	1,250,000
Exchangeable senior notes	218,755	218,755	—	—	—
Total (1)	13,987,703	12,337,703	300,000	100,000	1,250,000

(1) Excluded from total contractual obligations are the amounts due to our Manager under the management agreement, as those obligations do not have fixed and determinable payments.

As of June 30, 2017, we have approximately $21.7 million, $10.9 million and $140.5 million in contractual interest payments related to our repurchase agreements, exchangeable senior notes and secured loans, respectively.

Off-Balance Sheet Arrangements

We have committed to invest up to $122.0 million in unconsolidated ventures sponsored by an affiliate of our Manager. The unconsolidated ventures are structured as partnerships, and we invest in the partnerships as a limited partner. As of June 30, 2017, $109.5 million of our commitment has been called. We are committed to fund $12.6 million in additional capital to fund future investments and cover future expenses should they occur.

As of June 30, 2017, we have unfunded commitments on commercial loans of $6.4 million (December 31, 2016: $9.7 million).

Share-Based Compensation

We established the 2009 Equity Incentive Plan for grants of common stock and other equity based awards to our independent directors and officers and employees of our Manager and its affiliates (the "Incentive Plan"). Under the Incentive Plan, a total of 1,000,000 shares of common stock are authorized for issuance. Unless terminated earlier, the Incentive Plan will terminate in 2019, but will continue to govern the unexpired awards. As of June 30, 2017, 806,778 shares of common stock remain available for future issuance under the Incentive Plan.

We recognized compensation expense of approximately $112,000 (June 30, 2016: $85,000) and approximately $197,000 (June 30, 2016: $170,000) related to our independent directors for the three and six months ended June 30, 2017 and 2016, respectively. During the three months ended June 30, 2017 and 2016, we issued 5,292 shares and 6,160 shares of stock, respectively, pursuant to the Incentive Plan to our independent directors. During the six months ended June 30, 2017 and 2016, we issued 10,748 shares and 13,908 shares of stock, respectively, pursuant to the Incentive Plan to our independent directors. The fair market value of the shares granted was determined by the closing stock market price on the date of the grant. The grants vested immediately.

We recognized compensation expense of approximately $35,000 (June 30, 2016: $63,000) and $66,000 (June 30, 2016: $95,000) for the three and six months ended June 30, 2017, respectively,related to restricted stock units awarded to employees of our Manager and its affiliates which is reimbursed by our Manager under the management agreement. At June 30, 2017 there was approximately $288,000 of total unrecognized compensation cost related to restricted stock unit awards that is expected to be recognized over a period of up to 45 months, with a weighted-average remaining vesting period of 20 months.

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The following table summarizes the activity related to restricted stock units awarded to employees of our Manager and its affiliates for the three and six months ended June 30, 2017.

	Three Months Ended June 30,			Six Months Ended June 30,
	2017			2017
	Restricted Stock Units	Weighted Average Grant Date Fair Value (1)		Restricted Stock Units		Weighted Average Grant Date Fair Value (1)
Unvested at the beginning of the period	19,827	$	14.35	18,807		$	14.37
Shares granted during the period	—	—		8,115		15.55
Shares vested during the period	—	—		(7,095	)	15.78
Unvested at the end of the period	19,827	$	14.35	19,827		$	14.35

(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.

Dividends

We intend to continue to make regular quarterly distributions to holders of our common stock and preferred stock. U.S. federal income tax law generally requires that a REIT distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our repurchase agreements and other debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets or borrow funds to make cash distributions, or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

Inflation

Virtually all of our assets and liabilities are sensitive to interest rates. As a result, interest rates and other factors influence our performance far more than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates.

Unrelated Business Taxable Income

We have not engaged in transactions that would result in a portion of our income being treated as unrelated business taxable income.

Other Matters

We believe that we satisfy the organizational requirements for REIT status, that we satisfied each of the asset tests in Section 856(c)(4) of the Internal Revenue Code of 1986, as amended (the "Code") for the period ended June 30, 2017, and that our proposed method of operation will permit us to satisfy the asset tests, gross income tests, and distribution requirements for our taxable year that will end on December 31, 2017.

At all times, we intend to conduct our business so that neither we nor our Operating Partnership nor the subsidiaries of our Operating Partnership are required to register as an investment company under the 1940 Act. If we were required to register as an investment company, then our use of leverage would be substantially reduced. Because we are a holding company that conducts our business through our Operating Partnership and the Operating Partnership’s wholly-owned or majority-owned subsidiaries, the securities issued by these subsidiaries that are excepted from the definition of "investment company" under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, together with any other investment securities the Operating Partnership may own, may not have a combined value in excess of 40% of the value of the Operating Partnership’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. This requirement limits the types of businesses in which we are permitted to engage in through our subsidiaries. In addition, we believe neither we nor the Operating Partnership are considered an investment company under Section 3(a)(1)(A) of the 1940 Act because they do not engage primarily or hold themselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through the Operating Partnership’s wholly-owned or majority-owned subsidiaries, we and the Operating Partnership are primarily engaged in the non-investment company businesses of these subsidiaries. IAS Asset I LLC and certain of the Operating Partnership’s other subsidiaries that we may form in the future rely upon the exclusion from the definition of "investment company" under the 1940 Act provided by Section 3(c)(5)(C) of the 1940 Act, which is available for entities "primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in

66

real estate." This exclusion generally requires that at least 55% of each subsidiary’s portfolio be comprised of qualifying assets and at least 80% be comprised of qualifying assets and real estate-related assets (and no more than 20% comprised of miscellaneous assets). We calculate that as of June 30, 2017, we conducted our business so as not to be regulated as an investment company under the 1940 Act.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The primary components of our market risk are related to interest rate, principal prepayment and market value. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and we seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.

Interest Rate Risk

Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. We are subject to interest rate risk in connection with our investments and our repurchase agreements. Our repurchase agreements are typically of limited duration and will be periodically refinanced at current market rates. We mitigate this risk through utilization of derivative contracts, primarily interest rate swap agreements, TBAs and futures contracts.

Interest Rate Effect on Net Interest Income

Our operating results depend in large part upon differences between the yields earned on our investments and our cost of borrowing and interest rate hedging activities. Most of our repurchase agreements provide financing based on a floating rate of interest calculated on a fixed spread over LIBOR. The fixed spread will vary depending on the type of underlying asset which collateralizes the financing. Accordingly, the portion of our portfolio which consists of floating interest rate assets are match-funded utilizing our expected sources of short-term financing, while our fixed interest rate assets are not match-funded. During periods of rising interest rates, the borrowing costs associated with our investments tend to increase while the income earned on our fixed interest rate investments may remain substantially unchanged. This increase in borrowing costs results in the narrowing of the net interest spread between the related assets and borrowings and may even result in losses. Further, during this portion of the interest rate and credit cycles, defaults could increase and result in credit losses to us, which could adversely affect our liquidity and operating results. Such delinquencies or defaults could also have an adverse effect on the spread between interest-earning assets and interest-bearing liabilities.

Hedging techniques are partly based on assumed levels of prepayments of our RMBS. If prepayments are slower or faster than assumed, the life of the RMBS will be longer or shorter, which would reduce the effectiveness of any hedging strategies we may use and may cause losses on such transactions. Hedging strategies involving the use of derivative securities are highly complex and may produce volatile returns.

Interest Rate Effects on Fair Value

Another component of interest rate risk is the effect that changes in interest rates will have on the market value of the assets that we acquire. We face the risk that the market value of our assets will increase or decrease at different rates than those of our liabilities, including our hedging instruments.

We primarily assess our interest rate risk by estimating the duration of our assets and the duration of our liabilities. Duration measures the market price volatility of financial instruments as interest rates change. We generally calculate duration using various financial models and empirical data. Different models and methodologies can produce different duration numbers for the same securities.

The impact of changing interest rates on fair value can change significantly when interest rates change materially. Therefore, the volatility in the fair value of our assets could increase significantly in the event interest rates change materially. In addition, other factors impact the fair value of our interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, changes in actual interest rates may have a material adverse effect on us.

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Spread Risk

We employ a variety of spread risk management techniques that seek to mitigate the influences of spread changes on our book value and our liquidity to help us achieve our investment objectives. We refer to the difference between interest rates on our investments and interest rates on risk free instruments as spreads. The yield on our investments changes over time due to the level of risk free interest rates, the creditworthiness of the security, and the price of the perceived risk. The change in the market yield of our interest rate hedges also changes primarily with the level of risk free interest rates. We manage spread risk through careful asset selection, sector allocation, regulating our portfolio value-at-risk, and maintaining adequate liquidity. Changes in spreads impact our book value and our liquidity and could cause us to sell assets and to change our investment strategy in order to maintain liquidity and preserve book value.

Prepayment Risk

As we receive prepayments of principal on our investments, premiums paid on these investments are amortized against interest income. In general, an increase in prepayment rates will accelerate the amortization of purchase premiums, thereby reducing the interest income earned on the investments. Conversely, discounts on such investments are accreted into interest income. In general, an increase in prepayment rates will accelerate the accretion of purchase discounts, thereby increasing the interest income earned on the investments.

Extension Risk

We compute the projected weighted average life of our investments based upon assumptions regarding the rate at which the borrowers will prepay the underlying mortgages. In general, when a fixed-rate or hybrid adjustable-rate security is acquired with borrowings, we may, but are not required to, enter into an interest rate swap agreement or other hedging instrument that effectively fixes our borrowing costs for a period close to the anticipated average life of the fixed-rate portion of the related assets. This strategy is designed to protect us from rising interest rates, because the borrowing costs are fixed for the duration of the fixed-rate portion of the related target asset.

However, if prepayment rates decrease in a rising interest rate environment, then the life of the fixed-rate portion of the related assets could extend beyond the term of the swap agreement or other hedging instrument. This could have a negative impact on our results from operations, as borrowing costs would no longer be fixed after the end of the hedging instrument, while the income earned on the hybrid adjustable-rate assets would remain fixed. This situation may also cause the market value of our hybrid adjustable-rate assets to decline, with little or no offsetting gain from the related hedging transactions. In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.

Market Risk

Market Value Risk

Our available-for-sale securities are reflected at their estimated fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income pursuant to ASC Topic 320. The estimated fair value of these securities fluctuates primarily due to changes in interest rates and other factors. Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of these securities would be expected to increase.

The sensitivity analysis table presented below shows the estimated impact of an instantaneous parallel shift in the yield curve, up and down 50 and 100 basis points, on the market value of our interest rate-sensitive investments and net interest income, including net interest paid or received under interest rate swaps, at June 30, 2017, assuming a static portfolio. When evaluating the impact of changes in interest rates, prepayment assumptions and principal reinvestment rates are adjusted based on our Manager’s expectations. The analysis presented utilized assumptions, models and estimates of our Manager based on our Manager’s judgment and experience.

Change in Interest Rates	Percentage Change in Projected Net Interest Income		Percentage Change in Projected Portfolio Value
+1.00%	(22.49	)%	(1.30	)%
+0.50%	(7.19	)%	(0.44	)%
-0.50%	1.91	%	0.52	%
-1.00%	(4.44	)%	0.57	%

Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not

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occur that would affect the outcomes. The base interest rate scenario assumes interest rates at June 30, 2017. Furthermore, while we generally expect to retain such assets and the associated interest rate risk to maturity, future purchases and sales of assets could materially change our interest rate risk profile.

Given the low interest rates at June 30, 2017, we applied a floor of 0% for all anticipated interest rates included in our assumptions. Because of this floor, we anticipate that any hypothetical interest rate shock decrease would have a limited positive impact on our funding costs; however, because prepayment speeds are unaffected by this floor, we expect that any increase in our prepayment speeds (occurring as a result of any interest rate decrease or otherwise) could result in an acceleration of our premium amortization on Agency and interest-only securities purchased at a premium, and accretion of discount on our non-Agency RMBS purchased at a discount. As a result, because this floor limits the positive impact of any interest rate decrease on our funding costs, hypothetical interest rate decreases could cause the fair value of our financial instruments and our net interest income to decline.

The information set forth in the interest rate sensitivity table above and all related disclosures constitutes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual results could differ significantly from those estimated in the foregoing interest rate sensitivity table.

Real Estate Risk

Residential and commercial property values are subject to volatility and may be adversely affected by a number of factors, including, but not limited to: national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions (such as the supply of housing stock); changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to suffer losses.

Credit Risk

We believe that our investment strategy will generally keep our credit losses and financing costs low. However, we retain the risk of potential credit losses on all of our residential and commercial mortgage investments. We seek to manage this risk through our pre-acquisition due diligence process. In addition, we re-evaluate the credit risk inherent in our investments on a regular basis pursuant to fundamental considerations such as GDP, unemployment, interest rates, retail sales, store closings/openings, corporate earnings, housing inventory, affordability and regional home price trends. We also review key loan credit metrics including, but not limited to, payment status, current loan-to-value ratios, current borrower credit scores and debt yields. These characteristics assist in determining the likelihood and severity of loan loss as well as prepayment and extension expectations. We then perform structural analysis under multiple scenarios to establish likely cash flow profiles and credit enhancement levels relative to collateral performance projections. This analysis allows us to quantify our opinions of credit quality and fundamental value, which are key drivers of portfolio management decisions.

Foreign Exchange Rate Risk

We have an investment in a commercial loan denominated in foreign currency and an investment in an unconsolidated joint venture whose net assets and results of operations are exposed to foreign currency translation risk when translated in U.S. dollars upon consolidation. We seek to hedge our foreign currency exposures by purchasing currency forward contracts.

Risk Management

To the extent consistent with maintaining our REIT qualification, we seek to manage risk exposure to protect our investment portfolio against the effects of major interest rate changes. We generally seek to manage this risk by:

• monitoring and adjusting, if necessary, the reset index and interest rate related to our target assets and our financings;

• 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.

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ITEM 4. CONTROLS AND PROCEDURES.

Our management is responsible for establishing and maintaining disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.

We have evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of June 30, 2017. Based upon our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended June 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of June 30, 2017, we were not involved in any such legal proceedings.

ITEM 1A. RISK FACTORS.

There were no material changes during the period covered by this Report to the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on February 21, 2017. Additional risks not presently known, or that we currently deem immaterial, also may have a material adverse effect on our business, financial condition and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the three months ended June 30, 2017, we did not repurchase any shares of our common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

A list of exhibits to this Form 10-Q is set forth on the Exhibit Index and is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	INVESCO MORTGAGE CAPITAL INC.
August 7, 2017	By:	/s/ John M. Anzalone
		John M. Anzalone
		Chief Executive Officer
August 7, 2017	By:	/s/ Richard Lee Phegley, Jr.
		Richard Lee Phegley, Jr.
		Chief Financial Officer

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EXHIBIT INDEX

Item 6.        Exhibits

Exhibit No.	Description
3.1	Articles of Amendment and Restatement of Invesco Mortgage Capital Inc. (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 12, 2009).
3.2	Articles Supplementary of 7.75% Series A Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form 8-A, filed with the SEC on July 23, 2012).
3.3	Articles Supplementary of 7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form 8-A, filed with the SEC on September 8, 2014).
3.4	Amended and Restated Bylaws of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on February 17, 2017.
31.1	Certification of John M. Anzalone pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Richard Lee Phegley, Jr. pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of John M. Anzalone pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Richard Lee Phegley, Jr. pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following series of unaudited XBRL-formatted documents are collectively included herewith as Exhibit 101. The financial information is extracted from Invesco Mortgage Capital Inc.’s unaudited condensed consolidated interim financial statements and notes that are included in this Form 10-Q Report. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Calculation Linkbase Document 101.LAB XBRL Taxonomy Label Linkbase Document 101.PRE XBRL Taxonomy Presentation Linkbase Document 101.DEF XBRL Taxonomy Definition Linkbase Document

73

EX-31.1

EXHIBIT 31.1

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, John M. Anzalone, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q 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 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;

b) 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;

c) 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

d) 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

5. The registrant’s other certifying officer 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):

a) 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

b) 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.

August 7, 2017

/s/ John M. Anzalone

John M. Anzalone

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard Lee Phegley, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q 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 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;

b) 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;

c) 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

d) 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

5. The registrant’s other certifying officer 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):

a) 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

b) 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.

August 7, 2017

/s/ Richard Lee Phegley, Jr.

Richard Lee Phegley, Jr.

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF JOHN M. ANZALONE

PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Invesco Mortgage Capital Inc.’s (the “Company”) Quarterly Report on Form 10-Q for the period ended June 30, 2017 (the “Report”), I, John M. Anzalone, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 7, 2017

/s/ John M. Anzalone

John M. Anzalone

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF RICHARD LEE PHEGLEY, JR.

PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Invesco Mortgage Capital Inc.’s (the “Company”) Quarterly Report on Form 10-Q for the period ended June 30, 2017 (the “Report”), I, Richard Lee Phegley, Jr., do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 7, 2017

/s/ Richard Lee Phegley, Jr.

Richard Lee Phegley, Jr.

Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 03, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	Invesco Mortgage Capital Inc.
Trading Symbol	IVR
Entity Central Index Key	0001437071
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus (Q1,Q2,Q3,FY)	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		111,609,901

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
ASSETS
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $15,367,150 and $14,422,198, respectively)	$ 16,083,284	$ 14,981,331
Commercial loans, held-for-investment	278,866	273,355
Cash and cash equivalents	64,069	161,788
Due from counterparties	1,246	86,450
Investment related receivable	83,181	43,886
Accrued interest receivable	49,852	46,945
Derivative assets, at fair value	11,005	3,186
Other assets	102,428	109,297
Total assets	16,673,931	15,706,238
Liabilities:
Repurchase agreements	12,118,948	11,160,669
Secured loans	1,650,000	1,650,000
Exchangeable senior notes, net	217,804	397,041
Derivative liabilities, at fair value	44,147	134,228
Dividends and distributions payable	50,930	50,924
Investment related payable	202,051	9,232
Accrued interest payable	14,987	21,066
Collateral held payable	3,471	1,700
Accounts payable and accrued expenses	1,790	1,534
Due to affiliate	9,709	9,660
Total liabilities	14,313,837	13,436,054
Commitments and contingencies (See Note 16):
Equity:
Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 111,609,901 and 111,594,595 shares issued and outstanding, respectively	1,116	1,116
Additional paid in capital	2,380,243	2,379,863
Accumulated other comprehensive income	337,391	293,668
Retained earnings (distributions in excess of earnings)	(673,625)	(718,303)
Total stockholders’ equity	2,330,341	2,241,560
Non-controlling interest	29,753	28,624
Total equity	2,360,094	2,270,184
Total liabilities and equity	16,673,931	15,706,238
Series A Cumulative Redeemable Preferred Stock
Equity:
Preferred Stock	135,356	135,356
Series B Cumulative Redeemable Preferred Stock
Equity:
Preferred Stock	$ 149,860	$ 149,860

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Mortgage-backed and credit risk transfer securities, pledged as collateral	$ 15,367,150	$ 14,422,198
Preferred Stock - par value (in usd per share)	$ 0.01	$ 0.01
Preferred Stock - shares authorized	50,000,000	50,000,000
Common Stock - par value (in usd per share)	$ 0.01	$ 0.01
Common Stock - shares authorized	4,500,000	450,000,000
Common Stock - shares issued	111,609,901	111,594,595
Common Stock - shares outstanding	111,609,901	111,594,595
Series A Cumulative Redeemable Preferred Stock
Preferred Stock - dividend rate stated percentage	7.75%	7.75%
Preferred Stock - shares issued	5,600,000	5,600,000
Preferred Stock - shares outstanding	5,600,000	5,600,000
Preferred Stock - liquidation preference value	$ 140,000	$ 140,000
Series B Cumulative Redeemable Preferred Stock
Preferred Stock - dividend rate stated percentage	7.75%	7.75%
Preferred Stock - shares issued	6,200,000	6,200,000
Preferred Stock - shares outstanding	6,200,000	6,200,000
Preferred Stock - liquidation preference value	$ 155,000	$ 155,000

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Interest Income
Mortgage-backed and credit risk transfer securities	$ 121,027	$ 112,860	$ 239,900	$ 235,106
Commercial loans	6,021	5,947	11,785	10,840
Total interest income	127,048	118,807	251,685	245,946
Interest Expense
Repurchase agreements	36,072	31,260	66,019	73,060
Secured loans	4,535	2,688	7,948	5,403
Exchangeable senior notes	3,504	5,614	8,512	11,227
Total interest expense	44,111	39,562	82,479	89,690
Net interest income	82,937	79,245	169,206	156,256
Other Income (loss)
Gain (loss) on investments, net	11,175	1,414	9,322	13,015
Equity in earnings (losses) of unconsolidated ventures	(154)	202	(1,688)	1,263
Gain (loss) on derivative instruments, net	(53,513)	(90,363)	(48,051)	(328,906)
Realized and unrealized credit derivative income (loss), net	21,403	17,228	41,358	25,638
Net loss on extinguishment of debt	(526)	0	(5,237)	0
Other investment income (loss), net	2,533	(2,745)	3,862	(3,063)
Total other income (loss)	(19,082)	(74,264)	(434)	(292,053)
Expenses
Management fee – related party	9,027	9,061	17,828	18,573
General and administrative	1,608	1,896	3,692	3,933
Total expenses	10,635	10,957	21,520	22,506
Net income (loss)	53,220	(5,976)	147,252	(158,303)
Net income (loss) attributable to non-controlling interest	670	(75)	1,856	(1,958)
Net income (loss) attributable to Invesco Mortgage Capital Inc.	52,550	(5,901)	145,396	(156,345)
Dividends to preferred stockholders	5,716	5,716	11,432	11,432
Net income (loss) attributable to common stockholders	$ 46,834	$ (11,617)	$ 133,964	$ (167,777)
Earnings (loss) per share:
Net income attributable to common shareholders (basic) (usd per share)	$ 0.42	$ (0.10)	$ 1.20	$ (1.49)
Net income attributable to common shareholders (diluted) (usd per share)	0.41	(0.10)	1.15	(1.49)
Dividends declared per common share (usd per share)	$ 0.40	$ 0.4	$ 0.8	$ 0.8

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 53,220	$ (5,976)	$ 147,252	$ (158,303)
Other comprehensive income (loss):
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	39,633	117,116	55,922	238,576
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	651	(1,037)	1,501	(11,581)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	(6,369)	3,238	(12,667)	16,162
Currency translation adjustments on investment in unconsolidated venture	139	274	(476)	225
Total other comprehensive income (loss)	34,054	119,591	44,280	243,382
Comprehensive income (loss)	87,274	113,615	191,532	85,079
Less: Comprehensive (income) loss attributable to non-controlling interest	(1,099)	(1,435)	(2,414)	(1,094)
Less: Dividends to preferred stockholders	(5,716)	(5,716)	(11,432)	(11,432)
Comprehensive income (loss) attributable to common stockholders	$ 80,459	$ 106,464	$ 177,686	$ 72,553

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CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock Series A Cumulative Redeemable Preferred Stock	Preferred Stock Series B Cumulative Redeemable Preferred Stock	Common Stock	Additional Paid in Capital	Accumulated Other Comprehensive Income	Retained Earnings (Distributions in excess of earnings)	Total Stockholders’ Equity	Non- Controlling Interest
Balance at beginning of period at Dec. 31, 2015						$ 318,624
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ (158,303)
Other comprehensive income	243,382
Balance at end of period at Jun. 30, 2016						558,954
Balance at beginning of period at Mar. 31, 2016						440,873
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	(5,976)
Other comprehensive income	119,591
Balance at end of period at Jun. 30, 2016						558,954
Beginning Balance (in shares) at Dec. 31, 2016		5,600,000	6,200,000	111,594,595
Balance at beginning of period at Dec. 31, 2016	2,270,184	$ 135,356	$ 149,860	$ 1,116	$ 2,379,863	293,668	$ (718,303)	$ 2,241,560	$ 28,624
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	147,252						145,396	145,396	1,856
Other comprehensive income	44,280					43,722		43,722	558
Stock awards (in shares)				15,306
Common stock dividends	(89,286)						(89,286)	(89,286)
Common unit dividends	(1,140)								(1,140)
Preferred stock dividends	(11,432)						(11,432)	(11,432)
Amortization of equity-based compensation	236				233			233	3
Rebalancing of ownership percentage of non-controlling interest	1				147	1		148	(148)
Ending Balance (in shares) at Jun. 30, 2017		5,600,000	6,200,000	111,609,901
Balance at end of period at Jun. 30, 2017	2,360,094	$ 135,356	$ 149,860	$ 1,116	2,380,243	337,391	(673,625)	2,330,341	29,753
Balance at beginning of period at Mar. 31, 2017						303,765
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	53,220
Other comprehensive income	34,054
Rebalancing of ownership percentage of non-controlling interest	1
Ending Balance (in shares) at Jun. 30, 2017		5,600,000	6,200,000	111,609,901
Balance at end of period at Jun. 30, 2017	$ 2,360,094	$ 135,356	$ 149,860	$ 1,116	$ 2,380,243	$ 337,391	$ (673,625)	$ 2,330,341	$ 29,753

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash Flows from Operating Activities
Net income (loss)	$ 147,252	$ (158,303)
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	53,436	53,664
Amortization of commercial loan origination fees	(164)	(139)
Unrealized (gain) loss on derivative instruments, net	(20,120)	211,261
Unrealized (gain) loss on credit derivatives, net	(29,707)	(19,229)
(Gain) loss on investments, net	(9,322)	(13,015)
Realized (gain) loss on derivative instruments, net	25,311	63,569
Realized (gain) loss on credit derivatives, net	0	6,017
Equity in (earnings) losses of unconsolidated ventures	1,688	(1,263)
Amortization of equity-based compensation	263	265
Amortization of deferred securitization and financing costs	912	1,227
Amortization of net deferred losses on de-designated interest rate swaps	(12,667)	16,162
Net loss on extinguishment of debt	5,237	0
(Gain) loss on foreign currency transactions, net	(2,229)	4,741
Changes in operating assets and liabilities:
(Increase) decrease in operating assets	(2,497)	1,893
Decrease in operating liabilities	(3,016)	(5,039)
Net cash provided by operating activities	154,377	161,811
Cash Flows from Investing Activities
Purchase of mortgage-backed and credit risk transfer securities	(2,533,663)	(1,061,651)
(Contributions to) distributions from investments in unconsolidated ventures, net	7,826	6,863
Change in other assets	0	1,125
Principal payments from mortgage-backed and credit risk transfer securities	1,065,577	1,131,028
Proceeds from sale of mortgage-backed and credit risk transfer securities	572,616	659,959
Payments on sale of credit derivatives	0	(6,017)
Proceeds from/ (payments for) settlement or termination of forwards, swaps and swaptions, net	(25,311)	(62,083)
Principal payments from commercial loans held-for-investment	0	15,000
Origination and advances of commercial loans, net of origination fees	(3,170)	(83,005)
Net cash provided by (used in) investing activities	(919,582)	571,699
Cash Flows from Financing Activities
Proceeds from issuance of common stock	0	35
Repurchase of common stock	0	(25,000)
Due from counterparties	(1,246)	(158,132)
Change in collateral held payable	1,771	660
Proceeds from repurchase agreements	63,154,822	61,581,699
Principal repayments of repurchase agreements	(62,200,623)	(61,939,100)
Proceeds from secured loans	0	125,000
Principal repayments of secured loans	0	(125,000)
Extinguishment of exchangeable senior notes	(185,386)	0
Payments of deferred costs	0	(136)
Payments of dividends and distributions	(101,852)	(102,651)
Net cash provided by (used in) financing activities	667,486	(642,625)
Net change in cash and cash equivalents	(97,719)	90,885
Cash and cash equivalents, beginning of period	161,788	53,199
Cash and cash equivalents, end of period	64,069	144,084
Supplement Disclosure of Cash Flow Information
Interest paid	97,003	74,037
Non-cash Investing and Financing Activities Information
Net change in unrealized gain (loss) on mortgage-backed and credit risk transfer securities	57,423	226,995
Dividends and distributions declared not paid	50,930	50,919
Net change in investment related payable (receivable)	(163,489)	206,034
Net change in repurchase agreements, not settled	4,081	0
Change in due from counterparties	86,450	1,126
U.S. Treasury securities
Cash Flows from Investing Activities
Purchase of trading securities	0	(152,256)
Proceeds from sale of trading securities	0	122,736
Exchange-traded funds
Cash Flows from Investing Activities
Purchase of trading securities	(3,508)	0
Proceeds from sale of trading securities	$ 51	$ 0

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Organization and Business Operations

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Business Operations

Organization and Business Operations

Invesco Mortgage Capital Inc. (the "Company", "we") is a Maryland corporation primarily focused on investing in, financing and managing residential and commercial mortgage-backed securities and mortgage loans. We are externally managed and advised by Invesco Advisers, Inc. (our "Manager"), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd. ("Invesco"), a leading independent global investment management firm. We conduct our business through IAS Operating Partnership LP (the "Operating Partnership"), as its sole general partner. As of June 30, 2017, we owned 98.7% of the Operating Partnership, and a wholly-owned subsidiary of Invesco owned the remaining 1.3%. We have one operating segment.

We primarily invest in:

• Residential mortgage-backed securities ("RMBS") that are guaranteed by a U.S. government agency such as the Government National Mortgage Association, or a federally chartered corporation such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively "Agency RMBS");

• RMBS that are not guaranteed by a U.S. government agency ("non-Agency RMBS");

• Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises ("GSE CRT");

• Commercial mortgage-backed securities ("CMBS");

• Residential and commercial mortgage loans; and

• Other real estate-related financing agreements.

We elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986 commencing with our taxable year ended December 31, 2009. To maintain our REIT qualification, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits exclusion from the "Investment Company" definition under the Investment Company Act of 1940.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Certain disclosures included in our Annual Report on Form 10-K are not required to be included on an interim basis in our quarterly reports on Form 10-Q. We have condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016.

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Company and our controlled subsidiaries. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of our financial condition and results of operations for the periods presented.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Examples of estimates include, but are not limited to, estimates of the fair values of financial instruments, interest income on mortgage-backed and credit risk transfer securities, allowance for loan losses and other-than-temporary impairment charges. Actual results may differ from those estimates.

Significant Accounting Policies

There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements

In January 2016, the FASB issued guidance to improve certain aspects of classification and measurement of financial instruments, including significant revisions in accounting related to the classification and measurement of investments in equity securities and presentation of certain fair value changes for financial liabilities when the fair value option is elected. The guidance also amends certain disclosure requirements associated with the fair value of financial instruments. We are required to adopt the new guidance in the first quarter of 2018. Early adoption is permitted. We have determined that this new accounting standard will not have an impact on our financial condition or results of operations but will simplify financial statement disclosures.

In June 2016, the FASB issued an amendment to the guidance on reporting credit losses for assets measured at amortized cost and available-for-sale securities. We are required to adopt the new guidance in the first quarter of 2020. Early adoption is permitted. We are currently evaluating the potential impacts of the new guidance on our consolidated financial statements, as well as available transition methods.

In August 2016, the FASB issued new guidance that is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Additionally, in November 2016, the FASB issued new guidance on classification and presentation of changes in restricted cash on the statement of cash flows. We are required to adopt the new accounting standards in the first quarter of 2018 using a retrospective transition method for each period presented. Early adoption is permitted. We are currently evaluating the potential impacts of the new guidance on our consolidated financial statements.

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Variable Interest Entities ("VIEs")

6 Months Ended

Jun. 30, 2017

Variable Interest Entity Disclosure [Abstract]

Variable Interest Entities (VIEs)

Variable Interest Entities ("VIEs")

Our maximum risk of loss in VIEs in which we are not the primary beneficiary at June 30, 2017 is presented in the table below.

$ in thousands	Carrying Amount	Company's Maximum Risk of Loss
CMBS	2,777,516	2,777,516
Non-Agency RMBS	1,575,840	1,575,840
Investments in unconsolidated ventures	23,311	23,311
Total	4,376,667	4,376,667

Refer to Note 4 - "Mortgage-Backed and Credit Risk Transfer Securities" and Note 6 - "Other Assets" for additional details regarding these investments.

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Mortgage-Backed and Credit Risk Transfer Securities

6 Months Ended

Jun. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Mortgage-Backed and Credit Risk Transfer Securities

Mortgage-Backed and Credit Risk Transfer Securities

The following tables summarize our mortgage-backed securities ("MBS") and GSE CRT portfolio by asset type as of June 30, 2017 and December 31, 2016.

June 30, 2017
$ in thousands	Principal/ Notional Balance	Unamortized Premium (Discount)		Amortized Cost	Unrealized Gain/ (Loss), net		Fair Value	Net Weighted Average Coupon (1)		Period- end Weighted Average Yield (2)		Quarterly Weighted Average Yield (3)
Agency RMBS:
15 year fixed-rate	3,187,931	134,856		3,322,787	(46,007	)	3,276,780	3.09	%	2.19	%	1.97	%
30 year fixed-rate	4,816,054	232,385		5,048,439	20,677		5,069,116	3.95	%	3.10	%	2.83	%
ARM*	269,123	1,988		271,111	3,463		274,574	2.68	%	2.58	%	2.27	%
Hybrid ARM	1,891,257	30,099		1,921,356	12,659		1,934,015	2.71	%	2.54	%	2.29	%
Total Agency pass-through(4)	10,164,365	399,328		10,563,693	(9,208	)	10,554,485	3.42	%	2.69	%	2.44	%
Agency-CMO(5)	1,429,977	(1,129,678	)	300,299	(2,033	)	298,266	2.04	%	2.87	%	0.34	%
Non-Agency RMBS(6)(7)(8)	3,247,516	(1,793,760	)	1,453,756	122,084		1,575,840	2.18	%	5.80	%	5.90	%
GSE CRT(9)(10)	769,217	25,537		794,754	82,423		877,177	3.06	%	2.40	%	2.62	%
CMBS(11)(12)	3,317,888	(612,386	)	2,705,502	72,014		2,777,516	3.90	%	4.62	%	4.45	%
Total	18,928,963	(3,110,959	)	15,818,004	265,280		16,083,284	3.17	%	3.30	%	3.07	%

* Adjustable-rate mortgage ("ARM")

(1) Net weighted average coupon as of June 30, 2017 is presented net of servicing and other fees.

(2) Period-end weighted average yield is based on amortized cost as of June 30, 2017 and incorporates future prepayment and loss assumptions.

(3) Quarterly weighted average portfolio yield for the period was 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.

(4) We have elected the fair value option for Agency RMBS purchased on or after September 1, 2016 which represent 23.7% of principal/notional balance, 23.5% of amortized cost and 23.5% of fair value.

(5) Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent 84.3% of principal/notional balance, 24.1% of amortized cost and 23.9% of fair value.

(6) Non-Agency RMBS held by us is 43.8% fixed rate, 48.0% variable rate, and 8.2% floating rate based on fair value.

(7) Of the total discount in non-Agency RMBS, $258.2 million is non-accretable based on estimated future cash flows of the securities.

(8) Non-Agency RMBS includes interest-only securities which represent 47.7% of principal/notional balance, 1.8% of amortized cost and 1.5% of fair value.

(9) We have elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 26.1% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.

(10) GSE CRT weighted average coupon and 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.

(11) CMBS includes interest-only securities which represent 18.5% of principal/notional balance, 0.7% of amortized cost and 0.7% of fair value.

(12) We have elected the fair value option for CMBS purchased on or after September 1, 2016 which represent 10.6% of principal/notional balance, 11.3% of amortized cost and 11.0% of fair value.

December 31, 2016
$ in thousands	Principal/Notional Balance	Unamortized Premium (Discount)		Amortized Cost	Unrealized Gain/ (Loss), net		Fair Value	Net Weighted Average Coupon (1)		Period- end Weighted Average Yield (2)		Quarterly Weighted Average Yield (3)
Agency RMBS:
15 year fixed-rate	3,460,625	151,526		3,612,151	(54,223	)	3,557,928	3.11	%	2.19	%	1.99	%
30 year fixed-rate	2,780,806	185,521		2,966,327	15,390		2,981,717	4.37	%	2.61	%	2.57	%
ARM	301,900	2,520		304,420	3,453		307,873	2.69	%	2.59	%	2.16	%
Hybrid ARM	2,423,152	42,360		2,465,512	8,789		2,474,301	2.70	%	2.52	%	2.02	%
Total Agency pass-through(4)	8,966,483	381,927		9,348,410	(26,591	)	9,321,819	3.37	%	2.42	%	2.20	%
Agency-CMO(5)	1,712,120	(1,368,916	)	343,204	837		344,041	2.16	%	3.08	%	2.07	%
Non-Agency RMBS(6)(7)(8)	3,838,314	(1,934,269	)	1,904,045	91,506		1,995,551	2.21	%	5.22	%	5.22	%
GSE CRT(9)(10)	707,899	24,320		732,219	35,981		768,200	2.38	%	1.51	%	1.24	%
CMBS(11)(12)	3,050,747	(559,857	)	2,490,890	60,830		2,551,720	3.80	%	4.21	%	4.17	%
Total	18,275,563	(3,456,795	)	14,818,768	162,563		14,981,331	3.05	%	3.05	%	2.87	%

(1) Net weighted average coupon as of December 31, 2016 is presented net of servicing and other fees.

(2) Period-end weighted average yield is based on amortized cost as of December 31, 2016 and incorporates future prepayment and loss assumptions.

(3) Quarterly weighted average portfolio yield for the period was 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.

(4) We have elected the fair value option for Agency RMBS purchased on or after September 1, 2016 which represent 4.3% of principal/notional balance, 4.3% of amortized cost and 4.2% of fair value.

(5) Agency collateralized mortgage obligation ("Agency CMO") includes interest-only securities ("Agency IO"), which represent 85.5% of principal (notional) balance, 26.8%of amortized cost and 21.7% of fair value.

(6) Non-Agency RMBS held by us is 45.5% variable rate, 47.2% fixed rate, and 7.3% floating rate based on fair value.

(7) Of the total discount in non-Agency RMBS, $252.5 million is non-accretable based on estimated future cash flows of the securities.

(8) Non-Agency RMBS includes interest-only securities, which represent 43.5% of principal/notional balance, 1.5% of amortized cost and 1.3% of fair value.

(9) We have elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 19.2% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.

(10) GSE CRT weighted average coupon and 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.

(11) CMBS includes interest-only securities which represent 20.3% of principal/notional balance, 0.8% of amortized cost and 0.9% of fair value.

(12) We have elected the fair value option for CMBS purchased on or after September 1, 2016 which represent 0.4% of principal/notional balance, 0.6% of amortized cost and 0.5% of fair value.

The following table summarizes our non-Agency RMBS portfolio by asset type based on fair value as of June 30, 2017 and December 31, 2016.

$ in thousands	June 30, 2017	% of Non-Agency		December 31, 2016	% of Non-Agency
Prime	699,638	44.4	%	889,658	44.6	%
Alt-A	421,492	26.7	%	447,213	22.4	%
Re-REMIC	237,766	15.1	%	364,301	18.2	%
Subprime/reperforming	216,944	13.8	%	294,379	14.8	%
Total Non-Agency	1,575,840	100.0	%	1,995,551	100.0	%

The following table summarizes the credit enhancement provided to our re-securitization of real estate mortgage investment conduit ("Re-REMIC") holdings as of June 30, 2017 and December 31, 2016.

	Percentage of Re-REMIC Holdings at Fair Value
Re-REMIC Subordination(1)	June 30, 2017		December 31, 2016
0% - 10%	26.3	%	17.6	%
10% - 20%	3.9	%	7.4	%
20% - 30%	9.9	%	13.5	%
30% - 40%	19.4	%	15.7	%
40% - 50%	18.4	%	27.0	%
50% - 60%	20.3	%	16.1	%
60% - 70%	1.8	%	2.7	%
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. 48.3% of our Re-REMIC holdings are not senior tranches.

The components of the carrying value of our MBS and GSE CRT portfolio at June 30, 2017 and December 31, 2016 are presented below.

$ in thousands	June 30, 2017		December 31, 2016
Principal balance	18,928,963		18,275,563
Unamortized premium	484,242		476,314
Unamortized discount	(3,595,201	)	(3,933,109	)
Gross unrealized gains	379,923		302,099
Gross unrealized losses	(114,643	)	(139,536	)
Fair value	16,083,284		14,981,331

The following table summarizes our MBS and GSE CRT portfolio according to estimated weighted average life classifications as of June 30, 2017 and December 31, 2016. 

$ in thousands	June 30, 2017	December 31, 2016
Less than one year	117,913	121,076
Greater than one year and less than five years	8,306,399	6,719,923
Greater than or equal to five years	7,658,972	8,140,332
Total	16,083,284	14,981,331

The following tables present the estimated fair value and gross unrealized losses of our MBS and GSE CRTs by length of time that such securities have been in a continuous unrealized loss position at June 30, 2017 and December 31, 2016.

June 30, 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	2,534,116	(54,361	)	129	111,912	(2,469	)	19	2,646,028	(56,830	)	148
30 year fixed-rate	1,351,307	(16,221	)	59	507,832	(16,337	)	27	1,859,139	(32,558	)	86
ARM	82,986	(89	)	9	—	—		—	82,986	(89	)	9
Hybrid ARM	799,528	(4,824	)	73	7,048	(105	)	4	806,576	(4,929	)	77
Total Agency pass-through(1)	4,767,937	(75,495	)	270	626,792	(18,911	)	50	5,394,729	(94,406	)	320
Agency-CMO(2)	124,257	(5,340	)	26	21,443	(1,012	)	4	145,700	(6,352	)	30
Non-Agency RMBS	113,298	(2,385	)	23	166,184	(2,403	)	24	279,482	(4,788	)	47
CMBS(3)	487,895	(8,767	)	42	19,970	(330	)	5	507,865	(9,097	)	47
Total	5,493,387	(91,987	)	361	834,389	(22,656	)	83	6,327,776	(114,643	)	444

(1) Amounts disclosed include Agency RMBS with a fair value of $801.6 million for which the fair value option has been elected. Such securities have unrealized losses of $6.5 million.

(2) Fair value includes unrealized losses on Agency IO of $3.9 million and unrealized losses on CMO of $2.4 million.

(3) Amounts disclosed includes CMBS with a fair value of $168.0 million for which the fair value option has been elected. Such securities have unrealized losses of $2.3 million.

December 31, 2016

	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	2,781,777	(66,506	)	127	65,964	(1,556	)	17	2,847,741	(68,062	)	144
30 year fixed-rate	747,719	(15,409	)	45	547,763	(18,004	)	27	1,295,482	(33,413	)	72
ARM	120,540	(326	)	9	1,091	(7	)	1	121,631	(333	)	10
Hybrid ARM	1,356,687	(9,922	)	99	252	(4	)	2	1,356,939	(9,926	)	101
Total Agency pass-through(1)	5,006,723	(92,163	)	280	615,070	(19,571	)	47	5,621,793	(111,734	)	327
Agency-CMO(2)	163,114	(3,812	)	28	22,792	(952	)	3	185,906	(4,764	)	31
Non-Agency RMBS	287,647	(7,861	)	42	497,863	(6,671	)	36	785,510	(14,532	)	78
GSE CRT(3)	—	—		—	35,935	(969	)	3	35,935	(969	)	3
CMBS(4)	401,016	(6,733	)	36	47,219	(804	)	6	448,235	(7,537	)	42
Total	5,858,500	(110,569	)	386	1,218,879	(28,967	)	95	7,077,379	(139,536	)	481

(1) Amounts disclosed include Agency RMBS with a fair value of $149.7 million for which the fair value option has been elected. Such securities have unrealized losses of $4.0 million.

(2) Fair value includes unrealized losses on Agency IO of $3.0 million unrealized losses and unrealized losses on CMO of $1.7 million.

(3) Fair value includes unrealized losses on both the debt host contract and the embedded derivative.

(4) Amounts disclosed includes CMBS with a fair value of $13.9 million for which the fair value option has been elected. Such securities have unrealized losses of $613,000.

Gross unrealized losses on our Agency RMBS and CMO were $94.4 million and $2.4 million, respectively, at June 30, 2017. Due to the inherent credit quality of Agency RMBS and CMO, we determined that at June 30, 2017, any unrealized losses on our Agency RMBS and CMO portfolio are not other than temporary.

Gross unrealized losses on our Agency IO, non-Agency RMBS, GSE CRT and CMBS were $17.8 million at June 30, 2017. We did not consider these unrealized losses to be credit related, but rather due to non-credit related factors such as interest rate spreads, prepayment speeds, and market fluctuations. These investment securities are included in our assessment for other-than-temporary impairment on a quarterly basis.

We assess our investment securities for other-than-temporary impairment on a quarterly basis. When the fair value of an investment is less than its amortized cost at the balance sheet date of the reporting period for which impairment is assessed, the impairment is designated as either "temporary" or "other-than-temporary." This analysis includes a determination of estimated future cash flows through an evaluation of the characteristics of the underlying loans and the structural features of the investment. Underlying loan characteristics reviewed include, but are not limited to, delinquency status, loan-to-value ratios, borrower credit scores, occupancy status and geographic concentration.

The following table represents the other-than-temporary impairment losses ("OTTI") included in earnings for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended   June 30,		Six Months Ended   June 30,
$ in thousands	2017	2016	2017	2016
RMBS interest-only securities	3,585	1,472	3,876	7,155
Non-Agency RMBS (1)	513	53	754	53
Total	4,098	1,525	4,630	7,208

(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.

As we have previously elected the fair value option for RMBS interest-only securities, the OTTI was recorded as a reclassification from an unrealized to a realized loss within gain (loss) on investments, net on the condensed consolidated statements of operations. As of June 30, 2017, we did not intend to sell the securities and determined that it was not more likely than not that we will be required to sell the securities.

The following table summarizes the changes in accumulated other comprehensive income (loss) related to our GSE CRT debt host contracts and available-for-sale MBS for the three and six months ended June 30, 2017 and 2016.  We reclassify unrealized gains and losses from other comprehensive income to gain (loss) on investments, net when we sell our investments.

The table excludes MBS and GSE CRT that are accounted for under the fair value option. As of June 30, 2017, $3.1 billion or 19.3% of our MBS and GSE CRT are accounted for under the fair value option.

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Accumulated other comprehensive income (loss) from MBS and GSE CRT securities:
Unrealized gain (loss) on MBS and GSE CRT at beginning of period	163,440	288,715		146,301	177,799
Unrealized gain (loss) on MBS and GSE CRT	39,633	117,116		55,922	238,576
Reclassification of unrealized (gain) loss on sale of MBS and GSE CRT to gain (loss) on investments, net	651	(1,037	)	1,501	(11,581	)
Balance at the end of period	203,724	404,794		203,724	404,794

The following table summarizes the components of our total gain (loss) on investments, net for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Gross realized gains on sale of investments	1,311		1,037		2,215		14,052
Gross realized losses on sale of investments	(1,962	)	—		(3,873	)	(2,471	)
Other-than-temporary impairment losses	(4,098	)	(1,525	)	(4,630	)	(7,208	)
Net unrealized gains and losses on MBS accounted for under the fair value option	7,715		1,266		4,113		7,942
Net unrealized gains and losses on GSE CRT accounted for under the fair value option	8,195		173		11,474		237
Net unrealized gains and losses on trading securities	14		463		23		463
Total gain (loss) on investments, net	11,175		1,414		9,322		13,015

The following table presents components of interest income recognized on our MBS and GSE CRT portfolio for the three and six months ended June 30, 2017 and 2016. GSE CRT interest income 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.

For the three months ended June 30, 2017

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	91,979	(27,775	)	64,204
Non-Agency	18,131	3,734		21,865
GSE CRT	5,556	(347	)	5,209
CMBS	31,506	(1,852	)	29,654
Other	95	—		95
Total	147,267	(26,240	)	121,027

For the three months ended June 30, 2016

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	84,440	(28,277	)	56,163
Non-Agency	24,127	2,292		26,419
GSE CRT	2,136	(775	)	1,361
CMBS	31,476	(2,839	)	28,637
Other	297	(17	)	280
Total	142,476	(29,616	)	112,860

For the six months ended June 30, 2017

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	183,210	(56,353	)	126,857
Non-Agency	38,745	8,121		46,866
GSE CRT	10,043	(718	)	9,325
CMBS	61,182	(4,486	)	56,696
Other	156	—		156
Total	293,336	(53,436	)	239,900

For the six months ended June 30, 2016

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	170,211	(52,462	)	117,749
Non-Agency	49,976	6,136		56,112
GSE CRT	4,333	(1,542	)	2,791
CMBS	63,740	(5,779	)	57,961
Other	510	(17	)	493
Total	288,770	(53,664	)	235,106

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Commercial Loans Held-for-Investment

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Commercial Loans Held-for-Investment

Commercial Loans Held-for-Investment

The following table summarizes commercial loans held-for-investment as of June 30, 2017 and December 31, 2016 that we purchased or originated.

June 30, 2017

$ in thousands	Number of loans	Principal Balance	Unamortized (fees)/ costs, net		Carrying value	Weighted Average Coupon		Weighted Average Years to Maturity (1)
Mezzanine loans	10	279,121	(255	)	278,866	8.50	%	1.4
Total	10	279,121	(255	)	278,866	8.50	%	1.4

December 31, 2016

$ in thousands	Number of loans	Principal Balance	Unamortized (fees)/ costs, net		Carrying value	Weighted Average Coupon		Weighted Average Years to Maturity (1)
Mezzanine loans	10	273,666	(311	)	273,355	8.14	%	1.6
Total	10	273,666	(311	)	273,355	8.14	%	1.6

(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.

These loans were not impaired, and no allowance for loan loss has been recorded as of June 30, 2017 and December 31, 2016 based on our analysis of credit quality factors as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

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Other Assets

6 Months Ended

Jun. 30, 2017

Schedule of Investments [Abstract]

Other Assets

Other Assets

The following table summarizes our other assets as of June 30, 2017 and December 31, 2016.

$ in thousands	June 30, 2017	December 31, 2016
FHLBI stock	74,250	74,250
Investments in unconsolidated ventures	23,311	33,301
Investment in exchange-traded fund	3,979	500
Prepaid expenses and other assets	888	1,246
Total	102,428	109,297

IAS Services LLC, our wholly-owned subsidiary, is required to purchase and hold FHLBI stock as a condition of membership in the Federal Home Loan Bank of Indianapolis ("FHLBI"). The stock is recorded at cost.

We have invested in unconsolidated ventures that are managed by an affiliate of our Manager. The unconsolidated ventures invest in our target assets. Refer to Note 16 - "Commitments and Contingencies" for additional details regarding our commitments to these unconsolidated ventures.

We have invested in an exchange-traded fund that is managed by an affiliate of our Manager. The exchange-traded fund invests in our target assets.

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Borrowings

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Borrowings

Borrowings

We finance the majority of our investment portfolio through repurchase agreements, secured loans and exchangeable senior notes. The following table summarizes certain characteristics of our borrowings at June 30, 2017 and December 31, 2016. Refer to Note 8 - "Collateral Positions" for collateral pledged under our repurchase agreements and secured loans.

$ in thousands	June 30, 2017
				Weighted
		Weighted		Average
		Average		Remaining
	Amount	Interest		Maturity
	Outstanding	Rate		(days)
Repurchase Agreements:
Agency RMBS	9,227,679	1.29	%	20
Non-Agency RMBS	1,130,943	2.50	%	29
GSE CRT	661,432	2.58	%	7
CMBS	1,098,894	2.33	%	16
Total Repurchase Agreements	12,118,948	1.56	%	21
Secured Loans	1,650,000	1.23	%	2,501
Exchangeable Senior Notes (1)	218,755	5.00	%	258
Total Borrowings	13,987,703	1.58	%	317

$ in thousands	December 31, 2016
				Weighted
		Weighted		Average
		Average		Remaining
	Amount	Interest		Maturity
	Outstanding	Rate		(days)
Repurchase Agreements:
Agency RMBS	8,148,220	0.93	%	32
Non-Agency RMBS	1,519,859	2.06	%	28
GSE CRT	547,872	2.25	%	16
CMBS	944,718	1.86	%	16
Total Repurchase Agreements	11,160,669	1.23	%	30
Secured Loans	1,650,000	0.74	%	2,682
Exchangeable Senior Notes (1)	400,000	5.00	%	439
Total Borrowings	13,210,669	1.28	%	373

(1) The carrying value of exchangeable senior notes is $217.8 million and $397.0 million as of June 30, 2017 and December 31, 2016, respectively. The carrying value is net of unamortized debt issuance costs of $1.0 million and $3.0 million as of June 30, 2017 and December 31, 2016, respectively.

The following table shows the aggregate amount of maturities of our outstanding borrowings:

$ in thousands	As of June 30,
2018	12,337,703
2019	—
2020	300,000
2021	100,000
2022	—
Thereafter	1,250,000
Total	13,987,703

The following tables summarize certain characteristics of our repurchase agreements and secured loans at June 30, 2017 and December 31, 2016.

June 30, 2017
$ in thousands	Amount Outstanding	Percent of Total Amount Outstanding		MBS and GSE CRT Pledged as Collateral (1)
Repurchase Agreement Counterparties:
HSBC Securities (USA) Inc.	1,315,644	9.5	%	1,383,316
ING Financial Market LLC	1,270,181	9.2	%	1,336,963
Pierpont Securities LLC	1,125,511	8.2	%	1,181,071
Royal Bank of Canada	1,073,515	7.8	%	1,258,618
Mitsubishi UFJ Securities (USA), Inc.	653,956	4.7	%	691,437
E D & F Man Capital Markets Inc.	621,813	4.5	%	653,306
Scotia Capital	605,826	4.4	%	630,441
Citigroup Global Markets Inc.	552,926	4.0	%	656,821
Industrial and Commercial Bank of China Financial Services LLC	524,907	3.8	%	550,286
South Street Securities LLC	485,749	3.5	%	514,435
KGS-Alpha Capital Markets, L.P.	481,965	3.5	%	506,387
Goldman, Sachs & Co.	467,361	3.4	%	586,400
JP Morgan Securities Inc.	411,296	3.0	%	476,473
Societe Generale	395,937	2.9	%	509,082
Guggenheim Liquidity Services, LLC	329,375	2.4	%	346,416
Mizuho Securities USA Inc.	329,168	2.4	%	347,282
Natixis, New York Branch	302,566	2.2	%	327,418
BNP Paribas Securities Corp.	283,528	2.1	%	326,548
Daiwa Capital Markets America Inc.	218,702	1.6	%	230,239
All other counterparties(2)	669,022	4.9	%	857,358
Total Repurchase Agreement Counterparties	12,118,948	88.0	%	13,370,297
Secured Loans Counterparty:
FHLBI	1,650,000	12.0	%	1,941,665
Total	13,768,948	100.0	%	15,311,962

(1) Amount pledged as collateral is measured at fair value as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

(2) Represents amounts outstanding with seven counterparties.

December 31, 2016
$ in thousands	Amount Outstanding	Percent of Total Amount Outstanding		MBS and GSE CRT Pledged as Collateral (1)
Repurchase Agreement Counterparties:
HSBC Securities (USA) Inc.	1,401,966	11.2	%	1,468,793
ING Financial Market LLC	1,142,200	8.9	%	1,216,492
Royal Bank of Canada	1,098,631	8.6	%	1,293,336
Industrial and Commercial Bank of China Financial Services LLC	707,616	5.5	%	748,503
Mitsubishi UFJ Securities (USA), Inc.	703,382	5.5	%	740,404
Pierpont Securities LLC	681,853	5.3	%	717,663
South Street Securities LLC	675,660	5.3	%	713,330
Goldman, Sachs & Co.	486,430	3.8	%	623,400
Scotia Capital	479,105	3.7	%	500,578
JP Morgan Securities Inc.	477,947	3.7	%	554,494
KGS-Alpha Capital Markets, L.P.	441,541	3.4	%	475,858
Citigroup Global Markets Inc.	427,185	3.3	%	534,875
E D & F Man Capital Markets Inc.	405,615	3.2	%	430,896
Guggenheim Liquidity Services, LLC	356,149	2.8	%	377,030
Natixis, New York Branch	336,202	2.6	%	362,432
Societe Generale	325,393	2.5	%	427,200
BNP Paribas Securities Corp.	307,641	2.4	%	346,484
All other counterparties(2)	706,153	5.4	%	912,536
Total Repurchase Agreement Counterparties:	11,160,669	87.1	%	12,444,304
Secured Loans Counterparty:
FHLBI	1,650,000	12.9	%	1,931,582
Total	12,810,669	100.0	%	14,375,886

(1) Amount pledged as collateral is measured at fair value as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

(2) Represents amounts outstanding with seven counterparties.

Repurchase Agreements

Repurchase agreements bear interest at a contractually agreed upon rate and have maturities ranging from one month to twelve months. Repurchase agreements are accounted for as secured borrowings since we maintain effective control of the financed assets. Repurchase agreements are subject to certain financial covenants. We were in compliance with these covenants at June 30, 2017.

Our repurchase agreement collateral ratio (MBS and GSE CRTs pledged as collateral/Amount Outstanding) was 110% as of June 30, 2017 (December 31, 2016: 112%).

Secured Loans

Our wholly-owned captive insurance subsidiary, IAS Services LLC is a member of the FHLBI. As a member of the FHLBI, IAS Services LLC has borrowed funds from the FHLBI in the form of secured loans.

As of June 30, 2017, IAS Services LLC, had $1.65 billion in outstanding secured loans from the FHLBI. These secured loans have floating rates that are based on the three-month FHLB swap rate plus a spread. For the six months ended June 30, 2017, IAS Services LLC had weighted average borrowings of $1.65 billion with a weighted average borrowing rate of 0.96% and a weighted average maturity of 6.9 years.

The Federal Housing Finance Agency’s ("FHFA") final rule governing Federal Home Loan Bank membership (the "FHFA Rule") was effective on February 19, 2016. The FHFA Rule, among other provisions, excludes captive insurance companies from membership eligibility. The FHFA Rule permits existing captive insurance companies, such as IAS Services LLC, to remain members until February 2021. New advances or renewals that mature after February 2021 are prohibited. As permitted by the FHFA Rule, the FHLBI has indicated it will honor the contractual maturity dates of existing advances to IAS Services LLC that were made prior to February 19, 2016 and extend beyond February 2021. We do not expect there to be any impact to our existing FHLBI borrowings under the FHFA rule. The ability to borrow from the FHLBI is subject to our continued creditworthiness, pledging of sufficient eligible collateral to secure advances, and compliance with certain agreements with FHLBI and FHFA rules.

As discussed in Note 6 - "Other Assets," IAS Services LLC is required to purchase and hold a certain amount of FHLBI stock, which is based, in part, upon the outstanding principal balance of secured loans from the FHLBI.

Exchangeable Senior Notes

In 2013, our wholly-owned subsidiary, IAS Operating Partnership LP, issued $400.0 million in aggregate principal amount of Exchangeable Senior Notes (the "Notes") due March 15, 2018. The Notes may be exchanged for shares of our common stock at the applicable exchange rate at any time prior to the close of business on March 13, 2018. The Notes are reported on our consolidated balance sheets net of unamortized debt issuance costs. Debt issuance costs are amortized as an adjustment to interest expense using the effective interest method over the stated legal maturity of the Notes.

In June and March 2017, we retired $31.2 million and $150.0 million of Notes for a repurchase price of $31.6 million and $153.8 million, respectively. During the three months ended June 30, 2017, we realized a $526,000 net loss on extinguishment of debt including $136,000 of unamortized debt issuance costs associated with the retired debt. During the six months ended June 30, 2017, we realized a $5.2 million net loss on extinguishment of debt including $1.0 million of unamortized debt issuance costs associated with the retired debt.

Accrued interest payable on the Notes was approximately $3.2 million as of June 30, 2017 (December 31, 2016: $5.9 million).

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Collateral Positions

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Collateral Positions

Collateral Positions

The following table summarizes the fair value of collateral that we have pledged and held under our repurchase agreements, secured loans, interest rate swaps and currency forward contracts as of June 30, 2017 and December 31, 2016. Refer to Note 2 - "Summary of Significant Accounting Policies - Fair Value Measurements" of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for a description of how we determine fair value. RMBS, CMBS and GSE CRT collateral pledged is included in mortgage-backed and credit risk transfer securities on our consolidated balance sheets. Cash collateral pledged on bilateral swaps and currency forward contracts is classified as due from counterparties on our consolidated balance sheets.

Cash collateral held on bilateral swaps that is not restricted for use is included in cash and cash equivalents on our consolidated balance sheets and the liability to return the collateral is included in collateral held payable. Non-cash collateral held is only recognized if the counterparty defaults or if we sell the pledged collateral. As of June 30, 2017 and December 31, 2016, we did not recognize any non-cash collateral held.

Collateral Pledged	June 30, 2017	December 31, 2016
Repurchase Agreements:
Agency RMBS	9,711,706	8,654,233
Non-Agency RMBS	1,424,646	1,887,550
GSE CRT	874,493	734,212
CMBS	1,359,452	1,168,309
Total repurchase agreements collateral pledged	13,370,297	12,444,304
Secured Loans:
Agency RMBS	596,514	585,504
CMBS	1,345,151	1,346,078
Total secured loans collateral pledged	1,941,665	1,931,582
Interest Rate Swaps and Currency Forward Contracts:
Agency RMBS	55,188	46,312
Cash	1,246	86,450
Total interest rate swaps and currency forward contracts collateral pledged (1)	56,434	132,762
Total:
Mortgage-backed and GSE CRT securities	15,367,150	14,422,198
Cash	1,246	86,450
Total collateral pledged	15,368,396	14,508,648
Collateral Held	June 30, 2017	December 31, 2016
Interest Rate Swaps:
Cash	3,471	1,700
Non-cash collateral	—	536
Total collateral held	3,471	2,236

(1) Cash collateral pledged on our currency forward contracts was $980,000 as of June 30, 2017. We did not pledge any collateral on our currency forward contracts as of December 31, 2016.

Repurchase Agreements

Collateral pledged with our repurchase agreement counterparties is segregated in our books and records. The repurchase agreement counterparties have the right to resell and repledge the collateral posted but have the obligation to return the pledged collateral, or substantially the same collateral if agreed to by us, upon maturity of the repurchase agreement. Under the repurchase agreements, the respective lender retains the contractual right to mark the underlying collateral to fair value as determined by a pricing service agreed to by the respective lender and us. We would be required to provide additional collateral or fund margin calls if the value of pledged assets declined. We intend to maintain a level of liquidity that will enable us to meet margin calls.

Secured Loans

The ability to borrow from the FHLBI is subject to our continued creditworthiness, pledging of sufficient eligible collateral to secure advances, and compliance with certain agreements with FHLBI and FHFA rules. Collateral pledged with the FHLBI is held in trust for the benefit of the FHLBI and is not commingled with our other assets. The FHLBI does not have the right to resell or repledge collateral posted unless an event of default occurs. The FHLBI retains the right to mark the underlying collateral for FHLBI advances to fair value as determined by the FHLBI in its sole discretion. IAS Services LLC would be required to provide additional collateral or fund margin calls if the value of pledged assets declines.

Interest Rate Swaps

Collateral pledged with our interest rate swap counterparties is segregated in our books and records. We have two types of interest rate swap agreements: bilateral interest rate swaps that are governed by an International Swaps and Derivatives Association ("ISDA") agreement and interest rate swaps that are centrally cleared by the Chicago Mercantile Exchange ("CME") through a Futures Commission Merchant. Interest rate swaps that are governed by an ISDA agreement provide for bilateral collateral pledging based on the counterparties' market value. The counterparties have the right to repledge the collateral posted, but have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the interest rate swaps change.

We are required to pledge initial margin and daily variation margin for our interest rate swaps that are centrally cleared by CME. CME determines the fair value of our centrally cleared swaps, including daily variation margin. Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate swaps as settlement rather than collateral. As a result of this rule change, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps.

Currency Forward Contracts

Collateral pledged with our currency forward counterparty is segregated in our books and records. Eligible collateral to be pledged can be in the form of cash or securities. Our currency forward contract provides for bilateral collateral pledging based on the counterparties' market value. The counterparties have the right to repledge the collateral posted, but have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the currency forward contracts change.

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Derivatives and Hedging Activities

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

The following table summarizes changes in the notional amount of our derivative instruments during 2017:

$ in thousands	Notional Amount as of January 1, 2017	Additions	Settlement, Termination, Expiration or Exercise		Notional Amount as of June 30, 2017
Interest Rate Swaps	6,500,000	1,400,000	—		7,900,000
Currency Forward Contracts	62,308	137,860	(131,575	)	68,593
Credit Derivatives	569,966	—	(5,729	)	564,237
Total	7,132,274	1,537,860	(137,304	)	8,532,830

Interest Rate Swaps

Our repurchase agreements are usually settled on a short-term basis ranging from one to twelve months. At each settlement date, we typically refinance each repurchase agreement at the market interest rate at that time. In addition, our secured loans have floating interest rates. As such, we are exposed to changing interest rates. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposures to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Effective December 31, 2013, we voluntarily discontinued cash flow hedge accounting for our interest rate swaps to gain greater flexibility in managing interest rate exposures. Amounts recorded in accumulated other comprehensive income ("AOCI") before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the condensed consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements. We reclassified $6.4 million as a decrease (June 30, 2016: $3.2 million as an increase) and $12.7 million as a decrease (June 30, 2016: $16.2 million as an increase) to interest expense for the three and six months ended June 30, 2017, respectively. During the next 12 months, we estimate that $26.3 million will be reclassified as a decrease to interest expense, repurchase agreements. As of June 30, 2017, $136.6 million (December 31, 2016: $149.1 million) of unrealized gain/(loss) on discontinued cash flow hedges, net is still included in accumulated other comprehensive income.

As of June 30, 2017, we had the following interest rate swaps outstanding:

$ in thousands Counterparty			Notional	Maturity Date	Fixed Interest Rate in Contract
ING Capital Markets LLC			350,000	2/24/2018	0.95	%
UBS AG			500,000	5/24/2018	1.10	%
ING Capital Markets LLC			400,000	6/5/2018	0.87	%
CME Central Clearing			300,000	2/5/2021	2.50	%
CME Central Clearing			300,000	2/5/2021	2.69	%
Wells Fargo Bank, N.A.			200,000	3/15/2021	3.14	%
CME Central Clearing			500,000	5/24/2021	2.25	%
Citibank, N.A.			200,000	5/25/2021	2.83	%
CME Central Clearing			500,000	6/24/2021	2.44	%
HSBC Bank USA, National Association			550,000	2/24/2022	2.45	%
CME Central Clearing			1,000,000	6/9/2022	2.21	%
The Royal Bank of Scotland Plc			500,000	8/15/2023	1.98	%
CME Central Clearing			600,000	8/24/2023	2.88	%
HSBC Bank USA, National Association			500,000	12/15/2023	2.20	%
CME Central Clearing			450,000	1/12/2024	2.10	%
CME Central Clearing			450,000	1/25/2024	2.15	%
CME Central Clearing			100,000	4/2/2025	2.04	%
CME Central Clearing	(1	)	250,000	5/24/2028	2.78	%
CME Central Clearing	(1	)	250,000	5/24/2028	2.39	%
Total			7,900,000		2.17	%

(1) Forward start date of 5/24/2018

Refer to Note 8 - "Collateral Positions" for further information regarding our collateral pledged to and received from our interest rate swap counterparties.

Interest Rate Swaptions

We have purchased interest rate swaptions to help mitigate the potential impact of increases or decreases in interest rates on the performance of a portion of our investment portfolio (referred to as "convexity risk"). The interest rate swaptions provide us the option to enter into interest rate swap agreements for a predetermined notional amount, stated term and pay and receive interest rates in the future. The premium paid for interest rate swaptions is reported as a derivative asset in our condensed consolidated balance sheets. The premium is valued at an amount equal to the fair value of the swaption that would have the effect of closing the position adjusted for nonperformance risk, if any. The difference between the premium and the fair value of the swaption is reported in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations. If an interest rate swaption expires unexercised, the loss on the interest rate swaption would be equal to the premium paid. If we sell or exercise an interest rate swaption, the realized gain or loss on the interest rate swaption would be equal to the difference between the cash or the fair value of the underlying interest rate swap received and the premium paid.

As of June 30, 2017 and December 31, 2016, we have no outstanding interest rate swaptions.

Currency Forward Contracts

We use currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies. Realized and unrealized gains and losses associated with the purchases or sales of currency forward contracts are recognized in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations. As of June 30, 2017, we have $49.6 million (December 31, 2016: $49.0 million) of notional amount of forward contracts denominated in Pound Sterling and $19.0 million (December 31, 2016: $13.3 million) of notional amount of forward contracts denominated in Euro.

Credit Derivatives

Our GSE CRTs purchased prior to August 24, 2015 are accounted for as hybrid financial instruments consisting of a debt host contract and an embedded credit derivative. Embedded derivatives associated with GSE CRTs are recorded within mortgage-backed and credit risk transfer securities, at fair value, on the consolidated balance sheets. At June 30, 2017 and December 31, 2016, terms of the GSE CRT embedded derivatives are:

$ in thousand	June 30, 2017	December 31, 2016
Fair value amount	46,802	17,095
Notional amount	564,237	569,966
Maximum potential amount of future undiscounted payments	564,237	569,966

Tabular Disclosure of the Effect of Derivative Instruments on the Balance Sheet

The table below presents the fair value of our derivative financial instruments, as well as their classification on the condensed consolidated balance sheets as of June 30, 2017 and December 31, 2016.

$ in thousands

Derivative Assets			Derivative Liabilities
	As of June 30, 2017	As of December 31, 2016		As of June 30, 2017	As of December 31, 2016
Balance Sheet	Fair Value	Fair Value	Balance Sheet	Fair Value	Fair Value
Interest Rate Swaps Asset	11,005	3,085	Interest Rate Swaps Liability	43,047	133,833
Currency Forward Contracts	—	101	Currency Forward Contracts	1,100	395

Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate swaps as settlement rather than collateral. As a result of this rule change, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps.

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement

The tables below present the effect of our credit derivatives on the condensed consolidated statements of operations for the three and six months ended June 30, 2017 and 2016.

$ in thousands	Three months ended June 30, 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	—	5,844	15,559	21,403

$ in thousands	Three months ended June 30, 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	(5,097	)	6,112	16,213	17,228

$ in thousands	Six months ended June 30, 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	—	11,651	29,707	41,358

$ in thousands	Six months ended June 30, 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	)	12,426	19,229	25,638

The following table summarizes the effect of interest rate swaps, interest rate swaptions and currency forward contracts reported in gain (loss) on derivative instruments, net on the condensed consolidated statements of operations for the three and six months ended June 30, 2017 and 2016:

$ in thousands	Three months ended June 30, 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	(38,512	)	(19,966	)	7,975		(50,503	)
Currency Forward Contracts	(1,717	)	—		(1,293	)	(3,010	)
Total	(40,229	)	(19,966	)	6,682		(53,513	)

$ in thousands	Three months ended June 30, 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	(20,105	)	(24,985	)	(49,711	)	(94,801	)
Currency Forward Contracts	(479	)	—		4,917		4,438
Total	(20,584	)	(24,985	)	(44,794	)	(90,363	)

$ in thousands	Six months ended June 30, 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	(22,518	)	(42,860	)	20,925		(44,453	)
Currency Forward Contracts	(2,793	)	—		(805	)	(3,598	)
Total	(25,311	)	(42,860	)	20,120		(48,051	)

$ in thousands	Six months ended June 30, 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	(64,000	)	(54,076	)	(216,382	)	(334,458	)
Interest Rate Swaptions	(1,485	)	—		1,485		—
Currency Forward Contracts	1,916		—		3,636		5,552
Total	(63,569	)	(54,076	)	(211,261	)	(328,906	)

Credit-risk-related Contingent Features

We have agreements with each of our bilateral derivative counterparties. Some of those agreements contain a provision whereby if we default on any of our indebtedness, including default whereby repayment of the indebtedness has not been accelerated by the lender, we could be declared in default on our derivative obligations.

At June 30, 2017, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for non-performance risk related to bilateral interest rate swap agreements, was $40.0 million. We have minimum collateral posting thresholds with certain of our derivative counterparties and have pledged collateral of $55.2 million of Agency RMBS as of June 30, 2017. If we had breached any of these provisions at June 30, 2017, we could have been required to settle our obligations under these agreements at their termination value.

We also have an agreement with a clearing counterparty for our interest rate swaps that includes cross default provisions. The fair value of our centrally cleared interest rate derivative contracts was a net asset as of June 30, 2017.

We were in compliance with all of the financial provisions of these counterparty agreements as of June 30, 2017.

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Offsetting Assets and Liabilities

6 Months Ended

Jun. 30, 2017

Offsetting [Abstract]

Offsetting Assets and Liabilities

Offsetting Assets and Liabilities

Certain of our repurchase agreements and derivative transactions are governed by underlying agreements that generally provide for a right of setoff under master netting arrangements (or similar agreements) in the event of default or in the event of bankruptcy of either party to the transactions. Assets and liabilities subject to such arrangements are presented on a gross basis in the condensed consolidated balance sheets.

The following tables present information about the assets and liabilities that are subject to master netting agreements (or similar agreements) and can potentially be offset on our condensed consolidated balance sheets at June 30, 2017 and December 31, 2016. Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate swaps as settlement rather than collateral. As a result of this rule change, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps. Our derivative asset of $7.3 million at June 30, 2017 related to centrally cleared interest rate swaps is not included in the table below as a result of this change.

Offsetting of Derivative Assets

As of June 30, 2017

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	Financial Instruments	Cash Collateral Received		Net Amount
Derivatives (1) (4)	3,706	—	3,706	—	(3,445	)	261
Total	3,706	—	3,706	—	(3,445	)	261

Offsetting of Derivative Liabilities, Repurchase Agreements and Secured Loans

As of June 30, 2017

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	Financial Instruments (2)		Cash Collateral Pledged		Net Amount
Derivatives (4)	44,147	—	44,147	(43,047	)	(980	)	120
Repurchase Agreements (3)	12,118,948	—	12,118,948	(12,118,948	)	—		—
Secured Loans (5)	1,650,000	—	1,650,000	(1,650,000	)	—		—
Total	13,813,095	—	13,813,095	(13,811,995	)	(980	)	120

Offsetting of Derivative Assets

As of December 31, 2016

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	Financial Instruments		Cash Collateral Received		Net Amount
Derivatives (1) (4)	3,186	—	3,186	(1,640	)	(1,546	)	—
Total	3,186	—	3,186	(1,640	)	(1,546	)	—

Offsetting of Derivative Liabilities and Repurchase Agreements

As of December 31, 2016

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	Financial Instruments (2)		Cash Collateral Pledged		Net Amount
Derivatives (4)	134,228	—	134,228	(45,738	)	(85,787	)	2,703
Repurchase Agreements (3)	11,160,669	—	11,160,669	(11,160,669	)	—		—
Secured Loans (5)	1,650,000	—	1,650,000	(1,650,000	)	—		—
Total	12,944,897	—	12,944,897	(12,856,407	)	(85,787	)	2,703

(1) Amounts represent derivatives in an asset position which could potentially be offset against derivatives in a liability position at June 30, 2017 and December 31, 2016, 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 borrowing under repurchase agreements was $13.4 billion and $12.4 billion at June 30, 2017 and December 31, 2016, respectively.

(4) Cash collateral received on our derivatives was $3.5 million and $1.7 million at June 30, 2017 and December 31, 2016, respectively. We did not receive any non-cash collateral on our derivatives at June 30, 2017. Non-cash collateral received on our derivatives was $536,000 at December 31, 2016. Cash collateral pledged by us on our derivatives was $86.5 million at December 31, 2016. As a result of the CME rule change effective January 3, 2017, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps and therefore excluded from the table above at June 30, 2017.

(5) The fair value of securities pledged against IAS Services LLC's borrowing under secured loans was $1.9 billion at June 30, 2017 and December 31, 2016, respectively.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The three levels are defined as follows:

• 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.

The following tables present our assets and liabilities measured at fair value on a recurring basis.

	June 30, 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)	—	16,036,482	46,802	—	16,083,284
Derivative assets	—	11,005	—	—	11,005
Other assets(4)	3,979	—	—	23,311	27,290
Total assets	3,979	16,047,487	46,802	23,311	16,121,579
Liabilities:
Derivative liabilities	—	44,147	—	—	44,147
Total liabilities	—	44,147	—	—	44,147

	December 31, 2016
	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)	—	14,964,236	17,095	—	14,981,331
Derivative assets	—	3,186	—	—	3,186
Other assets(4)	500	—	—	33,301	33,801
Total assets	500	14,967,422	17,095	33,301	15,018,318
Liabilities:
Derivative liabilities	—	134,228	—	—	134,228
Total liabilities	—	134,228	—	—	134,228

(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 financial instruments consist of debt host contracts classified as Level 2 and embedded derivatives classified as Level 3. As of June 30, 2017, the net embedded derivative asset position of $46.8 million includes $47.7 million of embedded derivatives in an asset position and $900,000 of embedded derivatives in a liability position. As of December 31, 2016, the net embedded derivative asset position of $17.1 million includes $21.0 million of embedded derivatives in an asset position and $3.9 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 June 30, 2017 and December 31, 2016, the weighted average remaining term of investments in unconsolidated ventures is 1.8 and 1.3 years, respectively.

(4) Includes $4.0 million and $0.5 million of investment in an exchange-traded fund as of June 30, 2017 and December 31, 2016, respectively.

The following table shows a reconciliation of the beginning and ending fair value measurements of our GSE CRT embedded derivatives, which we have valued utilizing Level 3 inputs:

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Beginning balance	31,243	(22,706	)	17,095	(25,722	)
Sales and settlements	—	5,097		—	6,017
Total net gains / (losses) included in net income:	—	—			—
Realized gains/(losses), net	—	(5,097	)	—	(6,017	)
Unrealized gains/(losses), net(1)	15,559	16,213		29,707	19,229
Ending balance	46,802	(6,493	)	46,802	(6,493	)

(1) Included in realized and unrealized credit derivative income (loss), net in the condensed consolidated statements of operations for the three months ended June 30, 2017 and 2016, are $15.6 million and $11.1 million in net unrealized gains attributable to assets still held as of June 30, 2017 and June 30, 2016, respectively. Included in realized and unrealized credit derivative income (loss), net in the condensed consolidated statements of operations for the six months ended June 30, 2017 and 2016, are $29.7 million and $12.6 million in net unrealized gains attributable to assets still held as of June 30, 2017 and June 30, 2016, respectively. We did not reverse any unrealized gains or losses on securities sold in the three and six months ended June 30, 2017. During the three and six months ended June 30, 2016, we reversed unrealized losses on securities sold during the period of $5.1 million and $6.0 million, respectively.

The following table summarizes significant unobservable inputs used in the fair value measurement of our GSE CRT embedded derivatives:

	Fair Value at	Valuation	Unobservable		Weighted
$ in thousands	June 30, 2017	Technique	Input	Range	Average
GSE CRT Embedded Derivatives	46,802	Market Comparables, Vendor Pricing	Weighted average life	3.7 - 7.5 years	5.7 years

	Fair Value at	Valuation	Unobservable		Weighted
$ in thousands	December 31, 2016	Technique	Input	Range	Average
GSE CRT Embedded Derivatives	17,095	Market Comparables, Vendor Pricing	Weighted average life	2.5 - 7.7 years	5.3 years

These significant unobservable inputs change according to market conditions and security performance. We estimate the weighted average life of GSE CRTs in order to identify GSE corporate debt with a similar maturity. We obtain our weighted average life estimates from a third party provider. Although weighted average life is a significant input, changes in weighted average life may not have an explicit directional impact on the fair value measurement.

The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the condensed consolidated balance sheets at June 30, 2017 and December 31, 2016:

	June 30, 2017		December 31, 2016
$ in thousands	Carrying Value	Estimated Fair Value	Carrying Value	Estimated Fair Value
Financial Assets
Commercial loans, held-for-investment	278,866	280,257	273,355	275,319
Other assets	74,250	74,250	74,250	74,250
Total	353,116	354,507	347,605	349,569
Financial Liabilities
Repurchase agreements	12,118,948	12,118,722	11,160,669	11,161,034
Secured loans	1,650,000	1,650,000	1,650,000	1,650,000
Exchangeable senior notes	217,804	220,943	397,041	400,000
Total	13,986,752	13,989,665	13,207,710	13,211,034

The following describes our methods for estimating the fair value for financial instruments.

• 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 a 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 cost. 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.

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Related Party Transactions

6 Months Ended

Jun. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Under the terms of our management agreement, our Manager and its affiliates provide us with our management team, including our officers and appropriate support personnel. Each of our officers is an employee of our Manager or one of its affiliates. We do not have any employees. Our Manager is not obligated to dedicate any of its employees exclusively to us, nor is our Manager obligated to dedicate any specific portion of time to our business. During the three and six months ended June 30, 2017, we reimbursed our Manager $202,000 (June 30, 2016: $182,000) and $387,000 (June 30, 2016: $341,000), respectively, for costs of support personnel that are fully dedicated to our business.

We have invested $24.3 million as of June 30, 2017 (December 31, 2016: $149.9 million) in money market or mutual funds managed by affiliates of our Manager. The investments are reported as cash and cash equivalents on our condensed consolidated balance sheets.

We also pay our Manager a portion of the origination and commitment fees received from borrowers in connection with purchasing and originating commercial real estate loans. For the three and six months ended June 30, 2017, we did not pay our Manager any costs related to such transactions. For the three and six months ended June 30, 2016, we paid our Manager $189,000 and $692,000, respectively, related to such transactions.

Management Fee Expense

We pay our Manager a management fee equal to 1.50% of our stockholders’ equity per annum. The fee is calculated and payable quarterly in arrears. For purposes of calculating the management fee, stockholders’ equity is equal to the sum of the net proceeds from all issuances of equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus retained earnings at the end of the most recently completed calendar quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less any amount paid to repurchase common stock since inception. Stockholder's equity excludes (i) any unrealized gains, losses or other items that do not affect realized net income (regardless of whether such items are included in other comprehensive income or loss, or in net income); (ii) cumulative net realized losses that are not attributable to permanently impaired investments and that relate to the investments for which market movement is accounted for in other comprehensive income; provided, however, that such adjustment shall not exceed cumulative unrealized net gains in other comprehensive income; (iii) one-time events pursuant to changes in U.S. GAAP; and (iv) certain non-cash items after discussions between our Manager and our independent directors and approval by a majority of our independent directors.

We do not pay any management fees on our investments in unconsolidated ventures that are managed by an affiliate of our Manager.

Expense Reimbursement

We are required to reimburse our Manager for our operating expenses incurred on our behalf, including directors and officers insurance, accounting services, auditing and tax services, filing fees, and miscellaneous general and administrative costs. Our reimbursement obligation is not subject to any dollar limitation. We incurred costs of $1.2 million and $1.4 million originally paid for by our Manager for the three months ended June 30, 2017and 2016, respectively. We incurred costs of $2.8 million and $3.2 million originally paid for by our Manager for the six months ended June 30, 2017 and 2016, respectively.

Termination Fee

If we terminate our management agreement, we owe our Manager a termination fee equal to three times the sum of our average annual management fee during the 24-month period before termination, calculated as of the end of the most recently completed fiscal quarter.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Preferred Stock

Holders of our Series A Preferred Stock are entitled to receive dividends at an annual rate of 7.75% of the liquidation preference of $25.00 per share or $1.9375 per share per annum. The dividends are cumulative and payable quarterly in arrears.

Holders of our Series B Preferred Stock are entitled to receive dividends at an annual rate of 7.75% of the liquidation preference of $25.00 per share or $1.9375 per share per annum until December 27, 2024. After December 27, 2024, holders are entitled to receive dividends at a floating rate equal to three-month LIBOR plus a spread of 5.18% of the $25.00 liquidation preference per annum. Dividends are cumulative and payable quarterly in arrears.

We may elect to redeem shares of preferred stock at our option after July 26, 2017 (with respect to the Series A Preferred Stock) and after December 27, 2024 (with respect to the Series B Preferred Stock) for $25.00 per share, plus any accumulated and unpaid dividends through the date of the redemption. These shares are not redeemable, convertible into or exchangeable for any other property or any other securities of the Company prior to those times, except under circumstances intended to preserve our qualification as a REIT or upon the occurrence of a change in control.

Accumulated Other Comprehensive Income

The following tables present the components of accumulated other comprehensive income. The tables exclude MBS and GSE CRTs that are accounted for under the fair value option.

	Three Months Ended June 30, 2017
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		39,633		—		39,633
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		651		—		651
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(6,369	)	(6,369	)
Currency translation adjustments on investment in unconsolidated venture	139		—		—		139
Other comprehensive income/(loss), net	139		40,284		(6,369	)	34,054
Balance at beginning of period	(512	)	161,381		142,896		303,765
Other comprehensive income/(loss), net	139		40,284		(6,369	)	34,054
Other comprehensive income/(loss) attributable to non-controlling interest	(2	)	(508	)	81		(429	)
Rebalancing of ownership percentage of non-controlling interest	—		1		—		1
Balance at end of period	(375	)	201,158		136,608		337,391

	Three Months Ended June 30, 2016
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		117,116		—		117,116
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		(1,037	)	—		(1,037	)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		3,238		3,238
Currency translation adjustments on investment in unconsolidated venture	274		—		—		274
Other comprehensive income/(loss), net	274		116,079		3,238		119,591
Balance at beginning of period	(79	)	279,916		161,036		440,873
Other comprehensive income/(loss), net	274		116,079		3,238		119,591
Other comprehensive income/(loss) attributable to non-controlling interest	(5	)	(1,464	)	(41	)	(1,510	)
Balance at end of period	190		394,531		164,233		558,954

	Six Months Ended June 30, 2017
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		55,922		—		55,922
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		1,501		—		1,501
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(12,667	)	(12,667	)
Currency translation adjustments on investment in unconsolidated venture	(476	)	—		—		(476	)
Other comprehensive income/(loss), net	(476	)	57,423		(12,667	)	44,280
Balance at beginning of period	95		144,458		149,115		293,668
Other comprehensive income/(loss), net	(476	)	57,423		(12,667	)	44,280
Other comprehensive income/(loss) attributable to non-controlling interest	6		(724	)	160		(558	)
Rebalancing of ownership percentage of non-controlling interest	—		1		—		1
Balance at end of period	(375	)	201,158		136,608		337,391

	Six Months Ended June 30, 2016
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		238,576		—		238,576
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		(11,581	)	—		(11,581	)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		16,162		16,162
Currency translation adjustments on investment in unconsolidated venture	225		—		—		225
Other comprehensive income/(loss), net	225		226,995		16,162		243,382
Balance at beginning of period	(32	)	170,383		148,273		318,624
Other comprehensive income/(loss), net	225		226,995		16,162		243,382
Other comprehensive income/(loss) attributable to non-controlling interest	(3	)	(2,847	)	(202	)	(3,052	)
Balance at end of period	190		394,531		164,233		558,954

Effective December 31, 2013, we voluntarily discontinued cash flow hedge accounting for our interest rate swaps to gain greater flexibility in managing interest rate exposures. Amounts recorded in AOCI before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the condensed consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

Securities Convertible into Shares of Common Stock

The non-controlling interest holder of the Operating Partnership units, a wholly-owned Invesco subsidiary, has the right to cause the Operating Partnership to redeem their operating partnership units ("OP Units") for cash equal to the market value of an equivalent number of shares of common stock, or at our option, we may purchase their OP Units by issuing one share of common stock for each OP Unit redeemed. We also have an equity incentive plan which allows us to grant securities convertible into our common stock to our independent directors and employees of our Manager and its affiliates.

Share Repurchase Program

During the three and six months ended June 30, 2017 and three months ended June 30, 2016, we did not repurchase any shares of our common stock. During the six months ended June 30, 2016, we repurchased and concurrently retired 2,063,451 shares of our common stock at a weighted average repurchase price of $12.12 per share for a net cost of $25.0 million, including acquisition expenses. As of June 30, 2017, we have authority to purchase 18,239,082 additional shares of our common stock under our share repurchase program. The share repurchase program has no stated expiration date.

Share-Based Compensation

We established the 2009 Equity Incentive Plan for grants of common stock and other equity based awards to our independent directors and officers and employees of our Manager and its affiliates (the "Incentive Plan"). Under the Incentive Plan, a total of 1,000,000 shares of common stock are authorized for issuance. Unless terminated earlier, the Incentive Plan will terminate in 2019, but will continue to govern the unexpired awards. As of June 30, 2017, 806,778 shares of common stock remain available for future issuance under the Incentive Plan.

We recognized compensation expense of approximately $112,000 (June 30, 2016: $85,000) and approximately $197,000 (June 30, 2016: $170,000) related to our independent directors for the three and six months ended June 30, 2017, respectively. During the three months ended June 30, 2017 and 2016, we issued 5,292 shares and 6,160 shares of common stock, respectively, pursuant to the Incentive Plan to our independent directors. During the six months ended June 30, 2017 and 2016, we issued 10,748 shares and 13,908 shares of common stock, respectively, pursuant to the Incentive Plan to our independent directors. The fair market value of the shares granted was determined by the closing stock market price on the date of the grant. The grants vested immediately.

We recognized compensation expense of approximately $35,000 (June 30, 2016: $63,000) and $66,000 (June 30, 2016: $95,000) for the three and six months ended June 30, 2017, respectively,related to restricted stock units awarded to employees of our Manager and its affiliates which is reimbursed by our Manager under the management agreement. At June 30, 2017 there was approximately $288,000 of total unrecognized compensation cost related to restricted stock unit awards that is expected to be recognized over a period of up to 45 months, with a weighted-average remaining vesting period of 20 months.

The following table summarizes the activity related to restricted stock units awarded to employees of our Manager and its affiliates for the three and six months ended June 30, 2017.

	Three Months Ended June 30,			Six Months Ended June 30,
	2017			2017
	Restricted Stock Units	Weighted Average Grant Date Fair Value (1)		Restricted Stock Units		Weighted Average Grant Date Fair Value (1)
Unvested at the beginning of the period	19,827	$	14.35	18,807		$	14.37
Shares granted during the period	—	—		8,115		15.55
Shares vested during the period	—	—		(7,095	)	15.78
Unvested at the end of the period	19,827	$	14.35	19,827		$	14.35

(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.

Dividends

On June 15, 2017, we declared the following dividends:

• a dividend of $0.40 per share of common stock to be paid on July 26, 2017 to stockholders of record as of the close of business on June 27, 2017;

• a dividend of $0.4844 per share of Series A Preferred Stock to be paid on July 25, 2017 to stockholders of record as of the close of business on July 1, 2017; and

• a dividend of $0.4844 per share of Series B Preferred Stock to be paid on September 27, 2017 to stockholders of record as of the close of business on September 5, 2017.

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Earnings per Common Share

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Earnings per Common Share

Earnings per Common Share

Earnings per share for the three and six months ended June 30, 2017 and 2016 is computed as follows:

	Three Months Ended   June 30,			Six Months Ended   June 30,
In thousands except per share amounts	2017	2016		2017	2016
Numerator (Income)
Basic Earnings:
Net income (loss) available to common stockholders	46,834	(11,617	)	133,964	(167,777	)
Effect of dilutive securities:
Income allocated to exchangeable senior notes	3,504	—		8,512	—
Income (loss) allocated to non-controlling interest	670	(75	)	1,856	(1,958	)
Dilutive net income (loss) available to stockholders	51,008	(11,692	)	144,332	(169,735	)
Denominator (Weighted Average Shares)
Basic Earnings:
Shares available to common stockholders	111,608	111,581		111,603	112,362
Effect of dilutive securities:
Restricted stock awards	20	—		20	—
OP units	1,425	1,425		1,425	1,425
Exchangeable senior notes	10,507	—		12,782	—
Dilutive Shares	123,560	113,006		125,830	113,787
Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic	0.42	(0.10	)	1.20	(1.49	)
Diluted	0.41	(0.10	)	1.15	(1.49	)

The following potential common shares were excluded from diluted earnings per share for the three and six months ended June 30, 2016 as the effect would be anti-dilutive: 16,835,720 for the exchangeable senior notes and 46,001 and 44,172 for restricted stock awards.

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Non-controlling Interest - Operating Partnership

6 Months Ended

Jun. 30, 2017

Noncontrolling Interest [Abstract]

Non-controlling Interest - Operating Partnership

Non-controlling Interest - Operating Partnership

Non-controlling interest represents the aggregate ownership interest of a wholly-owned Invesco subsidiary in our Operating Partnership. The ownership percentage is determined by dividing the number of OP Units held by the Unit Holders by the total number of dilutive shares of common stock. The issuance or repurchase of common stock ("Share" or "Shares") or OP Units changes the percentage ownership of both the Unit Holders and the common stockholders. Since an OP unit is generally redeemable for cash or Shares at our option, it is deemed to be a Share equivalent. Therefore, such transactions are treated as capital transactions and result in a reallocation between stockholders’ equity and non-controlling interest in the accompanying condensed consolidated balance sheets. As of June 30, 2017 and December 31, 2016, non-controlling interest related to the outstanding 1,425,000 OP Units represented a 1.3% interest in the Operating Partnership.

Income allocated to the non-controlling interest is based on the Unit Holders' ownership percentage of the Operating Partnership. The following table presents the net income (loss) allocated and distributions paid to the Operating Partnership non-controlling interest for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Net income (loss) allocated	670	(75	)	1,856	(1,958	)
Distributions paid	570	570		1,140	1,140

As of June 30, 2017 and December 31, 2016, distributions payable to the non-controlling interest were approximately $570,000.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Commitments and Contingencies

Commitments and contingencies may arise in the ordinary course of business. Our material off-balance sheet commitments as of June 30, 2017 are discussed below.

As discussed in Note 6 - "Other Assets", we have invested in unconsolidated ventures that are sponsored by an affiliate of our Manager. The unconsolidated ventures are structured as partnerships, and we invest in the partnerships as a limited partner. The entities are structured such that capital commitments are to be drawn down over the life of the partnership as investment opportunities are identified. As of June 30, 2017 and December 31, 2016, our undrawn capital and purchase commitments were $12.6 million and $15.5 million, respectively.

As discussed in Note 5 - "Commercial Loans Held-for-Investment", we purchase and originate commercial loans. As of June 30, 2017 and December 31, 2016, we have unfunded commitments on commercial loans held-for-investment of $6.4 million and $9.7 million, respectively.

We have entered into agreements with financial institutions to guarantee certain obligations of our subsidiaries. We would be required to perform under these guarantees in the event of certain defaults. We have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.

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Subsequent Events

6 Months Ended

Jun. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

We have reviewed subsequent events occurring through the date that these condensed consolidated financial statements were issued, and determined that no subsequent events occurred that would require accrual or additional disclosure.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation and Consolidation

Certain disclosures included in our Annual Report on Form 10-K are not required to be included on an interim basis in our quarterly reports on Form 10-Q. We have condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016.

Consolidation

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Company and our controlled subsidiaries. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of our financial condition and results of operations for the periods presented.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Examples of estimates include, but are not limited to, estimates of the fair values of financial instruments, interest income on mortgage-backed and credit risk transfer securities, allowance for loan losses and other-than-temporary impairment charges. Actual results may differ from those estimates.

Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements

Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements

In January 2016, the FASB issued guidance to improve certain aspects of classification and measurement of financial instruments, including significant revisions in accounting related to the classification and measurement of investments in equity securities and presentation of certain fair value changes for financial liabilities when the fair value option is elected. The guidance also amends certain disclosure requirements associated with the fair value of financial instruments. We are required to adopt the new guidance in the first quarter of 2018. Early adoption is permitted. We have determined that this new accounting standard will not have an impact on our financial condition or results of operations but will simplify financial statement disclosures.

In June 2016, the FASB issued an amendment to the guidance on reporting credit losses for assets measured at amortized cost and available-for-sale securities. We are required to adopt the new guidance in the first quarter of 2020. Early adoption is permitted. We are currently evaluating the potential impacts of the new guidance on our consolidated financial statements, as well as available transition methods.

In August 2016, the FASB issued new guidance that is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Additionally, in November 2016, the FASB issued new guidance on classification and presentation of changes in restricted cash on the statement of cash flows. We are required to adopt the new accounting standards in the first quarter of 2018 using a retrospective transition method for each period presented. Early adoption is permitted. We are currently evaluating the potential impacts of the new guidance on our consolidated financial statements.

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Variable Interest Entities ("VIEs") (Tables)

6 Months Ended

Jun. 30, 2017

Variable Interest Entity, Not Primary Beneficiary

Variable Interest Entity

Summary of Assets and Liabilities of Variable Interest Entities

Our maximum risk of loss in VIEs in which we are not the primary beneficiary at June 30, 2017 is presented in the table below.

$ in thousands	Carrying Amount	Company's Maximum Risk of Loss
CMBS	2,777,516	2,777,516
Non-Agency RMBS	1,575,840	1,575,840
Investments in unconsolidated ventures	23,311	23,311
Total	4,376,667	4,376,667

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Mortgage-Backed and Credit Risk Transfer Securities (Tables)

6 Months Ended

Jun. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Summary of Investment Portfolio

The components of the carrying value of our MBS and GSE CRT portfolio at June 30, 2017 and December 31, 2016 are presented below.

$ in thousands	June 30, 2017		December 31, 2016
Principal balance	18,928,963		18,275,563
Unamortized premium	484,242		476,314
Unamortized discount	(3,595,201	)	(3,933,109	)
Gross unrealized gains	379,923		302,099
Gross unrealized losses	(114,643	)	(139,536	)
Fair value	16,083,284		14,981,331

The following tables summarize our mortgage-backed securities ("MBS") and GSE CRT portfolio by asset type as of June 30, 2017 and December 31, 2016.

June 30, 2017
$ in thousands	Principal/ Notional Balance	Unamortized Premium (Discount)		Amortized Cost	Unrealized Gain/ (Loss), net		Fair Value	Net Weighted Average Coupon (1)		Period- end Weighted Average Yield (2)		Quarterly Weighted Average Yield (3)
Agency RMBS:
15 year fixed-rate	3,187,931	134,856		3,322,787	(46,007	)	3,276,780	3.09	%	2.19	%	1.97	%
30 year fixed-rate	4,816,054	232,385		5,048,439	20,677		5,069,116	3.95	%	3.10	%	2.83	%
ARM*	269,123	1,988		271,111	3,463		274,574	2.68	%	2.58	%	2.27	%
Hybrid ARM	1,891,257	30,099		1,921,356	12,659		1,934,015	2.71	%	2.54	%	2.29	%
Total Agency pass-through(4)	10,164,365	399,328		10,563,693	(9,208	)	10,554,485	3.42	%	2.69	%	2.44	%
Agency-CMO(5)	1,429,977	(1,129,678	)	300,299	(2,033	)	298,266	2.04	%	2.87	%	0.34	%
Non-Agency RMBS(6)(7)(8)	3,247,516	(1,793,760	)	1,453,756	122,084		1,575,840	2.18	%	5.80	%	5.90	%
GSE CRT(9)(10)	769,217	25,537		794,754	82,423		877,177	3.06	%	2.40	%	2.62	%
CMBS(11)(12)	3,317,888	(612,386	)	2,705,502	72,014		2,777,516	3.90	%	4.62	%	4.45	%
Total	18,928,963	(3,110,959	)	15,818,004	265,280		16,083,284	3.17	%	3.30	%	3.07	%

* Adjustable-rate mortgage ("ARM")

(1) Net weighted average coupon as of June 30, 2017 is presented net of servicing and other fees.

(2) Period-end weighted average yield is based on amortized cost as of June 30, 2017 and incorporates future prepayment and loss assumptions.

(3) Quarterly weighted average portfolio yield for the period was 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.

(4) We have elected the fair value option for Agency RMBS purchased on or after September 1, 2016 which represent 23.7% of principal/notional balance, 23.5% of amortized cost and 23.5% of fair value.

(5) Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent 84.3% of principal/notional balance, 24.1% of amortized cost and 23.9% of fair value.

(6) Non-Agency RMBS held by us is 43.8% fixed rate, 48.0% variable rate, and 8.2% floating rate based on fair value.

(7) Of the total discount in non-Agency RMBS, $258.2 million is non-accretable based on estimated future cash flows of the securities.

(8) Non-Agency RMBS includes interest-only securities which represent 47.7% of principal/notional balance, 1.8% of amortized cost and 1.5% of fair value.

(9) We have elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 26.1% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.

(10) GSE CRT weighted average coupon and 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.

(11) CMBS includes interest-only securities which represent 18.5% of principal/notional balance, 0.7% of amortized cost and 0.7% of fair value.

(12) We have elected the fair value option for CMBS purchased on or after September 1, 2016 which represent 10.6% of principal/notional balance, 11.3% of amortized cost and 11.0% of fair value.

December 31, 2016
$ in thousands	Principal/Notional Balance	Unamortized Premium (Discount)		Amortized Cost	Unrealized Gain/ (Loss), net		Fair Value	Net Weighted Average Coupon (1)		Period- end Weighted Average Yield (2)		Quarterly Weighted Average Yield (3)
Agency RMBS:
15 year fixed-rate	3,460,625	151,526		3,612,151	(54,223	)	3,557,928	3.11	%	2.19	%	1.99	%
30 year fixed-rate	2,780,806	185,521		2,966,327	15,390		2,981,717	4.37	%	2.61	%	2.57	%
ARM	301,900	2,520		304,420	3,453		307,873	2.69	%	2.59	%	2.16	%
Hybrid ARM	2,423,152	42,360		2,465,512	8,789		2,474,301	2.70	%	2.52	%	2.02	%
Total Agency pass-through(4)	8,966,483	381,927		9,348,410	(26,591	)	9,321,819	3.37	%	2.42	%	2.20	%
Agency-CMO(5)	1,712,120	(1,368,916	)	343,204	837		344,041	2.16	%	3.08	%	2.07	%
Non-Agency RMBS(6)(7)(8)	3,838,314	(1,934,269	)	1,904,045	91,506		1,995,551	2.21	%	5.22	%	5.22	%
GSE CRT(9)(10)	707,899	24,320		732,219	35,981		768,200	2.38	%	1.51	%	1.24	%
CMBS(11)(12)	3,050,747	(559,857	)	2,490,890	60,830		2,551,720	3.80	%	4.21	%	4.17	%
Total	18,275,563	(3,456,795	)	14,818,768	162,563		14,981,331	3.05	%	3.05	%	2.87	%

(1) Net weighted average coupon as of December 31, 2016 is presented net of servicing and other fees.

(2) Period-end weighted average yield is based on amortized cost as of December 31, 2016 and incorporates future prepayment and loss assumptions.

(3) Quarterly weighted average portfolio yield for the period was 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.

(4) We have elected the fair value option for Agency RMBS purchased on or after September 1, 2016 which represent 4.3% of principal/notional balance, 4.3% of amortized cost and 4.2% of fair value.

(5) Agency collateralized mortgage obligation ("Agency CMO") includes interest-only securities ("Agency IO"), which represent 85.5% of principal (notional) balance, 26.8%of amortized cost and 21.7% of fair value.

(6) Non-Agency RMBS held by us is 45.5% variable rate, 47.2% fixed rate, and 7.3% floating rate based on fair value.

(7) Of the total discount in non-Agency RMBS, $252.5 million is non-accretable based on estimated future cash flows of the securities.

(8) Non-Agency RMBS includes interest-only securities, which represent 43.5% of principal/notional balance, 1.5% of amortized cost and 1.3% of fair value.

(9) We have elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 19.2% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.

(10) GSE CRT weighted average coupon and 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.

(11) CMBS includes interest-only securities which represent 20.3% of principal/notional balance, 0.8% of amortized cost and 0.9% of fair value.

(12) We have elected the fair value option for CMBS purchased on or after September 1, 2016 which represent 0.4% of principal/notional balance, 0.6% of amortized cost and 0.5% of fair value.

Components of Non-Agency RMBS Portfolio by Asset Type

The following table summarizes our non-Agency RMBS portfolio by asset type based on fair value as of June 30, 2017 and December 31, 2016.

$ in thousands	June 30, 2017	% of Non-Agency		December 31, 2016	% of Non-Agency
Prime	699,638	44.4	%	889,658	44.6	%
Alt-A	421,492	26.7	%	447,213	22.4	%
Re-REMIC	237,766	15.1	%	364,301	18.2	%
Subprime/reperforming	216,944	13.8	%	294,379	14.8	%
Total Non-Agency	1,575,840	100.0	%	1,995,551	100.0	%

Components of Senior Re-REMIC at Fair Value

The following table summarizes the credit enhancement provided to our re-securitization of real estate mortgage investment conduit ("Re-REMIC") holdings as of June 30, 2017 and December 31, 2016.

	Percentage of Re-REMIC Holdings at Fair Value
Re-REMIC Subordination(1)	June 30, 2017		December 31, 2016
0% - 10%	26.3	%	17.6	%
10% - 20%	3.9	%	7.4	%
20% - 30%	9.9	%	13.5	%
30% - 40%	19.4	%	15.7	%
40% - 50%	18.4	%	27.0	%
50% - 60%	20.3	%	16.1	%
60% - 70%	1.8	%	2.7	%
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. 48.3% of our Re-REMIC holdings are not senior tranches.

Fair Value of Mortgage-Backed Securities and GSE CRT Portfolio According to Weighted Average Life Classification

The following table summarizes our MBS and GSE CRT portfolio according to estimated weighted average life classifications as of June 30, 2017 and December 31, 2016. 

$ in thousands	June 30, 2017	December 31, 2016
Less than one year	117,913	121,076
Greater than one year and less than five years	8,306,399	6,719,923
Greater than or equal to five years	7,658,972	8,140,332
Total	16,083,284	14,981,331

Unrealized Losses and Estimated Fair Value of MBS and GSE CRT by Length of Time

The following tables present the estimated fair value and gross unrealized losses of our MBS and GSE CRTs by length of time that such securities have been in a continuous unrealized loss position at June 30, 2017 and December 31, 2016.

June 30, 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	2,534,116	(54,361	)	129	111,912	(2,469	)	19	2,646,028	(56,830	)	148
30 year fixed-rate	1,351,307	(16,221	)	59	507,832	(16,337	)	27	1,859,139	(32,558	)	86
ARM	82,986	(89	)	9	—	—		—	82,986	(89	)	9
Hybrid ARM	799,528	(4,824	)	73	7,048	(105	)	4	806,576	(4,929	)	77
Total Agency pass-through(1)	4,767,937	(75,495	)	270	626,792	(18,911	)	50	5,394,729	(94,406	)	320
Agency-CMO(2)	124,257	(5,340	)	26	21,443	(1,012	)	4	145,700	(6,352	)	30
Non-Agency RMBS	113,298	(2,385	)	23	166,184	(2,403	)	24	279,482	(4,788	)	47
CMBS(3)	487,895	(8,767	)	42	19,970	(330	)	5	507,865	(9,097	)	47
Total	5,493,387	(91,987	)	361	834,389	(22,656	)	83	6,327,776	(114,643	)	444

(1) Amounts disclosed include Agency RMBS with a fair value of $801.6 million for which the fair value option has been elected. Such securities have unrealized losses of $6.5 million.

(2) Fair value includes unrealized losses on Agency IO of $3.9 million and unrealized losses on CMO of $2.4 million.

(3) Amounts disclosed includes CMBS with a fair value of $168.0 million for which the fair value option has been elected. Such securities have unrealized losses of $2.3 million.

December 31, 2016

	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	2,781,777	(66,506	)	127	65,964	(1,556	)	17	2,847,741	(68,062	)	144
30 year fixed-rate	747,719	(15,409	)	45	547,763	(18,004	)	27	1,295,482	(33,413	)	72
ARM	120,540	(326	)	9	1,091	(7	)	1	121,631	(333	)	10
Hybrid ARM	1,356,687	(9,922	)	99	252	(4	)	2	1,356,939	(9,926	)	101
Total Agency pass-through(1)	5,006,723	(92,163	)	280	615,070	(19,571	)	47	5,621,793	(111,734	)	327
Agency-CMO(2)	163,114	(3,812	)	28	22,792	(952	)	3	185,906	(4,764	)	31
Non-Agency RMBS	287,647	(7,861	)	42	497,863	(6,671	)	36	785,510	(14,532	)	78
GSE CRT(3)	—	—		—	35,935	(969	)	3	35,935	(969	)	3
CMBS(4)	401,016	(6,733	)	36	47,219	(804	)	6	448,235	(7,537	)	42
Total	5,858,500	(110,569	)	386	1,218,879	(28,967	)	95	7,077,379	(139,536	)	481

(1) Amounts disclosed include Agency RMBS with a fair value of $149.7 million for which the fair value option has been elected. Such securities have unrealized losses of $4.0 million.

(2) Fair value includes unrealized losses on Agency IO of $3.0 million unrealized losses and unrealized losses on CMO of $1.7 million.

(3) Fair value includes unrealized losses on both the debt host contract and the embedded derivative.

(4) Amounts disclosed includes CMBS with a fair value of $13.9 million for which the fair value option has been elected. Such securities have unrealized losses of $613,000.

Changes in other than temporary impairment included in earnings

The following table represents the other-than-temporary impairment losses ("OTTI") included in earnings for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended   June 30,		Six Months Ended   June 30,
$ in thousands	2017	2016	2017	2016
RMBS interest-only securities	3,585	1,472	3,876	7,155
Non-Agency RMBS (1)	513	53	754	53
Total	4,098	1,525	4,630	7,208

(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.

Impact of MBS and GSE CRT on Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated other comprehensive income (loss) related to our GSE CRT debt host contracts and available-for-sale MBS for the three and six months ended June 30, 2017 and 2016.  We reclassify unrealized gains and losses from other comprehensive income to gain (loss) on investments, net when we sell our investments.

The table excludes MBS and GSE CRT that are accounted for under the fair value option. As of June 30, 2017, $3.1 billion or 19.3% of our MBS and GSE CRT are accounted for under the fair value option.

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Accumulated other comprehensive income (loss) from MBS and GSE CRT securities:
Unrealized gain (loss) on MBS and GSE CRT at beginning of period	163,440	288,715		146,301	177,799
Unrealized gain (loss) on MBS and GSE CRT	39,633	117,116		55,922	238,576
Reclassification of unrealized (gain) loss on sale of MBS and GSE CRT to gain (loss) on investments, net	651	(1,037	)	1,501	(11,581	)
Balance at the end of period	203,724	404,794		203,724	404,794

Realized Gain (Loss) on Investments

The following table summarizes the components of our total gain (loss) on investments, net for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended   June 30,				Six Months Ended   June 30,
$ in thousands	2017		2016		2017		2016
Gross realized gains on sale of investments	1,311		1,037		2,215		14,052
Gross realized losses on sale of investments	(1,962	)	—		(3,873	)	(2,471	)
Other-than-temporary impairment losses	(4,098	)	(1,525	)	(4,630	)	(7,208	)
Net unrealized gains and losses on MBS accounted for under the fair value option	7,715		1,266		4,113		7,942
Net unrealized gains and losses on GSE CRT accounted for under the fair value option	8,195		173		11,474		237
Net unrealized gains and losses on trading securities	14		463		23		463
Total gain (loss) on investments, net	11,175		1,414		9,322		13,015

Components of MBS and GSE CRT Interest Income

The following table presents components of interest income recognized on our MBS and GSE CRT portfolio for the three and six months ended June 30, 2017 and 2016. GSE CRT interest income 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.

For the three months ended June 30, 2017

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	91,979	(27,775	)	64,204
Non-Agency	18,131	3,734		21,865
GSE CRT	5,556	(347	)	5,209
CMBS	31,506	(1,852	)	29,654
Other	95	—		95
Total	147,267	(26,240	)	121,027

For the three months ended June 30, 2016

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	84,440	(28,277	)	56,163
Non-Agency	24,127	2,292		26,419
GSE CRT	2,136	(775	)	1,361
CMBS	31,476	(2,839	)	28,637
Other	297	(17	)	280
Total	142,476	(29,616	)	112,860

For the six months ended June 30, 2017

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	183,210	(56,353	)	126,857
Non-Agency	38,745	8,121		46,866
GSE CRT	10,043	(718	)	9,325
CMBS	61,182	(4,486	)	56,696
Other	156	—		156
Total	293,336	(53,436	)	239,900

For the six months ended June 30, 2016

$ in thousands	Coupon Interest	Net (Premium Amortization)/Discount Accretion		Interest Income
Agency	170,211	(52,462	)	117,749
Non-Agency	49,976	6,136		56,112
GSE CRT	4,333	(1,542	)	2,791
CMBS	63,740	(5,779	)	57,961
Other	510	(17	)	493
Total	288,770	(53,664	)	235,106

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Commercial Loans Held-for-Investment (Tables)

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Schedule of Commercial Loans Held-for-Investment

The following table summarizes commercial loans held-for-investment as of June 30, 2017 and December 31, 2016 that we purchased or originated.

June 30, 2017

$ in thousands	Number of loans	Principal Balance	Unamortized (fees)/ costs, net		Carrying value	Weighted Average Coupon		Weighted Average Years to Maturity (1)
Mezzanine loans	10	279,121	(255	)	278,866	8.50	%	1.4
Total	10	279,121	(255	)	278,866	8.50	%	1.4

December 31, 2016

$ in thousands	Number of loans	Principal Balance	Unamortized (fees)/ costs, net		Carrying value	Weighted Average Coupon		Weighted Average Years to Maturity (1)
Mezzanine loans	10	273,666	(311	)	273,355	8.14	%	1.6
Total	10	273,666	(311	)	273,355	8.14	%	1.6

(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.

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Other Assets (Tables)

6 Months Ended

Jun. 30, 2017

Schedule of Investments [Abstract]

Summary of Company's Other Investments

The following table summarizes our other assets as of June 30, 2017 and December 31, 2016.

$ in thousands	June 30, 2017	December 31, 2016
FHLBI stock	74,250	74,250
Investments in unconsolidated ventures	23,311	33,301
Investment in exchange-traded fund	3,979	500
Prepaid expenses and other assets	888	1,246
Total	102,428	109,297

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Schedule of Borrowings

The following table summarizes certain characteristics of our borrowings at June 30, 2017 and December 31, 2016. Refer to Note 8 - "Collateral Positions" for collateral pledged under our repurchase agreements and secured loans.

$ in thousands	June 30, 2017
				Weighted
		Weighted		Average
		Average		Remaining
	Amount	Interest		Maturity
	Outstanding	Rate		(days)
Repurchase Agreements:
Agency RMBS	9,227,679	1.29	%	20
Non-Agency RMBS	1,130,943	2.50	%	29
GSE CRT	661,432	2.58	%	7
CMBS	1,098,894	2.33	%	16
Total Repurchase Agreements	12,118,948	1.56	%	21
Secured Loans	1,650,000	1.23	%	2,501
Exchangeable Senior Notes (1)	218,755	5.00	%	258
Total Borrowings	13,987,703	1.58	%	317

$ in thousands	December 31, 2016
				Weighted
		Weighted		Average
		Average		Remaining
	Amount	Interest		Maturity
	Outstanding	Rate		(days)
Repurchase Agreements:
Agency RMBS	8,148,220	0.93	%	32
Non-Agency RMBS	1,519,859	2.06	%	28
GSE CRT	547,872	2.25	%	16
CMBS	944,718	1.86	%	16
Total Repurchase Agreements	11,160,669	1.23	%	30
Secured Loans	1,650,000	0.74	%	2,682
Exchangeable Senior Notes (1)	400,000	5.00	%	439
Total Borrowings	13,210,669	1.28	%	373

(1) The carrying value of exchangeable senior notes is $217.8 million and $397.0 million as of June 30, 2017 and December 31, 2016, respectively. The carrying value is net of unamortized debt issuance costs of $1.0 million and $3.0 million as of June 30, 2017 and December 31, 2016, respectively.

Schedule of Maturities of Outstanding Borrowings

The following table shows the aggregate amount of maturities of our outstanding borrowings:

$ in thousands	As of June 30,
2018	12,337,703
2019	—
2020	300,000
2021	100,000
2022	—
Thereafter	1,250,000
Total	13,987,703

Schedule of Repurchase Agreements by Counterparties

The following tables summarize certain characteristics of our repurchase agreements and secured loans at June 30, 2017 and December 31, 2016.

June 30, 2017
$ in thousands	Amount Outstanding	Percent of Total Amount Outstanding		MBS and GSE CRT Pledged as Collateral (1)
Repurchase Agreement Counterparties:
HSBC Securities (USA) Inc.	1,315,644	9.5	%	1,383,316
ING Financial Market LLC	1,270,181	9.2	%	1,336,963
Pierpont Securities LLC	1,125,511	8.2	%	1,181,071
Royal Bank of Canada	1,073,515	7.8	%	1,258,618
Mitsubishi UFJ Securities (USA), Inc.	653,956	4.7	%	691,437
E D & F Man Capital Markets Inc.	621,813	4.5	%	653,306
Scotia Capital	605,826	4.4	%	630,441
Citigroup Global Markets Inc.	552,926	4.0	%	656,821
Industrial and Commercial Bank of China Financial Services LLC	524,907	3.8	%	550,286
South Street Securities LLC	485,749	3.5	%	514,435
KGS-Alpha Capital Markets, L.P.	481,965	3.5	%	506,387
Goldman, Sachs & Co.	467,361	3.4	%	586,400
JP Morgan Securities Inc.	411,296	3.0	%	476,473
Societe Generale	395,937	2.9	%	509,082
Guggenheim Liquidity Services, LLC	329,375	2.4	%	346,416
Mizuho Securities USA Inc.	329,168	2.4	%	347,282
Natixis, New York Branch	302,566	2.2	%	327,418
BNP Paribas Securities Corp.	283,528	2.1	%	326,548
Daiwa Capital Markets America Inc.	218,702	1.6	%	230,239
All other counterparties(2)	669,022	4.9	%	857,358
Total Repurchase Agreement Counterparties	12,118,948	88.0	%	13,370,297
Secured Loans Counterparty:
FHLBI	1,650,000	12.0	%	1,941,665
Total	13,768,948	100.0	%	15,311,962

(1) Amount pledged as collateral is measured at fair value as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

(2) Represents amounts outstanding with seven counterparties.

December 31, 2016
$ in thousands	Amount Outstanding	Percent of Total Amount Outstanding		MBS and GSE CRT Pledged as Collateral (1)
Repurchase Agreement Counterparties:
HSBC Securities (USA) Inc.	1,401,966	11.2	%	1,468,793
ING Financial Market LLC	1,142,200	8.9	%	1,216,492
Royal Bank of Canada	1,098,631	8.6	%	1,293,336
Industrial and Commercial Bank of China Financial Services LLC	707,616	5.5	%	748,503
Mitsubishi UFJ Securities (USA), Inc.	703,382	5.5	%	740,404
Pierpont Securities LLC	681,853	5.3	%	717,663
South Street Securities LLC	675,660	5.3	%	713,330
Goldman, Sachs & Co.	486,430	3.8	%	623,400
Scotia Capital	479,105	3.7	%	500,578
JP Morgan Securities Inc.	477,947	3.7	%	554,494
KGS-Alpha Capital Markets, L.P.	441,541	3.4	%	475,858
Citigroup Global Markets Inc.	427,185	3.3	%	534,875
E D & F Man Capital Markets Inc.	405,615	3.2	%	430,896
Guggenheim Liquidity Services, LLC	356,149	2.8	%	377,030
Natixis, New York Branch	336,202	2.6	%	362,432
Societe Generale	325,393	2.5	%	427,200
BNP Paribas Securities Corp.	307,641	2.4	%	346,484
All other counterparties(2)	706,153	5.4	%	912,536
Total Repurchase Agreement Counterparties:	11,160,669	87.1	%	12,444,304
Secured Loans Counterparty:
FHLBI	1,650,000	12.9	%	1,931,582
Total	12,810,669	100.0	%	14,375,886

(1) Amount pledged as collateral is measured at fair value as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2016.

(2) Represents amounts outstanding with seven counterparties.

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Collateral Positions (Tables)

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value of Collateral Hold and Pledged

The following table summarizes the fair value of collateral that we have pledged and held under our repurchase agreements, secured loans, interest rate swaps and currency forward contracts as of June 30, 2017 and December 31, 2016. Refer to Note 2 - "Summary of Significant Accounting Policies - Fair Value Measurements" of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for a description of how we determine fair value. RMBS, CMBS and GSE CRT collateral pledged is included in mortgage-backed and credit risk transfer securities on our consolidated balance sheets. Cash collateral pledged on bilateral swaps and currency forward contracts is classified as due from counterparties on our consolidated balance sheets.

Cash collateral held on bilateral swaps that is not restricted for use is included in cash and cash equivalents on our consolidated balance sheets and the liability to return the collateral is included in collateral held payable. Non-cash collateral held is only recognized if the counterparty defaults or if we sell the pledged collateral. As of June 30, 2017 and December 31, 2016, we did not recognize any non-cash collateral held.

Collateral Pledged	June 30, 2017	December 31, 2016
Repurchase Agreements:
Agency RMBS	9,711,706	8,654,233
Non-Agency RMBS	1,424,646	1,887,550
GSE CRT	874,493	734,212
CMBS	1,359,452	1,168,309
Total repurchase agreements collateral pledged	13,370,297	12,444,304
Secured Loans:
Agency RMBS	596,514	585,504
CMBS	1,345,151	1,346,078
Total secured loans collateral pledged	1,941,665	1,931,582
Interest Rate Swaps and Currency Forward Contracts:
Agency RMBS	55,188	46,312
Cash	1,246	86,450
Total interest rate swaps and currency forward contracts collateral pledged (1)	56,434	132,762
Total:
Mortgage-backed and GSE CRT securities	15,367,150	14,422,198
Cash	1,246	86,450
Total collateral pledged	15,368,396	14,508,648
Collateral Held	June 30, 2017	December 31, 2016
Interest Rate Swaps:
Cash	3,471	1,700
Non-cash collateral	—	536
Total collateral held	3,471	2,236

(1) Cash collateral pledged on our currency forward contracts was $980,000 as of June 30, 2017. We did not pledge any collateral on our currency forward contracts as of December 31, 2016.

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Derivatives and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Outstanding Interest Rate Swaptions and Derivative Instrument Information

The following table summarizes changes in the notional amount of our derivative instruments during 2017:

$ in thousands	Notional Amount as of January 1, 2017	Additions	Settlement, Termination, Expiration or Exercise		Notional Amount as of June 30, 2017
Interest Rate Swaps	6,500,000	1,400,000	—		7,900,000
Currency Forward Contracts	62,308	137,860	(131,575	)	68,593
Credit Derivatives	569,966	—	(5,729	)	564,237
Total	7,132,274	1,537,860	(137,304	)	8,532,830

Interest Rate Derivatives Outstanding Designated as Cash Flow Hedges

As of June 30, 2017, we had the following interest rate swaps outstanding:

$ in thousands Counterparty			Notional	Maturity Date	Fixed Interest Rate in Contract
ING Capital Markets LLC			350,000	2/24/2018	0.95	%
UBS AG			500,000	5/24/2018	1.10	%
ING Capital Markets LLC			400,000	6/5/2018	0.87	%
CME Central Clearing			300,000	2/5/2021	2.50	%
CME Central Clearing			300,000	2/5/2021	2.69	%
Wells Fargo Bank, N.A.			200,000	3/15/2021	3.14	%
CME Central Clearing			500,000	5/24/2021	2.25	%
Citibank, N.A.			200,000	5/25/2021	2.83	%
CME Central Clearing			500,000	6/24/2021	2.44	%
HSBC Bank USA, National Association			550,000	2/24/2022	2.45	%
CME Central Clearing			1,000,000	6/9/2022	2.21	%
The Royal Bank of Scotland Plc			500,000	8/15/2023	1.98	%
CME Central Clearing			600,000	8/24/2023	2.88	%
HSBC Bank USA, National Association			500,000	12/15/2023	2.20	%
CME Central Clearing			450,000	1/12/2024	2.10	%
CME Central Clearing			450,000	1/25/2024	2.15	%
CME Central Clearing			100,000	4/2/2025	2.04	%
CME Central Clearing	(1	)	250,000	5/24/2028	2.78	%
CME Central Clearing	(1	)	250,000	5/24/2028	2.39	%
Total			7,900,000		2.17	%

(1) Forward start date of 5/24/2018

Disclosure of Credit Derivatives

At June 30, 2017 and December 31, 2016, terms of the GSE CRT embedded derivatives are:

$ in thousand	June 30, 2017	December 31, 2016
Fair value amount	46,802	17,095
Notional amount	564,237	569,966
Maximum potential amount of future undiscounted payments	564,237	569,966

Fair Value of Derivative Financial Instruments and Classification on Balance Sheet

The table below presents the fair value of our derivative financial instruments, as well as their classification on the condensed consolidated balance sheets as of June 30, 2017 and December 31, 2016.

$ in thousands

Derivative Assets			Derivative Liabilities
	As of June 30, 2017	As of December 31, 2016		As of June 30, 2017	As of December 31, 2016
Balance Sheet	Fair Value	Fair Value	Balance Sheet	Fair Value	Fair Value
Interest Rate Swaps Asset	11,005	3,085	Interest Rate Swaps Liability	43,047	133,833
Currency Forward Contracts	—	101	Currency Forward Contracts	1,100	395

Effect of Derivative Financial Instruments on Statement of Operations

The tables below present the effect of our credit derivatives on the condensed consolidated statements of operations for the three and six months ended June 30, 2017 and 2016.

$ in thousands	Three months ended June 30, 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	—	5,844	15,559	21,403

$ in thousands	Three months ended June 30, 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	(5,097	)	6,112	16,213	17,228

$ in thousands	Six months ended June 30, 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	—	11,651	29,707	41,358

$ in thousands	Six months ended June 30, 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	)	12,426	19,229	25,638

The following table summarizes the effect of interest rate swaps, interest rate swaptions and currency forward contracts reported in gain (loss) on derivative instruments, net on the condensed consolidated statements of operations for the three and six months ended June 30, 2017 and 2016:

$ in thousands	Three months ended June 30, 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	(38,512	)	(19,966	)	7,975		(50,503	)
Currency Forward Contracts	(1,717	)	—		(1,293	)	(3,010	)
Total	(40,229	)	(19,966	)	6,682		(53,513	)

$ in thousands	Three months ended June 30, 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	(20,105	)	(24,985	)	(49,711	)	(94,801	)
Currency Forward Contracts	(479	)	—		4,917		4,438
Total	(20,584	)	(24,985	)	(44,794	)	(90,363	)

$ in thousands	Six months ended June 30, 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	(22,518	)	(42,860	)	20,925		(44,453	)
Currency Forward Contracts	(2,793	)	—		(805	)	(3,598	)
Total	(25,311	)	(42,860	)	20,120		(48,051	)

$ in thousands	Six months ended June 30, 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	(64,000	)	(54,076	)	(216,382	)	(334,458	)
Interest Rate Swaptions	(1,485	)	—		1,485		—
Currency Forward Contracts	1,916		—		3,636		5,552
Total	(63,569	)	(54,076	)	(211,261	)	(328,906	)

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Offsetting Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2017

Offsetting [Abstract]

Offsetting Derivative Assets

Offsetting of Derivative Assets

As of June 30, 2017

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	Financial Instruments	Cash Collateral Received		Net Amount
Derivatives (1) (4)	3,706	—	3,706	—	(3,445	)	261
Total	3,706	—	3,706	—	(3,445	)	261

Offsetting of Derivative Liabilities, Repurchase Agreements and Secured Loans

As of June 30, 2017

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	Financial Instruments (2)		Cash Collateral Pledged		Net Amount
Derivatives (4)	44,147	—	44,147	(43,047	)	(980	)	120
Repurchase Agreements (3)	12,118,948	—	12,118,948	(12,118,948	)	—		—
Secured Loans (5)	1,650,000	—	1,650,000	(1,650,000	)	—		—
Total	13,813,095	—	13,813,095	(13,811,995	)	(980	)	120

Offsetting of Derivative Assets

As of December 31, 2016

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	Financial Instruments		Cash Collateral Received		Net Amount
Derivatives (1) (4)	3,186	—	3,186	(1,640	)	(1,546	)	—
Total	3,186	—	3,186	(1,640	)	(1,546	)	—

Offsetting of Derivative Liabilities and Repurchase Agreements

As of December 31, 2016

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	Financial Instruments (2)		Cash Collateral Pledged		Net Amount
Derivatives (4)	134,228	—	134,228	(45,738	)	(85,787	)	2,703
Repurchase Agreements (3)	11,160,669	—	11,160,669	(11,160,669	)	—		—
Secured Loans (5)	1,650,000	—	1,650,000	(1,650,000	)	—		—
Total	12,944,897	—	12,944,897	(12,856,407	)	(85,787	)	2,703

(1) Amounts represent derivatives in an asset position which could potentially be offset against derivatives in a liability position at June 30, 2017 and December 31, 2016, 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 borrowing under repurchase agreements was $13.4 billion and $12.4 billion at June 30, 2017 and December 31, 2016, respectively.

(4) Cash collateral received on our derivatives was $3.5 million and $1.7 million at June 30, 2017 and December 31, 2016, respectively. We did not receive any non-cash collateral on our derivatives at June 30, 2017. Non-cash collateral received on our derivatives was $536,000 at December 31, 2016. Cash collateral pledged by us on our derivatives was $86.5 million at December 31, 2016. As a result of the CME rule change effective January 3, 2017, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps and therefore excluded from the table above at June 30, 2017.

(5) The fair value of securities pledged against IAS Services LLC's borrowing under secured loans was $1.9 billion at June 30, 2017 and December 31, 2016, respectively.

Offsetting Derivative Liabilities

Offsetting of Derivative Assets

As of June 30, 2017

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	Financial Instruments	Cash Collateral Received		Net Amount
Derivatives (1) (4)	3,706	—	3,706	—	(3,445	)	261
Total	3,706	—	3,706	—	(3,445	)	261

Offsetting of Derivative Liabilities, Repurchase Agreements and Secured Loans

As of June 30, 2017

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	Financial Instruments (2)		Cash Collateral Pledged		Net Amount
Derivatives (4)	44,147	—	44,147	(43,047	)	(980	)	120
Repurchase Agreements (3)	12,118,948	—	12,118,948	(12,118,948	)	—		—
Secured Loans (5)	1,650,000	—	1,650,000	(1,650,000	)	—		—
Total	13,813,095	—	13,813,095	(13,811,995	)	(980	)	120

Offsetting of Derivative Assets

As of December 31, 2016

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	Financial Instruments		Cash Collateral Received		Net Amount
Derivatives (1) (4)	3,186	—	3,186	(1,640	)	(1,546	)	—
Total	3,186	—	3,186	(1,640	)	(1,546	)	—

Offsetting of Derivative Liabilities and Repurchase Agreements

As of December 31, 2016

				Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
$ in thousands Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Condensed Consolidated Balance Sheets	Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	Financial Instruments (2)		Cash Collateral Pledged		Net Amount
Derivatives (4)	134,228	—	134,228	(45,738	)	(85,787	)	2,703
Repurchase Agreements (3)	11,160,669	—	11,160,669	(11,160,669	)	—		—
Secured Loans (5)	1,650,000	—	1,650,000	(1,650,000	)	—		—
Total	12,944,897	—	12,944,897	(12,856,407	)	(85,787	)	2,703

(1) Amounts represent derivatives in an asset position which could potentially be offset against derivatives in a liability position at June 30, 2017 and December 31, 2016, 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 borrowing under repurchase agreements was $13.4 billion and $12.4 billion at June 30, 2017 and December 31, 2016, respectively.

(4) Cash collateral received on our derivatives was $3.5 million and $1.7 million at June 30, 2017 and December 31, 2016, respectively. We did not receive any non-cash collateral on our derivatives at June 30, 2017. Non-cash collateral received on our derivatives was $536,000 at December 31, 2016. Cash collateral pledged by us on our derivatives was $86.5 million at December 31, 2016. As a result of the CME rule change effective January 3, 2017, cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps and therefore excluded from the table above at June 30, 2017.

(5) The fair value of securities pledged against IAS Services LLC's borrowing under secured loans was $1.9 billion at June 30, 2017 and December 31, 2016, respectively.

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measured on Recurring Basis

The following tables present our assets and liabilities measured at fair value on a recurring basis.

	June 30, 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)	—	16,036,482	46,802	—	16,083,284
Derivative assets	—	11,005	—	—	11,005
Other assets(4)	3,979	—	—	23,311	27,290
Total assets	3,979	16,047,487	46,802	23,311	16,121,579
Liabilities:
Derivative liabilities	—	44,147	—	—	44,147
Total liabilities	—	44,147	—	—	44,147

	December 31, 2016
	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)	—	14,964,236	17,095	—	14,981,331
Derivative assets	—	3,186	—	—	3,186
Other assets(4)	500	—	—	33,301	33,801
Total assets	500	14,967,422	17,095	33,301	15,018,318
Liabilities:
Derivative liabilities	—	134,228	—	—	134,228
Total liabilities	—	134,228	—	—	134,228

(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 financial instruments consist of debt host contracts classified as Level 2 and embedded derivatives classified as Level 3. As of June 30, 2017, the net embedded derivative asset position of $46.8 million includes $47.7 million of embedded derivatives in an asset position and $900,000 of embedded derivatives in a liability position. As of December 31, 2016, the net embedded derivative asset position of $17.1 million includes $21.0 million of embedded derivatives in an asset position and $3.9 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 June 30, 2017 and December 31, 2016, the weighted average remaining term of investments in unconsolidated ventures is 1.8 and 1.3 years, respectively.

(4) Includes $4.0 million and $0.5 million of investment in an exchange-traded fund as of June 30, 2017 and December 31, 2016, respectively.

Embedded Derivatives Level 3 Roll Forward

The following table shows a reconciliation of the beginning and ending fair value measurements of our GSE CRT embedded derivatives, which we have valued utilizing Level 3 inputs:

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Beginning balance	31,243	(22,706	)	17,095	(25,722	)
Sales and settlements	—	5,097		—	6,017
Total net gains / (losses) included in net income:	—	—			—
Realized gains/(losses), net	—	(5,097	)	—	(6,017	)
Unrealized gains/(losses), net(1)	15,559	16,213		29,707	19,229
Ending balance	46,802	(6,493	)	46,802	(6,493	)

(1) Included in realized and unrealized credit derivative income (loss), net in the condensed consolidated statements of operations for the three months ended June 30, 2017 and 2016, are $15.6 million and $11.1 million in net unrealized gains attributable to assets still held as of June 30, 2017 and June 30, 2016, respectively. Included in realized and unrealized credit derivative income (loss), net in the condensed consolidated statements of operations for the six months ended June 30, 2017 and 2016, are $29.7 million and $12.6 million in net unrealized gains attributable to assets still held as of June 30, 2017 and June 30, 2016, respectively. We did not reverse any unrealized gains or losses on securities sold in the three and six months ended June 30, 2017. During the three and six months ended June 30, 2016, we reversed unrealized losses on securities sold during the period of $5.1 million and $6.0 million, respectively.

Embedded Derivatives Fair Value Inputs

The following table summarizes significant unobservable inputs used in the fair value measurement of our GSE CRT embedded derivatives:

	Fair Value at	Valuation	Unobservable		Weighted
$ in thousands	June 30, 2017	Technique	Input	Range	Average
GSE CRT Embedded Derivatives	46,802	Market Comparables, Vendor Pricing	Weighted average life	3.7 - 7.5 years	5.7 years

	Fair Value at	Valuation	Unobservable		Weighted
$ in thousands	December 31, 2016	Technique	Input	Range	Average
GSE CRT Embedded Derivatives	17,095	Market Comparables, Vendor Pricing	Weighted average life	2.5 - 7.7 years	5.3 years

Carrying Value and Estimated Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the condensed consolidated balance sheets at June 30, 2017 and December 31, 2016:

	June 30, 2017		December 31, 2016
$ in thousands	Carrying Value	Estimated Fair Value	Carrying Value	Estimated Fair Value
Financial Assets
Commercial loans, held-for-investment	278,866	280,257	273,355	275,319
Other assets	74,250	74,250	74,250	74,250
Total	353,116	354,507	347,605	349,569
Financial Liabilities
Repurchase agreements	12,118,948	12,118,722	11,160,669	11,161,034
Secured loans	1,650,000	1,650,000	1,650,000	1,650,000
Exchangeable senior notes	217,804	220,943	397,041	400,000
Total	13,986,752	13,989,665	13,207,710	13,211,034

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Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Schedule of accumulated other comprehensive income

The following tables present the components of accumulated other comprehensive income. The tables exclude MBS and GSE CRTs that are accounted for under the fair value option.

	Three Months Ended June 30, 2017
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		39,633		—		39,633
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		651		—		651
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(6,369	)	(6,369	)
Currency translation adjustments on investment in unconsolidated venture	139		—		—		139
Other comprehensive income/(loss), net	139		40,284		(6,369	)	34,054
Balance at beginning of period	(512	)	161,381		142,896		303,765
Other comprehensive income/(loss), net	139		40,284		(6,369	)	34,054
Other comprehensive income/(loss) attributable to non-controlling interest	(2	)	(508	)	81		(429	)
Rebalancing of ownership percentage of non-controlling interest	—		1		—		1
Balance at end of period	(375	)	201,158		136,608		337,391

	Three Months Ended June 30, 2016
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		117,116		—		117,116
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		(1,037	)	—		(1,037	)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		3,238		3,238
Currency translation adjustments on investment in unconsolidated venture	274		—		—		274
Other comprehensive income/(loss), net	274		116,079		3,238		119,591
Balance at beginning of period	(79	)	279,916		161,036		440,873
Other comprehensive income/(loss), net	274		116,079		3,238		119,591
Other comprehensive income/(loss) attributable to non-controlling interest	(5	)	(1,464	)	(41	)	(1,510	)
Balance at end of period	190		394,531		164,233		558,954

	Six Months Ended June 30, 2017
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		55,922		—		55,922
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		1,501		—		1,501
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(12,667	)	(12,667	)
Currency translation adjustments on investment in unconsolidated venture	(476	)	—		—		(476	)
Other comprehensive income/(loss), net	(476	)	57,423		(12,667	)	44,280
Balance at beginning of period	95		144,458		149,115		293,668
Other comprehensive income/(loss), net	(476	)	57,423		(12,667	)	44,280
Other comprehensive income/(loss) attributable to non-controlling interest	6		(724	)	160		(558	)
Rebalancing of ownership percentage of non-controlling interest	—		1		—		1
Balance at end of period	(375	)	201,158		136,608		337,391

	Six Months Ended June 30, 2016
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		238,576		—		238,576
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		(11,581	)	—		(11,581	)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		16,162		16,162
Currency translation adjustments on investment in unconsolidated venture	225		—		—		225
Other comprehensive income/(loss), net	225		226,995		16,162		243,382
Balance at beginning of period	(32	)	170,383		148,273		318,624
Other comprehensive income/(loss), net	225		226,995		16,162		243,382
Other comprehensive income/(loss) attributable to non-controlling interest	(3	)	(2,847	)	(202	)	(3,052	)
Balance at end of period	190		394,531		164,233		558,954

Schedule of Nonvested Restricted Stock Units Activity

The following table summarizes the activity related to restricted stock units awarded to employees of our Manager and its affiliates for the three and six months ended June 30, 2017.

	Three Months Ended June 30,			Six Months Ended June 30,
	2017			2017
	Restricted Stock Units	Weighted Average Grant Date Fair Value (1)		Restricted Stock Units		Weighted Average Grant Date Fair Value (1)
Unvested at the beginning of the period	19,827	$	14.35	18,807		$	14.37
Shares granted during the period	—	—		8,115		15.55
Shares vested during the period	—	—		(7,095	)	15.78
Unvested at the end of the period	19,827	$	14.35	19,827		$	14.35

(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.

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Earnings per Common Share (Tables)

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share

Earnings per share for the three and six months ended June 30, 2017 and 2016 is computed as follows:

	Three Months Ended   June 30,			Six Months Ended   June 30,
In thousands except per share amounts	2017	2016		2017	2016
Numerator (Income)
Basic Earnings:
Net income (loss) available to common stockholders	46,834	(11,617	)	133,964	(167,777	)
Effect of dilutive securities:
Income allocated to exchangeable senior notes	3,504	—		8,512	—
Income (loss) allocated to non-controlling interest	670	(75	)	1,856	(1,958	)
Dilutive net income (loss) available to stockholders	51,008	(11,692	)	144,332	(169,735	)
Denominator (Weighted Average Shares)
Basic Earnings:
Shares available to common stockholders	111,608	111,581		111,603	112,362
Effect of dilutive securities:
Restricted stock awards	20	—		20	—
OP units	1,425	1,425		1,425	1,425
Exchangeable senior notes	10,507	—		12,782	—
Dilutive Shares	123,560	113,006		125,830	113,787
Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic	0.42	(0.10	)	1.20	(1.49	)
Diluted	0.41	(0.10	)	1.15	(1.49	)

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Non-controlling Interest - Operating Partnership (Tables)

6 Months Ended

Jun. 30, 2017

Noncontrolling Interest [Abstract]

Schedule of Income (Expense) Allocated and Distributions Paid to Noncontrolling Interests

The following table presents the net income (loss) allocated and distributions paid to the Operating Partnership non-controlling interest for the three and six months ended June 30, 2017 and 2016.

	Three Months Ended   June 30,			Six Months Ended   June 30,
$ in thousands	2017	2016		2017	2016
Net income (loss) allocated	670	(75	)	1,856	(1,958	)
Distributions paid	570	570		1,140	1,140

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Organization and Business Operations (Detail) - segment	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Organization And Business Operations
Ownership interest in Operating Partnership	98.70%
Ownership percentage in Operating Partnership	1.30%	1.30%
Number of operating segments	1
Minimum distribution percentage of taxable income to qualify for REIT	90.00%
Invesco Investments (Bermuda) Ltd
Organization And Business Operations
Ownership percentage in Operating Partnership	1.30%

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Variable Interest Entities ("VIEs") (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Variable Interest Entity
Carrying Amount	$ 16,083,284	$ 14,981,331
Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity
Carrying Amount	4,376,667
Company's Maximum Risk of Loss	4,376,667
Variable Interest Entity, Not Primary Beneficiary | CMBS
Variable Interest Entity
Carrying Amount	2,777,516
Company's Maximum Risk of Loss	2,777,516
Variable Interest Entity, Not Primary Beneficiary | Non-Agency RMBS
Variable Interest Entity
Carrying Amount	1,575,840
Company's Maximum Risk of Loss	1,575,840
Variable Interest Entity, Not Primary Beneficiary | Investments in unconsolidated ventures
Variable Interest Entity
Carrying Amount	23,311
Company's Maximum Risk of Loss	$ 23,311

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Mortgage-Backed and Credit Risk Transfer Securities - Summary of Investment Portfolio (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 18,928,963	$ 18,275,563
Unamortized Premium (Discount)	(3,110,959)	(3,456,795)
Amortized Cost	15,818,004	14,818,768
Unrealized Gain/ (Loss), net	265,280	162,563
Fair value	$ 16,083,284	$ 14,981,331
Net Weighted Average Coupon	3.17%	3.05%
Period- end Weighted Average Yield	3.30%	3.05%
Quarterly Weighted Average Yield	3.07%	2.87%
Percentage of agency collateralized mortgage obligations interest only securities, principal balance	84.30%	85.50%
Percentage of agency collateralized mortgage obligations interest only securities, amortized cost	24.10%	26.80%
Percentage of agency collateralized mortgage obligations interest only securities, fair value	23.90%	21.70%
Unamortized premium (discount) non-accretable portion	$ 258,200	$ 252,500
Percentage of Non-Agency RMBS interest-only, principal balance	47.70%	43.50%
Percentage of Non-Agency RMBS interest-only, amortized cost	1.80%	1.50%
Percentage of Non-Agency RMBS interest only, fair value	1.50%	1.30%
Percentage of government sponsored enterprise credit risk transfer securities	26.10%	19.20%
Percentage of CMBS interest only, principal balance	18.50%	20.30%
Percentage of CMBS interest only, amortized cost	0.70%	0.80%
Percentage of CMBS interest only, fair value	0.70%	0.90%
On or After September 1, 2016
Schedule of Available-for-sale Securities
Fair value option, percentage of RMBS, principal balance	23.70%	4.30%
Fair value option, percentage of RMBS, amortized cost	23.50%	4.30%
Fair value option, percentage of RMBS, fair value	23.50%	4.20%
Fair value option, percentage of CMBS, principal balance	10.60%	0.40%
Fair value option, percentage of CMBS, amortized cost	11.30%	0.60%
Fair value option, percentage of CMBS, fair value	11.00%	0.50%
Agency RMBS
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 10,164,365	$ 8,966,483
Unamortized Premium (Discount)	399,328	381,927
Amortized Cost	10,563,693	9,348,410
Unrealized Gain/ (Loss), net	(9,208)	(26,591)
Fair value	$ 10,554,485	$ 9,321,819
Net Weighted Average Coupon	3.42%	3.37%
Period- end Weighted Average Yield	2.69%	2.42%
Quarterly Weighted Average Yield	2.44%	2.20%
Agency RMBS | 15 year fixed-rate
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 3,187,931	$ 3,460,625
Unamortized Premium (Discount)	134,856	151,526
Amortized Cost	3,322,787	3,612,151
Unrealized Gain/ (Loss), net	(46,007)	(54,223)
Fair value	$ 3,276,780	$ 3,557,928
Net Weighted Average Coupon	3.09%	3.11%
Period- end Weighted Average Yield	2.19%	2.19%
Quarterly Weighted Average Yield	1.97%	1.99%
Agency RMBS | 30 year fixed-rate
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 4,816,054	$ 2,780,806
Unamortized Premium (Discount)	232,385	185,521
Amortized Cost	5,048,439	2,966,327
Unrealized Gain/ (Loss), net	20,677	15,390
Fair value	$ 5,069,116	$ 2,981,717
Net Weighted Average Coupon	3.95%	4.37%
Period- end Weighted Average Yield	3.10%	2.61%
Quarterly Weighted Average Yield	2.83%	2.57%
Agency RMBS | ARM
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 269,123	$ 301,900
Unamortized Premium (Discount)	1,988	2,520
Amortized Cost	271,111	304,420
Unrealized Gain/ (Loss), net	3,463	3,453
Fair value	$ 274,574	$ 307,873
Net Weighted Average Coupon	2.68%	2.69%
Period- end Weighted Average Yield	2.58%	2.59%
Quarterly Weighted Average Yield	2.27%	2.16%
Agency RMBS | Hybrid ARM
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 1,891,257	$ 2,423,152
Unamortized Premium (Discount)	30,099	42,360
Amortized Cost	1,921,356	2,465,512
Unrealized Gain/ (Loss), net	12,659	8,789
Fair value	$ 1,934,015	$ 2,474,301
Net Weighted Average Coupon	2.71%	2.70%
Period- end Weighted Average Yield	2.54%	2.52%
Quarterly Weighted Average Yield	2.29%	2.02%
Agency-CMO
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 1,429,977	$ 1,712,120
Unamortized Premium (Discount)	(1,129,678)	(1,368,916)
Amortized Cost	300,299	343,204
Unrealized Gain/ (Loss), net	(2,033)	837
Fair value	$ 298,266	$ 344,041
Net Weighted Average Coupon	2.04%	2.16%
Period- end Weighted Average Yield	2.87%	3.08%
Quarterly Weighted Average Yield	0.34%	2.07%
Non-Agency RMBS
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 3,247,516	$ 3,838,314
Unamortized Premium (Discount)	(1,793,760)	(1,934,269)
Amortized Cost	1,453,756	1,904,045
Unrealized Gain/ (Loss), net	122,084	91,506
Fair value	$ 1,575,840	$ 1,995,551
Net Weighted Average Coupon	2.18%	2.21%
Period- end Weighted Average Yield	5.80%	5.22%
Quarterly Weighted Average Yield	5.90%	5.22%
Non-Agency RMBS | Variable Rate
Schedule of Available-for-sale Securities
Percentage of non-agency securities classified as variable rate	48.00%	45.50%
Non-Agency RMBS | Fixed Rate
Schedule of Available-for-sale Securities
Percentage of non-agency securities classified as fixed rate	43.80%	47.20%
Non-Agency RMBS | Floating Rate
Schedule of Available-for-sale Securities
Percentage of non-agency securities classified as floating rate	8.20%	7.30%
GSE CRT
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 769,217	$ 707,899
Unamortized Premium (Discount)	25,537	24,320
Amortized Cost	794,754	732,219
Unrealized Gain/ (Loss), net	82,423	35,981
Fair value	$ 877,177	$ 768,200
Net Weighted Average Coupon	3.06%	2.38%
Period- end Weighted Average Yield	2.40%	1.51%
Quarterly Weighted Average Yield	2.62%	1.24%
CMBS
Schedule of Available-for-sale Securities
Principal/ Notional Balance	$ 3,317,888	$ 3,050,747
Unamortized Premium (Discount)	(612,386)	(559,857)
Amortized Cost	2,705,502	2,490,890
Unrealized Gain/ (Loss), net	72,014	60,830
Fair value	$ 2,777,516	$ 2,551,720
Net Weighted Average Coupon	3.90%	3.80%
Period- end Weighted Average Yield	4.62%	4.21%
Quarterly Weighted Average Yield	4.45%	4.17%

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Mortgage-Backed and Credit Risk Transfer Securities - Components of Non-Agency RMBS Portfolio By Asset Type (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities
Non-Agency RMBS, at fair value	$ 16,083,284	$ 14,981,331
Non-Agency RMBS
Schedule of Available-for-sale Securities
Non-Agency RMBS, at fair value	$ 1,575,840	$ 1,995,551
Percentage Of Non-Agency	100.00%	100.00%
Non-Agency RMBS | Prime
Schedule of Available-for-sale Securities
Non-Agency RMBS, at fair value	$ 699,638	$ 889,658
Percentage Of Non-Agency	44.40%	44.60%
Non-Agency RMBS | Alt-A
Schedule of Available-for-sale Securities
Non-Agency RMBS, at fair value	$ 421,492	$ 447,213
Percentage Of Non-Agency	26.70%	22.40%
Non-Agency RMBS | Re-REMIC
Schedule of Available-for-sale Securities
Non-Agency RMBS, at fair value	$ 237,766	$ 364,301
Percentage Of Non-Agency	15.10%	18.20%
Non-Agency RMBS | Subprime/reperforming
Schedule of Available-for-sale Securities
Non-Agency RMBS, at fair value	$ 216,944	$ 294,379
Percentage Of Non-Agency	13.80%	14.80%

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Mortgage-Backed and Credit Risk Transfer Securities - Components of Senior Re-REMIC at Fair Value (Detail)	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities
Percentage of Re-REMIC Holdings at Fair Value	100.00%	100.00%
Re-REMIC holdings that are not senior class (percentage)	48.30%
0% - 10%
Schedule of Available-for-sale Securities
Percentage of Re-REMIC Holdings at Fair Value	26.30%	17.60%
10% - 20%
Schedule of Available-for-sale Securities
Percentage of Re-REMIC Holdings at Fair Value	3.90%	7.40%
20% - 30%
Schedule of Available-for-sale Securities
Percentage of Re-REMIC Holdings at Fair Value	9.90%	13.50%
30% - 40%
Schedule of Available-for-sale Securities
Percentage of Re-REMIC Holdings at Fair Value	19.40%	15.70%
40% - 50%
Schedule of Available-for-sale Securities
Percentage of Re-REMIC Holdings at Fair Value	18.40%	27.00%
50% - 60%
Schedule of Available-for-sale Securities
Percentage of Re-REMIC Holdings at Fair Value	20.30%	16.10%
60% - 70%
Schedule of Available-for-sale Securities
Percentage of Re-REMIC Holdings at Fair Value	1.80%	2.70%

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Mortgage-Backed and Credit Risk Transfer Securities - Components of Carrying Value of Investment Portfolio (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
Principal balance	$ 18,928,963	$ 18,275,563
Unamortized premium	484,242	476,314
Unamortized discount	(3,595,201)	(3,933,109)
Gross unrealized gains	379,923	302,099
Gross unrealized losses	(114,643)	(139,536)
Fair value	$ 16,083,284	$ 14,981,331

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Mortgage-Backed and Credit Risk Transfer Securities - Fair Value of Mortgage-Backed Securities According to Weighted Average Life Classification (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
Less than one year	$ 117,913	$ 121,076
Greater than one year and less than five years	8,306,399	6,719,923
Greater than or equal to five years	7,658,972	8,140,332
Fair value	$ 16,083,284	$ 14,981,331

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Mortgage-Backed and Credit Risk Transfer Securities - Unrealized Losses and Estimated Fair Value of MBS and GSE CRT by Length of Time (Detail) $ in Thousands	Jun. 30, 2017 USD ($) security	Dec. 31, 2016 USD ($) security
Fair Value
Less than 12 Months	$ 5,493,387	$ 5,858,500
12 Months or More	834,389	1,218,879
Total	6,327,776	7,077,379
Unrealized Losses
Less than 12 Months	(91,987)	(110,569)
12 Months or More	(22,656)	(28,967)
Total	$ (114,643)	$ (139,536)
Number of Securities
Less than 12 Months (in securities) | security	361	386
12 Months or More (in securities) | security	83	95
Total (in securities) | security	444	481
Agency RMBS
Fair Value
Less than 12 Months	$ 4,767,937	$ 5,006,723
12 Months or More	626,792	615,070
Total	5,394,729	5,621,793
Unrealized Losses
Less than 12 Months	(75,495)	(92,163)
12 Months or More	(18,911)	(19,571)
Total	$ (94,406)	$ (111,734)
Number of Securities
Less than 12 Months (in securities) | security	270	280
12 Months or More (in securities) | security	50	47
Total (in securities) | security	320	327
Fair value option, fair value	$ 801,600	$ 149,700
Fair value option, unrealized losses	6,500	4,000
Agency RMBS | 15 year fixed-rate
Fair Value
Less than 12 Months	2,534,116	2,781,777
12 Months or More	111,912	65,964
Total	2,646,028	2,847,741
Unrealized Losses
Less than 12 Months	(54,361)	(66,506)
12 Months or More	(2,469)	(1,556)
Total	$ (56,830)	$ (68,062)
Number of Securities
Less than 12 Months (in securities) | security	129	127
12 Months or More (in securities) | security	19	17
Total (in securities) | security	148	144
Agency RMBS | 30 year fixed-rate
Fair Value
Less than 12 Months	$ 1,351,307	$ 747,719
12 Months or More	507,832	547,763
Total	1,859,139	1,295,482
Unrealized Losses
Less than 12 Months	(16,221)	(15,409)
12 Months or More	(16,337)	(18,004)
Total	$ (32,558)	$ (33,413)
Number of Securities
Less than 12 Months (in securities) | security	59	45
12 Months or More (in securities) | security	27	27
Total (in securities) | security	86	72
Agency RMBS | ARM
Fair Value
Less than 12 Months	$ 82,986	$ 120,540
12 Months or More	0	1,091
Total	82,986	121,631
Unrealized Losses
Less than 12 Months	(89)	(326)
12 Months or More	0	(7)
Total	$ (89)	$ (333)
Number of Securities
Less than 12 Months (in securities) | security	9	9
12 Months or More (in securities) | security	0	1
Total (in securities) | security	9	10
Agency RMBS | Hybrid ARM
Fair Value
Less than 12 Months	$ 799,528	$ 1,356,687
12 Months or More	7,048	252
Total	806,576	1,356,939
Unrealized Losses
Less than 12 Months	(4,824)	(9,922)
12 Months or More	(105)	(4)
Total	$ (4,929)	$ (9,926)
Number of Securities
Less than 12 Months (in securities) | security	73	99
12 Months or More (in securities) | security	4	2
Total (in securities) | security	77	101
Agency-CMO
Fair Value
Less than 12 Months	$ 124,257	$ 163,114
12 Months or More	21,443	22,792
Total	145,700	185,906
Unrealized Losses
Less than 12 Months	(5,340)	(3,812)
12 Months or More	(1,012)	(952)
Total	$ (6,352)	$ (4,764)
Number of Securities
Less than 12 Months (in securities) | security	26	28
12 Months or More (in securities) | security	4	3
Total (in securities) | security	30	31
Agency IO
Number of Securities
Fair value option, fair value	$ 3,900
Fair value option, unrealized losses		$ 3,000
CMO
Number of Securities
Fair value option, unrealized losses	2,400	1,700
Non-Agency RMBS
Fair Value
Less than 12 Months	113,298	287,647
12 Months or More	166,184	497,863
Total	279,482	785,510
Unrealized Losses
Less than 12 Months	(2,385)	(7,861)
12 Months or More	(2,403)	(6,671)
Total	$ (4,788)	$ (14,532)
Number of Securities
Less than 12 Months (in securities) | security	23	42
12 Months or More (in securities) | security	24	36
Total (in securities) | security	47	78
GSE CRT
Fair Value
Less than 12 Months		$ 0
12 Months or More		35,935
Total		35,935
Unrealized Losses
Less than 12 Months		0
12 Months or More		(969)
Total		$ (969)
Number of Securities
Less than 12 Months (in securities) | security		0
12 Months or More (in securities) | security		3
Total (in securities) | security		3
CMBS
Fair Value
Less than 12 Months	$ 487,895	$ 401,016
12 Months or More	19,970	47,219
Total	507,865	448,235
Unrealized Losses
Less than 12 Months	(8,767)	(6,733)
12 Months or More	(330)	(804)
Total	$ (9,097)	$ (7,537)
Number of Securities
Less than 12 Months (in securities) | security	42	36
12 Months or More (in securities) | security	5	6
Total (in securities) | security	47	42
Fair value option, fair value	$ 168,000	$ 13,900
Fair value option, unrealized losses	$ 2,300	$ 613

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Mortgage-Backed and Credit Risk Transfer Securities - Additional Information (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities
Gross unrealized losses	$ 114,643	$ 139,536
CMO
Schedule of Available-for-sale Securities
Gross unrealized losses	2,400
Agency RMBS
Schedule of Available-for-sale Securities
Gross unrealized losses	94,400
Agency-IO, Non-Agency RMBS, GSE CRT and CMBS
Schedule of Available-for-sale Securities
Gross unrealized losses	$ 17,800

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Mortgage-Backed and Credit Risk Transfer Securities - OTTI included in earnings (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Schedule of Available-for-sale Securities
Other-than-temporary credit impairment losses	$ 4,098	$ 1,525	$ 4,630	$ 7,208
RMBS interest-only securities
Schedule of Available-for-sale Securities
Other-than-temporary credit impairment losses	3,585	1,472	3,876	7,155
Non-Agency RMBS
Schedule of Available-for-sale Securities
Other-than-temporary credit impairment losses	$ 513	$ 53	$ 754	$ 53

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Mortgage-Backed and Credit Risk Transfer Securities - Impact of MBS and GSE CRT on Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Investments, Debt and Equity Securities [Abstract]
Amount of MBS and GSE CRT are accounted for under the fair value option	$ 3,100,000		$ 3,100,000
Percentage of MBS and GSE CRT are accounted for under the fair value option	19.30%		19.30%
Accumulated Other Comprehensive Income Loss, Available-for-sale Securities [Roll Forward]
Unrealized gain (loss) on MBS and GSE CRT at beginning of period	$ 163,440	$ 288,715	$ 146,301	$ 177,799
Unrealized gain (loss) on MBS and GSE CRT	39,633	117,116	55,922	238,576
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	651	(1,037)	1,501	(11,581)
Unrealized gain (loss) on MBS and GSE CRT at end of period	$ 203,724	$ 404,794	$ 203,724	$ 404,794

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Mortgage-Backed and Credit Risk Transfer Securities - Realized Gain (Loss) on Investments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Schedule of Available-for-sale Securities
Gross realized gains on sale of investments	$ 1,311	$ 1,037	$ 2,215	$ 14,052
Gross realized losses on sale of investments	(1,962)	0	(3,873)	(2,471)
Other-than-temporary impairment losses	(4,098)	(1,525)	(4,630)	(7,208)
Net unrealized gains and losses on trading securities	14	463	23	463
Total gain (loss) on investments, net	11,175	1,414	9,322	13,015
RMBS IOs
Schedule of Available-for-sale Securities
Net unrealized gains (losses)	7,715	1,266	4,113	7,942
GSE CRT
Schedule of Available-for-sale Securities
Net unrealized gains (losses)	$ 8,195	$ 173	$ 11,474	$ 237

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Mortgage-Backed and Credit Risk Transfer Securities - Components of MBS and GSE CRT Interest Income (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Schedule of Available-for-sale Securities
Coupon Interest	$ 147,267	$ 142,476	$ 293,336	$ 288,770
Net (Premium Amortization)/Discount Accretion	(26,240)	(29,616)	(53,436)	(53,664)
Interest Income	121,027	112,860	239,900	235,106
Agency
Schedule of Available-for-sale Securities
Coupon Interest	91,979	84,440	183,210	170,211
Net (Premium Amortization)/Discount Accretion	(27,775)	(28,277)	(56,353)	(52,462)
Interest Income	64,204	56,163	126,857	117,749
Non-Agency RMBS
Schedule of Available-for-sale Securities
Coupon Interest	18,131	24,127	38,745	49,976
Net (Premium Amortization)/Discount Accretion	3,734	2,292	8,121	6,136
Interest Income	21,865	26,419	46,866	56,112
GSE CRT
Schedule of Available-for-sale Securities
Coupon Interest	5,556	2,136	10,043	4,333
Net (Premium Amortization)/Discount Accretion	(347)	(775)	(718)	(1,542)
Interest Income	5,209	1,361	9,325	2,791
CMBS
Schedule of Available-for-sale Securities
Coupon Interest	31,506	31,476	61,182	63,740
Net (Premium Amortization)/Discount Accretion	(1,852)	(2,839)	(4,486)	(5,779)
Interest Income	29,654	28,637	56,696	57,961
Other
Schedule of Available-for-sale Securities
Coupon Interest	95	297	156	510
Net (Premium Amortization)/Discount Accretion	0	(17)	0	(17)
Interest Income	$ 95	$ 280	$ 156	$ 493

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Commercial Loans Held-for-Investment (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2017 USD ($) loan	Dec. 31, 2016 USD ($) loan
Accounts, Notes, Loans and Financing Receivable
Carrying value	$ 278,866,000	$ 273,355,000
Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Number of loans | loan	10	10
Principal Balance	$ 279,121,000	$ 273,666,000
Unamortized (fees)/ costs, net	(255,000)	(311,000)
Carrying value	$ 278,866,000	$ 273,355,000
Weighted Average Coupon	8.50%	8.14%
Weighted Average Years to Maturity	1 year 5 months	1 year 7 months
Allowance for loan losses	$ 0	$ 0
Commercial Portfolio Segment | Mezzanine Loans
Accounts, Notes, Loans and Financing Receivable
Number of loans | loan	10	10
Principal Balance	$ 279,121,000	$ 273,666,000
Unamortized (fees)/ costs, net	(255,000)	(311,000)
Carrying value	$ 278,866,000	$ 273,355,000
Weighted Average Coupon	8.50%	8.14%
Weighted Average Years to Maturity	1 year 5 months	1 year 7 months

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Other Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule of Investments [Abstract]
FHLBI stock	$ 74,250	$ 74,250
Investments in unconsolidated ventures	23,311	33,301
Investment in exchange-traded fund	3,979	500
Prepaid expenses and other assets	888	1,246
Total	$ 102,428	$ 109,297

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Borrowings - Schedule of Borrowings (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Repurchase Agreements:
Amount outstanding	$ 12,118,948	$ 11,160,669
Weighted average interest rate	1.56%	1.23%
Weighted average remaining maturity	21 days	30 days
Secured Loans
Amount outstanding	$ 1,650,000	$ 1,650,000
Total Borrowings
Carrying value of exchangeable senior notes	217,804	397,041
Agency RMBS
Repurchase Agreements:
Amount outstanding	$ 9,227,679	$ 8,148,220
Weighted average interest rate	1.29%	0.93%
Weighted average remaining maturity	20 days	32 days
Non-Agency RMBS
Repurchase Agreements:
Amount outstanding	$ 1,130,943	$ 1,519,859
Weighted average interest rate	2.50%	2.06%
Weighted average remaining maturity	29 days	28 days
GSE CRT
Repurchase Agreements:
Amount outstanding	$ 661,432	$ 547,872
Weighted average interest rate	2.58%	2.25%
Weighted average remaining maturity	7 days	16 days
CMBS
Repurchase Agreements:
Amount outstanding	$ 1,098,894	$ 944,718
Weighted average interest rate	2.33%	1.86%
Weighted average remaining maturity	16 days	16 days
Secured Loans
Secured Loans
Amount outstanding	$ 1,650,000	$ 1,650,000
Weighted average interest rate	1.23%	0.74%
Weighted average remaining maturity	2501 days	2682 days
Exchangeable Senior Notes
Exchangeable Senior Notes
Amount outstanding	$ 218,755	$ 400,000
Weighted average interest rate	5.00%	5.00%
Weighted average remaining maturity	258 days	439 days
Total Borrowings
Debt issuance costs	$ 1,000	$ 3,000
Secured Debt, Excluding Asset-Backed Securities
Total Borrowings
Amount outstanding	$ 13,987,703	$ 13,210,669
Weighted average interest rate	1.58%	1.28%
Weighted average remaining maturity	317 days	373 days

XML

Borrowings - Schedule of Maturities (Details) $ in Thousands	Jun. 30, 2017 USD ($)
Debt Disclosure [Abstract]
2018	$ 12,337,703
2019	0
2020	300,000
2021	100,000
2022	0
Thereafter	1,250,000
Total	$ 13,987,703

XML

Borrowings - Repurchase Agreements (Detail) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017 USD ($) Counterparty	Dec. 31, 2016 USD ($) Counterparty
Repurchase Agreement Counterparty
Amount Outstanding	$ 12,118,948	$ 11,160,669
MBS and GSE CRTs Pledged as Collateral	13,370,297	12,444,304
Advances from Federal Home Loan Banks	$ 1,650,000	$ 1,650,000
Secured Loans Counterparty, Percentage of Total Amount Outstanding	12.00%	12.90%
Secured Loans Counterparty, Pledged as Collateral	$ 1,941,665	$ 1,931,582
Total, Amount Outstanding	$ 13,768,948	$ 12,810,669
Total, Percentage of Total Amount Outstanding	100.00%	100.00%
MBS and GSE CRTs Pledged as Collateral	$ 15,311,962	$ 14,375,886
Number of counterparties | Counterparty	7	7
Repurchase Agreement Counterparties [Member]
Repurchase Agreement Counterparty
Amount Outstanding	$ 12,118,948	$ 11,160,669
Percent of Total Amount Outstanding	88.00%	87.10%
MBS and GSE CRTs Pledged as Collateral	$ 13,370,297	$ 12,444,304
HSBC Securities (USA) Inc.
Repurchase Agreement Counterparty
Amount Outstanding	$ 1,315,644	$ 1,401,966
Percent of Total Amount Outstanding	9.50%	11.20%
MBS and GSE CRTs Pledged as Collateral	$ 1,383,316	$ 1,468,793
ING Financial Market LLC
Repurchase Agreement Counterparty
Amount Outstanding	$ 1,270,181	$ 1,142,200
Percent of Total Amount Outstanding	9.20%	8.90%
MBS and GSE CRTs Pledged as Collateral	$ 1,336,963	$ 1,216,492
Pierpont Securities LLC
Repurchase Agreement Counterparty
Amount Outstanding	$ 1,125,511	$ 681,853
Percent of Total Amount Outstanding	8.20%	5.30%
MBS and GSE CRTs Pledged as Collateral	$ 1,181,071	$ 717,663
Royal Bank of Canada
Repurchase Agreement Counterparty
Amount Outstanding	$ 1,073,515	$ 1,098,631
Percent of Total Amount Outstanding	7.80%	8.60%
MBS and GSE CRTs Pledged as Collateral	$ 1,258,618	$ 1,293,336
Mitsubishi UFJ Securities (USA), Inc.
Repurchase Agreement Counterparty
Amount Outstanding	$ 653,956	$ 703,382
Percent of Total Amount Outstanding	4.70%	5.50%
MBS and GSE CRTs Pledged as Collateral	$ 691,437	$ 740,404
E D & F Man Capital Markets Inc.
Repurchase Agreement Counterparty
Amount Outstanding	$ 621,813	$ 405,615
Percent of Total Amount Outstanding	4.50%	3.20%
MBS and GSE CRTs Pledged as Collateral	$ 653,306	$ 430,896
Scotia Capital
Repurchase Agreement Counterparty
Amount Outstanding	$ 605,826	$ 479,105
Percent of Total Amount Outstanding	4.40%	3.70%
MBS and GSE CRTs Pledged as Collateral	$ 630,441	$ 500,578
Citigroup Global Markets Inc.
Repurchase Agreement Counterparty
Amount Outstanding	$ 552,926	$ 427,185
Percent of Total Amount Outstanding	4.00%	3.30%
MBS and GSE CRTs Pledged as Collateral	$ 656,821	$ 534,875
Industrial and Commercial Bank of China Financial Services LLC
Repurchase Agreement Counterparty
Amount Outstanding	$ 524,907	$ 707,616
Percent of Total Amount Outstanding	3.80%	5.50%
MBS and GSE CRTs Pledged as Collateral	$ 550,286	$ 748,503
South Street Securities LLC
Repurchase Agreement Counterparty
Amount Outstanding	$ 485,749	$ 675,660
Percent of Total Amount Outstanding	3.50%	5.30%
MBS and GSE CRTs Pledged as Collateral	$ 514,435	$ 713,330
KGS Alpha Capital Markets LP
Repurchase Agreement Counterparty
Amount Outstanding	$ 481,965	$ 441,541
Percent of Total Amount Outstanding	3.50%	3.40%
MBS and GSE CRTs Pledged as Collateral	$ 506,387	$ 475,858
Goldman, Sachs & Co
Repurchase Agreement Counterparty
Amount Outstanding	$ 467,361	$ 486,430
Percent of Total Amount Outstanding	3.40%	3.80%
MBS and GSE CRTs Pledged as Collateral	$ 586,400	$ 623,400
JP Morgan Securities Inc.
Repurchase Agreement Counterparty
Amount Outstanding	$ 411,296	$ 477,947
Percent of Total Amount Outstanding	3.00%	3.70%
MBS and GSE CRTs Pledged as Collateral	$ 476,473	$ 554,494
Societe Generale
Repurchase Agreement Counterparty
Amount Outstanding	$ 395,937	$ 325,393
Percent of Total Amount Outstanding	2.90%	2.50%
MBS and GSE CRTs Pledged as Collateral	$ 509,082	$ 427,200
Guggenheim Liquidity Services, LLC
Repurchase Agreement Counterparty
Amount Outstanding	$ 329,375	$ 356,149
Percent of Total Amount Outstanding	2.40%	2.80%
MBS and GSE CRTs Pledged as Collateral	$ 346,416	$ 377,030
Mizuho Securities USA Inc.
Repurchase Agreement Counterparty
Amount Outstanding	$ 329,168
Percent of Total Amount Outstanding	2.40%
MBS and GSE CRTs Pledged as Collateral	$ 347,282
Natixis, New York Branch
Repurchase Agreement Counterparty
Amount Outstanding	$ 302,566	$ 336,202
Percent of Total Amount Outstanding	2.20%	2.60%
MBS and GSE CRTs Pledged as Collateral	$ 327,418	$ 362,432
BNP Paribas Securities Corp
Repurchase Agreement Counterparty
Amount Outstanding	$ 283,528	$ 307,641
Percent of Total Amount Outstanding	2.10%	2.40%
MBS and GSE CRTs Pledged as Collateral	$ 326,548	$ 346,484
Daiwa Capital Markets America Inc.
Repurchase Agreement Counterparty
Amount Outstanding	$ 218,702
Percent of Total Amount Outstanding	1.60%
MBS and GSE CRTs Pledged as Collateral	$ 230,239
All other counterparties
Repurchase Agreement Counterparty
Amount Outstanding	$ 669,022	$ 706,153
Percent of Total Amount Outstanding	4.90%	5.40%
MBS and GSE CRTs Pledged as Collateral	$ 857,358	$ 912,536

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Borrowings - Additional Information (Detail) - USD ($)	1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016	Dec. 31, 2013
Repurchase Agreement Counterparty
Collateral ratio					110.00%		112.00%
Advances from Federal Home Loan Banks	$ 1,650,000,000		$ 1,650,000,000		$ 1,650,000,000		$ 1,650,000,000
Net loss on extinguishment of debt			526,000	$ 0	$ 5,237,000	$ 0
Minimum
Repurchase Agreement Counterparty
Repurchase obligation maturity					1 month
Maximum
Repurchase Agreement Counterparty
Repurchase obligation maturity					12 months
FHLBI
Repurchase Agreement Counterparty
Advances from Federal Home Loan Banks	1,650,000,000		1,650,000,000		$ 1,650,000,000
Average outstanding borrowings from FHLBI					$ 1,650,000,000
FHLBI weighted average interest rate on advances					0.96%
Weighted average maturity (in years)					6 years 10 months 24 days
Exchangeable Senior Notes
Repurchase Agreement Counterparty
Debt principal amount								$ 400,000,000
Accrued interest payable	3,200,000		3,200,000		$ 3,200,000		$ 5,900,000
Exchangeable Senior Notes
Repurchase Agreement Counterparty
Debt principal amount	31,245,000	$ 150,000,000	31,245,000		31,245,000
Extinguishment of debt, amount	$ 31,600,000	$ 153,800,000
Net loss on extinguishment of debt			526,000		5,200,000
Write off of unamortized debt issuance costs			$ 136,000		$ 1,000,000

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Collateral Positions (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Derivative
Repurchase agreements collateral pledged	$ 13,370,297,000	$ 12,444,304,000
Securities loaned collateral pledged	1,941,665,000	1,931,582,000
Interest rate swaps collateral pledged	56,434,000	132,762,000
Total collateral pledged	15,368,396,000	14,508,648,000
Cash	3,471,000	1,700,000
Non-cash collateral	0	536,000
Total collateral held	3,471,000	2,236,000
Cash
Derivative
Total collateral pledged	1,246,000	86,450,000
Interest Rate Swaps and Currency Forward Contracts | Cash
Derivative
Interest rate swaps collateral pledged	1,246,000	86,450,000
Currency Forward Contracts | Cash
Derivative
Interest rate swaps collateral pledged	980,000	0
Agency RMBS
Derivative
Repurchase agreements collateral pledged	9,711,706,000	8,654,233,000
Securities loaned collateral pledged	596,514,000	585,504,000
Agency RMBS | Interest Rate Swaps and Currency Forward Contracts
Derivative
Interest rate swaps collateral pledged	55,188,000	46,312,000
Non-Agency RMBS
Derivative
Repurchase agreements collateral pledged	1,424,646,000	1,887,550,000
GSE CRT
Derivative
Repurchase agreements collateral pledged	874,493,000	734,212,000
CMBS
Derivative
Repurchase agreements collateral pledged	1,359,452,000	1,168,309,000
Securities loaned collateral pledged	1,345,151,000	1,346,078,000
Mortgage-backed and GSE CRT securities
Derivative
Total collateral pledged	$ 15,367,150,000	$ 14,422,198,000

XML

Derivatives and Hedging Activities - Outstanding Interest Rate Swaptions and Derivative Instrument Information (Detail)	6 Months Ended
	Jun. 30, 2017 USD ($)
Derivative Interest Rate Swaptions
Notional Amount as of January 1, 2017	$ 7,132,274,000
Additions	1,537,860,000
Settlement, Termination, Expiration or Exercise	(137,304,000)
Notional Amount as of June 30, 2017	8,532,830,000
Interest Rate Swaps
Derivative Interest Rate Swaptions
Notional Amount as of January 1, 2017	6,500,000,000
Additions	1,400,000,000
Settlement, Termination, Expiration or Exercise	0
Notional Amount as of June 30, 2017	7,900,000,000
Currency Forward Contracts
Derivative Interest Rate Swaptions
Notional Amount as of January 1, 2017	62,308,000
Additions	137,860,000
Settlement, Termination, Expiration or Exercise	(131,575,000)
Notional Amount as of June 30, 2017	68,593,000
Credit Derivatives
Derivative Interest Rate Swaptions
Notional Amount as of January 1, 2017	569,966,000
Additions	0
Settlement, Termination, Expiration or Exercise	(5,729,000)
Notional Amount as of June 30, 2017	$ 564,237,000

XML

Derivatives and Hedging Activities - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Decrease (increase) to interest expense	$ 6,400,000	$ (3,200,000)	$ 12,700,000	$ 16,200,000
Amount reclassified to interest expenses within Next 12 months	26,300,000		26,300,000
Unrealized gain on discontinued cash flow hedges included in AOCI	2,360,094,000		2,360,094,000			$ 2,270,184,000
Notional amount	8,532,830,000		8,532,830,000			7,132,274,000
Derivative Liabilities	44,147,000		44,147,000			134,228,000
Cash margin deposits						86,450,000
Accrued Interest
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative Liabilities	40,000,000		40,000,000
Agency RMBS
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Cash margin deposits	55,200,000		55,200,000
Derivative and hedging attributable to Parent
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Unrealized gain on discontinued cash flow hedges included in AOCI	136,608,000	$ 164,233,000	136,608,000	$ 164,233,000	$ 142,896,000	149,115,000	$ 161,036,000	$ 148,273,000
Currency Forward Contracts
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount	68,593,000		68,593,000			62,308,000
Derivative Liabilities	1,100,000		1,100,000			395,000
Pound Sterling | Currency Forward Contracts
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount	49,600,000		49,600,000			49,000,000
Euro | Currency Forward Contracts
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount	$ 19,000,000		$ 19,000,000			$ 13,300,000

XML

Derivatives and Hedging Activities - Interest Rate Derivatives Outstanding Designated as Cash Flow Hedges (Detail) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Interest Rate Derivatives Outstanding
Notional amount	$ 8,532,830,000	$ 7,132,274,000
Interest Rate Swaps
Interest Rate Derivatives Outstanding
Notional amount	$ 7,900,000,000	$ 6,500,000,000
Fixed Interest Rate in Contract	2.1664%
Interest Rate Swaps | ING Capital Markets LLC
Interest Rate Derivatives Outstanding
Notional amount	$ 350,000,000
Fixed Interest Rate in Contract	0.954%
Interest Rate Swaps | UBS AG
Interest Rate Derivatives Outstanding
Notional amount	$ 500,000,000
Fixed Interest Rate in Contract	1.102%
Interest Rate Swaps | ING Capital Markets LLC
Interest Rate Derivatives Outstanding
Notional amount	$ 400,000,000
Fixed Interest Rate in Contract	0.8675%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 300,000,000
Fixed Interest Rate in Contract	2.496%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 300,000,000
Fixed Interest Rate in Contract	2.691%
Interest Rate Swaps | Wells Fargo Bank, N.A.
Interest Rate Derivatives Outstanding
Notional amount	$ 200,000,000
Fixed Interest Rate in Contract	3.142%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 500,000,000
Fixed Interest Rate in Contract	2.249%
Interest Rate Swaps | Citibank, N.A.
Interest Rate Derivatives Outstanding
Notional amount	$ 200,000,000
Fixed Interest Rate in Contract	2.83%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 500,000,000
Fixed Interest Rate in Contract	2.439%
Interest Rate Swaps | HSBC Bank USA, National Association
Interest Rate Derivatives Outstanding
Notional amount	$ 550,000,000
Fixed Interest Rate in Contract	2.45%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 1,000,000,000
Fixed Interest Rate in Contract	2.213%
Interest Rate Swaps | The Royal Bank of Scotland Plc
Interest Rate Derivatives Outstanding
Notional amount	$ 500,000,000
Fixed Interest Rate in Contract	1.98375%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 600,000,000
Fixed Interest Rate in Contract	2.883%
Interest Rate Swaps | HSBC Bank USA, National Association
Interest Rate Derivatives Outstanding
Notional amount	$ 500,000,000
Fixed Interest Rate in Contract	2.201%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 450,000,000
Fixed Interest Rate in Contract	2.0999%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 450,000,000
Fixed Interest Rate in Contract	2.1456%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 100,000,000
Fixed Interest Rate in Contract	2.0375%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 250,000,000
Fixed Interest Rate in Contract	2.778%
Interest Rate Swaps | CME Central Clearing
Interest Rate Derivatives Outstanding
Notional amount	$ 250,000,000
Fixed Interest Rate in Contract	2.387%

XML

Derivatives and Hedging Activities - Schedule of Credit Derivatives (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Derivative
Notional amount	$ 8,532,830	$ 7,132,274
GSE CRT
Derivative
Fair value amount	46,802	17,095
GSE CRT | GSE CRT embedded derivatives
Derivative
Notional amount	564,237	569,966
Maximum potential amount of future undiscounted payments	$ 564,237	$ 569,966

XML

Derivatives and Hedging Activities - Fair Value of Derivative Financial Instruments and Classification on Balance Sheet (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Derivatives, Fair Value
Derivative Assets	$ 3,706	$ 3,186
Derivative Liabilities	44,147	134,228
Interest Rate Swaps Asset
Derivatives, Fair Value
Derivative Assets	11,005	3,085
Currency Forward Contracts
Derivatives, Fair Value
Derivative Assets	0	101
Derivative Liabilities	1,100	395
Interest Rate Swaps Liability
Derivatives, Fair Value
Derivative Liabilities	$ 43,047	$ 133,833

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Derivatives and Hedging Activities - Effect of Derivative Financial Instruments on Statement of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Derivative Instruments, Gain (Loss)
Realized gain (loss) on derivative instruments, net			$ (25,311)	$ (63,569)
Unrealized gain (loss), net			20,120	(211,261)
Gain (loss) on derivative instruments, net	$ (53,513)	$ (90,363)	(48,051)	(328,906)
Not Designated as Hedging Instrument
Derivative Instruments, Gain (Loss)
Realized gain (loss) on derivative instruments, net	(40,229)	(20,584)	(25,311)	(63,569)
Contractual net interest expense	(19,966)	(24,985)	(42,860)	(54,076)
Unrealized gain (loss), net	6,682	(44,794)	20,120	(211,261)
Gain (loss) on derivative instruments, net	(53,513)	(90,363)	(48,051)	(328,906)
Not Designated as Hedging Instrument | GSE CRT embedded derivatives
Derivative Instruments, Gain (Loss)
Realized gain (loss) on derivative instruments, net	0	(5,097)	0	(6,017)
Contractual net interest expense	5,844	6,112	11,651	12,426
Unrealized gain (loss), net	15,559	16,213	29,707	19,229
Gain (loss) on derivative instruments, net	21,403	17,228	41,358	25,638
Not Designated as Hedging Instrument | Interest Rate Swaps
Derivative Instruments, Gain (Loss)
Realized gain (loss) on derivative instruments, net	(38,512)	(20,105)	(22,518)	(64,000)
Contractual net interest expense	(19,966)	(24,985)	(42,860)	(54,076)
Unrealized gain (loss), net	7,975	(49,711)	20,925	(216,382)
Gain (loss) on derivative instruments, net	(50,503)	(94,801)	(44,453)	(334,458)
Not Designated as Hedging Instrument | Interest Rate Swaptions
Derivative Instruments, Gain (Loss)
Realized gain (loss) on derivative instruments, net				(1,485)
Contractual net interest expense				0
Unrealized gain (loss), net				1,485
Gain (loss) on derivative instruments, net				0
Not Designated as Hedging Instrument | Currency Forward Contracts
Derivative Instruments, Gain (Loss)
Realized gain (loss) on derivative instruments, net	(1,717)	(479)	(2,793)	1,916
Contractual net interest expense	0	0	0	0
Unrealized gain (loss), net	(1,293)	4,917	(805)	3,636
Gain (loss) on derivative instruments, net	$ (3,010)	$ 4,438	$ (3,598)	$ 5,552

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Offsetting Assets and Liabilities - Offsetting of Derivative Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Derivatives Asset
Gross Amounts of Recognized Assets	$ 3,706	$ 3,186
Gross Amounts Offset in the Condensed Consolidated Balance Sheets	0	0
Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	3,706	3,186
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Financial Instruments	0	(1,640)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Cash Collateral Received	(3,445)	(1,546)
Net Amount	261	0
Total
Gross Amounts of Recognized Assets	3,706	3,186
Gross Amounts Offset in the Condensed Consolidated Balance Sheets	0	0
Net Amounts of Assets presented in the Condensed Consolidated Balance Sheets	3,706	3,186
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Financial Instruments	0	(1,640)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Cash Collateral Received	(3,445)	(1,546)
Net Amount	261	$ 0
Central Clearing Counterparty
Derivatives Asset
Gross Amounts of Recognized Assets	$ 7,300

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Offsetting Assets and Liabilities - Offsetting of Derivative Liabilities (Detail) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Derivatives Liability
Gross Amounts of Recognized Liabilities	$ 44,147,000	$ 134,228,000
Gross Amounts Offset in the Condensed Consolidated Balance Sheets	0	0
Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	44,147,000	134,228,000
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Financial Instruments	(43,047,000)	(45,738,000)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Collateral Posted	(980,000)	(85,787,000)
Net Amount	120,000	2,703,000
Repurchase Agreements
Gross Amounts of Recognized Liabilities	12,118,948,000	11,160,669,000
Gross Amounts Offset in the Condensed Consolidated Balance Sheets	0	0
Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	12,118,948,000	11,160,669,000
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Financial Instruments	(12,118,948,000)	(11,160,669,000)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Collateral Posted	0	0
Net Amount	0	0
Secured Loans
Gross Amounts of Recognized Liabilities	1,650,000,000	1,650,000,000
Gross Amounts Offset in the Condensed Consolidated Balance Sheets	0	0
Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	1,650,000,000	1,650,000,000
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Financial Instruments	(1,650,000,000)	(1,650,000,000)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Collateral Posted	0	0
Net Amount	0	0
Total Borrowings
Gross Amounts of Recognized Liabilities	13,813,095,000	12,944,897,000
Gross Amounts Offset in the Condensed Consolidated Balance Sheets	0	0
Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheets	13,813,095,000	12,944,897,000
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Financial Instruments	(13,811,995,000)	(12,856,407,000)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, Collateral Posted	(980,000)	(85,787,000)
Net Amount	120,000	2,703,000
Fair value of securities pledged under repurchase agreement	13,370,297,000	12,444,304,000
Cash collateral posted by Company's derivative counterparties	3,471,000	1,700,000
Non-cash collateral received on derivatives	0	536,000
Due from counterparties		86,450,000
Collateral pledged against secured loans	$ 1,941,665,000	$ 1,931,582,000

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Fair Value of Financial Instruments - Fair Value Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $15,367,150 and $14,422,198, respectively)	$ 16,083,284	$ 14,981,331
Derivative Assets	3,706	3,186
Derivative Liabilities	$ 44,147	$ 134,228
Weighted average remaining term of investments in unconsolidated ventures	1 year 9 months 24 days	1 year 3 months 28 days
Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $15,367,150 and $14,422,198, respectively)	$ 16,083,284	$ 14,981,331
Derivative Assets	11,005	3,186
Other assets, at fair value	27,290	33,801
NAV as a practical expedient	23,311	33,301
Total assets	16,121,579	15,018,318
Derivative Liabilities	44,147	134,228
Total liabilities	44,147	134,228
Recurring | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $15,367,150 and $14,422,198, respectively)	0	0
Derivative Assets	0	0
Other assets, at fair value	3,979	500
Total assets	3,979	500
Derivative Liabilities	0	0
Total liabilities	0	0
Recurring | Level 1 | Exchange-traded funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Investments in exchange-traded funds	4,000	500
Recurring | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $15,367,150 and $14,422,198, respectively)	16,036,482	14,964,236
Derivative Assets	11,005	3,186
Other assets, at fair value	0	0
Total assets	16,047,487	14,967,422
Derivative Liabilities	44,147	134,228
Total liabilities	44,147	134,228
Recurring | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $15,367,150 and $14,422,198, respectively)	46,802	17,095
Derivative Assets	0	0
Other assets, at fair value	0	0
Total assets	46,802	17,095
Derivative Liabilities	0	0
Total liabilities	0	0
Recurring | Level 3 | Mortgage-backed and credit risk transfer securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Embedded derivatives at fair value	46,800	17,100
Embedded derivatives in an asset position	47,700	21,000
Embedded derivatives in a liability position	$ (900)	$ (3,900)

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Fair Value of Financial Instruments - Embedded Derivatives Level 3 Roll Forward (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Unrealized gains on credit derivative			$ 29,707,000	$ 19,229,000
Reverse of unrealized losses on securities sold	$ 0	$ 5,100,000	0	6,000,000
Embedded Credit Derivative | GSE CRT
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning balance	31,243,000	(22,706,000)	17,095,000	(25,722,000)
Sales and settlements	0	5,097,000	0	6,017,000
Realized gains/(losses), net	0	(5,097,000)	0	(6,017,000)
Unrealized gains/(losses), net	15,559,000	16,213,000	29,707,000	19,229,000
Ending balance	46,802,000	(6,493,000)	46,802,000	(6,493,000)
Unrealized gains on credit derivative	$ 15,600,000	$ 11,100,000	$ 29,700,000	$ 12,600,000

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Fair Value of Financial Instruments - Embedded Derivatives Fair Value Inputs (Detail) - GSE CRT - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016	Mar. 31, 2017	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Market Comparables, Vendor Pricing and Internal Models | Level 3 | Weighted Average
Fair Value Inputs, Assets, Quantitative Information
Weighted average life	5 years 8 months	5 years 3 months
Embedded Credit Derivative
Fair Value Inputs, Assets, Quantitative Information
Net embedded derivative	$ 46,802	$ 17,095	$ 31,243	$ (6,493)	$ (22,706)	$ (25,722)
Embedded Credit Derivative | Market Comparables, Vendor Pricing and Internal Models | Level 3 | Minimum
Fair Value Inputs, Assets, Quantitative Information
Weighted average life	3 years 8 months	2 years 6 months
Embedded Credit Derivative | Market Comparables, Vendor Pricing and Internal Models | Level 3 | Maximum
Fair Value Inputs, Assets, Quantitative Information
Weighted average life	7 years 6 months	7 years 8 months

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Fair Value of Financial Instruments - Carrying Value and Estimated Fair Value of Financial Instruments (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Carrying Value
Financial Assets
Other assets	$ 74,250	$ 74,250
Total	353,116	347,605
Financial Liabilities
Repurchase agreements	12,118,948	11,160,669
Secured loans	1,650,000	1,650,000
Exchangeable senior notes	217,804	397,041
Total	13,986,752	13,207,710
Carrying Value | Commercial Loans Held For Investment
Financial Assets
Commercial loans, held-for-investment	278,866	273,355
Estimated Fair Value
Financial Assets
Other assets	74,250	74,250
Total	354,507	349,569
Financial Liabilities
Repurchase agreements	12,118,722	11,161,034
Secured loans	1,650,000	1,650,000
Exchangeable senior notes	220,943	400,000
Total	13,989,665	13,211,034
Estimated Fair Value | Commercial Loans Held For Investment
Financial Assets
Commercial loans, held-for-investment	$ 280,257	$ 275,319

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Related Party Transactions (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016	Dec. 31, 2015
Related Party Transaction
Management fee – related party	$ 9,027,000	$ 9,061,000	$ 17,828,000	$ 18,573,000
Investment in money market or mutual funds managed by affiliates of a related party	64,069,000	144,084,000	$ 64,069,000	144,084,000	$ 161,788,000	$ 53,199,000
Manager
Related Party Transaction
Management fee			1.50%
Amounts of transaction with related party	1,200,000	1,400,000	$ 2,800,000	3,200,000
Termination fee multiplier			3
Termination fees assessment period			24 months
Invesco Advisers, Inc. | Affiliated Entity
Related Party Transaction
Management fee – related party	202,000	182,000	$ 387,000	341,000
Investment in money market or mutual funds managed by affiliates of a related party	24,300,000		24,300,000		$ 149,900,000
Loans origination and commitment fees paid	$ 0	$ 189,000	$ 0	$ 692,000

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Stockholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 15, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Class of Stock
Common stock dividend declared (dollars per share)		$ 0.40	$ 0.4	$ 0.8	$ 0.8
Common Stock
Class of Stock
Repurchase of shares of common stock (in shares)		0	0	0	2,063,451
Weighted average repurchase price (dollars per share)						$ 12.12
Repurchase of common stock						$ 25,000
Remaining number of shares authorized to be repurchased (in shares)		18,239,082		18,239,082
Common stock dividend declared (dollars per share)	$ 0.4
Preferred Stock
Class of Stock
Preferred stock, redemption price per share (dollars per share)		$ 25		$ 25
Series A Cumulative Redeemable Preferred Stock
Class of Stock
Preferred stock dividend rate				7.75%
Preferred stock, liquidation preference (dollars per share)		25		$ 25
Preferred stock, dividends per annum (dollars per share)				$ 1.9375
Series A preferred stock dividend (dollars per share)	0.4844
Series B Cumulative Redeemable Preferred Stock
Class of Stock
Preferred stock dividend rate				7.75%
Preferred stock, liquidation preference (dollars per share)		$ 25		$ 25
Preferred stock, dividends per annum (dollars per share)				$ 1.9375
Series A preferred stock dividend (dollars per share)	$ 0.4844
Three-month LIBOR rate | Series B Cumulative Redeemable Preferred Stock
Class of Stock
Preferred stock dividend variable rate spread		5.18%		5.18%
Incentive Plan
Class of Stock
Number of shares of common stock remain available for future issuance (in shares)		806,778		806,778
Total unrecognized compensation cost		$ 288		$ 288
Share-based compensation cost not yet recognized, period for recognition				45 months
Weighted average remaining vesting period				20 months
Incentive Plan | Common Stock
Class of Stock
Common stock options reserved for issuance (in shares)		1,000,000		1,000,000
Compensation expense recognized		$ 112	$ 85	$ 197	$ 170
Restricted stock issued (in shares)		5,292	6,160	10,748	13,908
Incentive Plan | Common Stock | Employee
Class of Stock
Compensation expense recognized		$ 35	$ 63	$ 66	$ 95

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Stockholders' Equity - Components of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	$ 39,633	$ 117,116	$ 55,922	$ 238,576
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	651	(1,037)	1,501	(11,581)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	(6,369)	3,238	(12,667)	16,162
Currency translation adjustments on investment in unconsolidated venture	139	274	(476)	225
Total other comprehensive income (loss)	34,054	119,591	44,280	243,382
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance at beginning of period			2,270,184
Other comprehensive income/(loss), net	34,054	119,591	44,280	243,382
Other comprehensive income/(loss) attributable to non-controlling interest	(429)	(1,510)	(558)	(3,052)
Rebalancing of ownership percentage of non-controlling interest	1		1
Balance at end of period	2,360,094		2,360,094
Equity method investments including portion attributable to noncontrolling interest
Accumulated Other Comprehensive Income (Loss) [Line Items]
Currency translation adjustments on investment in unconsolidated venture	139	274	(476)	225
Total other comprehensive income (loss)	139	274	(476)	225
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Other comprehensive income/(loss), net	139	274	(476)	225
Other comprehensive income/(loss) attributable to non-controlling interest	(2)	(5)	6	(3)
Available-for-sale securities including portion attributable to noncontrolling interest
Accumulated Other Comprehensive Income (Loss) [Line Items]
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	39,633	117,116	55,922	238,576
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	651	(1,037)	1,501	(11,581)
Total other comprehensive income (loss)	40,284	116,079	57,423	226,995
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Other comprehensive income/(loss), net	40,284	116,079	57,423	226,995
Other comprehensive income/(loss) attributable to non-controlling interest	(508)	(1,464)	(724)	(2,847)
Rebalancing of ownership percentage of non-controlling interest	1		1
Derivative and hedging including portion attributable to noncontrolling interest
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	(6,369)	3,238	(12,667)	16,162
Total other comprehensive income (loss)	(6,369)	3,238	(12,667)	16,162
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Other comprehensive income/(loss), net	(6,369)	3,238	(12,667)	16,162
Other comprehensive income/(loss) attributable to non-controlling interest	81	(41)	160	(202)
Equity method investments attributable to Parent
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance at beginning of period	(512)	(79)	95	(32)
Balance at end of period	(375)	190	(375)	190
Available-for-sale securities attributable to Parent
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance at beginning of period	161,381	279,916	144,458	170,383
Balance at end of period	201,158	394,531	201,158	394,531
Derivative and hedging attributable to Parent
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance at beginning of period	142,896	161,036	149,115	148,273
Balance at end of period	136,608	164,233	136,608	164,233
Accumulated other comprehensive income
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total other comprehensive income (loss)			43,722
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance at beginning of period	303,765	440,873	293,668	318,624
Other comprehensive income/(loss), net			43,722
Rebalancing of ownership percentage of non-controlling interest			1
Balance at end of period	$ 337,391	$ 558,954	$ 337,391	$ 558,954

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Shareholders' Equity - Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) - $ / shares	3 Months Ended	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2017
Restricted Stock Units
Unvested at the beginning of the period	19,827	18,807
Shares granted during the period	0	8,115
Shares vested during the period	0	(7,095)
Unvested at the end of the period	19,827	19,827
Weighted Average Grant Date Fair Value
Weighted Average Grant Date Fair Value, at the beginning of the period (usd per share)	$ 14.35	$ 14.37
Granted, Weighted Average Grant Date Fair Value (usd per share)	0.00	15.55
Vested, Weighted Average Grant Date Fair Value (usd per share)	0.00	15.78
Weighted Average Grant Date Fair Value, at the end of the period (usd per share)	$ 14.35	$ 14.35

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Earnings per Common Share - Earnings per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Basic Earnings:
Net income (loss) available to common stockholders	$ 46,834	$ (11,617)	$ 133,964	$ (167,777)
Effect of dilutive securities:
Income allocated to exchangeable senior notes	3,504	0	8,512	0
Income (loss) allocated to non-controlling interest	670	(75)	1,856	(1,958)
Dilutive net income (loss) available to stockholders	$ 51,008	$ (11,692)	$ 144,332	$ (169,735)
Basic Earnings:
Shares available to common stockholders (in shares)	111,608	111,581	111,603	112,362
Effect of dilutive securities:
Restricted stock awards (in shares)	20	0	20	0
OP units (in shares)	1,425	1,425	1,425	1,425
Exchangeable senior notes (in shares)	10,507	0	12,782	0
Dilutive Shares (in shares)	123,560	113,006	125,830	113,787
Net income (loss) attributable to common stockholders
Basic (usd per share)	$ 0.42	$ (0.10)	$ 1.20	$ (1.49)
Diluted (usd per share)	$ 0.41	$ (0.10)	$ 1.15	$ (1.49)

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Earnings per Common Share - Additional Information (Details) - shares	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016
Exchangeable Senior Notes
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share	16,835,720	16,835,720
Restricted Stock Units (RSUs)
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share	46,001	44,172

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Non-controlling Interest - Operating Partnership - Additional Information (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Noncontrolling Interest
Non-controlling interest related to the outstanding of OP Units	1,425,000	1,425,000
Non-controlling interest in Operating Partnership	1.30%	1.30%
Non- Controlling Interest
Noncontrolling Interest
Distribution payable	$ 570	$ 570

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Non-controlling Interest - Operating Partnership - Schedule of Income (Expense) Allocated and Distributions Paid to Noncontrolling Interests (Details) - Non- Controlling Interest - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Noncontrolling Interest
Net income (loss) allocated	$ 670	$ (75)	$ 1,856	$ (1,958)
Distributions paid	$ 570	$ 570	$ 1,140	$ 1,140

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Commitments and Contingencies (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Undrawn capital and purchase commitments for unconsolidated ventures sponsored by an affiliate	$ 12.6	$ 15.5
Unfunded commitment	$ 6.4	$ 9.7