0001437071-20-000004.txt : 20200219 0001437071-20-000004.hdr.sgml : 20200219 20200219162947 ACCESSION NUMBER: 0001437071-20-000004 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20200219 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20200219 DATE AS OF CHANGE: 20200219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Invesco Mortgage Capital Inc. CENTRAL INDEX KEY: 0001437071 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 262749336 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-34385 FILM NUMBER: 20630170 BUSINESS ADDRESS: STREET 1: TWO PEACHTREE POINTE STREET 2: 1555 PEACHTREE STREET, NE CITY: ATLANTA STATE: GA ZIP: 30309 BUSINESS PHONE: 404-892-0896 MAIL ADDRESS: STREET 1: TWO PEACHTREE POINTE STREET 2: 1555 PEACHTREE STREET, NE CITY: ATLANTA STATE: GA ZIP: 30309 FORMER COMPANY: FORMER CONFORMED NAME: Invesco Agency Securities Inc. DATE OF NAME CHANGE: 20080606 8-K 1 ivrq42019-8kxmain.htm 8-K Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 19, 2020
  ivrwordmarkmainimage08.jpg
Invesco Mortgage Capital Inc.

(Exact name of registrant as specified in its charter)
 
 
 
 
 
Maryland
 
001-34385
 
26-2749336
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
1555 Peachtree Street, NE,
 
 
Atlanta,
Georgia
 
30309
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (404892-0896
n/a
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):  
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share
 
IVR
 
New York Stock Exchange
7.75% Series A Cumulative Redeemable Preferred Stock
 
IVRpA
 
New York Stock Exchange
7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock
 
IVRpB
 
New York Stock Exchange
7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock
 
IVRpC
 
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
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.






Item 2.02
Results of Operations and Financial Condition.

On February 19, 2020, Invesco Mortgage Capital Inc. (the “registrant”) issued a press release announcing its financial results for the quarter ended December 31, 2019 (the “Release”).

The Release is attached to this Report as Exhibit 99.1 and the information contained in the Release is incorporated into this Item 2.02 by this reference. The information contained in this Item 2.02 is being "furnished" and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in such filing.



Item 9.01
Financial Statements and Exhibits.
 
 
(d)
Exhibits.
 
 
 
 
Exhibit No.
 
Description
99.1
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document).








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 hereunto duly authorized.

Invesco Mortgage Capital Inc.

By: /s/ R. Lee Phegley, Jr.
R. Lee Phegley, Jr.
Chief Financial Officer


Date: February 19, 2020



EX-99.1 2 ivrq42019-8kxex991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1

ivrwordmarkmainimage08.jpg
Press Release
For immediate release


Brandon Burke, Investor Relations
800-241-5477

Invesco Mortgage Capital Inc. Reports Fourth Quarter 2019 Financial Results
Atlanta - February 19, 2020 -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the “Company”) today announced financial results for the quarter ended December 31, 2019.
 
Reported net income per common share
 
$0.75 compared to $0.57 per common share in Q3 2019
 
 
 
 
 
Increased core earnings* per common share
 
$0.52 compared to $0.47 per common share in Q3 2019
 
 
 
 
 
Raised common stock dividend
 
$0.50 compared to $0.45 in Q3 2019
 
 
 
 
 
Maintained stable book value per common share**
 
$16.29 compared to $16.31 per common share at Q3 2019
 
 
 
 
 
Generated an attractive
economic return***
 
2.9% for the quarter and 18.8% for the year ended December 31, 2019

Update from John Anzalone, Chief Executive Officer

“We are pleased to announce core earnings of $0.52 per common share for the fourth quarter of 2019. Core earnings exceeded our dividend for the fifth consecutive quarter as IVR benefits from an active portfolio management and hedging strategy. The 11.1% increase in our quarterly dividend to $0.50 per share drove an economic return of 2.9% for the quarter as book value remained stable.

“2019 was a strong year for Invesco Mortgage Capital's stockholders, as we raised the dividend 19.0% and improved book value per common share by 6.7%. As such, stockholders enjoyed an economic return of 18.8% for the year. Additionally, we raised over $500 million in common equity during the year, which allowed us to gain scale while investing in accretive assets.

“As always, active portfolio management and our hedging strategy have been key to our success. This was evident in our investment portfolio, where we focused on allocating capital to strategies that generate attractive returns while minimizing our exposure to prepayment risk. This was also evident in our hedging strategy, where we actively managed our hedges to protect book value and improve our effective interest rate margin. We enter 2020 on a strong note, having raised an additional $347 million in common equity earlier this month as we continue to build upon the positive momentum achieved in 2019.”



* Core earnings (and by calculation, core earnings per common share) are non-Generally Accepted Accounting Principles ("GAAP") financial measures. Refer to the section entitled "Non-GAAP Financial Measures" for important disclosures and a reconciliation to the most comparable U.S. GAAP measures.
**Book value per common share is calculated as total stockholders' equity less the liquidation preference of our Series A Preferred Stock ($140.0 million), Series B Preferred Stock ($155.0 million) and Series C Preferred Stock ($287.5 million); divided by total common shares outstanding.
***Economic return for the quarter ended December 31, 2019 is defined as the change in book value per common share from September 30, 2019 to December 31, 2019 of $(0.02); plus dividends declared of $0.50 per common share; divided by the September 30, 2019 book value per common share of $16.31. Economic return for the year ended December 31, 2019 is defined as the change in book value per common share from December 31, 2018 to December 31, 2019 of $1.02; plus dividends declared of $1.85 per common share; divided by the December 31, 2018 book value per common share of $15.27.


 
1
 

Exhibit 99.1

Key performance indicators for the quarters ended December 31, 2019 and September 30, 2019 are summarized in the table below.
($ in millions, except share amounts)
Q4 ‘19
Q3 ‘19
Variance
Average Balances
(unaudited)
(unaudited)
 
Average earning assets (at amortized cost)

$21,318.1


$20,963.1


$355.0

Average borrowings

$19,676.2


$19,326.9


$349.3

Average stockholders' equity

$2,595.3


$2,598.0


($2.7
)
 
 
 
 
U.S. GAAP Financial Measures
 
 
 
Total interest income

$192.8


$196.3


($3.5
)
Total interest expense

$106.8


$123.3


($16.5
)
Net interest income

$86.0


$73.0


$13.0

Total expenses

$12.4


$10.6


$1.8

Net income attributable to common stockholders

$106.9


$77.9


$29.0

 
 
 
 
Average earning asset yields
3.62
%
3.75
%
(0.13
%)
Average cost of funds
2.17
%
2.55
%
(0.38
%)
Average net interest rate margin
1.45
%
1.20
%
0.25
%
 
 
 
 
Period-end weighted average asset yields*
3.86
%
3.87
%
(0.01
%)
Period-end weighted average cost of funds
2.09
%
2.47
%
(0.38
%)
Period-end weighted average net interest rate margin
1.77
%
1.40
%
0.37
%
 
 
 
 
Book value per common share**

$16.29


$16.31


($0.02
)
Earnings per common share (basic)

$0.75


$0.57


$0.18

Earnings per common share (diluted)

$0.75


$0.57


$0.18

Debt-to-equity ratio
6.5
x
6.8
x
(0.3x)

 
 
 
 
Non-GAAP Financial Measures***
 
 
 
Core earnings

$74.9


$63.7


$11.2

Effective interest income

$197.8


$201.5


($3.7
)
Effective interest expense

$100.7


$117.5


($16.8
)
Effective net interest income

$97.1


$84.0


$13.1

 
 
 
 
Effective yield
3.71
%
3.84
%
(0.13
%)
Effective cost of funds
2.04
%
2.43
%
(0.39
%)
Effective interest rate margin
1.67
%
1.41
%
0.26
%
 
 
 
 
Core earnings per common share

$0.52


$0.47


$0.05

Repurchase agreement debt-to-equity ratio
6.6
x
6.9
x
(0.3x)

*Period-end weighted average yields are based on amortized cost as of period end and incorporate future prepayment and loss assumptions.
**Book value per common share is calculated as total stockholders' equity less the liquidation preference of our Series A Preferred Stock ($140.0 million), Series B Preferred Stock ($155.0 million) and Series C Preferred Stock ($287.5 million); divided by total common shares outstanding.
*** 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 are non-GAAP financial measures. Refer to the section entitled "Non-GAAP Financial Measures" for important disclosures and a reconciliation to the most comparable U.S. GAAP measures of net income (loss) attributable to common stockholders (and by calculation, basic earnings (loss) per common share), total interest income (and by calculation, average earning asset yields), total interest expense (and by calculation, cost of funds), net interest income (and by calculation, net interest rate margin) and debt-to-equity ratio.

 
2
 

Exhibit 99.1

Financial Summary
Net income attributable to common stockholders for the fourth quarter of 2019 was $106.9 million, up $29.0 million compared to $77.9 million for the third quarter of 2019. Higher net income attributable to common stockholders was primarily due to a $17.8 million increase in other income and a $13.0 million increase in net interest income. Other income was driven by net gains on derivatives that totaled $191.6 million compared to net losses on derivatives of $177.2 million in the third quarter and net losses on investments that totaled $148.5 million in the fourth quarter compared to net gains on investments of $202.4 million in the third quarter. Net gains on derivatives and net losses on investments were driven by an increase in interest rates as the benchmark 10 year U.S. Treasury note rose 24 basis points to 1.92% as of December 31, 2019.
Book value per common share for the fourth quarter of 2019 was $16.29 compared to $16.31 in the third quarter reflecting the success of our active portfolio management and hedging strategy during the quarter. Higher interest rates negatively impacted most asset valuations during the quarter but were significantly offset by increases in the value of our interest rate swaps. Strong investor demand given declining volatility and attractive valuations drove significant spread tightening in Agency RMBS, as the sector posted modest gains for the quarter.
During the fourth quarter of 2019, the Company generated $74.9 million in core earnings, an increase of $11.2 million (17.6%) over the third quarter of 2019. Higher core earnings were driven by a $13.1 million increase in effective net interest income primarily due to a lower effective cost of funds during the quarter. Effective cost of funds was 2.04%, 39 basis points lower than the third quarter, primarily due to lower average repurchase agreement borrowing costs following the decrease in the federal funds target rate in September 2019 and the Federal Reserve's infusion of liquidity into the repurchase agreement market in the fourth quarter.
Total interest income decreased $3.5 million (1.8%) to $192.8 million during the fourth quarter and average earning asset yield decreased 13 basis points to 3.62%. Premium amortization increased $2.8 million to $21.4 million during the fourth quarter reflecting the impact of declining interest rates on prepayments of higher coupon Agency RMBS investments. Average earning assets increased $355.0 million (1.7%) to $21.3 billion in the fourth quarter reflecting trade settlement of approximately $1.2 billion of Agency CMBS securities purchased in the third quarter and sales of approximately $850 million of Agency RMBS. We continue to favor the prepayment protection embedded in Agency CMBS over Agency RMBS with less favorable prepayment characteristics.
The Company increased its average borrowings by $349.3 million (1.8%) in the fourth quarter of 2019 to $19.7 billion to finance its higher asset base. However, total interest expense decreased to $106.8 million compared to $123.3 million during the third quarter due to a 38 basis point decrease in average cost of funds to 2.17% from 2.55% during the third quarter.
The Company's debt-to-equity ratio was 6.5x as of December 31, 2019 compared to 6.8x at September 30, 2019. The Company's repurchase agreement debt-to-equity ratio was 6.6x as of December 31, 2019 compared to 6.9x as of September 30, 2019. The Company decreased leverage as of year end given elevated uncertainty surrounding prepayment speeds on our Agency MBS holdings and repurchase agreement funding levels.
Total expenses for the fourth quarter of 2019 increased to approximately $12.4 million compared to $10.6 million for the third quarter of 2019 primarily due to higher management fees. Total expenses include management fees and general and administrative expenses. The ratio of annualized total expenses to average stockholders' equity* increased to 1.91% compared to 1.63% for the third quarter of 2019.
As previously announced, the Company declared the following dividends on December 16, 2019: a common stock dividend of $0.50 per share paid on January 28, 2020 to its stockholders of record as of December 27, 2019 and a Series A preferred stock dividend of $0.4844 per share paid on January 27, 2020 to its stockholders of record as of January 1, 2020. The Company declared the following dividends on its Series B and Series C Preferred Stock on February 18, 2020 to its stockholders of record as of March 5, 2020: a Series B Preferred Stock dividend of $0.4844 per share payable on March 27, 2020 and a Series C Preferred Stock dividend of $0.46875 per share payable on March 27, 2020.
*The ratio of annualized total expenses to average stockholders' equity is calculated as the annualized sum of management fees plus general and administrative expenses divided by average stockholders' equity. Average stockholders' equity is calculated based on weighted month-end balance of total stockholders' equity excluding equity attributable to preferred stockholders.

 
3
 

Exhibit 99.1


About Invesco Mortgage Capital Inc.
Invesco Mortgage Capital Inc. is a real estate investment trust that primarily focuses on investing in, financing and managing residential and commercial mortgage-backed securities and mortgage loans. Invesco Mortgage Capital Inc. is externally managed and advised by Invesco Advisers, Inc., a registered investment adviser and an indirect wholly-owned subsidiary of Invesco Ltd., a leading independent global investment management firm.

Earnings Call

Members of the investment community and the general public are invited to listen to the Company’s earnings conference call on Thursday, February 20, 2020, at 9:00 a.m. ET, by calling one of the following numbers:

North America Toll Free:    800-857-7465
International:        1-312-470-0052
Passcode:         Invesco

An audio replay will be available until 5:00 pm ET on March 5, 2020 by calling:

888-562-7251 (North America) or 1-402-530-7628 (International)

The presentation slides that will be reviewed during the call will be available on the Company’s website at www.invescomortgagecapital.com.

Cautionary Notice Regarding Forward-Looking Statements

This press release, the related presentation and comments made in the associated conference call, may include statements and information that constitute “forward-looking statements” within the meaning of the U.S. securities laws as defined in the Private Securities Litigation Reform Act of 1995, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements include our views on the risk positioning of our portfolio, domestic and global market conditions (including the residential and commercial real estate market), the market for our target assets, our financial performance, including our core earnings, economic return, comprehensive income and changes in our book value, our ability to continue performance trends, the stability of portfolio yields, interest rates, credit spreads, prepayment trends, financing sources, cost of funds, our leverage and equity allocation. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks identified under the captions “Risk Factors,” “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K and quarterly reports on Form 10-Q, which are available on the Securities and Exchange Commission’s website at www.sec.gov.

All written or oral forward-looking statements that we make, or that are attributable to us, are expressly qualified by this cautionary notice. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Investor Relations Contact: Brandon Burke, 800-241-5477


 
4
 

Exhibit 99.1

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
 
Years Ended
$ in thousands, except share amounts
December 31, 2019
 
September 30, 2019
 
December 31, 2018
 
December 31, 2019
 
December 31, 2018
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
 
 
Interest Income
 
 
 
 
 
 
 
 
 
Mortgage-backed and credit risk transfer securities (1)
191,490

 
194,938

 
174,511

 
772,657

 
631,478

Commercial and other loans
1,291

 
1,353

 
1,593

 
5,710

 
11,538

Total interest income
192,781

 
196,291

 
176,104

 
778,367

 
643,016

Interest Expense
 
 
 
 
 
 
 
 
 
Repurchase agreements
97,993

 
112,851

 
91,057

 
430,697

 
301,794

Secured loans
8,808

 
10,413

 
10,565

 
41,623

 
35,453

Exchangeable senior notes

 

 

 

 
1,621

Total interest expense
106,801

 
123,264

 
101,622

 
472,320

 
338,868

Net interest income
85,980

 
73,027

 
74,482

 
306,047

 
304,148

Other Income (loss)
 
 
 
 
 
 
 
 
 
Gain (loss) on investments, net
(148,511
)
 
202,413

 
76,957

 
624,466

 
(327,700
)
Equity in earnings (losses) of unconsolidated ventures
427

 
403

 
624

 
2,224

 
3,402

Gain (loss) on derivative instruments, net
188,682

 
(177,244
)
 
(293,485
)
 
(534,755
)
 
(5,277
)
Realized and unrealized credit derivative income (loss), net
2,896

 
1

 
(9,026
)
 
8,343

 
(151
)
Net loss on extinguishment of debt

 

 

 

 
(26
)
Other investment income (loss), net
909

 
1,005

 
850

 
3,950

 
2,860

Total other income (loss)
44,403

 
26,578

 
(224,080
)
 
104,228

 
(326,892
)
Expenses
 
 
 
 
 
 
 
 
 
Management fee – related party
10,529

 
8,740

 
10,294

 
38,173

 
40,722

General and administrative
1,882

 
1,862

 
2,116

 
8,001

 
7,070

Total expenses
12,411

 
10,602

 
12,410

 
46,174

 
47,792

Net income (loss)
117,972

 
89,003

 
(162,008
)
 
364,101

 
(70,536
)
Net income (loss) attributable to non-controlling interest

 

 
(899
)
 

 
254

Net income (loss) attributable to Invesco Mortgage Capital Inc.
117,972

 
89,003

 
(161,109
)
 
364,101

 
(70,790
)
Dividends to preferred stockholders
11,106

 
11,107

 
11,106

 
44,426

 
44,426

Net income (loss) attributable to common stockholders
106,866

 
77,896

 
(172,215
)
 
319,675

 
(115,216
)
Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
 
 
 
 
 
 
 
 
 
Basic
0.75

 
0.57

 
(1.54
)
 
2.42

 
(1.03
)
Diluted
0.75

 
0.57

 
(1.54
)
 
2.42

 
(1.03
)
(1)
The table below shows the components of mortgage-backed and credit risk transfer securities income for the periods presented.
 
Three Months Ended
 
Years Ended
$ in thousands
December 31, 2019
 
September 30, 2019
 
December 31, 2018
 
December 31, 2019
 
December 31, 2018
Coupon interest
212,887

 
213,546

 
183,059

 
833,376

 
689,240

Net premium amortization
(21,397
)
 
(18,608
)
 
(8,548
)
 
(60,719
)
 
(57,762
)
Mortgage-backed and credit risk transfer securities interest income
191,490

 
194,938

 
174,511

 
772,657

 
631,478


 
5
 

Exhibit 99.1



INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 
Three Months Ended
 
Years Ended
$ in thousands
December 31, 2019
 
September 30, 2019
 
December 31, 2018
 
December 31, 2019
 
December 31, 2018
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
 
 
Net income (loss)
117,972

 
89,003

 
(162,008
)
 
364,101

 
(70,536
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net
(30,054
)
 
14,482

 
10,376

 
83,965

 
(210,424
)
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net

 
(954
)
 
39,756

 
9,072

 
193,162

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense
(5,981
)
 
(5,981
)
 
(5,980
)
 
(23,729
)
 
(25,839
)
Currency translation adjustments on investment in unconsolidated venture
(852
)
 
290

 
(119
)
 
(1,158
)
 
(447
)
Total other comprehensive income (loss)
(36,887
)
 
7,837

 
44,033

 
68,150

 
(43,548
)
Comprehensive income (loss)
81,085

 
96,840

 
(117,975
)
 
432,251

 
(114,084
)
Less: Comprehensive (income) loss attributable to non-controlling interest

 

 
1,027

 

 
979

Less: Dividends to preferred stockholders
(11,106
)
 
(11,107
)
 
(11,106
)
 
(44,426
)
 
(44,426
)
Comprehensive income (loss) attributable to common stockholders
69,979

 
85,733

 
(128,054
)
 
387,825

 
(157,531
)




 
6
 

Exhibit 99.1

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
As of
 
December 31, 2019
 
December 31, 2018
$ in thousands, except share amounts
 
ASSETS
 
 
 
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $21,132,742 and $17,082,825, respectively)
21,771,786

 
17,396,642

Cash and cash equivalents
172,507

 
135,617

Restricted cash
116,995

 

Due from counterparties
32,568

 
13,500

Investment related receivable
67,976

 
66,598

Derivative assets, at fair value
18,533

 
15,089

Other assets
166,180

 
186,059

Total assets
22,346,545

 
17,813,505

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities:
 
 
 
Repurchase agreements
17,532,303

 
13,602,484

Secured loans
1,650,000

 
1,650,000

Derivative liabilities, at fair value
352

 
23,390

Dividends payable
74,841

 
49,578

Investment related payable
99,561

 
132,096

Accrued interest payable
43,998

 
37,620

Collateral held payable
170

 
18,083

Accounts payable and accrued expenses
1,560

 
1,694

Due to affiliate
11,861

 
11,863

Total liabilities
19,414,646

 
15,526,808

Commitments and contingencies (See Note 15) (1)

 

Stockholders' Equity:
 
 
 
Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized:
 
 
 
7.75% Series A Cumulative Redeemable Preferred Stock: 5,600,000 shares issued and outstanding ($140,000 aggregate liquidation preference)
135,356

 
135,356

7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock: 6,200,000 shares issued and outstanding ($155,000 aggregate liquidation preference)
149,860

 
149,860

7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock: 11,500,000 shares issued and outstanding ($287,500 aggregate liquidation preference)
278,108

 
278,108

Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 144,256,357 and 111,584,996 shares issued and outstanding, respectively
1,443

 
1,115

Additional paid in capital
2,892,652

 
2,383,532

Accumulated other comprehensive income
288,963

 
220,813

Retained earnings (distributions in excess of earnings)
(814,483
)
 
(882,087
)
Total stockholders’ equity
2,931,899

 
2,286,697

Total liabilities and stockholders' equity
22,346,545

 
17,813,505

(1)
See Note 15 of the Company's consolidated financial statements filed in Part IV, Item 15 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019.



 
7
 

Exhibit 99.1

Non-GAAP Financial Measures
The Company uses the following non-GAAP financial measures to analyze its operating results and believes these financial measures are useful to investors in assessing the Company's 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 the Company's 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 its peer companies.

Core Earnings
The Company calculates 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. The Company may add and has added additional reconciling items to its core earnings calculation as appropriate.

The Company believes 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. The Company excludes 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, a portion of the Company's mortgage-backed securities are classified as available-for-sale securities, and changes in the valuation of these securities are recorded in other comprehensive income on its condensed consolidated balance sheet. The Company elected the fair value option for its 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 the consolidated statement of operations. In addition, certain gains and losses represent one-time events.

The Company believes that providing transparency into core earnings enables its investors to consistently measure, evaluate and compare its operating performance to that of its peers over multiple reporting periods. However, the Company cautions 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 the Company's cash flow from operating activities (determined in accordance with U.S. GAAP), a measure of the Company's liquidity, or an indication of amounts available to fund its cash needs, including its ability to make cash distributions.


 
8
 

Exhibit 99.1

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
 
Years Ended
 
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
$ in thousands, except per share data
 
 
 
 
Net income (loss) attributable to common stockholders
106,866

 
77,896

 
(172,215
)
 
319,675

 
(115,216
)
Adjustments:
 
 
 
 
 
 
 
 
 
(Gain) loss on investments, net
148,511

 
(202,413
)
 
(76,957
)
 
(624,466
)
 
327,700

Realized (gain) loss on derivative instruments, net (1)
(116,156
)
 
173,607

 
252,323

 
597,077

 
2,830

Unrealized (gain) loss on derivative instruments, net (1)
(60,435
)
 
15,352

 
40,533

 
(26,482
)
 
(17,568
)
Realized and unrealized (gain) loss on GSE CRT embedded derivatives, net (2)
2,091

 
5,195

 
14,595

 
12,490

 
22,629

(Gain) loss on foreign currency transactions,
net (3)
(20
)
 
14

 
(7
)
 
(6
)
 
930

Amortization of net deferred (gain) loss on de-designated interest rate swaps (4)
(5,981
)
 
(5,981
)
 
(5,980
)
 
(23,729
)
 
(25,839
)
Net loss on extinguishment of debt

 

 

 

 
26

Subtotal
(31,990
)
 
(14,226
)
 
224,507

 
(65,116
)
 
310,708

Cumulative adjustments attributable to non-controlling interest

 

 
(1,449
)
 

 
(2,536
)
Core earnings attributable to common stockholders
74,876

 
63,670

 
50,843

 
254,559

 
192,956

Basic earnings (loss) per common share
0.75

 
0.57

 
(1.54
)
 
2.42

 
(1.03
)
Core earnings per share attributable to common stockholders (7)
0.52

 
0.47

 
0.46

 
1.92

 
1.73


(1)
U.S. GAAP gain (loss) on derivative instruments, net on the consolidated statements of operations includes the following components:
 
Three Months Ended
 
Years Ended
 
December 31,
2019
 
September 30, 2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
$ in thousands
 
 
 
 
Realized gain (loss) on derivative instruments, net
116,156

 
(173,607
)
 
(252,323
)
 
(597,077
)
 
(2,830
)
Unrealized gain (loss) on derivative instruments, net
60,435

 
(15,352
)
 
(40,533
)
 
26,482

 
17,568

Contractual net interest income (expense)
12,091

 
11,715

 
(629
)
 
35,840

 
(20,015
)
Gain (loss) on derivative instruments, net
188,682

 
(177,244
)
 
(293,485
)
 
(534,755
)
 
(5,277
)

(2)
U.S. GAAP realized and unrealized credit derivative income (loss), net on the consolidated statements of operations includes the following components:
 
Three Months Ended
 
Years Ended
 
December 31,
2019
 
September 30, 2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
$ in thousands
 
 
 
 
Realized and unrealized gain (loss) on GSE CRT embedded derivatives, net
(2,091
)
 
(5,195
)
 
(14,595
)
 
(12,490
)
 
(22,629
)
GSE CRT embedded derivative coupon interest
4,987

 
5,196

 
5,569

 
20,833

 
22,478

Realized and unrealized credit derivative income (loss), net
2,896

 
1

 
(9,026
)
 
8,343

 
(151
)


 
9
 

Exhibit 99.1

(3)
U.S. GAAP other investment income (loss), net on the consolidated statements of operations includes the following components:
 
Three Months Ended
 
Years Ended
 
December 31,
2019
 
September 30, 2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
$ in thousands
 
 
 
 
Dividend income
889

 
1,019

 
843

 
3,944

 
3,790

Gain (loss) on foreign currency transactions, net
20

 
(14
)
 
7

 
6

 
(930
)
Other investment income (loss), net
909

 
1,005

 
850

 
3,950

 
2,860


(4)
U.S. GAAP repurchase agreements interest expense on the consolidated statements of operations includes the following components:
 
Three Months Ended
 
Years Ended
 
December 31,
2019
 
September 30, 2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
$ in thousands
 
 
 
 
Interest expense on repurchase agreement borrowings
103,974

 
118,832

 
97,037

 
454,426

 
327,633

Amortization of net deferred (gain) loss on de-designated interest rate swaps
(5,981
)
 
(5,981
)
 
(5,980
)
 
(23,729
)
 
(25,839
)
Repurchase agreements interest expense
97,993

 
112,851

 
91,057

 
430,697

 
301,794


(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.
The components of core income for the three months and year ended December 31, 2019 are:
 
Three Months Ended
 
Years Ended
$ in thousands
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Effective net interest income (1)
97,077

 
83,957

 
73,441

 
338,991

 
280,772

Dividend income
889

 
1,019

 
843

 
3,944

 
3,790

Equity in earnings (losses) of unconsolidated ventures
427

 
403

 
624

 
2,224

 
3,402

Total expenses
(12,411
)
 
(10,602
)
 
(12,410
)
 
(46,174
)
 
(47,792
)
Total core earnings
85,982

 
74,777

 
62,498

 
298,985

 
240,172

Dividends to preferred stockholders
(11,106
)
 
(11,107
)
 
(11,106
)
 
(44,426
)
 
(44,426
)
Core earnings attributable to non-controlling interest

 

 
(549
)
 

 
(2,790
)
Core earnings attributable to common stockholders
74,876

 
63,670

 
50,843

 
254,559

 
192,956

(1)
See below for a reconciliation of net interest income to effective net interest income, a non-GAAP measure.

 
10
 

Exhibit 99.1


Effective Interest Income/Effective Yield/Effective Interest Expense/Effective Cost of Funds/Effective Net Interest Income/Effective Interest Rate Margin
The Company calculates 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. The Company includes its GSE CRT embedded derivative coupon interest in effective interest income because GSE CRT coupon interest is not accounted for consistently under U.S. GAAP. The Company accounts for GSE CRTs purchased prior to August 24, 2015 as hybrid financial instruments, but has 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). The Company adds back GSE CRT embedded derivative coupon interest to its total interest income because the Company considers GSE CRT embedded derivative coupon interest a current component of its total interest income irrespective of whether the Company has elected the fair value option for the GSE CRT or accounted for the GSE CRT as a hybrid financial instrument.
The Company calculates effective interest expense (and by calculation, effective cost of funds) as U.S. GAAP total interest expense adjusted for contractual net interest income (expense) on its 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. The Company views its interest rate swaps as an economic hedge against increases in future market interest rates on its floating rate borrowings. The Company adds back the net payments it makes on its interest rate swap agreements to its total U.S. GAAP interest expense because the Company uses interest rate swaps to add stability to interest expense. The Company excludes the amortization of net deferred gains (losses) on de-designated interest rate swaps from its calculation of effective interest expense because the Company does not consider the amortization a current component of its borrowing costs.
The Company calculates effective net interest income (and by calculation, effective interest rate margin) as U.S. GAAP net interest income adjusted for contractual net interest income (expense) on its 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.
The Company believes 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 the Company's borrowing costs and operating performance.

 
11
 

Exhibit 99.1

The following tables reconcile total interest income to effective interest income and yield to effective yield for the following periods:
 
Three Months Ended December 31, 2019
 
Three Months Ended 
 September 30, 2019
 
Three Months Ended December 31, 2018
$ in thousands
Reconciliation
 
Yield/Effective Yield
 
Reconciliation
 
Yield/Effective Yield
 
Reconciliation
 
Yield/Effective Yield
Total interest income
192,781

 
3.62
%
 
196,291

 
3.75
%
 
176,104

 
3.88
%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
4,987

 
0.09
%
 
5,196

 
0.09
%
 
5,569

 
0.12
%
Effective interest income
197,768

 
3.71
%
 
201,487

 
3.84
%
 
181,673

 
4.00
%
 
Years Ended December 31,
 
2019
 
2018
$ in thousands
Reconciliation
 
Yield/Effective Yield
 
Reconciliation
 
Yield/Effective Yield
Total interest income
778,367

 
3.78
%
 
643,016

 
3.55
%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
20,833

 
0.11
%
 
22,478

 
0.13
%
Effective interest income
799,200

 
3.89
%
 
665,494

 
3.68
%

The following tables reconcile total interest expense to effective interest expense and cost of funds to effective cost of funds for the following periods:
 
Three Months Ended December 31, 2019
 
Three Months Ended 
 September 30, 2019
 
Three Months Ended December 31, 2018
$ in thousands
Reconciliation
 
Cost of Funds / Effective Cost of Funds
 
Reconciliation
 
Cost of Funds / Effective Cost of Funds
 
Reconciliation
 
Cost of Funds / Effective Cost of Funds
Total interest expense
106,801

 
2.17
 %
 
123,264

 
2.55
 %
 
101,622

 
2.57
%
Add: Amortization of net deferred gain (loss) on de-designated interest rate swaps
5,981

 
0.12
 %
 
5,981

 
0.12
 %
 
5,980

 
0.15
%
Add (Less): Contractual net interest expense (income) on interest rate swaps recorded as gain (loss) on derivative instruments, net
(12,091
)
 
(0.25
)%
 
(11,715
)
 
(0.24
)%
 
629

 
0.02
%
Effective interest expense
100,691

 
2.04
 %
 
117,530

 
2.43
 %
 
108,231

 
2.74
%
 
Years Ended December 31,
 
2019
 
2018
$ in thousands
Reconciliation
 
Cost of Funds / Effective Cost of Funds
 
Reconciliation
 
Cost of Funds / Effective Cost of Funds
Total interest expense
472,320

 
2.52
 %
 
338,868

 
2.16
%
Add: Amortization of net deferred gain (loss) on de-designated interest rate swaps
23,729

 
0.13
 %
 
25,839

 
0.16
%
Add (Less): Contractual net interest expense (income) on interest rate swaps recorded as gain (loss) on derivative instruments, net
(35,840
)
 
(0.19
)%
 
20,015

 
0.13
%
Effective interest expense
460,209

 
2.46
 %
 
384,722

 
2.45
%


 
12
 

Exhibit 99.1

The following tables reconcile 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 December 31, 2019
 
Three Months Ended 
 September 30, 2019
 
Three Months Ended December 31, 2018
$ in thousands
Reconciliation
 
Net Interest Rate Margin / Effective Interest Rate Margin
 
Reconciliation
 
Net Interest Rate Margin / Effective Interest Rate Margin
 
Reconciliation
 
Net Interest Rate Margin / Effective Interest Rate Margin
Net interest income
85,980

 
1.45
 %
 
73,027

 
1.20
 %
 
74,482

 
1.31
 %
Less: Amortization of net deferred (gain) loss on de-designated interest rate swaps
(5,981
)
 
(0.12
)%
 
(5,981
)
 
(0.12
)%
 
(5,980
)
 
(0.15
)%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
4,987

 
0.09
 %
 
5,196

 
0.09
 %
 
5,568

 
0.12
 %
Add (Less): Contractual net interest income (expense) on interest rate swaps recorded as gain (loss) on derivative instruments, net
12,091

 
0.25
 %
 
11,715

 
0.24
 %
 
(629
)
 
(0.02
)%
Effective net interest income
97,077

 
1.67
 %
 
83,957

 
1.41
 %
 
73,441

 
1.26
 %
 
Years Ended December 31,
 
2019
 
2018
$ in thousands
Reconciliation
 
Net Interest Rate Margin / Effective Interest Rate Margin
 
Reconciliation
 
Net Interest Rate Margin / Effective Interest Rate Margin
Net interest income
306,047

 
1.26
 %
 
304,148

 
1.39
 %
Less: Amortization of net deferred (gain) loss on de-designated interest rate swaps
(23,729
)
 
(0.13
)%
 
(25,839
)
 
(0.16
)%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
20,833

 
0.11
 %
 
22,478

 
0.13
 %
Add (Less): Contractual net interest income (expense) on interest rate swaps recorded as gain (loss) on derivative instruments, net
35,840

 
0.19
 %
 
(20,015
)
 
(0.13
)%
Effective net interest income
338,991

 
1.43
 %
 
280,772

 
1.23
 %

 
13
 

Exhibit 99.1

Repurchase Agreement Debt-to-Equity Ratio
The following tables show the allocation of the Company's stockholders' equity to its target assets, the Company's debt-to-equity ratio, and the Company's repurchase agreement debt-to-equity ratio as of December 31, 2019 and September 30, 2019. The Company's debt-to-equity ratio is calculated in accordance with U.S. GAAP and is the ratio of total debt (sum of repurchase agreements and secured loans) to total stockholders' equity. The Company presents 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. The Company believes presenting the Company's repurchase agreement debt-to-equity ratio when considered together with its U.S. GAAP financial measure of debt-to-equity ratio, provides information that is useful to investors in understanding the Company's 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.
December 31, 2019
$ in thousands
Agency RMBS
Agency CMBS
Commercial Credit (1)
Residential Credit (2)
Total
Mortgage-backed and credit risk transfer securities
11,301,037

4,767,930

3,829,031

1,873,788

21,771,786

Cash and cash equivalents (3)
73,927

27,881

51,092

19,607

172,507

Restricted cash (4)
81,830

34,441

724


116,995

Derivative assets, at fair value (4)
13,034

5,499



18,533

Other assets
94,525

12,460

110,122

49,617

266,724

Total assets
11,564,353

4,848,211

3,990,969

1,943,012

22,346,545

 
 
 
 
 
 
Repurchase agreements
9,666,964

4,246,359

2,041,968

1,577,012

17,532,303

Secured loans (5)
540,299


1,109,701


1,650,000

Derivative liabilities, at fair value (4)


352


352

Other liabilities
65,353

124,305

29,727

12,606

231,991

Total liabilities
10,272,616

4,370,664

3,181,748

1,589,618

19,414,646

 
 
 
 
 
 
Total stockholders' equity (allocated)
1,291,737

477,547

809,221

353,394

2,931,899

Adjustments to calculate repurchase agreement debt-to-equity ratio:
 
 
 
 
 
Net stockholders' equity in unsecured assets (6)


(46,053
)

(46,053
)
Collateral pledged against secured loans
(621,667
)

(1,276,822
)

(1,898,489
)
Secured loans
540,299


1,109,701


1,650,000

Stockholders' equity related to repurchase agreement debt
1,210,369

477,547

596,047

353,394

2,637,357

Debt-to-equity ratio (7)
7.9

8.9

3.9

4.5

6.5

Repurchase agreement debt-to-equity ratio (8)
8.0

8.9

3.4

4.5

6.6

(1)
Investments in non-Agency CMBS, multifamily GSE CRT, commercial loans and unconsolidated joint ventures are included in commercial credit.
(2)
Investments in non-Agency RMBS, single family GSE CRT and a loan participation interest are included in residential credit.
(3)
Cash and cash equivalents is allocated based on a percentage of stockholders' equity for each asset class.
(4)
Restricted cash, derivative assets and derivative liabilities are allocated based on the hedging strategy for each class.
(5)
Secured loans are allocated based on amount of collateral pledged.
(6)
Net stockholders' equity in unsecured assets includes commercial loans and investments in unconsolidated joint ventures.
(7)
Debt-to-equity ratio is calculated as the ratio of total debt (sum of repurchase agreements and secured loans) to total stockholders' equity.
(8)
Repurchase agreement debt-to-equity ratio is calculated as the ratio of repurchase agreements to stockholders' equity related to repurchase agreement debt.









 
14
 

Exhibit 99.1



September 30, 2019

$ in thousands
Agency RMBS
Agency CMBS
Commercial Credit (1)
Residential Credit (2)
Total
Mortgage-backed and credit risk transfer securities
12,864,217

4,936,184

3,851,552

1,947,546

23,599,499

Cash and cash equivalents (3)
56,122

17,226

37,536

15,004

125,888

Restricted cash (4)
57,878

22,208



80,086

Derivative assets, at fair value (4)
2,557

981

589


4,127

Other assets
76,417

13,452

111,501

50,353

251,723

Total assets
13,057,191

4,990,051

4,001,178

2,012,903

24,061,323

 










Repurchase agreements
11,124,901

3,306,244

2,018,542

1,622,345

18,072,032

Secured loans (5)
547,149


1,102,851


1,650,000

Derivative liabilities, at fair value (4)
33,519

12,862



46,381

Other liabilities
56,160

1,272,761

40,999

11,958

1,381,878

Total liabilities
11,761,729

4,591,867

3,162,392

1,634,303

21,150,291

 










Total stockholders' equity (allocated)
1,295,462

398,184

838,786

378,600

2,911,032

Adjustments to calculate repurchase agreement debt-to-equity ratio:
 
 
 
 
 
Net stockholders' equity in unsecured assets (6)


(47,493
)

(47,493
)
Collateral pledged against secured loans
(633,350
)

(1,276,599
)

(1,909,949
)
Secured loans
547,149


1,102,851


1,650,000

Stockholders' equity related to repurchase agreement debt
1,209,261

398,184

617,545

378,600

2,603,590

Debt-to-equity ratio (7)
9.0

8.3

3.7

4.3

6.8

Repurchase agreement debt-to-equity ratio (8)
9.2

8.3

3.3

4.3

6.9

(1)
Investments in non-Agency CMBS, commercial loans and unconsolidated joint ventures are included in commercial credit.
(2)
Investments in non-Agency RMBS, single family GSE CRT and a loan participation interest are included in residential credit.
(3)
Cash and cash equivalents is allocated based on a percentage of stockholders' equity for each asset class.
(4)
Restricted cash, derivative assets and derivative liabilities are allocated based on the hedging strategy for each class.
(5)
Secured loans are allocated based on amount of collateral pledged.
(6)
Net stockholders' equity in unsecured assets includes commercial loans and investments in unconsolidated joint ventures.
(7)
Debt-to-equity ratio is calculated as the ratio of total debt (sum of repurchase agreements and secured loans) to total stockholders' equity.
(8)
Repurchase agreement debt-to-equity ratio is calculated as the ratio of repurchase agreements to stockholders' equity related to repurchase agreement debt.




 
15
 

Exhibit 99.1

Average Earning Asset Balances
The table below presents information related to the Company's average earning assets for the following periods.
 
Three Months Ended
 
Years Ended
$ in thousands
December 31, 2019
 
September 30, 2019
 
December 31, 2018
 
December 31, 2019
 
December 31, 2018
Average Earning Asset Balances (1):
 
 
 
 
 
 
 
 
 
Agency RMBS:
 
 
 
 
 
 
 
 
 
15 year fixed-rate, at amortized cost
288,050

 
312,603

 
533,041

 
328,404

 
1,911,511

30 year fixed-rate, at amortized cost
10,852,691

 
11,837,640

 
10,438,730

 
11,757,662

 
8,867,942

Hybrid ARM, at amortized cost
57,182

 
66,671

 
936,312

 
129,396

 
1,531,077

Agency - CMO, at amortized cost
420,532

 
420,889

 
263,464

 
378,253

 
258,457

Agency CMBS, at amortized cost
4,185,558

 
2,796,732

 
781,557

 
2,522,256

 
339,816

Non-Agency CMBS, at amortized cost
3,685,198

 
3,607,381

 
3,296,258

 
3,532,202

 
3,226,174

Non-Agency RMBS, at amortized cost
873,774

 
946,446

 
1,051,883

 
980,775

 
1,055,682

GSE CRT, at amortized cost
885,571

 
905,062

 
760,318

 
863,080

 
767,220

Commercial loans, at amortized cost
24,099

 
24,233

 
31,624

 
25,007

 
110,461

Loan participation interest
45,419

 
45,465

 
51,468

 
49,220

 
20,503

Average earning assets
21,318,074

 
20,963,122

 
18,144,655

 
20,566,255

 
18,088,843


Average Earning Asset Yields (2):
 
 
 
 
 
 
 
 
 
Agency RMBS:
 
 
 
 
 
 
 
 
 
15 year fixed-rate
3.32
%
 
3.32
%
 
3.17
%
 
3.34
%
 
2.23
%
30 year fixed-rate
3.03
%
 
3.19
%
 
3.41
%
 
3.26
%
 
3.09
%
Hybrid ARM
3.27
%
 
3.22
%
 
2.66
%
 
3.27
%
 
2.40
%
Agency - CMO
3.50
%
 
3.40
%
 
3.34
%
 
3.41
%
 
3.01
%
Agency CMBS
3.14
%
 
3.44
%
 
3.19
%
 
3.32
%
 
3.30
%
Non-Agency CMBS
5.09
%
 
5.09
%
 
4.95
%
 
5.06
%
 
4.91
%
Non-Agency RMBS
7.18
%
 
6.54
%
 
7.07
%
 
6.73
%
 
7.11
%
GSE CRT (3)
3.03
%
 
3.33
%
 
3.67
%
 
3.39
%
 
3.40
%
Commercial loans
10.49
%
 
10.89
%
 
10.78
%
 
10.90
%
 
9.54
%
Loan participation interest
5.71
%
 
6.18
%
 
6.04
%
 
6.04
%
 
6.10
%
Average earning asset yields
3.62
%
 
3.75
%
 
3.88
%
 
3.78
%
 
3.55
%
(1)
Average earning asset balances for each period are based on weighted month-end average earning assets.
(2)
Average earning asset yields for the period are calculated by dividing interest income, including amortization of premiums and discounts, by average month-end earning assets based on the amortized cost of the investments. All yields are annualized.
(3)
GSE CRT average earning asset yields exclude 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.

 
16
 

Exhibit 99.1

Average Borrowings and Cost of Funds
The table below presents information related to the Company's average borrowings and average cost of funds.
 
Three Months Ended
 
Years Ended
$ in thousands
December 31, 2019
 
September 30, 2019
 
December 31, 2018
 
December 31, 2019
 
December 31, 2018
Average Borrowings (1):
 
 
 
 
 
 
 
 
 
Agency RMBS (2)
10,809,305

 
11,808,241

 
10,819,707

 
11,697,604

 
11,178,636

Agency CMBS
4,118,846

 
2,794,691

 
718,436

 
2,476,770

 
311,024

Non-Agency CMBS (2)
3,146,907

 
3,047,334

 
2,670,071

 
2,920,840

 
2,586,509

Non-Agency RMBS
808,299

 
865,961

 
900,036

 
865,353

 
887,132

GSE CRT
758,793

 
776,555

 
686,404

 
751,361

 
677,545

Exchangeable senior notes

 

 

 

 
28,646

Loan participation interest
34,064

 
34,099

 
38,601

 
36,915

 
15,377

Total average borrowings
19,676,214

 
19,326,881

 
15,833,255

 
18,748,843

 
15,684,869

Maximum borrowings during the period (3)
20,377,801

 
19,898,863

 
16,144,062

 
20,377,801

 
16,144,062


Average Cost of Funds (4):
 
 
 
 
 
 
 
 
 
Agency RMBS (2)
2.18
 %
 
2.54
 %
 
2.52
 %
 
2.52
 %
 
2.10
 %
Agency CMBS 
2.13
 %
 
2.54
 %
 
2.40
 %
 
2.40
 %
 
2.31
 %
Non-Agency CMBS (2)
2.61
 %
 
3.00
 %
 
3.11
 %
 
3.00
 %
 
2.74
 %
Non-Agency RMBS
2.82
 %
 
3.26
 %
 
3.49
 %
 
3.28
 %
 
3.25
 %
GSE CRT
2.85
 %
 
3.22
 %
 
3.47
 %
 
3.25
 %
 
3.19
 %
Exchangeable senior notes
 %
 
 %
 
 %
 
 %
 
5.58
 %
Loan participation interest
3.61
 %
 
4.03
 %
 
4.04
 %
 
3.99
 %
 
4.04
 %
Cost of funds
2.17
 %
 
2.55
 %
 
2.57
 %
 
2.52
 %
 
2.16
 %
Interest rate swaps average fixed pay rate (5)
1.56
 %
 
1.92
 %
 
2.19
 %
 
2.03
 %
 
2.30
 %
Interest rate swaps average floating receive rate (6)
(1.89
)%
 
(2.28
)%
 
(2.17
)%
 
(2.29
)%
 
(2.10
)%
Effective cost of funds (non-GAAP measure) (7)
2.04
 %
 
2.43
 %
 
2.74
 %
 
2.46
 %
 
2.45
 %
 
 
 
 
 
 
 
 
 
 
Debt-to-equity ratio (as of period end)
6.5
x
 
6.8
x
 
6.7
x
 
6.5
x
 
6.7x

(1)
Average borrowings for each period are based on weighted month-end balances; all percentages are annualized.
(2)
Agency RMBS and non-Agency CMBS average borrowings and 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 the Company's average borrowings.
(5)
Interest rate swaps average fixed pay rate is calculated by dividing annualized contractual swap interest expense by the Company's average notional balance of interest rate swaps.
(6)
Interest rate swaps average floating receive rate is calculated by dividing annualized contractual swap interest income by the Company's average notional balance of interest rate swaps.
(7)
For a reconciliation of cost of funds to effective cost of funds, see “Non-GAAP Financial Measures.”


 
17
 
EX-101.SCH 3 ivr-20200219.xsd XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT 0001000 - Document - Cover link:presentationLink link:calculationLink link:definitionLink EX-101.CAL 4 ivr-20200219_cal.xml XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT EX-101.DEF 5 ivr-20200219_def.xml XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT EX-101.LAB 6 ivr-20200219_lab.xml XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT Cover page. Entities [Table] Entities [Table] Class of Stock [Axis] Class of Stock [Axis] Class of Stock [Domain] Class of Stock [Domain] Common Stock, par value $0.01 per share Common Stock [Member] 7.75% Series A Cumulative Redeemable Preferred Stock Series A Cumulative Redeemable Preferred Stock [Member] Series A Cumulative Redeemable Preferred Stock [Member] 7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock Series B Cumulative Redeemable Preferred Stock [Member] Series B Cumulative Redeemable Preferred Stock [Member] 7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock Series C Cumulative Redeemable Preferred Stock [Member] Series C Cumulative Redeemable Preferred Stock [Member] Entity Information [Line Items] Entity Information [Line Items] Document Type Document Type Document Period End Date Document Period End Date Entity Registrant Name Entity Registrant Name Entity Central Index Key Entity Central Index Key Amendment Flag Amendment Flag Entity Incorporation, State or Country Code Entity Incorporation, State or Country Code Entity File Number Entity File Number Entity Tax Identification Number Entity Tax Identification Number Entity Address, Address Line One Entity Address, Address Line One Entity Address, City or Town Entity Address, City or Town Entity Address, State or Province Entity Address, State or Province Entity Address, Postal Zip Code Entity Address, Postal Zip Code City Area Code City Area Code Local Phone Number Local Phone Number Written Communications Written Communications Soliciting Material Soliciting Material Pre-commencement Tender Offer Pre-commencement Tender Offer Pre-commencement Issuer Tender Offer Pre-commencement Issuer Tender Offer Title of 12(b) Security