Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document


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): August 7, 2018

  394549984_ivrwordmarkmainimage04.jpg

(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: (404) 892-0896
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):
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 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





 
Item 2.02
Results of Operations and Financial Condition.

On August 7, 2018, Invesco Mortgage Capital Inc. (the “registrant”) issued a press release announcing its financial results for the quarter ended June 30, 2018 (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
 









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: August 7, 2018
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

394549984_ivrwordmarkmainimage04.jpg
Press Release
For immediate release


Tony Semak, Investor Relations
800-241-5477

Invesco Mortgage Capital Inc. Reports Second Quarter 2018 Financial Results
Diversified investment strategy and duration hedge discipline support book value stability
Basic EPS of $0.72, Core EPS* of $0.41



Atlanta - August 7, 2018 -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the “Company”) today announced financial results for the quarter ended June 30, 2018.

Financial Summary:
Q2 2018 net income attributable to common stockholders of $80.0 million or $0.72 basic earnings per common share (“EPS”) compared to $41.5 million or $0.37 basic EPS in Q1 2018
Q2 2018 core earnings* of $46.1 million or core EPS of $0.41 compared to $50.4 million or core EPS of $0.45 in Q1 2018
Q2 2018 book value per diluted common share** of $17.06 compared to $17.16 at Q1 2018
Economic return*** of 1.9% for the quarter, (2.5%) year to date
Q2 2018 debt-to-equity ratio of 6.1x compared to 6.2x at Q1 2018
Q2 2018 common stock dividend maintained at $0.42 per share

“We are pleased to announce core earnings of $0.41 per share for the second quarter, an economic return of 1.9% for the quarter, and continued book value stability. Despite the rise in interest rates, a flattening yield curve and further Federal Reserve balance sheet reduction in the quarter, we continued to benefit from our diversified investment strategy. Credit spreads have remained in a relatively narrow range in the current market environment, even as Agency RMBS spreads weakened. While our decline in core earnings was substantially attributable to a higher cost of funds, our disciplined approach to actively maintaining our equity duration target helped mitigate the pressure from headwinds during the second quarter,” said John Anzalone, Chief Executive Officer. “We remain confident about our ability to capture attractive returns in Agency RMBS and CMBS."


* 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 diluted common share is calculated as total 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 plus Operating Partnership Units convertible into shares of common stock (1,425,000 shares).
*** Economic return for the quarter ended June 30, 2018 is defined as the change in book value per diluted common share from March 31, 2018 to June 30, 2018 of ($0.10); plus dividends declared of $0.42 per common share; divided by the March 31, 2018 book value per diluted common share of $17.16. Economic return for the six months ended June 30, 2018 is defined as the change in book value per diluted common share from December 31, 2017 to June 30, 2018 of ($1.29); plus dividends declared of $0.84 per common share; divided by the December 31, 2017 book value per diluted common share of $18.35.




 
1
 

Exhibit 99.1

Key performance indicators for the quarters ended June 30, 2018 and March 31, 2018 are summarized in the table below.
($ in millions, except share amounts)
Q2 ‘18
Q1 ‘18
Variance
Average Balances
(unaudited)
(unaudited)
 
Average earning assets (at amortized costs)

$17,731.5


$18,131.0


-$399.5

Average borrowings

$15,276.0


$15,652.3


-$376.3

Average equity

$2,093.4


$2,119.0


-$25.6

 
 
 
 
U.S. GAAP Financial Measures
 
 
 
Total interest income

$151.6


$153.2


-$1.6

Total interest expense

$77.9


$68.1


$9.8

Net interest income

$73.7


$85.1


-$11.4

Total expenses

$11.6


$12.0


-$0.4

Net income (loss) attributable to common stockholders

$80.0


$41.5


$38.5

 
 
 
 
Average earning asset yields
3.42
%
3.38
%
0.04
%
Cost of funds
2.04
%
1.74
%
0.30
%
Net interest rate margin
1.38
%
1.64
%
-0.26
%
 
 
 
 
Book value per diluted common share*

$17.06


$17.16


-$0.10

Earnings (loss) per common share (basic)

$0.72


$0.37


$0.35

Earnings (loss) per common share (diluted)

$0.72


$0.37


$0.35

Debt-to-equity ratio
6.1
x
6.2
x
-0.1x

Comprehensive income (loss) attributable to common stockholders per common share (basic)

$0.32


($0.77
)

$1.09

 
 
 
 
Non-GAAP Financial Measures**
 
 
 
Core earnings

$46.1


$50.4


-$4.3

Effective interest income

$157.2


$158.9


-$1.7

Effective interest expense

$89.3


$86.8


$2.5

Effective net interest income

$68.0


$72.1


-$4.1

 
 
 
 
Effective yield
3.55
%
3.50
%
0.05
%
Effective cost of funds
2.34
%
2.22
%
0.12
%
Effective interest rate margin
1.21
%
1.28
%
-0.07
%
 
 
 
 
Core earnings per common share

$0.41


$0.45


-$0.04

Repurchase agreement debt-to-equity ratio
6.5
x
6.8
x
-0.3x


* Book value per diluted common share is calculated as total 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 plus Operating Partnership Units convertible into shares of common stock (1,425,000 shares).
** 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 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 second quarter of 2018 was $80.0 million compared to $41.5 million for the first quarter of 2018. Higher net income attributable to common stockholders was primarily driven by a $124.0 million decrease in losses on investments that was partially offset by a $66.2 million decrease in gains on derivative instruments. Losses on investments primarily consist of unrealized losses on the Company's mortgage-backed securities accounted for under the fair value option. Net income attributable to common stockholders was also impacted by an $11.4 million decrease in net interest income. Book value per diluted common share for the second quarter of 2018 decreased by 0.6% to $17.06.
During the second quarter of 2018, the Company generated $46.1 million in core earnings, a decrease of $4.3 million or 8.5% from the first quarter of 2018. Core earnings decreased in the second quarter primarily due to a $2.5 million increase in effective interest expense and a $1.7 million decrease in effective interest income. Effective interest expense rose due to a 12 basis point increase in effective cost of funds reflecting increases in the federal funds rate since December 2017. Effective interest expense includes contractual interest expense on interest rate swaps and excludes amortization of net deferred gains on designated interest rate swaps. Lower effective interest income was driven by a slight decrease in average earning assets to $17.7 billion from $18.1 billion during the first quarter following repayment of the Company's exchangeable senior notes in March 2018.
Total interest income for the second quarter of 2018 was $151.6 million compared to $153.2 million for the first quarter of 2018. Lower total interest income reflects a $0.4 billion decrease in average earnings assets that was partially offset by a 4 basis point increase in average earning asset yields from 3.38% to 3.42%. Average earning asset yields benefited from higher index rates on floating and adjustable rate non-Agency RMBS and GSE CRT securities and commercial loans.
The Company decreased its average borrowings by $0.4 billion (2.4%) in the second quarter of 2018 to $15.3 billion compared to average borrowings of $15.7 billion in the first quarter. Total interest expense was $77.9 million compared to total interest expense of $68.1 million during the first quarter of 2018. Total interest expense rose during the second quarter due to a 30 basis point increase in cost of funds to 2.04% from 1.74% in the first quarter.
The Company's debt-to-equity ratio decreased to 6.1x as of June 30, 2018 from 6.2x as of March 31, 2018 and its repurchase agreement debt-to-equity ratio decreased to 6.5x as of June 30, 2018 from 6.8x as of March 31, 2018.
Total expenses include management fees and general and administrative expenses primarily consisting of directors and officers insurance, legal costs, accounting, auditing and tax services and miscellaneous general and administrative costs. Total expenses for the second quarter of 2018 were approximately $11.6 million compared to $12.0 million for the first quarter of 2018. The ratio of annualized total expenses to average equity (1) decreased to 2.22% compared to 2.26% for the first quarter due to lower total expenses.
As previously announced, the Company declared the following dividends on June 15, 2018: a common stock dividend of $0.42 per share paid on July 26, 2018 and a Series A preferred stock dividend of $0.4844 per share paid on July 25, 2018. The Company declared the following dividends on its Series B and Series C Preferred Stock on August 2, 2018 to its stockholders of record as of September 5, 2018: a Series B Preferred Stock dividend of $0.4844 per share payable on September 27, 2018 and a Series C Preferred Stock dividend of $0.46875 per share payable on September 27, 2018.

(1)
The ratio of annualized total expenses to average equity is calculated as the annualized sum of management fees plus general and administrative expenses divided by average equity. Average equity is calculated based on the weighted month-end balance of total 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 Wednesday, August 8, 2018, 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 August 22, 2018 by calling:

800-819-5739 (North America) or 1-203-369-3350 (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: Tony Semak, 800-241-5477


 
4
 

Exhibit 99.1

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) 
 
Three Months Ended
 
Six Months Ended
$ in thousands, except share amounts
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Interest Income

 
 
 

 

 

Mortgage-backed and credit risk transfer securities (1)
147,548

 
149,003

 
121,027

 
296,551

 
239,900

Commercial loans
4,051

 
4,222

 
6,021

 
8,273

 
11,785

Total interest income
151,599

 
153,225

 
127,048

 
304,824

 
251,685

Interest Expense
 
 
 
 
 
 
 
 
 
Repurchase agreements
69,389

 
59,585

 
36,072

 
128,974

 
66,019

Secured loans
8,471

 
6,927

 
4,535

 
15,398

 
7,948

Exchangeable senior notes

 
1,621

 
3,504

 
1,621

 
8,512

Total interest expense
77,860

 
68,133

 
44,111

 
145,993

 
82,479

Net interest income
73,739

 
85,092

 
82,937

 
158,831

 
169,206

Other Income (loss)
 
 
 
 
 
 
 
 
 
Gain (loss) on investments, net
(36,377
)
 
(160,370
)
 
11,175

 
(196,747
)
 
9,322

Equity in earnings (losses) of unconsolidated ventures
798

 
896

 
(154
)
 
1,694

 
(1,688
)
Gain (loss) on derivative instruments, net
67,169

 
133,367

 
(53,513
)
 
200,536

 
(48,051
)
Realized and unrealized credit derivative income (loss), net
735

 
3,165

 
21,403

 
3,900

 
41,358

Net loss on extinguishment of debt

 
(26
)
 
(526
)
 
(26
)
 
(5,237
)
Other investment income (loss), net
(2,160
)
 
3,102

 
2,533

 
942

 
3,862

Total other income (loss)
30,165

 
(19,866
)
 
(19,082
)
 
10,299

 
(434
)
Expenses
 
 
 
 
 
 
 
 
 
Management fee – related party
10,102

 
10,221

 
9,027

 
20,323

 
17,828

General and administrative
1,525

 
1,756

 
1,608

 
3,281

 
3,692

Total expenses
11,627

 
11,977

 
10,635

 
23,604

 
21,520

Net income
92,277

 
53,249

 
53,220

 
145,526

 
147,252

Net income attributable to non-controlling interest
1,163

 
671

 
670

 
1,834

 
1,856

Net income attributable to Invesco Mortgage Capital Inc.
91,114

 
52,578

 
52,550

 
143,692

 
145,396

Dividends to preferred stockholders
11,106

 
11,107

 
5,716

 
22,213

 
11,432

Net income attributable to common stockholders
80,008

 
41,471

 
46,834

 
121,479

 
133,964

Earnings per share:
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
 
 
 
 
 
 
 
 
 
Basic
0.72

 
0.37

 
0.42

 
1.09

 
1.20

Diluted
0.72

 
0.37

 
0.41

 
1.08

 
1.15

Dividends declared per common share
0.42

 
0.42

 
0.40

 
0.84

 
0.80


(1)
The table below shows the components of mortgage-backed and credit risk transfer securities income for the periods presented.
 
Three Months Ended
 
Six Months Ended
$ in thousands
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Coupon interest
164,165

 
166,319

 
147,267

 
330,484

 
293,336

Net premium amortization
(16,617
)
 
(17,316
)
 
(26,240
)
 
(33,933
)
 
(53,436
)
Mortgage-backed and credit risk transfer securities interest income
147,548

 
149,003

 
121,027

 
296,551

 
239,900



 
5
 

Exhibit 99.1

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
In thousands
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Net income
92,277

 
53,249

 
53,220

 
145,526

 
147,252

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net
(47,929
)
 
(132,317
)
 
39,633

 
(180,246
)
 
55,922

Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net
9,889

 
9,237

 
651

 
19,126

 
1,501

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense
(6,898
)
 
(6,539
)
 
(6,369
)
 
(13,437
)
 
(12,667
)
Currency translation adjustments on investment in unconsolidated venture
486

 
312

 
139

 
798

 
(476
)
Total other comprehensive income (loss)
(44,452
)
 
(129,307
)
 
34,054

 
(173,759
)
 
44,280

Comprehensive income (loss)
47,825

 
(76,058
)
 
87,274

 
(28,233
)
 
191,532

Less: Comprehensive (income) loss attributable to non-controlling interest
(602
)
 
959

 
(1,099
)
 
357

 
(2,414
)
Less: Dividends to preferred stockholders
(11,106
)
 
(11,107
)
 
(5,716
)
 
(22,213
)
 
(11,432
)
Comprehensive income (loss) attributable to common stockholders
36,117

 
(86,206
)
 
80,459

 
(50,089
)
 
177,686



 
6
 

Exhibit 99.1

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
As of
 $ in thousands except share amounts
June 30, 2018
 
December 31, 2017
ASSETS
 
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $17,047,937 and $17,560,811, respectively)
17,583,187

 
18,190,754

Commercial loans, held-for-investment
127,607

 
191,808

Cash and cash equivalents
70,254

 
88,381

Restricted cash

 
620

Due from counterparties
7,255

 

Investment related receivable
70,839

 
73,217

Derivative assets, at fair value
47,509

 
6,896

Other assets
108,124

 
105,580

Total assets
18,014,775

 
18,657,256

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Repurchase agreements
13,702,321

 
14,080,801

Secured loans
1,650,000

 
1,650,000

Exchangeable senior notes, net

 
143,231

Derivative liabilities, at fair value
6,071

 
32,765

Dividends and distributions payable
50,201

 
50,193

Investment related payable
23,562

 
5,191

Accrued interest payable
18,886

 
17,845

Collateral held payable
39,748

 
7,327

Accounts payable and accrued expenses
1,705

 
2,200

Due to affiliate
10,558

 
10,825

Total liabilities
15,503,052

 
16,000,378

Commitments and contingencies (See Note 16) (1):

 

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

 
135,356

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

 
149,860

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

 
278,108

Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 111,643,188 and 111,624,159 shares issued and outstanding, respectively
1,116

 
1,116

Additional paid in capital
2,384,902

 
2,384,356

Accumulated other comprehensive income
89,461

 
261,029

Retained earnings (distributions in excess of earnings)
(551,632
)
 
(579,334
)
Total stockholders’ equity
2,487,171

 
2,630,491

Non-controlling interest
24,552

 
26,387

Total equity
2,511,723

 
2,656,878

Total liabilities and equity
18,014,775

 
18,657,256


(1)
See Note 16 of the Company's condensed consolidated financial statements filed in Item 1 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.

 
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 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. 
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, the majority 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 condensed 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
 
Six Months Ended
$ in thousands, except per share data
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Net income attributable to common stockholders
80,008

 
41,471

 
46,834

 
121,479

 
133,964

Adjustments:
 
 
 
 
 
 
 
 
 
(Gain) loss on investments, net
36,377

 
160,370

 
(11,175
)
 
196,747

 
(9,322
)
Realized (gain) loss on derivative instruments, net (1)
(36,274
)
 
(113,578
)
 
40,229

 
(149,852
)
 
25,311

Unrealized (gain) loss on derivative instruments, net (1)
(35,406
)
 
(31,901
)
 
(6,682
)
 
(67,307
)
 
(20,120
)
Realized and unrealized (gain) loss on GSE CRT embedded derivatives, net (2)
4,903

 
2,468

 
(15,559
)
 
7,371

 
(29,707
)
(Gain) loss on foreign currency transactions, net (3)
2,966

 
(1,814
)
 
(1,731
)
 
1,152

 
(2,244
)
Amortization of net deferred (gain) loss on de-designated interest rate swaps (4) 
(6,898
)
 
(6,539
)
 
(6,369
)
 
(13,437
)
 
(12,667
)
Net loss on extinguishment of debt

 
26

 
526

 
26

 
5,237

Subtotal
(34,332
)
 
9,032

 
(761
)
 
(25,300
)
 
(43,512
)
Cumulative adjustments attributable to non-controlling interest
432

 
(114
)
 
10

 
318

 
549

Core earnings attributable to common stockholders
46,108

 
50,389

 
46,083

 
96,497

 
91,001

Basic income (loss) per common share
0.72

 
0.37

 
0.42

 
1.09

 
1.20

Core earnings per share attributable to common stockholders (5)
0.41

 
0.45

 
0.41

 
0.86

 
0.82

(1)
U.S. GAAP gain (loss) on derivative instruments, net on the condensed consolidated statements of operations includes the following components:
 
Three Months Ended
 
Six Months Ended
$ in thousands
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Realized gain (loss) on derivative instruments, net
36,274

 
113,578

 
(40,229
)
 
149,852

 
(25,311
)
Unrealized gain (loss) on derivative instruments, net
35,406

 
31,901

 
6,682

 
67,307

 
20,120

Contractual net interest expense on interest rate swaps
(4,511
)
 
(12,112
)
 
(19,966
)
 
(16,623
)
 
(42,860
)
Gain (loss) on derivative instruments, net
67,169

 
133,367

 
(53,513
)
 
200,536

 
(48,051
)
(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
 
Six Months Ended
$ in thousands
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Realized and unrealized gain (loss) on GSE CRT embedded derivatives, net
(4,903
)
 
(2,468
)
 
15,559

 
(7,371
)
 
29,707

GSE CRT embedded derivative coupon interest
5,638

 
5,633

 
5,844

 
11,271

 
11,651

Realized and unrealized credit derivative income (loss), net
735

 
3,165

 
21,403

 
3,900

 
41,358


 
9
 

Exhibit 99.1


(3)
U.S. GAAP other investment income (loss), net on the condensed consolidated statements of operations includes the following components:
 
Three Months Ended
 
Six Months Ended
$ in thousands
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Dividend income
807

 
1,288

 
802

 
2,094

 
1,618

Gain (loss) on foreign currency transactions, net
(2,966
)
 
1,814

 
1,731

 
(1,152
)
 
2,244

Other investment income (loss), net
(2,159
)
 
3,102

 
2,533

 
942

 
3,862

(4)
U.S. GAAP repurchase agreements interest expense on the condensed consolidated statements of operations includes the following components:
 
Three Months Ended
 
Six Months Ended
$ in thousands
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Interest expense on repurchase agreement borrowings
76,287

 
66,124

 
42,441

 
142,411

 
78,686

Amortization of net deferred (gain) loss on de-designated interest rate swaps
(6,898
)
 
(6,539
)
 
(6,369
)
 
(13,437
)
 
(12,667
)
Repurchase agreements interest expense
69,389

 
59,585

 
36,072

 
128,974

 
66,019


(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.


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 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 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

 
10
 

Exhibit 99.1

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.
The following tables reconcile total interest income to effective interest income and yield to effective yield for the following periods:
 
Three Months Ended
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
$ in thousands
Reconciliation
 
Yield/Effective Yield
 
Reconciliation
 
Yield/Effective Yield
 
Reconciliation
 
Yield/Effective Yield
Total interest income
151,599

 
3.42
%
 
153,225

 
3.38
%
 
127,048

 
3.17
%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
5,638

 
0.13
%
 
5,633

 
0.12
%
 
5,844

 
0.15
%
Effective interest income
157,237

 
3.55
%
 
158,858

 
3.50
%
 
132,892

 
3.32
%
 
Six Months Ended June 30,
 
2018
 
2017
$ in thousands
Reconciliation
 
Yield/Effective Yield
 
Reconciliation
 
Yield/Effective Yield
Total interest income
304,824

 
3.40
%
 
251,685

 
3.11
%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
11,270

 
0.13
%
 
11,651

 
0.15
%
Effective interest income
316,094

 
3.53
%
 
263,336

 
3.26
%
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
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
$ 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
77,860

 
2.04
%
 
68,133

 
1.74
%
 
44,111

 
1.26
%
Add (Less): Amortization of net deferred gain (loss) on de-designated interest rate swaps
6,898

 
0.18
%
 
6,539

 
0.17
%
 
6,369

 
0.18
%
Add: Contractual net interest expense on interest rate swaps recorded as gain (loss) on derivative instruments, net
4,511

 
0.12
%
 
12,112

 
0.31
%
 
19,966

 
0.57
%
Effective interest expense
89,269

 
2.34
%
 
86,784

 
2.22
%
 
70,446

 
2.01
%

 
11
 

Exhibit 99.1

 
Six Months Ended June 30,
 
2018
 
2017
$ in thousands
Reconciliation
 
Cost of Funds / Effective Cost of Funds
 
Reconciliation
 
Cost of Funds / Effective Cost of Funds
Total interest expense
145,993

 
1.89
%
 
82,479

 
1.17
%
Add (Less): Amortization of net deferred gain (loss) on de-designated interest rate swaps
13,437

 
0.17
%
 
12,667

 
0.18
%
Add: Contractual net interest expense on interest rate swaps recorded as gain (loss) on derivative instruments, net
16,624

 
0.22
%
 
42,860

 
0.61
%
Effective interest expense
176,054

 
2.28
%
 
138,006

 
1.96
%

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, 2018
 
March 31, 2018
 
June 30, 2017
$ 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
73,739

 
1.38
 %
 
85,092

 
1.64
 %
 
82,937

 
1.91
 %
Add (Less): Amortization of net deferred (gain) loss on de-designated interest rate swaps
(6,898
)
 
(0.18
)%
 
(6,539
)
 
(0.17
)%
 
(6,369
)
 
(0.18
)%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
5,638

 
0.13
 %
 
5,633

 
0.12
 %
 
5,844

 
0.15
 %
Less: Contractual net interest expense on interest rate swaps recorded as gain (loss) on derivative instruments, net
(4,511
)
 
(0.12
)%
 
(12,112
)
 
(0.31
)%
 
(19,966
)
 
(0.57
)%
Effective net interest income
67,968

 
1.21
 %
 
72,074

 
1.28
 %
 
62,446

 
1.31
 %

 
Six Months Ended June 30,
 
2018
 
2017
$ in thousands
Reconciliation
 
Net Interest Rate Margin / Effective Interest Rate Margin
 
Reconciliation
 
Net Interest Rate Margin / Effective Interest Rate Margin
Net interest income
158,831

 
1.51
 %
 
169,206

 
1.94
 %
Add (Less): Amortization of net deferred (gain) loss on de-designated interest rate swaps
(13,437
)
 
(0.17
)%
 
(12,667
)
 
(0.18
)%
Add: GSE CRT embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net
11,270

 
0.13
 %
 
11,651

 
0.15
 %
Less: Contractual net interest expense on interest rate swaps recorded as gain (loss) on derivative instruments, net
(16,623
)
 
(0.22
)%
 
(42,860
)
 
(0.61
)%
Effective net interest income
140,041

 
1.25
 %
 
125,330

 
1.30
 %


 
12
 

Exhibit 99.1

Repurchase Agreement Debt-to-Equity Ratio
The following tables show the allocation of the Company's equity to its target assets, the Company's debt-to-equity ratio, and the Company's repurchase agreement debt-to-equity ratio as of June 30, 2018 and March 31, 2018. 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 and exchangeable senior notes) to total 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 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.

June 30, 2018
$ in thousands
Agency
RMBS and CMBS
Commercial Credit (1)
Residential Credit (2)
Total
Investments
12,361,217

3,307,841

2,070,733

17,739,791

Cash and cash equivalents (3)
33,312

23,077

13,865

70,254

Derivative assets, at fair value (4)
44,122

3,387


47,509

Other assets
86,210

64,389

6,622

157,221

Total assets
12,524,861

3,398,694

2,091,220

18,014,775

 
 
 
 
 
Repurchase agreements
10,671,351

1,450,627

1,580,343

13,702,321

Secured loans (5)
555,099

1,094,901


1,650,000

Derivative liabilities, at fair value (4)
6,071



6,071

Other liabilities
94,556

29,017

21,037

144,610

Total liabilities
11,327,077

2,574,545

1,601,380

15,503,002

 
 
 
 
 
Total equity (allocated)
1,197,784

824,149

489,840

2,511,773

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

(157,905
)

(157,905
)
Collateral pledged against secured loans
(642,808
)
(1,267,901
)

(1,910,709
)
Secured loans
555,099

1,094,901


1,650,000

Equity related to repurchase agreement debt
1,110,075

493,244

489,840

2,093,159

Debt-to-equity ratio (7)
9.4

3.1

3.2

6.1

Repurchase agreement debt-to-equity ratio (8)
9.6

2.9

3.2

6.5

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



 
13
 

Exhibit 99.1

March 31, 2018
$ in thousands
Agency
RMBS
Commercial Credit (1)
Residential Credit (2)
Other
Total
Investments
12,376,747

3,401,704

2,056,206


17,834,657

Cash and cash equivalents (3)
51,820

41,645

23,659


117,124

Restricted cash
666

1,734



2,400

Derivative assets, at fair value (4)
26,280

105



26,385

Other assets
268,033

63,585

5,894

3,966

341,478

Total assets
12,723,546

3,508,773

2,085,759

3,966

18,322,044

 
 
 
 
 
 
Repurchase agreements
10,864,431

1,482,869

1,563,837


13,911,137

Secured loans (5)
549,325

1,100,675



1,650,000

Derivative liabilities, at fair value (4)
20,170

184



20,354

Other liabilities
177,439

25,392

15,366


218,197

Total liabilities
11,611,365

2,609,120

1,579,203


15,799,688

 
 
 
 
 
 
Total equity (allocated)
1,112,181

899,653

506,556

3,966

2,522,356

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

(212,423
)

(3,966
)
(216,389
)
Collateral pledged against secured loans
(638,847
)
(1,280,048
)


(1,918,895
)
Secured loans
549,325

1,100,675



1,650,000

Equity related to repurchase agreement debt
1,022,659

507,857

506,556


2,037,072

Debt-to-equity ratio (7)
10.3

2.9

3.1

NA

6.2

Repurchase agreement debt-to-equity ratio (8)
10.6

2.9

3.1

NA

6.8

(1)
Investments in non-Agency CMBS, commercial loans and investments in unconsolidated joint ventures are included in commercial credit.
(2)
Investments in non-Agency RMBS and GSE CRT are included in residential credit.
(3)
Cash and cash equivalents is allocated based on a percentage of equity for each asset class.
(4)
Derivative assets and liabilities are allocated based on the hedging strategy for each asset class.
(5)
Secured loans are allocated based on amount of collateral pledged.
(6)
Net equity in unsecured assets and exchangeable senior notes includes commercial loans, investments in unconsolidated joint ventures, 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.


 
14
 

Exhibit 99.1

Average Asset Balances
The table below presents information related to the Company's average earning assets for the following periods.
 
Three Months Ended
 
Six Months Ended
$ in thousands
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Average Balances (1):
 
 
 
 
 
 
 
 
 
Agency RMBS:
 
 
 
 
 
 
 
 
 
15 year fixed-rate, at amortized cost
2,648,396

 
2,879,696

 
3,374,039

 
2,763,406

 
3,444,975

30 year fixed-rate, at amortized cost
7,805,977

 
7,830,802

 
4,852,769

 
7,818,321

 
4,657,799

ARM, at amortized cost
220,960

 
231,303

 
276,272

 
226,103

 
283,502

Hybrid ARM, at amortized cost
1,595,131

 
1,666,890

 
1,996,026

 
1,630,813

 
2,143,014

Agency - CMO, at amortized cost
254,642

 
273,884

 
309,113

 
264,210

 
318,728

Agency CMBS, at amortized cost
50,179

 

 

 
25,228

 

Non-Agency CMBS, at amortized cost
3,177,398

 
3,193,575

 
2,663,808

 
3,185,442

 
2,620,014

Non-Agency RMBS, at amortized cost
1,030,949

 
1,084,584

 
1,483,354

 
1,057,619

 
1,637,336

GSE CRT, at amortized cost
769,821

 
776,742

 
796,050

 
773,263

 
780,954

Commercial loans, at amortized cost
178,080

 
193,540

 
278,052

 
185,767

 
276,524

Average earning assets
17,731,533

 
18,131,016

 
16,029,483

 
17,930,172

 
16,162,846

Average Earning Asset Yields (2):
 
 
 
 
 
 
 
 
 
Agency RMBS:
 
 
 
 
 
 
 
 
 
15 year fixed-rate
1.99
%
 
2.04
%
 
1.97
%
 
2.02
%
 
2.00
%
30 year fixed-rate
2.95
%
 
2.96
%
 
2.83
%
 
2.96
%
 
2.74
%
ARM
2.43
%
 
2.32
%
 
2.27
%
 
2.37
%
 
2.29
%
Hybrid ARM
2.28
%
 
2.24
%
 
2.29
%
 
2.26
%
 
2.29
%
Agency - CMO
3.04
%
 
2.51
%
 
0.34
%
 
2.76
%
 
0.46
%
Agency CMBS
3.63
%
 
%
 
%
 
3.63
%
 
%
Non-Agency CMBS
4.95
%
 
4.85
%
 
4.45
%
 
4.90
%
 
4.33
%
Non-Agency RMBS
7.12
%
 
7.08
%
 
5.90
%
 
7.10
%
 
5.72
%
GSE CRT (3)
3.37
%
 
3.00
%
 
2.62
%
 
3.18
%
 
2.39
%
Commercial loans
9.12
%
 
8.85
%
 
8.69
%
 
8.98
%
 
8.59
%
Average earning asset yields
3.42
%
 
3.38
%
 
3.17
%
 
3.40
%
 
3.11
%
(1)
Average amounts for each period are based on weighted month-end balances; all percentages are annualized. Average balances are presented on an amortized cost basis.
(2)
Average earning asset yields for the period are calculated by dividing interest income, including amortization of premiums and discounts, by the average balance of the amortized cost of the investments. All yields are annualized.
(3)
GSE CRT average earning asset 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.

 
15
 

Exhibit 99.1

Average Borrowings and Equity Balances
The table below presents information related to the Company's average borrowings and average equity for the following periods.
 
Three Months Ended
 
Six Months Ended
$ in thousands
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Average Borrowings (1):
 
 
 
 
 
 
 
 
 
Agency RMBS (2)
11,146,252

 
11,427,614

 
9,665,651

 
11,286,117

 
9,691,612

Agency CMBS
43,984

 

 

 
22,114

 

Non-Agency CMBS (2)
2,556,166

 
2,542,722

 
2,239,854

 
2,549,519

 
2,205,758

Non-Agency RMBS
861,598

 
891,202

 
1,155,529

 
876,318

 
1,283,001

GSE CRT
667,972

 
674,555

 
655,715

 
671,245

 
628,122

Exchangeable senior notes

 
116,176

 
238,530

 
57,767

 
292,009

Total average borrowings
15,275,972

 
15,652,269

 
13,955,279

 
15,463,080

 
14,100,502

Maximum borrowings during the period (3)
15,352,321

 
15,674,202

 
13,986,752

 
15,674,202

 
14,484,038

Average Cost of Funds (4):
 
 
 
 
 
 
 
 
 
Agency RMBS (2)
1.98
 %
 
1.65
 %
 
1.10
 %
 
1.82
 %
 
0.99
 %
Agency CMBS
2.38
 %
 
 %
 
 %
 
2.38
 %
 
 %
Non-Agency CMBS (2)
2.68
 %
 
2.28
 %
 
1.63
 %
 
2.48
 %
 
1.49
 %
Non-Agency RMBS
3.19
 %
 
2.91
 %
 
2.47
 %
 
3.05
 %
 
2.32
 %
GSE CRT
3.16
 %
 
2.87
 %
 
2.51
 %
 
3.02
 %
 
2.39
 %
Exchangeable senior notes
 %
 
5.58
 %
 
5.88
 %
 
5.58
 %
 
5.83
 %
Cost of funds
2.04
 %
 
1.74
 %
 
1.26
 %
 
1.89
 %
 
1.17
 %
Interest rate swaps average fixed pay rate (5) 
2.18
 %
 
2.22
 %
 
2.13
 %
 
2.26
 %
 
2.13
 %
Interest rate swaps average floating receive rate (6) 
(2.00
)%
 
(1.68
)%
 
(1.06
)%
 
(1.89
)%
 
(0.97
)%
Effective cost of funds (non-GAAP measure) (7)
2.34
 %
 
2.22
 %
 
2.01
 %
 
2.28
 %
 
1.96
 %
Average Equity (8):
2,093,426

 
2,118,961

 
2,185,448

 
2,106,123

 
2,157,161

Average debt-to-equity ratio (average during period)
7.3
x
 
7.4x

 
6.4x

 
7.3
x
 
6.5
x
Debt-to-equity ratio (as of period end)
6.1
x
 
6.2x

 
5.9x

 
6.1
x
 
5.9
x
(1)
Average amounts for each period are based on weighted month-end balances; all percentages are annualized. Average balances are presented on an amortized cost basis.
(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.”
(8)
Average equity is calculated based on the weighted month-end balance of total equity excluding equity attributable to preferred stockholders.


 
16
 
(Back To Top)