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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
_______________________________________________ 
FORM 10-Q 
_______________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission file number 001-34385
397858899_ivrmainimageinblacka05.jpg
(Exact Name of Registrant as Specified in Its Charter)
_______________________________________________
Maryland
 
26-2749336
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
1555 Peachtree Street, N.E., Suite 1800
Atlanta, Georgia
 
30309
(Address of Principal Executive Offices)
 
(Zip Code)
(404) 892-0896
(Registrant’s Telephone Number, Including Area Code) 
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
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: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
 
ý
 
  
Accelerated filer
 
o
Non-Accelerated filer
 
o
 
  
Smaller reporting company
 
o
 
 
 
 
 
Emerging growth company
 
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No  ý
As of April 30, 2019, there were 128,588,493 outstanding shares of common stock of Invesco Mortgage Capital Inc.


Table of Contents


INVESCO MORTGAGE CAPITAL INC.
TABLE OF CONTENTS
 
 
 
Page
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.


Table of Contents


PART I
ITEM 1.
FINANCIAL STATEMENTS
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
As of
 $ in thousands except share amounts
March 31, 2019
 
December 31, 2018
ASSETS
 
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $20,544,317 and $17,082,825, respectively)
21,127,598

 
17,396,642

Cash and cash equivalents
78,482

 
135,617

Restricted cash
5,025

 

Due from counterparties
13,000

 
13,500

Investment related receivable
70,789

 
66,598

Derivative assets, at fair value
26,580

 
15,089

Other assets
177,913

 
186,059

Total assets
21,499,387

 
17,813,505

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Repurchase agreements
16,824,387

 
13,602,484

Secured loans
1,650,000

 
1,650,000

Derivative liabilities, at fair value
8,463

 
23,390

Dividends and distributions payable
60,433

 
49,578

Investment related payable
222,500

 
132,096

Accrued interest payable
47,100

 
37,620

Collateral held payable
2,273

 
18,083

Accounts payable and accrued expenses
2,384

 
1,694

Due to affiliate
10,133

 
11,863

Total liabilities
18,827,673

 
15,526,808

Commitments and contingencies (See Note 14):

 

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; 128,267,497 and 111,584,996 shares issued and outstanding, respectively
1,282

 
1,115

Additional paid in capital
2,642,050

 
2,383,532

Accumulated other comprehensive income
277,182

 
220,813

Retained earnings (distributions in excess of earnings)
(812,124
)
 
(882,087
)
Total stockholders’ equity
2,671,714

 
2,286,697

Total liabilities and stockholders' equity
21,499,387

 
17,813,505

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

 
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Table of Contents


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended March 31,
$ in thousands, except share amounts
2019
 
2018
Interest Income

 

Mortgage-backed and credit risk transfer securities
185,492

 
149,003

Commercial and other loans
1,582

 
4,222

Total interest income
187,074

 
153,225

Interest Expense
 
 
 
Repurchase agreements
101,875

 
59,585

Secured loans
11,144

 
6,927

Exchangeable senior notes

 
1,621

Total interest expense
113,019

 
68,133

Net interest income
74,055

 
85,092

Other Income (loss)

 

Gain (loss) on investments, net
268,382

 
(160,370
)
Equity in earnings (losses) of unconsolidated ventures
692

 
896

Gain (loss) on derivative instruments, net
(201,460
)
 
133,367

Realized and unrealized credit derivative income (loss), net
7,884

 
3,165

Net loss on extinguishment of debt

 
(26
)
Other investment income (loss), net
1,029

 
3,102

Total other income (loss)
76,527

 
(19,866
)
Expenses
 
 
 
Management fee – related party
9,534

 
10,221

General and administrative
2,258

 
1,756

Total expenses
11,792

 
11,977

Net income
138,790

 
53,249

Net income attributable to non-controlling interest

 
671

Net income attributable to Invesco Mortgage Capital Inc.
138,790

 
52,578

Dividends to preferred stockholders
11,107

 
11,107

Net income attributable to common stockholders
127,683

 
41,471

Earnings per share:
 
 


Net income attributable to common stockholders
 
 

Basic
1.05

 
0.37

Diluted
1.05

 
0.37

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

 
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 
Three Months Ended March 31,
$ in thousands
2019
 
2018
Net income
138,790

 
53,249

Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net
52,349

 
(132,317
)
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net
10,147

 
9,237

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense
(5,851
)
 
(6,539
)
Currency translation adjustments on investment in unconsolidated venture
(276
)
 
312

Total other comprehensive income (loss)
56,369

 
(129,307
)
Comprehensive income (loss)
195,159

 
(76,058
)
Less: Comprehensive (income) loss attributable to non-controlling interest

 
959

Less: Dividends to preferred stockholders
(11,107
)
 
(11,107
)
Comprehensive income (loss) attributable to common stockholders
184,052

 
(86,206
)

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


 
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Table of Contents


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the three months ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
(Distributions
in excess of
earnings)
 
Total
Stockholders’
Equity
 
Series A
Preferred Stock
 
Series B
Preferred Stock
 
Series C
Preferred Stock
 
 
 
$ in thousands 
except share amounts
 
 
 
Common Stock
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2018
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
111,584,996

 
1,115

 
2,383,532

 
220,813

 
(882,087
)
 
2,286,697

Net income

 

 

 

 

 

 

 

 

 

 
138,790

 
138,790

Other comprehensive income

 

 

 

 

 

 

 

 

 
56,369

 

 
56,369

Proceeds from issuance of common stock, net of offering costs

 

 

 

 

 

 
16,672,000

 
167

 
258,386

 

 

 
258,553

Stock awards

 

 

 

 

 

 
10,501

 

 

 

 

 

Common stock dividends

 

 

 

 

 

 

 

 

 

 
(57,720
)
 
(57,720
)
Preferred stock dividends

 

 

 

 

 

 

 

 

 

 
(11,107
)
 
(11,107
)
Amortization of equity-based compensation

 

 

 

 

 

 

 

 
132

 

 

 
132

Balance at March 31, 2019
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
128,267,497

 
1,282

 
2,642,050

 
277,182

 
(812,124
)
 
2,671,714

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








 
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)
For the three months ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Attributable to Common Stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
(Distributions
in excess of
earnings)
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interest
 
 
 
Series A
Preferred Stock
 
Series B
Preferred Stock
 
Series C
Preferred Stock
 
 
 
 
$ in thousands 
except
share amounts
 
 
 
Common Stock
 
Total
Equity
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
Balance at December 31, 2017
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
111,624,159

 
1,116

 
2,384,356

 
261,029

 
(579,334
)
 
2,630,491

 
26,387

 
2,656,878

Net income

 

 

 

 

 

 

 

 

 

 
52,578

 
52,578

 
671

 
53,249

Other comprehensive loss

 

 

 

 

 

 

 

 

 
(127,677
)
 

 
(127,677
)
 
(1,630
)
 
(129,307
)
Stock awards

 

 

 

 

 

 
12,564

 

 

 

 

 

 

 

Common stock dividends

 

 

 

 

 

 

 

 

 

 
(46,887
)
 
(46,887
)
 

 
(46,887
)
Common unit dividends

 

 

 

 

 

 

 

 

 

 

 

 
(599
)
 
(599
)
Preferred stock dividends

 

 

 

 

 

 

 

 

 

 
(11,107
)
 
(11,107
)
 

 
(11,107
)
Amortization of equity-based compensation

 

 

 

 

 

 

 

 
127

 

 

 
127

 
2

 
129

Rebalancing of ownership percentage of non-controlling interest

 

 

 

 

 

 

 

 
143

 

 

 
143

 
(143
)
 

Balance at March 31, 2018
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
111,636,723

 
1,116

 
2,384,626

 
133,352

 
(584,750
)
 
2,497,668

 
24,688

 
2,522,356

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


 
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  
Three Months Ended March 31,
$ in thousands
2019
 
2018
Cash Flows from Operating Activities
 
 
 
Net income
138,790

 
53,249

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Amortization of mortgage-backed and credit risk transfer securities premiums and (discounts), net
3,185

 
12,663

Realized and unrealized (gain) loss on derivative instruments, net
205,969

 
(145,479
)
Realized and unrealized (gain) loss on credit derivatives, net
(2,534
)
 
2,468

(Gain) loss on investments, net
(268,382
)
 
160,370

(Gain) loss from investments in unconsolidated ventures in excess of distributions received
(692
)
 
(352
)
Other amortization
(5,719
)
 
(6,265
)
Net loss on extinguishment of debt

 
26

(Gain) loss on foreign currency transactions, net

 
(1,800
)
Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in operating assets
(10,015
)
 
1,334

Increase in operating liabilities
7,758

 
562

Net cash provided by operating activities
68,360

 
76,776

Cash Flows from Investing Activities
 
 
 
Purchase of mortgage-backed and credit risk transfer securities
(4,340,536
)
 
(298,859
)
(Contributions to) distributions from investments in unconsolidated ventures, net
299

 
(1,532
)
Change in other assets
1,154

 

Principal payments from mortgage-backed and credit risk transfer securities
300,222

 
488,123

Proceeds from sale of mortgage-backed and credit risk transfer securities
734,834

 

Settlement (termination) of futures, currency forwards and interest rate swaps, net
(232,387
)
 
113,578

Net change in due from counterparties and collateral held payable
(14,060
)
 
14,853

Principal payments from commercial loans held-for-investment
7,128

 
10,042

Origination and advances of commercial loans, net of origination fees

 
(698
)
Net cash (used in) provided by investing activities
(3,543,346
)
 
325,507

Cash Flows from Financing Activities
 
 
 
Proceeds from issuance of common stock
258,966

 

Proceeds from repurchase agreements
28,316,732

 
35,711,164

Principal repayments of repurchase agreements
(25,094,829
)
 
(35,880,828
)
Extinguishment of exchangeable senior notes

 
(143,433
)
Payments of deferred costs
(21
)
 
(76
)
Payments of dividends and distributions
(57,972
)
 
(58,587
)
Net cash provided by (used in) financing activities
3,422,876

 
(371,760
)
Net change in cash, cash equivalents and restricted cash
(52,110
)
 
30,523

Cash, cash equivalents and restricted cash, beginning of period
135,617

 
89,001

Cash, cash equivalents and restricted cash, end of period
83,507

 
119,524

Supplement Disclosure of Cash Flow Information
 
 
 
Interest paid
109,392

 
73,811

Non-cash Investing and Financing Activities Information
 
 
 
Net change in unrealized gain (loss) on mortgage-backed and credit risk transfer securities
62,496

 
(123,080
)
Dividends and distributions declared not paid
60,433

 
50,199

Net change in investment related payable (receivable)
(95,250
)
 
80,688

Offering costs not paid
(413
)
 

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

 
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and Business Operations
Invesco Mortgage Capital Inc. (the "Company", "we") is a Maryland corporation primarily focused on investing in, financing and managing residential and commercial mortgage-backed securities and other mortgage-related assets. We are externally managed and advised by Invesco Advisers, Inc. (our "Manager"), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd. ("Invesco"), a leading independent global investment management firm. We conduct our business through IAS Operating Partnership LP (the "Operating Partnership") and have one operating segment. Prior to November 30, 2018, a wholly-owned subsidiary of Invesco owned 1.3% of the Operating Partnership. See Note 15 - "Non-Controlling Interest - Operating Partnership" of our Annual Report on Form 10-K for the year ended December 31, 2018 for information regarding redemption of Operating Partnership Units ("OP Units") previously held by Invesco.
We primarily invest in:
Residential mortgage-backed securities ("RMBS") that are guaranteed by a U.S. government agency such as the Government National Mortgage Association ("Ginnie Mae"), or a federally chartered corporation such as the Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac") (collectively "Agency RMBS");
Commercial mortgage-backed securities (“CMBS”) that are guaranteed by a U.S. government agency such as Ginnie Mae or a federally chartered corporation such as Fannie Mae or Freddie Mac (collectively "Agency CMBS");
RMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation ("non-Agency RMBS");
CMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency CMBS”);
Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises ("GSE CRT");
Residential and commercial mortgage loans; and
Other real estate-related financing agreements.
We elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986 commencing with our taxable year ended December 31, 2009. To maintain our REIT qualification, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits exclusion from the "Investment Company" definition under the Investment Company Act of 1940.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
Certain disclosures included in our Annual Report on Form 10-K are not required to be included on an interim basis in our quarterly reports on Form 10-Q. We have condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018.
Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Company and our controlled subsidiaries. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of our financial condition and results of operations for the periods presented.
Reclassifications
Our condensed consolidated balance sheet for the year ended December 31, 2018 presented in this Form 10-Q includes a reclassification of Commercial Loans, held-for-investment to Other assets to conform to our current period presentation. See Note 5 - "Other Assets" for further information. 
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and

 
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accompanying notes. Examples of estimates include, but are not limited to, estimates of the fair values of financial instruments, interest income on mortgage-backed and credit risk transfer securities, provision for loan losses and other-than-temporary impairment charges. Actual results may differ from those estimates.
Significant Accounting Policies
There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2018 except for the implementation of new accounting guidance for stock-based payments to non-employees discussed below.
Accounting Pronouncements Recently Adopted
Effective January 1, 2019, we adopted the accounting guidance that aligns the measurement and classification for stock-based payments to non-employees with the guidance for stock-based payments to employees. Under the new guidance, the measurement of equity-classified non-employee awards is fixed at the grant date. The implementation of the guidance did not have a material impact on our financial statements.
Pending Accounting Pronouncements
In June 2016, new accounting guidance was issued for reporting credit losses for assets measured at amortized cost and available-for-sale securities. The new guidance significantly changes how entities will measure credit losses for most financial assets, including loans, that are not measured at fair value through net income. The guidance replaces the existing “incurred loss” model with an “expected loss” model for instruments measured at amortized cost, and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. The new guidance also simplifies the accounting model for purchased credit-impaired debt securities and loans. We are required to adopt the new guidance in the first quarter of 2020 by recording a cumulative effect adjustment to retained earnings as of January 1, 2020. We are currently evaluating the potential impacts of the new guidance and proposed amendments to the new guidance on our consolidated financial statements.
Note 3 – Variable Interest Entities ("VIEs")
Our maximum risk of loss in VIEs in which we are not the primary beneficiary at March 31, 2019 is presented in the table below.
$ in thousands
Carrying Amount
 
Company's Maximum Risk of Loss
Non-Agency CMBS
3,455,806

 
3,455,806

Non-Agency RMBS
1,186,896

 
1,186,896

Investments in unconsolidated ventures
24,129

 
24,129

Total
4,666,831

 
4,666,831

Refer to Note 4 - "Mortgage-Backed and Credit Risk Transfer Securities" and Note 5 - "Other Assets" for additional details regarding these investments.

 
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Note 4 – Mortgage-Backed and Credit Risk Transfer Securities
The following tables summarize our mortgage-backed securities ("MBS") and GSE CRT portfolio by asset type as of March 31, 2019 and December 31, 2018.
March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
$ in thousands
Principal/ Notional
Balance
 
Unamortized
Premium
(Discount)
 
Amortized
Cost
 
Unrealized
Gain/
(Loss), net
 
Fair
Value
 
Period-
end
Weighted
Average
Yield (1)
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
343,116

 
2,595

 
345,711

 
6,391

 
352,102

 
3.34
%
30 year fixed-rate
12,264,517

 
386,145

 
12,650,662

 
65,974

 
12,716,636

 
3.66
%
ARM*
6,215

 
184

 
6,399

 
5

 
6,404

 
3.64
%
Hybrid ARM*
170,397

 
3,602

 
173,999

 
(478
)
 
173,521

 
3.11
%
Total Agency RMBS pass-through
12,784,245

 
392,526

 
13,176,771

 
71,892

 
13,248,663

 
3.64
%
Agency-CMO (2)
913,574

 
(585,878
)
 
327,696

 
(545
)
 
327,151

 
3.65
%
Agency CMBS
1,898,205

 
35,961

 
1,934,166

 
67,387

 
2,001,553

 
3.48
%
Non-Agency CMBS (3)
4,127,880

 
(737,241
)
 
3,390,639

 
65,167

 
3,455,806

 
5.08
%
Non-Agency RMBS (4)(5)(6)
2,774,428

 
(1,700,612
)
 
1,073,816

 
113,080

 
1,186,896

 
6.89
%
GSE CRT (7)
823,578

 
19,823

 
843,401

 
64,128

 
907,529

 
3.16
%
Total
23,321,910

 
(2,575,421
)
 
20,746,489

 
381,109

 
21,127,598

 
4.01
%
* Adjustable-rate mortgage ("ARM")
 
(1)
Period-end weighted average yield is based on amortized cost as of March 31, 2019 and incorporates future prepayment and loss assumptions.
(2)
Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent 67.8% of principal/notional balance, 10.3% of amortized cost and 9.7% of fair value.
(3)
Non-Agency CMBS includes interest-only securities which represent 14.6% of principal/notional balance, 0.4% of amortized cost and 0.4% of fair value.
(4)
Non-Agency RMBS is 54.9% fixed rate, 39.7% variable rate, and 5.4% floating rate based on fair value. Coupon payments on variable rate investments are based upon changes in the underlying ARM and Hybrid ARM loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.
(5)
Of the total discount in non-Agency RMBS, $140.8 million is non-accretable calculated using the principal/notional balance and based on estimated future cash flows of the securities.
(6)
Non-Agency RMBS includes interest-only securities ("non-Agency IO") which represent 54.6% of principal/notional balance, 2.2% of amortized cost and 2.1% of fair value.
(7)
GSE CRT weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option that is recorded as realized and unrealized credit derivative income (loss), net.


 
9
 


Table of Contents


December 31, 2018
 
 
 
 
 
 
 
 
 
 
$ in thousands
Principal/Notional
Balance
 
Unamortized
Premium
(Discount)
 
Amortized
Cost
 
Unrealized
Gain/
(Loss), net
 
Fair
Value
 
Period-
end
Weighted
Average
Yield (1)
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
417,233

 
5,077

 
422,310

 
1,944

 
424,254

 
3.27
%
30 year fixed-rate
9,599,301

 
298,693

 
9,897,994

 
(125,225
)
 
9,772,769

 
3.55
%
ARM
105,453

 
350

 
105,803

 
(56
)
 
105,747

 
2.74
%
Hybrid ARM
548,133

 
13,425

 
561,558

 
(7,357
)
 
554,201

 
2.80
%
Total Agency RMBS pass-through
10,670,120

 
317,545

 
10,987,665

 
(130,694
)
 
10,856,971

 
3.49
%
Agency-CMO (2)
907,862

 
(631,180
)
 
276,682

 
(8,991
)
 
267,691

 
3.61
%
Agency CMBS
973,122

 
15,058

 
988,180

 
14,330

 
1,002,510

 
3.54
%
Non-Agency CMBS (3)
4,024,715

 
(727,307
)
 
3,297,408

 
(10,949
)
 
3,286,459

 
5.05
%
Non-Agency RMBS (4)(5)(6)
2,800,335

 
(1,748,223
)
 
1,052,112

 
111,570

 
1,163,682

 
7.24
%
GSE CRT (7)
738,529

 
21,259

 
759,788

 
59,541

 
819,329

 
3.10
%
Total
20,114,683

 
(2,752,848
)
 
17,361,835

 
34,807

 
17,396,642

 
4.00
%
 
(1)
Period-end weighted average yield is based on amortized cost as of December 31, 2018 and incorporates future prepayment and loss assumptions.
(2)
Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent 73.6% of principal (notional) balance, 13.5% of amortized cost and 12.4% of fair value.
(3)
Non-Agency CMBS includes interest-only securities which represent 15.0% of principal/notional balance, 0.4% of amortized cost and 0.5% of fair value.
(4)
Non-Agency RMBS is 43.5% variable rate, 50.7% fixed rate, and 5.8% floating rate based on fair value. Coupon payments on variable rate investments are based upon changes in the underlying ARM and Hybrid ARM loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.
(5)
Of the total discount in non-Agency RMBS, $145.6 million is non-accretable calculated using the principal/notional balance and based on estimated future cash flows of the securities.
(6)
Non-Agency RMBS includes interest-only securities, which represent 55.4% of principal/notional balance, 2.3% of amortized cost and 2.4% of fair value.
(7)
GSE CRT weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option that is recorded as realized and unrealized credit derivative income (loss), net.
The following table presents the fair value of our available-for-sale securities and securities accounted for under the fair value option by asset type as of March 31, 2019 and December 31, 2018. We have elected the fair value option for all of our RMBS IOs, our MBS purchased on or after September 1, 2016 and our GSE CRTs purchased on or after August 24, 2015. As of March 31, 2019 and December 31, 2018, approximately 76% and 67%, respectively, of our MBS and GSE CRTs are accounted for under the fair value option.
 
March 31, 2019
 
December 31, 2018
$ in thousands
Available-for-sale Securities
 
Securities under Fair Value Option
 
Total
Fair Value
 
Available-for-sale Securities
 
Securities under Fair Value Option
 
Total
Fair Value
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
135,169

 
216,933

 
352,102

 
204,347

 
219,907

 
424,254

30 year fixed-rate
918,778

 
11,797,858

 
12,716,636

 
1,093,070

 
8,679,699

 
9,772,769

ARM
6,404

 

 
6,404

 
105,747

 

 
105,747

Hybrid ARM
141,320

 
32,201

 
173,521

 
521,199

 
33,002

 
554,201

Total RMBS Agency pass-through
1,201,671

 
12,046,992

 
13,248,663

 
1,924,363

 
8,932,608

 
10,856,971

Agency-CMO
166,730

 
160,421

 
327,151

 
168,385

 
99,306

 
267,691

Agency CMBS

 
2,001,553

 
2,001,553

 

 
1,002,510

 
1,002,510

Non-Agency CMBS
2,144,187

 
1,311,619

 
3,455,806

 
2,153,403

 
1,133,056

 
3,286,459

Non-Agency RMBS
916,158

 
270,738

 
1,186,896

 
961,445

 
202,237

 
1,163,682

GSE CRT
579,142

 
328,387

 
907,529

 
586,231

 
233,098

 
819,329

Total
5,007,888

 
16,119,710

 
21,127,598

 
5,793,827

 
11,602,815

 
17,396,642


 
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The components of the carrying value of our MBS and GSE CRT portfolio at March 31, 2019 and December 31, 2018 are presented below. 
 
March 31, 2019
$ in thousands
MBS and GSE CRT Securities
 
Interest-Only Securities
 
Total
Principal/ notional balance
20,734,762

 
2,587,148

 
23,321,910

Unamortized premium
488,161

 

 
488,161

Unamortized discount
(545,248
)
 
(2,518,334
)
 
(3,063,582
)
Gross unrealized gains (1)
447,903

 
5,613

 
453,516

Gross unrealized losses (1)
(67,022
)
 
(5,385
)
 
(72,407
)
Fair value
21,058,556

 
69,042

 
21,127,598

 
December 31, 2018
$ in thousands
MBS and GSE CRT Securities
 
Interest-Only Securities
 
Total
Principal/ notional balance
17,442,367

 
2,672,316

 
20,114,683

Unamortized premium
395,907

 

 
395,907

Unamortized discount
(549,988
)
 
(2,598,767
)
 
(3,148,755
)
Gross unrealized gains (1)
238,579

 
7,448

 
246,027

Gross unrealized losses (1)
(204,664
)
 
(6,556
)
 
(211,220
)
Fair value
17,322,201

 
74,441

 
17,396,642

(1)
Gross unrealized gains and losses includes gains (losses) recognized in net income for securities accounted for as derivatives or under the fair value option as well as gains (losses) for available-for-sale securities which are recognized as adjustments to other comprehensive income. Realization occurs upon sale or settlement of such securities. Further detail on the components of our total gains (losses) on investments, net for the three months ended March 31, 2019 and 2018 is provided below within this Note 4.
The following table summarizes our MBS and GSE CRT portfolio according to estimated weighted average life classifications as of March 31, 2019 and December 31, 2018
$ in thousands
March 31, 2019
 
December 31, 2018
Less than one year
49,768

 
110,020

Greater than one year and less than five years
5,188,229

 
3,508,100

Greater than or equal to five years
15,889,601

 
13,778,522

Total
21,127,598

 
17,396,642



 
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The following tables present the estimated fair value and gross unrealized losses of our MBS and GSE CRTs by length of time that such securities have been in a continuous unrealized loss position at March 31, 2019 and December 31, 2018.
March 31, 2019
  
Less than 12 Months
 
12 Months or More
 
Total
$ in thousands
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
8,398

 
(28
)
 
21

 
35,070

 
(165
)
 
25

 
43,468

 
(193
)
 
46

30 year fixed-rate
1,286

 
(11
)
 
4

 
4,448,849

 
(50,925
)
 
146

 
4,450,135

 
(50,936
)
 
150

ARM

 

 

 
2,760

 
(60
)
 
2

 
2,760

 
(60
)
 
2

Hybrid ARM
3,059

 
(6
)
 
1

 
101,210

 
(1,595
)
 
24

 
104,269

 
(1,601
)
 
25

Total Agency RMBS pass-through (1)
12,743

 
(45
)
 
26

 
4,587,889

 
(52,745
)
 
197

 
4,600,632

 
(52,790
)
 
223

Agency-CMO (2)
9,749

 
(3,276
)
 
16

 
109,177

 
(3,380
)
 
20

 
118,926

 
(6,656
)
 
36

Non-Agency CMBS (3)
94,622

 
(538
)
 
9

 
478,174

 
(10,226
)
 
41

 
572,796

 
(10,764
)
 
50

GSE CRT (4)
62,965

 
(381
)
 
4

 

 

 

 
62,965

 
(381
)
 
4

Non-Agency RMBS (5)
63,102

 
(1,225
)
 
13

 
93,291

 
(591
)
 
15

 
156,393

 
(1,816
)
 
28

Total
243,181

 
(5,465
)
 
68

 
5,268,531

 
(66,942
)
 
273

 
5,511,712

 
(72,407
)
 
341

(1)
Includes Agency RMBS with a fair value of $4.2 billion for which the fair value option has been elected. Such securities have unrealized losses of $47.0 million.
(2)
Includes Agency IO and Agency-CMO with fair value of $13.9 million and $17.9 million, respectively, for which the fair value option has been elected. These Agency IO and Agency-CMO securities have unrealized losses of $4.6 million and $64,000, respectively.
(3)
Includes non-Agency CMBS with a fair value of $323.9 million for which the fair value option has been elected. Such securities have unrealized losses of $3.1 million.
(4)
Fair value option has been elected for all GSE CRT that are in an unrealized loss position.
(5)
Includes non-Agency RMBS and non-Agency IO with a fair value of $6.1 million and $4.9 million, respectively for which the fair value option has been elected. Such securities have unrealized losses of $223,000 and $821,000, respectively.


 
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Table of Contents


December 31, 2018
  
Less than 12 Months
 
12 Months or More
 
Total
$ in thousands
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
86,241

 
(814
)
 
50

 
16,660

 
(189
)
 
22

 
102,901

 
(1,003
)
 
72

30 year fixed-rate
3,966,347

 
(49,182
)
 
158

 
2,846,090

 
(94,716
)
 
95

 
6,812,437

 
(143,898
)
 
253

ARM
2,632

 
(28
)
 
1

 
49,954

 
(785
)
 
10

 
52,586

 
(813
)
 
11

Hybrid ARM
6,758

 
(59
)
 
2

 
453,463

 
(8,390
)
 
71

 
460,221

 
(8,449
)
 
73

Total Agency RMBS pass-through (1)
4,061,978

 
(50,083
)
 
211

 
3,366,167

 
(104,080
)
 
198

 
7,428,145

 
(154,163
)
 
409

Agency-CMO (2)
152,962

 
(6,315
)
 
34

 
101,705

 
(5,100
)
 
19

 
254,667

 
(11,415
)
 
53

Non-Agency CMBS (3)
1,214,691

 
(17,778
)
 
94

 
659,298

 
(25,381
)
 
52

 
1,873,989

 
(43,159
)
 
146

Non-Agency RMBS (4)
87,850

 
(1,152
)
 
19

 
89,265

 
(1,138
)
 
16

 
177,115

 
(2,290
)
 
35

GSE CRT(5)
9,639

 
(193
)
 
1

 

 

 

 
9,639

 
(193
)
 
1

Total
5,527,120

 
(75,521
)
 
359

 
4,216,435

 
(135,699
)
 
285

 
9,743,555

 
(211,220
)
 
644

(1)
Includes Agency RMBS with a fair value of $6.1 billion for which the fair value option has been elected. Such securities have unrealized losses of $130.2 million.
(2)
Includes Agency IO and Agency-CMO with fair value of $21.8 million and $66.0 million, respectively, for which the fair value option has been elected. These Agency IO and Agency-CMO securities have unrealized losses of $6.3 million and $845,000, respectively.
(3)
Includes non-Agency CMBS with a fair value of $831.3 million for which the fair value option has been elected. Such securities have unrealized losses of $26.3 million.
(4)
Includes non-Agency RMBS and non-Agency IO with a fair value of $6.2 million and $3.7 million for which the fair value option has been elected. Such securities have unrealized losses of $79,000 and $269,000, respectively.
(5)
Fair value option has been elected for all GSE CRT that are in an unrealized loss position.
Gross unrealized losses on our Agency RMBS, Agency CMBS, GSE CRT and CMO were $55.3 million at March 31, 2019 (December 31, 2018: $159.3 million). Due to the inherent credit quality of Agency RMBS, Agency CMBS and Agency-CMO, we determined that at March 31, 2019 and December 31, 2018, any unrealized losses on these securities are not other than temporary.
Gross unrealized losses on our Agency IO, non-Agency RMBS and non-Agency CMBS were $17.1 million at March 31, 2019 (December 31, 2018: $51.9 million). We did not consider these unrealized losses to be credit related, but rather due to non-credit related factors such as interest rates, prepayment speeds, and market fluctuations. These investment securities are included in our assessment for other-than-temporary impairment ("OTTI").
We assess our investment securities for OTTI on a quarterly basis. When the fair value of an investment is less than its amortized cost at the balance sheet date of the reporting period for which impairment is assessed, the impairment is designated as either "temporary" or "other-than-temporary." This analysis includes a determination of estimated future cash flows through an evaluation of the characteristics of the underlying loans and the structural features of the investment. Underlying loan characteristics reviewed include, but are not limited to, delinquency status, loan-to-value ratios, borrower credit scores, occupancy status and geographic concentration.
The following table summarizes OTTI included in earnings for the three months ended March 31, 2019 and 2018:
 
Three Months Ended March 31,
$ in thousands
2019
 
2018
RMBS interest-only securities
1,463

 
4,309

Non-Agency RMBS (1)
313

 
50

Total
1,776

 
4,359

(1)
Amounts disclosed relate to credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income.

 
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Table of Contents


OTTI on RMBS interest-only securities was recorded as a reclassification from an unrealized to realized loss within gain (loss) on investments, net on the condensed consolidated statements of operations because we account for these securities under the fair value option. As of March 31, 2019, we did not intend to sell the securities and determined that it was not more likely than not that we will be required to sell the securities.
The following table summarizes the components of our total gain (loss) on investments, net for the three months ended March 31, 2019 and 2018.
 
Three Months Ended March 31,
$ in thousands
2019
 
2018
Gross realized gains on sale of investments
1,202

 

Gross realized losses on sale of investments
(12,317
)
 
(9,237
)
Other-than-temporary impairment losses
(1,776
)
 
(4,359
)
Net unrealized gains and losses on MBS accounted for under the fair value option
280,039

 
(147,195
)
Net unrealized gains and losses on GSE CRT accounted for under the fair value option
1,234

 
434

Net unrealized gains and losses on trading securities

 
(13
)
Total gain (loss) on investments, net
268,382

 
(160,370
)
The following tables present components of interest income recognized on our MBS and GSE CRT portfolio for the three months ended March 31, 2019 and 2018. GSE CRT interest income excludes coupon interest associated with embedded derivatives not accounted for under the fair value option that is recorded as realized and unrealized credit derivative income (loss), net.
For the three months ended March 31, 2019
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency RMBS and Agency CMBS
130,197

 
(12,725
)
 
117,472

Non-Agency CMBS
38,830

 
3,031

 
41,861

Non-Agency RMBS
14,267

 
3,922

 
18,189

GSE CRT
8,596

 
(1,178
)
 
7,418

Other
552

 

 
552

Total
192,442

 
(6,950
)
 
185,492

For the three months ended March 31, 2018
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency RMBS and Agency CMBS
108,317

 
(23,222
)
 
85,095

Non-Agency CMBS
37,293

 
1,426

 
38,719

Non-Agency RMBS
14,012

 
5,177

 
19,189

GSE CRT
6,525

 
(697
)
 
5,828

Other
172

 

 
172

Total
166,319

 
(17,316
)
 
149,003

 
 

 
14
 


Table of Contents


Note 5 – Other Assets
The following table summarizes our other assets as of March 31, 2019 and December 31, 2018.
$ in thousands
March 31, 2019
 
December 31, 2018
FHLBI stock
74,250

 
74,250

Loan participation interest
53,827

 
54,981

Commercial loans, held-for-investment
24,454

 
31,582

Investments in unconsolidated ventures
24,129

 
24,012

Prepaid expenses and other assets
1,253

 
1,234

Total
177,913

 
186,059

IAS Services LLC, our wholly-owned captive insurance subsidiary, is required to purchase and hold Federal Home Loan Bank of Indianapolis ("FHLBI") stock as a condition of membership in the FHLBI. The stock is recorded at cost.
In August 2018, we acquired a participation interest in a secured loan collateralized by mortgage servicing rights. The loan has a two year term subject to a one year extension at the borrower's option. The participation interest bears interest at a floating rate based on LIBOR plus a spread. The weighted average asset yield for the participation interest was 6.14% as of March 31, 2019 and 6.06% as of December 31, 2018. We elected to account for the investment using the fair value option. Refer to Note 14 - "Commitments and Contingencies" for additional details regarding our unfunded commitment on this loan participation interest.
As of March 31, 2019, our commercial loan portfolio consisted of one commercial loan with a weighted average maturity of 1.9 years (December 31, 2018: two commercial loans with a weighted average maturity of 1.7 years). The loans had a weighted average coupon rate of 10.99% as of March 31, 2019 and 10.69% as of December 31, 2018. The loans were not impaired, and we have not recorded an allowance for loan losses as of March 31, 2019 and December 31, 2018 based on our analysis of credit quality factors as described in Note 2 - "Summary of Significant Accounting Policies" included in the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2018.
We have invested in unconsolidated ventures that are managed by an affiliate of our Manager. The unconsolidated ventures invest in our target assets. Refer to Note 14 - "Commitments and Contingencies" for additional details regarding our commitments to these unconsolidated ventures.



 
15
 


Table of Contents


Note 6 – Borrowings
We finance the majority of our investment portfolio through repurchase agreements and secured loans. The following tables summarize certain characteristics of our borrowings at March 31, 2019 and December 31, 2018. Refer to Note 7 - "Collateral Positions" for collateral pledged under our repurchase agreements and secured loans.
$ in thousands
March 31, 2019
 
 
 
 
Weighted
 
 
Weighted
 
Average
 
 
Average
 
Remaining
Amount
 
Interest
 
Maturity
Outstanding
 
Rate
 
(days)
Repurchase Agreements:
 
 
 
 
 
Agency RMBS
11,868,925

 
2.68
%
 
67
Agency CMBS
1,639,097

 
2.67
%
 
72
Non-Agency CMBS
1,642,106

 
3.57
%
 
18
Non-Agency RMBS
887,186

 
3.46
%
 
25
GSE CRT
746,703

 
3.49
%
 
20
Loan participation interest
40,370

 
4.09
%
 
515
Total Repurchase Agreements
16,824,387

 
2.85
%
 
59
Secured Loans
1,650,000

 
2.76
%
 
1862
Total Borrowings
18,474,387

 
2.84
%
 
220

$ in thousands
December 31, 2018
 
 
 
 
Weighted
 
 
Weighted
 
Average
 
 
Average
 
Remaining
Amount
 
Interest
 
Maturity
Outstanding
 
Rate
 
(days)
Repurchase Agreements:
 
 
 
 
 
Agency RMBS
9,529,352

 
2.56
%
 
36
Agency CMBS
810,450

 
2.53
%
 
31
Non-Agency CMBS
1,616,473

 
3.56
%
 
19
Non-Agency RMBS
923,959

 
3.60
%
 
26
GSE CRT
681,014

 
3.48
%
 
21
Loan participation interest
41,236

 
4.09
%
 
605
Total Repurchase Agreements
13,602,484

 
2.80
%
 
34
Secured Loans
1,650,000

 
2.68
%
 
1952
Total Borrowings
15,252,484

 
2.79
%
 
242

The following table shows the aggregate amount of maturities of our outstanding borrowings:
$ in thousands
As of
Borrowings maturing within:
March 31, 2019
4/1/2019 - 3/31/2020
17,084,017

4/1/2020 - 3/31/2021
140,370

4/1/2021 - 3/31/2022

4/1/2022 - 3/31/2023

4/1/2023 - 3/31/2024

Thereafter
1,250,000

Total
18,474,387



 
16
 


Table of Contents


Repurchase Agreements
Our repurchase agreements generally bear interest at a contractually agreed upon rate and have maturities ranging from one month to six months. Our repurchase agreement that is collateralized by a loan participation interest bears interest at a floating rate based on LIBOR plus a spread and matures on August 27, 2020. Repurchase agreements are accounted for as secured borrowings since we maintain effective control of the financed assets. Repurchase agreements are subject to certain financial covenants. We were in compliance with these covenants at March 31, 2019.
Our repurchase agreement collateral ratio (MBS, GSE CRTs and a loan participation interest pledged as collateral/Amount Outstanding) was 110% as of March 31, 2019 (December 31, 2018: 111%).
Secured Loans
Our wholly-owned captive insurance subsidiary, IAS Services LLC, is a member of the FHLBI. As a member of the FHLBI, IAS Services LLC has borrowed funds from the FHLBI in the form of secured loans.
As of March 31, 2019, IAS Services LLC had $1.65 billion in outstanding secured loans from the FHLBI. These secured loans have floating rates that are based on the three-month FHLB swap rate plus a spread. For the three months ended March 31, 2019, IAS Services LLC had weighted average borrowings of $1.65 billion with a weighted average borrowing rate of 2.70% and a weighted average maturity of 5.1 years.
The Federal Housing Finance Agency’s ("FHFA") final rule governing Federal Home Loan Bank membership (the "FHFA Rule") became effective on February 19, 2016. The FHFA Rule permits existing captive insurance companies, such as IAS Services LLC, to remain members until February 2021. New advances or renewals that mature after February 2021 are prohibited. The FHLBI has indicated it will honor the contractual maturity dates of existing advances to IAS Services LLC that were made prior to February 19, 2016 and extend beyond February 2021. We do not expect there to be any impact to our existing FHLBI borrowings under the FHFA rule. The ability to borrow from the FHLBI is subject to our continued creditworthiness, pledging of sufficient eligible collateral to secure advances, and compliance with certain agreements with FHLBI and FHFA rules.
As discussed in Note 5 - "Other Assets," IAS Services LLC is required to purchase and hold a certain amount of FHLBI stock, which is based, in part, upon the outstanding principal balance of secured loans from the FHLBI.


 
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Note 7 - Collateral Positions
The following table summarizes the fair value of collateral that we have pledged and held under our repurchase agreements, secured loans, interest rate swaps, futures contracts and currency forward contracts as of March 31, 2019 and December 31, 2018. Refer to Note 2 - "Summary of Significant Accounting Policies - Fair Value Measurements" of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 for a description of how we determine fair value. RMBS, CMBS and GSE CRT collateral pledged is included in mortgage-backed and credit risk transfer securities on our condensed consolidated balance sheets. Loan participation interest collateral pledged is included in other assets on our condensed consolidated balance sheets. Cash collateral pledged on secured loans, centrally cleared swaps, bilateral interest rate swaps and currency forward contracts is classified as restricted cash on our condensed consolidated balance sheets. Cash collateral pledged on futures contracts is classified as due from counterparties on our condensed consolidated balance sheets.
Cash collateral held on bilateral swaps that is not restricted for use is included in cash and cash equivalents on our condensed consolidated balance sheets and the liability to return the collateral is included in collateral held payable. Non-cash collateral held is only recognized if the counterparty defaults or if we sell the pledged collateral. As of March 31, 2019 and December 31, 2018, we did not recognize any non-cash collateral held.
$ in thousands
As of
Collateral Pledged
March 31, 2019
 
December 31, 2018
Repurchase Agreements:
 
 
 
Agency RMBS
12,575,947

 
10,158,404

Agency CMBS
1,763,779

 
870,702

Non-Agency CMBS
2,072,829

 
2,016,202

Non-Agency RMBS
1,079,223

 
1,127,911

GSE CRT
907,529

 
819,328

Loan participation interest
53,827

 
54,981

Total repurchase agreements collateral pledged
18,453,134

 
15,047,528

Secured Loans:
 
 
 
Agency RMBS
686,656

 
702,952

Non-Agency CMBS
1,260,396

 
1,227,412

Total secured loans collateral pledged
1,947,052

 
1,930,364

Interest Rate Swaps, Futures Contracts and Currency Forward Contracts:
 
 
 
Agency RMBS
197,958

 
159,914

Cash (1)
18,025

 
13,500

Total interest rate swaps, futures contracts and currency forward contracts collateral pledged
215,983

 
173,414

 
 
 
 
Total collateral pledged:
 
 
 
Mortgage-backed and credit risk transfer securities
20,544,317

 
17,082,825

Loan participation interest
53,827

 
54,981

 Cash
18,025

 
13,500

Total collateral pledged
20,616,169

 
17,151,306

 
 
 
 
 
As of
Collateral Held
March 31, 2019
 
December 31, 2018
Interest Rate Swaps:
 
 
 
Cash
2,273

 
18,083

Non-cash collateral

 

Total collateral held
2,273

 
18,083

(1) Includes restricted cash of $5,025,000 pledged as collateral on centrally cleared swaps.

 
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Repurchase Agreements
Collateral pledged with our repurchase agreement counterparties is segregated in our books and records. The repurchase agreement counterparties have the right to resell and repledge the collateral posted but have the obligation to return the pledged collateral, or substantially the same collateral if agreed to by us, upon maturity of the repurchase agreement. Under the repurchase agreements, the respective lender retains the contrac