ATLANTA, Feb. 19, 2020 /PRNewswire/ -- Invesco Mortgage
Capital, Inc. (NYSE: IVR) (the
"Company") today announced financial results for the
quarter ended December 31, 2019.
|
Reported net
income per common share
|
|
$0.75 compared to
$0.57 per common share in Q3 2019
|
|
|
|
|
|
Increased core
earnings* per common share
|
|
$0.52 compared to
$0.47 per common share in Q3 2019
|
|
|
|
|
|
Raised common
stock dividend
|
|
$0.50 compared to
$0.45 in Q3 2019
|
|
|
|
|
|
Maintained stable
book value per common share**
|
|
$16.29 compared to
$16.31 per common share at Q3 2019
|
|
|
|
|
|
Generated an
attractive
economic
return***
|
|
2.9% for the quarter
and 18.8% for the year ended December 31, 2019
|
Update from John
Anzalone, Chief Executive Officer
"We are pleased to announce core earnings of $0.52 per common share for the fourth quarter of
2019. Core earnings exceeded our dividend for the fifth consecutive
quarter as IVR benefits from an active portfolio management and
hedging strategy. The 11.1% increase in our quarterly dividend to
$0.50 per share drove an economic
return of 2.9% for the quarter as book value remained stable.
"2019 was a strong year for Invesco Mortgage Capital's
stockholders, as we raised the dividend 19.0% and improved book
value per common share by 6.7%. As such, stockholders enjoyed an
economic return of 18.8% for the year. Additionally, we raised over
$500 million in common equity during
the year, which allowed us to gain scale while investing in
accretive assets.
"As always, active portfolio management and our hedging strategy
have been key to our success. This was evident in our investment
portfolio, where we focused on allocating capital to strategies
that generate attractive returns while minimizing our exposure to
prepayment risk. This was also evident in our hedging strategy,
where we actively managed our hedges to protect book value and
improve our effective interest rate margin. We enter 2020 on a
strong note, having raised an additional $347 million in common equity earlier this month
as we continue to build upon the positive momentum achieved in
2019."
* Core earnings (and
by calculation, core earnings per common share) are non-Generally
Accepted Accounting Principles ("GAAP") financial measures. Refer
to the section entitled "Non-GAAP Financial Measures" for important
disclosures and a reconciliation to the most comparable U.S. GAAP
measures.
|
**Book value per
common share is calculated as total stockholders' equity less the
liquidation preference of our Series A Preferred Stock ($140.0
million), Series B Preferred Stock ($155.0 million) and Series C
Preferred Stock ($287.5 million); divided by total common shares
outstanding.
|
***Economic return
for the quarter ended December 31, 2019 is defined as the
change in book value per common share from September 30, 2019
to December 31, 2019 of $(0.02); plus dividends declared of
$0.50 per common share; divided by the September 30, 2019 book
value per common share of $16.31. Economic return for the year
ended December 31, 2019 is defined as the change in book value
per common share from December 31, 2018 to December 31,
2019 of $1.02; plus dividends declared of $1.85 per common share;
divided by the December 31, 2018 book value per common share
of $15.27.
|
Key performance indicators for the quarters ended
December 31, 2019 and September 30, 2019 are summarized
in the table below.
($ in millions,
except share amounts)
|
Q4 '19
|
Q3 '19
|
Variance
|
Average
Balances
|
(unaudited)
|
(unaudited)
|
|
Average earning
assets (at amortized cost)
|
$21,318.1
|
|
$20,963.1
|
|
$355.0
|
|
Average
borrowings
|
$19,676.2
|
|
$19,326.9
|
|
$349.3
|
|
Average stockholders'
equity
|
$2,595.3
|
|
$2,598.0
|
|
($2.7)
|
|
|
|
|
|
U.S. GAAP
Financial Measures
|
|
|
|
Total interest
income
|
$192.8
|
|
$196.3
|
|
($3.5)
|
|
Total interest
expense
|
$106.8
|
|
$123.3
|
|
($16.5)
|
|
Net interest
income
|
$86.0
|
|
$73.0
|
|
$13.0
|
|
Total
expenses
|
$12.4
|
|
$10.6
|
|
$1.8
|
|
Net income
attributable to common stockholders
|
$106.9
|
|
$77.9
|
|
$29.0
|
|
|
|
|
|
Average earning asset
yields
|
3.62
|
%
|
3.75
|
%
|
(0.13)
|
%
|
Average cost of
funds
|
2.17
|
%
|
2.55
|
%
|
(0.38)
|
%
|
Average net interest
rate margin
|
1.45
|
%
|
1.20
|
%
|
0.25
|
%
|
|
|
|
|
Period-end weighted
average asset yields*
|
3.86
|
%
|
3.87
|
%
|
(0.01)
|
%
|
Period-end weighted
average cost of funds
|
2.09
|
%
|
2.47
|
%
|
(0.38)
|
%
|
Period-end weighted
average net interest rate margin
|
1.77
|
%
|
1.40
|
%
|
0.37
|
%
|
|
|
|
|
Book value per common
share**
|
$16.29
|
|
$16.31
|
|
($0.02)
|
|
Earnings per common
share (basic)
|
$0.75
|
|
$0.57
|
|
$0.18
|
|
Earnings per common
share (diluted)
|
$0.75
|
|
$0.57
|
|
$0.18
|
|
Debt-to-equity
ratio
|
6.5
|
x
|
6.8
|
x
|
(0.3)
|
x
|
|
|
|
|
Non-GAAP Financial
Measures***
|
|
|
|
Core
earnings
|
$74.9
|
|
$63.7
|
|
$11.2
|
|
Effective interest
income
|
$197.8
|
|
$201.5
|
|
($3.7)
|
|
Effective interest
expense
|
$100.7
|
|
$117.5
|
|
($16.8)
|
|
Effective net
interest income
|
$97.1
|
|
$84.0
|
|
$13.1
|
|
|
|
|
|
Effective
yield
|
3.71
|
%
|
3.84
|
%
|
(0.13)
|
%
|
Effective cost of
funds
|
2.04
|
%
|
2.43
|
%
|
(0.39)
|
%
|
Effective interest
rate margin
|
1.67
|
%
|
1.41
|
%
|
0.26
|
%
|
|
|
|
|
Core earnings per
common share
|
$0.52
|
|
$0.47
|
|
$0.05
|
|
Repurchase agreement
debt-to-equity ratio
|
6.6
|
x
|
6.9
|
x
|
(0.3)
|
x
|
|
*Period-end weighted
average yields are based on amortized cost as of period end and
incorporate future prepayment and loss assumptions.
|
**Book value per
common share is calculated as total stockholders' equity less the
liquidation preference of our Series A Preferred Stock ($140.0
million), Series B Preferred Stock ($155.0 million) and Series C
Preferred Stock ($287.5 million); divided by total common shares
outstanding.
|
*** Core earnings
(and by calculation, core earnings per common share), effective
interest income (and by calculation, effective yield), effective
interest expense (and by calculation, effective cost of funds),
effective net interest income (and by calculation, effective
interest rate margin), and repurchase agreement debt-to-equity
ratio are non-GAAP financial measures. Refer to the section
entitled "Non-GAAP Financial Measures" for important disclosures
and a reconciliation to the most comparable U.S. GAAP measures of
net income (loss) attributable to common stockholders (and by
calculation, basic earnings (loss) per common share), total
interest income (and by calculation, average earning asset yields),
total interest expense (and by calculation, cost of funds), net
interest income (and by calculation, net interest rate margin) and
debt-to-equity ratio.
|
Financial Summary
Net income attributable to common stockholders for the fourth
quarter of 2019 was $106.9 million,
up $29.0 million compared to
$77.9 million for the third quarter
of 2019. Higher net income attributable to common stockholders was
primarily due to a $17.8 million
increase in other income and a $13.0
million increase in net interest income. Other income was
driven by net gains on derivatives that totaled $191.6 million compared to net losses on
derivatives of $177.2 million in the
third quarter and net losses on investments that totaled
$148.5 million in the fourth quarter
compared to net gains on investments of $202.4 million in the third quarter. Net gains on
derivatives and net losses on investments were driven by an
increase in interest rates as the benchmark 10 year U.S. Treasury
note rose 24 basis points to 1.92% as of December 31, 2019.
Book value per common share for the fourth quarter of 2019 was
$16.29 compared to $16.31 in the third quarter reflecting the
success of our active portfolio management and hedging strategy
during the quarter. Higher interest rates negatively impacted
most asset valuations during the quarter but were significantly
offset by increases in the value of our interest rate swaps. Strong
investor demand given declining volatility and attractive
valuations drove significant spread tightening in Agency RMBS, as
the sector posted modest gains for the quarter.
During the fourth quarter of 2019, the Company generated
$74.9 million in core earnings, an
increase of $11.2 million (17.6%)
over the third quarter of 2019. Higher core earnings were driven by
a $13.1 million increase in effective
net interest income primarily due to a lower effective cost of
funds during the quarter. Effective cost of funds was 2.04%, 39
basis points lower than the third quarter, primarily due to lower
average repurchase agreement borrowing costs following the decrease
in the federal funds target rate in September 2019 and the Federal Reserve's infusion
of liquidity into the repurchase agreement market in the fourth
quarter.
Total interest income decreased $3.5
million (1.8%) to $192.8
million during the fourth quarter and average earning asset
yield decreased 13 basis points to 3.62%. Premium amortization
increased $2.8 million to
$21.4 million during the fourth
quarter reflecting the impact of declining interest rates on
prepayments of higher coupon Agency RMBS investments. Average
earning assets increased $355.0
million (1.7%) to $21.3
billion in the fourth quarter reflecting trade settlement of
approximately $1.2 billion of Agency
CMBS securities purchased in the third quarter and sales of
approximately $850 million of Agency
RMBS. We continue to favor the prepayment protection embedded in
Agency CMBS over Agency RMBS with less favorable prepayment
characteristics.
The Company increased its average borrowings by $349.3 million (1.8%) in the fourth quarter of
2019 to $19.7 billion to finance its
higher asset base. However, total interest expense decreased to
$106.8 million compared to
$123.3 million during the third
quarter due to a 38 basis point decrease in average cost of funds
to 2.17% from 2.55% during the third quarter.
The Company's debt-to-equity ratio was 6.5x as of December 31, 2019 compared to 6.8x at
September 30, 2019. The Company's repurchase agreement
debt-to-equity ratio was 6.6x as of December
31, 2019 compared to 6.9x as of September 30, 2019. The
Company decreased leverage as of year end given elevated
uncertainty surrounding prepayment speeds on our Agency MBS
holdings and repurchase agreement funding levels.
Total expenses for the fourth quarter of 2019 increased to
approximately $12.4 million compared
to $10.6 million for the third
quarter of 2019 primarily due to higher management fees. Total
expenses include management fees and general and administrative
expenses. The ratio of annualized total expenses to average
stockholders' equity* increased to 1.91% compared to
1.63% for the third quarter of 2019.
As previously announced, the Company declared the following
dividends on December 16, 2019: a common stock dividend of
$0.50 per share paid on
January 28, 2020 to its stockholders of record as of
December 27, 2019 and a Series A preferred stock dividend of
$0.4844 per share paid on
January 27, 2020 to its stockholders of record as of
January 1, 2020. The Company declared the following dividends
on its Series B and Series C Preferred Stock on February 18, 2020 to its stockholders of record
as of March 5, 2020: a Series B
Preferred Stock dividend of $0.4844
per share payable on March 27, 2020
and a Series C Preferred Stock dividend of $0.46875 per share payable on March 27, 2020.
*The ratio of annualized total expenses to average stockholders'
equity is calculated as the annualized sum of management fees plus
general and administrative expenses divided by average
stockholders' equity. Average stockholders' equity is calculated
based on weighted month-end balance of total stockholders' equity
excluding equity attributable to preferred stockholders.
About Invesco Mortgage Capital Inc.
Invesco Mortgage Capital Inc. is a real estate investment trust
that primarily focuses on investing in, financing and managing
residential and commercial mortgage-backed securities and mortgage
loans. Invesco Mortgage Capital Inc. is externally managed and
advised by Invesco Advisers, Inc., a registered investment adviser
and an indirect wholly-owned subsidiary of Invesco Ltd., a leading
independent global investment management firm.
Earnings Call
Members of the investment community and the general public are
invited to listen to the Company's earnings conference call on
Thursday, February 20, 2020, at 9:00
a.m. ET, by calling one of the following numbers:
North America Toll
Free:
|
800-857-7465
|
International:
|
1-312-470-0052
|
Passcode:
|
Invesco
|
An audio replay will be available until 5:00 pm ET on March 5,
2020 by calling:
888-562-7251 (North America) or
1-402-530-7628 (International)
The presentation slides that will be reviewed during the call
will be available on the Company's website at
www.invescomortgagecapital.com.
Cautionary Notice Regarding Forward-Looking
Statements
This press release, the related presentation and comments made
in the associated conference call, may include statements and
information that constitute "forward-looking statements" within the
meaning of the U.S. securities laws as defined in the Private
Securities Litigation Reform Act of 1995, and such statements are
intended to be covered by the safe harbor provided by the same.
Forward-looking statements include our views on the risk
positioning of our portfolio, domestic and global market conditions
(including the residential and commercial real estate market), the
market for our target assets, our financial performance, including
our core earnings, economic return, comprehensive income and
changes in our book value, our ability to continue performance
trends, the stability of portfolio yields, interest rates, credit
spreads, prepayment trends, financing sources, cost of funds, our
leverage and equity allocation. In addition, words such as
"believes," "expects," "anticipates," "intends," "plans,"
"estimates," "projects," "forecasts," and future or conditional
verbs such as "will," "may," "could," "should," and "would" as well
as any other statement that necessarily depends on future events,
are intended to identify forward-looking statements.
Forward-looking statements are not guarantees, and they involve
risks, uncertainties and assumptions. There can be no assurance
that actual results will not differ materially from our
expectations. We caution investors not to rely unduly on any
forward-looking statements and urge you to carefully consider the
risks identified under the captions "Risk Factors,"
"Forward-Looking Statements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our
annual report on Form 10-K and quarterly reports on Form 10-Q,
which are available on the Securities and Exchange Commission's
website at www.sec.gov.
All written or oral forward-looking statements that we make, or
that are attributable to us, are expressly qualified by this
cautionary notice. We expressly disclaim any obligation to update
the information in any public disclosure if any forward-looking
statement later turns out to be inaccurate.
Investor Relations Contact: Brandon
Burke, 800-241-5477
|
INVESCO MORTGAGE
CAPITAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
Three Months
Ended
|
|
Years
Ended
|
$ in thousands,
except share amounts
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
Mortgage-backed and
credit risk transfer securities (1)
|
191,490
|
|
|
194,938
|
|
|
174,511
|
|
|
772,657
|
|
|
631,478
|
|
Commercial and other
loans
|
1,291
|
|
|
1,353
|
|
|
1,593
|
|
|
5,710
|
|
|
11,538
|
|
Total interest
income
|
192,781
|
|
|
196,291
|
|
|
176,104
|
|
|
778,367
|
|
|
643,016
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
97,993
|
|
|
112,851
|
|
|
91,057
|
|
|
430,697
|
|
|
301,794
|
|
Secured
loans
|
8,808
|
|
|
10,413
|
|
|
10,565
|
|
|
41,623
|
|
|
35,453
|
|
Exchangeable senior
notes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,621
|
|
Total interest
expense
|
106,801
|
|
|
123,264
|
|
|
101,622
|
|
|
472,320
|
|
|
338,868
|
|
Net interest
income
|
85,980
|
|
|
73,027
|
|
|
74,482
|
|
|
306,047
|
|
|
304,148
|
|
Other Income
(loss)
|
|
|
|
|
|
|
|
|
|
Gain (loss) on
investments, net
|
(148,511)
|
|
|
202,413
|
|
|
76,957
|
|
|
624,466
|
|
|
(327,700)
|
|
Equity in earnings
(losses) of unconsolidated ventures
|
427
|
|
|
403
|
|
|
624
|
|
|
2,224
|
|
|
3,402
|
|
Gain (loss) on
derivative instruments, net
|
188,682
|
|
|
(177,244)
|
|
|
(293,485)
|
|
|
(534,755)
|
|
|
(5,277)
|
|
Realized and
unrealized credit derivative income (loss), net
|
2,896
|
|
|
1
|
|
|
(9,026)
|
|
|
8,343
|
|
|
(151)
|
|
Net loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26)
|
|
Other investment
income (loss), net
|
909
|
|
|
1,005
|
|
|
850
|
|
|
3,950
|
|
|
2,860
|
|
Total other income
(loss)
|
44,403
|
|
|
26,578
|
|
|
(224,080)
|
|
|
104,228
|
|
|
(326,892)
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Management fee –
related party
|
10,529
|
|
|
8,740
|
|
|
10,294
|
|
|
38,173
|
|
|
40,722
|
|
General and
administrative
|
1,882
|
|
|
1,862
|
|
|
2,116
|
|
|
8,001
|
|
|
7,070
|
|
Total
expenses
|
12,411
|
|
|
10,602
|
|
|
12,410
|
|
|
46,174
|
|
|
47,792
|
|
Net income
(loss)
|
117,972
|
|
|
89,003
|
|
|
(162,008)
|
|
|
364,101
|
|
|
(70,536)
|
|
Net income (loss)
attributable to non-controlling interest
|
—
|
|
|
—
|
|
|
(899)
|
|
|
—
|
|
|
254
|
|
Net income (loss)
attributable to Invesco Mortgage Capital
Inc.
|
117,972
|
|
|
89,003
|
|
|
(161,109)
|
|
|
364,101
|
|
|
(70,790)
|
|
Dividends to
preferred stockholders
|
11,106
|
|
|
11,107
|
|
|
11,106
|
|
|
44,426
|
|
|
44,426
|
|
Net income (loss)
attributable to common stockholders
|
106,866
|
|
|
77,896
|
|
|
(172,215)
|
|
|
319,675
|
|
|
(115,216)
|
|
Earnings (loss) per
share:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
Basic
|
0.75
|
|
|
0.57
|
|
|
(1.54)
|
|
|
2.42
|
|
|
(1.03)
|
|
Diluted
|
0.75
|
|
|
0.57
|
|
|
(1.54)
|
|
|
2.42
|
|
|
(1.03)
|
|
|
(1) The table
below shows the components of mortgage-backed and credit risk
transfer securities income for the periods presented.
|
|
Three Months
Ended
|
|
Years
Ended
|
$ in
thousands
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Coupon
interest
|
212,887
|
|
|
213,546
|
|
|
183,059
|
|
|
833,376
|
|
|
689,240
|
|
Net premium
amortization
|
(21,397)
|
|
|
(18,608)
|
|
|
(8,548)
|
|
|
(60,719)
|
|
|
(57,762)
|
|
Mortgage-backed and
credit risk transfer securities interest
income
|
191,490
|
|
|
194,938
|
|
|
174,511
|
|
|
772,657
|
|
|
631,478
|
|
INVESCO MORTGAGE
CAPITAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
|
|
|
Three Months
Ended
|
|
Years
Ended
|
$ in
thousands
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
Net income
(loss)
|
117,972
|
|
|
89,003
|
|
|
(162,008)
|
|
|
364,101
|
|
|
(70,536)
|
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized gain
(loss) on mortgage-backed and credit
risk transfer securities, net
|
(30,054)
|
|
|
14,482
|
|
|
10,376
|
|
|
83,965
|
|
|
(210,424)
|
|
Reclassification of
unrealized (gain) loss on sale of
mortgage-backed and credit risk transfer securities
to gain (loss) on investments, net
|
—
|
|
|
(954)
|
|
|
39,756
|
|
|
9,072
|
|
|
193,162
|
|
Reclassification of
amortization of net deferred (gain)
loss on de-designated interest rate swaps to
repurchase agreements interest expense
|
(5,981)
|
|
|
(5,981)
|
|
|
(5,980)
|
|
|
(23,729)
|
|
|
(25,839)
|
|
Currency translation
adjustments on investment in
unconsolidated venture
|
(852)
|
|
|
290
|
|
|
(119)
|
|
|
(1,158)
|
|
|
(447)
|
|
Total other
comprehensive income (loss)
|
(36,887)
|
|
|
7,837
|
|
|
44,033
|
|
|
68,150
|
|
|
(43,548)
|
|
Comprehensive income
(loss)
|
81,085
|
|
|
96,840
|
|
|
(117,975)
|
|
|
432,251
|
|
|
(114,084)
|
|
Less: Comprehensive
(income) loss attributable to
non-controlling interest
|
—
|
|
|
—
|
|
|
1,027
|
|
|
—
|
|
|
979
|
|
Less: Dividends to
preferred stockholders
|
(11,106)
|
|
|
(11,107)
|
|
|
(11,106)
|
|
|
(44,426)
|
|
|
(44,426)
|
|
Comprehensive income
(loss) attributable to common stockholders
|
69,979
|
|
|
85,733
|
|
|
(128,054)
|
|
|
387,825
|
|
|
(157,531)
|
|
INVESCO MORTGAGE
CAPITAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS
|
|
|
As
of
|
|
December 31,
2019
|
|
December 31,
2018
|
$ in thousands,
except share amounts
|
|
ASSETS
|
|
|
|
Mortgage-backed and
credit risk transfer securities, at fair value (including pledged
securities of
$21,132,742 and $17,082,825, respectively)
|
21,771,786
|
|
|
17,396,642
|
|
Cash and cash
equivalents
|
172,507
|
|
|
135,617
|
|
Restricted
cash
|
116,995
|
|
|
—
|
|
Due from
counterparties
|
32,568
|
|
|
13,500
|
|
Investment related
receivable
|
67,976
|
|
|
66,598
|
|
Derivative assets, at
fair value
|
18,533
|
|
|
15,089
|
|
Other
assets
|
166,180
|
|
|
186,059
|
|
Total
assets
|
22,346,545
|
|
|
17,813,505
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Liabilities:
|
|
|
|
Repurchase
agreements
|
17,532,303
|
|
|
13,602,484
|
|
Secured
loans
|
1,650,000
|
|
|
1,650,000
|
|
Derivative
liabilities, at fair value
|
352
|
|
|
23,390
|
|
Dividends
payable
|
74,841
|
|
|
49,578
|
|
Investment related
payable
|
99,561
|
|
|
132,096
|
|
Accrued interest
payable
|
43,998
|
|
|
37,620
|
|
Collateral held
payable
|
170
|
|
|
18,083
|
|
Accounts payable and
accrued expenses
|
1,560
|
|
|
1,694
|
|
Due to
affiliate
|
11,861
|
|
|
11,863
|
|
Total
liabilities
|
19,414,646
|
|
|
15,526,808
|
|
Commitments and
contingencies (See Note 15) (1)
|
|
|
|
Stockholders'
Equity:
|
|
|
|
Preferred Stock, par
value $0.01 per share; 50,000,000 shares authorized:
|
|
|
|
7.75% Series A
Cumulative Redeemable Preferred Stock: 5,600,000 shares issued and
outstanding ($140,000 aggregate liquidation preference)
|
135,356
|
|
|
135,356
|
|
7.75%
Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock:
6,200,000 shares issued and outstanding ($155,000 aggregate
liquidation preference)
|
149,860
|
|
|
149,860
|
|
7.50%
Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock:
11,500,000 shares issued and outstanding ($287,500 aggregate
liquidation preference)
|
278,108
|
|
|
278,108
|
|
Common Stock, par
value $0.01 per share; 450,000,000 shares authorized; 144,256,357
and 111,584,996 shares issued and outstanding,
respectively
|
1,443
|
|
|
1,115
|
|
Additional paid in
capital
|
2,892,652
|
|
|
2,383,532
|
|
Accumulated other
comprehensive income
|
288,963
|
|
|
220,813
|
|
Retained earnings
(distributions in excess of earnings)
|
(814,483)
|
|
|
(882,087)
|
|
Total stockholders'
equity
|
2,931,899
|
|
|
2,286,697
|
|
Total liabilities and
stockholders' equity
|
22,346,545
|
|
|
17,813,505
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See Note 15 of the
Company's consolidated financial statements filed in Part IV, Item
15 of the Company's Annual Report on Form 10-K for the year ended
December 31, 2019.
|
Non-GAAP Financial Measures
The Company uses the following non-GAAP financial measures to
analyze its operating results and believes these financial measures
are useful to investors in assessing the Company's performance as
further discussed below:
- core earnings (and by calculation, core earnings per common
share),
- effective interest income (and by calculation, effective
yield),
- effective interest expense (and by calculation, effective cost
of funds),
- effective net interest income (and by calculation, effective
interest rate margin), and
- repurchase agreement debt-to-equity ratio.
The most directly comparable U.S. GAAP measures are:
- net income (loss) attributable to common stockholders (and by
calculation, basic earnings (loss) per common share),
- total interest income (and by calculation, earning asset
yield),
- total interest expense (and by calculation, cost of
funds),
- net interest income (and by calculation, net interest rate
margin), and
- debt-to-equity ratio.
The non-GAAP financial measures used by the Company's management
should be analyzed in conjunction with U.S. GAAP financial measures
and should not be considered substitutes for U.S. GAAP financial
measures. In addition, the non-GAAP financial measures may
not be comparable to similarly titled non-GAAP financial measures
of its peer companies.
Core Earnings
The Company calculates core earnings as U.S. GAAP net income
(loss) attributable to common stockholders adjusted for (gain) loss
on investments, net; realized (gain) loss on derivative
instruments, net; unrealized (gain) loss on derivative instruments,
net; realized and unrealized (gain) loss on GSE CRT embedded
derivatives, net; (gain) loss on foreign currency transactions,
net; amortization of net deferred (gain) loss on de-designated
interest rate swaps; net loss on extinguishment of debt; and
cumulative adjustments attributable to non-controlling interest.
The Company may add and has added additional reconciling items to
its core earnings calculation as appropriate.
The Company believes the presentation of core earnings provides
a consistent measure of operating performance by excluding the
impact of gains and losses described above from operating results.
The Company excludes the impact of gains and losses because gains
and losses are not accounted for consistently under U.S.
GAAP. Under U.S. GAAP, certain gains and losses are reflected
in net income whereas other gains and losses are reflected in other
comprehensive income. For example, a portion of the Company's
mortgage-backed securities are classified as available-for-sale
securities, and changes in the valuation of these securities are
recorded in other comprehensive income on its condensed
consolidated balance sheet. The Company elected the fair value
option for its mortgage-backed securities purchased on or after
September 1, 2016, and changes in the
valuation of these securities are recorded in other income (loss)
in the consolidated statement of operations. In addition,
certain gains and losses represent one-time events.
The Company believes that providing transparency into core
earnings enables its investors to consistently measure, evaluate
and compare its operating performance to that of its peers over
multiple reporting periods. However, the Company cautions that core
earnings should not be considered as an alternative to net income
(determined in accordance with U.S. GAAP), or as an indication of
the Company's cash flow from operating activities (determined in
accordance with U.S. GAAP), a measure of the Company's liquidity,
or an indication of amounts available to fund its cash needs,
including its ability to make cash distributions.
The table below provides a reconciliation of U.S. GAAP net
income (loss) attributable to common stockholders to core earnings
for the following periods:
|
Three Months
Ended
|
|
Years
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
$ in thousands,
except per share data
|
|
|
|
|
Net income (loss)
attributable to common stockholders
|
106,866
|
|
|
77,896
|
|
|
(172,215)
|
|
|
319,675
|
|
|
(115,216)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
(Gain) loss on
investments, net
|
148,511
|
|
|
(202,413)
|
|
|
(76,957)
|
|
|
(624,466)
|
|
|
327,700
|
|
Realized (gain) loss
on derivative instruments,
net (1)
|
(116,156)
|
|
|
173,607
|
|
|
252,323
|
|
|
597,077
|
|
|
2,830
|
|
Unrealized (gain)
loss on derivative instruments,
net (1)
|
(60,435)
|
|
|
15,352
|
|
|
40,533
|
|
|
(26,482)
|
|
|
(17,568)
|
|
Realized and
unrealized (gain) loss on GSE CRT
embedded derivatives, net (2)
|
2,091
|
|
|
5,195
|
|
|
14,595
|
|
|
12,490
|
|
|
22,629
|
|
(Gain) loss on
foreign currency transactions,
net (3)
|
(20)
|
|
|
14
|
|
|
(7)
|
|
|
(6)
|
|
|
930
|
|
Amortization of net
deferred (gain) loss on de-
designated interest rate swaps (4)
|
(5,981)
|
|
|
(5,981)
|
|
|
(5,980)
|
|
|
(23,729)
|
|
|
(25,839)
|
|
Net loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
Subtotal
|
(31,990)
|
|
|
(14,226)
|
|
|
224,507
|
|
|
(65,116)
|
|
|
310,708
|
|
Cumulative
adjustments attributable to non-controlling interest
|
—
|
|
|
—
|
|
|
(1,449)
|
|
|
—
|
|
|
(2,536)
|
|
Core earnings
attributable to common stockholders
|
74,876
|
|
|
63,670
|
|
|
50,843
|
|
|
254,559
|
|
|
192,956
|
|
Basic earnings (loss)
per common share
|
0.75
|
|
|
0.57
|
|
|
(1.54)
|
|
|
2.42
|
|
|
(1.03)
|
|
Core earnings per
share attributable to common stockholders (7)
|
0.52
|
|
|
0.47
|
|
|
0.46
|
|
|
1.92
|
|
|
1.73
|
|
(1)
|
U.S. GAAP gain (loss)
on derivative instruments, net on the consolidated statements of
operations includes the following components:
|
|
Three Months
Ended
|
|
Years
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
$ in
thousands
|
|
|
|
|
Realized gain (loss)
on derivative instruments, net
|
116,156
|
|
|
(173,607)
|
|
|
(252,323)
|
|
|
(597,077)
|
|
|
(2,830)
|
|
Unrealized gain
(loss) on derivative instruments, net
|
60,435
|
|
|
(15,352)
|
|
|
(40,533)
|
|
|
26,482
|
|
|
17,568
|
|
Contractual net
interest income (expense)
|
12,091
|
|
|
11,715
|
|
|
(629)
|
|
|
35,840
|
|
|
(20,015)
|
|
Gain (loss) on
derivative instruments, net
|
188,682
|
|
|
(177,244)
|
|
|
(293,485)
|
|
|
(534,755)
|
|
|
(5,277)
|
|
(2)
|
U.S. GAAP realized
and unrealized credit derivative income (loss), net on the
consolidated statements of operations includes the following
components:
|
|
Three Months
Ended
|
|
Years
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
$ in
thousands
|
|
|
|
|
Realized and
unrealized gain (loss) on GSE CRT
embedded derivatives, net
|
(2,091)
|
|
|
(5,195)
|
|
|
(14,595)
|
|
|
(12,490)
|
|
|
(22,629)
|
|
GSE CRT embedded
derivative coupon interest
|
4,987
|
|
|
5,196
|
|
|
5,569
|
|
|
20,833
|
|
|
22,478
|
|
Realized and
unrealized credit derivative income
(loss), net
|
2,896
|
|
|
1
|
|
|
(9,026)
|
|
|
8,343
|
|
|
(151)
|
|
(3)
|
U.S. GAAP other
investment income (loss), net on the consolidated statements of
operations includes the following components:
|
|
Three Months
Ended
|
|
Years
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
$ in
thousands
|
|
|
|
|
Dividend
income
|
889
|
|
|
1,019
|
|
|
843
|
|
|
3,944
|
|
|
3,790
|
|
Gain (loss) on
foreign currency transactions, net
|
20
|
|
|
(14)
|
|
|
7
|
|
|
6
|
|
|
(930)
|
|
Other investment
income (loss), net
|
909
|
|
|
1,005
|
|
|
850
|
|
|
3,950
|
|
|
2,860
|
|
(4)
|
U.S. GAAP repurchase
agreements interest expense on the consolidated statements of
operations includes the following components:
|
|
Three Months
Ended
|
|
Years
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
$ in
thousands
|
|
|
|
|
Interest expense on
repurchase agreement borrowings
|
103,974
|
|
|
118,832
|
|
|
97,037
|
|
|
454,426
|
|
|
327,633
|
|
Amortization of net
deferred (gain) loss on de-
designated interest rate swaps
|
(5,981)
|
|
|
(5,981)
|
|
|
(5,980)
|
|
|
(23,729)
|
|
|
(25,839)
|
|
Repurchase agreements
interest expense
|
97,993
|
|
|
112,851
|
|
|
91,057
|
|
|
430,697
|
|
|
301,794
|
|
(5)
|
Core earnings per
share attributable to common stockholders is equal to core earnings
divided by the basic weighted average number of common shares
outstanding.
|
The components of core income for the three months and year
ended December 31, 2019 are:
|
Three Months
Ended
|
|
Years
Ended
|
$ in
thousands
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Effective net
interest income (1)
|
97,077
|
|
|
83,957
|
|
|
73,441
|
|
|
338,991
|
|
|
280,772
|
|
Dividend
income
|
889
|
|
|
1,019
|
|
|
843
|
|
|
3,944
|
|
|
3,790
|
|
Equity in earnings
(losses) of unconsolidated ventures
|
427
|
|
|
403
|
|
|
624
|
|
|
2,224
|
|
|
3,402
|
|
Total
expenses
|
(12,411)
|
|
|
(10,602)
|
|
|
(12,410)
|
|
|
(46,174)
|
|
|
(47,792)
|
|
Total core
earnings
|
85,982
|
|
|
74,777
|
|
|
62,498
|
|
|
298,985
|
|
|
240,172
|
|
Dividends to
preferred stockholders
|
(11,106)
|
|
|
(11,107)
|
|
|
(11,106)
|
|
|
(44,426)
|
|
|
(44,426)
|
|
Core earnings
attributable to non-controlling interest
|
—
|
|
|
—
|
|
|
(549)
|
|
|
—
|
|
|
(2,790)
|
|
Core earnings
attributable to common stockholders
|
74,876
|
|
|
63,670
|
|
|
50,843
|
|
|
254,559
|
|
|
192,956
|
|
(1)
|
See below for a
reconciliation of net interest income to effective net interest
income, a non-GAAP measure.
|
Effective Interest Income/Effective Yield/Effective Interest
Expense/Effective Cost of Funds/Effective Net Interest
Income/Effective Interest Rate Margin
The Company calculates effective interest income (and by
calculation, effective yield) as U.S. GAAP total interest income
adjusted for GSE CRT embedded derivative coupon interest that is
recorded as realized and unrealized credit derivative income
(loss), net. The Company includes its GSE CRT embedded derivative
coupon interest in effective interest income because GSE CRT coupon
interest is not accounted for consistently under U.S. GAAP. The
Company accounts for GSE CRTs purchased prior to August 24, 2015 as hybrid financial instruments,
but has elected the fair value option for GSE CRTs purchased on or
after August 24, 2015. Under U.S.
GAAP, coupon interest on GSE CRTs accounted for using the fair
value option is recorded as interest income, whereas coupon
interest on GSE CRTs accounted for as hybrid financial instruments
is recorded as realized and unrealized credit derivative income
(loss). The Company adds back GSE CRT embedded derivative coupon
interest to its total interest income because the Company considers
GSE CRT embedded derivative coupon interest a current component of
its total interest income irrespective of whether the Company has
elected the fair value option for the GSE CRT or accounted for the
GSE CRT as a hybrid financial instrument.
The Company calculates effective interest expense (and by
calculation, effective cost of funds) as U.S. GAAP total interest
expense adjusted for contractual net interest income (expense) on
its interest rate swaps that is recorded as gain (loss) on
derivative instruments, net and the amortization of net deferred
gains (losses) on de-designated interest rate swaps that is
recorded as repurchase agreements interest expense. The Company
views its interest rate swaps as an economic hedge against
increases in future market interest rates on its floating rate
borrowings. The Company adds back the net payments it makes on its
interest rate swap agreements to its total U.S. GAAP interest
expense because the Company uses interest rate swaps to add
stability to interest expense. The Company excludes the
amortization of net deferred gains (losses) on de-designated
interest rate swaps from its calculation of effective interest
expense because the Company does not consider the amortization a
current component of its borrowing costs.
The Company calculates effective net interest income (and by
calculation, effective interest rate margin) as U.S. GAAP net
interest income adjusted for contractual net interest income
(expense) on its interest rate swaps that is recorded as gain
(loss) on derivative instruments, amortization of net deferred
gains (losses) on de-designated interest rate swaps that is
recorded as repurchase agreements interest expense and GSE CRT
embedded derivative coupon interest that is recorded as realized
and unrealized credit derivative income (loss), net.
The Company believes the presentation of effective interest
income, effective yield, effective interest expense, effective cost
of funds, effective net interest income and effective interest rate
margin measures, when considered together with U.S. GAAP financial
measures, provide information that is useful to investors in
understanding the Company's borrowing costs and operating
performance.
The following tables reconcile total interest income to
effective interest income and yield to effective yield for the
following periods:
|
Three Months
Ended
December 31, 2019
|
|
Three
Months Ended
September 30, 2019
|
|
Three Months
Ended
December 31, 2018
|
$ in
thousands
|
Reconciliation
|
|
Yield/Effective
Yield
|
|
Reconciliation
|
|
Yield/Effective
Yield
|
|
Reconciliation
|
|
Yield/Effective
Yield
|
Total interest
income
|
192,781
|
|
|
3.62
|
%
|
|
196,291
|
|
|
3.75
|
%
|
|
176,104
|
|
|
3.88
|
%
|
Add: GSE CRT embedded
derivative
coupon interest recorded as
realized
and unrealized credit
derivative
income (loss), net
|
4,987
|
|
|
0.09
|
%
|
|
5,196
|
|
|
0.09
|
%
|
|
5,569
|
|
|
0.12
|
%
|
Effective interest
income
|
197,768
|
|
|
3.71
|
%
|
|
201,487
|
|
|
3.84
|
%
|
|
181,673
|
|
|
4.00
|
%
|
|
Years Ended
December 31,
|
|
2019
|
|
2018
|
$ in
thousands
|
Reconciliation
|
|
Yield/Effective
Yield
|
|
Reconciliation
|
|
Yield/Effective
Yield
|
Total interest
income
|
778,367
|
|
|
3.78
|
%
|
|
643,016
|
|
|
3.55
|
%
|
Add: GSE CRT embedded
derivative coupon interest recorded as
realized and unrealized credit
derivative income (loss), net
|
20,833
|
|
|
0.11
|
%
|
|
22,478
|
|
|
0.13
|
%
|
Effective interest
income
|
799,200
|
|
|
3.89
|
%
|
|
665,494
|
|
|
3.68
|
%
|
The following tables reconcile total interest expense to
effective interest expense and cost of funds to effective cost of
funds for the following periods:
|
Three Months
Ended
December 31, 2019
|
|
Three
Months Ended
September 30, 2019
|
|
Three Months
Ended
December 31, 2018
|
$ in
thousands
|
Reconciliation
|
|
Cost of Funds
/ Effective
Cost of Funds
|
|
Reconciliation
|
|
Cost of Funds
/ Effective
Cost of Funds
|
|
Reconciliation
|
|
Cost of Funds
/ Effective
Cost of Funds
|
Total interest
expense
|
106,801
|
|
|
2.17
|
%
|
|
123,264
|
|
|
2.55
|
%
|
|
101,622
|
|
|
2.57
|
%
|
Add: Amortization of
net deferred
gain (loss) on de-designated
interest
rate swaps
|
5,981
|
|
|
0.12
|
%
|
|
5,981
|
|
|
0.12
|
%
|
|
5,980
|
|
|
0.15
|
%
|
Add (Less):
Contractual net interest
expense (income) on interest
rate
swaps recorded as gain (loss)
on
derivative instruments,
net
|
(12,091)
|
|
|
(0.25)
|
%
|
|
(11,715)
|
|
|
(0.24)
|
%
|
|
629
|
|
|
0.02
|
%
|
Effective interest
expense
|
100,691
|
|
|
2.04
|
%
|
|
117,530
|
|
|
2.43
|
%
|
|
108,231
|
|
|
2.74
|
%
|
|
Years Ended
December 31,
|
|
2019
|
|
2018
|
$ in
thousands
|
Reconciliation
|
|
Cost of Funds
/ Effective
Cost of Funds
|
|
Reconciliation
|
|
Cost of Funds
/ Effective
Cost of Funds
|
Total interest
expense
|
472,320
|
|
|
2.52
|
%
|
|
338,868
|
|
|
2.16
|
%
|
Add: Amortization of
net deferred gain (loss) on de-designated
interest rate swaps
|
23,729
|
|
|
0.13
|
%
|
|
25,839
|
|
|
0.16
|
%
|
Add (Less):
Contractual net interest expense (income) on interest
rate swaps recorded as gain (loss) on
derivative instruments,
net
|
(35,840)
|
|
|
(0.19)
|
%
|
|
20,015
|
|
|
0.13
|
%
|
Effective interest
expense
|
460,209
|
|
|
2.46
|
%
|
|
384,722
|
|
|
2.45
|
%
|
The following tables reconcile net interest income to effective
net interest income and net interest rate margin to effective
interest rate margin for the following periods:
|
Three Months
Ended
December 31, 2019
|
|
Three
Months Ended
September 30, 2019
|
|
Three Months
Ended
December 31, 2018
|
$ in
thousands
|
Reconciliation
|
|
Net Interest
Rate Margin /
Effective
Interest Rate
Margin
|
|
Reconciliation
|
|
Net Interest
Rate Margin /
Effective
Interest
Rate Margin
|
|
Reconciliation
|
|
Net Interest
Rate Margin /
Effective
Interest Rate
Margin
|
Net interest
income
|
85,980
|
|
|
1.45
|
%
|
|
73,027
|
|
|
1.20
|
%
|
|
74,482
|
|
|
1.31
|
%
|
Less: Amortization of
net deferred
(gain) loss on de-designated interest
rate swaps
|
(5,981)
|
|
|
(0.12)
|
%
|
|
(5,981)
|
|
|
(0.12)
|
%
|
|
(5,980)
|
|
|
(0.15)
|
%
|
Add: GSE CRT embedded
derivative
coupon interest recorded as
realized and unrealized
credit
derivative income (loss),
net
|
4,987
|
|
|
0.09
|
%
|
|
5,196
|
|
|
0.09
|
%
|
|
5,568
|
|
|
0.12
|
%
|
Add (Less):
Contractual net interest
income (expense) on
interest
rate swaps recorded as gain
(loss) on derivative
instruments,
net
|
12,091
|
|
|
0.25
|
%
|
|
11,715
|
|
|
0.24
|
%
|
|
(629)
|
|
|
(0.02)
|
%
|
Effective net
interest income
|
97,077
|
|
|
1.67
|
%
|
|
83,957
|
|
|
1.41
|
%
|
|
73,441
|
|
|
1.26
|
%
|
|
Years Ended
December 31,
|
|
2019
|
|
2018
|
$ in
thousands
|
Reconciliation
|
|
Net Interest
Rate Margin /
Effective
Interest Rate
Margin
|
|
Reconciliation
|
|
Net Interest
Rate Margin /
Effective
Interest Rate
Margin
|
Net interest
income
|
306,047
|
|
|
1.26
|
%
|
|
304,148
|
|
|
1.39
|
%
|
Less: Amortization of
net deferred (gain) loss on de-
designated interest rate swaps
|
(23,729)
|
|
|
(0.13)
|
%
|
|
(25,839)
|
|
|
(0.16)
|
%
|
Add: GSE CRT embedded
derivative coupon interest recorded
as realized and unrealized credit
derivative income
(loss), net
|
20,833
|
|
|
0.11
|
%
|
|
22,478
|
|
|
0.13
|
%
|
Add (Less):
Contractual net interest income (expense) on
interest rate swaps recorded as gain
(loss) on derivative
instruments, net
|
35,840
|
|
|
0.19
|
%
|
|
(20,015)
|
|
|
(0.13)
|
%
|
Effective net
interest income
|
338,991
|
|
|
1.43
|
%
|
|
280,772
|
|
|
1.23
|
%
|
Repurchase Agreement Debt-to-Equity Ratio
The following tables show the allocation of the Company's
stockholders' equity to its target assets, the Company's
debt-to-equity ratio, and the Company's repurchase agreement
debt-to-equity ratio as of December 31, 2019 and
September 30, 2019. The Company's debt-to-equity ratio
is calculated in accordance with U.S. GAAP and is the ratio of
total debt (sum of repurchase agreements and secured loans) to
total stockholders' equity. The Company presents a repurchase
agreement debt-to-equity ratio, a non-GAAP financial measure of
leverage, because the mortgage REIT industry primarily uses
repurchase agreements, which typically mature within one year, to
finance investments. The Company believes presenting the Company's
repurchase agreement debt-to-equity ratio when considered together
with its U.S. GAAP financial measure of debt-to-equity ratio,
provides information that is useful to investors in understanding
the Company's refinancing risks, and gives investors a comparable
statistic to those other mortgage REITs who almost exclusively
borrow using short-term repurchase agreements that are subject to
refinancing risk.
December 31, 2019
$ in
thousands
|
Agency
RMBS
|
Agency
CMBS
|
Commercial
Credit (1)
|
Residential
Credit (2)
|
Total
|
Mortgage-backed and
credit risk transfer
securities
|
11,301,037
|
|
4,767,930
|
|
3,829,031
|
|
1,873,788
|
|
21,771,786
|
|
Cash and cash
equivalents (3)
|
73,927
|
|
27,881
|
|
51,092
|
|
19,607
|
|
172,507
|
|
Restricted cash
(4)
|
81,830
|
|
34,441
|
|
724
|
|
—
|
|
116,995
|
|
Derivative assets, at
fair value (4)
|
13,034
|
|
5,499
|
|
—
|
|
—
|
|
18,533
|
|
Other
assets
|
94,525
|
|
12,460
|
|
110,122
|
|
49,617
|
|
266,724
|
|
Total
assets
|
11,564,353
|
|
4,848,211
|
|
3,990,969
|
|
1,943,012
|
|
22,346,545
|
|
|
|
|
|
|
|
Repurchase
agreements
|
9,666,964
|
|
4,246,359
|
|
2,041,968
|
|
1,577,012
|
|
17,532,303
|
|
Secured loans
(5)
|
540,299
|
|
—
|
|
1,109,701
|
|
—
|
|
1,650,000
|
|
Derivative
liabilities, at fair value (4)
|
—
|
|
—
|
|
352
|
|
—
|
|
352
|
|
Other
liabilities
|
65,353
|
|
124,305
|
|
29,727
|
|
12,606
|
|
231,991
|
|
Total
liabilities
|
10,272,616
|
|
4,370,664
|
|
3,181,748
|
|
1,589,618
|
|
19,414,646
|
|
|
|
|
|
|
|
Total stockholders'
equity (allocated)
|
1,291,737
|
|
477,547
|
|
809,221
|
|
353,394
|
|
2,931,899
|
|
Adjustments to
calculate repurchase agreement
debt-to-equity ratio:
|
|
|
|
|
|
Net stockholders'
equity in unsecured assets (6)
|
—
|
|
—
|
|
(46,053)
|
|
—
|
|
(46,053)
|
|
Collateral pledged
against secured loans
|
(621,667)
|
|
—
|
|
(1,276,822)
|
|
—
|
|
(1,898,489)
|
|
Secured
loans
|
540,299
|
|
—
|
|
1,109,701
|
|
—
|
|
1,650,000
|
|
Stockholders' equity
related to repurchase
agreement debt
|
1,210,369
|
|
477,547
|
|
596,047
|
|
353,394
|
|
2,637,357
|
|
Debt-to-equity ratio
(7)
|
7.9
|
|
8.9
|
|
3.9
|
|
4.5
|
|
6.5
|
|
Repurchase agreement
debt-to-equity ratio (8)
|
8.0
|
|
8.9
|
|
3.4
|
|
4.5
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Investments in
non-Agency CMBS, multifamily GSE CRT, commercial loans and
unconsolidated joint ventures are included in commercial
credit.
|
(2)
|
Investments in
non-Agency RMBS, single family GSE CRT and a loan participation
interest are included in residential credit.
|
(3)
|
Cash and cash
equivalents is allocated based on a percentage of stockholders'
equity for each asset class.
|
(4)
|
Restricted cash,
derivative assets and derivative liabilities are allocated based on
the hedging strategy for each class.
|
(5)
|
Secured loans are
allocated based on amount of collateral pledged.
|
(6)
|
Net stockholders'
equity in unsecured assets includes commercial loans and
investments in unconsolidated joint ventures.
|
(7)
|
Debt-to-equity ratio
is calculated as the ratio of total debt (sum of repurchase
agreements and secured loans) to total stockholders'
equity.
|
(8)
|
Repurchase agreement
debt-to-equity ratio is calculated as the ratio of repurchase
agreements to stockholders' equity related to repurchase agreement
debt.
|
September 30, 2019
$ in
thousands
|
Agency
RMBS
|
Agency
CMBS
|
Commercial
Credit (1)
|
Residential
Credit (2)
|
Total
|
Mortgage-backed and
credit risk transfer
securities
|
12,864,217
|
|
4,936,184
|
|
3,851,552
|
|
1,947,546
|
|
23,599,499
|
|
Cash and cash
equivalents (3)
|
56,122
|
|
17,226
|
|
37,536
|
|
15,004
|
|
125,888
|
|
Restricted cash
(4)
|
57,878
|
|
22,208
|
|
—
|
|
—
|
|
80,086
|
|
Derivative assets, at
fair value (4)
|
2,557
|
|
981
|
|
589
|
|
—
|
|
4,127
|
|
Other
assets
|
76,417
|
|
13,452
|
|
111,501
|
|
50,353
|
|
251,723
|
|
Total
assets
|
13,057,191
|
|
4,990,051
|
|
4,001,178
|
|
2,012,903
|
|
24,061,323
|
|
|
|
|
|
|
|
Repurchase
agreements
|
11,124,901
|
|
3,306,244
|
|
2,018,542
|
|
1,622,345
|
|
18,072,032
|
|
Secured loans
(5)
|
547,149
|
|
—
|
|
1,102,851
|
|
—
|
|
1,650,000
|
|
Derivative
liabilities, at fair value (4)
|
33,519
|
|
12,862
|
|
—
|
|
—
|
|
46,381
|
|
Other
liabilities
|
56,160
|
|
1,272,761
|
|
40,999
|
|
11,958
|
|
1,381,878
|
|
Total
liabilities
|
11,761,729
|
|
4,591,867
|
|
3,162,392
|
|
1,634,303
|
|
21,150,291
|
|
|
|
|
|
|
|
Total stockholders'
equity (allocated)
|
1,295,462
|
|
398,184
|
|
838,786
|
|
378,600
|
|
2,911,032
|
|
Adjustments to
calculate repurchase agreement
debt-to-equity ratio:
|
|
|
|
|
|
Net stockholders'
equity in unsecured assets (6)
|
—
|
|
—
|
|
(47,493)
|
|
—
|
|
(47,493)
|
|
Collateral pledged
against secured loans
|
(633,350)
|
|
—
|
|
(1,276,599)
|
|
—
|
|
(1,909,949)
|
|
Secured
loans
|
547,149
|
|
—
|
|
1,102,851
|
|
—
|
|
1,650,000
|
|
Stockholders' equity
related to repurchase
agreement debt
|
1,209,261
|
|
398,184
|
|
617,545
|
|
378,600
|
|
2,603,590
|
|
Debt-to-equity ratio
(7)
|
9.0
|
|
8.3
|
|
3.7
|
|
4.3
|
|
6.8
|
|
Repurchase agreement
debt-to-equity ratio (8)
|
9.2
|
|
8.3
|
|
3.3
|
|
4.3
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Investments in
non-Agency CMBS, commercial loans and unconsolidated joint ventures
are included in commercial credit.
|
(2)
|
Investments in
non-Agency RMBS, single family GSE CRT and a loan participation
interest are included in residential credit.
|
(3)
|
Cash and cash
equivalents is allocated based on a percentage of stockholders'
equity for each asset class.
|
(4)
|
Restricted cash,
derivative assets and derivative liabilities are allocated based on
the hedging strategy for each class.
|
(5)
|
Secured loans are
allocated based on amount of collateral pledged.
|
(6)
|
Net stockholders'
equity in unsecured assets includes commercial loans and
investments in unconsolidated joint ventures.
|
(7)
|
Debt-to-equity ratio
is calculated as the ratio of total debt (sum of repurchase
agreements and secured loans) to total stockholders'
equity.
|
(8)
|
Repurchase agreement
debt-to-equity ratio is calculated as the ratio of repurchase
agreements to stockholders' equity related to repurchase agreement
debt.
|
Average Earning Asset Balances
The table below presents information related to the Company's
average earning assets for the following periods.
|
Three Months
Ended
|
|
Years
Ended
|
$ in
thousands
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Average Earning
Asset Balances (1):
|
|
|
|
|
|
|
|
|
|
Agency
RMBS:
|
|
|
|
|
|
|
|
|
|
15 year fixed-rate,
at amortized cost
|
288,050
|
|
|
312,603
|
|
|
533,041
|
|
|
328,404
|
|
|
1,911,511
|
|
30 year fixed-rate,
at amortized cost
|
10,852,691
|
|
|
11,837,640
|
|
|
10,438,730
|
|
|
11,757,662
|
|
|
8,867,942
|
|
Hybrid ARM, at
amortized cost
|
57,182
|
|
|
66,671
|
|
|
936,312
|
|
|
129,396
|
|
|
1,531,077
|
|
Agency - CMO, at
amortized cost
|
420,532
|
|
|
420,889
|
|
|
263,464
|
|
|
378,253
|
|
|
258,457
|
|
Agency CMBS, at
amortized cost
|
4,185,558
|
|
|
2,796,732
|
|
|
781,557
|
|
|
2,522,256
|
|
|
339,816
|
|
Non-Agency CMBS, at
amortized cost
|
3,685,198
|
|
|
3,607,381
|
|
|
3,296,258
|
|
|
3,532,202
|
|
|
3,226,174
|
|
Non-Agency RMBS, at
amortized cost
|
873,774
|
|
|
946,446
|
|
|
1,051,883
|
|
|
980,775
|
|
|
1,055,682
|
|
GSE CRT, at amortized
cost
|
885,571
|
|
|
905,062
|
|
|
760,318
|
|
|
863,080
|
|
|
767,220
|
|
Commercial loans, at
amortized cost
|
24,099
|
|
|
24,233
|
|
|
31,624
|
|
|
25,007
|
|
|
110,461
|
|
Loan participation
interest
|
45,419
|
|
|
45,465
|
|
|
51,468
|
|
|
49,220
|
|
|
20,503
|
|
Average earning
assets
|
21,318,074
|
|
|
20,963,122
|
|
|
18,144,655
|
|
|
20,566,255
|
|
|
18,088,843
|
|
Average Earning
Asset Yields (2):
|
|
|
|
|
|
|
|
|
|
Agency
RMBS:
|
|
|
|
|
|
|
|
|
|
15 year
fixed-rate
|
3.32
|
%
|
|
3.32
|
%
|
|
3.17
|
%
|
|
3.34
|
%
|
|
2.23
|
%
|
30 year
fixed-rate
|
3.03
|
%
|
|
3.19
|
%
|
|
3.41
|
%
|
|
3.26
|
%
|
|
3.09
|
%
|
Hybrid ARM
|
3.27
|
%
|
|
3.22
|
%
|
|
2.66
|
%
|
|
3.27
|
%
|
|
2.40
|
%
|
Agency -
CMO
|
3.50
|
%
|
|
3.40
|
%
|
|
3.34
|
%
|
|
3.41
|
%
|
|
3.01
|
%
|
Agency
CMBS
|
3.14
|
%
|
|
3.44
|
%
|
|
3.19
|
%
|
|
3.32
|
%
|
|
3.30
|
%
|
Non-Agency
CMBS
|
5.09
|
%
|
|
5.09
|
%
|
|
4.95
|
%
|
|
5.06
|
%
|
|
4.91
|
%
|
Non-Agency
RMBS
|
7.18
|
%
|
|
6.54
|
%
|
|
7.07
|
%
|
|
6.73
|
%
|
|
7.11
|
%
|
GSE CRT
(3)
|
3.03
|
%
|
|
3.33
|
%
|
|
3.67
|
%
|
|
3.39
|
%
|
|
3.40
|
%
|
Commercial
loans
|
10.49
|
%
|
|
10.89
|
%
|
|
10.78
|
%
|
|
10.90
|
%
|
|
9.54
|
%
|
Loan participation
interest
|
5.71
|
%
|
|
6.18
|
%
|
|
6.04
|
%
|
|
6.04
|
%
|
|
6.10
|
%
|
Average earning asset
yields
|
3.62
|
%
|
|
3.75
|
%
|
|
3.88
|
%
|
|
3.78
|
%
|
|
3.55
|
%
|
(1)
|
Average earning asset
balances for each period are based on weighted month-end average
earning assets.
|
(2)
|
Average earning asset
yields for the period are calculated by dividing interest income,
including amortization of premiums and discounts, by average
month-end earning assets based on the amortized cost of the
investments. All yields are annualized.
|
(3)
|
GSE CRT average
earning asset yields exclude coupon interest associated with
embedded derivatives on securities not accounted for under the fair
value option that is recorded as realized and unrealized credit
derivative income (loss), net under U.S. GAAP.
|
Average Borrowings and Cost of Funds
The table below presents information related to the Company's
average borrowings and average cost of funds.
|
Three Months
Ended
|
|
Years
Ended
|
$ in
thousands
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Average Borrowings
(1):
|
|
|
|
|
|
|
|
|
|
Agency RMBS
(2)
|
10,809,305
|
|
|
11,808,241
|
|
|
10,819,707
|
|
|
11,697,604
|
|
|
11,178,636
|
|
Agency
CMBS
|
4,118,846
|
|
|
2,794,691
|
|
|
718,436
|
|
|
2,476,770
|
|
|
311,024
|
|
Non-Agency CMBS
(2)
|
3,146,907
|
|
|
3,047,334
|
|
|
2,670,071
|
|
|
2,920,840
|
|
|
2,586,509
|
|
Non-Agency
RMBS
|
808,299
|
|
|
865,961
|
|
|
900,036
|
|
|
865,353
|
|
|
887,132
|
|
GSE CRT
|
758,793
|
|
|
776,555
|
|
|
686,404
|
|
|
751,361
|
|
|
677,545
|
|
Exchangeable senior
notes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,646
|
|
Loan participation
interest
|
34,064
|
|
|
34,099
|
|
|
38,601
|
|
|
36,915
|
|
|
15,377
|
|
Total average
borrowings
|
19,676,214
|
|
|
19,326,881
|
|
|
15,833,255
|
|
|
18,748,843
|
|
|
15,684,869
|
|
Maximum borrowings
during the period (3)
|
20,377,801
|
|
|
19,898,863
|
|
|
16,144,062
|
|
|
20,377,801
|
|
|
16,144,062
|
|
Average Cost of
Funds (4):
|
|
|
|
|
|
|
|
|
|
Agency RMBS
(2)
|
2.18
|
%
|
|
2.54
|
%
|
|
2.52
|
%
|
|
2.52
|
%
|
|
2.10
|
%
|
Agency
CMBS
|
2.13
|
%
|
|
2.54
|
%
|
|
2.40
|
%
|
|
2.40
|
%
|
|
2.31
|
%
|
Non-Agency CMBS
(2)
|
2.61
|
%
|
|
3.00
|
%
|
|
3.11
|
%
|
|
3.00
|
%
|
|
2.74
|
%
|
Non-Agency
RMBS
|
2.82
|
%
|
|
3.26
|
%
|
|
3.49
|
%
|
|
3.28
|
%
|
|
3.25
|
%
|
GSE CRT
|
2.85
|
%
|
|
3.22
|
%
|
|
3.47
|
%
|
|
3.25
|
%
|
|
3.19
|
%
|
Exchangeable senior
notes
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
5.58
|
%
|
Loan participation
interest
|
3.61
|
%
|
|
4.03
|
%
|
|
4.04
|
%
|
|
3.99
|
%
|
|
4.04
|
%
|
Cost of
funds
|
2.17
|
%
|
|
2.55
|
%
|
|
2.57
|
%
|
|
2.52
|
%
|
|
2.16
|
%
|
Interest rate swaps
average fixed pay rate (5)
|
1.56
|
%
|
|
1.92
|
%
|
|
2.19
|
%
|
|
2.03
|
%
|
|
2.30
|
%
|
Interest rate swaps
average floating receive rate (6)
|
(1.89)
|
%
|
|
(2.28)
|
%
|
|
(2.17)
|
%
|
|
(2.29)
|
%
|
|
(2.10)
|
%
|
Effective cost of
funds (non-GAAP measure) (7)
|
2.04
|
%
|
|
2.43
|
%
|
|
2.74
|
%
|
|
2.46
|
%
|
|
2.45
|
%
|
|
|
|
|
|
|
|
|
|
|
Debt-to-equity ratio
(as of period end)
|
6.5
|
x
|
|
6.8
|
x
|
|
6.7
|
x
|
|
6.5
|
x
|
|
6.7
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Average borrowings
for each period are based on weighted month-end balances; all
percentages are annualized.
|
(2)
|
Agency RMBS and
non-Agency CMBS average borrowings and cost of funds include
borrowings under repurchase agreements and secured
loans.
|
(3)
|
Amount represents the
maximum borrowings at month-end during each of the respective
periods.
|
(4)
|
Average cost of funds
is calculated by dividing annualized interest expense excluding
amortization of net deferred gain (loss) on de-designated interest
rate swaps by the Company's average borrowings.
|
(5)
|
Interest rate swaps
average fixed pay rate is calculated by dividing annualized
contractual swap interest expense by the Company's average notional
balance of interest rate swaps.
|
(6)
|
Interest rate swaps
average floating receive rate is calculated by dividing annualized
contractual swap interest income by the Company's average notional
balance of interest rate swaps.
|
(7)
|
For a reconciliation
of cost of funds to effective cost of funds, see "Non-GAAP
Financial Measures."
|
Brandon Burke, Investor
Relations
800-241-5477
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SOURCE Invesco Mortgage Capital Inc.