ATLANTA, May 6, 2015 /PRNewswire/ --
Highlights
- Q1 2015 core earnings* of $61.9
million, core earnings per common share of $0.50, and a common stock dividend of
$0.45 per share
- Q1 2015 book value per diluted common share** increased 2.9% to
$19.37 vs. $18.82 at year end 2014
- Economic return*** for Q1 2015 of 5.3% compared to 0.6% for Q4
2014
- Q1 2015 comprehensive income attributable to common
stockholders rose to $123.1 million
or $1.00 per common share vs.
$14.7 million or $0.12 per common share for Q4 2014
- Q1 2015 U.S. GAAP net loss attributable to common stockholders
of $32.7 million or ($0.27) per common share reflecting a
$122.7 million net loss on interest
rate hedges
- Portfolio equity allocation positioned to benefit from
improving real estate fundamentals and global demand for high
quality assets with attractive yields: 34% to commercial credit,
34% to Agency RMBS and 32% to residential credit as of March 31, 2015
Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today
announced financial results for the quarter ended March 31, 2015, reporting core earnings* of
$0.50 per common share. First quarter
results benefited from low volatility in prepayment speeds and a
$0.05 per common share contribution
from equity in earnings of unconsolidated real estate ventures.
"We seek to provide our stockholders with high income and an
enhanced risk/return profile via diversification and prudent
investing across the spectrum of potential mortgage finance
opportunities," said Richard King,
President and CEO. During the quarter ended March 31, 2015, IVR declared a $0.45 per common share dividend and grew book
value from $18.82 to $19.37 per diluted common share** for a 5.3%
economic return***. "Management believes the Company is positioned
to benefit from improving real estate fundamentals and to continue
delivering attractive economic return in 2015," said Mr. King.
The Company's first quarter 2015 increase in book value reflects
prudent sector allocation, asset selection and interest rate
hedging. Approximately two-thirds of equity is allocated to
commercial and residential credit assets as of March 31, 2015, which reduces overall interest
rate risk. During first quarter 2015, the Company also continued to
reduce reliance on repurchase agreement financing. The Company has
successfully diversified its funding sources and increased its
weighted average remaining maturity of borrowings from 60 days at
the end of 2013 to 359 days as of March 31,
2015.
* Core earnings (and by calculation, core earnings per common
share), 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-Generally Accepted Accounting
Principles ("GAAP") financial measures. Refer to the section
entitled "Non-GAAP Financial Measures" below for important
disclosures and a reconciliation to the most comparable U.S. GAAP
measures of net income attributable to common stockholders (and by
calculation, basic earnings (loss) per common share), total
interest expense (and by calculation, cost of funds), net interest
income (and by calculation, net interest rate margin) and total
debt-to-equity ratio.
**Book value per diluted common share is calculated as total
equity less the liquidation preference of our Series A Preferred
Stock ($140.0 million) and Series B
Preferred Stock ($155.0 million);
divided by total common shares outstanding plus Operating
Partnership Units convertible into shares of common stock
(1,425,000 shares).
***Economic return for the quarter ended March 31, 2015 is defined as the change in book
value per diluted common share from December
31, 2014 to March 31, 2015 of
$0.55; plus dividends declared of
$0.45 per common share; divided by
the December 31, 2014 book value per
diluted common share of $18.82.
Economic return for the quarter ended December 31, 2014 is defined as the change in
book value per diluted common share from September 30, 2014 to December 31, 2014 of ($0.34); plus dividends declared of $0.45 per common share; divided by the
September 30, 2014 book value per
diluted common share of $19.16.
Key performance indicators for the quarters ended March 31, 2015 and December 31, 2014 are summarized in the table
below.
($ in millions,
except share amounts)
|
Q1 '15
|
Q4 '14
|
|
(unaudited)
|
(unaudited)
|
Average earning
assets (at amortized costs)
|
$20,427.4
|
|
$20,282.7
|
|
Average borrowed
funds
|
18,110.5
|
|
17,985.4
|
|
Average
equity
|
$2,452.9
|
|
$2,407.4
|
|
|
|
|
Interest
income
|
$173.5
|
|
$179.0
|
|
Interest
expense
|
72.3
|
|
73.6
|
|
Net interest
income
|
101.2
|
|
105.4
|
|
Total other income
(loss)
|
(115.3)
|
|
(162.8)
|
|
Total
expenses
|
13.3
|
|
14.0
|
|
Net income
(loss)
|
(27.3)
|
|
(71.2)
|
|
Net income (loss)
attributable to non-controlling interest
|
(0.3)
|
|
(0.8)
|
|
Dividends to
preferred stockholders
|
5.7
|
|
8.6
|
|
Net income (loss)
attributable to common stockholders
|
($32.7)
|
|
($79.0)
|
|
|
|
|
Average portfolio
yield
|
3.40
|
%
|
3.53
|
%
|
Cost of
funds
|
1.60
|
%
|
1.64
|
%
|
Total debt to equity
ratio
|
6.80
|
x
|
6.9
|
x
|
Book value per common
share (diluted)**
|
$19.37
|
|
$18.82
|
|
Earnings (loss) per
common share (basic)
|
($0.27)
|
|
($0.64)
|
|
Dividends declared
per common share
|
$0.45
|
|
$0.45
|
|
Dividends declared
per preferred share on Series A Preferred Stock
|
$0.4844
|
|
$0.4844
|
|
Dividends declared
per preferred share on Series B Preferred Stock
|
$0.4844
|
|
$1.0549
|
|
|
|
|
Non-GAAP Financial
Measures*:
|
|
|
Core
earnings
|
$61.9
|
|
$59.7
|
|
Core earnings per
common share
|
$0.50
|
|
$0.49
|
|
Effective interest
expense
|
$98.7
|
|
$98.2
|
|
Effective cost of
funds
|
2.19
|
%
|
2.18
|
%
|
Effective net
interest income
|
$74.8
|
|
$80.9
|
|
Effective interest
rate margin
|
1.21
|
%
|
1.35
|
%
|
Repurchase agreement
debt-to-equity ratio
|
5.2
|
x
|
5.4
|
x
|
* Core earnings (and by calculation, core earnings per common
share), 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-Generally Accepted Accounting
Principles ("GAAP") financial measures. Refer to the section
entitled "Non-GAAP Financial Measures" below for important
disclosures and a reconciliation to the most comparable U.S. GAAP
measures of net income (and by calculation, basic earnings (loss)
per common share), total interest expense (and by calculation, cost
of funds), net interest income (and by calculation, net interest
rate margin) and total debt-to-equity ratio.
**Book value per diluted common share is calculated as total
equity less the liquidation preference of our Series A Preferred
Stock ($140.0 million) and Series B
Preferred Stock ($155.0 million);
divided by total common shares outstanding plus Operating
Partnership Units convertible into shares of common stock
(1,425,000 shares).
Financial Summary
During the first quarter of 2015, the Company generated
$61.9 million in core earnings, an
increase of $2.2 million over the
fourth quarter of 2014. Higher core earnings were aided by
$6.0 million of equity in earnings of
unconsolidated real estate ventures. Excluding the impact of
equity in earnings of unconsolidated real estate ventures, first
quarter of 2015 core earnings were $2.5
million lower than the fourth quarter of 2014 primarily due
to lower net interest income. Net loss attributable to common
stockholders for the first quarter of 2015 was $32.7 million, compared to net loss attributable
to common stockholders of $79.0
million for the fourth quarter of 2014. The first quarter of
2015 net loss attributable to common stockholders was primarily due
to a $122.7 million decline in the
valuation of interest rate swaps during the quarter. First quarter
2015 book value per diluted common share rose to $19.37 reflecting prudent sector allocation,
asset selection and interest rate hedging.
During the first quarter of 2015, the Company added one
residential loan securitization and several 15 year fixed-rate
agency residential mortgage-backed securities to its investment
portfolio. As of March 31, 2015, the Company increased its
portfolio of residential loans held for investment to $3.6 billion, an increase of $232.1 million from December 31, 2014. The
Company's mortgage-backed securities ("MBS") portfolio totaled
$17.3 billion, an increase of
$91.7 million from December 31,
2014. For the quarter ended March 31, 2015, average earning
assets were $20.4 billion,
representing an increase of $144.7
million from December 31, 2014. The portfolio generated
interest income of $173.5 million
during the three months ended March 31, 2015, which reflects a
decrease of $5.5 million from the
three months ended December 31, 2014. The decrease in interest
income was the result of a decline in average portfolio yield from
3.53% in the fourth quarter of 2014 to 3.40% for the three months
ended March 31, 2015. The lower portfolio yield in the first
quarter of 2015 primarily reflects lower yields on non-Agency
residential mortgage-backed securities ("non-Agency RMBS").
Yields on non-Agency RMBS declined from 3.70% in the fourth quarter
of 2014 to 3.55% in the first quarter of 2015 reflecting slower
prepayment speeds and lower discount accretion. In addition,
many of our non-Agency RMBS had coupons reset lower in the first
quarter of 2015.
For the quarter ended March 31, 2015, the Company had
average borrowed funds of approximately $18.1 billion and effective interest expense of
$98.7 million, compared to
$18.0 billion and $98.2 million, respectively, for the fourth
quarter of 2014. The Company's effective cost of funds was 2.19%
and 2.18% for the first quarter of 2015 and fourth quarter of 2014,
respectively. The slight increase in average borrowed funds is due
to asset-backed security balances associated with the consolidation
of one additional residential loan securitization during the
quarter.
Total expenses for the first quarter of 2015 were approximately
$13.3 million, compared to
$14.0 million for the fourth quarter
of 2014. First quarter 2015 total expenses include $2.2 million of securitization trust expenses
associated with direct operating expenses of the Company's
consolidated residential loan securitizations versus $2.0 million in the fourth quarter of 2014.
Securitization trust expenses rose in the first quarter of 2015 due
to the consolidation of an additional securitization that closed in
March 2015. General and
administrative expenses were $1.7
million in the first quarter of 2015, a decrease of
$0.6 million from the fourth quarter
of 2014. The decrease in general and administrative expenses was
primarily due to lower tax, legal and other professional fees in
the three months ended March 31, 2015. The ratio of operating
expenses to average equity* for the first quarter of 2015 was
1.82%, a decrease of 18 basis points from the fourth quarter of
2014.
In the first quarter of 2015, the Company declared the following
dividends: a common stock dividend of $0.45 per share paid on April 28, 2015; a Series A preferred stock
dividend of $0.4844 per share paid on
April 27, 2015; and a Series B
preferred stock dividend of $0.4844
per share that will be paid on June 29,
2015.
About Invesco Mortgage Capital Inc.
Invesco Mortgage Capital Inc. is a real estate investment trust
that focuses on 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 subsidiary of Invesco Ltd. (NYSE: IVZ), a leading
independent global investment management firm.
*The ratio of operating expenses to average equity is calculated
as the annualized sum of management fees plus general and
administrative expenses divided by average equity. Average equity
is calculated based on a weighted balance basis. The Company
excludes expenses of consolidated securitization trusts from this
calculation to facilitate comparison of the Company's operating
expenses to peers.
Earnings Call
Members of the investment community and the general public are
invited to listen to the Company's earnings conference call on
Thursday, May 7, 2015, at
9:00 a.m. ET, by calling one of the
following numbers:
North America Toll Free: 888-942-8507
International: 415-228-4839
Passcode: 487
An audio replay will be available until 5:00 pm ET on May 21,
2015 by calling:
888-562-2797 (North America) or
1-203-369-3747 (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, mortgage reform programs, 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, and 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.
INVESCO MORTGAGE
CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
Three Months
Ended
March 31,
|
In thousands,
except share amounts
|
2015
|
|
2014
|
Interest
Income
|
|
|
|
Mortgage-backed
securities
|
141,018
|
|
|
151,739
|
|
Residential loans
(1)
|
29,374
|
|
|
17,704
|
|
Commercial
loans
|
3,115
|
|
|
1,619
|
|
Total interest
income
|
173,507
|
|
|
171,062
|
|
Interest
Expense
|
|
|
|
Repurchase
agreements
|
43,310
|
|
|
49,071
|
|
Secured
loans
|
1,464
|
|
|
—
|
|
Exchangeable senior
notes
|
5,607
|
|
|
5,607
|
|
Asset-backed
securities (1)
|
21,898
|
|
|
13,935
|
|
Total interest
expense
|
72,279
|
|
|
68,613
|
|
Net interest
income
|
101,228
|
|
|
102,449
|
|
(Reduction in)
provision for loan losses
|
(62)
|
|
|
207
|
|
Net interest
income after (reduction in) provision for loan
losses
|
101,290
|
|
|
102,242
|
|
Other Income
(loss)
|
|
|
|
Gain (loss) on sale
of investments, net
|
2,142
|
|
|
(11,718)
|
|
Equity in earnings of
unconsolidated ventures
|
6,006
|
|
|
441
|
|
Gain (loss) on
derivative instruments, net
|
(122,745)
|
|
|
(151,312)
|
|
Realized and
unrealized credit default swap income
|
203
|
|
|
329
|
|
Other investment
income (loss), net
|
(894)
|
|
|
—
|
|
Total other income
(loss)
|
(115,288)
|
|
|
(162,260)
|
|
Expenses
|
|
|
|
Management fee –
related party
|
9,415
|
|
|
9,335
|
|
General and
administrative
|
1,727
|
|
|
2,012
|
|
Consolidated
securitization trusts (1)
|
2,156
|
|
|
1,184
|
|
Total
expenses
|
13,298
|
|
|
12,531
|
|
Net loss
|
(27,296)
|
|
|
(72,549)
|
|
Net loss attributable
to non-controlling interest
|
(312)
|
|
|
(822)
|
|
Net loss attributable
to Invesco Mortgage Capital Inc.
|
(26,984)
|
|
|
(71,727)
|
|
Dividends to
preferred stockholders
|
5,716
|
|
|
2,713
|
|
Net loss attributable
to common stockholders
|
(32,700)
|
|
|
(74,440)
|
|
Loss per
share:
|
|
|
|
Net loss attributable
to common stockholders
|
|
|
|
Basic
|
(0.27)
|
|
|
(0.60)
|
|
Diluted
|
(0.27)
|
|
|
(0.60)
|
|
Dividends declared
per common share
|
0.45
|
|
|
0.50
|
|
|
|
(1)
|
The condensed
consolidated statements of operations include income and expenses
of consolidated variable interest entities.
|
INVESCO MORTGAGE
CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
|
Three Months
Ended
March 31,
|
In
thousands
|
2015
|
|
2014
|
Net loss
|
(27,296)
|
|
|
(72,549)
|
|
Other
comprehensive income (loss):
|
|
|
|
Unrealized gain
(loss) on mortgage-backed securities, net
|
140,598
|
|
|
169,467
|
|
Reclassification of
unrealized (gain) loss on sale of mortgage-backed securities to
gain (loss) on sales of investments, net
|
(2,142)
|
|
|
11,718
|
|
Reclassification of
amortization of net deferred losses on de-designated interest rate
swaps to repurchase agreements interest expense
|
19,145
|
|
|
21,296
|
|
Total Other
comprehensive income
|
157,601
|
|
|
202,481
|
|
Comprehensive
income
|
130,305
|
|
|
129,932
|
|
Less: Comprehensive
income attributable to non-controlling interest
|
(1,490)
|
|
|
(1,483)
|
|
Less: Dividends to
preferred stockholders
|
(5,716)
|
|
|
(2,713)
|
|
Comprehensive income
attributable to common stockholders
|
123,099
|
|
|
125,736
|
|
INVESCO MORTGAGE
CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
As
of
|
In thousands
except share amounts
|
March 31,
2015
|
|
December 31,
2014
|
|
(Unaudited)
|
|
|
ASSETS
|
|
Mortgage-backed
securities, at fair value
|
17,340,595
|
|
|
17,248,895
|
|
Residential loans,
held-for-investment (1)
|
3,597,147
|
|
|
3,365,003
|
|
Commercial loans,
held-for-investment
|
146,211
|
|
|
145,756
|
|
Cash and cash
equivalents
|
157,025
|
|
|
164,144
|
|
Due from
counterparties
|
82,215
|
|
|
57,604
|
|
Investment related
receivable
|
27,697
|
|
|
38,717
|
|
Accrued interest
receivable
|
66,144
|
|
|
66,044
|
|
Derivative assets, at
fair value
|
6,706
|
|
|
24,178
|
|
Deferred
securitization and financing costs
|
12,286
|
|
|
13,080
|
|
Other
investments
|
110,993
|
|
|
106,498
|
|
Other
assets
|
1,055
|
|
|
1,098
|
|
Total assets
(1)
|
21,548,074
|
|
|
21,231,017
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Liabilities:
|
|
|
|
Repurchase
agreements
|
13,333,081
|
|
|
13,622,677
|
|
Secured
loans
|
1,550,000
|
|
|
1,250,000
|
|
Asset-backed
securities issued by securitization trusts
(1)
|
3,133,527
|
|
|
2,929,820
|
|
Exchangeable senior
notes
|
400,000
|
|
|
400,000
|
|
Derivative
liabilities, at fair value
|
290,852
|
|
|
254,026
|
|
Dividends and
distributions payable
|
61,766
|
|
|
61,757
|
|
Investment related
payable
|
30,351
|
|
|
17,008
|
|
Accrued interest
payable
|
23,800
|
|
|
29,670
|
|
Collateral held
payable
|
4,300
|
|
|
14,890
|
|
Accounts payable and
accrued expenses
|
3,248
|
|
|
2,439
|
|
Due to
affiliate
|
9,535
|
|
|
9,880
|
|
Total liabilities
(1)
|
18,840,460
|
|
|
18,592,167
|
|
Equity:
|
|
|
|
Preferred Stock, par
value $0.01 per share; 50,000,000 shares authorized:
|
|
|
|
7.75% Series A
Cumulative Redeemable Preferred Stock: 5,600,000 shares issued and
outstanding ($140,000 aggregate liquidation preference)
|
135,356
|
|
|
135,356
|
|
7.75%
Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock:
6,200,000 shares issued and outstanding ($155,000 aggregate
liquidation preference)
|
149,860
|
|
|
149,860
|
|
Common Stock, par
value $0.01 per share; 450,000,000 shares authorized; 123,131,777
and 123,110,454 shares issued and outstanding,
respectively
|
1,231
|
|
|
1,231
|
|
Additional paid in
capital
|
2,532,353
|
|
|
2,532,130
|
|
Accumulated other
comprehensive income
|
560,358
|
|
|
404,559
|
|
Retained earnings
(distributions in excess of earnings)
|
(700,930)
|
|
|
(612,821)
|
|
Total stockholders'
equity
|
2,678,228
|
|
|
2,610,315
|
|
Non-controlling
interest
|
29,386
|
|
|
28,535
|
|
Total
equity
|
2,707,614
|
|
|
2,638,850
|
|
Total liabilities and
equity
|
21,548,074
|
|
|
21,231,017
|
|
|
|
(1)
|
The condensed
consolidated balance sheets include assets of consolidated variable
interest entities ("VIEs") that can only be used to settle
obligations and liabilities of the VIEs for which creditors do not
have recourse to the Company. As of March 31, 2015 and
December 31, 2014, total assets of the consolidated VIEs were
$3,613,043 and $3,380,597, respectively, and total liabilities of
the consolidated VIEs were $3,142,670 and $2,938,512,
respectively.
|
Non-GAAP Financial Measures
In addition to the results presented in accordance with U.S.
GAAP, this release contains the non-GAAP financial measures of
"core earnings," (and by calculation, "core earnings per common
share"), "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 Company's management uses
these non-GAAP financial measures in its internal analysis of
results and believes these measures are useful to investors for the
reasons explained below. The most directly comparable U.S. GAAP
measures are net income attributable to common stockholders (and by
calculation basic earnings (loss) per common share), total interest
expense (and by calculation, cost of funds), net interest income
(and by calculation, net interest rate margin) and total
debt-to-equity ratio.
These non-GAAP financial measures should not be considered as
substitutes for any measures derived in accordance with U.S. GAAP
and may not be comparable to other similarly titled measures of
other companies. An analysis of any non-GAAP financial measure
should be made in conjunction with results presented in accordance
with U.S. GAAP.
Core Earnings
The Company calculates core earnings as U.S. GAAP net income
attributable to common stockholders adjusted for (gain) loss on
sale of investments, net; realized (gain) loss on derivative
instruments, net (excluding contractual net interest on interest
rate swaps); unrealized (gain) loss on derivative instruments, net;
(gain) loss on foreign currency transactions, net; reclassification
of amortization of net deferred losses on de-designated interest
rate swaps to repurchase agreements interest expense; and an
adjustment attributable to non-controlling interest. The Company
records changes in the valuation of its mortgage-backed securities
in other comprehensive income on its condensed consolidated balance
sheets. 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 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 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
|
$ in thousands,
except per share data
|
March 31,
2015
|
|
December 31,
2014
|
|
March 31,
2014
|
Net loss attributable
to common stockholders
|
(32,700)
|
|
|
(79,003)
|
|
|
(74,440)
|
|
Adjustments
|
|
|
|
|
|
(Gain) loss on sale
of investments, net
|
(2,142)
|
|
|
(1,006)
|
|
|
11,718
|
|
Realized (gain) loss
on derivative instruments, net (excluding contractual net interest
on interest rate swaps of $45,608, $45,691 and $51,441,
respectively)
|
26,103
|
|
|
37,310
|
|
|
18,824
|
|
Unrealized (gain)
loss on derivative instruments, net
|
51,034
|
|
|
81,637
|
|
|
81,047
|
|
Loss on foreign
currency transactions, net
|
1,525
|
|
|
1,266
|
|
|
—
|
|
Reclassification of
amortization of net deferred losses on de-designated interest rate
swaps to repurchase agreements interest expense
|
19,145
|
|
|
21,121
|
|
|
21,296
|
|
Subtotal
|
95,665
|
|
|
140,328
|
|
|
132,885
|
|
Adjustment
attributable to non-controlling interest
|
(1,095)
|
|
|
(1,606)
|
|
|
(1,511)
|
|
Core
earnings
|
61,870
|
|
|
59,719
|
|
|
56,934
|
|
Basic earnings (loss)
per common share
|
(0.27)
|
|
|
(0.64)
|
|
|
(0.60)
|
|
Core earnings per
share attributable to common stockholders
|
0.50
|
|
|
0.49
|
|
|
0.46
|
|
Effective Interest Expense/Effective Cost of Funds/Effective
Net Interest Income/Effective Interest Rate Margin
The Company calculates effective interest expense (and by
calculation, effective cost of funds) as U.S. GAAP total interest
expense adjusted for net interest paid on its interest rate swaps
that is recorded in gain (loss) on derivative instruments and the
reclassification of amortization of net deferred swap losses on
de-designated interest rate swaps that is being amortized into
interest expense over the remaining lives of the swaps. The Company
calculates effective net interest income (and by calculation,
effective interest rate margin) as U.S. GAAP net interest income
adjusted for net interest paid on its interest rate swaps that is
recorded in gain (loss) on derivative instruments and the
reclassification of amortization of net deferred losses on
de-designated interest rate swaps that is being amortized into
repurchase agreements interest expense over the remaining lives of
the swaps. 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 subtracts the
amortization of net deferred losses on de-designated interest rate
swaps because the Company does not consider the amortization a
current component of its borrowing costs.
The Company believes the presentation of effective interest
expense, effective costs 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 expense to
effective interest expense and cost of funds to effective cost of
funds for the following periods:
|
Three Months
Ended
March 31, 2015
|
|
Three Months
Ended
December 31, 2014
|
|
Three Months
Ended
March 31, 2014
|
$ 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
|
72,279
|
|
|
1.60
|
%
|
|
73,586
|
|
|
1.64
|
%
|
|
68,613
|
|
|
1.60
|
%
|
Less:
Reclassification of amortization of net deferred losses on
de-designated interest rate swaps to repurchase agreements interest
expense
|
(19,145)
|
|
|
(0.42)
|
%
|
|
(21,121)
|
|
|
(0.48)
|
%
|
|
(21,296)
|
|
|
(0.49)
|
%
|
Add: Net interest paid - interest rate
swaps
|
45,608
|
|
|
1.01
|
%
|
|
45,691
|
|
|
1.02
|
%
|
|
51,441
|
|
|
1.20
|
%
|
Effective interest expense
|
98,742
|
|
|
2.19
|
%
|
|
98,156
|
|
|
2.18
|
%
|
|
98,758
|
|
|
2.31
|
%
|
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
March 31, 2015
|
|
Three Months
Ended
December 31, 2014
|
|
Three Months
Ended
March 31, 2014
|
$ 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
|
101,228
|
|
|
1.80
|
%
|
|
105,433
|
|
|
1.89
|
%
|
|
102,449
|
|
|
1.92
|
%
|
Add: Reclassification
of amortization of net deferred losses on de-designated interest
rate swaps to repurchase agreements interest expense
|
19,145
|
|
|
0.42
|
%
|
|
21,121
|
|
|
0.48
|
%
|
|
21,296
|
|
|
0.49
|
%
|
Less: Net interest paid - interest rate
swaps
|
(45,608)
|
|
|
(1.01)
|
%
|
|
(45,691)
|
|
|
(1.02)
|
%
|
|
(51,441)
|
|
|
(1.20)
|
%
|
Effective net interest income
|
74,765
|
|
|
1.21
|
%
|
|
80,863
|
|
|
1.35
|
%
|
|
72,304
|
|
|
1.21
|
%
|
Repurchase Agreement Debt-to-Equity Ratio
The following tables show the allocation of the Company's equity
to its target assets, the Company's total debt-to-equity ratio, and
the Company's repurchase agreement debt-to-equity ratio as of
March 31, 2015 and December 31, 2014. The mortgage REIT
industry primarily uses repurchase agreements, which typically
mature within one year, to finance investments. Improving the
Company's balance sheet by diversifying the Company's liabilities
away from repurchase agreements has been a focus of management over
the past two years. Since the Company began using other longer-term
means of financing its investments, such as exchangeable senior
notes, asset-backed securities issued by consolidated
securitization trusts, and secured loans, the Company has reduced
its reliance on repurchase agreements. The Company's weighted
average remaining maturity on borrowings has increased from 60 days
as of December 31, 2013 to 359 days
as of March 31, 2015.The Company believes presenting
repurchase agreement debt-to-equity ratio, a non-GAAP financial
measure of leverage, when considered together with U.S. GAAP
financial measures, 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.
March 31, 2015
$ in
thousands
|
Agency
RMBS
|
Non-
Agency
RMBS (6)
|
GSE
CRT(6)
|
CMBS
(7)
|
Comm-
ercial
Loans (7)
|
Consol-
idated
VIEs
(4)(6)
|
Other
(7)
|
Elimin-
ations (5)
|
Total
|
Investments
|
10,274,261
|
|
3,407,153
|
|
661,767
|
|
3,456,892
|
|
146,211
|
|
3,597,147
|
|
41,243
|
|
(459,479)
|
|
21,125,195
|
|
Cash and
cash
equivalents
(1)
|
65,714
|
|
36,666
|
|
9,606
|
|
45,039
|
|
—
|
|
—
|
|
—
|
|
—
|
|
157,025
|
|
Derivative assets, at
fair value (2)
|
4,997
|
|
334
|
|
—
|
|
—
|
|
1,375
|
|
—
|
|
—
|
|
—
|
|
6,706
|
|
Other
assets
|
157,301
|
|
11,255
|
|
592
|
|
67,705
|
|
1,014
|
|
15,897
|
|
7,281
|
|
(1,897)
|
|
259,148
|
|
Total
assets
|
10,502,273
|
|
3,455,408
|
|
671,965
|
|
3,569,636
|
|
148,600
|
|
3,613,044
|
|
48,524
|
|
(461,376)
|
|
21,548,074
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
8,778,225
|
|
2,613,114
|
|
486,990
|
|
1,454,752
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,333,081
|
|
Secured loans
(3)
|
320,947
|
|
—
|
|
—
|
|
1,229,053
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,550,000
|
|
Asset-backed
securities issued by securitization trusts
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,593,006
|
|
—
|
|
(459,479)
|
|
3,133,527
|
|
Exchangeable senior
notes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
400,000
|
|
—
|
|
400,000
|
|
Derivative
liabilities, at fair value
|
290,852
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
290,852
|
|
Other
liabilities
|
66,858
|
|
20,239
|
|
5,041
|
|
30,919
|
|
—
|
|
10,951
|
|
889
|
|
(1,897)
|
|
133,000
|
|
Total
liabilities
|
9,456,882
|
|
2,633,353
|
|
492,031
|
|
2,714,724
|
|
—
|
|
3,603,957
|
|
400,889
|
|
(461,376)
|
|
18,840,460
|
|
|
|
|
|
|
|
|
|
|
|
Allocated
equity
|
1,045,391
|
|
822,055
|
|
179,934
|
|
854,912
|
|
148,600
|
|
9,087
|
|
(352,365)
|
|
—
|
|
2,707,614
|
|
Less equity
associated with secured loans:
|
|
|
|
|
|
|
|
|
|
Collateral
pledged
|
(392,137)
|
|
—
|
|
—
|
|
(1,501,668)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,893,805)
|
|
Secured
loans
|
320,947
|
|
—
|
|
—
|
|
1,229,053
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,550,000
|
|
Net equity (excluding
secured loans)
|
974,201
|
|
822,055
|
|
179,934
|
|
582,297
|
|
NA
|
NA
|
NA
|
—
|
|
2,558,487
|
|
Total debt-to-equity
ratio (8)
|
8.7
|
|
3.2
|
|
2.7
|
|
3.1
|
|
—
|
|
NA
|
NA
|
NA
|
6.8
|
|
Repurchase agreement
debt-to-equity ratio (9)
|
9.0
|
|
3.2
|
|
2.7
|
|
2.5
|
|
NA
|
NA
|
NA
|
NA
|
5.2
|
|
|
|
(1)
|
Cash and cash
equivalents is allocated based on a percentage of equity for Agency
RMBS, Non-Agency RMBS, GSE CRT and CMBS.
|
(2)
|
Derivative assets are
allocated based on the hedging strategy for each asset
class.
|
(3)
|
Secured loans are
allocated based on amount of collateral pledged.
|
(4)
|
Represents VIE assets
and liabilities before intercompany eliminations. VIEs are
securitized entities with no substantive equity at risk.
|
(5)
|
Represents the
Company's ownership of asset-backed securities and accrued interest
eliminated upon consolidation.
|
(6)
|
Non-Agency RMBS, GSE
CRT and Consolidated VIEs are considered residential
credit.
|
(7)
|
CMBS, Commercial
Loans and Investments in unconsolidated ventures of $41.2 million
(which are included in Other), are considered commercial
credit.
|
(8)
|
Debt-to-equity ratio
is calculated as the ratio of total debt (sum of repurchase
agreements, secured loans, asset-backed securities issued by
securitization trusts and exchangeable senior notes) to allocated
equity.
|
(9)
|
Repurchase agreement
debt-to-equity ratio is calculated as the ratio of repurchase
agreements to net equity (excluding secured loans).
|
December 31, 2014
$ in
thousands
|
Agency
RMBS
|
Non-
Agency
RMBS (6)
|
GSE
CRT(6)
|
CMBS
(7)
|
Comm-
ercial
Loans (7)
|
Consol-
idated
VIEs
(4)(6)
|
Other
(7)
|
Elimin-
ations
(5)
|
Total
|
Investments
|
10,091,989
|
|
3,494,181
|
|
625,424
|
|
3,469,835
|
|
145,756
|
|
3,365,003
|
|
43,998
|
|
(432,534)
|
|
20,803,652
|
|
Cash and
cash
equivalents
(1)
|
64,603
|
|
41,578
|
|
10,154
|
|
47,809
|
|
—
|
|
—
|
|
—
|
|
—
|
|
164,144
|
|
Derivative assets, at
fair value (2)
|
23,183
|
|
396
|
|
—
|
|
—
|
|
599
|
|
—
|
|
—
|
|
—
|
|
24,178
|
|
Other
assets
|
111,817
|
|
13,742
|
|
15,639
|
|
75,209
|
|
1,030
|
|
15,591
|
|
7,888
|
|
(1,873)
|
|
239,043
|
|
Total
assets
|
10,291,592
|
|
3,549,897
|
|
651,217
|
|
3,592,853
|
|
147,385
|
|
3,380,594
|
|
51,886
|
|
(434,407)
|
|
21,231,017
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
9,018,818
|
|
2,676,626
|
|
468,782
|
|
1,458,451
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,622,677
|
|
Secured loans
(3)
|
—
|
|
—
|
|
—
|
|
1,250,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,250,000
|
|
Asset-backed
securities issued by securitization trusts
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,362,354
|
|
—
|
|
(432,534)
|
|
2,929,820
|
|
Exchangeable senior
notes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
400,000
|
|
—
|
|
400,000
|
|
Derivative
liabilities, at fair value
|
254,026
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
254,026
|
|
Other
liabilities
|
56,894
|
|
21,351
|
|
5,233
|
|
37,589
|
|
—
|
|
10,563
|
|
5,887
|
|
(1,873)
|
|
135,644
|
|
Total
liabilities
|
9,329,738
|
|
2,697,977
|
|
474,015
|
|
2,746,040
|
|
—
|
|
3,372,917
|
|
405,887
|
|
(434,407)
|
|
18,592,167
|
|
|
|
|
|
|
|
|
|
|
|
Allocated
equity
|
961,854
|
|
851,920
|
|
177,202
|
|
846,813
|
|
147,385
|
|
7,677
|
|
(354,001)
|
|
—
|
|
2,638,850
|
|
Less equity
associated with secured loans:
|
|
|
|
|
|
|
|
|
|
Collateral
pledged
|
|
—
|
|
—
|
|
(1,550,270)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,550,270)
|
|
Secured
loans
|
|
—
|
|
—
|
|
1,250,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,250,000
|
|
Net equity (excluding
secured loans)
|
961,854
|
|
851,920
|
|
177,202
|
|
546,543
|
|
NA
|
NA
|
NA
|
—
|
|
2,537,519
|
|
Total debt-to-equity
ratio (8)
|
9.4
|
|
3.1
|
|
2.6
|
|
3.2
|
|
—
|
|
NA
|
NA
|
NA
|
6.9
|
|
Repurchase agreement
debt-to-equity ratio (9)
|
9.4
|
|
3.1
|
|
2.6
|
|
2.7
|
|
NA
|
NA
|
NA
|
NA
|
5.4
|
|
|
|
(1)
|
Cash and cash
equivalents is allocated based on a percentage of equity for Agency
RMBS, Non-Agency RMBS, GSE CRT and CMBS.
|
(2)
|
Derivative assets are
allocated based on the hedging strategy for each asset
class.
|
(3)
|
Secured loans are
allocated based on amount of collateral pledged.
|
(4)
|
Represents VIE assets
and liabilities before intercompany eliminations. VIEs are
securitized entities with no substantive equity at risk.
|
(5)
|
Represents our
ownership of asset-backed securities and accrued interest
eliminated upon consolidation.
|
(6)
|
Non-Agency RMBS, GSE
CRT and Consolidated VIEs are considered residential
credit.
|
(7)
|
CMBS, Commercial
Loans and Investments in unconsolidated ventures of $44.0 million
(which are included in Other), are considered commercial
credit.
|
(8)
|
Debt-to-equity ratio
is calculated as the ratio of total debt (sum of repurchase
agreements, secured loans, asset-backed securities issued by
securitization trusts and exchangeable senior notes) to allocated
equity.
|
(9)
|
Repurchase agreement
debt-to-equity ratio is calculated as the ratio of repurchase
agreements to net equity (excluding secured loans).
|
Mortgage-Backed Securities
The following table summarizes certain characteristics of the
Company's MBS portfolio as of March 31, 2015:
$ in
thousands
|
Principal
Balance
|
|
Unamortized
Premium
(Discount)
|
|
Amortized
Cost
|
|
Unrealized
Gain/
(Loss),
net
|
|
Fair
Value
|
|
Net
Weighted
Average
Coupon (1)
|
|
Period-
end
Weighted
Average
Yield
(2)
|
|
Quarterly
Weighted
Average
Yield
(3)
|
Agency
RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 year
fixed-rate
|
1,718,391
|
|
|
86,529
|
|
|
1,804,920
|
|
|
35,330
|
|
|
1,840,250
|
|
|
3.77
|
%
|
|
2.54
|
%
|
|
2.21
|
%
|
30 year
fixed-rate
|
4,239,350
|
|
|
285,902
|
|
|
4,525,252
|
|
|
98,204
|
|
|
4,623,456
|
|
|
4.29
|
%
|
|
3.02
|
%
|
|
2.99
|
%
|
ARM*
|
448,286
|
|
|
5,345
|
|
|
453,631
|
|
|
9,711
|
|
|
463,342
|
|
|
2.75
|
%
|
|
2.41
|
%
|
|
2.69
|
%
|
Hybrid ARM
|
2,806,427
|
|
|
48,919
|
|
|
2,855,346
|
|
|
48,618
|
|
|
2,903,964
|
|
|
2.77
|
%
|
|
2.28
|
%
|
|
2.28
|
%
|
Total Agency
pass-through
|
9,212,454
|
|
|
426,695
|
|
|
9,639,149
|
|
|
191,863
|
|
|
9,831,012
|
|
|
3.65
|
%
|
|
2.68
|
%
|
|
2.62
|
%
|
Agency-CMO(4)
|
1,997,925
|
|
|
(1,554,128)
|
|
|
443,797
|
|
|
(548)
|
|
|
443,249
|
|
|
2.29
|
%
|
|
4.91
|
%
|
|
3.71
|
%
|
Non-Agency
RMBS(5)(6)
|
3,428,864
|
|
|
(569,772)
|
|
|
2,859,092
|
|
|
88,583
|
|
|
2,947,675
|
|
|
3.55
|
%
|
|
4.03
|
%
|
|
4.35
|
%
|
GSE
CRT(7)
|
633,000
|
|
|
24,653
|
|
|
657,653
|
|
|
4,114
|
|
|
661,767
|
|
|
4.84
|
%
|
|
4.13
|
%
|
|
4.04
|
%
|
CMBS(8)
|
3,218,583
|
|
|
52,371
|
|
|
3,270,954
|
|
|
185,938
|
|
|
3,456,892
|
|
|
4.71
|
%
|
|
4.36
|
%
|
|
4.34
|
%
|
Total
|
18,490,826
|
|
|
(1,620,181)
|
|
|
16,870,645
|
|
|
469,950
|
|
|
17,340,595
|
|
|
3.71
|
%
|
|
3.35
|
%
|
|
3.33
|
%
|
|
|
*
|
Adjustable-rate
mortgage ("ARM")
|
|
|
(1)
|
Net weighted average
coupon ("WAC") as of March 31, 2015 is presented net of
servicing and other fees.
|
(2)
|
Period-end weighted
average yield is based on amortized cost as of March 31, 2015
and incorporates future prepayment and loss assumptions but
excludes changes in anticipated interest rates.
|
(3)
|
Quarterly weighted
average portfolio yield for the period was calculated by dividing
interest income, including amortization of premiums and discounts,
by the Company's average of the amortized cost of the investments.
All yields are annualized.
|
(4)
|
Agency collateralized
mortgage obligation ("Agency-CMO") includes interest-only
securities which represent 29.7% of the balance based on fair
value.
|
(5)
|
Non-Agency RMBS held
by the Company is 52.5% variable rate, 40.3% fixed rate, and 7.2%
floating rate based on fair value.
|
(6)
|
Of the total discount
in non-Agency RMBS, $392.5 million is non-accretable.
|
(7)
|
GSE CRT are general
obligations of Fannie Mae or Freddie Mac that are structured to
provide credit protection to the GSE issuer with respect to
defaults and other credit events within reference pools of
residential mortgage loans that collateralize MBS issued and
guaranteed by such GSE.
|
(8)
|
CMBS includes
commercial real estate mezzanine loan pass-through certificates
which represent 1.3% of the balance based on fair value.
|
Constant Prepayment Rates ("CPR")
The CPR of the Company's portfolio impacts the amount of premium
and discount on the purchase of securities that is recognized into
income. The Company's Agency, non-Agency RMBS and GSE CRT had a
weighted average CPR of 11.4 and 12.0 for the three months ended
March 31, 2015 and December 31,
2014, respectively. The table below shows the three month CPR for
the Company's RMBS compared to bonds with similar characteristics
("Cohorts"):
|
March 31,
2015
|
|
December 31,
2014
|
|
Company
|
|
Cohorts
|
|
Company
|
|
Cohorts
|
15 year Agency
RMBS
|
9.4
|
|
|
12.7
|
|
|
11.9
|
|
|
15.0
|
|
30 year Agency
RMBS
|
11.1
|
|
|
13.2
|
|
|
11.8
|
|
|
13.5
|
|
Agency Hybrid ARM
RMBS
|
14.2
|
|
|
NA
|
|
|
14.3
|
|
|
NA
|
|
Non-Agency
RMBS
|
10.3
|
|
|
NA
|
|
|
10.7
|
|
|
NA
|
|
GSE CRT
|
9.5
|
|
|
NA
|
|
|
7.7
|
|
|
NA
|
|
Weighted average
CPR
|
11.4
|
|
|
NA
|
|
|
12.0
|
|
|
NA
|
|
Borrowings
The Company has entered into repurchase agreements, secured
loans and issued exchangeable senior notes to finance the majority
of its portfolio of investments. The following table summarizes
certain characteristics of the Company's borrowings at
March 31, 2015 and December 31, 2014:
$ in
thousands
|
March 31,
2015
|
|
December 31,
2014
|
|
Amount
Outstanding
|
|
Weighted
Average
Interest
Rate
|
|
Weighted
Average
Remaining
Maturity
(Days)
|
|
Amount
Outstanding
|
|
Weighted
Average
Interest
Rate
|
|
Weighted
Average
Remaining
Maturity
(Days)
|
Repurchase
Agreements:
|
|
|
|
|
|
|
|
|
|
|
|
Agency
RMBS
|
8,778,225
|
|
0.35
|
%
|
|
17
|
|
9,018,818
|
|
|
0.35
|
%
|
|
18
|
Non-Agency
RMBS
|
2,613,114
|
|
1.52
|
%
|
|
34
|
|
2,676,626
|
|
|
1.51
|
%
|
|
36
|
GSE CRT
|
486,990
|
|
1.67
|
%
|
|
26
|
|
468,782
|
|
|
1.55
|
%
|
|
27
|
CMBS
|
1,454,752
|
|
1.33
|
%
|
|
38
|
|
1,458,451
|
|
|
1.32
|
%
|
|
26
|
Secured
Loans
|
1,550,000
|
|
0.40
|
%
|
|
3,071
|
|
1,250,000
|
|
|
0.37
|
%
|
|
3,472
|
Exchangeable Senior
Notes
|
400,000
|
|
5.00
|
%
|
|
1,081
|
|
400,000
|
|
|
5.00
|
%
|
|
1,170
|
Total
|
15,283,081
|
|
0.81
|
%
|
|
359
|
|
15,272,677
|
|
|
0.81
|
%
|
|
335
|
The Company finances its residential loans held-for-investment
through asset-backed securities issued by securitization
trusts.
Interest Rate Swaps
As of March 31, 2015, the Company had the following
interest rate swaps outstanding:
$ in thousands
Counterparty
|
|
|
Notional
|
|
Maturity Date
|
|
Fixed Interest Rate
in Contract
|
Morgan Stanley
Capital Services, LLC
|
|
|
300,000
|
|
|
1/24/2016
|
|
2.12
|
%
|
The Bank of New York
Mellon
|
|
|
300,000
|
|
|
1/24/2016
|
|
2.13
|
%
|
Morgan Stanley
Capital Services, LLC
|
|
|
300,000
|
|
|
4/5/2016
|
|
2.48
|
%
|
Credit Suisse
International
|
|
|
500,000
|
|
|
4/15/2016
|
|
2.27
|
%
|
The Bank of New York
Mellon
|
|
|
500,000
|
|
|
4/15/2016
|
|
2.24
|
%
|
JPMorgan Chase Bank,
N.A.
|
|
|
500,000
|
|
|
5/16/2016
|
|
2.31
|
%
|
Goldman Sachs Bank
USA
|
|
|
500,000
|
|
|
5/24/2016
|
|
2.34
|
%
|
Goldman Sachs Bank
USA
|
|
|
250,000
|
|
|
6/15/2016
|
|
2.67
|
%
|
Wells Fargo Bank,
N.A.
|
|
|
250,000
|
|
|
6/15/2016
|
|
2.67
|
%
|
JPMorgan Chase Bank,
N.A.
|
|
|
500,000
|
|
|
6/24/2016
|
|
2.51
|
%
|
Citibank,
N.A.
|
|
|
500,000
|
|
|
10/15/2016
|
|
1.93
|
%
|
Deutsche Bank
AG
|
|
|
150,000
|
|
|
2/5/2018
|
|
2.90
|
%
|
ING Capital Markets
LLC
|
|
|
350,000
|
|
|
2/24/2018
|
|
0.95
|
%
|
ING Capital Markets
LLC
|
|
|
300,000
|
|
|
5/5/2018
|
|
0.79
|
%
|
UBS AG
|
|
|
|
500,000
|
|
|
5/24/2018
|
|
1.10
|
%
|
ING Capital Markets
LLC
|
|
|
400,000
|
|
|
6/5/2018
|
|
0.87
|
%
|
The Royal Bank of
Scotland Plc
|
|
|
500,000
|
|
|
9/5/2018
|
|
1.04
|
%
|
Citibank, N.A. CME
Clearing House
|
(1)
|
|
300,000
|
|
|
2/5/2021
|
|
2.50
|
%
|
The Royal Bank of
Scotland Plc CME Clearing House
|
(1)
|
|
300,000
|
|
|
2/5/2021
|
|
2.69
|
%
|
Wells Fargo Bank,
N.A.
|
|
|
200,000
|
|
|
3/15/2021
|
|
3.14
|
%
|
Citibank,
N.A.
|
|
|
200,000
|
|
|
5/25/2021
|
|
2.83
|
%
|
HSBC Bank USA,
National Association
|
|
|
550,000
|
|
|
2/24/2022
|
|
2.45
|
%
|
HSBC Bank USA,
National Association
|
|
|
250,000
|
|
|
6/5/2023
|
|
1.91
|
%
|
The Royal Bank of
Scotland Plc
|
|
|
500,000
|
|
|
8/15/2023
|
|
1.98
|
%
|
Goldman Sachs Bank
USA CME Clearing House
|
|
|
600,000
|
|
|
8/24/2023
|
|
2.88
|
%
|
UBS AG
|
|
|
250,000
|
|
|
11/15/2023
|
|
2.23
|
%
|
HSBC Bank USA,
National Association
|
|
|
500,000
|
|
|
12/15/2023
|
|
2.20
|
%
|
Morgan Stanley
Capital Services, LLC
|
|
|
100,000
|
|
|
4/2/2025
|
|
2.04
|
%
|
Total
|
|
|
10,350,000
|
|
|
|
|
2.10
|
%
|
|
|
(1)
|
Forward start date of
February 2016
|
Average Balances
The table below presents certain information for the Company's
portfolio for the three months ended March 31, 2015 and
2014.
|
Three Months
Ended
March 31,
|
$ in
thousands
|
2015
|
|
2014
|
Average
Balances*:
|
|
|
|
Agency
RMBS:
|
|
|
|
15 year fixed-rate,
at amortized cost
|
1,748,996
|
|
|
1,597,879
|
|
30 year fixed-rate,
at amortized cost
|
4,580,728
|
|
|
6,727,509
|
|
ARM, at amortized
cost
|
460,624
|
|
|
287,160
|
|
Hybrid ARM, at
amortized cost
|
2,866,657
|
|
|
1,862,871
|
|
MBS-CMO, at amortized
cost
|
446,241
|
|
|
475,842
|
|
Non-Agency RMBS, at
amortized cost
|
2,892,894
|
|
|
3,524,751
|
|
GSE CRT, at amortized
cost
|
650,203
|
|
|
314,619
|
|
CMBS, at amortized
cost
|
3,271,611
|
|
|
2,565,513
|
|
Residential loans, at
amortized cost
|
3,363,323
|
|
|
1,986,973
|
|
Commercial loans, at
amortized cost
|
146,107
|
|
|
73,216
|
|
Average MBS and Loans
portfolio
|
20,427,384
|
|
|
19,416,333
|
|
Average Portfolio
Yields (1):
|
|
|
|
Agency
RMBS:
|
|
|
|
15 year
fixed-rate
|
2.21
|
%
|
|
2.81
|
%
|
30 year
fixed-rate
|
2.99
|
%
|
|
3.15
|
%
|
ARM
|
2.69
|
%
|
|
2.37
|
%
|
Hybrid ARM
|
2.28
|
%
|
|
2.35
|
%
|
MBS - CMO
|
3.71
|
%
|
|
4.14
|
%
|
Non-Agency
RMBS
|
4.35
|
%
|
|
4.21
|
%
|
GSE CRT
|
4.04
|
%
|
|
4.81
|
%
|
CMBS
|
4.34
|
%
|
|
4.51
|
%
|
Residential
loans
|
3.50
|
%
|
|
3.52
|
%
|
Commercial
loans
|
8.53
|
%
|
|
8.85
|
%
|
Average MBS and Loans
portfolio
|
3.40
|
%
|
|
3.52
|
%
|
Average
Borrowings*:
|
|
|
|
Agency RMBS
(2)
|
9,031,510
|
|
|
9,690,761
|
|
Non-Agency
RMBS
|
2,634,705
|
|
|
3,001,688
|
|
GSE CRT
|
454,510
|
|
|
214,866
|
|
CMBS
(2)
|
2,665,165
|
|
|
2,030,534
|
|
Exchangeable senior
notes
|
400,000
|
|
|
400,000
|
|
Asset-backed
securities issued by securitization trusts
|
2,924,615
|
|
|
1,765,161
|
|
Total borrowed
funds
|
18,110,505
|
|
|
17,103,010
|
|
Maximum borrowings
during the period (3)
|
18,416,608
|
|
|
17,144,362
|
|
Average Cost of
Funds (4):
|
|
|
|
Agency RMBS
(2)
|
0.34
|
%
|
|
0.36
|
%
|
Non-Agency
RMBS
|
1.51
|
%
|
|
1.51
|
%
|
GSE CRT
|
1.69
|
%
|
|
1.42
|
%
|
CMBS
(2)
|
0.90
|
%
|
|
1.38
|
%
|
Exchangeable senior
notes
|
5.61
|
%
|
|
5.61
|
%
|
Asset-backed
securities issued by securitization trusts
|
2.99
|
%
|
|
3.16
|
%
|
Unhedged cost of
funds (5)
|
1.18
|
%
|
|
1.11
|
%
|
Hedged / Effective
cost of funds (non-GAAP measure)
|
2.19
|
%
|
|
2.31
|
%
|
Average Equity
(6):
|
2,452,940
|
|
|
2,335,252
|
|
Average debt/equity
ratio (average during period)
|
7.38
|
x
|
|
7.32
|
x
|
Debt/equity ratio (as
of period end)
|
6.80
|
x
|
|
7.00
|
x
|
|
|
*
|
Average amounts for
each period are based on weighted month-end balances; all
percentages are annualized. For the three months ended
March 31, 2015, the average balances are presented on an
amortized cost basis.
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|
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(1)
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Average portfolio
yield for the period was calculated by dividing interest income,
including amortization of premiums and discounts, by the Company's
average of the amortized cost of the investments. All yields are
annualized.
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(2)
|
Agency RMBS and CMBS
average borrowing and cost of funds include borrowings under
repurchase agreements and secured loans.
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(3)
|
Amount represents the
maximum borrowings at month-end during each of the respective
periods.
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(4)
|
Average cost of funds
is calculated by dividing annualized interest expense by the
Company's average borrowings.
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(5)
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Excludes
reclassification of amortization of net deferred losses on
de-designated interest rate swaps to repurchase agreements interest
expense.
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(6)
|
Average equity is
calculated based on a weighted balance basis.
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SOURCE Invesco Mortgage Capital Inc.