Invesco Mortgage Capital Inc. Reports Second Quarter 2015 Financial Results

Aug 17, 2015, 17:05 ET from Invesco Mortgage Capital Inc.

ATLANTA, Aug. 17, 2015 /PRNewswire/ --

Highlights

  • Q2 2015 core earnings* of $50.0 million, core earnings per  common share of $0.41, and a common stock dividend of $0.45 per share 
  • YTD core earnings* per common share of $0.91 and YTD common stock dividend of $0.90 per common share
  • Q2 2015 book value per diluted common share** was $18.62 vs. $19.37 at Q1 2015 and $18.82 at Q4 2014
  • Economic return*** for the three and six months ended June 30, 2015 of -1.5% and 3.7%, respectively
  • Portfolio equity allocation strategically positioned for improving real estate fundamentals.
    • Equity allocation: 38% to Agency RMBS, 32% to residential credit and 30% to commercial credit as of June 30, 2015
    • Increased our allocation to Agency Hybrid ARMs in Q2  2015
    • Closed two commercial loans totaling $71 million
  • Q2 2015 comprehensive loss attributable to common stockholders was $36.7 million or ($0.30) per common share vs. comprehensive income attributable to common stockholders of $123.1 million or $1.00 per common share for Q1 2015
  • Q2 2015 U.S. GAAP net income attributable to common stockholders of $139.9 million or $1.14 basic earnings per common share and $1.04 earnings per diluted common share reflecting a $56.0 million net gain on interest rate hedges

Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today announced financial results for the quarter ended June 30, 2015, reporting core earnings* of $0.41 per common share and book value per diluted common share** of $18.62. Second quarter core earnings reflect lower interest income and contribution to earnings from unconsolidated real estate joint ventures relative to first quarter 2015. Interest income was primarily impacted by faster prepayment speeds, higher amortization, and reinvestment of principal repayments into assets with lower yields.

"Although market conditions weakened in the second quarter, our efforts to moderate risk preserved capital.  Our 1.1% decline in book value per share and 3.7% economic return year to date rank among the best in the industry," said Richard King, President and CEO. During the six months ended June 30, 2015, IVR declared dividends totaling $0.90 per common share and maintained a relatively stable book value of $18.62 per diluted common share versus $19.37 last quarter, $18.82 at year end 2014 and $17.97 at the end of 2013.

During the second quarter of 2015, the Company reinvested cash flow into Agency Hybrid ARMs and closed two commercial real estate loans totaling $71 million. "We believe our company is well positioned for the current market environment and to benefit from improving real estate fundamentals," said Mr. King.

On August 10, 2015, the Company announced the restatement of its financial statements for the years ended 2013 and 2014 and the quarter ended March 31, 2015.  The restatement corrects an error in the U.S. GAAP accounting treatment for credit risk transfer securities issued by government-sponsored enterprises ("GSE CRTs") and interest-only strips of residential mortgage-backed securities that are guaranteed by a U.S. government agency ("Agency MBS IOs"). We determined that these assets include embedded derivatives which should be accounted for under the accounting guidance for derivatives with changes in fair value reflected in the income statement instead of other comprehensive income. Previously reported key metrics such as economic return, book value per share, core earnings per common share and leverage ratios did not change. The changes also have no impact on our taxable income or compliance with REIT tax requirements.

* 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-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 income (and by calculation, yield), 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 June 30, 2015 is defined as the change in book value per diluted common share from March 31, 2015 to June 30, 2015 of ($0.75); plus dividends declared of $0.45 per common share; divided by the March 31, 2015 book value per diluted common share of $19.37. Economic return for the six months ended June 30, 2015 is defined as the change in book value per diluted common share from December 31, 2014 to June 30, 2015 of ($0.20); plus dividends declared of $0.90 per common share; divided by the December 31, 2014 book value per diluted common share of $18.82.

Key performance indicators for the quarters ended June 30, 2015 and March 31, 2015 are summarized in the table below.

($ in millions, except share amounts)

Q2 '15

Q1 '15

(unaudited)

(As Restated) (unaudited)

Average earning assets (at amortized costs)

$20,574.9

$20,427.4

Average borrowed funds

18,284.1

18,110.5

Average equity

$2,458.2

$2,452.9

Interest income

$160.8

$167.8

Interest expense

70.4

72.3

Net interest income

90.4

95.5

Total other income (loss)

70.4

(94.1)

Total expenses

13.6

13.3

Net income (loss)

147.3

(11.9)

Net income (loss) attributable to non-controlling interest

1.7

(0.1)

Dividends to preferred stockholders

5.7

5.7

Net income (loss) attributable to common stockholders

$139.9

($17.4)

Average portfolio yield

3.12

%

3.29

%

Cost of funds

1.54

%

1.60

%

Total debt to equity ratio

6.9

x

6.8

x

Book value per common share (diluted)**

$18.62

$19.37

Earnings (loss) per common share (basic)

$1.14

($0.14)

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

$0.4844

Non-GAAP Financial Measures*:

Core earnings

$50.0

$62.0

Core earnings per common share

$0.41

$0.50

Effective interest income

$167.0

$173.7

Effective yield

3.24

%

3.41

%

Effective interest expense

$100.1

$98.7

Effective cost of funds

2.19

%

2.19

%

Effective net interest income

$66.9

$74.9

Effective interest rate margin

1.05

%

1.22

%

Repurchase agreement debt-to-equity ratio

5.3

x

5.2

x

 

* 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-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 income (and by calculation, yield), 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 June 30, 2015 is defined as the change in book value per diluted common share from March 31, 2015 to June 30, 2015 of ($0.75); plus dividends declared of $0.45 per common share; divided by the March 31, 2015 book value per diluted common share of $19.37. Economic return for the six months ended June 30, 2015 is defined as the change in book value per diluted common share from December 31, 2014 to June 30, 2015 of ($0.20); plus dividends declared of $0.90 per common share; divided by the December 31, 2014 book value per diluted common share of $18.82.

Financial Summary

During the second quarter of 2015, the Company generated $50.0 million in core earnings, a decrease of $12.0 million from the first quarter of 2015. Lower core earnings were primarily due to lower contribution to earnings from unconsolidated real estate joint ventures and lower net interest income due primarily to faster prepayment speeds and higher amortization on our Agency residential mortgage-backed securities ("Agency RMBS"). Net income attributable to common stockholders for the second quarter of 2015 was $139.9 million, compared to net loss attributable to common stockholders of $17.4 million for the first quarter of 2015. The increase in second quarter of 2015 net income attributable to common stockholders was primarily due to a $56.0 million gain on interest rate hedges during the second quarter versus a $122.7 million loss on interest rate hedges in the first quarter of 2015. Second quarter 2015 book value per diluted common share declined to $18.62 as Agency RMBS and credit spreads widened with generally weaker market conditions due to uncertainty with respect to the crisis in Greece, and in anticipation of the first increase in the federal funds rate.

The Company reduced its holdings in 30 year fixed-rate Agency RMBS by $266.8 million but added $524.4 million Agency Hybrid Adjustable Rate Mortgage (ARM) securities to the investment portfolio in the second quarter of 2015.  The Company's MBS and GSE CRT portfolio totaled $17.2 billion, a decrease of $145.4 million from March 31, 2015. The non-Agency MBS portfolio declined by $147.0 million primarily due to continued paydowns.

For the quarter ended June 30, 2015, average earning assets were $20.6 billion, representing an increase of $147.5 million from March 31, 2015. The portfolio generated interest income of $160.8 million during the three months ended June 30, 2015, which reflects a decrease of $6.9 million from the three months ended March 31, 2015. The decrease in interest income was the result of a decline in average portfolio yield from 3.29% in the first quarter of 2015 to 3.12% for the three months ended June 30, 2015. The lower portfolio yield in the second quarter of 2015 primarily reflects lower yields on Agency RMBS.

For the quarter ended June 30, 2015, the Company had average borrowed funds of approximately $18.3 billion and effective interest expense of $100.1 million, compared to $18.1 billion and $98.7 million, respectively, for the first quarter of 2015. The Company's effective cost of funds was 2.19% for both the second quarter and first quarter of 2015. The slight increase in average borrowed funds for the second quarter is due to higher average borrowings for Agency RMBS.

Total expenses for the second quarter of 2015 were approximately $13.6 million, compared to $13.3 million for the first quarter of 2015. Second quarter 2015 total expenses include $2.3 million of securitization trust expenses associated with direct operating expenses of the Company's consolidated residential loan securitizations versus $2.2 million in the first quarter of 2015. Securitization trust expenses rose slightly in the second quarter due to the full quarter impact of consolidating an additional securitization that closed in March 2015. General and administrative expenses were $2.0 million in the second quarter of 2015, an increase of $0.2 million from the first quarter of 2015. The increase in general and administrative expenses was primarily due to higher tax, legal and other professional fees in the three months ended June 30, 2015. The ratio of annualized operating expenses to average equity* for the second quarter of 2015 was 1.84%, an increase of 2 basis points from the first quarter of 2015.

In the second quarter of 2015, the Company declared the following dividends: a common stock dividend of $0.45 per share paid on July 28, 2015; a Series A preferred stock dividend of $0.4844 per share paid on July 27, 2015; and a Series B preferred stock dividend of $0.4844 per share that will be paid on September 28, 2015.

*The ratio of consolidated 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.

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., 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 Tuesday, August 18, 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:

Invesco

An audio replay will be available until 5:00 pm ET on September 1, 2015 by calling:

866-369-3652 (North America) or 203-369-0244 (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, our leverage and equity allocation, and the impact of the restatement of our consolidated financial statements for certain periods and the adequacy of our disclosure controls and procedures and internal controls over financial reporting.  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  June 30,

Six Months Ended  June 30,

In thousands, except share amounts

2015

2014  (As Restated)

2015

2014  (As Restated)

Interest Income

Mortgage-backed and credit risk transfer securities

126,098

148,195

261,363

296,600

Residential loans (1)

30,247

20,471

59,621

38,175

Commercial loans

4,491

2,061

7,606

3,680

Total interest income

160,836

170,727

328,590

338,455

Interest Expense

Repurchase agreements

40,931

47,822

84,241

96,893

Secured loans

1,553

176

3,017

176

Exchangeable senior notes

5,613

5,613

11,220

11,220

Asset-backed securities (1)

22,329

15,826

44,227

29,761

Total interest expense

70,426

69,437

142,705

138,050

Net interest income

90,410

101,290

185,885

200,405

(Reduction in) provision for loan losses

(70)

(50)

(132)

157

Net interest income after (reduction in) provision for loan losses

90,480

101,340

186,017

200,248

Other Income (loss)

Gain (loss) on investments, net

10,876

(20,197)

13,048

(37,969)

Equity in earnings of unconsolidated ventures

1,231

3,894

7,237

4,335

Gain (loss) on derivative instruments, net

56,003

(167,816)

(66,742)

(319,128)

Realized and unrealized credit derivative income (loss), net

614

32,055

21,976

49,542

Other investment income (loss), net

1,673

779

Total other income (loss)

70,397

(152,064)

(23,702)

(303,220)

Expenses

Management fee – related party

9,343

9,327

18,758

18,662

General and administrative

1,952

2,376

3,679

4,388

Consolidated securitization trusts (1)

2,256

1,363

4,412

2,547

Total expenses

13,551

13,066

26,849

25,597

Net income (loss)

147,326

(63,790)

135,466

(128,569)

Net income (loss) attributable to non-controlling interest

1,685

(729)

1,549

(1,462)

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

145,641

(63,061)

133,917

(127,107)

Dividends to preferred stockholders

5,716

2,712

11,432

5,425

Net income (loss) attributable to common stockholders

139,925

(65,773)

122,485

(132,532)

Earnings (loss) per share:

Net income (loss) attributable to common stockholders

Basic

1.14

(0.53)

0.99

(1.08)

Diluted

1.04

(0.53)

0.96

(1.08)

Dividends declared per common share

0.45

0.50

0.90

1.00

 

(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  June 30,

Six Months Ended  June 30,

In thousands

2015

2014  (As Restated)

2015

2014  (As Restated)

Net income (loss)

147,326

(63,790)

135,466

(128,569)

Other comprehensive income (loss):

Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net

(193,322)

244,615

(67,368)

406,312

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

(1,669)

20,766

(4,603)

32,484

Reclassification of amortization of net deferred losses on de-designated interest rate swaps to repurchase agreements interest expense

16,313

21,532

35,458

42,828

Total Other comprehensive income (loss)

(178,678)

286,913

(36,513)

481,624

Comprehensive income (loss)

(31,352)

223,123

98,953

353,055

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

357

(2,553)

(1,133)

(4,036)

Less: Dividends to preferred stockholders

(5,716)

(2,712)

(11,432)

(5,425)

Comprehensive income (loss) attributable to common stockholders

(36,711)

217,858

86,388

343,594

 

 

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of

 In thousands except share amounts

June 30, 2015

December 31, 2014

(Unaudited)

(As Restated)

ASSETS

Mortgage-backed and credit risk transfer securities, at fair value

17,195,238

17,248,895

Residential loans, held-for-investment (1)

3,461,992

3,365,003

Commercial loans, held-for-investment

155,011

145,756

Cash and cash equivalents

87,003

164,144

Due from counterparties

65,107

57,604

Investment related receivable

37,123

38,717

Accrued interest receivable

70,076

66,044

Derivative assets, at fair value

20,504

24,178

Deferred securitization and financing costs

11,486

13,080

Other investments

114,553

106,498

Other assets

810

1,098

Total assets (1)

21,218,903

21,231,017

LIABILITIES AND EQUITY

Liabilities:

Repurchase agreements

13,174,860

13,622,677

Secured loans

1,550,000

1,250,000

Asset-backed securities issued by securitization trusts (1)

3,006,047

2,929,820

Exchangeable senior notes

400,000

400,000

Derivative liabilities, at fair value

189,669

254,026

Dividends and distributions payable

61,770

61,757

Investment related payable

165,634

17,008

Accrued interest payable

36,069

29,670

Collateral held payable

6,500

14,890

Accounts payable and accrued expenses

3,741

2,439

Due to affiliate

9,918

9,880

Total liabilities (1)

18,604,208

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; 123,140,501 and 123,110,454 shares issued and outstanding, respectively

1,231

1,231

Additional paid in capital

2,532,555

2,532,130

Accumulated other comprehensive income

388,495

424,592

Retained earnings (distributions in excess of earnings)

(621,191)

(632,854)

Total stockholders' equity

2,586,306

2,610,315

Non-controlling interest

28,389

28,535

Total equity

2,614,695

2,638,850

Total liabilities and equity

21,218,903

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 June 30, 2015 and December 31, 2014, total assets of the consolidated VIEs were $3,477,252 and $3,380,597, respectively, and total liabilities of the consolidated VIEs were $3,014,810 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 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 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 income (and by calculation, yield), 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. Additional reconciling items may be added in the future to these non-GAAP measures if deemed appropriate.

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 (excluding contractual net interest on interest rate swaps); unrealized (gain) loss on derivative instruments, net; realized and unrealized change in fair value of GSE CRT credit derivative income (loss), net; (gain) loss on foreign currency transactions, net; amortization of deferred swap losses from de-designation; and an adjustment attributable to non-controlling interest. The Company records changes in the valuation of its mortgage-backed securities and the valuation assigned to the debt host contract associated with its GSE CRTs 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 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

Six Months Ended

$ in thousands, except per share data

June 30, 2015

March 31, 2015

(As Restated)

June 30, 2014  (As Restated)

June 30, 2015

June 30, 2014  (As Restated)

Net income (loss) attributable to common stockholders

139,925

(17,440)

(65,773)

122,485

(132,532)

Adjustments:

(Gain) loss on investments, net

(10,876)

(2,172)

20,197

(13,048)

37,969

Realized (gain) loss on derivative instruments, net (excluding contractual net interest on interest rate swaps of $46,011, $45,608, $52,205, $91,619 and $103,646, respectively)

15,212

26,103

15,037

41,315

33,861

Unrealized (gain) loss on derivative instruments, net

(117,226)

51,034

100,574

(66,192)

181,621

Realized and unrealized change in fair value of GSE CRT credit derivative income (loss), net

6,591

(15,246)

(27,990)

(8,655)

(41,951)

(Gain) loss on foreign currency transactions, net

(996)

1,525

529

Amortization of deferred swap losses on de-designation

16,313

19,145

21,532

35,458

42,828

Subtotal

(90,982)

80,389

129,350

(10,593)

254,328

Adjustment attributable to non-controlling interest

1,041

(921)

(1,480)

120

(2,900)

Core earnings

49,984

62,028

62,097

112,012

118,896

Basic earnings (loss) per common share

1.14

(0.14)

(0.53)

0.99

(1.08)

Core earnings per share attributable to common stockholders

0.41

0.50

0.50

0.91

0.97

Effective Interest Income/ 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 in realized and unrealized credit derivative income (loss), net.  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.

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 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 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 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, 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 and GSE CRT embedded derivative coupon interest that is recorded in 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 our borrowing costs and operating performance.

The following table reconciles total interest income to effective interest income and yield to effective yield for the following periods:

Three Months Ended  June 30, 2015

Three Months ended March 31, 2015   (As Restated)

Three Months Ended  June 30, 2014   (As Restated)

$ in thousands

Reconciliation

Yield/Effective Yield

Reconciliation

Yield/Effective Yield

Reconciliation

Yield/Effective Yield

Total interest income

160,836

3.12

%

167,754

3.29

%

170,727

3.41

%

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

6,157

0.12

%

5,913

0.12

%

3,773

0.08

%

Effective interest income

166,993

3.24

%

173,667

3.41

%

174,500

3.49

%

 

Six Months Ended June 30,

2015

2014  (As Restated)

$ in thousands

Reconciliation

Yield/Effective Yield

Reconciliation

Yield/Effective Yield

Total interest income

328,590

3.20

%

338,455

3.43

%

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

12,070

0.12

%

6,970

0.07

%

Effective interest income

340,660

3.32

%

345,425

3.50

%

 

The following tables reconcile total interest expense to effective interest expense and cost of funds to effective cost of funds for the following periods:

Three Months Ended  June 30, 2015

Three Months ended March 31, 2015   (As Restated)

Three Months Ended  June 30, 2014   (As Restated)

$ 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

70,426

1.54

%

72,279

1.60

%

69,437

1.58

%

Less: Amortization of net deferred swap losses on de-designation

(16,313)

(0.36)

%

(19,145)

(0.42)

%

(21,532)

(0.49)

%

Add: Net interest paid - interest rate swaps

46,011

1.01

%

45,608

1.01

%

52,205

1.19

%

Effective interest expense

100,124

2.19

%

98,742

2.19

%

100,110

2.28

%

 

Six Months Ended June 30,

2015

2014  (As Restated)

$ in thousands

Reconciliation

Cost of Funds / Effective Cost of Funds

Reconciliation

Cost of Funds / Effective Cost of Funds

Total interest expense

142,705

1.57

%

138,050

1.59

%

Less: Amortization of net deferred swap losses on de-designation

(35,458)

(0.39)

%

(42,828)

(0.49)

%

Add: Net interest paid - interest rate swaps

91,619

1.01

%

103,646

1.20

%

Effective interest expense

198,866

2.19

%

198,868

2.30

%

 

 

 

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  June 30, 2015

Three Months ended March 31, 2015   (As Restated)

Three Months Ended  June 30, 2014   (As Restated)

$ 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

90,410

1.58

%

95,475

1.69

%

101,290

1.83

%

Add: Amortization of net deferred swap losses on de-designation

16,313

0.36

%

19,145

0.42

%

21,532

0.49

%

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

6,157

0.12

%

5,913

0.12

%

3,773

0.08

%

Less: Net interest paid - interest rate swaps

(46,011)

(1.01)

%

(45,608)

(1.01)

%

(52,205)

(1.19)

%

Effective net interest income

66,869

1.05

%

74,925

1.22

%

74,390

1.21

%

 

Six Months Ended June 30,

2015

2014  (As Restated)

$ in thousands

Reconciliation

Net Interest Rate Margin / Effective Interest Rate Margin

Reconciliation

Net Interest Rate Margin / Effective Interest Rate Margin

Net interest income

185,885

1.63

%

200,405

1.84

%

Add: Amortization of net deferred swap losses on de-designation

35,458

0.39

%

42,828

0.49

%

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

12,070

0.12

%

6,970

0.07

%

Less: Net interest paid - interest rate swaps

(91,619)

(1.01)

%

(103,646)

(1.20)

%

Effective net interest income

141,794

1.13

%

146,557

1.20

%

 

 

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 June 30, 2015 and March 31, 2015. 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 354 days as of June 30, 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. 

June 30, 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

10,434,839

3,250,833

665,896

3,293,853

155,011

3,461,992

44,803

(450,183)

20,857,044

Cash and cash equivalents (1)

38,532

21,564

4,805

22,102

87,003

Derivative assets, at fair value (2)

18,350

1,140

969

45

20,504

Other assets

147,504

7,034

527

67,452

1,155

25,859

6,667

(1,846)

254,352

Total assets

10,639,225

3,280,571

671,228

3,383,407

157,135

3,487,851

51,515

(452,029)

21,218,903

Repurchase agreements

8,795,055

2,452,975

509,617

1,417,213

13,174,860

Secured loans (3)

324,756

1,225,244

1,550,000

Asset-backed securities issued by securitization trusts

3,456,230

(450,183)

3,006,047

Exchangeable senior notes

400,000

400,000

Derivative liabilities, at fair value

188,306

1,363

189,669

Other liabilities

201,603

20,209

9,306

29,937

18,534

5,889

(1,846)

283,632

Total liabilities

9,509,720

2,473,184

518,923

2,672,394

1,363

3,474,764

405,889

(452,029)

18,604,208

Allocated equity

1,129,505

807,387

152,305

711,013

155,772

13,087

(354,374)

2,614,695

Less equity associated with secured loans:

Collateral pledged

(387,366)

(1,461,463)

(1,848,829)

Secured loans

324,756

1,225,244

1,550,000

Net equity (excluding secured loans)

1,066,895

807,387

152,305

474,794

NA

NA

NA

2,501,381

Total debt-to-equity ratio (8)

8.1

3.0

3.3

3.7

 NA

 NA

 NA

6.9

Repurchase agreement debt-to-equity ratio (9)

8.2

3.0

3.3

3.0

 NA

 NA

 NA

 NA

5.3

 

(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 $44.8 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).

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 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 $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).

 

 

Mortgage-Backed Securities and Credit Risk Transfer Securities

The following table summarizes certain characteristics of the Company's MBS and GSE CRT portfolio as of June 30, 2015:

June 30, 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

1,638,413

80,151

1,718,564

18,756

1,737,320

3.76

%

2.55

%

2.04

%

30 year fixed-rate

4,052,970

271,686

4,324,656

32,002

4,356,658

4.28

%

2.84

%

2.69

%

ARM*

461,173

5,560

466,733

6,863

473,596

2.74

%

2.57

%

1.99

%

Hybrid ARM

3,337,388

65,372

3,402,760

25,639

3,428,399

2.74

%

2.51

%

1.88

%

Total Agency pass-through

9,489,944

422,769

9,912,713

83,260

9,995,973

3.57

%

2.66

%

2.27

%

Agency-CMO(4)

2,063,207

(1,630,609)

432,598

6,268

438,866

2.25

%

4.49

%

3.15

%

Non-Agency RMBS(5)(6)

3,261,947

(548,656)

2,713,291

87,359

2,800,650

3.44

%

3.84

%

4.39

%

GSE CRT(7)

643,000

24,176

667,176

(1,280)

665,896

1.01

%

0.50

%

0.51

%

CMBS(8)

3,422,375

(231,765)

3,190,610

103,243

3,293,853

4.43

%

4.43

%

4.40

%

Total

18,880,473

(1,964,085)

16,916,388

278,850

17,195,238

3.43

%

3.10

%

2.98

%

 

* Adjustable-rate mortgage ("ARM")

(1)

Net weighted average coupon ("WAC") as of June 30, 2015 is presented net of servicing and other fees.

(2)

Period-end weighted average yield is based on amortized cost as of June 30, 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 Agency MBS IOs which represent 33.0% of the balance based on fair value.

(5)

Non-Agency RMBS held by the Company is 52.3% variable rate, 40.6% fixed rate, and 7.1% floating rate based on fair value.

(6)

Of the total discount in non-Agency RMBS, $328.1 million is non-accretable.

(7)

GSE CRT weighted average coupon and weighted average yield excludes embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net.

(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 14.4 and 11.4 for the three months ended June 30, 2015 and March 31, 2015, respectively. The table below shows the three month CPR for the Company's RMBS compared to bonds with similar characteristics ("Cohorts"):

June 30, 2015

March 31, 2015

Company

Cohorts

Company

Cohorts

15 year Agency RMBS

10.7

15.1

9.4

12.7

30 year Agency RMBS

13.9

17.1

11.1

13.2

Agency Hybrid ARM RMBS

17.3

NA

14.2

NA

Non-Agency RMBS

14.0

NA

10.3

NA

GSE CRT

13.9

NA

9.5

NA

Weighted average CPR

14.4

NA

11.4

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 June 30, 2015 and December 31, 2014:

 

$ in thousands

June 30, 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

8,795,055

0.37

%

17

9,018,818

0.35

%

18

Non-Agency RMBS

2,452,975

1.54

%

43

2,676,626

1.51

%

36

GSE CRT

509,617

1.69

%

31

468,782

1.55

%

27

CMBS

1,417,213

1.34

%

27

1,458,451

1.32

%

26

Secured Loans

1,550,000

0.40

%

2,980

1,250,000

0.37

%

3,472

Exchangeable Senior Notes

400,000

5.00

%

989

400,000

5.00

%

1,170

Total

15,124,860

0.82

%

354

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 June 30, 2015, the Company had the following interest rate swaps outstanding:

$ in thousands

Counterparty

Notional

Maturity Date

Fixed Interest Rate

in Contract

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

%

JPMorgan Chase Bank, N.A.

(2)

500,000

5/24/2021

2.25

%

Citibank, N.A.

200,000

5/25/2021

2.83

%

HSBC Bank USA, National Association

(3)

500,000

6/24/2021

2.44

%

HSBC Bank USA, National Association

550,000

2/24/2022

2.45

%

Deutsche Bank AG

1,000,000

6/9/2022

2.21

%

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

11,450,000

2.12

%

 

(1)

Forward start date of February 2016

(2)

Forward start date of May 2016

(3)

Forward start date of June 2016

 

 

 

Average Balances

The table below presents certain information for the Company's portfolio for the three and six months ended June 30, 2015 and 2014.

Three Months Ended  June 30,

Six Months Ended  June 30,

$ in thousands

2015

2014  (As Restated)

2015

2014  (As Restated)

Average Balances*:

Agency RMBS:

15 year fixed-rate, at amortized cost

1,747,623

1,490,857

1,748,306

1,544,072

30 year fixed-rate, at amortized cost

4,400,782

6,277,003

4,490,257

6,501,011

ARM, at amortized cost

446,754

526,816

453,651

407,650

Hybrid ARM, at amortized cost

3,270,461

2,441,988

3,069,675

2,154,029

MBS-CMO, at amortized cost

438,549

505,949

442,374

490,979

Non-Agency RMBS, at amortized cost

2,774,992

3,241,721

2,833,617

3,382,454

GSE CRT, at amortized cost

662,188

418,606

656,298

366,900

CMBS, at amortized cost

3,195,123

2,788,361

3,233,156

2,677,553

Residential loans, at amortized cost

3,480,101

2,240,066

3,422,035

2,114,219

Commercial loans, at amortized cost

158,312

94,541

152,231

86,653

Average MBS and Loans portfolio

20,574,885

20,025,908

20,501,600

19,725,520

Average Portfolio Yields (1):

Agency RMBS:

15 year fixed-rate

2.04

%

2.57

%

2.13

%

2.69

%

30 year fixed-rate

2.69

%

3.03

%

2.85

%

3.09

%

ARM

1.99

%

2.29

%

2.35

%

2.31

%

Hybrid ARM

1.88

%

2.23

%

2.06

%

2.28

%

MBS - CMO

3.15

%

3.42

%

3.44

%

3.77

%

Non-Agency RMBS

4.39

%

4.70

%

4.37

%

4.44

%

GSE CRT (2)

0.51

%

0.48

%

0.50

%

0.52

%

CMBS

4.40

%

4.54

%

4.37

%

4.52

%

Residential loans

3.48

%

3.66

%

3.49

%

3.60

%

Commercial loans

8.55

%

8.72

%

8.54

%

8.49

%

Average MBS and Loans portfolio

3.12

%

3.41

%

3.20

%

3.43

%

Average Borrowings*:

Agency RMBS (3)

9,166,962

10,040,134

9,099,236

9,865,448

Non-Agency RMBS

2,534,973

2,790,149

2,584,839

2,895,918

GSE CRT

495,605

307,237

475,057

261,052

CMBS (3)

2,663,097

2,033,655

2,664,131

2,032,975

Exchangeable senior notes

400,000

400,000

400,000

400,000

Asset-backed securities issued by securitization trusts

3,023,497

1,975,573

2,974,056

1,870,367

Total borrowed funds

18,284,134

17,546,748

18,197,319

17,325,760

Maximum borrowings during the period (4)

18,364,746

17,765,146

18,416,608

17,765,146

 

 

Average Cost of Funds (5):

Agency RMBS (3)

0.35

%

0.32

%

0.35

%

0.34

%

Non-Agency RMBS

1.57

%

1.55

%

1.54

%

1.53

%

GSE CRT

1.63

%

1.50

%

1.66

%

1.47

%

CMBS (3)

0.92

%

1.24

%

0.91

%

1.31

%

Exchangeable senior notes

5.61

%

5.61

%

5.61

%

5.61

%

Asset-backed securities issued by securitization trusts

2.95

%

3.20

%

2.97

%

3.18

%

Unhedged cost of funds (6)

1.18

%

1.09

%

1.18

%

1.10

%

Hedged / Effective cost of funds (non-GAAP measure)

2.19

%

2.28

%

2.19

%

2.30

%

Average Equity (7):

2,458,210

2,470,933

2,455,590

2,403,467

Average debt/equity ratio (average during period)

7.44x

7.10x

7.41x

7.21x

Debt/equity ratio (as of period end)

6.93x

6.82x

6.93x

6.82x

 

*       

Average amounts for each period are based on weighted month-end balances; all percentages are annualized. For the three and six months ended June 30, 2015, the average balances are presented on an amortized cost basis.

(1)

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.

(2)

GSE CRT average portfolio yield excludes embedded derivative coupon interest recorded as realized and unrealized credit derivative income (loss), net.

(3)

Agency RMBS and CMBS average borrowing and cost of funds include borrowings under repurchase agreements and secured loans.

(4)

Amount represents the maximum borrowings at month-end during each of the respective periods.

(5)

Average cost of funds is calculated by dividing annualized interest expense by the Company's average borrowings.

(6)

Excludes reclassification of amortization of net deferred losses on de-designated interest rate swaps to repurchase agreements interest expense.

(7)

Average equity is calculated based on a weighted balance basis.

 

Logo - http://photos.prnewswire.com/prnh/20150223/177126LOGO

 

SOURCE Invesco Mortgage Capital Inc.



RELATED LINKS

http://www.invescomortgagecapital.com