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Form 8-K Invesco Mortgage Capital For: May 06

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May 6, 2015 4:18 PM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 6, 2015
 

(Exact name of registrant as specified in its charter)

 
 
 
 
 
 
Maryland
 
001-34385
 
 26-2749336
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
1555 Peachtree Street, NE, Atlanta, Georgia
 
30309
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (404) 892-0896
n/a
(Former name or former address, if changed since last report.)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





 

Item 2.02
Results of Operations and Financial Condition.

On May 6, 2015, Invesco Mortgage Capital Inc. (the “registrant”) issued a press release announcing its financial results for the quarter ended March 31, 2015 (the “Release”).

The Release is attached to this Report as Exhibit 99.1 and the information contained in the Release is incorporated into this Item 2.02 by this reference. The information contained in this Item 2.02 is being "furnished" and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in such filing.





Item 9.01
Financial Statements and Exhibits.
 
 
(d)
Exhibits.
 
 
 
 
Exhibit No.
 
Description
99.1
 
Press Release, dated May 6, 2015, issued by Invesco Mortgage Capital Inc.








SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
Invesco Mortgage Capital Inc.

By: /s/ Richard Lee Phegley, Jr.
Richard Lee Phegley, Jr.
Chief Financial Officer


Date: May 6, 2015
 





Exhibit Index
 
 
 
 
Exhibit No.
 
Description
99.1
 
Press Release, dated May 6, 2015, issued by Invesco Mortgage Capital Inc.



Exhibit 99.1

Press Release
For immediate release
Invesco Mortgage Capital Inc. Reports First Quarter 2015 Financial Results
Atlanta – May 6, 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.
 
Highlights
 
Ÿ
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
 
Ÿ
Q1 2015 book value per diluted common share** increased 2.9% to $19.37 vs. $18.82 at year end 2014
 
Ÿ
Economic return*** for Q1 2015 of 5.3% compared to 0.6% for Q4 2014
 
Ÿ
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
 
Ÿ
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
 
Ÿ
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

* 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.


 
1
 
Exhibit 99.1

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
6.9x

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

 
2
 
Exhibit 99.1

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.

 
3
 
Exhibit 99.1

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.

Investor Relations Contact: Tony Semak, 800-241-5477


 
4
 
Exhibit 99.1



INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) 
 
Three Months Ended 
 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. 

 
5
 
Exhibit 99.1



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




 
6
 
Exhibit 99.1

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.



 
7
 
Exhibit 99.1

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.



 
8
 
Exhibit 99.1

The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to core earnings for the following periods:
 
Three Months Ended
$ 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.


 
9
 
Exhibit 99.1

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
 %


 
10
 
Exhibit 99.1

Repurchase Agreement Debt-to-Equity Ratio
The following tables show the allocation of the Company's equity to its target assets, the Company's 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).

 
11
 
Exhibit 99.1



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).



 
12
 
Exhibit 99.1

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





 
13
 
Exhibit 99.1

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.



 
14
 
Exhibit 99.1

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




 
15
 
Exhibit 99.1

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


 
16
 
Exhibit 99.1

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)
7.38x

 
7.32x

Debt/equity ratio (as of period end)
6.80x

 
7.00x

*
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.

(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)
Agency RMBS and CMBS average borrowing and cost of funds include borrowings under repurchase agreements and secured loans.
(3)
Amount represents the maximum borrowings at month-end during each of the respective periods.
(4)
Average cost of funds is calculated by dividing annualized interest expense by the Company's average borrowings.
(5)
Excludes reclassification of amortization of net deferred losses on de-designated interest rate swaps to repurchase agreements interest expense.
(6)
Average equity is calculated based on a weighted balance basis.






 
17
 

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