10-Q 1 ivr-20240331.htm 10-Q ivr-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
_______________________________________________ 
FORM 10-Q 
_______________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission file number 001-34385
ivrmainimageinblacka07.jpg
Invesco Mortgage Capital Inc.
(Exact Name of Registrant as Specified in Its Charter)
_______________________________________________
Maryland26-2749336
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
1331 Spring Street, N.W., Suite 2500,
Atlanta,Georgia30309
(Address of Principal Executive Offices)(Zip Code)
(404) 892-0896
(Registrant’s Telephone Number, Including Area Code) 
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareIVRNew York Stock Exchange
7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock IVR PrBNew York Stock Exchange
7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock IVR PrCNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
  Accelerated filer 
Non-Accelerated filer 
  Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
As of April 30, 2024, there were 48,825,594 outstanding shares of common stock of Invesco Mortgage Capital Inc.


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



PART I
ITEM 1.     FINANCIAL STATEMENTS
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
As of
 $ in thousands, except share amountsMarch 31, 2024December 31, 2023
ASSETS
Mortgage-backed securities, at fair value (including pledged securities of $4,616,412 and $4,712,185, respectively; net of allowance for credit losses of $359 and $320, respectively)
5,007,104 5,045,306 
U.S. Treasury securities, at fair value 11,214 
Cash and cash equivalents59,890 76,967 
Restricted cash140,615 121,670 
Investment related receivable22,924 26,604 
Derivative assets, at fair value131 939 
Other assets809 1,509 
Total assets 5,231,473 5,284,209 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements4,393,908 4,458,695 
Dividends payable19,530 19,384 
Accrued interest payable26,986 15,787 
Collateral held payable412 2,475 
Accounts payable and accrued expenses1,305 1,296 
Due to affiliate3,760 3,907 
Total liabilities 4,445,901 4,501,544 
Commitments and contingencies (See Note 14):
Stockholders' equity:
Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized:
7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock: 4,292,650 and 4,385,997 shares issued and outstanding, respectively ($107,316 and $109,650 aggregate liquidation preference, respectively)
103,758 106,014 
7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock: 7,449,522 and 7,545,439 shares issued and outstanding, respectively ($186,238 and $188,636 aggregate liquidation preference, respectively)
180,154 182,474 
Common Stock, par value $0.01 per share; 67,000,000 shares authorized, 48,825,594 and 48,460,626 shares issued and outstanding, respectively
488 484 
Additional paid in capital4,014,580 4,011,138 
Accumulated other comprehensive income535 698 
Retained earnings (distributions in excess of earnings)(3,513,943)(3,518,143)
Total stockholders’ equity785,572 782,665 
Total liabilities and stockholders' equity5,231,473 5,284,209 

The accompanying notes are an integral part of these condensed consolidated financial statements.
1

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three Months Ended March 31,
$ in thousands, except share data20242023
Interest income68,583 69,287 
Interest expense61,580 49,726 
Net interest income7,003 19,561 
Other income (loss)
Gain (loss) on investments, net(66,153)51,956 
(Increase) decrease in provision for credit losses(39) 
Equity in earnings (losses) of unconsolidated ventures(193)2 
Gain (loss) on derivative instruments, net93,161 (44,895)
Other investment income (loss), net (93)
Total other income (loss)26,776 6,970 
Expenses
Management fee – related party2,861 2,979 
General and administrative1,796 2,089 
Total expenses4,657 5,068 
Net income (loss)29,122 21,463 
Dividends to preferred stockholders(5,585)(5,862)
Gain on repurchase and retirement of preferred stock193  
Net income (loss) attributable to common stockholders23,730 15,601 
Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic0.49 0.39 
Diluted0.49 0.39 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
Three Months Ended March 31,
$ in thousands20242023
Net income (loss)29,122 21,463 
Other comprehensive income (loss):
Unrealized gain (loss) on mortgage-backed securities, net(202)(476)
Reclassification of unrealized loss on available-for-sale securities to (increase) decrease in provision for credit losses39  
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to interest expense (4,494)
Currency translation adjustments on investment in unconsolidated venture (10)
Reclassification of currency translation loss on investment in unconsolidated venture to other investment income (loss), net 123 
Total other comprehensive income (loss)(163)(4,857)
Comprehensive income (loss)28,959 16,606 
Dividends to preferred stockholders(5,585)(5,862)
Gain on repurchase and retirement of preferred stock193  
Comprehensive income (loss) attributable to common stockholders23,567 10,744 

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

3

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 2024 and 2023
(Unaudited)

 
Additional
Paid in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
(Distributions
in excess of
earnings)
Total
Stockholders’
Equity
Series B
Preferred Stock
Series C
Preferred Stock
$ in thousands, except share amountsCommon Stock
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 20234,385,997 106,014 7,545,439 182,474 48,460,626 484 4,011,138 698 (3,518,143)782,665 
Net income (loss)— — — — — — — — 29,122 29,122 
Other comprehensive income (loss)— — — — — — — (163)— (163)
Proceeds from issuance of common stock, net of offering costs— — — — 365,838 4 3,314 — — 3,318 
Stock awards— — — — (870)— — — — — 
Repurchase and retirement of preferred stock(93,347)(2,256)(95,917)(2,320)— — — — 193 (4,383)
Common stock dividends— — — — — — — — (19,530)(19,530)
Preferred stock dividends— — — — — — — — (5,585)(5,585)
Amortization of equity-based compensation— — — — — — 128 — — 128 
Balance as of March 31, 20244,292,650 103,758 7,449,522 180,154 48,825,594 488 4,014,580 535 (3,513,943)785,572 

Additional
Paid in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
(Distributions
in excess of
earnings)
Total
Stockholders’
Equity
Series B
Preferred Stock
Series C
Preferred Stock
$ in thousands, except share amountsCommon Stock
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 20224,537,634 109,679 7,816,470 189,028 38,710,916 387 3,901,562 10,761 (3,407,342)804,075 
Net income (loss)— — — — — — — — 21,463 21,463 
Other comprehensive income (loss)— — — — — — — (4,857)— (4,857)
Proceeds from issuance of common stock, net of offering costs— — — — 2,930,069 29 35,763 — — 35,792 
Stock awards— — — — 6,259 — — — — — 
Common stock dividends— — — — — — — — (16,658)(16,658)
Preferred stock dividends— — — — — — — — (5,862)(5,862)
Amortization of equity-based compensation— — — — — — 162 — — 162 
Balance as of March 31, 20234,537,634 109,679 7,816,470 189,028 41,647,244 416 3,937,487 5,904 (3,408,399)834,115 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Three Months Ended March 31,
$ in thousands20242023
Cash Flows from Operating Activities
Net income (loss)29,122 21,463 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization of premiums and (discounts), net(3,163)1,938 
Realized and unrealized (gain) loss on derivative instruments, net(47,874)99,359 
(Gain) loss on investments, net66,153 (51,956)
Increase (decrease) in provision for credit losses39  
(Gain) loss from investments in unconsolidated ventures in excess of distributions received193 (2)
Other amortization128 (4,332)
Loss on foreign currency translation 123 
Changes in operating assets and liabilities:
(Increase) decrease in operating assets1,573 (1,025)
Increase (decrease) in operating liabilities11,328 1,596 
Net cash provided by (used in) operating activities57,499 67,164 
Cash Flows from Investing Activities
Purchase of mortgage-backed securities(390,380)(1,449,957)
Distributions from investments in unconsolidated ventures, net307 40 
Principal payments from mortgage-backed securities71,212 61,089 
Proceeds from sale of mortgage-backed securities296,535 783,883 
Proceeds from sale of U.S. Treasury securities10,755  
Settlement (termination) of swaps and TBAs, net48,682 (91,900)
Net change in due from counterparties and collateral held payable on derivative instruments (49)
Net cash provided by (used in) investing activities37,111 (696,894)
Cash Flows from Financing Activities
Proceeds from issuance of common stock3,318 35,792 
Repurchase of preferred stock(4,383) 
Proceeds from repurchase agreements8,762,735 9,318,669 
Principal repayments of repurchase agreements(8,827,103)(8,738,792)
Net change in due from counterparties and collateral held payable on repurchase agreements(2,063)(4,671)
Payments of deferred costs(277)(153)
Payments of dividends (24,969)(31,024)
Net cash provided by (used in) financing activities(92,742)579,821 
Net change in cash, cash equivalents and restricted cash1,868 (49,909)
Cash, cash equivalents and restricted cash, beginning of period198,637 278,781 
Cash, cash equivalents and restricted cash, end of period200,505 228,872 
Supplement Disclosure of Cash Flow Information
Interest paid50,381 52,386 
Non-cash Investing and Financing Activities Information
Net change in unrealized gain (loss) on mortgage-backed securities classified as available-for-sale163 476 
Dividends declared not paid19,530 16,658 
Net change in investment related receivable (payable)(2,320)(723)
Net change in foreign currency translation adjustment recorded in accumulated other comprehensive income (113)

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and Business Operations
Invesco Mortgage Capital Inc. (the “Company” or “we”) is a Maryland corporation primarily focused on investing in, financing and managing mortgage-backed securities ("MBS”) and other mortgage-related assets.
As of March 31, 2024, we were invested in:
residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S. government agency such as the Government National Mortgage Association (“Ginnie Mae”), or a federally chartered corporation such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (collectively “Agency RMBS”);
commercial mortgage-backed securities (“CMBS”) that are guaranteed by a U.S. government agency such as Ginnie Mae or a federally chartered corporation such as Fannie Mae or Freddie Mac (collectively "Agency CMBS");
CMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency CMBS”); and
RMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency RMBS”).
During the periods presented in these condensed consolidated financial statements, we also invested in U.S. Treasury securities and real estate-related financing arrangements in the form of unconsolidated ventures.
We conduct our business through IAS Operating Partnership L.P. (the “Operating Partnership”) and have one operating segment. We are externally managed and advised by Invesco Advisers, Inc. (our “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd. (“Invesco”), a leading independent global investment management firm.
We elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986. To maintain our REIT qualification, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits our exclusion from the “Investment Company” definition under the Investment Company Act of 1940, as amended (the “1940 Act”).
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
Certain disclosures included in our Annual Report on Form 10-K are not required to be included on an interim basis in our quarterly reports on Form 10-Q. We have condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023.
Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and consolidate the financial statements of the Company and its controlled subsidiaries. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of our financial condition and results of operations for the periods presented.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Examples of estimates include, but are not limited to, estimates of the fair values of financial instruments, interest income on mortgage-backed securities and allowances for credit losses. Actual results may differ from those estimates.
Significant Accounting Policies
There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2023.
6

Note 3 – Variable Interest Entities ("VIEs")
Our maximum risk of loss in VIEs in which we are not the primary beneficiary as of March 31, 2024 is presented in the table below.
$ in thousandsCarrying
Amount
Company's Maximum Risk of Loss
Non-Agency CMBS10,188 10,188 
Non-Agency RMBS7,651 7,651 
Total17,839 17,839 
Refer to Note 4 - "Mortgage-Backed Securities" for additional details regarding these investments.
Note 4 – Mortgage-Backed Securities
The following tables summarize our MBS portfolio by asset type as of March 31, 2024 and December 31, 2023.
As of March 31, 2024
$ in thousandsPrincipal/ Notional
Balance
Unamortized
Premium
(Discount)
Amortized
Cost
Allowance for Credit LossesUnrealized
Gain/
(Loss), net
Fair
Value
Period-
end
Weighted
Average
Yield (1)
Agency RMBS:
30 year fixed-rate pass-through4,752,141 (144,348)4,607,793  41,259 4,649,052 5.35 %
Agency-CMO (2)
564,173 (491,192)72,981  1,720 74,701 9.64 %
Agency CMBS270,623 (6,343)264,280  1,232 265,512 4.94 %
Non-Agency CMBS 11,000 (245)10,755 (359)(208)10,188 9.58 %
Non-Agency RMBS (3)(4)(5)
267,218 (260,134)7,084  567 7,651 9.05 %
Total5,865,155 (902,262)4,962,893 (359)44,570 5,007,104 5.41 %
(1)Period-end weighted average yield is based on amortized cost as of March 31, 2024 and incorporates future prepayment and loss assumptions when appropriate.
(2)All Agency collateralized mortgage obligations (“Agency-CMO”) are interest-only securities (“Agency IO”).
(3)Non-Agency RMBS is 66.5% fixed rate, 32.8% variable rate, and 0.7% floating rate based on fair value. Coupon payments on variable rate investments are based upon changes in the underlying hybrid adjustable-rate mortgage (“ARM”) loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.
(4)Of the total discount in non-Agency RMBS, $2.1 million is non-accretable calculated using the principal/notional balance and based on estimated future cash flows of the securities.
(5)Non-Agency RMBS includes interest-only securities ("non-Agency IO") which represent 96.8% of principal/notional balance, 36.8% of amortized cost and 32.7% of fair value.
7

As of December 31, 2023
$ in thousandsPrincipal/Notional
Balance
Unamortized
Premium
(Discount)
Amortized
Cost
Allowance for Credit LossesUnrealized
Gain/
(Loss), net
Fair
Value
Period-
end
Weighted
Average
Yield (1)
Agency RMBS:
30 year fixed-rate pass-through5,005,512 (159,924)4,845,588  106,886 4,952,474 5.33 %
Agency-CMO (2)
573,240 (498,355)74,885  (127)74,758 9.74 %
Non-Agency CMBS11,000 (372)10,628 (320)(373)9,935 9.58 %
Non-Agency RMBS (3)(4)(5)
275,061 (267,744)7,317  822 8,139 9.10 %
Total5,864,813 (926,395)4,938,418 (320)107,208 5,045,306 5.42 %
(1)Period-end weighted average yield is based on amortized cost as of December 31, 2023 and incorporates future prepayment and loss assumptions when appropriate.
(2)All Agency-CMO are Agency IO.
(3)Non-Agency RMBS is 66.8% fixed rate, 32.5% variable rate and 0.7% floating rate based on fair value. Coupon payments on variable rate investments are based upon changes in the underlying hybrid ARM loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.
(4)Of the total discount in non-Agency RMBS, $2.1 million is non-accretable calculated using the principal/notional balance and based on estimated future cash flows of the securities.
(5)Non-Agency RMBS includes non-Agency IO which represent 96.9% of principal/notional balance, 37.6% of amortized cost and 31.7% of fair value.
The following table presents the fair value of our available-for-sale securities and securities accounted for under the fair value option by asset type as of March 31, 2024 and December 31, 2023. We have elected the fair value option for our MBS purchased on or after September 1, 2016 and all of our RMBS interest-only securities. As of March 31, 2024 and December 31, 2023, approximately 99.7% of our MBS were accounted for under the fair value option.
As of
March 31, 2024December 31, 2023
$ in thousandsAvailable-for-sale SecuritiesSecurities under Fair Value OptionTotal
Fair Value
Available-for-sale SecuritiesSecurities under Fair Value OptionTotal
Fair Value
Agency RMBS:
30 year fixed-rate pass-through 4,649,052 4,649,052  4,952,474 4,952,474 
Agency-CMO 74,701 74,701  74,758 74,758 
Agency CMBS 265,512 265,512   — 
Non-Agency CMBS10,188  10,188 9,935  9,935 
Non-Agency RMBS5,309 2,342 7,651 5,743 2,396 8,139 
Total15,497 4,991,607 5,007,104 15,678 5,029,628 5,045,306 
The components of the carrying value of our MBS portfolio as of March 31, 2024 and December 31, 2023 are presented below. Accrued interest receivable on our MBS portfolio, which is recorded within investment related receivable on our condensed consolidated balance sheets, was $22.3 million as of March 31, 2024 (December 31, 2023: $22.3 million).
8

As of
March 31, 2024December 31, 2023
$ in thousandsMBSInterest-Only SecuritiesTotalMBSInterest-Only SecuritiesTotal
Principal/notional balance5,042,208 822,947 5,865,155 5,025,062 839,751 5,864,813 
Unamortized premium4,999  4,999 5,061  5,061 
Unamortized discount(159,905)(747,356)(907,261)(169,342)(762,114)(931,456)
Allowance for credit losses(359) (359)(320) (320)
Gross unrealized gains (1)
47,275 4,423 51,698 107,899 3,523 111,422 
Gross unrealized losses (1)
(4,322)(2,806)(7,128)(393)(3,821)(4,214)
Fair value4,929,896 77,208 5,007,104 4,967,967 77,339 5,045,306 
(1)Gross unrealized gains and losses includes gains (losses) recognized in net income for securities accounted for under the fair value option as well as gains (losses) for available-for-sale securities which are recognized as adjustments to other comprehensive income. Realization occurs upon sale or settlement of such securities. Further detail on the components of our total gains (losses) on investments, net for the three months ended March 31, 2024 and 2023 is provided below in this Note 4.
The following table summarizes our MBS portfolio according to estimated weighted average life classifications as of March 31, 2024 and December 31, 2023.
As of
$ in thousandsMarch 31, 2024December 31, 2023
Less than one year  
Greater than one year and less than five years10,432 189,845 
Greater than or equal to five years4,996,672 4,855,461 
Total5,007,104 5,045,306 

The following tables present the estimated fair value and gross unrealized losses of our MBS by length of time that such securities have been in a continuous unrealized loss position as of March 31, 2024 and December 31, 2023.
As of March 31, 2024
  Less than 12 Months12 Months or MoreTotal
$ in thousandsFair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Agency RMBS:
30 year fixed-rate pass-through (1)
883,441 (3,898)10    883,441 (3,898)10 
Agency-CMO (1)
5,326 (253)1 26,096 (2,218)6 31,422 (2,471)7 
Agency CMBS (1)
73,416 (192)9    73,416 (192)9 
Non-Agency CMBS (2)
   10,189 (207)1 10,189 (207)1 
Non-Agency RMBS (3)
80 (1)1 1,437 (359)9 1,517 (360)10 
Total 962,263 (4,344)21 37,722 (2,784)16 999,985 (7,128)37 
(1)Fair value option has been elected for all Agency securities in an unrealized loss position.
(2)Unrealized losses on non-Agency CMBS are included in accumulated other comprehensive income. These losses are not reflected in an allowance for credit losses based on a comparison of discounted expected cash flows to current amortized cost basis.
(3)Includes non-Agency IO with a fair value of $1.2 million for which the fair value option has been elected. Such securities have unrealized losses of $337,000.
9

As of December 31, 2023
  Less than 12 Months12 Months or MoreTotal
$ in thousandsFair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Agency RMBS:
Agency-CMO (1)
17,486 (849)3 21,664 (2,574)6 39,150 (3,423)9 
Non-Agency CMBS (2)
9,935 (373)1   9,935 (373)1
Non-Agency RMBS (3)
   1,462 (418)9 1,462 (418)9 
Total27,421 (1,222)4 23,126 (2,992)15 50,547 (4,214)19 
(1)Fair value option has been elected for all Agency securities in an unrealized loss position.
(2)Unrealized losses on non-Agency CMBS are included in accumulated other comprehensive income. These losses are not reflected in an allowance for credit losses based on a comparison of discounted expected cash flows to current amortized cost basis.
(3)Includes non-Agency IO with a fair value of $1.2 million for which the fair value option has been elected. Such securities have unrealized losses of $399,000.

We recorded a $39,000 provision for credit losses on a single non-Agency CMBS during the three months ended March 31, 2024. We did not record any provisions for credit losses during the three months ended March 31, 2023. The following table presents a roll-forward of our allowance for credit losses.
Three Months Ended March 31,
$ in thousands2024
Beginning allowance for credit losses320 
Additional increases to the allowance for credit losses on securities that had an allowance recorded in a previous period39 
Ending allowance for credit losses359 
The following table summarizes the components of our total gain (loss) on investments, net for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
$ in thousands20242023
Gross realized gains on sale of MBS148 5,363 
Gross realized losses on sale of MBS(3,370)(19,128)
Net unrealized gains (losses) on MBS accounted for under the fair value option(62,473)65,721 
Net unrealized gains (losses) on U.S. Treasury securities(372) 
Net realized gains (losses) on U.S. Treasury securities(86) 
Total gain (loss) on investments, net(66,153)51,956 
10

The following tables present components of interest income recognized for the three months ended March 31, 2024 and 2023.
For the three months ended March 31, 2024
$ in thousandsCoupon
Interest
Net (Premium
Amortization)/Discount
Accretion
Interest
Income
Agency RMBS 66,131 1,136 67,267 
Agency CMBS504 5 509 
Non-Agency CMBS125 127 252 
Non-Agency RMBS280 (126)154 
U.S. Treasury securities22 (1)21 
Other (inclusive of interest earned on cash balances)380  380 
Total interest income67,442 1,141 68,583 
For the three months ended March 31, 2023
$ in thousandsCoupon
Interest
Net (Premium
Amortization)/Discount
Accretion
Interest
Income
Agency RMBS67,483 14 67,497 
Non-Agency CMBS475 291 766 
Non-Agency RMBS290 (134)156 
Other (inclusive of interest earned on cash balances)868  868 
Total interest income69,116 171 69,287 
Note 5 - U.S. Treasury Securities
The following table presents the components of the carrying value of our U.S. Treasury security as of December 31, 2023. We sold the security during the first quarter of 2024. We did not hold any U.S. Treasury securities as of March 31, 2024.
As of
$ in thousandsDecember 31, 2023
Principal balance10,000 
Unamortized premium842 
Amortized cost10,842 
Unrealized gain (loss), net372 
Fair value 11,214 
11

Note 6 – Borrowings
We finance the majority of our investment portfolio through repurchase agreements. Our repurchase agreements bear interest at a contractually agreed upon rate and generally have maturities ranging from one to six months. We account for our repurchase agreements as secured borrowings since we maintain effective control of the financed assets. Our repurchase agreements are subject to certain financial covenants. We were in compliance with all of these covenants as of March 31, 2024.
The following tables summarize certain characteristics of our borrowings as of March 31, 2024 and December 31, 2023. Refer to Note 7 - "Collateral Positions" for collateral pledged and held under our repurchase agreements.
As of
$ in thousandsMarch 31, 2024December 31, 2023
WeightedWeighted
WeightedAverageWeightedAverage
AverageRemainingAverageRemaining
AmountInterestMaturityAmountInterestMaturity
OutstandingRate(days)OutstandingRate(days)
Repurchase Agreements - Agency RMBS4,189,856 5.47 %214,458,695 5.53 %20
Repurchase Agreements - Agency CMBS204,052 5.47 %16 N/AN/A
Total Borrowings4,393,908 5.47 %204,458,695 5.53 %20

12

Note 7 - Collateral Positions
The following table summarizes the fair value of collateral that we pledged and held under our repurchase agreements, and interest rate swaps as of March 31, 2024 and December 31, 2023. Refer to Note 2 - "Summary of Significant Accounting Policies - Fair Value Measurements" of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a description of how we determine fair value. Agency RMBS and Agency CMBS collateral pledged is included in mortgage-backed securities on our condensed consolidated balance sheets. Cash collateral pledged on centrally cleared interest rate swaps is classified as restricted cash on our condensed consolidated balance sheets.
Cash collateral held that is not restricted for use is included in cash and cash equivalents on our condensed consolidated balance sheets and the liability to return the collateral is included in collateral held payable. Non-cash collateral held is only recognized if the counterparty defaults or if we sell the pledged collateral. As of March 31, 2024 and December 31, 2023, we did not recognize any non-cash collateral held on our condensed consolidated balance sheets.
$ in thousandsAs of
Collateral PledgedMarch 31, 2024December 31, 2023
Repurchase Agreements:
Agency RMBS 4,400,266 4,712,185 
Agency CMBS216,146  
Total repurchase agreements collateral pledged4,616,412 4,712,185 
Derivative Instruments:
Restricted cash140,615 121,670 
Total derivative instruments collateral pledged 140,615 121,670 
Total Collateral Pledged:
Mortgage-backed securities4,616,412 4,712,185 
Restricted cash140,615 121,670 
Total Collateral Pledged 4,757,027 4,833,855 
As of
Collateral HeldMarch 31, 2024December 31, 2023
Repurchase Agreements:
Cash 412 2,475 
Non-cash collateral8,528 39,130 
Total repurchase agreements collateral held8,940 41,605 
Repurchase Agreements
Collateral pledged with our repurchase agreement counterparties is segregated in our books and records. The repurchase agreement counterparties have the right to resell and repledge the collateral posted but have the obligation to return the pledged collateral, or substantially the same collateral if agreed to by us, upon maturity of the repurchase agreement. Under the repurchase agreements, the respective lender retains the contractual right to mark the underlying collateral to fair value. We would be required to provide additional collateral to fund margin calls if the value of pledged assets declined. We intend to maintain a level of liquidity that will enable us to meet margin calls.
The ratio of our total repurchase agreements collateral pledged to our total repurchase agreements outstanding was 105% as of March 31, 2024 (December 31, 2023: 106%) based on the fair value of the securities as reported in our condensed consolidated balance sheets.
Interest Rate Swaps
As of March 31, 2024 and December 31, 2023, all of our interest rate swaps were centrally cleared by a registered clearing organization such as the Chicago Mercantile Exchange (“CME”) and LCH Limited (“LCH”) through a Futures Commission Merchant (“FCM”). We are required to pledge initial margin and daily variation margin for our centrally cleared interest rate swaps that is based on the fair value of our contracts as determined by our FCM. Collateral pledged with our FCM is segregated in our books and records and can be in the form of cash or securities. Daily variation margin for centrally cleared interest rate swaps is characterized as settlement of the derivative itself rather than collateral and is recorded as gain (loss) on
13

derivative instruments, net in our condensed consolidated statements of operations. Certain of our FCM agreements include cross default provisions.
Note 8 – Derivatives and Hedging Activities
The following table summarizes changes in the notional amount of our derivative instruments during 2024.
$ in thousandsNotional Amount as of December 31, 2023AdditionsSettlement,
Termination,
Expiration
or Exercise
Notional Amount as of March 31, 2024
Interest Rate Swaps 4,065,000 1,335,000 (1,135,000)4,265,000 
Total4,065,000 1,335,000 (1,135,000)4,265,000 
Refer to Note 7 - "Collateral Positions" for further information regarding our collateral pledged to and received from our derivative counterparties.
Interest Rate Swaps
At each settlement date, we typically refinance each repurchase agreement at the market interest rate at that time. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposures to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Under the terms of the majority of our interest rate swap contracts, we make fixed-rate payments to a counterparty in exchange for the receipt of floating-rate amounts over the life of the agreements without exchange of the underlying notional amount. To a lesser extent, we also enter into interest rate swap contracts whereby we make floating-rate payments to a counterparty in exchange for the receipt of fixed-rate amounts as part of our overall risk management strategy.
Amounts recorded in accumulated other comprehensive income before we discontinued cash flow hedge accounting for our interest rate swaps were reclassified to interest expense on the condensed consolidated statements of operations as interest was accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements. We reclassified $4.5 million as a decrease to interest expense during the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, there were no gains or losses on discontinued cash flow hedges remaining in accumulated other comprehensive income.
As of March 31, 2024 and December 31, 2023, we had interest rate swaps whereby we pay interest at a fixed rate and receive floating interest based on the secured overnight financing rate (“SOFR”) with the following maturities outstanding.
$ in thousandsAs of March 31, 2024
MaturitiesNotional
Amount
Weighted Average Fixed Pay RateWeighted Average Floating Receive RateWeighted Average Years to Maturity
Less than 3 years740,000 1.62 %5.34 %2.0
3 to 5 years1,375,000 0.29 %5.34 %3.6
5 to 7 years1,150,000 0.55 %5.34 %6.3
7 to 10 years285,000 3.68 %5.34 %9.8
Greater than 10 years715,000 2.39 %5.34 %20.1
Total4,265,000 1.17 %5.34 %7.2
$ in thousandsAs of December 31, 2023
MaturitiesNotional
Amount
Weighted Average Fixed Pay RateWeighted Average Floating Receive RateWeighted Average Years to Maturity
Less than 3 years950,000 2.55 %5.38 %1.6
3 to 5 years1,375,000 0.29 %5.38 %3.8
5 to 7 years1,150,000 0.55 %5.38 %6.6
Greater than 10 years590,000 1.75 %5.38 %21.4
Total4,065,000 1.10 %5.38 %6.6

14

TBAs
We primarily use TBAs that we do not intend to physically settle on the contractual settlement date as an alternative means of investing in and financing Agency RMBS. We did not have any TBAs outstanding as of March 31, 2024 and December 31, 2023.
Tabular Disclosure of the Effect of Derivative Instruments on the Balance Sheet
The table below presents the fair value of our derivative financial instruments, as well as their classification on the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.
$ in thousands
Derivative AssetsDerivative Liabilities
As ofAs of
March 31,
2024
December 31,
2023
March 31,
2024
December 31,
2023
Balance SheetFair ValueFair ValueBalance SheetFair ValueFair Value
Interest Rate Swaps Asset131 939 Interest Rate Swaps Liability  
Total Derivative Assets131 939 Total Derivative Liabilities   
The following tables summarize the effect of interest rate swaps and TBAs reported in gain (loss) on derivative instruments, net on the condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023.
$ in thousands
Three Months Ended March 31, 2024
Derivative
not designated as
hedging instrument
Realized gain (loss) on derivative instruments, net Contractual net interest income (expense)Unrealized gain (loss), netGain (loss) on derivative instruments, net
Interest Rate Swaps48,682 45,287 (808)93,161 
Total48,682 45,287 (808)93,161 
$ in thousands
Three Months Ended March 31, 2023
Derivative
not designated as
hedging instrument
Realized gain (loss) on derivative instruments, net Contractual net interest income (expense)Unrealized gain (loss), netGain (loss) on derivative instruments, net
Interest Rate Swaps(90,949)54,464 (7,968)(44,453)
TBAs(951) 509 (442)
Total(91,900)54,464 (7,459)(44,895)

15

Note 9 – Offsetting Assets and Liabilities
Certain of our repurchase agreements and derivative transactions are governed by underlying agreements that generally provide for a right of offset under master netting arrangements (or similar agreements) in the event of default or in the event of bankruptcy of either party to the transactions. Assets and liabilities subject to such arrangements are presented on a gross basis in the condensed consolidated balance sheets.
The following tables present information about the assets and liabilities that are subject to master netting arrangements (or similar agreements) and can potentially be offset on our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023. The daily variation margin payment for centrally cleared interest rate swaps is characterized as settlement of the derivative itself rather than collateral. Our derivative asset of $131,000 as of March 31, 2024 (December 31, 2023: asset of $939,000) related to centrally cleared interest rate swaps is not included in the table below as a result of this characterization of daily variation margin.
As of March 31, 2024
Gross Amounts Not Offset with Financial Assets (Liabilities) in the Balance Sheets
$ in thousands
Gross
Amounts of
Recognized
Assets (Liabilities)
Gross
Amounts
Offset in the
Balance
Sheets
Net Amounts of Assets (Liabilities) Presented in the
Balance Sheets
Financial
Instruments

Cash Collateral
(Received) Pledged
Net
Amount
Liabilities
Repurchase Agreements (1)
(4,393,908) (4,393,908)4,393,908   
Total Liabilities (2)
(4,393,908) (4,393,908)4,393,908   
As of December 31, 2023
Gross Amounts Not Offset with Financial Assets (Liabilities) in the Balance Sheets
$ in thousands
Gross
Amounts of
Recognized
Assets (Liabilities)
Gross
Amounts
Offset in the
Balance
Sheets
Net Amounts of Assets (Liabilities) Presented in the
Balance Sheets
Financial
Instruments
Cash Collateral
(Received) Pledged
Net
Amount
Liabilities
Repurchase Agreements (1)
(4,458,695) (4,458,695)4,458,695   
Total Liabilities (2)
(4,458,695) (4,458,695)4,458,695   
(1)The fair value of securities pledged against our borrowings under repurchase agreements was $4.6 billion as of March 31, 2024 (December 31, 2023: $4.7 billion). We held $412,000 of cash collateral under repurchase agreements as of March 31, 2024 (December 31, 2023: $2.5 million).
(2)Cash collateral pledged by us on our derivatives was $140.6 million as of March 31, 2024 (December 31, 2023: $121.7 million) of which $140.6 million relates to initial margin pledged on centrally cleared interest rate swaps (December 31, 2023: $121.7 million). Centrally cleared interest rate swaps are excluded from the tables above. We held no cash collateral on our derivatives as of March 31, 2024 or December 31, 2023.
16

Note 10 – Fair Value of Financial Instruments
A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The three levels are defined as follows:
Level 1 Inputs – Quoted prices for identical instruments in active markets.
Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs – Instruments with primarily unobservable value drivers.
The following tables present our assets and liabilities measured at fair value on a recurring basis.
As of March 31, 2024
Fair Value Measurements Using:
$ in thousandsLevel 1Level 2Level 3Total at
Fair Value
Assets:
Mortgage-backed securities (1)
 5,007,104  5,007,104 
Derivative assets 131  131 
Total assets 5,007,235  5,007,235 
As of December 31, 2023
 Fair Value Measurements Using: 
$ in thousandsLevel 1Level 2Level 3
NAV as a practical expedient (3)
Total at
Fair Value
Assets:
Mortgage-backed securities (1)
 5,045,306  — 5,045,306 
U.S. Treasury securities (2)
 11,214  — 11,214 
Derivative assets 939  — 939 
Other assets    500 500 
Total assets 5,057,459  500 5,057,959 
(1)For more detail about the fair value of our MBS, refer to Note 4 - “Mortgage-Backed Securities”.
(2)For more information on U.S. Treasury securities, refer to Note 5 - “U.S. Treasury Securities”.
(3)Our investment in an unconsolidated venture was valued using the net asset value (“NAV”) as a practical expedient and was not subject to redemption, although investors could sell or transfer their interest at the approval of the general partner of the underlying funds. The unconsolidated venture made its final distribution in the first quarter of 2024.
The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.
As of
 March 31, 2024December 31, 2023
$ in thousandsCarrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Financial Liabilities
Repurchase agreements4,393,908 4,393,901 4,458,695 4,458,662 
Total4,393,908 4,393,901 4,458,695 4,458,662 
The estimated fair value of repurchase agreements is a Level 3 fair value measurement based on an expected present value technique. This method discounts future estimated cash flows using rates we determined best reflect current market interest rates that would be offered for repurchase agreements with similar characteristics and credit quality.
17

Note 11 – Related Party Transactions
Our Manager is at all times subject to the supervision and oversight of our board of directors and has only such functions and authority as we delegate to it. Under the terms of our management agreement, our Manager and its affiliates provide us with our management team, including our officers and appropriate support personnel. Each of our officers is an employee of our Manager or one of its affiliates. We do not have any employees. Our Manager is not obligated to dedicate any of its employees exclusively to us, nor is our Manager obligated to dedicate any specific portion of time to our business. The costs of support personnel provided by our Manager for the three months ended March 31, 2024 reimbursed or reimbursable by us were $231,000 (March 31, 2023: $409,000).
Management Fee
We pay our Manager a fee equal to 1.50% of our stockholders' equity per annum. For purposes of calculating the management fee, stockholders' equity is calculated as average month-end stockholders' equity for the prior calendar quarter as determined in accordance with U.S. GAAP. Stockholders' equity may exclude one-time events due to changes in U.S. GAAP and certain non-cash items upon approval by a majority of our independent directors.
We do not pay any management fees on our investments in unconsolidated ventures that are managed by an affiliate of our Manager.
Expense Reimbursement
We are required to reimburse our Manager for operating expenses incurred on our behalf, including directors and officers insurance, accounting services, auditing and tax services, legal services, filing fees, and miscellaneous general and administrative costs. Our reimbursement obligation is not subject to any dollar limitation.
The following table summarizes the costs incurred on our behalf by our Manager during the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
$ in thousands20242023
Incurred costs, prepaid or expensed1,478 1,394