Attached files
| file | filename |
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| 8-K - 8-K - Invesco Mortgage Capital Inc. | ivrq12014-8kxmain.htm |
Exhibit 99.1
Press Release For immediate release |
Invesco Mortgage Capital Inc. Reports First Quarter 2014 Financial Results Book Value Gains and Stable Core Earnings Drive $1.02 of Comprehensive Income |
Atlanta – May 5, 2014 -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the “Company”) today announced financial results for the quarter ended March 31, 2014 including core earnings of $0.46 per share and a 3.1% increase in book value. “Our efforts to deploy capital into new initiatives to reduce the interest rate sensitivity of our portfolio and benefit from strong real estate fundamentals continued as our book value improved," said Richard King, President and CEO. "We have been able to maintain our dividend and keep core earnings steady, building shareholder value." | First Quarter Highlights | ||
Ÿ | Book value per share increased 3.1% to $18.53 | ||
Ÿ | Core earnings of $56.9 million or $0.46 per share | ||
Ÿ | Net loss of $75.3 million or $0.60 per share, primarily due to change in value of interest rate swaps recorded in income | ||
Ÿ | Comprehensive income attributable to common shareholders of $125.7 million or $1.02 per share | ||
Management of the IVR portfolio reflects initiatives designed to take advantage of opportunities and mitigate risks resulting from structural changes in the financing of real estate in the United States. More narrative description of initiatives and rationale are included in the financial results below.
($ in millions, except per share amounts) | Q1 ‘14 | Q4 ‘13 | ||||
(unaudited) | (unaudited) | |||||
Average earning assets (at amortized costs) | $19,416.3 | $20,063.5 | ||||
Average borrowed funds | 17,103.0 | 17,867.2 | ||||
Average equity | $2,335.3 | $2,403.4 | ||||
Interest income | $171.1 | $174.9 | ||||
Interest expense | 68.6 | 95.6 | ||||
Net interest income | 102.4 | 79.2 | ||||
Loss on sale of investments | (11.7 | ) | (142.5 | ) | ||
Gain (loss) on interest rate derivative instruments, net | (151.3 | ) | (2.0 | ) | ||
Other income (loss) | 0.8 | (1.9 | ) | |||
Operating expenses | 12.5 | 14.2 | ||||
Net loss | (72.5 | ) | (81.6 | ) | ||
Preferred dividend | 2.7 | 2.7 | ||||
Net loss after preferred dividend | ($75.3 | ) | ($84.3 | ) | ||
Average portfolio yield | 3.52 | % | 3.49 | % | ||
Cost of funds | 1.60 | % | 2.14 | % | ||
Effective interest expense * | $98.8 | $95.6 | ||||
Effective cost of funds * | 2.31 | % | 2.14 | % | ||
Effective net interest income * | $72.3 | $79.2 | ||||
Effective interest rate margin * | 1.21 | % | 1.35 | % | ||
Debt to equity ratio | 7.00 | x | 7.28 | x | ||
Return on average equity | (12.89 | %) | (14.03 | %) | ||
Book value per common share (diluted) | $18.53 | $17.97 | ||||
Loss per common share (basic) | ($0.60 | ) | ($0.63 | ) | ||
Core earnings per common share * | $0.46 | $0.47 | ||||
Dividend per common share | $0.50 | $0.50 | ||||
Dividend per preferred share | $0.4844 | $0.4844 | ||||
Exhibit 99.1
* Core earnings, effective interest expense (and by calculation, effective cost of funds) and effective net interest income (and by calculation, effective interest rate margin) 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, total interest expense (and by calculation, cost of funds) and net interest income (and by calculation, net interest rate margin).
Financial Summary
During the first quarter, the Company generated $56.9 million in core earnings, and the book value improved 3.1% to $18.53. This was accomplished while continuing to reposition the investment portfolio to be less interest rate sensitive. The Company made progress on its three key initiatives by adding residential loan securitizations, increasing the investment in government-sponsored enterprises ("GSE") credit risk transfer assets and funding additional commercial real estate loans. In addition, the Company repurchased 1,438,213 shares of its common stock with an average price of $14.69.
As of March 31, 2014, the Company’s mortgage-backed securities ("MBS") portfolio was $17.5 billion, an increase of $186.5 million from December 31, 2013. In addition, the Company increased its portfolio of loans held for investment to $2.2 billion, an increase of $288.4 million from December 31, 2013. For the quarter ended March 31, 2014, average earning assets were $19.4 billion, representing a decrease of $647.1 million from December 31, 2013. The portfolio generated interest income of $171.1 million during the three months ended March 31, 2014, which reflects a decrease of $3.8 million from the three months ended December 31, 2013. The decrease in interest income was the result of lower average assets during the quarter and the change in portfolio composition.
For the quarter ended March 31, 2014, the Company had average borrowings of approximately $17.1 billion and effective interest expense of $98.8 million, compared to $17.9 billion and $95.6 million, respectively, for the fourth quarter of 2013. The Company's effective cost of funds was 2.31% and 2.14% for the first quarter of 2014 and fourth quarter of 2013, respectively. The increase in effective cost of funds was due to higher costs related to forward starting swaps entered into in prior periods that the Company began paying on in the fourth quarter.
Operating expenses for the first quarter of 2014 totaled $12.5 million, compared to $14.2 million for the fourth quarter of 2013. The ratio of operating expenses to average equity for the first quarter was 2.15%, which was a decrease of 21 basis points from the fourth quarter of 2013. The decrease in operating expenses was primarily due to lower management fees after repurchasing shares of common stock in the fourth quarter of 2013.
The Company declared a common stock dividend of $0.50 per share for the first quarter of 2014. The dividend was paid on April 28, 2014.
The Company declared a preferred stock dividend of $0.4844 per share for the first quarter of 2014. The dividend was paid on April 25, 2014.
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.
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 Monday, May 5, 2014, at 9:00 a.m. ET, by calling one of the following numbers:
North America Toll Free: 888-942-8507
International: 415-228-4839
Passcode: Invesco
An audio replay will be available until 5:00 pm ET on May 19, 2014 by calling:
800-839-1197 (North America) or 203-369-3683 (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 statements with respect to the Company's beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance. In addition, words such as “will,” “anticipates,” “expects” and “plans,” 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 the Company's expectations. The Company cautions investors not to rely unduly on any forward-looking statements and urges investors 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 the Company's 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 the Company makes, or that are attributable to the Company, are expressly qualified by this cautionary notice. The Company expressly disclaims any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.
Contact: Bill Hensel, 404-479-2886
Exhibit 99.1
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31, | |||||
$ in thousands, except per share data | 2014 | 2013 | |||
Interest Income | |||||
Mortgage-backed securities | 151,739 | 160,344 | |||
Residential loans | 17,704 | 137 | |||
Commercial loans | 1,619 | — | |||
Total interest income | 171,062 | 160,481 | |||
Interest Expense | |||||
Repurchase agreements | 49,071 | 66,328 | |||
Exchangeable senior notes | 5,607 | 1,160 | |||
Asset-backed securities | 13,935 | 79 | |||
Total interest expense | 68,613 | 67,567 | |||
Net interest income | 102,449 | 92,914 | |||
Provision for loan losses | 207 | — | |||
Net interest income after provision for loan losses | 102,242 | 92,914 | |||
Other Income (loss) | |||||
Gain (loss) on sale of investments, net | (11,718 | ) | 6,712 | ||
Equity in earnings and fair value change in unconsolidated ventures | 441 | 1,590 | |||
Gain (loss) on interest rate derivative instruments, net | (151,312 | ) | (2,003 | ) | |
Realized and unrealized credit default swap income | 329 | 351 | |||
Total other income (loss) | (162,260 | ) | 6,650 | ||
Expenses | |||||
Management fee – related party | 9,335 | 10,354 | |||
General and administrative | 3,196 | 1,543 | |||
Total expenses | 12,531 | 11,897 | |||
Net income (loss) | (72,549 | ) | 87,667 | ||
Net income (loss) attributable to non-controlling interest | (822 | ) | 962 | ||
Net income (loss) attributable to Invesco Mortgage Capital Inc. | (71,727 | ) | 86,705 | ||
Dividends to preferred shareholders | 2,713 | 2,713 | |||
Net income (loss) attributable to common shareholders | (74,440 | ) | 83,992 | ||
Earnings (loss) per share: | |||||
Net income (loss) attributable to common shareholders | |||||
Basic | (0.60 | ) | 0.65 | ||
Diluted | (0.60 | ) | 0.64 | ||
Dividends declared per common share | 0.50 | 0.65 | |||
Exhibit 99.1
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
As of | |||||
$ in thousands, except per share amounts | March 31, 2014 | December 31, 2013 | |||
(Unaudited) | |||||
ASSETS | |||||
Mortgage-backed securities, at fair value | 17,535,190 | 17,348,657 | |||
Residential loans, held-for-investment, net of loan loss reserve | 2,070,493 | 1,810,262 | |||
Commercial loans, held-for-investment, net of loan loss reserve | 92,748 | 64,599 | |||
Cash and cash equivalents | 188,371 | 210,612 | |||
Due from counterparties | 4,879 | 1,500 | |||
Investment related receivable | 303,565 | 515,404 | |||
Investments in unconsolidated ventures, at fair value | 42,123 | 44,403 | |||
Accrued interest receivable | 66,999 | 68,246 | |||
Derivative assets, at fair value | 166,691 | 262,059 | |||
Deferred securitization and financing costs | 13,687 | 13,894 | |||
Other investments | 109 | 10,000 | |||
Other assets | 1,201 | 1,343 | |||
Total assets (1) | 20,486,056 | 20,350,979 | |||
LIABILITIES AND EQUITY | |||||
Liabilities: | |||||
Repurchase agreements | 14,852,310 | 15,451,675 | |||
Asset-backed securities | 1,873,434 | 1,643,741 | |||
Exchangeable senior notes | 400,000 | 400,000 | |||
Derivative liability, at fair value | 259,317 | 263,204 | |||
Dividends and distributions payable | 64,969 | 66,087 | |||
Investment related payable | 532,991 | 28,842 | |||
Accrued interest payable | 22,934 | 26,492 | |||
Collateral held payable | 20,148 | 52,698 | |||
Accounts payable and accrued expenses | 2,717 | 4,304 | |||
Due to affiliate | 9,970 | 10,701 | |||
Total liabilities (1) | 18,038,790 | 17,947,744 | |||
Equity: | |||||
Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized, 7.75% series A cumulative redeemable, 5,600,000 shares issued and outstanding ($140,000 aggregate liquidation preference) at March 31, 2014 and December 31, 2013, respectively | 135,356 | 135,356 | |||
Common Stock: par value $0.01 per share, 450,000,000 shares authorized; 123,087,626 and 124,510,246 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively | 1,231 | 1,245 | |||
Additional paid in capital | 2,531,545 | 2,552,464 | |||
Accumulated other comprehensive income (loss) | 43,183 | (156,993 | ) | ||
Retained earnings (distributions in excess of earnings) | (291,940 | ) | (155,957 | ) | |
Total shareholders’ equity | 2,419,375 | 2,376,115 | |||
Non-controlling interest | 27,891 | 27,120 | |||
Total equity | 2,447,266 | 2,403,235 | |||
Total liabilities and equity | 20,486,056 | 20,350,979 | |||
(1) | The Company's 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 primary beneficiary (IAS Asset I LLC, an indirect subsidiary of the Company). As of March 31, 2014 and December 31, 2013, total assets of the consolidated VIEs were $2,080,824 and $1,819,295, respectively, and total liabilities of the consolidated VIEs were $1,878,875 and $1,648,400, respectively. |
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," "effective interest expense" (and by calculation, "effective cost of funds") and "effective net interest income (and by calculation, "effective interest rate margin"). 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 shareholders, total interest expense (and by calculation, cost of funds) and net interest income (and by calculation, net interest rate margin).
These non-GAAP financial measures should not be considered as substitutes for any measures derived in accordance with U.S. GAAP and may not be comparable to other similarly titled measures of other companies. An analysis of any non-GAAP financial measure should be made in conjunction with results presented in accordance with U.S. GAAP. Additional reconciling items may be added to the non-GAAP measures if deemed appropriate.
The Company calculates core earnings as U.S. GAAP net income attributable to common shareholders adjusted for gain (loss) on sale of investments, net, realized gain on interest rate derivative instruments (excluding contractual net interest on interest rate swaps), unrealized loss on interest rate derivative instruments, amortization of deferred swap losses from de-designation and adjustments attributable to non-controlling interest.
The Company believes the presentation of core earnings allows investors to evaluate and compare the performance of the Company to that of its peers because core earnings measures investment portfolio performance over multiple reporting periods by removing realized and unrealized gains and losses. The Company records changes in the valuation of its investment portfolio, and through December 31, 2013 certain interest rate swaps, in other comprehensive income. Effective December 31, 2013, the Company elected to discontinue hedge accounting for its interest rate swaps. As a result of its election, starting January 1, 2014, the change in market value of its interest rate swaps and the amortization of deferred swap losses remaining in other comprehensive income at December 31, 2013 are included in U.S. GAAP net income. In addition, the Company uses swaptions, invests in to-be-announced securities and U.S. Treasury futures that do not qualify under U.S. GAAP for inclusion in other comprehensive income, and, as such, the changes in valuation are recorded in the period in which they occur. For internal portfolio analysis, the Company’s management deducts these gains and losses from U.S. GAAP net income to provide a consistent view of investment portfolio performance across reporting periods. As such, the Company believes that the disclosure of core earnings is useful and meaningful to its investors.
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.
Effective interest expense, effective cost of funds, effective net interest income and effective interest rate margin include adjustments for the net interest component related to the Company's interest rate swaps and excludes amortization of deferred swap losses from de-designation. Although, as of January 1, 2014 the Company has elected to discontinue hedge accounting for its interest rate swaps, such derivative instruments are viewed by the Company as an economic hedge against increases in future market interest rates on its liabilities and therefore the effective cost of funds reflects interest expense adjusted to include the realized loss (i.e., the interest expense component) for all of its interest rate swaps and add back the unrealized loss from swap losses that were previously recorded in other comprehensive income and is being amortized into interest expense over the remaining swap lives. In addition, the Company views the cost of the associated repurchase agreements (interest expense), borrowing costs on its exchangeable senior notes, and borrowing costs on its asset-backed securities as a component of its effective cost of funds.
Exhibit 99.1
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, as viewed by the Company.
The table below provides a reconciliation of U.S. GAAP net income attributable to common shareholders to core earnings for the following periods:
Three Months Ended | ||||||||
$ in thousands, except per share data | March 31, 2014 | December 31, 2013 | March 31, 2013 | |||||
Net income (loss) attributable to common shareholders | (74,440 | ) | (83,384 | ) | 83,992 | |||
Adjustments | ||||||||
(Gain) loss on sale of investments, net | 11,718 | 142,530 | (6,712 | ) | ||||
Realized loss on interest rate derivative instruments (excluding contractual net interest on interest rate swaps of $51,441, $0 and $0, respectively) | 18,824 | 12,308 | — | |||||
Unrealized (gain) loss on interest rate derivative instruments | 81,047 | (7,887 | ) | 2,003 | ||||
Amortization of deferred swap losses from de-designation | 21,296 | — | — | |||||
Subtotal | 132,885 | 146,951 | (4,709 | ) | ||||
Adjustment attributable to non-controlling interest | (1,511 | ) | (1,608 | ) | 50 | |||
Core earnings | 56,934 | 61,959 | 79,333 | |||||
Basic earnings (loss) per common share | (0.60 | ) | (0.63 | ) | 0.65 | |||
Core earnings per share attributable to common shareholders | 0.46 | 0.47 | 0.62 | |||||
The following table reconciles 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, 2014 | Three Months Ended December 31, 2013 | Three Months Ended March 31, 2013 | |||||||||||||||
$ 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 | 68,613 | 1.60 | % | 95,641 | 2.14 | % | 67,567 | 1.57 | % | ||||||||
Less: Amortization of deferred swap losses from de-designation | (21,296 | ) | (0.49 | )% | — | — | — | — | |||||||||
Add: Net interest paid - interest rate swaps | 51,441 | 1.20 | % | — | — | — | — | ||||||||||
Effective interest expense | 98,758 | 2.31 | % | 95,641 | 2.14 | % | 67,567 | 1.57 | % | ||||||||
The following table reconciles 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, 2014 | Three Months Ended December 31, 2013 | Three Months Ended March 31, 2013 | |||||||||||||||
$ 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 | 102,449 | 1.92 | % | 79,225 | 1.35 | % | 92,914 | 1.64 | % | ||||||||
Add: Amortization of deferred swap losses from de-designation | 21,296 | 0.49 | % | — | — | — | — | ||||||||||
Less: Net interest paid - interest rate swaps | (51,441 | ) | (1.20 | )% | — | — | — | — | |||||||||
Effective net interest income | 72,304 | 1.21 | % | 79,225 | 1.35 | % | 92,914 | 1.64 | % | ||||||||
Exhibit 99.1
Mortgage-Backed Securities
The following table summarizes certain characteristics of the Company’s MBS portfolio as of March 31, 2014:
March 31, 2014 | |||||||||||||||||||||||
$ 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 | 1,470,313 | 74,494 | 1,544,807 | 19,656 | 1,564,463 | 4.04 | % | 2.69 | % | 2.81 | % | ||||||||||||
30 year fixed-rate | 6,166,378 | 414,656 | 6,581,034 | (153,651 | ) | 6,427,383 | 4.12 | % | 3.03 | % | 3.15 | % | |||||||||||
ARM | 351,557 | 4,450 | 356,007 | 2,684 | 358,691 | 2.88 | % | 2.63 | % | 2.37 | % | ||||||||||||
Hybrid ARM | 2,046,826 | 18,382 | 2,065,208 | 11,617 | 2,076,825 | 2.73 | % | 2.53 | % | 2.35 | % | ||||||||||||
Total Agency pass-through | 10,035,074 | 511,982 | 10,547,056 | (119,694 | ) | 10,427,362 | 3.78 | % | 2.87 | % | 2.94 | % | |||||||||||
Agency-CMO(4) | 1,638,374 | (1,161,357 | ) | 477,017 | (9,788 | ) | 467,229 | 2.68 | % | 4.46 | % | 4.14 | % | ||||||||||
Non-Agency RMBS(5)(6)(7) | 4,469,615 | (609,998 | ) | 3,859,617 | 82,324 | 3,941,941 | 3.76 | % | 4.10 | % | 4.26 | % | |||||||||||
CMBS(8) | 4,653,693 | (2,032,007 | ) | 2,621,686 | 76,972 | 2,698,658 | 3.37 | % | 4.57 | % | 4.51 | % | |||||||||||
Total | 20,796,756 | (3,291,380 | ) | 17,505,376 | 29,814 | 17,535,190 | 3.60 | % | 3.44 | % | 3.43 | % | |||||||||||
____________________
* | Residential mortgage-backed securities ("RMBS") |
(1) | Net weighted average coupon as of March 31, 2014 is presented net of servicing and other fees. |
(2) | Weighted average yield is based on amortized cost as of March 31, 2014 and incorporates future prepayment and loss assumptions. |
(3) | Weighted average yield is based on average amortized cost for the three months ended March 31, 2014 and incorporates actual cash flows and future prepayment and loss assumptions. |
(4) | Included in Agency-CMO are interest-only securities which represent 25.5% of the balance based on fair value. |
(5) | Included in Non-Agency RMBS are securities of $124.1 million for a future securitization not yet settled. |
(6) | Non-Agency RMBS held by the Company is 55.8% variable rate, 30.1% fixed rate, and 14.1% floating rate based on fair value (excluding securities for a future securitization not yet settled). |
(7) | Of the total discount in Non-Agency RMBS, $404.2 million is non-accretable. |
(8) | Included in the CMBS are interest-only securities and commercial real estate mezzanine loan pass-through certificates which represent 7.1% and 1.7% of the balance based on fair value, respectively. |
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 and non-Agency RMBS had a weighted average CPR of 8.2 and 9.7 for the three months ended March 31, 2014 and December 31, 2013, respectively. The table below shows the three month CPR for the Company's RMBS compared to bonds with similar characteristics (“Cohorts”):
March 31, 2014 | December 31, 2013 | ||||||||||
Company | Cohorts | Company | Cohorts | ||||||||
15 year Agency RMBS | 9.8 | 12.4 | 12.3 | 14.1 | |||||||
30 year Agency RMBS | 7.2 | 8.2 | 8.1 | 9.7 | |||||||
Agency Hybrid ARM RMBS | 5.9 | NA | 6.4 | NA | |||||||
Non-Agency RMBS | 10.1 | NA | 12.4 | NA | |||||||
Weighted average | 8.2 | NA | 9.7 | NA | |||||||
Exhibit 99.1
Borrowings
The Company has entered into repurchase agreements 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, 2014 and December 31, 2013:
$ in thousands | March 31, 2014 | December 31, 2013 | |||||||||||||||
Amount Outstanding | Weighted Average Interest Rate | Weighted Average Remaining Maturity (Days) | Amount Outstanding | Weighted Average Interest Rate | Weighted Average Remaining Maturity (Days) | ||||||||||||
Agency RMBS | 9,746,051 | 0.34 | % | 20 | 10,281,154 | 0.38 | % | 19 | |||||||||
Non-Agency RMBS | 3,067,127 | 1.55 | % | 35 | 3,088,064 | 1.54 | % | 33 | |||||||||
CMBS | 2,039,132 | 1.37 | % | 24 | 2,082,457 | 1.39 | % | 23 | |||||||||
Exchangeable Senior Notes | 400,000 | 5.00 | % | 1,445 | 400,000 | 5.00 | % | 1,535 | |||||||||
Total | 15,252,310 | 0.84 | % | 61 | 15,851,675 | 0.86 | % | 60 | |||||||||
Exhibit 99.1
Interest Rate Swaps
As of March 31, 2014, the Company had the following interest rate swaps outstanding:
$ in thousands Counterparty | Notional | Maturity Date | Fixed Interest Rate in Contract | |||||||||
SunTrust Bank | 100,000 | 7/15/2014 | 2.79 | % | ||||||||
Deutsche Bank AG | 200,000 | 1/15/2015 | 1.08 | % | ||||||||
Deutsche Bank AG | 250,000 | 2/15/2015 | 1.14 | % | ||||||||
Credit Suisse International | 100,000 | 2/24/2015 | 3.26 | % | ||||||||
Credit Suisse International | 100,000 | 3/24/2015 | 2.76 | % | ||||||||
Wells Fargo Bank, N.A. | 100,000 | 7/15/2015 | 2.85 | % | ||||||||
Wells Fargo Bank, N.A. | 50,000 | 7/15/2015 | 2.44 | % | ||||||||
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 | % | ||||||||
Citibank, N.A. | 300,000 | 4/15/2016 | 1.67 | % | ||||||||
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 | % | ||||||||
Morgan Stanley Capital Services, LLC | 100,000 | 4/5/2018 | 3.10 | % | ||||||||
ING Capital Markets LLC | 300,000 | 5/5/2018 | 0.79 | % | ||||||||
JPMorgan Chase Bank, N.A. | 200,000 | 5/15/2018 | 2.93 | % | ||||||||
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 | % | ||||||||
CME Clearing House | (3 | ) | (4) | 300,000 | 2/5/2021 | 2.50 | % | |||||
CME Clearing House | (3 | ) | (4) | 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 | (1 | ) | 550,000 | 2/24/2022 | 2.45 | % | ||||||
The Royal Bank of Scotland Plc | (2 | ) | 400,000 | 3/15/2023 | 2.39 | % | ||||||
UBS AG | (2 | ) | 400,000 | 3/15/2023 | 2.51 | % | ||||||
HSBC Bank USA, National Association | 250,000 | 6/5/2023 | 1.91 | % | ||||||||
HSBC Bank USA, National Association | 250,000 | 7/5/2023 | 1.97 | % | ||||||||
The Royal Bank of Scotland Plc | 500,000 | 8/15/2023 | 1.98 | % | ||||||||
CME Clearing House | (4 | ) | 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 | % | ||||||||
Total | 12,800,000 | 2.12 | % | |||||||||
(1) | Forward start date of February 2015 |
(2) | Forward start date of March 2015 |
(3) | Forward start date of February 2016 |
(4) | Beginning June 10, 2013, regulations promulgated under The Dodd-Frank Wall Street Reform and Consumer Protection Act mandate that the Company clear new interest rate swap transactions through a central counterparty. Transactions that are centrally cleared result in the Company facing a clearing house, rather than a swap dealer, as counterparty. Central clearing requires the Company to post collateral in the form of initial and variation margin to the clearing house which reduces default risk. |
Exhibit 99.1
Average Balances
The table below presents certain information for the Company's portfolio for the three month periods ending March 31, 2014 and 2013.
Three Months Ended March 31, | ||||||
$ in thousands | 2014 | 2013 | ||||
Average Balances*: | ||||||
Agency RMBS: | ||||||
15 year fixed-rate, at amortized cost | 1,597,879 | 2,045,062 | ||||
30 year fixed-rate, at amortized cost | 6,727,509 | 11,500,385 | ||||
ARM, at amortized cost | 287,160 | 97,460 | ||||
Hybrid ARM, at amortized cost | 1,862,871 | 527,379 | ||||
MBS-CMO, at amortized cost | 475,842 | 502,535 | ||||
Non-Agency RMBS, at amortized cost (1) | 3,839,370 | 3,241,229 | ||||
CMBS, at amortized cost | 2,565,513 | 2,057,457 | ||||
Residential loans, at amortized cost | 1,986,973 | 13,518 | ||||
Commercial loans, at amortized cost | 73,216 | — | ||||
Average MBS and Loans portfolio | 19,416,333 | 19,985,025 | ||||
Average Portfolio Yields (2): | ||||||
Agency RMBS: | ||||||
15 year fixed-rate | 2.81 | % | 2.19 | % | ||
30 year fixed-rate | 3.15 | % | 2.84 | % | ||
ARM | 2.37 | % | 2.13 | % | ||
Hybrid ARM | 2.35 | % | 2.33 | % | ||
MBS - CMO | 4.14 | % | 1.46 | % | ||
Non-Agency RMBS | 4.26 | % | 4.63 | % | ||
CMBS | 4.51 | % | 4.75 | % | ||
Residential loans | 3.52 | % | 3.04 | % | ||
Commercial loans | 8.85 | % | n/a | |||
Average MBS and Loans portfolio | 3.52 | % | 3.21 | % | ||
Average Borrowings*: | ||||||
Agency RMBS | 9,690,761 | 12,941,937 | ||||
Non-Agency RMBS | 3,216,554 | 2,524,189 | ||||
CMBS | 2,030,534 | 1,674,943 | ||||
Exchangeable senior notes | 400,000 | 84,444 | ||||
Asset-backed securities | 1,765,161 | 12,473 | ||||
Total borrowed funds | 17,103,010 | 17,237,986 | ||||
Maximum borrowings during the period (3) | 17,144,362 | 18,647,452 | ||||
Average Cost of Funds (4): | ||||||
Agency RMBS | 0.36 | % | 0.42 | % | ||
Non-Agency RMBS | 1.51 | % | 1.73 | % | ||
CMBS | 1.38 | % | 1.48 | % | ||
Exchangeable senior notes | 5.61 | % | 5.49 | % | ||
Asset-backed securities | 3.16 | % | 2.53 | % | ||
Unhedged cost of funds (5) | 1.11 | % | 0.74 | % | ||
Hedged / Effective cost of funds (Non-GAAP measure) | 2.31 | % | 1.57 | % | ||
Average Equity (6): | 2,335,252 | 2,708,474 | ||||
Average debt/equity ratio (average during period) | 7.32x | 6.36x | ||||
Debt/equity ratio (as of period end) | 7.00x | 6.40x | ||||
Exhibit 99.1
* | Average amounts for each period are based on weighted month-end balances; all percentages are annualized. For the three months ended March 31, 2014 the average balances are presented on an amortized cost basis. |
(1) | Non-Agency RMBS average balance excludes $124.1 million for a future securitization not yet settled. |
(2) | 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. |
(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 amortization of deferred swap losses from de-designation. |
(6) | Average equity is calculated based on a weighted balance basis. |