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Table of Contents


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 48,825,594Close outstanding shares of common stock of Invesco Mortgage Capital Inc.

Table of Contents

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.


Table of Contents

PART I
delete
ITEM 1.     FINANCIAL STATEMENTSdelete
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
Table of Contents

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
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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.

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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.
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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.
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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.
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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.
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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).
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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.
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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 
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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 
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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

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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
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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

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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)

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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.
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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.
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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 
Total incurred costs, originally paid by our Manager1,478 1,394 
Note 12 – Stockholders’ Equity
Preferred Stock
In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock. During the three months ended March 31, 2024, we repurchased and retired 93,347 shares of Series B Preferred Stock and 95,917 shares of Series C Preferred Stock. During the three months ended March 31, 2023, we did not repurchase any shares of preferred stock. As of March 31, 2024, we had authority to repurchase 1,092,650 additional shares of our Series B Preferred Stock and 949,522 additional shares of our Series C Preferred Stock under the current share repurchase program.
Holders of our Series B Preferred Stock are entitled to receive dividends at an annual rate of 7.75% of the liquidation preference of $25.00 per share or $1.9375 per share per annum until December 27, 2024. After December 27, 2024, holders are entitled to receive dividends at a floating rate equal to three-month CME Term SOFR and the applicable credit spread adjustment (0.26161%) plus a spread of 5.18% of the $25.00 liquidation preference per annum. Dividends are cumulative and payable quarterly in arrears.
Holders of our Series C Preferred Stock are entitled to receive dividends at an annual rate of 7.50% of the liquidation preference of $25.00 per share or $1.875 per share per annum until September 27, 2027. After September 27, 2027, holders are entitled to receive dividends at a floating rate equal to three-month CME Term SOFR and the applicable credit spread adjustment (0.26161%) plus a spread of 5.289% of the $25.00 liquidation preference per annum. Dividends are cumulative and payable quarterly in arrears.
We have the option to redeem shares of our Series B Preferred Stock after December 27, 2024 and shares of our Series C Preferred Stock after September 27, 2027 for $25.00 per share, plus any accumulated and unpaid dividends through the date of the redemption. Shares of Series B and Series C Preferred Stock are not redeemable, convertible into or exchangeable for any other property or any other securities of the Company before those times, except under circumstances intended to preserve our qualification as a REIT or upon the occurrence of a change in control.
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Common Stock
As of March 31, 2024, we may sell up to 5,934,691 shares of our common stock from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents. These shares are registered with the SEC under our shelf registration statement (as amended and/or supplemented). During the three months ended March 31, 2024, we sold 365,838 shares of common stock under our equity distribution agreement for proceeds of $3.3 million, net of approximately $43,000 in commissions and fees. During the three ended March 31, 2023, we sold 2,930,069 shares of common stock under an equity distribution agreement for proceeds of $35.8 million, net of approximately $482,000 in commissions and fees.
During the three months ended March 31, 2024 and 2023, we did not repurchase any shares of our common stock. As of March 31, 2024, we had authority to repurchase 1,816,359 shares of our common stock through our common stock share repurchase program.
Accumulated Other Comprehensive Income
The following tables present the components of total other comprehensive income (loss), net and accumulated other comprehensive income (“AOCI”) for the three months ended March 31, 2024 and 2023. The tables exclude gains and losses on MBS that are accounted for under the fair value option.
Three Months Ended March 31, 2024
$ in thousandsEquity method investmentsAvailable-for-sale securitiesDerivatives and hedgingTotal
Total other comprehensive income (loss)
Unrealized gain (loss) on mortgage-backed securities, net— (202)— (202)
Reclassification of unrealized loss on available-for-sale securities to (increase) decrease in provision for credit losses— 39 — 39 
Total other comprehensive income (loss)— (163)— (163)
AOCI balance at beginning of period— 698 — 698 
Total other comprehensive income (loss)— (163)— (163)
AOCI balance at end of period— 535 — 535 
Three Months Ended March 31, 2023
$ in thousandsEquity method investmentsAvailable-for-sale securitiesDerivatives and hedgingTotal
Total other comprehensive income (loss)
Unrealized gain (loss) on mortgage-backed securities, net— (476)— (476)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to interest expense— — (4,494)(4,494)
Currency translation adjustments on investment in unconsolidated venture(10)— — (10)
Reclassification of currency translation loss on investment in unconsolidated venture to other investment income (loss), net123 — — 123 
Total other comprehensive income (loss)113 (476)(4,494)(4,857)
AOCI balance at beginning of period(113)469 10,405 10,761 
Total other comprehensive income (loss)113 (476)(4,494)(4,857)
AOCI balance at end of period— (7)5,911 5,904 
Amounts recorded in AOCI 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 original life of the interest rate swap agreements.
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Dividends
The table below summarizes the dividends we declared during the three months ended March 31, 2024 and 2023.
$ in thousands, except per share amountsDividends Declared
Series B Preferred StockPer ShareIn AggregateDate of Payment
2024
February 21, 20240.4844 2,086 March 27, 2024
2023
February 17, 20230.4844 2,198 March 27, 2023
$ in thousands, except per share amountsDividends Declared
Series C Preferred StockPer ShareIn AggregateDate of Payment
2024
February 21, 20240.46875 3,499 March 27, 2024
2023
February 17, 20230.46875 3,664 March 27, 2023
$ in thousands, except per share amountsDividends Declared
Common StockPer ShareIn AggregateDate of Payment
2024
March 26, 20240.40 19,530 April 26, 2024
2023
March 27, 20230.40 16,658 April 27, 2023
Note 13 – Earnings (Loss) per Common Share
Earnings (loss) per share for the three months ended March 31, 2024 and 2023 is computed as shown in the table below.
Three Months Ended March 31,
In thousands, except per share amounts20242023
Numerator (Income)
Basic Earnings:
Net income (loss) available to common stockholders23,730 15,601 
Denominator (Weighted Average Shares)
Basic Earnings:
Shares available to common stockholders48,500 39,607 
Effect of dilutive securities:
Restricted stock awards1 1 
Dilutive Shares48,501 39,608 
Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic0.49 0.39 
Diluted0.49 0.39 
No potential weighted average common shares were excluded from diluted earnings per share for the three months ended March 31, 2024 or 2023 because the effect would be antidilutive.
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Note 14 – Commitments and Contingencies
Commitments and contingencies may arise in the ordinary course of business. Our material off-balance sheet commitments as of March 31, 2024 are discussed below.
In the first quarter of 2024, we received a final distribution from our sole remaining unconsolidated venture. However, as of March 31, 2024, we had an outstanding commitment to fund $2.9 million in additional capital if necessary because the venture had not yet been dissolved. In April 2024, the venture was dissolved and the balance of our outstanding uncalled capital commitments was canceled.
Note 15 – Subsequent Events
Dividends
We declared the following dividends on May 7, 2024: a Series B Preferred Stock dividend of $0.4844 per share payable on June 27, 2024 to our stockholders of record as of June 5, 2024 and a Series C Preferred Stock dividend of $0.46875 per share payable on June 27, 2024 to our stockholders of record as of June 5, 2024.




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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
delete
In this quarterly report on Form 10-Q, or this "Quarterly Report," we refer to Invesco Mortgage Capital Inc. and its consolidated subsidiaries as "we," "us," "our Company," or "our," unless we specifically state otherwise or the context indicates otherwise. We refer to our external manager, Invesco Advisers, Inc., as our "Manager," and we refer to the indirect parent company of our Manager, Invesco Ltd. together with its consolidated subsidiaries (which does not include us), as "Invesco."
The following discussion should be read in conjunction with our condensed consolidated financial statements and the accompanying notes to our condensed consolidated financial statements, which are included in Item 1 of this Quarterly Report, as well as the information contained in our most recent Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

Forward-Looking Statements
We make forward-looking statements in this Quarterly Report and other filings we make with the SEC within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, investment strategies, financial condition, liquidity, results of operations, plans, objectives and our views on domestic and global market conditions (including the mortgage-backed securities, residential and commercial real estate markets). When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “project,” “forecast” or similar expressions and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” and any other statement that necessarily depends on future events, we intend to identify forward-looking statements, although not all forward-looking statements may contain such words.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. We caution you not to rely unduly on any forward-looking statements and urge you to carefully consider the factors described under the headings "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Report and our Annual Report on Form 10-K. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Executive Summary
We are a Maryland corporation primarily focused on investing in, financing and managing mortgage-backed securities (“MBS”) and other mortgage-related assets. Our objective is to provide attractive risk-adjusted returns to our stockholders, primarily through dividends and secondarily through capital appreciation.
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 “FNMA”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”) (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 Freddie Mac or Fannie Mae (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 this Quarterly Report, we also invested in:
•to-be-announced securities forward contracts (“TBAs”) to purchase Agency RMBS;
•U.S. Treasury securities; and
•other real estate-related financing arrangements in the form of unconsolidated ventures.
We continuously evaluate new investment opportunities to complement our current investment portfolio by expanding our target assets and portfolio diversification.
We conduct our business through our wholly-owned subsidiary, IAS Operating Partnership L.P. (the “Operating Partnership”). We are externally managed and advised by our Manager, an indirect wholly-owned subsidiary of Invesco.
We have 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 definition of “Investment Company” under the 1940 Act.
Market Conditions and Impacts
Macroeconomic factors that affect our business include interest rates, interest rate volatility, spread premiums, fiscal and monetary policy, residential and commercial real estate prices, credit availability, the health of the banking system, consumer personal income and spending, corporate earnings, employment conditions, financial conditions and inflation.
Of these macroeconomic factors, government policy initiatives, inflation, interest rates and interest rate volatility had the most direct impacts on our performance and financial condition during the first quarter of 2024. Contributing factors included:
•Financial conditions remained accommodative during the first quarter as credit spreads tightened, equity market valuations increased, and interest rate volatility eased as financial markets reacted favorably despite the higher interest rate environment brought on by shifting expectations for economic growth and monetary policy. Inflation readings were generally flat during the quarter, remaining stubbornly above the Federal Reserve’s 2% inflation target. The headline consumer price index (“CPI”) ended the quarter at 3.5%, up from December’s 3.4%, while CPI (ex. food and energy) fell slightly from 3.9% to 3.8%. Given these relatively high readings, investors' expectations for future inflation have adjusted upward, as Treasury inflation-protected securities breakeven rates increased. The two-year breakeven ended the quarter at 2.72% (up from 2.02% at year-end) and the five-year breakeven ended at 2.44% (up from 2.15%)
•Stronger than expected inflation readings, along with continued evidence of robust economic activity, led to sharply higher interest rates across the maturity spectrum during the quarter. The yield on the two-year Treasury increased by 37 basis points to 4.62%, the yield on the five-year Treasury increased 37 basis points to 4.20% and the yield on the ten-year Treasury finished at 4.19%, up 33 basis points on the quarter. The stronger than expected economic growth and inflation data also led to a dramatic re-pricing of the market’s expectations of future monetary policy. These expectations, as seen the through the Federal Funds futures market, adjusted from projecting over six cuts in the
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Federal Open Market Committee’s (“FOMC”) benchmark rate during the balance of 2024 to less than three cuts. Further, the market’s expectation for the beginning of the easing cycle shifted from March to July.
•Higher coupon Agency RMBS outperformed Treasuries while coupons lower in the stack underperformed, given a notable decline in interest rate volatility and improvement in supply and demand dynamics in the first quarter of 2024. Despite the sharp increase in interest rates, interest rate volatility fell as market expectations for monetary policy converged with official projections by the FOMC, benefiting valuations in higher coupons. In addition, organic supply remained at very low levels while demand from money managers, commercial banks, and overseas investors broadly outpaced expectations.
•Quantitative tightening continued in the first quarter of 2024, as the Federal Reserve passively reduced the size of their balance sheet through maturities of U.S. Treasuries and paydowns of Agency RMBS. Paydowns of Agency RMBS from the balance sheet added approximately $14.5 billion of net supply to the market each month, well below the Federal Reserve's monthly cap of $35 billion. Although quantitative tightening is anticipated to conclude in the second half of 2024, runoff of the Agency RMBS portion of the balance sheet is expected to continue, with proceeds redeployed into Treasuries.
•Prepayment speeds remained at very low levels given limited housing activity and elevated mortgage rates.
•Premiums on higher coupon specified pool collateral increased modestly given improvement in supply and demand technicals.
•Implied financing via the dollar roll market for TBA investments remained relatively unattractive, as reduced demand from the Federal Reserve and commercial banks negatively impacted fundamentals, while the increase in loan balances worsened the prepayment profile.
•Agency CMBS risk premiums declined over the quarter as new issuance volumes remained relatively low and higher yields helped drive investor demand for fixed-rate bonds.
Market Rates
As of
March 31, 2024December 31, 2023September 30, 2023June 30, 2023March 31, 2023One Quarter ChangeOne Year
Change
Interest Rates
Effective Federal Funds Rate5.33 %5.33 %5.33 %5.08 %4.83 %— %0.50 %
One-month SOFR5.33 %5.35 %5.32 %5.14 %4.81 %(0.02)%0.52 %
2 Year Treasury4.62 %4.25 %5.04 %4.87 %4.06 %0.37 %0.56 %
5 Year Treasury4.20 %3.83 %4.60 %4.13 %3.61 %0.37 %0.59 %
10 Year Treasury4.19 %3.86 %4.57 %3.82 %3.49 %0.33 %0.70 %
30 Year Treasury4.34 %4.02 %4.71 %3.85 %3.69 %0.32 %0.65 %

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As of
(in basis points)March 31, 2024December 31, 2023September 30, 2023June 30, 2023March 31, 2023One Quarter ChangeOne Year
Change
Swap Spreads (1)
2 Year(8)(18)(7)(8)310(11)
5 Year(23)(32)(23)(22)(23)9—
10 Year(37)(40)(30)(25)(29)3(8)
30 Year(73)(71)(69)(66)(73)(2)—
30 Year Mortgage Spreads vs. 5/10 Year Treasury Blend (2)
FNMA 2.0%62556339657(3)
FNMA 2.5%68657150733(5)
FNMA 3.0%75737761802(5)
FNMA 3.5%8081857290(1)(10)
FNMA 4.0%89959689107(6)(18)
FNMA 4.5%102110107108125(8)(23)
FNMA 5.0%118131125133150(13)(32)
FNMA 5.5%138154144161174(16)(36)
FNMA 6.0%153165164184174(12)(21)
10 Year Agency CMBS Spreads vs. Treasuries (3)
FHLMC K5460746882(6)(28)
FNMA DUS5867787577(9)(19)
(1)Swap spreads represent the difference between the fixed rate coupon of an interest rate swap and the yield on a U.S. Treasury security with a similar maturity.
(2)Mortgage spreads represent the difference between the yield on the Agency TBA and the blended average yield of five year and ten year U.S. Treasury securities.
(3)Agency CMBS spreads represent the difference between the yields on new issue Freddie Mac K Certificates and Fannie Mae Delegated Underwriting and Servicing MBS (“DUS”) and a U.S. Treasury security with a similar maturity.

Outlook
Given the increase in market volatility in April, we remain cautious on the near-term outlook for the Agency RMBS sector as the market adjusts to shifting expectations around the timing of monetary policy adjustments. Our recent allocation to fixed rate Agency CMBS reduces our exposure to near-term interest rate volatility while providing attractive returns with favorable funding. Over the longer term, however, the potential normalization of monetary policy and a steeper yield curve should be supportive of Agency RMBS. We believe Agency RMBS investors stand to benefit from attractive valuations, favorable funding and robust liquidity as the macro environment evolves.
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Investment Activities
The table below shows the composition of our investment portfolio as of March 31, 2024, December 31, 2023 and March 31, 2023.
As of
$ in thousandsMarch 31, 2024December 31, 2023March 31, 2023
Agency RMBS:
30 year fixed-rate pass-through, at fair value4,649,052 4,952,474 5,320,942 
Agency CMO, at fair value74,701 74,758 81,258 
Agency CMBS, at fair value265,512 — — 
Non-Agency CMBS, at fair value10,188 9,935 36,624 
Non-Agency RMBS, at fair value7,651 8,139 8,319 
U.S. Treasury securities, at fair value— 11,214 — 
Investments in unconsolidated ventures— 500 504 
Subtotal5,007,104 5,057,020 5,447,647 
TBAs, at implied cost basis (1)
— — 929 
Total investment portfolio, including TBAs5,007,104 5,057,020 5,448,576 
(1)Our presentation of TBAs in the table above represents management's view of our investment portfolio and does not reflect how we record TBAs on our condensed consolidated balance sheets under U.S. GAAP. Under U.S. GAAP, we record TBAs that we do not intend to physically settle on the contractual settlement date as derivative financial instruments. We value TBAs on our condensed consolidated balance sheets at net carrying value, which represents the difference between the fair market value and the implied cost basis of the TBAs. Our TBA dollar roll transactions are a form of off-balance sheet financing. For further information on how management evaluates our at-risk leverage, see Non-GAAP Financial Measures below.
As of March 31, 2024, our holdings of 30 year fixed-rate Agency RMBS represented approximately 93% of our total investment portfolio, including TBAs, versus 98% as of December 31, 2023 and March 31, 2023. Our 30 year fixed-rate Agency RMBS holdings as of March 31, 2024, December 31, 2023 and March 31, 2023 consisted of specified pools with coupon distributions as shown in the table below.
As of
March 31, 2024December 31, 2023March 31, 2023
$ in thousandsFair ValuePercentagePeriod-end Weighted Average YieldFair ValuePercentagePeriod-end Weighted Average YieldFair ValuePercentagePeriod-end Weighted Average Yield
4.0%764,780 16.5 %4.64 %876,337 17.7 %4.65 %770,111 14.5 %4.52 %
4.5%892,872 19.2 %4.95 %1,017,191 20.5 %4.95 %1,445,923 27.2 %4.92 %
5.0%1,001,505 21.5 %5.34 %1,028,036 20.8 %5.34 %1,539,794 28.9 %5.27 %
5.5%992,970 21.4 %5.59 %1,016,707 20.5 %5.59 %1,565,114 29.4 %5.53 %
6.0%996,925 21.4 %6.03 %1,014,203 20.5 %6.03 %— — — %
Total 30 year fixed-rate Agency RMBS4,649,052 100.0 %5.35 %4,952,474 100.0 %5.33 %5,320,942 100.0 %5.15 %
Our purchases of Agency RMBS have been primarily focused on specified pools with attractive prepayment profiles. We seek to capitalize on the impact of prepayments on our investment portfolio by purchasing specified pools with characteristics that optimize borrower incentive to prepay for both our premium and discount priced investments. The table below shows the specified pool characteristics of our 30 year fixed-rate Agency RMBS holdings as of March 31, 2024, December 31, 2023 and March 31, 2023.
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As of
March 31, 2024December 31, 2023March 31, 2023
$ in thousandsFair ValuePercentageFair ValuePercentageFair ValuePercentage
Specified pool characteristic:
Geographic location968,689 20.9 %1,079,310 21.8 %1,566,529 29.5 %
Loan balance2,130,283 45.8 %2,193,876 44.3 %1,338,150 25.1 %
High loan-to-value ratio
470,621 10.1 %574,246 11.6 %956,556 18.0 %
Low credit score1,079,459 23.2 %1,105,042 22.3 %1,459,707 27.4 %
Total 30 year fixed-rate Agency RMBS4,649,052 100.0 %4,952,474 100.0 %5,320,942 100.0 %
As of March 31, 2024, our holdings of Agency CMBS represented approximately 5% of our total investment portfolio versus 0% as of December 31, 2023 and March 31, 2023. As of March 31, 2024, our Agency CMBS holdings were comprised of fixed-rate securities with Fannie Mae DUS representing 74% our holdings and Freddie Mac Multifamily Participation Certificates representing 24% of our holdings. We invested in Agency CMBS in the first quarter of 2024 because these securities benefit from prepayment protection characteristics and have an attractive return profile. Further, the hedging costs related to these holdings are economical as they are less sensitive to interest rate risk given prepayment protection and scheduled balloon maturity payments.
As of March 31, 2024, December 31, 2023 and March 31, 2023, our holdings of non-Agency CMBS and non-Agency RMBS represented less than 1% of our total investment portfolio, including TBAs. Approximately 70% of our non-Agency securities were rated double-A (or equivalent) or higher by a nationally recognized statistical rating organization as of March 31, 2024.
In the first quarter of 2024, we received a final distribution from our sole remaining unconsolidated venture. Following this distribution, we no longer have any investments in unconsolidated ventures.
Financing and Other Liabilities
We finance the majority of our investment portfolio through repurchase agreements. Repurchase agreements are generally settled on a short-term basis, usually from one to six months, and bear interest at rates that are expected to move in close relationship to the secured overnight financing rate (“SOFR”).
The following table presents the amount of collateralized borrowings outstanding under repurchase agreements as of the end of each quarter, the average amount outstanding during the quarter and the maximum balance outstanding during the quarter.
$ in thousandsCollateralized borrowings under repurchase agreements
Quarter EndedQuarter-end balance
Average quarterly balance (1)
Maximum balance (2)
March 31, 20234,814,700 4,734,819 4,814,700 
June 30, 20234,959,388 4,791,720 4,959,388 
September 30, 20234,987,006 4,902,400 4,987,006 
December 31, 20234,458,695 3,736,432 4,458,695 
March 31, 20244,393,908 4,419,757 4,531,261 
(1)Average quarterly balance for each period is based on month-end balances.
(2)Amount represents the maximum borrowings at month-end during each of the respective periods.
Hedging Instruments
We enter into interest rate swap agreements that are designed to mitigate the effects of changes in interest rates for a portion of our borrowings. Under these swap agreements, we generally pay fixed interest rates and receive floating interest rates indexed to SOFR. To a lesser extent, we have also used interest rate swap agreements whereby we make floating interest rate payments indexed to SOFR and receive fixed interest rate payments as part of our overall risk management strategy.
We actively manage our interest rate swap portfolio as the size and composition of our investment portfolio changes. During the three months ended March 31, 2024, we entered into interest rate swaps with a notional amount of $1.3 billion and terminated existing interest rate swaps with a notional amount of $1.1 billion. Daily variation margin payment for interest rate
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swaps is characterized as settlement of the derivative itself rather than collateral and is recorded as a realized gain or loss in our condensed consolidated statement of operations.
Capital Activities
As of March 31, 2024, we may sell up to 5,934,691 shares of our common stock from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents. During the three months ended March 31, 2024, we sold 365,838 shares of common stock under our equity distribution agreement for proceeds of $3.3 million, net of approximately $43,000 in commissions and fees. During the three months ended March 31, 2023, we sold 2,930,069 shares of common stock under an equity distribution agreement for proceeds of $35.8 million, net of approximately $482,000 in commissions and fees.
For information on dividends declared during the three months ended March 31, 2024 and 2023, see Note 12 - "Stockholders' Equity" of our condensed consolidated financial statements in Part I. Item 1 of this report on Form 10-Q.
During the three months ended March 31, 2024, we did not repurchase any shares of our common stock.
In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock. During the three months ended March 31, 2024, we repurchased and retired 93,347 shares of Series B Preferred Stock and 95,917 shares of Series C Preferred Stock. During the three months ended March 31, 2023, we did not repurchase any shares of preferred stock. As of March 31, 2024, we had authority to repurchase 1,092,650 additional shares of our Series B Preferred Stock and 949,522 additional shares of our Series C Preferred Stock under the current share repurchase program.
Book Value per Common Share
We calculate book value per common share as follows.
As of
In thousands except per share amountsMarch 31, 2024December 31, 2023
Numerator (adjusted equity):
Total equity785,572 782,665 
Less: Liquidation preference of Series B Preferred Stock(107,316)(109,650)
Less: Liquidation preference of Series C Preferred Stock(186,238)(188,636)
Total adjusted equity492,018 484,379 
Denominator (number of shares):
Common stock outstanding48,826 48,461 
Book value per common share10.08 10.00 
Our book value per common share increased 0.8% as of March 31, 2024 compared to December 31, 2023 as our higher coupon Agency RMBS performed well relative to interest rate swap hedges, despite a notable increase in interest rates during the quarter. Strong performance in higher coupons was driven by a meaningful decline in interest rate volatility given market expectations for monetary policy easing in the first half of 2024. Refer to Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for interest rate risk and its impact on fair value.
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policies and estimates that are disclosed in our most recent Form 10-K for the year ended December 31, 2023.
Recent Accounting Standards
None.

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Results of Operations
The table below presents information from our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023.
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 
Weighted average number of shares of common stock:
Basic48,499,863 39,607,354 
Diluted48,500,476 39,608,545 

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Interest Income and Average Earning Asset Yields
The table below presents information related to our average earning assets and earning asset yields for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
$ in thousands20242023
Average earning assets (1)
4,972,242 5,245,291 
Average earning asset yields (2)
5.52 %5.28 %
(1)Average balances for each period are based on weighted month-end balances.
(2)Average earning asset yields for the period were calculated by dividing interest income, including amortization of premiums and discounts, by average earning assets based on the amortized cost of the investments. All yields are annualized.
Total average earning assets decreased $273.0 million for the three months ended March 31, 2024 compared to 2023. We maintained similar amounts of leverage during both periods, but modest declines in stockholders' equity resulted in lower average earnings assets for the three months ended March 31, 2024 compared to 2023. Average earning asset yields increased for the three months ended March 31, 2024 compared to 2023 due to our rotation into higher yielding Agency RMBS.
We earned total interest income of $68.6 million for the three months ended March 31, 2024 (March 31, 2023: $69.3 million). Our interest income includes coupon interest and net (premium amortization) discount accretion as shown in the table below.
 Three Months Ended March 31,
$ in thousands20242023
Interest Income
Coupon interest67,442 69,116 
Net (premium amortization) discount accretion1,141 171 
Total interest income68,583 69,287 
Interest income was relatively unchanged for the three months ended March 31, 2024 compared to 2023 as a decrease in average earning assets was largely offset by an increase in average earning asset yields.
Prepayment Speeds
Our RMBS portfolio is subject to inherent prepayment risk primarily driven by changes in interest rates, which impacts the amount of premium and discount on the purchase of these securities that is recognized into interest income. Generally, in an environment of falling interest rates, prepayment speeds will increase as homeowners are more likely to prepay their existing mortgage and refinance into a lower borrowing rate. In an environment of rising interest rates, prepayment speeds will generally decrease as homeowners are not as incentivized to refinance. For Agency RMBS where we do not estimate prepayments, premium amortization and discount accretion are not impacted by prepayments until actual prepayments occur. For those securities on which we do estimate prepayments, expected future prepayment speeds are estimated on a quarterly basis. If the actual prepayment speed during the period is faster than estimated, the amortization on securities purchased at a premium to par value will be accelerated, resulting in lower interest income recognized. Conversely, for securities purchased at a discount to par value, interest income will be reduced in periods where prepayment speeds were slower than expected.
The following table presents net (premium amortization) discount accretion recognized for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
$ in thousands20242023
Agency RMBS1,136 14 
Agency CMBS5 — 
Non-Agency CMBS127 291 
Non-Agency RMBS(126)(134)
U.S. Treasury Securities(1)— 
Net (premium amortization) discount accretion1,141 171 

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Net discount accretion was $1.1 million for the three months ended March 31, 2024 compared to $171,000 in 2023. The increase in net discount accretion for the three months ended March 31, 2024 compared to 2023 was the result of repositioning our Agency RMBS portfolio into securities with lower book prices and slightly faster prepayment rates.
Our interest income is subject to interest rate risk. Refer to Item 3. "Quantitative and Qualitative Disclosures about Market Risk" for more information relating to interest rate risk and its impact on our operating results.
Interest Expense and Cost of Funds
The table below presents information related to our borrowings and cost of funds for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
$ in thousands20242023
Total average borrowings (1)
4,419,757 4,737,476 
Maximum borrowings during the period (2)
4,531,261 4,814,700 
Cost of funds (3)
5.57 %4.20 %
(1)Average borrowings for each period are based on weighted month-end balances.
(2)Amount represents the maximum borrowings at month-end during each of the respective periods.
(3)Average cost of funds is calculated by dividing annualized interest expense including amortization of net deferred gain (loss) on de-designated interest rate swaps by our average borrowings.
Total average borrowings decreased $317.7 million for the three months ended March 31, 2024 compared to 2023. We maintained similar amounts of leverage during both periods, but modest declines in stockholders' equity resulted in lower average borrowings for the three months ended March 31, 2024 compared to 2023. Our average cost of funds increased 137 basis points for the three months ended March 31, 2024 compared to 2023 as the FOMC has raised the Federal Funds target rate from a range of 4.25% to 4.50% as of January 1, 2023 to a range of 5.25% to 5.50% as of March 31, 2024.
The table below presents the components of interest expense for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
$ in thousands20242023
Interest Expense
Interest expense on repurchase agreement borrowings61,580 54,220 
Amortization of net deferred (gain) loss on de-designated interest rate swaps — (4,494)
Total interest expense61,580 49,726 
Our interest expense increased $11.9 million for the three months ended March 31, 2024 compared to 2023 as increases in our cost of funds more than offset decreases in our average borrowings.
Our interest expense as reported in our condensed consolidated statement of operations includes amortization of net deferred gains and losses on de-designated interest rate swaps as summarized in the table above. Amortization of net deferred gains on de-designated interest rate swaps decreased our total interest expense by $4.5 million during the three months ended March 31, 2023. 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. As of March 31, 2024 and December 31, 2023, there were no net deferred gains or losses on discontinued cash flow hedges remaining in accumulated other comprehensive income.
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Net Interest Income
The table below presents the components of net interest income for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
$ in thousands20242023
Interest income68,583 69,287 
Interest Expense:
Interest expense on repurchase agreement borrowings61,580 54,220 
Amortization of net deferred (gain) loss on de-designated interest rate swaps — (4,494)
Total interest expense61,580 49,726 
Net interest income7,003 19,561 
Net interest rate margin(0.05)%1.08 %
Our net interest income, which equals total interest income less total interest expense, totaled $7.0 million for the three months ended March 31, 2024 (March 31, 2023: $19.6 million). The decrease in net interest income and net interest rate margin, which equals the yield on our average assets for the period less the average cost of funds, for three months ended March 31, 2024 compared to 2023 was due to higher interest expense related to increases in the Federal Funds target rate. Our cost of funds is generally more sensitive to changes in interest rates than the yield on our investment portfolio, which is largely comprised of 30 year fixed-rate Agency RMBS.
Gain (Loss) on Investments, net
The table below summarizes the components of gain (loss) on investments, net for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
$ in thousands20242023
Net realized gains (losses) on sale of MBS(3,222)(13,765)
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 
During the three months ended March 31, 2024, we sold MBS and realized net losses of $3.2 million (March 31, 2023: net losses of $13.8 million). Net realized losses during the three months ended March 31, 2024 reflect sales of lower coupon Agency RMBS with a portion of the proceeds being used to purchase Agency CMBS. Net realized losses during the three months ended March 31, 2023 primarily reflect the repositioning of Agency RMBS coupon allocations and sales of lower yielding Agency RMBS to purchase higher yielding Agency RMBS in an effort to improve the earnings power of the portfolio.
We have elected the fair value option for all of our MBS purchased on or after September 1, 2016. Before September 1, 2016, we had also elected the fair value option for our non-Agency RMBS interest-only securities. Under the fair value option, changes in fair value are recognized in income in the condensed consolidated statements of operations. As of March 31, 2024 and December 31, 2023, $5.0 billion or 99.7% of our MBS were accounted for under the fair value option.
We recorded net unrealized losses on our MBS portfolio accounted for under the fair value option of $62.5 million in the three months ended March 31, 2024 compared to net unrealized gains of $65.7 million in the three months ended March 31, 2023. Net unrealized losses in the three months ended March 31, 2024 resulted from higher interest rates during the quarter, as valuations on fixed-rate securities declined as interest rates rose. Net unrealized gains in the three months ended March 31, 2023 were primarily due to improved Agency RMBS valuations as yields on Treasuries decreased.
We recorded net realized and unrealized losses of $458,000 on U.S. Treasury securities in the three months ended March 31, 2024. We did not hold any U.S. Treasury securities during the three months ended March 31, 2023.
(Increase) Decrease in Provision for Credit Losses
As of March 31, 2024, $15.5 million of our MBS are classified as available-for-sale and subject to evaluation for credit losses (December 31, 2023: $15.7 million). During the three months ended March 31, 2024, we recorded a $39,000 provision
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for credit losses on a single non-Agency CMBS based on a comparison of the security's amortized cost basis to discounted expected cash flows. We did not record any provisions for credit losses during the three months ended March 31, 2023.
Equity in Earnings (Losses) of Unconsolidated Ventures
For the three months ended March 31, 2024 we recorded equity in losses of unconsolidated ventures of $193,000 (March 31, 2023: equity in earnings of $2,000). We received a final distribution from our sole remaining unconsolidated venture during the first quarter of 2024, and the venture was dissolved in April 2024.
Gain (Loss) on Derivative Instruments, net
We record all derivatives on our condensed consolidated balance sheets at fair value. Changes in the fair value of our derivatives are recorded in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations. Net interest paid or received under our interest rate swaps is also recognized in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations.
The tables below summarize our realized and unrealized gain (loss) on derivative instruments, net for the following periods.
$ 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)
During the three months ended March 31, 2024, we entered into interest rate swaps with a notional amount of $1.3 billion and terminated existing interest rate swaps with a notional amount of $1.1 billion. We recorded net gains of $93.2 million on interest rate swaps for the three months ended March 31, 2024 (March 31, 2023: net losses of $44.5 million) primarily due to changes in forward interest rate expectations.
As of March 31, 2024, we had $4.4 billion of repurchase agreement borrowings with a weighted average remaining maturity of 20 days. We typically refinance each repurchase agreement at market interest rates upon maturity. We use interest rate swaps to manage our exposure to changing interest rates and add stability to interest rate expense.
As of March 31, 2024 and December 31, 2023, we held the following interest rate swaps whereby we pay fixed rate interest and receive floating rate interest based upon SOFR.
$ in thousandsAs of March 31, 2024As of December 31, 2023
Derivative instrumentNotional AmountWeighted Average Fixed Pay RateWeighted Average Floating Receive RateWeighted Average Years to MaturityNotional AmountWeighted Average Fixed Pay RateWeighted Average Floating Receive RateWeighted Average Years to Maturity
Interest Rate Swaps4,265,000 1.17 %5.34 %7.24,065,000 1.10 %5.38 %6.6
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. As of March 31, 2024 and December 31, 2023, we had no investments in TBAs. We recorded $442,000 of net realized and unrealized losses on TBAs during the three months ended March 31, 2023.
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Other Investment Income (Loss), net
Our other investment income (loss), net during the three months ended March 31, 2023 consisted of foreign currency transaction gains and losses and the reclassification of our foreign currency translation adjustment that was previously recorded in accumulated other comprehensive income related to an unconsolidated venture that was liquidated during the first quarter of 2023.
Expenses
We incurred management fees of $2.9 million for the three months ended March 31, 2024 (March 31, 2023: $3.0 million). Management fees decreased for the three months ended March 31, 2024 compared to the same period in 2023 due to a lower stockholders' equity management fee base. Refer to Note 11 – "Related Party Transactions" of our condensed consolidated financial statements for a discussion of our relationship with our Manager and a description of how our fees are calculated.
Our general and administrative expenses not covered under our management agreement amounted to $1.8 million for the three months ended March 31, 2024 (March 31, 2023: $2.1 million). General and administrative expenses not covered under our management agreement primarily consist of directors and officers insurance, legal costs, accounting, auditing and tax services, filing fees and miscellaneous general and administrative costs.
Gain on Repurchase and Retirement of Preferred Stock
In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock. During the three months ended March 31, 2024, we repurchased and retired 93,347 shares of Series B Preferred Stock and 95,917 shares of Series C Preferred Stock. During the three months ended March 31, 2023, we did not repurchase any shares of preferred stock. Gains on repurchases and retirements of preferred stock represent the difference between the consideration transferred and the carrying value of the preferred stock.
Net Income (Loss) attributable to Common Stockholders
For the three months ended March 31, 2024, our net income attributable to common stockholders was $23.7 million (March 31, 2023: $15.6 million) or $0.49 basic and diluted net income per average share available to common stockholders (March 31, 2023: $0.39). The change in net income attributable to common stockholders was primarily due to (i) net gains on derivative instruments of $93.2 million in the 2024 period compared to net losses on derivative instruments of $44.9 million in the 2023 period; (ii) net losses on investments of $66.2 million in the 2024 period compared to net gains on investments of $52.0 million in the 2023 period; and (iii) a $12.6 million decrease in net interest income.
For further information on the changes in net gain (loss) on derivative instruments, net gain (loss) on investments and changes in net interest income, see preceding discussion under “Gain (Loss) on Derivative Instruments, net”, “Gain (Loss) on Investments, net” and “Net Interest Income”.
Non-GAAP Financial Measures
The table below shows the non-GAAP financial measures we use to analyze our operating results and the most directly comparable U.S. GAAP measures. We believe these non-GAAP measures are useful to investors in assessing our performance as discussed further below.
Non-GAAP Financial MeasureMost Directly Comparable U.S. GAAP Measure
Earnings available for distribution (and by calculation, earnings available for distribution per common share)Net income (loss) attributable to common stockholders (and by calculation, basic earnings (loss) per common share)
Effective interest expense (and by calculation, effective cost of funds)Total interest expense (and by calculation, cost of funds)
Effective net interest income (and by calculation, effective interest rate margin)Net interest income (and by calculation, net interest rate margin)
Economic debt-to-equity ratioDebt-to-equity ratio
The non-GAAP financial measures used by management should be analyzed in conjunction with U.S. GAAP financial measures and should not be considered substitutes for U.S. GAAP financial measures. In addition, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of our peer companies.
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Earnings Available for Distribution
Our business objective is to provide attractive risk-adjusted returns to our stockholders, primarily through dividends and secondarily through capital appreciation. We use earnings available for distribution as a measure of our investment portfolio’s ability to generate income for distribution to common stockholders and to evaluate our progress toward meeting this objective. We calculate earnings available for distribution as U.S. GAAP net income (loss) attributable to common stockholders adjusted for (gain) loss on investments, net; realized (gain) loss on derivative instruments, net; unrealized (gain) loss on derivative instruments, net; TBA dollar roll income; gain on repurchase and retirement of preferred stock; foreign currency (gains) losses, net and amortization of net deferred (gain) loss on de-designated interest rate swaps.
By excluding the gains and losses discussed above, we believe the presentation of earnings available for distribution provides a consistent measure of operating performance that investors can use to evaluate our results over multiple reporting periods and, to a certain extent, compare to our peer companies. However, because not all of our peer companies use identical operating performance measures, our presentation of earnings available for distribution may not be comparable to other similarly titled measures used by our peer companies. We exclude the impact of gains and losses when calculating earnings available for distribution because (i) when analyzed in conjunction with our U.S. GAAP results, earnings available for distribution provides additional detail of our investment portfolio’s earnings capacity and (ii) gains and losses are not accounted for consistently under U.S. GAAP. Under U.S. GAAP, certain gains and losses are reflected in net income whereas other gains and losses are reflected in other comprehensive income. For example, a portion of our mortgage-backed securities are classified as available-for-sale securities, and we record changes in the valuation of these securities in other comprehensive income on our condensed consolidated balance sheets. We elected the fair value option for our mortgage-backed securities purchased on or after September 1, 2016, and changes in the valuation of these securities are recorded in other income (loss) in our condensed consolidated statements of operations. In addition, certain gains and losses represent one-time events. We may add and have added additional reconciling items to our earnings available for distribution calculation as appropriate.
To maintain our qualification as a REIT, U.S. federal income tax law generally requires that we distribute at least 90% of our REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. We have historically distributed at least 100% of our REIT taxable income. Because we view earnings available for distribution as a consistent measure of our investment portfolio's ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that our board of directors uses to determine the amount, if any, and the payment date of dividends on our common stock. However, earnings available for distribution should not be considered as an indication of our taxable income, a guaranty of our ability to pay dividends or as a proxy for the amount of dividends we may pay, as earnings available for distribution excludes certain items that impact our cash needs.
Earnings available for distribution is an incomplete measure of our financial performance and there are other factors that impact the achievement of our business objective. We caution that earnings available for distribution should not be considered as an alternative to net income (determined in accordance with U.S. GAAP) or as an indication of our cash flow from operating activities (determined in accordance with U.S. GAAP), a measure of our liquidity or as an indication of amounts available to fund our cash needs.
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The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to earnings available for distribution for the following periods.
 Three Months Ended March 31,
$ in thousands, except per share data20242023
Net income (loss) attributable to common stockholders23,730 15,601 
Adjustments:
(Gain) loss on investments, net66,153 (51,956)
Realized (gain) loss on derivative instruments, net (1)
(48,682)91,900 
Unrealized (gain) loss on derivative instruments, net (1)
808 7,459 
TBA dollar roll income (2)
— 697 
Gain on repurchase and retirement of preferred stock(193)— 
Foreign currency (gains) losses, net (3)
— 93 
Amortization of net deferred (gain) loss on de-designated interest rate swaps (4)
— (4,494)
Subtotal18,086 43,699 
Earnings available for distribution41,816 59,300 
Basic income (loss) per common share0.49 0.39 
Earnings available for distribution per common share (5)
0.86 1.50 
(1)U.S. GAAP gain (loss) on derivative instruments, net on the condensed consolidated statements of operations includes the following components.
Three Months Ended March 31,
$ in thousands20242023
Realized gain (loss) on derivative instruments, net48,682 (91,900)
Unrealized gain (loss) on derivative instruments, net(808)(7,459)
Contractual net interest income (expense) on interest rate swaps45,287 54,464 
Gain (loss) on derivative instruments, net93,161 (44,895)
(2)A TBA dollar roll is a series of derivative transactions where TBAs with the same specified issuer, term and coupon but different settlement dates are simultaneously bought and sold. The TBA settling in the later month typically prices at a discount to the TBA settling in the earlier month. TBA dollar roll income represents the price differential between the TBA price for current month settlement versus the TBA price for forward month settlement. We include TBA dollar roll income in earnings available for distribution because it is the economic equivalent of interest income on the underlying Agency RMBS, less an implied financing cost, over the forward settlement period. TBA dollar roll income is a component of gain (loss) on derivative instruments, net on our condensed consolidated statements of operations.
(3)Foreign currency gains (losses), net includes foreign currency transaction gains and losses and the reclassification of currency translation adjustments that were previously recorded in accumulated other comprehensive income and is included in other investment income (loss), net on the condensed consolidated statements of operations.
(4)U.S. GAAP interest expense on the condensed consolidated statements of operations includes the following components.
Three Months Ended March 31,
$ in thousands20242023
Interest expense on repurchase agreement borrowings61,580 54,220 
Amortization of net deferred (gain) loss on de-designated interest rate swaps— (4,494)
Total interest expense61,580 49,726 
(5)Earnings available for distribution per common share is equal to earnings available for distribution divided by the basic weighted average number of common shares outstanding.
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The table below shows the components of earnings available for distribution for the following periods.
Three Months Ended March 31,
$ in thousands20242023
Effective net interest income (1)
52,290 69,531 
TBA dollar roll income— 697 
Equity in earnings (losses) of unconsolidated ventures(193)2 
(Increase) decrease in provision for credit losses(39)— 
Total expenses (4,657)(5,068)
Subtotal47,401 65,162 
Dividends to preferred stockholders(5,585)(5,862)
Earnings available for distribution41,816 59,300 
(1)See below for a reconciliation of net interest income to effective net interest income, a non-GAAP measure.
Earnings available for distribution decreased during the three months ended March 31, 2024 compared to the same period in 2023 due to lower effective net interest income. See below for details on the change in effective net interest income.
Effective Interest Expense / Effective Cost of Funds / Effective Net Interest Income / Effective Interest Rate Margin
We calculate effective interest expense (and by calculation, effective cost of funds) as U.S. GAAP total interest expense adjusted for contractual net interest income (expense) on our interest rate swaps that is recorded as gain (loss) on derivative instruments, net and the amortization of net deferred gains (losses) on de-designated interest rate swaps that is recorded as interest expense. We view our interest rate swaps as an economic hedge against increases in future market interest rates on our borrowings. We add back the net payments or receipts on our interest rate swap agreements to our total U.S. GAAP interest expense because we use interest rate swaps to add stability to interest expense. We exclude the amortization of net deferred gains (losses) on de-designated interest rate swaps from our calculation of effective interest expense because we do not consider the amortization a current component of our borrowing costs.
We calculate effective net interest income (and by calculation, effective interest rate margin) as U.S. GAAP net interest income adjusted for contractual net interest income (expense) on our interest rate swaps that is recorded as gain (loss) on derivative instruments, net and amortization of net deferred gains (losses) on de-designated interest rate swaps that is recorded as interest expense.
We believe the presentation of effective interest expense, effective cost of funds, effective net interest income and effective interest rate margin measures, when considered together with U.S. GAAP financial measures, provides information that is useful to investors in understanding our borrowing costs and operating performance.
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,
 20242023
$ in thousandsReconciliationCost of Funds / Effective Cost of FundsReconciliationCost of Funds / Effective Cost of Funds
Total interest expense61,580 5.57 %49,726 4.20 %
Add: Amortization of net deferred gain (loss) on de-designated interest rate swaps — — %4,494 0.38 %
Less: Contractual net interest expense (income) on interest rate swaps recorded as gain (loss) on derivative instruments, net(45,287)(4.10)%(54,464)(4.60)%
Effective interest expense16,293 1.47 %(244)(0.02)%
Our effective interest expense and effective cost of funds increased in the three months ended March 31, 2024 compared to the same period in 2023 due to higher U.S. GAAP interest expense driven by increases in the Federal Funds target rate and decreases in contractual net interest income on interest rate swaps.
In addition to changes caused by the underlying floating rate index, the amount of contractual net interest income or expense on interest swaps that we recognize may change materially from period to period based on changes in the size and
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composition of our interest rate swap portfolio, which are generally broadly aligned with changes in our repurchase agreement borrowings. See preceding discussion under “Gain (Loss) on Derivative Instruments, net” for details of our interest rate swap portfolio as of March 31, 2024 and December 31, 2023.
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,
 20242023
$ in thousandsReconciliationNet Interest Rate Margin / Effective Interest Rate MarginReconciliationNet Interest Rate Margin / Effective Interest Rate Margin
Net interest income7,003 (0.05)%19,561 1.08 %
Less: Amortization of net deferred (gain) loss on de-designated interest rate swaps — — %(4,494)(0.38)%
Add: Contractual net interest income (expense) on interest rate swaps recorded as gain (loss) on derivative instruments, net45,287 4.10 %54,464 4.60 %
Effective net interest income52,290 4.05 %69,531 5.30 %
Our effective net interest income and effective interest rate margin decreased in the three months ended March 31, 2024 compared to the same period in 2023 due to higher U.S. GAAP interest expense driven by increases in the Federal Funds target rate and decreases in contractual net interest income on interest rate swaps.
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Economic Debt-to-Equity Ratio
The tables below show the allocation of our stockholders' equity to our target assets, our debt-to-equity ratio, and our economic debt-to-equity ratio as of March 31, 2024 and December 31, 2023. Our debt-to-equity ratio is calculated in accordance with U.S. GAAP and is the ratio of total debt to total stockholders' equity. As of March 31, 2024, approximately 88% of our equity is allocated to Agency RMBS.
We present an economic debt-to-equity ratio, a non-GAAP financial measure of leverage that considers the impact of the off-balance sheet financing of our investments in TBAs that are accounted for as derivative instruments under U.S. GAAP. We include our TBAs at implied cost basis in our measure of leverage because a forward contract to acquire Agency RMBS in the TBA market carries similar risks to Agency RMBS purchased in the cash market and funded with on-balance sheet liabilities. Similarly, a contract for the forward sale of Agency RMBS has substantially the same effect as selling the underlying Agency RMBS and reducing our on-balance sheet funding commitments. We believe that presenting our economic debt-to-equity ratio, when considered together with our U.S. GAAP financial measure of debt-to-equity ratio, provides information that is useful to investors in understanding how management evaluates our at-risk leverage and gives investors a comparable statistic to those of other mortgage REITs who also invest in TBAs and present a similar non-GAAP measure of leverage.
As of March 31, 2024
$ in thousandsAgency
RMBS 		Agency
CMBS
Credit Portfolio (1)
Total
Mortgage-backed securities4,723,751 265,512 17,841 5,007,104 
Cash and cash equivalents (2)
56,716 3,174 — 59,890 
Restricted cash (3)
125,860 14,755 — 140,615 
Derivative assets, at fair value (3)
117 14 — 131 
Other assets22,569 1,033 131 23,733 
Total assets4,929,013 284,488 17,972 5,231,473 
Repurchase agreements4,189,856 204,052 — 4,393,908 
Other liabilities48,061 3,245 687 51,993 
Total liabilities4,237,917 207,297 687 4,445,901 
Total stockholders' equity (allocated)691,096 77,191 17,285 785,572 
Debt-to-equity ratio (4)
6.1 2.6 — 5.6 
Economic debt-to-equity ratio (5)
6.1 2.6 — 5.6 
(1)Investments in non-Agency CMBS and non-Agency RMBS are included in credit portfolio.
(2)Cash and cash equivalents is allocated based on our financing strategy for each asset class.
(3)Restricted cash and derivative assets are allocated based on our hedging strategy for each asset class.
(4)Debt-to-equity ratio is calculated as the ratio of total repurchase agreements to total stockholders' equity.
(5)Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis to total stockholders' equity. We did not have any TBAs outstanding as of March 31, 2024.

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As of December 31, 2023
$ in thousandsAgency
RMBS
Credit Portfolio (1)
Total
Mortgage-backed securities5,027,232 18,074 5,045,306 
U.S. Treasury securities11,214 — 11,214 
Cash and cash equivalents (2)
76,967 — 76,967 
Restricted cash (3)
121,670 — 121,670 
Derivative assets, at fair value (3)
939 — 939 
Other assets27,480 633 28,113 
Total assets5,265,502 18,707 5,284,209 
Repurchase agreements4,458,695 — 4,458,695 
Other liabilities42,117 732 42,849 
Total liabilities4,500,812 732 4,501,544 
Total stockholders' equity (allocated)764,690 17,975 782,665 
Debt-to-equity ratio (4)
5.8 — 5.7 
Economic debt-to-equity ratio (5)
5.8 — 5.7 
(1)Investments in non-Agency CMBS, non-Agency RMBS and an unconsolidated joint venture are included in credit portfolio.
(2)Cash and cash equivalents is allocated based on our financing strategy for each asset class.
(3)Restricted cash and derivative assets are allocated based on our hedging strategy for each asset class.
(4)Debt-to-equity ratio is calculated as the ratio of total repurchase agreements to total stockholders' equity.
(5)Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis to total stockholders' equity. We did not have any TBAs outstanding as of December 31, 2023.

Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, repay borrowings and fund other general business needs. Our primary sources of funds for liquidity consist of the net proceeds from our common and preferred equity offerings, net cash provided by operating activities, proceeds from repurchase agreements and other financing arrangements and future issuances of equity and/or debt securities.
We currently believe that we have sufficient liquidity and capital resources available for the acquisition of additional investments, repayments on borrowings, margin requirements and the payment of cash dividends as required for continued qualification as a REIT. We generally maintain liquidity to pay down borrowings under repurchase arrangements to reduce borrowing costs and otherwise efficiently manage our long-term investment capital. Because the level of these borrowings can be adjusted on a daily basis, the level of cash and cash equivalents carried on our condensed consolidated balance sheets is significantly less important than our potential liquidity available under borrowing arrangements or through the sale of liquid investments. However, there can be no assurance that we will maintain sufficient levels of liquidity to meet any margin calls.
We held cash, cash equivalents and restricted cash of $200.5 million as of March 31, 2024 (March 31, 2023: $228.9 million). Our cash, cash equivalents and restricted cash change due to normal fluctuations in cash balances related to the timing of principal and interest payments, repayments of debt, and asset purchases and sales. Our operating activities provided net cash of approximately $57.5 million for the three months ended March 31, 2024 (March 31, 2023: $67.2 million).
Our investing activities provided net cash of $37.1 million in the three months ended March 31, 2024 compared to net cash used by investing activities of $696.9 million in the three months ended March 31, 2023. Our primary source of cash from investing activities for the three months ended March 31, 2024 was proceeds from sales of MBS of $296.5 million and proceeds from sales of U.S. Treasury securities of $10.8 million (March 31, 2023: $783.9 million from the sales of MBS). We also generated $71.2 million from principal payments of MBS during the three months ended March 31, 2024 (March 31, 2023: $61.1 million) and received cash of $48.7 million to settle derivative contracts in the three months ended March 31, 2024 (March 31, 2023: net cash used of $91.9 million). We used cash of $390.4 million to purchase MBS during the three months ended March 31, 2024 (March 31, 2023: $1.4 billion to purchase MBS).
Our financing activities used net cash of $92.7 million for the three months ended March 31, 2024 compared to net cash provided by financing activities of $579.8 million in the three months ended March 31, 2023. During the three months ended March 31, 2024, we used cash for net repayments on our repurchase agreements of $64.4 million (March 31, 2023: net cash
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provided of $579.9 million). We also used cash of $25.0 million for the three months ended March 31, 2024 to pay dividends (March 31, 2023: $31.0 million). Proceeds from issuance of common stock provided $3.3 million for the three months ended March 31, 2024 (March 31, 2023: $35.8 million).
As of March 31, 2024, the average margin requirement (weighted by borrowing amount), or the haircut, under our repurchase agreements was 4.6% for Agency RMBS and 5.0% for Agency CMBS. The haircuts ranged from a low of 3% to a high of 5% for Agency RMBS and a low of 4% to a high of 6% for Agency CMBS. Declines in the value of our securities portfolio can trigger margin calls by our lenders under our repurchase agreements. An event of default or termination event may give our counterparties the option to terminate all repurchase transactions outstanding with us and require any amount due from us to the counterparties to be payable immediately.
Effects of Margin Requirements, Leverage and Credit Spreads
Our securities have values that fluctuate according to market conditions and the market value of our securities will decrease as prevailing interest rates or credit spreads increase. When the value of the securities pledged to secure a repurchase loan decreases to the point where the positive difference between the collateral value and the loan amount is less than the haircut, our lenders may issue a “margin call”, which means that the lender will require us to pay cash or pledge additional collateral. Under our repurchase facilities, our lenders have full discretion to determine the value of the securities we pledge to them. Most of our lenders will value securities based on recent trades in the market. Lenders also issue margin calls as the published current principal balance factors change on the pool of mortgages underlying the securities pledged as collateral when scheduled and unscheduled paydowns are announced monthly.
We experience margin calls and increased collateral requirements in the ordinary course of our business. In seeking to effectively manage the margin requirements established by our lenders, we maintain a position of cash and unpledged securities. We refer to this position as our liquidity. The level of liquidity we have available to meet margin calls is directly affected by our leverage levels, our haircuts and the price changes on our securities. If interest rates increase as a result of a yield curve shift or for another reason or if credit spreads widen, then the prices of our collateral (and our unpledged assets that constitute our liquidity) will decline, we will experience margin calls, and we will seek to use our liquidity to meet the margin calls. There can be no assurance that we will maintain sufficient levels of liquidity to meet any margin calls or increased collateral requirements. If our haircuts increase, our liquidity will proportionately decrease. In addition, if we increase our borrowings, our liquidity will decrease by the amount of additional haircut on the increased level of indebtedness.
We intend to maintain a level of liquidity in relation to our assets that enables us to meet reasonably anticipated margin calls and increased collateral requirements but that also allows us to be substantially invested in securities. We may misjudge the appropriate amount of our liquidity by maintaining excessive liquidity, which would lower our investment returns, or by maintaining insufficient liquidity, which would force us to liquidate assets into unfavorable market conditions and harm our results of operations and financial condition.
We are subject to financial covenants in connection with our lending, derivatives and other agreements we enter into in the normal course of our business. We intend to operate in a manner which complies with all of our financial covenants. Our lending and derivative agreements provide that we may be declared in default of our obligations if our leverage ratio exceeds certain thresholds and we fail to maintain stockholders’ equity or market value above certain thresholds over specified time periods.
Forward-Looking Statements Regarding Liquidity
As of March 31, 2024, we held $4.6 billion of Agency securities that are financed by repurchase agreements. We also had approximately $390.7 million of unencumbered investments and unrestricted cash of $59.9 million as of March 31, 2024. As of March 31, 2024, our known contractual obligations primarily consisted of $4.4 billion of repurchase agreement borrowings with a weighted average remaining maturity of 20 days. We generally intend to refinance the majority of our repurchase agreement borrowings at market rates upon maturity. Repurchase agreement borrowings that are not refinanced upon maturity are typically repaid through the use of cash on hand or proceeds from sales of securities.
Based upon our current portfolio and existing borrowing arrangements, we believe that cash flow from operations and available borrowing capacity will be sufficient to enable us to meet anticipated short-term (one year or less) liquidity requirements to fund our investment activities, pay fees under our management agreement, fund our required distributions to stockholders and fund other general corporate expenses.
Our ability to meet our long-term (greater than one year) liquidity and capital resource requirements will be subject to obtaining additional debt financing. We may increase our capital resources by obtaining long-term credit facilities or through public or private offerings of equity or debt securities, possibly including classes of preferred stock, common stock, senior or subordinated notes and convertible notes. Such financing will depend on market conditions for capital raises and our ability to
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invest such offering proceeds. If we are unable to renew, replace or expand our sources of financing on substantially similar terms, it may have an adverse effect on our business and results of operations.
Exposure to Financial Counterparties
We finance a substantial portion of our investment portfolio through repurchase agreements. Under these agreements, we pledge assets from our investment portfolio as collateral. Additionally, certain counterparties may require us to provide cash collateral in the event the market value of the assets declines to maintain a contractual repurchase agreement collateral ratio. If a counterparty were to default on its obligations, we would be exposed to potential losses to the extent the fair value of collateral pledged by us to the counterparty including any accrued interest receivable on such collateral exceeded the amount loaned to us by the counterparty plus interest due to the counterparty.
As of March 31, 2024, no counterparty held collateral that exceeded the amounts borrowed under the related repurchase agreements by more than $39.3 million, or 5% of our stockholders' equity. The following table summarizes our exposure to counterparties by geographic concentration as of March 31, 2024. The information is based on the geographic headquarters of the counterparty or counterparty's parent company. However, our repurchase agreements are denominated in U.S. dollars.
$ in thousandsNumber of CounterpartiesRepurchase Agreement FinancingExposure
North America13 2,459,816 (118,063)
Europe (excluding United Kingdom)3 586,339 (25,413)
Asia4 927,386 (46,065)
United Kingdom1 420,367 (16,765)
Total21 4,393,908 (206,306)
Dividends
To maintain our qualification as a REIT, U.S. federal income tax law generally requires that we distribute at least 90% of our REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. We must pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our REIT taxable income. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our repurchase agreements and other debt payable. If our cash available for distribution is less than our REIT taxable income, we could be required to sell assets or borrow funds to make cash distributions, or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.
As discussed above, our distribution requirements are based on REIT taxable income rather than U.S. GAAP net income. The primary differences between our REIT taxable income and U.S. GAAP net income are: (i) unrealized gains and losses on investments that we have elected the fair value option for that are included in current U.S. GAAP income but are excluded from REIT taxable income until realized or settled; (ii) gains and losses on derivative instruments that are included in current U.S. GAAP net income but are excluded from REIT taxable income until realized; and (iii) temporary differences related to amortization of premiums and discounts on investments. For additional information regarding the characteristics of our dividends, refer to Note 12 – "Stockholders' Equity" of our annual report on Form 10-K for the year ended December 31, 2023.
Unrelated Business Taxable Income
We have not engaged in transactions that would result in a portion of our income being treated as unrelated business taxable income.
Other Matters
We believe that we satisfied each of the asset tests in Section 856(c)(4) of the Internal Revenue Code of 1986, as amended (the "Code") for the period ended March 31, 2024, and that our proposed method of operation will permit us to satisfy the asset tests, gross income tests, and distribution and stock ownership requirements for our taxable year that will end on December 31, 2024.
At all times, we intend to conduct our business so that neither we nor our Operating Partnership nor the subsidiaries of our Operating Partnership are required to register as an investment company under the 1940 Act. If we were required to register as an investment company, then our use of leverage would be substantially reduced. Because we are a holding company that conducts our business through our Operating Partnership and the Operating Partnership’s wholly-owned or majority-owned
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subsidiaries, the securities issued by these subsidiaries that are excepted from the definition of "investment company" under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, together with any other investment securities the Operating Partnership may own, may not have a combined value in excess of 40% of the value of the Operating Partnership’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. This requirement limits the types of businesses in which we are permitted to engage in through our subsidiaries. In addition, we believe neither we nor the Operating Partnership are considered an investment company under Section 3(a)(1)(A) of the 1940 Act because they do not engage primarily or hold themselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through the Operating Partnership’s wholly-owned or majority-owned subsidiaries, we and the Operating Partnership are primarily engaged in the non-investment company businesses of these subsidiaries. IAS Asset I LLC and certain of the Operating Partnership’s other subsidiaries that we may form in the future rely upon the exclusion from the definition of "investment company" under the 1940 Act provided by Section 3(c)(5)(C) of the 1940 Act, which is available for entities "primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate." This exclusion generally requires that at least 55% of each subsidiary’s portfolio be comprised of qualifying assets and at least 80% be comprised of qualifying assets and real estate-related assets (and no more than 20% comprised of miscellaneous assets). We calculate that as of March 31, 2024, we conducted our business so as not to be regulated as an investment company under the 1940 Act.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
delete
The primary components of our market risk are related to interest rate, principal prepayment and market value. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and we seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.
For additional discussion of market risk, see Part I. Item 1 - Risk Factors of our annual report on Form 10-K for the year ended December 31, 2023.
Interest Rate Risk
Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. We are subject to interest rate risk in connection with our investments and our repurchase agreements. Our repurchase agreements are typically short-term in nature and are periodically refinanced at current market rates. We typically mitigate this interest rate risk by utilizing derivative contracts, primarily interest rate swap agreements.
Interest Rate Effect on Net Interest Income
Our operating results depend in large part upon differences between the yields earned on our investments and our cost of borrowing and interest rate hedging activities. During periods of rising interest rates, the borrowing costs associated with our investments tend to increase while the income earned on our fixed interest rate investments may remain substantially unchanged. This increase in borrowing costs results in the narrowing of the net interest spread between the related assets and borrowings and may even result in losses. Further, defaults could increase and result in credit losses to us, which could adversely affect our liquidity and operating results. Such delinquencies or defaults could also have an adverse effect on the spread between interest-earning assets and interest-bearing liabilities.
Hedging techniques are partly based on assumed levels of prepayments of our RMBS. If prepayments are slower or faster than assumed, the life of the RMBS will be longer or shorter, which would reduce the effectiveness of any hedging strategies we may use and may cause losses on such transactions. Hedging strategies involving the use of derivative securities are highly complex and may produce volatile returns.
Interest Rate Effects on Fair Value
Another component of interest rate risk is the effect that changes in interest rates will have on the market value of the assets that we acquire. We face the risk that the market value of our assets will increase or decrease at different rates than those of our liabilities, including our hedging instruments.
We primarily assess our interest rate risk by estimating the duration of our assets and the duration of our liabilities. Duration measures the market price volatility of financial instruments as interest rates change. We generally calculate duration using various financial models and empirical data. Different models and methodologies can produce different duration values for the same securities.
The impact of changing interest rates on fair value can change significantly when interest rates change materially. Therefore, the volatility in the fair value of our assets could increase significantly in the event interest rates change materially. In addition, other factors impact the fair value of our interest rate-sensitive investments and hedging instruments, such as the
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shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, changes in actual interest rates may have a material adverse effect on us.
Spread Risk
We refer to the difference between interest rates on our investments and interest rates on risk free instruments as spreads. We employ a variety of spread risk management techniques that seek to mitigate the influences of spread changes on our book value and our liquidity to help us achieve our investment objectives. The yield on our investments changes over time due to the level of risk free interest rates, the creditworthiness of the security, and the price of the perceived risk. The change in the market yield of our interest rate hedges also changes primarily with the level of risk free interest rates. We manage spread risk through careful asset selection, sector allocation, regulating our portfolio value-at-risk, and seeking to maintain adequate liquidity. Changes in spreads impact our book value and our liquidity and could cause us to sell assets and to change our investment strategy to maintain liquidity and preserve book value.
Inflation, financial conditions, monetary policy initiatives, interest rates and interest rate volatility have impacted and may continue to impact credit spreads.
Prepayment Risk
As we receive prepayments of principal on our investments, premiums or discounts on these investments are amortized against interest income. In general, an increase in prepayment rates will accelerate the amortization of purchase premiums, thereby reducing the interest income earned on the investments. Conversely, discounts on such investments are accreted into interest income. In general, an increase in prepayment rates will accelerate the accretion of purchase discounts, thereby increasing the interest income earned on the investments.
Uncertainty regarding the rate of inflation, fiscal and monetary policy initiatives, elevated interest rate volatility and other factors have made it more difficult to predict prepayment levels for the securities in our portfolio. As a result, it is possible that realized prepayment behavior will be materially different from our expectations.
Extension Risk
We compute the projected weighted average life of our investments based upon assumptions regarding the rate at which the borrowers will prepay the underlying mortgages. In general, when a fixed-rate or hybrid adjustable-rate security is acquired with borrowings, we may, but are not required to, enter into an interest rate swap agreement or other hedging instrument that effectively fixes our borrowing costs for a period close to the anticipated average life of the fixed-rate portion of the related assets. This strategy is designed to protect us from rising interest rates, because the borrowing costs are fixed for the duration of the fixed-rate portion of the related target asset.
However, if prepayment rates decrease in a rising interest rate environment, then the life of the fixed-rate portion of the related assets could extend beyond the term of the swap agreement or other hedging instrument. This could have a negative impact on our results from operations, as borrowing costs would no longer be fixed after the end of the hedging instrument, while the income earned on the hybrid adjustable-rate assets would remain fixed. This situation may also cause the market value of our hybrid adjustable-rate assets to decline, with little or no offsetting gain from the related hedging transactions. In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.
Market Risk
Market Value Risk
Our available-for-sale securities are reflected at their estimated fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income under ASC Topic 320. The estimated fair value of these securities fluctuates primarily due to changes in interest rates and other factors. Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease; conversely, in a falling interest rate environment, the estimated fair value of these securities would be expected to increase.
Pandemics and other widespread crises, including any related fiscal or monetary policy responses, may cause extreme volatility and illiquidity in fixed income markets. The amount of financing we receive under our repurchase agreements is directly related to our counterparties’ valuation of our assets that collateralize the outstanding repurchase agreement financing. When these or similar market conditions are present, margin call risk is elevated and our operating results and financial condition may be materially impacted.
The sensitivity analysis table presented below shows the estimated impact of an instantaneous parallel shift in the yield curve, up and down 50 and 100 basis points, on the market value of our interest rate-sensitive investments and net interest income, including net interest paid or received under interest rate swaps, as of March 31, 2024 and December 31, 2023, assuming a static portfolio and constant financing and credit spreads. When evaluating the impact of changes in interest rates,
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prepayment assumptions and principal reinvestment rates are adjusted based on our Manager’s expectations. The analysis presented utilized assumptions, models and estimates of our Manager based on our Manager’s judgment and experience.
As of March 31, 2024As of December 31, 2023
Change in Interest RatesPercentage Change in Projected Net Interest IncomePercentage Change in Projected Portfolio ValuePercentage Change in Projected Net Interest IncomePercentage Change in Projected Portfolio Value
+1.00%0.05 %(0.51)%(1.04)%(0.76)%
+0.50%0.10 %(0.13)%(0.41)%(0.23)%
-0.50%(0.29)%(0.22)%0.27 %(0.13)%
-1.00%(0.52)%(0.87)%0.93 %(0.68)%
Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The interest rate scenarios assume interest rates as of March 31, 2024 and December 31, 2023. Furthermore, while the analysis reflects the estimated impact of interest rate increases and decreases on a static portfolio, we actively manage the size and composition of our investment and swap portfolios, which can result in material changes to our interest rate risk profile. When applicable, our scenario analysis assumes a floor of 0% for U.S. Treasury yields and, to be consistent, we also apply a floor of 0% for all related funding costs.
The information set forth in the interest rate sensitivity table above and all related disclosures constitutes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual results could differ significantly from those estimated in the foregoing interest rate sensitivity table.
Real Estate Risk
Residential and commercial property values are subject to volatility and may be adversely affected by a number of factors, including, but not limited to: national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions (such as the supply of housing stock or other property sectors); changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to suffer losses.
Credit Risk
We retain the risk of potential credit losses on all of our residential and commercial mortgage investments. We seek to manage this risk through our pre-acquisition due diligence process. In addition, we re-evaluate the credit risk inherent in our investments on a regular basis pursuant to fundamental considerations such as GDP, unemployment, interest rates, retail sales, store closings/openings, corporate earnings, housing inventory, affordability and regional home price trends. We also review key loan credit metrics including, but not limited to, payment status, current loan-to-value ratios, current borrower credit scores and debt yields. These characteristics assist in determining the likelihood and severity of loan loss as well as prepayment and extension expectations. We then perform structural analysis under multiple scenarios to establish likely cash flow profiles and credit enhancement levels relative to collateral performance projections. This analysis allows us to quantify our opinions of credit quality and fundamental value, which are key drivers of portfolio management decisions.
Given deteriorating fundamentals and tightening lending conditions, borrowers may experience difficulties meeting their obligations and refinancing loans upon scheduled maturities. Loans may experience increasing delinquency levels and eventual defaults, which could impact the performance of our mortgage-backed securities. We also expect credit rating agencies to continue to reassess transactions negatively impacted by these adverse changes, which may result in our investments being downgraded.
Risk Management
To the extent consistent with maintaining our REIT qualification, we seek to manage risk exposure to protect our investment portfolio against the effects of major interest rate changes. We generally seek to manage this risk by:
•monitoring and adjusting, if necessary, the reset index and interest rate related to our target assets and our financings;
•attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;
•exploring options to obtain financing arrangements that are not marked to market;
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•using hedging instruments, primarily interest rate swap agreements but also financial futures, options, interest rate cap agreements, floors and forward sales to adjust the interest rate sensitivity of our target assets and our borrowings; and
•actively managing, on an aggregate basis, the interest rate indices, interest rate adjustment periods, and gross reset margins of our target assets and the interest rate indices and adjustment periods of our financings.
ITEM 4.     CONTROLS AND PROCEDURES.
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Our management is responsible for establishing and maintaining disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
We have evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based upon our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Changes in Internal Control over Financial Reporting    
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION
 
ITEM 1.     LEGAL PROCEEDINGS.
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2024, we were not involved in any such legal proceedings.
ITEM 1A.     RISK FACTORS.
There were no material changes during the period covered by this Quarterly Report to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 22, 2024. Additional risks not presently known, or that we currently deem immaterial, also may have a material adverse effect on our business, financial condition and results of operations.
ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The following tables sets forth information with respect to our repurchases of Series B Preferred Stock during the three months ended March 31, 2024.
MonthTotal Number of Shares PurchasedAverage Price Paid Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plans or Programs (1)
Maximum Number at end of period of Shares
that May Yet Be Purchased
Under the Plans
or Programs (1)
January 1, 2024 to January 31, 202439,317 23.18 39,317 1,146,680 
February 1, 2024 to February 29, 202437,093 23.96 37,093 1,109,587 
March 1, 2024 to March 31, 202416,937 24.23 16,937 1,092,650 
 93,347 23.68 93,347 

The following tables sets forth information with respect to our repurchases of Series C Preferred Stock during the three months ended March 31, 2024.
MonthTotal Number of Shares PurchasedAverage Price Paid Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plans or Programs (1)
Maximum Number at end of period of Shares
that May Yet Be Purchased
Under the Plans
or Programs (1)
January 1, 2024 to January 31, 202439,007 22.29 39,007 1,006,432 
February 1, 2024 to February 29, 202436,510 22.92 36,510 969,922 
March 1, 2024 to March 31, 202420,400 22.87 20,400 949,522 
 95,917 22.65 95,917 
(1)In May 2022, our board of directors approved a share repurchase program under which we may purchase up to 3,000,000 shares of our Series B Preferred Stock and 5,000,000 shares of our Series C Preferred Stock with no stated expiration date. The shares may be repurchased from time to time through privately negotiated transactions or open market transactions, including under a trading plan in accordance with Rules 10b5-1 and 10b-18 under Exchange Act or by any combination of such methods. The manner, price, number and timing of share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules.
ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.     MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5.     OTHER INFORMATION.
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None.

ITEM 6.     EXHIBITS.
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A list of exhibits to this Form 10-Q is set forth on the Exhibit Index and is incorporated herein by reference.
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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 thereunto duly authorized.
 
INVESCO MORTGAGE CAPITAL INC.
May 8, 2024By:/s/ John M. Anzalone
John M. Anzalone
Chief Executive Officer
May 8, 2024By:/s/ R. Lee Phegley, Jr.
R. Lee Phegley, Jr.
Chief Financial Officer

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EXHIBIT INDEX
Item 6.        Exhibits
 
Exhibit
No.
  Description
3.1   
3.2   
3.3 
3.4 
3.5 
3.6 
3.7 
3.8 
3.9 
3.10   
31.1   
31.2   
32.1   
32.2   
101   
101.INS XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
 
101.SCH XBRL Taxonomy Extension Schema Document
 
101.CAL XBRL Taxonomy Calculation Linkbase Document
 
101.LAB XBRL Taxonomy Label Linkbase Document
 
101.PRE XBRL Taxonomy Presentation Linkbase Document
 
101.DEF XBRL Taxonomy Definition Linkbase Document

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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