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EX-31.2 - EXHIBIT 31.2 - Invesco Mortgage Capital Inc.ivr20160630ex312.htm
EX-32.2 - EXHIBIT 32.2 - Invesco Mortgage Capital Inc.ivr20160630ex322.htm
EX-32.1 - EXHIBIT 32.1 - Invesco Mortgage Capital Inc.ivr20160630ex321.htm
EX-31.1 - EXHIBIT 31.1 - Invesco Mortgage Capital Inc.ivr20160630ex311.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
_______________________________________________ 
FORM 10-Q 
_______________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
OR 
o
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

(Exact Name of Registrant as Specified in Its Charter)
_______________________________________________
Maryland
 
26-2749336
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
1555 Peachtree Street, N.E., Suite 1800
Atlanta, Georgia
 
30309
(Address of Principal Executive Offices)
 
(Zip Code)
(404) 892-0896
(Registrant’s Telephone Number, Including Area Code) 
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  ý    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 
Large Accelerated filer
 
ý
 
  
Accelerated filer
 
o
Non-Accelerated filer
 
o
(Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No  ý
As of August 2, 2016, there were 111,583,435 outstanding shares of common stock of Invesco Mortgage Capital Inc.



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



PART I
ITEM 1.
FINANCIAL STATEMENTS
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
As of
 $ in thousands except share amounts
June 30, 2016
 
December 31, 2015
ASSETS
 
Mortgage-backed and credit risk transfer securities, at fair value
15,625,027

 
16,065,935

Commercial loans, held-for-investment
272,502

 
209,062

U.S. Treasury securities, at fair value
152,701

 

Cash and cash equivalents
144,084

 
53,199

Due from counterparties
267,015

 
110,009

Investment related receivable
37,186

 
154,594

Accrued interest receivable
49,282

 
50,779

Derivative assets, at fair value
5,502

 
8,659

Other assets
108,283

 
115,072

Total assets
16,661,582

 
16,767,309

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Repurchase agreements
11,768,647

 
12,126,048

Secured loans
1,650,000

 
1,650,000

Exchangeable senior notes
395,800

 
394,573

Derivative liabilities, at fair value
447,738

 
238,148

Dividends and distributions payable
50,919

 
51,734

Investment related payable
87,668

 
167

Accrued interest payable
17,625

 
21,604

Collateral held payable
5,560

 
4,900

Accounts payable and accrued expenses
2,080

 
2,376

Due to affiliate
10,094

 
10,851

Total liabilities
14,436,131

 
14,500,401

Equity:
 
 
 
Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized:
 
 
 
7.75% Series A Cumulative Redeemable Preferred Stock: 5,600,000 shares issued and outstanding ($140,000 aggregate liquidation preference)
135,356

 
135,356

7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock: 6,200,000 shares issued and outstanding ($155,000 aggregate liquidation preference)
149,860

 
149,860

Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 111,583,435 and 113,619,471 shares issued and outstanding, respectively
1,116

 
1,136

Additional paid in capital
2,382,689

 
2,407,372

Accumulated other comprehensive income
558,954

 
318,624

Retained earnings (distributions in excess of earnings)
(1,028,354
)
 
(771,313
)
Total stockholders’ equity
2,199,621

 
2,241,035

Non-controlling interest
25,830

 
25,873

Total equity
2,225,451

 
2,266,908

Total liabilities and equity
16,661,582

 
16,767,309

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

 
1
 



INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
$ in thousands, except share amounts
2016
 
2015
 
2016
 
2015
Interest Income

 

 

 

Mortgage-backed and credit risk transfer securities
112,860

 
128,491

 
235,106

 
267,539

Residential loans (1)

 
30,247

 

 
59,621

Commercial loans
5,947

 
4,491

 
10,840

 
7,606

Total interest income
118,807

 
163,229

 
245,946

 
334,766

Interest Expense

 

 

 

Repurchase agreements
31,260

 
40,931

 
73,060

 
84,241

Secured loans
2,688

 
1,553

 
5,403

 
3,017

Exchangeable senior notes
5,614

 
5,613

 
11,227

 
11,220

Asset-backed securities (1)

 
22,329

 

 
44,227

Total interest expense
39,562

 
70,426

 
89,690

 
142,705

Net interest income
79,245

 
92,803

 
156,256

 
192,061

Reduction in provision for loan losses

 
70

 

 
132

Net interest income after reduction in provision for loan losses
79,245

 
92,873

 
156,256

 
192,193

Other Income (loss)

 

 

 

Gain (loss) on investments, net
1,414

 
10,896

 
13,015

 
12,986

Equity in earnings of unconsolidated ventures
202

 
1,231

 
1,263

 
7,237

Gain (loss) on derivative instruments, net
(90,363
)
 
56,003

 
(328,906
)
 
(66,742
)
Realized and unrealized credit derivative income (loss), net
17,228

 
614

 
25,638

 
21,976

Other investment income (loss), net
(2,745
)
 
1,673

 
(3,063
)
 
779

Total other income (loss)
(74,264
)
 
70,417

 
(292,053
)
 
(23,764
)
Expenses
 
 
 
 
 
 
 
Management fee – related party
9,061

 
9,343

 
18,573

 
18,758

General and administrative
1,896

 
1,952

 
3,933

 
3,679

Consolidated securitization trusts (1)

 
2,256

 

 
4,412

Total expenses
10,957

 
13,551

 
22,506

 
26,849

Net income (loss)
(5,976
)
 
149,739

 
(158,303
)
 
141,580

Net income (loss) attributable to non-controlling interest
(75
)
 
1,712

 
(1,958
)
 
1,618

Net income (loss) attributable to Invesco Mortgage Capital Inc.
(5,901
)
 
148,027

 
(156,345
)
 
139,962

Dividends to preferred stockholders
5,716

 
5,716

 
11,432

 
11,432

Net income (loss) attributable to common stockholders
(11,617
)
 
142,311

 
(167,777
)
 
128,530

Earnings (loss) per share:
 
 


 


 


Net income (loss) attributable to common stockholders
 
 

 

 

Basic
(0.10
)
 
1.16

 
(1.49
)
 
1.04

Diluted
(0.10
)
 
1.06

 
(1.49
)
 
1.00

Dividends declared per common share
0.40

 
0.45

 
0.80

 
0.90

(1)
The condensed consolidated statements of operations for the three and six months ended June 30, 2015 include income and expenses of consolidated variable interest entities ("VIEs"). The Company deconsolidated these VIEs in December 2015. Refer to Note 2 - “Summary of Significant Accounting Policies” for further discussion.
The accompanying notes are an integral part of these condensed consolidated financial statements.

 
2
 



INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
$ in thousands
2016
 
2015
 
2016
 
2015
Net income (loss)
(5,976
)
 
149,739

 
(158,303
)
 
141,580

Other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net
117,116

 
(195,715
)
 
238,576

 
(73,544
)
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net
(1,037
)
 
(1,689
)
 
(11,581
)
 
(4,541
)
Reclassification of amortization of net deferred losses on de-designated interest rate swaps to repurchase agreements interest expense
3,238

 
16,313

 
16,162

 
35,458

Currency translation adjustments on investment in unconsolidated venture
274

 

 
225

 

Total other comprehensive income (loss)
119,591

 
(181,091
)
 
243,382

 
(42,627
)
Comprehensive income (loss)
113,615

 
(31,352
)
 
85,079

 
98,953

Less: Comprehensive income (loss) attributable to non-controlling interest
(1,435
)
 
357

 
(1,094
)
 
(1,133
)
Less: Dividends to preferred stockholders
(5,716
)
 
(5,716
)
 
(11,432
)
 
(11,432
)
Comprehensive income (loss) attributable to common stockholders
106,464

 
(36,711
)
 
72,553

 
86,388

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


 
3
 



INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
For the six months ended June 30, 2016
(Unaudited)
 
 
 
 
 
 
 
Attributable to Common Stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Income
 
Retained
Earnings
(Distributions
in excess of
earnings)
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interest
 
 
 
Series A
Preferred Stock
 
Series B
Preferred Stock
 
 
 
 
$ in thousands except
 share amounts
 
 
Common Stock
 
Total
Equity
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
Balance at December 31, 2015
5,600,000

 
135,356

 
6,200,000

 
149,860

 
113,619,471

 
1,136

 
2,407,372

 
318,624

 
(771,313
)
 
2,241,035

 
25,873

 
2,266,908

Net loss

 

 

 

 

 


 

 

 
(156,345
)
 
(156,345
)
 
(1,958
)
 
(158,303
)
Other comprehensive income

 

 

 

 

 

 

 
240,330

 

 
240,330

 
3,052

 
243,382

Proceeds from issuance of common stock, net of offering costs

 

 

 

 
3,201

 

 
35

 

 

 
35

 

 
35

Repurchase of shares of common stock

 

 

 

 
(2,063,451
)
 
(20
)
 
(24,980
)
 

 

 
(25,000
)
 

 
(25,000
)
Stock awards

 

 

 

 
24,214

 

 

 

 

 

 

 

Common stock dividends

 

 

 

 

 

 

 

 
(89,264
)
 
(89,264
)
 

 
(89,264
)
Common unit dividends

 

 

 

 

 

 

 

 

 

 
(1,140
)
 
(1,140
)
Preferred stock dividends

 

 

 

 

 

 

 

 
(11,432
)
 
(11,432
)
 

 
(11,432
)
Amortization of equity-based compensation

 

 

 

 

 

 
262

 

 


 
262

 
3

 
265

Balance at June 30, 2016
5,600,000

 
135,356

 
6,200,000

 
149,860

 
111,583,435

 
1,116

 
2,382,689

 
558,954

 
(1,028,354
)
 
2,199,621

 
25,830

 
2,225,451

The accompanying notes are an integral part of this condensed consolidated financial statement.


 
4
 



INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  
Six Months Ended June 30,
$ in thousands
2016
 
2015
Cash Flows from Operating Activities
 
 
 
Net income (loss)
(158,303
)
 
141,580

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Amortization of mortgage-backed and credit risk transfer securities premiums and (discounts), net
53,664

 
59,075

Amortization of residential loans and asset-backed securities premiums (discount), net

 
(254
)
Amortization of commercial loan origination fees
(139
)
 
(22
)
Reduction in provision for loan losses

 
(132
)
Unrealized (gain) loss on derivative instruments, net
211,261

 
(66,192
)
Unrealized (gain) loss on credit derivatives, net
(19,229
)
 
(11,867
)
(Gain) loss on investments, net
(13,015
)
 
(12,986
)
Realized (gain) loss on derivative instruments, net
63,569

 
41,315

Realized (gain) loss on credit derivatives, net
6,017

 
2,468

Equity in earnings of unconsolidated ventures
(1,263
)
 
(7,237
)
Amortization of equity-based compensation
265

 
307

Amortization of deferred securitization and financing costs
1,227

 
1,594

Amortization of net deferred losses on de-designated interest rate swaps to repurchase agreements interest expense
16,162

 
35,458

(Gain) loss on foreign currency transactions, net
4,741

 
619

Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in operating assets
1,893

 
(4,114
)
(Decrease) increase in operating liabilities
(5,039
)
 
7,846

Net cash provided by operating activities
161,811

 
187,458

Cash Flows from Investing Activities
 
 
 
Purchase of mortgage-backed and credit risk transfer securities
(1,061,651
)
 
(1,416,277
)
Purchase of U.S. Treasury securities
(152,256
)
 

Proceeds from sale of U.S. Treasury securities
122,736

 

(Contributions) distributions (from) to investment in unconsolidated ventures, net
6,863

 
6,432

Change in other assets
1,125

 
(7,250
)
Principal payments from mortgage-backed and credit risk transfer securities
1,131,028

 
1,267,293

Proceeds from sale of mortgage-backed and credit risk transfer securities
659,959

 
242,543

Payments on sale of credit derivatives
(6,017
)
 
(2,468
)
Payment of premiums for interest rate swaptions

 
(1,485
)
(Payments) proceeds (for) from termination of futures, forwards, swaps, swaptions and TBAs, net
(62,083
)
 
(33,577
)
Purchase of residential loans held-for-investment

 
(372,305
)
Principal payments from residential loans held-for-investment

 
271,700

Principal payments from commercial loans held-for-investment
15,000

 
63,131

Origination and advances of commercial loans, net of origination fees
(83,005
)
 
(72,965
)
Net cash provided by (used in) investing activities
571,699

 
(55,228
)
Cash Flows from Financing Activities
 
 
 
Proceeds from issuance of common stock
35

 
122

Repurchase of common stock
(25,000
)
 

Cost of issuance of preferred stock

 
(14
)
Due from counterparties
(158,132
)
 
(10,026
)
Change in collateral held payable
660

 
(8,390
)
Proceeds from repurchase agreements
61,581,699

 
70,442,045

Principal repayments of repurchase agreements
(61,939,100
)
 
(70,889,813
)
Proceeds from asset-backed securities issued by securitization trusts

 
336,077

Principal repayments of asset-backed securities issued by securitization trusts

 
(255,848
)
Proceeds from secured loans
125,000

 
600,000

Principal repayments on secured loans
(125,000
)
 
(300,000
)
Payments of deferred costs
(136
)
 

Payments of dividends and distributions
(102,651
)
 
(123,524
)
Net cash used in financing activities
(642,625
)
 
(209,371
)
Net change in cash and cash equivalents
90,885

 
(77,141
)
Cash and cash equivalents, beginning of period
53,199

 
164,144

Cash and cash equivalents, end of period
144,084

 
87,003

Supplement Disclosure of Cash Flow Information
 
 
 
Interest paid
74,037

 
103,352

Non-cash Investing and Financing Activities Information
 
 
 
Net change in unrealized gain on mortgage-backed and credit risk transfer securities
226,995

 
(78,085
)
Dividends and distributions declared not paid
50,919

 
61,770

Net change in investment related payable (receivable)
206,034

 
152,580

Repurchase agreements, not settled

 
(49
)
Net change in due from counterparties
1,126

 
2,523

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

 
5
 



INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and Business Operations
Invesco Mortgage Capital Inc. (the “Company”) is a Maryland corporation primarily focused on investing in, financing and managing residential and commercial mortgage-backed securities and mortgage loans. The Company conducts its business through IAS Operating Partnership LP (the “Operating Partnership”), a variable interest entity ("VIE"), as its sole general partner. As of June 30, 2016, the Company owned 98.7% of the Operating Partnership, and a wholly-owned subsidiary of Invesco owned the remaining 1.3%. The Company has one operating segment.
The Company primarily invests in:
Residential mortgage-backed securities ("RMBS") that are guaranteed by a U.S. government agency such as the Government National Mortgage Association, 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");
RMBS that are not guaranteed by a U.S. government agency (“non-Agency RMBS”);
Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises ("GSE CRT");
Commercial mortgage-backed securities ("CMBS");
Residential and commercial mortgage loans; and
Other real estate-related financing agreements.
The Company is externally managed and advised by Invesco Advisers, Inc. (the "Manager"), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd. (“Invesco”), a leading independent global investment management firm. The Company 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, as amended, commencing with the Company's taxable year ended December 31, 2009. To maintain the Company’s REIT qualification, the Company is generally required to distribute at least 90% of its REIT taxable income to its stockholders annually. The Company operates its business in a manner that permits exclusion from the "Investment Company" definition under the Investment Company Act of 1940, as amended.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
Certain disclosures included in the Company’s Annual Report on Form 10-K are not required to be included on an interim basis in the Company’s quarterly reports on Form 10-Q. The Company has condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair presentation of the financial condition and results of operations for the periods presented. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation.
The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Company and its controlled subsidiaries. During the period from January 1, 2015 through December 9, 2015, the condensed consolidated financial statements also include the results of operations of certain residential loan securitization trusts (the "residential securitizations") that meet the definition of a VIE. On December 9, 2015, the Company completed the sale of certain beneficial interests in the residential securitizations and deconsolidated the residential securitizations.

 
6
 



Revision of Previously Issued Financial Statements
During the second quarter of 2016, the Company corrected errors in its accounting for premiums and discounts associated with non-Agency RMBS not of high credit quality. The Company concluded that the errors are immaterial to each of the annual and interim consolidated financial statements which were included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and its interim report on Form 10-Q for the quarter ended March 31, 2016. The Company has corrected its financial statements for previous periods included in this filing on Form 10-Q and will correct its previously issued financial statements for these errors as the financial statements are presented in future periodic filings.
Refer to Note 17 - "Revision of Previously Issued Financial Statements" for additional details.
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 the 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 and credit risk transfer securities, allowance for loan losses and other-than-temporary impairment charges. Actual results may differ from those estimates.
Significant Accounting Policies
There have been no changes to the Company's accounting policies included in Note 2 to the consolidated financial statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, other than the significant accounting policies disclosed below.
U.S. Treasury Securities
U.S. Treasury Securities are classified as trading securities and are recorded at fair value. The Company records its purchases of U.S. Treasury Securities on the trade date. Changes in fair value are recognized in gain (loss) on investments, net in the Company’s consolidated statements of operations. Interest income is accrued based on the outstanding principal balance of the securities and their contractual terms. Premiums are amortized into interest income over the contractual lives of the securities using a level yield method.
Interest Income Recognition
Mortgage-Backed Securities
Interest income on MBS is accrued based on the outstanding principal balance of the securities and their contractual terms. Premiums or discounts are amortized or accreted into interest income over the life of the investment using the effective interest method.
Interest income on the Company's non-Agency MBS (and other prepayable mortgage-backed securities where the Company may not recover substantially all of its initial investment) is based on estimated future cash flows. Management estimates future expected cash flows at the time of purchase and determines the effective interest rate based on these estimated cash flows and the Company’s purchase price. Over the life of the investments, management updates these estimated future cash flows and computes a revised yield based on the current amortized cost of the investment. In estimating these future cash flows, there are a number of assumptions that are subject to uncertainties and contingencies, including the rate and timing of principal payments (prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact management’s estimates and the Company's interest income. When actual cash flows vary from expected cash flows, the difference is recorded as an adjustment to the amortized cost of the security and the security's yield is revised prospectively. Changes in cash flows from the Company's original or most recent projection may result in a prospective change in interest income recognized on these securities, or the amortized cost of these securities.
For Agency RMBS that cannot be prepaid in such a way that the Company would not recover substantially all of its initial investment, interest income recognition is based on contractual cash flows. The Company does not estimate prepayments in applying the effective interest method.
Reclassifications
Certain prior period reported amounts have been reclassified to be consistent with the current presentation. Such reclassifications had no impact on net income or equity attributable to common stockholders.

 
7
 



Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements
Effective January 1, 2016, the Company adopted the newly issued accounting guidance for presentation of debt issuance costs. Under the new standard, debt issuance costs are required to be presented in the consolidated balance sheets as a direct deduction from the carrying value of the associated debt liability. The Company adopted the accounting standard on a retrospective basis, which required the restatement of the Company's December 31, 2015 balance sheet. The adoption resulted in a $5.4 million reduction in exchangeable senior notes and a corresponding reduction in other assets.
Effective January 1, 2016, the Company adopted the newly issued accounting guidance for reporting entities that are required to determine whether they should consolidate certain legal entities. The Company adopted the accounting standard on a modified retrospective approach which did not require restatement of prior periods to conform to the post adoption presentation. The Company did not consolidate or deconsolidate any legal entities as a result of implementing the new guidance.
In January 2016, the FASB issued guidance to improve certain aspects of classification and measurement of financial instruments, including significant revisions in accounting related to the classification and measurement of investments in equity securities and presentation of certain fair value changes for financial liabilities when the fair value option is elected. The guidance also amends certain disclosure requirements associated with the fair value of financial instruments. The Company is required to adopt the new guidance in the first quarter of 2018. Early adoption is permitted. The Company is currently evaluating the potential impact of the new guidance on its consolidated financial statements, as well as available transition methods.
In June 2016, the FASB issued an amendment to the guidance on reporting credit losses for assets measured at amortized cost and available-for-sale securities. The Company is required to adopt the new guidance in the first quarter of 2020. Early adoption is permitted. The Company is currently evaluating the potential impacts of the new guidance on its consolidated financial statements, as well as available transition methods.
Note 3 – Variable Interest Entities
The Company's maximum risk of loss in VIEs in which the Company is not the primary beneficiary at June 30, 2016 is presented in the table below.
$ in thousands
Carrying Amount
 
Company's Maximum Risk of Loss
Non-Agency RMBS
2,248,974

 
2,248,974

CMBS
2,733,442

 
2,733,442

Investments in unconsolidated ventures
33,037

 
33,037

Total
5,015,453

 
5,015,453

Refer to Note 4 - "Mortgage-Backed and Credit Risk Transfer Securities" and Note 7 - "Other Assets" for additional details regarding these investments.

 
8
 



Note 4 – Mortgage-Backed and Credit Risk Transfer Securities
The following tables summarize the Company’s MBS and GSE CRT portfolio by asset type as of June 30, 2016 and December 31, 2015.
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ in thousands
Principal/ Notional
Balance
 
Unamortized
Premium
(Discount)
 
Amortized
Cost
 
Unrealized
Gain/
(Loss), net
 
Fair
Value
 
Net
Weighted
Average
Coupon (1)
 
Period-
end
Weighted
Average
Yield (2)
 
Quarterly
Weighted
Average
Yield (3)
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
2,417,736

 
112,107

 
2,529,843

 
33,507

 
2,563,350

 
3.39
%
 
2.36
%
 
1.87
%
30 year fixed-rate
3,509,579

 
228,288

 
3,737,867

 
88,566

 
3,826,433

 
4.22
%
 
2.88
%
 
2.74
%
ARM*
351,704

 
3,332

 
355,036

 
9,298

 
364,334

 
2.71
%
 
2.62
%
 
2.30
%
Hybrid ARM
2,774,976

 
50,477

 
2,825,453

 
54,535

 
2,879,988

 
2.72
%
 
2.53
%
 
2.10
%
Total Agency pass-through
9,053,995

 
394,204

 
9,448,199

 
185,906

 
9,634,105

 
3.48
%
 
2.63
%
 
2.31
%
Agency-CMO(4)
1,718,714

 
(1,340,005
)
 
378,709

 
16,556

 
395,265

 
2.18
%
 
3.50
%
 
2.55
%
Non-Agency RMBS(5)(6)(7)
4,349,423

 
(2,178,234
)
 
2,171,189

 
77,785

 
2,248,974

 
2.18
%
 
5.21
%
 
4.74
%
GSE CRT(8)(9)
592,171

 
21,346

 
613,517

 
(276
)
 
613,241

 
1.46
%
 
0.78
%
 
0.86
%
CMBS(10)
3,166,131

 
(559,557
)
 
2,606,574

 
126,868

 
2,733,442

 
3.95
%
 
4.34
%
 
4.37
%
Total
18,880,434

 
(3,662,246
)
 
15,218,188

 
406,839

 
15,625,027

 
3.08
%
 
3.23
%
 
2.97
%
* Adjustable-rate mortgage ("ARM")
 
(1)
Net weighted average coupon as of June 30, 2016 is presented net of servicing and other fees.
(2)
Period-end weighted average yield is based on amortized cost as of June 30, 2016 and incorporates future prepayment and loss assumptions.
(3)
Quarterly weighted average portfolio yield for the period was calculated by dividing interest income, including amortization of premiums and discounts, by the Company's average of the amortized cost of the investments. All yields are annualized.
(4)
Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent 83.5% of principal (notional) balance, 24.3% of amortized cost and 25.3% of fair value.
(5)
Non-Agency RMBS held by the Company is 46.0% variable rate, 47.2% fixed rate, and 6.8% floating rate based on fair value.
(6)
Of the total discount in non-Agency RMBS, $261.6 million is non-accretable based on the Company's estimated future cash flows of the securities.
(7)
Non-Agency RMBS includes interest-only securities, which represent 1.4% of the balance based on fair value.
(8)
The Company has elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 3.4% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.
(9)
GSE CRT weighted average coupon and weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option recorded as realized and unrealized credit derivative income (loss), net.
(10)
CMBS includes interest-only securities, which represent 0.9% of the balance based on fair value.


 
9
 



December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ in thousands
Principal/Notional
Balance
 
Unamortized
Premium
(Discount)
 
Amortized
Cost
 
Unrealized
Gain/
(Loss), net
 
Fair
Value
 
Net
Weighted
Average
Coupon (1)
 
Period-
end
Weighted
Average
Yield (2)
 
Quarterly
Weighted
Average
Yield (3)
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
1,527,877

 
72,389

 
1,600,266

 
10,664

 
1,610,930

 
3.72
%
 
2.47
%
 
2.40
%
30 year fixed-rate
3,796,091

 
249,285

 
4,045,376

 
18,581

 
4,063,957

 
4.24
%
 
2.81
%
 
2.85
%
ARM
417,424

 
4,625

 
422,049

 
3,976

 
426,025

 
2.72
%
 
2.58
%
 
2.26
%
Hybrid ARM
3,240,967

 
63,324

 
3,304,291

 
5,234

 
3,309,525

 
2.73
%
 
2.56
%
 
2.22
%
Total Agency pass-through
8,982,359

 
389,623

 
9,371,982

 
38,455

 
9,410,437

 
3.54
%
 
2.65
%
 
2.53
%
Agency-CMO(4)
1,774,621

 
(1,386,284
)
 
388,337

 
482

 
388,819

 
2.23
%
 
4.29
%
 
3.42
%
Non-Agency RMBS(5)(6)(7)
4,965,978

 
(2,363,799
)
 
2,602,179

 
90,308

 
2,692,487

 
2.20
%
 
5.11
%
 
4.90
%
GSE CRT(8)(9)
657,500

 
22,593

 
680,093

 
(21,865
)
 
658,228

 
1.32
%
 
0.72
%
 
0.62
%
CMBS(10)
3,429,655

 
(558,749
)
 
2,870,906

 
45,058

 
2,915,964

 
3.95
%
 
4.30
%
 
4.35
%
Total
19,810,113

 
(3,896,616
)
 
15,913,497

 
152,438

 
16,065,935

 
3.08
%
 
3.31
%
 
3.16
%
 
(1)
Net weighted average coupon as of December 31, 2015 is presented net of servicing and other fees.
(2)
Period-end weighted average yield is based on amortized cost as of December 31, 2015 and incorporates future prepayment and loss assumptions.
(3)
Quarterly weighted average portfolio yield for the period was calculated by dividing interest income, including amortization of premiums and discounts, by the Company's average of the amortized cost of the investments. All yields are annualized.
(4)
Agency collateralized mortgage obligation ("Agency CMO") includes interest-only securities, which represent 84.4% of principal (notional) balance, 27.5% of amortized cost and 27.6% of fair value.
(5)
Non-Agency RMBS held by the Company is 48.4% variable rate, 45.2% fixed rate, and 6.4% floating rate based on fair value.
(6)
Of the total discount in non-Agency RMBS, $281.6 million is non-accretable based on the Company's estimated future cash flows of the securities.
(7)
Non-Agency RMBS includes interest-only securities, which represent 1.3% of the balance based on fair value.
(8)
The Company has elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 1.9% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.
(9)
GSE CRT weighted average coupon and weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option recorded as realized and unrealized credit derivative income (loss), net.
(10)
CMBS includes interest-only securities and commercial real estate mezzanine loan pass-through certificates, which represent 0.9% and 0.7% of the balance based on fair value, respectively.
The following table summarizes the Company's non-Agency RMBS portfolio by asset type based on fair value as of June 30, 2016 and December 31, 2015.
$ in thousands
June 30, 2016
 
% of Non-Agency
 
December 31, 2015
 
% of Non-Agency
Prime
980,428

 
43.6
%
 
1,081,428

 
40.2
%
Alt-A
476,444

 
21.2
%
 
544,306

 
20.2
%
Re-REMIC
446,997

 
19.8
%
 
663,853

 
24.7
%
Subprime/reperforming
345,105

 
15.4
%
 
402,900

 
14.9
%
Total Non-Agency
2,248,974

 
100.0
%
 
2,692,487

 
100.0
%

 
10
 



The following table summarizes the credit enhancement provided to the Company's re-securitization of real estate mortgage investment conduit ("Re-REMIC") holdings as of June 30, 2016 and December 31, 2015.
  
Percentage of Re-REMIC Holdings at Fair Value
Re-REMIC Subordination(1)
June 30, 2016
 
December 31, 2015
0% - 10%
14.4
%
 
11.0
%
10% - 20%
7.3
%
 
5.6
%
20% - 30%
13.6
%
 
12.7
%
30% - 40%
16.0
%
 
20.8
%
40% - 50%
30.3
%
 
32.8
%
50% - 60%
15.8
%
 
13.3
%
60% - 70%
2.6
%
 
3.8
%
Total
100.0
%
 
100.0
%
 
(1)
Subordination refers to the credit enhancement provided to the Re-REMIC tranche held by the Company by any junior Re-REMIC tranche or tranches in a resecuritization. This figure reflects the percentage of the balance of the underlying securities represented by any junior tranche or tranches at the time of resecuritization. Generally, principal losses on the underlying securities in excess of the subordination amount would result in principal losses on the Re-REMIC tranche held by the Company. 30.9% of the Company's Re-REMIC holdings are not senior tranches.
The components of the carrying value of the Company’s MBS and GSE CRT portfolio at June 30, 2016 and December 31, 2015 are presented below. 
$ in thousands
June 30, 2016
 
December 31, 2015
Principal balance
18,880,434

 
19,810,113

Unamortized premium
491,288

 
495,539

Unamortized discount
(4,153,534
)
 
(4,392,155
)
Gross unrealized gains
442,992

 
303,890

Gross unrealized losses
(36,153
)
 
(151,452
)
Fair value
15,625,027

 
16,065,935

The following table summarizes the Company’s MBS and GSE CRT portfolio according to estimated weighted average life classifications as of June 30, 2016 and December 31, 2015
$ in thousands
June 30, 2016
 
December 31, 2015
Less than one year
280,795

 
427,678

Greater than one year and less than five years
10,683,740

 
6,237,547

Greater than or equal to five years
4,660,492

 
9,400,710

Total
15,625,027

 
16,065,935



 
11
 



The following tables present the estimated fair value and gross unrealized losses of the Company's MBS and GSE CRTs by length of time that such securities have been in a continuous unrealized loss position at June 30, 2016 and December 31, 2015.
June 30, 2016
  
Less than 12 Months
 
12 Months or More
 
Total
$ in thousands
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
68,046

 
(263
)
 
14

 
94,534

 
(613
)
 
10

 
162,580

 
(876
)
 
24

30 year fixed-rate

 

 

 
1,193,363

 
(7,625
)
 
46

 
1,193,363

 
(7,625
)
 
46

ARM
1,392

 
(15
)
 
1

 

 

 

 
1,392

 
(15
)
 
1

Hybrid ARM
9,522

 
(6
)
 
2

 
256

 
(3
)
 
2

 
9,778

 
(9
)
 
4

Total Agency pass-through
78,960

 
(284
)
 
17

 
1,288,153

 
(8,241
)
 
58

 
1,367,113

 
(8,525
)
 
75

Agency-CMO (1)
36,372

 
(1,370
)
 
11

 
1,996

 
(260
)
 
3

 
38,368

 
(1,630
)
 
14

Non-Agency RMBS
756,236

 
(9,188
)
 
57

 
270,801

 
(6,891
)
 
29

 
1,027,037

 
(16,079
)
 
86

GSE CRT (2)
34,936

 
(64
)
 
1

 
146,726

 
(5,870
)
 
10

 
181,662

 
(5,934
)
 
11

CMBS
147,515

 
(2,484
)
 
12

 
126,851

 
(1,501
)
 
12

 
274,366

 
(3,985
)
 
24

Total
1,054,019

 
(13,390
)
 
98

 
1,834,527

 
(22,763
)
 
112

 
2,888,546

 
(36,153
)
 
210

(1) Fair value includes unrealized losses on Agency IO of $1.4 million and unrealized losses on CMO of $244,000.
(2) Fair value includes unrealized losses on both the debt host contract and the embedded derivative.
December 31, 2015
  
Less than 12 Months
 
12 Months or More
 
Total
$ in thousands
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
600,480

 
(8,081
)
 
33

 
77,506

 
(1,482
)
 
6

 
677,986

 
(9,563
)
 
39

30 year fixed-rate
776,065

 
(14,827
)
 
32

 
1,120,391

 
(39,497
)
 
47

 
1,896,456

 
(54,324
)
 
79

ARM
200,863

 
(501
)
 
11

 

 

 

 
200,863

 
(501
)
 
11

Hybrid ARM
1,913,872

 
(17,082
)
 
111

 

 

 

 
1,913,872

 
(17,082
)
 
111

Total Agency pass-through
3,491,280

 
(40,491
)
 
187

 
1,197,897

 
(40,979
)
 
53

 
4,689,177

 
(81,470
)
 
240

Agency-CMO (1)
166,754

 
(3,296
)
 
14

 
9,118

 
(6,934
)
 
9

 
175,872

 
(10,230
)
 
23

Non-Agency RMBS
872,575

 
(7,286
)
 
66

 
316,010

 
(10,699
)
 
20

 
1,188,585

 
(17,985
)
 
86

GSE CRT (2)
340,116

 
(10,050
)
 
16

 
120,877

 
(13,605
)
 
7

 
460,993

 
(23,655
)
 
23

CMBS
1,224,985

 
(17,328
)
 
85

 
31,533

 
(784
)
 
2

 
1,256,518

 
(18,112
)
 
87

Total
6,095,710

 
(78,451
)
 
368

 
1,675,435

 
(73,001
)
 
91

 
7,771,145

 
(151,452
)
 
459

(1) Fair value includes unrealized losses on Agency IO of $8.3 million and unrealized losses on CMO of $1.9 million.
(2) Fair value includes unrealized losses on both the debt host contract and the embedded derivative.
Gross unrealized losses on the Company’s Agency RMBS and CMO were $8.5 million and $244,000, respectively, at June 30, 2016. Due to the inherent credit quality of Agency RMBS and CMO, the Company determined that at June 30, 2016, any unrealized losses on its Agency RMBS and CMO portfolio are not other than temporary.
Gross unrealized losses on the Company’s Agency IO, non-Agency RMBS, GSE CRT and CMBS were $27.4 million at June 30, 2016. The Company does not consider these unrealized losses to be credit related, but rather due to non-credit related factors such as interest rate spreads, prepayment speeds, and market fluctuations. These investment securities are included in the Company’s assessment for other-than-temporary impairment on a quarterly basis.

 
12
 



The Company assesses its investment securities for other-than-temporary impairment on a quarterly basis. When the fair value of an investment is less than its amortized cost at the balance sheet date of the reporting period for which impairment is assessed, the impairment is designated as either “temporary” or “other-than-temporary.” This analysis includes a determination of estimated future cash flows through an evaluation of the characteristics of the underlying loans and the structural features of the investment. Underlying loan characteristics reviewed include, but are not limited to, delinquency status, loan-to-value ratios, borrower credit scores, occupancy status and geographic concentration.
The Company recorded $1.5 million and $7.2 million in other-than-temporary impairments ("OTTI") on RMBS interest-only securities during the three and six months ended June 30, 2016, respectively. As the Company had previously elected the fair value option for these interest-only securities, the OTTI was recorded as a reclassification from an unrealized to a realized loss within gain (loss) on investments, net reported on the consolidated statement of operations. The Company did not record any OTTI for the three and six months ended June 30, 2015. As of June 30, 2016, the Company did not intend to sell the securities and determined that it was not more likely than not that the Company will be required to sell the securities.
The following table presents the changes in OTTI included in earnings for the three and six months ended June 30, 2016 and 2015.
$ in thousands
Three Months 
 ended 
 June 30, 2016
 
Three Months 
 ended 
 June 30, 2015
 
Six Months ended 
 June 30, 2016
 
Six Months ended 
 June 30, 2015
Cumulative credit loss at beginning of period
5,683

 

 

 

Additions:

 

 

 

Other-than-temporary impairments not previously recognized
1,480

 

 
7,163

 

Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments
45

 

 
45

 

Cumulative credit loss at end of period
7,208

 

 
7,208

 

The following table presents the impact of the Company’s MBS and GSE CRT debt host contract on accumulated other comprehensive income (loss) for the three and six months ended June 30, 2016 and 2015.  The Company reclassifies unrealized gains and losses from other comprehensive income to gain (loss) on investments, net when it sells investments.
The table excludes RMBS IOs and GSE CRTs that are accounted for under the fair value option.
$ in thousands
Three Months 
 ended 
 June 30, 2016
 
Three Months 
 ended 
 June 30, 2015
 
Six Months ended 
 June 30, 2016
 
Six Months ended 
 June 30, 2015
Accumulated other comprehensive income (loss) from MBS and GSE CRT securities:
 
 
 
 
 
 
 
Unrealized gain (loss) on MBS and GSE CRT at beginning of period
288,715

 
495,655

 
177,799

 
376,336

Unrealized gain (loss) on MBS and GSE CRT
117,116

 
(195,715
)
 
238,576

 
(73,544
)
Reclassification of unrealized (gain) loss on sale of MBS and GSE CRT to gain (loss) on investments, net
(1,037
)
 
(1,689
)
 
(11,581
)
 
(4,541
)
Balance at the end of period
404,794

 
298,251

 
404,794

 
298,251



 
13
 



The following table summarizes the components of the Company's total gain (loss) on investments, net for the three and six months ended June 30, 2016 and 2015.
$ in thousands
Three Months 
 ended 
 June 30, 2016
 
Three Months 
 ended 
 June 30, 2015
 
Six Months ended 
 June 30, 2016
 
Six Months ended 
 June 30, 2015
Gross realized gain on sale of investments
1,037

 
1,813

 
14,052

 
4,777

Gross realized loss on sale of investments

 
(124
)
 
(2,471
)
 
(236
)
Other-than-temporary impairment losses
(1,525
)
 

 
(7,208
)
 

Net unrealized gain (loss) on RMBS IOs (fair value option)
1,266

 
9,207

 
7,942

 
8,445

Net unrealized gain (loss) on GSE CRT (fair value option)
173

 

 
237

 

Total gains (loss) on investments, net (1)
951

 
10,896

 
12,552

 
12,986

(1)
Included within gain (loss) on investments, net on the consolidated statement of operations is unrealized gains on U.S. Treasury securities of $463,000 (June 30, 2015: $0) for the three and six months ended June 30, 2016, respectively. U.S. Treasury securities are accounted for as trading securities, refer to Note 6 - "Trading Securities."
The following table presents components of interest income recognized on the Company’s MBS and GSE CRT portfolio for the three and six months ended June 30, 2016 and 2015. GSE CRT interest income excludes coupon interest associated with embedded derivatives not accounted for under the fair value option recorded as realized and unrealized credit derivative income (loss), net.
For the three months ended June 30, 2016
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
84,440

 
(28,277
)
 
56,163

Non-Agency
24,127

 
2,292

 
26,419

GSE CRT
2,136

 
(775
)
 
1,361

CMBS
31,476

 
(2,839
)
 
28,637

Other
297

 
(17
)
 
280

Total
142,476

 
(29,616
)
 
112,860

For the three months ended June 30, 2015
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
94,394

 
(34,828
)
 
59,566

Non-Agency
28,283

 
4,552

 
32,835

GSE CRT
1,618

 
(770
)
 
848

CMBS
37,607

 
(2,423
)
 
35,184

Other
58

 

 
58

Total
161,960

 
(33,469
)
 
128,491

For the six months ended June 30, 2016
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
170,211

 
(52,462
)
 
117,749

Non-Agency
49,976

 
6,136

 
56,112

GSE CRT
4,333

 
(1,542
)
 
2,791

CMBS
63,740

 
(5,779
)
 
57,961

Other
510

 
(17
)
 
493

Total
288,770

 
(53,664
)
 
235,106


 
14
 



For the six months ended June 30, 2015
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
188,766

 
(61,687
)
 
127,079

Non-Agency
59,093

 
8,993

 
68,086

GSE CRT
3,186

 
(1,530
)
 
1,656

CMBS
75,512

 
(4,851
)
 
70,661

Other
57

 

 
57

Total
326,614

 
(59,075
)
 
267,539

Note 5 – Commercial Loans Held-for-Investment
The following table summarizes commercial loans held-for-investment as of June 30, 2016 and December 31, 2015 that were purchased or originated by the Company.
June 30, 2016
$ in thousands
Number of
loans
 
Principal
Balance
 
Unamortized (fees)/
costs, net
 
Carrying
value
Mezzanine loans
10

 
272,980

 
(478
)
 
272,502

Total
10

 
272,980

 
(478
)
 
272,502

December 31, 2015
$ in thousands
Number of
loans
 
Principal
Balance
 
Unamortized (fees)/
costs, net
 
Carrying
value
Mezzanine loans
6

 
210,769

 
(1,707
)
 
209,062

Total
6

 
210,769

 
(1,707
)
 
209,062

These loans were not impaired, and no allowance for loan loss has been recorded as of June 30, 2016 and December 31, 2015.
Note 6 – Trading Securities
The following table presents the carrying value of the Company's U.S. Treasury securities as of June 30, 2016 and December 31, 2015.
$ in thousands
June 30, 2016
 
December 31, 2015
Amortized cost
152,238

 

Unrealized gains, net
463

 

Fair value
152,701

 

The Company did not record any realized gains or losses on U.S. Treasury securities for the three and six months ended June 30, 2016 and 2015.
Note 7 – Other Assets
The following table summarizes the Company's other assets as of June 30, 2016 and December 31, 2015.
$ in thousands
June 30, 2016
 
December 31, 2015
FHLBI stock
74,250

 
75,375

Investments in unconsolidated ventures
33,037

 
38,413

Prepaid expenses
996

 
1,284

Total
108,283

 
115,072


 
15
 



IAS Services LLC, the Company's wholly-owned subsidiary, is required to purchase and hold FHLBI stock as a condition of membership in the Federal Home Loan Bank of Indianapolis ("FHLBI"). The stock is recorded at cost.
The Company has invested in unconsolidated ventures that are managed by an affiliate of the Company's Manager. The unconsolidated ventures invest in the Company's target assets. Refer to Note 16 - "Commitments and Contingencies" for additional details regarding the Company's commitments to these unconsolidated ventures.
Note 8 – Borrowings
The Company has financed the majority of its investment portfolio through repurchase agreements, secured loans and exchangeable senior notes. The following table summarizes certain characteristics of the Company’s borrowings at June 30, 2016 and December 31, 2015.
$ in thousands
June 30, 2016
 
December 31, 2015
 
 
 
 
Weighted
 
 
 
 
 
Weighted
 
 
Weighted
 
Average
 
 
 
Weighted
 
Average
 
 
Average
 
Remaining
 
 
 
Average
 
Remaining
Amount
 
Interest
 
Maturity
 
Amount
 
Interest
 
Maturity
Outstanding
 
Rate
 
(days)
 
Outstanding
 
Rate
 
(days)
Repurchase Agreements:
 
 
 
 
 
 
 
 
 
 
 
Agency RMBS
8,351,796

 
0.65
%
 
16

 
8,389,643