What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-17 compared with 2021-02-22 · 302 added, 455 removed, 1124 unchanged (40% of the section changed)

19 unchanged sentences

Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Directors, Executive Officers and Corporate Governance.

27 unchanged sentences

3.1 Articles of Amendment and Restatement of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q, filed with the SEC on August 12, 2009.

3.2 Articles Supplementary of 7.75% Series A Cumulative Redeemable Preferred Stock, incorporated by reference to Exhibit 3.3 to our Registration Statement on Form 8-A, filed with the SEC on July 23, 2012.

3.3 Articles Supplementary classifying 1,500,000 shares of the Company's preferred stock as additional Series A Shares (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on March 19, 2019).

3.4 Articles Supplementary of 7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock, incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form 8-A, filed with the SEC on September 8, 2014.

3.5 Articles Supplementary classifying 1,500,000 shares of the Company's preferred stock as additional Series B Shares (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, filed with the SEC on March 19, 2019).

3.6 Articles Supplementary of 7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, incorporated by reference to Exhibit 3.4 to the Registrant’s Registration Statement on Form 8-A, filed with the SEC on August 11, 2017.

3.7 Articles Supplementary classifying 4,000,000 shares of the Company's preferred stock as additional Series C Shares (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K, filed with the SEC on March 19, 2019).

3.8 Amended and Restated Bylaws of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on February 17, 2017.

4.1 Specimen Common Stock Certificate of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No.

3.2 Articles Supplementary of 7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock, incorporated by reference to Exhibit 3.3 to our Registration Statement on Form 8-A, filed with the SEC on September 8, 2014.

3.3 Articles Supplementary classifying 1,500,000 shares of the Company's preferred stock as additional Series B Shares (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K, filed with the SEC on March 19, 2019).

3.4 Articles Supplementary of 7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, incorporated by reference to Exhibit 3.4 to our Registration Statement on Form 8-A, filed with the SEC on August 11, 2017.

3.5 Articles Supplementary classifying 4,000,000 shares of the Company's preferred stock as additional Series C Shares (incorporated by reference to Exhibit 3.3 to our Current Report on Form 8-K, filed with the SEC on March 19, 2019).

3.6 Articles Supplementary reclassifying 2,110,000 shares of authorized but unissued shares of Series A Preferred Stock as shares of Preferred Stock without designation, incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on June 17, 2021.

3.7 Amended and Restated Bylaws of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on February 17, 2017.

4.1 Specimen Common Stock Certificate of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 4.1 to our Pre-Effective Amendment No.

8, filed with the SEC on June 18, 2009.

4.2 Specimen 7.75% Series A Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 4.1 to our Registration Statement on Form 8-A, filed with the SEC on July 23, 2012.

4.3 Specimen 7.75% Series B Fixed-to-Floating Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form 8-A, filed with the SEC on September 8, 2014.

4.4 Specimen 7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form 8-A, filed with the SEC on August 11, 2017.

4.2 Specimen 7.75% Series B Fixed-to-Floating Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 4.1 to our Registration Statement on Form 8-A, filed with the SEC on September 8, 2014.

4.3 Specimen 7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 4.5 to our Registration Statement on Form 8-A, filed with the SEC on August 11, 2017.

4.4 Description of Invesco Mortgage Capital Inc.

Securities , incorporated b y reference to Exhibit 4.6 to ou r Annual Report on Form 10-K , filed with the SEC on February 19, 202 0

10.1 Management Agreement, dated as of July 1, 2009, among Invesco Advisers, Inc.

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and IAS Operating Partnership LP., incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q, filed with the SEC on August 12, 2009.

10.2 Amendment to Management Agreement, dated as of May 24, 2011, by and among Invesco Advisers, Inc.

10.2 Amendment to Management Agreement, dated as of May 24, 2011, among Invesco Advisers, Inc.

(formally known as Invesco Institutional (N.A.), Inc.), Invesco Mortgage Capital Inc., IAS Operating Partnership LP., and IAS Asset I LLC, incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on August 9, 2011.

10.3 Second Amendment to Management Agreement, dated as of July 1, 2015, by and among Invesco Advisers, Inc., Invesco Mortgage Capital Inc., and IAS Operating Partnership LP., incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on August 17, 2015.

10.4 Third Amendment to Management Agreement, dated as of November 6, 2019, by and among Invesco Advisers, Inc., Invesco Mortgage Capital Inc., and IAS Operating Partnership LP., incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2019

10.3 Second Amendment to Management Agreement, dated as of July 1, 2015, among Invesco Advisers, Inc., Invesco Mortgage Capital Inc., and IAS Operating Partnership LP., incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on August 17, 2015.

10.4 Third Amendment to Management Agreement, dated as of November 6, 2019, among Invesco Advisers, Inc., Invesco Mortgage Capital Inc., and IAS Operating Partnership LP., incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2019.

§ 10.5 Invesco Mortgage Capital Inc.

Amended and Restated 2009 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on May 5, 2021.

10.6 Equity Distribution Agreement, dated December 18, 2017, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc.

and JMP Securities LLC, incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on December 19, 2017

10.7 First Amendment to Equity Distribution Agreement, dated March 18, 2019, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc.

and JMP Securities LLC, incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on March 19, 2019

10.8 Equity Distribution Agreement with respect to the Series A Shares, Series B Shares, and Series C Shares, dated March 19, 2019, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc.

10.6 Form of Restricted Stock Award Agreement for Non-Executive Directors under the Invesco Mortgage Capital Inc.

2009 Equity Incentive Plan (May 2021), incorporated by reference to Exhibit 10.1 to our quarterly report on Form 10-Q, filed with the SEC on August 4, 2021.

10.7 Equity Distribution Agreement with respect to the Series B Shares and Series C Shares, dated March 19, 2019, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc.

and JonesTrading Institutional Services LLC, incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on March 19, 2019.

10.9 Equity Distribution Agreement, dated November 30, 2020, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc.

and JMP Securities LLC, incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on November 30, 2020

10.8 Amendment No.

1 to the Equity Distribution Agreement, among Invesco Mortgage Capital Inc., the Operating Partnership, the Manager and JonesTrading Institutional Services LLC, incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on June 17, 2021.

10.9 Equity Distribution Agreement, dated November 3, 2021, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc., JMP Securities LLC and JonesTrading Institutional Services LLC, incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on November 3, 2021.

21.1 Subsidiaries of the Registrant.

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INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets as of December 31, 202 1 and December 31, 20 20

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Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Equity for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019

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We have audited the accompanying consolidated balance sheets of Invesco Mortgage Capital Inc.

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Interest Income Recognition-Certain Mortgage-Backed Securities where the Company may not Recover Substantially all of their Initial Investment

As described in Note 2 to the consolidated financial statements, interest income on certain mortgage-backed securities (MBS) where the Company may not recover substantially all of their initial investment is based on estimated future cash flows.

Interest income subject to these cash flow assumptions makes up a portion of total interest income of $280 million for the year ended December 31, 2020.

These estimated future cash flows are utilized at the time of purchase in determining the effective interest rate.

Over the life of the investments, management updates these estimated future cash flows to compute a revised yield based on the current amortized cost of the investment, unless those changes are reflected in an allowance for credit losses.

In situations where an allowance for credit losses is limited by the fair value of the investment, the yield is computed as the rate that equates expected future cash flows to the current fair value of the investment.

In estimating these future cash flows, there are a number of assumptions that are subject to uncertainties and contingencies, including but not limited to the rate and timing of principal payments (prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations.

The principal considerations for our determination that performing procedures relating to interest income recognition on certain MBS where the Company may not recover substantially all of their initial investment is a critical audit matter are the significant judgment by management to estimate the cash flows of these investments, which included significant assumptions related to the rate and timing of principal payments;

this in turn led to a high degree of auditor subjectivity, judgment and effort in performing procedures to evaluate the audit evidence obtained related to the cash flow estimates and related effective interest yields, and the audit effort involved the use of professionals with specialized skill and knowledge.

Valuation of Mortgage-Backed Securities, at fair value

As described in Notes 2 and 10 to the consolidated financial statements, the Company’s mortgage-backed securities, at fair value were $7.8 billion as of December 31, 2021.

Management determines the fair value of mortgage-backed securities using an independent primary pricing service.

If the primary pricing service cannot provide a price, management seeks a value from other pricing services.

The pricing service uses two types of valuation approaches to determine the valuation of the Company’s various mortgage-backed securities:

a market approach, which uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities;

and an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount.

The principal considerations for our determination that performing procedures relating to the valuation of mortgage-backed securities, at fair value is a critical audit matter are the high degree of auditor effort in performing procedures and evaluating audit evidence related to the fair value of the mortgage-backed securities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to interest income, including the updating of cash flows and related effective interest yields for these MBS where substantially all of their initial investment may not be recovered.

These procedures also included, among others, (i) testing the calculation of the effective interest yield for MBS where substantially all of their initial investment may not be recovered and (ii) testing of the classification of the investments to be categorized as such upon acquisition.

For a sample of MBS securities where substantially all of their initial investment may not be recovered, professionals with specialized skill and knowledge were used to assist in developing an independent range of effective interest yields and comparison of management’s estimated yield to the independently developed ranges to evaluate the reasonableness of the estimate.

Developing the independent yield involved testing the completeness and accuracy of data provided by management and evaluating the reasonableness of management’s cash flows estimates, including assumptions related to the rate and timing of principal payments.

These procedures included testing the effectiveness of controls relating to the valuation of mortgage-backed securities, at fair value.

These procedures also included, among others, (i) developing an independent range of prices for the securities by obtaining independent pricing from third party vendors;

(ii) comparing management’s estimate of fair value to the independent range of prices to evaluate the reasonableness of management’s estimate;

and (iii) testing the completeness and accuracy of the data provided by management.

/s/ PricewaterhouseCoopers LLP

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$ in thousands except share amounts

Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $ 7,614,935 and $ 21,132,742 , respectively;

Mortgage-backed securities, at fair value (including pledged securities of $ 7,326,175 and $ 7,614,935 , respectively;

net of allowance for credit losses of $ 1,768 as of December 31, 2020)

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Derivative assets, at fair value 270 10,004

Other assets (including pledged security of $ 44,654 as of December 31, 2019)

41,163 166,180

Other assets 37,509 41,163

Total assets 8,443,841 8,632,851

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Repurchase agreements 6,987,834 7,228,699

Secured loans — 1,650,000

Derivative liabilities, at fair value 14,356 6,344

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7.75 % Series A Cumulative Redeemable Preferred Stock:

5,600,000 shares issued and outstanding ($ 140,000 aggregate liquidation preference)

135,356 135,356

no shares and 5,600,000 shares issued and outstanding, respectively ($ 140,000 aggregate liquidation preference as of December 31, 2020)

7.75 % Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock:

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Repurchase agreements (1)

( 11,290 ) 73,607 430,697

Secured loans — 8,655 41,623

Exchangeable senior notes — — 1,621

Total interest expense ( 11,290 ) 82,262 472,320

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Total expenses 29,233 40,230 46,174

Net income (loss) ( 1,674,352 ) 364,101 ( 70,536 )

Net income attributable to non-controlling interest — — 254

Net income (loss) attributable to Invesco Mortgage Capital Inc.

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Dividends to preferred stockholders 37,795 44,426 44,426

Issuance and redemption costs of redeemed preferred stock 4,682 — —

Net income (loss) attributable to common stockholders ( 132,477 ) ( 1,718,778 ) 319,675

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Diluted 275,132,233 173,730,389 132,317,853

(1) Negative interest expense on repurchase agreements in 2021 is due to amortization of net deferred gains on de-designated interest rate swaps that exceeds current period interest expense on repurchase agreements.

For further information on amortization of amounts classified in accumulated other comprehensive income before we discontinued hedge accounting, see Note 8 - “Derivatives and Hedging Activities” and Note 12 - “Stockholders' Equity” .

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

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Comprehensive income (loss) ( 111,319 ) ( 1,904,710 ) 432,251

Comprehensive (income) loss attributable to non-controlling interest — — 979

Dividends to preferred stockholders ( 37,795 ) ( 44,426 ) ( 44,426 )

Issuance and redemption costs of redeemed preferred stock ( 4,682 ) — —

Comprehensive income (loss) attributable to common stockholders ( 153,796 ) ( 1,949,136 ) 387,825

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

Attributable to Common Stockholders

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

$ in thousands except share amounts Series A

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Stockholders’

Interest Total

Shares Amount Shares Amount Shares Amount Shares Amount

Balance at December 31, 2018 5,600,000 135,356 6,200,000 149,860 11,500,000 278,108 111,584,996 1,115 2,383,532 220,813 ( 882,087 ) 2,286,697

Net loss — — — — — — — — — — ( 70,790 ) ( 70,790 ) 254 ( 70,536 )

Other comprehensive loss — — — — — — — — — ( 42,315 ) — ( 42,315 ) ( 1,233 ) ( 43,548 )

Repurchase of shares of common stock — — — — — — ( 75,100 ) ( 1 ) ( 1,143 ) — — ( 1,144 ) — ( 1,144 )

Net income (loss) — — — — — — — — — — 364,101 364,101

Other comprehensive income (loss) — — — — — — — — — 68,150 — 68,150

Proceeds from issuance of common stock, net of offering costs — — — — — — 32,640,260 328 508,598 — — 508,926

Stock awards — — — — — — 31,101 — — — — —

Common stock dividends — — — — — — — — — — ( 252,071 ) ( 252,071 )

Common unit dividends — — — — — — — — — — — — ( 1,796 ) ( 1,796 )

Preferred stock dividends — — — — — — — — — — ( 44,426 ) ( 44,426 )

Amortization of equity-based compensation — — — — — — — — 522 — — 522

Purchase of OP Units from non-controlling interest — — — — — — — — ( 798 ) 2,100 — 1,302 ( 23,066 ) ( 21,764 )

Rebalancing of ownership percentage of non-controlling interest — — — — — — — — 556 ( 1 ) — 555 ( 555 ) —

Balance at December 31, 2019 5,600,000 135,356 6,200,000 149,860 11,500,000 278,108 144,256,357 1,443 2,892,652 288,963 ( 814,483 ) 2,931,899

Net income — — — — — — — — — — 364,101 364,101 — 364,101

Other comprehensive income — — — — — — — — — 68,150 — 68,150 — 68,150

Cumulative effect of adoption of new accounting principle — — — — — — — — — — 342 342

Net income (loss) — — — — — — — — — — ( 1,674,352 ) ( 1,674,352 )

Other comprehensive income (loss) — — — — — — — — — ( 230,358 ) — ( 230,358 )

Proceeds from issuance of common stock, net of offering costs — — — — — — 42,549,740 425 420,312 — — 420,737

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Balance at December 31, 2020 5,600,000 135,356 6,200,000 149,860 11,500,000 278,108 203,222,108 2,032 3,387,552 58,605 ( 2,644,355 ) 1,367,158

Cumulative effect of adoption of new accounting principle — — — — — — — — — — 342 342 — 342

Net loss — — — — — — — — — — ( 1,674,352 ) ( 1,674,352 ) — ( 1,674,352 )

Other comprehensive loss — — — — — — — — — ( 230,358 ) — ( 230,358 ) — ( 230,358 )

Net income (loss) — — — — — — — — — ( 90,000 ) ( 90,000 )

Other comprehensive income (loss) — — — — — — ( 21,319 ) — ( 21,319 )

Proceeds from issuance of common stock, net of offering costs — — — — — — 126,469,020 1,265 428,239 — — 429,504

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Preferred stock dividends — — — — — — — — — — ( 37,795 ) ( 37,795 )

Redemption of preferred stock ( 5,600,000 ) ( 135,356 ) — — — — — — — — ( 4,682 ) ( 140,038 )

Amortization of equity-based compensation — — — — — — — — 615 — — 615

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Net (gain) loss on extinguishment of debt — ( 14,742 ) —

(Gain) loss on foreign currency transactions, net — — 1,038

Changes in operating assets and liabilities:

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Increase (decrease) in operating liabilities 1,108 ( 49,463 ) 6,189

Net cash provided by operating activities 170,459 343,359 304,264

Net cash provided by (used in) operating activities 152,292 170,459 343,359

Cash Flows from Investing Activities

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Payment on the sale of credit derivatives — ( 31,353 ) —

Settlement (termination) of futures, forwards, swaps, and TBAs, net ( 844,577 ) ( 597,077 ) ( 2,830 )

Settlement (termination) of futures, forwards, swaps, swaptions and TBAs, net 156,160 ( 844,577 ) ( 597,077 )

Redemption of Federal Home Loan Bank of Indianapolis stock — 74,250 —

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Principal payments from commercial loans held-for-investment — 136 7,527

Origination and advances of commercial loans, net of origination fees — — ( 1,677 )

Net cash provided by (used in) investing activities 120,748 11,554,509 ( 4,324,231 )

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Proceeds from issuance of common stock 430,496 420,737 509,075

Repurchase of common stock — — ( 1,144 )

Redemption of preferred stock ( 140,038 ) — —

Principal repayments of secured loans — ( 1,650,000 ) —

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Principal repayments of repurchase agreements and related fees ( 82,587,978 ) ( 85,987,597 ) ( 127,694,642 )

Extinguishment of exchangeable senior notes — — ( 143,433 )

Net change in due from counterparties and collateral held payable on repurchase agreements ( 4,743 ) 33,773 ( 32,557 )

Payments of deferred costs ( 354 ) ( 35 ) ( 346 )

Purchase of Operating Partnership units from non-controlling interest — — ( 21,764 )

Payments of dividends and distributions ( 137,499 ) ( 271,234 ) ( 234,374 )

Net cash (used in) provided by financing activities ( 11,621,886 ) 4,134,757 ( 879,199 )

Payments of dividends ( 133,068 ) ( 137,499 ) ( 271,234 )

Net cash provided by (used in) financing activities ( 88,572 ) ( 11,621,886 ) 4,134,757

Net change in cash, cash equivalents and restricted cash 184,468 103,082 153,885

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Net change in unrealized gain (loss) on mortgage-backed and credit risk transfer securities 756 ( 207,708 ) 93,037

Dividends and distributions declared not paid 18,970 74,841 49,578

Dividends declared not paid 29,689 18,970 74,841

Increase (decrease) in Agency CMBS purchase commitments — ( 99,557 ) ( 32,530 )

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Dividend paid in common stock — 74,234 —

Offering costs not paid 527 — 48

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

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Invesco Mortgage Capital Inc.

(the “Company”, “we”) is a Maryland corporation primarily focused on investing in, financing and managing mortgage-backed securities (“MBS”) and other mortgage-related assets.

We have historically invested in:

(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.

We currently invest 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”);

• Commercial mortgage-backed securities (“CMBS”) that are not guaranteed by a U.S.

government agency or a federally chartered corporation (“non-Agency CMBS”);

• RMBS that are not guaranteed by a U.S.

government agency or a federally chartered corporation (“non-Agency RMBS”);

• CMBS that are not guaranteed by a U.S.

government agency or a federally chartered corporation (“non-Agency CMBS”);

• Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises (“GSE CRT”);

• Residential and commercial mortgage loans;

• Commercial mortgage loans;

• Other real estate-related financing agreements.

We have also historically invested in:

• 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”);

• Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises (“GSE CRT”);

• Residential mortgage loans.

We conduct our business through IAS Operating Partnership L.P.

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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.

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

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Gains and losses arising on revaluation are included in other investment income (loss), net on the consolidated statements of operations.

During the year ended December 31, 2018 we incurred foreign currency losses of $ 930,000 primarily related to the revaluation

of a commercial loan investment denominated in Pound Sterling.

This commercial loan was repaid by the borrower during 2018.

Our reporting currency is U.S.

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Physical visits are also made to each pricing service's office.

An independent pricing service values our commercial loan using a discounted cash flow analysis.

Virtual visits may take place in lieu of physical visits given concerns surrounding the COVID-19 pandemic.

An independent pricing service values our commercial loan investment using a discounted cash flow analysis.

The yield used in the discounted cash flow analysis is determined by comparing the features of the loan to the interest rates and terms required by lenders in the new loan origination market for similar loans and the yield required by investors acquiring mezzanine loans in the secondary market as well as a comparison of current market and collateral conditions to those present at origination.

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If the price of a security is obtained from quoted prices for identical instruments in active markets, the security is classified as a level 1 security.

If the price of a security is obtained from quoted prices for similar instruments or model-derived valuations whose inputs are observable, the

security is classified as a level 2 security.

If the price of a security is obtained from quoted prices for similar instruments or model-derived valuations whose inputs are observable, the security is classified as a level 2 security.

If the inputs appear to be unobservable, the security would be classified as a level 3 security.

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We record our purchases of MBS and GSE CRTs on the trade date and report these securities at fair value as described above in the Fair Value Measurements section of this Note 2 to our consolidated financial statements.

Although we generally intend to hold most MBS and GSE CRTs until maturity, we may sell any of these securities prior to maturity as part of our overall management of our investment portfolio.

Approximately $ 8.1 billion ( 99 %) of our MBS and GSE CRTs are accounted for under the fair value option as of December 31, 2020 (December 31, 2019:

Approximately $ 7.7 billion ( 99 %) of our MBS are accounted for under the fair value option as of December 31, 2021 (December 31, 2020:

$ 8.1 billion or 99 %).

Under the fair value option, we recognize changes in fair value in our consolidated statements of operations as unrealized gains and losses.

In our view, this election more appropriately reflects the results of our operations because MBS and GSE CRT fair value changes are accounted for in the same manner as fair value changes in our economic hedging instruments.

In our view, this election more appropriately reflects the results of our operations because fair value changes are accounted for in the same manner as fair value changes in our economic hedging instruments.

We elected the fair value option for all MBS purchased on or after September 1, 2016, GSE CRTs purchased on or after August 24, 2015 and all RMBS interest-only securities.

We classify the remaining balance of our MBS and GSE CRTs as available-for-sale ($ 116.9 million or 1 % as of December 31, 2020;

$ 4.4 billion or 20 % as of December 31, 2019).

We classify the remaining balance of our MBS as available-for-sale ($ 70.2 million or 1 % as of December 31, 2021;

$ 116.9 million or 1 % as of December 31, 2020).

Unrealized gains or losses on available-for-sale securities are recorded in accumulated other comprehensive income, a separate component of stockholders' equity, until sale or disposition of the investment.

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Realized gains and losses from sales of MBS are determined based upon the specific identification method.

GSE CRTs purchased before August 24, 2015 were reported at fair value but are accounted for as hybrid financial instruments consisting of a debt host contract and an embedded derivative.

GSE CRTs purchased before August 24, 2015 were reported at fair value and accounted for as hybrid financial instruments consisting of a debt host contract and an embedded derivative.

Unrealized gains or losses arising from changes in fair value of the debt host contract, excluding other-than-temporary impairment, were recognized in accumulated other comprehensive income until sale or disposition of the investment.

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Realized and unrealized gains or losses arising from changes in fair value of the embedded derivative were recognized in realized and unrealized credit derivative income (loss), net in our consolidated statements of operations.

We elect the fair value option for GSE CRTs purchased on or after August 24, 2015 due to the complexities associated with bifurcation of GSE CRTs into a debt host contract and an embedded derivative.

Realized gains and losses from sales of GSE CRTs are determined based upon the specific identification method.

We elected the fair value option for GSE CRTs purchased on or after August 24, 2015 due to the complexities associated with bifurcation of GSE CRTs into a debt host contract and an embedded derivative.

Realized gains and losses from sales of GSE CRTs were determined based upon the specific identification method.

Our interest income recognition policies for MBS and GSE CRTs are described below in the Interest Income Recognition section of this Note 2 to our consolidated financial statements.

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The allowance for credit losses is limited to the amount by which the investment’s amortized cost exceeds fair value.

When the allowance for credit losses is limited, the effective interest rate used to recognize interest income and accrete credit losses is prospectively adjusted.

When the allowance for credit losses is

limited, the effective interest rate used to recognize interest income and accrete credit losses is prospectively adjusted.

We do not record an allowance for credit losses when an investment’s fair value exceeds its amortized cost.

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When we determine that we intend to sell, or more likely than not will be required to sell, an available-for-sale security in an unrealized loss position before we recover its amortized cost, we write off any allowance for credit losses and write down the investment’s amortized cost to its fair value.

We record the write off of the allowance for credit losses and write down of the available-for-sale security within gain (loss) on investments, net in our consolidated statements of operations.

We record the write off of the allowance for credit losses within (increase) decrease in provision for credit losses on our consolidated statements of operations and write down of the available-for-sale security within gain (loss) on investments, net in our consolidated statements of operations.

We present accrued interest receivable separately from our investment portfolio on our consolidated balance sheets.

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Commercial Loans Held-For-Investment

As of January 1, 2020, we report our one commercial loan at fair value as described in the Fair Value Measurements section of this Note 2 to the consolidated financial statements with changes in fair value reported within gain (loss) on investments, net in our consolidated statements of operations.

As of January 1, 2020, we report our commercial loan investment at fair value as described in the Fair Value Measurements section of this Note 2 to the consolidated financial statements.

We record changes in fair value within gain (loss) on investments, net in our consolidated statements of operations.

Before January 1, 2020, we carried commercial loans held-for-investment at amortized cost, net of any provision for loan losses.

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The difference between the coupon rate on the hybrid instrument and the coupon rate on the debt host contract was considered premium income associated with the embedded derivative and was recorded in realized and unrealized credit derivative income (loss), net in our consolidated statements of operations.

Interest income on GSE CRTs purchased on or after August 24, 2015 is based on estimated future cash flows.

Interest income on GSE CRTs purchased on or after August 24, 2015 was based on estimated future cash flows.

Commercial and Other Loans

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Interest received after a loan becomes past due or impaired is used to reduce the outstanding loan principal balance.

When a delinquent loan previously placed on nonaccrual status has cured, meaning all delinquent principal and interest have been remitted by the borrower, the loan is placed back on

accrual status.

When a delinquent loan previously placed on nonaccrual status has cured, meaning all delinquent principal and interest have been remitted by the borrower, the loan is placed back on accrual status.

Alternately, loans that have been individually impaired may be placed back on accrual status if restructured and after the loan is considered re-performing.

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Cash posted with counterparties as collateral is not available for general corporate purposes.

As of December 31, 2019, restricted cash also included cash posted with the Federal Home Loan Bank of Indianapolis ("FHLBI").

During the year ended December 31, 2020, we fully repaid our outstanding secured loans from the FHLBI and terminated our membership.

Due from Counterparties / Collateral Held Payable

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Collateral held payable represents cash posted with us by counterparties as collateral under our derivatives and repurchase agreements.

To the extent we receive collateral other than cash from our counterparties, such assets are not included in our consolidated balance sheets.

Notwithstanding the foregoing, if we either sell such assets or pledge the assets as collateral pursuant to a repurchase agreement, the cash received and the corresponding liability is reflected on the consolidated balance sheets .

If we receive collateral other than cash from our counterparties, such assets are not included in our consolidated balance sheets.

If we either sell such assets or pledge the assets as collateral under a repurchase agreement, the cash received and the corresponding liability is reflected on the consolidated balance sheets .

Investment Related Receivable / Investment Related Payable

Investment related receivable consists of receivables for mortgage-backed and credit risk transfer securities that we have sold but have not settled with the buyer and accrued interest and principal paydowns on mortgage-backed and credit risk transfer securities.

Investment related receivable consists of receivables for mortgage-backed securities that we have sold but have not settled with the buyer and accrued interest and principal paydowns on mortgage-backed securities.

Accrued interest receivable was $ 16.8 million and $ 15.6 million as of December 31, 2021 and 2020, respectively.

Investment related payable consists of liabilities for mortgage-backed and credit risk transfer securities that we have purchased but have not settled with the seller.

Investment related payable consists of liabilities for mortgage-backed securities that we have purchased but have not settled with the seller.

Investments in Unconsolidated Ventures

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Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements.

We record the mortgage-backed and credit risk transfer securities and the related repurchase agreement financing on a gross basis in our consolidated balance sheets, and the corresponding interest income and interest expense on a gross basis in our consolidated statements of operations.

We record the mortgage-backed securities and the related repurchase agreement financing on a gross basis in our consolidated balance sheets, and the corresponding interest income and interest expense on a gross basis in our consolidated statements of operations.

Secured Loans

Our wholly-owned subsidiary, IAS Services LLC, was a member of the FHLBI.

Our wholly-owned subsidiary, IAS Services LLC, was a member of the Federal Home Loan Bank of Indianapolis (“FHLBI”).

As a member of the FHLBI, IAS Services LLC borrowed funds from the FHLBI in the form of secured advances.

FHLBI advances were treated as secured financing transactions and carried at their contractual amounts.

During the year ended

December 31, 2020, we fully repaid our outstanding secured loans from the FHLBI and terminated our membership.

IAS Services LLC was dissolved in December 2020.

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We calculate basic earnings (loss) per share by dividing net income (loss) attributable to common stockholders for the period by the weighted-average number of shares of our common stock outstanding for that period.

Diluted earnings per share takes into account the effect of dilutive instruments, such as Operating Partnership Units (“OP Units”), exchangeable senior notes, and unvested restricted stock awards and uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding.

Diluted earnings per share takes into account the effect of dilutive instruments, such as unvested restricted stock awards, and uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding.

Share-Based Compensation

Under the terms of our 2009 Equity Incentive Plan (the “Incentive Plan”), our independent directors are eligible to receive quarterly stock awards as part of their compensation for serving as directors, In addition, we may compensate the officers and employees of our Manager and its affiliates under the Incentive Plan under the terms of our management agreement.

Under the terms of our 2009 Equity Incentive Plan (the “Incentive Plan”), our independent directors are eligible to receive stock awards as part of their compensation for serving as directors, In addition, we may compensate the officers and employees of our Manager and its affiliates under the Incentive Plan under the terms of our management agreement.

Share-based compensation arrangements may include share options, restricted and non-restricted share awards, performance-based awards and share appreciation rights.

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reclassification of amortization of net deferred gains and losses on de-designated interest rate swaps to repurchase agreements interest expense and currency translation adjustments on an investment in an unconsolidated venture.

Unrealized gains and losses on our MBS purchased before September 1, 2016 and the debt host contract associated with GSE CRTs purchased before August 24, 2015 were reclassified into net income upon their sale.

Unrealized gains and losses on our MBS purchased before September 1, 2016 and the debt host contract associated with GSE CRTs purchased before August 24, 2015 are reclassified into net income upon their sale.

Accounting for Derivative Financial Instruments

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We assessed at inception whether the economic characteristics of the embedded derivative instruments were clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the debt host contract), whether the financial instrument was remeasured to fair value through earnings and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument.

When it was determined that (1) the embedded instrument possessed economic characteristics that were not clearly and closely related to the economic characteristics of the debt host contract, (2) the financial instrument was not remeasured to fair value through earnings and (3) a separate instrument with the same terms would qualify

as a derivative instrument, the embedded instrument qualified as an embedded derivative that was separated from the debt host contract.

When it was determined that (1) the embedded instrument possessed economic

characteristics that were not clearly and closely related to the economic characteristics of the debt host contract, (2) the financial instrument was not remeasured to fair value through earnings and (3) a separate instrument with the same terms would qualify as a derivative instrument, the embedded instrument qualified as an embedded derivative that was separated from the debt host contract.

The embedded derivative was recorded at fair value, and changes in fair value were recorded in realized and unrealized credit derivative income (loss), net in our consolidated statements of operations.

We evaluate the terms and conditions of our holdings of futures contracts, currency forward contracts and TBAs to determine if an instrument has the characteristics of an investment or should be considered a derivative under U.S.

We evaluate the terms and conditions of our holdings of swaptions, futures contracts, currency forward contracts and TBAs to determine if an instrument has the characteristics of an investment or should be considered a derivative under U.S.

Accordingly, futures contracts, currency forward contracts and TBAs having the characteristics of derivatives are accounted for at fair value with such changes recognized in gain (loss) on derivative instruments, net in the consolidated statements of operations.

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We would recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which would be included in general and administrative expenses.

Reclassifications

Certain prior period reported amounts have been reclassified to be consistent with the current presentation.

Such reclassifications had no impact on total assets, net income or equity attributable to common stockholders.

Accounting Pronouncements Recently Adopted

On January 1, 2020, we adopted the accounting guidance that changes how entities report credit losses for assets measured at amortized cost and available-for-sale securities.

The new guidance significantly changes how entities measure credit losses for most financial assets, including loans, that are not measured at fair value through net income.

The guidance replaces the existing “incurred loss” model with an “expected loss” model for instruments measured at amortized cost and requires entities to record credit allowances for available-for-sale debt securities rather than reduce the carrying amount, as they previously did under the other-than-temporary impairment model.

The new guidance also simplifies the accounting model for purchased credit-impaired debt securities and loans and requires that entities record an adjustment to retained earnings on January 1, 2020 for the cumulative effect of adopting the new guidance.

We were not required to record a cumulative effect adjustment to retained earnings because all of our purchased credit-impaired securities were in an unrealized gain position as of the implementation date.

The new guidance specifically excludes available-for-sale securities measured at fair value through net income.

We elected the fair value option for all MBS purchased on or after September 1, 2016 and GSE CRTs purchased on or after August 24, 2015.

Accordingly, the impact of the new guidance on accounting for our debt securities is limited to those securities purchased before election of the fair value option and held on January 1, 2020.

For further information on the composition of our investment portfolio, see Note 4 - "Mortgage Backed and Credit Risk Transfer Securities".

During the year ended December 31, 2020, we recorded $ 94.1 million of impairment on non-Agency securities that we intended to sell or more likely than not would be required to sell before we recovered the amortized cost basis of the security.

We recorded the impairment within gain (loss) on investments, net in our consolidated statements of operations.

As of December 31, 2020, we have recorded a $ 1.8 million allowance for credit losses.

We had one commercial loan as of December 31, 2019 that was measured at amortized cost.

We implemented the new guidance for this loan by electing the fair value option and recording a cumulative effect adjustment to increase retained earnings by $ 342,000 on January 1, 2020.

During the year ended December 31, 2020, we recognized $ 1.2 million of unrealized losses on our commercial loan in our consolidated statement of operations.

Pending Accounting Pronouncements

In January 2021, the Financial Accounting Standards Board expanded existing accounting guidance for evaluating the effects of reference rate reform on financial reporting.

In January 2021, the Financial Accounting Standards Board (“FASB”) expanded existing accounting guidance for evaluating the effects of reference rate reform on financial reporting.

The new guidance expands the temporary optional expedients and exceptions to U.S.

GAAP for contract modifications, hedge accounting and other relationships that reference London Interbank Overnight Financing Rate (“LIBOR”) to apply to all derivative instruments affected by the market-wide change in the interest rates used for discounting, margining or contract price alignment (commonly referred to as the discounting transition).

The guidance can be applied as of January 1, 2020.

We will evaluate our contracts that are eligible for modification relief and may apply the elections prospectively as needed.

We are currently evaluating what impact the guidance will have on our consolidated financial statements.

The new guidance can be applied through December 31, 2022.

In the fourth quarter of 2021, we transitioned our interest rate swaps that were indexed to LIBOR to interest rate swaps that are indexed to the Secured Overnight Financing Rate (“SOFR”) in a manner that allowed us to qualify for contract modification relief and maintain the same accounting for and presentation of interest rate swaps that was in place prior to modification.

The modifications did not have a material effect on our financial statements.

We have an investment in a commercial loan indexed to LIBOR that is scheduled to mature in 2022.

In addition, our 7.75 % Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock and our 7.50 % Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock each become callable at the time the stock begins to pay a LIBOR-based rate.

Our Series B and Series C Preferred Stock are governed by New York state law that provides for U.S.

dollar LIBOR-linked contracts to transition to an alternative reference rate.

We do not currently intend to amend our Series B or Series C Preferred Stock to change the existing LIBOR cessation fallback language.

Note 3 – Variable Interest Entities (“VIEs”)

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We resumed investing in Agency RMBS in July 2020.

The following tables summarize our MBS and GSE CRT portfolio by asset type at December 31, 2020 and 2019.

The following tables summarize our MBS portfolio by asset type at December 31, 2021 and 2020.

December 31, 2021

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(Discount) Amortized

Cost Allowance for Credit Losses Unrealized

Cost Unrealized

(Loss), net Fair

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(Discount) Amortized

Cost Unrealized

Cost Allowance for Credit Losses Unrealized

(Loss), net Fair Value Period-

30 year fixed-rate 7,635,107 391,644 8,026,751 — 24,115 8,050,866 1.86 %

30 year fixed-rate 9,911,339 308,427 10,219,766 304,454 10,524,220 3.62 %

Hybrid ARM 55,024 602 55,626 1,267 56,893 3.46 %

Total Agency RMBS pass-through 7,635,107 391,644 8,026,751 — 24,115 8,050,866 1.86 %

1 unchanged sentence

19,634 ( 19,634 ) — — — — — %

Agency CMBS (3)

4,561,276 75,299 4,636,575 131,355 4,767,930 3.01 %

Non-Agency CMBS 112,549 ( 5,791 ) 106,758 ( 1,768 ) 4,593 109,583 9.40 %

4,464,525 ( 772,295 ) 3,692,230 131,244 3,823,474 5.16 %

Non-Agency RMBS (3)(4)(5)

790,627 ( 779,660 ) 10,967 — 766 11,733 7.83 %

858,244 19,945 878,189 45,483 923,672 2.78 %

Total 8,557,917 ( 413,441 ) 8,144,476 ( 1,768 ) 29,474 8,172,182 1.97 %

(1) Period-end weighted average yield is based on amortized cost as of December 31, 2020 and incorporates future prepayment and loss assumptions.

(2) Agency-CMO includes Agency IO which represent 56.3 % of principal/notional balance, 6.4 % of amortized cost and 6.4 % of fair value.

(3) Includes Agency CMBS purchase commitments with a fair value of approximately $ 96.2 million.

(4) Non-Agency CMBS includes interest-only securities which represent 13.1 % of principal/notional balance, 0.3 % of amortized cost and 0.3 % of fair value.

(2) All Agency-CMO are interest-only securities Agency IO.

(3) Non-Agency RMBS is 31.8 % variable rate, 67.3 % fixed rate and 0.9 % floating rate based on fair value.

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(5) Non-Agency RMBS includes non-Agency IO which represent 98.8 % of principal/notional balance, 49.3 % of amortized cost and 41.5 % of fair value.

(8) GSE CRT weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option that is recorded as realized and unrealized credit derivative income (loss), net.

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 December 31, 2021 and December 31, 2020.

We have elected the fair value option for all of our RMBS interest-only securities, our MBS purchased on or after September 1, 2016 and our GSE CRTs purchased on or after August 24, 2015.

As of December 31, 2020 and December 31, 2019, approximately 99 % and 80 %, respectively, of our MBS and GSE CRTs are accounted for under the fair value option.

Our percentage of MBS and GSE CRTs accounted for under the fair value option increased as of December 31, 2020 due to a change in portfolio composition.

During the first half of 2020, we sold MBS and GSE CRTs previously accounted for as available-for-sale securities to generate liquidity and reduce leverage given unprecedented market conditions as a result of the COVID-19 pandemic.

We resumed investing in Agency RMBS in July 2020 and elected the fair value option for these securities.

We have elected the fair value option for all of our RMBS interest-only securities and our MBS purchased on or after September 1, 2016.

As of December 31, 2021 and December 31, 2020, approximately 99 % of our MBS are accounted for under the fair value option.

December 31, 2021 December 31, 2020

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30 year fixed-rate — 7,701,523 7,701,523 — 8,050,866 8,050,866

30 year fixed-rate — 8,050,866 8,050,866 754,590 9,769,630 10,524,220

Hybrid ARM — — — 31,522 25,371 56,893

Total Agency RMBS pass-through — 7,701,523 7,701,523 — 8,050,866 8,050,866

Agency-CMO — 30,757 30,757 — — —

Agency CMBS — — — — 4,767,930 4,767,930

Non-Agency CMBS 62,909 — 62,909 109,583 — 109,583

Non-Agency RMBS 7,288 1,782 9,070 7,267 4,466 11,733

GSE CRT — — — 507,445 416,227 923,672

Total 70,197 7,734,062 7,804,259 116,850 8,055,332 8,172,182

The components of the carrying value of our MBS and GSE CRT portfolio at December 31, 2020 and 2019 are presented below.

The components of the carrying value of our MBS portfolio at December 31, 2021 and 2020 are presented below.

December 31, 2021 December 31, 2020

$ in thousands MBS and GSE

CRT Securities Interest-Only Securities Total MBS and GSE

CRT Securities Interest-Only Securities Total

$ in thousands MBS Interest-Only Securities Total MBS Interest-Only Securities Total

Principal/notional balance 7,584,812 618,603 8,203,415 7,757,491 800,426 8,557,917

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Fair value 7,771,694 32,565 7,804,259 8,167,312 4,870 8,172,182

(1) Gross unrealized gains and losses includes gains (losses) recognized in net income for securities accounted for as derivatives or under the fair value option as well as gains (losses) for available-for-sale securities which are recognized as adjustments to other comprehensive income.

(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 years ended December 31, 2021 and 2020 is provided below within this Note 4.

The following table summarizes our MBS and GSE CRT portfolio according to estimated weighted average life classifications as of December 31, 2020 and 2019.

The following table summarizes our MBS portfolio according to estimated weighted average life classifications as of December 31, 2021 and 2020.

$ in thousands December 31, 2021 December 31, 2020

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Total 7,804,259 8,172,182

The following tables present the estimated fair value and gross unrealized losses of our MBS and GSE CRTs by length of time that such securities have been in a continuous unrealized loss position at December 31, 2020 and 2019.

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 at December 31, 2021 and 2020.

December 31, 2021 Less than 12 Months 12 Months or More Total

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6,838,999 ( 60,741 ) 54 — — — 6,838,999 ( 60,741 ) 54

Non-Agency CMBS (2)

Agency-CMO (1)

21,810 ( 1,389 ) 5 — — — 21,810 ( 1,389 ) 5

2 unchanged sentences

Total 6,861,576 ( 63,262 ) 64 1,042 ( 1,073 ) 9 6,862,618 ( 64,335 ) 73

(1) Fair value option has been elected for all Agency RMBS in an unrealized loss position.

(2) Unrealized losses on non-Agency CMBS are included in accumulated other comprehensive income.

(1) Fair value option has been elected for all Agency securities in an unrealized loss position.

(2) Includes non-Agency IO with fair value of $ 1.7 million for which the fair value option has been elected.

Such securities have unrealized losses of $ 2.1 million.

The remaining $ 136,000 of unrealized losses on non-Agency RMBS 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) Fair value option has been elected for all non-Agency RMBS in an unrealized loss position.

December 31, 2020 Less than 12 Months 12 Months or More Total

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30 year fixed-rate 1,496,279 ( 4,108 ) 20 — — — 1,496,279 ( 4,108 ) 20

30 year fixed-rate 255,649 ( 207 ) 3 34,009 ( 256 ) 5 289,658 ( 463 ) 8

Hybrid ARM 434 ( 2 ) 1 1,524 ( 46 ) 3 1,958 ( 48 ) 4

Total Agency RMBS pass-through (1)

1,496,279 ( 4,108 ) 20 — — — 1,496,279 ( 4,108 ) 20

Agency-CMO (2)

67,875 ( 1,194 ) 15 6,155 ( 1,513 ) 13 74,030 ( 2,707 ) 28

Agency CMBS (3)

1,743,800 ( 50,521 ) 58 — — — 1,743,800 ( 50,521 ) 58

Non-Agency CMBS (2)

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2,681 ( 438 ) 6 1,612 ( 203 ) 7 4,293 ( 641 ) 13

77,044 ( 74 ) 4 — — — 77,044 ( 74 ) 4

Total 1,526,029 ( 4,965 ) 27 1,612 ( 203 ) 7 1,527,641 ( 5,168 ) 34

(1) Includes Agency RMBS with a fair value of $ 271.3 million for which the fair value option has been elected.

These securities have unrealized losses of $ 268,000 .

(2) Includes Agency IO and Agency-CMO with fair value of $ 11.1 million and $ 25.8 million, respectively, for which the fair value option has been elected.

These Agency IO and Agency-CMO securities have unrealized losses of $ 2.3 million and $ 134,000 , respectively.

(3) Fair value option has been elected for all securities in an unrealized loss position.

(4) Includes non-Agency CMBS with a fair value of $ 181.5 million for which the fair value option has been elected.

These securities have unrealized losses of $ 2.8 million.

(5) Includes non-Agency RMBS and non-Agency IO with a fair value of $ 17.6 million and $ 8.5 million, respectively, for which the fair value option has been elected.

These securities have unrealized losses of $ 261,000 and $ 3.7 million, respectively.

(6) Fair value option has been elected for all GSE CRT that are in an unrealized loss position.

(1) Fair value option has been elected for all Agency RMBS 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) Fair value option has been elected for all non-Agency RMBS in an unrealized loss position.

On January 1, 2020, we adopted accounting guidance that requires us to estimate an allowance for credit losses on available-for-sale securities in unrealized loss positions.

As of December 31, 2020, we have recorded an allowance for credit losses of $ 1.8 million on non-Agency CMBS on our consolidated balance sheet.

We recorded a $ 1.8 million provision for credit losses within (increase) decrease in provision for credit losses on our consolidated statement of operations during the year ended December 31, 2020.

Additionally, we recorded impairments of $ 94.1 million on our consolidated statement of operations during the year ended December 31, 2020 because we intended to sell or more likely than not would be required to sell the securities before recovery of amortized cost basis.

As of December 31, 2020, we had recorded an allowance for credit losses of $ 1.8 million on a single non-Agency CMBS on our consolidated balance sheet.

We recorded a $ 1.8 million decrease in the provision for credit losses on our consolidated statement of operations during the year ended December 31, 2021.

As of December 31, 2021, we do no t have an allowance for credit losses recorded on our consolidated balance sheet.

During the year ended December 31, 2020, we recorded impairments of $ 94.1 million on our consolidated statement of operations because we intended to sell or more likely than not would be required to sell the securities before recovery of amortized cost basis.

The following table presents a roll-forward of our allowance for credit losses.

$ in thousands Year Ended December 31,

$ in thousands Years Ended December 31,

Beginning allowance for credit losses ( 1,768 ) —

Additions to the allowance for credit losses on securities for which credit losses were not previously recorded — ( 1,768 )

Additional increases or decreases in the allowance for credit losses on securities that had an allowance recorded in a previous period 1,768 —

Ending allowance for credit losses — ( 1,768 )

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Underlying loan characteristics reviewed included, but were not limited to, delinquency status, loan-to-value ratios, borrower credit scores, occupancy status and geographic concentration.

The following table represents OTTI included in earnings for the years ended December 31, 2019 and 2018.

Years Ended December 31,

The following table represents OTTI included in earnings for the year ended December 31, 2019.

Year Ended December 31,

$ in thousands 2019

1 unchanged sentence

Non-Agency RMBS (1)

Total 7,731 7,846

(1) Amounts disclosed relate to credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income.

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Net unrealized gains (losses) on MBS and GSE CRT accounted for under the fair value option ( 85,702 ) ( 492,047 ) 624,158

Net unrealized gains (losses) on commercial loan and loan participation interest ( 1,164 ) — —

Net unrealized gains (losses) on commercial loan 417 ( 1,164 ) —

Realized loss on loan participation interest — ( 3,808 ) —

Net unrealized gains (losses) on trading securities — — ( 21 )

Total gain (loss) on investments, net ( 366,509 ) ( 961,938 ) 624,466

The following tables present components of interest income recognized on our MBS and GSE CRT portfolio for the years ended December 31, 2021, 2020 and 2019.

GSE CRT interest income excludes coupon interest associated with embedded derivatives not accounted for under the fair value option of $ 6.3 million, $ 20.8 million and $ 22.5 million for the years ended December 31, 2020, 2019 and 2018, respectively, that is recorded as realized and unrealized credit derivative income (loss), net.

GSE CRT interest income excludes coupon interest associated with embedded derivatives not accounted for under the fair value option of $ 6.3 million and $ 20.8 million for the years ended December 31, 2020 and 2019, respectively, that was recorded as realized and unrealized credit derivative income (loss), net.

For the Year ended December 31, 2021

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Agency RMBS 201,694 ( 41,881 ) 159,813

Agency CMBS 35,822 ( 1,744 ) 34,078

Non-Agency CMBS 3,841 2,695 6,536

Non-Agency RMBS 1,950 ( 1,264 ) 686

GSE CRT 10,232 ( 2,560 ) 7,672

Other 21 — 21

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$ in thousands December 31, 2021 December 31, 2020

FHLBI stock — 74,250

Loan participation interest — 44,654

Commercial loan, held-for-investment 23,515 23,098

2 unchanged sentences

Total 37,509 41,163

IAS Services LLC, our wholly-owned captive insurance subsidiary, was required to purchase and hold FHLBI stock as a condition of membership in the FHLBI.

During the year ended December 31, 2020, FHLBI fully redeemed our stock at cost in connection with the repayment of our secured loans.

We terminated our FHLBI membership in the third quarter of 2020.

IAS Services LLC was dissolved in December 2020.

We sold our participation interest in a secured loan collateralized by mortgage servicing rights for $ 21.6 million in April 2020.

We recorded a realized loss of $ 3.8 million upon sale of the participation interest.

The weighted average asset yield for the participation interest was 5.82 % as of December 31, 2019.

We have an investment in a commercial loan that matures in February 2021.

Refer to Note 16 – “Subsequent Events” for additional information on the contractual maturity of our commercial loan.

The loan had a weighted average coupon rate of 8.65 % as of December 31, 2020 ( 10.19 % as of December 31, 2019 ).

As discussed in Note 2 - “Summary of Significant Accounting Policies”, we elected the fair value option for this loan on January 1, 2020.

We recorded unrealized losses of $ 1.2 million on this loan in our consolidated statement of operations during the year ended December 31, 2020 based on a discounted cash flow valuation prepared by an independent pricing service.

We previously reported this loan on our consolidated balance sheet at amortized cost.

In March 2021, we agreed to extend the contractual maturity of our commercial loan investment from February 2021 to February 2022 at the request of the borrower.

The borrower continues to make current interest payments on the loan and posted additional cash reserves in connection with the loan modification.

The loan had a principal balance of $ 23.9 million as of December 31, 2021 and 2020 and a weighted average coupon rate of 8.60 % as of December 31, 2021 and 8.65 % as of

December 31, 2020.

We recorded unrealized gains of $ 417,000 and unrealized losses of $ 1.2 million on this loan in our consolidated statements of operations during the years ended December 31, 2021 and December 31, 2020, respectively.

In February 2022, we received a request from the borrower to extend the contractual maturity of our commercial loan investment to May 29, 2022.

Refer to Note 15 - "Subsequent Events" for additional information.

We have invested in unconsolidated ventures that are managed by an affiliate of our Manager.

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Rate Weighted

Repurchase Agreements:

Agency RMBS 9,666,964 1.95 % 46

Agency CMBS 4,246,359 1.95 % 43

Non-Agency CMBS 2,041,968 2.71 % 14

Non-Agency RMBS 790,412 2.65 % 16

GSE CRT 753,110 2.70 % 13

Loan Participation Interest 33,490 3.22 % 240

Total Repurchase Agreements 17,532,303 2.11 % 39

Secured Loans 1,650,000 1.93 % 1587

Repurchase Agreements - Agency RMBS 7,228,699 0.21 % 14

Total Borrowings 7,228,699 0.21 % 14

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As of May 7, 2020, we repaid all of our repurchase agreements that may have been in default.

Gains and losses associated with the termination of these repurchase agreements are reported as a net gain (loss) on extinguishment of debt in our consolidated statement of operations.

Gains and losses associated with the termination of these repurchase agreements during the year ended December 31, 2020 are reported as net gain (loss) on extinguishment of debt in our consolidated statement of operations.

We resumed financing the purchase of Agency RMBS with repurchase agreements in July 2020.

These repurchase agreements generally bear interest at a contractually agreed upon rate and have maturities of approximately one month .

These repurchase agreements generally bear interest at a contractually agreed upon rate and have maturities of approximately one to six months .

Repurchase agreements are accounted for as secured borrowings since we maintain effective control of the financed assets.

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We were in compliance with all of these covenants as of December 31, 2021.

Secured Loans

During the year ended December 31, 2020, IAS Services LLC, our former wholly-owned captive insurance subsidiary, fully repaid its outstanding secured loans from the FHLBI.

In April 2020, the FHLBI modified the terms of our secured loans because we were not in compliance with all of the financial covenants of our secured loan agreements as of March 31, 2020.

The modified loan terms required repayment of our secured loans by December 2020 but allowed for prepayment at any time without penalty.

These loans had a variable rate based on the FHLBI's short-term cost of funds.

For the year ended December 31, 2020, weighted average borrowings under our secured loans were $ 587.1 million with a weighted average borrowing rate of 1.47 %.

Exchangeable Senior Notes

During the year ended December 31, 2018, we retired $ 143.4 million of our Exchangeable Senior Notes for a repurchase price of $ 143.4 million and realized a net loss on extinguishment of debt of $ 26,000 .

Note 7 – Collateral Positions

The following table summarizes the fair value of collateral that we pledged and held under our repurchase agreements, secured loans, interest rate swaps, currency forward contracts, and TBAs as of December 31, 2020 and 2019.

The following table summarizes the fair value of collateral that we pledged and held under our repurchase agreements, interest rate swaps, currency forward contracts, and TBAs as of December 31, 2021 and 2020.

Refer to Note 2 - “Summary of Significant Accounting Policies - Fair Value Measurements” for a description of how we determine fair value.

MBS and GSE CRT collateral pledged is included in mortgage-backed and credit risk transfer securities on our consolidated balance sheets.

Loan participation interest collateral pledged was included in other assets on our consolidated balance sheets.

Cash collateral pledged on secured loans, centrally cleared interest rate swaps and currency forward contracts is classified as restricted cash on our consolidated balance sheets.

MBS collateral pledged is included in mortgage-backed securities on our consolidated balance sheets.

Cash collateral pledged on centrally cleared interest rate swaps and currency forward contracts is classified as restricted cash on our consolidated balance sheets.

Cash collateral pledged on repurchase agreements and TBAs accounted for as derivatives is classified as due from counterparties on our consolidated balance sheets.

Agency CMBS purchase commitments that are recorded as mortgage-backed and credit risk transfer securities on our consolidated balance sheets cannot be pledged as collateral until these securities settle.

We held approximately $ 96.2 million of these securities as of December 31, 2019.

We did no t have any Agency CMBS purchase commitments as of December 31, 2020.

Cash collateral held on repurchase agreements that is not restricted for use is included in cash and cash equivalents on our consolidated balance sheets and the liability to return the collateral is included in collateral held payable.

Cash collateral held that is not restricted for use is included in cash and cash equivalents on our 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.

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Agency RMBS 7,326,175 7,614,935

Agency CMBS — 4,446,384

Non-Agency CMBS — 2,549,841

Non-Agency RMBS — 943,176

GSE CRT — 918,117

Loan participation interest — 44,654

Cash 3,527 700

Total repurchase agreements collateral pledged 7,329,702 7,615,635

Secured Loans:

Agency RMBS — 621,471

Non-Agency CMBS — 1,276,418

Restricted cash — 600

Total secured loans collateral pledged — 1,898,489

Interest Rate Swaps, Currency Forward Contracts and TBAs:

Agency RMBS — 189,780

Derivative instruments:

Cash 4,458 378

Restricted cash 219,918 244,573

Total interest rate swaps, currency forward contracts and TBAs collateral pledged 244,951 306,175

Total derivative instruments collateral pledged 224,376 244,951

Total collateral pledged:

Mortgage-backed and credit risk transfer securities 7,614,935 21,132,742

Loan participation interest — 44,654

Agency RMBS 7,326,175 7,614,935

Cash 7,985 1,078

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Repurchase Agreements:

Cash 1,916 10

Non-cash collateral 248 4,226

Total repurchase agreements collateral held 248 6,142

Interest Rate Swaps and TBAs:

Derivative instruments:

Cash 280 1,630

Total interest rate swap and currency forward contracts collateral held 1,630 160

Total derivative instruments collateral held 280 1,630

Total collateral held:

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We intend to maintain a level of liquidity that will enable us to meet margin calls.

As of December 31, 2020, our repurchase agreement collateral ratio (MBS pledged as collateral/ amount outstanding) was 105 %.

As of December 31, 2019, our repurchase agreement collateral ratio (MBS, GSE CRTs and a loan participation interest pledged as collateral/ amount outstanding) was 109 %.

Secured Loans

Collateral pledged with the FHLBI was held in trust for the benefit of the FHLBI and was not commingled with our other assets.

The FHLBI retained the right to mark the underlying collateral for FHLBI advances to fair value as determined by the FHLBI in its sole discretion.

We repaid the outstanding balance of our secured loans during the year ended December 31, 2020 and did not have any secured loans outstanding as of December 31, 2020.

As of December 31, 2021 and 2020, our repurchase agreement collateral ratio (MBS pledged as collateral/ repurchase agreement amount outstanding) was 105 %.

Interest Rate Swaps

As of December 31, 2020 and 2019, all of our interest rate swaps are centrally cleared by a registered clearing organization such as the Chicago Mercantile Exchange (“CME”) and LCH Limited (“LCH”) through a Futures Commission Merchant (“FCM”).

As of December 31, 2021 and 2020, 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.

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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 derivative instruments, net in our consolidated statements of operations.

Our FCM agreements include cross default provisions.

Certain of our FCM agreements include cross default provisions.

TBAs and Currency Forward Contracts

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The following table summarizes changes in the notional amount of our derivative instruments during 2021:

$ in thousands Notional Amount as of December 31, 2019 Additions Settlement,

or Exercise Notional Amount as

$ in thousands Notional Amount as of December 31, 2020 Additions (1)

or Exercise (1)

Notional Amount as

of December 31, 2021

Interest Rate Swaps (2)(3)

Currency Forward Contracts

6,300,000 4,250,000 ( 2,500,000 ) 8,050,000

Credit Derivatives

464,966 — ( 464,966 ) —

Interest Rate Swaptions — 1,000,000 ( 1,000,000 ) —

Currency Forward Contracts 33,084 65,279 ( 84,767 ) 13,596

TBA Purchase Contracts 1,700,000 23,125,000 ( 23,225,000 ) 1,600,000

— 8,800,000 ( 7,100,000 ) 1,700,000

TBA Sale Contracts — ( 23,225,000 ) 23,225,000 —

— ( 5,600,000 ) 5,600,000 —

Total 8,033,084 5,215,279 ( 3,584,767 ) 9,663,596

(1) Excludes $ 7.3 billion of additions and terminations related to the transition of our interest rate swaps that were indexed to LIBOR to interest rate swaps that are indexed to SOFR.

These transactions were accounted for under the FASB's reference rate reform relief.

Refer to Note 2 - “Summary of Significant Accounting Policies” for additional information.

(2) Notional amount as of December 31, 2021 excludes $ 1.3 billion of interest rate swaps with forward start dates.

(3) Notional amount as of December 31, 2021 includes $ 6.3 billion of interest rate swaps whereby we pay interest at a fixed rate and receive interest at a floating rate and $ 1.8 billion of interest rate swaps whereby we pay interest at a floating rate and receive interest at a fixed rate.

Refer to Note 7 - “Collateral Positions” for further information regarding our collateral pledged to and received from our derivative counterparties.

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To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy.

Under the terms of our interest rate swap contracts, we make fixed-rate payments to a counterparty in exchange for the receipt of variable-rate amounts over the life of the agreements without exchange of the underlying notional amount.

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 variable-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 AOCI before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements.

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$ 52.1 million) of net unrealized gains on discontinued cash flow hedges are still included in accumulated other comprehensive income and will be reclassified to interest expense, repurchase agreements over a period of time through December 15, 2023.

As of December 31, 2020 and 2019, we had interest rate swaps with the following maturities outstanding:

As of December 31, 2021 and 2020, we had interest rate swaps whereby we pay interest at a fixed rate and receive interest at a floating rate, excluding interest rate swaps with forward start dates, with maturities as shown in the table below.

Floating rate interest on swaps held as of December 31, 2021 was based on SOFR and floating rate interest on swaps held as of December 31, 2020 was based on 1-month LIBOR.

$ in thousands As of December 31, 2021

Maturities Notional Amount (1)

Weighted Average Fixed Pay Rate Weighted Average Receive Rate Weighted Average Years to Maturity

2024 1,000,000 0.16 % 0.15 % 3.6

2025 1,250,000 0.23 % 0.15 % 4.6

Thereafter 4,050,000 0.53 % 0.15 % 8.1

Maturities Notional Amount Weighted Average Fixed Pay Rate Weighted Average Floating Receive Rate Weighted Average Years to Maturity

Less than 3 years 1,000,000 0.06 % 0.05 % 2.6

3 to 5 years 1,250,000 0.12 % 0.05 % 3.6

5 to 7 years 2,225,000 0.32 % 0.05 % 5.9

7 to 10 years 1,825,000 0.52 % 0.05 % 8.6

Total 6,300,000 0.30 % 0.05 % 5.7

$ in thousands As of December 31, 2020

Maturities Notional Amount (2)

Weighted Average Fixed Pay Rate Weighted Average Receive Rate Weighted Average Years to Maturity

2020 1,900,000 1.67 % 1.84 % 0.6

2021 2,500,000 1.40 % 1.77 % 1.3

2022 800,000 1.53 % 1.91 % 2.9

2023 2,400,000 1.44 % 1.72 % 3.9

2024 900,000 1.49 % 1.76 % 4.8

Thereafter 5,500,000 1.44 % 1.78 % 9.5

Maturities Notional Amount Weighted Average Fixed Pay Rate Weighted Average Floating Receive Rate Weighted Average Years to Maturity

3 to 5 years 2,250,000 0.20 % 0.15 % 4.2

5 to 7 years 1,775,000 0.43 % 0.15 % 6.7

7 to 10 years 2,275,000 0.60 % 0.15 % 9.2

Total 6,300,000 0.41 % 0.15 % 6.7

(1) Notional amount includes $ 6.3 billion of interest rate swaps that receive variable payments based on 1-month LIBOR as of December 31, 2020.

(2) Notional amount includes $ 10.7 billion of interest rate swaps that receive variable payments based on 1-month LIBOR and $ 3.3 billion of interest rate swaps that receive variable payments based on 3-month LIBOR as of December 31, 2019.

Futures and Currency Forward Contracts

As of December 31, 2021, we held $ 1.3 billion notional amount of interest rate swaps with forward start dates that will receive floating interest based on SOFR with a weighted average maturity of 20.8 years and a weighted average fixed pay rate of 0.99 %.

We did not hold any interest rate swaps with forward start dates as of December 31, 2020.

As of December 31, 2021, we had interest rate swaps whereby we pay floating interest based on SOFR and receive interest at a fixed rate with maturities as shown in the table below.

We did not hold any interest rate swaps that paid floating interest as of December 31, 2020.

$ in thousands As of December 31, 2021

Maturities Notional Amounts Weighted Average Floating Pay Rate Weighted Average Fixed Receive Rate Weighted Average Years to Maturity

Less than 3 years 1,000,000 0.05 % 0.77 % 2.6

5 to 7 years 500,000 0.05 % 1.26 % 6.9

7 to 10 years 250,000 0.05 % 1.27 % 10.0

Total 1,750,000 0.05 % 0.98 % 4.9

Swaptions, Futures and Currency Forward Contracts

We periodically purchase interest rate swaptions to help mitigate the potential impact of increases or decreases in interest rates on the performance of our Agency RMBS portfolio (referred to as “convexity risk”).

The interest rate swaptions provide us the option to enter into interest rate swap agreements for a predetermined notional amount, stated term and pay and receive interest rates in the future.

The premium paid for interest rate swaptions is reported as a derivative asset in our consolidated balance sheets.

The premium is valued at an amount equal to the fair value of the swaption that would have the effect of closing the position adjusted for nonperformance risk, if any.

The difference between the premium and the fair value of the swaption is reported in gain (loss) on derivative instruments, net in our consolidated statements of operations.

If an interest rate swaption expires unexercised, the loss on the interest rate swaption would equal the premium paid.

If we sell or exercise an interest rate swaption, the realized gain or loss on the interest rate swaption would equal the difference between the cash or the fair value of the underlying interest rate swap received and the premium paid.

We purchase or sell futures contracts to help mitigate the potential impact of changes in interest rates on the performance of our investment portfolio.

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Embedded derivatives associated with GSE CRTs were recorded within mortgage-backed and credit risk transfer securities, at fair value, on our consolidated balance sheets.

We did not hold any GSE CRTs that were accounted for as hybrid financial instruments as of December 31, 2020.

As of December 31, 2019, terms of the GSE CRT embedded derivatives were:

$ in thousands December 31, 2019

Fair value amount 10,281

Notional amount 464,966

Maximum potential amount of future undiscounted payments 464,966

We did not hold any GSE CRTs that were accounted for as hybrid financial instruments as of December 31, 2021 and 2020.

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.

The following table summarizes certain characteristics of our TBAs accounted for as derivatives as of December 31, 2020.

We did not hold any such instruments as of December 31, 2019.

The following table summarizes certain characteristics of our TBAs accounted for as derivatives as of December 31, 2021 and 2020.

$ in thousands As of December 31, 2021

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TBA purchase contracts 1,600,000 1,636,906 1,633,955 ( 2,951 )

Net TBA derivatives 1,700,000 1,772,211 1,782,104 9,893

$ in thousands As of December 31, 2020

Notional Amount Implied Cost Basis Implied Market Value Net Carrying Value

TBA purchase contracts 1,700,000 1,772,211 1,782,104 9,893

Tabular Disclosure of the Effect of Derivative Instruments on the Balance Sheet

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GSE CRT Embedded Derivatives — 20,833 ( 12,490 ) 8,343

$ in thousands Year Ended December 31, 2018

not designated as

hedging instrument Realized gain (loss), net GSE CRT embedded derivative coupon interest Unrealized

gain (loss), net Realized and unrealized credit derivative income (loss), net

GSE CRT Embedded Derivatives — 22,478 ( 22,629 ) ( 151 )

The following tables summarize the effect of interest rate swaps, futures contracts, currency forward contracts and TBAs reported in gain (loss) on derivative instruments, net on the consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018.

The following tables summarize the effect of interest rate swaps, swaptions, futures contracts, currency forward contracts and TBAs reported in gain (loss) on derivative instruments, net on the consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019.

$ in thousands Year ended December 31, 2021

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Interest Rate Swaps 185,232 ( 15,803 ) ( 5,869 ) 163,560

Interest Rate Swaptions ( 553 ) — — ( 553 )

Currency Forward Contracts 209 — 970 1,179

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Interest Rate Swaps ( 857,753 ) 8,047 ( 24,068 ) ( 873,774 )

Future Contracts ( 157,929 ) — 7,836 ( 150,093 )

Currency Forward Contracts ( 1,301 ) — ( 345 ) ( 1,646 )

TBAs 14,477 — 9,893 24,370

Total ( 844,577 ) 8,047 ( 14,520 ) ( 851,050 )

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Interest Rate Swaps ( 440,626 ) 35,840 18,826 ( 385,960 )

Future Contracts ( 86,318 ) — ( 7,836 ) ( 94,154 )

Futures Contracts ( 157,929 ) — 7,836 ( 150,093 )

Currency Forward Contracts 1,478 — ( 180 ) 1,298

TBAs ( 17 ) — — ( 17 )

Total ( 597,077 ) 35,840 26,482 ( 534,755 )

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Our derivative liability of $ 11.4 million at December 31, 2021 (December 31, 2020:

asset of $ 18.5 million) related to centrally cleared interest rate swaps is not included in the table below as a result of this characterization of daily variation margin.

liability of $ 5.5 million) 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 December 31, 2021

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10,004 — 10,004 ( 111 ) ( 1,630 ) 8,263

Repurchase Agreements (3)

Total Assets 10,004 — 10,004 ( 111 ) ( 1,630 ) 8,263

Derivatives (1) (2)

( 807 ) — ( 807 ) 111 610 ( 86 )

Secured Loans (4)

Repurchase Agreements (3)

( 7,228,699 ) — ( 7,228,699 ) 7,228,699 — —

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(1) Amounts represent derivative assets and derivative liabilities which could potentially be offset against other derivative assets, derivative liabilities and cash collateral pledged or received.

(2) The fair value of securities pledged as initial margin against our centrally cleared swaps was $ 189.8 million as of December 31, 2019.

(2) Cash collateral pledged by us on our currency forward contracts, TBAs and centrally cleared interest rate swaps was $ 224.4 million and $ 245.0 million at December 31, 2021 and December 31, 2020, respectively.

Cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps and is therefore excluded from the tables above.

We held cash collateral on our derivatives of $ 1.6 million and $ 160,000 as of December 31, 2020 and December 31, 2019, respectively.

We held cash collateral on our derivatives of $ 280,000 and $ 1.6 million as of December 31, 2021 and December 31, 2020, respectively.

(3) The fair value of securities pledged against our borrowing under repurchase agreements was $ 7.3 billion and $ 7.6 billion at December 31, 2021 and December 31, 2020, respectively.

We pledged cash collateral of $ 700,000 and $ 32.6 million under repurchase agreements as of December 31, 2020 and December 31, 2019, respectively.

We held cash collateral of $ 1.9 million and $ 10,000 under repurchase agreements as of December 31, 2020 and December 31, 2019, respectively.

(4) The fair value of securities pledged against borrowings under our secured loans was $ 1.9 billion at December 31, 2019.

We pledged cash collateral against secured loans of $ 600,000 as of December 31, 2019.

We pledged cash collateral of $ 3.5 million and $ 700,000 under repurchase agreements as of December 31, 2021 and December 31, 2020, respectively.

We held no cash collateral and $ 1.9 million of cash collateral under repurchase agreements as of December 31, 2021 and December 31, 2020, respectively.

Note 10 – Fair Value of Financial Instruments

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$ in thousands Level 1 Level 2 Level 3 NAV as a practical expedient (2)

Mortgage-backed and credit risk transfer securities (1)

Mortgage-backed securities (1)

— 7,804,259 — — 7,804,259

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$ in thousands Level 1 Level 2 Level 3 NAV as a practical expedient (2)

Mortgage-backed and credit risk transfer securities (1)(2)

Mortgage-backed securities (1)

— 8,172,182 — — 8,172,182

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Total liabilities — 6,344 — — 6,344

(1) For more detail about the fair value of our MBS and GSE CRTs, refer to Note 4 - “Mortgage-Backed and Credit Risk Transfer Securities.”

(2) Our GSE CRTs purchased before August 24, 2015 were accounted for as hybrid financial instruments with an embedded derivative.

The hybrid financial instruments consisted of debt host contracts classified as Level 2 and embedded derivatives classified as Level 3.

We did not hold any GSE CRTs accounted for as hybrid financial instruments as of December 31, 2020.

As of December 31, 2019, the net embedded derivative asset position of $ 10.3 million includes $ 19.5 million of embedded derivatives in an asset position and $ 9.2 million of embedded derivatives in a liability position.

(1) For more detail about the fair value of our MBS, refer to Note 4 - “Mortgage-Backed and Credit Risk Transfer Securities.”

(2) Investments in unconsolidated ventures are valued using the net asset value (“NAV”) as a practical expedient and are not subject to redemption, although investors may sell or transfer their interest at the approval of the general partner of the underlying funds.

As of December 31, 2020 and December 31, 2019, the weighted average remaining term of our investments in unconsolidated ventures is 1.5 years and 2.2 years, respectively.

(4) Includes $ 44.7 million of a loan participation interest as of December 31, 2019 and $ 23.1 million of a commercial loan as of December 31, 2020.

We elected the fair value option for our commercial loan as of January 1, 2020 and valued the loan based on a third party appraisal as of December 31, 2020.

We sold our loan participation interest on April 1, 2020.

The following table shows a reconciliation of the beginning and ending fair value measurements of our GSE CRT embedded derivatives, which we have valued utilizing Level 3 inputs:

$ in thousands December 31, 2020 December 31, 2019

As of December 31, 2021, both of the unconsolidated ventures are in liquidation and plan to sell or settle their remaining investments as expeditiously as possible.

(3) Includes $ 23.5 million and $ 23.1 million of a commercial loan investment as of December 31, 2021 and 2020, respectively.

We elected the fair value option for our commercial loan investment as of January 1, 2020 and valued the loan based on a third party appraisal as of December 31, 2021 and 2020.

The following table shows a reconciliation of the beginning and ending fair value measurements of our GSE CRT embedded derivatives which we valued utilizing Level 3 inputs:

$ in thousands December 31, 2020

Beginning balance 10,281

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Unrealized credit derivative gains (losses), net ( 10,281 )

( 10,281 ) ( 12,490 )

Ending balance —

(1) Included in realized and unrealized credit derivative income (loss), net in the consolidated statements of operations is $ 12.5 million in net unrealized losses attributable to assets still held as of December 31, 2019, respectively.

The following table shows a reconciliation of the beginning and ending fair value measurements of our loan participation interest, which we have valued utilizing Level 3 inputs:

$ in thousands December 31, 2020 December 31, 2019

The following table shows a reconciliation of the beginning and ending fair value measurements of our loan participation interest which we valued utilizing Level 3 inputs:

$ in thousands December 31, 2020

Beginning balance 44,654

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Sales ( 21,577 )

Total net gains and losses included in net income:

Total net gains (losses) included in net income:

Realized losses ( 3,808 )

Ending balance —

Realized losses on our loan participation interest are included in gain (loss) on investments, net in our consolidated statements of operations.

The following table shows a reconciliation of the beginning balance of our commercial loan and ending balance at fair value, which we have valued utilizing Level 3 inputs:

$ in thousands December 31, 2020

Realized losses on our loan participation interest were included in gain (loss) on investments, net in our consolidated statements of operations.

The following table shows a reconciliation of the beginning and ending balance of our commercial loan investment which we have valued utilizing Level 3 inputs:

$ in thousands December 31, 2021 December 31, 2020

Beginning balance 23,098 24,055

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Repayments — ( 136 )

Total net unrealized losses included in net income:

Unrealized losses ( 1,163 )

Total net unrealized gains (losses) included in net income:

Unrealized gain (loss) 417 ( 1,163 )

Ending balance 23,515 23,098

Unrealized losses on our commercial loan are included in gain (loss) on investments, net in our consolidated statements of operations.

The following tables summarize significant unobservable inputs used in the fair value measurement of our GSE CRT embedded derivatives:

Fair Value at

$ in thousands December 31, 2019 Valuation Technique Unobservable Input Range Weighted Average

GSE CRT Embedded Derivatives 10,281 Market Comparables, Vendor Pricing Weighted average life 1.1 - 4.2 years

These significant unobservable inputs change according to market conditions and security performance.

We estimate the weighted average life of GSE CRTs to identify GSE corporate debt with a similar maturity.

We obtain our weighted average life estimates from a third party provider.

Although weighted average life is a significant input, changes in weighted average life may not have an explicit directional impact on the fair value measurement.

The following table summarizes the significant unobservable input used in the fair value measurement of our commercial loan:

Unrealized gain (loss) on our commercial loan investment are included in gain (loss) on investments, net in our consolidated statements of operations.

We elected the fair value option for this loan on January 1, 2020 when we implemented the new accounting guidance for how entities report credit losses for assets measured at amortized cost.

The following table summarizes the significant unobservable input used in the fair value measurement of our commercial loan investment:

Fair Value at Valuation Unobservable

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Commercial Loan 23,515 Discounted Cash Flow Discount rate 18.8 %

Fair Value at Valuation Unobservable

$ in thousands December 31, 2020 Technique Input Rate

Commercial Loan 23,098 Discounted Cash Flow Discount rate 29.9 %

The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the consolidated balance sheets at December 31, 2021 and December 31, 2020:

4 unchanged sentences

Value Estimated

Financial Assets:

Commercial loan, held-for-investment (1)

N/A N/A 24,055 24,397

FHLBI stock — — 74,250 74,250

Total — — 98,305 98,647

Financial Liabilities:

Repurchase agreements 6,987,834 6,987,806 7,228,699 7,228,719

Secured loans — — 1,650,000 1,650,000

Total 6,987,834 6,987,806 7,228,699 7,228,719

(1) The carrying value and estimated fair value of our commercial loan as of December 31, 2020 are not applicable for disclosure in this table because we elected the fair value option for our commercial loan on January 1, 2020.

The following describes our methods for estimating the fair value for financial instruments not carried at fair value on the consolidated balance sheets.

• The estimated fair value of our commercial loan held-for-investment, included in “Other assets” on our consolidated balance sheets as of December 31, 2019, is a Level 3 fair value measurement.

The fair value was determined by an independent pricing service using a discounted cash flow analysis.

• The estimated fair value of FHLBI stock, included in “Other assets” on our consolidated balance sheets as of December 31, 2019, is a Level 3 fair value measurement.

The cost of the FHLBI stock approximated its fair value because it could only be sold back to the FHLBI at its discretion at par.

FHLBI redeemed our stock at cost in connection with the repayment of our secured loans.

We terminated our membership in FHLBI in the third quarter of 2020.

• 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.

• The estimated fair value of secured loans is a Level 3 fair value measurement.

As of December 31, 2019, the secured loans had floating rates based on an index plus a spread and the spread was typically consistent with those demanded in the market.

Accordingly, the interest rates on these secured loans were at market, and thus the carrying amount approximated fair value.

We fully repaid our secured loans during the year ended December 31, 2020.

Note 11 – Related Party Transactions

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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.

During the year ended December 31, 2020, we reimbursed our Manager $ 968,000 (2019:

During the year ended December 31, 2021, we reimbursed our Manager $ 1.1 million (2020:

$ 1.1 million;

$ 917,000 ) for costs of support personnel.

We have invested $ 1.9 million as of December 31, 2020 (2019:

$ 154.0 million) in money market or mutual funds managed by affiliates of our Manager.

We invested $ 1.9 million in money market or mutual funds managed by affiliates of our Manager as of December 31, 2020.

The investments are reported as cash and cash equivalents on our consolidated balance sheets as they are highly liquid and have original or remaining maturities of three months or less when purchased.

We did not have any investments in money market of mutual funds managed by affiliates of our Manager as of December 31, 2021.

During the year ended December 31, 2020, we sold non-Agency CMBS to affiliates of our Manager for cash proceeds of $ 40.0 million and recognized a realized gain of $ 4.1 million.

Management Fee

Effective October 1, 2019, our management fee is equal to 1.50 % of our stockholders' equity per annum.

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.

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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, filing fees, and miscellaneous general and administrative costs.

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.

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Preferred Stock

Holders of our Series A 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.

Dividends are cumulative and payable quarterly in arrears.

On June 16, 2021, we redeemed all issued and outstanding shares of our Series A Preferred Stock for $ 140.0 million plus accrued and unpaid dividends.

The cash redemption price for each share of Series A Preferred Stock was $ 25.00 .

The excess of the consideration transferred over carrying value was accounted for as a deemed dividend and resulted in a reduction of $ 4.7 million in net income (loss) attributable to common stockholders during the year ended December 31, 2021.

Prior to redemption, holders of our Series A Preferred Stock were 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.

Dividends were cumulative and payable quarterly in arrears.

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.

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Dividends are cumulative and payable quarterly in arrears.

As of July 2017, we have the option to redeem shares of our Series A Preferred Stock for $ 25.00 per share, plus any accumulated and unpaid dividends through the date of redemption.

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.

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We have not sold any shares of preferred stock under the equity distribution agreement.

As of December 31, 2020, we may sell up to 37,610,000 shares of our common stock from time to time in at-the-market or privately negotiated transactions.

These shares are registered with the SEC under our shelf registration statement (as amended and/or supplemented).

In February 2021, we completed a public offering of 27,600,000 shares of common stock at the price of $ 3.75 per share.

Total net proceeds were approximately $ 103.1 million after deducting offering expenses.

In June 2021, we completed a public offering of 43,125,000 shares of common stock at the price of $ 3.39 per share.

Total net proceeds were approximately $ 145.9 million after deducting offering expenses.

As of December 31, 2021, we may sell up to 56,865,980 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 year ended December 31, 2021, we sold 55,744,020 shares (2020:

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$ 73.7 million) net of approximately $ 2.6 million (2020:

$ 846,000 ) in commissions and fees.

$ 1.2 million) in commissions and fees.

In May 2021, we granted 127,115 restricted shares of common stock to our independent directors.

The restricted shares will become unrestricted shares of common stock on the first anniversary of the grant date unless forfeited, subject to certain conditions that accelerate vesting.

Share Repurchase Program

During the year ended December 31, 2020 and December 31, 2019, we did not repurchase any shares of our common stock.

During the year ended December 31, 2018, we repurchased 75,100 shares of our common stock as described in Note 14 “Note 14 - Non-Controlling Interest - Operating Partnership”.

During the years ended December 31, 2021 and December 31, 2020, we did not repurchase any shares of our common stock.

As of December 31, 2021, we had authority to purchase 18,163,982 shares of our common stock through our share repurchase program.

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$ in thousands Equity method investments Available-for-sale securities Derivatives and hedging Total

Total other comprehensive income (loss), net:

Total other comprehensive income (loss)

Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net — 756 — 756

Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net — 13,940 — 13,940

Reclassification of unrealized loss on available-for-sale securities to (increase) decrease in provision for credit losses 1,768 1,768

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense — — ( 22,000 ) ( 22,000 )

Currency translation adjustments on investment in unconsolidated venture ( 75 ) — — ( 75 )

Total other comprehensive income (loss), net 1,144 ( 207,708 ) ( 23,794 ) ( 230,358 )

Total other comprehensive income (loss) ( 75 ) 756 ( 22,000 ) ( 21,319 )

AOCI balance at beginning of period 499 5,993 52,113 58,605

Total other comprehensive income/(loss), net 1,144 ( 207,708 ) ( 23,794 ) ( 230,358 )

Total other comprehensive income (loss) ( 75 ) 756 ( 22,000 ) ( 21,319 )

AOCI balance at end of period 424 6,749 30,113 37,286

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$ in thousands Equity method investments Available-for-sale securities Derivatives and hedging Total

Total other comprehensive income (loss), net:

Total other comprehensive income (loss)

Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net — ( 223,416 ) — ( 223,416 )

Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net — 13,940 — 13,940

Reclassification of unrealized loss on available-for-sale securities to (increase) decrease in provision for credit losses — 1,768 — 1,768

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense — — ( 23,794 ) ( 23,794 )

Currency translation adjustments on investment in unconsolidated venture 1,144 — — 1,144

Total other comprehensive income (loss), net ( 1,158 ) 93,037 ( 23,729 ) 68,150

Total other comprehensive income (loss) 1,144 ( 207,708 ) ( 23,794 ) ( 230,358 )

AOCI balance at beginning of period ( 645 ) 213,701 75,907 288,963

Total other comprehensive income/(loss), net ( 1,158 ) 93,037 ( 23,729 ) 68,150

Total other comprehensive income (loss) 1,144 ( 207,708 ) ( 23,794 ) ( 230,358 )

AOCI balance at end of period 499 5,993 52,113 58,605

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Series A Preferred Stock Per Share In Aggregate Date of Payment

February 19, 2021 0.4844 2,713 April 26, 2021

November 5, 2020 0.4844 2,713 January 25, 2021

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March 17, 2020 0.4844 2,713 May 22, 2020

December 16, 2019 0.4844 2,712 January 27, 2020

September 16, 2019 0.4844 2,713 October 25, 2019

June 17, 2019 0.4844 2,712 July 25, 2019

March 18, 2019 0.4844 2,713 April 25, 2019

Dividends Declared

(1) On June 16, 2021, we paid a final dividend of $ 0.2691 per share ($ 1.5 million in aggregate) in connection with the redemption of our Series A Preferred Stock.

The final dividend was treated as a component of the redemption price for tax purposes.

$ in thousands, except per share amounts Dividends Declared

Series B Preferred Stock Per Share In Aggregate Date of Payment

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May 4, 2021 0.4844 3,004 June 28, 2021

February 18, 2020 0.4844 3,003 May 22, 2020

February 19, 2021 0.4844 3,003 March 29, 2021

November 5, 2020 0.4844 3,003 December 28, 2020

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May 9, 2020 0.4844 3,004 June 29, 2020

February 14, 2019 0.4844 3,003 March 27, 2019

Dividends Declared

February 18, 2020 0.4844 3,003 May 22, 2020

$ in thousands, except per share amounts Dividends Declared

Series C Preferred Stock Per Share In Aggregate Date of Payment

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May 4, 2021 0.46875 5,390 June 28, 2021

February 18, 2020 0.46875 5,391 May 22, 2020

February 19, 2021 0.46875 5,391 March 29, 2021

November 5, 2020 0.46875 5,391 December 28, 2020

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May 9, 2020 0.46875 5,390 June 29, 2020

February 14, 2019 0.46875 5,391 March 27, 2019

Common Stock Dividends Declared

Per Share In Aggregate Date of Payment

February 18, 2020 0.46875 5,391 May 22, 2020

$ in thousands, except per share amounts Dividends Declared

Common Stock Per Share In Aggregate Date of Payment

December 27, 2021 0.09 29,689 January 27, 2022

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June 23, 2021 0.09 26,071 July 27, 2021

March 17, 2020 0.50 82,483 June 30, 2020

March 26, 2021 0.09 22,176 April 27, 2021

December 28, 2020 0.08 16,258 January 26, 2021

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June 17, 2020 0.02 3,626 July 28, 2020

March 18, 2019 0.45 57,720 April 26, 2019

March 17, 2020 0.50 82,483 June 30, 2020

On May 9, 2020, our board of directors approved payment of our common stock dividend that was declared on March 17, 2020 in a combination of cash and shares of our common stock.

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Tax Characterization of Dividends

Fiscal Tax Year Dividends Declared Ordinary Dividends Return of Capital Capital Gain Distribution Carry Forward

Fiscal Tax Year Dividends Declared in Prior Year and Taxable in Current Year Dividends Declared and Taxable in Current Year Ordinary Dividends Return of Capital Capital Gain Distribution

Series A Preferred Stock Dividends

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0.500000 0.570000 — 1.070000 —

(1) Excludes preferred stock dividend of $ 0.4844 per share declared on November 5, 2020 that has a record date of January 1, 2021.

(1) Excludes preferred stock dividend of $ 0.4844 per share declared on November 5, 2020 that had a record date of January 1, 2021.

This dividend is a 2021 dividend for federal income tax purposes.

(2) Excludes preferred stock dividend of $ 0.4844 per share declared on December 16, 2019 that had a record date of January 1, 2020.

(2) Excludes common stock dividend of $ 0.09 per share declared on December 27, 2021 that had a record date of January 11, 2022.

This dividend is a 2022 dividend for federal income tax purposes.

(3) Our fourth quarter dividend declared on December 28, 2020 that has a record date of January 12, 2021 was paid on January 26, 2021.

(3) Excludes common stock dividend of $ 0.08 per share declared on December 28, 2020 that had a record date of January 12, 2021.

This dividend is a 2021 dividend for federal income tax purposes.

(4) Our fourth quarter dividend declared on December 16, 2019 that had a record date of December 27, 2019 was paid on January 28, 2020.

This dividend is a 2020 dividend for federal income tax purposes and is characterized as a return of capital.

Note 13 – Earnings per Common Share

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The following potential weighted average shares were excluded from diluted earnings per share as the effect would be anti-dilutive.

For the year ended December 31, 2020:

For the year ended December 31, 2021, 16,061 shares for restricted stock awards.

(December 31, 2020:

11,017 for restricted stock awards).

For the year ended December 31, 2018:

14,404 for restricted stock awards, 1,184,373 for the exchangeable senior notes and 1,300,068 for non-controlling interest.

Note 14 – Non-controlling Interest – Operating Partnership

Through November 30, 2018, non-controlling interest represented an approximately 1.3 % aggregate ownership interest of a wholly-owned Invesco subsidiary in our Operating Partnership.

The ownership percentage was determined by dividing the number of OP Units held by the Unit Holders by the total number of dilutive shares of common stock.

The issuance or repurchase of common stock (“Share” or “Shares”) or OP Units changed the percentage ownership of both the Unit Holders and the common stockholders.

Since an OP Unit was generally redeemable for cash or Shares at our option, it was deemed to be a Share equivalent.

Therefore, such transactions were treated as capital transactions and resulted in a reallocation between stockholders’ equity and non-controlling interest in our consolidated balance sheets.

On November 30, 2018, we redeemed all of the OP Units held by the non-controlling interest holder for $ 21.8 million.

We also repurchased 75,100 shares of common stock owned by Invesco for $ 1.1 million.

The redemption price for the OP Units and common stock was equal to the market value of an equivalent number of shares of our registered common stock.

We accounted for the redemption of the OP Units as an equity transaction and reallocated the components of accumulated other comprehensive income to us.

No gain or loss was recognized on the transaction.

The following table summarizes the effect of changes in our ownership interest in our Operating Partnership on our equity.

Year ended December 31,

$ in thousands 2018

Net income (loss) attributable to Invesco Mortgage Capital Inc.

Transfers from non-controlling interest:

Decrease in additional paid-in capital due to purchase of OP Units ( 798 )

Net transfers from non-controlling interest ( 798 )

Change from net income (loss) attributable to Invesco Mortgage Capital Inc.

common stockholders and transfers (to) from non-controlling interest ( 71,588 )

Before redemption of the OP Units, income was allocated to the non-controlling interest based on the Unit Holders’ ownership percentage of the Operating Partnership.

The following table presents the net income (loss) allocated and distributions paid to the Operating Partnership non-controlling interest for the year ended December 31, 2018.

Years ended December 31,

$ in thousands 2018

Net income (loss) allocated 254

Distributions paid 2,394

Note 14 – Commitments and Contingencies

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As discussed in Note 5 - “Other Assets”, we have invested in unconsolidated ventures that are sponsored by an affiliate of our Manager.

The unconsolidated ventures are structured as partnerships, and we invest in the partnerships as a limited partner.

The entities are structured such that capital commitments are to be drawn down over the life of the partnership as investment opportunities are identified.

As of December 31, 2020, our undrawn capital and purchase commitments were $ 6.8 million.

The unconsolidated ventures are structured as partnerships, and we invested in the partnerships as a limited partner.

Both of the unconsolidated ventures are in liquidation and plan to sell or settle their remaining investments as expeditiously as possible.

Until the ventures complete their liquidation, we are committed to fund $ 6.5 million in additional capital to cover future expenses should they occur.

Note 15 – Subsequent Events

On February 4, 2021, we completed a public offering of 27,600,000 shares of common stock at the price of $ 3.75 per share.

Total net proceeds were approximately $ 103.1 million after deducting estimated offering costs.

We declared the following dividends on February 16, 2022:

a Series A Preferred Stock dividend of $ 0.4844 per share payable on April 26, 2021 to our stockholders of record as of April 1, 2021, a Series B Preferred Stock dividend of $ 0.4844 per share payable on March 29, 2021 to our stockholders of record as of March 5, 2021, and a Series C Preferred Stock dividend of $ 0.46875 per share payable on March 29, 2021 to our stockholders of record on March 5, 2021.

Commercial Loan Modification

In February 2021, we received a request to modify the terms of our commercial loan and extend the contractual maturity of the commercial loan to February 2022.

We are currently negotiating the terms of the modification and expect to extend the term of the loan to February 28, 2022.

a Series B Preferred Stock dividend of $ 0.4844 per share payable on March 28, 2022 to our stockholders of record as of March 5, 2022, and a Series C Preferred Stock dividend of $ 0.46875 per share payable on March 28, 2022 to our stockholders of record on March 5, 2022.

Modification of Commercial Loan Investment

In February 2022, we received a request from the borrower to extend the contractual maturity of our commercial loan investment to May 29, 2022.

We are currently negotiating the terms of the modification and expect to extend the maturity date.

INVESCO MORTGAGE CAPITAL INC.

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Beginning balance 23,098 24,055 31,582

Originations and purchases of new loans — — 1,677

Amortization of commercial loan origination fees and premium (discount) — — 91

Unrealized gain 417 — —

Collection of principal — 136 7,527

Unrealized loss, net 821 — —

Loss on foreign currency revaluation — — 1,060

Unrealized loss — 821 —

Ending balance 23,515 23,098 24,055

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McGreevey Director February 17, 2022

Starr Director February 22, 2021

Zayicek was appointed to the Board of Directors on February 19, 2021 and accordingly did not sign this Report.

Zayicek Director February 17, 2022

Liu was appointed to the Board of Directors effective February 16, 2022 and accordingly did not sign this Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures