Stockholders’ Equity

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. The dividends are 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. After December 27, 2024, holders are entitled to receive dividends at a floating rate equal to three-month LIBOR plus a spread of 5.18% of the $25.00 liquidation preference per annum. Dividends are cumulative and payable quarterly in arrears.

In August 2017, we completed a public offering of 11,500,000 shares of 7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock") at the price of $25.00 per share. Total proceeds were $287.5 million before issuance costs of $9.4 million. Holders of our Series C Preferred Stock are entitled to receive dividends at an annual rate of 7.50% of the liquidation preference of $25.00 per share or $1.875 per share per annum until September 27, 2027. After September 27, 2027, holders are entitled to receive dividends at a floating rate equal to three-month LIBOR plus a spread of 5.289% of the $25.00 liquidation preference per annum. Dividends are cumulative and payable quarterly in arrears, commencing with the first dividend payment date on December 27, 2017.

As of July 27, 2017, we have the option to redeem shares of 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 Series B Preferred Stock after December 27, 2024 and shares of Series C Preferred Stock after September 27, 2027 for $25.00 per share, plus any accumulated and unpaid dividends through the date of the redemption. Shares of Series B and Series C Preferred Stock are not redeemable, convertible into or exchangeable for any other property or any other securities of the Company prior to those times, except under circumstances intended to preserve our qualification as a REIT or upon the occurrence of a change in control.

Accumulated Other Comprehensive Income

The following tables present the components of accumulated other comprehensive income. The tables exclude MBS and GSE CRTs that are accounted for under the fair value option.



	Three Months Ended September 30, 2017
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		19,089		—		19,089
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		7		—		7
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(6,438	)	(6,438	)
Currency translation adjustments on investment in unconsolidated venture	807		—		—		807
Other comprehensive income/(loss), net	807		19,096		(6,438	)	13,465

Balance at beginning of period	(375	)	201,158		136,608		337,391
Other comprehensive income/(loss), net	807		19,096		(6,438	)	13,465
Other comprehensive income/(loss) attributable to non-controlling interest	(10	)	(241	)	81		(170	)
Rebalancing of ownership percentage of non-controlling interest	—		—		—		—
Balance at end of period	422		220,013		130,251		350,686



	Three Months Ended September 30, 2016
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		32,015		—		32,015
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		—		—		—
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(4,831	)	(4,831	)
Currency translation adjustments on investment in unconsolidated venture	(235	)	—		—		(235	)
Other comprehensive income/(loss), net	(235	)	32,015		(4,831	)	26,949

Balance at beginning of period	190		394,531		164,233		558,954
Other comprehensive income/(loss), net	(235	)	32,015		(4,831	)	26,949
Other comprehensive income/(loss) attributable to non-controlling interest	3		(404	)	61		(340	)
Balance at end of period	(42	)	426,142		159,463		585,563



	Nine Months Ended September 30, 2017
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		75,011		—		75,011
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		1,508		—		1,508
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		(19,105	)	(19,105	)
Currency translation adjustments on investment in unconsolidated venture	331		—		—		331
Other comprehensive income/(loss), net	331		76,519		(19,105	)	57,745

Balance at beginning of period	95		144,458		149,115		293,668
Other comprehensive income/(loss), net	331		76,519		(19,105	)	57,745
Other comprehensive income/(loss) attributable to non-controlling interest	(4	)	(965	)	241		(728	)
Rebalancing of ownership percentage of non-controlling interest	—		1		—		1
Balance at end of period	422		220,013		130,251		350,686



	Nine Months Ended September 30, 2016
$ in thousands	Equity method investments		Available-for-sale securities		Derivatives and hedging		Total
Other comprehensive income/(loss), net
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net	—		270,591		—		270,591
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net	—		(11,581	)	—		(11,581	)
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense	—		—		11,331		11,331
Currency translation adjustments on investment in unconsolidated venture	(10	)	—		—		(10	)
Other comprehensive income/(loss), net	(10	)	259,010		11,331		270,331

Balance at beginning of period	(32	)	170,383		148,273		318,624
Other comprehensive income/(loss), net	(10	)	259,010		11,331		270,331
Other comprehensive income/(loss) attributable to non-controlling interest	—		(3,251	)	(141	)	(3,392	)
Balance at end of period	(42	)	426,142		159,463		585,563

Effective December 31, 2013, we voluntarily discontinued cash flow hedge accounting for our interest rate swaps to gain greater flexibility in managing interest rate exposures. 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 condensed consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

Securities Convertible into Shares of Common Stock

The non-controlling interest holder of the Operating Partnership units, a wholly-owned Invesco subsidiary, has the right to cause the Operating Partnership to redeem their operating partnership units ("OP Units") for cash equal to the market value of an equivalent number of shares of common stock, or at our option, we may purchase their OP Units by issuing one share of common stock for each OP Unit redeemed. We also have an equity incentive plan which allows us to grant securities convertible into our common stock to our independent directors and employees of our Manager and its affiliates.

Share Repurchase Program

During the three and nine months ended September 30, 2017 and three months ended September 30, 2016, we did not repurchase any shares of our common stock. During the nine months ended September 30, 2016, we repurchased and concurrently retired 2,063,451 shares of our common stock at a weighted average repurchase price of $12.12 per share for a net cost of $25.0 million, including acquisition expenses. As of September 30, 2017, we have authority to purchase 18,239,082 additional shares of our common stock under our share repurchase program. The share repurchase program has no stated expiration date.

Share-Based Compensation

We established the 2009 Equity Incentive Plan for grants of common stock and other equity based awards to our independent directors and officers and employees of our Manager and its affiliates (the "Incentive Plan"). Under the Incentive Plan, a total of 1,000,000 shares of common stock are authorized for issuance. Unless terminated earlier, the Incentive Plan will terminate in 2019, but will continue to govern the unexpired awards. As of September 30, 2017, 800,128 shares of common stock remain available for future issuance under the Incentive Plan.

We recognized compensation expense of approximately $129,000 (September 30, 2016: $85,000) and approximately $326,000 (September 30, 2016: $255,000) related to our independent directors for the three and nine months ended September 30, 2017, respectively. During the three months ended September 30, 2017 and 2016, we issued 6,650 shares and 5,448 shares of common stock, respectively, pursuant to the Incentive Plan to our independent directors. During the nine months ended September 30, 2017 and 2016, we issued 17,398 shares and 19,356 shares of common stock, respectively, pursuant to the Incentive Plan to our independent directors. The fair market value of the shares granted was determined by the closing stock market price on the date of the grant. The grants vested immediately.

We recognized compensation expense of approximately $33,000 (September 30, 2016: $75,000) and $99,000 (September 30, 2016: $170,000) for the three and nine months ended September 30, 2017, respectively, related to restricted stock units awarded to employees of our Manager and its affiliates which is reimbursed by our Manager under the management agreement. At September 30, 2017 there was approximately $263,000 of total unrecognized compensation cost related to restricted stock unit awards that is expected to be recognized over a period of up to 42 months, with a weighted-average remaining vesting period of 17 months.

The following table summarizes the activity related to restricted stock units awarded to employees of our Manager and its affiliates for the three and nine months ended September 30, 2017.



	Three Months Ended September 30,			Nine Months Ended September 30,
	2017			2017
	Restricted Stock Units	Weighted Average Grant Date Fair Value ⁽¹⁾		Restricted Stock Units		Weighted Average Grant Date Fair Value ⁽¹⁾
Unvested at the beginning of the period	19,827	$	14.35	18,807		$	14.37
Shares granted during the period	—	—		8,115		15.55
Shares vested during the period	—	—		(7,095	)	15.78
Unvested at the end of the period	19,827	$	14.35	19,827		$	14.35


(1)	The grant date fair value of restricted stock awards is based on the closing market price of our common stock at the grant date.

Dividends

On September 14, 2017, we declared the following dividends:


•	a dividend of $0.41 per share of common stock to be paid on October 26, 2017 to stockholders of record as of the close of business on September 27, 2017;


•	a dividend of $0.4844 per share of Series A Preferred Stock to be paid on October 25, 2017 to stockholders of record as of the close of business on October 1, 2017;


•	a dividend of $0.4844 per share of Series B Preferred Stock to be paid on December 27, 2017 to stockholders of record as of the close of business on December 5, 2017; and


•	a dividend of $0.6823 per share of Series C Preferred Stock to be paid on December 27, 2017 to stockholders of record as of the close of business on December 5, 2017.