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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
_______________________________________________ 
FORM 10-Q 
_______________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission file number 001-34385
Invesco Mortgage Capital Inc.
(Exact Name of Registrant as Specified in Its Charter)
_______________________________________________
Maryland26-2749336
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
1555 Peachtree Street, N.E., Suite 1800,
Atlanta,Georgia30309
(Address of Principal Executive Offices)(Zip Code)
(404) 892-0896
(Registrant’s Telephone Number, Including Area Code) 
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareIVRNew York Stock Exchange
7.75% Series A Cumulative Redeemable Preferred StockIVRpANew York Stock Exchange
7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock IVRpBNew York Stock Exchange
7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock IVRpCNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer 
Non-Accelerated filer 
  Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
As of April 30, 2021, there were 246,397,710 outstanding shares of common stock of Invesco Mortgage Capital Inc.


Table of Contents

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



Table of Contents

PART I
ITEM 1.     FINANCIAL STATEMENTS
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
As of
 $ in thousands, except share amountsMarch 31, 2021December 31, 2020
ASSETS
Mortgage-backed securities, at fair value (including pledged securities of $8,641,007 and $7,614,935, respectively; net of allowance for credit losses of $830 and $1,768, respectively)
9,099,742 8,172,182 
Cash and cash equivalents198,357 148,011 
Restricted cash380,678 244,573 
Due from counterparties11,440 1,078 
Investment related receivable18,536 15,840 
Derivative assets, at fair value17,193 10,004 
Other assets36,890 41,163 
Total assets 9,762,836 8,632,851 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements8,240,887 7,228,699 
Derivative liabilities, at fair value4,273 6,344 
Dividends payable24,888 18,970 
Investment related payable1,454 274 
Accrued interest payable547 823 
Collateral held payable1,337 3,546 
Accounts payable and accrued expenses1,967 1,448 
Due to affiliate5,551 5,589 
Total liabilities 8,280,904 7,265,693 
Commitments and contingencies (See Note 14):
Stockholders' equity:
Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized:
7.75% Series A Cumulative Redeemable Preferred Stock: 5,600,000 shares issued and outstanding ($140,000 aggregate liquidation preference)
135,356 135,356 
7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock: 6,200,000 shares issued and outstanding ($155,000 aggregate liquidation preference)
149,860 149,860 
7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock: 11,500,000 shares issued and outstanding ($287,500 aggregate liquidation preference)
278,108 278,108 
Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 246,397,710 and 203,222,108 shares issued and outstanding, respectively
2,464 2,032 
Additional paid in capital3,548,230 3,387,552 
Accumulated other comprehensive income54,827 58,605 
Retained earnings (distributions in excess of earnings)(2,686,913)(2,644,355)
Total stockholders’ equity1,481,932 1,367,158 
Total liabilities and stockholders' equity9,762,836 8,632,851 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Table of Contents

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three Months Ended March 31,
$ in thousands, except share amounts20212020
Interest income
Mortgage-backed and credit risk transfer securities39,434 185,536 
Commercial and other loans576 1,163 
Total interest income40,010 186,699 
Interest expense
Repurchase agreements (1)
(1,660)79,042 
Secured loans 6,646 
Total interest expense(1,660)85,688 
Net interest income41,670 101,011 
Other income (loss)
Gain (loss) on investments, net(331,857)(755,483)
(Increase) decrease in provision for credit losses938  
Equity in earnings (losses) of unconsolidated ventures(94)170 
Gain (loss) on derivative instruments, net286,961 (910,779)
Realized and unrealized credit derivative income (loss), net (33,052)
Net gain (loss) on extinguishment of debt (4,806)
Other investment income (loss), net(16)803 
Total other income (loss)(44,068)(1,703,147)
Expenses
Management fee – related party4,884 10,953 
General and administrative1,993 3,103 
Total expenses6,877 14,056 
Net income (loss) attributable to Invesco Mortgage Capital, Inc.(9,275)(1,616,192)
Dividends to preferred stockholders11,107 11,107 
Net income (loss) attributable to common stockholders(20,382)(1,627,299)
Net income (loss) per share:
Net income (loss) attributable to common stockholders
Basic(0.09)(10.38)
Diluted(0.09)(10.38)
(1)Negative interest expense on repurchase agreements for the three months ended March 31, 2021 consists of $3.7 million of current period interest expense on repurchase agreements and $5.4 million of amortization of net deferred gains on de-designated interest rate swaps. 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 condensed consolidated financial statements.
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
Three Months Ended March 31,
$ in thousands20212020
Net income (loss)(9,275)(1,616,192)
Other comprehensive income (loss):
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net981 (186,605)
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net 36,957 
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense(5,368)(10,067)
Currency translation adjustments on investment in unconsolidated venture609 480 
Total other comprehensive loss(3,778)(159,235)
Comprehensive income (loss)(13,053)(1,775,427)
Less: Dividends to preferred stockholders(11,107)(11,107)
Comprehensive income (loss) attributable to common stockholders(24,160)(1,786,534)

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

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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 2021 and 2020
(Unaudited)
 
Additional
Paid in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
(Distributions
in excess of
earnings)
Total
Stockholders’
Equity
Series A
Preferred Stock
Series B
Preferred Stock
Series C
Preferred Stock
$ in thousands, except share amountsCommon Stock
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 20205,600,000 135,356 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 
Net income (loss)— — — — — — — — — — (9,275)(9,275)
Other comprehensive loss— — — — — — — — — (3,778)— (3,778)
Proceeds from issuance of common stock, net of offering costs— — — — — — 43,150,000 432 160,549 — — 160,981 
Stock awards— — — — — — 25,602 — — — — — 
Common stock dividends— — — — — — — — — — (22,176)(22,176)
Preferred stock dividends— — — — — — — — — — (11,107)(11,107)
Amortization of equity-based compensation— — — — — — — — 129 — — 129 
Balance at March 31, 20215,600,000 135,356 6,200,000 149,860 11,500,000 278,108 246,397,710 2,464 3,548,230 54,827 (2,686,913)1,481,932 

Additional
Paid in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
(Distributions
in excess of
earnings)
Total
Stockholders’
Equity
Series A
Preferred Stock
Series B
Preferred Stock
Series C
Preferred Stock
$ in thousands, except share amountsCommon Stock
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 20195,600,000 135,356 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 
Cumulative effect of adoption of new accounting principle— — — — — — — — — — 342 342 
Net income (loss)— — — — — — — — — — (1,616,192)(1,616,192)
Other comprehensive loss— — — — — — — — — (159,235)— (159,235)
Proceeds from issuance of common stock, net of offering costs— — — — — — 20,700,000 207 346,819 — — 347,026 
Stock awards— — — — — — 10,000 — — — — — 
Common stock dividends— — — — — — — — — — (82,483)(82,483)
Preferred stock dividends— — — — — — — — — — (11,107)(11,107)
Amortization of equity-based compensation— — — — — — — — 131 — — 131 
Balance at March 31, 20205,600,000 135,356 6,200,000 149,860 11,500,000 278,108 164,966,357 1,650 3,239,602 129,728 (2,523,923)1,410,381 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Three Months Ended March 31,
$ in thousands20212020
Cash Flows from Operating Activities
Net income (loss)(9,275)(1,616,192)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of mortgage-backed and credit risk transfer securities premiums and (discounts), net11,625 10,658 
Realized and unrealized (gain) loss on derivative instruments, net(291,510)922,703 
Realized and unrealized (gain) loss on credit derivatives, net 37,770 
(Gain) loss on investments, net331,857 755,483 
Decrease in provision for credit losses(938) 
(Gain) loss from investments in unconsolidated ventures in excess of distributions received18 222 
Other amortization(5,239)(9,936)
Net loss on extinguishment of debt 4,806 
Changes in operating assets and liabilities:
(Increase) decrease in operating assets(1,990)37,955 
Decrease in operating liabilities(43)(33,431)
Net cash provided by operating activities34,505 110,038 
Cash Flows from Investing Activities
Purchase of mortgage-backed and credit risk transfer securities(7,012,452)(4,444,744)
Distributions from investments in unconsolidated ventures, net1,233 1,168 
Change in other assets 19,269 
Principal payments from mortgage-backed and credit risk transfer securities200,590 636,498 
Proceeds from sale of mortgage-backed and credit risk transfer securities5,545,566 16,238,252 
Proceeds from sale of credit derivatives 2,283 
Settlement (termination) of forwards, swaps, swaptions and TBAs, net282,250 (904,220)
Net change in due from counterparties and collateral held payable on derivative instruments(3,438)4,849 
Principal payments from commercial loans held-for-investment 136 
Net cash provided by (used in) investing activities(986,251)11,553,491 
Cash Flows from Financing Activities
Proceeds from issuance of common stock161,413 347,299 
Principal repayments of secured loans (300,000)
Proceeds from repurchase agreements28,514,983 44,017,958 
Principal repayments of repurchase agreements and related fees(27,502,795)(55,266,696)
Net change in due from counterparties and collateral held payable on repurchase agreements(7,953)(311,732)
Payments of deferred offering costs(86)(40)
Payments of dividends (27,365)(74,841)
Net cash provided by (used in) financing activities1,138,197 (11,588,052)
Net change in cash, cash equivalents and restricted cash186,451 75,477 
Cash, cash equivalents and restricted cash, beginning of period392,584 289,502 
Cash, cash equivalents and restricted cash, end of period579,035 364,979 
Supplement Disclosure of Cash Flow Information
Interest paid3,985 131,074 
Non-cash Investing and Financing Activities Information
Net change in unrealized gain (loss) on mortgage-backed and credit risk transfer securities981 (149,648)
Dividends declared not paid24,888 93,590 
Increase in Agency CMBS purchase commitments 410,654 
Net change in investment related receivable (payable) excluding Agency CMBS purchase commitments(271)(760,217)
Offering costs not paid(334)(273)
Net change in repurchase agreements, not settled (625)
Change in foreign currency translation adjustment on other investments(609)(480)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and Business Operations
Invesco Mortgage Capital Inc. (the "Company" or "we") is a Maryland corporation primarily focused on investing in, financing and managing mortgage-backed securities ("MBS") and other mortgage-related assets.
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 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");
Commercial mortgage loans; and
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"); and
Residential mortgage loans.
We conduct our business through IAS Operating Partnership L.P. (the "Operating Partnership") and have one operating segment. We are externally managed and advised by Invesco Advisers, Inc. (our "Manager"), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd. ("Invesco"), a leading independent global investment management firm.
We elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986. To maintain our REIT qualification, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits our exclusion from the "Investment Company" definition under the Investment Company Act of 1940, as amended (the "1940 Act").
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
Certain disclosures included in our Annual Report on Form 10-K are not required to be included on an interim basis in our quarterly reports on Form 10-Q. We have condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.
Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and consolidate the financial statements of the Company and our controlled subsidiaries. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of our financial condition and results of operations for the periods presented.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Examples of estimates include, but are not limited to, estimates of the fair values of financial instruments, interest income on mortgage-backed and credit risk transfer securities and allowances for credit losses. Actual results may differ from those estimates.
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Significant Accounting Policies
There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2020.
Accounting Pronouncements Recently Issued
In January 2021, the Financial Accounting Standards Board 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.
Note 3 – Variable Interest Entities ("VIEs")
Our maximum risk of loss in VIEs in which we are not the primary beneficiary at March 31, 2021 is presented in the table below.
$ in thousandsCarrying AmountCompany's Maximum Risk of Loss
Non-Agency CMBS91,250 91,250 
Non-Agency RMBS10,574 10,574 
Investments in unconsolidated ventures15,766 15,766 
Total117,590 117,590 
Refer to Note 4 - "Mortgage-Backed and Credit Risk Transfer Securities" and Note 5 - "Other Assets" for additional details regarding these investments.
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Note 4 – Mortgage-Backed and Credit Risk Transfer Securities
During the first half of 2020, we experienced unprecedented market conditions as a result of the COVID-19 pandemic and sold a substantial portion of our MBS and GSE CRT portfolio to generate liquidity and reduce leverage. We resumed investing in Agency RMBS in July 2020.
The following tables summarize our MBS portfolio by asset type as of March 31, 2021 and December 31, 2020.
March 31, 2021
$ in thousandsPrincipal/ Notional
Balance
Unamortized
Premium
(Discount)
Amortized
Cost
Allowance for Credit LossesUnrealized
Gain/
(Loss), net
Fair
Value
Period-
end
Weighted
Average
Yield (1)
Agency RMBS:
30 year fixed-rate8,832,549 352,768 9,185,317  (187,399)8,997,918 1.88 %
Total Agency RMBS pass-through8,832,549 352,768 9,185,317  (187,399)8,997,918 1.88 %
Agency-CMO (2)
18,536 (18,536)     %
Non-Agency CMBS 91,427 (4,914)86,513 (830)5,567 91,250 8.60 %
Non-Agency RMBS (3)(4)(5)
637,509 (627,312)10,197  377 10,574 6.21 %
Total9,580,021 (297,994)9,282,027 (830)(181,455)9,099,742 1.95 %

(1)Period-end weighted average yield is based on amortized cost as of March 31, 2021 and incorporates future prepayment and loss assumptions.
(2)Agency collateralized mortgage obligation ("Agency-CMO") are interest-only securities ("Agency IO").
(3)Non-Agency RMBS is 65.3% fixed rate, 33.7% variable rate, and 1.0% floating rate based on fair value. Coupon payments on variable rate investments are based upon changes in the underlying Hybrid adjustable-rate mortgage ("ARM") loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.
(4)Of the total discount in non-Agency RMBS, $2.1 million is non-accretable (calculated using the principal/notional balance) based on estimated future cash flows of the securities.
(5)Non-Agency RMBS includes interest-only securities ("non-Agency IO") which represent 98.5% of principal/notional balance, 48.3% of amortized cost and 37.7% of fair value.



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December 31, 2020
$ in thousandsPrincipal/Notional
Balance
Unamortized
Premium
(Discount)
Amortized
Cost
Allowance for Credit LossesUnrealized
Gain/
(Loss), net
Fair
Value
Period-
end
Weighted
Average
Yield (1)
Agency RMBS:
30 year fixed-rate7,635,107 391,644 8,026,751  24,115 8,050,866 1.86 %
Total Agency RMBS pass-through7,635,107 391,644 8,026,751  24,115 8,050,866 1.86 %
Agency-CMO (2)
19,634 (19,634)—  — — — %
Non-Agency CMBS112,549 (5,791)106,758 (1,768)4,593 109,583 9.40 %
Non-Agency RMBS (3)(4)(5)
790,627 (779,660)10,967  766 11,733 7.83 %
Total8,557,917 (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)All Agency-CMO are Agency IO.
(3)Non-Agency RMBS is 67.3% fixed rate, 31.8% variable rate and 0.9% floating rate based on fair value. Coupon payments on variable rate investments are based upon changes in the underlying Hybrid ARM loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.
(4)Of the total discount in non-Agency RMBS, $2.1 million is non-accretable calculated using the principal/notional balance based on estimated future cash flows of the securities.
(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.
The following table presents the fair value of our available-for-sale securities and securities accounted for under the fair value option by asset type as of March 31, 2021 and December 31, 2020. 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 March 31, 2021 and December 31, 2020, approximately 99% of our MBS are accounted for under the fair value option.
March 31, 2021December 31, 2020
$ in thousandsAvailable-for-sale SecuritiesSecurities under Fair Value OptionTotal
Fair Value
Available-for-sale SecuritiesSecurities under Fair Value OptionTotal
Fair Value
Agency RMBS:
30 year fixed-rate 8,997,918 8,997,918  8,050,866 8,050,866 
Total RMBS Agency pass-through 8,997,918 8,997,918  8,050,866 8,050,866 
Non-Agency CMBS91,250  91,250 109,583  109,583 
Non-Agency RMBS6,943 3,631 10,574 7,267 4,466 11,733 
Total98,193 9,001,549 9,099,742 116,850 8,055,332 8,172,182 
The components of the carrying value of our MBS portfolio at March 31, 2021 and December 31, 2020 are presented below. Accrued interest receivable on our MBS portfolio, which is recorded within investment related receivable on our condensed consolidated balance sheets, was $17.5 million at March 31, 2021 (December 31, 2020: $15.4 million).
March 31, 2021
$ in thousandsMBSInterest-Only SecuritiesTotal
Principal/notional balance8,933,501 646,520 9,580,021 
Unamortized premium354,451  354,451 
Unamortized discount(10,852)(641,593)(652,445)
Allowance for credit losses(830) (830)
Gross unrealized gains (1)
8,297 102 8,399 
Gross unrealized losses (1)
(188,816)(1,038)(189,854)
Fair value9,095,751 3,991 9,099,742 

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December 31, 2020
$ in thousandsMBSInterest-Only SecuritiesTotal
Principal/notional balance7,757,491 800,426 8,557,917 
Unamortized premium391,644  391,644 
Unamortized discount(10,067)(795,018)(805,085)
Allowance for credit losses(1,768) (1,768)
Gross unrealized gains (1)
34,539 103 34,642 
Gross unrealized losses (1)
(4,527)(641)(5,168)
Fair value8,167,312 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. Realization occurs upon sale or settlement of such securities. Further detail on the components of our total gains (losses) on investments, net for the three months ended March 31, 2021 and 2020 is provided below in this Note 4.
The following table summarizes our MBS portfolio according to estimated weighted average life classifications as of March 31, 2021 and December 31, 2020
$ in thousandsMarch 31, 2021December 31, 2020
Less than one year29,223 22,112 
Greater than one year and less than five years149,120 5,303,917 
Greater than or equal to five years8,921,399 2,846,153 
Total9,099,742 8,172,182 

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 March 31, 2021 and December 31, 2020.
March 31, 2021
  Less than 12 Months12 Months or MoreTotal
$ in thousandsFair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Agency RMBS:
30 year fixed-rate8,592,854 (188,816)93    8,592,854 (188,816)93 
Total Agency RMBS pass-through (1)
8,592,854 (188,816)93    8,592,854 (188,816)93 
Non-Agency RMBS (2)
3,487 (1,014)10 17 (24)4 3,504 (1,038)14 
Total8,596,341 (189,830)103 17 (24)4 8,596,358 (189,854)107 
(1)Fair value option has been elected for all Agency RMBS in an unrealized loss position.
(2)Fair value option has been elected for all non-Agency RMBS in an unrealized loss position.
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December 31, 2020
  Less than 12 Months12 Months or MoreTotal
$ in thousandsFair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Agency RMBS:
30 year fixed-rate1,496,279 (4,108)20    1,496,279 (4,108)20 
Total Agency RMBS pass-through (1)
1,496,279 (4,108)20    1,496,279 (4,108)20 
Non-Agency CMBS (2)
27,069 (419)1    27,069 (419)1 
Non-Agency RMBS (3)
2,681 (438)6 1,612 (203)7 4,293 (641)13 
Total1,526,029 (4,965)