TWO Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Stockholders' Equity

Equity

Redeemable Preferred Stock

The following is a summary of the Company’s series of cumulative redeemable preferred stock issued and outstanding as of September 30, 2019. In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Company, each series of preferred stock will rank on parity with one another and rank senior to the Company's common stock with respect to the payment of the dividends and the distribution of assets.

As of September 30, 2019

(in thousands)

Class of Stock

Issuance Date

Shares Issued and Outstanding

Carrying Value

Contractual Rate

Redemption Date ⁽¹⁾

Fixed to Floating Rate Conversion Date ⁽²⁾

Floating Annual Rate ⁽³⁾

Fixed-to-Floating Rate

Series A

March 14, 2017

5,750

138,872

8.125

April 27, 2027

3M LIBOR + 5.660%

Series B

July 19, 2017

11,500

278,094

7.625

July 27, 2027

3M LIBOR + 5.352%

Series C

November 27, 2017

11,800

285,585

7.250

January 27, 2025

3M LIBOR + 5.011%

Fixed Rate

Series D

July 31, 2018

3,000

74,964

7.750

July 31, 2018

N/A

Series E

July 31, 2018

8,000

199,986

7.500

July 31, 2018

N/A

Total

40,050

977,501

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(1)	Subject to the Company’s right under limited circumstances to redeem the preferred stock earlier than the redemption date disclosed in order to preserve its qualification as a REIT or following a change in control of the Company.


(2)	For the fixed-to-floating rate redeemable preferred stock, the dividend rate will remain at a annual fixed rate of the $25.00 per share liquidation preference from the issuance date up to but not including the transition date disclosed within. Effective the conversion date and onward, dividends will accumulate on a floating rate basis according to the terms disclosed within (3) below.


(3)	On and after the fixed to floating rate conversion date, the dividend will accumulate and be payable quarterly at a percentage of the $25.00 per share liquidation preference equal to an annual floating rate of three-month LIBOR plus the spread indicated within each preferred class.

On July 31, 2018, upon the closing of the merger with CYS, the Company issued 3,000,000 shares of newly classified 7.75% Series D Cumulative Redeemable Preferred Stock, par value $0.01 per share, and 8,000,000 shares of newly classified 7.50% Series E Cumulative Redeemable Preferred Stock, par value $0.01 per share, in exchange for all shares of CYS’s Series A and Series B cumulative redeemable preferred stock outstanding prior to the effective time of the merger. Pursuant to the terms of the merger agreement with CYS, the terms of the Company’s Series D and Series E Cumulative Redeemable Preferred Stock are substantially similar to the terms of CYS’s Series A and Series B Cumulative Redeemable Preferred Stock.

For each series of preferred stock, the Company may redeem the stock on or after the redemption date in whole or in part, at any time or from time to time. Each series of preferred stock has a par value of $0.01 per share and a liquidation and redemption price of $25.00, plus any accumulated and unpaid dividends thereon up to, but excluding, the redemption date. Through September 30, 2019, the Company had declared and paid all required quarterly dividends on the Company’s preferred stock.

Distributions to Preferred Stockholders

The following table presents cash dividends declared by the Company on its preferred stock from December 31, 2017 through September 30, 2019:



Declaration Date	Record Date	Payment Date	Cash Dividend Per Preferred Share
Series A Preferred Stock:
September 19, 2019	October 11, 2019	October 28, 2019	$	0.507810
June 19, 2019	July 12, 2019	July 29, 2019	$	0.507810
March 19, 2019	April 12, 2019	April 29, 2019	$	0.507810
December 18, 2018	December 31, 2018	January 28, 2019	$	0.507810
September 20, 2018	October 12, 2018	October 29, 2018	$	0.507810
June 19, 2018	July 12, 2018	July 27, 2018	$	0.507810
March 20, 2018	April 12, 2018	April 27, 2018	$	0.507810
Series B Preferred Stock:
September 19, 2019	October 11, 2019	October 28, 2019	$	0.476560
June 19, 2019	July 12, 2019	July 29, 2019	$	0.476560
March 19, 2019	April 12, 2019	April 29, 2019	$	0.476560
December 18, 2018	December 31, 2018	January 28, 2019	$	0.476560
September 20, 2018	October 12, 2018	October 29, 2018	$	0.476560
June 19, 2018	July 12, 2018	July 27, 2018	$	0.476560
March 20, 2018	April 12, 2018	April 27, 2018	$	0.476560
Series C Preferred Stock:
September 19, 2019	October 11, 2019	October 28, 2019	$	0.453130
June 19, 2019	July 12, 2019	July 29, 2019	$	0.453130
March 19, 2019	April 12, 2019	April 29, 2019	$	0.453130
December 18, 2018	December 31, 2018	January 28, 2019	$	0.453130
September 20, 2018	October 12, 2018	October 29, 2018	$	0.453130
June 19, 2018	July 12, 2018	July 27, 2018	$	0.453130
March 20, 2018	April 12, 2018	April 27, 2018	$	0.453130
Series D Preferred Stock:
September 19, 2019	October 1, 2019	October 15, 2019	$	0.484375
June 19, 2019	July 1, 2019	July 15, 2019	$	0.484375
March 19, 2019	April 1, 2019	April 15, 2019	$	0.484375
December 18, 2018	December 31, 2018	January 28, 2019	$	0.484375
September 20, 2018	October 1, 2018	October 15, 2018	$	0.484375
Series E Preferred Stock:
September 19, 2019	October 1, 2019	October 15, 2019	$	0.468750
June 19, 2019	July 1, 2019	July 15, 2019	$	0.468750
March 19, 2019	April 1, 2019	April 15, 2019	$	0.468750
December 18, 2018	December 31, 2018	January 28, 2019	$	0.468750
September 20, 2018	October 1, 2018	October 15, 2018	$	0.468750

Common Stock

Public Offering

On March 21, 2019, the Company completed a public offering of 18,000,000 shares of its common stock at a price of $13.76 per share. On March 22, 2019, an additional 2,700,000 shares were sold by the Company to the underwriters of the offering pursuant to an overallotment option. The net proceeds to the Company were approximately $284.5 million, after deducting offering expenses of approximately $0.3 million.

Issuance of Common Stock in Connection with Acquisition of CYS Investments, Inc.

On July 31, 2018, in exchange for all of the shares of CYS common stock outstanding immediately prior to the effective time of the merger, the Company issued approximately 72.6 million new shares of common stock, as well as aggregate cash consideration of $15.0 million, to CYS common stockholders.

As of September 30, 2019, the Company had 272,895,402 shares of common stock outstanding. The following table presents a reconciliation of the common shares outstanding for the three and nine months ended September 30, 2019 and 2018:



	Number of common shares
Common shares outstanding, December 31, 2017	174,496,587
Issuance of common stock	72,608,932
Issuance of restricted stock ⁽¹⁾	972,651
Common shares outstanding, September 30, 2018	248,078,170

Common shares outstanding, December 31, 2018	248,085,721
Issuance of common stock	24,399,107
Issuance of restricted stock ⁽¹⁾	412,074
Repurchase of common stock	(1,500	)
Common shares outstanding, September 30, 2019	272,895,402

____________________


(1)	Represents shares of restricted stock granted under the Second Restated 2009 Equity Incentive Plan, net of forfeitures, of which 1,202,252 restricted shares remained subject to vesting requirements at September 30, 2019.

Distributions to Common Stockholders

The following table presents cash dividends declared by the Company on its common stock from December 31, 2017 through September 30, 2019:



Declaration Date	Record Date	Payment Date	Cash Dividend Per Common Share
September 19, 2019	September 30, 2019	October 28, 2019	$	0.400000
June 19, 2019	July 1, 2019	July 29, 2019	$	0.400000
March 19, 2019	March 29, 2019	April 29, 2019	$	0.470000
December 18, 2018	December 31, 2018	January 28, 2019	$	0.470000
September 20, 2018	October 1, 2018	October 29, 2018	$	0.311630
July 13, 2018	July 25, 2018	July 30, 2018	$	0.158370
June 19, 2018	June 29, 2018	July 27, 2018	$	0.470000
March 20, 2018	April 2, 2018	April 27, 2018	$	0.470000

Dividend Reinvestment and Direct Stock Purchase Plan

The Company sponsors a dividend reinvestment and direct stock purchase plan through which stockholders may purchase additional shares of the Company’s common stock by reinvesting some or all of the cash dividends received on shares of the Company’s common stock. Stockholders may also make optional cash purchases of shares of the Company’s common stock subject to certain limitations detailed in the plan prospectus. The plan allows for the issuance of up to an aggregate of 3,750,000 shares of the Company’s common stock. As of September 30, 2019, 261,659 shares have been issued under the plan for total proceeds of approximately $4.9 million, of which 8,651 and 33,807 shares were issued for total proceeds of $0.1 million and $0.5 million during the three and nine months ended September 30, 2019, respectively. During the three and nine months ended September 30, 2018, 8,692 and 21,160 shares were issued for total proceeds of $0.1 million and $0.3 million, respectively.

Share Repurchase Program

The Company’s share repurchase program allows for the repurchase of up to an aggregate of 37,500,000 shares of the Company’s common stock. Shares may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, or by any combination of such methods. The manner, price, number and timing of share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. The share repurchase program does not require the purchase of any minimum number of shares, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice. The share repurchase program does not have an expiration date. As of September 30, 2019, a total of 12,069,000 shares had been repurchased by the Company under the program for an aggregate cost of $200.4 million; of these, 1,500 shares were repurchased for a total cost of $19.0 thousand during both the three and nine months ended September 30, 2019. No shares were repurchased during the three and nine months ended September 30, 2018.

At-the-Market Offerings

As of December 31, 2018, the Company was party to an equity distribution agreement under which the Company was authorized to sell up to an aggregate of 10,000,000 shares of its common stock from time to time in any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. During the nine months ended September 30, 2019, the Company terminated its prior equity distribution agreement and entered into a new equity distribution agreement pursuant to which a total of 35,000,000 shares of common stock are authorized for issuance. As of September 30, 2019, 7,458,235 shares of common stock had been sold under the equity distribution agreements for total accumulated net proceeds of approximately $128.2 million, of which 3,665,300 shares were sold for net proceeds of $50.6 million during the nine months ended September 30, 2019. No shares were sold during the three months ended September 30, 2019 or three and nine months ended September 30, 2018.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income at September 30, 2019 and December 31, 2018 was as follows:



(in thousands)	September 30, 2019			December 31, 2018
Available-for-sale securities
Unrealized gains	$	779,919		$	498,744
Unrealized losses	(31,565		)	(387,927		)
Accumulated other comprehensive income	$	748,354		$	110,817

Reclassifications out of Accumulated Other Comprehensive Income

The Company reclassifies unrealized gains and losses on AFS securities in accumulated other comprehensive income to net income upon the recognition of any other-than-temporary impairments and realized gains and losses on sales, net of income tax effects, as individual securities are impaired or sold. The following table summarizes reclassifications out of accumulated other comprehensive income for the three and nine months ended September 30, 2019 and 2018:



	Affected Line Item in the Statements of Comprehensive (Loss) Income	Amount Reclassified out of Accumulated Other Comprehensive Income
		Three Months Ended					Nine Months Ended
(in thousands)		September 30,					September 30,
		2019			2018		2019			2018
Other-than-temporary impairments on AFS securities	Total other-than-temporary impairment losses	$	5,950		$	95	$	11,004		$	363
Realized losses (gains) on sales of certain AFS securities, net of tax	Gain (loss) on investment securities	(226,790		)	30,368		(189,620		)	52,654
Total		$	(220,840	)	$	30,463	$	(178,616	)	$	53,017