Invesco Mortgage Capital Inc. Reports First Quarter 2013 Financial Results

ATLANTA, May 1, 2013 /PRNewswire/ -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today announced results for the quarter ended March 31, 2013.

(Logo: http://photos.prnewswire.com/prnh/20110131/MM39469LOGO-b)

The Company reported net income of $85.0 million, or $0.65 per common share (basic), for the quarter ended March 31, 2013 (after deducting the preferred dividend of $2.7 million) compared to $90.6 million, or $0.77 per common share (basic and diluted), for the quarter ended December 31, 2012.  The Company also reported its book value per common share as of March 31, 2013 was $20.42, compared to $20.83 per common share as of December 31, 2012.

"We are pleased to announce that we earned 65 cents per share in the first quarter.  We are also happy with our overall progress, having closed our first residential loan securitization and having issued our first exchangeable notes," said Richard King, President and CEO.  "These steps allow us to capture new mortgage market investment opportunities and to diversify and term out funding, further strengthening Invesco Mortgage Capital."

 

($ in millions, except per share amounts)


Q1 '13

Q4 '12


(unaudited)

(unaudited)

Average Earning Assets (at amortized costs)

$19,985.0

$17,776.3

Average Borrowed Funds

17,238.0

15,822.1

Average Equity

$2,708.5

$2,482.5




Interest Income

$160.5

$145.4

Interest Expense

67.6

65.1

Net Interest Income

92.9

80.3

Other Income

6.7

23.2

Operating Expenses

11.9

10.2

Net Income

87.7

93.3

Preferred Dividend

2.7

2.7

Net Income after Preferred Dividend

$85.0

$90.6




Average Portfolio Yield

3.21%

3.27%

Average Cost of Funds

1.57%

1.65%

Debt to Equity Ratio

6.4

6.1

Return on Average Equity

12.55%

14.60%

Book Value per Common Share (Diluted)

$20.42

$20.83

Earnings per Common share (Basic)

$0.65

$0.77

Dividend per Common share

$0.65

$0.65

Dividend per Preferred share

$0.4844

$0.4844

Financial Summary

The Company's portfolio of mortgage-backed securities ("MBS") was $21.2 billion as of March 31, 2013, an increase of $2.7 billion from December 31, 2012.  For the quarter ended March 31, 2013, average earning assets were $20.0 billion, representing an increase of $2.2 billion from December 31, 2012.  The portfolio generated interest income of $160.5 million, which reflects an increase of $15.1 million December 31, 2012. 

For the quarter ended March 31, 2013, the Company had average borrowings of approximately $17.2 billion and interest expense, including cost of hedging, of $67.6 million, compared to $15.8 billion and $65.1 million, respectively, for the fourth quarter of 2012.  Our average cost of funds was 1.57% and 1.65% for the first quarter of 2013 and the fourth quarter of 2012, respectively. 

Operating expenses for the first quarter of 2013 totalled $11.9 million, compared to $10.2 million for the fourth quarter of 2012.  The ratio of operating expenses to average equity in the first quarter of 2013 increased 0.12% to 1.76%.

The Company declared a common stock dividend of $0.65 per common share for the first quarter of 2013.  The dividend was paid on April 26, 2013.

The Company declared a preferred stock dividend of $0.4844 per preferred share for the first quarter of 2013.  The dividend was paid on April 25, 2013.

About Invesco Mortgage Capital Inc.

Invesco Mortgage Capital Inc. is a real estate investment trust that focuses on financing and managing residential and commercial mortgage-backed securities and mortgage loans. Invesco Mortgage Capital Inc. is externally managed and advised by Invesco Advisers, Inc., a subsidiary of Invesco Ltd. (NYSE: IVZ), a leading independent global investment management company.

Earnings Call

Members of the investment community and the general public are invited to listen to the Company's earnings conference call on Thursday, May 2, 2013, at 9:00 a.m. ET, by calling one of the following numbers:

US/Canada Toll Free:  888-942-8507
International: 1-415-228-4839
Passcode: Invesco

An audio replay will be available until 5:00 pm ET on May 16, 2013 by calling:

888-688-2171 (North America) or 402-998-0565 (International).

The presentation slides that will be reviewed during the call will be available on the Company's website at www.invescomortgagecapital.com.

Cautionary Notice Regarding Forward-Looking Statements

This press release, and comments made in the associated conference call, may include statements and information that constitute "forward-looking statements" within the meaning of the U.S. securities laws.  Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance. In addition, words such as "will," "anticipates," "expects" and "plans," as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

Forward-looking statements are not guarantees and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge investors to carefully consider the risks identified under the captions "Risk Factors," "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K and quarterly reports on Form 10-Q, which are available on the Securities and Exchange Commission's website at www.sec.gov.  

All written or oral forward-looking statements that we make, or that are attributable to us, are expressly qualified by this cautionary notice.  We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)




Three Months Ended


March 31,

$ in thousands, except per share data

2013


2012









Interest Income







Mortgage-backed securities


160,344



141,960


Residential loans


137



-



Total interest income


160,481



141,960


Interest Expense







Repurchase agreements


66,328



55,285


Exchangeable senior note


1,160



-


Asset-back securities issued


79



-



Total interest expense


67,567



55,285


Net interest income


92,914



86,675









Other income







Gain on sale of investments


6,712



6,045


Equity in earnings and fair value change in unconsolidated ventures


1,590



1,009


Unrealized loss on interest rate swaps and swaptions


(2,003)



(509)


Realized and unrealized credit default swap income


351



657


Total other income


6,650



7,202









Expenses







Management fee – related party


10,354



8,639


General and administrative


1,543



1,130


Total expenses


11,897



9,769


Net income


87,667



84,108


Net income attributable to non-controlling interest


962



1,026


Net income attributable to Invesco Mortgage Capital Inc.


86,705



83,082


Dividends to preferred shareholders


2,713



-


Net income attributable to common shareholders


83,992



83,082











Earnings per share:







Net income attributable to common shareholders








(basic)


0.65



0.72



(diluted)


0.64



0.72


Dividends declared per common share


0.65



0.65






















 




INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



$ in thousands, except per share amounts

As of



March 31,


December 31,

ASSETS

2013


2012



(Unaudited)











Mortgage-backed securities, at fair value


21,248,432



18,470,563

Residential loans, held-for-investment


405,541



-

Cash and cash equivalents


274,538



286,474

Investment related receivable


34,155



41,429

Investments in unconsolidated ventures, at fair value


35,456



35,301

Accrued interest receivable


72,863



62,977

Derivative assets, at fair value


8,026



6,469

Deferred securitization and financing costs


13,464



-

Other investments


10,000



10,000

Other assets


1,482



1,547


Total assets (1)


22,103,957



18,914,760








LIABILITIES AND EQUITY






Liabilities:






Repurchase agreements


17,873,256



15,720,460

Asset-backed securities issued


374,196



-

Exchangeable senior notes


400,000



-

Derivative liability, at fair value


420,439



436,440

Dividends and distributions payable


91,049



79,165

Investment related payable


305



63,715

Accrued interest payable


17,189



15,275

Accounts payable and accrued expenses


1,109



877

Due to affiliate


10,956



9,308


Total liabilities (1)


19,188,499



16,325,240








Equity:






Preferred Stock: par value $0.01 per share; 50,000,000 shares







authorized, 7.75% series A cumulative redeemable, $25 liquidation







preference, 5,600,000 issued and outstanding at March 31, 2013







and December 31, 2012, respectively


135,356



135,362

Common Stock: par value $0.01 per share; 450,000,000 shares







authorized, 134,477,190 and 116,195,500 shares issued and







outstanding, at March 31, 2013 and December 31, 2012, respectively


1,345



1,162

Additional paid in capital


2,697,177



2,316,290

Accumulated other comprehensive income


35,248



86,436

Retained earnings


15,430



18,848


Total shareholders' equity


2,884,556



2,558,098

Non-controlling interest


30,902



31,422


Total equity


2,915,458



2,589,520









Total liabilities and equity


22,103,957



18,914,760


 

(1) Our consolidated balance sheets include assets of consolidated variable interest entity ('VIE') that can only be used to settle obligations of this VIE and liabilities of the VIE for which creditors do not have recourse to the primary beneficiary (Invesco Mortgage Capital, Inc.).  At March 31, 2013 and December 31, 2012 assets of the consolidated VIE totaled $408,291 and $0 respectively, and liabilities of consolidated VIE totaled $375,261 and $0 respectively.








Mortgage-Backed Securities

The following table summarizes certain characteristics of the Company's mortgage-backed securities portfolio as of March 31, 2013:

















Period-
















Net  



end



Quarterly







Unamortized




Unrealized




Weighted 



Weighted



Weighted  





Principal


Premium


Amortized


Gain/


Fair


Average



Average  



Average


$ in thousands

Balance


(Discount)


Cost


(Loss), net


Value


Coupon (1)



Yield (2)



Yield (3)


Agency RMBS:




















15 year fixed-rate

 1,927,848 


102,811


2,030,659


58,848


2,089,507


 4.06 

%


 2.29 

%


 2.19 

%


30 year fixed-rate

 11,302,383 


752,598


12,054,981


116,840


12,171,821


 4.00 

%


 2.83 

%


 2.84 

%


ARM

 70,163 


2,139


72,302


1,753


74,055


 3.34 

%


 2.02 

%


 2.13 

%


Hybrid ARM

 461,439 


10,529


471,968


14,329


486,297


 3.16 

%


 2.23 

%


 2.33 

%



Total Agency pass-through

 13,761,833 


868,077


14,629,910


191,770


14,821,680


 3.98 

%


 2.73 

%


 2.72 

%























Agency-CMO(4)

 1,395,266 


(894,925)


500,341


2,738


503,079


 2.86 

%


 2.46 

%


 1.46 

%


Non-Agency RMBS(5)

 3,812,636 


(350,396)


3,462,240


93,063


3,555,303


 4.18 

%


 4.30 

%


 4.63 

%


CMBS

 2,679,653 


(477,301)


2,202,352


166,018


2,368,370


 4.41 

%


 4.77 

%


 4.75 

%

Total

 21,649,388 


(854,545)


20,794,843


453,589


21,248,432


 4.00 

%


 3.20 

%


 3.21 

%











































(1) Net weighted average coupon as of March 31, 2013 ("WAC") is presented net of servicing and other fees.








(2) Average yield based on amortized costs as of March 31, 2013 and incorporates future prepayment and loss assumptions.





(3) Average yield based on average amortized costs for the three months ended March 31, 2013 and incorporates future prepayment and loss assumptions.





(4) Included in the Agency-CMO are interest only securities which represent 15.1% of the balance based on fair value.





(5) The non-Agency RMBS held by the Company is 72.7% variable rate, 22.7% fixed rate, and 4.6% floating rate based on fair value.


























Constant Prepayment Rates (CPR)

The CPR of our portfolio impacts the amount of premium and discount on the purchase of securities that is recognized into income. The following table shows the three month CPR for our RMBS compared to bonds with similar characteristics ("Cohorts"):


March 31, 2013


December 31, 2012


Company


Cohort


Company


Cohort









15 year Agency RMBS

18.5


27.5


17.4


26.5

30 year Agency RMBS

9.5


19.5


11.6


20.9

Agency Hybrid ARM RMBS

25.6


NA


28.5


NA

Non-Agency RMBS

15.5


NA


17.7


NA

Overall

12.5


NA


14.6


NA

 

Borrowings

The following table summarizes the Company's borrowings by type of investment for the periods ended March 31, 2013 and December 31, 2012:


$ in thousands



March 31, 2013



December 31, 2012











Weighted








Weighted








Weighted



Average





Weighted



Average








Average



Remaining





Average



Remaining





Amount


Interest



Maturity



Amount


Interest



Maturity





Outstanding


Rate



(days)



Outstanding


Rate



(days)



Agency RMBS



13,545,701


0.40

%


15



11,713,565


0.48

%


16



Non-Agency RMBS



2,520,515


1.62

%


32



2,450,960


1.75

%


23



CMBS



1,807,040


1.47

%


20



1,555,935


1.51

%


18



Exchangeable Senior Notes



400,000


5.00

%


1,810



-


-

%


-



Total



18,273,256


0.78

%


57



15,720,460


0.78

%


17


Interest Rate Hedges

The following table summarizes our hedging activity as of March 31, 2013:

$ in thousands






Fixed Interest Rate



Counterparty

Notional

Maturity Date

in Contract



The Bank of New York Mellon


100,000


5/24/2013


1.83%



The Bank of New York Mellon


200,000


6/15/2013


1.73%



SunTrust Bank


100,000


7/15/2014


2.79%



Deutsche Bank AG


200,000


1/15/2015


1.08%



Deutsche Bank AG


250,000


2/15/2015


1.14%



Credit Suisse International


100,000


2/24/2015


3.26%



Credit Suisse International


100,000


3/24/2015


2.76%



Wells Fargo Bank, N.A.


100,000


7/15/2015


2.85%



Wells Fargo Bank, N.A.


50,000


7/15/2015


2.44%



Morgan Stanley Capital Services, LLC


300,000


1/24/2016


2.12%



The Bank of New York Mellon


300,000


1/24/2016


2.13%



Morgan Stanley Capital Services, LLC


300,000


4/5/2016


2.48%



Citibank, N.A.


300,000


4/15/2016


1.67%



Credit Suisse International


500,000


4/15/2016


2.27%



The Bank of New York Mellon


500,000


4/15/2016


2.24%



JPMorgan Chase Bank, N.A.


500,000


5/15/2016


2.31%



Goldman Sachs Bank USA


500,000


5/24/2016


2.34%



Goldman Sachs Bank USA


250,000


6/15/2016


2.67%



Wells Fargo Bank, N.A.


250,000


6/15/2016


2.67%



JPMorgan Chase Bank, N.A.


500,000


6/24/2016


2.51%



Citibank, N.A.


500,000


10/15/2016


1.93%



Deutsche Bank AG


150,000


2/5/2018


2.90%



ING Capital Markets LLC

(5)

350,000


2/24/2018


0.95%



Morgan Stanley Capital Services, LLC


100,000


4/5/2018


3.10%



JPMorgan Chase Bank, N.A.


200,000


5/15/2018


2.93%



UBS AG


500,000


5/24/2018


1.10%



The Royal Bank of Scotland Plc


500,000


9/5/2018


1.04%



Wells Fargo Bank, N.A.


200,000


3/15/2021


3.14%



Citibank, N.A.


200,000


5/25/2021


2.83%



The Royal Bank of Scotland Plc

(7)

400,000


3/15/2023


2.39%



UBS AG

(6)

400,000


3/15/2023


2.51%



HSBC Bank USA, National Association


250,000


6/5/2023


1.91%



HSBC Bank USA, National Association

(1)

250,000


7/5/2023


1.97%



The Royal Bank of Scotland Plc

(2)

500,000


8/15/2023


1.98%



UBS AG

(4)

250,000


11/15/2023


2.23%



HSBC Bank USA, National Association

(3)

500,000


12/15/2023


2.20%



Total


10,650,000




2.11%












(1) Forward start date of July 2013









(2) Forward start date of August 2013









(3) Forward start date of December 2013









(4) Forward start date of November 2013









(5) Forward start date of February 2013









(6) Forward start date of March 2015









(7) Forward start date of March 2015









 

Average Balances

The following table shows the average balances for the three months ended March 31, 2013 and 2012:





As of and for the Three Months ended




March 31,


$ in thousands

2013


2012


Average Balances*:







Agency RMBS:








15 year fixed-rate, at amortized cost


2,045,062



2,461,408



30 year fixed-rate, at amortized cost


11,500,385



7,003,685



ARM, at amortized cost


97,460



177,279



Hybrid ARM, at amortized cost


527,379



1,468,048



MBS-CMO, at amortized cost


502,535



396,103


Non-Agency RMBS, at amortized cost


3,241,229



2,379,370


CMBS, at amortized cost


2,057,457



1,214,162


Residential Loans, at amortized cost


13,518



-


Average MBS and Residential Loans portfolio


19,985,025



15,100,055










Average Portfolio Yields (1):







Agency RMBS:








15 year fixed-rate


2.19%



2.71%



30 year fixed-rate


2.84%



3.52%



ARM


2.13%



2.46%



Hybrid ARM


2.33%



2.59%



MBS - CMO


1.46%



1.85%


Non-Agency RMBS


4.63%



5.75%


CMBS


4.75%



5.59%


Residential Loans


4.05%



n/a


Average MBS and Residential Loans portfolio


3.21%



3.76%










Average Borrowings*:








Agency RMBS


12,941,937



10,319,296



Non-Agency RMBS


2,524,189



1,787,893



CMBS


1,674,943



870,104



Exchangeable senior notes


84,444



-



Asset-backed securities issued


12,473



-


Total borrowed funds


17,237,986



12,977,293


Maximum borrowings during the period (2)


18,647,452



13,089,145










Average Cost of Funds (3):








Agency RMBS


0.42%



0.32%



Non-Agency RMBS


1.73%



1.81%



CMBS


1.48%



1.58%



Exchangeable senior note


5.49%



n/a



Asset-backed securities, issued


2.53%



n/a



Unhedged cost of funds


0.74%



0.61%



Hedged cost of funds


1.57%



1.70%










Average Equity (4):


2,708,474



2,082,508


Average debt/equity ratio (average during period)


6.36x



6.23x


Debt/equity ratio (as of period end)


6.40x



6.04x










* Average amounts for each period are based on weighted month end balances, all percentages are annualized.  For the three months ended March 31, 2013, the average balances are presented on an amortized cost basis.  The three months ended March 31, 2012 has been reclassified for comparative purposes.


(1) Average portfolio yield for the period was calculated by dividing interest income, including amortization of premiums and discounts, by our average of the amortized cost of the investments.  All yields are annualized.


(2) Amount represents the maximum borrowings at month-end during each of the respective periods.


(3) Average cost of funds is calculated by dividing annualized interest expense, by our average borrowings.


(4) Average equity is calculated based on a weighted balance basis.

 



 

SOURCE Invesco Mortgage Capital Inc.



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