Invesco Mortgage Capital Inc. Reports Fourth Quarter 2011 Financial Results

ATLANTA, Feb. 22, 2012 /PRNewswire/ -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today announced results for the quarter ended December 31, 2011.

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

The Company reported net income of $76.5 million, or $0.66 per share (basic and diluted), for the quarter ended December 31, 2011 compared to $82.2 million, or $0.79 per share (basic and diluted), for the quarter ended September 30, 2011.  The Company also reported its book value per share as of December 31, 2011 was $16.41 compared to $16.47 per share as of September 30, 2011.

"Economic conditions improved during the fourth quarter and we saw book value stabilization as a result," said Richard King, President and Chief Executive Officer.  "Our fourth quarter portfolio moves combined with the improved markets for mortgage-backed securities has resulted in book value improvement of approximately 5% since year end.  We believe our portfolio is well-constructed to emphasize dividend stability as we also continue to focus on improving our book value."


($ in millions, except per share amounts)


Q4 '11

Q3 '11


(unaudited)

(unaudited)

Average Earning Assets (at fair value)

$13,979.4

$13,324.2

Average Borrowed Funds

12,126.9

11,466.6

Average Equity

1,921.7

1,847.3




Interest Income

137.5

138.3

Interest Expense

55.0

50.5

Net Interest Income

82.5

87.8

Other Income

3.6

3.1

Operating Expenses

9.6

8.7

Net Income

$76.5

$82.2




Average Portfolio Yield

3.94%

4.15%

Average Cost of Funds

1.81%

1.76%

Debt to Equity Ratio

6.4

6.3

Return on Average Equity

15.93%

17.79%

Book Value per Share (Diluted)

$16.41

$16.47

Earnings per share (Basic and Diluted)

$0.66

$0.79

Dividend

$0.65

$0.80




Financial Summary

The Company's portfolio of mortgage-backed securities ("MBS") was $14.2 billion as of December 31, 2011, a decrease of $0.1 billion from September 30, 2011.  For the quarter ended December 31, 2011, average earning assets were $14.0 billion representing an increase of $0.7 billion from September 30, 2011.  The portfolio generated interest income of $137.5 million which was down $0.8 million from September 30, 2011.  

For the quarter ended December 31, 2011, the Company had average borrowings of approximately $12.1 billion and interest expense including cost of hedging of $55.0 million, compared to $11.5 billion and $50.5 million, respectively, for the third quarter of 2011.  The increase in average borrowed funds was primarily the result of our portfolio realignment in the fourth quarter which placed a higher concentration of assets in agency RMBS.  Interest expense increased as the last of our previously purchased forward-starting swaps began to pay and increased funding rates on our credit assets.  Our average cost of funds was 1.81% and 1.76% for the fourth quarter of 2011 and the third quarter of 2011, respectively.  

Operating expenses for the fourth quarter of 2011 totaled $9.6 million compared to $8.7 million for the third quarter of 2011.  The ratio of operating expenses to average equity in the fourth quarter of 2011 increased 0.12% to 2.01%.

The Company declared a dividend of $0.65 per share for the fourth quarter of 2011.  The dividend was paid on January 27, 2012.

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.  Additional information is available at www.invescomortgagecapital.com.

Earnings Call

Members of the investment community and the general public are invited to listen to the Company's earnings conference call, Thursday, February 23, 2012, at 8:30 a.m. ET, by calling one of the following numbers:

US/Canada Toll Free:

888-942-8507

International:

415-228-4839

Passcode:

Invesco



An audio replay will be available until 5:00 pm ET on March 8, 2012 by calling:

866-465-2111 (North America)
203-369-1428 (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 today, 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


Year ended Months Ended





December 31,


December 31,

$ in thousands, except per share data

2011


2010


2011


2010

















Revenues













Interest income


137,545



50,945



453,352



134,229


Interest expense


55,004



10,652



155,241



29,556


Net interest income


82,541



40,293



298,111



104,673

















Other income













Gain (loss) on sale of investments


2,517



2,392



10,959



3,456


Equity in earnings (loss) and fair value change in unconsolidated














ventures


563



2,388



3,301



8,276


Loss on other-than-temporarily impaired securities


-



-



-



(510)


Unrealized loss on interest rate swaps


(109)



(46)



(764)



(90)


Realized and unrealized credit default swap income


659



13



5,308



13


Total other income


3,630



4,747



18,804



11,145

















Expenses













Management fee – related party


8,647



2,986



26,259



8,080


General and administrative


1,003



1,174



3,859



4,013


Total expenses


9,650



4,160



30,118



12,093


Net income


76,521



40,880



286,797



103,725

















Net income attributable to non-controlling interest


934



1,466



4,882



5,326


Net income attributable to common shareholders


75,587



39,414



281,915



98,399

















Earnings per share:













Net income attributable to common shareholders














(basic/diluted)


0.66



1.00



3.27



3.78


Dividends declared per common share


0.65



0.97



3.42



3.49


Weighted average number of shares of common stock:














Basic


115,392



39,354



86,365



26,039



Diluted


116,835



40,785



87,804



27,468

















































INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


$ in thousands, except per share amounts

As of



December 31,


December 31,

ASSETS

2011


2010










(U    (Unaudited)











Mortgage-backed securities, at fair value


14,214,149



5,578,333

Cash


197,224



63,552

Restricted cash


74,496



101,144

Investment related receivable


160,424



7,601

Investments in unconsolidated ventures, at fair value


68,793



54,725

Accrued interest receivable


54,167



22,503

Derivative assets, at fair value


1,339



33,255

Other assets


1,575



1,287


Total assets


14,772,167



5,862,400








LIABILITIES AND EQUITY






Liabilities:






Repurchase agreements


12,253,038



4,344,659

Derivative liability, at fair value


396,780



37,850

Dividends and distributions payable


75,933



49,741

Investment related payable


107,032



372,285

Accrued interest payable


12,377



2,579

Accounts payable and accrued expenses


556



1,065

Due to affiliate


9,038



3,407


Total liabilities


12,854,754



4,811,586








Equity:






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







authorized, 0 shares issued and outstanding


-



-

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







authorized, 115,395,695 and 49,854,196 shares issued and







outstanding, at December 31, 2011 and 2010, respectively


1,154



499

Additional paid in capital


2,299,543



1,002,809

Accumulated other comprehensive income (loss)


(393,291)



24,015

Distributions in excess of earnings


(15,068)



(8,173)


Total shareholders' equity


1,892,338



1,019,150








Non-controlling interest


25,075



31,664


Total equity


1,917,413



1,050,814









Total liabilities and equity


14,772,167



5,862,400











Mortgage-Backed Securities

The following table summarizes certain characteristics of the Company's mortgage-backed securities portfolio as of December 31, 2011:













Net










Unamortized




Unrealized




Weighted








Principal


Premium


Amortized


Gain/


Fair


Average



Average


$ in thousands

Balance


(Discount)


Cost


(Loss)


Value


Coupon (1)



Yield (2)


Agency RMBS:

















15 year fixed-rate

2,289,495


123,610


2,413,105


36,454


2,449,559


4.18

%


2.85

%


30 year fixed-rate

6,055,045


410,257


6,465,302


116,309


6,581,611


4.95

%


3.66

%


ARM

113,413


2,398


115,811


2,065


117,876


3.40

%


3.07

%


Hybrid ARM

1,321,339


30,516


1,351,855


22,630


1,374,485


3.29

%


2.59

%



Total Agency

9,779,292


566,781


10,346,073


177,458


10,523,531


4.53

%


3.33

%




















MBS-CMO

765,172


(592,342)


172,830


(4,368)


168,462


2.86

%


3.52

%


Non-Agency RMBS(3)

2,719,797


(252,135)


2,467,662


(108,434)


2,359,228


4.57

%


5.07

%


CMBS

1,250,607


(21,805)


1,228,802


(65,874)


1,162,928


5.38

%


5.60

%

Total

14,514,868


(299,501)


14,215,367


(1,218)


14,214,149


4.52

%


3.83

%





































(1) Net weighted average coupon ("WAC") is presented net of servicing and other fees.









(2) Average yield incorporates future prepayment and loss assumptions.









(3) The non-Agency RMBS held by the Company is 9.8% fixed rate, 5.2% floating rate and 85.0% variable 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"):



December 31, 2011


September 30, 2011


Company


Cohort


Company


Cohort









15 year Agency RMBS

11.2


25.6


9.1


20.5

30 year Agency RMBS

12.1


20.6


9.8


16.2

Agency Hybrid ARM RMBS

19.4


NA


14.9


N/A

Non-Agency RMBS (1)

14.8


NA


8.1


N/A

Overall

13.3


NA


8.7


N/A









(1) For the three months ended December 31, 2011, the calculation of CPR for Non-Agency RMBS has been modified to reflect voluntary prepayments and recoveries upon default and is adjusted for the effect of additional subordination on Re-REMIC Senior investments.  If the same calculation were to be applied for the three months ended September 30, 2011, the non-Agency RMBS CPR would have been 17.7 and the overall CPR would have been 12.4.




Repurchase Agreements

The following table summarizes the Company's borrowings by type of investment for the period ended December 31, 2011 and December 31, 2010:



$ in thousands



December 31, 2011




December 31, 2010








Weighted






Weighted








Average






Average





Amount


Interest



Amount


Interest





Outstanding


Rate



Outstanding


Rate



Agency RMBS



9,491,538


0.38

%



3,483,440


0.33

%


Non-Agency RBS



1,916,620


1.79

%



459,979


1.76

%


CMBS



844,880


1.55

%



401,240


1.30

%


Total



12,253,038


0.68

%



4,344,659


0.57

%




Interest Rate Hedges

The following table summarizes our hedging activity as of December 31, 2011:









Fixed Interest Rate



Counterparty

Notional

Maturity Date


in Contract



The Bank of New York Mellon


175,000


8/5/2012



2.07%



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, Inc.


300,000


1/24/2016



2.12%



The Bank of New York Mellon


300,000


1/24/2016



2.13%



Morgan Stanley Capital Services, Inc.


300,000


4/5/2016



2.48%



Citibank, N.A.


300,000


4/15/2016



1.67%



The Bank of New York Mellon


500,000


4/15/2016



2.24%



Credit Suisse International


500,000


4/15/2016



2.27%



JPMorgan Chase Bank, N.A.


500,000


5/16/2016



2.31%



Goldman Sachs Bank USA


500,000


5/24/2016



2.34%



Wells Fargo Bank, N.A.


250,000


6/15/2016



2.67%



Goldman Sachs Bank USA


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%



Morgan Stanley Capital Services, Inc.


100,000


4/5/2018



3.10%



JPMorgan Chase Bank, N.A.


200,000


5/15/2018



2.93%



Wells Fargo Bank, N.A.


200,000


3/15/2021



3.14%



Citibank, N.A.


200,000


5/25/2021



2.83%



Total


6,925,000





2.29%






Average Balances

The following table shows the average balances for the months ended December 31, 2011:





Three Months ended


Year ended Months ended




December 31,


December 31,


$ in thousands

2011 


2010 


2011 


2010 


Average Balances*:













Agency RMBS:














15 year fixed-rate, at fair value (Including CMOs)


2,559,040



1,681,252



2,279,661



811,966



30 year fixed-rate, at fair value


6,316,786



1,863,523



4,603,117



874,214



ARM, at fair value


102,512



20,542



87,033



11,819



Hybrid ARM, at fair value


1,329,884



46,490



1,009,829



83,878


Non-Agency RMBS, at fair value


2,435,012



817,112



2,030,195



622,575


CMBS, at fair value


1,236,181



445,937



988,105



262,182


Average MBS portfolio


13,979,415



4,874,856



10,997,939



2,666,634
















Average Portfolio Yields (1):













Agency RMBS:














15 year fixed-rate, (Including CMOs)


2.65%



2.58%



2.96%



2.87%



30 year fixed-rate


3.46%



2.97%



3.54%



3.37%



ARM


2.84%



2.51%



2.96%



2.48%



Hybrid ARM


2.46%



1.50%



2.55%



0.93%


Non-Agency RMBS


6.31%



10.25%



6.88%



10.94%


CMBS


6.05%



4.47%



5.54%



4.68%


Average MBS portfolio


3.94%



4.18%



4.12%



5.03%
















Average Borrowings*:














Agency RMBS


9,179,788



3,079,239



7,146,066



1,570,211



Non-Agency RMBS


1,994,379



526,445



1,536,245



339,209



CMBS


952,777



315,682



791,212



194,505


Total borrowed funds


12,126,944



3,921,366



9,473,523



2,103,924
















Average Cost of Funds (2):














Agency RMBS


0.32%



0.28%



0.27%



0.27%



Non-Agency RMBS


1.67%



1.58%



1.47%



1.59%



CMBS


1.53%



1.89%



1.35%



2.77%



Unhedged cost of funds


0.64%



0.58%



0.56%



0.71%



Hedged cost of funds


1.81%



1.09%



1.64%



1.40%
















Average Equity (3):


1,921,684



924,151



1,625,794



590,177


Average debt/equity ratio (average during period)


6.31x



4.24x



5.83x



3.56x


Debt/equity ratio (as of period end)


6.39x



4.13x



6.39x



4.13x
















* Average amounts for each period are based on weighted month end balances, all percentages are annualized.


(1) Average portfolio yield for the period was calculated by dividing interest income, including amortization of premiums and discounts, by our average of the investment balance at fair value.


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


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




SOURCE Invesco Mortgage Capital Inc.



RELATED LINKS
http://www.invescomortgagecapital.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.