Invesco Mortgage Capital Inc. Reports Fourth Quarter 2012 Financial Results

05 Feb, 2013, 16:05 ET from Invesco Mortgage Capital Inc.

ATLANTA, Feb. 5, 2013 /PRNewswire/ -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today announced results for the quarter ended December 31, 2012.

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

The Company reported net income of $90.6 million, or $0.77 per common share (basic and diluted), for the quarter ended December 31, 2012 (after deducting the preferred dividend of $2.7 million) compared to $84.1 million, or $0.72 per common share (basic and diluted), for the quarter ended September 30, 2012.  The Company also reported its book value per common share as of December 31, 2012 was $20.83, compared to $20.93 per common share as of September 30, 2012.

"Our fourth quarter strategy was to increase our allocation to credit assets and we accomplished this while delivering strong earnings per share of $0.77," said Richard King, President and Chief Executive Officer.  "During 2012, we successfully completed our goal of improving our book value while maintaining a stable dividend. The improving trend in the housing market should create great opportunities, and we believe the repositioning of the portfolio combined with our recent capital raise have us well positioned for 2013."

 

($ in millions, except per share amounts)

Q4 '12

Q3 '12

(unaudited)

(unaudited)

Average Earning Assets (at amortized costs)

$17,776.3

$16,955.1

Average Borrowed Funds

15,822.1

14,440.3

Average Equity

$2,482.5

$2,329.9

Interest Income

$145.4

$140.5

Interest Expense

65.1

60.3

Net Interest Income

80.3

80.2

Other Income

23.2

16.6

Operating Expenses

10.2

10.0

Net Income

93.3

86.8

Preferred Dividend

2.7

2.7

Net Income after Preferred Dividend

$90.6

$84.1

Average Portfolio Yield

3.27%

3.31%

Average Cost of Funds

1.65%

1.67%

Debt to Equity Ratio

6.1

5.8

Return on Average Equity

14.60%

14.44%

Book Value per Common Share (Diluted)

$20.83

$20.93

Earnings per Common share (Basic and Diluted)

$0.77

$0.72

Dividend per Common share

$0.65

$0.65

Dividend per Preferred share

$0.4844

$0.4790

 

Financial Summary

The Company's portfolio of mortgage-backed securities ("MBS") was $18.5 billion as of December 31, 2012, an increase of $0.2 billion from September 30, 2012.  For the quarter ended December 31, 2012, average earning assets were $17.8 billion, representing an increase of $0.8 billion from September 30, 2012.  The portfolio generated interest income of $145.4 million, which reflects an increase of $4.9 million from September 30, 2012. 

For the quarter ended December 31, 2012, the Company had average borrowings of approximately $15.8 billion and interest expense, including cost of hedging, of $65.1 million, compared to $14.4 billion and $60.3 million, respectively, for the third quarter of 2012.  Our average cost of funds was 1.65% and 1.67% for the fourth quarter of 2012 and the third quarter of 2012, respectively. 

Operating expenses for the fourth quarter of 2012 totalled $10.2 million, compared to $10.0 million for the third quarter of 2012.  The ratio of operating expenses to average equity in the fourth quarter of 2012 decreased 0.08% to 1.64%.

The Company declared a common stock dividend of $0.65 per common share for the fourth quarter of 2012.  The dividend was paid on January 28, 2013.

The Company declared a preferred stock dividend of $0.4844 per preferred share for the fourth quarter of 2012.  The dividend was paid on January 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 firm.

Earnings Call

Members of the investment community and the general public are invited to listen to the Company's earnings conference call on Wednesday, February 6, 2013, 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 February, 20, 2013 by calling:

888-568-0862 (North America) or 203-369-3485 (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

Year Ended

December 31,

December 31,

$ in thousands, except per share data

2012

2011

2012

2011

Revenues

Interest income

145,389

137,545

566,830

453,352

Interest expense

65,093

55,004

237,405

155,241

Net interest income

80,296

82,541

329,425

298,111

Other income

Gain on sale of investments

23,236

2,517

48,215

10,959

Equity in earnings  and fair value change in unconsolidated

   ventures

937

563

7,169

3,301

Unrealized loss on interest rate swaps and swaptions

(1,382)

(109)

(4,232)

(764)

Realized and unrealized credit default swap income

420

659

3,115

5,308

Total other income

23,211

3,630

54,267

18,804

Expenses

Management fee – related party

9,285

8,647

35,658

26,259

General and administrative

892

1,003

4,026

3,859

Total expenses

10,177

9,650

39,684

30,118

Net income

93,330

76,521

344,008

286,797

Net income attributable to non-controlling interest

1,098

934

4,123

4,882

Net income attributable to Invesco Mortgage Capital Inc.

92,232

75,587

339,885

281,915

Dividends to preferred shareholders

2,713

-

5,395

-

Net income attributable to common shareholders

89,519

75,587

334,490

281,915

Earnings per share:

Net income attributable to common shareholders

   (basic/diluted)

0.77

0.66

2.89

3.27

Dividends declared per common share

0.65

0.65

2.60

3.42

Weighted average number of shares of common stock:

               Basic

116,016

115,392

115,559

86,365

               Diluted

117,472

116,835

117,012

87,804

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

$ in thousands, except share and per share amounts

As of

December 31,

December 31,

ASSETS

2012

2011

(Unaudited)

Mortgage-backed securities, at fair value

18,470,563

14,214,149

Cash and cash equivalents

286,474

197,224

Restricted cash

12,371

74,496

Investment related receivable

41,429

160,424

Investments in unconsolidated ventures, at fair value

35,301

68,793

Accrued interest receivable

62,977

54,167

Derivative assets, at fair value

6,469

1,339

Other assets

11,547

1,575

Total assets

18,927,131

14,772,167

LIABILITIES AND EQUITY

Liabilities:

Repurchase agreements

15,720,460

12,253,038

Derivative liability, at fair value

436,440

396,780

Dividends and distributions payable

79,165

75,933

Investment related payable

76,086

107,032

Accrued interest payable

15,275

12,377

Accounts payable and accrued expenses

877

556

Due to affiliate

9,308

9,038

Total liabilities

16,337,611

12,854,754

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 and no shares issued and outstanding at

December 31, 2012 and 2011, respectively

135,362

-

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

authorized, 116,195,500 and 115,395,695 shares issued and

outstanding, at December 31, 2012 and 2011, respectively

1,162

1,154

Additional paid in capital

2,316,290

2,299,543

Accumulated other comprehensive income (loss)

86,436

(393,291)

Retained earnings (distributions in excess of earnings)

18,848

(15,068)

Total shareholders' equity

2,558,098

1,892,338

Non-controlling interest

31,422

25,075

Total equity

2,589,520

1,917,413

Total liabilities and equity

18,927,131

14,772,167

Mortgage-Backed Securities

The following table summarizes certain characteristics of the Company's mortgage-backed securities portfolio as of December 31, 2012:

 

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

 1,964,999 

102,058

2,067,057

63,839

2,130,896

4.09 %

 2.37 % 

 2.37 % 

30 year fixed-rate

 9,168,196 

601,592

9,769,788

238,949

10,008,737

4.21 %

 2.89 % 

 2.88 % 

ARM

 109,937 

3,464

113,401

2,365

115,766

 3.15 % 

 2.06 % 

 2.02 % 

Hybrid ARM

 556,790 

13,493

570,283

16,885

587,168

 3.19 % 

 2.18 % 

 2.22 % 

Total Agency pass-

through

 11,799,922 

720,607

12,520,529

322,038

12,842,567

 4.13 % 

 2.77 % 

 2.75 % 

Agency-CMO(4)

 1,322,043 

(819,530)

502,513

1,926

504,439

 2.89 % 

 2.35 % 

 1.51 % 

Non-Agency RMBS(5)

 3,339,683 

(308,885)

3,030,798

48,238

3,079,036

 4.20 % 

 4.61 % 

 4.80 % 

CMBS

 1,868,928 

24,070

1,892,998

151,523

2,044,521

 5.27 % 

 4.96 % 

 4.82 % 

Total

 18,330,576 

(383,738)

17,946,838

523,725

18,470,563

 4.17 % 

 3.30 % 

 3.27 % 

(1) Net weighted average coupon as of December 31, 2012 ("WAC") is presented net of servicing and other fees.

(2) Average yield based on amortized cost as of December 31, 2012 incorporates future prepayment and loss assumptions.

(3) Average yield based on average amortized cost for the three months ended December 31, 2012 incorporates future prepayment and loss assumptions.

(4) Included in the Agency-CMO are interest only securities which represent 14.1% of the balance based on fair value.

(5) The non-Agency RMBS held by the Company is 79.2% variable rate, 15.5% fixed rate, and 5.3% 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"):

 

December 31, 2012

September 30, 2012

Company

Cohort

Company

Cohort

15 year Agency RMBS

17.4

26.5

14.6

23.4

30 year Agency RMBS

11.6

20.9

13.1

20.7

Agency Hybrid ARM RMBS

28.5

NA

20.0

NA

Non-Agency RMBS

17.7

NA

16.2

NA

Overall

14.6

NA

14.3

NA

 

 

Repurchase Agreements

The following table summarizes the Company's borrowings by type of investment for the periods ended December 31, 2012 and December 31, 2011:

 

$ in thousands

December 31, 2012

December 31, 2011

Weighted

Weighted

Weighted

Average

Weighted

Average

Average

Remaining

Average

Remaining

Amount

Interest

Maturity

Amount

Interest

Maturity

Outstanding

Rate

(Days)

Outstanding

Rate

(Days)

Agency RMBS

11,713,565

0.48 %

16

9,491,538

0.38 %

22

Non-Agency RMBS

2,450,960

1.75 %

23

1,916,620

1.79 %

22

CMBS

1,555,935

1.51 %

18

844,880

1.55 %

22

Total

15,720,460

0.78 %

17

12,253,038

0.68 %

22

 

 

Interest Rate Hedges

The following table summarizes our hedging activity as of December 31, 2012:

 

$ 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, 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%

UBS AG (1)

500,000

5/24/2018

1.10%

The Royal Bank of Scotland Plc (2)

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%

HSBC Bank USA, National Association (3)

250,000

6/5/2023

1.91%

Total

8,000,000

2.13%

(1) Forward start date of May 2013

(2) Forward start date of September 2013

(3) Forward start date of  June 2013

 

 

Average Balances

The following table shows the average balances for the three and twelve months ended December 31, 2012 and 2011:

 

Three Months Ended

Year Ended

December 31,

December 31,

$ in thousands

2012

2011

2012

2011

Average Balances*:

Agency RMBS:

15 year fixed-rate, at amortized cost

2,114,987

2,393,468

2,302,218

2,171,988

30 year fixed-rate, at amortized cost

9,665,370

6,216,010

8,395,560

4,547,867

ARM, at amortized cost

116,608

100,661

150,377

86,177

Hybrid ARM, at amortized cost

591,081

1,309,862

1,028,432

998,933

MBS-CMO, at amortized cost

510,292

141,132

465,469

91,861

Non-Agency RMBS, at amortized cost

2,922,411

2,539,250

2,524,635

2,057,477

CMBS, at amortized cost

1,855,546

1,313,117

1,461,359

1,006,164

Average MBS portfolio

17,776,295

14,013,500

16,328,050

10,960,467

Average Portfolio Yields: (1)

Agency RMBS:

15 year fixed-rate

2.37%

2.75%

2.54%

2.96%

30 year fixed-rate

2.88%

3.52%

3.12%

3.59%

ARM

2.02%

2.90%

2.51%

2.99%

Hybrid ARM

2.22%

2.49%

2.60%

2.58%

MBS-CMO

1.51%

1.32%

2.02%

3.39%

Non-Agency RMBS

4.80%

6.05%

5.16%

6.79%

CMBS

4.82%

5.69%

5.22%

5.44%

Average MBS portfolio

3.27%

3.93%

3.47%

4.14%

Average Borrowings*:

Agency RMBS

12,010,877

9,179,788

11,161,176

7,146,066

Non-Agency RMBS

2,313,014

1,994,379

1,902,754

1,536,245

CMBS

1,498,221

952,777

1,108,438

791,212

Total borrowed funds

15,822,112

12,126,944

14,172,368

9,473,523

Maximum borrowings during the period (2)

16,227,024

12,253,038

16,227,024

12,253,038

Average Cost of Funds: (3)

Agency RMBS

0.45%

0.32%

0.39%

0.27%

Non-Agency RMBS

1.71%

1.67%

1.76%

1.47%

CMBS

1.50%

1.53%

1.55%

1.35%

Unhedged cost of funds

0.74%

0.64%

0.67%

0.56%

Hedged cost of funds

1.65%

1.81%

1.68%

1.64%

Average Equity: (4)

2,482,487

1,921,684

2,262,851

1,625,794

Average debt/equity ratio (average during period)

6.4x

6.3x

6.3x

5.8x

Debt/equity ratio (at period end)

6.1x

6.4x

6.1x

6.4x

* Average amounts for each period are based on weighted month end balances.  For the three and twelve months ended December 31, 2012, the average balances are presented on an amortized cost basis.  Prior periods have been adjusted accordingly 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 interest expense, by our average borrowings.

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

 

 

SOURCE Invesco Mortgage Capital Inc.



RELATED LINKS

http://www.invescomortgagecapital.com