Invesco Mortgage Capital Inc. Reports Fourth Quarter 2010 Financial Results

Mar 01, 2011, 07:00 ET from Invesco Mortgage Capital Inc.

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ATLANTA, March 1, 2011 /PRNewswire/ -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today announced results for the quarter ended December 31, 2010.

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

The Company reported net income of $40.9 million, or $1.00 per share (basic and diluted), for the quarter ended December 31, 2010 compared to $27.6 million, or $1.01 per share (basic and diluted), for the quarter ended September 30, 2010.  During the fourth quarter of 2010, the Company completed two follow-on common stock offerings generating net proceeds of $488.6 million.  The 48.2% increase in quarterly net income was driven by an increase in average earning assets as the Company invested the funds from the follow-on common stock offerings.

The Company also reported its book value per share as of December 31, 2010 was $20.49, compared to $20.28 per share as of September 30, 2010.

"We saw exciting opportunities to invest in the fourth quarter, particularly in late December," said Richard King, President and Chief Executive Officer.  "During the quarter we completed two successful follow-on common stock offerings and quickly invested the capital opportunistically in our target assets which drove our 48.2 % increase in income.  Our balanced portfolio approach resulted in a $0.21 increase in our book value per share while maintaining stable earnings per share and producing a strong $0.97 dividend."

($ in millions, except per share amounts)

Q4 '10

Q3 '10

(unaudited)

(unaudited)

Average Earning Assets (at fair value)

$4,874.9

$2,401.5

Average Borrowed Funds

3,921.4

1,862.9

Average Equity

924.1

560.4

Interest Income

50.9

36.1

Interest Expense

10.6

8.9

Net Interest Income

40.3

27.2

Operating Expenses

4.2

2.9

Other Income

4.8

3.3

Net Income

40.9

27.6

Average Portfolio Yield

4.18%

6.01%

Cost of Funds

1.09%

1.90%

Debt to Equity Ratio

4.1

3.4

Return on Average Equity

17.69%

19.71%

Book Value per Share (Diluted)

$20.49

$20.28

Earnings per share (Basic and Diluted)

$1.00

$1.01

Dividend

$0.97

$1.00

Financial Summary

The Company's portfolio of mortgage-backed securities ("MBS") was $5.6 billion as of December 31, 2010, an increase of $3.1 billion from September 30, 2010.  For the quarter ended December 31, 2010, average earning assets were $4.9 billion which generated interest income of $50.9 million.  This represents an increase of $2.5 billion, or 104%, and $14.8 million, or 41%, respectively, from the third quarter of 2010.  The increase was primarily driven by the follow-on common stock offerings completed in the fourth quarter.

During the fourth quarter, the constant prepayment rate ("CPR") of the Company's portfolio of agency residential mortgage-backed securities ("RMBS") continued to perform better than bonds with similar characteristics.  The Company's 15-year agency RMBS portfolio had a 3-month CPR of 12.0, versus a rate of approximately 28.8 for bonds with similar characteristics.  The Company's 30-year agency RMBS portfolio had a 3-month CPR of 14.6, compared to a rate of approximately 27.8 for bonds with similar characteristics.  The Company's agency hybrid adjustable rate mortgage ("ARM") portfolio had a 3-month CPR of 15.8 and the non-agency RMBS portfolio prepaid at a 3-month CPR of 16.0  Overall, the weighted average 3-month CPR on the portfolio was 12.8.

The Company historically financed its MBS portfolio with a combination of borrowings under repurchase agreements and the Federal Reserve's Term Asset-Backed Securities Loan Facility ("TALF").  During the fourth quarter, the Company exercised its right to prepay the TALF loans and replaced the borrowings with advances under its existing repurchase agreements.  For the quarter ended December 31, 2010, the Company had average borrowings of approximately $3.9 billion and interest expense of $10.6 million, compared to $1.9 billion and $8.9 million, respectively, for the third quarter of 2010.  

Operating expenses for the fourth quarter 2010 totalled $4.2 million compared to $2.9 million for the third quarter 2010.  The ratio of operating expenses to average equity in the fourth quarter of 2010 decreased 0.29% to 1.80% as the Company benefited from improved operating efficiency during the quarter.  

The Company declared a dividend of $0.97 per share for the fourth quarter of 2010.  The dividend was paid on January 27, 2011

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 today, Tuesday, March 1, 2011, at 8:00 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 22, 2011 by calling:

866-397-1427 (North America)

203-369-0534 (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 December 31,

Year Ended December 31,

$ in thousands, except per share data

2010

2009

2010

2009

Revenues

Interest income

50,945

12,546

134,229

23,529

Interest expense

10,652

2,557

29,556

4,627

Net interest income

40,293

9,989

104,673

18,902

Other income (loss)

Gain on sale of investments, net

2,392

2,002

3,456

2,002

Equity in earnings and fair value change in unconsolidated limited partnerships

2,388

84

8,276

71

Loss on other-than-temporarily impaired securities

(510)

Unrealized loss on interest rate swaps

(46)

(90)

Gain on Credit Default Swap

13

13

Total other income

4,747

2,086

11,145

2,073

Expenses

Management fee – related party

2,986

760

8,080

1,513

General and administrative

663

150

1,393

499

Insurance

235

354

1,164

723

Professional fees

276

341

1,456

729

Total expenses

4,160

1,605

12,093

3,464

Net income

40,880

10,470

103,725

17,511

Net income attributable to non-controlling interest

1,466

1,447

5,326

2,417

Net income attributable to common shareholders

39,414

9,023

98,399

15,094

Earnings per share:

Net income attributable to common shareholders

  (basic and diluted)

1.00

1.02

3.78

3.37

Dividends declared per common share

0.97

1.05

3.49

1.66

Weighted average number of shares of common stock:

   Basic

39,354

8,887

26,039

4,480

   Diluted

40,785

10,312

27,468

5,198

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

$ in thousands, except per share amounts

As of December 31,

ASSETS

2010

2009

(Unaudited)

Mortgage-backed securities, at fair value

5,578,333

802,592

Cash

63,552

24,041

Restricted cash

101,144

14,432

Investment related receivable

7,601

2,737

Investments in unconsolidated limited partnerships, at fair value

54,725

4,128

Accrued interest receivable

22,503

3,518

Derivative Assets, at fair value

33,255

Other assets

1,287

1,952

Total assets

5,862,400

853,400

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Repurchase agreements

4,344,659

545,975

TALF financing

80,377

Derivative liability, at fair value

37,850

3,782

Dividends and distributions payable

49,741

10,828

Investment related payables

372,285

Accrued interest payable

2,579

598

Accounts payable and accrued expenses

1,065

665

Due to affiliate

3,407

865

Total liabilities

4,811,586

643,090

Invesco Mortgage Capital Inc. Shareholders' 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, 49,854,196 and 8,887,212 shares issued and

outstanding, at December 31, 2010 and December 31, 2009, respectively

499

89

Additional paid in capital

1,002,809

172,385

Accumulated other comprehensive income

24,015

7,721

Retained earnings (accumulated deficit)

(8,173)

320

Total Invesco Mortgage Capital Inc. shareholders' equity

1,019,150

180,515

Non-controlling interest

31,664

29,795

Total equity

1,050,814

210,310

Total liabilities and shareholders' equity

5,862,400

853,400

Mortgage-Backed Securities

The following table summarizes certain characteristics of the Company's mortgage-backed securities portfolio as of December 31, 2010:

$ in thousands

Principal Balance

Unamortized Premium (Discount)

Amortized Cost

Unrealized Gain/ (Loss)

Fair Value

Net Weighted Average Coupon (1)

Average Yield (2)

Agency RMBS:

15 year fixed-rate

1,789,891

99,611

1,889,502

(8,688)

1,880,814

4.49%

2.89%

30 year fixed-rate

2,059,475

163,332

2,222,807

6,771

2,229,578

5.54%

3.57%

ARM

21,926

1,080

23,006

(494)

22,512

4.23%

2.55%

Hybrid ARM

70,253

1,612

71,865

448

72,313

3.68%

2.71%

Total Agency

3,941,545

265,635

4,207,180

(1,963)

4,205,217

5.03%

3.25%

MBS-CMO

57,232

(30,248)

26,984

1,821

28,805

4.92%

3.59%

Non-Agency MBS

1,168,797

(339,501)

829,296

17,072

846,368

4.83%

5.47%

CMBS

488,246

(4,640)

483,606

14,337

497,943

5.35%

5.51%

Total

5,655,820

(108,754)

5,547,066

31,267

5,578,333

5.01%

3.78%

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

(2)  Average yield incorporates future prepayment assumptions.

Repurchase Agreements

The following table summarizes the Company's borrowings by type of investment for the period ended

December 31, 2010 and December 31, 2009:

$ in thousands

December 31, 2010

December 31, 2009

Repurchase Agreements

Amount Outstanding

Weighted Average Interest Rate

Amount Outstanding

Weighted Average Interest Rate

Agency RMBS

3,483,440

0.33%

545,975

0.26%

Non-Agency RBS

459,979

1.76%

CMBS

401,240

1.30%

Total Repurchase agreements

4,344,659

0.57%

545,975

0.26%

CMBS under TALF

80,377

3.82%

Total Borrowings

4,344,659

0.57%

626,352

0.72%

SOURCE Invesco Mortgage Capital Inc.



RELATED LINKS

http://www.invescomortgagecapital.com