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Press release from PR Newswire

Invesco Mortgage Capital Inc. Reports Fourth Quarter 2012 Financial Results

Tuesday, February 05, 2013

Invesco Mortgage Capital Inc. Reports Fourth Quarter 2012 Financial Results16:05 EST Tuesday, February 05, 2013ATLANTA, Feb. 5, 2013 /PRNewswire/ -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today announced results for the quarter ended December 31, 2012.(Logo: )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 '12Q3 '12(unaudited)(unaudited)Average Earning Assets (at amortized costs)$17,776.3$16,955.1Average Borrowed Funds15,822.114,440.3Average Equity$2,482.5$2,329.9Interest Income$145.4$140.5Interest Expense65.160.3Net Interest Income80.380.2Other Income23.216.6Operating Expenses10.210.0Net Income93.386.8Preferred Dividend2.72.7Net Income after Preferred Dividend$90.6$84.1Average Portfolio Yield3.27%3.31%Average Cost of Funds1.65%1.67%Debt to Equity Ratio6.15.8Return on Average Equity14.60%14.44%Book Value per Common Share (Diluted)$20.83$20.93Earnings per Common share (Basic and Diluted)$0.77$0.72Dividend per Common share$0.65$0.65Dividend per Preferred share$0.4844$0.4790 Financial SummaryThe 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 CallMembers 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:  888-942-8507International:           415-228-4839Passcode:          InvescoAn 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 Notice Regarding Forward-Looking StatementsThis 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  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 SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)Three Months EndedYear EndedDecember 31,December 31,$ in thousands, except per share data2012201120122011RevenuesInterest income145,389137,545566,830453,352Interest expense65,09355,004237,405155,241Net interest income80,29682,541329,425298,111Other income Gain on sale of investments23,2362,51748,21510,959Equity in earnings  and fair value change in unconsolidated   ventures9375637,1693,301Unrealized loss on interest rate swaps and swaptions(1,382)(109)(4,232)(764)Realized and unrealized credit default swap income4206593,1155,308Total other income 23,2113,63054,26718,804ExpensesManagement fee ? related party9,2858,64735,65826,259General and administrative8921,0034,0263,859Total expenses10,1779,65039,68430,118Net income93,33076,521344,008286,797Net income attributable to non-controlling interest1,0989344,1234,882Net income attributable to Invesco Mortgage Capital Inc.92,23275,587339,885281,915Dividends to preferred shareholders2,713-5,395-Net income attributable to common shareholders89,51975,587334,490281,915Earnings per share:Net income attributable to common shareholders    (basic/diluted)0.770.662.893.27Dividends declared per common share0.650.652.603.42Weighted average number of shares of common stock:               Basic116,016115,392115,55986,365               Diluted117,472116,835117,01287,804INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS$ in thousands, except share and per share amountsAs ofDecember 31,December 31,ASSETS20122011(Unaudited)Mortgage-backed securities, at fair value18,470,56314,214,149Cash and cash equivalents286,474197,224Restricted cash12,37174,496Investment related receivable41,429160,424Investments in unconsolidated ventures, at fair value35,30168,793Accrued interest receivable62,97754,167Derivative assets, at fair value6,4691,339Other assets11,5471,575Total assets18,927,13114,772,167LIABILITIES AND EQUITYLiabilities:Repurchase agreements15,720,46012,253,038Derivative liability, at fair value436,440396,780Dividends and distributions payable79,16575,933Investment related payable76,086107,032Accrued interest payable15,27512,377Accounts payable and accrued expenses 877556Due to affiliate9,3089,038Total liabilities16,337,61112,854,754Equity:Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized, 7.75% series A cumulative redeemable, $25 liquidationpreference, 5,600,000 and no shares issued and outstanding atDecember 31, 2012 and 2011, respectively135,362-Common Stock: par value $0.01 per share; 450,000,000 shares authorized, 116,195,500 and 115,395,695 shares issued andoutstanding, at December 31, 2012 and 2011, respectively1,1621,154Additional paid in capital2,316,2902,299,543Accumulated other comprehensive income (loss)86,436(393,291)Retained earnings (distributions in excess of earnings)18,848(15,068)Total shareholders' equity2,558,0981,892,338Non-controlling interest31,42225,075Total equity2,589,5201,917,413Total liabilities and equity18,927,13114,772,167Mortgage-Backed SecuritiesThe following table summarizes certain characteristics of the Company's mortgage-backed securities portfolio as of December 31, 2012: Period- Net  end Quarterly UnamortizedUnrealizedWeighted  Weighted  Weighted  Principal Premium Amortized Gain/FairAverage Average  Average  $ in thousands Balance(Discount)Cost(Loss), netValueCoupon (1)Yield (2)Yield (3)Agency RMBS: 15 year fixed-rate  1,964,999 102,0582,067,05763,8392,130,8964.09 % 2.37 %   2.37 %  30 year fixed-rate  9,168,196 601,5929,769,788238,94910,008,7374.21 % 2.89 %   2.88 %  ARM  109,937 3,464113,4012,365115,766 3.15 %   2.06 %   2.02 %  Hybrid ARM  556,790 13,493570,28316,885587,168 3.19 %   2.18 %   2.22 %  Total Agency pass-through  11,799,922 720,60712,520,529322,03812,842,567 4.13 %   2.77 %   2.75 %  Agency-CMO(4) 1,322,043 (819,530)502,5131,926504,439 2.89 %   2.35 %   1.51 %  Non-Agency RMBS(5) 3,339,683 (308,885)3,030,79848,2383,079,036 4.20 %   4.61 %   4.80 %  CMBS  1,868,928 24,0701,892,998151,5232,044,521 5.27 %   4.96 %   4.82 %  Total  18,330,576 (383,738)17,946,838523,72518,470,563 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, 2012September 30, 2012CompanyCohortCompanyCohort15 year Agency RMBS17.426.514.623.430 year Agency RMBS11.620.913.120.7Agency Hybrid ARM RMBS28.5NA20.0NANon-Agency RMBS17.7NA16.2NAOverall14.6NA14.3NA  Repurchase AgreementsThe following table summarizes the Company's borrowings by type of investment for the periods ended December 31, 2012 and December 31, 2011: $ in thousandsDecember 31, 2012December 31, 2011WeightedWeightedWeightedAverageWeightedAverageAverageRemainingAverageRemainingAmount Interest Maturity Amount Interest Maturity OutstandingRate(Days)OutstandingRate(Days)Agency RMBS11,713,5650.48 %169,491,5380.38 %22Non-Agency RMBS2,450,9601.75 %231,916,6201.79 %22CMBS1,555,9351.51 %18844,8801.55 %22Total15,720,4600.78 %1712,253,0380.68 %22  Interest Rate HedgesThe following table summarizes our hedging activity as of December 31, 2012: $ in thousandsFixed Interest RateCounterpartyNotionalMaturity Datein ContractThe Bank of New York Mellon100,0005/24/20131.83%The Bank of New York Mellon200,0006/15/20131.73%SunTrust Bank100,0007/15/20142.79%Deutsche Bank AG200,0001/15/20151.08%Deutsche Bank AG250,0002/15/20151.14%Credit Suisse International100,0002/24/20153.26%Credit Suisse International100,0003/24/20152.76%Wells Fargo Bank, N.A.100,0007/15/20152.85%Wells Fargo Bank, N.A.50,0007/15/20152.44%Morgan Stanley Capital Services, Inc.300,0001/24/20162.12%The Bank of New York Mellon300,0001/24/20162.13%Morgan Stanley Capital Services, Inc.300,0004/5/20162.48%Citibank, N.A.300,0004/15/20161.67%The Bank of New York Mellon500,0004/15/20162.24%Credit Suisse International500,0004/15/20162.27%JPMorgan Chase Bank, N.A.500,0005/16/20162.31%Goldman Sachs Bank USA500,0005/24/20162.34%Wells Fargo Bank, N.A.250,0006/15/20162.67%Goldman Sachs Bank USA250,0006/15/20162.67%JPMorgan Chase Bank, N.A.500,0006/24/20162.51%Citibank, N.A.500,00010/15/20161.93%Deutsche Bank AG150,0002/5/20182.90%Morgan Stanley Capital Services, Inc.100,0004/5/20183.10%JPMorgan Chase Bank, N.A.200,0005/15/20182.93%UBS AG (1)500,0005/24/20181.10%The Royal Bank of Scotland Plc (2)500,0009/5/20181.04%Wells Fargo Bank, N.A.200,0003/15/20213.14%Citibank, N.A.200,0005/25/20212.83%HSBC Bank USA, National Association (3)250,0006/5/20231.91%Total8,000,0002.13%(1) Forward start date of May 2013(2) Forward start date of September 2013(3) Forward start date of  June 2013  Average BalancesThe following table shows the average balances for the three and twelve months ended December 31, 2012 and 2011: Three Months EndedYear EndedDecember 31,December 31,$ in thousands2012201120122011Average Balances*:Agency RMBS:15 year fixed-rate, at amortized cost2,114,9872,393,4682,302,2182,171,98830 year fixed-rate, at amortized cost9,665,3706,216,0108,395,5604,547,867ARM, at amortized cost116,608100,661150,37786,177Hybrid ARM, at amortized cost591,0811,309,8621,028,432998,933MBS-CMO, at amortized cost510,292141,132465,46991,861Non-Agency RMBS, at amortized cost2,922,4112,539,2502,524,6352,057,477CMBS, at amortized cost1,855,5461,313,1171,461,3591,006,164Average MBS portfolio17,776,29514,013,50016,328,05010,960,467Average Portfolio Yields: (1)Agency RMBS:15 year fixed-rate2.37%2.75%2.54%2.96%30 year fixed-rate2.88%3.52%3.12%3.59%ARM2.02%2.90%2.51%2.99%Hybrid ARM2.22%2.49%2.60%2.58%MBS-CMO1.51%1.32%2.02%3.39%Non-Agency RMBS4.80%6.05%5.16%6.79%CMBS4.82%5.69%5.22%5.44%Average MBS portfolio3.27%3.93%3.47%4.14%Average Borrowings*:Agency RMBS12,010,8779,179,78811,161,1767,146,066Non-Agency RMBS2,313,0141,994,3791,902,7541,536,245CMBS1,498,221952,7771,108,438791,212Total borrowed funds15,822,11212,126,94414,172,3689,473,523Maximum borrowings during the period (2)16,227,02412,253,03816,227,02412,253,038Average Cost of Funds: (3)Agency RMBS0.45%0.32%0.39%0.27%Non-Agency RMBS1.71%1.67%1.76%1.47%CMBS1.50%1.53%1.55%1.35%Unhedged cost of funds0.74%0.64%0.67%0.56%Hedged cost of funds1.65%1.81%1.68%1.64%Average Equity: (4)2,482,4871,921,6842,262,8511,625,794Average debt/equity ratio (average during period)6.4x6.3x6.3x5.8xDebt/equity ratio (at period end)6.1x6.4x6.1x6.4x* 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.For further information: Bill Hensel, +1-404-479-2886