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Press release from PR Newswire

Invesco Mortgage Capital Inc. Reports First Quarter 2013 Financial Results

Wednesday, May 01, 2013

Invesco Mortgage Capital Inc. Reports First Quarter 2013 Financial Results

16:05 EDT Wednesday, May 01, 2013

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:  888-942-8507International: 1-415-228-4839Passcode: 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 SUBSIDIARIESCONSOLIDATED 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 SUBSIDIARIESCONSOLIDATED 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.

For further information: Bill Hensel, 404-479-2886

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