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Invesco Mortgage Capital Inc. Reports Third Quarter 2024 Financial Results

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Invesco Mortgage Capital (NYSE: IVR) reported Q3 2024 financial results with net income per share of $0.63, compared to a loss of $0.38 in Q2. Book value per share increased to $9.37 from $9.27, delivering a 5.4% economic return. The company maintained its $0.40 quarterly dividend. The $5.9 billion investment portfolio primarily consisted of $5.2 billion Agency RMBS and $0.7 billion Agency CMBS. Earnings available for distribution decreased to $0.68 per share from $0.86, reflecting reduced effective net interest income. The debt-to-equity ratio increased to 6.1x from 5.6x quarter-over-quarter. The company announced plans to redeem Series B Preferred shares to optimize capital structure.

Invesco Mortgage Capital (NYSE: IVR) ha riportato i risultati finanziari del Q3 2024 con un utile netto per azione di $0,63, rispetto a una perdita di $0,38 nel Q2. Il valore contabile per azione è aumentato a $9,37 da $9,27, con un ritorno economico del 5,4%. L'azienda ha mantenuto il suo dividendo trimestrale di $0,40. Il portafoglio investimenti di $5,9 miliardi consisteva principalmente in $5,2 miliardi di Agency RMBS e $0,7 miliardi di Agency CMBS. Gli utili disponibili per la distribuzione sono diminuiti a $0,68 per azione da $0,86, riflettendo una riduzione del reddito netto da interessi effettivi. Il rapporto debito su capitale è aumentato a 6,1x da 5,6x rispetto al trimestre precedente. L'azienda ha annunciato piani per riscattare le azioni di tipo B preferenziali per ottimizzare la struttura del capitale.

Invesco Mortgage Capital (NYSE: IVR) reportó los resultados financieros del Q3 2024 con un ingreso neto por acción de $0.63, en comparación con una pérdida de $0.38 en el Q2. El valor en libros por acción aumentó a $9.37 desde $9.27, proporcionando un retorno económico del 5.4%. La compañía mantuvo su dividendo trimestral de $0.40. El portafolio de inversiones de $5.9 mil millones consistió principalmente en $5.2 mil millones en Agency RMBS y $0.7 mil millones en Agency CMBS. Las ganancias disponibles para distribución disminuyeron a $0.68 por acción desde $0.86, reflejando una reducción en el ingreso neto por intereses efectivos. La relación deuda-capital aumentó a 6.1x desde 5.6x trimestre a trimestre. La compañía anunció planes para redimir acciones preferentes de la Serie B para optimizar la estructura de capital.

인베스코 모기지 캐피털 (NYSE: IVR)는 Q3 2024 재무 결과를 발표했으며, 주당 순이익은 $0.63으로 Q2의 손실 $0.38에 비해 증가했습니다. 주당 장부 가치는 $9.27에서 $9.37로 증가하여 5.4%의 경제적 수익률을 달성했습니다. 회사는 $0.40의 분기 배당금을 유지했습니다. $5.9억 달러의 투자 포트폴리오는 주로 $5.2억 달러의 에이전시 RMBS와 $0.7억 달러의 에이전시 CMBS로 구성되어 있습니다. 배당 가능한 수익은 $0.86에서 $0.68로 감소했으며, 이는 순이자 수익의 감소를 반영합니다. 부채 비율은 5.6배에서 6.1배로 증가했습니다. 회사는 자본 구조를 최적화하기 위해 B 시리즈 우선주를 상환할 계획을 발표했습니다.

Invesco Mortgage Capital (NYSE: IVR) a annoncé les résultats financiers du T3 2024 avec un revenu net par action de 0,63 $, contre une perte de 0,38 $ au T2. La valeur comptable par action a augmenté à 9,37 $ contre 9,27 $, offrant un rendement économique de 5,4 %. L'entreprise a maintenu son dividende trimestriel de 0,40 $. Le portefeuille d'investissement de 5,9 milliards de dollars était principalement constitué de 5,2 milliards de dollars d'Agency RMBS et de 0,7 milliard de dollars d'Agency CMBS. Les bénéfices disponibles pour distribution ont diminué à 0,68 $ par action contre 0,86 $, reflétant une réduction du revenu net d'intérêts effectifs. Le ratio d'endettement a augmenté à 6,1x contre 5,6x d'un trimestre à l'autre. L'entreprise a annoncé son intention de racheter les actions préférentielles de Série B afin d'optimiser sa structure de capital.

Invesco Mortgage Capital (NYSE: IVR) berichtete über die Finanzergebnisse des Q3 2024 mit einem Nettoergebnis pro Aktie von $0,63, verglichen mit einem Verlust von $0,38 im Q2. Der Buchwert pro Aktie stieg von $9,27 auf $9,37 und lieferte eine wirtschaftliche Rendite von 5,4%. Das Unternehmen behielt seine vierteljährliche Dividende von $0,40 bei. Das Investitionsportfolio von $5,9 Milliarden bestand hauptsächlich aus $5,2 Milliarden Agency RMBS und $0,7 Milliarden Agency CMBS. Die zur Ausschüttung verfügbaren Erträge sanken von $0,86 auf $0,68 pro Aktie, was auf einen Rückgang der effektiven Nettozinserträge hinweist. Das Verhältnis von Schulden zu Eigenkapital stieg im Quartalsvergleich von 5,6x auf 6,1x. Das Unternehmen gab Pläne bekannt, die Series B Preferred Shares einzulösen, um die Kapitalstruktur zu optimieren.

Positive
  • Net income improved to $0.63 per share from -$0.38 in Q2
  • Book value per share increased to $9.37 from $9.27
  • Economic return of 5.4% compared to -4.1% in Q2
  • Maintained stable quarterly dividend of $0.40 per share
Negative
  • Earnings available for distribution decreased to $0.68 from $0.86 per share
  • Debt-to-equity ratio increased to 6.1x from 5.6x
  • Book value declined to estimated $8.42-$8.76 range as of October 31
  • Effective net interest income decreased quarter-over-quarter

Insights

Invesco Mortgage Capital's Q3 2024 results show notable improvements with $0.63 EPS compared to a loss of $0.38 in Q2. The company's book value per share increased to $9.37, delivering a positive economic return of 5.4%. However, earnings available for distribution decreased to $0.68 from $0.86, primarily due to changes in hedging strategy.

The portfolio composition reflects a strategic shift towards higher-coupon Agency RMBS, with 87% in 30-year fixed-rate pass-through securities. The debt-to-equity ratio increased to 6.1x, indicating higher leverage. The announced redemption of Series B Preferred shares and recent capital raise through ATM programs of $88.5 million demonstrate active capital management.

The October book value decline to $8.42-$8.76 range signals some near-term pressure, though management remains optimistic about Agency RMBS performance amid expected monetary policy easing.

ATLANTA, Nov. 5, 2024 /PRNewswire/ -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today announced financial results for the quarter ended September 30, 2024.

  • Net income per common share of $0.63 compared to net loss of $0.38 in Q2 2024
  • Earnings available for distribution per common share(1) of $0.68 compared to $0.86 in Q2 2024
  • Common stock dividend of $0.40 per common share, unchanged from Q2 2024
  • Book value per common share(2) of $9.37 compared to $9.27 as of June 30, 2024
  • Economic return(3) of 5.4% compared to (4.1)% in Q2 2024

Update from John Anzalone, Chief Executive Officer

"Agency mortgage valuations improved during the third quarter as interest rate volatility declined and the yield curve steepened in connection with the Federal Reserve's decision to begin easing monetary policy. In this macroeconomic environment, our higher coupon Agency RMBS investments outperformed, contributing to a 1.1% increase in book value per common share to $9.37. Combined with our $0.40 common stock dividend, this resulted in an economic return of 5.4% for the quarter. As of October 31, 2024, our book value per common share is estimated to be between $8.42 and $8.76.(4)

"Our debt-to-equity ratio ended the third quarter at 6.1x, up from 5.6x as of June 30th, while our economic debt-to-equity ratio(1) increased from 5.9x to 6.1x quarter over quarter. As of the end of the quarter, our $5.9 billion investment portfolio primarily consisted of $5.2 billion Agency RMBS and $0.7 billion Agency CMBS, and we continued to maintain a sizeable balance of unrestricted cash and unencumbered investments totaling $521 million.

"For the quarter, earnings available for distribution per common share was $0.68, compared to $0.86 in the second quarter. This decrease reflects a reduction in our effective net interest income(1) related to changes in the size and composition of our hedging portfolio.

"We recently announced the redemption of our Series B Preferred shares, which will help optimize our capital structure and reduce our dividend obligations going forward.

"The anticipated easing of monetary policy should lead to a steeper yield curve and lower interest rate volatility in the coming months, creating a favorable environment for Agency RMBS investments. However, risks including accelerating inflation, fiscal policy expectations and short-term funding pressures into year end could reduce investor demand for the sector in the near-term. Despite these risks, we are constructive on the sector, as Agency mortgage performance stands to benefit from normalization of monetary policy given attractive valuations and supportive supply and demand technicals."

(1) Earnings available for distribution (and by calculation, earnings available for distribution per common share), economic debt-to-equity ratio and effective net interest income are non-Generally Accepted Accounting Principles ("GAAP") financial measures. Refer to the section entitled "Non-GAAP Financial Measures" for important disclosures and reconciliations to the most comparable U.S. GAAP measures.

(2) Book value per common share as of September 30, 2024 and June 30, 2024 is calculated as total stockholders' equity less the liquidation preference of the Company's Series B Preferred Stock and Series C Preferred Stock ($106.2 million and $181.9 million as of September 30, 2024, respectively, and $106.2 million and $183.6 million as of June 30, 2024, respectively), divided by total common shares outstanding.

(3) Economic return for the quarter ended September 30, 2024 is defined as the change in book value per common share from June 30, 2024 to September 30, 2024 of $0.10; plus dividends declared of $0.40 per common share; divided by the June 30, 2024 book value per common share of $9.27. Economic return for the quarter ended June 30, 2024 is defined as the change in book value per common share from March 31, 2024 to June 30, 2024 of ($0.81); plus dividends declared of $0.40 per common share; divided by the March 31, 2024 book value per common share of $10.08.

(4) Book value per common share as of October 31, 2024 is adjusted to exclude a pro rata portion of the current quarter's common stock dividend (which for purposes of this calculation is assumed to be the same as the previous quarter) and is calculated as total stockholders' equity less the liquidation preference of the Company's Series B Preferred Stock and Series C Preferred Stock ($106.2 million and $181.2 million as of October 31, 2024, respectively), divided by total common shares outstanding of 60.7 million.

Key performance indicators for the quarters ended September 30, 2024 and June 30, 2024 are summarized in the table below.

($ in millions, except share amounts)

Q3 2024

Q2 2024

Variance

Average Balances (1)

(unaudited)

(unaudited)


Average earning assets (at amortized cost)

$5,566.3

$4,847.1

$719.2

Average borrowings

$5,004.5

$4,252.0

$752.5

Average total stockholders' equity

$845.7

$770.3

$75.4





U.S. GAAP Financial Measures




Total interest income

$73.8

$68.0

$5.8

Total interest expense

$66.3

$59.4

$6.9

Net interest income

$7.5

$8.6

($1.1)

Total expenses

$4.7

$4.9

($0.2)

Net income (loss) attributable to common stockholders

$35.3

($18.8)

$54.1





Average earning asset yields

5.31 %

5.61 %

(0.30) %

Average cost of funds

5.30 %

5.59 %

(0.29) %

Average net interest rate margin

0.01 %

0.02 %

(0.01) %





Period-end weighted average asset yields (2)

5.41 %

5.45 %

(0.04) %

Period-end weighted average cost of funds

5.15 %

5.46 %

(0.31) %

Period-end weighted average net interest rate margin

0.26 %

(0.01) %

0.27 %





Book value per common share (3)

$9.37

$9.27

$0.10

Earnings (loss) per common share (basic)

$0.63

($0.38)

$1.01

Earnings (loss) per common share (diluted)

$0.63

($0.38)

$1.01

Debt-to-equity ratio

               6.1x  

               5.6x  

               0.5x  





Non-GAAP Financial Measures (4)




Earnings available for distribution

$38.3

$42.3

($4.0)

Effective interest expense

$25.4

$16.1

$9.3

Effective net interest income

$48.4

$51.9

($3.5)





Effective cost of funds

2.03 %

1.52 %

0.51 %

Effective interest rate margin

3.28 %

4.09 %

(0.81) %





Earnings available for distribution per common share

$0.68

$0.86

($0.18)

Economic debt-to-equity ratio

               6.1x  

               5.9x  

               0.2x  


(1) Average earning assets, average borrowings and average total stockholders' equity are calculated based on the weighted month-end balances of mortgage-backed securities at amortized cost, repurchase agreement borrowings and total U.S. GAAP stockholders' equity, respectively.

(2) Period-end weighted average asset yields are based on amortized cost as of period-end and incorporate future prepayment and loss assumptions when appropriate.

(3) Book value per common share is calculated as total stockholders' equity less the liquidation preference of the Company's Series B Preferred Stock and Series C Preferred Stock ($106.2 million and $181.9 million as of September 30, 2024, respectively, and $106.2 million and $183.6 million as of June 30, 2024, respectively), divided by total common shares outstanding.

(4) Earnings available for distribution (and by calculation, earnings available for distribution per common share), effective interest expense (and by calculation, effective cost of funds), effective net interest income (and by calculation, effective interest rate margin), and economic debt-to-equity ratio are non-GAAP financial measures. Refer to the section entitled "Non-GAAP Financial Measures" for important disclosures and a reconciliation to the most comparable U.S. GAAP measures of net income (loss) attributable to common stockholders (and by calculation, basic earnings (loss) per common share), total interest expense (and by calculation, cost of funds), net interest income (and by calculation, net interest rate margin) and debt-to-equity ratio.

Portfolio Composition

The following table summarizes the Company's MBS portfolio as of September 30, 2024 and June 30, 2024.



As of



September 30, 2024


June 30, 2024

$ in thousands


Fair Value


Percentage of
Portfolio


Period-end
Weighted
Average
Yield


Fair Value


Percentage of
Portfolio


Period-end
Weighted
Average
Yield

Agency RMBS:













     30 year fixed-rate pass-through coupon:














4.0 %


577,105


9.8 %


4.66 %


562,192


11.6 %


4.66 %


4.5 %


703,865


12.0 %


4.95 %


868,511


17.9 %


4.95 %


5.0 %


1,147,475


19.5 %


5.27 %


876,344


18.1 %


5.35 %


5.5 %


1,260,678


21.5 %


5.59 %


965,700


20.0 %


5.59 %


6.0 %


1,418,691


24.2 %


5.98 %


1,087,049


22.5 %


6.02 %

     Total 30 year fixed-rate pass-through


5,107,814


87.0 %


5.43 %


4,359,796


90.1 %


5.40 %

     Agency-CMO


73,199


1.2 %


9.91 %


74,711


1.5 %


9.94 %

Agency CMBS


675,074


11.5 %


4.64 %


384,593


8.0 %


4.97 %

Non-Agency CMBS


9,936


0.2 %


8.91 %


10,264


0.2 %


8.91 %

Non-Agency RMBS


7,673


0.1 %


9.31 %


7,463


0.2 %


9.44 %

     Total MBS portfolio


5,873,696


100.0 %


5.41 %


4,836,827


100.0 %


5.45 %

The following table presents certain characteristics of the Company's borrowings as of September 30, 2024 and June 30, 2024.



As of

$ in thousands


September 30, 2024


June 30, 2024


Amount
Outstanding


Weighted
Average
Interest Rate


Weighted
Average
Remaining
Maturity (days)


Amount
Outstanding


Weighted
Average
Interest Rate


Weighted
Average
Remaining
Maturity (days)

Agency RMBS repurchase agreements


4,535,956


5.15 %


33


3,945,401


5.46 %


20

Agency CMBS repurchase agreements


648,929


5.16 %


25


315,074


5.46 %


17

Total borrowings


5,184,885


5.15 %


32


4,260,475


5.46 %


19

The following table summarizes certain characteristics of TBAs accounted for as derivatives as of June 30, 2024. The Company did not have any TBAs outstanding as of September 30, 2024.

$ in thousands


As of June 30, 2024



Notional

Amount


Implied

Cost Basis


Implied

Market Value


Net

Carrying Value

5.5% TBA Purchase Contracts


200,000


199,945


198,420


(1,525)

The tables below present certain characteristics of the Company's interest rate swaps whereby the Company pays interest at a fixed rate and receives floating interest based on the secured overnight financing rate ("SOFR") as of September 30, 2024 and June 30, 2024.

$ in thousands


As of September 30, 2024

Maturities


Notional

Amount


Weighted
Average Fixed
Pay Rate


Weighted
Average Floating
Receive Rate


Weighted
Average Years to
Maturity

Less than 3 years


1,730,000


1.93 %


4.96 %


2.1

3 to 5 years


575,000


0.33 %


4.96 %


3.4

5 to 7 years


950,000


0.54 %


4.96 %


5.8

7 to 10 years


100,000


3.61 %


4.96 %


9.3

Greater than 10 years


435,000


1.84 %


4.96 %


19.0

Total


3,790,000


1.37 %


4.96 %


5.4

 

$ in thousands


As of June 30, 2024

Maturities


Notional

Amount


Weighted
Average Fixed
Pay Rate


Weighted
Average Floating
Receive Rate


Weighted
Average Years to
Maturity

Less than 3 years


180,000


0.48 %


5.33 %


1.6

3 to 5 years


1,375,000


0.29 %


5.33 %


3.3

5 to 7 years


1,150,000


0.55 %


5.33 %


6.1

7 to 10 years


565,000


3.87 %


5.33 %


9.7

Greater than 10 years


645,000


2.25 %


5.33 %


18.8

Total


3,915,000


1.22 %


5.33 %


7.5

As of September 30, 2024, the Company held futures contracts representing short positions in Ultra 10 year U.S. Treasury Notes with a notional amount of $490.0 million. The Company did not hold any futures contracts as of June 30, 2024.

Capital Activities

Dividends

As previously announced on September 24, 2024, the Company declared a common stock dividend of $0.40 per share paid on October 25, 2024 to its stockholders of record as of the close of business on October 7, 2024. The Company declared the following dividends on November 4, 2024: a Series B Preferred Stock dividend of $0.4844 per share and a Series C Preferred Stock dividend of $0.46875 per share payable on December 27, 2024 to its stockholders of record on December 5, 2024.

Issuances of Common Stock

The Company sold 10,084,138 shares of common stock for net proceeds of $88.5 million during the third quarter through its at-the-market programs.

Repurchases of Preferred Stock

During the three months ended September 30, 2024, the Company repurchased and retired 66,507 shares of Series C Preferred Stock, respectively, for a total cost of $1.6 million.

Redemption of Series B Preferred Stock

On November 5, 2024, the Company announced that it intends to redeem all outstanding shares of its Series B Preferred Stock on December 27, 2024 for a cash redemption price of $25.00 per share, plus accrued and unpaid dividends (whether or not declared) to, but not including, the redemption date.

About Invesco Mortgage Capital Inc.

Invesco Mortgage Capital Inc. is a real estate investment trust that primarily focuses on investing in, financing and managing mortgage-backed securities and other mortgage-related assets. Invesco Mortgage Capital Inc. is externally managed and advised by Invesco Advisers, Inc., a registered investment adviser and an indirect wholly-owned subsidiary of Invesco Ltd., 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, November 6, 2024, at 9:00 a.m. ET, by calling one of the following numbers:

North America Toll Free:

888-982-7409

International:

1-212-287-1625

Passcode:

Invesco

An audio replay will be available until 5:00 pm ET on November 20, 2024 by calling:

866-363-4045 (North America) or 1-203-369-0206 (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, the related presentation 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 as defined in the Private Securities Litigation Reform Act of 1995, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements include our views on the risk positioning of our portfolio, domestic and global market conditions (including the mortgage-backed securities, residential and commercial real estate markets), the market for our target assets, our financial performance, including our earnings available for distribution, economic return, comprehensive income and changes in our book value, our intention and ability to pay dividends, our ability to continue performance trends, the stability of portfolio yields, interest rates, credit spreads, prepayment trends, financing sources, cost of funds, our leverage and equity allocation. In addition, words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "projects," "forecasts," and future or conditional verbs such as "will," "may," "could," "should," and "would" 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 you 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



Three Months Ended


Nine Months Ended

$ in thousands, except share data

September 30,
2024


June 30,
2024


September 30,
2023


September 30,
2024


September 30,
2023











Interest income

73,825


68,028


75,132


210,436


215,847

Interest expense

66,315


59,393


65,701


187,288


174,449

Net interest income

7,510


8,635


9,431


23,148


41,398











Other income (loss)










Gain (loss) on investments, net

165,168


(45,212)


(224,897)


53,803


(272,620)

(Increase) decrease in provision for credit losses

80


(263)


(43)


(222)


(212)

Equity in earnings (losses) of unconsolidated ventures

—


—


2


(193)


4

Gain (loss) on derivative instruments, net

(127,345)


28,262


151,689


(5,922)


203,418

Other investment income (loss), net

—


—


—


—


(66)

Total other income (loss)

37,903


(17,213)


(73,249)


47,466


(69,476)

Expenses










Management fee – related party

2,888


2,945


3,090


8,694


9,237

General and administrative

1,805


1,943


1,691


5,544


5,743

Total expenses

4,693


4,888


4,781


14,238


14,980

Net income (loss)

40,720


(13,466)


(68,599)


56,376


(43,058)

Dividends to preferred stockholders

(5,474)


(5,508)


(5,772)


(16,567)


(17,474)

Gain on repurchase and retirement of preferred stock

25


208


347


426


711

Net income (loss) attributable to common stockholders

35,271


(18,766)


(74,024)


40,235


(59,821)

Earnings (loss) per share: 










Net income (loss) attributable to common stockholders










Basic

0.63


(0.38)


(1.62)


0.78


(1.40)

Diluted

0.63


(0.38)


(1.62)


0.78


(1.40)

 

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)



Three Months Ended


Nine Months Ended

$ in thousands

September 30,
2024


June 30,
2024


September 30,
2023


September 30,
2024


September 30,
2023

Net income (loss)

40,720


(13,466)


(68,599)


56,376


(43,058)

Other comprehensive income (loss):










Unrealized gain (loss) on mortgage-backed securities,
net

(287)


(150)


(91)


(639)


(698)

Reclassification of unrealized loss on available-for-sale
securities to (increase) decrease in provision for credit
losses

—


263


43


302


212

Reclassification of amortization of net deferred (gain)
loss on de-designated interest rate swaps to interest
expense

—


—


(1,810)


—


(9,505)

Currency translation adjustments on investment in
unconsolidated venture

—


—


—


—


(10)

Reclassification of currency translation loss on
investment in unconsolidated venture to other
investment income (loss), net

—


—


—


—


123

Total other comprehensive income (loss)

(287)


113


(1,858)


(337)


(9,878)

Comprehensive income (loss)

40,433


(13,353)


(70,457)


56,039


(52,936)

Dividends to preferred stockholders

(5,474)


(5,508)


(5,772)


(16,567)


(17,474)

Gain on repurchase and retirement of preferred stock

25


208


347


426


711

Comprehensive income (loss) attributable to common
stockholders

34,984


(18,653)


(75,882)


39,898


(69,699)

 

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



As of

$ in thousands, except share amounts

September 30, 2024


December 31, 2023

ASSETS




Mortgage-backed securities, at fair value (including pledged securities of $5,401,351 and $4,712,185,
respectively; net of allowance for credit losses of $542 and $320, respectively)

5,873,696


5,045,306

U.S. Treasury securities, at fair value

—


11,214

Cash and cash equivalents

48,254


76,967

Restricted cash

120,199


121,670

Investment related receivable

26,739


26,604

Derivative assets, at fair value

12,035


939

Other assets

1,307


1,509

Total assets

6,082,230


5,284,209

LIABILITIES AND STOCKHOLDERS' EQUITY




Liabilities:




Repurchase agreements

5,184,885


4,458,695

Dividends payable

24,292


19,384

Accrued interest payable

10,686


15,787

Collateral held payable

336


2,475

Accounts payable and accrued expenses

1,607


1,296

Due to affiliate

3,421


3,907

Total liabilities

5,225,227


4,501,544

Commitments and contingencies (See Note 14) (1)




Stockholders' equity:




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




7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock: 4,247,989 and
4,385,997 shares issued and outstanding, respectively ($106,200 and $109,650 aggregate
liquidation preference, respectively)

102,678


106,014

7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock: 7,277,523 and
7,545,439 shares issued and outstanding, respectively ($181,938 and $188,636 aggregate
liquidation preference, respectively)

175,995


182,474

Common Stock, par value $0.01 per share; 134,000,000 and 67,000,000 shares authorized, respectively;
60,730,287 and 48,460,626 shares issued and outstanding, respectively

607


484

Additional paid in capital

4,119,347


4,011,138

Accumulated other comprehensive income

361


698

Retained earnings (distributions in excess of earnings)

(3,541,985)


(3,518,143)

Total stockholders' equity

857,003


782,665

Total liabilities and stockholders' equity

6,082,230


5,284,209



(1)

See Note 14 of the Company's condensed consolidated financial statements filed in Item 1 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

 

Non-GAAP Financial Measures

The table below shows the non-GAAP financial measures the Company uses to analyze its operating results and the most directly comparable U.S. GAAP measures. The Company believes these non-GAAP measures are useful to investors in assessing its performance as discussed further below.

Non-GAAP Financial Measure


Most Directly Comparable U.S. GAAP Measure

Earnings available for distribution (and by calculation,
earnings available for distribution per common share)


Net income (loss) attributable to common stockholders (and
by calculation, basic earnings (loss) per common share)

Effective interest expense (and by calculation, effective cost
of funds)


Total interest expense (and by calculation, cost of funds)

Effective net interest income (and by calculation, effective
interest rate margin)


Net interest income (and by calculation, net interest rate
margin)

Economic debt-to-equity ratio


Debt-to-equity ratio

The non-GAAP financial measures used by the Company's management should be analyzed in conjunction with U.S. GAAP financial measures and should not be considered substitutes for U.S. GAAP financial measures. In addition, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of its peer companies.

Earnings Available for Distribution

The Company's business objective is to provide attractive risk-adjusted returns to its stockholders, primarily through dividends and secondarily through capital appreciation. The Company uses earnings available for distribution as a measure of its investment portfolio's ability to generate income for distribution to common stockholders and to evaluate its progress toward meeting this objective. The Company calculates earnings available for distribution as U.S. GAAP net income (loss) attributable to common stockholders adjusted for (gain) loss on investments, net; realized (gain) loss on derivative instruments, net; unrealized (gain) loss on derivative instruments, net; TBA dollar roll income; gain on repurchase and retirement of preferred stock; foreign currency (gains) losses, net and amortization of net deferred (gain) loss on de-designated interest rate swaps.

By excluding the gains and losses discussed above, the Company believes the presentation of earnings available for distribution provides a consistent measure of operating performance that investors can use to evaluate its results over multiple reporting periods and, to a certain extent, compare to its peer companies. However, because not all of the Company's peer companies use identical operating performance measures, the Company's presentation of earnings available for distribution may not be comparable to other similarly titled measures used by its peer companies. The Company excludes the impact of gains and losses when calculating earnings available for distribution because (i) when analyzed in conjunction with its U.S. GAAP results, earnings available for distribution provides additional detail of its investment portfolio's earnings capacity and (ii) gains and losses are not accounted for consistently under U.S. GAAP. Under U.S. GAAP, certain gains and losses are reflected in net income whereas other gains and losses are reflected in other comprehensive income. For example, a portion of the Company's mortgage-backed securities are classified as available-for-sale securities, and changes in the valuation of these securities are recorded in other comprehensive income on its condensed consolidated balance sheets. The Company elected the fair value option for its mortgage-backed securities purchased on or after September 1, 2016, and changes in the valuation of these securities are recorded in other income (loss) in the condensed consolidated statements of operations. In addition, certain gains and losses represent one-time events. The Company may add and has added additional reconciling items to its earnings available for distribution calculation as appropriate.

To maintain qualification as a REIT, U.S. federal income tax law generally requires that the Company distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. The Company has historically distributed at least 100% of its REIT taxable income. Because the Company views earnings available for distribution as a consistent measure of its investment portfolio's ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that the Company's board of directors uses to determine the amount, if any, and the payment date of dividends on common stock. However, earnings available for distribution should not be considered as an indication of the Company's taxable income, a guaranty of its ability to pay dividends or as a proxy for the amount of dividends it may pay, as earnings available for distribution excludes certain items that impact its cash needs.

Earnings available for distribution is an incomplete measure of the Company's financial performance and there are other factors that impact the achievement of the Company's business objective. The Company cautions that earnings available for distribution should not be considered as an alternative to net income (determined in accordance with U.S. GAAP), or as an indication of the Company's cash flow from operating activities (determined in accordance with U.S. GAAP), a measure of the Company's liquidity, or as an indication of amounts available to fund its cash needs.

The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to earnings available for distribution for the following periods:


Three Months Ended


Nine Months Ended

$ in thousands, except per share data

September 30,
2024


June 30,
2024


September 30,
2023


September 30,
2024


September 30,
2023

Net income (loss) attributable to common stockholders

35,271


(18,766)


(74,024)


40,235


(59,821)

Adjustments:










(Gain) loss on investments, net

(165,168)


45,212


224,897


(53,803)


272,620

Realized (gain) loss on derivative instruments, net (1)

172,797


22,344


(84,565)


146,459


(19,611)

Unrealized (gain) loss on derivative instruments, net (1)

(4,569)


(7,335)


5,002


(11,096)


6,220

TBA dollar roll income (2)

39


1,078


—


1,117


697

Gain on repurchase and retirement of preferred stock

(25)


(208)


(347)


(426)


(711)

Foreign currency (gains) losses, net (3)

—


—


—


—


66

Amortization of net deferred (gain) loss on de-
designated interest rate swaps (4)

—


—


(1,810)


—


(9,505)

Subtotal

3,074


61,091


143,177


82,251


249,776

Earnings available for distribution

38,345


42,325


69,153


122,486


189,955

Basic income (loss) per common share

0.63


(0.38)


(1.62)


0.78


(1.40)

Earnings available for distribution per common share (5)

0.68


0.86


1.51


2.38


4.46



(1)

U.S. GAAP gain (loss) on derivative instruments, net on the condensed consolidated statements of operations includes the following components:




Three Months Ended


Nine Months Ended

$ in thousands

September 30,
2024


June 30,
2024


September 30,
2023


September 30,
2024


September 30,
2023

Realized gain (loss) on derivative instruments, net

(172,797)


(22,344)


84,565


(146,459)


19,611

Unrealized gain (loss) on derivative instruments, net

4,569


7,335


(5,002)


11,096


(6,220)

Contractual net interest income (expense) on interest
rate swaps

40,883


43,271


72,126


129,441


190,027

Gain (loss) on derivative instruments, net

(127,345)


28,262


151,689


(5,922)


203,418



(2)

A TBA dollar roll is a series of derivative transactions where TBAs with the same specified issuer, term and coupon but different settlement dates are simultaneously bought and sold. The TBA settling in the later month typically prices at a discount to the TBA settling in the earlier month. TBA dollar roll income represents the price differential between the TBA price for current month settlement versus the TBA price for forward month settlement. The Company includes TBA dollar roll income in earnings available for distribution because it is the economic equivalent of interest income on the underlying Agency RMBS, less an implied financing cost, over the forward settlement period. TBA dollar roll income is a component of gain (loss) on derivative instruments, net on the Company's condensed consolidated statements of operations.



(3)

Foreign currency gains (losses), net includes foreign currency transaction gains and losses and the reclassification of currency translation adjustments that were previously recorded in accumulated other comprehensive income and is included in other investment income (loss), net on the condensed consolidated statements of operations.



(4)

U.S. GAAP interest expense on the condensed consolidated statements of operations includes the following components:




Three Months Ended


Nine Months Ended

$ in thousands

September 30,
2024


June 30,
2024


September 30,
2023


September 30,
2024


September 30,
2023

Interest expense on repurchase agreement borrowings

66,315


59,393


67,511


187,288


183,954

Amortization of net deferred (gain) loss on de-
designated interest rate swaps

—


—


(1,810)


—


(9,505)

Total interest expense

66,315


59,393


65,701


187,288


174,449



(5)

Earnings available for distribution per common share is equal to earnings available for distribution divided by the basic weighted average number of common shares outstanding.

The table below shows the components of earnings available for distribution for the following periods:


Three Months Ended


Nine Months Ended

$ in thousands

September 30,
2024


June 30,
2024


September 30,
2023


September 30,
2024


September 30,
2023

Effective net interest income (1)

48,393


51,906


79,747


152,589


221,920

TBA dollar roll income

39


1,078


—


1,117


697

Equity in earnings (losses) of unconsolidated ventures

—


—


2


(193)


4

(Increase) decrease in provision for credit losses

80


(263)


(43)


(222)


(212)

Total expenses

(4,693)


(4,888)


(4,781)


(14,238)


(14,980)

Subtotal

43,819


47,833


74,925


139,053


207,429

Dividends to preferred stockholders

(5,474)


(5,508)


(5,772)


(16,567)


(17,474)

Earnings available for distribution

38,345


42,325


69,153


122,486


189,955



(1)

See below for a reconciliation of net interest income to effective net interest income, a non-GAAP measure.

 

Effective Interest Expense/Effective Cost of Funds/Effective Net Interest Income/Effective Interest Rate Margin

The Company calculates effective interest expense (and by calculation, effective cost of funds) as U.S. GAAP total interest expense adjusted for contractual net interest income (expense) on its interest rate swaps that is recorded as gain (loss) on derivative instruments, net and the amortization of net deferred gains (losses) on de-designated interest rate swaps that is recorded as interest expense. The Company views its interest rate swaps as an economic hedge against increases in future market interest rates on its borrowings. The Company adds back the net payments or receipts on its interest rate swap agreements to its total U.S. GAAP interest expense because the Company uses interest rate swaps to add stability to interest expense. The Company excludes the amortization of net deferred gains (losses) on de-designated interest rate swaps from its calculation of effective interest expense because the Company does not consider the amortization a current component of its borrowing costs.

The Company calculates effective net interest income (and by calculation, effective interest rate margin) as U.S. GAAP net interest income adjusted for contractual net interest income (expense) on its interest rate swaps that is recorded as gain (loss) on derivative instruments, net and amortization of net deferred gains (losses) on de-designated interest rate swaps that is recorded as interest expense.

The Company believes the presentation of effective interest expense, effective cost of funds, effective net interest income and effective interest rate margin measures, when considered together with U.S. GAAP financial measures, provides information that is useful to investors in understanding the Company's borrowing costs and operating performance.

The following table reconciles total interest expense to effective interest expense and cost of funds to effective cost of funds for the following periods:


Three Months Ended


September 30, 2024


June 30, 2024


September 30, 2023

$ in thousands

Reconciliation


Cost of Funds
/ Effective
Cost of Funds


Reconciliation


Cost of Funds
/ Effective
Cost of Funds


Reconciliation


Cost of Funds
/ Effective
Cost of Funds

Total interest expense

66,315


5.30 %


59,393


5.59 %


65,701


5.36 %

Add: Amortization of net deferred gain
        (loss) on de-designated interest
        rate swaps

—


— %


—


— %


1,810


0.15 %

Less: Contractual net interest expense
          (income) on interest rate swaps
          recorded as gain (loss) on
          derivative instruments, net

(40,883)


(3.27) %


(43,271)


(4.07) %


(72,126)


(5.88) %

Effective interest expense

25,432


2.03 %


16,122


1.52 %


(4,615)


(0.37) %

 


Nine Months Ended September 30,


2024


2023

$ in thousands

Reconciliation


Cost of Funds
/ Effective
Cost of Funds


Reconciliation


Cost of Funds
/ Effective
Cost of Funds

Total interest expense

187,288


5.48 %


174,449


4.83 %

Add: Amortization of net deferred gain (loss) on de-designated
        interest rate swaps

—


— %


9,505


0.26 %

Less: Contractual net interest expense (income) on interest rate
          swaps recorded as gain (loss) on derivative instruments, net

(129,441)


(3.78) %


(190,027)


(5.27) %

Effective interest expense

57,847


1.70 %


(6,073)


(0.18) %

The following table reconciles net interest income to effective net interest income and net interest rate margin to effective interest rate margin for the following periods:


Three Months Ended


September 30, 2024


June 30, 2024


September 30, 2023

$ in thousands

Reconciliation


Net Interest
Rate Margin /
Effective
Interest Rate
Margin


Reconciliation


Net Interest
Rate Margin /
Effective
Interest Rate
Margin


Reconciliation


Net Interest
Rate Margin /
Effective
Interest Rate
Margin

Net interest income

7,510


0.01 %


8,635


0.02 %


9,431


0.11 %

Less: Amortization of net deferred
         (gain) loss on de-designated
         interest rate swaps

—


— %


—


— %


(1,810)


(0.15) %

Add: Contractual net interest income
         (expense) on interest rate swaps
         recorded as gain (loss) on
         derivative instruments, net

40,883


3.27 %


43,271


4.07 %


72,126


5.88 %

Effective net interest income

48,393


3.28 %


51,906


4.09 %


79,747


5.84 %

 



Nine Months Ended September 30,



2024


2023

$ in thousands


Reconciliation


Net Interest
Rate Margin /
Effective
Interest Rate
Margin


Reconciliation


Net Interest
Rate Margin
/ Effective
Interest Rate
Margin

Net interest income


23,148


(0.01) %


41,398


0.56 %

Less: Amortization of net deferred (gain) loss on de-designated
         interest rate swaps


—


— %


(9,505)


(0.26) %

Add: Contractual net interest income (expense) on interest rate
         swaps recorded as gain (loss) on derivative instruments, net


129,441


3.78 %


190,027


5.27 %

Effective net interest income


152,589


3.77 %


221,920


5.57 %

Economic Debt-to-Equity Ratio

The following tables show the allocation of the Company's stockholders' equity to its target assets, the Company's debt-to-equity ratio, and the Company's economic debt-to-equity ratio as of September 30, 2024 and June 30, 2024. The Company's debt-to-equity ratio is calculated in accordance with U.S. GAAP and is the ratio of total debt to total stockholders' equity.

The Company presents an economic debt-to-equity ratio, a non-GAAP financial measure of leverage that considers the impact of the off-balance sheet financing of its investments in TBAs that are accounted for as derivative instruments under U.S. GAAP. The Company includes its TBAs at implied cost basis in its measure of leverage because a forward contract to acquire Agency RMBS in the TBA market carries similar risks to Agency RMBS purchased in the cash market and funded with on-balance sheet liabilities. Similarly, a contract for the forward sale of Agency RMBS has substantially the same effect as selling the underlying Agency RMBS and reducing the Company's on-balance sheet funding commitments. The Company believes that presenting its economic debt-to-equity ratio, when considered together with its U.S. GAAP financial measure of debt-to-equity ratio, provides information that is useful to investors in understanding how management evaluates at-risk leverage and gives investors a comparable statistic to those of other mortgage REITs who also invest in TBAs and present a similar non-GAAP measure of leverage.

As of September 30, 2024

$ in thousands

Agency RMBS

Agency CMBS

Credit Portfolio (1)

Total

Mortgage-backed securities

5,181,013

675,074

17,609

5,873,696

Cash and cash equivalents (2)

42,190

6,064

—

48,254

Restricted cash (3)

115,416

4,783

—

120,199

Derivative assets, at fair value (3)

11,556

479

—

12,035

Other assets

25,598

2,448

—

28,046

Total assets

5,375,773

688,848

17,609

6,082,230






Repurchase agreements

4,535,956

648,929

—

5,184,885

Other liabilities

37,289

2,360

693

40,342

Total liabilities

4,573,245

651,289

693

5,225,227






Total stockholders' equity (allocated)

802,528

37,559

16,916

857,003

Debt-to-equity ratio (4)

5.7

17.3

—

6.1

Economic debt-to-equity ratio (5)

5.7

17.3

—

6.1



(1)

Investments in non-Agency CMBS and non-Agency RMBS are included in credit portfolio.

(2)

Cash and cash equivalents is allocated based on the Company's financing strategy for each asset class.

(3)

Restricted cash and derivative assets are allocated based on the hedging strategy for each asset class.

(4)

Debt-to-equity ratio is calculated as the ratio of total repurchase agreements to total stockholders' equity.

(5)

Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis to total stockholders' equity. The Company did not have any TBAs outstanding as of September 30, 2024.

As of June 30, 2024

$ in thousands

Agency RMBS

Agency CMBS

Credit Portfolio (1)

Total

Mortgage-backed securities

4,434,507

384,593

17,727

4,836,827

Cash and cash equivalents (2)

54,428

4,347

—

58,775

Restricted cash (3)

109,485

15,182

—

124,667

Derivative assets, at fair value (3)

7,896

1,095

—

8,991

Other assets

35,665

1,474

130

37,269

Total assets

4,641,981

406,691

17,857

5,066,529






Repurchase agreements

3,945,401

315,074

—

4,260,475

Derivative liabilities, at fair value (3)

1,525

—

—

1,525

Other liabilities

40,686

3,918

709

45,313

Total liabilities

3,987,612

318,992

709

4,307,313






Total stockholders' equity (allocated)

654,369

87,699

17,148

759,216

Debt-to-equity ratio (4)

6.0

3.6

—

5.6

Economic debt-to-equity ratio (5)

6.3

3.6

—

5.9



(1)

Investments in non-Agency CMBS, non-Agency RMBS and an unconsolidated joint venture are included in credit portfolio.

(2)

Cash and cash equivalents is allocated based on the Company's financing strategy for each asset class.

(3)

Restricted cash and derivative assets and liabilities are allocated based on the hedging strategy for each asset class.

(4)

Debt-to-equity ratio is calculated as the ratio of total repurchase agreements to total stockholders' equity.

(5)

Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis ($199.9 million as of June 30, 2024) to total stockholders' equity.

Average Balances

The table below presents information related to the Company's average earning assets, average earning asset yields, average borrowings and average cost of funds for the following periods:


Three Months Ended


Nine Months Ended

$ in thousands

September 30,
2024


June 30,
2024


September 30,
2023


September 30,
2024


September 30,
2023

Average earning assets (1)

5,566,299


4,847,125


5,498,298


5,130,153


5,344,055

Average earning asset yields (2)

5.31 %


5.61 %


5.47 %


5.47 %


5.39 %











Average borrowings (3)

5,004,504


4,251,953


4,902,400


4,560,365


4,811,136

Average cost of funds (4)

5.30 %


5.59 %


5.36 %


5.48 %


4.83 %



(1)

Average balances for each period are based on weighted month-end balances.

(2)

Average earning asset yields for each period are calculated by dividing interest income, including amortization of premiums and discounts, by average earning assets based on the amortized cost of the investments. All yields are annualized.

(3)

Average borrowings for each period are based on weighted month-end balances.

(4)

Average cost of funds is calculated by dividing annualized interest expense, including amortization of net deferred gain (loss) on de-designated interest rate swaps, by average borrowings.

Greg Seals,
Investor Relations
404-439-3323

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/invesco-mortgage-capital-inc-reports-third-quarter-2024-financial-results-302296925.html

SOURCE Invesco Mortgage Capital Inc.

FAQ

What was Invesco Mortgage Capital's (IVR) net income per share in Q3 2024?

Invesco Mortgage Capital reported net income of $0.63 per share in Q3 2024, compared to a net loss of $0.38 per share in Q2 2024.

What is IVR's current quarterly dividend payment?

Invesco Mortgage Capital maintains a quarterly dividend of $0.40 per common share, unchanged from the previous quarter.

What was IVR's book value per share as of September 30, 2024?

IVR's book value per share was $9.37 as of September 30, 2024, up from $9.27 at the end of Q2 2024.

What is the size and composition of IVR's investment portfolio in Q3 2024?

IVR's investment portfolio totaled $5.9 billion, consisting primarily of $5.2 billion in Agency RMBS and $0.7 billion in Agency CMBS.

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Invesco Mortgage Capital Inc.

NYSE:IVR

IVR Rankings

#3132 Ranked by Market Cap
#14 Ranked by Dividends

IVR Latest News

Nov 5, 2024
Invesco Mortgage Capital Inc. Announces Redemption of 7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock
Oct 28, 2024
Invesco Mortgage Capital Inc. To Announce Third Quarter 2024 Results
Sep 24, 2024
Invesco Mortgage Capital Inc. Announces Quarterly Common Dividend
Aug 8, 2024
Invesco Mortgage Capital Inc. Reports Second Quarter 2024 Financial Results
Jul 24, 2024
Invesco Mortgage Capital Inc. To Announce Second Quarter 2024 Results

IVR Stock Data

497.99M
60.56M
0.27%
40.48%
7.14%
REIT - Mortgage
Real Estate Investment Trusts
Link
United States of America
ATLANTA