Invesco Mortgage Capital Inc. Reports Fourth Quarter 2012 Financial Results

 Invesco Mortgage Capital Inc. Reports Fourth Quarter 2012 Financial Results

PR Newswire

ATLANTA, Feb. 5, 2013

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

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

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

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

 

($ in millions, except per share amounts)
                                              Q4 '12      Q3 '12
                                              (unaudited) (unaudited)
Average Earning Assets (at amortized costs)   $17,776.3   $16,955.1
Average Borrowed Funds                        15,822.1    14,440.3
Average Equity                                $2,482.5    $2,329.9
Interest Income                               $145.4      $140.5
Interest Expense                              65.1        60.3
Net Interest Income                           80.3        80.2
Other Income                                  23.2        16.6
Operating Expenses                            10.2        10.0
Net Income                                    93.3        86.8
Preferred Dividend                            2.7         2.7
Net Income after Preferred Dividend           $90.6       $84.1
Average Portfolio Yield                       3.27%       3.31%
Average Cost of Funds                         1.65%       1.67%
Debt to Equity Ratio                          6.1         5.8
Return on Average Equity                      14.60%      14.44%
Book Value per Common Share (Diluted)         $20.83      $20.93
Earnings per Common share (Basic and Diluted) $0.77       $0.72
Dividend per Common share                     $0.65       $0.65
Dividend per Preferred share                  $0.4844     $0.4790

 

Financial Summary

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

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

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

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

The Company declared a preferred stock dividend of $0.4844 per preferred share
for the fourth quarter of 2012.  The dividend was paid on January 25, 2013.

About Invesco Mortgage Capital Inc.

Invesco Mortgage Capital Inc. is a real estate investment trust that focuses
on financing and managing residential and commercial mortgage-backed
securities and mortgage loans. Invesco Mortgage Capital Inc. is externally
managed and advised by Invesco Advisers, Inc., a subsidiary of Invesco Ltd.
(NYSE: IVZ), a leading independent global investment management firm.

Earnings Call

Members of the investment community and the general public are invited to
listen to the Company's earnings conference call on Wednesday, February 6,
2013, at 8:30 a.m. ET, by calling one of the following numbers:

US/Canada Toll Free:      888-942-8507
International:            415-228-4839
Passcode:                 Invesco

An audio replay will be available until 5:00 pm ET on February, 20, 2013 by
calling:

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

The presentation slides that will be reviewed during the call will be
available on the Company's website at www.invescomortgagecapital.com.

Cautionary Notice Regarding Forward-Looking Statements

This press release, and comments made in the associated conference call, may
include statements and information that constitute "forward-looking
statements" within the meaning of the U.S. securities laws.  Forward-looking
statements include statements with respect to our beliefs, plans, objectives,
goals, targets, expectations, anticipations, assumptions, estimates,
intentions and future performance. In addition, words such as "will,"
"anticipates," "expects" and "plans," as well as any other statement that
necessarily depends on future events, are intended to identify forward-looking
statements.

Forward-looking statements are not guarantees and they involve risks,
uncertainties and assumptions. There can be no assurance that actual results
will not differ materially from our expectations. We caution investors not to
rely unduly on any forward-looking statements and urge investors to carefully
consider the risks identified under the captions "Risk Factors,"
"Forward-Looking Statements" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our annual report on Form
10-K and quarterly reports on Form 10-Q, which are available on the Securities
and Exchange Commission's website at www.sec.gov. 

All written or oral forward-looking statements that we make, or that are
attributable to us, are expressly qualified by this cautionary notice.  We
expressly disclaim any obligation to update the information in any public
disclosure if any forward-looking statement later turns out to be inaccurate.

 

 

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                                        Three Months Ended  Year Ended
                                        December 31,        December 31,
$ in thousands, except per share data   2012      2011      2012      2011
        Revenues
        Interest income                  145,389   137,545   566,830   453,352
        Interest expense                 65,093    55,004    237,405   155,241
        Net interest income              80,296    82,541    329,425   298,111
        Other income
        Gain on sale of investments      23,236    2,517     48,215    10,959
        Equity in earnings  and fair
        value change in unconsolidated
           ventures                      937       563       7,169     3,301
        Unrealized loss on interest      (1,382)   (109)     (4,232)   (764)
        rate swaps and swaptions
        Realized and unrealized credit   420       659       3,115     5,308
        default swap income
        Total other income               23,211    3,630     54,267    18,804
        Expenses
        Management fee – related party   9,285     8,647     35,658    26,259
        General and administrative       892       1,003     4,026     3,859
        Total expenses                   10,177    9,650     39,684    30,118
        Net income                       93,330    76,521    344,008   286,797
        Net income attributable to       1,098     934       4,123     4,882
        non-controlling interest
        Net income attributable to       92,232    75,587    339,885   281,915
        Invesco Mortgage Capital Inc.
        Dividends to preferred           2,713     -         5,395     -
        shareholders
        Net income attributable to       89,519    75,587    334,490   281,915
        common shareholders
        Earnings per share:
        Net income attributable to
        common shareholders
           (basic/diluted)               0.77      0.66      2.89      3.27
        Dividends declared per common    0.65      0.65      2.60      3.42
        share
        Weighted average number of
        shares of common stock:
               Basic                     116,016   115,392   115,559   86,365
               Diluted                   117,472   116,835   117,012   87,804

INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
$ in thousands, except share and per share amounts  As of
                                                    December 31,  December 31,
ASSETS                                              2012          2011
                                                    (Unaudited)
Mortgage-backed securities, at fair value             18,470,563    14,214,149
Cash and cash equivalents                             286,474       197,224
Restricted cash                                       12,371        74,496
Investment related receivable                         41,429        160,424
Investments in unconsolidated ventures, at fair       35,301        68,793
value
Accrued interest receivable                           62,977        54,167
Derivative assets, at fair value                      6,469         1,339
Other assets                                          11,547        1,575
 Total assets                                         18,927,131    14,772,167
LIABILITIES AND EQUITY
Liabilities:
Repurchase agreements                                 15,720,460    12,253,038
Derivative liability, at fair value                   436,440       396,780
Dividends and distributions payable                   79,165        75,933
Investment related payable                            76,086        107,032
Accrued interest payable                              15,275        12,377
Accounts payable and accrued expenses                 877           556
Due to affiliate                                      9,308         9,038
 Total liabilities                                    16,337,611    12,854,754
Equity:
Preferred Stock, par value $0.01 per share;
50,000,000 shares
 authorized, 7.75% series A cumulative redeemable,
 $25 liquidation
 preference, 5,600,000 and no shares issued and
 outstanding at
 December 31, 2012 and 2011, respectively             135,362       -
Common Stock: par value $0.01 per share;
450,000,000 shares
 authorized, 116,195,500 and 115,395,695 shares
 issued and
 outstanding, at December 31, 2012 and 2011,          1,162         1,154
 respectively
Additional paid in capital                            2,316,290     2,299,543
Accumulated other comprehensive income (loss)         86,436        (393,291)
Retained earnings (distributions in excess of         18,848        (15,068)
earnings)
 Total shareholders' equity                           2,558,098     1,892,338
Non-controlling interest                              31,422        25,075
 Total equity                                         2,589,520     1,917,413
 Total liabilities and equity                         18,927,131    14,772,167

Mortgage-Backed Securities

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

 

                                                                                            Period- ^
                                                                               Net ^        end ^        Quarterly ^
                              Unamortized              Unrealized              Weighted ^   Weighted ^   Weighted ^ 
                Principal     Premium      Amortized   Gain/       Fair        Average ^    Average ^    Average ^ 
$ in thousands  Balance       (Discount)   Cost        (Loss),     Value       Coupon ^(1)  Yield ^(2)   Yield ^(3)
^                                                      net
Agency RMBS: ^
 15 year         1,964,999    102,058      2,067,057   63,839      2,130,896   4.09 %        2.37 %  ^    2.37 %  ^
 fixed-rate ^
 30 year         9,168,196    601,592      9,769,788   238,949     10,008,737  4.21 %        2.89 %  ^    2.88 %  ^
 fixed-rate ^
 ARM ^           109,937      3,464        113,401     2,365       115,766      3.15 %  ^    2.06 %  ^    2.02 %  ^
 Hybrid ARM ^    556,790      13,493       570,283     16,885      587,168      3.19 %  ^    2.18 %  ^    2.22 %  ^
    Total
    Agency
    pass-        11,799,922   720,607      12,520,529  322,038     12,842,567   4.13 %  ^    2.77 %  ^    2.75 %  ^

    through ^
 Agency-CMO^(4)  1,322,043    (819,530)    502,513     1,926       504,439      2.89 %  ^    2.35 %  ^    1.51 %  ^
 Non-Agency      3,339,683    (308,885)    3,030,798   48,238      3,079,036    4.20 %  ^    4.61 %  ^    4.80 %  ^
 RMBS^(5)
 CMBS ^          1,868,928    24,070       1,892,998   151,523     2,044,521    5.27 %  ^    4.96 %  ^    4.82 %  ^
Total ^          18,330,576   (383,738)    17,946,838  523,725     18,470,563   4.17 %  ^    3.30 %  ^    3.27 %  ^
(1) Net weighted average coupon as of December 31, 2012 ("WAC") is presented net of servicing and other
fees. ^
(2) Average yield based on amortized cost as of December 31, 2012 incorporates future prepayment and
loss assumptions. ^
(3) Average yield based on average amortized cost for the three months ended December 31, 2012
incorporates future prepayment and loss assumptions.
(4) Included in the Agency-CMO are interest only securities which represent 14.1% of the balance based
on fair value.
(5) The non-Agency RMBS held by the Company is 79.2% variable rate, 15.5% fixed rate, and 5.3% floating rate based on
fair value. ^

 

 

Constant Prepayment Rates (CPR)

The CPR of our portfolio impacts the amount of premium and discount on the
purchase of securities that is recognized into income. The following table
shows the three month CPR for our RMBS compared to bonds with similar
characteristics ("Cohorts"):

 

                       December 31, 2012  September 30, 2012
                       Company    Cohort  Company    Cohort
15 year Agency RMBS    17.4       26.5    14.6       23.4
30 year Agency RMBS    11.6       20.9    13.1       20.7
Agency Hybrid ARM RMBS 28.5       NA      20.0       NA
Non-Agency RMBS        17.7       NA      16.2       NA
Overall                14.6       NA      14.3       NA

 

 

Repurchase Agreements

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

 

 $ in        December 31, 2012                             December 31, 2011
 thousands
                                    Weighted                          Weighted
                          Weighted  Average                 Weighted  Average
                          Average   Remaining               Average   Remaining
             Amount       Interest  Maturity   Amount       Interest  Maturity
             Outstanding  Rate      (Days)     Outstanding  Rate      (Days)
 Agency       11,713,565  0.48 %    16          9,491,538   0.38 %    22
 RMBS
 Non-Agency   2,450,960   1.75 %    23          1,916,620   1.79 %    22
 RMBS
 CMBS         1,555,935   1.51 %    18          844,880     1.55 %    22
 Total        15,720,460  0.78 %    17          12,253,038  0.68 %    22

 

 

Interest Rate Hedges

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

 

$ in thousands                                                Fixed Interest
                                                              Rate
Counterparty                       Notional   Maturity Date   in Contract
The Bank of New York Mellon        100,000    5/24/2013       1.83%
The Bank of New York Mellon        200,000    6/15/2013       1.73%
SunTrust Bank                      100,000    7/15/2014       2.79%
Deutsche Bank AG                   200,000    1/15/2015       1.08%
Deutsche Bank AG                   250,000    2/15/2015       1.14%
Credit Suisse International        100,000    2/24/2015       3.26%
Credit Suisse International        100,000    3/24/2015       2.76%
Wells Fargo Bank, N.A.             100,000    7/15/2015       2.85%
Wells Fargo Bank, N.A.             50,000     7/15/2015       2.44%
Morgan Stanley Capital Services,   300,000    1/24/2016       2.12%
Inc.
The Bank of New York Mellon        300,000    1/24/2016       2.13%
Morgan Stanley Capital Services,   300,000    4/5/2016        2.48%
Inc.
Citibank, N.A.                     300,000    4/15/2016       1.67%
The Bank of New York Mellon        500,000    4/15/2016       2.24%
Credit Suisse International        500,000    4/15/2016       2.27%
JPMorgan Chase Bank, N.A.          500,000    5/16/2016       2.31%
Goldman Sachs Bank USA             500,000    5/24/2016       2.34%
Wells Fargo Bank, N.A.             250,000    6/15/2016       2.67%
Goldman Sachs Bank USA             250,000    6/15/2016       2.67%
JPMorgan Chase Bank, N.A.          500,000    6/24/2016       2.51%
Citibank, N.A.                     500,000    10/15/2016      1.93%
Deutsche Bank AG                   150,000    2/5/2018        2.90%
Morgan Stanley Capital Services,   100,000    4/5/2018        3.10%
Inc.
JPMorgan Chase Bank, N.A.          200,000    5/15/2018       2.93%
UBS AG ^(1)                        500,000    5/24/2018       1.10%
The Royal Bank of Scotland Plc     500,000    9/5/2018        1.04%
^(2)
Wells Fargo Bank, N.A.             200,000    3/15/2021       3.14%
Citibank, N.A.                     200,000    5/25/2021       2.83%
HSBC Bank USA, National            250,000    6/5/2023        1.91%
Association ^(3)
Total                              8,000,000                  2.13%
(1) Forward start date of May
2013
(2) Forward start date of
September 2013
(3) Forward start date of  June
2013

 

 

Average Balances

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

 

                    Three Months Ended              Year Ended
                    December 31,                    December 31,
 $ in thousands     2012            2011            2012           2011
 Average Balances*:
 Agency RMBS:
      15 year
      fixed-rate,     2,114,987       2,393,468       2,302,218     2,171,988
      at amortized
      cost
      30 year
      fixed-rate,     9,665,370       6,216,010       8,395,560     4,547,867
      at amortized
      cost
      ARM, at
      amortized       116,608         100,661         150,377       86,177
      cost
      Hybrid ARM,
      at amortized    591,081         1,309,862       1,028,432     998,933
      cost
      MBS-CMO, at
      amortized       510,292         141,132         465,469       91,861
      cost
 Non-Agency RMBS,     2,922,411       2,539,250       2,524,635     2,057,477
 at amortized cost
 CMBS, at amortized   1,855,546       1,313,117       1,461,359     1,006,164
 cost
 Average MBS          17,776,295      14,013,500      16,328,050    10,960,467
 portfolio
 Average Portfolio
 Yields: (1)
 Agency RMBS:
      15 year         2.37%           2.75%           2.54%         2.96%
      fixed-rate
      30 year         2.88%           3.52%           3.12%         3.59%
      fixed-rate
      ARM             2.02%           2.90%           2.51%         2.99%
      Hybrid ARM      2.22%           2.49%           2.60%         2.58%
      MBS-CMO         1.51%           1.32%           2.02%         3.39%
 Non-Agency RMBS      4.80%           6.05%           5.16%         6.79%
 CMBS                 4.82%           5.69%           5.22%         5.44%
 Average MBS          3.27%           3.93%           3.47%         4.14%
 portfolio
 Average
 Borrowings*:
      Agency RMBS     12,010,877      9,179,788       11,161,176    7,146,066
      Non-Agency      2,313,014       1,994,379       1,902,754     1,536,245
      RMBS
      CMBS            1,498,221       952,777         1,108,438     791,212
 Total borrowed       15,822,112      12,126,944      14,172,368    9,473,523
 funds
 Maximum borrowings
 during the period    16,227,024      12,253,038      16,227,024    12,253,038
 (2)
 Average Cost of
 Funds: (3)
      Agency RMBS     0.45%           0.32%           0.39%         0.27%
      Non-Agency      1.71%           1.67%           1.76%         1.47%
      RMBS
      CMBS            1.50%           1.53%           1.55%         1.35%
      Unhedged cost   0.74%           0.64%           0.67%         0.56%
      of funds
      Hedged cost     1.65%           1.81%           1.68%         1.64%
      of funds
 Average Equity:      2,482,487       1,921,684       2,262,851     1,625,794
 (4)
 Average
 debt/equity ratio    6.4x            6.3x            6.3x          5.8x
 (average during
 period)
 Debt/equity ratio    6.1x            6.4x            6.1x          6.4x
 (at period end)
 * 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.

Website: http://www.invescomortgagecapital.com
Contact: Bill Hensel, +1-404-479-2886