Attached files
| file | filename |
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| 8-K - Invesco Mortgage Capital Inc. | form8k-02282011.htm |
_____________________________________________________________________
Press Release
For immediate release
_____________________________________________________________________
Invesco Mortgage Capital Inc. Reports Fourth
Quarter 2010 Financial Results
Investor Relations Contact: Donald Ramon 404-439-3228
Media Relations Contact: Bill Hensel 404-479-2886
Atlanta – March 1, 2011 -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the “Company”) today announced results for the quarter ended December 31, 2010.
The Company reported net income of $40.9 million, or $1.00 per share (basic and diluted), for the quarter ended December 31, 2010 compared to $27.6 million, or $1.01 per share (basic and diluted), for the quarter ended September 30, 2010. During the fourth quarter of 2010, the Company completed two follow-on common stock offerings generating net proceeds of $488.6 million. The 48.2% increase in quarterly net income was driven by an increase in average earning assets as the Company invested the funds from the follow-on common stock offerings.
The Company also reported its book value per share as of December 31, 2010 was $20.49, compared to $20.28 per share as of September 30, 2010.
“We saw exciting opportunities to invest in the fourth quarter, particularly in late December,” said Richard King, President and Chief Executive Officer. “During the quarter we completed two successful follow-on common stock offerings and quickly invested the capital opportunistically in our target assets which drove our 48.2 % increase in income. Our balanced portfolio approach resulted in a $0.21 increase in our book value per share while maintaining stable earnings per share and producing a strong $0.97 dividend.”
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($ in millions, except per share amounts)
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||||||||
| Q4 ‘10 | Q3 ‘10 | |||||||
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(unaudited)
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(unaudited)
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|||||||
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Average Earning Assets (at fair value)
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$ | 4,874.9 | $ | 2,401.5 | ||||
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Average Borrowed Funds
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3,921.4 | 1,862.9 | ||||||
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Average Equity
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924.1 | 560.4 | ||||||
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Interest Income
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50.9 | 36.1 | ||||||
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Interest Expense
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10.6 | 8.9 | ||||||
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Net Interest Income
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40.3 | 27.2 | ||||||
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Operating Expenses
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4.2 | 2.9 | ||||||
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Other Income
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4.8 | 3.3 | ||||||
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Net Income
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40.9 | 27.6 | ||||||
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Average Portfolio Yield
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4.18 | % | 6.01 | % | ||||
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Cost of Funds
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1.09 | % | 1.90 | % | ||||
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Debt to Equity Ratio
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4.1 | 3.4 | ||||||
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Return on Average Equity
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17.69 | % | 19.71 | % | ||||
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Book Value per Share (Diluted)
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$ | 20.49 | $ | 20.28 | ||||
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Earnings per share (Basic and Diluted)
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$ | 1.00 | $ | 1.01 | ||||
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Dividend
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$ | 0.97 | $ | 1.00 | ||||
Financial Summary
The Company’s portfolio of mortgage-backed securities (“MBS”) was $5.6 billion as of December 31, 2010, an increase of $3.1 billion from September 30, 2010. For the quarter ended December 31, 2010, average earning assets were $4.9 billion which generated interest income of $50.9 million. This represents an increase of $2.5 billion, or 104%, and $14.8 million, or 41%, respectively, from the third quarter of 2010. The increase was primarily driven by the follow-on common stock offerings completed in the fourth quarter.
During the fourth quarter, the constant prepayment rate (“CPR”) of the Company’s portfolio of agency residential mortgage-backed securities (“RMBS”) continued to perform better than bonds with similar characteristics. The Company’s 15-year agency RMBS portfolio had a 3-month CPR of 12.0, versus a rate of approximately 28.8 for bonds with similar characteristics. The Company’s 30-year agency RMBS portfolio had a 3-month CPR of 14.6, compared to a rate of approximately 27.8 for bonds with similar characteristics. The Company’s agency hybrid adjustable rate mortgage (“ARM”) portfolio had a 3-month CPR of 15.8 and the non-agency RMBS portfolio prepaid at a 3-month CPR of 16.0 Overall, the weighted average 3-month CPR on the portfolio was 12.8.
The Company historically financed its MBS portfolio with a combination of borrowings under repurchase agreements and the Federal Reserve’s Term Asset-Backed Securities Loan Facility (“TALF”). During the fourth quarter, the Company exercised its right to prepay the TALF loans and replaced the borrowings with advances under its existing repurchase agreements. For the quarter ended December 31, 2010, the Company had average borrowings of approximately $3.9 billion and interest expense of $10.6 million, compared to $1.9 billion and $8.9 million, respectively, for the third quarter of 2010.
Operating expenses for the fourth quarter 2010 totalled $4.2 million compared to $2.9 million for the third quarter 2010. The ratio of operating expenses to average equity in the fourth quarter of 2010 decreased 0.29% to 1.80% as the Company benefited from improved operating efficiency during the quarter.
The Company declared a dividend of $0.97 per share for the fourth quarter of 2010. The dividend was paid on January 27, 2011
###
About Invesco Mortgage Capital Inc.
Invesco Mortgage Capital Inc. is a real estate investment trust that focuses on financing and managing residential and commercial mortgage-backed securities and mortgage loans. Invesco Mortgage Capital Inc. is externally managed and advised by Invesco Advisers, Inc., a subsidiary of Invesco Ltd. (NYSE: IVZ), a leading independent global investment management company. Additional information is available at www.invescomortgagecapital.com.
Earnings Call
Members of the investment community and the general public are invited to listen to the Company’s earnings conference call today, Tuesday, March 1, 2011, at 8:00 a.m. ET, by calling one of the following numbers:
US/Canada Toll Free: 888-942-8507
International: 415-228-4839
Passcode: Invesco
An audio replay will be available until 5:00 pm ET on March 22, 2011 by calling:
866-397-1427 (North America)
203-369-0534 (International)
The presentation slides that will be reviewed during the call will be available on the Company’s website at www.invescomortgagecapital.com.
Cautionary Notice Regarding Forward-Looking Statements
This press release, and comments made in the associated conference call today, may include statements and information that constitute “forward-looking statements” within the meaning of the U.S. securities laws. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance. In addition, words such as “will,” “anticipates,” “expects” and “plans,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.
Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge investors to carefully consider the risks identified under the captions “Risk Factors,” “Forward-Looking Statements” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K and quarterly reports on Form 10-Q, which are available on the Securities and Exchange Commission’s website at www.sec.gov.
All written or oral forward-looking statements that we make, or that are attributable to us, are expressly qualified by this cautionary notice. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.
###
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
December 31,
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Year Ended
December 31,
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|||||||||||||||
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$ in thousands, except per share data
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2010
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2009
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2010
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2009
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Revenues
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Interest income
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50,945 | 12,546 | 134,229 | 23,529 | ||||||||||||
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Interest expense
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10,652 | 2,557 | 29,556 | 4,627 | ||||||||||||
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Net interest income
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40,293 | 9,989 | 104,673 | 18,902 | ||||||||||||
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Other income (loss)
Gain on sale of investments, net
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2,392 | 2,002 | 3,456 | 2,002 | ||||||||||||
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Equity in earnings and fair value change in unconsolidated limited partnerships
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2,388 | 84 | 8,276 | 71 | ||||||||||||
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Loss on other-than-temporarily impaired securities
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— | — | (510 | ) | — | |||||||||||
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Unrealized loss on interest rate swaps
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(46 | ) | — | (90 | ) | — | ||||||||||
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Gain on Credit Default Swap
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13 | — | 13 | — | ||||||||||||
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Total other income
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4,747 | 2,086 | 11,145 | 2,073 | ||||||||||||
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Expenses
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||||||||||||||||
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Management fee – related party
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2,986 | 760 | 8,080 | 1,513 | ||||||||||||
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General and administrative
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663 | 150 | 1,393 | 499 | ||||||||||||
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Insurance
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235 | 354 | 1,164 | 723 | ||||||||||||
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Professional fees
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276 | 341 | 1,456 | 729 | ||||||||||||
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Total expenses
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4,160 | 1,605 | 12,093 | 3,464 | ||||||||||||
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Net income
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40,880 | 10,470 | 103,725 | 17,511 | ||||||||||||
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Net income attributable to non-controlling interest
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1,466 | 1,447 | 5,326 | 2,417 | ||||||||||||
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Net income attributable to common shareholders
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39,414 | 9,023 | 98,399 | 15,094 | ||||||||||||
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Earnings per share:
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||||||||||||||||
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Net income attributable to common shareholders
(basic and diluted)
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1.00 | 1.02 | 3.78 | 3.37 | ||||||||||||
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Dividends declared per common share
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0.97 | 1.05 | 3.49 | 1.66 | ||||||||||||
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Weighted average number of shares of common stock:
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Basic
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39,354 | 8,887 | 26,039 | 4,480 | ||||||||||||
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Diluted
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40,785 | 10,312 | 27,468 | 5,198 | ||||||||||||
CONSOLIDATED BALANCE SHEETS
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$ in thousands, except per share amounts
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As of December 31,
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ASSETS
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2010
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2009
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(Unaudited)
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Mortgage-backed securities, at fair value
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5,578,333 | 802,592 | ||||||
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Cash
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63,552 | 24,041 | ||||||
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Restricted cash
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101,144 | 14,432 | ||||||
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Investment related receivable
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7,601 | 2,737 | ||||||
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Investments in unconsolidated limited partnerships, at fair value
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54,725 | 4,128 | ||||||
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Accrued interest receivable
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22,503 | 3,518 | ||||||
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Derivative Assets, at fair value
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33,255 | – | ||||||
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Other assets
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1,287 | 1,952 | ||||||
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Total assets
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5,862,400 | 853,400 | ||||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Liabilities:
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Repurchase agreements
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4,344,659 | 545,975 | ||||||
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TALF financing
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– | 80,377 | ||||||
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Derivative liability, at fair value
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37,850 | 3,782 | ||||||
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Dividends and distributions payable
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49,741 | 10,828 | ||||||
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Investment related payable
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372,285 | – | ||||||
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Accrued interest payable
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2,579 | 598 | ||||||
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Accounts payable and accrued expenses
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1,065 | 665 | ||||||
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Due to affiliate
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3,407 | 865 | ||||||
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Total liabilities
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4,811,586 | 643,090 | ||||||
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Invesco Mortgage Capital Inc. Shareholders’ equity:
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||||||||
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Preferred Stock: par value $0.01 per share; 50,000,000 shares authorized,
0 shares issued and outstanding
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– | – | ||||||
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Common Stock: par value $0.01 per share; 450,000,000
shares authorized, 49,854,196 and 8,887,212 shares issued and
outstanding, at December 31, 2010 and December 31, 2009,
respectively
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499 | 89 | ||||||
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Additional paid in capital
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1,002,809 | 172,385 | ||||||
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Accumulated other comprehensive income
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24,015 | 7,721 | ||||||
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Retained earnings (accumulated deficit)
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(8,173 | ) | 320 | |||||
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Total Invesco Mortgage Capital Inc. shareholders’ equity
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1,019,150 | 180,515 | ||||||
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Non-controlling interest
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31,664 | 29,795 | ||||||
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Total equity
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1,050,814 | 210,310 | ||||||
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Total liabilities and shareholders’ equity
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5,862,400 | 853,400 | ||||||
Mortgage-Backed Securities
The following table summarizes certain characteristics of the Company’s mortgage-backed securities portfolio as of December 31, 2010:
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$ in thousands
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Principal Balance
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Unamortized
Premium (Discount)
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Amortized
Cost
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Unrealized
Gain/
(Loss)
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Fair
Value
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Net
Weighted Average
Coupon (1)
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Average
Yield (2)
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|||||||||||||||||||||
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Agency RMBS:
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15 year fixed-rate
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1,789,891 | 99,611 | 1,889,502 | (8,688 | ) | 1,880,814 | 4.49 | % | 2.89 | % | ||||||||||||||||||
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30 year fixed-rate
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2,059,475 | 163,332 | 2,222,807 | 6,771 | 2,229,578 | 5.54 | % | 3.57 | % | |||||||||||||||||||
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ARM
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21,926 | 1,080 | 23,006 | (494 | ) | 22,512 | 4.23 | % | 2.55 | % | ||||||||||||||||||
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Hybrid ARM
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70,253 | 1,612 | 71,865 | 448 | 72,313 | 3.68 | % | 2.71 | % | |||||||||||||||||||
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Total Agency
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3,941,545 | 265,635 | 4,207,180 | (1,963 | ) | 4,205,217 | 5.03 | % | 3.25 | % | ||||||||||||||||||
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MBS-CMO
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57,232 | (30,248 | ) | 26,984 | 1,821 | 28,805 | 4.92 | % | 3.59 | % | ||||||||||||||||||
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Non-Agency MBS
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1,168,797 | (339,501 | ) | 829,296 | 17,072 | 846,368 | 4.83 | % | 5.47 | % | ||||||||||||||||||
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CMBS
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488,246 | (4,640 | ) | 483,606 | 14,337 | 497,943 | 5.35 | % | 5.51 | % | ||||||||||||||||||
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Total
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5,655,820 | (108,754 | ) | 5,547,066 | 31,267 | 5,578,333 | 5.01 | % | 3.78 | % | ||||||||||||||||||
_____________________
(1) Net weighted average coupon (“WAC”) is presented net of servicing and other fees.
(2) Average yield incorporates future prepayment assumptions.
Repurchase Agreements
The following table summarizes the Company’s borrowings by type of investment for the period ended December 31, 2010 and December 31, 2009:
| $ in thousands | December 31, 2010 | December 31, 2009 | ||||||||||||||||
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Repurchase Agreements
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Amount Outstanding
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Weighted Average Interest Rate
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Amount Outstanding
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Weighted Average
Interest Rate
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||||||||||||||
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Agency RMBS
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3,483,440 | 0.33 | % | 545,975 | 0.26 | % | ||||||||||||
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Non-Agency RBS
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459,979 | 1.76 | % | — | — | |||||||||||||
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CMBS
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401,240 | 1.30 | % | — | — | |||||||||||||
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Total Repurchase agreements
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4,344,659 | 0.57 | % | 545,975 | 0.26 | % | ||||||||||||
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CMBS under TALF
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— | — | 80,377 | 3.82 | % | |||||||||||||
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Total Borrowings
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4,344,659 | 0.57 | % | 626,352 | 0.72 | % | ||||||||||||