Attached files
| file | filename |
|---|---|
| 8-K - Invesco Mortgage Capital Inc. | form8k-11032011.htm |
_____________________________________________________________________
Press Release
For immediate release
_____________________________________________________________________
Invesco Mortgage Capital Inc. Reports Third
Quarter 2011 Financial Results
Investor Relations Contact: Donald Ramon 404-439-3228
Media Relations Contact: Bill Hensel 404-479-2886
Atlanta – November 2, 2011 -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the “Company”) today announced results for the quarter ended September 30, 2011.
The Company reported net income of $82.2 million, or $0.79 per share (basic and diluted), for the quarter ended September 30, 2011 compared to $74.4 million, or $0.99 per share (basic and diluted), for the quarter ended June 30, 2011. During the third quarter of 2011, the Company completed a follow-on common stock offering generating net proceeds of $362.2 million. The 10% 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 in June and August 2011.
The Company also reported its book value per share as of September 30, 2011 was $16.47 compared to $19.34 per share as of June 30, 2011.
“During the third quarter, we saw an opportunity to acquire high quality assets at attractive levels given the uncertainty created by the U.S. debt ceiling debate and the turmoil in Europe. We also took the opportunity to participate with WL Ross, Invesco Real Estate, and other partners in buying a package of commercial mortgage loans auctioned by a large financial institution.” said Richard King, President and Chief Executive Officer. “We generated $0.79 in earnings for the quarter while investing the
proceeds from our capital raises. We believe our portfolio is well positioned for the current environment with the majority of our Agency RMBS invested in prepayment protected pools. While our credit assets have seen declines in prices, the underlying collateral continues to perform and our earnings power remains attractive.”
|
($ in millions, except per share amounts)
|
||
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Q3 ‘11
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Q2 ‘11
|
|
|
(unaudited)
|
(unaudited)
|
|
|
Average Earning Assets (at fair value)
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$13,324.2
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$10,165.9
|
|
Average Borrowed Funds
|
11,466.6
|
8,893.6
|
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Average Equity
|
1,847.3
|
1,567.1
|
|
Interest Income
|
138.3
|
109.0
|
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Interest Expense
|
50.5
|
34.2
|
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Net Interest Income
|
87.8
|
74.8
|
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Other Income
|
3.1
|
6.5
|
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Operating Expenses
|
8.7
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6.9
|
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Net Income
|
$82.2
|
$74.4
|
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Average Portfolio Yield
|
4.15%
|
4.29%
|
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Average Cost of Funds
|
1.76%
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1.54%
|
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Debt to Equity Ratio
|
6.3
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5.2
|
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Return on Average Equity
|
17.79%
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18.99%
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Book Value per Share (Diluted)
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$16.47
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$19.34
|
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Earnings per share (Basic and Diluted)
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$0.79
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$0.99
|
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Dividend
|
$0.80
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$0.97
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Financial Summary
The Company’s portfolio of mortgage-backed securities (“MBS”) was $14.3 billion as of September 30, 2011, an increase of $2.1 billion from June 30, 2011. For the quarter ended September 30, 2011, average earning assets were $13.3 billion which generated interest income of $138.3 million. This represents an increase of $3.1 billion, or 30%, and $29.3 million, or 27%, respectively, from the second quarter of 2011. The increase was primarily driven by the follow-on common stock offerings completed in June and August 2011.
For the quarter ended September 30, 2011, the Company had average borrowings of approximately $11.5 billion and interest expense including cost of hedging of $50.5 million, compared to $8.9 billion and $34.2 million, respectively, for the second quarter of 2011. The increase in average borrowed funds and interest expense was primarily the result of increasing the size of our investment portfolio.
Our average cost of funds was 1.76% and 1.54% for the third quarter of 2011 and the second quarter of 2011, respectively. The increase in our cost of funds was primarily the result of additional interest expense related to our hedging activities.
Operating expenses for the third quarter of 2011 totalled $8.7 million compared to $6.9 million for the second quarter of 2011. The ratio of operating expenses to average equity in the third quarter of 2011 increased 0.13% to 1.89%.
The Company declared a dividend of $0.80 per share for the third quarter of 2011. The dividend was paid on October 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, Thursday, November 3, 2011, 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 November 17, 2011 by calling:
866-372-3817 (North America)
203-369-0256 (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.
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
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Three Months Ended
|
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Nine Months Ended
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||||||||
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September 30,
|
|
September 30,
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||||||||
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$ in thousands, except per share data
|
2011
|
|
2010
|
|
2011
|
|
2010
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|||||||
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|
|
|
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|
|
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|
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Revenues
|
|
|
|
|
|
|
|
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|
|
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|
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Interest income
|
|
138,291
|
|
|
36,067
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|
|
315,808
|
|
|
83,284
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||
|
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Interest expense
|
|
50,452
|
|
|
8,873
|
|
|
100,237
|
|
|
18,904
|
||
|
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Net interest income
|
|
87,839
|
|
|
27,194
|
|
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215,571
|
|
|
64,380
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other income
|
|
|
|
|
|
|
|
|
|
|
|
||
|
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Gain (loss) on sale of investments
|
|
3,637
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|
|
(311)
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|
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8,442
|
|
|
1,064
|
||
|
|
Equity in earnings (loss) and fair value change in unconsolidated
|
|
|
|
|
|
|
|
|
|
|
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||
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|
|
ventures
|
|
(993)
|
|
|
3,793
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|
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2,738
|
|
|
5,888
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|
|
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Loss on other-than-temporarily impaired securities
|
|
-
|
|
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(124)
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|
|
-
|
|
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(510)
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||
|
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Unrealized loss on interest rate swaps
|
|
(453)
|
|
|
(9)
|
|
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(655)
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|
|
(44)
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||
|
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Realized and unrealized credit default swap income
|
|
858
|
|
|
-
|
|
|
4,649
|
|
|
-
|
||
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Total other income
|
|
3,049
|
|
|
3,349
|
|
|
15,174
|
|
|
6,398
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||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Expenses
|
|
|
|
|
|
|
|
|
|
|
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Management fee – related party
|
|
7,884
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|
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2,039
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|
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17,612
|
|
|
5,094
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||
|
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General and administrative
|
|
829
|
|
|
885
|
|
|
2,855
|
|
|
2,839
|
||
|
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Total expenses
|
|
8,713
|
|
|
2,924
|
|
|
20,467
|
|
|
7,933
|
||
|
|
Net income
|
|
82,175
|
|
|
27,619
|
|
|
210,278
|
|
|
62,845
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|
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|
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Net income attributable to non-controlling interest
|
|
1,091
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|
|
1,433
|
|
|
3,948
|
|
|
3,860
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||
|
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Net income attributable to common shareholders
|
|
81,084
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|
|
26,186
|
|
|
206,330
|
|
|
58,985
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|
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|
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Earnings per share:
|
|
|
|
|
|
|
|
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Net income attributable to common shareholders
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|
|
|
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(basic/diluted)
|
|
0.79
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|
|
1.01
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|
|
2.70
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|
|
2.74
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|
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Dividends declared per common share
|
|
0.80
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|
|
1.00
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|
|
2.77
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|
|
2.52
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Weighted average number of shares of common stock:
|
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|
|
|
|
|
|
|
|
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|
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Basic
|
|
103,028
|
|
|
26,047
|
|
|
76,311
|
|
|
21,552
|
|
|
|
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Diluted
|
|
104,472
|
|
|
27,478
|
|
|
77,750
|
|
|
22,981
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|
|
|
|
|
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|
|
|
|
|
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|
|
|
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|
|
|
|
|
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|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|||||||||
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
|
$ in thousands, except per share amounts
|
As of
|
|||||
|
|
|
September 30,
|
|
December 31,
|
||
|
ASSETS
|
2011
|
|
2010
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
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Mortgage-backed securities, at fair value
|
|
14,336,951
|
|
|
5,578,333
|
|
|
Cash
|
|
56,914
|
|
|
63,552
|
|
|
Restricted cash
|
|
254,587
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|
|
101,144
|
|
|
Investment related receivable
|
|
430,053
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|
|
7,601
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|
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Investments in unconsolidated ventures, at fair value
|
|
110,907
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|
|
54,725
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|
|
Accrued interest receivable
|
|
55,713
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|
|
22,503
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|
|
Derivative assets, at fair value
|
|
1,580
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|
|
33,255
|
|
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Other assets
|
|
1,812
|
|
|
1,287
|
|
|
|
Total assets
|
|
15,248,517
|
|
|
5,862,400
|
|
|
|
|
|
|
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LIABILITIES AND EQUITY
|
|
|
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Liabilities:
|
|
|
|
|
|
|
|
Repurchase agreements
|
|
12,181,845
|
|
|
4,344,659
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Derivative liability, at fair value
|
|
388,886
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|
|
37,850
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|
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Dividends and distributions payable
|
|
93,449
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|
|
49,741
|
|
|
Investment related payable
|
|
640,766
|
|
|
372,285
|
|
|
Accrued interest payable
|
|
10,780
|
|
|
2,579
|
|
|
Accounts payable and accrued expenses
|
|
916
|
|
|
1,065
|
|
|
Due to affiliate
|
|
8,092
|
|
|
3,407
|
|
|
|
Total liabilities
|
|
13,324,734
|
|
|
4,811,586
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Preferred Stock: par value $0.01 per share; 50,000,000 shares
|
|
|
|
|
|
|
|
|
authorized, 0 shares issued and outstanding
|
|
-
|
|
|
-
|
|
Common Stock: par value $0.01 per share; 450,000,000 shares
|
|
|
|
|
|
|
|
|
authorized, 115,387,548 and 49,854,196 shares issued and
|
|
|
|
|
|
|
|
outstanding, at September 30, 2011 and December 31, 2010, respectively
|
|
1,154
|
|
|
499
|
|
Additional paid in capital
|
|
2,299,309
|
|
|
1,002,809
|
|
|
Accumulated other comprehensive income (loss)
|
|
(386,187)
|
|
|
24,015
|
|
|
Distributions in excess of earnings
|
|
(15,648)
|
|
|
(8,173)
|
|
|
|
Total shareholders’ equity
|
|
1,898,628
|
|
|
1,019,150
|
|
|
|
|
|
|
|
|
|
Non-controlling interest
|
|
25,155
|
|
|
31,664
|
|
|
|
Total equity
|
|
1,923,783
|
|
|
1,050,814
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
15,248,517
|
|
|
5,862,400
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities
The following table summarizes certain characteristics of the Company’s mortgage-backed securities portfolio as of September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|||
|
|
|
|
|
|
|
Unamortized
|
|
|
|
Unrealized
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Principal
|
|
Premium
|
|
Amortized
|
|
Gain/
|
|
Fair
|
|
Average
|
|
|
Average
|
|
|
$ in thousands
|
|
Balance
|
|
(Discount)
|
|
Cost
|
|
(Loss)
|
|
Value
|
|
Coupon (1)
|
|
|
Yield (2)
|
|
||
|
Agency RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
15 year fixed-rate
|
|
2,360,188
|
|
128,782
|
|
2,488,970
|
|
43,399
|
|
2,532,369
|
|
4.33
|
%
|
|
3.13
|
%
|
|
|
|
30 year fixed-rate
|
|
5,701,102
|
|
400,866
|
|
6,101,968
|
|
110,900
|
|
6,212,868
|
|
5.17
|
%
|
|
3.94
|
%
|
|
|
|
ARM
|
|
92,785
|
|
1,850
|
|
94,635
|
|
2,087
|
|
96,722
|
|
3.53
|
%
|
|
3.14
|
%
|
|
|
|
Hybrid ARM
|
|
1,267,544
|
|
28,045
|
|
1,295,589
|
|
23,359
|
|
1,318,948
|
|
3.31
|
%
|
|
2.81
|
%
|
|
|
|
|
Total Agency
|
|
9,421,619
|
|
559,543
|
|
9,981,162
|
|
179,745
|
|
10,160,907
|
|
4.69
|
%
|
|
3.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
MBS-CMO
|
|
629,502
|
|
(487,871)
|
|
141,631
|
|
1,769
|
|
143,400
|
|
3.30
|
%
|
|
6.24
|
%
|
|
|
|
Non-Agency MBS(3)
|
|
3,061,712
|
|
(316,705)
|
|
2,745,007
|
|
(79,399)
|
|
2,665,608
|
|
5.84
|
%
|
|
6.39
|
%
|
|
|
|
CMBS
|
|
1,492,384
|
|
(21,422)
|
|
1,470,962
|
|
(103,926)
|
|
1,367,036
|
|
5.48
|
%
|
|
5.66
|
%
|
|
|
Total
|
|
14,605,217
|
|
(266,455)
|
|
14,338,762
|
|
(1,811)
|
|
14,336,951
|
|
4.70
|
%
|
|
4.11
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
(1) Net weighted average coupon (“WAC”) is presented net of servicing and other fees.
|
|
|
|
|
|
|
||||||||||||
|
(2) Average yield incorporates future prepayment and loss assumptions.
|
|
|
|
|
|
|
||||||||||||
|
(3) The Non-agency MBS held by the Company is 84.3% fixed rate and 15.7% floating rate, based on fair value.
|
|
|
|
|||||||||||||||
The following table summarizes our non-Agency RMBS portfolio by asset type as of September 30, 2011 and June 30, 2011, respectively:
|
$ in thousands
|
September 30, 2011
|
|
% of Non-Agency
|
|
June 30, 2011
|
|
% of Non-Agency
|
|
|
|
|
Re-REMIC Senior
|
1,640,916
|
|
61.6%
|
|
1,074,303
|
|
46.3%
|
|
|
|
Prime
|
708,575
|
|
26.6%
|
|
820,792
|
|
35.4%
|
|
|
|
Alt-A
|
304,551
|
|
11.4%
|
|
412,640
|
|
17.8%
|
|
|
|
Subprime
|
11,566
|
|
0.4%
|
|
12,686
|
|
0.5%
|
|
|
|
Total Non-Agency
|
2,665,608
|
|
100.0%
|
|
2,320,421
|
|
100.0%
|
|
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”):
|
|
September 30, 2011
|
|
June 30, 2011
|
||||
|
|
Company
|
|
Cohort
|
|
Company
|
|
Cohort
|
|
|
|
|
|
|
|
|
|
|
15 year Agency RMBS
|
9.1
|
|
20.5
|
|
7.7
|
|
12.8
|
|
30 year Agency RMBS
|
9.8
|
|
16.2
|
|
9.2
|
|
13.0
|
|
Agency Hybrid ARM RMBS
|
14.9
|
|
NA
|
|
5.6
|
|
N/A
|
|
Non-Agency RMBS
|
8.1
|
|
NA
|
|
11.5
|
|
N/A
|
|
Overall
|
8.7
|
|
NA
|
|
8.1
|
|
N/A
|
Repurchase Agreements
The following table summarizes the Company’s borrowings by type of investment for the period ended September 30, 2011 and December 31, 2010:
|
|
$ in thousands
|
|
|
September 30, 2011
|
|
|
|
December 31, 2010
|
|
||||
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Amount
|
|
Interest
|
|
|
Amount
|
|
Interest
|
|
||
|
|
|
|
Outstanding
|
|
Rate
|
|
|
Outstanding
|
|
Rate
|
|
||
|
|
Agency RMBS
|
|
|
9,044,073
|
|
0.29
|
%
|
|
|
3,483,440
|
|
0.33
|
%
|
|
|
Non-Agency RBS
|
|
|
2,114,019
|
|
1.51
|
%
|
|
|
459,979
|
|
1.76
|
%
|
|
|
CMBS
|
|
|
1,023,753
|
|
1.44
|
%
|
|
|
401,240
|
|
1.30
|
%
|
|
|
Total
|
|
|
12,181,845
|
|
0.60
|
%
|
|
|
4,344,659
|
|
0.57
|
%
|
Interest Rate Hedges
The following table summarizes our hedging activity as of September 30, 2011:
|
|
|
|
|
|
|
|
Fixed Interest Rate
|
|
|
|
Counterparty
|
Notional
|
Maturity Date
|
|
in Contract
|
|
|
|||
|
The Bank of New York Mellon
|
|
175,000
|
|
08/05/2012
|
|
|
2.07%
|
|
|
|
The Bank of New York Mellon
|
|
100,000
|
|
05/24/2013
|
|
|
1.83%
|
|
|
|
The Bank of New York Mellon
|
|
200,000
|
|
06/15/2013
|
|
|
1.73%
|
|
|
|
SunTrust Bank
|
|
100,000
|
|
07/15/2014
|
|
|
2.79%
|
|
|
|
Deutsche Bank AG
|
|
200,000
|
|
01/15/2015
|
|
|
1.08%
|
|
|
|
Deutsche Bank AG
|
|
250,000
|
|
02/15/2015
|
|
|
1.14%
|
|
|
|
Credit Suisse International
|
|
100,000
|
|
02/24/2015
|
|
|
3.26%
|
|
|
|
Credit Suisse International
|
|
100,000
|
|
03/24/2015
|
|
|
2.76%
|
|
|
|
Wells Fargo Bank, N.A.
|
|
100,000
|
|
07/15/2015
|
|
|
2.85%
|
|
|
|
Wells Fargo Bank, N.A.
|
|
50,000
|
|
07/15/2015
|
|
|
2.44%
|
|
|
|
Morgan Stanley Capital Services, Inc.
|
|
300,000
|
|
01/24/2016
|
|
|
2.12%
|
|
|
|
The Bank of New York Mellon
|
|
300,000
|
|
01/24/2016
|
|
|
2.13%
|
|
|
|
Morgan Stanley Capital Services, Inc.
|
|
300,000
|
|
04/05/2016
|
|
|
2.48%
|
|
|
|
Citibank, N.A.
|
|
300,000
|
|
04/15/2016
|
|
|
1.67%
|
|
|
|
The Bank of New York Mellon
|
|
500,000
|
|
04/15/2016
|
|
|
2.24%
|
|
|
|
Credit Suisse International
|
|
500,000
|
|
04/15/2016
|
|
|
2.27%
|
|
|
|
JPMorgan Chase Bank, N.A.
|
|
500,000
|
|
05/16/2016
|
|
|
2.31%
|
|
|
|
Goldman Sachs Bank USA
|
|
500,000
|
|
05/24/2016
|
|
|
2.34%
|
|
|
|
Wells Fargo Bank, N.A.
|
|
250,000
|
|
06/15/2016
|
|
|
2.67%
|
|
|
|
Goldman Sachs Bank USA
|
|
250,000
|
|
06/15/2016
|
|
|
2.67%
|
|
|
|
JPMorgan Chase Bank, N.A.
|
|
500,000
|
|
06/24/2016
|
|
|
2.51%
|
|
|
|
Citibank, N.A.
|
|
500,000
|
|
10/15/2016
|
|
|
1.93%
|
|
|
|
Deutsche Bank AG
|
|
150,000
|
|
02/05/2018
|
|
|
2.90%
|
|
|
|
Morgan Stanley Capital Services, Inc.
|
|
100,000
|
|
04/05/2018
|
|
|
3.10%
|
|
|
|
JPMorgan Chase Bank, N.A.
|
|
200,000
|
|
05/15/2018
|
|
|
2.93%
|
|
|
|
Wells Fargo Bank, N.A.
|
|
200,000
|
|
03/15/2021
|
|
|
3.14%
|
|
|
|
Citibank, N.A.
|
|
200,000
|
|
05/25/2021
|
|
|
2.83%
|
|
|
|
Total
|
|
6,925,000
|
|
|
|
|
2.29%
|
|
|