Invesco Mortgage Capital Inc. Reports Third Quarter 2024 Financial Results
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
AmountOutstanding
WeightedAverage Interest Rate
Weighted Average Remaining Maturity (days)
Amount Outstanding
WeightedAverageInterest 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
WeightedAverage 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
WeightedAverage Years toMaturity
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
